TRANSITION AGREEMENT
DATED AS OF
APRIL 30, 1999
AMONG
ESSEF CORPORATION,
XXXXXXX & SYLVAN POOLS CORPORATION
AND
PENTAIR, INC.
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.1. General...........................................................1
Section 1.2. References to Time................................................7
ARTICLE II
THE RELATED TRANSACTIONS
Section 2.1. Transfers of Certain Assets and Liabilities.......................8
Section 2.2. Methods of Transfer and Assumption................................8
Section 2.3. Company Approval of Certain A&S Actions...........................8
ARTICLE III
THE SPLIT-OFF
Section 3.1. Cooperation and Actions Prior to the Split-Off....................8
Section 3.2. Net Asset Adjustment.............................................10
Section 3.3. Actions of A&S Prior to the Cut-Off Date.........................11
Section 3.4. Post-Cut-Off Date Operations of A&S..............................11
Section 3.5. The Split-Off....................................................11
Section 3.6. Termination of Certain Claims....................................11
Section 3.7. Post-Closing Procedures..........................................11
ARTICLE IV
INTERCOMPANY TRANSACTIONS AND RELATIONSHIPS
Section 4.1. Cash Dividend....................................................12
Section 4.2. Intercompany Accounts............................................13
Section 4.3. Transition Services..............................................13
ARTICLE V
SURVIVAL AND INDEMNIFICATION
Section 5.1. Survival of Agreements...........................................14
Section 5.2. Indemnification by A&S...........................................14
Section 5.3. Indemnification by the Company...................................16
Section 5.4. Procedure for Indemnification....................................16
Section 5.5. Miscellaneous Indemnification Provisions.........................18
Section 5.6. Pending Litigation...............................................20
i
Section 5.7. Construction of Agreements.......................................20
ARTICLE VI
CERTAIN ADDITIONAL MATTERS
Section 6.1. Representations or Warranties; Disclaimers.......................20
Section 6.2. Further Assurances; Subsequent Transfers.........................21
Section 6.3. Use of Names.....................................................22
Section 6.4. Litigation Relating to Transaction...............................22
Section 6.5. Operation Prior to Split-Off.....................................23
Section 6.6. Restrictions on Post-Split-Off Competitive Activities............23
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
Section 7.1. Provision of Corporate Records...................................23
Section 7.2. Access to Information............................................24
Section 7.3. Production of Witnesses..........................................24
Section 7.4. Retention of Records.............................................24
Section 7.5. Confidentiality..................................................24
ARTICLE VIII
EMPLOYEE MATTERS
Section 8.1. Employees........................................................25
Section 8.2. Employee Benefits................................................25
Section 8.3. Other Liabilities and Obligations................................27
Section 8.4. Preservation of Rights to Amend or Terminate Plans...............27
Section 8.5. Reimbursement; Indemnification...................................27
Section 8.6. Nonsolicitation of Employees.....................................27
Section 8.7. Actions By A&S...................................................28
ARTICLE IX
INSURANCE
Section 9.1. General..........................................................28
Section 9.2. Certain Insured Claims...........................................28
ARTICLE X
CONDITIONS; TERMINATION; AMENDMENTS; WAIVERS
Section 10.1. Conditions to Split-Off.........................................29
Section 10.2. Termination.....................................................29
Section 10.3. Amendments; Waivers.............................................30
ii
ARTICLE XI
MISCELLANEOUS
Section 11.1. Survival of Indemnities; Release.............................30
Section 11.2. Entire Agreement.............................................30
Section 11.3. Fees and Expenses............................................31
Section 11.4. Governing Law................................................31
Section 11.5. Notices......................................................31
Section 11.6. Successors and Assigns; No Third Party Beneficiaries.........32
Section 11.7. Counterparts.................................................33
Section 11.8. Interpretation...............................................33
Section 11.9. Schedules....................................................33
Section 11.10. Legal Enforceability.........................................33
Section 11.11. Consent to Jurisdiction......................................33
Section 11.12. Specific Performance.........................................34
iii
TRANSITION AGREEMENT
THIS TRANSITION AGREEMENT (this "Agreement"), dated as of April 30,
1999, by and among ESSEF CORPORATION, an Ohio corporation (the "Company"),
XXXXXXX & SYLVAN POOLS CORPORATION, an Ohio corporation and an indirect
wholly-owned subsidiary of the Company ("A&S") and PENTAIR, INC., a Minnesota
corporation ("Parent").
RECITALS
WHEREAS, the Board of Directors of the Company has determined to
implement certain of the transfers and other transactions contemplated in
connection with the Merger (as hereafter defined) and the Split-Off (as
hereafter defined);
WHEREAS, the Board of Directors of the Company has also determined
to cause the Split-Off of shares of A&S Common Stock (as hereafter defined)
to the holders as of the Effective Time (as hereafter defined) of the Company
Common Stock (as hereafter defined) and to the holders of certain Stock
Options (as hereafter defined) all as part of, and in conjunction with, the
Merger;
WHEREAS, the Company and A&S have determined that it is desirable to
set forth the principal corporate transactions required to effect such Merger
and Split-Off and to set forth certain other agreements that will govern
certain other matters prior to or following such Split-Off;
WHEREAS, the Company has entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), with Parent and
Northstar Acquisition Company, an Ohio corporation and a wholly-owned
subsidiary of Parent (the "Purchaser"), providing for the Merger (as
hereafter defined), as a result of which the Company, as the corporation
surviving the Merger, will become a wholly-owned subsidiary of Parent; and
WHEREAS, in order to induce the parties to enter into this Agreement
and in consideration of the Company's willingness to enter into the Merger
Agreement, the parties hereto and certain other parties are entering or will
enter into the Tax Sharing Agreement (as hereafter defined) providing for
certain ongoing relationships among the parties;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. GENERAL. For convenience and brevity, certain terms
used in various parts of this Agreement (including the Disclosure Schedule
hereto) are listed in alphabetical order and defined or referred to below
(such terms to be equally applicable to both singular and plural forms of the
terms defined or referred to):
(a) "ACTION" means any action, claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration tribunal.
(b) "ADJUSTMENT CALCULATION" shall have the meaning set forth in
Section 3.2(a) hereof.
(c) "AFFILIATE" of any specified person or entity means (x) any
director or officer of, or any person or entity that beneficially owns at
least 50% of the capital stock or other equity interests of, such specified
person or entity, or (y) any other person or entity directly or indirectly
controlling, controlled by, or under common control with, such specified
person or entity, at any time during the period for which the determination
of affiliation is being made; provided that the Company and the Retained
Subsidiaries, on the one hand, and A&S, on the other hand, shall not, after
giving effect to the Split-Off, be deemed to be Affiliates of each other for
purposes of this Agreement.
(d) "AGREEMENT" means this Transition Agreement, together with all
exhibits and schedules hereto, as the same may be amended from time to time
in accordance with the terms hereof.
(e) "ASSERTED LIABILITY" shall have the meaning set forth in Section
5.4(a) hereof.
(f) "A&S" shall have the meaning set forth in the preamble to this
Agreement.
(g) "A&S ACTION" shall have the meaning set forth in Section 5.6 hereof.
(h) "A&S ASSETS" means (i) the assets of A&S set forth on the A&S
Balance Sheet, as adjusted for transactions occurring in the ordinary course
of business in a manner consistent with past practice between December 31,
1998 and the Effective Time; (ii) the assets listed on Schedule 2.1(a) of the
Disclosure Schedule; and (iii) all right, title and interest, to the extent
held by the Company and its Subsidiaries immediately prior to the Split-Off,
with respect to each of the following items: (A) the A&S Names and A&S
Proprietary Name Rights (such terms, as defined in Section 6.3 hereof) and
(B) any Actions commenced by A&S the subject matter of which is otherwise an
A&S Asset or any Action which relates primarily to an A&S Asset (to the
extent such Actions constitute assets).
(i) "A&S BALANCE SHEET" means the unaudited consolidated balance of the
A&S Business as of December 31, 1998 set forth in Schedule 1.1(i) of the
Disclosure Schedule.
(j) "A&S BUSINESS" means each business and each former business which
is or was conducted by A&S as of the Effective Time or which is or was
included within the A&S Assets.
(k) "A&S COMMON STOCK" means the common stock, without par value, of
A&S.
(l) "A&S EMPLOYEES" means (i) those persons who are employed as
officers or employees of A&S or otherwise employed by A&S immediately prior
to, or effective as of, the Effective Time, (ii) any person employed at the
Company's corporate level prior to the Effective Time listed in, or added any
time prior to the Effective Time to, Schedule 1.1(l) of the Disclosure
Schedule who at the Effective
Time is to become an employee of A&S, and (iii) all former officers and
employees of A&S who, immediately prior to the termination of their
employment, were employed by A&S. In the event any person shall have been
employed by A&S, as well as by the Company or any of the Retained
Subsidiaries, such person shall be considered an A&S Employee if at the
Effective Time such person's primary employment shall be with A&S or the A&S
Business.
(m) "A&S 401(k) PLAN" shall have the meaning set forth in Section
8.2(a) hereof.
(n) "A&S INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 5.3(a) hereof.
(o) "A&S LIABILITIES" means (i) all of the Liabilities of A&S to third
parties and all Liabilities relating to or arising out of the A&S Assets or
the conduct of the A&S Business (in all cases, whether arising before or
after the Effective Time); (ii) the liabilities set forth in the A&S Balance
Sheet, as adjusted for transactions occurring in the ordinary course of
business in a manner consistent with past practice between December 31, 1998
and the Effective Time; (iii) the liabilities listed in Schedule 2.1(b) of
the Disclosure Schedule; (iv) any Actions commenced by A&S the subject matter
of which is otherwise an A&S Asset or any Action which relates primarily to
an A&S Asset (to the extent such Actions constitute Liabilities); (v) except
as otherwise provided in Article VIII hereof, the Liabilities of the Company
and its subsidiaries, including, without limitation, A&S, in respect of A&S
Employees (in all cases, whether arising before or after the Effective Time);
and (vi) all Liabilities relating to or arising out of the A&S Assets or the
conduct of the A&S Business (in all cases, whether arising before or after
the Effective Time) with respect to which the Company or any Retained
Subsidiary has agreed, prior to the Effective Time, to indemnify any third
party in any manner with respect thereto or has agreed to otherwise be, or is
otherwise, liable with respect thereto, except to the extent the Liability
relates to or arises out of any product purchased by A&S from the Company or
any Retained Subsidiary or is otherwise covered under any warranty provided
by the Company or any Retained Subsidiary with respect to such product.
(p) "A&S NAMES" shall have the meaning set forth in Section 6.3 hereof.
(q) "A&S NET ASSETS" means the total assets of A&S minus the total
liabilities of A&S as set forth in the Interim Balance Sheet (excluding any
indebtedness of A&S to the Company or any of its Subsidiaries other than any
liabilities to the Company or any of its Subsidiaries incurred in connection
with the purchase by A&S of swimming pool equipment).
(r) "A&S PROPRIETARY NAME RIGHTS" shall have the meaning set forth in
Section 6.3 hereof.
(s) "A&S SUBSEQUENT HIRE" shall have the meaning set forth in Section
8.6(b) hereof.
(t) "A&S TRANSFEREE" shall have the meaning set forth in Section 11.6
hereof.
(u) "A&S WELFARE PLANS" shall have the meaning set forth in Section
8.2(b) hereof.
(v) "CASUALTY PROGRAM" means collectively, the series of programs
pursuant to which various insurance carriers provide insurance coverage to
the Company and its Subsidiaries in respect of claims or occurrences relating
to workers' compensation liability, general liability, products liability,
automobile liability and employer's liability for all periods up to the
Effective Time.
(w) "CLAIM NOTICE" shall have the meaning set forth in Section 5.4(a)
hereof.
(x) "CLOSING" shall have the meaning set forth in the Merger Agreement.
(y) "CLOSING BALANCE SHEET" shall have the meaning set forth in Section
3.7 hereof.
(z) "CLOSING DATE" shall have the meaning set forth in the Merger
Agreement.
(aa) "COMPANY" shall have the meaning set forth in the preamble to this
Agreement.
(ab) "COMPANY COMMON STOCK" means the common stock of the Company,
without par value.
(ac) "COMPANY DIVIDEND" shall have the meaning set forth in Section 4.1
hereof.
(ad) "COMPANY NAMES" shall have the meaning set forth in Section 6.3
hereof.
(ae) "COMPANY PROPRIETARY NAME RIGHTS" shall have the meaning set forth
in Section 6.3 hereof.
(af) "COMPANY PROXY STATEMENT" means the proxy statement or information
statement prepared by the Company for distribution to the holders of the
Company's Common Stock in connection with the Merger and Split-Off.
(ag) "COMPANY SUBSEQUENT HIRE" shall have the meaning set forth in
Section 8.6(a) hereof.
(ah) "COMPANY WELFARE PLANS" shall have the meaning set forth in Section
8.2(b) hereof.
(ai) "CONFIDENTIALITY AGREEMENT" means the confidentiality agreement
dated as of October 21, 1998 between Parent and the Company.
(aj) "CONFIDENTIAL INFORMATION" shall have the meaning set forth in
Section 7.5 hereof.
(ak) "CONVEYANCE AND ASSUMPTION INSTRUMENT" means, collectively, the
various agreements, instruments and other documents to be entered into to
effect the transfer of assets and the assumption of liabilities set forth in
Article II hereof.
(al) "COURT ORDER" means any judgment, decree, injunction, order or
ruling of any Governmental Entity that is binding on any person or its
property under applicable Law.
(am) "CUT-OFF DATE" shall have the meaning set forth in Section 3.2(a)
hereof.
(an) "DISCLOSURE SCHEDULE" means the disclosure schedule dated as of
the date hereof and attached hereto. References to a particular schedule of
the Disclosure Schedule shall only refer or modify the specific Section of
this Agreement to which such Schedule relates (i.e., Schedule 2.1(b) of the
Disclosure Schedule shall refer to or modify only Section 2.1(b) of this
Agreement), unless otherwise expressly set forth herein.
(ao) "EFFECTIVE TIME" shall have the meaning set forth in the Merger
Agreement.
(ap) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
(aq) "EXCESS NET TAX BENEFIT" shall have the meaning set forth in
Section 4.1(a) hereof.
(ar) "FORM S-1" means the registration statement on Form S-1 to be
filed by A&S with the SEC to effect the registration of the A&S Common Stock
pursuant to the Securities Act.
(as) "GOVERNMENTAL ENTITY" means any United States or any foreign,
federal, state or local government, court, administrative agency or
commission or other governmental or regulatory body or authority.
(at) "INDEMNIFIABLE LOSSES" means, with respect to any claim by an
Indemnified Party for indemnification pursuant to Articles V, VI or VIII
hereof, any and all damages, losses, deficiencies, Liabilities, obligations,
penalties, judgments, settlements, claims, payments, fines, interest, costs
and expenses (including, without limitation, the costs and expenses of any
and all Actions, demands, assessments, judgments, settlements and compromises
relating thereto and the costs and expenses of attorneys', accountants',
consultants' and other professionals', and fees and expenses incurred in the
investigation or defense thereof or the enforcement of rights hereunder),
including direct and consequential damages, but excluding punitive damages
(other than punitive damages awarded to any third party against an
Indemnified Party) suffered by such Indemnified Party with respect to such
claim.
(au) "INDEMNIFIED PARTY" means any party which is seeking
indemnification from an Indemnifying Person pursuant to the provisions of
Articles V, VI or VIII hereof.
(av) "INDEMNIFYING PARTY" means any party hereto from which any
Indemnified Party is seeking indemnification pursuant to the provisions of
Articles V, VI or VIII hereof.
(aw) "INFORMATION" shall have the meaning set forth in Section 7.2
hereof.
(ax) "INTERCOMPANY AGREEMENTS" means any contracts or agreements
between A&S on the one hand, and the Company or any Retained Subsidiary on
the other hand.
(ay) "INTERIM BALANCE SHEET" shall have the meaning set forth in
Section 3.2(a) hereof.
(az) "LAW" means any statute, law, rule, regulation, ordinance, order,
decree or judgment of any Governmental Entity, including, without limitation,
those covering environmental, energy, safety, health, transportation,
telecommunications, recordkeeping, zoning, antidiscrimination, antitrust,
wage and hour, and price and wage control matters.
(ba) "LIABILITY" means, with respect to any party, except as otherwise
expressly provided herein, any direct or indirect liability (whether
absolute, accrued, contingent, reflected on a balance sheet (or in the notes
thereto) or otherwise, and whether known or unknown), indebtedness,
obligation, expense, claim, deficiency, guarantee or endorsement of or by any
person (including, without limitation, those arising under any Law or Action
or under any award of any court, tribunal or arbitrator of any kind, and
those arising under any contract, commitment or undertaking).
(bb) "MERGER" shall have the meaning set forth in the Merger Agreement.
(bc) "MERGER AGREEMENT" shall have the meaning set forth in the
recitals to this Agreement.
(bd) "NET ASSET INCREASE ADJUSTMENT" shall have the meaning set forth
in Section 3.2(b) hereof.
(be) "NOTICE PERIOD" shall have the meaning set forth in Section 5.4(a)
hereof.
(bf) "PARENT" shall have the meaning set forth in the preamble to this
Agreement.
(bg) "PARENT EMPLOYEE" shall have the meaning set forth in Section
8.6(a) hereof.
(bh) "PARENT INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 5.2(a) hereof.
(bi) "PERSON" or "PERSON" means and includes any individual,
partnership, joint venture, corporation, association, joint stock company,
trust, unincorporated organization or similar entity and any Governmental
Entity.
(bj) "PLAN" shall have the meaning set forth in Section 8.2(c) hereof.
(bk) "PURCHASER" shall have the meaning set forth in the recitals to
this Agreement.
(bl) "RETAINED ACTION" shall have the meaning set forth in Section 5.6
hereof.
(bm) "RETAINED BUSINESS" means all businesses of the Company and the
Retained Subsidiaries and all business included within the assets, or
obligated by the liabilities, of the Company and the Retained Subsidiaries
(each as described in the Company's Annual Report on Form 10-K for the year
ended September 30, 1998), as conducted by the Company and such Subsidiaries
as of the Effective Time and all former businesses of the Company and the
Retained Subsidiaries; provided that the term "RETAINED BUSINESS" shall not
include the A&S Business, the A&S Assets or the A&S Liabilities.
(bn) "RETAINED EMPLOYEES" shall mean all current and former officers
and employees of the Company and its Subsidiaries, other than the A&S
Employees.
(bo) "RETAINED SUBSIDIARIES" means all of the Subsidiaries of the
Company, other than A&S.
(bp) "SEC" means the U.S. Securities and Exchange Commission.
(bq) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(br) "SPLIT-OFF" means the issuance of the shares of A&S Common Stock
to holders of Company Common Stock and to holders of Stock Options in
connection with the Merger pursuant to the provisions of the Merger Agreement.
(bs) "SPLIT-OFF CONDITIONS" means each of the conditions set forth in
clauses (i) through (vi) of Section 10.1(a) hereof.
(bt) "STOCK OPTIONS" shall have the meaning set forth in the Merger
Agreement.
(bu) "SUBSIDIARY" or "SUBSIDIARY" of any party means (i) a corporation,
a majority of the voting or capital stock of which is as of the time in
question directly or indirectly owned by such party and (ii) any other
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or similar entity, in which such party, directly
or indirectly, owns a majority of the equity interest thereof or has the
power to elect or direct the election of a majority of the members of the
governing body of such entity or otherwise has control over such entity
(e.g., as the managing partner of a partnership).
(bv) "SUIT" shall have the meaning set forth in Section 11.11 hereof.
(bw) "TAX SHARING AGREEMENT" means the Tax Sharing Agreement, in the
form of Exhibit B to the Merger Agreement, pursuant to which the Parent, the
Company and A&S have provided for certain tax matters, including, without
limitation, indemnification, allocation of tax benefits and filing of tax
returns.
(bx) "TRANSITION SERVICES" shall have the meaning set forth in Section
4.3 hereof.
(by) "TRANSITION SERVICES PERIOD" shall have the meaning set forth in
Section 4.3 hereof.
(bz) "TRANSITION SERVICES INVOICE" shall have the meaning set forth in
Section 4.3 hereof.
(ca) "TRANSACTION SUIT" shall have the meaning set forth in Section 6.4
hereof.
Section 1.2. REFERENCES TO TIME. All references in this Agreement to
times of the day shall be to Eastern Standard Time.
ARTICLE II
THE RELATED TRANSACTIONS
Section 2.1. TRANSFER OF CERTAIN ASSETS AND LIABILITIES. Subject to
the terms and conditions of this Agreement, at the Effective Time,
(a) the Company shall transfer to A&S (and the Company shall cause
each of its subsidiaries to transfer to A&S) all of their right, title and
interest in and to the assets listed in Schedule 2.1(a) of the Disclosure
Schedule; and
(b) A&S shall assume and shall in due course pay, perform and
discharge (or shall cause to be assumed and cause in due course to be paid,
performed and discharged), the liabilities listed in Schedule 2.1(b) of the
Disclosure Schedule.
Section 2.2. METHODS OF TRANSFER AND ASSUMPTION. In connection
with the transfers of assets other than capital stock and the assumption of
any liabilities, the Company and A&S shall execute or cause to be executed by
the appropriate entities any necessary Conveyance and Assumption Instruments
in such forms as Parent, the Company and A&S shall reasonably agree.
Section 2.3. COMPANY APPROVAL OF CERTAIN A&S ACTIONS. Unless
otherwise provided in this Agreement, the Company shall cooperate with A&S in
effecting, and if so requested by A&S, the Company shall cause Pac-Fab, Inc.,
a wholly-owned subsidiary of the Company and the sole stockholder of A&S, to
ratify any actions that are reasonably necessary or desirable to be taken by
A&S to effectuate the transactions contemplated by this Agreement, in a
manner consistent with the terms of this Agreement, including, without
limitation, adopting, preparing and implementing appropriate plans,
agreements and arrangements for A&S Employees and A&S non-employee directors
(including, without limitation, employee benefit plans, agreements and
arrangements (with such changes thereto as the Board of Directors of the
Company may approve in its reasonable discretion prior to the Effective
Time)).
ARTICLE III
THE SPLIT-OFF
Section 3.1. COOPERATION AND ACTIONS PRIOR TO THE SPLIT-OFF. (a)
As promptly as practicable after the date hereof and prior to the Effective
Time:
(i) Subject to the provisions of paragraph (ii) below, the
Company shall prepare the Company Proxy Statement (which shall set
forth appropriate disclosure concerning A&S, the A&S Business, the
Merger, the Split-Off and certain other matters) and A&S shall file
with the SEC the Form S-1 (or such other form of registration statement
determined by the Company to be appropriate to effect the registration
of the A&S Common Stock). The Company and A&S shall use their
respective reasonable efforts to cause the Form S-1 to be declared
effective under the Securities Act, or if the Company shall determine
that the registration of the A&S Shares
may not be effected pursuant to a Form S-1, the Company and A&S
shall use best efforts to cause the A&S Common Stock to be
registered pursuant to the registration statement or form determined
to be appropriate to effect such registration. As promptly as
practicable following the effectiveness of the Form S-1 (or other
registration statement, as the case may be), the Company shall mail
the Company Proxy Statement to the holders of the Company Common
Stock.
(ii) The Company shall promptly provide to Parent copies of
all filings made with the Commission in connection with the Split-Off,
including, without limitation, the Form S-1 (or any registration
statement referred to in Section 3.1(a) above) and any amendments
thereto, all comments made by the Commission with respect to such
filings and all Company responses to such Commission comments. Prior to
making such filings with the Commission or entering into any other
agreement with A&S other than this Agreement, the Company shall consult
with Parent with respect to such filings and other agreements and
provide Parent with a reasonable opportunity to comment on such filings
and other agreements.
(iii) The Company and A&S shall cooperate in preparing, filing
with the SEC and causing to become effective any registration
statements or amendments thereto which are appropriate to reflect the
establishment of, or amendments to, any employee benefit and other
plans contemplated by this Agreement.
(iv) The Company and A&S shall take all such action as may be
necessary or appropriate under state securities or "Blue Sky" Laws in
connection with the transactions contemplated by this Agreement.
(v) The Company and A&S shall prepare, and A&S shall file and
seek to make effective, an application to permit listing of the A&S
Common Stock either on a national securities exchange or national
market system as may be selected by A&S in its sole discretion (to the
extent permitted pursuant to the listing requirements of such exchange
or national market system).
(vi) In addition to the actions specifically provided for
elsewhere in this Agreement and except as otherwise expressly set forth
in this Agreement, each of the parties hereto shall use its respective
best efforts to take, or cause to be taken, all actions, and, to
execute and deliver, or cause to be executed and delivered, such
additional documents and instruments, and to do, or cause to be done,
all things, reasonably necessary, proper or advisable under applicable
Laws and agreements to consummate and make effective the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing sentence, each of the parties hereto shall use its respective
best efforts to ensure that the conditions set forth in Article X
hereof are satisfied (insofar as such matters are within the control of
such party). Notwithstanding any other provisions set forth in this
Agreement, neither the Company, nor A&S nor any of their respective
Affiliates shall, without first obtaining the prior written consent of
the Parent, take or commit to take any action, in connection with
obtaining any consent, waiver or approval or effecting any of the
transactions contemplated in connection with the Split-Off or
otherwise, (i)
except as otherwise expressly provided in this Agreement, that would
result in the payment of any funds (other than normal and usual
filing fees) or the incurrence of any liability by the Company or
any Retained Subsidiary, (ii) that would result in the divestiture
or holding separate of any assets, businesses or operations of the
Company or any of the Retained Subsidiaries, (iii) that might
materially limit or impair Parent's or the Company's or any Retained
Subsidiary's freedom of action with respect to, or its ability to
retain or exercise control over, any assets, businesses or
operations of the Company or any Retained Subsidiaries (other than
any limitations or restrictions expressly set forth in the Merger
Agreement, the Tax Sharing Agreement or any other agreement to be
entered into pursuant to this Agreement or the Merger Agreement), or
(iv) that might otherwise adversely affect Parent.
(b) Prior to the Effective Time, the Company and A&S may elect to
form a holding company for the ownership of the A&S Common Stock. In such
event, (i) the Company shall transfer the shares of A&S Common Stock to the
holding company and shares of common stock of the holding company will be
issued in substitution of the A&S Common Shares in the Split-Off and (ii) the
benefits and obligations from the transactions contemplated by this
Transition Agreement shall inure to and be binding upon the holding company;
provided that A&S shall not be released from its obligations hereunder.
Section 3.2. NET ASSET ADJUSTMENT.
(a) A&S, in consultation with Parent and the Company, shall prepare
and deliver to Parent within 15 days prior to the Closing Date and no later
than July 31, 1999, a balance sheet ("Interim Balance Sheet") of A&S as of
June 30, 1999 ("Cut-Off Date"), together with a calculation of the amount of
any adjustment determined under Section 3.2(b) (the "Adjustment
Calculation"). A&S shall prepare the Interim Balance Sheet in accordance with
generally accepted accounting principles applied on a consistent basis with
the accounting principles applied by A&S in preparation of its year-end 1998
financial statements. Representatives of Parent's accountants shall be
entitled to review, following execution of mutually agreed upon
confidentiality agreements, the work papers, schedules, memoranda and other
documents used in the preparation by A&S of the Interim Balance Sheet and the
Adjustment Calculation.
(b) If the value of the A&S Net Assets, as determined in the
Interim Balance Sheet, shall be greater than $40,836,000, the Company
Dividend (as defined in Section 4.1 below) shall be increased by an amount
equal to the difference between such amounts ("Net Asset Increase
Adjustment"). In addition, if Parent, based on its representatives' review of
the Interim Balance Sheet and Adjustment Calculation, determines that A&S's
payment of accounts payable was not conducted in compliance with Section 6.5
such that the value of A&S Net Assets (determined assuming compliance with
Section 6.5) differs from the value of A&S Net Assets as reflected in the
Interim Balance Sheet, then the parties shall mutually agree upon an
equitable adjustment to the calculation of the value of A&S Net Assets for
purposes of this Section 3.2(b).
Section 3.3. ACTIONS OF A&S PRIOR TO THE CUT-OFF DATE. By the
Cut-Off Date or as soon as practicable thereafter, A&S shall have obtained
financing upon terms and in such amount reasonably acceptable to A&S to allow
A&S to carryout the transactions contemplated by this Agreement, including
the payment of the Company Dividend prior to the Closing Date (as provided in
Section 4.1 below), and to conduct its business in the ordinary course after
the Cut-Off Date. In connection with A&S's obligation to obtain the financing
described in the preceding sentence and in particular financing between the
Cut-Off Date and the Closing Date, the Company agrees to take such action,
including issuing an interim guaranty for such financing, as is necessary to
enable A&S to obtain such financing on terms and a rate substantially similar
to financing then available to the Company for the period ending on the
Closing Date, with the understanding that any such interim guaranty would
expire at Closing.
Section 3.4. POST-CUT-OFF DATE OPERATIONS OF A&S. Effective as of
the Cut-Off Date, A&S shall operate its business as a stand alone entity (i)
entitled to all income realized after the Cut-Off Date and (ii) as provided
in the Tax Sharing Agreement, responsible for all taxes on income realized
from the activities or operations of A&S after the Cut-Off Date and entitled
to any tax benefits attributable to any losses or other tax attributes
resulting from the activities or operations of A&S after the Cut-Off Date.
Section 3.5. THE SPLIT-OFF. The Split-Off shall be effected
pursuant to the provisions of Article III of the Merger Agreement; provided,
however that such Split-Off shall be conditioned on the satisfaction (or
waiver, to the extent expressly permitted by the provisions of Section 10.1
hereof) of each of the Split-Off Conditions. All shares of A&S Common Stock
issued in the Split-Off shall be duly authorized, validly issued, fully paid,
non-assessable and free of preemptive rights.
Section 3.6. TERMINATION OF CERTAIN CLAIMS. Following the
Effective Time, A&S shall have no claims against the Company, any Retained
Subsidiary or any Affiliate of either based on any breach by the Company, any
Retained Subsidiary or any of their respective Affiliates of any obligations
under this Agreement that occurred on or prior to the Effective Time, all of
such claims being hereby irrevocably waived and terminated as of the
Effective Time; provided that the foregoing shall not limit the Company's
liability for any breach by the Company or any Retained Subsidiary of any of
their respective obligations under this Agreement that occurs following the
Effective Time.
Section 3.7. POST-CLOSING PROCEDURES. After the Closing, Parent
shall have the right to cause its independent auditors to conduct, at its
sole expense, a roll-back audit of A&S's year-end audited financial
statements to determine the accuracy of the balance sheet of A&S as of the
Closing Date (the "Closing Balance Sheet"). Such audit will be conducted in
accordance with procedures to be mutually agreed upon by the auditors of A&S
and Parent to verify the appropriateness at, or as of the Cut-Off Date, of
(i) the classification of assets and non-interest bearing liabilities between
A&S and the Company, (ii) the application of funds by A&S prior to the
Cut-Off Date, or (iii) tax allocations and other accruals. In conducting such
activities, Parent shall be given the opportunity to discuss A&S's year-end
audit with A&S's auditors and review work papers prepared by A&S's auditors
in connection with the preparation of A&S's year-end audited financial
statements. If Parent's independent auditors determine that inaccuracies
existed in the Closing Balance Sheet, then adjustments shall be made to the
calculations, allocations and payments made in connection with the
transactions contemplated by this Agreement. If Parent and A&S fail to agree
on the resolution of any of the matters in this Section 3.7, then such matter
shall be referred to the Accountant (as defined in Section 1(b) of the Tax
Sharing Agreement) for a binding determination. Parent and A&S shall deliver
to the Accountant copies of any schedules or documentation that may be
reasonably required by the Accountant to make its determination. Parent and
A&S shall be entitled to make presentations to the Accountant in connection
therewith. Parent and A&S shall use all reasonable efforts to cause the
Accountant to promptly complete such determination.
ARTICLE IV
INTERCOMPANY TRANSACTIONS AND RELATIONSHIPS
Section 4.1. CASH DIVIDEND.
(a) DECLARATION; AMOUNT. After June 30, 1999 and prior to the
Effective Time, A&S shall declare a cash dividend (the "Company Dividend")
payable to the Company in an amount equal to $17,000,000 plus any Net Asset
Increase Adjustment (as determined pursuant to Section 3.2(b)) and minus the
amount by which the Net Tax Benefit (as defined in Section 4(b) of the Tax
Sharing Agreement) exceeds $4,200,000 (such excess to be referred to herein
as the "Excess Net Tax Benefit").
(b) DISTRIBUTION.
(i) Immediately prior to the Effective Time, A&S shall
distribute the Company Dividend in the following manner: (1) by
distributing an amount (the "Initial Distribution") calculated in
accordance with the formula described in Section 4.1(a), and, for
purposes of that calculation, by computing an estimated Excess Net
Tax Benefit using as the value of the A&S Common Stock the
Pre-Closing A&S Trading Value (as defined in Section 4.1(d)(i)
below) two (2) days prior to the Closing Date; (2) by making the
distribution referred in clause (1) above subject to an obligation
by the Company to return to A&S such part of the Initial
Distribution as may exceed an amount equal to the Company Dividend
as computed using the Closing A&S Trading Value (as defined in
Section 4.1(d)(ii) below); and (3) by distributing to the Company a
right to receive an additional distribution from A&S, as soon as
possible after the Closing Date, to the extent that the Company
Dividend computed using the Closing A&S Trading Value, exceeds the
amount of the Initial Distribution.
(ii) Pursuant to the obligation referred to in Section
4.1(b)(i)(2) above or the right referred to in Section 4.1(b)(i)(3)
above, as the case may be, the Company shall return to A&S a portion
of the Initial Distribution, or A&S shall make an additional
distribution to the Company, such that the Initial Distribution as
adjusted by this paragraph equals the amount of the Company Dividend
computed using the Closing A&S Trading Value. Such amount shall be
paid under this Section 4.1 as soon as practicable following the
Closing Date.
(c) EFFECT. Upon payment of the Initial Distribution, any
remaining intercompany liabilities of A&S other than liabilities incurred in
connection with the purchase of swimming pool equipment from the Company and
its Subsidiaries shall be converted, and classified as a contribution, to the
capital of A&S and thereafter, A&S shall have no further obligation with
regard to such liabilities.
(d) DEFINITIONS. As used in this Section 4.1, the capitalized
terms used herein and not otherwise defined have the following meanings:
(i) "PRE-CLOSING A&S TRADING VALUE" shall mean the excess of
the high and low trading prices of Company Common Stock over $19.09.
(ii) "CLOSING A&S TRADING VALUE" shall mean the value
determined pursuant to the provisions of Section 5 of the Tax
Sharing Agreement.
Section 4.2. INTERCOMPANY ACCOUNTS. Following the date hereof, (i)
no transactions related to intercompany receivables, payables, loans, cash
overdrafts and other accounts in existence as of the date of this Agreement
between A&S, on the one hand, and the Company or any Retained Subsidiary, on
the other hand, shall be entered into except in the ordinary course of
business and in a manner consistent with past practice, and (ii) except with
the prior written consent of the Parent or for Intercompany Agreements which
are on their terms and conditions entered into in the ordinary course of
business and in a manner consistent with past practices, neither the Company,
any Retained Subsidiary or A&S shall enter into any Intercompany Agreement
following the date hereof and prior to the Effective Time.
Section 4.3. TRANSITION SERVICES.
(a) Following the Effective Time and ending on the one (1) year
anniversary of the Effective Time (such period, the "Transition Services
Period"), the Company shall provide, or make available, to A&S, at such times
and in such amounts as may be reasonably requested by A&S, the following
services (the "Transition Services") and A&S will pay for such Transition
Services on a cost basis as agreed to by the parties:
(i) tax preparation and filing services, including the
services of Xxxxxx Xxxxxxxx, the Company's current Director of
Taxes; provided such director is employed by the Parent at the time
such services are requested by A&S;
(ii) legal services, to be provided by the Company's general
counsel, Xxxxx Xxxxxxx; provided such counsel is employed by the
Parent or the Company at the time such services are requested by A&S;
(iii) information and technology support services of the
types set forth in Schedule 4.3 of the Disclosure Schedule; and
(iv) such other additional services as may be reasonably
requested by A&S; provided that the scope of any services, as well
as the time and the manner in which such services are to be
provided, shall be mutually agreeable between the parties.
Following the end of the calendar month in which any such Transition
Services are performed, the Company shall provide to A&S an invoice (the
"Transition Services Invoice") setting forth in summary detail the Transition
Services which were provided during such calendar month and the appropriate
cost thereof. A&S shall pay to the Company in immediately available funds, in
a reasonably prompt manner following the delivery by the Company of a
Transition Services Invoice, the amounts due with respect to the Transition
Services reflected on such Transition Services Invoice. Notwithstanding
anything herein to the contrary, neither Parent nor the Company shall have
any liability whatsoever to A&S or A&S's Affiliates or any third party for
any loss, liability, damage, cost or deficiency suffered by any such person
resulting from, caused by or arising out of the Company's performance of the
Transition Services.
(b) In addition to the Transition Services to be provided by the
Company, for a period of two (2) months following the Effective Time A&S
shall be entitled to occupy and use without charge such office space at 000
Xxxx Xxxxx, Xxxxxxx, Xxxx 00000 reasonably designated by A&S to be necessary
to enable A&S to continue to run its current operations at such location.
ARTICLE V
SURVIVAL AND INDEMNIFICATION
Section 5.1. SURVIVAL OF AGREEMENTS. The obligations under this
Article V of A&S, on the one hand, and the Company and the Retained
Subsidiaries, on the other hand, shall survive the sale or other transfer by
it of any assets or businesses or the assignment by it of any Liabilities. To
the extent that A&S transfers directly or indirectly to any other person all
or substantially all of the A&S Assets or the A&S Business, A&S will cause
the transferee of such A&S Assets or A&S Business to assume specifically its
obligations under this Agreement with respect thereto and will cause such
transferee to fulfill its obligations related to the A&S Liabilities. Such
assumption will not relieve A&S of its obligations in respect thereof. To the
extent that the Company or any of the Retained Subsidiaries transfers
directly or indirectly to any other person all or substantially all of the
Retained Business, the Company will cause the transferee of such Retained
Business to assume specifically its obligations under this Agreement with
respect thereto and will cause such transferee to fulfill its obligations
related to the Retained Liabilities. Such assumption will not relieve the
Company of its obligations in respect thereof. A&S, on the one hand, and the
Company, on the other hand, agree that such transferee may exercise all of
A&S's or the Company's rights hereunder, as the case may be, with respect to
such Assets or businesses.
Section 5.2. INDEMNIFICATION BY A&S.
(a) In addition to any indemnification required by Articles VI and
VIII hereof, subject to the terms and conditions set forth in this Agreement,
from and after the Effective Time, A&S shall indemnify, defend and hold
harmless the Company, each Retained Subsidiary, the Purchaser and Parent and
each of their respective directors, officers, employees, representatives,
advisors, agents and Affiliates (collectively, the "Parent Indemnified
Parties") from, against and in respect of any and all Indemnifiable Losses of
the Parent Indemnified Parties arising out of, relating to or resulting from,
directly or indirectly, (i) any misrepresentation or breach of any warranty
in this Agreement made by A&S or, on or prior to the Effective Time, made by
the Company, (ii) any breach of any agreement or covenant under this
Agreement by A&S or, on or prior to the Effective Time, by the Company, (iii)
any and all A&S Liabilities, (iv) the conduct of the A&S Business or any part
thereof on or following the Effective Time, (v) any transfer of A&S Assets
to, or assumption of A&S Liabilities by, A&S in accordance with this
Agreement or otherwise in connection with the Split-Off (other than any costs
and expenses which have been expressly assumed by the Company pursuant to the
provisions of this Agreement), (vi) any Indemnifiable Loss resulting from any
claims that any statements or omissions relating to or describing, directly
or indirectly, A&S, the A&S Business, any A&S Asset or any A&S Liability, and
which occur on or prior to the Effective Time in the Company Proxy Statement
or the Form S-1 (in each case other than with respect to any statements or
omissions made in reliance upon and in conformity with information furnished
in writing by Parent, the Purchaser or their Affiliates, representatives or
advisors and other than any statements or omissions which relate solely to
the Merger Agreement and this Agreement and the transactions contemplated
thereby and hereby), which are false or misleading with respect to any
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, (vii) any
Indemnifiable Loss arising out of or relating to Transaction Suits resulting
from, directly or indirectly, (a) any statement or omission on the part of
A&S or any of their Affiliates in the documents referred to in Section
5.2(a)(vi) above, (b) the A&S Business, A&S Assets and A&S Liabilities or (c)
any holder of Company Common Stock exercising appraisal rights under the Ohio
General Corporation Law with respect to the value of the Split-Off
Consideration (as defined in the Merger Agreement) and (viii) any
Indemnifiable Loss resulting from actions the Company or Pac-Fab, Inc. take
pursuant to Section 2.3 hereof.
(b) Notwithstanding A&S's obligations to indemnify Parent
Indemnified Parties pursuant to Section 5.2(a) hereof, A&S shall be obligated
to indemnify the Parent Indemnified Parties only for those Indemnifiable
Losses under clause (i) of Section 5.2(a) hereof as to which the Parent
Indemnified Parties have given A&S written notice thereof on or prior to the
third anniversary of the Effective Time and under clause (vi) of Section
5.2(a) hereof as to which the Parent Indemnified Parties have given A&S
written notice thereof on or prior to the expiration of any applicable
statute of limitations period (it being understood that there shall be no
corresponding time limitation with respect to any Indemnifiable Losses
arising under clauses (ii), (iii), (iv), (v), (vii) or (viii) of Section
5.2(a) hereof). Notwithstanding the foregoing, if on or before the expiration
of such indemnification period any Parent Indemnified Party has given notice
to A&S pursuant to Section 5.4 hereof of any matter which would be the basis
for a claim of indemnification by such Parent Indemnified Party pursuant to
Section 5.2(a),
such Parent Indemnified Party shall have the right after the expiration of
such indemnification period to assert or to continue to assert such claim and
to be indemnified with respect thereto.
Section 5.3. INDEMNIFICATION BY THE COMPANY.
(a) In addition to any indemnification required by Articles VI and
VIII hereof, subject to the terms and conditions set forth in this Agreement,
from and after the Effective Time, the Company shall indemnify, defend and
hold harmless A&S and each of their respective directors, officers,
employees, representatives, advisors, agents and Affiliates (collectively,
the "A&S Indemnified Parties") from, against and in respect of any and all
Indemnifiable Losses of the A&S Indemnified Parties arising out of, relating
to or resulting from, directly or indirectly, (i) any breach of any agreement
or covenant under this Agreement by Parent or Purchaser or, following the
Effective Time, by the Company, (ii) the conduct of the Retained Business or
any part thereof on, prior to or following the Effective Time, and (iii) any
Indemnifiable Loss resulting from any claims that any statements or omissions
relating to or describing, directly or indirectly, Parent or the Purchaser,
and which occur on or prior to the Effective Time in the Company Proxy
Statement or the Form S-1 (in each case only to the extent of any statements
or omissions made in reliance upon and in conformity with information
furnished in writing by Parent, the Purchaser or their Affiliates,
representatives or advisors), which are false or misleading with respect to
any material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing and anything to the contrary in this Agreement or any other
agreement to be entered into pursuant to this Agreement, the Company shall
not be required to indemnify, defend and hold harmless any A&S Indemnified
Party from and against any Indemnifiable Loss resulting from any claims that
the statements included in the Company Proxy Statement and the Form S-1 (in
each case other than statements or omissions made in reliance upon and in
conformity with information furnished in writing by Parent, the Purchaser or
their Affiliates, representatives or advisors expressly for use therein) are
false or misleading with respect to any material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) Notwithstanding the Company's obligations to indemnify the A&S
Indemnified Parties pursuant to Section 5.3(a) hereof, the Company shall be
obligated to indemnify the A&S Indemnified Parties only for those
Indemnifiable Losses under clause (iii) of Section 5.3(a) hereof as to which
the A&S Indemnified Parties have given the Company written notice thereof on
or prior to the expiration of any applicable statute of limitations period
(it being understood that there shall be no corresponding time limitation
with respect to any Indemnifiable Losses arising under clause (i) or (ii) of
Section 5.3(a) hereof). Notwithstanding the foregoing, if on or before the
expiration of such indemnification period any A&S Indemnified Party has given
notice to the Company pursuant to Section 5.4 hereof of any matter which
would be the basis for a claim of indemnification by such A&S Indemnified
Party pursuant to Section 5.3(a), such A&S Indemnified Party shall have the
right after the expiration of such indemnification period to assert or to
continue to assert such claim and to be indemnified with respect thereto.
Section 5.4. PROCEDURE FOR INDEMNIFICATION. All claims for
indemnification under this Article V shall be asserted and resolved as
follows:
(a) In the event that any claim or demand, or other circumstance or
state of facts which could give rise to any claim or demand, for which an
Indemnifying Party may be liable to an Indemnified Party hereunder is
asserted against or sought to be collected by a third party (an "Asserted
Liability"), the Indemnified Party shall promptly notify the Indemnifying
Party in writing of such Asserted Liability, specifying the nature of such
Asserted Liability and the amount or the estimated amount thereof to the
extent then feasible (which estimate shall not be conclusive of the final
amount of such claim or demand) (the "Claim Notice"); provided that no delay
on the part of the Indemnified Party in giving any such Claim Notice shall
relieve the Indemnifying Party of any indemnification obligation hereunder
unless (and then solely to the extent that) the Indemnifying Party is
materially prejudiced by such delay. The Indemnifying Party shall have twenty
(20) days (or less if the nature of the Asserted Liability requires) from its
receipt of the Claim Notice (the "Notice Period") to notify the Indemnified
Party whether or not the Indemnifying Party desires, at the Indemnifying
Party's sole cost and expense and by counsel of its own choosing, which shall
be reasonably satisfactory to the Indemnified Party, to defend against such
Asserted Liability; provided that if, under applicable standards of
professional conduct a conflict on any significant issue between the
Indemnifying Party and any Indemnified Party exists in respect of such
Asserted Liability, then the Indemnifying Party shall reimburse the
Indemnified Party for the reasonable fees and expenses of one additional
counsel to be retained in order to resolve such conflict, promptly upon
presentation by the Indemnified Party of invoices or other documentation
evidencing such amounts to be reimbursed. If the Indemnifying Party
undertakes to defend against such Asserted Liability, the Indemnifying Party
shall control the investigation, defense and settlement thereof; provided
that (i) the Indemnifying Party shall use its reasonable efforts to defend
and protect the interests of the Indemnified Party with respect to such
Asserted Liability, (ii) the Indemnified Party, prior to or during the period
in which the Indemnifying Party assumes control of such matter, may take such
reasonable actions as the Indemnified Party deems necessary to preserve any
and all rights with respect to such matter, without such actions being
construed as a waiver of the Indemnified Party's rights to defense and
indemnification pursuant to this Agreement, and (iii) the Indemnifying Party
shall not, without the prior written consent of the Indemnified Party,
consent to any settlement which (A) imposes any Liabilities on the
Indemnified Party (other than those Liabilities which the Indemnifying Party
agrees to promptly pay or discharge), and (B) with respect to any
non-monetary provision of such settlement, would be likely, in the
Indemnified Party's reasonable judgment, to have an adverse effect on the
business operations, assets, properties or prospects of Parent, the Company
or the Retained Business (in the case of a Parent Indemnified Party), A&S or
the A&S Business (in the case of an A&S Indemnified Party), or such
Indemnified Party. Notwithstanding the foregoing, the Indemnified Party shall
have the right to control, pay or settle any Asserted Liability which the
Indemnifying Party shall have undertaken to defend so long as the Indemnified
Party shall also waive any right to indemnification therefor by the
Indemnifying Party. If the Indemnifying Party undertakes to defend against
such Asserted Liability, the Indemnified Party shall cooperate fully with the
Indemnifying Party and its counsel in the investigation, defense and
settlement thereof. If the Indemnified Party desires to participate in any
such defense it may do so at its sole cost and expense. If the Indemnifying
Party does not undertake within the Notice Period to defend against such
Asserted Liability, then the Indemnifying Party shall have the right to
participate
in any such defense at its sole cost and expense, but the Indemnified Party
shall control the investigation, defense and settlement thereof (provided
that the Indemnified Party may not settle any such Asserted Liability without
obtaining the prior written consent of the Indemnifying Party (which consent
shall not be unreasonably withheld by the Indemnifying Party; provided that
in the event that the Indemnifying Party is in material breach at such time
of the provisions of this Section 5.4, then the Indemnified Party shall not
be obligated to obtain such prior written consent of the Indemnifying Party)
at the reasonable cost and expense of the Indemnifying Party (which shall be
paid by the Indemnifying Party promptly upon presentation by the Indemnified
Party of invoices or other documentation evidencing the amounts to be
indemnified). The Indemnified Party and the Indemnifying Party agree to make
available to each other, their counsel and other representatives, all
information and documents available to them which relate to such claim or
demand (subject to the confidentiality provisions of Section 7.5 hereof);
provided that no party hereto shall be obligated to disclose any information
which would result in the waiver of any attorney-client, attorney work
product or other similar privileges, if the disclosure of such information
would be materially prejudicial to such disclosing party. The Indemnified
Party and the Indemnifying Party and the Company and its employees also agree
to render to each other such assistance and cooperation as may reasonably be
required to ensure the proper and adequate defense of such claim or demand.
(b) In the event that an Indemnified Party should have a claim
against the Indemnifying Party hereunder which does not involve a claim or
demand being asserted against or sought to be collected from it by a third
party, the Indemnified Party shall send a Claim Notice with respect to such
claim to the Indemnifying Party. The Indemnifying Party shall have twenty
(20) days from the date such Claim Notice is delivered during which to notify
the Indemnified Party in writing of any good faith objections it has to the
Indemnified Party's Claim Notice or claims for indemnification, setting forth
in reasonable detail each of the Indemnifying Party's objections thereto. If
the Indemnifying Party does not deliver such written notice of objection
within such 20-day period, the Indemnifying Party shall be deemed to have
accepted responsibility for the prompt payment of the Indemnified Party's
claims for indemnification, and shall have no further right to contest the
validity of such indemnification claims. If the Indemnifying Party does
deliver such written notice of objection within such 20-day period, the
Indemnifying Party and the Indemnified Party shall attempt in good faith to
resolve any such dispute within thirty (30) days of the delivery by the
Indemnifying Party of such written notice of objection. If the Indemnifying
Party and the Indemnified Party are unable to resolve any such dispute within
such 30-day period, then either the Indemnifying Party or the Indemnified
Party shall be free to pursue any remedies which may be available to such
party under applicable Law.
Section 5.5. MISCELLANEOUS INDEMNIFICATION PROVISIONS.
(a) The Indemnifying Party agrees to indemnify any successors of
the Indemnified Party to the same extent and in the same manner and on the
same terms and conditions as the Indemnified Party is indemnified by the
Indemnifying Party under this Article V. In the event that any claim for
indemnification under either Articles V, VI or VIII hereof meets the criteria
of more than one of the types of claims for which indemnification is provided
for under such provisions, the Indemnified Party, in its sole discretion,
shall classify such claim and only be required to include such claim, and the
recoveries for indemnification therefrom, in one of such categories. No
investigation made by any party hereto shall affect any representation or
warranty of the other parties hereto contained in this Agreement, the
Disclosure Schedule or any certificate, document or other instrument
delivered in connection herewith. The consummation by Parent of the Merger
pursuant to the terms and conditions of the Merger Agreement, either with or
without knowledge of a breach of warranty or covenant or misrepresentation by
any party hereto, shall not constitute a waiver of any claim by any Parent
Indemnified Party for Indemnifiable Losses with respect to such breach or
misrepresentation. In determining the amount of Indemnifiable Losses to which
a Parent Indemnified Party or A&S Indemnified Party (as the case may be) is
entitled to indemnification hereunder, an arbitration panel, court or
tribunal may take into consideration, where appropriate and without
duplication, any diminution in the aggregate value of the Retained Business
or the A&S Business (as the case may be). Notwithstanding anything to the
contrary contained in this Agreement, the assignment of any party's rights
hereunder to any other person or entity shall not limit, affect or prejudice
the ability of the assigning party to continue to enforce any rights of
indemnification hereunder or other rights hereunder in accordance with the
terms and conditions of this Agreement.
(b) In determining the amount of any indemnity payable under this
Article V, such amount shall be reduced by (x) any related tax benefits if
and when actually realized or received (but only after taking into account
any tax benefits (including, without limitation, any net operating losses or
other deductions) to which the Indemnified Party would be entitled without
regard to such item), except to the extent such recovery has already been
taken into account in determining the amount of any indemnity payable under
Articles V, VI or VIII hereof, and (y) any insurance recovery if and when
actually realized or received, in each case in respect of such Asserted
Liability. Any such recovery shall be promptly repaid by the Indemnified
Party to the Indemnifying Party following the time at which such recovery is
realized or received pursuant to the previous sentence, minus all reasonably
allocable costs, charges and expenses incurred by the Indemnified Party in
obtaining such recovery. Notwithstanding the foregoing, if (x) the amount of
Indemnifiable Losses for which the Indemnifying Party is obligated to
indemnify the Indemnified Party is reduced by any tax benefit or insurance
recovery in accordance with the provisions of the previous sentence, and (y)
the Indemnified Party subsequently is required to repay the amount of any
such tax benefit or insurance recovery or such tax benefit or insurance
recovery is disallowed, then the obligation of the Indemnifying Party to
indemnify with respect to such amounts shall be reinstated immediately and
such amounts shall be paid promptly to the Indemnified Party in accordance
with the provisions of this Agreement.
(c) In the event that a dispute between any Indemnifying Party and
any Indemnified Party concerning the existence of a right or obligation to
indemnity under this Agreement is determined by
any arbitration panel or any court or tribunal, the reasonable fees and
expenses of the attorneys for the party which is principally prevailing in
such action shall be paid by the party which is not principally prevailing in
such action.
(d) All amounts owing under this Article V shall bear interest at a
fluctuating rate of interest equal to the rate of interest from time to time
announced by KeyBank, N.A. in Cleveland, Ohio as its prime lending rate,
computed from the time such damage, cost or expense was incurred or suffered
to the date of payment therefor.
(e) The remedies provided by this Article V shall be the parties'
sole and exclusive remedies for the recovery of any Indemnifiable Losses
resulting from, arising out of or related to misrepresentations, breaches of
warranties, and non-fulfillment of obligations under this Agreement, except
those arising from, arising out of or related to fraud; provided that the
provisions of this Section 5.5(e) shall not limit the ability of any party to
seek injunctive or similar relief pursuant to Section 11.12 hereof.
Section 5.6. PENDING LITIGATION. Following the Effective Time, (a)
A&S shall have exclusive authority and control over the investigation,
prosecution, defense and appeal of all pending Actions relating primarily to
the A&S Business, the A&S Assets or the A&S Liabilities (each, an "A&S
Action"), and may settle or compromise, or consent to the entry of any
judgment with respect to, any such Action without the consent of the Company,
and (b) the Company shall have exclusive authority and control over the
investigation, prosecution, defense and appeal of all pending Actions
relating primarily to the Retained Business (each, a "Retained Action"), and
may settle or compromise, or consent to the entry of any judgment with
respect to, any such Action without the consent of A&S; provided that if both
the Company and A&S are named as parties to any A&S Action or Retained
Action, neither the Company nor A&S (nor any of their respective
Subsidiaries) may settle or compromise, or consent to the entry of any
judgment with respect to, any such Action without the prior written consent
of the other party (which consent may not be unreasonably withheld) if such
settlement, compromise or consent to such judgment includes any form of
injunctive relief binding upon such other party. A&S shall indemnify, defend
and hold harmless each of the Parent Indemnified Parties, and the Company
shall indemnify and hold harmless each of the A&S Indemnified Parties, in the
manner provided in this Article V, from and against all Indemnifiable Losses
arising out of or resulting from each such Action over which such
Indemnifying Party has authority and control pursuant to this Section 5.6.
Section 5.7. CONSTRUCTION OF AGREEMENTS. Notwithstanding any other
provision in this Agreement to the contrary, in the event and to the extent
that there shall be a conflict between the provisions of this Article V and
the provisions of any other part of this Agreement or any exhibit or schedule
hereto, the provisions of this Article V shall control, and in the event and
to the extent that there shall be a conflict between the provisions of this
Agreement (including, without limitation, the provisions of this Article V)
and the provisions of the Tax Sharing Agreement, the provisions of the Tax
Sharing Agreement shall control.
ARTICLE VI
CERTAIN ADDITIONAL MATTERS
Section 6.1. REPRESENTATIONS OR WARRANTIES; DISCLAIMERS.
(a) It is the explicit intent of each party hereto that no party to
this Agreement or to the Merger Agreement is making any representation or
warranty whatsoever, express or implied, in this Agreement or in any other
agreement contemplated hereby, except those representations and warranties
expressly set forth in this Agreement. Each of the parties hereto agrees, to
the fullest extent permitted by Law, that none of them nor any of their
Affiliates, agents or representatives shall have any liability or
responsibility whatsoever to any such other party hereto or such other
party's Affiliates, agents or representatives on any basis (including,
without limitation, in contract or tort, under federal or state securities
laws or otherwise) based upon any information provided or made available, or
statements made, to any such other party or such other party's Affiliates,
agents or representatives (or any omissions therefrom), including, without
limitation, in respect of the specific representations and warranties set
forth in this Agreement and the Merger Agreement and the covenants and
agreements set forth in the Merger Agreement, except (i) as and only to the
extent expressly set forth in the indemnification provisions of Article V
hereof and as otherwise expressly set forth herein (subject to the
limitations and restrictions contained herein), and (ii) with respect to
breaches of the covenants and agreements set forth in this Agreement.
(b) Without limiting the generality of the foregoing, it is
understood and agreed (a) that neither Parent, the Company nor any of the
Retained Subsidiaries is, in this Agreement or in any other agreement or
document contemplated by this Agreement, representing or warranting in any
way as to the value or freedom from encumbrance of, or any other matter
concerning, any A&S Assets, (b) that the A&S Assets are being transferred "as
is, where is" and (c) that, subject to the obligations of the Company set
forth in Section 6.2 hereof, A&S shall bear the risk that any conveyances of
the A&S Assets might be insufficient. Similarly, it is understood and agreed
that neither Parent, the Company nor any of the Retained Subsidiaries is, in
this Agreement or in any other agreement or document contemplated by this
Agreement, representing or warranting to A&S or any A&S Indemnified Party in
any way that the obtaining of the consents and approvals, the execution and
delivery of any amendatory agreements and the making of the filings and
applications contemplated by this Agreement shall satisfy the provisions of
any or all applicable agreements or the requirements of all applicable Laws
or judgments.
(c) A&S represents and warrants to the Company that (i) since
December 31, 1998, the A&S Business has been conducted in the ordinary course
of business consistent with past practice; (ii) neither the Company nor any
of the Retained Subsidiaries will, after giving effect to the Split-Off, be
liable directly or indirectly, as borrower, surety, guarantor, indemnitor or
otherwise, with respect to any of the A&S Liabilities; (iii) except as set
forth in Schedule 6.1(c)(iii) of the Disclosure Schedule, there are no
Intercompany Agreements in effect as of the date hereof; (iv) there are no
A&S Assets which have been used within the Retained Business since December
31, 1998, other than those A&S Assets which are listed on Schedule 6.1(c)(iv)
of the Disclosure Schedule; (v) except as set forth in Schedule 6.1(c)(v) of
the Disclosure Schedule, A&S shall not immediately after giving effect to the
Split-Off, own, hold
or lease, in whole or in part, any of the assets, properties, licenses and
rights which are reasonably necessary to carry on the Retained Business as
presently conducted; and (vi) except as set forth in Schedule 6.1(c)(vi) of
the Disclosure Schedule or as provided in Section 4.2, since December 31,
1998, no other intercompany transfers, dividends or payments have taken, or
will take, place outside the ordinary course of business between A&S, on the
one hand, and the Company or any Retained Subsidiary, on the other hand.
Section 6.2. FURTHER ASSURANCES; SUBSEQUENT TRANSFERS. Each of the
parties hereto will execute and deliver such further instruments of transfer
and distribution and will take such other actions as any party hereto may
reasonably request in order to effectuate the purposes of this Agreement and
to carry out the terms hereof.
Section 6.3. USE OF NAMES. Following the Effective Time, A&S shall
have the sole and exclusive ownership of and right to use, as between the
Company and each of the Retained Subsidiaries, on the one hand, and A&S, on
the other hand, the "Xxxxxxx & Sylvan Pools Corporation" name and each of the
names used (or formerly used) in the A&S Business (the "A&S Names"), and each
of the trade marks, trade names, service marks and other proprietary rights
exclusively related to such A&S Names (the "A&S Proprietary Name Rights") and
any trade marks, trade names, service marks or other proprietary rights
mutually agreed among the Parties prior to the Effective Time. Following the
Effective Time, the Company and each of the Retained Subsidiaries shall have
the sole and exclusive ownership of and right to use, as between A&S, on the
one hand, and the Company and each of the Retained Subsidiaries, on the other
hand, all names used (or formerly used) by the Company or any of the Retained
Subsidiaries as of such date other than the A&S Names (the "Company Names"),
and all other trade marks, trade names, service marks and other proprietary
rights owned or used by the Company or any of the Retained Subsidiaries as of
such date other than the A&S Proprietary Name Rights (the "Company
Proprietary Name Rights"). Notwithstanding the foregoing, following the
Effective Time, (x) the Company shall, and shall cause its Subsidiaries and
other Affiliates to, take all action reasonably necessary to cease using, and
change as soon as commercially practicable (including by amending any charter
documents), any corporate or other names which are the same as or confusingly
similar to any of the A&S Names or any of the A&S Proprietary Name Rights,
and (y) A&S shall, and shall cause its Subsidiaries and other Affiliates to,
take all action reasonably necessary to cease using, and change as soon as
commercially practicable (including by amending any charter documents), any
corporate or other names which are the same as or confusingly similar to any
of the Company Names or any of the Company Proprietary Name Rights.
Section 6.4. LITIGATION RELATING TO TRANSACTION.
(a) Following the date hereof until the Effective Time, in the
event that any Action is commenced against the Company or any of its
Subsidiaries (including A&S) challenging either the Merger Agreement, this
Agreement or the Tax Sharing Agreement or any of the transactions
contemplated therein or herein (any such Action, a "Transaction Suit"), then
the Company shall provide promptly to Parent copies of all material pleadings
sent or received after the date hereof by the Company or its counsel with
respect to any such Transaction Suits. Parent shall be entitled to
participate in the defense of each Transaction Suit and to employ counsel at
its own expense to assist in the handling of each such Transaction Suit.
Neither the Company nor any of its Subsidiaries (including A&S) shall settle
or compromise any Transaction Suit or consent to the entry of any judgment
with respect to any such Transaction Suit, without the prior written consent
of Parent (which consent shall not be unreasonably withheld).
(b) Following the Effective Time, the Company shall provide
promptly to A&S copies of all material pleadings sent or received after the
Effective Time by the Company or its counsel with respect to any Transaction
Suits to which A&S or any of its Affiliates is a party. A&S shall be entitled
to participate in the defense of each Transaction Suit to which it or any of
its Affiliates is a party, and to employ counsel at its own expense to assist
in the handling of each such Transaction Suit. Following the Effective Time,
neither the Parent nor the Company nor any of their respective Subsidiaries
shall settle or compromise any Transaction Suit to which A&S or any of its
Affiliates is a party or consent to the entry of any judgment with respect to
any such Transaction Suit, without the prior written consent of A&S (which
consent shall not be unreasonably withheld).
Section 6.5. OPERATION PRIOR TO SPLIT-OFF. Prior to the Effective
Time, A&S and Company agree to operate their respective businesses in the
ordinary course of business and in a manner consistent with past practice. In
addition, during the period prior to the Cut-Off Date, A&S shall (i) continue
to sweep cash from its various accounts to the Company in the ordinary course
of its business in a manner consistent with past practices and (ii) pay its
accounts payable and take payment discounts on such accounts payable in the
ordinary course of its business in a manner consistent with past practices.
Section 6.6. RESTRICTIONS ON POST-SPLIT-OFF COMPETITIVE ACTIVITIES.
As an inducement to the parties hereto to execute this Agreement and
complete the transactions contemplated hereby, and in order to preserve the
goodwill associated with the A&S Business and the Retained Business, Parent
and the Company, on one hand, and A&S, on the other hand, hereby covenant and
agree that for a period of three (3) years from the Effective Time, they will
not, directly or indirectly: (i) enter, engage in, continue in or carry on
(x) in the case of Parent and the Company, the swimming pool installation
business, or (y) in the case of A&S, the business of manufacturing water
pressure vessels or swimming pool and spa equipment, which as of the date of
this Agreement are manufactured by the Company or any Retained Subsidiary; or
(ii) engage in any practice the purpose of which is to evade the provisions
of this covenant not to compete; provided, however, that the foregoing shall
not prohibit the ownership of securities of corporations engaged in the
prohibited businesses which are listed on a national securities exchange or
traded in the national over-the-counter market in an amount which shall not
exceed 5% of the outstanding shares of any such corporation. The parties
agree that the geographic scope of this covenant not to compete shall extend
throughout the world. In the event a court of competent jurisdiction
determines that the provisions of this covenant not to compete are
excessively broad as to duration, geographical scope or activity, it is
expressly agreed that this covenant not to compete shall be construed so that
the remaining provisions shall not be affected, but shall remain in full
force and effect, and any such excessively broad provisions shall be deemed,
without further action on the part of any person, to be modified, amended
and/or limited, but only to the extent necessary to render the same valid and
enforceable in such jurisdiction.
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
Section 7.1. PROVISION OF CORPORATE RECORDS. Except as provided in
the following sentence, on or about the Effective Time, the Company shall
deliver to A&S all corporate books and records, in its possession, (including
all active agreements, active litigation files and government filings) which
are corporate records of A&S, including, without limitation, original
corporate minute books, stock ledgers and certificates and corporate seals of
A&S. Notwithstanding the foregoing and subject to the confidentiality
provisions of Section 7.5 hereof, the Company shall have the right to retain
copies of any such documents which also relate to the Retained Business.
Section 7.2. ACCESS TO INFORMATION. Subject to the confidentiality
provisions of Section 7.5 hereof, from and after the Effective Time (i) A&S
shall afford to the Company and its authorized accountants, counsel and other
designated representatives reasonable access (including, without limitation,
using reasonable efforts to give access to persons or firms possessing
Information (as defined below)), subject to any access, disclosure, copying,
time or other limitations imposed by applicable law or A&S, to all records,
books, contracts, instruments, computer data and other data and information
(collectively, "Information") within A&S's possession relating to the A&S
Business, insofar as such access is reasonably required by the Company in
connection with the operation of the Retained Business, and (ii) the Company
shall afford to A&S and its authorized accountants, counsel and other
designated representatives reasonable access (including, without limitation,
using reasonable efforts to give access to persons or firms possessing
Information), subject to any access, disclosure, copying, time or other
limitations imposed by applicable law or the Company, to all Information
within the Company's possession relating to the Retained Business, insofar as
such access is reasonably required by A&S in connection with the operation of
the A&S Business. Information may be requested under this Article VII for,
without limitation, audit, accounting, claims, litigation and tax purposes,
as well as for purposes of fulfilling disclosure and reporting obligations.
Section 7.3. PRODUCTION OF WITNESSES. From and after the Effective
Time, each party shall use reasonable efforts to make available to the other
party, upon written request, its officers, directors, employees and agents as
witnesses to the extent that any such person may reasonably be required in
connection with any legal, administrative or other proceedings in which the
requesting party may from time to time be involved.
Section 7.4. RETENTION OF RECORDS. Except as otherwise required by
Law or agreed to in writing, A&S and the Company shall each retain, for a
period of at least seven (7) years following the Effective Time, all
significant Information relating to (i) in the case of the Company, the A&S
Business and (ii) in the case of A&S, the Retained Business. Notwithstanding
the foregoing, either A&S or the Company may destroy or otherwise dispose of
any of such Information at any time, provided that, prior to such destruction
or disposal, (a) A&S or the Company, as the case may be, shall provide no
less than ninety (90) or more than one hundred twenty (120) days' prior
written notice to the other party, specifying the Information proposed to be
destroyed or disposed of and (b) if the other party shall request in writing
prior to the scheduled date for such destruction or disposal that any of the
Information proposed to be destroyed or disposed of be delivered to the other
party, A&S or the Company, as the case may be, shall promptly arrange for the
delivery of such of the Information as was requested, at the expense of the
requesting party.
Section 7.5. CONFIDENTIALITY.
(a) Each party shall hold, and shall cause its officers, employees,
agents, consultants and advisors to hold, in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the
reasonable opinion of its counsel, by other requirements of Law, all
confidential, proprietary or other non-public information or trade secrets
concerning the other party (or such other party's business operations or the
business operations of such other party's Affiliates) which is furnished it
by such other party or its representatives (collectively, the "Confidential
Information"). None of the parties hereto nor any of their respective
Affiliates shall release or disclose to any other person or entity, any such
Confidential Information (except, to the extent reasonably required, for
disclosure to those of such party's auditors, attorneys and other
representatives who agree to be bound by the provisions of this Section 7.5).
Notwithstanding the foregoing, in the event any party hereto is requested to
disclose any Confidential Information to any third party pursuant to any
judicial or administrative process or, in the reasonable opinion of its
counsel, any other requirements of Law, the party from whom such disclosure
is sought shall (x) notify the other parties hereto as soon as reasonably
practicable of such request for disclosure, (y) disclose only that portion of
the Confidential Information which it reasonably believes, following the
advice of counsel, is necessary in order to comply with such judicial or
administrative process or other requirements of Law, and (z) cooperate with
the other parties hereto in seeking to narrow the scope of any such third
party request for disclosure).
(b) Notwithstanding the foregoing, the term "Confidential
Information" shall not include information (i) which is or becomes generally
available to the public other than as a result of disclosure of such
information by the disclosing party or any of its Affiliates or
representatives, (ii) becomes available to the recipient of such information
on a non-confidential basis from a source which is not, to the recipient's
knowledge, bound by a confidentiality or other similar agreement, or by any
other legal, contractual or fiduciary obligation which prohibits disclosure
of such information to the other party hereto, or (iii) which can be
demonstrated to have been developed independently by the representatives of
such recipient which representatives have not had any access to any
information which would otherwise be deemed to be "Confidential Information"
pursuant to the provisions of this Section 7.5.
ARTICLE VIII
EMPLOYEE MATTERS
Section 8.1. EMPLOYEES. Effective as of the Effective Time, all
A&S Employees shall remain or become employees of A&S in the same capacities
as then held by such employees (or in such other capacities as A&S shall
determine in its sole discretion), and the employment of any A&S Employee by
the Company or the Retained Subsidiaries shall cease.
Section 8.2. EMPLOYEE BENEFITS.
(a) A&S 401(k) PLAN. A&S maintains a defined contribution plan and
trust intended to qualify under Sections 401(a), 401(k) and 501(a) of the
Internal Revenue Code of 1986, as amended (the "A&S 401(k) Plan"), for the
benefit of A&S Employees. A&S agrees to indemnify and hold harmless the
Company, its officers, directors, employees, agents and affiliates from and
against any and all Indemnifiable Losses arising out of or relating to the
A&S 401(k) Plan, including all benefits accrued by A&S Employees thereunder
prior to the Effective Time.
(b) WELFARE BENEFIT PLANS. As of the Effective Time, A&S Employees
shall cease to participate in the employee welfare benefit plans (as such
term in defined in ERISA) maintained or sponsored by the Company (the
"Company Welfare Plans") and shall commence to participate in welfare benefit
plans of A&S (the "A&S Welfare Plans"). On and after the Effective Time, the
Company shall only be responsible for any claims by A&S Employees for
benefits relating to claims incurred prior to the Effective Time. The Company
shall use its best efforts to ensure that, except as provided otherwise in
the Merger Agreement or this Agreement, the consummation of the transactions
contemplated by this Agreement shall not entitle any employee to severance
benefits under any severance plan or arrangement of the Company or any of its
Subsidiaries. Notwithstanding the foregoing, the Company agrees to permit A&S
Employees (and their beneficiaries and dependents) to continue to participate
from the Effective Time to and including December 31, 1999 in the Company's
group medical plan maintained by the Company in which such persons were
participating prior to the Effective Time. A&S agrees to be responsible for
the actual costs incurred to provide such continuation of participation and
coverage and will promptly reimburse the Company for any costs advanced by it.
(c) DEFERRED COMPENSATION PLANS. A&S agrees to assume the
Company's responsibilities under the Company's Deferred Compensation Plan
("Plan") with respect to those employees or directors identified on Schedule
8.2(c) of the Disclosure Schedule and to make all payments required under the
terms of such Plan. In consideration for such assumption, the Company agrees
to contribute to A&S, immediately prior to the Effective Time, an amount of
money equal to the accrued liability of the Company under such Plan as of the
Effective Time, reduced by the tax benefit that the Company would otherwise
receive as a result of deducting such accrued liability. For purposes of this
Agreement, such tax benefit will be deemed to equal 39% of such accrued
liability.
(d) CERTAIN LIABILITIES. The Company hereby agrees to indemnify
A&S against, and agrees to hold it harmless from any and all Indemnifiable
Losses incurred or suffered as a result of any claim
by any Retained Employee which arises under federal, state or local statute
(including, without limitation, Title VII of the Civil Rights Act of 1964,
the Civil Rights Act of 1991, the Age Discrimination in Employment Act of
1990, the Equal Pay Act, the Americans with Disabilities Act of 1990, ERISA
and all other statutes regulating the terms and conditions of employment),
regulation or ordinance, under the common law or in equity (including any
claims for wrongful discharge or otherwise), or under any policy, agreement,
understanding or promise, written or oral, formal or informal, between the
Company and the Retained Employee, arising out of actions, events or
omissions that occurred (or, in the case of omissions, failed to occur) prior
to, or after, the Effective Time. A&S hereby agrees to indemnify the Company
against and agrees to hold the Company harmless from any and all
Indemnifiable Losses incurred or suffered as a result of any claim by any A&S
Employee which arises under federal, state or local statute (including,
without limitation, Title VII of the Civil Rights Act of 1964, the Civil
Rights Act of 1991, the Age Discrimination in Employment Act of 1990, the
Equal Pay Act, the Americans with Disabilities Act of 1990, ERISA and all
other statutes regulating the terms and conditions of employment), regulation
or ordinance, under the common law or in equity (including any claims for
wrongful discharge or otherwise), or under any policy, agreement,
understanding or promise, written or oral, formal or informal, between the
Company and/or A&S, on the one hand, and the A&S Employee, on the other hand,
arising out of actions, events or omissions that occurred (or, in the case of
omissions, failed to occur) prior to, or after, the Effective Time. The
indemnification provided for in this Section 8.2 shall be subject to the
terms and conditions of the indemnification provisions of Article V hereof.
Section 8.3. OTHER LIABILITIES AND OBLIGATIONS. As of the
Effective Time, with respect to claims relating to any employee liability or
obligation not otherwise provided for in this Agreement or the Merger
Agreement, including, without limitation, accrued holiday, vacation and sick
day benefits, (a) the Company shall assume and be solely responsible for all
liabilities and obligations whatsoever of both the Retained Business and the
A&S Business for all such claims made by Retained Employees and (b) A&S shall
assume and be solely responsible for all liabilities and obligations
whatsoever of both the Retained Business and the A&S Business for all such
claims made by all A&S Employees.
Section 8.4. PRESERVATION OF RIGHTS TO AMEND OR TERMINATE PLANS.
No provision of this Agreement, shall be construed as a limitation on the
right of the Company or A&S to amend any plan or terminate its participation
therein which the Company or A&S would otherwise have under the terms of such
plan or otherwise, and no provision of this Agreement shall be construed to
create a right in any employee or beneficiary of such employee under a plan
that such employee or beneficiary would not otherwise have under the terms of
such plan itself.
Section 8.5. REIMBURSEMENT; INDEMNIFICATION. A&S and the Company
acknowledge that the Company, on the one hand, and A&S, on the other hand,
may incur costs and expenses (including, without limitation, contributions to
plans and the payment of insurance premiums) pursuant to any of the employee
benefit or compensation plans, programs or arrangements which are, as set
forth in this Agreement, the responsibility of the other party. Accordingly,
the Company and A&S agree to reimburse each other, as soon as practicable but
in any event within thirty (30) days of receipt from the other party of
appropriate verification, for all such costs and expenses reduced by the
amount of any tax reduction or recovery of tax benefit realized by the
Company or A&S, as the case may be, in respect
of the corresponding payment made by it. All liabilities retained, assumed or
indemnified by A&S pursuant to this Article VIII shall in each case be deemed
to be liabilities of A&S, and all liabilities retained, assumed or
indemnified by the Company pursuant to this Article VIII shall in each case
be deemed to be liabilities of the Company, and, in each case, shall be
subject to the indemnification provisions set forth in Article V hereof.
Section 8.6. NONSOLICITATION OF EMPLOYEES. For a period ending two
(2) years after the date of this Agreement,
(a) A&S shall not, directly, or indirectly, (i) solicit or induce,
or attempt to solicit or induce, any Retained Employee (other than a Retained
Employee employed prior to the Effective Time at the Company's corporate
level), any employee of the Company or any Retained Subsidiary hired after
the date of this Agreement ("Company Subsequent Hire") or any employee of the
Parent or its Subsidiaries ("Parent Employee") to leave the employ of the
Company, the Parent or any of their Subsidiaries for any reason whatsoever,
or (ii) hire any Retained Employee, any Company Subsequent Hire or Parent
Employee; provided however, that the prohibition imposed by this subparagraph
(ii) shall not apply to any person whose employment by the Company, Parent or
any of their Subsidiaries is terminated by such entity; and
(b) Neither the Company, Parent nor any of their respective
Subsidiaries shall, directly or indirectly, (i) solicit or induce, or attempt
to solicit or induce, any A&S Employee or any employee of A&S or any
subsidiary thereof hired after the date of this Agreement ("A&S Subsequent
Hire") to leave the employ of A&S or any subsidiary thereof for any reason
whatsoever, or (ii) hire any A&S Employee or any A&S Subsequent Hire;
provided however, that the prohibition imposed by this subparagraph (ii)
shall not apply to any person whose employment by A&S or any subsidiary
thereof is terminated by such entity.
Section 8.7. ACTIONS BY A&S. Any action required to be taken under
this Article VIII may be taken by A&S, a Subsidiary of A&S or an entity
formed pursuant to the provisions of Section 3.2(b).
ARTICLE IX
INSURANCE
Section 9.1. GENERAL. Except as otherwise agreed in writing
between the parties, the Company shall maintain until the Effective Time all
policies of liability, fire, extended coverage, fidelity, fiduciary, workers'
compensation and other forms of insurance in effect as of the date hereof
insuring the products, properties, assets and operations of A&S; provided,
however, that coverage of the products, properties, assets and operation of
A&S under such policies shall cease as of the Effective Time.
Section 9.2. CERTAIN INSURED CLAIMS. The Company shall (a) use
reasonable efforts, upon A&S's written request and at A&S's sole expense, to
continue to maintain and renew for the benefit of A&S the insurance policies
under the Casualty Program with respect to claims having an occurrence
date (as the term "occurrence date" is customarily defined) prior to the
Effective Time, relating to, or arising out of the conduct of, the A&S
Business, and (b) use reasonable efforts and cooperate with A&S, upon A&S's
written request and at A&S's sole expense, to obtain coverage, recoveries and
other benefits under such policies for the benefit of A&S, including, without
limitation, by filing and pursuing claims with respect to obtaining such
coverage, recoveries and other benefits; provided that in no event shall the
Company be obligated to litigate or pursue any other extra-contractual
remedies against any insurer; provided further that all claims pursuant to
this Section 9.2 shall be submitted, investigated, processed and paid in
accordance with the claims handling procedures used by the Company and its
Affiliates from time to time with respect to other like claims. The Company
will reimburse A&S for any recovery obtained by it pursuant to such claims.
The Company shall make available to A&S such of its employees as A&S may
reasonably request as witnesses or deponents in connection with A&S's pursuit
of claims.
ARTICLE X
CONDITIONS; TERMINATION;
AMENDMENTS; WAIVERS
Section 10.1. CONDITIONS TO SPLIT-OFF.
(a) The obligations of each of the Company and A&S to effect the
Split-Off (other than those obligations which are normally expected to
precede the Split-Off) shall be subject to the satisfaction of the following
conditions: (i) the Purchaser shall have notified the Company that it is
prepared to immediately accept for payment shares of Company Common Stock
pursuant to the terms and conditions of the Merger Agreement, (ii) the Form
S-1 (or the registration statement referred to in Section 3.1(a) hereof)
shall have been declared effective by the SEC, (iii) no Court Order or Law
shall have been enacted, promulgated, issued or entered against any of the
parties hereto which (x) prohibits or materially restricts consummation of
any of the transactions contemplated by this Agreement and (y) remains in
effect as of the date on which the satisfaction of this condition is
determined, (iv) the Company and the Retained Subsidiaries (other than A&S)
shall have obtained all consents required to be obtained by the Company as a
result of or in connection with the transactions contemplated by this
Agreement in order to avoid a material default under any material contract or
agreement to or by which the Company or any of their respective Subsidiaries
is a party or may be bound, or otherwise necessary to permit the Company and
each of the Retained Subsidiaries to conduct their business in a manner
consistent with its past practices, (v) A&S shall have declared the Company
Dividend and paid the Initial Distribution, and (vi) all consents and
approvals of, and notices to and filings with, any Governmental Entity or any
other person or entity arising out of or relating to the consummation of the
transactions contemplated by this Agreement, shall have been obtained or made
(as the case may be).
(b) The parties hereto acknowledge and agree that (x) Parent may
waive, on behalf of all parties hereto, the conditions set forth in clauses
(iii), (iv) and (vi) of Section 10.1(a) above so long as (1) Parent
reasonably believes that consummation of the Split-Off at such time will have
no material adverse effect on A&S or the A&S Business and (2) Parent agrees
to indemnify A&S pursuant to the provisions of Article V hereof with respect
to any Indemnifiable Losses which result from any material
adverse effect on A&S or the A&S Business which results directly from such
waiver, and (y) the Company may not waive any of the conditions set forth in
Sections 10.1(a)(i) through 10.1(a)(vi) above without first obtaining the
prior written consent of Parent. The respective obligations of each party
hereto to perform those of its obligations which are to be performed
following consummation of the Split-Off, shall be conditioned on the
consummation of the Split-Off in accordance with the provisions of this
Agreement.
Section 10.2. TERMINATION. This Agreement (i) may be terminated
and the Split-Off abandoned at any time prior to the Effective Time by the
mutual written agreement of each of the parties hereto or (ii) shall be
terminated automatically and the Split-Off abandoned upon any termination of
the Merger Agreement in accordance with the terms and conditions thereof. In
the event that this Agreement shall be terminated pursuant to this Section
10.2, all obligations of the parties hereto under this Agreement shall
terminate without further liability or obligation of any party hereto to the
other parties hereto under this Agreement or otherwise, except (i) for any
breach by such party of the terms and provisions of this Agreement prior to
the date of such termination and (ii) as stated in Section 11.3 hereof.
Section 10.3. AMENDMENTS; WAIVERS. This Agreement may be amended,
modified or supplemented only by written agreement of each of the parties
hereto. Any term or provision of this Agreement may be waived at any time by
the party entitled to the benefit thereof by a written instrument executed by
such party. Except as provided in the preceding sentence, no action taken
pursuant to this Agreement, including, without limitation, any investigation
by or on behalf of any party, shall be deemed to constitute a waiver by the
party taking such action of compliance with any representations, warranties,
covenants, agreements or conditions contained herein. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any preceding or succeeding breach and no failure by
any party to exercise any right or privilege hereunder shall be deemed a
waiver of such party's rights or privileges hereunder or shall be deemed a
waiver of such party's rights to exercise the same at any subsequent time or
times hereunder.
ARTICLE XI
MISCELLANEOUS
Section 11.1 SURVIVAL OF INDEMNITIES; RELEASE. The representations
and warranties made in Section 6.1 of this Agreement shall survive for a
period of three years from the Effective Time, but shall not survive any
termination of this Agreement; provided that claims with respect to breaches
of covenants and agreements set forth in this Agreement shall survive for the
applicable statute of limitations period. Except as otherwise expressly
provided in this Agreement (including, without limitation, the
indemnification provisions of Article V hereof), each of the parties (a)
agrees that no claims or causes of action may be brought against the Company,
A&S, Parent or the Purchaser or any of their Affiliates, agents or
representatives based upon, directly or indirectly, any of the
representations and warranties contained in this Agreement after three years
following the Effective Time (other than causes of actions commenced after
such three-year period to seek recourse for claims asserted during such
three-year period that are not resolved by the parties), and (b) hereby
waives and releases all other claims and causes of action, that may be
asserted or brought against the Company, A&S, Parent or the Purchaser or any
of their Affiliates, agents or representatives directly or indirectly based
upon or arising under this Agreement or the Merger Agreement, or the
transactions contemplated hereby or thereby. Notwithstanding the foregoing,
this Section 11.1 shall not limit any covenant or agreement of the parties in
this Agreement, the Merger Agreement or the Tax Sharing Agreement which
contemplates performance after the Effective Time (including, without
limitation, the covenants and agreements set forth in Sections 2.1(b) and 6.2
hereof), except for the covenants and agreements in the Merger Agreement to
the extent of their performance prior to the Effective Time.
Section 11.2 ENTIRE AGREEMENT. This Agreement (including the
schedules and exhibits and the agreements and other documents referred to
herein, including, without limitation, the Merger Agreement, the Tax Sharing
Agreement and the Confidentiality Agreement) constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes
all other prior negotiations, commitments, agreements and understandings,
both written and oral, between the parties or any of them with respect to the
subject matter hereof.
Section 11.3 FEES AND EXPENSES. Except as otherwise provided in
this Agreement, the Merger Agreement or the Tax Sharing Agreement and subject
to the proviso below, all costs and expenses incurred by the Company and each
of the Retained Subsidiaries and by A&S in connection with (x) the
preparation, execution and delivery of this Agreement, the Merger Agreement
and the Tax Sharing Agreement and (y) consummating such party's obligations
hereunder and thereunder (including, without limitation, investment banking,
legal, accounting, audit and printing costs and expenses), shall be paid by
the Company, upon the submission to the Company of appropriate documentation
detailing such costs and expenses.
Section 11.4 GOVERNING LAW. This Agreement shall be governed by
and interpreted and enforced in accordance with the substantive laws of the
State of Ohio, without giving effect to the choice of law principles thereof.
Section 11.5 NOTICES. All notices and other communications
hereunder shall be (and shall be deemed to have been duly given upon receipt)
by delivery in person, by cable, telegram, telex, telecopy or other standard
form of telecommunication, or by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
(a) If to the Company, to:
Essef Corporation
c/o Xxxxxxx & Sylvan Pools Corporation
000 Xxxx Xxxxx
Xxxxxxx, Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxx X. Xxxxx
with a copy to:
Squire, Xxxxxxx & Xxxxxxx L.L.P.
0000 Xxx Xxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxx Xxx Xxxxxxxxx, Esq.
(b) If to A&S, to:
Xxxxxxx & Sylvan Pools Corporation
000 Xxxx Xxxxx
Xxxxxxx, Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
with a copy to:
Squire, Xxxxxxx & Xxxxxxx L.L.P.
0000 Xxx Xxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxx Xxx Xxxxxxxxx, Esq.
(c) If to Parent or Purchaser, to:
Pentair, Inc.
Waters Edge Plaza
0000 Xxxxxx Xxxx X0 Xxxx
Xxxxx Xxxx, Xxxxxxxxx 00000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx
with a copy to:
Pentair, Inc.
Waters Edge Plaza
0000 Xxxxxx Xxxx X0 Xxxx
Xxxxx Xxxx, Xxxxxxxxx 00000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
with a copy to:
Xxxxx & Xxxxxxx
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxx, III, Esq.
Section 11.6 SUCCESSORS AND ASSIGNS; NO THIRD PARTY BENEFICIARIES.
This Agreement and all of the provisions hereof shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto
(whether by operation of law or otherwise) without the prior written consent
of the other parties hereto (which consent may not be unreasonably withheld),
except that any party shall have the right, without the consent of any other
party hereto, to assign all or a portion of its rights, interests and
obligations hereunder to one or more direct or indirect subsidiaries, but no
such assignment of obligation shall relieve the assigning party from its
responsibility therefor. Notwithstanding the foregoing, A&S shall be
permitted to assign its rights and obligations under this Agreement to one of
its Affiliates (the "A&S Transferee") prior to the Effective Time so long as
(x) such assignment shall not relieve A&S from its joint responsibility
therefor and (y) such assignment does not adversely affect any of the rights,
benefits or obligations of Parent or any of the Parent Indemnified Parties
under this Agreement or the Merger Agreement; provided that in the event of
any such assignment to the A&S Transferee, all references to A&S shall be
automatically deemed to be references to A&S. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and, except for
the provisions of Section 8.1 hereof, nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any rights,
benefits or remedies
of any nature whatsoever under or by reason of this Agreement; provided,
however, that the Indemnified Parties are intended to be third party
beneficiaries of the provisions of Article V hereof, and shall have the right
to enforce such provisions as if they were parties hereto.
Section 11.7 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 11.8 INTERPRETATION. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
Section 11.9 SCHEDULES. The Disclosure Schedule shall be construed
with and as an integral part of this Agreement to the same extent as if the
same had been set forth verbatim herein.
Section 11.10 LEGAL ENFORCEABILITY. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without affecting the validity or enforceability of the
remaining provisions hereof. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as
is enforceable.
Section 11.11 CONSENT TO JURISDICTION. Each of the parties hereto
irrevocably and unconditionally (a) agrees that all suits, actions or other
legal proceedings arising out of this Agreement or any of the transactions
contemplated hereby (a "Suit") shall be brought and adjudicated solely in the
United States District Court for the Northern District of Ohio, or, if such
court will not accept jurisdiction, in any court of competent civil
jurisdiction sitting in Cleveland, Ohio, (b) submits to the non-exclusive
jurisdiction of any such court for the purpose of any such Suit and (c)
waives and agrees not to assert by way of motion, as a defense or otherwise
in any such Suit, any claims that it is not subject to the jurisdiction of
the above courts, that such Suit is brought in an inconvenient forum or that
the venue of such Suit is improper. Each of the parties hereto also
irrevocably and unconditionally consents to the service of any process,
summons, pleadings, notices or other papers in a manner permitted by the
notice provisions of Section 11.5 hereof and agrees that any such form of
service shall be effective in connection with any such Suit; provided that
nothing contained in this Section 11.11 shall affect the right of any party
to serve process, pleadings, notices or other papers in any other manner
permitted by applicable Law.
Section 11.12 SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement,
each non-breaching party would be irreparably and immediately harmed and
could not be made whole by monetary damages. It is accordingly agreed that
the parties hereto (a) will waive, in any action for specific performance,
the defense of adequacy of a remedy at law and (b) shall be entitled, in
addition to any other remedy to which they may be entitled at law or in
equity, to compel specific performance of this Agreement in any action
instituted in any court referred to in Section 11.11 hereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers, all as of the date
first written above.
ESSEF CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxx
---------------------------
Title: President
---------------------------
XXXXXXX & SYLVAN POOLS CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxx
---------------------------
Title: Chief Executive Officer
---------------------------
PENTAIR, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxxxx
---------------------------
Title: Executive Vice President
---------------------------
DISCLOSURE SCHEDULE
