EXHIBIT 2.4
EXECUTION
CAPITALIZATION AGREEMENT
Between
GT LIGHTING, LLC
and
THE GENLYTE GROUP INCORPORATED
Dated April 28, 1998
CAPITALIZATION AGREEMENT
CAPITALIZATION AGREEMENT, dated April 28, 1998, by and between GT Lighting,
LLC, a Delaware limited liability company (the "Company"), and The Genlyte Group
Incorporated, a Delaware corporation ("Transferor").
W I T N E S S E T H:
WHEREAS, Transferor is in the business of manufacturing, selling, marketing
and distributing consumer, commercial, industrial and outdoor lighting products;
WHEREAS, Transferor and ▇▇▇▇▇▇ Industries Inc. ("▇▇▇▇▇▇") have caused the
Company to be formed under the laws of the State of Delaware;
WHEREAS, Transferor desires to capitalize the Company with substantially
all of its assets, properties and capital stock in a transaction qualifying
under Section 721(a) of the Code, in exchange for an ownership interest in the
Company and the direct or indirect assumption by the Company of the Assumed
Liabilities and upon the terms and subject to the conditions hereinafter set
forth;
WHEREAS, Transferor's rights and duties as a member of the Company shall be
as set forth in that certain Limited Liability Company Agreement dated April 28,
1998 by and between Transferor and ▇▇▇▇▇▇ (the "LLC Agreement");
WHEREAS, the Company will consummate certain transactions and enter into
certain agreements as set forth in the Master Transaction Agreement dated April
28, 1998 by and between ▇▇▇▇▇▇ and Transferor (the "Master Transaction
Agreement") and the parties' obligations hereunder will be subject to
satisfaction or waiver of the conditions in the Master Transaction Agreement;
and
NOW, THEREFORE, in consideration of the mutual covenants, representations
and warranties made herein, and of the mutual benefits to be derived hereby, the
parties hereto agree as follows:
ARTICLE I
CAPITALIZATION
1.1 Assets. Subject to and upon the terms and conditions set forth in this
Agreement, at the Closing, Transferor will contribute, transfer, convey, assign
and deliver to the Company, and the Company will acquire from Transferor, all
right, title and interest of Transferor in and to Transferor's properties,
assets and rights of every nature, kind and description, tangible and intangible
(including goodwill), whether real, personal or mixed, whether accrued,
contingent or otherwise and whether now existing or hereinafter acquired (other
than the Excluded Assets) as the same may exist on the Closing Date
(collectively, the "Assets"), including all those items in the following
categories that conform to the definition of the term "Assets":
(a) all machinery, equipment, telephone systems and equipment,
furniture, furnishings, automobiles, trucks, vehicles, tools, dies, molds and
parts and similar property (including any of the foregoing purchased subject to
any conditional sales or title retention agreement in favor of any other Person)
together with all Systems and all Components;
(b) all inventories of raw materials, work in process, finished
products, goods, spare parts, replacement and component parts, and office and
other supplies (collectively, the "Inventories") held at any Facility and
Inventories previously purchased and in transit to any Transferor at the
Facilities;
(c) all rights in and to products sold or leased (including products
hereafter returned or repossessed and Transferor's unpaid rights of rescission,
replevin, reclamation and rights to stoppage in transit);
(d) all rights (including any and all Intellectual Property rights)
in and to the products sold or leased and in and to any products or other
Intellectual Property rights under research or development prior to or on the
Closing Date;
(e) all of the rights of Transferor under all contracts,
arrangements, licenses, leases and other agreements, including any right to
receive payment for products sold or services rendered, and to receive goods and
services, pursuant to such agreements and to assert claims and take other
rightful actions in respect of breaches, defaults and other violations of such
contracts, arrangements, licenses, leases and other agreements and otherwise;
(f) all credits, prepaid expenses, deferred charges, advance
payments, security deposits and prepaid items;
(g) all notes and accounts receivable held by Transferor and all
notes, bonds and other evidences of indebtedness of and rights to receive
payments from any Person held by Transferor;
(h) all Intellectual Property and all rights thereunder or in respect
thereof, including rights to ▇▇▇ for and remedies against past, present and
future infringements thereof, and rights of priority and protection of interests
therein under the laws of any jurisdiction worldwide and all tangible
embodiments thereof (the "Intellectual Property Assets");
(i) all books, records, manuals and other materials (in any form or
medium), including all records and materials maintained at the headquarters or
other offices of Transferor, advertising matter, catalogues, price lists,
correspondence, mailing lists, lists of customers, distribution lists,
photographs, production data, sales and promotional materials and records,
purchasing materials and records, personnel records, manufacturing and quality
control records and procedures, blueprints, research and development files,
records, data and laboratory books, Intellectual Property disclosures, media
materials and plates, accounting records, sales order files and litigation files
(collectively, the "Books and Records");
(j) to the extent their transfer is permitted by law, all
Governmental Approvals, including all applications therefor;
(k) all Real Property and all licenses, permits, approvals and
qualifications relating to any Real Property issued to Transferor by any
Governmental Authority;
(l) all rights to causes of action, lawsuits, judgments, claims and
demands of any nature available to or being pursued by Transferor with respect
to the Business or the ownership, use, function or value of any Asset, whether
arising by way of counterclaim or otherwise;
(m) all guarantees, warranties, indemnities and similar rights in
favor of Transferor with respect to any Asset;
(n) to the extent not described elsewhere in this Section 1.1, all
Net Working Capital;
(o) any web site domain name together with related rights; and
(p) all stock, partnership, membership or other interests in any
Person engaged in the Business listed on Schedule 1.1(p).
At the Closing, the Assets shall be transferred to the Company free and
clear of all liabilities, obligations, liens and encumbrances excepting only
Assumed Liabilities, liens listed on Schedule 3.1.11 and Permitted Liens.
1.2. Excluded Assets. Transferor will retain and not transfer, and the
Company will not acquire any assets of Transferor other than the Assets,
including (i) the assets listed on Schedule 1.2, and (ii) all Tax refunds
(collectively, the "Excluded Assets").
ARTICLE II
THE CLOSING
2.1. Place and Date. The consummation of the transactions contemplated
hereby shall take place on the "closing date" described in the Master
Transaction Agreement (the "Closing Date").
2.2. Consideration. On the terms and subject to the conditions set forth
in this Agreement, the Master Transaction Agreement and the LLC Agreement and as
the sole consideration for Transferor's contribution of the Assets to the
Company pursuant hereto, on the Closing Date, the Company agrees to issue to
Transferor an interest in the Company representing a 68% ownership interest (the
"Membership Interests") and to assume the Assumed Liabilities as provided in
Section 2.3.
2.3. Assumption of Liabilities. (a) Subject to Sections 2.4 and 8.2 and
the other terms and conditions set forth herein, at the Closing, the Company
will assume and agree to pay, honor and discharge when due all of those
liabilities relating to the Assets or arising out of the Business and existing
at or arising on or after the Closing Date (collectively, the "Assumed
Liabilities"), except for (i) Taxes of Transferor for periods prior to the
Closing Date, whether or not relating to or arising out of the Business, (ii)
intercompany accounts payable that do not represent trade accounts payable,
(iii) liabilities in respect of Employees, employment agreements or Plans
except to the extent specifically assumed by the Company pursuant to Article VI,
(iv) liabilities in respect to Transferred Employees except to the extent
specifically assumed by the Company pursuant to Article VI, and (v) any
liability, obligation or commitment of Transferor set forth on Schedule 2.3.
(b) At the Closing, the Company shall assume the Assumed Liabilities
by executing and delivering to Transferor an assumption agreement in a form
reasonably satisfactory to Transferor (the "Assumption Agreement").
2.4 Excluded Liabilities. Notwithstanding the provisions of Section 2.3
or any other provision hereof or any schedule or exhibit hereto and regardless
of any disclosure to the Company, the Company shall not assume any liabilities,
obligations or commitments of Transferor, whether or not relating to or arising
out of the operation of the Business or the ownership of the Assets prior to the
Closing, other than the Assumed Liabilities (the "Excluded Liabilities").
2.5 Consent of Third Parties. Notwithstanding anything to the contrary in
this Agreement, this Agreement shall not constitute an agreement to assign or
transfer any Governmental Approval, instrument, contract, lease, permit or other
agreement or arrangement or any claim, right or benefit arising thereunder or
resulting therefrom if an assignment or transfer or an attempt to make such an
assignment or transfer without the consent of a third party would constitute a
breach or violation thereof or affect adversely the rights of the Company or
Transferor thereunder; and any transfer or assignment to the Company by
Transferor of any interest under any such instrument, contract, lease, permit or
other agreement or arrangement that requires the consent of a third party shall
be made subject to such consent or approval being obtained. In the event any
such consent or approval is not obtained on or prior to the Closing Date,
Transferor shall continue to use its reasonable commercial efforts to obtain any
such approval or consent after the Closing Date until such time as such consent
or approval has been obtained, and Transferor will cooperate with the Company in
any lawful and economically feasible arrangement to provide that the Company
shall receive the interest of Transferor in the benefits under any such
instrument, contract, lease or permit or other agreement or arrangement,
including performance by Transferor as agent, if economically feasible, provided
that the Company shall be solely responsible for and undertake to pay or satisfy
the corresponding liabilities for the enjoyment of such benefit to the extent
the Company would have been responsible therefor hereunder if such consent or
approval had been obtained and shall be solely responsible for any breach of
warranty with respect to products of the Business manufactured after the Closing
Date. Transferor shall pay and discharge, and shall indemnify and hold the
Company harmless from and against, any and all out-of-pocket costs of seeking to
obtain or obtaining any such consent or approval whether before or after the
Closing Date. Nothing in this Section 2.5 shall be deemed a waiver by the
Company of its right to have received on or before the Closing an effective
assignment of all of the Assets nor shall this Section 2.5 be deemed to
constitute an agreement to exclude from the Assets any assets described under
Section 1.1.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of Transferor. Transferor represents
and warrants to and agrees with the Company as follows:
3.1.1. Authorization, etc. Transferor has the corporate power and
authority to execute and deliver this Agreement and each of the Collateral
Agreements to which it will be a party, to perform fully its obligations
thereunder, and to consummate the transactions contemplated hereby and thereby.
The execution and delivery by Transferor of this Agreement, and the consummation
of the transactions contemplated hereby, have been, and on the Closing Date the
execution and delivery by Transferor of each of the Collateral Agreements to
which it will be a party and the consummation of the transactions contemplated
thereby will have been, duly authorized by all requisite corporate action of
Transferor (including the approval of Transferor's shareholders to the extent
required by law). Transferor has duly executed and delivered this Agreement and
on the Closing Date will have duly executed and delivered each of the Collateral
Agreements to which it is a party. This Agreement is, and on the Closing Date
each of the Collateral Agreements to which Transferor is a party will be, legal,
valid and binding obligations of Transferor, enforceable against it in
accordance with their respective terms.
3.1.2. Corporate Status. (a) Transferor is a corporation duly organized,
validly existing and in good standing under the respective laws of the
jurisdiction of its incorporation, as set forth in Schedule 3.1.2(a), with full
corporate power and authority to carry on its business (including the Business)
and to own or lease and to operate its properties as and in the places where
such business is conducted and such properties are owned, leased or operated.
(b) Transferor is duly qualified or licensed to do business and is in
good standing in each of the respective jurisdictions specified in Schedule
3.1.2(b), which are the only jurisdictions in which the operation of the
Business or the character of the properties owned, leased or operated by it in
connection with the Business makes such qualification or licensing necessary.
(c) Transferor has delivered to the Company complete and correct
copies of its certificate of incorporation and by-laws or other organizational
documents, as amended and in effect on the date hereof. Transferor is not in
violation of any of the provisions of its certificate of incorporation or by-
laws or other organizational documents.
(d) Transferor has no Subsidiaries engaged in the Business except as
set forth on Schedule 3.1.2(d). Except as set forth on Schedule 3.1.2(d),
Transferor has no interest, direct or indirect, and has no commitment to
purchase any interest, direct or indirect, in any other corporation or in any
partnership, joint venture or other business enterprise or entity. Except as
set forth on Schedule 3.1.2(d), the Business has not been conducted through any
other direct or indirect Subsidiary or affiliate of Transferor.
3.1.3. No Conflicts, etc. The execution, delivery and performance by
Transferor of this Agreement and each of the Collateral Agreements to which it
is a party, and the consummation of the transactions contemplated hereby and
thereby, do not and will not conflict with or result in a violation of or a
default under (with or without the giving of notice or the lapse of time or
both) (i) any Applicable Law applicable to Transferor or any Affiliate thereof
or any of the properties or assets of Transferor (including the Assets), (ii)
the certificate of incorporation or by-laws or other organizational documents of
Transferor or (iii) except as set forth in Schedule 3.1.3, any Contract to
which Transferor or any Affiliate thereof is a party or by which Transferor or
any of its properties or assets, including the Assets, may be bound or
affected. Except as specified in Schedule 3.1.3, no Governmental Approval or
other Consent is required to be obtained or made by Transferor in connection
with the execution and delivery of this Agreement and the Collateral
Agreements or the consummation of the transactions contemplated thereby. The
consummation of the transaction that is the subject of this Agreement and the
Collateral Agreements and the issuance of the Membership Interests to all
members will not trigger any rights under the Rights Agreement between
Transferor and Continental Bank National Association dated August 29, 1989 or
any applicable shareholder protection or state takeover statute.
3.1.4. Financial Statements. Transferor has delivered to the Company (a)
its audited consolidated financial statements as at and for the year ended
December 31, 1997 (the "Audited Balance Sheet Date"), together with a report
thereon by Transferor's Accountants (the "Audited Financial Statements"), (b)
unaudited consolidated financial statements as at and for the period ended March
31, 1998 (the "Unaudited Financial Statements"), and (c) unaudited consolidated
financial statements as at and for the monthly periods ended March 31, 1998 (the
"Monthly Unaudited Financial Statements"), including in each of clauses (a), (b)
and (c) a balance sheet, statements of income and retained earnings and a
statement of cash flows (the Audited Financial Statements and the Monthly
Unaudited Financial Statements, collectively the "Financial Statements"). The
Audited Financial Statements are complete and correct in all material respects
and have been prepared in accordance with GAAP applied throughout the periods
indicated. The Unaudited Financial Statements and the Monthly Unaudited
Financial Statements have been prepared in accordance with GAAP, except that the
Unaudited Financial Statements and the Monthly Unaudited Financial Statements do
not contain notes and may be subject to normal audit adjustments and, in the
case of the Monthly Unaudited Financial Statements, normal annual adjustments.
The balance sheets included in the Financial Statements do not include any
material assets (other than Excluded Assets) or liabilities (other than Excluded
Liabilities) not intended to constitute a part of the Business or the Assets or
omit any material assets or liabilities of Transferor, and present fairly the
financial condition of Transferor as at their respective dates. The statements
of income and retained earnings and statements of cash flows included in the
Financial Statements do not reflect the operations of any entity or business not
intended to constitute a part of the transactions, reflect all costs that
historically have been incurred by Transferor (other than the Excluded
Liabilities) and present fairly the results of operations and cash flows of
Transferor for the periods indicated.
3.1.5. Absence of Undisclosed Liabilities. Transferor has no liabilities
or obligations of any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due, arising out of or
relating to the Business, except (a) as set forth in Schedule 3.1.5, (b) as and
to the extent disclosed or reserved against in the Audited Balance Sheet
(excluding the notes thereto) and (c) for liabilities and obligations that (i)
were incurred after the date of the Audited Balance Sheet in the ordinary course
of business consistent with prior practice and (ii) have not had or resulted in,
and will not have or result in, a Material Adverse Effect. None of Transferor's
employees is, or will by the passage of time hereinafter become, entitled to
receive any material vacation time, vacation pay or severance pay attributable
to services rendered prior to such date except as disclosed on the Audited
Balance Sheet (excluding the notes thereto) or as set forth on Schedule 3.1.5.
3.1.6. Taxes. (a) Transferor has (or by the Closing will have) duly and
timely filed all Tax Returns with respect to Taxes required to be filed on or
before the Closing Date ("Returns"). Except for Taxes set forth on Schedule
3.1.6(a), which are being contested in good faith and by appropriate
proceedings, and with respect to which Transferor has Adequate Reserves, the
following Taxes have (or by the Closing Date will have) been duly and timely
paid: (i) all Taxes shown to be due on the Returns, (ii) all deficiencies and
assessments of Taxes of which notice has (or by the Closing Date will have) been
received by Transferor that are or may become payable by the Company or
chargeable as a lien upon the Business or the Assets, and (iii) all other Taxes
due and payable on or before the Closing Date for which neither filing of
Returns nor notice of deficiency or assessment is required, if Transferor is or
reasonably should be (or by the Closing Date will be or reasonably should be)
aware that such Taxes are or may become payable by the Company or chargeable as
a lien upon the Business or the Assets. All Taxes required to be withheld by or
on behalf of Transferor in connection with amounts paid or owing to any
employee, independent contractor, or creditor ("Withholding Taxes") have been
withheld, and such withheld taxes have either been duly and timely paid to the
proper Governmental Authorities or set aside in accounts for such purposes.
(b) Except as set forth on Schedule 3.1.6(b), no agreement or other
document extending, or having the effect of extending, the period of assessment
or collection of any Taxes or Withholding Taxes, and no power of attorney with
respect to any such Taxes, has been filed with the IRS or any other Governmental
Authority.
(c) Except for items set forth on Schedule 3.1.6(c) , with respect to
which Transferor has Adequate Reserves, (i) there are no Taxes or Withholding
Taxes asserted in writing by any Governmental Authority to be due from
Transferor and (ii) no issue has been raised in writing by any Governmental
Authority in the course of any audit with respect to Taxes or Withholding
Taxes. Except as set forth on Schedule 3.1.6(c), no Taxes and no Withholding
Taxes are currently under audit by any Governmental Authority. Except for
items set forth on Schedule 3.1.6(c), with respect to which Transferor has
Adequate Reserves, neither the IRS nor any other Governmental Authority is
now asserting or, to the Knowledge of Transferor, threatening to assert
against Transferor any deficiency or claim for additional Taxes or any
adjustment or Taxes that would, if paid by the Company, have a Material
Adverse Effect, and there is no reasonable basis for any such assertion of
which Transferor is or reasonably should be aware.
(d) Except as set forth on Schedule 3.1.6(d), there is no litigation
or administrative appeal pending or, to the Knowledge of Transferor, threatened
against or relating to Transferor in connection with Taxes.
3.1.7. Absence of Changes. Except for items set forth in Schedule 3.1.7,
with respect to which Transferor has Adequate Reserves, since the Audited
Balance Sheet Date, Transferor has conducted the Business only in the ordinary
course consistent with prior practice and has not, on behalf of, in connection
with or relating to the Business or the Assets:
(a) suffered any Material Adverse Effect;
(b) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except current
liabilities for trade or business obligations incurred in connection with the
purchase of goods or services in the ordinary course of business consistent with
prior practice, none of which liabilities, in any case or in the aggregate,
could have a Material Adverse Effect;
(c) discharged or satisfied any Lien other than those then required
to be discharged or satisfied, or paid any obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to become due, other than
current liabilities shown on the Audited Balance Sheet and current liabilities
incurred since the date thereof in the ordinary course of business consistent
with prior practice;
(d) mortgaged, pledged or subjected to Lien, any property, business
or assets, tangible or intangible, held in connection with the Business other
than purchase money security interests incurred in the ordinary course of
business;
(e) sold, transferred, leased to others or otherwise disposed of any
of the Assets, except in the ordinary course of business, or canceled or
compromised any debt or claim, or waived or released any right of substantial
value;
(f) received any notice of termination of any contract, lease or
other agreement or suffered any damage, destruction or loss (whether or not
covered by insurance) which, in any case or in the aggregate, has had a Material
Adverse Effect;
(g) transferred or granted any rights under, or entered into any
settlement regarding the breach or infringement of, any Intellectual Property,
or modified any existing rights with respect thereto;
(h) other than in the ordinary course of business, made any change in
the rate of compensation, commission, bonus or other direct or indirect
remuneration payable, or paid or agreed or orally promised to pay, conditionally
or otherwise, any bonus, dividend, incentive, retention or other compensation,
retirement, welfare, fringe or severance benefit or vacation pay, to or in
respect of any shareholder, director, officer, employee, salesman, distributor
or agent of Transferor relating to the Business;
(i) encountered any labor union organizing activity, had any actual
or threatened employee strikes, work stoppages, slowdowns or lockouts, or had
any material change in its relations with its employees, agents, customers or
suppliers;
(j) failed to replenish Transferor's inventories and supplies in a
normal and customary manner consistent with its prior practice and prudent
business practices prevailing in the industry, or made any purchase commitment
in excess of the normal, ordinary and usual requirements of the Business or at
any price in excess of the then current market price or upon terms and
conditions more onerous than those usual and customary in the industry, or made
any change in its selling, pricing, advertising or personnel practices
inconsistent with its prior practice and prudent business practices prevailing
in the industry;
(k) made any capital expenditures or capital additions or
improvements in excess of $250,000;
(l) instituted, settled or agreed to settle any litigation, action or
proceeding before any court or governmental body relating to the Business or the
Assets other than in the ordinary course of business consistent with past
practices but not in any case involving amounts in excess of $250,000;
(m) entered into any transaction, contract or commitment other than
in the ordinary course of business or paid or agreed to pay any legal,
accounting, brokerage, finder's fee, Taxes or other expenses in connection with,
or incurred any severance pay obligations by reason of, this Agreement or the
transactions contemplated hereby; or
(n) except with respect to performing its obligations under this
Agreement, taken any action or omitted to take any action that would result in
the occurrence of any of the foregoing.
3.1.8. Litigation. Except for items set forth on Schedule 3.1.8, with
respect to which Transferor has Adequate Reserves, there is no action, claim,
demand, suit, proceeding, arbitration, grievance, citation, summons, subpoena,
inquiry or investigation of any nature, civil, criminal, regulatory or
otherwise, in law or in equity, pending or threatened against or relating to
Transferor in connection with the Assets or the Business or against or relating
to the transactions contemplated by this Agreement, and Transferor knows of no
basis for any of the foregoing. Except for items set forth in such Schedule
3.1.8, with respect to which Transferor has Adequate Reserves, since December
31, 1997, no material citations, fines or penalties have been asserted against
Transferor under any Environmental Law or any foreign, federal, state or local
law relating to occupational health or safety.
3.1.9. Compliance with Laws; Governmental Approvals and Consents;
Governmental Contracts. (a) Except for items disclosed in Schedule 3.1.9(a),
with respect to which Transferor has Adequate Reserves, since the Audited
Balance Sheet Date, Transferor has complied in all material respects with all
Applicable Laws applicable to the Business or the Assets, and Transferor has not
received any notice alleging any such conflict, violation, breach or default.
(b) Except for items set forth in Schedule 3.1.9(b), with respect to
which Transferor has Adequate Reserves, all Governmental Approvals and Consents
necessary for or otherwise material to the conduct of the Business have been
duly obtained and are in full force and effect, and Transferor is in material
compliance with each of such Governmental Approvals and Consents held by it with
respect to the Assets and the Business.
(c) To the Knowledge of Transferor, there are no proposed laws,
rules, regulations, ordinances, orders, judgments, decrees, governmental
takings, condemnations or other proceedings which would be applicable to the
business, operations or properties of Transferor and which might adversely
affect the properties, assets, liabilities, operations or prospects of
Transferor, either before or after the Closing Date.
3.1.10. Operation of the Business. Except as set forth in Schedule
3.1.10, (a) Transferor has not conducted the Business through any divisions or
any direct or indirect Subsidiary or Affiliate of Transferor and (b) no part of
the Business is operated by Transferor through any entity other than Transferor.
3.1.11. Assets. Except for items disclosed in Schedule 3.1.11, with
respect to which Transferor has Adequate Reserves, Transferor has good title to
all the Assets free and clear of any and all Liens other than Permitted Liens.
The Assets, together with the services and arrangements described in Section
5.2.2, comprise all assets and services required for the continued conduct of
the Business by the Company as now being conducted. The Assets, taken as a
whole, constitute all the properties and assets relating to or used or held for
use in connection with the Business during the past twelve months (except
Inventory sold, cash disposed of, accounts receivable collected, prepaid
expenses realized, Contracts fully performed, properties or assets sold in the
ordinary course of business, employees not hired by the Company, and the
Excluded Assets). Except for Excluded Assets and subject to Section 2.5, there
are no assets or properties used in the operation of the Business and owned by
any Person other than Transferor that will not be leased or licensed to the
Company under valid, current leases or license arrangements. Except as
disclosed on Schedule 3.1.11, the Assets are in all material respects adequate
for the purposes for which such Assets are currently used or are held for use,
and are in reasonably good repair and operating condition (subject to normal
wear and tear) and, to the Knowledge of Transferor, there are no facts or
conditions affecting the Assets which could interfere in any material respect
with the use, occupancy or operation thereof as currently used, occupied or
operated, or their adequacy for such use.
3.1.12. Contracts. (a) Schedule 3.1.12(a) contains a complete and
correct list of all agreements, contracts, commitments and other instruments and
arrangements (whether written or oral) of the types described below (x) by which
any of the Assets are bound or affected or (y) to which Transferor is a party or
by which it is bound in connection with the Business or the Assets (the
"Contracts"):
(i) other than the Leases and Other Leases, each lease and other
contract concerning or relating to the Real Property with respect to which
the amount that could reasonably be expected to be paid or received
thereunder exceeds $100,000 per year;
(ii) employment, consulting, agency, collective bargaining or
other similar contracts, agreements, and other instruments and arrangements
that cannot be terminated in accordance with their terms within six months
of the date hereof relating to or for the benefit of current, future or
former employees, officers, directors, sales representatives, distributors,
dealers, agents, independent contractors or consultants;
(iii) loan agreements, indentures, letters of credit,
mortgages, security agreements, pledge agreements, deeds of trust, bonds,
notes, guarantees, and other agreements and instruments relating to the
borrowing of money or obtaining of or extension of credit;
(iv) licenses, licensing arrangements and other contracts
providing in whole or in part for the use of, or limiting the use of, any
Intellectual Property;
(v) brokerage or finders' agreements;
(vi) joint venture, partnership and similar contracts involving a
sharing of profits or expenses (including joint research and development
and joint marketing contracts);
(vii) asset purchase agreements and other acquisition or
divestiture agreements, including any agreements relating to the sale,
lease or disposal of any Assets (other than sales of inventory or other
properties or assets in the ordinary course of business) or involving
continuing indemnity or other obligations, entered into since January 1,
1992;
(viii) other than purchase orders or contracts for capital
projects already approved by Transferor's Board of Directors, contracts
with respect to which the aggregate amount that could reasonably be
expected to be paid or received thereunder in the future exceeds $250,000
per annum;
(ix) contracts, agreements or arrangements with respect to the
representation of the Business in foreign countries, other than Canada and
Mexico;
(x) master lease agreements providing for the leasing of both
(A) personal property primarily used in, or held for use primarily in
connection with, the Business and (B) other personal property, pursuant to
which, in either case, the amount that could reasonably be expected to be
paid or received thereunder exceeds $100,000 per year or $1,500,000 in the
aggregate;
(xi) contracts, agreements or commitments with any employee,
director, officer, stockholder or Affiliate of Transferor; and
(xii) any other contracts, agreements or commitments that are
material to the Business pursuant to which the amount that could reasonably
be expected to be paid or received thereunder exceeds $100,000 per year or
$1,500,000 in the aggregate.
(b) Transferor has delivered to the Company complete and correct
copies of all written Contracts, together with all amendments thereto, and
accurate descriptions of all material terms of all oral Contracts, set forth or
required to be set forth in Schedule 3.1.12(a).
(c) All Contracts are in full force and effect and enforceable
against each party thereto. There does not exist under any Contract any event
of default or event or condition that, after notice or lapse of time or both,
would constitute a violation, breach or event of default thereunder on the part
of Transferor or, to the Knowledge of Transferor, any other party thereto except
for items set forth in Schedule 3.1.12(c), with respect to which Transferor has
Adequate Reserves, and except for such events or conditions that, individually
and in the aggregate, (i) has not had or resulted in, and will not have or
result in, a Material Adverse Effect and (ii) has not and will not materially
impair the ability of Transferor to perform its obligations under this Agreement
and under the Collateral Agreements. Except as set forth in Schedule 3.1.12(c),
no consent of any third party is required under any Contract as a result of or
in connection with, and the enforceability of any Contract will not be affected
in any manner by, the execution, delivery and performance of this Agreement or
any of the Collateral Agreements or the consummation of the transactions
contemplated hereby or thereby.
(d) Transferor has outstanding no power of attorney relating to the
Business.
3.1.13. Territorial Restrictions. Except as set forth on Schedule 3.1.13,
Transferor is not restricted by any written agreement or understanding with any
other Person from carrying on the Business anywhere in the world. Except as set
forth on Schedule 3.1.13, the Company, solely as a result of its purchase of the
Business from Transferor pursuant hereto and the assumption of the Assumed
Liabilities, will not thereby become restricted in carrying on any business
anywhere in the world.
3.1.14. Product Warranties. Except for items set forth in Schedule
3.1.14, with respect to which Transferor has Adequate Reserves, and for
warranties under Applicable Law, there are no pending or threatened claims with
respect to any warranty, express or implied, written or oral, with respect to
the products or services of the Business in excess of $100,000 per claim, and
Transferor has no liability with respect to any such warranty, whether known or
unknown, absolute, accrued, contingent or otherwise and whether due or to become
due.
3.1.15. Absence of Certain Business Practices. To the Knowledge of
Transferor, none of Transferor, any officer, employee or agent of Transferor, or
any other Person acting on their behalf, has, directly or indirectly, within the
past five years given or agreed to give any gift or similar benefit to any
customer, supplier, governmental employee or other person who was or may be
in a position to help or hinder the Business (or assist Transferor in
connection with any actual or proposed transaction relating to the Business)
(i) which subjected or might have subjected Transferor to any damage or
penalty in any civil, criminal or governmental litigation or proceeding, (ii)
which if not given in the past, might have had a Material Adverse Effect,
(iii) which if not continued in the future, might have a Material Adverse
Effect or subject Transferor to suit or penalty in any private or
governmental litigation or proceeding, (iv) for any of the purposes described
in Section 162(c) of the Code or (v) for the purpose of establishing or
maintaining any concealed fund or concealed bank account.
3.1.16. Intellectual Property. (a) Title. Schedule 3.1.16(a) contains a
complete and correct list of all Intellectual Property that is owned by
Transferor and primarily related to, used in, held for use in connection with,
or necessary for the conduct of, or otherwise material to the Business (the
"Owned Intellectual Property"). Except as set forth on Schedule 3.1.16(a),
Transferor owns or has the right to use pursuant to license, sublicense,
agreement or permission all Intellectual Property Assets, free from any Liens
(other than Permitted Liens) and free from any requirement of any past, present
or future royalty payments, license fees, charges or other payments, in any case
in excess of $100,000, or conditions or restrictions whatsoever. The
Intellectual Property Assets comprise all of the Intellectual Property necessary
for the Company to conduct and operate the Business as now being conducted by
Transferor.
(b) Transfer. Immediately after the Closing, the Company will own
all of the Owned Intellectual Property and will have a right to use all other
Intellectual Property Assets, free from any Liens (other than Permitted Liens)
and on the same terms and conditions as in effect prior to the Closing.
(c) No Infringement. The conduct of the Business does not infringe
or otherwise conflict with any rights of any Person in respect of any
Intellectual Property. To the Knowledge of Transferor, none of the Intellectual
Property Assets is being infringed or otherwise used or available for use, by
any other Person.
(d) No Intellectual Property Litigation. Except for items set forth
on Schedule 3.1.16(d) , with respect to which Transferor has Adequate Reserves,
no claim or demand of any Person has been made nor is there any proceeding that
is pending, or to the Knowledge of Transferor, threatened, nor is there a
reasonable basis therefor, that (i) challenges the rights of Transferor in
respect of any Intellectual Property Assets, (ii) asserts that Transferor is
infringing or otherwise in conflict with, or is, except for items set forth in
Schedule 3.1.16(d) , with respect to which Transferor has Adequate Reserves,
required to pay any royalty, license fee, charge or other amount, in any case in
excess of $100,000, with regard to, any Intellectual Property, or (iii) claims
that any default exists under any agreement or arrangement concerning any
Intellectual Property Assets. None of the Intellectual Property Assets is
subject to any outstanding order, ruling, decree, judgment or stipulation by or
with any court, arbitrator, or administrative agency, or has been the subject of
any litigation within the last five years, whether or not resolved in favor of
Transferor.
(e) Use of Name and ▇▇▇▇. Except as set forth in Schedule 3.1.16(e),
there are, and immediately after the Closing will be, no contractual restriction
or limitations pursuant to any orders, decisions, injunctions, judgments, awards
or decrees of any Governmental Authority on the Company's right to use the name
and marks set forth on Schedule 3.1.16(e) in the conduct of the Business as
presently carried on by Transferor.
3.1.17. Insurance. Schedule 3.1.17 contains a complete description of all
insurance policies maintained by Transferor for the benefit of or in connection
with the Assets or the Business. Transferor has made available to the Company
complete and correct copies of all such policies together with all riders and
amendments thereto. Such policies are in full force and effect, and all
premiums due thereon have been paid. Transferor has complied in all material
respects with the terms and provisions of such policies. The insurance coverage
provided by such policies is adequate and customary for the Business. Schedule
3.1.17 sets out all claims, other than worker's compensation claims, made by
Transferor under any policy of insurance during the past two years with respect
to the Business.
3.1.18. Real Property. (a) Owned Real Property. Schedule 3.1.18(a)
contains a complete and correct list of all Owned Real Property setting forth
the address and owner of each parcel of Owned Real Property and describing all
improvements thereon including the properties reflected as being so owned on the
Audited Financial Statements. Except as set forth on Schedule 3.1.18(a),
Transferor has, or on the Closing Date will have, good, valid and marketable fee
simple title to the Owned Real Property indicated on Schedule 3.1.18(a) as being
owned by it, free and clear of all Liens other than Permitted Liens. Except as
set forth on Schedule 3.1.18(a), there are no outstanding options or rights of
first refusal to purchase the Owned Real Property, or any portion thereof or
interest therein.
(b) Leases. Schedule 3.1.18(b) contains a complete and correct list
of (i) all Leases setting forth the address, landlord and tenant for each Lease
and (ii) all Other Leases, setting forth the address, landlord and tenant for
each Other Lease, in either case, with respect to which the amount that could
reasonably be expected to be paid or received thereunder exceeds $100,000 per
year. Transferor has made available to the Company correct and complete copies
of the Leases and the Other Leases. Each Lease and Other Lease is legal, valid,
binding, enforceable, and in full force and effect, except as may be limited by
bankruptcy, insolvency, reorganization and similar Applicable Laws affecting
creditors generally and by the availability of equitable remedies. Neither
Transferor nor any other party is in default, violation or breach in any respect
under any Lease or Other Lease, and no event has occurred and is continuing that
constitutes or, with notice or the passage of time or both, would constitute a
default, violation or breach in any respect under any Lease or Other Lease,
which default, violation or breach has had or could reasonably be expected to
have a Material Adverse Effect on the Business or the Company or cause any Lease
or Other Lease to be terminated. Each Lease grants the tenant under the Lease
the exclusive right to use and occupy the demised premises thereunder.
Transferor has good and valid title to the leasehold estate under each Lease
free and clear of all Liens other than Permitted Liens. Transferor enjoys
peaceful and undisturbed possession under its respective Leases for the Leased
Real Property.
(c) Fee and Leasehold Interests, etc. The Real Property constitutes
all the fee and leasehold interests in real property held for use in connection
with, necessary for the conduct of, or otherwise material to, the Business.
(d) No Proceedings. There are no eminent domain or other similar
proceedings pending or, to the Knowledge of Transferor, threatened affecting any
portion of the Real Property. There is no writ, injunction, decree, order or
judgment outstanding, nor any action, claim, suit or proceeding, pending or, to
the Knowledge of Transferor, threatened, relating to the ownership, lease, use,
occupancy or operation by any Person of any Real Property.
(e) Current Use. Transferor has received no written notice that the
use and operation of the Real Property in the conduct of the Business violates
in any material respect any instrument of record or agreement affecting the Real
Property. Transferor has received no written notice that there is any violation
of any covenant, condition, restriction, easement or order of any Governmental
Authority having jurisdiction over such property or of any other Person entitled
to enforce the same affecting the Real Property or the use or occupancy
thereof. No damage or destruction has occurred with respect to any of the
Real Property since December 31, 1997 that would, individually or in the
aggregate, have a Material Adverse Effect.
(f) Compliance with Real Property Laws. Transferor has received no
written notice that the Real Property is not in full compliance with all
applicable building, zoning, subdivision and other land use and similar
Applicable Laws affecting the Real Property (collectively, the "Real Property
Laws"). To the Knowledge of Transferor, there is no pending or anticipated
change in any Real Property Law that will have or result in a Material Adverse
Effect upon the ownership, alteration, use, occupancy or operation of the Real
Property or any portion thereof. No current use by Transferor of the Real
Property is dependent on a nonconforming use or other Governmental Approval the
absence of which would materially limit the use of such properties or Assets
held for use in connection with, necessary for the conduct of, or otherwise
material to, the Business.
(g) Subdivision. To Transferor's Knowledge, no approvals are
necessary to subdivide the Owned Real Property from any Real Property included
in the Excluded Assets.
3.1.19. Environmental Matters. (a) Permits. Except for items set forth
on Schedule 3.1.19(b), with respect to which Transferor has Adequate Reserves,
Transferor currently holds, and at all times has held, all such Environmental
Permits necessary to the operation of the Business or the ownership, occupancy
or use of the Real Property or the Assets, and all such Environmental Permits
shall be validly transferred to the Company on the Closing Date. All such
Environmental Permits are in full force and effect. To Transferor's Knowledge,
Transferor has not been notified by any relevant Governmental Authority that any
Environmental Permit will be modified, suspended, canceled or revoked, or cannot
be renewed in the ordinary course of business.
(b) No Violations. Except for items set forth on Schedule 3.1.19(b)
, with respect to which Transferor has Adequate Reserves, each of Transferor and
its Affiliates have complied and is in compliance in all material respects with
all Environmental Permits and all applicable Environmental Laws pertaining to
the Real Property (and the ownership, occupancy, use or transferability
thereof), the Business or the Assets. Except for items set forth on Schedule
3.1.19(b), with respect to which Transferor has Adequate Reserves, no Person has
alleged any violation by Transferor and its Affiliates of any Environmental
Permits or any applicable Environmental Law relating to the conduct of the
Business or the use, ownership or transferability of the Real Property or the
Assets.
(c) No Actions. Except for items set forth in Schedule 3.1.19(c) ,
with respect to which Transferor has Adequate Reserves, none of Transferor or
any of its Affiliates has caused or taken any action that has resulted or may
result in, or has been or is subject to, any liability or obligation relating to
(i) the environmental conditions on, under, about or emanating from any Real
Property, the Assets or other properties or assets owned, operated, leased or
used by Transferor held for use in connection with, necessary for the conduct
of, or otherwise material to, the Business, or (ii) the past or present use,
management, handling, transport, treatment, generation, storage, disposal or
Release of any Hazardous Substances, except for any such liabilities and
obligations that, individually and in the aggregate, are not material to the
Business and have not had or resulted in, and will not have or result in, a
Material Adverse Effect.
(d) Other. Except for items set forth in Schedule 3.1.19(d), with
respect to which Transferor has Adequate Reserves:
(i) None of current or past operations, or any by-product
thereof, and none of the currently or formerly owned property or assets of
Transferor used in the Business, including the Assets and the Real
Property, is related to or subject to any investigation or evaluation by
any Governmental Authority, as to whether any Remedial Action is needed to
respond to a Release or threatened Release of any Hazardous Substances.
(ii) Transferor is not subject to any outstanding order,
judgment, injunction, decree or writ from, or contractual or other
obligation to or with, any Governmental Authority or other Person in
respect of which the Company may be required to incur any Environmental
Liabilities and Costs arising from the Release or threatened Release of a
Hazardous Substances.
(iii) None of the Real Property is, and none of Transferor or
any of its Affiliates has transported or arranged for transportation
(directly or indirectly) of any Hazardous Substances relating to the Assets
or the Real Property to any location that is, listed or proposed for
listing under CERCLA, or on any similar state list, or the subject of
federal, state or local enforcement actions or investigations or Remedial
Action.
(iv) No work, repair, construction or capital expenditure is
required or planned in respect of the Assets pursuant to or to comply with
any Environmental Law, nor has Transferor or any of its Affiliates received
any notice of any such requirement, except for such work, repair,
construction or capital expenditure as is not material to the Business and
is in the ordinary course of business.
(e) Full Disclosure. Transferor has disclosed and made available to
the Company all information, including all studies, analyses and test results,
in the possession, custody or control of Transferor and its Affiliates relating
to (i) the environmental conditions on, under, about or emanating from the Real
Property, and (ii) Hazardous Substances used, managed, handled, transported,
treated, generated, stored, disposed of or Released by Transferor or any other
Person at any time on any Real Property, or otherwise in connection with the
operation of the Business or the ownership, operation, occupancy or use of the
Real Property, the Assets or other assets, equipment or facilities used in or
held for use in connection with the Business.
3.1.20. Employees, Labor Matters, etc. Except as set forth in Schedule
3.1.20, Transferor is not a party to or bound by any collective bargaining
agreement and there are no labor unions or other organizations representing,
purporting to represent or, to Transferor's Knowledge, attempting to represent
any employees employed in the operation of the Business. Since December 31,
1997, there has not occurred or, to Transferor's Knowledge, been threatened any
material strike, slowdown, picketing, work stoppage, concerted refusal to work
overtime or other similar labor activity with respect to any employees employed
in the operation of the Business. Except for items set forth on Schedule
3.1.20, with respect to which Transferor has Adequate Reserves, there are no
labor disputes currently subject to any grievance procedure, arbitration or
litigation and there is no representation petition pending or, to the Knowledge
of Transferor, threatened with respect to any employees employed in the
operation of the Business. Transferor has complied with all provisions of
Applicable Law pertaining to the employment of employees, including all such
Laws relating to labor relations, equal employment, fair employment practices,
entitlements, prohibited discrimination or other similar employment practices or
acts, except for any failure so to comply that, individually or together with
all such other failures has not had or resulted in, and will not have or result
in, a Material Adverse Effect. Except for items set forth on Schedule 3.1.20,
with respect to which Transferor has Adequate Reserves, Transferor is not party
to any agreement with any employee employed in the Business that contains change
of control and/or severance provisions that would become operative by virtue of
the consummation of the transaction that is the subject of this Agreement.
3.1.21. Employee Benefit Plans and Related Matters. (a) Employee Benefit
Plans. Schedule 3.1.21(a) sets forth a true and complete list of each "employee
benefit plan," as such term is defined in section 3(3) of the ERISA, whether or
not subject to ERISA, and each bonus, incentive or deferred compensation,
severance, termination or other separation benefits, retention, change of
control, stock option, stock appreciation, stock purchase, phantom stock or
other equity-based, fringe benefits or payroll practices, performance or other
employee or retiree benefit or compensation plan, program, arrangement,
agreement, policy or understanding, whether written or unwritten, that provides
or may provide benefits or compensation in respect of any employee or former
employee employed or formerly employed in the operation of the Business or the
beneficiaries or dependents of any such employee or former employee (such
employees, former employees, beneficiaries and dependents collectively, the
"Employees") or under which any Employee is or may become eligible to
participate or derive a benefit and that is or has been maintained, contributed
to, or required to contribute to, or established, by Transferor or any of its
Affiliates or any other trade or business, whether or not incorporated, which,
together with Transferor is or would have been at any date of determination
occurring within the preceding six years treated as a single employer under
Section 414 of the Code or within the meaning of section 4001 of ERISA (such
other trades and business collectively, the "Related Persons"), or to which
Transferor or any Related Person contributes or is or has been obligated or
required to contribute or with respect to which Transferor or the Business may
have any liability or obligation (collectively, the "Plans"). With respect to
each such Plan (other than a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA (a "Multiemployer Plan")), Transferor has provided the
Company and ▇▇▇▇▇▇ complete and correct copies, if applicable, of: the document
embodying or establishing each written Plan (including all amendments thereto);
a description of each unwritten Plan; all trust agreements, insurance contracts
or other funding arrangements; the two most recent actuarial and trust reports;
the two most recent Forms 5500 and all schedules thereto; the most recent IRS
determination letter; the current summary plan description; the two most recent
summary annual reports, all summaries of material modifications; all material
communications received from or sent to the IRS, including a request for a
compliance certificate under the IRS Voluntary Compliance Program (or similar
program), or an application under the IRS Closing Agreement Programs with
respect to any of the Plans, the Pension Benefit Guaranty Corporation or the
Department of Labor (including a written description of any oral communication);
an actuarial study of any post-employment life or medical benefits provided
under any such Plan; and all amendments and modifications to any such document.
With respect to each Multiemployer Plan, Transferor has provided the Company and
▇▇▇▇▇▇ a complete and correct copy of statements or other communications
regarding withdrawal or other multiemployer plan liabilities, and the most
recent available estimate from the Multiemployer Plan of the withdrawal
liability of the Transferor or Related Persons if the Transferor or Related
Persons were to have a complete withdrawal. Except as specifically set forth in
Schedule 3.1.21(a), Transferor has not communicated to any Employee any
intention or commitment to modify any Plan or to establish or implement any
other employee or retiree benefit or compensation arrangement.
(b) Qualification. Each of the Plans (other than a Multiemployer
Plan) that is intended to meet the requirements of Section 401(a) and, where
applicable, Section 401(k) of the Code, now meets, and since its inception has
met, the requirements for qualification under Section 401(a), and, where
applicable, Section 401(k) of the Code and its related trust is now, and since
its inception has been, exempt from taxation under Section 501(a) of the Code
and nothing has occurred that would adversely affect the qualified status of any
such Plan. Each such Plan and the trust forming a part thereof, has received a
favorable determination letter from the IRS pursuant to Revenue Procedure 93-39
and its progeny as to its qualification under the Code, and to the effect that
each such trust is exempt from taxation under section 501(a) of the Code, and,
to the Knowledge of the Transferor, nothing has occurred since the date of such
determination letter that could adversely affect such qualification or tax-
exempt status.
(c) Compliance; Liability.
(i) With respect to each Plan (other than a Multiemployer Plan)
that is subject to section 412 of the Code or section 302 or Title IV of
ERISA, (A) no "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA and Section 412 of the Code) has been or could be
expected to be incurred, whether or not waived, and no excise or other
taxes have been or could be expected to be incurred or are due and owing
with respect to the Plan because of any failure to comply with the minimum
funding standards of ERISA and the Code, (B) no proceeding has been or is
expected to be initiated to terminate such Plan, and (C) no security under
Section 401(a)(29) of the Code has been or could be expected to be
required.
(ii) No liability has been or is expected to be incurred by
Transferor, any Related Person or the Business (either directly or
indirectly, including as a result of an indemnification obligation) under
or pursuant to ERISA or otherwise or the penalty, excise tax or joint and
several liability provisions of the Code relating to employee benefit plans
that could, following the Closing, become or remain a liability of the
Business or become a liability of the Company or of any employee benefit
plan established or contributed to by the Company and, to the Knowledge of
each of Transferor, no event, transaction or condition has occurred or
exists that could result in any such liability to the Business or,
following the Closing, the Company.
(iii) Each of the Plans has been operated and administered in
all respects in compliance with all Applicable Laws and the provisions of
each Plan, except for any failure so to comply that, individually or
together with all other such failures, has not and will not result in a
material liability or obligation on the part of the Business, or, following
the Closing, the Company, and has not had or resulted in, and will not have
or result in, a Material Adverse Effect. There are no material pending or,
to the Knowledge of Transferor, threatened claims, lawsuits, arbitrations
or other action by or on behalf of any of the Plans, by any Employee or
otherwise involving any such Plan or the assets of any Plan (other than
routine claims for benefits).
No Plan is or is expected to be under audit or investigation by the IRS, DOL, or
any other Governmental Authority and no such completed audit, if any, has
resulted in the imposition of any tax or penalty. No "reportable event" within
the meaning of Section 4043(b) of ERISA has occurred with respect to any Plan.
Notwithstanding the foregoing, the representations set forth in this subsection
(c) with respect to any Multiemployer Plan shall be made to Transferor's
Knowledge.
(iv) No Plan is a "multiple employer plan" within the meaning of
section 4063 or 4064 of ERISA, and there has never been any "multiple
employer plan" covering any Employees. With respect to each Plan which is
a Multiemployer Plan:
(a) with respect to events prior to the Closing, none of the
Transferor, any Related Person, or their predecessors has incurred or
has any reason to believe it has incurred or will incur any withdrawal
liability; no event has occurred which with the giving of notice would
result in any liability under Section 4201 of ERISA as a result of a
complete withdrawal (within the meaning of Section 4203 of ERISA) or a
partial withdrawal (within the meaning of Section 4205 of ERISA); none
of the Transferor, any Related Person, or their predecessors has
received any notice of any claim or demand for complete or partial
withdrawal liability;
(b) none of the Transferor, any Related Person, or their
predecessors has received any notice or has any reason to believe that
such Multiemployer Plan is in "reorganization" (within the meaning of
Section 4241 of ERISA), that increased contributions may be required
to avoid a reduction in plan benefits or the imposition of an excise
tax, or that the Multiemployer Plan is or may become "insolvent"
(within the meaning of Section 4241 of ERISA);
(c) no Multiemployer Plan is a party to any pending merger or
asset or liability transfer under Part 2 of Subtitle E of Title IV of
ERISA; and
(d) the PBGC has not instituted proceedings against the
Multiemployer Plan.
(v) All contributions required to have been made by Transferor
and each Related Person to any Plan under the terms of any such Plan or
pursuant to any applicable collective bargaining agreement or Applicable
Law have been made within the time period prescribed by any such Plan,
agreement or Applicable Law.
(vi) No Employee is or may become entitled to post-employment
benefits of any kind by reason of employment in the Business, including
death or survivor benefits, medical or health benefits (whether or not
insured), other than (a) coverage provided pursuant to the terms of any
Plan specifically identified as providing such coverage in Schedule
3.1.21(c)(vi) or mandated by section 4980B of the Code, (b) retirement
benefits payable under any Plan qualified under section 401(a) of the Code
or (c) deferred compensation accrued as a liability on the Audited Balance
Sheet or incurred after December 31, 1997 in the ordinary course of
business consistent with the prior practice of Transferor, pursuant to the
terms of a Plan. The consummation of the transactions contemplated by this
Agreement or the Collateral Agreements will not (either alone or upon the
occurrence of any additional subsequent events) result in an increase in
the amount of compensation or benefits (whether of severance pay or
otherwise) or the acceleration of the vesting or timing of payment of any
compensation or benefits payable to or in respect of any Employee. No
amounts payable under any Plan will fail to be deductible for federal
income tax purposes by virtue of Sections 280G or 162(m) of the Code.
(vii) Transferor does not maintain any Plan that is funded by
a trust described in Section 501(c)(9) of the Code or subject to the
provisions of Section 505 of the Code. Transferor has complied with the
requirements of Section 4980B of the Code regarding the continuation of
health care coverage under any Plan and the provisions of the Health
Insurance Portability and Accountability Act of 1996 ("HIPAA").
(viii) No event, condition, or circumstance exists that could
result in a material increase of the benefits provided under any Plan or
the expense of maintaining any Plan from the level of benefits or expense
incurred for the most recent fiscal year ended before the Closing. No
event, condition, or circumstance exists that would prevent the amendment
or termination of any Plan.
3.1.22. Confidentiality. Except as set forth on Schedule 3.1.22,
Transferor has taken all steps reasonably necessary to preserve the confidential
nature of all material confidential information (including any proprietary
information) with respect to the Business, including the manufacturing or
marketing of any of Transferor's products or services.
3.1.23. No Guarantees. None of the obligations or liabilities of the
Business or of Transferor incurred in connection with the operation of the
Business is guaranteed by or subject to a similar contingent obligation of any
other Person other than Transferor. Other than guarantees by Transferor of the
obligations of its Affiliates, Transferor has not guaranteed or become subject
to a similar contingent obligation in respect of the obligations or liabilities
of any other Person related to the Business. There are no outstanding letters
of credit, surety bonds or similar instruments of Transferor or any of its
Affiliates in connection with the Business or the Assets.
3.1.24. Records. The minute books of Transferor insofar as they relate to
or affect the Business and the Assets are substantially complete and correct in
all material respects. The books of account of Transferor, insofar as they
relate to or affect the Business and the Assets, are sufficient to prepare the
Financial Statements in accordance with GAAP.
3.1.25. Brokers, Finders, etc. All negotiations relating to this
Agreement, the Collateral Agreements, and the transactions contemplated thereby,
have been carried on without the participation of any Person acting on behalf of
Transferor or its Affiliates in such manner as to give rise to any valid claim
against the Company or any of its subsidiaries for any brokerage or finder's
commission, fee or similar compensation, or for any bonus payable to any
officer, director, employee, agent or sales representative of or consultant to
Transferor or its Affiliates upon consummation of the transactions contemplated
hereby or thereby.
3.1.26. Disclosure. No representation or warranty by Transferor contained
in this Agreement nor any statement or certificate furnished or to be furnished
by or on behalf of Transferor to the Company or its representatives in
connection herewith or pursuant hereto or set forth in any reports filed with
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934 contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to make the statements
contained herein or therein not misleading. There is no fact (other than
matters of a general economic or political nature which do not affect the
Business uniquely) known to Transferor that has not been disclosed by Transferor
to the Company that might reasonably be expected to have or result in a Material
Adverse Effect.
3.1.27. Receivables. All of Transferor's receivables (including accounts
receivable, loans receivable and advances) which have arisen in connection with
the Business and which are reflected in the Audited Financial Statements, and
all such receivables which will have arisen since the Audited Balance Sheet
Date, shall have arisen only from bona fide transactions in the ordinary course
of business. Unless paid prior to the Closing Date, such receivables are or
will be as of the Closing Date current and collectible net of the respective
reserves shown on the Balance Sheet or on the accounting records of Transferor
as of the Closing Date (which reserves are adequate and calculated consistent
with past practices and, in the case of the reserve as of the Closing Date, will
not represent a greater percentage of such receivables as of the Closing Date
than the reserve reflected in the Balance Sheet represented of such receivables
reflected therein and will not represent a material adverse change in the
composition of such receivables in terms of aging).
3.1.28. Relationships With Related Entities. No Related Entity of
Transferor has, or since December 31, 1997 has had, any interest in property
(whether real, personal or mixed and whether tangible or intangible), used in or
pertaining to the Business. Neither Transferor nor any Related Entity of
Transferor is or since December 31, 1997 has owned (of record or as a beneficial
owner) an equity interest in or in any of the financial or profit interest in, a
Person that has (i) had business dealings or a material financial interest in
any transaction with Transferor relating to the Business, or (ii) engaged in
competition with Transferor with respect to any line of products or services of
Transferor relating to the Business in any market presently served by
Transferor. Neither Transferor nor any Related Entity of Transferor is a party
to any Contract with, or has any claim or right against, Transferor.
3.1.29. Year 2000 Compliance. (a) Transferor represents and warrants
that, (i) it is in the process of conducting a comprehensive review of its
Systems to identify those Systems that may be unable to process data accurately
beyond the year 1999; and (ii) a plan has been implemented whereby identified
Systems will either be replaced or modified over the next eighteen months and
that the execution of this plan will not cause significant disruptions in the
Business's operations or have a Material Adverse Effect.
3.1.30. Information Supplied for Joint Proxy Statement. None of the
information supplied or to be supplied by Transferor for inclusion or
incorporation by reference in the Joint Proxy Statement to be filed with the
Securities and Exchange Commission by Transferor and ▇▇▇▇▇▇ in connection with
the stockholder meetings of Transferor and ▇▇▇▇▇▇ to be held in connection with
the Master Transaction Agreement and the transactions contemplated hereby will,
at the date mailed to stockholders, or at the time of such meetings, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading. The
Joint Proxy Statement will, as of its mailing date, comply as to form in all
material respects with Applicable Law, including the Securities Exchange Act of
1934, as amended and the rules and regulations promulgated thereunder, except
that no representation is made by Transferor with respect to information
supplied by ▇▇▇▇▇▇ or the stockholders of ▇▇▇▇▇▇ for inclusion therein.
3.1.31 Opinion of Financial Advisor. The financial advisor of
Transferor, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation, has rendered an
opinion to the Board of Directors of Transferor to the effect that, as of the
date thereof, the Membership Interest to be received by Transferor pursuant to
this Agreement is fair from a financial point of view to Transferor; it being
understood and acknowledged by the Company that such opinion has been rendered
for the benefit of the Board of Directors of Transferor and is not intended to,
and may not, be relied upon by the Company or its Affiliates.
ARTICLE IV
COVENANTS
4.1. Covenants of Transferor.
4.1.1. Further Actions. (a) Subject to the terms and conditions of the
Master Transaction Agreement, Transferor agrees to use all reasonable good faith
efforts to take all actions and to do all things necessary, proper or advisable
to consummate the transactions contemplated hereby by the Closing Date,
including obtaining the approval of Transferor's stockholders.
(b) Transferor will, as promptly as practicable, file or supply, or
cause to be filed or supplied, all applications, notifications and information
required to be filed or supplied by it pursuant to Applicable Law in connection
with this Agreement, the Collateral Agreements, the sale and transfer of the
Assets pursuant to this Agreement and the consummation of the other transactions
contemplated thereby, including filings pursuant to the HSR Act and the WARN
Act, to the extent required by Applicable Law.
(c) Transferor, as promptly as practicable, will use all reasonable
efforts to obtain, or cause to be obtained, all Consents (including all
Governmental Approvals and any Consents required under any Contract) necessary
to be obtained by any of them in order to consummate the contribution and
transfer of the Assets to the Company pursuant to this Agreement and the
consummation of the other transactions contemplated thereby.
4.1.2. Further Assurances. Following the Closing, Transferor shall, and
shall cause each of their Affiliates to, from time to time, execute and deliver
such additional instruments, documents, conveyances or assurances and take such
other actions as shall be necessary, or otherwise reasonably requested by the
Company, to confirm and assure the rights and obligations provided for in this
Agreement, and in the Collateral Agreements and render effective the
consummation of the transactions contemplated hereby and thereby.
4.1.3. Certificates of Tax Authorities. On or before the Closing Date, to
the extent such taxing authorities grant certificates, Transferor shall provide
to the Company copies of certificates from all taxing authorities in which
Transferor files (or should file) Tax Returns stating that no Taxes are due to
any such state or other taxing authority for which the Company could have
liability to withhold or pay Taxes with respect to the transfer of the Assets or
the Business
4.1.4. Use of Business Name. After the Closing, Transferor will not,
directly or indirectly, use or do business, or allow any Affiliate to use or do
business, or assist any third party in using or doing business, under the names
and marks listed on Schedule 4.1.4.
4.1.5. Compliance with ISRA.
(a) Securing a Remediation Agreement.
(i) With respect to each "industrial establishment" (as such
term is defined under ISRA) owned or operated by Transferor, Transferor shall,
prior to the Closing Date, obtain from the NJDEP and execute a Remediation
Agreement ("RA") permitting the consummation of the transactions contemplated by
this Agreement. Transferor and the Company shall be the ordered parties on the
RA. Transferor shall prepare and file all documents required by the NJDEP to
obtain such RA.
(ii) In connection with the Closing, Transferor shall obtain and
post or execute any remediation funding source (as such term is defined under
ISRA) required in connection with the RA obtained in connection with clause (i)
above. From and after the Closing Date, the Company shall maintain such
remediation funding source in full force and effect as required by ISRA.
(b) Conduct of ISRA Proceedings Following the Closing. To the extent
necessary to achieve Compliance with ISRA after the Closing, the Company shall
take all actions required under the RA or ISRA, including the preparation and
filing of any Preliminary Assessment, Site Investigation, Remedial Investigation
or Remedial Action Workplan or any other document or information required by the
NJDEP under the RA or ISRA and the implementation of all Remedial Actions.
(c) Payment of ISRA Compliance Costs. Transferor shall pay all costs
required to satisfy its obligations under subparagraph (a) above. Except as
limited by the preceding sentence, the Company shall pay all fees, costs and
expenses incurred by Transferor or the Company to achieve Compliance with ISRA,
including without limitation, environmental consultants' and contractors' fees,
attorneys' fees, NJDEP filing fees and oversight charges, costs (including any
surcharges) associated with securing and maintaining any remediation funding
source, laboratory and analytical costs and expenses, equipment charges,
industrial or hazardous waste disposal costs and all other fees, costs and
expenses incurred in connection with or relating to Remedial Actions.
4.1.6. Environmental Compliance. Subject to Section 4.1.5 hereof,
Transferor shall comply in all material respects with the requirements of all
applicable Environmental Laws necessary to effect the lawful transfer of the
Real Property or the Business prior to the Closing Date.
4.1.7. Assumed Liabilities. Transferor agrees that the Company shall be
permitted to direct the defense and settlement of any litigation that is an
Assumed Liability and shall have sole discretion as to the manner of doing so,
provided that the Company takes all steps reasonably necessary to conduct a
competent and diligent defense or settlement thereof, and provided further that
such litigation does not seek injunctive or other equitable relief involving
Transferor or an adverse result in connection therewith could not reasonably be
expected to have a Material Adverse Effect on Transferor other than with respect
to this Agreement. In addition, to the extent that any litigation is reasonably
expected to exceed the Reserve attributable thereto, the Company shall consult
with Transferor regarding the settlement, disposition and strategy with respect
to such litigation and the Company shall not settle or dispose of such
litigation without Transferor's consent, which consent shall not be unreasonably
withheld.
4.1.8. Insurance. Transferor agrees that the Company shall have the
right to make claims against any product liability insurance or other insurance
maintained prior to Closing by Transferor for the Business, provided that the
cost of adding the Company as an additional named insured as well as any
deductible or self-insured retentions related to any claim asserted under these
insurance policies with respect to the Business shall be borne by the Company.
4.1.9. Adjusted Tax Basis. On or before the Closing Date, Transferor
shall prepare and deliver to the Company a schedule that accurately and
completely sets forth Transferor's adjusted tax basis in each of the Assets
having a value in excess of $10,000 which shall become the Company's tax basis
in the Assets by operation of Code Section 723, subject to adjustment in
accordance with the provisions of Code Sections 734(b) and 754, as set forth in
the LLC Agreement.
4.2. Covenants of the Company.
4.2.1. Further Assurances. Following the Closing, the Company shall, and
shall cause its members to, from time to time, execute and deliver such
additional instruments, documents, conveyances or assurances and take such other
actions as shall be necessary, or otherwise reasonably requested by Transferor,
to confirm and assure the rights and obligations provided for in this Agreement
and in the Collateral Agreements and render effective the consummation of the
transactions contemplated thereby.
4.2.2. Use of Business Names by the Company. To the extent the
trademarks, service marks, brand names or trade, corporate or business names of
Transferor or of any of Transferor's Affiliates or divisions are used by
Transferor or the Business on stationery, signage, invoices, receipts, forms,
packaging, advertising and promotional materials, products, training and service
literature and materials, computer programs or like materials ("Marked
Materials") or appear on Inventory at the Closing, the Company may use such
Marked Materials or sell such Inventory after the Closing for a period of 12
months without altering or modifying such Marked Materials or Inventory, or
removing such trademarks, service marks, brand names, or trade, corporate or
business names, but the Company shall not thereafter use such trademarks,
service marks, brand names or trade, corporate or business names in any other
manner without the prior written consent of Transferor. Within 13 months after
the Closing Date, the Company shall provide evidence reasonably satisfactory to
Transferor that all Marked Materials have been used or destroyed. The Company
shall defend, indemnify and hold Transferor harmless from any Loss from the use
of the Marked Materials, including any product liability or other claims arising
from products manufactured or sold by the Company using such Marked Materials
unless due to the fault of Transferor.
4.2.3. Liability for Transfer Taxes. The Company shall be responsible for
the timely payment of, and shall indemnify and hold harmless Transferor against,
all sales (including bulk sales), use, value added, documentary, stamp, gross
receipts, registration, transfer, conveyance, excise, recording, license and
other similar Taxes and fees ("Transfer Taxes"), arising out of or in connection
with or attributable to the transactions effected pursuant to this Agreement.
The Company shall prepare and timely file all Tax Returns required to filed in
respect of Transfer Taxes (including all notices required to be given with
respect to bulk sales taxes), provided that Transferor shall be permitted to
prepare any such Tax Returns that are the primary responsibility of Transferor
under applicable law. Transferor's preparation of any such Tax Returns shall be
subject to the Company's approval, which approval shall not be withheld
unreasonably.
4.2.4. ISRA. The Company shall satisfy its obligations to achieve
Compliance with ISRA as set forth in Section 4.1.5 hereof.
4.2.5. Removal of Transferor as Guarantor. The Company shall use its best
efforts to, within thirty days of the Closing Date, cause Transferor and its
Affiliates to be removed as guarantors with respect to any obligation or
liability related to the Business or any Asset. During the period prior to
removing Transferor and its Affiliates as guarantors, the Company shall
indemnify Transferor and its Affiliates from any and all Losses related to such
guaranties.
4.2.6. Records and Documents. For seven years following the Closing Date,
the Company shall grant Transferor and its representatives, at Transferor's
request, during normal business hours on two day's prior notice, access to and
the right to make copies of Books and Records, possession of which is held by
the Company, as may be necessary or useful in connection with Transferor's
preparation of its accounting records, tax returns, financial statements,
compliance with Applicable Laws related to Employee Benefits, filings with the
Securities and Exchange Commission or other related matters. If during such
period, the Company elects to dispose of such Books and Records, the Company
shall first give Transferor sixty (60) days' written notice during which period
Transferor shall have the right to take such Books and Records.
4.2.7. LIFO Method. The Company shall adopt the federal income tax
accounting methodology directed by Transferor for the inventories received by
the Company from Transferor.
ARTICLE V
CONDITIONS PRECEDENT
5.1. Conditions to Obligations of Each Party. The obligations of the
parties to consummate the transactions contemplated hereby shall be subject to
the fulfillment on or prior to the Closing Date of the following conditions:
5.1.1. Master Transaction Agreement. All of the conditions of ▇▇▇▇▇▇ and
Transferor set forth in the Master Transaction Agreement shall have been
satisfied, the LLC Agreement shall be effective and the ▇▇▇▇▇▇ Capitalization
Agreement shall close simultaneously herewith.
5.2. Conditions to Obligations of the Company. The obligations of the
Company to consummate the transactions contemplated hereby shall be subject to
the fulfillment (or waiver by the Company) on or prior to the Closing Date of
the following additional conditions, which Transferor agrees to use reasonable
good faith efforts to cause to be fulfilled:
5.2.1. Representations, Performance. The representations and warranties
of Transferor contained in this Agreements and in the Collateral Agreements
shall be true and correct in all respects (in the case of any representation or
warranty containing any materiality qualification) or in all material respects
(in the case of any representation or warranty without any materiality
qualification) at and as of the date hereof, and (ii) shall be repeated and
shall be true and correct in all respects (in the case of any representation or
warranty containing any materiality qualification) or in all material respects
(in the case of any representation or warranty without any materiality
qualification) on and as of the Closing Date with the same effect as though made
on and as of the Closing Date. Transferor shall have duly performed and
complied in all material respects with all agreements and conditions required by
this Agreement and each of the Collateral Agreements to be performed or complied
with by it prior to or on the Closing Date. Transferor shall have delivered to
the Company a certificate, dated the Closing Date and signed by its duly
authorized officers, to the foregoing effect.
5.2.2. Collateral Agreements. Transferor or one of its Affiliates, as the
case may be, shall have entered into each of the following agreements with the
Company:
(a) a transitional services agreement, in form and substance mutually
agreed upon by the parties (the "Services Agreement");
(b) the LLC Agreement; and
(c) the Master Transaction Agreement.
5.2.3. Opinion of Counsel. The Company shall have received an opinion,
addressed to it and dated the Closing Date, from ▇▇▇▇▇▇▇▇ & English, LLP,
counsel to Transferor, in substance and form reasonably satisfactory to the
Company.
5.2.4. Transfer Documents. Transferor shall have delivered to the Company
at the Closing all documents, certificates and agreements necessary to transfer
to the Company good and marketable title to the Assets, free and clear of any
and all Liens thereon, other than Permitted Liens, including:
(a) a ▇▇▇▇ of sale, assignment and general conveyance, in form and
substance reasonably satisfactory to the Company, dated the Closing Date, with
respect to the Assets, (other than any Asset to be transferred pursuant to any
of the instruments referred to in any other clause of this Section 5.2.4);
(b) assignments of all Contracts, Intellectual Property and any other
agreements and instruments constituting Assets, dated the Closing Date,
assigning to the Company all of Transferor's right, title and interest therein
and thereto, with any required Consent endorsed thereon;
(c) a general warranty deed, dated as of the Closing Date, with
respect to each parcel of Owned Real Property in form and substance mutually
agreed upon by the parties, together with any necessary transfer declarations,
or other filings;
(d) an assignment of lease, dated as of the Closing Date, with
respect to each Lease and each Other Lease, in form and substance mutually
agreed upon by the parties, together with any necessary transfer declarations or
other filings;
(e) certificates of title to all motor vehicles included in the
Assets to be transferred to the Company hereunder, duly endorsed for transfer to
the Company as of the Closing Date; and
(f) stock certificates representing the Assets described in Section
1.1(p) together with stock powers executed by Transferor in blank.
5.2.5. Consents and Estoppels. The Company shall have received consents
from the lessor of each Lease listed on Schedule 3.1.18(b) to the assignment of
such Lease to the Company. The Company shall also have received estoppel
certificates addressed to the Company from the lessor of each Lease, dated
within 30 days of the Closing Date, identifying the Lease documents and any
amendments thereto, stating that the Lease is in full force and effect and, to
the best knowledge of the lessor, that the tenant is not in default under the
Lease and no event has occurred that, with notice or lapse of time or both,
would constitute a default by the tenant under the Lease and containing any
other information reasonably requested by the Company.
5.2.6. FIRPTA Certificate. The Company shall have received a certificate
of Transferor, dated the Closing Date and sworn to under penalty of perjury,
setting forth the name, address and federal tax identification number of
Transferor and stating that Transferor is not a "foreign person" within the
meaning of Section 1445 of the Code, such certificate to be in the form set
forth in the Treasury Regulations thereunder.
5.2.7. Environmental Compliance. Subject to Section 4.1.5 hereof,
Transferor shall have complied in all material respects with the requirements of
all applicable Environmental Laws necessary to effect the lawful transfer of the
Real Property or the Business.
5.2.8. Adjusted Tax Basis. Transferor shall have delivered to the Company
the schedule referred to in Section 4.1.9 in form and substance reasonably
satisfactory to the Company.
5.2.9. ISRA. With respect to each "industrial establishment" (as such
term is defined under ISRA) owned or operated by Transferor, Transferor shall
have secured a RA issued by the NJDEP under ISRA permitting the consummation of
the transactions contemplated by this Agreement.
5.3. Conditions to Obligations of Transferor. The obligation of
Transferor to consummate the transactions contemplated hereby shall be subject
to the fulfillment (or waiver by Transferor), on or prior to the Closing Date,
of the following additional conditions, which the Company agrees to use
reasonable good faith efforts to cause to be fulfilled.
5.3.1. Representations, Performance, etc. The Company shall have duly
performed and complied in all material respects with all agreements and
conditions required by this Agreement and the Collateral Agreements to be
performed or complied with by it prior to or on the Closing Date. The Company
shall have delivered to Transferor a certificate, dated the Closing Date and
signed by its duly authorized officer, to the foregoing effect.
5.3.2. Assumption Agreement. Transferor shall have received from the
Company the Assumption Agreement.
5.3.3. Collateral Agreements. The Company shall have entered into each of
the Collateral Agreements to which it is a party.
5.3.4. ISRA. With respect to each "industrial establishment" (as such
term is defined under ISRA) owned or operated by Transferor, Transferor shall
have secured a RA issued by the NJDEP under ISRA permitting the consummation of
the transactions contemplated by this Agreement.
5.3.5. Environmental Compliance. Subject to Section 4.1.5 hereof,
Transferor shall have complied in all material respects with the requirements of
all applicable Environmental Laws necessary to effect the lawful transfer of the
Real Property or the Business.
ARTICLE VI
EMPLOYEES AND EMPLOYEE BENEFIT PLANS
6.1 Employment of Transferor's Employees
(a) Transferor will, and will cause each of its Affiliates to, use
all commercial efforts to cause the employees employed by Transferor in the
Business to make available their employment services to the Company. For a
period of two years from the Closing Date, Transferor will not, and will not
permit any of its Affiliates to, solicit, offer to employ, hire or retain the
services of or otherwise interfere with the relationship of the Company with any
person employed by or otherwise engaged to perform services for the Company in
connection with the operation of the Business.
(b) Effective as of the Closing Date, the Company shall offer
employment to all employees who are actively employed by Transferor ("Transferor
Employees"). Those Transferor Employees who accept such offers of employment
effective as of the Closing Date shall be referred to herein as the "Transferred
Employees". The Company shall provide any Transferred Employee who is
terminated by the Company within 180 days after the Closing Date with severance
pay equal to the severance pay that such Transferred Employee would have
received under the severance plans of Transferor listed on Schedule 3.1.21(a) if
such person's employment with Transferor were terminated as of the Closing
Date. Except as provided under the immediately preceding sentence,
Transferor shall remain responsible, and the Company shall not assume any
liability, for payment of any and all severance, termination pay, retention,
change in control or other similar compensation or benefits which are or may
become payable in connection with the consummation of the transactions
contemplated by this Agreement or the Collateral Agreements.
6.2 Assumption of Plans
Except as specifically provided under this Article VI, effective as of
the Closing Date, the Company will adopt and assume each Plan, and all rights
and Benefit Liabilities thereunder and all other non-material Benefit
Liabilities, and shall become a successor employer and be responsible for
Transferor's participation in and obligations and responsibilities with respect
to each Plan. Prior to and after the Closing, Transferor and the Company shall
cooperate in preparing any appropriate documents and use their reasonable best
efforts to take all other actions necessary to effectuate the intent of this
Section.
6.3 Multiemployer Plans
With respect to each Multiemployer Plan set forth on Schedule
3.1.21(a), the Company shall reimburse Transferor for any withdrawal liability
incurred by Transferor under such Multiemployer Plan as the result of the
transactions contemplated under this Agreement and the Collateral Agreements.
Notwithstanding the foregoing, the Company may elect prior to the Closing Date
that Section 4204 of ERISA shall apply to the transactions contemplated under
this Agreement and the Collateral Agreements with respect to any such
Multiemployer Plan, in which case Transferor and the Company shall take all
actions necessary to comply with Section 4204 of ERISA with respect to each such
Multiemployer Plan. Such compliance shall include the execution of any
necessary documentation and the posting of a bond or escrow (or letter of credit
if acceptable to the Multiemployer Plan) within the time required by Section
4204(a)(1)(B) of ERISA for each of the Multiemployer Plans for which a bond or
escrow (or letter of credit) is required, in an amount, for the period of time,
and in a form that complies with Section 4204 (a)(1)(B) of ERISA -- or, within
such time period obtaining a variance from such bonding or escrow requirement
from each of the applicable Multiemployer Plan or Multiemployer Plans or from
the Pension Benefit Guaranty Corporation (the "PBGC") -- so that a transfer of
contribution obligations to the Company under the Multiemployer Plans with
respect to Transferor Employees does not result in a complete or partial
withdrawal of Transferor from the applicable Multiemployer Plans under Sections
4203 or 4205 of ERISA, respectively. In order to assist the Company in making
any election contemplated by this Section 6.3, Transferor shall use its
reasonable best efforts to provide to the Company as soon as possible after the
date hereof a written estimate from each Multiemployer Plan of the withdrawal
liability of the Transferor or Related Persons if the Transferor or Related
Persons were to have a complete withdrawal as of the Closing.
6.4 Employment Taxes
(a) Transferor and the Company will, to the extent permitted by
Applicable Law, (i) treat the Company as a "successor employer" and Transferor
as a "predecessor employer," within the meaning of sections 3121(a)(1) and
3306(b)(1) of the Code, with respect to Transferred Employees who are employed
by the Company for purposes of Taxes imposed under the United States Federal
Unemployment Tax Act ("FUTA") or the United States Federal Insurance
Contributions Act ("FICA") and (ii) and cooperate with each other to avoid, to
the extent possible, the filing of more than one IRS Form W-2 with respect to
each such Transferred Employee for the calendar year within which the Closing
Date occurs.
(b) At the request of the Company with respect to any particular
applicable Tax law relating to employment, unemployment insurance, social
security, disability, workers' compensation, payroll, healthcare or other
similar Tax other than taxes imposed under FICA and FUTA, Transferor and the
Company will, to the extent permitted by Applicable Law, (i) treat the Company
as a successor employer and Transferor as a predecessor employer, within the
meaning of the relevant provisions of such Tax law, with respect to Transferred
Employees who are employed by the Company and (ii) cooperate with each other to
avoid, to the extent possible, the filing of more than one individual
information reporting form pursuant to each such Tax law with respect to each
such Transferred Employee for the calendar year within which the Closing Date
occurs.
6.5. Other Plans. The Company shall not assume or have any Benefit
Liabilities with respect to either the ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Option Plan or the
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Option Plan.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement shall be terminated at such time as the
Master Transaction Agreement is terminated. In the event of the termination of
this Agreement, this Agreement shall become void and have no effect, without any
liability to any Person in respect hereof or of the transactions contemplated
hereby on the part of any party hereto, or any of its directors, members,
managers, officers, employees, agents, consultants, representatives, advisers,
stockholders or Affiliates, except (i) as specified in Section 8.4, (ii) subject
to Article VIII of the Master Transaction Agreement, for any liability resulting
from such party's breach of this Agreement, and (iii) for the payment of any fee
pursuant to Article VIII of the Master Transaction Agreement.
ARTICLE VIII
DEFINITIONS, MISCELLANEOUS
8.1 Definition of Certain Terms. The terms defined in this Section 8.1,
whenever used in this Agreement (including in the Schedules), shall have the
respective meanings indicated below for all purposes of this Agreement. All
references herein to a Section, Article or Schedule are to a Section, Article or
Schedule of or to this Agreement, unless otherwise indicated.
Adequate Reserves: with respect to any asset or liability, an amount
of specific or general Reserves that equals or exceeds the amount of any
Loss associated with such asset or liability now or hereafter recognized.
Affiliate: when used with reference to a specified Person, any Person
that directly or indirectly through one or more intermediaries controls or
is controlled by or is under common control with the specified Person.
Agreement: this Capitalization Agreement, including the Schedules
hereto.
Applicable Law: all applicable provisions of all (i) constitutions,
treaties, statutes, laws (including the common law), rules, regulations,
ordinances, codes or orders of any Governmental Authority, (ii)
Governmental Approvals and (iii) orders, decisions, injunctions, judgments,
awards and decrees of or agreements with any Governmental Authority.
Assets: as defined in Section 1.1.
Assumed Liabilities: as defined in Section 2.3.
Assumption Agreement: as defined in Section 2.3(b).
Audited Balance Sheet: the balance sheet contained in the Audited
Financial Statements.
Audited Balance Sheet Date: as defined in Section 3.1.4.
Audited Financial Statements: as defined in Section 3.1.4.
Benefit Liabilities: liabilities, obligations, commitments, damages,
costs, taxes and expenses, including reasonable fees and disbursements of
attorneys and other advisors, including any such expenses incurred in
connection with the enforcement of any applicable provision of this
Agreement payable to any Employee or other Person as a result of, with
respect to or under any Plan or similar employee benefit plan, agreement,
policy or practice.
Books and Records: as defined in Section 1.1(i).
Business: the business of Transferor relating to the manufacture,
sale, marketing and distribution of consumer, commercial, industrial and
outdoor lighting.
Business Day: shall mean any day on which commercial banks in the
City of New York, New York are open for business.
CERCLA: the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. section9601 et seq.
Closing Date: as defined in Section 2.1.
Code: the Internal Revenue Code of 1986, as amended, or any successor
statute to such Code.
Collateral Agreements: the agreements and other documents and
instruments described in Section 5.2.2 and 5.2.4.
Company: as defined in the first paragraph of this Agreement.
Company Indemnitees: as defined in Section 8.2(a).
Company's Accountants: the accountants of the Company as determined
by the Company's management board.
Compliance with ISRA: with respect to each "industrial establishment"
(as such term is defined under ISRA) owned or operated by Transferor, the
receipt by the Company or Transferor of a Deminimis Quantity Exemption
approval, Negative Declaration approval or a No Further Action Letter and
Covenant Not to ▇▇▇ (as such terms are defined under ISRA) from the NJDEP,
or other document or documents advising that the requirements of ISRA have
been satisfied.
Component: means any Hardware, Software, Databases and/or Embedded
Control of any System used in the Business.
Consent: any consent, approval, authorization, waiver, permit, grant,
franchise, concession, agreement, license, exemption or order of
registration, certificate, declaration or filing with, or report or notice
to, any Person, including but not limited to any Governmental Authority.
Contract: as defined in Section 3.1.12(a).
Database: shall mean all data and other information recorded, stored,
transmitted and retrieved in electronic form by a System or any Component,
whether located on any Component(s) of a System or archived in storage
media of a type employed or used in conjunction with any Component or
System used in the Business.
$ or dollars: lawful money of the United States.
Embedded Control: shall mean any microprocessor, microcontroller, PLC,
smart instrumentation or other sensor, driver, monitor, robotic or other
device containing a semiconductor, memory circuit, BIOS, PROM or other
microchip used in the Business.
Employees: as defined in Section 3.1.21(a).
Environmental Laws: all Applicable Laws relating to the protection of
the environment, to human health and safety, or to any emission, discharge,
generation, processing, storage, handling, holding, abatement, existence,
Release, threatened Release or transportation or disposal of any Hazardous
Substances, including (i) CERCLA, the Resource Conservation and Recovery
Act, and the Occupational Safety and Health Act, (ii) all other
requirements pertaining to reporting, licensing, permitting, investigation
or remediation of emissions, discharges, releases or threatened releases of
Hazardous Substances into the air, surface water, groundwater or land, or
relating to the manufacture, processing, distribution, use, sale,
treatment, receipt, storage, disposal, transport or handling of Hazardous
Substances, and (iii) all other requirements pertaining to the protection
of the health and safety of employees or the public.
Environmental Liabilities and Costs: all Losses, whether direct or
indirect, known or unknown, current or potential, past, present or future,
imposed by, under or pursuant to Environmental Laws, including all Losses
related to Remedial Actions, and all fees disbursements and expenses of
counsel, experts, personnel and consultants based on, arising out of or
otherwise in respect of: (i) the ownership, operation, use or occupancy of
the Business, the Assets, the Real Property or Other Leases or any other
real properties, assets, equipment or facilities, by any Transferor, or any
of their predecessors or Affiliates; (ii) the environmental conditions
existing on the Closing Date on, under, above, about or emanating from any
Real Property, the Assets or property subject to Other Leases or any other
real properties, assets, equipment or facilities currently or previously
owned, leased, operated, occupied or used by the any Transferor, or any of
their predecessors or Affiliates; and (iii) expenditures necessary to cause
any Real Property or any aspect of the Business or the Assets to be in
compliance with any and all requirements of Environmental Laws as of the
Closing Date, including all Environmental Permits issued or required under
or pursuant to such Environmental Laws, and reasonably necessary to make
full economic use of any Real Property or the Assets.
Environmental Permits: any federal, state and local permit, license,
registration, consent, order, administrative consent order, certificate,
approval or other authorization with respect to the any Transferor
necessary for the conduct of the Business as currently conducted or
previously conducted under any Environmental Law.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
Excluded Assets: as defined in Section 1.2.
Excluded Liabilities: as defined in Section 2.4.
Financial Statements: each of the financial statements required to be
provided by Section 3.1.4.
GAAP: generally accepted accounting principles as in effect in the
United States.
Governmental Approval: any Consent of, with or to any Governmental
Authority.
Governmental Authority: any nation of government, any state or other
political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, including any government authority, agency,
department, board, commission or instrumentality of the United States, any
State of the United States or any political subdivision, thereof, and any
tribunal or arbitrator(s) of competent jurisdiction, and any self-
regulatory organization.
Hardware: shall mean all mainframes, midrange computers, personal
computers, notebooks, servers, switches, printers, modems, drives,
peripherals and any component of any of the foregoing used by the Business.
Hazardous Substances: any substance that: (i) is or contains
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum or petroleum-derived substances or wastes, radon gas or related
materials (ii) requires investigation, removal or remediation under any
Environmental Law, or is defined, listed or identified as a "hazardous
waste" or "hazardous substance" thereunder, or (iii) is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or
otherwise hazardous and is regulated by any Governmental Authority or
Environmental Law.
HIPAA: as defined in Section 3.1.21(c)(viii).
HSR Act: the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Anti-trust Improvements Act of 1976,
as amended.
Indemnified Party: as defined in Section 8.2(d).
Indemnifying Party: as defined in Section 8.2(d).
Intellectual Property: any and all United States and foreign: (a)
patents (including design patents, industrial designs and utility models)
and patent applications (including docketed patent disclosures awaiting
filing, reissues, divisions, continuations, continuations-in-part and
extensions), patent disclosures awaiting filing determination, inventions
and improvements thereto; (b) trademarks, service marks, trade names, trade
dress, logos, business and product names, slogans, and registrations and
applications for registration thereof; (c) copyrights (including software)
and registrations thereof; (d) inventions, processes, designs, formulae,
trade secrets, know-how, industrial models, confidential and technical
information, manufacturing, engineering and technical drawings, product
specifications and confidential business information; (e) mask work and
other semiconductor chip rights and registrations thereof; (f) Software;
(g) intellectual property rights similar to any of the foregoing; (h)
copies and tangible embodiments thereof (in whatever form or medium,
including electronic media) used in the Business.
Intellectual Property Assets: as defined in Section 1.1(h).
Inventories: as defined in Section 1.1(b).
IRS: the Internal Revenue Service.
ISRA: the Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq., and
the rules and regulations promulgated thereunder.
Joint Proxy Statement: the Joint Proxy Statement of ▇▇▇▇▇▇ and
Transferor to be filed with the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended, pursuant to which each of
▇▇▇▇▇▇ and Transferor will seek stockholder approval of the transactions
contemplated by the Master Transaction Agreement.
Knowledge: the actual knowledge after due inquiry of (i) any
"officer" of the Transferor, as such term is defined in Rule 16a-1(f) of
the General Rules and Regulations under the Securities Exchange Act of
1934, or (ii) any individual employed by Transferor as a manager of any
portion of the Business.
LLC Agreement: as defined in the WHEREAS clauses of this Agreement.
Leased Real Property: means all interests leased pursuant to the
Leases.
Leases: means the real property leases, subleases, licenses and
occupancy agreements relating the Business pursuant to which Transferor is
the lessee, sublessee, licensee or occupant.
Lien: any mortgage, pledge, hypothecation, right of others, claim,
security interest, encumbrance, lease, sublease, license, occupancy
agreement, adverse claim or interest, easement, covenant, encroachment,
burden, title defect, title retention agreement, voting, trust agreement,
interest, equity, option, lien, right of first refusal, charge or other
restrictions or limitations of any nature whatsoever, including such as may
arise under any Contracts.
Losses: as defined in Section 8.2(a).
Marked Materials: as defined in Section 4.2.2.
Master Transaction Agreement: as defined in the WHEREAS clauses of
this Agreement.
Material Adverse Effect: any event, occurrence, fact, condition,
change or effect that is adverse to the business, operations, prospects,
results of operations, condition (financial or otherwise), properties
(including intangible properties), assets (including intangible assets) or
liabilities of the Business in an amount equal to $5,000,000 or greater.
Membership Interests: as defined in Section 2.2.
Multiemployer Plan: as defined in Section 3.1.21(a).
Net Working Capital: current assets less current liabilities of the
Business (in each case excluding Excluded Assets and Excluded Liabilities),
all as determined in accordance with GAAP, consistently applied.
NJDEP: the New Jersey Department of Environmental Protection, its
divisions, bureaus and subdivisions.
Other Leases: the leases, subleases, licenses and occupancy
agreements pursuant to which Transferor is a lessor sublessor or licensor
of any part of the Real Property.
Owned Intellectual Property: as defined in Section 3.1.16(a).
Owned Real Property: the real property owned by the Transferor or any
Affiliate together with all other structures, facilities, improvements,
fixtures, systems, equipment and items of property presently or hereafter
located thereon attached or appurtenant thereto or owned by Transferor or
any Affiliate and located on Leased Real Property and all easements,
licenses, rights and appurtenances relating to the foregoing other than
owned real property included in Excluded Assets.
Permitted Liens: (i) Liens reserved against in the Audited Balance
Sheet to the extent so reserved, (ii) Liens for Taxes not yet due and
payable or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on
Transferor's books in accordance with GAAP, (iii) liens arising in the
ordinary course of business from a purchase money security interest or
related to indebtedness for borrowed money under Transferor's credit
facilities, or (iv) Liens that, individually and in the aggregate, do not
and would not materially detract from the value of any of the property or
assets of the Business or materially interfere with the use thereof as
currently used.
Person: any individual, partnership, limited liability company,
corporation, cooperative, trust, estate or other entity.
Plan: as defined in Section 3.1.21(a).
Real Property: all of the real property, together with all buildings,
structures, fixtures and improvements, listed on Schedules 3.1.18(a) and
3.1.18(b).
Real Property Laws: as defined in Section 3.1.18(f).
Related Entity: with respect to any Person other than an individual:
(a) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a material interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a material
interest;
(e) any Person with respect to which such specified Person serves
as a general partner or a trustee(or in a similar capacity); and
(f) any Related Entity of any individual described in clause (b)
or (c).
Related Persons: as defined in Section 3.1.21(a).
Release: any releasing, disposing, discharging, injecting, spilling,
leaking, leaching, pumping, dumping, emitting, escaping, emptying, seeping,
dispersal, migration, transporting, placing and the like, including, the
moving of any materials through, into or upon, any land, soil, surface
water, ground water or air, or otherwise entering into the environment.
Remedial Action: all actions required to (i) clean up, remove, treat
or in any other way remediate any Hazardous Substances; (ii) prevent the
release of Hazardous Substances so that they do not migrate or endanger or
threaten to endanger public health or welfare or the environment; or (iii)
perform studies, investigations and care related to any such Hazardous
Substances.
Reserves: the reserves shown on the Balance Sheet or in the
accounting records of Transferor for the Business as of the Closing Date.
Software: shall mean all software owned, developed, licensed or used
by Transferor or any of its Affiliates in the Business, including (i) all
modifications, enhancements, fixes, updates, upgrades, bypasses and work-
arounds, (ii) the source code and object code for any of the foregoing and
(iii) all operating systems, bridgeware, firmware, middleware or utilities
used by the Business.
Subsidiaries: each corporation or other Person in which a Person owns
or controls, directly or indirectly, capital stock or other equity
interests representing at least 50% of the outstanding voting stock or
other equity interests.
System: shall mean any combination of any Software, Hardware, Database
or Embedded Control used by the Business.
Tax: any federal, state, provincial, local, foreign or other income,
alternative, minimum, accumulated earnings, personal holding company,
franchise, capital stock, net worth, capital, profits, windfall profits,
gross receipts, value added, sales, use, goods and services, excise,
customs duties, transfer, conveyance, mortgage registration, stamp,
documentary, recording, premium, severance, environmental (including taxes
under Section 59A of the Code), real property, personal property, ad
valorem, intangibles, rent, occupancy, license, occupational, employment,
unemployment insurance, social security, disability, workers' compensation,
payroll, health care, withholding, estimated or other similar tax, duty or
other governmental charge or assessment or deficiencies thereof (including
all interest and penalties thereon and additions thereto whether disputed
or not).
Tax Return: any return, report, declaration, form, claim for refund
or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
▇▇▇▇▇▇: as defined in the WHEREAS clauses of this Agreement.
Transaction Expenses: as defined in Section 8.4.
Transferred Employees: as defined in Section 6.1(b).
Transfer Taxes: as defined in Section 4.2.3.
Transferor: as defined in the first paragraph of this Agreement.
Transferor's Accountants: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP.
Transferor Employees: as defined in Section 6.1(b).
Treasury Regulations: the regulations prescribed pursuant to the
Code.
Withholding Taxes: as defined in Section 3.1.6(a)
8.2 Indemnification. (a) By Transferor. Transferor covenants and agrees
to defend, indemnify and hold harmless the Company, its officers, directors,
employees, agents, advisers, representatives and Affiliates (collectively, the
"Company Indemnitees") from and against, and pay or reimburse the Company
Indemnitees for, any and all claims, liabilities, obligations, losses, fines,
costs, royalties, proceedings, deficiencies or damages (whether absolute,
accrued, conditional or otherwise and whether or not resulting from third party
claims), including out-of-pocket expenses and reasonable attorneys' and
accountants' fees incurred in the investigation or defense of any of the same or
in asserting any of their respective rights hereunder (collectively, "Losses"),
resulting from or arising out of:
(i) any inaccuracy of any representation or warranty made by
Transferor herein or under any Collateral Agreement or in connection
herewith or therewith;
(ii) any failure of Transferor to perform any covenant or
agreement hereunder or under any Collateral Agreement or fulfill any
other obligation in respect hereof or of any Collateral Agreement;
(iii) any Excluded Liabilities or Excluded Assets;
(iv) any and all Taxes of Transferor and all Affiliates thereof,
whether or not relating to or arising out of the Business; and
(v) any and all Benefit Liabilities not assumed by the Company.
Except for inaccuracies in the representations and warranties
contained in Sections 3.1.1, 3.1.2, 3.1.3, 3.1.6 and 3.1.11 and breaches of
covenants contained herein or in any Collateral Agreement, Transferor shall not
be required to indemnify the Company Indemnitees with respect to any claim for
indemnification pursuant to this Section 8.2(a) unless and until the aggregate
amount of all Losses arising under this Section 8.2(a) exceeds $1,000,000 and
then only for the amount of such excess. Notwithstanding the immediately
preceding sentence, Transferor shall not be required to indemnify the Company
Indemnitees with respect to any claim for indemnification arising from
inaccuracies in the representations and warranties contained in Section 3.1.19
unless and until the aggregate amount of all such Losses exceeds $500,000 and
then only for the amount of such excess.
(b) By the Company. The Company covenants and agrees to defend,
indemnify and hold harmless Transferor and its officers, directors, employees,
agents, advisers, representatives and Affiliates (collectively, the "Transferor
Indemnitees") from and against any and all Losses resulting from or arising out
of:
(i) any inaccuracy in any representation or warranty by the
Company made or contained in any Collateral Agreement or in connection
therewith; or
(ii) any failure of the Company to perform any covenant or
agreement made or contained in this Agreement or any Collateral
Agreement or fulfill any other obligation in respect thereof;
(iii) the Assumed Liabilities except to the extent that they
constitute Losses for which Transferor is required to indemnify the
Company Indemnitees under Section 8.2(a);
(iv) the use by the Company of any Transferor tradenames or
trademarks after the Closing Date as contemplated by Section 4.2.2;
and
(v) the operation of the Business by the Company or the
Company's ownership, operation or use of the Assets following the
Closing Date, except to the extent such Losses result from or arise
out of the Excluded Liabilities, Excluded Assets or constitute Losses
for which Transferor is required to indemnify the Company Indemnitees
under Section 8.2(a).
(c) Adjustment to Indemnification Payments. Any payment made by
Transferor pursuant to Section 8.2(a) in respect of any Losses shall be net of
any Reserve maintained by Transferor for such Loss or category of Losses. Any
payment made by Transferor to the Company Indemnitees, on the one hand, or by
the Company to the Transferor Indemnitees, on the other hand, pursuant to this
Section 8.2 in respect of any Losses (i) shall be net of any insurance proceeds
realized by and paid to the Indemnified Party in respect of such Losses and (ii)
shall be (A) reduced by an amount equal to any Tax benefits attributable to such
Losses and (B) increased by an amount equal to any Taxes attributable to the
receipt of such payment, but only to the extent that such Tax benefits are
actually realized, or such Taxes are actually paid, as the case may be, by the
Indemnified Party or by a consolidated, combined or unitary group of which the
Indemnified Party is a member. The Indemnified Party shall use its reasonable
efforts to make insurance claims relating to any Losses for which it is seeking
indemnification pursuant to this Section 8.2; provided that the Indemnified
Party shall not be obligated to make such an insurance claim if the Indemnified
Party in its reasonable judgment believes (based on written advice from
insurance brokers or providers) the cost of pursuing such an insurance claim
together with any corresponding increase in insurance premiums or other
chargebacks to the Indemnified Party, as the case may be, would exceed the value
of the claim for which the Indemnified Party is seeking indemnification. Any
amount paid by Transferor pursuant to Section 8.2(a) shall be characterized, for
tax purposes, as a contribution to the Company's capital and amounts paid by the
Company pursuant to Section 8.2(b) shall be characterized as a return of
capital. "Indemnified Party" means a party entitled to indemnification pursuant
to this Agreement.
(d) Indemnification Procedures. In the case of any claim asserted by
a third party against an Indemnified Party, notice shall be given by the
Indemnified Party to the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and the Indemnified Party
shall permit the Indemnifying Party (at the expense of such Indemnifying Party)
to assume the defense of any claim or any litigation resulting therefrom,
provided that (i) the counsel for the Indemnifying Party who shall conduct the
defense of such claim or litigation shall be reasonably satisfactory to the
Indemnified Party, (ii) the Indemnified Party may participate in such defense at
such Indemnified Party's expenses, and (iii) the omission by any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of its indemnification obligation under this Agreement except to the extent that
such omission results in a failure of actual notice to the Indemnifying Party
and such Indemnifying Party is materially damaged as a result of such failure to
give notice. Except with the prior written consent of the Indemnified Party, no
Indemnifying Party, in the defense of any such claim or litigation, shall
consent to entry of any judgment or enter into any settlement that provides for
injunctive or other nonmonetary relief affecting the Indemnified Party or that
does not include as an unconditional term thereof the giving by each claimant or
plaintiff to such Indemnified Party of a release from all liability with respect
to such claim or litigation. In the event that the Indemnified Party shall in
good faith determine that the conduct of the defense of any claim subject to
indemnification hereunder or any proposed settlement of any such claim by the
Indemnifying Party might be expected to affect adversely the Indemnified Party's
Tax liability or the ability of the Company to conduct its business, or that the
Indemnified Party may have available to it one or more defenses or counterclaims
that are inconsistent with one or more of those that may be available to the
Indemnifying Party in respect of such claim or any litigation relating thereto,
the Indemnified Party shall have the right at all times to take over and assume
control over the defense, settlement, negotiations or litigation relating to any
such claim at the sole cost of the Indemnifying Party, provided that if the
Indemnified Party does so take over and assume control, the Indemnified Party
shall not settle such claim or litigation without the written consent of the
Indemnifying Party, such consent not to be unreasonably withheld. In the event
that the Indemnifying Party does not accept the defense of any matter as above
provided, the Indemnified Party shall have the full right to defend against any
such claim or demand and shall be entitled to settle or agree to pay in full
such claim or demand. In any event, the Indemnifying Party and the Indemnified
Party shall cooperate in the defense of any claim or litigation subject to this
Section 8.2 and the records of each shall be available to the other with respect
to such defense.
(e) Time Limitation. All claims for indemnification under clause (i)
of the first sentence of Section 8.2(a) or clause (i) of the first sentence of
Section 8.2(b) must be asserted prior to the termination of the respective
survival periods set forth in Section 8.3. Notwithstanding the foregoing, any
claim for indemnification that is asserted by written notice within the
applicable survival period shall survive until resolved and discharged by the
parties or pursuant to a final non-appealable judicial determination.
(f) Payment by Transferor. Notwithstanding any provision of this
Section 8.2 to the contrary, any payment required to be made by Transferor to
the Company pursuant to this Section 8.2 shall be deemed a liability of
Transferor owing to the Company and shall be deducted from the next distribution
made to Transferor pursuant to Section 6.2(b) of the LLC Agreement (other than
Tax Distributions, as such term is defined in the LLC Agreement), provided that
in the event that the Loss payable by Transferor exceeds the amount of such
distribution, Transferor shall deliver to the Company a note in the amount of
such excess, which shall bear interest at the rate of the Company's primary
credit facility referenced in Sections 6.8 and 7.8 of the Master Transaction
Agreement, and shall be payable out of future distributions (other than Tax
Distributions) pursuant to the LLC Agreement. The mechanism provided in this
Section 8.2(f) shall be the sole and exclusive source of payment for any
obligation of Transferor pursuant to this Section 8.2.
(g) Application of Reserve. With respect to indemnification claims
for breach of representations or warranties to which a Reserve is applicable,
Transferor shall bear the burden of proving the amount of the Reserve.
(h) Exclusive Remedy. Except for the provisions of Section 7.1 and
subject to Article VIII of the Master Transaction Agreement, the
indemnifications contained in Section 8.2 shall be Transferor's and the
Company's sole and exclusive remedies with respect to money damages, against
each other, with respect to matters arising under this Agreement, of any kind or
nature, or relating to the Division, the Business, the Assets, the Assumed
Liabilities, the Excluded Assets or the Excluded Liabilities. Transferor and
the Company hereby waive and release any other rights, remedies, causes of
action or claims that they have or that may arise against the other with respect
to matters arising under this Agreement, of any kind or nature, or relating to
the Division, the Business, the Assets, the Assumed Liabilities, the Excluded
Assets or the Excluded Liabilities. The foregoing restrictions of this Section
8.2(h) shall not apply to any matter involving actual fraud or criminal
misconduct.
8.3. Survival of Representations and Warranties, etc. The representations
and warranties contained in this Agreement shall survive the execution and
delivery of this Agreement, any examination by or on behalf of the parties
hereto and the completion of the transactions contemplated herein, but only to
the extent specified below:
(a) except as set forth in clauses (b) and (c) below, the
representations and warranties contained in Section 3.1 shall survive
to the date that is 60 days after the delivery of the audited
financial statements of the Company for the fiscal year 1999;
(b) the representations and warranties contained in Section 3.1.19
shall survive for a period of three years following the Closing Date;
(c) the representations and warranties contained in Sections 3.1.1,
3.1.2, 3.1.3 and 3.1.11 shall survive without limitation; and
(d) the representations and warranties of Transferor contained in
Section 3.1.6 shall survive as to any Tax covered by such
representations and warranties for so long as any statute of
limitations for such Tax remains open, in whole or in part, including
by reason of waiver of such statute of limitations.
8.4. Expenses. Except as provided in Section 4.2.3 and in Section 8.2 of
the Master Transaction Agreement, Transferor, on the one hand, and the Company,
on the other hand, shall bear their respective expenses, costs and fees
(including attorneys', auditors' and financing commitment fees) in connection
with the transactions contemplated hereby, including the preparation, execution
and delivery of this Agreement and compliance herewith (the "Transaction
Expenses"), whether or not the transactions contemplated hereby shall be
consummated.
8.5. Partial Invalidity. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
8.6 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be, personally delivered or sent by
facsimile transmission with confirming copy sent by overnight courier (such as
Express Mail, Federal Express, etc.) and a delivery receipt obtained and
addressed to the intended recipient as follows:
(a) If to Transferor:
The Genlyte Group Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, President & CEO
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ & English, LLP
Four Gateway Center
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopy No. ▇▇▇-▇▇▇-▇▇▇▇
(b) If to the Company:
GT Lighting, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
P.O. Box 35120
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, President & CEO
Telecopy No. ▇▇▇-▇▇▇-▇▇▇▇
Any party may change its address for receiving notice by written notice given to
the others named above. Notices shall be deemed given as of the date of
receipt.
8.7. Miscellaneous.
8.7.1. Other Rules of Construction. References in this Agreement to
sections, schedules and exhibits are to sections of, and schedules and exhibits
to, this Agreement unless otherwise indicated. Words in the singular include
the plural and in the plural include the singular. The word "or" is not
exclusive. The word "including" shall mean including, without limitation. The
section and other headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement
8.7.2. Entire Transaction. This agreement and the agreements and documents
referred to herein contain the entire agreement and understanding among the
parties with respect to the transactions contemplated hereby and supersede all
other agreements, understandings and undertakings among the parties on the
subject matter hereof. All exhibits and schedules hereto are hereby
incorporated by reference and made a part of this Agreement
8.7.3. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.7.4. Governing Law, etc. This Agreement shall be governed in all
respects, including as to validity, interpretation and effect, by the internal
laws of the State of Delaware without giving effect to the conflict of laws
rules thereof. The Company and Transferor hereby irrevocably submit to the
jurisdiction of the courts of the State of Delaware and the Federal courts of
the United States of America located in the State of Delaware solely in respect
of the interpretation and enforcement of the provisions of this Agreement and of
the documents referred to in this Agreement, and hereby waive, and agree not to
assert, as a defense in any action, suit or proceeding for the interpretation or
enforcement hereof or of any such document, that such party is not subject
thereto or that such action, suit or proceeding may not be brought or is not
maintainable in said courts or that the venue thereof may not be appropriate or
that this Agreement or any of such document may not be enforced in or by said
courts, and the parties hereto irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such a Delaware State
or Federal court. The Company and Transferor hereby consent to and grant any
such court jurisdiction over the person of such parties and over the subject
matter of any such dispute and agree that mailing of process or other papers in
connection with any such action or proceeding in the manner provided in Section
8.6, or in such other manner as may be permitted by law, shall be valid and
sufficient service thereof.
8.7.5. Successors and Assigns This Agreement shall bind and inure to the
benefit of the parties named herein and their respective successors and
permitted assigns. This Agreement shall not be assigned by either party hereto
without the express prior written consent of the other party and any attempted
assignment, without such consents, shall be null and void, provided that the
Company may assign this Agreement to any Subsidiary of the Company, provided
further that the Company shall in all events remain liable hereunder. Except as
otherwise provided in the Master Transaction Agreement, this Agreement does not
create any rights, claims or benefits inuring to any person that is not a party
hereto nor create or establish any third-party beneficiary hereto.
8.7.6. Amendment; Waivers.
(a) No amendment, waiver or consent with respect to any provision of
this Agreement shall in any event be effective, unless the same shall be in
writing and signed by the parties hereto, and then such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
(b) The failure of any party at any time or times to require
performance of any provisions hereof shall in no manner affect that party's
right at a later time to enforce the same. No waiver by any party of the breach
of any term or covenant contained in this Agreement in any one or more instances
shall be deemed to be, or construed as, a further or continuing waiver of any
such breach, or a waiver of the breach of any other term or covenant contained
in this Agreement.
8.7.7. Remedies. The rights and remedies of any party based upon, arising
out of or otherwise in respect of any inaccuracy or breach of any
representation, warranty, covenant or agreement or failure to fulfill any
condition shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of any such inaccuracy
or breach is based may also be the subject matter of any other representation,
warranty, covenant or agreement as to which there is no inaccuracy or breach.
The representations and warranties of Transferor shall not be affected or deemed
waived by reason of any investigation made by or on behalf of the Company
(including but not limited to by any of its advisors, consultants or
representatives) or by reason of the fact that the Company or any of such
advisors, consultants or representatives knew or should have known that any such
representation or warranty is or might be inaccurate.
8.7.8. Authorship. The parties hereto agree that the terms and language
of this Agreement were the result of negotiations between the parties and, as a
result, there shall be no presumption that any ambiguities in this Agreement
shall be resolved against either party. Any controversy over the construction
of this Agreement shall be decided without regard to events of authorship or
negotiation.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
GT LIGHTING, LLC
By: ______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
THE GENLYTE GROUP INCORPORATED
By: ______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
LIST OF SCHEDULES
TO THE
CAPITALIZATION AGREEMENT
BETWEEN
GT LIGHTING, LLC
AND
THE GENLYTE GROUP INCORPORATED
DATED AS OF APRIL 28, 1998
Schedule 1.1(p): Stock, Partnership, Membership or Other Interests in
any Person Engaged in the Business
Schedule 1.2: Excluded Assets
Schedule 2.3: Excluded Liabilities
Schedule 3.1.2(a): State of Incorporation
Schedule 3.1.2(b): States in Which Qualified to do Business
Schedule 3.1.2(d): Subsidiaries
Schedule 3.1.3: Conflicts with Contracts; Governmental Approvals and
Consents Required
Schedule 3.1.5: Undisclosed Liabilities
Schedule 3.1.6(a): Contested Taxes
Schedule 3.1.6(b): Agreements or Powers of Attorney Extending Period of
Assessment or Collection of Taxes
Schedule 3.1.6(c): Taxes Due or Audit Issues
Schedule 3.1.6(d): Tax-Related Litigation or Administrative Appeal
Schedule 3.1.7: Changes in Conduct of Business Since the Audited
Balance Sheet Date
Schedule 3.1.8: Litigation Pending or Threatened
Schedule 3.1.9(a): Noncompliance with Applicable Law
Schedule 3.1.9(b): Governmental Approvals and Consents Required
Schedule 3.1.10: Conduct of the Business Outside of the Division
Schedule 3.1.11: Assets to Which The Genlyte Group Incorporated Does Not
Have Good Title; Assets Not in Reasonably Good Repair
and Operating Condition
Schedule 3.1.12(a): List of Contracts
Schedule 3.1.12(c): Defaults under Contracts; Consents Required
Schedule 3.1.13: Territorial Restrictions
Schedule 3.1.14: Pending or Threatened Claims Regarding Warranties in
Excess of $100,000
Schedule 3.1.16(a): Owned Intellectual Property
Schedule 3.1.16(d): Intellectual Property Litigation
Schedule 3.1.16(e): List of Names and Marks; Contractual Restrictions
Schedule 3.1.17: Insurance Policies; Claims Made within Last Two Years
Schedule 3.1.18(a): Owned Real Property
Schedule 3.1.18(b): Leases
Schedule 3.1.19(b): Noncompliance with Environmental Permits and Laws
Schedule 3.1.19(c): Actions Resulting in Liability or Obligation
Schedule 3.1.19(d): Environmental Exceptions
Schedule 3.1.20: Employees, Labor Matters, etc.
Schedule 3.1.21(a): Employee Benefit Plans, etc.
Schedule 3.1.21(c)(vi): List of Plans Providing Death or Survivor Benefits,
Medical or Health Benefits
Schedule 3.1.22: Breaches of Confidentiality
Schedule 4.1.4: Names and Marks Under which Business Will be Conducted
After Closing