Document:

Ex-10.4

 

Exhibit 10.4

AGREEMENT

          This Agreement (“Agreement”) was made as of this 4th day of April, 2003,
by and among United Bankshares, Inc., a West Virginia corporation (the
“Corporation”), United Bank, a Virginia state-chartered bank (the “Bank”) and
James G. Tardiff (the “Executive”). Capitalized terms used and not otherwise
defined herein shall have the meaning set forth in either the Executive
Employment Agreement dated as of January 2, 2002, as amended (the “Employment
Agreement”) or the Agreement and Plan of Reorganization by and between the
Corporation and Sequoia Bancshares, Inc., a Delaware corporation (“Sequoia”),
dated as of April 4, 2003, (the “Merger Agreement”).

WITNESSETH:

          WHEREAS, pursuant to the Merger Agreement, Corporation and Bank recognize
that (i) the Executive’s continued service to the Corporation and Bank is
needed and adds value to the operations of both Corporation and Bank after the
Effective Time of the Merger; and (ii) that the Executive’s continued service
to Corporation and Bank will maximize the potential of the strategic business
combination contemplated under the Merger Agreement; and

          WHEREAS, the parties have agreed to enter into this Agreement to provide
for the termination by Executive of his Employment Agreement, such termination
to be conditioned upon consummation of the Merger; and

          WHEREAS, Corporation and Bank agreed to assume the obligations of Sequoia
under the Employment Agreement conditioned upon consummation of the Merger; and

          WHEREAS, Corporation and Bank consider the availability of Executive’s
services to be important to the management and conduct of Corporation’s and
Bank’s business and desire to secure the continued availability of Executive’s
services; and

          WHEREAS, Executive is willing to make his services available to
Corporation and Bank on the terms and conditions set forth herein.

          NOW THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:

          1.     Consulting Arrangement. Upon commencement of the term of this
Agreement, Executive shall serve as a consultant to the Corporation and the
Bank under the terms of this Agreement.

          2.     Status of Executive. Executive shall, for all purposes under this
Agreement, be treated as an independent contractor.

 

          3.     Services to be Provided by Executive. During the term of this
Agreement, Executive shall provide services on a mutually agreeable schedule
which are consistent with his role as a consultant, including promoting the
products and services of Corporation and Bank to the customer base of Sequoia and its subsidiaries, maintaining
relationships and soliciting business with such former customers, general
customer and employee relations, public relations, assisting in strategic
planning and the full development of the potential of the strategic combination
contemplated in the Merger Agreement, assisting in the smooth and orderly
transition of management and employees from Sequoia and its subsidiaries to
Corporation and Bank, and such other services and duties consistent with the
forgoing as maybe reasonably assigned to him from time to time by the Board of
Directors of Bank or Corporation. Executive hereby accepts and agrees to the
above-described services subject to the general supervision and pursuant to the
orders, advice and direction of the Board of Directors of either Bank or
Corporation. In addition to the foregoing, Executive shall be elected to the
Board of Directors of Corporation as provided in Section 7.14 of the Merger
Agreement.

          4.     Compensation. In exchange for the services described in Paragraph 4
above, Executive shall be entitled to receive cash compensation of $250,000
during the term of this Agreement. The cash compensation provided herein shall
be paid in quarterly installments beginning on the Commencement Date.
Additionally, during the term of this Agreement, Executive may continue his
exclusive use of the office currently provided by Sequoia.

          During the term of this Agreement, Executive shall (i) be entitled to
participate in the Bank’s welfare benefit plans (health, life and disability)
on the same terms as if he were employed as a senior executive of the Bank or
be provided with comparable coverage on an individual basis in the event that
the Bank cannot provide such coverage directly by reason of Executive’s status
as an independent contractor, (ii) be provided with the use of a company-owned
or leased vehicle similar to the vehicle used by Executive prior to the Merger
and on the same terms as such vehicle was made available to the Executive, and
(iii) with respect to the period of the Executive’s service as a consultant to
the Bank under this Agreement, receive full credit for a “Year of Service” for
purposes of determining the Executive’s benefit under the Amended and Restated
Salary Continuation Agreement between Executive and Sequoia Bank, as amended,
which agreement has been assumed as an obligation of the Bank.

          5.     Term of Agreement. The term of this Agreement shall commence on the
last to occur of January 2, 2004 or the Effective Date (as such term if defined
in the Merger Agreement) (the “Commencement Date”) and shall terminate 12
months thereafter.

          6.     Non-Compete; Confidentiality; Non-Solicitation.

               (a)     The Executive agrees that during this Agreement and during the
two-year period after termination of this Agreement, the Executive will not,
directly or indirectly, (i) become a director, officer, employee, principal,
agent, consultant or independent contractor of any insured depository
institution, trust company or parent holding company of any such institution or
company (or any other entity offering products or services competing with such
institution or company) which has an office in Virginia, Maryland or the
District of Columbia. (a “Competing Business”), provided, however, that this
provision shall not prohibit

 

the Executive from owning bonds, non-voting
preferred stock or up to five percent (5%) of the outstanding common stock of
any such entity if such common stock is publicly traded, or (ii) solicit
(whether by mail, telephone, personal meeting or any other means) any customer
of United or any of its subsidiaries to transact business with any other
entity, whether or not a Competing Business, or to reduce or refrain from doing
any business with United or its subsidiaries, or interfere with or damage (or attempt to interfere with or
damage) any relationship between United or its subsidiaries and any such
customers.

               (b)     Except as required by law or regulation (including without limitation
in connection with any judicial or administrative process or proceeding), the
Executive shall keep secret and confidential and shall not disclose to any
third party (other than the Company, United or any of their respective
subsidiaries) in any fashion or for any purpose whatsoever any information
regarding the Company, United or any of their respective subsidiaries which is
not available to the general public to which the Executive had access at any
time during the course of the Executive’s employment by the Company or any of
its subsidiaries, including, without limitation, any such information relating
to: business or operations; plans, strategies, prospects or objectives;
products, technology, processes or specifications; research and development
operations or plans; customers and customer lists; distribution, sales,
service, support and marketing practices and operations; financial condition,
results of operations and prospects; operational strengths and weaknesses; and
personnel and compensation policies and procedures.

               (c)     Executive agrees that during this Agreement and the two-year period
after termination of this Agreement, Executive shall not, on his own behalf or
on behalf of any other person, corporation or entity, either directly or
indirectly, solicit, induce, recruit or cause another person in the employ of
United or its affiliates to terminate his or her employment for the purpose of
joining, associating or becoming an employee with any business which is in
competition with any business or activity engaged in by United or its
affiliates.

               (d)     The Executive agrees that damages at law will be an insufficient
remedy to United in the event that the Executive violates any of the provisions
of paragraph (a), (b) or (c) of this Section 6, and that United may apply for
and, upon the requisite showing, have injunctive relief in any court of
competent jurisdiction to restrain the breach or threatened or attempted breach
of or otherwise to specifically enforce any of the covenants contained in
paragraph (a), (b) or (c) of this Section 6. The Executive hereby consents to
any injunction (temporary or otherwise) which may be issued against the
Executive and to any other court order which may be issued against the
Executive from violating, or directing the Executive to comply with, any of the
covenants in paragraph (a), (b) or (c) of this Section 6. The Executive also
agrees that such remedies shall be in addition to any and all remedies,
including damages, available to United against the Executive for such breaches
or threatened or attempted breaches.

               (e)     In addition to United’s rights set forth in paragraph (d) of this
Section 6, in the event that the Executive shall violate the terms and
conditions of paragraphs (a), (b) or (c) of this Section 6, United and its
subsidiaries may terminate any payments or benefits of any type and regardless
of source payable by United or its subsidiaries, if applicable, to the
Executive, other than with respect to payments or benefits to the Executive
under plans or

 

arrangements that are covered by the Employee Retirement Income
Security Act of 1974, as amended.

          7.     Conflicting Agreements. Executive hereby represents and warrants that
the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which
he is a party or is bound, and that he is not now subject to any covenants against competition or similar covenants
which would affect the performance of his obligations hereunder.

          8.     Definition of “Person”. For purposes of this Agreement, the term
“Person” shall mean an individual, a corporation, an association, a
partnership, an estate, a limited liability company, and any other entity or
organization.

          9.     Assignment; Successors and Assigns, etc. Neither the Corporation and
Bank nor the Executive may make an assignment of this Agreement or any interest
herein, by operation of law or otherwise, without the prior written consent of
the other party hereto, and without such consent, any attempted transfer or
assignment shall be null and of no effect; provided, however, that the
Corporation and Bank may assign their rights under this Agreement without
consent of the Executive in the event that the Corporation and Bank shall
hereafter effect a reorganization, consolidate with or merge into any other
Person, or transfer all or substantially all of its properties or assets to any
other Person and such other Person assumes the obligations of the Corporation
and Bank under this Agreement. This Agreement shall inure to the benefit of
and be binding upon the Corporation and Bank and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.

          10.     Enforceability. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or enforceable, shall not be affected thereby, and each
portion and provisions of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.

          11.     Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party or any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.

          12.     Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by the duly authorized
representatives of the Corporation and Bank.

          13.     Governing Law. This Agreement shall be construed under and be
governed in all respects by the laws of the Commonwealth of Virginia, to the
extent not preempted by Federal law.

 

          14.     Complete Agreement. Except as otherwise provided in this Agreement,
on and after the Commencement Date, this Agreement shall supersede any other
agreement, written or oral, pertaining to the subject matter of this Agreement,
other than that certain Executive Agreement of even date herewith which the
Executive is a party.

          IN WITNESS WHEREOF, this Agreement has been executed by the Corporation
and Bank, by their respective duly authorized officers, and by the Executive,
as of the date first written above.

	 	 	 	 	 
	 	 	UNITED BANKSHARES, INC.
	 	 	 	 	 
	 	 	
By:
	     /s/ Richard M. Adams     
	 	 	 	

	 	 	Name: Richard M. Adams

Title: Chairman and Chief Executive Officer
	 	 	 	 	 
	 	 	UNITED BANK
	 	 	 	 	 
	 	 	
By:
	     /s/ James J. Consagra, Jr.     
	 	 	 	

	 	 	Name:  James J. Consagra, Jr.

Title: Chief Financial Officer and Chief Operating Officer
	 	 	 	 	 
	 	 	EMPLOYEE:
	 	 	 	 	 
	 	 	 	     /s/ James G. Tardiff     
	 	 	

	 	 	JAMES G. TARDIFFExhibit 10.1 Purchase Agreement

 

Execution Version

 

 

PURCHASE AGREEMENT

BY AND BETWEEN

ATLANTIC RESEARCH CORPORATION

AND

AEROJET-GENERAL CORPORATION

May 2, 2003

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 	 	 	 	

	ARTICLE I	 	
General Provisions
	 	 	1	 
	1.01	 	
Definitions
	 	 	1	 
	1.02	 	
Seller’s Knowledge
	 	 	2	 
	1.03	 	
Purchaser’s Knowledge
	 	 	2	 
	1.04	 	
Sole Discretion
	 	 	2	 
	1.05	 	
Currency Conversion
	 	 	2	 
	ARTICLE II	 	
Purchase, Sale and Related Transactions
	 	 	2	 
	2.01	 	
Purchased Assets and Assumed Liabilities
	 	 	2	 
	2.02	 	
Excluded Assets and Excluded Liabilities
	 	 	6	 
	2.03	 	
Transition Services Agreement
	 	 	9	 
	2.04	 	
Gainesville Services Agreement
	 	 	9	 
	2.05	 	
Gainesville Office Leases
	 	 	9	 
	2.06	 	
Camden Sublease
	 	 	10	 
	2.07	 	
Long Term Supply Contract
	 	 	10	 
	2.08	 	
Master Propellant License Agreement
	 	 	10	 
	2.09	 	
Environmental Action Agreement
	 	 	10	 
	2.10	 	
UK Local Agreement
	 	 	10	 
	2.11	 	
Sequa Guaranty
	 	 	10	 
	2.12	 	
GenCorp Guaranty
	 	 	11	 
	2.13	 	
Payment of Purchase Price
	 	 	11	 
	2.14	 	
Purchase Price Adjustment
	 	 	11	 
	2.15	 	
Allocation of Purchase Price
	 	 	14	 
	ARTICLE III	 	
Representations and Warranties
	 	 	14	 
	3.01	 	
General Representations and Warranties
	 	 	14	 
	3.02	 	
Representations and Warranties Concerning the Disclosure Package and Other
Disclosure Matters
	 	 	16	 
	3.03	 	
Additional Representations and Warranties Concerning the UK Company
	 	 	38	 
	3.04	 	
Purchaser’s Representations and Warranties
	 	 	45	 
	3.05	 	
Disclaimers
	 	 	47	 
	ARTICLE IV	 	
Certain Covenants and Agreements Prior to Closing
	 	 	48	 

-i-

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 	 	 	 	

	4.01	 	
Corporate Examinations and Investigations
	 	 	48	 
	4.02	 	
Cooperation; Consents
	 	 	49	 
	4.03	 	
Conduct of Business
	 	 	50	 
	4.04	 	
Preservation of Business
	 	 	51	 
	4.05	 	
Notification
	 	 	53	 
	4.06	 	
Hart-Scott-Rodino Act and Foreign Filings
	 	 	53	 
	4.07	 	
Government Contracts
	 	 	54	 
	4.08	 	
Confidentiality
	 	 	54	 
	4.09	 	
Return of Information
	 	 	55	 
	4.10	 	
No Shop
	 	 	55	 
	4.11	 	
Payment of Indebtedness by Related Parties
	 	 	55	 
	4.12	 	
Title Insurance
	 	 	56	 
	4.13	 	
Tax Certificates
	 	 	57	 
	4.14	 	
Supplements and Updates to Schedules
	 	 	57	 
	4.15	 	
Satisfaction of Conditions
	 	 	57	 
	4.16	 	
Termination of Tax Sharing Agreements; Surrender of Group Relief
	 	 	58	 
	4.17	 	
Limitation on Group Relief
	 	 	58	 
	ARTICLE V	 	
Conditions
	 	 	59	 
	5.01	 	
Conditions to Purchaser’s Obligations
	 	 	59	 
	5.02	 	
Conditions to Seller’s Obligations
	 	 	61	 
	5.03	 	
Termination
	 	 	62	 
	ARTICLE VI	 	
The Closing
	 	 	64	 
	6.01	 	
The Closing
	 	 	64	 
	6.02	 	
Time, Date and Place of Closing
	 	 	64	 
	6.03	 	
Deliveries at Closing
	 	 	64	 
	ARTICLE VII	 	
Certain Covenants and Agreements After Closing
	 	 	68	 
	7.01	 	
Further Conveyances and Assurances
	 	 	68	 
	7.02	 	
Further Consents to Assignment
	 	 	68	 
	7.03	 	
Access
	 	 	69	 
	7.04	 	
Use of Trademark and Trade Names
	 	 	70	 

-ii-

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 	 	 	 	

	7.05	 	
Non-Solicitation of Employees
	 	 	70	 
	7.06	 	
Covenant Not to Compete
	 	 	70	 
	7.07	 	
Administration of Accounts
	 	 	71	 
	7.08	 	
Sale and Transfer of Gainesville Fixed Assets
	 	 	71	 
	7.09	 	
Preparation and Filing of Tax Returns
	 	 	72	 
	ARTICLE VIII	 	
Employees and Non-UK Employee Benefits
	 	 	72	 
	8.01	 	
Employees After Closing
	 	 	72	 
	8.02	 	
ARC 401(k) Plan
	 	 	76	 
	8.03	 	
Welfare Benefits
	 	 	77	 
	8.04	 	
Stock Options and Restricted Stock
	 	 	80	 
	8.05	 	
Exposure to Hazardous Materials
	 	 	80	 
	ARTICLE IX	 	
Indemnification
	 	 	80	 
	9.01	 	
Indemnification of Sequa Entities
	 	 	80	 
	9.02	 	
Indemnification of Purchaser
	 	 	82	 
	9.03	 	
Procedure for Claims
	 	 	83	 
	9.04	 	
Indemnification Limitation on Real Property
	 	 	85	 
	9.05	 	
Survivability; Limitations
	 	 	85	 
	9.06	 	
Indemnification Based Upon Net Damage
	 	 	86	 
	ARTICLE X	 	
Miscellaneous
	 	 	87	 
	10.01	 	
Cooperation; Time of Essence
	 	 	87	 
	10.02	 	
Severability
	 	 	87	 
	10.03	 	
Expenses
	 	 	87	 
	10.04	 	
Transfer Taxes
	 	 	87	 
	10.05	 	
Notices
	 	 	87	 
	10.06	 	
Assignment
	 	 	89	 
	10.07	 	
No Third Parties
	 	 	89	 
	10.08	 	
Incorporation by Reference
	 	 	90	 
	10.09	 	
Governing Law
	 	 	90	 
	10.10	 	
Consent to Jurisdiction
	 	 	90	 
	10.11	 	
Counterparts
	 	 	91	 

-iii-

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 	 	 	 	

	10.12	 	
Complete Agreement
	 	 	91	 
	10.13	 	
Release of News Information
	 	 	91	 
	10.14	 	
Modification or Amendment of Agreement
	 	 	91	 
	10.15	 	
Waiver
	 	 	91	 
	10.16	 	
Headings; Interpretation
	 	 	92	 

-iv-

 

List of Schedules

	 	 	 
	Schedule 1.02A	 	
Seller’s Knowledge
	Schedule 1.02B	 	
Due Diligence Certifications
	Schedule 1.03	 	
Purchaser’s Knowledge
	Schedule 2.01(a)(vii)	 	
Purchased Joint Ventures
	Schedule 2.02(a)(viii)	 	
Excluded Patents and Trademarks
	Schedule 2.02(a)(ix)	 	
Excluded Assets
	Schedule 2.02(a)(xi)	 	
Other Excluded Assets
	Schedule 2.02(a)(xii)	 	
Retained Sequa Programs
	Schedule 2.02(a)(xiii)	 	
Retained Insurance Policies
	Schedule 2.02(a)(xiv)	 	
Retained Employee Benefit Programs
	Schedule 2.02(a)(xviii)	 	
Prior Transactions
	Schedule 2.02(a)(xxiii)	 	
Camden Automotive Fixed Assets
	Schedule 3.01(a)	 	
Corporate Organization and Existence
	Schedule 3.01(e)(i)	 	
No Default; Consents
	Schedule 3.01(g)	 	
Subsidiaries and Joint Ventures
	Schedule 3.02(a)	 	
Financial Statements
	Schedule 3.02(a)(ii)	 	
Exceptions to Financial Statements
	Schedule 3.02(c)	 	
Accounts Receivable
	Schedule 3.02(e)	 	
Owned Real Estate
	Schedule 3.02(f)	 	
Real Estate Leases
	Schedule 3.02(f)(i)	 	
Real Estate Leases: Subleasees
	Schedule 3.02(g)	 	
Personal Property Leases
	Schedule 3.02(h)	 	
Litigation
	Schedule 3.02(i)	 	
Material Contracts
	Schedule 3.02(j)(i)	 	
Government Contracts
	Schedule 3.02(j)(ii)	 	
Government Contracts: Investigations and Audits
	Schedule 3.02(j)(iii)	 	
Government Contracts: Financing Arrangements and Claims
	Schedule 3.02(j)(iv)	 	
Government Contracts: Suspension and Debarment
	Schedule 3.02(k)(i)	 	
Employee Benefits: Benefit Plans
	Schedule 3.02(k)(ii)	 	
Employee Benefits: Benefit Plans Not Provided
	Schedule 3.02(k)(iii)	 	
Employee Benefits: Legal Proceedings
	Schedule 3.02(k)(v)	 	
Employee Benefits: Retention Agreements
	Schedule 3.02(k)(viii)	 	
ARC’s 401(k) Plan
	Schedule 3.02(k)(ix)	 	
Workers’ Compensation Claims
	Schedule 3.02(l)	 	
Labor Matters
	Schedule 3.02(m)	 	
Employees
	Schedule 3.02(n)	 	
Permits and Approvals
	Schedule 3.02(o)	 	
Compliance with Laws
	Schedule 3.02(p)	 	
Filing of Tax Returns; Payment of Taxes; Tax Liens
	Schedule 3.02(q)	 	
Absence of Certain Changes and Events
	Schedule 3.02(r)	 	
Trademarks
	Schedule 3.02(s)	 	
Patents
	Schedule 3.02(t)	 	
Intercompany Transactions and Transactions with Certain Persons
	Schedule 3.02(u)(i)	 	
Insurance

-v-

 

	 	 	 
	Schedule 3.02(u)(ii)	 	
UK Policies
	Schedule 3.02(v)(i)	 	
Environmental Matters: Remediation and Repair Required
	Schedule 3.02(v)(ii)	 	
Environmental Matters: Compliance with Environmental Laws
	Schedule 3.02(v)(iii)	 	
Environmental Matters: Disclosure of Information
	Schedule 3.02(v)(iv)	 	
Environmental Matters: Permits
	Schedule 3.02(v)(v)	 	
Environmental Matters: Orders
	Schedule 3.02(v)(vi)	 	
Environmental Matters: Required Notices and Reports
	Schedule 3.02(v)(vii)	 	
Environmental Matters: Claims
	Schedule 3.02(v)(viii)	 	
Environmental Matters: Listing on National Priorities List, Etc.
	Schedule 3.02(v)(ix)	 	
Environmental Matters: Contamination
	Schedule 3.02(v)(x)	 	
Environmental Matters: Capital Expenditures
	Schedule 3.02(w)	 	
Product Liability and Warranties
	Schedule 3.02(x)	 	
Material Adverse Change
	Schedule 3.02(y)	 	
Disclosure
	Schedule 3.03(b)	 	
Solvency
	Schedule 3.03(e)(iii)	 	
Non-Compliance with Tax Obligations
	Schedule 3.03(f)	 	
UK Bank Accounts
	Schedule 3.03(g)(i)	 	
UK Employees
	Schedule 3.03(g)(ii)	 	
UK Employees: Leaves of Absence
	Schedule 3.03(g)(iii)	 	
UK Employees: Salary
	Schedule 3.03(g)(iv)	 	
UK Employees: Unpaid Remuneration
	Schedule 3.03(g)(v)	 	
UK Employees: Agreements
	Schedule 3.03(g)(vi)	 	
UK Employees: Non-Terminable Contracts
	Schedule 3.03(g)(vii)	 	
UK Employees: Termination
	Schedule 3.03(g)(viii)	 	
UK Employees: One-Off Payments
	Schedule 3.03(g)(ix)	 	
UK Employees: Severance
	Schedule 3.03(g)(x)	 	
UK Employees: Compliance with Legislation
	Schedule 3.03(g)(xi)	 	
UK Employees: Disputes
	Schedule 3.03(h)	 	
UK Benefit Plan
	Schedule 3.03(h)(iii)	 	
UK Benefit Plan: Legal Proceedings
	Schedule 3.03(h)(iv)	 	
UK Benefit Plan: Non-Compliance with Law
	Schedule 3.03(h)(v)	 	
UK Benefit Plan: Exceptions to Money Purchase Benefits
	Schedule 3.03(i)(ii)	 	
Taxation: Non-Compliance with Tax Obligations
	Schedule 3.03(i)(iii)	 	
Taxation: Payment of Taxes
	Schedule 3.03(i)(iv)	 	
Taxation: Non-Compliance with Employee Tax Deduction Obligation
	Schedule 3.03(i)(v)	 	
Taxation: Book Value of Assets
	Schedule 3.03(i)(vi)	 	
Taxation: UK Claims
	Schedule 3.03(i)(vii)	 	
Taxation: Pay as You Earn System
	Schedule 3.03(i)(viii)	 	
Taxation: UK Company Dispensations
	Schedule 3.03(i)(ix)	 	
Taxation: Non-Deductible Employee Remuneration
	Schedule 3.03(i)(x)	 	
Taxation: Non-Compliance with Insurance Contribution
	Schedule 3.03(i)(v)	 	
Taxation: Entity Classification Election
	Schedule 3.04(h)	 	
Regulatory Approvals
	Schedule 3.04(i)	 	
Purchaser’s 401(k) Plan
	Schedule 8.01(a)	 	
Active Employees
	Schedule 8.01(b)	 	
Non-Active Employees

-vi-

 

	 	 	 
	Schedule 8.01(c)	 	
Gainesville Transition Employees
	Schedule 8.01(d)	 	
Former Employees and Former Employee Obligations
	Schedule 8.01(p)	 	
Retention Bonuses
	Schedule 8.03(f)	 	
ARC Sick Leave Benefit Program and Retiree Medical Obligations

-vii-

 

List of Exhibits

	 	 	 
	Exhibit A	 	
Definitions
	Exhibit B	 	
Term Sheet for Transition Services Agreement
	Exhibit C	 	
Term Sheet for Gainesville Services Agreement
	Exhibit D	 	
Term Sheet for Gainesville Office Leases
	Exhibit E	 	
Term Sheet for Camden Sublease
	Exhibit F	 	
Form of Long Term Supply Contract
	Exhibit G	 	
Form of Master Propellant License Agreement
	Exhibit H	 	
Form of Environmental Action Agreement
	Exhibit I	 	
Form of UK Local Agreement
	Exhibit J-1	 	
Form of Sequa Guaranty
	Exhibit J-2	 	
Form of GenCorp Guaranty
	Exhibit K	 	
Excluded Gainesville Inventory
	Exhibit L	 	
Excluded Gainesville Fixed Assets
	Exhibit M	 	
Accounting Instructions
	Exhibit N	 	
Baseline Balance Sheet
	Exhibit O	 	
Consents

-viii-

 

PURCHASE AGREEMENT

     This
Purchase Agreement (this “Agreement”) is made and entered into this
2nd day of May 2003 by and between Aerojet-General Corporation, an Ohio
corporation (“Purchaser”), and Atlantic Research Corporation, a Delaware
corporation (“ARC” or “Seller”).

RECITALS

     A.     Seller is
engaged in, among other things, the business of manufacturing
propulsion systems for missiles and space vehicles (including station keeping
thrusters), certain related propellants and components, as well as the braiding
of composite parts and the manufacture of automotive airbag propellants in the
United States and in the United Kingdom through its Affiliate, ARC UK Limited
(the “UK Company”) (collectively, as operated by Seller or the UK Company, as
the case may be, the “Business”).

     B.     Seller and
its Affiliates desire to sell the Business, including
substantially all of its assets, properties, rights and interests of the
Business and the UK Shares as described in this Agreement and the UK Local
Agreement, to Purchaser.

     C.     Purchaser
desires to purchase from Seller substantially all of such
assets, properties, rights and interests of Seller and its Affiliates to the
Business, including the UK Shares, in consideration of certain payments by
Purchaser and the assumption by Purchaser of certain liabilities and
obligations of the Business as described in this Agreement and the UK Local
Agreement.

STATEMENT OF AGREEMENT

     NOW, THEREFORE, in
consideration of the foregoing recitals and of the
mutual covenants, representations, warranties, conditions and agreements
hereinafter set forth, and intending to be legally bound, the Parties hereby
agree as follows:

ARTICLE I

General Provisions

     1.01 Definitions. Terms used in this
Agreement shall have the meanings
ascribed to them by definition in this Agreement or on Exhibit A.

 

 

     1.02 Seller’s Knowledge. Whenever a
representation or warranty contained
in this Agreement refers to or is otherwise qualified to “Seller’s Knowledge”
(or words of similar import), such knowledge shall be deemed to consist of only
the actual knowledge, after reasonable inquiry, of those of Seller’s directors,
officers and senior management employees listed on Schedule 1.02A of the
Disclosure Package together with their titles, based upon a due diligence
review and having obtained the due diligence certifications, both as described
on Schedule 1.02B of the Disclosure Package. Seller’s Knowledge shall exclude
any imputed knowledge or matters which should have been known by Seller.

     1.03 Purchaser’s Knowledge.
Where a representation or warranty contained
in this Agreement refers to or is otherwise qualified to “Purchaser’s
Knowledge” (or words of similar import), such knowledge shall be deemed to
consist only of the actual knowledge, after reasonable inquiry, of Purchaser’s
officers and senior management employees listed on Schedule 1.03 together with
their titles. Purchaser’s Knowledge shall exclude any imputed knowledge or
matters which should have been known by Purchaser.

     1.04 Sole Discretion.
The words “sole discretion” as used in this
Agreement shall mean a determination made in a Party’s sole and absolute
discretion, which discretion shall not be subject to challenge for any reason
whatsoever, including, without limitation, bad faith, arbitrariness or
capriciousness.

     1.05 Currency Conversion.
All dollar amounts are United States Dollars
and other currency amounts will translate into dollar amounts at the closing
mid-point dollar spot rate applicable to that non-dollar currency at the close
of business in New York on the Business Day preceding the date on which a
payment is due or, if earlier, the Business Day preceding the date on which
payment is made (and with respect to the Closing Balance Sheet, at the close of
business on the Closing Date), as published in the Wall Street Journal.

ARTICLE II

Purchase, Sale and Related Transactions

     2.01 Purchased Assets and Assumed Liabilities.

          (a)  Upon
the terms and subject to the conditions of this Agreement, at the
Closing and effective as of the time set forth in Section 6.02, Purchaser or
its designee shall

2

 

purchase and acquire from Seller or Sequa UK, and Seller shall transfer,
or cause to be transferred, to Purchaser or its designee, all of Seller’s or
Sequa UK’s, if any, right, title and interest in, to or arising under the
assets, properties, rights and interests of every kind, nature and description,
tangible or intangible, that are owned, used, occupied or held by or for the
benefit of Seller or its Affiliates in the operation of the Business, wherever
situated, including, without limitation, the assets, properties, rights and
interests described in this Section 2.01(a), but excluding the Excluded Assets
(such assets, properties, rights and interests collectively, excluding the
Excluded Assets, the “Purchased Assets”):

           
    (i)  the Real Property;

           
    (ii)  the inventory
owned by Seller at the Closing that is used or held for
use in the operation of the Business as reflected in the Closing Balance Sheet
(the “Inventory”);

          
     (iii)  the
trade accounts receivable of Seller due from customers or
clients of the Business including unbilled receivables, to the extent relating
to the Business as reflected in the Closing Balance Sheet (the “Receivables”),
but excluding any amounts due from any of Seller’s Affiliates (the
“Intercompany Accounts”);

           
    (iv)  subject,
in regard to the Gainesville Fixed Assets, to Section 7.08,
the machinery, equipment, tooling and other fixed assets owned by Seller that
are used or held for use in the operation of the Business (the “Fixed Assets”);

           
    (v)  the prepaid
expenses, advance payments, deposits, surety accounts, key
man life insurance policies and similar assets of Seller to the extent relating
to the Business and reflected in the Closing Balance Sheet (the “Prepaids”);

           
    (vi)  all rights,
benefits and interests of Seller in and to all contracts,
leases, agreements and commitments relating to the Business, including the
Purchase and Sales Orders, Material Contracts and Government Contracts relating
to the Business as described in this Agreement (collectively, the “Assigned
Contracts”);

           
    (vii)  all of
Seller’s ownership interests in the joint ventures that are
set forth on Schedule 2.01(a)(vii) of the Disclosure Package (the “Purchased
Joint Ventures”);

3

 

          
     (viii)  except as set forth in Section 2.02(a)(viii), all
Intellectual
Property and Trade Secrets owned, licensed or used by Seller in the conduct of
the Business;

          
     (ix)  except
as set forth in Section 2.02(a)(xx), all books of account;
general, financial, accounting and personnel records; files; invoices; and
customer and supplier lists of Seller relating to the Business, including
as-built plans and specifications and surveys relating to the Real Property;
provided, however, that Seller shall be entitled to retain or obtain copies of
any such materials as it reasonably deems necessary for its Tax, accounting,
personnel or other legal purposes;

          
     (x)  all
open purchase and sale orders, bids, quotations and proposals of
Seller, to the extent relating to the Business (the “Purchase and Sales
Orders”);

          
     (xi)  to the
extent assignable or transferable, the permits, licenses,
franchises and other foreign or domestic, federal, state, provincial,
territorial, local or municipal approvals and authorizations issued by any
Governmental Authority to Seller to the extent relating to the Business or to
any Purchased Joint Venture (the “Permits”);

          
     (xii)  to
the extent assignable, all causes of action, claims, demands,
rights and privileges against any Person, including warranties and guaranties
received from vendors, suppliers or manufacturers with respect to the Purchased
Assets or the Business;

          
     (xiii)  the
assets reflected on the Closing Balance Sheet; and

           
    (xiv)  the
UK Shares.

          (b)  Assumed Liabilities. On
the terms and subject to the conditions of
this Agreement, at the Closing and effective as of the time set forth in
Section 6.02 and without further action, Purchaser shall absolutely and
irrevocably assume and pay, perform, satisfy and discharge when due, only the
following liabilities and obligations of Seller (such liabilities collectively,
the “Assumed Liabilities”):

          
     (i)  all
liabilities and payment obligations of Seller arising before, on
or after the Closing Date that constitute trade account payables relating to
the Business to the extent reflected in the Closing Balance Sheet (the
“Accounts Payable”) and all accrued expenses of Seller relating to the Business
to the extent reflected in the Closing Balance Sheet (the “Accrued Expenses”);

4

 

           
    (ii)  all
liabilities and obligations of Seller, arising before, on or
after the Closing Date that constitute non-current liabilities, including loans
outstanding against the key man life insurance policies (the “Non-Current
Liabilities”), to the extent reflected in the Closing Balance Sheet;

           
    (iii)  all
liabilities, obligations and losses arising on or after the
Closing Date under the Assigned Contracts including, without limitation, those
contracts subject to the loss contract reserve recorded on the Closing Balance
Sheet (the “Loss Contract Reserve”);

               (iv)  (A) any Taxes
in respect of the Business (including those assessed
against the Real Property) for any period or portion thereof following the
Closing, and

                    
  (B)  any Taxes in respect of the Business (including those assessed against
the Real Property) for any period prior to the Closing to the extent reflected
in the Closing Balance Sheet, but excluding income taxes of Seller or its
Affiliates;

               (v)  all liabilities and obligations of Seller arising on or after the
Closing Date under any Permits that are to be transferred to Purchaser in
accordance with this Agreement;

               (vi)  other than with respect to airbag propellant sold by Seller prior to
the Closing or Purchaser pursuant to the Long Term Supply Contract, all
liabilities and obligations in respect of claims brought or made against
Seller, Purchaser or both by or on behalf of any Person pertaining to the
repair, replacement or repurchase of products, including any program generally
to recall or replace all of a specific product, pursuant to any express or
implied warranties, statute or otherwise with respect to products that (A) were
sold by the Business on or prior to the Closing Date, or (B) are either sold by
the Business after the Closing Date or are included in Inventory on the Closing
Date;

               (vii)  all
liabilities and obligations arising out of the obligations for
which Purchaser is responsible under ARTICLE VIII;

               (viii)  all
liabilities and obligations in respect of the Purchased Joint
Ventures; and

               (ix)  financial
responsibility for certain Seller Historical Environmental
Liabilities to the extent set forth in the Environmental Action Agreement.

5

 

     2.02 Excluded Assets and Excluded Liabilities.

          (a)  Excluded Assets. The following properties, rights, interests and
assets (the “Excluded Assets”) will be retained by Seller and will not be
transferred to Purchaser at the Closing:

               (i)  all
cash and cash equivalents;

               (ii)  all
bank accounts and lockboxes maintained by or on behalf of Seller
in the United States and elsewhere;

               (iii)  all
of the issued and outstanding shares of capital stock of each of
ARC Automotive, Inc. (“ARC Automotive”), ARC-Coal, Inc. (“ARC-Coal”) and
ARC/Asia, Inc. (“ARC/Asia”) held by ARC;

               (iv)  all
of ARC’s ownership interest in and to BAG, S.p.A.;

               (v)  those
licenses, agreements, contracts and commitments that are in
ARC’s name to the extent that they relate to ARC-Coal, ARC Automotive or
ARC/Asia;

               (vi)  all
real property leases that are in ARC’s name to the extent that
they relate to ARC-Coal, ARC Automotive or ARC/Asia;

               (vii)  all
personal property leases that are in ARC’s name to the extent
that they relate to ARC-Coal, ARC Automotive or ARC/Asia;

               (viii) those
patents, patent applications and registered trademarks set
forth on Schedule 2.02(a)(viii) of the Disclosure Package and all Intellectual
Property and Trade Secrets that are in ARC’s name to the extent that they
relate to ARC-Coal, ARC Automotive or ARC/Asia (the “Excluded Intellectual
Property”);

               (ix)  all
other properties, rights, interests and assets of whatever kind
and nature held by ARC to the extent relating to or used, held for use or under
development for use by ARC-Coal, ARC Automotive or ARC/Asia, including such
items as more particularly set forth on Schedule 2.02(a)(ix) of the Disclosure
Package;

               (x)  except
as provided under Section 7.04, the names and trademarks
“Sequa,” “Chromalloy,” “Atlantic Research Corporation,” “ARC”, “ARC Automotive,
Inc.,” “ARC-Coal, Inc.,” “ARC/Asia, Inc.,” “BAICO” and related trademarks,
corporate names and

6

 

trade names incorporating “Sequa” or “Chromalloy” or any name or mark
confusingly similar thereto and the stylized “Sequa” and “Chromalloy” logos,
which are used by Seller as part of any trademark or trade name;

               (xi) 
those assets, if any, whether or not used or held for use in
connection with the conduct of the Business, as agreed upon by Purchaser and
Seller, and set forth on Schedule 2.02(a)(xi) of the Disclosure Package;

               (xii)  all
rights with respect to corporate and other services provided to
Seller by or on behalf of Sequa before the Closing, including those arising out
of master Sequa programs, all as more particularly set forth on Schedule
2.02(a)(xii) of the Disclosure Package;

               (xiii) except for
the UK Policies, all of Seller’s and its Affiliates’
casualty, liability, workers’ compensation and other insurance policies and
programs including those set forth on Schedule 2.02(a)(xiii) of the Disclosure
Package (the “Retained Insurance Policies”) and all claims, awards or rights,
including rights of recovery, under any such insurance policies, including
refunds of insurance premiums and proceeds thereof and any prepaid insurance
policies, and, for the avoidance of doubt, Retained Insurance Policies shall
include any of the foregoing that arise out of or are related to Seller
Historical Environmental Liabilities for which Seller or its Affiliates,
including Sequa, may recover;

               (xiv)  in
accordance with ARTICLE VIII, those employee benefit plans and
programs described on Schedule 2.02(a)(xiv) of the Disclosure Package;

               (xv)  all
claims and proceeds to which either ARC or ARC Automotive may
receive or otherwise be entitled and which arise out of or otherwise relate to
the proceedings that involved Breed Technologies, Inc., a Delaware corporation,
et al Reorganized Debtors in the United States Bankruptcy Court, District of
Delaware, Jointly Administered Case No. 99-3399-MFW, Chapter 11 and including
that certain Settlement Agreement dated January 8, 2001 by and between Breed
Technologies, Inc., as reorganized, ARC and ARC Automotive and all causes of
action, claims, demands, rights and privileges against any Person, including
warranties and guaranties received from vendors, suppliers or manufacturers
with respect to the Excluded Assets and Excluded Liabilities;

               (xvi)  all
owned real property, including land and office buildings, of ARC
located in Gainesville, Virginia (the “Owned Gainesville Real Estate”);

7

 

               (xvii) all leased real property, including land, office buildings and
manufacturing facilities, of ARC located in Gainesville, Virginia and including
the note receivable from the owner thereof payable to ARC relating thereto (the
“Leased Gainesville Real Estate”);

               (xviii) all rights, entitlements, benefits, monies, proceeds, claims and
causes of action arising out of or relating to the sale prior to Closing of
various ARC subsidiaries, divisions and Affiliates, including such transactions
as more particularly set forth on Schedule 2.02(a)(xviii) of the Disclosure
Package (the “Prior Transactions”);

               (xix)  all Tax refunds and claims relating to Taxes paid by or on behalf of
Seller;

               (xx)  (A) Seller’s Tax Returns and Tax records and (B) all other books,
records, manuals and other materials that (1) are maintained or held for use in
connection with or otherwise relate to any Excluded Liability or Excluded
Assets or (2)(x) were prepared in connection with the sale of the Purchased
Assets, (y) represent the personnel files of any employee that is not a
Transferring Employee, or (z) are accounting records that do not relate
exclusively to the Business; provided, however, that Purchaser shall be
entitled to receive copies of any such materials as it reasonably deems
necessary for its Tax, accounting, personnel or legal purposes;

               (xxi)  pursuant to Purchaser’s request, those items of inventory located at
the Leased Gainesville Real Estate and the Owned Gainesville Real Estate as set
forth on Exhibit K (the “Excluded Gainesville Inventory”);

               (xxii) pursuant to Purchaser’s request, those items of fixed assets
located at the Owned Gainesville Real Estate and the Leased Gainesville Real
Estate set forth on Exhibit L (the “Excluded Gainesville Fixed Assets”); and

               (xxiii) those items of fixed assets set forth on Schedule 2.02(a)(xxiii)
(the “Camden Automotive Fixed Assets”).

          (b)  Excluded Liabilities. Other than the Assumed Liabilities and the
Specified UK Liabilities, Purchaser shall not assume and the UK Company shall
not be responsible for any other liabilities or obligations including but not
limited to other liabilities or

8

 

obligations of Seller or the UK Company arising as a result of Seller’s or
the UK Company’s or their predecessors’ purchase, ownership, use or operation
of the Purchased Assets or the assets used in the business of the UK Company or
the conduct of the Business prior to the Closing (the “Excluded Liabilities”),
including, without limitation, any Exposure Liabilities or matters for which
Seller is responsible pursuant to ARTICLE VIII or otherwise. Seller agrees to
pay, perform and discharge all Excluded Liabilities. Notwithstanding the
consummation of such transactions, Seller will retain and shall be responsible
for all rights, title and interest in and to, and all obligations and
liabilities relating to or arising out of, the Excluded Assets.

     2.03 Transition Services Agreement. At Closing, Seller and Purchaser
shall enter into a transition services agreement containing the terms and
conditions set forth on Exhibit B and other reasonable and customary terms and
conditions as mutually agreed upon by the Parties (the “Transition Services
Agreement”). Such Transition Services Agreement shall provide, among other
things, for Purchaser to continue to provide certain accounting, employee
benefits, information services, support and other administrative services for
Sequa, ARC, ARC Automotive and ARC/Asia from and after the Closing Date for a
transition period not to exceed eighteen (18) months following the Closing.

     2.04
Gainesville Services Agreement. At Closing, Purchaser and Seller
shall enter into a services agreement containing the terms and conditions set
forth on Exhibit C and other reasonable and customary terms and conditions as
mutually agreed upon by the Parties, providing, among other things, for ARC to
provide, at Purchaser’s sole cost and expense, certain production, engineering
and related services to Purchaser at cost utilizing the Gainesville Transition
Employees and the Leased Gainesville Real Estate for a transition period not to
exceed eighteen (18) months after the Closing (the “Gainesville Services
Agreement”).

     2.05
Gainesville Office Leases. At Closing, Purchaser and Seller shall
enter into office leases with respect to the Owned Gainesville Real Estate
adjacent to the Leased Gainesville Real Estate containing the terms and
conditions set forth on Exhibit D and other reasonable and customary terms and
conditions as mutually agreed upon by the Parties (the “Office Leases”). The
Office Leases will provide, among other things, for Purchaser’s lease of all
office space at the Owned Gainesville Real Estate from Seller for a three (3)
year term.

9

 

     2.06 Camden Sublease. At Closing, Purchaser and Seller shall enter into a
sublease containing the terms and conditions set forth on Exhibit E and other
reasonable and customary terms and conditions as mutually agreed upon by the
Parties with respect to the sublease by Purchaser to ARC Automotive of certain
real estate located in Camden, Arkansas utilized exclusively by ARC Automotive
(the “Camden Sublease”).

     2.07
Long Term Supply Contract. At Closing, Purchaser and ARC Automotive
shall enter into a long term supply contract in the form of Exhibit F, with
such modifications or amendments as the Parties shall approve, each in its sole
discretion, with respect to certain products utilized by ARC Automotive (the
“Long Term Supply Contract”).

     2.08
Master Propellant License Agreement. At Closing, Purchaser and ARC
Automotive shall enter into a master propellant license agreement in the form
of Exhibit G, with such modifications or amendments as the Parties shall
approve, each in its sole discretion, with respect to certain licenses
necessary for the conduct of the business of ARC Automotive (the “Master
Propellant License Agreement”).

     2.09 Environmental Action Agreement. At Closing, Purchaser and Seller
shall enter into an environmental action agreement in the form of Exhibit H,
with such modifications or amendments as the Parties shall approve, each in its
sole discretion, with respect to claims, liabilities and obligations relating
to Seller Historical Environmental Liabilities and Remedial Action relating to
the environmental matters that are the subject of such claims, liabilities and
obligations (the “Environmental Action Agreement”).

     2.10 UK Local Agreement. At Closing, Purchaser shall cause an Affiliate
and Seller shall cause Sequa UK to enter into a UK local agreement in the form
of Exhibit I, with such modifications or amendments as the Parties shall
approve, each in its sole discretion, with respect to the transfer of the UK
Shares and certain matters relating thereto (the “UK Local Agreement”).

     2.11 Sequa Guaranty. At Closing, Seller shall cause Sequa and certain of
its Affiliates to enter into the Sequa Guaranty in the form of Exhibit J-1,
with such modifications or amendments as the Parties shall approve, each in its
sole discretion, (the “Sequa Guaranty”), pursuant to which Sequa and certain
of its Affiliates shall

10

 

          (a)  cause certain of Sequa’s Affiliates to fulfill their obligations under
this Agreement and the Other Agreements and,

          (b)  guarantee performance by Sequa’s Affiliates of their obligations under
this Agreement and the Other Agreements.

     2.12 GenCorp Guaranty. At Closing, Purchaser shall cause GenCorp to enter
into the GenCorp Guaranty in the form of Exhibit J-2, with such modifications
or amendments as the Parties shall approve, each in its sole discretion (the
“GenCorp Guaranty”), pursuant to which GenCorp shall

          (a)  cause GenCorp’s Affiliates to fulfill their obligations under this
Agreement and the Other Agreements and,

          (b)  guarantee performance by GenCorp’s Affiliates of their obligations
under this Agreement and the Other Agreements.

     2.13 Payment of Purchase Price. At the Closing, Purchaser will pay to
Seller, by means of a wire transfer of immediately available funds to such
account as Sequa, on behalf of Seller, shall have designated at least three (3)
Business Days prior to the Closing Date, the sum of One Hundred Thirty-Three
Million Dollars ($133,000,000) in respect of the Purchased Assets, subject to
post-closing adjustment in accordance with Section 2.14 (collectively, the
“Purchase Price”).

     2.14 Purchase Price Adjustment. The “Purchase Price Adjustment” (which
may be either a negative or positive number) shall be determined as follows:

          (a)  Closing Balance Sheet. Within sixty (60) days following the Closing,
Purchaser shall prepare and submit to Seller a balance sheet of the Business
including, for the avoidance of doubt, the UK Company, dated as of the Closing
Date (the “Closing Balance Sheet”), which shall be prepared from the books and
records maintained by Seller or the UK Company, as the case may be, in
connection with the Business and delivered to Purchaser at Closing and in
accordance with the mutually agreed accounting instructions set forth on
Exhibit M (the “Accounting Instructions”). The sole purpose of the Closing
Balance Sheet contemplated by this Section 2.14(a) is to measure the Closing
Net Book Value as of the Closing Date. “Closing Net Book Value” means the sum
of the (i) (A) Fixed Assets, Owned Real Estate,

11

 

Receivables, Inventory, and Prepaids included in the Purchased Assets less
(B) Accounts Payable, Accrued Expenses, Retiree Medical Obligations, Sick Leave
Obligations, Loss Contract Reserves, Taxes, Former Employee Obligations and
Non-Current Liabilities included in the Assumed Liabilities, and (ii) (A) UK
Fixed Assets, UK Receivables, UK Inventory and UK Prepaids less (B) UK Accounts
Payables, UK Accrued Expenses, UK Loss Contract Reserves, UK Taxes and UK
Non-Current Liabilities. Each Party shall provide to the other Party and its
representatives with reasonable access to the books and records and relevant
personnel during the preparation of the Closing Balance Sheet.

          (b)  Review by Seller. Following receipt of the Closing Balance Sheet,
Seller shall have a period of sixty (60) days to review the proposed Closing
Balance Sheet. During such period, Purchaser shall make available its
accounting staff and its internal auditors to respond to any questions of
Seller relating to the proposed Closing Balance Sheet and will furnish to
Seller such workpapers and other documents and information relating to the
Closing Balance Sheet as Seller may request and are available to Purchaser or
its Affiliates. At or before the end of such sixty (60) day period, Seller
will either: (i) accept the proposed Closing Balance Sheet entirely, in which
case the final Purchase Price Adjustment will be computed using the Closing
Balance Sheet; or (ii) deliver to Purchaser notice and an explanation of those
items in the proposed Closing Balance Sheet that Seller disputes, in which case
the aggregate amounts not affected by the disputed items will be deemed to be
as set forth on the proposed Closing Balance Sheet. After the end of such
sixty (60) day period, Seller may not introduce additional disagreements with
respect to any item in the Closing Balance Sheet or increase the amount of any
disagreement, and any item not so identified shall be deemed to be agreed to by
Seller and will be final and binding upon the Parties. Similarly, a
disagreement by Seller does not provide any right to Purchaser to introduce any
changes to the Closing Balance Sheet not directly related to the disputed item.
If Seller delivers the notice referred to in (ii) above, then within a period
of sixty (60) days from the date of such delivery, the Parties will attempt to
resolve in good faith any disputed items, and the Purchase Price Adjustment
will be computed using the Closing Balance Sheet produced through such
resolution. Failing such resolution, the unresolved disputed items will be
referred for final binding resolution to a nationally recognized firm of
certified public accountants other than Ernst & Young LLP, mutually agreed upon
by Seller and Purchaser (the “Accountants”). If issues in dispute are
submitted to the Accountants for

12

 

resolution, (x) each Party will furnish to the Accountants such workpapers
and other documents and information relating to the disputed issues as the
Accountants may request and are available to that Party or its Affiliates (or
an independent public accounting firm hired by such Party), and will be
afforded the opportunity to present to the Accountants any material relating to
the determination and to discuss the determination with the Accountants, (y)
the determination by the Accountants, as set forth in a notice delivered to
both Seller and Purchaser by the Accountants, will be binding and conclusive on
the Parties, and (z) all fees, costs and expenses of the Accountants shall be
paid by Seller and Purchaser in inverse proportion to the share of disputed
items determined in such Party’s favor. Nothing herein shall be construed to
authorize or permit the Accountants (i) to determine any questions or matters
whatsoever under or in connection with this Agreement except for the resolution
of differences between the Parties regarding the determination of the Closing
Net Book Value solely in accordance with the Accounting Instructions, or (ii)
to resolve any such differences by making an adjustment to the Purchase Price
that is outside of the range defined by amounts as finally proposed by the
Parties in their respective proposed statements of the Closing Net Book Value
submitted in accordance with this Section 2.14.

          (c)  Adjustment and Payment Procedures. If the value of the Closing Net
Book Value set forth on the Closing Balance Sheet is less than the value of the
baseline net book value (the “Baseline Net Book Value”) set forth on the
mutually agreed upon baseline balance sheet attached as Exhibit N (the
“Baseline Balance Sheet”), Seller shall pay to Purchaser by means of wire
transfer of immediately available funds to an account designated by Purchaser
the amount of such difference plus interest on the amount of the difference
within five (5) Business Days after final agreement by the Parties as to the
Closing Balance Sheet. If the value of the Closing Net Book Value set forth on
the Closing Balance Sheet is greater than the Baseline Net Book Value set forth
on the Baseline Balance Sheet, Purchaser shall pay to Seller by means of wire
transfer of immediately available funds to an account designated by Seller the
amount of such difference plus interest on the amount of the difference within
five (5) Business Days after final agreement by the Parties as to the Closing
Balance Sheet. In either case, the rate of interest shall be equal to the
prime rate of interest as charged by The Bank of New York on the Closing Date.
Interest shall accrue for the period from the Closing Date to the day before
the date on which the payment provided for under this Section 2.14(c) is paid.

13

 

     2.15 Allocation of Purchase Price. Seller and Purchaser agree that the
consideration provided for in this Agreement shall be allocated by Seller and
Purchaser and its Affiliates to the Purchased Assets and the Assumed
Liabilities in accordance with the principles of Section 1060 of the Code and
in accordance with the allocation schedule to be agreed upon by the Parties as
soon as practicable after the date hereof and prior to the Closing (the
“Allocation Schedule”). Purchaser shall prepare the Allocation Schedule, and
the allocations set forth therein shall be subject to the agreement of Seller
(which agreement shall not be unreasonably withheld or delayed). Seller and
Purchaser agree to adhere to such allocation, as modified to account for the
Purchase Price Adjustment, for all purposes of any federal or state income or
franchise tax returns filed by them and their Affiliates subsequent to the
Closing, including the determination by Seller and Purchaser, as the case may
be, of taxable gain or loss on the sale of the Purchased Assets and the
assumption of the Assumed Liabilities and the determination by Purchaser of its
Tax basis with respect to the Purchased Assets and Assumed Liabilities, and
including in respect of UK Tax and United Kingdom stamp duty.

ARTICLE III

Representations and Warranties

     3.01 General Representations and Warranties. Seller hereby represents and
warrants to Purchaser as follows:

          (a)  Corporate Organization and Existence. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Seller is qualified to do business as a foreign corporation, is in
good standing in those jurisdictions set forth on Schedule 3.01(a) of the
Disclosure Package and is not qualified to do business in any other
jurisdiction. Except as set forth on Schedule 3.01(a) of the Disclosure
Package, Seller has received no written notice or other assertion from any
Governmental Authority of any jurisdiction to the effect that it is required to
be qualified or otherwise authorized to do business therein on account of the
Business, in which it has not qualified or obtained such authorization.

          (b)  Power and Authority. Each of Seller and Sequa UK has the requisite
corporate power and authority to execute, deliver and perform or to procure the
execution, delivery and performance of this Agreement and all other agreements,
certificates or documents to be delivered in connection herewith, including,
without limitation, the other agreements,

14

 

instruments, certificates and documents expressly referred to herein to be
executed and delivered in connection with the transactions contemplated hereby,
including, without limitation, the agreements and instruments referred to in
ARTICLE II (collectively, the “Other Agreements”). Seller, Sequa UK and the UK
Company have the requisite corporate power and authority to own, lease and use
their respective assets and to conduct their respective businesses as the same
are currently being conducted.

          (c)  Authorization. The execution, delivery and performance of this
Agreement and all of the Other Agreements by Seller and Sequa UK has been duly
authorized, approved and ratified by all requisite stockholder and corporate
action.

          (d)  Binding Effect. Upon execution and delivery by Seller, this Agreement
and the Other Agreements, assuming the due execution and delivery hereof by
Purchaser, will be and constitute the valid, binding and legal obligations of
each of Seller and Sequa UK, as the case may be, enforceable against each of
Seller and Sequa UK, as the case may be, in accordance with the terms hereof
and thereof, except as the enforceability hereof or thereof may be subject to
the effect of (i) any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting the enforceability of
creditors’ rights generally, and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law) and the discretion of the courts in granting equitable remedies.

          (e)  No Default; Consents.

               (i)  Except as set forth on Schedule 3.01(e)(i) of the Disclosure Package,
neither the execution and delivery of this Agreement or the Other Agreements
nor the consummation or performance of any or all of the contemplated
transactions hereunder or thereunder by Seller or its Affiliates will, directly
or indirectly (with or without notice or lapse of time), (A) contravene,
conflict with or result in the violation of any provision of Seller’s or Sequa
UK’s organizational or corporate governance documents; (B) create or result in
the imposition or creation of any Liens on or with respect to any of the
Purchased Assets, except for Permitted Liens and except as otherwise provided
by the express terms and conditions of any Assigned Contract; (C) contravene,
conflict with or result in a violation of the terms or requirements of any
laws, rules, regulations, orders, authorizations, injunctions or decrees to
which Seller, Sequa UK, the UK Company or any of the Purchased Assets may be
subject; or

15

 

(D) contravene, conflict with or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to withdraw,
suspend, revoke, cancel, terminate or modify any Material Contract or any
governmental authorization and/or Permit held by Seller or the UK Company
(each, a “Violation”), except for such Violation as would not constitute a
material adverse change in the Business or the operations, properties, assets
or condition of the Business.

               (ii)  Except as set forth on Schedule 3.02(n) of the Disclosure Package, as
required under the H.S.R. Act, as contemplated by Section 5.02(d) with respect
to ARC Automotive’s business and operations in Camden, Arkansas, and with
respect to the permit held by Seller and pertaining to the Leased Gainesville
Real Estate, the Owned Gainesville Real Estate and the Owned Real Estate
located in Orange, Virginia, neither Seller nor its Affiliates will be required
(other than in respect of the transfer to Purchaser of an Assigned Contract or
assigned Permit) to give any notice to or obtain any consent from any Person in
connection with the execution and delivery of this Agreement or any Other
Agreement or the consummation or performance of any of the transactions set
forth hereunder and thereunder.

          (f)  Finders. Neither Seller nor any of its Affiliates has engaged or is
obligated to anyone who would be entitled to any broker’s, finder’s or similar
fee or commission on account of acting as a broker or finder or in any other
similar capacity in connection with this Agreement, the Other Agreements or the
transactions contemplated hereby or thereby.

          (g)  Subsidiaries and Joint Ventures. Except for ARC-Coal, ARC Automotive
and ARC/Asia, and ARC’s interest in and to BAG, S.p.A., neither Seller nor the
UK Company holds, directly or indirectly, any ownership or other interest in
any Person. Schedule 3.01(g) of the Disclosure Package sets forth all Persons
and other businesses to the extent relating to the Business (including, without
limitation, the Purchased Joint Ventures) in which Seller or the UK Company
currently holds, directly or indirectly, an equity, partnership, profit, joint
venture or similar interest.

     3.02 Representations and Warranties Concerning the Disclosure Package and
Other Disclosure Matters. Seller has delivered the Schedules and Exhibits
referred to in this Agreement, together constituting a document entitled the
“Disclosure Package” (the “Disclosure

16

 

Package”). Seller represents and warrants to Purchaser with respect to
the Disclosure Package and the matters expressly referred to in this Section
3.02 as follows:

          (a)  Financial Statements. Schedule 3.02(a) of the Disclosure Package sets
forth the unaudited consolidated balance sheet of the Business as of December
31, 2000, December 31, 2001 and December 31, 2002 (such unaudited consolidated
balance sheet as of December 31, 2002 referred to herein as the “2002 Balance
Sheet”), and the related unaudited consolidated statements of income and cash
flow for the periods then ended. Said financial statements:

               (i)  were derived from the books and records of Seller and the UK Company;
and

               (ii)  except as set forth on Schedule 3.02(a)(ii) of the Disclosure
Package, fairly present, in all material respects, the financial condition and
results of operations and cash flow of the Business as at the date thereof and
for the periods covered thereby, all in accordance with GAAP and reflecting the
consistent application of such accounting principles throughout the periods
involved.

          (b)  Title to and Sufficiency of Purchased Assets. Seller or, in the case
of the UK Shares, Sequa UK owns all of the properties, rights, interest and
assets included within the Purchased Assets and Seller and the UK Company own
all of the assets (whether real, personal or mixed and whether tangible or
intangible), properties, rights and interest that they purport to own,
including, in each case, all of the properties and assets reflected in the 2002
Balance Sheet (to the extent such exist as of the date of this Agreement and
continue to the Closing) free and clear of all Liens, other than Permitted
Liens. Neither Seller nor the UK Company, in connection with its conduct of
the Business, has purchased or otherwise acquired or sold or otherwise disposed
of any material properties or material assets (other than inventory in the
ordinary course of the Business consistent with past practice) since the date
of the 2002 Balance Sheet. The Purchased Assets and the assets owned by the UK
Company, together with the Other Agreements and the Excluded Assets and the
Excluded UK Assets, constitute all of the assets, properties, agreements,
licenses, rights and properties which are necessary to enable Purchaser to
conduct the Business after the Closing in substantially the same manner as the
Business has been conducted prior to the Closing.

17

 

          (c)  Accounts Receivable. All accounts receivable of Seller and the UK
Company that are reflected on the 2002 Balance Sheet or on the accounting
records of Seller and the UK Company related to the Business as of the Closing
Date (the “Accounts Receivable”) represent or will represent valid obligations
arising from sales actually made or services actually performed in the ordinary
course of the Business except as set forth on Schedule 3.02(c) of the
Disclosure Package. Except as set forth on Schedule 3.02(c) of the Disclosure
Package, there is no pending, or to Seller’s Knowledge, threatened in writing,
contest, claim or right of set-off (other than returns in the ordinary course
of the Business) under any contract or arrangement with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable.

          (d)  Inventory. All inventory (including the inventory of the UK Company)
reflected in the 2002 Balance Sheet, which is obsolete, defective or below
standard quality, has been reserved, written off or written down to net
realizable value.

          (e)  Owned Real Estate. Schedule 3.02(e) of the Disclosure Package sets
forth a description of each parcel of real estate owned by Seller or its
Affiliates, other than the Owned Gainesville Real Estate, in connection with
the Business (“Owned Real Estate”). Except as set forth on Schedule 3.02(e) of
the Disclosure Package, Seller has good and marketable title to all of the
Owned Real Estate, free and clear of all Liens, other than Permitted Liens.
Except as set forth on Schedule 3.02(e) of the Disclosure Package, to Seller’s
Knowledge, there is no material violation of any applicable building code,
zoning ordinance or other law or regulation with respect to any such Owned Real
Estate.

          (f)  Real Estate Leases. Schedule 3.02(f) of the Disclosure Package sets
forth a complete and accurate list of all real property leased by Seller, its
Affiliates or the UK Company, other than the Leased Gainesville Real Estate, in
connection with the Business (the “Leased Real Property,” and together with the
Owned Real Estate, the “Real Property”). The Leased Real Property, other than
the Leased Gainesville Real Estate, constitutes all of the real property leased
primarily for the Business. Seller or the UK Company, as the case may be,
enjoys peaceful and undisturbed possession under all of its real property
leases for the Leased Real Property. All such leases are valid and in full
force and effect. To Seller’s Knowledge, the Real Property and the use by
Seller or the UK Company thereof is not in material violation of any recorded
covenant or restriction or any Legal Requirement pertaining to the ownership or

18

 

use of real property. Except as set forth on Schedule 3.02(f) of the
Disclosure Package, with respect to the Real Property:

               (i)  neither Seller nor the UK Company has leased or sublet, as lessor or
sublessor, and no Person is in possession of, any of the Real Property, other
than tenants under leases set forth on Schedule 3.02(f)(i) of the Disclosure
Package, who are in possession of only the space to which they are entitled
under such leases;

               (ii)  to Seller’s Knowledge, there are no intervening strips, parcels or
easements between any Real Property and the public roads adjacent to such Real
Property, or, if intervening strips, parcels or easements exist between any
Real Property and the public roads adjacent to such Real Property, such Real
Property currently has access to a public road benefiting the Real Property; to
Seller’s Knowledge, neither Seller nor the UK Company is in violation or
default of any such right of access; and there is no pending or, to Seller’s
Knowledge, threatened, termination or alteration of any such right of access;

               (iii)  to Seller’s Knowledge, there is no written threatened curtailment in
any utility service being furnished to the Real Property;

               (iv)  to Seller’s Knowledge, neither Seller nor the UK Company has pending
boundary, water drainage, nuisance or other pending written claims or disputes
with the owners or lessees of any real property adjacent to any Real Property,
and, to Seller’s Knowledge, no such owner has any pending claims or disputes
with Seller or the UK Company;

               (v)  no written notice of any contemplated special assessment has been
received by Seller or the UK Company, and, to Seller’s Knowledge, there is no
threatened special assessment pertaining to any of the Real Property; and

               (vi)  there are no written or, to Seller’s Knowledge, oral contracts or
agreements to which Seller or the UK Company is a party or, to Seller’s
Knowledge, by which any of the Real Property is bound, granting to any Person
the right of use or occupancy of any portion of the Real Property.

          (g)  Personal Property Leases. Schedule 3.02(g) of the Disclosure Package
lists all material items of leased tangible personal property used in
connection with the Business (the “Leased Personal Property”), and all of the
vehicles leased from any Person and utilized by

19

 

employees of Seller or the UK Company and used in connection with the
Business (the “Leased Vehicles”). Except as set forth on Schedule 3.02(g) of
the Disclosure Package, (i) Seller or the UK Company, as the case may be, has
the right under valid and existing leases to possess and control as lessee all
of the Leased Personal Property and Leased Vehicles subject to the terms of
such leases, copies of which have been provided to Purchaser, and (ii) neither
Seller nor the UK Company is in default under any monetary provision or to
Seller’s Knowledge any other provision of any lease relating to the Leased
Personal Property or to the Leased Vehicles, and, to Seller’s Knowledge, no
condition exists which, with the giving of notice or the passage of time, or
both, may constitute such a default.

          (h)  Litigation. Except as set forth on Schedule 3.02(h) of the Disclosure
Package and except for claims for return and/or replacement of products and
refunds of purchase price for products in the ordinary course of the Business
or any claims covered under Section 3.03(g)(xi) hereof (i) there is no
litigation, proceeding, action, claim or investigation pending against Seller
or the UK Company, or that is related to the Business or any of the Purchased
Assets, nor, to Seller’s Knowledge, are there any of the foregoing that are
threatened and (ii) except for orders of general application and except as set
forth on Schedule 3.02(h) of the Disclosure Package, neither Seller nor the UK
Company nor the Purchased Assets are subject to any existing or pending notice,
writ, injunction, order or decree of any Governmental Authority (“Order”).
Except as set forth on Schedule 3.02(h) of the Disclosure Package, neither
Seller nor the UK Company has, since January 1, 2000, received written notice
from any Governmental Authority or any other Person regarding any actual or
alleged violation with respect to any such existing or pending Order.

     To Seller’s Knowledge, no officer, director, agent, or employee of Seller
or its Affiliates is subject to any Order that prohibits such officer,
director, agent or employee from engaging in or continuing any conduct,
activity or practice relating to the Business.

     Except as set forth on Schedule 3.02(h) of the Disclosure Package,

                         (A)  Each of Seller and the UK Company is in material compliance with all
of the terms and requirements of each Order to which it, or any of the
Purchased Assets, is or has been subject, excluding any noncompliance as to
which the remedy,

20

 

to Seller’s Knowledge, could reasonably be expected to involve less than
One Hundred Thousand Dollars ($100,000); and

                         (B)  Neither Seller nor the UK Company has received written notice or other
communication from any Governmental Authority or any other Person regarding any
actual, alleged, possible or potential violation of, or failure to comply with,
any term or requirement of any Order to which Seller or any of the Purchased
Assets is or has been subject.

          (i)  Contracts. Schedule 3.02(i) of the Disclosure Package sets forth a
true, complete and correct list of each material contract, agreement, purchase
order, lease, license, indenture or other commitment or arrangement (whether
written or oral), other than Government Contracts as referred to in Section
3.02(j) hereof, relating to the Business and to which Seller or the UK Company
is a party or by which either is or the Purchased Assets are bound and which
meet any of the following criteria:

               (i)  agreements that involve performance of services or delivery of goods
or materials by Seller or the UK Company in connection with the Business of an
amount or value in excess of One Hundred Fifty Thousand Dollars ($150,000);

               (ii)  each
agreement that was not entered into in the ordinary course of
the Business consistent with past practice and that involves expenditures or
receipts of Seller or the UK Company in connection with the Business in excess
of One Hundred Fifty Thousand Dollars ($150,000);

               (iii)  each lease, rental or occupancy agreement; license, installment and
conditional sale agreement; and other agreement affecting the ownership of,
leasing of, title to, use of, or any leasehold or other interest in, any real
or personal property, including, without limitation, leases for Leased Personal
Property and leases for Leased Real Property (excluding the Leased Gainesville
Real Estate) (except personal property leases and installment and conditional
sales agreements having a value per item or aggregate payments of less than One
Hundred Fifty Thousand Dollars ($150,000) and with terms of less than one year
and excluding the Lease for the Leased Gainesville Real Estate);

               (iv)  each licensing agreement or other agreement with respect to patents,
trademarks, copyrights or other Intellectual Property, including agreements
with current Employees and UK Employees and Former Employees and Former UK
Employees who

21

 

terminated employment within the last three (3) years, consultants or
contractors regarding the appropriation or the non-disclosure of the
Intellectual Property;

               (v)  each collective bargaining agreement and other agreement to or with
any labor union in relation to Employees or other employee representative of a
group of Employees and each employment or consulting agreement with any
Employee, UK Employee, Former Employee, Former UK Employee or any other Person;

               (vi)  each joint venture and partnership (however named) involving a
sharing of ownership as well as profits, losses, costs or liabilities by Seller
or the UK Company or the Business with any other Person;

               (vii)  each agreement containing covenants that in any way purport to
materially restrict the business activity of Seller or the UK Company or the
Business or limit the freedom of Seller or the UK Company or the Business to
engage in any line of business or to compete with any Person;

               (viii) each agreement providing for payments to or by any Person based on
sales, purchases or profits, other than direct payments for goods;

               (ix)  each power of attorney that is currently effective and outstanding
with respect to the UK Company or the Business;

               (x)  each agreement entered into other than in the ordinary course of the
Business consistent with past practice that contains or provides for an express
undertaking by Seller or the UK Company or with respect to the Business to be
responsible for consequential damages;

               (xi)  each agreement for capital expenditures in excess of One Hundred
Fifty Thousand Dollars ($150,000);

               (xii)  each agreement relating to the disposal of Hazardous Materials or
any Remedial Action;

               (xiii) each written warranty, guaranty or other similar undertaking with
respect to contractual performance extended by Seller or the UK Company, other
than in the ordinary course, in connection with the Business; and

22

 

               (xiv)  each material written amendment, supplement and modification in
respect of any of the foregoing.

     The contracts, agreements, purchase and sales orders, leases, licenses,
indentures, commitments or arrangements which are required to be set forth on
Schedule 3.02(i) of the Disclosure Package are hereinafter referred to as the
“Material Contracts.” True and complete copies of each of the Material
Contracts, and all amendments, modifications or other alterations thereof, have
been furnished to Purchaser by Seller for review.

     Except for the Government Contracts, and except as set forth on Schedule
3.02(i) of the Disclosure Package, (A) each of the Material Contracts is a
valid and binding obligation of Seller or the UK Company, entered into in the
ordinary course of the Business consistent with past practice and, to Seller’s
Knowledge, enforceable in accordance with its terms except as the same may be
limited by (1) applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws of general application relating to or affecting creditors’ rights,
including, without limitation, the effective statutory or other laws regarding
fraudulent conveyances and preferential transfers, and (2) general principles
of equity upon specific enforcement, injunctive relief and other equitable
remedies (regardless of whether enforcement is considered in proceedings at law
or in equity); (B) neither Seller nor the UK Company has terminated, cancelled
or modified any of the Material Contracts or has received any actual notice
that the other party to any of the Material Contracts has terminated or
cancelled such Material Contract or has, to Seller’s Knowledge, threatened in
writing, to do so; and (C) neither Seller nor the UK Company, nor, to Seller’s
Knowledge, any other party, is or has been in default under any material
provision of any such Material Contract, and each such entity is and has been
in material compliance with all applicable terms and requirements of such
Material Contract.

          (j)  Government Contracts.

               (i)  Listing. A list of each and every contract over One Hundred Fifty
Thousand Dollars ($150,000) with any Governmental Authority, any prime
contractor to a Governmental Authority or any subcontractor with respect to any
of the foregoing (collectively, “Government Contracts”) to which Seller or the
UK Company is a party and which, in the case of Seller, relates to the Business
and for which goods and/or services have yet to be provided or paid for in full
or for which services or other obligations thereunder have yet to be performed or

23

 

satisfied in all respects is set forth on Schedule 3.02(j)(i) of the
Disclosure Package. For purposes of this Section 3.02(j), “Bid” shall mean any
quotation, bid or proposal by Seller or the UK Company relating to the Business
that, if accepted or awarded, would lead to a contract with a Governmental
Authority or other entity, including a prime contractor or a higher tier
subcontractor to a Governmental Authority, for the design, manufacture or sale
of products or the provision of services by Seller or the UK Company in the
conduct of the Business. Except as set forth on Schedule 3.02(j)(i) of the
Disclosure Package:

                         (A)  Seller or the UK Company, as the case may be, has complied, in all
material respects, and is in material compliance with all terms, conditions and
requirements of such Government Contracts, including all clauses, provisions
and requirements incorporated expressly, by reference or by operation of law
therein;

                         (B)  Seller or the UK Company, as the case may be, has complied, in all
material respects, and is in material compliance, with all Legal Requirements,
agreements or other arrangements pertaining to such Government Contracts;

                         (C)  all representations and certifications of Seller or the UK Company, as
the case may be, executed, acknowledged or set forth in or pertaining to such
Government Contracts were current, accurate and complete, in all material
respects, as of their effective date, and Seller has complied, in all material
respects, with all such representations and certifications;

                         (D)  neither Seller nor the UK Company has been notified or informed, in
writing, by any Governmental Authority or any prime contractor, subcontractor
or other Person that either Seller or the UK Company is presently in material
breach of or in present material violation of any Legal Requirement;

                         (E)  no termination for convenience, termination for default, cure notice
or show cause notice has been issued, in writing, with respect to any
Government Contract;

                         (F)  no cost incurred by Seller, the UK Company or any of their respective
subcontractors, with respect to any Government Contract has been questioned or
disallowed, in writing;

24

 

                         (G)  no money due to Seller, or the UK Company or with respect or relating
to the Business under any Government Contract is presently being or is
presently attempted to be withheld or set off, nor has there been any written
notice of such withholding or setoff within the last two (2) years;

                         (H)  no officer, director, agent, employee, consultant or contractor of
Seller or the UK Company is bound by any contract, agreement or arrangement
that purports to limit the ability of such officer, director, agent, employee,
consultant or contractor to (1) engage in or continue any conduct, activity or
practice relating to the Business, or (2) assign to Seller or the UK Company or
the Business or to any other Person any rights to any invention, improvement or
discovery;

                         (I)  no Governmental Authority, prime contractor, subcontractor or vendor
has asserted any claim, in writing, or initiated any dispute proceeding, in
writing, against Seller or the UK Company, nor has Seller or the UK Company
asserted, in writing, any claim or initiated any dispute proceeding, directly
or indirectly, against any such party, concerning any Government Contract or
Bid relating to the Business. To Seller’s Knowledge, there are no current
facts upon which a material claim or dispute proceeding may be based in the
future;

                         (J)  there exists no Government Contract as to which Seller’s or the UK
Company’s, as the case may be, current EAC exceeds the current contract price
by Five Hundred Thousand Dollars ($500,000) (a “Loss Contract”); provided,
however, that Seller makes no representation regarding Purchaser’s final profit
or loss with respect to any Government Contract assumed by Purchaser;

                         (K)  neither Seller nor the UK Company has any fixed-price development
contracts governed by DFARS Part 235;

                         (L)  each of Seller and the UK Company has complied, in all material
respects, with applicable facilities and personnel security clearance
requirements of any Governmental Authority, including any set forth in the
Industrial Security Regulation (DOD 5220.22-R) and the National Industrial
Security Program Operating Manual (DOD 5220.22-M), relating to the Business;
and

25

 

                         (M)  each of Seller and the UK Company has complied, in all material
respects, with all applicable cost accounting standards and cost principles and
has not received written notice from the Defense Contract Management Command of
any intent to suspend, disapprove or disallow any material costs.

               (ii)  Investigations and Audits. Except as set forth on Schedule
3.02(j)(ii) of the Disclosure Package:

                         (A)  neither Seller nor the UK Company nor any of their respective
directors, officers, employees, agents or consultants, is or has been in the
past four (4) years subject to any administrative, civil or criminal
investigation, indictment or information, audit or internal investigation with
respect to any alleged irregularity, misstatement or omission arising under or
relating to any Government Contract, Bid or the Business;

                         (B)  neither Seller nor the UK Company has any material pending voluntary
disclosures to any Governmental Authority with respect to any alleged
irregularity, misstatement or omission arising under a Government Contract, Bid
or with respect to the Business; and

                         (C)  to Seller’s Knowledge, there is no irregularity, misstatement or
omission arising under or relating to any Government Contract or Bid that has
led or could reasonably be expected to lead, either before or after the
Closing, to any of the consequences set forth in clauses (A) or (B) above or
any other damage, penalty assessment, recoupment of payment or disallowance of
cost.

               (iii)  Financing Arrangements and Claims. Except as set forth on Schedule
3.02(j)(iii) of the Disclosure Package, there exist:

                         (A)  no receivables financing arrangements with respect to performance of
any Government Contract;

                         (B)  no outstanding claims pending against Seller or the UK Company by any
Governmental Authority or by any prime contractor, subcontractor, vendor or
other Person arising under or relating to any Government Contract that could
reasonably be expected to have a material adverse effect on the Business;

26

 

                         (C)  to Seller’s Knowledge, no facts upon which such a claim with respect
to any such Government Contract is reasonably likely to be based in the future;

                         (D)  no material disputes under the “Disputes” clause of any such
Government Contract with any Governmental Authority or any prime contractor,
subcontractor or vendor arising under or relating to any Government Contract;
and

                         (E)  to Seller’s Knowledge, no facts out of which such a dispute may be
reasonably likely to arise in the future with respect to any Government
Contract.

     Except as set forth on Schedule 3.02(j)(iii) of the Disclosure Package,
neither Seller nor the UK Company has any interest in any pending claim against
any Governmental Authority or any prime contractor, subcontractor or vendor
arising under any Government Contract.

               (iv)  No Suspension or Debarment. Except as set forth on Schedule
3.02(j)(iv) of the Disclosure Package, neither Seller, the UK Company nor, to
Seller’s Knowledge, any of their respective directors, officers or employees is
suspended or debarred from doing business with any Governmental Authority, or
has been declared non-responsible or ineligible for contracting with any
Governmental Authority. Except as set forth on Schedule 3.02(j)(iv) of the
Disclosure Package, there are no facts that could reasonably be expected to
warrant the institution of suspension or debarment of either Seller or the UK
Company.

          (k)  Employee Benefits.

               (i)  Schedule 3.02(k)(i) of the Disclosure Package lists each Benefit Plan
covering Employees.

               (ii)  Except as set forth on Schedule 3.02(k)(ii) of the Disclosure
Package, Seller has delivered or otherwise made available to Purchaser true and
correct copies of the following documents with respect to the Employees:

                         (A)  each Benefit Plan and/or summary plan descriptions of each ERISA Plan
set forth on Schedule 3.02(k)(i) of the Disclosure Package and all amendments
thereto;

                         (B)  each description of any other Benefit Plan which is currently provided
to participants in such plan;

27

 

                         (C)  each summary of the material terms of each Benefit Plan that is not
set forth in writing; and

                         (D)  each trust agreement and annuity contract (or any other funding
instrument) pertaining to any of the Benefit Plans, including all amendments to
such documents.

               (iii)  Except as set forth on Schedule 3.02(k)(iii) of the Disclosure
Package, there are no legal proceedings or governmental actions pending (other
than routine claims for benefits) or, to Seller’s Knowledge, threatened,
against any Benefit Plan, the assets of any Benefit Plan or the assets of
Seller or the ERISA Affiliates with respect to such Benefit Plans.

               (iv)  Except for the Retiree Medical Obligations as set forth on Schedule
8.03(f) of the Disclosure Package, there are no health plans or health-related
benefit commitments covering Former Employees, except as required under Section
4980B of the Code and Part 6 of Title 1 of ERISA.

               (v)  Except as set forth on Schedule 3.02(k)(v) of the Disclosure Package,
in connection with the Employees, neither Seller nor any Affiliate of Seller
has any obligation under any retention, stay-put or change-in-control
agreement, or agreement of similar purpose, to make any payments to any
officer, employee or director of Seller, or to any individual independent
contractor who has provided or who currently provides services to Seller or to
make nonforfeitable any otherwise forfeitable benefits as a result of the
execution of this Agreement or the Closing of the transaction contemplated by
this Agreement.

               (vi)  To Seller’s Knowledge, all (A) insurance premiums required to be paid
with respect to, and (B) benefits, expenses and other amounts due and payable
under any Benefit Plan prior to the Closing will have been paid, made or
accrued on or before the Closing.

               (vii)  All contributions, transfers or payments required to be made to any
Benefit Plan prior to the Closing will have been paid, made or accrued before
the Closing.

               (viii) Except as set forth on Schedule 3.02(k)(viii) of the Disclosure
Package, to Seller’s Knowledge, the ARC 401(k) Plan currently complies, in all
material respects with its terms and applicable law and there are no legal
proceedings pending (other than routine

28

 

claims for benefits) or, to Seller’s Knowledge, threatened, against the
ARC 401(k) Plan, the assets of such plan or the assets of Seller with respect
to such plans. Seller has delivered or made available to Purchaser a copy of
the most recent determination letter issued by the IRS with respect to the ARC
401(k) Plan.

               (ix)  Except as set forth on Schedule 3.02(k)(ix) of the Disclosure
Package, in connection with the Business (except for the business of the UK
Company), there are no pending workers’ compensation claims.

          (l)  Labor Matters. Except as set forth on Schedule 3.02(l) of the
Disclosure Package, to Seller’s Knowledge, the Business (other than the
business of the UK Company) is in material compliance with all applicable laws,
rules or regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not engaged in any unfair
or illegal labor practice. Except as set forth on Schedule 3.02(l) of the
Disclosure Package, (i) Seller is not a party to any collective bargaining
agreement with any labor organization covering any Employees, and (ii) no
organization or representation question is pending respecting the Employees.
Except as set forth on Schedule 3.02(l) of the Disclosure Package, to Seller’s
Knowledge, there is no claim, grievance, arbitration, negotiation, suit, action
or charge of or by any Employee that in any such instance might reasonably be
expected to have a material adverse effect on the business, financial condition
or results of operations of Seller or the Business (other than the business of
the UK Company) if it were resolved in a manner adverse to Seller or the
Business other than the business of the UK Company. Except as set forth on
Schedule 3.02(l) of the Disclosure Package, no complaint is pending or, to
Seller’s Knowledge, threatened, against Seller or the UK Company with respect
to the Business before the National Labor Relations Board, any state or local
agency or comparable Governmental Authority. Except as set forth on Schedule
3.02(l) of the Disclosure Package, there are no pending claims, complaints or
reports against Seller or the UK Company relating to the Business pursuant to
workers’ compensation laws or any other Legal Requirement relating to
employment or labor matters. Except as set forth on Schedule 3.02(l) of the
Disclosure Package, there is no labor strike, material dispute, work slowdown,
work stoppage, lockout or other job action pending or, to Seller’s Knowledge,
threatened, in writing, against Seller which relates to the Business (other
than the business of the UK Company).

29

 

          (m)  Employees. Schedule 3.02(m) of the Disclosure Package contains a
complete and accurate list of the following information for each Employee:
employer; name; job title; current compensation paid or payable; vacation
entitlement; service credited for purposes of vesting; and eligibility to
participate under any applicable pension, retirement, profit-sharing,
thrift-savings, deferred compensation, stock bonus, stock option, cash bonus,
employee stock ownership (including investment credit or payroll stock
ownership), severance pay, insurance, medical, welfare or vacation plan, any
other employee benefit plan or any director plan. Except as set forth on
Schedule 3.02(m) of the Disclosure Package, Seller does not have any deferred
compensation, retirement, incentive, bonus, severance, retention or employment
contract, written or otherwise, with any Employee. Since December 31, 2002, no
officer of the Business (except for the business of the UK Company) having a
base salary in excess of Ninety Thousand Dollars ($90,000) per year has given
written notice of his or her intention to discontinue employment. The complete
and accurate salary information for each Employee has been separately disclosed
on a confidential basis only to Purchaser and Purchaser’s counsel, although it
is not contained in the Disclosure Package.

          (n)  Permits and Approvals. Schedule 3.02(n) of the Disclosure Package
lists material Permits (including each Permit issued by the United States
Department of Commerce, the Bureau of Alcohol, Tobacco and Firearms, local,
state or federal safety and environmental agencies and the Federal
Communications Commission) issued to Seller or the UK Company that are used in
the operation of the Business and indicates which material Permits, if any,
will be part of the Excluded Assets. All such permits are in full force and
effect. Except as set forth on Schedule 3.02(n) of the Disclosure Package, to
Seller’s Knowledge, insofar as Seller or the UK Company or the Business is
concerned: (i) neither Seller nor the UK Company nor the Business is in
material violation of or under any of its respective Permits, nor is there any
existing condition that, with the giving of notice or the passage of time, or
both, might reasonably constitute such a violation; and (ii) no Permit of any
Governmental Authority that in any such instance is necessary for the continued
conduct of the Business as the same is being presently conducted has not been
obtained or applied for (including any renewal). There is no proceeding
pending or, to Seller’s Knowledge, threatened, with respect to any of the
foregoing.

30

 

          (o)  Compliance with Laws. Except as set forth on Schedule 3.02(o) of the
Disclosure Package and except for those claims covered under Section 3.03(g)(x)
hereof, to Seller’s Knowledge, the Business is being conducted in material
compliance with all Legal Requirements applicable to the conduct of the
Business. There are no proceedings, investigations or reviews pending or, to
Seller’s Knowledge, threatened in writing, with respect to any the foregoing.

          (p)  Filing of Tax Returns; Payment of Taxes; Tax Liens. Except as set
forth on Schedule 3.02(p) of the Disclosure Package, all Tax Returns required
to be filed by Seller with respect to the Business, including any federal
consolidated income tax return required to be filed by an Affiliated Group with
respect to any period ending on or prior to the Closing Date during which
Seller was a member, have been or will be filed on or before the date on which
such Tax Returns are required to be filed subject to any applicable extensions.
The Purchased Assets are not and will not be encumbered by any Liens, other
than Permitted Liens, arising out of or relating to unpaid Taxes. All Taxes
due and payable by Seller for any period ending at any time on or prior to the
Closing have been or will be accrued on the books and records of Seller and
will be paid on or before the dates on which same are due, subject to any
applicable extensions, or other than income taxes, will otherwise be accrued in
the Closing Balance Sheet and be included in the Assumed Liabilities. All
income taxes owed by any Affiliated Group have been paid or accrued for each
taxable period during which Seller was a member of such group. Seller has
withheld and paid or accrued all Taxes required to have been withheld and paid
or accrued in connection with any amount owing to any employee, independent
contractor, creditor, stockholder or other Person, and all Forms W-2 and 1099
required with respect thereto have been properly completed and timely filed.
None of the Assumed Liabilities is an obligation to make any future payments
that will not be fully deductible under Sections 161 or 280G of the Code. None
of the Purchased Assets (i) secures any debt the interest on which is
Tax-exempt under Section 103(a) of the Code, (ii) constitutes “Tax-exempt use
property” within the meaning of Section 168(h) of the Code, (iii) constitutes
“Tax exempt bond financing property” within the meaning of Section 168(g)(5) of
the Code, (iv) is “limited use property” within the meaning of Revenue
Procedure 76-30, or (v) will be treated as owned by another Person under
Section 168(f)(8) of the Code. Payments made pursuant to

31

 

the transactions contemplated by this Agreement are not subject to
withholding under Section 3406 of the Code or any other provision of applicable
law.

          (q) 
Absence of Certain Changes and Events. Except as set forth on
Schedule 3.02(q) of the Disclosure Package, since December 31, 2002, the
Business has been conducted only in the ordinary course consistent with the
past practice and except as contemplated by the transactions described herein
there has not been any:

               (i)  payment, grant or increase of any bonuses, salaries or other
compensation to any stockholder, director, officer, consultant or (except in
the ordinary course of business consistent with past practice) Employee or UK
Employee or entry into any employment, severance or similar contract or
arrangement with any director, officer, consultant, Employee or UK Employee
with respect or relating to the Business;

               (ii)  adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement or other employee benefit plan for or with any Employees or UK
Employees;

               (iii)  damage to or destruction or loss of any Purchased Asset or asset
used by the UK Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial condition or
prospects of the Business, taken as a whole;

               (iv)  entry into, termination of or receipt of notice of termination of any
license, distributorship, dealer, sales representative, joint venture, credit
or similar agreement;

               (v)  sale (other than sales of inventory in the ordinary course of Business
consistent with past practice), lease or other disposition of any Purchased
Asset or asset used by the UK Company or mortgage, pledge or imposition of any
lien or other encumbrance on any Purchased Asset or asset used by the UK
Company, including the sale, lease or other disposition of any Intellectual
Property;

               (vi)  cancellation or waiver of any claims or rights, other than as relates
to the Excluded Assets or Excluded Liabilities, with a value to the Business in
excess of One Hundred Fifty Thousand Dollars ($150,000);

32

 

               (vii)  material change in the accounting practices used by the UK Company
or the Business;

               (viii) guarantee of any debt for borrowed money, borrowing of money or
increase of any debt for borrowed money, except borrowings and intercompany
transfers for working capital from Seller made in the ordinary course of
business consistent with past practice; or

               (ix)  agreement, whether oral or written, by Seller or the UK Company with
respect or relating to the Business to do any of the foregoing.

     Schedule 3.02(q) of the Disclosure Package describes each material pending
dispute with any customer or vendor of Seller or the UK Company with respect to
the Business where the amount in dispute is in excess of Fifty Thousand Dollars
($50,000) or where the customer or vendor has threatened in writing to
terminate the relationship. Since December 31, 2002, as applicable, neither
Seller nor the UK Company has received written notice that any material
customer or vendor plans to discontinue or materially limit its relationship
with respect to the Business.

          (r)  Trademarks and Other Intellectual Property. Schedule 3.02(r) of the
Disclosure Package identifies all trade names, trademarks, services marks and
copyrights, and their registrations, used in or held for use in the Business or
in which Seller or the UK Company has any rights or licenses, together with a
brief description of each. Except for the Excluded Intellectual Property and
the trademarks, trade names and other names set forth in Section 2.02(a)(x),
Seller’s Intellectual Property included in the Purchased Assets and the
Intellectual Property held by the UK Company, taking into account the Master
Propellant License Agreement, constitutes all of the Intellectual Property
necessary for Seller to conduct the Business prior to the Closing. Except as
set forth on Schedule 3.02(r) of the Disclosure Package, to Seller’s Knowledge,
neither Seller nor the UK Company has infringed and is not now infringing on
any trade name, trademark, service mark or copyright in respect of the Business
belonging to any other Person, firm or corporation, and, except as set forth on
Schedule 3.02(r) of the Disclosure Package, neither Seller nor the UK Company
has received any actual notice or claim of material infringement or, to
Seller’s Knowledge, of any material infringement by any Person of the trade
names, trademarks, service marks or copyrights set forth on
Schedule 3.02(r)

33

 

of the Disclosure Package. Schedule 3.02(r) of the Disclosure
Package lists any license, agreement or arrangement used in or held for use in
the Business to which Seller or the UK Company is a party, whether as licensor,
licensee or otherwise, with respect to any trademarks, service marks, trade
names or applications therefor, or any copyrights.

          (s)  Patents. Schedule 3.02(s) of the Disclosure Package identifies all
unexpired material domestic and foreign patents, and applications for patents,
used in or held for use in the Business and in which Seller or the UK Company
has any rights or licenses. Except as set forth on Schedule 3.02(s) of the
Disclosure Package, there are no pending or, to Seller’s Knowledge, threatened,
infringement actions or other proceedings, in connection with the Business,
that (i) challenge the rights of Seller or the UK Company in respect of any
trademarks, patents or applications for patents set forth on Schedule 3.02(s)
of the Disclosure Package or any other Intellectual Property, (ii) assert that
Seller or the UK Company is infringing or is otherwise in conflict with or
violating the Intellectual Property rights of any Person, or are required to
pay any royalty, license fee or other amount with regard to, any patent or
application for patent set forth on Schedule 3.02(s) of the Disclosure Package,
or (iii) claim that any material default exists under any agreement or
arrangement set forth on Schedule 3.02(s) of the Disclosure Package. Except as
set forth on Schedule 3.02(s) of the Disclosure Package, neither Seller nor the
UK Company has received any written notice or has Knowledge of any fact,
document or instrument, asserting or indicating that the manufacture, use,
offering for sale or sale of the products covered by the patents and
applications for patents listed on Schedule 3.02(s) of the Disclosure Package
violate or infringe on any patent or any proprietary or personal right of any
Person nor has Seller or UK Company received any notification or has any
Knowledge of any non-compliance with any applicable data protection
legislation. Except as set forth on Schedule 3.02(s) of the Disclosure
Package, neither Seller nor the UK Company has received any actual notice or
has Knowledge of any fact, document or instrument, asserting or indicating that
it is now infringing on any patent or other right listed on Schedule 3.02(s) of
the Disclosure Package or otherwise violating any proprietary or personal right
of any Person. Schedule 3.02(s) of the Disclosure Package lists any license
agreement or arrangement used in or held for use in the Business to which
Seller or the UK Company is a party, whether as licensee, licensor or
otherwise, with respect to any patent, application for patent, invention,
design, model, process, Trade Secret or formula.

34

 

          (t)  Intercompany Transactions and Transactions with Certain Persons.
Schedule 3.02(t) of the Disclosure Package lists or otherwise refers to all
transactions or categories thereof between or among Seller, or any of its
Affiliates, with respect to the Business that remain executory on the date
hereof, and all liabilities or obligations or categories thereof of the
Business to Seller or any of its Affiliates. Except as set forth on Schedule
3.02(t) of the Disclosure Package, no officer, director or employee of Seller
or the UK Company is (i) a party to any agreement, arrangement or understanding
with Seller or the UK Company, other than any of the foregoing relating to
compensation for services as an officer, director or employee of Seller or the
UK Company or the Business, (ii) a supplier of goods or services to Seller or
the UK Company in connection with the Business, or (iii) the lessor of any real
or personal property to Seller or the UK Company in connection with the
Business.

          (u)  Insurance. Set forth on Schedule 3.02(u)(i) of the Disclosure Package
is a complete list, in connection with the Business, of all of Seller’s and the
UK Company’s policies of insurance providing for fire, property, casualty,
business interruption, personal or product liability, workers’ compensation,
errors and omissions and other forms of insurance coverage. Set forth on
Schedule 3.02(u)(ii) of the Disclosure Schedule is a complete list of those
insurance policies that will remain with the UK Company post-Closing, which
insurance policies shall not be considered Retained Insurance Policies (the “UK
Policies”).

          (v)  Environmental Matters.

               (i)  Except as set forth on Schedule 3.02(v)(i) of the Disclosure Package,
to Seller’s Knowledge, there are no conditions or operations on any of the Real
Property, which for the avoidance of doubt, excludes the Owned Gainesville Real
Estate and the Leased Gainesville Real Estate, at which removal, remediation,
repair, construction or capital expenditures are required under applicable
Environmental Laws.

               (ii)  Except as set forth on Schedule 3.02(v)(ii) of the Disclosure
Package, to Seller’s Knowledge, all operations conducted by Seller or the UK
Company in connection with the Real Property are being, and have been,
conducted in material compliance with all Environmental Laws.

               (iii)  To Seller’s Knowledge, Purchaser has been provided with all
information pertaining to Seller’s and the UK Company’s compliance with and
liability under

35

 

Environmental Laws with respect to the Real Property in the possession of
or reasonably available to Seller and the UK Company, including Phase I and
Phase II Studies, consultants reports, remediation plans, studies and status
reports, communications with environmental counsel, environmental consultants,
internal communications, internal audits and correspondence with Governmental
Authorities, all as further set forth on Schedule 3.02(v)(iii) of the
Disclosure Package.

               (iv)  Except as set forth on Schedule 3.02(v)(iv) of the Disclosure
Package, to Seller’s Knowledge, Seller and the UK Company submitted all
applications and obtained all material permits, consents, registrations,
variances, certifications and other governmental approvals required under
applicable Environmental Laws (“Environmental Permits”) necessary for the
operation or conduct of the Business at the Real Property, all such
Environmental Permits are, to Seller’s Knowledge, in good standing and, to
Seller’s Knowledge, transferable to Purchaser, and, to Seller’s Knowledge, each
of Seller and the UK Company is in material compliance with all terms and
conditions of such Environmental Permits.

               (v)  Except as set forth on Schedule 3.02(v)(v) of the Disclosure Package,
to Seller’s Knowledge, none of the Real Property is subject to any currently
effective order, judgment, decree, settlement, legally enforceable commitment
or agreement, or, to Seller’s Knowledge, to any ongoing judicial or
administrative investigation or other proceeding, relating to (A) any
Environmental Law or (B) any Remedial Action.

               (vi)  Except as set forth on Schedule 3.02(v)(vi) of the Disclosure
Package, to Seller’s Knowledge, Seller and the UK Company filed all material
notices and reports required to be filed under any Environmental Law with
respect to the Real Property, including, without limitation, notices or reports
(A) indicating past or present treatment, storage or disposal of a Hazardous
Material, (B) reporting a spill or Release of a Hazardous Material, or (C)
reporting a violation of any Environmental Law or any Environmental Permit.

               (vii)  Except as set forth on Schedule 3.02(v)(vii) of the Disclosure
Package, neither Seller nor the UK Company has received any notice or written
claim from any Governmental Authority or other Person to the effect that Seller
or the UK Company is or may be liable to any Person as a result of any actual
or alleged (A) Release or threatened Release of a Hazardous Material at or from
any Real Property, (B) violation of any Environmental Law at any

36

 

Real Property, or (C) damage to the environment or natural resources, the
subject of which has not been fully resolved, nor, to Seller’s Knowledge, are
there any facts or circumstances including, without limitation, a past or
present Release or threatened Release of a Hazardous Material, that could
reasonably be expected to form the basis for any such notice or claim.

               (viii) Except as set forth on Schedule 3.02(v)(viii) of the Disclosure
Package, to Seller’s Knowledge, none of the Real Property or other Purchased
Assets is listed or proposed for listing on the National Priorities List or in
the Comprehensive Environmental Response, Compensation, and Liability
Information System pursuant to CERCLA, in the National Corrective Action
Priority System pursuant to RCRA or on any similar state list established
pursuant to Environmental Laws of sites at which Remedial Action is or may be
necessary.

               (ix)  Except as set forth on Schedule 3.02(v)(ix) of the Disclosure
Package, to Seller’s Knowledge, none of the Real Property contains any active
or inactive (A) unit to treat, store, dispose or recycle hazardous waste, as
defined in RCRA, (B) underground or aboveground storage tank, (C) surface
impoundment, pit, pond, lagoon, sump, septic system or leach field, (D)
landfill, waste pile or wetland, (E) incinerator or open burning pit or area,
or (F) solvent degreaser or still, and, to Seller’s Knowledge, none of the Real
Property contains any (G) asbestos-containing material, (H) polychlorinated
biphenyls, (I) lead-based paint, (J) urea formaldehyde insulation, or (K)
beryllium-containing material.

               (x)  Except as set forth on Schedule 3.02(v)(x) of the Disclosure Package,
there are no Orders of any Governmental Authority specifically directed to
Seller or the UK Company, compliance with which, individually or in the
aggregate, to Seller’s Knowledge, could reasonably be expected to require
capital expenditures or increased annual operating expenses exceeding One
Million Dollars ($1,000,000) at any Real Property.

          (w) 
Product Liability and Warranties. Except as set forth on Schedule
3.02(w) of the Disclosure Package, since December 31, 1998, neither Seller, in
connection with the Business, nor the UK Company has received any claims for
product liability or breach of warranty (whether or not covered by insurance)
nor has Seller or the UK Company given written notice to any customer of the
Business of any defect or deficiency with respect to

37

 

products designed, manufactured, assembled, repaired, maintained,
delivered or installed or services rendered prior to the Closing.

          (x)  Material Adverse Change. Except as set forth on Schedule 3.02(x) of
the Disclosure Package, since the date of the 2002 Balance Sheet, to Seller’s
Knowledge, and other than matters affecting the economy in general or the
industry of which the Business is a part, including Purchaser’s business, there
has not been any material adverse change in the Business or the operations,
properties, assets or condition of the Business taken as a whole.

          (y)  Disclosure. To Seller’s Knowledge, except as set forth on Schedule
3.02(y) of the Disclosure Package, no representation and warranty of Seller
contained in this Agreement or in the Other Agreements contains an untrue
statement of material fact or omits to state a material fact necessary to make
the statements herein or therein, in light of the circumstances in which they
were made, not misleading.

     3.03 Additional Representations and Warranties Concerning the UK Company.
Seller represents and warrants to Purchaser with respect to the Disclosure
Package and the matters expressly referred to in this Section 3.03 as follows:

          (a)  Incorporation. Each of the UK Company and Sequa UK is a private
limited company duly incorporated and validly existing under the laws of
England and Wales.

          (b)  Solvency. Except as otherwise disclosed below:

               (i)  no petition has been presented or order made and no meeting convened
or resolution passed for the winding up or administration of the UK Company or
for a provisional liquidator to be appointed in respect of the UK Company;

               (ii)  no distress, execution or other process has been levied on any of the
assets of the UK Company;

               (iii)  no liquidator, provisional liquidator, receiver or an administrative
receiver of the UK Company has been appointed; and there is no reason to
believe that such a Person might be appointed;

               (iv)  no voluntary arrangement has been proposed under Section 1 of the
Insolvency Act 1986 in respect of the UK Company;

38

 

               (v)  the UK Company is not insolvent, or unable to pay its debts within the
meaning of Section 123 of the Insolvency Act 1986, and has not stopped paying
its debts as they fall due.

The UK Company would otherwise be insolvent without the financial support
provided to it by Seller and its Affiliates, which is described on Schedule
3.03(b) of the Disclosure Package, all of which financial support shall
terminate as of the Closing.

          (c)  Ownership of Shares.

               (i)  Sequa UK is entitled to sell and transfer the full legal and
beneficial ownership of the UK Shares on the terms of this Agreement and the UK
Local Agreement without the consent of any Person other than Sequa UK and free
from all Encumbrances. The UK Shares comprise the whole of the allotted and
issued share capital of the UK Company, have been properly and validly allotted
and issued and are each fully paid up.

               (ii)  There is no option, right to acquire or Encumbrance on, over or
affecting the UK Shares. The UK Company has not exercised or claimed to
exercise any Lien over any of the UK Shares. No call on the UK Shares is
outstanding. No Person has the right (whether exercisable now or in the future
and whether or not contingent) to call for the allotment, conversion, issue,
sale or transfer of any shares or loan capital in the UK Company by reason of
any agreement, conversion right, option, rights of pre-emption or howsoever
otherwise. No claim has been made by any Person to be entitled to any of the
foregoing.

          (d)  Conduct in relation to Capital. The UK Company has not, at any time:

               (i)  repaid or redeemed or agreed to repay any shares of any class of its
share capital or otherwise reduced or agreed to reduce any class of its issued
share capital or purchased any of its own shares or carried out any transaction
having the effect of a reduction of capital; or

               (ii)  except for the UK Shares, made or resolved or agreed to make any
issue of shares or other securities by way of capitalization of profits or
reserves.

          (e)  Information.

               (i)  The copies of the memorandum and articles of association of the UK
Company delivered to Purchaser are true and complete copies, having attached to
them

39

 

copies of all resolutions and agreements referred to in Section 380(2) of
the UK Companies Act 1985, and fully set out the rights and restrictions
attaching to each class of share of the UK Company to which they relate. The
UK Company has complied in all material respects with all the provisions of its
memorandum and articles of association.

               (ii)  The statutory books and registers of the UK Company have been
properly kept, are written up to date in all material respects and contain a
complete and accurate record in all material respects of the matters which
should be dealt with in the books and registers.

               (iii)  Except as set forth on Schedule 3.03(e)(iii) of the Disclosure
Package, the UK Company has complied in all material respects with all
obligations as to filing of returns, particulars, resolutions and other
documents with the Registrar of Companies.

          (f)  Bank Accounts. All bank accounts, building society accounts and other
investment accounts of the UK Company are set forth on Schedule 3.03(f) of the
Disclosure Package.

          (g)  UK Employees.

               (i)  A complete and accurate list of the (A) names, (B) dates of
commencement of continuous employment, and (C) the terms and conditions of
employment, including notice periods and details of material benefits of all
the UK Employees, is set forth on Schedule 3.03(g)(i) of the Disclosure Package
as of the date indicated thereon. Salary information that is complete and
accurate in all material respects for each UK Employee has been separately
disclosed on a confidential basis only to Purchaser and Purchaser’s counsel,
although it is not contained in the Disclosure Package.

               (ii)  Except as set forth on Schedule 3.03(g)(ii) of the Disclosure
Package, there are no Persons employed or engaged on other terms of service by
the UK Company apart from the UK Employees, and all of the UK Employees are
wholly employed therein. Except as set forth on Schedule 3.03(g)(ii) of the
Disclosure Package, none of the UK Employees are on secondment, maternity leave
or absent on grounds of disability or other long term leave of absence. Except
as set forth on Schedule 3.03(g)(ii) of the Disclosure Package, none of the UK
Employees have given notice of their intention to take any period of maternity
or parental leave within the six (6) months following the Closing.

40

 

               (iii)  Except as set forth on Schedule 3.03(g)(iii) of the Disclosure
Package, no Persons have been offered employment commencing after the Closing
who would earn a basic salary of more than Thirty Thousand Pounds Sterling
(£30,000) per year in aggregate.

               (iv)  Except as set forth on Schedule 3.03(g)(iv) of the Disclosure
Package, the current wages and salaries of all UK Employees, officers, workers
and consultants of the UK Company will have been paid up to Closing or will be
accrued in the Closing Balance Sheet.

               (v)  Except as set forth on Schedule 3.03(g)(v) of the Disclosure Package,
there are no agreements or other arrangements (whether or not legally binding)
between the UK Company and any trade union or other body representing employees
which confer any contractual rights upon any of the UK Employees.

               (vi)  Except as set forth on Schedule 3.03(g)(vi) of the Disclosure
Package, the contract of employment of each UK Employee may be terminated by
the UK Company without damages or compensation (other than that payable by
statute) by the giving of not more than thirteen (13) weeks’ notice at any
time.

               (vii)  Except as set forth on Schedule 3.03(g)(vii) of the Disclosure
Package, no UK Employee has given or received notice terminating his contract
of employment where such notice is due to expire on or after Closing. Except
as set forth on Schedule 3.03(g)(vii) of the Disclosure Package, no UK Employee
or Former UK Employee has been dismissed at any time in the three (3) months
preceding the Closing.

               (viii) Except as set forth on Schedule 3.03(g)(viii) of the Disclosure
Package, no UK Employee will be entitled by reason of this transaction to any
one-off payment or similar, or to terminate his service with the UK Company on
other than his normal contractual terms.

               (ix)  Except as set forth on Schedule 3.03(g)(ix) of the Disclosure
Package, there are no enhanced redundancy payment or other severance schemes or
practices conferring any entitlements on any UK Employees, workers or officers
of the UK Company.

41

 

               (x)  Except as set forth on Schedule 3.03(g)(x) of the Disclosure Package,
to Seller’s Knowledge, the UK Company has complied in all material respects
with applicable legislation in relation to the UK Employees, including, without
limitation, the Employment Rights Act 1996, the National Minimum Wage Act 1998
(and subsequent Regulations), the Public Interest Disclosure Act 1998, the
Working Time Regulations 1998, Section 8 Asylum and Immigration Act 1996 and
the Data Protection Act 1998.

               (xi)  Except as set forth on Schedule 3.03(g)(xi) of the Disclosure
Package, no UK Employee or Former UK Employee is involved in any pending or, to
Seller’s Knowledge, threatened industrial dispute with the UK Company.

          (h)  Pensions.

               (i)  Schedule 3.03(h) of the Disclosure Package is a list of each benefit
plan sponsored or maintained which covers UK Employees or Former UK Employees
(a “UK Benefit Plan”).

               (ii)  Seller has delivered or otherwise made available to Purchaser true
and complete copies of the employee information sheet and summary sheet
relating to the UK Pension Scheme.

               (iii)  Except as set forth on Schedule 3.03(h)(iii) of the Disclosure
Package, there are no legal proceedings or governmental actions pending (other
than routine claims for benefits) or, to Seller’s Knowledge, threatened against
any UK Benefit Plan or the benefits thereunder.

               (iv)  Except as set forth on Schedule 3.03(h)(iv) of the Disclosure
Package, to Seller’s Knowledge, each UK Benefit Plan currently complies, in all
material respects, with its terms and applicable law. Except as set forth on
Schedule 3.03(h)(iv) of the Disclosure Package, all amounts required to be
contributed with respect to the UK Employees and Former UK Employees under the
terms of each UK Benefit Plan have been paid as appropriate as of Closing or
will be accrued on the Closing Balance Sheet.

               (v)  Except as set forth on Schedule 3.03(h)(v) of the Disclosure Package,
the UK Pension Scheme provides only money purchase benefits within the meaning
of Section 181 of the Pension Schemes Act 1993.

42

 

          (i)  Taxation.

               (i)  The UK Company is and always has been resident for Tax purposes only
in the jurisdiction in which it is incorporated.

               (ii)  Except as set forth on Schedule 3.03(i)(ii) of the Disclosure
Package, the UK Company has properly made all returns and provided all
information required for Tax purposes and, to Seller’s Knowledge, none of such
returns is disputed by the Inland Revenue or any other Governmental Authority.

               (iii)  Except as set forth on Schedule 3.03(i)(iii) of the Disclosure
Package, the UK Company has duly paid all Tax which it has become liable to pay
and is under no liability to pay any penalty or interest in connection with any
claim for Tax.

               (iv)  Except as set forth on Schedule 3.03(i)(iv) of the Disclosure
Package, all payments by the UK Company to any Person which ought to have been
made under deduction of Tax have been so made and the UK Company has (if
required by law to do so) provided certificates of deduction to such Person and
accounted to the Inland Revenue for the Tax so deducted.

               (v)  Schedule 3.03(i)(v) of the Disclosure Package sets forth full and
accurate particulars of:

                         (A)  the extent to which the book value of a particular class of assets as
shown in the 2002 Balance Sheet is in excess of either:-

                   
                (1)  the amount falling to be deducted under Section 38 of the Taxation of
Capital Gains Act 1992 from the consideration receivable on a disposal of that
asset, or

               
                    (2)  the balance of the qualifying expenditure attributable to that asset
or pool of assets, as the case may be, brought forward into the accounting
period in which Closing will occur and save to the extent disclosed, no such
excess exists; and

                         (B)  the extent to which provision for Tax in respect of such excess has
been made in the 2002 Balance Sheet.

43

 

               
          (C)  No election under Section 35 of the Taxation of Capital Gains Act 1992
is in effect in relation to the UK Company.

               (vi)  Schedule 3.03(i)(vi) of the Disclosure Package sets forth full and
accurate particulars of any claim made by the UK Company prior to the date of
this Agreement under Sections 152 or 153 of the Taxation of Capital Gains Act
1992 to which Section 154 of the Taxation of Capital Gains Act 1992 applies
which affects or could affect the value of any asset owned by the UK Company on
the date hereof.

               (vii)  Except as set forth on Schedule 3.03(i)(vii) of the Disclosure
Package, the UK Company has properly operated the Pay As You Earn system,
deducting Tax as required by law from all payments to or treated as made to
employees and ex-employees of the UK Company and properly accounted to the
Inland Revenue for all Tax so deducted and all returns required pursuant to
Section 203 of the Taxes Act 1988 and regulations made thereunder have been
properly made and are accurate and complete in all material respects.

               (viii) Schedule 3.03(i)(viii) of the Disclosure Package sets forth full
details of all dispensations obtained by the UK Company and all details of any
visit from the Audit Office of the Inland Revenue since the incorporation of
the UK Company including full details of any settlement made pursuant thereto.

               (ix)  Except as set forth on Schedule 3.03(i)(ix) of the Disclosure
Package, the UK Company has not made any payment to or provided any benefit for
any officer of the UK Company or UK Employee or former officer of the UK
Employee or Former UK Employee that is not allowable as a deduction in
calculating the profits of the UK Company for taxation purposes.

               (x)  Except as set forth on Schedule 3.03(i)(x) of the Disclosure Package,
the UK Company has paid all national insurance contributions for which it is
liable and has kept proper books and records relating to the same.

               (xi)  The UK Company has duly paid or has procured to be paid all stamp
duty on documents required to be stamped by virtue of which it enjoys any
right. The UK Company has paid all stamp duty reserve tax for which it has
been liable.

44

 

               (xii)  The UK Company has complied in all material respects with all Legal
Requirements relating to value added tax and has duly paid or provided for all
amounts of value added tax for which the UK Company is liable.

               (xiii) The UK Company is not and has not been, for value added tax
purposes, a member of any group of companies and no act or transaction has been
effected in consequence whereof the UK Company is liable for any value added
tax chargeable against some other Person.

               (xiv)  Except as set forth on Schedule 3.03(i)(x) of the Disclosure
Package, no entity classification election has been made with respect to the UK
Company for United States federal income tax purposes since the UK Company’s
formation.

               (xv)  Except as set forth on Schedule 3.03(i)(ix) of the Disclosure
Package, the UK Company is party to certain Tax allocation or sharing agreement
with respect to the Business.

     3.04 Purchaser’s Representations and Warranties. Purchaser hereby
represents and warrants to Seller as follows:

          (a)  Organization and Existence. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio and is duly qualified to do business as a foreign corporation in all other
states where Purchaser owns or leases real property.

          (b)  Power and Authority. Purchaser has requisite corporate power and
authority to execute, deliver and perform this Agreement and the Other
Agreements.

          (c)  Authorization. The execution, delivery and performance of this
Agreement and the Other Agreements by Purchaser have been duly authorized by
all requisite shareholder and corporate action.

          (d)  Binding Effect. Upon execution and delivery by Purchaser, and
assuming the due execution and delivery thereof by the Parties other than
Purchaser, this Agreement and the Other Agreements will be and constitute the
valid, binding and legal obligations of Purchaser enforceable against Purchaser
in accordance with the terms hereof and thereof, except as the enforceability
hereof and thereof may be subject to the effect of (i) any applicable
bankruptcy,

45

 

insolvency, reorganization, moratorium or similar laws relating to or
affecting creditors’ rights generally, and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and the discretion of the courts in granting equitable
remedies.

          (e)  No Default. Neither the execution nor delivery of this Agreement or
the Other Agreements nor the performance by Purchaser of any or all of its
obligations hereunder or thereunder (i) violate or breach, or with the giving
of notice or the passage of time or both, will violate or breach, or otherwise
constitute or give rise to a default under, the terms or provisions of
Purchaser’s Articles of Incorporation or Regulations or of any material
contract, commitment or other obligation to which Purchaser is a party or by
which it or any of its property is bound, (ii) require the consent of any
party to any material contract or other agreement to which Purchaser is a party
by which it or any of its property is bound, or (iii) violate any laws, orders,
injunctions or decrees to which Purchaser or any of its property is subject;
with respect to each of (i), (ii) and (iii), except as would not materially
affect Purchaser’s obligations under this Agreement. Notwithstanding the
foregoing, the execution, delivery and performance of this Agreement and the
transactions contemplated hereby require certain consents under the GenCorp
Credit Facility.

          (f)  Finders. Purchaser has not engaged, and is not obligated to, anyone
who would be entitled to any broker’s, finder’s or similar fee or commission on
account of acting as a broker, finder or in any other similar capacity in
connection with this Agreement, the Other Agreements or the transactions
contemplated hereby or thereby.

          (g)  Litigation. There are no claims, suits or proceedings pending or, to
Purchaser’s Knowledge, threatened against Purchaser that are or would be
reasonably likely to affect its ability to perform its obligations under this
Agreement. To Purchaser’s Knowledge, there is no judgment or Order of any
Governmental Authority to which Purchaser, its business or assets are subject
that could affect its ability to perform its obligations under this Agreement
and the Other Agreements.

          (h)  Regulatory Approvals. All consents, approvals, authorizations and
other requirements prescribed by any law, regulation or rule which must be
obtained or satisfied by Purchaser and which are necessary for the execution
and delivery by Purchaser of this

46

 

Agreement, the Other Agreements and all other documents and the
consummation of the transactions contemplated in this Agreement and the Other
Agreements have been obtained or satisfied, except as required by Section 4.06
and as set forth on Schedule 3.04(h).

          (i)  Purchaser’s 401(k) Plan. Except as set forth on Schedule 3.04(i), to
Purchaser’s Knowledge, Purchaser’s 401(k) Plan currently complies, in all
material respects with its terms and applicable law and there are no legal
proceedings pending (other than routine claims for benefits) or, to Purchaser’s
Knowledge, threatened, against Purchaser’s 401(k) Plan, the assets of such plan
or the assets of Purchaser with respect to such plans. Purchaser has delivered
or made available to Seller a copy of the most recent determination letter
issued by the IRS with respect to Purchaser’s 401(k) Plan.

          (j)  No Knowledge of Seller’s Default. As of the date of this Agreement,
Purchaser has no Knowledge that any of Seller’s representations and warranties
contained in this Agreement or in the Other Agreements are untrue, inaccurate
or incomplete or that Seller is in default under any term or provision of this
Agreement.

          (k)  Disclosure. To Purchaser’s Knowledge, no representation and warranty
of Purchaser contained in this Agreement or in the Other Agreements contains an
untrue statement of material fact or omits to state a material fact necessary
to make the statements herein or therein, in light of the circumstances in
which they are made, not misleading.

     3.05 Disclaimers.

          (a)  Of Seller. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES IN ARTICLE
III AND IN THE OTHER AGREEMENTS, NEITHER SELLER NOR ANY OF ITS AFFILIATES IS
MAKING ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY NATURE
WHATSOEVER WITH RESPECT TO THE BUSINESS, THE PURCHASED ASSETS OR THE ASSUMED
LIABILITIES. WITHOUT LIMITING THE FOREGOING AND EXCEPT TO THE EXTENT INCLUDED
WITHIN THE REPRESENTATIONS OR WARRANTIES CONTAINED IN ARTICLE III OR IN THE
OTHER AGREEMENTS, SELLER MAKES NO REPRESENTATION OR WARRANTY REGARDING: (A)
ANY FINANCIAL STATEMENTS, BUDGETS, LONG RANGE PLANS, STRATEGIC PLANS, MARKET
ANALYSIS, FORECASTS, PROJECTIONS, EACS, OPINIONS AND SIMILAR MATERIALS PREPARED
OR FURNISHED BY SELLER OR

47

 

ITS AFFILIATES WITH RESPECT TO THE BUSINESS, THE PURCHASED ASSETS AND THE
ASSUMED OBLIGATIONS, (B) FUTURE PROSPECTS, INCOME POTENTIAL, OPERATING
EXPENSES, USES, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, (C) THE
CONDITION OR SAFETY OF THE REAL PROPERTY AND THE IMPROVEMENTS THEREON,
INCLUDING, BUT NOT LIMITED TO, PLUMBING, SEWER, HEATING AND ELECTRICAL SYSTEMS,
ROOFING, AIR CONDITIONING, FOUNDATIONS, SOILS AND GEOLOGY, LOT SIZE, OR
SUITABILITY OF THE REAL PROPERTY AND THE IMPROVEMENTS FOR A PARTICULAR PURPOSE,
(D) WHETHER THE APPLIANCES, IF ANY, PLUMBING OR UTILITIES ARE IN WORKING ORDER,
(E) THE HABITABILITY OR SUITABILITY FOR OCCUPANCY OF ANY STRUCTURE AND THE
QUALITY OF ITS CONSTRUCTION, (F) THE FITNESS OF ANY PERSONAL PROPERTY OR
FIXTURE, (G) WHETHER THE IMPROVEMENTS ARE STRUCTURALLY SOUND OR IN GOOD
CONDITION, OR (H) THE IMPACT, FINANCIAL AND OTHERWISE, OF NOT OBTAINING
CONSENTS AS REQUIRED BY THE TERMS AND CONDITIONS OF THE ASSIGNED CONTRACTS.

          (b)  Of Purchaser. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES IN
ARTICLE III AND IN THE OTHER AGREEMENTS, NEITHER PURCHASER NOR ANY OF ITS
AFFILIATES IS MAKING ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY
NATURE WHATSOEVER.

ARTICLE IV

Certain Covenants and Agreements Prior to Closing

     4.01 Corporate Examinations and Investigations. Prior to the Closing,
Purchaser shall, to the extent relating to the Business, be entitled, through
its employees, representatives and prospective lenders, to make such
investigations of the properties and plants and such examinations of the
personnel, books, records, contracts, documents, data and financial condition
of Seller or the UK Company as Purchaser may reasonably request. Any such
investigation and examination shall be conducted at a reasonable time and under
reasonable circumstances and Seller or the UK Company shall reasonably
cooperate therein. In order that Purchaser may have the full opportunity to
make such business, accounting and legal review, examination or investigation
as it may reasonably wish of the business and affairs of Seller or the UK
Company,

48

 

to the extent relating to the Business, Seller or the UK Company shall
furnish the representatives of Purchaser during such period with all such
information concerning the Business or the UK Company as such representatives
may reasonably request and cause its officers, employees, consultants, agents,
accountants and attorneys to cooperate with such representatives in connection
with such review and examination. Seller acknowledges that, in order for
GenCorp and Purchaser to obtain the debt financing necessary to consummate this
transaction, GenCorp and Purchaser require certain audited, unaudited and pro
forma financial information in respect of the Business including, without
limitation, an audit of the consolidated balance sheet of the Business for the
fiscal year ended December 31, 2002, the related audited consolidated statement
of income for the period then ended and such additional financial information
for interim periods or otherwise sufficient for GenCorp to comply with the
requirements of Regulation S-X and other applicable rules and regulations of
the Commission. Purchaser has engaged, or will engage, at Purchaser’s expense,
Ernst & Young LLP (“Ernst & Young”), to perform such audit and related
compilations of financial information. Seller hereby agrees that it shall, and
shall cause its Affiliates to, use their commercially reasonable efforts to
make available to Ernst & Young all resources (including, but not limited to,
any appropriate personnel of Seller or its Affiliates) as are reasonably
necessary to assist Ernst & Young in the completion of such audit and related
compilations of financial information. Certain contracts of the Business are
classified or secret and may require a “Need to Know” and a security clearance
to enable Purchaser or its agents and representatives to review such contracts
and any related documents, facilities and the products. All information and
documentation obtained by Purchaser as a result of the foregoing investigation
and examination shall be governed by the terms of the Confidentiality Agreement
dated May 14, 2001, as amended and extended on May 8, 2002, by and between
Purchaser and Sequa (the “Confidentiality Agreement”) and as further provided
in Section 4.08 and Section 4.09.

     4.02 Cooperation; Consents.

          (a)  As promptly as practicable after the date of this Agreement and in any
event prior to the Closing, each Party hereto shall in good faith reasonably
cooperate with the other to the end that the Parties shall (i) in a timely
manner make all necessary filings with, and conduct negotiations with, all
Governmental Authorities or other Persons the consent or approval of which, or
a license or permit from which, is required for the consummation of the
transactions

49

 

contemplated by this Agreement or any Other Agreement, and (ii) promptly
provide to each other such information as the other Party may reasonably
request in order to enable it to prepare such filings and to conduct such
negotiations. The Parties shall also use their respective commercially
reasonable efforts to expedite the review process and to obtain all such
necessary consents, approvals, licenses, permits and permit transfers as
promptly as practicable. To the extent permitted by any applicable statute or
ordinance, the Parties shall request that each Governmental Authority or other
Person whose review, consent or approval is requested treat as confidential all
information which is submitted to it.

          (b)  As soon as practicable following the date hereof, Purchaser shall
prepare (with Seller’s reasonable assistance), in accordance with Federal
Acquisition Regulations Part 42, ¶ 42.12 and any applicable agency regulations
or policies, a written request meeting the requirements of the Federal
Acquisition Regulations Part 42, as reasonably interpreted by the Responsible
Contracting Officer (as such term is defined in Federal Acquisition Regulations
Part 42, ¶ 42.1202(a)), which shall be submitted by Seller to each Responsible
Contracting Officer, for the United States government to (i) recognize
Purchaser as Seller’s successor in interest to all of the Assigned Contracts
constituting Government Contracts, and (ii) to enter into a novation agreement
(each, a “Novation Agreement”) in form and substance reasonably satisfactory to
Purchaser and Seller, pursuant to which, subject to the requirements of the
Federal Acquisition Regulations Part 42, all of Seller’s right, title and
interest in and to, and all of Seller’s obligations and liabilities under, each
such Government Contract shall be validly conveyed, transferred and assigned
and novated to Purchaser by all parties thereto. Purchaser shall provide to
Seller promptly any information regarding Purchaser required in connection with
such request. Seller and Purchaser shall each use reasonable efforts to obtain
all consents, approvals and waivers required for the purpose of processing,
entering into and completing the Novation Agreements with regard to any of the
Government Contracts, including responding to any requests for information by
the United States government with regard to such Novation Agreement.

     4.03 Conduct of Business. From the date hereof through the Closing,
unless otherwise consented in writing by Purchaser in its sole discretion,
Seller shall, and shall cause the UK Company to, conduct its business in the
usual and ordinary course consistent with past practice and substantially as
conducted at the date hereof, provided, however, that Seller shall be

50

 

permitted to cause and shall cause Sequa UK and the UK Company to transfer
the Excluded UK Assets to a designated Affiliate of Seller prior to the
Closing.

     4.04 Preservation of Business.

          (a)  From the date hereof through the Closing, Seller shall and shall cause
the UK Company to use its commercially reasonable efforts, without being
obligated to pay any additional compensation or remuneration, to preserve
intact the current business organization of Seller, the UK Company and the
Business, keep available the services of the current officers, employees and
agents of Seller, the UK Company and the Business and maintain the relations
and goodwill with suppliers, customers, landlords, creditors, employees, agents
and others having business relationships with Seller, the UK Company and the
Business.

          (b)  From the date hereof through the Closing, Seller shall not and shall
cause the UK Company not to, without the prior written consent of Purchaser,
which consent shall not be unreasonably withheld, or as otherwise permitted by
Section 4.03:

               (i)  incur or enter into any agreement or commitment involving any capital
expenditure in excess of Ten Thousand Pounds Sterling (£10,000) per item and
Fifty Thousand Pounds Sterling (£50,000) in aggregate;

               (ii)  terminate or serve any notice to terminate, surrender or accept any
surrender of or waive the terms of any lease, tenancy or license that is
material to the UK Company; agree to any new rent or fee payable in respect of
any lease, tenancy or license that is material; enter into or vary any
agreement, lease, tenancy, license or other commitment in respect of any Leased
Real Property that is material; and sell, convey, transfer, assign or charge
the Leased Real Property or grant any rights or easements over the Leased Real
Property or enter into any covenants affecting the Leased Real Property or
agree to do any of the foregoing;

               (iii)  incur any Indebtedness otherwise than in the ordinary and usual
course of business;

               (iv)  except as required by any Legal Requirement or otherwise in the
ordinary course of business, make any amendment to the terms and conditions of
employment (including, without limitation, remuneration, pension entitlements
and other benefits) of any UK Employee provide or agree to provide any
gratuitous payment or benefit to any such Person or

51

 

any of their dependants, or dismiss or terminate (except with good cause)
the employment of any UK Employee or engage or appoint any additional employee;

               (v)  discontinue or amend the UK Pension Scheme or commence to wind it up
or cause it to cease to admit new members or communicate to any employee any
material plan, proposal or intention to amend, wind up, terminate or exercise
any discretion other than in the ordinary course of business in relation to the
UK Pension Scheme;

               (vi)  pay any benefits under the UK Pension Scheme other than in accordance
with the terms of the documents governing such scheme and not under any
discretionary power;

               (vii)  enter into any guarantee, indemnity or other agreement to secure any
obligation of any Person or create or agree to create any Encumbrance over any
of its assets or undertaking;

               (viii) amend or discontinue any of the UK Policies, fail to notify any
insurance claim under any UK Policy in accordance with the provisions of the
relevant policy or settle any such claim below the amount claimed;

               (ix)  allot, issue, redeem, vary or repurchase or agree to allot, issue,
redeem, vary or repurchase any share or loan capital (or option or right to
subscribe for the same) of the UK Company; provided,
however, that Seller may
purchase from Sequa UK all of the UK Shares;

               (x)  acquire or agree to acquire any share, shares or other interest in any
Person or incorporate any Person;

               (xi)  declare, make or pay any dividend or other distribution to
shareholders, other than to transfer out any of the cash;

               (xii)  make any change to its accounting practices or policies or
accounting reference date or amend its memorandum or articles of association,
except as required by any Legal Requirement or by generally accepted accounting
principles;

               (xiii) change its residence for taxation purposes;

               (xiv)  enter into any contract or agreement with Seller or its Affiliates;

52

 

               (xv)  commence, compromise or discontinue any legal or arbitration
proceedings (other than in respect of the collection of debts or of other
disputes with customers in the ordinary and usual course of business); or

               (xvi)  make Tax elections (including for the avoidance of doubt, any
surrender of Group Relief).

     4.05 Notification. Between the date of this Agreement and the Closing,
Seller will promptly notify Purchaser in writing if Seller has Knowledge of any
fact or condition that causes or constitutes a breach of any of Seller’s
representations and warranties as of the date of this Agreement, or if Seller
has Knowledge of the occurrence after the date of this Agreement of any fact or

condition that would reasonably be expected to cause or constitute a breach of
any such representation or warranty had such representation or warranty been
made as of the time of occurrence or discovery of such fact or condition.
During the same period, Seller will, provided Seller has Knowledge thereof,
promptly notify Purchaser of the occurrence of any breach of any covenant of
Seller in this ARTICLE IV or of the occurrence of any event that may make the
satisfaction of the conditions in ARTICLE V impossible or unlikely.

     Between the date of this Agreement and the Closing, Purchaser will
promptly notify Seller in writing if Purchaser has Knowledge of any fact or
condition that causes or constitutes a breach of any of Purchaser’s
representations and warranties as of the date of the Agreement, or if any
Purchaser has Knowledge of the occurrence after the date of this Agreement of
any fact or condition that would (except as expressly contemplated by this
Agreement) reasonably be expected to cause or constitute a breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. During the same
period, Purchaser will, provided Purchaser has Knowledge thereof, promptly
notify Seller of the occurrence of any breach of any covenant of Purchaser in
this ARTICLE IV or of the occurrence of any event that may make the
satisfaction of the conditions in ARTICLE V impossible or unlikely.

     4.06 Hart-Scott-Rodino Act and Foreign Filings. The Parties will as soon
as reasonably practical after the date hereof, but in no event later than five
(5) Business Days after the date of this Agreement, file Notification and
Report forms under the Hart-Scott-Rodino Antitrust Improvements Act (the
“H.S.R. Act”) with the Federal Trade Commission (the “FTC”)

53

 

and the Antitrust Division of the Department of Justice (“Justice”) and,
as soon as reasonably practicable after the date hereof, any similar foreign
filings, if any, that are required, with respect to the transactions
contemplated herein and shall use their best efforts to respond as promptly as
practicable to all inquiries received from the FTC or Justice for additional
information or documentation. To the extent permitted by law, the Parties
shall request such Governmental Authorities to treat as confidential all such
information submitted to them and shall take all actions requested by Purchaser
to cause early termination of any applicable waiting period under the H.S.R.
Act. Purchaser agrees to use its commercially reasonable efforts to obtain
approval under the H.S.R. Act, including divesting assets after the Closing to
the extent required to obtain approval under the H.S.R. Act. Purchaser shall
pay all fees associated with the filing of the Notification and Report forms of
the H.S.R. Act.

     4.07 Government Contracts. Seller will use commercially reasonable
efforts and provide reasonable cooperation in making personal introductions of
representatives of Purchaser to the contracting officers responsible for the
award and administration of the Government Contracts. The purposes of such
introductions will include allowing Purchaser to discuss the need for novation
or other approvals of the transactions contemplated by this Agreement and
related agreements by Governmental Authorities or prime contractors, and
ensuring good customer relationships following the Closing.

     4.08 Confidentiality. At all times prior to the Closing (and, if this
Agreement is terminated, at all times after such termination), none of the
Parties or any of their respective agents, representatives or Affiliates will
disclose or use any confidential information of or with respect to the other
Parties to this Agreement or the conduct of its business, except to the extent
that any such confidential information subsequently becomes public knowledge
other than as a result of a violation of this Section 4.08 by such Party or any
of its agents, representatives or Affiliates. For purposes of this Agreement,
“confidential information” with respect to any Party shall include, without
limitation, (a) plans, programs, documents, agreements or other material
relating to the business, services, marketing or activities of such Party, and
(b) Trade Secrets, market reports, customer investigations, customer lists,
computer software and other similar information that is treated as proprietary
information by such Party. For the avoidance of doubt, the terms and
conditions of the Confidentiality Agreement shall continue to apply to
Purchaser if the Closing does not take place.

54

 

     Except as otherwise allowed pursuant to this Agreement, Purchaser, Seller
and the UK Company will keep confidential the terms of this Agreement unless
any Party’s counsel advises such Party that it is required by or advisable
under applicable law or regulation (including the Securities Act, the Exchange
Act, as amended, and the rules and regulations thereunder) or stock exchange
rules and procedures to divulge the same, or unless such information is
disclosed in an action between the Parties or is otherwise required by order of
competent judicial or administrative authority to be disclosed, and such Party
will only divulge such information in accordance with such law, regulation,
rule or procedure, as applicable.

     4.09 Return of Information. If this Agreement is terminated, the Parties
and their Affiliates will treat all confidential information of the other Party
and its Affiliates in accordance with the Confidentiality Agreement.

     4.10 No Shop. From the date hereof through the Closing, except with the
prior written approval of Purchaser or to the extent necessary to effect the
transactions contemplated by and pursuant to the terms of this Agreement,
Seller and its Affiliates will not permit their respective officers, directors,
employees, agents, consultants or other representatives to, directly or
indirectly: (a) solicit or initiate discussions with or any inquiries or
proposals from any Person or other group concerning any sale of the stock of
Seller, or any merger, consolidation or business combination with, or purchase
of or sale of all or any substantial portion of the assets of, the Business or
any similar transaction involving Seller, the UK Company or the Business; or
(b) negotiate with or provide any non-public information to any Person or other
group other than Purchaser other than in connection with the transactions
entered into in the ordinary course of the business of Seller and not relating
to the sale of the Business.

     4.11 Payment of Indebtedness by Related Parties. Prior to the Closing,
Seller will cause:

          (a)  all Indebtedness owed to or by Seller or any Affiliate (including the
UK Company) or related Person of Seller including the UK Company with respect
to the Business to be paid in full in accordance with its terms, and

          (b)  Seller’s lenders to terminate and release all Liens in, to and on the
Purchased Assets.

55

 

     4.12 Title Insurance.

          (a)  Not less than twenty (20) days prior to Closing, Purchaser may, at
Purchaser’s election and sole cost and expense, obtain and provide Seller with
a copy of Seller’s preliminary title report for an owner’s policy of title
insurance for the Real Property, from a title insurance company selected by
Purchaser (the “Title Company”), along with copies of all documents and
instruments reflecting items noted as exceptions of title (the “Preliminary
Report”). The Preliminary Report, if any, will be in sufficient detail to
provide the basis for the issuance of the Policy (as defined below).

          (b)  Not less than twenty (20) days prior to Closing, Purchaser may, at
Purchaser’s election and sole cost and expense, deliver to Seller and the Title
Company an as-built ALTA Survey of the Real Property in form and substance
acceptable to Purchaser and sufficient to enable the Title Company to delete
the so-called standard exception for matters disclosed by an accurate survey
(the “Survey”).

          (c)  Within ten (10) days after Purchaser receives the Preliminary Report
and the Survey in each case, if any, Purchaser will indicate which exceptions,
Liens, encroachments, overlaps, protrusions, boundary line disputes or other
matters shown in the Preliminary Report and the Survey (collectively “Defects”)
do not constitute Permitted Liens. Seller will cure or remove or cause the
Title Company to provide affirmative coverage, in form and substance acceptable
to Purchaser, with respect to all Defects that are not (i) de minimus or (ii)
set forth in the Disclosure Package as of the date hereof.

          (d)  Prior to Closing, Purchaser may obtain, at its election, an ALTA
Extended Policy of Title Insurance or its equivalent from the Title Company
(the “Policy”) or a binding undertaking from the Title Company to issue such
policy insuring, in an amount reasonably determined by Purchaser, that solid
leasehold title to the Real Property is vested in Seller. The Policy will
contain no exceptions other than the Permitted Liens (including any so-called
“standard exceptions”) and will insure leasehold title to the Real Property in
Seller with such affirmative endorsements as may be requested by Purchaser,
including, but not limited to, zoning (Form 3.1), survey, access, nonimputation
and contiguity. The cost of the premium charged by the Title Company will be
paid by Purchaser.

56

 

          (e)  With respect to the Owned Real Property, if Purchaser elects to obtain
the Policy, Seller will deliver an affidavit and indemnity to the Title Company
against unfiled mechanics’ and materialmen’s liens against such Real Property
and an affidavit of non-foreign ownership.

     4.13 Tax Certificates. On or prior to the Closing Date, Seller will
provide Purchaser with all FIRPTA documentation that may be required by any
Taxing Authority in order to relieve Purchaser of the obligation to withhold or
escrow any portion of the Purchase Price with respect to the sale of the Owned
Real Estate included within the Purchased Assets.

     4.14 Supplements and Updates to Schedules. Subject to Sections 5.01(k)
and 5.02(f), either Party may, at any time and from time to time, between the
date of this Agreement and the date that is five (5) Business Days before the
Closing Date (or, if the matter requiring disclosure arises during the five (5)
Business Days before the Closing Date, the Closing Date) (the “Supplement
Period”), update or supplement any Schedules required by this Agreement to be
delivered by such Party in order to incorporate disclosure regarding matters
first occurring or otherwise discovered during the Supplement Period to the
extent that such matters do not arise out of any breach by such Party of a
covenant or other agreement contained in this Agreement. No update or
supplement in accordance with this Section 4.14 shall serve to cure any
material breach of either Party’s representations and warranties as of the date
of this Agreement; provided however, in the event of any material breach of any
of Seller’s representations and warranties as of the date of this Agreement
that are discovered during the Supplement Period, at Purchaser’s sole
discretion, Purchaser may pursue its rights and remedies under Section 5.03 and
ARTICLE IX or, if Purchaser desires to pursue Closing notwithstanding such
breach, require that the Parties negotiate in good faith for a period no longer
than five (5) Business Days (the “Negotiation Period”) regarding an adjustment
to the Purchase Price, an amendment to this Agreement or the Other Agreements,
if applicable, or both, taking into account the impact, if any, to the Business
and/or the transactions contemplated herein as a result of such material
breach. If no resolution is agreed to by the Parties during the Negotiation
Period, both Parties shall retain their respective termination rights and
remedies or rights to indemnification, as the case may be, in respect of any
material breach in accordance with Section 5.03, ARTICLE IX or both.

     4.15 Satisfaction of Conditions. The Parties will cooperate and use their
commercially reasonable efforts to cause the conditions set forth in ARTICLE V
to be satisfied

57

 

as soon as practicable after the date hereof but in any event prior to the
Drop Dead Date, including, without limitation, reaching mutual agreement as to
the final terms and conditions of any Other Agreement (or any schedule or
exhibit thereto) that is not correct, complete and final on the date of this
Agreement. For the purposes of the preceding sentence, “mutual agreement”
shall include the agreement of ARC Automotive with respect to Exhibit C
(Specifications) and Schedule 6.1 (Capacity) to the Long Term Supply contract.
In addition, the Parties agree not to take any action that would reasonably be
expected to delay, impair, impede or frustrate the consummation of the
transactions contemplated herein.

     4.16 Termination of Tax Sharing Agreements; Surrender of Group Relief.

          (a)  Seller shall, or shall cause its Affiliates, to terminate all Tax
sharing agreements or practices among or between the UK Company on the one
hand, and any of Seller or any of its Affiliates on the other hand as of the
Closing, and no payments relating thereto shall be made subsequent to the
Closing. Seller shall, or shall cause its Affiliates, to terminate all powers
of attorney authorizing any party to represent the UK Company with respect to
Taxes on or before the Closing.

          (b)  Subject to Section 4.17, Purchaser shall cause the UK Company to
surrender to Warwick all such Group Relief properly relating to any period
prior to Closing as Warwick may direct after Closing in writing pursuant to the
existing practices between the UK Company and Warwick, details of which are set
forth on Schedule 3.03(i)(ix) of the Disclosure Package. Purchaser shall cause
the UK Company to take all steps reasonably requested by Warwick, at Warwick’s
expense, in relation to the surrender to be made under this Section 4.16(b),
including any request that the UK Company shall sign and submit to the Inland
Revenue notices of consent to surrender (including provisional or protective
notices of consent in cases where any relevant Tax computation has not yet been
agreed) and such other documents and returns as may be necessary to secure that
full effect is given to this Section 4.16(b).

     4.17 Limitation on Group Relief. Purchaser shall not be required to
procure any surrender of Group Relief pursuant to Section 4.16(b) to the extent
that the losses available for surrender to not exceed any amount to be brought
into charge in accordance with Section 94 Taxes Act 1988, except to the extent
that the amount brought into charge to tax under Section 94

58

 

Taxes Act 1988 reduces or shall reduce the losses available for surrender
to Warwick in a later period or part-period.

ARTICLE V

Conditions

     5.01 Conditions to Purchaser’s Obligations. The obligation of Purchaser
to consummate the transactions contemplated by this Agreement is subject to the
satisfaction of each of the following conditions at or before the Closing (any
of which may be waived by Purchaser, in whole or in part) and in no event
whatsoever later than the Drop Dead Date, unless extended in writing by the
mutual consent of the Parties hereto, each in its sole discretion:

          (a)  Truth of Representations and Warranties. The representations and
warranties of Seller contained in this Agreement, the Schedules and the
Disclosure Package must be true, accurate and complete (without giving effect
to any limitations as to materiality set forth in such representations and
warranties) in all material respects as of the date hereof and as of the
Closing (other than representations and warranties made as of another specific
date, which representations and warranties shall have been true and correct as
of such date), except with respect to the effect of transactions contemplated
or permitted by this Agreement, and Seller shall have delivered to Purchaser an
officer’s certificate to such effect in accordance with Section 6.03(a).

          (b)  Performance of Covenants. Seller shall have performed and complied in
all material respects with all covenants, agreements and conditions required by
this Agreement to be performed and complied with by Seller on or prior to the
Closing; Seller shall have delivered to Purchaser all documents, certificates
and instruments required to be delivered by Seller under the terms of this
Agreement; and Seller shall have delivered to Purchaser an officers’
certificate to such effect in accordance with Section 6.03(a).

          (c)  Consents. All third party consents and approvals set forth on Exhibit O
shall have been obtained and must be in full force and effect.

          (d)  No Restraints. There shall not have been issued and in effect any
injunction or similar legal order prohibiting or restraining consummation of
any of the transactions herein contemplated and no legal action or governmental
investigation which might

59

 

reasonably be expected to result in any such injunction, order challenge,
other relief or delay or interference shall be pending.

          (e)  Permits and Approvals. Any and all material Permits, approvals and
consents from any Governmental Authority or other Person or entity required for
the consummation of the transactions contemplated hereby, including, without
limitation, any legally required transfers of Permits necessary for the lawful
operation of the Business by Purchaser, shall have been obtained. All
applicable waiting periods under the H.S.R. Act shall have expired or approvals
required by Schedule 3.02(n) of the Disclosure Package shall have been
obtained.

          (f)  No Material Adverse Change. There shall have been no material adverse
change (whether or not in the ordinary and usual course of business) in the
financial condition, assets, liabilities, personnel, business or results of
operations of the Business or any material damage, destruction or loss that
could reasonably be expected to materially and adversely affect the business,
condition (financial or otherwise), assets, properties, liabilities, assets or
results of operation of the Business. For purposes of this Section 5.01(f),
“Material Adverse Change” shall not include an event or condition affecting the
economy generally or the industry of which the Business is a part generally.

          (g)  Global Agreement; Advance Agreement, etc.. The United States
government shall have entered into an advance agreement with Purchaser,
pursuant to which costs incurred by Purchaser under the Environmental Action
Agreement may be included as allowable costs under Purchaser’s existing Global
Agreement, and Purchaser shall have reasonably determined either that no other
novations, consents, approvals or waivers from Governmental Authorities or from
prime contractors and subcontractors are necessary in connection with the
transactions contemplated by this Agreement and related agreements, or that all
such novations, consents, approvals and waivers can be reasonably expected to
be forthcoming within a reasonable period of time after the Closing Date
without the imposition of any conditions that Purchaser in good faith
determines would be materially burdensome.

          (h)  Estoppel and Non-Disturbance for Leased Real Property. Purchaser
shall have obtained an estoppel certificate from the landlord for each Leased
Real Property and a non-disturbance agreement from any mortgage lender for each
Leased Real Property, in each case in form and substance reasonably
satisfactory to Purchaser.

60

 

          (i)  Financing. GenCorp shall have consummated a debt financing sufficient
to enable Purchaser to receive the cash necessary to make the payment to Seller
required by Section 2.13.

          (j)  Release of Liens. Seller shall have obtained the release and
cancellation of (i) all Liens except Permitted Liens with respect to the
Purchased Assets and (ii) all Encumbrances with respect to the UK Shares.

          (k)  Approval of Disclosure Package. Purchaser shall have consented, in
its sole discretion, to the form and substance of any Schedule that
constitutes, in accordance with Section 4.14, a supplement or update to a
Schedule previously delivered to Purchaser.

          (l)  Consent. GenCorp shall have obtained any lender consents required
under the GenCorp Credit Facility.

     5.02 Conditions to Seller’s Obligations. The obligation of Seller to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of each of the following conditions at or before the Closing (any
of which may be waived by Seller, in whole or in part) and in no event later
than the Drop Dead Date, unless extended in writing by the mutual consent of
the Parties, each in its sole discretion:

          (a)  Truth of Representations and Warranties. The representations and
warranties of Purchaser contained in this Agreement must be true, accurate and
complete (without giving effect to any limitations as to materiality set forth
in such representations and warranties) in all material respects as of the date
hereof and as of the Closing (other than representations and warranties made as
of another specific date, which representations and warranties shall have been
true and correct as of such date), except with respect to the effect of
transactions contemplated or permitted by this Agreement, and Purchaser shall
have delivered to Seller a duly executed officer’s certificate to such effect
in accordance with Section 6.03(c).

          (b)  Performance of Covenants. Purchaser shall have performed and complied
in all material respects with all covenants, agreements and conditions required
by this Agreement to be performed and complied with by Purchaser on or prior to
the Closing; Purchaser shall have delivered all documents, certificates and
instruments required to be delivered by Purchaser under the terms of this
Agreement; and Purchaser shall have delivered to Seller a duly executed
officer’s certificate to such effect in accordance with Section 6.03(c).

61

 

          (c)  No Restraints. There shall not have been issued and in effect any
injunction or similar legal order prohibiting or restraining consummation of
any of the transactions herein contemplated and no legal action or governmental
investigation which might reasonably be expected to result in any such
injunction or order shall be pending.

          (d)  Permits and Approvals. Any and all material Permits, approvals and
consents from any Governmental Authority or other Person or entity required for
the consummation of the transactions contemplated hereby shall have been
obtained, including any necessary permits, variances or waivers to enable ARC
Automotive to conduct its business in Camden, Arkansas, and Seller to conduct
its business in Gainesville, Virginia, as contemplated by this Agreement and
the Other Agreements, in a manner substantially similar to the conduct of such
businesses as of the date of this Agreement. All applicable waiting periods
under the H.S.R. Act shall have expired or approvals required by Schedule
3.02(n) of the Disclosure Package shall have been obtained.

          (e)  Payment of Purchase Price. Purchaser shall have paid the Purchase
Price in the manner provided herein.

          (f)  Approval of Schedules. Seller shall have consented, in its sole
discretion, to the form and substance of any Schedule that constitutes, in
accordance with Section 4.14, a supplement or update to a Schedule previously
delivered to Seller.

     5.03 Termination.

          (a)  This Agreement may be terminated as follows:

               (i)  at any time prior to the Closing by mutual written consent of Seller
and Purchaser;

               (ii)  by Purchaser prior to the Closing, if there has been a material
breach or failure of, or material inaccuracy in a representation, warranty or
covenant in this Agreement (including the Disclosure Package without giving
effect to any supplement thereto), or any certificate, instrument or other
document delivered pursuant thereto, of Seller;

               (iii)  by Seller prior to the Closing, if there has been a material breach
or failure of, or material inaccuracy in a representation, warranty or covenant
in this Agreement

62

 

(including Purchaser’s schedules without giving effect to any supplement
thereto), or any certificate, instrument or other document delivered pursuant
thereto, of Purchaser;

               (iv)  by Seller or by Purchaser if the Closing shall not have occurred as
provided in Section 6.02 for any reason other than the willful refusal of the
terminating Party to comply fully with its obligations hereunder; or

               (v)  by Seller or Purchaser if the conditions precedent referred to in
Section 5.01 or Section 5.02, respectively, have not for any reason other than
the failure of the terminating Party to comply fully with its obligations and
requirements hereunder, been completed by the Drop Dead Date.

          (b)  Any termination of this Agreement in accordance with the provisions of
Section 5.03(a)(ii), Section 5.03(a)(iii), Section 5.03(a)(iv) or Section
5.03(a)(v) shall be effected by the terminating Party providing written notice
of such termination to the other Parties to this Agreement prior to or at the
Closing in accordance with the provisions of Section 10.05.

          (c)  In the event that this Agreement is terminated in accordance with the
provisions of Section 5.03(a)(i), Section 5.03(a)(iv) or Section 5.03(a)(v),
Seller shall have no obligation to Purchaser, and Purchaser shall have no
obligation to Seller. If any of the Parties shall terminate this Agreement in
accordance with Section 5.03(a)(ii), Section 5.03(a)(iii) or in violation of
this Agreement, the rights of Purchaser or Seller, as the case may be, to
pursue all legal remedies for claims arising out of or relating to breach of
contract (excluding damages for diminution in value, lost profits and rents and
business interruption losses and indirect, punitive, exemplary and
consequential damages) shall survive unimpaired provided, however, that to the
extent that any part of such claim for breach of contract arises out of or
results from an alleged breach of warranty as of the date of this Agreement,
such claim or part thereof shall be governed by ARTICLE IX. Notwithstanding
the foregoing, upon any termination, the obligations of the Parties set forth
in Section 4.06, Section 4.08, Section 4.09, ARTICLE IX and Section 10.03, the
Confidentiality Agreement and under any provision hereof that expressly states
that it shall survive termination of this Agreement shall survive and be
binding upon and enforceable against the Parties hereto, including by
injunction or specific performance.

63

 

ARTICLE VI

The Closing

     6.01 The Closing. For purposes hereof, “Closing” means the time and place
at which the transactions contemplated by this Agreement are consummated and
the documents and instruments referred to in Section 6.03 are executed and
delivered by the Parties.

     6.02 Time, Date and Place of Closing. Unless extended by the Parties by
mutual agreement, the Closing will occur and be effective as of 11:59 p.m.
(Eastern Daylight Time) on the later of (a) June 30, 2003, or (b) the date that
is five (5) Business Days following satisfaction of all of the conditions
referred to in Section 5.01 and Section 5.02 (the “Closing Date”), but in no
event whatsoever later than one hundred twenty (120) days from the date hereof
(the “Drop Dead Date”). The Closing will take place at 10:00 a.m. on the
Closing Date at the offices of Atlantic Research Corporation, 5945 Wellington
Road, Gainesville, Virginia 20155-1699, or such as location as mutually agreed
and designated in writing by the Parties.

     6.03 Deliveries at Closing. At the Closing:

          (a)  Seller shall deliver to Purchaser the certificate referenced in
Sections 5.01(a) and 5.01(b) and one or more additional certificates, in each
case, executed by a duly authorized officer of Seller, to the effect that:

               (i)  all corporate and other proceedings or actions required to be taken by
Seller in connection with the transactions contemplated by this Agreement and
the Other Agreements have been taken;

               (ii)  if and only to the extent that Seller has obtained such consents or
approvals, those consents or approvals, or effective waivers thereof, to or of
assignment, of those Persons set forth on Exhibit O have been obtained;

               (iii)  all requisite governmental approvals and authorizations necessary
for consummation by Seller and its Affiliates of the transactions contemplated
hereby and by the Other Agreements have been duly issued or granted; and

               (iv)  there has not been issued, and there is not in effect, any injunction
or similar legal order against Seller or its Affiliates prohibiting or
restraining consummation of any of the transactions herein contemplated or in
any of the Other Agreements, and no legal or

64

 

governmental action, proceeding or investigation which might reasonably be
expected to result in any such injunction or order is pending against Seller or
its Affiliates.

          (b)  Seller shall deliver to Purchaser:

               (i)  one or more duly executed bills of sale in a form reasonably
acceptable to Purchaser (“Bill of Sale”);

               (ii)  one or more duly executed instruments of assignment and assumption of
the Assigned Contracts in a form reasonably acceptable to Purchaser
(“Instrument of Assignment and Assumption”);

               (iii)  one or more duly executed instruments effecting the transfer of
Seller’s ownership interests in the Purchased Joint Ventures in a form
reasonably acceptable to Purchaser (“Instrument of Transfer of Purchased Joint
Ventures”);

               (iv)  one or more duly executed assignments of trademarks in a form
reasonably acceptable to Purchaser (“Assignment of Trademarks”);

               (v)  one or more duly executed assignments of patents in a form reasonably
acceptable to Purchaser (“Assignment of Patents”);

               (vi)  a duly executed Transition Services Agreement;

               (vii)  a duly executed Gainesville Services Agreement;

               (viii) a duly executed Office Leases for the Owned Gainesville Real
Estate;

               (ix)  duly executed Camden Subleases;

               (x)  duly executed warranty deeds for the Owned Real Estate in a form
reasonably acceptable to Purchaser;

               (xi)  a duly executed Long Term Supply Contract;

               (xii)  a duly executed Master Propellant License Agreement;

               (xiii) a duly executed Environmental Action Agreement;

               (xiv)  a duly executed UK Local Agreement;

               (xv)  duly executed Novation Agreements;

65

 

               (xvi)  a duly executed Sequa Guaranty;

               (xvii) certified copies of resolutions of the Board of Directors of Seller
authorizing this Agreement and the Other Agreements, the transactions
contemplated by this Agreement and the obligations of Seller hereunder and
thereunder;

               (xviii) a good standing certificate from the Secretary of State of
Delaware, certifying as of a date not more than fifteen (15) days before the
Closing Date, that Seller is a corporation in good standing under the laws of
the State of Delaware;

               (xix)  other than as relates to the Excluded Assets and Excluded
Liabilities, custody of or control over the originals of all books, records,
correspondence, databases and papers of Seller used in or held for use in the
Business; and

               (xx)  a cross-receipt acknowledging receipt of the Purchase Price.

          (c)  Purchaser shall deliver to Seller the certificate referenced in
Sections 5.02(a) and 5.02(b) and one or more additional certificates, in each
case, executed by a duly authorized officer of Purchaser to the effect that:

               (i)  all corporate and other proceedings required to be taken by Purchaser
in connection with the transactions contemplated by this Agreement and the
Other Agreements have been taken;

               (ii)  all requisite governmental approvals and authorizations necessary for
consummation by Purchaser of the transactions contemplated hereby and by the
Other Agreements have been duly issued or granted; and

               (iii)  there has not been issued, and there is not in effect, any
injunction or similar legal order prohibiting or restraining consummation by
Purchaser of any of the transactions herein contemplated and by the Other
Agreements, and no legal or governmental action, proceeding or investigation
which might reasonably be expected to result in any such injunction or order is
pending against Purchaser.

          (d)  Purchaser shall deliver to Seller:

               (i)  the Purchase Price by means of a wire transfer of immediately
available funds to an account or accounts designated by Seller at least two (2)
Business Days prior to Closing;

66

 

               (ii)  one or more duly executed Instruments of Assignment and Assumption;

               (iii)  one or more duly executed Instruments of Transfer of Purchased Joint
Ventures;

               (iv)  one or more duly executed Assignments of Trademarks;

               (v)  one or more duly executed Assignments of Patents;

               (vi)  a duly executed Transition Services Agreement;

               (vii)  a duly executed Gainesville Services Agreement;

               (viii) duly executed Office Leases;

               (ix)  duly executed Camden Subleases;

               (x)  a duly executed Long Term Supply Contract;

               (xi)  a duly executed Master Propellant License Agreement;

               (xii)  a duly executed Environmental Action Agreement;

               (xiii) a duly executed UK Local Agreement;

               (xiv)  duly executed Novation Agreements;

               (xv)  a duly executed GenCorp Guaranty;

               (xvi)  a duly executed instrument of assumption of the Assumed Liabilities
in a form reasonably acceptable to Seller (the “Instrument of Assumption”);

               (xvii) certified copies of a resolution of the Board of Directors of
Purchaser authorizing this Agreement and the Other Agreements, the transactions
contemplated by this Agreement and the obligations of Purchaser hereunder and
thereunder;

               (xviii) Resale Tax Exemption Certificates duly executed by Purchaser in a
form reasonably acceptable to Seller; and

               (xix)  a cross-receipt acknowledging receipt of the Purchased Assets.

67

 

ARTICLE VII

Certain Covenants and Agreements After Closing

     7.01 Further Conveyances and Assurances. After the Closing, Seller will,
without further cost or expense to, or consideration of any nature from,
Purchaser, execute and deliver, or cause to be executed and delivered, to
Purchaser such additional documentation and instruments, and will take such
other and further actions, as Purchaser may reasonably request as more
completely to sell, transfer and assign to and fully vest in Purchaser
ownership of the Business and all of the Purchased Assets.

     After the Closing, Purchaser will, without further cost or expense to, or
consideration of any nature from, Seller, execute and deliver, or cause to be
executed and delivered, to Seller such additional documentation and
instruments, and will take such other and further actions, as Seller may
reasonably request as more completely to sell, transfer and assign to and fully
vest in Purchaser all of the Assumed Liabilities. In addition, after the
Closing, Purchaser will use commercially reasonable efforts to obtain Sequa’s
release from the Sequa Real Estate Guaranty including offering the holder of
such guaranty such substituted guaranty of any of GenCorp, Purchaser or their
respective Affiliates as may be reasonably acceptable to such holder and as may
be permitted in accordance with GenCorp’s existing financing arrangements or
other applicable material contractual arrangements.

     7.02 Further Consents to Assignment. With respect to those consents or
approvals (or effective waivers thereof) to or of assignment and all novations
which are not obtained on or prior to Closing and which are waived by the
applicable Party as a closing condition:

          (a)  the Parties will make all reasonable efforts to obtain such consent,
approval (or an effective waiver thereof) or novation;

          (b)  if the Parties are unable to obtain such consent or approval, or an
effective waiver thereof, or novation, then, with respect to the contract,
lease, license, permit, approval or other item of which such consent or
approval of or to the effective assignment or the novation is requested by
Purchaser at or after the Closing, (i) this Agreement shall not constitute or
be deemed to be an assignment or an agreement to assign such item if an
attempted assignment without such consent, approval or novation, or an
effective waiver thereof, would constitute a breach of or default under such
item or create in any party thereto the right or power to cancel or

68

 

terminate such item, and (ii) Seller will provide or cause to be provided
to Purchaser the benefit of Seller’s rights under or pursuant to such item,
including enforcement (at Purchaser’s sole cost and expense) of any and all
rights of Seller, as the case may be, against any other Person (including any
Governmental Authority) as Purchaser may request; provided, however, that
Seller and Purchaser shall share equally the expense of any amounts or
consideration paid to any other Person up to a combined limit of One Hundred
Thousand Dollars ($100,000), and neither Seller nor Purchaser shall be
obligated to incur any additional cost or expense unless expressly agreed to in
writing, such agreement to be in each Party’s sole discretion; and

          (c)  neither Party will be obligated to pay consideration (other than costs
of providing the benefit of such item as described in Section 7.02(b)) in order
to obtain any consent or approval, or an effective waiver thereof, or novation,
unless otherwise agreed by the Parties in writing, each in its reasonable
discretion. The Parties will cooperate in obtaining any required consent or
approval, or an effective waiver thereof, or novation, pursuant to an economic
arrangement satisfactory to the Parties.

     7.03 Access. For a period of seven (7) years following the Closing or
such other period as required by applicable law, rule or regulation, Purchaser
will retain all business, financial and other records of Seller relating to the
Business which are included in the Purchased Assets. During such period,
Purchaser will afford authorized representatives of Seller reasonable access to
all of such records at reasonable times and during normal business hours upon
prior reasonable notice at the principal business office of the Business, or as
directed by Purchaser at such other location or locations at which such
business records may be stored or maintained from time to time, and will permit
such representatives to make abstracts from, or copies of, any of such records,
or to obtain temporary possession of any thereof as may be reasonably required
by Seller at Seller’s sole cost and expense. During such period, Purchaser
will, at Seller’s expense (including reimbursement of Purchaser’s out-of-pocket
expenses), reasonably cooperate with Seller in furnishing information,
evidence, testimony and other reasonable assistance in connection with any
action, proceeding or investigation relating to the Business prior to the
Closing. Purchaser will not destroy any such records without first giving
Seller thirty (30) days’ prior written notice and an opportunity for Seller to
obtain possession of such records at Seller’s expense.

69

 

     7.04 Use of Trademark and Trade Names. Notwithstanding anything to the
contrary in this Agreement, Purchaser, after the Closing, may continue to use
“Sequa,” “Atlantic Research Corporation,” “ARC” and “ARC UK” and the stylized
logo of each such entity (a) in displays, signage and postings for nine (9)
months after the Closing Date, to the extent such displays, signage or postings
exist on the Closing Date, (b) with respect to all existing contracts for the
term of such contracts, (c) for a period of one (1) year, to state the
Business’ former affiliation with Sequa or its Affiliates, and (d) to the
extent the trade names, trademarks, service marks or logos of any of Sequa or
its Affiliates appear on stationery, packaging materials, supplies or inventory
on hand as of the Closing or on order at the time of the Closing, until such is
exhausted. Purchaser agrees to change the name of the UK Company as soon as
practicable after the Closing, but, in any event, within three (3) months of
the Closing Date.

     7.05 Non-Solicitation of Employees. For a period of eighteen (18) months
following the Closing Date, (a) Purchaser shall not, and shall cause its
Affiliates not to, solicit any employee of Seller for employment by Purchaser
or any of its Affiliates without the prior written consent of Sequa, and (b)
Seller shall not, and shall cause its Affiliates not to, solicit Transferring
Employees for employment by Seller or any of its Affiliates, without the prior
written consent of Purchaser. For the avoidance of doubt, an employee shall be
deemed not to have been solicited for employment if (i) such employee or its
agent has initiated any communication or contact for the purpose of discussing
any potential employment of such employee, or (ii) such employee responds to a
general public advertisement for job openings. Nothing herein shall prohibit
any Party or any of its respective Affiliates from employing or offering to
employ any employee if such employee was not solicited for employment.

     7.06 Covenant Not to Compete. For a period of five (5) years, from and
after the Closing Date (the “Restricted Period”), Seller shall not, directly or
indirectly through any of its Affiliates, engage in, participate in or make any
financial investment in any Person that engages directly or indirectly in any
business that competes with the Business as conducted at the Closing (a
“Competitive Business”); provided, however, that nothing herein shall prohibit
an investment in less than five percent (5%) of then-outstanding equity
securities (as determined at the time of the investment) in a Person. The
foregoing shall not apply to a Competitive Business acquired by Seller or any
of its Affiliates, if, in the year prior to such acquisition, the net sales of
such Competitive Business were less than twenty percent (20%) of the net sales
of the entire acquired

70

 

business. Seller or any of its Affiliates may also acquire a Competitive
Business that exceeds the threshold set forth in the immediately preceding
sentence; provided that Seller or Affiliate, as the case may be, divests the
Competitive Business within one year after its acquisition. In the event of a
breach of any provision of this Section 7.06 the running of the Restricted
Period shall be automatically tolled (i.e., no part of the Restricted Period
shall expire) from and after the date of the first such breach until such time
as the breach is cured.

     For the avoidance of doubt, none of the activities of Seller and its
Affiliates, including ARC Automotive, shall in any manner be restricted as
relates to either the Master Propellant License Agreement, the Long Term Supply
Contract or the right of Seller and its Affiliates, including ARC Automotive to
manufacture or have manufactured, automotive airbag propellants.

     7.07 Administration of Accounts.

          (a)  All payments and reimbursements made in the ordinary course by any
Person in the name of or to Seller to the extent in connection with or arising
out of the Purchased Assets, the Business or the Assumed Liabilities received
after the Closing shall be held by Seller in trust for the benefit of Purchaser
and, immediately upon receipt by Seller or any of its Affiliates, as the case
may be, of any such payment or reimbursement, Seller shall pay over to
Purchaser the amount of such payment or reimbursement without right of set-off.

          (b)  All payments and reimbursements made in the ordinary course by any
Person in the name of or to Purchaser or its Affiliates, to the extent in
connection with or arising out of the Excluded Assets or the Excluded
Liabilities received after the Closing shall be held by Purchaser or its
Affiliates, as the case may be, in trust for the benefit of Seller, and,
immediately upon receipt of any such payment or reimbursement, Purchaser shall
pay to Seller the amount of such payment or reimbursement without right of
set-off.

     7.08 Sale and Transfer of Gainesville Fixed Assets. Notwithstanding any
other provision of this Agreement or the Other Agreements, the sale, conveyance
and delivery of the Fixed Assets located at the Leased Gainesville Real Estate
(the “Gainesville Fixed Assets”) will not be effective as of the Closing, but
will be effective subsequent to the Closing at such time as Purchaser may
elect. The sale, conveyance and delivery of the Gainesville Fixed Assets will
(a) not be subject to the conditions set forth in ARTICLE V, and (b) be
effected by delivery by

71

 

Seller to Purchaser of an executed bill of sale (in form and substance
substantially similar to the Bill of Sale) transferring title to such
Gainesville Fixed Assets, or any portion thereof, to Purchaser on the date
elected by Purchaser.

     7.09 Preparation and Filing of Tax Returns. Seller or its Affiliates
shall prepare or cause to be prepared in a manner consistent with past
practice, and timely file or cause to be timely filed, all Tax Returns of the
UK Company with respect to periods ending on or before the Closing, and shall
timely pay, or cause to be timely paid, all Taxes shown due on such Tax
Returns. Tax Returns shall be subject to Purchaser’s approval (which approval
shall not be unreasonably withheld or delayed) and shall be delivered to
Purchaser at least fifteen (15) days prior to the due date for review and
approval. Purchaser shall prepare or cause to be prepared, and file or cause
to be filed, all Tax Returns of the UK Company with respect to periods ending
after the Closing. Tax Returns that include periods ending on or before the
Closing, and that must be signed by an officer of the UK Company, shall be
delivered to Purchaser not less than ten (10) days prior to the due date
including any extensions thereof.

ARTICLE VIII

Employees and Non-UK Employee Benefits

     8.01 Employees After Closing.

          (a)  Schedule 8.01(a) of the Disclosure Package identifies each of the
individuals who are active Employees other than Employees identified on
Schedule 8.01(c) of the Disclosure Package (collectively, the “Active
Employees”). Active Employees are defined as either actively at work, on
vacation or on sick leave (other than leave covered under the Family and
Medical Leave Act of 1993 (“FMLA”)) as of the date indicated on such schedule
and, when such schedule is updated, a date within three (3) Business Days prior
to the Closing.

          (b)  Schedule 8.01(b) of the Disclosure Package identifies each of the
individuals who are Employees as of the date indicated thereon and, when
updated, the date within three (3) Business Days prior to the Closing, are on
layoff with contractual recall rights, on workers’ compensation, on other leave
with contractual recall rights or legal reinstatement rights such as military
leave or leave covered by FMLA or on short-term disability leave (whether or
not due to occupational injury or disease) (collectively, the “Non-Active
Employees”).

72

 

          (c)  Schedule 8.01(c) of the Disclosure Package identifies each of the
individuals who are Employees as of the date indicated thereon and, when
updated, the date within three (3) Business Days prior to the Closing, are
identified by Purchaser as reasonably required for the transition activities at
the Leased Gainesville Real Estate (the “Gainesville Transition Employees”).

          (d)  Schedule 8.01(d) of the Disclosure Package identifies each of the
individuals who as of the date indicated thereon and, when updated, the date
within three (3) Business Days prior to the Closing are former employees of
Seller or its Affiliates (other than the UK Company) with rights to receive
certain benefits (collectively, the “Former Employees”). Schedule 8.01(d) of
the Disclosure Package shall be updated to include those individuals, if any,
who become Former Employees after the date of this Agreement through the
Closing. The benefits referred to in this Section 8.01(d) are the ARC
Non-qualified Benefit Plan, ARC Director and Executive Deferred Compensation
Plan and ARC Supplemental Executive Retirement Program listed on Schedule
8.01(d) of the Disclosure Package (the “Former Employee Obligations”) and the
ARC Retiree Medical Plan and, with respect to the two employees specifically
listed and so noted on Schedule 8.03(f) of the Disclosure Package as being
covered by the Execucare Program, the Execucare Program, both of which are
listed on Schedule 8.03(f) of the Disclosure Package (the “Retiree Medical
Obligations”).

          (e)  Seller may, with Purchaser’s approval, transfer any of the individuals
identified on Schedule 8.01(a) and Schedule 8.01(b) of the Disclosure Package,
hereto out of the Business prior to the Closing. Seller shall delete any such
transferred individual from either Schedule 8.01(a) or Schedule 8.01(b) of the
Disclosure Package, and Purchaser shall have no obligations pursuant to this
ARTICLE VIII with respect to any such individual. If Seller, in the ordinary
course of business, hires any additional employees for the Business or
transfers any individuals from another business of Seller to the Business, then
such newly hired or transferred individuals shall be added to Schedule 8.01(a)
of the Disclosure Package for all purposes under this Agreement. In the event
any individuals are deleted from or added to Schedule 8.01(a) and Schedule
8.01(b) of the Disclosure Package in accordance with the foregoing, at Closing
Seller shall provide Purchaser with an amended Schedule 8.01(a) of the
Disclosure Package and an amended Schedule 8.01(b) of the Disclosure Package
reflecting such deletions and additions.

73

 

          (f)  Purchaser may, prior to the date within three (3) Business Days prior
to the Closing, direct the transfer of individuals between (i) the class of
Active Employees identified on Schedule 8.01(a) of the Disclosure Package, and
(ii) the class of Gainesville Transition Employees identified on Schedule
8.01(c) of the Disclosure Package, who are reasonably required to perform
Gainesville transition efforts.

          (g)  Purchaser shall, prior to the Closing, but not later than three (3)
Business Days prior to the Closing, offer employment to each of the Active
Employees (other than the Gainesville Transition Employees identified on
Schedule 8.01(c)) of the Disclosure Package on terms and conditions reasonably
comparable in the aggregate to those in effect immediately prior to Closing
(each of the Active Employees that, as of the Closing, becomes an employee of
Purchaser is referred to as a “Transferring Employee”).

          (h)  Non-Active Employees as of the Closing shall remain Non-Active
Employees of Seller until such employees return from their leave of absence or
are released to return to work by such employees’ medical physicians.

          (i)  Purchaser shall offer employment on terms and conditions reasonably
comparable in the aggregate to those in effect immediately prior to Closing, to
each individual who as of the Closing is a Non-Active Employee, upon such
employee’s return from his or her leave of absence or release to return to work
by such employee’s medical physician. Each such employee who accepts such
offer becomes an employee of Purchaser and shall then also be referred to as a
Transferring Employee.

          (j)  Prior to and as of the Closing, Seller will offer to continue
employment of the Gainesville Transition Employees until completion of
activities in accordance with the Gainesville Services Agreement. After the
Closing and until the expiration of the Gainesville Services Agreement, Seller
shall be responsible for all wages, salaries, performance bonuses, transition
retention bonuses, vacations, deferred compensation, payroll taxes,
supplemental unemployment benefits, injuries, workers’ compensation claims and
obligations under insurance coverages and all employee benefits (including all
self-funded benefit plans) arising out of the employment of the Gainesville
Transition Employees (the “Gainesville Transition Employee Compensation
Costs”); provided, however, that Purchaser shall reimburse Seller for
Gainesville

74

 

Transition Employee Compensation Costs in accordance with the terms of the
Gainesville Services Agreement.

          (k)  At such time as the Gainesville Services Agreement has expired (the
“Gainesville Transition Expiration Date”), Purchaser will offer employment to
all then-employed Gainesville Transition Employees. Purchaser shall offer
employment on terms and conditions reasonably comparable in the aggregate to
those in effect immediately prior to the Gainesville Transition Expiration
Date. Purchaser will not offer employment to the Gainesville Transition
Employees prior to the Gainesville Transition Expiration Date without the
express written consent of Seller. Those Gainesville Transition Employees who
accept such employment from Purchaser also shall, from and after the date of
such employment, if any, be deemed to be “Transferring Employees” for purposes
of this ARTICLE VIII. No such Gainesville Transition Employee shall be a
Transferring Employee, if at all, until after the Gainesville Transition
Expiration Date.

          (l)  Except to the extent reflected in the Closing Balance Sheet, Seller
shall be responsible for all wages, salaries, performance bonuses, retention
bonuses, vacations, deferred compensation, payroll taxes, supplemental
unemployment benefits, claims and obligations under insurance coverages and all
employee benefits (including all self-funded benefit plans) arising out of the
employment of the Transferring Employees and Former Employees by Seller and
certain of its subsidiaries and Affiliates prior to the Closing.

          (m)  To the extent reflected in the Closing Balance Sheet, Purchaser shall
be responsible for (A) all wages, salaries, performance bonuses, vacations,
deferred compensation, payroll taxes and supplemental unemployment benefits
arising out of the employment of Transferring Employees by Seller prior to the
Closing, and (B) Former Employee Obligations.

          (n)  Purchaser shall be responsible for all wages, salaries, performance
bonuses, vacation, sick leave, deferred compensation, severance benefits,
supplemental unemployment benefits and all employee benefits arising out of the
employment of the Transferring Employees by Purchaser after the Closing or the
Gainesville Transition Expiration Date, as the case may be.

75

 

          (o)  Except for the Transferring Employees, the Former Employees, the UK
Employees and the Former UK Employees, Seller will continue to be responsible
for all other employees of Seller and its Affiliates after the Closing.

          (p)  With respect to the Former Employees, Seller shall be responsible for
any of Seller’s Severance Obligations. With respect to the Transferring
Employees, Seller shall be responsible for any and all retention bonuses,
including those disclosed in Schedule 8.01(p) of the Disclosure Package.

          (q)  For a period of twelve (12) months following the Closing, Purchaser
shall provide severance benefits no less favorable than those provided by
Seller in accordance with its plan in effect as of the date of this Agreement.
In addition, for a period of twelve (12) months following the Gainesville
Transition Expiration Date, Purchaser shall provide, to those Gainesville
Transition Employees who become Transferring Employees, severance benefits no
less favorable than those provided by Seller in accordance with its plan in
effect as of the date of this Agreement.

     8.02 ARC 401(k) Plan.

          (a)  Effective as of the Closing, Purchaser shall establish or amend a
Tax-qualified, defined contribution plan (the “Purchaser’s 401(k) Plan”) that
shall provide for credits for purposes of eligibility and vesting for service
with Seller for the Transferring Employees and Former Employees.

          (b)  All Transferring Employees as of the Closing shall be fully vested in
their account balances under the Atlantic Research Corporation Savings Plus
Plan (the “ARC 401(k) Plan”) and all Transferring Employees and Former
Employees shall be entitled in accordance with the terms of the ARC 401(k) Plan
to (i) an immediate distribution of their account balances, (ii) maintain such
amounts in the ARC 401(k) Plan, or (iii) transfer their respective account
balances directly to Purchaser’s 401(k) Plan. In the event that in accordance
with Section 8.02(b)(iii), any Transferring Employee or Former Employee elects
to transfer his or her respective account balances to Purchaser’s 401(k) Plan,
then, not later than ninety (90) days after the Closing Date, Seller shall
cause to be transferred from the trust under the ARC 401(k) Plan to the trust
under Purchaser’s 401(k) Plan cash or other liquid assets selected by Seller
and acceptable to Purchaser, the value of which shall be equal to the liability
for the account balances

76

 

of such Transferring Employees and Former Employees, if any, under the ARC
401(k) Plan as of the date of actual transfer of assets from the ARC 401(k)
Plan trust to Purchaser’s 401(k) Plan trust; provided, however, that such
transfer of assets with respect to any transferring Gainesville Transition
Employee shall occur not later than ninety (90) days after termination of the
Gainesville Services Agreement. The amount to be transferred shall be reduced
by the amount of any payments made with respect to the Transferring Employees
and Former Employees after the Closing or, if applicable, the actual date of
transfer of an individual Gainesville Transition Employee, but prior to the
date of transfer provided for in this Section 8.02. Any Transferring Employee
whose account balance under the ARC 401(k) Plan is transferred to or rolled
over to Purchaser’s 401(k) Plan shall be permitted to direct the investment of
such account under Purchaser’s 401(k) Plan.

          (c)  Upon completion of the transfer of assets and benefit liabilities
described in Section 8.02(b), Purchaser’s 401(k) Plan shall assume the benefit
liabilities under the ARC 401(k) Plan with respect to such Transferring
Employees and Former Employees and neither Seller nor the ARC 401(k) Plan shall
have any further obligation or responsibility with respect to such benefit
liabilities, which shall be considered for all purposes as having been
satisfied as a result of such transfer. Nothing herein shall be construed to
limit the right of Purchaser to amend or revise Purchaser’s 401(k) Plan in any
respect or to terminate Purchaser’s 401(k) Plan following Closing.

     8.03 Welfare Benefits.

          (a)  From and after the Closing and for a period of not less than twelve
(12) months after the Closing Date, Purchaser shall provide group health
benefits to Transferring Employees and their eligible dependents under
Purchaser’s Welfare Plans that are reasonably comparable in the aggregate to
those provided to the Transferring Employees and their eligible dependents
immediately prior to the Closing, provided, however, that Purchaser’s Welfare
Plans (i) shall have no exclusion for pre-existing conditions in any medical or
dental plan to the extent that such conditions were covered under applicable
benefit plans of Seller covering the Transferring Employees; (ii) shall apply
any deductible incurred under Seller’s medical and dental plans to any
applicable deductible under Purchaser’s medical and dental plans; and (iii)
shall recognize service with Seller as service with Purchaser for purposes of
group welfare plans and service-based policies and procedures.

77

 

          (b)  Except as otherwise provided in this Agreement, the Gainesville
Services Agreement or otherwise reflected or reserved in the Closing Balance
Sheet, Seller shall pay, or shall cause to be paid, in accordance with the
terms of any applicable Benefit Plan:

               (i)  any and all covered claims of every nature and description relating to
any covered medical and dental expenses incurred by (A) the Transferring
Employees or Former Employees or their covered dependents prior to the Closing,
and (B) all employees of Seller and its Affiliates other than the Transferring
Employees or Former Employees or their covered dependents prior to and after
the Closing; and

               (ii)  any and all sickness and accident benefits, and disability benefits,
for any continuous period of disability or incapacity (as defined in the
applicable plan) of (A) a Transferring Employee or Former Employee that
commenced prior to the Closing, and (B) all employees of Seller and its
Affiliates other than the Transferring Employees or Former Employees or their
covered dependents prior to and after the Closing.

          (c)  Except as otherwise provided in the Gainesville Services Agreement or
otherwise reflected or reserved in the Closing Balance Sheet, Seller shall
indemnify and hold Purchaser harmless from and against:

                (i)  any and all Losses arising out of or in connection with or relating to
any claims incurred in connection with any medical and dental expenses by (A)
the Transferring Employees and Former Employees and their covered dependents
prior to the Closing, and (B) all employees of Seller and its Affiliates other
than the Transferring Employees or Former Employees or their covered dependents
prior to and after the Closing;

               (ii)  Any and all Losses arising out of or in connection with or relating
to any and all occupational disease claims arising out of or relating to the
employment by Seller of (A) any Transferring Employee or Former Employee prior
to the Closing, and (B) all employees of Seller and its Affiliates other than
the Transferring Employees or Former Employees or their covered dependents
prior to and after the Closing; and

               (iii)  Any and all Losses arising out of or in connection with or relating
to any and all sickness, accident, life insurance and disability benefits
claims, with respect to any illness, accident, injury or death of (A) the
Transferring Employees, Former Employees and their covered dependents occurring
prior to the Closing, and (B) all employees of Seller and its

78

 

Affiliates other than the Transferring Employees or Former Employees or
their covered dependents prior to and after the Closing.

          (d)  Purchaser shall indemnify and hold Seller harmless from and against:

               (i)  any and all Losses arising out of or in connection with or relating to
any claims incurred in connection with any medical and dental expenses by the
Transferring Employees and Former Employees and their covered dependents after
the Closing;

               (ii)  any and all Losses arising out of or in connection with or relating
to any and all occupational disease claims arising out of or relating to the
employment by Purchaser of any Transferring Employee after the Closing; and

               (iii)  any and all Losses arising out of or in connection with or relating
to any and all sickness, accident, life insurance and disability benefits
claims, with respect to any illness, accident, injury or death of the
Transferring Employees and Former Employees and their covered dependents
occurring after the Closing.

          (e)  Purchaser shall indemnify and hold Seller harmless from and against
any and all Losses incurred in connection with Purchaser’s failure, during the
twelve (12) months immediately following the Gainesville Transition Expiration
Date, to provide to any Gainesville Transition Employee who becomes a
Transferring Employee, group health benefits that are reasonably comparable in
the aggregate to those provided by Seller immediately prior to the Closing.

          (f)  Purchaser shall be responsible for and bear the entire cost and
expense of the ARC sick leave benefit program for all Active Employees,
Non-Active Employees and Gainesville Transition Employees in each instance as
of the time any of the foregoing become Transferring Employees (“Sick Leave
Obligations”) and the Retiree Medical Obligations, regardless of the amounts
accrued for such items on the Closing Balance Sheet. The description of the
ARC sick leave benefit program and the amounts to which Employees have
accumulated thereunder as of the Closing and the description of the Retiree
Medical Obligations and the amounts to which the plan participants have become
eligible thereunder as of the Closing are set forth on Schedule 8.03(f) of the
Disclosure Package.

79

 

          (g)  Seller shall be responsible for and bear the entire cost and expense
of all workers’ compensation claims arising out of the employment of (i) the
Transferring Employees and Former Employees prior to the Closing, and (ii) all
employees of Seller and its Affiliates other than the Transferring Employees or
Former Employees or their covered dependents prior to and after the Closing.

          (h)  Purchaser shall be responsible for and bear the entire cost and
expense of all workers’ compensation claims arising out of the employment of
the Transferring Employees after the Closing.

          (i)  To the extent adequately reflected on the Closing Balance Sheet, plan
year 2003 deferrals and reimbursements by or to Transferring Employees under
Seller’s flexible spending accounts shall be carried over and applied to
Transferring Employees’ accounts under Purchaser’s flexible spending accounts.

     8.04 Stock Options and Restricted Stock. Seller and Sequa shall retain
the obligations and liabilities arising out of grants of stock options with
respect to Sequa stock and grants of restricted shares of Sequa to certain
Employees or Former Employees.

     8.05 Exposure to Hazardous Materials. Seller shall be liable for any
workers’ compensation or other claim relating to an occurrence or exposure to
Hazardous Materials, including Exposure Liabilities, in the workplace prior to
the Closing and Purchaser shall be liable for any workers’ compensation or
other claim relating to an occurrence or exposure to Hazardous Materials,
including Exposure Liabilities, in the workplace after the Closing. If a
workers’ compensation or other claim arises in connection with a “continuing”
occurrence or exposure to Hazardous Materials, including Exposure Liabilities,
in the workplace before and after the Closing, the liability of Purchaser and
Seller for such claim shall be determined by Legal Requirements or in the
absence of applicable Legal Requirements on an equitable basis, taking into
account, with limitation, the respective period of exposure with Seller and
Purchaser.

ARTICLE IX

Indemnification

     9.01 Indemnification of Sequa Entities. Purchaser hereby agrees that it
shall indemnify, defend and hold Seller and its parent corporation,
subsidiaries and Affiliates and their

80

 

respective officers, directors, employees, agents, representatives,
stockholders, controlling Persons and Affiliates (collectively, the “Sequa
Entities”) harmless from and against any and all claims, losses, damages
(excluding diminution in value, lost profits or rents, business interruption
losses, incidental, indirect, punitive, exemplary or consequential damages
except, in each case, to the extent arising out of or resulting from a Third
Party Claim), liabilities or expenses including, without limitation, amounts
paid in settlement, reasonable out-of-pocket attorneys’ fees, out-of-pocket
costs of investigation, defense and remediation, out-of-pocket costs of
investigative, judicial or administrative proceedings or appeals therefrom, and
costs of attachment or similar bonds, whether or not involving a Third Party
Claim (collectively, “Losses”), to the extent arising out of or resulting from,
directly or indirectly, any of the following:

          (a)  the breach, inaccuracy or falsehood of any representation or warranty
of Purchaser on the date hereof or as of the Closing contained in this
Agreement, the Other Agreements or any other certificate or document delivered
by Purchaser in accordance with any of the foregoing;

          (b)  the breach or failure to perform by Purchaser of any covenant
contained in this Agreement or the Other Agreements;

          (c)  any claim or obligation arising out of or relating to the failure by
Purchaser after the Closing to satisfy or cause to be satisfied any of the
Assumed Liabilities, including, without limitation, Purchaser’s financial
responsibility for certain Seller Historical Environmental Liabilities to the
extent set forth in the Environmental Action Agreement;

          (d)  any claim or obligation arising out of or relating to Purchaser’s or
its Affiliates’ operation of the Business after the Closing under the Sequa
Real Estate Guaranty; and

          (e)  all obligations and liabilities for injuries to Persons or damage to
property arising out of or relating to any product manufactured, sold or
delivered by Purchaser (including products manufactured by Seller (i) prior to
Closing that are included in the Purchased Assets and that are sold or
delivered by Purchaser post-Closing or (ii) in accordance with the Gainesville
Services Agreement) after the Closing. Notwithstanding the foregoing, the Long
Term Supply Contract shall govern the sale of the products covered under such
agreement.

81

 

     9.02 Indemnification of Purchaser. Seller hereby agrees that it shall
indemnify, defend and hold Purchaser and its parent corporation, subsidiaries
and Affiliates and each of their respective officers, directors, employees,
agents, representatives, stockholders, controlling Persons and Affiliates
(collectively, the “Purchaser Entities”) harmless from and against any Losses
to the extent arising out of or resulting from, directly or indirectly, any of
the following:

          (a)  the breach, inaccuracy or falsehood of any representation or warranty
of Seller or its Affiliates on the date hereof or as of the Closing contained
in this Agreement, the Other Agreements or any other certificate or document
delivered by Seller or its Affiliates in accordance with any of the foregoing;

          (b)  the breach or failure to perform by Seller or its Affiliates of any
covenant contained in this Agreement or the Other Agreements;

          (c)  any claim or obligation arising out of or relating to the Excluded
Assets or any Excluded Liability, including, without limitation, the Seller
Historical Environmental Liabilities, except as otherwise provided in the
Environmental Action Agreement;

          (d)  all obligations and liabilities for injuries to Persons or damage to
property arising out of or relating to any product manufactured, sold or
delivered by Seller (excluding products manufactured by Seller (i) prior to the
Closing that are included in the Purchased Assets and sold or delivered by
Purchaser post-Closing or (ii) in accordance with the Gainesville Services
Agreement) or services rendered by Seller on or prior to the Closing;

          (e)  any liability under bulk sales or similar laws resulting from any act
or omission of Seller on or prior to the Closing; and

          (f)  any liability or obligation of the UK Company, other than the
Specified UK Liabilities, including, without limitation, (i) any event,
occurrence, transaction, action or omission in respect of the UK Company
occurring on or prior to the Closing (including, without limitation, the
transfer of the Excluded UK Assets prior to Closing); (ii) the conduct of any
business by the UK Company on or prior to the Closing; (iii) the ownership or
use of any assets or property owned or used (or previously owned or used) by
the UK Company on or prior to the Closing; and (iv) the provision of relevant
benefits (within the meaning of Income and Capital Taxes Act 1988) for or in
respect of any Person (including UK Employees and their relatives).

82

 

     9.03 Procedure for Claims. If any of the Sequa Entities or Purchaser
Entities (the “Claimant”) desires to make a claim against any Party obligated
to provide indemnification under Sections 9.01 or 9.02 (the “Indemnitor”), with
respect to any matter covered by such indemnification obligation, the
procedures for making such claim shall be as follows:

          (a)  Third Party Claims. If the claim is for indemnification with respect
to any action, suit, proceeding or demand at any time instituted or asserted
against, or made upon, the Claimant by or on the behalf of any Person other
than the Seller Entities (a “Third Party Claim”), the Claimant will give prompt
written notice to the Indemnitor of the institution, assertion or making of the
Third Party Claim and the nature thereof. Upon delivery of such notice the
claim specified therein shall be deemed to have been made for purposes of this
Agreement. The Indemnitor shall, within ten (10) days after receipt of such
notice, give written notice to the Claimant as to whether or not the Indemnitor
accepts the responsibility to indemnify Claimant with respect to the Third
Party Claim. If the Indemnitor accepts the responsibility to indemnify the
Claimant with respect to the Third Party Claim, the Claimant will then grant to
the Indemnitor authority, and the Indemnitor will proceed, at its sole expense,
to cure, defend, compromise or settle the Third Party Claim in the name of the
Claimant; provided, however, that (i) any such defense of the Third Party Claim
shall be conducted by counsel reasonably satisfactory to the Claimant, (ii) the
Indemnitor shall not enter into any final compromise or settlement of the Third
Party Claim without the prior written consent of Claimant, which shall not be
unreasonably withheld or delayed, and (iii) the Indemnitor shall not negotiate
or otherwise agree to any final compromise or settlement of the Third Party
Claim that would impose on the Claimant any future obligations, monetary or
injunctive, or impose on the Real Property any restriction on future uses of
such property. If the Indemnitor denies the responsibility to indemnify the
Claimant with respect to the Third Party Claim, or if the Indemnitor fails to
accept responsibility in a timely manner following Claimant’s notice of the
Third Party Claim or fails to proceed in a diligent and timely manner to cure,
defend, compromise or settle a Third Party Claim for which it has accepted
responsibility in accordance with the foregoing provisions, the Claimant may
then proceed to cure, defend, compromise or settle such Third Party Claim as it
shall in its sole discretion deem to be advisable, without prejudice to any
right to indemnification Claimant may have against the Indemnitor with respect
thereto, whether pursuant to this Agreement or otherwise, and in such event the
liability of the Indemnitor to the Claimant for

83

 

indemnification with respect to such Third Party Claim shall be determined
by a final and non-appealable judgment entered by a court of competent
jurisdiction, or by written consent of the Indemnitor;
provided, however, that
Seller and Purchaser each hereby consents to the non-exclusive jurisdiction of
any court in which such a claim is brought for purposes of any indemnity claim
that a Claimant may have under this Agreement with respect to such Third Party
Claim or the matters alleged therein. The provisions of this Section 9.03(a)
shall not apply to Losses arising out of or resulting from Seller Historical
Environmental Liabilities in accordance with Section 9.02(c).

          (b)  Non-Third Party Claims. If the claim is for indemnification with
respect to a matter other than a Third Party Claim, the Claimant will give
prompt written notice to the Indemnitor of such claim, setting forth in
reasonable detail the basis, nature and estimated dollar amount thereof. Upon
delivery of such notice the claim specified therein shall be deemed to have
been made for purposes of this Agreement. The Indemnitor shall, within ten
(10) days after receipt of such notice, give written notice to the Claimant as
to whether or not the Indemnitor accepts the responsibility to indemnify
Claimant with respect to such claim. If the Indemnitor accepts the
responsibility to indemnify the Claimant with respect to such claim, the
Indemnitor shall immediately pay to the Claimant or its designee the amount set
forth in the notice thereof (provided such amount is no longer an estimate) or
make arrangements otherwise mutually satisfactory to the Parties, with such
payment to be made in immediately available funds, and upon actual receipt of
such payment by the Claimant or otherwise mutually satisfactory arrangements,
such claim shall be deemed to have been satisfied. If the Indemnitor denies
the responsibility to indemnify the Claimant with respect to such claim, or if
the Indemnitor fails to accept responsibility in a timely manner following
notice of such claim, the liability of the Indemnitor to the Claimant for
indemnification with respect to such claim shall be determined as provided
under Section 10.10. The provisions of this Section 9.03(b) shall not apply to
Losses arising out of or resulting from Seller Historical Environmental
Liabilities in accordance with Section 9.02(c).

          (c)  The procedures for claims relating to Losses arising out of or
resulting from Seller Historical Environmental Liabilities, including both
Third Party Claims and claims other than Third Party Claims, in accordance with
Section 9.02(c) shall be governed by the provisions of the Environmental Action
Agreement.

84

 

     9.04 Indemnification Limitation on Real Property. Notwithstanding
anything contained herein to the contrary, if there is any defect or deficiency
in title to the Owned Real Estate or the title to the leasehold interest in the
Leased Real Property, and such Real Property is the subject of title insurance,
Seller shall have no liability to Purchaser whatsoever on account of any
representation or warranty contained herein with respect to title to such Real
Property or any deficiency therein to the extent that such title insurance
provides Purchaser or its assignee with an insurance recovery in respect of
such defect or deficiency in title, and Purchaser shall be obligated to
diligently use all commercially reasonable efforts in pursuing a claim for such
insurance recovery.

     9.05 Survivability; Limitations.

          (a)  The representations and warranties of Seller and Purchaser or their
respective Affiliates contained in this Agreement and the Other Agreements
shall survive the Closing, and except as set forth in the next sentence, shall
terminate at the close of business on the eighteen-month anniversary of the
Closing Date (the “Expiration Date”), after which date the representations and
warranties shall be extinguished in all respects; provided,
however, that any
claim pending on the Expiration Date for which notice has been given in
accordance with Section 9.03(a) or Section 9.03(b), as the case may be, on or
before such Expiration Date may continue to be asserted and indemnified against
until finally resolved. Notwithstanding the foregoing, the representations and
warranties of Seller or Purchaser, as the case may be, set forth in: (i)
Sections 3.01(a), 3.01(b), 3.01(c), 3.01(d); the first sentence of Section
3.02(b); the second sentence of Section 3.02(e); Sections 3.03(a), 3.03(b), and
3.03(c); and Sections 3.04(a), 3.04(b), 3.04(c) and 3.04(d) (collectively, the
“Excluded Representations”) shall survive indefinitely; (ii) Sections 3.02(k),
3.02(p), 3.02(v) and Sections 3.03(h) and 3.03(i) shall survive until the date
that is thirty (30) days after the expiration of the applicable statute of
limitations.

          (b)  Notwithstanding anything to the contrary contained in this Agreement,
neither Seller nor Purchaser shall have any liability under Section 9.01 or
Section 9.02 for any Losses unless and until such Losses exceed Ten Thousand
Dollars ($10,000) (an “Eligible Loss”); provided, however, that this Eligible
Loss threshold shall not apply to Losses arising out of or resulting from the
Excluded Liabilities or the Assumed Liabilities.

85

 

          (c)  Notwithstanding anything to the contrary contained in this Agreement,
neither Purchaser nor Seller shall have any liability under Section 9.01(a) or
Section 9.02(a), as the case may be, (i) until the aggregate amount of all
Eligible Losses sustained by Seller or Purchaser, as the case may be, exceeds
One Million Dollars ($1,000,000), in which case Seller or Purchaser, as the
case may be, shall be liable for all such Eligible Losses in excess of such
amount, or (ii) in excess of an aggregate of Twenty-Five Million Dollars
($25,000,000); provided, however, that these limitations shall not apply to any
liability arising out of the Excluded Representations. Except for claims (y)
for equitable relief after the Closing, or (z) based on fraud, the exclusive
remedy of each of Purchaser and Seller for any and all Losses (including but
not limited to claims made in accordance with Section 9.01(a) or 9.02(a), as
the case may be, after termination of this Agreement in accordance with Section
5.03) shall be limited to indemnification as set forth in this ARTICLE IX. For
purposes of Sections 9.01(a) and 9.02(a) and this Section 9.05(c), any breach,
inaccuracy or falsehood of a representation or warranty of Purchaser, Seller or
any of their respective Affiliates (whether in this Agreement or the Other
Agreements) shall be determined without regard to any qualification related to
materiality contained in this Agreement or the Other Agreements.

     9.06
Indemnification Based Upon Net Damage. The obligation of either
Purchaser Seller to pay losses to the other shall be reduced by the net value,
after all costs, fees and expenses of collection, of any proceeds of insurance
from or claims, cross-claims or counterclaims against any Person that is not an
Affiliate, as a direct result of the event giving rise to the claim for
indemnification provided, however, that if any such proceeds have not been
realized at the time losses are paid, then the Party making such payment shall
be subrogated, to the extent of such payment, to the rights of the Party
receiving such payment against such Person. Notwithstanding the foregoing, the
amount of any such insurance proceeds shall not reduce the amount of Losses for
which the Indemnitor is responsible to the extent that the Claimant can
establish that the recovery of such proceeds will result in the termination of
a material applicable insurance policy or a material retrospective or
retroactive premium adjustment as a result of such claim.

86

 

ARTICLE X

Miscellaneous

     10.01 Cooperation; Time of Essence. Purchaser and Seller will each
cooperate with the other, at the other’s request and expense (unless otherwise
allocated herein), in furnishing information, testimony and other assistance in
connection with any actions, proceedings, arrangements, disputes with other
Persons or governmental inquiries or investigations involving the Businesses or
the transactions contemplated hereby. Purchaser will also direct the
Transferring Employees to complete year-end Tax packets, financial statements
for any stub period and the like for Sequa. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the essence.

     10.02 Severability. If any provision of this Agreement shall be finally
determined to be unlawful or unenforceable, then such provision shall be deemed
to be null and void to the extent of the invalid or unenforceable part or
degree and to be severed from this Agreement to such extent, and every other
provision of this Agreement or portion thereof shall remain in full force and
effect.

     10.03 Expenses. Except as otherwise provided in Section 2.14(b), Section
4.06, Section 4.12(a) and Section 10.04, each Party will bear its own costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, whether or not such transactions shall be consummated.

     10.04 Transfer Taxes. Purchaser and Seller shall equally bear any and all
transfer taxes, stamp duty reserve taxes or recordation fees, if any, which may
result from the transactions contemplated hereby.

     10.05 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given at
the time of receipt if delivered by hand or communicated by electronic
transmission, with confirmation of receipt thereof, or, if mailed, three (3)
days after deposit in the United States mail, whether express, registered or
certified, return receipt requested, in each such instance with postage
prepaid, or, if by nationally recognized overnight courier service, one (1)
Business Day after dispatch, and in each case addressed to the Party to receive
same as follows:

87

 

	 	 	 
	If to Purchaser:	 	Aerojet-General Corporation
	 	 	 
	If by mail:	 	P.O. Box 13222

Sacramento, California 95813-6000
	 	 	 
	If by courier:	 	Highway 50 and Aerojet Road

Rancho Cordova, California 95670

Attention: Brian E. Sweeney

Telephone: (916) 351-8588

Telefax: (916) 351-8610
	 	 	 
	With copies to:	 	GenCorp Inc.
	 	 	 
	If by mail:	 	P.O. Box 537012

Sacramento, California 95853-7012
	 	 	 
	If by courier:	 	Highway 50 and Aerojet Road

Rancho Cordova, California 95670

Attention: Deputy General Counsel

Telephone: (916) 351-8652

Telefax: (916) 351-8665
	 	 	 
	 	 	
and
	 	 	 
	 	 	Jones Day

2882 Sand Hill Road, Suite 240

Menlo Park, California 94025

Attention: S.M. McAvoy

Telephone: (650) 739-3939

Telefax: (650) 739-3900
	 	 	 
	If to Seller:	 	Atlantic Research Corporation

5945 Wellington Road

Gainesville, Virginia 20155-1699

Attention: Patrick Jenkins

Telephone: (703) 754-5000

Telefax: (703) 754-5120
	 	 	 
	With copies to:	 	Sequa Corporation

1310 Papin Street 3rd Floor

St. Louis, Missouri 63103

Attention: John J. Dowling III

Telephone: (314) 241-1000

Telefax: (314) 241-1027

88

 

	 	 	 
	 	 	
and
	 	 	 
	 	 	Sequa Corporation

200 Park Avenue – 44th Floor

New York, New York 10166

Attn: John J. Quicke

Telephone: (212) 986-5500

Telefax: (212) 949-5849

provided, however, that if any Party shall have designated a different address
by notice to the other given as provided above, then any subsequent notice
shall be addressed to such Party at the last address so designated.

     10.06 Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors of each of the Parties hereto, but except as provided
in the following sentence shall not be assignable by any Party without the
prior written consent of the other Parties. Purchaser may (a) assign its right
to purchase the Business, or any portion thereof, to a direct or indirect
wholly owned subsidiary of Purchaser, but no such assignment shall relieve
Purchaser from its obligations, representations, warranties, indemnities or
covenants under this Agreement, and (b) assign all but not less than all of its
rights, subject to (i) the assumption and (ii) the payment and performance
(when due), of all of its obligations and liabilities under this Agreement and
the Other Agreements to or for the account of any financial institution solely
and specifically for the purpose of securing the debt financing required by
GenCorp and Purchaser to consummate the transactions contemplated hereby, but
no such assignment and assumption shall diminish Seller’s rights, remedies and
defenses under this Agreement or applicable law generally against Purchaser or
its assignee, as the case may be.

     10.07 No Third Parties. This Agreement is not intended to, and shall not,
create any rights in or confer any benefit upon any Person other than the
Parties hereto or their permitted successors and assigns. The assumption of
any liability or obligation by Sequa or Purchaser pursuant to this Agreement
and the exclusion of any liability or obligation hereunder shall have effect
and shall create enforceable rights only as between the Parties to this
Agreement, and is not intended to create any rights of whatever nature
(including, without limitation, any rights to remedy, claim, liability,
reimbursement or cause of action) in, or confer any benefit upon, and shall not
be enforceable by, any Person other than the Parties to this Agreement.
Nothing in this

89

 

Agreement shall be construed as giving to any Employee, or any other
individual, any right or entitlement under any Benefit Plan, policy or
procedure maintained by Seller, except as expressly provided in such Benefit
Plan, policy or procedure. No Person shall have any rights under Section 502,
Section 503 or Section 504 of ERISA or any regulations thereunder because of
this Agreement that would not otherwise exist without reference to this
Agreement. No Person shall have any right, independent of any right that
exists irrespective of this Agreement, under or granted by this Agreement, to
bring any suit at law or equity for any matter governed by or subject to the
provisions of this Agreement.

     10.08 Incorporation by Reference. The Exhibits and Schedules to this
Agreement and the Disclosure Package and Schedules referred to or included
therein constitute integral parts of this Agreement and are hereby incorporated
into this Agreement by this reference.

     10.09 Governing Law. This Agreement will be governed by and construed and
interpreted in accordance with the internal substantive laws of the State of
New York, applicable to contracts made and to be performed wholly within such
State, and without regard to the conflicts of law principles thereof.

     10.10 Consent to Jurisdiction. Except as otherwise set forth herein, each
of the Parties hereby irrevocably consents and agrees that any action, suit or
proceeding arising in connection with any disagreement, dispute, controversy or
claim arising out of or relating to this Agreement or any related document,
other than a claim for indemnification relating to Seller Historical
Environmental Liabilities, which claim shall be governed by Section 17 of the
Environmental Action Agreement and not by this Section 10.10, or for
recognition and enforcement of any judgment in respect of such a disagreement,
dispute, controversy or claim (for purposes of this Section 10.10, a “Legal
Dispute”) shall be brought for determination solely to the exclusive
jurisdiction of the courts of the State of New York located in New York City,
Borough of Manhattan or the Federal District Court, Southern District of New
York, New York City, Borough of Manhattan. The Parties agree that, after a
Legal Dispute is before a court as specified in this Section 10.10 (or as
specified in Section 9.03(a)) and during the pendency of such Legal Dispute
before such court, all actions, suits or proceedings with respect to such Legal
Dispute or any other Legal Dispute, including, without limitation, any
counterclaim, cross-claim or interpleader, shall be subject to the exclusive
jurisdiction of such court. The Parties irrevocably and unconditionally waive
all right to trial by jury in any Legal Dispute (whether

90

 

based on contract, tort or otherwise) arising out of or relating to this
Agreement or the Other Agreements or their performance under or the enforcement
of this Agreement or the Other Agreements. Each of the Parties hereby waives,
and agrees not to assert, as a defense in any Legal Dispute that such Party is
not subject thereto or that such Legal Dispute may not be brought or is not
maintainable in such court or that such Party’s property is exempt or immune
from execution, that the Legal Dispute is brought in an inconvenient forum or
that the venue of Legal Dispute is improper. Each Party agrees that a final
judgment in any Legal Dispute described in this Section 10.10 (or Section
9.03(a)) after the expiration of any period permitted for appeal and subject to
any stay during appeal shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
applicable laws.

     10.11 Counterparts. Two original counterparts of this Agreement are being
executed by the Parties and each fully executed counterpart shall be deemed an
original without production of the others and will constitute one and the same
instrument.

     10.12 Complete Agreement. This Agreement, the Confidentiality Agreement
and the Other Agreements set forth the entire understanding of the Parties
hereto with respect to the subject matter hereof and supersede all prior
letters of intent, term sheets, agreements, covenants, arrangements,
communications, representations, warranties or due diligence materials, in all
such cases, whether oral or written, by any officer, employee or representative
of any Party or its respective Affiliates relating thereto.

     10.13 Release of News Information. Except as may be required by law, none
of the Parties shall, without the prior written consent of the other Parties,
make any news release or public announcement concerning the execution or
performance of this Agreement and the Other Agreements.

     10.14 Modification or Amendment of Agreement. The terms of this Agreement
may be modified or amended only upon the written agreement of each of the
Parties in a document that expressly references this Section of the Agreement.

     10.15 Waiver. Neither the waiver by any of the Parties of a breach of or
a default under any of the provisions of this Agreement, nor the failure of any
of the Parties, on one or more occasions, to enforce any of the provisions of
this Agreement or to exercise any right or privilege hereunder shall thereafter
be construed as a waiver of any subsequent breach or default of a

91

 

similar nature, or as a waiver of any such provisions, rights or
privileges hereunder. Without limiting the foregoing, to the extent permitted
by Legal Requirements, either Party may waive any of its conditions to Closing
under ARTICLE V including, without limitation, under any of Sections 5.01(a),
5.01(b), 5.02(a) or 5.02(b), without waiving its right to pursue any
post-Closing indemnity claim such Party may have in accordance with ARTICLE IX.

     10.16 Headings; Interpretation. When a reference is made in this
Agreement to an Article, Section, Exhibit or Schedule, such reference is to an
Article or Section of, or Exhibit or Schedule to, this Agreement unless
otherwise indicated. The table of contents and section headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words “include,”
“includes” and “including” are used in this Agreement, they are deemed to be
followed by the words “without limitation.” For all purposes of this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires, (a) the terms defined include the plural as well as the
singular and (b) the words “herein,” “hereof” and “hereunder” and other words
of similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision. Each of the Parties have participated
substantially in the negotiation and drafting of this Agreement and each Party
hereby disclaims any defense or assertion in any litigation or arbitration that
any ambiguity herein should be construed against the draftsman.

[SIGNATURES ON FOLLOWING PAGE]

92

 

     IN WITNESS WHEREOF, the Parties have caused this Purchase Agreement to be
executed by its duly authorized officers, as of the date first above written.

ATLANTIC RESEARCH CORPORATION

	 	 	 
	By:	 	/s/ Patrick J. Jenkins
	 	 	

	Title:	 	
Vice President, Chief Financial Officer and Treasurer

AEROJET-GENERAL CORPORATION

	 	 	 
	By:	 	
/s/ Michael F. Martin
	 	 	

	Title:	 	
President

93

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00053-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00053-of-00352.parquet"}]]