1
EXHIBIT 2.1
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇ PLC
▇▇▇▇▇▇▇▇▇ B.V.
▇▇▇▇▇▇▇▇▇ INTERNATIONAL INC.
▇▇▇▇▇▇▇▇▇ GMBH
SALE OF SHARES OF
REDPOINT THERMALLOY LIMITED
EL.BO.MEC. S.R.L.
THERMALLOY (MALAYSIA) SDN BHD
THERMALLOY LIMITED (HONG KONG)
THERMALLOY INVESTMENT COMPANY
CURAMIK ELECTRONICS GMBH
TO
AAVID THERMAL TECHNOLOGIES, INC.
--------------------------------
STOCK PURCHASE AGREEMENT
--------------------------------
Dated as of August 23, 1999
--------------------------------------------------------------------------------
2
TABLE OF CONTENTS
PAGE
1. Sale and Purchase. .....................................................................1
1.1 Sale and Purchase of the Shares................................................1
1.2 Closing........................................................................2
1.3 Allocation of Purchase Price..................................................3
1.4 Post-Closing Purchase Price Calculation........................................4
1.5 Inventory Purchase Price Adjustment............................................5
2. Representations and Warranties of the Sellers...........................................6
2.1 Authorization, etc.............................................................6
2.2 Corporate Status...............................................................7
2.3 No Conflicts, Consents and Approvals, etc......................................7
2.4 The Shares.....................................................................8
2.5 Financial Statements and Other Information.....................................8
2.6 Absence of Undisclosed Liabilities.............................................9
2.7 Assets, Properties, etc.......................................................10
2.8 Contracts.....................................................................12
2.9 Employee Benefit Matters......................................................14
2.10 Intellectual Property.........................................................19
2.11 Governmental Authorizations; Compliance with Law..............................21
2.12 Litigation....................................................................21
2.13 Taxes.........................................................................21
2.14 Absence of Changes............................................................26
2.15 Insurance.....................................................................28
2.16 Environmental Matters.........................................................28
2.17 Affiliate Transactions........................................................30
2.18 Customers.....................................................................30
2.19 Suppliers; Raw Materials......................................................31
2.20 Product Warranties............................................................31
2.21 Absence of Certain Business Practices.........................................31
2.22 Banking and Agency Arrangements...............................................31
2.23 Brokers.......................................................................32
2.24 Foreign Subsidiaries..........................................................32
2.25 Disclosure....................................................................32
3. Representations and Warranties of the Purchaser........................................32
3.1 Authorization, etc............................................................32
3.2 Corporate Status..............................................................33
3.3 No Conflicts, Consents and Approvals, etc.....................................33
3.4 Bank Financing Commitment.....................................................33
3.5 Litigation....................................................................33
3.6 Purchase for Investment.......................................................34
-i-
3
3.7 Brokers.......................................................................34
3.8 Purchaser's Investment Plan...................................................34
4. Certain Covenants......................................................................34
4.1 Obligations of Both the Parties...............................................34
4.2 Obligations of the Sellers....................................................35
4.3 Payment of Transaction-Related Taxes and Expenses.............................38
4.4 Taxes.........................................................................38
4.5 Publicity.....................................................................45
4.6 Modification of Disclosure Schedules..........................................46
4.7 Contact with Employees, Customers and Suppliers...............................46
4.8 Credit Support Arrangements...................................................46
4.9 Intercompany Accounts.........................................................47
4.10 Target Assets.................................................................47
4.11 No Solicitation...............................................................47
4.12 Discharge of Indebtedness and Liens...........................................48
4.13 Confidentiality...............................................................48
4.14 Insurance.....................................................................49
4.15 Non-Competition...............................................................49
4.16 Remediation of Existing Environmental Conditions..............................51
5. Employees and Employee Benefit Plans...................................................54
5.1 Compensation and Benefits of Target Company Employees.........................54
5.2 Savings Plan..................................................................57
5.3 No Third Party Beneficiaries..................................................58
6. Conditions Precedent...................................................................58
6.1 General.......................................................................58
6.2 Conditions to Obligations of Both Parties.....................................58
6.3 Conditions to Obligations of the Sellers......................................59
6.4 Conditions to Obligations of the Purchaser....................................59
7. Indemnification........................................................................60
7.1 Survival of Representations and Warranties....................................60
7.2 Indemnification...............................................................60
8. General Provisions.....................................................................64
8.1 Modification; Waiver..........................................................64
8.2 Entire Agreement..............................................................64
8.3 Exclusivity of Representations and Warranties and
Indemnification Provision; Relationship Between the Parties...................64
8.4 No Additional Rights or Remedies under Certain Agreements.....................65
8.5 Termination...................................................................65
8.6 Expenses......................................................................67
-ii-
4
8.7 Further Actions...............................................................67
8.8 Post-Closing Access...........................................................67
8.9 Notices.......................................................................67
8.10 Assignment....................................................................68
8.11 No Third Party Beneficiaries..................................................69
8.12 Counterparts..................................................................69
8.13 Interpretation................................................................69
8.14 Governing Law.................................................................70
8.15 Consent to Jurisdiction, etc..................................................70
8.16 Waiver of Jury Trial..........................................................70
-iii-
5
SCHEDULES
SCHEDULE DESCRIPTION
SELLERS' SCHEDULES
Schedule 2.1 Authorization, etc.
Schedule 2.2 Corporate Status
Schedule 2.3 Conflicts; Consents
Schedule 2.4 Ownership of Shares
Schedule 2.5 Financial Statements
Schedule 2.6 Absence of Undisclosed Liabilities
Schedule 2.7 Assets, Property, etc.
Schedule 2.8 Contracts
Schedule 2.9 Employee Benefit Matters
Schedule 2.10 Intellectual Property
Schedule 2.11 Governmental Permits
Schedule 2.12 Litigation
Schedule 2.13 Tax Matters
Schedule 2.14 Absence of Certain Changes
Schedule 2.15 Insurance Policies
Schedule 2.16 Environmental Matters
Schedule 2.17 Affiliate Transactions
Schedule 2.18 Customers
Schedule 2.19 Suppliers
Schedule 2.20 Product Warranties
Schedule 2.21 Absence of Certain Business Practices
Schedule 2.22 Banking and Agency Arrangements
Schedule 4.8 Credit Support Arrangements
Schedule 4.10 Target Assets
PURCHASER'S SCHEDULES
Schedule 3.3 Conflicts; Consents
Schedule 5.1 Target Company Group Benefit Plans Not Assumed by the
Purchaser
SELLERS' AND PURCHASER'S SCHEDULES
Schedule 1.3 Preliminary Allocation of Purchase Price
Schedule 4.2.1 Liabilities Schedule
Schedule 4.3 Payment of Transaction Related Taxes and Expenses
Schedule 6.2.1 Required Third-Party Consents
-iv-
6
EXHIBITS
Exhibit 1.2 Form of Local Purchase Agreement
Exhibit 2.9 Foreign Benefit Plan Representations
Exhibit 2.24 Foreign Subsidiary Representations
Exhibit 4.5 Press Release
Exhibit 4.10 Target Asset Purchase Agreement
Exhibit 5.1 UK Pension Transfer Provisions
-v-
7
DEFINED TERMS
SECTION
Aavid Group 4.15(b)
Accountant Inventory Statement 1.5(d)
Accountant Statement 1.4(c)
Active Employees 5.1(a)
Active Savings Participants 5.2(b)
Affiliate 2.17
Affiliated Group 2.13(a)
Ancillary Agreements 2.1
Assumed Liabilities Adjustment 1.1
Attached Tax Information 4.4.3(c)(i)
Benefit Plan 2.9
▇▇▇▇▇▇▇▇▇ B.V. Preamble
▇▇▇▇▇▇▇▇▇ GmbH Preamble
▇▇▇▇▇▇▇▇▇ International Preamble
▇▇▇▇▇▇▇▇▇ plc Preamble
Business 2.5
Business day 7.2.3(a)
capital stock Preamble
CIBC 3.4
Closing 1.2
Closing Date 1.2
Closing Date Inventory Statement 1.5(c)
Closing Date Statement 1.4(b)
Code 2.9
Combined Income Tax Returns 4.4.2(c)
Combined Income Taxes 4.4.2(c)
Company Contracts 2.8
Company Permits 2.11
Company Y2K Plan 2.10(b)
Computer Systems 2.10(b)
Confidentiality Agreement 4.2.2
Contracts 2.8
Credit Support Arrangements 4.8
Curamik Preamble
Damages 7.2.1
Department 2.9
ElBoMec Preamble
Employee 2.9
Employment Agreement 2.9
Environmental Conditions 4.16(a)
Environmental Law 2.16(a)
-vi-
8
SECTION
ERISA 2.9
ERISA Affiliate 2.9
Estimated Assumed Liabilities Adjustment 1.2
Exclusivity Period 4.11(a)
Financial Statements 2.5(a)
French Employees 2.9.3
GAAP 2.5(a)
German Employees 2.9.3
Hazardous Substance 2.16(a)
HSR Act 2.3(b)
Indemnitee 7.2.3
Indemnitor 7.2.3
Intellectual Property 2.10(a)
Inventory Adjustment 1.5(b)
Inventory Difference 1.5(b)
Inventory Revaluation 1.5(b)
IRS 2.9
Leased Real Property 2.7(a)
Leases 2.7(c)
Liabilities Schedule 4.2.1
Liens 2.3(a)
Local Purchase Agreements 1.2(a)
Malaysian Purchase Price 1.2
Malaysian Shares 1.2
Material Adverse Effect 2.2
Multi-Employer Plan 2.9
New Inventory Value 1.5(a)
New 1998 Inventory Value 1.5(a)
1998 Inventory Adjustment 1.5(b)
1999 Combined Income Taxes 4.4.1(b)
1999 Pro Forma Return 4.4.1(b)
1999 Tax 4.4.1(b)
Non-Company Affiliate 4.4.1
Order 4.1.2(b)
Organizational Documents 2.1
PBGC 2.9
Pension Plan 2.9
pension scheme 2.9.3
Permitted Liens 2.7(a)
Person 8.13
Pre 1999 Period 4.4.2(c)
Profit Adjustment` 1.5(b)
Property 4.16(b)
Purchase Price 1.1
-vii-
9
SECTION
Purchaser Preamble
Purchaser Statement 1.4(b)
Purchaser Statement of Objection 1.5(c)
Purchaser's Investment Plan 5.2(a)
Redpoint Preamble
Restricted Activities 4.15(a)
Restricted Period 4.15(a)
Restrictive Covenants 4.15(d)
Returns 2.13(dd)
Reviewing Accountants 1.4(c)
Section 338 Taxes 4.4.2(c)
Seller Group Employee 2.9(a)
Seller Indemnified Group 7.2.2
Seller Savings Plan 5.1.2(a)
Seller Statement 1.5(c)
Sellers Preamble
Sellers Representative 1.2(b)
Shadow ACT Regulation 2.13(w)
Shares Preamble
Stand-alone Taxes 4.4.2(c)
Statement of Objection 1.4(b)
Straddle Period Return 4.4.3(b)
Subsidiary Purchaser 1.1
Tangible Assets 2.7(a)
Target Asset Purchase Agreement 4.10
Target Assets 4.10
Target Companies Preamble
Target Company Group 2.1
Target Company Group Benefit Plan 2.9
Tax Dispute Accountants 4.4.7
Tax Dispute Resolution Mechanism 4.4.7
Taxes 2.13(dd)
Thermal Management Business 4.15(a)
Thermalloy Hong Kong Preamble
Thermalloy Investment Preamble
Thermalloy Malaysia Preamble
Transfer Date 5.1.2(b)
Treasury Regulations 2.13(l)
TNRCC 4.16(a)
VCP 4.16(a)
VOCs 4.16(a)
Welfare Plan 2.9
Y2K Compliant 2.10(b)
-viii-
10
STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated as of August 23,
1999, among ▇▇▇▇▇▇▇▇▇ plc, a company formed under the laws of England and Wales
("▇▇▇▇▇▇▇▇▇ PLC"), ▇▇▇▇▇▇▇▇▇ B.V., a Netherlands corporation ("▇▇▇▇▇▇▇▇▇ B.V."),
▇▇▇▇▇▇▇▇▇ International Inc., a Delaware corporation ("▇▇▇▇▇▇▇▇▇
INTERNATIONAL"), ▇▇▇▇▇▇▇▇▇ GmbH, a German corporation ("▇▇▇▇▇▇▇▇▇ GMBH";
together with ▇▇▇▇▇▇▇▇▇ plc, ▇▇▇▇▇▇▇▇▇ B.V. and ▇▇▇▇▇▇▇▇▇ International, the
"SELLERS"), and Aavid Thermal Technologies, Inc., a Delaware corporation (the
"PURCHASER").
WHEREAS, ▇▇▇▇▇▇▇▇▇ plc beneficially owns and controls all of the
outstanding shares of Redpoint Thermalloy Limited, a company formed under the
laws of England and Wales ("REDPOINT"); ▇▇▇▇▇▇▇▇▇ B.V. beneficially owns and
controls all of the outstanding share quota of El.Bo.Mec. S.r.l., an Italian
corporation ("ELBOMEC"), and all of the outstanding ordinary shares of
Thermalloy (Malaysia) Sdn Bhd, a Malaysian corporation ("THERMALLOY MALAYSIA");
▇▇▇▇▇▇▇▇▇ International beneficially owns and controls all of the outstanding
ordinary shares of Thermalloy Limited (Hong Kong), a Hong Kong corporation
("THERMALLOY HONG KONG"), and all of the outstanding capital stock of Thermalloy
Investment Company, a Texas corporation ("THERMALLOY INVESTMENT"); ▇▇▇▇▇▇▇▇▇
GmbH owns 65.2% of the outstanding company shares of Curamik Electronics GmbH, a
German corporation ("CURAMIK"); (together with Redpoint, ElBoMec, Thermalloy
Malaysia, Thermalloy Hong Kong and Thermalloy Investment, the "TARGET
COMPANIES");
WHEREAS, each Seller desires to sell all of the shares, share capital,
ordinary shares, quota, company shares or capital stock, as the case may be, of
each of the Target Companies owned by it (collectively the "SHARES") to the
Purchaser and the Purchaser desires to purchase the Shares. For purposes of this
Agreement, shares, share capital, ordinary shares, company shares, capital stock
or any other equity interest of any Target Company shall hereinafter be referred
to generally as "CAPITAL STOCK".
NOW, THEREFORE, the parties hereto agree as follows:
1. SALE AND PURCHASE.
1.1 SALE AND PURCHASE OF THE SHARES. Subject to the terms and
conditions of this Agreement, at the Closing (as defined in Section 1.2), each
Seller will sell the Shares owned by it, and the Purchaser will purchase (either
directly or by a designated subsidiary to which Purchaser's rights hereunder are
assigned in accordance with Section 8.10 hereof (a "SUBSIDIARY PURCHASER")) the
Shares, for an aggregate purchase price (the "PURCHASE PRICE") equal to
$79,500,000 less the sum of (A) any liabilities set forth on the Liabilities
Schedule (as defined in Section 4.2.1 below) which remain outstanding on the
Closing Date as permitted by this Agreement, after giving effect to payments
pursuant to Section 4.12, (B) the amount, if any, by which (pound)1,313,000
exceeds the amount of the Target Company Group overdraft facilities paid by the
Sellers pursuant to Section 4.12 (the amount set forth in clauses (A) and (B)
being referred to as the "ASSUMED LIABILITIES ADJUSTMENT"), (C) the Inventory
Adjustment (as defined below) and (D) the Profit Adjustment (as defined below),
11
payable as set forth below in Section 1.2. That portion of the Shares comprising
Redpoint capital stock shall be sold with full title guarantee free from all
Liens (as defined below), charges and encumbrances, except Liens arising by or
through the Purchaser or any of its Affiliates.
1.2 CLOSING. The closing of the sale and the purchase of the Shares
(the "CLOSING") will take place at the offices of Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 10:00 A.M., local time, no later than the second
business day after satisfaction of the latest to occur of the conditions set
forth in Section 6 hereof (other than the delivery of the officers' certificates
referred to therein and other than any conditions which are waived in accordance
with said Section) or such other time, place or date as the Sellers and
Purchaser may mutually agree. Failure to consummate the transactions provided
for in this Agreement on the date and time selected pursuant to this Section 1.2
shall not, except as permitted by Section 8.5 hereof, result in the termination
of this Agreement and shall not relieve any party to this Agreement of any
obligation hereunder. The date on which the Closing shall occur is hereinafter
referred to as the "CLOSING DATE". At the Closing:
(a) each Seller will deliver to the Purchaser (i) a stock certificate
or stock certificates representing the Shares owned by it, endorsed or
accompanied by stock powers or transfer forms in favor of the Purchaser or
duly executed in blank, or an indemnity agreement in form reasonably
satisfactory to Purchaser, indemnifying Purchaser against loss resulting
from lost certificates, and accompanied by all requisite stock transfer
stamps or (ii) in the case of a Target Company organized outside the United
States, such other evidence of ownership or instruments of transfer as are
customary, if any, in the jurisdiction of organization of such Target
Company and sufficient to convey ownership of the shares of capital stock
of such Target Company to the Purchaser or to the Purchaser's designated
subsidiaries, and in the case of ElBoMec, Thermalloy Hong Kong and Curamik
pursuant to stock purchase agreements, in substantially the form attached
hereto as EXHIBIT 1.2, to be entered into as of the Closing Date hereof
between the relevant Seller and the Purchaser or such designated
subsidiaries of the Purchaser (the "LOCAL PURCHASE AGREEMENTS");
(b) in relation to Redpoint, the Sellers will deliver, or cause to be
delivered, in addition to those documents referred to in Section 1.2(a), a
copy of any power of attorney under which this Agreement, or any of the
transfers or other documents referred to or required by this Section 1.2,
is executed and evidence to the Purchaser's reasonable satisfaction of the
authority of any person signing on behalf of any corporate entity, (ii)
duly executed transfers in favor of the Purchaser or as it directs in
respect of the shares in Redpoint's subsidiary, Redpoint Limited, which are
not registered in the name of Redpoint together with the share certificates
for the shares in question and (iii) powers of attorney in a form agreed
between the parties duly executed by the registered holders of shares in
Redpoint for the purpose of securing the interest of the Purchaser in the
Shares in Redpoint pending their registration into the names of the
Purchaser and/or its nominee(s);
(c) in relation to Thermalloy Malaysia, the Sellers will deliver, or
cause to be delivered, in addition to those documents referred to in
Section 1.2(a), a copy of any power
-2-
12
of attorney or other authority under which the transfer of the Shares
in Thermalloy Malaysia is executed and evidence to the Purchaser's
reasonable satisfaction of the authority of any person signing on
behalf of ▇▇▇▇▇▇▇▇▇ B.V.; and
(d) the Purchaser will deliver, or cause to be delivered, an
amount equal to $79,500,000 less the sum of (I) the Estimated Assumed
Liabilities Adjustment (as defined below), (II) the Inventory
Adjustment, as finally determined pursuant to Section 1.5 below, and
(III) the Profit Adjustment, as finally determined pursuant to Section
1.5 below, to ▇▇▇▇▇▇▇▇▇ plc, as representative of the Sellers (the
"SELLERS REPRESENTATIVE"), by wire transfer of immediately available
funds to a previously designated account of the Sellers Representative
on behalf of the Sellers.
At least five (5) business days prior to the Closing Date, the Sellers shall
prepare and deliver to Purchaser a good faith estimate of the Assumed
Liabilities Adjustment as of the Closing Date (the "ESTIMATED ASSUMED
LIABILITIES ADJUSTMENT"), prepared in U.S. Dollars in accordance with United
Kingdom generally accepted accounting principles, and accompanied by a
certificate signed by the chief financial officer of ▇▇▇▇▇▇▇▇▇ plc to that
effect.
In the event that all the conditions to the Closing set forth in
Section 6, other than receipt of the Malaysian governmental approvals referred
to below and the resignation of officers and directors of Thermalloy Malaysia as
required by Section 6.4.3, are satisfied, but the Controller of Foreign Exchange
of Malaysia has not yet approved the payment of that portion of the Purchase
Price allocated to the Malaysian Shares, as set forth on Schedule 1.3 (the
"MALAYSIAN PURCHASE PRICE"), or the Ministry of International Trade and Industry
of Malaysia has not yet approved the transfer of the shares of Thermalloy
Malaysia (the "MALAYSIAN SHARES") to the Purchaser, then receipt of such
approvals and the satisfaction of such other conditions relating solely to
Thermalloy Malaysia, including without limitation the resignation of officers
and directors of Thermalloy Malaysia as required by Section 6.4.3, shall not
constitute conditions to the closing of the purchase and sale of the Shares
other than the Malaysian Shares, and at the Closing the Malaysian Shares shall
be placed in escrow by ▇▇▇▇▇▇▇▇▇ B.V. and the Malaysian Purchase Price shall be
placed in escrow by Purchaser pursuant to a mutually agreed escrow agreement,
pending receipt of all such approvals. Upon receipt of all such approvals, the
Malaysian Shares shall be delivered to Purchaser (or its designee) and the
Malaysian Purchase Price shall be delivered to ▇▇▇▇▇▇▇▇▇ B.V. ▇▇▇▇▇▇▇▇▇ B.V.
hereby covenants and agrees to operate Thermalloy Malaysia in accordance with
all the terms of this Agreement, including without limitation those set forth in
Section 4, until the closing of the purchase and sale of the Malaysian Shares is
consummated. From and after the Closing, the Purchaser shall cause each other
member of the Target Company Group to deal with Thermalloy Malaysia, and
▇▇▇▇▇▇▇▇▇ B.V. shall cause Thermalloy Malaysia to deal with the other members of
the Target Company Group, in the ordinary course of business and consistent with
past practice until the Malaysian Purchase Price is delivered to the Sellers. If
such approvals have not been received by the six-month anniversary of the
Closing Date, this Agreement shall terminate with respect to the Malaysian
Shares.
-3-
13
1.3 ALLOCATION OF PURCHASE PRICE. Schedule 1.3 sets forth the
allocation of the Purchase Price to the Shares of each Target Company and the
Target Assets (as defined in Section 4.10 below). The parties shall prior to
Closing cooperate in good faith to finalize Schedule 1.3. In the event that the
Purchase Price is adjusted pursuant to Sections 1.4 or 1.5, such adjustment
shall be allocated to the purchase price for the Shares of the Target Company to
which such adjustment relates. The parties shall (and shall cause their
respective Affiliates (as defined in Section 2.17) to) report the transaction
contemplated by this Agreement in their respective Returns (as defined in
Section 2.13 below) in a manner consistent with such allocation unless otherwise
required by law.
1.4 POST-CLOSING PURCHASE PRICE CALCULATION. (a) If the Assumed
Liabilities Adjustment as of the Closing Date is greater than the Estimated
Assumed Liabilities Adjustment, then the Sellers shall pay the difference to
Purchaser. If the Assumed Liabilities Adjustment on the Closing Date is less
than the Estimated Assumed Liabilities Adjustment, then Purchaser shall pay the
difference to the Sellers. Any such payment shall be made in immediately
available funds within five business days after the date the Assumed Liabilities
Adjustment is finally determined pursuant to this Section 1.4, and shall be
accompanied by interest on such amount from the Closing Date to the date of
payment at a floating rate equal to the publicly announced base rate of Canadian
Imperial Bank of Commerce.
(b) As promptly as practicable, but in no event more than sixty (60) days,
following the Closing Date, Purchaser shall prepare or cause to be prepared and
shall deliver to the Sellers Representative a reasonably detailed statement
setting forth the Assumed Liabilities Adjustment, which statement shall include
a calculation of (I) the liabilities on the Liabilities Schedule that remain
outstanding as of the Closing Date after giving effect to the payments pursuant
to Section 4.12 and (II) the amount by which (pound)1,313,000 exceeds the amount
of the Target Company Group overdraft facilities paid by Sellers on the day
prior to the Closing Date (the "PURCHASER STATEMENT"). Unless within thirty (30)
days after its receipt of the Purchaser Statement the Sellers Representative
shall deliver to Purchaser a reasonably detailed statement describing its
objections to the Purchaser Statement (a "STATEMENT OF OBJECTION"), the Assumed
Liabilities Adjustment determined in accordance with this clause (b) shall be
final and binding on the parties hereto and the Purchaser Statement shall be the
final statement hereunder (the "CLOSING DATE STATEMENT").
(c) If the Sellers Representative shall deliver to Purchaser a timely
Statement of Objection, Purchaser and the Sellers Representative and their
respective independent accountants shall negotiate in good faith and use
reasonable best efforts to resolve any disputes. If a resolution is reached,
such resolution shall be final and binding on the parties and Purchaser and the
Sellers shall set forth the Assumed Liabilities Adjustment on a mutually
acceptable statement and such statement shall be the Closing Date Statement. If
a final resolution is not reached within fifteen (15) days after the Sellers
Representative has submitted its Statement of Objection, any remaining disputes
shall be resolved by a third firm of independent accountants (the "REVIEWING
ACCOUNTANTS") selected jointly by the parties' independent accounting firms. The
Reviewing Accountants shall be instructed to resolve any matters in dispute as
promptly as practicable, but in no event more than thirty (30) days, and set
forth their resolution in a statement setting forth the Assumed Liabilities
Adjustment (the "ACCOUNTANT
-4-
14
STATEMENT"). In such event, the determination of the Reviewing Accountants shall
be final and binding on the parties hereto and the Accountant Statement shall be
the Closing Date Statement.
(d) The Sellers and Purchaser each shall pay one-half of the fees and
expenses of the Reviewing Accountants. The Sellers and the Purchaser shall
cooperate with each other and the Reviewing Accountants in connection with the
matters contemplated by this Section 1.4, including Purchaser's preparation of
and Sellers' review of the Closing Date Statement, including by furnishing such
information and access to books, records (including accountants' work papers),
personnel and properties as may be reasonably requested.
(e) The Closing Date Statement shall be prepared in U.S. Dollars in
accordance with United Kingdom Generally Accepted Accounting Principles applied
in a manner consistent with the preparation of the Financial Statements (as
defined in Section 2.5 below).
1.5 INVENTORY PURCHASE PRICE ADJUSTMENT. (a) Prior to the Closing
Date, the Sellers shall determine the value of the inventory of Thermalloy Inc.
at December 31, 1998 (the "NEW 1998 INVENTORY VALUE") and at July 31, 1999 (the
"NEW INVENTORY VALUE") using the new standard costing system but otherwise in
all respects consistent with the historical valuation of such inventory.
(b) For purposes of this Section 1.5, the following terms shall have the
following meanings:
"INVENTORY ADJUSTMENT" is the amount, if any, by which $9,079,000
exceeds the New Inventory Value. Sellers estimate that the Inventory Adjustment
is approximately $836,000.
"INVENTORY DIFFERENCE" is the amount, if any, by which the Inventory
Adjustment exceeds the 1998 Inventory Adjustment.
"INVENTORY REVALUATION AMOUNT" shall be an amount equal to the
quotient determined by dividing (I) the product determined by multiplying (1) 12
by (2) the amount, if any, by which the Inventory Difference exceeds $200,000 by
(II) 7.
"1998 INVENTORY ADJUSTMENT" is the amount, if any, by which $8,099,000
exceeds the New 1998 Inventory Value.
"PROFIT ADJUSTMENT" shall be an amount equal to the product determined
by multiplying (I) 3.0 by (II) the Inventory Revaluation Amount.
(c) As promptly as practicable, but in no event more than five (5) days
following the date of this Agreement, the Sellers Representative shall deliver
to the Purchaser a reasonably detailed statement setting forth the New Inventory
Value, the Inventory Adjustment, the Inventory Difference, the New 1998
Inventory Adjustment, the Profit Adjustment, the Inventory Revaluation Amount
and the 1998 Inventory Adjustment (the "SELLER STATEMENT"). Unless within
fifteen (15) days after its receipt of the Seller Statement the Purchaser shall
deliver to the Sellers Representative a reasonably
-5-
15
detailed statement describing its objections to the Seller Statement (a
"PURCHASER STATEMENT OF OBJECTION"), the Inventory Adjustment and the Profit
Adjustment determined in accordance with this clause (c) shall be final and
binding on the parties hereto and the Seller Statement shall be the final
statement hereunder (the "CLOSING DATE INVENTORY STATEMENT").
(d) If the Purchaser shall deliver to the Sellers Representative a timely
Purchaser Statement of Objection, Purchaser and the Sellers Representative and
their respective independent accountants shall negotiate in good faith and use
reasonable best efforts to resolve any disputes. If a resolution is reached,
such resolution shall be final and binding on the parties and Purchaser and the
Sellers shall set forth the Inventory Adjustment and the Profit Adjustment on a
mutually acceptable statement and such statement shall be the Closing Date
Inventory Statement. If a final resolution is not reached within five (5) days
after the Purchaser has submitted its Purchaser Statement of Objection, any
remaining disputes shall be resolved by the Reviewing Accountants. The Reviewing
Accountants shall be instructed to resolve any matters in dispute as promptly as
practicable, but in no event more than fifteen (15) days, and set forth their
resolution in a statement setting forth the Inventory Adjustment and the Profit
Adjustment (the "ACCOUNTANT INVENTORY STATEMENT"). In such event, the
determination of the Reviewing Accountants shall be final and binding on the
parties hereto and the Accountant Inventory Statement shall be the Closing Date
Inventory Statement.
(e) The Sellers and Purchaser each shall pay one-half of the fees and
expenses of the Reviewing Accountants. The Sellers and the Purchaser shall
cooperate with each other and the Reviewing Accountants in connection with the
matters contemplated by this Section 1.5, including the Sellers preparation of
and Purchaser's review of the Closing Date Inventory Statement, including by
furnishing such information and access to books, records (including accountants'
work papers), personnel and properties as may be reasonably requested.
(f) The Closing Date Inventory Statement shall be prepared in U.S. Dollars
in accordance with United Kingdom Generally Accepted Accounting Principles
applied in a manner consistent with the preparation of the Financial Statements
(as defined in Section 2.5 below).
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS Except as set forth
in the Disclosure Schedules attached hereto, the Sellers, jointly and severally,
represent and warrant to the Purchaser as of the date hereof as follows:
2.1 AUTHORIZATION, ETC. Each of the Sellers has the corporate power
and authority to execute and deliver this Agreement, along with the Local
Purchase Agreements and the Target Asset Purchase Agreement (as defined in
Section 4.10, together with the Local Purchase Agreements and any instruments of
transfer and similar instruments contemplated herein required to be executed and
delivered by it pursuant to this Agreement in order to consummate the
transactions contemplated hereby, the "ANCILLARY AGREEMENTS"), to which it is or
will be a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the
-6-
16
Sellers party hereto and thereto, which constitutes all necessary corporate
action on the part of the Sellers for such authorization. This Agreement has
been, and each of the Ancillary Agreements when executed and delivered will be,
duly executed and delivered by the Sellers party hereto and thereto, and
constitute the valid and binding obligations of the Sellers, enforceable against
each of them in accordance with their terms, except as limited by laws affecting
the enforcement of creditors' rights generally or by general equitable
principles. The Purchaser has previously been furnished with complete and
correct copies of the certificate or articles of incorporation or association,
memorandum of association, by-laws and other organizational documents (the
"ORGANIZATIONAL DOCUMENTS") of each Target Company and its respective
subsidiaries (collectively, the "TARGET COMPANY GROUP"). Such Organizational
Documents are in full force and effect, and neither the Sellers nor any member
of the Target Company Group are in violation of any of the provisions of their
respective Organizational Documents. The stock certificate books, the stock
record books and/or other statutory books of each member of the Target Company
Group are correct and complete in all material respects, and all actions
required to be approved by the directors and/or stockholders of each member of
the Target Company Group under applicable law have been so approved, except
where the failure to obtain such approval will not (I) adversely affect the
ability of Purchaser to conduct the Business in all material respects as
currently conducted or (II) result in a liability to such Target Company Group
member.
2.2 CORPORATE STATUS. Each of the Sellers and each member of the
Target Company Group is a company duly incorporated or organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, as set forth in Schedule 2.2. Each of the Sellers has all
requisite corporate power and authority to own the Shares owned by it. Each
member of the Target Company Group has all requisite corporate power and
authority to conduct its business and to own or lease its properties, as now
conducted, owned or leased. Each member of the Target Company Group is duly
qualified to do business in each jurisdiction where the character of its
business or the nature of its properties makes such qualification or licensing
necessary, except where the failure to so qualify or be licensed would not
reasonably be expected to have a material adverse effect on the business,
operations, prospects (excluding the prospects of (I) the Target Company Group's
industry in general or (II) the economy in general), condition (financial or
otherwise) or assets ("MATERIAL ADVERSE EFFECT") of the Target Company Group
taken as a whole or adversely affect the ability of the Target Company Group to
conduct the Business (as defined in Section 2.5 below) after the Closing in all
material respects as currently conducted, all of which jurisdictions are set
forth on Schedule 2.2.
2.3 NO CONFLICTS, CONSENTS AND APPROVALS, ETC. (a) The execution,
delivery and performance of this Agreement and the Ancillary Agreements by the
Sellers party hereto and thereto and the consummation of the transactions
contemplated hereby and thereby by the Sellers will not result in (i) any
conflict with the Organizational Documents of the Sellers or of any member of
the Target Company Group, (ii) subject to obtaining the consents referred to in
Section 2.3(b), any breach or violation of or default under, or loss of benefit
pursuant to the terms of, or the acceleration of the performance pursuant to the
terms of, any law, rule, statute, regulation, judgment, order or decree
applicable to any Seller or any member of the Target Company Group, or license,
permit or other
-7-
17
governmental authorization held by any Seller or any member of the Target
Company Group or any mortgage, lease, agreement, deed of trust, indenture or any
other instrument to which any Seller or any member of the Target Company Group
is a party or by which any of its properties or assets are bound, (iii) the
creation or imposition of any liens, security interests, mortgages, pledges,
rights of third parties, adverse claims, charges or other encumbrances or
matters affecting title ("LIENS") other than Liens created by the Purchaser, or
(iv) result in any suspension, revocation, impairment, forfeiture or non-renewal
of any Company Permit (as defined in Section 2.11).
(b) Except as set forth in Schedule 2.3 and for filings required with
respect to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended
(the "HSR ACT"), no consent, approval or authorization of, notice to or filing
with any governmental authority or third party is required on the part of any
Seller or any member of the Target Company Group in connection with the
execution and delivery of this Agreement or the Ancillary Agreements or the
consummation of the transactions contemplated hereby and thereby, except for
consents of third parties under agreements the failure of which to obtain will
not adversely affect the ability of the Target Company Group to conduct the
Business after the Closing in all material respects as currently conducted.
2.4 THE SHARES. Schedule 2.4 contains a complete and correct
description of the shares of capital stock, including the number of authorized
shares and the number of issued and outstanding shares, of each member of the
Target Company Group. All of such outstanding shares of capital stock are duly
authorized, validly issued, fully paid and nonassessable, and are owned
beneficially and of record by the Sellers or members of the Target Company Group
set forth on Schedule 2.4, free and clear of any Liens. None of such outstanding
securities has been issued in violation of any pre-emptive rights, rights of
first refusal or similar rights. There are no outstanding options, warrants,
conversion, exchange or other rights, agreements or understandings of any kind
(other than this Agreement and the Local Purchase Agreements) for the purchase
or acquisition from, or the sale or issuance by, the Sellers or any member of
the Target Company Group of any shares of capital stock, and no authorization
therefor has been given. There are no outstanding obligations, contingent or
other, of any Seller or any member of the Target Company Group to purchase,
redeem or otherwise acquire any shares of Curamik's capital stock. There are no
voting trust agreements or other contracts, agreements, arrangements,
commitments, plans or understandings restricting or otherwise relating to
voting, dividend or other rights with respect to the capital stock of Curamik.
Upon payment for the Shares at the Closing as contemplated by this Agreement and
the Local Purchase Agreements, the Purchaser will acquire from the Sellers good
title to the Shares, free and clear of all Liens, except Liens arising by or
through the Purchaser or any of its Affiliates. The Target Company Group has no
direct or indirect equity, membership, partnership or similar interests or
investments in any Person (as defined in Section 8.13 below) other than a member
of the Target Company Group. The Sellers have no direct or indirect equity,
membership, partnership or similar interests or investments in any Person
involved in the Business other than the members of the Target Company Group.
2.5 FINANCIAL STATEMENTS AND OTHER INFORMATION. (a) The Sellers have
delivered to the Purchaser complete and correct copies of unaudited balance
sheets and related statements of
-8-
18
income and cash flows of the Target Company Group on a combined basis for the
1996, 1997 and 1998 fiscal years and the six-month period ended July 4, 1999
(collectively, the "FINANCIAL STATEMENTS"). The Financial Statements have been
derived from the books and records of the members of the Target Company Group.
The Financial Statements are complete and correct in all material respects and
present fairly in all material respects and on a consistent basis the financial
condition and results of operations and cash flows of the Target Company Group
on a combined basis as of the dates or for the periods indicated. The audited
Financial Statements delivered pursuant to Section 6.4.6 hereof will be prepared
in accordance with the requirements of the Companies ▇▇▇ ▇▇▇▇ and will not,
except as set forth on the face of such statements, be affected by any
extraordinary item (as that term is used in the Companies Act 1985). The
Financial Statements were prepared in accordance with United Kingdom Generally
Accepted Accounting Principles ("GAAP"), except that the unaudited Financial
Statements do not contain all footnotes required by GAAP. The Sellers have
conducted their thermal management business (the "BUSINESS") solely through the
Target Company Group during the period covered by the Financial Statements and
during such period the Target Company Group conducted no business other than the
Business. The July 4, 1999 balance sheet included in the Financial Statements
does not include any material assets not intended to constitute a part of the
Business after giving effect to the transactions contemplated hereby (other than
assets being transferred to Non-Company Affiliates in accordance with Section
2.5(d) or Section 4.2.1), it being understood that subsequent to July 4, 1999
inventory will be sold, cash used, accounts receivable collected and properties
or assets replaced or disposed of, in each case in the ordinary course of
business and consistent with past practice. The statements of income and 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 Business after
giving effect to all such transactions and reflect all costs that historically
have been incurred by the Business.
(b) The accounts receivable of the Target Company Group, net of applicable
allowances in accordance with GAAP consistently applied, as set forth on the
latest balance sheet included in the Financial Statements or arising since the
date thereof are valid and genuine; have arisen solely out of bona fide sales
and deliveries of goods, performance of services and other business transactions
in the ordinary course of business consistent with past practice; are not
subject to valid defenses, set-offs or counterclaims; and are collectible at the
full recorded amount thereof over the period of usual trade terms (by use of
such company's normal collection methods without resort to litigation or
reference to a collection agency). Each member of the Target Company Group has
fully performed all obligations with respect thereto which it was obligated to
perform to the date hereof. The Sellers have delivered to Purchaser an aging
schedule for the accounts receivable as of July 4, 1999.
(c) The inventory of the Target Company Group is of good, usable and
merchantable quality, in all material respects and does not include obsolete or
discontinued items. (I) All inventory that is finished goods is saleable as
current inventory at the current prices thereof in the ordinary course of
business, (II) all inventory is recorded on the books and records of the Target
Company Group at the lower of cost or market value determined in accordance with
GAAP and (III) no write-down in inventory has been or should have been made
pursuant to GAAP since January 1, 1997.
-9-
19
(d) Since July 4, 1999, no member of the Target Company Group has paid any
dividend to, or made any distribution or other payment to, or made any payment
on behalf of, or in respect of any liability or other obligation of, any Seller
or any Affiliate of any Seller (other than other members of the Target Company
Group), except for any payments of the type permitted to be made after the date
hereof pursuant to Section 4.2.1.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities
reflected or reserved against in the Financial Statements or reflected in the
Disclosure Schedules, no member of the Target Company Group has any liabilities
or obligations of any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due, other than liabilities
or obligations incurred since July 4, 1999 in the ordinary course of business
and consistent with past practice (none of which is a liability for breach of
contract, breach of warranty, tort, infringement claim or lawsuit). All vacation
time, vacation pay or severance pay to which any Employee (as defined in Section
2.9 below) is now or will, as a result of any event occurring prior to the
Closing Date, including without limitation by the passage of time, hereinafter
become entitled to receive has been properly accrued, in accordance with United
Kingdom generally accepted accounting principles consistently applied, in the
latest balance sheet included in the Financial Statements and, for accruals
since such date, in the books and records of the Target Company Group.
2.7 ASSETS, PROPERTIES, ETC. (a) The Target Company Group does not own
any real property. Schedule 2.7 lists all items of real property leased by the
Target Company Group (the "LEASED REAL PROPERTY"). The Target Company Group has
(I) valid leasehold interests in and, in the case of Leased Real Property
located in the United Kingdom, good and marketable title to, the Leased Real
Property listed on Schedule 2.7 and (II) legal and beneficial ownership of all
of their respective tangible personal property and assets included in the
balance sheet dated as of July 4, 1999 and all such personal property and assets
acquired since such date (except, in each such case, for (A) properties and
assets disposed of since July 4, 1999 in the ordinary course of business and (B)
title retention arrangements entered into or arising in the ordinary course of
business) (collectively, "TANGIBLE ASSETS"), in each case, free and clear of all
Liens, except as set forth on Schedule 2.7 (which Liens, to the extent they
secure obligations required to be paid or discharged pursuant to Section 4.12
hereof, will be removed on or before the Closing Date (by way of delivery to
Purchaser at the Closing of UCC-3 Termination Statements or other documentation
necessary to remove the Lien upon filing, duly executed by debtor and creditor
and ready for filing in the appropriate jurisdiction) and except for (I) Liens
for taxes and other governmental charges and assessments which are not yet due
and payable or which are being contested in good faith by appropriate
proceedings (for which adequate reserves have been made in the Financial
Statements), (II) Liens of carriers, warehousemen, mechanics and materialmen and
other like Liens arising in the ordinary course of business for sums not yet due
and payable or that are being contested in good faith by appropriate proceedings
(for which adequate reserves have been made in the Financial Statements), (III)
easements, rights of way, title imperfections and restrictions, zoning
ordinances and other similar encumbrances affecting the real property which in
the aggregate do not materially and adversely affect the value of such real
property or materially impair its current use by the Target Company Group, and
(IV) statutory Liens in favor of lessors arising in connection with any property
leased to
-10-
20
the Target Company Group (collectively, the "PERMITTED LIENS"). Except for the
Target Assets, the Target Company Group owns or has the right to use (pursuant
to valid lease or license arrangements where necessary) all of the rights,
properties and assets used in the conduct of their business as currently
conducted, which rights, properties and assets constitute all the rights,
properties and assets relating to or used or held for use in connection with, or
otherwise material to, the Business during the past 12 months (except inventory
sold, cash used, accounts receivable collected, prepaid expenses realized,
contracts fully performed, properties or assets replaced by equivalent or
superior properties or assets and properties and assets no longer necessary for
the conduct of the Business as currently conducted, in each case in the ordinary
course of business).
(b) To the knowledge of Sellers, there exist no pending condemnation
proceedings, lawsuits or administrative actions of or relating to the Leased
Real Property (or any part thereof) or other matters affecting materially and
adversely the current use or occupancy thereof.
(c) Each lease pursuant to which any member of the Target Company Group
leases any Leased Real Property is listed on Schedule 2.7 (the "LEASES") and is
in full force and effect and, to the knowledge of the Sellers, is enforceable
against the landlord which is party thereto in accordance with its terms. There
exists no default or event of default (or any event which with notice or lapse
of time or both would become a default) on the part of any member of the Target
Company Group under any Leases which, individually or in the aggregate, would
reasonably be expected to adversely affect the ability of the Target Company
Group to conduct the Business after the Closing in all material respects as
currently conducted. None of the Sellers or any member of the Target Company
Group has received any notice of any default under any Lease nor any other
termination notice with respect thereto. There are no pending material disputes
with any landlord under the Leases. With respect to each parcel of Leased Real
Property:
(i) all leased facilities have received all approvals of governmental
authorities (including licenses and permits) required in connection with
the operation thereof and have been operated and maintained in all material
respects in accordance with such approvals and applicable laws, rules and
regulations;
(ii) all leased facilities are supplied with utilities and other
services necessary for the operation of said facilities; and
(iii) neither Sellers nor any member of the Target Company Group has
assigned, transferred, conveyed, leased or otherwise transferred any of its
interest in the Leased Real Property.
Each member of the Target Company Group enjoys peaceful and undisturbed
possession under its respective Lease. The Sellers have delivered to the
Purchaser complete and correct copies of all Leases including all amendments
thereto.
-11-
21
(d) The Tangible Assets used by the Target Company Group or included in the
Target Assets are in good operating condition and repair, normal wear and tear
excepted, are usable in the ordinary course of business, are adequate and
suitable for the uses to which they are being put and conform in all material
respects to all applicable laws, ordinances, codes, rules, regulations and
authorizations relating to their construction, use and operation. None of the
Target Company Group's Tangible Assets or the Target Assets are in need of
maintenance or repairs other than ordinary routine maintenance and repairs which
are not material, individually or in the aggregate, in nature or cost. The
walls, roof and subterranean portions, if any, of the improvements on each
parcel of the Leased Real Property presently are, and as of the Closing will be,
sound and watertight and presently there is, and as of the Closing will be, no
water, chemical or gaseous seepage, diffusion or other intrusion into said
buildings, including any subterranean portions which would impair the continued
beneficial use of any parcel of the Leased Real Property or the Tangible Assets.
(e) Each U.K. member of the Target Company Group has no liability (whether
actual, contingent or prospective) or obligation in respect of any property
whether freehold (with title in perpetuity), leasehold, licensed or occupied
under an informal or undocumented arrangement in any part of the world (other
than the Leased Real Property), including without limitation any liability or
obligation to:
(i) perform covenants (restrictive or positive) or agreements
affecting or relating to land;
(ii) pay rents, service charges, insurance premiums or other monies or
observe or perform covenants, obligations or conditions contained in any
agreement for lease, lease, license, deed, agreement or other document
ancillary or supplemental to a lease whether or not expressed to be so;
(iii) pay principal, interest or other monies or observe or perform
covenants or agreements contained in any mortgage, charge or other document
creating a security interest affecting any property to which this Section
2.7(e) applies;
(iv) make payments under or otherwise observe or perform any guarantee
or surety (whether as primary or secondary obligor) or indemnity or
otherwise assume any liabilities of any third party by accepting a
leasehold or in any other manner;
(v) make payments under or otherwise observe or perform any agreement
for sale, option or right of pre-emption; or
(vi) make payments under or otherwise observe or perform any building
contract, collateral warranty, duty of care agreement or professional
appointment.
2.8 CONTRACTS. Schedule 2.8 lists all contracts, agreements,
commitments, understandings or arrangements (whether written or oral)
(collectively "CONTRACTS") of the following
-12-
22
types to which any member of the Target Company Group is a party or by which any
member of the Target Company Group or any of the respective properties of such
members is bound (other than Leases, labor or employment-related agreements and
Intellectual Property licenses, which are listed in Schedules 2.7, 2.9 and 2.10,
respectively):
(i) all Contracts with customers and suppliers disclosed on Schedules
2.18 and 2.19, respectively, and all material Contracts with any other
customers or suppliers, other than in each case Contracts or purchase
orders with respect to the sale by any member of the Target Company Group
of its products or the purchase by any member of the Target Company Group
of materials or supplies that are entered into in the ordinary course of
business;
(ii) all material Contracts with distributors of or for the marketing
of the products of the Target Company Group, other than Contracts with
distributors that are only in the form of customary purchase orders;
(iii) all mortgages, indentures, debentures, security agreements,
notes, loan agreements or guarantees of the obligations of third parties
and other Contracts and instruments relating to the borrowing of money or
the obtaining or extension of credit binding upon any member of the Target
Company Group or with respect to which any assets of the Target Company
Group or the Target Assets are subject;
(iv) all Contracts (or group of related Contracts) for the lease of
personal property to or from any Person providing for lease payments in
excess of $50,000 per annum;
(v) Contracts prohibiting or materially limiting the ability of any
member of the Target Company Group to engage in any business or compete
with any Person;
(vi) Contracts relating to acquisitions or divestitures of any assets
or properties (other than in the ordinary course of business), of any
business, or of any capital stock of or other equity interest in any Person
by any member of the Target Company Group involving continuing indemnity or
other obligations, in any case in excess of $50,000;
(vii) Contracts for capital expenditures or acquisitions in excess of
$50,000 for one project or series of related projects;
(viii) joint venture, partnership and similar Contracts involving a
sharing of profits or expenses (including joint research and development
and joint marketing Contracts);
(ix) Contracts between any member of the Target Company Group and any
Seller or any Affiliate of any Seller (other than any other member of the
Target Company Group) other than Contracts relating to indebtedness that
will be terminated immediately prior to the Closing;
-13-
23
(x) other Contracts which are not cancelable without penalty or with
notice of 60 days or less or which require payment by any member of the
Target Company Group after the date hereof of more than $50,000 in any one
calendar year; and
(xi) all Contracts, other than the foregoing, which could reasonably
be considered material to the business of the Target Company Group taken as
a whole.
The Sellers have furnished or made available to the Purchaser true and
correct copies of all of the Contracts listed on Schedule 2.8, other than those
described on Schedule 2.8 as not being furnished for the reasons set forth
therein. Each Contract to which any member of the Target Company Group is a
party, whether or not listed on Schedule 2.8 (all Contracts to which any member
of the Target Company Group is a party, whether or not listed on such Schedule,
being hereinafter referred to as "COMPANY CONTRACTS"), is a valid and binding
agreement of the member of the Target Company Group party thereto and, to the
knowledge of the Sellers, as to each other party thereto, and is in full force
and effect, the terms and enforceability of the Company Contracts will be
unaffected by the consummation of the transactions contemplated hereby. No
member of the Target Company Group, nor, to the knowledge of the Sellers, any
other Person is in breach or default under, and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification or acceleration, under any Company Contract, except
for such defaults and events as would not, individually or in the aggregate,
reasonably be expected to adversely affect the ability of the Target Company
Group to conduct the Business after the Closing in all material respects as
currently conducted. No party has repudiated any provision of a Company
Contract.
2.9 EMPLOYEE BENEFIT MATTERS. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
"BENEFIT PLAN" means each plan, program, policy, contract, agreement
or other arrangement (other than any Employment Agreement) providing for
compensation, deferred compensation, retention, change in control, supplemental
retirement, insurance, vacation, health, welfare, severance, termination pay,
performance awards, stock or stock-related awards, fringe benefits or other
employee benefits of any kind which is maintained in the United States, whether
formal or informal, funded or unfunded, written or oral, including, without
limitation, each "employee benefit plan" within the meaning of Section 3(3) of
ERISA.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DEPARTMENT" means the U.S. Department of Labor.
"EMPLOYEE" means each current, former or retired employee, officer,
consultant, independent contractor, agent or director of any member of the
Target Company Group, including any Seller Group Employee, but shall not include
any director who is not an employee of the Target Company Group and whose
compensation for services as a director has been borne entirely by any of the
Sellers or one of its Affiliates other than a member of the Target Company
Group.
-14-
24
"EMPLOYMENT AGREEMENT" means each management, employment, consulting,
non-compete, confidentiality or similar agreement or contract to which any
Employee is a party and pursuant to which any member of the Target Company Group
or any Seller has or may have any liability, contingent or otherwise.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means each business or entity which is a member of a
"controlled group of corporations," under "common control" or an "affiliated
service group" with any member of the Target Company Group within the meaning of
Section 414(b), (c) or (m) of the Code, or required to be aggregated with any
member of the Target Company Group under Section 414(o) of the Code, or is under
"common control" with any member of the Target Company Group, within the meaning
of Section 4001(a)(14) of ERISA.
"IRS" means the Internal Revenue Service.
"MULTI-EMPLOYER PLAN" means each Target Company Group Benefit Plan
which is a "multi-employer plan" within the meaning of Section 3(37) or
4001(a)(3) of ERISA or any single employer plan which is subject to Sections
4063 and 4064 of ERISA.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PENSION PLAN" means each Target Company Group Benefit Plan (other
than a MultiEmployer Plan) which is an "employee pension benefit plan" within
the meaning of Section 3(2) of ERISA.
"SELLER GROUP EMPLOYEE" means any person who is an employee of any of
the Sellers or one of its Affiliates (other than a member of the Target Company
Group) who has been seconded to, and devotes all his working time and attention
to the affairs of, one or more members of the Target Company Group.
"TARGET COMPANY GROUP BENEFIT PLAN" means each Benefit Plan (i) which
is now or has during the last six years been sponsored, maintained, contributed
to, or required to be contributed to, by any member of the Target Company Group
for the benefit of any Employee or their beneficiaries or covered dependents, or
(ii) with respect to which any member of the Target Company Group has or may
have any direct or indirect liability, contingent or otherwise.
"WELFARE PLAN" means each Target Company Group Benefit Plan which is
an "employee welfare benefit plan" within the meaning of Section 3(1) of ERISA.
2.9.1 EMPLOYMENT AGREEMENTS AND BENEFITS. (a) SCHEDULE. Schedule 2.9
contains a true and complete list of each Target Company Group Benefit Plan and
each Employment Agreement. There is no plan or commitment, whether legally
binding or not, to establish any new
-15-
25
Target Company Group Benefit Plan, to enter into any Employment Agreement or to
modify or to terminate any Target Company Group Benefit Plan or Employment
Agreement (except to the extent required by law, to conform any such Target
Company Group Benefit Plan to the requirements of any applicable law or as
provided under the terms of any such Target Company Group Benefit Plan,
Employment Agreement or other written contract, in each case as previously
disclosed to Purchaser, or as required by this Agreement), nor has any intention
to do any of the foregoing been communicated to Employees. No event, condition
or circumstance exists which would prevent the unilateral amendment or
termination (without participant consent) of any Target Company Group Benefit
Plan except with regard to those disclosed on Schedule 5.1.
(b) DOCUMENTS. The Sellers have provided, or have caused to be provided, to
Purchaser (I) current, accurate and complete copies of each Target Company Group
Benefit Plan and each Employment Agreement (or, in the case of Employment
Agreements having substantially identical terms, the form of such agreements and
the names of the Employees party thereto), including all amendments thereto, and
trust or funding agreements with respect thereto; (II) the two most recent
annual actuarial valuations, if any, prepared for each Target Company Group
Benefit Plan; (III) the two most recent annual reports (Series 5500 and all
schedules thereto), if any, required under ERISA in connection with each Target
Company Group Benefit Plan or related trust; (IV) any statement of alternative
form of compliance pursuant to Department of Labor Regulation ss. 2520.104-23,
if any, filed for each Target Company Group Benefit Plan which is an "employee
pension benefit plan" as defined in Section 3(2) of ERISA for a select group of
management or highly compensated employees; (V) the most recent determination
letter received from the IRS, if any, for each Target Company Group Benefit Plan
and related trust which is intended to satisfy the requirements of Section
401(a) of the Code; (VI) if the Target Company Group Benefit Plan is funded, the
most recent annual and periodic accounting of Target Company Group Benefit Plan
assets; (VII) the most recent summary plan description together with the most
recent summary of material modification, if any, required under ERISA with
respect to each Target Company Group Benefit Plan; and (VIII) all material
written communications to any Employee or Employees relating to any Target
Company Group Benefit Plan.
(c) COMPLIANCE. (i) Each Target Company Group Benefit Plan has been
administered and operated in all material respects in accordance with its terms
and all applicable laws, statutes, orders, rules and regulations, including but
not limited to ERISA and the Code; (II) each Target Company Group Benefit Plan
intended to qualify under Section 401 of the Code is, and since its inception
has been, so qualified and a determination letter has been issued by the IRS to
the effect that each such Target Company Group Benefit Plan is so qualified and
that each trust forming a part of any such Target Company Group Benefit Plan is
exempt from tax pursuant to Section 501(a) of the Code and, to the knowledge of
each Seller, no circumstances exist which would adversely affect such
qualification or exemption; (III) no action or failure to act and no transaction
or holding of any assets by, or with respect to, any Target Company Group
Benefit Plan prior to the Closing has or may subject any member of the Target
Company Group to any Tax (as defined in Section 2.13(o)), penalty or other
liability; (IV) there are no actions, proceedings, arbitrations, suits or claims
pending or, to the knowledge of each Seller, threatened (other than routine
claims for benefits) with respect to any
-16-
26
Target Company Group Benefit Plan or Employment Agreement; (V) all payments or
contributions required to be made with respect to all periods through the
Closing Date with respect to each Target Company Group Benefit Plan, each
related trust, each collective bargaining agreement or by law shall have been
made prior to the Closing Date; (VI) no Target Company Group Benefit Plan is
under audit or investigation by the IRS, the Department or the PBGC, and, to the
knowledge of each Seller, no such audit or investigation is threatened; (VII) no
liability under any Target Company Group Benefit Plan has been funded nor has
any such obligation been satisfied with the purchase of a contract from an
insurance company as to which notice has been received to the effect that such
insurance company is insolvent or is in rehabilitation or any similar
proceeding; (VIII) the Target Company Group has complied in all material
respects with the provisions of Section 4980B of the Code with respect to any
Target Company Group Benefit Plan which is a group health plan within the
meaning of Section 5001(b)(1) of the Code; (IX) with respect to each Target
Company Group Benefit Plan that is an "employee benefit plan" within the meaning
of Section 3(3) of ERISA or which is a "plan" within the meaning of Section
4975(e) of the Code, there has occurred no transaction which is prohibited by
Section 406 of ERISA or which constitutes a "prohibited transaction" under
Section 4975(c) of the Code; (X) no member of the Target Company Group has any
unfunded liabilities pursuant to any Target Company Group Benefit Plan that is
not intended to be qualified under Section 401(a) of the Code except as
otherwise reflected in the Financial Statements; and (XI) all liabilities of the
Target Company Group for matching contributions under the Seller Savings Plan
for service by the Active Savings participants for all periods through the date
hereof have been accrued on the latest balance sheet included in the Financial
Statements, and all such liabilities arising after the date hereof will be
accrued on the balance sheets to be delivered to Purchaser pursuant to Section
4.2.3 hereof.
(d) NO POST-EMPLOYMENT OBLIGATIONS. No member of the Target Company Group
maintains or contributes to any Target Company Group Benefit Plan, or is
obligated under, any plan, contract, policy or arrangement which provides life
insurance, medical, severance or other welfare benefits to any Employee upon his
retirement or termination of employment, except as may be required by Section
4980B of the Code.
(e) EFFECT OF TRANSACTION. Except as otherwise expressly contemplated
hereby and thereby, the execution of, and performance of the transactions
contemplated in, this Agreement and the Ancillary Agreements by the Sellers
party hereto and thereto will not (either alone or in conjunction with another
event, such as a termination of employment or other services) (I) result in any
additional payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or an
obligation to fund benefits with respect to any Employee, or (II) result in the
triggering or imposition of any restrictions or limitations on the right of any
member of the Target Company Group or the Purchaser to amend or terminate any
Target Company Group Benefit Plan and receive the full amount of any excess
assets remaining or resulting from such amendment or termination, subject to
applicable taxes. No payment or benefit which will or may be made by any member
of the Target Company Group or the Sellers will be characterized as an "excess
parachute payment," within the meaning of Section 280G(b)(1) of the Code or will
fail to be deductible by virtue of Sections 280G or 162(m) of the Code. To the
knowledge of the Sellers, no
-17-
27
officer, key employee or group of employees of the Target Company Group has any
plans to terminate their employment.
(f) EMPLOYMENT MATTERS. Each member of the Target Company Group and each of
the Sellers is in compliance in all material respects with all applicable
federal, state and local laws, rules and regulations (domestic and foreign)
respecting employment, employment practices, labor, terms and conditions of
employment, wages and hours and occupational safety and health, in each case,
with respect to Employees. Neither the Sellers nor any member of the Target
Company Group has instituted any "freeze" of, or delayed or deferred the grant
of, any cost-of-living or other salary adjustments for any of its Employees.
(g) LABOR. No work stoppage, slowdown or labor strike against any member of
the Target Company Group is pending or, to the knowledge of the Sellers,
threatened. No member of the Target Company Group (I) is involved in or, to the
knowledge of the Sellers, threatened with any labor dispute, grievance or
litigation relating to labor matters involving any Employees, including, without
limitation, violation of any federal, state or local labor, safety or employment
laws (domestic or foreign), charges of unfair labor practices or discrimination
complaints; (II) has engaged in any unfair labor practices within the meaning of
the National Labor Relations Act or the Railway Labor Act; or (III) is
presently, nor has been in the past a party to, or bound by, any collective
bargaining agreement or union contract with respect to Employees and no such
agreement or contract is currently being negotiated. No Employees are currently
represented by any labor union for purposes of collective bargaining and no
activities the purpose of which is to achieve such representation of all or some
of such Employees are threatened or ongoing.
2.9.2 ERISA MATTERS. (a) PENSION PLANS. No steps have been taken to
terminate any Pension Plan now maintained or contributed to by any member of the
Target Company Group. No direct or indirect liability(contingent or otherwise)
under Title IV or Section 302 of ERISA or Section 412 of the Code has been, is
or will be incurred by any member of the Target Company Group which has not been
satisfied in full. No event has occurred and no condition exists that could
reasonably be expected to result in the Target Company Group incurring any
liability, direct or indirect, contingent or otherwise, under Title IV or
Section 302 of ERISA, Section 412 of the Code and, with respect to any group
health plan within the meaning of Section 5001(b)(1) of the Code, Section 4980B
of the Code or could constitute grounds for terminating any Pension Plan. No
proceeding has been initiated by the PBGC to terminate any Target Company Group
Benefit Plan that is a Pension Plan or to appoint a trustee to administer any
Target Company Group Benefit Plan that is a Pension Plan. No Target Company
Group Benefit Plan that is a Pension Plan which is subject to Part 3 of Subtitle
B of Title 1 of ERISA or Section 412 of the Code has incurred any "accumulated
funding deficiency," as defined in Section 412 of the Code and Section 302 of
ERISA, whether or not waived. No member of the Target Company Group, the Sellers
or any ERISA Affiliate has sought or received a waiver of its funding
requirements with respect to any Pension Plan.
(b) MULTI-EMPLOYER PLANS. During the last six years, no member of the
Target Company Group or any of their ERISA Affiliates has contributed to, or
been required to contribute to, or
-18-
28
otherwise participated in, or in any way directly or indirectly has any
liability with respect to, any Multi-Employer Plan. During the last six years,
no member of the Target Company Group has incurred any withdrawal liability
(within the meaning of Section 4201 of ERISA).
(c) 501(c)(9) TRUST. No Target Company Group Benefit Plan nor Employment
Agreement is funded by a trust described in Section 501(c)(9) of the Code.
(d) PENSION FUNDING. Except with regard to the Seller Savings Plan and the
Salary Continuation Plan of Thermalloy, Inc., no Target Company Group Benefit
Plan is an "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA.
2.9.3 FOREIGN BENEFIT PLAN MATTERS. The Sellers jointly and severally
represent to the Purchaser with respect to benefit plans for non-United States
employees as set forth in EXHIBIT 2.9. The warranties set out in EXHIBIT 2.9 are
the only warranties given in respect of pension schemes of which any of the
German Employees and of the French Employees and any of the employees of the
Target Companies which are incorporated or organized outside the United States
of America are members or in which those Target Companies participate or have
participated. For the purposes of this Section 2.9.3 "PENSION SCHEME" means any
agreement, arrangement, custom or practice (whether legally enforceable or not
and whether or not approved by the Board of Inland Revenue for the purposes of
Chapter I of Part XIV of the Income and Corporation Taxes Act 1988) to which the
Target Companies or ▇▇▇▇▇▇▇▇▇ GmbH or Hellermann France SA contribute or have
contributed (or promise or have promised to provide on a funded or unfunded
basis) for the payment of any pensions, allowances, lump sums or other like
benefits on retirement, death or termination of employment (whether voluntary or
not) or during periods of sickness or disablement. For the purposes of this
Section 2.9.3 "GERMAN EMPLOYEES" means the employees of ▇▇▇▇▇▇▇▇▇ GmbH whose
employment is to transfer in connection with this Agreement and "FRENCH
EMPLOYEES" means the employees of Hellermann France SA whose employment is to
transfer in connection with this Agreement.
2.10 INTELLECTUAL PROPERTY. (a) Schedule 2.10 lists all trademark and
service ▇▇▇▇ registrations, copyright registrations, trade names and patents and
applications for any of the foregoing (I) owned by any member of the Target
Company Group or (II) licensed by any member of the Target Company Group (except
for "off-the-shelf" software and similar property which is readily available),
that, in each case, are necessary to the business or operations of such member
of the Target Company Group as currently conducted. Each member of the Target
Company Group owns or has the right to use all Intellectual Property that is
necessary to the business or operations of such member free and clear of all
Liens, except Permitted Liens. No member of the Target Company Group has
infringed upon or misappropriated any intellectual property rights of third
parties, and none of the Sellers or any member of the Target Company Group has
received any charge, complaint, claim, demand or notice alleging any such
interference, infringement, misappropriation or violation (including any claim
that any member of the Target Company Group must license or refrain from using
any intellectual property rights of any third party), and the Sellers have no
knowledge of any infringement on or conflict with any Intellectual Property
owned by any member of the Target Company Group by any other Person. The Sellers
have furnished or made available to the Purchaser
-19-
29
complete and correct copies of all licenses (other than licenses of standard,
"off-the-shelf" software) under which any member of the Target Company Group has
Intellectual Property licensed to it. Each license of Intellectual Property to
which any member of the Target Company Group is a party is a valid and binding
agreement of the member of the Target Company Group party thereto and, to the
knowledge of the Sellers, as to each other party thereto, and is in full force
and effect and the terms and enforceability thereof will be unaffected by the
consummation of the transactions contemplated hereby. No member of the Target
Company Group nor, to the knowledge of the Sellers, any other party thereto, is
in breach or default under any such license (and no event has occurred which
with notice or lapse of time would constitute a breach or default), except for
such defaults as, individually and in the aggregate, would not reasonably be
expected to adversely affect the ability of the Target Company Group to conduct
the Business after the Closing in all material respects as currently conducted.
No member of the Target Company Group has granted any royalty-bearing or
exclusive licenses of any Intellectual Property to any other Person. Each member
of the Target Company Group has taken such steps as such member has determined
are commercially reasonable to register and maintain (including ensuring that
all payments due in respect thereof are up to date) the registration of the
Intellectual Property owned by such member with the United States Patent and
Trademark Office, United States Copyright Office or such other filing offices,
domestic or foreign, and each member of the Target Company Group has taken such
other actions as such member has determined are commercially reasonable to
ensure full protection of such Intellectual Property, in each case to the extent
material to the Business.
For the purposes of this Agreement, "INTELLECTUAL PROPERTY" means in each
case to the extent necessary to the conduct of the business or operations of the
Target Company Group, (I) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof, (II) all trademarks, service marks, trade dress, logos, trade names,
corporate names and Internet domain names, together with all translations,
adaptations, derivations and combinations thereof and including all goodwill
associated therewith, and all applications, registrations and renewals in
connection therewith, (III) all copyrightable works, all copyrights, and all
applications, registrations and renewals in connection therewith, (IV) all mask
works and all applications, registrations and renewals in connection therewith,
(V) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (VI) all computer software
(including data and related documentation), (VII) all other similar proprietary
rights, and (VIII) all copies and tangible embodiments thereof (in whatever form
or medium).
(b) Each member of the Target Company Group has conducted a thorough
inventory and assessment of the hardware, software and embedded microcontrollers
in noncomputer equipment (collectively, the "COMPUTER SYSTEMS") used by the
Target Company Group in the conduct of their business in order to determine
which parts of the Computer Systems are not Y2K Compliant (as defined below) and
to estimate the cost of rendering such Computer Systems Y2K Compliant prior
-20-
30
to January 1, 2000 or such earlier date on which the Computer Systems may shut
down or may produce incorrect calculations or otherwise malfunction without
becoming totally inoperable. Schedule 2.10 describes all actions taken by each
member of the Target Company Group to render its Computer Systems Y2K Compliant
(the "COMPANY Y2K PLAN"). The actions described on Schedule 2.10 are all those
actions which, to Sellers' knowledge, are necessary to ensure that all computer
hardware and software used in and material to the Business is designed to be Y2K
Compliant. Each member of the Target Company Group has taken reasonable steps to
determine whether the failure of any suppliers or customers with which any
member of the Target Company Group has a material relationship to be Y2K
Compliant would adversely affect the ability of the Target Company Group to
conduct its business as currently conducted and, assuming the consummation of
the Company Y2K Plan, the occurrence of calendar year 2000 will not cause or
will not reasonably be expected to adversely affect the ability of the Target
Company Group to conduct its business as currently conducted. The Computer
Systems are scheduled to be Y2K Compliant by October 30, 1999. For purposes of
this ▇▇▇▇▇▇▇▇▇, "▇▇▇ COMPLIANT" means (i) with respect to Date Data (as defined
below), that such data is in proper format and accurate for all dates in the
twentieth and twenty-first centuries, and (ii) with respect to Date-Sensitive
Systems (as defined below), that each such system accurately processes all Date
Data, including for the twentieth and twenty-first centuries, without loss of
any functionality or performance, including, without limitation, calculating,
comparing, sequencing, storing and displaying such Date Data (including all leap
year considerations), when used as a stand-alone system or in combination with
other software or hardware; "DATE DATA" means any data of any kind that includes
date information or which is otherwise derived from, dependent on or related to
date information; and "DATE-SENSITIVE SYSTEM" means any software, microcode or
hardware system or component, including any electronic or electronically
controlled system or component that processes any Date Data and that is
installed, in development or on order, for internal or external use, or the
provision or operation of which provides a benefit to customers, vendors,
suppliers or any other party.
2.11 GOVERNMENTAL AUTHORIZATIONS; COMPLIANCE WITH LAW. Each member of
the Target Company Group holds all licenses, permits and other governmental
authorizations necessary to conduct its business as currently conducted
(collectively, the "COMPANY PERMITS"), all of which Company Permits are listed
on Schedule 2.11, and no member of the Target Company Group has received any
notice of any violation of any law, statute, rule, regulation, judgment, order,
decree, permit or other governmental authorization or approval, whether federal,
state, local or foreign, applicable to it or to any of its properties, except
for violations which would not, individually or in the aggregate, reasonably be
expected to adversely affect the ability of the Target Company Group to conduct
the Business after the Closing in all material respects as currently conducted.
The business of the Target Company Group is being conducted and since January 1,
1997 has been conducted in compliance in all material respects with all laws,
statutes, rules, regulations, judgments, orders, decrees, permits, concessions,
franchises and other governmental authorizations and approvals, whether federal,
state, local or foreign, applicable to them or to any of their properties.
Schedule 2.11 contains a true and complete list of all federal, state, local and
foreign governmental or judicial consents, orders, decrees and other compliance
agreements relating to any member of the Target Company Group or any of their
respective assets or businesses under which any member of the Target
-21-
31
Company Group is operating or bound. This Section 2.11 does not relate to
matters with respect to Taxes which are the subject of Section 2.13, to employee
benefit matters which are the subject of Section 2.9 or environmental matters
which are the subject of Section 2.16.
2.12 LITIGATION. There are no judicial or administrative actions,
proceedings, arbitrations or investigations pending or, to the knowledge of the
Sellers, threatened (I) against or affecting any member of the Target Company
Group or their respective businesses or operations or (II) which question the
validity of this Agreement or the Ancillary Agreements or any action taken or to
be taken by the Sellers or any member of the Target Company Group in connection
herewith and therewith. None of the actions, proceedings, arbitrations or
investigations described in Schedule 2.12 or Schedule 2.13 would, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Target Company Group taken as a whole or adversely affect the ability of the
Target Company Group to conduct the Business after the Closing in all material
respects as currently conducted.
2.13 TAXES. (a) Since January 1, 1997, (I) all Returns required to be
filed (taking into account any valid extension) with respect to any member of
the Target Company Group (or any affiliated, combined, consolidated, unitary or
similar group ("AFFILIATED GROUP") of which a member of the Target Company Group
is, or since January 1, 1997 was, a member) on or before the Closing Date have
(or by the Closing Date will have) been duly and timely filed (except for
Returns where the failure to so file would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Target Company Group taken as a whole) and all such Returns are true, correct
and complete in all material respects and accurately set forth all items
required to be reflected or included in such Returns by applicable tax laws,
(II) all Taxes required to be paid (taking into account any valid extension)
with respect to any member of the Target Company Group on or before the Closing
Date either directly, as part of the consolidated Return of another taxpayer, or
otherwise, and including any liability for Taxes as a successor-in-interest or
transferee of another entity, have (or by the Closing Date will have) been duly
and timely paid in full (except for Taxes where the failure to so pay would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Target Company Group taken as a whole) and (III) all Taxes
required to be withheld and paid (taking into account any valid extension) by
any member of the Target Company Group in connection with amounts paid or owing
to any employee, independent contractor or creditor on or before the Closing
Date have (or by the Closing Date will have) been duly withheld and paid to the
proper taxing authority or properly set aside in accounts for such purpose
(except for Taxes, where the failure to so withhold would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Target Company Group taken as a whole). The liability for Taxes of each
member of the Target Company Group for all periods or portions thereof ending on
or prior to December 31, 1998, to the extent any such liability was not paid on
or prior to July 4, 1999, has been (or, will on the due date be) paid in full by
the Sellers or provided for on the Sellers' financial statements, without the
use of any assets or revenues attributable to any member of the Target Company
Group. With respect to taxable periods or portions thereof beginning after
December 31, 1998, none of the revenues or assets of any member of the Target
Company Group have been used to pay any Taxes after July 4, 1999, other than
Taxes relating to the Target Company
-22-
32
Group that are due and payable. All estimated Taxes required to be paid on or
prior to the Closing Date with respect to any member of the Target Company Group
for taxable periods or portions thereof beginning on or after January 1, 1999
have, or prior to the Closing will have, been duly and timely paid in full. The
estimated U.S. federal income Taxes paid with respect to the applicable members
of the Target Company Group for taxable periods beginning on or after January 1,
1999 through May 31, 1999 are an amount equal to $277,000, and were determined
on the basis of such members' annualized actual income for such periods.
(b) No written agreement or other document extending, or having the effect
of extending, the period of assessment or collection of any material Taxes with
respect to any member of the Target Company Group, and no power of attorney with
respect to any such Taxes, has been executed or filed with the IRS or any other
taxing authority. No member of the Target Company Group has requested in writing
any extension of time to file any income or franchise Tax Return, which Return
has not (or by the Closing Date will not have) been filed.
(c) No member of the Target Company Group is or has been at any time since
January 1, 1997 a member of any Affiliated Group for purposes of filing income
Returns.
(d) (I) No Return with respect to any member of the Target Company Group is
currently under audit by any taxing authority, and neither the IRS nor any other
taxing authority is now asserting in writing against any member of the Target
Company Group any material deficiency or claim for additional Taxes or any
material adjustment of Taxes, (II) no taxing authority has indicated in writing
that it intends to conduct an audit or investigation of the Taxes of any member
of the Target Company Group and (III) since January 1, 1997, no claim for Taxes
has been asserted in writing against any member of the Target Company Group by a
taxing authority where such member does not file a Return. All Returns filed by
or on behalf of each member of the Target Company Group for the taxable years
ended on the respective dates set forth on Schedule 2.13 have been examined or
audited by the relevant taxing authority or the statue of limitations with
respect to such Returns has expired. No issue has been raised in writing in any
audit or examination that, by application of similar principles, reasonably can
be expected to result in the assertion of a deficiency for any other year not so
examined or audited.
(e) No member of the Target Company Group is a party to or bound by or has
any obligation under any written Tax sharing agreement or arrangement.
(f) The Purchaser is not required to withhold Taxes pursuant to Section
1445 of the Code from payments made to the Sellers pursuant to this Agreement.
(g) No U.S. member of the Target Company Group has executed any closing
agreement pursuant to Section 7121 of the Code or any similar provision of
state, local or foreign law, in each case, which agreement is currently in
effect.
(h) No U.S. member of the Target Company Group is subject to any private
letter ruling of
-23-
33
the IRS or comparable rulings of other taxing authorities, in each case, which
ruling or rulings are currently in effect.
(i) No U.S. member of the Target Company Group has filed a consent pursuant
to Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as such is defined in
Section 341(f)(4) of the Code) owned by such member of the Target Company Group.
(j) No U.S. member of the Target Company Group has agreed or is required to
make any adjustments pursuant to Section 481(a) of the Code or any similar
provision of other tax law, domestic or international, by reason of a change in
accounting method initiated by it or any other relevant party or it has no
knowledge that any taxing authority has proposed any such adjustment or change
in accounting method. No U.S. member of the Target Company Group has any
application pending with any taxing authority anywhere in the world requesting
permission for any changes in accounting methods.
(k) No U.S. member of the Target Company Group will, as a result of the
transaction contemplated by this Agreement, make or become obligated to make any
"parachute payment" as defined in Section 280G of the Code.
(l) Since January 1, 1997, no U.S. member of the Target Company Group or
any member of an Affiliated Group has filed an election pursuant to Rev. Proc.
95-11, 1995-1 C.B. 505 or under Section 1.1502-75(c) of the regulations under
the Code ("TREASURY REGULATIONS") or any similar provision of other Tax law with
respect to a U.S. member of the Target Company Group.
(m) No U.S. member of the Target Company Group owns any interest in any
entity that is treated as a partnership for U.S. federal income tax purposes or
as a pass-through or transparent entity for any U.S. Federal income tax purpose.
(n) No property owned by any U.S. member of the Target Company Group is (A)
property required to be treated as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately prior to the enactment of the Tax Reform Act of 1986,
(B) constitutes "tax-exempt use property" within the meaning of Section
168(h)(1) of the Code or (C) is "tax-exempt bond financed property" within the
meaning of Section 168(g) of the Code.
(o) If each of the assets other than trading stock of any non-U.S. member
of the Target Company Group were disposed of for a consideration equal to the
book value of that asset in, or adopted for the purpose of, the Financial
Statements, no liability to taxation and no balancing charge (or corresponding
tax in any jurisdiction) in relation to any such asset or pool of assets would
arise (disregarding for this purpose any relief and allowances available to any
non-U.S. member of the Target Company Group other than amounts falling to be
deducted from consideration receivable for the asset in question).
-24-
34
(p) No liability to taxation would arise on the disposal by any non-U.S.
member of the Target Company Group of any asset other than trading stock
acquired since July 4, 1999 for a consideration equal to the consideration
actually given for the acquisition.
(q) No U.K. member of the Target Company Group has at any time acquired any
assets from another company which was at any relevant time a member of the same
group of companies (as defined in Section 170 TCGA 1992) as that of which the
relevant member of the Target Company Group was also a member or an associated
company as defined in Section 774 ICTA 1988.
(r) No non-U.S. member of the Target Company Group has since January 1,
1999 done or omitted to do, or agreed to do, or permitted to be done, any act as
a result of which there may be made a balancing charge or any disposal value may
be brought into account or any deemed trading receipt may arise under or by
virtue of any provision of CAA 1990 (or any corresponding legislation in the UK
or elsewhere), or there may be a withdrawal or refusal of allowances or a
recovery of excess relief under any such provision.
(s) No U.K. member of the Target Company Group is party to any loan
relationship as defined in Chapter II, Part IV Finance ▇▇▇ ▇▇▇▇ which may give
rise to any debits or credits for the purposes of that Chapter other than in
relation to interest, charges or expenses.
(t) No U.K. member of the Target Company Group is a party to any loan
relationship: (i) where there is a connection between the parties as defined by
Section 87 Finance ▇▇▇ ▇▇▇▇; (II) where there has been or will be a release of
the amounts payable under the relationship; (III) to which the transitional
provisions of Schedule 15 Finance ▇▇▇ ▇▇▇▇ apply or will apply; (IV) to which
paragraphs 11 or 13, Schedule 9 Finance ▇▇▇ ▇▇▇▇ apply or may apply
(transactions not at arm's length); (V) to which Sections 92 (convertible
securities etc), 93 (relationships linked to the value of chargeable assets) or
94 (indexed gilt-edged securities) Finance ▇▇▇ ▇▇▇▇ apply.
(u) Each U.K. member of the Target Company Group accounts for all its loan
relationships (as defined in Section 81 Finance Act 1996) on an authorized
accruals basis and no circumstances exist by virtue of which a balancing debit
or credit may be brought into account in an accounting period ending after
Closing pursuant to Section 89 Finance Act 1996 (inconsistent application of
accounting methods) or Section 90 Finance Act 1996 (changes of accounting
method).
(v) No non-U.S. member of the Target Company Group has at any time been a
party to or otherwise involved in a transaction or series of transactions in
relation to which advisers considered that there was a risk that a non-U.S.
member of the Target Company Group could be liable to taxation under the
provisions of Part XVII ICTA 1988 or as a result of the principles in ▇.▇.
▇▇▇▇▇▇ Limited v IRC (54 TC 101) or ▇▇▇▇▇▇▇ v ▇▇▇▇▇▇ (55 TC 324), as developed
in subsequent cases, or similar rules or concepts outside the UK.
(w) As at April 6, 1999, no U.K. member of the Target Company Group had any
unrelieved surplus advance corporation tax, as defined in The Corporation Tax
(Treatment of Unrelieved Surplus
-25-
35
Advance Corporation Tax) Regulations 1999 (SI 1999/358) (the "SHADOW ACT
REGULATIONS").
(x) No U.K. member of the Target Company Group has at any time on or after
April 6, 1999 been a member of any group (for the purposes of the Shadow ACT
Regulations) that had another member which had unrelieved surplus advance
corporation (as defined in such Regulations) as at April 6, 1999.
(y) All U.K. members of the Target Company Group are required by The
Corporation Tax (Instalment Payments) Regulations 1998 (SI 1998/3175) (in this
warranty referred to as "the Regulations") to pay corporation tax by
instalments.
(z) For each accounting period of each U.K. member of the Target Company
Group in respect of which the date when corporation tax is due and payable in
accordance with TMA 1970 section 59D(1) has not passed (9 month date) the
Disclosure Letter gives full details of the following:
(i) The dates when payments of corporation tax are treated by the
Regulations as becoming due and payable.
(ii) The amount of such member's "total liability" for the purposes of
the Regulations.
(iii) The amount of corporation tax payable and the amount of
corporation tax paid by each member of the Target Company Group on each
instalment date, in respect of the respective accounting periods.
(iv) Any claim by any member of the Target Company Group for
corporation tax paid by way of instalment to be repaid.
(v) Any interest paid or payable by or to any member of the Target
Company Group in respect of any instalment payment.
(aa) In relation to each accounting period of each U.K. member of the
Target Company Group in respect of which the date when corporation tax is due
and payable in accordance with TMA 1970 section 59D has not passed (9 month
date), each Company has duly paid all corporation tax which has been treated as
becoming due and payable by it pursuant to the Regulations.
(bb) Schedule 2.13 gives full details of the calculation (including
assumptions made) of the "total liability" of each U.K. member of the Target
Company Group for the purposes of the Regulations in relation to any instalment
payments due on or before Completion in respect of the current accounting period
of each member of the Target Company Group.
(cc) Since December 31, 1998, each U.K. member of the Target Company Group
has conducted its business in the ordinary course consistent with past practice
and has not otherwise incurred any liability for Taxes.
-26-
36
(dd) DEFINITIONS.
(i) "TAXES" means taxes of any kind, levies or other like assessments,
customs, duties, imposts, charges or fees, in each case which are in the
nature of taxes, including without limitation all income taxes, franchise
taxes, withholding taxes, unemployment insurance taxes, social security
taxes, sales and use taxes, excise taxes, real and personal property taxes,
stamp taxes, transfer taxes, workers' compensation taxes, payroll taxes,
capital taxes, net worth taxes, estimated taxes and other similar taxes or
similar governmental charges imposed on or payable to the United States or
any state, county, local or foreign government, subdivision or agency
thereof, together with all interest and penalties and other additions
payable with respect thereto.
(ii) "RETURNS" means any return, report, declaration, form or
statement relating to Taxes, including any schedule or attachment thereto,
and including any amendment thereof.
2.14 ABSENCE OF CHANGES. Since July 4, 1999, other than in connection
with the transactions contemplated by this Agreement or the Ancillary
Agreements:
(a) there has not been any material adverse change or event in the
business, prospects or financial condition of the Target Company Group taken as
a whole, other than those relating to or as may be a result of (I) the
transactions contemplated by this Agreement or the Ancillary Agreements, (II)
generally applicable economic conditions or (III) the Target Company Group's
industry in general; and
(b) each member of the Target Company Group has conducted its business
in the ordinary course consistent with past practice, and no member of the
Target Company Group has:
(i) purchased, redeemed or otherwise acquired any shares of its
capital stock or issued or agreed to issue any capital stock or other
equity securities (or securities convertible into or exchangeable for
equity securities) or amended any of the terms of any equity securities
outstanding on the date hereof, or declared, set aside or paid any dividend
or made any distribution with respect to its capital stock (whether in cash
or in kind);
(ii) incurred any long-term indebtedness for borrowed money or entered
into any guarantee, or incurred any other obligation or liability,
absolute, accrued, contingent or otherwise, whether due or to become due,
except for liabilities and obligations incurred in the ordinary course of
business consistent with past practice, none of which obligations or
liabilities, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect on the Target Company Group taken as a
whole;
(iii) mortgaged, pledged or subjected (or permitted to be subjected)
to any Lien any of its properties or assets, except for Permitted Liens
incurred in the ordinary course of business;
(iv) except as required by GAAP, made any material change in its
accounting methods, principles or practices;
-27-
37
(v) other than in the ordinary course of business consistent with past
practice, sold, assigned, transferred, conveyed, leased or otherwise
disposed of any material assets of the Target Company Group or any Target
Assets;
(vi) other than in the ordinary course of business consistent with
past practice, increased the benefits payable under or established any
Benefit Plan or in any other fashion increased the compensation payable or
to become payable to any officers or Employees of the Target Company Group,
or entered into any Contract or other binding commitment to effect any of
the foregoing;
(vii) amended the Organizational Documents of any member of the Target
Company Group;
(viii) canceled or forgiven any material debts or claims, except in
the ordinary course of business consistent with past practice;
(ix) entered into any material Contract, lease or license (or series
of related Contracts, leases and licenses) outside the ordinary course of
business;
(x) failed to replenish inventories and supplies in a normal and
customary manner consistent with its prior practice, or made any purchase
commitment in excess of the normal, ordinary and usual requirements of its
business or at any price in excess of the then current market price, or
made any change in its selling, pricing, advertising or personnel practices
inconsistent with its prior practice;
(xi) made any capital expenditures or capital additions or
improvements, or commitments therefor, in excess of an aggregate of
$50,000;
(xii) delayed or postponed the payment of accounts payable and other
liabilities outside the ordinary course of business;
(xiii) except as permitted by Section 4.2.1, paid, loaned or advanced
any amount to, or sold, transferred or leased any property or asset (real,
personal or mixed, tangible or intangible) to, any Seller or any Affiliate
of any Seller (other than any member of the Target Company Group);
(xiv) entered into any Contract with any Seller or any Affiliate of
any Seller (other than any member of the Target Company Group) other than
Contracts entered into in the ordinary course of business and consistent
with past practice in respect of both type and terms; or
(xv) taken any action or omitted to take any action that would result
in the occurrence of any of the foregoing.
-28-
38
2.15 INSURANCE. Schedule 2.15 contains a complete and correct list of,
and Sellers have provided to Purchaser summary descriptions of, all insurance
policies covering the members of the Target Company Group and their respective
businesses, assets and properties. The policies of insurance covering the
members of the Target Company Group or any of their respective businesses,
assets or properties cover such risks and contain such policy limits, types of
coverage and deductibles as are customary for companies engaged in businesses
similar to that of the Target Company Group. Such policies are in full force and
effect and all premiums due with respect to all periods to and including the
Closing Date have either been paid or adequate provisions for payment thereof
have been made in the Financial Statements. All members of the Target Company
Group have complied in all material respects with the terms and provisions of
such policies. Neither the Sellers nor any member of the Target Company Group
has received any notice of increase of premiums with respect to, or cancellation
or non-renewal of, any of such insurance policies. There are no pending claims
against such insurance by any member of the Target Company Group as to which the
insurers have denied coverage or otherwise reserved rights. All such policies
are sufficient for compliance in all material respects with all requirements of
applicable law and the terms of leases to which any member of the Target Company
Group is a party.
2.16 ENVIRONMENTAL MATTERS. DEFINITIONS. (a) For purposes of this
Section 2.16, the following capitalized terms shall have the following meanings:
"ENVIRONMENTAL LAW" means any foreign, federal, state, or local law,
statute, rule, regulation, order or other requirement of law relating to (I) the
manufacture, transport, use, treatment, storage, disposal, release or threatened
release of Hazardous Substances (as defined below), or (II) the protection of
human health or the environment (including, without limitation, natural
resources, air, and surface or subsurface land or waters).
"HAZARDOUS SUBSTANCE" means any material or substance that is: (I)
listed, classified or regulated pursuant to or under any applicable
Environmental Law, or (II) any petroleum product or by-product, asbestos, urea
formaldehyde insulation or polychlorinated biphenyls.
(b) ENVIRONMENTAL COMPLIANCE AND CONDITIONS. (I) Each member of the Target
Company Group has been and is currently being operated in compliance in all
material respects with all applicable limitations, restrictions, conditions,
standards, prohibitions, requirements and obligations of Environmental Laws and
related orders of any court or other governmental authority;
(ii) There are not any existing, pending or, to the knowledge of the
Sellers, threatened actions, suits, claims, investigations, inquiries or
proceedings by or before any court or any other governmental entity
directed against any member of the Target Company Group that pertain or
relate to (1) any remedial obligations under any applicable Environmental
Law, (2) violations by any member of the Target Company Group of any
Environmental Law, (3) personal injury or property damage claims relating
to a release of chemicals or Hazardous Substances, or (4) response,
removal, or remedial costs under the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), 42 ▇.▇.▇.▇▇. 9601 et seq. the
Resource
-29-
39
Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 6901 et seq., or any
similar state or federal laws;
(iii) With respect to permits and licenses, (1) all licenses, permits,
consents, or other approvals required under Environmental Laws that are
necessary to the operations of any member of the Target Company Group have
been obtained and are in full force and effect and the Sellers are unaware
of any basis for revocation or suspension of any such licenses, permits,
consents or other approvals; (2) to the knowledge of Sellers, no
Environmental Laws impose any obligation upon Purchaser to provide prior
notification to any governmental entity of the transactions contemplated
hereby in order to maintain in full force and effect any permit, license,
consent, or other approval which is necessary to the operations of the
assets or the business; and (3) each member of the Target Company Group has
operated in compliance in all material respects with such permits,
licenses, consents, or approvals, and at the production levels or emission
levels specified in such permits, licenses, consents, or approvals;
(iv) To the knowledge of the Sellers, no portion of any of the Leased
Real Property is listed on the National Priorities List ("NPL") or the
Comprehensive Environmental Response, Compensation, and Liability
Information System ("CERCLIS") list under CERCLA, or any similar ranking or
listing under any state law;
(v) To the knowledge of the Sellers, all Hazardous Substances
generated by any member of the Target Company Group has been transported by
carriers, or stored, treated and disposed of by treatment, storage and
disposal facilities, authorized or maintaining valid permits under all
applicable Environmental Laws;
(vi) No Seller or member of the Target Company Group nor, to the
knowledge of the Sellers, any other Person has disposed or released any
Hazardous Substances on, at, or under the Leased Real Property, except in
compliance with laws;
(vii) To the knowledge of the Sellers, no member of the Target Company
Group has any obligation to remediate or has entered into any agreement to
remediate any condition resulting from the release, treatment, storage or
disposal of any Hazardous Substances.
(viii) No facts or circumstances exist which could reasonably be
expected to result in any liability to any member of the Target Company
Group or Purchaser with respect to the current or past business and
operations of the Sellers in connection with (i) any release,
transportation or disposal of any Hazardous Substances, or (ii) any action
taken or omitted that was not in full compliance with or was in violation
of any applicable Environmental Law.
2.17 AFFILIATE TRANSACTIONS. None of the members of the Target Company
Group is a party to any agreement with (A) any of their respective directors or
officers or (B) any Seller or any of its subsidiaries or Affiliates (other than
the members of the Target Company Group). Schedule 2.17 sets forth a list of all
services provided by the Sellers or any of their respective subsidiaries or
Affiliates
-30-
40
(other than the members of the Target Company Group) to the members of the
Target Company Group and the charges and allocations therefor. There have been
no changes in the intercompany charges or allocations shown on Schedule 2.17
since January 1, 1998. No Seller nor, to the knowledge of the Sellers, any of
their or any member of the Target Company Group's respective officers, directors
or Affiliates, nor any relative or spouse (or relative of such spouse) of any
such officer, director or Affiliate, nor any entity controlled by one of more of
the foregoing:
(i) owns, directly or indirectly, any interest in (excepting less than
2% stock holdings for investment purposes in securities of publicly held
and traded companies), or is an officer, director, employee or consultant
of, any Person which is, or is engaged in business as, a competitor,
licensor, lessor or lessee of the Target Company Group; or
(ii) has any cause of action or other claim whatsoever against, or
owes any amount to, any member of the Target Company Group, except for
claims in the ordinary course of business such as for wages, accrued
vacation pay, accrued benefits under employee benefit plans, and similar
matters and agreements existing on the date hereof.
For purposes of this Agreement, "AFFILIATE" shall mean, with respect to any
Person, any other Person that, directly or indirectly, controls or is controlled
by or is under common control with such Person. As used in this definition of
"Affiliate", the term "control" and any derivatives thereof mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract, or otherwise.
2.18 CUSTOMERS. Schedule 2.18 lists for each of the 1997 and 1998
fiscal years and the six month period ended July 4, 1999 (A) the ten largest
customers of each member of the Target Company Group based on the aggregate
value of goods and services ordered from the Target Company Group by such
customers during each such period and (B) the aggregate amount for which all
such customers were invoiced during each such period. No Seller nor any member
of the Target Company Group has received any notice since January 1, 1998 that
any customer listed on Schedule 2.18 or any other customer of the Business that
ordered more than $1,000,000 of goods and services from the Target Company Group
during the 1998 fiscal year or $500,000 of goods and services from the Target
Company Group during the six months ended July 4, 1999, (I) has ceased or
intends to cease to use the products, goods or services of the Target Company
Group, (II) has substantially reduced or intends to substantially reduce the
Target Company Group's products, goods and services, (III) intends to cancel any
outstanding purchase order or (IV) has sought, since January 1, 1998, or is
seeking, to reduce the price it will pay for the Target Company Group's
products, goods and services, including in each case following consummation of
the transactions contemplated hereby.
2.19 SUPPLIERS; RAW MATERIALS. Schedule 2.19 lists for each of the
1997 and 1998 fiscal years and the six months ended July 4, 1999 (A) the ten
largest suppliers of each member of the Target Company Group based on the
aggregate value of raw materials, supplies, component parts, merchandise and
other goods and services ordered by the Target Company Group from such suppliers
during each such period and (B) the aggregate amount for which all such
suppliers invoiced the Target
-31-
41
Company Group during each such period. No Seller nor any member of the Target
Company Group has received any notice since January 1, 1999 that any supplier
listed on Schedule 2.19 or any other significant supplier will not (I) sell
supplies, raw materials and other goods to the Target Company Group during the
one year period following the Closing Date on terms and conditions similar to
those used in its current sales to the Target Company Group, subject to general
and customary price increases, or (II) be unable to fulfill any outstanding
purchase order placed by any member of the Target Company Group.
2.20 PRODUCT WARRANTIES. Except for warranties under applicable law,
(A) there are no warranties, express or implied, written or oral, with respect
to the products or services of the Business and (B) there are no pending or, to
the knowledge of the Sellers, threatened claims with respect to any such
warranty, and no member of the Target Company Group has any liability with
respect to any such warranty, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due, other than warranty
claims in the ordinary course of business which are not material in amount. No
member of the Target Company Group has outstanding any warranty which allows for
the recovery of consequential damages.
2.21 ABSENCE OF CERTAIN BUSINESS PRACTICES. None of the Sellers, any
member of the Target Company Group, any of their respective officers, employees
or agents, 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 is or may be in a position to help or hinder the Business (or assist any
member of the Target Company Group in connection with any actual or proposed
transaction relating to the Business) (I) which subjected or might have
subjected any Seller or any member of the Target Company Group 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 on the
Target Company Group taken as a whole, (III) which if not continued in the
future, could reasonably be expected to adversely affect the ability of the
Target Company Group to conduct the Business in all material respects as
currently conducted or subject any member of the Target Company Group 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.
2.22 BANKING AND AGENCY ARRANGEMENTS. Schedule 2.22 sets forth a list
of: (A) each bank, savings and loan or similar financial institution in which
each member of the Target Company Group has an account or safe deposit box or
other custodial arrangement and the numbers of such accounts or safe deposit
boxes maintained by the Target Company Group and (B) the names of all persons
authorized to draw on each such account or to have access to any such safe
deposit box facility. None of the Sellers or members of the Target Company Group
have outstanding any power of attorneys in respect of the Target Company Group.
2.23 BROKERS. Except for NM Rothschild & Sons, whose fees will be paid
by ▇▇▇▇▇▇▇▇▇ plc, all negotiations relating to this Agreement and the Ancillary
Agreements and the transactions contemplated hereby and thereby have been
carried out without the intervention of any Per-
-32-
42
son acting on behalf of the Sellers or the Target Company Group in such manner
as to give rise to any valid claim against the Purchaser, the Sellers or the
Target Company Group for any brokerage or finder's commission, fee or similar
compensation.
2.24 FOREIGN SUBSIDIARIES. The Sellers jointly and severally represent
and warrant to Purchaser with respect to the matters set forth on EXHIBIT 2.24.
2.25 DISCLOSURE. To the knowledge of Sellers, no representation or
warranty by Sellers contained in this Agreement 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 Sellers that has not been
disclosed by Sellers to the Purchaser that might reasonably be expected to have
or result in a Material Adverse Effect on the Target Company Group taken as a
whole or adversely affect the ability of the Target Company Group to conduct the
Business after the Closing in all material respects as currently conducted.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to the Sellers as follows:
3.1 AUTHORIZATION, ETC. The Purchaser has the corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Purchaser of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the board of directors of the Purchaser, which constitutes all
necessary corporate action on the part of the Purchaser for such authorization.
This Agreement has been, and each of the Ancillary Agreements when executed and
delivered will be, duly executed and delivered by the Purchaser and constitute
the valid and binding obligations of the Purchaser, enforceable against the
Purchaser in accordance with its terms, except as limited by laws affecting the
enforcement of creditors' rights generally or by general equitable principles.
In the event Purchaser assigns its rights hereunder to one or more Subsidiary
Purchasers:
(i) such Subsidiary Purchaser will have the corporate power and
authority to assume the obligations of Purchaser hereunder, to execute and
deliver the Ancillary Agreements to which it becomes a party, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby;
(ii) the assumption of the obligations of the Purchaser hereunder, the
execution, delivery and performance by such Subsidiary Purchaser of the
Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby will have been duly authorized
by all necessary corporate action on the part of such Subsidiary Purchaser;
and
(iii) each of the Ancillary Agreements, when executed and delivered by
such Subsidiary Purchaser, will be duly executed and delivered by such
Subsidiary Purchaser and will constitute,
-33-
43
together with this Agreement, the valid and binding obligations of such
Subsidiary Purchaser, enforceable against such Subsidiary Purchaser in
accordance with its terms, except as limited by laws affecting the
enforcement of creditors' rights generally or by general equitable
principles.
3.2 CORPORATE STATUS. The Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the requisite corporate power and authority to conduct its
business.
3.3 NO CONFLICTS, CONSENTS AND APPROVALS, ETC. (a) Except as set forth
in Schedule 3.3, the execution, delivery and performance of this Agreement and
the Ancillary Agreements by the Purchaser and the consummation by Purchaser of
the transactions contemplated hereby and thereby will not result in (I) any
conflict with the Organizational Documents of the Purchaser, or (II) subject to
obtaining the consents referred to in Section 3.3(b), any breach or violation of
or default under any law, rule, statute, regulation, judgment, order, decree,
license, permit or other governmental authorization or any mortgage, lease,
agreement, deed of trust, indenture or any other instrument to which the
Purchaser is a party or by which the Purchaser or any of its properties or
assets are bound, except in the case of clause (ii) only for such breaches,
violations or defaults which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the Purchaser's
ability to consummate the transactions contemplated hereby and thereby.
(b) Except as set forth in Schedule 3.3, no consent, approval or
authorization of, notice to or filing with any governmental authority or third
party is required on the part of the Purchaser in connection with the execution
and delivery of this Agreement or the Ancillary Agreements or the consummation
of the transactions contemplated hereby and thereby, except (I) filings required
with respect to the HSR Act and (II) filings, consents or approvals which, if
not made or obtained, would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the Purchaser's ability to
consummate the transactions contemplated hereby and thereby.
3.4 BANK FINANCING COMMITMENT. The Purchaser has delivered to the
Sellers a copy of a commitment letter from Canadian Imperial Bank of Commerce
("CIBC"), pursuant to which CIBC has advised the Purchaser that it is willing,
on the terms and subject to the conditions set forth in such commitment letter,
to provide up to an aggregate of $100 million of senior credit facilities to the
Purchaser upon the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements.
3.5 LITIGATION. There are no judicial or administrative actions,
proceedings or investigations pending or, to the knowledge of the Purchaser,
threatened, which question the validity of this Agreement or the Ancillary
Agreements or any action taken or to be taken by the Purchaser in connection
herewith and therewith.
3.6 PURCHASE FOR INVESTMENT. The Purchaser is acquiring the Shares for
investment and not with a view toward any resale or distribution thereof except
in compliance with the Securities
-34-
44
Act of 1933, as amended.
3.7 BROKERS. All negotiations relating to this Agreement and the
Ancillary Agreements and the transactions contemplated hereby and thereby have
been carried out without the intervention of any Person acting on behalf of the
Purchaser in such manner as to give rise to any valid claim against the Sellers
or any member of the Target Company Group for any brokerage or finder's
commission, fee or similar compensation.
3.8 PURCHASER'S INVESTMENT PLAN. The Purchaser has provided, or has
caused to be provided, to Sellers current, accurate and complete copies of the
following materials with respect to the Purchaser's Investment Plan: (I) the
plan document, including all amendments thereto; (II) the most recent annual
report (Series 5500 and all schedules thereto); (III) the most recent
determination letter received from the IRS; and (IV) the most recent summary
plan description together with the most recent summary of material modification,
if any, required under ERISA. The Purchaser's Investment Plan is intended to
qualify under Section 401 of the Code and, since its inception, has been so
qualified. To the knowledge of Purchaser, no circumstances exist which would
adversely affect such qualification.
4. CERTAIN COVENANTS.
4.1 OBLIGATIONS OF BOTH THE PARTIES.
4.1.1 CLOSING CONDITIONS. The parties shall use their
commercially reasonable best efforts to bring about the satisfaction as soon as
practicable of all the conditions contained in Section 6 and to effect the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements by October 2, 1999. Without limiting the generality of the
foregoing, the parties shall apply for and diligently prosecute all applications
for, and shall use their commercially reasonable best efforts promptly to
obtain, such consents, authorizations and approvals from such governmental
authorities and third parties as shall be necessary to permit the consummation
of the transactions contemplated by this Agreement and the Ancillary Agreements.
4.1.2 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT AND FOREIGN REGULATORY REQUIREMENTS.
(a) Each of the Sellers and the Purchaser shall (i) prepare and file as promptly
as practicable with the Department of Justice and the Federal Trade Commission
the notification and report form, if any, required for the transactions
contemplated hereunder by the HSR Act, including without limitation, a request
for early termination of the waiting period thereunder, as well as any filings
with, or submissions to, any antitrust, competition or other similar authority
in any foreign jurisdiction where such filing is required in connection with the
transactions contemplated hereby and (ii) respond promptly to inquiries, if any,
from the Federal Trade Commission or the Department of Justice or the antitrust,
competition or comparable governmental authority of any foreign jurisdiction in
connection with such filing. The Purchaser will pay all filing fees in
connection with the filings required by the HSR Act or the antitrust,
competition or comparable laws of any foreign jurisdiction and each party shall
bear the expenses for the preparation of their documentation for the filing.
-35-
45
(b) Without limiting the generality of the foregoing, the Sellers, on
the one hand, and the Purchaser, on the other hand, agree to cooperate and to
use their respective commercially reasonable best efforts to obtain any
government clearances required to consummate the transactions contemplated by
this Agreement and the Ancillary Agreements (including through compliance with
the HSR Act), to respond to any federal, state or foreign government requests
for information, and to contest and resist any action, including any
legislative, administrative or judicial action, and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order (whether
temporary, preliminary or permanent (an "ORDER")) that restricts, prevents or
prohibits the consummation of the transactions contemplated by this Agreement
and the Ancillary Agreements, including, without limitation, by vigorously
pursuing all available avenues of administrative and judicial appeal and all
available legislative action. The parties also agree to take any and all of the
following actions to the extent commercially reasonable to obtain the approval
of any governmental authority with jurisdiction over the enforcement of any
applicable laws regarding the transactions contemplated by this Agreement and
the Ancillary Agreements: entering into negotiations; providing information;
substantially complying with any second request for information pursuant to the
HSR Act; or making proposals; entering into and performing agreements or
submitting to judicial or administrative orders. The parties hereto will consult
and cooperate with one another, and consider in good faith the views of one
another, in connection any analyses, appearances, presentations, memoranda,
briefs, arguments, opinions and proposals made or submitted by or on behalf of
any party hereto in connection with proceedings under or relating to the HSR Act
or any other federal, state or foreign antitrust or fair trade law.
Notwithstanding anything to the contrary in this section, none of the Sellers,
Target Company Group or the Purchaser shall be required to take any action that
would reasonably be expected to substantially impair the overall benefits
expected, as of the date hereof, to be realized from the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements.
4.2 OBLIGATIONS OF THE SELLERS.
4.2.1 CONDUCT OF BUSINESS, ETC. From the date hereof until the
Closing, except (A) for the execution of and the performance under this
Agreement and the Ancillary Agreements, (B) for the effect of the consummation
of the transactions contemplated hereby and thereby, (C) for the performance of
the Sellers' obligations hereunder and thereunder or (D) as otherwise consented
to by the Purchaser in writing, such consent not to be unreasonably withheld or
delayed, the Sellers shall cause each member of the Target Company Group to:
(i) conduct their business in the ordinary course in substantially the
same manner in which it previously has been conducted and use all
reasonable efforts to preserve intact its present business organization,
maintain its properties in good operating condition and repair, keep
available the services of its present officers (other than those officers
disclosed to Purchaser in writing) and significant employees, and preserve
its relationship with customers, suppliers and others having business
dealings with it, to the end that its goodwill and going business shall be
in all material respects unimpaired following the Closing;
(ii) pay accounts payable and other obligations when they become due
and payable in
-36-
46
the ordinary course of business consistent with prior practice;
(iii) perform in all material respects all of its obligations under
all Company Contracts and other agreements and instruments relating to or
affecting the Business, and comply in all material respects with all laws
applicable to it or the Business;
(iv) not take any action or omit to take any action which act or
omission would result in the inaccuracy of any of its representations and
warranties set forth herein if such representations or warranties were to
be made immediately after the occurrence of such act or omission; and
(v) not otherwise engage in any practice, take any action or enter
into any transaction of the sort described in Section 2.14 above.
From and after the date hereof until the Closing, the Sellers shall not
cause or permit any member of the Target Company Group to pay any liabilities or
obligations other than (A) trade payables and accrued expenses (including
interest on indebtedness for borrowed money and the interest component of
finance lease obligations) to unAffiliated third parties which are included in
the July 4, 1999 balance sheet included in the Financial Statements, (B) trade
payables and accrued expenses (including interest on indebtedness for borrowed
money and the interest component of finance lease obligations) to unAffiliated
third parties incurred subsequent to July 4, 1999 in the ordinary course of
business and consistent with past practice, (C) reimbursement of Sellers' direct
out-of-pocket costs for Seller Group Employees, but not for any allocation of
overhead or similar charge, incurred subsequent to July 4, 1999 in the ordinary
course of business and consistent with past practice, (D) payments to Sellers
and their Affiliates for products supplied to the Target Company Group
subsequent to July 4, 1999 in the ordinary course of business and consistent
with past practice, PROVIDED that the charges for such products are no greater
than charged to unAffiliated third parties, (E) reimbursement of Sellers' direct
out-of-pocket costs for the accounting personnel assisting in the implementation
of the new accounting system in Dallas, but not for any allocation of overhead
or similar charge, incurred subsequent to July 4, 1999 in the ordinary course of
business and consistent with past practice, (F) the Target Company Group's
allocable portion of insurance premiums and employee benefit costs, in each
case, incurred subsequent to July 4, 1999 in the ordinary course of business and
consistent with past practice, (G) payments to Employees and operating expenses
incurred by such persons in the performance of their employment-related duties
and obligations, in each case incurred subsequent to July 4, 1999 in the
ordinary course of business and consistent with past practice, (H) payments
relating to the employment of ▇▇▇▇▇ ▇▇▇▇▇▇▇ incurred subsequent to July 4, 1999
in the ordinary course of business and consistent with past practice, (I) fees
charged by financial institutions and governmental agencies incurred subsequent
to July 4, 1999 in the ordinary course of business and consistent with past
practice, (J) liabilities listed on Schedule 4.2.1 (the "LIABILITIES SCHEDULE")
in accordance with the payment schedule set forth on the Liabilities Schedule,
(K) Taxes relating to any member of the Target Company Group due and payable for
any taxable period (or a portion thereof) beginning on or after January 1, 1999,
and (L) payments in respect of any overdraft facility of any member of the
Target Company Group.
-37-
47
Notwithstanding anything herein to the contrary, (A) the Target Company
Group may transfer to the Sellers on or before the Closing Date Tax receivables
relating to 1998 Tax refunds in the aggregate amount of (pound)236,000, an
insurance policy in the amount of (pound)263,000 relating to the deferred
compensation plan being retained by Sellers and (pound)194,000 in respect of
Taxes relating to any member of the Target Company Group for any taxable period
(or a portion thereof) beginning on or after January 1, 1999 directly or
indirectly previously paid by the Sellers or any Non-Company Affiliates, (B)
Curamik may pay the (pound)277,000 dividend declared by Curamik in respect of
its 1998 profits, and (c) the members of the Target Company Group may transfer
such amounts to the Sellers or the Non-Company Affiliates, as applicable (which
amounts shall be determined by the Sellers Representative in good faith and
based on the annualized actual 1999 income of the applicable members of the
Target Company Group, as represent each installment due and payable on or prior
to the Closing Date for timely payment of estimated 1999 Combined Income Taxes.
4.2.2 ACCESS AND INFORMATION. Prior to the Closing, the Sellers
shall, and, subject to the rights of the minority stockholders of Curamik, shall
cause each member of the Target Company Group to (A) give to the Purchaser or
its authorized representatives reasonable access at all reasonable times to the
properties, books and records of members of the Target Company Group, (B)
furnish to the Purchaser or its authorized representatives such financial and
operating data and other information with respect to the business and properties
of or otherwise relating to members of the Target Company Group, in each case,
as the Purchaser may reasonably request, PROVIDED that the Purchaser shall not
be entitled to any such access, information or documents for the purposes of
conducting any environmental audit or assessment without the prior written
consent of the Sellers Representative, which consent shall not be unreasonably
withheld, conditioned or delayed, and (C) cooperate with and assist Ernst &
Young LLP in connection with (I) their preparation of the audited financial
statements required by Section 6.4.6 hereof and (II) their review of the
Quarterly Financial Statements required to be delivered by Section 4.2.3 hereof.
All such information and documents obtained by the Purchaser shall be subject to
the terms of the Confidentiality Agreement, dated September 11, 1998, between
the Pur chaser and the Sellers Representative and the Letter Agreement, dated
June 8, 1999, between the Purchaser and the Sellers Representative (together,
the "CONFIDENTIALITY AGREEMENT"). The Purchaser hereby agrees that the
provisions of the Confidentiality Agreement will apply to any properties, books,
records, data, documents or other information relating to the Sellers or the
members of the Target Company Group provided to the Purchaser or its affiliates
or any of their respective advisers or employees pursuant to this Agreement or
the Ancillary Agreements.
4.2.3 UPDATED FINANCIAL STATEMENTS. As soon as available and in
any event within 30 days after the end of each accounting month prior to the
Closing Date, commencing with July 1999, the Sellers shall deliver to Purchaser
the standard monthly reporting packages showing the financial condition and
results of operations of each member of the Target Company Group, which packages
shall be prepared in the ordinary course of business and consistent with past
practice and fairly present the information shown therein. As soon as available
and in any event within 45 days after the end of each fiscal quarter ending
prior to the Closing Date, commencing with the fiscal quarter ending September
26, 1999, the Sellers shall deliver to Purchaser a combined balance sheet and
related combined statements of operations and cash flows of the Target Company
Group for such fiscal quarter
-38-
48
and the year to date (the "QUARTERLY FINANCIAL STATEMENTS"). All such Quarterly
Financial Statements shall be covered by and conform to the representations and
warranties set forth in Section 2.5 hereof and shall be included in the term
"Financial Statements" for purposes of this Agreement.
4.3 PAYMENT OF TRANSACTION-RELATED TAXES AND EXPENSES. All transfer,
sales, use and similar Taxes and notarial and other transfer related fees
arising out of the sale of the Shares and Target Assets pursuant to this
Agreement and the Ancillary Agreements shall be paid by the Person specified on
Schedule 4.3. Purchaser shall pay the fees and expenses of Ernst & Young LLP in
connection with (I) the preparation of the audited financial statements required
by Section 6.4.6 hereof and (II) the review of the Quarterly Financial
Statements required to be delivered by Section 4.2.3 hereof.
4.4 TAXES.
4.4.1 TERMINATION OF EXISTING TAX SHARING ARRANGEMENTS; TAX
SHARING PAYMENT. (a) As of the Closing Date, all existing tax sharing, group
relief or similar agreements and arrangements in any jurisdiction (other than
any tax sharing agreement or arrangement provided herein) between any member of
the Target Company Group, on the one hand, and any of the Sellers or any
Affiliate of the Sellers other than any member of the Target Company Group (a
"NON-COMPANY AFFILIATE") on the other hand, shall be terminated, and no
additional payments shall be made thereunder. After the Closing, neither any
member of the Target Company Group, the Sellers nor the Non-Company Affiliates
shall have any further rights or liabilities under any such agreements or
arrangements for any taxable period (whether the current year, a future year or
a past year).
(b) (i) With respect to any Combined Income Taxes relating to any member of
the Target Company Group for taxable periods or portions thereof beginning on or
after January 1, 1999 and ending prior to or on the Closing Date (the "1999
COMBINED INCOME TAXES"), such 1999 Combined Income Taxes shall be computed as if
no member of the Target Company Group had been included in any Combined Income
Tax Return which includes any Seller or any Non-Company Affiliate as a member,
and as if, instead, the members (and only such members) of the Target Company
Group eligible to file a Return on a consolidated, combined or unitary basis had
filed a separate Combined Income Tax Return with respect to such 1999 Combined
Income Taxes. Such 1999 Combined Income Taxes shall be computed assuming that
the books of the Target Company Group were closed at the close of business on
December 31, 1998 and the close of business on the Closing Date (except that
deductions (such as depreciation) allowable on a periodic basis and real and
personal property Taxes shall be allocated on a daily basis). For purposes of
such computation, the Sellers Representative shall (or shall cause its
Affiliates to) deliver to the Purchaser a draft of a pro forma Return relating
to the 1999 Combined Income Taxes (the "1999 PRO FORMA RETURN") no later than 60
days prior to the due date (including any valid extension) on which the Combined
Income Tax Return relating to the 1999 Pro Forma Return is required to be filed
with the applicable taxing authority. Unless otherwise provided in this
Agreement, the Combined Income Tax Return for 1999 as filed with the applicable
taxing authorities shall be consistent with the 1999 Pro Forma Return, and the
1999 Pro Forma Return shall not be affected by any amendments to such Combined
Income Tax Return, audit adjustments or claims for refunds. The Purchaser shall
have the right at its own expense to review all work papers and
-39-
49
procedures used to prepare the 1999 Pro Forma Return. Unless the Purchaser
timely delivers notice of objection as specified in this Section 4.4.1(b), the
1999 Pro Forma Return shall be final and binding on the parties without further
adjustment. If the Purchaser objects to any item on the 1999 Pro Forma Return,
it shall, within 30 days after delivery of such 1999 Pro Forma Return, notify
the Sellers Representative in writing that it so objects, specifying any such
item and stating the factual or legal basis for any such objection. If a notice
of objection shall be duly delivered, disputed items shall be resolved pursuant
to the Tax Dispute Resolution Mechanism (as defined in Section 4.4.7). Upon
resolution of all disputed items, such 1999 Pro Forma Return shall be adjusted
to reflect such resolution and shall be final and binding on the parties without
further adjustment.
(ii) Within five (5) business days after the 1999 Pro Forma Return
becomes final, (A) the Purchaser shall (or shall cause its Affiliates to) pay to
the Sellers designated by the Sellers Representative the excess, if any, of (X)
the 1999 Combined Income Taxes shown on the 1999 Pro Forma Return over (Y) the
sum of $277,000 (which amount is equal to the April 15, 1999 and June 15, 1999
estimated Tax payments with respect to the 1999 Combined Income Taxes made by
the Target Company Group out of its assets or revenues, as properly computed
based on the annualized actual income for 1999 of the applicable members of the
Target Company Group) and any similar Tax payment with respect to 1999 Combined
Income Taxes made after June 15, 1999 by any member of the Target Company Group
out of its assets or revenues (the "1999 TAX") or (B) the Sellers Representative
shall (or shall cause its Affiliates to) pay to the Purchaser the excess, if
any, of (X) the 1999 Tax over (Y) the 1999 Combined Income Taxes shown on the
1999 Pro Forma Return. In addition, the Sellers Representative shall (or shall
cause its Affiliates to) pay to the Purchaser an amount equal to the tax benefit
actually realized by the Sellers and the Non-Company Affiliates by use of the
loss, if any, shown on the 1999 Pro Forma Return, based upon the assumption that
any such loss is the last tax benefit utilized. For avoidance of uncertainty,
notwithstanding anything to the contrary contained herein, the Purchaser shall
not be responsible for any Combined Income Taxes relating or attributable to any
member of the Target Company Group for any period or portion thereof ending on
or prior to the Closing Date (other than the payment of the 1999 Combined Income
Taxes, if any, pursuant to Section 4.4.1(b)).
(c) If the Closing Date occurs after December 31, 1999, provisions similar
to those contained in Section 4.4.1(b) shall be applicable to determine the
Combined Income Taxes attributable to the members of the Target Company Group
for the period beginning on or after January 1, 2000 and ending on or prior to
the closing Date (the "2000 Combined Income Taxes), except that the amount
described in clause (ii)(A)(y) shall equal the sum of all payments with respect
to 2000 Combined Income Taxes made after January 1, 2000 by any member of the
Target Company Group out of its assets or revenues.
4.4.2 PAYMENTS. (a) The applicable Sellers shall indemnify and
hold harmless the Purchaser and its Affiliates from and against, and be
responsible for, any liability for (I) any Stand-alone Taxes (as defined below)
of any member of the Target Company Group for any Pre-1999 Period (as defined
below), (II) any transaction-related Taxes pursuant to Section 4.3 to the extent
set forth on Schedule 4.3 and (III) any Combined Income Taxes (as defined below)
imposed on, asserted against or incurred by any member of the Target Company
Group, including, without limitation, any increase in
-40-
50
such Combined Income Taxes resulting from any audit or examination of a member
of the Target Company Group. Subject to this Agreement, the Sellers shall also
be responsible for all reasonable out-of-pocket costs and expenses (including,
without limitation, reasonable expenses and fees for attorneys, consultants,
expert witnesses and accountants and expenses reasonably incurred in
prosecution, investigation, remediation, defense or settlement) incurred by the
Purchaser or its Affiliates in connection with the liability for Taxes for which
the Sellers are required to indemnify Purchaser hereunder.
(b) The Purchaser shall indemnify and hold harmless the Sellers and their
respective Affiliates from and against, and shall be responsible for, any
liability for any Taxes (including, without limitation, any Section 338 Taxes
(as defined below) and any transaction-related taxes pursuant to Section 4.3 to
the extent set forth on Schedule 4.3) with respect to any member of the Target
Company Group which are not described as the Sellers' responsibility in the
paragraph (a) of this Section 4.4.2. Subject to this Agreement, the Purchaser
shall also be responsible for all reasonable out-of-pocket costs and expenses
(including, without limitation, reasonable expenses and fees for attorneys,
consultants, expert witnesses and accountants and expenses reasonably incurred
in prosecution, investigation, remediation, defense or settlement) incurred by
the Sellers or any Non-Company Affiliate in connection with the liability for
Taxes for which the Purchaser is required to indemnify Sellers hereunder.
(c) For the purposes of Section 4.4, (I) "COMBINED INCOME TAXES" shall mean
(X) any Taxes with respect to any member of the Target Company Group for any
taxable period or portion thereof ending on or prior to the Closing Date for
which such member has been included or is required to be included (at any time
during the periods ending on or before the Closing Date) as a member of an
Affiliated Group of which any of the Sellers or any Non-Company Affiliate is or
was the common parent for the purpose of paying (or filing a Return with respect
to) such Taxes and (Y) any Taxes imposed on, asserted against or incurred by any
member of the Target Company Group under Section 1.1502-6 of the Treasury
Regulations or similar provisions under state or local law as a result of such
member's being a member (at any time on or before the Closing Date) of any
Affiliated Group of which any of the Sellers or any Non-Company Affiliate is or
was the common parent for the purpose of filing a Return or paying Taxes;
PROVIDED, HOWEVER, that Combined Income Taxes shall not include any Section 338
Taxes, (II) "COMBINED INCOME TAX RETURNS" shall mean any Returns relating to any
Combined Income Taxes, (III) "SECTION 338 TAXES" shall mean any Taxes arising
from or attributable to any election made under Section 338 of the Code (or the
comparable provisions of other Tax law) with respect to any member of the Target
Company Group in connection with the Purchaser's acquisition of the Shares
pursuant to this Agreement or the Local Purchase Agreements, (IV) "STAND-ALONE
TAXES" shall mean Taxes other than Section 338 Taxes and Combined Income Taxes,
and (V) "PRE 1999 PERIOD" means, with respect to Stand-alone Taxes, a taxable
period or portion thereof that ends on or prior to December 31, 1998. If a
taxable period begins on or prior to December 31, 1998 and ends after December
31, 1998, then the portion of the taxable period that ends on (and including)
December 31, 1998 shall constitute a Pre 1999 Period. For purposes of clause (v)
of this Section 4.4.2(c), Taxes attributable to a Pre 1999 Period shall be
determined on the basis of an interim closing of the books as of the close of
business on December 31, 1998, except that deductions (such as depreciation)
allowable on a periodic basis and real and personal property Taxes shall be
allocated on
-41-
51
a daily basis over the taxable year.
(d) Notwithstanding anything to the contrary contained in this Agreement,
this Section 4.4.2 shall be the exclusive provision governing the responsibility
of the Sellers relating to indemnification with respect to the payment of Taxes
for any taxable period (or a portion thereof) ending on or before the Closing
Date.
4.4.3 RETURNS. (a) The Sellers Representative and the Purchaser
shall cause each member of the Target Company Group, to the extent permitted by
law, to join, for all taxable periods of such member of the Target Company Group
ending on or prior to the Closing Date, in any Combined Income Tax Return with
respect to which such member of the Target Company Group filed such a Combined
Income Tax Return for the most recent taxable period prior to the Closing Date
and is eligible to file such a Combined Income Tax Return for such taxable
periods ending on or prior to the Closing Date. The income, gains, losses,
deductions and credits of such member of the Target Company Group for periods
ending on or prior to the Closing Date shall be included in such Combined Income
Tax Return where applicable. The Sellers shall file, or cause to be filed, all
Combined Income Tax Returns relating to any member of the Target Company Group
for any taxable period ending on or before the Closing Date, all Returns
relating to the Stand-alone Taxes of any member of the Target Company Group for
any Pre 1999 Period and all other Returns of any member of the Target Company
Group required to be filed (taking into account any valid extension) on or prior
to the Closing Date. Any such Returns for which the Sellers are responsible
shall, insofar as they relate to items or transactions for periods ending on or
prior to the Closing Date and to the extent permitted by applicable Tax law, be
filed on a basis consistent with the past custom and practice of the applicable
member of the Target Company Group.
(b) (i) The Purchaser shall file, or cause to be filed, all Returns
(including, without limitation, any Return for any taxable period beginning
on or after January 1, 1999 but no later than the Closing Date, (such
Return, a "STRADDLE PERIOD RETURN")) relating to the business or assets of
any member of the Target Company Group other than those Returns described
in Section 4.4.3(a). The income, gains, losses, deductions and credits of
the Target Company Group, other than those required to be included in the
Returns described in Section 4.4.3(a), shall be included in the Returns
described in the immediately preceding sentence. Any such Returns for which
the Purchaser is responsible shall, insofar as they relate to items or
transactions for periods ending on or prior to the Closing Date and to the
extent permitted by applicable Tax law, be filed on a basis consistent with
the past custom and practice of the applicable member of the Target Company
Group.
(ii) With respect to any Straddle Period Return, the Purchaser shall
provide to the Sellers Representative a draft of such Straddle Period
Return and Tax information (including, without limitation, work papers and
schedules) for review of such Straddle Period Return in a timely manner no
later than 60 days prior to the due date (taking into account valid
extensions) of filing such Straddle Period Return. The Sellers
Representative shall have the right at its expense to review all work
papers and procedures used to prepare each such draft Straddle
-42-
52
Period Return. Unless the Sellers Representative timely objects as
specified in this Section 4.4.3(b)(ii), each such draft Straddle Period
Return shall be final and binding on the parties without further
adjustment. If the Sellers Representative objects to any item on any such
draft Straddle Period Return, it shall, within 30 days after delivery of
such draft Straddle Period Return, notify the Purchaser in writing that it
so objects, specifying any such item and stating the factual or legal basis
for any such objection. If a notice of objection shall be duly delivered,
any disputed item shall be resolved pursuant to the Tax Dispute Resolution
Mechanism. Upon resolution of all disputed items, such Straddle Period
Return shall be adjusted to reflect such resolution and shall be final and
binding on the parties without further adjustment.
(iii) Notwithstanding the provisions of Section 4.4.2(a), (X) if the
Purchaser shall fail to provide notice to the Sellers Representative with
respect to a Return or to an audit relating to a Tax as provided in Section
4.4.6, the Sellers shall not be required to pay to the Purchaser pursuant
to Section 4.4.2(a) any portion of such Tax to the extent that such failure
to give notice results in a lack of actual notice to the Sellers and the
Sellers or any Non-Company Affiliates are materially prejudiced as a result
of such failure or (Y) if the Purchaser shall file any Straddle Period
Return (including amended Returns) described in Section 4.4.3(b)(ii)
without complying with the provisions of Section 4.4.3(b)(ii) or any Return
(including amended Returns) relating to any Tax described as being the
responsibility of the Sellers in Section 4.4.2(a), the Sellers shall not be
required to pay to the Purchaser pursuant to Section 4.4.2(a) any portion
of such Taxes to the extent that the Sellers or any Non-Company Affiliates
are materially prejudiced as a result of such failure to comply (in each
case, except to the extent such failure was caused by the Sellers or any
Non-Company Affiliates).
(c) (i) With respect to 1999 Combined Income Tax Returns, the Sellers
shall provide the Purchaser a draft of the portion of the schedules,
workpapers and attachments, if any, for all such Returns relating to the
applicable members of the Target Company Group (the "ATTACHED TAX
INFORMATION") for review of Attached Tax Information in a timely manner no
later than 60 days prior to the due date (taking into account valid
extensions) for filing the 1999 Combined Income Tax Returns. The Sellers
may redact any portion of the Attached Tax Information which does not
relate to any member of the Target Company Group. The Purchaser shall have
the right at its expense to review all workpapers and procedures used to
prepare each such draft Attached Tax Information. Unless the Purchaser
timely objects as specified in this Section 4.4.3(c)(i), each such draft
Attached Tax Information shall be final and binding on the parties without
further adjustment. If the Purchaser objects to any item on any such draft
Attached Tax Information, it shall, within 30 days after delivery of such
draft Attached Tax Information, notify the Sellers Representative in
writing that it so objects, specifying any such item and stating the
factual or legal basis for any such objection. If a notice of objection
shall be duly delivered, any disputed item shall be resolved pursuant to
the Tax Dispute Resolution Mechanism. Upon resolution of all disputed
items, such Attached Tax Information shall be adjusted to reflect the
resolution and shall be final and binding on the parties without further
adjustment.
-43-
53
(ii) Notwithstanding the provisions of Section 4.4.2(b), (x) if the
Sellers Representative shall fail to provide notice to the Purchaser with
respect to a Return or to an audit relating to a Tax as provided in Section
4.4.6, the Purchaser shall not be required to pay to the applicable Sellers
pursuant to Section 4.4.2(b) any portion of such Tax to the extent the
failure to give notice results in a lack of actual notice to the Purchaser
and the Purchaser, the members of the Target Company Group or their
Affiliates are materially prejudiced as a result of such failure or (y) if
the Sellers Representative shall file any Attached Tax Information
(including amended Attached Tax Information) referred to in Section
4.4.3(c)(i) without complying with the provisions of Section 4.4.3(c)(i) or
any Return (including amended Returns) relating to any Tax described as
being the responsibility of the Purchaser in Section 4.4.2(b), the
Purchaser shall not be required to pay to the applicable Sellers pursuant
to Section 4.4.2(b) any portion of such Taxes to the extent the Purchaser,
the members of the Target Company Group or their Affiliates are materially
prejudiced as a result of such failure to comply (in each case, except to
the extent such failure was caused by the Purchaser any member of the
Target Company Group or any member of their Affiliates).
4.4.4 AMENDMENT OF RETURNS. Unless otherwise required by law, the
Sellers shall not (and shall not permit any Non-Company Affiliate to) amend any
Return with respect to any member of the Target Company Group for any taxable
period (including a portion thereof) ending on or prior to the Closing Date, in
a way that would reasonably be expected to have an adverse effect on any Tax
liability or obligation of any member of the Target Company Group without the
prior written consent of the Purchaser, which consent shall not be unreasonably
withheld, conditioned or delayed. Unless otherwise required by law, the
Purchaser shall not (and shall not permit any member of the Target Company Group
or any of its other Affiliates to) amend any Return with respect to any member
of the Target Company Group for any taxable period (including a portion thereof)
ending on or prior to the Closing Date, in a way that would reasonably be
expected to have an adverse effect on any Tax liability or obligation of any
Seller or any Non-Company Affiliate without the prior written consent of the
Sellers Representative, which consent shall not be unreasonably withheld,
conditioned or delayed. Sellers and Purchaser shall provide each other with
copies of any schedules, workpapers and attachments, if any, for such amended
Returns (other than any Combined Income Tax Return) or, in the case of a
Combined Income Tax Return, such amended Attached Tax Information, if any, at
least 30 days prior to the filing thereof.
4.4.5 REFUNDS. The Sellers or the Non-Company Affiliates shall be
entitled to retain (or shall be entitled to receive immediate payment from the
Purchaser of) any refund or credit with respect to Taxes (plus any interest
received with respect thereto) (including, without limitation, the refund of the
remaining Tax receivable described in the last sentence of Section 4.2.1) from
the applicable taxing authorities relating to any member of the Target Company
Group that are described as being the responsibility of the Sellers in Section
4.4.2(a), and (b) the Purchaser and the Target Company Group shall be entitled
to retain (or shall be entitled to receive immediate payment from the Sellers
of) any refund or credit with respect to Taxes (plus any interest received with
respect thereto) from the applicable taxing authorities relating to any member
of the Target Company Group that are not described as being the right of the
Sellers or the Non-Company Affiliates in clause (a) of this
-44-
54
Section 4.4.5. Any payments made by Purchaser or the Sellers, as the case may
be, under this Section 4.4.5 shall be net of any Tax cost to Purchaser or its
Affiliates or the Sellers or the Non-Company Affiliates, as the case may be,
attributable to the receipt of such Refund, taking into account the
deductibility of state and local taxes for other income Tax purposes.
Notwithstanding the foregoing, no refunds shall be paid to the Sellers that
arise as a result of a carryback of a tax attribute from a taxable period ending
after the Closing Date to a taxable period ending on or before the Closing Date,
except to the extent Taxes of any Seller or any Non-Company Affiliate are
increased as a result of such carryback.
4.4.6 AUDITS, ETC. Each of the Purchaser and the Sellers
Representative shall promptly (and shall cause their respective Affiliates to)
notify the other in writing within 10 business days from receipt of notice of
any pending or threatened Tax audits or assessments of any member of the Target
Company Group relating to any taxable period (or a portion thereof) ending on or
prior to the Closing Date. The Sellers shall have the right to represent the
interests of the Target Company Group in any Tax audit or administrative or
court proceeding to the extent relating to Taxes that are described as being the
responsibility of the Sellers in Section 4.4.2(a), and to employ counsel of
their choice at their expense; PROVIDED, HOWEVER, that the Purchaser and the
Sellers shall each have the right to consult with the other regarding any Tax
proceeding relating to any taxable period beginning before but ending after
December 31, 1998; and PROVIDED, FURTHER, that any settlement or other
disposition of any such Tax proceeding that may adversely affect the Tax
liability of any member of the Target Company Group in an amount, individually
or in the aggregate, of $10,000 or more for any periods after the Closing Date
or would result in an indemnity payment by Purchaser to the Sellers pursuant to
Section 4.4.2(b) may be made subject to the consent of Purchaser, which consent
shall not be unreasonably withheld, conditioned or delayed. The Purchaser shall
have the right to represent the interests of the Target Company Group in any
other Tax audit or administrative or court proceeding not described as being the
right of the Sellers under this Section 4.4.6 and to employ counsel of its
choice at its expense; PROVIDED, HOWEVER, that any settlement or other
disposition that may adversely affect any obligation of Sellers as set forth in
Section 4.4.2(a) in an amount, individually or in the aggregate, of $10,000 or
more or would result in an indemnity payment by the Sellers to the Purchaser
pursuant to Section 4.4.2(a) may be made subject to the consent of the Sellers
Representative, which consent shall not be unreasonably withheld, conditioned or
delayed.
4.4.7 THE TAX DISPUTE RESOLUTION MECHANISM. Wherever in this
Agreement it shall be provided that a dispute shall be resolved pursuant to the
"TAX DISPUTE RESOLUTION MECHANISM", such dispute shall be resolved as follows:
(A) the parties will in good faith attempt to negotiate a prompt settlement of
the dispute; (B) if the parties are unable to negotiate a resolution of the
dispute within 10 business days, the dispute will be submitted to a firm of
independent accountants of nationally recognized standing reasonably
satisfactory to the Purchaser and the Sellers Representative (or, if the
Purchaser and the Sellers Representative do not agree on such a firm, then a
firm chosen by the Arbitration and Mediation Committee of the New York Society
of Certified Public Accountants) (the "TAX DISPUTE ACCOUNTANTS"); (C) the
parties will present their arguments and submit the proposed amount of each item
in dispute to the Tax Dispute Accountants within 10 business days after
submission of the dispute to the Tax Dispute Accountants; (D) the Tax Dispute
Accountants, whose decision shall
-45-
55
be final, conclusive and binding on the parties, shall resolve the dispute, in a
fair and equitable manner and in accordance with applicable Tax law and the
provisions of this Agreement, by selecting, for each item in dispute, the
proposed amount for such item submitted by one party or the other party within
10 business days after the parties have presented their arguments to the Tax
Dispute Accountants; (E) notwithstanding any other provision of this Agreement,
any payment to be made as a result of the resolution of a dispute shall be made,
and any other action to be taken as a result of the resolution of a dispute
shall be taken, on or before the later of (I) the date on which such payment or
action would otherwise be required or (II) the third business day following the
date on which the dispute is resolved (in the case of a dispute resolved by the
Tax Dispute Accountants, such date being the date on which the parties receive
written notice from the Tax Dispute Accountants of their resolution); PROVIDED,
that if a dispute with respect to an item in a Return shall not be resolved on
or before the date that is three business days prior to the latest date on which
such Return may be filed under applicable Tax law, then the party having the
responsibility for filing such Return pursuant to Section 4.4.3 shall file such
Return reflecting all disputed items that have been resolved in the manner so
resolved, and reflecting all unresolved disputed items in the manner proposed by
such party, and shall, if necessary, upon the resolution of all such unresolved
disputed items, file an amended Return reflecting the resolution thereof in the
manner so resolved; and (F) the fees and expenses of the Tax Dispute Accountants
in resolving a dispute will be borne equally by the Purchaser and the applicable
Seller.
4.4.8 COOPERATION ON TAX MATTERS. (a) The Purchaser and the
Sellers shall (and shall cause their respective Affiliates to) cooperate, with
respect to the preparation or filing of any Return referred to in Section
4.4.1(b) or 4.4.3 and any Tax audit or administrative or court proceeding
referred to in Section 4.4.6. Such cooperation shall include causing the
appropriate officer to sign any such Return, executing of the applicable power
of attorney, providing such information (including access to books and records)
relating to any member of the Target Company Group as is reasonably necessary
for the preparation or filing of any such Return or the preparation of any such
audit, proceeding, prosecution or defense and making personnel available at and
for reasonable times, including, without limitation, to prepare responses to any
taxing authority's requests for information, PROVIDED that the foregoing shall
be done in a manner so as not to interfere unreasonably with the conduct of the
business of the parties or their respective Affiliates.
(b) Each of the Purchaser and the Sellers agrees to retain or cause to be
retained all books, records, Returns, schedules, documents, work papers and
other material items of information relating to Taxes with respect to any member
of the Target Company Group for any period (or a portion thereof) ending on or
prior to the Closing Date for the longer of (I) the seven-year period beginning
on the Closing Date or (II) the full period of the applicable statute of
limitations, including any extension thereof, and to abide by all record
retention agreements entered into with any taxing authority. Each of the
Purchaser and the Sellers agrees to give each other reasonable notice prior to
transferring, discarding or destroying any such materials relating to Taxes with
respect to any member of the Target Company Group, and, if the other party so
requests, to allow the other party to take possession of such materials at its
expense.
4.4.9 CONDUCT OF TAX AFFAIRS ON THE CLOSING DATE. The Purchaser
shall cause
-46-
56
each member of the Target Company Group to carry on its business on the Closing
Date following the conclusion of the Closing in the ordinary course.
4.5 PUBLICITY. No press release or public announcement related to this
Agreement or the Ancillary Agreements or the transactions contemplated hereby
and thereby shall be issued or made without the joint approval of the Sellers
Representative, on the one hand, and the Purchaser on the other hand, unless
required by law or London Stock Exchange Limited, the United Kingdom Panel on
Mergers and Acquisitions or Nasdaq National Market rule, in which case the
Sellers and the Purchaser shall have the right to review such press release or
announcement prior to publication and, where practicable, agree to the form and
wording of such release or announcement. Notwithstanding the foregoing, (i)
Sellers and Purchaser agree that a press release, in substantially the form of
Exhibit 4.5, will be released upon execution of this Agreement, and (ii) Sellers
understand and agree that Purchaser will disclose this transaction in the
Schedules 14D-1 and 14D-9 and/or proxy statement filed in connection with the
proposed acquisition of Purchaser by a private investment firm. Purchaser will
provide counsel for the Sellers with drafts of the Schedules 14D-1 and 14D-9
and/or proxy statement prior to their being filed with the Securities and
Exchange Commission, and will, to the extent practicable, give consideration to
any comments of such counsel, it being understood that there are strict
deadlines for the filing of such Schedules.
4.6 MODIFICATION OF DISCLOSURE SCHEDULES. At any time prior to ten
business days before the Closing Date, the Sellers may amend or supplement the
schedules attached to this Agreement with respect to any matter that, if
existing or occurring at or prior to the Closing Date, would have been required
to be set forth or described in such a schedule or that is necessary to complete
or correct any information in any representation or warranty contained in
Section 2. No supplement or amendment of a schedule made pursuant to this
Section shall be deemed to cure any breach of, affect or otherwise diminish any
representation or warranty made in this Agreement unless Purchaser specifically
agrees thereto in writing.
4.7 CONTACT WITH EMPLOYEES, CUSTOMERS AND SUPPLIERS. The Purchaser
(and all of its agents and Affiliates and any employees, directors or officers
thereof) shall contact and communicate with the employees, customers, suppliers
and licensors of any member of the Target Company Group in connection with the
transactions contemplated hereby only with the prior written consent of
▇▇▇▇▇▇▇▇▇ plc, which consent shall not be unreasonably withheld or delayed but
may be conditioned upon an officer of ▇▇▇▇▇▇▇▇▇ plc or one of its Affiliates
being present.
4.8 CREDIT SUPPORT ARRANGEMENTS. The Purchaser acknowledges that in
the course of the conduct by the members of the Target Company Group of their
business, the Sellers and their respective subsidiaries (other than any member
of the Target Company Group) have entered into various arrangements (a) in which
guarantees (including of performance under contracts, leases or agreements),
letters of credit or other credit arrangements, including surety and performance
bonds, were issued by or for the account of the Sellers and their respective
subsidiaries (other than any member of the Target Company Group) or (b) in which
the Sellers and their respective subsidiaries (other than members of the Target
Company Group) are the primary or secondary obligors on debt instruments or
financing or
-47-
57
other contracts or agreements, in any case to support or facilitate business
transactions by such Target Company and its subsidiary. Such arrangements are
referred to herein as the "CREDIT SUPPORT ARRANGEMENTS". Schedule 4.8 hereto
lists all Credit Support Arrangements in effect on the date of this Agreement.
Sellers will update Schedule 4.8 from time to time as new Credit Support
Arrangements are entered into and existing Credit Support Arrangements expire,
it being understood and agreed that Sellers will not, and will not permit their
Affiliates to, enter into new Credit Support Arrangements without the prior
consent of the Purchaser, such consent not to be unreasonably withheld or
delayed. Prior to the Closing, the Purchaser shall (i) obtain replacement Credit
Support Arrangements or (ii) repay, or cause the repayment of, all debt and
other obligations to which such Credit Support Arrangements relate (and cause
the cancellation of such Credit Support Arrangements) or arrange for itself or
one of its subsidiaries to be substituted as the obligor thereof. Following the
Closing, the Purchaser shall indemnify the Sellers and their respective
Affiliates from and against any loss, obligations, cost or expense (including
reasonable attorneys' fees) they may suffer arising out of the Credit Support
Arrangements, except to the extent such loss, obligation, cost or expense was
caused by Sellers' actions or omissions. Notwithstanding anything to the
contrary herein, the Sellers shall retain all liability for any obligations of
Thermalloy, Inc. and Thermalloy Investment Company to permit ▇▇▇▇▇ ▇▇▇▇▇▇'▇
continued participation in the Salary Continuation Plan or a plan that is
substantially equivalent in all material respects (which obligations are set
forth in the expired Employment Agreement, dated September 22, 1998, between
Thermalloy, Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇, certain provisions of which survive
expiration by express incorporation into the Manufacturer's Representative
Agreement, dated August 1, 1996, between Thermalloy, Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇).
4.9 INTERCOMPANY ACCOUNTS. All intercompany accounts between any
member of the Target Company Group, on the one hand, and any Seller or any
Non-Company Affiliate, on the other hand, other than (I) those arising after
July 4, 1999 in respect of amounts permitted under clauses (c), (d), (e), (f),
(g), (h) or (i) of the second paragraph of Section 4.2.1 hereof, (II) those
arising on or after January 1, 1999 in respect of Taxes, including the
obligation to pay (pound)194,000 referred to in the third paragraph of Section
4.2.1 hereof and (III) the dividend of (pound)277,000 referred to in the last
sentence of this Section 4.9, shall be cancelled as of the close of business on
the business day immediately preceding the Closing Date. Where any cancellation
contemplated by this Section 4.9 is either unlawful or gives rise to a Tax
liability in a member of the Target Company Group, the parties shall take such
steps as are required to put the parties in, to the nearest extent possible, the
position they would have been in had the cancellation not been unlawful or such
Tax liability not arisen. Sellers shall, and shall cause the Target Company
Group to, cancel all dividends declared by any member of the Target Company
Group after January 1, 1999 but unpaid at July 4, 1999, including the
(pound)560,000 dividend payable included on the July 4, 1999 balance sheet
included in the Financial Statements but excluding the dividend of
(pound)277,000 declared by Curamik in respect of its 1998 profits. Sellers shall
assume, pursuant to an assignment and assumption agreement reasonably acceptable
to Purchaser, the $523,000 deferred compensation liability for retired employees
and the (pound)822,000 liability for 1998 Taxes, which Taxes Sellers have agreed
to pay pursuant to Section 4.4.
4.10 TARGET ASSETS. On or prior to the Closing Date, ▇▇▇▇▇▇▇▇▇ GmbH
shall enter into an asset purchase agreement, substantially in the form of
EXHIBIT 4.10 (the "TARGET ASSET PURCHASE
-48-
58
AGREEMENT"), for the sale of certain assets owned by ▇▇▇▇▇▇▇▇▇ GmbH used in the
business and operations of ElBoMec and Redpoint set forth on Schedule 4.10 (the
"TARGET ASSETS").
4.11 NO SOLICITATION. (a) None of the Sellers nor any of their
Affiliates, whether acting directly or through any authorized agent, attorney or
representative, shall, from the date hereof through the Closing Date (the
"EXCLUSIVITY PERIOD"), (i) solicit, encourage or entertain any offers from any
Person other than Purchaser, or initiate or enter into any form of preliminary
discussion or negotiation with any Person other than the Purchaser for a
purchase (or other acquisition), merger, share exchange or other consolidation,
sale of stock or other equity securities or any other form or manner of
transaction, howsoever described or denominated, of any member of the Target
Company Group or, other than in the ordinary course of business, any properties
or assets used in the conduct of the Business, or any option or other
contractual right with respect to any of the foregoing or (ii) in connection
with any offer or proposal furnish or cause to be furnished any non-public
information relating to any member of the Target Company Group to any Person
(other than Purchaser and its agents and representatives or except as required
by applicable law, the London Stock Exchange Limited or the United Kingdom Panel
on Mergers and Acquisitions). In the event any Seller or any of its Affiliates
receives any offer, proposal or other communication to enter into any such
negotiations with a party other than Purchaser during the Exclusivity Period,
such Seller will provide prompt notice of the same to Purchaser.
(b) The parties hereto recognize and acknowledge that a breach by Sellers
of this Section 4.11 will cause irreparable and material loss and damage to
Purchaser as to which it will not have an adequate remedy at law or in damages.
Accordingly, each party acknowledges and agrees that the issuance of an
injunction or other equitable remedy (without the posting of a bond) is an
appropriate remedy for any such breach.
4.12 DISCHARGE OF INDEBTEDNESS AND LIENS. At or prior to the Closing,
Sellers shall cause (A) to be paid in full (I) all amounts outstanding under the
Target Company Group's overdraft facilities, up to a maximum of (pound)1,313,000
And (ii) all other indebtedness for borrowed money of each member of the Target
Company Group to unAffiliated third parties, including any guarantee of
indebtedness for borrowed money of any other Person and loans from minority
stockholders and including without limitation all loans and obligations, as
shown on the Liabilities Schedule, except to the extent permitted to be paid
prior to the Closing Date by the Target Company Group in accordance with the
Liabilities Schedule and except any obligations to be transferred as set forth
in clause (c) of this Section 4.12, (B) all Liens (other than Permitted Liens)
on any real or personal property owned or leased by any member of the Target
Company Group to be terminated or otherwise discharged in the manner and to the
extent provided in Section 2.7(a) and (C) that certain lease of the Property (as
defined below), dated as of April 24, 1981, as amended, between ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇ and Thermalloy, Inc. to be transferred to the Sellers pursuant to an
assignment and assumption agreement reasonably acceptable to Purchaser whereby
the Sellers will assume all of Thermalloy Inc.'s obligations under the lease and
will allow Thermalloy Inc. to continue to use the Property as long as it
desires, subject to Thermalloy Inc.'s obligation to comply with all covenants of
the lease, other than the obligation to pay rent, for the period from the
Closing Date until Thermalloy, Inc. ceases to use the Property. At the Closing,
the
-49-
59
Target Company Group or, if the Target Company Group does not have sufficient
available cash, the Purchaser, shall pay in full all amounts, if any,
outstanding under the Target Company Group's overdraft facilities in excess of
(pound)1,313,000, together with all interest accrued and unpaid on the
indebtedness for borrowed money and guarantees thereof paid or discharged
pursuant to the first sentence of this Section 4.12.
4.13 CONFIDENTIALITY. From and after the Closing Date, the Sellers
shall, and shall cause their respective Affiliates and their respective
officers, directors, employees and advisors (collectively, the "RECIPIENTS") to,
keep confidential any information relating to the Target Company Group or the
Business, except for any such information that (i) is available to the public on
the Closing Date, (ii) thereafter becomes available to the public other than as
a result of a disclosure by the Sellers or any of the Recipients, or (iii) is or
becomes available to the Sellers or any of the Recipients on a non-confidential
basis from a source that to the Sellers' or such Recipient's knowledge is not
prohibited from disclosing such information to the Sellers or such Recipient by
a legal, contractual or fiduciary obligation to any other Person; PROVIDED,
HOWEVER, that nothing contained in this Section 4.13 shall prohibit the Sellers
from disclosing any information in connection with the filing of Tax Returns or
any arbitration, action or proceeding by or against the Purchaser or any of its
Affiliates against or by the Sellers or any of their Affiliates or, subject to
the provisions of the next sentence, any other disclosure required by court
order, law, a request of a governmental authority, rules of the London Stock
Exchange or administrative process. Should any Seller or Recipient be required
to disclose any such information in response to a court order or as otherwise
required by law, a request of a governmental authority, rules of the London
Stock Exchange or administrative process, it shall inform the Purchaser in
writing of such request or obligation as soon as possible after it is informed
of it and, if possible, before any information is disclosed and shall cooperate
with Purchaser, so that a protective order or other appropriate remedy may be
obtained by Purchaser or any Person designated by Purchaser. If any Seller or
Recipient is obligated to make the disclosure, it may make such disclosure, but
only to the extent to which it is so obligated, but not further or otherwise.
4.14 INSURANCE. Effective 12:01 a.m. (New York City time) on the
Closing Date, the Target Company Group and the Business shall cease to be
insured by the Sellers' insurance policies; PROVIDED, HOWEVER, that with respect
to insurance coverage written on an "occurrence basis" and for which any member
of the Target Company Group was an insured under such policies, then (I) for the
first year following the Closing Date, such member shall continue to be an
insured under such policies to the extent the events giving rise to a claim
under such policies occurred prior to 12:01 a.m. (New York City time) on the
Closing Date, and (II) the Sellers agree to cooperate with such member for the
first year following the Closing Date in making claims under the Sellers'
insurance policies in connection with insurable events that occurred prior to
12:01 a.m. (New York City time) on the Closing Date and shall promptly remit any
recoveries that the Sellers receive with respect thereto to the Target Company
Group. Purchaser acknowledges and agrees that the Sellers shall have no
liability with respect to any failure by any carrier under such insurance
policies to make payment with respect to any such claim. Furthermore, the
Purchaser acknowledges and agrees that the Sellers shall not have any liability
to Purchaser or the Target Company Group with respect to deductibles and the
failure of any claim to be covered as a result of such deductibles under any
insurance coverage with respect to the Target
-50-
60
Company Group or the Business.
4.15 NON-COMPETITION. (a) For a period of two (2) years from the
Closing Date (the "RESTRICTED PERIOD"), ▇▇▇▇▇▇▇▇▇ plc shall not, and shall cause
its subsidiaries not to, whether for compensation or without compensation,
directly or indirectly, as an owner, principal, partner, stockholder,
independent contractor, consultant, joint venturer, investor, licensor, lender
or in any other capacity whatsoever, alone, or in association with any other
Person, carry on, be engaged or take part in, or render services (other than
services which are generally offered to third parties) or advice to, own, share
in the earnings of, invest in the stocks, bonds or other securities of, or
otherwise become financially interested in any Person engaged in the business of
designing, manufacturing or selling products that remove heat from electrical
and electronic components and systems (the "THERMAL MANAGEMENT BUSINESS") (the
"RESTRICTED ACTIVITIES"). The record or beneficial ownership by ▇▇▇▇▇▇▇▇▇ plc
and its subsidiaries of up to one percent (1%) of the shares of any corporation
whose shares are publicly traded on a national securities exchange or in the
over-the-counter market shall not of itself constitute a breach hereunder.
(b) During the Restricted Period, ▇▇▇▇▇▇▇▇▇ plc shall not, and shall cause
its subsidiaries not to, whether for its own account or for the account of any
Person, (I) solicit, endeavor to entice away from Aavid Thermal Technologies,
Inc. or any of its subsidiaries, including without limitation the members of the
Target Company Group (collectively, the "AAVID GROUP"), or otherwise interfere
with the relationship of any member of the Aavid Group with, any Person that,
(A) during the Restricted Period, is employed by or otherwise engaged to perform
services for any member of the Aavid Group (including, but not limited to, any
independent sales representatives or organizations) or (B) during the Restricted
Period, is, or, during the one (1)-year period preceding the Closing, was, a
customer or client of the Aavid Group or (II) solicit, interfere with or entice
from the Aavid Group any employee of the Aavid Group, but nothing in this
subparagraph (b) shall preclude ▇▇▇▇▇▇▇▇▇ plc or any of its subsidiaries from
(A) general advertising for employees which is not directed at members of the
Aavid Group or (B) soliciting or otherwise doing business with any independent
sales representatives or organizations, customers or clients other than in
connection with the Thermal Management Business, so long as ▇▇▇▇▇▇▇▇▇ plc or
such subsidiary would not reasonably expect its activities to interfere with the
relationship of the Aavid Group with such Person in the Thermal Management
Business.
(c) The Restrictive Covenants (as defined below) set forth herein have been
separately bargained for to protect the Business, including goodwill, being
acquired by Purchaser hereunder and to ensure that Purchaser shall have the full
benefit of the value thereof. The Sellers recognize and acknowledge that the
business and markets of the Aavid Group (including without limitation the
thermal management business) are national and international in scope, and that
the Purchaser is investing substantial sums in purchasing the Business and in
consideration for the Restrictive Covenants contained in this Agreement, that
such covenants are necessary in order to protect and maintain the legitimate
business interests of the Aavid Group and are reasonable in all respects, and
that Purchaser would not consummate the transactions contemplated hereby but for
such agreements. The Sellers hereby waive, on behalf of themselves and their
subsidiaries, any and all right to contest the validity of the Restrictive
Covenants on the ground of the breadth of their geographic or product coverage
or the length of their
-51-
61
term. The Sellers acknowledge and agree that a substantial and legally
sufficient portion of the Purchase Price is attributable to the Restrictive
Covenants and the Sellers, on behalf of themselves and their subsidiaries,
hereby waive any right to assert inadequacy of consideration as a defense to
enforcement of the Restrictive Covenants should such enforcement ever become
necessary
(d) If ▇▇▇▇▇▇▇▇▇ plc or any of its subsidiaries breaches, or threatens to
commit a breach of, any of the provisions of this Section 4.15 (the "RESTRICTIVE
COVENANTS"), the Aavid Group shall have, in addition to, and not in lieu of, any
other rights and remedies available to them under law or in equity, the rights
to have the Restrictive Covenants specifically enforced by any court of
competent jurisdiction, it being agreed that any breach or threatened breach of
the Restrictive Covenants would cause irreparable injury to the Aavid Group and
that money damages would not provide an adequate remedy to the Aavid Group. The
Sellers, on behalf of themselves and their subsidiaries, covenant and agree not
to oppose any demand for specific performance and injunctive and other equitable
relief in case of any such breach or attempted breach.
(e) The existence of any claim or cause of action by any Seller or any of
its Affiliates against any member of the Aavid Group shall not constitute a
defense to the enforcement by the Aavid Group of the Restrictive Covenants, but
such claim or cause of action shall be litigated separately.
(f) In addition to the remedies the Aavid Group may seek and obtain
pursuant to Section 4.15(d) hereof, the Restricted Period shall be extended by
any and all periods during which ▇▇▇▇▇▇▇▇▇ plc or any of its subsidiaries shall
be found by a final non-appealable judgment of a court possessing personal
jurisdiction over it to have been in violation of the Restrictive Covenants.
(g) Whenever possible, each provision of this Section 4.15 shall be
interpreted in such manner as to be effective and valid under applicable law but
if any provision of this Section 4.15 shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Section 4.15. If any provision of this
Section 4.15 shall, for any reason, be judged by any court of competent
jurisdiction to be invalid or unenforceable, such judgment shall not affect,
impair or invalidate the remainder of this Section 4.15 but shall be confined in
its operation to the provision of this Section 4.15 directly involved in the
controversy in which such judgment shall have been rendered. In the event that
the provisions of this Section 4.15 should ever be deemed to exceed the time or
geographic limitations permitted by applicable law, then such provision shall be
reformed to the maximum time or geographic limitations permitted by applicable
law.
(h) Notwithstanding anything in this Section 4.15 to the contrary, nothing
herein shall prevent ▇▇▇▇▇▇▇▇▇ B.V. from continuing to operate Thermalloy
Malaysia in the ordinary course of business and consistent with the past
practice from and after the Closing Date if the Malaysian Shares are not
transferred to Purchaser at the Closing; PROVIDED, HOWEVER, that the operation
of Thermalloy Malaysia cannot be expanded beyond the scope of its operations on
the date of this Agreement.
4.16 REMEDIATION OF EXISTING ENVIRONMENTAL CONDITIONS. (a) For
purposes of this
-52-
62
Section 4.16, the following capitalized terms shall have the following meanings:
"ENVIRONMENTAL CONDITIONS" means any pollution, contamination,
degradation, damage or injury caused by or arising from the generation,
handling, use, treatment, storage, transportation, disposal, discharge, release,
or emission of volatile organic compounds ("VOCs").
"VCP" means the Voluntary Cleanup Program implemented by the Texas
Natural Resource Conservation Commission ("TNRCC") under House ▇▇▇▇ 2296 of the
74th Legislature, codified at Tex. Health & Safety Code ▇▇▇. ch 361, subch. S
(▇▇▇▇▇▇ Supp. 1999), and all regulations promulgated thereunder.
(b) With respect to the property operated by Thermalloy, Inc. located at
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ (the "PROPERTY"), the Sellers
covenant that they will timely remediate under the VCP all Environmental
Conditions existing on, at or underlying the Property as of the Closing Date in
accordance with the provisions set forth in this Section 4.16.
(c) Sellers shall remediate the Property to the satisfaction of the TNRCC.
The determinations of the TNRCC shall be final and binding on the parties
hereto. All remediation obligations shall be governed by the classification of
the Property as an industrial site.
(d) Purchaser further agrees that the Sellers shall control all
investigation and remediation activities addressed in this Section 4.16 and
shall control all communications, discussions and negotiations with the TNRCC.
Unless required by applicable law, Purchaser may not conduct any communications,
discussions or negotiations with the TNRCC relating to this remediation without
the prior consent of the Sellers.
(e) Sellers shall provide copies of any and all remedial action plans,
closure plans or other similar plans to Purchaser for review and comment before
implementation of the same. No remedial action plan or closure plan shall be
implemented if it unreasonably interferes with the Purchaser's operations.
(f) The procedures to be followed for the remediation of the Property and
approval of the plans are as follows:
(i) The Sellers will prepare the VCP application for submission to the
TNRCC, along with the documentation and reports necessary to support the
application. Purchaser will be permitted to be a co-applicant on the VCP
application, but will not be required to enter into any agreed orders or
similar agreements required by the TNRCC to be accepted into the VCP.
Purchaser will be provided a period of ten (10) business days to review and
provide comments on the VCP application or supporting documentation before
the foregoing is submitted to the TNRCC; however, Sellers are under no
obligation to incorporate any of Purchaser's comments in the VCP
application.
-53-
63
(ii) The Sellers will prepare a draft Closure Plan for submission to
the TNRCC. Purchaser will be afforded ten (10) business days to provide
comments to Sellers on the draft Closure Plan before the plan is submitted
to the TNRCC. Sellers will submit a revised Closure Plan to Purchaser
within ten (10) working days upon receipt of Purchaser's comments.
(iii) The Sellers will submit the Closure Plan to the TNRCC within
twenty (20) days of receipt of Purchaser's comments on the final draft
Closure Plan.
(iv) The Sellers covenant that they will commence the work described
in the Closure Plan within fifteen (15) days of receiving TNRCC approval of
the Closure Plan and will proceed in a timely manner to complete the work
and to prepare the documentation necessary to achieve a Final Certificate
of Completion from the TNRCC for the Property.
(v) The Sellers agree to provide Purchaser with copies of all written
communications transmitted by the Sellers, or their agents,
representatives, contractors or attorneys on their behalf, to the TNRCC,
and all written communications received from the TNRCC with respect to any
of the existing Environmental Conditions on the Property or any of the
plans described herein. The Sellers further agree to allow Purchaser to
have representatives present during all meetings with the TNRCC.
(vi) All costs of the Sellers' investigation and any remediation
conducted on the Property that is required by the TNRCC in order to achieve
a final Certificate of Completion pursuant to this Section 4.16 will be
paid by the Sellers.
(vii) All remediation shall be conducted in a manner that does not
interfere unreasonably with Purchaser's operation of the Property. Subject
to the Sellers' right to direct the work, Purchaser shall be kept advised
of, and may monitor, the implementation of the remediation. Purchaser, at
its sole expense, may also reasonably inspect all stages of the remediation
provided that such inspection does not interfere with or delay the work.
(viii) The Sellers shall be granted access to the Property during
normal business hours or at such other times as may be agreed upon by
Purchaser and the Sellers, for the purpose of implementing any remediation
for which they are responsible under this Agreement. The Sellers shall
coordinate with Purchaser as to the timing of specific remediation
activities so as to minimize any disruption to Purchaser's operations. In
this regard, the Sellers shall provide Purchaser with at least two (2)
business days advance notice of their intention to enter the Property for
the purposes of performing remediation work. Purchaser and the Sellers
agree to cooperate in good faith to select a mutually acceptable
alternative date for entry onto the Property if entry on the date desired
by the Sellers would result in an unreasonable interference with
Purchaser's use or operation of the Property.
(ix) The Sellers agree that, in performing remedial activities on or
at the Property, the Sellers or their agents, contractors and
subcontractors shall carry liability insurance in the
-54-
64
following minimum amounts:
KINDS OF INSURANCE IN LIMITS NOT LESS THAN
------------------ -----------------------
Workmen's Compensation Statutory
Employer's Liability $100,000 each accident/disease
$500,000 Policy Limit
Comprehensive General Combined Bodily Injury and
Property Damage
$1,000,000 each person
$1,000,000 each occurrence
Automotive Bodily Injury $1,000,000 each person
Liability (including hired
automobiles and non-ownership
liability).
Errors and Omissions $1,000,000 each occurrence
(Professional Liability) $2,000,000 annual aggregate
Furthermore, Purchaser shall be named as an additional insured on all of
the foregoing policies except for Worker's Compensation.
(x) Purchaser agrees that the Sellers shall not be responsible for any
investigation or remediation at the Property that relates to, or arises
from, any Environmental Condition caused by the Purchaser or caused by any
Person other than Sellers or their employees, agents or contractors after
the Closing Date. Such costs and expenses shall be borne by the Purchaser.
(g) The Sellers, jointly and severally, agree to indemnify, defend, and
hold Purchaser free and harmless from any loss, injury, damage, claim, lien,
cost or expense, including reasonable attorney's fees and costs, arising out of
or caused by the conduct of the remediation by the Sellers; PROVIDED, that the
Sellers shall not have any obligation to pay any consultants', engineers' or
attorneys' fees, or any other expenses or fees incurred by the Purchaser in
exercising its rights of monitoring or inspection in the remediation pursuant to
this Section 4.16. The Sellers, jointly and severally, agree to indemnify,
defend and hold Purchaser free and harmless from any loss, injury, damage,
claim, lien, cost or expense arising out of (x) any subsequent remediation,
monitoring or inspection of the Property required by the TNRCC with respect to
VOCs, other than VOCs which Sellers can prove were released, disposed, generated
or used by the Purchaser, its agents or Affiliates after the Closing or (y) any
claim by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, as landlord of the Property, or any other third
party, arising out of the presence of VOCs on the Property, other than VOCs
which Sellers can prove were released, disposed, generated or used
-55-
65
by the Purchaser, its agents or Affiliates after the Closing; PROVIDED that,
notwithstanding any provision in this Agreement to the contrary, the rights to
indemnification set forth in this paragraph (g) shall not be transferable,
directly or indirectly, to any other Person, including without limitation, any
subsequent transferee of the leasehold interest in the Property or any of the
assets or stock of Thermalloy, Inc.; and PROVIDED FURTHER that, the indemnity
set forth in this clause (g) is intended to benefit only the Purchaser and its
Affiliates.
(h) Promptly following the Closing, the Purchaser shall commence, at its
expense, additional environmental assessments, investigations or studies of the
Property, as it deems appropriate. To the extent any such assessment,
investigation or study undertaken by the Purchaser after the Closing indicates
the presence of any Hazardous Substance (other than VOCs, which are provided for
above) above the level permitted by applicable law such presence shall be
considered a breach of the representations and warranties set forth in Section
2.16 regardless of whether set forth in the Disclosure Schedules. The
representations, warranties, indemnities and other undertakings set forth herein
shall not be affected by any such assessment, investigation or study or lack
thereof, or the results of any such assessment, investigation or study.
5. EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
5.1 COMPENSATION AND BENEFITS OF TARGET COMPANY EMPLOYEES. (a) From
and after the Closing, the Purchaser shall, or shall cause a Target Company or
such Target Company's subsidiary or one of the Purchaser's subsidiaries, as
applicable, to honor, pay, perform and satisfy any and all liabilities,
obligations and responsibilities with respect to the Employees under each Target
Company Group Benefit Plan (other than those Target Company Group Benefit Plans
sponsored or maintained by Sellers, including without limitation those listed on
Schedule 5.1) and each Employment Agreement. Except as otherwise expressly
provided herein, the Sellers shall honor, pay, perform, satisfy and be solely
responsible for any and all liabilities, obligations and responsibilities (I)
under any Target Company Group Benefit Plan that is disclosed on Schedule
5.1(II) under any Target Company Group Benefit Plan that is not disclosed on
Schedule 2.9, (III) under the Thermalloy Inc. Salary Continuation Plan and any
obligations of Thermalloy, Inc. and Thermalloy Investment Company to permit
▇▇▇▇▇ ▇▇▇▇▇▇'▇ continued participation in the Salary Continuation Plan or a plan
that is substantially equivalent in all material respects (which obligations are
set forth in the expired Employment Agreement, dated September 22, 1998, between
Thermalloy, Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇, certain provisions of which survive
expiration by express incorporation into the Manufacturer's Representative
Agreement, dated August 1, 1996, between Thermalloy, Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇) and
(IV) with respect to any Target Company Group Benefit Plan participant who is
not an Employee or the beneficiary or dependent of an Employee. Nothing in this
Section 5.1 shall preclude the Purchaser or any Target Company or its subsidiary
from, at any time following the Closing, (i) unilaterally amending, modifying or
terminating any particular Assumed Target Company Benefit Plan pursuant to the
relevant provision of such Assumed Target Company Benefit Plan, PROVIDED that
the covenants set forth in this Section 5 are satisfied, or (ii) terminating the
employment of each Employee actively employed by such Target Company or its
subsidiary immediately prior to the Closing (the "ACTIVE EMPLOYEES"), so long
as, if such termination occurs prior to six (6) months following the Closing
Date and such termination is not for cause, any such
-56-
66
terminated Active Employee receives severance and other termination benefits
upon or in connection with such termination in an amount which is at least equal
to the severance and other termination benefits which would have been provided
to such Active Employee if his or her employment had been terminated for the
same reason immediately prior to the Closing, all of which benefits are
described on Schedule 2.9. Notwithstanding the foregoing, Sellers shall bear (I)
any relocation and similar costs and loyalty bonus payable to ▇▇▇▇▇ ▇▇▇▇▇▇▇ in
connection with the termination of his employment and (II) any loyalty bonus
payable to any other Person pursuant to an arrangement entered into by Sellers
or any member of the Target Company Group at any time prior to the Closing.
(b) Active Employees shall be given credit for all service with the Target
Companies for purposes of eligibility and vesting, to the same extent as such
service was credited for such purpose by Sellers under any Target Company Group
Benefit Plan prior to the Closing Date, under each employee benefit plan,
program or arrangement of Purchaser or any of its subsidiaries in which the
Active Employees are eligible to participate, PROVIDED, HOWEVER, that in no
event shall the employees be entitled to any credit to the extent that it would
result in a duplication of benefits with respect to the same period of service.
(c) Purchaser and the Sellers agree to comply with the agreements set forth
in EXHIBIT 5.1 attached hereto.
(d) (i) If, by operation of law as provided for in Section 613a of the
German Civil Code, the employment contracts of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and Jurgen
Mullmaier the ("German Employees") have effect after Closing as if originally
made between the Purchaser or the Purchaser's German subsidiary and the German
Employees the Sellers agree that they shall or shall procure that ▇▇▇▇▇▇▇▇▇ GmbH
shall:
(A) perform and discharge for their own account all their obligations
towards the German Employees for the period up to and including
Closing; and
(B) indemnify the Purchaser against all liabilities arising from the
Sellers, or ▇▇▇▇▇▇▇▇▇ GmbH's performance and discharge of those
obligations (including any failure by the Sellers or ▇▇▇▇▇▇▇▇▇
GmbH to inform and/or consult the German Employees'
representatives before the transfer of their employment to the
Purchaser or the Purchaser's German subsidiary).
(ii) If any contract of employment of any person employed by ▇▇▇▇▇▇▇▇▇
GmbH who is not a German Employee is found or alleged to have effect
pursuant to Section 613a of the German Civil Code on or after Closing as if
it was a contract of employment originally made with the Purchaser or the
Purchaser's German subsidiary, the Sellers agree that:
(A) in consultation with the Purchaser, it shall or shall procure
that ▇▇▇▇▇▇▇▇▇ GmbH shall within seven days of discovering such a
finding or allegation or within seven days of being so requested
by the Purchaser make to such person
-57-
67
an offer in writing to employ him under a new contract of
employment to take effect on the termination referred to below;
and
(B) such offer of employment will be on terms and conditions which,
when taken as a whole do not materially differ from the terms and
conditions of employment of that person immediately before
Closing.
Upon that offer being made, or at any time after the expiry of seven days from a
request by the Purchaser for the Sellers to make or procure that ▇▇▇▇▇▇▇▇▇ GmbH
make that offer, the Purchaser shall terminate the employment of the person
concerned, and the Sellers shall indemnify and hold harmless and keep the
Purchaser indemnified against all and any claims, costs, liabilities, losses,
expenses, damages, demands and actions (including, without limitation, legal
costs) directly or indirectly arising both out of or relating to the employment
of such person from Closing until such termination and the termination of such
employment (including without prejudice to the generality of the foregoing any
redundancy pay and compensation for breach of contract or unfair dismissal).
(iii) The Sellers shall make available, to the extent such individuals
remain employees of the Sellers or their Affiliates, the German Employees
and the two French salesmen currently employed by Hellermann Tyton S.A., an
Affiliate of ▇▇▇▇▇▇▇▇▇ plc, until the employment of such individuals can be
transferred to Affiliates of Purchaser.
(iv) Purchaser shall reimburse the Sellers for the actual
out-of-pocket expenses relating to the employment of such individuals, but
not for any allocation for overhead or depreciation. Subject to
subparagraph (v) Purchaser shall be responsible for any severance expense
with respect to these individuals if Purchaser determines not to transfer
their employment to Purchaser's Affiliates.
(v) Subject to subparagraph (vi) Purchaser shall have no liability to
such employees if they cease to be employed by Sellers or their Affiliates
through the act or default of Sellers or their Affiliates or if such
employees refuse to accept a "comparable offer" of employment made with 120
days following Closing made by the Purchaser or its Affiliates; for the
purpose of this subparagraph the expression "comparable offer" shall mean
an offer at least as favorable to the employee as the terms of his existing
engagement with the Sellers or their Affiliates;
(vi) Purchaser covenants with Sellers and their Affiliates that in
relation to each of such employees it shall:
(A) not engage in any conduct which, if any such employee had been an
employee of Purchaser or its Affiliates, could reasonably be
considered unfair or repudiatory conduct in its nature on the
part of the Purchaser or its Affiliates;
(B) provide Sellers and Sellers' Affiliates with all reasonable
assistance as Sellers and Sellers' Affiliates shall reasonably
require in connection with defending any
-58-
68
claim any such employee may bring against Sellers and Sellers'
Affiliates; and
(C) maintain a complete and accurate record of all communications
between Purchaser and its Affiliates and all such employees
relating to their employment by the Purchaser or its Affiliates
following Closing.
(vii) Sellers covenant with Purchaser that in relation to each of such
employees they shall provide or shall procure that Sellers' Affiliates
provide the Purchaser with all reasonable assistance as Purchaser shall
reasonably require in connection with defending any claim any such employee
may bring against Purchaser.
(e) The Sellers shall make available, to the extent such individuals remain
employees of the Sellers or their Affiliates, the services of the two German
salesmen currently employed by ▇▇▇▇▇▇▇▇▇ GmbH and the two French salesmen
currently employed by Hellermann Tyton SA, an Affiliate of ▇▇▇▇▇▇▇▇▇ plc, until
the employment of such individuals can be transferred to Affiliates of
Purchaser. Purchaser shall reimburse the Sellers for the actual out-of-pocket
expenses relating to the employment of such individuals, but not for any
allocation for overhead or depreciation. Purchaser shall be responsible for any
severance expense with respect to these individuals if Purchaser determines not
to transfer their employment to Purchaser's Affiliates.
5.2 SAVINGS PLAN. (a) As of the Closing Date, each of the Target
Companies shall cease to be a participating employer under the 401(k) Retirement
and Profit Sharing Plan for Employees of the U.S. Affiliates of ▇▇▇▇▇▇▇▇▇ (the
"SELLER SAVINGS PLAN") and the Sellers shall take any and all actions necessary
to effect such cessation of participation. As soon as practicable, but in no
event later than 120 days after the Closing Date, the Purchaser shall, or shall
cause the Company to, establish or designate, a defined contribution plan (the
"PURCHASER'S INVESTMENT PLAN") to provide benefits to the Active Employees (for
purposes of this Section 5.2, Active Employees shall include those Employees on
disability, vacation and approved leaves of absence) who are participants in the
Seller Savings Plan as of the Closing Date (the "ACTIVE SAVINGS PARTICIPANTS").
The Purchaser's Investment Plan shall contain such provisions required to be
provided pursuant to Section 411(d)(6) of the Code by a transferee plan.
(b) As soon as practicable after the Closing Date, upon the reasonable
determination by Purchaser and the Sellers Representative, that the Seller
Savings Plan, in form, meets the requirements of Sections 401(a) and (k) of the
Code, the Sellers shall cause to be transferred to the Purchaser's Investment
Plan an amount equal to the account balances of all Active Savings Participants
as of the end of the date ended immediately prior to the transfer date (the
"TRANSFER DATE"). Such distribution shall be effected by a transfer in cash or
by the transfer of a proportionate interest in any investments held for the
benefit of such Active Savings Participants under the terms of the Seller
Savings Plan, PROVIDED THAT, to the extent that any loan had been extended to
any Active Savings Participant from the Seller Savings Plan prior to the Closing
Date, such loans and any promissory notes or other documents evidencing such
loans shall be transferred to the Purchaser's Investment Plan and shall be
valued based on the outstanding principal and interest due thereunder. From and
after such transfer from the Seller Savings
-59-
69
Plan to Purchaser's Investment Plan in accordance with the provisions of this
Section 5.2, the Purchaser's Investment Plan shall be solely responsible for the
provision of all benefits to the Active Savings Participants previously provided
under the Seller Savings Plan.
(c) As of the Closing Date, Purchaser shall contribute to the Seller
Savings Plan, on behalf of each Employee who contributed 401(k) contributions to
the Seller Savings Plan during the plan year in which the Closing Date occurs, a
matching contribution for such plan year to the extent such matching
contribution has been accrued on the most recent balance sheet included in the
Financial Statements. Sellers shall cause the Employees to be fully vested in
their accrued benefits under the Seller Savings Plan. Sellers shall take all
necessary actions (including, without limitation, by amending the Seller Savings
Plan to allow contributions on behalf of participants who are not employed by
Sellers or its affiliates on the last day of the plan year and who do not
complete 1,000 hours of service during such plan year) to cause the
contributions and vesting referenced in this Section 5.2(c) to occur.
5.3 NO THIRD PARTY BENEFICIARIES. Nothing in this Section 5 is
intended, or shall be construed, to confer upon any person, other than the
parties to this Agreement and their successors and permitted assigns, any rights
or remedies by reason of this Section 5.
6. CONDITIONS PRECEDENT.
6.1 GENERAL. The respective obligations set forth herein of the
Sellers and the Purchaser to consummate the sale and purchase of the Shares at
the Closing shall be subject to the fulfillment or waiver, on or before the
Closing Date, in the case of the Sellers, of the conditions set forth in
Sections 6.2 and 6.3, and in the case of the Purchaser, of the conditions set
forth in Sections 6.2 and 6.4.
6.2 CONDITIONS TO OBLIGATIONS OF BOTH PARTIES.
6.2.1 CONSENTS. All governmental consents listed on Schedules 2.3(b)
and 3.3(b) and all third party consents listed on Schedule 6.2.1 shall have been
obtained. If notifications are required to be filed under the HSR Act or the
antitrust, competition or comparable laws of any foreign jurisdiction, the
waiting period under the HSR Act or such other laws shall have been terminated
or expired.
6.2.2 NO INJUNCTION. There shall not be in effect any injunction or
other order issued by a court of competent jurisdiction, local or foreign, and
no statute, rule or regulation shall have been enacted, in each case restraining
or prohibiting the consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements, and no proceeding seeking to prevent
consummation of the transactions contemplated by this Agreement or the Ancillary
Agreements which has a reasonable likelihood of success shall be pending.
-60-
70
6.2.3 PURCHASE AND SALE OF SHARES. At the Closing, Sellers shall sell
all of the Shares (other than the Malaysian Shares to the extent provided in
Section 1.2) and Purchaser shall purchase all of the Shares (other than the
Malaysian Shares to the extent provided in Section 1.2).
6.3 CONDITIONS TO OBLIGATIONS OF THE SELLERS.
6.3.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
representations and warranties in Section 3 (i) that are qualified as to
materiality shall be true in all respects on and as of the Closing Date and (ii)
that are not qualified as to materiality shall be true in all material respects
on and as of the Closing Date, with the same force and effect as though such
representations and warranties were made on and as of the Closing Date. The
Purchaser shall have duly performed and complied in all material respects with
all agreements contained herein required to be performed or complied with by it
at or before the Closing.
6.3.2 OFFICER'S CERTIFICATE. The Purchaser shall have delivered on the
Closing Date to the Sellers a certificate, dated the Closing Date and signed by
a duly authorized officer of the Purchaser, as to the fulfillment of the
conditions set forth in Section 6.3.1.
6.4 CONDITIONS TO OBLIGATIONS OF THE PURCHASER.
6.4.1 REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The
representations and warranties in Section 2 (i) that are qualified as to
materiality shall be true in all respects on and as of the Closing Date and (ii)
that are not qualified as to materiality shall be true in all material respects
on and as of the Closing Date, with the same force and effect as though such
representations and warranties were made on and as of the Closing Date. Each
Seller shall have duly performed and complied in all material respects with all
agreements contained herein required to be performed or complied with by it at
or before the Closing.
6.4.2 OFFICER'S CERTIFICATE. The Sellers shall have delivered on the
Closing Date to the Purchaser a certificate, dated the Closing Date and signed
by a duly authorized officer of each Seller, as to the fulfillment of the
conditions set forth in Sections 6.4.1 and 6.4.4.
6.4.3 RESIGNATIONS. The directors and officers of any member of the
Target Company Group (other than Curamik) specified in a notice delivered by the
Purchaser to the Sellers at least five days prior to the Closing and each
director and officer of Curamik appointed by Seller shall have submitted their
resignations, or shall have been removed by shareholder action, from the Boards
of Directors and as officers of such members, effective as of the Closing Date,
in each case without liability to any member of the Target Company Group. For
purposes of this Section 6.4.3, the officers who must submit their resignations
are those Persons who are employees of any Seller or any Affiliate and who do
not devote their full working time to the Target Company Group.
6.4.4 MATERIAL ADVERSE CHANGE. Since July 4, 1999, there shall have
been no material
-61-
71
adverse change in the business or financial condition of the Target Company
Group taken as a whole, other than those relating to or those that are as a
result of (i) generally applicable economic conditions or (ii) the Target
Company Group's industry in general.
6.4.5 FIRPTA CERTIFICATE. ▇▇▇▇▇▇▇▇▇ International shall have delivered
on the Closing Date to the Purchaser a certificate, as contemplated under and
meeting the requirements of Section 1.1445-2(b)(2)(i) of the Treasury
Regulations to the effect that ▇▇▇▇▇▇▇▇▇ International is not a foreign person
within the meaning of the Code and applicable Treasury Regulations.
6.4.6 AUDITED FINANCIAL STATEMENTS. The Sellers shall have delivered
to Purchaser audited combined balance sheets of the Target Company Group as of
December 31, 1997 and 1998 and the related audited combined statements of income
and cash flows for each of the years ended December 31, 1996, 1997 and 1998,
accompanied by an unqualified report of the Sellers' independent accountants,
Ernst & Young (the "AUDITED FINANCIAL STATEMENTS"). The Audited Financial
Statements shall be prepared in accordance with United Kingdom generally
accepted accounting principles, shall be accompanied by a reconciliation to
United States generally accepted accounting principles, shall be covered by and
conform to the representations and warranties set forth in Section 2.5(a)
hereof, and shall be included in the term "Financial Statements" for purposes of
this Agreement.
7. INDEMNIFICATION.
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained in this Agreement and the Ancillary Agreements shall
survive the Closing hereunder, regardless of any investigation made by Purchaser
or Sellers. Any claim for indemnification under Section 7 with respect to the
representations and warranties contained in this Agreement must be brought
within 18 months following the Closing Date in accordance with Section 7.2.3,
PROVIDED, HOWEVER, that claims for indemnification with respect to the
representations and warranties set forth in (a) Section 2.13 may be brought at
any time prior to 30 days following the expiration of the applicable statute of
limitations for matters covered by such Sections and (b) Section 2.4 may be
brought at any time.
7.2 INDEMNIFICATION.
7.2.1 BY THE SELLERS. (a) From and after the Closing, the Sellers,
jointly and severally, agree to indemnify and hold harmless the Purchaser and
its Affiliates, and its and their respective officers, directors, employees and
agents (collectively, the "PURCHASER INDEMNIFIED GROUP"), from and against any
demands, claims, actions or causes of action, losses, liabilities, damages,
costs and expenses, including without limitation interest, penalties and
reasonable fees and expenses of attorneys and other professionals (collectively,
"DAMAGES"), incurred or sustained by the Purchaser Indemnified Group resulting
from (I) the breach by the Sellers of any covenant set forth in this Agreement,
and (II) subject to Section 7.1, the breach by the Sellers of any representation
or warranty set forth in this Agreement (without regard to any materiality
qualifier (including any Material Adverse Effect qualifier) contained in such
representation or warranty).
-62-
72
(b) The rights of the Purchaser Indemnified Group to indemnification under
this Section 7 shall be limited as follows:
(i) The amount of any Damages incurred by the Purchaser Indemnified
Group shall be reduced by the net amount the Purchaser or any of its
Affiliates recovers (after deducting all attorneys' fees, expenses and
other costs of recovery) from any insurer or other party liable for such
Damages, and the Purchaser shall use commercially reasonable efforts to
effect any such recovery.
(ii) The Purchaser Indemnified Group shall be entitled to
indemnification under clause (ii) of Section 7.2.1(a) only to the extent
that the aggregate amount of such Damages (reduced as provided in paragraph
(b)(i) above) for one or more claims exceeds $825,000, at which point the
Sellers will be obligated to indemnify the Purchaser Indemnified Group from
and against all such Damages (reduced as provided in paragraph (b)(i)
above) in excess of $400,000 and in no event will the Purchaser Indemnified
Group be entitled to indemnification under clause (ii) of Section 7.2.1(a)
in excess of $12,375,000; PROVIDED that the foregoing threshold, basket and
limit shall not apply to indemnification for Damages resulting from
breaches of Sections 2.4 or 2.13; and PROVIDED FURTHER that the foregoing
threshold and basket shall not apply to indemnification for Damages
resulting from any deemed breach of the representations or warranties set
forth in Section 2.16 pursuant to Section 4.16(h).
(iii) The Purchaser Indemnified Group shall not be entitled to
indemnification for breaches of:
(A) representations and warranties in respect of the unaudited
financial statements for the years ended December 31, 1996, 1997 and
1998 following delivery of the Audited Financial Statements and after
delivery of the Audited Financial Statements the term Financial
Statements shall not include the unaudited financial statements for
the years ended December 31, 1996, 1997 and 1998;
(B) Sellers representations and warranties if such breach was a
direct result of any act or thing done or omitted to be done at any
time after the date of this Agreement at the written request of, with
the written approval of or by Purchaser;
(C) Sellers representations and warranties set forth in Section
2.5(c) if such breach is directly the result of actions taken by
Purchaser after the Closing; and
(D) Sellers covenant in clause (ii) of the second sentence of
Section 5.1(a) to the extent the Damages from such breach, together
with Damages from breaches of all other representations and warranties
set forth in this Agreement, do not exceed the threshold and basket
set forth in Section 7.2.1(b)(ii) hereof, and then such recovery shall
only be to the extent set forth in Section 7.2.1(b)(ii) hereof.
-63-
73
(c) Each Seller hereby agrees that it will not, and will not permit any
member of the Seller Indemnified Group (as defined below) in respect of an
action brought against such Person by any Seller to, make any claim for
indemnification against any member of the Target Company Group by reason of the
fact that it or he was a stockholder, director, officer, employee or agent of
any such entity or was serving at the request of any such entity as a partner,
trustee, director, officer, employee or agent of another entity (whether such
claim is for judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses or otherwise and whether such claim is pursuant to
any statute, charter document, bylaw, agreement or otherwise) with respect to
any action, suit, proceeding, complaint, claim or demand brought by the
Purchaser against such Seller (whether such action, suit, proceeding, complaint,
claim or demand is pursuant to this Agreement, applicable law or otherwise).
7.2.2 BY THE PURCHASER. (a) From and after the Closing, the Purchaser
agrees to indemnify and hold harmless the Sellers and their respective
Affiliates and their respective officers, directors, employees and agents
(collectively, the "SELLER INDEMNIFIED GROUP"), from and against any Damages
incurred or sustained by the Seller Indemnified Group resulting from (i) the
breach by the Purchaser of any covenant set forth in this Agreement, and (ii)
subject to Section 7.1, the breach by Purchaser of any representation or
warranty set forth in this Agreement (without regard to any materiality
qualifier (including any material adverse effect qualifier), contained in any
such representation or warranty), PROVIDED that there shall not be any
duplicative payments or indemnities by the Purchaser.
(b) The rights of the Seller Indemnified Group to indemnification under
this Section 7 shall be limited as follows:
(i) The amount of any Damages incurred by the Seller Indemnified Group
shall be reduced by the net amount the Sellers or any of its Affiliates
recovers (after deducting all attorneys' fees, expenses and other costs of
recovery) from any insurer or other party liable for such Damages, and the
Sellers shall use commercially reasonable efforts to effect any such
recovery.
(ii) The Seller Indemnified Group shall be entitled to indemnification
under clause (ii) of Section 7.2.2(a) only to the extent that the aggregate
amount of such Damages (reduced as provided in paragraph (b)(i) above)
exceeds $825,000, at which point the Purchaser will be obligated to
indemnify the Seller Indemnified Group from and against all such Damages
(reduced as provided in paragraph (b)(i) above) in excess of $400,000 and
in no event will the Seller Indemnified Group be entitled to
indemnification under clause (ii) of Section 7.2.2(a) in excess of
$12,375,000.
7.2.3 INDEMNIFICATION PROCEDURES. A party entitled to indemnification
hereunder shall herein be referred to as an "INDEMNITEE." A party obligated to
indemnify an Indemnitee hereunder shall herein be referred to as an
"INDEMNITOR."
(a) THIRD PARTY CLAIMS. Within 15 business days after an Indemnitee
receives notice
-64-
74
of any third party claim or the commencement of any action by any third party
which such Indemnitee reasonably believes may give rise to a claim for
indemnification from an Indemnitor hereunder, such Indemnitee shall, if a claim
in respect thereof is to be made against an Indemnitor under Section 7, notify
such Indemnitor in writing in reasonable detail of such claim or action,
PROVIDED, HOWEVER, that failure to so notify the Indemnitor shall not relieve
the Indemnitor of its indemnification obligations hereunder, except to the
extent the Indemnitor is actually prejudiced thereby. Upon receipt of such
notice, the Indemnitor shall be entitled to participate in such claim or action,
to assume the defense thereof with counsel reasonably satisfactory to the
Indemnitee, and to settle or compromise such claim or action without the consent
of the Indemnitee as long as such settlement or compromise (i) does not include
the entry of any judgment or provide for injunctive or other non-monetary relief
affecting the Indemnitee and (ii) includes as an unconditional term thereof the
giving by such plaintiff or claimant of a release from all liability with
respect to such claim or litigation; PROVIDED that if the Indemnitee has elected
to be represented by separate counsel pursuant to the proviso to the following
sentence, such settlement or compromise shall be effected only with the consent
of the Indemnitee, which consent shall not be unreasonably withheld or delayed.
After notice to the Indemnitee of the Indemnitor's election to assume the
defense of such claim or action, the Indemnitor shall not be liable to the
Indemnitee under Section 7 for any legal or other expenses subsequently incurred
by the Indemnitee in connection with the defense thereof other than reasonable
costs of investigation (although the Indemnitee shall have the right to
participate in any defense at its own cost and expense); PROVIDED, HOWEVER, that
the Indemnitee shall have the right to employ counsel to represent it at the
Indemnitor's expense if either (x) such claim or action involves remedies other
than monetary damages and such remedies, in the Indemnitee's reasonable
judgment, could have a material adverse effect on such Indemnitee or (y) the
Indemnitee may have available to it one or more defenses or counterclaims which
are inconsistent with one or more defenses or counterclaims which may be alleged
by the Indemnitor. If the Indemnitor does not elect to assume the defense of
such claim or action, the Indemnitee shall have the full right to defend against
any such claim or demand and shall be entitled to agree to settle, compromise or
pay in full such claim or demand without the consent of the Indemnitor. The
parties hereto agree to render to each other such assistance as may reasonably
be requested in order to insure the proper and adequate defense of any such
claim or action, including making employees available on a mutually convenient
basis to provide additional information and explanation of any relevant
materials or to testify at any proceedings relating to such claim or action. For
the purposes of this Agreement, a "BUSINESS DAY" shall be a day other than a
Saturday, Sunday or other day on which commercial banks in New York, New York
are authorized or required by law to close.
(b) OTHER CLAIMS. Within 20 business days after an Indemnitee obtains
knowledge that it has sustained any Damages not involving a third party claim or
action which such Indemnitee reasonably believes may give rise to a claim for
indemnification from an Indemnitor hereunder, such Indemnitee shall deliver
notice of such claim to the Indemnitor; PROVIDED, HOWEVER, that failure to so
notify the Indemnitor shall not relieve the Indemnitor of its indemnification
obligations hereunder, except to the extent that the Indemnitor is actually
prejudiced thereby. If the Indemnitor does not notify the Indemnitee within 30
calendar days following its receipt of such notice that the Indemnitor disputes
its liability to the Indemnitee under this Section 7, such claim specified by
the Indemnitee in such notice shall be conclusively deemed a liability of the
Indemnitor under this Section 7 and the Indemnitor shall
-65-
75
pay the amount of such claim to the Indemnitee on demand or, in the case of any
notice in which the amount of the claim (or any portion thereof) is estimated,
on such later date when the amount of such claim (or such portion thereof)
becomes finally determined. If the Indemnitor has timely disputed its liability
with respect to such claim, as provided above, the Indemnitor and the Indemnitee
shall proceed in good faith to negotiate a resolution of such dispute and, if
not resolved through negotiations, such dispute shall be resolved by litigation
in an appropriate court of competent jurisdiction in accordance with Section
8.15.
7.2.4 TAX TREATMENT OF INDEMNITY PAYMENT. Each of the Sellers, on the
one hand, and the Purchaser, on the other hand, agrees to treat any payment made
pursuant to Section 7.2 or Section 4.4 as an adjustment to the Purchase Price
for all Tax purposes unless otherwise required by law.
8. GENERAL PROVISIONS.
8.1 MODIFICATION; WAIVER. This Agreement may be modified only by a
written instrument executed by the parties hereto. Any of the terms and
conditions of this Agreement may be waived in writing at any time on or prior to
the Closing Date by the party entitled to the benefits thereof.
8.2 ENTIRE AGREEMENT. This Agreement, including the Schedules hereto
(which are hereby incorporated by reference and made a part hereof), and the
Ancillary Agreements constitute the entire agreement of the parties with respect
to the subject matter hereof and thereof and supersede all other prior
agreements, understandings, documents, projections, financial data, statements,
representations and warranties, oral or written, express or implied, between
the parties hereto and thereto and their respective affiliates, representatives
and agents in respect of the subject matter hereof and thereof, except that this
Agreement and the Ancillary Agreements do not supersede the Confidentiality
Agreement, the terms and conditions of which the parties hereto expressly
reaffirm, except that nothing in the Confidentiality Agreement shall prevent the
Purchaser from disclosing information regarding the Target Company Group
following the Closing.
8.3 EXCLUSIVITY OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
PROVISION; RELATIONSHIP BETWEEN THE PARTIES. It is the explicit intent and
understanding of each of the parties hereto that none of such parties or any of
their respective Affiliates, representatives or agents is making any
representation or warranty whatsoever, oral or written, express or implied,
other than those set forth in Section 2 and 3 and no party is relying on any
statement, representation or warranty, oral or written, express or implied, made
by any other party or such other party's Affiliates, representatives or agents,
except for the representations and warranties set forth in such sections and in
the Ancillary Agreements. The indemnity provided for in Section 7 shall be the
sole and exclusive monetary remedy of the Purchaser and the Sellers after the
Closing for any inaccuracy of any representation or warranty of the Sellers or
the Purchaser, as the case may be, or any failure or breach of any covenant,
obligation, condition or agreement to be performed or fulfilled by the Sellers
or the Purchaser, as the case may be, pursuant to this Agreement and the
Ancillary Agreements or otherwise arising out of Purchaser's purchase of the
Shares, PROVIDED, HOWEVER, that the foregoing shall not (i) prevent Purchaser or
Sellers from bringing an action for fraud or (ii) apply to Sellers' or
Purchaser's obligations under Section 4.4.
-66-
76
The parties agree that this is an arm's length transaction in which the parties'
undertakings and obligations are limited to the performance of their obligations
under this Agreement. The Purchaser acknowledges that it is a sophisticated
investor and that it has only a contractual relationship with the Sellers, based
solely on the terms of this Agreement and that there is no special relationship
of trust or reliance between the Purchaser and any Seller. Notwithstanding
anything herein to the contrary, no investigation by or on behalf of Purchaser
into the business, operations, prospects, assets or condition (financial or
otherwise) of the Target Company Group shall diminish in any way the effect of
any representations or warranties made by the Sellers in this Agreement or the
Ancillary Agreements or shall relieve any Seller of any of its obligations under
this Agreement or the Ancillary Agreements.
8.4 NO ADDITIONAL RIGHTS OR REMEDIES UNDER CERTAIN AGREEMENTS.
▇▇▇▇▇▇▇▇▇ plc and the Purchaser hereby agree, on their own behalf and on behalf
of each other Seller and each Subsidiary Purchaser, respectively, that,
notwithstanding any provision to the contrary in any Local Purchase Agreement,
the Target Asset Purchase Agreement or any applicable law, statute, rule or
regulation, the legal or equitable contractual rights or remedies that any of
the Sellers on the one hand, or any of the Purchasers, on the other hand, may
have in respect of any breach or violation by the other of any of its
representations, warranties, obligations, covenants or agreements under this
Agreement or any of the Local Purchase Agreements or the Target Asset Purchase
Agreement shall be limited to the rights and remedies under this Agreement and
hereby waive, on their behalf and on behalf of each other Seller and each
Subsidiary Purchaser, respectively, any additional rights or remedies they may
otherwise have under any Local Purchase Agreement, the Target Asset Purchase
Agreement or any applicable law, statute, rule or regulation. For the avoidance
of doubt and without limiting the generality of the foregoing, the provisions of
Section 7 shall be the sole monetary remedy for breaches of any of the
provisions of this Agreement or any of the Local Purchase Agreements or the
Target Asset Purchase Agreement, and the provisions of Sections 8.13-8.16 shall
govern any disputes between any of the parties to this Agreement or any of the
Local Purchase Agreements or the Target Asset Purchase Agreement. In the event
that, notwithstanding the foregoing provisions of this Section 8.4, any Seller
or the Purchaser or any Subsidiary Purchaser asserts any rights or remedies it
alleges it has under any Local Purchase Agreement, the Target Asset Purchase
Agreement or any applicable law, statute, rule or regulation, ▇▇▇▇▇▇▇▇▇ plc and
the Purchaser hereby agree to indemnify and hold each other and each other's
Affiliates harmless against any Damages arising out of such assertions of any
Seller or the Purchaser or any Subsidiary Purchaser, respectively.
8.5 TERMINATION. (a) Notwithstanding anything contained herein to the
contrary, this Agreement may be terminated and the transactions contemplated
hereby abandoned at any time prior to the Closing:
(i) by mutual written consent of the Sellers and the Purchaser;
(ii) by any party hereto, if the Closing does not occur on or
prior to January 23, 2000;
(iii) by the Purchaser by written notice to the Sellers
Representative if (A) any
-67-
77
of the conditions set forth in Sections 6.2 or 6.4 shall not have
been, or if it becomes apparent that any of such conditions will not
be, fulfilled by 5:00 p.m. New York City time on January 23, 2000 or
(B) the operating profit before head office charges and extraordinary
items (as defined in GAAP) for the Target Company Group for the year
ended December 31, 1998 shown in the Audited Financial Statements is
more than five percent (5%) lower than the operating profit before
head office charges for the Target Company Group for such period shown
in the unaudited Financial Statements delivered pursuant to Section
2.5; or
(iv) by Sellers by written notice to the Purchaser if (A) any of
the conditions set forth in Sections 6.2 or 6.3 shall not have been,
or if it becomes apparent that any of such conditions will not be,
fulfilled by 5:00 p.m. New York City time on January 23, 2000 or (B)
the operating profit before head office charges and extraordinary
items (as defined in GAAP) for the Target Company Group for the year
ended December 31, 1998 shown in the Audited Financial Statements is
more than five percent (5%) higher than the operating profit before
head office charges for the Target Company Group for such period shown
in the unaudited Financial Statements delivered pursuant to Section
2.5;
PROVIDED, HOWEVER, that the party seeking termination pursuant to the foregoing
clauses (ii), (iii) or (iv) is not in breach in any material respect of any of
its representations, warranties, covenants or agreements contained in this
Agreement, other than the representations and warranties set forth in Section
2.5 with respect to the unaudited Financial Statements for the years ended
December 31, 1996, 1997 and 1998 if Sellers terminate pursuant to subclause (B)
of clause (iv) above.
(b) In the event of termination by the Sellers, on the one hand, or
the Purchaser, on the other hand, pursuant to this Section 8.5, written notice
thereof shall forthwith be given to the other party and the transactions
contemplated by this Agreement shall be terminated without further action by any
party. If the transactions contemplated by this Agreement are terminated as
provided herein:
(i) the Purchaser shall return to the Sellers all documents and
other materials received from the Sellers, their Affiliates or their
agents (including all copies of or materials developed from any such
documents or other materials) relating to the transactions
contemplated hereby, whether obtained before or after the execution
hereof; and
(ii) all confidential information received by the Purchaser with
respect to the Sellers and their Affiliates shall be treated in
accordance with the Confidentiality Agreement which shall remain in
full force and effect notwithstanding the termination of this
Agreement.
(c) If this Agreement is terminated as provided in this Section 8.5,
this Agreement shall become null and void and of no further force or effect,
except for the Confidentiality Agreement, Section 4.5 relating to publicity and
Section 8.6 relating to certain expenses; PROVIDED that nothing in this Section
8.5 shall be deemed to release the Sellers, on the one hand, or the Purchaser,
on the other hand, from any liability for any breach by any of the Sellers or
the Purchaser, as the case may be, of the terms and provisions of this Agreement
or to impair the right of any party to compel specific
-68-
78
performance by any of the Sellers or the Purchaser, as the case may be, of their
respective obligations under this Agreement.
8.6 EXPENSES. Except as expressly provided herein, whether or not the
transactions contemplated herein shall be consummated, each party shall pay its
own expenses incident to the preparation and performance of this Agreement and
the Ancillary Agreements.
8.7 FURTHER ACTIONS. Each party shall execute and deliver such
certificates and other documents and take such other actions as may reasonably
be requested by the other party in order to consummate or implement the
transactions contemplated hereby.
8.8 POST-CLOSING ACCESS. In connection with any matter relating to any
period prior to, or any period ending on, the Closing, the Purchaser shall (and
shall cause its Affiliates to), upon the reasonable request of the Sellers,
permit the Sellers and their representatives full access at all reasonable times
to the books and records of each member of the Target Company Group which shall
have been transferred to the Purchaser, and the Purchaser shall execute (and
shall cause each member of the Target Company Group to execute) such documents
as the Sellers may reasonably request to enable the Sellers to file any required
reports or Returns relating to such member. Subject to Section 4.4.8 of this
Agreement, the Purchaser may dispose of such books and records at any time,
PROVIDED that for the six-year period beginning with the Closing Date, the
Purchaser shall give 30 days' prior written notice of any such destruction to
the Sellers, and the Sellers shall have the right to take possession of such
books and records within 60 days at no expense to the Purchaser.
8.9 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made as follows: (a) if sent by registered or certified mail in the United
States return receipt requested, upon receipt; (b) if sent by reputable
overnight air courier (such as DHL or Federal Express), two business days after
mailing; (c) if sent by facsimile transmission, with a copy mailed on the same
day in the manner provided in (a) or (b) above, when transmitted and receipt is
confirmed by telephone; or (d) if otherwise actually personally delivered, when
delivered and shall be delivered as follows:
if to any of the Sellers, to such Seller:
c/o Bowthorpe plc
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax Number: ▇▇▇-▇▇-▇▇▇-▇▇▇-▇▇▇▇
Attention: Company Secretary
-69-
79
with a copy to (which shall not constitute notice):
Debevoise & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
if to the Purchaser:
Aavid Thermal Technologies, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman and
Chief Executive Officer
with copies to (which shall not constitute notice):
Aavid Thermal Technologies, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq., Vice President and
General Counsel
Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
or to such other address or fax number or to such other person as either party
hereto shall have last designated by notice to the other party.
8.10 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, but shall not be assignable, by operation of law or otherwise, by any
of the Sellers, on the one hand, or the Purchaser, on the other hand, without
the prior written consent of the Sellers or the Purchaser, as the case may be,
and any purported assignment or other transfer without such consent shall be
void and unenforceable; PROVIDED that no such consent shall be required for the
Purchaser (I) to assign all or any part of its rights and obligations under this
Agreement to one or more of its Affiliates, PROVIDED that no such assignment
shall relieve the Purchaser of its obligations hereunder and each such assignee
shall execute and deliver to
-70-
80
the Sellers an assumption agreement in form and substance reasonably
satisfactory to the Sellers pursuant to which such assignee becomes jointly and
severally obligated hereunder with the Purchaser or (II) to grant a security
interest in its rights hereunder to CIBC or any other financial institution
extending credit to Purchaser and its Affiliates and for the enforcement of all
rights and remedies in connection herewith.
8.11 NO THIRD PARTY BENEFICIARIES. Except as otherwise provided
herein, nothing in this Agreement shall confer any rights upon any person or
entity which is not a party or a successor or permitted assignee of a party to
this Agreement.
8.12 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall constitute one and the same instrument.
8.13 INTERPRETATION. The Section headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or affect the
meaning or interpretation of any provision hereof. Any reference to any federal,
state, local, or foreign statute or law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without limitation. As used
in this Agreement, the term "PERSON" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, a limited liability
company, an association, an unincorporated organization or any other entity or
organization, including a government or any department or agency thereof. Any
references to the knowledge of any Seller or any Seller's knowledge or any
similar formulation shall mean the actual knowledge of each of ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇.▇. ▇▇, ▇▇▇▇▇ Ma, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ Ortzi, ▇.▇. ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇, in each case after due inquiry,
including inquiry of other officers and employees of the Sellers and the Target
Company Group responsible for the relevant matter. References herein to a
particular schedule shall be deemed to refer to the versions of such schedule
relating to each jurisdiction, and general disclosure relating to the Target
Company Group as a whole contained in one Schedule shall be deemed to apply to
all Schedules. The disclosure of any matter in the Schedules hereto shall be
deemed to be a disclosure for all purposes of this Agreement to which such
matter could reasonably be likely to be pertinent, but shall expressly not be
deemed to constitute an admission by any Seller or the Purchaser, or to
otherwise imply, that any such matter is material for the purposes of this
Agreement or that such matter is required to be disclosed or that the existence
of such would if not disclosed constitute a breach or violation of this
Agreement. However, no disclosure in a Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Schedule identifies and describes the exception with such detail as would allow
a reasonable person to understand what exception is being taken. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other item itself).
The parties intend that each representation, warranty and covenant contained
herein shall have independent significance. If any party has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the
-71-
81
relative levels of specificity) which the party has not breached shall not
detract from or mitigate the fact that the party is in breach of the first
representation, warranty or covenant.
8.14 GOVERNING LAW. This Agreement shall be construed, performed and
enforced in accordance with the laws of the State of New York, without regard to
principles of conflicts of law.
8.15 CONSENT TO JURISDICTION, ETC. (a) Each of the parties hereto
hereby irrevocably and unconditionally submits, for itself and its property, to
the exclusive jurisdiction of any New York State court or Federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement, the Ancillary Agreements or the transactions contemplated hereby or
thereby or for recognition or enforcement of any judgment relating thereto, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in such New York State court or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the
Ancillary Agreements or the transactions contemplated hereby or thereby in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 8.9. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
8.16 WAIVER OF JURY TRIAL. (a) EACH PARTY ACKNOWLEDGES AND AGREES THAT
ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE ANCILLARY AGREEMENTS
IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, THE ANCILLARY AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
(b) EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (ii) IT UNDERSTANDS
-72-
82
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (iii) IT MAKES SUCH WAIVER
VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 8.16.
-73-
83
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
▇▇▇▇▇▇▇▇▇ PLC
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title Chief Executive Officer
▇▇▇▇▇▇▇▇▇ B.V.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name ▇▇▇▇ ▇▇▇▇▇▇▇
Title Duly Authorized Attorney
▇▇▇▇▇▇▇▇▇ INTERNATIONAL INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Name ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title Assistant Secretary
▇▇▇▇▇▇▇▇▇ GMBH
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name ▇▇▇▇ ▇▇▇▇▇▇▇
Title Duly Authorized Attorney
AAVID THERMAL TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title Chief Executive Officer
-74-