PURCHASE AND SALE AGREEMENT
By and Among
MAGNETEK, INC.,
MAGNETEK TEMPE, INC.
MAGNETEK DEUTSCHLAND HOLDING GMBH
as Sellers,
and
PTS, INC.,
as Buyer,
for the Power Technology Systems Business, including EuroAtlas but
excluding Airport Systems, of MagneTek, Inc.
TABLE OF CONTENTS
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ARTICLE I TERMS OF PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . 1
1.1 Purchase and Sale of Stock and Purchased Assets . . . . . . . . . . 1
1.2 Continued Use of Certain Assets . . . . . . . . . . . . . . . . . . 4
1.3 Transfer and Conveyance . . . . . . . . . . . . . . . . . . . . . . 4
1.4 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . 4
1.5 Retained Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.6 Retained Liabilities. . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Adjustments to Purchase Price . . . . . . . . . . . . . . . . . . . 7
2.3 Post-Closing Adjustments to Purchase Price. . . . . . . . . . . . . 7
2.4 Manner of Payment . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5 Allocation of Purchase Price. . . . . . . . . . . . . . . . . . . . 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS. . . . . . . . . . . . 10
3.1 Due Organization and Qualification. . . . . . . . . . . . . . . . . 10
3.2 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Government Contracts. . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 Patents, Trademarks, Etc. . . . . . . . . . . . . . . . . . . . . . 12
3.5 Governmental Authorizations; Consents.. . . . . . . . . . . . . . . 13
3.6 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . 13
3.7 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.8 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.9 Corporate Power and Authority . . . . . . . . . . . . . . . . . . . 14
3.10 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.11 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . 16
(a) Definitions. . . . . . . . . . . . . . . . . . . . . . . 16
(b) Representations. . . . . . . . . . . . . . . . . . . . . 16
3.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . 18
3.13 Availability of Documents . . . . . . . . . . . . . . . . . . . . . 18
3.14 Financial Condition and Results of Operations . . . . . . . . . . . 18
3.15 Assets of the Division. . . . . . . . . . . . . . . . . . . . . . . 19
3.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.17 Absence of Certain Changes or Events. . . . . . . . . . . . . . . . 22
3.18 Acquired Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 23
3.19 Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.20 Clearances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.21 Brokers Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.22 Warranty Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . . 24
4.1 Due Organization and Qualification. . . . . . . . . . . . . . . . . 24
4.2 Corporate Power and Authority . . . . . . . . . . . . . . . . . . . 24
4.3 Governmental Authorizations; Consents . . . . . . . . . . . . . . . 25
4.4 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.5 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . 26
4.6 Buyer's Acknowledgment. . . . . . . . . . . . . . . . . . . . . . . 26
4.7 Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.8 HSR Act Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V COVENANTS OF SELLERS . . . . . . . . . . . . . . . . . . . . . . 26
5.1 Approvals of Third Parties. . . . . . . . . . . . . . . . . . . . . 26
5.2 Access to Books and Records . . . . . . . . . . . . . . . . . . . . 27
5.3 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . 27
5.4 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . 28
5.5 Tax Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.6 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.7 Supply Arrangements . . . . . . . . . . . . . . . . . . . . . . . . 30
5.8 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) No Solicitation. . . . . . . . . . . . . . . . . . . . . 30
(b) Notification . . . . . . . . . . . . . . . . . . . . . . 30
5.9 Access to Information . . . . . . . . . . . . . . . . . . . . . . . 30
5.10 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . 31
5.11 Payment of Taxes and Fees . . . . . . . . . . . . . . . . . . . . . 31
5.12 Closure/Remediation of Leer Paint Facility. . . . . . . . . . . . . 31
ARTICLE VI COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . 31
6.1 Approvals of Third Parties. . . . . . . . . . . . . . . . . . . . . 32
6.2 Access to Books and Records . . . . . . . . . . . . . . . . . . . . 32
6.3 Employee Benefit Matters. . . . . . . . . . . . . . . . . . . . . . 32
(a) Employee Retention . . . . . . . . . . . . . . . . . . . 32
(b) Employee Benefit Plans . . . . . . . . . . . . . . . . . 33
(c) Vacation, Holiday, Sick and Severance Pay. . . . . . . . 33
(d) Teledyne Pension Credits . . . . . . . . . . . . . . . . 33
(e) Third-Party Beneficiaries. . . . . . . . . . . . . . . . 34
6.4 Letters of Credit, Etc. . . . . . . . . . . . . . . . . . . . . . . 34
6.5 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . 34
6.6 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII MUTUAL COVENANTS OF SELLERS AND BUYER. . . . . . . . . . . . . . 36
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.2 Assignment of Contracts and Rights. . . . . . . . . . . . . . . . . 36
7.3 Use of Trademark and Trade Names. . . . . . . . . . . . . . . . . . 37
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7.4 Notification of Certain Matters . . . . . . . . . . . . . . . . . . 37
7.5 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 38
7.6 Profits of German Entities. . . . . . . . . . . . . . . . . . . . . 38
7.7 German Share Transfer Matters . . . . . . . . . . . . . . . . . . . 38
7.8 Agreements Pertaining to Retained German Pension Liability. . . . . 38
ARTICLE VIII CLOSING; CONDITIONS PRECEDENT; RISK OF LOSS. . . . . . . . . . 39
8.1 Date and Place of Closing . . . . . . . . . . . . . . . . . . . . . 39
8.2 Sellers' Performance. . . . . . . . . . . . . . . . . . . . . . . . 39
(a) Conveyances. . . . . . . . . . . . . . . . . . . . . . . 39
(b) Records. . . . . . . . . . . . . . . . . . . . . . . . . 39
(c) Opinions of Sellers' Counsel . . . . . . . . . . . . . . 39
(d) Consents . . . . . . . . . . . . . . . . . . . . . . . . 39
(e) Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 39
(f) Notice to German Counsel . . . . . . . . . . . . . . . . 40
(g) Charter Documents. . . . . . . . . . . . . . . . . . . . 40
(h) Releases of Liens. . . . . . . . . . . . . . . . . . . . 40
8.3 Buyer's Performance . . . . . . . . . . . . . . . . . . . . . . . . 40
(a) Purchase Price . . . . . . . . . . . . . . . . . . . . . 40
(b) Assignment and Assumption Agreement. . . . . . . . . . . 40
(c) Opinion of Counsel to Buyer. . . . . . . . . . . . . . . 40
(d) Release of Letters of Credit, Etc. . . . . . . . . . . . 40
(e) Consents . . . . . . . . . . . . . . . . . . . . . . . . 40
8.4 Other Instruments and Actions . . . . . . . . . . . . . . . . . . . 41
(a) Further Action by Sellers. . . . . . . . . . . . . . . . 41
(b) Further Action by Buyer. . . . . . . . . . . . . . . . . 41
8.5 Conditions To Sellers' Obligations. . . . . . . . . . . . . . . . . 41
(a) Representations, Warranties and Covenants. . . . . . . . 41
(b) No Proceedings, Litigation or Laws . . . . . . . . . . . 41
(c) Certificates . . . . . . . . . . . . . . . . . . . . . . 41
(d) Corporate Documents. . . . . . . . . . . . . . . . . . . 41
(e) Consents . . . . . . . . . . . . . . . . . . . . . . . . 41
(f) Other Agreements . . . . . . . . . . . . . . . . . . . . 41
(g) Officers Certificates. . . . . . . . . . . . . . . . . . 42
8.6 Conditions To Buyer's Obligations . . . . . . . . . . . . . . . . . 42
(a) Representations, Warranties and Covenants. . . . . . . . 42
(b) Consents; Assignment . . . . . . . . . . . . . . . . . . 42
(c) No Proceedings or Litigation . . . . . . . . . . . . . . 42
(d) Certificates . . . . . . . . . . . . . . . . . . . . . . 42
(e) Corporate Documents. . . . . . . . . . . . . . . . . . . 42
(f) Other Agreements . . . . . . . . . . . . . . . . . . . . 42
(g) German Federal Cartel Office Approval. . . . . . . . . . 43
8.7 Risk of Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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ARTICLE IX SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . 43
9.1 Expenses and Losses . . . . . . . . . . . . . . . . . . . . . . . . 43
9.2 Basket for Indemnification. . . . . . . . . . . . . . . . . . . . . 43
9.3 Indemnification by Sellers. . . . . . . . . . . . . . . . . . . . . 43
9.4 Indemnification by Buyer. . . . . . . . . . . . . . . . . . . . . . 48
9.5 Notice of Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.6 Defense of Claims . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.7 Indemnification Relating to Certain Product-Related Matters . . . . 51
9.8 Losses Net of Insurance, Taxes. . . . . . . . . . . . . . . . . . . 51
ARTICLE X MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(a) Termination. . . . . . . . . . . . . . . . . . . . . . . 52
(b) In the Event of Termination. . . . . . . . . . . . . . . 52
10.2 Expenses and Finders' Fees. . . . . . . . . . . . . . . . . . . . . 53
10.3 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.4 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . 53
10.5 Identical Counterparts. . . . . . . . . . . . . . . . . . . . . . . 53
10.6 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.7 Use of Certain Terms. . . . . . . . . . . . . . . . . . . . . . . . 53
10.8 Modification And Waiver . . . . . . . . . . . . . . . . . . . . . . 53
10.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.11 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . 55
10.12 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . 64
10.13 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE XI MEDIATION AND ARBITRATION. . . . . . . . . . . . . . . . . . . . 64
11.1 Negotiation and Mediation . . . . . . . . . . . . . . . . . . . . . 64
11.2 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.3 Binding Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 65
11.4 Selection of Arbitrator . . . . . . . . . . . . . . . . . . . . . . 65
11.5 Arbitration Hearing . . . . . . . . . . . . . . . . . . . . . . . . 65
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered
into as of the 18th day of November, 1994, by and between MAGNETEK, INC., a
Delaware corporation ("MagneTek"), MAGNETEK TEMPE, INC., an Arizona corporation
("Tempe"), and MAGNETEK DEUTSCHLAND HOLDING GMBH, a German corporation
("Deutschland") (each individually, a "Seller," and collectively, the
"Sellers"), and PTS, INC., a Delaware corporation ("Buyer").
WHEREAS, MagneTek, Tempe, the Company (as defined below), and the
German Entities (as defined below) have heretofore collectively and individually
engaged in the business of designing, developing and manufacturing power
generation and distribution systems, magnetic coils, transformers, power line
conditioners, inverters, converters and other products, and providing
engineering services with respect to such products, through MagneTek's Power
Technology Systems group, all generally described on Schedule 1 hereto (the
"Division") (hereinafter the above-referenced business of the Division is
referred to as the "Business");
WHEREAS, MagneTek owns all of the stock of the Company and Deutschland
owns all of the stock of the German Entities;
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to buy from
Sellers, the Division, such sale to be effected by the conveyance to Buyer of
(i) all of the stock of (x) MagneTek Power Technology Systems, Inc., a
California corporation (the "Company"), and (y) MagneTek EuroAtlas GmbH and
MagneTek JovyAtlas GmbH, each a German company (collectively, the "German
Entities") (such stock of the Company and the German Entities is hereinafter
collectively referred to as the "Stock"), and (ii) substantially all of the
assets, subject to certain liabilities, of the Division that are held by Persons
other than the Acquired Subsidiaries (as defined below); and
WHEREAS, certain capitalized terms used herein are defined in Article X
hereof.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements and upon the terms and subject to the
conditions hereinafter set forth, the parties hereby agree as follows:
ARTICLE I
TERMS OF PURCHASE AND SALE
1.1 PURCHASE AND SALE OF STOCK AND PURCHASED ASSETS. With the
understanding that Buyer may utilize one or more subsidiaries or affiliated
Persons controlled by Buyer to acquire the Purchased Assets and the Stock,
Sellers will sell, convey, transfer, assign and deliver to Buyer, and Buyer will
acquire and accept from Sellers, at the Closing
(as defined in Section 8.1), all right, title and interest of Sellers in and to
the Purchased Assets and the Stock. The "Purchased Assets" shall mean all of
the Division Assets other than the Stock and the Division Assets owned by the
Acquired Subsidiaries. The "Division Assets" shall mean all rights, properties
and assets Used in the operations of the Division (excluding the Retained
Assets), including, without limitation, the following rights, properties and
assets (in each case, Used in the operations of the Division), as they shall
exist on the Closing Date, subject to the limitations set forth below with
respect to each described category of assets, free and clear of any and all
Encumbrances other than Permitted Encumbrances:
(a) all of the real property owned by Sellers or the Acquired
Subsidiaries described on Schedule 1.1A, including, without limitation,
buildings, improvements, rights-of-way, easements, rights, privileges and
appurtenances thereto or located thereon;
(b) all tangible assets and properties used in the operations of
the Division, wherever located and whether or not described or referred to
herein, including, without limitation, all equipment, machinery, tools,
vehicles, furniture, construction in progress (if any), replacement and spare
parts, operating supplies and other similar personal property used in connection
with such assets and properties, including those assets and properties described
on Schedule 1.1B(i), and all additions thereto prior to the Closing Date, except
to the extent of Inventory sold or consumed prior to the Closing Date in the
ordinary course of business (collectively, "Personal Property"); PROVIDED,
HOWEVER, that Personal Property will not include any interest of the U.S.
Government as identified on Schedule 1.1B(ii);
(c) all inventories of raw materials, work in process, finished
goods, supplies, fuel and other inventoried items that are (i) owned by Sellers
or the Acquired Subsidiaries and (ii) held for sale or used for consumption by
the Division, subject to any interest of the U.S. Government described on
Schedule 1.1B(ii) (collectively, "Inventory");
(d) the Contracts, bids, quotations and proposals of each
Seller and Acquired Subsidiary as of the Closing Date related to the Division,
including, without limitation, all of the Contracts, identified on Schedule 3.7
("Assigned Contracts"), but excluding those identified as "Non-Assigned
Contracts" on Schedule 1.1D (the "Non-Assigned Contracts");
(e) all intangible properties and rights wherever located and
whether or not described or referred to herein, including, without limitation,
all United States and foreign patents and patent applications, trade names,
trademark and service xxxx registrations and applications or registered trade
dress rights, common law trademarks and copyright registrations and applications
owned or used by Sellers or the Acquired Subsidiaries in the operations of the
Division (except for the names "MagneTek," "Energy Engineered" and the "Power M"
design, or any derivation thereof, subject to the limited rights granted in
Section 7.3) or which Sellers or any of the Acquired Subsidiaries is licensed
2
to use relating to the Business or under which such entities possess any rights
under any Contract and all other intellectual property and rights, computer
applications and operating programs and proprietary information, know-how, trade
secrets, technical information and data, maps, computer discs and tapes, plans,
diagrams, blueprints and schematics relating to the operations of the Division,
including without limitation those described on Schedule 3.4 (collectively,
"Transferred Intellectual Property");
(f) all transferable (with or without consent) licenses,
permits, franchises, certificates and authorizations relating to the Division,
including those described on Schedule 1.1F;
(g) all accounts receivable, promissory notes, contract rights,
and similar rights to receive money of Sellers or the Acquired Subsidiaries
relating to the Division including, without limitation, those identified on
Schedule 1.1G;
(h) the Stock;
(i) all of Sellers' and the Acquired Subsidiaries' books and
records relating to or used in connection with the Division, including copies of
the Assigned Contracts and personnel records, and all records and supporting
documents required by applicable sales Tax statutes and regulations relating to
sales Taxes required to be collected and paid over by the Division and relating
to all exempt transactions of the Division for all periods open under applicable
statutes of limitations as of the Closing Date;
(j) all leasehold interests, leasehold improvements and rights
in and to personal property leases used in the operations of the Division
including, without limitation, those described on Schedule 1.1J;
(k) all rights against third parties relating to the Division,
whether pursuant to Contracts or otherwise, except to the extent any rights
against third parties relate exclusively to Retained Assets;
(l) all transferable warranties or similar rights of Sellers or
the Acquired Subsidiaries against manufacturers, suppliers or providers that
relate to the Division Assets;
(m) that certain trade show booth utilized by the Division;
(n) the goodwill associated with the Division, the Business and
the Division Assets; and
(o) any other asset reflected on the Adjusted July Balance Sheet
or the Final Closing Balance Sheet, except for current assets (including
Inventory) that are consumed or disposed of in the ordinary course of business
prior to the Closing Date.
3
For purposes of the definition of Division Assets and the provisions of
this Section 1.1, the term "Used in the operations of the Division" as to any
asset means that (i) it is currently, or has been within the two years preceding
the Closing, used in connection with the business of the Division, and (ii) such
use is not merely incidental or isolated use of an asset principally used by the
non-Division operations of Sellers.
1.2 CONTINUED USE OF CERTAIN ASSETS. On or prior to Closing,
Sellers shall grant Buyer a royalty-free, perpetual, worldwide license to the
"Motogard" trademark, Registration No. 841,961, evidenced by a License Agreement
in form and substance mutually acceptable to Sellers and Buyer. Such license
shall be exclusive, except to the extent of rights to use the tradename
"Motogard" granted to Michigan Acquisition Corporation pursuant to that certain
Asset Purchase Agreement dated as of June 17, 1994, by and between MagneTek
Controls, Inc. and Controls Acquisition Corporation. On or prior to Closing,
Buyer shall xxxxx Xxxxxxx a non-exclusive, royalty-free, perpetual, worldwide
license under the first two patents set forth on Schedule 3.4 (which patents are
being transferred to Buyer hereunder) to the extent Sellers' uses do not violate
the noncompetition agreement set forth in Section 5.3, such license to be
evidenced by a License Agreement in form and substance mutually acceptable to
Sellers and Buyer.
1.3 TRANSFER AND CONVEYANCE. The Stock and the Purchased Assets
will be conveyed to Buyer in accordance with Article VIII.
1.4 ASSUMPTION OF LIABILITIES. On the terms and subject to the
conditions of this Agreement, Buyer agrees to assume, effective as of the
Closing, and thereafter to pay, perform or discharge the Assumed Liabilities.
The "Assumed Liabilities" shall mean the Division Liabilities other than those
that constitute Liabilities of an Acquired Subsidiary (which Division
Liabilities will be assumed by operation of law insofar as the Acquired
Subsidiary's stock is purchased). The term "Division Liabilities" means all
Liabilities of Sellers or the Subsidiaries arising out of the operations of the
Division, whether arising before or after the Closing, other than Retained
Liabilities, and includes:
(a) Liabilities under the Assigned Contracts and the Transferred
Intellectual Property;
(b) accrued and unpaid payables of the Division, as set forth on
the Final Closing Balance Sheet, to the extent not paid prior to Closing;
(c) any obligation to repair or service any products of the
Division;
(d) all Liabilities for which Buyer has expressly assumed
responsibility pursuant to this Agreement, including Liabilities of Buyer under,
and relating to, Sections 5.6 and 6.3 hereof; and
(e) accrued and unpaid pension Liabilities of the German
Entities (the "Assumed German Pension Liabilities") other than the pension
liabilities (in the
4
approximate amount of DM 1.4 million) owing to the former owner of EuroAtlas,
which will be a Retained Liability (the "Retained German Pension Liability").
1.5 RETAINED ASSETS. Notwithstanding anything herein to the
contrary, the following assets are not included in the Division Assets and shall
be retained by Sellers (the "Retained Assets"):
(a) all "cash and cash equivalents" as defined pursuant to the
accounting classifications used in the preparation of the Adjusted July Balance
Sheet and the Final Closing Balance Sheet (including, without limitation, cash
in checking accounts, bank accounts, certificates of deposit, lockboxes, time
deposits and securities, and any liability to cover "negative cash balances");
PROVIDED, HOWEVER, that an adjustment to the Purchase Price will be made for any
cash and cash equivalents generated by the Division subsequent to October 31,
1994, as set forth in Section 2.3(b);
(b) rights to or claims for refunds or rebates of Taxes to which
any Seller is entitled under Section 9.3(c) or Section 6.6(b);
(c) claims or rights against third parties and any rights of
indemnification, contribution or reimbursement to the extent they relate
exclusively to the Retained Assets or the Retained Liabilities;
(d) all insurance policies and rights thereunder, including, but
not limited to, rights to any cancellation value as of the Closing Date;
(e) proprietary or confidential business or technical
information, records and policies that relate to Sellers or any of their
Affiliates and are not used in the operations of the Division;
(f) subject to the limited rights granted in Section 7.3, all
"MagneTek" marks, including any and all trademarks or service marks, trade
names, slogans or other like property relating to or including the name
"MagneTek," the xxxx MagneTek or any derivative thereof and the MagneTek logo or
any derivative thereof, and the name "Energy Engineered," the "Power M" design,
and any derivative thereof;
(g) all Records relating to pending lawsuits that constitute
Retained Liabilities;
(h) all rights of Sellers with respect to Non-Assigned
Contracts;
(i) all rights of Sellers under this Agreement and the
agreements and instruments delivered to Sellers by Buyer pursuant to this
Agreement;
(j) certain inventory valued at approximately $274,534 relating
to the Automatic Test Equipment business of Sellers;
5
(k) lockboxes and lockbox accounts;
(l) all assets of Sellers used primarily in connection with
Sellers' corporate functions (including but not limited to their respective
corporate charters, taxpayer and other identification numbers, seals, minute
books and stock transfer books);
(m) all amounts payable to the Division by Sellers or any of
their Affiliates;
(n) all assets under all Employee Plans and ERISA Affiliate
Plans; and
(o) the assets set forth on Schedule 1.5O.
1.6 RETAINED LIABILITIES. The term "Retained Liabilities"
means:
(a) all Taxes for which Buyer is indemnified pursuant to
Section 9.3(c);
(b) all Financing Obligations;
(c) all obligations under the Non-Assigned Contracts;
(d) all Liabilities of Sellers or the Subsidiaries under or
arising in connection with any Employee Plan or ERISA Affiliate Plan (whether
relating to periods before or after the Closing Date), other than Liabilities
for benefits accrued on the Final Closing Balance Sheet or otherwise expressly
assumed hereunder;
(e) any and all Liabilities of any Seller or Affiliate of any
Seller of any kind, character or description, that are not attributable to the
Division or the Division Assets, including, without limitation, all Controlled
Group Liabilities;
(f) all Liabilities arising from the Retained Assets;
(g) all Liabilities for fees and expenses (including Taxes
referred to in Section 5.11) incurred by or on behalf of any of Sellers or the
Subsidiaries or any of their Affiliates in connection with the Transaction
Documents and the Transactions, except to the extent that Buyer has specifically
assumed or agreed to assume responsibility for such fees and expenses in any
Transaction Document;
(h) all Liabilities owing to any of Sellers or any of their
Affiliates;
(i) all other Liabilities for which Sellers have expressly
assumed responsibility pursuant to this Agreement;
6
(j) all Liabilities currently owing to any Person from whom
Sellers acquired any of the businesses comprising the Division, and any related
bank guarantee, including without limitation the Retained German Pension
Liability and the related bank guarantee of Dresdner Bank (subject to
Section 7.8 hereof);
(k) all Liabilities relating to any Pre-Closing Environmental
Matter; or
(l) all Pending or Threatened Litigation.
ARTICLE II
PURCHASE PRICE
2.1 CONSIDERATION. The purchase price for the Stock and the
Purchased Assets and the amount paid for the covenant not to compete described
in Section 5.3 will consist in the aggregate of $33,000,000 in cash, subject to
adjustment as provided in Sections 2.2 and 2.3 (the "Purchase Price").
2.2 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price of
$33,000,000 is based on the unaudited combined balance sheet of the Division,
including only Division Assets and Division Liabilities, and excluding the
Retained Assets and the Retained Liabilities, as of July 31, 1994 (the "Adjusted
July Balance Sheet"), a copy of which is set forth at Schedule 2.2, and will be
subject to the adjustments to be made pursuant to Section 2.3.
2.3 POST-CLOSING ADJUSTMENTS TO PURCHASE PRICE.
(a) Within thirty (30) days after the Closing Date, Sellers
shall prepare and deliver to Buyer a combined, unaudited balance sheet of the
Division as of the close of business on October 31, 1994, including only the
Division Assets and the Division Liabilities and excluding the Retained Assets
and the Retained Liabilities (the "Final Closing Balance Sheet"). For purposes
of preparing the Final Closing Balance Sheet, Buyer shall make Division
Employees available to Sellers (without charge) and such employees shall
cooperate in all reasonable respects with Sellers in preparing the Final Closing
Balance Sheet. The Final Closing Balance Sheet shall be prepared in accordance
with generally accepted accounting principles consistent with those used in
preparation of the Adjusted July Balance Sheet (except as set forth below with
respect to the Assumed German Pension Liabilities) and shall fairly present in
all material respects the Division Assets and Division Liabilities as of
October 31, 1994. In preparing the Final Closing Balance Sheet, all known
accounting entries (including all known liabilities and accruals) will be taken
into account, regardless of amount, and all identified errors and omissions will
be corrected and adjustments made. The Final Closing Balance Sheet will include
as a liability the amount of the Assumed German Pension Liabilities (the parties
acknowledging, however, that there was no such accrual on the Adjusted July
Balance Sheet). The Purchase Price shall (as applicable) (1) be increased in
the amount by which Net Worth as set forth on the Final
7
Closing Balance Sheet (as finally determined in accordance with Section 2.3(c))
exceeds $32,649,338, or (2) decreased in the amount by which $32,649,338 exceeds
Net Worth as set forth on the Final Closing Balance Sheet (as finally determined
in accordance with Section 2.3(c)), such increase or decrease being referred to
herein as the "Balance Sheet Adjustment." For purposes of the foregoing, "Net
Worth" shall mean total assets minus total liabilities (with such adjustments as
are consistent with the methodology used in preparing the Adjusted July Balance
Sheet except as set forth above with respect to the Assumed German Pension
Liability).
(b) Concurrent with delivery of the Final Closing Balance Sheet,
Sellers shall deliver to Buyer a schedule (the "Cash Schedule") detailing
(i) all cash generated by the Division during the period (the "Adjustment
Period") from and including November 1, 1994 through and including the Closing
Date, including all uncashed checks received by the Acquired Subsidiaries or
Sellers (in connection with the Division) during the Adjustment Period
("Generated Cash") and (ii) all cash used by the Division during the Adjustment
Period, including all uncashed checks issued by the Acquired Subsidiaries or
Sellers (in connection with the Division) during the Adjustment Period, but
excluding any financing expenses and amounts (such as management fees and
corporate allocations) paid by the Division to any Seller or any Affiliate of
any Seller other than in direct payment for goods or services rendered
("Expended Cash"). In the event that the Cash Schedule (as finally determined
in accordance with Section 2.3(c)) shows an excess of Expended Cash over
Generated Cash, then the Purchase Price shall be increased in an amount equal to
such excess; and if the Cash Schedule shows an excess of Generated Cash over
Expended Cash, the Purchase Price shall be decreased by an amount equal to such
excess (such increase or decrease referred to herein as the "Interim Cash
Adjustment").
(c) Buyer shall be entitled to review the Final Closing Balance
Sheet and the Cash Schedule and the working papers of Sellers relating to the
Final Closing Balance Sheet and the Cash Schedule, and to have the same audited
and/or reviewed by an accounting firm of Buyer's choice ("Buyer's Accountants").
Sellers shall provide Buyer and Buyer's Accountants access at all reasonable
times to its personnel, properties, books and records to the extent relevant to
such audit and/or review. The Final Closing Balance Sheet and the Cash Schedule
shall become final and binding upon the parties on (i) the ninetieth day
following delivery thereof if Buyer elects to have the same reviewed and/or
audited by Buyer's Accountants, or (ii) the thirtieth day following delivery
thereof if Buyer does not so elect, and in either case unless Buyer gives
written notice to MagneTek of its disagreement with any aspect of the Final
Closing Balance Sheet or the Cash Schedule (a "Notice of Disagreement") prior to
such date. Any Notice of Disagreement shall specify in reasonable detail the
nature of any disagreement so asserted. If a timely Notice of Disagreement is
received by MagneTek with respect to the Final Closing Balance Sheet or the Cash
Schedule, then the Final Closing Balance Sheet or the Cash Schedule (as revised
in accordance with clause (x) or (y) below), shall become final and binding upon
the parties on the earlier of (x) the date the parties hereto resolve in writing
any differences they have with respect to any matter specified in a Notice of
Disagreement or (y) the date any matters properly in dispute are finally
resolved in writing by the Accounting Firm. During the thirty (30) days
immediately following the delivery of any Notice of Disagreement, Sellers and
Buyer shall
8
seek in good faith to resolve in writing any differences which they may have
with respect to any matter specified in such Notice of Disagreement. During
such period, Sellers and Buyer shall each have access to the other party's
working papers prepared in connection with the other party's preparation or
review of the Final Closing Balance Sheet or the Cash Schedule. At the end of
such 30-day period, Sellers and Buyer shall submit to an independent Big Six
accounting firm mutually acceptable to them (other than Buyer's Accountants or
any other accounting firm that provides significant services to any Seller or
Buyer) (the "Accounting Firm") for review and resolution any and all matters
which remain in dispute, and which were properly included in any Notice of
Disagreement, and the Accounting Firm shall reach a final, binding resolution of
all matters which remain in dispute. The Final Closing Balance Sheet and the
Cash Schedule, with such adjustments as are necessary to reflect the Accounting
Firm's resolution of the matters in dispute, shall become final and binding on
Buyer and Sellers on the date the Accounting Firm delivers its final resolution
to the parties. The fees and expenses of the Accounting Firm in connection with
the procedures contemplated pursuant to this Section 2.3 shall be borne 50% by
Buyer and 50% by Sellers.
(d) Based on the Final Closing Balance Sheet and the Cash
Schedule as determined under Subsections (a), (b) and (c) above, the Final
Adjustment Factor (as defined below) will be calculated as provided herein. In
the event that a timely Notice of Disagreement has been given, the Final
Adjustment Factor shall be calculated (x) by the parties pursuant to the
resolution in writing of any differences between them, or (y) by the Accounting
Firm, in writing, as part of its final resolution of disputes. In the event
that no Notice of Disagreement has been given, the Final Adjustment Factor will
be calculated by Sellers and delivered to Buyer within three (3) Business Days
following the date on which the Final Closing Balance Sheet and the Cash
Schedule become final and binding. The "Final Adjustment Factor" shall be
(i) the increase (expressed as a positive number) or decrease (expressed as a
negative number) in Purchase Price pursuant to the Balance Sheet Adjustment,
PLUS (ii) the increase (expressed as a positive number) or decrease (expressed
as a negative number) in Purchase Price pursuant to the Interim Cash Adjustment.
In the event the Final Adjustment Factor is a positive number, then Buyer shall
pay to Sellers (as additional Purchase Price) an amount equal to the Final
Adjustment Factor plus an additional amount equal to interest thereon calculated
at the Applicable Rate for the period from (and including) the Closing Date to
(but not including) the date such payment is made (the "Interest Period"); and
in the event the Final Adjustment Factor is a negative number, then Sellers
shall pay to Buyer (as a refund of Purchase Price) an amount equal to the Final
Adjustment Factor (expressed as if a positive number) plus an additional amount
equal to interest thereon calculated at the Applicable Rate for the Interest
Period. Within three (3) Business Days following determination of the Final
Adjustment Factor, such payment shall be made in cash, via wire transfer to an
account designated at least 48 hours in advance by the party or parties to
receive such payment, by Buyer or Sellers, as the case may be, to the other
party or parties.
(e) Notwithstanding the foregoing provisions of this section
2.3, no adjustment to the Purchase Price pursuant to this Section 2.3 shall be
made unless such adjustment would exceed $100,000, and if such adjustment would
exceed $100,000, then the full amount of such adjustment shall be made.
9
2.4 MANNER OF PAYMENT. On the Closing Date, Buyer will pay
Sellers $33,000,000 by wire transfer of immediately available funds to the
account or accounts designated in advance by Sellers.
2.5 ALLOCATION OF PURCHASE PRICE. The Purchase Price plus the
Assumed Liabilities which give rise to basis for income tax purposes (the
"Aggregate Purchase Price") will be allocated among the Stock, the Purchased
Assets and the covenant not to compete described in Section 5.3. Buyer and
Sellers further agree that the aggregate fair market value of the foregoing
assets will be appraised at Buyer's expense by an appraisal firm of its choice
within 120 days after the Closing Date. Buyer shall thereafter promptly prepare
an IRS Form 8594 reflecting the allocation of the Aggregate Purchase Price among
the Stock, the Purchased Assets and the covenant not to compete (as adjusted
under Section 2.3) and such other information as required by the form, and shall
forward it to Sellers for their approval, which approval will not be withheld
unless the proposed contents of the form are, in the good faith determination of
the Seller, unreasonable. Except to the extent that Sellers determine in good
faith that such allocation is unreasonable, each of Buyer and Sellers shall file
IRS Form 8594 in a manner consistent with such allocation. Buyer and Sellers
shall each deliver to the other a copy of the IRS Form 8594 as filed with their
respective federal income tax return within thirty (30) days of the filing of
such return.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller hereby makes the following representations and warranties
to Buyer:
3.1 DUE ORGANIZATION AND QUALIFICATION. Each Seller and
Acquired Subsidiary is a corporation or similar organization under foreign law,
duly organized, validly existing and (with respect to United States entities) in
good standing under the laws of the jurisdiction of its formation, and has all
requisite corporate (or comparable power under foreign law) power and authority
to own or lease such of the Division Assets as it owns or leases and to carry on
the Business as it is presently being operated by such Seller or Acquired
Subsidiary, as the case may be, and in the place where such Division Assets are
respectively owned or leased by such Seller or Acquired Subsidiary and the
Business is conducted by such Seller or Acquired Subsidiary, as the case may be.
3.2 TITLE. Each Seller has, and upon conveyance of the Stock
and the Purchased Assets to Buyer by each Seller at the Closing in exchange for
the Purchase Price, will convey to Buyer its interests in the leased properties
leased by such Seller as described on the instruments of lease described on
Schedule 1.1J and good title to the Stock and all of the Purchased Assets,
whether real, personal or mixed, as are owned by such Seller, free and clear of
any and all Encumbrances other than Permitted Encumbrances and other than as set
forth on Schedule 3.2. Each Acquired Subsidiary has good and marketable title
in fee simple (or the equivalent thereto under foreign law) to all real estate
described on Schedule 1.1A as owned by such Acquired Subsidiary and interests in
the leased properties as described on the
10
instruments of lease described on Schedule 1.1J as leased by it and good title
to all of the other assets, whether real, personal or mixed, owned by each
Acquired Subsidiary, free and clear of any and all Encumbrances other than
Permitted Encumbrances. Each Seller enjoys peaceable possession of all material
Purchased Assets owned by it and peaceable possession of all real property
leased by it. Each Acquired Subsidiary enjoys peaceable possession of all
material assets and real property owned or leased by it.
3.3 GOVERNMENT CONTRACTS.
(a) To the Knowledge of Sellers, during the past five (5) years,
no payment has been made by any of Sellers or the Subsidiaries, or by any Person
authorized to act on their behalf, to any Person in connection with any
Government Contract in violation of applicable procurement laws or regulations
or in violation of (or requiring disclosure pursuant to) the Foreign Corrupt
Practices Act or other laws.
(b) The Division's cost accounting and procurement systems with
respect to Government Contracts are in compliance in all material respects with
all applicable governmental regulations.
(c) With respect to each Government Contract, except as set
forth on Schedule 3.3: (i) each Seller and Subsidiary has complied with all
material terms and conditions of such Government Contract, including all
clauses, provisions and requirements incorporated expressly, by reference or by
operation of law therein; (ii) each Seller and Subsidiary has complied with all
material requirements of applicable laws, rules and regulations pertaining to
such Government Contract; (iii) all representations and certifications executed,
acknowledged or set forth in or pertaining to such Government Contract were
complete and correct in all material respects as of their effective date, and
each Seller and Subsidiary has complied in all material respects with all such
representations and certifications; (iv) neither the United States Government
nor any prime contractor, subcontractor or other Person has notified Sellers or
any Subsidiary in writing that any Seller or Subsidiary has breached or violated
any applicable law, or any material certification, representation, clause,
provision or requirement pertaining to such Government Contract; (v) since
January 1, 1993, no termination for convenience, cure notice or show cause
notice has been received by a Seller pertaining to such Government Contract,
except with respect to Government Contracts involving no more than $50,000 per
calendar year in the aggregate; and (vi) since January 1, 1992, no termination
for default has been received by a Seller pertaining to a Government Contract.
(d) Except as set forth on Schedule 3.3: (i) neither Sellers
nor any of the Subsidiaries nor, to the Knowledge of Sellers, any of their
respective directors, officers or employees is (or during the last five
(5) years has been) under administrative, civil or criminal investigation, or
indictment by any governmental authority with respect to any alleged
irregularity, misstatement or omission; and (ii) during the last five (5) years,
none of the Sellers or the Subsidiaries has made a voluntary disclosure to the
United States Government of any actual or potential violation of law arising
under or relating to a Government Contract (whether under the Voluntary
Disclosure program of the Department of
11
Defense Inspector General or otherwise), which actual or potential violation
of law has not been finally resolved with the United States Government. Any
and all disclosures made pursuant to the Voluntary Disclosure program of the
Department of Defense Inspector General within the last five (5) years are
disclosed on Schedule 3.3, regardless whether the actual or potential
violation has been resolved.
(e) Except as set forth on Schedule 3.3, to the Knowledge of
Sellers, there exist (i) no material outstanding claims against Sellers or any
of the Subsidiaries, either by the United States Government or by any prime
contractor, subcontractor, vendor or other third party, arising under or
relating to any Government Contract; and (ii) no material disputes between any
of Sellers or the Subsidiaries and the United States Government under the
Contract Disputes Act or any other Federal statute or between any of Sellers or
the Subsidiaries and any prime contractor, subcontractor or vendor arising under
or relating to any Government Contract.
(f) None of Sellers or the Subsidiaries, nor, to the Knowledge
of Sellers, any of their directors, officers or employees is (or during the last
five (5) years has been) suspended or debarred from doing business with the
United States Government or is (or during such period was) the subject of a
finding of nonresponsibility or ineligibility for United States Government
contracting.
3.4 PATENTS, TRADEMARKS, ETC. Set forth on Schedule 3.4 is a
list of all United States and foreign patents and patent applications, trade
names, trademark and service xxxx registrations and applications or registered
trade dress rights, common law trademarks and copyright registrations and
applications owned or used by any Seller or Subsidiary related to the Business
(except for the names "MagneTek," "Energy Engineered," and the "Power M" design,
or any derivation thereof), or which any Seller or Subsidiary is licensed to use
or under which it possesses any similar rights ("Patent and Trademark Rights"),
all of which are part of the Division Assets. Except as set forth on Schedule
3.4, since July 1, 1992, none of the products, activities or operations of the
Business involve or have resulted in (i) to the Knowledge of Sellers,
infringement of, or (ii) any written claim of infringement of, any patent or
patent application, trade name, trademark or service xxxx registration or
application, common law trademark or trade dress rights, copyright or copyright
registration or application of any other person, firm or entity; and no
proceedings have been instituted, are pending, or, to the Knowledge of Sellers
threatened, which challenge the rights of Sellers or any of the Subsidiaries in
respect thereof. Except as set forth on Schedule 3.4, none of the Patent and
Trademark Rights, to Sellers' Knowledge, are being infringed by the products,
activities, operations, patents, trade names, trademarks, service marks, trade
dress rights or copyrights of any other person or persons and none are subject
to any outstanding order, judgment, decree, stipulation or agreement restricting
the use thereof. Except as set forth on Schedule 3.4, no Seller or Acquired
Subsidiary has given or is bound by an agreement of indemnification for patent,
trade name, service xxxx, trademark, trade dress or copyright infringement as to
any property produced, used or sold by the Division.
12
3.5 GOVERNMENTAL AUTHORIZATIONS; CONSENTS.
(a) Except as set forth on Schedule 3.5, the execution, delivery
and performance by Sellers of this Agreement and the consummation by Sellers and
the Acquired Subsidiaries of the Transactions require no action by or in respect
of, or filing with, any Federal or state governmental body, agency, official or
authority other than (i) compliance with the applicable requirements of the HSR
Act or the Exon-Xxxxxx Amendment, (ii) compliance with and filings under section
13(a) or 15(d), as the case may be, of the Exchange Act, (iii) any necessary
approvals of the United States Department of Defense or any agencies,
departments or instrumentalities thereof in connection with the novation of
Government Contracts and the transfer or procurement of security clearances and
(iv) except as set forth in Section 7.7.
(b) Schedule 3.5 sets forth all consents, approvals, waivers and
other action required by any Person under any material Contract, instrument or
other document to which any Seller or Acquired Subsidiary is bound or which is
required or necessary for the assignment or transfer of such Contract to Buyer,
the execution, delivery and performance of the Transaction Documents by any
Seller or Acquired Subsidiary or the consummation of the Transactions by any
Seller or Acquired Subsidiary. Where referred to with an asterisk on
Schedule 3.5, such consents, approvals, waivers or other actions have been
obtained or completed.
3.6 COMPLIANCE WITH LAWS. Each Seller and Acquired Subsidiary
(i) has complied in all material respects with all laws, regulations, licensing
requirements and orders applicable to the Business, (ii) has filed with the
proper authorities all material statements and reports required by the laws,
regulations, licensing requirements and orders to which it or any of its
employees (because of their activities on behalf of their employer) is subject,
and (iii) possesses all necessary licenses, franchises, permits and governmental
authorizations to conduct the Business in the manner in which, and in the
jurisdictions and places where the Business is now conducted, and is not in
material violation of any such licenses, franchises, permits and governmental
authorizations. This Section 3.6 does not pertain to employee benefits matters,
environmental matters, or tax matters, such matters being the subject of
Sections 3.11, 3.12 and 3.16, respectively.
3.7 CONTRACTS. Schedule 3.7 sets forth all material Contracts,
other than Non-Assigned Contracts, to which any Seller or Subsidiary is a party
or by which it is bound relating to the operations of the Division, all of which
are part of the Division Assets, except as otherwise indicated on such Schedule.
Except as identified on Schedules 1.1D and 1.1J or as set forth on Schedule 3.7,
no Seller or Acquired Subsidiary is a party to or is bound or affected by any of
the following types of Contract relating to the operations of the Division:
(i) partnership, joint venture or teaming agreement; (ii) mortgage, deed of
trust, or other security agreement; (iii) guaranty or suretyship agreement or
performance bond; (iv) employment, consulting or compensation agreement or
arrangement (other than those relating to the German Entities) that provides for
annual compensation or severance benefits greater than $100,000 (or the foreign
equivalent) or is not terminable on six month's notice with a cost of less than
$100,000 (or the foreign equivalent); (v) labor or collective
13
bargaining agreement (other than those relating to the German Entities);
(vi) debt instrument, loan agreement, letter of credit arrangement, or other
obligation relating to indebtedness for borrowed money or money lent to another;
(vii) deed or other document evidencing an interest in or contract to purchase
or sell real property; (viii) Contract for the acquisition of services,
supplies, equipment or other personal property involving more than $100,000;
(ix) powers of attorney; (x) Contract containing a noncompetition covenant;
(xi) offset agreement; (xii) any other Contract (other than purchase orders
under a master Contract already disclosed hereunder) that involves either an
unperformed commitment in excess of $100,000 or that, to the Knowledge of
Sellers, will result in a material loss to the Division; (xiii) any Contract
with any Seller or any Affiliate of any Seller; (xiv) any material license
agreement or arrangement pursuant to which Sellers or any Subsidiary licenses
any of the Transferred Intellectual Property; or (xv) any other material
Contract. Sellers have delivered or otherwise made available to Buyer or its
agents true, correct and complete copies of each of the Contracts listed on
Schedule 3.7, except as set forth thereon. There are no existing material
defaults by any Seller or Acquired Subsidiary party to such Contracts or events,
occurrences or acts that, with the giving of notice or lapse of time or both,
would constitute such defaults, and no penalties have been incurred nor are
material amendments pending, with respect to the Contracts. Sellers further
represent that (1) the Contracts are in full force and effect and are valid and
enforceable obligations of the parties thereto in accordance with their terms,
(2) to the Knowledge of Sellers, there are no existing material defaults by any
party to such Contracts other than Sellers or the Acquired Subsidiaries or
events, occurrences or acts that, with the giving of notice or lapse of time, or
both, would constitute such defaults, and (3) to the Knowledge of Sellers, since
January 1, 1993 no defenses, offsets or counterclaims have been asserted or may
be made by any party thereto. Except as set forth on Schedule 3.7, no Seller or
Acquired Subsidiary has waived any material rights thereunder except as may be
contained therein. Except as set forth on Schedule 3.7, no Seller or Subsidiary
has received written notice of any plan or intention of any other party to any
material Contract to exercise any right to cancel or terminate such Contract.
To the Knowledge of Sellers, since January 1, 1994 no supplier of the Division
has refused, or communicated that it will refuse, to continue to supply goods or
services on substantially the same terms as are currently made available to the
Division (including any volume discounts which may not continue to apply if
levels of purchase are reduced).
3.8 LITIGATION. Except as set forth on Schedule 3.8, there is
no action, suit, investigation or proceeding pending against, or to the
Knowledge of Seller threatened against any Seller or Acquired Subsidiary by any
Person which, if adversely determined or resolved, could have a Material Adverse
Effect or which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the Transactions. No Seller or Acquired Subsidiary, nor the
Division Assets, is subject to any material judgment, order, writ, injunction or
decree relating to the Business. For purposes of this Agreement, a "pending"
matter means any action, suit or proceeding as to which a complaint has been
filed and a Seller or Acquired Subsidiary has been served or otherwise given
notice as to such filing on or before the Closing Date.
3.9 CORPORATE POWER AND AUTHORITY. The execution, delivery and
performance of this Agreement by each Seller, and all other Transaction
Documents by the
14
respective Sellers who are parties thereto and the consummation by each Seller
of the Transactions, have been duly authorized by all requisite corporate (or
comparable power under foreign law) action and no further action or approval is
required in order to permit any Seller to consummate the Transactions, except as
provided on Schedule 3.5, Section 7.2 and Section 7.7. This Agreement
constitutes, and all other Transaction Documents by and among the parties, when
executed and delivered in accordance with the terms thereof, will constitute the
legal, valid and binding obligations of the respective Seller that is a party
thereto, enforceable in accordance with their terms (subject, as to the
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights from time to time in
effect). Each Seller has full power, authority and legal right to enter into
this Agreement and all other agreements to which it is a party and to consummate
the Transactions. The execution and delivery of this Agreement and the
Transaction Documents by Sellers, and the consummation of the Transactions will
not (i) conflict with the charter documents of any Seller or Acquired
Subsidiary, (ii) result in any breach or termination of, or constitute a default
under, or constitute an event which with notice or lapse of time, or both, would
become a default under, or result in the creation of any Encumbrance (other than
a Permitted Encumbrance or an Encumbrance associated with Buyer's acquisition
financing) upon any of the Stock or the Division Assets under, or create any
rights of termination, cancellation or acceleration in any Person under, any
material Contract, or violate any order, writ, injunction or decree to which any
Seller or Acquired Subsidiary is a party, or by which any of the Division Assets
may be bound, or (iii) result in the violation of any provisions of law
applicable to the Division, any Seller or Acquired Subsidiary, the violation of
which could have a Material Adverse Effect.
3.10 LABOR RELATIONS.
(a) No Seller or Acquired Subsidiary since July 1, 1992 has
experienced or is experiencing, nor does any Seller have Knowledge of any
imminent strikes, work stoppages, slowdowns or other material interference with
or impairment of the Business by labor, nor, to the Knowledge of Seller has any
Seller or Acquired Subsidiary committed any material unfair labor practice in
the conduct of the Business. No United States Division Employee is represented
by any labor union or collective bargaining unit. No Seller or Acquired
Subsidiary is experiencing, nor does any Seller have knowledge of, any current
or contemplated union organization efforts or negotiations, or requests for
negotiations, for any representation or any labor contract relating to any
United States Division Employee.
(b) Schedule 3.10(b) is a true and complete list, as of June 30,
1994, of the employees of the German Entities ("German Employees"), setting
forth the names, position, tenure and salary of each of the German Employees.
The employment contracts with the German Employees do not contain any provisions
other than those contained in the Standard Contract, a copy of which is attached
to Schedule 3.10(b) and, except as set forth on Schedule 3.10(b), no further
written or oral agreements relating to the employment of the German Employees
(including agreements with the Workers Council or collective or other
agreements) have been entered into. None of the German Employees or former
employees of the German Entities has received a pension promise from either of
the German Entities, except for Xx. Xxxxx, Xx. Xxxxx, Xx. Xxxxxxxxx, Xx. Xxxxx,
15
Mr. Mattheas, Xx. Xxxx, Xx. Xxxxxxx, Xx. Xxxxx, Mr. Hogelwecht, Xx. Xxxxxxx,
Xx. Xxxxxxx, Xx. Xxxxxxxxx, Xx. Xxxxxxx, Xx. Xxxxxx, Xx. Xxxxxx, Xx. Xxxxxxx,
Xx. Xxxxxxxx, Xx. Xxxxx, Xx. Xxxxx, Xx. Xxxxx, and Xx. Xxxxxxx. Except as set
forth on Schedule 3.8, no material labor disputes or strikes or court actions in
relation to labor issues are pending or, to the Knowledge of Sellers, threatened
with regard to the German Employees. The German Entities have duly deducted and
timely paid all German or other foreign social security contributions to be
deducted and paid (including, without limitation, social security pension
contributions to the "Bundesversicherungsanstalt fur Angestellte" or similar
pension contributions to other public organizations, unemployment insurance
contributions to the "Bundesanstalt fur Arbeit" and compulsory health insurance
contributions and other compulsory social contributions or insurance payments
with respect to the German Employees), and will continue to duly deduct and
timely pay such amounts which become due before the Closing Date.
3.11 EMPLOYEE BENEFIT PLANS.
(a) DEFINITIONS. The following term shall have the following
meaning, and this term may, unless the context otherwise requires, be used in
the singular or the plural depending on the reference.
EMPLOYEE PLAN. "Employee Plan" shall mean any United
States employment, consulting, severance or other similar contract,
arrangement or policy and each plan, arrangement, program, agreement or
commitment providing for insurance coverage (including, without
limitation, any self-insured arrangements), workers' compensation, fringe
benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits, life, health, disability or accident benefits
(including, without limitation, any "voluntary employees' beneficiary
association" as defined in section 501(c)(9) of the Code providing for the
same or other benefits) or for deferred compensation, profit-sharing,
bonuses, stock options, restricted stock, stock appreciation rights, stock
purchases or other forms of incentive compensation, or for post-retirement
insurance, compensation or benefits which (A) is entered into, maintained,
contributed to or required to be contributed to, as the case may be, by
Sellers or an Acquired Subsidiary or under which Sellers or any Acquired
Subsidiary may incur any liability, and (B) covers or has covered any
current or former United States Division Employees (with respect to their
relationship to the Division).
(b) REPRESENTATIONS. Sellers have provided Buyer with true and
complete copies of the most recent "MagneTek Associate Handbook" and
"Anaheim/Gardena Summary of Benefits and General Information" describing
Employee Plans, and there are no Employee Plans other than those described in
such handbooks under which any Acquired Subsidiary may incur any material
Liability that is not reflected on the Final Closing Balance Sheet. Except as
set forth on Schedule 3.11, Sellers represent and warrant as follows:
16
(i) No Acquired Subsidiary has, at any time, maintained,
contributed to, participated or agreed to participate in a "multiemployer plan"
as defined in section 4001(a)(3) or 3(37) of ERISA.
(ii) None of the Sellers or any Acquired Subsidiary has any
announced or unannounced plan or legally binding commitment to create any
additional Employee Plans or amend or modify any existing Employee Plan, for
which any Acquired Subsidiary could reasonably be expected to incur a material
Liability; and except as provided by law, the employment of all United States
Division Employees and individuals rendering service to the Division in the
United States as independent contractors or otherwise is terminable at will.
(iii) The Acquired Subsidiaries have made all required
contributions under each Employee Plan for all periods through and including the
Closing Date or proper accruals have been made and are reflected on the
appropriate balance sheets and books and records.
(iv) There is no contract, agreement, plan or arrangement
covering any current or former United States Division Employee that,
individually or collectively, provides for the payment by any Acquired
Subsidiary to such employee of any material amount that is not deductible or
capitalizable under the Code. No Acquired Subsidiary will be required to "gross
up" or otherwise compensate any current or former United States Division
Employee because of the imposition of any excise tax (including any interest or
penalties related thereto) on the individual because of the applicability of
sections 280G and 4999 of the Code as a result of any Employee Plan or agreement
existing on or prior to the Closing Date.
(v) No entity (other than the Acquired Subsidiaries) which
is (or at any relevant time was) a member of a "controlled group of
corporations" with, under "common control" with, or otherwise required to be
aggregated with, any Seller or any Acquired Subsidiary, as set forth in section
414(b), (c) or (o) of the Code, has incurred any Liability with respect to or
under any employee benefit plan, program, policy or arrangement, including any
"pension plan" or "welfare plan" as defined in sections 3(2) and 3(1),
respectively, of ERISA, and any plan, program, policy or arrangement which
provides deferred compensation, profit sharing bonuses, stock options, stock
appreciation rights, stock purchases or other forms of incentive compensation
other than a German Benefit Plan (each an "ERISA Affiliate Plan"), which has or
will create any obligation by, or result in any Liability to, any Acquired
Subsidiary.
(vi) Each employee benefit plan, program, policy,
arrangement, agreement or commitment which (A) is entered into, maintained,
contributed to or required to be contributed to, as the case may be, by Sellers
or an Acquired Subsidiary or under which Sellers or any Acquired Subsidiary may
incur any liability, and (B) covers or has covered any current or former
employee of the German Entities (each a "German Benefit Plan") has been
maintained in substantial compliance with its terms and with the
17
requirements prescribed by any and all applicable statutes, orders, rules and
regulations and has been maintained in good standing with applicable regulatory
authorities.
3.12 ENVIRONMENTAL MATTERS. Except as set forth on Schedule
3.12, to the Knowledge of Sellers:
(a) Sellers and the Acquired Subsidiaries are in substantial
compliance with all Environmental Laws in effect at the time of Closing in
connection with the operations of the Division and the Division Assets;
(b) Sellers and the Acquired Subsidiaries have no liability
under any Environmental Law with respect to the operations or properties of the
Division or the Division Assets which is material to the operations or the
financial condition of the Division;
(c) in the past three (3) years, no notices of any violation or
alleged violation of, or any liability under, any Environmental Law relating to
the operations of the Division or the Division Assets have been received by any
of Sellers or the Subsidiaries;
(d) there is no Substance that is used in a manner that may pose
any material risk to safety, health or the environment on or under any property
owned, leased or operated by the Division, currently or in the past, and there
has heretofore been no spillage, discharge, release or disposal of any such
Substance on, under or from such property in any amount or in any manner which
could reasonably be expected to result in material liability to the Division;
and
(e) there are no writs, injunctions, decrees, orders or
judgments outstanding, or any actions, suits, claims, proceedings or
investigations pending or, to Sellers' Knowledge, threatened, relating to
compliance with or liability under any Environmental Law affecting the Division.
3.13 AVAILABILITY OF DOCUMENTS. Each Seller has made available
for inspection by Buyer at the offices of such Seller true, correct and complete
copies of its charter documents and the charter documents of each Acquired
Subsidiary.
3.14 FINANCIAL CONDITION AND RESULTS OF OPERATIONS. MagneTek has
furnished to Buyer (i) the unaudited balance sheet and related unaudited
statements of income (including the deprecation, amortization and capital
spending data to the extent noted on Schedule 3.14) of the Division for the
fiscal years ended June 30, 1993 and June 30, 1994 and (ii) the unaudited
balance sheet and related unaudited statement of income of the Division for the
three-month period ended September 30, 1994 (collectively, the "Financial
Statements"), each of which are set forth on Schedule 3.14. Except as set forth
therein or on Schedule 3.14, the Financial Statements present fairly the
financial condition and results of operations of the Division as of the dates
and for the periods indicated and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis with
prior periods. Except as set forth on Schedule 3.14, the Adjusted July Balance
Sheet fairly presents, in all material respects, the Division Assets and
Division Liabilities on
18
a combined basis as of July 31, 1994, and has been prepared in accordance with
generally accepted accounting principles consistent with those used in preparing
the Financial Statements.
To the Knowledge of Sellers, other than the Retained Liabilities, there
are no material Liabilities of or relating to the Division, except
(a) Liabilities which are reflected or reserved against on the Adjusted July
Balance Sheet and which have not been paid or discharged since the date thereof,
(b) Liabilities arising under the Contracts listed on Schedule 3.7 (or under
Contracts which, pursuant to the terms of Section 3.7, are not required to be so
listed), and (c) other Division Liabilities that were incurred since the date of
the Adjusted July Balance Sheet in the ordinary course of the Business and
consistent with the Division's past practices.
3.15 ASSETS OF THE DIVISION. The Division Assets and the rights
conferred by the Transaction Documents comprise all the properties and assets
reasonably necessary for the operation of the Business as conducted on the date
hereof. The Acquired Subsidiaries do not own any material assets that are not
Division Assets, nor are they liable for any material liabilities that are not
Division Liabilities.
3.16 TAXES. Except as set forth on Schedule 3.16:
(a) The Acquired Subsidiaries have duly and timely filed with
the appropriate governmental agencies all Tax Returns (including information
returns) required to be filed by the United States or any state or any political
subdivision thereof or any foreign jurisdiction. All such Tax Returns are
complete and accurate and properly reflect the Taxes of the Acquired
Subsidiaries for the periods covered thereby.
(b) The Acquired Subsidiaries have timely paid to taxing
authorities all Taxes which have become due with respect to any Tax Returns that
each has filed and any assessments of which each is aware. The Acquired
Subsidiaries have paid or accrued all amounts with respect to Taxes required to
be paid to Persons (other than Taxing authorities) such as pursuant to tax
sharing or allocation agreements with respect to all taxable periods or portions
of periods ending on or before the Closing Date. None of the Acquired
Subsidiaries is delinquent in the payment of any Tax, assessment or governmental
charge or amounts owed to other persons or entities with respect to Taxes.
(c) MagneTek has filed all Tax Returns that have become due
(giving effect to extensions of time to file) and has paid all liabilities for
Taxes that have become due and payable prior to the date hereof, except such Tax
Returns and Taxes (i) with respect to which the failure to file or pay,
respectively, would not have a Material Adverse Effect, or (ii) the filing or
payment, respectively, of which is being contested in good faith by MagneTek.
(d) There is no unpaid assessment, proposal for additional
Taxes, deficiency or delinquency in the payment of any of the Taxes of the
Acquired Subsidiaries, except to the extent that adequate liabilities or
reserves with respect thereto are accrued on
19
the Financial Statements and the Adjusted July Balance Sheet in accordance with
GAAP or (i) such deficiency or claim is being contested in good faith by
appropriate proceedings, (ii) no such accrual is required by GAAP and (iii) the
nature and amount of the disputed Tax is set forth on Schedule 3.16.
(e) There are no Encumbrances for Taxes (other than for Taxes
not yet due and payable) upon any of the Division Assets or the Stock.
(f) No claim has ever been made by any authority in a
jurisdiction where Sellers or the Acquired Subsidiaries do not file Tax Returns
that Sellers or the Acquired Subsidiaries are or may be subject to taxation by
that jurisdiction in respect of the assets or operations of the Division;
(g) None of the German Entities is a "United States real
property holding corporation" within the meaning of section 897(c)(2) of the
Code, nor is any of Sellers a foreign person within the meaning of section
1445(b)(2) of the Code.
(h) None of the Division Assets constitutes property that Buyer,
or any Affiliate of Buyer, will be required to treat as being owned by another
person pursuant to the "Safe Harbor Lease" provisions of section 168(f)(8) of
the Code prior to repeal by the Tax Equity and Fiscal Responsibility Act of
1982.
(i) None of the Division Assets is, or at the Closing will be,
subject to a lease to a "tax-exempt entity" as such term is defined in
section 168(h)(2) of the Code.
(j) None of the Division Assets directly or indirectly secures
any debt the interest on which is tax-exempt under section 103(a) of the Code.
(k) None of the Acquired Subsidiaries currently is the
beneficiary of any extension of time within which to file any Tax Return;
(l) None of the Acquired Subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a tax assessment or deficiency;
(m) None of the Acquired Subsidiaries has filed a consent under
Code section 341(f) concerning collapsible corporations;
(n) None of the Acquired Subsidiaries has made any payments, nor
is it obligated to make any payments, and is not a party to any agreement that,
in and of itself, could obligate it to make any payments that will not be
deductible under Code section 280G;
(o) None of the Acquired Subsidiaries has filed with respect to
any item a disclosure statement pursuant to Code section 6662 or any comparable
disclosure with
20
respect to foreign, state and/or local statutes with respect to items pertaining
to the assets or operations of the Division;
(p) None of the Acquired Subsidiaries (A) has been a member of
any affiliated group filing a consolidated federal income Tax Return (other than
a group the common parent of which is MagneTek, the "MagneTek Group") and (B)
has any liability for the Taxes of any person as defined in section 7701(a)(1)
of the Code (other than the MagneTek Group) under Treas. Reg. Section 1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise, except for such liabilities and agreements
as may have been incurred or entered into in the ordinary course of business and
which in the aggregate are not material in amount;
(q) There are no deemed elections in effect with respect to any
of the Acquired Subsidiaries pursuant to Code sections 338(e) or 338(f) or the
regulations thereunder;
(r) No member of the MagneTek Group will elect to have the
Company excluded from the MagneTek Group under Treas. Reg. Section 1.1502-
76(b)(5)(ii) for the MagneTek Group taxable year that includes the day
immediately preceding the Closing Date;
(s) Schedule 3.16 sets forth the Sellers' estimate of the
aggregate tax basis of certain categories of assets owned by the Acquired
Subsidiaries as of June 30, 1994. The sum of the tax bases of the assets of the
Acquired Subsidiaries as set forth on Schedule 3.16 does not exceed the actual
sum of the tax bases of the assets of the Acquired Subsidiaries as of June 30,
1994 by an amount which, if such actual amounts were properly taken into account
on the combined balance sheet of the Acquired Subsidiaries, prepared in
accordance with GAAP, as of June 30, 1994, would require that the Acquired
Subsidiaries include a deferred tax liability on such combined balance sheet,
net of all deferred tax assets without regard to any valuation allowance with
respect thereto.
(t) The Acquired Subsidiaries have maintained all sales and use
records and supporting documents in the manner required by applicable sales and
use Tax statutes and regulations;
(u) The Acquired 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, stockholder, or other party
in connection with the Division;
(v) There are no pending or, to the best of Sellers' or any
Acquired Subsidiary's knowledge, threatened audits, investigations or claims for
or relating to any material liability in respect of Taxes payable by the
Acquired Subsidiaries and there are no matters under discussion with any
governmental authorities with respect to Taxes payable by the Acquired
Subsidiaries that are likely to result in a material additional amount of Taxes.
Federal income tax audits of the Acquired Subsidiaries have been completed for
each period
21
set forth on Schedule 3.16. None of the Acquired Subsidiaries has been notified
that any taxing authority intends to audit a Tax Return of any other period;
(w) None of the Acquired Subsidiaries has entered into any tax-
sharing agreement or similar agreement that will remain in effect following the
Closing;
(x) Neither of the German Entities has been a member of an
affiliated group that has filed a consolidated United States Federal income tax
Return or of any group that has filed a combined, consolidated or unitary Tax
Return, other than such Tax Returns for Taxes for which the period for
assessment has expired (taking into account any extension or waiver thereof);
(y) Neither of the German Entities is (i) engaged in a United
States trade or business for federal income tax purposes; (ii) a passive foreign
investment company within the meaning of the Code; or (iii) a foreign investment
company within the meaning of the Code;
(z) None of the Acquired Subsidiaries is a party to any joint
venture, partnership or other arrangement or contract which is treated as a
partnership for tax purposes;
(aa) MagneTek will not be required to include any amount in gross
income with respect to the German Entities pursuant to section 951 of the Code
for the taxable period ending on the date prior to the Closing Date. None of
the German Entities has an investment in United States property within the
meaning of section 956 of the Code;
(bb) The amount of any liability for deferred Taxes of the
Acquired Subsidiaries on a combined basis will not, at Closing, exceed the
amount of any deferred tax assets of the Acquired Subsidiaries at Closing, all
determined in accordance with GAAP.
(cc) The "Gliederung des verwendbaren Eigenkapitals" of the
German Entities pursuant to section 30 of the German Corporate Income Tax Act
("Korperschaftsteuergesetz") is accurately and properly reflected on the
German Corporate Income Tax Returns for these entities for the taxable period
ending before Closing Date. Net operating loss carryovers of these entities
for German corporate income tax purposes as well as for German trade income
tax ("Gewerbertragsteuer") purposes are also accurately and properly
reflected on the German Tax Returns of the German Entities for the taxable
period ending before the Closing Date.
3.17 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1994,
except as set forth on Schedule 3.17, (i) there has not been any change in the
Division Assets, Division Liabilities or financial condition or operations of
the Division that has had or could reasonably be expected to have a Material
Adverse Effect; (ii) no Seller or Acquired Subsidiary has contracted for or paid
any capital expenditures in excess of $100,000 (or the foreign equivalent)
relating to the Division; (iii) no Seller or Acquired Subsidiary has forgiven or
canceled any material debts or claims or released or waived any material right
22
relating to the Division; (iv) no Seller or Acquired Subsidiary has suffered any
damage or destruction to or loss of any Division Assets in excess of $100,000
and not covered by insurance, or has disposed of any material assets (other than
current assets, such as Inventory, disposed of in the ordinary course of
business); (v) no Seller or Acquired Subsidiary has lost customers or suppliers
that would have a Material Adverse Effect; (vi) no Seller or Acquired Subsidiary
has undergone any change in accounting methods, principles or practices relating
to the Division; (vii) no Seller or Acquired Subsidiary has increased the rate
of compensation payable or to become payable to any director, officer or other
Division Employee, other than in the ordinary course of business; (viii) no
Seller or Acquired Subsidiary has cancelled or terminated any material Contract
relating to the Division or entered into any material Contract relating to the
Division which is not in the ordinary course of the Business; and (ix) no Seller
or Acquired Subsidiary has entered into any transaction that is material to this
Agreement, any other Transaction Document, the Transactions, the Division or to
any of the Division Assets that would have a Material Adverse Effect.
3.18 ACQUIRED SUBSIDIARIES.
(a) The authorized, issued and outstanding capital stock (or
equivalent under foreign law) of, and the jurisdiction of formation of, each of
the Acquired Subsidiaries is as set forth on Schedule 3.18. All of the issued
and outstanding shares of capital stock of each of the Acquired Subsidiaries
were validly issued and are fully-paid and nonassessable (or the foreign law
equivalent), were not issued in violation of the preemptive rights of any
stockholder (or the foreign law equivalent) and are owned as set forth above
free and clear of any Encumbrances (other than a Permitted Encumbrance or an
Encumbrance arising through Buyer). There are no outstanding subscriptions,
options, warrants, rights, convertible securities, calls, commitments or
agreements (or the foreign law equivalent) to issue shares of capital stock or
other securities of any of the Acquired Subsidiaries.
(b) The Stock constitutes all of the outstanding capital stock
of the Company and the German Entities. None of the Company or the German
Entities own any Subsidiaries or any shareholdings, joint venture or other
interests in any other Person.
(c) The registered share capital (Stammkapital) of MagneTek
EuroAtlas GmbH amounts to DM 1,000,000 and is divided into two shares
(Geschaftsanteil) of DM 200,000 each, two shares of DM 75,000 each, and three
shares of DM 150,000 each. The registered share capital (Stammkapital) of
MagneTek JovyAtlas GmbH amounts to DM 200,000 and is divided into one share
(Geschaftsanteil) of DM 20,000, one share of DM 80,000 and one share of DM
100,000. Deutschland is entitled to transfer such shares without
restrictions, the shares are not encumbered with rights of third parties, and
such shares do not represent Deutschland's entire or almost entire property.
The terms of the lease contract dated December 15, 1983, as amended, between
MagneTek JovyAtlas GmbH and Dr. Ing. Jovy Electronic GmbH & Co. KG on the use
of the real property and building used by it at the time of the Closing do
not permit the lessor thereunder to terminate such lease because of the sale
of the shares of MagneTek JovyAtlas GmbH to the Buyer.
23
3.19 BACKLOG. Schedule 3.19 sets forth each Contract of any of
Sellers or the Subsidiaries relating to the Division and having backlog as of
July 31, 1994 in excess of $100,000 and a description of the same, including the
name of each customer, the dollar amount of funded backlog and backlog unfunded
by the United States Congress or any customer in respect of undelivered orders.
Except as set forth on Schedule 3.19, all of the Contracts constituting the
backlog of Sellers or the Subsidiaries relating to the Division were entered
into in the ordinary course of business and are capable of performance in
accordance with their terms by the Division.
3.20 CLEARANCES. Schedule 3.20 sets forth all material security
clearances held by Sellers and the Acquired Subsidiaries relating to the
Business.
3.21 BROKERS FEES. Except as set forth on Schedule 3.21 (which
fees shall be the sole responsibility of Sellers), no broker, finder or
investment banker is entitled to any brokerage, finders fee or other fee or
commission in connection with the Transactions as a result of any actions taken
by any of Sellers or their Affiliates.
3.22 WARRANTY CLAIMS. Except as set forth on Schedule 3.22,
there are no material existing or, to Sellers' Knowledge, threatened claims or
any facts upon which a material claim properly could be based, against any of
Sellers or the Subsidiaries for or related to goods of the Division which are
defective or fail to meet any service or product warranties or any applicable
federal, state or local standards or specifications. Since January 1, 1992,
none of Sellers or the Acquired Subsidiaries has received written notice of any
statements, citations or decisions by any governmental or regulatory body
stating that any of its products is defective or unsafe or fails to meet any
standards promulgated by any such governmental or regulatory body.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties to each
Seller:
4.1 DUE ORGANIZATION AND QUALIFICATION. Buyer is a corporation
duly formed, validly existing and in good standing under the laws of the State
of Delaware, and has all requisite corporate power and authority to own or lease
its properties and to carry on its business as it is presently being operated
and in the place where such properties are owned or leased and such business is
conducted.
4.2 CORPORATE POWER AND AUTHORITY. The execution, delivery and
performance of this Agreement by Buyer, and all other Transaction Documents to
which Buyer is a party, and the consummation by it of the Transactions, have
been duly authorized by all requisite corporate action and no further action or
approval is required in order to permit Buyer to consummate the transactions
contemplated hereby and thereby, except as contemplated in this Agreement. This
Agreement constitutes, and all other Transaction
24
Documents to which Buyer is a party, when executed and delivered in accordance
with the terms thereof, will constitute the legal, valid and binding obligations
of Buyer, enforceable in accordance with their terms (subject, as to the
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights from time to time in
effect). Buyer has full power, authority and legal right to enter into this
Agreement and all other agreements by and among the parties and to consummate
the Transactions. The execution and performance of this Agreement and the
Transaction Documents to which Buyer is a party, and the consummation of the
Transactions will not (i) conflict with the certificate of incorporation or
bylaws of Buyer, (ii) result in any breach or termination of, or constitute a
default under, or constitute an event which with notice or lapse of time, or
both, would become a default under, or result in the creation of any Encumbrance
(other than a Permitted Encumbrance or an Encumbrance associated with Buyer's
acquisition financing for the Division) upon any asset of Buyer under, or create
any rights of termination, cancellation or acceleration in any person under, any
contract, lease, arrangement or commitment, or violate any order, writ,
injunction or decree, to which Buyer is a party or by which Buyer or its assets,
business or operations may be bound, or (iii) result in the violation of any
provisions of law applicable to Buyer, the violation of which could have a
material adverse effect upon the business, operations or assets of Buyer or upon
the consummation of the Transactions.
4.3 GOVERNMENTAL AUTHORIZATIONS; CONSENTS.
(a) The execution, delivery and performance by Buyer of this
Agreement and the consummation by Buyer of the transactions contemplated hereby
require no action by or in respect of, or filing with, any Federal or state
governmental body, agency, official or authority other than (i) compliance with
the applicable requirements of the HSR Act or the Exon-Xxxxxx Amendment,
(ii) compliance with and filings under section 13(a) or 15(d), as the case may
be, of the Exchange Act, (iii) any necessary approvals of the United States
Department of Defense, or any agencies, departments or instrumentalities thereof
in connection with the novation of Government Contracts or the transfer or
procurement of security clearances, and (iv) except as set forth in Section 7.7.
(b) No consent, approval, waiver or other action by any person
under any contract, agreement, indenture, lease, instrument or other document to
which Buyer is a party or by which it is bound is required or necessary for the
execution, delivery and performance of this Agreement by Buyer or the
consummation of the transactions contemplated hereby.
4.4 LITIGATION. There is no pending or threatened litigation in
any court or any proceeding before any governmental body, agency, official or
authority (i) in which it is sought to restrain, prohibit, invalidate or obtain
damages in respect of the consummation of the purchase and sale of the Division
Assets or the other Transactions, (ii) which could, if adversely determined or
resolved, result in any material adverse change in the business, operations or
assets or the condition, financial or otherwise, or results of operations of
Buyer or upon the consummation of the Transactions or (iii) which could, if
adversely determined,
25
have a material adverse effect on the right or ability of Buyer to carry on its
business substantially as now conducted.
4.5 COMPLIANCE WITH LAW. Buyer has complied with all laws,
regulations, licensing requirements and orders applicable to its business the
breach or violation of which could have a material adverse effect on said
business, (ii) has filed with the proper authorities all material statements and
reports required by the laws, regulations, licensing requirements and orders to
which it is subject and (iii) possesses all necessary licenses, franchises,
permits and governmental authorizations to conduct its business in the manner in
which and in the jurisdictions and places where such business is now conducted.
4.6 BUYER'S ACKNOWLEDGMENT. Buyer acknowledges and agrees that,
other than the representations and warranties of Sellers specifically contained
in this Agreement (including the Schedules and Exhibits hereto) and the other
Transaction Documents (including any certificates delivered pursuant hereto or
thereto), there are no representations or warranties of any Seller either
expressed or implied with respect to any Seller or Acquired Subsidiary, the
Business, the Division Assets, the Division, or the Transactions.
4.7 BROKER'S FEES. No broker, finder or investment banker is
entitled to any brokerage, finder's fee or commission in connection with the
Transactions as a result of actions taken by Buyer or its Affiliates, except for
any fees payable to The Carlyle Group, L.P. or an Affiliate thereof (for which
Buyer will be solely responsible).
4.8 HSR ACT MATTERS. PTS Holdings, Inc., the newly-formed
parent of Buyer, is the "ultimate parent entity" of the "acquiring person" (as
the foregoing terms are defined in 16 C.F.R. Section 801.1 and 801.2) and its
annual "net sales" and "total assets" (as the foregoing terms are defined in 16
C.F.R. Section 801.11) are each less than $10 million.
ARTICLE V
COVENANTS OF SELLERS
Sellers hereby covenant and agree with Buyer as follows:
5.1 APPROVALS OF THIRD PARTIES. As soon as practicable after
the date hereof, both before and after Closing, Sellers will use all reasonable
efforts to secure or cause to be secured all necessary consents, approvals and
clearances of third parties that heretofore have not been procured and that may
be required to consummate the Transactions including, without limitation, the
consents, approvals and clearances referred to without asterisks on Schedule 3.5
hereof, and will otherwise use all reasonable efforts to cause the consummation
of the Transactions.
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5.2 ACCESS TO BOOKS AND RECORDS.
(a) For a period of seven (7) years following the Closing,
Sellers will retain all Records held by them and not conveyed to Buyer
hereunder. During such period, Sellers will afford authorized representatives
of Buyer (including its auditors) access to such Records at reasonable times and
during normal business hours at the principal business office of any of Sellers,
or at such other location or locations at which such Records may be stored or
maintained from time to time, and will permit such representatives to make
abstracts from, or copies of, any of such Records, or to obtain temporary
possession of any thereof as may be reasonably required by Buyer at such Buyer's
sole cost and expense. During such period, Sellers will, at Buyer's expense
(limited, however, to Buyer's reasonable out-of-pocket expenditures plus
reimbursement for employee time on the basis set forth in Section 5.2(b) below),
cooperate with Buyer in furnishing information, evidence, testimony, and other
reasonable assistance in connection with any action, proceeding, Tax audit,
employee or labor dispute or investigation to which such Buyer or any of its
Affiliates is subject relating to the Business or the Division. The term
"Record" as used in this Section 5.2 shall include any data processing files or
other computerized data.
(b) If more than five (5) working days as to any particular
matter is required to be expended by employees of Sellers and their Affiliates
in responding to a request of Buyer under this Section 5.2, then Sellers'
provision of such employees may be conditioned on Buyer's agreement to reimburse
Sellers at reasonable per diem rates (calculated on a basis consistent with the
labor rates applicable to such employees for other purposes) for the services of
such employees; PROVIDED that no such reimbursement shall be required for the
assistance of such employees in connection with any litigation or disputes for
which Buyer is required to indemnify Sellers hereunder.
5.3 COVENANT NOT TO COMPETE.
(a) Sellers and their Affiliates will not, on a worldwide basis,
at any time during the period of five (5) years from the Closing Date, directly
or indirectly, own, manage, operate, join, control or participate in the
ownership, management, operation or control of, any business which, or any
business organization any part of which, engages in activities relating to the
products listed on Schedule 5.3A hereof, except that Sellers and their
Affiliates may acquire (a) any Person, less than 10% of the gross revenues of
which are derived from a business involving the production of any of the
foregoing products (a "Competitive Business"), PROVIDED that the Competitive
Business is not thereafter expanded such that its revenues exceed 20% of the
gross revenues of such Person; or (b) no more than 5% of any class of securities
of a Person, if such securities are traded in any public market (within or
outside the United States) or 15% of any class of privately held securities of a
Person, in either case if such Person derives 10% or more of its gross revenues
from a Competitive Business. The remedy at law for any breach or attempted
breach of the provisions of this Section 5.3 will be inadequate and Buyer shall
be entitled to temporary or permanent injunctive relief against any breach or
attempted breach of such provision without the necessity of posting bond or
proving actual damages. It is the express intention of the parties hereto to
comply with all laws which may be applicable to this Section 5.3. Should
27
any restriction contained in this Section 5.3 be found to contain limitations as
to time, geographical area or scope of activity that are not reasonable and
impose a greater restraint than is necessary to protect the goodwill or other
business interest of Buyer, it is expressly agreed that the covenant not to
compete contained in this Section 5.3 may be reformed or modified by the final
judgment of a court of competent jurisdiction to the extent necessary to cause
the limitations contained in this covenant not to compete as to time,
geographical area and scope of activity to be restrained to be reasonable and
impose a restraint that is not greater than necessary to protect Buyer and
enforce the covenant not to compete as reformed or modified. If any one or more
of the provisions contained in this Section 5.3 shall for any reason be held to
be invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
(b) Notwithstanding the foregoing, the covenant not to compete
as to items 2 and 3 on Schedule 5.3A shall be limited to nine (9) months.
5.4 ACCOUNTS RECEIVABLE. Sellers agree promptly to forward to
Buyer any and all proceeds from accounts receivable of the Division that are
received by Sellers after the Closing Date. If, after the Closing Date, a
Seller receives any payment from any Person who at the time of such payment has
outstanding accounts payable to Seller unrelated to the Business or the
Division, on the one hand (for the purposes of this Section and Section 6.5,
"Seller Accounts Receivable"), and to the Buyer or any Acquired Subsidiary, on
the other hand (for the purposes of this Section and Section 6.5, "Buyer
Accounts Receivable"), and the payment (a) does not indicate whether it is in
respect of Seller Accounts Receivable or Buyer Accounts Receivable or (b)
indicates that it is in payment of both Seller Accounts Receivable and Buyer
Accounts Receivable without specifying the portion to be allocated to each, then
Sellers and Buyer shall consult with one another to determine the proper
allocation of such payment; and, if they are unable to reach agreement on the
proper allocation, such payment shall be applied so as to retire Seller Accounts
Receivable and Buyer Accounts Receivable in chronological order based upon the
period of time such accounts receivable have been in existence.
5.5 TAX CERTIFICATES. Buyer will furnish resale or exemption
certificates to Sellers for Inventory and exempt machinery and equipment.
5.6 EMPLOYEE BENEFITS.
(a) Sellers remain obligated to provide continuation coverage to
their covered employees, former employees and their qualified beneficiaries (and
those of the Acquired Subsidiaries) in compliance with the provisions of Code
section 4980B and ERISA Section 601 ET SEQ. (herein referred to as "COBRA
Continuation Coverage"), and subject to Buyer establishing one or more group
health plans for the benefit of Transferred Employees as provided in Section
6.3(b), Sellers agree to indemnify and hold Buyer harmless from any claims for
COBRA Continuation Coverage made by or on behalf of such employees, former
employees and their qualified beneficiaries who are receiving COBRA Continuation
Coverage
28
at the Closing or with respect to whom a qualifying event occurred either prior
to the Closing or as a result of the Closing of the transaction contemplated by
this Agreement.
(b) Sellers shall make all contributions due through the Closing
Date under the Employee Plans on behalf of all Transferred Employees. As of the
Closing Date, MagneTek shall fully vest all Transferred Employees in their
accrued benefits under the MagneTek FlexCare Plus Retirement Savings Plan and
the MagneTek FlexCare Plus Retirement Pension Plan. Effective as of the Closing
Date, the United States Division Employees shall cease accruing any benefits
under all Employee Plans (except for benefits accrued on the Final Closing
Balance Sheet), and MagneTek shall take, or cause to be taken, all such actions,
if any, as may be necessary to effect such cessation or continuation of benefit
accrual, as applicable.
(c) (i) Sellers remain obligated for Liabilities relating to
all claims by United States Division Employees (and their dependents and
beneficiaries) for benefits under all medical, dental, employee assistance,
life, accidental death and dismemberment, dependent life, short- and long-term
disability, and business travel accident plans of Sellers, but excluding any
German Benefit Plans, which are incurred on or prior to the Closing Date whether
or not notice of any such claim has been received by Sellers, the Acquired
Subsidiaries, Buyer or the plan as of the Closing Date, subject to the terms of
such plans (including without limitation any applicable insurance contracts).
(ii) MagneTek shall provide COBRA Continuation Coverage for
benefits under the MagneTek, Inc. Self-Funded Benefits Plan to United States
Transferred Employees (and their dependents and beneficiaries) without a premium
charge to such persons who are employees of MagneTek immediately prior to the
Closing Date, and shall similarly treat those United States Transferred
Employees who are employees of an Acquired Subsidiary on the Closing Date, from
the Closing Date until the earlier of January 1, 1995 or the date that Buyer
establishes a group health plan for United States Transferred Employees (the
"Transition Period"), and MagneTek shall be obligated for Liabilities relating
to all claims incurred by such individuals during the Transition Period in
accordance with the terms of such plan. On the date that is thirty (30) days
from the Closing Date, MagneTek shall invoice Buyer in an amount equal to the
actual cost incurred by MagneTek in providing the above-described coverage to
the United States Transferred Employees during such thirty (30) day period,
consistent with past practices (the "Billed Amount"), and Buyer shall remit the
Billed Amount promptly to MagneTek. At the end of the Transition Period,
MagneTek shall determine in good faith and forward to Buyer a report of the
actual cost of providing the above-described coverage during the Transition
Period, and Buyer shall remit to MagneTek the excess (if any) of such actual
cost over the Billed Amount. If the Billed Amount exceeds such actual cost,
MagneTek shall remit promptly to Buyer the excess amount.
(iii) For purposes of this Section 5.6(c), a claim will
be deemed incurred when the service which results in such claim is rendered.
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(d) Commencing with the date hereof and continuing to the
Closing Date and thereafter, Sellers shall make reasonably available to Buyer
such existing actuarial, financial, personnel and related information as may be
reasonably requested by Buyer with respect to any Employee Plan as it relates to
a Division Employee, including, but not limited to, compensation and employment
histories.
5.7 SUPPLY ARRANGEMENTS. Sellers will, and will cause MagneTek
S.p.A., Italy, MagneTek Drives & Systems and MagneTek Motors & Generators, and
certain of its other Affiliates to, continue to supply certain goods to the
Division on substantially the terms set forth on Exhibit A.
5.8 NO SOLICITATION.
(a) NO SOLICITATION. From the date hereof through the Closing
Date or the earlier termination of this Agreement, Sellers shall not, and shall
instruct each of their respective representatives (including, without
limitation, investment bankers, attorneys and accountants) not to, directly or
indirectly, enter into, solicit, initiate or continue any discussions or
negotiations with, or encourage or respond to any inquiries or proposals by, or
participate in any negotiations with, or provide any information to, or
otherwise cooperate in any other way with, any Person, other than Buyer and its
representatives, concerning any sale of all or any substantial portion of the
Division or the Division Assets, or any merger, consolidation, liquidation,
dissolution or similar transaction involving the Division or the Acquired
Subsidiaries (each such transaction being referred to herein as a "Proposed
Acquisition Transaction"), PROVIDED that the definition of "Proposed Acquisition
Transaction" does not include sales of substantially all of the stock or assets
of MagneTek (PROVIDED that such sale shall not alter any Seller's obligations
under this Agreement).
(b) NOTIFICATION. MagneTek will promptly notify Buyer if any
discussions or negotiations are sought to be initiated, any proposal is made, or
any information is requested, in each case with respect to any Proposed
Acquisition Transaction, and will notify Buyer of the terms of any proposal
which it may receive in respect of any such Proposed Acquisition Transaction,
including, without limitation, the identity of the prospective purchaser or
soliciting party.
5.9 ACCESS TO INFORMATION. From the date hereof through the
Closing Date, Sellers shall, and shall cause their employees to, afford Buyer
and its authorized representatives, during normal business hours and upon
reasonable notice to Sellers in a manner which will not unduly interfere with
the operation of the business of Sellers, complete access at all reasonable
times to the Division and the Division Assets for the purpose of inspecting the
same, and to the officers and employees of Sellers and the Subsidiaries, and
shall furnish Buyer and its authorized representatives all financial, operating
and other data and information as Buyer may reasonably request, except to the
extent that such access would violate any governmental regulation,
confidentiality agreement, claim of attorney-client privilege, law or order to
which Sellers, any Subsidiary, their employees or the Division are subject.
30
5.10 CONDUCT OF BUSINESS. From the date hereof through the
Closing Date, Sellers shall, except as contemplated by this Agreement, or as
consented to by Buyer in writing, operate the business of the Division in the
ordinary course and substantially in accordance with past practice and will not
take any action inconsistent with this Agreement. Without limiting the
generality of the foregoing, as to the Division Sellers shall not, and Sellers
shall cause each of the Acquired Subsidiaries not to, except as specifically
contemplated by this Agreement:
(a) take any action that would require disclosure on
Schedule 3.17 had such action been taken prior to the date hereof;
(b) create or incur any Liability of the Acquired Subsidiaries
that is not a Division Liability;
(c) take any other action (or omit to take any action) which
would cause any representation or warranty of Sellers in this Agreement to be or
become untrue in any material respect as of the Closing Date; or
(d) enter into any agreement, or otherwise become obligated, to
take any action prohibited hereunder.
5.11 PAYMENT OF TAXES AND FEES. Sellers will timely pay all
sales, use, transfer and recording Taxes with respect to the sale of the Stock
and the Purchased Assets to Buyer. Buyer and Sellers shall share equally all
notarial fees associated with the sale of the German Entities.
5.12 CLOSURE/REMEDIATION OF LEER PAINT FACILITY. As soon as
practicable after the date hereof, both before and after Closing, Sellers shall
retain, at Sellers sole cost and expense, the services of an organization
reasonably satisfactory to Buyer, to conduct the removal and disposal of all
Substances located in the Paint Room at the Leer, Germany facility, including
but not limited to any Substances contained in the paint booth and paint
collection system in the Paint Room, or released from the paint booth and paint
collection system into the soil or groundwater ("Paint Room Remediation").
Sellers acknowledge and agree that the Paint Room Remediation shall comply with
all applicable German federal, state or local laws and regulations including,
but not limited to, all laws and regulations pertaining to the release or
disposal of Substances. Sellers shall complete the Paint Room Remediation no
later than 120 days after Closing. The obligations set forth in this
Section 5.12 are in addition to, and not limited by, the indemnities contained
in Section 9.3 of this Agreement.
ARTICLE VI
COVENANTS OF BUYER
Buyer hereby covenants and agrees with Sellers as follows:
31
6.1 APPROVALS OF THIRD PARTIES. As soon as practicable after
the date hereof, both before and after Closing, Buyer will use its reasonable
efforts to assist Sellers to secure all necessary consents, approvals and
clearances of third parties that have not been procured prior to Closing and
that may be required to consummate the Transactions contemplated hereby and will
otherwise use all reasonable efforts to cause the consummation of the
Transactions in accordance with the terms and conditions of the Transaction
Documents.
6.2 ACCESS TO BOOKS AND RECORDS.
(a) For a period of seven (7) years following the Closing, Buyer
will retain all Records. During such period, Buyer will afford authorized
representatives of Sellers (including its auditors) access to such Records at
reasonable times and during normal business hours at the principal business
office of the Division, or at such other location or locations at which such
Records may be stored or maintained from time to time, and will permit such
representatives to make abstracts from, or copies of, any of such Records, or to
obtain temporary possession of any thereof as may be reasonably required by
Sellers at such Sellers' sole cost and expense. During such period, Buyer will,
at Sellers' expense (limited, however, to Buyer's reasonable out-of-pocket
expenditures plus reimbursement for employee time on the basis set forth in
Section 6.2(b) below), cooperate with Sellers in furnishing information,
evidence, testimony, and other reasonable assistance in connection with any
action, proceeding, Tax audit, employee or labor dispute or investigation to
which such Seller or any of its affiliates is subject relating to the Business
or the Division. The term "Record" as used in this Section 6.2 shall include
any data processing files or other computerized data.
(b) If more than five (5) working days as to any particular
matter is required to be expended by employees of Buyer and its Affiliates in
responding to a request of any Seller under this Section 6.2, then Buyer's
provision of such employees may be conditioned on Sellers' agreement to
reimburse Buyer at reasonable per diem rates (calculated on a basis consistent
with the labor rates applicable to such employees for other purposes) for the
services of such employees; PROVIDED that no such reimbursement shall be
required for the assistance of such employees in connection with any litigation
or disputes for which Sellers are required to indemnify Buyer hereunder.
6.3 EMPLOYEE BENEFIT MATTERS.
(a) EMPLOYEE RETENTION. Buyer shall offer employment to
commence as of the Closing Date to all Division Employees who are active
employees of Sellers as of the close of business on the Closing Date (except for
those Division Employees of Sellers who have received notice of termination from
a Seller on or prior to the Closing Date), and shall set salaries, wages and
employee benefits that, in the aggregate, are generally comparable in value to
those provided to Transferred Employees by Sellers and the Acquired Subsidiaries
as disclosed to Buyer, other than any retiree welfare benefits and other than
those benefits provided to certain Division Employees as described in
subsection (d) below; PROVIDED that nothing in this Agreement shall be construed
as granting any Division
32
Employee any rights under this Agreement. Buyer has no present intention
(subject to its discretion as to employee performance) to terminate the
employment of any Transferred Employee within the sixty (60) days following the
Closing Date, except for those employees who have received notice of termination
on or prior to the Closing Date. Buyer also agrees to comply with the terms of
the WARN Act and any analogous state and German law following the Closing Date,
and shall be liable for and indemnify Sellers against all Liabilities, if any,
under the WARN Act, and analogous state and German law arising out of the
transaction contemplated by this Agreement with respect to a Transferred
Employee.
(b) EMPLOYEE BENEFIT PLANS. With respect to Buyer's benefit
plans, Buyer shall grant all Transferred Employees from and after the Closing
Date credit for all service with Sellers and their Affiliates and their
respective predecessors prior to the Closing Date for purposes of eligibility to
participate for which such service was recognized by Sellers and their
Affiliates. Not later than January 1, 1995, Buyer shall establish a health plan
for United States Transferred Employees which shall waive any exclusion or
limitation with respect to pre-existing conditions and actively-at-work
exclusions and shall provide that any expenses incurred by a United States
Transferred Employee or his covered dependents during the plan year in which
such plan is established shall be taken into account under such health plan for
such plan year for purposes of satisfying applicable deductible, coinsurance and
maximum out-of-pocket provisions. Buyer shall also cause its health plan to be
responsible for all health benefit claims by United States Transferred Employees
and their covered dependents for services rendered on or after the earlier of
the date such plan is established or January 1, 1995.
(c) VACATION, HOLIDAY, SICK AND SEVERANCE PAY. As of the
Closing Date, Buyer shall assume the Division Liabilities for vacation, holiday,
sick and severance pay to the extent such obligations are reflected in the Final
Closing Balance Sheet with respect to all United States Transferred Employees.
(d) TELEDYNE PENSION CREDITS. As soon as reasonably practicable
after MagneTek's actuaries complete the actuarial determinations required for
calculating the present value equivalent of the aggregate "Transition Credit
Amounts" that would be credited to the "Retirement Accounts" of those
Transferred Employees who are "Supplement C Participants" if such Transferred
Employees had continued to accrue service and benefits after the Closing Date
and through and including the last day of 1997 under the MagneTek FlexCare Plus
Retirement Pension Plan as in effect on the date hereof (hereinafter referred to
as the "MagneTek Pension Plan"), MagneTek shall pay such amount in cash to
Buyer; PROVIDED that if Buyer disputes such amount in good faith, Buyer and
Sellers shall negotiate in good faith to arrive at an amount reasonably
acceptable to Sellers and Buyer. Provided that MagneTek pays to Buyer the
amount set forth above, Buyer shall provide to those Transferred Employees who
are "Supplement C Participants" (as identified by MagneTek in writing delivered
to Buyer at the time of such payment) benefits in addition to those provided
pursuant to Section 6.3(a), which in the aggregate preserve the substantive
economic benefits provided to such Transferred Employees under Section C4.2 of
the MagneTek Pension Plan. Nothing herein shall obligate Buyer to replicate the
method of calculating "Transition Credit Amounts" or obligate Buyer to provide
any benefits to "Supplement C Participants" within a
33
tax-qualified retirement plan of Buyer. For purposes of this Section 6.3(d),
the terms "Transition Credit Amounts," "Retirement Accounts" and "Supplement C
Participants" shall have the meanings set forth for such terms in the MagneTek
Pension Plan.
(e) THIRD-PARTY BENEFICIARIES. No provision of this Section 6.3
shall create any third-party beneficiary rights in any Division Employee
including, without limitation, any right to continued employment or employment
in any particular position with Buyer for any specified period of time after the
Closing Date.
6.4 LETTERS OF CREDIT, ETC. Buyer shall secure replacements for
the letters of credit, performance bonds and bank guarantees listed on Schedule
6.4 or alternative security satisfactory to the beneficiaries of such
instruments (except for the Dresdner Bank guarantee relating to the Retained
German Pension Liability).
6.5 ACCOUNTS RECEIVABLE. Buyer agrees to promptly forward or
cause to be forwarded to Sellers any and all proceeds from accounts receivable
of Sellers that are unrelated to the Business or the Division and that are
received by Buyer and the Division after the Closing Date. If, after the
Closing Date, Buyer receives any payment from any person who at the time of such
payment has outstanding Seller Accounts Receivable and Buyer Accounts Receivable
and the payment (a) does not indicate whether it is in respect of Seller
Accounts Receivable or Buyers Accounts Receivable or (b) indicates that it is in
payment of both Seller Accounts Receivable and Buyer Accounts Receivable without
specifying the portion to be allocated to each, then Seller and Buyer shall
consult with one another to determine the proper allocation of such payment;
and, if they are unable to reach agreement on the proper allocation, such
payment shall be applied so as to retire Seller Accounts and Buyer Accounts
Receivable in chronological order based upon the period of time such accounts
receivable have been in existence.
6.6 TAX MATTERS.
(a) For any taxable period of the Acquired Subsidiaries ending
on or after the Closing Date, Buyer shall timely prepare and file with the
appropriate Governmental Authorities all Tax Returns required to be filed and
will pay all Taxes due with respect to such Tax Returns; PROVIDED THAT Sellers
shall be given a copy of such returns no later than thirty (30) days prior to
the filing thereof and Buyer shall make such changes thereto as Sellers
reasonably request prior to the filing thereof (unless Buyer reasonably
determines any such change not to be appropriate under applicable law);
PROVIDED, FURTHER, that Sellers will reimburse Buyer pursuant to Section 9.3(c)
with respect to its portion of taxes due for the taxable periods covered by such
Tax Returns, except that, if Buyer wrongfully fails to make changes in such Tax
Returns that were reasonably requested by Sellers, then Sellers shall not be
required to reimburse Buyer for such portion as would not have been payable had
Buyer made such changes; PROVIDED, FURTHER, that if Buyer makes changes
requested by Sellers and it is finally determined that such changes are improper
under applicable law, Sellers shall remain liable for their portion of such
Taxes under Section 9.3(c)(i)(1). For any taxable period of the Acquired
Subsidiaries that ends before the Closing Date (including any portion of a
taxable period includible in a combined,
34
consolidated, unitary or similar return for a period prior to the Closing Date),
Sellers shall timely prepare and file with the appropriate Governmental
Authorities all Tax Returns required to be filed and will pay all Taxes due with
respect to such Returns. Buyer and Sellers agree to cause the Acquired
Subsidiaries to file all Tax Returns for the period including the Closing Date
on the basis that the relevant taxable period ended as of the close of business
on the day preceding the Closing Date, unless the relevant Governmental
Authority will not accept a Tax Return filed on that basis. Buyer and Sellers
further agree to prepare the permanent records of the Sellers and the Acquired
Subsidiaries in a manner that would result in the tax items of the Acquired
Subsidiaries being included in the consolidated federal income Tax return of
MagneTek for periods up to, but not after, the close of business on the day
before the Closing Date.
(b) Any refunds or credits of Taxes of the Acquired Subsidiaries
paid with respect to taxable periods ending before the Closing Date shall be for
the account of Sellers. Any refunds or credits of Taxes of the Acquired
Subsidiaries paid with respect to taxable periods beginning on or after the
Closing Date shall be for the account of Buyer. Any refunds or credits of Taxes
of the Acquired Subsidiaries paid with respect to any Straddle Period shall be
prorated between Sellers and Buyer. Buyer and Seller shall cooperate to effect
the purposes of the foregoing provisions. Any amounts payable to Buyer or
Sellers shall be net of any tax cost or benefit to the payor attributable to the
receipt of such refund and/or the payment of such amounts; in no event shall
such payment exceed the amount of the refund. Notwithstanding the foregoing,
the control of the prosecution of a claim for refund of Taxes attributable to
Pre-Closing Tax Periods paid pursuant to a deficiency assessed subsequent to the
Closing Date as a result of an audit shall be governed by the provisions of
Section 9.3(c).
(c) Sellers shall be responsible for filing any consolidated,
combined or unitary Tax returns for periods prior to the Closing Date which are
required as a result of examination adjustments made by the IRS or by the
applicable state, local or foreign taxing authorities for such periods as
finally determined. For those jurisdictions in which separate Tax Returns are
filed by the Acquired Subsidiaries, any required returns resulting from such
examination adjustments, as finally determined, shall be prepared by Sellers and
furnished to Buyer or the Acquired Subsidiaries, as the case may be, for
approval (which approval shall not be unreasonably withheld or delayed),
signature and filing at least thirty (30) days prior to the due date for filing
such returns.
(d) Except as otherwise specifically provided for in this
Agreement, all other Taxes shall be payable and be the responsibility of the
party on whom such Taxes are imposed.
(e) Sellers shall deliver to Buyer at the Closing (i) a
"certification of non-foreign status" described in Treasury Regulation
section 1.1445-2(a)(2) with respect to MagneTek and Tempe, and (ii) a
certification of Deutschland that the stock of the German Entities does not
constitute a "United States real property interest," in accordance with Treasury
Regulation section 1.1445-2(c)(3).
35
(f) Sellers shall cause the provisions of any Tax sharing
agreement to which the Division or any Acquired Subsidiary is a party to be
terminated no later than the close of business on the day preceding the Closing
Date.
(g) Buyer shall not, and shall cause its Affiliates not to, make
an election pursuant to section 338 of the Code with respect to the purchase of
the stock of the German Entities.
ARTICLE VII
MUTUAL COVENANTS OF SELLERS AND BUYER
Sellers and Buyer covenant and agree as follows:
7.1 CONFIDENTIALITY.
(a) Buyer acknowledges that the information being provided to it by
Sellers is subject to the terms of the Confidentiality Agreement, the terms of
which are incorporated herein by reference. Effective upon, and only upon, the
Closing, the Confidentiality Agreement will terminate; PROVIDED, HOWEVER, that
Buyer acknowledges that the Confidentiality Agreement will terminate only with
respect to information relating solely to the Division Assets, the Division
Liabilities or the Business; and PROVIDED, FURTHER, that Buyer acknowledges that
any and all other confidential or proprietary information provided to it by
Sellers or Sellers' representatives concerning Sellers shall remain subject to
the terms and conditions of the Confidentiality Agreement after the date of the
Closing.
(b) Sellers and the Subsidiaries may have obtained confidential
or proprietary information relating to the business, operations and assets of
the Division. Following the Closing, Sellers and the Subsidiaries shall treat
such information as confidential, preserve the confidentiality thereof, not
duplicate or use such information, and instruct their employees who have had
access to such information to keep confidential and not to use any such
information unless such information (i) is now or is hereafter disclosed,
through no act or omission of Sellers or the Subsidiaries, in a manner making it
available to the general public or (ii) is required by law to be disclosed.
7.2 ASSIGNMENT OF CONTRACTS AND RIGHTS. Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign or novate any Contract or any claim or right or any
benefit arising thereunder or resulting therefrom if an attempted assignment or
novation thereof, without the consent of a third party thereto, would constitute
a breach or other contravention thereof or in any way adversely affect the
rights of Buyer or Sellers thereunder, except to the extent such consent(s) have
been obtained. With respect to any Government Contract or any claim, right or
benefit arising thereunder or resulting therefrom, Buyer and Sellers each will
use all reasonable efforts, both before and after Closing, to obtain the consent
(including, without limitation, by way of novation) of the other parties to any
such Contract for the assignment or novation thereof to Buyer with the release
of Sellers (PROVIDED, HOWEVER, that the release of Sellers
36
shall not be made a condition to obtaining such consent). With respect to any
other Contract or any claim, right or benefit arising thereunder or resulting
therefrom, to the extent requested by Buyer, Buyer and Sellers will use their
respective reasonable best efforts, both before and after Closing, to obtain the
consent of the other parties to any such Contract for the assignment or novation
thereof to Buyer with the release of Sellers (PROVIDED, HOWEVER, that the
release of Sellers shall not be made a condition to obtaining such consent). If
any such consent is not obtained, or if an attempted assignment or novation of
any such Contract would be ineffective or would materially adversely affect the
rights of Sellers thereunder so that Buyer would not in fact receive all such
rights, Sellers and Buyer will cooperate in a mutually agreeable arrangement
under which Buyer would obtain substantially the same economic benefits that
would be obtained under an assignment or novation thereof and assume the
obligations thereunder in accordance with this Agreement, including
subcontracting, sub-licensing, or subleasing to Buyer, or under which Sellers
would enforce for the benefit of Buyer, with Buyer assuming Sellers'
obligations, any and all rights of Sellers against a third party thereto.
Sellers will promptly pay to Buyer when received all monies received by any
Seller or its Affiliates under any Contract or any claim or right or any benefit
arising thereunder not transferred pursuant to this Section 7.2, except to the
extent the same represents a Non-Assigned Contract. Buyer's obligations in
respect of such unassigned contracts shall be commensurate with the benefits
thereof made available to Buyer pursuant to any arrangement referred to herein,
and shall comprise Assumed Liabilities. Any contract as to which consent is
obtained after the Closing Date shall thereafter comprise an Assigned Contract.
The reasonable efforts required hereby shall not include any requirement to
institute suit, to offer or grant financial accommodations or to assume
additional Liabilities, except to the extent funded by Buyer.
7.3 USE OF TRADEMARK AND TRADE NAMES. Notwithstanding anything
to the contrary in this Agreement, Buyer may continue to use the name "MagneTek"
and related trademarks, corporate names, and trade names incorporating
"MagneTek," and the stylized "MagneTek" logos (i) in displays, signage and
postings for the period after the Closing Date necessary to permit the
reasonably prompt removal of such names, and only to the extent such displays,
signage or postings exist on the Closing Date; (ii) for a period of two years,
to state the Company's former affiliation with MagneTek (E.G., "formerly a
division of MagneTek, Inc.") and (iii) to the extent any such trade names,
trademarks, service marks or logos appear on stationery, packaging materials,
supplies or inventory on hand as of the Closing Date or on order at the time of
the Closing, until such is exhausted.
7.4 NOTIFICATION OF CERTAIN MATTERS. From the date hereof
through the Closing Date, Sellers shall give prompt notice to Buyer and Buyer
shall give prompt notice to Sellers of (a) the occurrence, or failure to occur,
of any event which occurrence or failure would be likely to cause any of
Sellers' or Buyer's respective representations or warranties contained in this
Agreement to be untrue or inaccurate in any material respect as of the date
hereof or Closing Date and (b) any material failure of any of Sellers or Buyer
to comply with or satisfy any of its respective covenants, conditions or
agreements to be complied with or satisfied by it under this Agreement;
PROVIDED, HOWEVER, that such disclosure shall not be deemed to cure any breach
of a representation, warranty, covenant or agreement, or to satisfy any
condition.
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7.5 FURTHER ASSURANCES. Each of the parties hereto agrees, both
before and after the Closing, (i) to use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the
Transactions, (ii) to execute any documents, instruments or conveyances of any
kind which may be reasonably necessary or advisable to carry out any of the
Transactions, and (iii) to cooperate with each other in connection with the
foregoing and with the fulfillment of all conditions to this Agreement.
7.6 PROFITS OF GERMAN ENTITIES. The parties agree that, subject
to the provisions of Sections 1.5(a) and 2.3, Buyer shall be entitled to any
profits (within the meaning of German law) of the German Entities that have not
been distributed to the shareholders or otherwise disbursed prior to the Closing
Date.
7.7 GERMAN SHARE TRANSFER MATTERS. The parties to this
Agreement acknowledge that the acquisition of the shares of the German Entities
by Buyer will require the prior approval of the Bundeskartellamt (German Federal
Cartel Office) as provided for under German antitrust laws and that any
agreements creating an obligation of Buyer to acquire the shares, and the
consummation of such Agreement, would be null and void without such prior
approval. The parties therefore acknowledge that this Agreement, to the extent
that it relates to the German Entities, is subject to the condition precedent of
the Bundeskartellamt giving its consent to the conclusion and consummation of
the purchase of the German Entities by Buyer, or the Bundeskartellamt declaring
that reasons to prohibit the purchase of the German Entities by Buyer do not
exist, PROVIDED that the German Share Transfer Agreement attached hereto as
Exhibit B (the "German Share Transfer Agreement") will be executed as soon as
practicable after the execution of this Agreement. Furthermore, Sellers agree
to support Buyer in any reasonable respect and as may be required in order to
obtain the approval of the German Federal Cartel Office. With respect to the
German Entities, Deutschland shall, as soon as practicable after the execution
of this Agreement, irrevocably authorize certain of the partners of the Hamburg
law firm Schon Xxxxx Xxxxxxxxxxx & Xxxxx, or such other person or persons as are
reasonably acceptable to Buyer, to sign in its name and on its behalf a duly
notarized copy of the German Share Transfer Agreement. The German Share
Transfer Agreement shall be executed as soon as practicable after the signing of
this Agreement before a Hamburg notary chosen by Buyer.
7.8 AGREEMENTS PERTAINING TO RETAINED GERMAN PENSION LIABILITY.
While the Retained German Pension Liability is a Retained Liability, it is
agreed and understood that it will remain a liability of EuroAtlas, and that
MagneTek's indemnification obligation to Buyer shall arise only as and when
payments owed to Xx. Xxxxxxxxx become due pursuant to the terms of such
Liability. MagneTek agrees to maintain the existing letter of credit or to
replace or back it with a similar letter of credit such that (i) the terms of
the Retained German Pension Liability are fulfilled and (ii) any exposure to
EuroAtlas is either nonexistent or supported in full by a corresponding
obligation of MagneTek or a Subsidiary; and MagneTek shall cause such letter of
credit to be increased in amount as may be required by applicable law or in
order to comply with clause (ii) of this sentence. It is further understood
that MagneTek shall be permitted to conduct negotiations with Xx. Xxxxxxxxx
looking to eliminate the Retained German Pension Liability (and related letter
of credit) from
38
the books of EuroAtlas and to replace the same with any arrangement satisfactory
to Xx. Xxxxxxxxx, and that Buyer will cause EuroAtlas to provide all reasonable
cooperation in connection with such effort, PROVIDED it remains free from any
obligation as to the Retained German Pension Liability.
ARTICLE VIII
CLOSING; CONDITIONS PRECEDENT; RISK OF LOSS
8.1 DATE AND PLACE OF CLOSING. Subject to satisfaction or
waiver of the conditions to the obligations of the parties, the purchase and
sale of the Stock and the Purchased Assets pursuant to this Agreement shall be
consummated at a closing (the "Closing") to be held in the offices of Xxxxxx,
Xxxxxx & Xxxxxxx, Eighty Xxxx Xxxxxx, Xxx Xxxx, XX 00000, at 10:00 A.M. Eastern
Standard Time, on November 22, 1994 (the "Closing Date"). Title to the Stock
and the Purchased Assets shall be deemed to have passed from Sellers to Buyer as
of 12:01 a.m., California time, on the Closing Date.
8.2 SELLERS' PERFORMANCE. At the Closing, concurrently with
performance by Buyer of its obligations to be performed at the Closing:
(a) CONVEYANCES. Sellers shall execute and deliver to Buyer, in
form and substance acceptable to Buyer, (i) a combined xxxx of sale and
Assignment and Assumption Agreement in substantially the form attached hereto as
Exhibit C conveying to Buyer all items of personalty and rights under Assigned
Contracts included among the Purchased Assets and providing for the assumption
by Buyer of the Assumed Liabilities, and (ii) all other assignments,
endorsements and instruments of transfer as shall be necessary or appropriate to
carry out the intent of this Agreement and as shall be sufficient to vest in
Buyer all of Sellers' right, title and interest in the Purchased Assets. If
requested by Buyer, such documents shall be in a form suitable for recording.
(b) RECORDS. Sellers shall deliver to Buyer all Records
included in the Division Assets.
(c) OPINIONS OF SELLERS' COUNSEL. Buyer shall have received an
opinion from Xxxxxx, Xxxx & Xxxxxxxx, counsel for Sellers, dated the Closing
Date, and from Xxxxxx X. Miley, Vice President, Secretary and General Counsel to
MagneTek, each in form and substance reasonably acceptable to Buyer (and on
which Buyer's lenders will be entitled to rely).
(d) CONSENTS. Sellers shall deliver to Buyer the consents and
approvals required to be obtained by Sellers and set forth on Schedule 3.5.
(e) STOCK. Sellers shall deliver to Buyer certificates
representing the Stock (to the extent certificated), duly endorsed or
accompanied by stock powers duly executed in blank and otherwise in a form
acceptable for transfer on the books of each of the Company and the German
Entities, and any documents that are necessary for the transfer to
39
Buyer of good title to the Stock, with any requisite transfer tax or stamps
attached or provided for.
(f) NOTICE TO GERMAN COUNSEL. Sellers shall deliver to Buyer or
to a party designated by Buyer the notice contemplated in Section 4 of the
German Share Transfer Agreement to the effect that the Purchase Price has been
received by Sellers.
(g) CHARTER DOCUMENTS. Sellers shall deliver to Buyer a copy of
the Articles of Incorporation (or the foreign equivalent thereof) of each
Acquired Subsidiary with all amendments thereto, a copy of the bylaws (or the
foreign equivalent thereof) of each of the Acquired Subsidiaries as amended
through the Closing Date, certified by the secretary (or closest German
equivalent) of each respective Acquired Subsidiary, and all corporate minute
books and stock records of the Company, and certificates of good standing (or
the foreign equivalent thereof) for the jurisdiction of incorporation of each
Acquired Subsidiary and each jurisdiction where each Acquired Subsidiary is
qualified to do business, as a foreign corporation, each of which shall be
certified as of a date within ten (10) days prior to the Closing Date by the
Secretary of State (or the foreign equivalent thereof reasonably acceptable to
Buyer) of the jurisdictions of incorporation and qualification.
(h) RELEASES OF LIENS. Sellers shall deliver to Buyer executed
releases by the appropriate creditors of any and all liens or other Encumbrances
(other than Permitted Encumbrances) on any of the Division Assets or the Stock.
8.3 BUYER'S PERFORMANCE. At the Closing, concurrently with the
performance by Sellers of their obligations to be performed at the Closing,
Buyer shall:
(a) PURCHASE PRICE. Deliver to Sellers the Purchase Price by
wire transfer specified in Section 2.4.
(b) ASSIGNMENT AND ASSUMPTION AGREEMENT. Execute and deliver to
Sellers the Assignment and Assumption Agreement in substantially the form
attached hereto as Exhibit C.
(c) OPINION OF COUNSEL TO BUYER. Sellers shall have received an
opinion from Xxxxxx & Xxxxxxx, counsel for Buyer, dated the Closing Date, in
form and substance reasonably acceptable to Sellers.
(d) RELEASE OF LETTERS OF CREDIT, ETC. Buyer shall have
obtained replacement letters of credit for, or alternative security satisfactory
to the beneficiaries of, the letters of credit, performance bonds and bank
guarantees of Sellers with respect to the Division set forth on Schedule 6.4
(other than the Dresdner Bank guaranty relating to the Retained German Pension
Liability).
(e) CONSENTS. Buyer shall deliver to Sellers evidence of the
clearance required from the German Federal Cartel Office.
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8.4 OTHER INSTRUMENTS AND ACTIONS. In addition to the
foregoing, Buyer and Sellers agree as follows:
(a) FURTHER ACTION BY SELLERS. At any time and from time to
time, at or after the Closing, upon request of Buyer, Sellers shall do, execute,
acknowledge and deliver or shall cause to be done, executed, acknowledged and
delivered all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney and assurances as may reasonably be required in order to vest
in and confirm to Buyer full and complete title to, possession of, and the right
to use and enjoy, the Stock and the Purchased Assets.
(b) FURTHER ACTION BY BUYER. At any time and from time to time,
at or after the Closing, upon request of Sellers, Buyer shall do, execute,
acknowledge and deliver or shall cause to be done, executed, acknowledged and
delivered all such further acts and assurances as may reasonably be required in
order to better assure and confirm to Sellers the assumption by Buyer of the
obligations to render performance which are to be assumed by Buyer pursuant to
this Agreement.
8.5 CONDITIONS TO SELLERS' OBLIGATIONS. The obligations of
Sellers to effect the Closing are subject, in the discretion of Sellers, to the
satisfaction, on or prior to the Closing, of each of the following conditions,
any of which may be waived by Sellers:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects at and as of the date of this
Agreement and at and as of the Closing, and Buyer shall have performed and
satisfied all material agreements and covenants required hereby to be performed
by Buyer prior to the Closing.
(b) NO PROCEEDINGS, LITIGATION OR LAWS. No action by any
governmental authority of competent jurisdiction or other Person shall have been
instituted which would reasonably be expected to materially damage any Seller if
the transactions contemplated hereunder are consummated.
(c) CERTIFICATES. Buyer shall furnish Sellers with
such certificates of its duly authorized officers and others to evidence
compliance with the conditions set forth in this Article VIII as may be
reasonably requested by Sellers.
(d) CORPORATE DOCUMENTS. Sellers shall have received from Buyer
resolutions adopted by the board of directors of Buyer approving this Agreement,
the Transaction Documents and the Transactions, certified by Buyer's corporate
secretary.
(e) CONSENTS. All governmental consents necessary (except for
Government Contract assignment or novation) to effect the Closing shall have
been obtained.
(f) OTHER AGREEMENTS. Buyer shall have executed and delivered
the Transaction Documents in the forms attached as exhibits hereto or in forms
mutually acceptable to Sellers and Buyer.
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(g) OFFICERS CERTIFICATES. Sellers shall have received
Certificates in the form of Exhibit D hereto from each of Messrs. Xxxxx, Xxxxxx
and Xxxxxx.
8.6 CONDITIONS TO BUYER'S OBLIGATIONS. The obligations of Buyer
to consummate the transactions provided for hereby are subject, in the
discretion of Buyer to the satisfaction, on or prior to the Closing, of each of
the following conditions, any of which may be waived by Buyer:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of Sellers contained in this Agreement shall be
true and correct in all material respects at and as of the date of this
Agreement and at and as of the Closing, and Sellers shall have performed and
satisfied all material agreements and covenants required hereby to be performed
by them prior to the Closing.
(b) CONSENTS; ASSIGNMENT. All governmental consents necessary
to effect the Closing and for the operation of the business by Buyer shall have
been obtained except for novations required to be obtained from the U.S.
Government or any agency thereof in connection with a Government Contract. All
Contracts to which a Seller is a party that are material to the Division (and
all Contracts of an Acquired Subsidiary that are material to the Division and
that require a consent upon a change of control of such Acquired Subsidiary),
including, without limitation, all of the Contracts set forth on Schedules 1.1J
or 3.7 hereto either (A) shall have been validly assigned to Buyer, which
assignments shall be reasonably acceptable to Buyer with consents and approvals
required from third parties having been obtained, or (B) shall have been treated
pursuant to Section 7.2 such that Buyer would obtain substantially the same
economic benefits that would be obtained under an assignment thereof.
(c) NO PROCEEDINGS OR LITIGATION. No action by any governmental
authority of competent jurisdiction or other Person shall have been instituted
which would reasonably be expected to materially damage Buyer if the
transactions contemplated hereby are consummated.
(d) CERTIFICATES. Sellers shall furnish Buyer with such
certificates of its duly authorized officers and others to evidence compliance
with the conditions set forth in this Article VIII as may be reasonably
requested by Buyer.
(e) CORPORATE DOCUMENTS. Buyer shall have received from Sellers
resolutions adopted by the boards of directors of Sellers (except for
Deutschland) approving this Agreement, the Transaction Documents and the
Transactions, certified by each Seller's corporate secretary, as applicable.
(f) OTHER AGREEMENTS. Sellers shall have executed and delivered
the Transaction Documents in the forms attached as exhibits hereto or in forms
mutually satisfactory to Sellers and Buyer.
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(g) GERMAN FEDERAL CARTEL OFFICE APPROVAL. Buyer shall have
received all requisite clearances from the German Federal Cartel Office.
8.7 RISK OF LOSS. If any material portion of the Division
Assets is destroyed or damaged by fire or any other cause on or prior to the
Closing Date, Sellers shall give written notice to Buyer as soon as practicable
after, but in any event within five (5) calendar days of, discovery of such
damage or destruction, including specification of the amount of insurance, if
any, covering such Division Assets and the amount, if any, which Sellers are
otherwise entitled to receive as a consequence of such damage or destruction.
Prior to the Closing, Buyer shall have the option, which shall be exercised by
written notice to Sellers within ten (10) calendar days after receipt of
Sellers' notice or if there are not ten (10) calendar days prior to the Closing
Date, as soon as practicable prior to the Closing Date, of (a) accepting such
Division Assets in their destroyed or damaged condition in which event Buyer
shall be entitled to the proceeds of any insurance or other proceeds payable
with respect to such loss, or the cash equivalent thereof, and to such
indemnification for any uninsured portion of such loss pursuant to Article IX,
and the full Purchase Price shall be paid for such Division Assets,
(b) excluding such Division Assets from this Agreement, in which event the
Purchase Price shall be reduced by the amount allocated to such Division Assets,
as mutually agreed between Sellers and Buyer or (c) after providing Sellers with
a reasonable opportunity to cure, terminating this Agreement in accordance with
Section 10.1 if such damage or destruction has a Material Adverse Effect.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1 EXPENSES AND LOSSES. For purposes of this Article IX, the
following definitions shall apply:
"EXPENSES" shall mean any and all reasonable out-of-pocket expenses
incurred in connection with investigating, defending or asserting any claim,
action, suit or proceeding in connection with any matter indemnified against
(including, without limitation, the reasonable out of pocket fees and expenses
of legal-counsel).
"LOSSES" shall mean any and all losses, costs, obligations,
settlements, payments, fines, penalties, expenses, awards or judgments.
9.2 BASKET FOR INDEMNIFICATION. Except with respect to
Liabilities described in Subsections 9.3(a) and 9.4(a), with respect to which
the obligation to indemnify shall be absolute, neither Sellers nor Buyer will be
responsible for indemnifying the other Sellers or Buyer, as the case may be, for
any Losses or Expenses until the aggregate of all such Losses and Expenses
exceed $500,000 (and then only to the extent of any such excess).
9.3 INDEMNIFICATION BY SELLERS. Sellers agree, jointly and
severally, to indemnify and hold harmless Buyer and its officers, directors,
employees, agents, investors and Affiliates from and against any and all Losses
and Expenses in connection with or
43
arising from (i) the Liabilities set forth in Section 9.3(a) below and
(ii) subject to the limitations of Section 9.3(b), any breach or inaccuracy of
any representation, warranty, covenant or agreement set forth in any of the
Transaction Documents (including any certificates delivered pursuant thereto):
(a) Sellers' indemnification with respect to the following
Liabilities (whether arising in connection with an Acquired Subsidiary or a
Division Asset) shall not be limited in either amount or time (except as
otherwise set forth in Section 9.3(b) with respect to indemnification pursuant
to clause (vii) below):
(i) TAXES. Any Liability for Taxes for which Buyer is
indemnified pursuant to Section 9.3(c).
(ii) FINANCING OBLIGATIONS. Any Financing Obligations.
(iii) EMPLOYEE BENEFITS-RELATED. All Liabilities (other
than Liabilities for benefits accrued on the Final Closing Balance Sheet or
otherwise expressly assumed hereunder) under, relating to or arising in
connection with any Employee Plan or ERISA Affiliate Plan, including without
limitation (1) any Losses or Expenses or commitment to, or offset in favor of,
any Governmental Authority and (2) any refusal of any Governmental Authority to
reimburse Buyer fully for costs of any employee benefit plan or benefit
arrangement maintained or contributed to by Buyer which costs are allocable to
flexibly priced contracts with any such Governmental Authority to the extent
that such refusal is related to the closure, termination, or funding status of
any Employee Plan or ERISA Affiliate Plan.
(iv) LIABILITIES UNRELATED TO THE BUSINESS. Any and
all Liabilities of Sellers or any of their affiliates of any kind, character or
description, that are not attributable to the Division or the Division Assets,
including, without limitation, all Controlled Group Liabilities.
(v) LIABILITIES RELATING TO THE RETAINED ASSETS. All
claims against and obligations of Sellers under the Non-Assigned Contracts and
all other Liabilities of Sellers relating to the Retained Assets.
(vi) PENDING OR THREATENED LITIGATION OR KNOWN
DISPUTES. All Pending or Threatened Litigation.
(vii) ENVIRONMENTAL LIABILITIES. All Liabilities
relating to Pre-Closing Environmental Matters, subject to the provisions of
Section 9.3(b) and Section 9.3(d).
(viii) OTHER RETAINED LIABILITIES. All other Retained
Liabilities, including without limitation the Retained German Pension Liability.
44
(b) Except as set forth below, other than matters that are also
subject to indemnification under Section 9.3(a), Sellers' indemnification with
respect to any breach or inaccuracy of any representation, warranty, covenant or
agreement ("Buyer's General Claims") shall be limited to claims made or
identified to Sellers with reasonable specificity within a period of two (2)
years after Closing. Sellers' indemnification for claims arising under
Sections 9.3(a)(vii) and 9.3(d) ("Buyer's Environmental Claims") shall be
limited to claims made or identified to Sellers with reasonable specificity
within a period of five (5) years after the Closing. Notwithstanding the
foregoing, Buyer's General Claims, insofar as any thereof pertain to a claimed
breach of the representations made in Section 3.16, shall be limited to claims
made or identified to Sellers with reasonable specificity prior to the
expiration of the statute of limitations applicable to the taxable period of
Sellers (or the portion thereof) ending the day before the Closing Date, which
limitation shall not be extended by any extension or waiver thereof not effected
by MagneTek or a then-existing Subsidiary thereof. Sellers' liability for
Buyer's General Claims and Buyer's Environmental Claims shall be limited to an
aggregate amount of $12,000,000 in respect of all such Claims.
(c) TAX INDEMNIFICATION.
(i) Subject to the terms and conditions of this Article IX,
Sellers shall indemnify Buyer and its Affiliates (including the Acquired
Subsidiaries) and each of their respective officers, directors, employees and
agents and hold them harmless from (1) all liability for Taxes of Sellers and
the Acquired Subsidiaries for Pre-Closing Tax Periods (as defined below);
(2) all liability for Taxes incurred as a result of actions outside the ordinary
course of business taken by the Sellers or the Acquired Subsidiaries at the
direction of Sellers on the Closing Date; (3) all liability of the Acquired
Subsidiaries for Taxes of any person as defined in section 7701(a)(1) of the
Code (other than the MagneTek Group) under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract, or otherwise, except for such liabilities and agreements as may
have been incurred or entered into in the ordinary course of business and which
in the aggregate are not material in amount; (4) all liability for Taxes
incurred as a result of any income or gain restored to the income of the Company
under the consolidated return rules of Treas. Reg. Section 1.1502-13, -13T, -14,
-14T or -19 by reason of the Company ceasing to be a member of the MagneTek
Group; and (5) all liability for Expenses incurred with respect to any item
indemnified pursuant to clauses (1) through (4). "Pre-Closing Tax Period" shall
mean any taxable period ending before the Closing Date and the portion ending at
the close of business the day preceding the Closing Date of any taxable period
that includes (but does not end on) the Closing Date.
(ii) Buyer shall indemnify Sellers and their Affiliates and
each of their respective officers, directors, employees and agents, and hold
them harmless from (1) all liability for Taxes of Buyer and the Acquired
Subsidiaries for any taxable period ending on or 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 are not
for the Pre-Closing Tax Period), and (2) all liability for Expenses incurred
with respect to any item indemnified pursuant to clause (1).
45
(iii) In the case of any taxable period that includes
(but does not end on) the Closing Date (a "Straddle Period"), the Taxes of
Sellers and the Acquired Subsidiaries, for the portion of the Straddle Period
that constitutes a Pre-Closing Tax Period, shall be computed as if such taxable
period ended as of the close of business on the day preceding the Closing Date.
Sellers' obligation to indemnify Buyer pursuant to clause (a)(i) of the first
sentence of this Section 9.3(c) with respect to Taxes for a Straddle Period
shall be limited to an amount equal to the excess of (x) Taxes for the portion
of the Straddle Period that constitutes a Pre-Closing Tax Period (as calculated
pursuant to the preceding sentence) over (y) (A) the amount of Taxes for the
Straddle Period paid, or provided for through estimated Taxes or deposits paid,
at any time by a Seller, plus (B) the amount of such Taxes paid or provided for
through estimated Taxes or deposits paid by Sellers or the Acquired Subsidiaries
on or prior to the Closing Date. Sellers shall pay such excess to Buyer within
thirty (30) days after the Tax Return for such Straddle Period (other than a Tax
Return with respect to estimated Tax) is filed (or required to be filed, if
later).
(iv) At least thirty (30) days prior to the filing by Buyer
or any of the Acquired Subsidiaries of a Tax Return for a Straddle Period, Buyer
shall notify MagneTek of any amount payable by any Seller calculated in
accordance with this Section 9.3(c) and shall provide MagneTek with reasonably
detailed computations to support the amount notified. Sellers shall pay to
Buyer the amount within thirty (30) days after the Tax Return for the Straddle
Period (other than a Tax Return with respect to estimated Taxes) is filed or
required to be filed, if later, except to the extent such amounts would not have
been payable had Buyer not wrongfully failed to make changes to the Tax Return
required to be made pursuant to Section 6.6(a). The amount payable by Sellers
or Buyer, as the case may be, pursuant to this paragraph shall be adjusted to
reflect any final determination with respect to Taxes for a Straddle Period and
payments between Sellers and Buyer to reflect such adjustments shall be made if
necessary. Such adjustments and any resulting payments shall be made within
sixty (60) days of such final determination. Buyer and Sellers acknowledge
that, except to the extent otherwise provided in this Agreement, they have no
obligation to indemnify each other for any Taxes other than as specifically
provided in this Section 9.3(c).
(A) If a claim (including an informal or proposed
claim) shall be made by any Tax authority, which, if successful, might result in
an indemnity payment to any Person hereunder (a "Tax Indemnitee"), the Tax
Indemnitee shall promptly notify the party against whom indemnification is or
may be sought (the "Tax Indemnitor") in writing of such claim (a "Tax Claim").
If notice of a Tax Claim is not given to the Tax Indemnitor within a sufficient
period of time to allow the Tax Indemnitor to effectively contest such Tax
Claim, or in reasonable detail to apprise the Tax Indemnitor of the nature of
the Tax Claim, in each case taking into account the facts and circumstances with
respect to such Tax Claim, the Tax Indemnitor shall not be liable to the Tax
Indemnitee to the extent that the Tax Indemnitor's ability to effectively
contest such Tax Claim is actually prejudiced as a result thereof (without
consideration of the merits of the claim or the Tax Indemnitor's potential
arguments against such claim).
46
(B) With respect to any Tax Claim, the Tax Indemnitor
shall control all proceedings taken in connection with such Tax Claim
(including, without limitation, selection of counsel) and, without limiting the
foregoing, may in its sole discretion 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 the Tax Claim in any permissible manner, PROVIDED, HOWEVER, that the
Tax Indemnitor shall not settle or compromise a Tax Claim without giving thirty
(30) days prior notice to the Tax Indemnitee, and without the Tax Indemnitee's
consent, which shall not be unreasonably withheld or delayed. The Tax
Indemnitee, and each of its Affiliates, shall cooperate with the Tax Indemnitor
in contesting any Tax Claim, which cooperation shall include, without
limitation, the filing of amended Tax Returns or claims for refund, the
execution of settlement documents, the retention and (upon the Tax Indemnitor's
request) the provision to Tax Indemnitor of Records and information which are
reasonably relevant to such Tax Claim, and making employees available on a
mutually convenient basis to provide additional information or explanation of
any material provided hereunder or to testify at proceedings relating to such
Tax Claim.
(d) INDEMNIFICATION FOR PRE-CLOSING ENVIRONMENTAL MATTERS. In
the event that Buyer becomes aware of any action, proceeding, investigation or
claim relating to any Pre-Closing Environmental Matter (a "Pre-Closing
Environmental Proceeding"), notice thereof shall be given to Sellers as promptly
as practicable. Buyer will use its reasonable best efforts to provide notice of
Pre-Closing Environmental Proceedings to Sellers as promptly as practicable so
that Sellers can take control of the defense and investigation thereof, if they
so elect, in accordance with this Section 9.3(d); PROVIDED that the failure of
Buyer to give timely notice hereunder shall not affect rights of any indemnified
person to indemnification hereunder, to the extent that Sellers have not
suffered actual damage caused by such failure. After receipt of notice of a
Pre-Closing Environmental Proceeding, if Sellers acknowledge in writing to Buyer
that Sellers shall be obligated under the terms of their indemnity hereunder in
connection with such matter, then Sellers shall be entitled, if they so elect:
(i) to take control of the defense and investigation of such matter; and (ii) to
employ and engage attorneys and consultants of their own choice to handle and
defend the same, at Sellers' cost, risk and expense. However, in connection
with such matters, Sellers may not compromise or settle any claims or admit any
liability on behalf of any Indemnified Person, contractually bind any
Indemnified Person, or conduct or enter into any agreement to conduct any
investigation, remedial action or other action at or under any Facility without
the written consent of Buyer, such consent not to be unreasonably withheld. If
Sellers have taken control of a matter, they will keep Buyer reasonably informed
of the progress of any such investigation, defense, compromise or settlement of
such matter. In the event Sellers notify Buyer of their intent to take control
of a Pre-Closing Environmental Proceeding, Sellers shall have no further
obligation to indemnify Buyer or any other Indemnified Person with respect to
any expenses voluntarily incurred by such other Indemnified Person in connection
with such matter after the date on which Sellers take control of such matter,
except to the extent that such expenses were necessary to mitigate further
damages or to comply with any Environmental Law and Sellers have failed to take
appropriate measures to ensure such compliance or mitigation of damages (as
applicable).
47
Buyer shall cooperate in all reasonable respects with Sellers and their
attorneys in the investigation and defense of such matter; and Buyer may, at its
own cost, participate in the investigation and defense of such matter. In
connection with Sellers' control of any Pre-Closing Environmental Proceeding,
Buyer shall: (i) afford Sellers and their authorized representatives, during
normal business hours and upon reasonable notice to Buyer, access to any
Facility and to officers and employees of Buyer to the extent reasonably
necessary for Sellers to defend or investigate such matter, and (ii) furnish
Sellers and their authorized representatives all non-privileged relevant data
and information which they may reasonably request. Sellers will not utilize
their rights of access and right to information in a manner that unreasonably
interferes with or interrupts the operations of the affected Facility or the
Division, and will take all actions reasonably necessary to minimize disruption
of the operations of Buyer.
If Sellers fail to take control of a Pre-Closing Environmental
Proceeding within fifteen (15) calendar days after receipt of the notice of a
Pre-Closing Environmental Proceeding, Buyer will (upon delivering notice to such
effect to Sellers) have the right to undertake the investigation, defense,
compromise or settlement of such matter and Sellers shall have the right to
participate therein at their own cost. If Buyer takes control of the matter,
Buyer will keep Sellers reasonably informed of the progress of such matter. If
an action, proceeding, investigation or claim concerns both a Pre-Closing
Environmental Matter and another matter arising from events occurring after
Closing for which Sellers are not liable or otherwise responsible under this
Agreement, Sellers may assume control of that portion of the matter concerning a
Pre-Closing Environmental Matter in accordance with the provisions stated above,
and shall not be obligated to respond to or contribute to the cost of responding
to the remaining portion of the matter which does not relate to a Pre-Closing
Environmental Matter. In such instances where each of Buyer and Sellers is in
control of a portion of a matter, each of Buyer and Sellers shall in good faith
attempt to agree upon an appropriate allocation of the costs of responding to
such matter and an appropriate arrangement for communicating with governmental
authorities and other persons and for otherwise cooperating in the response to
such matter.
9.4 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and
hold harmless the Sellers and their officers, directors, employees, investors
and Affiliates from and against any and all Losses and Expenses in connection
with or arising from the following subject to such limitations as to time and
amount as may be set forth for any category of Liabilities below:
(a) Buyer's indemnification with respect to Division
Liabilities, Taxes as set forth in Section 9.3(c), amounts to be paid by Buyer
pursuant to Section 5.6(c)(ii) relating to COBRA Continuation Coverage during
the Transition Period, and all liabilities for fees and expenses to the extent
expressly assumed by Buyer hereunder, shall not be limited in either amount or
time.
(b) Buyer's indemnification with respect to any breach or
inaccuracy of any representation, warranty, covenant or agreement of Buyer
("Sellers' General Claim") shall be limited to claims made or identified to
Buyer with reasonable
48
specificity within a period of two (2) years after Closing. Buyer's
indemnification for Post-Closing Environmental Matters shall be limited to
claims made with reasonable specificity within a period of five (5) years after
the Closing. Buyer's liability for Sellers' General Claims and for Post-Closing
Environmental Matters shall be limited to an aggregate amount of $12,000,000 in
respect of all such claims.
(c) INDEMNIFICATION FOR POST-CLOSING ENVIRONMENTAL MATTERS. In
the event that any Seller becomes aware of any action, proceeding, investigation
or claim relating to any Post-Closing Environmental Matter (a "Post-Closing
Environmental Proceeding"), notice thereof shall be given to Buyer as promptly
as practicable. Each Seller will use its reasonable best efforts to provide
notice of Post-Closing Environmental Proceedings to Buyer as promptly as
practicable so that Buyer can take control of the defense and investigation of
such claims, if it so elects, in accordance with this Section 9.4(c); PROVIDED
that the failure of Sellers to give timely notice hereunder shall not affect
rights of any indemnified person to indemnification hereunder, to the extent
that Buyer has not suffered actual damage caused by such failure. After receipt
of notice of a Post-Closing Environmental Proceeding, if Buyer acknowledges in
writing to Sellers that Buyer shall be obligated under the terms of its
indemnity hereunder in connection with such matter, then Buyer shall be
entitled, if it so elects: (i) to take control of the defense and investigation
of such matter; and (ii) to employ and engage attorneys and consultants of their
own choice to handle and defend the same, at Buyer's cost, risk and expense.
However, in connection with such matters, Buyer may not compromise or settle any
claims or admit any liability on behalf of any Indemnified Person, contractually
bind any Indemnified Person, or conduct or enter into any agreement to conduct
any investigation, remedial action or other action at or under any relevant
facility then used by a Seller without the written consent of Sellers, such
consent not to be unreasonably withheld. If Buyer has taken control of a
matter, it will keep Sellers reasonably informed of the progress of any such
investigation, defense, compromise or settlement of such matter. In the event
Buyer notifies Sellers of its intent to take control of a Post-Closing
Environmental Proceeding, Buyer shall have no further obligation to indemnify
Sellers or any other Indemnified Person with respect to any expenses voluntarily
incurred by such other Indemnified Person in connection with such matter after
the date on which Buyer takes control of such matter, except to the extent that
such expenses were necessary to mitigate further damages or to comply with any
Environmental Law and Buyer has failed to take appropriate measures to ensure
such compliance or mitigation of damages (as applicable).
Sellers shall cooperate in all reasonable respects with Buyer and its
attorneys in the investigation and defense of such matter; and each Seller may,
at its own cost, participate in the investigation and defense of such matter.
In connection with Buyer's control of any Post-Closing Environmental Proceeding,
each Seller shall: (i) afford Buyer and its authorized representatives, during
normal business hours and upon reasonable notice to Sellers, access to any
relevant facility then used by a Seller and to officers and employees of Sellers
to the extent reasonably necessary for Buyer to defend or investigate such
matter, and (ii) furnish Buyer and its authorized representatives all non-
privileged relevant data and information which it may reasonably request. Buyer
will not utilize its rights of access and right to information in a manner that
unreasonably interferes with or interrupts the operations
49
of the affected facility (if used by a Seller) or the business of Sellers, and
will take all actions reasonably necessary to minimize disruption of the
operations of Sellers.
If Buyer fails to take control of a Post-Closing Environmental
Proceeding within fifteen (15) calendar days after receipt of the notice of a
Post-Closing Environmental Proceeding, Sellers will (upon delivering notice to
such effect to Buyer) have the right to undertake the investigation, defense,
compromise or settlement of such matter and Buyer shall have the right to
participate therein at its own cost. If Sellers take control of the matter,
Sellers will keep Buyer reasonably informed of the progress of such matter. If
an action, proceeding, investigation or claim concerns both a Post-Closing
Environmental Matter and another matter arising from events occurring prior to
or after Closing for which Buyer is not liable or otherwise responsible under
this Agreement, Buyer may assume control of that portion of the matter
concerning a Post-Closing Environmental Matter in accordance with the provisions
stated above, and shall not be obligated to respond to or contribute to the cost
of responding to the remaining portion of the matter which does not relate to a
Post-Closing Environmental Matter. In such instances where each of Sellers and
Buyer is in control of a portion of a matter, each of Sellers and Buyer shall in
good faith attempt to agree upon an appropriate allocation of the costs of
responding to such matter and an appropriate arrangement for communicating with
governmental authorities and other persons and for otherwise cooperating in the
response to such matter.
9.5 NOTICE OF LOSS. Subject to the provisions of
Sections 9.3(c), 9.3(d) and 9.4(c) (which shall govern in lieu of Sections 9.5
and 9.6 with respect to all matters covered thereby) if a claim for
indemnification hereunder (a "Claim") is to be made by an Indemnified Party,
such Indemnified Party shall give written notice (a "Claim Notice") to the
Indemnifying Party as soon as practicable after such Indemnified Party becomes
aware of any fact, condition or event which may give rise to any Expense or Loss
for which indemnification may be sought under this Article IX. If any lawsuit
or enforcement action is filed against any Indemnified Party hereunder, notice
thereof (a "Third Party Notice") shall be given to the Indemnifying Party as
promptly as practicable (and in any event within thirty (30) calendar days after
the service of the citation or summons). The failure of any Indemnified Party
to give timely notice hereunder shall not affect rights to indemnification
hereunder, except to the extent that the Indemnifying Party demonstrates actual
damage caused by such failure.
9.6 DEFENSE OF CLAIMS. Except as otherwise set forth in
Sections 9.3(c), 9.3(d) and 9.4(c), after receipt of a Claim Notice or a Third
Party Notice, if the Indemnifying Party shall acknowledge in writing to the
Indemnified Party that the Indemnifying Party shall be obligated under the terms
of its indemnity hereunder in connection with such lawsuit or action, then the
Indemnifying Party shall be entitled, if it so elects, (i) to take control of
the defense and investigation of such lawsuit or action, (ii) to employ and
engage attorneys of its own choice (such counsel to be reasonably acceptable to
the Indemnified Party) to handle and defend the same, at the Indemnifying
Party's cost, risk and expense (unless the named parties to such action or
proceeding include both the Indemnifying Party and the Indemnified Party and the
indemnified party has been advised in writing by counsel that there may be one
or more legal defenses available to such
50
Indemnified Party that are different from or additional to those available to
the Indemnifying Party), and (iii) to compromise or settle such claim, which
compromise or settlement shall be made only with the written consent of the
Indemnified Party, such consent not to be unreasonably withheld. The
Indemnified Party shall cooperate in all reasonable respects with the
Indemnifying Party and such attorneys in the investigation, trial and defense of
such lawsuit or action and any appeal arising therefrom; and the Indemnified
Party may, at its own cost, participate in the investigation, trial and defense
of such lawsuit or action and any appeal arising therefrom. The parties shall
also cooperate with each other in any notifications to insurers. If the
Indemnifying Party fails to assume the defense of such claim within fifteen (15)
calendar days after receipt of the Claim Notice or the Third Party Notice, the
Indemnified Party against which such claim has been asserted will (upon
delivering notice to such effect to the Indemnifying Party) have the right to
undertake the defense, compromise or settlement of such claim and the
Indemnifying Party shall have the right to participate therein at its own cost;
PROVIDED, HOWEVER, that such claim shall not be compromised or settled without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. In the event the Indemnified Party assumes the defense
of the claim, the Indemnified Party will keep the Indemnifying Party reasonably
informed of the progress of any such defense, compromise or settlement.
9.7 INDEMNIFICATION RELATING TO CERTAIN PRODUCT-RELATED MATTERS.
Sellers and Buyer agree that notwithstanding the fact that it is not included on
Schedule 3.8, the matters referred to on Schedule 3.22 (hereinafter, the
"Product Failure") will be treated as a Retained Liability for which Buyer is
indemnified in full under Section 9.3(a) in the same manner as a threatened
litigation. Notwithstanding the foregoing, even if there shall not have been a
Claim (within the meaning of Section 9.5) in respect thereof, Sellers shall be
entitled to take commercially reasonable measures to obviate, reduce or mitigate
any liability relating to the Product Failure, including, without limitation,
the issuance of any recall notice or provision of replacement parts and labor,
all at its own expense and after reasonable notice to Buyer. In addition, to
the extent Sellers wish to pursue any claim against a manufacturer in respect of
the Product Failure, any amounts recovered therefrom shall be considered
Retained Assets, and Buyer shall provide reasonable cooperation, including
serving as a nominal plaintiff, subject to the provisions of Section 6.2(b)
hereof. In the event of a Claim (within the meaning of Section 9.5), the
provisions of Section 9.6 hereof shall apply; however, the existence of one or
more Claims shall not diminish Sellers' right to take commercially reasonable
prophylactic measures as referred to above.
9.8 LOSSES NET OF INSURANCE, TAXES.
(a) The amount of any Loss for which indemnification is provided
under this Article IX shall be net of any amounts recovered or recoverable by
the Indemnified Person under insurance policies, or in the form of a refund of
Taxes or a reduction in Taxes otherwise payable, with respect to such Loss.
(b) The parties hereto agree that, from and after the Closing,
the indemnification provisions of this Article IX are intended to provide the
exclusive remedy as to all Losses that either may incur arising from or relating
to the Transactions, and each
51
party hereby waives, to the extent it may do so, any other rights or remedies
that may arise under any applicable statute, rule or regulation.
ARTICLE X
MISCELLANEOUS
10.1 TERMINATION.
(a) TERMINATION. This Agreement may be terminated at any time
prior to Closing:
(i) by mutual written consent of Buyer and Sellers;
(ii) by Buyer or Sellers if the Closing shall not have
occurred on or before December 31, 1994; PROVIDED, HOWEVER, that if Buyer or
Sellers have the right to terminate this Agreement under clause (iii) or (iv),
respectively, of this Section 10.1(a), the breaching party may not terminate
this Agreement until March 31, 1995 and, if the breach is for any reason other
than a breach of a representation or warranty and the breaching party has not
cured the breach by March 31, 1995, the breaching party shall on such date
promptly pay to the non-breaching party all fees and expenses (including,
without limitation, attorneys and accountants fees) incurred by the non-
breaching party in connection with the proposed purchase of the Division both
before and after the date hereof up to March 31, 1995;
(iii) by Buyer if there is a material breach of any
representation or warranty of Sellers or any covenant or agreement to be
complied with or performed by Sellers pursuant to the terms of this Agreement,
PROVIDED that Buyer may not terminate this Agreement prior to the Closing if
Sellers have not had an adequate opportunity to cure such failure; or
(iv) by Sellers if there is a material breach of any
representation or warranty of Buyer or of any covenant or agreement to be
complied with or performed by Buyer pursuant to the terms of this Agreement;
PROVIDED that Sellers may not terminate this Agreement prior to the Closing if
Buyer has not had an adequate opportunity to cure such failure.
(b) IN THE EVENT OF TERMINATION. In the event of termination of
this Agreement:
(i) each party will redeliver all documents, work papers
and other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same;
(ii) the provisions of the Confidentiality Agreement shall
continue in full force and effect; and
52
(iii) no party hereto shall have any liability or
further obligation to any other party to this Agreement, PROVIDED that, in
addition to any liability for fees and expenses incurred pursuant to Section
10.1(a)(ii), a party shall remain liable for any breach of this Agreement (other
than of a representation or warranty) by it occurring prior to the termination
of this Agreement.
10.2 EXPENSES AND FINDERS' FEES. Except as set forth in Section
5.11, each party hereto will bear its own costs and expenses associated with the
Transactions, including the payment of any agents' or finders' fees due in
connection with the transaction contemplated hereby. Without limiting the
generality of the foregoing, none of the costs and expenses of Buyer or its
Affiliates will be paid out of the Division Assets prior to Closing.
10.3 ENTIRE AGREEMENT. Together with the Confidentiality
Agreement (to the extent provided herein), this Agreement, the Schedules and
Exhibits hereto and any side letter concurrently or subsequently executed,
constitute the entire contract and shall supersede all prior agreements and
understandings, both written and oral, between the parties hereto with respect
to the subject matter hereof and no party shall be liable or bound to the other
in any manner by any representations or warranties except as specifically set
forth herein or expressly required to be made or delivered pursuant hereto.
10.4 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto. Nothing in this Agreement,
express or implied, is intended to confer upon any party, other than the parties
and their respective successors and assigns, any rights, remedies, obligations
or Liabilities under or by reason of such agreements. This Agreement and the
rights and obligations hereunder shall not be assignable or transferable by any
party hereto without the prior written consent of the other parties hereto,
which consent shall not be unreasonably withheld; PROVIDED, HOWEVER, that Buyer
may assign this Agreement and Buyer's rights and obligations hereunder to a
subsidiary of Buyer or to a lender as security, without the prior written
consent of any other party hereto.
10.5 IDENTICAL COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall for all purposes be deemed to be
an original and all of which shall constitute the same instrument, but only one
of which need be produced.
10.6 HEADINGS. The headings of the paragraphs and subparagraphs
of this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
10.7 USE OF CERTAIN TERMS. As used in this Agreement, the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular paragraph, subparagraph or
other subdivision.
10.8 MODIFICATION AND WAIVER. Any of the terms or conditions of
this Agreement may be waived in writing at any time, whether before or after
action thereon by the party which is entitled to the benefits thereof; and this
Agreement may be modified or
53
amended at any time, whether before or after action thereon by the parties. No
supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by all of the parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver.
10.9 NOTICES. All notices, consents, requests, instructions,
approvals and/or communications provided for herein, shall be validly given,
made or served if in writing or by facsimile or overnight delivery and addressed
to the party to be notified as follows:
(i) If to a Seller:
MagneTek, Inc.
00 Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Miley
Facsimile Number: (000) 000-0000
Copy to:
Xxxxxx, Xxxx & Xxxxxxxx
0000 Xxxxxxx Xxxx Xxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx, Esq.
Facsimile Number: (000) 000-0000
(ii) If to Buyer:
PTS, Inc.
c/o The Carlyle Group
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxx
Facsimile Number: (000) 000-0000
Copy to:
Xxxxxx & Xxxxxxx
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Facsimile Number: (000) 000-0000
54
The designation of the person to be so notified or the address of such
person for the purposes of such notice may be changed from time to time by a
similar notice. Notices shall be deemed to have been given (i) if delivered
personally or otherwise actually received, (ii) if sent by overnight delivery
service, (iii) if mailed by first class United States mail, postage prepaid,
registered or certified, with return receipt requested, or (iv) if sent by
facsimile. Any notice, as provided in clause (iii) above, which is addressed
and mailed in the manner herein provided shall be conclusively presumed to have
been duly given to the party to which it is addressed at the close of business,
local time of the recipient, on the third business day after the day it is so
placed in the mail. Notice given in any manner described in this section shall
be effective upon receipt by the addressees thereof.
10.10 GOVERNING LAW. The parties hereby agree that this Agreement
has been executed and delivered in the State of New York and shall be construed
and enforced in accordance with and governed by the laws thereof, except as to
the German Share Transfer Agreement which shall be governed by German law.
10.11 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Accounting Firm" shall mean the independent public accounting firm set
forth in Section 2.3(c).
"Acquired Subsidiaries" means the Company, the German Entities and each
of their respective Subsidiaries.
"Adjusted July Balance Sheet" has the meaning set forth in Section 2.2.
"Adjustment Period" has the meaning set forth in Section 2.3(b).
"Affiliate" has the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act by the SEC, as in effect on the date hereof.
"Aggregate Purchase Price" shall have the meaning set forth in
Section 2.5.
"Applicable Rate" means the "prime rate" as set forth in the WALL
STREET JOURNAL on the Closing Date, and if such publication shall contain more
than one "prime rate" on such date, then the average of such rates.
"Arbitration Notice" has the meaning set forth in Section 11.3.
"Assigned Contract" has the meaning set forth in Section 1.1(d).
"Assignment and Assumption Agreement" means an Assumption Agreement in
substantially the form attached hereto as Exhibit C.
55
"Assumed German Pension Liabilities" has the meaning set forth in
Section 1.4(e).
"Assumed Liabilities" shall have the meaning set forth in Section 1.4.
"Balance Sheet Adjustments" has the meaning set forth in Section
2.3(a).
"Xxxx of Sale and Assignment" means a Xxxx of Sale and Assignment in
substantially the form attached hereto as Exhibit C.
"Billed Amount" has the meaning set forth in Section 5.6(c)(ii).
"Business" has the meaning set forth in the Recitals hereto.
"Business Day" means a day other than a Saturday or a Sunday or other
day on which commercial banks in New York are authorized or required by law to
close.
"Buyer" has the meaning set forth in the preamble hereto.
"Buyer Accounts Receivable" has the meaning set forth in Section 5.4.
"Buyer's Accountants" has the meaning set forth in Section 2.3(c).
"Buyer's Environmental Claims" has the meaning set forth in
Section 9.3(b).
"Buyer's General Claims" has the meaning set forth in Section 9.3(b).
"Cash Schedule" has the meaning set forth in Section 2.3(b).
"Claim" has the meaning set forth in Section 9.5.
"Claim Notice" has the meaning set forth in Section 9.5.
"Closing" has the meaning set forth in Section 8.1.
"Closing Date" means the day on which the Closing occurs pursuant to
Section 8.1.
"COBRA Continuation Coverage" has the meaning set forth in Section 5.6.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Company" has the meaning set forth in the recitals to this Agreement.
"Competitive Business" has the meaning set forth in Section 5.3.
56
"Confidentiality Agreement" means that certain Confidentiality
Agreement entered into between The Carlyle Group and MagneTek, Inc. executed by
The Carlyle Group on September 8, 1994.
"Contract" means any contract, subcontract, agreement, license, lease,
sales or purchase order or other legally binding commitment, whether written or
oral.
"Controlled Group Liabilities" means any and all Liabilities under (i)
Title IV of ERISA, (ii) section 302 of ERISA, (iii) sections 412 and 4971 of the
Code, (iv) the continuation coverage requirements of section 601 et seq. of
ERISA and section 4980B of the Code and (v) corresponding or similar provisions
of foreign laws or regulations.
"CPR" means the Center for Public Resources, Inc.
"DCAA" means the Defense Contract Audit Agency.
"Division" has the meaning set forth in the recitals hereto.
"Division Assets" has the meaning set forth in Section 1.1.
"Division Employee" means any person employed by the Business on the
Closing Date, including, without limitation, any Person on lay-off, leave of
absence, sick or short-term disability leave.
"Division Liabilities" has the meaning set forth in Section 1.4.
"Employee Plan" has the meaning set forth in Section 3.11(a).
"Encumbrances" means any option, mortgage, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or other security agreement
of any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement or any financing lease having
substantially the same economic effect as any of the foregoing).
"Environmental Law" shall mean any and all United States and German
federal, state, or local statutes, rules, laws, regulations, ordinances, codes
or common law relating to pollution or the environment (including without
limitation the Handling of Substances or the presence of Substances at a
Facility owned, leased or used by Sellers or the Subsidiaries at any time prior
to the Closing Date) that are applicable to the Division.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means, with respect to any entity, trade or business,
any other entity, trade or business that is a member of a group described in
section 414(b), (c), (m) or (o) of the Code or section 4001(b)(1) of ERISA that
includes the first entity, trade or
57
business, or that it a member of the same "controlled group" as the first entity
trade or business pursuant to section 4001(a)(14) of ERISA.
"ERISA Affiliate Plan" has the meaning set forth in Section 3.11(b)(v).
"EuroAtlas" means MagneTek EuroAtlas GmbH, a German company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations of the SEC promulgated from
time to time thereunder.
"Exon-Xxxxxx Amendment" shall mean the Exon-Xxxxxx Amendment to the
Defense Production Act of 1990.
"Expended Cash" has the meaning set forth in Section 2.3(b).
"Expenses" has the meaning set forth in Article IX.
"Facility" has the meaning set forth in the definition of "Pre-Closing
Environmental Matters."
"Final Adjustment Factor" has the meaning set forth in Section 2.3(d).
"Final Closing Balance Sheet" has the meaning set forth in
Section 2.3(a).
"Financial Statements" has the meaning set forth in Section 3.14.
"Financing Obligations" shall mean (i) indebtedness of Sellers, the
Subsidiaries or any of their respective Affiliates for borrowed money,
(ii) obligations of Sellers, the Subsidiaries or any of their respective
Affiliates evidenced by bonds, notes, debentures or similar instruments (other
than surety or similar bonds), (iii) obligations of Sellers, the Subsidiaries or
any of their respective Affiliates under capitalized leases, except to the
extent disclosed on Schedule 10.11A, (iv) obligations under conditional sale,
title retention or similar agreements or arrangements creating an obligation of
Sellers, the Subsidiaries or any of their respective Affiliates with respect to
the deferred purchase price of property (other than customary trade credit),
except to the extent disclosed on Schedule 10.11A, and (v) all obligations of
Sellers, the Subsidiaries or any of their respective Affiliates to guarantee any
of the foregoing types of obligations on behalf of others; PROVIDED that
Financing Obligations shall not include any Liabilities incurred by Buyer (or by
the Acquired Subsidiaries under Buyer's control) subsequent to Closing.
"Foreign Corrupt Practices Act" means the Foreign Corrupt Practices Act
of 1977, as amended from time to time.
"GAAP" means generally accepted accounting principles in the United
States of America.
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"Generated Cash" has the meaning set forth in Section 2.3(b).
"German Benefit Plan" has the meaning set forth in Section 3.11(b)(vi).
"German Employees" has the meaning set forth in Section 3.10(b).
"German Share Transfer Agreement" has the meaning set forth in
Section 7.7.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Government Contract" shall mean any bid, quotation, proposal,
contract, agreement, work authorization, lease, commitment of sale or purchase
order of Sellers or the Subsidiaries relating to the Business that (i) is with
the United States Government or (ii) a subcontract with a prime contractor (or
another subcontractor) with respect to any contract of the type described in
clause (i).
"Handling" has the meaning set forth in the definition of "Pre-Closing
Environmental Matters".
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended from time to time.
"Indemnified Person" means, with respect to any Loss, the Person
seeking indemnification hereunder.
"Indemnifying Person" means, with respect to any Loss, the Person from
whom indemnification is being sought hereunder.
"Interest Period" has the meaning set forth in Section 2.3(d).
"Interim Cash Adjustment" has the meaning set forth in Section 2.3(b).
"Inventory" has the meaning set forth in Section 1.1(c).
"IRS" means the United States Internal Revenue Service.
"Knowledge of Seller" or "Seller's Knowledge" with reference to any of
the representations and warranties of Seller means the actual knowledge of any
"officer" of MagneTek, as such term is defined in 17 C.F.R. Section 240.16a-
1(f), and of Xx. Xxxx Xxxxxx, Xx. Xxxxxx Xxxxxx and Xx. Xxxxx Xxxxx.
"Liabilities" shall mean liabilities, obligations or commitments of any
nature, absolute, accrued, contingent or otherwise, whether matured or
unmatured, and whether material or not material.
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"Losses" has the meaning set forth in Article IX.
"Material" when used in connection with a representation and warranty
of Sellers shall mean material to the Business or the Division, taken as a
whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property or condition (financial or other) of the Business
or the Division, taken as a whole or (b) the ability of Sellers to consummate
the Transactions.
"Net Worth" has the meaning set forth in Section 2.3(a).
"Non-Assigned Contracts" means those Contracts designated as "Excluded
Contracts" on Schedule 1.1D.
"Notice of Disagreement" has the meaning set forth in Section 2.3(c).
"Paint Room" shall mean and include the area and equipment to the east
of the production factory at the Leer, Germany facility, including but not
limited to the paint booth and related equipment and the paint collection system
and related equipment (including the paint collection basin).
"Paint Room Remediation" has the meaning set forth in Section 5.12.
"Patent and Trademark Rights" has the meaning set forth in Section 3.4.
"Pending or Threatened Litigation" means any action, suit or proceeding
(i) against any Seller or Acquired Subsidiary as to which a complaint has been
filed and a Seller or Acquired Subsidiary has been served or otherwise given
notice as to such filing on or before the Closing Date or (ii) which has been
threatened against any Seller or Acquired Subsidiary and is set forth on
Schedule 3.8.
"Permitted Encumbrances" shall mean: (i) mechanics', carriers',
workmen's, repairmen's or other like Encumbrances arising or incurred in the
ordinary course of business and which secure Division Liabilities that are not
due and payable or which are being contested in good faith by appropriate
proceedings with appropriate reserves set aside therefor, (ii) Encumbrances for
Taxes and other governmental charges which (x) are not due and payable or (y)
are being contested in good faith and by appropriate proceedings with
appropriate reserves set aside therefor; and (iii) as to interests in real
estate, (A) easements, covenants, rights-of-way and other similar restrictions
of record, (B) zoning, building and other similar restrictions, (C) Encumbrances
that have been placed by any developer, landlord or other third party on
property over which Seller has easement rights or on any of Seller's leased
property and subordination or similar agreements relating thereto and
(D) unrecorded easements, covenants, rights-of-way or other similar
restrictions, PROVIDED any such interest described in this clause (iii) does not
materially interfere with the use to which such real estate is presently used.
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"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Personal Property" has the meaning set forth in Section 1.1(b).
"Post-Closing Environmental Matters" shall mean (i) the production,
use, generation, storage, treatment, transport, recycling, disposal, discharge,
release, or other handling or disposition at any time after the Closing Date of
any Substances, either in, on, under or from any real property or facility owned
or leased by any Seller and conveyed to Buyer pursuant to this Agreement
("Transferred Facility"), including, without limitation, the effects of such
handling of Substances on resources, Persons, or property within or outside the
boundaries of any Transferred Facility, (ii) the presence after the Closing Date
of Substances in, on or under any Transferred Facility, PROVIDED that the
Substances were not in, on or under the Transferred Facility on or prior to the
Closing Date, (iii) the failure after the Closing Date of any Transferred
Facility or any operations of Buyer to be in compliance with any Environmental
Laws PROVIDED that the failure to be in compliance did not begin on or prior to
the Closing Date, and (iv) any other act, omission or condition existing with
respect to the Division or the Division Assets after the Closing Date which
gives rise to Liability under any Environmental Laws, PROVIDED that the act,
omission or condition did not give rise to Liability under any Environmental
Laws on or prior to the Closing Date.
"Post-Closing Environmental Proceeding" has the meaning set forth in
Section 9.4(c).
"Pre-Closing Environmental Matters" shall mean (i) the production, use,
generation, storage, treatment, transport, recycling, disposal, discharge,
release, or other handling or disposition at any time on or prior to the Closing
Date (collectively, "Handling"), of any hazardous materials or other toxic,
hazardous, or other regulated wastes, substances products, pollutants or
materials including, without limitation, asbestos, petroleum including crude oil
or any fraction thereof, petroleum products and any substance regulated under an
Environmental Law (collectively, "Substances"), either in, on, under or from any
real property or facility owned, leased, operated or used at any time by
Sellers, the Acquired Subsidiaries or any of their Affiliates (or a predecessor
of any Seller or Subsidiary or any of their respective Affiliates) ("Facility"),
including, without limitation, the effects of such Handling of Substances on
resources, Persons, or property within or outside the boundaries of any
Facility, (ii) the presence as of the Closing Date of Substances in, on or under
any Facility regardless of how the Substances came to rest at, on or under the
Facility, (iii) the failure on or prior to the Closing Date of any Facility or
any operations of Seller or its Subsidiaries to be in compliance with any
Environmental Laws in effect at the time of Closing, and (iv) any other act,
omission or condition existing with respect to the Division or the Division
Assets or any Facility prior to the Closing Date which gives rise to Liability
under any Environmental Laws in effect at the time of Closing. Pre-Closing
Environmental Matters shall in no event be considered to include the presence of
asbestos in or upon any improvements located on a Facility at any time, other
than insofar as remediation or
61
containment may reasonably be required as to friable asbestos in such a Facility
on the Closing Date.
"Pre-Closing Environmental Proceeding" has the meaning set forth in
Section 9.3(d).
"Pre-Closing Tax Period" has the meaning set forth in Section 9.3(c).
"Proposed Acquisition Transaction" has the meaning set forth in
Section 5.8.
"Purchase Price" has the meaning set forth in Section 2.1.
"Purchased Assets" has the meaning set forth in Section 1.1.
"Records" means all of Sellers' or Buyer's (as the context shall
indicate) books and records relating to or used in connection with the Division
or the Business.
"Retained Assets" has the meaning set forth in Section 1.5.
"Retained Liabilities" has the meaning set forth in Section 1.6.
"Retained German Pension Liability" has the meaning set forth in
Section 1.4(e).
"Rules" has the meaning set forth in Section 11.3.
"SEC" means the Securities and Exchange commission.
"Seller" and "Sellers" have the meanings set forth in the preamble
hereto.
"Seller Accounts Receivable" has the meaning set forth in Section 5.4.
"Seller Facility" means any real property or facility used at any time
by Sellers or the Subsidiaries or any of their Affiliates and not transferred to
Buyer pursuant to this Agreement.
"Sellers' General Claims" has the meaning set forth in Section 9.4(b).
"Straddle Period" has the meaning set forth in Section 9.3(c).
"Subsidiary" means (a) any corporation in an unbroken chain of
corporations beginning with either a Seller and/or a Subsidiary of a Seller if
each of the corporations other than the last corporation in the unbroken chain
then owns stock possessing 50 percent or more of the combined voting power of
all classes of stock in one of the other corporations in such chain, (b) any
partnership in which a Seller or a Subsidiary of a Seller is a General Partner,
or (c) any partnership in which a Seller or a Subsidiary of a Seller possesses a
62
50 percent or greater interest in the total capital or total income of such
partnership. Unless explicitly stated otherwise, the term "Subsidiaries" shall
include the Acquired Subsidiaries.
"Substances" has the meaning set forth in the definition of "Pre-
Closing Environmental Matters".
"Tax" or "Taxes" means, with respect to any Person, any federal, state,
local or foreign net income, gross income, gross receipts, sales, use, ad
valorem, value-added, capital, unitary, intangible, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, transfer,
occupation, premium, property or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, addition to tax or additional amount
imposed by any jurisdiction or other taxing authority, on such Person.
"Tax Claim" has the meaning set forth in Section 9.3(c).
"Tax Indemnitee" has the meaning set forth in Section 9.3(c).
"Tax Indemnitor" has the meaning set forth in Section 9.3(c).
"Tax Return" means all Tax returns, reports or forms.
"Teledyne" means Teledyne Industries, Inc.
"Third Party Notice" has the meaning set forth in Section 9.5.
"Transaction Documents" means (i) this Agreement, (ii) the Xxxx of
Sale, (iii) the Assignment and Assumption Agreement, (iv) the License Agreement,
(v) the deeds of conveyance of real property, and (iv) any other document
delivered or executed pursuant to any of the foregoing.
"Transactions" means the transactions contemplated by the Transaction
Documents.
"Transferred Employee" means any person employed by the Business on the
Closing Date who is required in accordance with Section 6.3(a) to be offered
employment by Buyer and who accepts such employment, and any employee of an
Acquired Subsidiary who is an employee of an Acquired Subsidiary on the Closing
Date (other than those Division Employees who have received notice of
termination from such Acquired Subsidiary on or prior to the Closing Date).
"Transferred Intellectual Property" has the meaning set forth in
Section 1.1(e).
"Transition Period" has the meaning set forth in Section 5.6(c)(ii).
63
"United States Division Employees" means all Division Employees other
than the German Employees.
"United States Transferred Employees" means all Transferred Employees
that are not employed by the German Entities.
"Used in the operation of the Division" has the meaning set forth in
Section 1.1.
10.12 OTHER DEFINITIONAL PROVISIONS.
(a) Terms defined in this Agreement in Sections other than
Section 10.11 shall have the meanings as so defined when used in this Agreement.
(b) As used herein, accounting terms not defined or to the
extent not defined, shall have the respective meanings given to them under GAAP.
(c) Unless express reference is made to Business Days,
references to days shall be to calendar days.
10.13 SEVERABILITY. Should any of the provisions of this
Agreement be invalid or unenforceable such invalidity or unenforceability shall
not affect the validity of the remaining provisions. The parties hereby agree
to cooperate to substitute the invalid or unenforceable provision by a valid or
enforceable provision which comes the closest to the economic result of the
unenforceable or invalid provision.
ARTICLE XI
MEDIATION AND ARBITRATION
11.1 NEGOTIATION AND MEDIATION. The parties will attempt in good
faith to resolve any controversy or dispute arising out of or relating to this
Agreement promptly by negotiations between or among the parties. The
negotiation process may be started by notice by any party to the other parties,
and the parties agree to negotiate in good faith and select an independent
mediator to facilitate the negotiations and conduct at least eight (8)
consecutive hours of mediated negotiations within thirty (30) days after the
notice is first sent. If, within ten (10) days after the initial notice the
parties are not able to agree upon a mediator, the party originally giving the
notice shall promptly notify the Center for Public Resources, Inc. ("CPR"), 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; telephone (000) 000-0000; fax (212)
000-0000. CPR will promptly designate a mediator who is independent and
impartial, and CPR's decision about the identity of the mediator will be final
and binding.
11.2 NO LITIGATION. No arbitration may be commenced by any party
unless and until a negotiation complying with the foregoing paragraph has been
completed, and except for litigation in order to procure injunctive relief
instituted pursuant to Section 5.3 of
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this Agreement and except for litigation for other injunctive relief, whether
temporary, permanent or otherwise, no litigation or other proceeding may ever be
instituted in any court for the purpose of adjudicating, interpreting or
enforcing any of the rights or obligations of the parties hereto or any rights
or obligations relating to the subject matter hereof, whether or not covered by
the express terms of this Agreement, or for the purpose of adjudicating a breach
or termination or the validity of this Agreement, or for the purpose of
appealing any decision of an arbitrator, except a proceeding instituted for the
sole purpose of compelling the parties to mediate and/or arbitrate under the
terms of this Agreement and having the award or judgment of an arbitrator
entered and enforced.
11.3 BINDING ARBITRATION. If a controversy or dispute is not
resolved after completion of the negotiation process described above, then, upon
notice by any party to the other parties (an "Arbitration Notice") and to CPR,
the controversy or dispute shall be submitted to a sole arbitrator who is
independent and impartial, for binding arbitration in accordance with CPR's
Rules for Non-Administered Arbitration of Business Disputes (the "Rules"). The
parties agree that they will faithfully observe this Agreement and the Rules and
that they will abide by and perform any award rendered by the arbitrator. The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
Section 1-16 (or by the same principles enunciated by such Act in the event it
may not be technically applicable). The award or judgment of the arbitrator
shall be final and binding on all parties and judgment upon the award of
judgment of the arbitrator may be entered and enforced by any court having
jurisdiction. The fees and expenses of the arbitrator will be shared ratably by
all parties engaged in the dispute or controversy.
11.4 SELECTION OF ARBITRATOR. Promptly after the Arbitration
Notice is given, CPR will select three (3) possible arbitrators, to whom CPR
will give the identities of the parties and the general nature of the
controversy. If any of those arbitrators disqualifies himself or declines to
serve, CPR shall continue to designate potential arbitrators until the parties
have three (3) to select from. After the panel of three (3) potential
arbitrators has been completed, a two-page summary of the background of each of
the potential arbitrators will be given to each of the parties, and the parties
will have a period of ten (10) days after receiving the summaries in which to
attempt to agree upon the arbitrator to conduct the arbitration. If the parties
are unable to agree upon an arbitrator, then one of the parties shall notify
CPR, and CPR shall select the arbitrator from one of the three, or less, if one
or more has been found to be disqualified or removes himself from consideration
(if all three are disqualified or remove themselves, then CPR shall start the
arbitration-selection process over again). The decision of CPR with respect to
the selection of the arbitrator will be final and binding.
11.5 ARBITRATION HEARING. Within ten (10) days after the
selection of the arbitrator, the parties and their counsel will appear before
the arbitrator at a place and time designated by the arbitrator for the purpose
of each party making a one hour or less presentation and summary of the case.
Thereafter, the arbitrator will set dates and times for additional hearings
until the proceeding is concluded. The desire and goal of the parties is, and
the arbitrator will be advised that his goal should be, to conduct and conclude
the arbitration proceeding as expeditiously as possible. If any party or his
counsel fails to appear
65
at any hearing, the arbitrator shall be entitled to reach a decision based upon
the evidence which has been presented to him by the parties who did appear.
66
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed in counterparts all as of the date first above written.
SELLERS:
MAGNETEK, INC.
By: /s/ Xxxxx X. Xxxxxxx
------------------------------
Name: XXXXX X. XXXXXXX
---------------------
Title: EXECUTIVE V.P.
----------------------
MAGNETEK TEMPE, INC.
By: /s/ Xxxxx X. Xxxxxxx
------------------------------
Name: XXXXX X. XXXXXXX
---------------------
Title: PRESIDENT
----------------------
MAGNETEK DEUTSCHLAND HOLDING
GMBH
By: /s/ Xxxxx Xxxxxxxxx
------------------------------
Name: XXXXX XXXXXXXXX
---------------------
Title: MANAGING DIRECTOR
----------------------
By: XXXXX X. XXXXXXX
ATTORNEY-IN-FACT
BUYER:
PTS, INC.
By: /s/ Illegible
------------------------------
Name: Illegible
---------------------
Title: Vice President
----------------------
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List of Schedules and Exhibits
SCHEDULES
---------
1 Description of the Division and the Business
1.1A Real Property
1.1B(i) Personal Property
1.1B(ii) Interests of U.S. Government
1.1D Non-Assigned Contracts
1.1F Licenses, Permits, Franchises and Authorizations
1.1G Accounts Receivable
1.1J Leasehold Interests
1.5O Other Retained Assets
2.2 Adjusted July Balance Sheet
3.2 Results of Lien Search
3.3 Government Contracts Matters
3.4 Patents, Trademarks, Etc.
3.5 Required Consents
3.7 Contracts
3.8 Litigation
3.10(b) Labor Matters
3.11 Employee Benefits
3.12 Environmental Matters
3.14 Financial Statements
3.16 Tax Matters
3.17 Changes
3.18 Capitalization of Acquired Subsidiaries
3.19 Backlog
3.20 Security Clearances
3.21 Brokers' Fees
3.22 Warranty Claims
5.3A Non-Compete Products
6.4 Letters of Credit
10.11A Financing Obligations
EXHIBITS
--------
A Supply Arrangements
B German Share Transfer Agreement
C Xxxx of Sale and Assignment and Assumption Agreement
D Certificate
2
