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STOCK PURCHASE AGREEMENT
AMONG
THE XXXXXXX COMPANY, INC.,
AS SELLER,
XXXXX PLC,
AS GUARANTOR,
AND
RANCO INCORPORATED OF DELAWARE,
AS BUYER
DATED AS OF FEBRUARY 18, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I PURCHASE AND SALE
Section 1.1 Purchase and Sale of Shares . . . . . . . . . . . . . . . . 2
Section 1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Deliveries at Closing . . . . . . . . . . . . . . . . . . . 3
Section 1.4 Purchase Price Adjustment . . . . . . . . . . . . . . . . . 4
Section 1.5 Intercompany Accounts . . . . . . . . . . . . . . . . . . . 9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER
Section 2.1 Organization and Qualification. . . . . . . . . . . . . . . 9
Section 2.2 Authority Relative to This Agreement. . . . . . . . . . . . 11
Section 2.3 Capitalization; Title . . . . . . . . . . . . . . . . . . . 12
Section 2.4 Consents and Approvals; No Violation. . . . . . . . . . . . 14
Section 2.5 Financial Statements. . . . . . . . . . . . . . . . . . . . 16
Section 2.6 Assets Necessary to Business. . . . . . . . . . . . . . . . 18
Section 2.7 Title to Properties; Encumbrances . . . . . . . . . . . . . 18
Section 2.8 Contracts and Commitments . . . . . . . . . . . . . . . . . 20
Section 2.9 Absence of Certain Changes or Events. . . . . . . . . . . . 24
Section 2.10 Absence of Litigation . . . . . . . . . . . . . . . . . . . 24
Section 2.11 Intellectual Property . . . . . . . . . . . . . . . . . . . 25
Section 2.12 ERISA Compliance. . . . . . . . . . . . . . . . . . . . . . 27
Section 2.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.14 Environmental Matters . . . . . . . . . . . . . . . . . . . 33
Section 2.15 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . 35
Section 2.16 Transactions with Affiliates. . . . . . . . . . . . . . . . 36
Section 2.17 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 2.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 2.19 Labor Difficulties. . . . . . . . . . . . . . . . . . . . . 37
Section 2.20 Compliance with Laws. . . . . . . . . . . . . . . . . . . . 38
Section 2.21 Customer Accounts Receivable; Inventories . . . . . . . . . 39
Section 2.22 Information . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER AND GUARANTOR
Section 3.1 Organization and Qualification. . . . . . . . . . . . . . . 41
Section 3.2 Authority Relative to This Agreement. . . . . . . . . . . . 41
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Section 3.3 Consents and Approvals; No Violation. . . . . . . . . . . . 42
Section 3.4 Financing . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 3.5 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 3.6 No Representation Regarding Future Prospects. . . . . . . . 44
Section 3.7 Investment. . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 3.8 Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE IV COVENANTS OF THE PARTIES
Section 4.1 Conduct of the Business . . . . . . . . . . . . . . . . . . 45
Section 4.2 HSR Act Compliance. . . . . . . . . . . . . . . . . . . . . 49
Section 4.3 Post-Closing Collections. . . . . . . . . . . . . . . . . . 49
Section 4.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.5 Severance Arrangements. . . . . . . . . . . . . . . . . . . 50
Section 4.6 Public Announcements. . . . . . . . . . . . . . . . . . . . 51
Section 4.7 Transaction Costs . . . . . . . . . . . . . . . . . . . . . 52
Section 4.8 Further Assurances. . . . . . . . . . . . . . . . . . . . . 52
Section 4.9 Product Liability . . . . . . . . . . . . . . . . . . . . . 52
Section 4.10 Use of Name . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 4.11 Books and Records . . . . . . . . . . . . . . . . . . . . . 55
Section 4.12 Transfer of Nominee Share . . . . . . . . . . . . . . . . . 57
ARTICLE V CERTAIN EMPLOYEE AND BENEFIT MATTERS
Section 5.1 Continued Employment; Service Credit. . . . . . . . . . . . 57
Section 5.2 Continuation of Benefits. . . . . . . . . . . . . . . . . . 59
Section 5.3 Severance Pay . . . . . . . . . . . . . . . . . . . . . . . 59
Section 5.4 Indemnification of Buyer for Plans Not Assumed. . . . . . . 61
Section 5.5 Company Defined Contribution Plan . . . . . . . . . . . . . 61
ARTICLE VI TAXES
Section 6.1 Tax Indemnification . . . . . . . . . . . . . . . . . . . . 62
Section 6.2 Procedures Relating to Indemnification of Tax Claims. . . . 65
Section 6.3 Section 338(h)(10) Election . . . . . . . . . . . . . . . . 69
Section 6.4 Survival of Tax Provisions. . . . . . . . . . . . . . . . . 73
Section 6.5 Return Filings, Refunds and Credits . . . . . . . . . . . . 73
Section 6.6 Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . 80
Section 6.7 Termination of Tax Sharing Agreements . . . . . . . . . . . 80
Section 6.8 Disputes. . . . . . . . . . . . . . . . . . . . . . . . . . 80
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Section 6.9 Determination and Characterization of Payments. . . . . . . 81
ARTICLE VII CONDITIONS TO CLOSING
Section 7.1 Conditions to the Obligations of All Parties. . . . . . . . 82
Section 7.2 Conditions to the Obligations of Seller . . . . . . . . . . 83
Section 7.3 Conditions to the Obligations of Buyer. . . . . . . . . . . 84
ARTICLE VIII TERMINATION
Section 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . 85
ARTICLE IX INDEMNIFICATION
Section 9.1 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 9.2 Indemnification by Seller . . . . . . . . . . . . . . . . . 87
Section 9.3 Indemnification by Buyer. . . . . . . . . . . . . . . . . . 88
Section 9.4 Limitations of Claims . . . . . . . . . . . . . . . . . . . 88
Section 9.5 Procedures. . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 9.6 Exclusivity of Remedies . . . . . . . . . . . . . . . . . . 97
ARTICLE X MISCELLANEOUS PROVISIONS
Section 10.1 Disclosure Schedules; Exhibits . . . . . . . . . . . . . . 98
Section 10.2 Amendment and Modification . . . . . . . . . . . . . . . . 99
Section 10.3 Waiver of Compliance . . . . . . . . . . . . . . . . . . . 99
Section 10.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 10.5 Parties in Interest; Assignment. . . . . . . . . . . . . .102
Section 10.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . .102
Section 10.7 Construction; Interpretation . . . . . . . . . . . . . . .103
Section 10.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . .104
Section 10.9 Severability . . . . . . . . . . . . . . . . . . . . . . .104
Section 10.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . .105
Section 10.11 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . .105
EXHIBIT A License Agreement
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Index of Defined Terms
DEFINED TERM WHERE DEFINED
Adjusted GAAP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4(b)
Affected Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 5.1
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause
Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.3(b)
appropriate Seller or Company personnel. . . . . . . . . . . . . . . .Section 10.7(b)
Article. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 10.7(c)
Auditor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4(d)
Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 1.2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 1.2
Closing Statement of Company Business Net Worth. . . . . . . . . . . . Section 1.4(b)
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.12(a)
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause
Company Business Net Worth . . . . . . . . . . . . . . . . . . . . . . Section 1.4(a)
Company DC Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 5.5
Company Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . Section 2.12
Company ERISA Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . Section 2.12
Confidentiality Agreement. . . . . . . . . . . . . . . . . . . . . . . . .Section 8.2
Confidential Memorandum. . . . . . . . . . . . . . . . . . . . . . . . . .Section 3.6
December 31, 1996 Financial Statements . . . . . . . . . . . . . . . . Section 2.5(a)
December 31, 1997 Statement of Company Business Net Worth. . . . . . . Section 2.5(a)
December 31, 1997 Financial Statements . . . . . . . . . . . . . . . . Section 2.5(a)
Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4(a)
Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 4.11(a)
Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.1(a)
Employment Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 5.3
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.14
Environmental Permits. . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.14
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.12
Estimated Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4(a)
Executive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 4.5
Exhibit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 10.7(c)
Finder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 3.5
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4(b)
Governmental Entity. . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.4
Guarantor. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause
iv
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.4
Indemnified Party. . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.5(a)
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.5(a)
Indemnity Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.4(d)
Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.11
Intercompany Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . .Section 1.5
knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 10.7(b)
License Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3(a)
Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.3
Limitations Period . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 9.1
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 9.2
Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.1
Nominee Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.3(c)
Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.5(a)
Permitted Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.7
Pre-Closing Tax Period . . . . . . . . . . . . . . . . . . . . . . . . Section 6.1(a)
Predecessor Policies . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.9(c)
Private Placement Notes. . . . . . . . . . . . . . . . . . . . . . . . Section 2.3(a)
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 1.1
Retention Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 4.5
Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 10.7(c)
Section. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 10.7(c)
Section 338 Statement. . . . . . . . . . . . . . . . . . . . . . . . . Section 6.3(b)
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause
Seller Credit Agreement. . . . . . . . . . . . . . . . . . . . . . . . Section 2.3(a)
Seller DC Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 5.5
Seller Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.16
Separate Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.5(a)
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause
Straddle Period . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.1(c)
subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.1
Tax Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.4(d)
Tax Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(a)
Tax Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(a)
Tax Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(a)
Tax Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(a)
Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.13(h)
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.13(h)
Taxing Authority . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.13(h)
Third Party Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.5(a)
Year 2000 Compliant. . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 3.8
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of February 18, 1998 (the
"Agreement"), among The Xxxxxxx Company, Inc., a Delaware corporation
("Seller"), Xxxxx plc, an English corporation ("Guarantor"), and Ranco
Incorporated of Delaware, a Delaware corporation and a wholly-owned
subsidiary of Guarantor ("Buyer").
WHEREAS, Seller owns all of the issued and outstanding shares (the
"Shares") of common stock, par value $1.00 per share (the "Common Stock"), of
Xxxxxxx Safety & Security Products, Inc., a Delaware corporation (the
"Company"), which, together with its subsidiaries, engages in designing,
manufacturing, marketing and selling smoke alarms and carbon monoxide alarms
which it markets to home builders and remodelers principally via the
electrical wholesale distribution channel and to individual consumers via
retail distribution channels and a broad range of other electronic products
for residential homes and commercial buildings, including electronic
and mechanical thermostats and duct smoke detectors; and
WHEREAS, Seller desires to sell and transfer to Buyer, and Buyer
desires to purchase and accept from Seller, all of the Shares;
NOW, THEREFORE, in consideration of the foregoing and the agreements
set forth herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
Section 1.1 PURCHASE AND SALE OF SHARES. Upon the terms and
subject to the conditions set forth in this Agreement, at the Closing (as
hereinafter defined) Seller shall sell, assign and transfer to Buyer, and
Buyer shall purchase and accept from Seller, the Shares for an aggregate
purchase price of $105,000,000 in immediately available funds, adjusted as
provided in Sections 1.4(a) and (e) hereof (the "Purchase Price").
Section 1.2 CLOSING. Upon the terms and
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subject to the conditions of this Agreement, the closing with respect to the
transactions provided for herein (the "Closing") shall take place at the
offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx on the fifth business day following the satisfaction or waiver
of all of the conditions to each party's obligations to close hereunder,
other than those conditions which can only be satisfied at the Closing or
such other date as the parties shall agree (the "Closing Date").
Section 1.3 DELIVERIES AT CLOSING. (a) At the Closing, Seller shall
deliver to Buyer:
(i) a certificate or certificates representing all of the
Shares, endorsed in blank or accompanied by stock powers executed in blank
and any other instruments necessary to transfer to Buyer good and marketable
title to such Shares;
(ii) the License Agreement (the "License Agreement") in the form
attached hereto as Exhibit A, duly executed by Seller and the Company;
3
(iii) evidence of the release of the Shares and the Company as a
guarantor under the Seller Credit Agreement (as hereinafter defined) and the
Private Placement Notes (as hereinafter defined); and
(iv) the certificate required by Section 7.3(c) hereof.
(b) At the Closing, Buyer shall deliver to Seller:
(i) the Purchase Price as adjusted pursuant to Section 1.4(a)
hereof, by wire transfer to an account or accounts identified by Seller not
later than three business days prior to the Closing Date;
(ii) the License Agreement, duly executed by Buyer; and
(iii) the certificate required by Section 7.2(c) hereof.
Section 1.4 PURCHASE PRICE ADJUSTMENT. (a) ADJUSTMENT AT CLOSING.
Not later than three business days prior to the Closing, Seller shall deliver
to Buyer a statement of the consolidated tangible net worth of the
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Company and its subsidiaries, adjusted by the accounting adjustments set
forth in Section 1.4(a) of the disclosure schedule delivered by Seller to
Buyer on or prior to the date hereof (the "Disclosure Schedule") (the
"Company Business Net Worth") estimated as of the close of business on the
Closing Date (the "Estimated Net Worth"), determined on a basis consistent
with that used for the December 31, 1997 Statement of Company Business Net
Worth (as hereinafter defined), accompanied by a certificate of the Chief
Financial Officer of Seller to the effect that such estimate represents a
good faith estimate of the Estimated Net Worth in accordance with this
Agreement. At the Closing, (i) if the Estimated Net Worth exceeds the
Company Business Net Worth as of December 31, 1997, the Purchase Price shall
be increased by the amount of such excess and (ii) if the Estimated Net Worth
is less than the Company Business Net Worth as of December 31, 1997, the
Purchase Price shall be decreased by the amount of such deficit; provided
that the amount to be paid by Buyer at the Closing shall not exceed
$105,000,000.
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(b) CLOSING STATEMENT OF COMPANY BUSINESS NET WORTH. As promptly
as practicable, but in any event not later than 60 days after the Closing,
Seller shall cause to be prepared and delivered to Buyer an audited
consolidated statement of Company Business Net Worth and the notes thereto as
of the Closing Date (the "Closing Statement of Company Business Net Worth")
determined in accordance with Adjusted GAAP (as hereinafter defined) applied
on a basis consistent with the December 31, 1997 Statement of Company
Business Net Worth. The Closing Statement of Company Business Net Worth
delivered pursuant to this Section 1.4(b) shall be accompanied by a
special-purpose report of Ernst & Young LLP to the effect that such statement
and any related notes thereto were prepared in accordance with Adjusted GAAP.
"Adjusted GAAP" shall mean United States generally accepted accounting
principles in effect on the date hereof ("GAAP") applied on a basis
consistent with the December 31, 1997 Statement of Company Business Net
Worth, as adjusted by the accounting adjustments in Section 1.4(a) of the
Disclo-
6
sure Schedule.
(c) COOPERATION BY BUYER. Buyer shall make available to Seller and
its representatives (at no cost to Seller) such books, records and employees
of Buyer, the Company or any of the Company's subsidiaries as may be
necessary for Seller's preparation of the Closing Statement of Company
Business Net Worth. Buyer and its representatives shall have the right to
observe any inventory count and, after the delivery of the Closing Statement
of Company Business Net Worth pursuant to Section 1.4(b) above, to review the
work papers, schedules, memoranda and other documents and information
prepared or reviewed by Seller and to communicate with the persons who
conducted such preparation, review or count.
(d) DISPUTE RESOLUTION. Within 45 days after the delivery of the
Closing Statement of Company Business Net Worth to Buyer, Buyer shall notify
Seller of any objections to the Closing Statement of Company Business Net
Worth, specifying in reasonable detail any such
7
objections, and if Buyer fails to notify Seller of any objections within such
period, Buyer shall be deemed to have agreed to the Closing Statement of
Company Business Net Worth as prepared by Seller. If Buyer has no objections
or if Seller and Buyer agree on the resolution of all such objections, the
Closing Statement of Company Business Net Worth (with any such changes as may
be agreed) shall be final and binding. Seller and Buyer shall each have the
right, at any time, to unilaterally terminate, in writing, all discussions
with respect to such objections or changes. Not later than 10 business days
after either Seller or Buyer shall have terminated such discussions, all such
disputed items shall be submitted for resolution to a certified public
accounting firm of national standing designated by Seller and Buyer (the
"Auditor"), which Auditor must be independent of and have no ongoing business
relationship with Seller, Buyer or their respective affiliates. Seller and
Buyer shall use reasonable efforts to cause the report of the Auditor to be
rendered within 30 days of its appointment, and the
8
Auditor's determination as to the appropriateness and extent of changes (if
any) to the Closing Statement of Company Business Net Worth shall be final
and binding.
(e) POST-CLOSING NET WORTH ADJUSTMENT.
(i) If the Company Business Net Worth as finally determined
pursuant to subsection (d) of this Section 1.4 is less than the Estimated Net
Worth, the Purchase Price shall be reduced by the amount of such deficit. If
the Company Business Net Worth as finally determined pursuant to subsection
(d) of this Section 1.4 is greater than the Estimated Net Worth, the Purchase
Price shall be increased by the amount of such excess.
(ii) If the Purchase Price, as adjusted pursuant to this
subsection (e), is less than the amount paid by Buyer at the Closing, Seller
shall pay to Buyer, in immediately available funds, the amount of such
deficit with interest from the Closing Date through the date of payment at
the rate of 6% per annum. If the Purchase Price, as adjusted pursuant to
this subsection (e), is greater than the amount paid by Buyer at the Closing,
9
Buyer shall pay to Seller, in immediately available funds, the amount of such
excess with interest from the Closing Date through the date of payment at the
rate of 6% per annum.
(iii) Any sums payable pursuant to this subsection (e) shall
be paid within five business days after the final determination of Company
Business Net Worth pursuant to subsection (d) hereof.
(f) FEES OF AUDITOR. The fees and expenses of the Auditor shall be
shared equally by Seller and Buyer.
Section 1.5 INTERCOMPANY ACCOUNTS. On or prior to the Closing
Date, all intercompany account balances between the Company and Seller or any
of its subsidiaries (as defined below) ("Intercompany Accounts") shall be
cancelled, effective immediately prior to the Closing Date. No adjustment
shall be made to the Purchase Price as a result of any such cancellation,
except to the extent provided in Section 1.4 hereof.
10
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
Section 2.1 ORGANIZATION AND QUALIFICATION. Section 2.1 of the
Disclosure Schedule contains a complete list of each of the subsidiaries of
the Company and jurisdictions in which they and the Company are qualified (to
the extent such concepts are applicable in such jurisdictions) to conduct
their business. Each of the Company and its subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (to the extent such
concepts are applicable in such jurisdictions), has all requisite corporate
power and corporate authority to own, lease and operate its properties and to
carry on its business as now being conducted, and is duly qualified and in
good standing to do business in each jurisdiction in which such concepts are
applicable and the nature of the business conducted by it or the ownership,
lease or operation of its proper-
11
ties makes such qualification necessary, other than where the failure to be
so duly qualified and in good standing have not had, prior to the Closing, a
Material Adverse Effect. (For purposes of this Agreement, "Material Adverse
Effect" means any condition, event, circumstance, change or effect that,
individually or in the aggregate, would result in a material adverse effect
on the business, assets or results of operations of the Company and its
subsidiaries, taken as a whole. A "subsidiary" of any entity means any
corporation, partnership, joint venture or other business entity of which the
specified entity, directly or indirectly, beneficially owns, 50% or more of
the equity interests, or holds the voting control of 50% or more of the
equity interests). Seller has heretofore delivered to Buyer a true and
correct copy of the constituent documents of the Company and each subsidiary
of the Company as in effect on the date hereof.
Section 2.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Seller has full
corporate power and authority to execute and deliver this Agreement and to
consummate the
12
transactions contemplated hereby. The execution of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by Seller and no other corporate proceedings on the part
of Seller (or any other person) are necessary to authorize the execution of
this Agreement by Seller or the consummation by Seller of the transactions
contemplated hereby. This Agreement has been duly and validly executed by
Seller and (assuming the valid execution of this Agreement by Buyer)
constitutes a valid and binding agreement of Seller, enforceable against
Seller in accordance with its terms, except (a) that such enforcement may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and (b) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be
13
brought.
Section 2.3 CAPITALIZATION; TITLE. (a) The authorized capital
stock of the Company consists of 1,000 shares of Common Stock all of which
are issued and outstanding. Each of the Shares has been duly authorized and
validly issued, and is fully paid and non-assessable, and all of the Shares
are owned by Seller, free and clear of any and all liens, encumbrances,
security interests, mortgages, pledges, claims, options or restrictions of
any kind whatsoever ("Liens"). Except as expressly contemplated by this
Agreement and except for the obligations of the Company pursuant to (i) the
Amended and Restated Credit Agreement, dated as of August 3, 1995, among
Seller, certain subsidiaries of Seller named therein, the banks named
therein, as Lenders, and Credit Suisse, as Agent (the "Seller Credit
Agreement") and (ii) the Note Purchase Agreement, dated August 3, 1995,
relating to the 7.26% Senior Notes due 2007, and the Note Purchase Agreement,
dated May 1, 1996, relating to the 7.10% Senior Notes, Series A, due 2006 and
7.25% Senior
14
Notes, Series B, due 2008 (collectively, the "Private Placement Notes"),
which obligations will terminate on or prior to the Closing Date without any
continuing liability or obligation to the Company or any of its subsidiaries
as a result thereof, there is no subscription, option, warrant, call, right,
contract, agreement, commitment, understanding or arrangement of any kind,
direct or indirect, relating to (x) the issuance, purchase, acquisition,
sale, pledge, delivery or transfer of any shares of capital stock of the
Company (including the Shares), including any right of direct or indirect
conversion or exchange under any security or other instrument, or (y) the
voting or control of any such capital stock, security or other instrument
(including the Shares).
(b) Upon consummation of the transactions contemplated by this
Agreement, Buyer will acquire good and marketable title to the Shares, free
and clear of all Liens.
(c) All of the outstanding shares of capital stock, or other equity
interests, of each of the Com-
15
pany's subsidiaries have been duly authorized and validly issued, are fully
paid and non-assessable and are owned by either the Company or another of its
subsidiaries (except for one share of Series A stock of Xxxxxxx Manufacturing
de Mexico, S.A. de C.V., of which an employee of the Seller is the record
owner as nominee of the Company's subsidiary Jasan Products Ltd. (the
"Nominee Share")), free and clear of all Liens. Except as expressly
contemplated by this Agreement and except for the obligations of the Company
with respect to its subsidiaries pursuant to (i) the Seller Credit Agreement
and (ii) the Private Placement Notes, which obligations will terminate on or
prior to the Closing Date without any continuing liability or obligation to
the Company or any of its subsidiaries as a result thereof, there is no
subscription, option, warrant, call, right, contract, agreement, commitment,
understanding or arrangement of any kind, direct or indirect, relating to (x)
the issuance, purchase, acquisition, sale, pledge, delivery or transfer of
any shares of capital stock, or other equity
16
interests, of any of the Company's subsidiaries, including any right of
direct or indirect conversion or exchange under any security or other
instrument, or (y) the voting or control of any such capital stock, security
or other instrument.
Section 2.4 CONSENTS AND APPROVALS; NO VIOLATION. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) require Seller to file or register
with, notify, or obtain any permit, authorization, consent, or approval of or
from, any Governmental Entity (as defined below), with the exception of
filings pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder (together,
the "HSR Act") and filings with the Mexican Comision Federal de Competencia
(if any), (ii) conflict with or breach any provision of the certificate of
incorporation or by-laws (or other similar charter documents) of Seller or
any of its subsidiaries, including the Company and its subsidiaries, (iii)
violate or
17
breach any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result
in the creation of a Lien on the Shares or any asset of the Company or any of
its subsidiaries pursuant to, any agreement or other obligation to which
Seller or any of its subsidiaries, including the Company and its
subsidiaries, is a party, or by which any of them may be bound, except for
those listed in Section 2.4 of the Disclosure Schedule as to which Seller
will use its best efforts to obtain requisite waivers or consents prior to
the Closing, or (iv) violate any material order, writ, injunction, decree,
judgment, statute, law or ruling of any Governmental Entity applicable to
Seller or any of its subsidiaries, including the Company and its
subsidiaries, excluding from the foregoing clauses (i) and (iii) such
requirements, defaults, rights or violations which would not have a Material
Adverse Effect or would not have a material adverse effect on the ability of
Seller to consummate the transactions contemplated by this Agreement, or
18
which become applicable as a result of any acts or omissions by Buyer (other
than the execution and performance of this Agreement by Buyer) or the status
of Buyer. For purposes of this Agreement, "Governmental Entity" means any
nation or government, any state or other political subdivision thereof, any
entity, authority or body exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including any governmental authority, agency, department, board, commission
or instrumentality of the United States, any state of the United States or
any political subdivision thereof, or any nation, or any court, or legally
constituted tribunal or arbitrator.
Section 2.5 FINANCIAL STATEMENTS. (a) Seller has previously
delivered to Buyer the audited consolidated statement of Company Business Net
Worth and consolidated statement of operations as of and for the year ended
December 31, 1996 (collectively, the "December 31, 1996 Financial
Statements") which were prepared in accordance with Adjusted GAAP and are
included in Section
19
2.5(a) of the Disclosure Schedule. Seller has also delivered to Buyer an
unaudited consolidated statement of Company Business Net Worth as of December
31, 1997 with the review report of Ernst & Young LLP (the "December 31, 1997
Statement of Company Business Net Worth") and an unaudited consolidated
statement of operations for the year ended December 31, 1997 for the Company
and its subsidiaries with the review report of Ernst & Young LLP (together
with the December 31, 1997 Statement of Company Business Net Worth, the
"December 31, 1997 Financial Statements"), which were prepared in accordance
with Adjusted GAAP, applied on a basis consistent with the December 31, 1996
Financial Statements (except for the accounting adjustments set forth in
Section 2.5(a) of the Disclosure Schedule) and are included in Section 2.5(a)
of the Disclosure Schedule. The December 31, 1996 Financial Statements and
the December 31, 1997 Financial Statements fairly present, in all material
respects, the Company Business Net Worth and the results of operations of the
Company and its subsidiaries as of the respective
20
dates and for the respective periods then ended on the basis described in the
notes thereto.
(b) The Closing Statement of Company Business Net Worth when
delivered will have been prepared in accordance with Adjusted GAAP applied on
a basis consistent with the December 31, 1997 Statement of Company Business
Net Worth as adjusted by the accounting adjustments in Section 1.4(a) of the
Disclosure Schedule and will fairly present, in all material respects, the
Company Business Net Worth as of the Closing Date on the basis described in
the notes thereto.
Section 2.6 ASSETS NECESSARY TO BUSINESS. Except for the
"Xxxxxxx" trademark and tradename, the Company and its subsidiaries
collectively have good and marketable title to or valid leasehold interest in
all of the assets, properties and rights which are necessary to carry on the
business of the Company and its subsidiaries as presently conducted. From
January 1, 1997 until the date hereof, neither the Company nor any of its
subsidiaries have disposed of any assets, properties or rights
21
of the business of the Company and its subsidiaries necessary for the conduct
of the Company's business as conducted during such period, except in the
ordinary course of business, including but not limited to dispositions and/or
replacements of obsolete assets.
Section 2.7 TITLE TO PROPERTIES; ENCUMBRANCES. Section 2.7 of the
Disclosure Schedule sets forth a complete list of all real property owned,
leased or otherwise occupied by the Company or any of its subsidiaries.
Except as otherwise contemplated by this Agreement (and, since December 31,
1997, other than any of such properties or assets sold or otherwise disposed
of in the ordinary course of business or with respect to which any lease
relating thereto has terminated) at the Closing, the Company and its
subsidiaries will have good and marketable title to, or a valid leasehold
interest in, all of the properties and assets (real, personal and mixed,
tangible and intangible, wherever located) reflected in the December 31, 1997
Statement of Company Business Net Worth or acquired after the date thereof.
22
All such properties and assets are owned or held under lease, in each case,
free and clear of all Liens, except for Permitted Liens and, to the actual
knowledge of the Senior Vice President of Operation of Seller, there are no
material defects in the buildings, improvements and structures located on any
of the owned property of the Company or its subsidiaries which would
substantially impair the conduct of the business of the Company and its
subsidiaries immediately following the Closing as compared with the conduct
of the business of the Company and its subsidiaries immediately prior to the
Closing. For purposes of this Agreement, "Permitted Liens" means (i)
mechanics', carriers', workmen's, repairmen's or other similar Liens arising
or incurred in the ordinary course of business with respect to liabilities
that are not yet due or delinquent, (ii) Liens for Taxes (as defined below),
assessments and other governmental charges not yet due and payable or, if due
and payable, for which adequate reserves have been made, and (iii) Liens that
do not, individually or in the aggregate, materially impair
23
the use, or materially detract from the value, of the property to which they
relate. Permitted Liens have been accrued to the extent required by GAAP.
Section 2.8 CONTRACTS AND COMMITMENTS. (a) Section 2.8 of the
Disclosure Schedule sets forth, with respect to the Company and its
subsidiaries, a complete and accurate list of: (i) all contracts or
agreements, whether oral or written (including, without limitation,
mortgages, leases, indentures and loan agreements), except (x) such contracts
and agreements which are required to be set forth in the Disclosure Schedule
pursuant to clauses (ii) through (xiii) of this Section 2.8 or are listed on
other Disclosure Schedules required by this Agreement, (y) contracts and
agreements which involve, or which may reasonably be expected to involve, the
payment by or to any one or more of the Company and its subsidiaries of less
than $50,000 with respect to any one contract or agreement or $75,000 with
respect to any related group of contracts or agreements and (z) contracts or
agreements in the nature of purchase and sales
24
orders entered into by the Company or any subsidiary in the ordinary course
of business and containing normal terms and conditions, (ii) all sales
agency, distribution or dealership contracts that are not cancellable on
notice of not less than 90 days and without liability, penalty or premium for
such cancellation under such contract; (iii) all employment and consulting
agreements or other agreements with employees that contain any severance or
termination pay liabilities or obligations that are not cancellable on notice
of not less than 90 days without liability, penalty or premium for such
cancellation under such contract; (iv) all collective bargaining or union
contracts or agreements; (v) all non-competition or other agreements between
the Company or any of its subsidiaries and any third party preventing or
restricting the Company or any of its subsidiaries from carrying on their
respective businesses anywhere in the world; (vi) all debt obligations,
mortgages, notes or indentures for borrowed money, including guaranties of or
agreements to acquire any such debt obligation of others
25
(other than obligations to be extinguished at or before the Closing)
including the amount of any credit line or commitment and the names of all
persons authorized to borrow or to discount debt obligations or otherwise act
on behalf of the Company or any subsidiary in any dealings with any bank or
financial institution; (vii) the name of each bank or other financial
institution in which the Company or any subsidiary has an account or safe
deposit box, the numbers of such accounts or boxes and the names of all
persons authorized to draw thereof or have access thereto; (viii) the names
of the ten largest suppliers to, and the ten largest customers of, the
Company and its subsidiaries as a whole for the year ended December 31, 1997
together with the approximate dollar volume by supplier and customer and a
general description of the goods or services provided by each supplier; (ix)
all loans to, or guarantees of loans to, employees of the Company or any
subsidiary made by the Company or any subsidiary; (x) all outstanding
commitments by the Company or any subsidiary to make a capital
26
expenditure, capital addition or capital improvement involving an amount in
excess of $50,000, together with any Capital Expenditure Report by the
Company or any subsidiary related to making or committing to make any capital
expenditure, capital addition or capital improvement subsequent to the date
hereof involving an amount in excess of $50,000; (xi) all contracts or
agreements under which the Company or any subsidiary has granted, or is
obligated to grant, rights to others to use, reproduce, market or exploit any
United States or foreign patents, trademarks, trade names, service marks,
service names, technology, copyrights, logos, brand names, designs,
industrial designs, inventions, trade secrets, secret processes or know-how
involving an amount in excess of $50,000; (xii) the names and current annual
compensation rates of all employees of the Company or any subsidiary whose
current annual rate of compensation (including bonuses) is $75,000 or more;
and (xiii) the names of all retired employees of the Company or any
subsidiary who are receiving or are entitled to receive any pension or
27
other benefits under any unfunded plan not qualified under Section 401 of the
Internal Revenue Code of 1954, as amended, their ages and their current
annual unfunded pension rates.
(b) True and complete copies of all documents referred to in
Section 2.8 of the Disclosure Schedule have been heretofore made available to
the Buyer. Neither the Company nor any of its subsidiaries is in default
under any document listed or required to be listed on Section 2.8 of the
Disclosure Schedule and, to the knowledge of Seller, after due inquiry, no
other person is in breach thereof.
(c) All such contracts have been entered into lawfully and
individually and collectively do not violate the provisions of any federal,
state or local, statute, rule, regulation or ordinance, including without
limitation, with respect to pricing, except for such violations which,
individually or collectively, would not have a Material Adverse Effect.
Section 2.9 ABSENCE OF CERTAIN CHANGES OR
28
EVENTS. Except as set forth in Section 2.9 of the Disclosure Schedule, since
December 31, 1997 neither the Company nor any of its subsidiaries (a) has
taken any of the actions set forth in Sections 4.1(a) through (j) hereof or
entered into any transaction, or conducted its business or operations other
than in the ordinary and usual course of business or (b) has suffered a
material adverse change in its business or financial condition.
Section 2.10 ABSENCE OF LITIGATION. Except as set forth in
Section 2.10 of the Disclosure Schedule, there is no action, suit or
proceeding of any kind, at law or in equity (including actions or proceedings
seeking injunctive relief), by or before any Governmental Entity pending or,
to the knowledge of Seller after due inquiry of appropriate Seller or Company
personnel, threatened against the Company or any of its subsidiaries. None
of such actions, suits or proceedings, if adversely determined, would have a
Material Adverse Effect or would have a material adverse effect on Seller's
ability to consummate the transactions contem-
29
plated hereby.
Section 2.11 INTELLECTUAL PROPERTY. For purposes hereof,
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions and reexaminations thereof, (b) all trademarks, service
marks, trade names and corporate names, including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith, (c) all copyrights and all applications, registrations and
renewals in connection therewith, (d) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information and business and marketing plans
and proposals), (f) all computer
30
software (including data and related document) and (g) all other proprietary
rights. Section 2.11 of the Disclosure Schedule sets forth all patents,
registered trademarks and registered copyrights (and applications for any of
the foregoing) and material common law trademarks owned by the Company. To
the knowledge of Seller, after due inquiry of appropriate Seller or Company
personnel, in addition to the items set forth in Section 2.11 of the
Disclosure Schedule, the Company and its subsidiaries own, free and clear of
all Liens, all right, title and interest in and to the Intellectual Property
necessary to the conduct of the business of the Company and its subsidiaries
as now being conducted, other than the "Xxxxxxx" trademark and tradename and
other than such Intellectual Property which the Company has the right to use
pursuant to a license, sublicense, agreement or permission, set forth, where
applicable, in Section 2.8 of the Disclosure Schedule. With respect to any
such license, sublicense, agreement or permission, to the knowledge of
Seller, (i) the underlying item of Intellec-
31
tual Property is not subject to any outstanding injunction, judgment, order,
decree, ruling or charge, and (ii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or is threatened
which challenges the legality, validity or enforceability of the underlying
item of Intellectual Property. Except for the matters set forth in Section
2.11 of the Disclosure Schedule, there is no claim, action, proceeding, suit,
complaint, or, to the knowledge of Seller, investigation pending or
threatened that (i) the operations, products, Intellectual Property or
manufacturing processes of the Company or any of its subsidiaries infringe
upon or conflict with the intellectual property rights of any other person,
or (ii) challenges the legality, validity, enforceability, use or ownership
of the Intellectual Property owned by the Company. To the knowledge of
Seller, no third party has interfered with, infringed upon or misappropriated
any Intellectual Property rights of the Company or its subsidiaries.
Section 2.12 ERISA COMPLIANCE. (a) Section
32
2.12 of the Disclosure Schedule sets forth a true and complete list of all
employee benefit and compensation plans, programs or agreements maintained
for the benefit of the current or former employees or directors of the
Company or any of its subsidiaries, which employee benefit and compensation
plans, programs or agreements are sponsored, maintained or contributed to by
the Company or any affiliate of the Company, or with respect to which the
Company or any affiliate of the Company has any liability, including any such
plan that is an "employee benefit plan" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA") (collectively, the
"Company Employee Benefit Plans"). Except as set forth in Section 2.12 of
the Disclosure Schedule, all Company Employee Benefit Plans have been
maintained in compliance with all applicable requirements of law, including
but not limited to ERISA and the Internal Revenue Code of 1986, as amended
(the "Code"), except to the extent where the failure to be so maintained
would not have, individually or in the aggregate, a Material
33
Adverse Effect.
(b) None of the Company Employee Benefit Plans is a "defined
benefit plan" (within the meaning of Section 3(35) of ERISA) or a
"multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA), and
neither the Company nor any of its subsidiaries has maintained, sponsored or
contributed to any such plan within the previous six (6) years.
(c) Each Company Employee Benefit Plan that is intended to qualify
under Section 401 of the Code, and each trust maintained pursuant thereto,
has been determined to be exempt from federal income taxation under Section
501 of the Code by the Internal Revenue Service, and, to the Seller's
knowledge, nothing has occurred that would cause the loss of such
qualification or exemption. With respect to each Company Employee Benefit
Plan, (i) no "prohibited transaction" (within the meaning of Section 406 of
ERISA and Section 4975 of the Code) has occurred, and (ii) no audit or
investigation has been commenced by the Internal Revenue Service or the
Depart-
34
ment of Labor, and no such audit or investigation is pending or, to the
Seller's knowledge, threatened. No material liability under Title IV of
ERISA has been or is reasonably expected to be incurred by the Company or any
entity which is considered one employer with the Company under Section
4001(a)(15) of ERISA or Section 414 of the Code (each, a "Company ERISA
Affiliate").
(d) The Company does not maintain or contribute to any "employee
benefit plan" as defined in Section 3(3) of ERISA which provides or has any
liability to provide life insurance or medical or other employee welfare
benefits to any employee or former employee upon retirement or termination of
employment.
(e) Except as set forth in Section 2.12 of the Disclosure Schedule,
the execution of, and performance of the transactions contemplated by, this
Agreement will not (either alone or in combination with another event)
constitute an event under any Company Employee Benefit Plan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of
35
indebtedness, vesting, distribution, increase in benefits or compensation or
obligation to fund benefits or compensation with respect to any current or
former employee or director.
Section 2.13 TAXES. Except as set forth in Section 2.13 of the
Disclosure Schedule:
(a) All Tax Returns required to be filed by or with respect to or
which includes or included the Company and each of its subsidiaries have been
filed in accordance with all applicable laws with the appropriate Taxing
Authorities on or before the due date thereof (including extensions), other
than those Tax Returns which the failure to file would not have a Material
Adverse Effect. All material Taxes of the Company and each of its
subsidiaries due and payable by them (whether or not shown to be due on such
Tax Returns) have been paid in full, other than Taxes being contested in good
faith in appropriate proceedings and for which adequate provision has been
made therefor.
(b) There are no Liens for Taxes upon the
36
assets of the Company or any of its subsidiaries except for statutory Liens
for Taxes not yet due and payable.
(c) There are no audits or proceedings pending, proposed or in
progress with respect to liabilities for Taxes of the Company or any of its
subsidiaries, and neither the Company nor any of its affiliates has received
any written notice of a pending, proposed or asserted deficiency or
assessment from any Taxing Authority with respect to liabilities for Taxes of
the Company or any of its subsidiaries which has not been paid or finally
settled or is not being contested in good faith in appropriate proceedings
and for which adequate reserves have been made.
(d) Except with respect to the person identified on Section 4.5(ii)
of the Disclosure Schedule, no payment (whether in cash, property or the
vesting of property) made by the Company or the Buyer to an Affected
Employee, in connection with the execution of, and performance of the
transactions contemplated in, this Agreement (whether alone or upon the
occurrence of any other
37
event) could be characterized as an "excess parachute payment" within the
meaning of Section 280G of the Code.
(e) No extension of time within which to file any Tax Returns
required to be filed by the Company or any of its subsidiaries (which Tax
Returns shall not under any circumstances include Tax Returns that relate to
an affiliated, consolidated, combined or unitary group which includes a
company other than the Company and any of its subsidiaries) has been
requested which Tax Return has not since been filed.
(f) There are no waivers or extensions of any applicable statute of
limitations for the assessment or collection of Taxes with respect to any Tax
Returns required to be filed by the Company or any of its subsidiaries which
waivers or extensions are pending or remain in effect.
(g) The Company and its subsidiaries have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor, stock-
38
holder or other third party.
(h) For purposes of this Agreement: (i) "Taxes" means all federal,
state, local and foreign net income, gross income, sales, use, franchise,
profits, service, withholding, payroll, employment, excise, gross receipts,
capital stock, occupation, net worth, transfer, stamp, estimated, ad valorem,
gains, property taxes, asset tax, value added tax, and other similar taxes,
charges, duties, tariffs, levies, fees, or assessments together with any
interest, penalties, and additions to tax or additional amounts thereon,
imposed by any Taxing Authority, (ii) "Taxing Authority" means any federal,
state, local or foreign governmental authority responsible for the imposition
of any Taxes; and (iii) "Tax Returns" means any return, report, declaration,
estimate or other information filed or required to be supplied to a Taxing
Authority in connection with Taxes.
Section 2.14 ENVIRONMENTAL MATTERS. (a) The Company and its
subsidiaries hold, and are in material compliance with, all permits, licenses
and other govern-
39
ment authorizations ("Environmental Permits") required for the Company and
its subsidiaries to conduct their respective businesses under Environmental
Laws. (For purposes of this Agreement, "Environmental Laws" means all
applicable foreign, federal, state and local, laws, statutes, ordinances,
rules, regulations, orders, judgments and decrees relating to pollution or
the protection of the environment.) The Company and its subsidiaries are in
material compliance with all such Environmental Laws and have no liability
under any indemnity agreement or other contractual obligations relating to
pollution or the protection of the environment or human health or safety.
(b) Except as set forth in Section 2.14 of the Disclosure Schedule,
the Company has not received any written or, to the Company's knowledge, oral
request for information, or been notified or the subject of any claim that it
is or may be a potentially responsible party or otherwise is or may be
responsible for the investigation or cleanup of hazardous substances, under
the federal
40
Comprehensive Environmental Response Compensation and Liability Act of 1980,
as amended, or any other Environmental Law with respect to any on-site or
off-site location, whether or not currently or previously owned, leased, used
or occupied by the Company.
(c) The Company is not subject to, nor has it received any notice
that it may be subject to, any judgment, decree, order or other agreement
relating to compliance with, or the cleanup of regulated substances under,
any applicable Environmental Laws.
(d) There has been no release or disposal as a result of the
Company's or any of its subsidiaries' operations or, to the Company's
knowledge, operations by others, at any time of any regulated substances at,
on, under, from or affecting any real property currently or formerly owned,
leased or operated by the Company or any of its subsidiaries or any of their
predecessors-in-interest (other than pursuant to and in accordance with
Environmental Permits held by the Company, its subsidiaries or any of their
predecessors, or that will not give
41
rise to liability under Environmental Laws).
(e) To the knowledge of Seller, Seller has made available to Buyer
true and complete copies of all environmental reports, studies, audits and
assessments which are in the possession or control of the Company relating to
any real property or facilities currently or formerly owned, leased or
operated by the Company or any of its subsidiaries or any of their
predecessors-in-interest.
Section 2.15 NO UNDISCLOSED LIABILITIES. Except as and to the
extent set forth in the December 31, 1997 Statement of Company Business Net
Worth, neither the Company nor any of its subsidiaries had, at December 31,
1997, any undisclosed liabilities except for those liabilities which,
separately or in the aggregate, are not expected to have a Material Adverse
Effect. Except as and to the extent set forth in Section 2.15 of the
Disclosure Schedule, neither the Company nor any of its subsidiaries has
incurred any liabilities (absolute, accrued, contingent or otherwise) which
would be required
42
by Adjusted GAAP to be included in a consolidated statement of the Company
Business Net Worth dated as of the date hereof, except liabilities incurred
since December 31, 1997 in the ordinary course of business and liabilities
incurred in connection with this Agreement.
To the knowledge of Seller, after due inquiry, there is no latent
or overt design, manufacturing or other defect in any products of the Company
or its subsidiaries which could reasonably be expected to result in a series
of liability claims which would have a Material Adverse Effect.
Section 2.16 TRANSACTIONS WITH AFFILIATES. Except as set forth in
Section 2.16 of the Disclosure Schedule, none of the Company or any of its
subsidiaries has any outstanding contract, agreement or other arrangement
with any member of the Seller Group (as defined below) which will continue in
effect subsequent to the Closing. "Seller Group" means Seller and its
affiliates, other than the Company and its subsidiaries.
43
Section 2.17 BROKERS. No broker, finder or investment banker,
including any director, officer, employee, affiliate or associate of Seller,
is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement by reason of
any action taken by Seller, except for BancAmerica XXXXXXXXX XXXXXXXX, the
fees and expenses of which shall be paid by Seller.
Section 2.18 INSURANCE. Section 2.18 of the Disclosure Schedule
contains an accurate and complete list as of the date hereof of all material
policies, currently in force, of fire, liability, workmen's compensation,
public and product liability, title and other forms of insurance owned, held
by or applicable to the Company or any of its subsidiaries or their
respective assets or businesses. All such policies are in full force and
effect. Seller has heretofore delivered to Buyer an accurate summary
description of all such policies.
Section 2.19 LABOR DIFFICULTIES. Except as
44
set forth in Section 2.10 or Section 2.19 of the Disclosure Schedule, (a)
there is no unfair labor practice complaint or charge of discrimination or
other employee claim against the Company or any of its subsidiaries pending
or, to the knowledge of Seller after due inquiry of appropriate Seller or
Company personnel, threatened, (b) there is no labor strike, dispute,
slowdown, stoppage or other labor difficulty actually pending or, to the
knowledge of the Seller after due inquiry of appropriate Seller or Company
personnel, threatened against or affecting the Company or any of its
subsidiaries and (c) there are no pending union negotiations relating to
employees of the Company or any of its subsidiaries.
Section 2.20 COMPLIANCE WITH LAWS. Except as set forth in Section
2.20 of the Disclosure Schedule or as provided for in Sections 2.10, 2.12,
2.13 and 2.14 hereof, the Company and its subsidiaries have operated their
respective businesses in compliance with all laws, ordinances, regulations
and orders of all Governmental Entities except for violations of such laws,
ordinances,
45
regulations and orders which do not and are not expected to have a Material
Adverse Effect. The Company and its subsidiaries have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of their respective businesses, except those
the absence of which does not and are not expected to have a Material Adverse
Effect. No notice has been received by, and, to the knowledge of the Seller
after due inquiry of appropriate Seller or Company personnel, no
investigation or review is pending or threatened by, any Governmental Entity
with respect to (i) any alleged violation by the Company of any law,
ordinance, regulation or order of any Governmental Entity which may have a
Material Adverse Effect or (ii) any alleged failure to have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of the respective businesses of the Company and
its subsidiaries which may have a Material Adverse Effect.
Section 2.21 CUSTOMER ACCOUNTS RECEIVABLE;
46
INVENTORIES. (a) All customer accounts receivable of the Company and its
subsidiaries, whether reflected on the December 31, 1997 Financial Statements
or subsequently created, have arisen from bona fide transactions in the
ordinary course of business. Except as set forth in Section 2.21(a) of the
Disclosure Schedule, to the knowledge of the Seller, after due inquiry, all
such customer accounts receivable are, in the aggregate, good and collectible
at the aggregate recorded amounts thereof, net of any applicable reserves for
doubtful accounts returns or credits as the ordinary course of business
reflected on the December 31, 1997 Financial Statements.
(b) Except as set forth in Section 2.21(b) of the Disclosure
Schedule, to the knowledge of Seller, after due inquiry, the cost of
inventories, net of any revenues, of the Company and its subsidiaries
reflected on the December 31, 1997 Financial Statements or subsequently
acquired prior to the Closing Date, represent inventory which are generally
of a quality and quantity usable and salable in all material respects in
accordance
47
with past practice of the Company (except as otherwise noted in the December
31, 1997 Financial Statements or the Closing Statement of Company Business
Net Worth). No representation is made under this Section with respect to the
inventory relating to the DC carbon monoxide detectors existing on December
31, 1997, the date hereof or the Closing Statement of Company Business Net
Worth.
Section 2.22 INFORMATION. To the knowledge of the Seller, after
due inquiry and subject to the limitations contained in Section 3.6, none of
the information provided by Seller to Buyer in connection with transactions
contemplated by this Agreement contains any material misstatement of fact or
omits to state any material fact necessary to be stated in order to make the
statements therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND GUARANTOR
Buyer and Guarantor hereby jointly and severally represent and
warrant to Seller as to the matters set
48
forth in Sections 3.1, 3.2 and 3.3 hereof, and Buyer hereby represents and
warrants to Seller as to the matters set forth in Sections 3.4, 3.5, 3.6, 3.7
and 3.8 hereof, as follows:
Section 3.1 ORGANIZATION AND QUALIFICATION. Each of Buyer and
Guarantor is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
Section 3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Buyer
and Guarantor has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution of this Agreement and the consummation of the transactions
contemplated hereby has been duly and validly authorized by each of Buyer and
Guarantor and no other corporate proceedings on the part of each of Buyer and
Guarantor (or any other person) are necessary to authorize the execution of
this Agreement by each of Buyer
49
and Guarantor or the consummation by each of Buyer and Guarantor of the
transactions contemplated hereby. This Agreement has been duly and validly
executed by each of Buyer and Guarantor, and (assuming the valid execution of
the Agreement by Seller) constitutes a valid and binding agreement of each of
Buyer and Guarantor, enforceable against each of Buyer and Guarantor in
accordance with its terms, except (a) that such enforcement may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally and (b) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding therefor may be
brought.
Section 3.3 CONSENTS AND APPROVALS; NO VIOLATION. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) require Buyer or Guarantor to file
or register with, notify, or obtain any permit, authoriza-
50
tion, consent, or approval of or from, any Governmental Entity, with the
exception of filings pursuant to the HSR Act and filings with the Mexican
Comision Federal de Competencia (if any), (ii) conflict with or breach any
provision of the Certificate of Incorporation, By-Laws or other
organizational documents of Buyer or Guarantor, (iii) violate or breach any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, any agreement or
other obligation to which Buyer or Guarantor is a party, or by which it may
be bound, or (iv) violate any order, writ, injunction, decree, judgment,
statute, law or ruling of any Governmental Entity applicable to Buyer or
Guarantor, excluding from the foregoing clauses (i), (iii) and (iv) such
requirements, defaults, rights or violations which would not, individually or
in the aggregate, have a material adverse effect on the ability of Buyer or
Guarantor to consummate the transactions contemplated by this Agreement, or
which become applicable as a result of any acts or omissions by, or the
status of,
51
Seller.
Section 3.4 FINANCING. Buyer has on the date of execution of this
Agreement and will have at the Closing sufficient immediately available
funds, in cash or pursuant to credit agreements in effect on the date of this
Agreement, to pay the Purchase Price and any other amounts payable pursuant
to this Agreement and to effect the transactions contemplated hereby.
Section 3.5 BROKERS. No broker, finder or investment banker
("Finder"), including any director, officer, employee, affiliate or associate
of Buyer, is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement by reason
of any action taken by Buyer. Buyer has not dealt with any Finder except
BancAmerica XXXXXXXXX XXXXXXXX, whose fees are payable by Seller.
Section 3.6 NO REPRESENTATION REGARDING FUTURE PROSPECTS. Buyer
acknowledges and agrees that neither the representations and warranties of
Seller contained in
52
Article II hereof nor any other information contained in the documents to be
delivered at the Closing, the Confidential Offering Memorandum relating to
the Company and its subsidiaries prepared by BancAmerica XXXXXXXXX XXXXXXXX
and previously distributed to Buyer (the "Confidential Memorandum") or
otherwise provided to Buyer, shall be construed as a representation or
warranty with respect to any projections, estimates or budgets heretofore
delivered to or made available to Buyer regarding future revenues, future
expenses or expenditures, future results of operations, future cash flows,
future financial condition, the future business and operations of the Company
and its subsidiaries, or future relationships with customers or suppliers,
including any such information as may have been set forth in the Confidential
Memorandum.
Section 3.7 INVESTMENT. Buyer is acquiring the Shares for its own
account, for investment, and without a view to the public distribution
thereof and will not sell or transfer the Shares in violation of the
53
Securities Act of 1933, as amended, or the rules and regulations promulgated
thereunder.
Section 3.8 YEAR 2000. Buyer acknowledges that Seller's software,
hardware and other information technologies, whether owned or licensed by
Seller, are not Year 2000 Compliant. For purposes of this Agreement, "Year
2000 Compliant" means that any applicable hardware, software or other
information technologies can properly process dates after the date December
31, 1999.
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.1 CONDUCT OF THE BUSINESS. Seller agrees that, during
the period from the date of this Agreement to the Closing, except as (i)
otherwise contemplated by this Agreement, (ii) set forth in Section 4.1 of
the Disclosure Schedule or (iii) consented to by Buyer in writing, Seller
shall cause the business operations of the Company and its subsidiaries to be
conducted in the ordinary course. Without limitation to the generality of
54
the foregoing, Seller shall not permit the Company, and, as applicable, the
Company shall not permit any of its subsidiaries, to:
(a) (i) amend their respective certificates of incorporation or
by-laws (or other charter documents), (ii) split, combine or reclassify any
shares of their respective outstanding capital stock, or (iii) directly or
indirectly redeem or otherwise acquire any shares of its capital stock or
shares of the capital stock of any of their respective subsidiaries;
(b) authorize for issuance, issue or sell or agree to issue or sell
any shares of, or rights to acquire any shares of, their respective capital
stock (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise);
(c) (i) merge, combine or consolidate with another entity, (ii)
acquire or purchase an equity interest in or a substantial portion of the
assets of another corporation, partnership or other business organization
55
or otherwise acquire any assets outside the ordinary course of business or
otherwise enter into any contract, commitment or transaction outside the
ordinary course of business, or (iii) sell, lease, license, waive, release,
transfer, encumber (except for Liens which will be removed prior to or at the
Closing) or otherwise dispose of any of their respective assets outside the
ordinary course of business;
(d) (i) incur, assume or prepay any indebtedness or any other
liabilities other than, in each case, in the ordinary course of business or
indebtedness or liabilities which can be prepaid or repaid at any time
without penalty, (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations
of any other person, in each case, other than in the ordinary course of
business or other than those which will be removed at or prior to the
Closing, or (iii) make any loans, advances or capital contributions to, or
investments in, any other person (other than between the Compa-
56
ny and its subsidiaries);
(e) modify or amend, or waive any benefit of, any non-competition
agreement to which the Company or any of its subsidiaries is a party;
(f) authorize or make capital expenditures in excess of $100,000
individually, or in excess of $300,000 in the aggregate;
(g) cancel or terminate any insurance policy naming the Company or
any of its subsidiaries as a beneficiary or a loss payee other than in the
ordinary course of business;
(h) (i) adopt, enter into, terminate or amend in any material
respect (except as may be required by applicable law) any plan for the
current or future benefit or welfare of any officer, director or employee of
the Company or any of its subsidiaries, (ii) enter into amend, waive, modify
or renew any employment or consulting agreement, (iii) increase in any manner
the compensation or fringe benefits of, or pay any bonus to, any officer,
director or employee (except for normal increas-
57
es in salaries, compensation and bonuses and payment of bonuses, in each case
in the ordinary course of business or as required by contract), or (iv) take
any action to fund or in any other way secure, or to accelerate or otherwise
remove restrictions with respect to, the payment of compensation or benefits
under any employee plan, agreement, contract, arrangement or plan other than
in the ordinary course of business;
(i) make any material change in its accounting or Tax policies or
procedures, except as required by law or to comply with mandatory principles
of accounting; or
(j) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing.
Section 4.2 HSR ACT COMPLIANCE AND OTHER GOVERNMENTAL FILINGS.
Each party hereto agrees to use its best efforts to file as expeditiously as
possible (i) a completed notification report under the HSR Act in connection
with the transactions contemplated by this Agreement and (ii) filings with or
required by the Mexi-
58
can Comision Federal de Competencia (if any), and upon the request of the
Mexican Comision Federal de Competencia, the Federal Trade Commission or the
Department of Justice, as the case may be, to supply such entity with any
additional requested information as expeditiously as possible. Each party
shall promptly inform the other of any such request and shall cooperate with
the other in responding to such request.
Section 4.3 POST-CLOSING COLLECTIONS. Seller and its affiliates
shall promptly pay over to Buyer all amounts received by Seller or its
affiliates on or after the Closing Date in respect of the accounts receivable
or other assets of the Company and its subsidiaries, and Buyer shall promptly
pay over to Seller all amounts received by Buyer on or after the Closing Date
that are not related to the accounts receivable or other assets of the
Company and its subsidiaries.
Section 4.4 EXPENSES. Each of Seller and Buyer shall pay all of
its own costs and expenses associated with the negotiation and conclusion of
this Agree-
59
ment and the consummation of the transactions contemplated hereby.
Section 4.5 SEVERANCE ARRANGEMENTS. Buyer shall, or shall cause
the Company to, honor and be solely responsible for payment of the amounts
described in the section entitled "Severance Arrangements" in each of the
letter agreements between the Company and certain of its officers (each, an
"Executive") set forth in Section 4.5(i) of the Disclosure Schedule (the
"Retention Agreements") in accordance with the terms and conditions regarding
such payment set forth in such Retention Agreements, except to the extent
modified or superseded by any separate agreement which may be entered into by
the Executive and Buyer or any of its subsidiaries. Seller shall honor and be
solely responsible for payment of the amounts described in the sections of
such Retention Agreements entitled "Stay Bonus" and shall take any actions
required to be taken by such Retention Agreements with respect to stock
options granted by Seller in such Retention Agreements, subject to and in
accordance with
60
the terms and conditions regarding such payment or actions set forth in the
Retention Agreements. Seller shall be solely responsible for payment of any
amounts which arise pursuant to the employment agreement referred to in
Section 4.5(ii) of the Disclosure Schedule.
Section 4.6 PUBLIC ANNOUNCEMENTS. No party hereto shall make or
issue, or cause to be made or issued, any announcement or written statement
concerning this Agreement or the transactions contemplated hereby for
dissemination to the media or the public without the prior written consent of
the other party. The preceding sentence shall not apply, however, to any
announcement or written statement required to be made by applicable law or
administrative or legal process or pursuant to any securities exchange rules,
except that the party required to make the announcement shall, whenever
practicable, consult with the other parties prior to the making of any such
announcement concerning the timing and content thereof.
61
Section 4.7 TRANSACTION COSTS. Seller shall pay all sales, use,
transfer, documentary stamp and other similar Taxes with respect to the sale
and purchase of the Shares.
Section 4.8 FURTHER ASSURANCES. Each of Seller and Buyer shall
use its best efforts to take all action and to do all things necessary to
consummate and make effective the transactions contemplated by this
Agreement; PROVIDED, HOWEVER, that neither Seller nor Buyer nor their
respective affiliates shall be required to dispose of any part of its
business or the assets pertaining thereto. In the event that, at any time
after the Closing, any further action is necessary or desirable to carry out
the purposes of this Agreement, each party to this Agreement shall take, and
shall cause its officers and directors, as the case may be, to take, all such
necessary action including, without limitation, the execution and delivery of
such further instruments and documents as may reasonably be requested by the
parties hereto for such purposes or otherwise to complete the
62
transactions contemplated hereby.
Section 4.9 PRODUCT LIABILITY. (a) Seller is and shall be solely
responsible for any and all claims for injury (including, without limitation,
death) or claims for damage, direct or consequential, resulting from or
connected with goods manufactured or sold or products-related services
provided by the Company or any of its subsidiaries on or before the Closing
Date, to the extent that such claims are delivered to Seller on or before the
first anniversary of the Closing Date.
(b) Buyer is and shall be solely responsible for any and all
claims for injury (including, without limitation, death) or claims for
damage, direct or consequential, resulting from or connected with goods
manufactured or sold or products-related services provided by the Company on
or prior to the Closing Date, to the extent that such claims are not
delivered to Seller on or before the first anniversary of the Closing Date,
and shall be solely responsible for all claims for all products manufactured
after the Closing Date. If the parties
63
hereto cannot determine, in good faith, whether a product was manufactured on
or before the Closing Date, then all claims with respect to that product
shall be the responsibility of Buyer.
(c) Buyer acknowledges that prior to Seller's ownership of the
Company certain insurance policies which included coverage for product
liability were purchased by the Company's predecessor (the "Predecessor
Policies"). Such Predecessor Policies are in the name of predecessor
companies to the Company and are assets of the Company. Buyer and the
Company hereby grant Seller the authority to file claims with the insurers
under the Predecessor Policies and pursue the benefits of such coverage to
the extent that such Predecessor Policies provide coverage for product
liability claims retained by Seller pursuant to Section 4.9(a) above. Buyer
assigns to Seller all benefits of the insurance under the Predecessor
Policies to the extent such benefits are actually received for the product
liability claims retained by Seller pursuant to Section 4.9(a) above and
turned over to Buyer to the
64
extent required by Section 4.9. Buyer agrees to aid and support Seller in
pursuit of the insurance under the Predecessor Policies which shall include,
but not be limited to, supplying records, personnel, and, if necessary,
filing lawsuits or claims against insurers to collect the insurance under the
Predecessor Policies and Seller shall reimburse Buyer for its third party
costs incurred in connection with such assistance to Seller. Seller shall be
entitled to control the proceedings for any such lawsuits or claims.
Section 4.10 USE OF NAME. Promptly after the Closing but in no
event more than 30 days following the Closing Date, Buyer shall file an
amendment to the certificate of incorporation or other charter documents of
the Company and, to the extent applicable, its subsidiaries, and each
qualification to do business in each jurisdiction in which the Company and
its subsidiaries is so qualified changing the name of the Company and any
applicable subsidiary to a name which does not include or resemble in any way
"Xxxxxxx" or any other trade name or
65
trademark owned or used by Seller or its affiliates.
Section 4.11 BOOKS AND RECORDS. (a) Seller will deliver to Buyer
as promptly as practicable on or after the Closing Date all books and records
of the Company and its subsidiaries (collectively, the "Documents"),
PROVIDED, HOWEVER, that Seller may retain copies of Documents and certain
Documents related to Taxes, product liability claims, insurance or required
by law to be kept by Seller. Each party hereto agrees to make reasonably
available to the other party, at the other party's expense (including, with
respect to clause (i) below, the right to make copies) (i) any and all such
Documents (other than Documents relating to liabilities for which Seller is
indemnifying Buyer and its subsidiaries, including Taxes as set forth in
Article VI hereof), and including, without limitation, those reasonably
necessary to respond to inquiries regarding the Company or any of its
subsidiaries from Governmental Entities or any customer or supplier of the
Company or any of its subsidiaries or to defend claims or otherwise indemnify
66
Seller or Buyer, as the case may be, under the terms of this Agreement and
(ii) in connection with another party's review of any such Documents, any and
all personnel as are reasonably requested by such other party, who will
render all assistance as may reasonably be requested in that regard.
(b) Subject to (x) the provisions of Section 6.5(c) hereof, (y)
the following four sentences and (z) damage or destruction beyond Buyer's or
Seller's reasonable control, as applicable, Buyer shall maintain and keep all
Documents delivered to Buyer pursuant to this Agreement. In the event that
Buyer determines that it does not wish to keep certain Documents, Buyer shall
notify Seller of its intent to ship such Documents to Seller, and of the
approximate amount of such Documents to be shipped, no later than 30 days
before the date of shipment. At the request of Seller made prior to the
scheduled shipment date, Buyer shall permit Seller to inspect such Documents
at Buyer's usual location for the same on a mutually convenient date and
shall permit
67
Seller to destroy any or all of such Documents at such site. Any of such
Documents not so destroyed (or all such Documents if no such request is
timely made) shall be shipped to Seller at Seller's expense. Seller has no
obligation to retain any Document so shipped to it.
Section 4.12 TRANSFER OF NOMINEE SHARE. At or immediately prior
to the Closing, Seller will cause the Nominee Share to be transferred to an
employee of the Company.
ARTICLE V
CERTAIN EMPLOYEE AND BENEFIT MATTERS
Section 5.1 CONTINUED EMPLOYMENT; SERVICE CREDIT. Buyer shall on
the Closing Date continue the employment of all employees of the Company and
its subsidiaries as of the Closing Date (the "Affected Employees"). The
Affected Employees shall be given credit for all service with the Company or
its subsidiaries (and service credited by the Company or such subsidiary), to
the same extent as such service was credited for such
68
purpose by the Company or such subsidiary, under (a) all employee benefit
plans, programs and policies, and fringe benefits of Buyer in which they
become participants for purposes of eligibility and vesting (but not for
purposes of benefit accrual), and (b) severance plans for purposes of
calculating the amount of each Affected Employee's severance benefits;
PROVIDED, HOWEVER, that no Executive who is a party to a Retention Agreement
that provides for Severance Arrangements shall be eligible to participate in
any severance plan of the Buyer or any affiliate of the Buyer while such
Retention Agreement remains in effect. To the extent permissible under the
terms thereof and required by applicable law, Buyer shall (i) waive all
limitations as to preexisting conditions exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Affected
Employees under any welfare benefit plans that such employees may be eligible
to participate in after the Closing Date, other than limitations or waiting
periods that are already in effect with respect to such employees and that
69
have not been satisfied as of the Closing Date under any welfare benefit plan
maintained for the Affected Employees immediately prior to the Closing Date,
and (ii) provide each Affected Employee with credit for any co-payments and
deductibles paid prior to the Closing Date in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Closing Date. Nothing in
this Section shall be deemed to require the employment of any Affected
Employee to be continued for any particular period of time after the Closing
Date.
Section 5.2 CONTINUATION OF BENEFITS. Buyer will maintain for a
period of at least one year after the Closing Date, without interruption,
such employee compensation and benefit plans (other than stock option plans),
programs, policies and fringe benefits as will, in the aggregate, provide
benefits to the Affected Employees that are no less favorable than those
provided pursuant to such employee compensation and benefit plans, programs,
policies and fringe benefits of the Company and
70
its subsidiaries, as in effect on the Closing Date.
Section 5.3 SEVERANCE PAY. In addition to and notwithstanding the
provisions of Section 4.5 hereof, Buyer will bear, and will indemnify, defend
and hold harmless Seller from and against, all losses, damages, deficiencies,
suits, claims, demands, judgments, costs, expenses or other liabilities,
including without limitation reasonable expenses and fees of counsel, arising
from or relating to claims made by or on behalf of any Affected Employee in
respect of employment agreements and corporate policy pertaining to payroll,
severance pay, accrued vacation and similar obligations ("Employment Losses")
relating to the termination of any Affected Employee's employment with the
Company or any of its subsidiaries as a result of actions by Buyer or the
Company at or after the Closing; PROVIDED, HOWEVER, that nothing in this
Section 5.3 shall (i) be construed to cause any person other than Seller to
be responsible for payment of any amounts which arise pursuant to the
employment agreement referred to in Section 4.5(ii) of the
71
Disclosure Schedule and (ii) affect Buyer's right in respect of Seller's
representations, warranties and covenants. Seller agrees that all Employment
Losses with respect to employees (other than Affected Employees) terminated
from employment with the Company or any of its subsidiaries arising before
the Closing Date will be discharged in full to the extent required prior to
the Closing Date; PROVIDED, HOWEVER, that Seller will indemnify Buyer from
and against Employment Losses with respect to employees other than Affected
Employees to the extent such Employment Losses are not either discharged
prior to the Closing Date or accrued on the Closing Statement of Company
Business Net Worth.
Section 5.4 INDEMNIFICATION OF BUYER FOR PLANS NOT ASSUMED.
Seller shall indemnify and hold harmless Buyer, the Company and all of the
Company's subsidiaries against any and all Losses (as defined in Section 9.2)
arising under Title IV of ERISA, Section 302 of ERISA and Sections 412 and
4971 of the Code which may be incurred by any of them arising out of or
relating to any employee
72
benefit plan sponsored by the Seller or any Company ERISA Affiliate, other
than the Company Employee Benefit Plans, whether such Losses arise out of or
relate to any event or state of facts occurring or existing before, on or
after the Closing Date.
Section 5.5 COMPANY DEFINED CONTRIBUTION PLAN. Effective as of
the Closing Date, Buyer shall make available (or cause one of its affiliates
to make available) a defined contribution plan for the benefit of the
Affected Employees (the "Company DC Plan"). As promptly as practicable after
the Closing Date, the Seller shall cause the trustee of the Xxxxxxx Monthly
Salaried Retirement Income Savings Plan and the Xxxxxxx Retirement Incentive
Savings Plan (collectively, the "Seller DC Plans") to transfer to the trustee
of the Company DC Plan the account balances of each Affected Employee with
respect to whom the Seller DC Plans maintain an account as of the close of
business on the Closing Date. Such transfers shall be equal to the value of
the transferred account balances as of the close of business on the day
preceding
73
the date of transfer and shall be in cash (or, in the case of participant
loans granted prior to the Closing Date, if any, such loans and any
promissory notes or other documents evidencing such loans).
ARTICLE VI
TAXES
Section 6.1 TAX INDEMNIFICATION. Independent, and without
duplication of the indemnification provisions set forth in Article IX of this
Agreement:
(a) Seller shall indemnify Buyer, the Company and the Company's
subsidiaries and hold them harmless from and against, without duplication,
(i) all liability for all Taxes (except as provided in paragraph (b) of this
Section 6.1) of the Company and its subsidiaries for all taxable periods
ending on or before the Closing Date and the portion ending on the Closing
Date of any taxable period that includes (but does not end on) the Closing
Date ("Pre-Closing Tax Period"), (ii) all liability for Taxes resulting from
a valid, timely and effective elec-
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tion under Section 338(h)(10) of the Code and Section 1.338(h)(10)-1 of the
Treasury Regulations and any comparable election under state or local tax law
with respect to the Company and the subsidiaries set forth in Section 6.1 of
the Disclosure Schedule (collectively, the "Election"), as contemplated by
Section 6.3 hereof, (iii) any and all liability for Taxes of any member of an
affiliated, consolidated, combined or unitary group of which the Company or
any of its subsidiaries (or any predecessor of any of the foregoing) is or
was a member on or prior to the Closing Date, including by reason of the
liability of the Company or any of its subsidiaries (or any predecessor of
any of the foregoing) pursuant to Treasury Regulation Section 1.1502-6 or any
analogous or similar state, local or foreign law or regulation, (iv) any
payments required to be made after the Closing Date under any Tax sharing,
Tax indemnity, Tax allocation or similar contracts (whether or not written)
to which the Company was obligated, or was a party, on or prior to the
Closing Date, and (v) all liability for Taxes of any person
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(other than the Company and its subsidiaries) imposed on the Company or any
of its subsidiaries as a transferee or successor, by contract or pursuant to
any law, rule or regulation, which Taxes relate to an event or transaction
occurring before the Closing; PROVIDED, HOWEVER, that in the case of clauses
(i), (ii), (iii), (iv) and (v) above, Seller shall be liable only to the
extent that such Taxes are in excess of the amount, if any, reserved for such
Taxes on the Closing Statement of Company Business Net Worth. Subject to the
specific allocation of expenses set forth in Article VI and any provision
relating to expenses to be borne by Buyer set forth in this Article VI,
Seller shall indemnify Buyer, the Company and the Company's subsidiaries for
Losses (as defined in Section 9.2) incurred in defense of any Tax Claim that
is initiated by any Taxing Authority against the Buyer, the Company or the
Company's subsidiaries that relates to liabilities for Taxes described in
clauses (i), (ii), (iii), (iv) and (v) above.
(b) Buyer shall, and shall cause the Company
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to, indemnify Seller and its affiliates and hold them harmless from and
against all liability for Taxes of Company or any of its subsidiaries for any
taxable period ending after the Closing Date (except to the extent such
taxable period began before the Closing Date, in which case Buyer's indemnity
will cover only that portion of any such Taxes that do not relate to the
Pre-Closing Tax Period).
(c) In the case of any taxable period that includes (but does not
end on) the Closing Date (a "Straddle Period"), the Taxes of the Company and
its subsidiaries for the Pre-Closing Tax Period shall be determined based on
an interim closing of the books as of the close of business on the Closing
Date (and for such purpose, the taxable period of any partnership or other
pass-through entity in which the Company or any subsidiary holds a beneficial
interest shall be deemed to terminate at such time), except that the amount
of any such Taxes that are imposed on a periodic basis and are not based on
or measured by income or receipts shall be
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determined by reference to the relative number of days in the pre-Closing and
post-Closing portions of such Straddle Period. All determinations necessary
to effect the foregoing allocations shall be made in a manner consistent with
prior practice of the Company and its subsidiaries.
Section 6.2 PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS.
(a) If a claim for Taxes shall be made by any Taxing Authority in writing,
which, if successful, could reasonably result in an indemnity payment
pursuant to Section 6.1 hereof, the party seeking indemnification (the "Tax
Indemnified Party") shall upon receipt thereof promptly notify the other
party (the "Tax Indemnifying Party") in writing of such claim (a "Tax
Claim"). If the Tax Claim is delivered to the party that would be the Tax
Indemnifying Party for such Tax Claim, the Tax Indemnifying Party shall
promptly notify the Tax Indemnified Party, in writing, of the existence of
such claim. If notice of a Tax Claim ("Tax Notice") is not given to the Tax
Indemnifying Party by the Tax Indemni-
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fied Party within a reasonably sufficient period of time to allow the Tax
Indemnifying Party effectively to contest such Tax Claim, or in reasonable
detail to notify the Tax Indemnifying Party of the nature of the Tax Claim,
taking into account the facts and circumstances with respect to such Tax
Claim, the Tax Indemnifying Party shall not be liable to the Tax Indemnified
Party or any of its affiliates to the extent that the Tax Indemnifying
Party's position is actually prejudiced as a result thereof.
(b) With respect to any Tax Claim which might result in Seller
being obligated to make an indemnity payment to Buyer pursuant to Section
6.1(a) hereof (other than a Tax Claim relating to Taxes of the Company or any
of its subsidiaries for a Straddle Period) or any Tax Claim involving
Seller's Tax gain pursuant to the Election, Seller shall at its sole expense
control all proceedings in connection with such Tax Claim (including, without
limitation, selection of counsel) and without limiting the foregoing, may in
its sole discretion and at
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its sole expense pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any Taxing Authority with respect
thereto, and may, in its sole discretion, either pay the Tax claimed and xxx
for a refund where applicable law permits such refund suits or contest such
Tax Claim in any permissible manner. Buyer and the Company may participate
in, but not control, all proceedings relating to such Tax Claim at their sole
expense; PROVIDED, HOWEVER, that such participation shall not, under any
circumstances, require the disclosure of any Tax Return relating to a
Pre-Closing Tax Period of an affiliated, consolidated, combined or unitary
group which includes a company other than the Company and any of its
subsidiaries or any work papers relating thereto. In no case shall Buyer or
the Company settle or otherwise compromise any Tax Claim referred to in the
preceding sentence without Seller's prior written consent, which consent will
not be unreasonably withheld. In no case shall Seller settle or otherwise
compromise any Tax Claim referred to above which could have an
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adverse effect which is material to the Company and any of its subsidiaries
with respect to Taxes owed for any taxable period beginning after the Closing
Date or post-Closing portion of a Straddle Period, without Buyer's prior
written consent, which consent will not be unreasonably withheld. Buyer, the
Company and their affiliates shall reasonably cooperate with Seller in
contesting such Tax Claim, which cooperation shall include, without
limitation, the reasonable retention and (upon Seller's request) the
provision to Seller of copies of records and information which are reasonably
relevant to such Tax Claim, and making employees reasonably available to
provide additional information or explanation of any material provided
hereunder or to testify at proceedings relating to such Tax Claim, all at
Seller's expense.
(c) The contest of any Tax Claim that relates to Taxes of the
Company or any of its subsidiaries for a Straddle Period shall be conducted
and controlled jointly by Buyer and Seller, with either party having the
option with the other party's consent of
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ceding the entire defense to the other, and each party shall reasonably
cooperate (which cooperation shall not, under any circumstances, require the
disclosure of any Tax Return relating to a Pre-Closing Tax Period of an
affiliated, consolidated, combined or unitary group which includes a company
other than the Company and its subsidiaries or any work papers relating
thereto) and consult with the other party at its own expense and there shall
be no settlement or closing or other agreement with respect thereto without
the consent of the other party, which consent shall not be unreasonably
withheld.
Section 6.3 SECTION 338(h)(10) ELECTION. (a) Seller and Buyer
shall jointly make the Election on a timely basis in accordance with all
rules and regulations applicable to the Election. As soon as practicable
after the Closing, Seller and Buyer shall mutually prepare a Form 8023-A,
with all attachments, and Seller shall sign such Form 8023-A. Also, Buyer
and Seller shall cooperate with each other to take all actions necessary and
appropriate (including timely filing such additional forms,
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returns, elections, schedules and other documents on a joint or separate
basis) as may be required to effect and preserve a timely Election in
accordance with the provisions of Section 1.338(h)(10)-1 of the Treasury
Regulations (or any comparable provisions of state or local tax law) or any
successor provisions. Seller and Buyer shall report the purchase by Buyer of
the Shares pursuant to this Agreement consistent with the Election and shall
take no position inconsistent therewith in any Tax Return or any proceeding
before any Taxing Authority.
(b) In connection with the Election, not later than 70 days after
the Closing, Seller and Buyer shall, together and in good faith, determine
and agree upon the "Modified Aggregate Deemed Sale Price" of the assets of
the Company and the subsidiaries set forth in Section 6.1 of the Disclosure
Schedule (within the meaning of, and in accordance with Section
1.338(h)(10)-1(f) of the Treasury Regulations and any comparable provisions
of state or local tax law). Each of Seller and Buyer can terminate in
writing at any time negotiations with respect to
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the "Modified Aggregate Deemed Sale Price" within 70 days after the Closing.
In the event of such termination, Seller and Buyer shall, not later than 10
days after such termination, submit all such disputed items for resolution to
the Auditor which shall resolve the disputed items within 20 days thereafter.
The parties' agreement on the amount of "Modified Aggregate Deemed Sales
Price" and the Auditor's resolution of disputed items with respect thereto
shall be final and binding on the parties. In connection with the Election,
not later than 60 days after the later of the parties' agreement as to the
amount of the "Modified Aggregate Deemed Sales Price" or the Auditor's
resolution of disputed items with respect thereto, Buyer shall reasonably
determine the proper allocations (the "Allocations") of the "Modified
Aggregate Deemed Sale Price" among the assets of the Company and such
subsidiaries (in accordance with Section 338(b)(5) of the Code and the
Treasury Regulations promulgated thereunder and comparable provisions of
state or local tax law) and shall submit a statement (the "Section
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338 Statement") to Seller setting forth the foregoing. Seller may dispute
Buyer's determination of the Allocations within 40 days ("40 Day Review") of
delivery of the Section 338 Statement to Seller if Seller reasonably believes
that Buyer's determinations are unreasonable. In the event of such a
dispute, the parties shall commence negotiations (which either party may
terminate at any time) and shall attempt in good faith to resolve any such
dispute and any resolution of such dispute by them shall be final and binding
on them. If either party terminates such negotiations, or if the parties
cannot resolve any such dispute within 40 days of such delivery by Buyer to
Seller, the dispute shall be submitted no later than 10 days thereafter for
resolution to the Auditor which shall make its determination within 20 days
after submission to it of the dispute. Buyer and Seller shall be bound by
Buyer's determinations of the Allocations unless the Auditor determines that
they are unreasonable. The "Modified Aggregate Deemed Sales Price" and
Allocations shall be adjusted as appropriate to reflect
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the final and binding Closing Statement of Company Net Worth. In the event
that the parties cannot resolve any disputes over such adjustments within 20
days after the receipt of the final and binding Closing Statement of Company
Net Worth, the disputes shall be submitted no later than 10 days thereafter
for resolution to the Auditor which shall make its determination within 20
days after submission to it of the dispute. Seller and Buyer shall (i) be
bound by the final determination of the "Modified Aggregate Deemed Sale
Price" and such Allocations for purposes of determining any Taxes, unless
otherwise required by law, (ii) prepare and file their Tax Returns on a basis
consistent with such final determination of the "Modified Aggregate Deemed
Sale Price" and such Allocations, subject to adjustment to reflect (x)
Seller's selling expenses as a reduction of sales proceeds, and (y) Buyer's
acquisition expenses as an adjustment to Purchase Price, and (iii) take no
position inconsistent with such determination of the "Modified Aggregate
Deemed Sales Price" and Allocations on any
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applicable Tax Return or in any proceeding before any Taxing Authority. No
Tax Returns reflecting the Allocations shall be filed prior to the later of
(i) the last day of the 40 Day Review and (ii) if any items with respect to
the Allocations are in dispute, the Auditor's resolution of such disputed
items, except as otherwise required by law. In the event that any of the
Allocations is disputed by any Taxing Authority, the party receiving notice
of the dispute shall promptly notify the other party hereto concerning
resolution of the dispute.
Section 6.4 SURVIVAL OF TAX PROVISIONS. Any claim to be made
pursuant to this Article VI hereof must be made within 15 days of the
expiration (with valid extensions) of the applicable statutes of limitations
relating to the Taxes at issue. Buyer shall notify Seller in writing in the
event that Buyer extends the statute of limitations for any period that
begins prior to the Closing Date; PROVIDED, HOWEVER, the failure of Buyer to
provide such notification shall not affect the rights of Buyer, the Company
or any subsidiaries of the
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Company to indemnification under Section 6.1(a).
Section 6.5 RETURN FILINGS, REFUNDS AND CREDITS. (a) Seller shall
prepare or cause to be prepared and file or cause to be filed on a timely
basis all Tax Returns with respect to the Company and its subsidiaries for
taxable periods ending on or prior to the Closing Date. Seller shall timely
pay or cause to be paid all Taxes shown on all such Tax Returns and Buyer
and/or the Company shall pay to Seller from the reserves, if any, on the
Closing Statement of Company Business Net Worth for such Taxes an amount not
in excess of the amount paid by the Seller in respect of such Taxes. Such
Tax Returns shall be prepared in a manner consistent with past practices and
such Tax Returns which do not relate to or include a company other than the
Company and any of its subsidiaries ("Separate Returns") shall be provided to
Buyer to allow for Buyer's review prior to filing. Seller and Buyer agree to
consult and resolve in good faith any issue arising as a result of the review
of such Separate Returns. In the event the parties are unable to
88
resolve any dispute within ten days following the delivery of such Separate
Returns, the parties shall jointly request the Auditor to resolve any issue
at least five days before the due date of any such Separate Return, in order
that such Separate Return may be timely filed. The Seller and Buyer shall
each pay one-half of the Auditor's fees and expenses.
(b) Buyer shall prepare or cause to be prepared and shall file or
cause to be filed on a timely basis all Tax Returns with respect to the
business of the Company and its subsidiaries other than those set forth in
clause (a) of this Section 6.5. Buyer shall cause to be timely paid all
Taxes shown on all such Tax Returns related to Straddle Periods, except that
Seller shall be responsible for and shall pay any Taxes for which Seller has
agreed to indemnify Buyer pursuant to Section 6.1 hereof. Buyer shall
provide Seller with copies of any such Tax Returns covering Taxes for which
Seller has agreed to indemnify Buyer pursuant to Section 6.1 hereof at least
20 days prior to the due date thereof (giving
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effect to any extensions thereto), accompanied by a statement calculating
Seller's indemnification obligation pursuant to Section 6.1 hereof. Seller
shall pay to Buyer the amount of Seller's indemnification obligation within
10 days of receiving copies of such Tax Returns unless Seller objects to the
calculation of Seller's indemnification obligation in the statement provided
by Buyer. In the event of an objection, the parties will commence
negotiations to resolve such disagreement (which negotiations either party
may terminate at any time) and if necessary resolve any disputes in
accordance with Section 6.8 hereof.
(c) Seller, Buyer and the Company shall reasonably cooperate, and
shall cause their respective affiliates, officers, employees, agents,
auditors and representatives reasonably to cooperate, in preparing and filing
all Tax Returns (including amended returns and claims for refund), including
maintaining and making reasonably available to each other all records
necessary in connection with Taxes with respect to, and in resolv-
90
ing all disputes and audits relating to Taxes with respect to, all taxable
periods ending on or prior to or which include the Closing Date; provided
however, that cooperation as required by this clause (c) of Section 6.5 shall
not, under any circumstances, require the disclosure of any Tax Return
relating to a Pre-Closing Tax Period of an affiliated, consolidated, combined
or unitary group which includes a company other than the Company and its
subsidiaries or any work papers relating thereto. Buyer and Seller recognize
that Seller and its affiliates will need access, from time to time, after the
Closing Date, to certain accounting and Tax records and information held by
the Company or its subsidiaries to the extent such records and information
pertain to events occurring prior to the Closing Date; therefore, Buyer
agrees that (i) from and after the Closing Date until the seventh anniversary
of the Closing Date, Buyer shall, and shall cause the Company to, (A) use all
reasonable efforts to properly retain and maintain such records until such
time as Seller agrees that such retention and main-
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tenance is no longer necessary, and (B) allow Seller and its agents and
representatives (and agents or representatives of any of its affiliates), to
inspect, review and make copies of such records as Seller may reasonably deem
necessary or appropriate from time to time, such activities to be conducted
during normal business hours and at Seller's expense and (ii) from and after
the seventh anniversary of the Closing Date, Buyer shall not, and shall cause
the Company and its subsidiaries not to, dispose of any of such records
without first providing Seller with an opportunity to take possession of such
records or to make copies thereof, at Seller's expense, prior to such
disposal.
(d) Any refunds or credits of Taxes of the Company or any of its
subsidiaries for any taxable period ending on or before the Closing Date
shall be for the account of Seller but only to the extent that the amount of
any such refund or credit is in excess of the amount of such refund or credit
reflected on the Closing Statement of Company Business Net Worth. If such
Tax refunds
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or credits are received or used by or on behalf of Buyer or any affiliate or
successor thereto including the Company or any of its subsidiaries, then
Buyer shall, within 10 days of such receipt, pay the amount of such Tax
refund or credit to the Seller (reduced by any Taxes that the Buyer, the
Company or any of the Company's subsidiaries shall be required to pay with
respect thereto; PROVIDED, HOWEVER, that Buyer, the Company or any subsidiary
shall use its reasonable best efforts to minimize such Taxes if and to the
extent that any such efforts will not have an adverse effect which is
material to the Company and any of its subsidiaries with respect to Taxes
owed in any taxable period beginning after the Closing Date or the
post-Closing portion of a Straddle Period). Any refunds or credits of Taxes
of the Company or any of its subsidiaries for any taxable period beginning
after the Closing Date shall be for the account of Buyer. If such Tax refunds
or credits are received by or on behalf of Seller or any affiliate or
successor thereto, then Seller shall within 10 days of such receipt, pay
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the amount of such Tax refund or credit to Buyer (reduced by any Taxes that
the Seller shall be required to pay with respect thereto; PROVIDED, HOWEVER,
that the amount of such Tax refund or credit shall be net of Taxes only if
Seller uses its best efforts to minimize such Taxes). Any refunds or credits
of Taxes of the Company or any of its subsidiaries for any Straddle Period
shall be apportioned between Seller and Buyer on the same basis on which such
Taxes were apportioned under Section 6.1 hereof between Buyer and Seller.
Buyer shall, if Seller so requests and at Seller's sole expense, cause the
Company or any of its subsidiaries, as appropriate, to file for and use its
reasonable best efforts to obtain any refunds or credits to which Seller is
entitled under this Section 6.5 provided that the seeking of any such refund
or credit shall not have any adverse effect which is material to the Company
and any of its subsidiaries with respect to Taxes owed in any taxable period
beginning after the Closing Date or the post-Closing portion of a Straddle
Period. Buyer shall permit Seller to
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participate in, but not control, the prosecution of any such refund claim.
Buyer shall cause the Company or such subsidiary to forward to Seller any
such refund within 10 days after the refund is received (or reimburse Seller
for any such credit within 10 days after the relevant Tax Return is filed in
which the credit is actually applied against the Company or such subsidiary's
liability for Taxes).
Section 6.6 TRANSFER TAXES. Notwithstanding any other provisions
of this Agreement to the contrary, Seller shall prepare or cause to be
prepared and timely file or cause to be timely filed with the appropriate
Taxing Authority all Tax Returns with respect to all transfer, stamp,
duties, recording, value added tax and similar taxes imposed in connection
with Buyer's purchase of the Shares pursuant to this Agreement. As provided
in Section 4.7 hereof, Seller shall pay or cause to be paid all such Taxes.
Section 6.7 TERMINATION OF TAX SHARING AGREEMENTS. Seller hereby
agrees and covenants that any Tax
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sharing, indemnity, allocation, or similar agreements to which the Company or
any of its subsidiaries is a party will cease to apply to the Company or any
of its subsidiaries as of the Closing Date and, after the Closing Date, the
Buyer, the Company and its subsidiaries will not be bound by or have any
liability thereunder.
Section 6.8 DISPUTES. If the parties disagree as to (i) the
calculation of any Tax or (ii) the amount of or liability for any Tax-related
payment to be made under this Article VI or (iii) the definition of "adverse
effect which is material to the Company and any of its subsidiaries" as used
in Sections 6.2(b) and 6.5(d), the parties shall cooperate in good faith to
resolve any such dispute, and any agreed-upon amount shall be paid to the
appropriate party. A party may, at any time, terminate, in writing,
discussions with respect to such dispute. Not later than 10 business days
after either Seller or Buyer shall have terminated such discussion, all such
disputed items set forth in clauses (i) and (ii) above shall be submitted for
resolution to the Auditor. The
96
decision of such firm shall be final and binding. The fees and expenses
incurred in connection with such decision shall be shared by Seller and Buyer
in accordance with the final allocation of the Tax liability in dispute.
Following the decision of the Auditor, the parties shall each take or cause
to be taken any action that is necessary or appropriate to implement such
decision, including, without limitation, the filing of amended Tax Returns
and the prompt payment of underpayment or overpayment, with interest
calculated on such underpayment or overpayment at the interest rate specified
in Section 6621(a)(2) of the Code (or such successor provision) from the date
such payment was due.
Section 6.9 DETERMINATION AND CHARACTERIZATION OF PAYMENTS. The
payments made pursuant to this Article VI shall be treated as adjustments to
the Purchase Price.
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ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1 CONDITIONS TO THE OBLIGATIONS OF ALL PARTIES. The
obligations of Seller and Buyer to effect the transactions contemplated by
this Agreement are subject to the satisfaction or waiver, on or before the
Closing Date, of each of the following conditions:
(a) no statute, rule or regulation shall have been enacted or
promulgated and no injunction or other order shall have been entered, and not
vacated, by a court or administrative agency of competent jurisdiction in any
proceeding or action, which enjoins, restrains, makes illegal or prohibits
consummation of the transactions contemplated hereby;
(b) all waiting periods under any law, regulation, rule or order
applicable to, or deemed to be applicable to, any of the transactions
contemplated by this Agreement, including without limitation the HSR Act,
shall have expired or been terminated, and all approvals required thereunder
shall have been granted, including
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but not limited to any approvals required from the Mexican Comision Federal
de Competencia; if approval under any such law is subject to the satisfaction
of any material conditions, then each such condition shall have been approved
by the party affected by such condition, which approval shall not be
unreasonably withheld; and
(c) Seller shall have received (i) all necessary consents or
waivers required under the Seller Credit Agreement and (ii) the release of
the Company as a guarantor under the Private Placement Notes and the Seller
Credit Agreement.
Section 7.2 CONDITIONS TO THE OBLIGATIONS OF SELLER. The
obligations of Seller to effect the transactions contemplated by this
Agreement are subject to the satisfaction or waiver by Seller, on or before
the Closing Date, of the following conditions:
(a) the representations and warranties of Buyer contained herein
shall have been true and correct in all material respects when made and as of
the Closing Date, as if made on the Closing Date;
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(b) Buyer shall have performed or complied in all material respects
with all agreements, covenants and conditions required by this Agreement to
be performed or complied with by it at or prior to the Closing; and
(c) Seller shall have been furnished with a certificate of an
executive officer of Buyer, dated the Closing Date, certifying to the
foregoing.
Section 7.3 CONDITIONS TO THE OBLIGATIONS OF BUYER. The
obligations of Buyer to effect the transactions contemplated by this
Agreement are subject to the satisfaction or waiver by Buyer, on or before
the Closing Date, of the following conditions:
(a) the representations and warranties of Seller contained herein
shall have been true and correct in all material respects when made and as of
the Closing Date, as if made on the Closing Date;
(b) Seller shall have performed or complied in all material
respects with all agreements, covenants and conditions required by this
Agreement to be performed or
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complied with by it at or prior to the Closing; and
(c) Buyer shall have been furnished with a certificate of an executive
officer of Seller, dated the Closing Date, certifying to the foregoing.
ARTICLE VIII
TERMINATION
Section 8.1 TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(a) by mutual consent of Seller and Buyer;
(b) by Buyer after April 30, 1998 (which date shall be
automatically extended to June 30, 1998 if the conditions set forth in
Section 7.1(b) or (c) have not been satisfied or waived and are still capable
of being satisfied) if any of the conditions provided for in Sections 7.1 or
7.3 hereof shall not have been met or waived in writing by Buyer prior to or
on such date; or
(c) by Seller after April 30, 1998 (which date shall be
automatically extended to June 30, 1998 if the conditions set forth in
Section 7.1(b) or (c) have not
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been satisfied or waived and are still capable of being satisfied) if any of
the conditions provided for in Sections 7.1 or 7.2 hereof shall not have been
met or waived in writing by Seller prior to or on such date.
If any party has caused a delay in closing the transactions
contemplated hereby by its failure to perform any covenant hereunder, which
failure has resulted in the failure of a condition contained in Article VII
hereof, such party shall not be entitled to terminate this Agreement pursuant
to subsections (b) or (c) of this Section, as the case may be, until the
expiration of a period following the date specified in such subsection
corresponding to the period of delay so caused.
Section 8.2 EFFECT OF TERMINATION. In the event of termination of
this Agreement pursuant to this Article VIII, this Agreement shall
immediately terminate and be of no further force and effect, and there shall
be no liability on the part of Buyer or Seller (except for liabilities
arising from willful breach of this Agreement prior to such termination);
PROVIDED, HOWEVER, that
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Sections 4.4, 4.5, 10.4, 10.8 and 10.10 hereof and this Article VIII shall
survive the termination hereof; PROVIDED FURTHER, that all information
received by Buyer with respect to the Company and its subsidiaries shall be
treated in accordance with the Confidentiality Agreement dated November 17,
1997 between Buyer and BancAmerica XXXXXXXXX XXXXXXXX (the "Confidentiality
Agreement"), which shall remain in full force and effect notwithstanding the
execution or termination of this Agreement.
ARTICLE IX
INDEMNIFICATION
Section 9.1 SURVIVAL. The representations and warranties: (i)
contained in this Agreement (except for those set forth in Sections 2.13 and
2.14 hereof) shall survive the Closing and shall continue in full force and
effect for a period of eighteen months (18) months thereafter; (ii) contained
in Section 2.13 hereof shall not survive the Closing and (iii) contained in
Section 2.14 hereof shall survive the Closing and shall continue in
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full force and effect for a period of three (3) years, after which such
representations and warranties shall terminate and have no further force or
effect. The periods set forth in clauses (i), (ii) and (iii) above are
collectively referred to herein as the "Limitations Period." No action or
proceeding may be brought with respect to any of the representations and
warranties hereunder unless written notice thereof, setting forth in
reasonable detail the claimed misrepresentation or breach of warranty, shall
have been delivered prior to the expiration of the applicable Limitations
Period to the party alleged to have breached such representation or warranty.
The covenants and agreements contained herein to be performed or complied
with after the Closing shall survive indefinitely or for such shorter term as
is specified in such covenants and agreements.
Section 9.2 INDEMNIFICATION BY SELLER. Seller shall indemnify,
defend and hold harmless Buyer and its affiliates against any and all losses,
damages, deficiencies, suits, claims, demands, judgments, costs, expenses
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or other liabilities including, without limitation, reasonable attorneys'
fees and related expenses ("Losses") resulting from, arising from, or
relating to (i) any breach of a representation or warranty of Seller
contained in Article II of this Agreement except those representations and
warranties of Seller contained in Section 2.13 hereof, and (ii) any failure
by Seller to perform or comply with any agreement or obligation contained in
this Agreement.
Section 9.3 INDEMNIFICATION BY BUYER. Buyer shall indemnify,
defend and hold harmless Seller against any and all Losses resulting, arising
from, or relating to (i) any breach of a representation or warranty of Buyer
contained in Article III of this Agreement, (ii) any failure by Buyer to
perform or comply with any agreement or obligation contained in this
Agreement, and (iii) all liabilities and obligations relating to the Company
and its subsidiaries, except to the extent that Seller is required to
indemnify Buyer in respect thereof (without regard to any deductible or cap
on the dollar amount of
105
indemnity).
Section 9.4 LIMITATIONS OF CLAIMS. (a) Indemnification pursuant to
this Article IX with respect to a breach of the representations and
warranties set forth in Article II or Article III hereof shall be available
to any party only (i) if any such Loss or series of related Losses is greater
than $10,000 and (ii) to the extent such party's aggregate Losses exceed the
sum of $1,500,000; provided that, for purposes of computing Losses in respect
of this Article IX, any reference to materiality or Material Adverse Effect
in the representations and warranties shall be disregarded, and, provided,
further, that indemnification with respect to a breach of the representations
and warranties set forth in Section 2.14 hereof shall be available to Buyer
and its affiliates to the extent Buyer's aggregate Losses exceed the sum of
$500,000.
(b) Anything to the contrary herein notwithstanding, the aggregate
indemnification to be provided by any party pursuant to Article VI hereof or
this Article
106
IX shall not exceed the Purchase Price, as adjusted by any payments pursuant
to Section 1.4 hereof.
(c) The amount of any Loss for which indemnification is provided
under this Article IX shall be net of (i) any amounts recovered by the
Indemnified Party (as defined below) pursuant to any indemnification by or
indemnification agreement with any third party and (ii) any insurance
proceeds or other cash receipts or sources of reimbursement received as an
offset against such Loss (and no right of subrogation shall accrue to any
third party indemnitor, insurer or reimburser hereunder); provided that the
Indemnified Party shall use its best efforts (at the sole cost and expense of
the Indemnifying Party, which shall reimburse third party expenses as they
are incurred) to receive the benefits of any such indemnification and
insurance and, upon such receipt, to pay such funds over to the Indemnifying
Party as reimbursement of any indemnification payment hereunder. If the
amount to be netted hereunder from any payment required under Sections 9.2 or
9.3 above is determined after
107
payment by the Indemnifying Party (as defined below) of any amount required
to be paid to an Indemnified Party pursuant to this Article IX, the
Indemnified Party shall repay to the Indemnifying Party, promptly after such
determination, any amount that the Indemnifying Party would not have had to
pay pursuant to this Article IX had such determination been made at the time
of such payment. Indemnification payments hereunder shall be treated as
adjustments to the Purchase Price.
(d) Anything to the contrary herein notwithstanding, if an amount
with respect to which any claim is made under Article VI or Article IX (an
"Indemnity Claim") gives rise to a current Tax deduction to the party (the
"Indemnified Party") making the Indemnity Claim (as opposed to an increase in
the Tax basis of the Indemnified Party's assets), then the amount of the
related indemnity payment shall be (x) reduced by the amount of any Tax
Benefit whenever utilized by the Indemnified Party as a result of such Tax
deduction in respect of such Indemnity Claim, and (y) increased by the amount
108
of any Tax Detriment whenever suffered by the Indemnified Party as a result
of the receipt of such indemnity payment (including by reason of a reduction
in the Tax basis of the Indemnified Party's assets). For purposes of this
Section 9.4, a "Tax Benefit" means an amount by which the Tax liability or
Tax sharing liability of a party is reduced (including, without limitation,
by deduction, reduction of income by virtue of increased Tax basis or
otherwise, entitlement to refund, credit or otherwise) plus any related
interest received from the relevant Taxing Authority, and a "Tax Detriment"
means an amount by which the Tax liability or Tax sharing liability of a
party is increased plus any related interest paid to the relevant Taxing
Authority. For purposes of determining Tax detriment, the "amount by which
the Tax liability or Tax sharing liability of a party is increased" in the
case where such increase is attributable to a reduction in the Tax basis of
assets shall be the present value of the Amount amortized or depreciated over
the Adjustment Period (properly weighted to take into account the rele-
109
vant amortization or depreciation method) using the Interest Rate. The
Amount shall mean the amount that Tax basis is reduced by reason of the
receipt of an indemnity payment in respect of an Indemnity Claim. The
Adjustment Period shall mean the remaining life of the asset or assets whose
Tax basis has been so reduced at the time of such reduction using the
amortization or depreciation method applicable to such asset or assets at
such time. The Interest Rate shall mean the prime rate as reported in the
Wall Street Journal on the date which is three business days prior to the
date such indemnity payment in respect of such Indemnity Claim is made.
Where a party has other losses, deductions, credits or items available to it
such that it would not have any Tax liability or Tax sharing liability for a
Tax year, the determination of any Tax Benefit or Tax Detriment (as the case
may be) of such party for such Tax year shall be calculated by comparing (A)
the Tax liability or Tax sharing liability of such Party, computed without
regard to any income, gains, losses, credits, deductions, or items relating
to
110
such Indemnity claim and such indemnity payment (as applicable), to (B) the
Tax liability or Tax sharing liability of such party, computed after taking
into account any income, gains, losses, deductions, credits or items relating
to such Indemnity Claim and such indemnity payment (as applicable). In the
event that there shall be a determination disallowing all or any portion of a
Tax Benefit or a Tax Detriment, the amount of the related indemnity payment
shall be recalculated in accordance with the terms of this Section 9.4(d),
taking into account such disallowance, and the Indemnifying Party shall be
liable to pay to the Indemnified Party the amount of any resulting upward
adjustment to the amount of the related indemnity payment, and the
Indemnified Party shall be liable to pay to the Indemnifying Party the amount
of any resulting downward adjustment to the amount of the related indemnity
payment.
(e) Any claim made under or with respect to this Agreement or the
subject matter hereof, including statutory and common law claims, shall be
subject to the
111
provisions set forth in this Section 9.4 or, with respect to Taxes, Article VI
hereof.
Section 9.5 PROCEDURES. (a) A party seeking indemnification
pursuant to Sections 9.2 or 9.3 above or Section 4.9 hereof (an "Indemnified
Party") shall give prompt notice to the party from whom such indemnification
is sought (the "Indemnifying Party") of the assertion of any claim or
assessment, or the commencement of any action, suit, audit or proceeding, by
a third party in respect of which indemnity may be sought hereunder (a "Third
Party Claim") and will give the Indemnifying Party such information with
respect thereto as the Indemnifying Party may reasonably request, but no
failure to give such notice shall relieve the Indemnifying Party of any
liability hereunder (except to the extent the Indemnifying Party has
suffered actual prejudice thereby). Thereafter, the Indemnified Party shall
deliver to the Indemnifying Party, within five business days after the
Indemnified Party's receipt thereof, copies of all notices and documents
(including court papers) received by the Indem-
112
nified Party relating to the Third Party Claim. The Indemnifying Party shall
have the right, exercisable by written notice (the "Notice") to the
Indemnified Party within 10 days of receipt of notice from the Indemnified
Party of the commencement of or assertion of any Third Party Claim, to assume
the defense of such Third Party Claim, using counsel selected by the
Indemnifying Party and reasonably acceptable to the Indemnified Party.
Should the Indemnifying Party so elect to assume the defense of a Third Party
Claim, the Indemnifying Party will not be liable to the Indemnified Party for
legal expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof. If the Indemnifying Party shall fail to assume the
defense of the Third Party Claim within such 10-day period, the Indemnified
Party shall have the right to undertake the defense of such Third Party Claim
on behalf of the Indemnifying Party. If the Indemnifying Party elects to
assume the defense of any such Third Party Claim, the Indemnified Party shall
not admit any liability with respect to, or
113
settle, compromise or discharge, such Third Party Claim without the
Indemnifying Party's prior written consent. If the Indemnifying Party does
not elect to assume the defense of any such Third Party Claim, the
Indemnified Party shall not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the Indemnifying
Party's prior written consent, which consent will not be unreasonably
withheld; provided that, if the Indemnifying Party fails to reaffirm its
obligations to provide indemnification in respect of such Third Party Claim
if requested to do so by the Indemnified Party, the Indemnified Party may
settle, compromise or discharge such Third Party Claim on commercially
reasonable terms without the consent of the Indemnifying Party.
(b) The Indemnifying Party or the Indemnified Party, as the case
may be, shall in any event have the right to participate, at its own expense,
in the defense of any Third Party Claim which the other is defending.
(c) The Indemnifying Party, if it shall have
114
assumed the defense of any Third Party Claim in accordance with the terms
hereof, shall have the right, upon five days prior written notice to the
Indemnified Party, to consent to the entry of judgment with respect to, or
otherwise settle such Third Party Claim provided the Indemnifying Party
agrees that as between the Indemnifying Party and the Indemnified Party, the
Indemnifying Party shall be solely obligated to satisfy and discharge such
judgment or settlement unless the Third Party Claim involves equitable or
other non-monetary damages. In the event such judgment or settlement
involves equitable or non-monetary damages and in the reasonable judgment of
the Indemnified Party such judgment or settlement would have a continuing
material adverse effect on the Indemnified Party's business (including any
material impairment of its relationships with customers and suppliers), the
consent to the entry of such judgment or such settlement may only be made
with the written consent of the Indemnified Party, which consent shall not be
unreasonably withheld.
115
(d) Whether or not the Indemnifying Party chooses to defend or
prosecute any Third Party Claim, all the parties hereto shall cooperate in
the defense or prosecution thereof and shall furnish such records,
information and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested in
connection therewith. Such cooperation shall include access during normal
business hours afforded to the Indemnifying Party to, and reasonable
retention by the Indemnified Party of, records and information which are
reasonably relevant to such Third Party Claim, and making employees available
on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder, and the Indemnifying Party
shall reimburse the Indemnified Party for all its reasonable out-of-pocket
expenses in connection therewith.
Section 9.6 EXCLUSIVITY OF REMEDIES. As between Seller, on the
one hand, and Buyer, on the other hand, the remedies set forth in this
Article IX and
116
Article VI hereof shall be the exclusive remedies with respect to all claims
for which indemnification may be sought, except for claims relating to fraud
or deceit under common law. As of the Closing, each party will release and
forever discharge the other party's officers, directors, employees, agents
and affiliates (other than Buyer's or Seller's subsidiaries), and such
affiliates' officers, directors, employees and agents from any and all rights
to seek reimbursement for or to make any claim against such other person in
respect of any Losses incurred in connection with the execution, delivery and
performance of this Agreement (including the accuracy of the representations
and warranties contained herein) and the transactions contemplated hereby,
provided that such release and discharge shall not apply to any other
matters. This Section 9.6 shall not restrict the rights of either party to
seek and obtain injunctive relief to specifically enforce the other party's
obligations hereunder or constitute a release or waiver of any person or
entity for actions taken by such person or entity after
117
the Closing.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 DISCLOSURE SCHEDULES; EXHIBITS. Matters reflected in
the Schedules and Exhibits hereto are not necessarily limited to those
matters that Seller believes are required by this Agreement to be disclosed
herein or therein. Such additional matters are provided for informational
purposes only, and such inclusion shall not be deemed to be an acknowledgment
by Seller that such items would have a Material Adverse Effect, nor shall
such inclusion be applied to affect or modify the definition of the term
Material Adverse Effect for purposes of this Agreement.
Section 10.2 AMENDMENT AND MODIFICATION. This Agreement may be
amended, modified or supplemented only by written agreement of the parties
hereto.
Section 10.3 WAIVER OF COMPLIANCE. Any party hereto may waive
compliance by the other party or parties
118
with any of the agreements or conditions contained herein. Any such waiver
shall be valid only if set forth in a written instrument signed by the party
or parties to be bound thereby.
Section 10.4 NOTICES. All notices and other communications given
or made pursuant hereto shall be in writing and shall be deemed to have been
duly given on the date delivered, if delivered personally, on the fifth
business day after being mailed by registered or certified mail (postage
prepaid, return receipt requested) or on the business day after being sent by
reputable overnight courier (delivery prepaid), in each case, to the parties
at the following addresses, or on the date sent and confirmed by electronic
transmission to the facsimile number specified below (or at such other
address or
119
facsimile number for a party as shall be specified by notice given in
accordance with this Section 11.4):
(a) if to Seller, to:
The Xxxxxxx Company, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
The Xxxxxxx Company, Inc.
0000 Xxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxx 00000
Attention: Corporate Secretary
Tel: (000) 000-0000
Fax: (000) 000-0000
and
Skadden, Arps, Slate, Xxxxxxx
& Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
120
(b) if to Buyer, to:
Ranco Incorporated of Delaware
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: President
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxx plc
Xxxxx Xxxxx
0-0 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx XX0 0XX
Attention: Chief Legal Officer
Tel: 000-00-0000-000-000
Fax: 000-00-0000-000-000
with a copy to:
Fried Xxxxx Xxxxxx Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
(c) if to Guarantor, to:
Xxxxx plc
Xxxxx Xxxxx
0-0 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx XX0 0XX
Attention: Chief Legal Officer
121
Tel: 000-00-0000-000-000
Fax: 000-00-0000-000-000
with a copy to:
Fried Xxxxx Xxxxxx Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
Section 10.5 PARTIES IN INTEREST; ASSIGNMENT. This Agreement
shall be binding upon and inure to the benefit of each party hereto and its
respective successors and permitted assigns, and no provision of this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, except as provided in Article IX hereof. Neither
this Agreement nor any of the rights, interests or obligations hereunder may
be assigned, directly or indirectly, by any party hereto without the prior
written consent of the other parties hereto. Notwithstanding the foregoing,
Seller may assign any or all of its rights or
122
interests under this Agreement to a wholly-owned subsidiary; PROVIDED,
HOWEVER, Seller may not so assign any of its obligations hereunder, and Buyer
may assign its rights hereunder (but such assignment will not relieve it of
any of its obligations) to any wholly-owned subsidiary of Guarantor.
Section 10.6 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which when executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
Section 10.7 CONSTRUCTION; INTERPRETATION. (a) Any rule of law
that would require interpretation of any claimed ambiguities in this
Agreement against the party that drafted it shall have no application and is
expressly waived.
(b) For purposes of this Agreement, all references to the
"appropriate Seller or Company personnel" shall refer solely to the
appropriate corporate officer of Seller or the Company listed in Section
10.7(b) of the
123
Disclosure Schedule of whom due inquiry was made and "knowledge" of Seller
shall be deemed to include only the actual current knowledge of such
corporate officer of Seller or the Company.
(c) References made to an "Exhibit" or a "Schedule," unless
otherwise specified, refer to an Exhibit or Schedule, respectively, attached
to this Agreement, and references made to an "Article" or a "Section," unless
otherwise specified, refer to an Article or Section, respectively, of this
Agreement or the Disclosure Schedule. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement.
(d) As used herein, the plural form of any noun shall include the
singular and the singular shall include the plural, unless the context
requires otherwise. Each of the masculine, neuter and feminine forms of any
pronoun shall include all such forms unless the
124
context requires otherwise.
Section 10.8 ENTIRE AGREEMENT. Except for the Confidentiality
Agreement, this Agreement (together with the Disclosure Schedule, Exhibits,
and the further agreements expressly referred to herein) and the License
Agreement constitute the entire agreement of the parties hereto with respect
to the subject matter hereof and supersede all prior agreements and
undertakings, both written and oral, between or among the parties, or any of
them, with respect to the subject matter hereof.
Section 10.9 SEVERABILITY. If any term or other provision of this
Agreement, or any portion thereof, is invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other terms and provisions
of this Agreement, or the remaining portions thereof, shall nevertheless
remain in full force and effect. Upon such determination that any such term
or other provision, or any portion thereof, is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this
125
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions
contemplated hereby are consummated to the fullest possible extent.
Section 10.10 GOVERNING LAW. This Agreement shall be governed by
the laws of the State of New York as to all matters, without regard to the
conflict of laws principles thereof.
Section 10.11 GUARANTEE. Guarantor hereby unconditionally and
irrevocably guarantees all of the obligations and liabilities of Buyer under
this Agreement, including but not limited to the full and prompt payment of
all sums that now are or may hereafter become due and payable from Buyer to
Seller under this Agreement and the full and prompt performance of all
present and future obligations and liabilities of Buyer to Seller under this
Agreement. Guarantor further promises to pay all such sums due Seller under
this guarantee promptly on demand, without deduction for any claim or set-off
or counterclaim and regardless of whether recourse has first
126
been sought against Buyer. This is a guarantee of payment and not of
collection.
127
IN WITNESS WHEREOF, Seller, Guarantor and Buyer have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
THE XXXXXXX COMPANY, INC.
By: Xxxx Xxxxxxx
----------------------------------
Name: Xxxx Xxxxxxx
Title: Executive Vice President/
General Counsel
XXXXX PLC
By: XXXXX X. XXXXXXX
----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Director
RANCO INCORPORATED OF DELAWARE
By: XXXXXXX X. XXXXX
----------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President
EXHIBIT A
LICENSE AGREEMENT
THIS AGREEMENT, made and entered into as of [___________], 1998 by
and among THE XXXXXXX COMPANY, INC., a Delaware corporation (hereinafter
referred to as "Licensor"), XXXXX PLC, an English corporation (hereinafter
referred to as "Guarantor"), and RANCO INCORPORATED OF DELAWARE, a Delaware
corporation and a wholly-owned subsidiary of Guarantor (hereinafter referred
to as "Licensee").
WITNESSETH:
WHEREAS Licensee desires to obtain a license to use the Licensed
Xxxx (as defined below) in connection with the manufacture, merchandising,
promotion, advertising, sale and distribution of the Merchandise (as defined
below), and Licensor is willing to grant such license subject to all the
terms of this Agreement:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, Licensor and Licensee agree as follows:
I DEFINITIONS
The following definitions shall be applicable throughout this
Agreement:
1.1 The term "Licensed Xxxx" shall mean the trademark "COLEMAN,"
and the variations thereof and associated logos set forth in Schedule A.
1.2 The term "Licensed Merchandise" shall mean Merchandise (as
that term is defined in Section 1.C below) that is approved by Licensor in
accordance with
Section 4 hereof and is sold or promoted by Licensee under the Licensed Xxxx.
1.3 The term "Merchandise" shall mean smoke alarms, carbon
monoxide detectors, heat detectors, flammable gas detectors and indoor air
quality monitors.
1.4 The term "Territory" shall mean the world.
1.5 The term "Net Sales" shall mean the total invoiced price of
the Licensed Merchandise shipped by Licensee to its customers, less federal,
state and local sales, use and excise taxes, freight and insurance (if
separately stated), and actual returns. Net Sales in any quarter shall be
reduced by returns made in such quarter, regardless of when the sales of such
returned items were made. For purposes of calculating Net Sales in the case
of "direct ship", "first-cost" or F.O.B. sales made by Licensee hereunder,
any Licensed Merchandise shipped by Licensee's contract manufacturer directly
to a customer of Licensee shall be valued at Licensee's customary wholesale
price to its trade customers, regardless of the actual invoiced price to the
customer.
1.6 The term "Stock Purchase Agreement" shall mean the Stock
Purchase Agreement between Licensor and Licensee dated February 18, 1998.
1.7 The term ("Term") shall mean the duration of this Agreement,
as set forth in Section 3, and shall include any renewal period(s) as
described therein.
II LICENSE GRANT
2.1 Licensor hereby grants to Licensee an exclusive license
throughout the Territory during the Term to all of Licensor's right, title
and interest in and to the Licensed Xxxx for use as a trademark and service
xxxx, solely in conjunction with the term "Xxxxxxx," for use solely in
connection with the manufacture, advertising, merchandising, promotion,
publicity,
2
use, sale, distribution and servicing of Licensed Merchandise, subject to all
the terms and conditions of this Agreement. It is agreed that during the
Term, Licensor shall not grant to any other entity, nor shall Licensor have,
the right to use the word "Xxxxxxx" alone, or with other terms or symbols, in
connection with Merchandise. It is further agreed that should the Term last
through, and end upon the conclusion of, a Second Renewal Term, then for one
(1) year following the end of the Term, Licensor shall not use the word
"Xxxxxxx" alone, or with other terms or symbols, in connection with the
advertising, promotion, publicity, distribution or sale of Merchandise, nor
license any other entity to so use the word or otherwise allow such use in
return for compensation.
2.2 Licensee accepts said grant, and agrees to use its reasonable
efforts to exploit the rights granted herein including, without limitation,
maintaining a sales force or distribution network sufficient to provide
effective distribution of the Licensed Merchandise, and assisting with
Licensor's advertising program. It is agreed that nothing herein shall
require Licensee to sell Licensed Merchandise at a loss or shall interfere
with Licensee's right to sell Merchandise which is not Licensed Merchandise.
2.3 Licensee may use the Licensed Xxxx only in connection with the
manufacture, advertising, merchandising, promotion, publicity, use, sale,
distribution and servicing of Licensed Merchandise. No license is granted
hereunder for the use of the Licensed Xxxx for any purpose other than upon or
in connection with the Licensed Merchandise.
2.4 Licensor makes no representation or warranty as to any rights
to use the Licensed Xxxx outside of the United States and Canada.
3
2.5 Licensee shall have no right to sublicense the Licensed Xxxx,
except that Licensee may sublicense the Licensed Xxxx to any wholly-owned
subsidiary of Guarantor, so long as such subsidiary remains a wholly-owned
direct or indirect subsidiary of Guarantor. In the event that Licensee shall
grant a sublicense as permitted hereby, Licensee shall be jointly and
severally liable along with any such authorized sublicensee to comply in all
respects with all requirements of this Agreement. In addition, Licensor
shall have the direct right under any such sublicense agreement to exercise
direct control over the quality of Licensed Merchandise and related materials
to the same extent as it has under this Agreement.
III TERM
3.1 This Agreement shall become effective as of the date first
above written (the "Effective Date") and shall continue for a period of five
(5) years, terminating on the fifth anniversary of the Effective Date (the
"Initial Term"), unless terminated prior thereto in accordance with the terms
and conditions hereof.
3.2 Licensee shall have the option to renew this Agreement for two
additional five (5) year periods (the "First Renewal Term" and "Second
Renewal Term," respectively) by giving Licensor written notice at least one
hundred and twenty (120) days prior to the end of the Initial Term or the
First Renewal Term, respectively; PROVIDED that Licensee is in compliance in
all material respects with all terms and conditions of this Agreement. The
First Renewal Term shall commence upon the date of expiration of the Initial
Term and shall terminate on the fifth anniversary of such date; the Second
Renewal Term shall commence upon the date of expiration of the First Renewal
Term and shall terminate on the fifth anniversary of such date.
IV LICENSED MERCHANDISE AND QUALITY CONTROL
4
4.1 Licensee agrees that Licensed Merchandise and its Packaging
will be designed, manufactured, advertised, promoted, publicized, distributed
and sold only in a manner which (i) is consistent with Licensor's standards
for the Licensed Merchandise in the six (6) months prior to the date hereof,
(ii) is consistent with the safety and quality standards of the industry
standards for the Licensed Merchandise, and (iii) is commensurate with the
prestige and reputation of the Licensed Xxxx.
4.2 Licensee must obtain the prior written approval of Licensor
for all material changes in designs, specifications, colors, materials and
contract manufacturers of all Merchandise and components thereof intended to
be sold as Licensed Merchandise, including any labels, instructions,
packaging, containers and displays (said labels, instructions, packaging,
containers and displays hereinafter collectively "Packaging") intended to be
utilized in connection with the Licensed Merchandise, to the extent that any
such changes affect the safety, performance or quality standards of such
Licensed Merchandise and Packaging or the use of the Licensed Xxxx thereon.
The designs, specifications, colors, materials and contract manufacturers for
the Merchandise and Packaging sold by Licensor immediately prior to the date
hereof shall be deemed pre-approved.
4.3 From time to time during the Term, Licensee shall submit to
Licensor design change proposals for any items or styles of Licensed
Merchandise and Packaging proposed by Licensee, which materially differ from
the Licensed Merchandise and Packaging sold by Licensor immediately prior to
the date hereof, to the extent such design change proposals or Packaging
affect the safety, performance or quality standards of the Licensed
Merchandise or Packaging or the use of the Licensed Xxxx thereon. Within
ten (10) business days of Licensor's receipt of such design proposals of the
Li-
5
censed Merchandise and Packaging, Licensor will review them and Licensee will
provide its full assistance and cooperation to Licensor in such review,
including making available a qualified person(s) appointed by Licensee to
meet with Licensor and assist Licensor in its review. Not later than the end
of such ten (10) business day period, Licensor shall notify Licensee of which
if any of the design proposals or Packaging Licensor has approved and of
objections, if any, to any aspect of the design proposals or Packaging.
Failure to notify Licensee of approval or objections within said ten (10)
business day period shall be deemed an approval.
4.4 The Licensed Merchandise and Packaging manufactured, sold,
advertised or promoted by Licensee shall be identical to the Licensed
Merchandise and Packaging approved by Licensor pursuant to Section 4.B with
respect to the safety, performance or quality standards of such Licensed
Merchandise and Packaging and the use of the Licensed Xxxx thereon.
Immediately upon commencement of commercial production of any Licensed
Merchandise and Packaging, Licensee shall notify Licensor and permit Licensor
to inspect a production sample of each stock keeping unit (an "SKU") of the
Licensed Merchandise and Packaging. If, in Licensor's judgment, the
production sample is "Nonconforming" (i.e., not substantially identical to
the previously-approved Licensed Merchandise and Packaging in the
above-mentioned respects), Licensor shall promptly notify Licensee and shall
specify in which respects the sample is Nonconforming. Upon receipt of such
notice, Licensee shall immediately stop production and sale of the
Nonconforming Licensed Merchandise and Packaging until a production sample is
submitted and approved by Licensor.
4.5 For purposes of monitoring quality, Licensee agrees to permit
Licensor to inspect samples of each SKU of Licensed Merchandise and related
Packaging
6
from time to time, upon request throughout the Term. In addition, upon
request Licensee shall provide to Licensor, free of charge, at least one
sample of each SKU (not including color variations) of Licensed Merchandise
and related Packaging for presenting Licensor's licensing activities to
corporate and business constituencies and for display purposes at Licensor's
headquarters.
4.6 Licensee will comply with all laws, rules, regulations and
requirements of any governmental or administrative body (including, without
limitation, the Federal Trade Commission and the Consumer Product Safety
Commission), which may be applicable to the manufacture, advertising,
merchandising, packaging, publicity, promotion, sale, distribution, shipment,
import and export of the Licensed Merchandise, its Packaging and its
componentry.
4.7 Licensor and its duly authorized representatives shall have
the right, during normal business hours and upon reasonable notice and the
execution of a confidentiality agreement with Licensee substantially in the
form attached hereto as Exhibit 1, once per quarter during the Term to
inspect all manufacturing facilities utilized by Licensee (and its
contractors and suppliers to the extent Licensee may use the same) and to
examine all processes and records relating to the manufacturing, packaging,
warehousing and distribution of the Licensed Merchandise and Packaging
including, without limitation, the right to open and inspect shipping
cartons, and make such other tests and inspections as it shall deem necessary
to insure the quality of the Licensed Merchandise and Packaging. Licensee
shall take all necessary steps requested by Licensor to correct any
deficiencies that might affect the quality of the Licensed Merchandise and
Packaging.
4.8 Licensee agrees to use its best efforts to safeguard the
prestige of the Licensed Xxxx for the
7
benefit of Licensor. Licensee shall not market any of the Licensed
Merchandise as close-outs or irregulars, in excess of 5% of total unit sales
during any calendar year, except as approved in advance by Licensor in
writing on a case-by-case basis. In the event Licensor approves the sale of
Licensed Merchandise as close-outs, Licensor shall have the absolute right to
determine the appropriate close-out outlets.
4.9 All Licensed Merchandise and/or Packaging will bear at least
one label or display with the Licensed Xxxx in a form approved by Licensor in
advance in accordance with Section 4.B hereof and will bear no label or
display of the Licensed Xxxx unless previously approved by Licensor.
4.10 The Licensed Merchandise shall be sold by Licensee only to (i)
retail outlets to which Licensor has sold Licensed Merchandise immediately
prior to the date hereof in its ordinary course of business and not for
closeout, or such other outlets as are specified on Schedule B hereto, (ii)
such other retail outlets as may be expressly approved by Licensor in writing
prior to any sale of Licensed Merchandise to such outlet, and (iii) such
retail outlets as are established in the future that are of at least the same
quality and reputation as those described in clauses (i) and (ii) above
(collectively, the "Approved Retail Outlets"). Licensee shall not sell the
Licensed Merchandise other than to Approved Retail Outlets, unless, and then
only to the extent that, such sale has been previously approved in writing by
Licensor. Licensee shall upon notice immediately stop selling to any
previously approved customer or other approved entity which becomes engaged
in reselling Licensed Merchandise otherwise than to consumers at retail in
the Territory.
8
V PUBLIC RELATIONS, ADVERTISING AND PROMOTION
5.1 Licensee shall submit to Licensor for its prior written
approval any and all public statements, press releases and responses to press
inquiries relating in any way to this Agreement.
5.2 Licensor shall have the right to approve in advance any and
all advertising, marketing and promotions to be conducted by Licensee and all
trade materials, business cards, invoices, stationery and other printed
matter prepared by or for Licensee using or referring to the Licensed Xxxx.
Licensee shall submit to Licensor for its prior approval copies of all of the
foregoing. Such approval shall not be unreasonably withheld and shall be
deemed granted if Licensor does not respond within ten (10) business days of
receipt of such submission.
5.3 At least once each year, Licensee will submit for Licensor's
information a presentation detailing Licensee's plans to market, promote and
advertise the Licensed Merchandise.
VI ROYALTY PAYMENTS
6.1 Licensee shall pay Licensor on a quarterly basis, for the
duration of the Initial Term, and First Renewal Term and Second Renewal Term,
if any, a royalty of five percent (5%) of Net Sales (the "Royalties").
6.2 Royalties shall be paid within thirty (30) days of the close
of each calendar quarter. Each royalty payment shall be accompanied by a
statement signed and certified by the Chief Financial Officer of Licensee
that the accompanying remittance is the full amount due hereunder. Each such
accounting statement shall be in such form as Licensor may specify and shall
show the Net Sales by customer made during the preceding quarter, and a
9
computation of the amount of Royalties payable hereunder in respect of such
Net Sales for such period (the "Royalty Report"). Such Royalty Report shall
be furnished to Licensor whether or not any Royalty payments are payable for
such period. The first Royalty Report due under this Agreement shall be for
the quarter ending March 31, 1998. Upon request by Licensor, Licensee shall
submit invoices, credit memoranda, factor statements and/or computer
printouts substantiating the reported information, in addition to a summary
by customer and product code and invoices and other supporting documentation.
Receipt or acceptance by Licensor of any Royalty Report furnished, or of any
sums paid by Licensee, shall not preclude Licensor from questioning their
correctness at any time.
6.3 In the event Licensee exercises its option pursuant to Section
13.B hereof to extend the license herein granted for purposes of liquidating
its inventory of Licensed Merchandise, Licensee shall pay all Royalties with
the accompanying Royalty Report quarterly within thirty (30) days following
the close of each calendar quarter during the extension period following
termination.
6.4 As soon as practicable, but not later than ninety (90) days
after the end of each year during the Term, and within ninety (90) days after
the expiration or termination of the Term, Licensee shall submit to Licensor
a statement signed and certified by the Chief Financial Officer of Licensee
that the quarterly statements furnished by Licensee hereunder as well as
Licensee's related books of account and other records and that such quarterly
statements have been prepared in accordance with generally accepted
accounting principles (except as provided in Section 6.H) applied on a basis
consistent with Licensee's audited financial statements and that such
statements and report are correct. At the same time, Licensee shall also
submit to Licensor a copy of the audited financial statements of Guarantor
for its
10
most recently completed fiscal year.
6.5 All royalty payments and accounting statements are to be
directed as provided in Section 16.A, below.
6.6 In the event that payment of Royalties to Licensor hereunder
gives rise to any taxes, duties and other governmental charges in the
Territory, including, without limitation, any withholding taxes, stamp duties
or documentary taxes, turnover, sales or use taxes, value added taxes, excise
taxes, customs or exchange control duties or any charges, Licensee and
Licensor shall each be responsible for one half of such taxes, duties or
charges, except that Licensor shall be responsible for any tax imposed on
Licensor's income by the jurisdictions in which it conducts business.
6.7 All royalty payments shall accrue upon the sale of the
Licensed Merchandise regardless of the time of collection by Licensee. For
purposes of this Agreement, Licensed Merchandise shall be considered "sold"
upon the date of invoicing.
6.8 Royalty payments shall be based on U.S. dollar calculations
and paid by Licensee in U.S. dollars. Local currency sales shall be
converted to U.S. dollars on a monthly basis using the average exchange rates
of New York banks as published in the WALL STREET JOURNAL during the month in
which sales are made, in accordance with generally accepted accounting
principles as the same may be amended from time to time.
6.9 If any governmental entity restricts or prohibits, by exchange
controls or otherwise, the payment to Licensee of any sums due it on sales of
Licensed Merchandise hereunder, Licensee shall, notwithstanding any such
restriction, pay to Licensor in the United States any and all such sums due
Licensor hereunder in
11
U.S. dollars, as and when due in accordance with the terms hereof.
VII USE OF LICENSED XXXX
7.1 Licensee shall use and display the Licensed Xxxx only in such
forms detailed in the standards and specifications guidelines provided by
Licensor, as the same may be changed from time to time, or otherwise approved
by Licensor in writing; provided, however, that Licensor shall provide thirty
(30) days' advance notice of any such change to the guidelines, but Licensee
may continue to use the Packaging, stationery and other items containing the
previously approved forms of the Licensed Xxxx to the extent such items are
held in inventory on the date of such notice, but in no event for more than
nine (9) months following such notice.
7.2 Licensee will not use the Licensed Xxxx as a corporate name or
as a trade name, in whole or in part, or in such a way as, in Licensor's sole
judgment, may give the impression that the Licensed Xxxx is the property of
Licensee. No name or names shall be conjoined or used by Licensee in
connection with the Licensed Xxxx in or on any advertising, publicity, trade
or promotional material or Packaging utilized by Licensee in connection with
the Licensed Merchandise except as required by Section 2.A or to the extent
that such is specifically required by law to indicate the source of
manufacture or distribution of the Licensed Merchandise. Licensee shall not
use any name which, in Licensor's judgment, may be confusingly similar to the
Licensed Xxxx on Merchandise or otherwise, during the Term or thereafter.
7.3 Licensee acknowledges that the Licensed Xxxx has acquired
valuable goodwill with the public and that any products bearing the Licensed
Xxxx have acquired a reputation of high quality. Licensee acknowledges that
Licensor is the owner of all right, title and interest in
12
and to the Licensed Xxxx, and is also the owner of the goodwill attached to
the Licensed Xxxx including that which arises from the sale of Licensed
Merchandise hereunder. All use by Licensee of the Licensed Xxxx shall be
deemed to have been made by and for the benefit of Licensor for the purposes
of securing and maintaining trademark rights, applications and/or
registrations, and all uses of the Licensed Xxxx by Licensee, or by any
sublicensee or assignee, and any goodwill arising therefrom, shall inure to
the sole and exclusive benefit of Licensor.
7.4 Licensee hereby assigns to Licensor any rights to the Licensed
Xxxx which may, by operation of law or otherwise, vest in Licensee as a
consequence of Licensee's activities under this Agreement, and any goodwill
arising therefrom, which shall in any event inure to the sole and exclusive
benefit of Licensor. Licensee will not, at any time, do or suffer to be done
any act or thing which will, in any way, impair or adversely affect the
ownership or the rights of Licensor in or to the Licensed Xxxx or its
reputation, and Licensee will make no applications nor seek any registration
or ownership rights in or to the Licensed Xxxx in the Territory or elsewhere.
7.5 Licensee acknowledges that only Licensor may file or prosecute
trademark applications to register the Licensed Xxxx. Licensee will
cooperate with Licensor in connection with the filing and prosecution by
Licensor of any such applications, and the maintenance or renewal of any
trademark registration for the Licensed Xxxx, and will supply Licensor with
Merchandise bearing the Licensed Xxxx, including samples, Packaging and other
uses of the Licensed Xxxx, as may reasonably be requested by Licensor in
connection herewith. Licensee shall execute all documents, including, but
not limited to, registered user agreements and any cancellations thereof,
which Licensor may request in order to obtain or maintain a
13
registration or to establish or to maintain Licensor's ownership of the
Licensed Xxxx.
7.6 Licensor currently owns registrations and applications for
registration of the Licensed Xxxx for Merchandise in the jurisdictions listed
on Schedule A hereto. Licensee will give Licensor reasonable advance notice
prior to using any of the Licensed Marks in any jurisdiction not covered by a
registration or application for registration licensed hereunder. Licensor
will (i) file and prosecute applications for registration of the Licensed
Xxxx for use for Merchandise in such other jurisdictions as Licensee
reasonably deems appropriate at Licensee's cost, and (ii) if Licensor elects
not to maintain or renew any trademark registration of the Licensed Xxxx,
Licensee may request that Licensor do so and Licensor will so renew or
maintain such registration at Licensee's expense; provided that in either
case, Licensee shall be entitled to deduct Licensee's costs and expenses from
the Royalties payable to Licensor hereunder on account of sales of Licensed
Merchandise in such jurisdiction.
7.7 Licensee agrees and undertakes to use the Licensed Xxxx in
compliance with any and all applicable trademark and other laws and to use
such legends, markings or notices in connection therewith as are required by
law or otherwise reasonably required by Licensor to protect its rights. Upon
expiration or termination of this Agreement for any reason whatsoever,
Licensee will execute and file any and all documents acknowledging that it no
longer has rights in the Licensed Xxxx which Licensor shall require.
Licensor shall bear all expenses reasonably incurred in preparing and
recording any such documents.
7.8 Licensee agrees not (i) to challenge the validity of or
Licensor's ownership of the Licensed Xxxx when used separately or in
composite form with other
14
trademarks, logos, or designs, or any application for registration thereof,
or any trademark registration thereof, in any jurisdiction, or (ii) to
contest the fact that Licensee's rights under this Agreement terminate upon
termination or expiration of this Agreement. The provisions of this Section
7.H shall survive termination or expiration of this Agreement.
7.9 Licensee shall promptly notify Licensor of any infringement,
imitation or act inconsistent with Licensor's ownership of the Licensed Xxxx
by third parties, or any act of unfair competition by third parties relating
to the Licensed Xxxx, wherever and whenever such infringement or act shall
come to the attention of the executive of Licensee responsible for licensing
matters or the general manager of Licensee's business, and any successors
thereto or replacements therefor. After receipt of such notice from
Licensee, Licensor shall in its sole discretion decide whether to take action
with respect to such infringement or act, and Licensee shall fully cooperate
with Licensor in such action and, if so requested by Licensor, shall join
with Licensor as a party to any such action brought by Licensor. Licensor
shall bear all expenses in connection with the foregoing. Any recovery as a
result of such action shall belong solely to Licensor. Licensee agrees that
Licensor shall have the sole power to take legal or other action before any
court or governmental authority with respect to the infringement and the
protection of the Licensed Xxxx. If Licensor decides not to take action with
respect to such infringement or act, Licensee may request that Licensor so
act and upon such request, Licensor shall take all reasonable steps to stop
the infringement, imitation or act, provided that Licensee reimburse Licensor
for all costs incurred by Licensor (net of amounts recovered by Licensor).
7.10 Licensee shall not at any time use the Licensed Xxxx or the
Licensed Merchandise, or any materi-
15
al utilizing or reproducing the Licensed Xxxx or Licensed Merchandise, in a
manner that is reasonably likely to derogate the value, reputation or
goodwill associated with the Licensed Xxxx.
VIII BOOKS AND RECORDS
Licensee shall maintain, at its main offices, true and accurate
books and records, in accordance with generally accepted accounting
principles, containing all particulars which may be necessary for the purpose
of verifying compliance with the terms and conditions hereof and for
determining all amounts payable to Licensor hereunder, which books and
records shall be separate and distinct from those relating to Licensee's
businesses other than the sale of Licensed Merchandise. Licensee shall make
such books and records available to Licensor and its designated
representatives during regular business hours and upon reasonable notice once
per quarter throughout the Term, including any renewal terms, and a period of
twelve (12) months thereafter, for the purpose of auditing Licensee's
reports, accounting statements and royalty payments hereunder. Licensor
shall be entitled to make copies, at its expense, of any such records.
Without limitation of Licensor's rights under Section 12, if Licensor
uncovers an error in Net Sales or royalty computation or in the computation
of any other amounts due to Licensor or payable by Licensee, Licensee agrees
to pay immediately all sums due (with interest at the prime rate from the
date payment was due hereunder), and if such error exceeds 5% of the amount
properly payable by Licensee, Licensee will at the same time reimburse
Licensor for its reasonable costs of conducting such audit.
IX REPRESENTATIONS AND WARRANTIES OF LICENSEE AND GUARANTOR
9.1 ORGANIZATION. Each of Licensee and Guar-
16
antor is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization.
9.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Licensee and
Guarantor has full corporate power and authority to execute, perform and
deliver this Agreement. The execution, delivery and performance of this
Agreement has been duly and validly authorized by all necessary corporate
action, and no other corporate proceedings on the part of Licensee or
Guarantor are necessary to authorize this Agreement. This Agreement has been
duly and validly executed and delivered by each of Licensee and Guarantor and
constitutes a valid and binding agreement of each of Licensee and Guarantor,
enforceable in accordance with its terms, except that (i) such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
9.3 NO VIOLATION. The execution, performance and delivery of this
Agreement by each of Licensee and Guarantor will not (i) violate any
provision of the Certificate of Incorporation, By-Laws or other
organizational documents of Licensee or Guarantor, (ii) violate, or be in
conflict with, or constitute a default or termination event (or an event
which, with notice or lapse of time or both, would constitute a default or a
termination event) under, any agreement or commitment to which Licensee or
Guarantor is a party, or (iii) violate any applicable statute or law or any
judgment, decree, order, regulation or rule of any court or governmental
authority binding on Licensee or Guarantor.
9.4 CONSENTS AND APPROVALS. No consent,
17
approval or authorization of, or declaration, filing or registration with,
any governmental or regulatory authority is required in connection with the
execution, delivery and performance of this Agreement by Licensee or
Guarantor. No consent of any person is necessary for the execution,
performance or delivery of this Agreement by Licensee or Guarantor,
including, without limitation, consents from parties to loans, contracts,
leases or other agreements to which Licensee or Guarantor is a party.
X REPRESENTATION AND WARRANTIES OF LICENSOR
10.1 ORGANIZATION. Licensor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
10.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Licensor has full
corporate power and authority to execute, perform and deliver this Agreement.
The execution, delivery and performance of this Agreement has been duly and
validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of Licensor are necessary to authorize this
Agreement. This Agreement has been duly and validly executed and delivered
by Licensor and constitutes a valid and binding agreement of Licensor,
enforceable in accordance with its terms, except that (i) such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
10.3 NO VIOLATION. The execution, performance and delivery of this
Agreement by Licensor will not (i) violate any provision of the Certificate
of Incorporation
18
or By Laws of Licensor, (ii) violate, or be in conflict with, or constitute a
default or termination event (or an event which, with notice or lapse of time
or both, would constitute a default or a termination event) under, any
agreement or commitment to which Licensor is a party, or (iii) violate any
applicable statute or law or any judgment, decree, order, regulation or rule
of any court or governmental authority binding on Licensor.
10.4 CONSENTS AND APPROVALS. No consent, approval or authorization
of, or declaration, filing or registration with, any governmental or
regulatory authority is required in connection with the execution, delivery
and performance of this Agreement by Licensor. No consent of any person is
necessary for the execution, performance or delivery of this Agreement by
Licensor, including, without limitation, consents from parties to loans,
contracts, leases or other agreements to which Licensor is a party.
10.5 LICENSED XXXX. To the knowledge of Licensor after due inquiry
of appropriate Licensor personnel, Licensor owns all right, title and
interest in and to the Licensed Xxxx in the United States and Canada. There
is no claim, action, proceeding, suit, complaint or, to the knowledge of
Licensor, investigation pending or, to the knowledge of Licensor, threatened
that (i) the use of the Licensed Xxxx in connection with the Merchandise
infringes upon or conflicts with the intellectual property rights of any
other person, or (ii) challenges the legality, validity, enforceability, use
or ownership of the Licensed Xxxx. To the knowledge of Licensor, no third
party has interfered with, infringed upon or misappropriated the Licensed
Xxxx.
XI INDEMNIFICATION AND INSURANCE
11.1 Licensor hereby agrees to indemnify and hold harmless
Licensee, its affiliates and each of their
19
respective shareholders, officers, directors, employees and agents against
any and all liability, claims, causes of action, suits, damages and expenses
(including reasonable attorneys' fees), for which they or any of them may
become liable or may incur or be compelled to pay in any action or claim
against them or any of them arising from infringement of statutory or common
law trademark or trade name rights of others through the use of the Licensed
Xxxx by Licensee in the United States, Canada or Mexico in compliance with
all of the terms and conditions of this Agreement, provided that Licensee:
(i) gives Licensor written notice of each such action or claim promptly
following its receipt thereof, (ii) gives Licensor the opportunity to
undertake and to control the defense and settlement of such claim through
counsel of its own choosing, and (iii) fully cooperates with Licensor in the
investigation, defense and settlement of any such claim. Licensee shall have
the right to participate in (but not to control) any such defense through
counsel of its choice, but at Licensee's expense. If Licensor fails or
refuses to undertake the defense of any such claim within a reasonable period
after notice from Licensor, Licensee shall be entitled to defend such claim
through counsel of its choice, and Licensor shall be responsible for
reimbursing Licensee for any expenses incurred by Licensee, including but not
limited to reasonable attorneys', accountants', and other experts' fees and
expenses in the investigation, defense and settlement of such claim and in
enforcing its rights pursuant to this Section 11.A, in addition to any
damages and penalties ultimately awarded against Licensee which are
indemnifiable hereunder.
11.2 Licensee agrees to indemnify and hold harmless Licensor, its
affiliates and each of their respective shareholders, officers, directors,
employees and agents against any and all liability, claims, causes of action,
suits, damages and expenses for which they or any of them may become liable
or may incur or be com-
20
pelled to pay in any action or claim against them or any of them by any
persons other than Licensor for or by reason of (a) the infringement of
design rights, patents, trade secret rights or rights to any intellectual
property of third persons (other than trademark rights infringed by use of
the Licensed Xxxx in accordance with all the terms hereof, or resulting from
a breach by Licensee of its representations and warranties in the Stock
Purchase Agreement) as a result of the manufacture, warehousing, marketing,
promotion, publicity, advertising, sale or distribution of Licensed
Merchandise by Licensee or any of its agents, representatives, contractors,
sublicensees or assigns, (b) any acts, whether of omission or commission,
that may be committed or suffered by Licensee or any of its agents,
representatives, contractors, sublicensees or assigns in connection with this
Agreement, (c) any liability (including, without limitation, any personal
injury or property damage) arising out of the manufacture, warehousing,
marketing, promotion, publicity, sale, advertising, or distribution of or the
use by any professional or consumer of, Licensed Merchandise, or any
violation of any warranty, representation or agreement made or deemed made by
Licensee or any of its agents, representatives, contractors, sublicensees or
assigns with respect to the Licensed Merchandise, or (d) the breach by
Licensee of any of its representations, warranties or covenants in this
Agreement. Licensor shall give Licensee written notice of any such claim
promptly following its receipt thereof. Licensee shall have the opportunity
to undertake and to control the defense and settlement thereof through
attorneys selected by Licensee after notice to and consultation with Licensor
and good faith negotiations regarding alternative counsel if Licensor has
reasonable objections to Licensee's choice of counsel. Notwithstanding the
foregoing, Licensee shall not, without the consent of Licensor, settle or
compromise any claim or consent to the entry of any judgment which includes a
remedy other than the payment of money by Licensee. Licensor will cooperate
21
with Licensee in the investigation, defense and settlement of any such claim
and shall have the right to participate in (but not to control) any such
defense through counsel of its own choice, but at Licensor's own expense. If
Licensee elects not to undertake the defense of any such claim, it will be
responsible for reimbursing Licensor for any expenses incurred by Licensor,
including but not limited to reasonable attorneys', accountants', and other
experts' fees and expenses in the investigation, defense and settlement of
such claim and in enforcing its rights pursuant to this Section 11.B, in
addition to any damages and penalties ultimately awarded against Licensor
which are indemnifiable hereunder.
11.3(i) Without limiting the indemnification provided in Section
11.B above and in addition to it, Guarantor agrees to carry and maintain,
throughout the Term (including all renewal terms, if any) and for five years
thereafter, with an insurance carrier authorized to do business in all
jurisdictions in which Licensee is qualified to do business and having a
rating of "A" Class "X" or better according to Best's Insurance Reports and a
rating of classification "A" or better according to Standard and Poor's, the
following insurance coverage:
(1) a broad form Comprehensive General Liability Insurance Policy
or, if such policy is not reasonably available, such other policy
as would provide substantially the same protection to Licensor and
Licensee or Guarantor written on occurrence basis covering
Licensee's activities with respect to the Licensed Merchandise
which includes but is not limited to coverage for contractual
liability, premises operations, products liability, personal injury
and advertising injury liability and broad form property damage
liability, which shall provide protection to Licensor of at least
Ten Mil-
22
lion Dollars ($10,000,000) per occurrence and Ten Million Dollars
($10,000,000) in the annual aggregate;
(2) statutory workers' compensation and employers liability
insurance with a limit for Bodily Injury by Accident of not less
than One Million Dollars ($1,000,000) each accident and for Bodily
Injury by Disease of not less than One Million Dollars ($1,000,000)
policy limit and of not less than One Million Dollars ($1,000,000)
for each employee; and
(3) automobile liability insurance covering all owned, non-owned,
and hired vehicles to be used in the performance of this Agreement
with minimum limits of Two Million Dollars ($2,000,000) combined
single limit.
These stipulated limits of coverage shall not be construed as a
limitation of any potential liability of Licensee or Guarantor. Guarantor
shall have Licensor, its parents, subsidiaries, affiliated companies and
their respective officers, directors, employees, and agents named as
additional insureds on such policies. Guarantor shall, within thirty (30)
days after the date first above written, provide to Licensor a Certificate of
Insurance and certified copies of endorsements to such policies from the
insurance carrier which evidences each insurance coverage required, the
limits of liability stated above, without any provision for deductibles or
self-insured retentions, and further provides that the policies may not be
materially changed or canceled without at least sixty (60) days prior written
notice to Licensor. Not less than thirty (30) days prior to any such
cancellation or expiration of the policies, Guarantor shall provide Licensor
with a Certificate of Insurance and certified copies of endorsements
evidencing that a new insurance policy with the same coverage and terms
described above will be in place prior to such termination. Upon reason-
23
able request by Licensor during the Term, Guarantor shall deliver to Licensor
evidence in form and substance reasonably satisfactory to Licensor, of the
maintenance and renewal of the required insurance, including, without
limitation, renewal certificates and copies of those portions of policies,
riders and endorsements pertaining to this Agreement. Any insurance policy
purchased by or carried by Licensor or any of its affiliates shall not be
required to contribute in case of any loss by any person, including Licensor
or Licensee and their affiliates, relating to the Licensed Merchandise and
either the Certificate of Insurance to be provided hereunder or an
endorsement to such policy shall state the same, with a certified copy of
such endorsement accompanying the Certificate of Insurance to be delivered to
Licensor. Guarantor's failure to deliver said insurance certificate or
renewals thereof and/or Licensor's failure to request said insurance
documentation shall not be construed as a waiver of Guarantor's obligation to
provide the required insurance.
(ii) Each of Licensee and Guarantor hereby waives all rights
to claim against Licensor with respect to any bodily injury, personal injury
losses or damages to real or personal property, or any other loss arising
from any claim however so caused covered by Licensee's indemnification
obligation hereunder and agrees to obtain a waiver of subrogation from any
insurance company insuring its interests in favor of Licensor, its parents,
subsidiaries, affiliated companies, and their respective officers, directors,
employees and agents.
(iii) Guarantor shall require all subcontractors for whom
Guarantor or Licensee does not furnish insurance to carry and maintain
throughout their performance of services in connection with this Agreement
the insurance coverage required under this Section 11.C with the appropriate
endorsements as required hereunder.
24
(iv) Should Guarantor fail to obtain the insurance coverage
and provide the documentation required by this Section 11.C, Licensor shall
have the right itself to obtain such coverage, at Guarantor's expense.
XII TERMINATION
Notwithstanding the terms and conditions of Section 3 hereof, this
Agreement may be terminated in accordance with the following provisions:
12.1 Licensor may terminate this Agreement immediately by giving
notice in writing to Licensee in the event Licensee fails to make payment of
royalties and any other amounts due hereunder as and when due, and fails to
cure such default (i) for the first or third calendar quarter, within thirty
(30) working days, or (ii) for the second or fourth calendar quarter, within
ten (10) working days, after delivery of written notice of such default by
Licensor.
12.2 Either party may terminate this Agreement immediately by
giving notice in writing to the other party in the event the other party
materially fails to perform its obligations hereunder (including, without
limitation, the obligations to submit timely its quarterly reports; to obtain
prior approvals as required hereby; to distribute only through approved
distribution channels; to maintain adequate insurance and to use only as
expressly permitted hereunder the Licensed Xxxx) or otherwise materially
breaches any of its covenants, representations or warranties as set forth in
this Agreement and such party fails to cure such default within thirty (30)
days after delivery of written notice of such default from the other party.
12.3 If Licensee or Guarantor shall make an assignment for the
benefit of creditors, or shall generally not pay its debts as they become
due, or shall file
25
a petition commencing a voluntary case under the Bankruptcy Reform Act of
1978, 11 U.S.C. Section 101 et seq., as amended or any successor thereto (the
"Bankruptcy Code"), or shall be adjudicated an insolvent, or shall file any
petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under
any present or future statute, law or regulations, or shall file any answer
admitting or shall fail to deny the material allegations of such petition
filed against it for such relief, or consent to the filing of any such
petition or shall seek or consent to or acquiesce in the appointment of any
agent, trustee, receiver, custodian, liquidator or similar officer for it or
of all or any substantial part of its assets or properties, or its directors
or majority stockholders shall take any action authorizing any of the
foregoing or looking to its dissolution or liquidation, or it shall cease
doing business as a going concern, or an order for relief shall be entered
against it under any chapter of the Bankruptcy Code, or if, within sixty (60)
days after the filing of any petition or the commencement of any proceeding
against either party seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the Bankruptcy
Code or any other similar present or future statute, law or regulation, such
proceeding shall not have been dismissed, or a decree or order of a court
having competent jurisdiction shall have been entered approving as properly
filed any such petition, or if, within sixty (60) days after the appointment,
without the consent or acquiescence of such party, of any agent, trustee,
receiver, custodian, liquidator or similar officer for it or of all or any
substantial part of its properties, such appointment shall not have been
vacated this Agreement shall automatically, without notice or any further act
or deed of any party, terminate and be of no further force or effect, except
that any and all liabilities and obligations of Licensee or Guarantor at the
time outstanding under or in connec-
26
tion with this Agreement shall automatically, without notice or any
creditor's act or deed of any party, become due and payable.
12.4 In the event Licensee assigns or sublicenses any of its rights
hereunder, or otherwise engages in a transfer prohibited by Section 16.C,
without the prior written approval of Licensor, Licensor may, at its option,
terminate this Agreement pursuant to Section 12.B.
12.5 Notwithstanding anything to the contrary herein, in the event
that Licensor terminates this Agreement pursuant to this Section 12, Licensor
does not waive and shall have and reserves all rights and remedies provided
under this Agreement and available at law and in equity, and in addition
shall be entitled to accelerate payment to Licensor of all unpaid Royalties
due up through the date of termination of the Agreement, which shall be
payable to Licensor in full within thirty (30) days of the effective date of
termination.
12.6 If this Agreement shall be determined by a court,
administrative or governmental body or authority to be in violation of any
applicable law, or to require any material change to be in compliance with
any judicial or administrative decision or ruling, the parties shall
negotiate in good faith to revise the offending provision, and if either
party in good faith determines that such offending provision cannot be
revised without adversely affecting the material benefits to it of this
Agreement, either party may elect to terminate this Agreement upon thirty
(30) days' written notice to the other party.
27
XIII EFFECT OF EXPIRATION OR TERMINATION
13.1 Except to the extent provided in Section 13.B hereof, upon the
expiration or termination of this Agreement for any reason, neither Licensee
nor its receivers, representatives, agents, successors or assigns shall have
any right to exploit or in any way use the Licensed Xxxx. Except to the
extent provided in Section 13.B hereof, upon such expiration or termination
of this Agreement, Licensee shall forthwith discontinue all use of the
Licensed Xxxx and shall not thereafter use the Licensed Xxxx or any variation
or simulation thereof, and Licensee hereby irrevocably releases and disclaims
any right or interest in or to the Licensed Xxxx. Within thirty (30) days of
the expiration or termination of this Agreement, Licensee shall provide
Licensor with an accurate schedule of all work in process and finished
inventory of Licensed Merchandise to which the Licensed Xxxx is affixed,
which is on hand as of the close of business on the date of such expiration
or termination (hereinafter the "Inventory").
13.2 If, upon the expiration or termination of this Agreement,
Licensee shall have on hand any Inventory of the Licensed Merchandise and if
Licensee is not otherwise in default under this Agreement, Licensee may
continue to use the Licensed Xxxx solely in connection with the advertising,
merchandising, promotion and sale of the Inventory of Licensed Merchandise
for a period of up to nine (9) months following the expiration or termination
of this Agreement. During such nine (9) month period, Licensee shall be
obligated to continue to pay Licensor the Royalties, if any, provided for in
Section 6.A. If Licensee elects to continue to use the Licensed Xxxx as
provided under this paragraph, it shall notify Licensor of its election at
least ninety (90) days prior to the expiration or termination of this
Agreement. Such notice shall include a complete and accurate schedule of
Inventory of Licensed Merchandise which is projected to be on
28
hand as of the close of business on the date of such expiration or
termination and shall reflect Licensee's actual cost of each such item as set
forth or reflected on the balance sheet contained in Licensee's latest
quarterly report on Form 10-Q or annual report on Form 10-K.
13.3 Upon the expiration or termination of this Agreement or, if
applicable, upon the expiration of the period provided for in Section 13.B
hereof, Licensee shall, at its own expense, remove all uses of or references
to the Licensed Xxxx from all Inventory or destroy such Inventory, Packaging,
advertising and promotional materials bearing the Licensed Xxxx or prepared
for use in connection with the Licensed Merchandise.
XIV CONFIDENTIALITY
14.1 In connection with the performance of this Agreement, Licensor
and Licensee will have access to certain confidential and proprietary
information of the other party, including, but not limited to, business
plans, proposed advertising, designs, sales records, financial data and
manufacturer's know-how, and also including the business terms of this
Agreement. Recognizing that such information represents valuable assets and
property of the disclosing party, and the harm that may befall such party if
any of such information is disclosed, the recipient agrees to hold all such
information in strict confidence and not to use or otherwise disclose any
such information to third parties without having received the prior written
consent of the disclosing party and a written agreement from such third party
to maintain such information in strict confidence. The obligation of
confidentiality created herein shall survive the expiration or termination of
this Agreement.
14.2 The obligations of confidentiality created herein shall cease
to apply:
29
(i) to information which comes into the public domain,
provided it did not come into the public domain through the unauthorized
acts of the receiving party;
(ii) to information which was in the receiving party's
possession prior to its disclosure, or was later disclosed to the receiving
party by a third party who is lawfully in possession of such and, to the
receiving party's knowledge, was under no obligation to keep such information
confidential;
(iii) to information which, in the opinion of the receiving
party's counsel, is required to be disclosed by law, but only to the extent
so required and only upon prior written notice to the other party hereto; and
(iv) to information of Licensee which Licensor may be
required to disclose in order to enforce its rights under this Agreement.
XV BANKRUPTCY
15.1 Notwithstanding the provisions of Section 12.C, in the event
that it is determined by any court or bankruptcy trustee that this Agreement
may be assumed or assigned in connection with a case commenced by or against
either party under the Bankruptcy Code, Licensor and Licensee hereby
acknowledge that adequate assurance of future performance under this
Agreement (within the meaning of the Bankruptcy Code) shall include, INTER
ALIA, adequate assurance:
(i) that any and all royalty payments and other consideration
due from Licensee to Licensor under or pursuant to this Agreement shall be
duly and timely paid;
30
(ii) that the assumption or assignment of this Agreement will
not result in the breach by either party of any provision in any other
license, contract, or agreement relating to the Licensed Xxxx or otherwise;
(iii) that any person or entity that assumes this Agreement or
to which this Agreement is assigned shall fully and faithfully assume,
observe and comply with all of the covenants, requirements and restrictions
provided for under this Agreement and that termination rights for breach of
this Agreement shall continue to apply without change; and
(iv) that the value of the Licensed Xxxx to Licensor shall
not be materially diminished by reason of the assumption or assignment of
this Agreement.
Notwithstanding the foregoing, the parties recognize that circumstances may
give rise to additional considerations, and nothing contained herein shall be
construed to mean that considerations other than those set forth above shall
not be deemed relevant to adequate assurance.
15.2 Any person or entity to which this Agreement is assigned
pursuant to the provisions of the Bankruptcy Code shall be deemed without
further act or deed to have assumed all of the obligations arising under this
Agreement on and after the date of such assignment. Any such assignees shall
upon demand execute and deliver to Licensor or Licensee, as the case may be,
an instrument confirming such assumption.
XVI MISCELLANEOUS
16.1 All notices required or permitted by this Agreement to be
given to a party shall be in writing and shall be deemed to be duly given on
the date delivered if delivered personally, on the fifth business day after
being mailed by certified or registered mail (postage
31
prepaid, return receipt requested) or on the next business day after being
sent by reputable overnight courier (delivery prepaid), in each case, to the
parties at the following addresses, or on the date sent and confirmed by
electronic transmission to the facsimile number specified below (or at such
other address or facsimile number for a party as shall be specified by notice
given in accordance with this Section):
If to Licensor:
The Xxxxxxx Company, Inc.
0000 Xxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
Attention: Corporate Secretary
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
The Xxxxxxx Company, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Licensee:
Ranco Incorporated of Delaware
32
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000-0000
Attention: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx plc
Xxxxx Xxxxx
0-0 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx XX0 0XX
Attention: Chief Legal Officer
Telephone: 000-00-0000-000-000
Facsimile: 011-44-1753-622-030
and:
Fried, Frank, Harris, Xxxxxxx and Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party may change the address to which such notice and
communications shall be sent by written notice to the other party, provided
that any notice of change of address shall be effective only upon receipt.
16.2 This Agreement (including Schedules) and the Stock Purchase
Agreement set forth the entire agreement and understanding between the
parties hereto relating in any way to the use of the Licensed Xxxx on the
Licensed Merchandise, and to any other subject matter contained herein and
merges all prior discussions between them. Neither party shall be bound by
any definition, condition, warranty or representation other than as
33
expressly stated in this Agreement, and this Agreement may not be amended or
modified except by a written instrument signed by the party against whom such
modification or amendment is to be enforced.
16.3 The rights granted to Licensee hereunder are strictly personal
to Licensee. Other than pursuant to Section 2.E, neither this Agreement nor
any of the rights granted to Licensee hereunder may be assigned or
sublicensed by Licensee or otherwise transferred (voluntarily or by operation
of law), to any person, firm or corporation without the prior written
approval of Licensor (which shall be in Licensor's sole discretion).
16.4 In any review or consultation conducted by or on behalf of
Licensor hereunder, Licensor is acting solely on its behalf and not as a
consultant or advisor, and shall have no responsibility for the operation of
Licensee's business or its manufacturing, distribution, sales or facilities
used in connection therewith, whether upon the recommendation of Licensor or
otherwise. Nothing herein contained shall be construed to constitute the
parties hereto as partners or as joint venturers, or either as an employee or
agent of the other.
16.5 This Agreement shall be deemed to be a contract made under the
laws of the State of New York and shall be governed by and construed in
accordance with the laws of such State, as if both parties were residents of
such State. The parties hereby consent to the exclusive jurisdiction of any
court of competent jurisdiction sitting in the State of Delaware and hereby
waive any objection to venue in such court.
16.6 The headings in this Agreement are for the convenience of the
parties only and shall not affect the meaning or interpretation of this
Agreement or any provisions thereof.
34
16.7 No waiver by either party, whether expressed or implied, of
any provision of this Agreement, or of any breach or default, shall
constitute a continuing waiver of such provision or a waiver of any other
provision of this Agreement. Acceptance of payments by Licensor shall not be
deemed a waiver of any violation of, or default in, any of the provisions of
this Agreement by Licensee.
16.8 Except as otherwise provided herein, this Agreement shall be
binding upon and inure to the benefit of the parties, their successors and
permitted assigns.
16.9 Guarantor hereby unconditionally and irrevocably guarantees
all of the obligations and liabilities of Licensee under this Agreement,
including but not limited to the full and prompt payment of all sums that now
are or may hereafter become due and payable from Licensor to Licensee under
this Agreement and the full and prompt performance of all present and future
obligations and liabilities of Licensee to Licensor under this Agreement.
Guarantor further promises to pay all such sums due Licensor under this
guarantee promptly on demand, without deduction for any claim or set-off or
counterclaim and regardless of whether recourse has first been sought against
Licensee. This is a guarantee of payment and not of collection.
16.10 This Agreement may be executed in one or more counterparts,
each of which shall be an original, but all of which, together, shall be
deemed to constitute a single document.
35
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date and year first above written.
THE XXXXXXX COMPANY, INC.
By:
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Name: XXXX XXXXXXX
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Title: EXECUTIVE VICE PRESIDENT/GENERAL COUNSEL
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RANCO INCORPORATED OF DELAWARE
By:
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Name:
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Title:
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XXXXX PLC
By:
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Name:
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Title:
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