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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
by and among
KAYDON CORPORATION
AND
ACE CONTROLS, INC.,
ACE CONTROLS INTERNATIONAL, INC., AND
THE SHAREHOLDERS OF ACE CONTROLS, INC.
AND ACE CONTROLS INTERNATIONAL, INC.
Dated as of March 1, 2001
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TABLE OF CONTENTS
PAGE
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Article I
Purchase and Sale of Shares and Closing
1.1. Purchase and Sale........................................................................................2
1.2. Purchase Price; Purchase Price Allocation; Closing Date Distributions....................................2
1.3. Purchase Price Adjustment................................................................................2
1.4. Closing; Payment of the Purchase Price...................................................................4
1.5. Escrow...................................................................................................4
1.6. Certain Definitions......................................................................................5
1.7. Construction and Interpretation..........................................................................6
Article II
Representations and Warranties of the Sellers
2.1. Organization of the Companies; Qualification; Capitalization.............................................7
2.2. Authority; No Violation or Consent.......................................................................8
2.3. No Subsidiaries or Investments...........................................................................9
2.4. Financial Statements.....................................................................................9
2.5. No Undisclosed Liabilities...............................................................................9
2.6. Absence of Certain Changes or Events....................................................................10
2.7. Real Estate and Tangible Personal Properties; Title.....................................................10
2.8. Patents, Trademarks, Trade Names, Etc...................................................................11
2.9. Environmental Matters...................................................................................12
2.10. Insurance...............................................................................................16
2.11. Labor Matters...........................................................................................16
2.12. ERISA; Benefit Plans....................................................................................17
2.13. Certain Contracts and Arrangements......................................................................19
2.14. Legal Proceedings, Etc..................................................................................20
2.15. Governmental Authorizations and Regulations.............................................................20
2.16. Taxes...................................................................................................20
2.17. Transactions with Shareholders, Officers, Directors, Etc................................................22
2.18. Change in Control Agreements............................................................................22
2.19. Commissions.............................................................................................22
2.20. Inventory...............................................................................................22
2.21. Accounts and Notes Receivable; Accounts Payable.........................................................22
2.22. Suppliers...............................................................................................23
2.23. Customers...............................................................................................23
2.24. Officers, Directors and Employees.......................................................................23
2.25. Effect of Transaction...................................................................................23
2.26. Compliance with Law.....................................................................................23
2.27. Absence of Certain Commercial Practices.................................................................24
2.28. No Competing Business...................................................................................24
2.29. Warranty; Product Liability.............................................................................24
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2.30. Sellers' Representative.................................................................................25
2.31. Transaction Discussions.................................................................................25
2.32. No Misleading Statements................................................................................25
Article III
Representations and Warranties of the Purchaser
3.1. Organization............................................................................................25
3.2. Authority Relative to this Agreement....................................................................25
3.3. Consents and Approvals; No Violation....................................................................26
3.4. Financing...............................................................................................26
3.5. Commissions.............................................................................................26
3.6. Access to Information...................................................................................26
3.7. No Misleading Statements................................................................................27
Article IV
Covenants of the Parties
4.1. Conduct of Business of the Companies....................................................................27
4.2. Access to Information...................................................................................28
4.3. Additional Financial Statements; Updated Schedules......................................................29
4.4. Consents................................................................................................29
4.5. Filings.................................................................................................29
4.6. No Shopping, Etc........................................................................................29
4.7. Furnishing Information; Announcements...................................................................30
4.8. Additional Agreements...................................................................................30
4.9. Notification of Certain Matters.........................................................................30
4.10. Tax Matters.............................................................................................30
4.11. Personal Property of the Sellers........................................................................33
4.12. Section 338(h)(10) Election.............................................................................33
4.13. Appointment of Sellers' Representative..................................................................35
4.14. Quiet Title Suit........................................................................................36
4.15. Air Permit..............................................................................................36
Article V
Conditions to Obligations of the Purchaser
5.1. Representations and Warranties; Agreements..............................................................37
5.2. Authorization; Consents.................................................................................37
5.3. Absence of Litigation...................................................................................37
5.4. Title Policy; Survey; Environmental Assessment..........................................................38
5.5. Consent and Estoppel Certificate........................................................................39
5.6. Employment Agreement....................................................................................39
5.7. Non-Competition Agreement...............................................................................39
5.8. Other Deliveries........................................................................................39
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Article VI
Conditions to Obligations of the Sellers
6.1. Representations and Warranties; Agreements..............................................................40
6.2. Authorization; Consents.................................................................................40
6.3. Absence of Litigation...................................................................................40
6.4. Other Deliveries........................................................................................41
Article VII
Indemnification
7.1. Indemnification.........................................................................................41
7.2. Payment for Indemnity Claims............................................................................45
7.3. Survival................................................................................................46
Article VIII
Miscellaneous
8.1 Termination.............................................................................................47
8.2. Expenses................................................................................................48
8.3. Notices.................................................................................................48
8.4. Assignment..............................................................................................49
8.5. Entire Agreement........................................................................................49
8.6. Modifications, Amendments and Waivers...................................................................49
8.7. Counterparts............................................................................................50
8.8. Governing Law...........................................................................................50
8.9. Severability............................................................................................50
8.10. Specific Performance....................................................................................50
8.11. Third Parties...........................................................................................50
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SCHEDULES:
Schedule 1.2(a) Purchase Price; Purchase Price Allocation; Closing Date
Distributions
Schedule 1.2(b) Assets to be Distributed to the Sellers at the Closing
Schedule 1.3(d) Purchase Price Adjustment; Calculation of Target Net
Asset Closing Amount
Schedule 1.4(b) Closing; Ownership of Shares
Schedule 1.4(c) Closing; Payment of Purchase Price; Wire Transfer
Instructions
Schedule 1.6 Exceptions to GAAP
Schedule 2.1 Organization of the Companies; Qualification;
Capitalization
Schedule 2.3 No Subsidiaries or Investments
Schedule 2.6 Absence of Certain Changes or Events
Schedule 2.7(a) Real Estate and Tangible Personal Properties; Title
Schedule 2.7(b) De-Commission Machinery and Equipment Held in Storage or
Held For Future Possible Use
Schedule 2.8 Patents, Trademarks, Trade Names, Etc.
Schedule 2.9 Environmental Matters
Schedule 2.10 Insurance
Schedule 2.11 Labor Matters
Schedule 2.12 ERISA; Benefit Plans
Schedule 2.13 Certain Contracts and Arrangements
Schedule 2.14 Legal Proceedings, Etc.
Schedule 2.17 Transactions with Stockholders, Officers, Directors,
Etc.
Schedule 2.19 Commissions
Schedule 2.20 Inventory
Schedule 2.21 Accounts Payable
Schedule 2.23 Customers
Schedule 2.24 Officers, Directors and Employees
Schedule 2.29 Warranty; Product Liability
Schedule 2.31 Transaction Discussions
Schedule 4.1 Conduct of the Business of the Companies
Schedule 4.4 Required Consents
Schedule 4.11 Personal Property of the Sellers
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Exhibits:
Exhibit A Form of Escrow Agreement
Exhibit B Methodology of Section 338(h)(10) Purchase Price Allocation
Exhibit C Form of Employment Agreement
Exhibit D Form of Non-Competition Agreement
Exhibit E Form of Resignation
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made as of March 1,
2001, by and among KAYDON CORPORATION, a Delaware corporation (the "Purchaser"),
and the XXXXXXX X. XXXXXXX REVOCABLE TRUST DATED JUNE 5, 1974, AS AMENDED AND
RESTATED ON 28, 1999, the XXXXX X. XXXXXXX REVOCABLE TRUST DATED SEPTEMBER 29,
1976, AS AMENDED AND RESTATED ON JUNE 28, 1999, XXXXXXXX X. XXXXXXX, XXXXX
XXXXXXX-XXXXXXX, XXXXX X. XXXXX, XXXXX X. XXXXXX, XXXXXXX XXXX XXXXXXX, XXXXX X.
XXXXXXXX, XXXX X. XXXXXXXXX, the XXXXXXX X. XXXXXXX IRREVOCABLE 1996 CHILDREN'S
TRUST DATED JUNE 5, 1996, the XXXXX X. XXXXXXX IRREVOCABLE 1996 CHILDREN'S TRUST
DATED JUNE 5, 1996, the XXXXX XXXXXXX-XXXXXXX GRANTOR RETAINED ANNUITY TRUST
DATED NOVEMBER 16, 2000, the XXXXX X. XXXXX GRANTOR RETAINED ANNUITY TRUST DATED
NOVEMBER 16, 2000, the XXXXX X. XXXXXX GRANTOR RETAINED ANNUITY TRUST DATED
NOVEMBER 16, 2000, and the XXXX X. XXXXXXXXX GRANTOR RETAINED ANNUITY TRUST
DATED NOVEMBER 16, 2000 (each individually, a "Seller" and collectively, the
"Sellers"), ACE CONTROLS, INC., a Michigan corporation ("ACE Controls"), ACE
CONTROLS INTERNATIONAL, INC., a Delaware corporation ("ACE Controls
International" and together with ACE Controls, the "Parent Companies"), and
XXXXXXX XXXXXX XXXXXXX and XXXXX X. XXXXXXX (together, the "Sellers'
Representative"). The Purchaser, the Sellers, the Parent Companies, and the
Sellers' Representative are referred to from time to time in this Agreement
together as the "Parties" and individually as a "Party."
BACKGROUND
A. The Sellers are owners of all of the outstanding shares of the
capital stock of the Parent Companies.
B. The Purchaser desires to purchase all of the outstanding
shares of the capital stock of each Parent Company, and the
Sellers desire to sell all such shares to the Purchaser, on
the terms and conditions set forth in this Agreement.
C. Capitalized terms not otherwise defined in this Agreement
shall have the meanings given to them in Section 1.6.
Now, therefore, the Parties hereby agree as follows.
AGREEMENT
ARTICLE I
PURCHASE AND SALE OF SHARES AND CLOSING
1.1. Purchase and Sale. Upon and subject to the terms and conditions of
this Agreement, the Sellers shall sell, convey, transfer, assign and deliver to
the Purchaser, free and clear of all Liens, and the Purchaser shall purchase
from the Sellers, as of and with effect from the beginning of business on the
Closing Date (a) Ten Thousand (10,000) shares of Class A common voting stock and
One Million (1,000,000) shares of Class B common non-voting stock
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of ACE Controls, and (b) One Thousand (1,000) shares of Class A common voting
stock and One Hundred Thousand (100,000) shares of Class B common non-voting
stock of ACE Controls International (collectively, the "Shares"), constituting
all of the issued and outstanding shares of the capital stock of each Parent
Company.
1.2. Purchase Price; Purchase Price Allocation; Closing Date
Distributions.
(a) The purchase price payable by the Purchaser to the Sellers
for the Shares shall be $70,750,000 (the "Purchase Price"), which shall be
allocated among the Sellers and between the Parent Companies as set forth on
Schedule 1.2(a). The Purchase Price shall be either increased or decreased by
the Purchase Price Adjustment described in Section 1.3.
(b) The Parent Companies shall distribute to the Sellers at
the Closing the assets listed in Schedule 1.2(b). The distribution of such
assets has been agreed to by the Purchaser, shall not be considered to be a
breach of any representation, warranty, covenant, agreement or obligation of the
Sellers or the Parent Companies under this Agreement, and shall not be deducted
from or otherwise adversely affect the Purchase Price.
1.3. Purchase Price Adjustment. A post-closing adjustment to the
Purchase Price shall be made as follows.
(a) On or before the thirtieth day after the Closing, or as
soon as practicable thereafter, the Purchaser, at its cost and expense, shall
prepare and provide to the Sellers' Representative a balance sheet reflecting
the consolidated total assets and total liabilities of the Companies (as defined
in Section 1.6) as of the Closing Date; provided, however, that the assets
included on Schedule 1.2(b) shall not be included in such total assets, and,
provided, further, that any and all outstanding checks written by any Company
prior to the Closing on any foreign bank accounts, the funds of which have been
liquidated and distributed to the Sellers, which have not cleared prior to the
close of business on the day before the Closing Date shall be included in such
total liabilities (the "Closing Date Balance Sheet"). The difference between the
total assets and total liabilities as reflected on the Closing Date Balance
Sheet, as finally determined, is referred to as the "Net Asset Amount." The
Purchaser shall prepare the Closing Date Balance Sheet in accordance with GAAP,
as consistently applied by the Parent Companies and consistent with the
methodology utilized in the calculation of the Target Net Asset Amount as
reflected on Schedule 1.3(d), provided that for purposes of the Closing Date
Balance Sheet, employee vacation days and sick days shall be accrued for in
accordance with GAAP, regardless of the past practices of the Companies. The
Sellers' Representative and its representatives shall have the right to observe
the work performed by the Purchaser or its representatives in connection with
the preparation of the Closing Date Balance Sheet and shall have the right to
examine and make copies of the work papers and such other documents that are
generated or reviewed in connection with the preparation of the Closing Date
Balance Sheet.
(b) The Sellers' Representative shall have thirty days after
the Sellers' Representative receives the Closing Date Balance Sheet to review
such balance sheet (the
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"Sellers' Review Period"). If, within the Sellers' Review Period, the Sellers'
Representative notifies the Purchaser in writing that it is unwilling to accept
any items on the Closing Date Balance Sheet, specifically identifying the items
and amounts in dispute and the basis for such dispute (the "Sellers' Notice"),
then the Sellers' Representative and the Purchaser shall use their reasonable
efforts to reach agreement within the thirty days following the delivery of
Sellers' Notice, or such longer period as may be agreed upon by the Sellers'
Representative and the Purchaser (the "Resolution Period"), with respect to such
disputed items or amounts. If the Sellers' Representative does not deliver a
Sellers' Notice prior to the end of the Sellers' Review Period, then the
Sellers' Representative shall be deemed to have accepted in full the Closing
Date Balance Sheet prepared by the Purchaser and such balance sheet shall not be
subject to any further review or change. If the Sellers' Representative timely
delivers a Sellers' Notice to the Purchaser, then any items or amounts on the
Closing Date Balance Sheet not identified in writing as a disputed item on the
Sellers' Notice shall be deemed to have been accepted by the Sellers'
Representative and shall not be subject to any further review or change.
(c) If the Sellers' Representative and the Purchaser fail to
reach a mutually agreeable determination with respect to the Closing Date
Balance Sheet within the Resolution Period, then the Sellers' Representative and
the Purchaser shall submit the unresolved disputed items to an independent
nationally recognized firm of certified public accountants not currently
providing services to any Party and mutually agreed upon by the Sellers'
Representative and the Purchaser, which agreement shall not be unreasonably
withheld (the "Reviewing Accountants"). The Sellers' Representative and the
Purchaser shall direct the Reviewing Accountants to resolve such unresolved
disputed items within thirty days of submission or as soon thereafter as is
practicable. The Reviewing Accountants' determination shall be made on the same
basis as the Closing Date Balance Sheet, shall be final and binding on the
Parties, and judgment on such determination may be entered in any court having
jurisdiction. The Sellers, jointly and severally, and the Purchaser shall each
be responsible for one-half of the fees and expenses of the Reviewing
Accountants. Any agreement as to the Closing Date Balance Sheet shall be in
writing and signed by the Sellers' Representative and the Purchaser.
(d) As reflected on the Closing Date Balance Sheet, as finally
determined, if the Net Asset Amount is less than the amount indicated on
Schedule 1.3(d) (the "Target Net Asset Amount"), which is the amount reflected
on the September 30, 2000 balance sheet (the calculation of which is set forth
on Schedule 1.3(d)), then the Sellers, jointly and severally, shall be obligated
promptly to pay the amount of such deficiency to the Purchaser in immediately
available funds as directed by the Purchaser.
(e) As reflected on the Closing Date Balance Sheet, as finally
determined, if the Net Asset Amount is greater than the Target Net Asset Amount,
then the Purchaser shall be obligated promptly to pay the amount of such excess
to the Sellers in immediately available funds as directed by the Sellers.
(f) The payment, if any, required by this Section 1.3 shall be
referred to as the "Purchase Price Adjustment."
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1.4. Closing; Payment of the Purchase Price.
(a) Subject to the conditions set forth in this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of Xxxxxx Xxxxxxx PLLC, 000 Xxxx Xxxxxxxxxx Xxxxxxx,
Xxx Xxxxx, Xxxxxxxx, at 10:00 o'clock a.m., local time, on March 1, 2001, or at
such other time, place and date as shall be mutually agreed on by the Parties.
The date on which the Closing occurs is referred to in this Agreement as the
"Closing Date" and the Closing shall be deemed to be effective as of the
beginning of business on the Closing Date.
(b) At the Closing, in consideration of the Purchaser's
delivery of the Purchase Price pursuant to Section 1.4(c), the Sellers each
shall deliver to the Purchaser a certificate or certificates representing the
Shares owned by such Seller as set forth on Schedule 1.4(b), duly endorsed in
blank for transfer or accompanied by stock powers duly executed in blank,
sufficient in form and substance to convey to the Purchaser good title to all of
the Shares, free and clear of all Liens, and registered in the name of the
Purchaser.
(c) At the Closing, the Purchaser shall deliver to bank
account(s) designated by the Sellers on Schedule 1.4(c), by intrabank or wire
transfer of immediately available funds, an amount equal to the Purchase Price
less the Escrow Amount (as defined below) (such amount, the "Closing Date
Payment Amount"). The Sellers may direct the Purchaser to deliver a portion of
the Closing Date Payment Amount to certain third parties for fees, expenses,
costs or other obligations arising out of or in connection with the transactions
contemplated in this Agreement.
1.5. Escrow.
(a) At the Closing, the Purchaser shall deposit by wire
transfer of immediately available funds $5,000,000 of the Purchase Price (the
"Escrow Amount") into escrow to be held in accordance with the terms of the
Escrow Agreement among the Purchaser, the Sellers' Representative, and the
Detroit, Michigan office of Bank One Trust Company, National Association, in
substantially the form attached in this Agreement as Exhibit A (the "Escrow
Agreement"). To the extent that amounts are to be paid by the Sellers to the
Purchaser pursuant to this Agreement, such amounts shall be paid from the Escrow
Amount pursuant to the terms of the Escrow Agreement, other than amounts, if
any, the Sellers are required to pay to the Purchaser pursuant to Section 1.3,
which the Sellers shall pay directly. Disbursement of all or any of the Escrow
Amount shall be governed by the terms of the Escrow Agreement.
(b) The Escrow Amount shall be established with funds taken
from the Purchase Price allocated to the XXXXXXX X. XXXXXXX IRREVOCABLE 1996
CHILDREN'S TRUST DATED JUNE 5, 1996 (the "WJC Trust"). The other Sellers hereby
agree to indemnify the WJC Trust ratably according to their respective ownership
percentages of the Shares against any and all payments from the Escrow Amount to
the Purchaser. The agreement in this Section 1.5(b) shall survive termination of
this Agreement.
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1.6. Certain Definitions. For purposes of this Agreement:
"ACE Germany" means ACE Stossdampfer GmbH, a German Gesellschaft mit
beschrankter Haftung.
"ACE Japan" means ACE Controls Japan, L.L.C., a Michigan limited
liability company.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Company" or "Companies" shall mean the Parent Companies, ACE Japan,
and ACE Germany.
"GAAP" means generally accepted accounting principles, consistently
applied, except as provided on Schedule 1.6.
"To the knowledge," or "known," and words of similar import shall mean
the actual knowledge of a person; provided, however, that with respect to the
Sellers, such terms shall include the actual knowledge of Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxx X. Xxxxxxx, Xxxxxxxx X. Xxxxxxx, and Xxxxxxx Xxxx Xxxxxxx, after
making reasonable inquiry of Xxxx Xxxxx, A. Xxxx Xxxxxx, and Xxxxx Xxxxxxx.
"Leases" means any written or oral lease agreement under which any
Company leases real or tangible personal property, including any equipment
leases and capitalized leases.
"Lien" means any pledge, lien (including any Tax lien), charge, claim,
community property interest, condition, equitable interest, encumbrance,
security interest, mortgage, option, restriction on transfer (including any
buy-sell agreement or right of first refusal or offer), forfeiture, penalty,
equity or other right of another person of every nature and description
whatsoever.
"Material Adverse Effect" means any change in, or effect on, any
Company which is, or is reasonably likely to be, materially adverse to the
combined business, properties, results of operations, financial condition or
prospects of the Companies taken as a whole, other than a change or effect that
is caused by or results from general economic conditions or that affects
generally the industry in which the Companies operate.
"Person" or "person" means an individual or any corporation,
partnership, joint venture, association, limited liability company, trust,
unincorporated organization, or other legal entity or a government or
governmental entity.
"Real Estate" means the Owned Real Estate and the Leased Real Estate
(as defined in Section 2.7) and all appurtenances, improvements, buildings and
fixtures thereto or thereon.
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1.7. Construction and Interpretation. The Parties have participated
jointly in the negotiation and drafting of this Agreement. If 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.
(a) Each definition in this Agreement includes the singular
and the plural, and references to any gender include the other gender where
appropriate.
(b) Any reference to any federal, state, local or foreign
statute or law shall be deemed to also to refer to all rules and regulations
promulgated under such statute or law, unless the context requires otherwise.
References to any statute or regulation mean such statute or regulation as
amended at the time and include any successor legislation or regulation.
(c) The word "including" means "including, but not limited
to." The word "or" is not exclusive. The headings to the Articles and Sections
are for convenience of reference and shall not affect the meaning or
interpretation of this Agreement.
(d) Unless otherwise provided for in this Agreement,
references to Articles, Sections, Exhibits and Schedules mean the Articles,
Sections, Exhibits and Schedules of this Agreement. The Exhibits and Schedules
are incorporated by reference into and shall be deemed a part of this Agreement.
(e) All references to dollar amounts in this Agreement shall
be references to United States Dollars unless otherwise provided.
(f) In computing any time period provided for in this
Agreement, the first day of the time period shall not be counted but the last
day of the time period shall be counted. Any action required to be taken on a
particular day must be taken before 5:00 p.m., Eastern Time on that day. For
example, if an action were required to be taken within ten days after the
Closing Date, and the Closing Date were October 31, the first day to be counted
would be November 1 and the action would be required to be taken before 5:00
p.m., on November 10.
(g) All accounting terms used in this Agreement which are not
expressly defined in this Agreement shall have the respective meanings given to
them in accordance with GAAP on the date of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers, jointly and severally, represent and warrant to the
Purchaser that the following representations and warranties are true and
correct.
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2.1. Organization of the Companies; Qualification; Capitalization.
(a) Each Company is the type of entity listed opposite its
name on Schedule 2.1 and is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization as set forth on
Schedule 2.1. Each Company has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Except as listed on Schedule 2.1, no Company used any assumed name or did
business under any name other than its formal name at any time during the five
years prior to the date of this Agreement.
(b) Each Company is duly qualified or licensed to do business
as a foreign corporation and is in good standing in each jurisdiction set forth
on Schedule 2.1, which are all jurisdictions in which the property owned, leased
or operated by it or the nature of its business makes such qualification
necessary, except where the failure to be so qualified and in good standing will
not have a Material Adverse Effect.
(c) The authorized and issued capital stock or equity
interests of each Company are set forth on Schedule 2.1. All issued shares or
units of such capital stock or equity interests are validly issued and
outstanding, fully paid and nonassessable, and owned beneficially and of record
by the Sellers or the Parent Companies as set forth on Schedule 2.1. Each Seller
and Parent Company has good title to such shares or units, free and clear of any
and all Liens. Except as set forth on Schedule 2.1:
(i) no Company or Seller has granted, issued or
entered into any security, option, warrant, right, call, subscription,
agreement, commitment or understanding of any nature whatsoever, fixed or
contingent, that directly or indirectly (A) calls for the issuance, sale, pledge
or other disposition of any shares or units of such capital stock or equity
interests or any securities convertible into, or exchangeable for, or other
rights to acquire, such shares or units, or (B) obligates any Company or Seller
to grant, offer or enter into any of the foregoing;
(ii) there are no outstanding phantom stock rights or
other equity-based rights issued by any Company or Seller;
(iii) there are no outstanding contractual
obligations of any Company or Seller to repurchase, redeem or otherwise acquire
any shares or units of such capital stock or equity interests;
(iv) there are no voting trusts, proxies or other
agreements or understandings to which any Company or Seller is a party with
respect to the (A) voting of shares or units of such capital stock or equity
interests, (B) dividends or distributions on account of such shares or units, or
(C) the transfer or disposition of such shares or units.
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2.2. Authority; No Violation or Consent.
(a) Each Parent Company and each Seller has full power and
authority to enter into this Agreement and to carry out the transactions
contemplated by this Agreement and all corporate, shareholder, company, trust or
other proceedings required to be taken by or on his, her or its part to
authorize the execution, delivery and performance of this Agreement have been
duly and properly taken. This Agreement has been duly and validly executed and
delivered by each Parent Company and each Seller and constitutes a valid and
binding agreement of each Parent Company and each Seller enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
(b) The execution and delivery of this Agreement, the
consummation of the transactions contemplated by this Agreement and the
compliance with the terms of this Agreement do not and will not:
(i) conflict with or result in any breach of any
provision of any Company's Articles of Incorporation or Bylaws, any Seller's
trust agreement or other similar governing documents or the terms of any
agreement or other instrument to which any Company or any Seller is a party or
by which he, she or it or any of his, hers or its property may be bound;
(ii) conflict with, result in a breach of any
provision of, constitute (with or without due notice or lapse of time or both) a
default under, result in the modification or cancellation of, or give rise to
any right of termination or acceleration in respect of, any contract, agreement,
commitment, understanding, arrangement or restriction of any kind to which any
Seller or any Company is a party or to which any Seller or any Company or any of
his, her or its property is subject;
(iii) result in the creation of any Lien upon, or any
Person obtaining the right to acquire, any of the Shares or any of the assets of
any Company;
(iv) violate or conflict with any law, ordinance,
code, rule, regulation, decree, order or ruling of any court or governmental
authority, to which any Seller or any Company or any of the Shares or any of any
Company's assets is subject;
(v) require, to the Sellers' knowledge, any
authorization, consent, order, permit or approval of, or notice to, or filing,
registration or qualification with, any governmental, administrative or judicial
authority except as may be required to be in compliance with the provisions of
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act") and comparable foreign competition or antitrust provisions; or
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(vi) except for the Required Consents set forth on
Schedule 4.4, require any consent of any Person to the execution, delivery or
performance of this Agreement or to the consummation of the transactions
contemplated by this Agreement or to the operation of any Company's business
after the Closing Date substantially as operated prior thereto, including
consents from parties to leases or other agreements or commitments.
2.3. No Subsidiaries or Investments. Except as set forth on Schedule
2.3 (the "Subsidiaries"), no Company beneficially owns, directly or indirectly,
any outstanding voting stock, membership interests, partnership interests or
equity of any other corporation, limited liability company, partnership or other
entity, nor is any Company a party to or involved with any partnership, joint
venture, limited liability company or other entity in which any Company,
directly or indirectly, has, or pursuant to any agreement has or will have the
right to acquire by any means, an interest or investment representing an equity,
profit or voting interest entitling any Company or any subsidiary of any Company
to vote for or appoint the management of such entity.
2.4. Financial Statements.
(a) The Sellers have furnished to the Purchaser the ACE
Controls Consolidated Financial Statements - Income Tax Basis as of and for the
year ended December 31, 1999, as reviewed by Deloitte & Touche LLP. Such
financial statements are referred to as the "1999 ACE Controls Financial
Statements." The balance sheet included in the 1999 ACE Controls Financial
Statements presents fairly the financial position of ACE Controls as of December
31, 1999, and the related statement of operations included therein presents
fairly the results of operations for the fiscal year then ended, in each case in
accordance with GAAP, except as noted therein.
(b) The Sellers have furnished to the Purchaser the ACE
Controls International Statutory Audited Consolidated Financial Statements as of
and for the year ended December 31, 1999, as audited by Xxxxx, Xxxxxx & Lang,
Chartered Accountants. Such financial statements are referred to as the "1999 UK
Financial Statements." The balance sheet included in the 1999 UK Financial
Statements presents fairly the financial position of ACE Controls International
as of December 31, 1999, and the related statement of operations included
therein presents fairly the results of operations for the fiscal year then
ended, in each case in accordance with GAAP, except as noted therein.
(c) The Sellers have furnished to the Purchaser the ACE
Germany Statutory Audited Consolidated Financial Statements as of and for the
year ended December 31, 1999, as audited by Deloitte & Touche, LLP. Such
financial statements are referred to as the "1999 ACE Germany Financial
Statements." The balance sheet included in the 1999 ACE Germany Financial
Statements presents fairly the financial position of ACE Germany as of December
31, 1999, and the related statement of operations included therein presents
fairly the results of operations for the fiscal year then ended, in each case in
accordance with GAAP, except as noted therein.
16
(d) The 1999 ACE Controls Financial Statements, the 1999 UK
Financial Statements, and the 1999 ACE Germany Financial Statements are referred
to collectively in this Agreement as the "1999 Financial Statements."
(e) The Sellers have furnished to the Purchaser (i) an
unaudited consolidated balance sheet of each Company as of September 30, 2000,
and (ii) an unaudited consolidated statement of operations of each Company for
the nine-month period then ended. Such financial statements are referred to in
this Agreement as the "Interim Financial Statements." The Interim Financial
Statements were prepared in conformity with GAAP, except as noted therein, and
fairly present (subject to normal year-end audit adjustments) the financial
position and results of operations of the Companies for the periods covered by
such statements.
2.5. No Undisclosed Liabilities.
(a) No Company has any liability or obligation, secured or
unsecured (whether known or unknown, asserted or unasserted, absolute, accrued,
contingent or otherwise, and whether due or to become due), nor is there any
such liability or obligation for which any Company is or may become liable,
contingently or otherwise, which are not reflected in the 1999 Financial
Statements or the Interim Financial Statements or disclosed in the notes
thereto, except those (i) which are of the type not required under GAAP to be
reflected in the 1999 Financial Statements or the Interim Financial Statements,
(ii) which were incurred in the ordinary course of business after September 30,
2000, and are consistent with past practices in nature and are individually and
in the aggregate in an amount consistent with the Interim Financial Statements,
or (iii) which are disclosed on any Schedules to this Agreement. The Sellers
have no knowledge of any circumstance, condition, event or arrangement that will
give rise to any liabilities of any Company or any successor to any Company
after the date of this Agreement, other than in the ordinary course of business.
(b) ACE Controls Japan, Ltd., a Delaware corporation, was
dissolved effective as of December 31, 1997. After the liquidation and
dissolution of such company, there were no unpaid liabilities of such company to
any Person, including Tax liabilities and liabilities to suppliers and vendors.
2.6. Absence of Certain Changes or Events. Except as set forth on
Schedule 2.6 or as otherwise expressly contemplated by this Agreement, since
September 30, 2000, there has not been: (a) any Material Adverse Effect; (b) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock, property or any combination thereof) in respect of any
Company's capital stock or any repurchase, redemption or other acquisition by
any Company of any shares of capital stock or other equity interests of any
Company; (c) any damage, destruction or casualty loss, whether covered by
insurance or not, which has a Material Adverse Effect on any individual Company;
(d) any material change by any Company in its accounting methods, principles or
practices; or (e) any acquisition or disposition of an asset with an individual
value in excess of $25,000 or an aggregate value in excess of $100,000.
17
2.7. Real Estate and Tangible Personal Properties; Title.
(a) Schedule 2.7(a) sets forth a list of all real property
owned by any Company (the "Owned Real Estate") and any lease pursuant to which
any Company leases real property as lessee or lessor (the real property subject
to such leases, the "Leased Real Estate").
(b) The buildings, facilities, machinery, equipment (other
than de-commissioned machinery and equipment in storage or held for possible
future use set forth on Schedule 2.7(b)), furniture, leasehold and other
improvements, fixtures, vehicles, structures, any related capitalized items and
other tangible property material to the business or operations of any Company
(the "Tangible Property") (i) are in good operating condition and repair as of
the date of this Agreement (normal wear and tear and temporary service outages
for repair or replacement excepted), (ii) have received or are receiving,
through the date of this Agreement, repair and replacement in accordance with
the Companies' past practices, and (iii) are suitable for their current use and
are currently in use by the applicable Company in the operation of its
businesses in the ordinary course (other than items awaiting or undergoing
repair, or de-commissioned machinery and equipment in storage or held for
possible future use). The Tangible Property is free of any material structural
or engineering defects that would have a Material Adverse Effect.
(c) Each Company has good, valid and marketable fee simple
title to all of the Owned Real Estate and to the Tangible Property and all of
the other assets reflected on the Interim Financial Statements, all of which are
free and clear of all Liens other than (i) those set forth on Schedule 2.7(a),
(ii) Liens for current Taxes, assessments or governmental charges not yet due or
delinquent, (iii) those which do not, individually or in the aggregate,
materially interfere with the use of the Owned Real Estate or Tangible Property
or materially detract from their value, (iv) liens of mechanics, materialmen,
laborers, warehousemen, carriers and other similar common law or statutory liens
arising in the ordinary course of business which are not yet due and payable or,
if due and payable, have been adequately bonded, (v) any liens or encumbrances
disclosed on the title commitment provided by the Sellers to the Purchaser
pursuant to Section 5.4, and (vi) zoning, entitlement and other land use and
environmental regulations by governmental agencies.
(d) No Company is in violation of any local zoning or similar
land use laws or governmental regulations, except where such violation would not
have a Material Adverse Effect. No Company is in violation of or in
noncompliance with any covenant, condition, restriction, order or easement
affecting the Owned Real Estate, except where such violation or noncompliance
would not have a Material Adverse Effect.
(e) No Company has received notice that the whole nor any
portion of the Real Estate is subject to any governmental decree or order to be
sold or is being condemned, expropriated or otherwise taken by any governmental
authority, body or other Person with or without payment of compensation
therefor, nor, to the Sellers' knowledge, has any such condemnation,
expropriation or taking been proposed.
18
2.8. Patents, Trademarks, Trade Names, Etc.
(a) Schedule 2.8 sets forth a complete and correct list of (i)
all patents and patent applications and other invention disclosures, trademarks,
trade names, service marks, and copyrights owned by any Company, and all
licenses and other agreements relating thereto, whether registered or
unregistered, and whether in the United States or any other jurisdiction, and
(ii) all agreements relating to third-party Intellectual Property that any
Company is licensed or authorized to use.
(b) The Sellers have delivered to the Purchaser copies of all
documentation which they or the Companies possess relating to each item set
forth on Schedule 2.8. The Companies own or have the right to use, pursuant to
license, sublicense, agreement or permission, all Intellectual Property (as
defined below) used in the operation of their business as presently conducted.
(c) Except as set forth on Schedule 2.8, no Company has
received any charge, complaint, claim, demand or notice alleging any
interference, infringement, misappropriation or violation with or of any
Intellectual Property rights of a third party (including any claims that any
Company must license or refrain from using any Intellectual Property rights of a
third party). To the Sellers' knowledge, no Company has interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property rights of third parties and, to the Sellers' knowledge, no
third party has interfered with, infringed upon, misappropriated or otherwise
come into conflict with any Intellectual Property rights of any Company.
(d) With respect to each item of Intellectual Property owned
by any Company and identified on Schedule 2.8, the applicable Company possesses
all right, title and interest in and to the item, free and clear of any Lien.
With respect to each item of Intellectual Property identified on Schedule 2.8
that any Company is licensed or authorized to use, the license, sublicense,
agreement or permission covering such item (i) is legal, valid, binding,
enforceable and in full force and effect and will not be affected by
consummation of the transactions contemplated by this Agreement, and (ii) has
not been breached by any party thereto.
(e) As used in this Agreement, "Intellectual Property" means
all U.S. and foreign patents, patent applications, inventions, trade secrets,
know-how, registered or unregistered trademarks, trade names, service marks, and
copyrights (including any goodwill associated therewith).
19
2.9. Environmental Matters.
(a) Except as set forth on Schedule 2.9, each Company holds
all Environmental Permits necessary to conduct its business as presently
conducted. All such Environmental Permits are in full force and effect and the
Companies have made all appropriate filings and registrations where necessary
for the issuance or renewal of such Environmental Permits. Schedule 2.9 lists
(i) each Environmental Permit now held, (ii) the governmental entity which has
jurisdiction with respect to such Environmental Permit, (iii) the entity which
is required to hold such Environmental Permit, and (iv) the effective date and
duration of such Environmental Permit. The Companies are in compliance, in all
material respects, with all terms and conditions of all such Environmental
Permits and all Environmental Laws.
(b) Except as set forth on Schedule 2.9, the consummation of
the transactions contemplated by this Agreement will not require the Purchaser
or the Companies to provide notice, obtain governmental approval or take any
other actions in order to enable the Purchaser to continue to hold all
Environmental Permits and to remain in compliance with the terms and conditions
of all Environmental Permits and all Environmental Laws. No Company has obtained
information from regulatory agencies having jurisdiction or any other Person,
which would lead a reasonable Person with knowledge of the facts and
circumstances to believe that such Permits may not be issued, renewed, extended
or reissued in due course and as requested without material cost or penalty.
(c) Except as set forth on Schedule 2.9, there is not pending
against any Company any civil, criminal or administrative action, suit, summons,
citation, complaint, claim, notice of violation, demand, judgment, order, lien,
proceeding or hearing or any study, inquiry, proceeding or investigation
(collectively, "Environmental Actions"), based on or related to any
Environmental Permit or any Environmental Law or the presence, manufacture,
generation, processing, distribution, use, sale, treatment, recycling, receipt,
storage, disposal, transport, arranging for transportation, treatment or
disposal, or handling, or the emission, discharge, release or threatened release
into the environment, of any Regulated Substance, nor to Sellers' knowledge, has
any such Environmental Action been threatened within the five years immediately
prior to the date of this Agreement.
(d) Except as set forth on Schedule 2.9, no Company has
manufactured, generated, processed, distributed, used, sold, treated, recycled,
received, stored, disposed of, transported, arranged for transportation,
treatment or disposal of, handled or conducted any other activity involving, any
Regulated Substance except in compliance in all material respects with
Environmental Laws and Environmental Permits.
(e) Except as set forth in Schedule 2.9, the Sellers have no
knowledge of any past or present conditions, events, circumstances, facts,
activities, practices, incidents, actions, omissions or plans: (i) that will
interfere with or prevent continued material compliance by any Company with
Environmental Laws and the requirements of Environmental Permits; (ii) that will
give rise to any liability or other obligation under any Environmental Laws that
will require
20
either Party to incur any actual or potential Environmental Costs; or (iii) that
will form the basis of any claim, action, suit, proceeding, hearing,
investigation or inquiry against or involving either Party based on or related
to any Environmental Matter or which will require any Company to incur any
Environmental Costs.
(f) Except as set forth in Schedule 2.9, there are no
underground or aboveground storage tanks, incinerators, surface impoundments or
lagoons at, on, under or within the Owned Real Estate or Leased Real Estate.
Schedule 2.9 lists all underground or aboveground storage tanks, incinerators or
surface impoundments that, to the Sellers' knowledge, were removed from or
closed at any such properties.
(g) No Company has received any written notice or other
communication that it is or may be a potentially responsible person or otherwise
liable, nor to the Sellers' knowledge is any Company otherwise liable, in
connection with an Environmental Matter relating to any waste disposal site or
other location allegedly containing, used for, or resulting from the disposal
of, any Regulated Substances.
(h) To the Sellers' knowledge, since January 1, 1996, no
Company has used any waste disposal or waste treatment site, or otherwise
disposed of or treated, transported for disposal or treatment, or arranged for
the transportation for disposal or treatment of, any Hazardous Waste to any
place or location in violation of any Environmental Laws. Since January 1, 1996
(i) no Company has generated, stored, disposed of, transported or arranged for
the transportation of any Hazardous Waste to, a landfill or other facility,
except those which are set forth on Schedule 2.9, and (ii) all third-parties
used by any Company to transport or dispose of any Hazardous Waste or other
waste are set forth on Schedule 2.9. No Company has received, nor do the Sellers
have knowledge of, any request for response action, administrative or other
order (or request therefor), judgment, complaint, claim, investigation, request
for information or other request for relief in any form relating to any facility
where Hazardous Waste generated or transported by any Company has been or may
have been handled, stored, disposed of, placed or located. Except as set forth
on Schedule 2.9, no Company has been requested or required by any governmental
authority or any other person to perform any investigatory or remedial activity
or other action in connection with any Environmental Matter.
(i) Except as specifically disclosed in the environmental
reports listed in Schedule 2.9 (the "Environmental Reports"), copies of which
the Sellers have provided to the Purchaser, or as otherwise set forth in
Schedule 2.9, there has been no release or other discharge by any Company at any
time of any Regulated Substances at, on, or about, under or within the Real
Estate currently owned, leased, operated or controlled by any Company which
would give rise to any material liabilities or obligations of any Company under
Environmental Laws (other than pursuant to and in accordance with Environmental
Permits held by such Company). None of the Real Estate is, nor has any ever
been, listed on the United States Environmental Protection Agency's National
Priorities List or any analogous state or foreign listing, except as listed on
Schedule 2.9. To the Sellers' knowledge, no waste of any Company has been
transported to or
21
treated at any place or location listed on the United States Environmental
Protection Agency's National Priorities List or any analogous state or foreign
listing, except as listed on Schedule 2.9.
(j) To the extent requested by the Purchaser, the Sellers have
provided to the Purchaser true, accurate, and complete information in its
possession or control pertaining to all of the matters set forth in subsections
(a) through (i) of this section, including all documents and information
pertaining to all environmental audits or assessments prepared by or for any
Company, any governmental entity or any third party (including any financial
institution) and including all reports of environmental audits or assessments
and all documents in the possession of any Company relating to the
transportation or disposal of Hazardous Waste.
(k) Except as specifically disclosed in the Environmental
Reports, the Companies and the Real Estate are in compliance in all material
respects with all Environmental Laws.
(l) As used in this Section 2.9:
(i) "Environmental Laws" means any currently
applicable federal, state, local or foreign statutory or common law, and any
rule, regulation, code, plan, ordinance, order, decree, judgment, permit, grant,
franchise, concession, restriction, agreement, requirement or injunction issued,
entered, promulgated or approved thereunder, relating to the environment,
including any law relating to emissions, discharges, disseminations, releases or
threatened releases of Regulated Substances into the environment (including air,
surface water, groundwater and land surface or subsurface), or relating to the
presence, manufacture, generation, processing, distribution, use, sale,
treatment, recycling, receipt, storage, disposal, transport, arranging for
transportation, treatment of disposal, or handling of Regulated Substances.
(ii) "Environmental Permits" means, collectively,
permits, consents, licenses, approvals, registrations, certifications and
authorizations required under Environmental Laws.
(iii) "Environmental Costs" means, without
limitation, any actual or potential cleanup costs, remediation, removal, or
other response costs (which shall include costs to cause any Company to come
into compliance with Environmental Laws), investigation costs (including fees of
consultants, counsel, and other experts in connection with any environmental
investigation, testing, audits or studies), fees, losses, liabilities or
obligations (including liabilities or obligations under any lease or other
contract), payments, damages (including any actual, punitive or consequential
damages under any statutory laws, common law cause of action or contractual
obligations or otherwise, including damages (A) of third parties for personal
injury or property damage, or (B) to natural resources), civil, administrative
or criminal fines or penalties, judgments and amounts paid in settlement arising
out of or relating to or resulting from any Environmental Matter.
22
(iv) "Environmental Matter" means any matter having a
Material Adverse Effect arising out of, relating to, or resulting from (A) any
matters relating to emissions, discharges, disseminations, releases or
threatened releases, of Regulated Substances into the air (indoor and outdoor),
surface water, ground water, soil, land surface or subsurface, buildings,
facilities, real or personal property or fixtures in violation of an
Environmental Law, or (B) otherwise arising out of, relating to, or resulting
from the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, handling, release or threatened release of Regulated
Substances in violation of an Environmental Law.
(v) "Hazardous Waste" means a solid waste, or
combination of solid wastes, which because of its quantity, concentration, or
physical, chemical, or infectious characteristics may (A) cause, or
significantly contribute to an increase in mortality or an increase in serious
irreversible, or incapacitating reversible, illness, or (B) pose a substantial
present or potential hazard to human health or the environment when improperly
treated, stored, transported, or disposed of, or otherwise managed.
(vi) "Regulated Substances" means any substance,
compound or material regulated by or pursuant to any Environmental Law.
2.10. Insurance. Schedule 2.10 sets forth a listing and a brief
description of the type, amount of coverage and term of all policies of fire,
liability, workers' compensation and all other forms of insurance owned or held
by and insuring any Company or its business, each of which is in full force and
effect. All premiums with respect to such insurance policies covering all
periods up to and including the Closing Date have been or will be paid (other
than retrospective premiums which may be payable with respect to workers'
compensation insurance policies), and no notice of cancellation or termination
has been received with respect to any such policy. Such policies are valid,
outstanding, and enforceable up to the Closing Date and, to the Sellers'
knowledge, will not in any way be affected by, or terminate or lapse by reason
of, the transactions contemplated by this Agreement. Except as set forth in
Schedule 2.10: (a) to the Sellers' knowledge, the insurance policies to which
any Company is a party are sufficient for compliance with all requirements of
law and for all agreements to which any Company is a party; (b) there are no
outstanding claims by any Company under any such insurance policies except for
routine claims under workers' compensation and employee benefit plans; (c) no
Company has been refused any insurance with respect to their assets or
operations nor has its coverage been limited by any insurance carrier to which
it has applied for any such insurance or with which it has carried insurance
during the 36 months immediately prior to the date of this Agreement; and (d) to
the Sellers' knowledge, each Company has timely and properly given all notices
required to have been given by any Company to any insurance company, and no
insurance company has asserted in writing that any claim is not covered by the
applicable policy relating to such claim.
2.11. Labor Matters. Except as set forth in Schedule 2.11, no Company
is a party to or subject to any labor union or collective bargaining agreement.
Each Company is in compliance in all material respects with all applicable laws
respecting employment and employment
23
practices, terms and conditions of employment and wages and hours, and are not
engaged in any unfair labor practice. There is not actually pending or, to the
Sellers' knowledge, threatened against any Company (a) any labor strike,
slowdown or work stoppage, (b) any material grievance or arbitration proceeding
arising out of or under any collective bargaining agreements, or (c) any unfair
labor practice complaint against any Company before the National Labor Relations
Board or comparable foreign governmental or administrative entity. No
representation petition respecting the employees of any Company has ever been
filed with the National Labor Relations Board or any comparable foreign
governmental or administrative entity. No Company has ever experienced any
primary work stoppage or labor strike involving its employees.
2.12. ERISA; Benefit Plans.
(a) Schedule 2.12 contains a list of all employment-related
plans, including employment or consulting agreements, collective bargaining and
supplemental agreements, pension, profit sharing, incentive, bonus, deferred
compensation, retirement, stock option, stock purchase, severance, medical and
hospitalization, insurance, vacation, salary continuation, sick pay, welfare,
fringe benefit and other employee benefit plans, contracts, programs, policies
and arrangements, whether written or oral, which any Company maintains or have
maintained, or under which any Company has or had any obligations with respect
to any employee, now or at any time during the five years immediately prior to
the date of this Agreement (the "Plans").
(b) Except as set forth in Schedule 2.12: (i) no Company has
any unfunded liabilities in connection with any of the Plans; (ii) all
contributions, premium payments and other payments due from any Company to or
under such Plans have been paid in a timely manner; and (iii) all additional
contributions, premium payments and other payments due on or before the Closing
Date shall have been paid by that date.
(c) Except as set forth in Schedule 2.12, with respect to each
of the Plans:
(i) each Plan has been established, maintained,
funded and administered in all material respects in accordance with its
governing documents, and all applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (including compliance with
ERISA Section 404(c) and related regulations regarding participant self-directed
investments), the Code, other applicable domestic or foreign law, and all
regulations thereunder;
(ii) all disclosures to employees and all filings and
other reports relating to each such Plan and required (under ERISA, the Code,
other applicable domestic or foreign law, including federal, state and foreign
securities laws, and all regulations thereunder) to have been made or filed on
or before the Closing Date have been or will be duly and timely made or filed by
that date;
(iii) there is no litigation, disputed claim (other
than routine claims for benefits), governmental proceeding, audit, inquiry or
investigation pending or, to the Sellers'
24
knowledge, threatened with respect to any such Plan, its related assets or
trusts, or any fiduciary, administrator or sponsor of such Plan;
(iv) the Sellers have delivered to the Purchaser true
and complete copies of the following: (A) the current Plan document (including a
written description of all oral Plans); (B) any amendments thereto, and the
related summary plan description, if any; (C) each trust or custodial agreement
and each deposit administration, group annuity, insurance or other funding
agreement associated with each such Plan; (D) for the last three Plan years, the
financial information or reports (including any FASB required reports, if
applicable), valuation reports, and/or actuarial reports relating to each such
Plan; (E) all Internal Revenue Service and other governmental agency rulings
relating thereto, and all applications for such rulings; (F) and all filing and
reports (including the Annual Report Form 5500 series, if applicable) filed with
any governmental agency at any time during the three year period ending on the
Closing Date, along with all schedules and reports filed therewith;
(v) neither any such Plan nor any other person or
entity has engaged in a "prohibited transaction" (as defined in ERISA Section
406 or Code Section 4975) or comparable foreign statutes or regulations with
respect to such Plan, for which no individual or class exemption exists;
(vi) each Plan which is a "group health plan" (as
defined in Code Section 5000(b)(1)) has complied and will comply at all times
(whether before or on the Closing Date) in all respects with the applicable
requirements of ERISA, the Code, and any applicable state law, including ERISA
Sections 601 through 734, Code Sections 498B and 9801 through 9833 and all
related regulations thereunder; and
(vii) no such Plan is an "employee welfare benefit
plan" (as defined in ERISA Section 3(1)) that provides benefits to or on behalf
of any person following retirement or other termination of employment (except to
the extent required by Code Section 4980B).
(d) Except as set forth in Schedule 2.12, with respect to each
Plan which is an "employee pension benefit plan" (as defined in ERISA Section
3(2)):
(i) no event has occurred and no condition exists
relating to any such Plan that would subject any Company or the Purchaser to any
tax under Code Sections 4972 or 4979, or to any liability under ERISA Section
502;
(ii) to the extent applicable, no such Plan has
experienced any "accumulated funding deficiency" (as defined in Code Section
412), whether or not waived, at any time;
(iii) no such Plan is subject to Title IV of ERISA;
and
25
(iv) no such Plan is a "multiemployer plan" (as
defined in ERISA Section 3(37)).
(e) The consummation of the transactions contemplated by this
Agreement will not:
(i) entitle any current or former employee of any
Company to severance pay, unemployment compensation or similar payment;
(ii) accelerate the time of any payment or vesting or
increase the amount of any compensation due to, or in respect of, any current or
former employee of any Company; or
(iii) constitute or involve the breach of fiduciary
responsibility within the meaning of ERISA Section 502(l) or otherwise violate
Part 4 of Subtitle B of Title I of ERISA.
2.13. Certain Contracts and Arrangements.
(a) Schedule 2.13 sets forth a list of the following: (i) open
purchase orders, purchase commitments, sales orders and sales commitments
greater than $100,000 entered into in the ordinary course of business; (ii)
current employment agreements, consulting agreements or other employee or
similar agreements with any employee of any Company and other similar
arrangements or understandings not terminable at the will of any Company without
penalty; (iii) each current indenture, mortgage, note, installment obligation,
agreement or other instrument relating to the borrowing of money in excess of
$50,000 by any Company or the guaranty of any obligation for the borrowing of
money in excess of $50,000 by any Company; (iv) each other current contract,
agreement, commitment, arrangement or understanding which is not terminable by
any Company on 30 or fewer days' notice at any time without penalty and which
involves the receipt or payment by any Company of more than $50,000; (v) any
current partnership, joint venture, shareholder or similar agreement; (vi) any
current guaranty, letter of credit, currency or interest rate exchange or other
derivative agreement, keep-well or similar instrument or agreement; (vii) any
current agreement containing non-competition or other limitations restricting
the conduct of the business of any Company; (viii) any current manufacturer's
representative agreement, broker's agreement, distributorship or dealer
agreement or other agreement relating to the sale or distribution of products to
or by persons or other retailers; (ix) any current agreement with any
manufacturer, supplier or customer with respect to discounts, allowances,
chargebacks, rebates or retroactive price adjustments; (x) any current agreement
entered into since January 1, 1996 (other than for the purchase of machinery and
equipment in the ordinary course of business), relating to the acquisition or
disposition of businesses, product lines or a material amount of assets; or (xi)
any current indemnification agreement with any employee of any Company.
26
(b) All purchase orders and commitments and all sales orders
and commitments of the Companies have been entered into in the ordinary course
of business consistent with past practices.
(c) Except as set forth in Schedule 2.13, no default or, to
the Sellers' knowledge, alleged default or any event which, with the lapse of
time or with the election of any Person other than the Companies, could become a
default exists under any of the contracts, agreements, commitments, arrangements
or understandings which are required to be disclosed pursuant to this Agreement.
Each of such contracts, agreements, commitments, arrangements or understandings
is now valid, in full force and effect and enforceable in accordance with its
terms and each Company has fulfilled in all material respects, or taken all
action reasonably necessary to enable it to fulfill when due, all its
obligations under such contracts, agreements, commitments, arrangements or
understandings.
(d) The Sellers have provided to the Purchaser copies of all
of the agreements and documents listed on Schedule 2.13.
2.14. Legal Proceedings, Etc. Except as described on Schedule 2.14,
there is no claim, suit, action, proceeding or investigation pending or, to the
Sellers' knowledge, threatened against any Company before any court or
governmental or regulatory authority or body, or any arbitral body, nor does any
Seller know of any basis in fact for any such claim, suit, action, proceeding or
investigation. No Company is subject to any outstanding order judicial, writ,
injunction or decree whatsoever.
2.15. Governmental Authorizations and Regulations. There are no
licenses, permits or other governmental authorizations (other than Environmental
Permits) issued to any Company by any governmental authority or agency which are
necessary for the conduct of business by such Company or which are necessary to
enable such Company to use its name or to own, lease, hold or use its properties
and assets. To the Sellers' knowledge, the businesses of the Companies are being
conducted in material compliance with all applicable licenses, permits and other
governmental authorizations.
2.16. Taxes.
(a) Each Parent Company duly made an election pursuant to
Subchapter S of the Code and at all times since such elections has qualified as
an "S Corporation", as defined in Section 1361(a)(1) of the Code through the
Closing Date. ACE Germany duly made an election pursuant to Code Reg. Section
301.7701-3 to be classified as a partnership for United States federal income
tax purposes and at all times since such election through the Closing Date has
so qualified. No Company has taken any action that could jeopardize the tax
classification of such Company obtained pursuant to such elections.
(b) Each Company has duly filed (or caused to be filed) all
returns of Taxes (as defined in Section 2.16(j)) required to be filed by it on
or prior to the Closing Date, and each
27
Company has paid all Taxes for all periods covered by such returns. Such returns
of Taxes are true, correct, and complete in all material respects.
(c) No action or proceeding for the assessment or collection
of any Taxes is pending or, proposed against any Company, and no deficiency,
assessment or other claim for any Taxes has been asserted or made against any
Company that has not been fully paid. No issue has been raised by any Taxing
authority in connection with an audit or examination of any return of Taxes. No
Company has agreed, nor is required, to include in income any adjustment
pursuant to Section 481(a) of the Code (or comparable state or foreign law or
regulations) by reason of a change in accounting method or otherwise. There are
no outstanding agreements or waivers extending the applicable statutory periods
of limitation for the assessment or collection of Taxes for any Company for any
period. No Company has, with regard to any assets or property held by any
Company, filed a consent to the application of Section 341(f)(2) of the Code (or
comparable state or foreign law or regulations). No Company has received any
reports or other written assertions by agents of any Taxing authority of any
deficiencies or other liabilities for Taxes with respect to Taxable periods for
which the limitations period has not run.
(d) All Taxes which any Company has been required to collect
or withhold have been duly withheld or collected and, to the extent required,
have been paid to the proper Taxing authority.
(e) There is no contract, agreement, plan or arrangement of
any Company covering any person that, individually or collectively, as a
consequence of the transactions contemplated by this Agreement, could give rise
to the payment of any amount that would not be deductible by the Purchaser by
reason of Section 280G of the Code (or comparable state or foreign law or
regulations).
(f) No Company is, nor has been, a party to any tax allocation
or tax sharing agreement.
(g) There are no liens or encumbrances asserted by any
governmental body, foreign or domestic, as a result of the failure of any
Company to pay Taxes.
(h) None of the assets of any Company is subject to a "safe
harbor lease" under Section 168(f)(8) of the Code, as in effect immediately
prior to the Tax Equity and Fiscal Responsibility Act of 1982 (or comparable
federal, state or foreign law or regulations).
(i) The Parent Companies will not be liable for any Tax under
Section 1374 of the Code in connection with the deemed sale of the Parent
Company's assets caused by the Section 338(h)(10) election contemplated by this
Agreement. No Company has, in the ten years prior to the date of this Agreement
(i) acquired assets from another corporation in a transaction in which the tax
basis for the acquired assets was determined by reference to the tax basis of
the acquired assets in the hands of the transferor, or (ii) acquired shares of
the capital stock of any corporation which is a qualified Subchapter S
subsidiary.
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(j) As used in this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies or other assessments including income, excise, property,
transfer, payroll, withholding, employment, value added, capital, net worth,
estimated, sales, use and franchise taxes, imposed by the United States, or any
state, county, local or foreign government or subdivision or agency thereof, and
including any interest, penalties or additions attributable thereto, whether or
not disputed.
2.17. Transactions with Shareholders, Officers, Directors, Etc. Except
as disclosed on Schedule 2.17, and other than accrued but unpaid salary due from
the end of the last pay period and routine payments pursuant to Sections 2.12 or
2.13(a), there are no amounts owing from any Company to any present or former
shareholder, officer, director, member or employee of any Company, nor are there
any amounts owing from any such person to any Company, nor have there been since
September 30, 2000, or are there currently pending any transactions between any
Company and any such Person.
2.18. Change in Control Agreements. No Seller nor any Company is a
party to any plan, agreement, contract, authorization or arrangement pursuant to
which any participant, beneficiary or party is or will become entitled to any
benefit upon a change of control of any Company.
2.19. Commissions. Except as set forth on Schedule 2.19, neither any
Seller nor any Company has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finders' fees, and no broker or finder has acted directly or indirectly for the
Sellers or any Company in connection with this Agreement or the transactions
contemplated in this Agreement.
2.20. Inventory. Except as set forth on Schedule 2.20, all the
inventories of each Company are suitable, usable and, in the case of finished
goods and products, saleable at applicable prices and, in the case of raw
materials and work-in-process, properly valued under GAAP at no less than the
values reflected on the books of each Company, in the ordinary course of
business consistent with past practices for the purposes for which intended,
except to the extent written down or reserved against. The Sellers have no
knowledge of any adverse condition affecting a material source of materials
available to any Company.
2.21. Accounts and Notes Receivable; Accounts Payable.
(a) The accounts and notes receivable of each Company (i) are
bona fide accounts and notes receivable created in the ordinary and usual course
of business in connection with bona fide transactions and consistent with past
practice, (ii) are outstanding as set forth on the aging schedules delivered to
the Purchaser, and (iii) are fully collectible when due at their face amounts,
except to the extent of any allowance for doubtful accounts and sales
adjustments set forth on the Interim Financial Statements, which allowance has
been fairly determined in accordance with GAAP.
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(b) The accounts payable of each Company (i) are bona fide
accounts payable created in the ordinary and usual course of business in
connection with bona fide transactions and consistent with past practice, and
(ii) except as set forth on Schedule 2.21, are not past due, have not been
discounted (other than in the ordinary course of business), and have been paid
in accordance with the past practices of the applicable Company.
2.22. Suppliers. No supplier of materials or services to any Company in
an amount in excess of $100,000 per year has during the last twelve months
decreased materially or, to the Sellers' knowledge, threatened to decrease or
limit materially, except upon any Company's request, its provision of services
or supplies to any Company. The Sellers have no knowledge of any termination,
cancellation or limitation of, or any material modification or change in, the
business relationships of any Company with any supplier of any Company of
materials or services in an amount in excess of $100,000 per year.
2.23. Customers. Schedule 2.23 sets forth a list of the twenty-five
largest customers of each Company in terms of sales during the year ended
December 31, 1999 (the "Major Customers"). To the Sellers' knowledge, except as
set forth on Schedule 2.23, there has not been any adverse change in the
business relationships of any Company with any Major Customer. Except as set
forth in Schedule 2.23, to the Sellers' knowledge, consummation of the
transactions contemplated by this Agreement will not adversely affect the
relationship of any Company with any Major Customer in any material respect.
Schedule 2.23 sets forth a list and description of all trade discounts currently
in effect with, or offered to, any Major Customer.
2.24. Officers, Directors and Employees. Schedule 2.24 sets forth (a)
the name and total calendar year 1999 and 2000 compensation (including bonuses,
commissions or incentive compensation) of each officer and director of any
Company, and (b) the name and total calendar year 1999 and 2000 compensation
(including bonuses, commissions or incentive compensation) of each other
employee whose aggregate compensation for federal or foreign income tax purposes
during calendar year 1999 and 2000 was in excess of $50,000 (or equivalent
amount in foreign currency). Except as disclosed on Schedule 2.24, none of the
Persons referred to in clause (a) or (b) above has notified any Company or been
notified by any Company that he or she will cancel, have canceled, or otherwise
terminate such Person's relationship with such Company. Schedule 2.24 contains a
list of all employees of each Company, including their job title and primary
location of employment.
2.25. Effect of Transaction. To the Sellers' knowledge, no creditor,
employee or customer or other Person having a material business relationship
with any Company has informed any Company that such Person intends to change the
relationship because of the purchase and sale of the Shares, nor do the Sellers
have knowledge of any such intent.
2.26. Compliance with Law. Except with respect to Environmental Laws
(which are the subject of Section 2.9), the operations of each Company have been
conducted at all times in all material respects in accordance with all
applicable laws, regulations and other requirements of
30
all governmental authorities, whether federal, state, local or foreign, having
jurisdiction over each Company, including all such laws, regulations and
requirements relating to antitrust, consumer protection, currency exchange,
equal opportunity, health, occupational safety, pension, securities and
trading-with-the-enemy matters. No Company has received any notification of any
asserted present or past failure by any Company to comply with any such laws,
rules, regulations or requirements. Each Company has all material licenses,
permits, orders or approvals from governmental authorities required for the
conduct of its current activities, and are not in material violation of any such
license, permit, order or approval. To the Sellers' knowledge, all such material
licenses, permits, orders and approvals are in full force and effect and no
suspension or cancellation thereof has been threatened.
2.27. Absence of Certain Commercial Practices. No Company has, and no
director, officer, agent, employee or other Person acting on behalf of any
Company has, in violation of federal, state or foreign laws or regulations: (a)
given or agreed to give any gift or similar benefit of more than nominal value
to any customer, supplier, governmental employee or official or any other Person
who is or may be in a position to help or hinder any Company or assist in
connection with any proposed transaction; or (b) used any company or other funds
for unlawful contributions, payments, gifts, or entertainment, or made any
unlawful expenditures relating to political activity to governmental officials
or others or established or maintained any unlawful or unrecorded funds. No
Company has, and to the Sellers' knowledge, no director, officer, agent,
employee or other Person acting on behalf of any Company has, with respect to
any Company, accepted or received any unlawful contributions, payments, gifts,
entertainment or expenditures.
2.28. No Competing Business. No Seller, nor any Company, nor any
officer or director of any Company, has any direct or indirect equity interest
in any Person that competes with or conducts any business similar to that of any
Company, other than equity interests in such Persons that are listed for trading
on a United States national securities exchange or in the Nasdaq Stock Market or
on a major foreign stock exchange and which represent not more than 1% of the
outstanding voting power of any such Person.
2.29. Warranty; Product Liability. Schedule 2.29 contains a list of any
and all warranties made by any Company covering or relating to any of the
products or services sold by the business of any Company, including those
related to the warranty obligations. Schedule 2.29 contains a list of the claims
experience of each Company with respect to warranty and product liability claims
for the five years immediately prior to the date of this Agreement (including
the type of product or service and the monetary value). Except for losses,
claims, damages and expenses which are described on Schedule 2.29 there are no
liabilities of any Company, fixed or contingent, asserted and arising out of or
based upon incidents occurring on or before the date of this Agreement with
respect to:
(a) any product liability or any similar claim that relates to
any of the products of any Company;
(b) the delivery of faulty service by any Company; or
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(c) any claim for the breach of any express or implied product
warranty, or any similar claim that relates to any product sold or service
delivered by any Company and the Sellers have no knowledge of any product or
service defects which could give rise to any such liabilities or claims.
2.30. Sellers' Representative. Each Seller has irrevocably appointed
the Sellers' Representative to be his, her or its agent and attorney-in-fact to
act in connection with the transactions contemplated by this Agreement and, as
such, to act, as each Seller's agent (with full power of substitution), to take
such action on each Seller's behalf with respect to all matters relating to this
Agreement and all transactions contemplated by this Agreement.
2.31. Transaction Discussions. Except as set forth on Schedule 2.31,
since October 5, 2000, no Parent Company nor any Seller has, nor has any
officer, director, trustee, agent, or representative of any Company or any
Seller, directly or indirectly, engaged in any discussions with any Person,
other than the Purchaser, relating to any acquisition or purchase of any equity
interest in, or all or (other than in the ordinary course of business consistent
with past practices) a portion of the assets of, any Company or any business
combination with any Company.
2.32. No Misleading Statements. The representations of the Sellers in
this Agreement or any Exhibit, Schedule, list or other document delivered by any
Company or the Sellers to the Purchaser pursuant to this Agreement do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained in this Agreement or any
Exhibit, Schedule, list or other document not misleading. No information
necessary to make any of the representations and warranties in this Agreement
not misleading has been withheld from, or has not been disclosed in writing to,
the Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Sellers that the following
representations and warranties are true and correct.
3.1. Organization. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
3.2. Authority Relative to this Agreement. The Purchaser has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly and validly authorized by the
Board of Directors of the Purchaser, and no other corporate proceedings on the
part of the Purchaser are necessary to authorize this Agreement or to consummate
the transactions contemplated by this Agreement or thereby. This Agreement has
been duly and validly executed and delivered by the Purchaser and this Agreement
constitutes a valid and
32
binding agreement of the Purchaser, enforceable against the Purchaser in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
3.3. Consents and Approvals; No Violation. Neither the execution
and delivery of this Agreement by the Purchaser nor the consummation of the
transactions contemplated by this Agreement or thereby will (a) conflict with or
result in any breach of any provision of the Certificate of Incorporation or
Bylaws of the Purchaser, (b) require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, except in connection with the HSR Act or comparable foreign
competition or antitrust provisions, (c) assuming compliance with the HSR Act or
comparable foreign competition or antitrust provisions, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Purchaser or
any of their assets, which violation would in the opinion of the Purchaser
impair in any material respect its ability to consummate the transactions
contemplated by this Agreement, (d) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, any
of the material terms, conditions or provisions of any note, bond, mortgage,
indenture, license, lease, contract, agreement or other instrument or obligation
to which the Purchaser is a party or by which any of its properties or assets
may be bound, or (e) violate any order, judicial writ, injunction or decree,
legislative statute, or governmental agency rule or regulation applicable to the
Purchaser, or any of its properties or assets.
3.4. Financing. The Purchaser has sufficient funds available
(through existing credit arrangements or otherwise) to purchase the Shares, to
fully satisfy any other obligations it may have to the Sellers, and to pay all
fees and expenses related to the transactions contemplated by this Agreement.
3.5. Commissions. The Purchaser has not employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finders' fees, and no broker or finder has acted directly
or indirectly for the Purchaser in connection with this Agreement or the
transactions contemplated in this Agreement.
3.6. Access to Information. Prior to the Closing Date, the Sellers
(a) have given the Purchaser and its authorized representatives reasonable
access to all books, records (including all work papers and other documents of
the Companies and their independent auditors), plants, offices and other
facilities and properties, (b) have permitted the Purchaser to make such
inspections thereof as the Purchaser has requested, and (c) to the Purchaser's
knowledge, have caused the officers and advisors of the Companies to furnish the
Purchaser with such financial and operating data and other information with
respect to the businesses and properties of the Companies as the Purchaser has
requested.
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3.7. No Misleading Statements. The representations of the Purchaser
in this Agreement or any Exhibit, Schedule, list or other document delivered by
the Purchaser to the Sellers pursuant to this Agreement do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained in this Agreement or any Exhibit,
Schedule, list or other document not misleading. No information necessary to
make any of the representations and warranties in this Agreement not misleading
has been withheld from, or has not been disclosed in writing to, the Sellers.
ARTICLE IV
COVENANTS OF THE PARTIES
4.1. Conduct of Business of the Companies. Except as contemplated
by this Agreement or as set forth in Schedule 4.1, during the period from the
date of execution of this Agreement to the Closing Date, each Parent Company
shall, and the Parent Companies and the Sellers shall cause the other Companies
to, conduct its business and operations according to its ordinary and usual
course of business and consistent with past practices. Without limiting the
generality of the foregoing, and except as expressly contemplated in this
Agreement, prior to the Closing Date, without the prior written consent of the
Purchaser, no Company shall:
(a) create, incur or assume any indebtedness, including,
obligations in respect of capital leases, except for short-term borrowings for
working capital purposes that may be unsecured or secured;
(b) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the obligations
of any other person or persons except in the ordinary course of business
consistent with past practices not exceeding individually or in the aggregate
$25,000; except that any Company may endorse negotiable instruments in the
ordinary course of business consistent with past practices;
(c) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of its capital stock or other equity interests, or issue, pledge or sell
any shares of its capital stock or other equity interests or other securities
convertible into, exchangeable for or conferring the right to acquire shares of
its capital stock or other equity interests, or repurchase or redeem or
otherwise acquire any shares of its capital stock or other equity interests or
such other securities; provided, however, that the Parent Companies shall be
permitted to make distributions to the Sellers on the Closing Date pursuant to
Section 1.2(b).
(d) (i) increase the rate or terms of compensation
payable or to become payable by any Company to its directors, officers or
employees listed on Schedule 2.24, or (ii) increase the rate or terms of any, or
commit itself to any additional, bonus, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with any such directors,
officers or employees;
34
(e) amend its Articles of Incorporation or Bylaws (or
similar governing documents), merge, consolidate or amalgamate with or into any
other Person, subdivide, combine or reclassify any shares of its capital stock,
equity interests or other securities;
(f) take or omit to take any action that would cause any
of the representations and warranties contained in Article II to be untrue; or
(g) buy or sell any futures contract, option or forward
commitment relating to commodities used as raw materials by any Company or enter
into any contract, agreement, arrangement or other understanding to do any act
prohibited by any of the foregoing provisions of this Section 4.1.
4.2. Access to Information. Between the date of this Agreement and
the Closing Date, the Sellers shall, during ordinary business hours, continue to
(a) give the Purchaser and its authorized representatives reasonable access to
all books, records (including all work papers and other documents of the
Companies and their independent auditors), plants, offices and other facilities
and properties of the Companies, (b) permit the Purchaser to make such
inspections thereof as the Purchaser may reasonably request, (c) cause the
Companies' officers and advisors to furnish the Purchaser with such financial
and operating data and other information with respect to the business and
properties of the Companies as the Purchaser may from time to time reasonably
request, and (d) cause the Companies' advisors, including its auditors,
attorneys, financial advisors and other consultants, to furnish the Purchaser
with such financial, Tax and other operating data and other information with
respect to the business and properties of each Company for periods ending before
or including the Closing Date as the Purchaser may reasonably request with
respect to Taxes for purposes of preparing Tax returns and conducting
proceedings relating to Taxes. Any such inspection or investigation shall be
conducted in such a manner as not to interfere unreasonably with the operation
of the business of the Companies. The Sellers shall not be required at any time
to take any action which would constitute a waiver of the attorney-client
privilege and the Sellers need not supply the Purchaser with any information
which they are under a legal obligation not to supply; provided, however, that
the Sellers shall promptly notify the Purchaser if the Sellers believe
responding to any information requests by the Purchaser would violate the
foregoing. The Purchaser shall not contact or meet with any customer of any
Company to discuss the transactions contemplated by this Agreement without the
prior consent of the Sellers' Representative, which consent shall not be
unreasonably withheld or delayed.
4.3. Additional Financial Statements; Updated Schedules. As soon as
reasonably practicable after they become available, the Sellers shall furnish to
the Purchaser a combined unaudited internal balance sheet and a combined
statement of operations of the Companies, for all interim monthly periods
subsequent to the date of this Agreement and prior to the Closing Date. Such
financial statements will be prepared in conformity with GAAP, except as noted
therein and will fairly present (subject to normal year-end audit adjustments)
the consolidated combined financial position and consolidated results of
operations of the Companies for the periods covered by such statements.
35
4.4. Consents. Each Party shall use its respective commercially
reasonable efforts to obtain consents of all Persons and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement including the consents specified on Schedule 4.4 (the "Required
Consents").
4.5. Filings. Pursuant to the HSR Act and comparable applicable
foreign competition or antitrust provisions, each Party shall have filed, on a
timely basis prior to the Closing Date, all requisite documents and
notifications in connection with the transactions contemplated by this Agreement
with the United States Federal Trade Commission and the Antitrust Division of
the United States Department of Justice and each applicable foreign
jurisdiction. Additionally, each Party shall file, or cause to be filed, with
any other federal, state or local governmental authority all such other filings
and submissions under laws and regulations applicable to each Party, if any, as
may be required for the consummation of the transactions contemplated by this
Agreement. The Parties shall coordinate and cooperate with one another in
exchanging such information and reasonable assistance as may be requested in
connection with all of the foregoing. The Purchaser shall pay all of the filing
fee required pursuant to the HSR Act.
4.6. No Shopping, Etc. No Parent Company nor any Seller shall, and
each Parent Company and the Sellers shall cause its and the other Companies'
officers, directors, trustees, agents, and representatives not to, directly or
indirectly, through any officer, director, agent or otherwise, solicit, initiate
or encourage submission of proposals or offers from any Person relating to any
acquisition or purchase of any equity interest in, or all or (other than in the
ordinary course of business consistent with past practices) a portion of the
assets of, each Company or any business combination with each Company, or
participate in any negotiations regarding, or furnish to any other Person any
information with respect to, or otherwise cooperate in any way with, assist, or
participate in, facilitate or encourage, any effort or attempt by any other
Person to do or seek any of the foregoing.
4.7. Furnishing Information; Announcements. Each Party shall, as
soon as practicable after reasonable request therefor, furnish to the other
Parties all the information concerning the Parties required for inclusion in any
statement or application made to any governmental or regulatory body in
connection with the transactions contemplated by this Agreement. No Party shall
issue any press releases or otherwise make any public statement with respect to
the transactions contemplated by this Agreement, without the prior consent of
the other Parties, except as, in the reasonable judgment of the Party
determining to issue such press release or make such public statement, is
otherwise required by law or by any stock exchange on which the shares of the
Purchaser are listed, and then only upon prompt prior notice to the other Party
at least forty-eight hours prior to making any such press release or public
announcement.
4.8. Additional Agreements. Subject to the terms and conditions of
this Agreement, each of the Parties agrees to use its commercially reasonable
efforts, at its own expense, to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
36
transactions contemplated by this Agreement. If at any time after the Closing
any further action is necessary to carry out or perform a Party's obligations
under this Agreement, such Party shall take, at its own expense, such necessary
action.
4.9. Notification of Certain Matters. Prior to the Closing, each
Party shall give the other prompt notice in writing of: (a) any information
which indicates that any representation and warranty contained in this Agreement
was not true and correct as of the date of this Agreement or will not be true
and correct as of the Closing; provided, however, that such notification shall
not be deemed to have amended any Schedule; (b) the occurrence of any event
which will result, or has a reasonable prospect of resulting, in a Material
Adverse Effect or in the failure to satisfy a condition specified in Article V
of this Agreement; and (c) any notice or other communication from any third
person alleging that the consent of such third person is or may be required in
connection with the transactions contemplated by this Agreement. The Sellers
shall confer on a regular and frequent basis with one or more designated
representatives of the Purchaser to report operational matters and to report the
general status of on-going operations, and will notify the Purchaser of any
emergency or other change in the normal course of business or in the operation
of the properties of the Companies and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) or adjudicatory proceedings involving any property of the
Companies.
4.10. Tax Matters.
(a) Between the date of this Agreement and the Closing,
the Sellers shall cause each Company to file on a timely basis all Tax returns
required to be filed by, or with respect to, each Company on or before the
Closing Date, including all Tax returns arising out of the Parent Companies'
status as Subchapter S corporations. All such Tax returns will be true, correct
and complete when filed by the applicable Company. No Company shall make any
election or file any amended Tax return reflecting any position that could
result in adverse Tax consequences to the Companies or the Purchaser for any
period beginning on or after the Closing Date. The Parent Companies and the
Sellers shall not revoke the Parent Companies' elections to be taxed as
Subchapter S corporations within the meaning of Code Section 1361. The Parent
Companies and the Sellers shall not take or allow any action (other than the
transactions contemplated by this Agreement) that would result in a termination
of the Parent Companies' status as a validly elected Subchapter S corporation
within the meaning of Code Section 1361. Further, the Parent Companies and the
Sellers shall not take any election to change the classification of ACE Germany
or ACE Japan under any applicable tax provisions.
(b) After the Closing, the Sellers shall have full and
complete access, at reasonable times and places, to the Companies' accounting
and business records for the purposes of preparation or audit of the Sellers'
year 2000 and 2001 income tax returns, or the audit of any prior year income tax
returns and for purposes of fulfilling their indemnity obligations under Article
VII; provided, however, that all of the Sellers shall be required to examine
such records collectively, rather than each Seller or groups of Sellers
requesting to examine such records.
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(c) The sale of the Shares to the Purchaser will require
the filing of a federal income tax return for each Parent Company as a
Subchapter S corporation for the period beginning January 1, 2001 and ending on
the Closing Date (the "Short Tax Period"). Each Parent Company shall close its
books as of the end of the Short Tax Period pursuant to Section 1362(e)(6)(D) of
the Code and compute taxable income or taxable loss for the Short Tax Period on
the basis of the permanent books and records (including workpapers) of each
Parent Company. The sale of the Shares to the Purchaser will also require the
filing of a federal income tax return for ACE Germany as a partnership for the
Short Tax Period. ACE Germany shall close its books as of the end of the Short
Tax Period pursuant to Section 706 of the Code and compute taxable income or
taxable loss for the Short Tax Period on the basis of the permanent books and
records (including workpapers) of the partnership. The Sellers shall prepare on
behalf of each Parent Company and ACE Germany the necessary Tax returns, in
accordance with its customary accounting procedures, for the Short Tax Period,
in accordance with the applicable requirements of the Code and in a manner
consistent with the Tax returns previously filed by the applicable Parent
Company and ACE Germany and provide such information, and copies of such
returns, to the Purchaser. Such Tax returns shall be filed by the Sellers by the
due date of such returns (without extensions). The Sellers shall pay the federal
and any applicable state or foreign income tax for the Short Tax Period.
(d) Notwithstanding anything to the contrary in Article
VII, the Sellers shall have the right to represent the interests of the
Companies in any Tax audit or administrative or court proceeding relating to any
Tax returns (federal, state, local or foreign) for periods prior to the Closing
Date, including any proceeding relating to any Company. The Purchaser or its
representatives shall be permitted to participate in any such audit or
proceeding that the Purchaser reasonably concludes may result in a claim for
indemnification under Section 7.1. The Purchaser and the Sellers' Representative
shall cooperate with each other in responding to such audit or proceeding.
Notwithstanding anything to the contrary in this Agreement (i) without the prior
written consent of the Purchaser (which shall not be unreasonably withheld or
delayed), neither the Sellers, the Sellers' Representative nor any affiliate of
either shall agree or consent to compromise or settle, either administratively
or after the commencement of any litigation, any issue or claim arising in any
such audit or proceeding, or otherwise agree or consent to any Tax liability, to
the extent that any such compromise, settlement, consent or agreement may affect
the Tax liability of the Purchaser or any Company or any affiliate of either
after the Closing Date (including the imposition of Tax deficiencies, the
reduction of asset basis or cost adjustments, the lengthening of any
amortization or depreciation periods, the denial of amortization or depreciation
deductions, or the reduction or loss of credit carryforwards), and (ii) neither
the Purchaser nor any affiliate of the Purchaser shall agree or consent to
compromise or settle, either administratively or after the commencement of
litigation, any issue or claim arising in any such audit or proceeding, or
otherwise agree or consent to any Tax liability for periods prior to the Closing
Date, to the extent that any such compromise, settlement, consent or agreement
may result in a claim from the Purchaser for indemnification by the Sellers
under Article VII.
(e) The Purchaser shall promptly notify the Sellers'
Representative upon receipt by the Purchaser, any affiliate of the Purchaser or
any Company of notice of any pending
38
or threatened Tax audits or assessments relating to the income, properties or
operations of the Companies, in each case for periods prior to the Closing Date
only, so long as such periods remain open; provided, however, that failure by
the Purchaser to comply with this section shall not affect the Purchaser's right
to indemnification relating to Taxes if such failure does not prejudice the
rights of the Sellers. The Sellers shall promptly notify the Purchaser upon
receipt by any Seller or any affiliate thereof of notice of any pending or
threatened Tax audits or assessments relating to the income, properties or
operations of any Company, in each case for periods prior to the Closing Date
only; provided, however, that the failure by the Sellers to comply with this
section shall not affect the Sellers' right to indemnification if such failure
does not prejudice the rights of the Purchaser.
(f) Neither the Sellers, the Sellers' Representative nor
any affiliate of any Seller shall, without the prior written consent of the
Purchaser (which shall not be unreasonably withheld or delayed), file, or cause
to be filed, any amended Tax return or claim for Tax refund, with respect to any
Company, to the extent that any such filing may affect the Tax liability of the
Purchaser, any of its affiliates or any Company (including the imposition of Tax
deficiencies, the reduction of asset basis or cost adjustments, the lengthening
of any amortization or depreciation periods, the denial of amortization or
depreciation deductions, or the reduction of loss or credit carryforwards).
Neither the Purchaser nor any affiliate of the Purchaser shall file any amended
Tax return or claim for Tax refund, with respect to any Company for periods
prior to the Closing Date, to the extent that any such filing may affect the Tax
liability of the Sellers or any of their affiliates (including the imposition of
Tax deficiencies, the reduction of asset basis or cost adjustments, the
lengthening of any amortization or depreciation periods, the denial of
amortization or depreciation deductions, or the reduction of loss or credit
carryforwards).
(g) Any and all existing Tax sharing, allocation,
compensation or like agreements or arrangements, whether or not written, that
include any Company, including any arrangement by which any Company makes
compensating payments to each other or any other member of any affiliated,
consolidated, combined, unitary or other similar Tax group for the use of
certain tax attributes, shall be terminated as of the day before the Closing
Date (pursuant to a writing executed on or before the Closing Date by all
parties concerned) and shall have no further force or effect. All liabilities of
any Company to any Seller or any affiliate of any Seller (for Taxes or otherwise
pursuant to such agreements or arrangements) shall be canceled on or prior to
the Closing Date. Any and all powers of attorney relating to Tax matters
concerning any Company shall be terminated as to the applicable Company on or
prior to the Closing Date and shall have no further force or effect.
(h) The Parties shall retain, and the Purchaser shall
cause the Companies to retain, all returns, schedules and work papers, and all
material records and other documents relating thereto, until the expiration of
the statute of limitation (and, to the extent notified by any party, any
extensions thereof) of the taxable years to which such returns and other
documents relate and, unless such returns and other documents are offered and
delivered to the Sellers or the Purchaser, as applicable, until the final
determination of any Tax in respect of such years. Any information obtained
under this Section 4.10 shall be kept confidential, except as may be
39
otherwise necessary in connection with filing any Tax return, amended return, or
claim for refund, determining any Tax liability or right to refund of Taxes, or
in conducting or defending any audit or other proceeding in respect of Taxes.
Notwithstanding the foregoing, neither the Sellers, the Sellers' Representative
nor the Purchaser, nor any of their affiliates, shall be required unreasonably
to prepare any document, or determine any information not then in its
possession, in response to a request under this section.
4.11. Personal Property of the Sellers. The Purchaser acknowledges
that certain Sellers have personal property listed on Schedule 4.11 located on
the Companies' premises and such personal property is not a part of this
transaction and shall at all times remain the personal property of the
respective Sellers.
4.12. Section 338(h)(10) Election.
(a) The Sellers and the Purchaser agree that they shall
jointly make or cause to be made the election under Section 338(h)(10) of the
Code on Form 8023 (and any corresponding election under state or local law where
available) with respect to the Companies as a result of the purchase of the
Shares under this Agreement (the "Section 338 Election"). The Sellers will
include any income, gain, loss, deduction or other tax items resulting from the
Section 338 Election on their Tax returns to the extent required by applicable
law. The Sellers also shall pay any Tax imposed on the Companies attributable to
making the Section 338 Election, including (i) any Tax imposed under Code
Section 1374, (ii) any Tax imposed under Reg. Section 1.338(h)(10)-1T and
(d)(5), or (iii) any state, local or foreign Tax imposed on the Companies gains,
and the Sellers shall indemnify the Purchaser against any Loss (as defined in
Section 7.1) or other adverse consequences arising out of any failure to pay any
such Taxes.
(b) As soon after the Closing as is practicable, the
Purchaser shall complete a final Form 8023 (and all required attachments) and
any similar forms required to be filed in order to effect the Section 338
Election under state or local law and shall present such forms to the Sellers'
Representative for approval (which approval shall not be unreasonably withheld
or delayed) promptly after their completion. For purposes of the Section 338
Election, the aggregate amount of (i) the Purchase Price, as adjusted, and (ii)
the liabilities of the Parent Companies shall be allocated to the assets of the
Parent Companies for all purposes (including tax and financial accounting
purposes) in a manner consistent with the methodology set forth on Exhibit B. If
there is a dispute concerning the application of such methodology to the final
Section 338 Election forms, the Purchaser and the Sellers' Representative shall
attempt to resolve such dispute and if they have not done so within thirty days
prior to any filing deadline, all unresolved items shall be submitted to the
Reviewing Accountants for resolution in accordance with such methodology. The
Parties shall direct the Reviewing Accountants to resolve the dispute within
twenty days of submission or as soon thereafter as practicable. The Reviewing
Accountants' determination shall be final and binding on the Parties, and
judgment on such determination may be entered in any court having jurisdiction.
The Sellers, jointly and severally, and the Purchaser shall each be responsible
for one-half of the fees and expenses of the Reviewing Accountants under this
section.
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(c) The Sellers shall cooperate with the Purchaser in
filing such election forms and the Sellers shall take any other actions that are
necessary for making or perfecting the elections and the Sellers shall execute
the Form 8023 and such other applicable election forms.
(d) The Purchaser and the Sellers shall report all
transactions pursuant to this Agreement consistent with the Section 338
Election, except where required otherwise by applicable state law, and shall
take no position contrary thereto unless required to do so pursuant to a
"determination" within the meaning of Section 1313 of the Code. The Sellers
shall pay any and all Taxes attributable to the making of the Section 338
Election ("Section 338 Election Taxes") and, notwithstanding any limitations or
restrictions set forth in Article VII, shall indemnify the Purchaser and the
Companies against any Loss (as defined in Section 7.1) relating to such Taxes.
Notwithstanding any limitations or restrictions set forth in Article VII, the
Purchaser shall indemnify the Sellers for any and all Additional Section 338
Election Taxes. For purposes of this Agreement, "Additional Section 338 Election
Taxes" means the excess of the Section 338 Election Taxes actually paid by the
Sellers over the Section 338 Election Taxes that should have been payable by the
Sellers had the Purchaser reported all transactions pursuant to the methodology
set forth on Exhibit B.
(e) The Parties agree that a violation of the provisions
of this Section 4.12 is a proper subject of injunctive relief.
4.13. Appointment of Sellers' Representative.
(a) Each of the Sellers hereby irrevocably appoints the
Person designated from time to time pursuant to Section 4.13(g) as its true and
lawful attorney-in-fact, to act as his, her or its representative (the "Sellers'
Representative") under this Agreement and, as such, to act, as such Seller's
agent (with full power of substitution), to take such action on such Seller's
behalf with respect to all matters relating to this Agreement and the related
documents and all transactions contemplated by this Agreement and the related
documents. All actions taken on the Sellers' behalf by the Sellers'
Representative shall be binding and enforceable on and against the Sellers and
each of their respective beneficiaries, heirs, personal representatives,
successors and assigns and the Purchaser shall be entitled to rely, and shall be
fully protected in relying, upon any actions taken, or statements made, by the
Sellers' Representative as the representative and agent of all of the Sellers.
(b) The Sellers' Representative designated herein accepts
the appointment as the initial Sellers' Representative and the authorization set
forth in this subsection. The Sellers' Representative shall not have any duties
or responsibilities except those expressly set forth in this Agreement, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into the Agreement or shall otherwise exist against
the Sellers' Representative. With respect to all other actions, the Sellers'
Representative shall only take or authorize such actions approved orally or in
writing by the Sellers holding a majority of the voting stock of the Parent
Companies.
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(c) The Sellers' Representative shall be entitled to
rely, and shall be fully protected in relying, upon any statements furnished to
them by any Seller or the Purchaser, or any other evidence deemed by the
Sellers' Representative to be reliable, and the Sellers' Representative shall be
entitled to act on the advice of counsel selected by them. The Sellers'
Representative shall be fully justified in failing or refusing to take any
action under this Agreement unless they have received such advice or concurrence
of such other Sellers as they deem appropriate or they have been expressly
indemnified to their satisfaction by the Sellers appointing them severally,
according to their respective ownership percentages of the Shares, against any
and all liability and expense that the Sellers' Representative may incur by
reason of taking or continuing to take any such action.
(d) The Sellers' Representative shall be entitled to
retain counsel and to incur such expenses as the Sellers' Representative deems
to be necessary or appropriate in connection with the performance of their
obligations under this Agreement, and all such fees and expenses (including
reasonable attorneys' fees and expenses) incurred by the Sellers' Representative
shall be borne by the Sellers pro rata according to their respective ownership
percentages of the Shares.
(e) The Sellers hereby agree to indemnify the Sellers'
Representative (in their capacity as such) ratably according to their respective
ownership percentages of the Shares against, and to hold the Sellers'
Representative (in their capacity as such) harmless from, any and all losses of
whatever kind which may at any time be imposed upon, incurred by or asserted
against the Sellers' Representative in such capacity in any way relating to or
arising out of their action or failures to take action pursuant to this
Agreement or in connection with this Agreement in such capacity, provided,
however, that no Seller shall be liable for the payment of any portion of such
losses resulting solely from the gross negligence or willful misconduct of the
Sellers' Representative. The agreements in this Section 4.13(e) shall survive
termination of this Agreement.
(f) To the extent this Agreement provides that the
Sellers shall be jointly and severally liable to personally pay any cost,
expense or other liability, the Sellers shall share such payment ratably in
accordance with their respective ownership percentages of the Shares, and shall
reimburse each other as necessary to give effect to the intent of this
provision.
(g) Xxxxxxx Xxxxxx Xxxxxxx and Xxxxx X. Xxxxxxx shall be
the initial Sellers' Representative and shall serve as the Sellers'
Representative until the earlier of his or her resignation, death, legal
incapacity or removal (with or without cause) by Sellers holding a majority of
the voting stock of the Parent Companies. Upon the resignation, death, legal
incapacity or removal of either Xxxxxxx Xxxxxx Xxxxxxx or Xxxxx X. Xxxxxxx, then
the survivor shall continue to serve as the sole Sellers' Representative. Upon
the resignation, death, legal
42
incapacity or removal of both Xxxxxxx Xxxxxx Xxxxxxx and Xxxxx X. Xxxxxxx, then
Xxxxxxxx X. Xxxxxxx shall serve as the sole Sellers' Representative, who may
resign, be removed or replaced in the same manner as the initial Sellers'
Representative. Upon the resignation, death, legal incapacity or removal of
Xxxxxxx Xxxxxx Xxxxxxx, Xxxxx X. Xxxxxxx and Xxxxxxxx X. Xxxxxxx, then the
Sellers holding a majority of the voting stock of the Parent Companies shall
select a new Sellers' Representative who may resign, be removed or replaced in
such a manner as the selecting Sellers agree. Each time a new Sellers'
Representative is appointed pursuant to this Agreement, such Person shall accept
such position in writing.
(h) The selecting Sellers shall notify the Purchaser of
each change of Sellers' Representative. Until the Purchaser receives the
foregoing notice, it shall be entitled to assume that a prior Person acting as
the Sellers' Representative is still the duly authorized Sellers'
Representative.
4.14. Quiet Title Suit.
(a) The Parties acknowledge that ACE Controls, through
its attorneys Xxxx, Xxxxx & XxXxxxxx, P.C., has commenced a suit in Oakland
County Circuit Court to "quiet title" to Parcel No. 29 making up part of the
real property owned by ACE Controls at 00000 Xxxxxxxxxx Xxxx Xxxxx, Xxxxxxxxxx
Xxxxx, Xxxxxxxx (the "Parcel"). After the date of this Agreement and until the
Closing Date, ACE Controls and the Sellers shall take all actions necessary or
advisable to prosecute such suit in order to have ACE Controls be the record
title holder of the Parcel. After the Closing Date, the Purchaser shall cause
ACE Controls to continue to take all such actions and shall respond to the
Sellers' Representative's reasonable requests for status updates on such suit.
(b) The Sellers shall be jointly and severally liable for
all liabilities (including attorney's fees and expenses and the costs of
settlement (if any) of any claims raised by any third-party(ies) in connection
with such suit) incurred by ACE Controls in connection with such suit, whether
taken before or after the date of this Agreement or before or after the Closing
Date, and shall directly pay the legal fees and expenses of Xxxx, Xxxxx &
XxXxxxxx, P.C. incurred in connection with such suit. The amount of such
liabilities shall not be paid from the Escrow Fund, but rather shall be a direct
obligation of the Sellers, jointly and severally. The amount of such liabilities
shall not count against any limitations on indemnification provided for in this
Agreement.
(c) The Purchaser acknowledges that the law firm of Xxxx,
Xxxxx & XxXxxxxx, P.C. shall represent ACE Controls in the "quiet title" suit
before and after the Closing Date, and the Purchaser waives any and all conflict
of interest claims arising from or relating to Xxxx, Xxxxx & XxXxxxxx, P.C.'s
representation in such matter.
4.15. Air Permit.
(a) Each Party has received and reviewed the Air Quality
Survey of ACE Controls' Farmington Hills, Michigan facility prepared by Dragun
Corporation ("Dragun"), dated February 5, 2001 (the "Air Quality Survey"). In
the Air Quality Survey, Dragun
43
concluded that ACE Controls is required to apply for a "permit to install" under
the Michigan Air Pollution Control Rules (the "Air Permit").
(b) The Parties agree that, as promptly as is practicable
after the Closing Date, ACE Controls shall apply for the Air Permit. The
Sellers, jointly and severally, shall be required to reimburse ACE Controls in
an amount equal to the costs incurred in connection with preparing and
submitting the application and any liabilities, fines or penalties arising out
of the failure to apply for the Air Permit in accordance with applicable
Environmental Laws (including attorneys' and consultants' fees, costs, and
expenses; any filing and related administrative fees; and the costs of any
equipment or improvements required by the State of Michigan in connection with
the Air Permit). Notwithstanding anything in this Agreement to the contrary, the
Sellers shall not have any obligation to reimburse the Purchaser for, or
indemnify or hold the Purchaser harmless from, any costs, expenses or other
losses incurred by the Purchaser in obtaining the Air Permit in excess of the
minimum costs and expenses required by the State of Michigan to obtain the Air
Permit.
(c) The Purchaser promptly shall notify the Sellers and
provide the Sellers with a copy of any data, information, documents, reports or
other materials relating to the Air Permit. The Sellers may, at their own cost
and expense, retain consultants and/or counsel to monitor the Purchaser's
actions regarding the Air Permit. The Purchaser shall provide the Sellers with a
copy of any plan or proposed actions or agreements with governmental agencies
and shall give the Sellers at least thirty days to comment on such plans,
actions or agreements, except where a shorter time period is necessary for the
Purchaser to comply with a regulatory time period or order or with a demand from
a governmental agency. The Purchaser shall consider and incorporate all
reasonable comments from the Sellers in such plans and agreements. Subject to
the above, the Purchaser shall make all final decisions as to the scope and
implementation of any plans, action or agreements.
(d) Except as set forth in the following sentence, such
reimbursement obligation shall not be paid from the Escrow Fund, but rather
shall be a direct obligation of the Sellers, jointly and severally.
Notwithstanding the foregoing, the first $25,000 of the amount of such
reimbursement shall be paid to the Purchaser from the Escrow Fund without regard
to whether the threshold provided for in Section 7.1(g) has been exceeded;
provided, however, that the first $25,000 of such reimbursement shall not count
against such threshold, and provided, further, that if the amount of such
reimbursement exceeds $25,000, then such excess reimbursement obligation shall
not count against any limitations on indemnification provided for in this
Agreement.
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ARTICLE V
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser required to be performed by it at the
Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by the Purchaser
as provided in this Agreement except as otherwise required by applicable law.
5.1. Representations and Warranties; Agreements. Each of the
representations and warranties of the Sellers contained in this Agreement shall
be true and correct in all material respects as of the Closing as if made on the
Closing Date. As of the Closing, each Company and the Sellers shall have, in all
material respects, duly performed and complied with each of its obligations
required by this Agreement to be performed by it at or prior to the Closing. At
the Closing, the Purchaser shall have received a certificate duly executed by
each Seller, to the effect that the conditions set forth in this section have
been satisfied.
5.2. Authorization; Consents. Any filings required to be made in
connection with the transactions contemplated by this Agreement, including the
applicable HSR filing and any required comparable foreign competition filings,
shall have been made and all applicable waiting periods with respect to each
such filing, including any extensions thereof, shall have expired or been
terminated. All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies required to consummate the transactions contemplated by this
Agreement, and all other governmental, regulatory or third party consents or
waivers shall have been made or obtained. In addition, the Sellers and the
Companies shall have obtained the consents of all Persons and governmental
authorities necessary for the Sellers and the Parent Companies to consummate the
transactions contemplated by this Agreement, including the Required Consents.
5.3. Absence of Litigation. No order, stay, injunction or decree of
any court of competent jurisdiction shall be in effect (a) that prevents or
delays the consummation of any of the transactions contemplated by this
Agreement, (b) that would impose any material limitation on the ability of the
Purchaser effectively to exercise full rights of ownership of the Shares, or (c)
that would require the divestiture by the Purchaser or any Company or any Seller
of shares of stock or any business, assets or property of any of them, or that
would impose any material limitation on the ability of any of them to conduct
its business or own stock, assets or property. No action, suit or proceeding
before any court or any governmental or regulatory entity shall be pending (or
threatened by any governmental or regulatory entity), and no investigation by
any governmental or regulatory entity shall have been commenced (and be pending)
(i) seeking to restrain or prohibit (or questioning the validity or legality of)
the consummation of the transactions contemplated by this Agreement, (ii)
seeking to require the divestiture by the Purchaser or any Company or any Seller
of shares of stock or any business, assets or property of any of them, or to
impose any material limitation on the ability of any of them to conduct its
business or own stock, assets or property, or (iii) seeking material damages in
connection therewith which the Purchaser, in good faith and with the advice of
counsel, believes makes it
45
undesirable to proceed with the consummation of the transactions contemplated by
this Agreement.
5.4. Title Policy; Survey; Environmental Assessment.
(a) The Sellers shall furnish to the Purchaser, within
ten days after the date of this Agreement (i) a title insurance commitment for
each parcel of Owned Real Estate, in each case issued by LandAmerica or Chicago
Title Insurance Company (the "Title Company") and committing the Title Company
to insure the Purchaser's fee simple title with respect to such Owned Real
Estate, without standard exceptions, in an amount equal to $4,000,000, and (ii)
an "ALTA" land title survey and legal description with respect to such Owned
Real Estate. Each title insurance commitment shall be accompanied by copies of
all items shown as exceptions to title therein.
(b) The Purchaser shall have until fifteen days after
receipt of the last of the title commitments, the title documents, and the
surveys in which to (i) examine title to the Owned Real Estate, and (ii) notify
the Sellers in writing of the Purchaser's disapproval of any matter shown
thereon. Upon notice from the Purchaser of its disapproval of any matter shown
on the applicable title commitment, the Sellers shall have until the day
immediately preceding the Closing within which to cure or eliminate such matters
or to obtain title insurance from the Title Company that insures against such
defects to the Purchaser's reasonable satisfaction. Concurrently with the
Closing, the Sellers shall cause the Title Company to issue to the Purchaser,
with respect to each of the Owned Real Estate, the Title Company's standard ALTA
owner's title policy (or a "marked-up" title commitment), without standard
exceptions, and with a Form 3.1 (completed structure) zoning endorsement, an
access endorsement, a comprehensive endorsement and a tax parcel endorsement,
each in form acceptable to the Purchaser. The cost of the title insurance
policies and endorsements shall be born by the Sellers.
(c) No Party shall have received any notice, nor have any
knowledge, of any claim, allegation or threat challenging ACE Control's
ownership of the Parcel.
(d) The Sellers, at their expense, shall obtain and
provide a copy to the Purchaser of a Phase I Environmental Site Assessment of
the land and buildings included in the Owned Real Estate by an environmental
testing firm reasonably acceptable to the Purchaser. If the Phase I
Environmental Site Assessment recommends a Phase II Environmental Site
Assessment and if the Purchaser requests, the Companies or their designee shall
provide the Phase II Environmental Site Assessment to the Purchaser and the
Purchaser shall reimburse the Companies for the actual cost of such Phase II
Assessments. Any further Environmental Site Assessments beyond the Phase II
Assessments shall be at the expense of the Purchaser. The Purchaser shall have
until fifteen days after receipt of the last of Phase I or II assessments in
which to (i) examine such assessments, and (ii) notify the Sellers in writing of
the Purchaser's disapproval of any matter shown thereon. Upon notice from the
Purchaser of its disapproval of any matter shown on the applicable assessment,
the Sellers shall have until the day immediately
46
preceding the Closing within which to cure or eliminate such matters to the
Purchaser's reasonable satisfaction.
5.5. Consent and Estoppel Certificate. The Sellers shall obtain and
deliver to the Purchaser at or prior to Closing a certificate from the lessor
under each Company's real estate leases, dated during the month in which the
Closing occurs, which (a) grants the consent of the lessor to the assignment (or
deemed assignment) of such Lease to the Purchaser or certifies that such consent
is not required, (b) certifies that such lease is in good standing and full
force and effect in accordance with its terms and has not been modified, (c)
certifies that the date to which rent and other charges under such lease have
been paid, and (d) certifies that there is no default under such leases on the
part of any party to such leases.
5.6. Employment Agreement. At or prior to the Closing, the
Purchaser and Xxxxxxx Xxxx Xxxxxxx shall execute and deliver an employment
agreement in substantially the form attached to this Agreement as Exhibit C (the
"Employment Agreement").
5.7. Non-Competition Agreement. At or prior to the Closing, the
Purchaser, Xxxxxxx Xxxxxx Xxxxxxx, Xxxxx X. Xxxxxxx, Xxxxxxxx X. Xxxxxxx, Xxxxx
Xxxxxxx-Xxxxxxx, Xxxxx X. Xxxxx, Xxxxx X. Xxxxxx, Xxxxxxx Xxxx Xxxxxxx, Xxxxx X.
XxXxxxxx, and Xxxx X. Xxxxxxxxx shall execute and deliver a non-competition
agreement in substantially the form attached to this Agreement as Exhibit D (the
"Non-Competition Agreement").
5.8. Other Deliveries. The Sellers also shall have delivered to
the Purchaser the following:
(a) signed Escrow Agreement;
(b) stock certificates and stock powers required by
Section 1.4(b);
(c) the corporate record book, stock record book and
corporate seal of each Company (if such seals exist);
(d) resignations from each of the officers and directors
of each Company and each person who, directly or indirectly, is a Seller, in
substantially the form as Exhibit E;
(e) a termination of the Redemption Buy-Sell Agreement
dated May 22, 1990 by and among ACE Controls and its Shareholders signed by each
party to that agreement;
(f) if the Purchaser requests more than ten days prior to
the Closing Date, such other documents and agreements as shall be sufficient to
terminate, at or promptly after the Closing, all of the Plans not previously
terminated; provided, however, that in no event shall any Plan be terminated
prior to the Closing; and
47
(g) a good standing certificate for each Company issued
by the jurisdiction of its organization as of a date not more than five days
prior to the Closing Date.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers required to be performed by it at the
Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by the Sellers as
provided in this Agreement except as otherwise required by applicable law.
6.1. Representations and Warranties; Agreements. Each of the
representations and warranties of the Purchaser contained in this Agreement
shall be true and correct in all material respects as of the Closing as if made
on the Closing Date. As of the Closing, the Purchaser shall have, in all
material respects, duly performed and complied with each of its obligations
required by this Agreement to be performed by it at or prior to the Closing. At
the Closing, the Sellers shall have received a certificate, duly executed by an
officer of the Purchaser, to the effect that the conditions set forth in this
section have been satisfied.
6.2. Authorization; Consents. All corporate action necessary to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement shall have been
duly and validly taken by the Purchaser. Any filings required to be made in
connection with the transactions contemplated by this Agreement, including the
applicable HSR filing and any required comparable foreign competition filings,
shall have been made and all applicable waiting periods with respect to each
such filing, including any extensions thereof, shall have expired or been
terminated. All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies required to consummate the transactions contemplated by this
Agreement, and all other governmental, regulatory or third party consents or
waivers shall have been made or obtained. In addition, the Purchaser shall have
obtained the consents of all Persons and governmental authorities necessary for
the Purchaser to consummate the transactions contemplated by this Agreement,
including the Required Consents.
6.3. Absence of Litigation. No order, stay, injunction or decree of
any court of competent jurisdiction shall be in effect (a) that prevents or
delays the consummation of any of the transactions contemplated by this
Agreement, or (b) that would impose any material limitation on the ability of
the Purchaser to purchase the Shares pursuant to the terms of this Agreement. No
action, suit or proceeding before any court or any governmental or regulatory
entity shall be pending (or threatened by any governmental or regulatory
entity), and no investigation by any governmental or regulatory entity shall
have been commenced (and be pending) (i) seeking to restrain or prohibit (or
questioning the validity or legality of) the consummation of the transactions
contemplated by this Agreement, or (ii) seeking material damages in connection
therewith which the Sellers, in good faith and with the advice of counsel,
48
believes makes it undesirable to proceed with the consummation of the
transactions contemplated by this Agreement.
6.4. Other Deliveries. The Purchaser also shall have delivered to
the Sellers the following:
(a) the payments required by Section 1.4;
(b) signed Escrow Agreement;
(c) signed Employment Agreement(s);
(d) signed Non-Competition Agreement;
(e) a good standing certificate for the Purchaser issued
by the state of its incorporation as of a date not more than five days prior to
the Closing Date; and
(f) the resolutions of the Board of Directors of the
Purchaser authorizing the execution and delivery of this Agreement by the
Purchaser and the performance of its obligations under this Agreement certified
by an officer of the Purchaser.
ARTICLE VIII
INDEMNIFICATION
7.1. Indemnification. The Parties shall indemnify each other as
set forth below.
(a) Subject to the limitations of Sections 7.1(g), and
7.1(h), the Sellers, jointly and severally, shall indemnify and hold harmless
the Purchaser and its shareholders, officers, directors, employees,
representatives, and agents (collectively, the "Purchaser's Indemnified
Persons"), from and against any and all Losses, as defined in this section,
arising out of, based upon or resulting from (i) any breach of any
representation or warranty of the Parent Companies or the Sellers which is
contained in or made pursuant to this Agreement, (ii) any breach or
nonfulfillment by either Parent Company or the Sellers of any of their
respective covenants, agreements or other obligations contained in or made
pursuant to this Agreement, (iii) any Environmental Matter or Tax liability of
any Company for periods prior to the Closing Date (whether or not disclosed on a
Schedule), (iv) any act or omission of either Parent Company or the Sellers, or
any of their predecessors, prior to the Closing Date, that constitutes a breach
or default under, or a failure to perform any obligation, duty or liability of
any Company under any loan agreement, lease, contract, order or other agreement
(relating to the business of the Companies) to which any Company is a party or
by which any were bound, or (v) except as disclosed on any Schedule or otherwise
expressly contemplated by this Agreement, any claims caused by the acts or
omissions of any Company or the Sellers prior to the Closing Date, including
claims for Losses which arise out of the Sellers' direct or indirect operation
of the
49
Companies or by virtue of Sellers' direct or indirect ownership of the Companies
prior to the Closing Date, except to the extent of the Sellers' right to
indemnification under Section 7.1(b).
(b) Subject to the limitations of Sections 7.1(i), the
Purchaser shall indemnify and hold harmless, the Sellers and their
representatives and agents (collectively, the "Sellers' Indemnified Persons"),
from and against any and all Losses arising out of, based upon or resulting from
(i) any breach of any representation or warranty of the Purchaser which is
contained in or made pursuant to this Agreement, (ii) any breach or
nonfulfillment by the Purchaser of any of its covenants, agreements or other
obligations contained in or made pursuant to this Agreement, (iii) any Tax
liability of any Company for periods after the Closing Date, (iv) any act or
omission of the Purchaser or the Companies, or any of their successors or
assigns, after the Closing Date, that constitutes a breach or default under, or
a failure to perform any obligation, duty or liability of the Purchaser or the
Companies under any loan agreement, lease, contract, order or other agreement
(relating to the business of the Companies) to which the Purchaser or the
Companies are a party or by which they are bound, or (v) any claims caused by
the acts or omissions of the Purchaser or the Companies after the Closing Date,
including claims for Losses which arise out of the Purchaser's direct or
indirect operation of the Companies or by virtue of the Purchaser's direct or
indirect ownership of the Companies after the Closing Date, except to the extent
of the Purchaser's right to indemnification under Section 7.1(a).
(c) For purposes of this Section 7.1, "Losses" shall mean
and include damages, liabilities and claims, and (to the extent that the person
that is obligated to provide such indemnification (an "Indemnifying Party")
maintains or has maintained liability insurance and such coverage is applicable
to the person entitled to indemnification (an "Indemnified Party")), insurance
benefits paid to or for the benefit or protection of the Indemnified Party.
Losses shall include all reasonable fees, costs and expenses related thereto,
including any and all of the Indemnified Party's Legal Expenses. As used in this
Agreement, "Legal Expenses" shall mean the fees, costs and expenses reasonably
incurred by the Indemnified Party in investigating, preparing for, defending
against or providing evidence, producing documents or taking other action with
respect to, any threatened or asserted claim, prior to assumption of control of
the defense of such claim by the Indemnifying Party.
(d) Whenever any claim for indemnification shall arise
under this Article, the Indemnified Party shall notify the Indemnifying Party of
the claim and, when known, the facts constituting the basis for such claim.
Promptly after receipt of notice of the commencement of any action or claim by a
third party in respect of which the Indemnified Party may seek indemnification
under this Agreement, the Indemnified Party shall promptly notify the
Indemnifying Party of such notice. Except as provided in subsection (j) of this
section, the Indemnifying Party shall be entitled to control the defense of such
action; provided, however, that:
(i) the Indemnified Party shall be entitled to
participate in the defense of such action or claim and to employ counsel at its
own expense to assist in the handling of such action or claim;
50
(ii) the Indemnifying Party shall obtain the
prior written approval of the Indemnified Party before entering into any
settlement of such action or claim, or ceasing to defend against such action or
claim (with such approval not to be unreasonably withheld);
(iii) no Indemnifying Party shall consent to the
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to each
Indemnified Party of a release from all liability in respect of such action or
claim; and
(iv) the Indemnifying Party shall not be entitled
to control (but shall be entitled to participate at its own expense in the
defense of), and the Indemnified Party shall be entitled to have sole control
over, the defense or settlement of any action or claim to the extent the claim
seeks an injunction, non-monetary or other equitable relief against the
Indemnified Party which, if successful, would materially interfere with the
business, operations, assets, condition (financial or otherwise) or prospects of
the Indemnified Party.
After written notice by the Indemnifying Party to the Indemnified Party
of its election to assume control of the defense of any such action or claim,
the Indemnifying Party shall not be liable to such Indemnified Party under this
section for any Legal Expenses subsequently incurred by such Indemnified Party
in connection with the defense thereof. If the Indemnifying Party does not
assume control of the defense of such action or claim as provided in this
Section 7.1(d), the Indemnified Party shall have the right to defend such action
or claim in such manner as it may deem appropriate at the cost and expense of
the Indemnifying Party, and the Indemnifying Party will promptly reimburse the
Indemnified Party therefor in accordance with this Section 7.1. The
reimbursement of fees, costs and expenses required by this Section 7.1 shall be
made by periodic payments during the course of the investigations or defense, as
and when bills are received or expenses incurred.
(e) In the event that the Indemnifying Party shall be
obligated to indemnify the Indemnified Party pursuant to this Section 7.1, the
Indemnifying Party shall, upon payment of such indemnity in full, be subrogated
to all rights of the Indemnified Party with respect to the actions or claims to
which such indemnification relates.
(f) If any claim for indemnification is, or may be, the
subject of the Indemnifying Party's liability insurance or other right to
indemnification or contribution from any third person, then the Indemnified
Parties agree that they shall promptly notify the applicable insurance carrier
of any such claim or loss and tender defense thereof to such carrier, and shall
also promptly notify any potential third party indemnitor or contributor which
may be liable for any portion of such losses or claims. The Indemnified Parties
agree to pursue, at the cost and expense of the Indemnifying Party, such claims
diligently and to reasonably cooperate, at the cost and expense of the
Indemnifying Party, with each applicable insurance carrier and third party
indemnitor or contributor.
51
(g) The Sellers shall have no liability for
indemnification with respect to the matters described in this Section 7.1 or
otherwise under this Agreement unless and until, and only to the extent that the
aggregate amount of all Losses for which indemnification is sought from the
Sellers exceeds $50,000; provided, however, that such threshold shall not apply
to the following:
(i) the Sellers' indemnification obligations
with respect to breaches of Sections 2.1 (Organization of the Companies;
Qualification; Capitalization), 2.2 (Authority), 2.7(c) (Title), 2.18 (Change in
Control), or 2.19 (Commissions);
(ii) the Sellers' obligations, if any (A) to make
a Purchase Price Adjustment payment to the Purchaser pursuant to Section 1.3,
(B) to make any payments to any Company pursuant to Section 8.2, (C) arising out
of a breach of Section 4.12(c) or (d), or (D) to make payments pursuant to
Section 4.14 or 4.15; or
(iii) the amount of any Tax liability of any
Company for periods prior to the Closing Date (whether or not disclosed on a
Schedule).
(h) Notwithstanding any other provision of this Agreement
to the contrary, the Sellers shall have no liability for indemnification with
respect to the matters described in this Section 7.1 or otherwise under this
Agreement to the extent that the aggregate amount of all payments made by the
Sellers on account of Losses exceeds, or would exceed the Escrow Amount;
provided, however, that such limitation shall not apply to the following:
(i) the Sellers' indemnification obligations
with respect to breaches of Sections 2.1 (Organization of the Companies;
Qualification; Capitalization), 2.2 (Authority), 2.7(c) (Title), 2.18 (Change in
Control), or 2.19 (Commissions);
(ii) the Sellers' obligations, if any (A) to make
a Purchase Price Adjustment payment to the Purchaser pursuant to Section 1.3,
(B) to make any payments to any Company pursuant to Section 8.2, (C) arising out
of a breach of Section 4.12(c) or (d), or (D) to make payments pursuant to
Section 4.14 or 4.15; or
(iii) the amount of any Tax liability of any
Company for periods prior to the Closing Date (whether or not disclosed on a
Schedule).
(i) The Purchaser shall have no liability for
indemnification with respect to the matters described in this Section 7.1 or
otherwise under this Agreement unless and until, and only to the extent that,
the aggregate amount of all Losses for which indemnification is sought from the
Purchaser exceeds $50,000; provided, however, that such threshold shall not
apply to (i) the Purchaser's obligation, if any, to make a Purchase Price
Adjustment payment to the Sellers pursuant to Section 1.3 or to make any payment
to the Sellers pursuant to Section 4.12(d), or (ii) the amount of any Tax
liability of any Company for periods after the Closing Date.
52
(j) Notwithstanding anything to the contrary in this
Agreement, with respect to any claim for indemnification for Losses arising out
of Environmental Matters, the Purchaser shall control the response to the claim
that is the basis of such Losses. Concurrently with asserting any such claim for
indemnification, the Purchaser promptly shall notify the Sellers and provide the
Sellers with a copy of any data, information, documents, reports or other
materials that describe such claim. The Sellers may, at their own cost and
expense, retain consultants and/or counsel to monitor the Purchaser's remedial
actions. The Purchaser shall provide the Sellers with a copy of any remedial
plan or proposed remedial actions or agreements with governmental agencies and
shall give the Sellers at least thirty days to comment on such plans, actions or
agreements, except where a shorter time period is necessary for the Purchaser to
comply with a regulatory time period or order or with a demand from a
governmental agency. The Purchaser shall consider and incorporate all reasonable
comments from the Sellers in such plans and agreements. Subject to the above,
the Purchaser shall make all final decisions as to the scope and implementation
of any environmental cleanup or remedial action plans. Notwithstanding anything
in this Agreement to the contrary, in no event shall the Sellers have any
indemnification obligations for Losses arising out of Environmental Matters with
respect to any costs, expenses or other Losses incurred by the Purchaser in the
performance by the Purchaser of response activities, remediation or cleanup to a
standard more stringent than the standard applicable to the property subject to
the remediation as of the Closing Date (except where a more stringent standard
is otherwise required by a governmental agency or by a governmental or court
order, which more stringent standard shall apply).
7.2. Payment for Indemnity Claims. Except as limited in Sections
7.1 and 7.3, the Purchaser will have the right to receive from the Escrow Amount
the amount of any Losses incurred by the Purchaser from any third-party claim or
any claim against the Sellers under Section 7.1 that has been finally determined
by agreement or by a court of competent jurisdiction, as provided in the Escrow
Agreement.
7.3. Survival.
(a) Except as otherwise set forth in this Agreement, the
representations, warranties, covenants and agreements contained in this
Agreement, or in any Schedule, certificate, document or statement delivered
pursuant to this Agreement, shall survive until March 31, 2002, and shall be
deemed to have been relied upon and shall not be affected in any respect by the
Closing, any investigation conducted by any Party or by any information which
any Party may receive.
(b) Notwithstanding Section 7.3(a):
(i) the representations and warranties of the
Sellers contained in Sections 2.1 (Organization of the Companies; Qualification;
Capitalization), 2.2 (Authority), 2.7(c) (Title), 2.18 (Change in Control), or
2.19 (Commissions) shall survive until the earlier of (A) the expiration of all
statute of limitations periods (or extensions or waivers thereof)
53
applicable to a particular representation and warranty, and (B) the sixth
anniversary of the Closing Date;
(ii) the obligations of the Sellers under
Section 7.1 with respect to any Tax liability of any Company for periods prior
to the Closing Date (whether or not disclosed on a Schedule), shall survive
indefinitely after the Closing Date; and
(iii) the covenants of the Sellers contained in
Section 4.12(c) and (d) shall survive until the expiration of the applicable
statute of limitations (or extensions or waivers thereof) relating to any such
liability for Taxes.
(c) Notwithstanding Section 7.3(a):
(i) the obligations of the Purchaser under
Section 7.1(b) with respect to any Tax liability of any Company for periods
after the Closing Date shall survive indefinitely after the Closing Date; and
(ii) the covenant of the Purchaser contained in
Section 4.12(d) shall survive until the expiration of the applicable statute of
limitations (or extensions or waivers thereof) relating to any such liability
for Taxes.
(d) The liability of any Party under Article VII shall
not terminate with respect to any claim, whether or not fixed as to liability or
liquidated as to amount, with respect to which such Party has been given written
notice prior to the date on which it would otherwise terminate.
ARTICLE VIII
MISCELLANEOUS
8.1 Termination. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any time prior
to the Closing Date notwithstanding any requisite approval and adoption of this
Agreement by the Parties:
(a) by mutual written consent duly authorized by the
Sellers' Representative and the Board of Directors of the Purchaser; or
(b) by the Sellers' Representative or the Purchaser if
any court or governmental entity of competent jurisdiction shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action is or shall have become final and
nonappealable; or
(c) by the Purchaser, if the Purchaser is not in material
breach of this Agreement and there shall have been a material breach of any of
the Parent Companies' or the
54
Sellers' representations, warranties or covenants which breach cannot be or has
not been cured within ten days following receipt of written notice of such
breach; provided, however, that if, in the reasonable judgment of the Purchaser,
the breach is of such nature that it can be cured, but cannot be completely
cured within such ten-day period, then the Purchaser shall not be entitled to
terminate this Agreement if the Sellers shall have begun curing such breach
within such ten-day period and shall, with reasonable diligence and in good
faith, proceed to cure it as promptly as possible; or
(d) by the Sellers' Representative, if the Sellers are
not in material breach of this Agreement and there shall have been a material
breach of any of the Purchaser's representations, warranties or covenants which
breach cannot be or has not been cured within ten days of the receipt of written
notice of such breach; provided, however, that if, in the reasonable judgment of
the Sellers' Representative, the breach is of such nature that it can be cured,
but cannot be completely cured within such ten-day period, then the Sellers'
Representative shall not be entitled to terminate this Agreement if the
Purchaser shall have begun curing such breach within such ten-day period and
shall, with reasonable diligence and in good faith, proceed to cure it as
promptly as possible; or
(e) by either the Sellers' Representative or the
Purchaser if the Closing shall not have occurred on or before March 1, 2001, so
long as the Party desiring to terminate the Agreement is not in material breach
of this Agreement; provided, however, that the termination of this Agreement by
any Party pursuant to this Section 8.1 shall not relieve any Party from
liability arising after the date accurate disclosure should have been made as a
result of the representations and warranties of a Party being materially
incorrect when made or the breach by a Party of a covenant or agreement.
8.2. Expenses.
(a) Except as otherwise provided for in this Agreement
(i) the Purchaser shall pay its own fees and expenses (including the fees of any
attorneys, accountants, investment bankers, environmental consultants or others
engaged by such Party), and (ii) the Sellers shall pay their own fees and
expenses (including the fees of any attorneys, accountants, investment bankers,
environmental consultants or others engaged by such Party), incurred in
connection with this Agreement and the transactions contemplated by this
Agreement, whether or not such transactions are consummated.
(b) Notwithstanding Section 8.2(a), the Purchaser agrees
that the Companies shall pay their own fees and expenses (including the fees of
any attorneys, accountants, investment bankers (including Deloitte & Touche
LLP), environmental consultants or others engaged by such Party) incurred in
connection with this Agreement and the transactions contemplated by this
Agreement, whether or not such transactions are consummated, but only to the
extent such fees and expenses are accrued on the Closing Date Balance Sheet.
After the Closing, the Sellers, jointly and severally, shall be obligated to
reimburse the Companies for the
55
entire amount of any such fees and expenses that are not accrued on the Closing
Date Balance Sheet. Such obligations shall survive indefinitely after the
Closing, shall not be subject to any of the limitations set forth in Article
VII, and shall not be counted toward any caps set forth in Article VII.
8.3. Notices. All notices or other communications required or
permitted under this Agreement shall be given in writing and shall be either
delivered by hand or by overnight courier (or by fax confirmed by one of such
methods) as follows:
If to the Sellers:
c/o Xxxxxxx Xxxxxx Xxxxxxx or Xxxxx X. Xxxxxxx
00000 Xxxxxxxx
Xxxxxxxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
With a copy to:
Xxxx, Xxxxx & XxXxxxxx, P.C.
00000 Xxxxxx Xxxxxx
X.X. Xxx 00000
Xxxxxx Xxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxx
Fax: (000) 000-0000
If to the Purchaser:
Kaydon Corporation
000 Xxxx Xxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, President
Fax: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxx PLLC
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxxx
Fax: (000) 000-0000
or such other address as shall be furnished in writing by such Party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so delivered;
56
provided, however, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
8.4. Assignment. This Agreement and all of the provisions of this
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors and permitted assigns, and the provisions of Article
VII of this Agreement shall inure to the benefit of the indemnified parties
referred to therein; provided, however, that neither this Agreement nor any of
the rights, interests, or obligations under this Agreement may be assigned by
any of the Parties without the prior written consent of the other parties,
except that the Purchaser may assign this Agreement and such rights, interests
and obligations to a wholly owned direct or indirect subsidiary of the Purchaser
(provided that such assignment shall not relieve the Purchaser of its
obligations under this Agreement).
8.5. Entire Agreement. This Agreement (including the Schedules and
Exhibits) and the confidentiality agreement between the Purchaser and ACE
Controls dated November 3, 2000 contain the entire agreement and understanding
of the parties with respect to the transactions contemplated by this Agreement
and supersedes all prior or contemporaneous written or oral commitments,
arrangements or understandings with respect thereto. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to the
transactions contemplated by this Agreement other than those expressly set forth
in this Agreement.
8.6. Modifications, Amendments and Waivers. At any time prior to
the Closing, to the extent permitted by law (a) the Parties may, by written
agreement, modify, amend or supplement any term or provision of this Agreement,
and (b) any term or provision of this Agreement may be waived in writing by the
Party which is entitled to the benefits thereof.
8.7. Counterparts. This Agreement may be executed with counterpart
signature pages or in two or more counterparts (including facsimile
transmissions of such signature pages), all of which shall be considered one and
the same agreement and each of which shall be deemed an original.
8.8. Governing Law. This Agreement shall be governed by the laws
of the United States and the State of Michigan (regardless of the laws that
might be applicable under principles of conflicts or choice of law) as to all
matters including matters of validity, construction, effect and performance.
8.9. Severability. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this Agreement shall
not be affected thereby and this Agreement will be construed and enforced as if
such invalid, illegal or unenforceable provisions had not been included in this
Agreement. To the extent permitted by applicable law, each Party waives any
provision of law which renders any provision of this Agreement invalid, illegal
or unenforceable in any respect.
57
8.10. Specific Performance. The Parties recognize that any breach of
the terms of this Agreement may give rise to irreparable harm for which money
damages would not be an adequate remedy, and accordingly agree that, in addition
to other remedies, any nonbreaching Party shall be entitled to enforce the terms
of this Agreement by a decree of specific performance without the necessity of
proving the inadequacy as a remedy of money damages.
8.11. Third Parties. Nothing in this Agreement shall be deemed to be
for the benefit of, or enforceable by or on behalf of any Party, including any
employee or former employee of any Company, any dependent or beneficiary of any
such employee, any labor union or other Party or organization, any obligee,
owner or holder of any obligation or liability, other than the Parties and the
Indemnified Parties.
8.12. Childrens Trusts. For all purposes of this Agreement,
including the identification of the Sellers and the execution of this Agreement,
all references to the Xxxxxxx X. Xxxxxxx Irrevocable 1996 Children's Trust dated
June 5, 1996 and the Xxxxx X. Xxxxxxx Irrevocable 1996 Children's Trust dated
June 5, 1996, shall be deemed to include all "sub-trusts" under each such trust,
including those for the benefit of Xxxxxxxx X. Xxxxxxx, Xxxxx Xxxxxxx-Xxxxxxx,
Xxxxx X. Xxxxx, Xxxxx X. Xxxxxx, Xxxxxxx Xxxx Xxxxxxx, Xxxxx X. XxXxxxxx, and
Xxxx X. Xxxxxxxxx.
* * * * * * * * * * * * * * * * *
58
The Parties executed this Stock Purchase Agreement as of the day and
year first above written.
KAYDON CORPORATION
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------
Xxxxx X. Xxxxxxxx, President
ACE CONTROLS, INC.
By: /s/ Xxxxxxx Xxxxxx Xxxxxxx
-----------------------------
Xxxxxxx Xxxxxx Xxxxxxx, CEO
ACE CONTROLS INTERNATIONAL, INC.
By: /s/ Xxxxxxx Xxxxxx Xxxxxxx
-----------------------------
Xxxxxxx Xxxxxx Xxxxxxx, CEO
[Signatures Continue on Following Page]
59
SELLERS' REPRESENTATIVE
/s/ Xxxxxxx Xxxxxx Xxxxxxx
------------------------------
Xxxxxxx Xxxxxx Xxxxxxx
/s/ Xxxxx X. Xxxxxxx
------------------------------
Xxxxx X. Xxxxxxx
THE XXXXXXX X. XXXXXXX REVOCABLE TRUST
DATED JUNE 5, 1974, AS AMENDED AND RESTATED
ON JUNE 28, 1999
By: /s/ Xxxxxxx Xxxxxx Xxxxxxx /s/ Xxxxxxxx X. Xxxxxxx
------------------------------- -----------------------------------
Xxxxxxx Xxxxxx Xxxxxxx, Trustee Xxxxxxxx X. Xxxxxxx, Individually
/s/ Xxxxx Xxxxxxx-Xxxxxxx
-----------------------------------
THE XXXXX X. XXXXXXX REVOCABLE TRUST Xxxxx Xxxxxxx-Xxxxxxx, Individually
DATED SEPTEMBER 29, 1976, AS AMENDED
AND RESTATED ON JUNE 28, 1999
By: /s/ Xxxxx X. Xxxxxxx /s/ Xxxxx X. Xxxxx
------------------------------- -----------------------------------
Xxxxx X. Xxxxxxx, Trustee Xxxxx X. Xxxxx, Individually
THE XXXXXXX X. XXXXXXX IRREVOCABLE 1996
CHILDREN'S TRUST DATED JUNE 5, 1996 /s/ Xxxxx X. Xxxxxx
-----------------------------------
Xxxxx X. Xxxxxx, Individually
By: /s/ Xxxxxxxx X. Xxxxxxx /s/ Xxxxxxx Xxxx Xxxxxxx
------------------------------- -----------------------------------
Xxxxxxxx X. Xxxxxxx, Trustee Xxxxxxx Xxxx Xxxxxxx, Individually
By: /s/ Xxxxx Xxxxxxx-Xxxxxxx /s/ Xxxxx X. XxXxxxxx
------------------------------- -----------------------------------
Xxxxx Xxxxxxx-Xxxxxxx, Trustee Xxxxx X. XxXxxxxx, Individually
By: /s/ Xxxxx X. Xxxxx
-------------------------------
Xxxxx X. Xxxxx, Trustee
60
[Signatures Continue on Following Page]
/s/ Xxxx X. Xxxxxxxxx
------------------------------------
Xxxx X. Xxxxxxxxx, Individually
THE XXXXX X. XXXXXXX IRREVOCABLE 1996
CHILDREN'S TRUST DATED JUNE 5, 1996
By: /s/ Xxxxxxxx X. Xxxxxxx
------------------------------
Xxxxxxxx X. Xxxxxxx, Trustee
By: /s/ Xxxxx X. Xxxxx
------------------------------
Xxxxx X. Xxxxx, Trustee
By: /s/ Xxxxx Xxxxxxx-Xxxxxxx
------------------------------
Xxxxx Xxxxxxx-Xxxxxxx, Trustee
XXXXX XXXXXXX-XXXXXXX GRANTOR RETAINED
ANNUITY TRUST DATED NOVEMBER 16, 2000
By: /s/ Xxxxx Xxxxxxx-Xxxxxxx
------------------------------
Xxxxx Xxxxxxx-Xxxxxxx, Trustee
XXXXX X. XXXXX GRANTOR RETAINED ANNUITY
TRUST DATED NOVEMBER 16, 2000
By: /s/ Xxxxx X. Xxxxx
------------------------------
Xxxxx X. Xxxxx, Trustee
XXXXX X. XXXXXX GRANTOR RETAINED
ANNUITY TRUST DATED NOVEMBER 16, 2000
By: /s/ Xxxxx X. Xxxxxx
------------------------------
Xxxxx X. Xxxxxx, Trustee
61
[Signatures Continue on Following Page]
XXXX X. XXXXXXXXX GRANTOR RETAINED
ANNUITY TRUST DATED NOVEMBER 16, 2000
By: /s/ Xxxx X. Xxxxxxxxx
--------------------------
Xxxx X. Xxxxxxxxx, Trustee
