[Execution Copy]
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ASSET PURCHASE AGREEMENT
among
MAGNETEK, INC.,
MAGNETEK CONTROLS, INC.
and
CONTROLS ACQUISITION CORPORATION
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Dated as of June 17, 1994
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SALE OF MAGNETEK CONTROLS, INC.
AND THE MAGNETEK TRANSDUCERS DIVISION
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TABLE OF CONTENTS
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PAGE
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ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . . . 7
ARTICLE II CLOSING; PURCHASE PRICE ADJUSTMENT. . . . . . . . . . . . 7
2.1 Sale and Transfer of the Assets . . . . . . . . . . . . . 7
2.2 Assets Not Transferred. . . . . . . . . . . . . . . . . . 9
2.3 Assumed Liabilities . . . . . . . . . . . . . . . . . . . 10
2.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.5 Purchase Price Adjustment . . . . . . . . . . . . . . . . 14
2.6 Tax Allocation. . . . . . . . . . . . . . . . . . . . . . 17
2.7 Sales and Use Tax . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . 18
3.1 Buyer's Obligation. . . . . . . . . . . . . . . . . . . . 18
3.2 Sellers' Obligation . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . 21
4.1 Authority; Corporate Matters;
No Conflicts; Governmental Consents . . . . . . . . . . . 21
4.2 Financial Statements; Absence of Changes. . . . . . . . . 22
4.3 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.4 Assets Other than Real Property Interests . . . . . . . . 25
4.5 Real Property . . . . . . . . . . . . . . . . . . . . . . 26
4.6 Intellectual Property . . . . . . . . . . . . . . . . . . 27
4.7 Contracts . . . . . . . . . . . . . . . . . . . . . . . . 28
4.8 Litigation; Decrees . . . . . . . . . . . . . . . . . . . 29
4.9 Employee and Related Matters. . . . . . . . . . . . . . . 30
4.10 Environmental Matters . . . . . . . . . . . . . . . . . . 30
4.11 Employee and Labor Relations. . . . . . . . . . . . . . . 31
4.12 Assets Owned by Affiliates. . . . . . . . . . . . . . . . 31
4.13 Compliance with Law; Governmental Authorizations. . . . . 32
4.14 Assets of the Business. . . . . . . . . . . . . . . . . . 32
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . 32
5.1 Authority; No Conflicts; Governmental Consents. . . . . . 32
5.2 Actions and Proceedings, Etc. . . . . . . . . . . . . . . 33
5.3 Inconsistent Representations. . . . . . . . . . . . . . . 33
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ARTICLE VI COVENANTS OF SELLERS. . . . . . . . . . . . . . . . . . . 34
6.1 Access. . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.2 Ordinary Conduct. . . . . . . . . . . . . . . . . . . . . 35
6.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 35
6.4 Title Commitment. . . . . . . . . . . . . . . . . . . . . 35
6.5 Acquisition Proposals . . . . . . . . . . . . . . . . . . 36
6.6 Accounts Receivable . . . . . . . . . . . . . . . . . . . 36
6.7 Disclosure of Information; Non-Competition. . . . . . . . 37
6.8 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.9 Removal of Liens. . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VII COVENANTS OF BUYER. . . . . . . . . . . . . . . . . . . . 39
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . 39
7.2 Accounts Receivable . . . . . . . . . . . . . . . . . . . 39
7.3 Excluded Assets . . . . . . . . . . . . . . . . . . . . . 40
7.4 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VIII MUTUAL COVENANTS. . . . . . . . . . . . . . . . . . . . . 40
8.1 HSR Filings; Permits and Consents . . . . . . . . . . . . 40
8.2 Cooperation . . . . . . . . . . . . . . . . . . . . . . . 41
8.3 Publicity . . . . . . . . . . . . . . . . . . . . . . . . 42
8.4 Reasonable Efforts. . . . . . . . . . . . . . . . . . . . 42
8.5 Records . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.6 Access to Former Business Records . . . . . . . . . . . . 42
8.7 Use of Trademark and Trade Names. . . . . . . . . . . . . 43
8.8 Required Modifications or Replacements of Products. . . . 43
8.9 Assumed Litigation. . . . . . . . . . . . . . . . . . . . 44
8.10 Waiver of Bulk Sales Law Compliance . . . . . . . . . . . 45
8.11 Further Instruments and Assurances. . . . . . . . . . . . 45
ARTICLE IX EMPLOYEE BENEFIT MATTERS. . . . . . . . . . . . . . . . . 46
9.1 Employee Retention. . . . . . . . . . . . . . . . . . . . 46
9.2 Employee Benefit Plans. . . . . . . . . . . . . . . . . . 46
9.3 Vacation and Holiday Pay. . . . . . . . . . . . . . . . . 47
9.4 Access to Information . . . . . . . . . . . . . . . . . . 47
9.5 No Third Party Beneficiary. . . . . . . . . . . . . . . . 47
ARTICLE X INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 48
10.1 Indemnification by Sellers. . . . . . . . . . . . . . . . 48
10.2 Indemnification by Buyer. . . . . . . . . . . . . . . . . 48
10.3 Indemnification for Environmental Matters.. . . . . . . . 49
10.4 Losses Net of Insurance, Etc. . . . . . . . . . . . . . . 50
10.5 Termination of Indemnification. . . . . . . . . . . . . . 51
10.6 Procedures Relating to Indemnification (Other than
for Tax Claims) . . . . . . . . . . . . . . . . . . . . . 51
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10.7 Procedures Relating to Indemnification of Tax Claims. . . 53
10.8 Survival of Representations . . . . . . . . . . . . . . . 54
10.9 Parties Free to Refer to Obligations of the Other . . . . 54
10.10 Interest. . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE XI GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . 54
11.1 Benefits of Agreement; Assignment . . . . . . . . . . . . 54
11.2 No Third-Party Beneficiaries. . . . . . . . . . . . . . . 55
11.3 Termination . . . . . . . . . . . . . . . . . . . . . . . 55
11.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 56
11.5 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . 56
11.6 Amendment, Modification and Waiver. . . . . . . . . . . . 57
11.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.8 Interpretation; Exhibits and Schedules. . . . . . . . . . 58
11.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 58
11.10 Entire Agreement. . . . . . . . . . . . . . . . . . . . . 58
11.11 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.12 Severability. . . . . . . . . . . . . . . . . . . . . . . 59
11.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . 59
EXHIBIT A Form of Bulk Xxxx of Sale, Assignment and
Assumption Agreement. . . . . . . . . . . . . . . . . . . 1
EXHIBIT B Supply Agreement. . . . . . . . . . . . . . . . . . . . . 1
EXHIBIT C Escrow Agreement. . . . . . . . . . . . . . . . . . . . . 1
EXHIBIT D Form of Opinion of Xxxxxx, Xxxx & Xxxxxxxx. . . . . . . . 1
EXHIBIT E Form of Opinion of General Counsel of MagneTek, Inc.. . . 1
EXHIBIT F Form of Opinion of X'Xxxxxxxx Graev & Karabell. . . . . . 1
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SCHEDULES
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Schedule 2.1(a) Owned Property
Schedule 2.1(b) Leased Property
Schedule 2.6 Purchase Price Allocation [post signing]
Schedule 4.1(b) Jurisdictions where the Business does business
Schedule 4.1(c) Capital Stock Owned By Controls
Schedule 4.1(d) Seller Consents
Schedule 4.2(a) Financial Statements
Schedule 4.2(b) Additional Liabilities
Schedule 4.2(c) Changes since December 31, 1993
Schedule 4.3 Taxes
Schedule 4.4 Liens
Schedule 4.5 Real Property and Leases
Schedule 4.6 Intellectual Property
Schedule 4.7 Contracts
Schedule 4.8 Litigation
Schedule 4.9(a),(b) Employee and Related Matters
Schedule 4.11 Labor Matters
Schedule 4.12 Assets Owned by Affiliates
Schedule 4.13 Compliance with Law
Schedule 5.1(b) Conflicts
Schedule 6.2 Exceptions to Ordinary Course
Schedule 6.7 Products Covered by Noncompete Agreement
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of June 17, 1994, between MAGNETEK,
INC., a Delaware corporation ("MagneTek"), MAGNETEK CONTROLS, INC., a Delaware
corporation ("Controls"; and together with MagneTek, the "Sellers") and CONTROLS
ACQUISITION CORPORATION, a Delaware corporation (the "Buyer").
MagneTek, through its MagneTek Transducers Division (the "Division"),
and Controls are engaged in the business (the "Business") of developing,
manufacturing, selling and distributing various products, including rotary cam
limit switches, programmable limit switches, tank monitoring systems, industrial
brakes, pressure and position transducers, accelerometers, programmable logic
controllers and other products related to the foregoing. The parties hereto
desire that the Sellers sell, transfer, convey and assign to the Buyer all of
the assets, properties, interests in properties and rights used primarily in,
held for use primarily in or otherwise relating to the Business, and that the
Buyer purchase and acquire the same, subject to the assumption by the Buyer of
certain liabilities and obligations of the Sellers relating to the Business,
upon the terms and subject to the conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Affiliate" has the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act by the SEC, as in effect on the date hereof.
"Assets" has the meaning set forth in Section 2.1.
"Assigned Contracts" has the meaning set forth in Section 2.1(f).
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Assumed Litigation" has the meaning set forth in Section 2.3(b).
"Xxxx of Sale, Assignment and Assumption Agreement" means a Xxxx of
Sale, Assignment and Assumption Agreement in substantially the form attached
hereto as Exhibit A.
"Business" has the meaning set forth in the preamble.
"Business Day" means a day other than a Saturday or a Sunday or other
day on which commercial banks in New York are authorized or required by law to
close.
"Business Employee" means any individual actively employed by either
Seller working primarily for the Business on the Closing Date, including any
such employee on vacation or illness leave on such date.
"Business Property" has the meaning set forth in Section 4.5 hereto.
"Claim" means any claim, demand, assessment, action, arbitration,
suit, proceeding, investigation, cause of action, litigation, judgment, order or
decree.
"Closing Balance Sheet" has the meaning set forth in Section 2.5.
"Closing Date" means the day on which the Closing occurs pursuant to
Section 2.4.
"Closing Net Assets" has the meaning set forth in Section 2.5(a).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Confidential Information" has the meaning set forth in Section 6.7.
"Contract" means any contract, agreement, instrument, license, lease,
sales or purchase order or other legally binding commitment or undertaking,
whether written or oral, to which Controls is a party or to which MagneTek or
the Business is a party and relating primarily to the Business.
"Contractual Obligation" means, as to any Person, any provision of any
note, bond or security issued by such Person or of any mortgage, indenture, deed
of trust, lease, license, franchise, contract, agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property or assets is subject.
2
"December Balance Sheet" means the unaudited balance sheet of the
Business as of December 31, 1993, attached hereto as part of Schedule 4.2, which
shows the adjustments made to the Interim Balance Sheet to arrive at the
December 31 Balance Sheet.
"Employee Benefit Arrangements" means each and all pension,
supplemental pension, accidental death and dismemberment, life and health
insurance and benefits (including medical, dental, vision and hospitalization),
short and long-term disability, savings, bonus, deferred compensation, incentive
compensation, holiday, vacation, severance pay, salary continuation, sick pay,
sick leave, tuition refund, service award, company car, scholarship, relocation,
patent award, fringe benefit, flexible spending account programs and other
employee benefit arrangements, plans, contracts or policies or practices
providing employee or executive compensation or benefits to Business Employees,
other than the Employee Benefit Plans.
"Employee Benefit Plans" means each and all "employee benefit plans,"
as defined in Section 3(3) of ERISA, maintained or contributed to by Sellers or
in which Sellers participate or participated and which provides benefits to
Business Employees, including (i) any such plans that are "employee welfare
benefit plans" as defined in Section 3(1) of ERISA and (ii) any such plans that
are "employee pension benefit plans" as defined in Section 3(2) of ERISA.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Resource Conservation
and Recovery Act of 1976, as amended, and any other applicable statutes,
regulations, rules, ordinances or codes or any order, decree, consent decree or
similarly binding instrument from a court or other Governmental Authority which
relate to the protection of human health or the environment, including but not
limited to, any of the foregoing regulating the presence, manufacture, transfer,
generation, production, refinement, pumping, processing, distribution, use,
treatment, storage, transport, handling, abatement, remediation, clean up or
removal of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Escrow Agent" means Commerce Escrow Agent (or other party serving as
successor escrow agent under the Escrow Agreement).
"Escrow Agreement" means an escrow agreement to be entered into by
Sellers and Buyer on the Closing Date relating
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to the escrow of $2,300,000 of the purchase price pending final determination
thereof in substantially the form of Exhibit C hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations of the SEC promulgated from
time to time thereunder.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.3.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means any nation or government, any state,
local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Hazardous Material" means any substance: (i) which is defined as a
hazardous waste, hazardous substance, pollutant or contaminant under any
Environmental Law, (ii) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is
regulated by any Governmental Authority, or (iii) which contains gasoline,
diesel fuel or other petroleum hydrocarbons.
"Hired Employees" has the meaning set forth in Section 9.1.
"Knowledge of Sellers" with reference to any of the representations
and warranties of Sellers means (i) the actual knowledge of the following
individuals: Xxxxx X. Xxxxxxx, Xxxx X. Xxxxxxx, Xx., Xxxxxx X. Miley, Xxxxxx
Xxxxxxxx, Xxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxx Xxxxxxx and Xxxx
Xxxxxxxxxx; PROVIDED, HOWEVER, that any such individual shall be deemed to have
had actual knowledge of any matter that would have been apparent to a reasonable
person of comparable education, background and responsibilities under the
circumstances and (ii) in addition, insofar as either Xxxxx Xxxxxxx or Xxxxxxx
Xxxxxxxxx (the "Business Representatives") has reviewed or prepared, and
provided written materials to MagneTek for use in connection with this
Agreement, the actual knowledge of either such Business Representative;
PROVIDED, HOWEVER, that in the absence of actual knowledge (including deemed
actual knowledge) of either Seller as defined in the preceding clause (i) to the
contrary on any subject covered
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thereby, such written materials shall be conclusive evidence as to the knowledge
of Sellers.
"Indemnified Person" means, with respect to any Loss, the Person
seeking indemnification hereunder.
"Indemnifying Person" means, with respect to any Loss, the Person from
whom indemnification is being sought hereunder.
"Intellectual Property Rights" has the meaning set forth in
Section 4.6.
"Interim Balance Sheet" has the meaning set forth in Section 4.2.
"Lien" means any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other), option, right of first refusal or right
of first offer or other security interest or agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement or any financing lease having substantially the same
economic effect as any of the foregoing).
"Loss" means any loss, cost, liability, claim, damage, or expense
(including reasonable attorneys' fees and disbursements and the costs of
investigation).
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, results of operations, property, assets, liabilities or
condition (financial or other) of the Business, taken as a whole or (b) the
ability of Sellers to consummate the Transactions.
"Owned Property" has the meaning set forth in Section 2.1(a).
"Permits" has the meaning set forth in Section 4.13.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Records" has the meaning set forth in Section 2.1(h).
"Required Modification" means, with respect to any product, a
modification, improvement or enhancement which is (a) required by any
Requirement of Law or (b) otherwise necessary or advisable in Sellers'
reasonable discretion to permit Sellers to meet any duty or obligation owing by
Sellers to remedy defects or hazards in such products or to provide any warning
with respect to any such defects or hazards. Required
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Modification shall in no event mean or include any modification,
improvement or enhancement required by any written warranty covering the
relevant product.
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, statute, treaty, rule, regulation, ordinance, order,
decree, consent decree or similar instrument or determination of an arbitrator
or a court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or assets or to which such
Person or any of its property or assets is subject.
"SEC" means the Securities and Exchange Commission.
"Sellers" has the meaning set forth in the preamble hereto.
"Sellers' Plans" means each and all Employee Benefit Plans and
Employee Benefit Arrangements sponsored or maintained by Sellers under which any
Business Employee participates or is entitled to receive benefits.
"Specifically Excluded Liabilities" has the meaning set forth in
Section 2.3.
"Supply Agreement" means the agreement between Buyer and Sellers
relating to the supply of certain components relating to the Allispede product
line, in form and substance reasonably satisfactory to Buyer and Sellers,
containing the terms set forth on the summary attached hereto as Exhibit B.
"Tax" or "Taxes" means, with respect to any Person, any federal,
state, local or foreign net income, gross income, gross receipts, sales, use, ad
valorem, value-added, capital, unitary, intangible, franchise, profits, license,
withholding, payroll, employment, unemployment, excise, severance, stamp,
transfer, occupation, premium, property or windfall profit tax, custom, duty or
other tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax or additional
amount imposed by any jurisdiction or other taxing authority, on such Person.
"Tax Returns" has the meaning set forth in Section 4.3.
"Transaction Documents" means (i) this Agreement, (ii) the Xxxx of
Sale, Assignment and Assumption Agreement, (iii) the special warranty deeds of
conveyance of Owned Property and the other instruments of conveyance furnished
pursuant to
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Section 2.4, (iv) the Escrow Agreement and (v) the Supply Agreement.
"Transactions" means the transactions contemplated by the Transaction
Documents.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Terms defined in this Agreement in Sections other than
Section 1.1 shall have the meanings as so defined when used in this Agreement.
(b) As used herein, accounting terms not defined or to the
extent not defined, shall have the respective meanings given to them under GAAP.
(c) Unless express reference is made to Business Days,
references to days shall be to calendar days.
ARTICLE II
CLOSING; PURCHASE PRICE ADJUSTMENT
2.1 SALE AND TRANSFER OF THE ASSETS. Subject to the terms and
conditions of this Agreement, on the Closing Date Sellers will sell, convey,
transfer, assign and deliver to Buyer all of Sellers' right, title and interest
in, to and under the assets, properties, interests in properties and rights of
Sellers of every kind, nature and description, whether real, personal or mixed,
tangible or intangible, used primarily in, held for use primarily in or
otherwise primarily relating to the Business (other than the Excluded Assets),
wherever located, as the same shall exist on the Closing Date (the "Assets"),
including, without limitation, the following:
(a) the real property (including all buildings, improvements and
structures located thereon and all rights, privileges, easements and
appurtenances thereto) located at the Xxxxxxx and Xxxx facilities in Michigan
(respectively, the "Clawson Facility" and the "Xxxx Facility") described on
Schedule 2.1(a) hereto (the "Owned Property");
(b) the leasehold interest relating to the facility used by the
Business at 000 Xxxx Xxxxxx, Xxxx Xxxxxx, Xxxxxxxxxx (the "Simi Valley
Facility") listed on Schedule 2.1(b) (the "Leased Property");
(c) all tangible personal property, including, without
limitation, all fixtures, furnishings, furniture, office supplies, vehicles,
rolling stock, tools, machinery, equipment, computer equipment (including
software) (collectively, including the fixtures, the "Equipment");
7
(d) all inventory, including without limitation, raw materials,
work-in-process, finished goods, packaging materials, spare parts and supplies
(the "Inventory");
(e) all Intellectual Property Rights, including such rights as
to the names "Gemco," "B/W Controls," "Industrial Brake Products," "Rayelco" and
the trademarks, trade names, patents, service marks, copyrights (whether
registered or unregistered) and pending applications for the foregoing listed on
Schedule 4.6;
(f) all Contracts (including but not limited to all Contracts
listed on Schedule 4.7, except to the extent indicated on such Schedule 4.7, and
all Contracts entered into by the Business through the Closing Date) (the
"Assigned Contracts");
(g) all transferable Permits used primarily in or relating
primarily to the Business or the Assets;
(h) all books and records either in original or photostatic form
(except in the case of computer software, which shall be in the form in which it
is used in the Business) (including copies, to the extent segregatable from
other MagneTek records and/or located at the Xxxxxxx, Xxxx or Simi Valley
Facilities, of historical accounting, financial and Tax records), Controls'
proprietary accounting and reporting formats, data bases, systems and
procedures, plans and specifications, surveys and title policies relating to the
Owned Property, sales literature, product information, engineering drawings and
records, employment records and files and all other information and/or data
related to or used by Sellers primarily in connection with the Assets and the
operation of the Business (the "Records");
(i) all insurance proceeds paid or payable by any insurance
provider, other than Sellers or any Affiliate of Sellers, for any Asset that is
destroyed or damaged after the date hereof and prior to the Closing;
(j) all accounts receivable;
(k) all prepaid expenses (other than prepaid Taxes, except
prepaid property Taxes pertaining to post-Closing Date periods), advances and
deposits (including utility deposits);
(l) all telephone, telex and telecopier numbers and all existing
listings in all telephone books and directories;
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(m) all warranties and guaranties received from vendors,
suppliers or manufacturers with respect to the Assets or the Business;
(n) all transferable rights (including transferable experience
ratings) with respect to unemployment and workers' compensation insurance
reserves, in each case relating to Business Employees who become Hired
Employees; and
(o) all goodwill appurtenant to the foregoing Assets.
Anything contained in this Agreement to the contrary notwithstanding, but
subject to the provisions of Section 2.2, to the extent that any asset,
property, interest in property or right used primarily in, held for use
primarily in or otherwise primarily relating to the Business is owned by any
Affiliate of either Seller, such asset, property, interest in property or right
shall be deemed to be an Asset for all purposes of this Agreement, and Sellers
shall do, and shall cause any such other Affiliate of any Seller to do, all
things required to be done to effect the transfer thereof as if such Asset were
referred to above.
2.2 ASSETS NOT TRANSFERRED. Notwithstanding anything herein to the
contrary, the following assets are not included in the Assets and shall be
retained by Sellers (the "Excluded Assets"):
(a) all cash and cash equivalent items (except as described in
Section 2.1(i) and (k), including, without limitation, checking accounts, bank
accounts, certificates of deposit, time deposits, securities, and the proceeds
of accounts receivable, including uncashed checks in payment thereof, received
by either Seller on or prior to the Closing Date; PROVIDED, HOWEVER, that
accounts receivable on the Closing Balance Sheet do not include any such
accounts receivable as to which Seller has received proceeds, to the extent of
such proceeds;
(b) all rights, properties, and assets which have been used or
held for use in connection with the Business and which shall have been
transferred (including transfers by way of sale) or otherwise disposed of prior
to the Closing, provided such transfers and disposals shall have been in the
ordinary course of the business of the Business as conducted at the date hereof;
(c) rights to or claims for refunds or rebates of Taxes and
other governmental charges for periods ending on or prior to the Closing Date
and the benefit of net operating loss
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carryforwards, carrybacks or other credits of Sellers, whether or not
attributable to the Business;
(d) Claims or rights against third parties arising from breaches
of any of the Assigned Contracts (other than those described in Section 2.1(m))
on or prior to the Closing Date; PROVIDED, HOWEVER, that any rights of
indemnification, contribution or reimbursement that may exist under the Assigned
Contracts in respect of Excluded Assets or Excluded Liabilities hereunder shall
also be Excluded Assets regardless of the period to which they pertain;
(e) except as set forth in Sections 2.1(i) and 2.1(n), all
insurance policies and rights thereunder, including but not limited to, rights
to any cancellation value as of the Closing Date;
(f) proprietary or confidential business or technical
information, records and policies that relate generally to either Seller and are
not used primarily in, held for use primarily in or otherwise primarily relating
to the Business, including, without limitation, organization manuals and
strategic plans;
(g) subject to the limited rights granted in Section 8.7, all
"MagneTek" marks, including any and all trademarks or service marks, trade
names, slogans or other like property relating to or including the name
"MagneTek," the xxxx MagneTek or any derivative thereof and the MagneTek logo or
any derivative thereof, the name "MagneTek Controls"; and MagneTek's proprietary
computer programs or other software not primarily used in the Business,
including but not limited to Sellers' proprietary data bases, accounting and
reporting formats, systems and procedures;
(h) all Records relating to pending lawsuits (other than any
included in the Assumed Liabilities) to which either Seller is a party and which
involve the Business; and
(i) all other assets used primarily in connection with the
Sellers' corporate functions (including but not limited to the corporate
charter, taxpayer and other identification numbers, seals, minute books and
stock transfer books), whether or not used for the benefit of the Business.
2.3 ASSUMED LIABILITIES. On the Closing Date, Buyer shall execute
and deliver to Sellers the Xxxx of Sale, Assignment and Assumption Agreement
pursuant to which Buyer shall assume and agree to pay, perform and discharge
when due, only the following liabilities and obligations of Sellers pertaining
to the Assets and the Business (collectively, the "Assumed Liabilities"):
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(a) all of the accounts payable, accrued pay, other accrued
expenses and any other items accrued or otherwise reflected as "current
liabilities" on the Closing Balance Sheet in accordance with Section 2.5;
(b) all liabilities and obligations of each Seller which pertain
to or are to be performed during the period following the Closing Date and which
arise under any of the Assigned Contracts (i) listed on Schedule 4.7, (ii) not
required to be listed on Schedule 4.7 either (A) pursuant to the provisions of
Section 4.7 or (B) because they were entered into after the date hereof and on
or before the Closing Date, but in each case only to the extent effectively
assigned and transferred to Buyer pursuant to the provisions hereof or the
benefits of which are provided to Buyer pursuant to Section 8.1(c) and subject
to the subsequent assignment thereof pursuant to Section 8.1(c);
(c) the liabilities expressly assumed by Buyer in Section 2.7,
Section 8.9, Article IX and Section 11.4 of this Agreement, and any other
liabilities expressly assumed by Buyer hereunder;
(d) all liabilities and obligations under open purchase orders
that were entered into by Seller on behalf of the Business and which provide for
the delivery of goods or services (and in either case for payment) subsequent to
the Closing Date;
(e) all obligations and liabilities for Taxes, utilities, gas
and other services arising out of, or in connection with, or attributable to the
Business for any periods after the Closing Date, including the Taxes covered by
Section 2.7;
(f) all liabilities for (i) warranty claims made after the
Closing Date for service, repair, replacement and similar work pursuant to
Sellers' written warranties with respect to products sold or services provided
before the Closing Date, unless written notice of such claim has been delivered
to Sellers within the two-year period following the Closing Date and the
warranty reserve on the Closing Balance Sheet has been exhausted (based upon
expenses at shop level cost (direct materials plus labor)); (ii) workers'
compensation claims relating to injury occurring after the Closing Date; and
(iii) warranty and product liability claims made after the Closing Date for
injuries, property damage or other Losses arising after the Closing Date;
(g) all liabilities and obligations (fixed or contingent, known
or unknown, matured or unmatured, whether arising by operation of law, by
contract or otherwise) arising
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from the operation of the Business from and after the Closing Date; and
(h) all liabilities and obligations of Buyer relating to the
transactions contemplated hereby, including, without limitation, finders, legal
and accounting fees and expenses incurred by Buyer in connection with the
Transactions, to the extent required to be paid for by Buyer pursuant to the
provisions of this Agreement.
Buyer is not assuming any liabilities or obligations (fixed or
contingent, known or unknown, matured or unmatured) of Sellers, whether related
to the Assets or the Business or not, or of the Business, other than the Assumed
Liabilities (such other liabilities or obligations being referred to as the
"Excluded Liabilities," which term includes, but is not limited to, the
Specifically Excluded Liabilities) and the Assumed Liabilities shall in no event
include the following liabilities (the "Specifically Excluded Liabilities"):
(i) all Claims, liabilities and obligations arising under
or with respect to (A) any Contract that is not an Assigned Contract, or
any Assigned Contract to the extent not assumed pursuant to Section 2.3(b);
(B) except as provided in Section 2.3(f), products liability, warranty,
personal injury, property damage, workers' compensation, labor grievance
proceedings, auto physical damage claims, medical claims or any other
Claims not expressly included in the Assumed Liabilities which arose or
were incurred on or before the Closing Date or which are based on events
occurring on or before the Closing Date notwithstanding that the date on
which the Claim, liability or obligation is asserted is after the Closing
Date; and (C) violations of any Requirement of Law for which either Seller
is responsible;
(ii) all liabilities and obligations of any nature
whatsoever of Sellers to any of their respective Affiliates;
(iii) except to the extent included in the Assumed
Liabilities, including pursuant to Article IX, all Claims by and all
liabilities and obligations to employees and independent contractors for
periods prior to and including the Closing Date, including, without
limitation, any Claims, liabilities and obligations arising (x) out of any
of Sellers' Plans, (y) from any bonus plans or agreements of Sellers
disclosed on Schedule 4.7 as "Bonus Agreements" and (z) from Sellers'
failure to deposit or fund any amounts withheld from employees pursuant to
any of Sellers' Plans;
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(iv) all liabilities and obligations of Sellers to financial
institutions or other Persons for borrowed money or with respect to
indebtedness and obligations of others which any Seller has directly or
indirectly guaranteed;
(v) all liabilities and obligations of Sellers relating to
the Excluded Assets or with respect to the transactions contemplated
hereby, including, without limitation, legal and accounting fees and
expenses incurred by Sellers in connection with the Transactions, except to
the extent required to be paid for by Buyer pursuant to the provisions of
this Agreement;
(vi) any liability or obligation for Taxes, utilities, gas
and other services arising out of, or in connection with, or attributable
to the Business for any period ending on or prior to the Closing Date,
excluding the Taxes covered by Section 2.7; and
(vii) any liability or obligation of any nature
whatsoever of Sellers relating to any business of Sellers (other than the
Business) or any employees of Sellers (other than the Hired Employees),
including, without limitation, under any employee plans, benefits contracts
or arrangements that would be Sellers' Plans if any Business Employee were
participating or entitled to benefits thereunder.
2.4 CLOSING. The closing (the "Closing") of the purchase and sale of
the Assets shall be held at the offices of Xxxxxx, Xxxx & Xxxxxxxx, 0000 Xxxxxxx
Xxxx Xxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx, at 10:00 a.m. on June 30, 1994
or, if the waiting period referred to in Section 3.1(k) has not theretofore
expired, on July 1, 1994, provided that the conditions to Closing set forth in
Article III have been satisfied or waived by such date, or on such other date as
the parties may agree upon in writing. The foregoing date on which the Closing
shall occur is hereinafter referred to as the "Closing Date." At the Closing,
Buyer shall deliver:
(a) to Sellers by wire transfer (to a bank account designated at
least two business days prior to the Closing Date in writing by Sellers)
immediately available funds in an amount equal to the sum of $43,700,000 (forty-
three million seven-hundred thousand dollars); and
(b) to the Escrow Agent, an amount equal to $2,300,000 (two
million three hundred thousand dollars) (the "Escrow Amount").
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At the Closing, the Sellers shall deliver or cause to be delivered to
Buyer (a) the Xxxx of Sale, Assignment and Assumption Agreement, (b) special
warranty deeds in recordable form for the Owned Property, (c) the Escrow
Agreement, (d) the Supply Agreement and (e) such other instruments of transfer
and documents as Buyer may reasonably request, and Buyer shall deliver to Seller
(a) the Xxxx of Sale, Assignment and Assumption Agreement, (b) the Escrow
Agreement, (c) a favorable opinion of counsel in accordance with the terms
hereof and (d) such other instruments of assumption and documents as Sellers may
reasonably request. In addition, the Sellers shall deliver to Buyer at the
Closing an affidavit in form and substance reasonably satisfactory to Buyer,
duly executed and acknowledged, certifying that neither Seller is a foreign
person within the meaning of Section 1445(f)(3) of the Code, and any
corresponding affidavit required for state tax purposes.
2.5 PURCHASE PRICE ADJUSTMENT.
(a) Within 60 days after the Closing Date, MagneTek shall
prepare and deliver to Buyer (i) a balance sheet of the Business as of the close
of business on the Closing Date comprising the Assets and the outstanding
Assumed Liabilities in the manner set forth in Section 2.5(c) (the "Closing
Balance Sheet") and (ii) the Sellers' calculation of the Closing Net Assets. As
used herein, the term "Closing Net Assets" means the difference between the
total amount of Assets at the Closing Date and the total amount of the Assumed
Liabilities at the Closing Date, in each case as reflected on the Closing
Balance Sheet. For purposes of preparing the Closing Balance Sheet, Buyer shall
make the necessary Business Employees reasonably available to Sellers (without
charge) during normal business hours of the Business and without unduly
disrupting the normal operations of the Business and such employees shall, for
the purpose of assisting Sellers in preparing the Closing Balance Sheet, be
instructed by Buyer to act at Sellers' direction consistent herewith.
During the 30 days immediately following Buyer's receipt of the
Closing Balance Sheet, Buyer and Deloitte & Touche (the "Buyer's Accountants")
shall be entitled to review the Closing Balance Sheet and Sellers' working
papers, trial balances and similar materials relating to the Closing Balance
Sheet, and Sellers shall provide Buyer and Buyer's Accountants with timely
access during Sellers' normal business hours and without unduly disrupting the
normal operation of the Sellers' business the necessary personnel, properties,
books and records to the extent relevant and not comprising Assets. The Closing
Balance Sheet shall become final and binding upon the parties on the
thirty-first day following delivery thereof unless Buyer gives written notice to
Sellers of its disagreement with the Closing Balance Sheet (a "Notice of
Disagreement") prior to such
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date. Any Notice of Disagreement shall specify in reasonable detail the nature
of any disagreement so asserted. If a timely Notice of Disagreement is received
by Sellers with respect to the Closing Balance Sheet, then the Closing Balance
Sheet (as revised in accordance with clause (x) or (y) below), shall become
final and binding upon the parties on the earlier of (x) the date the parties
hereto resolve in writing any differences they have with respect to any matter
specified in a Notice of Disagreement or (y) the date any matters in dispute are
finally resolved in writing by the Accounting Firm (as defined below) (the date
on which the Closing Balance Sheet so becomes final and binding being
hereinafter referred to as the "Final Determination Date"). During the 30 days
immediately following the delivery of any Notice of Disagreement, Sellers and
Buyer shall seek in good faith to resolve in writing any differences which they
may have with respect to any matter specified in such Notice of Disagreement.
During such period, Buyer and Sellers shall each have access to the other
party's working papers, trial balances and similar materials prepared in
connection with the other party's preparation of the Closing Balance Sheet and
the Notice of Disagreement, as the case may be. At the end of such 30-day
period, Sellers and Buyer shall submit to an independent "Big 6" public
accounting firm (the "Accounting Firm") for review and resolution any and all
matters which remain in dispute and which were included in any Notice of
Disagreement, and the Accounting Firm shall reach a final, binding resolution of
all matters which remain in dispute, which final resolution shall be (A) in
writing, (B) furnished to Buyer and Sellers as soon as practicable after the
items in dispute have been referred to the Accounting Firm, (C) made in
accordance with this Agreement and (D) conclusive and binding upon Buyer and
Sellers. The Closing Balance Sheet, with any adjustments necessary to reflect
the Accounting Firm's resolution of the matters in dispute, shall become final
and binding on Buyer and Sellers on the date the Accounting Firm delivers its
final resolution to the parties. The Accounting Firm shall be Xxxxxx Xxxxxxxx,
or if such firm is unable or unwilling to act, such other independent Big 6
public accounting firm as shall be agreed upon by the parties hereto in writing
or, if Buyer and Sellers cannot so agree within the 30-calendar day period
referred to above, by lot from among the remaining independent Big 6 public
accounting firms willing to act. Each party shall pay its own costs and
expenses incurred in connection with such arbitration, provided that the fees
and expenses of the Accounting Firm shall be borne 50% by Buyer and 50% by
Sellers.
(b) Upon the final determination of the Closing Balance Sheet in
accordance with this Section 2.6, the following Additional Payment or Seller
Refund (in each case as hereinafter defined) will be payable, as applicable, in
accordance with Section 2.5(e): (i) if the Closing Net Assets are greater than
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or equal to $29,240,470 (the "Target Amount"), then the Escrow Agent shall pay
to Sellers from the funds held in escrow an amount equal to the Escrow Amount
and Buyer shall pay to Sellers the amount, if any, by which the Closing Net
Assets exceed the Target Amount, (ii) if the Closing Net Assets are less than
the Target Amount by an amount less than or equal to the Escrow Amount, then the
Escrow Agent shall pay to Sellers from the funds held in escrow an amount equal
to the Escrow Amount less the amount, if any, by which the Target Amount exceeds
the Closing Net Assets and to Buyer the balance of the Escrow Amount, and
(iii) if the Closing Net Assets are less than the Target Amount by an amount
greater than the Escrow Amount, then Sellers shall pay to Buyer an amount equal
to the amount by which the Target Amount exceeds the Closing Net Assets and the
Escrow Agent shall pay the Escrow Amount to Buyer from the funds held in escrow.
Any required adjustment to the purchase price pursuant to this Section 2.5 shall
be in an amount equal to the difference between the Closing Net Assets and the
Target Amount and shall be referred to as the "Purchase Price Adjustment."
(c) The Closing Balance Sheet shall be prepared in accordance
with GAAP, applied in a manner consistent with that followed in the preparation
of the Interim Balance Sheet, subject to the following:
(i) the Closing Balance Sheet shall not reflect
any provision for Taxes (whether as an asset or a
liability), except in the case of taxes that are an Asset or
an Assumed Liability;
(ii) intercompany accounts receivable and
intercompany liabilities shall be eliminated; and
(iii) all Excluded Assets (and related
depreciation and reserves) shall be eliminated and all
Excluded Liabilities (and related reserves) shall be
eliminated;
(iv) all accounts payable as to which checks
written on the accounts included in the Excluded Assets are
outstanding shall be eliminated;
(v) all accounts receivable as to which proceeds
have been received shall be eliminated to the extent of such
proceeds; and
(vi) vacation and holiday pay accrued in respect
of any employee who is not a Hired Employee shall be
eliminated.
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(d) Buyer agrees, solely with respect to the calculation of
Purchase Price Adjustments, and without restricting in any manner whatsoever
Buyer's right to take any such action that would not affect such calculation,
that following the Closing, Buyer will not take any actions with respect to the
accounting books, records, policies and procedures of the Business on which the
Closing Balance Sheet is to be based that are not consistent with GAAP applied
in the manner consistent with the past practices of the Business.
(e) Within thirty-three (33) days after the receipt by Buyer of
the Closing Balance Sheet in accordance with Section 2.5(a) hereof, Buyer and
the Escrow Agent shall remit to Sellers and the Escrow Agent or Sellers shall
remit to Buyer, as the case may be, in immediately available funds, any
undisputed amounts constituting Purchase Price Adjustments. With respect to any
items that are the subject of a Notice of Disagreement, payment shall be made in
immediately available funds within three (3) business days after the Final
Determination Date. Each payment not pursuant to the Escrow Agreement made
pursuant to this Section 2.5 shall be made with interest on the amount of the
payment at an annual rate equal to the reference rate quoted by the San
Xxxxxxxxx xxxxxx of Bank of America on the Closing Date for the period from the
Closing Date to the date of payment, computed on the basis of a 360-day year and
actual days elapsed.
2.6 TAX ALLOCATION. As promptly as practicable after the date
hereof, Buyer and Sellers shall agree in writing upon the allocation of the
Purchase Price plus the Assumed Liabilities in a manner consistent with
applicable law to broad categories constituting components of the Assets and the
covenant not to compete contained in Section 6.7 hereof. Such allocation shall
be attached hereto as Schedule 2.6 and shall be updated by a similar mutual
writing as of the Closing to reflect changes in the Assets or Assumed
Liabilities occurring after the date thereof and prior to the Closing Date. The
same procedure shall apply to any changes necessary as a result of the Purchase
Price Adjustment, if any, on the Final Determination Date pursuant to
Section 2.5(b)). Buyer and Sellers shall report the purchase and sale of the
Assets in accordance with the applicable agreed-upon allocation among such broad
categories for all Tax purposes (including the filing of the forms prescribed
under Section 1060 of the Code and the Treasury Regulations promulgated
thereunder), and none of Buyer and Sellers shall take a position inconsistent
with such allocation for Tax or other purposes.
2.7 SALES AND USE TAX. Buyer and Sellers shall cooperate in
preparing, executing and filing use and sales Tax returns relating to, and at
the Closing, Buyer shall pay one-half, and Sellers shall pay one-half of any and
all sales,
17
real estate, transfer or use Tax due with regard to, the purchase and sale of
the Assets. To the extent such Taxes cannot be accurately computed at the
Closing, the parties shall each pay their respective shares of such Taxes when
they are due. Such Tax Returns shall be prepared in a manner that is consistent
with the allocation of the Purchase Price and Assumed Liabilities contemplated
by Section 2.6. Buyer shall also furnish Sellers with a form of resale
certificate that complies with the requirements of the California Taxation and
Revenue Code and other applicable state taxation laws, and Sellers shall furnish
any information or assistance reasonably requested by Buyer in obtaining such
certificates.
ARTICLE III
CONDITIONS TO CLOSING
3.1 BUYER'S OBLIGATION. The obligations of Buyer to purchase and pay
for the Assets are subject to the satisfaction (or waiver by Buyer) as of the
Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties of Sellers made in this Agreement shall be true
and correct in all material respects (except to the extent that any
representation is qualified by materiality, in which case, to such extent, the
representation shall be true and correct in all respects) as of the date hereof
and, except as specifically contemplated by this Agreement, on and as of the
Closing, as though made on and as of the Closing Date, and Sellers shall have
performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by Sellers
by the time of the Closing; and Sellers shall have delivered to Buyer a
certificate dated the Closing Date and signed by an authorized officer of the
respective Seller confirming the foregoing.
(b) SECRETARY'S CERTIFICATES. Sellers shall each have delivered
to Buyer a certificate of the Secretary of such Seller, as the case may be, as
to the Certificate of Incorporation, By-laws, corporate resolutions and
incumbency of certain officers of such Seller, in each case in form and
substance reasonably satisfactory to Buyer.
(c) CONSENTS, AUTHORIZATIONS, ETC. All material consents,
authorizations, orders or approvals of, and filings or registrations with, any
Governmental Authority or other Person which are required for or in connection
with the execution and delivery by each of Sellers of the Transaction Documents
to which each of them is or will be a party and the consummation by
18
Sellers of the transactions contemplated hereby and thereby shall have been
obtained or made.
(d) INSTRUMENTS OF TRANSFER, CONVEYANCE AND ASSIGNMENT. Buyer
shall have received a duly executed Xxxx of Sale, Assignment and Assumption
Agreement, deeds and such other duly executed conveyance instruments, in form
and substance reasonably satisfactory to Buyer, as are necessary or desirable to
effect the sale, transfer, conveyance and assignment of the Assets to Buyer in
accordance herewith.
(e) FINANCING. The closing of the financing necessary for the
consummation of the transactions contemplated hereby and the payment of all
costs and expenses incurred in connection therewith (the "Financing") to be
provided by one or more financial institutions or other investors (the
"Lenders") shall have occurred.
(f) SUPPLY AGREEMENT. MagneTek shall have executed and
delivered to Buyer the Supply Agreement.
(g) ESCROW AGREEMENT. Sellers shall have executed and delivered
to Buyer the Escrow Agreement.
(h) TITLE POLICIES. Buyer shall have obtained an ALTA owner's
policy of title insurance (the "Title Policies") with respect to each parcel of
Owned Property in form and substance reasonably acceptable to Buyer and in
accordance with the Title Commitment for such Owned Property referred to in
Section 6.4.
(i) OPINIONS OF COUNSEL. Buyer shall have received an opinion
dated the Closing Date of Xxxxxx, Xxxx & Xxxxxxxx, counsel to Sellers, and an
opinion dated the Closing Date of Xxxxxx X. Miley, Esq., General Counsel of
Sellers, covering the matters referred to in Exhibits D and E, respectively,
which opinions shall be reasonably satisfactory in form and substance to Buyer.
(j) LEGAL RESTRAINT. No injunction or order shall have been
granted by any Governmental Authority of competent jurisdiction that would
restrain, delay or prohibit any of the Transactions or that would impose damages
as a result thereof, and no action or proceeding shall be pending before any
Governmental Authority of competent jurisdiction in which any Person seeks such
a remedy (if in the opinion of counsel to Buyer there exists a reasonable risk
of a materially adverse result in such pending action or proceeding).
(k) HSR ACT. The waiting period under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act") shall have
expired or been terminated.
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3.2 SELLERS' OBLIGATION. The obligation of Sellers to sell and
deliver the Assets to Buyer are subject to the satisfaction (or waiver by
Sellers) as of the Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties of Buyer made in this Agreement shall be true and
correct in all material respects (except to the extent that any representation
is qualified by materiality, in which case, to such extent, the representation
shall be true and correct in all respects) as of the date hereof and on and as
of the Closing, as though made on and as of the Closing Date, and Buyer shall
have performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by Buyer
by the time of the Closing; and Buyer shall have delivered to Sellers a
certificate dated the Closing Date and signed by an authorized officer of Buyer
confirming the foregoing.
(b) SECRETARY'S CERTIFICATES. Buyer shall have delivered to
Sellers a certificate of the Secretary of Buyer as to the Charter, By-laws,
corporate resolutions and incumbency of certain officers of Buyer, in form and
substance reasonably satisfactory to Sellers.
(c) CONSENTS, AUTHORIZATIONS, ETC. All material consents,
authorizations, orders or approvals of, and filings or registrations with, any
Governmental Authority or other Person which are required for or in connection
with the execution and delivery by Buyer of the Transaction Documents to which
it is or will be a party and the consummation by Buyer of the transactions
contemplated hereby and thereby shall have been obtained or made.
(d) INSTRUMENTS OF TRANSFER, CONVEYANCE AND ASSIGNMENT. Sellers
shall have received a duly executed Xxxx of Sale, Assignment and Assumption
Agreement and such other duly executed conveyance instruments, in form and
substance reasonably satisfactory to Sellers, as are necessary or desirable to
effect the assumption of the Assumed Liabilities.
(e) SUPPLY AGREEMENT. Buyer shall have executed and delivered
to MagneTek the Supply Agreement.
(f) ESCROW AGREEMENT. Buyer shall have executed and delivered
to Sellers the Escrow Agreement.
(g) OPINIONS OF COUNSEL. Sellers shall have received an opinion
dated as of the Closing Date of X'Xxxxxxxx Graev & Karabell, counsel to Buyer,
covering the matters referred to in Exhibit F, which opinion shall be reasonably
satisfactory in form and substance to Sellers.
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(h) LEGAL RESTRAINT. No injunction or order shall have been
granted by any Governmental Authority of competent jurisdiction that would
restrain or prohibit the Transactions or that would impose damages as a result
thereof, and no action or proceeding shall be pending before any Governmental
Authority of competent jurisdiction in which any Person seeks such a remedy (if
in the opinion of counsel to Sellers there exists a reasonable risk of a
materially adverse result in such pending action or proceeding).
(i) HSR ACT. The waiting period under the HSR Act shall have
expired or been terminated.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller hereby, jointly and severally, represents and warrants to
Buyer as follows:
4.1 AUTHORITY; CORPORATE MATTERS; NO CONFLICTS; GOVERNMENTAL
CONSENTS.
(a) Each Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each
Seller has all requisite corporate power and authority to enter into the
Transaction Documents and to consummate the Transactions. All corporate acts
and other proceedings required to be taken by each Seller to authorize the
execution, delivery and performance of the Transaction Documents and the
consummation of the Transactions have been duly and properly taken. This
Agreement has been, and each of the Transaction Documents, when executed and
delivered, will be, duly executed and delivered by each Seller and constitutes
(or will constitute) a valid and binding obligation of such Seller, enforceable
against such Seller in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally or by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(b) Schedule 4.1(b) sets forth a true and complete list of all
jurisdictions in which Sellers are qualified to do business, and Sellers are
qualified to do business in all jurisdictions where the conduct of the Business
or the ownership of the Assets requires such qualification, except where the
failure to so qualify would not have a Material Adverse Effect.
21
(c) Controls does not currently have any subsidiaries and, except as
set forth on Schedule 4.1(c), does not currently own any capital stock or other
proprietary interest, directly or indirectly, in any Person.
(d) The execution and delivery of this Agreement does not and of
the other Transaction Documents will not, and the consummation of the
Transactions and compliance with the terms of the Transaction Documents will not
conflict with, or result in any violation of or 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 to loss of a benefit under, or
result in the creation of any Lien upon any of the properties or assets of
Sellers under, any provision of (i) the Certificate of Incorporation or By-Laws
of either Seller, (ii) subject to the matters disclosed in Schedule 4.1(d), any
Contractual Obligation of either Seller or (iii) any judgment, order or decree
or, subject to the matters described in clauses (A)-(D) below, any Requirement
of Law applicable to either Seller or their respective property or assets, other
than, in the case of clause (ii) above, any such conflicts, violations,
defaults, rights or Liens that, individually and in the aggregate, would not
have a Material Adverse Effect. No consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority is required to be obtained or made by or with respect to either Seller
in connection with the execution and delivery of the Transaction Documents or
the consummation of the Transactions contemplated hereby, other than
(A) compliance with and filings under Section 13(a) or 15(d), as the case may
be, of the Exchange Act, (B) as set forth on Schedule 4.1(d), (C) those that may
be required solely by reason of Buyer's participation in the transactions
contemplated hereby and (D) compliance with and filings under the HSR Act.
4.2 FINANCIAL STATEMENTS; ABSENCE OF CHANGES.
(a) Schedule 4.2(a) contains true and complete copies of the
following:
(i) the unaudited balance sheet of the Business as at
June 30, 1993, and the related unaudited statements of income and
retained earnings and cash flows for the fiscal year then ended;
(ii) the unaudited balance sheet of the Business as at
December 31, 1993 (the "Interim Balance Sheet"), and the related
statements of income and retained earnings and cash flows for the
six-month period ended
22
December 31, 1993 (the "Interim Balance Sheet Date"); and
(iii) the December Balance Sheet.
The financial statements described in the foregoing clauses (i), (ii) and (iii)
are collectively referred to herein as the "Financial Statements." Except as
set forth on Schedule 4.2(a) (including as indicated by any PRO FORMA
calculations made thereon), the Financial Statements (A) were prepared in
accordance with the books and records of the Business (whether maintained by
MagneTek or Controls or otherwise), (B) fairly present the financial position of
the Business in each case at and as of the dates indicated and the results of
operations, retained earnings and cash flows of the Business for the periods
indicated (in each case other than the December Balance Sheet) and (C) except as
otherwise set forth on Schedule 4.2 and except for the adjustments made to
arrive at the December Balance Sheet, were prepared in accordance with GAAP
consistently applied throughout the periods covered thereby (subject to the
absence of notes and to normal year-end adjustments).
(b) ABSENCE OF UNDISCLOSED LIABILITIES. To the Knowledge of
Sellers, except (i) as set forth on Schedule 4.2(b), (ii) any and all
Specifically Excluded Liabilities and (iii) liabilities incurred in the ordinary
course of the Business since the Interim Balance Sheet Date, there are no
liabilities of any nature (matured or unmatured, fixed or contingent) affecting
or relating to the Business which were not provided for or disclosed on the
Interim Balance Sheet.
(c) ABSENCE OF CHANGES. Except as set forth on Schedule 4.2(c),
since the Interim Balance Sheet Date the Business has been operated in the
ordinary course and consistent with past practice, and there have not been any:
(i) material adverse changes in the business,
operations, results of operations, assets (including, without
limitation, levels of working capital and the material components
thereof), liabilities, earnings or financial condition (financial
or otherwise) of the Business;
(ii) to the Knowledge of Sellers, occurrences resulting
in the damage, destruction or loss (whether or not covered by
insurance) affecting any tangible asset or property of the
Business in excess of $100,000 in the aggregate;
(iii) material increases in, or, to the Knowledge
of Sellers, changes in the method
23
of computing, the compensation of employees of MagneTek or Controls
who are employed in the Business (including, without limitation,
increases pursuant to or change in method under any bonus, pension,
profit sharing, deferred compensation arrangement or other plan or
commitment), or increase in compensation payable to any officer,
employee, consultant or agent of MagneTek or Controls who are employed
in the Business, or entering into of any employment contract with or
making of any loan to, or engagement in any transaction with, any
officer or employee of MagneTek or Controls who are employed in the
Business, in each case other than in the ordinary course of the
business of the Business and consistent with past practice;
(iv) to the Knowledge of Sellers, material changes in
the manner in which the Business extends discounts or credits to
customers or otherwise deals with customers;
(v) changes in the accounting methods or practices
followed by or with respect to the Business, or, to the Knowledge
of Sellers, any changes in depreciation or amortization policies
or rates theretofore adopted;
(vi) agreements or commitments to merge or consolidate
with or otherwise acquire any other Person, or, to the Knowledge
of Sellers, any part or division thereof;
(vii) cancellation or termination of any insurance
policy maintained by or with respect to the Business;
(viii) incurrence of indebtedness for borrowed money
or the guaranty thereof (in either case, involving amounts
exceeding $100,000) in respect of such indebtedness of an
Affiliate;
(ix) termination of employment of any key Business
Employee, or, to the Knowledge of the Sellers, any expression of
intention by any key Business Employee to terminate his
employment in the immediate future;
(x) to the Knowledge of Sellers, sales or other
dispositions of any material tangible or intangible assets of the
Business, other than in the ordinary course of the business
24
of the Business and consistent with past practice;
(xi) other material transactions relating to the
Business, other than in the ordinary course of the Business and
consistent with past practice; or
(xii) agreements or understandings, whether in
writing or otherwise, for either Seller to take any of the
actions specified in items (i) through (xi) above.
4.3 TAXES.
(a) Except as disclosed on Schedule 4.3, each Seller, and any
affiliated group within the meaning of Section 1504 of the Code, of which each
Seller is or has been a member (the "Affiliated Group," but only for the taxable
period during which such Seller has been a member thereof), have filed or caused
to be filed in a timely and accurate manner (within any applicable extension
periods) with the appropriate Governmental Authority (i) all Tax returns,
reports and forms (collectively, "Tax Returns") required to be filed by the Code
or by applicable laws, (ii) all Taxes shown on such Tax Returns have been timely
paid in full by the due date thereof, (iii) no Tax Liens or assessments have
been filed by any Tax authority against any property or assets of the Business
and (iv) no claims have been asserted, proposed or assessed in writing with
respect to any Taxes relating to the Business.
(b) Except as set forth in Schedule 4.3, (i) none of the Assets
comprises "tax exempt use property" within the meaning of Section 168(h) of the
Code, and (ii) the Assigned Contracts do not include any lease made pursuant to
former Section 168(f)(8) of the Internal Revenue Code of 1954.
(c) Neither Seller is a "foreign person" within the meaning of
Section 1445(f)(3) of the Code.
4.4 ASSETS OTHER THAN REAL PROPERTY INTERESTS. Sellers have good and
valid title to all of the Assets, free and clear of all Liens except (a) such as
are disclosed on Schedule 4.4 and (b) mechanics', carriers', workmen's,
repairmen's or other like Liens arising or incurred in the ordinary course of
business and securing Claims that (i) are either not yet due and payable or are
being contested in good faith or by appropriate proceedings with appropriate
reserves having been established therefor to the extent required by GAAP and
(ii) are not or will not, as of the Closing Date, be Excluded Liabilities, Liens
arising under original purchase price conditional sales contracts and equipment
leases with
25
third parties entered into in the ordinary course of business, Liens for Taxes
and other governmental charges which are not due and payable or which may
thereafter be paid without penalty, and other imperfections of title,
restrictions or encumbrances, if any, which Liens, imperfections of title,
restrictions or other encumbrances do not, individually or in the aggregate,
materially impair the continued use and operation of the specific assets to
which they relate or secure a payment obligation not described above (the Liens
described in the preceding clause (b) are hereinafter referred to collectively
as "Permitted Liens"). Except as set forth on Schedule 4.4, there does not
exist any Contractual Obligation of either Seller, or Requirement of Law
applicable to the Business, in each case which is not of broad or customary
application to Persons or businesses similarly situated, as the case may be,
which materially interferes with the use of any tangible personal property
included in the Assets. All of the Assets are in reasonably good operating
condition, normal wear and tear excepted.
This Section 4.4 does not relate to real property or interests in real
property, such items being the subject of Section 4.5, or to Intellectual
Property Rights, such items being the subject of Section 4.6.
4.5 REAL PROPERTY. Schedule 4.5 sets forth a list of all Owned
Properties and a list of all Leased Properties and, as to Leased Property,
identifies any leases relating thereto (an Owned Property or Leased Property
being sometimes referred to herein individually as a "Business Property" and
collectively as "Business Properties"), which lists collectively comprise a
complete list of Sellers' interests in real property of all types used or held
for use primarily in the Business. Sellers have good, marketable and insurable
fee title to all Owned Property, free and clear of all Liens, easements,
covenants, rights-of-way and other similar restrictions of any nature
whatsoever, except (i) Permitted Liens, (ii) easements, covenants, rights-of-way
and other similar restrictions of record and (iii) (A) zoning, building and
other similar restrictions. Except as set forth on Schedule 4.5, (A) each lease
pursuant to which Sellers lease Leased Property (a "Lease") is in full force and
effect and all rent and other sums and charges payable thereunder are current,
and (B) no lessor under any Lease has any Lien under any Lease or otherwise
against Sellers. Except for the matters listed on Schedule 4.5, the leasehold
estate under and leasehold interest in each Lease is held free and clear of all
Liens. Sellers have made available to Buyer true and complete copies of all
Leases. Except as set forth on Schedule 4.5, (A) the improvements on the Real
Property are in reasonably good operating condition, normal wear and tear
excepted, and to the Knowledge of Sellers, there does not exist any Requirement
of Law or Contractual Obligation
26
applicable to the Business in each case which is not of broad or customary
application to Persons or businesses similarly situated, as the case may be,
which materially interferes with the economic value or use thereof, and (B) none
of the buildings and structures located on the Real Property, the appurtenances
thereto or the equipment therein or the operation or maintenance thereof
violates any material restrictive covenant applicable thereto.
4.6 INTELLECTUAL PROPERTY.
(a) Schedule 4.6 sets forth a list of all patents, trademarks,
trade names, material service marks, service xxxx registrations, material
registered copyrights and pending applications for the foregoing, in each case
included in the Assets. Except as set forth on Schedule 4.6, Sellers own all
right, title and interest in and to the patents and trademarks set forth on
Schedule 4.6, free and clear of all Liens other than Permitted Liens. With
respect to registered trademarks, Schedule 4.6 contains a list of all
jurisdictions in which such trademarks are registered or applied for and all
registration and application numbers.
(b) Except as disclosed on Schedule 4.6 , Sellers own or have
the right to use, without payment to any other party, the Intellectual Property
Rights included in the Assets. Except as set forth on Schedule 4.8, (i) to the
Knowledge of Sellers, no product currently manufactured, marketed, distributed
or sold or developed and held for future manufacture, marketing, distribution or
sale by the Business violates or will (as to such developed products held for
future sale) violate any license or infringes or will (as to such developed
products held for future sale) infringe upon any Intellectual Property Rights of
any other Person, and (ii) no Claims are pending or, to the Knowledge of
Sellers, threatened against either Seller by any person with respect to the
ownership, validity, enforceability or use of any Intellectual Property Rights
or otherwise challenging or questioning the validity or effectiveness of any
such Intellectual Property Rights. As used herein, the term "Intellectual
Property Rights" means all intellectual property rights, including, without
limitation, patents, patent rights, trademarks, trade names, service marks,
copyrights (statutory and common law), all applications and registrations with
respect to any of the foregoing, logos, franchises, licenses, layouts,
proprietary processes, formulae, patentable inventions, trade secrets, know-how
and other proprietary rights and all documentation and media constituting,
describing or relating to any of the foregoing, including, without limitation,
manuals, memoranda and records.
27
4.7 CONTRACTS. Schedule 4.7 sets forth a list of all Contracts of
the following types to which Controls is a party or to which MagneTek or the
Business is a party and which relate to the Business:
(a) any employment or severance Contract that has an aggregate
future liability in excess of $100,000 and is not terminable by notice of not
more than 60 days for a cost of less than $50,000 (including any contracts or
agreements with certain employees that relate to the transactions contemplated
by this Agreement which are not being assumed by Buyer, referred to as "Stay and
Pay" Agreements);
(b) any employee collective bargaining agreement or other
Contract with any labor union covering Business Employees;
(c) any Contract pursuant to which the aggregate of payments to
become due from or to the applicable Seller is equal to or exceeds $200,000, and
which is not terminable by no more than 60 days' notice for a cost of less than
$100,000;
(d) (i) any lease or similar Contract under which either Seller
is a lessor or sublessor of, or makes available for use by any third party
(including another division of such Seller), any Business Property or premises
otherwise occupied by the Business and (ii) any Lease;
(e) any distributor, dealer, sales, advertising, agency,
manufacturer's representative, franchise or similar Contract or any other
Contract requiring the payment of any commissions in excess of $100,000 per
year;
(f) any indenture, mortgage, promissory note, loan agreement or
other agreement or commitment for the borrowing of money, for a line of credit
or for any leasing transaction of a type required to be capitalized in
accordance with Statement of Financial Accounting Standards No. 13 issued by the
Financial Accounting Standards Board;
(g) any option or other Contract to purchase or otherwise
acquire or sell or otherwise dispose of any interest in real property;
(h) any guaranty of the obligations of third parties;
(i) any Contract which restricts the Business from conducting
its business anywhere in the world;
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(j) any Contract under which either Seller has agreed to
indemnify any third party with respect to, or to share, the Tax liability of any
third party; or
(k) any other Contract which is material to the Business, the
Assets or Assumed Liabilities, other than this Agreement and the other
Transaction Documents.
Except as disclosed on Schedule 4.7, (i) each Contract listed on
Schedule 4.7 is valid, binding and in full force and effect and is enforceable
by Sellers in accordance with its terms, (ii) to the Knowledge of Sellers, each
Seller has performed all material obligations required to be performed by it to
date under the Contracts and is not (with or without the lapse of time of the
giving of notice, or both) in breach or default in any material respect
thereunder and, to the Knowledge of Sellers, no other party to any of the
Contracts is (with or without the lapse of time or the giving of notice, or
both) in breach or default in any material respect thereunder, (iii) no Seller
has received from any party to any Contract notice of its intention to cancel,
terminate or fail to renew such Contract, (iv) there are no Contracts pertaining
to returns, guaranteed sales, advertising commitments, customer chargebacks or
commissions or other payments due to sales representatives which are not
reflected upon or reserved against in the Closing Balance Sheet and (v) to the
Knowledge of Sellers, the terms of Sellers' written warranties with respect to
products sold or services provided before the Closing Date do not exceed one (1)
year in duration.
4.8 LITIGATION; DECREES. Schedule 4.8 sets forth a list, as of the
date of this Agreement, of all pending and, to the Knowledge of Sellers,
threatened lawsuits, claims, demands, consent decrees, actions, suits,
proceedings, litigation, arbitration or mediation by or against such Seller
before any Governmental Authority or arbitrator or mediator relating to the
Business (including the Assets or the Assumed Liabilities) which (a) involves a
claim by or against such Seller of more than $100,000, (b) seeks any injunctive
relief or (c) relates to the Transactions. To the knowledge of Sellers, except
as disclosed on Schedule 4.8,neither Seller is in default under any judgment,
order, decree or award of any court, administrative agency or commission or
other Governmental Authority or any arbitrator or mediator applicable to the
Business (including the Assets or the Assumed Liabilities). For purposes of
this Section 4.8, a "pending" matter does not include any litigation as to which
a complaint has been filed but has not been served. Sellers have made available
to Buyer, subject to matters of privilege based upon the advice of counsel, all
documents and correspondence relating to matters referred to in Schedule 4.8.
29
4.9 EMPLOYEE AND RELATED MATTERS.
(a) Schedule 4.9(a) sets forth a list of each material Employee
Benefit Plan.
(b) To the Knowledge of Sellers, there are no material Employee
Benefit Arrangements providing employee or executive compensation or benefits to
Business Employees employed at the Xxxxxxx Facility or the Xxxx Facility except
as set forth on Schedule 4.9(b).
(c) There are no material Employee Benefit Arrangements
providing employee or executive compensation or benefits to Business Employees
employed at the Simi Valley Facility except as set forth in the MagneTek
Transducer Products Handbook for Associates.
(d) Sellers have delivered to Buyer true, complete and correct
copies of (i) descriptions of any material unwritten Seller Plans and (ii) the
most recent summary plan description for each material Seller Plan for which
such a summary plan description is required. Such summary plan descriptions are
attached to Schedule 4.9 and accurately describe in all material aspects the
respective Seller Plans to which they relate.
4.10 ENVIRONMENTAL MATTERS. Except as disclosed in the Phase I Report
prepared by Dames & Xxxxx and provided to Buyer, to the Knowledge of Sellers, as
to the Business and the Business Property:
(a) Neither Seller is in violation of any applicable
Environmental Law nor is either Seller under investigation or review by any
Governmental Authority with respect to compliance therewith, or with respect to
the generation, use, treatment, storage or disposal, or the spillage or other
release of any Hazardous Material which could reasonably be expected to result
in material liability to the Business;
(b) There is no Hazardous Material that is likely to pose any
material risk to safety, health or the environment, and there has heretofore
been no spillage, discharge, release or disposal of any such Hazardous Material
on or under any Business Property in an amount and of a nature which could
reasonably be expected to result in material liability to the Business;
(c) No oral or written notification of the inadvertent spillage
by either Seller of a Hazardous Material
30
has been filed by or on behalf of any Seller in the conduct of the Business;
(d) Sellers have made available to Buyer at the respective
Business Properties its files of manifests pertaining to the transportation of
Hazardous Materials to locations not on Business Property.
(e) There are no pending citations, fines, penalties or Claims
that have been asserted against either Seller under any Environmental Law which
could reasonably be expected to have a Material Adverse Effect and which have
not been reflected in the December Balance Sheet.
4.11 EMPLOYEE AND LABOR RELATIONS. Except as set forth on
Schedule 4.11:
(a) there is no labor strike, dispute, or work stoppage or
lockout pending, or, to the Knowledge of Sellers, threatened, involving the
Business;
(b) to the Knowledge of Sellers, no union organization campaign
is in progress with respect to the Business Employees, and no question
concerning representation exists respecting such employees;
(c) there is no unfair labor practice charge or complaint
against either Seller pending, or, to the Knowledge of Sellers, threatened,
before the National Labor Relations Board involving the Business;
(d) there is no pending, or, to the Knowledge of Sellers,
threatened, grievance involving an employee of the Business that, if adversely
decided, would have a Material Adverse Effect; and
(e) no charges with respect to or relating to either Seller are
pending before the Equal Employment Opportunity Commission or any other
Governmental Authority responsible for the prevention of unlawful employment
practices as to which there is a reasonable likelihood of adverse determination
involving the Business, other than those which, if so determined would not have
a Material Adverse Effect.
4.12 ASSETS OWNED BY AFFILIATES. Except as disclosed on Schedule 4.12
or as to any Excluded Assets, no Affiliate of any Seller owns any assets,
properties, interests in properties or rights, of any kind or description, used
primarily in, held for use primarily in or otherwise primarily related to the
Business.
31
4.13 COMPLIANCE WITH LAW; GOVERNMENTAL AUTHORIZATIONS.
(a) Except as set forth on Schedule 4.13(a), no Seller is in
violation of any Requirement of Law applicable to the Business that could
reasonably be expected to result in a material liability to the Business.
(b) Except as set forth on Schedule 4.13(b), (A) each Seller has
all licenses, permits, orders, approvals and other authorizations of or from all
Governmental Authorities which are necessary in the conduct of the Business
(collectively, the "Permits"), (B) such Permits are in full force and effect,
and (C) no violations or claimed violations are pending before any Governmental
Authority with respect to any such Permit.
4.14 ASSETS OF THE BUSINESS. Except for any Assets that may not be
transferred to Buyer pursuant to Section 2.2 or Section 8.1, the Assets and the
rights conferred by the Transaction Documents comprise all the properties and
assets used primarily, or held for use by Sellers primarily, in the operation of
the Business as conducted on the date hereof. EXCEPT AS EXPRESSLY PROVIDED
HEREIN, SELLERS MAKE NO REPRESENTATION OR WARRANTY CONCERNING THE ASSETS OR THE
BUSINESS, INCLUDING AS TO THE QUALITY, CONDITION, MERCHANTABILITY, SALABILITY,
OBSOLESCENCE, WORKING ORDER OR FITNESS FOR A PARTICULAR PURPOSE THEREOF. EXCEPT
AS EXPRESSLY PROVIDED HEREIN, THE ASSETS ARE SOLD TO BUYER "AS IS AND WHERE IS."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
5.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS.
(a) Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Buyer has all
requisite corporate power and authority to enter into the Transaction Documents
and to consummate the Transactions. All corporate acts and other proceedings
required to be taken by Buyer to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and properly taken. This Agreement has been,
and the Transaction Documents, when executed and delivered, will be, duly
executed and delivered by Buyer and constitutes (or will constitute) a valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
32
affecting creditors' rights generally or by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or law).
(b) Except as disclosed on Schedule 5.1(b), the execution and
delivery of this Agreement does not and of the other Transaction Documents will
not, and the consummation of the Transactions and compliance with the terms of
the Transaction Documents will not, conflict with, or result in any violation of
or 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 to loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of the Buyer under, any provision of
(i) the Certificate of Incorporation or By-Laws of Buyer, (ii) any Contractual
Obligation of Buyer or (iii) any judgment, order or decree or, subject to the
matters described in clauses (A)-(C) below, any Requirement of Law applicable to
Buyer or its property or assets. No material consent, approval, license, permit
order or authorization of, or registration, declaration or filing with, any
Governmental Authority is required to be obtained or made by or with respect to
Buyer or its Affiliates in connection with the execution and delivery of the
Transaction Documents or the consummation by Buyer of the Transactions, other
than (A) as disclosed on Schedule 5.1(b), (B) compliance with and filings under
the HSR Act and (C) those that may be required solely by reason of Sellers' (as
opposed to any other third party's) participation in the transactions
contemplated hereby.
5.2 ACTIONS AND PROCEEDINGS, ETC. There are no (a) outstanding
judgments, orders, writs, injunctions or decrees of any court, governmental
agency or arbitration tribunal against Buyer or (b) actions, suits, claims or
legal, administrative or arbitration proceedings or investigations pending or,
to the knowledge of Buyer, threatened against Buyer.
5.3 INCONSISTENT REPRESENTATIONS. In connection with the Financing,
Buyer intends to enter into loan documentation which will contain
representations and warranties and related disclosure schedules ("Buyer's
Schedules") relating to the Business. Prior to the Closing, Buyer will provide
to MagneTek copies of the sections of the applicable loan documentation
containing such representations and warranties and any sections thereof
necessary to interpret such representations and warranties and copies of the
related Buyer's Schedules. If any such representation or warranty or the
material contained on any such Buyer's Schedule, when fairly interpreted in the
context of such loan documentation, would, if true, evidence a breach of any of
the representations and warranties of Sellers in this Agreement, then Sellers
shall be permitted to modify the Schedules hereto to include information
contained in such
33
Buyer's Schedule to the extent that such inclusion would cure such breach. For
purposes of the rights and obligations of the parties hereunder, any Schedule so
modified shall be deemed to have been modified as of the date of this Agreement.
Nothing in this Section 5.3 should be construed to imply that as of the date
hereof, Buyer is aware of or intends to make any representation or warranty that
would permit Sellers to make any such modification to the Schedules hereto.
ARTICLE VI
COVENANTS OF SELLERS
Sellers covenant and agree as follows:
6.1 ACCESS. Subject to the provisions of Section 7.1 hereof, prior
to the Closing, Sellers will give, and with respect to clause (ii) below, will
cause Sellers' Accountants to give, Buyer and its representatives, employees,
counsel and accountants, together with representatives of Persons providing
financing to Buyer for the Transactions, with reasonable access, during normal
business hours and upon reasonable notice, to the personnel, properties, books
and records (including portions pertaining primarily to the Business or Sellers'
Tax returns most recently filed and those in preparation, audit work papers and
other records of Sellers' Accountants and financial and other operating data and
information to the extent relating primarily to the Business, the Assets or the
Assumed Liabilities) of the Business for purposes of investigating its assets,
operations, prospects, obligations and liabilities; provided, however, that such
access does not unreasonably disrupt the normal operations of the Business.
Notwithstanding anything contained herein to the contrary, neither (i) any such
investigation nor (ii) the direct or indirect ownership of any interest in Buyer
by any Person providing any information on behalf of Seller in connection with
such investigation or the participation by any such Person in the preparation of
the Schedules hereto shall affect or otherwise diminish or obviate in any
respect any of the representations and warranties of Sellers or their respective
indemnification obligations contained in this Agreement or any Transaction
Document to which either Seller is or will be a party, except that any
representation or warranty qualified by reference to the Knowledge of Sellers
shall be subject to the provision of the definition of such term with respect to
the knowledge of Xxxxx Xxxxxxx and Xxxxxxx Xxxxxxxxx. Additionally, subject to
the provisions of Section 7.1 hereof and to prior notification and the consent
(which will not be unreasonably withheld or delayed) of Buyer, Buyer and such
representatives may contact the principal customers and suppliers of the
Business for purposes of the foregoing investigation.
34
6.2 ORDINARY CONDUCT. Except as contemplated by this Agreement or as
set forth in Schedule 6.2, from the date hereof to the Closing, Seller agrees to
cause the business of the Business to be conducted in the ordinary course in
substantially the same manner as presently conducted and will make all
reasonable efforts, consistent with past practices to preserve intact the
present organization of the Business and its relationships with customers,
suppliers, employees and agents and others with whom the Business deals. Except
as contemplated by this Agreement, Sellers will not, without the prior written
consent of Buyer, which consent will not be unreasonably withheld or delayed,
take any action, or deliberately omit to take any action which in the ordinary
course it would have taken, in either case which would cause the representations
and warranties of Sellers herein to be untrue in any material respect except
insofar as either Seller may enter into a Contract which would be required to be
listed on Schedule 4.7 hereto were it in existence on the date hereof.
6.3 INSURANCE. Sellers shall keep, or cause to be kept, all
insurance policies presently maintained relating to the Business and its
properties, or replacements therefor, in full force and effect through the close
of business on the Closing Date with their current insurers, or other
financially sound insurers, insuring against the types of risks currently
insured against in at least such amounts as are currently insured against.
Buyer will not have any rights under any such insurance policies from and after
the Closing Date.
6.4 TITLE COMMITMENT. Buyer intends to obtain, prior to the Closing
and at the shared expense of Sellers and Buyer, a standard form commitment for
an owner's policy of title insurance (the "Title Commitment") issued by Chicago
Title Insurance Company in amounts equal to the appraised value of the Xxxxxxx
Facility and the Xxxx Facility as set forth in customary, third-party
appraisals, such appraisals to be procured at Buyer's expense. The Title
Commitment shall not contain any material exceptions to title except (a) the
standard exceptions to title customarily contained in such title commitments in
Michigan and which cannot be omitted on the basis of one or more affidavits of
the applicable Seller, (b) Permitted Liens, except without duplication, and
(c) such other Liens of record, if any, provided the same are consented to in
writing by Buyer. No later than five (5) Business Days prior to the Closing,
Buyer shall notify Sellers if it believes the Title Commitment fails to conform
to the foregoing, and in the absence of such notification, the Title Commitment
will be deemed for all purposes hereof so to conform. In the event of any such
objection which is appropriate and remediable by Sellers, Sellers shall
remediate the problem unless the required actions would entail expenditures in
excess of $500,000, in which case Buyer shall have the option, exercisable
within two
35
(2) Business Days, of terminating this Agreement or accepting the property with
a further purchase price adjustment of $500,000. If the Buyer so elects to
proceed, the Title Commitment shall be deemed for all purposes hereof to conform
with this Section 6.4.
6.5 ACQUISITION PROPOSALS. From and after the date hereof until the
termination hereof, without the written consent of Buyer, neither Seller shall
(i) solicit or initiate discussions with any Person, other than the Buyer, its
Affiliates and their respective designees and agents, relating to the possible
acquisition, whether by way of merger, reorganization, purchase of capital
stock, purchase of assets or otherwise (any such acquisition being referred to
in this section as an "Acquisition Transaction"), of any material interest in
the Business or any material Asset, (ii) provide Confidential Information with
respect to the Business or any Asset to any Person, other than Buyer, its
Affiliates and their respective designees and agents, in connection with a
possible Acquisition Transaction or (iii) enter into a transaction with any
Person, other than Buyer, its Affiliates and their respective designees and
agents, concerning a possible Acquisition Transaction. If either Seller
receives an unsolicited offer or proposal relating to an Acquisition
Transaction, such Seller shall immediately reject such offer and notify Buyer
and provide information to Buyer as to the identity of the party making any such
offer or proposal and the specific terms of such offer or proposal. The parties
recognize and acknowledge that a breach by any Seller of Section 6.5 will cause
irreparable and material loss and damage for Buyer, the amount of which cannot
be readily determined and as to which it will not have any adequate remedy at
law or in damages. Accordingly, in addition to any remedy Buyer may have in
damages by an action at law, it shall be entitled to the issuance of an
injunction restraining any such breach or any other remedy at law or in equity
for any such breach.
6.6 ACCOUNTS RECEIVABLE. Each Seller agrees promptly to forward to
Buyer any and all proceeds from accounts receivable of the Business that are
received by such Seller after the Closing Date. If, after the Closing Date,
either Seller receives any payment from any Person who at the time of such
payment has outstanding accounts payable to such Seller, on the one hand (for
the purposes of this Section, "Seller Accounts Receivable"), and to the Buyer,
on the other hand (for the purposes of this Section, "Buyer Accounts
Receivable"), and the payment (a) does not indicate whether it is in respect of
Seller Accounts Receivable or Buyer Accounts Receivable or (b) indicates that it
is in payment of both Seller Accounts Receivable and Buyer Accounts Receivable
without specifying the portion to be allocated to each, then such Seller and
Buyer shall consult with one another to determine the proper
36
allocation of such payment; and, if they are unable to reach agreement on the
proper allocation, such payment shall be applied so as to retire Seller Accounts
Receivable and Buyer Accounts Receivable in chronological order based upon the
invoice date thereof.
6.7 DISCLOSURE OF INFORMATION; NON-COMPETITION.
(a) From and after the Closing, Sellers shall not use or
disclose to any Person, except as required by any Requirement of Law, any
Confidential Information (as hereinafter defined), for any reason or purpose
whatsoever, nor shall they make use of any of the Confidential Information for
their own purposes or for the benefit of any Person except Buyer or any of its
Affiliates. For purposes of this Agreement, "Confidential Information" shall
mean all information of a proprietary nature relating to Controls, the Business
or the Assets (other than information which is in the public domain at the time
of receipt thereof by the receiving Person or is in such Person's possession at
the time of its use or disclosure by Sellers, in either case other than as a
result of the breach by the Sellers of its agreement hereunder).
(b) Each of the Sellers acknowledges and recognizes that the
Business has been conducted by the Sellers, and substantial sales of its
products have been made, throughout the United States, and further acknowledges
and recognizes the highly competitive nature of the industry in which the
Business is involved. Accordingly, in consideration of the premises contained
herein and the consideration to be received hereunder, and in consideration of
and as an inducement to the Buyer to consummate the transactions contemplated
hereby, the Sellers shall not from and after the Closing until the third
anniversary of the Closing Date (i) directly or indirectly engage, whether or
not such engagement shall be as a partner, stockholder, Affiliate or other
participant, in any Competitive Business, or represent in any way any
Competitive Business, whether or not such engagement or representation shall be
for profit, (ii) interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between the Buyer and any other Person, including,
without limitation, any customer, supplier or employee of the Buyer, (iii)
induce any employee of the Buyer or the Business to terminate his employment
with the Buyer or the Business or to engage in any Competitive Business in any
manner described in the foregoing clause (i) (as well as an officer or director
of any Competitive Business), or (iv) affirmatively assist or induce any other
Person to engage in any Competitive Business in any manner described in the
foregoing clause (i) (as well as an officer or director of any Competitive
Business). As used herein, "Competitive Business" shall mean any business
involving the sale of any of the products described on Schedule 6.7 hereto in
any city or county in any state of the
37
United States or anywhere outside the United States. Notwithstanding the
foregoing, nothing in this Agreement shall be construed to prohibit MagneTek
from manufacturing, marketing or distributing any medium-voltage starter
products after the first anniversary of the Closing Date, PROVIDED, that, with
respect to such product, during the period prior to the third anniversary
MagneTek will not market to or solicit sales from the principal existing
customer of the Business for such product. MagneTek will not be permitted,
however, to incorporate in any manner whatsoever into its medium-voltage starter
products any technology that is included in the Assets, except to the extent
such technology is in the public domain. Anything contained in this Section 6.7
to the contrary notwithstanding, the acquisition by any of the Sellers of any
Person, less than 10% of the gross revenues of which are derived in a
Competitive Business, shall not constitute a breach of this Section 6.7 if such
Competitive Business of such Person is sold or otherwise disposed of or
discontinued within the year following such acquisition. In addition, nothing
in this Agreement shall prohibit either Seller from acquiring (i) no more than
15%, in the case of a privately held Person and (ii) no more than 5%, in the
case of a Person whose securities are actively traded in any securities market
worldwide, of the securities of any class, of a Person engaged in a Competitive
Business.
(c) It is the desire and intent of the parties that the
provisions of this Section 6.7 be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of this
Section 6.7 shall be adjudicated to be invalid or unenforceable, such provision
shall be deemed amended to the extent necessary in order that such provision be
valid and enforceable, such amendment to apply only with respect to the
operation of such provision of this Section 6.7 in the particular jurisdiction
in which such adjudication is made.
(d) The parties recognize and acknowledge that a breach by any
Seller of this Section 6.7 will cause irreparable and material loss and damage
to Buyer, the amount of which cannot be readily determined and as to which it
will not have an adequate remedy at law or in damages. Accordingly, in addition
to any remedy Buyer may have in damages by an action at law, it shall be
entitled to the issuance of an injunction restraining any such breach or any
other remedy at law or in equity for any such breach.
6.8 ASSETS. If, after the Closing Date, Assets shall remain on the
premises utilized or controlled by Sellers or any Affiliate thereof, then
Sellers shall take reasonable steps at the expense of Sellers to deliver such
Assets to Buyer, and so
38
long as such assets remain in such Seller's or Affiliates' control, shall
exercise reasonable care with respect thereto, and in no event less care than
with respect to its own properties.
6.9 REMOVAL OF LIENS. Following the date hereof, Sellers shall use
commercially reasonable efforts to (a) remove any Liens listed on Schedule 4.4
that are indicated as requiring removal prior to the Closing Date and (b) obtain
all assignments necessary to vest in the Sellers all right, title and interest
in and to the Intellectual Property Rights listed on Schedule 4.6 that are not
currently held in the name of Sellers.
ARTICLE VII
COVENANTS OF BUYER
Buyer covenants and agrees as follows:
7.1 CONFIDENTIALITY. Buyer acknowledges that the information being
provided to it by Sellers is subject to the terms of a confidentiality agreement
between Buyer and Sellers (the "Confidentiality Agreement"), the terms of which
are incorporated herein by reference. Effective upon, and only upon, the
Closing, the Confidentiality Agreement will terminate and be of no further
effect; PROVIDED, HOWEVER, that Buyer acknowledges that the Confidentiality
Agreement will terminate only with respect to information relating to the
Business; and PROVIDED, FURTHER, HOWEVER, that Buyer acknowledges that any and
all other information provided to it by Sellers or Sellers' representatives
concerning either Seller shall remain subject to the terms and conditions of the
Confidentiality Agreement after the date of the Closing.
7.2 ACCOUNTS RECEIVABLE. Buyer agrees to promptly forward or cause
to be forwarded to the applicable Seller any and all proceeds from accounts
receivable of such Seller that are received by Buyer after the Closing Date.
If, after the Closing Date, Buyer receives any payment from any person who at
the time of such payment has Seller Accounts Receivable and Buyer Accounts
Receivable, and the payment (a) does not indicate whether it is in respect of
Seller Accounts Receivable or Buyers Accounts Receivable or (b) indicates that
it is in payment of both Seller Accounts Receivable and Buyer Accounts
Receivable without specifying the portion to be allocated to each, then Sellers
and Buyer shall consult with one another to determine the proper allocation of
such payment; and, if they are unable to reach agreement on the proper
allocation, such payment shall be applied so as to retire Seller Accounts
Receivable and Buyer Accounts Receivable in chronological order based upon the
invoice dates.
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7.3 EXCLUDED ASSETS. If, after the Closing Date, Excluded Assets
shall remain on the premises utilized or controlled by Buyer, then Buyer shall
take reasonable steps at the expense of the applicable Seller to deliver such
Excluded Assets to such Seller, and so long as such assets remain in Buyer's
control, shall exercise reasonable care with respect thereto, and in no event
less care than with respect to its own properties.
7.4 INSURANCE. Buyer shall secure insurance with respect to the
Business from the Closing Date covering general liability and products liability
in amounts customary for the industry in which the Business operates.
ARTICLE VIII
MUTUAL COVENANTS
Each of Seller and Buyer covenant and agree as follows:
8.1 HSR FILINGS; PERMITS AND CONSENTS.
(a) Each Seller and Buyer have filed with the United States
Federal Trade Commission (the "FTC") and the United States Department of Justice
(the "DOJ") the notification and report form, if any, required for the
Transactions and any supplemental information requested in connection therewith
pursuant to the HSR Act. Any such notification and report form and supplemental
information will be in substantial compliance with the requirements of the HSR
Act. Each Seller and Buyer shall furnish to the other party necessary
information and reasonable assistance as the other may request in connection
with its preparation of any filing or submission which is necessary under the
HSR Act. Sellers and Buyer shall keep each other apprised of the status of any
communications with, and inquiries or requests for additional information from,
the FTC and the DOJ and shall comply promptly with any such inquiry or request.
Each Seller and Buyer will use all reasonable efforts to obtain any clearance
required under the HSR Act for the Transactions.
(b) As promptly as practicable after the date hereof, Buyer and
Sellers shall make all other filings with Governmental Authorities, and use all
reasonable efforts to obtain all permits, approvals, authorizations and consents
of all third parties, required to consummate the Transactions. Buyer and
Sellers shall furnish promptly to each other all information that is not
otherwise available to the other party and that such party may reasonably
request in connection with any such filing. Buyer and Sellers shall use
commercially reasonable efforts to obtain such consents to the assignment of
40
the Assigned Contracts as may be required; PROVIDED, HOWEVER, that such
commercially reasonable efforts shall not include any requirement that Buyer or
Sellers commence any litigation or offer or grant any accommodation (financial
or otherwise) to any third party. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement or
attempted agreement to transfer, sublease or assign any Contract or any Claim or
right with respect to any benefit arising thereunder or resulting therefrom, or
any Permit, if an attempted transfer, sublease or assignment thereof, without
the required consent of any other party thereto, would constitute a breach
thereof or in any way affect the rights or obligations of Buyer or Sellers
thereunder. Except as set forth in Section 2.7 or 11.4, Sellers shall be
responsible for the cost of complying with or obtaining the consent to or
approval of the Transactions contemplated hereby of any Person or Governmental
Authority including, without limitation, any such approval or consent required
by any safety, health, environmental or other Requirement of Law which is
applicable to the Business.
(c) With respect to each such Assigned Contract not assigned on
the Closing Date, after the Closing Date the applicable Seller shall continue to
deal with the other contracting party(ies) to such Assigned Contract as the
prime contracting party, and Buyer and such Seller shall continue to use
reasonable efforts to obtain the consent of all required parties to the
assignment of such Assigned Contract. Such Assigned Contract shall be promptly
assigned by the applicable Seller to Buyer after receipt of such consent after
the Closing Date. Notwithstanding the absence of any such consent, Buyer shall
be entitled to the benefits of such Assigned Contract accruing after the Closing
Date to the extent that the applicable Seller may provide Buyer with such
benefits without violating the terms of such contract; and to the extent such
benefits are so provided, Buyer agrees to perform at its sole expense all of the
obligations of such Seller to be performed under such Assigned Contract after
the Closing Date.
8.2 COOPERATION. Buyer and Sellers shall cooperate with each other
and shall cause their officers, employees, agents, auditors and representatives
to cooperate with each other after the Closing to ensure the orderly transition
of the Business to Buyer and to minimize any disruption to the respective
businesses of Sellers or the Business that might result from the Transactions,
including that to the extent that Continental Illinois National Bank and Trust
Company of Chicago and Bank of America in Simi Valley agree to transfer to Buyer
the lock boxes maintained by Sellers with such banks (respectively, lock box no.
98438 and 53768), Sellers shall cooperate in such transfers.. Neither party
shall be required by this Section 8.2 to take any action that would unreasonably
interfere with the conduct of its business.
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8.3 PUBLICITY. Sellers and Buyer agree that, from the date hereof
through the Closing Date, no public release or announcement concerning the
Transactions shall be issued without the prior consent of Sellers, on the one
hand, or Buyer, on the other hand (which consent shall not be unreasonably
withheld or delayed), except as such release or announcement may be required by
any Requirement of Law, in which case the party required to make the release or
announcement shall allow the other party reasonable time to comment on such
release or announcement in advance of such issuance.
8.4 REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement (including the limitations set forth in Section 8.1), each party will
use all reasonable efforts to cause the Closing to occur.
8.5 RECORDS. On the Closing Date, Sellers shall deliver or cause to
be delivered to Buyer all Records (to the extent not then in the possession of
the Business), except any Records relating primarily to Excluded Liabilities
(including, without limitation, to Sellers' Tax liability or to any litigation
or claim not assumed by Buyer hereunder). After the Closing, upon reasonable
written notice and at Buyer's sole expense, Sellers agree to furnish or cause to
be furnished to Buyer and its representatives (including its auditors), access
at reasonable times and during normal business hours to all such information
relating to the Business in such Seller's possession as is reasonably necessary
for financial reporting and accounting matters, the preparation and filing of
any Tax Returns, reports or forms or the defense of any Tax Claim or assessment
and will permit such representatives to make abstracts from or copies of any
such records, the out-of-pocket expense of which shall be entirely borne by
Sellers; PROVIDED, HOWEVER, that such access does not unreasonably disrupt the
normal operations of such Seller. Buyer shall, and shall cause its
representatives to, use the information provided pursuant hereto solely for the
purposes for which it may be requested set forth herein.
8.6 ACCESS TO FORMER BUSINESS RECORDS. Buyer will retain all
historical accounting, financial and Tax Records and all Records relating to the
manufacture of products sold by the Business prior to the Closing Date for a
period of seven (7) years following the Closing, and Buyer will retain all other
material Records for a period of at least three (3) years following the Closing.
During such periods, upon reasonable written notice and at Buyer's sole expense,
Buyer will afford authorized representatives of either Seller (including their
respective auditors) access to such Records at reasonable times and during
normal business hours at the principal business office of the Business, or at
such other location or locations at which such Records may be stored or
maintained from time to
42
time, and will permit such representatives to make abstracts from, or copies of,
any of such Records, at such Seller's sole cost and expense. During such
periods, Buyer will, upon the reasonable request of either Seller and at such
Seller's expense (limited, however, to Buyer's reasonable out-of-pocket
expenditures without regard to any employee cost or other overhead expenses),
cooperate with such Seller in furnishing information, evidence, testimony, and
other reasonable assistance in connection with any action, proceeding, Tax
audit, or investigation to which such Seller or any of its Affiliates is subject
relating to the business of the Business prior to the Closing; PROVIDED,
HOWEVER, that such access does not unreasonably disrupt the normal operations of
Buyer. Sellers shall, and shall cause their representatives to, use the
information provided pursuant hereto solely for the purposes for which it may be
requested as set forth herein. Following the expiration of the aforesaid
three-year or seven-year period as applicable, Buyer may dispose of such work
papers, books and records at any time upon giving 30 days' prior written notice
to Sellers, unless Sellers agree to take possession of such work papers, books
and records within such 30 days at no expense to Buyer.
8.7 USE OF TRADEMARK AND TRADE NAMES.
(a) Notwithstanding anything to the contrary in this Agreement,
Buyer may continue to use the name "MagneTek" and related trademarks, corporate
names, and trade names incorporating "MagneTek," and the stylized "MagneTek"
logos (i) in displays, signage and postings for the period after the Closing
Date necessary to permit the removal of such names as promptly as is reasonably
feasible, and only to the extent such displays, signage or postings exist on the
Closing Date; (ii) for a period of two years, to state the Business' former
affiliation with MagneTek (e.g., "formerly a division of MagneTek, Inc.") and
(iii) to the extent any such trade names, trademarks, service marks or logos
appear on stationery, packaging materials, supplies or inventory on hand as of
the Closing Date or on order at the time of the Closing, until such is
exhausted.
(b) Notwithstanding anything to the contrary in this Agreement,
Sellers may continue to use the name "MagneTek Controls" and related trademarks
and trade names incorporating "MagneTek Controls," and any stylized "MagneTek
Controls" logos.
8.8 REQUIRED MODIFICATIONS OR REPLACEMENTS OF PRODUCTS. The
following provisions of this Section 8.8 shall govern the responsibilities of
Buyer and Sellers regarding Required Modifications:
43
(a) Buyer shall advise the appropriate Seller promptly after an
officer of Buyer shall have concluded that there is a reasonable likelihood that
a Required Modification to any product shipped by the Business prior to the
Closing Date would materially affect the amount or likelihood of any related
liability with respect to such product for which Sellers would be obligated to
indemnify Buyer.
(b) Whether or not Buyer gives the foregoing notice, Buyer shall
make any Required Modifications, at the reasonable request and expense pursuant
to Section 8.3(c) of the applicable Sellers, to products shipped by the Business
prior to the Closing Date which are necessary or advisable, in the reasonable
discretion of the applicable Seller. If the cost to such Seller under
Section 8.8(c) of implementing any such Required Modification exceeds the cost
to such Seller of replacing such products, Buyer shall replace such products.
The obligation of Buyer hereunder shall include, but not be limited to, such
actions as such Seller may reasonably request for (i) the notification of
customer and other third parties in possession of the applicable products, (ii)
the shipping of such products, if necessary, to and from Buyer's facilities for
modification, improvement, enhancement or replacement, (iii) production of
replacement products, parts or supplies necessary for the implementation of the
product modification, enhancement, improvement or placement, (iv) the
installation, modification or replacement of the product by personnel of Buyer,
either at the customer's location or at Buyer's facilities, as appropriate, and
(v) recordkeeping and reports with respect to such product modifications,
enhancements, improvements or replacements to the extent required by law or
reasonably requested by Seller.
(c) The applicable Seller shall reimburse Buyer for direct
manufacturing, installation, labor and materials costs incurred by Buyer in
installing or implementing any Required Modification under Section 8.8(b) or in
producing any replacement products, parts or supplies under Section 8.8(b),
together with all reasonable out-of-pocket shipping, postage and printing and
other costs incurred by Buyer in connection therewith.
8.9 ASSUMED LITIGATION. Notwithstanding any other provision of this
Agreement, upon the Closing Buyer will assume, to the extent herein set forth,
liability for claims alleging personal injury, illness or other Loss based upon
exposure or alleged exposure prior to or following the Closing Date to asbestos
occurring in the industrial brake product line no longer manufactured by the
Business ("Asbestos Claims"), only as follows:
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(a) during the two (2) years immediately succeeding the Closing
Date, Buyer shall assume responsibility (with commercially reasonable assistance
as to information, case histories and similar matters from Sellers) for the
administration of Asbestos Claims and all related litigation, such that, by the
end of such two-year period, the administration thereof shall have become
Buyer's responsibility entirely;
(b) during the five (5) years immediately succeeding the Closing
Date, the Losses from Asbestos Claims and/or related litigation shall be shared
equally as between Sellers, on the one hand, and Buyer, on the other hand,
PROVIDED, that notwithstanding anything to the contrary contained herein,
Buyer's share of such Losses shall not exceed $100,000 during either the first
or second twelve-month periods or $200,000 during any of the third, fourth or
fifth twelve-month periods of such five (5) year period; and notwithstanding
anything to the contrary in Article X, amounts so expended shall not be
considered to contribute to or count against the minimum and aggregate maximum
amounts for which indemnification is provided in Article X hereof; and
(c) from and after the fifth anniversary of the Closing Date,
Buyer shall be liable for all Losses arising from Asbestos Claims, and,
notwithstanding anything to the contrary in Article X, Seller shall be
indemnified therefor under Section 10.2(c) without application of any minimum or
aggregate maximum amount for which indemnification is so provided in Article X.
8.10 WAIVER OF BULK SALES LAW COMPLIANCE. Buyer hereby waives
compliance by Sellers with the requirements, if any, of Article 6 of the Uniform
Commercial Code as in force in any state in which Assets are located and all
other similar Requirements of Law applicable to bulk sales and transfers, to the
extent applicable to the Transactions (the "Bulk Sale Laws").
8.11 FURTHER INSTRUMENTS AND ASSURANCES. Sellers shall, at any time
and from time to time after the Closing, upon the reasonable request of and at
the expense of Buyer, do, execute, acknowledge, deliver and file, or cause to be
done, executed, acknowledged, delivered and filed, all such further acts,
transfers, conveyances, assignments or assurances as may reasonably be required
for better selling, transferring, conveying, assigning and assuring to Buyer, or
for aiding and assisting in the collection of or reducing to possession by
Buyer, any of the Assets. Similarly, Buyer shall, at any time and from time to
time after the Closing, upon the reasonable request of and at the expense of
Sellers, do, execute, acknowledge, deliver and file, or cause to be done,
executed,
45
acknowledged, delivered and filed, all such further acts, transfers,
conveyances, assignments or assurances as may reasonably be required for better
effectuating the assumption by Buyer of the Assumed Liabilities.
ARTICLE IX
EMPLOYEE BENEFIT MATTERS
9.1 EMPLOYEE RETENTION. Buyer shall offer employment to commence as
of the Closing Date to all Business Employees, at substantially the same
salaries and wages (including division-level, but not MagneTek-wide bonus and
incentive programs) and except as provided in Section 9.2, on substantially the
same terms and conditions as those in effect immediately prior to the Closing
Date (any such employees who accept such offer of employment being referred to
herein as the "Hired Employees"). Buyer shall have no obligation to offer
employment to and shall have no other liability to any Business Employee who, on
the Closing Date, is not actively employed or is on disability, leave of absence
(but not vacation, illness leave or maternity leave), military service leave or
lay-off (whether or not with recall rights), or whose employment has been
terminated (voluntarily or involuntarily) or who has retired prior to the
Closing Date. Buyer has no present intention (subject to its discretion as to
employee performance) to terminate the employment of any Business Employee
within the sixty (60) days following the Closing Date, and Buyer assumes all
obligations and liabilities, if any, under the Worker Adjustment and Retraining
Notification Act (the "WARN Act") arising out of the Transactions but no other
actual or potential liability of Sellers, whether by Contract or Requirement of
Law, relating to termination or severance of Business Employees.
9.2 EMPLOYEE BENEFIT PLANS.
(a) Effective as of the Closing Date, (i) Hired Employees shall
cease accruing any benefits under any Seller Plan, and Sellers shall take, or
cause to be taken, all such action, if any, as may be necessary to effect such
cessation of participation and (ii) Buyer shall establish employee benefit plans
providing benefits which in the aggregate are substantially the same as the
benefits provided to Business Employees under the Seller's Plans listed on
Schedule 4.9(a), (b) and (c) as described to Buyer in the materials referred to
in Section 4.9 (provided that Buyer shall have no obligation to, and shall not,
establish a defined benefit pension plan or a retiree health or life insurance
benefit plan) (the "Buyer's Benefit Plans"). With respect to the Buyer's
Benefit Plans, Buyer shall grant all Hired Employees from and after the Closing
Date credit for all service with the applicable Seller and its Affiliates and
their respective predecessors prior to the
46
Closing Date for all purposes for which such service was recognized by either
Seller and its Affiliates. With respect to Buyer's Benefit Plans that provide
medical or dental benefits after the Closing Date, such plans shall waive any
exclusions or limitations with respect to pre-existing conditions and actively-
at-work exclusions and shall provide that any expenses incurred on or before the
Closing Date by a Hired Employee or his covered dependents shall be taken into
account under such Buyer's Benefit Plans for purposes of satisfying applicable
deductible, coinsurance and maximum out-of-pocket provisions. Buyer shall also
cause its health plan(s) to be responsible for all health benefit claims by
Hired Employees and their covered dependents for services rendered after the
Closing Date.
(b) On or prior to the Closing Date, Sellers shall cause all
Business Employees to be fully vested in all benefits accrued as of the Closing
Date under the MagneTek, Inc., FlexCare Plus Retirement Pension Plan and the
MagneTek, Inc., FlexCare Plus Retirement Savings Plan.
(c) Sellers shall be solely responsible for and shall pay when
due any amounts payable under any Sellers' Plan in respect of the Transactions
including, without limitation, under the Bonus Agreements. Notwithstanding the
foregoing, no Hired Employee shall be entitled to receive, and no Seller shall
be required by the terms of this Agreement to pay to any Hired Employee, any
portion of the executive incentive compensation plan for fiscal years 1994 or
1995.
9.3 VACATION AND HOLIDAY PAY. As of the Closing Date, Buyer shall
assume all of Sellers' obligations for vacation and holiday pay to all Hired
Employees.
9.4 ACCESS TO INFORMATION. Commencing with the date hereof and
continuing to the Closing Date and thereafter, Sellers shall make reasonably
available to Buyer such actuarial, financial, personnel and related information
as may be reasonably requested by Buyer with respect to any Seller Plan as it
relates to a Business Employee, including, but not limited to, compensation and
employment histories.
9.5 NO THIRD PARTY BENEFICIARY. Nothing contained in this Article IX
or elsewhere herein shall confer upon any Hired Employee or Business Employee
any rights or remedies of any nature or kind whatsoever under or by reason of
this Agreement, including, without limitation, any right to employment or
continued employment or to any benefits that may be provided, directly or
indirectly, under any employee benefit plan, policy or arrangement of either
Seller or of Buyer, nor shall anything contained in this Article IX or elsewhere
herein constitute a limitation on or restriction against the right of either
Seller
47
or of Buyer to amend, modify or terminate any such plan, policy or arrangement
or the terms or conditions of employment.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY SELLERS. Subject to the terms and conditions
of this Article X, Sellers shall, jointly and severally, indemnify Buyer and
each of its officers, directors, employees, agents, Affiliates and successors
and assigns in respect of all or substantially all of the Business, against, and
hold them harmless from, any Loss sustained, suffered or incurred by any such
Indemnified Person (other than any relating to environmental matters, for which
indemnification provisions are set forth in Section 10.3) to the extent arising
from (a) if the Closing occurs, any breach of any representation or warranty of
either Seller contained in this Agreement which survives the Closing or in any
certificate, instrument or other document delivered pursuant hereto, (b) any
breach of any covenant or agreement of either Seller contained in this Agreement
or any other Transaction Document or (c) if the Closing occurs, the existence
of, or the failure of such Seller to pay, perform and discharge when due, any of
the Excluded Liabilities (including, without limitation, any Losses as a result
of the failure of such Seller to comply with any Bulk Sales Laws referred to in
Section 8.10); PROVIDED, HOWEVER, that neither Seller shall have any liability
under clause (a) of this Section 10.1 unless the aggregate of all Losses
relating thereto for which Sellers would, but for this proviso, be liable
exceeds on a cumulative basis together with Losses for which Buyer is
indemnified under Section 10.3, an amount equal to $500,000 (and then only to
the extent of any such excess); and PROVIDED FURTHER, HOWEVER, that Sellers'
aggregate liability under clause (a) of this Section 10.1, clause (c) of this
Section 10.1 (with respect to Excluded Liabilities other than Specifically
Excluded Liabilities) and Section 10.3 shall in no event exceed $15,000,000.
Sellers shall have no obligation to indemnify Buyer with respect to any Loss,
including but not limited to, any breach of the representations set forth in
Section 4.5, which are within the scope of the Title Policy procured in
accordance with the Title Commitment referred to in Section 6.4, and Buyer
agrees that its sole recourse with respect to such matters shall be against the
issuer of such Title Policy.
10.2 INDEMNIFICATION BY BUYER. Subject to the terms and conditions of
this Article X, Buyer shall indemnify Sellers and each of their respective
officers, directors, employees, agents, Affiliates and successors and assigns in
respect of all or substantially all of the Business, against, and hold them
harmless from, any Loss sustained, suffered or incurred by any such Indemnified
Person (other than any relating to
48
environmental matters, for which indemnification provisions are set forth in
Section 10.3) to the extent arising from (a) if the Closing occurs, any breach
of any representation or warranty of Buyer contained in this Agreement which
survives the Closing or in any certificate, instrument or other document
delivered pursuant hereto or in connection herewith, (b) any breach of any
covenant or agreement of Buyer contained in this Agreement or any other
Transaction Document, (c) if the Closing occurs, the existence of, or the
failure of Buyer to pay, perform and discharge when due, any of the Assumed
Liabilities and (d) any violation of a Requirement of Law with respect to the
Business for which Buyer is responsible other than those for which
indemnification of Sellers by Buyer is provided in Section 10.3; PROVIDED,
HOWEVER, that Buyer shall not have any liability under clause (a) of this
Section 10.2 unless the aggregate of all Losses relating thereto for which Buyer
would, but for this proviso, be liable exceeds on a cumulative basis, together
with Losses for which Sellers are indemnified under Section 10.3, an amount
equal to $500,000 (and then only to the extent of such excess); and PROVIDED
FURTHER, HOWEVER, that Buyer's aggregate liability under clause (a) of this
Section 10.2 shall in no event exceed $15,000,000.
10.3 INDEMNIFICATION FOR ENVIRONMENTAL MATTERS. Subject to the terms
and conditions of this Article X, Sellers, jointly and severally, shall
indemnify and hold Buyer harmless from and against all Losses (i) resulting from
claims or demands by any Governmental Authority or any third party which is
unrelated to Buyer or its Affiliates arising under (A) any Environmental Law, or
(B) under any common law tort claim theory applicable to Hazardous Materials or
(ii) Hazardous Materials remediation otherwise specifically required to be
performed or conducted by any Environmental Law, in each case to the extent such
Losses (a) are attributable, based on events, facts or circumstances existing or
occurring prior to the Closing Date, to the Business or any premises owned,
operated or otherwise used by either Seller prior to the Closing Date including,
without limitation, any Business Property (a "Seller Facility") or to Hazardous
Materials transported offsite from a Seller Facility for treatment, storage,
disposal or otherwise prior to the Closing Date and (b) exceed, on a cumulative
basis together with Losses for which Buyer is indemnified under clause (a) of
Section 10.1, an amount equal to $500,000 (but only to the extent of such
excess); and PROVIDED, FURTHER, that Sellers' aggregate liability under
clause (a) of this Section 10.3, Section 10.1 and clause (c) of Section 10.1
(with respect to Excluded Liabilities other than Specifically Excluded
Liabilities) shall in no event exceed $15,000,000. Sellers' indemnification
liability hereunder shall in no event be construed to extend to or include any
remediation arising as a result of the presence of asbestos in or upon any of
the improvements located on the Business Property at any time, other
49
than any reasonably necessary to remediate or contain friable asbestos at the
Closing Date, which shall be included in the indemnification provided in this
Section 10.3. Sellers' obligation to indemnify Buyer under this Section 10.3
shall expire on the third anniversary of the Closing Date, and Buyer hereby
expressly releases Sellers, but not any Person (other than successors and
assigns of, or Indemnified Persons related to, either Seller) from and after
such third anniversary from any liability in respect of the matters covered by
such indemnification, whether arising by statute or common law, or otherwise.
Buyer shall indemnify and hold Sellers harmless from and against all Losses
resulting from claims or demands by any Governmental Authority or private party
that is unrelated to Sellers arising under any Environmental Law, or under any
common tort claim theory applicable to Hazardous Materials to the extent such
Losses are attributable to Buyer's operation of any Business Property (but not
as to Hazardous Materials present at such property on or prior to the Closing
Date) or conduct of the Business (whether by commission or omission) after the
Closing Date. Nothing in this Section 10.3 shall be interpreted to limit
Buyer's obligations in respect of the Asbestos Claims as set forth in
Section 8.9.
10.4 LOSSES NET OF INSURANCE, ETC.
(a) The amount of any Loss for which indemnification is provided
under this Article X shall be net of any amounts recovered or recoverable by the
Indemnified Person under insurance policies with respect to such Loss and of any
reserve in respect thereof reflected on the Closing Balance Sheet.
(b) If the Indemnifying Person makes any payment under this
Article X in respect of any Loss, the Indemnifying Person shall be subrogated,
to the extent of such payment, to the rights of the Indemnified Person against
any insurer or third party with respect to such Losses.
(c) Each party agrees that it will not seek punitive damages as
to any matter under, relating to or arising out of the Transactions.
(d) The parties hereto agree that the indemnification provisions
of this Article X are intended to provide the exclusive remedy as to all Losses
either may incur arising from or relating to the Transactions, and each party
hereby waives, to the extent they may do so, any other rights or remedies that
may arise under any applicable statute, rule or regulation; PROVIDED, HOWEVER,
that the foregoing shall not be interpreted to limit the types of remedies,
including specific performance or other equitable remedies, which may be sought
by an Indemnified Person in connection with a breach of any
50
covenant or agreement contained in this Agreement, or in respect of any third
party, regardless of the monetary Loss such Indemnified Person has sustained,
provided that the Losses of such person in connection with the pursuit of such
remedy shall be subject to all of the provisions of this Article X.
10.5 TERMINATION OF INDEMNIFICATION. The obligations to indemnify and
hold harmless a party hereto, (A) pursuant to Sections 10.1(a) and 10.2(a),
shall terminate when the applicable representation or warranty terminates
pursuant to Section 10.8 and (B) pursuant to Section 10.3, shall terminate as
set forth therein; PROVIDED, HOWEVER, that as to clauses (A) and (B) above, such
obligations to indemnify and hold harmless shall not terminate with respect to
any item as to which the person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice (stating in reasonable detail the basis of such claim) to the
Indemnifying Person.
10.6 PROCEDURES RELATING TO INDEMNIFICATION (OTHER THAN FOR TAX
CLAIMS). In order for an Indemnified Person to be entitled to any
indemnification provided for under this Agreement (other than for Tax Claims) in
respect of, arising out of or involving a claim or demand made by any Person
against the Indemnified Person (a "Third-Party Claim"), such Indemnified Person
must notify the Indemnifying Person in writing, and in reasonable detail, of the
Third-Party Claim promptly, and in all events within ten (10) Business Days
after receipt by such Indemnified Person of actual notice of such Third-Party
Claim; PROVIDED, HOWEVER, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
Indemnifying Person shall have been actually prejudiced as a result of such
failure. Thereafter, the Indemnified Person shall deliver to the Indemnifying
Person, within five (5) Business Days after the Indemnified Person's receipt
thereof, copies of all notices and documents (including court papers) received
by the Indemnified Person relating to the Third-Party Claim; PROVIDED, HOWEVER,
that failure to provide such notices and documents shall not affect the
indemnification provided hereunder except to the extent the Indemnifying Person
shall have been actually prejudiced as a result of such failure.
If a Third-Party Claim is made against an Indemnified Person, the
Indemnifying Person will be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Person and reasonably satisfactory to the Indemnified Person by
sending a written notice to the Indemnified Person within 30 days of delivery of
the Claims Notice notifying him or it that the Indemnifying Person acknowledges
its indemnification liability with respect to Losses, if any, of the Indemnified
Person arising from the Third-Party Claim and is assuming the defense
51
of such Third-Party Claim; PROVIDED, HOWEVER, that in the event that the named
parties to any such action or proceeding (including any impleaded parties)
include both the Indemnified Person and the Indemnifying Person and the former
shall have been advised in writing by counsel (with a copy to the Indemnifying
Person) that there is actually or is reasonably likely to be a conflict among or
between the Indemnified Person and Indemnifying Persons, the Indemnified Person
may obtain separate counsel reasonably satisfactory to the Indemnifying Person
(but in no event more than one such counsel at the expense of the Indemnifying
Party in any matter) and the Indemnified Person shall cause such counsel to
cooperate with the Indemnifying Party in the defense of the overall action.
Should the Indemnifying Person so elect to assume the defense of a Third-Party
Claim, the Indemnifying Person will not be liable to the Indemnified Person for
legal fees and expenses subsequently incurred by the Indemnified Person in
connection with the defense thereof except to the extent set forth in the
preceding sentence. If the Indemnifying Person assumes such defense, the
Indemnified Person shall have the right to participate in the defense thereof
and to employ counsel, at its own expense, separate from the counsel employed by
the Indemnifying Person, it being understood that the Indemnifying Person shall
control such defense. The Indemnifying Person shall be liable for the fees and
expenses of counsel employed by the Indemnified Person for any period during
which the Indemnifying Person has not assumed the defense thereof. If the
Indemnifying Person chooses to defend or prosecute any Third-Party Claim, all
the parties hereto shall cooperate in the defense or prosecution thereof. Such
cooperation shall include the retention and (upon the Indemnifying Person's
request) the provision to the Indemnifying Person of records and information
which are reasonably relevant to such Third-Party Claim, and making employees
available on a mutually convenient basis in the manner specified in Section 8.6
hereof to provide additional information and explanation of any material
provided hereunder. Whether or not the Indemnifying Person shall have assumed
the defense of a Third-Party Claim, (i) the Indemnified Person shall not admit
any liability with respect to, or settle, compromise or discharge, such
Third-Party Claim without the Indemnifying Person's prior written consent (which
consent shall not be unreasonably withheld or delayed) and (ii) the Indemnifying
Person shall not enter into any such settlement, compromise or discharge that
does not include, as one of its terms, the unconditional release of the
Indemnified Person. Anything to the contrary contained in the first sentence of
this Section 10.6 notwithstanding, the Indemnifying Person's acknowledgment of
indemnification liability with respect to any Third Party Claim shall not
preclude the Indemnifying Person from later contesting its indemnification
liability vis-a-vis the Indemnified Person with respect to such Third Party
Claim on the basis of developments following delivery of the Claims
52
Notice; PROVIDED, FURTHER, that the failure of the Indemnifying Person to send
the Claims Notice within the 30 days set forth in the first sentence of this
Section 10.6 shall not affect the indemnification provided hereunder except to
the extent the Indemnified Person shall have been actually prejudiced as a
result of such failure. All Tax Claims (as defined in Section 10.7) shall be
governed by Section 10.7.
10.7 PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS.
(a) If a claim shall be made by any Tax authority, which, if
successful, might result in an indemnity payment to any Person hereunder (a "Tax
Indemnitee"), the Tax Indemnitee shall promptly notify the party against whom
indemnification is sought (the "Tax Indemnitor") in writing of such claim (a
"Tax Claim"). If notice of a Tax Claim is not given to the Tax Indemnitor
within a sufficient period of time to allow the Tax Indemnitor to effectively
contest such Tax Claim, or in reasonable detail to apprise the Tax Indemnitor of
the nature of the Tax Claim, in each case taking into account the facts and
circumstances with respect to such Tax Claim, the Tax Indemnitor shall not be
liable to the Tax Indemnitee to the extent that the Tax Indemnitor's ability to
effectively contest such Tax Claim is actually prejudiced as a result thereof.
(b) With respect to any Tax Claim, the Tax Indemnitor shall
control all proceedings taken in connection with such Tax Claim (including,
without limitation, selection of counsel) and, without limiting the foregoing,
may in its sole discretion pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any taxing authority with respect
thereto and may, in its sole discretion, either pay the Tax claimed and xxx for
a refund where applicable law permits such refund suits or contest the Tax Claim
in any permissible manner, provided, however, that the Tax Indemnitor shall not
admit liability or settle, compromise or discharge a Tax Claim without giving 30
days' prior notice to the Tax Indemnitee, and without the Tax Indemnitee's
consent, which shall not be unreasonably withheld or delayed; provided, however,
that the failure of the Tax Indemnitor to give such notice to the Tax Indemnitee
shall not affect the indemnification provided hereunder except to the extent the
Tax Indemnitee shall have been actually prejudiced as a result of such failure.
The Tax Indemnitee, and each of its Affiliates, shall cooperate with the Tax
Indemnitor in contesting any Tax Claim, which cooperation shall include, without
limitation, the retention and (upon the Tax Indemnitor's request) the provision
to Tax Indemnitor of Records and information which are reasonably relevant to
such Tax Claim, and making employees available on a mutually convenient basis in
the manner in Section 8.6 to provide additional information or explanation of
53
any material provided hereunder or to testify at proceedings relating to such
Tax Claim.
10.8 SURVIVAL OF REPRESENTATIONS. The representations and warranties
in this Agreement and in any other Transaction Document delivered in connection
herewith shall survive the Closing solely for purposes of Sections 10.1(a) and
10.2(a) and, except as set forth in the next sentence, shall terminate at the
close of business eighteen months after the Closing Date. The representations
and warranties in Section 4.1(a), 4.4, the second sentence of Section 4.6(a) and
5.1(a) shall not terminate and shall remain in full force and effect without
time limit, and the representations and warranties in Section 4.3 shall
terminate upon expiration of the applicable statute of limitations (including
any extensions thereof agreed to by Sellers). The representations and
warranties relating to environmental matters in Section 4.10 shall not survive
the Closing.
10.9 PARTIES FREE TO REFER TO OBLIGATIONS OF THE OTHER.
Notwithstanding anything to the contrary herein, neither Sellers nor Buyer shall
be prohibited or restricted from asserting any defense vis-a-vis a third party
to any liability or obligation with respect to any Excluded Liabilities or
Assumed Liability, as the case may be, including, without limitation, asserting
that any such Excluded Liability or Assumed Liabilities, as the case may be, is
the liability or obligation of the other party or parties.
10.10 INTEREST. Any amounts determined to be owing to any
Indemnified Person for indemnification under this Article X shall bear interest
at the reference rate announced from time to time by the San Xxxxxxxxx xxxxxx of
Bank America from the date that the subject Loss was suffered or incurred until
the date paid to such Indemnified Person.
ARTICLE XI
GENERAL PROVISIONS
11.1 BENEFITS OF AGREEMENT; ASSIGNMENT. The terms and provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Anything
contained herein to the contrary notwithstanding, this Agreement shall not be
assignable by any party hereto without the consent of the other parties hereto;
PROVIDED, HOWEVER, that (a) MagneTek may assign this Agreement to any Person who
acquires substantially all of the assets of MagneTek and (b) Buyer may transfer
or assign, in whole or from time to time in part, to one or more of its
Affiliates, any of its rights in, to and under this Agreement, including,
without limitation, the right to purchase all or any
54
part of the Purchased Assets, but in no event shall any such transfer or
assignment relieve Buyer of its obligations under this Agreement, and (c) Buyer
may assign its rights hereunder to or for the benefit of any Person holding a
financial obligation of Buyer issued in connection with the Financing of the
transactions contemplated thereby or in connection with any renewal, extension,
modification, amendment, refinancing, refunding or replacement of any such
financial obligation.
11.2 NO THIRD-PARTY BENEFICIARIES. Except as provided in Article X as
to Indemnified Persons, this Agreement is for the sole benefit of the parties
hereto and their permitted assigns and nothing herein expressed or implied shall
give or be construed to give to any person or entity, other than the parties
hereto and such assigns, any legal or equitable rights hereunder.
11.3 TERMINATION.
(a) Anything contained herein to the contrary notwithstanding,
this Agreement may be terminated (except as set forth in Section 11.3(c)) and
the Transactions abandoned at any time prior to the Closing Date:
(i) by mutual written consent of each Seller and
Buyer;
(ii) by either Seller if any of the conditions set
forth in Section 3.2 shall have become incapable of fulfillment,
and shall not have been waived by such Seller;
(iii) by Buyer if any of the conditions set forth in
Section 3.1 shall have become incapable of fulfillment, and shall
not have been waived by Buyer; or
(iv) by either party hereto, if the Closing does not
occur on or prior to June 30, 1994; PROVIDED, HOWEVER, that such
date shall be extended to July 1, 1994 solely in the event the
waiting period under the HSR Act shall not have been terminated
prior to June 30, 1994.
(b) In the event of termination by Sellers or Buyer pursuant to
this Section 11.3, written notice thereof shall forthwith be given to the other
party and the Transactions shall be terminated, without further action by either
party. If the Transactions are terminated as provided herein:
(i) Buyer shall return all documents and copies and
other material received from each
55
Seller relating to the Transactions, whether so obtained before or
after the execution hereof, to such Seller;
(ii) all confidential information received by Buyer with
respect to the Business and Sellers shall be treated in accordance
with the Confidentiality Agreement which shall remain in full
force and effect notwithstanding the termination of this Agreement.
(c) If this Agreement is terminated pursuant to its terms and
the transactions contemplated hereby are abandoned as described in this Section
11.3, this Agreement shall become void and of no further force and effect,
except for the provisions of (i) Section 7.1 relating to the obligation of Buyer
to keep confidential certain information and data obtained by it, (ii) Section
11.4 relating to certain expenses, (iii) Section 8.3 relating to publicity,
(iv) Section 12.5 relating to attorneys' fees and expenses, (v) Section 11.11
relating to finder's fees and broker's fees and (vi) this Section 11.3. Nothing
in this Section 11.3 shall be deemed to release either party from any liability
for any breach by such party of the terms and provisions of this Agreement or to
impair the right of either party to compel specific performance by the other
party of its obligations under this Agreement.
11.4 EXPENSES. Whether or not the transactions contemplated hereby are
consummated, and except as otherwise provided in this Section 11.4, Section 2.7
or elsewhere in this Agreement, all fees, costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such fees, costs or expenses. Notwithstanding the
foregoing, Sellers, on the one hand, and Buyer, on the other hand, shall share
equally all transfer, sales, use or other transaction Taxes, charges or
impositions, title charges, survey costs, lien search and similar fees relating
to the sale of the Assets (but not such as relate to (i) the financing thereof
by Buyer, such as loan commitment fees and expenses of its financing sources,
all of which shall be borne entirely by Buyer) or (ii) any Tax imposed on the
net income of either Seller as a result of the Transactions; PROVIDED, HOWEVER,
that each party shall pay its own HSR Act filing fees.
11.5 ATTORNEYS' FEES. Should any litigation be commenced concerning
this Agreement or the rights and duties of any party with respect to it, the
party prevailing shall be entitled, in addition to such other relief as may be
granted, to a reasonable sum for such party's attorney fees and expenses
determined by the court in such litigation or in a separate action brought for
that purpose.
56
11.6 AMENDMENT, MODIFICATION AND WAIVER. No amendment to this
Agreement shall be effective unless it shall be in writing and signed by both
parties hereto. The waiver by one party of the performance of any covenant,
condition or promise shall not invalidate this Agreement, nor shall it be
considered as a waiver by such party of any other covenant, condition or
promise. The delay in pursuing any remedy or in insisting upon full performance
for any breach or failure of any covenant, condition or promise shall not
prevent a party from later pursuing any remedies or insisting upon full
performance for the same or any similar breach or failure, subject to the
provisions of Article X in respect of any remedy available thereunder and to all
defenses a party may have in respect of such delay.
11.7 NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent prepaid telex, cable or telecopy, or sent, postage prepaid, by
registered, certified or express mail, or reputable overnight courier service
and shall be deemed given when so delivered by hand, telexed, cabled or
telecopied, or if mailed, three days after mailing (one business day in the case
of express mail or overnight courier service), as follows:
(i) if to Buyer, to:
Controls Acquisition Corporation
c/o First Atlantic Capital, Ltd.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxx X. Xxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
X'Xxxxxxxx Graev & Karabell
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention:Xxxxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
57
(ii) if to Seller, to:
MagneTek, Inc.
00000 Xxxxx Xxxxxx Xxxxxxxxx
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Miley, Esq.
General Counsel
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx
0000 Xxxxxxx Xxxx Xxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention:Xxxxxxxx Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
11.8 INTERPRETATION; EXHIBITS AND SCHEDULES. The headings contained
in this Agreement, in any Exhibit or Schedule hereto and in the table of
contents to this Agreement, are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Any matter
disclosed in one Schedule hereto shall be deemed incorporated by reference into
each other Schedule hereto and disclosed in each such Schedule to the extent
such disclosure may be fairly interpreted as pertaining to matters addressed in
other Schedules without reference to any undisclosed facts, and the failure to
cross-reference Schedules is inadvertent. All Exhibits and Schedules annexed
hereto or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. Any capitalized terms used in any
Schedule or Exhibit, but not otherwise defined therein, shall have the meaning
as defined in this Agreement.
11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other party.
11.10 ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreement contain the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior oral
and written agreements and understandings (including, without limitation, the
letter of intent dated February 14, 1994, as amended to the date hereof)
relating to such subject matter.
58
11.11 FEES. Each party hereto hereby represents and warrants that
(a) the only brokers or finders that have acted for such party in connection
with this Agreement or the transactions contemplated hereby or that may be
entitled to any brokerage fee, finder's fee or commission in respect thereof are
set forth on Schedule 11.11 hereto and (b) each party agrees that it will pay
all fees or commissions which may be payable to such firm(s) retained by it or
to which it is obligated.
11.12 SEVERABILITY. If any provision of this Agreement or the
application of any such provision to any person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
11.13 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
59
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
SELLERS:
-------
MAGNETEK, INC.
By: /S/XXXX X. XXXXXXX, XX.
------------------------
Name: Xxxx X. Xxxxxxx, Xx.
Title: Vice President and
Treasurer
MAGNETEK CONTROLS, INC.
By: /S/XXXX X. XXXXXXX, XX.
------------------------
Name: Xxxx X. Xxxxxxx, Xx.
Title: Vice President and
Treasurer
BUYER:
-----
CONTROLS ACQUISITION CORPORATION
By: /S/XXXXX XXXXXXX
------------------------
Name: Xxxxx Xxxxxxx
Title: President and Chief
Executive Officer
60
