This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 18th day of March, 1999, between Dynamics Corporation of America
("Seller"), a New York corporation and a wholly-owned subsidiary of CTS
Corporation ("Parent"), an Indiana corporation, and Mestek, Inc., ("Purchaser"),
a Pennsylvania corporation, and joined in by Parent.
RECITALS:
A. Parent, through the Anemostat Products and Anemostat West Divisions
of Seller, is engaged in the business (the "Business") of designing,
manufacturing, marketing and servicing commercial air products, including but
not limited to grilles, registers, diffusers and terminal units used in
commercial HVAC systems, and fume hood controls, security air products and fire
rated door products under the brand name of, among others, "Anemostat"
(hereinafter, the "Products");
B. Parent desires to cause Seller to sell, transfer, convey assign and
deliver ("Transfer") to Purchaser, and Purchaser desires to purchase and accept
from Seller, the Acquired Assets on the terms and subject to the conditions of
this Agreement; and
C. Parent desires to cause Seller to assign and transfer to Purchaser,
and Purchaser is willing to assume, the Assumed Liabilities on the terms and
subject to the conditions of this Agreement.
Now, therefore, the parties hereto agree as follows:
I. PURCHASE AND SALE OF ACQUIRED ASSETS
1.1. Purchase and Sale. On the terms and subject to the conditions of
this Agreement, at the Closing, Parent will cause Seller to Transfer to
Purchaser, and Purchaser will purchase, acquire and accept from Seller, free and
clear from all liens, encumbrances, restrictions and adverse charges of any
nature whatsoever, except as may be permitted in Section 2.1.6, all of the
assets, rights, interest, properties and goodwill of every nature whatsoever,
tangible or intangible and wheresoever situated, required or appropriate for the
continued operation of the Business (collectively herein, "the Acquired
Assets").
1.2. Acquired Assets and Excluded Assets. (a) For purposes of this
Agreement, the term "Acquired Assets" means the following properties, assets and
rights (other than the Excluded Assets) owned by Seller as of the Closing and
used or held for use primarily in the Business:
(i) the Leased Real Property listed in Schedule 2.1.7;
(ii) the inventory of Seller on the Closing Date that is used
or held for use primarily in the Business;
(iii) the machinery and equipment, furniture, fixtures and
other fixed assets of Seller on the Closing Date that is used or held
for use primarily in the Business, as listed on Schedule 1.2(a)(iii),
together with any rights of Seller to all warranties, if
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any, to the extent assignable, received from the manufacturers and
sellers of such items;
(iv) the prepaid expenses of Seller as of the Closing to the
extent relating to the Business;
(v) the right, title and interest of Seller as of the Closing
in, to and under all contracts, collective bargaining agreements,
leases, licenses and all other legally binding commitments
("Contracts") relating primarily to the Business ("Assumed Contracts"),
including without limitation those Contracts that are listed or
required to be listed on Schedule 2.1.11 or that would be required to
be listed on Schedule 2.1.11 but for any dollar, time or other
exclusion or exception in Section 2.1.11 and any Contract primarily
relating to the Business entered into in accordance with this
Agreement, including without limitation Section 3.5, subject to
required consents of third parties as set forth in Section 6.13;
(vi) the right, title and interest of Seller as of the Closing
in, to and under the intellectual property listed or required to be
listed on Schedule 2.1.9;
(vii) the trade secrets, know how and goodwill owned by Seller
as of the Closing relating primarily to the Business;
(viii) the books of account, general, financial, accounting
and personnel records, files, invoices, customers' and suppliers' lists
and other written information (excluding State, Federal and local (if
any) Corporate Income Tax Returns) owned by Seller or Parent or any of
their Affiliates, controlled by them as of the Closing and relating
primarily to the Business;
(ix) to the extent assignable or transferable, the permits,
licenses, franchises and other federal, state, local and foreign
governmental approvals and authorizations of Seller as of the Closing
related primarily to the Business as listed on Schedule 1.2(a)(ix);
(x) the accounts receivable of the Business as of the Closing
Date, as listed in Schedule 1.2(a)(x); and
(xi) as not otherwise set forth above, the assets reflected as
such in the Closing Date Balance Sheet.
(b) Notwithstanding Section 1.2(a), for purposes of this Agreement the
term "Acquired Assets" will not include any Excluded Assets. For purposes of
this Agreement, the term "Excluded Assets" means:
(i) cash and cash-equivalent assets;
(ii) the insurance policies or other insuring agreements of
Seller, whether or not pertaining to the Acquired Assets or the
Business, and all rights of every nature and description under or
arising out of such policies or agreements;
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(iii) the rights of Seller under this Agreement and the
agreements, instruments and certificates delivered in connection with
this Agreement;
(iv) the Records referred to in Section 6.9(a)(i), (ii) or
(iii);
(v) the rights and other assets (including Federal, State, and
local (if any) Corporate Income Tax and other refunds and claims
thereto) to the extent related to any of the Excluded Liabilities;
(vi) the rights, title and interest in the corporate names or
trade names "Dynamics Corporation of America" and "DCA" and any
variations or derivations thereof and the corporate names "CTS
Corporation" and "CTS" and any variations or derivations thereof
(collectively, the "Parent and/or Seller Names");
(vii) any assets held in trust for the purpose of providing
benefits under the CTS Corporation Retirement Savings Plan (the "401(k)
Plan"), the Retirement Plan for Employees of Dynamics Corporation of
America (the "Pension Plan" and, together with the 401(k) Plan, the
"Retirement Plans") or under any other Employee Benefit Plan.
(c) As used in this Agreement, the phrases "used" or "held for use in,"
"relate to," "related primarily to" or "relating primarily to" the Business, or
the conduct thereof, and similar phrases are intended to exclude assets of
Seller owned or held (i) in any business other than the Business, (ii) for use
in the businesses or activities of Seller generally, other than the Business, or
(iii) for use by both the Business and any other business of Seller so long as
such assets or rights do not exclusively or predominantly relate to the
Business. Notwithstanding the foregoing, the Acquired Assets include all of the
material assets used in the operation of the Business as of the date of the
Closing, except for the Excluded Assets. Nothing in this Section 1.2 constitutes
a representation or warranty with respect to the extent of Seller's right, title
and interest in or to any of the Acquired Assets.
(d) The transfer of the Acquired Assets provided for in this Section
1.2 shall be made by (a) a duly executed xxxx of sale, evidencing the warranty
provisions of this Agreement and substantially in the form of Exhibit 4.2.2
attached hereto, and (b) such other good and sufficient instruments of
conveyance, assignment, and transfer as shall be reasonably necessary to vest in
Purchaser as of the Closing, full title to the Acquired Assets being transferred
hereunder.
1.3. Assumption of Liabilities. (a) On the terms and subject to the
conditions of this Agreement, effective as of the Closing and without further
action, Purchaser will assume and agree to pay, perform, satisfy and discharge
when due, , all obligations and liabilities (other than Excluded Liabilities) of
Parent and Seller to the extent relating to, resulting from or arising out of
the Business, any of the Acquired Assets or any of the Products (the "Assumed
Liabilities"), including the obligations and liabilities specified below:
(i) the obligations and liabilities of Parent and Seller
under the executory portion of the Assumed Contracts;
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(ii) the accounts payable and accrued expenses in respect of
the Business as of the Closing Date, as set forth on Schedule
1.3(a)(ii);
(iii) the obligations and liabilities in respect of any and
all Products manufactured in the Business prior to the Closing Date,
including without limitation obligations and liabilities for refunds,
adjustments, allowances, damages, repairs, exchanges, returns,
warranties (other than claims involving alleged personal injury or
property damage and Epidemic Warranty Claims, as defined in Section
1.3(b)(ix), below);
(iv) the obligations and liabilities relating to Taxes, except
Federal, State and local (if any) Corporate Income Taxes related to the
period prior to the Closing Date, with respect to the conduct of the
Business, and reflected or reserved against in the Closing Date Balance
Sheet;
(v) the obligations and liabilities for any legal, accounting,
travel, printing or other expenses incurred on behalf or at the request
of Purchaser or any of its Affiliates in connection with the
transactions contemplated by this Agreement, as set forth in Schedule
1.3(a)(v);
(vi) the obligations and liabilities for one-half of any
Transfer Taxes incurred in connection with this transaction;
(vii) the obligations and liabilities set forth in Section
5.3(c);
(viii) as not otherwise set forth above, the obligations and
liabilities relating to, resulting from or arising out of the conduct
of the Business on or after the Closing Date; and
( ix) as not otherwise set forth above, the liabilities
reflected as such or reserved against on the Closing Date Balance
Sheet.
Notwithstanding any other provision hereof or of applicable law to the contrary,
the parties' respective obligations under any covenant in this Agreement,
including without limitation Purchaser's obligations under this Section 1.3(a),
will not be subject to offset or reduction by reason of any actual or alleged
breach of any representation, warranty or covenant contained in this Agreement
or any document delivered in connection herewith or any right or alleged right
to indemnification hereunder or any other matter whatsoever.
(b) Notwithstanding Section 1.3(a), for purposes of this Agreement, the
term "Assumed Liabilities" will not include any Excluded Liabilities. For
purposes of this Agreement, the term "Excluded Liabilities" means:
(i) the obligations or liabilities of Parent and Seller to
the extent attributable to any of the Excluded Assets;
(ii) the obligations or liabilities of Parent and Seller for
Taxes that are the responsibility of Parent or Seller pursuant to
Section 6.10;
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(iii) the obligations or liabilities for any legal,
accounting, investment banking, brokerage or similar fees or expenses
incurred by Seller or any of its Affiliates in connection with the
transactions contemplated by this Agreement;
(iv) the obligations or liabilities expressly retained by
Seller pursuant to Section 6.3(a);
(v) the obligations or liabilities of Parent and Seller under
the Contracts listed on Schedule 1.3(b)(v) (the "Excluded Contracts");
(vi) the obligations and liabilities of Parent and Seller with
respect to the pending litigation and claims listed on Schedule
1.3(b)(vi) (the "Excluded Pending Litigation and Claims");
(vii) the obligations and liabilities in respect of any and
all Products manufactured in the Business prior to the Closing Date
with respect to claims for alleged personal injury or property damage;
and
(viii) the obligations and liabilities in respect of any and
all Products manufactured in the Business prior to the Closing Date for
Epidemic Warranty Claims. For the purpose of this Agreement, "Epidemic
Warranty Claims" shall be defined as warranty claims relating to a
single product from one of the Product Families listed below which are
determined to have been caused by a common defect or non-conformity,
where the dollar amount of all payments made with respect to such
warranty claims exceeds five percent (5%) of the sales of all products
in that Product Family for calendar year 1998. The Product Families
shall be as follows: Grilles and Registers; Diffusers (including but
not limited to RMD's); HV Terminal Boxes; Security Air Products; Door
Products and Louvers; and Systems (Fume Hoods and Environmental
Controls);
(ix) the obligations and liabilities in respect of Federal,
State and local (if any) Corporate Income Taxes applicable to the
Business for periods ending prior to the Closing Date;
(x) the obligations and liabilities for one-half of any
Transfer Taxes (as defined in Section 6.10) incurred in connection with
this transaction; and
(xi) the obligations and liabilities for any workers'
compensation payment, premium, or claims arising or accruing with
respect to employment of any person by Seller prior to the Closing
Date.
1.4. Purchase Price. (a) In addition to assuming the Assumed
Liabilities, at the Closing, Purchaser will pay to Seller U.S. $21,478,000 (the
"Closing Price"), subject to adjustment as provided in Section 1.5 in respect of
changes in the amount of the Net Working Capital (as adjusted, the "Purchase
Price"). "Net Working Capital" means the current assets of the Business,
excluding cash, intercompany profit in inventory and inventory reserves
(determined in accordance with the next sentence of this section), less the
current liabilities of the Business, excluding Federal, State and local (if any)
Corporate Income taxes. Inventory shall be valued for this purpose by deducting
$367,000 from the gross FIFO value of the
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inventory on hand at Closing. A form balance sheet showing the items included in
the Net Working Capital definition is attached as Schedule 1.4(a).
(b) On the Closing Date, Purchaser will pay by wire transfer of
immediately available funds to such account as Parent has theretofore designated
an amount equal to the Closing Price.
1.5. Purchase Price Adjustment. (a) In order to determine the Purchase
Price, the Closing Price will be reduced or increased dollar-for-dollar, as the
case may be, to the extent that the Actual Net Working Capital is less or
greater than the $5,220,000 (which is the net working capital of the Business as
of December 31, 1998). For purposes of this Agreement, the "Actual Net Working
Capital" means the Net Working Capital of the Business as reflected on a balance
sheet for the Business prepared in accordance with this Section 1.5 as of the
close of business on the Closing Date without giving effect to any financing and
other activities of Purchaser (the "Closing Date Balance Sheet") prepared in
accordance with generally accepted accounting principles ("GAAP"), on a basis
consistent with, and using the same accounting principles, policies, practices
and procedures used in preparing the Balance Sheet, except that the Closing Date
Balance Sheet will in all events exclude any Excluded Liabilities and Excluded
Assets.
(b) Within 60 calendar days after the Closing Date, Purchaser will
prepare, or cause to be prepared, and deliver to Parent a Closing Date Balance
Sheet setting forth the Actual Net Working Capital. Upon receipt of the Closing
Date Balance Sheet prepared by Purchaser, Parent and its authorized
representatives will be entitled to review, during normal business hours, the
books, records and work papers of the Business. Without limiting the generality
or effect of any other provision hereof, (i) Purchaser will (A) provide Parent
and its representatives access, during normal business hours, to the facilities,
personnel and accounting and other records of the Business to the extent
reasonably determined by Parent to be necessary; provided, however, that Parent
will conduct any such review in a manner that does not unreasonably interfere
with the conduct of the Business by the Purchaser after the Closing, and (B)
take such actions as may be reasonably requested by Parent to assist Parent and
otherwise reasonably to cooperate with Parent and its representatives and (ii)
Purchaser and Parent will cooperate and jointly participate in, directly or
through their respective independent accountants, a physical count of
inventories of the Business conducted consistent with past practice and based on
GAAP, provided, however, that in no event will Purchaser be obligated to incur
any substantial out-of-pocket costs in connection with any of the matters
referred to in clause (i) of this sentence.
(c) If, within 60 calendar days after the date of Purchaser's delivery
of its computation of the Actual Net Working Capital, Parent disagrees in good
faith with such computation, Parent will give written notice to Purchaser within
such 60 calendar day period (i) setting forth Parent's computation of Actual Net
Working Capital as of the Closing Date and (ii) specifying in reasonable detail
Parent's basis for its disagreement with Purchaser's computation. The failure by
Parent so to express its disagreement or provide such specification within such
60 calendar day period will constitute Parent's acceptance of Purchaser's
computation of the Actual Net Working Capital. If Purchaser and Parent are
unable to resolve any disagreement between them within fifteen calendar days
after the giving of notice of such disagreement, the items in dispute will be
referred for determination to the Chicago, Illinois office of Deloitte Touche
(the "Accountants") as promptly as practicable.
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Purchaser and Parent will use reasonable efforts to cause the Accountants to
render their decision as soon as practicable, including without limitation by
promptly complying with all reasonable requests by the Accountants for
information, books, records and similar items. The Accountants will make a
determination as to each of the items in dispute, which determination will be
(A) in writing, (B) furnished to each of the parties hereto as promptly as
practicable after the items in dispute have been referred to the Accountants,
(c) made in accordance with this Agreement, and (D) conclusive and binding upon
each of the parties hereto. In connection with their determination of the
disputed items, the Accountants will be entitled, but not obligated, to rely on
the work papers, trial balances and similar materials prepared by
PriceWaterhouseCoopers LLP in connection with such firm's examination of the
financial statements of Parent and its subsidiaries, the Accountants will not
consider or make any adjustment in respect of any matter which is not in
dispute, other than an adjustment resulting from any other adjustment in respect
of a matter which is in dispute, and the fees and expenses of the Accountants
will be shared equally by Purchaser and Seller (except as provided below). If
the determination of the Accountants represents an outcome more favorable to
either Purchaser or Seller than the midpoint of such parties' last written
settlement offers related to all items in dispute, in the aggregate, submitted
to the Accountants upon the referral of the matter to the Accountants (each a
"Last Offer"), then the party obtaining such favorable result will be deemed the
"Prevailing Party" and the other party will be deemed the "Non-Prevailing
Party". For purposes hereof, all of the fees and expenses of the Accountants,
and the reasonable out-of-pocket expenses of the Prevailing Party related to the
dispute, will be borne by the Non-Prevailing Party. No party will disclose to
the Accountants, and the Accountants will not consider for any purpose, any
settlement offer (other than the Last Offer) made by any party.
(d) To the extent that the Actual Net Working Capital determined as
provided in this Section 1.5 is more or less than $5,220,000, Purchaser or
Seller, as applicable, will, within ten calendar days after the final
determination of the Actual Net Working Capital pursuant to this Section 1.5,
make payment by wire transfer of immediately available funds of the amount of
such difference, together with interest thereon from the Closing Date to the
date of payment (at a rate equal to Citibank N.A.'s prime rate, as publicly
announced and in effect from time to time during such period, plus 1.0%,
calculated on the basis of the actual number of days elapsed over 360), to such
account as has been designated by Purchaser or Seller, as applicable.
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II. REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of Seller. Subject to Section 2.3,
Seller represents and warrants to Purchaser as of the date of this Agreement and
at the Closing Date as follows:
2.1.1. Authorization and Effect of Agreement. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York. Seller has the requisite corporate power to execute and
deliver this Agreement and to perform the transactions contemplated hereby to be
performed by it. All necessary corporate action required to be taken for the due
authorization of the execution and delivery by Seller of this Agreement and the
performance by Seller of the transactions contemplated hereby to be performed by
Seller has been duly taken by Seller. This Agreement has been duly executed and
delivered by Seller and, assuming the due execution and delivery of this
Agreement by Purchaser, constitutes a valid and binding obligation of Seller.
2.1.2. No Restrictions. The execution and delivery of this Agreement by
Seller does not, and the performance by Seller of the transactions contemplated
hereby to be performed by Seller will not, in any material respect, conflict
with, or result in any material violation of, or constitute a material default
(with or without notice or lapse of time or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, any provision of the certificate of incorporation or
bylaws of Seller, or under any Contract listed or described or required to be
listed or described on Schedule 2.1.11, or any permit or approval pertaining to
the Business ("Permit") issued under any domestic, foreign or other statute,
law, ordinance, rule, regulation, judgment, order, injunction, decree or ruling
or common law obligation ("Law") of any domestic, foreign or other court,
government, governmental agency, authority, entity or instrumentality
("Governmental Entity"), other than any such conflicts, violations or defaults
as are listed or described on Schedule 2.1.2 or which would not have a material
adverse effect on the Business or the financial condition or results of
operations of the Business, taken as a whole (a "Material Adverse Effect"). No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or made by or
with respect to Seller under any applicable Law in connection with the execution
and delivery of this Agreement by Seller or the performance by Seller of the
transactions contemplated hereby to be performed by it, except for (i) the
filing of a premerger notification report by or on behalf of Seller under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) such of the foregoing as are listed or described on Schedule 2.1.2,
and (iii) such consents, approvals, orders, authorizations of, or registrations,
declarations or filings with, any Governmental Entity, which if not obtained or
made, would not have a Material Adverse Effect.
2.1.3. Balance Sheet. Attached as Schedule 2.1.3 is the unaudited
balance sheet of the Business as of August 23, 1998 (the "Balance Sheet"). The
Balance Sheet presents fairly, in all material respects, the financial position
of the Business, in accordance with GAAP, as of the date thereof. For purposes
of this Agreement, "Balance Sheet Date" means August 23, 1998.
2.1.4. Conduct of the Business Since the Balance Sheet Date. Except
as listed or described on Schedule 2.1.4, and except as a result of matters
required by this Agreement,
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since the Balance Sheet Date, the Business has been conducted in the ordinary
course, and consistent with past practice, Seller has not taken any action which
would have constituted a violation of Section 3.5 if Section 3.5 had applied
since the Balance Sheet Date and there has not been any Material Adverse Effect
except as a result of general economic conditions and competitive circumstances
affecting the Business generally.
2.1.5. Compliance with Laws. To the Knowledge of Seller, except as
listed or described on Schedule 2.1.5 , Seller is not in violation of any
applicable Law in the conduct of the Business, other than such violations which
would not have a Material Adverse Effect.
2.1.6. Tangible Personal Property; Title to Assets. Except (i) with
respect to the Leased Real Property which is the subject of Section 2.1.7 and
(ii) for assets sold in the ordinary course of business since the Balance Sheet
Date, Seller has good and marketable title to the all tangible assets reflected
on the Balance Sheet as owned by Seller for the Business, or thereafter
purchased or acquired by Seller for the Business, and upon consummation of the
transactions contemplated by this Agreement, including execution and delivery of
a xxxx of sale of other instruments of transfer, Purchaser will acquire title to
such assets, free and clear of all mortgages, liens, security interests or other
encumbrances ("Liens") except for Liens that are listed or described on Schedule
2.1.6 hereafter referred to as "Permitted Liens".
2.1.7. Leased Real Property. The Leased Real Property listed on
Schedule 2.1.7 constitutes all real property used primarily in the Business and
leased by Seller or any of its Affiliates.
2.1.8. Insurance. Seller has made available to Purchaser schedules of
all material policies of fire, liability and other forms of insurance covering
occurrences as of, or claims made on, the date hereof and maintained by Seller
to the extent applicable to the Business as listed in Schedule 2.1.8. The
schedule indicates for each policy the type of policy, the name and address of
the carrier and the policy limits, deductibles and self-insured retentions, if
any.
2.1.9. Intellectual Property. Schedule 2.1.9 lists or describes all
patents, trademarks, trade names, service marks, registered copyrights and
registrations and applications therefor used primarily in the conduct of the
Business as of the date hereof (the "Intellectual Property"). Except as set
forth on Schedules 2.1.9 and 2.1.10, to the Knowledge of Seller, the use of the
Intellectual Property as currently used by Seller does not conflict with or
infringe upon any intellectual property rights of others and neither Seller nor
any of its Affiliates has received any written notice (that has not been
subsequently satisfied or withdrawn) of any conflict with the asserted rights of
others in connection with the use by Seller of any of the Intellectual Property
in the conduct of the Business, nor has the Intellectual Property been held or
stipulated to be invalid in any litigation which has been concluded.
2.1.10. Litigation; Decrees. Except as listed or described on Schedules
2.1.5 or 2.1.10, to the Knowledge of Seller, there are no lawsuits, claims or
administrative or other proceedings ("Legal Proceedings") pending or threatened
in writing against Seller or any of its Affiliates with respect to the Business,
except for Legal Proceedings which, if determined adversely, would not have a
Material Adverse Effect. To the Knowledge of Seller, there are no judgments or
other judicial or administrative orders or decrees outstanding against Seller
and neither Seller nor any of its Affiliates is in default in any material
respect under the terms of any judgment, order or decree of any Governmental
Entity (collectively, "Orders") with
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respect to the Business, except for such defaults which would not have a
Material Adverse Effect.
2.1.11. Contract Rights. Except as listed or described on Schedule
2.1.7 or Schedule 2.1.11 , and except for Excluded Contracts, as of the date
hereof, neither Seller nor any of its Affiliates is a party to or bound by any
Contract relating primarily to the Business that has a term of greater than one
(1) year, is not terminable at will within sixty (60) days and is of a type
described below:
(a) Any employment, severance or consulting Contract that is not
terminable at will by Seller (other than any Contract of employment implied in
Law) and which will require the payment of amounts to any person after the date
hereof in excess of $25,000 in any year;
(b) Any Contract for capital expenditures or the acquisition or
construction of fixed assets which requires aggregate future payments in excess
of $25,000;
(c) Any Contract requiring aggregate future payments or expenditures in
excess of $25,000 and relating to cleanup, abatement or other actions in
connection with environmental liabilities;
(d) Any license or other Contract with respect to Intellectual Property
(other than licenses for terms of less than one year granted or received in the
ordinary course of business of the Business), which pursuant to the terms
thereof requires future payments in excess of $25,000 in any year;
(e) Any indenture, mortgage, loan or credit Contract under which Seller
has borrowed any money or issued any note, bond, indenture or other evidence of
indebtedness for borrowed money, or guaranteed indebtedness for money borrowed
by others, which is not reflected in the Balance Sheet;
(f) Any Contract with any manufacturer's representative or other sales
agent having a remaining term in excess of one year and which is not terminable
without penalty on 60 calendar days' or less notice;
(g) Any Contract which requires payments in any year in excess of $
25,000 under which Seller is (i) a lessee of, or holds or uses, any machinery,
equipment, vehicle or other tangible personal property owned by a third Person
or (ii) a lessor or one who otherwise makes available for third party use of any
tangible personal property owned by Seller;
(h) Any Contract which involves aggregate future payments by or to the
Seller in excess of $25,000, other than a purchase or sales order or other
Contract entered into in the ordinary course of the conduct of the Business; and
(i) Any other Contract to which Seller is a party a breach or default
under which would have a Material Adverse Effect.
Except as set forth on Schedule 2.1.11, (i) each Contract listed or described on
Schedule 2.1.11 is a valid and binding obligation of Seller and the other
parties thereto, (ii) to the Knowledge of Seller, Seller has performed in all
material respects the obligations required to
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be performed by it through the date hereof under each of the Contracts listed or
required to be listed on Schedule 2.1.11 and (iii) Seller is not (with or
without the lapse of time or the giving of notice, or both) in breach or default
in any material respect under any such Contract, except in any such case for any
breach or default which would not have a Material Adverse Effect.
2.1.12. Employee Benefit Plans
2.1.12.1. Except as set forth on Schedule 2.1.12.1 attached hereto and
except as relates exclusively to an Excluded Contract, as set forth in Schedule
1.3(b)(v), with respect to all employees and former employees of the Business,
neither Seller nor any ERISA Affiliate (as defined below) of Seller presently
maintains, contributes to or has any liability under:
(a) any bonus, incentive compensation, profit sharing, retirement,
pension, group insurance, death benefit, group health, medical expense
reimbursement, cafeteria, dependent care, stock option, stock purchase, stock
appreciation rights, savings, deferred compensation, consulting, severance pay
or termination pay, vacation pay, life insurance, welfare or other employee
benefit or fringe benefit plan, program or arrangement;
(b) any plan, program or arrangement which is an "employee pension
benefit plan" as such term is defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or an "employee welfare
benefit plan" as such term is defined in Section 3(1) of ERISA.
For purposes of this Agreement, "ERISA Affiliate" shall mean each person (as
defined in Section 3(9) of ERISA) that, together with Seller (or any person
whose liabilities Seller has assumed or is otherwise subject to), currently or
in the past would be treated as a single employer under Section 4001(b) of ERISA
or that would be deemed to be a member of the same "controlled group" within the
meaning of section 414(b), (c), (m) and (o) of the Internal Revenue Code of
1986, as amended (the "Code"). The plans, programs and arrangements set forth on
Schedule 2.1.12.1, except for the Multiemployer Plans set forth on Schedule
2.1.12.6, are herein referred to as the "Employee Benefit Plans."
2.1.12.2. With respect to all employees and former employees of the
Business, neither Seller nor any ERISA affiliate of Seller presently maintains,
contributes to or has any liability under any funded or unfunded medical, health
or life insurance plan or arrangement for present or future retirees or present
or future terminated employees except as required by the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"). Neither Seller nor any
ERISA Affiliate of Seller maintains or contributes to a trust, organization or
association described in any of Section 501(c)(9), 501(c)(17) or 501(c)(20) of
the Code.
2.1.12.3. With respect to each Employee Benefit Plan which is subject
to Title I of ERISA, neither Seller nor any ERISA Affiliate of Seller has failed
to comply with any of the material applicable reporting, disclosure or other
requirements of ERISA and the Code, and there has been no "prohibited
transaction" which would result in any material excise taxes under Section 4975
of the Code or material liability for a breach of Section 406 of ERISA.
2.1.12.4. To the Knowledge of Seller and Parent, neither Seller nor any
ERISA Affiliate of Seller, nor any of their respective directors, officers,
employees or any other
11
"fiduciary," as such term is defined in Section 3(21) of ERISA, has any material
liability for failure to comply with ERISA or the Code for any action or failure
to act in connection with the administration or investment of the Employee
Benefit Plans.
2.1.12.5. With respect to the Employee Benefit Plans and the
Multiemployer Plans set forth on Schedule 2.1.12.6, all applicable contributions
and premium payments for all periods ending prior to the Closing Date (including
periods from the first day of the then current plan year to the Closing Date)
have been made, and shall be made prior to the Closing Date in accordance with
past practice and with any applicable collective bargaining agreement.
2.1.12.6. Except as set forth on Schedule 2.1.12.6, neither Seller nor
any ERISA Affiliate of Seller presently maintains, contributes to or has any
liability (including current or potential withdrawal liability) with respect to
any Multiemployer Plan as such term is defined in Section 3(37) of ERISA.
2.1.12.7. Except as set forth in Schedule 2.1.10, to the Knowledge of
Seller or Parent, there is no pending or threatened legal action, proceeding or
investigation against or involving any Employee Benefit Plan maintained by
Seller or any ERISA Affiliate of Seller or Multiemployer Plan set forth on
Schedule 2.1.12.6 (other than routine claims for benefits) which could
reasonably be expected to give rise to a material liability for Seller or any
ERISA Affiliate of Seller, and, to the Knowledge of Seller or Parent, there is
no basis for or fact which could give rise to any such legal action, proceeding
or investigation.
2.1.12.8. , There has been no act or acts which would result in a
material disallowance of a deduction or the imposition of a material tax
pursuant to Section 4980B, or with regard to plan years beginning before
December 31, 1988, Section 162(i) of the Code as in effect immediately prior to
the enactment of the Technical and Miscellaneous Revenue Act of 1988, or any
regulations promulgated thereunder, whether final, temporary or proposed.
2.1.12.9. Seller is not in breach of its obligations under any
collective bargaining agreement with respect to any Multiemployer Plan.
2.1.12.10. No amendment has been made, or is reasonably expected to be
made, to any Employee Benefit Plan that has required or could reasonably be
expected to require the provision of security under ERISA Section 307 or Code
Section 401(a)(29).
2.1.12.11. No accumulated funding deficiency, whether or not waived,
exists with respect to any Employee Benefit Plan and, to the Knowledge of Seller
of Parent, no event has occurred or circumstance exists that may result in an
accumulated funding deficiency as of the last day of the current plan year of
any such Plan.
2.1.12.12. To the Knowledge of Seller or Parent, no reportable event
(as defined in ERISA Section 4043 and in regulations issued thereunder), for
which notice to the Pension Benefit Guaranty Corporation (PBGC) is not waived,
has occurred with respect to any Employee Benefit Plan.
2.1.12.13. To the Knowledge of Seller or Parent, there is no fact or
circumstance that could give rise to any material liability of Seller or any
ERISA Affiliate of Seller to the PBGC
12
with respect to the Pension Plan under Title IV of ERISA (other than the payment
of premiums in the ordinary course of business).
2.1.12.14. The 401(k) Plan maintained by Seller is qualified in form
under Code Section 401(a); the trust for such Plan is exempt from Federal income
tax under Code Section 501(a). To the Knowledge of Seller or Parent, no event
has occurred or circumstance exists that will or could give rise to
disqualification of such Plan or loss of tax-exempt status of such trust. The
401(k) Plan has received a favorable determination letter from the Internal
Revenue Service evidencing compliance with the relevant provisions of the Tax
Reform Act of 1986.
2.1.13. Taxes. Parent has filed or caused to be filed or will cause to
be filed in the case of taxable periods which have not yet closed or for which
no filing is yet due with the appropriate Federal, State, local and foreign
Governmental Entities all Tax Returns required to be filed by them with respect
to the Business on or prior to the Closing Date (taking into account all
extensions of due dates) and Seller has paid or adequately reserved or provided
for all Taxes shown thereon as owing. Except as set forth on Schedule 2.1.13, to
the Knowledge of Seller, no Governmental Entity has proposed any adjustment to
any such Tax Return which adjustment relates to the Business , unless such
adjustment has been adequately provided for or satisfied or would not have a
Material Adverse Effect.
2.1.14. Environmental Matters. (a) Except as listed or described on
Schedule 2.1.14 or in the environmental evaluations or so-called "Phase I
report" relating to the Leased Real Property (the "Phase I"), a copy of which
has previously been delivered to Purchaser, (i) neither Seller nor any of its
Affiliates has any liability under any Environmental Law (including without
limitation any obligation to remediate any Environmental Condition) applicable
to the Leased Real Property, (ii) neither Seller nor any of its Affiliates is in
violation of any Environmental Law with respect to the Business, (iii) Seller is
in compliance in all material respects with the terms and conditions of required
permits, licenses and authorizations in its conduct of the Business and its use
of the Leased Real Property, (iv) To the Knowledge of Seller, no past or present
events, circumstances, practices, incidents or actions have occurred which would
give rise to an Environmental Condition, and (v) there exists no Environmental
Condition with respect to the Leased Real Property or the Business, which
liability, violation or Environmental Condition specified in (i), (ii) (iii),
(iv) or (v) would have a Material Adverse Effect.
(b) For purposes of this Agreement, (i) the term "Environment" means
soil, surface waters, groundwaters, land, surface or subsurface strata, ambient
air or any other environmental medium, (ii) the term "Environmental Condition"
means a condition with respect to the Environment which is reasonably likely to
result in an Indemnifiable Loss with respect to the Business, and (iii) the term
"Environmental Law" means any Law for the protection of the Environment.
2.1.15. Receivables. The accounts receivable of the Business being
conveyed hereunder will at the Closing be owned by Seller free and clear of all
claims, encumbrances, credits, backcharges, counterclaims, setoffs and
deductions and are not subject to additional requirements of performance by
Seller and such receivables have not been billed or collected for a greater
percentage of the work done or material supplied than has actually been
performed or supplied by Seller. To the Knowledge of Seller, the value of the
accounts receivable at Closing shall be collectible by Purchaser except as
otherwise reserved on the Balance Sheet.
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2.1.16. Related Party Agreements. No affiliate, officer or director of
Seller or Parent o r any related person has, directly or indirectly, entered
into any transaction with Seller related to the Business except for arrangements
reflected on the Balance Sheet. For purposes of this Agreement, the term
"related person" shall mean and include any person related to any affiliate,
officer or director of Seller or Parent by blood or by marriage or any
corporation, partnership, proprietorship, trust or other entity in which any
officer or director of Seller or Parent (or any spouse, ancestor, or descendent
of the same) has more than a five percent (5%) legal or beneficial interest.
2.1.17. Inventory. To the Knowledge of Seller, the inventory of Seller
included in the Acquired Assets (whether raw materials, purchased components,
manufactured parts, work in process, finished goods or other) does not contain
any items which are not currently usable or saleable in the ordinary course of
the Business, except as otherwise reserved on the Balance Sheet. Raw materials
and purchased components shall be valued individually in accordance with GAAP
consistently applied. Work in process (consisting of manufactured parts and
subassemblies) and finished goods shall be valued at the sum of the value of the
raw material and purchased components, direct labor and factory burden
applicable to such items of work in process and finished goods as further set
forth herein: (a) Raw materials and purchased components shall be valued in
accordance with GAAP consistently applied, (b) direct labor shall be valued at
Seller's actual labor, consistent with Seller's costing methods used by Seller
as of the Balance Sheet Date and not inconsistent with GAAP, and (c) factory
burden shall be expressed as a percentage of direct labor cost for the
respective products which percentage shall be those used by Seller as of the
Balance Sheet Date, adjusted to eliminate any costs which may be inconsistent
with GAAP in the calculation of burden. All items of inventory on hand at the
Scranton, Pennsylvania and Carson, California facilities of Seller that are
included in the physical counts at the Closing but not yet set forth or
reflected in Seller's accounts payable reported at the Closing shall be
disclosed to Purchaser, as shall all items of inventory (and their locations)
held at locations other than Seller's Scranton and Xxxxxx facilities (if any).
2.1.18. No Material Nondisclosures. To the Knowledge of Seller, there
is no fact which would have a Material Adverse Effect or in the future may (so
far as can now be reasonably foreseen) have a Material Adverse Effect on the
Business or the Acquired Assets which has not been set forth in this Agreement.
2.1.19. Certification of Products. To the Knowledge of Seller, the
products of the Business manufactured and sold by Seller prior to Closing have,
where necessary, been qualified under and comply in all material respects with
the specifications and requirements of applicable rating and compliance agencies
and safety standards.
2.1.20. Employment Activity. To the Knowledge of Seller, as of the date
of Closing, with respect to the employees of the Business, Seller is in
compliance in all material respects with all applicable laws respecting
employment, employment practices, non-discrimination in employment, terms and
conditions of employment and wages and is not engaged in any unfair labor
practice. There is no labor strike or labor disturbance pending or threatened
against Seller nor is any grievance currently being asserted against Seller
except as listed in Schedule 2.1.10 and Seller is not experiencing a work
stoppage or other material labor difficulties with respect to the Business.
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2.1.21. Liabilities. To the Knowledge of Seller, the obligations and
liabilities assumed by Purchaser hereunder have been accurately and completely
set forth or disclosed by Seller and, to the extent that supporting
documentation exists, Seller has delivered to Purchaser supporting documentation
necessary to timely pay, address or satisfy such obligations and liabilities.
2.1.22. Other Intangibles. The intangibles being conveyed to Purchaser
pursuant to this Agreement, including engineering drawings, bills of material,
manufacturing data, software information system programs and other intangibles,
are all of such items used in the Business that are in the possession of Seller.
Seller has no knowledge that any customers of the Business will not continue to
be customers of Purchaser or that any suppliers or vendors having business
relationships with Seller with respect to the Business will not continue to have
such relationships with Purchaser subsequent to the Closing.
2.1.23. Product Warranties. To the Knowledge of Seller, Seller, in
operating the Business prior to the date of Closing, has not sold any Products
or performed any services related thereto, under the Anemostat name, which fail
to comply with any express warranty of Seller applicable to such Products or
Services, except as set forth on Schedule 2.1.23.
2.2. Representations and Warranties of Purchaser. Subject to Section
2.3, Purchaser represents and warrants to Seller as of the date of this
Agreement and at the Closing Date as follows:
2.2.1. Authorization and Effect of Agreement. Purchaser has the
requisite corporate power to execute and deliver this Agreement and to perform
the transactions contemplated hereby to be performed by it. All necessary
corporate action required to be taken for the due authorization of the execution
and delivery by Purchaser of this Agreement and the performance by Purchaser of
the transactions contemplated hereby to be performed by Purchaser has been duly
taken by Purchaser. This Agreement has been duly executed and delivered by
Purchaser and, assuming the due execution and delivery of this Agreement by
Seller, constitutes a valid and binding obligation of Purchaser.
2.2.2. No Restrictions. The execution and delivery of this Agreement by
Purchaser does not, and the performance by Purchaser of the transactions
contemplated hereby to be performed by Purchaser will not conflict with, or
result in any material violation of, or constitute a material default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, any provision of the charter or bylaws or comparable
governing documents of Purchaser, or any indenture, mortgage, deed of trust or
other agreement or Permit applicable to Purchaser. No material consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required to be obtained or made by or with
respect to Purchaser under an applicable Law in connection with the execution
and delivery of this Agreement by Purchaser or the performance by Purchaser of
the transactions contemplated hereby to be performed by Purchaser, except for
the filing of a premerger notification report by Purchaser under the HSR Act and
as listed or described on Schedule 2.2.2.
2.2.3. Financial Capacity. Purchaser has cash on hand sufficient to
satisfy all of its obligations under this Agreement.
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2.3. Certain Limitations on Representations and Warranties. (a) Each of
the parties is a sophisticated legal entity that was advised by experienced
counsel and, to the extent it deemed necessary, other advisors in connection
with this Agreement. Accordingly, each of the parties hereby acknowledges that
(i) no party has relied or will rely upon any document or written or oral
information previously furnished or made available to or discovered by it or its
representatives, other than this Agreement (including the Schedules hereto) or
such of the foregoing as are delivered at the Closing, (ii) there are no
representations or warranties by or on behalf of any party hereto or any of its
respective Affiliates or representatives other than those expressly set forth in
this Agreement, and (iii) the parties' respective rights, obligations and
remedies with respect to this Agreement and the events giving rise thereto will
be solely and exclusively as set forth in this Agreement and the letter
agreement dated July 21, 1998 between Purchaser and First Chicago Capital
Markets, Inc., acting on behalf of Parent and Seller (the "Confidentiality
Agreement").
(b) The representations and warranties made in this Agreement by Seller
will be deemed for all purposes to be qualified by the disclosures made in the
Schedules, regardless of whether in the case of any particular representation
and warranty such representation or warranty refers to the Schedule in which the
disclosure is made or to any other Schedule so long as the relevance of a matter
to the representation or warranty in question on any such other Schedule is
reasonably apparent.
III. COVENANTS
3.1. Investigation by Purchaser. (a) Prior to the Closing, upon
reasonable notice from Purchaser to Seller given in accordance with this
Agreement, Parent will cause Seller to afford to the officers, attorneys,
accountants or other authorized representatives of Purchaser reasonable access
during normal business hours to the facilities, assets and the books and records
of the Business so as to afford Purchaser a reasonable opportunity to make, at
their sole cost and expense, such review, examination and investigation of the
Business as Purchaser may reasonably desire to make, provided, however, no
so-called "Phase I" (i.e., documentary review and walk-through site inspection)
preliminary environmental evaluation and no borings or other so-called "Phase
II" environmental examinations will be performed without Parent's prior written
consent which may be given or withheld in Parent's sole discretion. Purchaser
will be permitted to make extracts from or to make copies of such books and
records as may be reasonably necessary. Purchaser will not contact any employee
of Seller or Parent without the prior approval of an authorized representative
of Parent. Prior to the Closing, Parent will furnish to Purchaser, or cause to
be furnished to Purchaser, such financial and operating data and other
information pertaining to the Business as Purchaser may reasonably request;
provided, however, that nothing in this Agreement will obligate Parent or Seller
to take actions that would unreasonably disrupt the normal course of their
businesses, violate the terms of any applicable Law or any contract or agreement
to which Parent or Seller is a party or by which Parent or Seller or any of
their assets are subject, or grant access to any proprietary or confidential
information. The covenants set forth in this Section 3.1 will not survive the
Closing.
(b) Subject to Section 3.2, whether or not the Closing occurs,
Purchaser will, and will cause each of its Affiliates to, treat in confidence
all documents, materials and other information (including without limitation
information relating to supply and sales agreements
16
and relationships with third Persons) disclosed by or on behalf of Parent or
Seller, whether before, during or after the course of the negotiations leading
to the execution of this Agreement or thereafter, including without limitation
in its investigation of the other parties and in the preparation of agreements,
schedules and other documents relating to the consummation of the transactions
contemplated hereby. Prior to the Closing, and in the event that this Agreement
is terminated, neither Purchaser nor any of its Affiliates will use in their
businesses or otherwise any information furnished by Seller not independently
known to Purchaser. If this Agreement is terminated, Purchaser and its
Affiliates will return to Parent all originals and copies of all non-public
documents and materials of the type provided for in this Section 3.1 which have
been furnished or made available in connection with this Agreement, and
Purchaser will destroy all notes, analyses, compilations, studies or other
documents which contain or otherwise reflect such information.
3.2. Press Releases. Prior to the Closing, no party will issue or cause
the publication of any press release or other public announcement with respect
to this Agreement or the transactions contemplated hereby without the prior
consent of Purchaser (in the case of Seller) or Parent (in the case of
Purchaser), which consent will not be unreasonably withheld; provided, however,
that nothing herein will prohibit any party from issuing or causing publication
of any such press release or public announcement to the extent that such party
determines such action to be required by Law or the rules of any national stock
exchange applicable to it or its Affiliates, in which event the party making
such determination will, if practicable in the circumstances, use reasonable
efforts to allow the other party reasonable time to comment on such release or
announcement in advance of its issuance.
3.3. Regulatory Filings. (a) Purchaser and Parent have made such
filings as may be required by the HSR Act with respect to the consummation of
the transactions contemplated by this Agreement. Thereafter, Purchaser and
Parent will file or cause to be filed as promptly as practicable with the United
States Federal Trade Commission and the United States Department of Justice any
supplemental information which may be requested pursuant to the HSR Act. If
applicable to the consummation of the transactions contemplated by this
Agreement, Purchaser will make such filings and use its respective reasonable
efforts to obtain all permits required by Law. To the extent required by Law,
Parent will make such filings and use its reasonable efforts to obtain the
governmental approvals referred to in Section 2.1.2, and Purchaser will make
such filings and use their respective reasonable efforts to obtain the
governmental approvals referred to in Section 2.2.2. All filings referred to in
this Section 3.3(a) will comply in all material respects with the requirements
of the respective Laws pursuant to which they are made.
(b) Without limiting the generality or effect of Section 3.3(a), each
of the parties will (i) use their respective reasonable efforts to comply as
expeditiously as possible with all lawful requests of Governmental Entities for
additional information and documents pursuant to the HSR Act, (ii) not (A)
extend any waiting period under the HSR Act or (B) enter into any agreement with
any Governmental Entity not to consummate the transactions contemplated by this
Agreement, except with the prior consent of Parent in the case of Purchaser, or
Purchaser in the case of Seller or Parent, and (iii) cooperate with each other
and use reasonable efforts to cause the lifting or removal of any temporary
restraining order, preliminary injunction or other judicial or administrative
order which may be entered into in connection with the transactions contemplated
by this Agreement, including without limitation the execution, delivery and
performance by the appropriate entity of such divestiture, hold-separate or
other
17
agreements or actions, as the case may be, as may be necessary to secure the
expiration or termination of the applicable waiting periods under the HSR Act or
the removal, dissolution, stay or dismissal of any temporary restraining order,
preliminary injunction or other judicial or administrative order which prevents
the consummation of the transactions contemplated hereby or requires as a
condition thereto that all or any part of the Business be held separate and,
prior to or after the Closing, pursue the underlying litigation or
administrative proceeding diligently and in good faith.
3.4. Injunctions. Without limiting the generality or effect of any
provision of Section 3.3 or Article IV, if any Governmental Entity having
jurisdiction over any party issues or otherwise promulgates any injunction,
decree or similar order prior to the Closing which prohibits the consummation of
the transactions contemplated hereby, the parties will use their respective
reasonable efforts to have such injunction dissolved or otherwise eliminated as
promptly as possible and, prior to or after the Closing, to pursue the
underlying litigation diligently and in good faith.
3.5. Operation of the Business. Except in connection with or as a
result of any matter listed or described on any Schedule, as expressly
contemplated herein or as otherwise consented to by Purchaser in writing, prior
to the Closing, Seller will:
(a) Use reasonable efforts to keep the Business in tact and not take or
permit to be taken or do or suffer to be done anything other than in the
ordinary course of business of the Business as presently conducted, and use
reasonable efforts to preserve and maintain the goodwill associated with the
Business and the ordinary and customary relationships of the Business with the
customers, suppliers, distributors, licensors and others having business
relationships with it;
(b) Continue existing practices relating to the maintenance of the
Acquired Assets;
(c) Not sell, lease or dispose of, or enter into any lease, agreement
or other contract for the purchase, sale, lease or disposition of, or subject to
Lien, any of the Acquired Assets other than (i) Products, (ii) in the ordinary
course of business of the Business, or (iii) pursuant to any Contract listed or
described on Schedule 2.1.11 or that would be listed or described on Schedule
2.1.11 but for a dollar, time or other exclusion or exception in Section 2.1.11
(an "Existing Contract");
(d) Not make any material amendment to any Employee Plan or materially
increase the general rates of compensation of Employees, except (i) as required
by Law, (ii) in the ordinary course of business of the Business or (iii)
pursuant to an Existing Contract;
(e) Not incur any indebtedness in excess of $500,000 in the aggregate,
or guarantee any debt or other liability of any other Person, that would
constitute an Assumed Liability;
(f) Not increase the compensation payable or to become payable by the
Seller to any Employee whose annual base compensation exceeds $100,000 except
for normal periodic increases of regular salary (not bonuses or other
compensation) in the ordinary course of business of the Business that are made
in accordance with established compensation policies of the Seller or as
required under a Contract listed on Schedule 3.5(f); and
18
(g) Not enter into any employment Contract which would be an Assumed
Contract and is not terminable at will without Purchaser incurring any
liability.
3.6. Supplemental Schedules. Parent may (but will not be required to),
from time to time prior to or at the Closing, by notice in accordance with this
Agreement, supplement or amend any Schedule to this Agreement with respect to
any matter, including without limitation one or more supplements or amendments
to correct any matter which would otherwise constitute a breach of any
representation, warranty or covenant herein contained. No such supplement or
amendment will affect the rights or obligations of the parties to this Agreement
which such party would have had in the absence of such supplement or amendment.
Notwithstanding any other provision hereof, if the Closing occurs, any such
supplement or amendment of any Schedule will be effective to cure and correct
for all purposes any breach of any representation, warranty or covenant, as well
as to extinguish Purchaser's right to seek Indemnification pursuant to Article
V, which would have existed by reason of Seller not having made such supplement
or amendment.
3.7. Satisfaction of Conditions. Without limiting the generality or
effect of any provision of Article IV, prior to the Closing, each of the parties
hereto will use its respective reasonable efforts with due diligence and in good
faith to satisfy promptly all conditions required hereby to be satisfied by such
party in order to expedite the consummation of the transactions contemplated
hereby.
3.8. Bulk Transfer Laws. Purchaser hereby waives compliance by Seller
with the provisions of any so-called "bulk transfer" law of any jurisdiction in
connection with the sale of the Acquired Assets to Purchaser.
3.9. Income Statements of the Business. At or prior to the Closing,
Seller will deliver to Purchaser statements of the results of operations of the
Business ("Income Statements") for each and every month commencing September
1998 through the Closing Date. Such Income Statements fairly present the results
of operations of the Business for the periods specified therein, consistent with
Seller's past practices and procedures.
3.10 Product Warranty. At or prior to the Closing Date, Seller shall
deliver or cause to be delivered to Purchaser a copy of a standard warranty form
(if such a form exists) which, to the Knowledge of Seller, is a standard express
product warranty generally used in connection with sales of products of the
Business.
IV. THE CLOSING
4.1. Conditions Precedent to Obligations of Purchaser and Seller. The
obligations of Purchaser and Seller under this Agreement to consummate the
transactions contemplated hereby will be subject to the satisfaction, at or
prior to the Closing, of the conditions that (a) subject to the last sentence of
this Section 4.1, each of the governmental and other approvals, consents or
waivers identified with an asterisk on Schedule 2.1.2 or Schedule 2.2.2 shall
have been obtained, (b) there shall not have been entered a preliminary or
permanent injunction, temporary restraining order or other judicial or
administrative order or decree in any jurisdiction, the effect of which
prohibits the Closing , and (c) the waiting period under the HSR Act shall have
expired or been terminated. Any of the foregoing conditions may be
19
waived (i) insofar as it is a condition to the obligations of Purchaser, by
Purchaser at its option and (ii) insofar as it is a condition to the obligations
of Seller, by Seller at its option.
4.2. Additional Conditions Precedent to Obligations of Purchaser. The
obligations of Purchaser under this Agreement to consummate the transactions
contemplated hereby will be subject to the satisfaction, at or prior to the
Closing, of all of the following conditions, any one or more of which may be
waived at the option of Purchaser:
4.2.1. No Material Misrepresentation or Breach. (a) There shall have
been no material breach by Seller in the performance of any of the covenants
herein to be performed by it in whole or in part prior to the Closing and (b)
the representations and warranties of Seller contained in this Agreement that
are qualified as to materiality shall be true and correct, and the
representations and warranties of Seller contained in this Agreement that are
not so qualified shall be true and correct in all material respects, on the date
hereof and as of the Closing Date as if made anew on the Closing Date, except
for representations or warranties made as of a specified date, which shall be
true and correct in all material respects (or true and correct if qualified by
materiality) as of the specified date, and (c) Seller shall have delivered to
Purchaser a certificate certifying each of the foregoing, dated the Closing Date
and signed by one of its or Parent's executive officers to the foregoing effect;
4.2.2. Xxxx of Sale. Seller shall have delivered to Purchaser a xxxx
of sale for the Transfer of the personal property included in the Acquired
Assets in the form attached as Exhibit 4.2.2;
4.2.3. Assignment Agreements. Seller shall have delivered to Purchaser
any assignment documents relating to the assignment by Seller to Purchaser of
any Acquired Assets reasonably requested by Purchaser for recording or other
evidentiary purposes in the form attached as Exhibit 4.2.3; and
4.2 4. Non-Competition Agreement. Seller and Parent covenant and agree
that they will not, for a period of two (2) years after the Closing Date,
directly or indirectly, own, manage, operate, control or participate in any
business that designs, manufactures or sells any products which are in direct
competition with any Product sold or manufactured in the Business as of the
Closing Date; provided, however, that nothing in this Section 4.2. 4shall
restrict or prevent in any manner Seller or Parent from engaging in any business
or related activity (other than the Business) in which it is engaged on the
Closing Date, including but not limited to the business of the Xxxxx and Xxxxx
Division of Seller. Seller and Parent agree to execute on the Closing Date the
Non-Competition Agreement designated as Exhibit 4.2. 4 to this Agreement, the
terms of which shall control the operation and effect of this Section 4.2.
4.
4.2.5. Schedules. In the event that Seller supplements or amends any of
the Schedules between the date of the signing of this Agreement and the Closing
Date, Purchaser reserves the right to object to such supplement or amendment;
provided, however, that Purchaser's objection must be reasonable.
4.3. Additional Conditions Precedent to Obligations of Seller. The
obligations of Seller under this Agreement to consummate the transactions
contemplated hereby will be
20
subject to the satisfaction, at or prior to the Closing, of all the following
conditions, any one or more of which may be waived at the option of Seller:
4.3.1. No Material Misrepresentation or Breach. (a) There shall have
been no material breach by Purchaser in the performance of any of the covenants
herein to be performed by Purchaser in whole or in part prior to the Closing,
(b) the representations and warranties of Purchaser contained in this Agreement
that are qualified as to materiality shall be true and correct and the
representations and warranties of Purchaser contained in this Agreement shall be
true and correct in all material respects as of the Closing Date, except for
representations or warranties made as of a specified date, which shall be true
and correct in all material respects (or true and correct if qualified by
materiality) as of the specified date, and (c) Purchaser shall have delivered to
Parent a certification of each of the foregoing, dated the as of the Closing
Date and signed by one of its executive officers to the foregoing effect;
4.3.2. Assumption Agreement. Purchaser shall have delivered to Seller
an assumption agreement substantially in the form of Exhibit 4.3.2 related to
the Assumed Liabilities;
4.3.3. Real Property Purchase Agreement. Seller shall have received a
signed Agreement substantially in the form of Exhibit 4.3.3(a), pursuant to
which Xxxxxx Properties, Inc. shall purchase the Real Property located at 000
Xxxxx Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxxx 00000 ("the Real Property"), from
Seller, and Seller shall have received from Purchaser a guarantee of the
performance of Xxxxxx Properties, Inc. thereunder in the form of Exhibit
4.3.3(b); and
4.3.4. Closing Purchase Price. Purchaser shall have delivered to
Parent in the manner specified in Section 1.4 an amount equal to the Closing
Price; and
4.4. The Closing. (a) Subject to the fulfillment or waiver of the
conditions precedent specified in Sections 4.1, 4.2 and 4.3, the consummation of
the purchase of the Acquired Assets and assumption of the Assumed Liabilities
contemplated hereby (the "Closing") will take place on March 26, 1999 or such
other date as provided in Section 4.4(b) (the "Closing Date"). The Closing will
take place at 9:00 a.m., Eastern Standard Time, at 000 Xxxx Xxxxxxxxx Xxxxx,
Xxxxxxx, Xxxxxxx 00000.
(b) Subject to Section 4.5(b), if the Closing has not occurred by the
date specified in Section 4.4(a), then the Closing Date will be extended to the
earlier of (a) the business day after the conditions set forth in Section 4.1
have been satisfied and (b) such other date, on or prior to the 30th calendar
day after the date hereof, to which Purchaser and Parent mutually agree.
4.5. Termination. Notwithstanding anything contained in this
Agreement to the contrary, this Agreement may be terminated at any time prior to
the Closing:
(a) By the mutual written consent of Purchaser and Seller;
(b) By either Purchaser or Seller if the Closing shall not have
occurred on or before the 60th calendar day after the date hereof; provided the
failure to consummate the transactions contemplated hereby on or before such
date did not result from the failure by the
21
party seeking termination of this Agreement to fulfill any undertaking or
commitment provided for herein that is required to be fulfilled before the
Closing; or
(c) By either Purchaser or Seller if there shall have been entered a
final, nonappealable order or injunction of any Governmental Entity restraining
or prohibiting the consummation of the transactions contemplated hereby or any
material part thereof.
In the event of the termination of this Agreement under this Section 4.5, each
party hereto will pay all of its own fees and expenses. There will be no further
liability hereunder on the part of any party hereto if this Agreement is so
terminated, except under Section 3.1(b) or by reason of an intentional breach of
any covenant contained in this Agreement, including without limitation the
covenants contained in Sections 3.3(b), 3.4 and 3.7.
4.6 Transactions to be Effected at the Closing. At the Closing:
(a) Seller will deliver or cause to be delivered to Purchaser the
documents described in Section 4.2; and
(b) Purchaser will deliver to Seller payment of the Closing Price as
provided in Section 1.4(b) and the documents described in Section 4.3.
V. SURVIVAL AND INDEMNIFICATION
5.1. Survival of Representations, Warranties and Covenants. (a) Each of
the representations and warranties contained in Article II will survive the
Closing and remain in full force and effect until the last calendar day of the
fifteenth month following the Closing Date, except that the representations and
warranties set forth in Sections 2.1.1, 2.2.1 and 2.1.13 will survive the
Closing and remain in full force and effect until the expiration of the statute
of limitation applicable to breaches of contractual obligations. Any claim for
indemnification with respect to any of such matters which is not asserted by a
notice given as herein provided specifically identifying the particular breach
underlying such claim and the facts and Indemnifiable Loss relating thereto,
within such specified periods of survival may not be pursued and is hereby
irrevocably waived.
(b) The covenants contained in Sections 3.3(b), 3.4, 3.8, 7.2 and 7.8
and in this Article V and in Articles I, VI and VII, will survive the Closing
and remain in effect indefinitely unless a specified period is otherwise set
forth in this Agreement (in which event such specified period will control). All
other covenants contained in this Agreement will terminate, without further
action, upon the occurrence of the Closing, with the result that any claim for
an alleged breach of any such covenant may not be pursued and is hereby
irrevocably waived.
5.2. Limitations on Liability. (a) For purposes of this Agreement, (i)
"Indemnity Payment" means any amount of Indemnifiable Losses required to be paid
pursuant to this Agreement, (ii) "Indemnitee" means any person entitled to
indemnification under this Agreement, (iii) "Indemnifying Party" means any
person required to provide indemnification under this Agreement, (iv)
"Indemnifiable Losses" means any and all claims, demands, actions, suits or
proceedings (by any person, including without limitation any Governmental
Entity), settlements and compromises relating thereto and reasonable attorneys'
fees and
22
expenses in connection therewith, losses, liabilities, costs and expenses,
reduced by the amount of insurance proceeds recoverable by the Indemnitee or an
Affiliate of the Indemnitee from any person that is not the Indemnitee or an
Affiliate of the Indemnitee, and (v) "Third Party Claim" means any claim,
demand, action, suit or proceeding made or brought by any person who or which is
not a party to this Agreement or an Affiliate of a party to this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement, if the Closing occurs, no claim for indemnification may be asserted
under Section 5.3 with respect to any matter discovered by or known to the
prospective Indemnitee on or before the Closing Date. For the purposes of this
paragraph, in the event that the Purchaser is the prospective Indemnitee, "known
to" Purchaser shall not include the knowledge of any employee of Purchaser who,
prior to the Closing Date, was an employee of Seller or Parent.
(c) Notwithstanding any other provision in this Agreement or of any
applicable Law, no Indemnitee will be entitled to make a claim against an
Indemnifying Party under Section 5.3(a) or Section 5.3(b) unless and until the
aggregate amount of claims which may be asserted for Indemnifiable Losses under
Section 5.3(a) or Section 5.3(b) exceeds $250,000; provided, however, that when
the aggregate amount of claims which may be asserted for Indemnifiable Losses
under Section 5.3(a) or Section 5.3(b) has exceeded $250,000, then an Indemnitee
will be entitled to make a claim against an Indemnifying Party under Section
5.3(a) or Section 5.3(b) for Indemnifiable Losses in excess of $50,000.
(d) Notwithstanding any other provision of this Agreement, the
indemnification obligations of Parent and Seller under Section 5.3(a) will not
exceed $2.5 million and will not extend beyond the last calendar day of the
fifteenth month following the Closing Date.
(e) As between Seller and any of its Affiliates, on the one hand, and
Purchaser and any of its Affiliates (collectively, the "Purchaser Companies"),
on the other hand, the rights and obligations set forth in this Article V will
be the sole and exclusive rights, obligations and remedies with respect to this
Agreement, the events giving rise to this Agreement and the transactions
provided for herein or contemplated hereby. Without limiting the generality or
effect of the foregoing, as a material inducement to the other parties hereto
entering into this Agreement, and in light of, among other factors, the
acknowledgments contained in Section 2.3, each of the parties to this Agreement
hereby (i) waives any claim or cause of action which it otherwise might assert,
including without limitation under the common law or federal or state
securities, trade regulation, environmental or other Laws, by reason of this
Agreement, the events giving rise to this Agreement and the transactions
provided for herein or contemplated hereby (other than in respect of the
Confidentiality Agreement, as hereafter defined) except for claims or causes of
action brought under and subject to the terms and conditions of this Article V
and (ii) agrees that, regardless of the foregoing provisions, no party will have
any liability or obligation in respect of any claim or cause of action that is
or may be brought (other than in respect of the Confidentiality Agreement)
except in respect of an Indemnifiable Loss, and then only to the extent
expressly provided in this Article V.
5.3. Indemnification. (a) Subject to Sections 5.1, 5.2 and 5.4, Seller
will indemnify, defend and hold harmless Purchaser and its Affiliates and their
respective directors, officers, employees, agents and representatives (including
without limitation any predecessor or
23
successor to any of the foregoing) from and against any and all Indemnifiable
Losses relating to, resulting from or arising out of:
(i) Any material breach by Seller of any of its
representations or warranties contained in this Agreement;
(ii) Any material breach by Seller of any covenant
of Seller contained in this Agreement which requires performance by
Seller after the Closing or which required performance by Seller
before the Closing and such covenant survives the Closing pursuant to
the terms of Section 5.1;
(iii) Any Excluded Liability (provided, however,
notwithstanding any other provision of this Agreement, that the
indemnification obligations of Seller with respect to Excluded
Liabilities shall not be subject to the limitations on liability set
forth in Sections 5.2(c) and 5.2(d) of this Agreement);
(iv) The obligations and liabilities in respect of any and
all Products manufactured in the Business prior to the Closing Date
with respect to claims for alleged personal injury or property damage;
(v) The obligations and liabilities relating to the
Excluded Assets;
(vi) The conduct of the Business prior to the Closing Date
or any liability or obligation to the extent resulting therefrom except
to the extent that such liability or obligation is an Assumed Liability
under this Agreement;
(vii) The conduct of the other businesses of Parent and
Seller on or after the Closing Date or any liability or obligation to
the extent resulting therefrom ; and
(viii) Notwithstanding the provisions of Section 5.3(c) of
this Agreement, a Third Party Claim resulting from a violation of an
Environmental Law which occurred during the period between January 1,
1996 and the Closing Date or arising out of a condition with respect to
the Environment which occurred during the period between January 1,
1996 and the Closing Date, in each case that relates to or arises out
of the Leased Real Property, the Real Property or the conduct or
operation of the Business ("Environmental Third Party Claim"), provided
that (1) the Environmental Third Party Claim does not relate to any
condition that was disclosed to Purchaser prior to the Closing Date, or
that was otherwise known to Purchaser prior to the Closing Date,
including, without limitation, conditions or items disclosed in the
so-called "Phase I" environmental evaluation; (2) the Environmental
Third Party Claim is not for an item which has been expressly excluded
from coverage under the terms of the Insurance Policy described in
Section 5.3(c) (which is Exhibit 5.3(c) to this Agreement), except for
an Environmental Third Party Claim for civil or criminal fines,
penalties or assessments expressly excluded from coverage under the
terms of the Insurance Policy which are assessed as a direct result of
an intentional or negligent act or omission of Seller or Parent and are
not assessed due to an intentional or negligent act or omission of
Purchaser; and (3) Purchaser has properly and timely submitted the
Environmental Third Party Claim to the carrier of the Insurance Policy
and has taken all other actions reasonably necessary and appropriate to
obtain coverage, provided, however, that in
24
the event that Seller has in its possession information that is
reasonably required in order for Purchaser to obtain such coverage,
Seller shall provide such information to Purchaser within a reasonable
period of time; and (4) the carrier has denied coverage under the
Insurance Policy. For the purposes of this paragraph, the 20 calendar
day time limit set forth in Section 5.4(a) will begin to run upon
Purchaser's receipt from the carrier of a notice of denial of coverage
under the Insurance Policy.
(b) Subject to Sections 5.1, 5.2 and 5.4, Purchaser will indemnify,
defend and hold harmless Seller and its Affiliates (including without limitation
Parent) and their respective directors, officers, employees, agents and
representatives (including without limitation any predecessor or successor to
any of the foregoing) from and against any and all Indemnifiable Losses relating
to, resulting from or arising out of:
(i) Any material breach by Purchaser of any of the
representations or warranties of Purchaser contained in this Agreement;
(ii) Any material breach by Purchaser of any covenant
of Purchaser contained in this Agreement which requires performance
by Purchaser after the Closing or which required performance by
Purchaser before the Closing and which covenant survives the Closing
pursuant to the terms of Section 5.1;
(iii) The obligations and liabilities in respect of any
and all Products manufactured in the Business on or after the Closing
Date with respect to claims for alleged personal injury or property
damage;
(iv) The obligations and liabilities relating to the
Acquired Assets on or after the Closing Date;
(v) The obligations and liabilities assumed by Purchaser
pursuant to Section 6.2, Section 6.3(b) and Section 6.4;
(vi) Any Assumed Liability; and
(vii) The conduct of the Business on or after the Closing
Date or any liability or obligation to the extent resulting therefrom.
(c) Assumption of Liabilities and Indemnification with respect to the
Environment and Employee Safety and Health. Seller has agreed to (i) reduce the
amount that Purchaser is paying for the Business to cover the cost of certain
equipment and other items related to employee safety and health, including,
without limitation, safety equipment, machine guarding and asbestos, so that the
Purchase Price includes a discount in the amount of $185,000 from what would
otherwise have been the purchase price for the Business; (ii) pay the premium to
purchase policy of insurance, a specimen of which is attached hereto as Exhibit
5.3(c) ("the Insurance Policy") which provides coverage for certain
environmental liabilities in connection with both the Leased Real Property and
the Real Property which is being purchased by Xxxxxx Properties, Inc.,
("Xxxxxx") in accordance with a separate Agreement substantially in the form of
Exhibit 4.3.3(a) ("the Real Property Purchase Agreement"); and reimburse
Purchaser and/or Xxxxxx for amounts actually paid by Purchaser and/or Xxxxxx
toward the deductible amount under the Insurance Policy in connection with up to
three (3) claims which are made by Purchaser and/or
25
Xxxxxx under the Insurance Policy (i.e., three $50,000 deductibles or an
aggregate of $150,000), as set forth in Section 7.3 of Exhibit 4.3.3(a). In
consideration for Seller's agreement to perform items (i) through (iii),
Purchaser expressly agrees to assume all obligations and liabilities, of
whatever kind and nature, primary or secondary, direct or indirect, absolute or
contingent, known or unknown, whether or not accrued, arising before, on or
after the Closing Date, arising out of or resulting from the conduct or
operation of the Business on the Leased Real Property or the Real Property and
(i) relating to personal injury, property damage, or other claims with respect
to employee safety and health (including, without limitation, safety equipment,
machine guarding and asbestos), except workers' compensation claims arising or
accruing prior to the Closing Date; or ( ii) arising from or relating to the
violation of any Environmental Law or otherwise arising out of a condition with
respect to the Environment, except as limited by Section 5.3(a)(viii). Purchaser
agrees that it will, subject to Sections 5.1 and 5.4, indemnify, defend and hold
harmless Seller and its Affiliates (including without limitation Parent) and
their respective directors, officers, employees, agents and representatives
(including without limitation any predecessor or successor to any of the
foregoing) from and against any and all Indemnifiable Losses, as defined in
Section 5.2(a), relating to, resulting from or arising out of such obligations
and liabilities. This indemnification shall not be subject to the limitations on
liability set forth in Section 5.2 of this Agreement; provided, however, that
the indemnification obligations of Purchaser under this Section 5.3(c) shall not
exceed $10 million.
(d) The rights of the parties under the various clauses of Sections 5.3
are cumulative and not exclusive.
5.4. Defense of Claims. (a) If any Indemnitee receives notice of the
assertion or commencement of any Third Party Claim against such Indemnitee with
respect to which an Indemnifying Party is obligated to provide indemnification
under this Agreement, the Indemnitee will give such Indemnifying Party
reasonably prompt written notice thereof, but in any event not later than 20
calendar days after receipt of such notice of such Third Party Claim. Such
notice by the Indemnitee will describe the Third Party Claim in reasonable
detail, will include copies of all material written evidence thereof and will
indicate the estimated amount, if reasonably practicable, of the Indemnifiable
Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party
will have the right to participate in or, by giving written notice to the
Indemnitee, to assume, the defense of any Third Party Claim at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel and the
Indemnitee will cooperate in good faith in such defense.
(b) If, within ten calendar days after giving notice of a Third Party
Claim to an Indemnifying Party pursuant to Section 5.4(a), an Indemnitee
receives written notice from the Indemnifying Party that the Indemnifying Party
has elected to assume the defense of such Third Party Claim as provided in the
last sentence of Section 5.4(a), the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnitee in connection with
the defense thereof; provided, however, that if the Indemnifying Party fails to
take reasonable steps necessary to defend diligently such Third Party Claim
within ten calendar days after receiving written notice from the Indemnitee that
the Indemnitee believes the Indemnifying Party has failed to take such steps,
the Indemnitee may assume its own defense, and the Indemnifying Party will be
liable for all reasonable costs or expenses paid or incurred in connection
therewith. Without the prior written consent of the Indemnitee, the Indemnifying
Party will not enter into any settlement of any Third Party Claim which would
lead to liability or create any financial or other obligation on the part of the
Indemnitee for
26
which the Indemnitee is not entitled to indemnification hereunder. If a firm
offer is made to settle a Third Party Claim without leading to liability or the
creation of a financial or other obligation on the part of the Indemnitee for
which the Indemnitee is not entitled to indemnification hereunder and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party will give written notice to the Indemnitee to that effect. If the
Indemnitee fails to consent to such firm offer within ten calendar days after
its receipt of such notice, the Indemnitee may continue to contest or defend
such Third Party Claim and, in such event, the maximum liability of the
Indemnifying Party as to such Third Party Claim will not exceed the amount of
such settlement offer.
(c) Any claim by an Indemnitee on account of an Indemnifiable Loss
which does not result from a Third Party Claim (a "Direct Claim") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than 30 calendar days after the Indemnitee
becomes aware of such Direct Claim. Such notice by the Indemnitee will describe
the Direct Claim in reasonable detail, will include copies of all material
written evidence thereof and will indicate the estimated amount, if reasonably
practicable, of the Indemnifiable Loss that has been or may be sustained by the
Indemnitee. The Indemnifying Party will have a period of 30 calendar days within
which to respond in writing to such Direct Claim. If the Indemnifying Party does
not so respond within such 30 calendar day period, the Indemnifying Party will
be deemed to have rejected such claim, in which event the Indemnitee will be
free to pursue such remedies as may be available to the Indemnitee on the terms
and subject to the provisions of this Agreement.
(d) A failure to give timely notice or to include any specified
information in any notice as provided in Sections 5.4(a), 5.4(b) or 5.4(c) will
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, any party which was entitled to
receive such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise prejudiced as a result of such
failure.
(e) If the amount of any Indemnifiable Loss, at any time subsequent to
the making of an Indemnity Payment, is reduced by recovery, settlement or
otherwise under or pursuant to any insurance coverage, or pursuant to any claim,
recovery, settlement, rebate or other payment by or against any other Person,
the amount of such reduction, less any costs, expenses, premiums or taxes
incurred in connection therewith, together with interest thereon from the date
of payment thereof at the rate of interest described in Section 1.5(d), will
promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any
Indemnity Payment the Indemnifying Party will, to the extent of such Indemnity
Payment, be subrogated to all rights of the Indemnitee against any third Person
that is not an Affiliate of the Indemnitee on an insurer of the Indemnitee in
respect of the Indemnifiable Loss to which the Indemnity Payment relates;
provided, however, that (i) the Indemnifying Party shall then be in compliance
with its obligations under this Agreement in respect of such Indemnifiable Loss
and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss,
any and all claims of the Indemnifying Party against any such third Person on
account of said Indemnity Payment will be subrogated and subordinated in right
of payment to the Indemnitee's rights against such third Person. Without
limiting the generality or effect of any other provision hereof, each such
Indemnitee and Indemnifying Party will duly execute upon request all instruments
reasonably necessary to evidence and perfect the above-described subrogation and
subordination rights.
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VI. OTHER POST-CLOSING COVENANTS
6.1. Employees and Employee Benefit Plans. (a) Effective as of the
Closing, Purchaser will, or will cause one of its Affiliates to, offer
employment to each person employed primarily in the Business as of the Closing
Date (including without limitation any Employee on short term disability or an
approved leave of absence) ("Employees") with compensation and employee benefits
that are, in the aggregate, comparable to the compensation and employee benefits
of such Employees immediately prior to the Closing Date (other than the Pension
Plan). Employees who accept offers of employment with the Purchaser or one of
its Affiliates will become "Hired Employees." If, within one year following the
Closing Date, Purchaser or an Affiliate of Purchaser terminates the employment
of any Hired Employee with Purchaser and all of its Affiliates and such
termination of employment is without cause (and for a reason other than death),
Purchaser will, or will cause one of its Affiliates to, provide to each such
terminated Hired Employee a severance benefit that is not less favorable than
the severance benefit to which such Hired Employee would have been entitled had
such Hired Employee's employment been terminated immediately prior to the
Closing Date under the terms of an applicable severance plan or policy listed or
described on Schedule 2.1.12.1 (but only if, and to the extent, such Hired
Employee was covered by such plan or policy immediately prior to the Closing
Date).
(b) Effective as of the Closing Date, and for a period of one year
after the Closing Date, Purchaser will, or will cause one of its Affiliates to,
provide Hired Employees with employee benefits that are comparable to, in the
aggregate, the employee benefits provided to such Hired Employees by Seller
immediately prior to the Closing Date (other than the Pension Plan).
(c) Purchaser agrees that each Hired Employee will receive credit for
his or her years of service with Seller or any of its Affiliates prior to the
Closing in determining eligibility and vesting under the Purchaser's employee
benefit plans, and in determining the amount of benefits under any applicable
sick leave, vacation or severance plan of the Purchaser. Notwithstanding the
foregoing, it is agreed that if Purchaser makes available to Hired Employees a
plan providing a profit-sharing contribution ("Profit-Sharing Plan"), in
addition to, or in combination with, a 401(k) plan, the Profit-Sharing Plan may
require that a Hired Employee have one year of service with Purchaser or one of
its Affiliates prior to being eligible to participate in the Profit-Sharing
Plan. Purchaser will, or will cause one of its Affiliates to, offer such Hired
Employees and their dependents as of the Closing coverage under a group health
plan substantially similar to the coverage (including dependent coverage) that
was provided by Seller or any of its Affiliates immediately prior to the Closing
and will waive any waiting period and preexisting condition limitations
applicable to Hired Employees and eligible dependents under any such group
health plan made available to Hired Employees and eligible dependents to the
extent that a Hired Employee's or Hired Employee's eligible dependent's
condition would not have operated as a preexisting condition limitation under
the applicable group health plan of or sponsored by Seller or any of its
Affiliates prior to Closing, and Purchaser will, or will cause one of its
Affiliates to, take all action necessary to ensure that such Hired Employees and
eligible dependents are given full credit for all co-payments and deductibles
incurred under the applicable group health plan of or sponsored by Seller or any
of its Affiliates for the plan year that includes the Closing Date.
28
(d) Schedule 6.1(d) to this Agreement contains the name, address, hire
date, job title, current base salary, bonus (if any), years of service and
current employment status of each Employee. To the Knowledge of Seller, Schedule
6.1(d) is an accurate listing.
6.2. Assumption of Obligations. (a) Effective as of the Closing,
Purchaser will, or will cause one of its Affiliates to, assume and be solely
responsible for all liabilities and obligations of Seller and each of its
Affiliates relating to employment of any Hired Employee, incurred prior to the
Closing, to the extent reflected or reserved against on the Closing Date Balance
Sheet, or incurred after the Closing Date, except to the extent that any of such
liabilities or obligations are expressly retained by Seller or any of its
Affiliates pursuant to Section 6.3(a) or are pursuant to an Excluded Contract. A
medical claim is treated as "incurred" when the services or material giving rise
to the claim are provided.
(b) Subject to the applicable representations and warranties set forth
in Section 2.1.12 above, effective as of the Closing, Purchaser will, or will
cause one of its Affiliates to, assume and be solely responsible for any
liability or obligation to provide Employees and former Employees and their
qualified beneficiaries with continuation coverage (within the meaning of
Section 4980B(f)(2) of the Code) under each Employee Benefit Plan and
Multiemployer Plan that is a group health plan, including without limitation any
liability or obligation to provide such Employees and former Employees with the
notice required under Section 4980B(f)(6) of the Code with respect to qualifying
events that occur as a result of the transfer of the Acquired Assets.
6.3. Retirement Plans. (a) As of the Closing, Seller will cause
Employees as of the Closing Date to be fully vested in their accrued benefits
under the Retirement Plans, as defined in Section 1.2(b)(vii). As of the
Closing, Seller will no longer accept contributions to the 401(k) Plan with
respect to any Hired Employees and Seller will no longer match employee
contributions to the 401(k) Plan with respect to any Hired Employees. Neither
Purchaser nor any of its Affiliates will assume any liabilities or obligations
with respect to the Retirement Plans, which will be retained by Seller, or with
respect to any claims made with respect to benefits allegedly payable
thereunder.
(b) The following provisions shall apply with respect to the Sheet
Metal Workers' National Pension Fund (the "Multiemployer Pension Plan") to which
Seller contributes pursuant to the applicable collective bargaining agreements
so that the transfer of the Acquired Assets shall be covered under Section 4204
of ERISA and shall not be deemed a complete or partial withdrawal under Title IV
of ERISA:
(1) Effective on and after the Closing Date, Purchaser or one
of its Affiliates shall contribute to the Multiemployer Pension Plan for
substantially the same number of contribution base units for which Seller had an
obligation to contribute under the applicable collective bargaining agreement.
(2) Purchaser and Seller shall (i) prior to the Closing Date,
jointly inform the Multiemployer Pension Plan in writing of their intention that
the sale of assets hereunder be covered by Section 4204 of ERISA, and (ii)
immediately upon signing of this Agreement, use their best efforts to
demonstrate jointly to the satisfaction of the Multiemployer Pension Plan that
no Purchaser's bond or escrow is required under Section 4204( a)(1)(B) of ERISA
and the regulations promulgated thereunder, and that Seller's secondary
liability under Section
29
4204( a)(1)(C) of ERISA should be waived. If after reasonable such efforts,
Purchaser and Seller are unable to so demonstrate to the satisfaction of the
Multiemployer Pension Plan, the Purchaser shall , within ten (10) days of
receiving such determination from the Multiemployer Pension Plan, but in no
event later than December 31, 1999, provide to the Multiemployer Pension Plan a
bond issued by a corporate surety company that is an acceptable surety for
purposes of ERISA Section 412, or an amount held in escrow by a bank or similar
financial institution satisfactory to the Multiemployer Pension Plan, in an
amount equal to the greater of:
(i) the average annual contribution required to be made by
Seller with respect to the operations of the Business covered under the
Multiemployer Pension Plan for the three plan years preceding the plan year in
which the Closing Date occurs, or
(ii) the annual contribution that Seller was required to make
with respect to the operations of the Business under the Multiemployer Pension
Plan for the last plan year before the plan year in which the Closing Date
occurs.
Such bond or escrow shall be maintained by Purchaser for a period of five plan
years commencing with the first plan year beginning after the Closing Date. The
bond or escrow shall be paid to the Multiemployer Pension Plan if the Purchaser
withdraws from such plan, or fails to make a contribution to such plan when due,
at any time during the first five plan years beginning after the Closing Date.
(3) If during the first five plan years beginning after the
Closing Date, the Purchaser withdraws in a complete or partial withdrawal with
respect to the operations of the Business covered by the Multiemployer Pension
Plan, Seller will be secondarily liable for any withdrawal liability it would
have had to the Multiemployer Pension Plan with respect to such operations (but
for ERISA Section 4204) if the liability of the Purchaser with respect to the
Multiemployer Pension Plan is not paid. In lieu of incurring such secondary
liability, Seller shall have the right in its discretion to pay any withdrawal
liability of Purchaser in the event it deems it in its best interests to do so.
(4) Purchaser shall provide written notice to Seller within
thirty (30) days prior to any request by Purchaser to the Pension Benefit
Guaranty Corporation (PBGC) of a request for a variance from the bond or escrow
requirement set forth in Section 6.3(b)(2). Purchaser and Seller shall jointly
inform the PBGC in writing of their intention that the sale of assets hereunder
be covered by Section 4204 of ERISA, and use their best efforts to demonstrate
jointly to the satisfaction of the PBGC that no Purchaser's bond or escrow is
required under Section 4204(a)(1)(B) of ERISA and the regulations promulgated
thereunder, and that Seller's secondary liability under Section 4204( a)(1)(C)
should be waived. If the PBGC fails to grant a variance both with respect to the
bond or escrow requirement as to Purchaser and as to the secondary liability of
Seller, Purchaser shall continue to maintain the bond or escrow required under
Section 6.3(b)(2) until the end of the five plan year period specified therein.
(5) Purchaser agrees to require the surety bonding company or
escrow agent to give Seller notice within thirty days after the failure to
timely pay any premium on any bond required under Section 6.3(b)(2), or any
other default on any such bond or escrow
30
within the first five plan years of the Multiemployer Pension Plan immediately
following the Closing Date.
(6) Purchaser agrees to indemnify and hold harmless Seller for
any withdrawal liability imposed by the Multiemployer Pension Plan in connection
with the transactions described in this Agreement and from and against any
liability, damages, cost or expense that Seller may incur as a result of
Purchaser's failure to timely post a bond or escrow funds, if required by the
Multiemployer Pension Plan, or as a result of Purchaser's failure to timely pay
any premium on such bond or Purchaser's default for any other reason with
respect to its obligation to provide such bond or escrow such funds.
(7) Purchaser shall provide to the Multiemployer Pension Plan
or the PBGC any security required in the event of Purchaser's liquidation or
distribution of all or substantially all of its assets during the five plan year
period.
(8) If all, or substantially all, of Seller's assets are
distributed, or if the Seller is liquidated, before the end of the five plan
year period, then Seller shall provide a bond or amount in escrow to the extent
required by the Multiemployer Pension Plan.
6.4. Employment and Plan Amendments or Terminations. Except as provided
in Section 6.1, no provision of this Section 6 will limit Purchaser's or any of
its Affiliates' right and authority to discontinue, suspend or modify the
employment of any Hired Employee or benefits provided to any or all Hired
Employees and dependents after the Closing; provided, however, that in the event
of any such discontinuance, suspension or modification Purchaser will, or will
cause one of its Affiliates to, remain liable for all employee benefit
liabilities or obligations expressly assumed pursuant to this Agreement. Neither
Seller nor any of its Affiliates will be liable for any liability or obligation
that may arise from the amendment or termination by Purchaser or any of its
Affiliates of any employee benefit plan assumed, established or maintained by
Purchaser or any of its Affiliates.
6.5. Employee Information. Each of Seller and Purchaser will provide
the other, in a timely manner, any information with respect to any Hired
Employee's or former Employee's employment with and compensation from Seller,
any of its Affiliates or Purchaser or any of its Affiliates, as the case may be,
or rights or benefits under any employee benefit plan which the other party
hereto may reasonably request and require.
6.6. W-2 Matters. Purchaser will assume Seller's obligation to furnish
Forms W-2 for the year ending December 31, 1999 to Hired Employees. Seller will
provide or cause its agents to provide Purchaser the information not available
to Purchaser and relating to periods ending on the Closing Date necessary for
Purchaser or Purchaser's agent to prepare and distribute Forms W-2 to Hired
Employees for the year ending December 31, 1999, which Forms W-2 will include
all remuneration earned by Hired Employees from Seller and Purchaser during the
year ending December 31, 1999, and Purchaser or Purchaser's agent will prepare
and distribute such Forms.
6.7. Post-Closing Notifications. Purchaser and Seller will, and each
will cause its respective Affiliates to, comply with any post-Closing
notification or other requirements, to the extent then applicable to such party,
of any antitrust, trade competition, investment,
31
control or other Law of any Governmental Entity having jurisdiction over the
Business or the transactions contemplated hereby.
6.8. Names, Trademarks, Etc. Purchaser will revise trademarks and
Product literature, change signage and stationery and otherwise discontinue use
of the Parent and Seller Names as promptly as practicable after the Closing;
provided, however, that for a period of six months from the Closing Date,
Purchaser may consume stationery and similar supplies on hand as of the Closing
which contain the Parent or Seller Names thereon, provided that such items are
overstamped or otherwise appropriately indicate that the Business is then owned
by Purchaser. Without limiting the generality or effect of the foregoing,
Purchaser will, and will cause each of its Affiliates to, discontinue (a) no
later than the close of business on the Closing Date, affixing in any manner
whatsoever the Parent or Seller Names to any Product and (b) no later than the
close of business on the 30th calendar day after the Closing Date, selling,
shipping and delivering any Product having the Parent or Seller Names affixed
thereto in any manner whatsoever.
6.9. Access. (a) On the Closing Date, or as soon thereafter as
practicable, and in no event later than 90 calendar days after the Closing Date,
Seller will deliver or cause to be delivered to Purchaser all original
agreements, documents, books, records and files primarily relating to the
Business (collectively, "Records") in the possession of Seller or any Affiliate
of Seller to the extent not in the possession of Purchaser, subject to the
following exceptions:
(i) Purchaser recognizes that certain Records may
contain only incidental information relating to the Business or may
primarily relate to Seller or any of its Affiliates, or the businesses
of Seller or any of its Affiliates other than the Business, and
Seller and its Affiliates may retain such Records and Seller may
deliver appropriately excised, but otherwise true and correct copies,
of such Records, so long as the effect of such excising is not
to omit necessary information from the Records for the conduct of the
Business;
(ii) Seller and each of its Affiliates may retain any
Tax Returns so long as true and complete copies of the portions
thereof relating to the Business are delivered to Purchaser at or
before the Closing or made available to the Purchaser following the
Closing; and
(iii) Seller and each post-Closing Affiliate may
retain Records relating to the Excluded Liabilities or Excluded Assets.
After the Closing, Purchaser will retain all Records (except those Records
referred to in Section 6.9(a)(i), (ii) and (iii), which Seller will retain)
required to be retained pursuant to obligations imposed by any applicable Law.
Except as provided in the immediately preceding sentence, Purchaser will retain
all Records for a period of seven years after the Closing Date. After the end of
such seven-year period, before disposing of any such Records, Purchaser will
give notice to such effect to Seller and give Seller at its cost and expense an
opportunity to remove and retain all or any part of such Records as Seller may
elect.
(b) After the Closing, upon reasonable notice, each party hereto will
give, or cause to be given, to the representatives, employees, counsel and
accountants of the other parties hereto access, during normal business hours, to
Records relating to periods prior to or including the
32
Closing including, for good cause shown, those Records referred to in Section
6.9(a)(i), (ii) and (iii), and will permit such persons to examine and copy such
Records to the extent reasonably requested by the other party in connection with
tax and financial reporting matters, audits, legal proceedings, governmental
investigations and other business purposes; provided, however, that nothing
herein will obligate any party to take actions that would unreasonably disrupt
the normal course of its business, violate the terms of any contract to which it
is a party or to which it or any of its assets is subject or grant access to any
of its proprietary, confidential or classified information or information that
is privileged or similarly protected from disclosure. Purchaser will provide or
make available to Seller and each of its Affiliates access to, and assistance
from, employees of Purchaser for the purposes of, and with the limitations
described in, the preceding sentence. The parties hereto will, and will cause
their respective Affiliates to, cooperate with each other in the conduct of any
tax audit, claim for refund of taxes, or similar proceedings involving or
otherwise relating to the Business (or the income therefrom or assets thereof)
with respect to any Tax as may be necessary to carry out the intent of this
Section 6.9(b). Without limiting the generality or effect of the foregoing,
Purchaser will provide, or cause to be provided, to Seller upon request, as
promptly as possible, for the year in which the Closing Date takes place, copies
of any Tax Return in which the Business is included and Seller will provide the
Purchaser for such year, as promptly as possible, copies of its Tax Returns as
requested by Purchaser. Purchaser and Seller will each be responsible to the
other for ensuring that such information and Tax Returns can be provided to the
other in the event that the party obligated to provide the Tax Return disposes
of any portion of the Business.
6.10. Certain Tax Matters. (a) Seller and Purchaser will each pay
one-half of all sales, use, transfer, gains, stamp, conveyance, value added or
other similar Taxes, duties, excise or governmental charges imposed by any
United States federal, state, local or foreign Governmental Entity, and all
recording or filing fees, notarial fees and other similar costs of Closing with
respect to the Transfer of the Acquired Assets or otherwise on account of this
Agreement or the transactions contemplated hereby (collectively, the "Transfer
Taxes"); provided, however, that any tax imposed by the State of California on
the transfer of tangible property shall be borne solely by Purchaser and further
provided that Purchaser shall pay such taxes on the transfer of tangible
property to Seller at Closing and Seller shall remit same to the State of
California. Purchaser agrees that, with respect to the inventory being acquired
by the Purchaser under Section 1.2(a)(ii) of this Agreement, an authorized
representative of Purchaser will execute a "California Resale Certificate"
substantially in the form attached hereto as Exhibit 6.10(a), at Closing, so as
to exempt said inventory from the tax imposed by the State of California on the
transfer of tangible property.
(b) Purchaser will be responsible for preparing and filing or causing
to be prepared and filed all required Tax Returns due after the Closing Date
with respect to the Acquired Assets and the Business for all taxable periods
beginning after the Closing Date (other than for Taxes with respect to periods
for which the consolidated, unitary and combined Tax Returns of Parent will
include the operations of the Business). Purchaser will make all payments
required with respect to any such Tax Returns.
(c) Seller or an Affiliate of Seller will be responsible for preparing
and filing or causing to be prepared and filed all required Tax Returns due
after the Closing Date with respect to the Acquired Assets and the Business,
other than Tax Returns that Purchaser is obligated to prepare and file pursuant
to Section 6.10(b). Seller will pay or cause to be paid
33
all Taxes required to be paid with respect to such Tax Returns. The amount of
any Income Taxes attributable to a portion of a taxable period that includes but
does not end on the Closing Date shall be determined pursuant to the Closing
Date Balance Sheet.
(d) The Purchase Price will be allocated among the Acquired Assets in
accordance with the values set forth in Schedule 6.10(d). Purchaser and Seller
will jointly prepare Form 8594 pursuant to Section 1060 of the Code, on a basis
consistent with Schedule 6.10(d).
(e) Purchaser will promptly provide or cause to be provided to Seller,
and Seller or Parent will promptly provide or cause to be provided to Purchaser,
such other information as Seller or Purchaser, respectively, may reasonably
request in order for the operations of the Business to be properly reported in,
respectively, Seller's or Parent's Tax Returns or Purchaser's Tax Returns.
(f) For purposes of this Agreement, (i) "Tax" or "Taxes" includes all
federal, state, local, foreign and other taxes, assessments, or governmental
charges of any kind whatsoever including, without limitation, income, franchise,
capital stock, excise, property, sales, use, service, service use, leasing,
leasing use, gross receipts, value added, single business, alternative or add-on
minimum, occupation, real and personal property, stamp, , payroll taxes related
to severance pay, environmental, payroll, withholding, employment, unemployment
and social security taxes, or other taxes of the same or similar nature,
together with any interest, penalties or additions thereon and estimated
payments thereof, whether disputed or not, (ii) "Tax Return" or "Tax Returns"
includes all returns, reports, information returns, forms, declarations, claims
for refund, statements and other documents (including any amendments thereto and
including any schedule or attachment thereto) in connection with Taxes that are
required to be filed with a Governmental Entity or other tax authority, or sent
or provided to another party under applicable Law, (iii) "Corporate Income Tax"
or "Corporate Income Taxes" means all Taxes imposed on, measured by, or that
require reference to, net or taxable income (including any income, franchise,
capital stock, excise, estimated, alternative, minimum, add-on minimum or other
tax imposed on, measured by, or which requires reference to, net or taxable
income), together with interest and penalties thereon and estimated payments
thereof, and (iv) "Code" means the Internal Revenue Code of 1986, as amended
(all citations to the Code or to the Treasury Regulations promulgated thereunder
will include any amendments or successor provisions thereto).
6.11. Insurance. With respect to any loss, liability or damage suffered
after the Closing Date relating to, resulting from or arising out of the conduct
of the Business on or prior to the Closing Date for which Purchaser is now
responsible because said loss, liability or damage is, or has arisen in
connection with, an Assumed Liability under this Agreement, and for which Seller
or any of its Affiliates would be entitled to assert, or cause any other Person
to assert, a claim for recovery under any policy of insurance maintained by or
for the benefit of Seller, in respect of the Business ("Insurance"), at the
request of Purchaser, Seller will use its reasonable efforts to assert, or to
assist Purchaser to assert, one or more claims under such Insurance covering
such loss, liability or damage if Purchaser is not itself entitled to assert
such claim, but Seller or any of its Affiliates is so entitled, provided that
all of Seller's and any of its Affiliates' out-of-pocket costs and expenses
incurred in connection with the foregoing, including without limitation any
liability, obligation or expense referred to in the last sentence of this
Section 6.11 are promptly reimbursed by Purchaser; provided, however, that,
effective as of the Closing Date, Seller or any of its Affiliates may in their
sole discretion
34
terminate or otherwise discontinue any policy of Insurance. To the extent
required under the terms of Insurance to give effect to the foregoing, Seller
will be deemed, solely for the purpose of asserting claims for Insurance
pursuant to the immediately preceding sentence, to have assumed or retained
liability for such loss, liability or damage to the extent of the policy limits
of the applicable policy of Insurance; provided, however, that (a) Purchaser's
obligations under Section 5.3(b) will not be affected by the provisions of this
Section 6.11 and (b) with respect to any claim made by Seller or any of its
Affiliates under any Insurance pursuant to this Section 6.11, Purchaser will
jointly and severally indemnify, defend and hold harmless Seller and each of its
Affiliates and their respective directors, officers, partners, employees, agents
and representatives (including without limitation any predecessor or successor
of any of the foregoing) from and against any Indemnifiable Loss relating to,
resulting from or arising out of any deductible, policy limit, obligation,
indemnity, reinsurance due to the liquidation or insolvency of the reinsurer,
self-insurance retention, or retroactive or retrospective premium resulting from
claims made under this Section 6.11 or other like arrangement by which any such
entity, including without limitation any captive insurance company, retains any
liability or obligation under any such policy of Insurance or otherwise.
6.12. Assumed Contracts, Etc. From and after the Closing, neither
Seller nor any of its Affiliates will have any further obligation under the
executory portion of any Assumed Contract or to continue any other welfare or
other benefit, insurance or other agreements, plans or programs, for the benefit
of the Business.
6.13. Certain Contracts. (a) Notwithstanding anything to the contrary
in this Agreement, to the extent that (i) any Assumed Contract (other than an
Excluded Contract) is not capable of being assigned to Purchaser in connection
with the Closing without the consent or waiver of a third person (including
without limitation a Governmental Entity) which has not been obtained on or
before the Closing Date, or (ii) any of the transactions relating to the
transactions contemplated by this Agreement constituted or would constitute a
breach of any such Contract, or a violation of any Law or Order or other
governmental edict, Seller will be deemed not to have Transferred, and will not
be obligated to Transfer, to Purchaser any direct or indirect right, title or
interest in or to any such Contract without first having obtained all necessary
consents and waivers. Seller will use reasonable efforts to obtain such consents
and waivers as may be necessary to cure such potential breach or violation;
provided, however, neither Seller nor any of its Affiliates will be obligated to
pay any consideration therefor to the party from whom the consent or waiver is
requested. Purchaser agrees that neither Seller nor any of its Affiliates will
have any liability whatsoever arising out of or relating to the failure to
obtain any consents or waivers that may have been or may be required in
connection with the transactions contemplated by this Agreement or because of a
breach of, default under or termination of any Assumed Contract as a result
thereof, except in connection with a breach of the representation in the last
sentence of Section 2.1.11 or in this Section 6.13(a).
(b) To the extent that the consents and waivers referred to in the
immediately preceding paragraph are not obtained, or until the breaches or
violations referred to in the immediately preceding paragraph are resolved,
Seller will use reasonable efforts, with reasonable costs of Seller and its
Affiliates related thereto to be promptly reimbursed by Purchaser, to (i)
provide to Purchaser, at its request, the benefits of any such Contract, (ii)
cooperate in any reasonable and lawful arrangement designed to provide such
benefits to Purchaser, without incurring any financial obligation to Seller or
any of its Affiliates, and (iii) enforce, at the request and for the account of
Purchaser, any rights of Seller arising from any
35
such Contract against the other party or parties to such Contract (including the
right to elect to terminate in accordance with the terms thereof upon the advice
of Purchaser). Notwithstanding any provision to the contrary contained herein,
Purchaser will perform or pay for the benefit of the other party or parties
thereto the obligations of Seller under or in connection with any such Contract
and will indemnify and hold Seller and its Affiliates harmless from any
Indemnifiable Losses relating to, resulting from or arising out of any failure
by Purchaser so to perform or pay. Purchaser will comply with all reasonable
requests of Seller for cooperation in connection with the performance of
Seller's obligations under this Section 6.13.
6.14. Further Actions. Upon the terms and subject to the conditions
hereof, each of the parties hereto agrees to use its best efforts to take or
cause to be taken all actions and to cause to be done all things necessary,
proper and advisable to consummate the transactions contemplated by this
Agreement and the other documents necessary to close this transaction, and shall
use its best efforts to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations and filings in connection therewith. In
addition, Seller covenants and agrees that it will take all actions and execute
and deliver all documents and instruments necessary to assist Purchaser in the
removal of all liens whether set forth in Schedule 2.1.6 or not, after Purchaser
has satisfied its obligations (pursuant to its assumption of Seller's
liabilities) for the underlying indebtedness of such liens.
6.15. Receipt of Funds. After the Closing Date, each of Purchaser,
Seller and Parent shall segregate any monies or other amounts paid to either of
them in respect of receivables or assets that belong to the other party whether
received in a lock box account or otherwise and each party shall pay over and
remit to the other party promptly any such monies and amounts after receipt
thereof. Each of Purchaser, Seller and Parent shall take all reasonable actions,
including the timely notices to third parties to assure that the covenants set
forth in this Section are faithfully and timely fulfilled.
6.16 Discharge of Liabilities. Purchaser will pay and discharge in due
course after the Closing Date all Assumed Liabilities and Seller will pay and
discharge in due course after the Closing Date all Excluded Liabilities.
VII. MISCELLANEOUS PROVISIONS
7.1. Notices. All notices and other communications required or
permitted hereunder will be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been duly given when delivered in person or
when dispatched by telegram or electronic facsimile transfer (confirmed in
writing by mail simultaneously dispatched) or one business day after having been
dispatched by a nationally recognized overnight courier service to the
appropriate party at the address specified below:
36
(a) If to Purchaser, to:
Mestek, Inc.
000 Xxxxx Xxx Xxxxxx
Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: R. Xxxxx Xxxxx
Senior Vice President
and General Counsel
(b) If to Seller or to Parent, to:
CTS Corporation
000 Xxxx Xxxxxxxxx
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxx
Senior Vice President,
Secretary and General Counsel
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
7.2. Expenses. Except as otherwise expressly provided herein, (a)
Parent or Seller will pay or cause to be paid all expenses incurred by Seller or
any of its Affiliates incident to this Agreement and in preparing to consummate
and consummating the transactions provided for herein and (b) Purchaser will pay
any expenses incurred by it or any of its Affiliates incident to this Agreement
and in preparing to consummate and consummating the transactions provided for
herein.
7.3. Successors and Assigns. (a) Subject to Sections 7.3(b) and (c),
this Agreement will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but will not be
assignable or delegatable by any party without the prior written consent of the
other parties hereto.
(b) Nothing in this Agreement is intended to limit Purchaser's ability
to sell or to Transfer the Acquired Assets and the Assumed Liabilities following
the Closing Date; provided, however, that any such sale or Transfer will not
result in a termination of any of Purchaser's covenants, duties,
responsibilities, obligations or liabilities hereunder, including without
limitation under Articles V and VI, and provided further, that the Person
acquiring the Acquired Assets and Assumed Liabilities pursuant to such sale or
Transfer will assume all of such covenants, duties, responsibilities,
obligations and liabilities in a written instrument satisfactory to Seller.
(c) Notwithstanding anything contained in this Agreement to the
contrary, upon notice to Purchaser, Parent and Seller may assign or delegate any
or all of their rights under this
37
Agreement to any of their Affiliates, or to any Person that acquires all or
substantially all of the assets or voting stock of Parent or Seller.
7.4. Waiver. Either Purchaser or Seller by written notice to the other
may (a) extend the time for performance of any of the obligations or other
actions of the other under this Agreement, (b) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement, (c)
waive compliance with any of the conditions or covenants of the other contained
in this Agreement, or (d) waive or modify performance of any of the obligations
of the other under this Agreement. Except as provided in the immediately
preceding sentence, no action taken pursuant to this Agreement will be deemed to
constitute a waiver of compliance with any representations, warranties or
covenants contained in this Agreement. Any waiver of any term or condition will
not be construed as a subsequent waiver of the same term or condition, or a
waiver of any other term or condition of this Agreement. No failure or delay of
any party in asserting any of its rights hereunder will constitute a waiver of
any such rights.
7.5. Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) supersedes any other agreement, whether written or oral, that
may have been made or entered into by any party or any of their respective
Affiliates (or by any director, officer or representative thereof) prior to the
date hereof relating to the matters contemplated hereby, other than the
Confidentiality Agreement, which will survive the execution, delivery or
termination of this Agreement. This Agreement (together with the Schedules and
Exhibits hereto) and the Confidentiality Agreement constitute the entire
agreement by and among the parties hereto and there are no agreements or
commitments by or among such parties or their Affiliates except as expressly set
forth herein and therein.
7.6. Amendments, Supplements, Etc. This Agreement may be amended or
supplemented at any time by additional written agreements as may mutually be
determined by Purchaser and Seller to be necessary, desirable or expedient to
further the purposes of this Agreement, or to clarify the intention of the
parties hereto.
7.7. Rights of the Parties. Except as provided in Article V or in
Section 7.3, nothing expressed or implied in this Agreement is intended or will
be construed to confer upon or give any Person other than the parties hereto and
their respective Affiliates any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby.
7.8. Further Assurances. From time to time, as and when requested by
either Purchaser or Seller, the other will execute and deliver, or cause to be
executed and delivered, all such documents and instruments as may be reasonably
necessary to consummate the transactions contemplated by this Agreement. Without
limitation of the foregoing, Seller agrees to cooperate with Purchaser with
respect to making reasonably necessary modifications to the application for the
Title V environmental permit (No. 13-0579260-01) filed by Seller on October 18,
1996, and to execute such documents as may be necessary, in order to facilitate
the transfer of the Title V application to Purchaser.
38
7.9. Applicable Law; Jurisdiction. (a) This Agreement and the legal
relations among the parties hereto will be governed by and construed in
accordance with the substantive Laws of the State of Indiana, without giving
effect to the principles of conflict of laws thereof.
(b) Each party irrevocably submits to the exclusive jurisdiction of
either the United States District Court for the Northern District of Indiana,
for purposes of any action, suit or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Purchaser hereby irrevocably
designates, appoints and empowers the person named in Section 7.1(a), and each
of Parent and Seller hereby irrevocably designates, appoints and empowers the
person named in Section 7.1(b), in each case as its true and lawful agent and
attorney-in-fact in its name, place and stead to receive and accept on its
behalf service of process in any action, suit or proceeding in Indiana with
respect to any matters as to which it has submitted to jurisdiction as set forth
in the immediately preceding sentence.
(c) With respect to any dispute, claim or controversy between the
parties arising out of or relating to this Agreement, the parties agree that
they will attempt in good faith to resolve the matter through negotiation. Upon
mutual agreement of the parties, the matter may be submitted to any mutually
agreed upon mediation service for mediation. Mediation shall be commenced by
providing to the mediation service a joint, written request for mediation,
setting forth the subject of the dispute and the relief requested. The parties
will cooperate with the mediation service and with one another in selecting a
neutral mediator and in scheduling the mediation proceedings. The parties
covenant that they will use commercially reasonable efforts in participating in
the mediation. The parties agree that the mediator's fees and expenses and the
costs incidental to the mediation will be shared equally between the parties.
The parties further agree that all offers, promises, conduct and statements,
whether oral or written, made in the course of the mediation by any of the
parties, their agents, employees, experts and attorneys, and by the mediator and
any employees of the mediation service, are confidential, privileged and
inadmissible for any purpose, including impeachment, in any litigation or other
proceeding involving the parties, provided that evidence that is otherwise
admissible or discoverable shall not be rendered inadmissible or
non-discoverable as a result of its use in the mediation. Either party may
commence a civil action with respect to the matter submitted to mediation at any
time after the completion of the initial mediation session, or ninety (90) days
after the date of filing the written request for mediation, whichever occurs
first.
7.10. Titles and Headings. Titles and headings to Sections herein are
inserted for convenience of reference only, and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
7.11. Certain Interpretive Matters and Definitions. (a) Unless the
context otherwise requires, (i) all references to Sections or Schedules are to
Sections or Schedules of or to this Agreement, (ii) each term defined in this
Agreement has the meaning assigned to it, (iii) each accounting term not
otherwise defined in this Agreement has the meaning assigned to it in accordance
with GAAP, (iv) "or" is disjunctive but not necessarily exclusive, (v) words in
the singular include the plural and vice versa, (vi) the terms "subsidiary" and
"Affiliate" have the meanings given to those terms in Rule 12b-2 of Regulation
12B under the Securities Exchange Act of 1934, as amended, (vii) all references
to "$" or dollar amounts will be to lawful
39
currency of the United States of America, and (viii) "Knowledge of Seller" means
the actual knowledge of the persons listed on Schedule 7.11 (Purchaser hereby
expressly acknowledging that such persons are under no obligation to conduct any
particular inquiry for purposes of this Agreement).
(b) No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
DYNAMICS CORPORATION OF AMERICA
By: /S/ XXXXXXXX X. XXXXX
Xxxxxxxx X. Xxxxx
Vice President and Secretary
MESTEK, INC.
By: /S/ XXXXXXX X. XXXX
Xxxxxxx X. Xxxx
Senior Vice President - Finance
40
JOINDER
Parent joins in this Agreement solely to guarantee the due and punctual
performance by Seller of its obligations, covenants and agreements under this
Agreement; provided that, if the Closing occurs, this guarantee will terminate
and be of no further force and effect from and after the Closing. Parent hereby
represents and warrants to Purchaser than (a) Parent is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Indiana, (b) it has requisite corporate power to execute and deliver this
Agreement and to perform the transactions contemplated hereby to be performed by
it, (c) all necessary corporate action required to be taken under applicable
Indiana Law for the due authorization of the execution and delivery by Parent of
this Agreement and the performance by it of the transactions contemplated hereby
to be performed by it has been duly taken by Parent, (d) this Agreement has been
duly executed and delivered by Parent and, assuming the due execution and
delivery of this Agreement by Purchaser and Seller, constitutes a valid and
binding obligation of Parent, is duly enforceable according to its terms, and
(e) the execution and delivery of this Agreement does not, and, assuming that
the consents and approvals described in the last sentence of Section 2.2.2 have
been obtained, the performance by Parent of the transactions contemplated
thereby to be performed by it will not result in any violation of any applicable
Law of any Governmental Entity. The foregoing guarantee is absolute and
unconditional, is not subject to any defense or offset, lack of consideration or
similar defense and, in connection herewith, Parent hereby waives any suretyship
defenses which it otherwise might have or assert in the event of enforcement
hereof.
CTS CORPORATION
By: /S/ XXXXXXXX X. XXXXX
Xxxxxxxx X. Xxxxx
Senior Vice President, Secretary
and General Counsel
41
List of Schedules
Schedule 1.2(a)(iii) Fixed Assets
Schedule 1.2(a)(ix) Permits
Schedule 1.2(a)(x) Accounts Receivable
Schedule 1.3(a)(ii) Accounts Payable and Accrued Expenses
Schedule 1.3(a)(v) Expenses Incurred on Purchaser's Behalf
Schedule 1.3(b)(v) Excluded Contracts
Schedule 1.3(b)(vi) Excluded Pending Litigation and Claims
Schedule 1.4(a) Net Working Capital Form Balance Sheet
Schedule 2.1.2 Seller Consents and Approvals/Conflicts
Schedule 2.1.3 Balance Sheet
Schedule 2.1.4 Conduct of Business
Schedule 2.1.5 Compliance with Laws
Schedule 2.1.6 Liens
Schedule 2.1.7 Leased Real Property
Schedule 2.1.8 Insurance
Schedule 2.1.9 Intellectual Property
Schedule 2.1.10 Litigation
Schedule 2.1.11 Contracts
Schedule 2.1.12.1 Employee Benefit Plans
Schedule 2.1.12.6 Multiemployer Plans
Schedule 2.1.13 Taxes
Schedule 2.1.14 Environmental Matters
Schedule 2.1.23 Express Warranty Non-Compliance
Schedule 2.2.2 Purchaser Consents and Approvals/Conflicts
Schedule 3.5(f) Operation of the Business
Schedule 6.1(d) Employee Listing
Schedule 6.10(d) Purchase Price Allocation
Schedule 7.11 Definition of Knowledge
List of Exhibits
Exhibit 4.2.2 Xxxx of Sale
Exhibit 4.2.3 Assignment Agreement
Exhibit 4.2.4 Non-Competition Agreement
Exhibit 4.3.2 Assumption Agreement
Exhibit 4.3.3(a) Real Property Purchase Agreement
Exhibit 4.3.3(b) Guaranty
Exhibit 5.3(c) Insurance Policy
Exhibit 6.10(a) California Resale Certificate
