[Execution Copy]
RECAPITALIZATION AGREEMENT
AMONG
HARNISCHFEGER CORPORATION
THE SELLERS NAMED HEREIN
AND
MHE INVESTMENTS, INC.
January 28, 1998
TABLE OF CONTENTS
Page
Section 1. Definitions......................................................1
Section 2. Purchase and Sale of Company Shares.............................18
(a) Recapitalization Transaction....................................18
(b) The Closing.....................................................20
(c) Pre-Closing Transactions........................................21
(d) Purchase Price Adjustment.......................................22
(e) Certain Actions in Connection with the Closing..................25
(f) Allocation of Purchase Price....................................26
(g) Excluded Liabilities; Contracts.................................27
(h) Treatment.......................................................28
Section 3. Representations and Warranties Concerning the Transaction.......28
(a) Representations and Warranties of HarnCo and Sellers............28
(b) Representations and Warranties of Investor......................30
Section 4. Representations and Warranties Concerning the Companies
and their Subsidiaries.........................................33
(a) Organization, Qualification, and Corporate Power................33
(b) Capitalization..................................................34
(c) Noncontravention................................................35
(d) Brokers' Fees...................................................36
(e) Title to Assets.................................................36
(f) Subsidiaries....................................................36
(g) Financial Statements............................................37
(h) Subsequent Events...............................................38
(i) Legal Compliance................................................40
(j) Tax Matters.....................................................40
(k) Real Property...................................................42
(l) Intellectual Property...........................................44
(m) Contracts.......................................................45
(n) Litigation......................................................47
(o) Employee Benefits...............................................48
(p) Bonds...........................................................51
(q) Environmental Matters...........................................51
(r) Licenses and Authorizations.....................................53
(s) Labor and Employee Matters......................................53
(t) Insurance.......................................................55
(u) Certain Business Relationships with the Companies and their
Subsidiaries....................................................55
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(v) Foreign Corrupt Practices Act...................................56
(w) Condition of Assets.............................................56
(x) Disclosure......................................................56
Section 5. Pre-Closing Covenants...........................................56
(a) General.........................................................56
(b) Notices and Consents............................................56
(c) Operation of Business...........................................57
(d) Preservation of Business........................................59
(e) Full Access.....................................................59
(f) Compensation....................................................59
(g) Notice of Developments..........................................60
(h) Exclusivity.....................................................60
(i) Insurance.......................................................60
(j) Notice of Litigation............................................61
(k) Performance of Agreements.......................................61
(l) No Solicitation.................................................61
(m) Tax Elections...................................................61
(n) Financing.......................................................61
(o) Exchange Proceeds...............................................61
(p) Interim Financial Statements....................................62
(q) Update by Investor..............................................62
(r) Knowing Breach..................................................62
(s) Collective Bargaining Agreements................................62
(t) Joinder.........................................................63
Section 6. Post-Closing Covenants..........................................63
(a) General.........................................................63
(b) Records; Employees..............................................64
(c) Employees and Employee Benefit Matters..........................65
(d) Tax Matters.....................................................70
(e) Transition......................................................74
(f) Concerning the Separation Agreement.............................74
(g) Insurance Arrangements..........................................74
(h) Concerning the Trademark Agreement..............................75
(i) Certain Purchasing Arrangements.................................75
Section 7. Conditions to Obligation to Close...............................75
(a) Conditions to Obligation of Investor............................75
(b) Conditions to Obligation of HarnCo and Sellers..................77
Section 8. Remedies for Breaches of this Agreement.........................79
(a) Survival of Representations and Warranties......................79
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(b) Indemnification Provisions for Benefit of Investor..............80
(c) Indemnification Provisions for Benefit of HarnCo and Sellers....82
(d) Tax Indemnification Provisions..................................83
(e) Indemnification Procedure.......................................84
(f) Remedy..........................................................86
(g) No Contribution From Company....................................86
(h) Calculation Methodology.........................................87
Section 9. Termination.....................................................87
(a) Termination of Agreement........................................87
(b) Effect of Termination...........................................89
Section 10. Miscellaneous...................................................89
(a) Certain Understandings of Investor..............................89
(b) Press Releases and Public Announcements.........................90
(c) No Third Party Beneficiaries....................................90
(d) Entire Agreement................................................90
(e) Succession and Assignment.......................................90
(f) Return of Information...........................................91
(g) No Personal Liability...........................................91
(h) Counterparts....................................................91
(i) Headings........................................................91
(j) Notices.........................................................91
(k) Governing Law...................................................92
(l) Amendments and Waivers..........................................92
(m) Severability....................................................93
(n) Expenses........................................................93
(o) Construction....................................................94
(p) Incorporation of Exhibits and Schedules.........................94
(q) Specific Performance............................................94
(r) Submission to Jurisdiction......................................94
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List of Exhibits
Exhibit A - Trademark Agreement
Exhibit B - Confidentiality and Non-Competition Agreement
Exhibit C - Separation Agreement
Exhibit D - Specified Employees
Exhibit E - Term Sheet for Stockholders Agreement
Exhibit F - Supply Agreement
Exhibit G - Transition Services Agreement
Exhibit H - Sellers' Opinion
Exhibit I - Investor's Opinion
Exhibit J - Preferred Stock Term Sheets
Exhibit K - Intentionally Omitted
Exhibit L - U.K. Pension Arrangements
Exhibit M - Net Assets Calculation
Exhibit N - Excluded Taxes
Exhibit O - Value of Assets
Exhibit P - Credit Indemnification Agreement
Exhibit Q - Assumption Agreement
Exhibit R - Employees Party to the Employment Agreements
Disclosure Schedule - Exceptions to Representations and Warranties
Concerning the Companies and their Subsidiaries
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RECAPITALIZATION AGREEMENT
AGREEMENT entered into as of January 28, 1998, by and among MHE
Investments, Inc., a Delaware corporation (the "Investor"), Harnischfeger
Corporation, a Delaware corporation ("HarnCo"), and each of the Sellers (as
defined herein). Investor, HarnCo and Sellers are collectively referred to
herein as the "Parties." Other capitalized terms used herein are defined in
Section 1.
WHEREAS, the MHE Business is owned and conducted by the Companies;
WHEREAS, the Parties wish to enter into the transactions set forth
herein, pursuant to which, among other things, (i) MHE will acquire the
outstanding interests and capital stock of the other Companies; and (ii) HarnCo
and Investor will participate in a recapitalization of MHE; and
WHEREAS, in connection with the Closing, MHE will license certain
trademarks and trade names from Harnischfeger Technologies, Inc., a Delaware
corporation ("HTI"), pursuant to the Trademark Agreement of even date herewith.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
Section 1. Definitions.
"Adjusted Closing Balance Sheet" has the meaning set forth in
Section 2(d)(iv) below.
"Adverse Consequences" means all actions, suits, proceedings,
investigations, charges, complaints, claims, injunctions, judgments, orders,
decrees, rulings, damages, dues,
hearings, penalties, fines, costs, reasonable amounts paid in settlement,
Liabilities, obligations, Taxes, liens, losses, expenses, and fees, including
court costs and reasonable attorneys' fees and expenses.
"Affiliate" means, with respect to any Person, (a) any other Person
that, directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned Person; (b)
any other Person who is a director, officer or general partner or is, directly
or indirectly, the beneficial owner of ten percent (10%) or more of any class of
equity securities, of the specified Person (but excluding any beneficial owner
of more than 10% of any class of equity securities of HII); (c) any other Person
of whom the specified Person is a director, officer or general partner or is,
directly or indirectly, the beneficial owner of ten percent (10%) or more of any
class of equity securities; or (d) any relative of the specified Person. As used
in this definition, "control" (including, with correlative meanings, "controlled
by" and "under common control with") shall mean possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise). The foregoing notwithstanding, the
Companies and their Subsidiaries (and their other Affiliates) shall not be
considered Affiliates of HII, HarnCo or Sellers (or their Affiliates) from and
after the Closing.
"Affiliated Group" means any affiliated group within the meaning of
Section 1504 of the Code (or any group defined under similar provision of state,
local or foreign law) of which any of the Companies or their Subsidiaries is a
member.
"Applicable Rate" means the sum of (i) the six-month London
Interbank Offered Rate, as published from time to time in The Wall Street
Journal, plus (ii) 0.325%.
"Asbestos Liabilities" means Liabilities arising in connection with
claims made or litigation brought by or on behalf of Persons before, on or after
the Closing Date alleging exposure to asbestos prior to the Closing in
connection with the MHE Business.
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"Audit Fees" has the meaning set forth in Section 10(n) below.
"Audited Financial Statements" has the meaning set forth in Section
4(g) below.
"BCH" means Birmingham Crane & Hoist, Inc., an Alabama corporation.
"BelCan" means Beloit Canada Ltd., a corporation organized under the
laws of Canada
"Blooma" means Xxxxxx Blooma Pte., Ltd., a corporation organized
under the laws of Singapore, which was formerly known as Blooma Engineering
Pte., Ltd.
"Brokers" has the meaning set forth in Section 3(a)(iv) below.
"Business Assets" means all real, personal and mixed assets, both
tangible and intangible, which are used exclusively in the conduct of the MHE
Business. Business Assets shall include all such assets existing on the date of
this Agreement and all such assets acquired between the date hereof and the
Closing Date, but shall exclude any such assets (other than for purposes of
Exchange Proceeds) which are (x) disposed of between the date hereof and the
Closing Date in transactions consistent with the terms hereof or (y) are the
subject of a loss, casualty or condemnation between the date hereof and the
Closing Date.
"Business Records" means any books, records or other information
relating to (i) the assets, Liabilities, business or affairs of the MHE Business
prior to the Closing or (ii) the transactions contemplated by the Transaction
Agreements.
"Canada Newco" means a limited liability company to be organized
under the Laws of Delaware.
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"Canada Newco Interests" means the limited liability company
membership interests of Canada Newco.
"Cash" means cash and cash equivalents including marketable
securities and short term investments (but excluding Exchange Proceeds).
"Chartwell Group" means the following persons: Xxxx X. Xxxxxx,
Xxxxxxx X. Xxxxx, Xxxxxxx X. Xxxxxx and Xxxxx X. Xxxxxxxxx.
"Closing" has the meaning set forth in Section 2(b)(i) below.
"Closing Balance Sheet" has the meaning set forth in Section 2(d)(i)
below.
"Closing Date" has the meaning set forth in Section 2(b)(i) below.
"Closing Financial Data" has the meaning set forth in Section
2(d)(i) below.
"COBRA" has the meaning set forth in Section 4(o)(v) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment Letters" means the letters dated January 27, 1998 from
Canadian Imperial Bank of Commerce and Credit Agricole Indosuez pursuant to
which a syndicate of lenders is to provide $180 million of bank financing
subject to, and in accordance with, the terms and conditions thereof.
"Companies" collectively means MHE, Redcrown, Hercules, Canada Newco
and MHE Technologies.
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"Company Shares" means the MHE Common Shares, the MHE Class C
Preferred Shares, the Redcrown Shares, the Hercules Shares and the Canada Newco
Interests.
"Confidentiality Agreement" has the meaning set forth in Section
10(d) below.
"Contract" means any contract, agreement or lease.
"Credit Indemnification Agreement" means the Credit Indemnification
Agreement between HII and MHE substantially in the form attached hereto as
Exhibit P.
"Current Employee" means any individual employed by any of the
Companies or their Subsidiaries on the Closing Date; provided, that Current
Employees shall be limited to individuals employed in the United States at such
time.
"Current Employee Claims" has the meaning set forth in Section
6(c)(iv) below.
"Disclosure Schedule" has the meaning set forth in Section 3(a)
below.
"Divestiture Bonus Agreements" means those certain Divestiture Bonus
Agreements referred to in Schedule 4(m)(iv) of the Disclosure Schedule.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan, or (d)
Employee Welfare Benefit Plan.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Sec. 3(1).
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"Employment Agreements" means the employment agreements in effect on
the date of this Agreement with the individuals listed on Exhibit R hereto,
copies of which have been furnished to Investor.
"Encumbrance" means any mortgage, pledge, lien, encumbrance, claim,
easement, right of way, lease, occupancy, tenancy, option, warrant, purchase
right, charge, or security interest, other than, with respect to assets other
than shares, partnership interests and membership interests of the Companies and
their Subsidiaries, (a) mechanic's, materialmen's, and similar liens, (b) liens
for taxes not yet due and payable or for taxes that the taxpayer is contesting
in good faith through appropriate proceedings, (c) purchase money liens and
liens securing rental payments under capital lease arrangements, and (d) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money (which other liens do not materially interfere with
the present use or value of the asset subject thereto).
"End Date" has the meaning set forth in Section 6(c)(ix) below.
"Environmental, Health and Safety Requirements" means, to the extent
enacted and in effect on or prior to the Closing Date, all federal, foreign,
state, provincial and local statutes, regulations, rules, ordinances, guidelines
having the force of law and policies having the force of law, and all court
orders and decrees and arbitration awards, which pertain to environmental
matters, including particulate emissions, pollution, effluent discharges,
Hazardous Substances, and the protection of the environment, or the health and
safety of workers or the general public, including but not limited to, the
Resource Conservation and Recovery Act; the Comprehensive Environment Response,
Compensation and Liability Act; the Superfund Amendments and Reauthorization
Act; the Toxic Substances Control Act; the Hazardous Materials Transportation
Act; the Clean Air Act, the Clean Water Act; and the Hazard Communication
Standard.
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"Environmental Permits" means permits, licenses, registrations,
governmental approvals, agreements and consents that are required under
Environmental, Health and Safety Requirements.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Estimated Purchase Price Adjustment" has the meaning set forth in
Section 2(a)(iii) below.
"Exchange Proceeds" means (i) any insurance proceeds payable on
account of the loss of or casualty to any Business Asset or Incidental Asset,
(ii) any proceeds from the taking of any Business Asset or Incidental Asset
pursuant to the power of eminent domain, (iii) any proceeds from the sale of
Business Assets or Incidental Assets outside of the Ordinary Course of Business
or (iv) proceeds from the sale of excess or obsolete assets which generate book
gains in excess of $500,000 in the aggregate; provided that the Xxxx Indemnity
Proceeds shall not be considered Exchange Proceeds.
"Excluded Liabilities" means: (i) Excluded Taxes; (ii) Liabilities
for which HarnCo and its Affiliates are liable pursuant to Section 6(c) hereof;
(iii) Asbestos Liabilities; (iv) Liabilities retained by HarnCo under Section
4.3 of the Separation Agreement; (v) payments under the Divestiture Bonus
Agreements; (vi) Liabilities for which HarnCo or its Affiliates have been named
as a potentially responsible party with respect to the Marina Cliffs Superfund
Site in South Milwaukee, Wisconsin and the Muskego Landfill Superfund Site in
Muskego, Wisconsin; and (viii) Assumed Liabilities (as defined in the Separation
Agreement) if and to the extent such Assumed Liabilities did not result from,
arise out of or relate to the MHE Business as presently conducted or as
conducted in the past.
"Excluded Taxes" has the meaning set forth on Exhibit N hereto.
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"Financing Shares" means MHE Common Shares, if any, or warrants to
purchase MHE Common Shares, if any, issued to purchasers of MHE Class A
Preferred Shares referred to in the Term Sheets.
"Financing Shares Ratio" means a fraction (currently estimated to be
0.053), the numerator of which is the value of the Financing Shares (currently
estimated to be $2.4 million) and the denominator of which is $45,000,000.
"Former Employee" means any individual employed by any of the
Companies or their Subsidiaries (or any predecessor thereto) prior to but not on
the Closing Date; provided, that Former Employees shall be limited to
individuals previously employed in the United States.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"Xxxx Indemnity Proceeds" has the meaning set forth in Section
6(d)(viii) below.
"Governmental Agency" means any court or federal, state, municipal
or other government or governmental or quasi-governmental agency, authority,
department, commission, board, agency or instrumentality, foreign or domestic,
or any employee or agent thereof.
"Guaranty" means any obligation, contingent or otherwise, of any
Person guaranteeing any Indebtedness or obligation of any other Person in any
manner, whether directly or indirectly, including any obligation of such Person,
direct or indirect, (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such
Indebtedness, (ii) to purchase property, securities or services for the express
purpose of assuring the owner of such Indebtedness of the payment thereof, or
(iii) to maintain the working capital, equity capital or other financial
statement condition of any primary obligor; provided, however, that the term
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Guaranty shall not include endorsement of instruments for deposit and collection
in the ordinary course of business.
"HarnCo" has the meaning set forth in the preface above.
"HarnCo Indemnitees" has the meaning set forth in Section 8(c)(i).
"Harnischfeger Savings Plan" has the meaning set forth in Section
6(c)(vi)(A) below.
"Hazardous Substances" means any hazardous substance, regulated
substance, hazardous or toxic waste, hazardous material, noise, pollutant or
contaminant, as those or similar terms are used in the Environmental, Health and
Safety Requirements and shall include, without limitation, asbestos and
asbestos-related products, nuclear waste, radon, chlorofluorocarbons, oils or
petroleum-derived compounds, polychlorinated biphenyls, pesticides and other
substances defined, listed or regulated under the Environmental, Health and
Safety Requirements.
"HCHC" means HCHC, Inc., a Delaware corporation.
"HDS" means Harnischfeger Distribution & Service, LLC, a Delaware
limited liability company.
"HDS Subsidiaries" collectively means HPH Material Handling, LLC,
EPH Material Handling, LLC and CMH Material Handling, LLC.
"Hercules" means Hercules S.A. de C.V., a corporation organized
under the laws of Mexico.
"Hercules Shares" means the shares of common stock and variable
capital stock of
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Hercules.
"HII" means Harnischfeger Industries, Inc., a Delaware corporation.
"HII Note" means those certain promissory notes payable by Lowfile
Limited to HII.
"HK Agreement" means an agreement to become bound by the provisions
of (i) that certain Noncompetition Agreement dated as of October 28, 1993 by and
among HEI Acquisition, Inc., HII and Harnischfeger Engineers, Inc. (as and to
the extent required by Section 2(b) thereof) and (ii) that certain HC Closing
Agreement dated as of October 28, 1993 by and among HII, HarnCo and
Harnischfeger Engineers, Inc. (as and to the extent required by Section 2.7
thereof).
"HMH" means Harnischfeger Mexico Holdings S.A. de C.V., a
corporation organized under the laws of Mexico.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"HTI" has the meaning set forth in the preface above.
"Incidental Assets" means all assets (other than Business Assets)
included in the Most Recent Balance Sheet or the fixed asset ledgers of the
Companies or their Subsidiaries. Incidental Assets shall include all such assets
existing on the date of this Agreement and on the Closing Date, but shall
exclude any such assets (other than for purposes of Exchange Proceeds) which are
(x) disposed of between the date hereof and the Closing Date in transactions
consistent with the terms hereof or (y) are the subject of a loss, casualty or
condemnation between the date hereof and the Closing Date.
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"Income Taxes" means any Tax (including, without limitation, in the
case of the United Kingdom, corporation Tax), levy or other charge or assessment
based in whole or in part upon or calculated with reference to the income (as
defined for the purposes of any Tax legislation), profits or gains (including
capital gains) of any description or from any source, net worth or capital of an
entity, and any other Tax levied in lieu thereof or with respect to any returns
or report therefor, and all interest, penalties, charges and additions thereto,
whether disputed or not.
"Indebtedness" of any Person means, without duplication: (a) all
obligations of such Person for borrowed money and purchase money indebtedness
(in each case, whether or not full recourse), (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (c) all Guaranties
by such Person of obligations of another Person which would constitute
Indebtedness of such other Person (other than a wholly-owned Subsidiary
thereof); and (d) all lease obligations, but only to the extent, if any, that
such lease obligations are required to be classified and accounted for as
capital leases on a balance sheet of such Person as of such date computed in
accordance with GAAP.
"Indemnified Party" has the meaning set forth in Section 8(e)(i)
below.
"Indemnifying Party" has the meaning set forth in Section 8(e)(i)
below.
"Intellectual Property" has the meaning set forth in Section 4(l)(i)
below.
"Intercompany Debt" means any and all debts owed between (A) any of
the Companies and their respective Subsidiaries, and (B) HII and its Affiliates,
excluding the entities described in clause (A).
"Investor" has the meaning set forth in the preface above.
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"Investor Indemnitees" has the meaning set forth in Section 8(b)(i)
below.
"Investor Notice" has the meaning set forth in Section 5(q) below.
"Knowing Breach" has the meaning set forth in Section 5(r).
"Knowledge" means actual knowledge.
"Liabilities" means all obligations, indebtedness, commitments, and
other items constituting "liabilities" under GAAP, and any other known or
unknown obligations or liabilities.
"Licenses" means all licenses, franchises, authorizations, permits,
approvals and other governmental authorizations owned, leased or held and used
by HarnCo, the Sellers, the Companies or any of their Subsidiaries in connection
with the ownership and operation of the MHE Business, together with any
renewals, extensions or modifications thereof and additions thereto between the
date hereof and the Closing Date (but giving effect to any Licenses which expire
or are surrendered which are not necessary for the continued conduct of the MHE
Business).
"Local 1114" has the meaning set forth in Section 5(s) below.
"Material Adverse Effect" means any material and adverse effect upon
the business, assets, Liabilities or financial condition of the MHE Business,
taken as a whole, or upon the ability of HarnCo or Sellers to perform in any
material respect their respective obligations under the Transaction Agreements.
"MHE" means Material Handling Equipment, Inc., a Delaware
corporation.
"MHE Business" means (i) the original equipment business for
industrial cranes,
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hoists, winches, and other related types of industrial "through-the-air"
material handling equipment, (ii) aftermarket products, parts and services for
the products described in clause (i), including inspection, repair,
modernization and maintenance, and (iii) other service activities conducted at
Material Handling Service Center locations. Except in the definition of the term
"Excluded Liabilities," references to the MHE Business shall refer to the MHE
Business as performed by or through HII and its Subsidiaries and Affiliates on
the date hereof and the Closing Date.
"MHE Canada" means a company to be organized under the laws of
Canada and a wholly-owned subsidiary of MHE.
"MHE Class A Preferred Shares" means the Class A Preferred Stock,
par value $0.01 per share, of MHE which will (i) be authorized and issued
following the date of this Agreement in connection with the Investor's financing
of the transaction contemplated hereby and (ii) have the terms described on
Exhibit J-1.
"MHE Class B Preferred Shares" means the Class B Preferred Stock,
par value $0.01 per share, of MHE which will (i) be authorized and issued
following the date of this Agreement and (ii) have the terms described on
Exhibit J-2.
"MHE Class C Preferred Shares" means the Class C Preferred Stock,
par value $0.01 per share, of MHE which will (i) be authorized and issued
following the date of this Agreement and (ii) have the terms described on
Exhibit J-3.
"MHE Common Shares" means the Common Stock, par value $0.01 per
share, of MHE.
"MHE Defined Contribution Plan" has the meaning set forth in Section
6(c)(vi)(A) below.
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"MHE Nevada" means Material Handling Equipment Nevada Corporation, a
Nevada corporation.
"MHE Technologies" means MHE Technologies, Inc., a Delaware
corporation.
"MHE U.K." means a company to be organized under the laws of the
United Kingdom and a wholly-owned subsidiary of MHE.
"Most Recent Balance Sheet" means the October 31, 1997 balance sheet
contained in the Audited Financial Statements.
"MPH" means MPH Crane, Inc., a Delaware corporation.
"Net Assets" means the net amount of the balance sheet line items
listed in Exhibit M hereto.
"Neutral Auditors" has the meaning set forth in Section 2(d)(iv)
below.
"New Subsidiary" means a new wholly-owned Subsidiary of MHE to be
formed after the date of this Agreement.
"Non-Competition Agreement" means the Confidentiality and
Non-Competition Agreement between HII and MHE substantially in the form attached
hereto as Exhibit B.
"Non-U.S. Employee Benefit Plan" means any non-U.S. (A) pension,
welfare benefit or deferred compensation plan or scheme (including all Non-U.S.
Pension Plans) or (B) other employee benefit plan, policy or arrangement,
whether or not Tax-qualified, Tax-exempt or otherwise Tax-favored under the laws
of the applicable non-U.S. (federal or state) Governmental
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Agency.
"Non-U.S. Pension Plan" means any plan, scheme, policy or
arrangement which provides pension or retirement benefits and which is intended
to be Tax-qualified, Tax-exempt, or otherwise Tax-favored under the laws of any
non-U.S. (federal or state) Governmental Agency.
"NPH" means NPH Material Handling, Inc., a Michigan corporation.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"Party" has the meaning set forth in the preface above (as qualified
by Section 5(t) below).
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a body corporate, a limited liability
company, an unlimited liability company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"PHME" means PHME Service, Inc., a Delaware corporation.
"PHMH" means PHMH Holding Company, a Delaware corporation.
"Pre-Closing Transactions" has the meaning set forth in Section 2(c)
below.
"RCHH" means RCHH, Inc., a Delaware corporation.
"Redcrown" means Redcrown, ULC, an unlimited liability company
organized under the laws of the United Kingdom.
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"Redcrown Shares" means the ordinary shares of Redcrown.
"Redemption Price" has the meaning set forth in Section 2(a)(ii)
below.
"Resolution Period" has the meaning set forth in Section 2(d)(iii)
below.
"RYL" means RYL, LLC, a Delaware limited liability company.
"SEC" means the Securities and Exchange Commission.
"Section 338(h)(10) Election" has the meaning set forth in Section
6(d)(v)(A) below.
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" means RCHH, RYL, HCHC, HMH and BelCan.
"Separation Agreement" means the Separation Agreement between HarnCo
and Material Handling, LLC dated as of October 26, 1997 and attached hereto as
Exhibit C.
"Specified Employees" means the persons listed on Exhibit D.
"Stockholders Agreement" means a Stockholders and Registration
Rights Agreement among MHE, HarnCo and the Investor containing the terms set
forth in Exhibit E hereto.
"Subsidiary" means any corporation or other form of entity with
respect to which a specified Person (or a Subsidiary thereof), directly or
indirectly, owns a majority of the common stock or other voting interests, or,
directly or indirectly, has the power to vote or direct the voting
-16-
of sufficient securities to elect a majority of the directors of such
corporation or entity. For the avoidance of doubt, Material Handling, LLC shall
be considered a Subsidiary of MHE for purposes of this Agreement.
"Supply Agreement" means the Component and Manufactured Products
Supply Agreement among HarnCo and the Companies substantially in the form
attached hereto as Exhibit F.
"Tax" or "Taxes" means all forms of taxation and includes (without
limitation) any federal, state, governmental, local, or foreign income
(including income tax or amounts for or on account of income tax required to be
deducted or withheld from or accounted for in respect of any payment), gross
receipts, corporation, advance corporation, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, capital
gains, development land, inheritance, national insurance contributions, capital
duty, landfill, stamp duty or stamp duty reserve tax, secondary tax on
companies, duties of customs and excise, petroleum revenue tax, all taxes,
duties or charges replaced by or replacing any of them, and all levies, imposts,
duties, charges or withholdings of any nature whatsoever chargeable by any Tax
Authority, and any payment whatsoever which the Companies or any of their
Subsidiaries may be or become bound to make to any Person as a result of the
discharge by that Person of any tax which the Companies or any of their
Subsidiaries has failed to discharge, together with all penalties, charges and
interest relating to any of the foregoing or to any late or incorrect return in
respect of any of them, and regardless of whether any such taxes, levies,
duties, imposts, charges, withholdings, penalties and interest are chargeable
directly or primarily against or attributable directly or primarily to the
Companies, any of their Subsidiaries or any other Person.
"Tax Audit" means any audit, examination or other proceeding
conducted by a Tax
-17-
Authority with respect to Taxes of a Person for which a separate notice of
audit, examination or proceeding is issued.
"Tax Authority" means any taxing or other authority (whether within
or outside the United States) competent to impose any Tax.
"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.
"Termination Date" shall mean the latest to occur of (i) December
31, 2007 or (ii) 60 days after the expiration of the statute of limitations
period (including extensions) relating to the records or matter in question.
"Term Sheets" means the Term Sheets dated January 27, 1998 from CIBC
Xxxxxxxxxxx Corp. outlining the terms and conditions of an offering of $175
million of subordinated debt and $45 million of MHE Class A Preferred Shares.
"Third Party Claim" has the meaning set forth in Section 8(e)(i)
below.
"Trademark Agreement" means the Trademark License Agreement between
HTI and MHE substantially in the form attached hereto as Exhibit A.
"Transaction Agreements" means this Agreement, the Trademark
Agreement, the Non-Competition Agreement, the Separation Agreement, the
Stockholders Agreement, the Supply Agreement, the Transition Services Agreement,
the Assumption Agreement, the Credit Indemnification Agreement and the HK
Agreement.
"Transfer Date" has the meaning set forth in Section 6(c)(vi)(B)
below.
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"Transition Services Agreement" means the Transition Services
Agreement among HarnCo and the Companies substantially in the form attached
hereto as Exhibit G.
"U.S. Entities" collectively means MHE, PHMH, BCH, PHME, MHE Nevada,
MHE Technologies, MPH, the New Subsidiary, NPH, HDS and the HDS Subsidiaries.
"Unresolved Changes" has the meaning set forth in Section 2(d)(iv)
below.
Section 2. Purchase and Sale of Company Shares
(a) Recapitalization Transaction. On and subject to the terms and
conditions of this Agreement, the Parties will consummate the following
transactions at the Closing:
(i) The New Subsidiary shall redeem from MHE shares of the New
Subsidiary's capital stock, the proceeds of which shall be used by
MHE as partial funding for the transactions described in Sections
2(a)(ii) and (iii) below.
(ii) MHE shall redeem from HarnCo for a price of $282 million:
(A) that number of MHE Class C Preferred Shares
(currently estimated to be 1,600 MHE Class C
Preferred Shares) equal to the product of (x)
30,000 and (y) the Financing Shares Ratio; and
(B) that number of MHE Common Shares (currently
estimated to be 88,176 MHE Common Shares) equal to
88,679.245 less (x) the number of MHE Class C
Preferred Shares redeemed pursuant to Section
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2(a)(ii)(A) above (currently estimated to be 1,600
MHE Class C Preferred Shares) multiplied by (y)
$1,000 divided by (z) $3,180.
The price paid pursuant to this Section 2(a)(ii) (the "Redemption
Price") shall be payable by wire transfer of immediately available
funds.
(iii) MHE shall pay to HarnCo $5 million in immediately
available funds as an estimate of the adjustment to the Redemption
Price to be made pursuant to Section 2(d) hereof (the "Estimated
Purchase Price Adjustment").
(iv) MHE shall redeem from HarnCo that number of MHE Common
Shares (currently estimated to be 1,488 MHE Common Shares) equal to
1,572.327 multiplied by the difference of (a) 1 (one) less (b) the
Financing Shares Ratio, in exchange for MHE Class B Preferred Shares
having a face value (currently estimated to be $4,733,333) of $5.0
million multiplied by the difference of (a) 1 (one) less (b) the
Financing Shares Ratio.
(v) Investor shall purchase from HarnCo:
(A) 7,547.170 MHE Common Shares for $24 million;
(B) that number of MHE Common Shares (currently
estimated to be 503 MHE Common Shares) equal to
(x) 9,433.962 multiplied by (y) the Financing
Shares Ratio, in exchange for that amount
(currently estimated to be $1.6 million) equal to
the product of (a) $30 million and (b) the
Financing Shares Ratio; and
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(C) that number of MHE Class C Preferred Shares
(currently estimated to be 28,400) equal to 30,000
MHE Class C Preferred Shares times the difference
of (x) 1 (one) less (y) the Financing Shares
Ratio, in exchange for that amount equal to the
product of (a) $1,000 and (b) the number of MHE
Class C Preferred Shares purchased by Investor
pursuant to this Section 2(a)(v)(C).
The cash price paid pursuant to this Section 2(a)(v) shall be payable by wire
transfer of immediately available funds.
(b) The Closing.
(i) Closing Transactions. The closing of the transactions
contemplated by Section 2(a) above (the "Closing") shall take place
at the offices of Xxxxxxxx & Xxxxx in Chicago, Illinois or such
other place as the Investor's financing sources shall require,
commencing at 9:00 a.m. local time on February 27, 1998 (or, if
later, the second business day following the satisfaction or waiver
of all conditions to the obligations of the Parties to consummate
the transactions contemplated hereby (other than conditions with
respect to actions the respective Parties will take at the Closing
itself)) (the "Closing Date").
(ii) Post-Closing Transactions. MHE and one of its
Subsidiaries shall purchase all of the Hercules Shares from HCHC and
HMH for an aggregate price of $2 million payable in immediately
available funds. Such price shall be paid to HCHC and HMH pro rata
based on their ownership of the Hercules Shares.
(c) Pre-Closing Transactions. Prior to the Closing Date, HarnCo and
Sellers
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shall cause the following transactions to be consummated (the "Pre-Closing
Transactions"):
(i) HarnCo shall contribute to MHE cash (in Pounds Sterling
and U.S. or Canadian Dollars) in amounts sufficient to consummate the
transactions set forth in Section 2(b)(ii) above and Sections 2(c)(ii),
(iii), (iv) and (v) below.
(ii) MHE shall loan Pounds Sterling in cash to MHE U.K. and
U.S. or Canadian Dollars in cash to MHE Canada and shall contribute Pounds
Sterling in cash to the capital of MHE U.K. and U.S. or Canadian Dollars
in cash to the capital of MHE Canada, in each case in amounts sufficient
to consummate the transactions set forth in Sections 2(c) (iii), (iv) and
(v) below. The allocation of such amounts between loans and capital
contributions shall be reasonably satisfactory to Investor.
(iii) MHE U.K. and a Subsidiary of MHE shall purchase all of
the Redcrown Shares from RCHH and RYL for an aggregate price of One
Hundred (100) Pounds Sterling.
(iv) MHE U.K. shall purchase the HII Note from HII for an
amount in Pounds Sterling equal to principal plus accrued interest
thereon, such amount to be payable in immediately available funds.
(v) MHE Canada shall purchase all of the Canada Newco
Interests from BelCan for $32 million (or its Canadian Dollar equivalent),
such amount to be payable in immediately available funds.
(vi) HDS shall distribute all of its shares of NPH to MHE
Nevada and PHME in accordance with their respective ownership interests in
HDS.
(vii) Such other transactions as may be necessary for MHE to
own (and continue to own at Closing), directly or indirectly, all
outstanding equity securities of
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the other Companies and their Subsidiaries (other than Hercules and the
15% of Blooma held by third parties), free and clear of Encumbrances.
(viii) MHE shall contribute all of its assets and assign all
of its Liabilities to the New Subsidiary.
(d) Purchase Price Adjustment.
(i) As soon as practicable, but in no event later than 60 days
following the Closing Date, MHE shall prepare a combined and
consolidated balance sheet of the Companies as of the Closing Date
(the "Closing Balance Sheet") and a calculation of Net Assets as of
the Closing Date based on the Closing Balance Sheet (collectively,
the "Closing Financial Data"). The Closing Balance Sheet and
calculation of Net Assets shall be prepared on a basis consistent
with the methods, principles, practices and policies employed in the
preparation and presentation of the Audited Financial Statements and
in accordance with Exhibit M.
(ii) During the preparation of the Closing Financial Data, and
the period of any review or dispute within the contemplation of this
Section 2(d), MHE shall (A) provide Investor, HarnCo and their
authorized representatives with full access to all relevant books,
records, work-papers and employees of the Companies and their
Subsidiaries, and (B) cooperate fully with Investor, HarnCo and
their authorized representatives, including the provision on a
timely basis of all information necessary or useful.
(iii) MHE shall deliver a copy of the Closing Financial Data
to Investor and HarnCo promptly after it has been prepared. After
receipt of the Closing Financial Data, Investor and HarnCo shall
have 30 days to review the
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Closing Financial Data, together with the work-papers used in the
preparation thereof. Unless Investor or HarnCo delivers written
notice to MHE on or prior to the 30th day after their receipt of the
Closing Financial Data stating that it has objections to the Closing
Financial Data (and setting forth the details of its calculation of
disputed items), Investor and HarnCo shall be deemed to have
accepted and agreed to the Closing Financial Data. If Investor or
HarnCo so notifies MHE of its objections to the Closing Financial
Data, then Investor and HarnCo shall, within 30 days (or such longer
period as they may agree) following such notice (the "Resolution
Period"), attempt to resolve their differences and any resolution by
them as to any disputed amounts shall be final, binding and
conclusive on all Parties (and MHE).
(iv) Any amounts remaining in dispute at the conclusion of the
Resolution Period ("Unresolved Changes") shall be submitted to a
nationally recognized independent public accounting firm jointly
selected by the independent public accounting firms of HarnCo and
Investor (such firm being referred to as the "Neutral Auditors")
within 10 days after the expiration of the Resolution Period. The
Parties agree to execute, if requested by the Neutral Auditors, a
reasonable engagement letter. All fees and expenses relating to the
work, if any, to be performed by the Neutral Auditors shall be borne
pro rata by HarnCo and MHE in proportion to the allocation of the
dollar amount of the Unresolved Changes made by the Neutral Auditors
such that the prevailing party pays a lesser proportion of the fees
and expenses. The Neutral Auditors shall act as an arbitrator to
determine, based on the provisions of this Section 2(d), only the
Unresolved Changes. The Neutral Auditors' determination of the
Unresolved Changes shall be made within 45 days of the submission of
the Unresolved Changes thereto, shall be set forth in a written
statement delivered to HarnCo and Investor and shall be final,
binding and conclusive on all Parties (and MHE). The term "Adjusted
Closing Balance Sheet," as used in this Agreement, shall mean the
definitive Closing
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Balance Sheet agreed to (or deemed agreed to) by HarnCo and Investor
under Section 2(d)(iii) or, if Unresolved Changes are submitted to
the Neutral Auditors, such definitive Closing Balance Sheet, as
adjusted to reflect the determination of the Neutral Auditors under
this Section 2(d)(iv).
(v) If and to the extent Net Assets as of the Closing as shown
on the Adjusted Closing Balance Sheet are greater than One Hundred
Twenty-Five Million Nine Hundred and Seventy-Three Thousand Dollars
($125,973,000) plus the Estimated Purchase Price Adjustment, then
MHE shall pay such excess to HarnCo as an adjustment to the
Redemption Price. If and to the extent Net Assets as of the Closing
as shown on the Adjusted Closing Balance Sheet are less than One
Hundred Twenty-Five Million Nine Hundred and Seventy-Three Thousand
Dollars ($125,973,000) plus the Estimated Purchase Price Adjustment,
then HarnCo shall pay such shortfall to MHE as an adjustment to the
Redemption Price. Any payment made pursuant to this Section 2(d)(v)
shall be paid by wire transfer of immediately available funds to a
bank account specified by the party to which such payment is owed.
If the amount of Net Assets as of the Closing is agreed to (or
deemed agreed to) by HarnCo and Investor before or during the
Resolution Period, then payment of any adjustment shall be made
within five business days after the date of such agreement (or
deemed agreement). If there are Unresolved Changes at the end of the
Resolution Period, then (A) the minimum amount which the parties
agree is owed pursuant to this Section 2(d) shall be paid within
five business days after the end of the Resolution Period and any
additional amounts owing with respect to the Unresolved Changes
shall be paid within five business days after the resolution thereof
by the Neutral Auditors or (B) in all other cases, any and all
payments shall be made within five business days after the
resolution of the Unresolved Changes by the Neutral Auditors.
(vi) All payments made pursuant to this Section 2(d) shall be
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accompanied by interest at the Applicable Rate from the Closing Date
through the date of payment.
(e) Certain Actions in Connection with the Closing.
(i) Prior to the Closing, HarnCo shall (and shall cause its
Affiliates to) (A) take such action as is necessary to cause all
Intercompany Debt to be settled in full, (B) cause MHE to organize
MHE Canada and MHE U.K. and (C) cause the charters (or corresponding
governing documents) of the Companies and their Subsidiaries to be
amended to create the MHE Class B Preferred Shares and the MHE Class
C Preferred Shares (and other capital stock necessary to consummate
the reorganization of the Subsidiaries in Canada, Mexico, the United
States and the United Kingdom to facilitate the transactions
contemplated by the Transaction Agreements). At their option, HarnCo
and its Affiliates may, at any time prior to the Closing, remove all
or a portion of any Cash held by the Companies and their
Subsidiaries; provided that the Cash contributed to MHE pursuant to
Section 2(c)(i) above shall be used for the purposes referred to in
such Section.
(ii) Prior to MHE's approval and consummation of the actions
to be taken by it at the Closing (and the debt and equity financing
thereof), HarnCo shall take such actions as are necessary to cause
the board of directors of MHE (and its Subsidiaries which are party
to the financing arrangements) to be comprised exclusively of
individuals who are (A) members of the MHE management team or (B)
members of the Chartwell Group. HarnCo shall consult with Investor
as to the individuals who will be elected to MHE's board of
directors under the preceding sentence, and Investor shall use its
best efforts to ensure that such individuals are available to serve
in such capacity.
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(iii) Subject to obtaining financing on terms reasonably
consistent with those contained in the Term Sheets and the
Commitment Letters, Investor shall procure senior debt, subordinated
debt and preferred stock financing for MHE in amounts sufficient to
enable MHE to make the payments and enter into the transactions
contemplated by Section 2(a) of this Agreement.
(iv) At the Closing, (A) HarnCo shall deliver to MHE and
Investor the various instruments and documents referred to in
Section 7(a) below, (B) MHE and Investor shall deliver to HarnCo the
various instruments and documents referred to in Section 7(b) below,
(C) HarnCo shall deliver to MHE and Investor certificates
representing the MHE Common Shares and MHE Class C Preferred Shares
to be acquired by them, endorsed in blank or accompanied by duly
executed assignment documents, (D) MHE and Investor shall deliver to
HarnCo the consideration specified in Section 2(a) above, and (E)
MHE shall deliver to HarnCo certificates representing the MHE Class
B Preferred Shares to be issued to HarnCo.
(v) In connection with the closing of the Pre-Closing
Transactions, (A) the Sellers shall deliver to MHE U.K. or MHE
Canada (as appropriate) certificates representing the Company Shares
to be acquired by them, endorsed in blank or accompanied by duly
executed assignment documents and (B) MHE U.K. and MHE Canada shall
deliver to the Sellers the consideration specified in Section 2(c)
above.
(vi) Immediately after Closing, (A) the Sellers shall deliver
to MHE certificates representing the Hercules Shares and (B) MHE
shall deliver to the Sellers the consideration specified in Section
2(b)(ii) above.
(f) Allocation of Purchase Price. The Parties agree that the fair
market values
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of the assets of the MHE Business are as set forth on Exhibit O hereto, and that
such fair market values shall be used in determining allocations of the amounts
paid hereunder for all purposes. No Party shall take any action in preparation
of tax returns or tax filings or otherwise that is inconsistent with such
allocations, except as otherwise required by law.
(g) Excluded Liabilities; Contracts.
(i) Limitation on Obligations of MHE. Neither MHE nor the
other Companies nor their Subsidiaries shall retain or be deemed to
retain at Closing, under the Transaction Agreements or by reason of
any transactions contemplated thereunder, any Excluded Liabilities.
Immediately prior to the Closing, HarnCo shall assume the Excluded
Liabilities and relinquish its rights to indemnification for
Excluded Liabilities under the Separation Agreement pursuant to an
assumption agreement in the form attached as Exhibit Q hereto.
(ii) Substitution Where Not Transferable. If the Parties shall
be unable, on or prior to the Closing, to obtain any consent
required in connection with the transactions contemplated by the
Transaction Agreements under (A) any Contract to which any of the
Companies or their Subsidiaries is a party or (B) any Contract (as
defined under the Separation Agreement), then HarnCo, HarnCo's
Affiliates and Investor will cooperate to enter into a reasonable
arrangement designed to enable the Companies or their Subsidiaries
to perform the obligations thereunder, and to provide for the
retention by the Companies or their Subsidiaries of the benefits,
risks and burdens of, and Liabilities under, any such Contract,
including enforcement at the cost and for the account of the
Companies and their Subsidiaries of any and all rights of the
Companies and their Subsidiaries against the other party thereto;
provided that if any third party refuses to consent to the
assignment of any such Contract, challenges any arrangement under
this Section 2(g)(ii) or attempts to cancel, accelerate or change
the terms of any such Contract
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as a result of the transactions contemplated hereby, then HarnCo and
Sellers, on the one hand, and the Companies and their Subsidiaries,
on the other hand, shall each bear 50% of the total Adverse
Consequences suffered by HarnCo, Sellers, the Companies and their
Subsidiaries (and their respective Affiliates) which arise or result
therefrom. Effective as of the date of this Agreement, the
provisions of this Section 2(g) shall supersede and replace the
provisions of Sections 3.4 and 4.4 of the Separation Agreement.
(h) Treatment. For U.S. federal, state and local tax purposes only,
the creation and issuance of the MHE Class B Preferred Shares and MHE Class C
Preferred Shares, the redemptions described under Sections 2(a)(i), (ii) and
(iv) of this Agreement and any distributions or deemed distributions to HarnCo
or MHE (when combined with the sale of stock of MHE described under Section 2(a)
of this Agreement and Code Sec. 338(h)(10) elections for MHE and the New
Subsidiary), shall be deemed to constitute proceeds from the respective Code
Sec. 332 liquidations of MHE and the New Subsidiary. This Agreement shall
constitute the plans of liquidation of MHE and the New Subsidiary for purposes
of Code Sec. 332.
Section 3. Representations and Warranties Concerning the
Transaction.
(a) Representations and Warranties of HarnCo and Sellers. HarnCo and
Sellers jointly and severally represent and warrant to Investor that the
statements contained in this Section 3(a) are true and correct as of the date of
this Agreement and will be true and correct as of the Closing Date (or the dates
specified in such statements), except (1) as set forth in the disclosure
schedule delivered by HarnCo and Sellers to Investor on the date hereof (the
"Disclosure Schedule") (as the same may be supplemented in accordance with
Sections 5(g) and 5(q) below) and (2) as may be affected by the transactions
contemplated by this Agreement. The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 3(a) and Sections 3(b) and 4.
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(i) Organization. Each of HarnCo and Sellers is a corporation
or limited liability company, duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
organization.
(ii) Authorization of Transaction. Each of HarnCo and Sellers
has full power and authority pursuant to its corporate charter or
limited liability company operating agreement, as the case may be,
to execute and deliver each of the Transaction Agreements to which
it is a party and to perform its obligations thereunder. Each of the
Transaction Agreements constitutes the valid and legally binding
obligation of each of HarnCo and the Sellers party thereto,
enforceable in accordance with its respective terms and conditions.
Neither HarnCo nor Sellers needs to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of
any Governmental Agency in order to consummate the transactions
contemplated by the Transaction Agreements, except as required
pursuant to the HSR Act and any applicable foreign merger
regulations (including those of Mexico).
(iii) Noncontravention. Neither the execution and the delivery
of the Transaction Agreements, nor the consummation of the
transactions contemplated thereby, do or will, either with notice or
upon the expiration of applicable grace or cure periods or both, (A)
violate or conflict in any material respect with any statute,
constitution, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any Governmental Agency or
court to which any of HarnCo or Sellers is subject or any provision
of its charter, bylaws or operating agreement, as applicable, or (B)
result in a breach of, constitute a default under, conflict with,
result in the acceleration or termination of, create in any party
the right to accelerate, terminate, modify, or cancel, or require
any notice under any material Contract or license unrelated to the
MHE Business to which HarnCo or any Seller is a party or otherwise
bound.
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(iv) Brokers' Fees. Neither HarnCo, Sellers, the Companies,
the MHE Business nor any of their Affiliates has engaged any broker
or consultant (collectively, "Brokers") in connection with this
Agreement or the transactions contemplated herein or any aspect
hereof. Neither HarnCo nor Sellers has any liability or obligation
to pay any fees or commissions to any Broker with respect to the
transactions contemplated by the Transaction Agreements for which
the Companies, their Subsidiaries or Investor could become liable or
obligated.
(v) Company Shares. Immediately prior to the Closing, (A)
HarnCo will hold of record and beneficially own 100,000 MHE Common
Shares and 30,000 MHE Class C Preferred Shares (which will represent
all of the issued and outstanding shares of MHE's capital stock
immediately prior to the Closing), (B) MHE U.K. and a Subsidiary of
MHE will collectively hold of record and beneficially own all of the
issued and outstanding Redcrown Shares, (C) HCHC and HMH will
collectively hold of record and beneficially own all of the issued
and outstanding Hercules Shares, and (D) MHE Canada will hold of
record and beneficially own all of the issued and outstanding Canada
Newco Interests, in each case free and clear of any restrictions on
transfer (other than restrictions under the Securities Act and state
securities laws), Taxes, Encumbrances, claims and demands. Neither
HarnCo nor any Seller is party to any option, warrant, purchase
right, or other contract or commitment that could require it to
sell, transfer, or otherwise dispose of any capital stock or
interests of any of the Companies (other than this Agreement).
Neither HarnCo nor any Seller is party to any voting trust, proxy,
or other agreement or understanding with respect to the voting of
any capital stock or interests of any of the Companies or their
Subsidiaries.
(b) Representations and Warranties of Investor. Investor represents
and
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warrants to HarnCo and Sellers that the statements contained in this Section
3(b) are true and correct as of the date of this Agreement and will be true and
correct as of the Closing Date (or the dates specified in such statements).
(i) Organization. Investor is a corporation duly organized,
validly existing and in good standing under the laws of Delaware.
(ii) Authorization of Transaction. Investor has full power and
authority pursuant to its organizational documents to execute and
deliver each of the Transaction Agreements to which it is a party
and to perform its obligations thereunder. Each of the Transaction
Agreements to which Investor is a party constitutes the valid and
legally binding obligation of Investor, enforceable in accordance
with its respective terms and conditions. Investor does not need to
give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Governmental Agency in
order to consummate the transactions contemplated by the Transaction
Agreements, except as required pursuant to the HSR Act and any
applicable foreign merger regulations (including those of Mexico).
(iii) Sufficient Funds. Investor has obtained the Commitment
Letters and the Term Sheets (copies of which have been furnished to
HarnCo and Sellers) relating to bank, subordinated debt and
preferred stock financing for the transactions contemplated by this
Agreement. Investor has received (and furnished HarnCo copies of)
commitment letters for $54 million in equity financing to fund its
purchase of preferred and common stock from HarnCo under Section
2(a) (v) above. Based on its due diligence investigation and current
market conditions, Investor believes that such financing will be
available at the Closing on terms reasonably consistent with those
set forth in the Commitment Letters and the Term Sheets.
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(iv) Noncontravention. Neither the execution and the delivery
of the Transaction Agreements to which the Investor is a party, nor
the consummation of the transactions contemplated thereby, do or
will, either with notice or upon the expiration of applicable grace
or cure periods or both, (A) violate or conflict with any statute,
constitution, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any Governmental Agency or
court to which the Investor is subject or any provision of its
charter, bylaws or partnership agreement, or (B) conflict with,
result in a breach of, constitute a default under, result in the
acceleration or termination of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice
under any material agreement, contract, lease, license, instrument,
or other arrangement to which the Investor is a party or by which it
is bound or to which any of its material assets is subject.
(v) Brokers' Fees. Investor has no liability or obligation to
pay any fees or commissions to any Broker with respect to the
transactions contemplated by the Transaction Agreements for which
any of HarnCo or Sellers could become liable or obligated.
(vi) MHE Solvency; Net Worth. Assuming the correctness of the
representations and warranties in Section 4 hereof:
(A) MHE will, after giving effect to the transactions
contemplated hereby, be solvent and capable of meeting its
obligations as they become due, have assets exceeding its
Liabilities and have a reasonable amount of capital for the conduct
of its business.
(B) MHE's surplus (as defined under Delaware law) at the time
of
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the Closing will exceed the Redemption Price.
(vii) No Knowledge of Breach. To the Knowledge of the
Chartwell Group (after reviewing reports from attorneys, consultants
and other advisors), the representations and warranties of HarnCo
and the Sellers in Section 3(a)(iii)(B) and Section 4 of this
Agreement are true and correct in all material respects as of the
date of this Agreement.
(viii) Share Ownership. Assuming the correctness of the
representations and warranties in Section 4 hereof, the MHE Common
Shares held by HarnCo immediately following the Closing will
represent 22.58% of the total MHE Common Shares then outstanding
(subject, however, to adjustment under the provisions of Section
2(a) hereof and decrease due to the equity interests of MHE
management and any initial common investment in MHE by Investor in
excess of the amount contemplated by the Term Sheets).
Section 4. Representations and Warranties Concerning the Companies
and their Subsidiaries. HarnCo and Sellers jointly and severally represent and
warrant to Investor that the statements contained in this Section 4 are true and
correct as of the date of this Agreement and will be true and correct as of the
Closing Date (or the dates specified in such statements), except (i) as set
forth in the Disclosure Schedule (as the same may be supplemented in accordance
with Sections 5(g) and 5(q) below) and (ii) as may be affected by the
transactions contemplated by this Agreement.
(a) Organization, Qualification, and Corporate Power. Each of the
Companies and its Subsidiaries is duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its organization. Each of the
Companies and its Subsidiaries is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification, individually or in the
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aggregate, would not have a Material Adverse Effect. Each of the Companies and
its Subsidiaries has full corporate (or other entity) power and authority to
carry on the businesses in which it is engaged and which it proposes to engage
under existing agreements and to own and use the properties owned and used by
it. HarnCo has made available (or will promptly make available after the date
hereof) to the Investor correct and complete copies of the charter and bylaws of
each of HarnCo, Sellers, the Companies and the Companies' Subsidiaries (as
amended to date). The stock certificate books and the stock record books of each
of the Companies and the Companies' Subsidiaries correctly reflect the current
stockholders and their record ownership thereof. None of HarnCo, Sellers, the
Companies nor any of the Companies' Subsidiaries is in default under or in
violation of any provision of its charter or bylaws. None of the MHE Business is
conducted through any corporation or Person other than the Companies and their
Subsidiaries. Since becoming Affiliates of HarnCo, the Companies and their
Subsidiaries' sole business and operations have consisted of the ownership and
operation of the MHE Business.
(b) Capitalization.
(i) Immediately prior to the Closing, the entire authorized
capital stock of MHE will consist of 1,000,000 Common Shares, a
number of MHE Class A Preferred Shares to be determined by Investor,
100,000 MHE Class B Preferred Shares and 100,000 MHE Class C
Preferred Shares, of which 100,000 Common Shares and 30,000 MHE
Class C Preferred Shares will be issued and outstanding. All of the
issued and outstanding shares of MHE's capital stock immediately
prior to the Closing will have been duly authorized, will be validly
issued, fully paid and nonassessable, and will be held of record and
beneficially by HarnCo.
(ii) Redcrown's authorized share capital comprises 100,000,000
redeemable ordinary shares, par value one Pound Sterling, and 100
ordinary shares, par value one Pound Sterling, of which no
redeemable ordinary shares and 100 ordinary shares are issued. All
of the issued Redcrown Shares have been duly
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authorized, are validly issued, are fully paid and are
nonassessable. As of the date of this Agreement, all of the issued
and outstanding shares of Redcrown are held of record and
beneficially by RCHH and RYL. As of the Closing, all of the issued
and outstanding shares of Redcrown will be held by MHE U.K. and a
Subsidiary of MHE. Redcrown has neither allotted nor agreed to allot
any further shares.
(iii) The entire authorized capital stock of Hercules consists
of 8,000 shares of Common Stock and an unlimited number of shares of
variable capital stock, of which 8,000 shares of Common Stock and
3,661,000 shares of variable capital stock are issued and
outstanding. All of the issued and outstanding Hercules Shares have
been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record and beneficially by HCHC and
HMH.
(iv) As of the Closing, all of the issued and outstanding
Canada Newco Interests will have been duly authorized, will be
validly issued, fully paid, and nonassessable, and will be held of
record and beneficially by MHE Canada.
There are no Encumbrances or outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other commitments or arrangements, relating to any securities or
interests in the Companies or that could require any of the Companies to issue,
sell, or otherwise cause to become outstanding any of its respective capital
stock, securities or interests, as the case may be. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, stock based
or similar rights with respect to any of the Companies. There are no voting
trusts, proxies or other agreements or understandings with respect to the voting
of the capital stock of the Companies. Neither the Companies, nor any of their
Subsidiaries own, directly or indirectly, debt securities, shares or other
equity interests or securities in any corporation, partnership, joint venture or
other Person, and none of them has any agreement or commitment to purchase any
such interests or securities.
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(c) Noncontravention. Neither the execution and the delivery of the
Transaction Agreements, nor the consummation of the transactions contemplated
thereby, do or will, either with notice or upon the expiration of applicable
grace or cure periods or both, (i) violate or conflict in any material respect
with any statute, regulation, rule, injunction, judgment, constitution, order,
decree, ruling, charge, or other restriction of any Governmental Agency or court
to which any of the Companies or their Subsidiaries or the MHE Business is
subject or any provision of the charter, bylaws or operating agreement of any of
the Companies or their Subsidiaries or (ii) result in a breach of, constitute a
default under, conflict with, result in the acceleration or termination of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under (x) any Contract listed (or required to be listed) on
Schedule 4(m) of the Disclosure Schedule or (y) to the Knowledge of the
Specified Employees, any other material Contract or license (I) to which any of
the Companies or their Subsidiaries or the MHE Business is a party, (II) by
which any of them is bound, (III) to which any of their material assets is
subject or (IV) which could result in the imposition of any Encumbrance upon any
of their material assets. None of the Companies, their Subsidiaries or the MHE
Business needs to give any notice to, make any material filing with, or obtain
any material authorization, consent, waiver or approval of any government or
Governmental Agency in order for the Parties to consummate the transactions
contemplated by this Agreement, except under the HSR Act and any applicable
European or national merger regulations. The foregoing notwithstanding, no
representation or warranty is made as to the financing of the transactions
contemplated by this Agreement or any Contracts entered into in connection
therewith.
(d) Brokers' Fees. None of the Companies or their Subsidiaries has
any Liability or obligation to pay any fees or commissions to any Broker
(including those listed on Schedule 3(a)(iv) of the Disclosure Schedule, which
shall be borne by HarnCo) with respect to the transactions contemplated by the
Transaction Agreements.
(e) Title to Assets. The Companies and their Subsidiaries have good
and marketable title to, or have a valid leasehold interest in, all tangible
personal property included in
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the Business Assets or the Incidental Assets and have good and marketable title
to, a valid leasehold interest in or other valid right to use all intangible
assets included in the Business Assets or the Incidental Assets, in each case
free and clear of Encumbrances (it being understood, however, that certain
services will be provided and certain assets will be made available to the
Companies and their Subsidiaries under the Transition Services Agreement, the
Supply Agreement and the Trademark Agreement). The Business Assets, plus the
Incidental Assets, plus the services to be provided and assets to be made
available under the Transition Services Agreement, the Supply Agreement and the
Trademark Agreement, are sufficient to operate the MHE Business in substantially
the same manner as operated prior to the date of this Agreement.
(f) Subsidiaries. Schedule 4(f) of the Disclosure Schedule sets
forth for each Subsidiary of each Company (i) if such Subsidiary is a
corporation (A) its name and jurisdiction of incorporation, (B) the number of
shares of authorized capital stock of each class of its capital stock and other
securities, (C) the number of issued and outstanding shares of each class of its
capital stock and other securities, (D) the names of the holders of shares of
each class of its capital stock and other securities, and (E) the number of
shares held by each such holder; (ii) if such Subsidiary is a partnership (A)
its name and jurisdiction of organization, (B) the names of the holders of its
general and limited partner interests and (C) the percentage general or limited
partner interest held by each such holder; and (iii) if such Subsidiary is a
limited liability company (A) its name and jurisdiction of organization, (B) the
names of its members, and (C) the percentage interest held by each such member.
All of the issued and outstanding shares of capital stock of each corporate
Subsidiary of the Companies have been duly authorized and are validly issued,
fully paid and nonassessable. All of the outstanding general and limited partner
interests of each partnership Subsidiary of the Companies have been duly
authorized and are validly issued. All of the outstanding limited liability
company membership interests of each limited liability company Subsidiary of the
Companies have been duly authorized and are validly issued, fully paid and
nonassessable. One of the Companies or their Subsidiaries holds of record and
owns beneficially all of the outstanding shares of each corporate Subsidiary of
the Companies and one of the Companies or their Subsidiaries owns each
outstanding partner interest or member interest
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of each partnership or limited liability company Subsidiary of the Companies, as
the case may be, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), Taxes,
Encumbrances, claims and demands. There are no Encumbrances or outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights or other contracts or commitments that could require any
of the Companies or their Subsidiaries to sell, transfer or otherwise dispose of
any capital stock or securities of any of their Subsidiaries or that could
require any Subsidiary of the Companies to issue, sell or otherwise cause to
become outstanding any of their own capital stock. There are no outstanding
stock appreciation, phantom stock, profit participation, stock based or similar
rights with respect to any Subsidiary of the Companies. There are no voting
trusts, proxies or other agreements or understandings with respect to the voting
of any capital stock of any Subsidiary of the Companies. None of the Companies
or any of their Subsidiaries controls directly or indirectly or has any direct
or indirect equity participation in any corporation, partnership, trust or other
business association which is not a Subsidiary of the Companies.
(g) Financial Statements. Schedule 4(g) of the Disclosure Schedule
contains the following financial statements: audited combined balance sheets for
the MHE Business as of October 31, 1997 and 1996 and income statements and cash
flow statements for the MHE Business as and for the fiscal years ended October
31, 1997, 1996 and 1995 (the "Audited Financial Statements"). Except as
otherwise noted, the Audited Financial Statements present fairly in all material
respects the financial condition and results of operations of the MHE Business
as of and for the periods covered thereby in accordance with GAAP consistently
applied and are consistent with the books and records of the MHE Business. To
the Knowledge of the Specified Employees, none of the Companies or their
Subsidiaries has any Liabilities which would be required by GAAP (applied on a
basis consistent with the preparation of the Audited Financial Statements) to be
set forth on a balance sheet other than (1) Liabilities reflected on the Most
Recent Balance Sheet, (2) Liabilities that have arisen thereafter in the
Ordinary Course of Business (excluding Liabilities arising from Knowing
Breaches), (3) Liabilities to be reflected in the calculation of Net Assets on
the Closing Balance Sheet, and (4) other immaterial Liabilities.
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(h) Subsequent Events.
(i) Since October 31, 1997, there has not been any material
adverse change in the business, financial condition or operations of
the MHE Business.
(ii) Since October 31, 1997, neither HarnCo nor Sellers nor
their Affiliates have, with respect to the MHE Business, engaged in
any material practice, taken any material action or entered into any
material transaction outside the Ordinary Course of Business (other
than (A) the transactions contemplated by or referred to in the
Transaction Agreements and (B) the reorganization of their
Subsidiaries in Canada, Mexico, the United States, and the United
Kingdom to facilitate the transactions contemplated by the
Transaction Agreements).
Without limiting the generality of the foregoing, since
October 31, 1997, none of Sellers, HarnCo (with respect to the MHE
Business), the Companies or the Companies' Subsidiaries:
(A) has sold, leased, transferred, or assigned any of its
material assets, tangible or intangible, other than in the Ordinary
Course of Business;
(B) has (nor, to the Knowledge of the Specified Employees, has
any other party) accelerated, terminated, modified or cancelled any
Contract or license (or series of related Contracts and licenses)
involving more than $50,000 (other than change orders for sales and
purchasing contracts in the Ordinary Course of Business);
(C) has made any capital expenditure (or series of related
capital
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expenditures) either involving more than $1,250,000 or outside the
Ordinary Course of Business;
(D) has issued any note, Guaranty, bond or other debt security
or created, incurred or assumed any Indebtedness, either involving
more than $250,000 singly or $1,000,000 in the aggregate (for the
entire MHE Business);
(E) has made any material change in the policies of the
Companies or any of their Subsidiaries with respect to the payment
of accounts payable or other current Liabilities or the collection
of accounts receivable, including any acceleration, deferral or
write-off of the payment or collection thereof, as applicable.
(F) has cancelled, compromised, waived or released any right
or claim (or series of related rights and claims) either involving
more than $250,000 or outside the Ordinary Course of Business;
(G) has made any general changes in employee compensation;
(H) has made any material change in accounting policies
(including with respect to intercompany transactions) in connection
with the maintenance of the books and records of the MHE Business;
(I) has waived or released any material rights of the Company
or any of its Subsidiaries, except in the Ordinary Course of
Business and for fair value;
(J) has removed any Exchange Proceeds from the Companies or
their Subsidiaries (by dividend, distribution, redemption or other
means); or
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(K) none of HarnCo, the Sellers, the Companies nor any of the
Companies' Subsidiaries has committed to any of the foregoing.
(i) Legal Compliance. To the Knowledge of the Specified Employees,
the MHE Business has been conducted in compliance in all material respects with
all applicable laws, rules, codes, plans, injunctions, judgments, orders,
decrees, rulings, charges and regulations of Governmental Agencies and the MHE
Business has not received written notice of any such non-compliance (other than
notices as to (x) matters which have been resolved and (y) immaterial matters).
(j) Tax Matters.
(i) Each of the Companies and their Subsidiaries has filed or
been included in all Tax Returns that it was required to file or to
be included in and all Taxes shown thereon as owing have been paid.
(ii) No Tax liens have been filed by any Governmental Agency
against any property or assets of the Companies or their
Subsidiaries, and no claims are being asserted with respect to any
Taxes.
(iii) The U.S. federal income Tax Returns of the Companies and
their Subsidiaries and of each consolidated group of which any of
the Companies or their Subsidiaries is or has been a member have
been examined by the IRS and closed or are federal income Tax
Returns with respect to which the applicable period for assessment
under applicable law, after giving effect to extensions or waivers,
has expired. No issue relating to the Companies or their
Subsidiaries has been raised in writing by any taxing authority in
any audit or examination with respect to taxable periods of any of
the Companies or their Subsidiaries, which, by
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application of the same or similar principles, could reasonably be
expected to result in a material deficiency for any subsequent
period (including periods subsequent to the Closing Date). There are
no outstanding agreements, waivers, or arrangements extending the
statutory period of limitation applicable to any claim for, or the
period of collection or assessment of, Taxes due from or with
respect to the Companies or their Subsidiaries for any taxable
period. No power of attorney granted by any of the Companies or
their Subsidiaries with respect to Taxes is currently in force. No
closing agreement pursuant to Section 7121 of the Code (or any
predecessor provision) or any similar provision of any state, local
or foreign law has been entered into by or with respect to any of
the Companies or their Subsidiaries.
(iv) No audit or other proceeding by any Governmental Agency,
or similar Person is pending nor has any dispute been raised or, to
the Knowledge of the Specified Employees, threatened with respect to
any Taxes due from or with respect to any of the Companies or their
Subsidiaries or any Tax Return filed by or with respect to any of
the Companies or their Subsidiaries. No assessment of Tax is
proposed against any of the Companies or their Subsidiaries or any
of their assets. No claim has ever been made by any Governmental
Authority in a jurisdiction where any of the Companies or their
Subsidiaries do not file Tax Returns that any of them is or may be
subject to Tax by that jurisdiction.
(v) None of the Companies or their Subsidiaries (A) has been a
member of an Affiliated Group filing a consolidated federal Tax
Return (other than a group the common parent of which was HII) or
(B) has any Liability for Taxes of any Person under Reg. Section
1.1502-6 (or other similar provision of state, local or foreign
law), as a transferee or successor, by contract, or otherwise.
(vi) None of the Companies or their Subsidiaries have filed a
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consent under Code Section 341(f) concerning collapsible
corporations. None of the Companies or their Subsidiaries have made
or entered into, or holds any assets subject to, a "safe harbor
lease" subject to former Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended, and the regulations thereunder. None of
the Companies or their Subsidiaries has made any payments, is
obligated to make any payments, or is party to any agreement that
under certain circumstances could obligate it to make any payments
that would not be deductible under Code Section 280G. None of the
Companies or their Subsidiaries has been a United States real
property holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). None of the Companies or their Subsidiaries has
been an investment company within the meaning of Code Section
351(e).
(vii) All elections made on IRS Form 8832 with respect to
entity classification relating to any of the Companies or their
Subsidiaries are set forth in Schedule 4(j) of the Disclosure
Schedule.
(k) Real Property.
(i) Schedule 4(k)(i) of the Disclosure Schedule lists all real
property owned by the Companies and their Subsidiaries. With respect
to each such parcel of real property:
(A) the owner has good and marketable title to the parcel of
real property, free and clear of any Encumbrance, easement,
covenant, or other restriction, except for installments of special
assessments not yet delinquent, recorded easements, covenants, and
other restrictions, and utility easements, building restrictions,
zoning restrictions, and other easements and restrictions existing
generally with respect to properties of a similar character that do
not
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materially impair the current or contemplated use of such parcel or
the value thereof;
(B) there are not any leases, subleases, licenses,
concessions, or other agreements granting to any party or parties
the right of use or occupancy of any portion of the parcel of real
property, other than leases, subleases, licenses and other
agreements which do not, individually or in the aggregate,
materially impair the current or contemplated use of such property
or the value thereof;
(C) there are not any outstanding options or rights of first
refusal to purchase the parcel of real property or any portion
thereof (or any binding commitment to grant or enter into any such
option or right);
(D) there are no pending or, to the Knowledge of the Specified
Employees, threatened condemnation proceedings;
(E) all approvals of Governmental Agencies (including licenses
and permits) required in connection with the ownership or operation
thereof have been received, except those the failure to obtain which
would not, individually or in the aggregate, materially impair the
current or contemplated use of such property or the value thereof.
(ii) Schedule 4(k)(ii) of the Disclosure Schedule lists all
leases and subleases of real property to which any of the Companies
or their Subsidiaries is a party as of the date of this Agreement
providing for lease payments in excess of $20,000 per year. HarnCo
and Sellers have made available to Investor copies of the leases and
subleases listed in Schedule 4(k)(ii) of the Disclosure Schedule. To
the Knowledge of the Specified Employees, each lease and sublease
relating to the property listed in Schedule 4(k)(ii) of the
Disclosure Schedule is legal, valid,
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binding, enforceable, and in full force and effect.
(l) Intellectual Property.
(i) Schedule 4(l) of the Disclosure Schedule identifies and
describes the following included in the Business Assets: (A) U.S.
and Foreign patents and pending patent applications; (B) U.S. and
Foreign trademark, service xxxx and trade name registrations and
applications therefor; (C) U.S. and Foreign copyright registrations
and applications (or similar protections by whatever name) therefor;
and (D) licenses and similar agreements for the use, reproduction,
distribution, manufacture or sale of any intellectual property
(including, without limitation, patents, unpatented inventions and
technology, trademarks, service marks and trade names, copyrights
and copyrightable works, know-how and trade secrets, hereinafter
collectively referred to as "Intellectual Property") (other than
licenses for the use of commercially available computer software and
related documentation, which licenses do not require the payment of
ongoing royalties and were each acquired for consideration totaling
less than $10,000).
(ii) The Companies and their Subsidiaries own and possess all
right, title and interest in and to, or have a license or right to
use, the Intellectual Property necessary for the operation of the
MHE Business (it being understood, however, that certain assets will
be made available and certain services will be provided to the
Companies and their Subsidiaries under the Transition Services
Agreement, the Supply Agreement and the Trademark Agreement). To the
Knowledge of the Specified Employees, no action, suit, proceeding or
written claim by any third party is currently outstanding which (i)
contests the validity, enforceability, use or ownership of any of
the Intellectual Property owned or used by the MHE Business or (ii)
alleges that the MHE Business has infringed or misappropriated any
Intellectual Property of others, in each case except as would
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not have a Material Adverse Effect.
(iii) Schedule 4(l) of the Disclosure Schedule sets forth as
of the date hereof a list of all licenses and agreements under which
the MHE Business have granted rights to third parties under any of
the Intellectual Property, including without limitation any rights
granted to third parties to use any computer programs, databases,
manufacturing processes or other know-how.
(iv) To the Knowledge of the Specified Employees, all granted
and issued patents listed on Schedule 4(l) of the Disclosure
Schedule, all registered trademarks, trade names and service marks
and all applications to register the same listed on Schedule 4(l) of
the Disclosure Schedule, and all copyright registrations and
applications listed on Schedule 4(l) of the Disclosure Schedule are
valid, enforceable and subsisting. To the Knowledge of the Specified
Employees, as of the date hereof, there has not been and there is
not any unauthorized use, infringement or misappropriation by any
third party, employee or former employee of the MHE Business of any
Intellectual Property owned by the Companies or their Subsidiaries,
except as would not have a Material Adverse Effect.
(m) Contracts. Schedule 4(m) of the Disclosure Schedule lists the
following written Contracts of the MHE Business as of the date
hereof:
(i) any Contract the performance of which is expected to
involve consideration in excess of $2,000,000;
(ii) any Contract which restricts or contains limitations on
the ability of any of the MHE Business or the Companies or their
Subsidiaries to freely conduct business anywhere in the world or
relates to confidentiality (other than confidentiality agreements
that relate to (x) the purchase or sale of goods or
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services in the Ordinary Course of Business, or (y) acquisitions or
joint venture transactions);
(iii) any collective bargaining agreement;
(iv) any contract which provides for the employment of any
individual on a full-time, part-time, consulting or other basis
providing annual salary and cash bonus in excess of $100,000 or
which provides for severance or change in control benefits;
(v) any agreement which relates to Indebtedness or any
Guaranty;
(vi) any Contract concerning a partnership, joint venture or
other similar entity or arrangement;
(vii) any Contract between the Companies or their Subsidiaries
on the one hand, and any of the Sellers or their Affiliates (other
than the Companies and their Subsidiaries) on the other hand;
(viii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other plan or
arrangement for the benefit of its current or former directors,
officers and employees;
(ix) any Contract under which the Companies or any of their
Subsidiaries has advanced or loaned any amount to any of their
directors, officers and employees outside the Ordinary Course of
Business; and
(x) with respect to any of the foregoing, any outstanding
executed letters of intent and written offers to which the Companies
and/or their
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Subsidiaries is party (including, but not limited to, offers made,
but not yet accepted, for the acquisition or sale of any facility,
real property or business, but excluding offers made, but not yet
accepted, for the sale of goods or services in the Ordinary Course
of Business).
HarnCo and Sellers have made available to Investor (or will make
available to Investor promptly following the date hereof) a correct and complete
copy of each written contract or other agreement listed in Schedule 4(m) of the
Disclosure Schedule. With respect to each such Contract: (A) the Contract is
legal, valid, binding, enforceable in accordance with its terms against the
Companies, their Subsidiaries and their Affiliates party thereto and, to the
Knowledge of the Specified Employees, the other parties thereto; (B) neither the
Companies, their Subsidiaries nor their Affiliates and, to the Knowledge of the
Specified Employees, no other party thereto is in material breach or default,
and, to the Knowledge of the Specified Employees, no event has occurred which
with notice or upon the expiration of applicable grace or cure periods or both
would constitute a material breach or default, or permit termination,
modification or acceleration under, the Contract; (C) neither the Companies,
their Subsidiaries nor their Affiliates and, to the Knowledge of the Specified
Employees, no other party, has repudiated any material provision of the
Contract; and (D) none of HarnCo, Sellers, the Companies nor any of the
Companies' Subsidiaries has granted any release or waiver of any material
provision under the Contract outside the Ordinary Course of Business.
(n) Litigation. Schedule 4(n) of the Disclosure Schedule sets forth
each instance in which HarnCo (with respect to the MHE Business), Sellers, the
Companies or any Subsidiaries of the Companies (or the MHE Business or the
Business Assets) is (i) subject to any outstanding injunction, judgment,
stipulation, writ, order, decree, ruling, or charge or (ii) a party to, or to
the Knowledge of any of the Specified Employees, is threatened to be made a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or Governmental Agency . The foregoing
notwithstanding, HarnCo and the Sellers shall not be required to list in the
Disclosure Schedules any action, suit or proceeding which has been filed
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against them but which has not been served (unless a Specified Employee has
Knowledge of the action, suit or proceeding in question).
(o) Employee Benefits. Schedule 4(o) of the Disclosure Schedule
lists, and the Sellers, the Companies and their Subsidiaries will make available
to Investor promptly after the date hereof copies of, each Employee Benefit Plan
and each Non-U.S. Employee Benefit Plan that any of the Companies or their
Subsidiaries maintains or to which any of them contributes or has any obligation
to contribute.
(i) Each such Employee Benefit Plan and each such non-U.S.
Employee Benefit Plan (and, with respect to all such plans, each
related trust, insurance contract, or fund) complies in form and in
operation in all material respects with (A) the applicable
requirements of ERISA, the Code and other applicable laws, both U.S.
and non-U.S., and (B) its own terms.
(ii) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been
paid to each Employee Benefit Plan which is an Employee Pension
Benefit Plan and to each Non-U.S. Employee Benefit Plan and all
contributions for any period ending on or before the Closing Date
which are not yet due have been reserved for in the accounts of
HarnCo, the Sellers, the Companies or the Companies' Subsidiaries
(as applicable). All premiums or other payments for all periods
ending on or before the Closing Date which are due have been paid
with respect to each Employee Welfare Benefit Plan and with respect
to each Non-U.S. Employee Benefit Plan. With respect to non-U.S.
operations and employees, the Sellers, the Companies and their
Subsidiaries are in compliance in all material respects with the
laws and regulations of any applicable Governmental Agency with
respect to employee benefits.
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(iii) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan has (A) received a determination letter from
the Internal Revenue Service to the effect that it meets the
requirements of Code Sec. 401(a), or (B) an application for such a
determination letter for such plan has been timely filed within the
remedial amendment period (as described in Section 401(b) of the
Code) with respect to the Tax Reform Act of 1986, as amended, and
subsequent federal legislation, or (C) such remedial amendment
period for such plan has not yet expired; and none of HII, HarnCo or
the Sellers is aware of any facts or circumstances that could result
in the revocation of any such determination letter. Each of the
Non-U.S. Pension Plans has been operated in accordance with all
applicable laws in all material respects to retain its
Tax-qualified, Tax-exempt or Tax-favored status and, if applicable,
has been determined to be Tax-qualified, Tax-exempt or Tax-favored
by any relevant Governmental Agency.
(iv) Neither HarnCo nor any "ERISA Affiliate" (each business
or entity which is a member of a "controlled group of corporations,"
under "common control" or an "affiliated service group" with HarnCo
within the meaning of Sections 414(b), (c) or (m) of the Code, or is
required to be aggregated with HarnCo under Section 414(o) of the
Code, or is under "common control" with HarnCo, within the meaning
of Section 4001(a)(14) of ERISA) has any liability with respect to
any multiemployer plan within the meaning of Section 3(37)(A) of
ERISA. Neither BelCan nor any of its Subsidiaries is required to
make any contributions to any multiemployer plan.
(v) HarnCo, Sellers, the Companies and their Subsidiaries have
complied in all material respects with the requirements under
Section 4980B of the Code and Section 601 et seq. of ERISA
("COBRA").
(vi) To the Knowledge of the Specified Employees, (A) there
have
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been no prohibited transactions (as defined in ERISA Section 406)
with respect to any Employee Benefit Plan, (B) no fiduciary of any
Employee Benefit Plan or any Non-U.S. Employee Benefit Plan has any
Liability for breach of fiduciary duty or any other failure to act
or comply in connection with the administration or investment of the
assets of any Employee Benefit Plan or any Non-U.S. Employee Benefit
Plan; and (C) no action, suit, proceeding, hearing, audit or
investigation with respect to the administration or the investment
of the assets of any Employee Benefit Plan or any Non-U.S. Employee
Benefit Plan (other than routine claims for benefits) is pending.
(vii) No Liability under Title IV of ERISA has been incurred
by HarnCo, HII or any ERISA Affiliate which has not been satisfied
in full (other than for the payment of PBGC premiums), and no event
has occurred and no condition exists that could reasonably be
expected to result in HII, HarnCo or any ERISA Affiliate incurring a
Liability under Title IV of ERISA (other than for the payment of
PBGC premiums) or could constitute grounds for terminating any
Employee Pension Benefit Plan.
(viii) HarnCo and Sellers have made available to Investor (or
will make available to Investor promptly after the date hereof) true
and correct copies of the plan documents and summary plan
descriptions, the most recent determination letter received from the
Internal Revenue Service and any recent applications for a
determination letter with respect to each Employee Pension Benefit
Plan and each Non-U.S. Employee Benefit Plan, the two most recently
filed Form 5500 Annual Reports or other annual reports, the two most
recent actuarial valuations for the Xxxxxx Mechanical Handling
Limited Scheme, all related trust agreements and other funding
agreements which implement each such Employee Benefit Plan and each
such Non-U.S. Employee Benefit Plan and all insurance contracts
which relate to each such Non-U.S. Employee Benefit Plan.
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(ix) Unless listed in the Disclosure Schedule, none of the
Companies or their Subsidiaries have made any commitments (A) to
increase benefits under any of the Employee Benefit Plans or
Non-U.S. Employee Benefit Plans or (B) to establish new employee
benefits, plans, policies, schemes or other arrangements.
(p) Bonds. Schedule 4(p) of the Disclosure Schedule identifies all
bonds, Guarantees, letters of credit and similar instruments and credit support
maintained by or on behalf of the MHE Business, copies of which have been made
available to Investor.
(q) Environmental Matters. To the Knowledge of the Specified
Employees, the Companies and their Subsidiaries and the MHE Business are in
compliance in all material respects with all Environmental, Health and Safety
Requirements, and each of them has obtained all material Environmental Permits
which are required for the operation of their respective businesses, and none of
them is subject to any outstanding material claim or notice to the contrary with
respect to such businesses or any businesses previously owned, leased, used,
conducted, occupied or controlled by any of the Companies and their Subsidiaries
or any other location where any of the Companies or their Subsidiaries would
have any Liability under the Environmental, Health and Safety Requirements.
(i) Without limiting the generality of the foregoing, to the
Knowledge of the Specified Employees, the Companies, their Subsidiaries
and the MHE Business have not generated, manufactured, refined,
transported, treated, stored, handled, disposed, transferred, produced,
imported, exported, used or processed any Hazardous Substances, except in
compliance in all material respects with all Environmental Health and
Safety Requirements (excluding for this purpose any previous failure to so
comply which has been substantially addressed or resolved).
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(ii) Without limiting the generality of the foregoing, to the
Knowledge of the Specified Employees, there has been no material release,
spill, emission, discharge or similar occurrence (which would require
reporting thereof to the applicable governmental or regulatory authority)
of any Hazardous Substances at or from any location of the Companies,
their Subsidiaries, the MHE Business or at any other locations where any
Hazardous Substances were generated, manufactured, refined, transported,
treated, stored, handled, disposed, transferred, produced, imported,
exported, used or processed from or by the Companies, their Subsidiaries
or the MHE Business in connection with their respective business and there
are no material remediation obligations, costs or expenses currently
required to be incurred by the Companies, their Subsidiaries or the MHE
Business relating to Environmental, Health and Safety Requirements.
(iii) HarnCo and the Sellers have heretofore made available to
Investor true and correct copies of all material internal and third-party
environmental audits, studies, reports and records in the possession or
control of HII, the Sellers, the Companies or their Subsidiaries (other
than audits, studies, reports and records relating to Excluded
Liabilities). There are no agreements between the Companies and their
Subsidiaries, on the one hand, and HarnCo and its other Affiliates, on the
other hand, as to the sharing of environmental liabilities (except as
expressly set forth in this Agreement and the Separation Agreement).
(iv) To the Knowledge of the Specified Employees, none of the
following exists at any property or facility owned or operated by the
Companies, their Subsidiaries and the MHE Business, the presence of which
could reasonably be expected to give rise to a material liability: (A)
underground storage tanks, (B) asbestos-containing material in any damaged
and friable form or condition, (C) materials or equipment containing
polychlorinated biphenyls, or (D) landfills, surface impoundments or
disposal areas.
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(v) To the Knowledge of the Specified Employees, neither the
Transaction Agreements nor the consummation of the transactions that are
the subject of the Transaction Agreements will result in any material
obligation for site investigation or clean-up, or notification to or
consent of any Governmental Agency under so-called "responsible property
transfer" Environmental, Health and Safety Requirements.
(vi) This Section 4(q), together with Sections 4(n), 4(p) and
4(r), sets forth the sole and exclusive representations and warranties of
HarnCo and Sellers with respect to environmental, health and safety
matters, including without limitation any matters arising under
Environmental, Health and Safety Requirements.
(r) Licenses and Authorizations. The Companies or one of their
Subsidiaries holds or owns all material Licenses the Companies and their
Subsidiaries must have to conduct the MHE Business as presently being conducted.
All such material Licenses are listed on Schedule 4(r) of the Disclosure
Schedule. To the Knowledge of the Specified Employees, all such Material
Licenses are valid and in full force and effect. There are no judgments, writs,
decrees, injunctions, stipulations, compliance or settlement agreements that
have been issued that could be expected to result in a forfeiture or the
suspension, termination prior to its expiration date, revocation, material
impairment, materially adverse modification or non-renewal of any material
License. No action, suit or proceeding is pending, or to the Knowledge of the
Specified Employees, threatened before any Governmental Authority to revoke,
refuse to renew or make material adverse modifications to any such material
License.
(s) Labor and Employee Matters.
(i) The Companies and their Subsidiaries are not party to any
labor or collective bargaining agreement and there are no labor or
collective bargaining agreements that pertain to employees of the
Companies, their
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Subsidiaries or the MHE Business. The Companies have made available
to the Investor correct, and complete copies of the labor or
collective bargaining agreements listed on Schedule 4(s)(i) of the
Disclosure Schedule, together with all amendments, modifications,
letters of agreements and supplements thereto. HarnCo, Sellers, the
Companies and the Subsidiaries of the Companies are not currently
engaged in or required to be engaged in collective bargaining with
any employee representative.
(ii) No employees of the Companies or the MHE Business are
represented by any labor organization. No labor organization or
group of employees of the Companies or the MHE Business has made a
pending demand for recognition, and there are no representation
proceedings or petitions presently pending or, to the Knowledge of
the Specified Employees, threatened to be brought or filed, with the
National Labor Relations Board or other labor relations tribunal.
There is no labor organizing activity involving the Companies'
employees or employees of the MHE Business pending or, to the
Knowledge of the Specified Employees, threatened by any labor
organization or group of employees of the Companies or the MHE
Business.
(iii) There are no strikes, work stoppages, slow downs,
lockouts, arbitrations or unfair labor practice charges (or actions,
suits or proceedings relating to wrongful discharge, discrimination,
employment practices, employment conditions, or terms and conditions
of employment) pending or, to the Knowledge of the Specified
Employees, threatened against or involving the Companies, their
Subsidiaries or the MHE Business.
(iv) Neither the Companies, their Subsidiaries, nor the MHE
Business is delinquent or allegedly delinquent in payments to any of
its employees of any wages, salaries, commissions, bonuses, or other
direct compensation for any
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services performed by them to date or in amounts required to be
reimbursed to such employees.
(v) Sellers have heretofore delivered to Investor a list of
all Employees of the MHE Business whose aggregate salary and cash
bonus exceeded $100,000 for the 12 month period ended October 31,
1997 setting forth as to each such employee listed thereon, the job
title, location and salary and cash bonus of such employee for such
period.
(t) Insurance. Schedule 4(t) of the Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
policies providing property, casualty, liability and workers' compensation
coverage) to which any of the MHE Business has been a party, a named insured or
otherwise the beneficiary of coverage at any time within the past 5 years:
(i) the policy number and the period of coverage;
(ii) the scope (including an indication of whether the
coverage was on a claims made, occurrence or other basis) and amount
(including a description of how deductibles and ceiling are
calculated and operate) of coverage; and
(iii) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable and in full force and effect; (B) neither HarnCo, the
Sellers nor their Affiliates (nor, to the Knowledge of the Specified Employees,
any other party to the policy) is in material breach or default, and no event
has occurred which, with notice or the lapse of time, would constitute such a
material breach or default, or permit termination, modification or acceleration,
under the policy; and (C) to
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the Knowledge of the Specified Employees, no party to the policy has repudiated
any material provision thereof. Schedule 4(t) of the Disclosure Schedule
describes any self-insurance arrangements affecting any of the MHE Business.
(u) Certain Business Relationships with the Companies and their
Subsidiaries. Except as set forth on Schedule 4(u) in the Disclosure Schedule,
none of HarnCo, the Sellers nor their Affiliates (i) is or has been involved in
any material business arrangement or relationship with any of the Companies, the
Companies' Subsidiaries or the MHE Business since November 1, 1996, and none of
the Sellers or their Affiliates owns any material asset, tangible or intangible,
which is used in the MHE Business or (ii) is the direct or indirect owner of an
interest in any Person which is a present competitor or supplier of the MHE
Business; provided that, in the case of individuals included in the definition
of Affiliate by virtue of their status as a director, officer, partner or
relative, the representation and warranty in this sentence is made to the
Knowledge of the Specified Employees.
(v) Foreign Corrupt Practices Act. To the Knowledge of the Specified
Employees, the MHE Business has been conducted in compliance with the Foreign
Corrupt Practices Act of 1977, as amended, and the rules and regulations
promulgated thereunder.
(w) Condition of Assets. Viewed in the aggregate, the Business
Assets and the Incidental Assets are in reasonable operating condition (subject
to ordinary wear and tear).
(x) Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements contained in
this Section 4 not misleading.
Section 5. Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and the Closing
(or the earlier termination of this Agreement under Section 9); provided that
with respect to Hercules, the
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covenants in this Section 5 shall apply until such time as MHE purchases
Hercules.
(a) General. Each of the Parties will use commercially reasonable
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Section 7 below and the execution and delivery of the other Transaction
Agreements).
(b) Notices and Consents. Each of the Parties will (and HarnCo and
Sellers will cause each of the Companies and their Subsidiaries to) give any
notices to third parties, and each of the Parties will (and HarnCo and Sellers
will cause each of the Companies and their Subsidiaries to) use commercially
reasonable efforts to obtain any third party consents, that the other Party may
reasonably request in connection with the transactions contemplated by this
Agreement. Each of the Parties will (and HarnCo and Sellers will cause each of
the Companies and their Subsidiaries to) give any notices to, make any filings
with, and use commercially reasonable efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in connection
with the matters referred to in Section 3(a)(ii), Section 3(b)(ii), and Section
4(c) above. Without limiting the generality of the foregoing, each of the
Parties will file within 15 business days of the date of this Agreement any
Notification and Report Forms and related material that it may be required to
file with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the HSR Act. Each of the Parties will
promptly make any other merger, anti-trust or similar filings which may be
required in other jurisdictions. The Parties will (i) supply promptly any
additional information and documentary material that may be requested in
connection with such filings, (ii) use commercially reasonable efforts to obtain
early termination (if available) of any applicable waiting periods, (iii) make
any further filings pursuant thereto that may be necessary, proper, or advisable
in connection therewith and (iv) take all commercially reasonable actions
necessary to obtain all required clearances. Prior to Closing, the Employment
Agreements with U.S. employees shall be assigned from HarnCo to MHE (or one of
its Subsidiaries), and HarnCo shall be released from its
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obligations thereunder.
(c) Operation of Business. HarnCo and the Sellers will not and will
not cause or permit any of the Companies and their Subsidiaries to engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business (other than (A) the transactions contemplated by or referred
to in the Transaction Agreements and (B) the reorganization of their
subsidiaries in Canada, Mexico, the United States and the United Kingdom to
facilitate the transactions contemplated by this Agreement). Without limiting
the generality of the foregoing, HarnCo and the Sellers (with respect to the MHE
Business) will not and will not cause or permit any of the Companies or any of
their Subsidiaries to:
(i) declare, set aside or pay any dividend or make any
distribution with respect to its capital stock (other than dividends
and distributions payable in Cash prior to the Closing) or redeem,
purchase or otherwise acquire any of its capital stock for any
consideration other than Cash payable prior to the Closing;
(ii) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by
any other manner, any corporation, partnership, association or other
business organization or division thereof;
(iii) amend the charter, bylaws or comparable governing
instruments of the Companies or any of their Subsidiaries;
(iv) except pursuant to pre-existing contractual commitments
heretofore disclosed to Investor, issue or sell any shares of its
capital stock or other interests or securities, or issue options,
warrants or rights of any kind to acquire, or any securities
convertible into, exchangeable for or representing a right to
purchase or receive, or enter into any contract, plan, understanding
or
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arrangement with respect to the issuance of, any equity based or
equity related awards, shares of its capital stock or other
securities, in each instance of the Companies or any of their
Subsidiaries;
(v) enter into any arrangement or contract with respect to the
purchase, encumbrance or voting of the shares of capital stock or
adjust, split, combine or reclassify any of the securities, or make
any other changes in the equity capital structure, in each instance
of the Companies or any of their Subsidiaries; or
(vi) otherwise engage in any practice, take any action or
enter into any transaction of the sort described in Section 4(h)(ii)
above (provided that neither HarnCo nor the Sellers will be deemed
to have breached this covenant as a result of (i) actions taken or
omissions made by Persons other than HarnCo, the Sellers, the
Companies or their Subsidiaries or Affiliates or (ii) acts of God or
other events beyond their control).
(d) Preservation of Business. HarnCo and Sellers shall use
commercially reasonable efforts to and shall cause each of the Companies and
their Subsidiaries to use commercially reasonable efforts to keep the MHE
Business and its properties substantially intact, including its present
operations, physical facilities, working conditions and relationships with
lessors, licensors, suppliers, customers and employees.
(e) Full Access. Each of HarnCo and the Sellers will permit, and
HarnCo and the Sellers will cause each of the Companies and their Subsidiaries
to permit, representatives of the Investor to have full access at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of the Companies and their Subsidiaries, to all premises, properties,
personnel, books, records (including Tax records), contracts and documents of or
pertaining to each of the Companies and their Subsidiaries; it being understood
that the foregoing shall include such access (i) as Investor and its
accountants, attorneys, agents and representatives
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shall reasonably require in order to review (at Investor's expense) the books
and records of the MHE Business, including access to accountants' work-papers
and the like (but subject to Investor signing any letter which such accountants
may require as a prerequisite to reviewing work papers and the like); and (ii)
as Investor may reasonably require to the management of the MHE Business to
enable Investor to obtain information about the employees of the MHE Business.
(f) Compensation. Without Investor's prior written consent, no
increase shall be made in the compensation, bonuses or commissions payable or to
become payable to any employee of the MHE Business, except in accordance with
existing employment arrangements or in the Ordinary Course of Business; no
arrangement shall be made by the Companies or any of their Subsidiaries for any
new, additional or increased bonuses, profit sharing plan, pension or retirement
plan, or any similar plan relating to the employees of the MHE Business; and no
material change shall be effected in management, personnel policies or employee
benefits of the MHE Business or any of the Companies or their Subsidiaries.
(g) Notice of Developments. HarnCo and Sellers shall promptly notify
Investor in writing in the event that any Specified Employee has Knowledge of
any matter which would cause any of their representations and warranties in
Section 3(a) or Section 4 above (or in the other Transaction Agreements) to be
untrue as of the date of this Agreement or the Closing Date. With respect to any
fact, circumstance, event or development occurring after the date of this
Agreement (other than those which constitute a Knowing Breach), the written
notice pursuant to this Section 5(g) will be deemed to have amended the
Disclosure Schedule, to have qualified the representations and warranties
contained in Section 3(a) or Section 4 above, and to have corrected any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the fact, circumstance, event or development (with the
result that no misrepresentation or breach shall be deemed to have occurred), in
each case to the extent of the disclosure contained in such notice.
(h) Exclusivity. From and after the date of this Agreement, neither
HarnCo
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nor the Sellers nor their Affiliates will (i) solicit, initiate, or encourage
the submission of any proposal or offer from any Person relating to the
acquisition of all or substantially all of the MHE Business or the capital
stock, voting securities or assets of any of the Companies or their Subsidiaries
(including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any discussion or negotiations regarding,
furnish any information or enter into any agreement with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. The Sellers will notify the Investor
immediately if any Person makes any proposal, offer, inquiry or contact with
respect to any of the foregoing and will promptly provide Investor with a copy
of any documentation relating thereto.
(i) Insurance. The Companies shall use commercially reasonable
efforts to maintain in effect through the Closing Date the property damage,
liability and other insurance policies set forth on Schedule 4(t) of the
Disclosure Schedule with respect to the MHE Business.
(j) Notice of Litigation. The Companies shall notify Investor of any
material litigation filed by or served on them or their Subsidiaries after the
date of this Agreement, including any litigation which challenges the
transactions contemplated hereby, and of any material damage to or destruction
of their material assets.
(k) Performance of Agreements. HarnCo and the Sellers shall use
commercially reasonable efforts to, and shall cause the Companies and their
Subsidiaries to use commercially reasonable efforts to, perform all obligations
(including, without limitation, all payment obligations) required to be
performed by them under all agreements, leases, contracts and commitments
relating to the MHE Business. Neither the Companies nor their Subsidiaries shall
enter into any collective bargaining agreement, employment agreement with any
management-level employee (other than agreements terminable at will and
agreements required by law in nations other than the U.S.) or Employee Benefit
Plan (or any material amendment thereto), except as otherwise required by law or
with the prior written consent of Investor.
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(l) No Solicitation. Neither HarnCo nor any of its Affiliates shall
directly or indirectly through another Person induce or attempt to induce any
employee of the Companies or their Subsidiaries to leave the employ of the
Companies or their Subsidiaries.
(m) Tax Elections. Neither HII, HarnCo, the Sellers, the Companies
nor any of the Companies' Subsidiaries shall make any new elections with respect
to Taxes, or change any current elections with respect to Taxes, that adversely
affect the Companies, their Subsidiaries or the MHE Business.
(n) Financing. Investor shall use commercially reasonable efforts to
obtain the necessary financing for the transactions contemplated by this
Agreement on terms reasonably consistent with those referred to in the
Commitment Letters and the Term Sheets.
(o) Exchange Proceeds. If, between the date hereof and the Closing,
HarnCo, Sellers, the Companies or their Subsidiaries and/or any of their
Affiliates receives any Exchange Proceeds, one of them shall promptly notify the
Investor of the receipt of the Exchange Proceeds. Any Exchange Proceeds received
by HarnCo, Sellers, the Companies or their Subsidiaries between October 31, 1997
and the Closing shall either be used to purchase replacement Business Assets or
shall be retained by the Companies (as determined based on consultation with
Investor).
(p) Interim Financial Statements. HarnCo shall furnish to Investor
within twenty (20) days after the end of each monthly accounting period,
commencing with the monthly accounting period ending in December, unaudited
combined consolidated management accounts for the MHE Business consisting of (i)
statements of income and cash flows for the MHE Business for such monthly
accounting period and the fiscal year to date and (ii) a balance sheet of the
MHE Business as of the end of such monthly accounting period. Notwithstanding
anything to the contrary contained in this Agreement, HarnCo and the Sellers do
not make (and will not make) any representation or warranty as to the financial
information furnished under this Section.
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(q) Update by Investor. Investor shall promptly give written notice
to HarnCo (an "Investor Notice") in the event that any person in the Chartwell
Group has Knowledge of any matter which would cause any representation or
warranty of HarnCo and the Sellers in this Agreement or any other Transaction
Document to be untrue or incorrect in any material respect. Any Investor Notice
shall have the same effect as a notice delivered by HarnCo and Sellers under
Section 5(g) hereof.
(r) Knowing Breach. HarnCo and Sellers shall not cause or permit
any Knowing Breach to occur. As used in this Agreement, "Knowing Breach" means
an action (or a willful failure to take action) by, at the direction of, or with
the prior Knowledge of any Specified Employee, which action would (i) cause any
of the representations or warranties of HarnCo and Sellers in this Agreement or
any other Transaction Agreement to be untrue in any material respect (other than
actions (or willful failures to take action) in the Ordinary Course of Business)
or (ii) breach any other covenant contained in this Section 5.
(s) Collective Bargaining Agreements. Effective on the Closing Date,
Investor shall cause MHE to assume and to be responsible for all employer
liabilities and obligations (as such apply to the MHE Business) that accrue
after the Closing Date under the collective bargaining agreement applicable to
United Steelworkers of America, Local No. 1114 ("Local 1114"), as currently set
forth in the "1995-1998 Agreement" between HarnCo and Local 1114, dated
September 1, 1995, subject to the provisions in this Agreement as to Excluded
Liabilities.
(t) Joinder. At the Closing, Investor shall cause MHE and the other
Companies to execute an instrument for the benefit of HarnCo and its Affiliates
pursuant to which MHE, the other Companies and their Subsidiaries will ratify
and approve and will agree to honor and be bound by all provisions of this
Agreement which are applicable to them. From and after the Closing, MHE and the
other Companies shall be deemed "Parties" to this Agreement for purposes of all
provisions of this Agreement which are applicable to them.
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Section 6. Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing.
(a) General. In case at any time after the Closing any further
reasonable action is necessary to carry out the purposes of this Agreement, each
of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party may
reasonably request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 8 below). HarnCo and the Sellers acknowledge and agree that from and
after the Closing, the Investor will be entitled to possession of all documents,
books, records (including Tax records other than U.S. and state income Tax
records relating to periods ending on or prior to the Closing Date), agreements
and financial data of any sort relating to the Companies and the Companies'
Subsidiaries and the MHE Business, if and to the extent such Business Records
are reasonably separable from those relating to HII's other businesses.
(b) Records; Employees.
(i) Records in Investor's and MHE's Possession. Until the
Termination Date, Investor and MHE agree to permit HarnCo, Sellers
and their officers, employees, attorneys, accountants, agents and
designees, such access to, and right to copy, Business Records in
the possession of the Investor or MHE (or any of their Affiliates)
as HarnCo or Sellers may deem reasonably necessary or reasonably
desirable. Any such examination and copying shall be at HarnCo or
Sellers' expense, shall be performed at the place where the Business
Records are regularly maintained and shall not unreasonably
interfere with the normal business activities of the furnishing
party. In the event that Investor or MHE (or any of their
Affiliates) intends to destroy any Business Records prior to the
Termination Date, it shall so notify HarnCo and Sellers (and HarnCo
and the Sellers shall have
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the right to review and remove at their expense any of the Business
Records to be destroyed).
(ii) Records in HarnCo's or Sellers' Possession. Until the
Termination Date, HarnCo and Sellers agree to permit Investor, MHE
and their officers, employees, attorneys, accountants, agents and
designees, such access to, and right to copy, such Business Records
in the possession of HarnCo and Sellers (or any of their Affiliates)
as Investor or MHE may deem reasonably necessary or reasonably
desirable. Any such examination and copying shall be at the expense
of Investor or MHE, shall be performed at the place where the
Business Records are regularly maintained and shall not unreasonably
interfere with the normal business activities of the furnishing
party. In the event that HarnCo or Sellers (or any of their
Affiliates) intend to destroy any Business Records prior to the
Termination Date, they shall so notify the Investor and MHE (and the
Investor and MHE shall have the right to review and remove at its
expense any of the Business Records to be destroyed).
(iii) Investor and MHE Employees. Until the Termination Date,
Investor and MHE shall afford HarnCo and Sellers access to those
employees of Investor or MHE (or any of their Affiliates) who are
familiar with the MHE Business. Any such access shall be: (i) at the
request of HarnCo or Sellers, (ii) scheduled and provided on a
reasonable basis, and (iii) for any proper business purpose of
HarnCo or Sellers, including the defense of any legal proceedings
and the preparation, filing and execution of any Tax Returns. HarnCo
and Sellers shall pay all reasonable out-of-pocket expenses,
excluding wages, salaries, overhead or burden, incurred by Investor
or MHE (or any of their Affiliates) in connection with this
subsection (iii).
(iv) HarnCo and Seller Employees. Until the Termination Date,
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HarnCo and Sellers shall afford Investor and MHE access to those
employees of HarnCo or Sellers who are familiar with the MHE
Business. Any such access shall be: (i) at the request of Investor
or MHE; (ii) scheduled and provided on a reasonable basis, and (iii)
for any proper business purpose of Investor or MHE, including the
defense of any legal proceedings and the preparation, filing and
execution of any Tax Returns. Investor and MHE shall pay all
reasonable out-of-pocket expenses, excluding wages, salaries,
overhead or burden, incurred by HarnCo or Sellers in connection with
this subsection (iv).
(c) Employees and Employee Benefit Matters.
(i) Except as set forth in Section 6(c)(vi) below and except
as may be required by collective bargaining agreements in effect on
the Closing Date, nothing in this Agreement (whether express or
implied) shall in any way restrict the right of the Companies and/or
their Subsidiaries to provide salaries, wages and benefits different
from those provided to Current Employees (or employees of the
non-U.S. Companies and their Subsidiaries) prior to the Closing
Date. HarnCo and Sellers shall retain all Liability for
post-retirement medical benefits and other benefits payable to
Former Employees as of the Closing Date. Nothing in this Agreement
shall be deemed to restrict or otherwise prevent or prohibit the
Companies or their Subsidiaries from terminating after the Closing
Date any employee of the Companies or their Subsidiaries, to the
extent permitted by applicable law and any applicable collective
bargaining agreement. Investor and MHE shall indemnify HarnCo and
its Affiliates against any Adverse Consequences which HarnCo or its
Affiliates may incur or suffer under the Worker Adjustment and
Retraining Notification Act or any similar state law arising out of,
or relating to, any actions taken by Investor, the Companies or
their Subsidiaries with respect to Current Employees on or after the
Closing Date.
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(ii) To the extent Current Employees or Former Employees
participate in employee health, disability, dental or life insurance
benefit plans which are sponsored by HII, HarnCo or one or more of
the Sellers, then HII, HarnCo and Sellers shall retain liability for
all claims filed thereunder prior to the Closing Date. The Companies
and their Subsidiaries shall have liability for all claims filed
under such plans by Current Employees on or after the Closing Date.
HarnCo and Sellers shall retain Liability for all medical and
disability benefits for all Current Employees who are on short-term
or long-term disability as of the Closing Date as to such condition
or disability.
(iii) HarnCo and Sellers shall retain and assume the Liability
for all workers' compensation claims filed prior to the Closing Date
and the Companies and their Subsidiaries shall have Liability for
all workers' compensation claims for all Current Employees filed on
or after the Closing Date.
(iv) HarnCo and its Affiliates shall retain responsibility for
any claims by Former Employees arising out of or relating to the
termination of their retiree medical benefits. The Companies and
their Subsidiaries shall be responsible for any claims by Current
Employees arising out of or relating to the termination of their
retiree medical benefits ("Current Employee Claims"). HarnCo and its
Affiliates shall control and manage the defense of any litigation
brought against the Companies or their Subsidiaries in respect of
Current Employee Claims and shall pay the costs and expenses of
defending such litigation (but not any settlements or judgments in
respect of such litigation); provided that the Companies and their
Subsidiaries may retain separate co-counsel at their sole cost and
expense to monitor the defense of such litigation; and provided
further that the Companies and their Subsidiaries may elect to
assume control of the defense (in which case (A) the Companies and
their Subsidiaries shall be responsible for the payment of the costs
and expenses of defending such litigation and (B) HarnCo and its
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Affiliates may retain separate co- counsel at their sole cost and
expense to monitor such litigation). Neither the Companies or their
Subsidiaries, on the one hand, nor HarnCo or its Affiliates, on the
other hand, shall enter into any settlement of any litigation
against the Companies or their Subsidiaries in respect of Current
Employee Claims without the consent of the other, not to be
unreasonably withheld.
(v) On behalf of itself, MHE and the Companies, Investor
agrees and acknowledges that (i) HarnCo does not consider retiree
medical insurance to be a vested benefit and (ii) HarnCo has
retained, and communicated to Former Employees and Current
Employees, its right to change, modify or alter, in whole or in
part, or to eliminate retiree medical benefits. With respect to
retiree medical insurance, Investor shall permit HarnCo to monitor
and consult with MHE concerning its planning for and presentations
in collective bargaining negotiations with Local 1114. Until such
time as HarnCo and its Affiliates cease to hold any ownership
interest (including any interest in preferred shares) in MHE,
Investor shall not (and shall not permit MHE or the Companies to)
make any statement or admission in its collective bargaining
negotiations or otherwise which is inconsistent with the first
sentence of this Section 6(c)(v).
(vi) (A) Effective as of the Closing Date, MHE shall adopt and
maintain a defined contribution plan (the "MHE Defined Contribution
Plan") intended to be qualified under Section 401(a) of the Code
that has features concerning the timing and method of distributions
such that a mandatory transfer from the Harnischfeger Industries
Employees' Savings Plan (the "Harnischfeger Savings Plan") to the
MHE Defined Contribution Plan of account balances attributable to
the Current Employees will not cause a violation of Section
411(d)(6) of the Code, and that credits the Current Employees with
all of their years of service credited under the Harnischfeger
Savings Plan as of the Closing
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Date for all purposes under the MHE Defined Contribution Plan. As
soon as practicable following the Closing Date, MHE shall submit the
MHE Defined Contribution Plan to the IRS for a favorable
determination that the MHE Defined Contribution Plan is qualified
under Section 401(a) of the Code, and MHE shall take all such
actions as may be necessary to obtain such favorable determination
prior to the end of the remedial amendment period specified therefor
in Section 401(b) of the Code.
(B) In accordance with the applicable provisions of
Section 414(l) of the Code, HarnCo and Sellers shall cause the
assets of the Harnischfeger Savings Plan attributable to the
accounts (whether or not vested) of each Current Employee (or the
beneficiaries or alternate payee(s) of each Current Employee) to be
transferred by the trustee of the Harnischfeger Savings Plan to the
trustee of the MHE Defined Contribution Plan. The transfer of assets
from the Harnischfeger Savings Plan to the MHE Defined Contribution
Plan made pursuant to the terms of this Agreement shall be in cash
or in kind (including any promissory notes or other evidences of
indebtedness with respect to outstanding loans made to Current
Employees), as mutually agreed by HarnCo, Sellers and MHE, or in
cash and such promissory notes if no such agreement is made, and
shall be made as of and as soon as practicable after a valuation
date under the Harnischfeger Savings Plan occurring coincident with
or immediately following the Closing Date, or as of such later
valuation date as may be mutually selected by Sellers, HarnCo and
MHE. Such transfer shall account appropriately for earnings and
losses during the period from the applicable valuation date to the
actual date of transfer (the "Transfer Date").
(C) From the Closing Date until the Transfer Date, MHE
shall make continuous payroll deductions each pay period from the
pay of each Current Employee who has a loan(s) outstanding from the
Harnischfeger Savings Plan of
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amounts sufficient to pay the installment payments of principal and
interest on each such loan as required by the promissory note or
other evidence of indebtedness relating to such loan. Such deducted
amounts shall be paid by MHE to the trustee of the Harnischfeger
Savings Plan who shall accept such payments for a credit against
such loans.
(vii) HarnCo and Sellers shall retain the Harnischfeger
Industries Salaried Employees' Retirement Plan and the Harnischfeger
Industries Hourly Employees' Retirement Plan, and all Liabilities
with respect to each such plan; provided, that effective as of the
Closing Date, Current Employees will no longer accrue service for
purposes of benefit accrual, vesting or early retirement subsidies.
Neither Investor nor MHE shall assume the Harnischfeger Industries
Salaried Employees' Retirement Plan or the Harnischfeger Industries
Hourly Employees' Retirement Plan, or any Liabilities with respect
to either such plan.
(viii) The provisions of Exhibit L shall govern the treatment
of the Xxxxxx Pension Scheme.
(ix) From the Closing Date until the earlier of MHE's notice
of termination to HarnCo or December 31, 1998 (such earlier date
shall be the "End Date"), the Current Employees shall continue to
participate in the medical, dental, life and long-term disability
insurance benefit plans which are sponsored by HarnCo for the
benefit of such Current Employees as of the Closing Date; provided
that, except as otherwise set forth in this Section 6(c), MHE shall
(and Investor and MHE shall cause the other Companies and their
Subsidiaries to) pay to HarnCo and Sellers the cost of all benefits
provided under such plans with respect to the Current Employees from
the Closing Date until the End Date, including, but not limited to,
(i) the amount of all claims paid thereunder on or prior to the End
Date, (ii) the amount of any claims paid thereunder subsequent to
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the End Date, provided that any such claim was incurred on or prior
to the End Date, and (iii) the cost of any administrative and
support services provided with respect to the claims paid pursuant
to clauses (i) and (ii). All payments of such costs shall be made
not later than 30 days following the submission to the Companies of
an invoice therefor by HII or HarnCo.
(d) Tax Matters. The following provisions shall govern the
allocation of responsibility as between the Parties for certain Tax matters
following the Closing Date:
(i) Tax Periods Ending on or Before the Closing Date. Investor
shall prepare or cause to be prepared and file or cause to be filed
and pay any amounts (other than Excluded Taxes) related to all Tax
Returns for each of the Companies and their Subsidiaries for all
periods ending on or prior to the Closing Date which are filed after
the Closing Date other than Tax Returns with respect to periods for
which a consolidated, unitary or combined income Tax Return of
HarnCo or the Sellers will include the operations of any of the
Companies or their Subsidiaries, the income Tax Returns of Redcrown,
ULC and its subsidiaries for periods ending on or before October 31,
1997 and the income Tax Returns for periods ended on or before the
Closing Date of any U.S. Entity which is a flow-through entity for
U.S. Tax purposes (which returns shall be prepared or be caused to
be prepared and filed or be caused to be filed by Sellers and
Sellers will pay any amounts related thereto).
(ii) Tax Periods Beginning Before and Ending After the Closing
Date. Investor shall prepare or cause to be prepared and file or
cause to be filed and pay any amounts (other than Excluded Taxes)
related to any Tax Returns of each of the Companies and their
Subsidiaries which begin before and end after the Closing Date.
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(iii) Cooperation on Tax Matters. Investor, MHE, HarnCo, the
Sellers and the Companies and their Subsidiaries shall cooperate
fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this
Section 6(d), the providing of copies of Tax Returns and any audit,
litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other Party's
request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other
proceeding and making employees available without charge on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder.
(iv) Tax Sharing Agreements. On the Closing Date, none of the
Companies or their Subsidiaries will be a party to, be bound by, or
have any obligation under any Tax sharing agreement or similar
contract or arrangement.
(v) Section 338(h)(10) Election.
(A) The Parties will join in making an election under Section
338(h)(10) of the Code (and any corresponding election under state
or local law) with respect to the purchase and sale of the stock of
the U.S. Entities and Xxxxxx Mechanical Handling Inc. (a "Section
338(h)(10) Election"). HarnCo and the Sellers will include any
income, gain, loss, deduction, or any other tax item resulting from
the Section 338(h)(10) Election on their Tax Returns to the extent
permitted by applicable law. HarnCo and the Sellers shall also pay
any Tax imposed on the U.S. Entities attributable to the making of
the Section 338(h)(10) Election, including, but not limited to, (A)
any Tax imposed under Reg. Section 1.338(h)(10)-1(e)(5), or (B) any
state, local or foreign Tax imposed on the U.S. Entities gain, and
HarnCo and the Sellers shall indemnify the Investors, or the U.S.
Entities against any Adverse Consequences arising out of any failure
to pay any
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such Taxes. HarnCo and the Sellers shall report, in connection with
the determination of Taxes, the transactions contemplated by this
Agreement in a manner consistent with the Section 338(h)(10)
Election, including the reasonable determination by the fair market
value of the assets of the U.S. Entities and the allocation of the
deemed purchase price of the assets of the U.S. Entities within the
meaning of Section 338(h)(10) of the Code and the Treasury
Regulations promulgated thereunder.
(B) The Parties jointly shall be responsible for the
preparation and filing of all forms and documents required in
connection with the Section 338(h)(10) Election. The Parties shall
cooperate fully with each other and make available to each other
such Tax data and other information as may be reasonably required by
the Parties in order to timely file the Section 338(h)(10) Election
and other required statements or schedules. HarnCo and the Sellers
shall promptly execute and deliver the Investor any amendments made
to Form 8023 (or successor form) (and any comparable state and local
forms) subsequent to the filing of the Section 338(h)(10) Election
and any attachments which are required to be filed under applicable
law, including any amendments to Form 8023 (or successor form)
necessitated by any indemnification payments made pursuant to this
Agreement.
(C) To the extent permitted by state or local laws, the
principles and procedures of this Section 6(d) shall also apply with
respect to a Section 338(h)(10) election or equivalent or comparable
provision under state or local, including, without limitation, an
election under Section 338(g) of the Code or equivalent or
comparable provision under state or local law.
(vi) Investor, MHE, HarnCo and Sellers shall take such action
as is necessary to cause the elections under the Code (and any
comparable election
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under state and local tax law) to be made in connection with the
transactions contemplated by this Agreement. The U.S. Entities,
Investor, Sellers, HarnCo and their respective affected Affiliates
shall cooperate with each other in the making of such elections. The
Parties shall prepare and deliver the appropriate election forms as
soon as practicable after Closing. None of the Companies, their
Subsidiaries or the Parties shall take a position for Tax or other
purposes which is inconsistent with this Agreement.
(vii) Investor shall notify HarnCo upon receipt of a notice
from any Taxing Authority claiming that MHE or any of its
Subsidiaries has a Tax Liability referred to in paragraph (e) of
Exhibit N in excess of $250,000 for any Tax Audit that relates to
the operation of the MHE Business prior to Closing. HarnCo shall
have the right to monitor and participate in any such Tax Audit.
(viii) Xxxx Indemnity Rights. Notwithstanding anything in this
Agreement to the contrary, HarnCo and Sellers shall have the right
to receive and retain $400,000 of the Xxxx Indemnity Proceeds (as
defined below) in order to pay Excluded Taxes associated with MPH
Crane, Inc. and HarnCo's collection costs; provided that any portion
of such $400,000 of the Xxxx Indemnity Proceeds in excess of such
Excluded Taxes and collection costs shall be available to the
Companies and their Subsidiaries as a source of payment for
indemnity claims under (and subject to the terms of) that certain
Share and Asset Purchase Agreement dated February 14, 1997. As used
in this Agreement, "Xxxx Indemnity Proceeds" means the cash proceeds
from the sale by MPH of that certain real estate on West 3rd Street
in Dayton, Ohio. Notwithstanding any provision of Section 5 of this
Agreement to the contrary, HarnCo shall be entitled to cause the
sale of such real estate to be completed after the date of this
Agreement and to cause the Companies and their Subsidiaries to
distribute or pay to HarnCo $400,000 of the Xxxx Indemnity Proceeds.
In the event such sale is completed
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after the Closing, MHE shall cause $400,000 of the Xxxx Indemnity
Proceeds to be paid to HarnCo for application in accordance with
this Section.
(ix) Effective as of the Closing Date, the procedures in this
Section 6(d) shall supersede the procedures contained in Section 14
of the Separation Agreement.
(e) Transition. None of the Sellers, HarnCo nor any of their
Affiliates will take any action that is designed or intended to have the effect
of discouraging any lessor, licensor, customer, supplier or other business
associate of any of the MHE Business from maintaining the same business
relationships with the MHE Business after the Closing as it maintained with the
MHE Business prior to the Closing. Each of HarnCo, the Sellers and their
Affiliates will refer all customer inquiries relating to the MHE Businesses to
MHE from and after the Closing.
(f) Concerning the Separation Agreement. Notwithstanding any
provision of the Separation Agreement to the contrary, the Parties agree that
(i) the Closing Date shall be deemed to be the "Termination Date" for purposes
of the Separation Agreement and (ii) Material Handling LLC may assign its rights
and obligations under the Separation Agreement to a third party as part of a
sale of all or substantially all of the MHE Business (whether by stock sale,
asset sale, merger or otherwise) so long as the successor to the MHE Business
executes an assumption agreement for the benefit of HarnCo and its Affiliates
pursuant to which such successor becomes fully and unconditionally bound by the
Separation Agreement.
(g) Insurance Arrangements. HarnCo shall use commercially reasonable
efforts to make available to the Companies and their Subsidiaries coverage under
any existing insurance policies (other than self insurance) which may be in
effect with respect to occurrences prior to the Closing. HarnCo shall permit the
Companies and their Subsidiaries to pursue access to such insurance through
declaratory judgment and other legal proceedings against HarnCo's insurance
carriers in the name of HarnCo and/or its Affiliates (or, to the extent
practicable, any of
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their predecessors which are named insureds on such policies).
(h) Concerning the Trademark Agreement. HarnCo agrees, on behalf of
itself and its Affiliates, to comply and to cause HTI to comply with the
Trademark Agreement.
(i) Certain Purchasing Arrangements. Following the Closing (and for
a period of up to two years thereafter), HarnCo and the Sellers shall use
commercially reasonable efforts to make available to the Companies those
purchasing arrangements referenced in item 2 of Schedule 4(m)(vii) of the
Disclosure Schedule which are in effect on the Closing.
Section 7. Conditions to Obligation to Close.
(a) Conditions to Obligation of Investor. The obligation of Investor
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section
3(a) and Section 4 shall be true and correct in all material
respects as of the date of this Agreement, taking into account the
Disclosure Schedule;
(ii) the representations set forth in Section 3(a) and Section
4 shall be true and correct in all material respects as of the
Closing Date, taking into account the Disclosure Schedule (as
supplemented in accordance with Sections 5(g) and 5(q) hereof);
(iii) from the date of this Agreement through the Closing
Date, no Material Adverse Effect shall have occurred;
(iv) HarnCo and Sellers shall have performed and complied with
all
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of their covenants hereunder in all material respects through the
Closing;
(v) there shall not be any action, suit or proceeding pending
or threatened before any Governmental Agency or before any
arbitrator in connection with the consummation of the transactions
contemplated by this Agreement wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (A) prevent
consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation or result in
material damages to Investor, the MHE Business or the Companies, (C)
affect adversely the right of the Investor to own the shares of MHE
and to control the Companies and their Subsidiaries , or (D) have a
material adverse effect on the right of the Companies and their
Subsidiaries to own their assets or to operate their business (and
no such injunction, judgment, order, decree, ruling, or charge shall
be in effect);
(vi) all applicable waiting periods (and any extensions
thereof) under the HSR Act and any applicable European or national
merger regulations shall have expired or otherwise been terminated;
(vii) HTI shall have executed the Trademark Agreement;
(viii) HII shall have executed the Non-Competition Agreement;
(ix) HarnCo shall have executed the Stockholders Agreement,
the Supply Agreement, the Transition Services Agreement, the
Assumption Agreement and the Credit Indemnity Agreement;
(x) HarnCo and the Sellers shall have delivered to the
Investor a certificate to the effect that each of the conditions
specified above in Section
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7(a)(i) - (iv) is satisfied in all respects;
(xi) Investor shall have received the opinions in form and
substance as set forth in Exhibit H attached hereto, addressed to
the Investor, and dated as of the Closing Date;
(xii) Investor shall have obtained financing for the
transactions contemplated by this Agreement on terms reasonably
consistent with the Commitment Letters and Term Sheets,
respectively;
(xiii) The business relationships identified on Schedule
4(m)(vii) (other than those identified in items 4 through 12 and
items 17 and 19 thereof) shall have either been (A) terminated or
(B) superseded or otherwise modified pursuant to the express terms
of the Transaction Agreements (as applicable);
(xiv) The Employment Agreements shall be in full force and
effect; and
(xv) MHE shall own, directly or indirectly, all of the
outstanding equity securities of the other Companies and their
Subsidiaries free and clear of all Encumbrances (other than (A) the
15% interest in Blooma held by third parties and (B) the Hercules
Shares).
Investor may waive any condition specified in this Section 7(a) prior to the
Closing (without prejudice to any of Investor's rights under Section 8 hereof).
(b) Conditions to Obligation of HarnCo and Sellers. The obligation
of HarnCo and Sellers to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
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(i) the representations and warranties set forth in Section
3(b) above shall be true and correct in all material respects at and
as of the date of this Agreement and the Closing Date;
(ii) Investor shall have performed and complied with all of
its covenants hereunder in all material respects through the
Closing;
(iii) there shall not be any action, suit, or proceeding
pending or threatened before any Governmental Agency or before any
arbitrator in connection with the consummation of the transactions
contemplated by this Agreement wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (A) prevent
consummation of any of the transactions contemplated by this
Agreement, or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(iv) all applicable waiting periods (and any extensions
thereof) under the HSR Act and any applicable European or national
merger regulations shall have expired or otherwise been terminated;
(v) MHE shall have executed the Trademark Agreement;
(vi) MHE shall have executed the Non-Competition Agreement;
(vii) MHE shall have executed the Supply Agreement and the
Transition Services Agreement;
(viii) MHE, Investor and the other parties shall have executed
and
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delivered the Stockholders Agreement;
(ix) MHE and Investor shall have executed and delivered the HK
Agreement;
(x) MHE shall have executed and delivered the Credit
Indemnification Agreement; and
(xi) HarnCo and Sellers shall have received from Akin, Gump,
Strauss, Xxxxx & Xxxx, L.L.P., counsel to the Investor, an opinion
in form and substance as set forth in Exhibit I attached hereto,
addressed to HarnCo and Sellers, and dated as of the Closing Date.
HarnCo and Sellers may waive any condition specified in this Section 7(b) prior
to the Closing (without prejudice to any of HarnCo and Sellers' rights under
Section 8 of this Agreement).
Section 8. Remedies for Breaches of this Agreement.
(a) Survival of Representations and Warranties.
(i) All of the representations and warranties of HarnCo and
Sellers contained in Section 3(a)(iii)(B) and 4 above (taking into
account the Disclosure Schedule as supplemented pursuant to Sections
5(g) and 5(q)) shall survive the Closing hereunder and shall
continue in full force and effect for a period of eighteen (18)
months after the Closing; with the exception of (A) those
representations and warranties contained in Sections 4(a)
(Organization, Qualification and Corporate Power), 4(b)
(Capitalization) and 4(f) (Subsidiaries) which shall survive
indefinitely; (B) those representations and warranties contained in
Sections 4(e) (Title to Assets) and 4(q) (Environmental Matters)
which shall
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survive for two (2) years after the Closing; (C) those
representations and warranties contained in Sections 4(l)
(Intellectual Property) and 4(o) (Employee Benefits) which shall
survive for three (3) years after the Closing; and (D) those
representations and warranties contained in Section 4(j) (Tax
Matters) which shall survive until expiration of applicable statutes
of limitation or, if later, the date on which the relevant
Governmental Agency is no longer entitled to raise an assessment in
respect of the relevant matters.
(ii) All of the representations and warranties of HarnCo and
Sellers contained in Section 3(a) (i), (ii), (iii)(A), (iv) and (v)
above (taking into account the Disclosure Schedule as supplemented
pursuant to Sections 5(g) and 5(q)) shall survive the Closing and
continue in full force and effect forever thereafter (subject to any
applicable statutes of limitations). All of the representations and
warranties of Investor contained in Section 3(b) above shall survive
the Closing and continue in full force and effect forever thereafter
(subject to any applicable statutes of limitations).
(b) Indemnification Provisions for Benefit of Investor.
(i) In the event that (A) HarnCo and Sellers breach any of
their representations or warranties contained herein (other than the
representations and warranties in Section 3(a) (i), (ii), (iii)(A),
(iv) and (v) and Sections 4(b) and 4(f) above) and (B) Investor
makes a written claim for indemnification against HarnCo and Sellers
with respect thereto within the time periods, if any, specified in
Section 8(a)(i) above (which written claim shall specify in
reasonable particulars the basis of the breach being asserted and,
to the extent then determinable, an estimate of any Adverse
Consequences which Investor, the Companies and their Subsidiaries
and their respective Affiliates (the "Investor Indemnitees") claim
to suffer as a result thereof), then HarnCo and Sellers jointly and
severally agree to indemnify
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the Investor Indemnitees from and against any Adverse Consequences
the Investor Indemnitees suffer (including any Adverse Consequences
the Investor Indemnitees may suffer after the end of any applicable
survival period) resulting from, arising out of, or caused by such
breach; provided, however, that HarnCo and Sellers shall not have
any obligation to indemnify the Investor Indemnitees from and
against any Adverse Consequences caused by the breach of any
representation or warranty of HarnCo and Sellers contained herein
(other than those representations and warranties in Section 3(a)(i),
(ii), (iii)(A), (iv) and (v) and in Sections 4(b) and 4(f)): (X)
unless and until the Investor Indemnitees have suffered Adverse
Consequences by reason of all such breaches in excess of a $7.5
million aggregate deductible (after which point HarnCo and Sellers
will be obligated only to indemnify the Investor Indemnitees from
and against further such Adverse Consequences), and (Y) to the
extent the Adverse Consequences the Investor Indemnitees have
suffered by reason of all such breaches exceeds a $32.5 million
aggregate ceiling (after which point HarnCo and Sellers will have no
obligation to the indemnify the Investor Indemnitees from and
against further such Adverse Consequences). For purposes of clarity,
the purpose of the proviso in the preceding sentence is to limit the
total indemnification obligations of HarnCo and Sellers to a maximum
of $25 million in respect of all breaches of the representations and
warranties contained herein (other than those representations and
warranties in Section 3(a)(i), (ii), (iii)(A), (iv) and (v) and in
Sections 4(b) and 4(f)).
(ii) In the event that (A) HarnCo and Sellers breach any of
their representations and warranties in Section 3(a) (i), (ii),
(iii)(A), (iv) or (v) or Sections 4(b) or 4(f) or (B) HarnCo or
Sellers breach any of their covenants contained herein, then HarnCo
and Sellers jointly and severally agree to indemnify the Investor
Indemnitees from and against any Adverse Consequences the Investor
Indemnitees suffer through and after the date of the claim for
indemnification
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resulting from, arising out of, or caused by the breach.
(iii) HarnCo and the Sellers jointly and severally agree to
indemnify the Investor Indemnitees from and against the entirety of
any Adverse Consequences the Investor Indemnitees may suffer
resulting from, arising out of, or caused by any Excluded Liability
(other than Asbestos Liabilities).
(iv) HarnCo and Sellers jointly and severally agree to
indemnify Investor for any Adverse Consequences Investor suffers as
the result of any employee pension benefit plan maintained or
contributed to by HarnCo and Sellers and which is subject to Title
IV of ERISA.
(c) Indemnification Provisions for Benefit of HarnCo and Sellers.
(i) In the event Investor breaches any of its representations,
warranties, or covenants contained herein, then Investor shall
indemnify (and, from and after the Closing, MHE, the other Companies
and their Subsidiaries shall jointly and severally indemnify)
HarnCo, Sellers and their Affiliates (the "HarnCo Indemnitees") from
and against any Adverse Consequences the HarnCo Indemnitees suffer
resulting from, arising out of, or caused by the breach.
(ii) MHE shall (and MHE shall cause the other Companies and
their Subsidiaries to) jointly and severally indemnify the HarnCo
Indemnitees from and against any and all Adverse Consequences the
HarnCo Indemnitees suffer resulting from, arising out of or caused
by the Asbestos Liabilities; provided that (x) Adverse Consequences
shall be net of any insurance proceeds received by the HarnCo
Indemnitees, excluding self-insurance and giving effect to all
deductibles, ceilings, uninsured layers, exclusions, payments in
respect of retro-rated coverage and similar items, and (y) MHE shall
control the defense of the litigation relating to
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the Asbestos Liabilities as an Indemnifying Party under Section 8(e)
below. MHE shall be responsible for the cost of defending the
litigation relating to the Asbestos Liabilities to the extent not
paid by HarnCo's insurance carriers.
(iii) From and after the Closing, MHE, the other Companies and
their Subsidiaries shall jointly and severally indemnify the HarnCo
Indemnitees from and against all Adverse Consequences the HarnCo
Indemnitees suffer resulting from, arising out of, or caused by the
breach by any of MHE, the other Companies or their Subsidiaries of
any provision of this Agreement or any other Transaction Agreement
which is applicable to them.
(iv) The Parties agree and acknowledge that Investor has not
agreed to assume or pay any of the Liabilities of the Companies or
their Subsidiaries or the MHE Business.
(v) The foregoing notwithstanding, (A) the indemnification
provisions in clauses (i) and (ii) above shall not apply to those of
the Companies and their Subsidiaries incorporated under U.K. company
law (the "U.K. Companies") and (B) the indemnification provisions of
clause (iii) above shall only apply to the U.K. Companies on a
several basis with respect to those provisions of this Agreement and
the other Transaction Agreements expressly applicable to them as to
which such U.K. Company committed a breach; provided that the U.K.
Companies agree that they will make such dividends or distributions
as are lawful in order to provide funds to the other Companies (or
their Subsidiaries) to make any indemnification payments which such
other Companies (or their Subsidiaries) are required to make
hereunder.
(d) Tax Indemnification Provisions. Notwithstanding any other
provisions of this Agreement:
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(i) HarnCo and the Sellers shall be liable for the payment or
satisfaction of and hereby indemnify and hold harmless Investor and
its Affiliates against any and all (A) Excluded Taxes and (B) any
and all Taxes for which the Companies and their Subsidiaries are
liable arising from or by reason of Treas. Reg. ss.1.1502-6 or any
similar provision of state, local or foreign law for any taxable
period ending on or prior to the Closing Date.
(ii) All payments made by HarnCo or the Sellers pursuant to
Section 8 of this Agreement shall be made free and clear of, and
without reduction or withholding of, any Taxes. If any withholding
Taxes are payable in respect of any such payment, the amount of such
payment shall be increased to the extent necessary to yield (after
payment of all withholding Taxes) the same amount that would have
been received if no withholding Taxes were payable in respect of the
payment giving effect to any offsets or credits for such withholding
Taxes received by the indemnified party.
(e) Indemnification Procedure.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against
any other Party (the "Indemnifying Party") under this Section 8,
then the Indemnified Party shall promptly (and in any event within
20 business days after receiving notice of the Third Party Claim)
notify each Indemnifying Party thereof in writing; provided,
however, that failure to provide such notice on a timely basis shall
not release the Indemnifying Party from any of its obligations under
this Section 8 except to the extent the Indemnifying Party is
prejudiced by such failure.
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(ii) The Indemnifying Party will have the right at any time to
assume and thereafter conduct the defense of the Third Party Claim
with counsel of its choice; provided, however, that the Indemnifying
Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (not to be
unreasonably withheld or delayed) unless the judgment or proposed
settlement involves only the payment of money damages and does not
impose an injunction or other equitable relief upon the Indemnified
Party.
(iii) If the Indemnifying Party assumes the defense of the
Third Party Claim, the Indemnified Party may retain separate
co-counsel at its sole cost and expense to monitor the defense of
the Third Party Claim.
(iv) Unless and until the Indemnifying Party assumes the
defense of the Third Party Claim as provided in Section 8(e)(ii)
above, or if the Indemnifying Party assumes the defense and
thereafter fails to conduct the defense in good faith, (A) the
Indemnified Party may defend against the Third Party Claim in any
manner it reasonably may deem appropriate, and (B) the Indemnifying
Parties will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, or
caused by the Third Party Claim to the extent provided in this
Section 8.
(v) In no event will the Indemnified Party consent to the
entry of any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of each of
the Indemnifying Parties (not to be unreasonably withheld or
delayed).
(vi) In the event that any Party suffers damage or loss in
respect of which it makes a valid claim against another Party for
indemnification, it must take
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reasonable steps to mitigate its loss or damage.
(vii) With respect to any investigatory, remedial, or
corrective action undertaken with respect to any claim under this
Section 8 made by Investor Indemnitees arising from a breach of the
representation set forth in Section 4(q) hereof (in addition to the
procedures set forth above and whether or not arising from a Third
Party Claim), HarnCo and Sellers shall have the right, but not the
obligation, to conduct and principally manage all such action
(including any related governmental negotiations), subject to the
obligation to consult reasonably with Investor Indemnitees with
respect to such action and to complete such action with reasonable
promptness and diligence and in compliance with all Environmental,
Health and Safety Requirements; provided that HarnCo and Sellers
shall not have the right to enter into any agreements, consents or
settlements which would require any payment by or materially
adversely affect the Companies, their Subsidiaries or the MHE
Business without the prior written consent of MHE (not to be
unreasonably withheld).
(viii) Subject to the provisions of Sections 3(b)(vii), 5(g)
and 5(q), each Party to this Agreement shall be entitled to
indemnification for any breach of representation or warranty
notwithstanding that such Party had Knowledge at or prior to the
Closing of the facts or circumstances giving rise to such breach.
(f) Remedy. Except as set forth in Section 10(q), each of the
Parties hereby acknowledges and agrees that its sole and exclusive remedy with
respect to any and all claims (including without limitation any matters arising
under CERCLA or any other Environmental, Health and Safety Requirements) against
any other Party after the Closing relating to the acquisition of the MHE
Business or any other issue relating to the subject matter of this Agreement or
the transactions contemplated hereby shall be pursuant to the indemnification
provisions contained in this Section 8. Notwithstanding the foregoing, the
Parties shall have the
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right to pursue remedies against other Parties outside of this Section 8 to
enforce covenants contained in the other Transaction Agreements; provided that
HarnCo shall not have the right to seek indemnification from the Companies or
their Subsidiaries under the Separation Agreement for Excluded Liabilities.
(g) No Contribution From Company. The obligations of the Sellers and
HarnCo to indemnify pursuant to this Agreement are primary obligations of the
Sellers and HarnCo, subject to the limitations set forth herein. Each Seller and
HarnCo hereby waives any rights to seek or obtain indemnification or
contribution from the Companies or their Subsidiaries in respect of any
Liability or obligation of HarnCo or Sellers pursuant to Section 8. The
foregoing notwithstanding, this Section shall not limit the right of HarnCo and
Sellers to obtain indemnification under Section 8 of this Agreement or under the
other Transaction Agreements; provided that HarnCo shall not have the right to
seek indemnification from the Companies or their Subsidiaries under the
Separation Agreement for Excluded Liabilities.
(h) Calculation Methodology. The Parties recognize that in order to
structure this transaction as a recapitalization, the Investor is acquiring less
than all of the stock of MHE. The parties also recognize that in certain events
a representation, warranty or covenant of HarnCo or the Sellers may be breached
that may not entail an actual "loss" suffered by the Investor but would result
in an actual loss by a purchaser of 100% of the stock of MHE. However, for
purposes of the indemnification obligations under Section 8, Adverse
Consequences suffered, sustained or incurred by the Investor shall be deemed to
be those that would have been sustained by a purchaser of 100% of the stock of
MHE in reliance on such representations, warranties and covenants (it being
understood, however, that indemnification in respect of such Adverse
Consequences shall be payable to the Companies and their Subsidiaries as opposed
to Investor (except to the extent Investor has suffered such Adverse
Consequences directly)).
Section 9. Termination.
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(a) Termination of Agreement. This Agreement may be terminated as
provided below:
(i) Investor and HarnCo may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) Investor may terminate this Agreement by giving written
notice to HarnCo at any time prior to the Closing in the event that
(A) HarnCo and Sellers have given Investor any notice pursuant to
Section 5(g) above and (B) the matter that is the subject of the
notice (taken together with the matters which have been the subject
of previous notices under Sections 5(g) or 5(q)) has had or could
reasonably be expected to have a Material Adverse Effect;
(iii) Investor may terminate this Agreement by giving written
notice to HarnCo (A) at any time prior to the Closing in the event
that (1) HarnCo and Sellers have breached any covenant contained in
this Agreement in any material respect, (2) Investor has notified
HarnCo of such breach and (3) such breach has not been cured within
30 days after the notice of breach or cannot be cured; (B) at any
time prior to the Closing in the event that (1) HarnCo and Sellers
have breached any representation or warranty contained in this
Agreement, (2) such breach would have or could reasonably be
expected to have a Material Adverse Effect, (3) Investor has
notified HarnCo of such breach and (4) such breach has not been
cured (by means of a supplement to the Disclosure Schedule under
Sections 5(g) or 5(q) or otherwise) within 30 days after the notice
of breach or cannot be cured; or (C) if the Closing shall not have
occurred on or before March 31, 1998 by reason of the failure of any
condition precedent under Section 7(a) hereof (unless the failure
results primarily from Investor breaching any representation,
warranty or covenant contained in this Agreement); and
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(iv) HarnCo may terminate this Agreement by giving written
notice to Investor (A) at any time prior to the Closing if Investor
has breached any material representation, warranty or covenant
contained in this Agreement in any material respect, HarnCo has
notified Investor of the breach, and the breach has not been cured
within 30 days after the notice of breach, (B) at any time after
March 15, 1998; provided that, such termination right shall not be
available to HarnCo in the event there is a reasonable expectation
that the Closing will occur by March 31, 1998 or (C) if the Closing
shall not have occurred on or before March 31, 1998 by reason of the
failure of any condition precedent under Section 7(b) hereof (unless
the failure results primarily from HarnCo or any Seller breaching
any representation, warranty or covenant contained in this
Agreement) or by reason of Investor's not having procured financing
for the transactions contemplated by this Agreement by such date.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided, that the
Confidentiality Agreement shall survive termination; and provided further that,
if this Agreement is terminated by Investor by reason of the breach hereof by
HarnCo or Sellers (other than a Knowing Breach), Investor's remedy shall be
limited to the recovery of its out-of-pocket costs and expenses in connection
the transactions contemplated hereby.
Section 10. Miscellaneous.
(a) Certain Understandings of Investor. Investor acknowledges that
it has had sufficient opportunity to make whatever investigation it has deemed
necessary and advisable for purposes of determining whether or not to enter into
this Agreement and acknowledges and agrees that, EXCEPT TO THE EXTENT OF THE
EXPRESS REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS CONTAINED IN THIS
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AGREEMENT, AND SUBJECT TO THE DISCLOSURE SCHEDULE, INVESTOR IS ACQUIRING THE
COMPANIES, THEIR SUBSIDIARIES AND THE MHE BUSINESS IN RELIANCE UPON ITS OWN
INVESTIGATION AND WITHOUT ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY,
FITNESS FOR ANY PARTICULAR PURPOSE OR ANY OTHER IMPLIED WARRANTIES WHATSOEVER.
Investor acknowledges (i) that in the course of its independent investigation of
the MHE Business, it examined the information contained in the draft
Confidential Offering Memorandum (the "Offering Memorandum"), attended
presentations conducted by management of the MHE Business (the "Presentations"),
and has made its own evaluation of the Companies, their Subsidiaries and the MHE
Business, and their respective present and expected future values, (ii) that
because of its investigation, Investor is not relying on the information
contained in the Offering Memorandum or the statements made and information
furnished in connection with the Presentations in its decision to enter into
this Agreement, including any projections, estimates or budgets contained in the
Offering Memorandum or provided to Investor, and (iii) that neither HarnCo nor
Sellers make any representation or warranty concerning the information contained
in the Offering Memorandum or the statements made and information furnished in
connection with the Presentations.
(b) Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of
HarnCo and Investor; provided, however, that any Party may make any public
disclosure it believes in good faith, upon the advice of counsel, is required by
applicable law, the regulations of the New York Stock Exchange, Inc. or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use commercially reasonable efforts to consult
the other Parties prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted
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assigns.
(d) Entire Agreement. The Transaction Agreements (including the
schedules and exhibits thereto) constitute the entire agreement among the
Parties and supersedes any prior understandings, agreements, or representations
by or among the Parties, written or oral, to the extent they related in any way
to the subject matter hereof; provided, however, that the letter agreement
between Chartwell Investments Inc. and HII concerning confidentiality (the
"Confidentiality Agreement") shall continue in effect between the date of this
Agreement and the Closing.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of HarnCo and Investor; provided, however, that any Party may (i)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates or financing sources and (ii) designate one or more of its Affiliates
to perform its obligations hereunder (in any or all of which cases the assigning
Party nonetheless shall remain responsible for the performance of all of its
obligations hereunder). Any attempted assignment made in violation of this
Agreement shall be null and void.
(f) Return of Information. If for any reason whatsoever the
transactions contemplated by this Agreement or the other Transaction Agreements
are not consummated, Investor shall promptly return to HarnCo and Sellers all
books and records furnished by HarnCo and Sellers, the Companies or any of their
respective agents, employees or representatives (including all copies, if any,
thereof), and shall not use or disclose the information contained in such books
and records for any purpose or make such information available to any other
entity or Person.
(g) No Personal Liability. No director, officer, member, employee or
agent of
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XXX, Xxxxxxxx or their Affiliates (including, without limitation, HarnCo,
Chartwell Investments Inc. and Sellers) shall have any personal liability to any
other party for any breach of any representation, warranty or obligation
contained in this Agreement or the other Transaction Agreements.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(i) Headings. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(j) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then five
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to HarnCo or Sellers: Copy to:
Harnischfeger Industries, Inc. Xxxxxxxx & Xxxxx
0000 Xxxxx Xxxx Xxxxx 000 Xxxx Xxxxxxxx Xxxxx
Xx. Xxxxxxx, XX 00000-0000 Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx Attn: Xxxxx X. Xxxx
If to Investor: Copy to:
Chartwell Investments Inc. Akin, Gump, Strauss, Xxxxx
000 Xxxxx Xxxxxx & Xxxx, L.L.P.
23rd Floor 0000 Xxx Xxxxxxxxx Xxxxxx, XX
Xxx Xxxx, XX 00000 Suite 400
Attn: Xxxx X. Xxxxxx Xxxxxxxxxx, X.X. 00000
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Attn: Xxxxxxx X. Xxxxx, Xx.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(k) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of New York without giving
effect to any choice or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
(l) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by duly
authorized representatives of Investor and HarnCo. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(m) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(n) Expenses. Each of Investor and HarnCo will bear its own costs
and
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expenses (including legal fees and expenses) incurred in connection with this
Agreement, the other Transaction Agreements and the transactions contemplated
hereby and thereby. Investor shall be responsible for the payment upon
termination of this Agreement (other than due to a breach by HarnCo or Sellers)
of the first $100,000 of the fees and expenses of Price Waterhouse LLP in
connection with the audit performed on the Companies and their Subsidiaries
prior to the Closing (the "Audit Fees") and HarnCo shall be responsible for the
payment of the balance of the Audit Fees; provided that, in the event the
Closing occurs, MHE shall pay 100% of the Audit Fees. The Sellers and HarnCo
agree that, except as provided below, neither the Companies nor any of their
Subsidiaries will bear on or after the Closing any of the Sellers' or HarnCo's
costs and expenses (including any of their legal fees and expenses) in
connection with the Transaction Agreements or any of the transactions
contemplated thereby and that on the Closing MHE will (i) pay to Investor and
its Affiliates their costs and fees associated with the transactions
contemplated by this Agreement, (ii) pay to the entities financing the
transactions contemplated by this Agreement their fees and charges and (iii) pay
to Xxxxxxxx & Xxxxx the fees and expenses of Xxxxxxxx & Xxxxx in connection with
the opinion referred to in Section 7(a)(xi) above. Notwithstanding the
foregoing, none of the fees and expenses payable by MHE hereunder shall offset
or reduce the consideration payable to HarnCo and Sellers under this Agreement.
(o) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(p) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof, and Section 1 applies to each of them accordingly.
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(q) Specific Performance. Each of the Parties recognizes and affirms
that in the event of breach by any of them of any of the provisions of this
Agreement, money damages would be inadequate and no adequate remedy at law would
exist. Accordingly, each of the Parties agrees that any Party shall have the
right, in addition to any other rights and remedies existing in its favor, to
enforce its rights and the obligations of any other Party under this Agreement
not only by an action or actions for damages, but also by an action or action
for specific performance, injunction and/or other equitable relief in order to
enforce or prevent any violations of the provision of this Agreement.
(r) Submission to Jurisdiction. Each of the Parties consents to the
exclusive jurisdiction of the federal courts of the Eastern District of
Wisconsin for any legal action, suit, or proceeding arising out of or in
connection with this Agreement, and agrees that any such action, suit, or
proceeding may be brought only in such courts. If such forum is not available,
each of the Parties consents to the exclusive jurisdiction of the Milwaukee
County Circuit Court for any such action, suit or proceeding. Each of the
Parties further waives any objection to the laying of venue for any such suit,
action, or proceeding in such courts. Each Party agrees to accept and
acknowledge service of any and all process that may be served in any suit,
action, or proceeding. Each Party agrees that any service of process upon it
mailed by registered or certified mail, return receipt requested to such Party
at the address provided in Section 10(j) above shall be deemed in every respect
effective service of process upon such Party in any such suit, action, or
proceeding. Each Party agrees to waive any right it might have to a trial by
jury in any such suit, action or proceeding.
* * * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
MHE INVESTMENTS, INC. HARNISCHFEGER CORPORATION
By: /s/ Xxxxxxx X. Xxxxx By: /s/ Xxxx X. Xxxxxxx
----------------------------- -------------------------------------
Name: Xxxxxxx X. Xxxxx Name: Xxxx X. Xxxxxxx
Title: Vice President Title: Assistant Secretary
HCHC, INC.
By: /s/ Xxxx X. Xxxxxxxxxx, Xx.
-----------------------------
Name: Xxxx X. Xxxxxxxxxx, Xx.
Title: President
RCHH, INC.
By: /s/ Xxxx X. Xxxxxxx
-----------------------------
Name: Xxxx X. Xxxxxxx
Title: President
RYL, LLC
By: /s/ Xxxx X. Xxxxxxx
-----------------------------
Name: Xxxx X. Xxxxxxx
Title: Authorized Signatory
HARNISCHFEGER MEXICO
HOLDINGS S.A. de C.V.
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Secretary
BELOIT CANADA LTD.
By: /s/ Xxxxxxx X. Xxxxx, Xx.
-----------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
Title: Treasurer
FIRST AMENDMENT TO
THE RECAPITALIZATION AGREEMENT
This FIRST AMENDMENT, dated as of March 4, 1998, by and among (a) MHE
Investments, Inc., a Delaware corporation ("Investor"), (b) Harnischfeger
Corporation, a Delaware corporation ("HarnCo"), and (c) RCHH, Inc., a Delaware
corporation, RYL, LLC, a Delaware limited liability company, HCHC, Inc., a
Delaware corporation, Harnischfeger Mexico Holdings S.A. de C.V., a corporation
organized under the laws of Mexico, and Beloit Canada Ltd., a corporation
organized under the laws of Canada (collectively, "Sellers"). Investor, HarnCo
and Sellers are collectively referred to herein as the "Parties."
WHEREAS, Investor, HarnCo and Sellers are parties to that certain
Recapitalization Agreement dated as of January 28, 1998 (the "Recapitalization
Agreement"); and
WHEREAS, the Parties desire to modify certain provisions of the
Recapitalization Agreement.
NOW, THEREFORE, the Parties hereby covenant and agree as follows:
Section 1. Definitions; Amendments. Capitalized terms which are used
herein without definition and which are defined in the Recapitalization
Agreement shall have the same meanings herein as in the Recapitalization
Agreement. The following definitions are hereby amended and restated in their
entirety to read:
"Commitment Letters" means the letters dated March 4, 1998
from Canadian Imperial Bank of Commerce and Credit Agricole Indosuez pursuant to
which a syndicate of lenders is to provide $155 million of bank financing
subject to, and in accordance with, the terms and conditions thereof.
"Financing Shares Ratio" means a fraction (currently estimated
to be 0.038), the numerator of which is the value of the Financing Shares
(currently estimated to be $2.1 million) and the denominator of which is $55
million.
"Term Sheets" means the Term Sheets dated March 4, 1998 from
CIBC Xxxxxxxxxxx Corp., outlining the terms and conditions of an offering of
$190 million of senior debt and $55 million of MHE Class A Preferred Shares.
Section 2. Amendment to Section 2. Sections 2(a)(ii), (iv) and (v) of the
Recapitalization Agreement are hereby amended and restated in their entirety to
read as follows:
"(ii) MHE shall redeem from HarnCo for a price of $282 million:
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(A) that number of MHE Class C Preferred Shares
(currently estimated to be 1,145 MHE Class C
Preferred Shares) equal to the product of (x)
30,000 and (y) the Financing Shares Ratio; and
(B) that number of MHE Common Shares (currently
estimated to be 88,319 MHE Common Shares) equal to
88,679.245 less (x) the number of MHE Class C
Preferred Shares redeemed pursuant to Section
2(a)(ii)(A) above (currently estimated to be 1,145
MHE Class C Preferred Shares) multiplied by (y)
$1,000 divided by (z) $3,180.
The price paid pursuant to this Section 2(a)(ii) (the "Redemption Price")
shall be payable by wire transfer of immediately available funds.
(iv) MHE shall redeem from HarnCo that number of MHE Common
Shares (currently estimated to be 1,512 MHE Common Shares) equal to
1,572.327 multiplied by the difference of (a) 1 (one) less (b) the
Financing Shares Ratio, in exchange for MHE Class B Preferred Shares
having a face value (currently estimated to be $4,809,000) of $5.0
million multiplied by the difference of (a) 1 (one) less (b) the
Financing Shares Ratio.
(v) Investor shall purchase from HarnCo:
(A) 7,547.170 MHE Common Shares for $24 million;
(B) that number of MHE Common Shares (currently
estimated to be 360 MHE Common Shares) equal to
(x) 9,433.962 multiplied by (y) the Financing
Shares Ratio, in exchange for that amount
(currently estimated to be $1.1 million) equal to
the product of (a) $30 million and (b) the
Financing Shares Ratio; and
(C) that number of MHE Class C Preferred Shares
(currently estimated to be 28,855) equal to 30,000
MHE Class C Preferred Shares times the difference
of (x) 1 (one) less (y) the Financing Shares
Ratio, in exchange for that amount equal to the
product of (a) $1,000 and (b) the number of MHE
Class C Preferred Shares purchased by Investor
pursuant to this Section 2(a)(v)(C).
-2-
The cash price paid pursuant to this Section 2(a)(v) shall be payable by
wire transfer of immediately available funds."
Section 3. No Other Changes. Except as specifically amended by this First
Amendment, the Recapitalization Agreement shall remain in full force and effect.
Without limiting the foregoing, Sections 2(a)(i) and (iii) of the
Recapitalization Agreement shall remain in full force and effect.
Section 4. No Waiver. The execution and delivery of this First Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of any party
under, the Recapitalization Agreement.
Section 5. Miscellaneous.
(a) Headings. The Section headings contained in this First
Amendment are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this First Amendment.
(b) Counterparts. This First Amendment may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
-3-
IN WITNESS WHEREOF, the Parties hereto have executed this First Amendment
to the Recapitalization Agreement as of the date first above written.
MHE INVESTMENTS, INC. HARNISCHFEGER CORPORATION
By:/s/ Xxxxxxx X. Xxxxx By: /s/ Xxxx X. Xxxxxxx
------------------------------ --------------------------------------
Name: Xxxxxxx X. Xxxxx Name: Xxxx X. Xxxxxxx
Title: Vice President Title: Assistant Secretary
HCHC, INC.
By: /s/ Xxxx X. Xxxxxxxxxx, Xx.
--------------------------------------
Name: Xxxx X. Xxxxxxxxxx, Xx.
Title: President
RCHH, INC.
By: /s/ Xxxx X. Xxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxx
Title: President
RYL, LLC
By: /s/ Xxxx X. Xxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Authorized Signatory
HARNISCHFEGER MEXICO
HOLDINGS S.A. de C.V.
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Secretary
BELOIT CANADA LTD.
By: /s/ Xxxxxxx X. Xxxxx, Xx.
--------------------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
Title: Treasurer
-4-
SECOND AMENDMENT TO
THE RECAPITALIZATION AGREEMENT
This SECOND AMENDMENT, dated as of March 23, 1998, by and among (a) MHE
Investments, Inc., a Delaware corporation ("Investor"), (b) Harnischfeger
Corporation, a Delaware corporation ("HarnCo"), and (c) RCHH, Inc., a Delaware
corporation, RYL, LLC, a Delaware limited liability company, HCHC, Inc., a
Delaware corporation, Harnischfeger Mexico Holdings S.A. de C.V., a corporation
organized under the laws of Mexico, and Beloit Canada Ltd., a corporation
organized under the laws of Canada (collectively, "Sellers"). Investor, HarnCo
and Sellers are collectively referred to herein as the "Parties."
WHEREAS, Investor, HarnCo and Sellers are parties to that certain
Recapitalization Agreement dated as of January 28, 1998, as amended as of March
4, 1998 (the "Recapitalization Agreement"); and
WHEREAS, the Parties desire to modify certain provisions of the
Recapitalization Agreement.
NOW, THEREFORE, the Parties hereby covenant and agree as follows:
Section 1. Definitions; Amendments. Capitalized terms which are used
herein without definition and which are defined in the Recapitalization
Agreement shall have the same meanings herein as in the Recapitalization
Agreement. The following definition is hereby amended and restated in its
entirety to read:
"Financing Shares Ratio" means a fraction (currently estimated
to be 0.038), the numerator of which is the value of the Financing Shares
(currently estimated to be $2.29 million) and the denominator of which is $60
million.
Section 2. Retirement Plan. Notwithstanding the provisions of Section
6(c)(vii) of the Recapitalization Agreement, the Harnischfeger Industries Hourly
Employees' Retirement Plan (the "HIHERP") shall be amended in connection with
the Closing in accordance with Exhibit I attached hereto. Section 6(c)(vii) of
the Recapitalization Agreement is hereby amended to the extent it is
inconsistent with the transactions contemplated by Exhibit I. In consideration
of such amendment to the HIHERP, MMH Holdings, Inc. Shall pay HarnCo $115,000 on
the Closing Date. The price paid pursuant to this Section 2 of this Second
Amendment to the Recapitalization Agreement shall be payable by wire transfer of
immediately available funds.
-1-
Section 3. Hercules Capitalization. Section 4(b)(iii) of the
Recapitalization Agreement is hereby amended and restated in its entirety to
read:
"(iii) The entire authorized capital stock of Hercules consists of
an unlimited number of shares of variable capital stock, of which
20,891,605 shares of variable capital stock are issued and outstanding.
All of the issued and outstanding Hercules Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are
held of record and beneficially by HCHC and HMH."
Section 4. No Other Changes. Except as specifically amended by this Second
Amendment, the Recapitalization Agreement shall remain in full force and effect.
Section 5. No Waiver. The execution and delivery of this Second Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of any party
under, the Recapitalization Agreement.
Section 6. Miscellaneous.
(a) Headings. The Section headings contained in this Second
Amendment are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Second Amendment.
(b) Counterparts. This Second Amendment may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
-2-
IN WITNESS WHEREOF, the Parties hereto have executed this Second Amendment
to the Recapitalization Agreement as of the date first above written.
MHE INVESTMENTS, INC. HARNISCHFEGER CORPORATION
By: /s/ Xxxxxxx X. Xxxxx By: /s/ Xxxx X. Xxxxxxx
------------------------------ --------------------------------------
Name: Xxxxxxx X. Xxxxx Name: Xxxx X. Xxxxxxx
Title: Vice President Title: Assistant Secretary
HCHC, INC.
By: /s/ Xxxx X. Xxxxxxxxxx, Xx.
--------------------------------------
Name: Xxxx X. Xxxxxxxxxx, Xx.
Title: President
RCHH, INC.
By: /s/ Xxxx X. Xxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxx
Title: President
RYL, LLC
By: /s/ Xxxx X. Xxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Assistant Secretary
HARNISCHFEGER MEXICO
HOLDINGS S.A. de C.V.
By: /s/ Xxxx X. Xxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Assistant Secretary
BELOIT CANADA LTD.
By: /s/ Xxxx X. Xxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Assistant Secretary
-3-
