Exhibit 2.1
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STOCK PURCHASE AGREEMENT
by and between
ALLIANT TECHSYSTEMS INC.
and
XXXXXX INTERNATIONAL, INC.,
and
XXXXXX, INC.,
dated as of
November 6, 2001
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TABLE OF CONTENTS
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ARTICLE I SALE OF SHARES; PURCHASE PRICE PROVISIONS...........................1
1.01 Purchase and Sale of Business Shares............................1
1.02 Purchase Price; Manner of Payment...............................2
1.03 Purchase Price Adjustments......................................2
ARTICLE II FORMATION AND CAPITALIZATION OF NEWCO..............................4
2.01 Formation of Newco..............................................4
2.02 Contribution of Certain Assets..................................4
ARTICLE III CLOSING...........................................................5
3.01 Closing.........................................................5
3.02 Closing Procedure...............................................5
Article IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER................8
4.01 Incorporation and Corporate Power...............................8
4.02 Capitalization..................................................9
4.03 Execution, Delivery; Valid and Binding Agreement................9
4.04 Governmental Authorities; Consents.............................10
4.05 Noncontravention...............................................10
4.06 Financial Statements...........................................11
4.07 Absence of Undisclosed Liabilities.............................12
4.08 Absence of Certain Developments................................12
4.09 Real Property..................................................13
4.10 Assets.........................................................17
4.11 Accounts Receivable............................................18
4.12 Inventory......................................................18
4.13 Customers......................................................18
4.14 Suppliers; Raw Materials.......................................19
4.15 Tax Matters....................................................19
4.16 Contracts and Commitments......................................22
4.17 Intellectual Property Rights...................................26
4.18 Litigation; Orders.............................................32
4.19 Products.......................................................33
4.20 Employees; Labor Matters.......................................33
4.21 Employee Benefit Plans.........................................34
4.22 Insurance......................................................36
4.23 Affiliate Transactions.........................................36
4.24 Compliance with Laws; Permits..................................36
4.25 Environmental Matters..........................................37
4.26 Books and Records..............................................40
4.27 Securities Law Matters.........................................40
4.28 Brokerage......................................................40
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER............................40
5.01 Incorporation and Corporate Power..............................40
5.02 Execution, Delivery; Valid and Binding Agreement...............41
5.03 Governmental Authorities; Consents.............................41
5.04 Noncontravention...............................................41
5.05 Brokerage......................................................41
5.06 Capitalization.................................................42
5.07 SEC Filings....................................................42
5.08 Absence of Certain Developments................................42
ARTICLE VI PRE-CLOSING COVENANTS.............................................43
6.01 Conduct of the Business........................................43
6.02 Access to Books, Records, Etc..................................45
6.03 Satisfaction of Conditions.....................................45
6.04 Nonsolicitation................................................45
6.05 Consents and Approvals.........................................46
6.06 Intercompany Transfer and Assumption...........................46
6.07 Removal of Certain Materials...................................46
ARTICLE VII POST-CLOSING COVENANTS...........................................47
7.01 Cooperation on Tax Matters.....................................47
7.02 Transfer and Sales Taxes.......................................50
7.03 Further Assurances.............................................50
7.04 Cooperation with Proceedings...................................50
7.05 Novation.......................................................51
7.06 Confidentiality................................................51
7.07 Cooperation on Assertion of Attorney-Client Privilege..........52
7.08 Cooperation in Maintenance of Intellectual Property Rights.....52
7.09 Letters of Credit and Guarantees...............................52
ARTICLE VIII OTHER AGREEMENTS................................................52
8.01 Antitrust Law Compliance.......................................52
8.02 Employment and Employee Benefit Matters........................53
8.03 Preserve Accuracy of Representations and Warranties............60
8.04 Press Releases and Announcements...............................60
8.05 Expenses.......................................................61
8.06 Title Examination..............................................61
ARTICLE IX CONDITIONS TO CLOSING.............................................62
9.01 Conditions to Buyer's Obligation...............................62
9.02 Conditions to the Obligation of Parent and Seller..............63
ARTICLE X TERMINATION........................................................64
10.01 Termination..................................................64
10.02 Effect of Termination........................................64
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ARTICLE XI SURVIVAL; INDEMNIFICATION.........................................65
11.01 Survival of Representations and Warranties...................65
11.02 Indemnification by Parent and Seller.........................65
11.03 Indemnification by Parent and Seller-Environmental Matters...67
11.04 Indemnification by Buyer.....................................68
11.05 Time Limitations.............................................69
11.06 Limitations on Amount........................................69
11.07 Method of Asserting Claims...................................71
11.08 Miscellaneous Indemnity Provisions...........................74
ARTICLE XII MISCELLANEOUS....................................................75
12.01 Amendment and Waiver.........................................75
12.02 Notices......................................................75
12.03 Assignment...................................................76
12.04 Severability.................................................76
12.05 Complete Agreement...........................................77
12.06 Counterparts.................................................77
12.07 Governing Law................................................77
12.08 No Third Party Beneficiaries.................................77
12.09 Interpretation...............................................77
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ANNEX, EXHIBITS AND SCHEDULES
DISCLOSURE SCHEDULE
ANNEX A INDEX OF DEFINED TERMS
EXHIBIT A SELLER ENTITIES
EXHIBIT B FORM OF CONTRIBUTION AGREEMENT
EXHIBIT C FORM OF TRANSITION SERVICES AGREEMENT
EXHIBIT D FORM OF NONCOMPETITION AGREEMENT
EXHIBIT E FORM OF INTERCOMPANY ASSIGNMENT AND ASSUMPTION AGREEMENT
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STOCK PURCHASE AGREEMENT
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This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of November
6, 2001, is made and entered into by and between Alliant Techsystems Inc., a
Delaware corporation ("Buyer"), Xxxxxx International, Inc., a Delaware
corporation ("Parent"), and Xxxxxx, Inc., a Delaware corporation and
wholly-owned subsidiary of Parent ("Seller").
WHEREAS, Seller, through its subsidiaries listed on the attached
Exhibit A (such subsidiaries, together with Newco (as defined below) upon its
formation, are collectively referred to herein as the "Seller Entities") and its
sporting equipment division (the "Division") is engaged in various business
activities under its Sporting Equipment Group, including the manufacture,
marketing, sale and distribution of ammunition, sports optics, reloading
equipment and related products under such brand names as Federal, Xxxxx, CCI,
OCBS, Outers, Xxxxxx, Ram-Line, Simmons, Redfield, Champion and Estate (the
"Business");
WHEREAS, to facilitate the transactions contemplated by this Agreement,
prior to the Closing, Seller shall form a new corporation under the laws of the
State of Delaware, to have such name as Buyer may request ("Newco"), and
transfer to Newco substantially all of the assets and certain liabilities of the
Division in exchange for shares of Newco capital stock, all as described more
fully in this Agreement;
WHEREAS, Seller desires to sell, transfer and assign to a newly formed,
indirect wholly-owned subsidiary of Buyer (the "Acquisition Sub"), and the Buyer
desires that Acquisition Sub purchase and acquire from Seller, on the terms and
subject to the conditions set forth in this Agreement, all of the issued and
outstanding shares of capital stock of the Seller Entities;
WHEREAS, contemporaneously with the execution of this Agreement, Buyer
and Seller are entering into a Registration Rights Agreement (the "Registration
Rights Agreement") that sets forth the terms and conditions pursuant to which
Buyer will register Seller's resale of the shares that comprise a portion of the
purchase price hereunder;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements and the conditions set forth in this
Agreement, the parties agree as follows:
ARTICLE I
SALE OF SHARES; PURCHASE PRICE PROVISIONS
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1.01 Purchase and Sale of Business Shares.
On the terms and subject to the conditions of this Agreement, at the
Closing, Seller shall sell, transfer and assign to the Acquisition Sub,
and the Acquisition Sub shall purchase and acquire from Seller, all of
Seller's right, title and interest in and to all of the outstanding
shares of capital stock of the Seller Entities (the "Business Shares").
1.02 Purchase Price; Manner of Payment.
(a) As consideration for the Acquisition Sub's purchase of the
Business Shares, Buyer shall pay to Seller an aggregate of
$10,000 (the "Cash Purchase Price"), by wire transfer in
immediately available funds to an account designated by
Seller, and shall issue to Seller shares of Buyer's common
stock, par value $.01 per share ("Buyer Common Stock"), with
the specific number of shares to be determined as follows,
rounding all fractional share calculations down to the nearest
whole number (collectively, the "Buyer Shares"):
(i) if the Specified Price Per Share is less than or
equal to $82.00, then Buyer shall issue to Seller an
aggregate of 3,048,780 shares of Buyer Common Stock;
(ii) if the Specified Price Per Share is greater than
$82.00 and less than or equal to $86.00, then Buyer
shall issue to Seller, in the aggregate, such number
of shares of Buyer Common Stock as shall equal the
quotient of 250,000,000 divided by the Specified
Price Per Share; or
(iii) if the Specified Price Per Share is greater than
$86.00, then Buyer shall issue to Seller an aggregate
of 2,906,980 shares of Buyer Common Stock.
"Specified Price Per Share" means the lower of (i) the Closing
Date Average Price Per Share (as defined below) and (ii) the
Closing Date Price Per Share (as defined below). "Closing Date
Average Price Per Share" means the average closing price per
share of Buyer Common Stock on the New York Stock Exchange
during the ten (10) trading days immediately preceding the
Closing Date. "Closing Date Price Per Share" means the closing
price per share of Buyer Common Stock on the New York Stock
Exchange on the trading day immediately preceding the Closing
Date.
(b) At the Closing, Buyer will deliver to Seller certificates
representing all of the Buyer Shares. For purposes of this
Agreement, the term "Purchase Price" means the sum of the Cash
Purchase Price plus the aggregate value of the Buyer Shares
based on the Specified Price Per Share.
1.03 Purchase Price Adjustments.
(a) If the Specified Price Per Share is greater than $86.00, then,
upon Seller's completion of its offering of the Buyer Shares,
Seller shall pay to Buyer, by wire transfer in immediately
available funds to an account specified by Seller (or such
other form or manner of payment as Buyer may reasonably
request), an amount equal to one-half of (i) the gross
proceeds received from such offering, minus (ii) $250,000,000;
provided, however, that in no event will Seller be obligated
to pay more than $5,000,000 to Buyer pursuant to this Section
1.03(a).
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(b) Balance Sheet Adjustment.
(i) Schedule 1.03(b) sets forth the balance sheet of the
Business as of September 30, 2001 (the "Initial
Balance Sheet"), including the net book value of the
Business Assets (as defined below) as of such date
(the "Initial Net Book Value") calculated in the
manner described therein. As soon as practicable (but
in any event within sixty (60) days after the Closing
Date), Seller shall prepare or cause to be prepared
and shall deliver to Buyer an audited balance sheet
of the Business dated as of the Closing Date (the
"Closing Date Balance Sheet") prepared in accordance
with generally accepted accounting principles applied
on a basis consistent with Seller's past policies,
principles and practices ("GAAP"). The Closing Date
Balance Sheet shall set forth the net book value of
the Business Assets as of such date (the "Closing
Date Net Book Value") calculated in the same manner
as was the Initial Net Book Value. For purposes of
this Agreement, the term "Business Assets" means the
Division Assets and all properties, assets and rights
of the Seller Entities of every kind and nature,
tangible and intangible (including goodwill), whether
real, personal or mixed, whether accrued, contingent
or otherwise and whether now existing or hereafter
acquired.
(ii) If the Closing Date Net Book Value exceeds
$203,000,000, then the Purchase Price shall be
increased by an amount equal to the excess of the
Closing Date Net Book Value over $203,000,000. If the
Closing Date Net Book Value is less than
$203,000,000, then the Purchase Price shall be
decreased by an amount equal to the excess of
$203,000,000 over the Closing Date Net Book Value.
Any such increase or decrease in the Purchase Price
is referred to in this Agreement as a "Purchase Price
Adjustment."
(iii) If Buyer disagrees with Seller's determination of the
Closing Date Net Book Value, then Buyer shall notify
Seller in writing of such disagreement within thirty
(30) days after Buyer receives the Closing Date
Balance Sheet (the "Objection Period"), setting forth
in such notice in reasonable detail the reasons for
such disagreement and Buyer's calculation of the
Closing Date Net Book Value. If Buyer fails to
provide such written notice within the Objection
Period, then the determination of the Closing Date
Net Book Value as set forth in the Closing Date
Balance Sheet will be final and binding. If Seller
timely receives such written notice and Seller and
Buyer are unable to resolve the disagreement within
fifteen (15) business days thereafter, Seller and
Buyer each agree to retain a nationally recognized
accounting firm which is independent of, and is not
auditing the books and records of, each of Seller or
any of its affiliates or Buyer or any of its
affiliates (the "Accounting Firm") to arbitrate the
dispute and render a decision regarding the Closing
Date Net Book Value within thirty (30) days of such
retention, which decision shall be final and binding.
The Accounting Firm shall conduct such arbitration by
reviewing the Closing
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Date Balance Sheet with the understanding that such
Closing Date Balance Sheet was prepared as provided
herein. The Accounting Firm's work shall be limited
to resolving the matter that Buyer raised in its
notice of objection, and the Accounting Firm's
decision on such matter shall be final and binding
and unreviewable for error of any kind. Seller and
Buyer shall each bear their own costs and expenses of
any such arbitration and shall share equally the fees
and expenses of (i) the Accounting Firm and (ii)
associated with the audit specified in Section
1.03(b)(i).
(iv) In connection with any Purchase Price Adjustment:
(A) in the event the Purchase Price is
increased, Buyer shall, within five (5) days
after the later of the expiration of the
Objection Period or the date on which any
dispute regarding the Closing Date Net Book
Value as provided in Section 1.03(b)(ii) is
finally resolved, pay to Seller by wire
transfer in immediately available funds an
amount equal to the Purchase Price
Adjustment; or
(B) in the event the Purchase Price is
decreased, within five days after the later
of the expiration of the Objection Period or
the date on which dispute regarding the
Closing Date Net Book Value as provided in
Section 1.02(b)(ii) is finally resolved,
Seller shall pay to Buyer, by wire transfer
in immediately available funds to an account
designated by Buyer, an amount equal to the
Purchase Price Adjustment.
ARTICLE II
FORMATION AND CAPITALIZATION OF NEWCO
-------------------------------------
2.01 Formation of Newco.
On or prior to the Closing Date (as defined in Section 3.01), Seller
shall (a) form Newco by filing a certificate of incorporation with the
secretary of state of the State of Delaware in form and substance
reasonably acceptable to Buyer, (b) take all appropriate steps to duly
organize Newco, including, without limitation, causing Newco to adopt
bylaws in form and substance reasonably acceptable to Buyer and (c)
take all appropriate steps to cause Newco to qualify to do business in
each of the jurisdictions listed in the Disclosure Schedule (as defined
below) where Seller is so qualified in connection with the operation of
the Business.
2.02 Contribution of Certain Assets.
On or prior to the Closing Date, but effective immediately prior to the
Closing, Seller shall enter into a contribution agreement with Newco in
the form attached as Exhibit B (the "Contribution Agreement") and,
pursuant thereto, (a) Seller shall contribute to Newco the Division
Assets (as such assets are expressly described in the Contribution
Agreement), free and clear of all Liens (other than Permitted Liens),
and (b) Seller shall
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assign to Newco, and Newco shall assume from Seller, the Division
Assumed Liabilities (as such term is expressly defined in the
Contribution Agreement). Neither Parent nor Seller shall take any
action to amend the Contribution Agreement at or prior to the Closing
without Buyer's prior written consent. The term "Lien" means any
mortgage, pledge, lien, hypothecation, encumbrance, charge, burden,
security interest or other adverse claim or title defect of any nature
whatsoever. The term "Permitted Lien" means any of the following Liens:
(u) any Lien for current Taxes not yet due and payable, (v) any Lien
imposed by law and incurred in the ordinary course of business for
obligations not yet due to carriers, warehousemen, laborers,
materialmen and the like, (w) any Lien in respect of pledges or
deposits under workers' compensation laws (x) any purchase money Lien
and any Lien securing rental payments under capital lease arrangements,
(y) attachment, judgment and similar non-Tax Liens arising in
connection with court proceedings, but only if and for so long as the
execution or enforcement of such Liens is and continues to be
effectively stayed and bonded on appeal and the claims contested
thereby are being contested in good faith by appropriate proceedings or
(z) any matter disclosed in the title insurance commitments issued to
Buyer pursuant to Section 8.06, other than Liens securing monetary
obligations or that would render title uninsurable or materially
adversely affect the use or operation of the subject property.
ARTICLE III
CLOSING
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3.01 Closing.
The closing of the transactions contemplated by this Agreement (the
"Closing") will take place at the offices of Xxxxxx & Xxxxxxx LLP, 00
Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx, commencing at 10:00 a.m.
local time, on the second business day after the satisfaction or
written waiver of all conditions set forth in Article IX, other than
conditions with respect to actions of the respective parties at the
Closing, or such other date as the parties may mutually agree (the
"Closing Date"). The Closing will be effective as of the close of
business on the Closing Date.
3.02 Closing Procedure.
Subject to the conditions set forth in this Agreement, Seller and Buyer
agree to consummate all of the following closing transactions on the
Closing Date:
(a) Seller will assign and transfer to Acquisition Sub good and
valid title in and to the Business Shares, free and clear of
all Liens, by delivering to Acquisition Sub stock certificates
representing the Business Shares, duly endorsed for transfer
or accompanied by duly executed stock powers endorsed in blank
with requisite stock transfer tax stamps, if any, attached.
(b) Seller will deliver or cause to be delivered to Buyer all of
the following:
(i) certificates representing the Business Shares duly
endorsed for transfer by Seller or accompanied by a
duly executed stock power;
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(ii) an irrevocable standby letter of credit (the "Letter
of Credit") having an initial term commencing as of
the Closing and continuing thereafter until March 31,
2003 (the "Initial Letter of Credit Period"), issued
by a nationally recognized bank, naming Buyer as
beneficiary, and issued at all times for the account
of Seller in the amount of $25,000,000 (the "Letter
of Credit Amount"), which letter of credit (A) may be
drawn upon by Buyer at any time upon (1) any failure
of Seller and Parent to satisfy their indemnification
obligations under Article XI of this Agreement or (2)
any failure by the issuer to extend the term of the
letter of credit at Buyer's request during the thirty
(30) day period prior to the expiration of the
Initial Letter of Credit Period or thereafter through
and including the second anniversary of the Closing
Date (after which no such letter of credit shall be
required) and (B) shall contain such other terms as
Buyer may reasonably request; provided that the
Letter of Credit Amount shall be reduced on a dollar
for dollar basis for (i) each drawing made in respect
of such Letter of Credit and (ii) any payment made by
Seller or Parent in respect of their indemnification
obligations under Article XI of this Agreement;
(iii) the Transition Services Agreement substantially in
the form attached hereto as Exhibit C (the
"Transition Services Agreement") and the
Noncompetition Agreement substantially in the form
attached as Exhibit D (the "Noncompetition
Agreement") both duly executed by Parent, Seller and
each Seller Entity, as applicable;
(iv) original releases of, or written authorizations from
Seller's creditors (or the relevant debtor's
creditors) to release, all Liens on the Business
Assets (other than Permitted Liens) including,
without limitation, releases of each mortgage of
record and reconveyances of each deed of trust with
respect to each parcel of Real Property;
(v) certificates of Seller and each Seller Entity in form
and substance reasonably acceptable to Buyer, dated
the Closing Date, stating that the conditions
precedent set forth in Sections 9.01(a), 9.01(b) and
9.01(f) have been satisfied;
(vi) a copy of the text of the resolutions adopted by the
board of directors of Parent and Seller authorizing
the execution, delivery and performance of this
Agreement and the consummation of all of the
transactions contemplated by this Agreement; together
with a certificate or certificates executed on behalf
of Seller by their respective corporate secretaries
certifying to Buyer that each such copy is correct
and complete, and that such resolutions were duly
adopted and have not been amended or rescinded in any
respect;
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(vii) incumbency certificates executed on behalf of Parent
and Seller certifying the signature and office of
each officer executing this Agreement or any of the
Ancillary Agreements;
(viii) resignations (effective as of the Closing) from all
of the directors of the Seller Entities and such
officers of the Seller Entities as Buyer shall have
requested prior to the Closing;
(ix) a copy of the certificate or articles of
incorporation of each of Seller and the Seller
Entities, duly certified as of a recent date by the
Secretary of State of their respective jurisdictions
of incorporation;
(x) the minute books, stock transfer records and
corporate seal (if in existence) of each Seller
Entity and all other materials related to their
corporate administration; and
(xi) such other certificates, documents and instruments as
Buyer may reasonably request related to the
transactions contemplated hereby.
(c) Buyer will deliver or cause to be delivered to Seller all of
the following:
(i) certificates representing all of the Buyer Shares;
(ii) the Cash Purchase Price, by wire transfer in
immediately available funds to an account designated
by Seller;
(iii) a certificate of Buyer in form and substance
reasonably acceptable to Seller, dated the Closing
Date, stating that the conditions precedent set forth
in Sections 9.02(a) and 9.02(b) have been satisfied;
(iv) the Noncompetition Agreement and the Transition
Services Agreement, both duly executed by Buyer;
(v) a copy of the text of the resolutions adopted by the
board of directors of Buyer authorizing the
execution, delivery and performance of this Agreement
and the consummation of all of the transactions
contemplated by this Agreement; along with a
certificate or certificates executed on behalf of
Buyer by its corporate secretary certifying to Seller
that such copy is correct and complete, and that such
resolutions were duly adopted and have not been
amended or rescinded;
(vi) incumbency certificates executed on behalf of Buyer
certifying the signature and office of each officer
executing this Agreement or any of the Ancillary
Agreements; and
(vii) such other certificates, documents and instruments as
Seller may reasonably request related to the
transactions contemplated hereby.
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(d) Immediately prior to the Closing, Seller and each Seller
Entity shall consummate the transfer of the Seller Entity
Assets to Seller and the assumption of the Seller Entity
Assumed Liabilities by Seller pursuant to the Intercompany
Agreement and shall have delivered to Buyer the Intercompany
Agreement, duly executed by all parties thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
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Parent and Seller jointly and severally represent and warrant to Buyer
that, except as set forth in the disclosure schedule they delivered to Buyer on
the date hereof (the "Disclosure Schedule"), each of the statements set forth in
this Article IV are correct and complete. The Disclosure Schedule sets forth the
exceptions to the representations and warranties contained in this Article IV
under captions referencing the Sections to which such exceptions apply;
provided, that (a) any disclosure with respect to a Section of this Agreement
shall constitute disclosure with respect to other Sections of this Agreement to
the extent that such disclosure would reasonably be expected to be pertinent to
such other Sections in light of and readily apparent from the disclosure made
and (b) the mere listing (or inclusion of a copy) of a document or other item
therein shall not be deemed adequate to disclose an exception to a
representation or warranty made herein, unless the representation or warranty
addresses only the existence of the document or other item itself. For purposes
of this Agreement, a party will be deemed to have "Knowledge" of a particular
fact or other matter if (a) any individual who is serving as an officer or site
or facilities manager (or in any similar capacity) of such party is, or at any
time was, actually aware of such fact or other matter, or (b) such officer or
site or facilities manager could be expected to discover or otherwise become
aware of such fact or other matter in the course of conducting a reasonably
diligent investigation concerning the existence of such fact or other matter.
For purposes of this Agreement, the term "Material Adverse Effect" means a
material adverse effect in the business condition (financial or otherwise),
operations, assets or liabilities of the Business or in Seller's right, title
and interest in and to the Business Shares, provided that such term shall not
include any event or occurrence arising directly out of or resulting from (w)
general economic or financial conditions, (x) a change, condition or
circumstance in the industry in which the Business operates, (y) the existence
of this Agreement or any public announcement thereof or (z) a general public
awareness of Seller's intention to sell the Business.
4.01 Incorporation and Corporate Power.
Parent, Seller and each Seller Entity are corporations duly
incorporated, validly existing and in good standing under the laws of
their jurisdictions of incorporation. Parent, Seller and each Seller
Entity have all requisite corporate power and authority necessary to
own and operate the Business and to carry on the Business as now being
conducted and presently proposed to be conducted. The copies of the
respective articles or certificates of incorporation and bylaws of
Parent, Seller and each Seller Entity, which they previously provided
to Buyer, reflect all amendments thereto and are correct and complete
as of the date hereof. Seller and each Seller Entity are duly qualified
as foreign corporations to do business in every jurisdiction in which
the nature of the Business or their ownership of the Business Assets
requires them to be so qualified, except for those jurisdictions in
which the failure to be so qualified would not, individually or in the
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aggregate, have a Material Adverse Effect. The Disclosure Schedule
under the caption referencing this Section 4.01 sets forth a correct
and complete list of all jurisdictions in which Seller and each Seller
Entity are qualified.
4.02 Capitalization.
(a) The authorized capital stock of:
(i) Federal Cartridge Company consists solely of 1,000
shares of common stock, par value $.01 per share, of
which 99 shares are issued and outstanding;
(ii) Xxxxxxx Outdoor Corporation consists solely of 1,000
shares of common stock, par value $.01 per share, of
which 1,000 shares are issued and outstanding; and
(iii) Estate Cartridge, Inc. consists solely of 1,000,000
shares of common stock, par value $.01 per share, of
which 16,018 shares are issued and outstanding.
(b) Seller is the sole stockholder of each Seller Entity. All
issued and outstanding shares of capital stock of the Seller
Entities (collectively, the "Seller Entity Shares") are duly
authorized, validly issued, fully paid, nonassessable and are
free of preemptive rights or any other third party rights. All
of the Seller Entity Shares have been offered, sold and
delivered by the issuer thereof in compliance with applicable
securities and corporate laws. None of the Seller Entity
Shares have been issued in violation of any preemptive rights,
rights of first refusal or similar rights.
(c) There are no options, warrants, calls, subscriptions,
convertible securities, rights (including preemptive rights),
commitments or agreements of any character to which any Seller
Entity is a party or by which any of them are bound obligating
any Seller Entity to issue, exchange, transfer, sell,
repurchase, redeem or otherwise acquire any shares of their
capital stock or obligating any of them to grant, extend,
accelerate the vesting of or enter into any such subscription,
option, warrant, equity security, call, right, commitment or
agreement. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation or similar
rights with respect to any Seller Entity. Except as
contemplated by this Agreement, there are no registration
rights agreements, voting trusts, proxies or other agreements
or understandings to which any Seller Entity is a party or by
which any of them are bound with respect to any equity
security of any class of any Seller Entity. The share
registers of each Seller Entity are current, complete and
correct in all material respects.
4.03 Execution, Delivery; Valid and Binding Agreement.
The execution, delivery and performance of this Agreement and the
agreements attached as exhibits or otherwise entered into in connection
with the transactions contemplated
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hereby (collectively, the "Ancillary Agreements") by Parent and Seller,
and the consummation of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all requisite action
of their respective boards of directors and stockholders, and no other
proceedings or actions on the part of Parent or Seller are necessary to
authorize the execution, delivery and performance of this Agreement or
the Ancillary Agreements. This Agreement and the Registration Rights
Agreement have been duly executed and delivered by Parent and Seller
and constitutes the valid and binding obligation of each such party,
enforceable in accordance with its terms, except that such enforcement
may be subject to any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws, now or hereafter in
effect, relating to or limiting creditors' rights generally and the
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought. Upon delivery at Closing, each of the other Ancillary
Agreements shall have been duly executed and delivered by Parent and
Seller, as applicable, and each shall constitute the valid and binding
obligation of Parent and Seller, as applicable, enforceable in
accordance with its terms, except that such enforcement may be subject
to any bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other laws, now or hereafter in effect, relating to or
limiting creditors' rights generally and the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
4.04 Governmental Authorities; Consents.
Except for the applicable requirements of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the "HSR Act"), neither Parent, nor
Seller nor any Seller Entity (each, a "Seller Party") is required to
submit any notice, report or other filing with any Governmental
Authority in connection with its execution or delivery of this
Agreement or the Ancillary Agreements or the consummation of the
transactions contemplated hereby or thereby. Except as set forth in the
Disclosure Schedule under the caption referencing this Section 4.04
(collectively, the "Required Seller Consents"), no Seller Party is
required to obtain any consent, approval, authorization, waiver,
permit, grant, license, franchise, concession, agreement, license or
exemption (each, a "Consent") of any Governmental Authority or any
material Consent of any other party or person in connection with its
execution, delivery and performance of this Agreement or the Ancillary
Agreements or the transactions contemplated hereby and thereby. For
purposes of this Agreement, the term "Governmental Authority" means any
domestic or foreign nation or government, any state or other political
subdivision thereof, and any domestic or foreign entity or authority
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
4.05 Noncontravention.
Except as set forth in the Disclosure Schedule under the caption
referencing the specific subsections of this Section 4.05, neither the
execution and delivery of this Agreement or
10
any Ancillary Agreement nor the consummation or performance of any of
the transactions contemplated hereby or thereby will, directly or
indirectly (with or without notice or lapse of time):
(a) conflict with or result in a breach of any provision of the
certificate or articles of incorporation, bylaws or other
organizational documents of any Seller Party;
(b) conflict with or violate any material federal, state, local,
municipal, foreign, international, multinational or other
constitution, law, ordinance, principle of common law, code,
regulation, statute or treaty (each a "Legal Requirement")
that relates to or affects the Business or the Business Assets
except for conflicts or violations that would not have,
individually or in the aggregate, a Material Adverse Effect;
(c) conflict with, violate, or give any Governmental Authority or
other person the right to challenge any of the transactions
contemplated by this Agreement or the Ancillary Agreements or
to exercise any remedy or obtain any relief under, any order,
injunction, judgment, decree, ruling, assessment or
arbitration award of any Governmental Authority or arbitrator
(each an "Order") that relates to or affects in any way the
Business or the Business Assets, other than consents,
authorizations or approvals required under the HSR Act;
(d) conflict with, violate or give any Governmental Authority the
right to revoke, withdraw, suspend, cancel, terminate or
modify any Permit (as defined in Section 4.24(b)) or
Environmental Permit (as defined in Section 4.25(a)), except
for such revocations, withdrawals, suspensions, cancellations,
terminations or modifications that would not have,
individually or in the aggregate, a Material Adverse Effect;
(e) breach any provision of, constitute a default under or give
any person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of,
or payment under, or to cancel, terminate or modify, any
material Business Contract (as defined in Section 4.16(a)),
except for breaches, defaults or rights that would not have,
individually or in the aggregate, a Material Adverse Effect;
or
(f) result in the imposition or creation of any Lien upon or with
respect to any of the Business Assets, except for Liens that
would not have, individually or in the aggregate, a Material
Adverse Effect.
4.06 Financial Statements.
(a) Seller has delivered to Buyer the audited consolidated
financial statements of Seller as of and for the periods ended
December 31, 2000 (the "Audited Balance Sheet Date") and
December 31, 1999, together with a report thereon by Seller's
auditors (the "Audited Financial Statements"), and the
unaudited consolidated financial statements of the Business as
of and for the periods ended December 31, 2000 and 1999, and
September 30, 2001 (the "Unaudited Business Financial
11
Statements"), including in clause (i) a balance sheet,
statements of income and retained earnings and a statement of
cash flows.
(b) The Audited Financial Statements are based upon the
information contained in Seller's books and records and fairly
present in all material respects Seller's financial condition
as of the dates thereof and results of operations for the
periods referred to therein. The Unaudited Business Financial
Statements are based upon the information contained in the
books and records of Seller and the Seller Entities and fairly
present in all material respects the financial condition of
the Business as of the dates thereof and results of operations
for the periods referred to therein. The Audited Financial
Statements and the Unaudited Business Financial Statements
(other than those for the period ended September 30, 2001)
have been prepared in accordance with GAAP. The Unaudited
Business Financial Statements (other than those for the
periods ended December 31, 2000 and 1999) have been prepared
on a basis consistent with the Audited Financial Statements
and in accordance with GAAP applicable to unaudited interim
financial statements (and thus may not contain all notes and
may not contain prior period comparative data which are
required to be prepared in accordance with GAAP), and reflect
all adjustments necessary to a fair statement of the results
for the interim period(s) presented (except for normally
recurring year-end adjustments).
4.07 Absence of Undisclosed Liabilities.
There are no material liabilities or obligations of a nature required
by GAAP to be reflected on the Unaudited Business Financial Statements or of
which any Seller Party has actual knowledge (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due, and
regardless of when asserted) through the date hereof, except (a) as reflected or
reserved against in the Unaudited Business Financial Statements, (b) current
liabilities which have arisen after the date of the most recent Unaudited
Business Financial Statements (the "Unaudited Balance Sheet Date") in the
ordinary course of business consistent with past practice, or (c) as otherwise
set forth in the Disclosure Schedule under the caption referencing this Section
4.07.
4.08 Absence of Certain Developments.
Except as set forth in the Disclosure Schedule under the caption
referencing the specific subsections of this Section 4.08, and except
for the solicitation and negotiation of a transaction to dispose of the
Business and the transactions contemplated by this Agreement, since the
Unaudited Balance Sheet Date through the date hereof, Seller and each
Seller Entity have conducted the Business only in the ordinary course
of business consistent with past practice and have not, on behalf of,
in connection with or relating to the Business or the Business Assets:
(a) suffered or otherwise incurred or experienced any Material
Adverse Effect;
12
(b) delayed or postponed or accelerated the payment of accounts
payable and other liabilities other than in the ordinary
course of business;
(c) sold, assigned, pledged, encumbered, transferred or granted
(including, without limitation, transfers to any employees,
affiliates or shareholders) any licenses, patents, trademarks,
trade names, copyrights, trade secrets or other intangible
assets;
(d) suffered any theft, damage, destruction or loss of or to any
property or properties owned or used by it, whether or not
covered by insurance, that would have, individually or in the
aggregate, a Material Adverse Effect;
(e) entered into or modified any employment, severance or similar
agreements or arrangements with or granted any bonuses, salary
or benefits increases, severance or termination pay to, any
officer or employee, or consultant outside the ordinary course
of business consistent with past practice;
(f) adopted or amended any bonus, profit sharing, compensation,
stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, trust, fund or
group arrangement for the benefit or welfare of any employees,
officer, director or affiliate;
(g) made any capital expenditure or commitment therefore in excess
of $250,000;
(h) acquired (by merger, exchange, consolidation, acquisition of
stock or assets or otherwise) any corporation, partnership,
limited liability company, joint venture or other business
organization or division or material assets thereof;
(i) made any change in accounting principles or practices from
those utilized in the preparation of the Audited Financial
Statements or the Unaudited Business Financial Statements;
(j) sold, pledged, encumbered or otherwise burdened any shares of
capital stock of any Seller Entity;
(k) taken any action or entered into any agreement not described
in subsections (a) through (j) above that is material to
Seller or any Seller Entity; or
(l) agreed or committed, whether orally or in writing, to do any
of the foregoing.
4.09 Real Property.
(a) The Division Real Property (as defined in the Contribution
Agreement) and the real property described in the Disclosure
Schedule under the caption referencing this Section 4.09(a),
including all buildings, structures, improvements, fixtures,
systems and equipment thereon and attached or appurtenant
thereto, together with all rights and easements appurtenant to
and benefiting such real property (together with the Division
Real Property, the "Real Property"), constitutes all of the
real
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property owned or used by Seller (in connection with the
Business) or by any Seller Entity. Except as set forth in the
Disclosure Schedule under the caption referencing the specific
subsections of this Section 4.09(a), with respect to each
parcel of Real Property owned by Seller (in connection with
the Business) or any Seller Entity (other than any real estate
that is a Seller Entity Asset as defined in Section 6.06):
(i) Seller or the Seller Entity has good, valid and
insurable title in fee simple absolute to such
parcel, free and clear of any Lien (other than
Permitted Liens);
(ii) there are no pending or, to the Knowledge of each
Seller Party, threatened condemnation proceedings,
lawsuits, or administrative actions relating to such
parcel, or other matters affecting adversely the
current use, occupancy, or value thereof that would
have, individually or in the aggregate, a Material
Adverse Effect;
(iii) the legal description of such parcel set forth in the
Disclosure Schedule under the caption referencing
this Section 4.09(a)(iii) describes such parcel
accurately; the buildings and improvements are
located within the boundary lines of such parcel, are
not as currently used in violation of applicable
setback requirements, zoning laws, and ordinances
(and, to the Knowledge of each Seller Party, none of
such parcel or the buildings or improvements thereon
are subject to "permitted non-conforming use" or
"permitted non-conforming structure"
classifications), and do not encroach on any easement
which may burden the land; such parcel does not serve
any adjoining property for any purpose inconsistent
with the current use of such parcel; and the
buildings and improvements on such parcel are not
located within any flood plain or subject to any
similar type restriction for which any permits or
licenses necessary to the use thereof have not been
obtained;
(iv) all facilities located on such parcel have received
all material approvals of Governmental Authorities
(including licenses and permits) required in
connection with the ownership or operation thereof as
currently used and have been operated and maintained
in all material respects in accordance with
applicable laws, rules, and regulations;
(v) there are no leases, subleases, licenses,
concessions, or other agreements, written or oral,
granting to any party or parties the right of use or
occupancy of any portion of such parcel;
(vi) there are no outstanding options or rights of first
refusal to purchase such parcel, or any portion
thereof or interest therein;
(vii) there are no parties (other than Seller and the
Seller Entities) in possession of such parcel;
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(viii) all facilities located on such parcel are supplied
with utilities and other services necessary in all
material respects for the operation of such
facilities as currently used, including gas,
electricity, water, telephone, sanitary sewer, and
storm sewer, all of which services are adequate in
all material respects in accordance with all
applicable laws, ordinances, rules, and regulations
and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefiting such
parcel;
(ix) such parcel abuts on and has direct vehicular access
to a public road, or has access to a public road via
a permanent, irrevocable, appurtenant easement
benefiting such parcel, and access to such parcel is
provided by paved public right-of-way with adequate
curb cuts available;
(x) such parcel is assessed for real property tax
purposes as a wholly independent tax lot, separate
from adjoining land or improvements not constituting
a part of such parcel;
(xi) the buildings, structures and improvements included
within such parcel are structurally sound and in good
repair in all material respects;
(xii) Seller has not received any notice from any
Governmental Authority that such parcel is in
violation of the provisions of any Legal Requirement,
including, without limitation, any zoning,
subdivision, environmental protection, building, fire
or health laws, rules or regulations the violation of
which would have, individually or in the aggregate, a
Material Adverse Effect; and (xiii) to the extent
such parcel is located in Minnesota, neither Parent
nor Seller have any knowledge of any "xxxxx" on such
parcel within the meaning of Minn. Xxxx.xx. 1031.
(b) The Real Property used by Seller or any Seller Entity under
any leases, subleases, licenses or use or occupancy agreements
set forth in the Disclosure Schedule under the caption
referencing this Section 4.09(b) (the "Real Property Leases")
constitutes all of the real property that Seller (in
connection with the Business) or any Seller Entity leases or
subleases (collectively, the "Leased Real Property"). The
Disclosure Schedule under the caption referencing this Section
4.09(b) identifies the subject Leased Real Property. Seller
has delivered to Buyer complete and accurate copies of each
Real Property Lease, none of which have been modified in any
respect, except to the extent that such modifications are
disclosed by the copies delivered to Buyer. Except as set
forth in the Disclosure Schedule under the caption referencing
this Section 4.09(b), with respect to each Real Property Lease
(other than any real property lease that is a Seller Entity
Asset as defined in Section 6.06):
15
(i) Seller or the Seller Entity is the owner or holder of
the leasehold estate or interest in the Leased Real
Property that is the subject of such Real Property
Lease, free and clear of all Liens (other than
Permitted Liens);
(ii) such Real Property Lease is legal, valid, binding,
enforceable, and in full force and effect in all
material respects, except as such enforcement may be
limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application affecting enforcement of creditors rights
generally;
(iii) such Real Property Lease will continue to be legal,
valid, binding, enforceable, and in full force and
effect on identical terms following the consummation
of the transactions contemplated hereby, except as
such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting
enforcement of creditors rights generally;
(iv) to the Knowledge of each Seller Party, no party to
such Real Property Lease is in breach or default, and
no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder
except for such breaches, defaults or events that
would not have, individually or in the aggregate, a
Material Adverse Effect;
(v) there are no disputes, oral agreements, or
forbearance programs in effect as to such Real
Property Lease except for such disputes, agreements
and programs that would not, individually or in the
aggregate, have a Material Adverse Effect;
(vi) if such Real Property Lease is a sublease, the
representations and warranties set forth in
subsections (i) through (v) above are true and
correct with respect to the underlying lease;
(vii) neither Seller nor any Seller Entity has assigned,
transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or
subleasehold;
(viii) all facilities leased or subleased thereunder have
received all material approvals of Governmental
Authorities (including licenses and permits) required
in connection with the operation thereof as currently
used and have been operated and maintained in all
material respects in accordance with applicable laws,
rules, and regulations;
(ix) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary
in all material respects for the operation of such
facilities as currently used;
16
(x) neither Seller nor any Seller Entity has received any
notice from any Governmental Authority that such
parcel is in violation of the provisions of any Legal
Requirement, including, without limitation, any
zoning, subordination, environmental protection,
building, fire or health laws, rules or regulations
the violation of which would have, individually or in
the aggregate, a Material Adverse Effect.
4.10 Assets.
(a) Except as set forth in the Disclosure Schedule under the
caption referencing this Section 4.10(a), Seller or the
applicable Seller Entity has good, valid and marketable title
to all of the material tangible Business Assets (other than
the Real Property), free and clear of all Liens (other than
Permitted Liens).
(b) The Business Assets and the Seller Entity Assets (as defined
in Section 6.06) comprise all assets required for the
continued conduct of the Business as it is now being conducted
by Seller and the Seller Entities. The Seller Entities do not
own any capital stock, partnership interest, joint venture
interest or any other security or ownership interest issued by
any corporation, organization or entity. The Business Assets,
taken as a whole, constitute all the properties and assets
relating to or used or held for use in connection with the
Business, other than the Division Excluded Assets (as defined
in the Contribution Agreement) and any other assets excluded
from the definition of Business Assets as expressly provided
herein and inventory sold, cash disposed of, accounts
receivable collected, prepaid expenses realized, contracts
fully performed, properties or assets replaced by equivalent
or superior properties or assets, in each case in the ordinary
course of business. Except for Division Excluded Assets, any
other assets excluded from the definition of Business Assets
as expressly provided herein or as otherwise set forth in the
Disclosure Schedule under the caption referencing this Section
4.10(b), there are no assets or properties used in the
operation of the Business and owned by any person or entity
other than Seller or a Seller Entity that will not be leased
or licensed to any Seller Entity immediately after the Closing
under valid, current leases or license arrangements.
(c) The Business Assets are in all material respects adequate for
the purposes for which such assets are currently used or are
held for use. All equipment, machinery, tools, dies, molds,
computers, work stations, test equipment, vehicles, furniture,
fixtures, furnishings, leaseholds improvements and other fixed
assets are in reasonably good repair and operating condition
(subject to normal wear and tear) and, to the Knowledge of
each Seller Party, there are no defects, facts or conditions
affecting the Business Assets which could, individually or in
the aggregate, interfere in any respect with the use,
occupancy or operation thereof as currently used, occupied or
operated, or their adequacy for such use except, in each case,
as would not have, individually or in the aggregate, a
Material Adverse Effect.
17
4.11 Accounts Receivable.
The Division Receivables (as defined in the Contribution Agreement) and
the accounts and notes receivable of the Seller Entities (including,
without limitation, the accounts receivable reflected on the Unaudited
Business Financial Statements which have not been collected prior to
the Closing) are valid receivables, are not subject to valid
counterclaims or setoffs (except for immaterial counterclaims or
setoffs arising in the ordinary course of business) and are collectible
in accordance with their terms, except (a) as otherwise described in
the Disclosure Schedule under the caption referencing this Section
4.11, and (b) to the extent of the bad debt reserve reflected on the
Unaudited Business Financial Statements.
4.12 Inventory.
The Division Inventory (as defined in the Contribution Agreement) and
all inventories of supplies, raw materials, parts, finished goods,
work-in-process, product prototypes and developments, product labels,
packaging materials and office and other supplies of the Seller
Entities (together with the Division Inventory, the "Inventory") are of
good and usable quality and, except as set forth in the Disclosure
Schedule under the caption referencing this Section 4.12, (a) are not
obsolete or discontinued, (b) are of such quality as to meet in all
material respects the quality control standards of Seller and the
Seller Entities and all material Legal Requirements, (c) with respect
to finished goods, are saleable as current inventories in all material
respects in the ordinary course of business, (d) are recorded on the
books of the Business at the lower of cost or market value determined
in accordance with GAAP and (e) no write-down in inventory has been
made or should have been made pursuant to GAAP during the past two
years. The Disclosure Schedule, under the caption referencing this
Section 4.12, lists the locations and net book value as of September
30, 2001 of all Inventory.
4.13 Customers.
(a) The Disclosure Schedule under the caption referencing this
Section 4.13(a) sets forth:
(i) the names and addresses of all customers of the
Business that ordered goods or services with an
aggregate value for each such customer of $500,000 or
more during the nine-month period ended September 30,
2001 (each, a "Significant Customer"), and
(ii) the amount for which each Significant Customer was
invoiced during such period.
(b) As of the date hereof, no Seller Party has received any notice
or otherwise has any Knowledge that any Significant Customer:
(i) has ceased, or will cease, to use the products, goods
or services of the Business except for any such
cessations that would not have, individually or in
the aggregate, a Material Adverse Effect, or
18
(ii) has substantially reduced or will substantially
reduce its use of the products, goods or services of
the Business.
(c) To the Knowledge of each Seller Party, as of the date hereof,
no Significant Customer has otherwise threatened to take any
action described in Section 4.13(b) due to the consummation of
the transactions contemplated by this Agreement or the
Ancillary Agreements.
4.14 Suppliers; Raw Materials.
(a) The Disclosure Schedule under the caption referencing this
Section 4.14(a) sets forth:
(i) the names and addresses of all suppliers (including
without limitation Seller and any of its affiliates)
from which the Business ordered raw materials,
supplies, merchandise and other goods and services
with an aggregate purchase price for each such
supplier of $250,000 or more during the nine-month
period ended September 30, 2001 (each a "Significant
Supplier"), and
(ii) the amount for which each Significant Supplier
invoiced the Business during such period.
(b) With respect to each Business Contract with a Significant
Supplier concerning the supply of raw materials, supplies,
merchandise or other goods or services, no Seller Party has
received any notice or has any Knowledge as of the date hereof
of any pending or proposed material increase in the price or
prices thereunder during the term thereof. No Seller Party has
any Knowledge that as of the date hereof any Significant
Supplier will not sell raw materials, supplies, merchandise
and other goods or services to the Business at any time after
the Closing on terms and conditions substantially the same as
are in effect immediately prior to the Closing, subject to
price increases in the ordinary course of business consistent
with past practice.
(c) To the Knowledge of each Seller Party, as of the date hereof
no Significant Supplier has otherwise threatened to take any
action described in Sections 4.14(b) due to the consummation
of the transactions contemplated by this Agreement or the
Ancillary Agreements.
4.15 Tax Matters.
(a) Definitions.
(i) "Affiliated Group" means any affiliated group within
the meaning of Code ss. 1504(a) or any similar group
defined under a similar provision of any state, local
or foreign law.
19
(ii) "Tax" means any federal, state, local or foreign tax,
charge, fee, levy or other assessment of every kind
or nature, including, without limitation, all net
income, gross income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, profit,
windfall profit, capital stock, environmental,
license, withholding, payroll, employment,
unemployment, social security, disability, excise,
estimated, severance, stamp, registration,
occupation, premium, personal or real property,
alternative or add-on minimum, or other taxes,
customs duties, fees, assessments, deposits or
charges of any kind or nature, including, without
limitation, all interest and penalties thereon and
additions to tax or additional amounts imposed by any
taxing authority, domestic or foreign.
(iii) "Tax Return" means any return, declaration, report,
claim for refund, or information return or statement
relating to Taxes, including any schedule or
attachment thereto, and including any amendment
thereof.
(b) Each Seller Entity has timely filed all material Tax Returns
that it was required to file. All such Tax Returns were
correct and complete in all material respects. All material
Taxes owed by any Seller Entity (whether or not shown on any
Tax Return) have been timely and properly paid. No Seller
Entity is currently the beneficiary of any extension of time
within which to file any Tax Return. No material claim has
ever been made in writing or otherwise to the Knowledge of any
Seller Party by an authority in a jurisdiction where any
Seller Entity does not file Tax Returns that any Seller Entity
is or may be subject to taxation by that jurisdiction which
claim has not been resolved in full. There are no material
Liens on any of the Business Assets that arose in connection
with any failure (or alleged failure) to pay any Tax, other
than Permitted Liens and any Lien being contested in good
faith by appropriate proceedings.
(c) Each Seller Entity has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor,
stockholder or other third party.
(d) No Governmental Authority has threatened in writing or
otherwise to the Knowledge of any Seller Party an assessment
of any additional material Taxes owed by any Seller Entity for
any period for which Tax Returns have been filed. There is no
dispute or claim concerning any material Tax liability of any
Seller Entity either (i) claimed or raised by any Governmental
Authority in writing or (ii) as to which any Seller Party has
Knowledge. The Disclosure Schedule under the caption
referencing this Section 4.15(d) lists all federal, state,
local, and foreign income and franchise Tax Returns filed with
respect to each Seller Entity and its business or property for
the most recent taxable period ended on or before October 15,
2001, indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of
audit. Parent and Seller shall provide to Buyer within three
weeks of the date of this Agreement, as an amendment to the
Disclosure Schedule under the caption referencing this Section
4.15(d), a list of all federal, state, local and foreign
excise, sales and use,
20
real property and personal property Tax Returns filed with
respect to each Seller Entity and its business or property for
the most recent taxable period ended on or before October 15,
2001, and shall indicate thereon those Tax Returns that have
been audited or are currently the subject of audit. Parent and
Seller have delivered to Buyer correct and complete copies of
all federal income Tax Returns for the preceding three taxable
years. Parent and Seller shall deliver to Buyer, within three
weeks of the date of this Agreement, correct and complete
copies of all examination reports and statements of
deficiencies relating to each Seller Entity for all open Tax
periods.
(e) Except as disclosed on the Disclosure Schedule under the
caption referencing this Section 4.15(e), no Seller Entity has
waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax
assessment or deficiency.
(f) No Seller Entity has filed a consent under Codess. 341(f)
concerning collapsible corporations. No Seller Party has made
any payments, is obligated to make any payments, or is a party
to any agreement that would obligate it to make any payments
that will not be deductible under Codess. 280G as a result of
any of the transactions contemplated by this Agreement. Each
of Seller and Parent is a U.S. person within the meaning of
Section 7701(a)(30) of the Code. Each Seller Entity has
disclosed on its federal income Tax Returns all positions
taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of
Codess. 6662. No Seller Entity is a party to any Tax
allocation or sharing agreement. Except as disclosed on the
Disclosure Schedule under the caption referencing this Section
4.15(f), none of the Seller Entities has been a member of an
Affiliated Group filing a consolidated federal income Tax
Return other than a group the common parent of which is
Parent.
(g) The unpaid Taxes of each Seller Entity did not, as of the date
of the Unaudited Business Financial Statements, exceed the
reserve for Tax Liability, if any, (rather than any reserve
for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the
Unaudited Business Financial Statements (rather than in any
notes thereto).
(h) To the Knowledge of each Seller Party, none of the Seller
Entities will be required to include any material item of
income in, or exclude any material item of deduction from,
taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any (i) change in
method of accounting for a taxable period ending on or prior
to the Closing Date under Codess. 481(c) (or any corresponding
or similar provision of state, local or foreign income Tax
law); (ii) "closing agreement" as described in Codess. 7121
(or any corresponding or similar provision of state, local or
foreign income Tax law) executed on or prior to the Closing
Date; (iii) installment sale or open transaction disposition
made on or prior to the Closing Date; or (iv) prepaid amount
received on or prior to the Closing Date.
21
(i) The Affiliated Group in which the Seller Entities are
currently included has timely filed all material income Tax
Returns that it was required to file for each taxable period
during which any of the Seller Entities was a member of the
group. All such Tax Returns were correct and complete in all
material respects. All material income Taxes owed by the
Affiliated Group in which the Seller Entities are currently
included (whether or not shown on any Tax Return) have been
timely and properly paid for each taxable period during which
any of the Seller Entities was a member of the group.
(j) No Governmental Authority has threatened in writing, or
otherwise to the Knowledge of any Seller Party, an assessment
of any additional material income Taxes against the Affiliated
Group in which the Seller Entities are currently included for
any taxable period during which any of the Seller Entities was
a member of the group. There is no dispute or claim concerning
any material income Tax liability of the Affiliated Group in
which the Seller Entities are currently included for any
taxable period during which any of the Seller Entities was a
member of the group either (i) claimed or raised by any
Governmental Authority in writing or (ii) as to which any
Seller Party has Knowledge. Except as disclosed on the
Disclosure Schedule under the caption referencing this Section
4.15(j), the Affiliated Group in which the Seller Entities are
currently included has not waived any statute of limitations
in respect of any income Taxes or agreed to any extension of
time with respect to any income Tax assessment or deficiency
for any taxable period during which any of the Seller Entities
was a member of the group.
4.16 Contracts and Commitments.
(a) The Disclosure Schedule under the caption referencing this
Section 4.16 contains an accurate and complete list of:
(i) each Business Contract (as defined below) with any
labor union or other employee representative of a
group of employees relating to wages, hours and other
conditions of employment, including, without
limitation, any collective bargaining agreement;
(ii) each Business Contract relating to bonus, pension,
profit sharing, retirement or other forms of deferred
compensation plans, other than as described in the
Disclosure Schedule under the caption referencing
Section 4.21 (or excluded by such Section from
inclusion thereunder);
(iii) each Business Contract relating to hospitalization
insurance or any other welfare benefit plan or
practice, whether formal or informal, other than as
described in the Disclosure Schedule under the
caption referencing Section 4.21 (or excluded by such
Section from inclusion thereunder);
(iv) each Business Contract relating to the employment of
any officer or individual employee that provides for
annual base salary payments in
22
excess of $100,000 or relating to severance pay for
any such person that has an aggregate potential
future liability in excess of $100,000;
(v) each Business Contract that involves an obligation to
maintain confidentiality;
(vi) each Business Contract relating to the borrowing of
money or to mortgaging, pledging or otherwise placing
a Lien on any of the Business Assets;
(vii) each Business Contract that involves a guaranty of
any obligation for borrowed money or otherwise;
(viii) each Business Contract wherein Seller or any Seller
Entity is a lessee of, or holds or operates any
personal property, owned by any other party, for
which the annual rental exceeds $100,000;
(ix) each Business Contract wherein Seller or any Seller
Entity is a lessor of, or permits any third party to
hold or operate, any property, real or personal, for
which the annual rental exceeds $100,000;
(x) each Business Contract with a Government Authority
(each, a "Government Contract");
(xi) each Business Contract or group of related Business
Contracts that involve the performance of services or
the delivery of goods or materials by Seller or any
Seller Entity having an amount or value in excess of
$100,000;
(xii) each Business Contract or group of related Business
Contracts that involve the provision of services or
the delivery of goods or materials to Seller or any
Seller Entity having an amount or value in excess of
$100,000;
(xiii) each Business Contract relating to the distribution
of goods or materials or to the payment of a
commission or other form of remuneration in
connection with the sale of goods or materials having
an amount or value in excess of $100,000;
(xiv) each Business Contract or group of related Business
Contracts (other than Business Contracts covered by
the other subsections of this Section 4.16(a))
continuing over a period of more than six months from
the date or dates thereof, not terminable by Seller
or a Seller Entity on 30 days' or less notice without
penalty and involving more than $100,000;
(xv) each Business Contract containing covenants that in
any manner and to any extent purport to restrict the
right of Seller or any Seller Entity to freely engage
in business anywhere in the world;
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(xvi) each Business Contract relating to the payment or
receipt of royalties or other compensation by Seller
or any Seller Entity in connection with the
Intellectual Property Rights;
(xvii) each Business Contract relating to the sharing of
profits, losses, costs or liabilities;
(xviii) each Business Contract relating to capital
expenditures in excess of $100,000;
(xix) each Business Contract relating to the sale of any
material capital asset;
(xx) each Business Contract between an Insider and Seller
or any Seller Entity;
(xxi) each material Business Contract which is terminable
by the other party thereto upon the failure of Seller
or any Seller Entity to satisfy financial or
performance criteria set forth therein; and
(xxii) any other Business Contract which is either material
to the Business or was not entered into in the
ordinary course of business.
For purposes of this Agreement, the term "Business Contract"
means any contract, purchase order, agreement, commitment,
promise, undertaking or understanding (other than the Real
Property Leases) currently in effect, whether oral or written
and whether express or implied, relating to the Business or
the Business Assets and (x) under which Seller (with respect
to the Business) or any Seller Entity has or may acquire any
rights or benefits, (y) under which Seller (with respect to
the Business) or any Seller Entity has or may become subject
to any obligation or liability or (z) by which Seller or any
Seller Entity, the Business Shares or any of the Business
Assets are or may become affected or bound.
(b) Except as set forth in the Disclosure Schedule under the
caption referencing this Section 4.16(b), with respect to each
Business Contract:
(i) such Business Contract is in full force and effect
and is valid and enforceable against each party
thereto in accordance with its terms in all material
respects, except as such enforcement may be limited
by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application
affecting enforcement of creditors' rights or by
general principles of equity;
(ii) no Seller Party has any Knowledge that any such
Business Contract will upon completion or performance
thereof have a Material Adverse Effect;
(iii) Seller and the Seller Entities and, to the Knowledge
of each Seller Party, all other parties thereto are
and at all times have been in compliance with all
applicable material terms and conditions of such
Business Contracts;
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(iv) to the Knowledge of each Seller Party, no event has
occurred and no circumstance exists that (with or
without notice or lapse of time) may contravene,
conflict with or result in a breach of, or give any
party to such Business Contract the right to declare
a default or exercise any remedy under, or to
accelerate the maturity or performance of, or payment
under, or to cancel, terminate or modify, any such
Business Contract except for any such event or
circumstance that would not have, individually or in
the aggregate, a Material Adverse Effect;
(v) no Seller Party has any Knowledge of any actual,
alleged, threatened, possible or potential material
violation or material breach of or material default
under such Business Contract by any party thereto;
(vi) that grants a license of any material Intellectual
Property Rights to any Seller Entity, such Business
Contract will not be terminated and the rights
granted under it will not be impaired by reason of
Buyer's acquisition of the Business Shares and/or the
resulting change of control.
(c) In addition to the foregoing representations, with respect to
each Government Contract:
(i) Seller and each of the Seller Entities, as
applicable, have complied with all material Legal
Requirements relating thereto, all representations
and certifications executed with respect to such
Government Contract were accurate and Seller and each
Seller Entity, as applicable, have fully complied
with all such representations and certifications, and
no termination or default, cure notice or show cause
notice with respect to such Government Contract has
been issued.
(ii) Neither Seller nor any Seller Entity is, or during
the last five years has been, under civil or criminal
investigation, indictment or information by any
Governmental Authority.
(iii) There is not pending, nor to the Knowledge of each
Seller Party, during the last five years has there
been, any investigation of Seller or any Seller
Entity resulting in a material adverse finding with
respect to any alleged irregularity, misstatement or
omission arising under or relating to any such
Government Contract.
(iv) There are (A) no outstanding or, to the Knowledge of
each Seller Party, threatened claims against Seller
or any Seller Entity by any Governmental Authority or
by any prime contractor, subcontractor, vendor or
other third party arising under or relating to any
such Government Contract; and (B) no disputes between
Seller or any Seller Entity and any Governmental
Authority under 41 X.X.X.xx. et seq. (also known as
the Contract Disputes Act) or any other Legal
Requirement, or between Seller or any Seller Entity
and any prime contractor, subcontractor or vendor
arising under or
25
relating to any such Government Contract; and (C) no
Seller Party has any Knowledge of any facts or
circumstances that would or would reasonably be
expected to form the basis of or result in a claim or
dispute described in clauses (A) or (B) of this
Section 4.16(c)(iv).
(v) Neither Seller nor any Seller Entity is, nor during
the last five years has been, suspended or debarred
from doing business with any Governmental Authority
nor, during such period, has Seller or any Seller
Entity been the subject of a finding of
non-responsibility or ineligibility by any
Governmental Authority.
(d) Prior to the date of this Agreement, Buyer has been supplied
with a correct and complete copy of each written Business
Contract, and a written description of each oral Business
Contract (in each case, described in Sections 4.16(a)(i) to
(xxii)), together with all amendments, waivers or other
changes thereto.
4.17 Intellectual Property Rights.
(a) Definitions.
(i) "Copyrights" means all rights in original works of
authorship used or held for use by any Seller Entity
or that relate to or are used or held for use by
Seller in connection with the Business as presently
conducted or proposed to be conducted.
(ii) "Intellectual Property Rights" means all Copyrights,
Know-How, Patent Rights, Trademarks, Trade Secrets,
Owned Software, Licensed Software, Internet IP and
all other similar rights used or held for use by any
Seller Entity or that relate to or are used or held
for use by Seller in connection with the Business as
presently conducted or proposed to be conducted.
(iii) "Know-How" means all of the following to the extent
they are used or held for use by any Seller Entity or
they relate to or are used or held for use by Seller
in connection with the Business as presently
conducted or proposed to be conducted: (A)
manufacturing processes, (B) quality assurance and
process control information, (C) design documents,
(D) specifications and performance criteria, (E)
operating instructions and maintenance manuals, (F)
source and object code copies of the Owned Software
(as defined below) in electronic and printed forms,
(G) computer software tools and related
documentation, including, without limitation, source
and object code copies therefor in electronic and
printed forms, (H) prototypes, models or samples and
(I) files relating to applications for Intellectual
Property Rights.
(iv) "Licensed Software" means all software used or held
for use by any Seller Entity or that relate to or are
used or held for use by Seller under license (or for
which Seller or any Seller Entity has a right to
reproduce and
26
distribute copies) in connection with the Business as
presently conducted or presently proposed to be
conducted.
(v) "Patents" means all rights provided by or relating to
a United States or foreign patent, including, without
limitation, reissues, reexaminations or extensions
thereof, and any applications for the foregoing,
including any divisions, continuations and
continuations-in-part of any of the foregoing, filed
by any Seller Entity or by Seller (in connection with
the Business as presently conducted or proposed to be
conducted) on or before the Closing Date or by Buyer
after the Closing Date on patent disclosures of
record contained in files of Seller or any Seller
Entity on or before the Closing Date.
(vi) "Trade Secrets" means all confidential and
proprietary information used or held for use by any
Seller Entity or that relate to or are used or held
for use by Seller in connection with the Business as
presently conducted or proposed to be conducted and
that (A) derives independent economic value, actual
or potential, from not being generally known to, and
not being readily ascertainable by proper means by,
third parties who can obtain economic value from its
disclosure or use and (B) is the subject of efforts
by Seller or any Seller Entity that have been
reasonable under the circumstances to maintain its
secrecy.
(vii) "Trademarks" means all trade names, trademarks,
service marks, logos, designs, trade dress and
product configurations used or held for use by any
Seller Entity or that relate to or are used or held
for use by Seller in connection with the Business as
presently conducted or proposed to be conducted,
including, without limitation, all (A) goodwill and
common law rights symbolized thereby or associated
therewith, and (B) all registrations and recordings
thereof and all applications in connection therewith
pending thereon in any state and in any country.
(viii) "Owned Software" means all computer programs and
software that any Seller Entity has developed or is
developing or that Seller has developed or is
developing in connection with or that Seller or any
Seller Entity has acquired substantially all rights
for use with the operation of the Business or the
products sold by the Business as presently conducted
or presently proposed to be conducted.
(ix) "Internet IP" means all internet web sites, internet
domain names and commercial e-mail addresses used or
held for use by any Seller Entity or relating to or
used or held for use by Seller in connection with the
Business as presently conducted or proposed to be
conducted.
(b) The Intellectual Property Rights, together with all intangible
Seller Entity Assets (as defined in Section 6.06) and third
party rights licensed to Seller or the Seller Entities under
the license agreements set forth in the Disclosure Schedule
under
27
the caption referencing this Section 4.17(b), comprise all
intellectual property rights relating to or used or held for
use by Seller or any Seller Entity in connection with, and
constitute all intellectual property rights necessary or
desirable for the conduct of, the Business as presently
conducted or proposed to be conducted.
(c) Except as set forth in the Disclosure Schedule under the
caption referencing this Section 4.17(c), all former and
current employees of Seller and each Seller Entity have
executed written agreements that assign to Seller or a Seller
Entity, as applicable, all rights to any material inventions,
improvements, discoveries or information relating to the
Business. No Seller Party has any Knowledge of any material
breach or other material violation of such agreements
(including, without limitation, any breach that materially
lessens the value of the subject matter of the agreement) or
any breach that is reasonably likely to become material within
ninety (90) days after the Closing Date. Neither Seller nor
any Seller Entity have disclosed or authorized the disclosure
of any information considered material, proprietary and
confidential to any person except in the ordinary course of
business (subject to an obligation of confidentiality binding
upon such person) or pursuant to an obligation of
confidentiality binding upon such person. No Seller Party has
any Knowledge of any material breach or other material
violation of such obligations.
(d) The Disclosure Schedule under the caption referencing this
Section 4.17(d) sets forth a correct and complete list and
summary description of all Patents. Except as expressly
described therein, with respect to each Patent:
(i) Seller or a Seller Entity is the owner of all right,
title and interest in and to such Patent, free and
clear of all Liens, and has the right to use such
Patent without payment to any third-party;
(ii) Such Patent is currently in compliance with all Legal
Requirements (including, without limitation, the
payment of filing, examination, annuity and
maintenance fees or other fees, taxes or actions to
continue protection and/or to keep rights in effect
and proofs of working or use), other than
noncompliance that does not materially lessen the
value of such Patent and is not reasonably likely to
have such effect within ninety (90) days after the
Closing Date is valid and enforceable and is not
subject to any maintenance fees or taxes or actions
falling due within ninety (90) days after the Closing
Date.
(iii) Such Patent is not and has not been the subject of
any interference, reissue, reexamination or
opposition Proceeding, and no Seller Party has any
Knowledge of any potentially interfering patent or
patent application.
(iv) No Seller Party has any Knowledge of any infringement
upon such Patent or Knowledge of any challenge or
threat to such Patent.
28
(v) All products made, used or sold under such Patent
have been marked with the proper patent notice.
(e) The Disclosure Schedule under the caption referencing this
Section 4.17(e) sets forth a correct and complete list and
summary description of all Trademarks. Except as expressly
described therein, with respect to each Trademark:
(i) Seller or a Seller Entity is the owner of all right,
title and interest in and to such Trademark, free and
clear of all Liens, and has the right to use such
Trademark without payment to any third-party.
(ii) Such Trademark has been registered with the United
States Patent and Trademark Office, or for marks
identified as existing outside the United States,
with the corresponding foreign registration office,
is currently in compliance with all Legal
Requirements (including the timely post-registration
filing of affidavits of use and incontestability and
renewal applications and all other fees, taxes and
actions required to continue protection and/or to
keep rights in effect and proofs of working or use),
other than noncompliance that does not materially
lessen the value of such Trademark and is not
reasonably likely to have such effect within ninety
(90) days after the Closing Date. is valid and
enforceable and is not subject to any maintenance
fees or taxes or actions falling due within ninety
(90) days after the Closing Date.
(iii) Such Trademark is not and has not been the subject of
any opposition, invalidation or cancellation
Proceeding and no Seller Party has any Knowledge of
any such threatened action with respect to such
Trademark.
(iv) No Seller Party has any Knowledge of any potentially
interfering trademark or trademark application.
(v) No Seller Party has any Knowledge of any infringement
upon such Trademark or of any challenge or threat to
such Trademark.
(vi) Such Trademark does not infringe and to the Knowledge
of each Seller Party has not been alleged to have
infringed upon any trade name, trademark or service
xxxx of any third party.
(vii) All products and materials containing such Trademark
bear the proper federal registration notice where
permitted by law.
(f) The Disclosure Schedule under the caption referencing this
Section 4.17(f) sets forth a correct and complete list and
summary description of all material Copyrights. Except as
expressly described therein, with respect to each such
Copyright:
29
(i) Seller or a Seller Entity is the owner of all right,
title and interest in and to such Copyright, free and
clear of all Liens, and has the right to use such
Copyright without payment to any third-party.
(ii) Such Copyright, if registered or applied for, is
currently in compliance with all Legal Requirements,
other than noncompliance that does not materially
lessen the value of such Copyright and is not
reasonably likely to have such effect within ninety
(90) days of the Closing Date, including, without
limitation, the timely filing of renewal applications
and all other fees, taxes and actions required to
continue protection and/or to keep rights in effect
and proofs of working or use is valid and enforceable
and is not subject to any maintenance fees or taxes
or actions falling due within ninety (90) days after
the Closing Date.
(iii) No Seller Party has any Knowledge of any infringement
upon such Copyright or of any challenge or threat to
such Copyright.
(iv) The subject matter of such Copyright does not
infringe and to the Knowledge of each Seller Party
has not been alleged to infringe any copyright of any
third party and is not a derivative work based upon
the work of any third party.
(v) All works encompassed by such Copyright have been
marked with the proper copyright notice.
(g) Except as described on the Disclosure Schedule under the
caption referencing this Section 4.17(g), with respect to each
material Trade Secret:
(i) The documentation relating to such Trade Secret is
current, accurate and sufficient in detail and
content to identify and explain such Trade Secret and
to allow its full and proper use in all material
respects without reliance on the knowledge or memory
of any individual.
(ii) All reasonable precautions have been taken to protect
the secrecy, confidentiality and value of such Trade
Secret and all other proprietary information that is
material to the Business, including, without
limitation, the implementation and enforcement of
policies requiring each employee or independent
contractor that has access to material Trade Secrets
to execute proprietary information and
confidentiality agreements substantially in Seller's
standard form, and all such current and former
employees and contractors of Seller and each Seller
Entity have executed such an agreement. No Seller
Party has any Knowledge of any material breach or
other violation of such policies or agreements
(including, without limitation, any breach or
violation that materially lessens the value of such
Trade Secret) or any breach that is reasonably likely
to become material within ninety (90) days after the
Closing Date.
30
(iii) Seller or a Seller Entity has good title to and an
absolute right to use such Trade Secret and all other
proprietary information that is material to the
Business. Such Trade Secret and all other proprietary
information that is material to the Business is not
part of the public knowledge or literature and, to
the Knowledge of each Seller Party, such Trade Secret
and all other proprietary information that is
material to the Business has not been used, divulged
or appropriated either for the benefit of any third
party or to the detriment of the owner thereof. Such
Trade Secret and all other proprietary information
that is material to the Business is not subject to
any adverse claim, no Seller Party has any Knowledge
of any challenge or threat to such Trade Secret and
all other proprietary information that is material to
the Business, and such Trade Secret and all other
information that is material to the Business does not
infringe upon any intellectual property right of any
third party. The provisions of this representation
regarding proprietary information, the
confidentiality of which is material to the Business,
apply and govern notwithstanding whether it is
formally within the definition of Trade Secret.
(h) The Disclosure Schedule under the caption referencing this
Section 4.17(h) sets forth a correct and complete list and
summary description of all material Internet IP Rights. Except
as expressly described therein, with respect to each such
Internet IP Right:
(i) Seller or a Seller Entity is the owner of all right,
title and interest in and to such Internet IP Right
in all material respects, free and clear of all
Liens, and has the right to use such Internet IP
Right without payment to any third-party.
(ii) Such Internet IP Right has been registered in the
name of Seller or a Seller Entity and is incompliance
with all material Legal Requirements and any material
requirements imposed by private home registrars
(including, without limitation, the timely filing of
renewal applications and all other fees, taxes and
actions required to continue protection and/or to
keep rights in effect and proofs of working or use),
other than noncompliance that does not materially
lessen the value of such Internet IP Right and is not
reasonably likely to have such effect within ninety
(90) days after the Closing Date.
(iii) Such Internet IP Right is not and has not been the
subject of any dispute, opposition, invalidation or
cancellation Proceeding and no Seller Party has any
Knowledge of any such threatened action with respect
to such Internet IP Right.
(iv) No Seller Party has any Knowledge of any pending
domain name or other Internet IP Right application
that may interfere with or infringe on such Internet
IP Right.
31
(v) Such Internet IP Right does not infringe and has not
been alleged to have infringed upon any trademark,
copyright or Internet IP Right of any third party.
(i) Neither Seller nor any Seller Entity have taken any action or
failed to take any action that may have the effect of
estopping or otherwise limiting Buyers right to enforce any
Intellectual Property Rights against any third party.
(j) The Disclosure Schedule under the caption referencing this
Section 4.17(h) sets forth a correct and complete list and
summary description of all Licensed Software other than
off-the-shelf Licensed Software that is widely commercially
available and is priced at less than $200 per user. The
Licensed Software constitutes all of the software for which
Seller or any Seller Entity has obtained, in connection with
the Business, a license to use the intellectual property
rights of third parties with respect to software in exchange
for a royalty or other consideration. Except for the licenses
for Licensed Software, there are no other agreements requiring
Seller or any Seller Entity to make payments or provide any
consideration for, or restricting their right to use, any
intellectual property rights of third parties with respect to
software, in each case, in connection with the Business as
presently conducted or proposed to be conducted.
4.18 Litigation; Orders.
(a) Except as set forth in the Disclosure Schedule under the
caption referencing this Section 4.18(a) (which also
identifies the parties to and briefly describes the basis for
each pending or threatened Proceeding),
(i) there is no pending or, to the Knowledge of each
Seller Party, threatened Proceeding that relates to
or that may affect in any manner the Business or the
Business Assets; and
(ii) there is no pending or, to the Knowledge of each
Seller Party, threatened Proceeding that challenges
or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with any of
the transactions contemplated by this Agreement or
the Ancillary Agreements.
Buyer has been provided with correct and complete copies of
all pleadings, correspondence and other documents and
materials relating to each Proceeding described in the
Disclosure Schedule under the caption referencing this Section
4.18(a), and no Proceeding listed or required to be listed
therein could have a Material Adverse Effect. For purposes of
this Agreement, the term "Proceeding" means any action, claim,
arbitration, demand, proceeding, grievance, subpoena, inquiry,
audit, hearing, investigation, litigation or suit, whether
civil, criminal, administrative, judicial or investigative,
whether formal or informal, whether public or private,
commenced, brought, conducted or heard by or before, or
otherwise involving, any Governmental Authority or private
arbitrator or mediator.
32
(b) Except as set forth in the Disclosure Schedule under the
caption referencing this Section 4.18(b), no Order is in
effect that relates to or that may affect in any material
manner the Business or any of the Business Assets.
4.19 Products.
Buyer has been furnished with correct and complete copies of the
standard terms and conditions of sale for each of the products or services of
the Business (containing applicable guaranty, warranty and indemnity
provisions). Except as set forth in the Disclosure Schedule under the caption
referencing this Section 4.19: (a) no product manufactured, sold, leased or
delivered by, or service rendered by or on behalf of, Seller or any Seller
Entity in connection with the Business is subject to any guaranty, warranty or
other indemnity, express or implied, beyond such standard terms and conditions;
and (b) each product manufactured, sold, leased or delivered by, or service
rendered by or on behalf of, Seller or any Seller Entity in connection with the
Business has been in conformity with all applicable contractual commitments and
all express and implied warranties, except for guaranties, warranties,
indemnities and nonconformities that would not have, individually or in the
aggregate, a Material Adverse Effect.
4.20 Employees; Labor Matters.
(a) The Disclosure Schedule under the caption referencing this
Section 4.20(a), contains a complete and accurate list of the
following information for each employee, director, independent
contractor, consultant and agent retained by Seller in
connection with the Business or by any Seller Entity,
including each employee on leave of absence or layoff status:
employer; name; job title; date of hiring or engagement; date
of commencement of employment or engagement; and current
compensation paid or payable.
(b) To the Knowledge of each Seller Party, neither Seller nor any
Seller Entity has violated the Worker Adjustment and
Retraining Notification Act (the "WARN Act") or any similar
state or local Legal Requirement.
(c) Except as set forth in the Disclosure Schedule under the
caption referencing this Section 4.20(c), with respect to each
officer, director, employee, agent, independent contractor or
consultant previously or presently retained by Seller in
connection with the Business or by any Seller Entity:
(i) no such person is bound by any contract, agreement,
understanding or other arrangement that purports to
limit his, her or its ability (A) to engage in or
continue or perform any conduct, activity, duties or
practice relating to the Business or (B) to assign to
Seller, any Seller Entity or to any other person any
rights to any invention, improvement, or discovery;
(ii) Seller and each Seller Entity have complied in all
material respects with all Legal Requirements
relating to the employment of labor, including
provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of
social security and other Taxes;
33
(iii) no Seller Party has any Knowledge of any pending
material labor relations problem, and, to the
Knowledge of each Seller Party, their labor relations
are satisfactory;
(iv) there is no collective bargaining agreement to which
Seller or any Seller Entity is a party, no collective
bargaining agreement is currently being negotiated or
proposed and, to the Knowledge of each Seller Party,
no person is making any attempt or effort to form a
labor union;
(v) there are no material workers' compensation claims
pending against Seller or any Seller Entity and no
Seller Party has any Knowledge of any facts that
would give rise to such a claim; and
(vi) to the Knowledge of each Seller Party, Seller or a
Seller Entity is the exclusive owner of all
Intellectual Property Rights developed by such
persons and no such person has any claim with respect
to any Intellectual Property Rights.
4.21 Employee Benefit Plans.
(a) Except as set forth in the Disclosure Schedule under the
caption referencing this Section 4.21(a),
(i) neither Seller nor any Seller Entity maintains or
contributes to any nonqualified deferred compensation
or retirement plan, contract or arrangement;
(ii) neither Seller nor any Seller Entity maintains or
contributes to any qualified defined contribution
plans (as defined in Section 3(34) of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), or Code ss. Section 414(i));
(iii) Seller does not maintain or contribute to any
qualified defined benefit plans (as defined in ERISA
ss. 3(35) or Code ss. 414(j)); and
(iv) neither Seller nor any Seller Entity maintains or
contributes to any employee welfare benefit plans (as
defined in ERISAss. 3(1)) (a "Welfare Plans");
in each case, that provides benefits to any present or former
employee, director or consultant of any of the Seller
Entities.
(b) To the extent required (either as a matter of law or to obtain
the intended tax treatment and tax benefits), all employee
benefit plans (as defined in ERISAss. 3(3)) which Seller or
any Seller Entity does maintain or to which it does
contribute, and in respect of which Buyer or any of its
subsidiaries would reasonably be expected to have any
liability or obligation after the Closing (collectively, the
"Plans") comply in all material respects with the requirements
34
of ERISA, the Code and any other applicable law, except for
instances of non-compliance that would not have, individually
or in the aggregate, a Material Adverse Effect. With respect
to the Plans, (i) all required contributions which are due
have been paid, (ii) there are no material actions, suits or
claims pending, other than routine uncontested claims for
benefits, and (iii) to the Knowledge of Seller or each Seller
Entity, there have been no prohibited transactions (as defined
in ERISAss. 406 or Codess. 4975) except for instances of
non-compliance that would not have, individually or in the
aggregate, a Material Adverse Effect.
(c) Seller has made available to Buyer true and complete copies of
(i) the most recent determination letter, if any, received by
Seller or any Seller Entity from the Internal Revenue Service
regarding the Plans and any amendment to any Plan made
subsequent to any Plan amendments covered by any such
determination letter; (ii) the most recent financial
statements and IRS Form 5500 for the Plans; and (iii) the most
recently prepared actuarial valuation reports for the Plans,
in each case to the extent applicable to the Plans.
(d) For purposes of this Section 4.21(d), the term "Seller" refers
to Seller, each Seller Entity and any corporation, trade, or
business under common control with Seller or any Seller Entity
within the meaning of Codess. 414(b) or (c). Seller does not
contribute (and has not ever contributed) to any
multi-employer plan, as defined in ERISAss. 3(37). Except as
would not have, individually or in the aggregate, a Material
Adverse Effect, no Seller Entity has any actual unsatisfied
liabilities or is reasonably expected to incur any liabilities
that would reasonably be expected to become a liability of
Buyer or any of its subsidiaries (under Title IV of ERISA or
otherwise) for any complete or partial withdrawal from a
multi-employer plan.
(e) Except as would not have, individually or in the aggregate, a
Material Adverse Effect, neither Seller nor any Seller Entity
has any actual unsatisfied liabilities, or is reasonably
expected to incur any liabilities that would reasonably be
expected to become a liability of Buyer or any of its
subsidiaries, with respect to death or medical benefits after
separation from employment, other than (i) death or medical
benefits under the employee benefit plans or programs (whether
or not subject to ERISA) set forth in the Disclosure Schedule
under the caption referencing Section 4.21(a) and (ii) health
care continuation benefits described in Codess. 4980B or
required under applicable law or group life insurance
continuation benefits required under applicable state law.
(f) Neither Seller nor any Seller Entity has incurred any
unsatisfied liability, or is reasonably expected to incur any
liabilities that would reasonably be expected to become a
liability of Buyer or any of its subsidiaries, for (i) any tax
or civil penalty or any disqualification of any employee
benefit plan (as defined in ERISA ss. 3(3)) or (ii) any
unsatisfied liability imposed by Code xx.xx. 4980B and 4975
and Part 6 of Title I and ss. 502(i) of ERISA.
(g) Federal Cartridge Company has no liability for post-retirement
medical or life insurance benefits for former employees of the
Business who terminated
35
employment with Federal Cartridge Company (or its predecessor,
Federal-Xxxxxxx, Inc.) prior to Seller's acquisition of all of
the outstanding stock of Federal-Xxxxxxx, Inc.
4.22 Insurance.
Seller and the Seller Entities maintain policies of fire and casualty,
liability and other forms of insurance with respect to the Business and the
Business Assets in such amounts, with such deductibles and against such risks
and losses as are, in the judgment of Seller and the Seller Entities, reasonable
for the Business and the Business Assets. The material insurance policies
maintained by Seller and the Seller Entities with respect to the Business and
the Business Assets are set forth in the Disclosure Schedule under the caption
referencing this Section 4.22. All such policies are in full force and effect,
no invoiced premiums are overdue for payment (other than retroactive or
retrospective premium adjustments that are not yet, but may be, required to be
paid with respect to any periods ending prior to the Closing Date, all of which
are to be paid by Seller), and no notice of cancellation or termination has been
received with respect to any such policy which has not been replaced on
substantially similar terms prior to the date of such cancellation.
4.23 Affiliate Transactions.
Except as described in the Disclosure Schedule under the caption
referencing this Section 4.23, and other than pursuant to this
Agreement, no officer, director or stockholder (beneficially owning at
least 5% of the stock of such applicable entity) of any Seller Party
or, to the Knowledge of each Seller Party, any member of the immediate
family of any such officer, director, employee or stockholder, or, to
the Knowledge of each Seller Party, any entity in which any of such
persons owns any beneficial interest (other than any publicly-held
corporation whose stock is traded on a national securities exchange or
in the over-the-counter market and less than 1% of the stock of which
is beneficially owned by any of such persons) (collectively
"Insiders"), has any agreement with Seller or any Seller Entity (other
than normal employment arrangements) or any interest in any property,
real, personal or mixed, tangible or intangible, used in or pertaining
to the Business. No Insider of any Seller Party has any direct or
indirect interest in any competitor, supplier or customer of Seller or
any Seller Entity or in any person, firm or entity from whom or to whom
Seller or any Seller Entity leases any property, or in any other
person, firm or entity with whom Seller or any Seller Entity transacts
business of any nature in any material manner. For purposes of this
Section 4.23, the members of the immediate family of an officer,
director or stockholder shall consist of the spouse, parents, children,
siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and
brothers- and sisters-in-law of such officer, director or stockholder.
4.24 Compliance with Laws; Permits.
(a) Seller, each Seller Entity and their respective officers,
directors, agents and employees have complied in all material
respects with all applicable material Legal Requirements,
including, without limitation, federal, state, local and
foreign laws, ordinances, rules, regulations and other
requirements pertaining to the
36
manufacture, import or export of ammunition, optical products,
firearms or any components of the foregoing; product labeling;
consumer products safety; government procurement and
contracting; the Foreign Corrupt Practices Act; equal
employment opportunity; employee retirement; affirmative
action and other hiring practices; occupational safety and
health; workers' compensation; unemployment; and building and
zoning codes, to which Seller (in connection with the
Business) or any Seller Entity may be subject, and no claims
have been filed against Seller or any Seller Entity alleging a
violation of any such Legal Requirements. No Seller Party has
any Knowledge of any action, pending or threatened, to change
the zoning or building ordinances or any other Legal
Requirements affecting the Business or the Business Assets.
(b) Seller and each Seller Entity have, in full force and effect,
all licenses, permits, authorizations and certificates from
each Governmental Authority (including, without limitation,
federal, state and foreign agencies and other regulatory
authorities regulating occupational health and safety
government procurement or the import or export of materials
and products related to the Business) necessary to conduct the
Business and own and operate the Business Assets (other than
Environmental Permits, as such term is defined in Section
4.25(a) hereof) (collectively, the "Permits"). A correct and
complete list of the Permits is set forth in the Disclosure
Schedule under the caption referencing this Section 4.24(b),
together with a description of each Permit's relationship to
the Business and any conditions or restrictions applicable to
such Permit in connection with the transactions contemplated
by this Agreement and the Ancillary Agreements. Seller and
each Seller Entity have conducted the Business in compliance
with all terms and conditions of the Permits in all material
respects.
(c) This Section 4.24 does not apply to Environmental,
Intellectual Property Rights, Tax or employee benefits
matters, each of which are the subject of other Sections of
this Article IV.
4.25 Environmental Matters.
(a) As used in this Section 4.25, the following terms shall have
the following meanings:
(i) "Hazardous Materials" means (A) any dangerous, toxic
or hazardous pollutant, contaminant, chemical, waste,
material or substance as defined in or regulated or
governed by any current Environmental Law, including
without limitation any pollutant, contaminant,
chemical, waste, material or substance that could
reasonably be expected to subject Seller or any
Seller Entity to any imposition of costs or liability
under any current Environmental Law, and (B)
urea-formaldehyde, polychlorinated biphenyls,
asbestos or asbestos-containing materials, petroleum
and petroleum products.
37
(ii) "Environment" means soil, land, surface or subsurface
strata, surface waters (including navigable waters,
ocean waters, streams, ponds, impoundments, drainage
basins and wetlands), ground waters, drinking water
supplies, xxxxx, stream sediments, ambient air,
indoor air, and natural resources.
(iii) "Environmental Law" means any Legal Requirement or
Order relating to pollution, contamination or
protection of the Environment, including, without
limitation, the following statutes and all rules and
regulations relating thereto, all as amended from
time to time: the Comprehensive Environmental
Response, Compensation and Liability Act as amended
by the Superfund Amendments and Reauthorization Act
of 1986, 42 U.S.C. Sections 9601 et seq., the
Resource Conservation and Recovery Act of 1976, 42
U.S.C. Section 6901 et seq., the Clean Air Act, 42
U.S.C. Sections 7401 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. Sections 1251 et
seq., the Toxic Substances Control Act, 15 U.S.C.
Sections 2601 et seq., the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. Sections 136
et seq. and similar state laws.
(iv) "Environmental Permit" means any permit, license,
certificate of compliance, approval or other
authorization required under applicable Environmental
Laws to conduct the Business and own or operate the
Business Assets, including, without limitation the
Real Property and the Leased Real Property.
(v) "Offsite Release" means any Release of Hazardous
Materials at or under any properties, except for such
Releases at or under the Real Property, the Leased
Real Property or any other property owned or operated
at any time by Seller or any Seller Entity.
(vi) "Release" means any spilling, leaking, disposing,
discharging, emitting, depositing, ejecting,
leaching, escaping or any other release, whether
intentional or unintentional, of any Hazardous
Material into the Environment, including, without
limitation, the abandonment or discarding of barrels,
containers and other closed or partially closed
receptacles containing any Hazardous Materials.
(b) Seller (in connection with the Business and the Business
Assets) and each Seller Entity is now, and at all times during
the preceding two (2) years has been, in compliance with all
applicable Environmental Laws, except for individual matters
of non-compliance which could not reasonably be expected to
result in costs or expenses in excess of $50,000.
(c) Seller (with respect to the Business and the Business Assets)
and each Seller Entity possesses, and maintains in full force
and effect, all Environmental Permits. The Disclosure Schedule
under the caption referencing this Section 4.25(c) and except
as set forth therein, lists each Environmental Permit. Seller
38
and each Seller Entity have conducted the Business and the
Business Assets in compliance with all terms and conditions of
the Environmental Permits during the preceding two (2) years,
except for individual matters of non-compliance which could
not reasonably be expected to result in costs or expenses in
excess of $50,000. Seller and each Seller Entity have filed
all reports and notifications required to be filed under and
pursuant to all applicable Environmental Laws with respect to
the Business or the Business Assets during the preceding two
(2) years, except for any requirements to file any individual
reports or notifications, the non-compliance with which could
not reasonably be expected to result in costs or expenses in
excess of $50,000.
(d) Except in compliance with Environmental Laws (i) there have
been no material Releases of Hazardous Materials (x) on or
under any part of the Real Property or the Leased Real
Property or any improvements thereon, or (y) caused by Seller
or any Seller Entity on or under any property formerly owned
or operated by Seller or any Seller Entity, (ii) no asbestos,
urea-formaldehyde, polychlorinated biphenyls (PCBs) or
pesticides are located on or under the Real Property or the
Leased Real Property or any improvements thereon, and (iii) no
aboveground or underground storage tanks are located on or
under the Real Property or the Leased Real Property or any
improvements thereon, or, to the Knowledge of each Seller
Party have been located on or under the Real Property or the
Leased Real Property or any improvements thereon and then
subsequently been removed or filled. If any such storage tanks
exist on or under the Real Property, the Leased Real Property
or any improvements thereon, such storage tanks have been duly
registered with all appropriate Governmental Authorities and
are otherwise in compliance with all applicable Environmental
Laws, except for individual matters of non-compliance which
could not reasonably be expected to result in costs or
expenses in excess of $50,000.
(e) Neither Seller nor any Seller Entity, nor the Real Property or
the Leased Real Property, are or have been listed on the
United States Environmental Protection Agency National
Priorities List of Hazardous Waste Sites or similar state
lists. Seller has not received any written notice during the
past three (3) years alleging that Seller or any Seller Entity
is liable for any investigation, clean-up or other remedial
costs with respect to any Offsite Release.
(f) Seller and each Seller Entity have disclosed and delivered to
Buyer all (i) environmental site assessments, (ii) internal
compliance audit reports generated in the past three (3)
years, and (iii) environmental baseline studies, which
assessments, reports or studies are in the care, custody and
control of Seller or a Seller Entity with respect to the
Business and the Business Assets, including the Real Property
and the Leased Real Property.
(g) No Lien has been attached or filed against Seller or any
Seller Entity (with respect to the Business or the Business
Assets) or the Business Assets (including the Real Property
and the Leased Real Property) in favor of any Governmental
Authority
39
or private entity for (i) any liability or imposition of costs
under or violation of any applicable Environmental Law or (ii)
any Release of Hazardous Materials.
4.26 Books and Records.
The books of account and other financial records of each Seller Entity,
and of Seller to the extent they relate to the Business or the Business
Assets are complete and correct in all material respects. The minute
books of each Seller Entity, and of Seller to the extent they relate to
the Business or the Business Assets contain accurate and complete
records of all meetings held of, and corporate action taken by, the
shareholders, the board of directors and committees of the board of
directors of Seller and each Seller Entity, and no meeting of any such
shareholders, board of directors or committee has been held for which
minutes have not been prepared or are not contained in such minute
books.
4.27 Securities Law Matters.
(a) Seller is an "accredited investor" as defined in Regulation D
under the Securities Act and is knowledgeable, sophisticated
and experienced in making, and is qualified to make decisions
with respect to, investments in securities such as the Buyer
Shares. Seller has requested, received, reviewed and
considered all information that it deems relevant in making an
informed decision whether to accept the Buyer Shares as
consideration for the Business Shares.
(b) Seller will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) any of
the Buyer Shares except in compliance with the Securities Act,
applicable state securities laws and the respective rules and
regulations promulgated thereunder.
4.28 Brokerage.
No third party shall be entitled to receive any brokerage commissions,
finder's fees, fees for financial advisory services or similar
compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of
Seller or any Seller Entity other than the fees and expenses of Xxxxxx
Brothers, Inc., which will be the sole responsibility of Parent and
Seller.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Seller that:
5.01 Incorporation and Corporate Power.
Buyer is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, with the requisite
corporate power and authority to enter into this Agreement and the
Ancillary Agreements and perform its obligations hereunder
40
and thereunder. Buyer's certificate of incorporation and bylaws, to
which Seller has had access, reflect all amendments thereto and are
correct and complete as of the date hereof.
5.02 Execution, Delivery; Valid and Binding Agreement.
Buyer's execution, delivery and performance of this Agreement and the
Ancillary Agreements and Buyer's consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized
by all requisite corporate action, and no other corporate proceedings
on its part are necessary to authorize the execution, delivery or
performance of this Agreement or the Ancillary Agreements. Buyer has
duly executed and delivered this Agreement and the Registration Rights
Agreement to Seller and Parent, and at the Closing Buyer will duly
execute and deliver the other Ancillary Agreements to Seller and
Parent, as applicable. This Agreement and the Ancillary Agreements
constitute or will constitute, as applicable, the valid and binding
obligations of Buyer, enforceable in accordance with their terms,
except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights or by general
principles of equity.
5.03 Governmental Authorities; Consents.
Except for the applicable requirements of the HSR Act, Buyer is not
required to submit any notice, report or other filing with any
Governmental Authority in connection with its execution or delivery of
this Agreement or the Ancillary Agreements or the consummation of the
transactions contemplated hereby and thereby. Except as set forth in
Schedule 5.03 (collectively, the "Required Buyer Consents"), Buyer is
not required to obtain any Consents of any Governmental Authority or
any other party or person in connection with its execution, delivery
and performance of this Agreement or the Ancillary Agreements or the
transactions contemplated hereby and thereby.
5.04 Noncontravention.
Except as set forth in Schedule 5.04, neither Buyer's execution,
delivery and performance of this Agreement or any Ancillary Agreement
nor Buyer's consummation of any of the transactions contemplated hereby
or thereby will conflict with or result in any breach of any of the
provisions of, constitute a default under, result in a violation of,
result in the creation of a right of termination or acceleration or any
Lien, or require any authorization, consent, approval, exemption or
other action by or notice to any Governmental Authority, under (a) any
provisions of its certificate or articles of incorporation or bylaws or
other organizational documents, (b) any indenture, mortgage, lease,
loan agreement or other material agreement or instrument by which it is
bound or affected or (c) any material Legal Requirement, other than any
such notices, filings, submissions, consents, authorizations or
approvals required under the HSR Act.
5.05 Brokerage.
No third party shall be entitled to receive any brokerage commissions,
finder's fees, fees for financial advisory services or similar
compensation in connection with the
41
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Buyer.
5.06 Capitalization.
As of September 30, 2001, Buyer's authorized capital stock consists
solely of 60,000,000 shares of common stock, $.01 par value per share,
of which 21,534,892 shares are issued and outstanding as of the date
hereof, and 5,000,000 shares of preferred stock, par value $1.00 per
share, of which no shares are issued and outstanding as of the date
hereof. At the Closing, the Buyer Shares shall have been duly
authorized and, upon issuance in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable.
5.07 SEC Filings.
Prior to the date of this Agreement, Seller has been provided with or
had access to correct and complete copies of:
(a) all Annual Reports on Form 10-K filed by Buyer with the
Securities and Exchange Commission (the "SEC") for the year
ended March 30, 2000;
(b) all Quarterly Reports on Form 10-Q filed by Buyer with the SEC
for each of the quarters ended June 30 and September 30, 2001;
(c) each definitive proxy statement filed by Buyer with the SEC
since December 31, 2000;
(d) each final prospectus filed by Buyer with the SEC since
December 31, 2000, except any final prospectus on Form S-8;
and
(e) all Current Reports on Form 8-K filed by Buyer with the SEC
since December 31, 2000.
As of their respective dates, such reports, proxy statements and
prospectuses (i) complied as to form in all material respects with all
applicable Legal Requirements and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Since December 31, 2000, Buyer has timely filed all reports,
registration statements and other filings that it was required to file
with the SEC under applicable Legal Requirements.
5.08 Absence of Certain Developments.
Except as set forth in Schedule 5.08, and except for the negotiation of
the transactions contemplated by this Agreement, since September 30,
2001, Buyer has conducted its business only in the ordinary course of
business consistent with past practice.
42
ARTICLE VI
PRE-CLOSING COVENANTS
---------------------
6.01 Conduct of the Business.
In connection with the Business Assets or the Business, Seller and each
Seller Entity shall observe each term set forth in this Section 6.01
and agree that, from the date hereof until the Closing, except (i) as
set forth in the Disclosure Schedule under the caption referencing the
specific subsections of this Section 6.01 or (ii) as expressly provided
in this Agreement or unless Buyer otherwise consents in writing (which
consent Buyer may not unreasonably withhold):
(a) The Business shall be conducted only in, and neither Seller
nor any Seller Entity shall take any action except in, the
ordinary course of business consistent with past practice, on
an arm's-length basis and in accordance with all material
Legal Requirements.
(b) Neither Seller nor any Seller Entity shall, directly or
indirectly, do or permit to occur any of the following: (i)
sell, pledge, dispose of or encumber any of the Business
Assets, except in the ordinary course of business consistent
with past practice, or the Business Shares; (ii) acquire (by
merger, exchange, consolidation, acquisition of stock or
assets or otherwise) any corporation, partnership, joint
venture or other business organization or division or material
assets thereof; (iii) incur any indebtedness for borrowed
money or issue any debt securities; (iv) permit any accounts
payable owed to trade creditors to remain outstanding more
than 60 days, except in the ordinary course of business
consistent with past practice; (v) accelerate, beyond the
normal collection cycle, collection of accounts receivable,
except in the ordinary course of business consistent with past
practice; or (vi) enter into or propose to enter into, or
modify or propose to modify, any agreement, arrangement or
understanding with respect to any of the matters set forth in
this Section 6.01(b).
(c) Neither Seller nor any Seller Entity shall, directly or
indirectly, (i) enter into or modify any employment, severance
or similar agreements or arrangements with, or grant any
bonuses, salary increases, severance or termination pay to,
any officers, directors or consultants of the Business; or
(ii) in the case of employees, officers or consultants who
earn in excess of $100,000 per year, take any action with
respect to the grant of any bonuses, salary increases,
severance or termination pay or with respect to any increase
of benefits payable in effect on the date hereof, except, in
each of clauses (i) and (ii), (A) as required pursuant to any
written contract or agreement in effect immediately prior to
the date hereof, (B) in the ordinary course of business
consistent with past practice (including in connection with
promotions) and (C) for any actions or increases for which
Seller shall be solely obligated.
(d) Except as required to comply with ERISA or to maintain
qualification under Code ss. 401(a), neither Seller nor any
Seller Entity shall adopt or amend any Plan
43
without Buyer's express written consent. Except as required
under each Plan, neither Seller nor any Seller Entity shall
make any contributions to or with respect to any Plan without
Buyer's express written consent.
(e) Neither Seller nor any Seller Entity shall cancel or terminate
any current insurance policy covering the Business Assets or
the Business, or cause any of the coverage thereunder to
lapse, unless simultaneously with such termination,
cancellation or lapse, a replacement policy providing coverage
equal to or greater than the coverage under the canceled,
terminated or lapsed policy for substantially similar premiums
are in full force and effect.
(f) Seller and each Seller Entity shall use their reasonable best
efforts to preserve intact the organization and goodwill of
the Business, keep available the services of their respective
officers, employees and consultants as a group and maintain
satisfactory relationships with suppliers, distributors, sales
representatives, Governmental Authorities, customers,
landlords, creditors and others having business relationships
with the Business.
(g) Neither Seller nor any Seller Entity shall authorize, declare,
make or pay any dividend or distribution of any kind or
nature, except in the ordinary course of business consistent
with past practice and to the extent used to pay amounts due
in respect of Parent's or Seller's indebtedness.
(h) Neither Seller nor any Seller Entity shall permit the levels
of raw materials, supplies, products or other items included
in the Inventories to vary materially from the levels
maintained in the ordinary course of business consistent with
past practice.
(i) Seller and each Seller Entity shall confer with Buyer prior to
implementing material operational decisions and shall
otherwise report to Buyer concerning the status and operations
of the Business as and to the extent reasonably requested by
Buyer.
(j) Seller and each Seller Entity shall notify Buyer of any
emergency or other change in the normal course of the Business
or in the operation of the Business Assets and of any
Proceedings initiated or threatened by any Governmental
Authority or third party.
(k) Seller and each Seller Entity shall (i) file any Tax Returns
with respect to any liabilities for Taxes of Seller or any
Seller Entity or other matters relating to Taxes of Seller or
any Seller Entity which affect the Business Assets or the
Business and pursuant to applicable law must be filed prior to
the Closing Date; (ii) provide copies of the portion of any
such Tax Returns relating to any Seller Entity to Buyer for
Buyer's review and comment no later than 15 days prior to the
due date for filing such Tax Returns, and promptly upon filing
provide Buyer with correct and complete copies thereof; (iii)
make any such Tax elections or other discretionary positions
with respect to Taxes taken by or affecting any Seller
44
Entity only upon prior consultation with and the consent of
Buyer; and (iv) not amend any Tax Return affecting any Seller
Entity without prior consultation with Buyer. Buyer shall
prepare or cause to be prepared and file any Tax Return of the
Seller Entities required to be filed after the Closing Date.
(l) Neither Seller, any Seller Entity nor any of their respective
affiliates shall make any election with respect to Taxes,
change an annual accounting period, adopt or change any
accounting method or file any amended return, report or form,
if such election, adoption, change or filing would have the
effect of increasing the Tax liability of the Buyer with
respect to any period ending after the Closing Date.
(m) Seller shall not perform any act referenced by (or omit to
perform any act which omission is referenced by) the terms of
Section 4.08.
6.02 Access to Books, Records, Etc..
Seller and each Seller Entity shall afford to Buyer and its authorized
representatives ("Buyer's Representatives") full access at all
reasonable times and upon reasonable notice to the offices, properties,
books, records, officers, employees and other items of the Business,
and the work papers of PricewaterhouseCoopers, the independent
accountants of Seller and each Seller Entity, relating to work they
have performed for Seller (insofar as the work relates to the Business
or the Business Assets) for each of the fiscal years ended December 31,
2000 and 1999, and otherwise provide such assistance as Buyer may
reasonably request in order that Buyer may have a full opportunity to
make such investigation and evaluation as it may reasonably desire to
make of the Business and the Business Assets. In addition, Seller, each
Seller Entity and their respective officers shall cooperate reasonably
(including providing introductions where necessary) with Buyer to
enable Buyer to contact such third parties, including customers,
prospective customers, specifying agencies, vendors or suppliers of the
Business, as Buyer deems reasonably necessary; provided that Buyer
agrees not to initiate such contacts without the prior approval of
Seller or the relevant Seller Entity, which approval will not be
unreasonably withheld.
6.03 Satisfaction of Conditions.
Buyer, Seller and each Seller Entity shall each use their respective
reasonable best efforts to cause the conditions set forth in Article IX
to be satisfied and to consummate the transactions contemplated herein
as soon as reasonably practicable after the satisfaction thereof.
6.04 Nonsolicitation.
Neither Seller nor any Seller Entity shall directly or indirectly,
through any officer, director, agent or otherwise, solicit, initiate or
encourage submission of any proposal or offer from any person or entity
(including any of its or their officers or employees) relating to any
liquidation, dissolution, recapitalization, merger, consolidation or
acquisition, purchase or other disposition of all or any portion of the
Business or the Business Assets or any equity interest in any of the
Seller Entities, or other similar
45
transaction or business combination involving Seller or any Seller
Entity with respect to the Business, or participate in any negotiations
regarding, or furnish to any other person any information with respect
to, or otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any other person
or entity to do or seek any of the foregoing. Seller shall promptly
notify Buyer if any such proposal or offer, or any inquiry from or
contact with any person with respect thereto, is made and shall
promptly provide Buyer with such information regarding such proposal,
offer, inquiry or contact as Buyer may request.
6.05 Consents and Approvals.
Parent, Seller and each Seller Entity shall use their respective
reasonable best efforts to obtain all consents and approvals of
Governmental Authorities or other third parties required for them
consummate the transactions contemplated by this Agreement and the
Ancillary Agreements, including the Required Seller Consents, and will
cooperate with Buyer to obtain all Required Buyer Consents. Buyer shall
use its reasonable best efforts to obtain all consents and approvals of
Governmental Authorities or other third parties required for it to
consummate the transactions contemplated by this Agreement and the
Ancillary Agreements, including the Required Buyer Consents, and will
cooperate with Parent, Seller and each Seller Entity to obtain all
Required Seller Consents.
6.06 Intercompany Transfer and Assumption.
On or prior to the Closing, the Seller and the Seller Entities shall
enter into an assignment and assumption agreement substantially in the
form attached as Exhibit E (the "Intercompany Agreement") pursuant to
which the Seller Entities will transfer to the Seller the Seller Entity
Assets (as defined in the Intercompany Agreement) and the Seller shall
assume all of the Seller Entity Assumed Liabilities (as defined in the
Intercompany Agreement). For purposes of this Agreement, the Seller
Entity Assets shall not be deemed to be Business Assets.
6.07 Removal of Certain Materials.
Seller shall use its reasonable best efforts to remove and dispose of,
in accordance with all applicable Environmental Laws and prior to the
Closing Date, all material quantities of lead shot, shot shells and
paint sludge (to the extent that such items constitute waste materials)
located on, under or about the Real Property, the Leased Real Property
or any improvements thereon in Richmond, Indiana, and Willis, Texas. To
the extent that Seller is unable to complete such removal and disposal
prior to the Closing Date, it shall complete such action promptly
following the Closing Date. All such removal and disposal shall be
conducted at Seller's sole cost and expense.
46
ARTICLE VII
POST-CLOSING COVENANTS
----------------------
7.01 Cooperation on Tax Matters. The following provisions of this Section
7.01 shall apply notwithstanding any other provision of this Agreement.
(a) Seller shall prepare and file (or cause to be prepared and
filed) all consolidated income, franchise, and payroll Tax
Returns with respect to each of the Seller Entities for all
periods ending on or prior to the Closing Date which are filed
after the Closing Date and shall timely pay all Taxes shown as
due on such Tax Returns. Seller shall permit Buyer to review
and comment on the portions of each such Tax Return described
in the preceding sentence relating to any Seller Entity prior
to filing. Buyer shall prepare and file (or cause to be
prepared and filed) all other Tax Returns with respect to each
of the Seller Entities for all periods ending on or prior to
the Closing Date which are filed after the Closing Date. Buyer
shall permit Seller to review and comment on each such Tax
Return described in the preceding sentence prior to filing,
and will not file such Tax Return without the consent of
Seller, which consent shall not be unreasonably withheld.
(b) Buyer shall prepare or cause to be prepared and file or cause
to be filed any and all Tax Returns for the Seller Entities
for all periods beginning before the Closing Date and ending
after the Closing Date. In the case of any taxable period that
includes (but does not end on) the Closing Date (a "Straddle
Period"), Buyer shall prepare or cause to be prepared and file
or cause to be filed any such Tax Returns as required by
applicable law and in a manner consistent with past practices
employed by Seller with respect to such Tax Returns. Seller
shall pay to Buyer within fifteen (15) days after the date on
which Taxes are paid with respect to such periods an amount
equal to the portion of such Taxes which relates to the
portion of such Taxable period ending on the Closing Date to
the extent such Taxes are not reflected in the reserve for Tax
liabilities (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax
income) shown on the face of the Unaudited Business Financial
Statements. In order to apportion appropriately any Taxes
relating to any taxable year or period that includes the
Closing Date, the parties hereto shall, to the extent
permitted under applicable law, elect with the relevant Taxing
authority to treat for all purposes the Closing Date as the
last day of the taxable year or period of the relevant Seller
Entity. In any case where applicable law does not permit the
parties to treat the Closing Date as the last day of the
taxable year or period, any portion of any such Tax that is
allocable to the portion of the period ending on the Closing
Date shall be:
(i) in the case of Taxes that are either (A) based upon
or related to income or receipts, or (B) imposed in
connection with any sale or other transfer or
assignment of property (real or personal, tangible or
intangible), deemed equal to the amount which would
be payable if the taxable year or period ended on the
Closing Date;
47
(ii) in the case of Taxes not described in subparagraph
(i) above that are imposed on a periodic basis and
measured by the level of any item, deemed to be the
amount of such Taxes for the entire relevant period
(or, in the case of such Taxes determined on an
arrears basis, the amount of such Taxes for the
immediate preceding period) multiplied by a fraction
the numerator of which is the number of calendar days
in the period ending on the Closing Date and the
denominator of which is the number of calendar days
in the entire relevant period; and
(iii) for purposes of determining such Taxes, exemptions,
relief, allowances or deductions that are calculated
on an annual basis, such as the deduction for
depreciation, shall be apportioned in the manner
specified in subparagraph (i) above. All
determinations necessary to give effect to the
foregoing allocations shall be made in a manner
consistent with prior practice of the Seller
Entities.
(c) Parent and Seller, on the one hand, and Buyer, on the other
hand, shall promptly notify the other parties upon receipt of
any notice of any Tax audit, assessment, claim or
investigation (a "Tax Claim") that involves the Tax liability
of any of the Seller Entities. The failure promptly to give
such notice shall not affect any Indemnified Party's ability
to seek indemnification hereunder unless such failure has
materially and adversely affected the right of the
Indemnifying Party to participate in and contest the Tax
Claim. With respect to any Tax Claim relating to Taxes with
respect solely to a pre-Closing tax period, Parent and Seller
shall control all proceedings and may make all decisions taken
in connection with such Tax Claim, provided that Parent and
Seller will allow each Seller Entity and its counsel to
participate at its own expense in any audits or administrative
or court proceeding of Parent consolidated federal income Tax
Returns to the extent that such returns relate to such Seller
Entity.
(d) Buyer and each Seller Party shall cooperate fully, as and to
the extent reasonably requested by the other party, in
connection with the filing of Tax Returns filed after the
Closing Date and any audit, litigation, or other proceeding
with respect to Taxes; provided, however, that Buyer shall
have final authority with respect to any such proceeding other
than those described in Section 7.01(c). Such cooperation
shall include the retention and (upon the other party's
request) the provision of records and information which are
relevant to any such audit, litigation, or other proceeding
and making employees available on a mutually convenient basis
to provide additional information and explanation of any
material provided under this Agreement. Notwithstanding the
foregoing, with respect to any audit, litigation, or other
proceeding relating to a Straddle Period, Buyer shall not
enter into any compromise or agree to settle any claim
pursuant to such proceeding without the written consent of
Seller, which consent shall not be unreasonably withheld.
Parent, Seller and each Seller Entity agree (i) to retain all
books and records with respect to Tax matters pertinent to
each Seller Entity relating to any taxable period beginning
before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Buyer, Parent
48
or Seller, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements
entered into with any taxing authority, and (ii) to give the
other party reasonable written notice prior to transferring,
destroying, or discarding any such books and records and, if
the other party so requests, the Seller Entities or the
Seller, as the case may be, shall allow the other party to
take possession of such books and records.
(e) Buyer, Seller and Parent further agree, upon request, to use
their commercially reasonable efforts to obtain any
certificate or other document from any governmental authority
or any other person as may be necessary to mitigate, reduce,
or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated
hereby).
(f) All Tax sharing agreements or similar agreements with respect
to or involving any of the Seller Entities shall be terminated
as of the Closing Date and, after the Closing Date, none of
the Seller Entities shall be bound thereby or have any
liability thereunder.
(g) At Buyer's option, Parent and Seller shall join with Buyer in
making joint elections under Code ss. 338(h)(10) (and under
any similar provision of any state, local law and foreign law)
(collectively, the "Section 338(h)(10) Election") with respect
to the purchase and sale of the stock of each of the Seller
Entities. Parent, Seller and Buyer shall cooperate in good
faith in drafting and making final the Section 338 Forms.
Parent and Seller will pay any Tax attributable to the making
of the Section 338(h)(10) Election and will indemnify the
Buyer and the Seller Entities against any costs or expenses
arising out of failure to pay such Tax. Buyer, Parent and
Seller shall agree upon the allocation of the "Aggregate
Deemed Sales Price" (as defined under applicable Treasury
Regulations) among the assets of the Seller Entities. Buyer,
Parent and Seller shall use their respective best efforts to
agree upon such allocation no later than 180 days after the
Closing Date. None of Buyer, Parent or Seller (or any of their
respective affiliates) shall take any position on any Tax
Return or with any taxing authority that is inconsistent with
the allocation agreed upon by Buyer, Parent and Seller. Buyer
shall prepare for filing all of the tax returns, information
returns and statements that may be required pursuant to
Codess. 338(h)(10) (other than those specified in Section
7.01(a)). Parent and Seller shall provide information that may
be required by the Buyer for the purpose of preparing such
returns, shall execute and file such returns as reasonably
requested by Buyer and shall file all other returns and tax
information on a basis that is consistent with the 338(h)(10)
Election and such returns.
(h) The amount or economic benefit of any refunds, credits or
offsets of Taxes of any Seller Entity for any pre-Closing tax
period shall be for the account of Parent or Seller, as the
case may be. The amount or economic benefit of any refunds,
credits or offsets of Taxes of any Seller Entity for any
taxable period beginning after the Closing Date shall be for
the account of Buyer. The amount or economic benefit of any
refunds, credit or offset of Taxes of any Seller Entity for
any
49
taxable period that begins before and ends after the Closing
Date shall be equitably apportioned between Seller and Buyer.
Each party shall forward, and shall cause its affiliates to
forward, to the party entitled to receive the amount or
economic benefit of a refund, credit or offset to Tax pursuant
to this Section 7.01(h) the amount of such refund or economic
benefit within 10 days after such refund is received or such
credit or offset is allowed or applied against another Tax
liability, as the case may be.
(i) The parties to this Agreement intend that the purchase and
sale of the capital stock of the Seller Entities as set forth
in this Agreement shall not qualify for treatment as a
tax-free reorganization within the meaning of Section
368(a)(1) of the Code.
7.02 Transfer and Sales Taxes.
Seller and Buyer shall share equally all applicable documentary, sales,
use, stamp, registration and such other Taxes, and all conveyance fees,
recording charges and other fees and charges (including any penalties
and interest) ("Transfer Taxes") incurred in connection with
consummation of the transaction contemplated by this Agreement. For the
avoidance of doubt, Transfer Taxes shall not include any income Taxes
incurred as a result of the Section 338(h)(10) Election contemplated by
Section 7.01(g) of this Agreement. For purposes of this Section 7.02,
Transfer Taxes shall include any such Taxes incurred by Seller upon its
contribution of the Division Assets to Newco. Seller will, at its own
expense, file all necessary Tax Returns and other documentation with
respect to such Taxes, fees and charges, and, if required by applicable
law, Buyer will join in the execution of any such Tax Returns and other
documentation.
7.03 Further Assurances.
(a) If at any time after the Closing any further action by Parent,
Seller or any Seller Entity is necessary to carry out the
purposes of this Agreement, each such party will take such
further action (including the execution and delivery of such
further instruments and documents) as Buyer may reasonably
request, at the sole cost and expense of the requesting party.
Seller agrees to cooperate with and to assist Buyer in
recovering on behalf of Buyer the proceeds under any insurance
policies of Seller under which Seller Entities are insured.
(b) If at any time after the Closing any further action by Buyer
or Acquisition Sub is necessary to carry out the purposes of
this Agreement, Buyer or Acquisition Sub will take such
further action (including the execution and delivery of such
further instruments and documents) as Parent, Seller or any
Seller Entity may reasonably request, at the sole cost and
expense of the requesting party.
7.04 Cooperation with Proceedings.
(a) In the event and for so long as Buyer or Acquisition Sub is
contesting or defending against any Proceedings in connection
with (i) any transaction contemplated by this Agreement or the
Ancillary Agreements or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence,
50
event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving any of Seller or the
Seller Entities, Parent, Seller and each Seller Entity will
cooperate with Buyer and Acquisition Sub and their counsel in
the contest or defense, make available its personnel, and
provide such testimony and access to its books and records as
shall be necessary in connection with the contest or defense,
all at Buyer's sole cost and expense (unless Buyer is entitled
to indemnification therefor under Article XI below).
(b) In the event and for so long as Parent, Seller or any Seller
Entity is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim,
or demand in connection with (i) any transaction contemplated
under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving any of
Parent, Seller or the Seller Entities, Buyer will cooperate
with the contesting or defending party and its counsel in the
contest or defense, make available its personnel, and provide
such testimony and access to its books and records as shall be
necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending party
(unless the contesting or defending party is entitled to
indemnification therefor under Article XI below).
7.05 Novation.
Buyer, Parent, Seller and each Seller Entity shall cooperate with each
other and use their reasonable best efforts to obtain any necessary
novation agreements of (a) any Government Contracts between Seller or
any Seller Entity and a Governmental Authority which require novation
under any Legal Requirements, (b) all Government Contracts which have
not been novated to Seller or a Seller Entity but which are being
performed by the Business and have been or will be assigned to a Seller
Entity pursuant to the Contribution Agreement and (c) any other
contracts requiring novation. With respect to Government Contracts
which have not been novated to Seller or a Seller Entity and which
require novation, Parent, Seller and each Seller Entity shall obtain,
or shall seek permission for Buyer to obtain, such records and
documentation as may be necessary, in Buyer's reasonable judgment, to
perform through its direct or indirect wholly-owned subsidiaries under
such Government Contracts.
7.06 Confidentiality.
Buyer acknowledges that all information provided to any of it and its
affiliates, agents and representatives by Seller, the Seller Entities
or any of their affiliates, predecessors, agents and representatives is
subject to the terms of the Confidentiality Agreement, the terms of
which are hereby incorporated herein by reference. Buyer acknowledges
that any and all information provided or made available to it and its
affiliates, agents and representatives by or on behalf of Seller
concerning Seller, the Seller Entities and their affiliates (other than
information to the extent that such information relates to the
Business, the Business Assets and the Assumed Liabilities) shall remain
subject to the terms and conditions of the Confidentiality Agreement
after the Closing Date.
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7.07 Cooperation on Assertion of Attorney-Client Privilege.
Parent and Seller agree to cooperate and use commercially reasonable
efforts to preserve and, at Buyer's reasonable request, assert
attorney-client privilege in connection with any Proceeding by a
third-party or a Governmental Authority against Buyer or Buyer and
Seller with respect to the Business or the Business Assets; provided,
however, that nothing in this Section 7.07 shall constitute or be
construed as a waiver of any right to assert attorney-client privilege
in connection with any Proceeding in which Buyer, on the one hand, and
Parent and/or Seller, on the other hand, are or in Seller's judgment
may reasonably be expected to be adverse parties. The parties shall
also enter into an appropriate joint defense agreement to accommodate
matters addressed in this Section 7.07.
7.08 Cooperation in Maintenance of Intellectual Property Rights.
(a) Seller, at Buyer's sole cost and expense, agrees that in the
event any Intellectual Property Rights of any Seller Entity
require fees or taxes or actions falling due within 90 days
after the Closing Date, Seller or its representatives will pay
or take such action as may be reasonably required within the
required deadline and promptly advise Buyer that it has done
so, providing a copy of applicable documents or receipts.
(b) Seller, at Buyer's sole cost and expense, further agrees to
provide docket listings, due date listings, copies of pending
matters and otherwise to take all actions reasonably required
to provide an orderly transition to Buyer's control of and
maintenance of all files relating to all Intellectual Property
Rights.
7.09 Letters of Credit and Guarantees.
Buyer shall, effective as of the Closing, cause the letters of credit,
guarantees and other credit enhancements (other than the Letter of
Credit) given by Seller and its affiliates (other than the Seller
Entities) and set forth on Schedule 7.09, to the extent they relate to
the Business or the Business Assets, to be replaced by letters of
credit, guarantees or other credit enhancements of Buyer and its
affiliates so that Seller and its affiliates (other than the Seller
Entities) shall have no further obligation or liability thereunder.
ARTICLE VIII
OTHER AGREEMENTS
----------------
8.01 Antitrust Law Compliance.
As promptly as practicable after the date hereof, but in no event later
than November 9, 2001, Buyer and Seller shall file with the Federal
Trade Commission and the Antitrust Division of the Department of
Justice the notifications and other information required to be filed
under the HSR Act and any rules and regulations promulgated thereunder,
with respect to the transactions contemplated by this Agreement;
provided, however, that neither party shall make any such filing
without providing to the other party a final copy of such for review
and consent for a reasonable period of time in advance of the proposed
52
filing. Buyer and Seller each warrant that their respective filings
will be, as of the date filed, true and accurate and in accordance with
the requirements of the HSR Act and any such rules and regulations.
Buyer and Seller each agree to make available to the other such
information as the other party may reasonably request relative to its
business, assets and property (including, in the case of Seller, the
Business) as may be required to file any additional information
requested by such agencies under the HSR Act and any such rules and
regulations. Any filing fees payable under the HSR Act in connection
with the notifications described in this Section 8.01 shall be paid by
Buyer.
8.02 Employment and Employee Benefit Matters.
(a) Employment. Prior to the Closing, Seller shall transfer all of
its employees who are actively employed (including any
employees on approved leave but excluding employees on
long-term disability) in the Division (collectively, the
"Xxxxxx Transferred Employees") to one or more Seller
Entities. For purposes of this Agreement, each employee of a
Seller Entity other than a Xxxxxx Transferred Employee is
referred to as a "Seller Entity Employee." Buyer has provided
to Seller a list of those employees (including any Xxxxxx
Transferred Employees) of Seller or any Seller Entity that
Buyer will not retain as employees of Acquisition Sub or any
Seller Entity immediately following the Closing (the
"Terminated Employees"). On or prior to the Closing, Seller
and the Seller Entities shall take all necessary action to (i)
terminate the employment by the Seller Entities of each
Terminated Employee and (ii) terminate each contract relating
to the employment or severance of any Xxxxxx Transferred
Employee or Seller Entity Employee, or the retention or
severance of any person who serves as a consultant to Seller
(in connection with the Business) or any Seller Entity
(collectively, the "Business Employment Contracts"). For
purposes of this Agreement, each Seller Entity Employee and
Xxxxxx Transferred Employee who is an employee of a Seller
Entity at the Closing, other than any Terminated Employee,
shall be referred to as an "Affected Employee." Buyer agrees
to provide each Affected Employee with salary, bonus and
benefit opportunities that are commercially reasonable. On and
after the Closing Date, Buyer shall give the Affected
Employees full credit for purposes of eligibility to
participate and vesting under any employee benefit plans or
arrangements maintained by Buyer and its subsidiaries, for the
Affected Employees' service with Seller and its subsidiaries
to the same extent recognized by Seller and its subsidiaries
immediately prior to the Closing Date. Nothing in this Section
8.02 or elsewhere in this Agreement or the Ancillary
Agreements shall be construed to create any rights or claims
for benefits by any Affected Employees or any other employee
of the Business. Nothing in this Section 8.02 or elsewhere in
this Agreement or the Ancillary Agreements shall constitute an
agreement or guaranty that any employee or consultant of the
Business shall be entitled to remain for any specified period
in the employment of any Seller Entity or any affiliate of
Buyer.
(b) Severance and Separation Benefits. Seller and Buyer intend
that the transactions contemplated by this Agreement shall not
constitute a severance of employment of any Affected Employee
prior to or upon the consummation of the transactions
53
contemplated by this Agreement, and that the Affected
Employees shall have continuous and uninterrupted employment
immediately before and immediately after the Closing. Seller
shall be liable for all liabilities, responsibilities, and
obligations for any compensation, benefits, severance
payments, or other separation payments of any kind or nature
(i) to which any Terminated Employee or former employee of the
Business may be or become entitled or claim to be entitled as
a result of such employee's or former employee's termination
of employment in connection with or prior to the Closing, (ii)
to which any Affected Employee or former employee of the
Business may be or become entitled or claim to be entitled
pursuant to or in connection with the termination of the
Business Employment Contracts or (iii) to which any Affected
Employee or former employee of the Business may be or become
entitled or claim to be entitled under the Federal Cartridge
Company Voluntary Separation Window Program (except to the
extent any such liability has been accrued on the books of
Federal Cartridge Company before the Closing).
(c) Health and Welfare Plan Coverage and Continuation Rights.
Buyer shall (A) waive all limitations as to preexisting
conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the
Affected Employees under any Welfare Plans of Buyer and its
subsidiaries ("Buyer Welfare Plans") in which the Affected
Employees and their dependents may be eligible to participate
after the Closing Date to the extent waived under the
applicable corresponding Welfare Plan of Seller and its
subsidiaries immediately prior to the Closing Date and (B)
provide each Affected Employee with credit under any Buyer
Welfare Plans for any co-payments and deductibles paid under a
corresponding Welfare Plan of Seller and its subsidiaries in
the calendar year in which the Closing Date occurs (or, if
later, in the calendar year in which Affected Employees and
their dependents commence participation in the applicable
Buyer Welfare Plan) for purposes of satisfying any applicable
deductible or out-of-pocket requirements under any Buyer
Welfare Plans in which the Affected Employees are eligible to
participate after the Closing Date. Except as otherwise
provided in this Section 8.02, as of the Closing, each Seller
Entity shall cease to be a participating employer of and shall
cease making contributions to, being charged for, or otherwise
being financially responsible for each Welfare Plan maintained
by the Seller. Except as otherwise provided in Section 8.02,
Seller shall be responsible for all claims incurred on or
prior to the Closing under its Welfare Plans with respect to
each Xxxxxx Transferred Employee and each Seller Entity
Employee (to the extent that such Seller Entity Employee was
covered under Seller's Welfare Plans prior to the Closing);
each Seller Entity shall be responsible for all claims
incurred prior to, on and after the Closing under their
Welfare Plans with respect to each Seller Entity Employee; and
Buyer shall be responsible for all claims incurred after the
Closing under its employee benefit plans with respect to each
Affected Employee. A claim shall be deemed to have been
incurred (i) in the case of health benefits, when the service
is provided or supplies or drugs are delivered, (ii) in the
case of death benefits, when the death occurs and (iii) in the
case of disability benefits, when the illness or injury is
certified to have occurred. With respect to qualifying events
occurring prior to or
54
in connection with the Closing, Seller shall take such actions
as may be required to cause Seller's Plans to continue to
provide continuation coverage under Code ss. 4980B and ERISA
ss. 601 et. seq. and any continuation or conversion rights
existing under applicable state law or contract ("COBRA") to
each Xxxxxx Transferred Employee, each Seller Entity Employee
(to the extent such employees were covered under Seller's
Welfare Plans prior to the Closing) and each qualifying
beneficiary of such employees.
(d) Reimbursement Accounts. Buyer and Seller shall use their
commercially reasonable efforts to provide transition from
Seller to Buyer with respect to flexible spending
reimbursement accounts (under a cafeteria plan qualifying
under Code ss. 125) that provide benefits to Affected
Employees.
(e) Life, Accidental Death and Dismemberment and Disability
Benefits. To the extent that any Affected Employees
participate in Seller's Plans providing life, accidental death
and dismemberment and disability benefits prior to the
Closing, Seller will use commercially reasonable efforts to
permit such Affected Employees to continue their participation
in Seller's Plans at the same benefit levels in effect on the
Closing, from the Closing through the last day of the month in
which the Closing occurs at no cost to Affected Employees or
Buyer. Buyer will use its commercially reasonable efforts to
cause Welfare Plans providing life, accidental death and
dismemberment and disability coverage to be established on a
timely basis so that such plans will be in effect and cover
Affected Employees as soon as possible but in no event later
than the first day of the month following the Closing.
(f) Retiree Medical and Retiree Life Insurance Benefits. After the
Closing, Seller shall retain the responsibility for providing
former employees of the Business with retiree medical and life
insurance benefits under the Seller's Welfare Plans to the
extent such former employees are entitled to receive such
benefits in accordance with the terms of such plans. After the
Closing, Federal Cartridge Company shall retain the
responsibility for providing former employees of the Business
with retiree medical and life insurance benefits under Federal
Cartridge Company's Welfare Plans to the extent such former
employees are entitled to receive such benefits in accordance
with the terms of such plans. Buyer will use its commercially
reasonable efforts to cause employee benefit welfare plans
providing post-retirement medical and life insurance benefits
to be established on a timely basis so that such plans will be
in effect and cover all Affected Employees by the first day of
the month following the Closing (it being understood that
Affected Employees who are Seller Entity Employees shall
continue to be covered immediately following the Closing under
the applicable Seller Entity Welfare Plan in which such Seller
Entity Employees participated immediately prior to the
Closing).
(g) Federal Cartridge Company Pension Plan. Buyer or one of its
subsidiaries (which for this purpose includes the Seller
Entities immediately following the closing) shall adopt as
successor plan sponsor (or, if applicable, remain the plan
sponsor)
55
of the Federal Cartridge Company Pension Plan and its related
trust (collectively, the "Federal Pension Plan"), and assume
and/or retain as of the Closing all rights and obligations
under the Federal Pension Plan. Neither Seller nor any of its
subsidiaries shall, following the Closing, have any rights or
liabilities of any kind or description under the Federal
Pension Plan. If, as of the Closing, the present value of the
Federal Pension Plan's projected benefit obligations (as
defined in Statement of Financial Accounting Standards No. 87
("FAS 87")), determined on the basis of the actuarial
assumptions set forth in the actuarial report for the 2000
plan year (the "Federal PBO"), exceeds the fair market value
as of the Closing of assets accumulated to provide pension
benefits under the Federal Pension Plan (the "Federal Assets")
by more than $4,065,304, Seller shall pay to Buyer, as a
Purchase Price adjustment, an amount (the "Federal Adjustment
Amount") in cash equal to the product of (x) 0.5 multiplied by
(y) the excess of (A) the Federal PBO minus $4,065,304, over
(B) the Federal Assets. Buyer shall cause its actuary, as soon
as practicable following the Closing Date, to calculate the
amount of the Federal PBO, and Buyer shall provide any actuary
designated by Seller with information reasonably necessary to
review the calculations in all material respects and to verify
that such calculations have been performed in a manner
consistent with the terms of this Agreement. The principles
embodied in the provisions of Section 8.02(h)(vi) shall apply
to any dispute regarding the calculations of the Federal PBO.
The Federal Adjustment Amount shall be payable at the time
specified in Section 1.03 or, if later, within 10 days
following the date on which the amount of the Federal PBO has
been determined in accordance with the foregoing.
(h) Xxxxxx Retirement Plan.
(i) Effective as of the Closing, Seller shall take all
necessary actions to cause the Xxxxxx Retirement Plan
(the "Xxxxxx XX Plan") to be amended (if required) to
provide for the direct trust-to-trust transfer of
assets and the assumption of liabilities as
contemplated herein.
(ii) Not later than the Closing, Buyer shall establish or
otherwise have in effect a defined benefit pension
plan which shall be qualified under Codess. 401(a)
(the "Buyer DB Plan") and shall cover those Affected
Employees who are participants in the Xxxxxx XX Plan
on the Closing. Buyer and Seller shall reasonably
cooperate to make any and all filings and submissions
to the appropriate governmental agencies required to
be made by Seller or Buyer as are appropriate in
effectuating the provisions of this Section 8.02(h)
(including (i) IRS Forms 5310-A in respect of the
transfers of assets and (ii) in the event that the
transactions contemplated by this Agreement
constitute a "reportable event" (within the meaning
of Section 4043 of ERISA and the related regulations)
for which the 30-day notice has not been waived,
timely notification of the PBGC and filing of all
reports required in connection therewith).
56
(iii) The Buyer DB Plan and the trust which is a part of
such plan (and any successor to such plan and/or
trust) shall provide (A) that with respect to assets
transferred to the Buyer DB Plan from the Xxxxxx XX
Plan, such assets shall be held by the trust which is
a part of the Buyer DB Plan for the exclusive benefit
of the participants in such plan; (B) that the
accrued benefits as of the Closing Date of each
Affected Employee may not be decreased by amendment
or otherwise; and (C) that each Affected Employee
shall have the right to receive his or her benefit
accrued through the Closing Date under the Xxxxxx XX
Plan in any optional form provided under the Xxxxxx
XX Plan.
(iv) As soon as practicable following the Closing Date,
Seller shall cause its actuary to calculate the
Accrued Liability (as defined in clause (vi) below)
of the Affected Employees and of all participants and
beneficiaries as of the end of the month that
includes the Closing Date. If the Accrued Liability
of all participants and beneficiaries is determined
to be less than the fair market value of the assets
of the Xxxxxx XX Plan as of the end of the month that
includes the Closing Date, then Seller shall cause to
be transferred to a trust established by Buyer as
part of the Buyer DB Plan cash or assets (or a
combination thereof) reasonably acceptable to the
trustees of the Buyer DB Plan equal to the Accrued
Liability for all Affected Employees, as determined
as of the end of the month that includes the Closing
Date, subject to further adjustments in accordance
with this Section 8.02(h)(iv). If the Accrued
Liability of all participants and beneficiaries is
determined to be equal to or more than the fair
market value of assets of the Xxxxxx XX Plan as of
the end of the month that includes the Closing Date,
then if required by ERISA or the code, Seller shall
cause its actuary to determine the amount of assets
allocable to the Accrued Liabilities of the Affected
Employees based on Section 4044 of ERISA (the
"Section 4044 Amount"), and Seller shall cause to be
transferred to a trust established by Buyer as part
of the Buyer DB Plan cash or assets (or a combination
thereof) reasonably acceptable to the trustees of the
Buyer DB Plan equal to the Section 4044 Amount
applicable to the Affected Employees, as determined
as of the end of the month that includes the Closing
Date, subject to further adjustments in accordance
with this Section 8.02(h)(iv). Notwithstanding
anything to the contrary in this Agreement, the
transfers contemplated by this Section 8.02(h)(iv)
shall be determined in accordance with Codess. 414(l)
and the related regulations (including the safe
harbor PBGC assumptions) and methodology set forth at
the end of this Section 8.02(h)(iv), and shall be
adjusted to the extent necessary for any other
governmental approval (including the IRS and the
PBGC) and to comply with Codess. 414(l) and the
related regulations as well as Section 4044 of ERISA
and the related regulations. The amount finally
determined in accordance with the foregoing to be
transferred from the Xxxxxx XX Plan to the Buyer DB
Plan shall be further adjusted, as determined by
Seller's actuary, to take into account the actual
investment return on the assets of the Xxxxxx XX Plan
57
from the end of the month in which the Closing Date
occurs until the date of transfer (provided, that the
investment return for the month in which the transfer
occurs shall be deemed to be the average rate of the
90-day Treasury Xxxx on the auction date coincident
with the first day of the calendar month in which the
transfer occurs or, if there is no auction on such
date, on the next immediately preceding auction
date), and shall be decreased by any benefit payments
made in respect of Affected Employees under the
Xxxxxx XX Plan during such period.
(v) The transfer of assets from the Xxxxxx XX Plan to the
Buyer DB Plan shall be made as soon as practicable
following the determination by Seller's actuary of
the applicable amount to be transferred, but not
later than 180 days following the Closing Date.
Notwithstanding the foregoing, no transfer shall be
made until such time as Seller has been provided
evidence reasonably satisfactory to Seller that Buyer
has established a trust as part of the Buyer DB Plan
and that the Buyer DB Plan satisfies the requirements
for a qualified plan under Codess. 401(a) and that
such trust is exempt from tax under Code ss. 501(a),
Buyer has been provided evidence reasonably
satisfactory to it that the Xxxxxx XX Plan satisfies
the requirements for a qualified plan under Codess.
401(a) and that the trust which forms part of such
plan is exempt from tax under Codess. 501(a) and the
parties have received any required governmental
approvals. Unless Seller and Buyer agree otherwise,
all transfers shall occur on the last business day of
a month. Seller's actuary shall be responsible for
the required actuarial certification under Codess.
414(l). Buyer as of the Closing Date shall assume all
liabilities and obligations of Seller and its
subsidiaries and the Xxxxxx XX Plan with respect to
the Affected Employees under the Xxxxxx XX Plan in
respect of the transferred assets other than
liabilities or obligations arising on account of or
in connection with any acts or omissions of Seller,
its subsidiaries or any other party prior to the
Closing Date in connection with the Xxxxxx XX Plan in
violation of the terms of such plan or Applicable
Law.
(vi) The term "Accrued Liability" shall mean the benefit
obligation under the Xxxxxx XX Plan for each Affected
Employee, determined as of the Closing on a plan
termination basis using safe harbor PBGC assumptions.
The Accrued Liability and the Section 4044 Amount
shall be determined by an enrolled actuary designated
by Seller, and Seller shall provide any actuary
designated by Buyer with information reasonably
necessary to review the calculations in all material
respects and to verify that such calculations have
been performed in a manner consistent with the terms
of this Agreement. If there is a good faith dispute
between Seller's actuary and Buyer's actuary as to
the amount to be transferred to the Buyer DB Plan
under this Agreement and such dispute remains
unresolved for 14 days, the chief financial officers
of Seller and Buyer shall endeavor to resolve the
dispute. If such dispute remains unresolved for 30
days, Seller and Buyer shall select and appoint a
third actuary who is mutually satisfactory
58
to both Seller and Buyer. The decision of such third
party actuary shall be rendered within 30 days and
shall be conclusive as to any dispute for which such
actuary was appointed. The cost of such third party
actuary shall be divided equally between Seller and
Buyer. Each of Buyer and Seller shall be responsible
for the cost of its own actuary.
(vii) The actual amount of assets transferred from the
Xxxxxx XX Plan to the Buyer DB Plan shall be referred
to herein as the "Transfer Amount". To the extent
that the Adjusted Accrued Liability (as defined
below) for Affected Employees exceeds the Transfer
Amount (such excess, the "Pension Shortfall Amount"),
Seller shall pay to Buyer, as a Purchase Price
adjustment, at the time specified in Section 1.03 or,
if later, within ten (10) days following the transfer
of assets from the Xxxxxx XX Plan to the Buyer DB
Plan, an amount in cash equal to the product of (x)
the Pension Shortfall Amount and (y) 0.6 (60%). The
term "Adjusted Accrued Liability" shall mean the
Accrued Liability, originally determined in
accordance with Section 8.02(h)(vi) as of the end of
the month in which the Closing Date occurs and
adjusted, using the initial PBGC interest rate used
in the calculation of Accrued Liability and decreased
by any benefit payments in the same manner as
provided in the last sentence of Section 8.02(h)(iv),
through the date on which the Transfer Amount is
actually transferred to the Buyer DB Plan.
(i) 401(k) Plan and Non-Qualified Deferred Compensation Plans.
After the Closing, Seller shall retain all responsibility for
any assets held and liabilities incurred with respect to the
Affected Employees under the Xxxxxx 401(k) Retirement Savings
Plan (the "Xxxxxx 401(k) Plan") or any non-qualified deferred
compensation plan maintained by Seller (including, but not
limited to, the Xxxxxx, Inc. and Subsidiaries Supplemental
Retirement Benefit Plan and the Xxxxxx, Inc. and Subsidiaries
Supplemental Retirement Savings Plan). After the Closing,
Seller and Omark Industries, Inc. shall retain all
responsibilities for any assets held and liabilities incurred
with respect to any Affected Employees under the Omark
Industries, Inc. Retirement Protection Plan and the Omark
Industries, Inc. Supplemental Retirement Plan. Not later than
the Closing, Buyer shall establish or otherwise have in effect
a defined contribution plan which shall be qualified under
Code ss. 401(a) and shall include a qualified cash or deferred
arrangement within the meaning of Code ss. 401(k) (the
"Buyer's 401(k) Plan") that will provide benefits to Affected
Employees. Each Affected Employee participating in the Xxxxxx
401(k) Plan as of the Closing Date shall become a participant
in the Buyer's 401(k) Plan as of the Closing Date. At such
time as Seller is reasonably satisfied that the Buyer's 401(k)
Plan meets the requirements for qualification under Code ss.
401(a), and if Seller reasonably determines that each Affected
Employee shall be entitled to a distribution of his or her
account balance following the Closing Date under Code ss.
401(k)(10) or other Applicable Law, in accordance with the
terms of the Xxxxxx 401(k) Plan, Seller agrees to permit each
Affected Employee to effect a "direct rollover" (within the
meaning of Code ss. 401(a)(31)) of his or her account balances
under the Xxxxxx 401(k) Plan if such
59
rollover is elected in accordance with Applicable Law by such
Affected Employee. Without limiting the generality of the
foregoing, each Affected Employee may elect to effect, and
Buyer agrees to cause the Buyer's 401(k) Plan to accept, a
"direct rollover" to the Buyer's 401(k) Plan of his or her
account balances (including promissory notes evidencing all
outstanding loans) in the Xxxxxx 401(k) Plan if such rollover
is elected in accordance with Applicable Law by such Affected
Employee. Following any "direct rollover" to the Buyer's
401(k) Plan in respect of Affected Employees, Buyer shall
indemnify and hold harmless Seller and its subsidiaries from
all costs, expenses or other damages that may result to Seller
and its subsidiaries from any claim by such Affected Employees
for any benefit alleged to be payable under the Xxxxxx 401(k)
Plan in respect of the assets transferred to the Buyer's
401(k) Plan, other than costs, expenses or other damages
arising on account of or in connection with any acts or
omissions by Seller, its subsidiaries or any other party prior
to the Closing Date in connection with the Xxxxxx 401(k) Plan
in violation of the terms of such plan or Applicable Law.
(j) Documents and Other Information. Seller and each Seller Entity
and Buyer shall provide each other with such documents,
employee data or other information as may be reasonably
required to carry out the provisions of this Section 8.02.
8.03 Preserve Accuracy of Representations and Warranties.
Each of the parties hereto shall refrain from taking any action which
would render any representation or warranty of such party in this
Agreement inaccurate as of the Closing Date to the extent such an
inaccuracy would result in the closing conditions specified in Sections
9.01(a) or 9.02(a), as applicable, not being satisfied, and shall
notify the other parties of any Proceeding that is instituted or
threatened to restrain, prohibit or otherwise challenge, in whole or in
part, the legality of any transaction contemplated by this Agreement or
any Ancillary Agreement. Prior to the Closing, each party shall give
the other parties prompt written notice upon becoming aware of any
breach of or inaccuracy in any representation or warranty of such
notifying party to the extent such an inaccuracy would result in the
closing conditions specified in Sections 9.01(a) or 9.02(a), as
applicable, not being satisfied; provided, however, that such notice
shall not be deemed to amend the Disclosure Schedule or any other
schedule or exhibit hereto, or to prevent or cure any breach or
inaccuracy in, or disclose any exception to, any of the representations
or warranties set forth in this Agreement.
8.04 Press Releases and Announcements.
Prior to the Closing Date, neither party hereto shall issue any press
release (or make any other public announcement) related to this
Agreement or the transactions contemplated hereby or make any
announcement to the employees, customers or suppliers of Seller or any
Seller Entity without prior written approval of the other party hereto,
except as may be necessary, to comply with the requirements of this
Agreement or applicable law. If any such press release or public
announcement is so required, the party making such disclosure shall
consult with the other party prior to making such disclosure, and the
60
parties shall use all reasonable efforts, acting in good faith, to
agree upon a text for such disclosure which is satisfactory to both
parties.
8.05 Expenses.
Except as otherwise expressly provided for herein, Parent and Seller,
on the one hand, and Buyer, on the other hand, will pay all of their
own expenses (including environmental investigation expenses), and the
expenses of their respective affiliates and subsidiaries incurred prior
to the Closing, including, without limitation, attorneys' and
accountants' fees, in connection with the negotiation of this
Agreement, the performance of their respective obligations hereunder
and the consummation of the transactions contemplated by this Agreement
(whether consummated or not). Seller and Buyer shall share equally all
fees and expenses payable to the issuer of the Letter of Credit arising
in connection with the issuance thereof and throughout the Initial
Letter of Credit Period, and Buyer shall be solely responsible for all
fees and expenses payable to the issuer of the Letter of Credit arising
after the Initial Letter of Credit Period.
8.06 Title Examination.
(a) Seller or the relevant Seller Entity shall use commercially
reasonable efforts to furnish to Buyer, a reasonable period
prior to the Closing Date, the following with respect to each
parcel of Real Property (collectively, "Title Evidence"): a
commitment ("Title Commitment") for an ALTA Form B 1998
Owner's Policy of Title Insurance (or the equivalent if such
policy is not available in the jurisdiction in which such
property is located) insuring title to such parcel, showing a
Seller Entity as owner of such parcel, in the amount of the
Purchase Price attributable thereto, issued by First American
Title Insurance Company ("Title"), and (assuming compliance
with the conditions of such commitments) providing for full
extended coverage over all general title exceptions contained
in such policies and the following special endorsements to the
extent available in such jurisdiction and requested by Buyer:
zoning (including parking), access, restrictions, utility
facilities, comprehensive, survey, tax parcel, contiguity and
subdivision and a current ALTA/ACSM as-built survey of such
parcel of Real Property prepared by a registered land surveyor
in form reasonably acceptable to Buyer (a "Survey"). The cost
of any title policies issued from the Title Commitments and
each Survey shall be borne by Buyer.
(b) Buyer shall make any written reasonable objections
("Objections") to the form and/or contents of the Title
Evidence within five days after its receipt of the latest
delivered Title Evidence. Any matter shown on such Title
Evidence and not timely objected to by Buyer shall be a
"Permitted Lien" hereunder. Seller shall use its reasonable
best efforts to correct any Objections.
61
ARTICLE IX
CONDITIONS TO CLOSING
---------------------
9.01 Conditions to Buyer's Obligation.
The obligation of Buyer to consummate the transactions contemplated by
this Agreement is subject to the satisfaction or written waiver by
Buyer of the following conditions on or before the Closing Date:
(a) Except for any inaccuracy or breach that has not had,
individually or in the aggregate, a Material Adverse Effect,
the representations and warranties of Parent and Seller
contained in this Agreement (disregarding all references to
materiality or Material Adverse Effect contained therein)
shall be true and correct (i) as of the Closing Date or (ii)
if made as of a date specified therein, as of such date.
(b) Parent, Seller and each Seller Entity shall have performed in
all material respects all of the covenants and agreements that
they are required to perform and comply with prior to the
Closing.
(c) The applicable waiting periods under the HSR Act shall have
expired or been terminated and all other material governmental
filings, authorizations and approvals that are required for
the consummation of the transactions contemplated hereby will
have been duly made and obtained.
(d) There shall not be instituted or pending any Proceeding,
before any Governmental Authority, (i) challenging or seeking
to make illegal, or to delay or otherwise directly or
indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain damages
in connection with such transactions, (ii) seeking to prohibit
direct or indirect ownership or operation by Buyer of all or a
material portion of the Business Assets, or to compel Buyer to
dispose of or to hold separately all or a material portion of
the business or assets of Buyer as a result of the
transactions contemplated hereby, (iii) seeking to invalidate
or render unenforceable any material provision of this
Agreement or any of the Ancillary Agreements or (iv) otherwise
relating to and materially adversely affecting the
transactions contemplated hereby.
(e) There shall not be any action taken, or any Legal Requirement
(including, without limitation, the Assignment of Claims Act,
31 U.S.C. ss. 203, 41 U.S.C. ss. 15, with respect to
Government Contracts) or Order enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions
contemplated hereby by any Governmental Authority, which would
reasonably be expected to result, directly or indirectly, in
any of the consequences referred to in Section 9.01(d) hereof.
(f) Between the date of this Agreement and the Closing Date, there
shall not have been any Material Adverse Effect.
62
(g) Seller shall have delivered to Buyer all of the documents
required to be delivered pursuant to Section 3.02(b).
9.02 Conditions to the Obligation of Parent and Seller.
The obligation of Parent and Seller to consummate the transactions
contemplated by this Agreement are subject to the satisfaction or
written waiver by Seller of the following conditions on or before the
Closing Date:
(a) Except for any materiality inaccuracy or breach that has not
had, individually or in the aggregate, a Material Adverse
Effect, the representation and warranties of Buyer contained
in this Agreement (disregarding all references to materiality
or Material Adverse Effect contained therein) shall be true
and correct (A) as of the Closing Date or (B) if made as of a
date specified therein, as of such date.
(b) Buyer shall have performed in all material respects all of the
covenants and agreements that it is required to perform and
comply with prior to the Closing.
(c) The applicable waiting periods under the HSR Act shall have
expired or been terminated and all other material governmental
filings, authorizations and approvals that are required for
the consummation of the transactions contemplated hereby will
have been duly made and obtained.
(d) There shall not be instituted or pending any Proceeding,
before any Governmental Authority, (i) challenging or seeking
to make illegal, or to delay or otherwise directly or
indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain damages
in connection with such transactions, (ii) seeking to
invalidate or render unenforceable any material provision of
this Agreement or any of the Ancillary Agreements or (iii)
otherwise relating to and materially adversely affecting the
transactions contemplated hereby.
(e) There shall not be any action taken, or any Legal Requirement
(including, without limitation, the Assignment of Claims Act,
31 U.S.C. ss. 203, 41 U.S.C. ss. 15, with respect to
Government Contracts or Order enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions
contemplated hereby by any Governmental Authority, which would
reasonably be expected to result, directly or indirectly, in
any of the consequences referred to in Section 9.02(d) hereof.
(f) Seller shall have obtained, or caused to be obtained, the
consent required under the Credit Agreement dated as of August
19, 1999, among Parent, Seller, Bank of America, N.A., as
administrative agent, and the other parties thereto, as
amended to date, to the transactions contemplated by this
Agreement.
(g) On the Closing Date, Buyer shall have delivered to Seller all
of the documents required to be delivered pursuant to Section
3.02(c).
63
(h) The Registration Statement on Form S-3 of Buyer covering the
resale by Seller of the Buyer Shares shall have been declared
effective by the Securities and Exchange Commission.
ARTICLE X
TERMINATION
-----------
10.01 Termination.
This Agreement may be terminated at any time prior to the Closing:
(a) by the mutual written consent of Buyer, on the one hand, and
Parent and Seller, on the other hand;
(b) by Buyer, upon delivery of written notice to Seller if any of
the conditions to the Closing set forth in Section 9.01 shall
have become incapable of fulfillment and shall not have been
waived in writing by Buyer;
(c) by Seller, upon delivery of written notice to Buyer if any of
the conditions to the Closing set forth in Section 9.02 have
become incapable of fulfillment and shall not have been waived
in writing by Seller;
(d) by Buyer or Seller if the transactions contemplated by this
Agreement have not been consummated by January 31, 2002, due
to the failure to satisfy any condition precedent on or prior
to such date;
provided, that no party will be entitled to terminate this Agreement
pursuant to Section 10.01(b), (c) or (d) if such party is at such time
in willful breach of this Agreement;
10.02 Effect of Termination.
(a) If Parent, Buyer or Seller terminates this Agreement in
accordance with Section 10.01, this Agreement shall become
void and there shall be no liability on the part of either
Buyer or Seller, or their respective affiliates, stockholders,
officers or directors, except that Sections 7.06, 8.04 and
8.05 and Articles X and XII shall survive indefinitely, and
except with respect to willful breaches of this Agreement
prior to the time of such termination.
(b) Upon termination in accordance with Section 10.01, Buyer shall
return to Seller all documents and copies and other materials
received from or on behalf of Seller or any Seller Entity
relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, and all
confidential information received by Buyer with respect to the
Business Assets, the Business Shares and the Business shall be
treated in accordance with the Confidentiality Agreement,
which shall remain in full force and effect notwithstanding
the termination of this Agreement.
64
(c) Nothing in this Section 10.02 shall be deemed to release any
party from any liability for any breach by such party of the
terms and provisions of this Agreement or to impair the right
of any party to compel specific performance by another party
of its obligations under this Agreement.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
-------------------------
11.01 Survival of Representations and Warranties.
Notwithstanding any investigation made by or on behalf of any of the
parties hereto or the results of any such investigation and
notwithstanding the participation of such party in the Closing, the
representations and warranties contained in Article IV and Article V
hereof shall survive the Closing for the greater of the following
periods: (a) two (2) years from the Closing Date, with the exception of
(i) Sections 4.01, 4.02, 4.03, 4.10(b) (only the third sentence
thereof), 5.01, 5.02 and 5.06, which shall survive for a period equal
to the applicable statute of limitations, (ii) Section 4.15, which
shall survive for a period equal to the statute of limitations
applicable to actions by the Internal Revenue Service or any other Tax
Governmental Authority regarding the subject matter thereof, and (iii)
Section 4.25, which shall survive for a period of five (5) years from
the Closing Date, or (b) with respect to any specific representation or
warranty under which a party shall have made a claim for
indemnification hereunder and as to which such claim has not been
completely and finally resolved prior to the expiration of the
applicable time period above, such representation or warranty shall
survive solely with respect to any such claim for the period of time
beyond such time period sufficient to resolve, completely and finally,
the claim relating to such representation or warranty (the later of (a)
or (b), the "Survival Period").
11.02 Indemnification by Parent and Seller.
(a) Parent and Seller jointly and severally agree to indemnify in
full Buyer and its officers, directors, employees, agents,
stockholders and subsidiaries (collectively, the "Buyer
Indemnified Parties") and hold them harmless from and against
any loss, liability, damage, expense or cost (including,
without limitation, costs of investigation and defense, and
reasonable legal and other professional fees and expenses but
not including consequential damages, punitive, special or
indirect damages), as incurred and whether or not involving a
Third Party Action (as defined in Section 11.07(a)), which any
of the Buyer Indemnified Parties may suffer, sustain or become
subject to, as a direct or indirect result of, or arising from
or in connection with any of the following (collectively,
"Buyer Losses"):
(i) any breach or inaccuracy in any of the
representations and warranties of Parent or Seller
contained in this Agreement, the Ancillary
Agreements, or in any exhibits, schedules,
certificates or other documents delivered or to be
delivered by or on behalf of Parent or Seller
pursuant to the terms hereof or thereof or otherwise
referenced or incorporated in this Agreement
(collectively, the "Seller Related Documents"), it
being
65
understood and agreed that for all purposes under
this Article XI any such breach of a representation
or warranty shall be determined without regard to the
effect of any qualification set forth therein
relating to materiality or a Material Adverse Effect;
provided that Buyer Losses resulting from a breach or
inaccuracy of Section 4.25 shall only include any
costs or expenses incurred to comply with the
requirements of any Environmental Law or any Order
under or pursuant to any Environmental Law, except to
the extent Buyer or another party after the Closing
has contributed to the condition or the
circumstances, including any Releases, forming the
basis of any such Buyer Losses.
(ii) any breach of, or failure to perform, any covenant or
agreement of Parent or Seller contained in this
Agreement or any of the Seller Related Documents;
(iii) any product or component thereof manufactured or
shipped, or any services provided, by the Business in
whole or in part prior to the Closing (including,
without limitation, any product liability claims);
(iv) any product recall required by any Governmental
Authority with respect to any product or component
thereof manufactured or shipped by the Business in
whole or in part prior to the Closing;
(v) the Division Retained Assets (as defined in the
Contribution Agreement), the Division Retained
Liabilities (as defined in the Contribution
Agreement) or the Seller Entity Assumed Liabilities
(as defined in the Intercompany Agreement); and
(vi) any liabilities, responsibilities or obligations of
Parent or Seller for severance payments, severance
benefits or other payments, benefits, costs and
expenses of any kind or nature in respect of
terminated employees pursuant to or incurred in
connection with the actions contemplated by Sections
8.02(a) or 8.02(b); and
(vii) any liability of any of the Seller Entities for Taxes
of any person other than any of the Seller Entities,
(A) under Treasury regulations Section 1.1502-6 (or
any similar provision of state, local or foreign
law); (B) as a result of an express or implied
obligation to indemnify any other person, provided,
however, in each case such Taxes are attributable to
a taxable period ending on or before the Closing
Date.
Notwithstanding the foregoing, Parent and Seller shall not
indemnify and hold harmless the Buyer Indemnified Parties from
any liability for Taxes directly resulting from any action
taken after the Closing Date by Buyer or any of its affiliates
(other than any such action expressly required or permitted by
this Agreement or required by applicable law) (a "Buyer Tax
Act"). In addition, notwithstanding any other provision of
this Agreement, Parent and Seller shall not
66
indemnify and hold harmless the Buyer Indemnified Parties from
any Buyer Losses as a result of the transactions contemplated
by this Agreement qualifying as tax-free reorganizations under
Section 368 of the Code.
11.03 Indemnification by Parent and Seller-Environmental Matters.
(a) In addition to the provisions of Section 11.02, Parent and
Seller jointly and severally agree to indemnify in full Buyer
and each of the other Buyer Indemnified Parties and hold them
harmless from and against any Buyer Loss (including, without
limitation, all costs and expenses of cleanup, containment and
remediation of contamination and the investigation thereof),
as incurred and whether or not involving a Third Party Action
(as defined in Section 11.07(a)), which any of the Buyer
Indemnified Parties may suffer, sustain or become subject to,
as a direct or indirect result of, or arising from or in
connection with any of the following:
(i) any Release of Hazardous Materials (A) on, under or
from the Real Property or the Leased Real Property at
any time prior to the Closing, including Hazardous
Materials coming onto or under the Real Property or
the Lease Real Property from another location; or (B)
directly caused by Seller or any Seller Entity on,
under or from any property formerly owned or operated
by Seller or any Seller Entity;
(ii) any injury to human health or safety associated with
exposure to Hazardous Materials, by reason of the
condition of, or activities on or under the Real
Property or the Leased Real Property prior to the
Closing;
(iii) any violation, or alleged violation, of any
Environmental Law with respect to any operations of
Seller or any Seller Entity prior to the Closing; or
(iv) any Buyer Losses related to the operation of the
TCAAP Facility in New Brighton, Minnesota, arising
under any Environmental Laws or order pursuant to
Environmental Laws for any conditions directly caused
by Seller or any Seller Entity prior to the Closing.
(b) The duty of Parent and Seller to indemnify and hold harmless
Buyer and the other Buyer Indemnified Parties includes, but is
not limited to, Proceedings commenced by any person
(including, but not limited to, any Governmental Authority)
before any Governmental Authority; provided, that Buyer Losses
subject to indemnity under Section 11.03(a) shall only include
any costs or expenses incurred to comply with the requirements
of any Environmental Law or any Order under or pursuant to any
Environmental Law, except to the extent Buyer or another party
after the Closing has contributed to the condition or the
circumstances, including any Releases, forming the basis of
any such Buyer Losses.
(c) Notwithstanding the above, because certain environmental
matters relating to the Federal Cartridge Company ("FCC") are
the subject of an indemnity provided to Seller under the Stock
Purchase Agreement among Seller, Xxxxxxx Enclosures,
67
Inc., Pentair, Inc. and Federal-Xxxxxxx, Inc. dated November
4, 1997 (the "Pentair Indemnity"), Parent and Seller shall
have liability to a Buyer Indemnified Party for any Buyer
Losses under Section 11.03 or under Section 11.02(a) with
respect to a breach or inaccuracy of the representations and
warranties contained in Section 4.25 resulting or arising from
or in connection with FCC, or any of the real property owned,
leased or operated by FCC, including the property in Anoka,
Minnesota, and the TCAAP Facility in New Brighton, Minnesota
("FCC Properties"), or any conditions or operations at any
time existing or occurring thereat, only to the extent
directly caused, created or contributed to by Seller or any
Seller Entity or caused or created during the time period of
Seller's or any Seller Entity's ownership or operation of FCC
or the FCC Properties and then in either case only to the
extent not covered by the Pentair Indemnity, provided that
before seeking any indemnification from Parent or Seller for
any Buyer Losses under Section 11.03 or Section 11.02(a) with
respect to a breach or inaccuracy of the representations and
warranties contained in Section 4.25 relating to FCC or the
FCC Properties, Buyer shall have pursued all reasonable
remedies against indemnitors (other than Parent or Seller)
under the Pentair Indemnity, including any remedies that
Parent or Seller directs Buyer to pursue at Seller's cost.
Reasonable attorney's fees of seeking such indemnity shall be
a Buyer Loss to the extent not covered by the Pentair
Indemnity.
11.04 Indemnification by Buyer.
(a) Buyer agrees to indemnify in full Parent, Seller and their
respective officers, directors, employees, agents,
stockholders and subsidiaries (collectively, the "Seller
Indemnified Parties") and hold them harmless from and against
any loss, liability, deficiency, diminution in value, damage,
expense or cost (including, without limitation, interest,
penalties, costs of investigation and defense, and reasonable
legal and other professional fees and expenses but not
including consequential damages, punitive, special or indirect
damages), whether or not actually incurred or paid prior to
the date referred to in Section and whether or not involving a
Third Party Action, which any of the Seller Indemnified
Parties may suffer, sustain or become subject to, as a direct
or indirect result of, or arising from or in connection with
any of the following (collectively, "Seller Losses"):
(i) any breach or inaccuracy in any of the
representations and warranties of Buyer contained in
this Agreement, the Ancillary Agreements, or in any
exhibits, schedules, certificates or other documents
delivered or to be delivered by or on behalf of Buyer
pursuant to the terms hereof or thereof or otherwise
referenced or incorporated in this Agreement
(collectively, the "Buyer Related Documents"), it
being understood and agreed that for all purposes
under this Article XI any such breach of a
representation or warranty shall be determined
without regard to the effect of any qualification set
forth therein relating to materiality or a Material
Adverse Effect;
68
(ii) any breach of, or failure to perform, any covenant or
agreement of Buyer contained in this Agreement or any
of the Buyer Related Documents;
(iii) the Division Assets or the Division Assumed
Liabilities (as such terms are defined in the
Contribution Agreement) but only to the extent such
Seller Losses result exclusively from or arise
exclusively in connection with Buyer's operation of
the Business after the Closing Date; or
(iv) any liability for Taxes directly resulting from a
Buyer Tax Act.
11.05 Time Limitations.
(a) If the Closing occurs, Parent and Seller will have no
liability (for indemnification or otherwise) to any Buyer
Indemnified Party for any particular Buyer Loss unless Buyer
delivers to Seller a written notice, pursuant to Section
11.07(a) or (b) (as applicable), specifying the factual basis
for the claim giving rise to the Buyer Loss prior to the
second anniversary of the Closing Date, except for (i) claims
arising from a breach or inaccuracy in the representations and
warranties made in Sections 4.01, 4.02, 4.03, 4.10(b) (only
the third sentence thereof), 4.15 and 4.25, for which a claim
may be brought through the Survival Period described in
Section 11.01; (ii) claims arising under Section 11.02(a)(iii)
or (iv), for which a claim may be brought through the
applicable statute of limitations; and (iii) claims arising
under Section 11.03, for which a claim may be brought through
the fifth anniversary of the Closing Date.
(b) If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) to any Seller Indemnified Party
for any particular Seller Loss unless Seller delivers to Buyer
a written notice, pursuant to Section 11.07(a) or (b) (as
applicable), specifying the factual basis for the claim given
rise to the Seller Loss prior to the second anniversary of the
Closing Date, except for claims arising from a breach or
inaccuracy in the representations and warranties made in
Sections 5.01, 5.02 and 5.06, for which a claim may be brought
through the Survival Period described in Section 11.01.
11.06 Limitations on Amount.
(a) Parent and Seller will have no liability to a Buyer
Indemnified Party (for indemnification or otherwise) with
respect to any Buyer Losses covered by Section 11.02(a)(i) or
Section 11.03 until the aggregate amount of all Buyer Losses
exceeds $1,000,000 (the "Basket Amount"), in which case Parent
and Seller shall be obligated to indemnify the Buyer
Indemnified Parties for the total amount of all Buyer Losses
in excess of the Basket Amount; provided, however, that no
individual claim or series of related claims for
indemnification under Section 11.02(a)(i) or Section 11.03
shall be recoverable hereunder if it is or they are for an
amount less than $50,000, until the aggregate amount of all
such claims is equal to at least $500,000. Except for fraud or
willful misrepresentation or as otherwise provided below, the
aggregate liability of Parent and Seller for all
69
amounts under Section 11.02(a)(i) and Section 11.03 shall not
exceed $25,000,000; provided, however, that the aggregate
liability of Parent and Seller for all amounts under Section
11.02(a)(i) with respect to breaches of or inaccuracies in the
representations and warranties set forth in Section 4.25 and
Section 11.03 shall not exceed $30,000,000 minus the amounts
paid by Parent or Seller in respect of all other claims for
indemnification under Section 11.02(a)(i) (the "Cap").
Notwithstanding the foregoing, the Basket Amount shall apply
only to breaches of or inaccuracies in representations and
warranties other than those set forth in Sections 4.01, 4.02,
4.03, 4.10(b) (only the third sentence thereof) or 4.15, and
the Cap shall not apply to claims, breaches of or inaccuracies
in representations and warranties set forth in Sections 4.01,
4.02, 4.03, 4.10(b) (only the third sentence thereof) or 4.15.
(b) Buyer will have no liability to a Seller Indemnified Party
(for indemnification or otherwise) with respect to any Seller
Losses covered by Section 11.04(a)(i) until the aggregate
amount of all Seller Losses exceeds the Basket Amount, in
which case Buyer shall be obligated to indemnify the Seller
Indemnified Parties for the total amount of all Seller Losses
in excess of the Basket Amount; provided, however, that no
individual claim or series of related claims for
indemnification under Section 11.04(a)(i) shall be recoverable
hereunder if it is or they are for an amount less than
$50,000, until the aggregate amount of all such claims is
equal to at least $500,000. Except for fraud or willful
misrepresentation or as otherwise provided below, aggregate
liability of Buyer for all amounts under Section 11.04(a)(i)
shall not exceed the Cap. Notwithstanding the foregoing, the
Basket Amount shall apply only to breaches of or inaccuracies
in representations and warranties other than those set forth
in Sections 5.01, 5.02 or 5.06 and shall not apply to any
breaches of any covenants of Buyer set forth in this Agreement
or in any Buyer Related Document, and the Cap shall not apply
to claims, breaches of or inaccuracies in representations and
warranties set forth in Sections 5.01, 5.02 or 5.06.
(c) In addition to the requirements of Sections 11.07(a) and
11.07(b), with respect to any claims for indemnification under
Section 11.03, under Section 11.02(a) with respect to any
breach or inaccuracy of the representations and warranties in
Section 4.25, or under Section 11.02(a)(v), with respect to
any Release or alleged Release of Hazardous Materials or any
contamination or alleged contamination of the Environment,
whether or not involving a Third Party Claim, the following
shall apply:
(i) the Indemnified Party shall give the Indemnifying
Party prompt written notice of any Release,
contamination or other fact or condition
(collectively, "Potential Claim") which could
reasonably be expected to give rise to a claim for
indemnification, including a description of the
nature and extent of the Potential Claim;
(ii) the Indemnified Party shall cooperate with the
Indemnifying Party in assessing the Potential Claim,
including providing reasonable access to
70
properties, employees and documents, including, but
not limited to, pertinent environmental site
assessments or other environmental reports, sampling
data and other results of investigations, and
correspondence with applicable government agencies,
in a manner that does not unreasonably interfere with
the operations of the business of the Indemnified
Party or cause the Indemnified Party to waive any
privileges or rights; and
(iii) the Indemnified Party shall consult on a regular
basis with the Indemnifying Party regarding the
response to and the containment, monitoring or
cleanup of (collectively, "Remedial Actions") any
Potential Claim, including, but not limited to (A)
the selection of any environmental consultants
involved in any Remedial Actions, (B) the scope and
selection of any cleanup or other remedial workplans
or remedies, any feasibility studies or other
environmental investigations and (C) the entering
into any Orders or other binding agreements with any
applicable Governmental Authority or any voluntary
cleanup programs. Notwithstanding any other terms of
this Section 11.06, the Indemnified Party shall have
the right to take any actions that it may reasonably
determine to be necessary, without consulting with
the Indemnifying Party, to contain any Release,
contamination or other fact or condition in order to
avoid any immediate threat to the Environment or
human health and safety. Any Remedial Action, or any
part thereof, subject to or potentially subject to an
indemnification claim under this Agreement shall be
performed in a workmanlike manner, consistent with
all applicable professional standards, using
recognized remedial methods and technologies and in a
cost effective manner not exceeding industry cost
standards for comparable work.
11.07 Method of Asserting Claims.
(a) If any Buyer Indemnified Party or Seller Indemnified Party (an
"Indemnified Party") is made a defendant in or party to any
action or proceeding, judicial, administrative or arbitral,
instituted by any third party, the liability or the costs or
expenses of which are or may be Buyer Losses or Seller Losses
(any such third party action or proceeding being referred to
as a "Third Party Action"), such Indemnified Party shall give
the party from whom indemnification is sought (the
"Indemnifying Party") prompt written notice thereof (which, in
the case of notice to Seller, shall also constitute notice to
Parent). Such written notice shall have attached thereto the
complaint or other papers pursuant to which the third party
commenced such Third Party Action. The failure promptly to
give such notice shall not affect any Indemnified Party's
ability to seek indemnification hereunder unless such failure
has materially and adversely affected the ability of the
Indemnifying Party to defend successfully the relevant Third
Party Action. The Indemnifying Party shall be entitled to
contest and defend such Third Party Action; provided, that the
Indemnifying Party (i) has a reasonable basis for concluding
that such defense may be successful and (ii) can diligently
contest and defend such Third Party Action. The Indemnifying
Party shall give notice of its
71
intention to so contest and defend to the Indemnified Party
within twenty (20) business days after the date it receives
the Indemnified Party's notice of such Third Party Action
(but, in all events, at least five business days prior to the
date that an answer to such Third Party Action is due to be
filed). Such contest and defense shall be conducted by
reputable attorneys retained by the Indemnifying Party. The
Indemnified Party shall be entitled at any time, at its own
cost and expense (which expense shall not constitute a Buyer
Loss or a Seller Loss unless the Indemnified Party reasonably
determines that Indemnifying Party is not adequately
representing or, because of a conflict of interest, may not
adequately represent, the interests of the Indemnified Party,
and only to the extent that such expenses are reasonable), to
participate in such contest and defense and to be represented
by attorneys of its or their own choosing. If the Indemnified
Party elects to participate in such defense, the Indemnified
Party will cooperate with the Indemnifying Party in the
conduct of such defense. The Indemnified Party shall cooperate
with the Indemnifying Party to the extent they reasonably
request such cooperation in the contest and defense of such
Third Party Action, including providing reasonable access
(upon reasonable notice) to the books, records and employees
of the Indemnified Party if relevant to the defense of such
Third Party Action; provided, that such cooperation shall not
unduly disrupt the operations of the business of the
Indemnified Party or cause the Indemnified Party to waive any
statutory or common law privileges, breach any confidentiality
obligations owed to third parties or otherwise cause any trade
secret or confidential information of such Indemnified Party
to become public. Neither the Indemnified Party nor the
Indemnifying Party may concede, settle or compromise any Third
Party Action without the consent of the other party, which
consents will not be unreasonably withheld. Notwithstanding
the foregoing, (i) if a Third Party Action seeks the issue of
an injunction, the specific election of an obligation or
similar remedy, or (ii) if the subject matter of a Third Party
Action relates to the ongoing business of the Indemnified
Party, which Third Party Action, if decided against the
Indemnified Party, would materially adversely affect the
ongoing business or reputation of the Indemnified Party, then,
in each such case, the Indemnified Party alone shall be
entitled to contest, defend and settle such Third Party Action
in the first instance (provided that the Indemnified Party
shall not settle such Third Party Action without the consent
of the Indemnifying Party, which consent shall not be
unreasonably withheld) and, if the Indemnified Party does not
contest, defend or settle such Third Party Action, the
Indemnifying Party shall then have the right to contest and
defend (but not settle) such Third Party Action.
(b) In the event any Indemnified Party should have a claim for
indemnification hereunder against an Indemnifying Party that
does not involve a Third Party Action (including, without
limitation, a claim for indemnification with respect to a
third party claim that is not yet the subject of a Third Party
Action), the Indemnified Party shall give the Indemnifying
Party prompt written notice thereof (which, in the case of
notice to Seller, shall also constitute notice to Parent).
Such written notice shall state in reasonable detail the
factual basis for such claim to the extent then known by the
Indemnified Party and the nature of the Buyer Loss or Seller
Loss for which indemnification is sought, and it may state the
amount of
72
the Buyer Loss or Seller Loss claimed. The failure promptly to
give such notice shall not affect any Indemnified Party's
ability to seek indemnification hereunder unless either (i)
such failure has materially and adversely affected the ability
of the Indemnifying Party to investigate such claim, or (ii)
such notice is given after the end of the period specified in
Section 11.01. If such notice states the amount of the Buyer
Loss or Seller Loss claimed and the Indemnifying Party
notifies the Indemnified Party that the Indemnifying Party
does not dispute the claim described in such notice or fails
to notify the Indemnified Party within twenty (20) business
days after its receipt of such notice whether the Indemnifying
Party disputes the claim described in such notice, the Buyer
Loss or Seller Loss in the amount specified in the Indemnified
Party's notice will be conclusively deemed a liability of the
Indemnifying Party and the Indemnifying Party shall pay
(subject to the Basket Amount and the Cap, to the extent
applicable), the amount of such Buyer Loss or Seller Loss to
the Indemnified Party on demand. If the Indemnifying Party has
timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in
good faith to negotiate a resolution of such dispute, and if
not resolved through such negotiations within twenty (20) days
after receipt of the Indemnified Party's notice of such claim,
such dispute shall be resolved fully and finally in Chicago,
Illinois, by an arbitrator selected pursuant to and an
arbitration governed by Commercial Arbitration Rules of the
American Arbitration Association, as modified herein. The
parties will jointly appoint a mutually acceptable independent
arbitrator, seeking assistance in such regard from the
American Arbitration Association. The dispute shall be
submitted to the arbitrator for an initial determination of
whether a Buyer Loss or a Seller Loss (each, a "Loss") has
occurred for which indemnification is provided under this
Agreement (but not the amount of such Loss). In the event that
the arbitrator determines that a Loss has occurred for which
indemnification is provided under this Agreement, each of the
parties shall within twenty (20) business days (the
"Submission Period") after the arbitrator issues such
determination, submit in writing a dollar amount to the
arbitrator representing such party's best and final estimate
of the amount of such Loss. The arbitrator shall then
determine the amount of such Loss. The party responsible for
such Loss, as determined by the arbitrator, shall pay the
dollar amount so determined by the arbitrator to the party
entitled to such amount, as determined by the arbitrator, upon
demand by such first party. In the event a party fails to
submit such a dollar amount during the Submission Period, the
arbitrator shall choose the dollar amount submitted by the
party that submitted a dollar amount. The arbitrator shall
resolve the dispute based on the governing law, without regard
to its rules of evidence, and judgment upon the award rendered
by such arbitrator may be entered in any court of competent
jurisdiction. In any such arbitration pursuant to this Section
11.07(b), and before the arbitrator establishes the facts of
the case, each party shall be entitled to (i) the timely
production by the other party of relevant, non-privileged
documents or copies thereof and (ii) examine witnesses by
deposition to provide non-privileged testimony that is
relevant to the controversies, claims or disputes at issue. If
the parties are unable to agree on such matters, the
arbitrator shall have the power,
73
upon application of any party, to make all appropriate orders
for the production of documents by any party or in connection
with a proposed deposition. The Indemnified Party and the
Indemnifying Party shall each bear their own fees and expenses
in connection with such arbitration and shall each bear 50% of
the fees and expenses of the arbitrator.
(c) Upon the determination of the liability of an Indemnifying
Party for a Buyer Loss or a Seller Loss pursuant to this
Article XI and the amount of such Buyer Loss or Seller Loss
(whether such determination is made pursuant to the procedures
set forth in Section 11.07(b), by agreement between the
Indemnified Party and the Indemnifying Party, by arbitration
award or by final adjudication), the Indemnifying Party shall
pay the amount of such Buyer Loss or Seller Loss to the
Indemnified Party within 10 days following such determination.
(d) For purposes of computing the amount of any indemnification
payment under this Article XI, any such indemnification shall
be treated as an adjustment to the Purchase Price for all Tax
purposes unless a final determination, as defined under Code
ss. 1313, with respect to an Indemnified Party causes a
payment not to be so treated. The parties shall make
appropriate adjustments for Tax benefits in determining the
amount of any Buyer Losses or Seller Losses for which
indemnification is provided under this Article XI.
11.08 Miscellaneous Indemnity Provisions.
(a) Except as otherwise specifically provided in this Agreement or
in any Ancillary Agreement, Buyer, on the one hand, and Seller
and Parent, on the other hand, acknowledge that its sole and
exclusive remedy with respect to any and all claims for
monetary damages relating to this Agreement and the Ancillary
Agreements, the acquisition of the Business Shares and the
other transactions contemplated hereby and thereby, the
Business and its assets and liabilities shall be pursuant to
the indemnification provisions set forth in this Article XI.
Notwithstanding the foregoing, nothing in this Agreement or in
any Ancillary Agreement shall limit the right of any party to
seek specific performance or other equitable relief hereunder
or thereunder, or shall be deemed a waiver or limitation by
any party of any right or remedy, including the recovery of
monetary damages, which such party may have at law or in
equity based on a claim of fraud or willful misconduct.
(b) Parent, Buyer and Seller shall cooperate with each other with
respect to resolving any claim or liability with respect to
which one party is obligated to indemnify the other party
hereunder, including by using commercially reasonably efforts
to mitigate or resolve any such claim or liability; provided,
however, that such party shall not be required to use such
efforts if they would be detrimental in any material respect
to such party. In the event that Buyer or Seller shall fail to
use such commercially reasonably efforts to mitigate or
resolve any claim or liability, then (unless the proviso to
the foregoing sentence shall be applicable) notwithstanding
anything else to the contrary contained herein, the other
party
74
shall not be required to indemnify any person for any loss,
liability, claim, damage or expense that could reasonably be
expected to have been avoided if Buyer or Seller, as the case
may be, had made such efforts.
(c) Buyer shall notify Seller within a reasonable time after
receiving any information relating to the Seller Entity
Assumed Liabilities or the Division Retained Liabilities and
Buyer shall, at its own cost and expense, take all
commercially reasonable measures requested by Seller to
cooperate in managing or mitigating any Seller Entity Assumed
Liability or Division Retained Liability, including, among
other things, by providing Seller with (i) the assistance of
Buyer's and the Seller Entities' personnel to the extent
reasonably necessary and requested by Seller and (ii)
reasonable access to the directly relevant records and
properties of Buyer and each Seller Entity, in each case upon
reasonable notice and during normal business hours.
ARTICLE XII
MISCELLANEOUS
-------------
12.01 Amendment and Waiver.
This Agreement may not be amended or waived except in a writing
executed by the party against which such amendment or waiver is sought
to be enforced. No course of dealing between or among any persons
having any interest in this Agreement will be deemed effective to
modify or amend any part of this Agreement or any rights or obligations
of any person under or by reason of this Agreement.
12.02 Notices.
All notices, demands and other communications to be given or delivered
under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when personally delivered
or three business days after being mailed by first class U.S. mail,
return receipt requested, or when receipt is acknowledged, if sent by
facsimile, telecopy or other electronic transmission device. Notices,
demands and communications to Buyer and Seller will, unless another
address is specified in writing, be sent to the address indicated
below:
Notices to Buyer:
Alliant Techsystems Inc.
0000 Xxxxxxx Xxxxx
Xxxxx, Xxxxxxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxxx LLP
00 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
75
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Facsimile: (000) 000-0000
Notices to Seller and Parent:
Xxxxxx International, Inc.
0000 Xxxxxxxxx Xxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, III
Facsimile: (000) 000-0000
With a copy to:
Cravath, Swaine & Xxxxx
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Cami
Facsimile: (000) 000-0000
12.03 Assignment.
This Agreement and all of the provisions hereof will be binding upon
and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, provided that, except for an
assignment by Buyer to one or more direct or indirect wholly-owned
subsidiaries solely for the purpose of consummating the transactions
contemplated hereby (it being understood that Buyer shall not be
released from its obligations hereunder as a result of such
assignment), neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by any party hereto without the
prior written consent of the other parties hereto, and provided
further, that the Buyer may grant, and the Buyer's lenders may obtain,
a security interest in Buyer's rights under this Agreement. Nothing in
this Section 12.03 shall operate or be construed as a restriction on
the assignability of any of the Business Assets by Buyer or any Seller
Entity after the Closing, and Seller hereby consents to any such
assignment of the Business Assets or any portion thereof (including,
without limitation, any and all Patent licenses that comprise the
Business Assets).
12.04 Severability.
Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but
if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only
to the extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of this
Agreement.
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12.05 Complete Agreement.
This Agreement, the Ancillary Agreements, the exhibits and schedules
hereto and the other documents referred to herein contain the complete
agreement between the parties and supersede any prior understandings,
agreements or representations by or between the parties, written or
oral, which may have related to the subject matter hereof in any way.
12.06 Counterparts.
This Agreement may be executed in one or more counterparts, any one of
which need not contain the signatures of more than one party, but all
such counterparts taken together will constitute one and the same
instrument.
12.07 Governing Law.
The internal law, without regard to conflicts of laws principles, of
the State of Delaware will govern all questions concerning the
construction, validity and interpretation of this Agreement and the
performance of the obligations imposed by this Agreement.
12.08 No Third Party Beneficiaries.
This Agreement is for the sole benefit of the parties hereto and their
permitted assigns and nothing herein express or implied shall give or
be construed to give to any person or entity, other than the parties
hereto and such permitted assigns, any legal or equitable rights
hereunder.
12.09 Interpretation.
Article titles and headings to sections 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. The schedules
and exhibits referred to herein shall be construed with and as an
integral part of this Agreement as though set forth verbatim herein.
[The remainder of this page has been left blank intentionally.
Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
XXXXXX, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Pres. & CEO
XXXXXX INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Pres. & CEO
ALLIANT TECHSYSTEMS, INC.
By: /s/ Xxxx Xxxxx Xxxxxx
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Name: Xxxx Xxxxx Xxxxxx
Title: COACH
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AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
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This AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT (this "Agreement"),
dated as of December 4, 2001, is made and entered into by and between Alliant
Techsystems Inc., a Delaware corporation ("Buyer"), Xxxxxx International, Inc.,
a Delaware corporation ("Parent"), and Xxxxxx, Inc., a Delaware corporation and
wholly-owned subsidiary of Parent ("Seller").
WHEREAS, Buyer, Parent and Seller are parties to that certain Stock
Purchase Agreement, dated as of November 6, 2001 (the "Purchase Agreement"); and
WHEREAS, Buyer, Seller and Purchaser desire to amend the Purchase
Agreement as provided in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements and the conditions set forth in this
Agreement, the parties agree as follows:
1. Section 1.02. Section 1.02 of the Purchase Agreement is hereby amended
and restated in its entirety to read as follows:
1.02 Purchase Price.
As consideration for the Acquisition Sub's purchase of the
Business Shares, Buyer shall pay to Seller an aggregate of
$10,000 (the "Cash Purchase Price"), by wire transfer in
immediately available funds to an account designated by
Seller, and shall issue to Seller 3,048,780 shares
(collectively, the "Buyer Shares") of Buyer common stock, par
value $.01 per share ("Buyer Common Stock") . For purposes of
this Agreement, the term "Purchase Price" means the sum of the
Cash Purchase Price plus the aggregate value of the Buyer
Shares based on the Specified Price Per Share (as defined
below). The Purchase Price is subject to adjustment as
provided in this Agreement. At the Closing, Buyer will deliver
to Seller the Buyer Shares in uncertificated form.
"Specified Price Per Share" means the lower of (y)
the Closing Date Average Price Per Share (as defined
below) and (z) the Closing Date Price Per Share (as
defined below). "Closing Date Average Price Per
Share" means the average closing price per share of
Buyer Common Stock on the New York Stock Exchange
during the ten (10) trading days immediately
preceding the Closing Date. "Closing Date Price Per
Share" means the closing price per share of Buyer
Common Stock on the New York Stock Exchange on the
trading day immediately preceding the Closing Date.
2. Section 1.03(a). Section 1.03(a) of the Purchase Agreement is hereby
deleted and of no further legal effect.
3. Section 3.02(b)(ii). Section 3.02(b)(ii) of the Purchase Agreement is
hereby amended and restated in its entirety to read as follows, and
Attachment A to this Agreement constitutes and shall hereafter be
deemed to be the Exhibit F referenced therein:
(ii) the Escrow Agreement substantially in the form attached
hereto as Exhibit F (the "Escrow Agreement") duly executed by
Parent, Seller and XX Xxxxxx Chase or an Affiliate thereof as
Escrow Agent (the "Escrow Agent");
4. Section 3.02(c)(iv). Section 3.02(c)(iv) of the Purchase Agreement is
hereby amended and restated in its entirety to read as follows:
(iv) the Noncompetition Agreement, the Transition Services
Agreement and the Escrow Agreement, each duly executed by
Buyer;
5. Section 8.05. Section 8.05 of the Purchase Agreement is hereby amended
by deleting the last sentence thereof and replacing the following
therefor:
Seller and Buyer shall share equally all fees and expenses
payable to (i) the issuer of any letter of credit that
replaces the Escrow Agreement in accordance with Section
2.01(b) thereof (the "Letter of Credit") (A) arising in
connection with the issuance of the Letter of Credit and (B)
through March 31, 2003 and (ii) the Escrow Agent pursuant to
the Escrow Agreement, and Buyer shall be solely responsible
for all fees and expenses payable to the issuer of the Letter
of Credit arising after March 31, 2003.
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6. Effect of Agreement. Except as expressly provided in this Agreement,
the Purchase Agreement and all exhibits and schedules thereto are
unchanged and shall continue in full force and effect.
7. Amendment and Waiver. This Agreement may not be amended or waived
except in a writing executed by the party against which such amendment
or waiver is sought to be enforced. No course of dealing between or
among any persons having any interest in this Agreement will be deemed
effective to modify or amend any part of this Agreement or any rights
or obligations of any person under or by reason of this Agreement.
8. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
9. Counterparts. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together will
constitute one and the same instrument.
10. Governing Law. The internal law, without regard to conflicts of laws
principles, of the State of Delaware will govern all questions
concerning the construction, validity and interpretation of this
Agreement and the performance of the obligations imposed by this
Agreement.
11. No Third Party Beneficiaries. This Agreement is for the sole benefit of
the parties hereto and their permitted assigns and nothing herein
express or implied shall give or be construed to give to any person or
entity, other than the parties hereto and such permitted assigns, any
legal or equitable rights hereunder.
12. Interpretation. Article titles and headings to sections 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.
The schedules and exhibits referred to herein shall be construed with
and as an integral part of this Agreement as though set forth verbatim
herein.
[The remainder of this page has been left blank intentionally.
Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
XXXXXX, INC.
By:
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Name:
Title:
XXXXXX INTERNATIONAL, INC.
By:
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Name:
Title:
ALLIANT TECHSYSTEMS, INC.
By:
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Name:
Title:
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Alliant Techsystems Inc. hereby agrees to furnish supplementally a copy
of any omitted schedule to the Securities and Exchange Commission upon request.
