Exhibit 2.1
EXECUTION COPY
STOCK AND ASSET PURCHASE AGREEMENT
dated as of
March 19, 2002
between
U.S. INDUSTRIES, INC.,
JUSI HOLDINGS, INC.,
USI CANADA INC.
and
XXXXXXX INCORPORATED
TABLE OF CONTENTS
Page
ARTICLE 1. Definitions......................................................................................... 1
Section 1.01 Definitions.............................................................................. 1
ARTICLE 2. Purchase and Sale................................................................................... 14
Section 2.01 Preliminary Transfers; Purchase and Sale of Shares and Purchased Assets and
Assumption of Liabilities........................................................... 14
Section 2.02 Closing.................................................................................. 15
Section 2.03 Closing Balance Sheet.................................................................... 15
Section 2.04 Adjustment of Purchase Price............................................................. 18
Section 2.05 Assignment of Contracts and Rights....................................................... 19
ARTICLE 3. Representations and Warranties of Parent and Sellers................................................ 19
Section 3.01 Corporate Existence and Power............................................................ 19
Section 3.02 Corporate Authorization.................................................................. 19
Section 3.03 Governmental Authorization............................................................... 20
Section 3.04 Noncontravention......................................................................... 20
Section 3.05 Capitalization........................................................................... 20
Section 3.06 Ownership of Shares; Title to Purchased Assets........................................... 21
Section 3.07 Condition and Sufficiency of Assets...................................................... 21
Section 3.08 Subsidiaries............................................................................. 21
Section 3.09 Financial Statements..................................................................... 22
Section 3.10 Absence of Certain Changes............................................................... 22
Section 3.11 No Undisclosed Liabilities............................................................... 23
Section 3.12 Material Contracts....................................................................... 24
Section 3.13 Litigation............................................................................... 26
Section 3.14 Compliance with Laws and Court Orders.................................................... 26
Section 3.15 Real Property............................................................................ 26
Section 3.16 Intellectual Property.................................................................... 28
Section 3.17 Finders' Fees............................................................................ 29
Section 3.18 Employees................................................................................ 29
Section 3.19 Employee Benefit Plans................................................................... 29
Section 3.20 Environmental Matters.................................................................... 33
Section 3.21 Labor Matters............................................................................ 34
Section 3.22 Tax Matters.............................................................................. 34
Section 3.23 Insurance................................................................................ 35
Section 3.24 Customers................................................................................ 35
Section 3.25 Suppliers................................................................................ 36
Section 3.26 Working Capital; Accounts Receivable..................................................... 36
Section 3.27 Inventories.............................................................................. 36
Section 3.28 Product Liability/Warranty/Recalls....................................................... 36
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Section 3.29 Permits.................................................................................. 37
Section 3.30 Bank Accounts............................................................................ 37
Section 3.31 Powers of Attorney....................................................................... 37
Section 3.32 Corporate Existence and Manufacturing Matters............................................ 37
ARTICLE 4. Representations and Warranties of Buyer............................................................. 37
Section 4.01 Corporate Existence and Power............................................................ 37
Section 4.02 Corporate Authorization.................................................................. 37
Section 4.03 Governmental Authorization............................................................... 37
Section 4.04 Noncontravention......................................................................... 38
Section 4.05 Financing................................................................................ 38
Section 4.06 Purchase for Investment.................................................................. 38
Section 4.07 Litigation............................................................................... 38
Section 4.08 Finders' Fees............................................................................ 38
Section 4.09 Inspections; No Other Representations.................................................... 38
Section 4.10 Canadian Registrations................................................................... 39
ARTICLE 5. Covenants of Parent and Sellers..................................................................... 39
Section 5.01 Interim Operations and Conduct of the Company............................................ 39
Section 5.02 Access to Information.................................................................... 40
Section 5.03 Resignations............................................................................. 41
Section 5.04 Matters Related to Intellectual Property................................................. 41
Section 5.05 Provincial Sales Tax Clearance Certificate............................................... 42
Section 5.06 Bank Account Signatories................................................................. 42
Section 5.07 Financing Assistance..................................................................... 42
Section 5.08 Real Property............................................................................ 42
ARTICLE 6. Covenants of Buyer.................................................................................. 42
Section 6.01 Access................................................................................... 42
Section 6.02 Trademarks; Tradenames................................................................... 43
Section 6.03 Preservation of Records.................................................................. 43
Section 6.04 Certain Post-Closing Assistance by Buyer................................................. 43
ARTICLE 7. Covenants of Buyer and Sellers...................................................................... 43
Section 7.01 Best Efforts; Further Assurances......................................................... 43
Section 7.02 Certain Filings.......................................................................... 44
Section 7.03 Public Announcements..................................................................... 44
Section 7.04 Notices of Certain Events................................................................ 44
Section 7.05 Treasury Matters......................................................................... 45
Section 7.06 Approvals and Consents; Cooperation; Notification........................................ 45
Section 7.07 Insurance Policies....................................................................... 45
Section 7.08 No Solicitation.......................................................................... 47
Section 7.09 No Negotiation........................................................................... 48
Section 7.10 Non-competition.......................................................................... 48
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Section 7.11 Discharge of All Indebtedness............................................................ 49
Section 7.12 Environmental Insurance.................................................................. 49
Section 7.13 Supply Arrangements...................................................................... 50
Section 7.14 Extension of Agreement................................................................... 50
Section 7.15 San Leandro Facilities Sublease.......................................................... 50
Section 7.16 The Puerto Rico Grant.................................................................... 50
Section 7.17 Tax Certificates......................................................................... 50
ARTICLE 8. Employment and Canadian Tax Matters................................................................. 50
Section 8.01 Employee and Employee Benefit Matters.................................................... 50
Section 8.02 Canadian Tax Matters..................................................................... 54
ARTICLE 9. Conditions to Closing............................................................................... 54
Section 9.01 Conditions to Obligations of Buyer and Sellers........................................... 54
Section 9.02 Conditions to Obligation of Buyer........................................................ 54
Section 9.03 Conditions to Obligation of Sellers...................................................... 56
ARTICLE 10. Survival; Indemnification.......................................................................... 56
Section 10.01 Survival................................................................................ 56
Section 10.02 Indemnification......................................................................... 56
Section 10.03 Environmental Matters................................................................... 57
Section 10.04 Procedures.............................................................................. 61
Section 10.05 Calculation of Damages.................................................................. 63
Section 10.06 Assignment of Claims.................................................................... 63
Section 10.07 Exclusivity............................................................................. 63
ARTICLE 11. Termination........................................................................................ 63
Section 11.01 Grounds for Termination................................................................. 63
Section 11.02 Effect of Termination................................................................... 64
ARTICLE 12. Miscellaneous...................................................................................... 64
Section 12.01 Notices................................................................................. 64
Section 12.02 Amendments and Waivers.................................................................. 65
Section 12.03 Expenses................................................................................ 65
Section 12.04 Successors and Assigns.................................................................. 66
Section 12.05 Governing Law........................................................................... 66
Section 12.06 Jurisdiction............................................................................ 66
Section 12.07 Waiver of Jury Trial.................................................................... 66
Section 12.08 Counterparts; Third Party Beneficiaries................................................. 66
Section 12.09 Entire Agreement........................................................................ 66
Section 12.10 Captions................................................................................ 67
Section 12.11 Disclosure Schedules.................................................................... 67
Section 12.12 Tax Sharing............................................................................. 67
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Section 12.13 Severability............................................................................ 67
Section 12.14 Specific Performance.................................................................... 67
Section 12.15 Currency................................................................................ 67
Section 12.16 English Language........................................................................ 67
Section 12.17 Bulk Sales Laws......................................................................... 68
EXHIBITS
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Exhibit A Capital Expenditure Plan
Exhibit B Pension Plan Liability Actuarial Methods and Assumptions
Exhibit C Special Pre-Closing Environmental Liabilities
Exhibit D Form of Assignment and Assumption Agreement
Exhibit E Section 1445(b)(2) Form
Exhibit F Insurance Assignment and Assumption Agreement
Exhibit G Form of San Leandro Facilities Sublease
Exhibit H Form of Opinion of Xxxxx Xxxx & Xxxxxxxx
Exhibit I Form of Opinion of Fraser Xxxxxx Casgrain LLP
Exhibit J Form of Tax Sharing and Indemnification Agreement
Exhibit K Form of Opinion of Xxxxxx & Xxxxxxx
Exhibit L Form of Opinion of General Counsel of Buyer
Exhibit M Form of Escrow Agreement
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STOCK AND ASSET PURCHASE AGREEMENT
AGREEMENT (this "Agreement") dated as of March 19, 2002, by
and among U.S. Industries, Inc., a Delaware corporation ("Parent" or "USI"),
JUSI Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent ("US Seller"), USI Canada Inc., an Ontario corporation ("Canadian Seller"
and together with US Seller, "Sellers"), and Xxxxxxx Incorporated, a Connecticut
corporation ("Buyer").
W I T N E S S E T H :
WHEREAS, Parent conducts its business of manufacturing and
distributing indoor and outdoor lighting fixtures in North America through its
indirect wholly owned subsidiaries, LCA Group Inc., a Delaware corporation
("LCA"), Dual-Lite Inc., a Delaware corporation ("Dual-Lite") and the Progress
division of Canadian Seller ("Progress");
WHEREAS, Parent indirectly owns, and US Seller directly owns,
all of the issued and outstanding shares of capital stock of LCA and Dual-Lite;
WHEREAS, on the terms and subject to conditions set forth
herein, each of Parent and US Seller wishes to sell, and Buyer wishes to
purchase, all of the outstanding shares of capital stock of LCA and Dual-Lite;
WHEREAS, on the terms and subject to conditions set forth
herein, Canadian Seller wishes to assign and transfer, and Buyer wishes to
purchase and assume, all of the assets and the liabilities of Progress.
The parties hereto agree as follows:
ARTICLE 1.
Definitions
Section 1.01 Definitions. (a) The following terms, as used herein, have
the following meanings:
"AFFILIATE" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with such Person; provided that none of the Transferred Companies shall
be considered an Affiliate of a Seller.
"ASSUMED LIABILITIES" means all debts, obligations, contracts
and liabilities, other than Excluded Liabilities, of Canadian Seller, of any
kind, character or description (whether known or unknown, accrued, absolute,
contingent or otherwise) primarily relating to or primarily arising out of the
conduct of the Canadian Business or the ownership or operation of real property
used as of the date hereof in the Canadian Business, including without
limitation, the following:
(i) all liabilities set forth on the Preliminary
Balance Sheet (other than liabilities discharged between the
date hereof and the Closing Date in the ordinary course of
business);
(ii) all liabilities and obligations arising under
any agreement, lease, license, commitment sale or purchase
order, contract or other instrument relating primarily to or
arising primarily out of the Canadian Business (collectively,
the "Canadian Contracts");
(iii) all liabilities and obligations arising out of
any action, suit, investigation or proceeding relating to or
arising out of the Canadian Business or the Purchased Assets
before any court or arbitrator or any Governmental Authority;
(iv) all liabilities and obligations relating to any
products manufactured or sold in connection with the Canadian
Business on or prior to the Closing Date;
(v) all liabilities and obligations relating to
employee benefits to the extent provided in Article 8; and
(vi) all liabilities and obligations relating to the
Purchased Assets, including transfer, documentary, sales, use,
registration and other such Taxes apportioned to Buyer
pursuant to Section 2(f) of the Tax Sharing Agreement and real
property Taxes, personal and intangible property Taxes and
similar ad valorem obligations apportioned to Buyer pursuant
to Section 8.02.
"BALANCE SHEET DATE" means September 30, 2001.
"BUSINESS" means (A) the business, as conducted as of the date
hereof by Parent and its direct and indirect subsidiaries (other than SiTeco and
its subsidiaries), of manufacturing and distributing all lighting products,
including, but not limited to (i) outdoor commercial and industrial lighting
fixtures under various brand names wherever used, including the brand names
Alera, Xxx, Spaulding, Whiteway, Moldcast and Architectural Area Lighting which
include street, area, parking garage and landscape lighting, (ii) indoor
commercial and industrial lighting fixtures under various brand names wherever
used, including the brand names Columbia, Keystone, Prescolite and Dual Lite,
which include incandescent and compact fluorescent, down light fixtures,
emergency and exit lighting and other fluorescent lighting fixtures and (iii)
indoor residential lighting fixtures under the brand name Progress which include
chandeliers, hall and foyer sconces, pendants, bath and vanity, ceiling,
fluorescent, under-cabinet and track lighting, and (B) the Canadian Business.
"CANADIAN BUSINESS" means the business, as conducted as of the
date hereof by Canadian Seller, without limitation, of distributing indoor
residential lighting fixtures under the brand name Progress which include
chandeliers, hall and foyer sconces, pendants, bath and vanity, ceiling,
fluorescent, under-cabinet and track lighting.
"CAPITAL EXPENDITURE PLAN" means the Transferred Companies'
approved capital expenditure plan attached as Exhibit A hereto.
"CLOSING DATE" means the date on which the Closing occurs.
"CODE" means the United States Internal Revenue Code of 1986,
as amended.
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"COMPANY" means each of LCA and Dual-Lite; and collectively,
LCA and Dual-Lite shall be referred to as the "Companies".
"COMPETITION ACT (CANADA)" means the Competition Act, R.S.C.
1985, c. C-34 (as amended).
"CONFIDENTIALITY AGREEMENT" means the Confidentiality
Agreement between Parent and Buyer, dated as of May 8, 2000.
"DORMANT SUBSIDIARY" means Lighting Corporation of the
Americas, S.A. de C.V., a variable capital stock corporation incorporated under
the laws of the United Mexican States, and its subsidiaries, if any.
"ENVIRONMENTAL CLAIM" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter or other communication from any
Governmental Authority or any third party involving alleged violations of
Environmental Laws or Releases or threatened Releases of Hazardous Substances.
"ENVIRONMENTAL LAWS" shall mean all federal, state,
provincial, local and foreign laws and regulations relating to pollution or
protection of human health or the environment, including without limitation,
laws relating to Releases or threatened Releases of Hazardous Substances or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, Release, disposal, transport or handling of Hazardous Substances and
all laws and regulations with regard to recordkeeping, notification, disclosure
and reporting requirements respecting Hazardous Substances.
"ENVIRONMENTAL LIABILITIES" means any Damages or obligations
arising out of or relating in any way to the operation of the Transferred
Companies, the Canadian Business (as currently or previously conducted), the
Purchased Assets, or the use of the Real Property, whether accrued, contingent,
absolute, determined, determinable or otherwise, to the extent based upon (i) a
violation of or liability under any Environmental Law, (ii) a failure to obtain,
maintain, or comply with any Environmental Permit, directive, order or notice of
violation under, or any requirement of, any Environmental Law, (iii) a Release
of any Hazardous Substance at, on, from or under any Real Property, Purchased
Asset, (iv) any environmental investigation, remediation, removal, clean-up or
monitoring required under Environmental Laws or required by a Governmental
Authority at, on, from or under any Real Property or Purchased Asset (including
without limitation Governmental Authority oversight costs that the party
conducting the investigation, remediation, removal, clean-up or monitoring is
required to reimburse) or (v) the use, generation, storage, transportation,
treatment, sale or other off-site disposal of Hazardous Substances generated or
otherwise used in connection with the Canadian Business (as currently or
previously conducted) or by any Transferred Company or Canadian Seller (in
connection with the Canadian Business or Purchased Assets).
"ENVIRONMENTAL PERMITS" means all permits, licenses,
franchises, certificates, approvals and other similar authorizations of any
Governmental Authority relating to or required by Environmental Law.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" of any entity means any other entity which,
together with such entity, would be treated as a single employer under Section
414 of the Code.
"EXCLUDED ASSETS" means:
(i) all the assets of Canadian Seller not used in the
Canadian Business, including, without limitation, the assets
used exclusively in its Jacuzzi division or in the conduct of
its Jacuzzi business;
(ii) all of Canadian Seller's cash and cash
equivalents on hand and in banks;
(iii) all right of Canadian Sellers to the following
marks and names: U.S. Industries Inc., USI or any derivative
thereof;
(iv) all books, records, files and papers, whether in
hard copy or computer format, prepared in connection with this
Agreement or the transactions contemplated hereby and all
minute books and corporate records of Canadian Seller and its
Affiliates other than those used in the Canadian Business;
(v) all rights of Canadian Seller arising under this
Agreement, the Tax Sharing Agreement or the transactions
contemplated hereby; and
(vi) any Purchased Assets sold or otherwise disposed
of in the ordinary course of business during the period from
the date hereof until the Closing Date in accordance with
Section 5.01.
"EXCLUDED ENTITIES" means SiTeco Holdings GmbH, a German
corporation ("SiTeco") and its subsidiaries and G-Kapital GbR, a German
partnership.
"EXCLUDED LIABILITIES" means:
(i) any liability or obligation of Sellers or
predecessors or Affiliates of any Seller under the Tax Sharing
Agreement;
(ii) any liability or obligation of Canadian Seller,
its subsidiaries or predecessors for Taxes other than
transfer, documentary, sales, use, registration and other such
Taxes apportioned to Buyer pursuant to Section 2(f) of the Tax
Sharing Agreement and other than the real property Taxes,
personal and intangible property Taxes and similar ad valorem
obligations apportioned to Buyer pursuant to Section 8.02;
(iii) any liability or obligation relating to
employee benefits or compensation arrangements existing on or
prior to the Closing Date with respect to any employee or
former employee of Sellers or the Transferred Companies,
4
(including, without limitation, severance payments, stay
bonuses and change-of-control payments or any other payment
resulting from or attributable to the transactions hereunder
except for liabilities under those agreements, plans and
arrangements set forth on Schedule 3.19 and Schedule 3.21;
(iv) all liabilities with respect to any
Indebtedness;
(v) all liabilities relating to any Former Facility
of any Seller or Transferred Company (including Environmental
Liabilities but excluding any liabilities (whether or not
constituting Environmental Liabilities) relating to any
product manufactured by the Business at any such Former
Facility);
(vi) all liabilities with respect to any former
employees of Canadian Seller who had their employment
terminated or who have left Canadian Seller's employ on or
prior to the Closing Date except to the extent set forth in
Article 8;
(vii) all liabilities primarily arising out of or
primarily relating to the Excluded Assets or the use and/or
operation thereof;
(viii) all liabilities not relating primarily to the
Business or the Purchased Assets, including without,
limitation, all asbestos related liabilities of Parent and its
Affiliates (other than those specific claims against the
Transferred Companies set forth on Schedule 3.13);
(ix) all liabilities for any legal, accounting,
investment banking, brokerage or similar fees or expenses
incurred by any Seller in connection with, resulting from or
attributable to the transactions contemplated by this
Agreement;
(x) to the extent not reserved in the Closing Balance
Sheet, all liabilities primarily relating to any retroactively
rated insurance adjustments on any Insurance Coverage;
(xi) all liabilities arising out of or related to the
Excluded Entities;
(xii) all liabilities related to the failure of the
parties to comply with any applicable Bulk Sales Laws in
connection with transactions contemplated hereby except to the
extent such liabilities arise due to the failure of Buyer to
discharge the Assumed Liabilities;
(xiii) all liabilities relating to the Canadian
Employee Plans except to the extent set forth in Article 8;
(xiv) all liabilities relating to independent
contractors of the Canadian Business existing on or prior to
the Closing Date including any liability for Taxes arising
prior to the Closing Date in connection with the assumption of
the independent contractor agreements; and
5
(xv) with respect to the Xxx Lighting facility
located at 0000 Xxxx Xxxxxxx Xxxxxx in Ontario, California,
any and all liabilities or obligations arising out of or
related to pre-Closing violations of Sections 311, 312, 313 of
the Emergency Planning and Community Right-to-Know Act of
1986, also known as Title III of the Superfund Amendments and
Reauthorization Act or its state equivalent.
"FORMER FACILITY" means each and every plant, office,
manufacturing facility, store, warehouse, improvement, administrative building
and all real property and related facilities that was owned, leased, operated or
used by the Sellers or each of the Transferred Companies in connection or
relating to the Business, including without limitation the Tijuana Facility, at
any time prior to the date hereof, which facilities are not owned, leased or
operated by the Transferred Companies as of the Closing Date and,
notwithstanding the preceding, with respect to Environmental Liabilities
(including obligations arising under or at the expiration or termination of the
relevant existing leases) the foregoing definition shall include the
Philadelphia Facility and the San Leandro Facilities; provided that (i) Buyer
shall be responsible for any Environmental Liabilities arising out of or
relating to operations of the Philadelphia Facility and the San Leandro
Facilities or the use of the related Real Property at any time on or after the
Closing Date and (ii) in the event Buyer extends the term of the current
subleases at the Philadelphia Facility or the San Leandro Facilities, then any
Damages with respect to Environmental Liabilities incurred by Buyer at such
facility following any such extension shall be subject to the provisions of this
Agreement regarding Pre-Closing Environmental Liabilities.
"GOVERNMENTAL AUTHORITY" means any federal, national,
regional, state, provincial, municipal, local or other governmental or
regulatory authority, court, administrative body or government, department,
board, bureau, body, agency, instrumentality, commission or any subdivision or
authority of any of the foregoing.
"HAZARDOUS SUBSTANCES" shall mean (a) any element, compound,
or chemical that is defined, listed, or otherwise classified as a contaminant,
pollutant, toxic pollutant, toxic or hazardous substance, extremely hazardous
substance or chemical, hazardous waste, medical waste, bio-hazardous or
infectious waste, special waste, or solid waste under Environmental Laws; (b)
petroleum, petroleum-based or petroleum derived products; (c) polychlorinated
biphenyls; (d) any substance exhibiting a hazardous waste characteristic
including but not limited to corrosivity, ignitability, toxicity or reactivity
as well as any radioactive or explosive materials; and (e) any raw materials,
building components, including but not limited to asbestos-containing materials,
and manufactured products containing Hazardous Substances.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
"IMPROVEMENTS" means any buildings, facilities, parking lots,
other structures and improvements, building systems and fixtures located on or
under any Owned Property or Leased Property.
"INDEBTEDNESS" means, with respect to the Business, (A)
indebtedness of Sellers or the Transferred Companies or any of them for borrowed
money (including, without limitation,
6
any pre-payment penalties and costs associated with pre-payment of such
indebtedness), (B) obligations of Sellers or Transferred Companies or any of
them evidenced by bonds, notes, debentures, letters of credit, bankers
acceptances or similar instruments, (C) except for the leases for personal
property or real property of the Transferred Companies (i) set forth on Schedule
3.12 or Schedule 3.15(b), (ii) that, in accordance with Section 3.12 or Section
3.15(b), as applicable, are not required to be disclosed on the Schedules or
(iii) are entered into between the date hereof and the Closing Date to the
extent permitted by Section 5.01, obligations of Sellers or Transferred
Companies or any of them under capitalized leases, (D) obligations of Sellers or
Transferred Companies or any of them under conditional sale, title retention or
similar agreements or arrangements creating an obligation of Sellers or
Transferred Companies with respect to the deferred purchase price of property
(other than customary trade credit), (E) interest rate and currency obligation
swaps, xxxxxx or similar arrangements and (F) all obligations of any of the
Sellers or Transferred Companies to guarantee any of the foregoing types of
obligations on behalf of any Person other than the Sellers or the Transferred
Companies.
"INTELLECTUAL PROPERTY RIGHTS" means any and all rights in and
to all (i) patents, patent applications, patent disclosures and inventions, (ii)
trademarks, service marks, trade dress, trade names, logos, domain names, and
corporate names and registrations and applications for registration thereof
together with all of the goodwill associated therewith, (iii) copyrights
(registered and unregistered) and copyrightable works and registrations and
applications for registration thereof, (iv) features of shape, configuration,
pattern or ornament and design registrations and patents, (v) mask works and
registrations and applications for registration thereof, (vi) computer software,
source code, object code, data, data bases and documentation thereof, (vii)
trade secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, financial and
marketing plans and customer and supplier lists and information), (viii) other
intellectual property rights, (ix) copies and tangible embodiments thereof (in
whatever form or medium) and (x) any claims or causes of action arising out of
or related to any infringement or misappropriation of any of the foregoing.
"INVENTORY" means, in each case with respect to the Business,
(a) all stock in trade, merchandise, goods, supplies and other products owned by
a Seller or the Transferred Companies for resale or lease in the ordinary course
of business to its customers or otherwise under the control of any Seller or
Transferred Company or carried on the books of the Sellers or the Transferred
Companies for the exclusive use by the Sellers or the Transferred Companies, (b)
all office supplies or similar materials of the Transferred Companies, and (c)
all of the raw materials, work in process, spare parts, finished products,
wrapping, supply and packaging items, promotional materials and similar items
owned by the Sellers or the Transferred Companies, wherever located.
"INVESTMENT CANADA ACT" means the Investment Canada Act,
R.S.C. 1985, c. 28 (1st Supp.) (as amended).
"KNOWLEDGE OF SELLERS" or words of similar import shall mean
actual knowledge possessed by the individuals set forth Schedule 1.01.
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"KNOWLEDGE OF BUYER" or words of similar import shall mean
actual knowledge possessed by Xxxxxxx X. Xxxxxx, Xxxxx Xxxxx, Xxxxx Xxxxxxx and
Xxxx Xxxxxxxxx.
"LIEN" means, with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest or encumbrance in respect of
such property or asset.
"MATERIAL ADVERSE EFFECT" means any effect or change that is
or would reasonably be expected to be material and adverse to the Business,
results of operations or financial condition of the Transferred Companies, taken
as a whole.
"1934 ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"PENSION PLAN LIABILITY" means, as of any date, the excess of
the present value of the aggregate projected benefit obligations of the Pension
Plans (excluding the Canadian Employee Plans, but including but not limited to
the LCA Pension Plan, Xxxxxxxxx Lighting Pension Plan and Supplemental Executive
Retirement Plan) (as calculated pursuant to the actuarial methods and
assumptions set forth on Exhibit B) over the fair market value of such Pension
Plan assets as of such date. For purposes of the calculation referred to in the
preceding sentence, Employee data, including without limitation, salaries,
number of Employees, age of Employees and years of service, as of January 1,
2002 will be utilized and projected to the date on which such Pension Plan
Liability is calculated.
"PERMITS" means all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, or notifications to, any
Governmental Authority, whether foreign, federal, state, provincial or local,
necessary or desirable for the past, present or anticipated conduct of, or
relating to the operation, of the Business.
"PERMITTED LIENS" means (i) Liens reflected or reserved
against in the Preliminary Balance Sheet (including in the notes thereto), (ii)
Liens set forth on Schedule 1.01, (iii) Liens, easements, servitudes,
encroachments, rights-of-way, pledges, charges, restrictions and encumbrances,
including, without limitation, survey matters, mechanics' liens, repairmen's
liens and other similar liens, if any, that do not materially detract from the
value of the property subject thereto or materially interfere with the manner in
which the subject property is currently being used by the applicable Transferred
Company or materially interfere with the ordinary conduct of the business of the
applicable Transferred Company with respect to such property, (iv) taxes and
general and special assessments not yet due and payable without penalty or
interest, and (v) Liens that will serve as collateral for any financing of
Buyer; provided, however, that the foregoing definition shall in no event
include any Senior Debt Liens.
"PERSON" means an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"PHILADELPHIA FACILITY" means the real property located at 000
Xxxx Xxxxxx, Xxxxxxxxxxxx, XX.
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"POLICIES" means all Contracts that insure (i) the Transferred
Companies' properties, plant and equipment for loss or damage, and (ii) the
Transferred Companies or their officers, directors, employees or agents against
any liabilities, losses or damages (or lost profits) for any reason or purpose.
"POST-CLOSING ENVIRONMENTAL LIABILITIES" means any
Environmental Liabilities to the extent arising out of or relating to the
operations of the Transferred Companies, the Canadian Business, the Purchased
Assets or the use of the Real Property at any time on or after the Closing Date.
"PRE-CLOSING ENVIRONMENTAL LIABILITIES" means any
Environmental Liabilities (excluding any Special Pre-Closing Environmental
Liabilities) to the extent arising out of or relating to the operations of any
of the Transferred Companies, the Canadian Business, the Purchased Assets or the
use of the Real Property at any time prior to the Closing Date, including
without limitation (i) all Damages arising out of or related to any breach of
the representations and warranties contained in Section 3.20; (ii) all costs,
fees and expenses relating to environmental regulatory compliance, permitting or
other regulatory issues commenced by Buyer relating to pre-Closing environmental
conditions; and (iii) all costs related to restoring the condition of property
and buildings damaged by Remedial Action.
"PRELIMINARY BALANCE SHEET" means the audited combined balance
sheet of the Transferred Companies as of September 30, 2001.
"PR CODE" means the Puerto Rico Internal Revenue Code of 1994,
as amended.
"PURCHASED ASSETS" means assets, properties and business, of
every kind and description, owned, held or used in the conduct of Canadian
Business by Canadian Seller as the same shall exist on the Closing Date,
including all right, title and interest of Canadian Seller in, to and under the
following Purchased Assets to the extent owned, held or used in the conduct of
Canadian Business, including, without limitation, all right, title and interest
in and to the following:
(i) all equipment, furniture, fixtures, machinery,
vehicles and other tangible personal property;
(ii) all Leased Property;
(iii) all Canadian Contracts and all purchase orders
outstanding as of the Closing;
(iv) all accounts, accounts receivable, rights to
payment, rebates receivable and other receivables;
(v) all general intangibles and intangible property,
including without limitation, all Intellectual Property
Rights;
(vi) all refunds or deposits made by the Canadian
Seller to any other Person and prepaid expenses;
9
(vii) all items of Inventory, including, without
limitation, raw materials, work-in-process, finished goods,
supplies and spare parts and other inventories;
(viii) all Permits issued or granted by any
Government Authority;
(ix) all assets reflected on the Preliminary Balance
Sheet;
(x) all insurance policies relating to the Canadian
Business except those relating to the Canadian Employee Plans;
(xi) all product certifications;
(xii) all books, records, files and papers relating
to the foregoing;
(xiii) all goodwill associated with the Canadian
Business or the Purchased Assets; and
(xiv) all employee records except to the extent the
disclosure of such would be a breach of applicable law;
provided, however, that an Excluded Asset shall not be a
Purchased Asset.
"REAL PROPERTY" means the Leased Property and the Owned
Property.
"RELEASE" means any release, spill, emission, leaking,
pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge,
dispersal, leaching or migration of Hazardous Substances into air, soil, water,
groundwater or other media.
"REMEDIAL ACTION" means any response action, removal action,
remedial action, closure, corrective action, regulatory permitting, monitoring
program, risk assessment, deed restriction, sampling program, investigation or
other activity required, allowed by or consistent with any Environmental Law or
Governmental Authority to clean up, remove, remediate, treat, xxxxx or otherwise
address any Hazardous Substances and shall include by way of example and not
limitation, (i) obtaining any Environmental Permits necessary to conduct any
such work, (ii) preparing and implementing any plans or studies for such work,
(iii) obtaining a written notice from a Governmental Authority with jurisdiction
over the site in question or any portion thereof under Environmental Laws that
material additional work is required by such Governmental Authority; and (iv)
any other activities required under Environmental Laws to address the presence
of Hazardous Substances at the site in question or any portion thereof which
exceed standards or criteria applicable to the Real Property or site at issue
given its use at the time of Closing.
"SAN LEANDRO FACILITIES" means the real property located at
0000 Xxxxxxxxx Xxxxx and 0000 Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx.
10
"SELLER GROUP" means, with respect to federal income Taxes,
the affiliated group of corporations (as defined in Section 1504(a) of the Code)
of which a Seller is a member and, with respect to state income or franchise
Taxes, the consolidated, combined or unitary group of which Sellers, the
Companies or the Subsidiaries or any of their Affiliates is a member prior to
the Closing.
"SENIOR DEBT LIENS" means the liens on the Purchased Assets,
the Shares or any of the assets of the Transferred Companies created under any
of the Collateral Documents referred to in the Amendment, Restatement, General
Provisions and Intercreditor Agreement dated as of August 15, 2001 among USI,
USI GlobalCorp., USI American Holdings, Inc., USI Atlantic Corp., Rexair
Holdings Inc., Rexair, Inc., the other subsidiaries of USI party thereto,
Wilmington Trust Company and Xxxxx X. Xxxxxxxx, as Collateral Trustees (the
"Collateral Trustees"), Bank of America, N.A., as Debt Coordinator, USI Agent,
Rexair Agent and Rexair Collateral Agent and the lenders party thereto, as
amended from time to time, for the benefit of the secured parties named therein,
including without limitation the Amended and Restated Pledge and Security
Agreement dated as of August 15, 2001 among USI and its subsidiaries party
thereto and the Collateral Trustees and the Amended and Restated Collateral
Trust Agreement dated as of August 15, 2001 among USI and its subsidiaries party
thereto and the Collateral Trustees, in each case as amended from time to time.
The Senior Debt Liens are listed on Schedule 9.01.
"SHARES" means all of the shares of the capital stock of the
Companies set forth next to the names of the Companies on Schedule 2.01(a).
"SPECIAL PRE-CLOSING ENVIRONMENTAL LIABILITIES" means any
Environmental Liabilities to the extent arising out of or relating to the
operation of the Transferred Companies, the Canadian Business, the Purchased
Assets or the use of the Real Property at any time prior to the Closing Date
that relate to those items identified on Exhibit C with respect to the El
Dorado, Arkansas facility and the Bucks County, Pennsylvania facility.
"SUBSIDIARY" means any entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are at the time
directly or indirectly owned by a Company.
"TAX" means any tax, duty, fee, assessment or charge of any
nature whatsoever imposed by any government or taxing authority, domestic or
foreign, including, without limitation, any gross or net income, gross or net
receipts, minimum, sales, use, ad valorem, asset, value added, stamp, transfer,
franchise, withholding, payroll, employment, profit sharing, capital and
corporation tax, excise, occupation, premium or property tax, together with any
interest, penalty, addition to tax or additional amount imposed with respect
thereto.
"TIJUANA FACILITY" means the real property located at Ave. Eje
Xxxxxxx Xxxxxxx-Poniente No. 25, Ciudad Nueva Industrial, Tijuana, Baja
California, Mexico.
"TRANSFERRED COMPANY" means each of the Companies, the
Subsidiaries and Progress (collectively, the Companies, the Subsidiaries and
Progress are referred to as the "Transferred Companies").
11
(b) Each of the following terms is defined in the Section set
forth opposite such term:
TERM SECTION
Accounting Principles.................................................................. 2.03(a)
Acquired Business...................................................................... 7.10
Agreement.............................................................................. Preamble
Alternate Firm......................................................................... 2.03(a)
Assumed Leases......................................................................... 3.15(b)
Auditor................................................................................ 2.03(a)
Benefit Arrangement.................................................................... 3.19(a)(iii)
Bulk Sales Laws........................................................................ 12.18
Buyer.................................................................................. Preamble
Buyer Deductible....................................................................... 10.03(a)
Buyer Pension Trust.................................................................... 8.01(e)
Canadian Contracts..................................................................... 1.01
(Assumed Liabilities)
Canadian Employee Plan................................................................. 3.19(i)
Canadian Employees..................................................................... 3.18(a)
Canadian Seller........................................................................ Preamble
Claim.................................................................................. 10.03(a)
Closing................................................................................ 2.02
Closing Balance Sheet.................................................................. 2.03(a)
Closing Net Worth...................................................................... 2.03(a)
Collateral Trustees.................................................................... 1.01
(Senior Debt Liens)
COBRA.................................................................................. 8.01(a)
Companies.............................................................................. 1.01
(Company)
Company Securities..................................................................... 3.05(b)
Company-Specific Plans................................................................. 8.01(b)
Contracts.............................................................................. 3.12
Credit Support Documents............................................................... 7.05(b)
Damages................................................................................ 10.02(a)
Deficit Amount......................................................................... 2.04(a)
Dispute Resolution Procedure........................................................... 10.03(g)
DOL.................................................................................... 3.03(a)
Dual-Lite.............................................................................. Recitals
Environmental Escrow Account........................................................... 10.03(j)
Environmental Escrow Funds............................................................. 10.03(j)
Environmental Policy................................................................... 7.12
Environmental Policy Claim............................................................. 7.12
Employee............................................................................... 3.19(a)(i)
Employee Benefit Plans................................................................. 3.19(a)(ii)
Excess Amount.......................................................................... 2.04(a)
Excess Insurance Coverage.............................................................. 7.07(a)(iii)
Excess Insurance Coverage Claim........................................................ 7.07(b)
12
FASB Reports........................................................................... 3.19(e)
Final Net Worth........................................................................ 2.04(a)
Final Pension Plan Liability........................................................... 8.01(d)(i)
Final Pension Plan Liability Notification.............................................. 8.01(d)(i)
Final Pension Plan Liability Objection Notice.......................................... 8.01(d)(i)
Financing.............................................................................. 4.05
Foreign Employee Benefit Plan.......................................................... 3.19(i)
GAAP................................................................................... 2.03(a)
Indemnified Party...................................................................... 10.03(a)
Indemnifying Party..................................................................... 10.03(a)
Insurance.............................................................................. 3.23
Insurance Assignment and Assumption Agreement ......................................... 7.07(a)(ii)
IRS.................................................................................... 3.03(a)
JAMS................................................................................... 10.03(l)
LCA.................................................................................... Recitals
Lead Party............................................................................. 10.03(c)
Leased Property........................................................................ 3.15(b)
Manufacturing Group.................................................................... 3.32
Master Trusts.......................................................................... 3.19(b)
Material Contracts..................................................................... 3.12
Multiemployer Plan..................................................................... 3.19(d)
NFA.................................................................................... 10.03(e)
New 401(k) Trusts...................................................................... 8.01(c)
Non-Lead Party......................................................................... 10.03(c)
No Further Action Determination........................................................ 10.03(g)
Objection Notice....................................................................... 2.03(b)
Owned Property......................................................................... 3.15(a)
Parent................................................................................. Preamble
PBGC................................................................................... 3.19(f)
Pension Plans.......................................................................... 3.19(a)(ii)
Personnel.............................................................................. 3.10(d)
Post-Closing Tax Period................................................................ 8.02
Potential Contributor.................................................................. 10.06
Pre-Closing Claims .................................................................... 7.07(e)
Pre-Closing Tax Period................................................................. 8.02
Preliminary Transfers.................................................................. 2.01(a)
Prescolite............................................................................. 2.01(a)
Prescolite Texas....................................................................... 3.07(a)
Progress............................................................................... Recitals
Puerto Rico Grant...................................................................... 7.16
Puerto Rico Treasury Department........................................................ 7.17
Purchase Price......................................................................... 2.01(c)
PWC.................................................................................... 2.03(a)
Reimbursed Amounts..................................................................... 7.07(c)
Remedy Criteria........................................................................ 10.03(e)
Restricted Amounts..................................................................... 7.10
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San Leandro Facilities Sublease........................................................ 7.15
Xxxxx Place Lease...................................................................... 5.08
Schedules.............................................................................. 12.11
Self-Insured Reimbursed Amounts........................................................ 7.07(d)
Self-Insured Threshold................................................................. 7.07(a)(v)
Seller Names........................................................................... 6.02
Seller Pension Trust................................................................... 8.01(e)
Sellers................................................................................ Preamble
Sellers' Indemnity..................................................................... 10.03(a)
SiTeco................................................................................. 1.01
(Excluded Entities)
SiTeco Supply Agreements............................................................... 7.13
Subsidiary Securities.................................................................. 3.08(b)
Target Balance Sheet................................................................... 2.04(a)
Target Net Worth....................................................................... 2.04(a)
Tax Return............................................................................. 3.22
Tax Sharing Agreement.................................................................. 9.02(f)
Third Party Claim...................................................................... 10.04(b)
Title IV Plan.......................................................................... 3.19(f)
Transfer 401(k) Plans.................................................................. 8.01(c)
Transfer Date.......................................................................... 8.01(e)
Unrelated Accounting Firm.............................................................. 2.03(c)
Unrelated Pension Plan Expert.......................................................... 8.01(d)(ii)
USI.................................................................................... Recitals
US Seller.............................................................................. Preamble
VCP.................................................................................... 10.03(e)
WARN................................................................................... 3.21(b)
Warranty Breach........................................................................ 10.02(a)
Welfare Plans.......................................................................... 3.19(a)(iii)
ARTICLE 2.
PURCHASE AND SALE
Section 2.01 Preliminary Transfers; Purchase and Sale of Shares and
Purchased Assets and Assumption of Liabilities. (a) (a) (i) Notwithstanding the
provisions of Section 5.01 hereof or any other provision of this Agreement to
the contrary, at or prior to the Closing, (i) the interests of the Dormant
Subsidiary shall be transferred, distributed or assigned in one or more
transactions and (ii) the lease with respect to the San Leandro Facilities shall
be assigned from Prescolite, Inc., a Delaware corporation ("Prescolite"), in
each case to Sellers or one or more Affiliates or designees of Sellers other
than a Transferred Company (collectively, the "Preliminary Transfers"). Subject
to Section 7.15, the form and manner of the Preliminary Transfers shall be
reasonably satisfactory to Sellers and Buyer. Sellers shall pay all costs and
expenses associated with the Preliminary Transfers including any Taxes,
expenses, costs or liabilities.
14
(ii) Upon the terms and subject to the conditions of
this Agreement, US Seller agrees to sell, or cause to be sold, to Buyer, and
Buyer agrees to purchase from US Seller the Shares set forth on Schedule 2.01(a)
at the Closing.
(b) Except as otherwise provided below, upon the terms and
subject to the conditions of this Agreement, Buyer agrees to purchase from
Canadian Seller, and Canadian Seller agrees to sell, convey, transfer, assign
and deliver to Buyer at the Closing, free and clear of all Liens, other than
Permitted Liens, all of Canadian Seller's right, title and interest in, to and
under the Purchased Assets; provided, however, that Purchased Assets shall not
include any Excluded Asset. Upon the terms and subject to the conditions of this
Agreement, Buyer agrees, effective at the time of the Closing, to assume all
Assumed Liabilities and to subsequently pay, honor and discharge when due and
payable in accordance with and subject to the terms and conditions of the
relevant governing agreements, commitments and instruments. Buyer expressly
understands and agrees that the Excluded Assets shall remain the property of the
Canadian Seller and that Buyer shall not have any rights with respect thereto.
Canadian Seller agrees to retain those Excluded Liabilities related to the
operation of the Canadian Business.
(c) The purchase price for the Shares and the Purchased Assets
(the "Purchase Price") is $250.0 million in cash. The Purchase Price shall be
paid as provided in Section 2.02 and shall be subject to adjustment as provided
in Section 2.04.
Section 2.02 Closing. The closing (the "Closing") of the purchase and
sale of the Shares and Purchased Assets hereunder shall take place at the
offices of Xxxxx Xxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, as
soon as possible, but in no event later than five business days, after
satisfaction of the conditions set forth in Article 9, or at such other time or
place as Buyer and US Seller may agree, it being agreed and understood that the
parties will use their reasonable efforts to effectuate the Closing on or before
April 30, 2002. At the Closing:
(a) Buyer shall deliver to US Seller, who shall receive funds
on behalf of Sellers, the Purchase Price in immediately available funds by wire
transfer to an account of US Seller with a bank designated by US Seller, by
notice to Buyer, which notice shall be delivered not later than two business
days prior to the Closing Date (or if not so designated, then by certified or
official bank check payable in immediately available funds to the order of US
Seller in such amount).
(b) US Seller shall deliver to Buyer certificates for the
Shares duly endorsed or accompanied by stock powers duly endorsed in blank, with
any required transfer stamps affixed thereto.
(c) Canadian Seller and Buyer shall enter into an Assignment
and Assumption Agreement with respect to the Purchased Assets and Assumed
Liabilities substantially in the form attached hereto as Exhibit D.
Section 2.03 Closing Balance Sheet. (a) As promptly as practicable,
but no later than 90 days after the Closing Date, Buyer will use reasonable best
efforts to cause to be prepared and delivered to US Seller the Closing Balance
Sheet, together with a report of PricewaterhouseCoopers LLP ("PWC") thereon, and
a certificate based on such Closing Balance
15
Sheet setting forth Buyer's calculation of Closing Net Worth; provided, however,
that should PWC be unable or unwilling to provide the report described above,
Buyer shall promptly engage another independent public accounting firm of
national reputation other than KPMG LLP (the "Alternate Firm") to provide such
report. PWC or the Alternate Firm, as the case may be, shall hereinafter be
referred to as the "Auditor". Buyer shall be responsible for the fees and
expenses of the Auditor. The Closing Balance Sheet (the "Closing Balance Sheet")
shall (i) fairly present the combined financial position of the Transferred
Companies as at the close of business on the Closing Date in accordance with
United States generally accepted accounting principles in effect on September
30, 2001 ("GAAP") and as used in the preparation of the Preliminary Balance
Sheet as described and supplemented by the principles set forth in Schedule 2.03
(the "Accounting Principles") applied on a basis consistent with those used in
the preparation of the Preliminary Balance Sheet and Target Balance Sheet, and
(ii) include line items consistent with those in the Preliminary Balance Sheet
(with the exception of the notes and interest payable to affiliates line item)
and Target Balance Sheet. Additionally the Closing Balance Sheet shall include
(A) a reserve for self-insured retentions for general liability, automobile and
worker's compensation insurance in an amount equal to $3.6 million (which amount
shall be identical to the amount set forth on the Target Balance Sheet), (B)
goodwill (net) in an amount equal to $45.2 million (which amount shall be
identical to the amount set forth on the Target Balance Sheet), (C) assets and
liabilities relating to pension plans in amounts equal to $0.6 and $12.5
million, respectively (which amounts shall be identical to the amounts set forth
on the Target Balance Sheet) and (D) net assets and liabilities relating to
deferred income taxes equal to $0.0 (which amount shall be identical to the
amount set forth on the Target Balance Sheet). The parties acknowledge that the
calculation of Pension Plan Liability for purposes of Section 8.01(d) shall be
determined solely in accordance with that Section and the definition of Pension
Plan Liability. "Closing Net Worth" shall mean the combined assets of the
Transferred Companies less the combined liabilities of the Transferred
Companies, as reflected on the Closing Balance Sheet.
(b) If US Seller disagrees with Buyer's calculation of Closing
Net Worth delivered pursuant to Section 2.03(a), US Seller may, within 30 days
after the work papers of Buyer's independent accountants are made available to
it as contemplated by Section 2.03(d),deliver a notice ("Objection Notice") to
Buyer disagreeing with such calculation and setting forth US Seller's
calculation of such amount. Any such notice of disagreement shall specify those
items or amounts as to which US Seller disagrees, and US Seller shall be deemed
to have agreed with all other items and amounts contained in the Closing Balance
Sheet and the calculation of Closing Net Worth delivered pursuant to Section
2.03(a).
(c) If an Objection Notice shall be duly delivered pursuant to
Section 2.03(b), Buyer and US Seller shall, during the 15 days following such
delivery, use their commercially reasonable efforts to reach agreement on the
disputed items or amounts in order to determine, as may be required, the amount
of Closing Net Worth, which amount shall not be more than the amount thereof
shown in US Seller's calculations delivered pursuant to Section 2.03(b) nor less
than the amount thereof shown in Buyer's calculation delivered pursuant to
Section 2.03(a). If, during such period, Buyer and US Seller are unable to reach
such agreement, any unresolved disputed items shall be promptly referred to an
independent accounting firm jointly selected by Buyer and US Seller with whom
none of the parties have a material relationship (the "Unrelated Accounting
Firm"). The parties agree that KPMG LLP shall serve as the Unrelated Accounting
16
Firm, provided that, at the time any services hereunder are required, it meets
the standard set forth in the immediately preceding sentence. The Unrelated
Accounting Firm shall be directed to render a written report only on the
unresolved disputed issues with respect to the Closing Balance Sheet as promptly
as practicable and to resolve only those issues of dispute set forth in the
Objection Notice. US Seller and Buyer shall use their commercially reasonable
efforts to agree on the procedures to be followed by the Unrelated Accounting
Firm (including procedures with regard to presentation of evidence) within
thirty (30) days following such referral to the Unrelated Accounting Firm. If US
Seller and Buyer are unable to agree upon procedures at the end of such thirty
(30) day period, the Unrelated Accounting Firm shall establish such procedures
giving due regard to the intention of US Seller and Buyer to resolve disputes as
quickly, efficiently and inexpensively as possible, which procedures may be, but
not need be, those proposed by either US Seller or Buyer. US Seller and Buyer
shall then submit evidence in support of its position on each item in dispute as
well as the procedures to be followed by the Unrelated Accounting Firm, and the
Unrelated Accounting Firm shall decide the dispute in accordance therewith. In
reaching a decision on each item in dispute, the Unrelated Accounting Firm's
decision is expressly limited to the selection of either US Seller's or the
Buyer's position on each such disputed item. The adjustment contemplated by this
Section 2.03(c) is intended to show the change in net worth of the Transferred
Companies from March 30, 2002 to the Closing Date, and each party acknowledges
that such change can only be measured if the calculation is done in the same
way, using the same methods, at both dates. Upon final resolution of all
disputed issues, the Unrelated Accounting Firm shall issue a report showing the
calculation of the Closing Net Worth of the Transferred Companies based on the
Closing Balance Sheet delivered pursuant to Section 2.03(a) as amended by the
determinations of the Unrelated Accounting Firm. The resolution of the dispute
by Unrelated Accounting Firm shall be final and binding on the parties.
Sellers shall bear the percentage of the fees and expenses of
the Unrelated Accounting Firm that equals the difference between US Seller's
calculation of Closing Net Worth and the Final Net Worth divided by the
difference between US Seller's calculation and Buyer's calculation of Closing
Net Worth. Buyer shall bear the percentage of the expenses of the Unrelated
Accounting Firm that equals the difference between the Final Net Worth and
Buyer's calculation of Closing Net Worth divided by the difference between US
Seller's calculation and Buyer's calculation of Closing Net Worth.
(d) Buyer and Sellers agree that they will, and agree to cause
their respective independent accountants and the Companies and Subsidiaries to,
cooperate and assist in the preparation of the Closing Balance Sheet and the
calculation of Closing Net Worth and in the conduct of the audits and reviews
referred to in this Section 2.03, including without limitation, the making
available to the extent reasonably necessary or desirable of books, records,
work papers and personnel, including the execution of customary release or
indemnification letters required by the Auditor. Additionally, Buyer agrees that
with respect to the preparation of the Closing Balance Sheet and the related
audit of the Business and the Transferred Companies, the independent accountants
of US Seller shall have the right to observe a count of the Inventory in
connection with such audit and shall have reasonable access to the work papers
and personnel of the Auditor and to the management and employees of Buyer and
each Transferred Company in connection therewith. The foregoing notwithstanding,
each party agrees that no participation,
17
review or audit contemplated by this Section 2.03(d) shall be conducted in a
manner that would unreasonably interfere with the conduct of the business of the
other party or its subsidiaries.
Section 2.04 Adjustment of Purchase Price(a) . (a) If Target Net Worth
exceeds Final Net Worth in an amount in excess of $2.0 million (such amount in
excess of $2.0 million shall be referred to as the "Deficit Amount") US Seller,
on behalf of Sellers, shall pay to Buyer, as an adjustment to the Purchase
Price, in the manner and with interest as provided in Section 2.04(b), the
Deficit Amount, if any. If Final Net Worth exceeds Target Net Worth in an amount
in excess of $2.0 million (such amount in excess of $2.0 million shall be
referred to as the "Excess Amount"), Buyer shall pay to US Seller, who shall
receive funds on behalf of Sellers, in the manner and with interest as provided
in Section 2.04(b), the Excess Amount, if any. "Target Net Worth" means the
greater of (i) $235,125,000 or (ii) the combined assets of the Transferred
Companies, less the combined liabilities of the Transferred Companies, as set
forth on the Target Balance Sheet. "Target Balance Sheet" means the combined
balance sheet of the Transferred Companies as of March 30, 2002 prepared in
accordance with GAAP as described and supplemented by the Accounting Principles
applied on a basis consistent with the Preliminary Balance Sheet (with the
exception of the notes and interest payable to affiliates line item) and shall
fairly present the combined financial position of the Transferred Companies as
of the close of business on March 30, 2002; provided, that the Target Balance
Sheet shall include (i) a reserve for self-insured retentions for general
liability, automobile and worker's compensation insurance in an amount equal to
$3.6 million (which amount shall be identical to the amount set forth on the
Closing Balance Sheet), (ii) goodwill (net) in an amount equal to $45.2 million
(which amount shall be identical to the amount set forth on the Closing Balance
Sheet), (iii) assets and liabilities relating to pension plans in amounts equal
to $0.6 and $12.5 million, respectively (which amounts shall be identical to the
amounts set forth on the Closing Balance Sheet) and (iv) net assets and
liabilities relating to deferred income taxes equal to $0.0 (which amount shall
be identical to the amount set forth on the Closing Balance Sheet). The parties
acknowledge that the calculation of Pension Plan Liability for purposes of
Section 8.01(d) shall be determined solely in accordance with that Section and
the definition of Pension Plan Liability. "Final Net Worth" means the Closing
Net Worth (i) as shown in Buyer's calculation delivered pursuant to Section
2.03(a), if no Objection Notice is duly delivered pursuant to Section 2.03(b);
or (ii) if such Objection Notice is delivered, (A) as agreed by Buyer and US
Seller pursuant to Section 2.03(c), or (B) in the absence of such agreement, as
shown in the Unrelated Accounting Firm's calculation delivered pursuant to
Section 2.03(c); provided that in no event shall Final Net Worth be more than US
Seller's calculation of Closing Net Worth delivered pursuant to Section 2.03(b)
or less than Buyer's calculation of Closing Net Worth delivered pursuant to
Section 2.03(a).
(b) Any payment pursuant to Section 2.04(a) shall be made at a
mutually convenient time and place within 10 days after the Final Net Worth has
been determined by delivery by Buyer or US Seller, on behalf of Sellers, as the
case may be, of a certified or official bank check payable in immediately
available funds to the other party or by causing such payments to be credited to
such account of such other party as may be designated by such other party. The
amount of any payment to be made pursuant to this Section 2.04 shall bear
interest from and including the Closing Date to but excluding the date of
payment at a rate per annum equal to the rate of interest publicly announced by
Bank of America in San Francisco from time to time as its "reference rate"
during the period from the Closing Date to the date of payment.
18
Such interest shall be payable at the same time as the payment to which it
relates and shall be calculated daily on the basis of a year of 365 days and the
actual number of days elapsed.
(c) If an adjustment is made with respect to the Purchase
Price pursuant to this Section, the purchase price allocations set forth in the
Tax Sharing Agreement or on the schedules attached thereto shall be adjusted in
accordance with the Code and any other applicable law and as mutually agreed by
Buyer and US Seller. In the event that an agreement is not reached within 20
days after the determination of Final Net Worth, any disputed items shall be
referred to the Unrelated Accounting Firm to resolve the disputed items. Upon
resolution of the disputed items, the purchase price allocations set forth in
the Tax Sharing Agreement or on the schedules attached thereto shall be adjusted
to reflect such resolution. The costs, fees and expenses of resolving the
allocation disputes by the Unrelated Accounting Firm shall be borne equally by
Buyer on the one hand and Sellers on the other. Buyer and Sellers agree to file
any additional information return required to be filed pursuant to the Code or
any state, local, provincial or foreign tax law.
Section 2.05 Assignment of Contracts and Rights. Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign any Purchased Asset or any right thereunder if an
attempted assignment, without the consent of a third party, would constitute a
breach or in any way adversely affect the rights of Buyer or Canadian Seller
thereunder. Until the Closing Date, Canadian Seller will use its commercially
reasonable efforts (but without the payment of any funds or monies therefore) to
obtain consents listed on Schedule 3.04 and after the Closing Date, Canadian
Seller will cooperate with Buyer with respect thereto. If such consent is not
obtained, Canadian Seller and Buyer will cooperate in a mutually agreeable
arrangement under which Buyer would obtain the benefits and assume the
obligations thereunder in accordance with this Agreement.
ARTICLE 3.
Representations and Warranties of Parent and Sellers
Each of Parent and Sellers jointly and severally represent and
warrant to Buyer as of the date hereof that:
Section 3.01 Corporate Existence and Power. Each of Parent, Sellers,
and the Companies is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all material governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted. Each of Parent, Sellers, and the Companies is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary, except for those jurisdictions where
failure to be so qualified would not reasonably be expected to have a material
adverse effect on the Parent, Sellers or the Companies.
Section 3.02 Corporate Authorization. The execution, delivery and
performance by Parent and each Seller of this Agreement and the consummation of
the transactions contemplated hereby by Parent and each Seller are within the
corporate powers of such Parent and Seller and have been duly authorized by all
necessary corporate action on the part of such Parent and Seller.
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This Agreement has been duly executed and delivered by Parent and each Seller
and constitutes a valid and binding agreement of Parent and each Seller
enforceable against Parent and each Seller in accordance with its terms, except
as enforceability hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to the enforcement of
creditors' rights generally and by general principles of equity.
Section 3.03 Governmental Authorization(a) . (a) The execution,
delivery and performance by Parent and each Seller of this Agreement and the
consummation of the transactions contemplated hereby require no material action
by or in respect of, or material filing with, any Governmental Authority other
than (i) compliance with any applicable requirements of the HSR Act, (ii)
filings set forth on Schedule 3.03, and (iii) filings with the Pension Benefit
Guaranty Corporation, the Internal Revenue Service ("IRS"), the Department of
Labor ("DOL"), any applicable provincial Department or Ministry of Labor and any
other similar Governmental Authority with respect to the transfer of assets and
liabilities of Employee Benefit Plans pursuant to this Agreement.
(b) The Companies and their affiliates (as affiliation is
determined under the Competition Act (Canada)), other than Canadian Seller, are
not operating businesses for the purpose of the Part IX of the Competition Act
(Canada), and the value of the Purchased Assets does not exceed the threshold
prescribed by section 110 of the Competition Act (Canada) for the purposes of
determining whether the transactions contemplated by this Agreement are subject
to pre-merger notification under Part IX of the Competition Act (Canada).
(c) Neither the Companies, nor any entity controlled directly
or indirectly by the Companies, are a Canadian business within the meaning of
the Investment Canada Act, and the value, calculated in the manner prescribed,
of the Purchased Assets of the Canadian Business being acquired is not CDN
$5,000,000 or more within the meaning of and for the purposes of Part IV of the
Investment Canada Act.
Section 3.04 Noncontravention. The execution, delivery and performance
by Parent and Sellers of this Agreement and the consummation of the transactions
contemplated hereby by Parent and Sellers do not and will not (i) violate the
certificate of incorporation or bylaws of Parent or Sellers, (ii) assuming
compliance with the matters referred to in Section 3.03, violate any material
applicable law, rule, regulation, judgment, injunction, order or decree, (iii)
except as otherwise disclosed on Schedule 3.04, require any material consent or
other action by any Person under, constitute a material default under, or give
rise to any right of termination, cancellation or acceleration of any right or
obligation of any Transferred Company or to a loss of any benefit to which such
Transferred Company is entitled under any provision of any material agreement or
other instrument binding upon such Transferred Company or (iv) result in the
creation or imposition of any Lien on any asset of any Company or Progress,
except for any Permitted Liens.
Section 3.05 Capitalization(a) . (a) The authorized and outstanding
capital stock of each Company on the date hereof is set forth in Schedule 3.05.
(b) All outstanding shares of capital stock of each Company
have been duly authorized and validly issued and are fully paid and
non-assessable. Except as set forth in this
20
Section 3.05 or on Schedule 3.05, there are no outstanding (i) shares of capital
stock or voting securities of the Companies, (ii) securities of any Company
convertible into or exchangeable for shares of capital stock or voting
securities of such Company or (iii) options, warrants, calls, subscriptions or
other rights to acquire from any Company, or other obligation of such Company to
issue, any capital stock, voting securities or partnership interests or
securities convertible into or exchangeable for capital stock or voting
securities or partnership interests of such Company (the items in clauses
3.05(b)(i), 3.05(b)(ii) and 3.05(b)(iii) being referred to collectively as the
"Company Securities"). There are no outstanding obligations of any Company to
repurchase, redeem or otherwise acquire any Company Securities or voting trusts
or similar agreements to which any Company is a party with respect to the voting
of the capital stock of such Company.
Section 3.06 Ownership of Shares; Title to Purchased Assets(a) . (a) US
Seller is the record and beneficial owner of the Shares on Schedule 2.01(a),
free and clear of any Lien other than those listed on Schedule 9.01, and will
transfer and deliver to Buyer at the Closing valid title to such Shares as set
forth on Schedule 2.01(a) free and clear of any Lien other than those created by
Buyer or an Affiliate of Buyer.
(b) Subject to Section 2.05, upon consummation of the
transactions contemplated hereby, Buyer will have acquired good and marketable
title in and to, or a valid leasehold interest in, each of the Purchased Assets,
free and clear of all Liens, except for Permitted Liens.
Section 3.07 Condition and Sufficiency of Assets.
(a) The Improvements and equipment of the Transferred
Companies considered as a whole (giving due account to the age and length of use
of same, ordinary wear and tear excepted) are structurally sound, are in good
operating condition and repair, and are adequate for the uses to which they are
currently being put, and none of such Improvements or equipment is in need of
maintenance or repairs, in each case, except for ordinary, routine maintenance
and repairs that are not material in nature or cost, except for items set forth
on Schedule 3.07 or reflected in the Capital Expenditure Plan. The assets of the
Transferred Companies are sufficient for the continued conduct of the Business
after the Closing in substantially the same manner as conducted prior to the
Closing, and except as set forth on Schedule 3.07, there are no assets held by,
or service performed by, Sellers, the Dormant Subsidiary, Prescolite Lite
Controls, Inc., a Texas corporation ("Prescolite Texas") or their other
Affiliates (other than the Companies) that are material in nature or cost and
relate to the Business.
(b) The Dormant Subsidiary does not (i) engage in any active
business operations or (ii) hold or reserve any corporate or other names or any
assets that relate to or are used in connection with the Business.
Section 3.08 Subsidiaries(a) . (a) The authorized and outstanding
capital stock (including the name of the record and beneficial holder of such
shares of capital stock) of each Subsidiary on the date hereof is set forth in
Schedule 3.08(a). Each Subsidiary is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all corporate powers and all material governmental
licenses,
21
authorizations, permits, consents and approvals required to carry on its
business as now conducted.
(b) Except as disclosed in Schedule 3.08(b), all of the
outstanding capital stock or other voting securities of each Subsidiary is owned
by a Company, directly or indirectly, free and clear of any Lien other than
those listed on Schedule 9.01. Except as disclosed in Schedule 3.08(b), there
are no outstanding (i) securities of any Company or any Subsidiary convertible
into or exchangeable for shares of capital stock or voting securities of any
Subsidiary or (ii) options or other rights to acquire from any Company or any
Subsidiary (or their respective shareholders or partners, as the case may be),
or other obligation of any Company or any Subsidiary to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of any Subsidiary (the items in clauses
3.08(b)(i) and 3.08(b)(ii) being referred to collectively as the "Subsidiary
Securities"). There are no outstanding obligations of any Company or any
Subsidiary to repurchase, redeem or otherwise acquire any outstanding Subsidiary
Securities or voting trusts or similar agreements to which any Company is a
party with respect to the voting of the capital stock of such Company.
Section 3.09 Financial Statements. The audited combined balance sheets
of the Transferred Companies as of September 30, 2000 and 2001, and the related
combined statements of operations, changes in invested capital, and cash flows
for the three years in the period ended September 30, 2001 are set forth in
Schedule 3.09 and present fairly, in all material respects, the combined
financial position of the Transferred Companies at September 30, 2000 and 2001
and the combined results of their operations and their cash flows for each of
the three years in the period ended September 30, 2001, in conformity with GAAP
as described in Schedule 2.03.
Section 3.10 Absence of Certain Changes. Except as disclosed in
Schedule 3.10, since the Balance Sheet Date, the business of the Transferred
Companies has been conducted in the ordinary course consistent with past
practices and there has not been:
(a) acquisition by merger, consolidation or purchase of any
business or Person by the Transferred Companies, including by purchase of all or
substantially all of the assets or a substantial portion of the assets or
business of any Person;
(b) any material change in any method of accounting or
accounting practice by the Transferred Companies except for any such change
required by reason of a concurrent change in GAAP;
(c) declaration or payment of any dividends on any shares of
capital stock of the Transferred Companies (other than dividends payable in the
ordinary course or in accordance with cash management practices in the ordinary
course of Parent's, Seller's or the Transferred Companies' business);
(d) (i) material increase in the compensation payable or to
become payable by the Transferred Companies to any of their respective officers,
employees, independent contractors or agents (collectively, "Personnel") whose
total compensation for services rendered to the Transferred Companies is
currently at an annual rate of more than $75,000 (except for normal periodic
increases in the ordinary course of business consistent with past practice),
22
(ii) material bonus, incentive compensation, service award or other like benefit
granted, made or accrued, contingently or otherwise, for or to the credit of any
of the Personnel, (iii) material employee welfare, pension, retirement,
profit-sharing, insurance or similar payment or arrangement made or agreed to by
the Transferred Companies for any Personnel except pursuant to the existing
plans and arrangements described in Schedule 3.10 or (iv) material new
employment agreement or independent contractor agreement to which the
Transferred Companies are a party;
(e) material addition to or modification of any Employee
Benefit Plan affecting Personnel other than (i) contribution made for the 2001
fiscal year in accordance with the normal practices of the Transferred Companies
or (ii) the extension of coverage to other Personnel who became eligible under
the terms of the applicable Employee Benefit Plan as in effect on the date
hereof;
(f) sale (other than sales of Inventory in the ordinary course
of business), lease, assignment, transfer or other disposition of any material
assets or properties of the Transferred Companies other than in the ordinary
course;
(g) cancellation of any material Indebtedness or waiver of any
claims or rights of substantial value to the Transferred Companies or mortgage,
pledge or imposition of any Liens (other than Permitted Liens) on any material
asset or property of the Transferred Companies;
(h) cancellation or termination of any Contract, that, if in
effect on the date hereof, would constitute a Material Contract (other than any
termination of any such contract upon expiration of its stated term);
(i) capital expenditure or the execution of any lease or any
incurring of liability therefor by the Transferred Companies, involving payments
in excess of $100,000 individually or $500,000 in the aggregate, except in
accordance with the Capital Expenditure Plan;
(j) change in accounting methods or practices by the
Transferred Companies;
(k) revaluation by the Transferred Companies of any of their
respective assets, including without limitation, writing off notes or accounts
receivable or inventory in any case in excess of reserves, except in the
ordinary course consistent with past practice;
(l) damage, destruction or loss (whether or not covered by
insurance) of any material asset or property of any Transferred Company
adversely affecting the properties, business or prospects of the Transferred
Companies; or
(m) agreement, whether oral or written, by the Transferred
Companies to do any of the foregoing.
Section 3.11 No Undisclosed Liabilities. Except as set forth in
Schedule 3.11, there are no liabilities or obligations of any nature (whether
absolute or contingent, liquidated or unliquidated, or due or become due) of the
Transferred Companies of any kind, other than:
23
(a) liabilities provided for in the Preliminary Balance Sheet
(including to the extent reserved therefor therein) or disclosed in the notes
thereto;
(b) liabilities not required under the Accounting Principles
to be shown on the Preliminary Balance Sheet;
(c) performance obligations arising in the ordinary course of
business under the Contracts;
(d) liabilities incurred in the ordinary course of business
since the Balance Sheet Date which are not material to the Transferred
Companies, taken as a whole;
(e) Excluded Liabilities; and
(f) other undisclosed liabilities which, individually or in
the aggregate, are not material to the Transferred Companies, taken as a whole.
Section 3.12 Material Contracts. Schedule 3.12 includes lists of all
agreements and contracts of the Transferred Companies (collectively "Contracts")
of the following types (such Contracts are collectively, the "Material
Contracts"):
(a) all patent, trademark, servicemark, tradename, copyright,
royalty, license and inventor Contracts, except those relating to "off the
shelf" or other standard products;
(b) all Contracts (including purchase orders) for the purchase
of any materials, supplies, equipment, merchandise or services under which there
is a continuing purchase obligation and that involve an annual expenditure by a
Transferred Company of more than $50,000 for any one Contract; (c) all Contracts
(including sales orders) involving the obligations of a Transferred Company to
deliver products or service with an unfilled order balance of more than $50,000;
(d) any option or other agreement to purchase or otherwise
acquire or sell or otherwise dispose of any interest in real property;
(e) any commitment to make a capital expenditure or to
purchase a capital asset which is material to the Business, not contemplated by
the Capital Expenditure Plan;
(f) any agreement or commitment with a third party other than
an employee relating to the location of employees or minimum number of employees
to be employed by any Transferred Company with respect to the Business;
(g) any power of attorney (other than powers of attorney given
in the ordinary course of Business with respect to routine export, tax or
securities matters);
(h) all leases for personal property under which a Transferred
Company is either lessor or lessee that involve annual payments or receipts of
more than $50,000 for any one
24
lease or commitments for aggregate payments or receipts of more than $250,000
for any one lease;
(i) all Contracts, mortgages, indentures, notes, installment
obligations and other instruments relating to indebtedness to which a
Transferred Company is a party or by which it or its properties are bound,
except any such agreement (A) with annual payments by a Transferred Company not
exceeding $50,000, (B) which may be prepaid with not more than 60 days notice
without the payment of a penalty or (C) entered into subsequent to the date of
this Agreement as permitted by Section 5.01;
(j) all distributor, representative and agency Contracts that
involve an annual payment by a Transferred Company of more than $50,000 for any
one Contract;
(k) all government Contracts and all other agreements with
customers that involve an annual payment to a Transferred Company of more than
$50,000 for any one Contract;
(l) all material Contracts with any current officer, director
or employee of any Transferred Company;
(m) all Contracts (whether such Contracts would qualify as an
Excluded Liability or not) under which any Transferred Company has agreed to
indemnify or guarantee the obligations of any Person (whether in the ordinary
course of business, in connection with an asset sale, a sale of all or
substantially all of a business or otherwise, except Contracts with customers of
the Transferred Companies entered into in the ordinary course of business) or to
share tax liability with any Person;
(n) all Contracts limiting the freedom of any Transferred
Company to engage in any line of business or in any geographic area;
(o) all Contracts relating to the acquisition by any
Transferred Company of any operating business or the shares or other interests
of any Person;
(p) except as disclosed in Schedule 3.19, all employment,
independent contractor, sales agents, consulting or severance agreements,
collective bargaining or labor union agreements, or pension, profit-sharing,
incentive compensation, deferred compensation, stock purchase, stock option,
stock appreciation right, group insurance, severance pay, or retirement plans or
agreements of any Transferred Company; and
(q) any agreements, whether written or oral, by any
Transferred Company to do any of the foregoing.
Sellers have made available to Buyer complete and correct
copies of all items listed on Schedule 3.12. Except as disclosed in Schedule
3.12, no Transferred Company is in material default under the terms of any item
listed on Schedule 3.12 and each Material Contract to which the Transferred
Companies are a party is valid, binding and in full force and effect and is
enforceable by the Companies that are party thereto in accordance with its
terms. Except as disclosed in Schedule 3.12, the Transferred Companies have
performed all material obligations
25
required to be performed by them to date under the Material Contracts and are
not in breach or default in any material respect thereunder and, to the
knowledge of the Transferred Companies, no other party to any of the Material
Contracts is in breach or default in any material respect thereunder, or has
repudiated any material provision thereof.
Section 3.13 Litigation. Schedule 3.13 sets forth all actions,
suits, investigations and proceedings pending against, or to the Knowledge of
Sellers, threatened in writing against or affecting, the Transferred Companies
or any of their respective properties before any court or arbitrator or any
Governmental Authority, (a) which would reasonably be expected to involve
liability equal to or greater than $125,000, (b) which would reasonably be
expected to involve any asbestos related liabilities or (c) which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement, and identifies whether such
actions, suits, investigations, proceedings and threats are or would reasonably
be expected to be covered by insurance or a third-party indemnification.
Section 3.14 Compliance with Laws and Court Orders. No
Transferred Company is (i) in violation of its respective articles of
incorporation or by-laws or similar organizational documents, or (ii) in
violation in any material respect of any material applicable law, rule,
regulation, judgment, statute, permit or other approvals (other than
Environmental Laws which are addressed in Section 3.20) applicable to the
Transferred Company or the Real Property, injunction, order or decree. Each
Transferred Company conducts the Business in compliance in all material respects
with all applicable laws (other than Environmental Laws which are addressed in
Section 3.20). No Seller or Transferred Company has received any written notice
to the effect that with respect to the operation of the Business or the
ownership of the Purchased Assets such Seller or Transferred Company is not
currently in material compliance with any applicable laws (other than
Environmental Laws which are addressed in Section 3.20).
Section 3.15 Real Property
(a) Owned Property. Schedule 3.15(a)(1) lists the
addresses and record owners of all real property used in the Business and now
owned by any Transferred Company (the "Owned Property"). There is no Owned
Property used in the Canadian Business. With respect to each parcel of Owned
Property, (1) the applicable Transferred Company has good and marketable fee
simple title to such parcel, free and clear of any and all Liens other than
Permitted Liens and the Senior Debt Liens set forth in Schedule 9.01 (all of
such Senior Debt Liens will be released at Closing); (2) there are no leases,
subleases, licenses, options, rights, concessions or other agreements, granting
to any party or parties the right of use or occupancy of any portion of such
parcel, and there are no third parties who are in possession of or who are using
any such parcel or any portion thereof; (3) there are no outstanding options or
rights of first refusal in favor of any other party to purchase any such parcel
or any portion thereof or interest therein, except as shown on Schedule
3.15(a)(2); (4) except as disclosed in the title commitments, surveys and title
insurance policies listed on Schedule 3.15(a)(3) each such parcel abuts on or
has direct, permanent vehicular access to a public road; (5) there is no (a)
pending or, to the Knowledge of Sellers, threatened condemnation proceeding
relating to such parcel, (b) pending or, to the Knowledge of Sellers, threatened
special assessment, that has been made or is pending or threatened relating to
any Owned Property or any portion thereof or (c) other proceeding or action
pending or, to the Knowledge of Sellers, threatened, which would be
26
reasonably likely to have a material adverse effect on the current use or
occupancy of, such parcel; (6) without limiting the generality of the provisions
of Section 3.14 hereof, except as set forth on Schedule 3.15(a)(3) there are no
violations of any applicable zoning ordinances, building codes, land laws,
restrictive covenants or easements applicable to the Owned Property and/or the
Improvements on the Owned Property and/or the use and occupancy thereof which
would be reasonably likely to have a material adverse effect on the current use
or occupancy of the Owned Property; (7) such parcel has access to the utilities
necessary for the operation of the Improvements located thereon as currently
conducted; and (8) except as shown on the flood hazard search reports listed on
Schedule 3.15(a)(4), and except as disclosed on the surveys listed on Schedule
3.15(a)(3), no portion of the Owned Property is located in a special flood
hazard area as designated by any federal governmental authorities (with respect
to any portion of the Owned Property that is located in such a flood hazard
zone, to the Knowledge of Sellers the Transferred Company carries adequate flood
hazard insurance under an insurance Policy specified on Schedule 3.23). Except
as otherwise disclosed on Schedule 3.15(a)(2), no Transferred Company holds any
option, right of first refusal or similar right to purchase any additional
parcel of real property or any portion thereof or interest therein. Prior to the
date hereof, each Transferred Company has delivered to Buyer true and correct
copies of all title reports, title policies and recent surveys it has with
respect to any of the Owned Property.
(b) Leased Property. Schedule 3.15(b) lists all real
property (including all land and buildings) which is leased by any Transferred
Company as lessee or sublessee (the "Leased Property"). The Sellers have
delivered or made available to Buyer complete and accurate copies of the written
leases and subleases for all Leased Property, including all amendments and
modifications pursuant to which the Transferred Company leases the Leased
Property (the "Assumed Leases"). Each applicable Transferred Company has good
and valid leasehold title to, and enjoys peaceful and quiet possession of, the
respective Leased Property, free and clear of any and all Encumbrances other
than any Permitted Lien that would not cause the termination of the applicable
Assumed Lease by the lessor thereunder. With respect to each parcel of Leased
Property, (1) to the Knowledge of Sellers, there are no pending or threatened
proceedings (including, without limitation, condemnation or eminent domain
proceedings or any other matter which would be reasonably likely to have a
material adverse effect on the current use or occupancy of such Leased Property)
relating to such Leased Property or any portion thereof, (2) except as disclosed
on Schedule 3.15(a)(3), no Transferred Company or, to the Knowledge of Sellers,
any third party has entered into any sublease, license, option, right,
concession or other agreement or arrangement, written or oral, granting to any
Person the right to use or occupy such Leased Property or any portion thereof or
interest therein, (3) no Transferred Company has received notice of any pending
or threatened special assessment relating to such Leased Property or otherwise
has any knowledge of any pending or threatened special assessment relating
thereto; (4) to the Knowledge of Sellers, such parcel has access to the
utilities necessary for the operation of the Improvements thereon as currently
conducted, and abuts on or has direct, permanent vehicular access to a public
road. Without limiting the generality of the provisions of Section 3.14 hereof,
there are no violations of any applicable zoning ordinances, building codes,
land laws, restrictive covenants or easements applicable to the Leased Property
and/or the Improvements on the Leased Property and/or the use and occupancy
thereof, with which the Transferred Company, as lessee or sublessee of such
Leased Property, is responsible for complying, which, if not cured, would be
reasonably likely to have a material adverse effect on the current use or
occupation of the Leased Property. With respect to
27
each of the Assumed Leases, (a) such lease is in full force and effect and is
valid, binding and enforceable in accordance with its respective terms; (b) no
material amount payable under any Assumed Lease is past due beyond any
applicable cure period except those being contested, in good faith and in
accordance with the provisions of the applicable Assumed Lease, as being due and
owing under such Assumed Lease; (c) no Transferred Company has received actual
notice of or is otherwise aware of any default or any event that has occurred
which, with the giving of notice or the passage of time, or both, would
constitute a default by either the lessor or the lessee that would entitle
either party to damages or the right to terminate the applicable Assumed Lease;
and (d) except as otherwise disclosed on Schedule 3.15(b) and Schedule 9.01 no
Transferred Company has subleased, assigned, mortgaged, pledged or otherwise
encumbered its interest under any Assumed Lease, nor has any such party entered
into any agreement or commitment to take any such action.
(c) Real Property Generally. The Owned Property and
the Leased Property constitute all of the real property used in the Business as
currently conducted, and except as disclosed on Schedule 3.15(a)(3), no
Improvement or portion thereof is dependent for its access, operation or utility
on any land, building or other improvement not included in the Owned Property or
Leased Property. No Transferred Company is a party to or otherwise bound by any
leasing commission or brokerage agreements with respect to any Owned Property or
Assumed Leases for which any Transferred Company or Buyer or any of their
Affiliates will have any liability. All construction or other work performed on
the Improvements has been or will be paid for in the ordinary course of
business; provided, with respect to Improvements located on Leased Property,
this clause shall only apply to construction or other work that the lessee is
required to pay for under the applicable lease.
Section 3.16 Intellectual Property. (a) Schedule 3.16(a) contains a
complete and accurate list of all: (i) registered patents, industrial designs,
trademarks, trade names, copyrights and domain names, and pending applications
therefor, owned by each Transferred Company and (ii) unregistered trademarks,
trade names and corporate names used by each Transferred Company. Schedule
3.16(a) also contains a complete and accurate list of all licenses and other
rights granted by each Transferred Company to any third party or another
Transferred Company with respect to any Intellectual Property Rights and all
licenses and other rights granted by any third party to any Transferred Company
with respect to any Intellectual Property Rights, in each case identifying the
subject Intellectual Property Rights but not including licenses arising from the
purchase of "off the shelf" or other standard products.
(b) Each Transferred Company solely owns all right, title and
interest in and to all of the Intellectual Property Rights listed on Schedule
3.16(a) free and clear of all Liens or claims of others. Each Transferred
Company owns all right, title and interest to, or has the right to use pursuant
to a valid license, all Intellectual Property Rights necessary for the operation
of the business of each Transferred Company as presently conducted and as
presently proposed by the Transferred Companies to be conducted, free and clear
of all Liens or claims of others. Except as disclosed in Schedule 3.16(b), no
Transferred Company is contractually obligated or under any contractual
liability whatsoever to make any payments by way of royalties, fees or otherwise
to any owner of, licensor of, or other claimant to, any Intellectual Property
Rights, with respect to the use thereof or in connection with the operations of
the business of the Transferred Companies.
28
(c) Each Transferred Company has taken or will take all
necessary actions to maintain the Intellectual Property Rights that they own or
license, including the payment of any and all filing fees, renewal fees,
registration fees and/or any other fees or payments that are currently or will
become due and payable prior to Closing to maintain or secure the Intellectual
Property Rights that the Transferred Companies own or license, other than
Intellectual Property Rights specifically identified as such on Schedule 3.16(c)
that are no longer necessary in the conduct of the Business and that the loss
thereof would not be material to the Business as a whole or any Transferred
Company individually. Except as set forth on Schedule 3.13, there have been no
claims made or threatened against any Transferred Company asserting the
invalidity, misuse or unenforceability of any of Intellectual Property Rights
owned by them or, to the Knowledge of Sellers, licensed to them or that such
Intellectual Property Rights infringe, misappropriate or conflict with any
Intellectual Property Rights of others, and to the Knowledge of Sellers, there
are no valid grounds for the same. To the Knowledge of Sellers, the operations
of the business of the Transferred Companies has not infringed, misappropriated
or conflicted with and does not infringe, misappropriate or conflict with any
Intellectual Property Rights of others, nor would any future conduct as
presently contemplated by the Transferred Companies infringe, misappropriate or
conflict with any Intellectual Property Rights of others nor is any Intellectual
Property Rights of any of the Transferred Companies subject to an outstanding
injunction, order, decree or agreement restructuring the use or licensing
thereof by the Transferred Companies. Except as set forth on Schedule 3.16(c),
to the Knowledge of Sellers, the Intellectual Property Rights owned by or
licensed to each Transferred Company have not been infringed, misappropriated or
conflicted by others. The transactions contemplated by this Agreement will have
no adverse effect on any of the Transferred Companies' right, title and interest
in and to the Intellectual Property Rights listed on Schedule 3.16(a).
Section 3.17 Finders' Fees. Except for Deutsche Banc Xxxx Xxxxx and
Credit Suisse First Boston whose fees will be paid by Sellers, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of Sellers or the Transferred Companies who
might be entitled to any fee or commission from the Transferred Companies in
connection with the transactions contemplated by this Agreement.
Section 3.18 Employees(a). (a) Except as set forth in Schedule 3.18,
all employees who are engaged in the Business are employed by the Transferred
Companies.
(b) Except as set forth on Schedule 3.18, no Employee has any
agreement as to length of notice (or payment in lieu of notice) or severance
payment owing upon termination of his or her employment, other than such which
would result by law from the employment of an Employee without an agreement as
to notice or severance.
(c) Schedule 3.18 lists the names of all individuals engaged
by Canadian Seller as independent contractors in the Canadian Business.
Section 3.19 Employee Benefit Plans.
(a) Definitions.
29
(i) The term "Employees" shall mean all current and
former employees of the Companies and the Subsidiaries, as
well as those employees of Canadian Seller employed in
connection with the Canadian Business (the "Canadian
Employees"), including any such employees on approved leaves
of absence (whether family leave, workers' compensation,
medical leave, pregnancy or parental leave or otherwise), and
the term "Employee" shall mean any of the Employees.
(ii) The term "Employee Benefit Plans" shall mean
each and all "employee benefit plans" as defined in Section
3(3) of ERISA, including any Foreign Employee Benefit Plans
maintained or contributed to by a Transferred Company or a
Seller or ERISA Affiliate, or any predecessor or in which a
Transferred Company or a Seller or ERISA Affiliate or any
predecessor participates or participated and which provides
benefits to Employees, which shall include (a) any such plans
that are "employee welfare benefit plans", as defined in
Section 3(1) of ERISA, including, but not limited to, retiree
medical and life insurance plans ("Welfare Plans") and (b) any
such plans that are "employee pension benefit plans" as
defined in Section 3(2) of ERISA or to which any of the
Transferred Companies contribute or may become liable to
contribute ("Pension Plans").
(iii) The term "Benefit Arrangements" shall mean any
life and health insurance (or other commitment providing for
insurance coverage, including, without limitation, any
self-insured arrangements), post-retirement insurance,
hospitalization, savings, bonus, stock option, stock purchase,
stock appreciation right, deferred compensation, incentive
compensation, holiday, vacation, termination, severance pay,
sick pay, sick leave, disability, tuition refund, service
award, company car, scholarship, relocation, patent award,
fringe benefit, contracts, collective bargaining agreements,
individual employment, consultancy, termination contracts or
severance contracts, plans and other policies or practices of
the Transferred Companies providing employee or executive
compensation or benefits to Employees (whether written or
oral), other than Employee Benefit Plans.
(b) Schedule 3.19(b) lists all Employee Benefit Plans and all
Benefit Arrangements. Such Schedule 3.19(b) also indicates whether any Pension
Plans listed thereon participate in trusts sponsored by entities other than the
Companies or the Subsidiaries for investment of plan assets (the "Master
Trusts"). With respect to each of the Employee Benefit Plans and Benefit
Arrangements, Sellers have delivered or made available to Buyer, as applicable,
true and complete copies of any: (i) plans or programs or agreements and related
trust documents and amendments thereto; (ii) the most recent summary plan
descriptions and the annual report (Form 5500 Series) for the past three fiscal
years; (iii) actuarial valuation for the past three fiscal years; (iv) the most
recent determination letter received from the Internal Revenue Service; and (v)
a description of complete age, salary, service, and related data as of the last
day of the last plan year for all Employees. All such reports (Form 5500 Series)
with respect to each Employee Benefit Plans have been properly filed in all
material respects including the payment in full of any late fees, interest and
penalties, if, and to the extent applicable.
30
(c) Except as shown on Schedule 3.19(c), (i) each of the
Transferred Companies is in compliance with the terms of each Employee Benefit
Plan or Benefit Arrangement, as applicable, and each Employee Benefit Plan or
Benefit Arrangement has been maintained in accordance with the requirements
prescribed by all applicable statutes, orders or governmental rules or
regulations including, without limitation, ERISA, the Code and the PR Code, as
applicable; (ii) each Pension Plan intended to qualify under Section 401(a) of
the Code has received a favorable determination letter from the Internal Revenue
Service with respect to such qualification or the corresponding provisions of
the PR Code with respect to Pension Plans for the Puerto Rico resident
Employees, or in the unqualified written opinion of Sellers' employee benefits
counsel furnished to Buyer would receive a favorable determination letter if
submitted to the Internal Revenue Service; its related trust has been determined
to be exempt from taxation under Section 501(a) of the Code; and, to the
Knowledge of Sellers, nothing has occurred since the date of such letter that
would adversely affect such qualification or exemption; and (iii) there are no
material actions or proceedings (other than routine claims for benefits) pending
or, to the Knowledge of Sellers, threatened, with respect to any such Employee
Benefit Plan or Benefit Arrangement or against the assets of any such Employee
Benefit Plan or any fiduciary to any such Employee Benefit Plan or Benefit
Arrangement with respect to such plans or arrangements.
(d) (i) There has been no non-exempt "prohibited transaction"
(and there will be none as a result of any of the transactions contemplated
hereby) within the meaning of Section 4975(c) of the Code or Section 406 of
ERISA involving the assets of any Employee Benefit Plan or Benefit Arrangement,
as applicable; and (ii) except as shown on Schedule 3.19(d), none of the
Companies, the Subsidiaries nor US Seller is or was during the preceding six
years obligated to contribute to any multiemployer plan (as defined in Section
4001(a)(13) of ERISA, "Multiemployer Plan") covering Employees which would give
rise to any obligation by a Company and none of the Companies has assumed any
obligation of any predecessor of a Company with respect to any Multiemployer
Plan covering Employees (including, without limitation, the obligation pursuant
to an agreement entered into in accordance with Section 4204 of ERISA). None of
US Seller, the Companies nor any of its ERISA Affiliates has engaged in, or is a
successor or parent corporation to an entity that has engaged in, a transaction
described in Section 4212(c) of ERISA.
(e) Except as shown on Schedule 3.19(e) or as required by
Section 4980B of the Code, where applicable, no Employee Benefit Plan or Benefit
Arrangement provides medical or death benefits with respect to Employees beyond
their retirement or other termination of employment. Any continuation coverage
provided under any Welfare Plans is in good-faith compliance with Section 4980B
of the Code and is at the expense of the participant or beneficiary. Copies of
the most recent reports (the "FASB Reports") regarding post-retirement benefits
under Employee Benefit Plans, other than pension benefits, prepared in
accordance with Financial Accounting Standards Board Statement No. 106 as
amended, have been made available to Buyer. Except as shown on Schedule 3.19(e),
there has been no significant adverse change in the benefit formulas in the
Employee Benefit Plans covered by any such FASB Report since the date of such
report.
(f) No accumulated funding deficiency or unpaid required
installments within the meaning of Section 412 of the Code exists with respect
to any Employee Benefit Plan that is
31
subject to Title IV of ERISA (a "Title IV Plan"), whether or not waived. With
respect to each Title IV Plan, there has not occurred any reportable event
within the meaning of Section 4043 of ERISA or the regulations thereunder. The
Pension Benefit Guaranty Corporation (the "PBGC") has not instituted or, to the
Knowledge of Sellers, threatened a proceeding to terminate any Title IV Plan. US
Seller has paid all premiums (and interest charges and penalties for late
payments, if applicable), due to the PBGC with respect to each Employee Benefit
Plan for each plan year thereof for which such premiums are required. Neither US
Seller nor any ERISA Affiliate has engaged in, or is a successor or parent
corporation to an entity that has engaged in, a transaction described in Section
4069 of ERISA.
(g) With respect to the merger or spin-off of any Employee
Benefit Plans or any assets thereunder occurring prior to the Closing Date, all
applicable IRS Forms or Puerto Rico ruling requests, where applicable, have been
timely filed by the relevant Company or Subsidiary or US Seller and any and all
rules set forth in ERISA, the Code or the PR Code, where applicable, or the
regulations thereunder providing for the protection of participants in such
Employee Benefit Plans have been followed, including, but not limited to, the
rule providing that each participant of any such plan will be entitled to a
benefit after the merger or spin-off equal to or exceeding the benefit before
such merger or spin-off and, in the case of a merger or spin-off between two
defined contribution Employee Benefit Plans, the rule providing that each
participant shall have an account balance after the merger at least equal to
their account balance before such merger or spin-off.
(h) No Employee Benefit Plan or Benefit Arrangement or any
other agreement, program, policy or other arrangement by or to which any
Company, any Subsidiary or US Seller is a party, is bound or is otherwise
liable, by its terms or in effect could reasonably be expected to require any
payment or transfer of money, property or other consideration on account of or
in connection with the transactions contemplated by this Agreement which payment
would (a) constitute an "excess parachute payment" within the meaning of Section
280G of the Code or (b) not be deductible under Section 162(a)(1) or 404 of the
Code.
(i) Each Foreign Employee Benefit Plan has been maintained in
substantial compliance with its terms and with the requirements of any and all
applicable laws and has been maintained, where required, in good standing with
applicable regulatory entities. All contributions or premiums required to be
paid by the Sellers under the terms of each Canadian Employee Plan or by
applicable law have been made in a timely fashion with such law and the terms of
such Plan. Except as properly reported in the books and records of the Companies
or as indicated on Schedule 3.19(i), none of the Transferred Companies has
incurred any obligations in connection with the termination of or withdrawal
from any Foreign Employee Benefit Plan, or has any unfunded liability with
respect to benefits under any such Foreign Employee Benefit Plan. "Foreign
Employee Benefit Plan" means (A) any plan, fund or other similar program
established or maintained outside the United States of America by a Company, a
Subsidiary or a Seller primarily for the benefit of Employees residing outside
of the United States of America which plan, fund or other similar program
provides retirement income for such Employees, results in a deferral of income
for such Employees in contemplation of retirement or provides payments to be
made to such Employees upon termination of employment, and which plan is not
subject to ERISA or the Code, and (B) any plan, fund or other similar program
established or maintained outside the United States of America by a Company, a
Subsidiary or a Seller
32
primarily for the benefit of Employees residing outside of the United States of
America which plan, fund or similar program is not described in clause (A) above
including, but not limited to, any plan, fund or other similar program
established or maintained outside the United States of America by a Company, a
Subsidiary or a Seller providing benefits comparable to those provided under
Welfare Plans. For purposes hereof, the term "Canadian Employee Plan" shall mean
Foreign Employee Benefit Plans maintained for or covering any of the Canadian
Employees.
Section 3.20 Environmental Matters.(a) Except as set forth in Schedule
3.20 or for such matters which individually could not reasonably be expected to
result in Environmental Liability in excess or $100,000:
(a) Each Seller, the Transferred Companies, and their
respective operations is in material compliance with applicable Environmental
Law;
(b) Each of the Sellers and the Transferred Companies have
obtained, are maintaining in full force and effect, and are in material
compliance with all necessary permits and other authorizations required under
applicable Environmental Laws;
(c) No Environmental Claims have been asserted against either
Sellers or any of the Transferred Companies, or to the Knowledge of Sellers, any
Person for whose conduct Sellers or any of the Transferred Companies may be held
responsible. Neither Sellers nor any of the Transferred Companies have knowledge
or notice of any threatened or pending Environmental Claim against Sellers, any
of the Transferred Companies, or any Person for whom Sellers or any of the
Transferred Companies may be held responsible.
(d) To the Knowledge of Sellers, no Environmental Claims have
been asserted against any facilities that may have received Hazardous Substances
generated by the Sellers or the Transferred Companies.
(e) To the Knowledge of each Seller, there is no event,
condition, circumstance, activity, practice, incident, action or plan which
could reasonably be expected (i) to materially interfere with or prevent
continued compliance with Environmental Laws by each Seller, the Transferred
Company, or their respective operations, (ii) to give rise to any material
Environmental Liability (defined below), or (iii) otherwise to form the basis of
any Environmental Claim that could reasonably be expected to result in a
material Environmental Liability. Without limiting the foregoing, to the
Knowledge of Sellers, there has been no Release of Hazardous Substances at any
of the properties owned or operated by Sellers or the Transferred Companies
which in any case could reasonably be expected to give rise to a material
Environmental Liability.
(f) Each Seller has made available to Buyer true and correct
copies of all non-privileged environmental reports, studies, investigations and
material correspondence regarding (i) any Environmental Liabilities of the
Sellers or the Transferred Companies and (ii) any environmental conditions
relating to the Sellers, the Transferred Companies, or their respective
operations.
33
Section 3.21 Labor Matters. (a) Except as set forth on Schedule
3.21(a), there are no collective bargaining agreements in effect relating to the
Employees of any Transferred Company or any other contract or commitment to any
labor union or association representing any Employee of any Transferred Company
nor does any labor union or collective bargaining agent represent or hold
bargaining rights with respect to any Employee of any Transferred Company. To
the Knowledge of Sellers, except as set forth on Schedule 3.21(a), (i) there is
no organizational effort currently being made or threatened to organize
employees of any Transferred Company and no such action has occurred within the
past two years, (ii) there are no written or duly filed grievances outstanding
against any Transferred Company under any collective bargaining agreement, (iii)
within the past two years, there has been no strike, slow-down, work stoppage,
arbitration or other material work-related dispute involving any Transferred
Company, and to the Knowledge of Sellers no such action is now pending or
threatened, and (iv) within the past two years, no proceeding or petition has
been filed against any Transferred Company or no controversy or dispute between
any Transferred Company and any Employee is pending relating to the alleged
violation of any legal requirement pertaining to labor relations including, but
not limited to, any unfair labor practice complaint, or to employment matters,
including any charge, complaint or petition filed by an Employee or labor
organization or labor union with the National Labor Relations Board, the Equal
Employment Opportunity Commission, the U.S. Department of Labor or any
comparable Governmental Authority, any of which could reasonably be expected to
result in a material liability. To the Knowledge of Sellers, each Transferred
Company is in compliance in all material respects with the terms of, and is not
currently in default in any material respect under, any collective bargaining
agreement or other labor union contract covering any Employees.
(b) Except as set forth on Schedule 3.21(b), no Company or
Subsidiary has incurred any liability or obligation under the Worker Adjustment
and Retraining Notification Act ("WARN") or similar state or foreign laws,
including with respect to the provision of any notice of any plant closing or
mass layoff taking place up to and including the Closing Date, which remains
unpaid or unsatisfied or which has not been accrued. Except as set forth on
Schedule 3.21(b), no Company or Subsidiary has laid off more than 10% of its
Employees at any single site of employment in any 90-day period during the last
12 months.
Section 3.22 Tax Matters. Except as set forth on Schedule 3.22, (i)
each Company, each Subsidiary and each Seller have filed (or caused to be filed)
in a timely manner, all federal, state, local and foreign returns, reports,
statements and forms required to be filed under the Code, the PR Code or
applicable state, local or foreign tax laws (the "Tax Returns") and such Tax
Returns are true, complete and correct in all material respects; (ii) each
Company and each Subsidiary (and Canadian Seller) have paid (or the Seller Group
of which such entity is or was a member has paid) all Taxes that have been
incurred or are due and for which each Company and each Subsidiary (and Canadian
Seller) could be liable whether to taxing authorities or to third parties; (iii)
there is no outstanding agreement, waiver or consent providing for an extension
of the statutory period of limitations with respect to any Taxes or Tax Returns
of any Company or any Subsidiary (and Canadian Seller) and no power of attorney
granted by any Company or any Subsidiary or any Seller Group with respect to any
tax matter is currently in force; (iv) no tax liens (except for liens for Taxes
not yet due) have been filed and there is no action, suit, proceeding,
investigation, audit or claim now pending against any Company or any Subsidiary
(or Canadian Seller) with respect to any Tax, or with respect to which any
Company or any
34
Subsidiary (or Canadian Seller) could be severally liable under Treasury
Regulation Section 1.1502-6 or any comparable state, local or foreign tax
provisions; (v) each Company and each Subsidiary (and Canadian Seller) has
complied with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes and is not liable for any Taxes for failure to comply
with such laws, rules and regulations, (vi) no Company or Subsidiary is a party
to or is otherwise bound by any agreement or understanding providing for the
allocation or sharing of Taxes or has any obligation or liability under any such
agreement or understanding to which it was once a party or otherwise bound;
(vii) no Company or Subsidiary is required to include in income any adjustment
pursuant to Section 481(a) of the Code by reason of a voluntary change in
accounting method initiated by such Company or such Subsidiary and to the
Knowledge of Sellers, the Internal Revenue Service has not proposed any such
adjustment or change in accounting method; (viii) no Company or Subsidiary has
filed with respect to any item a disclosure statement pursuant to Section 6662
of the Code or any comparable disclosure with respect to foreign, state and/or
local tax statutes for any tax year ended after December 31, 1995; (ix) no
Company or Subsidiary has filed any agreement or consent under Section 341(f) of
the Code; and (x) no property of any Transferred Company organized in the United
States is "tax-exempt use property" within the meaning of Section 168(h) of the
Code nor property that Buyer will be required to treat as being owned by another
person pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately prior to the enactment of the Tax Reform Act
of 1986. Schedule 3.22 contains a list of any federal income tax audits of USI
that were concluded by the Internal Revenue Service with respect to Taxes of any
Transferred Company within three years of the date of this Agreement. US Seller
is not a "foreign person" within the meaning of Section 1445(b)(2) of the Code
and will furnish an affidavit of this status substantially in the form of
Exhibit E. None of the Purchased Assets are located in either (A) Ontario and
subject to Ontario Retail Sales Act or (B) British Columbia and subject to
British Columbia Social Service Tax. Canadian Seller is not a non-resident of
Canada for purposes of the Income Tax Act (Canada). Canadian Seller is
registered within the meaning of Part IX of the Excise Tax Act (Canada) and
Chapter VIII of An Act Representing the Quebec Sales Tax and its registration
numbers are as follows: Federal Business Number 125343822 and Quebec Business
Number (NEQ) 1144025427 and MRQ Identification Number 1003856662 TQ0001.*
Section 3.23 Insurance. Schedule 3.23 contains a correct and complete
list and description of the insurance Policies in force and effect in respect of
the Business, properties and assets, including insurance on personnel
(collectively, the "Insurance"). The Insurance is in full force and effect and
protects the Sellers and the Transferred Companies against such losses and risks
as is consistent with industry practice. None of the Sellers and the Transferred
Companies is in default under, or in non-compliance with, any insurance policy.
To the Knowledge of the Sellers, there are no material liabilities for which the
Sellers and the Transferred Companies are not insured which are not described in
Schedule 3.23. The Sellers and the Transferred Companies have not been refused
insurance by any insurance carrier to which it has applied for insurance for the
period from January 1, 1999 until the Closing Date.
Section 3.24 Customers. Sellers have provided to Buyer the names and
addresses of the ten largest customers of the Transferred Companies that ordered
goods or merchandise from the Transferred Companies during the fiscal years
ended September 30, 2000 and September 30, 2001, and during the five-month
period ended February 28, 2002 and the approximate amount
35
during such period for which each such customer was involved. Except as
disclosed in Schedule 3.24, neither Company has received any actual notice nor
has any valid reason to believe that any of its customers listed in Schedule
3.24 has ceased, nor will cease, to use its products, equipment, goods or
services, nor has substantially reduced, nor will substantially reduce, the use
of such product, equipment, goods or services at any time.
Section 3.25 Suppliers. Sellers have provided to Buyer the names and
address of the ten largest suppliers of the Transferred Companies that sold
goods or merchandise to the Transferred Companies during the fiscal years ended
September 30, 2000 and September 30, 2001, and during the five-month period
ended February 28, 2002 and the approximate amount during such period for which
the Transferred Companies were invoiced by each such supplier. Except as
disclosed in Schedule 3.25, neither Company has received any actual notice or
has any valid reason to believe that any such supplier will not sell raw
material, supplies, merchandise and other goods to the Transferred Companies at
any time after the Closing Date on terms and conditions substantially similar to
those currently in effect, subject only to general and customary price
increases.
Section 3.26 Working Capital; Accounts Receivable. Except as set forth
in Schedule 3.26, the accounts receivable reflected on the Preliminary Balance
Sheet result from bona fide transactions with third parties and are reflected on
the Preliminary Balance Sheet consistent with past practice and collection rates
with respect to such accounts receivable considered as a whole, are currently
expected to conform to historical levels experienced by the Transferred
Companies; and none of such accounts receivable or other debts is currently
subject to any counterclaim or set-off except to the extent of any such
provision or reserve. Other than changes in the ordinary course of business,
there has been no material adverse change in the amount of the Transferred
Companies' working capital from that reflected on the Preliminary Balance Sheet.
Section 3.27 Inventories. Schedule 3.27 contains a complete and
accurate list of all of the addresses at which any substantial portion of the
Inventory of each Transferred Company is located and identifies which such
locations are Owned Property and Leased Property and which locations are in
possession of Inventory for consignment or other purposes. The values at which
the Inventory is shown on the Preliminary Balance Sheet have been determined in
accordance with the normal valuation policy of the Transferred Companies, and in
accordance with GAAP, each consistently applied throughout the periods covered
by the financial statements set forth in Section 3.09. The Inventory (and items
of Inventory acquired or manufactured subsequent to the Balance Sheet Date)
consists, and will as of the Closing Date consist, only of items of a quality
commercially usable in the ordinary course of the Transferred Companies'
business determined in accordance with the accounting policies of the
Transferred Companies set forth on Schedule 2.03, and the present quantities of
all Inventory, are reasonable in the present circumstances of the Business.
Schedule 2.03 also sets forth the accounting policies of the Transferred
Companies with respect to the Inventory, including policies with respect to the
write-off of excess or obsolete Inventory.
Section 3.28 Product Liability/Warranty/Recalls. Except as expressly
disclosed on Schedule 3.28, the Transferred Companies or Sellers have not
received within the last five (5) years written notice of any claim or
threatened written claim for any (a) any warranty claims that
36
involve liability equal to or greater than $25,000 individually or $200,000 in
the aggregate with respect to a group of similar claims in connection with the
Business or (b) product liability claims or product recalls in connection with
the Business.
Section 3.29 Permits. Sellers have all material Permits (other than
those permits or authorizations relating to Environmental Laws which are
addressed in Section 3.20) required to conduct the Business as now being
conducted. All such Permits are valid and in full force and effect and are
listed on Schedule 3.29. Sellers have not violated and are in compliance with
all such Permits.
Section 3.30 Bank Accounts. Set forth in Schedule 3.30 is an accurate
and complete list showing the name and address of each bank in which each
Transferred Company has an account or safe deposit box and the number of any
such account or box.
Section 3.31 Powers of Attorney. Set forth in Schedule 3.31 is an
accurate and complete list of the names of all persons, if any, holding powers
of attorney from each Transferred Company and a summary statement of the terms
thereof.
Section 3.32 Corporate Existence and Manufacturing Matters. Each
Transferred Company (other than Progress, which is a division of Canadian
Seller) has at all times maintained a separate corporate existence from Parent
and its Affiliates, including without limitation, Xxxx Industries, Inc.,
Jacuzzi, Inc. and Selkirk, Inc. (the "Manufacturing Group) and none of the
Transferred Companies have at any time manufactured products that are the same
as or substantially similar to the products that are or have been manufactured
by the Manufacturing Group.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as of the date hereof that:
Section 4.01 Corporate Existence and Power. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers and all material
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted.
Section 4.02 Corporate Authorization. The execution, delivery and
performance by Buyer of this Agreement and the consummation of the transactions
contemplated hereby are within the corporate powers of Buyer and have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement constitutes a valid and binding agreement of Buyer enforceable against
Buyer in accordance with its terms, except as enforceability hereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to the enforcement of creditors' rights generally and by general
principles of equity.
Section 4.03 Governmental Authorization. The execution, delivery and
performance by Buyer of this Agreement and the consummation of the transactions
contemplated hereby require no material action by or in respect of, or material
filing with, any Governmental
37
Authority other than (i) compliance with any applicable requirements of the HSR
Act and (ii) filings with the Pension Benefit Guaranty Corporation, the Internal
Revenue Service, the Department of Labor and any other similar Governmental
Authority with respect to the transfer of assets and liabilities of Employee
Benefit Plans pursuant to this Agreement.
Section 4.04 Noncontravention. The execution, delivery and performance
by Buyer of this Agreement and the consummation of the transactions contemplated
hereby do not and will not (i) violate the certificate of incorporation or
bylaws of Buyer, (ii) assuming compliance with the matters referred to in
Section 4.03, violate any applicable law, rule, regulation, judgment,
injunction, order or decree, (iii) require any material consent or other action
by any Person under, constitute a material default under, or give rise to any
right of termination, cancellation or acceleration of any material right or
obligation of Buyer or to a loss of any material benefit to which Buyer is
entitled under any provision of any agreement or other instrument binding upon
Buyer or (iv) result in the creation or imposition of any material Lien on any
asset of Buyer.
Section 4.05 Financing. Buyer has, or will have at the Closing, the
financial capacity to perform all of the obligations under this Agreement and
the closing documents to be executed hereunder.
Section 4.06 Purchase for Investment. Buyer is purchasing the
applicable Shares for investment for its own account and not with a view to, or
for sale in connection with, any distribution thereof and will not sell such
Shares in violation of applicable federal, state, provincial or foreign
securities laws. Buyer (either alone or together with its advisors) has
sufficient knowledge and experience in financial and business matters so as to
be capable of evaluating the merits and risks of its investment in the Shares
and is capable of bearing the economic risks of such investment.
Section 4.07 Litigation. There is no action, suit, investigation or
proceeding pending against, or to the Knowledge of Buyer threatened in writing
against, or affecting Buyer before any court or arbitrator or any Governmental
Authority which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement.
Section 4.08 Finders' Fees. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Buyer who might be entitled to any fee or commission from Sellers
or any of their Affiliates upon consummation of the transactions contemplated by
this Agreement.
Section 4.09 Inspections; No Other Representations. Buyer is an
informed and sophisticated purchaser, and has engaged expert advisors,
experienced in the evaluation and purchase of companies such as the Transferred
Companies, as contemplated hereunder. Buyer has undertaken such investigation
and has been provided with and has evaluated such documents and information as
it has deemed necessary to enable it to make an informed and intelligent
decision with respect to the execution, delivery and performance of this
Agreement. Buyer acknowledges that Sellers have given Buyer full access to the
key Employees, documents and facilities of the Transferred Companies. Buyer will
undertake prior to Closing such further investigation and request such
additional documents and information as it deems necessary. Buyer agrees to
accept the Shares of the Companies and the Subsidiaries and the Purchased
38
Assets in the condition they are in on the Closing Date based upon its own
inspection, examination and determination with respect thereto as to all
matters, and without reliance upon any express or implied representations or
warranties of any nature made by or on behalf of or imputed to Sellers, except
as expressly set forth in this Agreement. Without limiting the generality of the
foregoing, Buyer acknowledges that Sellers make no representation or warranty
with respect to (i) any projections, estimates or budgets delivered to or made
available to Buyer of future revenues, future results of operations (or any
component thereof), future cash flows or future financial condition (or any
component thereof) of the Transferred Companies or the future business and
operations of the Transferred Companies, (ii) accuracy of any information
developed by Sellers' consultants as set forth in those environmental reports
relating to certain Real Property or (iii) any other information or documents
made available to Buyer or its counsel, accountants or advisors with respect to
the Transferred Companies or their respective businesses or operations, except
as expressly set forth in this Agreement.
Section 4.10 Canadian Registrations. For purposes of the election under
Section 167 of the Excise Tax Act (Canada), Buyer is acquiring under this
Agreement ownership, possession or use of all or substantially all of the
property that, assuming the accuracy of Parent's and Sellers' representations
set forth in Section 3.07, can reasonably be regarded as being necessary for
Buyer to be capable of carrying on the Canadian Business as a business.
ARTICLE 5.
COVENANTS OF PARENT AND SELLERS
Parent and Sellers jointly and severally agree that:
Section 5.01 Interim Operations and Conduct of the Company. Each Seller
covenants and agrees that, (i) except as contemplated by this Agreement, (ii)
except as disclosed on Schedule 5.01 or any other Schedule, (iii) the Capital
Expenditure Plan or (iv) without the prior written consent of Buyer, after the
date hereof and prior to the Closing Date:
(a) the business of the Transferred Companies shall be
conducted only in the ordinary and usual course of business consistent with past
practice;
(b) the Transferred Companies shall not amend their respective
articles of incorporation or by-laws or similar organizational documents;
(c) no Transferred Company shall (i) split, combine or
reclassify any of the Shares; (ii) declare, set aside or pay any dividend or
other distribution payable in cash, stock or property with respect to any of the
Shares other than in accordance with cash management practices in the ordinary
course of Sellers', Parent's or the Transferred Companies' business; (iii) issue
or sell any additional Shares of, or securities convertible into or exchangeable
for, or options, warrants, calls, commitments or rights of any kind to acquire,
any of the Shares or (iv) redeem, purchase or otherwise acquire directly or
indirectly any of its capital stock;
(d) no Transferred Company shall (i) adopt any new Employee
Benefit Plan or Benefit Arrangement, except in the ordinary and usual course of
business or as may be required by applicable law, or amend any existing employee
benefit plan in any material respect, except for changes which may be required
by applicable law or (ii) increase any compensation or
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enter into or amend any employment, severance, termination or similar agreement
with any of its present or future officers or directors, except for normal
increases in the ordinary and usual course of business and the payment of cash
bonuses to employees pursuant to and consistent with existing plans or programs;
(e) no Transferred Company shall, except as may be required or
contemplated by this Agreement or in the ordinary and usual course of business,
acquire, sell, lease or dispose of any assets which, in the aggregate, are
material to the Transferred Companies, except for the transfer to the
Transferred Companies, prior to the Closing, of assets related to the business
of the Transferred Companies held by Affiliates, all of which assets are set
forth on Schedules;
(f) no Transferred Company shall (i) incur or assume any
long-term or short-term debt or issue any debt securities except for borrowings
under existing lines of credit in the ordinary course of business consistent
with past practice; (ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the material
obligations of any other person except in the ordinary and usual course of
business consistent with past practice in an amount which, in the aggregate, is
not material to the Transferred Companies; (iii) make any material loans,
advances or capital contributions to, or investments in, any other person other
than in the ordinary and usual course of business consistent with past practice;
(iv) pledge or otherwise encumber the Shares or (v) mortgage or pledge any of
its material assets, tangible or intangible, or create any material mortgage,
lien, pledge, charge, security interest or encumbrance of any kind with respect
to any such asset;
(g) no Transferred Company shall acquire (by merger,
consolidation or acquisition of stock or assets) any corporation, partnership or
other business organization or division thereof or any equity interest therein;
(h) no Transferred Company shall adopt a plan of complete or
partial liquidation or resolutions providing for or authorizing such liquidation
or a dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization;
(i) no Transferred Company shall materially change any of the
tax or accounting methods or elections used by it unless required by GAAP or
applicable law;
(j) no Transferred Company shall authorize or enter into an
agreement to do any of the foregoing; and
(k) the Transferred Companies shall continue to make capital
expenditures substantially in accordance with the Capital Expenditure Plan.
Section 5.02 Access to Information. From the date hereof until the
Closing Date, Sellers will (i) give, and will cause each Transferred Company to
give, Buyer, its counsel, financial advisors, auditors and other authorized
representatives reasonable access to the offices, properties, books and records
of the Transferred Companies, (ii) furnish, and will cause each Transferred
Company to furnish, to Buyer, its counsel, financial advisors, auditors and
other authorized representatives such financial and operating data and other
information relating to such Transferred Company as such Persons may reasonably
request and (iii) instruct the employees, counsel and financial advisors of
Sellers, the Companies, Progress or the
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Subsidiaries to cooperate with Buyer in its investigation of the Transferred
Companies. Any investigation pursuant to this Section shall be conducted in such
manner as not to interfere unreasonably with the conduct of the business of
Sellers or the Transferred Companies. Notwithstanding the foregoing, Buyer shall
not have access to personnel records of Sellers, Progress, the Companies or the
Subsidiaries relating to individual performance or evaluation records, medical
histories or other information which in Sellers' good faith opinion is sensitive
or the disclosure of which could subject any Seller, any Transferred Company to
risk of liability.
Section 5.03 Resignations. Set forth in Schedule 5.03(a) is a true and
complete list of all directors and officers of each of the Transferred Companies
as of the date hereof. Schedule 5.03(a)(i) sets forth a true and complete list
of all directors of each of the Transferred Companies whose resignations US
Seller shall deliver to Buyer on the Closing Date. Schedule 5.03(a)(ii) sets
forth a true and complete list of the executive officers of each of the
Transferred Companies whose resignations US Seller shall deliver to Buyer on the
Closing Date.
Section 5.04 Matters Related to Intellectual Property.
(a) Certain of the patents, trademarks and copyrights listed
on Schedule 3.16(a) are not held in the name of any Transferred Company and are
specifically identified as such. Except with regard to the patents, trademarks
and copyrights identified on Schedule 3.16(c), Sellers shall as promptly as
practicable, commencing on the day following the date hereof, either (i) assign
such patents, trademarks and copyrights to a Transferred Company or (ii) make a
name change filing to reflect the proper name of the Transferred Company as
appropriate.
(b) Substantially all of the patents, trademarks and
copyrights listed on Schedule 3.16(a) are subject to a security interest held by
Wilmington Trust Company. Prior to Closing, all such security interests shall be
released by Wilmington Trust Company in accordance with Section 7.11.
(c) Upon the written request of Buyer, Sellers shall, at their
expense, provide reasonable assistance, and shall execute any documentation, as
may be reasonably requested, to properly and completely transfer to, and vest
in, Buyer all of Sellers' right, title and/or interest in and to the
Intellectual Property Rights set forth on Schedule 3.16(a). This shall include,
without acting as a limitation, and within a reasonable time after the Closing
Date, executing any documentation necessary with any state, federal and/or
foreign government agency, including without limitation the United States Patent
and Trademark Office and any comparable foreign patent and/or trademark office,
to duly and properly file any registrations, assignments and/or recordals as
necessary to fully transfer and vest all of Sellers' rights in and to the
Intellectual Property Rights to Buyer as provided in this Agreement. In
addition, Parent, Sellers and their Affiliates shall discontinue all use of the
names of the Dormant Subsidiary and Prescolite Texas, including without
limitation, any trade names, doing business as names, corporate names and
registrations, domain names, logos, service marks, trade dress and applications
for registration thereof and the right, title and interest to the Intellectual
Property Rights associated with such names shall be fully transferred to and
vested in Buyer free and clear of all Liens and without any additional
consideration or payment.
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Section 5.05 Provincial Sales Tax Clearance Certificate. On or prior to
the Closing, Canadian Seller shall use its commercially reasonable best efforts
to provide Buyer with a clearance certificate issued under Section 6 of the
Retail Sales Tax Act (Ontario) and a certificate from the Ministry of Finance
and Corporate Relations in British Columbia pursuant to Section 99 of the Social
Service Tax Act (British Columbia), indicating that all taxes collected by
Canadian Seller up to the Closing Date (or the nearest date of the Closing Date
as may be practicable) have been paid.
Section 5.06 Bank Account Signatories. On or before March 27, 2002,
Sellers shall provide Buyer with an updated Schedule 3.30 with respect to bank
accounts and safe deposit boxes which shall include and specifically identify
the names of all persons authorized to draw on and have access to such bank
accounts and safe deposit boxes.
Section 5.07 Financing Assistance. Sellers acknowledge that Buyer may
fund, in whole or in part, the Purchase Price (or refinance any interim
financing used to fund the Purchase Price) through capital markets financing
transactions and that this process will necessitate the creation and
dissemination to potential investors of customary offering materials as well as
the filing of one or more registration statements with the United States
Securities and Exchange Commission as part of such process or, following such
process, pursuant to customary registration rights arrangements. Sellers agree
to use all commercially reasonable efforts to facilitate such transactions,
including but not limited to (i) providing all information, including financial
information, reasonably requested by Buyer for inclusion in its offering
materials or any related governmental filings and (ii) causing its accountants
to provide (x) consents to the use of the Transferred Companies' audited and
unaudited financial statements in relevant offering documents and any related
governmental filings, (y) consents to the use of their name in a customary
manner in any such offering materials and related governmental filings and (z)
customary "cold comfort" letters in connection with financial information of the
Transferred Companies included in any such offering materials and related
governmental filings.
Section 5.08 Real Property. Schedule 5.08 identifies a lease for real
property (the "Xxxxx Place Lease") that requires the tenant thereunder to
deliver notice to the landlord relating to a change in control of tenant. At or
prior to Closing, Sellers shall deliver such notice in accordance with the terms
of the Xxxxx Place Lease.
ARTICLE 6.
COVENANTS OF BUYER
Buyer agrees that:
Section 6.01 Access. Buyer will and will cause each Transferred
Company, on and after the Closing Date, to afford promptly to Sellers and their
agents reasonable access to their properties, books, records, employees and
auditors to the extent necessary to permit Sellers to determine any matter
relating to its rights and obligations hereunder or to any period ending on or
before the Closing Date; provided that any such access by Sellers shall not
unreasonably interfere with the conduct of the business of Buyer or the
Transferred Companies; provided further that the covenant to afford such access
shall expire concurrently with any applicable statute of limitations with
respect any particular matter. Sellers will hold, and will use their
42
commercially reasonable efforts to cause their officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
Transferred Companies provided to it pursuant to this Section.
Section 6.02 Trademarks; Tradenames. After the Closing, Buyer shall
not, and shall not permit their Affiliates to, use the names "USI" or "U.S.
Industries, Inc." or any derivative thereof (the "Seller Names"). Buyer and the
Transferred Companies shall promptly, but no later than the first anniversary of
the Closing Date, destroy all business cards, signs, displays and other
materials that contain the Seller Names. Notwithstanding the foregoing, for a
period of the first anniversary of the Closing Date, the Transferred Companies
may continue to use the Seller Names on any stationery, promotional materials,
manuals or packaging in possession of a Transferred Company prior to the Closing
Date so long as Buyer and the Transferred Companies destroy all remaining
materials at the end of such period.
Section 6.03 Preservation of Records. Buyer and Sellers each agree, at
their own expense, that they (a) shall preserve and keep those records of the
Transferred Companies relating exclusively to ongoing litigation or other
Government Authority, for a period of five (5) years from the Closing, or for
any longer periods as may be required by any Government Authority or ongoing
litigation; so long as Buyer or Sellers, as the case may be, is notified in
writing by such Government Authority, parties relating to such ongoing
litigation or by Buyer, in the case of Sellers, or Sellers in the case of Buyer,
that such records must be kept by the party receiving such notice beyond such
five-year period and (b) shall make such records available to Buyer or Sellers,
as the case may be, as may be reasonably requested. In the event either party
wishes to destroy such records after the time specified above, such party shall
first give thirty (30) days' prior written notice to the other which shall have
the right at its option and expense, upon prior written notice given to the
notifying party within that thirty (30) day period, to take possession of the
records within thirty (30) days after receipt of the initial notice.
Section 6.04 Certain Post-Closing Assistance by Buyer. Buyer agrees to
cause the appropriate personnel of the Transferred Companies at no cost or
expense to Sellers, to prepare all customary accounting, tax, employment,
benefits-related and similar reports for the Transferred Companies for periods
up to the Closing Date which are reasonably requested by Sellers. Sellers agree
to provide Buyer, at no cost or expense to Buyer, with information in the
possession and control of Sellers in respect of accounting, employment,
benefits-related and similar reports for Buyer after the Closing Date to the
extent reasonably requested by Buyer.
ARTICLE 7.
COVENANTS OF BUYER AND SELLERS
Buyer on the one hand, and Parent and Sellers jointly and
severally on the other hand, agree that:
Section 7.01 Best Efforts; Further Assurances. Subject to the terms and
conditions of this Agreement, Buyer, Parent and Sellers will use their
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement;
43
provided that nothing in the Agreement shall obligate Buyer or its Affiliates to
(i) sell or restructure any of its business or assets including the Purchased
Assets and the assets of the Transferred Companies, (ii) agree to amend
Contracts or make concessions materially adverse to Buyer or the Business, or
(iii) take any other action materially adverse to Buyer or the Business. Sellers
and Buyer agree, and Sellers, prior to the Closing, and Buyer, after the
Closing, agree to cause the Transferred Companies, to execute and deliver such
other documents, certificates, agreements and other writings and to take such
other actions as may be necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement.
Section 7.02 Certain Filings. (a) Sellers and Buyer shall cooperate
with one another in determining whether any action by or in respect of, or
filing with, any Governmental Authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions contemplated
by this Agreement.
(b) As promptly as practicable after the execution of this
Agreement, each party shall, in cooperation with the other, but at its own
expense, file any reports or notifications or furnish information and pay any
fees that may be required to be paid by it under applicable law including
filings under the HSR Act with the Federal Trade Commission and the Antitrust
Division of the Department of Justice, and shall furnish to the other all such
information in its possession as may be necessary for the completion of the
reports or notifications to be filed by the other. Each party will use its
reasonable efforts to obtain any early termination of any applicable waiting
period, and shall promptly make any further filings pursuant thereto that may be
necessary, proper or advisable. Each party shall each pay one-half the cost of
any filing required under the HSR Act.
Section 7.03 Public Announcements. The parties agree to consult with
each other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except
for any press releases and public announcements the making of which may be
required by applicable law or any listing agreement with any national securities
exchange, will not issue any such press release or make any such public
statement prior to such consultation. If Buyer or a Seller, or parent or other
affiliated entity of such parties, is so required to issue a press release or
otherwise make a public statement, they shall inform and provide draft copies to
the other parties hereto for review and comment prior to issuing it. Buyer
agrees that Sellers may deliver a copy of this Agreement to the holders of the
Senior Debt Liens and any other persons reasonably requested by such holders.
Section 7.04 Notices of Certain Events. From the date hereof until the
Closing Date, Sellers and Buyer shall promptly notify the other of:
(a) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this Agreement;
and
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(c) any actions, suits, claims, investigations or proceedings
commenced relating to Sellers, Buyer or the Transferred Companies that, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 3.13 or 4.07.
Section 7.05 Treasury Matters. (a) Sellers shall continue to cause
the funding of the Transferred Companies' checks, in accordance with past
practices, which are presented for payment through the Closing Date. Sellers
shall have no obligation to fund checks which are presented for payment after
the Closing Date, provided that such payable has been properly recorded on the
Closing Balance Sheet in accordance with the Accounting Principles. Buyer shall
assume all of the bank accounts of Progress as provided in Section 2.01(b) on
the Closing Date and be prepared to fund the above-mentioned checks which are
presented for payment after the Closing Date. Amounts received in the lockbox
and depository accounts of Sellers through the Closing Date shall be retained by
Sellers notwithstanding that, consistent with past practices, such collections
may not be credited to Sellers or their Affiliates until after the Closing Date;
provided that such amounts retained by Sellers shall not be included in the
Closing Balance Sheet.
(b) Certain of the Transferred Companies are party to or
financially supported by certain letters of credit and guarantees in respect of
which a Seller or its Affiliates are subject to continuing obligations (the
"Credit Support Documents"), each of which is set forth on Schedule 7.05. The
parties shall use their reasonable best efforts to terminate the Credit Support
Documents as soon as practicable after the Closing. Buyer shall use its
reasonable best efforts to cause the obligations which are secured by the Credit
Support Documents to be secured or discharged in such a manner that Sellers or
their Affiliates will not be required to make any payments relating to the
periods after the Closing under the Credit Support Documents in relation
thereto. Should any such payments be required of and paid by a Seller, Buyer
shall reimburse such Seller making payment immediately upon demand. The
Transferred Companies shall not incur any new obligations secured or supported
by the Credit Support Documents after the Closing and Buyer shall cause the
Transferred Companies not to incur any such obligations.
Section 7.06 Approvals and Consents; Cooperation; Notification.
(a) The parties hereto shall use their respective commercially
reasonable best efforts, and cooperate with each other, to obtain as promptly as
practicable all governmental and third-party authorizations, approvals,
consents, Permits or waivers required in order to consummate the transactions
contemplated by this Agreement.
(b) Sellers shall give prompt notice to Buyer of the
occurrence of any event that would reasonably be expected to have a Material
Adverse Effect on the Business, and Buyer shall give prompt notice to Sellers of
the occurrence of any event that could impair Buyer's ability to consummate the
transactions contemplated hereunder.
Section 7.07 Insurance Policies. (a) The parties agree that the benefit
of the insurance policies covering the business, operations, assets or
properties of the Transferred Companies shall be transferred to Buyer as
follows:
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(i) the worker's compensation insurance Policy
currently in effect under which LCA is the named insured and
Pacific Employers Insurance Company, an Ace USA company is the
insurer shall remain in full force and effect;
(ii) all primary insurance coverage provided by
third-party insurers under the Policies identified on Schedule
7.07(a)(ii) shall be assumed by Buyer pursuant to the
Assumption Agreement (the "Insurance Assignment and Assumption
Agreement") attached hereto as Exhibit F;
(iii) all stop loss, excess liability and umbrella
coverage provided by third-party insurers under the policies
identified on Schedule 7.07(a)(iii) (the "Excess Insurance
Coverage") shall be retained by Parent and administered in
accordance with the provisions of Sections 7.07(b) and (c);
(iv) Sellers shall secure appropriate tail coverage
on the claims made based Policies specified on Schedule
7.07(a)(iv), in such amounts and for such periods as are set
forth in such Schedule; and
(v) Sellers shall be responsible for all liabilities
relating to matters intended to be covered by the reserves for
self-insured retentions for general liability, automobile and
worker's compensation insurance set forth on the Closing
Balance Sheet to the extent, and only to the extent, the
aggregate amount of such liabilities exceed $3.6 million (the
"Self-Insured Threshold") and Buyer shall be responsible for
all such liabilities up to the Self-Insured Threshold.
(b) Sellers agree to take such action as may be reasonably
necessary to maintain the Excess Insurance Coverage after the Closing for the
benefit of the Buyer and not to voluntarily relinquish or terminate such
Insurance Coverage. To the extent that any claim with respect to the Assumed
Liabilities that arises out of any act, omission, occurrence, fact or
circumstance existing or occurring prior to the Closing Date is made against any
Buyer and/or any Seller, and the Excess Insurance Coverage by its terms applies
to such claim (any such claim, an "Excess Insurance Coverage Claim"), the
Sellers shall submit such Excess Insurance Coverage Claim upon becoming aware
thereof to the insurer under the applicable insurance policy for potential
payment. The Buyer shall reimburse the Sellers for any applicable administrative
and processing fees, premiums, deductibles or other costs and expenses imposed
by the insurer and paid by the Sellers relating to Excess Insurance Coverage
Claims and the processing thereof. In addition, the Sellers agree to cooperate
with the Buyer to make the benefits of the Excess Insurance Coverage available
to the Buyer (subject to the terms and conditions of such Excess Insurance
Coverage) and continue, from and after the Closing, to process such Excess
Insurance Coverage Claims in the ordinary course of business in substantially
the same manner as similar claims were processed prior to the Closing Date. In
the event that (i) the Sellers receive any proceeds of the Excess Insurance
Coverage with respect to any Excess Insurance Coverage Claims thereunder and
(ii) such claim has been paid by the Buyer, the Sellers shall promptly pay or
reimburse the Buyer with respect to the amount so paid by the Buyer net of any
applicable administrative or processing fees, premiums, deductibles or other
costs and expenses of the Sellers relating thereto.
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(c) With respect to the Buyer's obligation to reimburse the
Sellers for any amounts described in this Section 7.07 (the "Reimbursed
Amounts"), the Sellers and the Buyer agree that (i) the Sellers will invoice the
Buyer on a monthly basis for all Reimbursed Amounts paid or incurred by the
Sellers with appropriate supporting details and (ii) the Buyer agrees to pay the
amount reflected on such invoices as promptly as practicable and in any event
within ten (10) days of receipt of any such invoice with appropriate supporting
details.
(d) With respect to the Sellers' obligation to reimburse Buyer
for any amounts described in Section 7.07(a)(v) (the "Self-Insured Reimbursed
Amounts"), following the date on which the Self-Insured Threshold has been met,
(i) Buyer will invoice US Seller on a monthly basis for all Self-Insured
Reimbursed Amounts paid or incurred by Buyer with appropriate supporting details
and (ii) US Seller agrees to pay the amount reflected on such invoices as
promptly as practicable and in any event within ten (10) days of receipt of any
such invoice with appropriate supporting details.
(e) With regard to the Policies referred to in Sections
7.07(a)(i) and 7.07(a)(ii), Buyer agrees that it shall not, without the prior
written consent of Parent (which consent shall not be unreasonably withheld),
replace, in any manner, the claims administrator currently managing the Claims
under such Policies or delegate the duties performed by such claims
administrator to any other Person. Buyer further agrees that it shall furnish,
or cause to be furnished, to Parent (i) a quarterly loss run report with respect
to Claims relating to events or circumstances occurring prior to the Closing
Date that are either covered by a Policy of a Transferred Company or will be
counted against the Self-Insured Threshold ("Pre-Closing Claims") and (ii)
prompt notice of any Pre-Closing Claim for which a reserve in excess of $100,000
has been established. With respect to any Pre-Closing Claim identified in the
quarterly loss run report referred to in clause (i) above or in any notice
delivered pursuant to clause (ii) above, Parent shall have the right to consult
with Buyer regarding the handling of such Pre-Closing Claim and Buyer agrees to
consider Parent's views with respect thereto.
Section 7.08 No Solicitation. (a) Parent and Sellers agree that, for a
period of two (2) years from the Closing Date, Parent and Sellers shall not in
any capacity, either separately, jointly or in association with others, directly
or indirectly, employ or seek to employ any Person or agent who is then employed
or retained by the Business or any business of the Buyer that is substantially
similar to the Business (or who was so employed or retained at any time within
the six months prior to the date the Parent or Sellers employs or seeks to
employ such Person).
(b) Buyer agrees that, for a period of two (2) years from the
Closing Date, it shall not, and shall not permit the Transferred Companies, in
any capacity, either separately, jointly or in association with others, directly
or indirectly, employ or seek to employ any Person or agent who is then employed
or retained by SiTeco or its subsidiaries (or who was so employed or retained at
any time within the six months prior to the date the Buyer or any Transferred
Company employs or seeks to employ such Person).
(c) The foregoing notwithstanding, it shall not constitute a
violation of this Section 7.08 for any party to make a general solicitation for
employment or other services contained in a newspaper, other periodical or on
the internet.
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(d) In the event the agreement in this Section 7.08 shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too great a period of time or over too great a geographical
area or by reason of its being too extensive in any other respect, it shall be
interpreted to extend only over the maximum period of time for which it may be
enforceable, and/or over the maximum geographical area as to which it may be
enforceable and/or to the maximum extent in all other respects as to which it
may be enforceable, all as determined by such court in such action.
(e) Sellers acknowledge that a breach of the covenants
contained in this Section 7.08 will cause irreparable damage to Buyer or the
Business, the exact amount of which will be difficult to ascertain, and that the
remedies at law for any such breach will be inadequate. Accordingly, Sellers
agree that if Sellers breach the covenant contained in this Section 7.08, in
addition to any other remedy which may be available at law or in equity, Buyer
shall be entitled to specific performance and injunctive relief, without posting
bond or other security.
Section 7.09 No Negotiation
Unless and until this Agreement is terminated, Parent and
Sellers shall not, and shall cause its respective directors, officers,
employees, representatives, agents, advisors, accountants and attorneys not to,
initiate or solicit, directly or indirectly, any inquiries or the making of any
proposal with respect to, or engage in negotiations concerning, or provide any
confidential information or data to any Person with respect to, or have any
discussions with any Person relating to, the Business or the Transferred
Companies, and shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. Parent and Sellers hereby represent that
neither Parent nor Sellers are now engaged in discussions or negotiations with
any party other than Buyer and its representatives, with respect to any of the
foregoing. Parent and Sellers agree not to release any third party from, or
waive any provision of, any confidentiality or standstill agreement to which
Parent or Sellers are a party.
Section 7.10 Non-competition.
(a) As an inducement for Buyer to enter into this Agreement,
Parent and Sellers agree that for a period of five (5) years after the Closing
(the "Restricted Period"), neither Parent nor Sellers shall, without Buyer's
prior written consent, directly or indirectly, own, manage, operate, join,
control or participate in the ownership, management, operation or control of, or
act as a director, officer, employee, partner, or consultant with, any profit or
non-profit business or organization, which competes in North America (including
the territories of the United States) with the Business or any business of Buyer
substantially similar to the Business; provided, however, any Excluded Entity's
purchase or other acquisition of a business (an "Acquired Business") that
competes in North America (including the territories of the United States) with
the Business or any business of Buyer substantially similar to the Business
shall not be deemed to violate this Section 7.10, so long as the portion of the
Acquired Business that competes in North America (including the territories of
the United States) with the Business or any business of Buyer substantially
similar to the Business (i) represents less than 5% of the total annual gross
revenues of the Acquired Business and (ii) has less than $10.0 million in total
annual gross revenues, in each case based on the Acquired Business' last full
fiscal year. Each
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of Parent and Sellers agree to maintain in confidence, and not to disclose to
any third party, any ideas, methods, developments, inventions, improvements and
business plans and information which are confidential information and essential
in the operation of the Business.
(b) In the event the agreement in this Section 7.10 shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too great a period of time or over too great a geographical
area or by reason of its being too extensive in any other respect, it shall be
interpreted to extend only over the maximum period of time for which it may be
enforceable, and/or over the maximum geographical area as to which it may be
enforceable and/or to the maximum extent in all other respects as to which it
may be enforceable, all as determined by such court in such action.
(c) Sellers acknowledge that a breach of the covenants
contained in this Section 7.10 will cause irreparable damage to Buyer or the
Business, the exact amount of which will be difficult to ascertain, and that the
remedies at law for any such breach will be inadequate. Accordingly, Sellers
agree that if Sellers breach the covenant contained in this Section 7.10, in
addition to any other remedy which may be available at law or in equity, Buyer
shall be entitled to specific performance and injunctive relief, without posting
bond or other security.
Section 7.11 Discharge of All Indebtedness. Except as disclosed on
Schedule 7.11, prior to Closing, the Sellers shall discharge or cause to be
discharged, all Indebtedness (including, without limitation, all Indebtedness
secured by the Senior Debt Liens and all prepayment penalties and costs
associated therewith) and cause the release of all Liens in connection with such
Indebtedness.
Section 7.12 Environmental Insurance. Prior to the Closing Date, Parent
and Sellers hereby agree, at their sole expense, to purchase insurance coverage
(the "Environmental Policy") for certain Pre-Closing Environmental Liabilities
in such amounts and on such other terms and conditions as specified on Schedule
7.12. Buyer shall cooperate with Parent and Sellers in obtaining this
Environmental Policy. Each of the Sellers, Parent and Buyer shall be named as a
co-insured party under such Environmental Policy. To the extent that any claim
with respect to such Pre-Closing Environmental Liabilities that arises out of
any act, omission, occurrence, fact or circumstance existing or occurring prior
to the Closing Date is made against Buyer, Parent and/or any Seller, and the
Environmental Policy by its terms applies to such claim (any such claim, an
"Environmental Policy Claim"), the Buyer agrees to submit such Environmental
Policy Claim upon becoming aware thereof to the Sellers and Sellers shall
undertake all necessary notices and communications with the insurer under the
Environmental Policy for potential payment. Any proceeds received by Buyer,
Parent or Sellers from the Environmental Policy with respect to any
Environmental Policy Claim shall be divided pro rata between Parent and Sellers
on the one hand and Buyer on the other hand, based upon the allocation of the
liability for the Damages related to such Environmental Policy Claim between
Parent and Sellers on the one hand, and Buyer on the other hand, pursuant to the
provisions of Section 10.03. Notwithstanding anything in this Section 7.12 to
the contrary, any party entitled to indemnification pursuant to Section 10.03
shall be entitled to such indemnification in accordance with the provisions of
Section 10.03 regardless of whether a Environmental Policy Claim is pursued and
regardless of whether any proceeds from such claim are collected.
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Section 7.13 Supply Arrangements. Parent and Sellers agree to cause (a)
SiTeco to sell and/or license to Columbia Lighting, Inc., a Delaware
corporation, and Prescolite products at prices in effect as of the date hereof
and in quantities consistent with the projected sales volumes and (b) Xxx
Lighting, Inc., a Delaware corporation, to Sell and/or license to SiTeco
products at prices in effect as of the date hereof and in quantities consistent
with the projected purchasing volume, in each case for a period of at least one
year after the Closing Date and on such other terms and conditions mutually
acceptable to Parent, Sellers and Buyer in accordance with supply agreements to
be entered into prior to Closing (the "SiTeco Supply Agreements").
Section 7.14 Extension of Agreement. Parent and Sellers agree to cause
the agreement identified on Schedule 7.14 to be extended or reinstated, as
appropriate, with Dual-Lite as a party thereto, on substantially the same terms
and conditions as set forth in such agreement at least until April 30, 2003.
Section 7.15 San Leandro Facilities Sublease. Simultaneously with the
Closing, Parent and Sellers agree to cause the entity to which the lease with
respect to the San Leandro Facilities is assigned prior to Closing to enter into
a sublease (the "San Leandro Facilities Sublease") with Buyer with respect to
the San Leandro Facilities for a term of eighteen (18) months, substantially in
the form of the San Leandro Facilities Sublease attached hereto as Exhibit G.
Section 7.16 The Puerto Rico Grant.
With respect to the grant of the Industrial Tax Exemption
issued to Dual-Lite Manufacturing Inc., Case No. 78-57-I-91, as amended through
Case No. EI-99-18 (78-57-I-91)-G (the "Puerto Rico Grant"), Parent and Sellers
shall take such actions and use their commercially reasonable efforts to
cooperate fully with Buyer in Buyer's efforts to obtain authorization for the
transfer of control of Dual-Lite Manufacturing Inc. to Buyer, including, but not
limited to, the execution and filing of any applications with the Puerto Rico
Office of Industrial Tax Exemption, the issuance or provision of any other
consents, instructions or information, and the taking of any actions necessary
to achieve such transfer.
Section 7.17 Tax Certificates.
With respect to any Transferred Company operating in the
Commonwealth of Puerto Rico, on or before the Closing, Parent and Sellers shall
provide Buyer with a Negative Debt Certificate issued by the Center for the
Collection of Municipal Revenue with respect to real and personal taxes and a
Negative Debt Certificate issued by the Treasury Department of Puerto Rico
("Puerto Rico Treasury Department") with respect to income, excise and any other
taxes or licenses administered by the Puerto Rico Treasury Department.
ARTICLE 8.
EMPLOYMENT AND CANADIAN TAX MATTERS
Section 8.01 Employee and Employee Benefit Matters.
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(a) Employment of Employees at Closing. On the Closing Date,
Buyer shall continue to employ the Employees (other than the Canadian Employees)
of the Companies and their Subsidiaries. Employees not covered by a collective
bargaining agreement shall be employed at substantially equivalent (except that
in determining any such equivalence, any benefit relating to equity ownership
(including stock options) of any entity shall not be taken into account)
compensation and benefit levels. Employees covered by a collective bargaining
agreement shall be employed, at the same wages and on the same terms and
conditions of employment in effect as of the Closing Date. Additionally, Buyer
agrees to continue the Employee Benefit Plans and Benefit Arrangements either
(A) pursuant to any collective bargaining agreement, as may be amended from time
to time or (B) for Employees not covered by a collective bargaining agreement,
on substantially equivalent terms, in the aggregate, for a period of six (6)
months following the Closing Date; provided, however, that Buyer shall not be
obligated to continue any stock contribution under the Transfer 401(k) Plan,
stock option plans or any other equity plan or arrangement maintained by the
Companies and their Subsidiaries or Sellers granting options to any Employees
for the purchase of any Shares or shares of common stock of Sellers. Subject to
the Closing, Buyer shall deliver a letter to all Canadian Employees confirming
the sale of the Canadian Business and stating that, in accordance with
applicable law, the terms and conditions of employment of such employees of the
Canadian Business after Closing will be continued by Buyer on terms
substantially equivalent in the aggregate to those existing as of the Closing
Date (except that in determining any such equivalence, any benefit relating to
equity ownership (including stock options) of any entity shall not be taken into
account). Buyer shall indemnify Sellers from any and all termination or
severance liability incurred with respect to terminations subsequent to the
Closing Date, and Sellers shall indemnify Buyer from any and all termination or
severance liability incurred on or prior to the Closing Date which has not been
properly accrued prior to the Closing Date (including, without limitation, any
liability related to or arising out of WARN, the continuation coverage rules of
Section 4980B of the Code and part 6 of Subtitle B of Title I of ERISA
("COBRA"), and any similar state, local or foreign laws with respect to the
Employees).
(b) Assumption of Plans. From and after the Closing Date,
Buyer shall cause the Companies and Subsidiaries to retain sponsorship of each
Employee Benefit Plan or Benefit Arrangement (excluding Canadian Employee Plans)
maintained by any Company or Subsidiary primarily for the benefit of Employees
(excluding Canadian Employees) ("Company-Specific Plans").
(c) Transfer of Assets of 401(k) Plans. After the Closing
Date, Sellers shall cause the assets of the Employees' accounts (reflecting all
earnings through the Closing Date and all contribution obligations accrued
through the Closing Date) of the USI Retirement Savings and Investment Plan (the
"Transfer 401(k) Plan") held in Master Trusts to be transferred to a successor
trust or trusts or other funding medium established by a Buyer (the "New 401(k)
Trust"). Such transfer shall occur as soon as reasonably practicable following
(i) receipt by US Seller of (A) notification from Buyer that the New 401(k)
Trust has been established and (B) an opinion from counsel to US Seller that the
Transfer 401(k) Plan and the trust pursuant thereto meet the requirements of
Sections 401(a), 401(k), if applicable, and 501(a) of the Code or corresponding
provisions of the PR Code, where applicable, and (ii) the lapse of at least
thirty (30) days after the filing of any required Form 5310 with respect to the
transfer of assets of the Transfer 401(k) Plan.
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(d) (i) As promptly as practicable, but no later than 90 days
after the Closing Date, US Seller will use reasonable best efforts to cause to
be prepared and delivered to Buyer a calculation of the Pension Plan Liability
(the "Final Pension Plan Liability") as of the last day of the calendar month in
which the Closing Date occurs, and a certificate setting forth US Seller's
calculation of the Final Pension Plan Liability (the "Final Pension Plan
Liability Notification"). If Buyer disagrees with US Seller's calculation of the
Final Pension Plan Liability set forth in the Final Pension Plan Liability
Notification, Buyer may, within 30 days after delivery of the Final Pension Plan
Liability Notification, deliver a notice ("Final Pension Plan Liability
Objection Notice") to US Seller disagreeing with such calculation and setting
forth Buyer's calculation of such amount.
(ii) If a Final Pension Plan Liability Objection Notice
shall be duly delivered pursuant to Section 8.01(d)(i), Buyer and US Seller
shall, during the 15 days following such delivery, use their commercially
reasonable efforts to reach agreement on the disputed items or amounts in order
to determine, as may be required, the amount of the Final Pension Plan
Liability, which amount shall not be more than the amount thereof shown in
Buyer's calculations set forth in the Final Pension Plan Liability Objection
Notice nor less than the amount thereof shown in US Seller's calculation set
forth in the Final Pension Plan Liability Notification. If, during such period,
Buyer and US Seller are unable to reach such agreement, any unresolved disputed
items shall be promptly referred to an independent pension plan expert jointly
selected by Buyer and US Seller with whom none of the parties have a material
relationship (the "Unrelated Pension Plan Expert").
(iii) The Unrelated Pension Plan Expert shall be directed
to render a calculation of the Final Pension Plan Liability in accordance with
definition of Pension Plan Liability and other provisions of this Agreement as
promptly as practicable. Upon determining the Final Pension Plan Liability, the
Unrelated Pension Plan Expert shall issue a report showing its calculation. The
calculation of the Final Pension Plan Liability by the Unrelated Pension Plan
Expert shall be final and binding on the parties.
The party whose calculation, as set forth in the Final
Pension Plan Liability Notification, in the case of US Seller, or as set forth
in the Final Pension Plan Liability Objection Notice, in the case of Buyer, is
further from the calculation rendered by the Unrelated Pension Plan Expert shall
bear all of the fees and expenses of the Unrelated Pension Plan Expert.
Buyer and Sellers agree that they will, and agree to cause
their respective independent accountants and the Companies and Subsidiaries to,
cooperate and assist in the preparation of the Final Pension Plan Liability,
including without limitation, the making available to the extent necessary of
books, records, work papers and personnel, including the execution of customary
release or indemnification letters required by the Unrelated Pension Plan
Expert.
(iv) If the Final Pension Plan Liability, as determined in
accordance with the procedures set forth herein, exceeds $18 million, the US
Seller shall pay to Buyer the amount in excess of $18 million. Any payment
pursuant to this Section shall be made at a mutually convenient time and place
within 10 days after the Final Pension Plan Liability has been finally
determined, by delivery by US Seller, of a certified or official bank check
payable in
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immediately available funds to Buyer or by causing such payments to be credited
to such account of Buyer as may be designated by Buyer.
(e) Transfer of Pension Plan Assets. The assets of the Pension
Plans (excluding Canadian Employee Plans or the Transfer 401(k) Plan) shall be
transferred from the trusts pursuant thereto (the "Seller Pension Trust") to one
or more pension trusts to be established by Buyer (the "Buyer Pension Trust").
Such transfers shall occur as soon as practicable following the last day of the
calendar month in which the Closing Date occurs (the "Transfer Date") and shall
be made in cash or in kind as the parties shall agree, except that the full fair
market value of any non-publicly traded securities (as mutually agreed by the
parties) shall be transferred in cash. If, within 60 days following the Transfer
Date as of which benefit payments are due to any participant or beneficiary in
any of the Pension Plans, Buyer informs Sellers that the Buyer Pension Trust is
not administratively able to make any such payment, Buyer shall cause the Buyer
Pension Trust to transfer, in cash, the amount of any such payments to the
Seller Pension Trust and Sellers shall cause such trust to make such payment.
(f) (i) Notwithstanding the foregoing, Buyer shall not assume
any of the Canadian Employee Plans or liability for accrued benefits or any
other liability under or in respect of any of the Canadian Employee Plans; (ii)
the Canadian Employees shall, as of the Closing Date, cease to accrue further
benefits under the Canadian Employee Plans; and (iii) Buyer shall enroll the
Canadian Employees in benefit and pension plans sponsored by the Buyer which
shall recognize the credited service date of the Canadian Employees as disclosed
in Schedule 3.18 for purposes of eligibility to participate, vesting and
entitlement to benefits under such replacement plans but not for the purpose of
benefit accrual. Buyer shall waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Canadian Employees under the Buyer's benefit and
pension plans. After the date hereof, Sellers shall promptly provide to the
Buyer, at the request of Buyer, all employee data reasonably necessary to enable
the Buyer to establish and administer replacement plans for the Canadian
Employees.
(g) Interim Administration of Plans. Prior to the transfer of
the assets of the Transfer 401(k) Plan to the New 401(k) Trust pursuant to
Section 8.01(c), and prior to the assets of the Pension Plan being transferred
to Buyer Pension Trust pursuant to Section 8.01, Sellers shall continue the
administration of such plan and the Company-Specific Plans in accordance with
past practice. For purposes of the preceding sentence, "administration of plans"
shall include all actions required on a routine basis for the proper maintenance
of the Transfer 401(k) Plan and Company-Specific Plans, including but not
limited to, transfer to the applicable trusts of any employer contributions,
employee contribution, and loan payments and, except as otherwise provided for
in Section 8.01(e) with respect to Pension Plans, the payment of all benefits or
other distributions to participants required by the provisions of such plans. As
consideration for the Sellers' obligation to continue the administration of such
plans, Buyer agrees to reimburse Sellers, upon the delivery of proper invoices
identifying the charges (but not any allocation of overhead) associated with the
applicable plan and services provided, for pro rata out-of-pocket expenses
incurred by Sellers in administration of the plans including, but not limited
to, the routine fees charged by the Transfer Plan's or Company-Specific Plans'
trustees, actuaries or third-party administrators in accordance with past
practice.
53
(h) Sellers and Buyer agree to provide each other with such
records and information as they may reasonably request in order to carry out
their respective obligations under Section 8.01. During the period following the
Closing and prior to the transfer of assets of the Transfer 401(k) Plan to the
New 401(k) Trust pursuant to Section 8.01(b) and with respect to the Pension
Plans pursuant to Section 8.01(e), Sellers shall promptly forward to Buyer any
correspondence or written communications received from the IRS, the Department
of Labor or the Puerto Rico Treasury Department, where applicable.
Section 8.02 Canadian Tax Matters.
All real property Taxes, personal and intangible property
Taxes and similar ad valorem obligations levied with respect to the Purchased
Assets for a taxable period which includes (but does not end on) the Closing
Date shall be apportioned between Canadian Seller and Buyer based on the number
of days of such taxable period which fall on or before the Closing Date (a
"Pre-Closing Tax Period") and the number of days of such taxable period after
the Closing Date (a "Post-Closing Tax Period"). Canadian Seller shall be liable
for the proportionate amount of such taxes that is attributable to the
Pre-Closing Tax Period, and Buyer shall be liable for the proportionate amount
of such taxes that is attributable to the Post-Closing Tax Period.
ARTICLE 9.
CONDITIONS TO CLOSING
Section 9.01 Conditions to Obligations of Buyer and Sellers. The
obligations of Buyer and Sellers to consummate the Closing are subject to the
satisfaction of the following conditions:
(a) Any waiting period applicable to the transactions
contemplated hereby under the HSR Act and any applicable foreign antitrust or
competition laws shall have expired or been terminated;
(b) No court, arbitrator, tribunal or governmental body,
agency or official shall have issued, any order, decree or ruling, and there
shall not be any statute, rule or regulation, restraining, enjoining or
prohibiting the consummation of the transactions contemplated by this Agreement;
provided that the parties shall have used their reasonable best efforts to cause
any such order, decree, ruling, statute, rule or regulation to be vacated or
lifted; and
(c) all material authorizations, approvals, waivers, consents
or Permits which are required to consummate the transactions contemplated in
this Agreement from any Governmental Authority shall have been obtained and be
in full force and effect.
Section 9.02 Conditions to Obligation of Buyer. The obligation of Buyer
to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) (i) Parent and Sellers shall have performed in all
material respects all of their obligations hereunder required to be performed by
them on or prior to the Closing Date, and (ii) the representations and
warranties of Parent and Sellers, contained in this Agreement and in
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any certificate or other writing delivered by Parent and Sellers pursuant hereto
shall be true and correct in all material respects at and as of the Closing
Date, as if made as of such date;
(b) Buyer shall have received a certificate signed by an
appropriate officer of Parent and each Seller, dated as of the Closing Date, to
the effect that, to the best of such officer's knowledge, the conditions set
forth in Section 9.02(a) has been satisfied;
(c) Buyer shall have received a legal opinion from (i) Xxxxx
Xxxx & Xxxxxxxx, counsel to the Parent and the Sellers, in substantially the
form attached as Exhibit H hereto and (ii) Fraser Xxxxxx Casgrain LLP, Canadian
counsel to Canadian Seller, in substantially the form attached hereto as Exhibit
I hereto;
(d) All material consents to Contracts and other third-party
approvals identified in Schedule 9.02(d) shall have been obtained;
(e) Each Seller and each other deemed transferor of Shares,
shall furnish Buyer a clearance certificate or similar document(s) that may be
required by any taxing authority in order to relieve Buyer of any obligation to
withhold any portion of the Purchase Price including an affidavit from US
Seller, stating, under penalty of perjury, that the indicated number is the
transferor's United States taxpayer identification number and that the
transferor is not a foreign Person, pursuant to Section 1445(b)(2) of the Code;
(f) Execution and delivery of the tax sharing and
indemnification agreement in the form of Exhibit J (the "Tax Sharing Agreement")
by Sellers;
(g) Buyer shall have received evidence reasonably satisfactory
to it that Senior Debt Liens listed on Schedule 9.01 and other Liens other than
Permitted Liens have been released by the holders thereof;
(h) Buyer shall have received evidence reasonably satisfactory
to it that Parent and Sellers shall have consummated the Preliminary Transfers;
(i) Buyer shall have received evidence reasonably satisfactory
to it that Parent and Sellers shall have purchased the Environmental Policy;
(j) Execution and delivery of the Insurance Assignment and
Assumption Agreement by the parties thereto, other than Buyer;
(k) Execution and delivery of the SiTeco Supply Agreements by
each of the necessary parties thereto;
(l) Buyer shall have received evidence reasonably satisfactory
to it that the actions set forth in Section 7.14 have been effectuated;
(m) Buyer shall have received evidence reasonably satisfactory
to it that the insurance coverage referred to in Section 7.07(a)(i) - (iv) shall
be in full force and effect;
55
(n) Execution and delivery of the San Leandro Facilities
Sublease by each of the necessary parties thereto; and
(o) Buyer shall have received evidence reasonably satisfactory
to it that the leases set forth on Schedule 9.02(o) shall have been extended for
the period set forth on such Schedule on such terms and conditions as are
reasonably satisfactory to Buyer.
Section 9.03 Conditions to Obligation of Sellers. The obligation of
Sellers to consummate the Closing is subject to the satisfaction of the
following further conditions:
(a) (i) Buyer shall have performed in all material respects
all of its obligations hereunder required to be performed by it at or prior to
the Closing Date and (ii) the representations and warranties of Buyer contained
in this Agreement and in any certificate or other writing delivered by Buyer
pursuant hereto shall be true and correct in all material respects at and as of
the Closing Date, as if made as of such date;
(b) Sellers shall have received a certificate signed by an
appropriate officer of Buyer, dated as of the Closing Date, to the effect that,
to the best of such officer's knowledge, the conditions set forth in Section
9.03(a) has been satisfied;
(c) Sellers shall have received a legal opinion from Xxxxxx &
Xxxxxxx, counsel to Buyer, in substantially the form attached as Exhibit K
hereto;
(d) Sellers shall have received a legal opinion from Xxxxxxx
X. Xxxxxx, general counsel to Buyer, in substantially the form attached as
Exhibit L hereto; and
(e) Execution and delivery of the Tax Sharing Agreement by
Buyer.
ARTICLE 10.
SURVIVAL; INDEMNIFICATION
Section 10.01 Survival. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing until eighteen months after the Closing Date; provided
that (i) the covenants, agreements, representations and warranties contained in
Sections 2.01, 2.04, 2.05, 3.01, 3.05, 3.06, 7.05 and Articles 6, 8, 10 and 12
shall survive indefinitely; (ii) the representations and warranties contained in
Sections 3.19 and 3.22 shall survive until the expiration of the applicable
statute of limitations plus ninety (90) days; and (iii) the representations and
warranties contained in Section 3.20 shall survive the Closing until five years
after the Closing Date. Notwithstanding the preceding sentence, any covenant,
agreement, representation or warranty in respect of which indemnity may be
sought under this Agreement shall survive the time at which it would otherwise
terminate pursuant to the preceding sentence with respect to the specific claim,
if notice of the inaccuracy or breach thereof giving rise to such right of
indemnity shall have been given to the party against whom such indemnity may be
sought prior to such time.
Section 10.02 Indemnification(a) . (a) Subject to the other provisions
of this Article 10, Parent and Sellers jointly and severally hereby indemnify
Buyer and its Affiliates against and
56
agree to hold each of them harmless from any and all damage, loss, liability and
expense (including, without limitation, reasonable expenses of investigation or
remediation, any consulting or engineering fees in connection with any
investigation or remediation and reasonable attorneys' fees and expenses in
connection with any action, suit or proceeding) ("Damages") incurred or suffered
by Buyer or any of its Affiliates arising out of (i) any misrepresentation or
breach as of the date made or deemed to be made or required to be true of any
warranty (each such misrepresentation and breach of warranty a "Warranty
Breach") except under Section 3.22 (which is addressed in the Tax Sharing
Agreement) and Section 3.20 (which is addressed in Section 10.03), (ii) breach
of covenant or agreement made or to be performed by Parent and Sellers pursuant
to this Agreement, (iii) any Excluded Liability or (iv) the matters set forth in
Section 7.07(a)(v) and Section 8.01(d); provided that with respect to
indemnification by Parent and Sellers for any Warranty Breach pursuant to this
Section, (A) Parent and Sellers shall not be liable unless the aggregate amount
of Damages with respect to such Warranty Breaches exceeds 1% of the Purchase
Price whereupon the party to be indemnified shall be entitled to seek
indemnification to the extent and only to the extent that the aggregate amount
of Damages exceeds 1% of the Purchase Price, and, (B) Parent's and Sellers'
maximum liability for all such Warranty Breaches shall not exceed 50% of the
Purchase Price. Notwithstanding the foregoing, the indemnity under Sections
10.02(a)(ii), 10.02(a)(iii), 10.02(a)(iv) and 10.03 shall not be subject to the
limitations of this Section 10.02(a).
(b) Subject to the other provisions of this Article 10, Buyer
hereby indemnifies Parent, Sellers and their Affiliates against and agree to
hold each of them harmless from any and all Damages incurred or suffered by
Parent, Sellers or any of their Affiliates arising out of (i) any Warranty
Breach, (ii) breach of covenant or agreement made or to be performed by Buyer
pursuant to this Agreement, or (iii) any Assumed Liability, except for and to
the extent of Parent's and Sellers' indemnification obligations as provided in
Section 10.02(a) above; provided that with respect to indemnification by Buyer
for any Warranty Breach pursuant to this Section, (x) Buyer shall not be liable
unless the aggregate amount of Damages with respect to such Warranty Breaches
exceeds 1% of the Purchase Price whereupon the party to be indemnified shall be
entitled to seek indemnification to the extent and only to the extent that the
aggregate amount of Damages exceeds 1% of the Purchase Price, and (y) Buyer's
aggregate maximum liability for all such Warranty Breaches shall not exceed 50%
of the Purchase Price. Notwithstanding the foregoing, the indemnity under
Section 10.02(b)(ii) and Section 10.02(b)(iii) shall not be subject to the
limitations of this Section 10.02(b).
Section 10.03 Environmental Matters. The remedies set forth in this
Section 10.03 are the exclusive remedy of Sellers and Buyer for all Damages
associated with or arising out of any environmental matter, whether a
Pre-Closing Environmental Liability, Special Pre-Closing Environmental
Liability, Post-Closing Environmental Liability or otherwise.
(a) Parent and Sellers jointly and severally hereby indemnify
Buyer ("Sellers' Indemnity") and its Affiliates against and agree to hold each
of them harmless from any and all Pre-Closing Environmental Liabilities and
Special Pre-Closing Environmental Liabilities; provided that with respect to
indemnification by Parent and Sellers for any Pre-Closing Environmental
Liabilities pursuant to this subsection (a), (i) Parent and Sellers shall only
be liable with respect to 80% of the aggregate amount of Damages arising out of
a Pre-Closing Environmental Liability, (ii) with respect to each business
location identified on
57
Schedule 10.03(a), Parent and Sellers shall have no liability for Damages or
other expense arising out of any Pre-Closing Environmental Liability pursuant to
this subsection (a) unless the aggregate amount of Damages for such business
location exceeds $300,000 (the "Buyer Deductible") (and then only to the extent
of such excess), (iii) Parent's and Sellers' maximum liability for Pre-Closing
Environmental Liabilities shall not exceed $10.0 million, and (iv) Parents' and
Sellers' indemnification obligations with respect to Pre-Closing Environmental
Liabilities shall be limited to those Claims and Remedial Actions that are
commenced prior to the fifth (5th) anniversary of the Closing Date. Sellers'
liability with respect to all Remedial Action Costs or other obligations arising
out of or in connection with all Special Pre-Closing Environmental Liabilities
shall not exceed $20.0 million.
(b) Subject to the other provisions of this Article 10, Buyer
hereby indemnifies Parent and Sellers and their Affiliates against and agree to
hold each of them harmless from any and all Damages incurred or suffered by
Parent and Sellers or their Affiliates to the extent arising out of (i) a
Post-Closing Environmental Liability or (ii) the portion of any Pre-Closing
Environmental Liability for which Sellers are not responsible pursuant to the
terms of Section 10.03.
(c) Sellers shall be the lead party ("Lead Party") in
directing Remedial Action in connection with Pre-Closing Environmental
Liabilities, subject to the duty to cooperate with Buyer as the non-lead party
("Non-Lead Party") as set forth in Section 10.03(f) below, and to the remainder
of this Section. Notwithstanding this designation of Sellers as Lead Party,
Buyer shall have the right to initiate and conduct its own investigation of
potential Pre-Closing Environmental Liabilities and to take any necessary or
appropriate action in response to information it obtains, including reporting
such information to the appropriate Governmental Authority or Governmental
Authorities and taking any action reasonably necessary to address an imminent or
substantial threat to human health or the environment. In initiating and
conducting such investigation and taking such Remedial Action, Buyer shall act
in a commercially reasonable manner, taking into consideration all of the
relevant facts and circumstances. If Buyer reasonably concludes that the
potential for indemnity from Sellers under this Article 10 exists with respect
any conditions discovered, even if the Buyer Deductible has not been satisfied,
Buyer shall promptly notify Sellers in writing, provide all relevant, available,
non-privileged information to Sellers, and provide Sellers with the opportunity
to assume the role of Lead Party in connection with such Pre-Closing
Environmental Liability. If Sellers decline to assume such role, or fails to
respond to the notice within a reasonable time (in any case not to exceed 30
days from receipt of the notice), then Buyer shall be the Lead Party in
directing the Remedial Action. With respect to all Pre-Closing Environmental
Liabilities, once a remedy has been selected and approved by the relevant
Governmental Authority or Governmental Authorities, Buyer shall have the right,
but not the obligation, upon written notice to Sellers, to assume the role of
Lead Party in connection with implementing the Remedial Action. All actions
taken by Sellers and Buyer under this Section 10.03(c) shall be in conformance
with the cooperation requirements of Section 10.03(f) and the Remedial Action
Procedures of Section 10.03(e).
(d) Sellers shall be the Lead Party in directing Remedial
Action in connection with Special Pre-Closing Environmental Liabilities, subject
to the duty to cooperate with Buyer as the Non-Lead Party as set forth in
Section 10.03(f) below, and to the remainder of this
58
Section. With respect to all Special Pre-Closing Environmental Liabilities, once
a remedy has been selected and approved by the relevant Governmental Authority
or Governmental Authorities, Buyer shall have the right, but not the obligation,
upon written notice to Sellers, to assume the role of Lead Party in connection
with implementing the Remedial Action.
(e) In the event sampling conducted with regard to any
Pre-Closing Environmental Liability or Special Pre-Closing Environmental
Liability discloses any Hazardous Substance in excess of applicable, relevant
and appropriate standards established pursuant to applicable Environmental Law,
the parties, jointly, shall reasonably determine if the conditions disclosed
must be reported to a Governmental Authority with jurisdiction over such matter.
If such reporting is required, the parties shall attempt to have the data and
potential need for Remedial Action assessed pursuant to the applicable state's
voluntary cleanup program ("VCP") or similar program, if reasonably available.
If the VCP is available, the Lead Party shall make reasonable attempts to have
both Buyer and Sellers named as "released" persons by the Governmental
Authority. If a VCP or similar program is unavailable or inappropriate for the
conditions in question, the Lead Party shall develop and implement a Remedial
Action program designed to attain applicable no further action ("NFA") criteria.
In all cases, the Lead Party shall undertake all Remedial Action diligently and
in good faith and shall seek a remedy in connection with all Pre-Closing
Environmental Liabilities and Special Pre-Closing Environmental Liabilities that
(i) complies with applicable Environmental Law, including the requirements of
Governmental Authorities with jurisdiction over the Remedial Action and
following reasonable opportunity to negotiate the selected remedy with the
Governmental Authority and without conduct of delaying litigation; (ii) is
cost-effective, provided that a Remedial Action required by or ultimately
negotiated with a Governmental Authority shall be deemed to be cost-effective;
(iii) does not unreasonably interfere with Buyer's use of the property for the
purpose extant at the time of Closing or operation of the Business; and (iv)
reasonably addresses risk to human health and the environment ((i)-(iv) and the
use of VCP being collectively referred to herein as the "Remedy Criteria").
(f) In connection with all Remedial Action related to either
Pre-Closing Environmental Conditions or Special Pre-Closing Environmental
Conditions, the Lead Party and the Non-Lead Party shall cooperate with each
other reasonably and in good faith. Such cooperation shall include, without
limitation, the following: (i) timely sharing of relevant, non-privileged
information; (ii) providing a reasonable opportunity for joint inspection of
site work; (iii) sharing samples intended for analysis, when reasonably
requested; (iv) providing a reasonable opportunity for review and comment, and
reasonably and in good faith accepting comments, on draft proposed requests for
proposals, contracts, scopes of work, work plans, correspondence, reports,
summaries, position papers, and other similar documents; and (v) providing
reasonable notice and opportunity to participate in meetings and teleconferences
with Governmental Authorities. Subject to the other provisions of this Section
10.03, the Non-Lead Party shall not unilaterally conduct negotiations with the
Governmental Authority or Authorities overseeing Remedial Action or otherwise
circumvent the Lead Party's communications with the Governmental Authority.
Additionally, where Sellers are the Lead Party, they shall not enter Buyer's
property without reasonable prior notice to Buyer and without the prior approval
of Buyer, which approval shall not be unreasonably withheld. Buyer shall not be
deemed unreasonable in denying access to its property if Buyer concludes, in its
sole discretion, that such access will unreasonably interfere with Buyer's
operation of the Business. Under no
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circumstances shall this duty to cooperate require any person to take any action
that could reasonably be expected to violate Environmental Law or to refrain
from taking any action that could reasonably be expected to be required by
Environmental Law. Finally, the parties shall also cooperate in seeking coverage
under the Environmental Insurance Policy and any other policies of insurance
held currently or historically by the Transferred Companies with regard to any
Claims or Remedial Action. During the Indemnity Period, Sellers shall be the
Lead Party for purposes of communication and negotiation with the Environmental
Insurance carrier.
(g) A Remedial Action shall be deemed complete under this
Agreement when it satisfies the Remedy Criteria and the Governmental Authority
or Governmental Authorities with jurisdiction over the Remedial Action provide
reasonably satisfactory written confirmation that no further Remedial Action is
required (a "No Further Action Determination") or when the parties otherwise
agree. In the absence of an NFA termination, if one party hereto asserts in
writing that a Remedial Action is complete and the other party opposes that
conclusion within thirty (30) days of said notice, the parties will have a
period of sixty (60) days to amicably resolve the dispute. If resolution is not
achieved within that 60-day period, either party may submit the matter to
arbitration pursuant to the provisions of Section 10.03(l) (the "Dispute
Resolution Procedure").
(h) Sellers, at their expense, shall develop detailed work
plans reasonably satisfactory to Buyer for further environmental investigation
in connection with the Special Pre-Closing Environmental Conditions. With
respect to the Bucks County, Pennsylvania facility, Sellers shall (i) finalize
such work plan prior to Closing and (ii) commence implementation of such work
plan promptly after Closing as the Lead Party subject to the duty to cooperate
with Buyer as set forth in Section 10.03(f) and the other requirements of this
Section. With respect to the El Dorado, Arkansas facility, Sellers shall (i)
finalize such work plan prior to Closing, (ii) begin to implement such work plan
prior to Closing in a manner consistent with the duty to cooperate set forth in
Section 10.03(f), and (iii) report the results of their further investigation to
the relevant Governmental Authorities, in each case, in a manner consistent with
the duty to cooperate set forth in Section 10.03(f).
(i) Parent and Sellers jointly and severally agree to pay
Buyer any amounts owed to Buyer under this Article 10 within 30 days after
receipt of an invoice from Buyer identifying such costs in reasonable detail,
unless Parent and Sellers object to the amount, basis or other matters
associated with such invoice. Parents and Sellers shall provide Buyer with
written notice of any such invoice objection within fifteen (15) days of receipt
of said invoice. In the event the parties cannot resolve such payment dispute
within a reasonable period, either party, upon ten (10) days' written notice to
the other may refer the matter to resolution via binding arbitration pursuant to
the Dispute Resolution Procedure.
(j) At Closing, Sellers shall fund $5,000,000.00 (the
"Environmental Escrow Funds") into an interest-bearing, environmental escrow
account (the "Environmental Escrow Account") pursuant to an escrow agreement
substantially in the form of Exhibit M attached hereto, for the purposes of
securing Remedial Action obligations associated with the Special Pre-Closing
Environmental Liabilities. The Environmental Escrow Funds will remain in the
Environmental Escrow Account until Remedial Action in connection with the
Special Pre-Closing Environmental Conditions is complete, unless otherwise
agreed to by the parties or
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ordered by a court of competent jurisdiction. With respect to a Special
Pre-Closing Environmental Liability, Remedial Action will be deemed complete
when such Remedial Action satisfies the Remedy Criteria and the Governmental
Authority or Governmental Authorities with jurisdiction over the Remedial Action
provide a No Further Action Determination or the parties otherwise agree and
subject to the Dispute Resolution Procedure. When Remedial Action in connection
with the Bucks County, Pennsylvania facility is complete, Sellers and Buyer
shall jointly instruct the escrow agent to release Environmental Escrow Funds in
the amount of $1,500,000.00 to Sellers. When Remedial Action in connection with
the El Dorado, Arkansas facility is complete, Sellers and Buyer shall jointly
instruct the escrow agent to release Environmental Escrow Funds in the amount of
$3,500,000.00 to Sellers. When all Remedial Action in connection with Special
Pre-Closing Environmental Conditions is complete and any Environmental Escrow
Funds to which Buyer is entitled have been released to Buyer, then the parties
shall jointly instruct the escrow agent to release any balance in the
Environmental Escrow Account to Sellers.
(k) Notwithstanding the provisions of Section 12.04, Buyer
shall have the right to assign its rights and obligations under this Article 10
and the Environmental Escrow Agreement, in whole or in part, to any of the
Transferred Companies or to any purchaser of all or substantially all of the
assets of the Business or any Transferred Company on the condition that the
assignee accepts, in writing, all rights, conditions and obligations imposed or
inuring to Buyer under this Article 10.
(l) Notwithstanding anything herein to the contrary, in the
event that there shall be a dispute among the parties arising out of or relating
to this Section 10.03, including without limitation the indemnities provided
herein, the parties agree that such dispute shall be resolved by final and
binding arbitration in New York, New York administered by Judicial Arbitration &
Mediation Services, Inc. ("JAMS"), in accordance with JAMS' rules of practice
then in effect. Depositions may be taken and other discovery may be obtained
during such arbitration proceedings to the same extent as authorized in civil
judicial proceedings. Any award issued as a result of such arbitration shall be
final and binding between the parties thereto, and shall be enforceable by any
court having jurisdiction over the party against whom enforcement is sought. The
fees and expenses of such arbitration (including reasonable attorneys' fees) or
any action to enforce an arbitration award shall be allocated by the arbitrator.
(m) Subject to Section 10.03(a)(iv), the parties hereby
acknowledge that the provisions of this Section 10.03 shall survive the Closing
indefinitely.
Section 10.04 Procedures.
(a) The party seeking indemnification under Section 10.02 or
Section 10.03 (the "Indemnified Party") agrees to give prompt written notice,
but no later than 5 days after receipt thereof, to the party against whom
indemnity is sought (the "Indemnifying Party") of the assertion of any claim, or
the commencement of any suit, action or proceeding ("Claim") in respect of which
indemnity may be sought under such Section and will provide the Indemnifying
Party such information with respect thereto that the Indemnifying Party may
reasonably request.
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(b) The Indemnifying Party shall be entitled to participate in
the defense of, investigation of, or corrective action required to be undertaken
in response to, any Claim asserted by a third party, including any Governmental
Authority ("Third Party Claim") and, subject to the limitations set forth in
this Section or Section 10.03, shall be entitled to control and appoint lead
counsel for such defense, in each case at its expense subject to the deductible
and maximum liability described in Section 10.02 and Section 10.03, as
applicable.
(c) If the Indemnifying Party shall assume the control of the
defense of any Third Party Claim in accordance with the provisions of this
Section or Section 10.03, (i) the Indemnifying Party shall obtain the prior
written consent of the Indemnified Party (which shall not be unreasonably
withheld) before entering into any settlement of such Third Party Claim if the
settlement does not release the Indemnified Party from all liabilities and
obligations with respect to such Third Party Claim or if the settlement imposes
injunctive or other equitable relief against the Indemnified Party and (ii) the
Indemnified Party shall be entitled to participate in the defense of such Third
Party Claim and to employ separate counsel of its choice for such purpose. The
fees and expenses of such separate counsel shall be paid by the Indemnified
Party.
(d) Each party shall cooperate, and cause their respective
Affiliates to cooperate, in the defense or prosecution of any Third Party Claim
(including any counterclaims filed by Sellers) and shall provide access to
properties and individuals as reasonably requested and furnish or cause to be
furnished records, information and testimony, and attend such conferences,
discovery proceedings, hearings, trials or appeals, as may be reasonably
requested in connection therewith. This cooperation shall be provided without
cost or expense other than reimbursement of out-of-pocket travel or similar
expenses subject to the provisions of Section 10.02 and Section 10.03, as
applicable.
(e) Other than with respect to liabilities relating to matters
covered by Section 7.07(a) (which shall be governed solely by Section 7.07), if
the Indemnifying Party is required to indemnify the Indemnified Party with
respect to any Claim or assumes the defense of any Third Party Claim under
Section 10.02 or Section 10.03, the Indemnifying Party shall have the right, in
good faith, to determine all matters relating to the utilization of any
insurance policy of any Transferred Company in connection with the Claim or
Third Party Claim and shall be entitled to control all decisions relating to
such claims under such insurance policies as if it were the named insured
thereunder; provided, however, that notwithstanding anything in this 10.04(e) to
the contrary, the Indemnified Party shall entitled to indemnification pursuant
to the provisions of Section 10.02 or Section 10.03 regardless of whether a
claim under such insurance policies is pursued and regardless of whether any
proceeds from such claim are collected. Buyer and Parent agree to cooperate and
take all reasonable actions necessary to implement the intent of the provisions
set forth in this clause (e), and each Indemnified Party further agrees that it
will not take any action that is inconsistent with the provisions of this clause
(e) and will refrain from taking any action or doing anything that would
undermine the insurance benefits available to Indemnifying Party as contemplated
by this Section 10.04(e).
(f) To the extent that the procedures set forth in this
Section 10.04 conflict with the procedures set forth in Section 10.03, the
procedures set forth in Section 10.03 shall govern.
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Section 10.05 Calculation of Damages(a) . (a) The amount of any Damages
payable under Section 10.02 or Section 10.03 by the Indemnifying Party shall be
net of any amounts recovered or recoverable by the Indemnified Party under
applicable insurance policies (including any deductibles) or from any other
Person alleged to be responsible therefor. If the Indemnified Party receives any
amounts under applicable insurance policies, or from any other Person alleged to
be responsible for any Damages, subsequent to an indemnification payment by the
Indemnifying Party, then such Indemnified Party shall promptly reimburse the
Indemnifying Party for any payment made or expense incurred by such Indemnifying
Party in connection with providing such indemnification payment up to the amount
received by the Indemnified Party, net of any expenses incurred by such
Indemnified Party in collecting such amount.
(b) The Indemnifying Party shall not be liable under Section
10.02(a) for any Damages relating to any matter (A) that is included in the
Closing Balance Sheet as a specific liability or reserve to the extent that such
liability or reserve reflects the Damages relating to such matter or (B) the
Indemnified Party had otherwise been compensated for such matter pursuant to the
Purchase Price adjustment under Section 2.04 to the extent such Damages relate
to such matter.
Section 10.06 Assignment of Claims. If the Indemnified Party receives
any payment from an Indemnifying Party in respect of any Damages pursuant to
Section 10.02 or Section 10.03 and the Indemnified Party could have recovered
all or a part of such Damages from a third party (a "Potential Contributor")
based on the underlying Claim asserted against the Indemnifying Party, the
Indemnified Party shall assign such of its rights to proceed against the
Potential Contributor as are necessary to permit the Indemnifying Party to
recover from the Potential Contributor the amount of such payment.
Section 10.07 Exclusivity. Other than the rights of Buyer under this
Agreement, the Tax Sharing Agreement and any agreement contemplated herein or
therein, Buyer waives any rights and claims it may have against Sellers whether
in law or in equity, relating to the Transferred Companies or the Shares, the
Canadian Business, the Purchased Assets or the Excluded Liabilities or the
transactions contemplated hereby, except for claims sounding in fraud. After the
Closing, this Agreement, the Tax Sharing and any agreement contemplated herein
or therein will provide the exclusive remedy for any misrepresentation, breach
of warranty, covenant or other agreement or other claim arising out of this
Agreement or the transactions contemplated hereby. No party shall be entitled to
seek, and to the fullest extent permitted by applicable Law, the parties hereto
waive, any rights they might otherwise have to rescind the sale and purchase of
the Shares and the Purchased Assets.
ARTICLE 11.
TERMINATION
Section 11.01 Grounds for Termination. This Agreement may be terminated
at any time prior to the Closing:
(a) by mutual written agreement of US Seller and Buyer;
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(b) by either US Seller or Buyer if the Closing shall not have
been consummated on or before June 15, 2002; provided, however, that
the terminating party may not exercise this right if it or any of its
Affiliates is in breach of its obligations under this Agreement; or
(c) by either US Seller or Buyer if consummation of the
transactions contemplated hereby would violate any nonappealable final
order, decree or judgment of any court or Governmental Authority having
competent jurisdiction.
The party desiring to terminate this Agreement pursuant to
Sections 11.01(b) or 11.01(c) shall give notice of such termination to the other
party. If this Agreement is terminated as provided herein:
(i) upon written request therefor, Buyer will
redeliver to Sellers all documents, work papers and other
material of Sellers, the Transferred Companies, relating to
the transactions contemplated hereby, whether obtained before
or after the execution hereof; and
(ii) all filings, applications and other submissions
made shall, to the extent practicable, be withdrawn from the
agency or other person to which made.
Section 11.02 Effect of Termination. If this Agreement is terminated as
permitted by Section 11.01, such termination shall be without liability of
either party (or any stockholder, director, officer, employee, agent, consultant
or representative of such party) to the other party to this Agreement; provided
that if such termination shall result from the willful (i) failure of either
Buyer or Sellers to fulfill a condition to the performance of the obligations of
the other party, (ii) failure to perform a covenant of this Agreement or (iii)
breach by either Buyer or Sellers hereto of any representation or warranty
contained herein, such party shall be fully liable for any and all Damages
incurred or suffered by the other party as a result of such failure or breach.
The provisions of Section 11.02 and Article 12 shall survive any termination
hereof pursuant to Section 11.01.
ARTICLE 12.
MISCELLANEOUS
Section 12.01 Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given as follows or to such address as the party may specify,
if to Buyer, to:
Xxxxxxx Incorporated
000 Xxxxx Xxxxxxx Xxxx
X.X. Xxx 000
Xxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Vice President, General Counsel and Secretary
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Fax: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: R. Xxxxxx Xxxxxxxxx
Fax: (000) 000-0000
if to Parent and Sellers, to:
c/o U.S. Industries, Inc.
000 Xxxx Xxxxxx Xxxxx
X.X. Xxx 000
Xxxxxx, XX 00000-0000
Attention: General Counsel
Fax: (000) 000-0000
with a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxx
Fax: (000) 000-0000
All such notices, requests and other communications shall be
deemed received on the date of receipt by the recipient thereof if received
prior to 5 p.m. in the place of receipt and such day is a business day in the
place of receipt. Otherwise, any such notice, request or communication shall be
deemed not to have been received until the next succeeding business day in the
place of receipt.
Section 12.02 Amendments and Waivers(a) . (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by US Seller and Buyer,
or in the case of a waiver, by the party against whom the waiver is to be
effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
Section 12.03 Expenses. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.
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Section 12.04 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that Sellers and Buyer,
respectively, may not assign, delegate or otherwise transfer any of its rights
or obligations under this Agreement without the consent (which consent shall not
be unreasonably withheld) of Buyer or US Seller; provided, further, that Buyer
may without the prior written consent of Sellers (a) assign its rights hereunder
to any lender providing financing in connection with the transactions
contemplated hereby and hereunder as collateral security or (b) assign its
rights and obligations hereunder in whole or in part to one or more Affiliates
of Buyer which shall assume Buyer's obligations and liabilities hereunder,
provided that in each case Buyer shall remain liable for all obligations of
Buyer hereunder.
Section 12.05 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York.
Section 12.06 Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby shall be
brought in the United States District Court for the Southern District of New
York (or if such action cannot be brought therein, in any New York State court
sitting in New York City), so long as such courts shall have subject matter
jurisdiction over such suit, action or proceeding, and that any cause of action
arising out of this Agreement shall be deemed to have arisen from a transaction
of business in the State of New York. Each of the parties hereby irrevocably
consents to the jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and irrevocably waives,
to the fullest extent permitted by law, any objection that it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
in any such court or that any such suit, action or proceeding which is brought
in any such court has been brought in an inconvenient forum. Process in any such
suit, action or proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court. Without limiting
the foregoing, each party agrees that service of process on such party as
provided in Section 12.01 shall be deemed effective service of process on such
party.
Section 12.07 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 12.08 Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other parties hereto. No
provision of this Agreement is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.
Section 12.09 Entire Agreement. This Agreement, the Tax Sharing
Agreement, the Escrow Agreement and the Confidentiality Agreement (a) constitute
the entire agreement between the parties with respect to the subject matter of
this Agreement and supersede all prior
66
agreements and understandings, both oral and written, between the parties with
respect to the subject matter of this Agreement, and (b) except as provided
herein, are not intended to confer upon any Person other than the parties hereto
any rights or remedies hereunder (it being explicitly understood that nothing in
this Agreement shall confer any such third party beneficiary rights upon any
current or former employee of the Transferred Companies or their Affiliates).
The Confidentiality Agreement shall remain in full force and effect after the
execution hereof.
Section 12.10 Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
Section 12.11 Disclosure Schedules. The parties acknowledge and agree
that (i) the disclosure schedules ("Schedules") attached to this Agreement may
include certain items and information solely for informational purposes for the
convenience of Buyer and (ii) the disclosure by Sellers of any matter in the
Schedules shall not be deemed to constitute an acknowledgment by Sellers that
the matter is required to be disclosed by the terms of this Agreement or that
the matter is material. If any Schedule discloses an item or information in such
a way as to make its relevance to the disclosure required by another Schedule
readily apparent, the matter shall be deemed to have been disclosed in such
other Schedule, notwithstanding the omission of an appropriate cross-reference
to such other Schedule.
Section 12.12 Tax Sharing. This Agreement and the Tax Sharing Agreement
shall be the only tax sharing agreement relating to any Company, any Subsidiary
or the Canadian Business.
Section 12.13 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 12.14 Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement, each
non-breaching party would be irreparably and immediately harmed and could not be
made whole by monetary damages. It is accordingly agreed that the parties hereto
(a) will waive, in any action for specific performance, the defense of adequacy
of a remedy at law and (b) shall be entitled, in addition to any other remedy to
which they may be entitled at law or in equity, to compel specific performance
of this Agreement in any action instituted in accordance with Section 12.06
hereof.
Section 12.15 Currency. All references in this Agreement to dollars
unless otherwise specifically indicated, are expressed in United States
currency.
Section 12.16 English Language. The parties confirm that it is their
wish that this Agreement as well as any other document relating hereto,
including notices, have been and shall be drawn up in English only. Les Parties
aux presentes confirment qu'il est de leur intention que cette convention ainsi
que tout autre document s'y rapportant incluant xxx xxxx, soient rediges en
langue anglaise seulement.
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Section 12.17 Bulk Sales Laws. The parties hereby waive compliance with
the provisions of the "bulk sales law" or similar provisions of law of any
jurisdiction insofar as the same may be applicable to the transactions
contemplated by this Agreement ("Bulk Sales Laws"). The Parent and Sellers
jointly and severally agree to (a) pay all amounts due to its creditors that
have accrued on or before the Closing Date in connection with or in any way
relating to the Canadian Business, and (b) subject to the terms and conditions
in Section 10.02(a), indemnify the Buyer against all claims of creditors
asserted against the Buyer by reason of its non-compliance with any Bulk Sales
Laws, except to the extent that such claims arise due to the failure of Buyer
(or the Transferred Companies after the Closing) to discharge the Assumed
Liabilities.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
U.S. INDUSTRIES, INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President,
General Counsel and Secretary
JUSI HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President
USI CANADA INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President
XXXXXXX INCORPORATED
By: /s/ Xxxxx X. Xxxxx
-----------------------------------------------
Name: Xxxxx X. Xxxxx
Title: Vice President,
Corporate Planning & Development
