EXHIBIT 2
EXECUTION COPY
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STOCK AND ASSET PURCHASE AGREEMENT
BY AND BETWEEN
UCB S.A.
AND
SOLUTIA INC.
Dated as of December 2, 2002
TABLE OF CONTENTS
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RECITALS ..............................................................................................1
ARTICLE I THE PURCHASE AND SALE.........................................................................1
Section 1.1. Purchase and Sale of Shares............................................................1
Section 1.2. Purchase and Sale of the Purchased Assets..............................................1
Section 1.3. Excluded Assets........................................................................3
Section 1.4. Assumed Liabilities....................................................................4
Section 1.5. Excluded Liabilities...................................................................6
ARTICLE II CONSIDERATION.................................................................................7
Section 2.1. Amount and Form of Consideration.......................................................7
Section 2.2. Payment of Consideration...............................................................7
Section 2.3. Purchase Price Adjustment..............................................................7
Section 2.4. Allocation of Purchase Price...........................................................9
Section 2.5. Designation of Subsidiary by Purchaser................................................10
ARTICLE III THE CLOSING..................................................................................10
Section 3.1. Closing Date..........................................................................10
Section 3.2. Deliveries by Seller to Purchaser.....................................................10
Section 3.3. Deliveries by Purchaser to Seller.....................................................11
Section 3.4. Proceedings at Closing................................................................12
Section 3.5. Staged Closings.......................................................................12
ARTICLE IV WARRANTIES OF SELLER.........................................................................13
Section 4.1. Organization and Good Standing........................................................13
Section 4.2. Capital Structure of Purchased Companies..............................................13
Section 4.3. Subsidiaries..........................................................................13
Section 4.4. Authorization of Agreement............................................................14
Section 4.5. Conflicts; Consents of Third Parties..................................................14
Section 4.6. Financial Statements..................................................................15
Section 4.7. No Undisclosed Liabilities............................................................15
Section 4.8. Absence of Certain Developments.......................................................16
Section 4.9. Taxes.................................................................................16
Section 4.10. Real Property.........................................................................17
Section 4.11. Tangible Personal Property; Personal Property Leases..................................18
Section 4.12. Intellectual Property.................................................................18
Section 4.13. Contracts.............................................................................19
Section 4.14. Employee Benefits.....................................................................20
Section 4.15. Labor.................................................................................21
Section 4.16. Litigation............................................................................22
Section 4.17. Compliance with Other Laws; Permits...................................................22
Section 4.18. Environmental Matters.................................................................23
Section 4.19. Ownership of Necessary Assets and Rights..............................................23
Section 4.20. Customers and Suppliers...............................................................23
Section 4.21. Products..............................................................................24
Section 4.22. Brokers...............................................................................24
Section 4.23. Disclosure............................................................................24
Section 4.24. Disclaimers of Seller.................................................................24
Section 4.25. Knowledge Regarding Warranties........................................................24
ARTICLE V WARRANTIES OF PURCHASER......................................................................25
Section 5.1. Organization and Good Standing........................................................25
Section 5.2. Authorization of Agreement............................................................25
Section 5.3. Consents of Third Parties.............................................................25
Section 5.4. Litigation............................................................................25
Section 5.5. Financing.............................................................................26
Section 5.6. Brokers...............................................................................26
Section 5.7. Knowledge Regarding Warranties........................................................26
Section 5.8. No Inducement or Reliance; Independent Assessment.....................................26
ARTICLE VI COVENANTS OF SELLER..........................................................................26
Section 6.1. Access to Documents; Opportunity to Ask Questions.....................................27
Section 6.2. Conduct of Business...................................................................27
Section 6.3. Consents and Conditions...............................................................29
Section 6.4. Public Statements.....................................................................30
Section 6.5. Non-Solicitation......................................................................31
Section 6.6. Updating of Information...............................................................31
Section 6.7. Intercompany Accounts.................................................................31
Section 6.8. Certain Liens.........................................................................32
Section 6.9. Further Actions.......................................................................32
Section 6.10. Transfer of Assets....................................................................32
Section 6.11. Additional Financial Information......................................................32
Section 6.12. Termination of Organschaft............................................................32
Section 6.13. Payment of Insurance Claims or Proceeds...............................................32
ARTICLE VII COVENANTS OF PURCHASER.......................................................................32
Section 7.1. Confidentiality.......................................................................33
Section 7.2. Public Statements.....................................................................33
Section 7.3. Consents and Conditions...............................................................33
Section 7.4. Seller's Access to Documents..........................................................34
Section 7.5. Further Actions.......................................................................34
Section 7.6. Guaranties; Letters of Credit.........................................................35
Section 7.7. Use of Seller's Name..................................................................35
Section 7.8. Bulk Sales Law........................................................................35
ARTICLE VIII CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS..............................................35
Section 8.1. Accuracy of Warranties................................................................36
Section 8.2. Performance of Covenants..............................................................36
Section 8.3. Antitrust Laws........................................................................36
Section 8.4. No Injunctions........................................................................36
Section 8.5. Consents..............................................................................36
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Section 8.6. Officer's Certificate.................................................................36
Section 8.7. Delivery of Documents.................................................................36
Section 8.8. Separation Agreements.................................................................36
ARTICLE IX CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.................................................37
Section 9.1. Accuracy of Warranties................................................................37
Section 9.2. Performance of Covenants..............................................................37
Section 9.3. No Injunctions........................................................................37
Section 9.4. Officer's Certificate.................................................................37
Section 9.6. Antitrust Laws........................................................................37
Section 9.7. Separation Agreements.................................................................37
Section 9.8. Delivery of Documents.................................................................37
ARTICLE X ADDITIONAL POST-CLOSING COVENANTS............................................................37
Section 10.1. Certain Employment Matters............................................................37
Section 10.2. Separation Agreements.................................................................42
ARTICLE XI SURVIVAL, INDEMNIFICATION AND RELATED MATTERS................................................42
Section 11.1. Survival..............................................................................42
Section 11.2. Indemnification.......................................................................43
Section 11.3. Environmental Indemnification.........................................................45
Section 11.4. Procedures for Indemnification........................................................48
Section 11.5. Special Indemnification...............................................................49
ARTICLE XII NONCOMPETITION; NONSOLICITATION..............................................................50
Section 12.1. Noncompetition........................................................................50
Section 12.2. Nonsolicitation of Employees..........................................................51
Section 12.3. Remedies..............................................................................51
ARTICLE XIII TERMINATION..................................................................................52
Section 13.1. Termination...........................................................................52
Section 13.2. Procedure and Effect of Termination...................................................52
ARTICLE XIV TAX MATTERS..................................................................................52
Section 14.1. Tax Indemnification...................................................................52
Section 14.2. Preparation and Filing of Tax Returns.................................................53
Section 14.3. Refunds, Credits and Carrybacks.......................................................53
Section 14.4. Tax Contests..........................................................................54
Section 14.5. Cooperation...........................................................................55
Section 14.6. Timing Differences....................................................................55
Section 14.7. Tax Treatment of Indemnification Payments.............................................56
Section 14.8. Additional Tax Covenant...............................................................56
ARTICLE XV MISCELLANEOUS................................................................................56
Section 15.1. Certain Definitions...................................................................56
Section 15.2. Entire Agreement......................................................................68
Section 15.3. Governing Law.........................................................................68
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Section 15.4. Jurisdiction..........................................................................68
Section 15.5. Expenses..............................................................................69
Section 15.6. Table of Contents and Headings........................................................69
Section 15.7. Notices...............................................................................69
Section 15.8. Severability..........................................................................70
Section 15.9. Binding Effect; No Assignment.........................................................70
Section 15.10. Amendments............................................................................70
Section 15.11. Counterparts..........................................................................70
SCHEDULES [OMITTED]
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Schedule 1.1 -- Purchased Companies
Schedule 1.2 -- Liens on Purchased Assets
Schedule 1.2(a)(i) -- Owned Real Properties
Schedule 1.2(a)(ii) -- Leased Real Properties
Schedule 1.2(g) -- Excluded Telephone Numbers
Schedule 1.2(i) -- Licenses
Schedule 1.2(j) -- Permits Being Transferred
Schedule 1.3 -- Excluded Assets
Schedule 2.4 -- Allocation Schedule
Schedule 3.2(g) -- Resigning Officers, Directors and Auditors
Schedule 3.5 -- Subsequent Closing Jurisdictions
Schedule 9.5 -- Antitrust Consents
Schedule 10.1(a)(i) -- Business Employees
Schedule 10.1(c)(i) -- European Actuarial Assumptions
Schedule 10.1(f)(i) -- International Assignments
Schedule 10.1(f)(ii) -- Third Country National Employees
Schedule 10.1(h) -- Terms of Services Agreement
Schedule 10.2 -- Separation Agreements
Schedule 14.8(a) -- Certain Acquired Companies
Schedule 14.8(b) -- Actions With Respect to Certain Acquired Companies
Schedule 15.1(a) -- Knowledge Officers
Schedule 15.1(b) -- Material Sites
Schedule 15.1(c) -- Potential Thai Tax Claim
Seller Disclosure Schedule
EXHIBITS
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Exhibit A -- Description of Business
Exhibit B [omitted] -- Form of Assumption Agreement
Exhibit C [omitted] -- Indian Orchard Lease and Manufacturing
Agreement Including Manufacturing Lease Terms
Exhibit D [omitted] -- Indian Orchard Laboratory Services Agreement
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Exhibit E [omitted] -- Indian Orchard Laboratory and Office Space Lease
and Access Agreement
Exhibit F [omitted] -- DME Supply Agreement
Exhibit G [omitted] -- Adipic Acid Supply Agreement
Exhibit H [omitted] -- Services and Supply Agreement (Nitro, West Virginia)
Exhibit I [omitted] -- Toll Manufacturing Agreement (LaSalle, Quebec)
Exhibit J [omitted] -- Umbrella Transition Services Agreement
-- Services
-- Term Sheet for Maryville Lease
-- Consulting/Professional Services
Exhibit K [omitted] -- Term Sheet for Intellectual Property License Agreement
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STOCK AND ASSET PURCHASE AGREEMENT
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STOCK AND ASSET PURCHASE AGREEMENT, dated as of December
2, 2002 (together with the Schedules and Exhibits hereto, this "AGREEMENT"),
by and between UCB S.A., a corporation organized under the laws of Belgium
("PURCHASER"), and SOLUTIA INC., a Delaware corporation ("SELLER").
Unless otherwise indicated, capitalized terms used herein
have the respective meanings set forth in Section 15.1.
RECITALS
WHEREAS, Seller and certain of its Subsidiaries are
engaged in the business of production, manufacture and sale of resins and
additives and adhesives, as more fully described on Exhibit A and including
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the Acquired Companies (as defined herein) (the "BUSINESS"); and
WHEREAS, upon the terms and subject to the conditions
hereinafter set forth, the parties desire that Seller and its Subsidiaries
sell, assign and transfer to Purchaser and the Subsidiary Purchasers, and
that Purchaser and the Subsidiary Purchasers purchase and acquire from
Seller and its Subsidiaries, all of the right, title and interest of Seller
and its Subsidiaries in and to the Purchased Shares and the Purchased
Assets, and that Purchaser assume (and cause the Subsidiary Purchasers to
assume) the Assumed Liabilities.
NOW, THEREFORE, in consideration of the premises and the
mutual warranties, covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
ARTICLE I
THE PURCHASE AND SALE
Section 1.1. Purchase and Sale of Shares. On the terms and
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subject to the conditions set forth herein, at the Closing, Seller shall
sell and deliver, or cause one or more of its Subsidiaries to sell and
deliver, and Seller shall cause any of its directors, officers and
employees, or those of its Subsidiaries, to sell and deliver, to Purchaser
and the Subsidiary Purchasers, and Purchaser and the Subsidiary Purchasers
shall purchase, acquire and accept from Seller, or the applicable Subsidiary
or Subsidiaries or directors, officers and employees, free and clear of all
Liens, except for Permitted Exceptions, legal and beneficial ownership of
all of the issued and outstanding capital stock and comparable ownership
interests, except as set forth on Schedule 1.1, (the "PURCHASED SHARES") of
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each of the companies and other entities listed on Schedule 1.1 (each, a
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"PURCHASED COMPANY" and, collectively, the "PURCHASED COMPANIES"; the
Purchased Companies, collectively with their Subsidiaries, being referred to
as the "ACQUIRED COMPANIES").
Section 1.2. Purchase and Sale of the Purchased Assets. On
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the terms and subject to the conditions hereof, and subject to the
exclusions set forth in Section 1.3, at the Closing, Seller shall sell,
assign, transfer, convey and deliver, or cause one or more of its
Subsidiaries to sell, assign, transfer, convey and deliver, to Purchaser and
the Subsidiary Purchasers, and Purchaser shall, and shall cause the
Subsidiary Purchasers to, purchase, acquire
and accept from Seller, or the applicable Subsidiary or Subsidiaries, all of
the right, title and interest of Seller, or the applicable Subsidiary or
Subsidiaries, in, to and under the following assets, properties, rights,
contracts and claims of Seller, or such Subsidiary or Subsidiaries, wherever
located, whether tangible or intangible, real, personal or mixed, that are
owned or leased by Seller or any Subsidiary of Seller, other than an
Acquired Company, on the Closing Date (collectively, the "PURCHASED
ASSETS"), free and clear of all Liens except for Permitted Exceptions or as
set forth on Schedule 1.2, as and to the extent such are Related to the
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Business:
(a) (i) the real property listed on Schedule 1.2(a)(i)
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(the "OWNED REAL PROPERTY"), and (ii) the leases with respect to the real
properties listed on Schedule 1.2(a)(ii) (the "LEASED REAL PROPERTY" and,
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together with the Owned Real Property, the "PURCHASED PROPERTIES");
(b) all buildings, structures, improvements, furnishings,
furniture, fixtures, artwork, displays, display materials, signs, machinery,
equipment, appliances, systems, building materials (including supplies and
tools), supplies and other tangible personal property of every kind and
nature whatsoever located at any of the Purchased Properties, including any
of the following that are attached to any buildings, structures or
improvements located on any such Purchased Property, or that are located in,
on or about any such Purchased Property: all gas and electric fixtures,
plumbing and heating fixtures and systems, carpeting and other floor
coverings, wall coverings, decorative objects, air conditioning apparatus
and systems, refrigerators, computers and all hardware and software
therefor, typewriters and other office equipment, supplies and furnishings,
electrical, electronic and mechanical equipment and systems used to monitor,
control, maintain or operate such Purchased Property, radio, telephone,
facsimile, xerography and other communications equipment and systems,
marketing and advertising material (other than all "Solutia" marked sales
and promotional materials and brochures) of every media (including
brochures, displays, building models and videotapes), together with all
receipts or other documents of title relating to any of the foregoing,
together with the benefit of any deposits or payments now or hereafter made
by Seller or on its behalf in connection with any of the foregoing
(collectively, the "PURCHASED EQUIPMENT");
(c) all raw materials, work-in-process inventories,
packaging materials, finished goods inventories and other items of tangible
property normally considered part of "inventory" of the Business as of the
Closing (the "INVENTORY");
(d) all trade accounts and notes receivable and other
receivables of the Business as of the Closing arising out of the sale of
goods or services of the Business;
(e) all rights and incidents of interest of Seller or any
Subsidiary of Seller as of the Closing Date in and to all Business
Contracts;
(f) all of the Purchased Intellectual Property and the
Intellectual Property that is the subject of the Intellectual Property
License Agreement, subject to the terms thereof (the "LICENSED INTELLECTUAL
PROPERTY");
(g) books and records, files, papers, tapes, disks,
manuals, programs, keys, reports, plans, catalogs, sales and promotional
materials, data brochures, telephone numbers,
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customer referral lists and all other printed and written materials used in
the Business within two years prior to the Closing Date, or, for those
materials for which a document retention period is imposed by Law, such
period imposed by Law, to the extent available, other than (i) books,
records and other materials that Seller or any of its Subsidiaries is
required by Law to retain (copies of which, to the extent permitted by Law,
will be made available to Purchaser upon Purchaser's reasonable request),
(ii) all "Solutia" marked sales and promotional materials and brochures and
(iii) those telephone numbers listed on Schedule 1.2(g);
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(h) all rights under or pursuant to all warranties,
representations and guarantees made by suppliers, manufacturers and
contractors in connection with any Purchased Assets except to the extent
relating to Excluded Assets or Excluded Liabilities or as to which Purchaser
has been indemnified by Seller;
(i) the licenses listed on Schedule 1.2(i);
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(j) the Permits issued by any Governmental Bodies held and
used by Seller or its Subsidiaries listed on Schedule 1.2(j) (to the extent
---------------
permitted by applicable Law to be transferred);
(k) all deferred and prepaid charges, sums and fees of
Seller or any of its Subsidiaries that relate to the Purchased Assets or the
operation of the Business, in each case to the extent reflected on the
Closing Date Balance Sheet;
(l) claims, or the proceeds thereof, Related to the
Business under insurance policies (but not the insurance policies
themselves) for damages or losses of equipment and other tangible assets
occurring between December 31, 2001 and the Closing Date, which equipment or
other tangible assets have not been repaired or replaced by the Closing
Date, to the extent that such claims, or the proceeds thereof, relate to
reimbursement of costs and expenses incurred by Purchaser or any Acquired
Company after the Closing Date to repair or replace such equipment or other
tangible assets (subject to Purchaser providing Seller reasonable
documentation thereof); and
(m) all choses in action, causes of action or claims of
any kind available to or being pursued by Seller or any of its Subsidiaries
whether as plaintiff, claimant, counterclaimant or otherwise, except to the
extent relating to Excluded Assets or Excluded Liabilities or as to which
Purchaser has been indemnified by Seller.
Section 1.3. Excluded Assets. Notwithstanding anything to
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the contrary contained in Section 1.2, the parties hereto expressly
understand and agree that Seller is not hereunder selling, assigning,
transferring or conveying to Purchaser the following assets, properties,
rights, contracts and claims, whether tangible or intangible, real, personal
or mixed (collectively, the "EXCLUDED ASSETS"):
(a) all cash, cash equivalents, bank deposits,
certificates of deposit or similar cash items, of Seller or any Subsidiary
(other than the Acquired Companies);
(b) all refunds of any Tax for which Seller is liable
pursuant to Section 14.1;
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(c) any Seller Employee Benefit Plan and any trusts,
insurance arrangements or other assets held pursuant to, or set aside to
fund the obligations of Seller or its Subsidiaries under, any such Employee
Benefit Plan;
(d) any and all insurance policies, binders and claims and
rights thereunder and the proceeds thereof (other than claims described in
Section 1.2(l));
(e) any assets of Seller or any of its Subsidiaries not
Related to the Business, including the performance films businesses
conducted by Seller and its Subsidiaries;
(f) all of Seller's right, title and interest in the name
"Solutia" or part of a trade name and the trademark or service ▇▇▇▇
"Solutia" and the "Solutia" logo, together with all of the goodwill
represented thereby, or pertaining thereto;
(g) any inter-company receivables or inter-company loans
owed to the Business from Seller or any Subsidiary (other than the Acquired
Companies);
(h) any receivables from the sale of Seller's
alkylphenolic and terpenic resins and printing inks businesses
(i) all assets of the Liquidating Companies;
(j) the assets listed on Schedule 1.3;
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(k) all assets relating to LaSalle (other than finished
goods, work in progress, raw materials and supplies, packaging materials,
trade accounts and notes receivable that are Related to the Business),
including all assets relating to the Eastman Agreement and the Hercules
Agreement;
(l) all assets relating to the Nitro, West Virginia
facility (other than trade accounts and notes receivable and other
receivables arising out of the sale of goods or services of the Business);
(m) the land at the Springfield, Massachusetts facility;
and
(n) all other assets, properties, rights, contracts and
claims of Seller or any Subsidiary (other than the Acquired Companies) not
Related to the Business, wherever located, whether tangible or intangible,
real, personal or mixed to the extent not reflected on the Benchmark Balance
Sheet.
All references herein to the Purchased Assets or the
Assets shall be deemed not to include the Excluded Assets.
Section 1.4. Assumed Liabilities. Simultaneously with the
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Closing, Purchaser shall assume and be liable for, and shall pay, perform
and discharge as and when due, the following obligations and liabilities of
Seller and its Subsidiaries, as and to the extent such are Related to the
Business (collectively, the "ASSUMED LIABILITIES"):
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(a) all liabilities and obligations to the extent
reflected or reserved against on the Closing Date Balance Sheet;
(b) all liabilities and obligations under Business
Contracts, whether accruing before or after the Closing Date;
(c) any and all liabilities, claims, demands, expenses,
commitments or obligations of the Business, whether accruing before or after
the Closing Date, whether known or unknown, fixed or contingent, asserted or
unasserted, and not satisfied or extinguished as of the Closing Date;
(d) subject to Section 1.5(d), any Environmental Claims
and other liabilities or obligations relating in any way to the Environment
or Hazardous Materials related to or arising, directly or indirectly, from
the operations of the Business or the use of the Purchased Assets, at any
time before, on or after the Closing Date;
(e) all liabilities and obligations that Purchaser or any
of its Subsidiaries has assumed or agreed to pay for or be responsible for
pursuant to the terms hereof or the Separation Agreements;
(f) all liabilities and obligations arising from
commitments (in the form of accepted purchase orders or otherwise) to sell
products, or outstanding quotations, proposals or bids, of the Business
entered into in the ordinary course;
(g) all liabilities and obligations arising from
commitments (in the form of issued purchase orders or otherwise), or
outstanding quotations, proposals or bids, to purchase or acquire raw
materials, components, supplies or services, of the Business entered into in
the ordinary course;
(h) all liabilities and obligations with respect to any
return, warranty or similar liabilities relating to products of the Business
that were designed, manufactured, serviced or sold on or prior to the
Closing Date or that were held in the inventory, of the Business as of the
Closing Date;
(i) all liabilities and obligations to the extent arising
out of Legal Proceedings relating to or arising out of, directly or
indirectly, the Business or the use, manufacture, sale, ownership, lease,
operation or disposition of any of the assets or property of the Business;
and
(j) any liability or obligation in respect of Taxes for
which Purchaser is liable pursuant to Section 14.1.
For the avoidance of doubt, the term "Assumed Liabilities"
shall also include all liabilities and obligations of the Acquired
Companies. The parties hereto expressly understand and agree that Purchaser
and the Subsidiary Purchasers shall not assume or become liable for any
obligations, liabilities or indebtedness of Seller or its Subsidiaries
except for those specifically assumed pursuant to this Section 1.4 or as a
result of the purchase of the Purchased Shares.
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Section 1.5. Excluded Liabilities. Notwithstanding the
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provisions of Section 1.4, it is expressly understood and agreed that there
shall be excluded from the liabilities and obligations being assumed by
Purchaser hereunder the following liabilities and obligations of Seller or
any of its Subsidiaries, whether or not an Acquired Company (collectively,
the "EXCLUDED LIABILITIES"), and that references herein to Assumed
Liabilities shall not include the Excluded Liabilities:
(a) the indebtedness for borrowed money of Seller or any
of its Subsidiaries, except to the extent reflected in Closing Cash (which
amount shall not be in excess of U.S.$5 million);
(b) any liability or obligation in respect of Taxes for
which Seller is liable pursuant to Section 14.1;
(c) any liability or obligation for which Seller or any of
its Subsidiaries (other than the Acquired Companies) is made responsible
pursuant hereto or to the Separation Agreements;
(d) all Environmental Claims related to or arising from
the operations of Seller or its Subsidiaries (other than the Acquired
Companies) or their respective predecessors or the use of their assets
(including the Purchased Assets) at the (i) Springfield, Massachusetts
facility prior to the Closing Date or (ii) Nitro, West Virginia facility or
LaSalle on, after or prior to the Closing Date, in each case, except to the
extent set forth in the Separation Agreements (the "RETAINED ENVIRONMENTAL
LIABILITIES");
(e) any inter-company payables, or inter-company loans
owed to the Business from Seller or any Subsidiary (other than the Acquired
Companies); and
(f) all liabilities or obligations of the Liquidating
Companies and all liquidator's liabilities arising out of or resulting from
the liquidation of the Liquidating Companies;
(g) all liabilities or obligations relating to LaSalle
(except as provided in the Separation Agreements and for trade payables and
sales rebates Related to the Business and liabilities and obligations under
Business Contracts), including all liabilities relating to the ▇▇▇▇▇▇▇
Agreement and the Hercules Agreement;
(h) all liabilities or obligations relating to the Nitro,
West Virginia facility (except as provided in the Separation Agreements);
(i) all liabilities or obligations relating to the
Springfield, Massachusetts facility (except as provided in the Separation
Agreements or as are related to the Purchased Assets at such facility or the
operation thereof); and
(j) any liability or obligation arising in connection with
or related to any violations by Seller or any of its Subsidiaries of any
Competition Laws relating to or concerning rubber chemicals.
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ARTICLE II
CONSIDERATION
Section 2.1. Amount and Form of Consideration. The
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consideration to be paid by Purchaser and the Subsidiary Purchasers to
Seller in consideration of the Purchased Shares and the Purchased Assets
shall consist of:
(a) U.S.$500 million (the "CASH CONSIDERATION"), subject
to adjustment as set forth in Section 2.3, to be paid in the manner and at
the time set forth in Section 2.2; and
(b) the assumption on and as of the Closing Date of the
Assumed Liabilities.
Section 2.2. Payment of Consideration. At the Closing, the
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Cash Consideration, plus any applicable value added Tax, goods and services
Tax or similar Tax (collectively, "VAT") imposed on, or required to be
remitted by, Seller or applicable Subsidiary or Subsidiaries as a result of
the transactions contemplated hereby, shall be paid by wire transfer of
immediately available funds in U.S. Dollars to an account designated by
Seller, such designation to be made in writing at least three Business Days
prior to the Closing Date (provided, that, except as otherwise required by
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applicable Law, the parties shall treat the sale and purchase of the
Purchased Shares as not being subject to VAT). Seller shall have the right
to direct that all or part of any payment due to it hereunder be made
directly to one or more of its Subsidiaries that are conveying Purchased
Shares or Purchased Assets hereunder; provided, however, that no such
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direction shall relieve Seller of any of its responsibilities hereunder. Any
such payment by Purchaser (or any Subsidiary of Purchaser designated
pursuant to Section 2.5) shall be a good discharge of its obligations under
this Section 2.2 and neither Purchaser nor any such Subsidiary shall be
obligated to see to the application of any funds so paid.
Section 2.3. Purchase Price Adjustment.
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(a) Within 90 calendar days following the Closing Date,
Seller shall prepare, or cause to be prepared (including in connection
therewith conducting a physical inventory in accordance with Seller's past
practices), and deliver to Purchaser a balance sheet of the Business
(including all Delayed Transfer Assets) as of the close of business on the
Closing Date (assuming there will be no Subsequent Closings) (as such may be
adjusted following resolution of disputes in accordance with Section 2.3(c),
the "CLOSING DATE BALANCE SHEET"). The Closing Date Balance Sheet will be
prepared in accordance with GAAP using the same accounting principles,
procedures, policies and methods that were employed in preparing the
Benchmark Balance Sheet (true and correct copies of such specific
principles, procedures, policies and methods, as they have been applied to
the Business, have been Made Available to Purchaser). Based on the Closing
Date Balance Sheet and this Section 2.3, Seller shall prepare a certificate
setting forth a calculation of Closing Cash and of the Net Asset Value of
the Business as of the Closing Date (the "CLOSING NET ASSET VALUE"). Seller
shall also cause to be prepared and shall deliver to Purchaser at the same
time as the foregoing an audit report of Deloitte & Touche LLP, Seller's
independent public accountants, stating that the Closing Date Balance Sheet
was prepared in accordance with GAAP consistently applied and presents
fairly, in all material respects, the financial position of the Business as
of the Closing Date.
7
(b) During the preparation of the Closing Date Balance
Sheet and the calculation of Closing Cash and Closing Net Asset Value, and
the period of any dispute within the contemplation of this Section 2.3,
Purchaser shall, and shall cause the Acquired Companies to: (i) provide
Seller and Seller's authorized representatives with reasonable access to the
books, records, facilities and employees of the Acquired Companies and the
Purchased Assets; and (ii) cooperate fully with Seller and Seller's
authorized representatives, including by providing on a timely basis all
information necessary or useful in the calculation of Closing Cash and
Closing Net Asset Value. Such access and cooperation shall be provided in
accordance with the terms of Section 7.4, and Seller and Purchaser shall
bear in equal proportion any direct costs associated with Purchaser's
provision of such access and cooperation.
(c) After receipt of the calculation of Closing Cash and
Closing Net Asset Value and the workpapers used in the preparation thereof,
Purchaser shall have 20 Business Days to review the calculation of Closing
Cash and Closing Net Asset Value and such workpapers. Purchaser and its
authorized representatives shall have reasonable access to all relevant
books and records and employees of Seller and its Subsidiaries to the extent
reasonably required to complete their review of the calculation of Closing
Cash and Closing Net Asset Value. Purchaser may dispute items reflected in
the calculation of Closing Cash and Closing Net Asset Value only on the
basis that such amounts were not determined in conformity with GAAP applied
by Seller on a consistent basis or contain arithmetic error. Unless
Purchaser delivers written notice to Seller on or prior to the 20th Business
Day after Purchaser's receipt of the calculation of Closing Cash and Closing
Net Asset Value specifying in reasonable detail the amount, nature and basis
of all disputed items, Purchaser shall be deemed to have accepted and agreed
to the calculation of Closing Cash and Closing Net Asset Value. If Purchaser
so notifies Seller of its objection to the calculation of Closing Cash or
Closing Net Asset Value, Purchaser and Seller shall, within 30 calendar days
following such notice (the "RESOLUTION PERIOD"), attempt to resolve their
differences and any resolution by them as to any disputed amounts shall be
final, binding and conclusive. If following resolution of any disputed
amounts there do not remain in dispute amounts the aggregate net effect of
which would result in an adjustment to Cash Consideration under Section
2.3(e) in excess of U.S.$1 million, then all amounts remaining in dispute
shall be deemed to have been resolved in favor of the calculation of Closing
Cash and Closing Net Asset Value delivered by Seller to Purchaser.
(d) If, at the conclusion of the Resolution Period, the
net effect of all amounts remaining in dispute would result in an adjustment
to Cash Consideration under Section 2.3 in excess of U.S.$1 million, then
all amounts remaining in dispute shall be submitted to KPMG LLP (the
"NEUTRAL AUDITORS") within ten calendar days after the expiration of the
Resolution Period. Each party agrees to execute, if requested by the Neutral
Auditors, a reasonable engagement letter, including customary indemnities.
All fees and expenses relating to the work, if any, to be performed by the
Neutral Auditors shall be borne pro rata as between Seller on the one hand
and Purchaser on the other, in proportion to the allocation of the dollar
amount of the amounts remaining in dispute between Seller and Purchaser made
by the Neutral Auditors such that the prevailing party pays the lesser
proportion of the fees and expenses. The Neutral Auditors shall act as an
arbitrator to determine, based solely on the provisions of this Section 2.3
and the presentations by Seller and Purchaser, and not by independent
review, only those issues still in dispute and only as to whether such
amounts were arrived at in conformity with GAAP and Section 2.3(a). The
Neutral Auditors' determination shall be made within 30 calendar days
8
of their selection, shall be set forth in a written statement delivered to
Seller and Purchaser and shall be final, binding and conclusive. The term
"FINAL CLOSING CASH" shall mean the definitive Closing Cash and the term
"FINAL CLOSING NET ASSET VALUE" shall mean the definitive Closing Net Asset
Value, in each case, as agreed to (or deemed to be agreed to) by Purchaser
and Seller in accordance with the terms of Section 2.3(c) or resulting from
the determinations made by the Neutral Auditors in accordance with this
Section 2.3(d) (in addition to those items theretofore agreed to by Seller
and Purchaser).
(e) The Cash Consideration shall be (i)(A) increased
dollar for dollar to the extent that Final Closing Net Asset Value exceeds
105% of the Net Asset Value of the Business as of September 30, 2002, and
(B) decreased dollar for dollar to the extent that Final Closing Net Asset
Value is less than 95% of the Net Asset Value of the Business as of
September 30, 2002, and (ii)(A) increased dollar for dollar to the extent
that Final Closing Cash is greater than U.S.$0 and (B) decreased dollar for
dollar to the extent that Final Closing Cash is less than U.S.$0. Any
adjustments to the Cash Consideration made pursuant to this Section 2.3(e)
shall bear interest from the Closing Date through the date of payment at the
rate of interest publicly announced by Citibank, N.A., in New York, New
York, from time to time as its prime rate. Any adjustments to the Cash
Consideration made pursuant to this Section 2.3(e), adjusted to reflect any
increase or decrease in applicable VAT for which Purchaser is responsible,
shall be paid by wire transfer of immediately available funds to the account
or accounts specified by Seller, if Seller is owed payment, or to the
account or accounts specified by Purchaser, if Purchaser is owed payment,
within five business days after the Final Closing Cash and Final Closing Net
Asset Value are agreed to by Purchaser and Seller or any remaining disputed
items are ultimately determined by the Neutral Auditors.
Section 2.4. Allocation of Purchase Price. Prior to the
----------------------------
Closing Date Purchaser and Seller shall negotiate in good faith to agree
upon a schedule (the "ALLOCATION SCHEDULE") allocating the Cash
Consideration and the Assumed Liabilities among the Purchased Shares and the
Purchased Assets. The Allocation Schedule shall be reasonable and shall be
prepared in accordance with Section 1060 of the Code and the Treasury
Regulations promulgated thereunder and Schedule 2.4. Each party agrees that,
------------
within 15 calendar days of finalizing the agreed Allocation Schedule, it
shall sign the Allocation Schedule and return an executed copy thereof to
the other party. Except as otherwise required by Law or pursuant to a
"determination" under Section 1313(a) of the Code (or any comparable
provision of state, local or non-U.S. Law), Purchaser and Seller agree to
act in accordance with the allocations contained in the Allocation Schedule
for all Tax purposes and that neither of them will take any position
inconsistent therewith in any Tax Returns or similar filings (including IRS
Form 8594 (or any similar form required to be filed under state, local or
non-U.S. Law)), any refund claim, any litigation, or otherwise. Purchaser
and Seller each agree to provide the other party with any other information
required to complete IRS Form 8594. In the event that Purchaser and Seller
are unable to reach an agreement within 90 calendar days of the later of the
Closing Date and the date on which the last purchase price adjustment, if
any, is determined pursuant to Section 2.3, then any disputed items shall be
resolved within the next 30 calendar days by the Neutral Auditors, whose
fees shall be borne equally by Purchaser and Seller. Such determination by
the Neutral Auditors shall be binding on the parties without further
adjustment. The Allocation Schedule and IRS Form 8594 (or any similar form
required to be filed under state, local or non-U.S. Law) shall be
9
revised to reflect the resolution of the Neutral Auditors and, once revised,
shall be final and binding on all parties without further adjustment.
Section 2.5. Designation of Subsidiary by Purchaser. Prior
--------------------------------------
to the Closing, upon at least ten calendar days written notice to Seller,
Purchaser will designate a Subsidiary as the final purchaser of all the
Purchased Shares of Erste Viking Resins Germany 1 GmbH at the Closing and
Purchaser may designate one or more Subsidiaries as final purchasers of all
the Purchased Shares of one or more other Purchased Companies at the
Closing, in which event all references herein to "Purchaser" shall be deemed
also to refer to any such Subsidiary, as appropriate; provided, however,
-------- -------
that no such designation shall in any event limit or affect the obligations
of Seller or Purchaser hereunder; and provided, further, that Purchaser
-------- -------
shall not designate any Subsidiary to acquire all the Purchased Shares of
one or more Purchased Companies if (a) the designation of any such
Subsidiary would require that any approval be obtained or made that would
not otherwise be required, or (b) after such time as any request for, or
other filing or application in connection with, any consent required to be
obtained pursuant hereto has been made, if the designation of any such
Subsidiary would require that such request, filing or application be made
again or amended.
ARTICLE III
THE CLOSING
Section 3.1. Closing Date. Except as hereinafter provided,
------------
the closing of the transactions contemplated hereunder (the "CLOSING") shall
take place at the offices of Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, on the fifth Business Day following the
date on which the last of the conditions set forth in Articles VIII and IX
have been satisfied (other than those conditions that by their terms cannot
be satisfied until the Closing Date or that the parties expect to be
satisfied on or prior to the Closing Date) or, in the case of Article VIII,
waived by Purchaser, or, in the case of Article IX, waived by Seller, or at
such other place and at such other time and date as may be mutually agreed
upon by Purchaser and Seller (it being understood and agreed that the
parties shall use all reasonable endeavors to cause the Closing Date to
occur on the last day of a calendar month). The date of the Closing is
referred to herein as the "CLOSING DATE" and the Closing shall be effective
as of 11:59 p.m. (St. Louis, Missouri time) on the Closing Date. The parties
shall use all reasonable endeavors to cause the Closing Date to occur on
January 31, 2003, subject to the satisfaction of the conditions set forth in
Articles VIII and IX.
Section 3.2. Deliveries by Seller to Purchaser. At the
---------------------------------
Closing, Seller shall deliver, or shall cause to be delivered, to Purchaser
the following:
(a) stock certificates representing all of the Purchased
Shares (other than those that are in book-entry form), in each case
accompanied by stock powers duly executed in blank or other duly executed
instruments of transfer as required in order to validly transfer title in
and to the Purchased Shares;
(b) one or more bills of sale, local transfer agreements
as may be necessary or desirable under applicable Law (in notarial form if
required by applicable Law) or comparable
10
instruments of transfer (including, where relevant, appropriate invoices),
in customary form as may be reasonably acceptable to Seller and Purchaser
(each, a "▇▇▇▇ OF SALE") transferring to Purchaser or the Subsidiary
Purchasers, as the case may be, all of the Purchased Assets, duly executed
by Seller;
(c) special warranty deeds, or comparable instruments of
transfer, in customary form as may be reasonably acceptable to Seller and
Purchaser, with respect to the Owned Real Properties owned by Seller or any
of its Subsidiaries (other than Acquired Companies);
(d) duly executed instruments of assignment of the Real
Property Leases to which Seller or any of its Subsidiaries (other than
Acquired Companies) is a party, in customary form as may be reasonably
acceptable to Seller and Purchaser;
(e) duly executed instruments of assignment or transfer of
the Purchased Intellectual Property, in customary form as may be reasonably
acceptable to Seller and Purchaser;
(f) the certificates referred to in Section 8.6 signed on
behalf of Seller by the Chairman, Chief Executive Officer, President, Chief
Financial Officer or any Vice President of Seller;
(g) the resignations of the officers, as corporate
officers, and directors and auditors of the Acquired Companies set forth on
Schedule 3.2(g) (which list includes all officers and directors of the
---------------
Acquired Companies elected or appointed by Seller);
(h) the Separation Agreements (as defined in Section
10.2), duly executed on behalf of Seller;
(i) the certificate as provided for in Article 442bis of
the Belgian Income Tax; and
(j) a certificate signed on behalf of Seller by the
Chairman, Chief Executive Officer, President, Chief Financial Officer or any
Vice President of Seller to the effect that (i) Seller shall have performed
the covenants contained in Section 6.7, and (ii) that the Organschaft has
been terminated in accordance with the provisions of Section 4.9(e), in each
case, together with reasonable documentation thereof.
Section 3.3. Deliveries by Purchaser to Seller. At the
---------------------------------
Closing, Purchaser shall deliver to Seller the following:
(a) the Cash Consideration by wire transfer of immediately
available funds in the amount and manner provided in Section 2.2;
(b) a duly executed assumption of liabilities agreement or
other comparable instrument of assumption, substantially in the form of
Exhibit B, evidencing assumption of the Assumed Liabilities and all other
---------
instruments or documents as shall be necessary in the
11
reasonable judgment of Seller to evidence the assumption by Purchaser or its
Subsidiaries of the Assumed Liabilities;
(c) the certificate referred to in Section 9.4 signed by a
duly authorized officer of Purchaser; and
(d) the Separation Agreements, duly executed by Purchaser.
Section 3.4. Proceedings at Closing. All proceedings to be
----------------------
taken and all documents to be executed and delivered by the parties at the
Closing shall be deemed to have been taken and executed simultaneously, and,
except as permitted hereunder, no proceedings shall be deemed taken nor any
documents executed or delivered until all have been taken, executed and
delivered.
Section 3.5. Staged Closings. Notwithstanding anything to
---------------
the contrary contained herein, in the event that the conditions set forth in
Articles VIII and IX have been satisfied, except that the transfer of the
Purchased Shares of entities formed under the laws of, or Purchased Assets
located in, the jurisdictions listed on Schedule 3.5 require any approval of
------------
a Governmental Body under applicable Law that has not been received (such
Purchased Shares and Purchased Assets, the "DELAYED TRANSFER ASSETS"), the
Closing shall be effected as contemplated hereby, but not with respect to
the Delayed Transfer Assets. Subsequent closings (each a "SUBSEQUENT
CLOSING") with respect to Delayed Transfer Assets shall occur as soon as
practicable following receipt of the applicable approvals in each applicable
jurisdiction. At the applicable Subsequent Closing, Purchaser and Seller
shall make such deliveries as may be necessary under applicable Law with
respect to the Delayed Transfer Assets being transferred at such Subsequent
Closing. From the Closing Date to the Subsequent Closing, Seller shall, with
any necessary cooperation from Purchaser, preserve each Delayed Transfer
Asset and hold and operate each such Delayed Transfer Asset in trust for the
account of Purchaser or the applicable Subsidiary Purchaser, and Purchaser
or the applicable Subsidiary Purchaser shall be liable for all obligations
relating to such Delayed Transfer Assets. To the extent that Seller is not
lawfully able to hold and operate any Delayed Transfer Asset in trust for
the account of Purchaser as contemplated by the preceding sentence, Seller
shall use all reasonable endeavors to enter into an arrangement that passes
through to Purchaser the economic costs and benefits of ownership of such
Delayed Transfer Assets. In connection therewith, the Business Employees in
any such jurisdiction shall continue to be regarded as employees of Seller
or its Subsidiaries, and any provisions of Section 10.1 shall apply to such
Business Employees only as of the date of the applicable Subsequent Closing.
If Solutia GOM India Coatings Materials Private Limited shall be a Delayed
Transfer Asset, Seller shall take all reasonable endeavors to cause those
persons that Seller has designated to be directors (or the holders of an
equivalent office under the Law applicable to such entity) of Solutia GOM
India Coatings Materials Private Limited to be replaced, as soon as
reasonably practicable following the Closing, with such persons as Purchaser
shall designate in writing to Seller.
12
ARTICLE IV
WARRANTIES OF SELLER
Seller hereby warrants to Purchaser that, as of the date
hereof, except as set forth in the Disclosure Schedule dated as of the date
hereof and delivered by Seller to Purchaser (the "SELLER DISCLOSURE
SCHEDULE"):
Section 4.1. Organization and Good Standing. Each of
------------------------------
Seller and each Acquired Company is an entity duly organized, validly
existing and, if applicable, in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on, in all
material respects, its business as now being conducted. Each of Seller and
each Acquired Company is duly qualified, authorized or licensed to conduct
its business as a corporation and, if applicable, is in good standing under
the laws of each jurisdiction in which the conduct of its business or the
ownership of its properties requires such qualification, authorization or
license, except where the failure to be so qualified, authorized or licensed
would not materially interfere with the continued operation of the Business
or of any Material Site. True and correct copies of the certificate or
articles of incorporation and all amendments thereto and of the bylaws or
comparable organizational documents, as amended to date, of Seller and each
Purchased Company have been Made Available to Purchaser.
Section 4.2. Capital Structure of Purchased Companies. As
----------------------------------------
of the date hereof, the authorized capital stock, or comparable equity
interests, of each of the Purchased Companies and the number of shares, or
other equity interests, of such capital stock that are issued and
outstanding are set forth on Section 4.2 of the Seller Disclosure Schedule.
-----------
The Purchased Shares are duly authorized, validly issued, fully paid and
nonassessable and are not subject to any preemptive or subscription rights
(and were not issued in violation of any preemptive or subscription rights).
Seller, directly or indirectly through one or more wholly-owned Subsidiaries
of Seller, beneficially owns and has good and valid title to all the
Purchased Shares, free and clear of all Liens other than Permitted
Exceptions. There are no securities, warrants, options, rights or other
enforceable agreements to which any of Seller, the Purchased Companies or
any of their respective Subsidiaries is a party or by which any of them is
bound directly or indirectly obligating any of them (a) to issue, deliver,
sell, pledge or otherwise dispose of, or refrain from issuing, delivering,
selling, pledging or otherwise disposing of, any shares of capital stock, or
comparable equity interests, of any Acquired Company or any securities
convertible into, or other rights to acquire, any shares of capital stock,
or comparable equity interests, of any of the Acquired Companies, or to
grant, extend or enter into any such security, warrant, option, right or
other enforceable agreement, (b) to repurchase, redeem or otherwise acquire,
or to refrain from repurchasing, redeeming or otherwise acquiring, any
shares of capital stock, or comparable equity interests, of any Acquired
Company, or to grant, extend or enter into any such security, warrant,
option, right, agreement or other enforceable agreement or (c) to vote, or
to refrain from voting, any shares of capital stock, or comparable voting
securities, of any Acquired Company.
Section 4.3. Subsidiaries. All of the outstanding shares
------------
of capital stock, or comparable equity interests, of each Subsidiary of the
Purchased Companies are owned by the
13
Purchased Companies, by one or more wholly-owned Subsidiaries of the
Purchased Companies or by one or more of the Purchased Companies and one or
more wholly-owned Subsidiaries of the Purchased Companies, free and clear of
all Liens other than Permitted Exceptions, and are duly authorized, validly
issued, fully paid and nonassessable and are not subject to any preemptive
or subscription rights (and were not issued in violation of any preemptive
or subscription rights). The Purchased Companies and/or Subsidiaries
concerned have good and valid title to all such shares or comparable equity
interests. No Acquired Company owns, directly or indirectly, any capital
stock or other ownership interests, or has any obligations to acquire any
capital stock or other ownership interest, in any corporation, partnership,
joint venture or other Person that is not one of the Acquired Companies.
Section 4.4. Authorization of Agreement. Seller has all
--------------------------
requisite corporate power and authority to execute and deliver (or cause to
be executed and delivered) this Agreement and each other agreement,
document, instrument or certificate contemplated hereby to be executed by
Seller or its Subsidiaries in connection with the consummation of the
transactions contemplated hereby (all such other agreements, documents,
instruments and certificates required to be executed by Seller or any of its
Subsidiaries being hereinafter referred to, collectively, as the "SELLER
DOCUMENTS"), and to perform (or cause to be performed) fully its obligations
hereunder and thereunder. The execution, delivery and performance by Seller
hereof and by Seller or its Subsidiaries of each of the Seller Documents has
been duly authorized by all necessary corporate action on the part of Seller
or such Subsidiaries, as applicable. This Agreement has been, and each of
the Seller Documents will be, on or prior to the Closing Date, duly executed
and delivered by Seller and its Subsidiaries and (assuming the due
authorization, execution and delivery by the other parties hereto and
thereto) this Agreement constitutes, and each of the Seller Documents when
so executed and delivered will constitute, legal, valid and binding
obligations of Seller and its Subsidiaries, enforceable against each in
accordance with its terms.
Section 4.5. Conflicts; Consents of Third Parties. None of
------------------------------------
the execution and delivery by Seller hereof and the Seller Documents, the
consummation of the transactions contemplated hereby or thereby or
compliance by Seller and its Subsidiaries with any of the provisions hereof
or thereof will (a) result in the breach of any provision of the certificate
or articles of incorporation, by-laws or similar organizational documents of
Seller or any Purchased Company; (b) violate, result in the breach or
termination of, or constitute (with or without notice of lapse of time or
both) a default or give rise to any right of consent, cancellation,
termination or acceleration or right to increase the obligations or
otherwise modify the terms under any Material Business Contract or any
Contract listed in Sections 4.11(b) or 4.12(a) of the Seller Disclosure
---------------- -------
Schedule; (c) constitute a material violation of any Law applicable to
Seller or any Purchased Company; or (d) result in the creation or imposition
of any Lien (other than any Lien in favor of Purchaser and Permitted
Exceptions) upon any of the Purchased Assets or the Purchased Shares. No
consent, waiver, approval, Order, Permit or authorization of, or declaration
or filing with, or notification to, any Person or Governmental Body is
required on the part of Seller or any Purchased Company in connection with
the execution and delivery hereof or the Seller Documents, the consummation
of the transactions contemplated hereby and thereby or the compliance by
Seller and its Subsidiaries with any of the provisions hereof or thereof,
except (i) for such consents, waivers, approvals, Orders, Permits or
authorizations of, or declarations or filings with, or notifications to, any
Person or Governmental Body the failure to receive or make
14
would not materially impair the continued operation of the Business or of
any Material Site and (ii) for compliance with the applicable requirements
of (x) the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 and the
rules and regulations promulgated thereunder (the "HSR ACT"), (y) Council
Regulation (EEC) No. 4064/89 of the Commission of the European Communities
(the "EC REGULATION") or (z) other applicable merger control or similar
Laws.
Section 4.6. Financial Statements.
--------------------
(a) Seller has Made Available to Purchaser true and
correct copies of (i) an audited combined balance sheet of Seller's resins,
additives and adhesives business, as of December 31, 2001 (the "BALANCE
SHEET DATE" and such balance sheet being the "AUDITED BALANCE SHEET") and
the related audited combined statement of income for the fiscal year ended
as of the Balance Sheet Date (collectively with the Audited Balance Sheet,
the "AUDITED FINANCIAL STATEMENTS"), (ii) the unaudited pro forma combined
balance sheet of the Business as of the Balance Sheet Date (the "BENCHMARK
BALANCE SHEET") and related unaudited pro forma combined statement of income
of the Business for the fiscal year ended the Balance Sheet Date
(collectively with the Benchmark Balance Sheet, the "BENCHMARK FINANCIAL
STATEMENTS"), which Benchmark Financial Statements are based on the Audited
Financial Statements and reflect solely those adjustments set forth in
Section 4.6 of the Seller Disclosure Schedule (which section also contains a
-----------
true and correct copies of (A) the Audited Financial Statements, (B) the
Benchmark Financial Statements, (C) the Interim Financial Statements and
(D) the specific accounting principles, procedures, policies and methods
employed by Seller in preparing the Benchmark Financial Statements and the
Interim Financial Statements), and (iii) the unaudited combined balance
sheet of the Business as of September 30, 2002 (the "INTERIM BALANCE SHEET")
and the related unaudited combined statement of income of the Business for
the nine months ended September 30, 2002 (collectively with the Interim
Balance Sheet, the "INTERIM FINANCIAL STATEMENTS"). Each of the Benchmark
Financial Statements and the Interim Financial Statements has been prepared
by Seller in accordance with GAAP consistently applied and presents fairly,
in all material respects, as applicable, the financial position and results
of operations of the Business as at the dates and for the periods indicated,
subject, in the case of the Interim Financial Statements, to normal year-end
adjustments and the absence of footnotes.
(b) There are no material assets or liabilities Related to
the Business (other than Excluded Assets and Excluded Liabilities) that are
reflected on the September 30, 2002 consolidated balance sheet of Seller and
its consolidated Subsidiaries contained in Seller's Quarterly Report on Form
10-Q filed with the United States Securities and Exchange Commission that
are not reflected on the Interim Balance Sheet.
Section 4.7. No Undisclosed Liabilities. Seller and its
--------------------------
Subsidiaries did not have, as of the Balance Sheet Date, any indebtedness,
obligations or liabilities Related to the Business that were required in
accordance with GAAP consistently applied by Seller to be reflected,
reserved against or otherwise disclosed on the Benchmark Balance Sheet that
were not so reflected, reserved against or otherwise disclosed and that
exceeded U.S.$1 million in the aggregate. Since the Balance Sheet Date, none
of Seller or its Subsidiaries has incurred any liabilities Related to the
Business other than (a) those incurred in the ordinary course of business
consistent with past practice, (b) those otherwise disclosed herein or in a
Schedule hereto, (c) those that are not in excess of U.S.$1 million in the
aggregate, or (d) to the extent paid or
15
extinguished prior to the Closing Date or reflected in the calculation of
Closing Cash or Closing Net Asset Value.
Section 4.8. Absence of Certain Developments. Since the
-------------------------------
Balance Sheet Date, except in connection with the transactions contemplated
hereby:
(a) The Business has been conducted in all material
respects on a going concern basis in the ordinary course consistent with
past practice of the last three years;
(b) There has not occurred any Material Adverse Effect;
and
(c) Seller has not made any change in the accounting
practices or policies applied in the preparation of financial statements,
except as required by GAAP or local accounting principles (which changes are
set forth in Section 4.8(c) of the Seller Disclosure Schedule).
--------------
Section 4.9. Taxes.
-----
(a) All material Tax Returns required to be filed by or
with respect to the Acquired Companies or the Business for any period ending
on or before the Closing Date have been or will be timely filed (taking into
account any extensions validly obtained) and all such Tax Returns are
complete and accurate in all material respects. All Tax liabilities have
been properly accrued on a basis consistent with such Tax Returns.
(b) All Taxes shown to be due on such Tax Returns (or
payable pursuant to any assessments with respect to such Tax Returns) have
been or will be timely paid.
(c) There is no material action, suit, investigation,
audit, claim or assessment pending, with respect to Taxes of the Acquired
Companies or the Business.
(d) All monies required to be withheld or collected for
payment by the Acquired Companies, including from employees for income
Taxes, social security and other payroll Taxes have, in all material
respects, been collected and/or withheld and timely paid (or are being held
for payment) to the respective taxing authorities.
(e) Any Tax sharing agreement (which, with respect to any
Subsidiary of Seller organized under the laws of Germany, shall include any
profit and loss absorption agreement or contract relating to the fiscal
integration of any Subsidiary) between Seller and its Affiliates (other than
the Acquired Companies) on the one hand, and the Acquired Companies, on the
other hand, shall be terminated on or prior to the Closing Date and, after
such termination, no further payments shall be required thereunder with
respect to any taxable year (whether the current year, a future year, or a
past year). Any payments required by any such agreement shall be made at or
prior to the termination thereof.
(f) From January 1, 2000, Solutia Deutschland Holding GmbH
and Erste Viking Resins Germany 1 GmbH have formed, and will continue to
form until a date not later than the Closing Date, a valid fiscal unity for
German corporate and trade Tax purposes.
16
(g) To the extent required by applicable Law, each of the
Acquired Companies is, and up to the Closing will be, duly registered for
VAT purposes, and each of the Acquired Companies (and any other company that
is a member of the same VAT group as such Acquired Company) has complied in
all material respects with all applicable Laws and Orders relating to VAT
(including, the terms of any written agreement with any taxing authority).
(h) Since January 1, 2002, (i) Seller has not undertaken
any Tax planning strategies that are not consistent with past practice that
would create new deferred Tax liabilities that would be reflected on the
Closing Date Balance Sheet, and (ii) Seller has followed the Tax accounting
policies with respect to deferred Tax assets and deferred Tax liabilities
that Seller followed for the year ended December 31, 2001 (except to the
extent arising from changes in applicable standards or applicable Law).
Section 4.10. Real Property.
-------------
(a) Seller or its applicable Subsidiary has good title to
all Owned Real Properties and valid leasehold estates in all Leased Real
Properties, in each case free and clear of all Liens except Permitted
Exceptions.
(b) None of the Purchased Properties at a Material Site is
subject to any lease, sublease, license or other agreement granting to any
other Person any right to the use, occupancy or enjoyment of such Purchased
Property or any part thereof, except as would not materially interfere with
the continued operation of the Business at any such Material Site.
(c) Each Real Property Lease relating to a Material Site
is in full force and effect and is valid and enforceable in accordance with
its terms, and there is no material default under any such Real Property
Lease either by Seller or its Subsidiaries or, to the Knowledge of Seller,
by any other party thereto, and no event has occurred that, with the lapse
of time or the giving of notice or both, would constitute a material default
by Seller or its Subsidiaries thereunder.
(d) Each Purchased Property at a Material Site complies in
all material respects with all applicable Laws. No written notice of
violation of any Law has been received by Seller or any of its Subsidiaries
or has been issued by any Governmental Body with respect to any Purchased
Property at a Material Site, except as would not materially interfere with
the continued operation of the Business at such Material Site.
(e) (i) Seller or its Subsidiaries have all certificates
of occupancy and other Permits of any Governmental Body necessary for the
current use and operation by Seller or its Subsidiaries of each Purchased
Property at a Material Site, (ii) to the Knowledge of Seller, Seller and its
Subsidiaries have complied in all material respects with all applicable
conditions of each Permit referred to in clause (i), and (iii) neither
Seller nor any of its Subsidiaries has received any written notice of and,
to the Knowledge of Seller, there is no material default or violation by
Seller or any of its Subsidiaries, or an event that with the lapse of time
or giving of notice or both would become a material default or violation by
Seller or any of its Subsidiaries, of any Permit referred to in clause (i).
17
(f) There does not exist any actual or, to the Knowledge
of Seller, threatened or contemplated condemnation or eminent domain
proceedings that affect any Purchased Property at a Material Site, and
Seller and its Subsidiaries have not received any written notice, or to the
Knowledge of Seller, any oral notice, of the intention of any Governmental
Body or other Person to take or use any Purchased Property at a Material
Site.
Section 4.11. Tangible Personal Property; Personal
------------------------------------
Property Leases.
---------------
(a) Seller or its Subsidiaries have good and valid title
to each item of tangible personal property that constitutes a Purchased
Asset having a book value in excess of U.S.$100,000 on the Benchmark Balance
Sheet, free and clear of all Liens except for Permitted Exceptions.
(b) Section 4.11(b) of the Seller Disclosure Schedule sets
---------------
forth all leases of personal property (i) included in the Purchased Assets
and requiring aggregate lease payments equal to or exceeding U.S.$200,000
per annum or U.S.$500,000 in the aggregate, or (ii) the loss of which would
materially impair the continued operation of the Business or of any Material
Site (collectively, the "PERSONAL PROPERTY LEASES"). Seller has Made
Available to Purchaser a true and correct copy of each such Personal
Property Lease, including all amendments, modifications, supplements, side
letters or consents materially affecting the obligations of any party
thereunder.
(c) Except as would not materially interfere with the
continued operation of the Business or of any Material Site, each Personal
Property Lease is in full force and effect and is valid and enforceable in
accordance with its terms, and there is no default under any Personal
Property Lease either by Seller or its Subsidiaries or, to the Knowledge of
Seller, by any other party thereto, and no event has occurred that, with the
lapse of time or the giving of notice or both, would constitute a default by
Seller or its Subsidiaries thereunder.
Section 4.12. Intellectual Property.
---------------------
(a) Section 4.12(a) of the Seller Disclosure Schedule
---------------
contains a true and correct list, as of the date hereof, of the following
categories of Acquired Intellectual Property: (i) Patents; (ii) trademark
and service ▇▇▇▇ registrations and applications and material unregistered
Trademarks; (iii) registered Internet domain names; (iv) Outgoing IP
Licenses relating to Material Intellectual Property, Patents or registered
trademarks and service marks; and (v) Incoming IP Licenses of Material
Intellectual Property.
(b) (i) Seller or its Subsidiaries are the beneficial
owners of the Material Intellectual Property (other than that used under
Incoming IP Licenses) and have all right, title and interest in and to such
Material Intellectual Property free and clear of any Liens other than
Permitted Exceptions; (ii) neither Seller nor any of its Subsidiaries is a
party to any agreement that restricts or limits the use by Seller or its
Subsidiaries of the Material Intellectual Property, or such rights are used
pursuant to an agreement or license and each such agreement or license is
valid and enforceable and in full force and effect and, to the Knowledge of
Seller, Seller and its Subsidiaries are not in default under or in breach of
any such license or agreement; and (iii) the consummation of the
transactions contemplated hereby and by the Seller Documents will not
18
result in the loss or impairment of any of the rights of any of the Acquired
Companies in any of the Material Intellectual Property.
(c) None of the Material Intellectual Property is the
subject of any pending or, to the Knowledge of Seller, threatened,
opposition, interference, cancellation proceeding or other proceeding before
any registration authority in any jurisdiction, and all registrations and
applications for all such Acquired Intellectual Property are in full force
and effect and have not been abandoned or withdrawn.
(d) (i) Neither Seller nor any of its Subsidiaries has
given any notice of infringement to any third party with respect to any of
the Material Intellectual Property, and no claim or controversy with respect
to any such alleged infringement currently exists; (ii) to the Knowledge of
the Seller, the use of the Material Intellectual Property and the
manufacture, use or sale of Seller's and its Subsidiaries' products and
services by Seller or any of its Subsidiaries does not violate any
obligations of any Acquired Company or infringe upon any Intellectual
Property of any Person and no claims of infringement of third party
Intellectual Property have been asserted by any Person against Seller or any
of its Subsidiaries with respect to their use of the Material Intellectual
Property, or challenging or questioning the validity or effectiveness of any
license or agreement relating thereto; and (iii) Seller and its Subsidiaries
have not received any notice of claim that any of the Material Intellectual
Property is not valid or enforceable in any country.
Section 4.13. Contracts. Section 4.13 of the Seller
--------- ------------
Disclosure Schedule sets forth a true and correct list, as of the date
hereof, of each of the following to which Seller or any of its Subsidiaries
is a party, in each cased Related to the Business: (a) contract not made in
the ordinary course of business, including any joint venture agreements,
shareholder agreements, indemnities or guarantees; (b) contract for, or
setting forth any of the terms or conditions relating to, the employment or
termination of employment of any officer or employee; (c) franchise,
distributorship or sales agency agreement involving annual payments in
excess of U.S.$200,000 or involving annual payments in excess of
U.S.$100,000 and that is not terminable without penalty within a period of
60 calendar days; (d) contract for (i) the purchase or the sale, supply or
provision, of materials, supplies, services, merchandise or equipment,
(ii) research and development collaboration, (iii) Incoming IP License of
Material Intellectual Property, or (iv) Outgoing IP License of Material
Intellectual Property, Patents or registered trademarks and service marks,
in each case, not capable of being fully performed or not terminable without
penalty within a period of 60 calendar days and involving annual payments in
excess of U.S.$150,000 (it being understood that as far as the agreements
between any of the Acquired Companies and Infraserv GmbH are concerned,
these thresholds shall be calculated on the basis of the aggregate payments
made by the Acquired Companies to Infraserv GmbH); (e) agreement for the
purchase or sale of any of its assets, other than in the ordinary course of
business, or any shares of its subsidiaries or interests in its businesses
or joint ventures; (f) non-competition agreement with any Person, other than
any current or former officer or employee of Seller or one of its
Subsidiaries; (g) contract relating to any indebtedness for borrowed money,
guaranty, surety, line of credit or other loan or financing arrangement
involving annual payments in excess of U.S.$100,000; or (h) toll
manufacturing agreement involving annual payments in excess of U.S.$200,000
(those contracts required to be disclosed in such section, collectively, the
"MATERIAL BUSINESS CONTRACTS"). Seller and its Subsidiaries have performed
in all material
19
respects all of the obligations required to be performed by them to date,
and are not in material default under, any of the Material Business
Contracts, and, to the Knowledge of Seller, no other party to one of the
Material Business Contracts is in material default thereunder. Each Material
Business Contract is in full force and effect and constitutes as of the date
hereof the legal, valid and binding obligation of Seller or its Subsidiaries
and, to the Knowledge of Seller, each other party thereto, enforceable in
accordance with its terms in all material respects.
Section 4.14. Employee Benefits.
-----------------
(a) Section 4.14(a) of the Seller Disclosure Schedule sets
---------------
forth a true and correct list, as of the date hereof, of all material
written, and to the Knowledge of Seller, oral, employee benefit plans, and
any other material written, and to the Knowledge of Seller, oral, incentive
compensation or employee benefit plan, arrangement or agreement (including
retention, change in control, severance, disability, fringe benefit,
deferred compensation, bonus or other incentive compensation and stock
option, purchase or other equity based plans, agreements and arrangements),
but excluding payroll practices and plans, agreements and arrangements that
are mandated by Law, that are sponsored or maintained by Seller or any of
its Subsidiaries, to which Seller or any of its Subsidiaries contributes or
is obligated to contribute, in any such case, with respect to Acquired
Company Employees, Business Employees, and, solely with respect to
employment with any Acquired Company, Former Acquired Company Employees
(collectively, the "EMPLOYEE BENEFIT PLANS"). Section 4.14(a) of the Seller
---------------
Disclosure Schedule identifies each Employee Benefit Plan that is sponsored,
maintained or contributed to solely by one or more of the Acquired
Companies, or to which solely the Acquired Companies are required to
contribute (collectively, the "ACQUIRED COMPANY PLANS").
(b) Nothing has occurred with respect to any material
Acquired Company Plan in a jurisdiction other than the United States that
could reasonably be expected to cause the loss of any tax approval or
qualification of such plan in such jurisdiction that is material with
respect to such plan.
(c) Except as would not have a Material Adverse Effect,
all contributions, premiums and expenses required to be made by Law or by
the terms of each Acquired Company Plan or any agreement relating thereto
have been timely made.
(d) True and correct copies of the most recent plan
summaries distributed to employees, if any, and all amendments or
supplements thereto, with respect to each of the Employee Benefit Plans (as
applicable) have been Made Available to Purchaser. In addition, true and
correct copies of the most recent actuarial report and the most recent
financial statements, if any, with respect to each of the Acquired Company
Plans have been Made Available to Purchaser.
(e) There are no pending or, to the Knowledge of Seller,
threatened Legal Proceedings, audits or investigations against or involving
any Acquired Company Plan, the assets of any such plan or the plan
administrator or fiduciary of any Acquired Company Plan (other than routine
benefit claims), except for such Legal Proceedings, audits or investigations
as would not reasonably be expected to result in liabilities in excess of
U.S.$100,000.
20
(f) To the Knowledge of Seller, each of the material
Acquired Company Plans has been maintained, operated and administered, in
all material respects in accordance with its terms and all provisions of
applicable Law.
(g) To the Knowledge of Seller, neither the execution
hereof nor the consummation of the transactions contemplated hereby will
(whether alone or together with any other event or events): (i) entitle any
Acquired Company Employee or Business Employee at any Material Site to any
increase in any compensation or benefits (including any cash or equity award
or benefit); (ii) accelerate the time at which any compensation, benefits or
award may become payable, vested or required to be funded in respect of any
Acquired Company Employee or Business Employee at any Material Site; and
(iii) entitle any Acquired Company Employee or Business Employee at any
Material Site to any additional compensation, benefits or award.
(h) Set forth in Section 4.14(h) is a true and correct
---------------
list, as of September 30, 2002, of the number of Acquired Company Employees
and Business Employees by country of employment.
(i) Set forth in Section 4.14(i) is a true and correct
---------------
list, as of September 30, 2002, of the names, annual salaries, date of hire
and whether or not active of all Business Employees and Acquired Company
Employees.
Section 4.15. Labor.
-----
(a) Set forth in Section 4.15(a) of the Seller Disclosure
---------------
Schedule is a true and correct list, as of the date hereof, of each labor or
collective bargaining agreement and all agreements with unions, works
councils or similar organizations (including shop practices (betriebliche
Ubung) in Germany or other countries and any agreements pertaining to work
regulations) to which Seller or any of its Subsidiaries is a party that
pertains to Acquired Company Employees or Business Employees (other than
those that apply to all workers within the country in a given industry).
(b) No labor organization representing any Acquired
Company Employees or Business Employees or group of Acquired Company
Employees or Business Employees has made a pending demand against Seller or
any of its Subsidiaries for recognition; and there are no representation
proceedings or petitions seeking a representation proceeding presently
pending against Seller or any of its Subsidiaries involving any Acquired
Company Employees or Business Employees or, to the Knowledge of Seller,
threatened to be brought or filed against Seller or any of its Subsidiaries
Related to the Business with the United States National Labor Relations
Board or any other labor relations tribunal inside or outside of the United
States. There is no ongoing organizing activity involving Acquired Company
Employees or Business Employees pending or, to the Knowledge of Seller,
threatened by any labor organization or group of Acquired Company Employees
or Business Employees.
(c) As of the date hereof, there are no (i) strikes, work
stoppages, slowdowns, lockouts or arbitrations pending, or to the Knowledge
of Seller, threatened, involving in excess of 35 Business Employees or
Acquired Company Employees at any Material Site, (ii) grievances or other
labor disputes or proceedings pending or threatened against or involving any
21
Acquired Company Employees or Business Employees, or (iii) unfair labor
practice charges, grievances or complaints pending or threatened by or on
behalf of any Acquired Company Employees or Business Employees, except, in
the cases of clauses (ii) and (iii), which would not reasonably be expected
to result in costs or liabilities in excess of U.S.$200,000.
(d) The Business and the Acquired Companies are in
compliance in all material respects with all Laws and Orders and works
council regulations Related to the Business relating to the employment of
their respective employees and the engagement of their respective
independent contractors, including all such Laws and Orders relating to
wages, hours, collective bargaining, legal qualification of employment
status, employment discrimination, immigration, disability, civil rights,
rights of privacy, unfair labor practices, occupational safety and health,
workers' compensation, pay equity, the collection and payment of withholding
and/or social contribution taxes and similar Taxes.
Section 4.16. Litigation. As of the date hereof, there is
----------
no material Legal Proceeding pending or, to the Knowledge of Seller,
threatened against Seller or any of its Subsidiaries that challenges, or
questions the validity of, this Agreement, any Seller Document or any action
taken or to be taken by Seller and its Subsidiaries in connection with, or
that seeks to enjoin or obtain monetary damages in respect of, the
consummation of the transactions contemplated hereby or thereby. Section 4.16
------------
of the Seller Disclosure Schedule sets forth a true and correct list, as of
the date hereof, of all pending or, to the Knowledge of Seller, threatened
Legal Proceedings in which Seller or any of its Subsidiaries is a party,
which would reasonably be expected to result in liabilities in excess of
U.S.$100,000.
Section 4.17. Compliance with Other Laws; Permits.
-----------------------------------
(a) The Business is being conducted, and has been
conducted for the three years prior to the date hereof, in all material
respects in compliance with all applicable Laws (including Laws relating to
competition, restrictive trade practices, antitrust, monopolies, merger
control, fair trade and restraint of trade ("COMPETITION LAWS"), but
excluding Environmental Laws and Environmental Permits, which are addressed
in Section 4.18) and Orders promulgated by any Governmental Body applicable
to Seller or its Subsidiaries or to the operation of the Business or the
ownership or use of the Assets. To the Knowledge of Seller, there are no
pending or threatened investigations or Legal Proceedings Related to the
Business under any Competition Laws. Neither Seller nor any its Subsidiaries
is subject to any enforceable undertaking with any Governmental Body Related
to the Business under any Competition Laws, nor has any Governmental Body
requested in writing that the Seller enter into any such undertaking.
(b) Section 4.17(b) of the Seller Disclosure Schedule
---------------
lists all Permits of all Governmental Bodies or other Persons issued to
Seller and its Subsidiaries and Related to the Business, which represent all
Permits of all Governmental Bodies or other Persons required by the nature
of the operations of the Business to permit the operation thereof in the
manner in which they are currently conducted, except for such Permits the
failure to have would not materially impair the continued operation of the
Business or of any Material Site. As of the date hereof, all Permits listed
on Section 4.17(b) are in full force and effect and none of them have
---------------
expired, and neither Seller nor any of its Subsidiaries has received any
written notice of any and,
22
to the Knowledge of Seller there is no, suspension, modification,
revocation, cancellation or non-renewal, in whole or in part, of any Permit
listed in Section 4.17(b) of the Seller Disclosure Schedule.
---------------
Section 4.18. Environmental Matters. (a) Seller and its
---------------------
Subsidiaries have conducted the Business in material compliance with all
applicable Environmental Laws and Environmental Permits; (b) none of the
Owned Real Estate or other real properties owned or leased by the Acquired
Companies contains Hazardous Materials as a result of any activity of the
Seller or any of its Subsidiaries or any of its or their predecessors in
amounts exceeding the levels permitted by applicable Environmental Laws or
Environmental Permits, which would reasonably be expected to result in costs
or liabilities in excess of U.S.$100,000; (c) since December 31, 2001,
neither Seller nor its Subsidiaries has received any notices, demand letters
or requests for information from any federal, state, local or foreign
Governmental Body indicating that Seller or any of its Subsidiaries may be
in violation of, or liable under, any Environmental Law or Environmental
Permit in connection with the ownership or operation of the Business, which
would reasonably be expected to result in costs or liabilities in excess of
U.S.$100,000; (d) as of the date hereof, there are no civil, criminal or
administrative actions, suits, demands, claims, hearings, investigations or
proceedings pending or, to the Knowledge of the Sellers, threatened against
the Seller or any of its Subsidiaries relating to any violation, or alleged
violation, of any Environmental Law or Environmental Permit in connection
with the Business, which would reasonably be expected to result in costs or
liabilities in excess of U.S.$100,000; and (e) attached as Section 4.18(e)
---------------
of the Seller Disclosure Schedule is a true and correct list of all Phase I
and Phase II environmental reports Made Available to Purchaser, and, to the
Knowledge of Seller, these reports constitute all Phase I and Phase II
environmental reports Related to the Business prepared in the past five
years and in the possession of Seller.
Section 4.19. Ownership of Necessary Assets and Rights.
----------------------------------------
Except for (a) the Excluded Assets, (b) the Licensed Intellectual Property,
(c) the identification numbers assigned to Seller and its Subsidiaries
(other than any Acquired Company) by any Governmental Body relating to
environmental matters, and (d) those assets and services to be provided
pursuant to the terms of the Separation Agreements, the Assets to be
transferred to Purchaser or Subsidiary Purchasers at the Closing and any
Subsequent Closing comprise sufficient assets, properties and rights of
every type and description, real, personal and mixed, tangible and
intangible, necessary to the operation of the Business as described in the
Benchmark Financial Statements in all material respects.
Section 4.20. Customers and Suppliers. Set forth in
-----------------------
Section 4.20 of the Seller Disclosure Schedule is a true and correct list of
------------
(a) the ten largest customers of the Business, and (b) the ten largest
suppliers of the Business, in each case, during the year ended December 31,
2001. No customer or supplier that is not listed in Section 4.20 of the
------------
Seller Disclosure Schedule accounted for in excess of 5% of the revenues or
purchases of the Business during the year ended December 31, 2001. To the
Knowledge of Seller, as of the date hereof, no customer or supplier listed
in Section 4.20 of the Seller Disclosure Schedule has canceled or otherwise
------------
terminated its relationship with the Business, or decreased or limited its
purchases from or sales to the Business, in each case, in such a manner as
would materially adversely affect the operations of the Business.
23
Section 4.21. Products. (a) Neither Seller nor any of its
--------
Subsidiaries has received any written notice of any, and to the Knowledge of
Seller there is no, pending or threatened Legal Proceeding or claim by any
Governmental Body or any other Person before any Governmental Body alleging
any defect in any product manufactured or sold by the Business or alleging
any failure to warn by the Business or any breach of warranty or alleging
death, personal injury, other injury to persons or property damages relating
to or arising out of, directly or indirectly, use of or exposure to any of
the products (or any component thereof) designed, manufactured, serviced or
sold, or services performed, by the Business, and (b) there has not been,
within the past three years, any product recall conducted with respect to
any product manufactured or sold by the Business, in each case, which
resulted, or would reasonably be expected to result in, liabilities or costs
in excess of U.S.$100,000.
Section 4.22. Brokers. Except for Credit Suisse First
-------
Boston Corporation, no Person has acted directly or indirectly as a broker,
finder or financial advisor for Seller in connection with the negotiations
relating to or the transactions contemplated hereby and no Person is
entitled to any fee or commission or like payment in respect thereof from
Purchaser based in any way on any agreement, arrangement or understanding
made by or on behalf of Seller. Seller is solely responsible for the fees
and expenses of Credit Suisse First Boston payable in connection with the
transactions contemplated hereby.
Section 4.23. Disclosure. Seller has Made Available to
----------
Purchaser copies of all agreements and documents listed in the Seller
Disclosure Schedule, and all such agreements and documents are true and
correct in all material respects.
Section 4.24. Disclaimers of Seller. EXCEPT AS EXPRESSLY
---------------------
SET FORTH HEREIN OR IN ANY SEPARATION AGREEMENT, (A) SELLER EXCLUDES AND
DISCLAIMS ALL WARRANTIES WITH RESPECT TO THE BUSINESS OR THE PURCHASED
ASSETS, INCLUDING, WITHOUT LIMITATION, IMPLIED WARRANTIES OF SATISFACTORY
QUALITY AND FITNESS FOR A PARTICULAR PURPOSE, AND (B) SELLER MAKES NO
REPRESENTATION OR WARRANTY WITH RESPECT TO THE MEMORANDA, PRESENTATIONS,
REPORTS, SELLER'S LONG RANGE PLAN OR ANY OTHER DOCUMENT CONTAINING FINANCIAL
FORECASTS OR PROJECTIONS OR OTHER INFORMATION FURNISHED BY SELLER OR ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES. NOTHING HEREIN
SHALL EXCLUDE OR LIMIT SELLER'S LIABILITY FOR (I) FRAUD OR THE TORT OF
DECEIT; (II) DEATH OR PERSONAL INJURY CAUSED BY THE SELLER'S NEGLIGENCE OR
ITS FAILURE TO EXERCISE REASONABLE SKILL AND CARE; (III) ANY BREACH OF THE
OBLIGATIONS IMPLIED BY S.12 SALE OF GOODS ▇▇▇ ▇▇▇▇ OR S.2 SUPPLY OF GOODS
AND SERVICES ▇▇▇ ▇▇▇▇; OR (IV) ANY OTHER LIABILITY THAT CANNOT BE EXCLUDED
OR LIMITED BY APPLICABLE LAW. ALL THE LIMITATIONS ON LIABILITY IN THIS
SECTION 4.24 ARE SEPARATE AND SEVERABLE PROVISIONS HEREOF.
Section 4.25. Knowledge Regarding Warranties. Seller is
------------------------------
not aware of any actual breach of any warranties of Purchaser herein or in
the Purchaser Documents.
24
ARTICLE V
WARRANTIES OF PURCHASER
Purchaser hereby warrants to Seller that:
Section 5.1. Organization and Good Standing. Purchaser is
------------------------------
a corporation duly organized, validly existing and in good standing under
the laws of Belgium. Each Subsidiary Purchaser is an entity duly organized,
validly existing and, if applicable, in good standing under the laws of the
jurisdiction of its organization.
Section 5.2. Authorization of Agreement. Purchaser has all
--------------------------
requisite corporate power and authority to execute and deliver this
Agreement and each other agreement, document, instrument or certificate
contemplated hereby or to be executed by Purchaser in connection with the
consummation of the transactions contemplated hereby and thereby (all of
such agreements, documents, instruments and certificates required to be
executed by Purchaser and any of its Subsidiaries being hereinafter referred
to, collectively, as the "PURCHASER DOCUMENTS"), and to perform fully its
obligations hereunder and thereunder. The execution, delivery and
performance by Purchaser hereof and by Purchaser or the Purchaser
Subsidiaries of each Purchaser Document has been duly authorized by all
necessary corporate action on the part of Purchaser. This Agreement has
been, and each of Purchaser Documents will be, on or prior to the Closing
Date, duly executed and delivered by Purchaser or the Purchaser Subsidiaries
and (assuming the due authorization, execution and delivery by the other
parties hereto) this Agreement constitutes, and each of Purchaser Documents
when so executed and delivered will constitute, the legal, valid and binding
obligations of Purchaser and the Purchaser Subsidiaries, enforceable against
Purchaser in accordance with its terms.
Section 5.3. Consents of Third Parties. None of the
-------------------------
execution and delivery by Purchaser hereof and Purchaser Documents, the
consummation of the transactions contemplated hereby or thereby or the
compliance by Purchaser or the Purchaser Subsidiaries with any of the
provisions hereof or thereof will (a) result in the breach of, any provision
of the certificate or articles of incorporation, by-laws or similar
organizational documents of Purchaser or any Purchaser Subsidiary or
(b) violate, result in the breach of, or constitute a default under any Order
by which Purchaser or any of their properties or assets is bound or subject. No
consent, waiver, approval, Order, Permit or authorization of, or declaration
or filing with, or notification to, any Person or Governmental Body is
required on the part of Purchaser or any Purchaser Subsidiary in connection
with the execution and delivery hereof or Purchaser Documents, the
consummation of the transactions contemplated hereby and thereby or the
compliance by Purchaser and the Purchaser Subsidiaries with any of the
provisions hereof or thereof, except for compliance with the applicable
requirements of the HSR Act or the EC Regulation and other applicable merger
control or similar Laws and the receipt of appropriate Permits by Purchaser
to conduct the business and operate the Assets.
Section 5.4. Litigation. As of the date hereof, there is
----------
no material Legal Proceeding pending or, to the best knowledge, after due
investigation, of Purchaser, threatened against Purchaser or any Purchaser
Subsidiary that challenges, or questions the validity of, this Agreement,
the Purchaser Documents or any action taken or to be taken by Purchaser and
any
25
Purchaser Subsidiaries in connection with, or that seeks to enjoin or obtain
monetary damages in respect of, the consummation of the transactions
contemplated hereby or thereby.
Section 5.5. Financing. On the date hereof, Purchaser has
---------
sufficient cash resources available to pay the Cash Consideration, and on
the Closing Date, Purchaser will have sufficient immediately available cash
to pay the Cash Consideration.
Section 5.6. Brokers. Except for Bear, ▇▇▇▇▇▇▇ & Co., no
-------
Person has acted directly or indirectly as a broker, finder or financial
advisor for Purchaser in connection with the negotiations relating to or the
transactions contemplated hereby and no Person is entitled to any fee or
commission or like payment in respect thereof from Seller based in any way
on agreements, arrangements or understandings made by or on behalf of
Purchaser. Purchaser is solely responsible for all fees and expenses of Bear
▇▇▇▇▇▇▇ payable in connection with the transactions contemplated hereby.
Section 5.7. Knowledge Regarding Warranties. Purchaser is
------------------------------
not aware of any actual breach of warranty of Seller contained herein or in
the Seller Documents.
Section 5.8. No Inducement or Reliance; Independent
--------------------------------------
Assessment.
----------
(a) With respect to the Purchased Assets, the Business or
any other rights or obligations to be transferred hereunder or under the
Separation Agreements or pursuant hereto or thereto, Purchaser has not been
induced by and has not relied upon any representations, warranties or
statements, whether express or implied, made by Seller, any Affiliate of
Seller, or any agent, employee, attorney or other representative of Seller
representing or purporting to represent Seller that are not expressly set
forth herein or in the Separation Agreements (including the Schedules and
Exhibits hereto and thereto), whether or not any such representations,
warranties or statements were made in writing or orally (other than the
documents and information Made Available to Purchaser), and that (in the
absence of fraud) Purchaser will not have any right or remedy arising out of
any such representation, warranty or statement.
(b) Purchaser acknowledges that, except as explicitly set
forth herein, neither Seller nor any of its Affiliates has made any
warranty, express or implied, as to the prospects of the Business or its
profitability for Purchaser, or with respect to any forecasts, projections
or business plans prepared by or on behalf of Seller and delivered to
Purchaser in connection with Purchaser's review of the Business and the
negotiation and the execution hereof, and that (in the absence of fraud)
Purchaser shall not have any right or remedy arising out of any such
representation, warranty or statement.
ARTICLE VI
COVENANTS OF SELLER
From and after the date hereof and until the Closing
(except with respect to Sections 6.3(b) and 6.9, which shall survive the
Closing in accordance with their terms), Seller hereby covenants and agrees
that:
26
Section 6.1. Access to Documents; Opportunity to Ask
---------------------------------------
Questions. Seller shall, and shall cause its Subsidiaries to, afford to
---------
representatives of Purchaser reasonable access to its senior management to
answer Purchaser's questions concerning the business operations and affairs
of the Business, corporate records, books of accounts, Business Contracts,
financial statements and all other documents Related to the Business
reasonably requested by Purchaser and shall permit Purchaser and its
Representatives reasonable access to the Purchased Properties; provided,
--------
that in each case, such access shall be given at reasonable times and upon
reasonable notice and without undue interruption to Seller's business or
personnel. Notwithstanding the foregoing, nothing contained herein shall
permit Purchaser to conduct any soil, groundwater or other intrusive
sampling. All requests for access shall be made to such representatives of
Seller as Seller shall designate, who shall be solely responsible for
coordinating all such requests and access thereunder.
Section 6.2. Conduct of Business. Until the Closing Date,
-------------------
Seller shall, and shall cause its Subsidiaries to, solely with respect to
the operation of the Business (unless Purchaser shall otherwise consent in
writing (which consent shall not be unreasonably withheld, conditioned or
delayed) or except as otherwise contemplated hereby or as disclosed in
Section 6.2 of the Seller Disclosure Schedule (it being understood and
-----------
agreed that Section 6.2 of the Seller Disclosure Schedule shall not be
-----------
subject to update as provided in Section 6.6)) preserve the Business as a
going concern, and in particular (but not limited to):
(a) (i) operate in the ordinary course in all material
respects consistent with past practice, (ii) preserve its present material
business operations, organization and goodwill, (iii) keep available the
services of its present officers and key employees, (iv) preserve its
present relationships with Persons having business dealings with it and
(v) except for changes resulting from transactions in the ordinary course,
keep the level of its inventories, supplies, accounts receivable and accounts
payables consistent in all material respects with past practice;
(b) (i) maintain its assets and properties in all material
respects in accordance with Seller's maintenance policies and procedures in
effect as of the date hereof, and (ii) maintain insurance upon its assets
and properties in such amounts and of such kinds comparable in all material
respects to that in effect as of the date hereof on such properties and with
respect to such operation;
(c) maintain its books, accounts and records in the
ordinary course, on a basis consistent in all material respects with past
practice;
(d) except in the ordinary course of business or as
required by Law, or as required by any contractual obligation or other
understanding or arrangement disclosed in Section 6.2(d) of the Seller
--------------
Disclosure Schedule, (i) not increase the rate of compensation payable or
to become payable to any Acquired Company Employees or Business Employees,
(ii) not enter into any new, or amend any existing, Acquired Company Plan,
and (iii) not enter into any new, or amend any existing Seller Employee
Benefit Plan;
(e) except in the ordinary course of business consistent
with past practice or as otherwise provided for herein or contemplated
hereby (i) not enter into any new, or modify the terms of any existing,
Material Business Contract; (ii) not mortgage, pledge or subject to any
27
new Lien (other than Permitted Exceptions) any of the material Assets or the
Purchased Shares; (iii) not sell, assign, transfer, convey, lease or
otherwise use or dispose of any of the material Assets or any of the shares
of capital stock of the Acquired Companies; provided, however, that anything
-------- -------
in this Section 6.2 to the contrary notwithstanding, but subject to Section
11.5, Seller shall be permitted to transfer, or to cause its Subsidiaries to
transfer, the shares of (A) Erste Viking Resins Germany 1 GmbH or (B) any
Liquidating Company, to Seller or any of its Subsidiaries (other than an
Acquired Company); (iv) not cancel or compromise any material debt or claim
or waive or release any material right Related to the Business; (v) not make
or enter into any new commitment to make any capital expenditure in excess
of U.S.$100,000 individually or U.S.$500,000 in the aggregate; or (vi) not
enter into, or renew, any collective bargaining agreement, "shop agreement,"
or equivalent union or works council agreement except for negotiations and
renewals of existing agreements expiring in accordance with their terms;
(f) maintain or cause to be maintained the Acquired
Intellectual Property in accordance with Seller's existing policies and
procedures consistently applied;
(g) comply in all material respects with all Laws to which
it is subject;
(h) not settle any pending litigation or obtain any
releases of threatened actions or proceedings in each case, in excess of
U.S.$100,000 individually or U.S.$250,000 in the aggregate;
(i) not accelerate or delay collection of any notes or
accounts receivable in advance of or beyond their regular due dates or the
dates when the same would have been collected in the ordinary course of
business consistent with past practice;
(j) not delay or accelerate payment of any accounts
payable or other liabilities beyond or in advance of their due dates or the
dates when such liabilities would have been paid in the ordinary course of
business consistent with past practice;
(k) not make any change in the accounting practices or
policies applied in the preparation of financial statements, except as
required by GAAP;
(l) promptly notify Purchaser of any (i) losses or damages
suffered by Seller with respect to property and assets having an individual
replacement cost of more than U.S.$100,000 or an aggregate replacement cost
of more than U.S.$500,000 or that would have a Material Adverse Effect,
whether or not such losses or damages are covered by insurance and
(ii) Legal Proceeding commenced by or against Seller or any of its
Subsidiaries Related to the Business or any Legal Proceeding commenced or,
to the Knowledge of Seller, threatened in writing, against Seller or any
of its Subsidiaries relating to the transactions contemplated hereby;
(m) not amend its organizational documents in a manner
that, or, except as required by Law, assist in any shareholder action
(whether by action in writing, at a special or extraordinary meeting or
otherwise) that, prohibits or delays the transactions contemplated hereby;
28
(n) not issue any capital stock of any Acquired Companies,
or any securities convertible into, or other rights to acquire, any shares
of capital stock of any of the Acquired Companies;
(o) account for, make appropriate filings with respect to
(in the ordinary course of business), and pay when due, all Taxes,
assessments and other governmental charges against the Assets or in respect
of the Business;
(p) except as reasonably required to facilitate the
transactions contemplated hereby, not agree to permit any Person employed by
Seller or its Subsidiaries other than in connection with the Business to be
transferred to a job Related to the Business or to cause any Person employed
in a job Related to the Business to transfer employment to another position
with Seller or any Affiliate of Seller that is not Related to the Business;
(q) (i) not undertake any Tax planning strategies that are
not consistent with past practice that would create new deferred Tax
liabilities that would be reflected on the Closing Date Balance Sheet, and
(ii) follow the Tax accounting policies with respect to deferred Tax assets
and deferred Tax liabilities that Seller followed for the year ended
December 31, 2001 (except to the extent required by changes in applicable
standards or applicable Law); and
(r) not agree to take any action or actions prohibited by
any of the foregoing clauses (a) through (q).
Section 6.3. Consents and Conditions.
-----------------------
(a) Seller shall take, or cause to be taken, all
reasonable endeavors, and to do, or cause to be done, and to assist and
cooperate with Purchaser in doing, all things necessary, proper or advisable
to consummate and make effective the transactions contemplated hereby as
promptly as practicable, including, but not limited to: (i) obtaining all
necessary consents, approvals or waivers from, engaging in any required
consultation with, and giving any necessary notifications to, third parties
(including works councils); (ii) making all registrations and filings with,
and obtaining all necessary actions or non-actions, waivers, consents and
approvals from, all Governmental Bodies (including those in connection with
the HSR Act and the EC Regulation) and taking all reasonable steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, a Governmental Body; (iii) responding to any information
requests from the European Commission and/or the United States as soon as
possible; and (iv) defending any Legal Proceedings challenging this
Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered by
any Governmental Body vacated or reversed.
(b) If any consent of a third party that is required in
order to assign or transfer any Contract or Permit, or any claim, right or
benefit arising thereunder or resulting therefrom, is not obtained prior to
the Closing Date, or if an attempted assignment would be ineffective or
would adversely affect the ability of Seller to convey its interest in
question to Purchaser, Seller will cooperate with Purchaser in any lawful
arrangement to provide that Purchaser shall receive the interest of Seller
in the benefits under any such Contract or Permit, and Purchaser shall be
responsible for the liabilities and obligations under such Contract or
Permit, until such consent is
29
obtained. Nothing herein shall be construed as an attempt to assign any
Contract or Permit that is by its terms non-assignable without the consent
of the other party thereto. This Section 6.3(b) is not intended to limit
Purchaser's right under Section 8.6 not to consummate the transactions
contemplated hereby in the event the condition contained therein is not
satisfied.
(c) Seller shall keep Purchaser reasonably apprised of the
status of matters relating to the completion of the transactions
contemplated hereby, including promptly furnishing Purchaser with copies of
notices or other communications received by Seller or by any of its
Subsidiaries from any third party and/or any Governmental Body with respect
to the transactions contemplated hereby. Purchaser and Seller shall each
promptly furnish to the other such necessary information and reasonable
assistance as the other party may request in connection with the foregoing
and shall each promptly provide counsel for the other party with copies of
all filings made by such party, and all correspondence between such party
(and its advisors) and any Governmental Body and any other information
supplied by such party and such party's Affiliates to a Governmental Body in
connection herewith and the transactions contemplated hereby; provided,
--------
however, that Purchaser and Seller may, as each deems advisable and
-------
necessary, reasonably designate any competitively sensitive material
provided to the other as "outside counsel only," and materials may be
redacted (i) to remove references concerning the valuation of the Business
and (ii) as necessary to comply with contractual arrangements. Materials
designated as for "outside counsel only" and the information contained
therein shall be given only to the outside legal counsel of the recipient
and will not be disclosed by such outside counsel to employees, officers or
directors of the recipient unless express permission is obtained in advance
from the source of the materials (Purchaser or Seller, as the case may be)
or its legal counsel. Each party shall, subject to applicable Law, permit
counsel for the other party reasonable opportunity to review in advance, and
consider in good faith the views of the other party in connection with, any
proposed written communication to any Governmental Body. Purchaser and
Seller agree not to participate, or to permit their affiliates to
participate, in any substantive meeting or discussion, either in person or
by telephone, with any Governmental Body in connection herewith and the
transactions contemplated hereby unless it consults with the other party in
advance and, to the extent not prohibited by such Governmental Body, gives
the other party the opportunity to attend and participate; provided,
--------
however, that Seller shall not be deemed to have breached this covenant if
-------
(A) Seller uses efforts reasonable under the circumstances to contact
Purchaser or its representatives, but is nonetheless unable to reach
Purchaser or its representatives prior to the time at which such
Governmental Body proposes to conduct such meeting or discussion or (B) any
such designated representatives are unable to participate in such meeting at
such proposed time.
(d) Seller shall take all reasonable endeavors to ensure
that the Subsequent Closings (if any) shall take place as soon as
practicable after the Closing Date, and in any event no later than 90 days
after the Closing Date.
Section 6.4. Public Statements. Before Seller shall issue
-----------------
any press release or otherwise make any public statement concerning this
Agreement or the transactions contemplated hereby, Seller shall so advise
and cooperate with Purchaser and shall not release such information without
Purchaser's consent (which consent shall not be unreasonably withheld,
conditioned or delayed), unless (a) such information is otherwise publicly
available other than as a result of a disclosure by Seller made in breach of
this Section 6.4 or (b) the
30
release thereof is, in the reasonable judgment of Seller, required by any
Law (including any rule of any securities exchange on which Seller's
securities are traded) or Order to which Seller is bound or subject;
provided, in the case of this clause (b), that Seller take all reasonable
--------
endeavors to notify Purchaser prior to making any such disclosure and shall
restrict such disclosure to the minimum required by Law (in the reasonable
judgment of Seller).
Section 6.5. Non-Solicitation. Seller covenants that from
----------------
the date hereof it will not, and will not permit any of its Subsidiaries and
its and their respective Representatives to, (a) solicit, assist, initiate,
facilitate or encourage any inquiries, proposals, offers or bids from any
other party relating to the Acquired Companies, the Purchased Shares, the
Assets (other than as permitted under Section 6.2) or the Business, or
(b) participate in any discussions or negotiations regarding, or furnish or
cause to be furnished to any Person any non-public information relating to
the Acquired Companies, the Purchased Shares, the Assets or the Business,
other than in the ordinary course of business consistent with past practice.
Seller covenants that from the date hereof through the Closing Date, it will
not, directly or indirectly, enter into or authorize, or permit any of its
Representatives or Affiliates to enter into, any agreement or agreement in
principle with any third party for the acquisition of any of the Purchased
Shares or the Assets (other than as permitted under Section 6.2) (an
"ACQUISITION TRANSACTION"). Notwithstanding the foregoing, nothing contained
herein shall prevent Seller from (a) making, soliciting, assisting,
initiating, facilitating or encouraging any inquiries, proposals, offers or
bids from any other party relating to Seller, (b) participating in any
discussions or negotiations regarding, or furnishing or causing to be
furnished to any Person, any non-public information relating to Seller, or
(c) entering into an agreement relating to a Change in Control of Seller;
provided, in each case, that such action shall not prevent or materially
--------
delay the transactions contemplated hereby.
Section 6.6. Updating of Information. Seller shall, as
-----------------------
soon as reasonably practicable after it obtains knowledge thereof prior to
the Closing Date, deliver to Purchaser any information concerning a change
or any event occurring subsequent to the date hereof and prior to the
Closing Date that causes any Schedule or Section of the Seller Disclosure
Schedule to become incorrect or incomplete in any material respect or to
otherwise correct or amend any Schedule or Section of the Seller Disclosure
Schedule to reflect such change or event, it being understood and agreed
that the delivery of such information shall not in any manner constitute a
waiver by Purchaser of any of the conditions precedent to the Closing
hereunder, including the condition contained in Section 8.1; provided,
--------
however, that in determining whether there is a breach of any warranty
-------
contained in Article IV for purposes of the indemnification to be provided
by Seller pursuant to Article XI, such warranty shall not be qualified by
any information provided pursuant to this Section 6.6, unless (a) Seller
stipulates that such information would prevent the condition set forth in
Section 8.1 from being satisfied, and (b) Purchaser waives the satisfaction
of the condition set forth in Section 8.1 with respect to such information.
Section 6.7. Intercompany Accounts. Effective as of the
---------------------
Closing Date, all intercompany receivables, payables and loans then existing
between Seller or any of its Subsidiaries that is not an Acquired Company,
on the one hand, and the Acquired Companies, on the other hand, shall be
settled, including by way of capital contribution (with respect to
intercompany payables or loans due to Seller or any of its Subsidiaries that
is not an Acquired Company) or by way of dividend in kind (with respect to
intercompany payables or loans owed
31
by Seller or any of its Subsidiaries that is not an Acquired Company or
investments by the Acquired Companies); provided, that all Taxes arising
--------
from any such settlement shall be borne by the Seller in accordance with
Section 14.1.
Section 6.8. Certain Liens. Seller shall cause all Liens
-------------
on Purchased Assets or on the shares or other equity interests of any
Acquired Company securing indebtedness of Seller or any of its Subsidiaries
under Seller's Second Amended and Restated Credit Agreement, dated as of
July 25, 2002, to be removed as of the Closing or promptly thereafter, and
Seller shall indemnify Purchaser or its Subsidiaries for any Losses arising
out of or resulting from the fact that any such removal did not occur as of
the Closing.
Section 6.9. Further Actions. Seller, whether before, at
---------------
or after the Closing, shall execute and deliver such instruments and take
such other actions as may reasonably be required to (a) carry out the intent
hereof and of the Separation Agreements and (b) consummate the transactions
contemplated hereby and thereby.
Section 6.10. Transfer of Assets. Except for (a) the
------------------
Excluded Assets, (b) the Licensed Intellectual Property, (c) the
identification numbers assigned to Seller and its Subsidiaries (other than
any Acquired Company) by any Governmental Body relating to environmental
matters, and (d) those assets and services to be provided pursuant to the
terms of the Separation Agreements, at the Closing and any Subsequent
Closing, Seller and its Subsidiaries shall transfer to Purchaser or
Subsidiary Purchasers assets that comprise sufficient assets, properties and
rights of every type and description, real, personal and mixed, tangible and
intangible, necessary to the operation of the Business as described in the
Benchmark Financial Statements in all material respects.
Section 6.11. Additional Financial Information. Seller
--------------------------------
shall furnish to Purchaser, by January 24, 2003, an unaudited balance sheet
of the Business as of December 31, 2002 prepared on a consistent basis with
the Interim Balance Sheet.
Section 6.12. Termination of Organschaft. Seller shall
--------------------------
take commercially reasonable endeavors to terminate the Organschaft between
Solutia Deutschland Holding GmbH and Erste Viking Resins Germany 1 GmbH
effective as of December 31, 2002.
Section 6.13. Payment of Insurance Claims or Proceeds.
---------------------------------------
Seller shall transfer to the Purchaser or the relevant Acquired Company the
claims or proceeds referred to in Section 1.2(l) within ten Business Days
following receipt by Seller of the documentation referred to in such
section.
ARTICLE VII
COVENANTS OF PURCHASER
From and after the date hereof and until the Closing
(except with respect to Sections 7.4, 7.5, 7.6, 7.7 and 7.8, which shall
survive the Closing in accordance with their terms), Purchaser hereby
covenants and agrees that:
32
Section 7.1. Confidentiality. Any information provided to
---------------
Purchaser or its representatives pursuant hereto shall be held in accordance
with, and shall be subject to the terms of, the Confidentiality Agreement.
As of the Closing Date, the Confidentiality Agreement shall terminate and
cease to be of effect.
Section 7.2. Public Statements. Before Purchaser shall
-----------------
issue any press release or otherwise make any public statement concerning
this Agreement or the transactions contemplated hereby, Purchaser shall so
advise and cooperate with Seller and shall not release such information
without Seller's consent (which consent shall not be unreasonably withheld,
conditioned or delayed), unless (a) such information is otherwise publicly
available other than as a result of a disclosure by Purchaser made in breach
of this Section 7.2 or (b) the release thereof is, in the reasonable
judgment of Purchaser, required by any Law (including any rule of any
securities exchange on which Purchaser's securities are traded) or Order to
which Purchaser is bound or subject; provided, in the case of this clause
--------
(b), that Purchaser shall take all reasonable endeavors to notify Seller
prior to making any such disclosure and shall restrict such disclosure to
the minimum required by Law (in the reasonable judgment of Purchaser).
Section 7.3. Consents and Conditions.
-----------------------
(a) Purchaser shall use all reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with Seller in doing, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated
hereby as promptly as practicable, including, but not limited to: (i)
obtaining all necessary consents, approvals or waivers from, and giving any
necessary notifications to, third parties; (ii) making all registrations and
filings with, and obtaining all necessary actions or non-actions, waivers,
consents and approvals from, all Governmental Bodies (including those in
connection with the HSR Act and the EC Regulation) and using all reasonable
best efforts to obtain an approval or waiver from, or to avoid an action or
proceeding by, a Governmental Body; (iii) responding to any information
requests from the European Commission and/or the United States as soon as
possible; and (iv) defending any Legal Proceedings challenging this
Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order or
preliminary or permanent injunction entered by any Governmental Body vacated
or reversed. In furtherance of, and without in any way limiting, the
foregoing, Purchaser shall use all reasonable best efforts to avoid the
issuance of a Request for Additional Information and Documentary Material
("SECOND REQUEST") under 15 U.S.C. Section 18a(e)(2) in the United States or
the issuance of a decision under Article 6(1)(c) of the EC Regulation
initiating a "Second Phase" investigation ("SECOND PHASE").
(b) Purchaser shall keep Seller reasonably apprised of the
status of matters relating to the completion of the transactions
contemplated hereby, including promptly furnishing Seller with copies of
notices or other communications received by Purchaser or by any of its
Subsidiaries from any third party and/or any Governmental Body with respect
to the transactions contemplated hereby. Purchaser and Seller shall each
promptly furnish to the other such necessary information and reasonable
assistance as the other party may request in connection with the foregoing
and shall each promptly provide counsel for the other party with copies of
all filings made by such party, and all correspondence between such party
(and its advisors) and any Governmental Body and any other information
supplied by such party and
33
such party's Affiliates to a Governmental Body in connection herewith and
the transactions contemplated hereby; provided, however, that Purchaser and
-------- -------
Seller may, as each deems advisable and necessary, reasonably designate any
competitively sensitive material provided to the other as "outside counsel
only," and materials may be redacted (i) to remove references concerning the
valuation of the Business and (ii) as necessary to comply with contractual
arrangements. Materials designated as for "outside counsel only" and the
information contained therein shall be given only to the outside legal
counsel of the recipient and will not be disclosed by such outside counsel
to employees, officers or directors of the recipient unless express
permission is obtained in advance from the source of the materials
(Purchaser or Seller, as the case may be) or its legal counsel. Each party
shall, subject to applicable Law, permit counsel for the other party
reasonable opportunity to review in advance, and consider in good faith, the
views of the other party in connection with, any proposed written
communication to any Governmental Body. Purchaser and Seller agree not to
participate, or to permit their affiliates to participate, in any
substantive meeting or discussion, either in person or by telephone, with
any Governmental Body in connection herewith and the transactions
contemplated hereby unless it consults with the other party in advance and,
to the extent not prohibited by such Governmental Body, gives the other
party the opportunity to attend and participate (in the case of Seller, as
an observer); provided, however, that Purchaser shall not be deemed to have
-------- -------
breached this covenant if (A) Purchaser uses efforts reasonable under the
circumstances to contact Seller's designated representatives at Van Bael &
▇▇▇▇▇▇ and Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇, but is nonetheless unable to
reach any such designated representatives prior to the time at which such
Governmental Body proposes to conduct such meeting or discussion or (B) any
such designated representatives are unable to participate in such meeting or
discussion at the proposed time.
(c) Purchaser shall take all reasonable endeavors to
ensure that the Subsequent Closings (if any) shall take place as soon as
practicable after the Closing Date and, in any event, no later than 90 days
after the Closing Date.
Section 7.4. Seller's Access to Documents. Purchaser
----------------------------
shall, and shall cause its Subsidiaries to, afford to Seller's
Representatives, upon reasonable notice and without undue interruption to
Purchaser's business, access during normal business hours to the books and
records of the Business pertaining to the operations of the Business prior
to the Closing Date for a period of five years (or such longer period as may
necessary to enable Seller to comply with provisions of applicable Law)
following the Closing Date in connection with financial statements and U.S.
Securities and Exchange Commission reporting obligations, Excluded
Liabilities, Excluded Assets and other reasonable business purposes provided
that nothing herein shall limit Seller's rights of discovery. Purchaser
agrees to hold all of the books and records of the Business existing on the
Closing Date or included in the Purchased Assets in accordance with
Purchaser's standard record retention policies provided that Purchaser shall
not destroy, alter or dispose of any of such books and records for a period
of ten years from the Closing Date or such longer time as may be required by
Law without first offering in writing at least 60 calendar days prior to
such destruction or disposition to surrender them to Seller.
Section 7.5. Further Actions. Purchaser shall, whether
---------------
before, at or after the Closing, execute and deliver such instruments and
take such other actions as may reasonably be required to (a) carry out the
intent hereof and of the Separation Agreements and (b) consummate the
transactions contemplated hereby and thereby, including the taking of all
acts necessary to
34
cause the conditions to Closing to be satisfied as promptly as possible.
From the execution hereof until the Closing, Purchaser undertakes to
promptly notify Seller of any known inaccuracy or breach in any warranty or
covenant of Seller or any circumstance or condition that could reasonably be
expected to constitute such a breach.
Section 7.6. Guaranties; Letters of Credit. Purchaser
-----------------------------
shall take all reasonable endeavors to cause itself or one or more of its
Affiliates to be substituted in all respects for Seller or any of its
Subsidiaries that is not an Acquired Company, effective as of the Closing
Date, in respect of all obligations of Seller and any such Subsidiary that
is not an Acquired Company under each of the guaranties, letters of credit,
letters of comfort, bid bonds and performance bonds obtained by Seller or
any its Subsidiaries that is not an Acquired Company for the benefit of the
Business, which guaranties, letters of credit, letters of comfort, bid bonds
and performance bonds are set forth in Section 7.6 of the Seller Disclosure
-----------
Schedule (the "GUARANTIES"). As a result of the substitution contemplated by
the first sentence of this Section 7.6, and, provided such substitution has
been consented to by the beneficiaries of such Guaranties, Seller and the
Subsidiaries that are not Acquired Companies shall from and after the
Closing cease to have any obligation whatsoever arising from or in
connection with the Guaranties.
Section 7.7. Use of Seller's Name. Purchaser agrees that
--------------------
(a) as soon as reasonably practicable after the Closing, it shall ▇▇▇▇
products and other property, both internally and externally, with
Purchaser's name and ▇▇▇▇ and shall remove and cease to ▇▇▇▇ products and
other property with the names, marks or other indicia of "Solutia,"
Santotec, Phos-Check, Butvar, Saflex, Vanceva, Dequest, the Solutia logo or
other similar ▇▇▇▇; provided, however, that for a period of six months
-------- -------
following the Closing Date, Purchaser may continue to use or dispose of any
inventory product specifications, manuals and other accompanying materials,
and packaging and shipping materials that bear the ▇▇▇▇ "Solutia," Santotec,
Phos-Check, Butvar, Saflex, Vanceva, Dequest, the Solutia logo or other
similar ▇▇▇▇, in a manner consistent with that employed immediately prior to
the Closing, and (b) it shall not advertise or hold itself out as Seller or
an Affiliate thereof after the Closing Date. Purchaser shall take all
reasonable endeavors to cause the names of all applicable Acquired Companies
to be changed to delete any references to "Solutia" from such names as
promptly as reasonably practicable after the Closing Date.
Section 7.8. Bulk Sales Law. Purchaser hereby waives
--------------
compliance by Seller, in connection with the transactions contemplated
hereby, with the provisions of any applicable bulk sales law, and Seller
shall indemnify Purchaser and its Subsidiaries for any Losses arising from
such failure to comply with any bulk sales law.
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
The obligation of Purchaser to consummate the transactions
contemplated hereby on the Closing Date is subject to the satisfaction (or,
if permitted, waiver by Purchaser in its sole discretion) of each of the
following conditions:
35
Section 8.1. Accuracy of Warranties. Each of the
----------------------
warranties of Seller contained herein shall be true and correct in all
respects with the same force as if made on and as of the Closing Date
(except, in each case, to the extent any such warranty speaks as of a
specific date, in which case such warranty shall be, subject to the
qualification set forth below, true and correct as of such specific date),
except for any such failures to be true and correct as would not,
individually or in the aggregate, have a Material Adverse Effect.
Section 8.2. Performance of Covenants. Seller shall have
------------------------
performed and complied, in all material respects, with the covenants and
provisions hereof required to be performed or complied with by it between
the date hereof and the Closing Date.
Section 8.3. Antitrust Laws. Any required waiting period
--------------
under the HSR Act relating to the transactions contemplated hereby shall
have expired or been terminated and the European Commission shall have
issued a decision under Article 6(1)(b) or 8(2) of Council Regulation No.
4064/89 of the European Community, as amended (or shall be deemed to have
done so under Article 10(b) thereof), declaring the transactions
contemplated hereby compatible with the EC Common Market.
Section 8.4. No Injunctions. No preliminary or permanent
--------------
injunction or other order of any court of competent jurisdiction restraining
or prohibiting the consummation of the transactions contemplated hereby
shall be in effect.
Section 8.5. Consents. Seller shall have obtained all
--------
third-party and governmental consents and shall have made all notifications
to work councils, required for the consummation of the transactions
contemplated hereby, other than such consents and notifications the failure
of which to have obtained or made would not have a Material Adverse Effect.
Section 8.6. Officer's Certificate. Purchaser shall have
---------------------
received a certificate from Seller to the effect set forth in Sections 8.1
and 8.2, dated the Closing Date, signed on behalf of Seller by the Chairman,
Chief Executive Officer, President, Chief Financial Officer or any Vice
President of Seller.
Section 8.7. Delivery of Documents. Seller shall have
---------------------
executed, if applicable, and delivered to Purchaser, at the Closing, all
documents and instruments listed in Section 3.2 to evidence the conveyance
by Seller and its Subsidiaries of the Purchased Shares and the Purchased
Assets.
Section 8.8. Separation Agreements. At or prior to the
---------------------
Closing, Seller shall have executed and delivered to Purchaser each of the
Separation Agreements.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligation of Seller to consummate the transactions
contemplated hereby on the Closing Date is subject to the satisfaction (or,
if permitted, waiver by Seller in its sole discretion) of each of the
following conditions:
36
Section 9.1. Accuracy of Warranties. Each of the
----------------------
warranties of Purchaser contained herein that is qualified as to materiality
shall be true and correct in all respects at and as of the Closing Date with
the same force as if made on and as of the Closing Date, and each of the
warranties of Purchaser contained herein that is not so qualified shall be
true and correct in all material respects at and as of the Closing Date with
the same force as if made on and as of the Closing Date (except, in each
case, to the extent any such warranty speaks as of a specific date, in which
case such warranty shall be true and correct, or true and correct in all
material respects, as the case may be, as of such specific date).
Section 9.2. Performance of Covenants. Purchaser shall
------------------------
have performed and complied, in all material respects, with the covenants
and provisions hereof required herein to be performed or complied with by it
between the date hereof and the Closing Date.
Section 9.3. No Injunctions. No preliminary or permanent
--------------
injunction or other order of any court of competent jurisdiction restraining
or prohibiting the consummation of the transactions contemplated hereby
shall be in effect.
Section 9.4. Officer's Certificate. Seller shall have
---------------------
received a certificate from Purchaser to the effect set forth in Sections
9.1 and 9.2, dated the Closing Date, signed by two directors of Purchaser or
by the holder(s) of a specific power of attorney.
Section 9.5. Antitrust Laws. Any required waiting period
--------------
under the HSR Act relating to the transactions contemplated hereby shall
have expired or been terminated, the European Commission shall have issued a
decision under Article 6(1)(b) or 8(2) of Council Regulation No. 4064/89 of
the European Community, as amended (or shall be deemed to have done so under
Article 10(b) thereof), declaring the transactions contemplated hereby
compatible with the EC Common Market and the consents and approvals set
forth on Schedule 9.5 shall have been received.
------------
Section 9.6. Separation Agreements. At or prior to the
---------------------
Closing, Purchaser shall have executed and delivered to Seller each of the
Separation Agreements.
Section 9.7. Delivery of Documents. Purchaser shall have
---------------------
executed, if applicable, and delivered to Seller, at the Closing, all
documents and instruments listed in Section 3.3 to evidence the assumption
by Purchaser and its Subsidiaries of the Assumed Liabilities.
ARTICLE X
ADDITIONAL POST-CLOSING COVENANTS
Section 10.1. Certain Employment Matters.
--------------------------
(a) Employment of Business Employees and Acquired Company
-----------------------------------------------------
Employees.
---------
(i) Identification of Business Employees. Schedule
------------------------------------ --------
10.1(a)(i) lists each Business Employee as of the date indicated
----------
thereon, and shows whether such Business Employee is (A) employed
in or seconded or assigned from jurisdictions that
37
have adopted, or have implemented in their domestic legislation,
Council Directive 2001/23/EC of 12 March 2001 of the Council of the
European Union (the "DIRECTIVE") or equivalent rules (a "EUROPEAN
BUSINESS EMPLOYEE"), (B) employed in the United States of America
(a "U.S. BUSINESS EMPLOYEE"), or (C) employed elsewhere (an "OTHER
BUSINESS EMPLOYEE"). Without prejudice to Section 6.2(p), Seller
shall periodically update Schedule 10.1(a)(i) as appropriate to
-------------------
reflect changes in the identity of the Business Employees up to
the Closing Date.
(ii) European Business Employees. By virtue of the
---------------------------
consummation of the transactions contemplated hereby, the
employment contracts of all European Business Employees shall
automatically transfer to Purchaser or one of its Subsidiaries,
effective as of the Closing. From and after the Closing, the terms
and conditions of employment (including secondments and
international assignees) of each European Business Employee with
Purchaser or its Subsidiary, as applicable, shall, except as
specifically provided in this Section 10.1, be the same as apply to
such European Business Employee immediately before the Closing and
shall be consistent with the requirements of the Directive or
equivalent rules, as applicable. Seller and Purchaser shall
cooperate to provide European Business Employees with appropriate
communication about their status.
(iii) U.S. Business Employees and Other Business
------------------------------------------
Employees. Purchaser shall, or shall cause one of its Subsidiaries
---------
to, offer employment, effective as of the Closing, to each U.S.
Business Employee and each Other Business Employee on terms and
conditions of employment no less favorable, when taken in the
aggregate, than those that apply to such Business Employee
immediately before the Closing. Such offers to Other Business
Employees shall also comply with any applicable Law.
(iv) Acquired Company Employees. It is acknowledged
--------------------------
and agreed that all Acquired Company Employees shall remain
employed by the Acquired Companies immediately following the
Closing. In the case of Acquired Company Employees employed in
jurisdictions that have adopted, or have implemented in their
domestic legislation, the Directive or equivalent rules, such
continued employment shall comply with the Directive or equivalent
rules, as applicable. In all other cases, such continued employment
shall comply with any applicable Law.
(v) Liabilities. Except as specifically provided in
-----------
this Section 10.1, Seller shall remain solely responsible for any
Liabilities in respect of (A) any U.S. Business Employee or Other
Business Employee with respect to whom Purchaser or one of its
Subsidiaries complies with the requirements of Section
10.1(a)(iii), but who does not become a Transferred Employee, and
(B) any Transferred Employee with respect to his or her employment
or termination of employment with Seller and its Subsidiaries
before the Closing. Without prejudice to Purchaser's rights under
Article XI, Purchaser and its Subsidiaries shall be solely
responsible for any Liabilities in respect of (A) any Business
Employee or Acquired Company Employee arising out of the failure of
Purchaser and its Subsidiaries to comply with their obligations
under this Section 10.1, (B) in respect of any Acquired Company
Employee arising in connection with or as a result of any claim of
actual or constructive termination of such individual's employment
38
as a result of the consummation of the transactions contemplated
hereby, (C) any Transferred Employee with respect to his or her
employment with Purchaser and its Subsidiaries from and after the
Closing, (D) otherwise arising out of the employment or termination
of employment of any Acquired Company Employee or Former Acquired
Company Employee, whether before, upon or after the Closing; and
(E) otherwise arising out of the employment or termination of
employment of any Transferred Employee with Purchaser or one of its
Subsidiaries (including the Acquired Companies) from and after the
Closing.
(vi) Confidentiality Agreements. Seller and its
--------------------------
Affiliates shall release each Employee, to the extent applicable,
from his or her obligations under any confidentiality agreements
which he or she may have entered into with Seller or any of its
Affiliates, to the extent (and only to the extent) necessary for
Purchaser and its Subsidiaries to employ such Employee in the
Business. The Employees' obligations of confidential treatment of
Seller's business information and trade secret technology being
transferred to Purchaser and its Subsidiaries (whether under such
agreements or otherwise) shall not be released except for the
benefit of Purchaser and its Subsidiaries as provided in the
preceding sentence.
(b) Employee Benefits Generally.
---------------------------
(i) Plans Generally. Except as otherwise provided in
---------------
this Section 10.1: (A) effective as of the Closing, Seller shall
cause the Acquired Companies to cease to sponsor or constitute a
participating employer in all Employee Benefit Plans, other than
the Acquired Company Plans; (B) Seller shall remain solely
responsible for any and all Liabilities and obligations arising
under, in connection with or in respect of the Seller Employee
Benefit Plans, and all rights and entitlements of all current and
former employees employed in connection with the Business under
such plans (including the rights and entitlements of the
Transferred Employees thereunder), and neither Purchaser nor any of
its Subsidiaries (including, after the Closing Date, the Acquired
Companies) shall have any responsibility or obligation in respect
of any such plan; (C) effective as of the Closing, Purchaser and
its Subsidiaries (including the Acquired Companies) shall be solely
responsible for any and all Liabilities and obligations arising
under, in connection with or in respect of the Acquired Company
Plans, and all rights and entitlements of all current and former
employees employed in connection with the Business under such plans
(including the rights and entitlements of the Transferred
Employees, Acquired Company Employees and Former Acquired Company
Employees thereunder), and neither Seller nor any of its
Subsidiaries (other than the Acquired Companies) shall have any
responsibility or obligation in respect of any such plan; and
(D) from and after the Closing, Purchaser and its Subsidiaries shall
honor all Acquired Company Plans in accordance with their terms as
in effect immediately before the Closing, subject to any amendment
or termination thereof that may be permitted by such terms (without
prejudice to the provisions of Section 6.2(d)).
(ii) Post-Closing Benefits Generally. For a period of
-------------------------------
not less than one year following the Closing, Purchaser shall
provide, or shall cause to be provided, to each Employee base
compensation, incentive compensation and employee benefits
(including
39
those resulting from letters of assignment and other agreements
referred to in Section 10.1(f)(i)) that are no less favorable, when
taken in the aggregate, than those that apply to such Employee
immediately before the Closing. The foregoing shall not be
construed to prevent the termination of employment of any Employee.
It is acknowledged that Purchaser and its Subsidiaries are not able
to provide stock options, stock purchase or other equity-based
plans to Employees from and after the Closing, and no provision of
this Section 10.1 shall be construed to require them to do so.
(iii) Welfare Benefits for Transferred Employees
------------------------------------------
Generally. Without limiting the generality of the foregoing
---------
provisions of Section 10.1: (A) Seller and its Subsidiaries shall
be solely responsible for (I) claims for the welfare benefits and
for workers' compensation, in each case that are incurred by or
with respect to any Transferred Employee and reported before the
Closing, (II) claims relating to health continuation coverage
required by Section 601 et seq. of the Employee Retirement Income
-- ---
Security Act of 1974, as amended ("COBRA COVERAGE") attributable to
"qualifying events" with respect to any Transferred Employee and
his or her beneficiaries and dependents that occur upon or before
the Closing, (III) claims for Welfare Benefits and for workers'
compensation, in each case that are incurred by or with respect to
any Business Employee who does not become a Transferred Employee,
whether reported before, upon or after the Closing; and (IV) claims
relating to COBRA Coverage attributable to "qualifying events" with
respect to any Business Employee who does not become a Transferred
Employee and his or her beneficiaries and dependents, whether
occurring before, upon or after the Closing; and (ii) Purchaser and
its Subsidiaries shall be solely responsible for (A) claims for
Welfare Benefits and for workers compensation, in each case that
are incurred by or with respect to any Transferred Employee and
reported upon or after the Closing Date, and (B) claims relating to
COBRA Coverage attributable to "qualifying events" with respect to
any Transferred Employee and his or her beneficiaries and
dependents that occur after the Closing.
(iv) Past Service Credit Generally. For all purposes
-----------------------------
under the employee benefit plans of Purchaser and its Subsidiaries
providing benefits after the Closing to any Transferred Employees
(the "NEW PLANS"), each such Transferred Employee shall be credited
with his or her years of service with Seller and its Subsidiaries
(including the Acquired Companies) before the Closing, to the same
extent as such Transferred Employee was entitled, before the
Closing, to credit for such service under any similar Employee
Benefit Plans, ("PAST SERVICE CREDIT"), except (1) in the case of
U.S Business Employees, for purposes of benefit accrual under New
Plans that are defined benefit or cash balance pension plans,
(2) as provided in Sections 10.1(c)(i) and 10.1(c)(iii), and (3) to
the extent Past Service Credit would result in a duplication of
benefits. For the avoidance of doubt, there shall be no transfer of
assets or liabilities from the Solutia pension plan in which U.S.
Business Employees participate before the Closing to any plan
sponsored by Purchaser or its Subsidiaries.
(c) Certain Pension Provisions.
--------------------------
(i) Pension Benefit Transfer for Certain European
---------------------------------------------
Business Employees. European Business Employees employed in Belgium
------------------
and the United
40
Kingdom shall be permitted to elect to have their pension assets
and liabilities transferred from the applicable pension plan
sponsored by Seller and its Affiliates to a plan or plans sponsored
by Purchaser or one of its Subsidiaries, in accordance with
applicable Law and local custom and practice. The assets
transferred for each such European Business Employee that so elects
shall equal the amount of his or her liabilities so transferred, on
a projected benefit obligation basis, determined in accordance with
the actuarial assumptions set forth in Schedule 10.1(c)(i). Each
-------------------
such European Business Employee who does not elect to have his or
her pension assets and liabilities so transferred shall be enrolled
in the appropriate pension plan of Purchaser and its Subsidiaries
effective as of the Closing, but shall not be entitled to Past
Service Credit for purposes of such pension plan.
(ii) Hoechst Pension Plans. Seller shall use its
---------------------
reasonable best efforts to procure that the Acquired Company
Employees employed in Germany and Austria shall be permitted, from
and after the Closing Date, to maintain their active membership of
or become full active members of the Hoechst Pensionskasse der
Mitarbeiter der Hoechst Gruppe (Germany), the Hoechst Sterbekasse
(Germany) or the BVP-Pensionkasse (Austria), as applicable, on at
least the same conditions as currently apply.
(iii) Other Business Employees. Any Other Business
------------------------
Employee employed in jurisdictions other than jurisdictions in
which an Acquired Company is organized, the United States, the
United Kingdom or Belgium, and who participates in a funded pension
plan, shall be accorded, if allowed under local plan rules and
applicable Law, the treatment accorded to the European Business
Employees employed in Belgium and the United Kingdom, on terms to
be agreed to by Seller and Purchaser. Seller and Purchaser agree to
cooperate in good faith to implement the foregoing.
(d) Continuity of Benefits for U.S. and Other Business
--------------------------------------------------
Employees. Without limiting the generality of the foregoing, the following
---------
shall apply with respect to the participation of each Transferred Employee
who is a U.S. Business Employee or an Other Business Employee in any New
Plans that Purchaser and its Subsidiaries choose to offer. Each such
Transferred Employee shall be eligible to participate effective as of the
Closing, without any waiting time, nor any pre-existing condition exclusions
or actively-at-work conditions (both for the Transferred Employee and
his/her dependents), in such New Plans to the extent coverage under such New
Plan replaces coverage under a similar type of Employee Benefit Plan in
which such Transferred Employee currently participates (such plans,
collectively, the "OLD PLANS"). In addition, Purchaser shall cause each such
New Plan that provides medical, dental, pharmaceutical, vision and/or
disability benefits to recognize any eligible expenses incurred by any
Transferred Employee and his or her covered dependents under the
corresponding Old Plan during 2003 but before the Closing, for purposes of
satisfying all deductible, coinsurance and maximum out-of-pocket
requirements for the remainder of 2003 under such New Plan.
(e) Delayed Commencement of Benefits. Notwithstanding the
--------------------------------
foregoing provisions of this Section 10.1, if it is not possible for
Purchaser to begin providing benefits to Other Business Employees under
plans sponsored by Purchaser and its Subsidiaries as of the
41
Closing, the commencement of such benefits may be delayed past the Closing
to the extent and on terms and conditions to be agreed to in good faith by
Seller and Purchaser.
(f) International Assignments and Third Country Nationals.
-----------------------------------------------------
(i) Purchaser and its Subsidiaries shall assume and be solely responsible
for, as of the Closing, all Liabilities of Seller and its Affiliates with
respect to all letters of assignment and other agreements under which any
Employee is seconded from his or her home country to another country, to the
extent such letters and agreements have been Made Available to Purchaser.
(ii) Third country national employees shall be treated as set out in
Schedule 10.1(f)(ii).
--------------------
(g) Certain Compensation Obligations. Without limiting the
--------------------------------
generality of the foregoing provisions of Section 10.1, Purchaser and its
Subsidiaries shall (i) honor all entitlements of Transferred Employees to
vacation that has accrued but not been taken as of the Closing, except to
the extent required by applicable Law to be paid in cash, (ii) pay all
unpaid compensation of the Transferred Employees accrued through the
Closing, including without limitation salary, wages, annual bonuses for
years ended before the Closing, thirteenth-month bonuses and other bonuses
and incentive compensation, social security payments, and vacation pay
required by applicable Law to be paid in cash and (iii) pay annual bonus for
the year in which the Closing occurs to each Employee who is eligible to
receive an annual bonus under any Employee Benefit Plan and who meets the
service requirements to receive such a bonus, based upon service with Seller
and its Subsidiaries (including the Acquired Companies) before the Closing
and service with Purchaser and its Subsidiaries (including the Acquired
Companies) after the Closing. A pro-rata portion of the annual bonuses
described in clause (iii) of the preceding sentence (pro-rated based upon
the portion of 2003 that occurs before the Closing), shall be based upon the
applicable bonus plan of Seller and its Affiliates (including the Acquired
Companies) and performance before the Closing, and the remainder shall be
based upon the applicable bonus plan of Purchaser and its Subsidiaries
(including the Acquired Companies) and performance after the Closing. For
the avoidance of doubt, it is clearly understood that neither Purchaser nor
any of its Subsidiaries (including any Acquired Company) shall be liable for
any obligation to pay an Employee any bonus relating to the completion of
the transactions contemplated hereby.
(h) Provision of Services. Seller shall provide certain
---------------------
post-Closing services to Purchaser pursuant to a Services Agreement, to be
entered into at or before Closing, on the terms and conditions described in
Schedule 10.1(h).
Section 10.2. Separation Agreements. Effective at the
---------------------
Closing, Purchaser and Seller, or such of their respective Subsidiaries as
appropriate, shall enter into (a) agreements substantially in the form of
▇▇▇▇▇▇▇▇ ▇, ▇, ▇, ▇, ▇, ▇, ▇ and J and (b) an agreement substantially on the
---------- - - - - - - -
terms set forth in the term sheet set forth in Exhibits K, in each case as
----------
listed on Schedule 10.2 (collectively, the "SEPARATION AGREEMENTS").
-------------
ARTICLE XI
SURVIVAL, INDEMNIFICATION AND RELATED MATTERS
Section 11.1. Survival.
--------
42
(a) All warranties contained herein, in any Seller
Document or in any Purchaser Document, and the right to commence any claim
with respect thereto, shall terminate upon the second anniversary of the
Closing Date, except that (i) the warranties contained in Section 4.9
(Taxes) shall survive until 60 calendar days after the end of the period of
the applicable statute of limitations, (ii) the warranties contained in
Sections 4.1 (Organization and Good Standing), 4.2 (Capital Structure of
Purchased Companies), 4.3 (Subsidiaries), 4.4 (Authorization of Agreement),
5.1 (Organization and Good Standing), 5.2 (Authorization of Agreement),
5.7 (Knowledge Regarding Warranties) and 5.8 (No Inducement or Reliance;
Independent Assessment) shall survive without limitation as to time, and
(iii) the warranties contained in Section 4.18 (Environmental Matters) shall
survive until the fifth anniversary of the Closing Date; provided, however,
-------- -------
that in the event written notice of any claim for indemnification under
Section 11.2(a)(i) or Section 11.2(b)(i) shall have been given in accordance
herewith within the applicable survival period setting forth in reasonable
detail (including a reasonable specification of the legal and factual basis
for such claim), the warranties that are the subject of such indemnification
claim shall survive with respect to such claim until such time as such claim
is fully and finally resolved. The covenants and agreements of the parties
hereto contained herein, in any Seller Document and in any Purchaser
Document, to the extent such covenants and agreements have not been
performed or remain unfulfilled as of the Closing, shall survive the Closing
and continue in effect in accordance with their terms.
(b) After the Closing, the indemnification expressly
provided for herein shall be the sole and exclusive remedy for monetary
damages for any breach of warranties, covenants or agreements herein by
either party hereto, and no party shall have any right of rescission (other
than as may be contemplated by Article XIII); provided, however, the
-------- -------
foregoing shall not limit the right of either party hereto to seek specific
enforcement or injunctive or similar relief for a breach of such covenants
or agreements. Each Person entitled to indemnification hereunder shall take
all reasonable endeavors to mitigate Losses for which it seeks
indemnification hereunder. No Person shall be entitled to indemnification
hereunder if, on the Closing Date, such Person had knowledge of the actual
breach of any warranty with respect to which such Person is seeking
indemnification hereunder.
(c) In calculating any amount of Losses recoverable
pursuant to Section 11.2 or 11.3, the amount of such Losses shall be reduced
by (i) any insurance proceeds actually received from any unaffiliated
insurance carrier offsetting the amount of such Loss, net of any expenses
incurred by the Indemnified Party in obtaining such insurance proceeds
(provided, that the Indemnified Party shall be obligated to reasonably seek
--------
any such proceeds to which it may be entitled), and (ii) any recoveries from
third parties pursuant to indemnification (or otherwise) with respect
thereto, net of any expenses incurred by the Indemnified Party in obtaining
such third party payment.
(d) Notwithstanding anything herein to the contrary, no
party shall be liable to any Indemnified Party for special, incidental,
indirect, consequential, punitive or exemplary Losses.
Section 11.2. Indemnification.
---------------
43
(a) Except with respect to those matters covered under
Sections 11.3, 11.5 and 14.1, Seller hereby agrees to indemnify and hold
Purchaser, its Subsidiaries and the officers, directors, employees and
agents thereof, harmless from and against any and all claims, judgments,
causes of action, liabilities, obligations, damages, losses, deficiencies,
costs, penalties, interest and expenses (including the reasonable fees and
expenses of counsel) (collectively, "LOSSES") arising out of or resulting
from:
(i) any breach (whether as of the date hereof or as of
the Closing Date, without giving effect to the qualification set
forth in Section 8.1) of warranty on the part of Seller herein
(other than any warranty contained in Section 4.18 (Environmental
Matters), indemnification with respect to which is set forth in
Section 11.3) or in any Seller Document subject to the limitations
and conditions contained therein;
(ii) any non-fulfillment of any agreement or
undertaking on the part of Seller herein or in any Seller Document
that is to be performed before, on or after the Closing Date,
subject to the limitations and conditions contained therein;
(iii) any Excluded Liability (other than the Retained
Environmental Liabilities, indemnification with respect to which is
set forth in Section 11.3); and
(iv) the failure of Seller to comply with any
applicable bulk sales law, except that this clause (iv) shall not
affect the obligation of Purchaser to pay and discharge the Assumed
Liabilities.
Seller shall not be liable for any Losses with respect to
the matters set forth in Section 11.2(a)(i) unless (x) a claim is timely
asserted during the survival period specified in Section 11.1(a), (y) the
Loss with respect to the particular act, circumstance, development, event,
fact, occurrence or omission exceeds U.S.$100,000 (aggregating all Losses
arising from substantially identical facts) and (z) the aggregate of
all Losses under Section 11.2(a)(i) exceeds, on a cumulative basis,
U.S.$5 million (and then only to the extent of such excess); provided, however,
-------- -------
notwithstanding anything herein to the contrary, Seller shall not be
required to pay an aggregate amount in excess of U.S.$100 million in respect
of Losses for the matters set forth in Sections 11.2(a)(i) or 11.2(a)(iv).
For the avoidance of doubt, the limitations in this paragraph do not apply
to clauses (ii) or (iii) of Section 11.2(a), or Sections 11.3 or 11.5.
(b) Purchaser hereby agrees to indemnify and hold Seller,
its Subsidiaries and the officers, directors, employees and agents thereof
harmless from and against any and all Losses arising out of or resulting
from:
(i) any breach of warranty (whether as of the date
hereof or as of the Closing Date, without giving effect to the
qualification set forth in Section 9.1) on the part of Purchaser
herein or in any Purchaser Document, subject to the limitations and
conditions contained therein;
(ii) any non-fulfillment of any agreement or
undertaking on the part of Purchaser herein or in any Purchaser
Document that is to be performed before, on or after the Closing
Date, subject to the limitations and conditions contained therein;
44
(iii) Purchaser's and any of its Subsidiaries'
ownership (or effective ownership) or operation of the Business,
the Acquired Companies or the Purchased Assets from and after the
Closing Date; and
(iv) any Assumed Liabilities or the failure of any of
the Acquired Companies (or their successors or assigns) to pay,
perform and discharge when due any of their respective Liabilities.
Purchaser shall not be liable for any Losses with respect
to the matters set forth in Section 11.2(b)(i) unless (x) a claim is timely
asserted during the survival period specified in Section 11.1(a), (y) the
Loss with respect to the particular act, circumstance, development, event,
fact, occurrence or omission exceeds U.S.$100,000 (aggregating all Losses
arising from substantially identical facts) and (z) the aggregate of
all Losses under Section 11.2(b)(i) exceeds, on a cumulative basis,
U.S.$5 million (and then only to the extent of such excess); provided, however,
-------- -------
notwithstanding anything herein to the contrary, Purchaser shall not be
required to pay an aggregate amount in excess of U.S.$100 million in respect
of Losses for the matters set forth in Section 11.2(b)(i). For the avoidance
of doubt, the limitations in this paragraph do not apply to clauses (ii),
(iii) or (iv) of Section 11.2(b), or Section 11.3.
Section 11.3. Environmental Indemnification.
-----------------------------
(a) Seller shall be responsible for, and hereby agrees to
indemnify and hold Purchaser and the other members of the Purchaser
Indemnified Group harmless from and against (i) all Environmental Costs
resulting from Environmental Claims related to or arising from the Retained
Environmental Liabilities, and (ii) Losses arising out of or resulting from
any breach of warranty (whether as of the date hereof or as of the Closing
Date, without giving effect to the qualification set forth in Section 8.1)
on the part of Seller contained in Section 4.18 (Environmental Matters),
subject to the limitations and conditions contained therein.
(b) If (i) prior to the fifth anniversary of the Closing
Date, Purchaser incurs Environmental Costs with respect to any Environmental
Claim (or any series of related Environmental Claims) relating to the
operations of (A) the Acquired Companies or their predecessors or the use of
any assets of such Acquired Companies by them or their predecessors at any
time prior to the Closing Date or (B) the operations of Seller or its
Subsidiaries or their predecessors or the use of the Purchased Assets at the
Suzano, Brazil facility at any time prior to the Closing Date and (ii) such
Environmental Costs exceed the aggregate amount of reserves set forth on
(A) if the Closing Date occurs on or prior to January 31, 2003, the Interim
Balance Sheet, or (B) if the Closing Date occurs after January 31, 2003, the
Closing Date Balance Sheet, in each case, with respect to such Environmental
Claim (or any series of related Environmental Claims), Seller hereby agrees,
except as otherwise provided in the next sentence and subject to the
limitations set forth in Section 11.3(e), to reimburse Purchaser for a
portion of its aggregate Environmental Costs in excess of such aggregate
amount of reserves with respect to such Environmental Claim (or series of
related Environmental Claims) on a sliding scale basis with Seller paying
(1) 70% of the first U.S.$5 million of such excess, (2) 80% of the next
U.S.$5 million of such excess, (3) 90% of the next U.S.$10 million of such
excess and (4) 95% of any additional excess. Notwithstanding the foregoing,
this cost sharing arrangement shall not apply, and Seller shall have no
obligation to reimburse any Environmental Costs: (x) incurred at
45
any site arising out of Purchaser's, any member of the Purchaser Indemnified
Group's or any of them or their successors' decision to terminate the
operations conducted at such site; or (y) with respect to any Environmental
Claim based upon any Environmental Law or amendment thereof that was not in
force and effect as of the Closing Date. If Purchaser incurs Environmental
Costs as a result of the presence of Hazardous Materials, which presence
results from the operations of the Acquired Companies or their predecessors
or successors or the use of any assets of such Acquired Companies by them or
their predecessors or successors both prior to and after the Closing Date:
(i) if the relative amounts of Hazardous Materials attributable to
pre-Closing Date and post-Closing Date operations or use of assets may be
clearly established, the relative obligations of the parties shall be
determined proportionally based upon the relative amounts of Hazardous
Materials, and the cost sharing arrangement contained in the first sentence
of this Section 11.3(b) shall apply only to Environmental Costs for
pre-Closing Date operations or use of assets; (ii) if the relative amounts
of Hazardous Materials attributable to pre-Closing Date and post-Closing
Date operations or use of assets cannot be clearly established, pre-Closing
Date and post-Closing Date responsibility will be proportionally allocated
based upon the pounds of products related to such Hazardous Materials
produced by the Acquired Companies or their predecessors in the period prior
to the Closing Date that is equivalent to the period between the Closing
Date and the commencement of the Environmental Claim to which such
Environmental Costs relate, and the pounds of products related to such
Hazardous Materials produced by the Acquired Companies or their successors
or assigns in the period from the Closing Date to the commencement of the
Environmental Claim to which such Environmental Costs relate, and the cost
sharing arrangement contained in the first sentence of this Section 11.3(b)
shall apply only to the pre-Closing Date allocation; provided, however, that
-------- -------
nothing in this Section 11.3 shall require Seller to contribute to any
Environmental Costs or indemnify any member of the Purchaser Indemnified
Group with respect to any Environmental Costs incurred with respect to the
generation of Hazardous Materials as a result of the operations by any
member of the Purchaser Indemnified Group after the Closing Date. If
Environmental Costs are incurred as a result of the presence of a
combination of Hazardous Materials on and after the Closing Date, then such
Environmental Costs applicable to pre-Closing Date and post-Closing Date
operations or use of assets shall be equitably allocated, generally in
accordance with the principles set forth in the preceding sentence, between
Seller and Purchaser based upon the nature and amount of Hazardous Materials
resulting from pre-Closing Date and post-Closing Date operations or use of
assets.
(c) Seller's obligations under Section 11.3(b) are
expressly conditioned upon: (i) Seller being kept fully informed, on a
timely basis, of all substantive contacts between any Governmental Body or
other Person and any of the Purchaser Indemnified Group with respect to each
matter with respect to which indemnification or cost-sharing may be sought
under this Section 11.3 (each, a "COVERED ENVIRONMENTAL MATTER");
(ii) Seller being given by the Purchaser Indemnified Group the option to
participate in and/or manage, in due consultation with Purchaser, all
discussions and proceedings concerning the timing, method, extent and cost
of each Covered Environmental Matter; provided, that if Seller assumes
--------
management of any Covered Environmental Matter, it shall keep Purchaser
fully informed on a timely basis of all substantive contacts relating to
such Covered Environmental Matter with any Governmental Body or other
Person; (iii) Seller being given by the Purchaser Indemnified Group the
authority to determine the method of complying with each Covered
Environmental Matter; provided, Seller shall cooperate with Purchaser to
--------
minimize any nuisance or hindrance caused to
46
Purchaser's operations by any Environmental Remedial Action in connection
with such Covered Environmental Matter and shall submit the project, budget
and any related documents of such Environmental Remedial Action to Purchaser
for comment prior to any submission to the relevant Governmental Body, and,
if Purchaser proposes an alternative method that is acceptable to the
relevant Governmental Body and that would cause less nuisance and/or
hindrance to Purchaser's operations without significantly increasing the
cost, Seller shall either apply the alternative method thus proposed or
compensate Purchaser for any Loss caused by the nuisance and/or hindrance
to Purchaser's operations caused by the Environmental Remedial Action;
(iv) Seller being given the option to challenge in any manner at its sole
expense, including, without limitation, initiating legal proceedings
regarding each Covered Environmental Matter, that Seller considers to be
unlawful; (v) the taking of all reasonable endeavors by the Purchaser
Indemnified Group during discussions, proceedings and other activities
regarding each Covered Environmental Matter, to keep the number and costs of
each such Covered Environmental Matter as low as reasonably possible,
including, but not limited to agreeing to allow the imposition of
institutional controls and/or restrictions in a deed to restrict future
use of the real estate to industrial and commercial purposes only; and
(vi) Seller's obligations under Sections 11.3(b) being limited to Hazardous
Materials as the same were defined in Environmental Laws in force and effect
on the Closing Date and not as the term Hazardous Materials may be defined
thereafter.
(d) Seller and Purchaser and their respective Affiliates
shall cooperate and consult with each other in the performance of their
respective obligations hereunder (including with respect to any actions
taken by Seller under Section 11.3(c)), and in taking actions reasonably
necessary to limit the duration, expense and scope of any Environmental Cost
and Environmental Claim. In furtherance of and without limiting the
foregoing, Purchaser shall operate and manage any site with respect to which
it or any other member of the Purchaser Indemnified Group may seek
indemnification or reimbursement of Environmental Costs under this Section
11.3 in a manner consistent with the way in which it operates and manages
its chemical sites with respect to which Purchaser is not entitled to any
reimbursement of Environmental Costs. Purchaser and its Affiliates shall
cooperate with Seller as may be reasonably requested by Seller so as to
allow Seller and its Affiliates to receive the benefit of any
indemnification to which Seller or any of its Affiliates may be entitled
under the Hoechst Agreement.
(e) Seller shall not be liable for (i) Losses with respect
to the matters set forth in Section 11.3(a)(ii), or (ii) reimbursement of
Environmental Costs under Section 11.3(b), unless: (A) a claim is timely
asserted prior to the fifth anniversary of the Closing Date, (B)(1) with
respect to Losses with respect to the matters set forth in Section
11.3(a)(ii); the Loss with respect to the particular act, circumstance,
development, event, fact, occurrence or omission exceeds U.S.$100,000
(aggregating all Losses arising from substantially identical facts), or (2)
with respect to reimbursement of Environmental Costs under Section 11.3(b),
the Environmental Costs arising or resulting from a particular Environmental
Clam (aggregating all Environmental Claims arising from substantially
identical facts) exceed U.S.$100,000; and (C) the aggregate of such Losses
and Environmental Costs exceed, on a cumulative basis, U.S.$5 million (and
then only to the extent of such excess); provided, however, that
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notwithstanding anything herein to the contrary, Seller shall not be
required to pay an aggregate amount in excess of U.S.$75 million in respect
of Losses with respect to the matters set forth in
47
Section 11.3(a)(ii) or reimbursement of Environmental Costs under Section
11.3(b). For the avoidance of doubt, the limitations in this Section 11.3(e)
do not apply to Section 11.3(a)(i) (relating to Retained Environmental
Liabilities).
(f) Except as provided in any applicable Separation
Agreement, the indemnification and remedies provisions provided for in this
Section 11.3 shall be the exclusive remedy for the matters addressed in
Section 11.3 (irrespective of whether such matters may also constitute a
breach of any of Seller's warranties hereunder), including but not limited
to any private right of action that either party might have under any
Environmental Law. It is expressly understood and agreed that no member of
the Purchaser Indemnified Group shall be allowed to assert any claim under
Section 11.2 with respect to any Environmental Claim or any Environmental
Costs.
Section 11.4. Procedures for Indemnification.
------------------------------
(a) Whenever a claim shall arise for indemnification under
Section 11.2, 11.3 or 14.1, with the exception of claims for litigation
expenses in respect of litigation as to which a notice of claim, as provided
in this Section 11.4, has previously been given, which expenses shall be
funded on an ongoing basis, and, except as otherwise provided in Section
14.4, the party entitled to indemnification (the "INDEMNIFIED PARTY") shall
promptly notify the party from which indemnification is sought (the
"INDEMNIFYING PARTY") of such claim and, when known, the facts constituting
the basis for such claim; provided, however, that in the event of any claim
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for indemnification hereunder resulting from or in connection with any claim
or Legal Proceeding by a third party, the Indemnified Party shall give such
notice thereof to the Indemnifying Party not later than ten Business Days
prior to the time any response to the asserted claim is required, if
possible, and in any event within fifteen Business Days following receipt of
notice thereof (provided that failure to notify the Indemnifying Party shall
--------
not relieve the Indemnifying Party of any liability it may have to the
Indemnified Party, except to the extent that the Indemnifying Party
demonstrates that it has been actually prejudiced by such failure). In the
event of any such claim for indemnification resulting from or in connection
with a claim or Legal Proceeding by a third party, the Indemnifying Party
may, at its sole cost and expense, assume the defense thereof by written
notice within 30 calendar days, using counsel that is reasonably
satisfactory to the Indemnified Party. If an Indemnifying Party assumes the
defense of any such claim or Legal Proceeding, the Indemnifying Party shall
be entitled to take all steps necessary in the defense thereof including the
settlement of any case that involves solely monetary damages without the
consent of the Indemnified Party; provided, however, that the Indemnified
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Party may, at its own expense, participate in any such proceeding with the
counsel of its choice without any right of control thereof. If the
Indemnifying Party has assumed the defense of any claim or Legal Proceeding
by a third party as provided herein, (A) it shall be conclusively
established for the purposes hereof that the claims made in that Legal
Proceeding are within the scope of and subject to indemnification hereunder,
and the Indemnifying Party shall promptly indemnify the Indemnified Party in
accordance with the terms of this Article XI, and (B) the Indemnifying Party
shall not consent to, or enter into, any compromise or settlement of (which
settlement (i) commits the Indemnified Party to take, or to forbear to take,
any action or (ii) does not provide for a full and complete written release
by such third party of the Indemnified Party), or consent to the entry of
any judgment that does not relate solely to monetary damages arising from,
any such claim or Legal Proceeding by a third party without the Indemnified
Party's prior written
48
consent, which shall not be unreasonably withheld, conditioned or delayed.
The Indemnifying Party and the Indemnified Party shall cooperate fully in
all aspects of any investigation, defense, pre-trial activities, trial,
compromise, settlement or discharge of any claim in respect of which
indemnity is sought pursuant to this Article XI, including, but not limited
to, by providing the other party with reasonable access to employees and
officers (including as witnesses) and other information. So long as the
Indemnifying Party is in good faith defending such claim or proceeding, the
Indemnified Party shall not compromise or settle such claim without the
prior written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld, conditioned or delayed. If the Indemnifying Party
does not assume the defense of any such claim or litigation in accordance
with the terms hereof, the Indemnified Party may defend against such claim
or litigation in such manner as it may deem appropriate, including settling
such claim or litigation (after giving prior written notice of the same to
the Indemnifying Party and obtaining the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld,
conditioned or delayed) on such terms as the Indemnified Party may
reasonably deem appropriate, and the Indemnifying Party will promptly
indemnify the Indemnified Party in accordance with the provisions of this
Article XI.
(b) If Seller, as the Indemnifying Party, assumes defense
of a claim or Legal Proceeding under and subject to Section 11.4(a) and such
claim or Legal Proceeding has been brought by a customer or supplier of the
Business of any Acquired Company, subject to any limitation under applicable
Law and in addition to those rights afforded Purchaser as Indemnified Party
under Section 11.4(a), (i) Seller shall provide Purchaser with a timely and
reasonably detailed account of such claim or Legal Proceeding and copies
of all written materials relating to such claim or Legal Proceeding,
(ii) Seller shall consult with Purchaser before taking any significant action
in connection with such claim or Legal Proceeding, (iii) Seller shall consult
with Purchaser and offer Purchaser an opportunity to comment before
submitting any written materials to any Governmental Body prepared or
furnished in connection with such claim or Legal Proceeding, and (iv) Seller
shall defend such claim or Legal Proceeding diligently and in good faith.
Section 11.5. Special Indemnification.
-----------------------
(a) Seller hereby agrees to indemnify and hold Purchaser,
its Subsidiaries and the officers, directors, employees and agents thereof,
harmless from and against any and all Taxes arising out of or resulting from
the transfer by Seller or its Subsidiaries of the shares of Erste Viking
Resins Germany 1 GmbH or any Liquidating Company pursuant to Section 6.2(e).
(b) Whenever a claim shall be made for indemnification
pursuant to Section 11.5(a), Purchaser shall notify Seller of the amount of
such claim and Seller shall, within ten Business Days of such notification,
indemnify Purchaser (or any other Person designated by the Purchaser) in
accordance with the provisions of this Section 11.5; provided, that, if the
--------
indemnified party is required to make a payment to a taxing authority,
Seller shall not be required to make any payment earlier than three days
before such payment is due. For the avoidance of doubt, none of the other
provisions of this Article XI shall apply to this Section 11.5. Purchaser
shall render to Seller such assistance as Seller may reasonably request in
defending any Tax Claim giving rise to a claim for indemnification pursuant
to this Section 11.5; provided, that Purchaser shall be under no obligation
--------
to render any such assistance if (i) Seller
49
fails to indemnify Purchaser within the time periods contemplated by the
first sentence hereof or (ii) Seller takes any action that would cause
significant harm to Purchaser's reputation with the relevant taxing
authority.
ARTICLE XII
NONCOMPETITION; NONSOLICITATION
Section 12.1. Noncompetition.
--------------
(a) Subject to Section 12.1(b), Seller covenants and
agrees that for a period of three years following the Closing Date (the
"COVENANT TERM") it shall not, and shall cause its Subsidiaries not to:
(i) engage in the manufacture or sale of products that
are within the scope of the Business as defined in Exhibit A
---------
(a "COMPETITIVE BUSINESS") in direct competition with Purchaser,
whether as employer, proprietor, partner, stockholder, consultant,
agent, lender or guarantor or otherwise; or
(ii) make use of, in connection with any Competitive
Business, any mailing lists, customer lists, subscription lists,
processes, trade secrets, software, research, techniques, designs
or other technical data, know-how or other proprietary or
confidential information used by Seller or any of its Subsidiaries
as of the Closing or within one year prior to the Closing Date in
connection with the Business or that constitutes a Purchased Asset,
except to the extent Purchaser may so authorize in writing.
(b) Notwithstanding anything to the contrary contained in
Section 12.1(a):
(i) in the event that during the Covenant Term Seller
completes a business combination transaction with a Person that is
engaged in any Competitive Business, which transaction results in
the holders of the voting securities of Seller outstanding
immediately prior to the consummation of such transaction owning
less than 50% of the voting power of the voting securities of
Seller or the surviving entity in the transaction or any parent
thereof (any such entity, an "ACQUIROR") outstanding immediately
after the consummation of such transaction, such Acquiror or any of
its Subsidiaries or Affiliates may engage in any activity
prohibited or restricted by Section 12.1(a);
(ii) Seller may directly or indirectly hold interests
in or securities of any Person to the extent that such investment
does not directly or indirectly confer on Seller more than 10% of
the voting power of such Person;
(iii) Seller may maintain and continue the operations
of Seller and its Subsidiaries that are not being transferred to
Purchaser hereunder in accordance with current and past practices;
(iv) Seller may acquire interests in or securities of
any Person as an investment by Seller's pension funds or funds of
any other Benefit Plan of Seller whether or not such Person is
engaged in any Competitive Business;
50
(v) Seller may acquire interests in or securities of
any Person that derived 15% or less of its total annual revenues in
its most recent fiscal year from activities that constitute
Competitive Businesses;
(vi) Seller may acquire more than 50% of the
outstanding capital stock or other equity interests in any Person
(or any lesser percentage if, pursuant to contractual or other
arrangements, Seller has the right to cause such Person to take the
actions specified in the following proviso) that derived in excess
of 15% but not more than 50% of its total annual revenues in its
most recent fiscal year from activities that constitute Competitive
Businesses; provided, however, that Seller shall use commercially
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reasonable efforts to divest that portion of such Person that
engages in activities constituting Competitive Businesses on
commercially reasonable terms as soon as reasonably practicable
following the acquisition of such ownership or interest;
(vii) Seller may acquire or use any product for
internal uses or to conduct Seller's or its Subsidiaries' other
businesses that consume, use, contain, depend upon or otherwise
incorporate any such product; and
(viii) Seller may perform any act or conduct any
business contemplated hereby or the Separation Agreements.
(c) The parties hereto acknowledge and agree that nothing
herein shall be deemed to require Seller to give notice to or obtain the
consent of Purchaser in order to engage in any transaction of the types
described in Section 12.1(b) or otherwise.
Section 12.2. Nonsolicitation of Employees. Seller
----------------------------
covenants and agrees that for a period of two years following the Closing
Date it shall not, and shall cause its Subsidiaries not to, solicit,
directly or through any recruitment firm, any Acquired Company Employee or
Transferred Employee (at a time when such person is an employee of Purchaser
or any of its Subsidiaries) to terminate his or her employment relationship
with Purchaser or any of its Subsidiaries; provided, however, that nothing
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herein shall prohibit Seller or any of its Subsidiaries from advertising
publicly or from employing persons who respond to any such public
advertising whether or not such persons are then employed by Purchaser or
any its Subsidiaries.
Section 12.3. Remedies. Purchaser and Seller each
--------
acknowledge that the time, scope and other provisions of this Article XII
have been specifically negotiated by sophisticated commercial parties and
specifically hereby agree that such time, scope and other provisions are
reasonable under the circumstances. It is further agreed that other remedies
cannot fully compensate Purchaser for a violation by Seller of the terms of
this Article XII and that Purchaser shall be entitled to injunctive relief
to prevent any such violation or continuing violation by Seller. It is the
intent and understanding of each party hereto that if, in any Legal
Proceeding, any term, restriction, covenant or promise herein is found to be
unreasonable and for that reason unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent necessary to make
it enforceable.
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ARTICLE XIII
TERMINATION
Section 13.1. Termination. This Agreement may be
-----------
terminated and the transactions contemplated hereby abandoned any time prior
to the Closing:
(a) upon the written agreement of Purchaser and Seller;
(b) by Purchaser, upon ten Business Days prior written
notice to Seller, if any of the conditions set forth in Section 8.1 or 8.2
becomes incapable of fulfillment as a result of events beyond the control of
Purchaser and such condition is not waived by Purchaser;
(c) by Seller, upon ten Business Days prior written notice
to Purchaser, if any of the conditions set forth in Section 9.1 or 9.2
becomes incapable of fulfillment as a result of events beyond the control of
Seller and such condition is not waived by Seller; or
(d) by Purchaser or by Seller on or after the first
anniversary of the date hereof if the Closing has not occurred prior to such
date or at such earlier time if either a court of competent jurisdiction in
the United States issues a preliminary injunction prohibiting closing or the
European Commission issues a decision under Article 8(3) of the EC
Regulation prohibiting the consummation of the transactions contemplated
hereby; provided, that the right to terminate this Agreement under this
--------
Section 13.1(d) shall not be available to any party hereto whose failure to
perform any covenant or obligation hereunder has caused or resulted into the
failure of the Closing to occur on or before such date.
Section 13.2. Procedure and Effect of Termination. In the
-----------------------------------
event of termination by either party under Section 13.1(b), (c) or (d),
written notice thereof shall be given to the other party and this Agreement
shall terminate and the transactions contemplated hereby shall be abandoned,
without further action by either party, upon delivery of such notice, except
that the Confidentiality Agreement shall survive in accordance with its
terms and Sections 13.2, 15.3, 15.4 and 15.5 shall also survive such
termination. Upon any termination hereof pursuant to Section 13.1, no party
hereto shall thereafter have any further liability or obligation hereunder;
provided, however, that no such termination shall relieve any party hereto
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of any liability for any breach of any term hereof prior to the date of such
termination.
ARTICLE XIV
TAX MATTERS
Section 14.1. Tax Indemnification.
-------------------
(a) Seller shall be liable for and shall pay, and shall
indemnify Purchaser and its Affiliates against, all Excluded Taxes.
(b) Purchaser shall be liable for and shall pay, and shall
indemnify Seller and its Affiliates against (i) any and all Taxes imposed on
or payable with respect to the Acquired Companies or the Business, other
than Excluded Taxes, and (ii) any and all Taxes imposed on
52
Seller or any of its Affiliates as a result of Purchaser's failure to comply
with its obligations pursuant to Section 14.8.
(c) Anything herein to the contrary notwithstanding,
Purchaser shall be responsible for any and all sales, use, registration,
transfer (including all real estate transfer and conveyance and recording
fees, if any), goods and services, value added, stamp, stamp duty reserve or
other similar Taxes that may be imposed upon, payable, collectible or
incurred in connection herewith and the transactions contemplated hereby,
regardless of the Person liable for such Taxes under applicable Law. Seller
and Purchaser shall use commercially reasonable efforts to minimize the
amount of such Taxes.
(d) Seller or Purchaser, as the case may be, shall provide
reimbursement for any Tax paid by one party, all or a portion of which is
the responsibility of the other party pursuant to Section 14.1. Payment by
the indemnifying party of any amount due under this Section 14.1 shall be
made within ten calendar days following written notice by the indemnified
party that payment of such amount is due; provided, that, if the indemnified
--------
party is required to make a payment to a taxing authority, the indemnifying
party shall not be required to make any payment earlier than three days
before such payment is due.
Section 14.2. Preparation and Filing of Tax Returns.
-------------------------------------
(a) Seller shall timely prepare and file or shall cause to
be timely prepared and filed (i) any combined, consolidated or unitary Tax
Return that includes the Seller or any of its Affiliates, and (ii) any Tax
Return of the Acquired Companies for any taxable period that ends on or
before the Closing Date.
(b) Purchaser shall, except to the extent that such Tax
Returns are the responsibility of Seller under Section 14.2(a), timely
prepare and file or shall cause to be timely prepared and filed all Tax
Returns with respect to the Acquired Companies. For any Straddle Period Tax
Return of the Acquired Companies that is the responsibility of Purchaser
under this Section 14.2(b), Purchaser shall deliver to Seller for its
review, comment and approval (which approval shall not be unreasonably
withheld, conditioned or delayed) a copy of such proposed Tax Return
(accompanied by an allocation between the Pre-Closing Period and the
Post-Closing Period of the Taxes shown to be due on such Tax Return) at
least 30 Business Days prior to the due date (giving effect to any validly
obtained extensions) thereof. Except as otherwise required by Law or
pursuant to a "determination" under Section 1313(a) of the Code (or any
comparable provision of state, local or non-U.S. Law), Purchaser shall, and
shall cause its Affiliates to, prepare all Tax Returns in a manner
consistent with past practices of the Acquired Companies.
Section 14.3. Refunds, Credits and Carrybacks.
-------------------------------
(a) Seller shall be entitled to any refunds or credits of
or against any Excluded Taxes. Purchaser shall, at Seller's reasonable
request and at Seller's expense, cause the relevant entity to file for and
use commercially reasonable efforts to obtain any refund to which Seller is
entitled. Subject to Section 14.3(c), Purchaser shall be entitled to any
refunds or credits of or against any Taxes other than refunds or credits of
or against Excluded Taxes.
53
(b) Purchaser shall cause the Acquired Companies promptly
to forward to Seller or to reimburse Seller for any refunds or credits due
Seller (pursuant to the terms of this Article XIV) after receipt thereof,
and Seller shall promptly forward to Purchaser or reimburse Purchaser for
any refunds or credits due Purchaser (pursuant to the terms of this Article
XIV) after receipt thereof.
(c) Purchaser agrees that none of the Acquired Companies
shall elect to carry back any item of loss, deduction or credit that arises
in any taxable period ending after the Closing Date and that relates to or
affects any Excluded Tax (a "SUBSEQUENT LOSS") into any taxable period
ending on or before the Closing Date.
Section 14.4. Tax Contests.
------------
(a) If any taxing authority asserts a Tax Claim in respect
of the Acquired Companies, then the party hereto first receiving notice of
such Tax Claim promptly shall provide written notice thereof to the other
party or parties hereto; provided, however, that the failure of such party
-------- -------
to give such prompt notice shall not relieve the other party of any of its
obligations under this Article XIV, except to the extent that the other
party is actually prejudiced thereby. Such notice shall specify in
reasonable detail the basis for such Tax Claim and shall include a copy of
the relevant portion of any correspondence received from the taxing
authority.
(b) Seller shall have the right to control, at its own
expense, in any audit, examination, contest, litigation or other proceeding
by or against any taxing authority (a "TAX PROCEEDING") in respect of the
Acquired Companies for any taxable period that ends on or before the Closing
Date; provided, however, that (i) Seller shall provide Purchaser with a
-------- -------
timely and reasonably detailed account of each stage of such Tax Proceeding,
(ii) Seller shall consult with Purchaser before taking any significant
action in connection with such Tax Proceeding, (iii) Seller shall consult
with Purchaser and offer Purchaser an opportunity to comment before
submitting any written materials prepared or furnished in connection with
such Tax Proceeding, (iv) Seller shall defend such Tax Proceeding diligently
and in good faith as if it were the only party in interest in connection
with such Tax Proceeding, (v) Purchaser shall be entitled to participate, at
its own expense, in such Tax Proceeding and receive copies of any written
materials relating to such Tax Proceeding received from the relevant taxing
authority, and (vi) Seller shall not settle, compromise or abandon any such
Tax Proceeding without obtaining the prior written consent of Purchaser,
which consent shall not be unreasonably withheld, conditioned or delayed.
(c) In the case of a Tax Proceeding for a Straddle Period
of the Acquired Companies, the Controlling Party shall have the right to
control, at its own expense, such Tax Proceeding; provided, however, that
-------- -------
(i) the Controlling Party shall provide the Non-controlling Party with a
timely and reasonably detailed account of each stage of such Tax Proceeding,
(ii) the Controlling Party shall consult with the Non-controlling Party
before taking any significant action in connection with such Tax Proceeding,
(iii) the Controlling Party shall consult with the Non-controlling Party and
offer the Non-controlling Party an opportunity to comment before submitting
any written materials prepared or furnished in connection with such Tax
Proceeding, (iv) the Controlling Party shall defend such Tax Proceeding
diligently and in good faith as if it were the only party in interest in
connection with such Tax Proceeding, (v) the Non-controlling
54
Party shall be entitled to participate in such Tax Proceeding, at its own
expense, if such Tax Proceeding could have an adverse impact on the
Non-controlling Party or any of its Affiliates and (vi) the Controlling
Party shall not settle, compromise or abandon any such Tax Proceeding
without obtaining the prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed, of the Non-controlling Party.
"CONTROLLING PARTY" shall mean (A) with respect to Tax Proceedings described
in Section 14.4(b), the Seller, (B) with respect to Tax Proceedings described
in Section 14.4(c), whichever of Seller or Purchaser is reasonably expected
to bear the greater Tax liability in connection with a Straddle Period
Tax Proceeding, and (C) with respect to Tax Proceedings described in
Section 14.4(d), the Purchaser. "NON-CONTROLLING PARTY" shall mean whichever
of Seller or Purchaser is not the Controlling Party with respect to a Tax
Proceeding described in Section 14.4.
(d) Purchaser shall have the right to control, at its own
expense, any Tax Proceeding involving the Acquired Companies (other than a
Tax Proceeding described in Section 14(b) or (c)).
(e) The Controlling Party shall indemnify and hold the
Non-controlling Party, its Subsidiaries, the officers, directors, employees
and agents thereof harmless from any Taxes (and any related costs imposed by
a court or other tribunal) arising out of or resulting from the Controlling
Party's failure to comply with its obligations under Section 14.4(b), (c) or
(d), as the case may be.
Section 14.5. Cooperation. Each party hereto shall, and
-----------
shall cause its Affiliates to, provide to the other party hereto such
cooperation, documentation and information as either of them reasonably may
request in (a) filing any Tax Return, amended Tax Return or claim for
refund, (b) determining a liability for Taxes or an indemnity obligation
under this Article XIV or a right to refund of Taxes, (c) conducting any Tax
Proceeding or (d) determining an allocation of Taxes between a Pre-Closing
Period and Post-Closing Period. Such cooperation and information shall
include providing copies of all relevant portions of relevant Tax Returns,
together with all relevant portions of relevant accompanying schedules and
relevant work papers, relevant documents relating to rulings or other
determinations by taxing authorities and relevant records concerning the
ownership and Tax basis of property and other information, that any such
party may possess. Each party will retain all Tax Returns, schedules and
work papers, and all material records and other documents relating to Tax
matters, of the relevant entities for their respective Tax periods ending on
or prior to the Closing Date until the expiration of the statute of
limitations for the Tax periods to which the Tax Returns and other documents
relate. Thereafter, the party holding such Tax Returns or other documents
may dispose of them after offering the other party reasonable notice and
opportunity to take possession of such Tax Returns and other documents at
such other party's own expense. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to provide
explanation of any documents or information so provided.
Section 14.6. Timing Differences. Purchaser agrees that if
------------------
as a result of any audit adjustment (or adjustment in any other Tax
Proceeding) made with respect to any Tax Item that relates to or affects any
Excluded Tax, by any taxing authority with respect to a taxable period (or
portion thereof) ending on or prior to the Closing Date, Purchaser or any of
its Affiliates, including the Acquired Companies, receives a Tax Benefit,
then Purchaser shall pay to
55
Seller the amount of such Tax Benefit within fifteen calendar days of filing
the Tax Return in which such Tax Benefit is realized or utilized. If as a
result of the foregoing audit adjustment Purchaser incurs any additional
Tax, then Seller shall pay to Purchaser the amount of such additional Tax
within fifteen calendar days of the due date for making payment of such
additional Tax. For purposes of determining the amount and timing of any Tax
Benefit, the recipient of the Tax Benefit (a) shall be deemed to pay Tax at
the effective rate of Tax imposed on the recipient of the Tax Benefit in the
year such Tax Benefit is realized or utilized (or, if no Tax is imposed on
the recipient of the Tax Benefit, the statutory rate of Tax applicable in
the year such Tax Benefit is realized or utilized) and (b) shall be deemed
to realize or utilize any Tax Benefit in the first taxable year that such
Tax Benefit may be realized or utilized under applicable Law; provided,
--------
that, if it cannot be determined whether a Tax Benefit is attributable to a
Tax Item resulting from an audit adjustment (or adjustment in any other Tax
Proceeding) described in the first sentence of this Section 14.6 or is
attributable to another Tax Item of the recipient of the Tax Benefit, the
amount of the Tax Benefit deemed realized or utilized pursuant to clause (b)
of the preceding sentence shall be calculated assuming that such Tax Items
are utilized on a pro rata basis.
Section 14.7. Tax Treatment of Indemnification Payments.
-----------------------------------------
Except as otherwise required by applicable Law or pursuant to a
"determination" under Section 1313(a) of the Code (or any comparable
provision of state, local, or non-U.S. Law), Seller, Purchaser, the Acquired
Companies and their respective Affiliates shall treat any and all payments
under this Article XIV or under Article XI as an adjustment to the purchase
price for all Tax purposes. Any such payments under this Article XIV or
Article XI shall be increased by an amount required to fully indemnify the
recipient for any liabilities for Taxes resulting from the receipt of
payment of such indemnity obligations (other than Taxes resulting from a
reduction in Tax basis), and reduced by any Tax Benefit actually realized by
the recipient as a result of the payment or incurrence of the Losses giving
rise to such indemnity obligations.
Section 14.8. Additional Tax Covenant.
-----------------------
(a) Purchaser shall not make, and shall cause its
Affiliates not to make, an election under Section 338(g) of the Code with
respect to any of the Acquired Companies set forth on Schedule 14.8(a);
----------------
provided, that, at Seller's written request, Purchaser shall make, or shall
--------
cause its Affiliates to make, an election under Section 338(g) of the Code
for each of the Acquired Companies identified by Seller in such request,
such election to be made at the time and in the manner requested by Seller.
(b) From the date of the Closing through the end of the
calendar year during which the Closing occurs, Purchaser shall not, and
shall cause its Affiliates (including the Acquired Companies) not to, take
any action described on Schedule 14.8(b) with respect to any of the Acquired
----------------
Companies listed on Schedule 14.8(b) without Seller's prior written consent.
----------------
ARTICLE XV
MISCELLANEOUS
Section 15.1. Certain Definitions.
-------------------
56
"ACQUIRED COMPANIES" has the meaning set forth in
Section 1.1.
"ACQUIRED COMPANY EMPLOYEE" means any individual who is
employed by an Acquired Company immediately before the Closing, including
any individual who is absent due to vacation, holiday, sickness or other
approved leave of absence.
"ACQUIRED COMPANY INTELLECTUAL PROPERTY" means the
Intellectual Property that is owned, in whole or in part, or held for use
under license, by any Acquired Company and that does not constitute Excluded
Assets.
"ACQUIRED COMPANY PLANS" has the meaning set forth in
Section 4.14(a).
"ACQUIRED INTELLECTUAL PROPERTY" means the Purchased
Intellectual Property, the Licensed Intellectual Property and the Acquired
Company Intellectual Property.
"ACQUIROR" has the meaning set forth in Section
12.1(b)(i).
"ACQUISITION TRANSACTION" has the meaning set forth in
Section 6.5.
"AFFILIATE" means, as to any Person, (a) any Subsidiary of
such Person and (b) any other Person that, directly or indirectly, controls,
is controlled by, or is under common control with, such Person. For the
purposes of this definition, "control" means the possession of the power to
direct or cause the direction of management and policies of such Person,
whether through the ownership of voting securities, by contract or
otherwise.
"AGREEMENT" has the meaning set forth in the preamble.
"ALLOCATION SCHEDULE" has the meaning set forth in
Section 2.4.
"ASSETS" means, collectively, the Purchased Assets and any
and all items of like kind owned, leased or used by an Acquired Company and
that do not constitute Excluded Assets.
"ASSUMED LIABILITIES" has the meaning set forth in
Section 1.4.
"AUDITED BALANCE SHEET" has the meaning set forth in
Section 4.6.
"AUDITED FINANCIAL STATEMENTS" has the meaning set forth
in Section 4.6.
"BALANCE SHEET DATE" has the meaning set forth in
Section 4.6.
"BENCHMARK BALANCE SHEET" has the meaning set forth in
Section 4.6.
"BENCHMARK FINANCIAL STATEMENTS" has the meaning set forth
in Section 4.6.
"▇▇▇▇ OF SALE" has the meaning set forth in Section 3.2(b).
"BRAZILIAN TAX CLAIM" means any liability for Taxes
imposed on Solutia Brazil Ltda. in connection with the adjustment proposed
in writing by the Brazilian taxing authorities with respect to the period
from September 1997 through June 2000.
57
"BUSINESS" has the meaning set forth in the Recitals.
"BUSINESS CONTRACTS" means all Contracts Related to the
Business or to which the Acquired Assets or Purchased Shares are subject
(other than this Agreement and any lease of real property that is part of
the Excluded Assets).
"BUSINESS DAY" means any day other than a Saturday, a
Sunday or a day on which banks in New York, New York are authorized or
obligated by Law to close.
"BUSINESS EMPLOYEE" means all individuals employed by
Seller or any of its Affiliates in the Business in connection with the
Purchased Assets, including any individual who is, on the Closing Date,
absent due to vacation, holiday, sickness, short-term disability or other
approved leave of absence who is expected to return to work on or before the
first anniversary of the date of this Agreement or who has a legal right to
return to work, but excluding any individual who is receiving long-term
disability benefits under any Employee Benefit Plan immediately before the
Closing and excluding the Acquired Company Employees.
"BUSINESS SEGMENT" means the following segments of
the Business: (a) liquid coating resins, (b) powder coating resins,
(c) technical resins, (d) additives and specialty products, and (e) adhesives.
"CASH CONSIDERATION" has the meaning set forth in
Section 2.1(a).
"CHANGE IN CONTROL" means any event in which (a) any
Person or group (as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended), excluding Purchaser and its Subsidiaries, becomes
the beneficial owner of more than 50% of the total votes that may be cast
for the election of directors of Seller, (b) Seller consolidates or merger
with another corporation or (c) Seller or any of its Subsidiaries conveys,
transfers or leases all or substantially all of its assets to any Person
other than Purchaser.
"CLOSING" has the meaning set forth in Section 3.1.
"CLOSING CASH" means the difference (whether positive or
negative) of (a) cash, cash equivalents, bank deposits, certificates of
deposit or similar cash items less (b) indebtedness for borrowed money of
the Business, in each case, as of the Closing Date.
"CLOSING DATE" has the meaning set forth in Section 3.1.
"CLOSING DATE BALANCE SHEET" has the meaning set forth in
Section 2.3(a).
"CLOSING NET ASSET VALUE" has the meaning set forth in
Section 2.3(a).
"COBRA COVERAGE" has the meaning set forth in Section
10.1(c)(iii).
"CODE" means the United States Internal Revenue Code of
1986, as amended.
"COMPETITIVE BUSINESS" has the meaning set forth in
Section 12.1(a)(i).
58
"COMPETITION LAWS" has the meaning set forth in
Section 4.17(a).
"CONTRACT" means any contract, agreement, indenture, note,
bond, loan, instrument, lease, conditional sale contract, purchase or sales
orders, mortgage, license, franchise, insurance policy, undertaking,
commitment or other enforceable arrangement or agreement, whether written or
oral.
"CONTROLLING PARTY" has the meaning set forth in
Section 14.4(c).
"COVENANT TERM" has the meaning set forth in Section 12.1(a).
"COVERED ENVIRONMENTAL MATTER" has the meaning set forth
in Section 11.3(d).
"DELAYED TRANSFER ASSETS" has the meaning set forth in
Section 3.5.
"DIRECTIVE" has the meaning set forth in Section
10.1(a)(i).
"EASTMAN AGREEMENT" means the toll manufacturing
agreement, dated as of April 1, 2001, by and between Solutia Canada Inc. and
▇▇▇▇▇▇▇ Chemicals Inc.
"EC REGULATION" has the meaning set forth in Section 4.5.
"EMPLOYEE" means any Transferred Employee or Acquired
Company Employee.
"EMPLOYEE BENEFIT PLANS" has the meaning set forth in
Section 4.14(a).
"ENVIRONMENT" means any surface water, groundwater, land
surface, subsurface strata, river sediment, plant or animal life, natural
resources and soil.
"ENVIRONMENTAL ARBITER" shall mean an Environmental
Arbiter to be mutually agreed by Purchaser and Seller, or if the Purchaser
and Seller cannot mutually agree on the selection of the Environmental
Arbiter, the parties shall refer the selection of such Environmental Arbiter
to The President for the time being of The Law Society of England and Wales,
whose selection of such Environmental Arbiter shall be conclusive and
binding on Purchaser and Seller.
"ENVIRONMENTAL CLAIM" means any Legal Proceeding, Lien,
Order, notice of violation, or investigation, demand or allegation by any
Governmental Body, or any claim arising out of any Legal Proceeding
commenced by any other Person, resulting from or based upon: (a) the breach
of any Environmental Law; (b) the breach of, or the failure to have in
effect, any Environmental Permit; (c) the existence, or the continuation of
the existence, of a Release or threatened Release of, or exposure to, any
Hazardous Material into or onto the Environment; or (d) any Environmental
Remedial Action.
"ENVIRONMENTAL COSTS" means (a) any verifiable costs and
expenses paid to third parties (such as contractors retained to perform
remedial work), as evidenced by itemized invoices, incurred by the Purchaser
Indemnified Group, as the case may be, in response to any Environmental
Claim, and (b) any amounts paid by the Purchaser Indemnified Group pursuant
to any judgement or settlement of any Environmental Claim, in each case
reduced by (i) any
59
insurance proceeds actually received from any third party insurance carrier
offsetting the amount of such Environmental Costs net of any expenses
incurred by the party in obtaining such insurance proceeds (provided that
--------
the Indemnified Party shall be obligated to reasonably seek any such
proceeds to which it may be entitled) and (ii) any recoveries from third
parties pursuant to indemnification (or otherwise) with respect to such
Environmental Costs net of any expense incurred by the Indemnified Party in
obtaining such third party payment.
"ENVIRONMENTAL LAW" means any Law concerning: (a) the
Environment, including pollution, contamination, cleanup, preservation,
protection, and reclamation of the Environment; (b) health or safety,
including occupational safety and the exposure of employees and other
persons to any Hazardous Material; (c) any Release or threatened Release of
any Hazardous Material, including investigation, monitoring, clean up,
removal, treatment, or any other action to address such Release or
threatened Release; and (d) the management of any Hazardous Material,
including the manufacture, generation, formulation, processing, labelling,
distribution, introduction into commerce, registration, use, treatment,
handling, storage, disposal, transportation, re-use, recycling or
reclamation of any Hazardous Material.
"ENVIRONMENTAL PERMIT" means any Permit, approval,
authorization, license, variance, registration, or permission required under
any applicable Environmental Law.
"ENVIRONMENTAL REMEDIAL ACTION" means any action,
including any capital expenditure to: (a) investigate, monitor, clean up,
remove, treat, or in any other way address any Hazardous Material in the
Environment; or (b) prevent the Release or threat of Release, or minimize
the further Release, of any Hazardous Material so it does not migrate or
endanger or threaten to endanger the Environment, which action (i) is
required by any Governmental Body, (ii) in the opinion of the Environmental
Arbiter, would be required to be taken if a Governmental Body were aware of
the presence of, or risk of, Release of Hazardous Materials; provided, that
--------
the taking of such action prior to actual requirement by any Governmental
Body would serve to minimize the aggregate costs that would be required to
remediate such condition or would serve to avert an imminent danger to human
health or safety, or (iii) in the reasonable opinion of Purchaser, is
required to avert an imminent danger to human health and safety.
"EUROPEAN BUSINESS EMPLOYEE" has the meaning set forth in
Section 10.1(a)(i).
"EXCLUDED ASSETS" has the meaning set forth in Section 1.3.
"EXCLUDED LIABILITIES" has the meaning set forth in
Section 1.5.
"EXCLUDED TAXES" means (a) any Taxes imposed on or payable
with respect to any of the Acquired Companies or the Business for any
Pre-Closing Period (other than Taxes imposed with respect to the Acquired
Companies or the Business resulting from any act or transaction by Purchaser
or any of its Affiliates (including the Acquired Companies) after the
Closing that is not in the ordinary course of business) and (b) any Taxes of
Seller or any of its Affiliates (other than the Acquired Companies) for
which the Acquired Companies may be liable under Section 1.1502-6 of the
Treasury Regulations (or any similar provision of state, local, or non-U.S.
Tax law), including any Taxes for which Erste Viking Resins Germany 1 GmbH
may be liable as a result of having been a member of the Organschaft between
Solutia Deutschland
60
Holding GmbH and Erste Viking Resins Germany 1 GmbH. For the avoidance of
doubt, Excluded Taxes (i) shall include Taxes imposed with respect to the
Potential Thai Tax Claim and the Brazilian Tax Claim and (ii) shall include
any payment of Italian substitution Tax required to be made by Solutia Italy
S.R.L. in 2003 (but shall not include the final payment of Italian
substitution Tax required by be made by Solutia Italy S.R.L in 2004). For
purposes hereof, in the case of any period that begins before and ends after
the Closing Date, (i) Property Taxes of the Acquired Companies or the
Business allocable to the Pre-Closing Period shall be equal to the amount of
such Property Taxes for the entire period multiplied by a fraction, the
numerator of which is the number of calendar days during such period that
are in the Pre-Closing Period and the denominator of which is the number of
calendar days in the entire period, and (ii) Taxes (other than Property
Taxes) of the Acquired Companies or the Business allocable to the
Pre-Closing Period shall be computed as if such taxable period ended on the
Closing Date.
"FINAL CLOSING CASH" has the meaning set forth in
Section 2.3(d).
"FINAL NET ASSET VALUE" has the meaning set forth in
Section 2.3(d).
"FINANCIAL STATEMENTS" has the meaning set forth in
Section 4.6.
"FIRST PHASE" has the meaning set forth in Section 7.3(c).
"FORMER ACQUIRED COMPANY EMPLOYEE" means any individual
who is not an Acquired Company Employee but who was, at any time before the
Closing, an employee of an Acquired Company.
"GAAP" means generally accepted accounting principles in
the United States of America set forth in the opinions and pronouncements of
the Accounting Principles Board and the American Institute of Certified
Public Accountants and the statements and pronouncements of the Financial
Accounting Standards Board, or in such other statements by such other entity
as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GOVERNMENTAL BODY" means any government or governmental
or regulatory body thereof, or political subdivision thereof, of any country
or subdivision thereof, whether national, federal, state or local, or any
agency or instrumentality thereof, or any court or arbitrator (public or
private).
"GUARANTIES" has the meaning set forth in Section 7.6.
"HAZARDOUS MATERIAL" means collectively, any material
defined as, or considered to be, a "hazardous waste," "hazardous substance,"
regulated substance, pollutant or contaminant under any Environmental Law.
"HERCULES AGREEMENT" means the toll manufacturing
agreement, dated as of August 1, 1999, by and between Solutia Canada Inc.
and Hercules Inc.
"HOECHST AGREEMENT" means the agreement dated 6th October,
1998 between Hoechst AG and Viking Resins Group Holdings B.V., pursuant to
which Viking Resins Group
61
Holdings B.V. acquired the business currently carried on by the Vianova
group and included in the Business, as amended by an agreement dated 15th
December, 1998.
"HSR ACT" has the meaning set forth in Section 4.5.
"INCOMING IP LICENSES" means Contracts under which
Intellectual Property Related to the Business and owned in whole or in part
by Persons other than the Acquired Companies is licensed for use by Seller
or any of its Subsidiaries.
"INDEMNIFIED PARTY" has the meaning set forth in
Section 11.4.
"INDEMNIFYING PARTY" has the meaning set forth in
Section 11.4.
"INTELLECTUAL PROPERTY" means all intellectual or
industrial property rights or other similar proprietary rights in any
jurisdiction owned or held for use under license, including such rights in
and to: (a) Trademarks; (b) Patents; (c) inventors' certificates, invention
disclosures, discoveries and improvements, whether or not patentable;
(d) Trade Secrets; (e) rights to limit the use or disclosure of confidential
information by any Person; (f) registered Internet domain names;
(g) registrations of, and applications to register, any of the foregoing
with any Governmental Body and any renewals or extensions thereof; and
(h) the goodwill associated with each of the foregoing.
"INTELLECTUAL PROPERTY LICENSE AGREEMENT" means the
Intellectual Property License Agreement, substantially on the terms set
forth in Exhibit N by and between Seller and Purchaser.
---------
"INTERIM BALANCE SHEET" has the meaning set forth in
Section 4.6.
"INTERIM FINANCIAL STATEMENTS" has the meaning set forth
in Section 4.6.
"INVENTORY" has the meaning set forth in Section 1.2(c).
"KNOWLEDGE" means the actual knowledge after due inquiry,
as of the date hereof, or the Closing Date with respect to those warranties
that are deemed made as of the Closing Date pursuant to Section 8.1, of the
individuals set forth on Schedule 15.1(a).
----------------
"LaSALLE" means Seller's LaSalle, Quebec, Canada facility.
"LAW" means any national, federal, state or local law
(including common law), statute, constitutional provision, code, ordinance,
rule, regulation, directive, concession, Order or other requirement or
guideline of any country or subdivision thereof.
"LEASED REAL PROPERTIES" has the meaning set forth in
Section 1.2(a)(ii).
"LEGAL PROCEEDING" means any judicial, administrative or
arbitral action, suit, proceeding (public or private) or governmental
proceeding.
62
"LIABILITIES" means any indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or otherwise,
and whether or not due or to become due or asserted or unasserted).
"LICENSED INTELLECTUAL PROPERTY" has the meaning set forth
in Section 1.2(f).
"LIEN" means any lien (statutory or otherwise), pledge,
mortgage, deed of trust, security interest, charge, option, right of first
refusal, easement, covenant, condition, restriction, servitude, transfer
restriction or encumbrance.
"LIQUIDATING COMPANIES" means Vianova Resins Inc., Vianova
Resins-Quimicas Limitada, Vianova Resins Canada Inc. and Vianova Resins
N.V./S.A.
"LOSSES" has the meaning set forth in Section 11.2(a).
"MADE AVAILABLE" with respect to any information or
document, means that such information or document, or copy thereof, was
(a) included in the materials provided by Seller to Purchaser in data room
in Frankfurt, Germany, or (b) provided in writing by Seller to Purchaser
in response to other inquiries.
"MATERIAL ADVERSE EFFECT" means any material adverse
change in the business, properties, results of operations or financial
condition of the Business, taken as a whole; provided, however, that any
-------- -------
(a) changes in Laws or changes in the enforcement thereof applicable to the
Business, (b) changes resulting from the announcement of the execution
hereof and the transactions contemplated hereby, (c) changes resulting from
any action taken by Purchaser or Seller or any of their respective
representatives in accordance with the terms hereof or in order to
consummate the transactions contemplated hereby, (d) changes in general
economic conditions, including changes in currency exchange or interest
rates, or (e) changes affecting the resins, additives and adhesives
manufacturing industry generally and not specifically relating to the
Business, shall not constitute a Material Adverse Effect.
"MATERIAL BUSINESS CONTRACTS" has the meaning set forth in
Section 4.13.
"MATERIAL INTELLECTUAL PROPERTY" means any Acquired
Intellectual Property that is necessary for production of or is incorporated
into any product sales of which constituted in excess of (a) 1% of the
revenues of the Business as set forth in the Benchmark Financial Statements
or (b) 10% of the revenues of any Business Segment for the year ended
December 31, 2001.
"MATERIAL SITE" means those sites listed on Schedule 15.1(b).
----------------
"NET ASSET VALUE" means, as of any date, the difference of
total assets minus total liabilities of the Business, as of such date, in
each case as shown on a balance sheet of the Business prepared in accordance
with GAAP using the same accounting principles, procedures, policies and
methods that were employed in preparing the Benchmark Balance Sheet, subject
to the following adjustments: (a) all amounts derived from currencies other
than U.S. dollars shall be restated to reflect the currency exchange rates
in effect on September 30, 2002 (as reported in the Wall Street Journal,
International Edition dated October 1, 2002), (b) all items included in
63
calculation of Closing Cash shall be excluded, (c) all amounts pertaining to
Excluded Liabilities (including Excluded Taxes) and Excluded Assets shall be
excluded, (d) goodwill and intangible assets shall be deemed to have a value
frozen at U.S.$192.3 million, and (e) if the date of such balance sheet is
on or before January 31, 2003, the aggregate environmental reserves shall be
deemed to have a value frozen at U.S.$8.9 million.
"NEW PLANS" has the meaning set forth in Section 10.1(b)(iv).
"NEUTRAL AUDITORS" has the meaning set forth in
Section 2.3(d).
"NON-CONTROLLING PARTY" has the meaning set forth in
Section 14.4(c).
"OLD PLANS" has the meaning set forth in Section 10.1(d).
"ORDER" means any order, injunction, judgment, decree,
ruling, writ, assessment or arbitration award of any Governmental Body.
"OTHER BUSINESS EMPLOYEE" has the meaning set forth in
Section 10.1(a)(i).
"OUTGOING IP LICENSES" means Contracts under which rights
in the Acquired Intellectual Property are licensed to Persons other than the
Acquired Companies.
"OWNED REAL PROPERTIES" has the meaning set forth in
Section 1.2(a)(i).
"PAST SERVICE CREDIT" has the meaning set forth in Section
10.1(b)(iv).
"PATENTS" means patents, including design patents and
utility patents, reissues, divisions, continuations, continuations-in-part,
reexaminations and extensions thereof, in each case including all
applications therefor.
"PERMIT" means any approval, authorization, consent,
franchise, license, permit or certificate by any Governmental Body.
"PERMITTED EXCEPTIONS" means: (a) liens for current taxes,
assessments or other claims by a Governmental Body not yet delinquent or the
amount or validity of which is being contested in good faith by appropriate
proceedings that constitute Excluded Liabilities or for which an appropriate
reserve or security deposit is established by Seller therefor;
(b) mechanics', carriers', workers', repairers' and similar Liens arising or
incurred in the ordinary course of business that are not material to the
Business; (c) zoning, entitlement and other land use and environmental
regulations by Governmental Bodies; and (d) such other imperfections in
title, charges, easements, restrictions and encumbrances that do not
materially detract from or diminish the value of or materially interfere
with the present use of such property (real or personal) or asset used in
the Business.
"PERSON" means any individual, corporation, partnership,
limited liability company, firm, joint venture, association, joint-stock
company, trust, unincorporated organization, representative office, branch,
Governmental Body or other similar entity.
64
"PERSONAL PROPERTY LEASES" has the meaning set forth in
Section 4.11(a).
"POST-CLOSING PERIOD" means any taxable period (or portion
thereof) beginning after the Closing Date.
"POTENTIAL THAI TAX CLAIM" means the potential Tax
liability described on Schedule 15.1(c).
----------------
"PRE-CLOSING PERIOD" means any taxable period (or portion
thereof) ending on or before the Closing Date.
"PROPERTY TAXES" means real, personal, and intangible ad
valorem property Taxes.
"PURCHASED ASSETS" has the meaning set forth in Section 1.2.
"PURCHASED COMPANY" has the meaning set forth in Section 1.1.
"PURCHASED COMPANIES" has the meaning set forth in
Section 1.1.
"PURCHASED EQUIPMENT" has the meaning set forth in
Section 1.2(b).
"PURCHASED INTELLECTUAL PROPERTY" means the Intellectual
Property Related to the Business that is owned, in whole or in part, or held
for use under license by Seller or any of its Subsidiaries (excluding the
Acquired Company Intellectual Property) and that does not constitute an
Excluded Asset.
"PURCHASED PROPERTIES" has the meaning set forth in
Section 1.2(a)(ii).
"PURCHASED SHARES" has the meaning set forth in Section 1.1.
"PURCHASER" has the meaning set forth in the preamble.
"PURCHASER DOCUMENTS" has the meaning set forth in
Section 5.2.
"PURCHASER INDEMNIFIED GROUP" means Purchaser, its
Subsidiaries and their respective Affiliates (including, after the Closing
Date, the Acquired Companies), together with their successors and assigns,
and their officers, directors, employees and agents.
"REAL PROPERTY LEASE" means any Contract providing
leasehold or other similar rights to Seller or one of its Subsidiaries in
and to any Leased Real Property.
"RELATED TO THE BUSINESS" means required for, dedicated
to, and used primarily in the Business as currently conducted by Seller and
its Subsidiaries.
"RELEASE" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching, or
migration at, into or onto the Environment, including movement or migration
through or in the air, soil, surface water or groundwater, whether sudden
65
or non-sudden and whether accidental or non-accidental, or any release,
emission or discharge as those terms are defined in any applicable
Environmental Law.
"REPRESENTATIVES" has the meaning set forth in Section 6.1.
"RESOLUTION PERIOD" has the meaning set forth in
Section 2.3(c).
"RETAINED ENVIRONMENTAL LIABILITIES" has the meaning set
forth in Section 1.5(d).
"SECOND PHASE" has the meaning set forth in Section 7.3(a).
"SECOND REQUEST" has the meaning set forth in Section 7.3(a).
"SELLER" has the meaning set forth in the preamble.
"SELLER DISCLOSURE SCHEDULE" has the meaning set forth in
Article IV.
"SELLER DOCUMENTS" has the meaning set forth in Section 4.4.
"SELLER EMPLOYEE BENEFIT PLAN" means any Employee Benefit
Plan that is not an Acquired Company Plan.
"SELLER GROUP" means (a) any "affiliated group" (as
defined in Section 1504(a) of the Code without regard to the limitations
contained in Section 1504(b) of the Code) that, at any time on or before the
Closing Date, includes or has included Seller or (b) any other group of
corporations that, at any time on or before the Closing Date, files or has
filed Tax Returns on a combined, consolidated or unitary basis with Seller.
"SELLER INDEMNIFIED GROUP" means Seller, its Subsidiaries
and their respective Affiliates, together with their successors and assigns,
and their officers, directors, employees and agents.
"SELLER'S LONG-RANGE PLAN" means the Resins and Additives
2003 Planning Process presentation prepared by Seller.
"SEPARATION AGREEMENTS" has the meaning set forth in
Section 10.2.
"STRADDLE PERIOD" means any taxable period beginning on or
prior to and ending after the Closing Date.
"SUBSEQUENT CLOSING" has the meaning set forth in
Section 3.5.
"SUBSEQUENT LOSS" has the meaning set forth in Section
14.3(c).
"SUBSIDIARY" means, with respect to any Person, any other
Person of which such Person (either alone or through or together with any
other Subsidiary) owns, directly or indirectly, a majority of the
outstanding equity securities or securities carrying a majority of the
voting power in the election of the board of directors or other governing
body of such Person.
66
"SUBSIDIARY PURCHASERS" means any direct or indirect
Subsidiary of Purchaser that is assigned or designated to purchase and
acquire any of the Purchased Shares or Purchased Assets.
"TAX" or "TAXES" shall mean all taxes, however
denominated, including any interest or penalties that may become payable in
respect thereof, imposed by any federal, state, local or non-U.S. government
or any agency or political subdivision of any such government, which taxes
shall include, without limiting the generality of the foregoing, all income,
excise, franchise, gains, capital, real property, goods and services,
transfer, value added, gross receipts, personal property, sales, use,
license, stamp, documentary stamp, mortgage recording, employment, payroll,
unemployment, social security (including social security contributions for
fictitious self-employed personnel), environmental, estimated or withholding
taxes, all customs and import duties, and all repayments of any capital
investment bonus in Germany.
"TAX BENEFIT" means the Tax effect of any item of loss,
deduction or credit or any other item that decreases Taxes paid or payable
or increases tax basis, including any interest with respect thereto or
interest that would have been payable but for such item.
"TAX CLAIM" means any claim with respect to Taxes made by
any taxing authority that, if pursued successfully, would reasonably be
expected to serve as the basis for a claim for indemnification under
Article XIV.
"TAX ITEM" means any item of income, gain, loss,
deduction, credit, recapture of credit or any other item that increases
or decreases Taxes paid or payable.
"TAX PROCEEDING" has the meaning set forth in
Section 14.4(b).
"TAX RETURN" means a report, return or other information
(including any amendments) required to be supplied to a Governmental Body
with respect to Taxes including, where permitted or required, combined or
consolidated returns for any group of entities that includes Seller or any
Subsidiary.
"TRADEMARKS" means trademarks, service marks, brand names,
logos, certification marks, trade dress, assumed names and trade names,
including all applications for registration therefor and all renewals,
modifications and extensions thereof.
"TRADE SECRETS" means trade secrets and other similar
confidential or non-public business information, including ideas, formulas,
compositions, technical documentation, operating manuals and guides, plans,
designs, sketches, inventions, production molds, product specifications,
equipment lists, engineering reports and drawings, architectural and
engineering plans, manufacturing and production processes and techniques;
drawings, specifications, plans, proposals, research records, inspection
processes, invention records and technical data; financial, marketing and
business data, pricing and cost information, business and marketing plans
and customer and supplier lists and information, licensing records,
advertising and promotional materials, service and parts records, warranty
records, maintenance records and similar records; and all other know-how in
each case, as recognized under patent, copyright, trade secret law or
similar law.
67
"TRANSFERRED EMPLOYEE" means (a) all European Business
Employees, and (b) all U.S. Business Employees and Other Business Employees
who accept Purchaser's offer of employment pursuant to Section 10.1(a)(iii)
and actually commence active employment with Purchaser or one of its
Subsidiaries.
"U.S.$" means United States Dollars.
"U.S. BUSINESS EMPLOYEE" has the meaning set forth in
Section 10.1(a)(i).
"VAT" has the meaning set forth in Section 2.2.
Whenever used in this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, (a) any noun or
pronoun shall be deemed to include the plural as well as the singular and to
cover all genders, (b) the terms "include" and "including" shall be
inclusive and not exclusive and shall be deemed to be followed by the
following phrase "without limitation," and (c) any reference to any English
legal term for any action, remedy, method of judicial proceeding, legal
document, legal status, court, official or any legal concept or thing shall,
in respect of any jurisdiction other than England, be deemed to include what
most nearly approximates in that jurisdiction such English legal term.
Unless otherwise specified, the terms "hereof," "herein," "hereunder,"
"herewith" and similar terms refer to this Agreement as a whole (including
the schedules and disclosure letters to this Agreement), and references in
this Agreement to Sections and Articles refer to sections and articles of
this Agreement.
Section 15.2. Entire Agreement. This Agreement (together
----------------
with the documents referred to herein) and the Confidentiality Agreement,
dated as of October 7, 2002, by and between Seller and Purchaser constitute
the entire agreement and understanding of the Parties with respect to the
matters contemplated by this Agreement and supercede any previous agreement
between the Parties in relation to such matters.
Section 15.3. Governing Law. This Agreement shall be
-------------
governed by and construed in accordance with the laws of England and Wales.
Section 15.4. Jurisdiction.
------------
(a) Each party irrevocably agrees to submit to the
exclusive jurisdiction of the courts of England and Wales over any claim or
matter arising under or in connection herewith or the legal relationships
established hereby.
(b) (i) Purchaser irrevocably appoints Hackwood
Secretaries Limited, at its registered office for the time being, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, fax number ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇ and (ii) Seller
irrevocably appoints ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Solicitors, ▇ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, fax number ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇ (Attn: MRL/AMC 302621), in each
case, to act as its agent to accept service of process out of the Courts of
England and Wales in relation to all proceedings arising out of or in
connection herewith. Such service shall be deemed completed on delivery to
such agent (whether or not it is forwarded to and received by Purchaser or
Seller as the case may be). If for any reason such agent ceases to be able
to act as agent or no longer has an address in England, Purchaser or Seller,
as the case may be, shall forthwith appoint a substitute agent in England
acceptable to the Purchaser or Seller, as the case
68
may be, and deliver to Seller or Purchaser, as the case may be, the new
agent's name, address and fax number and, failing such appointment being
made within 15 days, Seller or Purchaser, as the case may be, shall be
entitled to appoint such a person by notice to the other.
(c) Each of Purchaser and Seller irrevocably consents to
any process in any Legal Proceedings arising out of or in connection
herewith being served on it in accordance with the provisions hereof
relating to service of notices. Nothing contained herein shall affect the
right to service of process in any other manner permitted by law.
(d) Each party waives objection to the English courts on
grounds of inconvenient forum or otherwise as regards proceedings in
connection herewith or the legal relationships established hereby and
further agrees that a judgment or order of an English court in connection
with this Agreement or the legal relationships established by this Agreement
is conclusive and binding on it and may be enforced against it in the courts
of any other jurisdiction.
Section 15.5. Expenses. Each of the parties hereto shall
--------
bear its own expenses (including fees and disbursements of its counsel,
accountants and other experts) incurred by it in connection with the
preparation, negotiation, execution, delivery and performance hereof, each
of the other documents and instruments executed in connection herewith or
contemplated hereby and the consummation of the transactions contemplated
hereby and thereby.
Section 15.6. Table of Contents and Headings. The table of
------------------------------
contents and section headings hereof are for convenience of reference only
and are to be given no effect in the construction, interpretation or effect
hereof.
Section 15.7. Notices. All notices and other
-------
communications hereunder shall be in writing and in the English language and
shall be deemed given when delivered personally or by overnight mail or to
the extent receipt is confirmed, facsimile or other electronic transmission
service, or five calendar days after being mailed by registered mail, return
receipt requested, to a party at the following address (or to such other
address as such party may have specified by notice given to the other
parties pursuant to this Section 15.7):
If to Seller, to:
Solutia Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
69
If to Purchaser, to:
UCB ▇.▇.
▇▇▇▇▇ ▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Attn: Group General Counsel
Tel: ▇▇▇.▇.▇▇▇.▇▇.▇▇
Fax: ▇▇▇.▇.▇▇▇.▇▇.▇▇
with a copy to:
Linklaters ▇▇ ▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇-▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Tel: ▇▇▇ ▇ ▇▇▇ ▇▇ ▇▇
Fax: ▇▇▇ ▇ ▇▇▇ ▇▇ ▇▇
Section 15.8. Severability. The invalidity or
------------
unenforceability of any provision hereof shall not affect the validity or
enforceability of any other provision hereof, each of which shall remain in
full force and effect.
Section 15.9. Binding Effect; No Assignment. This
-----------------------------
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. Nothing herein shall
create or be deemed to create any third party beneficiary rights in any
Person not a party hereto (except for Indemnified Parties in Article XI),
and except as expressly set forth herein, no Person not a party hereto
(except for Indemnified Parties in Article XI) shall have the right to
enforce any term or terms hereof pursuant to the Contracts (Rights of Third
Parties) ▇▇▇ ▇▇▇▇. No assignment hereof or of any rights or obligations
hereunder may be made by any party hereto (by operation of law or otherwise)
without the prior written consent of the other party hereto and any
attempted assignment without such required consent shall be without effect;
provided, however, that Purchaser may, without limiting or affecting in any
-------- -------
manner its obligations hereunder and without further approval or consent of
Seller, assign and delegate to one or more wholly-owned Subsidiary
Purchasers part or all of its rights and obligations hereunder.
Section 15.10. Amendments. This Agreement may be amended,
----------
supplemented or modified, and any provision hereof may be waived, only
pursuant to a written instrument making specific reference hereto signed by
each of the parties hereto.
Section 15.11. Counterparts. This Agreement may be
------------
executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
70
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
UCB S.A.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman, Executive Committee
By: /s/ Ben Van Assche
---------------------------------------
Name: Ben Van Assche
Title: Director, General Chemical Sector
SOLUTIA INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman, President and Chief
Executive Officer
71
EXHIBIT A
SCOPE OF BUSINESS
-----------------
"Business" shall mean the research, development, manufacture,
--------
marketing and sale of Resins and Additives, as defined by product trade
names and their chemical characterization in the Appendix A.1 to this
Exhibit A, in four (4) product lines: Liquid Coating Resins (LCR), Powder
Coating Resins (PCR), Technical Resins (TR), and Additives & Specialty
Products (ASP), primarily to customers in the industry fields of Paints and
Coatings (PC), Building and Construction (BC), Mechanical Engineering (ME),
Automotive Body and Parts (AB), Wood and Furniture (WF), Sports and Leisure
Goods (SL), Tires and Rubber Goods (TR) and electronic components
manufacturing (EC) as well as the research, development, manufacture,
marketing and sale of Adhesives comprising multipolymer resins used for
pressure sensitive adhesives, including, without limitation, Gelva(R)
acrylic multipolymer solutions and Gelva(R) multipolymer emulsions and
adhesive technology, including, without limitation, free radical
polymerizations, crosslinkers, and formulation components.
Products and technologies included in LCR product line are:
waterborne acrylics, waterborne alkyds, and waterborne epoxies; polyurethane
dispersions; conventional acrylic coating resins, conventional alkyds and
conventional epoxies, conventional and hi-solids melamines;
UV/EB-(ultra-violet/electron beam) cured coating resins; unsaturated
polyester coating resins; and phenolic coating resins.
Products and technologies included in the PCR product line are:
polyester based and acrylic based resins for powder coatings used in thermal
or UV-cured powder coating resins.
Products and technologies included in the TR product line are:
technical and specialty melamines; technical phenolics; and technical
unsaturated polyesters.
Products in the ASP include Santosol(R) dimethyl products as well
as the following products and technologies: thermoplastic resins;
Modaflow(R) acrylic-based flow modifiers and PC defoamers; and Additol(R)
additives (primarily acrylic-based), and Stymer(R) synthetic resins.
Seller's proprietary information, material and data of a technical
or scientific nature, in tangible or intangible form, and Seller
Intellectual Property relating to the adhesive GMS-3109, subject Purchaser's
grant to Seller (or Seller's designee) of an exclusive worldwide,
royalty-free irrevocable license, which may be sublicensed and is
assignable, for use with any film or combination of films used in optical
applications, including but not limited to window films or display films
("Seller GMS-3109 Applications").
The attached list of sales products in Appendix A is intended to
describe generally the chemistry of the Classes of Product set out above.
The trademarks shown are for illustrative purposes associated with the
chemistry. The detailed schedule of trademarks is contained in Schedule 4.12.
APPENDIX A.1
------------
TRADE NAME/TRADEMARK CHEMICAL CHARACTERIZATION
-------------------- -------------------------
Liquid Coating Resins
Vialkyd solvent borne alkyd resins (oil and/or fatty acid-modified,
oil-free, urethane, acrylic, epoxy or urethane modified)
Duroftal solvent borne hydroxy functional polyesters
Resydrol water borne air drying (oxidising) and stoving (chemically
crosslinkable) alkyd resins (oil and/or fatty acid-modified,
oil-free, urethane, acrylic, epoxy or urethane modified), resins
for water-borne electrodeposition coatings
Daotan aqueous polyurethane dispersions
Viamin urea based crosslinking resins
Macrynal water and solvent borne hydroxy functional acrylic resins
Viacryl thermoplastic acrylic resins, hydroxy functional acrylic resins,
both water and solvent borne, for one-pack coatings with
crosslinkers or self-crosslinking resins
Beckopox liquid and solid bulk (100%) epoxy resins, reactively diluted
epoxy resins, water borne epoxy resin dispersions, hardeners for
bulk, solvent borne and water borne epoxy resins
Duroxyn epoxy esters
Beckocoat moisture curing one-pack polyurethane resins
Viapal unsaturated polyester resins for paints
Viaktin radiation curable resins, bulk, solvent borne and water borne
Phenodur, Durophen phenolic coating resins
Maprenal melamine crosslinker resins for liquid coatings
Resimene urea or melamine crosslinker resins for liquid coatings
Resamin plasticising resin based on butyl urethane and formaldehyde
Santolink Phenolic crosslinker
Modacure allyl alcohol modified melamine crosslinker
Powder Coating Resins
Alftalat polyester powder coating resins
Synthacryl acrylic powder coating resins
Additol curing agents and additives for powder coating resins
2
Technical Resins
Madurit melamine resins for laminates, finish foil and edges, adhesives,
paper, and insulation material in building
Alnovol phenolic resins for rubber and electronics, but not including uses
for adhesives
Viapal unsaturated polyester resins for composites and gel coats
Additol melamine based resins for textile and wood finishing
Hypersal additives for woodworking
Resimene melamine resins for rubber compositions
Phenodur phenolic resins for abrasives
Alpex cyclised rubber for coatings and printing inks
Synotex cyclised rubber
Alresat SKE 150 phenolic resin supplied to Clariant under limited license for use in
non-printing inks application
Additives and Specialty Products
Additol leveling agents, antiskinning agents, wetting agents, dispersing
agents, antifloating agents, catalysts, defoaming agents,
antisettling agents, preservers, adhesion promoters, and rheology
modifiers
Modaflow silicone-free flow modifiers for liquid and powder coatings
Multiflow acrylic leveling agent
Resamin plasticising resin for phenolics
Hypersal additives for laminates, impregnation assistants
PC Defoamers acrylic based defoaming agents for hydrocarbon fuel and oil
Alresat SKE 150(R) limited rights under license from Akzo that permits Sierra to
manufacture and sell resin for a non-printing ink application
to Clariant.
Santosol Dimethyl esters of adipic, glutanic and succinic acids
Stymer Synthetic resins used in treatment of textiles [Note As of Aug, 2001
these products were no longer made.]
Santolink Crosslinking resins for thermoset and free radical cure systems.
3
OMITTED SCHEDULES
A list briefly identifying the contents of all omitted schedules to this
Stock and Asset Purchase Agreement by and between UCB S.A. and Solutia Inc.,
dated as of December 2, 2002, appears in the Table of Contents to this
agreement. Solutia will furnish supplementally to the Securities and
Exchange Commission upon request a copy of any omitted schedule.
4