MEMBERSHIP INTEREST PURCHASE AGREEMENT by and among ENPRO HOLDINGS, INC., FAIRBANKS MORSE, LLC, and ARCLINE FM HOLDINGS, LLC Dated as of December 12, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(viii)      entered into any settlement or release with respect to any material Action relating to the Business other than any settlement or release that contemplates only the payment of money in an amount not to exceed $250,000 without ongoing limits on the conduct or operation of the Business and results in a full release of the claims giving rise to such Action;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(i)          As soon as administratively practicable following the Closing Date, Buyer shall establish or maintain, or cause to be established or maintained, a defined benefit pension plan (the “Buyer Pension Plan”) for the benefit of each Pension Plan Participant, which is intended to be qualified under Section 401(a) of the Code and the trust which is a part of such plan must be exempt from Tax under Section 501(a) of the Code.

 

 

 

(iv)        The Buyer Pension Plan shall be responsible for all accrued benefit obligations applicable to the Pension Plan Participants associated with any compensation or service occurring on or after the Closing Date under the Buyer Pension Plan and for any changes to the Buyer Pension Plan made by Buyer or its Affiliates after the Closing Date or as a result of any changes to the CBA after the Closing Date.  Seller shall be responsible only for benefits accrued (including any early retirement subsidies associated with such accrued benefits) under the Seller Pension Plan as of the Closing Date and shall have no liability with respect to any benefits accrued under the Buyer Pension Plan from and after Closing.

 

(v)         Without limiting the generality of the foregoing, the Buyer Pension Plan shall take into account the service of each Pension Plan Participant with a Seller or its Affiliates prior to the Closing under the Seller Pension Plan for purposes of eligibility to participate, vesting, benefits accruals (if applicable) and,

 

 

 

 

(h)         With respect to each Company Continuing Employee, effective as of the Closing Date or such later date as set forth in the Transition Services Agreement (the “FSA Transfer Date”), the Company Continuing Employee shall cease to contribute to Seller’s flexible spending account plan (the “Seller FSA Plan”).  Company Continuing Employee who elected to participate in the Seller FSA Plan for the plan year beginning January 1 of the year during which the Closing occurs (or January 1 of the year in which benefits are no longer provided pursuant to the Transition Services Agreement) shall become participants in a flexible spending account plan established by  Buyer or its Affiliates on or as soon as administratively practicable following the Closing Date (the “Buyer FSA Plan”) as if their participation in the Buyer FSA Plan had been continuous from such January 1 and at the same level of coverage elected under the Seller FSA Plan. Following the FSA Transfer Date, each Company Continuing Employee will be reimbursed by Buyer or its Affiliates under the Buyer FSA Plan for qualifying medical and dependent care expenses incurred by such Company Continuing Employee at any time during the year during which the Closing occurs, up to the amount of the elections made by each Company Continuing Employee under the Seller FSA Plan for such year, reduced by amounts previously reimbursed by Seller or its Affiliates pursuant to the Seller FSA Plan for such year.  To effectuate the foregoing, as soon as practicable after the FSA Transfer Date, Seller shall provide Buyer with a summary of account balances and confirm whether the amounts of the account balances (if any) under the Seller FSA Plan for the Company Continuing Employee are

 

 

 

 

 

(b)         Tax Sharing Agreements.  All Tax sharing, allocation and indemnity agreements and similar agreements with respect to or involving the Company shall be terminated as of the Closing Date, and, after the Closing Date, the Company shall not be bound thereby or have any liability or obligation thereunder.

 

(c)          Straddle Periods.  For purposes of this Agreement, any applicable Taxes with respect to any taxable period that includes (but does not end on) the Closing Date (such taxable period, a “Straddle Period”) shall be prorated (i) in the case of any real property, personal property and similar ad valorem Taxes, on a daily basis based upon the number of days in the portion of such taxable period that ends on and includes the Closing Date and the number of days in the portion of such taxable period after the Closing Date,

 

 

 

 

 

 

 

 

 

 

7.12       Cooperation with Financing.  Seller shall, and shall cause the Company and its and their respective employees and representatives to, use commercially reasonable efforts to provide, at Buyer’s sole cost and expense, such assistance and cooperation as Buyer may reasonably request in connection with obtaining debt financing (if any) in connection with the transactions contemplated hereby (the “Debt Financing”), including (a) using commercially reasonable efforts to cooperate with the marketing efforts of Buyer and its financing sources, (b) upon reasonable prior notice, making senior management of the Company reasonably available during normal business hours for customary presentations or meetings with lenders or proposed financing sources, (c) allowing Buyer to provide its financing sources with access to the Company Financial Statements and any other pertinent information regarding the Company that has been made available to Buyer prior to the date hereof or that is readily available to the Company as may reasonably be requested by Buyer, (d) timely furnishing Buyer with (i) all available pertinent financial statements and other financial information of the Company and (ii) all available and customary financial information of the Company that is required to permit Buyer to prepare a pro forma consolidated balance sheet and related pro forma consolidated statement of income of the Company, in each case as may be reasonably requested by Buyer in connection with the Debt Financing, (e) assisting with the preparation of and executing and delivering definitive documentation for the Debt Financing, including schedules and exhibits thereto, and facilitating the pledging of collateral pursuant thereto, (f) at least three Business Days prior to the Closing Date, providing all documentation and information regarding the Company required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the USA Patriot Act of 2001 and applicable beneficial ownership regulations to the extent requested in writing seven Business Days prior to Closing and (g) cooperating in the prepayment and termination of Company Debt and release of Liens in connection therewith in accordance with the terms hereof; provided, that (i) none of Seller, the Company or any of their respective Affiliates or representatives shall be required to incur any liability or obligation (including any obligation to pay any commitment or other fee) in respect of any assistance provided in connection with the Debt Financing prior to the Closing or enter into any definitive agreement related to the Debt Financing that would be effective prior to Closing and (ii) nothing herein shall require such cooperation to the extent it would unreasonably interfere with the business or operations of the Company; provided, further, that the Company and its officers, employees, and other representatives shall have no obligation to: (A) approve, authorize or ratify the execution of any of the definitive documents in respect of the Debt Financing (other than customary authorization letters) that would be effective prior to the Closing or that or that could reasonably be expected to result in personal liability to such officer, employee, or representatives or (B) take any action prior to the Closing that would conflict with any Law or injunction, writ or temporary restraining order or any other order of any nature issued by a court or Governmental Authority applicable to the Company. Seller hereby consents to the use of the logos of the Company by Buyer in connection with the Debt Financing; provided, that Buyer shall ensure that such logos are used solely in a manner that is not intended, or that is not reasonably likely, to harm or disparage the Company’s reputation or goodwill.

 

7.13        Closing Transfers.  At Closing and in order to facilitate the sale of the Canadian Business, Seller shall cause Garlock to enter into the Bill of Sale and Assignment and Assumption Agreement in substantially the form attached hereto as Exhibit A with such changes thereto as are reasonably agreed by the parties negotiating in good faith (the “Closing Transfer Documents”), which details the transfer, which transfer shall occur, for greater certainty, immediately after the acquisition of the Membership Interests by Buyer, of the Transferred Assets, Assumed Liabilities and Business Employees employed by Garlock from Garlock to the Canadian Buyer (the “Closing Transfers”).

 

7.14        Pre-Closing Transfers.  At or immediately prior to the Closing as provided on Schedule 7.14, Seller shall enter into the agreements set forth on Schedule 7.14, in each case in form and substance reasonably acceptable to Buyer (the “Pre-Closing Transfer Documents”), which shall effectuate the transactions set forth on Schedule 7.14 (the “Pre-Closing Transfers”).

 

7.15        Assignment of Certain Transferred Assets.  Notwithstanding any other provision of this Agreement to the contrary, neither this Agreement nor any agreement or instrument entered into in order to effect the Closing Transfers shall constitute an agreement to assign or transfer any Transferred Asset in the Closing Transfers or any claim or right or any benefit arising thereunder or resulting therefrom if an attempted assignment or transfer thereof, without the consent of a third party (including any Government Authority), would constitute a breach or other contravention thereof or a violation of Law.  Seller will, and will cause Garlock to, use commercially reasonable efforts, during the period beginning on the date hereof and ending 45 days following the Closing Date, to cooperate with Buyer to obtain any consent necessary for the transfer or assignment of any such Transferred Asset to the Canadian Buyer.  If, on the Closing Date, any such consent has not been obtained, Seller and Buyer will cooperate in a mutually agreeable arrangement under which (a) the Canadian Buyer would, in compliance with Law, obtain the benefits and assume, perform and pay the obligations and bear the economic burdens associated with such Transferred Asset in accordance with this Agreement, and (b) Seller would take or cause to be taken at Buyer’s expense such actions as Buyer may reasonably request so as to provide the Canadian Buyer with the benefits of such Transferred Asset (collectively, “Third Party Rights”), including subcontracting, sublicensing or leasing all or any portions of such Transferred Assets to the Canadian Buyer, and Seller would promptly pay or cause to be paid to the Canadian Buyer when received all monies received under any such Transferred Asset (net of expenses incurred in connection with any assignment contemplated by this Section 7.15).  Buyer shall indemnify and hold Seller and its Affiliates, successors and assigns harmless from and against any and all Losses based upon, arising out of or relating to the Canadian Buyer’s performance of, or failure to perform, such obligations associated with any such Transferred Asset after the Closing, except to the extent such Losses are based on, arising out of or relating to Seller’s or its Affiliates’ gross negligence, bad faith, fraud, or breach of the Transaction Agreements.

 

 

 

7.17        Resignations.  At or prior to the Closing, Seller shall deliver to Buyer the resignation of all members of the board of directors (or other similar governing body) and officers of the Company requested by Buyer in writing at least five Business Days prior to Closing, which resignations shall be effective at the Closing.

 

7.18        Exclusive Dealings.  From the date hereof until the Closing or the earlier termination of this Agreement, neither Seller nor the Company shall, and shall cause their respective Affiliates and Representatives not to, take any action to solicit, knowingly encourage, initiate or engage in discussions or negotiations with, or provide any information to, enter into any agreement with, or furnish any confidential information to any Person (other than Buyer or its Representatives or Affiliates) concerning any purchase of any of the Company’s equity securities or any merger, sale of substantial assets, other than assets sold in the ordinary course of business, or similar transaction involving the Company or Seller (solely with respect to the Company or Garlock (as Related to the Business)) or the Business (each such acquisition transaction, an “Acquisition Transaction”).  Seller and the Company will cease, and cause their respective Affiliates and Representatives to cease, and cause to be terminated any and all existing activities, discussions or negotiations with any Person (other than Buyer and its Affiliates and Representatives) conducted prior to or on the date hereof with respect to any Acquisition Transaction.  In the event that Seller, the Company or any of their respective Affiliates or Representatives receives an Acquisition Transaction proposal after the date hereof but prior to the Closing, Seller will provide Buyer with prompt notice thereof, which notice shall include the terms of, and the identity of the Person or Persons making, such Acquisition Transaction proposal.

 

 

 

(b)         Seller, for itself and its Affiliates, agrees that after the Closing Date, Seller and its Affiliates (i) will not expressly, or by implication, do business as or represent themselves under the Names, (ii) with respect to Transferred Assets, or other assets managed, operated or leased by the Company or Canadian Buyer after the Closing Date, will respond to any third party inquiry regarding the Transferred Assets or other assets by representing in writing to the owners or lessors of such Transferred Assets or other assets that such assets are those of Buyer and its Affiliates (including the Company and Canadian Buyer) and not those of Seller and its Affiliates and (iii) will cooperate with Buyer or any

 

 

 

7.20        Insurance.  After the Closing, Buyer shall have the right to assert claims arising from or relating to facts, circumstances, events or matters that occurred prior to the Closing and that constitute Assumed Liabilities or are otherwise liabilities of the Company under any applicable insurance policies of Seller or its Subsidiaries in effect on or prior to the Closing Date and relating to the Business, the Company or the Transferred Assets that are written on an “occurrence” basis under the policies set forth on Schedule 7.20 (“Occurrence Policies”), to the extent permitted under such Occurrence Policies and subject to the applicable deductibles, up to the full available coverage of such Occurrence Policies.  Seller hereby authorizes Buyer to report such claims directly to the provider of such Occurrence Policies; provided that Buyer shall report such claims simultaneously to Seller.  At Buyer’s request, and subject at all times to Buyer’s direction and control, Seller shall, and its shall cause its Affiliates to, provide reasonable participation and assistance in Buyer’s efforts to pursue and settle claims made against such Occurrence Policies; provided that Buyer shall be solely responsible for its own costs and fees in connection therewith and shall promptly reimburse Seller for reasonable costs and fees incurred by Seller or its Affiliates in providing such participation or assistance.  Seller and its Affiliates shall be entitled to copies of all documents and correspondence related to such claims and to discuss the status of such claims with the provider of the applicable Occurrence Policies.  Buyer shall be entitled to settle or compromise any claim for which it is seeking insurance coverage in excess of the deductible under such Occurrence Policies; provided that Buyer shall be solely responsible for any liabilities incurred in connection therewith (including the payment of any deductible, self-insured retention or other cost with respect to the applicable Occurrence Policy). For the avoidance of doubt, Seller shall be responsible for any deductibles, self-insured retentions, retentions and other retained amounts on insurance coverage with respect to any such losses not covered under such Occurrence Policies to the extent relating to liabilities for which Seller is responsible by operation of law or pursuant to this Agreement (including Excluded Liabilities).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)          In consideration for the Purchase Price, as of and following the Closing Date, Seller (on behalf of itself and its Affiliates) knowingly, voluntarily and unconditionally releases, forever discharges, and covenants not to sue Buyer or its Affiliates (including the Company) from or for any and all claims, causes of action, demands, suits, debts, obligations, liabilities, damages, losses, costs and expenses (including attorneys’ fees) of every kind or nature whatsoever, known or unknown, actual or potential, suspected or unsuspected, fixed or contingent, that Seller has or may have, now or in the future, arising out of, relating to, or resulting from any act or omission, error, negligence, breach of contract, tort, violation of law, matter or cause whatsoever from the period of time prior to the Closing Date and relating to the operation of the Business, the ownership of the Membership Interests and the ownership of the Transferred Assets, as applicable; provided, however, that the foregoing release will not apply to any claims arising out of this Agreement or any other Transaction Agreement.

 

 

 

 

7.24        DCSA Approval.  Each party hereto agrees to use its commercially reasonable efforts, as promptly as reasonably practicable and in any event no later than Closing, to obtain DCSA Approval of the terms of the FOCI mitigation approach required in connection with the transactions contemplated by this Agreement.

 

7.25        Nondisclosure and Proprietary Rights Agreements.  The Company will use commercially reasonably efforts prior to the Closing Date to obtain from the employees of the Company and/or Garlock (Related to the Business), as applicable, listed on Schedule 7.25, executed Nondisclosure and Proprietary Rights Agreements in substantially the form attached hereto on Schedule 7.25.

 

 

 

 

 

(a)          (i) The representations and warranties of Buyer set forth in Article VI (other than the Fundamental Representations set forth therein) must be true and correct in all respects (without giving effect to any materiality or material adverse effect qualifications contained therein) as of the Closing Date as though made on and as of the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct would not have a material adverse effect on the ability of Buyer to consummate the transactions contemplated by this Agreement, and (ii) the Fundamental Representations of Buyer set forth in Article VI shall be true and correct in all respects (without giving effect to any materiality or material adverse effect qualifications contained therein) as of the

 

 

(b)          Buyer must have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing.

 

(c)          The applicable waiting periods, if any, under the HSR Act will have expired or been terminated.

 

(d)          Buyer must have delivered, or caused to be delivered, to Seller the items and documents set forth in Section 3.2.

 

(e)          None of the parties hereto will be subject to any Order of a court of competent jurisdiction that prohibits or materially restrains the consummation of the transactions contemplated by this Agreement.

 

(f)          The Closing Transfers shall be consummated, immediately after the acquisition by Buyer of the Membership Interests, in accordance with this Agreement and Closing Transfer Documents.

 

 

 

(b)          The Company and Seller must have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Closing Date.

 

 

 

(e)          Seller must have delivered, or caused to be delivered, to Buyer the items and documents set forth in Section 3.1.

 

(f)          The third party approvals required pursuant to Section 3.1(m) must remain in full force and effect.

 

(g)          None of the parties hereto will be subject to any Order of a court of competent jurisdiction that prohibits or materially restrains the consummation of the transactions contemplated by this Agreement.

 

(h)          The Closing Transfers shall be consummated, immediately after the acquisition by Buyer of the Membership Interests, in accordance with this Agreement and Closing Transfer Documents.

 

(i)          The Pre-Closing Transfers shall have been consummated in accordance with this Agreement and Pre-Closing Transfer Documents.

 

(j)          Buyer shall have obtained a registration under the International Traffic in Arms Regulations.

 

 

 

 

9.1          Termination.  Notwithstanding any other provision of this Agreement, this Agreement may be terminated at any time prior to the Closing:

 

 

(b)          by Buyer or Seller, upon written notice to the other, if the transactions contemplated by this Agreement have not been consummated on or prior to April 10, 2020, or such later date, if any, as Buyer and Seller agree upon in writing (the “Termination Date”); provided, however, that the right to terminate this Agreement pursuant to this Section 9.1(b) is not available to any party whose breach of any provision of this Agreement results in or causes the failure of the transactions contemplated by this Agreement to be consummated by the Termination Date;

 

 

 

 

 

 

 

 

 

 

(c)          The representations and warranties contained in this Agreement, other than the Fundamental Representations, shall not surviving the Closing Date.

 

 

 

 

 

 

 

 

(c)          Other than with respect to claims of, or causes of action arising from, Fraud by Buyer, the aggregate liability of Buyer for all indemnification under Section 10.2 shall not exceed the Purchase Price.

 

(d)          The Seller Indemnitees’ and the Buyer Indemnitees’ right to indemnification pursuant to Section 10.2 and Section 10.3, respectively, will be reduced by the amount of insurance or indemnification proceeds or other amounts actually recovered from other sources (net of any fees, costs and expenses related to the recovery

 

 

 

 

 

 

 

 

 

 

 

 

 

 

	If to the Company (only after Closing) or Buyer:
	c/o Arcline Investment Management, LP
	Four Embarcadero Center, Suite 3460
	San Francisco, CA 94111
	Attention:  Shyam Ravindran; Gib Efird; Alex Iannaccone
	Email:  ***@***; ***@***; ***@***

	with a copy to:
	Kirkland & Ellis LLP
	300 North LaSalle
	Chicago, IL 60654
	Attention:  Richard J. Campbell, P.C.; Navneeta Rekhi
	Email:  ***@***; ***@***
	If to the Company (only prior to Closing) or Seller:
	c/o EnPro Industries, Inc.
	5605 Carnegie Blvd, Suite 500
	Charlotte, NC 28209
	Attention:  Chris O’Neal and Tom Price
	Email:  ***@***, ***@***
	with a copy to:
	Robinson, Bradshaw & Hinson, P.A.
	101 North Tryon Street, Suite 1900
	Charlotte, NC 28246
	Attention:  Kelly Loving and Scott Dove
	Email:  ***@***; ***@***

	COMPANY:
	FAIRBANKS MORSE, LLC
	By:	/s/ Marvin Riley
	Name:	Marvin Riley
	Title:	Sole Manager
	SELLER:
	ENPRO HOLDINGS, INC.
	By:	/s/ Marvin Riley
	Name:	Marvin Riley
	Title:	President
	BUYER:
	ARCLINE FM HOLDINGS, LLC
	By:	/s/ Shyam Ravindran
	Name:	Shyam Ravindran
	Title:	President