Defendant Hexcel Corporation moves for summary judgment, pursuant to CPLR 3212, dismissing plaintiff Hercules Corporation's claims for indemnification under a 1996 sale and purchase agreement for the cost of defending and settling five class action lawsuits commenced in 1999, several years after the sale of Hercules' carbon fiber and prepreg business to Hexcel. Hercules cross-moves for summary judgment on its first and second causes of action, seeking a declaratory judgment and/or specific performance of the indemnification provisions of the parties' agreement, arguing that Hexcel, the buyer, agreed to indemnify Hercules, the seller, for [*2]all claims and lawsuits filed after the closing of the transaction.

In April 1996, plaintiff Hercules and defendant Hexcel entered into a Sale and Purchase Agreement, pursuant to which Hexcel purchased Hercules' carbon fiber and prepreg assets (defined by the parties as the "CPD Business") for $135 million. The transaction closed on June 28, 1996, following regulatory clearance.

On October 4, 1999, more than three years after the closing, a class action lawsuit alleging antitrust violations and civil fraud in connection with the sale of carbon fiber and carbon prepreg products — the CPD Business — was filed in California federal court (Thomas action). Hexcel, Hercules and several other manufacturers were named as defendants in the Thomas action. Other similar class action lawsuits followed. The lawsuits alleged acts or omissions by all of the defendants both before and after Hexcel's 1996 acquisition of the CPD Business from Hercules — from 1993 or earlier to 1999 or later.Shortly after the initial class action lawsuit, Hexcel served a notice of claim dated November 1, 1999 on Hercules asserting that Hercules was responsible for its own antitrust conduct before the closing and that Hercules must indemnify Hexcel against any claim incurred by or asserted against Hexcel relating to the period of time prior to the June 1996 closing. Hercules responded by letter dated November 29, 1999, claiming that it was not obligated under the Sale and Purchase Agreement to indemnify Hexcel or hold it harmless for any of the claims in the Thomas action. Without making its own claim for indemnification against Hexcel, Hercules retained its outside counsel and separately defended the third-party antitrust and civil fraud lawsuits. In August 2000, Hercules entered into a Joint Defense Agreement with the other defendants, including Hexcel. The stated purpose of the agreement was to "continue to pursue their separate but common defense interests and avoid any suggestion of a waiver of privileged communications" (Dillickrath Aff., Exh. 28).

Following the filing of additional lawsuits, Hexcel served upon Hercules additional notices of claim during the 1999 to 2002 time period. In response, Hercules continued to deny any responsibility for indemnifying Hexcel. In addition, citing the parties' "mutuality of interest" in defending the lawsuits, Hercules charged that Hexcel was not cooperating with Hercules in defending the lawsuits. Specifically, Hercules claimed that Hexcel's failure to provide access to documents, information and former personnel in a timely and open manner was significantly prejudicing Hercules' ability to respond to discovery and defend itself in the lawsuits.

In September 2004, Hexcel entered into a settlement with the plaintiffs in the Thomas action. On October 15, 2004, Hercules sent a notice of claim to Hexcel requesting indemnification pursuant to sections 2.4(B), 2.4(F) and 12.4.2 of the Sale and Purchase Agreement for "all settlements, liabilities, damages, judgments, costs and expenses, including . . . reasonable fees of counsel," from that date going forward incurred by Hercules in connection with the antitrust lawsuits. Hercules also repeated its complaints about Hexcel's alleged failure to cooperate with Hercules in defending the class actions, allegedly in violation of section 12.4.2(D) of the Sale and Purchase Agreement, and objected to Hexcel's settlement of the Thomas action on the ground that the settlement happened without prior notice to Hercules and without affording Hexcel the opportunity to participate with Hexcel in a joint settlement. Thereafter, Hercules settled the Thomas action and four additional actions, paying a total of $24,356,250 pursuant to such settlement agreements. Hexcel has paid $23,450,000 in settlement of the antitrust lawsuits. [*3]

Hercules commenced this action on December 6, 2004. The complaint alleges four causes of action, denominated as "counts." The first and second causes of action seek a declaratory judgment regarding and/or specific performance of sections 2.4(B) and 2.4(F), 2.5.1 and 12.3(B), (C) and (D) of the Sale and Purchase Agreement, which allegedly requires Hexcel to indemnify Hercules for all costs and expenses incurred in connection with the antitrust lawsuits after October 15, 2004. The third and fourth causes of action seek a declaratory judgment regarding and/or specific performance of Hexcel's duty to indemnify Hercules for all expenses arising from Hexcel's alleged violation of its duty to cooperate in the defense and settlement of the antitrust lawsuits.

Both parties argues that the relevant provisions of the Sale and Purchase Agreement with respect to Hexcel's indemnification obligations are clear and unambiguous, but provide for opposite results. The following sections of this agreement are relevant to the indemnification claim made herein:

1.1.8"CLAIM" shall mean any and all damages, deficiencies, demands, debts, obligations, losses, claims, assessments, remediation, product liability claims, actions, suits, arbitrations, proceedings, liabilities, damages, fines, penalties, assessments, judgments, costs and expenses (including legal expenses, settlement payments, investigation expenses and reasonable fees of counsel for other experts) of every kind (whether absolute, accrued, contingent or other) and however and wherever arising (whether foreign, domestic or other). . . .

1.1.75"TURNOVER POINT" means the closing [June 28, 1996] . . .

2.4ASSUMPTION OF LIABILITIES. Effective as of the TURNOVER POINT, HEXCEL shall and does hereby assume and thereafter, subject to the terms and conditions of this AGREEMENT, shall pay, perform, discharge and satisfy only each and all of the liabilities and obligations described in Paragraphs (A) through (G) of this Section 2.4 which liabilities and obligations shall not include the EXCLUDED LIABILITIES (Collectively the "ASSUMED LIABILITIES"). . . .

(B)Except as otherwise expressly provided in the DEFINITIVE AGREEMENTS, all liabilities and obligations associated with or arising in respect of the PURCHASED ASSETS, whether or not accrued or reserved against on the CPD FINANCIAL STATEMENTS, to the extent such liability or obligation arises after the TURNOVER POINT.

(F)All CLAIMS, obligations, responsibilities and liabilities to the extent relating to or arising from or incurred in connection with the CPD BUSINESS ITEMS after the TURNOVER POINT except as otherwise provided in the DEFINITIVE AGREEMENTS, including any closure or shutdown, partial or otherwise, of the operations of the CPD BUSINESS or any of the PURCHASED ASSETS (including any arising from the TRANSACTIONS). [*4]

2.5EXCLUDED LIABILITIES

2.5.1 Except for the ASSUMED LIABILITIES, HEXCEL is not assuming or agreeing to pay, perform, discharge or satisfy, and shall have no responsibility or obligation for any liabilities or obligations of the CPD BUSINESS or of HERCULES, HISPAN, HAESA or any of their respective AFFILIATES, including the liabilities or obligations related to matters described in Schedule 2.5, and including any liability or obligations which arises prior to the TURNOVER POINT.

12.7OVERLAPPING CLAIMS FOR INDEMNIFICATION. If any INDEMNITEE shall be entitled to indemnification pursuant hereto due to events, acts or omissions determined to have occurred in part prior to the CLOSING and in part after the CLOSING, then each INDEMNITOR shall be required to provide indemnification as provided herein but only to the extent of its respective share of the responsibility.

(Dillickrath Aff., Ex. 3 at pp. 3, 16-17, 69).

In support of its claim for indemnification, Hercules relies almost exclusively on Section 2.4(F) of the Sale and Purchase Agreement. Hercules contends that the language of this section requires Hexcel to indemnify Hercules for all "claims," defined in Section 1.1.8 to include legal actions, arising from the CPD Business and filed or commenced after the June 1996 closing, as well as any costs and expenses, including settlement payments and legal fees, incurred after June 1996. Since it is undisputed that all of the antitrust and fraud claims were first asserted, the settlement payments were made and the legal fees incurred, several years after June 1996, Hercules argues for summary judgment in its favor on the first and second causes of action.

According to Hexcel, Section 2.5's description of liabilities that were excluded from the deal leaves Hercules, the seller, responsible for any liability or obligation which arises prior to the closing when it operated the CPD Business, while Hexcel, the buyer, took responsibility in Sections 2.4(B) and 2.4(F) for liabilities and claims arising from the CPD Business after the closing. The Sale and Purchase Agreement does not contain a definition of "arise," therefore the term must be given its ordinary and usual meaning, which, according to Hexcel, is "originates," "stems from," and "come into being." Accordingly, Hexcel takes the position that a claim arises or originates from the act or omission that gave rise to the claim or liability. Hexcel further argues that Hercules' interpretation of Section 2.4(F) would render meaningless other sections of the Sale and Purchase Agreement, particularly Section 2.5's "Excluded Liabilities" and Section 12.7 dealing with "Overlapping Claims For Indemnification." Finally, Hexcel argues that Hercules' interpretation of the Sale and Purchase Agreement is contrary to undisputed extrinsic evidence concerning the negotiations leading up to the execution of the final agreement, and is directly as odds with Hercules' post-closing conduct, particularly its failure to request indemnification until years after the antitrust lawsuits were filed.

In response, Hercules argues the drafting history of the Sale and Purchase Agreement does not support Hexcel's interpretation, and that Hexcel's motion is based on an agreement it would have liked to sign, and not on the final agreement it did, in fact, execute. Hercules further argues that Section 2.4(F) is the most specific provision dealing with Hexcel's duty to indemnify third-party claims asserted against Hercules and thus must be given precedence over the [*5]contractual provisions Hexcel relies upon. If its post-closing conduct is deemed relevant, Hercules' offers an affidavit from its Deputy General Counsel in which he contends that the most significant factor in Hercules' decision to refrain, prior to 2004, from asserting a claim against Hexcel for indemnification was that such a claim would have placed the two parties into openly adverse positions at a time when Hercules was dependent on Hexcel for access to documents and personnel of its former CPD Business.

The threshold issue is whether the relevant provisions of the Sale and Purchase Agreement are ambiguous under Delaware law.^[FN1] "Although the parties disagree as to the proper interpretation of the contract, their disagreement does not create an ambiguity" (Northwestern National Ins. Co. v Esmark, Inc., 672 A2d 41, 43 [Del 1996]; see also City Investing Co. Liquidating Trust v Continental Casualty Co., 624 A2d 1191, 1198 [Del

1993]). Clear and unambiguous language should be given its ordinary and usual meaning (Rhone-Poulenc Basic Chemicals Co. v American Motorists Ins. Co., 616 A2d 1192, 1195 [Del 1992]); Northwestern National Ins. Co., 672 A2d at 43, supra). "Courts will not torture contractual terms to impart ambiguity where ordinary meaning leaves no room for uncertainty. The true test is not what the parties to the contract intended it to mean, but what a reasonable person in the position of the parties would have thought it meant (citations omitted)" (Rhone-Poulenc Basic Chemicals Co., 616 A2d at 1196, supra).

The most current edition of Black's Law Dictionary defines "arise " as a verb meaning "1. To originate: to stem (from)" (Black's Law Dictionary 115 [8th ed 2004]). Older editions of Black's added that a "cause of action arises, so as to start the statute of limitation, when [a] party has a right to apply to proper tribunal for relief; and it arises at [a] time when and place where [the] act is unlawfully omitted or committed (citations omitted)" (Black's Law Dictionary 99 [5th ed 1979]). The American Heritage Dictionary defines the word "arise" to mean to "come into being," "originate," and to "result, issue, or proceed" (American Heritage Dictionary 99 [3rd ed 1992]). These definitions support Hexcel's interpretation of Section 2.4(F) that a claim arises from the act or omission that results in a liability, claim or lawsuit.

In Jones v R.R. Donnelly & Sons Co., 541 US 369, 382 (2004), the Supreme Court accorded the word "arise" its usual and ordinary meaning by following these dictionary definitions, stating that the common usage of the word arise means to come into being, originate or spring up. Accordingly, if the phrase arising from the CPD Business after the closing is according is ordinary and ordinary meaning, it is not necessary, as Hercules contends, that additional language had to have been included to say that the claim must have arisen from Hexcel's operation of the CPD Business after the closing.

A core principle of contract interpretation is that "[a] writing is interpreted as a whole, and all writings that are part of the same transaction are interpreted together" (Restatement [Second] of Contracts § 202[2]). "[A]n interpretation which gives a reasonable, lawful, and effective meaning to all the terms is preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect" (id., 203[a]). Delaware follows the Restatement and recognizes that "[t]he cardinal rule of contract construction is that, where possible, a court [*6]should give effect to all contract provisions" (Sonitrol Holding Co. v Marceau Investissements, 607 A2d 1177, 1184 [Del 1992]), citing E.I. duPont de Nemours & Co., Inc. v Shell Oil Co., 498 A2d 1108, 1114 [Del 1985]).

Under Hercules' interpretation of Section 2.4(F) of the Sale and Purchase Agreement, Hexcel would be responsible for every third-party lawsuit filed or commenced after the closing regardless of when the acts or omissions giving rise to the underlying liability occurred. However, this interpretation is inconsistent with Sections 2.4(B), 2.5 and 12.7. In Section 2.4(B), Hexcel assumed responsibility for "all liabilities and obligations associated with or arising in respect of the PURCHASED ASSETS, . . ., to the extent such liability or obligation arises after the TURNOVER POINT (emphasis added)." More importantly, Section 2.5 specifically excludes "any liability or obligations which arises prior to the TURNOVER POINT." If Hexcel were responsible for all lawsuits filed after June 1996, regardless of when the underlying acts or omissions giving rise to liability occurred, then the language of Section 2.5 would be rendered meaningless. Since the indemnification provisions are only dealing with future claims and lawsuits,^[FN2] there could never be an excluded liability under Section 2.5. Likewise, Hercules' argument that Hexcel is responsible to pay any and all litigation expenses if they are "incurred" by Hercules after June 1996, without regard to whether those expenses arose from excluded liabilities or obligations, transforms any third-party liability into one subject to indemnity, and for which Hexcel would have no control over.

Section 12.7 recognizes that responsibility for third-party claims and lawsuits depends on when the challenged events, acts, or omissions occurred. Hercules' sole focus on the complaint filing date would render Section 12.7 completely superfluous, because Hexcel would be 100% responsible for every third-party lawsuit filed after the closing.

Hexcel's interpretation of its indemnification obligations for third party claims under the Sale and Purchase Agreement is also consistent with the manner in which the parties divided up responsibility for environmental liabilities and obligations, which is governed by a separate annex to the Sale and Purchase Agreement. In Section E(1) of the "Environmental Annex," Hexcel assumed liability only for all environmental claims associated with its ownership and operation of the CPD Business after the closing. Likewise, in Section E(2) of the annex, Hercules assumed liability for all environmental claims associated with Hercules' ownership and operation of the CPD Business before the closing.

Hexcel's straightforward reading of the Sale and Purchase Agreement is the only interpretation that gives full effect to all of the relevant provisions of the agreement, and thus is the only interpretation that accords with the above-stated principles of contract construction. The language of Sections 2.4(B). 2.4(F), 2.5 and 12.7 clearly assign responsibility for third-party claims based on when the claim arose or originated. Of course, the parties could have entered into an agreement that assigns responsibility for third-party legal claims based simply on the complaint filing date; it would have been easy to write a contract that way. But that is not what occurred here.

Hercules places much import on a statement of the Delaware Superior Court in DCV Holdings, Inc. v Conagra, Inc., 2005 WL 698133, at *10 (Del Super, Mar. 24, 2005), affd 889 [*7]A2d 954 (Del 2005), in which the Superior Court stated that "[w]hen the parties signed the Purchase Agreement in August 1997, no liabilities' had arisen from DuCoa's antitrust activity." In doing so, the court was referring to the fact that a federal antitrust investigation and resulting civil suits were commenced after the closing. However, at issue in DCV Holdings was not "when" an antitrust claim or liability arises, but the meaning of completely different contractual language concerning the seller's warranties to the buyers. The Delaware Supreme Court affirmed the lower court's ruling that two warranty provisions were in conflict, and the most specific section prevailed, since any other result would render it meaningless (889 A2d at 962). DCV Holdings does not support Hercules' strained and unnatural reading of the Sale and Purchase Agreement, but supports Hexcel's argument that the court should not construe a contractual provision so as to render it meaningless.

Both parties rely on Smith v Meadow Mills, Inc., 60 F Supp 2d 911 (ED Wis, 1999). In that case, a user of a saw brought an action against a purchasing corporation for injuries occurring in March 1997 stemming from a defect in the saw, which was manufactured in 1979. The defendant purchased the company in September 1990. The sales agreement provided that the seller would indemnify the buyer "from all claims, . . ., loss and liability resulting from or based upon . . . (b) obligations, liabilities or claims arising out of the operation of the Business prior to Closing." In attempting to hold the purchasing company liable for his injuries, the plaintiff argued, similar to Hercules herein, that the buyer was responsible for claims based on liability arising after the closing date, and that the liability to the plaintiff arose when he was injured in 1997 (60 F Supp 2d at 915-16, supra). In rejecting this argument, the district court noted that plaintiff was essentially eliding the phrase "out of the operation of the Business prior to Closing," and that the most obvious meaning of this language was that the buyer's liability was triggered by or connected to some facet of defendant's business operations after the asset purchase (id., at 916). The court further ruled that any ambiguity was cleared up by the other provisions of the agreement. In this case, Hexcel's liability for third-party claims in Section 2.4(F) is also limited to claims relating to or arising from or incurred in connection its operation of the CPD Business after the closing, and any argued ambiguity vanishes when Section 2.4(F) is read in context of its neighboring provisions and the entire Sale and Purchase Agreement.

Since the indemnification provisions of the Sale and Purchase Agreement are clear and unambiguous on its face, I may not and do not consider the various pieces of parol evidence offered by the parties to interpret the parties' agreement (Northwestern Nat. Ins. Co., 672 A2d at 43, supra; Pellaton v The Bank of New York, 592 A2d 473, 478 [Del 1991]).

Hercules agreed to take responsibility for liabilities or obligations of the CPD Business that arise before the June 1996 closing. The third party-antitrust lawsuits assert that Hercules and other manufacturers formed an antitrust conspiracy in 1993, well before the June 1996 closing. Since a claim arising from the CPD Business before the closing is not covered under Section 2.4 of the Sale and Purchase Agreement, and is specifically excluded under Section 2.5, Hexcel is entitled to summary judgment dismissing the First and Second Counts of the Complaint.

While Hexcel's notice of motion seeks dismissal of the "remaining claims" of the complaint, defendant provides no basis for dismissal of counts three and four, which are still pending and are based on Hexcel's alleged violation of its duty to cooperate in the defense and settlement of the antitrust lawsuits. [*8]

For the foregoing reasons, it is

ORDERED that defendant Hexcel Corporation's motion for summary judgment is granted to the extent of dismissing the First and Second Counts of the Verified Complaint, and is denied in all other respects; and it is further

ORDERED that plaintiff Hercules Incorporated's cross motion for summary judgment is denied; and it is further

ORDERED that, as per agreement of the parties at the November 2, 2006 argument of these motions, exhibit 13 to affidavit of Thomas J. Dillickrath, filed under seal, shall be destroyed by the court to prevent the need for the County Clerk to partially seal the file in this matter, and counsel agree to include an identical copy of this document in the appellate record in the event an appeal is taken.

Dated: April 27, 2007

ENTER:

________________________

J.S.C.