ACQUISITION AGREEMENT

Exhibit 2.1

ACQUISITION AGREEMENT

This ACQUISITION AGREEMENT, effective as of October 9, 2006 (together with the Schedules and Exhibits hereto, this “ Agreement ”), is entered into by and between WESTLAKE NG II CORPORATION (the “ Purchaser ”), a corporation incorporated under the laws of Delaware, and EASTMAN CHEMICAL COMPANY (the “ Seller ”), a corporation incorporated under the laws of the State of Delaware.

Purchaser and Seller are sometimes referred to herein individually as a “party” and together as the “parties.” Unless otherwise indicated, capitalized terms used herein have the respective meanings set forth in Section 1.1.

RECITALS

WHEREAS, Seller, through its wholly-owned subsidiary Eastman Ethylene Polymers Company, a Delaware corporation (“ Eastman EPC ”), is engaged in the businesses described on Exhibit A attached hereto (hereinafter referred to, collectively, as the “ Business ”); and

WHEREAS, upon the terms and subject to the conditions hereinafter set forth, the parties desire that Seller sell, assign and transfer to Purchaser, and that Purchaser purchase and acquire from Seller all of the issued and outstanding capital stock of Eastman EPC (the “ Purchased Shares ”).

NOW, THEREFORE, in consideration of the premises and the mutual warranties, covenants and agreements hereinafter set forth and other good and valuable consideration, being hereinafter referred to, acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND USE OF TERMS

Section 1.1. Definitions . The following capitalized terms used in this Agreement shall have the meanings assigned to them in this Section 1.1:

“ Affiliate ” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by, or is under common control with, such Person. For the purposes of this definition, “control” means the possession of the power to direct or cause the direction of management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“ Agreement ” has the meaning set forth in the Preamble.

“ Business ” has the meaning set forth in the Recitals.

“ Business Contracts ” means all Contracts (i) to which Eastman EPC is a party or (ii) to which Seller is a party and exclusively relating to the Business, including the Material Business Contracts.

“ Business Day ” means any day other than a Saturday, a Sunday or a day on which banks in New York, New York are authorized or obligated by Law to close.

“ Business Employees ” means all individuals designated by the Seller prior to the date hereof who are primarily supportive of the Business.

“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.

“ Closing ” has the meaning set forth in Section 4.1.

“ Closing Date ” has the meaning set forth in Section 4.1.

“ Closing Date Inventory Schedule ” has the meaning set forth in Section 3.3.

“ Closing Date Working Capital Schedule ” has the meaning set forth in Section 3.3.

“ Closing Inventory ” has the meaning set forth in Section 3.3.

“ Closing Working Capital ” has the meaning set forth in Section 3.3.

“ COBRA ” has the meaning set forth in Section 11.1(j).

“ Code ” means the United States Internal Revenue Code of 1986, as amended.

“ Competitive Business ” has the meaning set forth in Section 13.1(a).

“ Confidentiality Agreement ” means that certain confidentiality agreement executed by and between Seller and Westlake Chemical Corporation dated November 30, 2005.

“ Contract ” means any contract, agreement, indenture, note, bond, loan, instrument, lease, conditional sale contract, purchase or sales orders, mortgage, license, franchise, insurance policy, undertaking, commitment or other enforceable arrangement or agreement.

“ Covenant Term ” has the meaning set forth in Section 13.1(a).

“ Current Assets ” means, as of any date, the total of trade accounts receivables net of any securitized ones, prepaids, miscellaneous receivables and other current assets normally considered part of the Business. For purposes of this Agreement, Inventory shall not be included in Current Assets.

“ Current Liabilities ” means, as of any date, the total of trade payables, miscellaneous payables and accrued liabilities normally considered part of the Business.

“ Eastman EPC Leased Real Property ” means the real properties indicated in Schedule 5.9(a) of the Seller Disclosure Schedules currently used by Eastman EPC in the operation of the Business.

 

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“ Eastman EPC Real Property Lease ” means the Ground Lease granting a leasehold and related rights to Eastman EPC in and to the Eastman EPC Leased Real Property.

“ Eastman EPC ” has the meaning set forth in the Recitals.

“ Effective Time ” has the meaning set forth in Section 4.1.

“ Employee Benefit Plans ” has the meaning set forth in Section 5.13(c).

“ Employment Agreements ” has the meaning set forth in Section 5.13(b).

“ Employee Policies and Procedures ” has the meaning set forth in Section 5.13(e).

“ Environment ” means soil, soil vapor, surface water, groundwater, land, sediment, surface or subsurface strata or ambient air.

“ Environmental Authority ” means any department, agency, or other body or component of any Governmental Body with jurisdiction under any Environmental Law.

“ Environmental Authorization ” means any license, permit, order, approval, consent, notice, registration, filing or other form of permission or action required under any Environmental Law.

“ Environmental Law ” means any Law relating to the protection of human health or the Environment or occupational and worker health and safety.

“ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ Ethylene Supply Agreement ” means the agreement substantially in the form set forth in Exhibit H hereto.

“ Final Closing Inventory ” has the meaning set forth in Section 3.3(d).

“ Final Closing Working Capital ” has the meaning set forth in Section 3.3(d).

“ Full Year Financial Statements ” has the meaning set forth in Section 5.5.

“ GAAP ” means generally accepted accounting principles in the United States of America as implemented by Seller, which are in practice as of the date of the relevant financial statements, consistently applied.

“ Governmental Body ” means any government or governmental or regulatory body thereof, or political subdivision thereof, of any country or subdivision thereof, whether national, federal, state or local, or any agency or instrumentality thereof, or any court or arbitrator (public or private) that, in each case, has asserted jurisdiction over the matter in question.

“ Ground Lease ” means the Agreement substantially in the form set forth in Exhibit D attached hereto.

 

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“ Hazardous Substance ” means any pollutant, contaminant, or hazardous or toxic material that in each case is defined, regulated or controlled under any Environmental Law. The term includes, but is not limited to, all materials defined as “hazardous substances” in CERCLA, “hazardous waste” in the Resource Conservation and Recovery Act, and “hazardous materials” regulated by the Department of Transportation. The term also includes petroleum (crude oil or any fraction thereof) and natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel.

“ HSR Act ” has the meaning set forth in Section 5.3.

“ Indemnified Party ” has the meaning set forth in Section 12.4.

“ Indemnifying Party ” has the meaning set forth in Section 12.4.

“ Intellectual Property ” shall have the meaning set forth in the Technology Transfer Agreement.

“ Interim Financial Statements ” has the meaning set forth in Section 5.5.

“ Inventory ” means all finished goods (including in transit), raw materials, packing materials, work in process and maintenance spare parts of the Business and owned by Seller.

“ Inventory Adjustment Amount ” means the difference (positive or negative) between the Inventory Purchase Price and the Inventory Target Amount.

“ Inventory Difference ” has the meaning set forth in Section 3.3(e).

“ Inventory Target Amount ” means $100,164,000.

“ Inventory Bill of Sale ” means the Bill of Sale from Seller to Purchaser substantially in the form set forth in Exhibit I attached hereto.

“ Inventory Purchase Price ” means the consideration to be paid for the Inventory under the Inventory Bill of Sale as determined in accordance with Section 3.2.

“ Inventory Review ” has the meaning set forth in Section 3.2.

“ IP Consents ” has the meaning set forth in Section 5.11(b).

“ IP License(s) ” means a Contract or Contracts under which Intellectual Property is licensed to an unaffiliated Person(s), or from unaffiliated Person(s) by (i) Seller exclusively for use in the Business or (ii) Eastman EPC.

“ Knowledge ” means with respect to Seller or Purchaser, as the case may be, (i) the actual knowledge, as of the date hereof, of the individuals set forth on Schedule 1.1(a) and identified as Seller employees or Purchaser employees, respectively.

“ Law ” means any national, federal, state, municipal or local law, statute, code, ordinance, rule or regulation existing at the date hereof.

 

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“ LDPE ” means low density polyethylene.

“ Leased Employees ” means all Business Employees who shall be leased to Purchaser under the terms of the Operating Agreement.

“ Licensed Intellectual Property ” means Intellectual Property that is licensed to Purchaser and/or Eastman EPC pursuant to the Technology Transfer Agreement.

“ LLDPE ” means linear low density polyethylene.

“ Lien ” means any lien (statutory or otherwise), pledge, mortgage, deed of trust, security interest, charge, option, right of first refusal, transfer restriction or encumbrance.

“ Losses ” has the meaning set forth in Section 12.2(a).

“ Material Adverse Effect ” means (i) when used with respect to the Business, any material adverse change in, or effect on, the business, properties, assets, results of operations or financial condition of the Business, taken as a whole, but excluding any change to the extent relating to or arising from any (A) changes in Laws or changes in the enforcement thereof, (B) changes resulting from the announcement of the execution of this Agreement and the transactions contemplated hereby, (C) changes resulting from any action taken by Purchaser or Seller or any of their respective representatives or Affiliates or in order to consummate the transactions contemplated hereby, (D) changes in general economic conditions (so long as Eastman EPC is not disproportionately affected as compared to other companies in the industry in which the Business competes) other than as a result of a declaration of war by the Congress of the United States in respect of an armed conflict occurring within the 48 contiguous states of the United States, or (E) changes generally affecting the industry in which the Business competes (so long as Eastman EPC is not disproportionately affected as compared to other companies in the industry in which the Business competes), including changes in the price of energy, supplies and raw materials, and (ii) when used with respect to Seller or Purchaser, any effect that materially impairs the ability of Seller or Purchaser, respectively, to complete the transactions contemplated hereby or to fulfill its respective obligations hereunder.

“ Material Business Contracts ” has the meaning set forth in Section 5.12.

“ Neutral Auditors ” has the meaning set forth in Section 3.3(d).

“ Operating Agreement ” means that certain Operating Agreement by and among the parties hereto and substantially in the form set forth as Exhibit F hereto.

“ Order ” means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award of any Governmental Body.

“ Organizational Documents ” means as to any Person, the Articles of incorporation, certificate of incorporation or Articles of association, and bylaws, or other applicable organizational documents, of such Person.

“ Patents ” shall have meaning set forth in the Technology Transfer Agreement.

 

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“ Penalty ” means a monetary assessment by a Governmental Body pursuant to a final, non-appealable Order.

“ Permit ” means any authorization, franchise, license, permit or certificate issued by any Governmental Body.

“ Permitted Exceptions ” means (i) liens for current Taxes, assessments or other claims by a Governmental Body not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings or for which an appropriate reserve or security deposit is established by Eastman EPC therefor; (ii) mechanics’, carriers’, workers’, repairers’, warehousemans’, landlords’ and similar Liens arising or incurred in the ordinary course of business for amounts not yet due or payable or for which reserves adequate for payment of the debt secured thereby have been established; (iii) zoning, entitlement and other land use and environmental regulations and restrictions by Governmental Bodies; (iv) easements, restrictions and other encumbrances (other than liens for the payment of debt) that do not materially detract from or materially diminish the value of or materially interfere with the present use of such property (real or personal) or asset in the Business; (v) express conditions, restrictions or limitations set forth in Permits, Business Contracts or conveyancing instruments provided to Purchaser; and (iv) such other matters as are disclosed on Schedule 1.1(b) attached hereto.

“ Person ” means any individual, corporation, partnership, limited partnership, limited liability company, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other similar entity.

“ Personal Property Leases ” means those Contracts providing for the lease of personal property by Eastman in respect of the Business or by Eastman EPC that are not terminable without penalty within a period of sixty (60) calendar days and involving annual payments in excess of $500,000.

“ Pipeline Purchase Agreement ” means the agreement substantially in the form set forth as Exhibit E hereto.

“ Pipeline Purchase Price ” means the amount of $18 million to be paid by Purchaser to Mustang Pipeline Company, a Texas corporation, pursuant to the terms and conditions of the Pipeline Purchase Agreement.

“ Pre-Closing Litigation ” means the pending litigation identified on Schedule 5.15 of the Seller Disclosure Schedules.

“ Pre-Closing Taxes ” means (i) all Taxes of Eastman EPC for periods that end on or before the Closing Date (including Taxes in respect of transactions that occur on or before the Closing Date but which are included under applicable Law (such as the regulations for the filing of consolidated returns of United States federal income tax) in a period that begins after the Closing Date); (ii) any Tax of Eastman EPC that is payable by reason of an adjustment under Section 481 of the Code in respect of a change in accounting method prior to the Closing Date or a comparable provision of another Tax Law; and (iii) the Pre-Closing portion of Taxes of Eastman EPC with respect to a Straddle Period (A) in the case of any Tax based upon or related to income or receipts, the pre-Closing portion of such Tax shall be deemed equal to the amount

 

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that would be payable if the relevant period ended at the end of the Closing Date, and (B) in the case of any real or personal property Tax or any other Tax not described in the next sentence or in clause (iv)(A), the pre-Closing portion of such Tax shall be deemed equal to the amount of such Tax for the entire taxable period multiplied by a fraction, the numerator of which is the number of days in the taxable period ending on and including the Closing Date, and the denominator of which is the number of days in the entire taxable period. For purposes of the preceding sentence, Taxes incurred as a result of a transaction or event occurring after the Closing but on the Closing Date that was not in the ordinary course of business and was directed by Purchaser shall be treated as being incurred on the date after the Closing Date. Sales and use Taxes shall be deemed to accrue in the period in which the property is purchased, sold, used or transferred, as reflected in the books and records of the Business.

“ Proceeding ” means any judicial or arbitral action, suit, or proceeding.

“ Purchased Intellectual Property ” means the Intellectual Property that is either (i) owned by Seller for use in the Business and conveyed to Purchaser by the Technology Transfer Agreement or (ii) owned by Eastman EPC.

“ Purchased Shares ” has the meaning set forth in the Recitals.

“ Purchase Price ” has the meaning set forth in Section 3.1.

“ Purchaser ” has the meaning set forth in the Preamble.

“ Purchaser Disclosure Schedules ” has the meaning set forth in the introduction to ARTICLE VI.

“ Purchaser Documents ” has the meaning set forth in Section 6.2.

“ Purchaser Indemnified Group ” means Purchaser and its Affiliates, together with their successors and assigns, and their respective officers, directors, employees and agents.

“ Purchaser’s 401(k) Plan ” means any qualified cash or deferred arrangement (within the meaning of Section 401(k) of the Code) maintained by Purchaser.

“ Purchaser’s Pipeline Indemnities ” means all indemnification obligations of Purchaser and its Affiliates under Article X of the Pipeline Purchase Agreement.

“ Purchaser’s Release ” has the meaning set forth in Section 12.3(b).

“ Reference Balance Sheet ” means the December 31, 2005 Year End Balance Sheet attached hereto as part of Schedule 5.5 .

“ Reference Date ” means December 31, 2005, the date of the Reference Balance Sheet.

“ Reference Working Capital ” means ($164,000), the Working Capital of the Business, as calculated from the Reference Balance Sheet in accordance with Schedule 3.3(a) .

 

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“ Release ” has the meaning set forth in CERCLA.

“ Resolution Period ” has the meaning set forth in Section 3.3(c).

“ Response ” has the meaning set forth in CERCLA.

“ Responsible Party ” has the meaning set forth in Section 12.3(e).

“ Restrictions ” means any restriction of any rights related to the Purchased Shares, including without limitation, proxies, voting agreements, transfer restrictions, agreements to sell or purchase and similar terms.

“ SEC ” shall mean the United States Securities and Exchange Commission.

“ Seller ” has the meaning set forth in the Preamble.

“ Seller Disclosure Schedules ” has the meaning set forth in the introduction to ARTICLE V.

“ Seller Documents ” has the meaning set forth in Section 5.2.

“ Seller FSA Plans ” means the medical and dependent care expense reimbursement programs identified as such in Schedule 5.13(c) of the Seller Disclosure Schedules.

“ Seller Indemnified Group ” means Seller and its Affiliates, together with their successors and assigns, and their respective officers, directors, employees and agents.

“ Seller Proprietary Information ” has the meaning set forth in Section 8.1.

“ Seller’s 401(k) Plan ” means any qualified cash or deferred arrangement (within the meaning of Section 401(a) of the Code) maintained by Seller.

“ Seller’s Pipeline Indemnities ” means all indemnification obligations of Seller and its Affiliates under Article X of the Pipeline Purchase Agreement.

“ Seller’s Release ” has the meaning set forth in Section 12.3(a).

“ Services Agreement ” means the agreement substantially in the form set forth as Exhibit G hereto.

“ Share Purchase Price ” means the sum of $255,000,000, minus the Inventory Purchase Price, minus the Pipeline Purchase Price, plus or minus the Inventory Adjustment Amount.

“ Straddle Period ” means taxable periods which begin before the Closing Date and end after the Closing Date.

“ Straddle Period Returns ” has the meaning set forth in Section 11.2(b).

 

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“ Subsidiary ” means, with respect to any Person, any other Person of which such Person (either alone or through or together with any other Subsidiary) owns, directly or indirectly, a majority of the outstanding equity securities or securities carrying a majority of the voting power in the election of the board of directors or other governing body of such Person.

“ Tax ” or “ Taxes ” shall mean all taxes, however denominated, including any interest or penalties that may become payable in respect thereof, imposed by any federal, state, local or non-United States government or any agency or political subdivision of any such government, which taxes shall include, without limiting the generality of the foregoing, all income, excise, franchise, gains, capital, real property, goods and services, transfer, value added, gross receipts, personal property, sales, use, license, stamp, documentary stamp, mortgage recording, employment, payroll, unemployment, social security, environmental, estimated or withholding taxes, and all customs and import duties.

“ Tax Return ” means a report, return or other information (including any amendments) required to be supplied to a Governmental Body with respect to Taxes including, where permitted or required, combined or consolidated returns for any group of entities that includes Seller or any Subsidiary of Seller.

“ TCEQ ” has the meaning set forth in Section 10.7.

“ Technology Transfer Agreement ” means the agreement substantially in the form set forth as Exhibit B hereto.

“ Termination Date ” has the meaning set forth in Section 8.3(c).

“ Trademark Assignment Agreement ” means the agreement substantially in the form set forth in Exhibit J hereto.

“ Trademarks ” shall have the meaning set forth in the Technology Transfer Agreement.

“ Trade Secrets ” shall have the meaning set forth in the Technology Transfer Agreement.

“ Transferred Business Employee ” has the meaning set forth in Section 11.1(c).

“ Transition Services Agreement ” means the agreement to be entered into by the parties at or immediately prior to the Closing substantially in the form set forth as Exhibit K hereto.

“ VLDPE ” means very low density polyethylene.

“ Voluntary or Discretionary Assessment ” means a voluntary or discretionary investigation or assessment of any kind whatsoever of the Environment (including but not limited to sampling of soil, soil vapor, groundwater, surface water or sediment) other than any investigation or assessment that is required to be performed by an Order from an Environmental Authority or that is required to be performed by the Purchaser under any Environmental Law. Without in any way limiting the generality of the preceding exception, the term does not include (1) any sampling or monitoring required to be conducted to obtain or to comply with Environmental Authorizations, (2) any assessment or test of equipment, such as a sewer or

 

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junction box, to determine the equipment’s integrity, (3) any reasonable and necessary engineering investigation or assessment related to a Purchaser construction project approved by Seller in accordance with the terms of the Ground Lease so long as any investigation or assessment of the Environment conducted as part of the construction project is performed in accordance with a work plan that has been approved by Seller in accordance with the Ground Lease, and (4) any investigation or assessment conducted by Purchaser designed strictly to rebut allegations or claims by Seller against Purchaser that are based on investigations or assessments conducted by Seller so long as the nature, scope or extent of Purchaser’s investigation or assessment substantially corresponds to the nature, scope or extent of any investigation or assessment performed by Seller.

“ Work-around ” has the meaning set forth in Section 2.2.

“ Working Capital ” means, as of any date, total Current Assets minus total Current Liabilities of the Business, as of such date in each case as prepared in accordance with the same accounting principles, procedures, policies and methods that were employed in preparing the Reference Balance Sheet and calculating the Reference Working Capital.

“ Working Capital Difference ” has the meaning set forth in Section 3.3(e).

“ Year End Balance Sheets ” has the meaning set forth in Section 5.5.

Section 1.2. Rules of Construction . Whenever used in this Agreement, except as otherwise expressly provided or unless the context otherwise requires, (a) any noun or pronoun shall be deemed to include the plural as well as the singular and to cover all genders, and (b) the terms “include” and “including” shall be inclusive and not exclusive and shall be deemed to be followed by the phrase “without limitation.” Unless otherwise specified, the terms “hereof,” “herein,” “hereunder,” “herewith” and similar terms refer to this Agreement as a whole (including the schedules, exhibits and disclosure letters to this Agreement), and references in this Agreement to Sections and Articles refer to sections and articles of this Agreement.

ARTICLE II

THE PURCHASE AND SALE

Section 2.1. Purchase and Sale of Purchased Shares and Inventory . On the terms and subject to the conditions set forth herein, at the Closing, Seller shall sell, assign, transfer, convey and deliver to Purchaser, and Purchaser shall purchase, acquire and accept from Seller, the Purchased Shares and the Inventory, free and clear of all Liens and Restrictions.

Section 2.2. Nonassignable Business Contracts . In the case of any Business Contracts that require approval or consent in respect of the transactions contemplated hereby, Seller shall use commercially reasonable efforts to obtain, or cause to be obtained, on or prior to the Closing, any approvals or consents necessary to convey to Purchaser the benefit thereof. Purchaser shall cooperate with Seller in such manner as may be reasonably requested in connection therewith. In the event any consent or approval to an assignment contemplated hereby is not obtained on or prior to the Closing Date, Seller shall continue to use commercially reasonable efforts to obtain any such approval or consent after the Closing Date, (a) with respect to Material Business

 

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Contracts, until the earlier of (i) nine (9) months after the Closing Date, (ii) until such time as such consent or approval has been obtained or (iii) until it shall become reasonably apparent that such consent or approval is not forthcoming, whichever is shorter, and (b) with respect to all other Business Contracts, until the earlier of (i) three (3) months after the Closing Date, (ii) until such time as such consent or approval has been obtained or (iii) until it shall become reasonably apparent that such consent or approval is not forthcoming, whichever is shorter, and Seller shall cooperate with Purchaser in any appropriate and economically feasible arrangement (a “ Work-around ”) to provide that Purchaser shall receive Seller’s interest in the benefits under any such Business Contract, provided that Purchaser shall undertake to pay or satisfy the corresponding liabilities for the enjoyment of such benefit to the extent Purchaser would have been responsible therefor if such consent or approval had been obtained.

ARTICLE III

CONSIDERATION

Section 3.1. Amount and Form of Consideration . The consideration to be paid by Purchaser to Seller in consideration of the Purchased Shares shall consist of the Share Purchase Price, subject to adjustment as set forth in Section 3.3, to be paid to Seller by Purchaser by wire transfer of same day funds in accordance with written wire instructions delivered to Purchaser by Seller at least two (2) Business Days prior to the Closing Date (the Share Purchase Price and Inventory Purchase Price, shall be referred to collectively herein as, the “ Purchase Price ”).

Section 3.2. Inventory Purchase Price Calculation . Seller shall give Purchaser prior notice of the time and place of its annual physical inventory of the Inventory (the “ Inventory Review ”) and Purchaser shall have the right to have its auditors (and, after the signing of this Agreement, Purchaser’s personnel) present at all times during the Inventory Review. Upon completion of the Inventory Review, Seller shall reconcile the results of the Inventory Review with the records of the Inventory kept in Seller’s SAP financial system, in accordance with Seller’s accounting policies as set forth on Schedule 3.2 , consistently applied. At Closing, Inventory shall be valued as of the last day of the month immediately preceding the month in which Closing occurs, in accordance with Seller’s accounting policies as set forth on Schedule 3.2 , consistently applied (such valuation, subject to adjustment as set forth in Section 3.3 , the “ Inventory Purchase Price ”).

Section 3.3. Purchase Price Adjustment .

(a) Within ninety (90) calendar days following the Closing Date, Seller shall prepare, or cause to be prepared, and deliver to Purchaser an unaudited schedule of Working Capital and an unaudited Schedule of Inventory of the Business as of the close of business on the Closing Date (respectively, the “ Closing Date Working Capital Schedule ” and the “ Closing Date Inventory Schedule ”). Seller will certify to Purchaser that (i) the calculation of the Working Capital of the Business as of the Closing Date has been prepared in accordance with the same accounting principles, procedures, policies and methods that were employed in preparing the Reference Working Capital as set forth on Schedule 3.3(a) (the “ Closing Working Capital ”), and (ii) the calculation of the Inventory of the Business as of the Closing Date has been prepared in accordance with Seller’s accounting policies as set forth on Schedule 3.2 , consistently applied (the “ Closing Inventory ”),

 

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(b) During the preparation of the Closing Date Working Capital Schedule and Closing Date Inventory Schedule and the calculation of Closing Working Capital and Closing Inventory, and the period of any dispute within the contemplation of this Section 3.3, Purchaser shall: (i) provide Seller and Seller’s representatives with full access to the books, records, facilities and employees of the Business; and (ii) cooperate fully with Seller and Seller’s representatives, including by providing on a timely basis all information necessary or useful in the preparation of the Closing Date Working Capital Schedule and Closing Date Inventory Schedule and the calculation of Closing Working Capital and Closing Inventory.

(c) After receipt of the Closing Date Working Capital Schedule and Closing Date Inventory Schedule and the calculation of Closing Working Capital and Closing Inventory, Purchaser shall have sixty (60) calendar days to review the calculation of Closing Working Capital and Closing Inventory. Purchaser and its representatives shall have reasonable access to all relevant books, records and employees of Seller and Seller’s Affiliates to the extent reasonably required to complete their review of the Closing Date Working Capital Schedule and Closing Date Inventory Schedule and the calculation of Closing Working Capital and Closing Inventory. Purchaser may dispute those individual items which are a part of an aggregate line item in the Closing Date Working Capital Schedule or Closing Date Inventory Schedule and the calculation of Closing Working Capital or Closing Inventory (i) for which the disputed amount is at least $2,500; and (ii) which are disputed on the basis that such amounts were not determined in conformity with the same accounting principles, procedures, policies and methods that were employed in preparing the Reference Working Capital as set forth on Schedule 3.3(a) or Seller’s inventory policies as set forth on Schedule 3. 2, as applicable, or contain arithmetic error. Any offsetting errors in the Closing Date Working Capital Schedule and Closing Date Inventory Schedule shall be deducted from the amounts disputed by Purchaser. Except to the extent Purchaser delivers written notice to Seller on or prior to the 60 ^th calendar day after Purchaser’s receipt of the Closing Date Working Capital Schedule and Closing Date Inventory Schedule and the calculation of Closing Working Capital and Closing Inventory, which notice specifies in reasonable detail the amount, nature and basis of all disputed items, Purchaser shall be deemed to have accepted and agreed to the calculation of Closing Working Capital and/or Closing Inventory. If Purchaser so notifies Seller of its objection to the calculation of Closing Working Capital and/or Closing Inventory, Seller and Purchaser shall, within sixty (60) calendar days following such notice (the “ Resolution Period ”), attempt to resolve their differences and any resolution by them as to any disputed amounts shall be set forth in writing and shall be final, binding and conclusive. If, at the conclusion of the Resolution Period, the aggregate net effect of all amounts remaining in dispute would result in an aggregate adjustment to Closing Working Capital and Closing Inventory under Section 3.3 of less than $250,000, then no adjustment shall be made to the calculation of Closing Working Capital or Closing Inventory delivered by Seller to Purchaser.

(d) If, at the conclusion of the Resolution Period, the aggregate net effect of all amounts remaining in dispute would result in an aggregate adjustment to Closing Working Capital and Closing Inventory in excess of $250,000, then all amounts remaining in dispute shall be submitted to Ernst & Young LLP, or such other nationally recognized accounting firm that is

 

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not then the independent auditor for either party and is selected by mutual agreement of Seller and Purchaser (the ” Neutral Auditors ”), within ten (10) calendar days after the expiration of the Resolution Period. Each party agrees to execute, if requested by the Neutral Auditors, a reasonable engagement letter, including customary indemnities. All fees and expenses relating to the work, if any, to be performed by the Neutral Auditors shall be shared equally between Seller and Purchaser. The Neutral Auditors shall act as an arbitrator to determine, based solely on the provisions of this Section 3.3 and the presentations by Seller and Purchaser (such presentations to contain the information deemed relevant by Seller or Purchaser, each in their sole discretion), and not by independent review, only those issues still in dispute and only as to whether such amounts were arrived at in conformity with the same accounting principles, procedures, policies and methods that were employed in preparing the Reference Working Capital as set forth on Schedule 3.3(a) or Seller’s inventory policies as set forth on Schedule 3.2 , as applicable, and this Section 3.3. The Neutral Auditors’ determination shall be made within thirty (30) calendar days of their selection, shall be set forth in a written statement delivered to Seller and Purchaser and shall be final, binding and conclusive. The term “ Final Closing Working Capital ” and “ Final Closing Inventory ” shall mean the definitive Closing Working Capital and Closing Inventory, in each case, as agreed to (or deemed to be agreed to) by Purchaser and Seller in accordance with the terms of Section 3.3(c) or resulting from the determinations made by the Neutral Auditors in accordance with this Section 3.3(d) (in addition to those items theretofore agreed to by Seller and Purchaser).

(e) Provided that the sum of (i) the difference between (W) Final Closing Working Capital and (X) Reference Working Capital (the “ Working Capital Difference ”), plus (ii) the difference between (Y) Final Closing Inventory and (Z) the Inventory Purchase Price (the “ Inventory Difference ”), is $250,000 or more, then the Share Purchase Price shall be (iii) increased dollar for dollar to the extent that the Working Capital Difference is a positive number and (iv) decreased dollar for dollar to the extent that the Working Capital Difference is a negative number, and the Inventory Purchase Price shall be (v) increased dollar for dollar to the extent that the Inventory Difference is a positive number, and (vi) decreased dollar for dollar to the extent the Inventory Difference is a negative number. Any adjustments to the Share Purchase Price or Inventory Purchase Price made pursuant to this Section 3.3(e) shall be paid by wire transfer of immediately available funds to the account specified by Purchaser or Seller, as applicable, within five Business Days after the Final Closing Working Capital and Final Closing Inventory is agreed to by Purchaser and Seller or any remaining disputed items are ultimately determined by the Neutral Auditors.

ARTICLE IV

THE CLOSING

Section 4.1. Closing Date . Except as hereinafter provided, the closing of the transactions contemplated hereunder (the ” Closing ”) shall take place at the offices of Jones Day in Atlanta, Georgia, on the last calendar day of the month in which the last of the conditions set forth in ARTICLE IX and ARTICLE X have been satisfied (other than those conditions that by their terms cannot be satisfied until the Closing Date, but subject to satisfaction or waiver of such conditions) or, in the case of ARTICLE IX, waived by Purchaser, or, in the case of ARTICLE X, waived by Seller, or at such other place and at such other time and date as may be mutually

 

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agreed upon by Purchaser and Seller. The date of the Closing is referred to herein as the “ Closing Date ” and the Closing shall be effective as of 11:59 p.m. Eastern Time on the last calendar day of the month in which Closing occurs (the “ Effective Time ”).

Section 4.2. Deliveries by Seller to Purchaser . At the Closing, Seller shall deliver, or shall cause to be delivered, to Purchaser the following:

(a) stock certificates representing the Purchased Shares free and clear of all Liens and Restrictions, together with stock powers duly endorsed in blank;

(b) the certificate referred to in Section 9.6 signed on behalf of Seller by an officer of Seller;

(c) the Technology Transfer Agreement, duly executed by Seller;

(d) the Ground Lease, duly executed by Seller;

(e) the Operating Agreement, duly executed by Seller;

(f) the Pipeline Purchase Agreement, duly executed by Mustang Pipeline Company, a Subsidiary of Seller;

(g) the Services Agreement, duly executed by Seller;

(h) the Ethylene Supply Agreement, duly executed by Seller;

(i) the Trademark Assignment Agreement, duly executed by Seller;

(j) the Transition Services Agreement, duly executed by Seller;

(k) the Inventory Bill of Sale, duly executed by Seller;

(l) the resignations of the then-current officers and directors of Eastman EPC as required by Section 9.8; and

(m) such other documents and instruments as Purchaser may reasonably request that do not alter the parties’ respective obligations hereunder.

Section 4.3. Deliveries by Purchaser to Seller . At the Closing, Purchaser shall deliver to Seller the following:

(a) the Share Purchase Price in the amount and manner provided in Section 3.1;

(b) the Inventory Purchase Price as provided in the Inventory Bill of Sale;

(c) the certificate referred to in Section 10.5 signed on behalf of Purchaser by the Chief Executive Officer, President, Chief Financial Officer or any Vice President of Purchaser;

(d) the Technology Transfer Agreement, duly executed by Eastman EPC;

 

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(e) the Ground Lease, duly executed by Eastman EPC;

(f) the Operating Agreement, duly executed by Eastman EPC

(g) the Pipeline Purchase Agreement, duly executed by Eastman EPC;

(h) the Services Agreement, duly executed by Eastman EPC;

(i) the Ethylene Supply Agreement, duly executed by Eastman EPC;

(j) the Trademark Assignment Agreement, duly executed by Eastman EPC;

(k) the Transition Services Agreement, duly executed by Eastman EPC; and

(l) such other documents and instruments as Seller may reasonably request that do not alter the parties’ respective obligations hereunder.

Section 4.4. Proceedings at Closing . All proceedings to be taken and all documents to be executed and delivered by the parties at the Closing shall be deemed to have been taken and executed simultaneously as of the Effective Time, and, except as permitted hereunder, no proceedings shall be deemed taken nor any documents executed or delivered until all have been taken, executed and delivered.

ARTICLE V

WARRANTIES OF SELLER

Seller hereby represents and warrants to Purchaser that, except as set forth in the Disclosure Schedules dated as of the date hereof and delivered by Seller to Purchaser (the “ Seller Disclosure Schedules ”):

Section 5.1. Organization and Good Standing . Each of Seller and Eastman EPC are duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was incorporated and has all requisite power and authority to own, lease and operate its properties and assets and to carry on, in all material respects, the Business. Seller and Eastman EPC are each duly qualified, authorized or licensed to conduct business under the laws of each jurisdiction in which the conduct of the Business or the ownership or lease of the assets owned or leased by it in respect of the Business requires such qualification, authorization or license, except where the failure to be so qualified, authorized or licensed would not reasonably be expected to have a Material Adverse Effect on the Business.

Section 5.2. Authorization of Agreement . Each of Seller and Eastman EPC has all requisite power and authority to execute and deliver this Agreement and each other agreement, document, instrument or certificate contemplated hereby to be executed and delivered by it in connection with the consummation of the transactions contemplated hereby (all such other agreements, documents, instruments and certificates required to be executed by Seller or Eastman EPC being hereinafter referred to, collectively, as the “ Seller Documents ”) and to perform its obligations contemplated hereby and thereby. The execution, delivery and

 

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performance by Seller of this Agreement and each Seller Document to which it is a party, and the execution, delivery and performance by Eastman EPC of each of the Seller Documents to which it is a party, have been duly authorized by all necessary corporate action on the part of Seller and Eastman EPC. This Agreement has been duly executed and delivered by Seller and (assuming the due authorization, execution and delivery hereof by Purchaser) constitutes a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except that (i) the enforceability hereof may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally, and (ii) the availability of equitable remedies may be limited by equitable principles of general applicability. Each of the Seller Documents will be, on or prior to the Closing Date, duly executed and delivered by, as applicable, Seller and/or Eastman EPC and (assuming the due authorization, execution and delivery thereof by Purchaser) each of the Seller Documents when so executed and delivered will constitute a legal, valid and binding obligation of, as applicable, Seller and/or Eastman EPC, enforceable against them in accordance with their respective terms, except that (A) the enforceability thereof may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally, and (B) the availability of equitable remedies may be limited by equitable principles of general applicability.

Section 5.3. Conflicts; Consents of Third Parties . None of the execution and delivery by Seller of this Agreement or the Seller Documents to which it is a party, the execution and delivery by Eastman EPC of the Seller Documents to which it is a party, the consummation of the transactions contemplated hereby or thereby, compliance by Seller with any of the provisions hereof, or by Seller or Eastman EPC with any of the provisions of any of the Seller Documents, will (a) result in the breach of any provision of Seller’s Organizational Documents or the Organizational Documents of Eastman EPC; (b) violate, result in the breach or termination of, or constitute (with or without notice or lapse of time or both) a default or give rise to any right of consent, cancellation, termination or acceleration or right to increase the obligations or otherwise modify the terms under any Material Business Contract, other than those Material Business Contracts identified on Schedule 5.3 hereto; (c) to the Knowledge of Seller, constitute a violation of any Law or Order applicable to Seller or Eastman EPC; or (d) result in the creation or imposition of any Lien (other than any Lien in favor of Purchaser and Permitted Exceptions) upon any of the assets of Eastman EPC, except in the case of subsections (c) and (d) as is not reasonably likely to have a Material Adverse Effect on the Business or Seller. No consent, waiver, approval, Permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of Seller or Eastman EPC in connection with the execution and delivery of this Agreement or the Seller Documents, the consummation of the transactions contemplated hereby and thereby or the compliance by Seller and Eastman EPC with any of the provisions hereof or thereof, except (y) for such consents, waivers, approvals, Permits or authorizations of, or declarations or filings with, or notifications to, any Person or Governmental Body, the failure to receive or make is not reasonably likely to have a Material Adverse Effect on the Business, and (z) for compliance with the applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder (the “ HSR Act ”).

Section 5.4. Capitalization; Equity Interests . Schedule 5.4 of the Seller Disclosure Schedules sets forth the authorized and outstanding capital stock of Eastman EPC. All of the issued and outstanding shares of the capital stock of Eastman EPC have been duly authorized

 

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and validly issued and are fully paid and nonassessable and are owned of record by Seller. Seller is the sole record and beneficial holder of the Purchased Shares. Seller owns the Purchased Shares free and clear of all Liens and Restrictions and such shares represent all of the issued and outstanding capital stock of Eastman EPC. There are no outstanding (a) securities of Eastman EPC convertible into or exchangeable for shares of capital stock or voting securities of Eastman EPC, or (b) options or other rights in favor of third parties to acquire from Eastman EPC, and no obligation of Eastman EPC to issue, any capital stock, voting securities, or securities convertible into or exchangeable for capital stock or voting securities. No preemptive rights or rights of first refusal exist with respect to shares of capital stock of Eastman EPC and, no such rights will arise by virtue of or in connection with the transactions contemplated by this Agreement. Eastman EPC does not have any Subsidiaries or hold, directly or indirectly, an equity interest in any other Person.

Section 5.5. Financial Statements; Books and Records . Seller has made available to Purchaser true and correct copies of (a) the unaudited balance sheets of the Business as of December 31, 2005, 2004 and 2003 (the “ Year End Balance Sheets ”) and the related unaudited statement of income for the fiscal years ended as of December 31, 2005, 2004 and 2003 (collectively with the Year End Balance Sheets, the “ Full Year Financial Statements ”) and (b) the unaudited balance sheet of the Business as of June 30, 2006 and the related unaudited statements of income for the quarter ended as of June 30, 2006 (collectively, the “ Interim Financial Statements ”). The Full Year Financial Statements were derived from the audited consolidated financial statements of Seller which were prepared in accordance with GAAP and fairly present in all material respects the financial condition of Eastman EPC at each of the dates of the Full Year Financial Statements and the results of operations for each of the periods covered thereby. The Interim Financial Statements were derived from the unaudited interim consolidated financial statements of Seller which were prepared in accordance with GAAP (except insofar as they do not reflect normal, recurring year-end adjustments and do not contain footnote disclosures) and fairly present in all material respects the financial condition of Eastman EPC at the date of the Interim Financial Statements and the results of operations for the period covered thereby. The Full Year Financial Statements and the Interim Financial Statements have been prepared in a manner customary for divisions reporting into a consolidated group within Seller and compiled in accordance with the accounting principles, adjustments and exceptions described in Schedules 3.2 and 5.5 of the Seller Disclosure Schedules. The Full Year Financial Statements and the Interim Financial Statements have not been prepared in accordance with GAAP standards for presentation on a standalone basis, and both include certain items that are eliminated in consolidation as described therein and exclude certain items that may customarily be included in consolidations as described therein. The Full Year Financial Statements and the Interim Financial Statements have been derived from, and prepared in accordance with, the books and records of Seller and its Affiliates.

Section 5.6. No Undisclosed Liabilities . Neither Seller, with respect to the Business, nor Eastman EPC, have, as of the Reference Date, any indebtedness, obligations or liabilities aggregating to exceed $100,000 that were required in accordance with the accounting principles described in Section 5.5 used to prepare the Year End Balance Sheet as of such dates, to be reflected, reserved against or otherwise disclosed on the Year End Balance Sheet that were not so reflected, reserved against or otherwise disclosed. Since the Reference Date, neither Seller with respect to the Business, nor Eastman EPC, have incurred any liabilities that would have been

 

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required to be reflected, reserved against or otherwise disclosed on the Year End Balance Sheet as of such dates had such liabilities existed as of the Reference Date other than (a) those incurred in the ordinary course of business consistent in all material respects with past practice, (b) those otherwise disclosed herein or in the Interim Financial Statements, or (c) those that will be paid or extinguished prior to the Effective Time or reflected in the calculation of Closing Working Capital.

Section 5.7. Absence of Certain Developments . Since the Reference Date, except in connection with the transactions contemplated hereby:

(a) The Business has been conducted in all material respects in the ordinary course consistent with past practice;

(b) There has not occurred any Material Adverse Effect on the Business; and

(c) Seller has not made any change in the accounting practices or policies applied in the preparation of financial statements of the Business, except to incorporate portions of the Business as a wholly-owned subsidiary of Seller and as required by GAAP.

Section 5.8. Taxes .

(a) All material Tax Returns required to be filed on or before the Closing Date (taking into account any extensions validly obtained) by Seller with respect to the Business or by Eastman EPC in either case for any period ending on or before the Closing Date have been, or will be, timely filed on or before the Closing Date and all such Tax Returns are complete and accurate in all respects. All Tax liabilities that are shown to be due on any such Tax Return or are related to any such Tax Return have been properly accrued on a basis consistent with such Tax Returns.

(b) All Taxes shown to be due on such Tax Returns (or payable pursuant to any assessments with respect to such Tax or Tax Returns) have been, or will be, timely paid. There is no Lien for Taxes upon any property or asset of Eastman EPC, except for Liens for Taxes not yet due.

(c) To the Knowledge of Seller, there is no material action, suit, claim, or assessment, or any investigation or audit pending (i) against Eastman EPC with respect to Taxes or (ii) against Seller or any Affiliate of Seller with respect to Taxes for which Eastman EPC may be liable whether by agreement or by reason of applicable law or regulation (including Treasury Regulation Section 1.1502-6).

(d) All Taxes due and payable by Eastman EPC or for which Eastman EPC is or may be liable in respect of periods prior to the Closing Date, other than Taxes for current periods not yet due and payable prior to the Closing Date, have been (or will be, prior to the Closing Date) paid in full, all Tax returns required to be filed in connection therewith have been accurately prepared and filed, and all deposits required by Law to be made by Eastman EPC with respect to employees’ withholding Taxes and other withholding Taxes have been duly made, and any such amount that is required to be withheld but not yet deposited has so been withheld. No deficiency for any Tax or claim for additional Taxes has been asserted, assessed or, to the Knowledge of the

 

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Seller, proposed against Eastman EPC, and Eastman EPC has not granted any waiver of any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. Eastman EPC is not a party to any tax allocation or sharing agreement.

(e) Eastman EPC has not engaged in any “reportable transaction”, within the meaning of Treasury Regulation Section 1.6011-4(b)(2).

(f) Eastman EPC has not agreed to make any adjustment pursuant to Section 481(a) of the Code (or any predecessor provision or comparable provision of other law) by reason of any change in accounting method. Eastman EPC has no application pending as to any such change in accounting method and no such change in accounting method has been proposed by any Tax authority.

(g) Eastman EPC is not a distributing corporation or a controlled corporation, in either case within the meaning of Section 355(a)(1)(A) of the Code, as to a distribution that constitutes part of the plan (or a series of related transactions) of the transaction for which provision is made in this Agreement. No payment that is made pursuant to this Agreement will be an “excess parachute payment” within the meaning of Section 280G of the Code.

(h) No asset of Eastman EPC is “tax exempt use property”, within the meaning of Section 168(h) of the Code, or “tax exempt bond financed property”, within the meaning of Section 168(g)(5) of the Code, or is otherwise subject to a provision of applicable law which extends the period over which the cost thereof may be recovered for purposes of any Tax.

Section 5.9. Real Property .

(a) As of the Closing, Eastman EPC will own (i) a valid leasehold interest in all Eastman EPC Leased Real Property indicated in Schedule 5.9(a) of the Seller Disclosure Schedules as being leased by it and (ii) good and marketable title to the improvements and fixtures on the Eastman EPC Leased Real Property, in each case free and clear of all Liens except Permitted Exceptions.

(b) As of the Closing, the Eastman EPC Real Property Lease will be in full force and effect, and a valid and binding obligation of Seller, enforceable against it in accordance with its terms, and there will be no material default under the Eastman EPC Real Property Lease by Seller, and no event will have occurred as of the Closing Date that, with the lapse of time or the giving of notice or both, would constitute a material default by Eastman EPC.

(c) Seller is the holder of good and marketable fee simple title to the Eastman EPC Leased Real Property, free and clear of all Liens except Permitted Exceptions.

Section 5.10. Tangible Personal Property . Eastman EPC has valid title to all material items of tangible personal property owned by it, free and clear of all Liens except for Permitted Exceptions, other than personal property subject to a Personal Property Lease.

 

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Section 5.11. Intellectual Property .

(a) The Technology Transfer Agreement contains a true and correct list of the following categories of Purchased Intellectual Property: (i) Patents; (ii) Trademark and service mark registrations and applications; and (iii) registered internet domain names.

(b) (i) Other than the Patents listed on Schedule 5.11(b)(i) of the Seller Disclosure Schedules, Seller is the owner of all Purchased Intellectual Property material to the Business, and has all right, title and interest in and to such Purchased Intellectual Property free and clear of any Liens other than Permitted Exceptions; (ii) Seller and its Affiliates have full right, power and authority to grant the licenses granted pursuant to the Technology Transfer Agreement; and (iii) the consummation of the transactions contemplated hereby and by the Seller Documents will not, to the Knowledge of Seller, result in the loss or impairment of any of the rights of the Business or Eastman EPC in any Purchased Intellectual Property, assuming the receipt of the consents under certain contracts required in connection with the transactions contemplated hereby all as identified on Schedule 5.11(e) of the Seller Disclosure Schedules (the “ IP Consents ”).

(c) To the Knowledge of Seller, (i) other than as provided in Schedule 5.11(c) of the Seller Disclosure Schedules, neither the Purchased Intellectual Property nor the Licensed Intellectual Property is the subject of any pending or threatened, opposition, interference or cancellation proceeding before any registration authority in any jurisdiction in which the operations of the Business or Eastman EPC are conducted and (ii) all registrations and applications for all such Purchased Intellectual Property and Licensed Intellectual Property as provided in the Technology Transfer Agreement are in full force and effect and have not been abandoned or withdrawn.

(d) (i) Neither Seller nor Eastman EPC has given any notice of infringement or misappropriation to any Person with respect to any Purchased Intellectual Property or Licensed Intellectual Property within the past two years, and no claim or controversy with respect to any such alleged infringement or misappropriation currently exists or to the Knowledge of Seller, is threatened and (ii) to the Knowledge of Seller, use of Purchased Intellectual Property or Licensed Intellectual Property, and the manufacture, use or sale of Seller’s products by each of Seller or Eastman EPC do not infringe or misappropriate any valid intellectual property rights of any Person and no claims of infringement or misappropriation of intellectual property rights of any Person have been asserted within the past two years by any Person against Seller or Eastman EPC with respect to their use of the Purchased Intellectual Property or Licensed Intellectual Property, and no such claims are, to the Knowledge of Seller, presently pending or threatened.

(e) Schedule 5.11(e) of the Seller Disclosure Schedules identifies each IP License material to the Business currently in effect.

(f) Seller has taken commercially reasonable steps to ensure the protection and maintenance of Trade Secrets that are part of the Purchased Intellectual Property and Licensed Intellectual Property. To Seller’s Knowledge, no past or present employee or contractor of Seller or Eastman EPC has asserted or has any claims in or to any Purchased Intellectual Property or Licensed Intellectual Property material to the Business.

 

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Section 5.12. Contracts . Schedule 5.12 of the Seller Disclosure Schedules sets forth a true and correct list, as of the date hereof, of each of the following Contracts to which Eastman EPC is a party, or to which Seller is a party and that primarily relate to the Business, and are “ Material Business Contracts .” “ Material Business Contracts ,” as such term is used in this Agreement means: (i) Contracts relating to the acquisition or disposition of any material assets not made in the ordinary course of business, and any Contracts providing for any merger, acquisition or other business combination, to the extent that such Contract provides for continuing obligations by the parties thereto; (ii) Contracts providing for the purchase of electricity, raw materials, supplies, services, merchandise or equipment that are not terminable without penalty within a period of ninety (90) calendar days and involving annual payments in excess of $5,000,000; (iii) Contracts providing for the sale of products and involving annual payments in excess of $5,000,000; (iv) Personal Property Leases; (v) Contracts for research and development collaboration involving annual payments in excess of $2,000,000; (vi) non-competition or exclusive dealing agreements, or any other agreement or obligation which purports to limit or restrict in any respect (A) the ability of Eastman EPC to solicit customers for the Business or (B) the localities in which, all or any portion of the Business is conducted; (vii) joint venture or partnership agreements; (viii) Contracts providing for the disposal of Hazardous Substances; and (ix) Contracts providing for the transportation of products of the Business that are not terminable without penalty within a period of ninety (90) calendar days and involving annual payments in excess of $5,000,000. Each of Seller and Eastman EPC has performed in all material respects all of the obligations required to be performed by it to date, and is not in default under, any of the Material Business Contracts, and, to the Knowledge of Seller, no other party to any of the Material Business Contracts is in default thereunder, in each case except as is not reasonably likely to have a Material Adverse Effect on the Business or Seller. Each Material Business Contract is in full force and effect. Seller has made available to Purchaser accurate, correct and complete copies of each Material Business Contract (as amended to the date hereof).

Section 5.13. Employee Matters .

(a) Schedule 5.13(a) of the Seller Disclosure Schedules sets forth a complete list of the Business Employees.

(b) Section 5.13(b) of the Seller Disclosure Schedules lists all employment agreements to which Seller or a Subsidiary of Seller is a party with a Business Employee (“ Employment Agreements ”) and that do not terminate as of the Closing Date, and Seller has made available to Purchaser true, complete, and correct copies of all such Employment Agreements.

(c) Schedule 5.13(c) of the Seller Disclosure Schedules sets forth a true and correct list, as of the date hereof, of all material deferred compensation, pension, profit-sharing and retirement plans, all bonus, retention bonus, and severance plans, and all other material employee benefit, welfare or fringe benefit plans, including, without limitation, all “employee benefit plans” as defined in Section 3(3) of ERISA, maintained, sponsored or with respect to which contributions are made by Seller or its Subsidiaries for the benefit of the Business Employees, or in which any Business Employee participates (collectively, the “ Employee Benefit Plans ”). True and correct copies of the most recent plan summaries distributed to the Business Employees, if any, with respect to each of the Employee Benefit Plans (as applicable) have been made available to Purchaser.

 

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(d) Eastman EPC does not employ any individuals as of the date of this Agreement, nor has it ever employed any individuals.

(e) Seller has made available to Purchaser copies of all employee manuals and all material policies, procedures, and work-related rules that apply to the Business Employees (“ Employee Policies and Procedures ”).

(f) None of the Business Employees participates in any “multiemployer plan” (as defined in Section 3(37) of ERISA). No withdrawal liability has been incurred by or asserted by Seller, its Subsidiaries or Eastman EPC with respect to any multiemployer plan. No Employee Benefit Plan is subject to Title IV of ERISA or a multiple employer plan under Section 413(c) of the Code.

(g) The single Employee Benefit Plan that is intended to qualify under the provisions of Section 401(a) of the Code that the Business Employees participate in is the Seller’s 401(k) Plan. The Internal Revenue Service has issued a favorable determination or opinion letter for Seller’s 401(k) Plan and, to the Knowledge of Seller, nothing has occurred that would adversely affect the qualified status of such plan.

Section 5.14. Labor .

(a) There are no collective bargaining agreements that pertain to any of the Business Employees.

(b) Within the past five (5) years, no labor organization representing any Business Employees or group of Business Employees has made a pending demand against Seller or any of its Subsidiaries for recognition; and there are no representation proceedings or petitions seeking a representation proceeding presently pending involving any Business Employees or, to the Knowledge of Seller, threatened to be brought or filed with the U.S. National Labor Relations Board or with any non-U.S. Governmental Body having jurisdiction over such matters.

(c) As of the date hereof, there are no strikes, work stoppages or lockouts pending, or to the Knowledge of Seller, threatened, involving Business Employees, and within the past five (5) years, no strikes, work stoppages or lockouts have occurred involving Business Employees.

(d) Within the past five (5) years, neither Seller nor any of its Subsidiaries has engaged in a “plant closing” or “mass layoff” as such terms are defined in the United States Federal Worker Adjustment, Retraining and Notification Act of 1988, as amended, at Seller’s Longview, Texas facility.

Section 5.15. Litigation . As of the date hereof, and with the exception of environmental matters, which are addressed in Section 5.17, there is no material Proceeding pending or, to the Knowledge of Seller, threatened against Seller or Eastman EPC or any other Affiliate of Seller that challenges, or questions the validity of, this Agreement, any Seller Document or any action taken or to be taken by Seller or Eastman EPC in connection with, or that seeks to enjoin or

 

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obtain monetary damages in respect of, the consummation of the transactions contemplated hereby or thereby. Schedule 5.15 of the Seller Di