Exhibit 10.14
--------------------------------------------------------------------------------
SHARE PURCHASE AGREEMENT
by and among
ADC TELECOMMUNICATIONS, INC.,
KRONE INTERNATIONAL HOLDING INC.,
KRONE DIGITAL COMMUNICATIONS INC.,
GENTEK HOLDING CORPORATION,
and
GENTEK INC.
March 25, 2004
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Article I The Acquisition.........................................................................................1
1.1 Purchase and Sale...............................................................................1
1.2 Purchase Price..................................................................................2
1.3 Closing Transactions............................................................................3
1.4 Purchase Price Adjustment.......................................................................4
1.5 Right to Revise Structure.......................................................................5
1.6 Taking of Necessary Action......................................................................6
Article II Representations and Warranties of Seller and Parent....................................................6
2.1 Incorporation and Corporate Power...............................................................6
2.2 Title to Shares.................................................................................6
2.3 Execution, Delivery; Valid and Binding Agreement................................................6
2.4 No Violations, etc..............................................................................7
2.5 Parent Reorganization...........................................................................7
Article III Representations and Warranties Regarding the Companies................................................7
3.1 Incorporation; Corporate Power and Authority....................................................8
3.2 Subsidiaries....................................................................................9
3.3 Capitalization..................................................................................9
3.4 Execution, Delivery; Valid and Binding Agreement................................................9
3.5 No Violations, etc.............................................................................10
3.6 Financial Statements...........................................................................10
3.7 Absence of Undisclosed Liabilities.............................................................11
3.8 Absence of Certain Developments................................................................11
3.9 Title to Properties............................................................................13
3.10 Accounts Receivable............................................................................14
3.11 Inventory......................................................................................14
3.12 Tax Matters....................................................................................14
3.13 Contracts and Commitments......................................................................16
3.14 Intellectual Property Rights...................................................................17
3.15 Litigation.....................................................................................19
3.16 Employees......................................................................................19
3.17 Employee Benefit Plans.........................................................................20
-i-
3.18 Insurance......................................................................................23
3.19 Affiliate Transactions.........................................................................23
3.20 Customers and Suppliers........................................................................23
3.21 Compliance with Laws; Permits..................................................................24
3.22 Environmental Matters..........................................................................24
3.23 Brokerage......................................................................................26
3.24 No Other Representations.......................................................................26
Article IV Representations and Warranties of Buyer...............................................................26
4.1 Incorporation and Corporate Power..............................................................26
4.2 Execution, Delivery; Valid and Binding Agreement...............................................27
4.3 No Violations, etc.............................................................................27
4.4 Litigation.....................................................................................28
4.5 Buyer Financing................................................................................28
Article V Conduct Prior to the Closing...........................................................................28
5.1 Conduct of the Business........................................................................28
5.2 Access to Books and Records....................................................................30
5.3 Access to Customers and Suppliers..............................................................30
5.4 Integration Planning...........................................................................30
Article VI Additional Agreements.................................................................................30
6.1 Regulatory Filings.............................................................................30
6.2 Conditions.....................................................................................31
6.3 No Negotiations................................................................................31
6.4 Employee Matters...............................................................................32
6.5 Benefit Plans..................................................................................32
6.6 Confidentiality................................................................................34
6.7 Notification of Certain Matters................................................................35
6.8 Noncompetition.................................................................................35
6.9 Nonsolicitation................................................................................35
6.10 Litigation Support.............................................................................35
6.11 Books and Records; Access......................................................................35
6.12 Assignment of Confidentiality Agreements.......................................................36
6.13 Intercompany Contracts.........................................................................36
6.14 Audited Financial Statements...................................................................36
-ii-
6.15 Further Assurances.............................................................................37
Article VII Conditions to Closing................................................................................37
7.1 Conditions to Obligations of Each Party to Effect the Acquisition..............................37
7.2 Additional Conditions to Buyer's Obligations...................................................38
7.3 Additional Conditions to Seller's Obligations..................................................39
Article VIII Termination.........................................................................................40
8.1 Termination....................................................................................40
8.2 Effect of Termination..........................................................................41
Article IX Survival; Indemnification.............................................................................41
9.1 Survival of Representations and Warranties and Covenants.......................................41
9.2 Indemnification by Parent and Seller...........................................................41
9.3 Indemnification by Buyer.......................................................................43
9.4 Notice of Claims...............................................................................43
9.5 Method of Asserting Claims.....................................................................44
9.6 Indemnity Payments.............................................................................45
9.7 Sole and Exclusive Remedy......................................................................45
Article X Allocation of Taxes; Tax Returns.......................................................................45
10.1 Tax Returns; Allocation of Tax Liabilities.....................................................45
10.2 Cooperation....................................................................................48
10.3 Transfer Taxes.................................................................................49
10.4 Section 338(h)(10) Election....................................................................49
10.5 Survival.......................................................................................51
Article XI Miscellaneous.........................................................................................51
11.1 Press Releases and Announcements...............................................................51
11.2 Expenses.......................................................................................51
11.3 Amendment and Waiver...........................................................................51
11.4 Notices........................................................................................52
11.5 Interpretation.................................................................................52
11.6 No Third Party Beneficiaries...................................................................53
11.7 Severability...................................................................................53
11.8 Complete Agreement.............................................................................53
11.9 Assignment.....................................................................................53
11.10 Counterparts...................................................................................53
-iii-
11.11 Governing Law..................................................................................53
11.12 Submission to Jurisdiction.....................................................................53
11.13 Waiver of Jury Trial...........................................................................53
-iv-
Exhibits
Exhibit A Form of Transition Services Agreement
Schedules
Schedule 1.1(b) Related IP
Schedule 1.2(b)(iv) Cash Obligation Liabilities
Schedule 1.3(b)(ii) Intercompany Accounts
Schedule 11.5 Knowledge Group
INDEX OF DEFINED TERMS
Accountant...................................................................................................1.4(b)
Accrued Unfunded Pension Liability........................................................................1.2(b)(i)
Acquired Companies.......................................................................................1.2(b)(ii)
Acquisition................................................................................................Preamble
Actual Closing Statement.....................................................................................1.4(a)
Actuarial Report..........................................................................................1.2(b)(i)
Adjustments..................................................................................................1.2(a)
Affiliate......................................................................................................11.5
Agreement..................................................................................................Preamble
Allocation Arbiter..........................................................................................10.4(e)
Asset Allocation Statements.................................................................................10.4(e)
Balance Sheet Date..............................................................................................3.7
Basket Amount................................................................................................9.2(b)
Buyer......................................................................................................Preamble
Buyer 401(k) Plan............................................................................................6.5(e)
Buyer Environmental Losses...................................................................................9.2(b)
Buyer Indemnified Parties....................................................................................9.2(a)
Buyer Losses.................................................................................................9.2(a)
Buyer Material Adverse Effect...................................................................................4.1
Buyer's Representatives.........................................................................................5.2
Cap..........................................................................................................9.2(b)
Cash Amount.............................................................................................1.2(b)(iii)
Cash Obligation Liabilities...............................................................................1.2(b)(v)
Cash Obligation Liabilities Excess Amount.................................................................1.2(a)(i)
Charter Documents............................................................................................3.1(b)
Closing......................................................................................................1.3(a)
Closing Date.................................................................................................1.3(a)
COBRA........................................................................................................6.5(f)
Code........................................................................................................3.12(a)
Companies..................................................................................................Preamble
Company Capital Stock........................................................................................3.3(a)
Company Employees...............................................................................................6.4
Company Intellectual Property...............................................................................3.14(a)
-i-
Company Pension Obligation................................................................................1.2(b)(i)
Comparable Election.........................................................................................10.4(b)
Confidential Information....................................................................................3.14(e)
Contract Employee..........................................................................................Preamble
Contracts...................................................................................................3.13(a)
Disclosure Schedule......................................................................................Article II
Election....................................................................................................10.4(b)
Eligible Companies..........................................................................................10.4(b)
Environmental Basket Amount..................................................................................9.2(b)
Environmental Claim......................................................................................3.22(g)(i)
Environmental Laws......................................................................................3.22(g)(ii)
Environmental Permits.......................................................................................3.22(b)
ERISA.......................................................................................................3.17(a)
Estimated Closing Purchase Price.............................................................................1.2(d)
FAS 87....................................................................................................1.2(b)(i)
Final Closing Purchase Price.................................................................................1.4(b)
Foreign Plan................................................................................................3.17(i)
Forms 8023..................................................................................................10.4(b)
GenTek KERP..................................................................................................6.5(b)
German Pension Plans........................................................................................3.17(j)
Governing Documents..........................................................................................3.1(b)
Governmental Entity.............................................................................................2.4
Hazardous Material.....................................................................................3.22(g)(iii)
HSR Act.........................................................................................................2.4
include........................................................................................................11.5
includes.......................................................................................................11.5
including......................................................................................................11.5
Indemnified Party...............................................................................................9.5
Indemnifying Party..............................................................................................9.5
Initial Resolution Period....................................................................................1.4(b)
insiders.......................................................................................................3.19
Intellectual Property.......................................................................................3.14(a)
Intercompany Accounts........................................................................................1.3(b)
IRS.........................................................................................................3.12(e)
knowledge......................................................................................................11.5
Krone 2003 MIP...............................................................................................6.5(c)
Krone 2004 MIP...............................................................................................6.5(c)
Krone Digital..............................................................................................Preamble
Krone International........................................................................................Preamble
Latest Balance Sheet.........................................................................................3.6(a)
Latest Financial Statements..................................................................................3.6(a)
Law.............................................................................................................2.4
Leased Real Property.........................................................................................3.9(c)
Leases.......................................................................................................3.9(c)
Liens...........................................................................................................1.1
Losses.......................................................................................................9.2(a)
-ii-
material adverse effect..............................................................................7.3(a). 7.2(a)
Material Adverse Effect......................................................................................3.1(a)
materiality..........................................................................................7.3(a). 7.2(a)
Net Intercompany Accounts....................................................................................1.3(b)
non-Business Plans..........................................................................................3.17(k)
Objection Notice.............................................................................................1.4(a)
Objection Period.............................................................................................1.4(a)
Order...........................................................................................................2.4
Owned Real Property..........................................................................................3.9(b)
Parent.....................................................................................................Preamble
Parent 401(k) Plan...........................................................................................6.5(e)
Permits.....................................................................................................3.21(b)
Permitted Liens..............................................................................................3.8(b)
Person.........................................................................................................11.5
Plan........................................................................................................3.17(a)
Post-Closing Tax Period.....................................................................................10.1(h)
Pre-Closing Tax Period......................................................................................10.1(i)
Proposed Closing Statement...................................................................................1.4(a)
Purchase Price...............................................................................................1.2(a)
Real Property................................................................................................3.9(c)
Related Documents............................................................................................9.2(a)
Related IP......................................................................................................1.1
Release.................................................................................................3.22(g)(iv)
Returns.....................................................................................................3.12(a)
SEC.........................................................................................................3.21(e)
Section 338(h)(10) Election.................................................................................10.4(b)
Seller.....................................................................................................Preamble
Seller Indemnified Parties...................................................................................9.3(a)
Seller Losses................................................................................................9.3(a)
Shares.....................................................................................................Preamble
Straddle Period.............................................................................................10.1(j)
Subsidiaries....................................................................................................3.2
Subsidiary......................................................................................................3.2
Subsidiary Capital Stock.....................................................................................3.3(a)
Tax.........................................................................................................3.12(l)
Tax Benefits................................................................................................10.1(k)
Tax Detriments..............................................................................................10.1(l)
Tax Package.................................................................................................10.1(b)
Taxes.......................................................................................................3.12(l)
Term............................................................................................................6.9
Third Party Action...........................................................................................9.5(a)
Third Party Expenses...........................................................................................11.2
Third Party Intellectual Property Rights....................................................................3.14(b)
U.S. GAAP................................................................................................1.2(b)(iv)
without limitation.............................................................................................11.5
-iii-
SHARE PURCHASE AGREEMENT
This SHARE PURCHASE AGREEMENT (this "Agreement"), dated March 25, 2004,
is made and entered into by and among ADC Telecommunications, Inc., a Minnesota
corporation ("Buyer"), Krone International Holding Inc., a Delaware corporation
("Krone International"), Krone Digital Communications Inc., a Delaware
corporation ("Krone Digital" and together with Krone International, the
"Companies"), GenTek Holding Corporation, a Delaware corporation and the sole
shareholder of the Companies ("Seller"), and GenTek Inc., a Delaware corporation
and the parent entity of Seller ("Parent").
WHEREAS, Seller owns 1,000 shares of common stock of Krone
International and 1,000 shares of common stock of Krone Digital (collectively,
the "Shares"), such Shares constituting all of the issued and outstanding shares
of capital stock of the Companies; and
WHEREAS, Seller desires to sell, and Buyer desires to purchase, the
Shares, including the business and assets of the Companies, as well as the
Related IP (as defined below); and
WHEREAS, the respective Boards of Directors of Buyer, Parent, Seller
and the Companies have determined that it is advisable and in the best interests
of the respective corporations and their shareholders that Buyer acquire all of
the outstanding Shares of the Companies and the Related IP in exchange for cash
(the "Acquisition") in accordance with the terms of this Agreement; and
WHEREAS, certain employees of the Companies are concurrently entering
into employee retention agreements with Buyer (the "Contract Employees"); and
WHEREAS, Buyer, Parent, Seller and the Companies desire to make certain
representations, warranties, covenants, and agreements in connection with, and
establish various conditions precedent to, the Acquisition;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth in this Agreement, the parties hereto hereby
agree as follows:
Article I
The Acquisition
1.1 Purchase and Sale. Upon the terms and subject to the conditions
contained herein, at the Closing (as defined in Section 1.3 hereof), Seller
shall sell, transfer and deliver to Buyer (or shall cause its subsidiaries or
affiliates to sell, transfer and deliver to Buyer), and Buyer shall purchase and
accept from Seller (or Seller's subsidiaries or Affiliates, as applicable),
Seller's right, title and interest in and to (a) the Shares, which Shares shall
comprise in the aggregate all of the shares of capital stock of the Companies
that will be issued and outstanding on the Closing Date (as defined in Section
1.3 hereof), free and clear of any and all liens, security interests, claims,
pledges, charges or other encumbrances or restrictions of any kind
(collectively, "Liens"), and (b) those certain items of intellectual property
set forth on Schedule 1.1(b) hereof (the "Related IP"), free and clear of any
and all Liens except for Permitted Liens (as defined in Section 3.8(b) hereof).
1.2 Purchase Price.
(a) Subject to the terms and conditions of this Article I, the
total purchase price (the "Purchase Price") to be paid by Buyer for the Shares
and the Related IP shall be an amount equal to $350,000,000 (x) minus each of
the following adjustments (collectively, the "Adjustments"):
(i) an amount equal to the excess (if any) of (A) the Cash
Obligation Liabilities over (B) $15,900,000 (such excess hereafter
referred to as the "Cash Obligation Liabilities Excess Amount"); and
(ii) an amount equal to the Accrued Unfunded Pension Liability
as of the Closing;
and (y) plus the Cash Amount.
(b) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "Accrued Unfunded Pension Liability" means the sum of the
excess of the projected benefit obligation (as defined in Statement of
Financial Accounting Standards No. 87 ("FAS 87")) for each Company's
defined benefit pension plan or similar obligation covering employees
of the Acquired Companies (other than such employees who participate in
the GenTek pension plan and not the Company's pension plan) ("Company
Pension Obligation"), over the fair market value as of the Closing Date
of assets accumulated to provide for the Company Pension Obligation,
using an exchange rate of $1.2134 to 1 Euro, in all cases determined
using the same assumptions and methodology that has been used in the
most recent actuarial report entitled Versicheerungsmathematisches
Gutachten uber die Pensionsverbindlichkeiten der Krone GmbH, Berlin,
prepared by Aon ▇▇▇▇▇ & ▇▇▇▇▇▇▇ Consulting GmbH, dated December 18,
2003 and effective December 31, 2003 (the "Actuarial Report") (subject
only to adjustment based on such assumptions and methodology to
calculate the obligations and assets as of the Closing).
(ii) "Acquired Companies" means the Companies and the
Subsidiaries (as defined in Section 3.2 hereof).
(iii) "Cash Amount" means the amount of any cash or "cash
equivalents" (which, for purposes of this definition, shall mean bank
deposits, money market accounts or other short-term investments that
would be reported on a balance sheet as cash pursuant to U.S. GAAP) of
the Acquired Companies or any of their wholly owned Subsidiaries as
recorded on the books and records thereof as of Closing (other than any
cash or cash equivalents that are "blocked," or otherwise restricted
from use or withdrawal or repatriation to the U.S. as a result of
exchange controls or similar restrictions); provided, for purposes of
this Agreement, in no event shall such amount exceed $2,500,000 in the
aggregate.
-2-
(iv) "U.S. GAAP" means generally accepted accounting
principles and practices of the United States, as in effect from time
to time.
(v) "Cash Obligation Liabilities" means those certain
liabilities of the Acquired Companies set forth in Schedule 1.2(b)(v)
hereof as of the Closing.
(c) The Adjustments provided for in Section 1.2(a) shall be
determined in accordance with U.S. GAAP, and on a basis consistent with the
accounting methods, practices and procedures used to prepare the Latest
Financial Statements (as defined in Section 3.6(a) hereof) insofar as such
practices are consistent with U.S. GAAP and, as applicable, Section 1.2(b)(i).
(d) Not less than three business days prior to the Closing
Date, Seller and the Companies shall prepare and deliver to Buyer (i) a good
faith estimate of the Purchase Price as of the Closing Date (the "Estimated
Closing Purchase Price"), setting forth, in reasonable detail, a calculation of
(A) the estimated Cash Obligation Liabilities and Cash Amount prepared in
compliance with Section 1.2(c) above and (B) the estimated Accrued Unfunded
Pension Liability, prepared in compliance with Section 1.2(c) above, and (ii) a
certificate of the Chief Financial Officer of Parent certifying the foregoing.
1.3 Closing Transactions.
(a) The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇ & Whitney
LLP, Suite 1500, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ within two
business days after the date on which the last of the conditions to the Closing
set forth in Article VII, other than the requirement that certain documents be
delivered at the Closing, shall have been satisfied or waived, or at such other
place and on such other date as is mutually agreeable to the parties ("Closing
Date").
(b) At the Closing:
(i) Buyer shall pay the Estimated Closing Purchase Price to
Seller by wire transfer of immediately available funds against delivery
of certificates representing the Shares, duly endorsed in blank or
accompanied by duly executed stock powers in form reasonably
satisfactory to Buyer, which Shares shall be free and clear of all
Liens;
(ii) Except as set forth in Schedule 1.3(b)(ii) hereof or in
the Transition Services Agreement, the Net Intercompany Accounts shall
be settled and reduced to zero as of the Closing. For purposes of this
Agreement, "Net Intercompany Accounts" means the amount of the
Intercompany Accounts owing to Seller and its subsidiaries and
Affiliates (other than the Acquired Companies) by the Acquired
Companies, net of the Intercompany Accounts owing to the Acquired
Companies by Seller and its subsidiaries and Affiliates (other than the
Acquired Companies). "Intercompany Accounts" means the accounts
maintained on the books and records of the Seller and the Acquired
Companies (in accordance with their customary practices, and whether or
not evidenced by promissory notes or other instruments) in which there
are recorded amounts owed (plus interest, if any, accrued through the
Closing Date) by Seller or any of its subsidiaries and Affiliates
(other than the Acquired Companies) to the Acquired Companies or by the
-3-
Acquired Companies to Seller or any of its subsidiaries and Affiliates
(other than the Acquired Companies), attributable to intercompany
transactions through the Closing Date in respect of cash advances,
current federal and state Taxes (as defined in Section 3.12 hereof)
payable and receivable, intercorporate expense allocations and other
corporate charges or transactions for goods or services, whether
provided by Seller or any of its subsidiaries and Affiliates (other
than the Acquired Companies) to the Acquired Companies or by the
Acquired Companies to Seller or any of its subsidiaries and Affiliates
(other than the Acquired Companies); and
(iii) The Companies and Seller shall deliver to Buyer the
documents required to be delivered to Buyer under Section 7.2(g) below,
and Buyer shall deliver to Seller the documents required to be
delivered to Seller under Section 7.3(c) below.
1.4 Purchase Price Adjustment.
(a) Within 90 days following the Closing Date, Buyer shall
prepare and deliver to Seller its calculation (to be made in accordance with the
terms of Section 1.2) of the Cash Obligation Liabilities Excess Amount (if any),
the Cash Amount and the Accrued Unfunded Pension Liability (the "Proposed
Closing Statement" and, in its final and binding form after resolution of any
disputes pursuant to this Section, the "Actual Closing Statement") and the
adjusted Closing Purchase Price resulting from the Proposed Closing Statement,
together with a copy of all supporting work papers (including schedules,
memoranda and other documents) utilized in the preparation of the Proposed
Closing Statement and the calculation of the Closing Purchase Price, and Seller
shall have a period of 30 days (the "Objection Period") after delivery of the
Proposed Closing Statement in which to provide written notice to Buyer of any
objections thereto (the "Objection Notice"), setting forth the specific item of
the Proposed Closing Statement to which each such objection relates and the
basis for each such objection in reasonable detail. The Proposed Closing
Statement and the resulting Closing Purchase Price shall be deemed to be
accepted by Seller, and shall become final and binding on the parties, on the
later of the expiration of the Objection Period or the date on which all
objections have been resolved by the parties or the Accountant (as defined
below) pursuant to this Section. If Seller gives any such Objection Notice
within the Objection Period, then Seller and Buyer shall attempt in good
faith to resolve any dispute concerning the item(s) subject to such Objection
Notice as soon as practicable. If Seller and Buyer do not resolve any dispute
arising in connection with the Proposed Closing Statement within the time period
specified below, such dispute shall be resolved in accordance with the
procedures set forth in Section 1.4(b) below.
(b) If Buyer and Seller have not been able to resolve a
dispute within 30 days after the date of delivery of the Objection Notice, which
30 day period may be extended by written agreement of Buyer and Seller (such
period, as it may be extended, the "Initial Resolution Period"), the parties
shall submit such dispute to, and such dispute shall be resolved fully, finally
and exclusively by a mutually agreeable nationally recognized independent
accounting firm (the "Accountant"). The fees and expenses of Accountant incurred
in the resolution of such dispute shall be borne equally by Buyer and Seller.
Buyer and Seller shall use their respective reasonable best efforts to cause the
Accountant to issue a written determination to Seller and Buyer as promptly as
practicable, but in any event within 30 days, following the date on which the
Proposed Closing Statement is delivered to the Accountant, with such
-4-
determination based on the written submissions and other information requested
by the Accountant related to the disputed items that have been submitted by the
parties to the Accountant, as to whether and to what extent (if any) the
Proposed Closing Statement and resulting adjustment in the Closing Purchase
Price require adjustment. The parties shall instruct the Accountant to, and
shall use their respective best efforts to cause the Accountant to, make its
determination in a manner consistent with Section 1.2(c) hereof. Such written
determination shall provide a written explanation in reasonable detail of each
such required adjustment, including the basis therefor. All negotiations
pursuant to this Section 1.4(b) shall be treated as compromise and settlement
negotiations for purposes of Rule 408 of the Federal Rules of Evidence and
comparable state rules of evidence, and all negotiations, submissions to the
Accountant, and arbitration proceedings under this Section 1.4(b) shall be
treated as confidential information. The Accountant shall be bound by a mutually
agreeable confidentiality agreement. The procedures of this Section 1.4(b) are
exclusive and the determination of the Accountant shall be final, non-appealable
and binding on the parties. The decision rendered pursuant to this Section
1.4(b) may be filed as a judgment in any court of competent jurisdiction. Either
party may seek specific enforcement or take other necessary legal action to
enforce any decision under this Section 1.4(b). The other party's only defense
to such a request for specific enforcement or other legal action shall be fraud
by or on the part of the Accountant. Absent such fraud, such other party shall
reimburse the party seeking enforcement for its Third Party Expenses (as defined
in Section 11.2 hereof) related to such enforcement.
(c) Promptly after the Actual Closing Statement, the
Adjustments and the resulting Closing Purchase Price calculated with reference
thereto become final and binding on the parties under subsections (a) and (b) of
this Section 1.4, the Estimated Closing Purchase Price shall be recalculated by
giving effect to such final and binding amounts (as recalculated, the "Final
Closing Purchase Price").
(i) If the Estimated Closing Purchase Price is greater than
the Final Closing Purchase Price, Seller shall pay to Buyer within one
business day by wire transfer of immediately available funds, the
amount by which the Estimated Closing Purchase Price exceeds the Final
Closing Purchase Price.
(ii) If the Estimated Closing Purchase Price is less than the
Final Closing Purchase Price, Buyer shall pay to Seller within one
business day by wire transfer of immediately available funds, the
amount by which the Final Closing Purchase Price exceeds the Estimated
Closing Purchase Price.
1.5 Right to Revise Structure. By notice to Parent within 20 days of
the date hereof, Buyer may elect to revise the structure of the transactions
contemplated hereby to cause one or more of its wholly owned subsidiaries to
acquire 100% of the stock of one or more of the Companies and/or their
respective Subsidiaries on the same terms and conditions set forth herein in all
respects (other than such mutually agreed changes as are necessary to implement
the revised structure); provided, however, that in no event shall Parent or
Seller be required to proceed to implement any such revised structure that would
reasonably be expected to (a) delay, impede, prevent or otherwise adversely
effect the consummation of the transactions contemplated hereby in any respect
(including, without limitation, the receipt of any regulatory approvals and
consents or any other approvals or consents), (b) result in any additional tax
cost
-5-
or other cost, expense or other liability (contingent or otherwise) to Parent or
Seller or their Affiliates, (c) adversely effect the likelihood of the receipt
of regulatory approvals and consents or any other approvals and consents by any
party hereto or (d) otherwise be less advantageous to Parent or Seller than the
structure contemplated hereby.
1.6 Taking of Necessary Action. Buyer, Parent, Seller and the
Companies, respectively, shall each use commercially reasonable efforts to take
all such action as may be necessary or appropriate to effectuate the Acquisition
at the time specified in Section 1.3 hereof.
Article II
Representations and Warranties of Seller and Parent
Except as set forth in the Disclosure Schedule delivered by the
Companies and Seller to Buyer on the date hereof (the "Disclosure Schedule"),
Seller and Parent hereby jointly and severally represent and warrant to Buyer as
set forth in this Article II, and acknowledge that Buyer is relying upon such
representations and warranties in connection with the purchase of the Shares and
the Related IP. Each item disclosed in the Disclosure Schedule shall constitute
an exception to the representations and warranties to which it makes reference
and shall be deemed to be disclosed with respect to each section of the
Disclosure Schedule to which it relates and/or representation and warranty
herein given, without the necessity of repetitive disclosure or cross-reference,
so long as such item is fairly described with reasonable particularity and
detail and such description provides a reasonable indication that the item
applies to another schedule contained in the Disclosure Schedule.
2.1 Incorporation and Corporate Power. Each of Seller and Parent is a
corporation duly incorporated, validly existing and in good standing under the
Laws (as defined in Section 2.4 hereof) of the State of Delaware, with the
requisite corporate power and authority to enter into this Agreement and perform
its obligations hereunder.
2.2 Title to Shares. Seller has valid title to and is the sole record
and beneficial owner of all of the Shares, free and clear of any Liens other
than Permitted Liens, all of which Permitted Liens shall be removed or satisfied
prior to Closing. There are no agreements or restrictions which in any way limit
or restrict the transfer to Buyer of any of the Shares, and there are no
stockholder agreements, voting trusts or other agreements or understandings with
respect to the voting of any of the Shares.
2.3 Execution, Delivery; Valid and Binding Agreement. Each of Seller
and Parent has all requisite power and authority to execute and deliver, and
perform their respective obligations under, this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Seller and Parent and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all requisite
corporate action and no other corporate proceedings on Seller's or Parent's part
are necessary to authorize the execution, delivery or performance of this
Agreement. This Agreement has been duly and validly executed and delivered by
Seller and Parent and constitutes the valid and binding obligation of Seller and
Parent, enforceable against each of them in accordance with its terms, except to
the extent that their enforceability may be limited by
-6-
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
2.4 No Violations, etc. The execution, delivery and performance of this
Agreement by Seller and Parent do not and the consummation of the transactions
contemplated hereby will not: (a) contravene any provision of the Certificate of
Incorporation or Bylaws of Seller or Parent; (b) assuming the consents referred
to in subsection (e) of this Section 2.4 are obtained, violate or conflict in
any material respect with any federal, state, local or foreign law, statute,
ordinance, rule or regulation (collectively, a "Law") or any decree, writ,
injunction, judgment or order of any court or administrative or other
governmental body or of any arbitration award (collectively, an "Order") which
is either applicable to, binding upon or enforceable against Seller or Parent;
(c) assuming the consents referred to in subsection (e) of this Section 2.4 are
obtained, conflict with, result in any breach of any of the provisions of, or
constitute a default (or any event which would, with the passage of time or the
giving of notice or both, constitute a default) under, result in a violation of,
result in the creation of a right of termination, amendment, modification,
abandonment or acceleration under any material agreement, including any
indenture, hypothecation, mortgage, lease, license, loan agreement or other
material agreement or instrument which is either binding upon or enforceable
against Seller or Parent; (d) result in the creation of any Lien upon the Shares
or the Related IP; or (e) require any authorization, consent, approval,
exemption or other action by or notice to any court, commission, governmental
body, regulatory authority, agency or tribunal wherever located (a "Governmental
Entity") or any other third party, other than (i) in connection with the
applicable requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and any other similar foreign merger,
competition or anti-trust Laws, (ii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal or state securities Laws and (iii) consents set forth in
Section 2.4 of the Disclosure Schedule (which Seller and Parent undertake to use
their respective commercially reasonable efforts to obtain prior to the Closing
Date), except, in the case of subsections (b), (c) and (d) of this Section 2.4,
such violations, conflicts, breaches, defaults, terminations, amendments,
modifications, abandonments, accelerations, authorizations, consents, approvals,
exemptions, other actions or notices that, individually or in the aggregate,
would not have a Material Adverse Effect (as defined in Section 3.1(a) hereof).
2.5 Parent Reorganization. There are no restrictions resulting or
arising from that certain joint plan of reorganization of Parent and certain of
its subsidiaries, dated August 28, 2003 (as modified on October 3, 2003),
confirmed by the United States Bankruptcy Court for the District of Delaware on
October 7, 2003, that will prevent or materially delay Parent's or Seller's
ability to consummate the Acquisition or that will, or is reasonably likely to,
materially adversely affect the ability of the Companies and the Subsidiaries to
conduct their business after the Closing Date as currently conducted.
Article III
Representations and Warranties Regarding the Companies
Except as set forth in the Disclosure Schedule, Seller and Parent
hereby jointly and severally represent and warrant to Buyer as set forth in this
Article III, and acknowledge that Buyer is relying upon the following
representations and warranties in connection with the
-7-
purchase of the Shares and the Related IP. Each item disclosed in the Disclosure
Schedule shall constitute an exception to the representations and warranties to
which it makes reference and shall be deemed to be disclosed with respect to
each section of the Disclosure Schedule to which it relates and/or
representation and warranty herein given, without the necessity of repetitive
disclosure or cross-reference, so long as such item is fairly described with
reasonable particularity and detail and such description provides a reasonable
indication that the item applies to another schedule contained in the Disclosure
Schedule.
3.1 Incorporation; Corporate Power and Authority.
(a) Each of the Companies and the Subsidiaries is a
corporation duly organized, validly existing, duly registered (if applicable)
and in good standing under the laws of the jurisdiction of its organization (in
such jurisdictions that recognize the concept of good standing or a similar
concept) and has all requisite corporate power and authority to carry on its
business as now being conducted. Each of the Companies and the Subsidiaries has
all authorizations, licenses, permits and certifications necessary to carry on
its business as now being conducted and presently proposed to be conducted and
to own, lease and operate its assets, other than any such failures that,
individually or in the aggregate, would not have a Material Adverse Effect. Each
of the Companies and the Subsidiaries is duly qualified as a foreign corporation
to do business in every jurisdiction in which the nature of its business or its
ownership of property requires it to be so qualified, except for those
jurisdictions in which the failure to be so qualified would not, individually or
in the aggregate, have a Material Adverse Effect (as defined below). Section 3.1
of the Disclosure Schedule sets forth a true and complete list, by corporation,
of all jurisdictions in which the Companies and each of the Subsidiaries is
qualified and in good standing, if applicable. As used herein, the term
"Material Adverse Effect" means any change, effect, event or condition that (i)
has had or would, individually or in the aggregate, reasonably be expected to
have a material adverse effect on the business, assets (including intangible
assets), results of operations or financial condition of the Companies and the
Subsidiaries, taken as a whole, other than any such change, effect, event or
condition that results or arises from (A) changes or conditions affecting the
industry in which the Companies operate or market or produce their products and
services generally, except to the extent such changes or conditions
disproportionately affect the Companies and the Subsidiaries, taken as a whole
or (B) changes in general economic, regulatory or political conditions or
resulting from armed hostilities or terrorist actions, except to the extent such
changes or conditions or results disproportionately affect the Companies and the
Subsidiaries, taken as a whole or (C) the announcement of this Agreement and the
transactions contemplated hereby or the consummation of the transactions
contemplated hereby, or (ii) would prevent or materially delay the Companies',
Seller's or Parent's ability to consummate the Acquisition or the other
transactions contemplated hereby.
(b) None of the Companies or the Subsidiaries is in violation
of any of the provisions of its Certificate of Incorporation or other applicable
charter document (any such document hereinafter referred to as its "Charter
Documents") or Bylaws or other applicable governing document (any such documents
hereinafter referred to as its "Governing Documents"). The Companies have
delivered to Buyer accurate and complete copies of the respective Charter
Documents and Governing Documents, as currently in effect, of each of the
Companies and the Subsidiaries.
-8-
3.2 Subsidiaries. The Companies are the record and beneficial owners of
the outstanding shares of capital stock of each of the entities listed (and in
the amount and ownership percentage shown) in Section 3.2 of the Disclosure
Schedule (each, a "Subsidiary" and together, the "Subsidiaries"). Neither the
Companies nor any of the Subsidiaries owns, controls or holds with the power to
vote, directly or indirectly, of record, beneficially or otherwise, any capital
stock or any equity or ownership interests in any corporation, partnership,
association, joint venture or other entity, except for the Subsidiaries. All of
such shares so owned by the Companies are duly authorized, validly issued, fully
paid and nonassessable and are owned by it free and clear of any Lien with
respect thereto other than Permitted Liens, all of which Permitted Liens shall
be removed or satisfied prior to Closing.
3.3 Capitalization.
(a) The authorized capital stock of Krone International
consists of 1,000 shares of common stock, par value $1.00 per share, of which
1,000 shares are issued and outstanding and held of record by Seller. The
authorized capital stock of Krone Digital consists of 1,000 shares of common
stock, par value $0.01 per share, of which 1,000 shares are issued and
outstanding and held of record by Seller. The authorized capital stock of Krone
International and the authorized capital stock of Krone Digital are together
referred to herein as "Company Capital Stock," and the authorized capital stock
of each of the Subsidiaries is collectively referred to herein as "Subsidiary
Capital Stock." The Shares are duly authorized, validly issued, fully paid and
nonassessable, and are free of preemptive rights or any other third party
rights. All issued and outstanding shares of Company Capital Stock, and all
issued and outstanding shares of Subsidiary Capital Stock, have been offered,
sold and delivered by the Companies and the Subsidiaries, as applicable, in
compliance in all material respects with applicable securities and corporate
Laws. None of the Shares have been issued in violation of any preemptive rights,
rights of first refusal or similar rights.
(b) There are no options, warrants, calls, subscriptions,
convertible securities, rights (including preemptive rights), commitments or
agreements of any character to which any of the Companies or the Subsidiaries is
a party or by which it is bound obligating the Companies or the Subsidiaries to
issue, exchange, transfer, sell, repurchase, redeem or otherwise acquire any
shares of Company Capital Stock or Subsidiary Capital Stock or obligating the
Companies or the Subsidiaries to grant, extend, accelerate the vesting of or
enter into any such subscription, option, warrant, equity security, call, right,
commitment or agreement. There are no registration rights agreements, no voting
trust, proxy or other agreement or understanding to which any of the Companies
or the Subsidiaries is a party or by which it is bound with respect to any
equity security of any class of the Companies or the Subsidiaries. The share
registers and the transfer of shares of the Companies and the Subsidiaries,
copies of which have been made available to Buyer prior to the date hereof, are
up-to-date, complete and correct in all material respects.
3.4 Execution, Delivery; Valid and Binding Agreement. Each of the
Companies has all requisite corporate power and authority to execute and
deliver, and perform its obligation under, this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Companies and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all requisite
corporate action and no other corporate proceedings on the Companies' part are
necessary to
-9-
authorize the execution, delivery or performance of this Agreement. This
Agreement has been duly and validly executed and delivered by the Companies and
constitutes the valid and binding obligation of the Companies, enforceable
against the Companies in accordance with its terms, except to the extent that
their enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general equitable principles.
3.5 No Violations, etc. The execution, delivery and performance of this
Agreement by the Companies do not and the consummation of the transactions
contemplated hereby will not: (a) contravene any provision of the Certificate of
Incorporation or Bylaws of the Companies; (b) assuming the consents referred to
in subsection (e) of this Section 3.5 are obtained, violate or conflict in any
material respect with any federal, state, local or foreign Law or any Order
which is either applicable to, binding upon or enforceable against either of the
Companies or any of the Subsidiaries, or the business or any assets of either of
the Companies or any of the Subsidiaries; (c) assuming the consents referred to
in subsection (e) of this Section 3.5 are obtained, conflict with, result in any
breach of any of the provisions of, or constitute a default (or any event which
would, with the passage of time or the giving of notice or both, constitute a
default) under, result in a violation of, result in the creation of a right of
termination, amendment, modification, abandonment or acceleration under any
material agreement, including indenture, hypothecation, mortgage, lease,
license, loan agreement or other material agreement or instrument which is
either binding upon or enforceable against either of the Companies or any of the
Subsidiaries; (d) result in the creation of any Lien (other than Permitted
Liens) upon the Companies or any of the Subsidiaries or any of the assets of
either of the Companies or any of the Subsidiaries; or (e) require any
authorization, consent, approval, exemption or other action by or notice to any
Governmental Entity or any other third party, other than (i) in connection with
the applicable requirements of the HSR Act, and any other similar foreign
merger, competition or anti-trust Laws, (ii) such consents, waivers, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal or state securities Laws and (iii) consents
set forth in Section 3.5 of the Disclosure Schedule (which the Companies
undertake to use their commercially reasonable efforts to obtain prior to the
Closing Date), except, in the case of subsections (b), (c) and (d) of this
Section 3.5, such violations, conflicts, breaches, defaults, terminations,
amendments, modifications, abandonments, accelerations, authorizations,
consents, approvals, exemptions, other actions or notices that, individually or
in the aggregate, would not have a Material Adverse Effect.
3.6 Financial Statements.
(a) Parent has delivered to Buyer true and complete copies of
(i) the unaudited consolidated balance sheet, as of December 31, 2003, of the
Companies and the Subsidiaries (the "Latest Balance Sheet") and (ii) the
unaudited consolidated statements of income and cash flows of the Companies and
the Subsidiaries for the year ended December 31, 2003 (such unaudited statements
and the Latest Balance Sheet being herein referred to as the "Latest Financial
Statements").
(b) The Latest Financial Statements are based upon the
information contained in the books and records of the Companies and the
Subsidiaries and fairly present in all material respects the financial condition
of the Companies and the Subsidiaries as of the dates thereof and
-10-
results of operations for the periods referred to therein in accordance with
U.S. GAAP. The Latest Financial Statements have been prepared in accordance with
U.S. GAAP applicable to unaudited interim financial statements (and thus may not
contain all notes or prior period comparative data which are required to be
prepared in accordance with U.S. GAAP), and reflect all adjustments required by
U.S. GAAP (except for normally recurring year-end adjustments).
(c) Section 3.6(c) of the Disclosure Schedule lists, and
Seller has made available to Buyer copies of the documentation creating or
governing, all securitization transactions and "off-balance sheet arrangements"
(as defined in Item 303(a) of Regulation S-K promulgated under the Securities
Exchange Act of 1934) effected by the Companies or the Subsidiaries since
January 1, 2003.
(d) Seller is not aware of any significant deficiencies or
material weaknesses existing in the design or operation of the internal controls
over financial reporting of the Companies and the Subsidiaries that adversely
affect the Companies' or the Subsidiaries' ability to record, process, summarize
and report to management or the Board of Directors of Parent material financial
information relating to the Companies and the Subsidiaries. Since January 1,
2003, no fraud, whether or not material, that involves management or other
employees of the Companies who have a significant role in the preparation of
financial reports of the Companies and the Subsidiaries, as a whole, has been
disclosed to Parent's auditors, Board of Directors or executive management.
3.7 Absence of Undisclosed Liabilities. None of the Companies or the
Subsidiaries has any material liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due, whether
known or unknown, and regardless of when asserted), including any such
liabilities under any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect to the
obligations, liabilities (contingent or otherwise) or indebtedness of any
Person, in either case, arising out of transactions or events heretofore entered
into, or any action or inaction, or any state of facts existing, with respect to
or based upon transactions or events heretofore occurring, except (a) as
reflected in the Latest Balance Sheet, (b) liabilities which have arisen after
the date of the Latest Balance Sheet (the "Balance Sheet Date") in the ordinary
course of business (none of which is a material uninsured liability for breach
of contract, breach of warranty, tort, infringement, claim or lawsuit) or (c) as
otherwise set forth in the Disclosure Schedule.
3.8 Absence of Certain Developments. Since December 31, 2003, except as
disclosed in the Latest Financial Statements or contemplated by this Agreement
or the transactions contemplated hereby, there has been no change in the
Companies and its Subsidiaries, taken as a whole, which change has had or would
reasonably be expected to have a Material Adverse Effect, and none of the
Companies or the Subsidiaries has:
(a) borrowed any amount or incurred or become subject to any
contractual liability in excess of $500,000 individually, or $1,000,000 in the
aggregate, except (i) current liabilities incurred in the ordinary course of
business, (ii) liabilities under contracts entered into in the ordinary course
of business and (iii) short-term borrowings under existing credit facilities
that will be repaid in full on or prior to the Closing;
-11-
(b) hypothecated, mortgaged, pledged or subjected to any Lien,
any of its assets with a fair market value in excess of $500,000 individually,
or $1,000,000 in the aggregate, except (i) Liens for current property taxes not
yet due and payable, (ii) Liens incurred in the ordinary course of business for
obligations not yet due to carriers, warehousemen, laborers, materialmen and
similar Liens, (iii) Liens in respect of pledges or deposits under workers'
compensation Laws, (iv) statutory landlords' Liens under leases to which the
Companies or any Subsidiary is a party, (v) zoning restrictions, easements,
rights of way, licenses and restrictions on the use of Real Property or minor
irregularities in title thereto, which do not materially impair the use of such
property in the normal operation of the business of the Acquired Companies or
the value of such property for the purpose of such business, (vi) Liens that do
not materially impair the use, operation, value or marketability of the asset or
property to which it relates, (vii) statutory or common law Liens (such as
rights of set-off) on deposit accounts of the Companies or any Subsidiary, or
(viii) Liens arising out of or created by this Agreement or the transactions
contemplated hereby; or (ix) Liens set forth under the caption referencing this
Section 3.8 in the Disclosure Schedule (collectively, the "Permitted Liens");
(c) sold, assigned or transferred (including, without
limitation, transfers to any employees, affiliates or stockholders) any tangible
assets of its business except sales of inventory in the ordinary course of
business, or canceled any debts or claims except in the ordinary course of
business, in each case with a value in excess of $500,000 individually, or
$1,000,000 in the aggregate, other than any sales, assignments or transfers to
or between wholly owned subsidiaries of the Companies;
(d) sold, assigned, transferred or granted (including, without
limitation, transfers to any employees, affiliates or stockholders) any material
licenses, patents, trademarks, trade names, domain names, copyrights, trade
secrets or other intangible assets, other than licenses on a non-exclusive basis
in conjunction with the sale of product in the ordinary course of business;
(e) except in the ordinary course of business or required by
applicable Law disclosed, to any Person other than Buyer and authorized
representatives of Buyer, any material proprietary confidential information,
other than pursuant to a confidentiality agreement limiting the use or further
disclosure of such information, which agreement is identified in the Disclosure
Schedule under the caption referencing this Section 3.8 and is in full force and
effect on the date hereof;
(f) waived any rights of material value or suffered any
extraordinary losses or adverse changes in collection loss experience, whether
or not in the ordinary course of business or consistent with past practice;
(g) issued, sold or transferred any of its equity securities,
securities convertible into or exchangeable for its equity securities or
warrants, options or other rights to acquire its equity securities, or any bonds
or debt securities;
(h) to the knowledge of Parent or Seller, entered into any
transaction with any "insider" (as defined in Section 3.19 hereof) other than
employment arrangements otherwise
-12-
disclosed in this Agreement and the Disclosure Schedule, or the transactions
contemplated by this Agreement;
(i) suffered any material theft, damage, destruction or loss
of or to any property or properties owned or used by it, whether or not covered
by insurance;
(j) entered into or modified any material employment,
severance or similar agreements or arrangements with, or granted any bonuses,
salary or benefits increases, severance or termination pay to, any employee
other than in the ordinary course of business and consistent with past practice,
or to any officer or consultant;
(k) adopted or amended any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, trust, fund or group arrangement for
the benefit or welfare of any employees, officer, director or affiliate;
(l) made any capital expenditure or commitment therefor in
excess of the aggregate capital expenditures set forth in the Company's 2004
capital expenditure plan for the period in question in the form attached to
Section 3.8 of the Disclosure Schedule;
(m) except in the ordinary course of business, made any loans
or advances to, or guarantees for the benefit of, any Persons;
(n) acquired (by merger, exchange, consolidation, acquisition
of stock or assets or otherwise) any corporation, partnership, limited liability
company, joint venture or other business organization or division or material
assets thereof; or
(o) except as required by U.S. GAAP, made any change in
accounting principles or practices from those utilized in the preparation of the
Latest Financial Statements.
3.9 Title to Properties.
(a) The real properties owned by the Companies or the
Subsidiaries or demised by the leases described under the caption referencing
this Section 3.9 in the Disclosure Schedule constitute all of the real property
owned, leased (whether or not occupied and including any leases assigned or
leased premises sublet for which the Companies remain liable), used or occupied
by the Companies or the Subsidiaries.
(b) One of the Companies or one of the Subsidiaries owns good
and valid title to each parcel of real property identified under the caption
referencing this Section 3.9 in the Disclosure Schedule as being owned by the
Companies or the Subsidiaries (the "Owned Real Property"), free and clear of all
Liens, except for Permitted Liens.
(c) The leases of real property (the "Leases") listed under
the caption referencing this Section 3.9 in the Disclosure Schedule as being
leased by the Companies or the Subsidiaries (the "Leased Real Property" and
together with the Owned Real Property, the "Real Property") are in full force
and effect and the Companies and each Subsidiary, as applicable, holds a valid
and existing leasehold interest under each of the respective Leases for the term
set
-13-
forth under such caption referencing Section 3.9 in the Disclosure Schedule. The
Companies have made available to Buyer complete and accurate copies of each of
the Leases, and none of the Leases has been modified in any material respect,
except to the extent that such modifications are disclosed by the copies
delivered to Buyer. None of the Companies or the Subsidiaries is in default in
any material respect, and, to the knowledge of the Companies, no circumstances
exist which, if unremedied, would, either with or without notice or the passage
of time or both, result in such default under any of the Leases; nor, to the
knowledge of the Companies, is any other party to any of the Leases in default
in any material respect thereunder.
(d) One of the Companies or one of the Subsidiaries owns good
and valid title to each of the material tangible properties and material
tangible assets reflected on the Latest Balance Sheet or acquired since the date
thereof, free and clear of all Liens, except for (i) Permitted Liens, (ii) Liens
for current Taxes not yet due and payable, (iii) the Real Property subject to
the Leases, (iv) personal property used by the Companies and subject to lease,
all of which leases are identified in the Disclosure Schedule under the caption
referencing this Section 3.9, and (v) assets disposed of since the Balance Sheet
Date in the ordinary course of business.
(e) All of the material buildings, machinery, equipment and
other tangible assets that are necessary for the conduct of the Companies' and
the Subsidiaries' business are in satisfactory condition and repair, ordinary
wear and tear excepted with respect to all of such assets. The Companies and the
Subsidiaries own, or lease under valid leases, all buildings, machinery,
equipment and other tangible assets necessary for the conduct of their business
as currently conducted.
3.10 Accounts Receivable. The accounts receivable reflected on the
Latest Balance Sheet are valid receivables, have arisen from bona fide
transactions in the ordinary course of business and, to the Companies' knowledge
are not subject to any material valid counterclaims or setoffs.
3.11 Inventory. The Companies' and each Subsidiary's inventory of raw
materials, work in process and finished products relating to its business
consists of items in all material respects of a quality and quantity usable and,
with respect to finished products only, salable in the ordinary course of its
business, in each case net of reserves for excess or obsolete inventory set
forth in the Latest Financial Statements.
3.12 Tax Matters. Except (i) as provided in Section 3.12 of the
Disclosure Schedule and (ii) solely to the extent of the knowledge of Parent,
Seller or the Companies with respect to representations and warranties of Parent
and Seller regarding any Subsidiaries which are not U.S. Persons as defined in
Section 7701(a)(30) of the Code:
(a) Each of the Companies and each Subsidiary has: (i) timely
filed (or has had timely filed on its behalf) all material returns,
declarations, reports, estimates, information returns, and statements required
to be filed or sent by it in respect of any Taxes ("Returns"), and all such
Returns are true, correct, and complete in all material respects; (ii) timely
and properly paid (or has had paid on its behalf) all material Taxes due and
payable, whether or not shown on such Returns; (iii) established on its Latest
Balance Sheet, in accordance with U.S. GAAP, reserves that are adequate as of
the date hereof for the payment of any Taxes not yet due and
-14-
payable, whether or not shown on any Return; (iv) complied in all materials
respects with all applicable Laws relating to the withholding of Taxes and the
payment thereof (including, without limitation, withholding of Taxes under
Sections 1441 and 1442 of the Internal Revenue Code of 1986, as amended (the
"Code"), or similar provisions under any foreign Laws); and (v) timely and
properly withheld from individual employee wages and paid over to the proper
Governmental Entity all material amounts required to be so withheld and paid
over under all applicable Laws.
(b) There is no audit, examination, deficiency, refund
litigation, proposed adjustment or matter in controversy with respect to any
Taxes or Return of any of the Companies or Subsidiaries which, if determined
adversely, would be expected to result in a material Tax deficiency, nor is any
such audit or other proceeding pending, nor has there been any notice in writing
to the Companies or Subsidiaries by any taxing authority regarding any such
audit or other proceeding. No waiver, extension or comparable consent given by
the Companies or the Subsidiaries regarding the application of the statute of
limitations with respect to any Taxes or Returns is outstanding, nor is any
request for any such waiver or consent pending.
(c) None of the Companies or Subsidiaries is a party to any
Contract that would result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code,
and the consummation of the transactions contemplated by this Agreement will not
be a factor causing payments to be made by the Companies to be non-deductible
(in whole or in part) under Section 280G of the Code.
(d) None of the Companies or Subsidiaries has requested any
extension of time within which to file any Return; however, if an extension has
been requested for any Return, such Return has been or will be filed by the
extended due date.
(e) None of the Companies or Subsidiaries is required to
include in income any adjustment under Section 481(a) of the Code by reason of a
voluntary change in accounting method initiated by the Companies and the United
States Internal Revenue Service (the "IRS") has not proposed in writing any such
adjustment or change in accounting method.
(f) To the knowledge of Parent or Seller, no claim has ever
been made in writing by an authority in a jurisdiction where any of the
Companies or the Subsidiaries do not file Tax Returns that it is or may be
subject to a material Tax by that jurisdiction.
(g) None of the Companies or the Subsidiaries have been part
of a consolidated group for Tax purposes with any Person other than a group the
common parent of which was Parent, any of the Companies or any of the
Subsidiaries.
(h) None of the Companies or the Subsidiaries is a party to
any Tax allocation, indemnification or sharing agreement other than any such
agreement the parties to which are solely the Companies or the Subsidiaries.
(i) None of the Companies or any Subsidiary has participated
in any reportable or listed transaction as defined under Code Section 6011. If
any of the Companies or any of the Subsidiaries has participated in a reportable
or listed transaction, such entity has properly disclosed such transaction in
accordance with the applicable Tax regulations.
-15-
(j) Except as otherwise provided in Section 10.3, all Taxes
of the Companies and the Subsidiaries which will be due and payable, whether
now or hereafter, for any period ending on or prior to the Closing Date, shall
have been paid by or on behalf of the Companies or shall be reflected on the
Companies' books as an accrued Tax liability, either current or deferred, the
amount of which as of the date of the Latest Financial Statements is set forth
in Section 3.12(j) of the Disclosure Schedule.
(k) None of the Companies or the Subsidiaries constitutes
either a "distributing corporation" or a "controlled corporation" (within the
meaning of Section 355(a)(1)(A) of the Code) in a distribution of shares
qualifying for tax-free treatment under Section 355 of the Code (i) in the two
years prior to the date of this Agreement or (ii) in a distribution that could
otherwise constitute a part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Acquisition.
(l) For purposes of this Agreement, the term "Tax" or "Taxes"
means all taxes, charges, fees, levies, or other assessments or impositions of
any kind payable to any Governmental Entity, including, without limitation, all
net income, profits, gross income, gross receipts, minimum, alternative minimum,
sales, use, service, occupation, ad valorem, net worth, value added, transfer,
franchise, license, payroll, employment, social security, Medicare,
unemployment, withholding, disability, workers' compensation, excise, estimated,
severance, stamp, occupation, property, premium or other taxes or customs
duties, fees, assessments, or charges of any kind whatsoever, including, without
limitation, all interest and penalties thereon, and additions to tax or
additional amounts imposed by any taxing authority, domestic or foreign, upon
the Companies or any Subsidiary.
3.13 Contracts and Commitments.
(a) Section 3.13 of the Disclosure Schedule, under the caption
referencing the subsections of this Section 3.13, lists the following contracts,
commitments and/or binding understandings, whether oral or written, to which any
of the Companies or any Subsidiary is a party and which are in effect as of the
date hereof (the "Contracts"):
(i) all executive officer or other material employment, agency
or consulting agreements, all contracts or commitments providing for
severance, termination or similar payments, including on a change of
control of the Companies, and all union, collective bargaining or
similar agreements with labor representatives;
(ii) all material distributor, reseller, OEM, dealer,
manufacturer's representative, sales agency or advertising agency,
finder's and manufacturing or assembly contracts;
(iii) all material contracts terminable by any other party
thereto upon a change of control of the Companies or any Subsidiary or
upon the failure of the Companies or any Subsidiary to satisfy
financial or performance criteria specified in such contract as
provided therein;
-16-
(iv) all agreements or indentures relating to the borrowing of
money or to mortgaging, pledging or otherwise placing a Lien (other
than a Permitted Lien) on any of the assets of the Companies or any
Subsidiary;
(v) other than purchase orders and similar items in the
ordinary course of business, all material contracts or group of related
contracts with the customers or suppliers referenced in Section 3.20
hereof;
(vi) all material contracts containing exclusivity or
noncompetition provisions or which would otherwise prohibit the
Companies or any Subsidiary from freely engaging in business anywhere
in the world;
(vii) all license agreements, transfer or joint-use agreements
or other agreements providing for the payment or receipt of royalties
or other compensation by the Companies or any Subsidiary in excess of
$100,000 annually or $200,000 in the aggregate for any such agreement
in connection with the Company Intellectual Property (as defined in
Section 3.14(a) hereof);
(viii) any and all other material agreements of the Companies
not entered into in the ordinary course of business or that are
material to the business, financial condition or results of operation
of the Companies;
(ix) any and all other contracts or commitments for capital
expenditures in excess of $1,000,000;
(x) all material agreements providing for the development of
any products, software or Intellectual Property by or for any third
party; and
(xi) all agreements for the sale of any capital assets in
excess of $1,000,000.
(b) Each of the Companies or the applicable Subsidiary has
performed in all material respects all obligations required to be performed by
it in connection with the Contracts and is not in receipt of any written claim
of material default under any such Contract. The Companies have no knowledge of
any breach or anticipated breach by any other party to any Contract. The
Companies have no knowledge that any existing Contracts with the Companies' or
any Subsidiary's customers cannot be fully performed by each of the Companies or
the applicable Subsidiary in accordance with its terms.
(c) Prior to the date of this Agreement, the Companies have
made available to Buyer a true and complete copy of each written Contract,
together with all amendments, waivers or other changes thereto.
3.14 Intellectual Property Rights.
(a) The Companies, together with the Subsidiaries, own, or are
validly licensed or otherwise possess legally enforceable rights to use, all
patents, patent rights, trademarks, trademark rights, industrial designs,
industrial design rights, trade names, trade name rights, service marks, domain
names, copyrights, and any applications for any of the foregoing,
-17-
maskworks, schematics, inventions, technology, know-how, trade secrets, ideas,
algorithms, processes, computer software programs or applications (in both
source code and object code form), database, and tangible or intangible
proprietary or confidential information ("Intellectual Property") that are used
in the business of the Companies and the Subsidiaries as currently conducted by
the Companies and the Subsidiaries (collectively, "Company Intellectual
Property").
(b) Section 3.14(b) of the Disclosure Schedule lists (i) all
patents and patent applications and all registered trademarks and trademark
applications, all registered industrial designs and industrial design
applications, registered trade names and registered service marks, domain names
and all registered copyrights owned by the Companies and the Subsidiaries,
including the jurisdictions in which each such Company Intellectual Property
right has been issued or registered or in which any application for such
issuance and registration has been filed, (ii) all material licenses,
sublicenses and other agreements as to which the Companies or any Subsidiary is
a party and pursuant to which any third party is authorized to use any Company
Intellectual Property, and (iii) all material licenses, sublicenses and other
agreements as to which the Companies or any Subsidiary is a party and pursuant
to which the Companies or any Subsidiary is authorized to use any third-party
patents, trademarks or copyrights, including software, other than off-the-shelf,
shrink wrapped software and other currently available commercial software,
("Third Party Intellectual Property Rights") which are incorporated in, are, or
form a part of any product of the Companies or any Subsidiary. One of the
Companies or a Subsidiary is the sole and exclusive owner of, with all right,
title and interest in and to (free and clear of any Liens other than Permitted
Liens), the Company Intellectual Property, and has sole and exclusive rights to
the use thereof or the material covered thereby in connection with the services
or products in respect of which Company Intellectual Property is being used by
the Companies or such Subsidiary.
(c) To the knowledge of the Companies, there is no material
unauthorized use, infringement or misappropriation of any Company Intellectual
Property, any trade secret material of the Companies or any Subsidiary or any
Third Party Intellectual Property to the extent licensed by or through the
Companies or any Subsidiary, by any third party, including any current or former
employee, contractor or independent consultant.
(d) (i) None of the Companies or the Subsidiaries has been
sued in any suit, action or proceeding during the past four (4) years which
involves a claim of infringement of any patents, trademarks, industrial designs,
service marks, domain names, copyrights or violation of any trade secret or
other proprietary right of any third party, (ii) to the knowledge of the
Companies, neither the conduct of the business of the Companies and the
Subsidiaries as currently conducted nor the use of the Company Intellectual
Property by the Companies or any Subsidiary or the sale of products by the
Companies or any Subsidiary, infringes or otherwise violates any valid or
enforceable license, trademark, trademark right, trade name, trade name right,
industrial design, industrial design right, patent, patent right, invention,
service ▇▇▇▇, domain name or copyright of any third party, (iii) no third party
is challenging the ownership or license by the Companies or any Subsidiary, or
the validity or effectiveness thereof, of any of the Company Intellectual
Property, (iv) none of the Companies or the Subsidiaries has brought any action,
suit or proceeding for infringement of Company Intellectual Property or breach
of any license or agreement involving Company Intellectual Property against any
third party during the
-18-
past four (4) years, and (v) there are no pending or, to the knowledge of the
Companies, threatened interference, re-examinations, oppositions or nullities
involving any patents, patent rights or applications therefor of the Companies
or any Subsidiary, except such as may have been commenced by the Companies or
any Subsidiary.
(e) The Companies and each Subsidiary have taken reasonable
steps to protect and preserve the confidentiality of all confidential Company
Intellectual Property not otherwise protected by patents, patent applications or
copyright ("Confidential Information").
3.15 Litigation. There is no action, arbitration, mediation, suit,
proceeding, order or investigation pending or, to the knowledge of the
Companies, threatened against the Companies or any Subsidiary, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign that (a) would reasonably be expected to result in damages payable by
the Companies or any of the Subsidiaries in excess of $500,000 in respect of any
individual action, arbitration, mediation, suit, proceeding, order or
investigation, or (b) challenge the validity of the transactions contemplated by
this Agreement.
3.16 Employees.
(a) All employees necessary for the conduct of the business of
the Companies and the Subsidiaries are employed directly by the Companies or the
Subsidiaries, and not by Parent or another subsidiary or Affiliate of Parent.
Each of the Companies and each Subsidiary has complied in all material respects
at all times with all Laws relating to the employment of labor, including
provisions thereof relating to wages, hours, equal opportunity and collective
bargaining. None of the Companies or the Subsidiaries has any material labor
relations problem pending, or to the knowledge of the Companies, threatened. The
Companies or the Subsidiaries own all Intellectual Property material to the
operation of the business of the Companies and the Subsidiaries developed by
their respective current and former employees, contractors and independent
consultants during the period of their employment or within the scope of their
contracting or consulting relationship, as the case may be, with the Companies
or the Subsidiaries. To the knowledge of the Companies, no employee or former
employee of the Companies or any Subsidiary has any claim with respect to such
Company Intellectual Property.
(b) The employment of any terminated former employee of the
Companies or any Subsidiary has been terminated in accordance with any
applicable contractual terms and applicable Law. The consummation of the
Acquisition or the other transactions contemplated hereby will not cause the
Companies or any Subsidiary to incur or suffer any liability relating to, or
obligation to pay, severance, termination or other payments to any Person.
(c) None of the Companies or the Subsidiaries has made any
loans (except advances against accrued salaries or for business travel, lodging
or other expenses in the normal course of business) to any employee of the
Companies or any Subsidiary.
(d) (i) There are no strikes, slowdowns, work stoppages or
other labor controversies pending or, to the knowledge of the Companies,
threatened in writing against or otherwise affecting the employees or facilities
of the Companies or any Subsidiary; (ii) none of the Companies or the
Subsidiaries has experienced any labor strike, slowdown, work stoppage
-19-
exceeding 24 hours or other material labor controversy involving its employees
within the past two years; (iii) no labor representatives hold bargaining rights
with respect to any employees of the Companies or any Subsidiary, and there are
no current or, to the knowledge of the Companies, threatened attempts to
organize or establish any trade union or employee association with respect to
the Companies or any Subsidiary; (iv) to the knowledge of the Companies, neither
the Companies nor any Subsidiary is delinquent in payments to any of its
employees for any wages, salaries or commissions due and payable to such
employees for services performed; and (v) there have been no lay-offs of
employees or senior employees or work reduction programs undertaken by or on
behalf of the Companies or the Subsidiaries in the past two years, and no such
programs have been adopted by any of the Companies' or Subsidiaries' boards of
directors or publicly announced.
3.17 Employee Benefit Plans.
(a) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and "Plan" means every plan, fund, contract, program and
arrangement (whether written or not) which is maintained or contributed to by
the Companies or the Subsidiaries for the benefit of present or former employees
in respect of which the Companies or any Subsidiary has any material liability.
"Plan" includes any arrangement intended to provide: (i) medical, surgical,
health care, hospitalization, dental, vision, workers' compensation, life
insurance, death, disability, legal services, severance, sickness, accident, or
cafeteria plan benefits (whether or not defined in Section 3(1) of ERISA), (ii)
pension, profit sharing, stock bonus, retirement, supplemental retirement or
deferred compensation benefits (whether or not tax qualified and whether or not
defined in Section 3(2) of ERISA), (iii) bonus, incentive compensation, stock
option, stock appreciation right, phantom stock or stock purchase benefits,
change in control benefits or (iv) salary continuation, unemployment,
supplemental unemployment, termination pay, vacation or holiday benefits
(whether or not defined in Section 3(3) of ERISA). The Disclosure Schedule,
under the caption referencing this Section 3.17, sets forth all Plans by name
and brief description identifying: (i) the type of Plan, including a specific
reference to any Plan which provides benefits (or increased benefits or vesting)
as a result of a change in control of the Companies, and (ii) the categories of
participating employees in the Plan.
(b) To the extent required (either as a matter of Law or to
obtain the intended Tax treatment and Tax benefits), all Plans comply in all
material respects with the requirements of ERISA and the Code. With respect to
the Plans, since January 1, 2000, (i) all required contributions which are
currently due have been made or otherwise accrued for to the extent required by
U.S. GAAP and any future contributions have been accrued for on the books and
records of the Companies to the extent required by U.S. GAAP; (ii) with respect
to each Plan that is subject to Section 301 et seq. of ERISA or Section 412 of
the Code, the Companies have not incurred any accumulated funding deficiency as
that term is defined in Section 412 of the Code; (iii) all Plans have been
administered in accordance with the documents and instruments governing the
Plans; (vi) the Companies have made a good faith effort to comply with the
reporting and taxation requirements for FICA taxes with respect to any deferred
compensation arrangements under Section 3121(v) of the Code; (vii) there are no
actions, suits or claims pending, other than routine uncontested claims for
benefits; and (viii) there have been no nonexempt prohibited transactions (as
defined in Section 406 of ERISA or Section 4975 of the Code), except, in the
case of clauses (iii) through (viii), to the extent any such failure, violation,
-20-
lack of compliance, actions, suits, claims or transactions, individually or in
the aggregate, would not have a Material Adverse Effect. All benefits under the
Plans (other than Code Section 125 cafeteria plans) are payable either through a
fully-funded trust or an insurance contract and no welfare benefit Plan (as
defined in Section 3(1) of ERISA) is self-funded.
(c) Buyer has had made available to it true and complete
copies of (i) all Plan documents, including related trust agreements or funding
arrangements; (ii) the most recent determination letter, if any, received by the
Companies or any Subsidiary from the IRS regarding the Plans and any amendment
to any Plan made subsequent to any Plan amendments covered by any such
determination letter; (iii) the most recent financial statements for the Plans,
if any; (iv) the most recently prepared actuarial valuation reports, if any; (v)
current summary plan descriptions; (vi) annual returns/reports on Form 5500 and
summary annual reports for each of the most recent three plan years, and (vii)
any filings with the IRS or the DOL within the last five years preceding the
date of this Agreement.
(d) None of the Companies or the Subsidiaries maintains or
contributes to (nor has ever contributed to) any multiemployer plan, as defined
in Section 3(37) of ERISA. None of the Companies or the Subsidiaries has any
actual or potential material liabilities under Title IV of ERISA, including
under Section 4201 of ERISA for any complete or partial withdrawal from a
multiemployer plan.
(e) None of the Companies or the Subsidiaries has any actual
or, to the Companies' knowledge, potential material liability not reflected in
the Latest Financial Statements for death or medical benefits after separation
from employment, other than (i) death benefits or severance benefits under the
employee benefit plans or programs (whether or not subject to ERISA) set forth
in Section 3.17 of the Disclosure Schedule and (ii) health care continuation
benefits described in Section 4980B of the Code or other applicable Law.
(f) To the knowledge of the Companies, none of the Companies
or the Subsidiaries nor any of their directors, officers, employees or other
"fiduciaries", as such term is defined in Section 3(21) of ERISA, has committed
any breach of fiduciary responsibility imposed by ERISA or any other applicable
Law with respect to the Plans which would subject the Companies, the
Subsidiaries, Buyer or any of their respective directors, officers or employees
to any material liability under ERISA or any other applicable Law.
(g) There are no (i) legal, administrative or other
proceedings or governmental investigations or audits, or (ii) written complaints
to or by any Governmental Entity, pending or to the knowledge of the Companies,
threatened against any Plan or its assets, or against any Plan fiduciary or
administrator, or against the Companies or their officers or employees with
respect to any Plan, other than any proceedings, investigations, audits or
complaints that, individually or in the aggregate, would not have a Material
Adverse Effect.
(h) There are no leased employees, as defined in Section
414(n) of the Code, providing services to the Companies or the Subsidiaries,
that must be taken into account with respect to the requirements under Section
414(n)(3) of the Code. No Person who currently performs or previously performed
services for the Companies or the Subsidiaries and who has
-21-
not been treated as a common law employee by the Companies or the Subsidiaries,
is eligible for or otherwise entitled to any benefit under any Plan or other
arrangement.
(i) "Foreign Plan" means every plan, fund, contract program
and arrangement (whether written or not) which is maintained or contributed to
by the Companies or the Subsidiary for the benefit of present or former
employees working outside of the United States or with respect to which the
Companies or the Subsidiaries otherwise has current or, to the Companies'
knowledge, potential liability for such current or former employees other than
plans mandated by applicable Law. Foreign Plan may include plans that also
benefit United States employees and include any arrangement intended to provide:
(i) medical, surgical, health care, hospitalization, dental, vision, workers
compensation, life insurance, death, disability, legal services, severance,
sickness, or accident benefits; (ii) pension, profit sharing, retirement,
supplemental retirement or deferred compensation benefits; (iii) bonus,
incentive compensation, stock option, stock appreciation rights, phantom stock
or stock purchase benefits, change in control benefits; or (iv) salary
continuation, unemployment, supplemental unemployment, termination pay, vacation
or holiday benefits. Section 3.17 of the Disclosure Schedule sets forth all
Foreign Plans by name and provides a brief description for each plan. Either as
a matter of Law or to obtain the intended Tax treatment and Tax benefits, the
Foreign Plans have at all times complied with and been duly administered in
accordance in all material respects with all applicable Laws and regulations and
requirements having force of Law and in accordance with their terms. There are
not in respect of any Foreign Plan or the benefits thereunder any actions, suits
or claims pending or, to the knowledge of the Companies, threatened other than
routine claims for benefits. None of the Companies or the Subsidiaries has
received any notice or directive that it has not complied with all material
provisions of the Foreign Plans applicable to it.
(j) There is no retirement plan or any other legally
enforceable commitments other than those certain agreements between Krone GmbH
and its predecessor Krone AG and its Works Council contained in the document
numbers BV 20102/94 dated January 10, 1989 and BV 2052/94 and BV 20102A/94 dated
December 22, 1994 relating to a pension scheme covering employees of the
Companies or the Subsidiaries in Germany (collectively, the "German Pension
Plans"), or as described in Section 3.17 of the Disclosure Schedule. All
liabilities to participants in the German Pension Plans have been adequately
accounted for under the Actuarial Report as of the effective date specified
therein. There has been no failure to provide for cost of living increases under
applicable Law or as required by contract or other commitment made to German
Pension Plan participants, the German Pension Plans were properly frozen as to
new participants effective January 1, 1995, and there have been no written or,
to the knowledge of the Companies, oral promises of increased pension benefits
to either active or retired employees other than increases reflected in the
Report.
(k) Except as set forth in Section 3.17 of the Disclosure
Schedule, (i) there are no Plans which cover current or former employees of
business entities other than the Companies or Subsidiaries, and (ii) there are
no current or former employees of the Companies or Subsidiaries who participate
in employee benefit plans which are sponsored or maintained by business entities
other than the Companies or Subsidiaries (plans identified per this clause (ii)
referred to as "non-Business Plans").
-22-
(l) Section 3.17 of the Disclosure Schedule identifies all
works councils, economic committees, union representation and similar
arrangements relating to benefits or terms and conditions of employment for
employees of the Companies and the Subsidiaries. Such schedule also identifies
for each such arrangement the types and locations of workers represented.
(m) The current agreement with the Works Council is that no
more than nine employees are eligible for the Company's partial retirement plan
under Works Agreement BV 20906/98 dated September 2, 1999.
(n) A true and complete copy of the Actuarial Report has been
delivered to Buyer.
3.18 Insurance. Each of the Companies and the Subsidiaries has at all
times maintained commercially reasonable insurance relating to its business and
covering property, fire, casualty, liability, life, workers' compensation. Such
insurance: (a) is in full force and effect; (b) is sufficient for compliance, in
all material respects, with all requirements of applicable Law and of any
contract or agreement to which the Companies or such Subsidiary is subject; and
(c) provides commercially reasonable insurance coverage for the activities of
the Companies or such Subsidiary.
3.19 Affiliate Transactions. Except as disclosed in Section 3.19 of the
Disclosure Schedule and other than pursuant to this Agreement, to the knowledge
of the Companies, no officer, director or employee of the Companies or any
Subsidiary or any member of the immediate family of any such officer, director
or employee, or any entity in which any of such Persons owns any beneficial
interest (other than any publicly held corporation whose stock is traded on a
national securities exchange or in the over-the-counter market and less than one
percent of the stock of which is beneficially owned by any of such Persons)
(collectively "insiders"), has any agreement with the Companies or any
Subsidiary (other than normal employment, severance and similar arrangements) or
any interest in any property, real, personal or mixed, tangible or intangible,
used in or pertaining to the business of the Companies or any Subsidiary (other
than ownership of capital stock of the Companies). To the knowledge of the
Companies, none of the insiders has any material direct or indirect interest
(other than any publicly held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market and less than one percent
of the stock of which is beneficially owned by any of such Persons) in any
competitor, vendor, supplier or customer of the Companies or any Subsidiary or
in any Person from whom or to whom the Companies or any Subsidiary leases any
property, or in any other Person with whom the Companies or any Subsidiary
transacts any material business. For purposes of this Section 3.19, the members
of the immediate family of an officer, director or employee shall consist of the
spouse and dependent children of such officer, director or employee.
3.20 Customers and Suppliers. The Disclosure Schedule, under the
caption referencing this Section 3.20, lists the 10 largest customers and the 10
largest suppliers of the Companies and the Subsidiaries for the fiscal year
ended December 31, 2003. Since December 31, 2003 and through the date hereof, no
customer or supplier listed on the Disclosure Schedule under the caption
referencing this Section 3.20 has indicated in writing to the Companies that it
will substantially decrease the volume of business done with the Companies and
the Subsidiaries,
-23-
taken as a whole, except for such decreases in the ordinary course of the
Companies' or the Subsidiaries' business.
3.21 Compliance with Laws; Permits.
(a) Other than with respect to Taxes, Plans and Environmental
Laws, which are addressed solely in Sections 3.12, 3.17 and 3.22, respectively,
the Companies and each Subsidiary have complied in all material respects with,
and are not in any material violation of, any applicable Laws, including, but
not limited to, federal, state, local and foreign Laws relating to the business
operations and assets of the Companies or the Subsidiaries, and, to the
knowledge of the Companies, no claims have been filed against the Companies or
any Subsidiary alleging a violation of any such Laws in last four years. To the
knowledge of the Companies, none of the Companies or the Subsidiaries is relying
on any exemption from or deferral of any such applicable Law that would not be
available to it after the Closing.
(b) The Companies and each Subsidiary have, in full force and
effect, all material licenses, approvals, permits and certificates, from
federal, state and foreign authorities and all material licenses, approvals,
permits and certificates from local authorities, in each case, necessary to
conduct their respective business and own and operate their respective assets in
all material respects (collectively, the "Permits"). A true and complete list of
all material Permits is set forth under the caption referencing this Section
3.21 in the Disclosure Schedule. The Companies and each Subsidiary have
conducted its business in compliance in all material respects with the terms and
conditions of the Permits.
(c) To the knowledge of the Companies, none of the Companies,
the Subsidiaries any Person authorized to represent the Companies or any
Subsidiary has offered, authorized, promised, made or agreed to make gifts of
money, other property or similar benefits (other than incidental gifts of
articles of nominal value) to any actual or potential customer or supplier,
governmental employee, political party, political party official or candidate,
official of a public international organization or any other Person in a
position to assist or hinder the Companies or the Subsidiaries in connection
with any actual or proposed transaction, other than payments required or
permitted by the Laws of the applicable jurisdiction.
(d) The Companies and the Subsidiaries have conducted their
export transactions in accordance with applicable provisions of export control
Laws, including, without limitation, any Laws relating to the export of
technology.
(e) Except in connection with any obligation of Parent or as
filed and publicly available prior to the date hereof, none of the Companies or
the Subsidiaries has and has not had in the past any legal obligation to file
any form, report, schedule, statement, proxy statement or other document or
information with the U.S. Securities and Exchange Commission (the "SEC"), and
has not filed with the SEC any such form, report, schedule, statement, proxy
statement or other document or information.
3.22 Environmental Matters.
-24-
(a) Except for matters that have been resolved without
material ongoing liability (i) each of the Companies and the Subsidiaries has
been in compliance and is presently complying in all material respects with all
applicable Environmental Laws (defined below) and (ii) none of the Companies or
the Subsidiaries has received any written notice of any violation of or
delinquency with respect to any applicable Environmental Laws. To the knowledge
of the Companies and Subsidiaries, there are no circumstances or conditions
existing at the Real Property that would prevent or materially increase the cost
of such compliance in the future.
(b) Each of the Companies and the Subsidiaries has obtained
all material permits, licenses and authorizations (collectively "Environmental
Permits") which are required under all applicable Environmental Laws and are in
compliance in all material respects with such Environmental Permits.
(c) There is no Environmental Claim (defined below) pending,
or to the knowledge of the Companies and Subsidiaries, threatened against any of
them or relating to the Real Property or any business conducted thereon which,
if adversely determined, would have a Material Adverse Effect. To the knowledge
of the Companies and Subsidiaries, there are no past or present actions,
activities, conditions, or events, including without limitation the release,
transportation, treatment, storage, recycling or reclamation of any Hazardous
Material (as defined below) at any of the Real Property or former real property
utilized in the Companies' or any of the Subsidiaries' businesses that could
reasonably be expected to result in any material Environmental Claim against the
Companies or any of the Subsidiaries.
(d) Except as set forth in Section 3.22(d) of the Disclosure
Schedule, (i) the Companies and the Subsidiaries have not, and to the knowledge
of the Companies and the Subsidiaries, no other Person has, caused a Release (as
defined below) of any Hazardous Material on, in, at, under, from or otherwise
affecting the Real Property (including but not limited to the air, soil, surface
water, groundwater or natural resources) that would result in a material
liability to the Companies and/or the Subsidiaries under applicable
Environmental Laws, and (ii) none of the Real Property (including without
limitation soils and surface and ground waters) are contaminated with any
Hazardous Materials in quantities which require investigation or remediation
under applicable Environmental Laws, the cost of which investigation or
remediation would have a Material Adverse Effect.
(e) Any underground or above ground storage tanks on the Real
Property are in compliance in all material respects with all applicable
Environmental Laws, including underground tank requirements, and there has been
no Release from any such tank in material violation of applicable Environmental
Laws.
(f) Seller shall have made available to Buyer prior to the
Closing true, correct and complete copies of all surveys, reports, assessments,
audits, evaluations, sampling results, or other documents (including any
notices, filings, or other communications with governmental authorities) in each
case that are material, relating to compliance with or violation or suspected
violation of Environmental Laws, or to the handling, storage, transportation or
Release of any Hazardous Material, prepared by, for or at the request of Seller,
the Companies, or any Subsidiary, or in the possession of any of them and
relating to the Real Property.
-25-
(g) The following terms, as used in this Agreement, shall have
the meanings set forth below:
(i) "Environmental Claim" means any claim, demand, complaint,
action, suit, proceeding, investigation or written notice by any person
alleging potential liability arising out of, based on, or relating to
Environmental Laws or the presence of any Hazardous Material at any
location.
(ii) "Environmental Laws" means all federal, state, local and
other foreign Laws (including, without limitation, common law),
statutes, ordinances, judgments, decrees, agreements with any
governmental authority, licenses, permits, rules, regulations, and
other binding obligations relating to pollution, the protection of
human health or the environment or occupational or worker health and
safety including, without limitation, Laws, statutes, ordinances,
judgments, decrees, agreements with any governmental authority,
licenses, permits, rules, regulations and other binding obligations
relating to the Release of any Hazardous Material at any location or
otherwise relating to the use, treatment, storage, disposal, transport,
or handling of any Hazardous Material.
(iii) "Hazardous Material" means any material, substance or
compound regulated under Environmental Laws, whether constituting a
useful product or otherwise, including without limitation any
pollutant, contaminant, waste, hazardous waste, hazardous substance,
toxic substance, contaminant, hazardous material, extremely hazardous
material, asbestos, polychlorinated biphenyl, petroleum, or any refined
product, fraction, byproduct or constituent thereof.
(iv) "Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching,
migrating or presence of any Hazardous Material in the environment.
3.23 Brokerage. Other than Credit Suisse First Boston, LLC (the fees of
which will be paid by Parent), no third party shall be entitled to receive any
brokerage commissions, finder's fees, fees for financial advisory services or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of the
Companies.
3.24 No Other Representations. Except for the representations and
warranties contained in Article II or this Article III, neither Parent, Seller
or the Companies makes any representation or warranty, express or implied, in
respect of this Agreement or the subject matter hereof.
Article IV
Representations and Warranties of Buyer
Buyer hereby represents and warrants to Seller as set forth in this
Article IV.
4.1 Incorporation and Corporate Power. Buyer is a corporation duly
incorporated, validly existing and in good standing under the Laws of the State
of Minnesota, with the requisite corporate power and authority to enter into
this Agreement and perform its obligations
-26-
hereunder. As used herein, the term "Buyer Material Adverse Effect" means any
change, effect, event or condition that (i) has had or would, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
business, assets (including intangible assets), results of operations or
financial condition of Buyer and its subsidiaries, taken as a whole, other than
any such change, effect, event or condition that results or arises from (A)
changes or conditions affecting the industry in which Buyer operates or markets
or produces its products and services generally, except to the extent such
changes or conditions disproportionately affect Buyer and its subsidiaries,
taken as a whole or (B) changes in general economic, regulatory or political
conditions or resulting from armed hostilities or terrorist actions, except to
the extent such changes or conditions or results disproportionately affect Buyer
and its subsidiaries, taken as a whole or (C) the announcement of this Agreement
and the transactions contemplated hereby or the consummation of the transactions
contemplated hereby, or (ii) would prevent or materially delay Buyer's ability
to consummate the Acquisition or the other transactions contemplated hereby.
4.2 Execution, Delivery; Valid and Binding Agreement. Buyer has all
requisite corporate power and authority to execute and deliver, and perform its
obligations under, this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by Buyer, and the consummation of the transactions contemplated hereby, have
been duly and validly authorized by all requisite corporate action, and no other
corporate proceedings on its part are necessary to authorize the execution,
delivery or performance of this Agreement. This Agreement has been duly and
validly executed and delivered by Buyer and constitutes the valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms, and
the other documents contemplated hereby, when executed and delivered by Buyer,
will constitute the valid and binding obligations of Buyer, enforceable against
Buyer in accordance with their respective terms, in each case except to the
extent that their enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally and by general equitable principles.
4.3 No Violations, etc. The execution, delivery and performance of this
Agreement by Buyer does not and the consummation of the transactions
contemplated hereby will not: (a) contravene any provision of the Articles of
Incorporation or Bylaws of Buyer; (b) violate or conflict in any material
respect with any federal, state, local or foreign Law or any Order which is
either applicable to, binding upon or enforceable against Buyer, or the business
or any assets of Buyer; (c) conflict with, result in any breach of any of the
provisions of, or constitute a default (or any event which would, with the
passage of time or the giving of notice or both, constitute a default) under,
result in a violation of, result in the creation of a right of termination,
amendment, modification, abandonment or acceleration under any material
agreement, including indenture, hypothecation, mortgage, lease, license, loan
agreement or other material agreement or instrument which is either binding upon
or enforceable against Buyer; or (d) require any authorization, consent,
approval, exemption or other action by or notice to any Governmental Entity or
any other third party, other than (i) in connection with the applicable
requirements of the HSR Act, and any other similar foreign merger, competition
or anti-trust Laws and (ii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal or state securities Laws, except, in the case of subsections
(b) and (c) of this Section 4.3, such violations, conflicts, breaches, defaults,
terminations,
-27-
amendments, modifications, abandonments, accelerations, authorizations,
consents, approvals, exemptions, other actions or notices that, individually or
in the aggregate, would not have a Buyer Material Adverse Effect.
4.4 Litigation. There are no actions, arbitrations, mediations, suits,
proceedings, orders or investigations pending or, to the knowledge of the Buyer,
threatened against the Buyer, at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign that challenge the validity of
the transactions contemplated by this Agreement.
4.5 Buyer Financing. Buyer has, or prior to Closing will have,
sufficient funds to enable it to pay the consideration required to be paid by
Buyer pursuant to Article I and to perform its obligations hereunder.
Article V
Conduct Prior to the Closing
5.1 Conduct of the Business. The Companies shall, and shall cause each
Subsidiary to, observe each term set forth in this Section 5.1 and agree that,
except as set forth in Section 5.1 of the Disclosure Schedule or contemplated by
this Agreement, from the date hereof until the Closing Date, unless otherwise
consented to by Buyer in writing:
(a) The business of the Companies and each Subsidiary shall be
conducted only in, and none of the Companies or the Subsidiaries shall take any
action except in, the ordinary course of the Companies' and each Subsidiary's
business and in accordance in all material respects with all applicable Laws;
(b) Other than any cash distributions or cash dividends to
Parent or one of its Affiliates, none of the Companies or the Subsidiaries
shall, directly or indirectly, do or permit to occur any of the following: (i)
issue or sell any additional shares of, or any options, warrants, conversion
privileges or rights of any kind to acquire any shares of its capital stock;
(ii) sell, pledge, dispose of or encumber any of its assets, except in the
ordinary course of business; (iii) amend or propose to amend its Charter
Documents or Governing Documents; (iv) split, combine or reclassify any
outstanding shares of its capital stock, or declare, set aside or pay any
dividend or other distribution payable in stock or other property (other than
cash) or otherwise with respect to its capital stock; (v) redeem, purchase or
acquire or offer to acquire any shares of its capital stock or other securities
of such entity; (vi) acquire (by merger, exchange, consolidation, acquisition of
stock or assets or otherwise) any corporation, partnership, joint venture or
other business organization or division or material assets thereof; (vii) other
than in the ordinary course of business, incur any indebtedness for borrowed
money or issue any debt securities, other than short-term borrowings under
existing credit facilities that will be repaid in full on or prior to the
Closing; (viii) other than in the ordinary course of business, permit any
accounts payable owed to trade creditors to remain outstanding more than 60
days; (ix) accelerate, beyond the normal collection cycle, collection of
accounts receivable; (x) other than in the ordinary course of business, amend or
modify any Contract listed on Section 3.13 of the Disclosure Schedule, or enter
into any contract or agreement that otherwise would be listed on Section 3.13 of
the Disclosure Schedule if such contract or agreement had been in effect on the
date of this
-28-
Agreement (and notwithstanding anything to the contrary, shall not enter into
any exclusive distribution or sales agency agreement, whether or not in the
ordinary course of business); or (xi) other than in the ordinary course of
business, enter into or propose to enter into, or modify or propose to modify,
any agreement, arrangement or understanding with respect to any of the matters
set forth in this Section 5.1(b);
(c) None of the Companies or the Subsidiaries shall, directly
or indirectly, (i) enter into or modify any employment, severance or similar
agreements or arrangements with, or grant any bonuses, salary increases,
severance or termination pay to, any officers, directors or consultants, or (ii)
other than in the ordinary course of business, in the case of employees who are
not officers, take any action with respect to the grant of any bonuses, salary
increases, severance or termination pay or with respect to any increase of
benefits payable in effect on the date hereof;
(d) None of the Companies or the Subsidiaries shall adopt or
amend any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other employee benefit plan,
trust, fund or group arrangement for the benefit or welfare of any employees or
any bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund or arrangements for the benefit or welfare of any director;
(e) Other than in the ordinary course of business, none of the
Companies or the Subsidiaries shall cancel or terminate its current insurance
policies or cause any of the coverage thereunder to lapse, unless simultaneously
with such termination, cancellation or lapse, replacement policies providing
coverage equal to or greater than the coverage under the canceled, terminated or
lapsed policies for substantially similar premiums are in full force and effect.
Without limiting the foregoing, the Company or one or more of the Subsidiaries
will use commercially reasonable efforts to cause to be renewed, before its
April 1, 2004 expiration date, the Environmental Liability Policy for locations
in Germany (Policy No. JL05820305, issued by XL Insurance Company);
(f) The Companies and each Subsidiary shall use its
commercially reasonable efforts to (i) preserve intact the Companies' and each
Subsidiary's business organization and goodwill, keep available the services of
the Companies' and each Subsidiary's officers and employees as a group and
maintain satisfactory relationships with suppliers, distributors, customers and
others having business relationships with the Companies and each Subsidiary; and
(ii) not intentionally take any action which would render, or which reasonably
may be expected to render, any representation or warranty made by it in this
Agreement untrue at the Closing;
(g) None of the Companies or the Subsidiaries shall (i) make
or rescind any express or deemed election or take any other discretionary
position relating to Taxes, (ii) amend any Return, (iii) settle or compromise
any claim, action, suit, litigation, proceeding, arbitration, investigation,
audit or controversy relating to Taxes, or (iv) change any of their methods of
reporting income or deductions for federal, state, local or foreign income Tax
purposes from those employed in the preparation of the federal, state, local or
foreign income Tax Returns for the taxable year ended December 31, 2002;
-29-
(h) The Companies and the Subsidiaries shall not change any of
their methods of accounting in effect at December 31, 2003, other than those
required by U.S. GAAP; and
(i) The Companies and the Subsidiaries shall not perform any
act referenced by (or omit to perform any act which omission is referenced by)
the terms of Section 3.8 hereof.
5.2 Access to Books and Records. Between the date hereof and the
Closing Date, to the extent permitted by applicable Law, the Companies and the
Subsidiaries shall afford to Buyer and its authorized representatives ("Buyer's
Representatives") reasonable access upon reasonable notice to the facilities,
senior officers and other members of management, business and financial records,
contracts, business plans, budget and projections regarding the Companies and
the Subsidiaries as Buyer may reasonably request; provided, that no such access
shall unreasonably interfere with the Companies or Subsidiaries' normal
operations; and provided, that all such access under this Section 5.2 and under
Section 5.3, as well as all integration planning under Section 5.4, shall be
coordinated through the senior officers of the Companies after consultation with
Seller, which consultation shall occur as promptly as reasonably practicable so
as not to unreasonably delay any such access; and provided, however, that
neither the Buyer nor any of its Affiliates shall have the right to receive or
obtain any information relating to Taxes or Returns of the Parent, Seller or any
of their affiliates, or any of their respective predecessors other than
information relating solely to any of the Companies or the Subsidiaries.
5.3 Access to Customers and Suppliers. Subject to Section 5.2, between
the date hereof and the Closing Date, the parties agree to use commercially
reasonable efforts and to act in good faith to develop a limited list of
customers and suppliers of the Companies and the Subsidiaries that Buyer may
contact with respect to the Acquisition (provided that any such contact shall be
initiated by, and at all times conducted in the presence of, representatives of
the Companies or Parent), as well as a communication plan with respect to such
customers and suppliers that is acceptable to Parent, which acceptance will not
be unreasonably withheld.
5.4 Integration Planning. Subject to Section 5.2, to the extent
permitted by applicable Law, the parties agree to cooperate in good faith to
enable Buyer to work with senior management and other subject matter experts of
the Companies for purposes of integration planning, provided that such
integration planning shall be coordinated through senior management of the
Companies in all cases and not unreasonably interfere with the Companies' or
Subsidiaries' normal business operations.
Article VI
Additional Agreements
6.1 Regulatory Filings. As promptly as practicable after the execution
of this Agreement, Buyer, Seller, Parent and the Companies shall make or cause
to be made all filings and submissions under any Laws, including the HSR Act,
the Securities Act or any comparable laws regulating competition or securities
applicable to such party for the consummation of the transactions contemplated
herein. Parent (on behalf of itself, Seller and the Companies) will coordinate
and cooperate with Buyer (or its affiliates) and Buyer will coordinate and
cooperate with Parent in exchanging such information necessary to make such
filings. Any cooperation provided by any party to the other parties towards
making the necessary filings and obtaining the
-30-
necessary approvals shall not derogate from or release such party from its
obligations to make the necessary filings and obtain the necessary approvals
applicable to such party for the consummation of the transactions contemplated
herein.
6.2 Conditions. Each of Buyer, Seller, Parent and the Companies shall
take all commercially reasonable actions necessary or desirable to comply
promptly with all legal requirements which may be imposed on such party with
respect to the Acquisition and will promptly cooperate with and furnish such
information to any other party hereto in connection with any such requirements
imposed upon such other party in connection with the Acquisition. Each party
will take all commercially reasonable actions to obtain (and will cooperate with
the other parties in obtaining) any consent, authorization, order or approval of
or any registration, declaration or filing with, or an exemption by any
Governmental Entity, or other third party, required to be obtained or made by
such party in connection with the Acquisition or the taking of any action
contemplated thereby or by this Agreement, including all consents, waivers or
approvals required under any Contracts disclosed in Section 3.12 of the
Disclosure Schedule; provided, however, that Buyer shall not be required to
agree to (i) any divestiture by Buyer or the Companies or any of Buyer's
subsidiaries or Affiliates shares of capital stock or of any business, assets or
property of Buyer or its subsidiaries or Affiliates or of the Companies or its
Affiliates that would result in the disposition of control over assets
generating annual revenues of more than $10,000,000 (as determined from the
latest twelve trailing months' income statements) or (ii) the imposition of any
material limitation on the ability of any of them to conduct their business or
to own or exercise control of such assets, properties and stock.
6.3 No Negotiations. From and after the date of this Agreement until
the earlier to occur of the Closing Date or termination of this Agreement
pursuant to its terms, Parent, Seller and the Companies shall not, and each of
Parent, Seller and the Companies will instruct their respective officers,
directors, employees, agents, representatives and Affiliates, not to, directly
or indirectly solicit, initiate or encourage submission of any proposal or offer
from any Person (including any of its or their officers or employees,
representatives, agents, or affiliates) relating to any liquidation,
dissolution, recapitalization, tender or exchange offer, solicitation of
proxies, merger, consolidation or acquisition or purchase of all or a material
portion of the assets of, or any equity interest in, the Companies or any of the
Subsidiaries or other similar transaction or business combination involving the
Companies or any of the Subsidiaries, or participate in any discussions or
negotiations regarding, or furnish to any other Person any information with
respect to, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other Person to do or seek
any of the foregoing. Parent shall promptly notify Buyer if any such proposal or
offer, or any inquiry from or contact with any Person with respect thereto, is
made and shall promptly provide Buyer with such information regarding such
proposal, offer, inquiry or contact as Buyer may request. In addition, from and
after the date of this Agreement until the earlier to occur of the Closing Date
or the termination of this Agreement pursuant to its terms, Parent, Seller and
Companies shall not, and each of Parent, Seller and the Companies shall instruct
their respective directors, officers, employees, representatives, agents and
Affiliates not to, directly or indirectly, make or authorize any public
statement, recommendation or solicitation in support of any proposal made by any
Person or group (other than Buyer) relating to any of the foregoing. The parties
agree, however, that nothing in the foregoing sentences of this Section 6.3
shall prohibit Parent from entering into any agreement, discussion or
negotiation with or providing any information to any third party who
-31-
has made a bona fide unsolicited offer to acquire (whether by way of merger,
purchase of the equity or assets of Parent or otherwise) Parent if the Board of
Directors of Parent determines in good faith and after receipt of advice of
outside counsel that the failure to provide such information or engage in such
discussions or negotiations could reasonably be expected to result in a breach
of Parent's Board's fiduciary duties under applicable Law.
6.4 Employee Matters.
(a) Employees of the Companies and the Subsidiaries
immediately following the Closing Date (the "Company Employees") shall continue
as employees of the Companies and the Subsidiaries on the Closing Date, subject
to the right of the Companies and the Subsidiaries, as the case may be, to
terminate the employment of such employees in accordance with Law.
(b) Following the Closing Date, Buyer shall provide, or cause
to be provided, compensation and benefits for the Company Employees that is
reasonable and appropriate under the circumstances, including, for a period of
one year following the Closing Date, at least the same base salary as was in
effect for each such Company Employee immediately prior to the Closing Date.
(c) Each Company Employee shall be entitled to roll over to a
Buyer vacation plan and Buyer shall honor any accrued but unused vacation days
as of the Closing Date.
6.5 Benefit Plans.
(a) Krone SERP. Buyer does not assume and shall have no
obligation to provide, and Seller shall retain all liabilities, responsibilities
and obligations for, any non-qualified deferred compensation benefits, severance
benefits or enhanced severance benefits to which any employee or former employee
of the Companies and the Subsidiaries may be or become entitled or claim to be
entitled under the Krone Incorporated Supplemental Executive Retirement Plan.
(b) GenTek KERP. From and after the Closing, Buyer will assume
all liabilities, responsibilities and obligations for any severance benefits (i)
to which any Contract Employee may become entitled under the GenTek Key Employee
Retention Plan (the "GenTek KERP"), and (ii) subject to Parent's obligation to
bear the first $1,000,000 of severance benefits to become due and payable under
the terms of the GenTek KERP (if the terminations or resignations of employment
giving rise to such $1,000,000 occur within the first twelve months after the
Closing Date), to any other employee of the Companies and the Subsidiaries
thereunder, and with respect to any terminations or resignations that occur
after the twelve-month anniversary of the Closing Date, any and all severance
benefits. Except as provided in the foregoing sentence, neither Parent nor
Seller shall be responsible for, and Buyer shall assume and indemnify and hold
harmless Parent and Seller in respect of, all liabilities, responsibilities and
obligations for any severance benefits due and payable under the GenTek KERP to
any employee whose employment is terminated with Buyer or one of its Affiliates
and within one year thereafter such employee is rehired by, or otherwise
provides any compensated services to, Buyer or one of its Affiliates and shall
in addition promptly reimburse Seller or Parent in respect of any payment made
by it on account of such severance benefits paid to any such employees.
-32-
(c) Krone MIP. Seller has previously delivered to Buyer the
final terms of the Acquired Companies' management incentive plan for 2004 as
presently in effect (the "Krone 2004 MIP"), including but not limited to the
financial targets under the Krone 2004 MIP for the relevant period and the
weightings for the financial metrics used thereunder. Buyer and Seller agree
that, assuming that the Closing occurs and contingent upon the Closing
occurring, payments under the Krone 2004 MIP will be calculated on a pro rated,
partial year basis as of the Closing Date, such calculation to be made by Buyer
in accordance with the terms of the Acquired Companies' management incentive
plan for 2003 ("Krone 2003 MIP") as soon as reasonably practicable following the
Closing Date. Following the Closing, Buyer shall cause the Acquired Companies to
make such payments to eligible employees that are due in accordance with the
Krone 2004 MIP pursuant to the preceding sentence as soon as reasonably
practicable after such calculation has been made by Buyer.
(d) Non-Business Plans. To the extent Section 3.17 of the
Disclosure Schedule discloses non-Business Plans, Parent will take all
appropriate steps to ensure that (i) the employees of the Companies and
Subsidiaries who are covered under any non-Business plans which are retirement
plans become fully vested in their benefits accrued under such plans as of the
Closing Date, to the extent permitted under such non-Business Plans, and (ii)
coverage under all such non-Business plans will cease as of Closing, and Parent
shall retain all liabilities, responsibilities, and obligations for the benefits
due to the employees or former employees of the Companies and the Subsidiaries
with respect to benefits accrued through Closing. Parent agrees to make
distributions available to the employees of the Companies and the Subsidiaries
under any 401(k) plan that is a non-Business Plan, including a distribution of
outstanding loans, if any. If any non-Business Plans provide welfare benefits,
Parent shall be liable for all claims allocated to the period ending on Closing.
Claims will be allocated in general according to the date on which the claim is
incurred (that is, the date of the event or events causing a covered individual
to become eligible to receive benefit payments, regardless of the dated of
filing the claim). Coverage under non-Business Plans which are welfare plans
will cease upon Closing for employees of the Companies and the Subsidiaries,
subject to Parent's obligation to permit continued coverage for a reasonable
period of time after Closing under the Transition Services Agreement.
(e) Credit for Service. Buyer shall cause each applicable
employee benefit plan, program, policy and arrangement of Buyer or an Affiliate
of Buyer, including, without limitation, any pension plans, welfare plans,
short-term disability plans, vacation plans, retiree medical plans and severance
plans, to recognize (i) for purposes of satisfying any deductibles, co-pays and
out-of-pocket maximums in any health or other insurance plan of Buyer or an
Affiliate of Buyer, any payment made by any employee during the coverage period
up to the Closing towards deductibles, co-pays and out-of-pocket maximums in any
health or other insurance plan of Parent, Seller or any of their Affiliates and
(ii) for purposes of determining eligibility to participate, vesting thereunder
and benefit accruals (except for the purposes of accruals under any defined
benefit plan of Buyer or an Affiliate of Buyer), all service of a Company
Employee with Seller or any Affiliate of Seller. Buyer agrees that its health
and welfare plans (or such plans of an Affiliate of Buyer) shall (i) waive any
pre-existing condition exclusion with respect to employees and any proof of
insurability and (ii) recognize as dependents of the Company Employees any
dependents recognized by the Sellers' or an Affiliate of Seller's health and
welfare plans. Notwithstanding the foregoing, any such crediting of
-33-
service shall not operate to duplicate any benefit or the funding of any such
benefit and shall not be credited if such service is prior to a specific date
before which service would not have been credited for employees of Buyer or an
Affiliate of Buyer.
(f) Tax Qualified Plans. Parent shall fully vest all Company
Employees in its tax-qualified defined contribution and defined benefit pension
plans (but only to the extent such plans are non-Business Plans) as of the
Closing Date. As soon as practicable following the Closing Date, Buyer shall
designate a tax-qualified defined contribution plan of Buyer or an Affiliate of
Buyer that either (i) currently provides for the receipt from Company Employees
of "eligible rollover distributions" (as such term is defined under Section 402
of the Code) or (ii) shall be amended as soon as practicable following the
Closing Date to provide for the receipt from the Company Employees of eligible
rollover distributions. Each Company Employee who is a participant in a
tax-qualified defined contribution plan maintained by Parent or an Affiliate of
Parent (a "Parent 401(k) Plan") shall be given the opportunity to receive a
distribution of his or her account balance and shall be given the opportunity to
elect to "roll over" such account balance to the tax-qualified defined
contribution plan maintained by Buyer or Affiliate of Buyer (a "Buyer 401(k)
Plan"), subject to and in accordance with the terms of the respective plans and
applicable Law. A Company Employee who elects to make such transfer may also
transfer any loan balance she/he has with Seller's 401(k) Plan to Buyer's 401(k)
Plan provided that Buyer's 401(k) Plan will accept such a transfer only if the
Company Employee or Seller's 401(k) Plan also transfers to Buyer's 401(k) Plan
the promissory note evidencing such loan balance and the repayment schedule for
same.
(g) COBRA. Effective for qualifying events occurring after the
Closing Date, Buyer or an Affiliate of Buyer shall assume all obligations with
respect to the provision of notices, election periods and benefits pursuant to
Section 4980B of the Code or Part VI of Subtitle B of ERISA ("COBRA") to all
Company Employees (and their beneficiaries). Similarly, Buyer or an Affiliate of
Buyer shall assume such obligations which respect to the Company Employees (and
their beneficiaries) who, as of the Closing Date, are entitled to receive or
entitled to elect to receive continuation of group health plan coverage under
COBRA with respect to group health plans which are not non-Business Plans. Any
COBRA obligations which arise for qualifying events on or before the Closing
Date under non-Business Plans shall remain an obligation of Seller. If any COBRA
obligation relates to qualifying events after the Closing Date under a
non-Business Plan, coverage under which is continued under the Transition
Services Agreement, responsibility shall be allocated under the terms of the
Transition Services Agreement.
6.6 Confidentiality. Except as required by applicable Law, after the
Closing, Parent, Seller and each of their Affiliates shall hold in confidence
all trade secrets and other confidential or proprietary documents and
information related to the Companies' and the Subsidiaries' business, and shall
refrain from disclosing or using any such confidential information other than
for the benefit of the Companies or the Subsidiaries. This obligation of
confidentiality and non-use shall not apply, or shall cease to apply, to such
information which is publicly available as of the Closing Date or subsequently
becomes publicly available through a source other than Parent, Seller or any of
their Affiliates.
-34-
6.7 Notification of Certain Matters. The Companies, Seller, Parent or
Buyer, as the case may be, shall promptly notify the others of (a) its obtaining
of knowledge as to the matters set forth in clauses (i), (ii) and (iii) below,
or (b) the occurrence, or failure to occur, of any event, which occurrence or
failure to occur would be likely to cause (i) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Closing Date, (ii) any material failure
of the Companies, Seller, Parent or Buyer, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement or (iii) the institution of any claim, suit, action or
proceeding arising out of or related to the Acquisition or the transactions
contemplated hereby; provided, however, that no such notification shall affect
the representations or warranties of the parties or the conditions to the
obligations of the parties hereunder.
6.8 Noncompetition. Prior to the third anniversary of the Closing Date,
the Seller shall not, and shall cause its Affiliates not to, directly or
indirectly, own, manage, operate, control, participate or have any interest in
any Person that (i) produces, manufactures, supplies, sells or distributes wire,
cable or connectivity devices for voice, data or telecommunications networks
(whether public or private) and devices, or (ii) designs, plans, constructs or
installs telecommunications systems; provided that this Section 6.8 shall not
prevent the Seller or its Affiliates from owning, solely as an investment,
securities of a publicly traded company so long as the Seller and its Affiliates
do not own or control, in the aggregate, more than 10% of any class of
securities of such company; and provided further, that this Section 6.8 shall
not apply to, and no breach shall occur as a result of, the continued conduct of
Parent's NOMA business in a manner that does not materially compete with the
business of the Acquired Companies of Buyer and its other Affiliates.
6.9 Nonsolicitation. Parent and Seller agree that during the period
beginning on the Closing Date and ending on the date which is two (2) years
after the Closing Date (the "Term"), neither Parent nor Seller will, directly or
indirectly, solicit for employment or other services or hire any Person who is
or was an employee of the Companies or the Subsidiaries at any time during the
six-month period immediately preceding the Closing or during the Term, except on
behalf of the Companies or the Subsidiaries or Buyer; provided that this Section
6.9 shall not apply to any such employee whose employment is terminated by the
Buyer or one of its Affiliates on or after the Closing.
6.10 Litigation Support. In the event and for so long as Parent,
Seller, Buyer, the Companies or any Subsidiary is actively contesting or
defending against any litigation in connection with any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction existing or occurring on or
prior to the Closing Date involving the Companies or any Subsidiary, Buyer, on
the one hand, and Parent or Seller, on the other hand, will provide such
reasonable cooperation as may be reasonably requested by the other party, all at
the sole cost and expense of the requesting party (unless in the good faith
belief of the non-requesting party such cooperation will conflict with the
business interests of such non-requesting party or shall materially interfere
with the normal operations of the business of the non-requesting party).
6.11 Books and Records; Access. After the Closing Date, Parent and
Seller will afford to Buyer and Buyer's Representatives, during normal business
hours, upon reasonable request,
-35-
reasonable access to the books and records of Parent and Seller pertaining to
each of the Companies and the Subsidiaries (unless in the good faith belief of
Parent such access will conflict with the business interests of Parent or any of
its subsidiaries or shall materially interfere with the normal operations of the
business of Parent or its subsidiaries). Notwithstanding the foregoing or any
other provision in this Agreement, neither the Buyer nor any of its Affiliates
shall have the right to receive or obtain any information relating to Taxes or
Returns of the Parent, Seller, any of their Affiliates, or any of their
predecessors other than information relating solely to any of its Companies and
the Subsidiaries. After the Closing Date, Buyer will cause the Companies to hold
all of the books and records of each of the Companies and the Subsidiaries
existing on the Closing Date in accordance with Buyer's retention policies in
effect from time to time (and applied to Buyer's representations generally) for
a period of not less than two years from the Closing Date and, if it thereafter
proposes to destroy or dispose of any such books and records, to offer first in
writing at least 60 days prior to such proposed destruction or disposition to
surrender them to Parent or Seller at the sole expense of Parent and Seller.
After the Closing Date, Buyer will cause each of the Companies and the
Subsidiaries to afford Parent and Seller and their accountants and counsel,
during normal business hours, upon reasonable request, reasonable access to the
books and records of each of the Companies and the Subsidiaries (unless in the
good faith belief of Buyer such access will conflict with the business interests
of Buyer or any of its subsidiaries or shall materially interfere with the
normal operations of the business operations of the business of Buyer or its
subsidiaries). Notwithstanding the foregoing or any other provision in this
Agreement, neither the Parent nor any of its Affiliates shall have the right to
receive or obtain any information relating to Taxes or Returns of the Buyer,
Seller, any of their Affiliates, or any of their predecessors other than
information relating solely to any of its Companies and the Subsidiaries.
6.12 Assignment of Confidentiality Agreements. Effective upon the
Closing, Parent and Seller will use commercially reasonable efforts to assign to
the Companies all of Parent and Seller's right, title and interest in and to any
material confidentiality agreements that Parent or Seller are a party to and
which are currently in effect pertaining to the confidentiality of information
pertaining to the Companies, the hiring of employees of the Companies or other
matters.
6.13 Intercompany Contracts. Except as contemplated in the Transition
Services Agreement (or as set forth in Schedule 1.3(b)(ii)), all contracts and
arrangements between the Companies and the Subsidiaries, on the one hand, and
Parent and Seller or any of their subsidiaries (other than the Acquired
Companies), on the other hand, will be terminated as of the Closing Date, at no
liability to the Companies or the Subsidiaries.
6.14 Audited Financial Statements. From and after the date of this
Agreement, Parent and Seller will afford to Buyer and Buyer's Representatives
reasonable access at all reasonable times and upon reasonable notice to the
books and records and other information regarding the Companies and the
Subsidiaries, including the work papers of Deloitte & Touche LLP, Parent's
independent auditors, for the purpose of preparing audited financial statements
of the Acquired Companies. Parent and Seller shall cooperate with Buyer in the
preparation of audited financial statements for the Acquired Companies for the
past three fiscal years and any interim periods specified in the rules
promulgated under the Securities Exchange Act of 1934, at Buyer's sole
-36-
expense, including but not limited to making commercially reasonable efforts to
ensure that Deloitte & Touche LLP is available and duly authorized to audit such
financial statements.
6.15 Further Assurances. Each party to this Agreement shall execute
such documents and other papers and perform such further acts as may be
reasonably required to carry out the provisions hereof and the transactions
contemplated hereby. For a reasonable period of time after the Closing Date upon
the reasonable request of any party (or parties), the other parties shall
promptly execute and deliver such further instruments of assignment, transfer,
conveyance, endorsement, direction or authorization and other documents as may
be requested to effectuate the purposes of this Agreement and the transactions,
plans and arrangements contemplated hereby.
Article VII
Conditions to Closing
7.1 Conditions to Obligations of Each Party to Effect the Acquisition.
The respective obligations of each party to this Agreement to effect the
Acquisition shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date:
(a) No Injunctions or Restraints. No Order or Law entered,
enacted, promulgated, enforced or issued by any court or other Governmental
Entity of competent jurisdiction or other legal restraint or prohibition shall
be in effect (i) imposing or seeking to impose material sanctions, damages, or
liabilities directly arising out of the Acquisition on Parent, Seller or the
Companies or any of their officers or directors; or (ii) prohibiting or making
illegal the consummation of the Acquisition;
(b) Governmental Action. No action or proceeding shall be
threatened, instituted or pending by any Governmental Entity challenging or
seeking to prevent or delay consummation of or seeking to render unenforceable
the Acquisition, asserting the illegality of the Acquisition or any material
provision of this Agreement or seeking material damages in connection with the
transactions contemplated hereby;
(c) Governmental Approvals. The applicable waiting period
under the HSR Act shall have expired or been terminated, and all other material
domestic or foreign governmental filings, authorizations, consents, orders or
approvals that are required for the consummation of the transactions
contemplated hereby will have been duly filed or obtained; and
(d) Approval of Creditors. Parent shall have obtained all
approvals or consents of the lenders necessary pursuant to (i) that certain
Credit Agreement, dated as of November 10, 2003, among Parent, Noma Company and
the domestic subsidiaries of Parent from time to time party thereto and Bank of
America, N.A. as the Agent, and Banc of America Securities LLC as sole
Syndication Agent, Book Runner and Lead Arranger, and (ii) that certain Senior
Term Loan and Guarantee Agreement, dated as of November 10, 2003, among Parent,
the subsidiaries of Parent party thereto, and BNY Asset Solutions LLC, as
Administrative Agent, and any agreements ancillary thereto required to
consummate the transaction contemplated by this Agreement, other than any such
approvals or consents that the failure to obtain would not
-37-
delay or interfere with the consummation of the transactions contemplated by
this Agreement, and shall provide Buyer with evidence of the release of all
related Liens, guarantees, payment obligations or similar obligations of the
Companies or any Subsidiaries.
7.2 Additional Conditions to Buyer's Obligations. The obligation of
Buyer to consummate the transactions contemplated by this Agreement is subject
to the satisfaction or, in Buyer's sole discretion, waiver of each of the
following conditions on or before the Closing Date:
(a) Representations and Warranties True and Correct. The
representations and warranties set forth in Article II and Article III hereof
shall be true and correct in all material respects both when made and at and as
of the Closing Date as though then made and as though the Closing Date had been
substituted for the date of this Agreement throughout such representations and
warranties (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein and without taking into account any
disclosures by the Companies of discoveries, events or occurrences arising on or
after the date hereof), except that any such representation or warranty made as
of a specified date (other than the date hereof (except for Sections 3.20 and
3.12(a)(iii)) shall only need to have been true on and as of such date, provided
that such representations and warranties shall be deemed to be true and correct
in all material respects only if the failure or failures of such representations
and warranties to be so true and correct without regard to knowledge,
materiality, and Material Adverse Effect exceptions do not represent in the
aggregate a Material Adverse Effect;
(b) Covenants Performed. The Companies, Seller and Parent
shall have performed in all material respects all of the covenants and
agreements required to be performed and complied with by them under this
Agreement prior to the Closing;
(c) No Injunctions or Restraints. No Order or Law entered,
enacted, promulgated, enforced or issued by any court or other Governmental
Entity of competent jurisdiction or other legal restraint or prohibition shall
be in effect (i) imposing or seeking to impose material limitations on the
ability of Buyer to acquire or hold or to exercise full rights of ownership of
any securities of the Acquired Companies; (ii) imposing or seeking to impose
material limitations on the ability of Buyer or its affiliates to combine and
operate the business and assets of the Acquired Companies; (iii) imposing or
seeking to impose other material sanctions, damages, or liabilities directly
arising out of the Acquisition on Buyer or any of its officers or directors; or
(iv) requiring or seeking to require divestiture by Buyer of any portion of the
business, assets or property of the Acquired Companies or of Buyer that would
result in the disposition of control over assets generating annual revenues of
more than $10,000,000 (as determined from the latest twelve trailing months'
income statements);
(d) No Material Adverse Change. Between the date of this
Agreement and the Closing Date, except as disclosed in the Disclosure Schedule
(and without taking into account any disclosures after the date hereof by the
Companies of discoveries, events or occurrences arising on or after the date
hereof) or the Latest Financial Statements or as contemplated by this Agreement
or the transactions contemplated hereby, there shall not have occurred a
Material Adverse Effect.
-38-
(e) Consents Obtained. Parent, Seller and/or the Companies
shall have obtained, or caused to be obtained, each material consent and
approval referred to in Section 2.4 and Section 3.5 hereof;
(f) Parent Audited Financial Statements. At least five (5)
business days prior to the Closing Date, Parent shall have delivered to Buyer a
true and complete copy of Parent's audited consolidated financial statements as
of and for the year ended December 31, 2003, including a true and complete copy
of Parent's independent auditor's report thereon and all financial notes
constituting a part thereof; and
(g) Delivery of Certain Documents. On the Closing Date, Parent
shall have delivered to Buyer all of the following:
(i) a certificate of an executive officer of Parent, dated the
Closing Date, stating that the conditions precedent set forth in
subsections (a) and (b) above have been satisfied;
(ii) a copy of (A) the text of the resolutions adopted by the
Board of Directors of Parent, Seller and the Companies authorizing the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement,
including the Acquisition and (B) an incumbency certificate executed on
behalf of Parent by its corporate secretary certifying the signature
and office of each officer executing this Agreement and such other
agreements contemplated in this Agreement;
(iii) copies of the third party and governmental consents and
approvals referred to in subsections (c) and (e) above;
(iv) a duly executed FIRPTA statement for purposes of
satisfying Buyer's obligations under Treasury Regulation Section 1.1445
2(b)(2);
(v) a copy, fully executed by Parent and Seller, of the
Transition Services Agreement in substantially the form attached as
Exhibit A hereto;
(vi) a ▇▇▇▇ of sale, executed by Seller or an applicable
Affiliate of Seller, and such other instruments of conveyance,
transfer, assignment and delivery with respect to the Related IP as
Buyer shall have reasonably requested;
(vii) except as prohibited by applicable Law, the resignation
in writing of the directors and officers of the Companies and the
Subsidiaries who are employees of Parent or its Affiliates (other than
the Acquired Companies) effective as of the Closing Date; and
(viii) such other certificates, documents and instruments as
Buyer reasonably requests related to the transactions contemplated
hereby.
7.3 Additional Conditions to Seller's Obligations. The obligations of
Seller to consummate the transactions contemplated by this Agreement are subject
to the satisfaction or,
-39-
in Seller's sole discretion, waiver of each of the following conditions on or
before the Closing Date:
(a) Representations and Warranties True and Correct. The
representations and warranties set forth in Article IV hereof shall be true and
correct in all material respects both when made and at and as of the Closing as
though then made and as though the Closing Date had been substituted for the
date of this Agreement throughout such representations and warranties (without
giving effect to any limitation as to "materiality" or "material adverse effect"
set forth therein), except that any such representation or warranty made as of a
specified date (other than the date hereof) shall only need to have been true on
and as of such date, provided that such representations and warranties shall be
deemed to be true and correct in all material respects only if the failure or
failures of such representations and warranties to be so true and correct
without regard to knowledge, materiality, and Material Adverse Effect exceptions
do not represent in the aggregate a Buyer Material Adverse Effect;
(b) Covenants Performed. Buyer shall have performed in all
material respects all the covenants and agreements required to be performed by
it under this Agreement prior to the Closing; and
(c) Delivery of Certain Documents. On the Closing Date, Buyer
will have delivered to the Companies:
(i) a certificate of an executive officer of Buyer dated the
Closing Date, stating that the conditions precedent set forth in
subsections (a) and (b) above have been satisfied;
(ii) a copy of the Transition Services Agreement executed by
Buyer;
(iii) a copy of each of (A) the text of the resolutions
adopted by the Board of Directors of Buyer authorizing the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated by this Agreement; along with a certificate
executed on behalf of Buyer by its corporate secretary certifying to
Seller that such copy is a true and complete copy of such resolutions,
and that such resolutions were duly adopted and have not been amended
or rescinded, and (B) an incumbency certificate executed on behalf of
Buyer by its corporate secretary certifying the signature and office of
each officer executing this Agreement and such other agreements
contemplated in this Agreement; and
(iv) such other certificates, documents and instruments as
Seller and Parent may reasonably require relating to the transactions
contemplated hereby.
Article VIII
Termination
8.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual consent of Buyer and Parent (on behalf of
itself, Seller and the Companies);
-40-
(b) by either Buyer or Parent (on behalf of itself, Seller and
the Companies) if there has been a material breach of any representation or
warranty or covenant on the part of the Companies, Seller or Parent, on the one
hand, or Buyer, on the other, and such breach is not cured by the breaching
party within 30 days following the receipt by the breaching party of a notice
from the non-breaching party of any such breach such that the conditions set
forth in Section 7.2(a) or (b) or 7.3(a) or (b), as applicable, cannot be
satisfied at or prior to the date set forth in Section 8.1(c) below, provided,
that, neither Buyer nor Parent will be entitled to terminate this Agreement
pursuant to this Section 8.1(b) if such party's willful breach of this Agreement
has prevented the consummation of the transactions contemplated hereby; or
(c) by either Buyer or Parent (on behalf of itself, Seller or
the Companies) if the transactions contemplated hereby have not been consummated
by September 30, 2004; provided, that, neither Buyer nor Parent will be entitled
to terminate this Agreement pursuant to this Section 8.1(c) if such party's
willful breach of this Agreement has prevented the consummation of the
transactions contemplated hereby.
8.2 Effect of Termination. In the event of termination of this
Agreement by either Buyer or Seller as provided in Section 8.1 hereof, all
provisions of this Agreement shall terminate and there shall be no liability on
the part of Buyer, Parent, Seller or their respective shareholders, officers, or
directors, except that: (i) this Section 8.2 and Sections 11.1 (press releases),
11.2 (expenses) and 11.11 (governing law) hereof shall survive indefinitely, and
(ii) the parties shall remain liable for their willful breaches of this
Agreement prior to the time of such termination.
Article IX
Survival; Indemnification
9.1 Survival of Representations and Warranties and Covenants.
Notwithstanding any investigation made by or on behalf of any of the parties
hereto or the results of any such investigation and notwithstanding the
participation of such party in the Closing, the representations, warranties and
covenants contained herein shall, except as otherwise provided in the provision
to this sentence or in the next two sentences of this Section 9.1, survive the
Closing for a period of 18 months from the Closing Date; provided that any claim
by a party for indemnification hereunder prior to such date that has not been
completely and finally resolved prior to such earlier date shall survive until
such time as such claim is resolved, completely and finally. Notwithstanding the
preceding sentence, the representations and warranties set forth in Sections
2.2, 2.3 and the first and last sentence of 3.2 shall survive for the length of
the applicable statutory period within which to assert a claim with respect
thereto. Any covenant or other agreement herein of any party any portion of the
performance of which may or is specified to occur after the Closing shall
survive the Closing indefinitely or for such lesser period of time as may be
specified therein.
9.2 Indemnification by Parent and Seller.
(a) From and after the Closing, except as provided in Article
X, which shall exclusively govern any claim for indemnification and obligations
and procedures related thereto, in each case, with respect to any Losses related
to Taxes and subject to the notice requirement
-41-
and limitations of Section 9.2(b) hereof, Parent and Seller agree, jointly and
severally, to indemnify in full (without duplication) Buyer, the Companies and
their respective officers, directors, employees, agents and subsidiaries
(collectively, the "Buyer Indemnified Parties") and hold them harmless from and
against any claim, demand, loss, liability, obligation, deficiency, action,
damage, expense or cost (including, without limitation, interest, penalties,
costs of investigation and defense, and reasonable legal and other professional
fees and expenses), whether or not actually incurred or paid prior to the date
referred to in Section 9.2(b) and whether or not involving a Third Party Action
(as defined in Section 9.5 hereof) (collectively "Losses"), which any of the
Buyer Indemnified Parties may suffer, sustain or become subject to, arising from
or relating to (i) any inaccuracy or misrepresentation in or breach of any of
the representations and warranties of Parent or Seller contained in this
Agreement (other than the representations and warranties in Section 3.12)
(including in the Disclosure Schedule or closing certificates delivered or to be
delivered by or on behalf of such party pursuant to the terms of this Agreement)
(collectively, the "Related Documents"), or (ii) any breach of, or failure to
perform, any covenant of the Companies, Parent or Seller contained in this
Agreement (other than covenants in Article X) (collectively, the "Buyer
Losses"). Notwithstanding the foregoing, no recovery shall be available under
this Section 9.2(a) on account of any Loss in respect of which, and to the
extent that, a price adjustment was made under Article II.
(b) Parent and Seller will be liable to the Buyer Indemnified
Parties for any Buyer Loss (i) only if Buyer delivers to Seller a written
notice, pursuant to Section 9.4 or 9.5, as applicable, with respect to such
Buyer Indemnified Party's claim to be indemnified for such Buyer Losses prior to
18 months of the Closing Date, except for claims arising from a breach of or
inaccuracy in the representations and warranties made in Sections 2.2, 2.3 and
the first and last sentence of 3.2 or for claims arising from a breach of a
covenant the performance of which may or is specified to occur after the
expiration of such 18-month period, for which a claim may be brought through the
survival period described in Section 9.1, and (ii) (A) except as provided in the
following clause (B), only if the aggregate amount of all Buyer Losses exceeds
1% of the Final Closing Purchase Price (the "Basket Amount") or (B) solely in
respect of Buyer Losses for which Parent and Seller are liable to the Buyer
Indemnified Parties as a result of a breach or inaccuracy of the representations
and warranties set forth in Section 3.22 hereof (including, for this purpose,
any Buyer Losses related to the sites referred to in Section 3.22(d) of the
Disclosure Schedule in excess of $2,000,000) ("Buyer Environmental Losses"),
only if the aggregate amount of all such Buyer Environmental Losses exceeds 0.5%
of the Final Closing Purchase Price (the "Environmental Basket Amount"), in
which case Parent and Seller shall be obligated to indemnify the Buyer
Indemnified Parties for the total amount of all such Buyer Losses or Buyer
Environmental Losses, as the case may be, in excess of the Basket Amount or
Environmental Basket Amount, as applicable; provided, however, that the Basket
Amount shall apply only to breaches of or inaccuracies in representations and
warranties other than those set forth in Sections 2.2, 2.3 and the first and
last sentence of 3.2 hereof and shall not apply to any breaches of any covenants
of the Companies or Seller or Parent set forth in this Agreement (except as
otherwise provided in Section 10.1(c)); provided further that, for the avoidance
of doubt, (x) any amounts paid by Parent or Seller in excess of the
Environmental Basket Amount in respect to Buyer Environmental Losses shall not
be counted for purposes of determining the aggregate amount of Buyer Losses to
be applied against the Basket Amount, and (y) the Environmental Basket Amount
shall be treated as a subset of the Basket Amount (e.g., if the Environmental
Basket Amount has been fully applied against Buyer Environmental Losses, and no
other Buyer
-42-
Losses have been incurred by Buyer, the amount remaining in the Basket Amount
would be equal to 0.5% of the Final Closing Purchase Price). Parent's and
Seller's aggregate liability in respect of all matters covered by this Section
9.2 and Section 10.1(c) shall not exceed an amount equal to 25% of the Final
Closing Purchase Price (such product, the "Cap"); provided, however, that such
Cap shall not be applicable in the event that a final, non-appealable judgment
finds that Parent or Seller committed intentional fraud in connection with the
breach of the representations, warranties or covenants in question.
9.3 Indemnification by Buyer.
(a) From and after the Closing, subject to the notice
requirement and limitations of Section 9.3(b) hereof, Buyer agrees to indemnify
in full Parent and Seller and their respective officers, directors, employees,
agents and subsidiaries (collectively, the "Seller Indemnified Parties") and
hold them harmless from and against any Losses which any of the Seller
Indemnified Parties may suffer, sustain or become subject to, arising from or
relating to (i) any inaccuracy or misrepresentation in or breach of any of the
representations and warranties of Buyer contained in this Agreement or other
Related Documents or (ii) any breach of, or failure to perform, any covenant of
Buyer contained in this Agreement (collectively, the "Seller Losses").
Notwithstanding the foregoing, no recovery shall be available under this Section
9.3(a) on account of any Loss in respect of which, and to the extent that, a
price adjustment was made under Article II.
(b) Buyer will be liable to the Seller Indemnified Parties for
any Seller Loss (i) only if Parent delivers to Buyer a written notice, pursuant
to Section 9.4 or 9.5, as applicable, with respect to such Seller Indemnified
Party's claim to be indemnified for such Seller Losses prior to 18 months of the
Closing Date, except for claims arising from a breach of a covenant the
performance of which may or is specified to occur after the expiration of such
18-month period, for which a claim may be brought through the survival period
described in Section 9.1, and (ii) only if the aggregate amount of all Seller
Losses exceeds the Basket Amount, in which case Buyer shall be obligated to
indemnify the Seller Indemnified Parties for the total amount of all such Seller
Losses in excess of the Basket Amount; provided, however, that the Basket Amount
shall apply only to breaches of or inaccuracies in representations and
warranties and shall not apply to any breaches of any covenants of Buyer set
forth in this Agreement. Buyer's aggregate liability for all amounts under this
Section 9.3 shall not exceed an amount equal to the Cap; provided, however, that
such Cap shall not be applicable in the event that a final, non-appealable
judgment finds that Buyer committed intentional fraud in connection with the
breach of the representations, warranties or covenants in question.
9.4 Notice of Claims. Any written notice required to be delivered to
the applicable Indemnifying Party under Section 9.2 or 9.3, as the case may be,
shall specify in reasonable detail (i) the representation and warranty or
covenant that is alleged to have been inaccurate or to have been breached, (ii)
the basis for such allegation and (iii) if known, the aggregate amount of the
Losses for which a claim is being made under this Article IX or, to the extent
that such Losses are not known or have not been incurred at the time such claim
is made, an estimate, to be prepared in good faith, of the aggregate potential
amount of such Losses. To the extent readily available and the production of
which shall not materially interfere with the normal operations of the business
of the Indemnified Party or its subsidiaries, the Indemnified Party
-43-
shall supply such documentation as it reasonably believes to be relevant to such
notice. Written notice to such Indemnifying Party of the existence of a claim
shall be given by the Indemnified Party promptly after the Indemnified Party
first receives notice of the potential claim; provided, however, that the
Indemnified Party shall not be foreclosed from seeking indemnification pursuant
to this Article IX by any failure to provide such prompt notice of the existence
of a claim to the applicable Indemnifying Party or to supply such relevant
supporting documentation, except and only to the extent that such Indemnifying
Party has been materially damaged or prejudiced as a result of such delay.
9.5 Method of Asserting Claims. As used herein, an "Indemnified Party"
shall refer to a Buyer Indemnified Party or Seller Indemnified Party, as
applicable, and the "Indemnifying Party" shall refer to the party or parties
hereto obligated to indemnify such Indemnified Party.
(a) In the event that any Indemnified Party is made a
defendant in or party to any action or proceeding, judicial or administrative,
instituted by any third party for the liability or the costs or expenses of
which are Losses (any such third party action or proceeding being referred to as
a "Third Party Action"), the Indemnified Party shall give the Indemnifying Party
prompt notice thereof. The failure to give such notice shall not affect any
Indemnified Party's ability to seek reimbursement unless the Indemnifying Party
has been materially damaged or prejudiced as a result of such delay. The
Indemnifying Party shall be entitled to contest and defend such Third Party
Action (at its own expense and by its own counsel). Notice of the intention to
so contest and defend shall be given by the Indemnifying Party to the
Indemnified Party within 20 business days after the Indemnified Party's notice
of such Third Party Action (but, in all events, at least five business days
prior to the date that an answer to such Third Party Action is due to be filed).
(b) For so long as no Indemnifying Party elects to compromise
or defend against the Third Party Action, fails to notify the Indemnified Party
of its election to do so, or otherwise abandons the defense of such Third Party
Action, (i) the Indemnified Party may pay (without prejudice of any of its
rights as against any applicable Indemnifying Party), compromise or defend such
Third Party Action (until such defense is assumed by an applicable Indemnifying
Party) and (ii) the costs and expenses of the Indemnified Party incurred in
connection therewith shall be indemnifiable by the applicable Indemnifying Party
or Indemnifying Parties pursuant to the terms of this Agreement. Notwithstanding
anything to the contrary contained herein, in connection with any Third Party
Action in which the Indemnified Party shall reasonably conclude, based upon the
advice of its counsel, that (x) there is a conflict of interest between an
applicable Indemnifying Party and the Indemnified Party in the conduct of the
defense of such Third Party Action or (y) there are specific defenses available
to the Indemnified Party which are different from or additional to those
available to an applicable Indemnifying Party and which could be materially
adverse to such Indemnifying Party, then the Indemnified Party shall have the
right to participate in the defense of such Third Party Action. The Indemnified
Party shall cooperate with the Indemnifying Party to the extent reasonably
requested by the Indemnifying Party in the contest and defense of any Third
Party Action, including providing reasonable access (upon reasonable notice) to
the books, records and employees of the Indemnified Party if relevant to the
defense of such Third Party Action; provided that, such cooperation shall not
materially interfere with the normal operations of the business of the
Indemnified Party. Neither the Indemnified Party nor the Indemnifying Party may
concede, settle or compromise any Third
-44-
Party Action without the consent of any other party that has any monetary
liability with respect to such claim or any other Indemnified Party that is a
party to such claim, which consents will not be unreasonably withheld.
(c) In the event any Indemnified Party should have a claim
against the Indemnifying Party that does not involve a Third Party Action, the
Indemnified Party shall deliver a notice of such claim to the Indemnifying Party
and, if the Indemnifying Party disputes its liability with respect to such
claim, an officer of Parent and an officer of Buyer will first proceed in good
faith to negotiate a resolution of such dispute. If such dispute is not resolved
through the negotiations of such individuals within 30 days after the delivery
of the Indemnified Party's notice of such claim, the Indemnified Party may
pursue legal action to satisfy its claim (subject to Section 11.12 hereof).
9.6 Indemnity Payments. All indemnity payments owed under this Article
IX or Article X shall be reduced to reflect (i) any Tax Benefits, net of any Tax
Detriments, realized by the Indemnified Party or any of its Affiliates and (ii)
any insurance recovery made by the Indemnified Party, in either case, with
respect to the Loss subject to indemnification.
9.7 Sole and Exclusive Remedy. After the Closing, the rights set forth
in this Article IX and X shall be each party's sole and exclusive remedies
against the other parties hereto for any Buyer Losses or Seller Losses, as the
case may be, or any other Losses sustained, incurred or arising from or related
to this Agreement or the transaction contemplated hereby. Notwithstanding the
foregoing, nothing herein shall prevent any of the parties hereto from bringing
an action based upon allegations of intentional fraud on the part of one or more
of the other parties hereto in connection with this Agreement or the other
Related Documents.
Article X
Allocation of Taxes; Tax Returns
10.1 Tax Returns; Allocation of Tax Liabilities.
(a) Parent shall timely prepare and file, or cause to be
timely prepared and filed, in accordance with past practices (unless otherwise
required by applicable law), all Returns of the Acquired Companies for all
taxable periods ending on or before the Closing Date, provide copies (subject to
the limitations of Section 6.11) thereof to Buyer and timely pay (subject to the
limitations of Section 10.1(c)), or cause to be paid, when due, all Taxes
relating to such Returns. Buyer shall timely prepare and file, or cause to be
timely prepared and filed, all Returns of the Acquired Companies for all taxable
periods ending after the Closing Date, including all Straddle Periods, and
timely pay (subject to the limitations of Section 10.1(c)), or cause to be paid,
when due, all Taxes relating to such Returns. All Returns relating to a Straddle
Period shall be prepared and all elections with respect to such Returns shall be
made, to the extent permitted by law, in a manner consistent with prior
practice. Buyer shall provide, or cause to be provided, to Parent, for its
review, a substantially final draft of each Return relating to a Straddle Period
and a schedule setting forth, in reasonable detail, the calculation of Parent's
share of any Tax liability (determined in accordance with Section 10.1(j))
relating to such period at least thirty (30) days prior to the due date for
filing such Return. Parent shall notify Buyer of any reasonable objections it
may have to any items set forth in such draft Return and Buyer and Parent agree
to
-45-
consult and resolve in good faith any such objection and to mutually consent to
the filing of such Return. If Buyer and Parent are unable to resolve any such
objection, the parties shall submit such objection to the Reviewing Party for
review and resolution based upon procedures consistent with the procedures
described in Section 1.4(b) but with appropriate changes to enable the filing of
the relevant Returns on its due date.
(b) Within 120 days after the Closing Date, Buyer shall cause
the Acquired Companies to prepare and provide to Parent, and Parent shall
reimburse Buyer for any reasonable out-of-pocket expenses related to the
preparation thereof, a package of Tax information materials, including schedules
and work papers (the "Tax Package") reasonably required by Parent or its
Affiliates to enable Parent or its Affiliates to prepare all Returns required to
be prepared and filed by Parent pursuant to Section 10.1(a) or any U.S. federal
or state consolidated, combined, unitary or affiliated Return. The Tax Package
shall be prepared in good faith and in a manner consistent with past practice of
the Acquired Companies.
(c) Subject to the Basket Amount and Cap limits provided for
in Section 9.2(b), Parent and Seller shall be jointly and severally liable for
all Taxes attributable to a Pre-Closing Tax Period which were not properly
accrued or reserved for on the Latest Balance Sheet (as such accrual or reserve
may be modified, consistent with past practices, for subsequent events through
Closing), and shall indemnify Buyer and the Acquired Companies and hold them
harmless from and against any liability for such Taxes; provided, however, that
Parent and Seller shall not be liable for and shall not indemnify Buyer or the
Acquired Companies for any Taxes resulting from transactions or actions taken or
deemed to be taken by any of the Acquired Companies on the Closing Date after
the Closing except for transactions or actions undertaken in the ordinary course
of business or otherwise contemplated by this Agreement. Buyer shall be liable
for all Taxes attributable to a Post-Closing Tax Period and shall indemnify
Parent and Seller and hold them harmless from and against any liability for such
Taxes. No amount in excess of the Basket Amount shall be payable under this
Section 10.1(c) until the aggregate amount of all such excess unpaid indemnity
payments exceeds $50,000, in which case, the indemnifying party thereafter shall
be liable to pay all such excess amounts. Parent will pay all U.S. federal,
state and local Taxes attributable to the making of any Election.
(d) Buyer and its Affiliates shall not, and shall not allow
any of the Acquired Companies to, make any election, change any tax accounting
method or convention or take any position on any Return with respect to any
taxable period ending after the Closing Date (including an amendment to any such
Return) that would adversely affect the Tax liability of Parent or Seller
without the prior written consent of Parent. In addition, Buyer and its
Affiliates, shall not (and shall not cause or permit any of the Acquired
Companies to) amend, refile or otherwise modify any Return relating in whole or
in part to any of the Acquired Companies with respect to any Pre-Closing Period
without the prior written consent of Parent, which consent shall not be
unreasonably withheld. In those jurisdictions where no Election is made or
deemed made, Parent and Seller shall not, and shall not allow any of their
Affiliates to, make any election, change any tax accounting method or
convention, amend, refile or otherwise modify any Return or take any position on
any Return with respect to any Pre-Closing Period (including an amendment to any
such Return) that would adversely affect the Tax liability of Buyer and its
Affiliates or any of the Acquired Companies without the prior written consent of
Buyer, which consent may not be unreasonably withheld.
-46-
(e) The amount of any Tax refund (including any interest in
respect thereof) received by Buyer or any of its Affiliates (including the
Acquired Companies), and any amounts credited against Tax to which Buyer or any
of its Affiliates (including the Acquired Companies) become entitled (including
by way of any amended Returns), that relate to any Pre-Closing Period shall be
paid over to Parent within five business days after receipt thereof or upon
receipt of a credit therefor, but only to the extent such refund exceeds any Tax
refund reflected on the Latest Balance Sheet. Any refunds of Taxes or any
amounts credited against Taxes with respect to a Straddle Period shall be
apportioned between Buyer and Parent in the same manner as the liability for
such Taxes is apportioned. Upon the request of Parent, Buyer shall prepare and
file, or cause to be prepared and filed, and Parent shall reimburse Buyer for
any reasonable out-of-pocket expenses related to the preparation thereof, all
carryback claims and claims for refunds relating to Taxes for any pre-Closing
Tax Period.
(f) If the examination of any U.S. federal, state, local or
other Return of Parent, Seller, any of their Affiliates, or any of the Acquired
Companies for any Pre-Closing Period shall result (by settlement or otherwise)
in any adjustment that permits Buyer or any of its Affiliates (including the
Acquired Companies) to increase deductions, losses or Tax credits or decrease
the income, gains or recapture of Tax credits that would otherwise (but for such
adjustments) have been reported or taken into account (including by way of any
increase in basis) by Buyer, any of its Affiliates, or any of the Acquired
Companies for one or more periods ending after the Closing Date, Parent will
notify Buyer and provide it with adequate information so that Buyer can reflect
on its, its Affiliates, or the Acquired Companies' Returns such increases in
deductions, losses or Tax credits or decreases in income, gains or recapture of
Tax credits. The Buyer shall pay to Parent within 30 days of the receipt of such
information, the amount of any resulting Tax Benefits.
(g) If the examination of any U.S. federal, state, local or
other Return of Buyer or any of Buyer's Affiliates, or any of the Acquired
Companies for any Post-Closing Period shall result (by settlement or otherwise)
in any adjustment that permits Parent, Seller or any of its Affiliates to
increase deductions, losses or Tax credits or decrease the income, gains or
recapture of Tax credits that would otherwise (but for such adjustments) have
been reported or taken into account (including by way of any increase in basis)
by Parent, Seller, or any of their Affiliates for one or more periods ending on
or before the Closing Date, Buyer will notify Parent and provide it with
adequate information so that Parent, Seller, or any of their Affiliates can
reflect on its Returns such increases in deductions, losses or Tax credits or
decreases in income, gains or recapture of Tax credits. Parent shall pay to
Buyer within 30 days of the receipt of such information, the amount of any
resulting Tax Benefits.
(h) "Post-Closing Tax Period" means any Tax period beginning
after the Closing Date; and, with respect to a Straddle Period, the portion of
such Tax period beginning after the Closing Date.
(i) "Pre-Closing Tax Period" means any Tax period ending on or
before the Closing Date; and, with respect to a Straddle Period, the portion of
such Tax period ending on the Closing Date.
-47-
(j) The parties hereto shall, to the extent permitted under
applicable law, treat the Closing Date as the last day of the taxable year or
period of each of the Acquired Companies for all Tax Purposes. In any case where
applicable law does not permit the Closing Date to be treated as the last day of
the taxable year or period, any Taxes (including Taxes based upon or related to
income and any gross receipts, sales or use Tax) of any Acquired Company
attributable to a Tax period which begins before and ends after the Closing Date
(a "Straddle Period") shall be apportioned between the Pre-Closing Tax Period
and the Post-Closing Tax Period based on the actual operations and transactions
of such Acquired Company during the portion of such period ending on the Closing
Date, and the portion of such period beginning after the Closing Date,
respectively, calculated as though the taxable year of the Acquired Company
terminated at the close of business on the Closing Date, except that (i) real
property, personal property, intangibles and other similar Taxes and (ii)
exemptions, allowances or deductions that are allocated and allowed on an annual
basis shall be apportioned on a per diem basis.
(k) "Tax Benefits" realized means the sum of any increased
deductions, losses, or credits in future years or decreases in income, gains or
recapture of credits then allowable (including by way of amended Returns), or
based on reasonable estimates, allowable in future years, multiplied by 39%, and
reduced, by applying a discount rate equal to 115% of the applicable federal
rate, as determined under Section 1274(d) of the Code for the appropriate time
period, from the close of the earliest year in which such increased deductions,
losses or credits or such decreases in income, gains or recapture of credits
would possibly be available.
(l) "Tax Detriments" realized means the sum of any decreased
deductions, losses, or credits in future years or increases in income, gains or
recapture of credits then allowable (including by way of amended Returns), or
based on reasonable estimates, allowable in future years, multiplied by 39%, and
reduced, by applying a discount rate equal to 115% of the applicable federal
rate, as determined under Section 1274(d) of the Code for the appropriate
period, from the close of the earliest year in which such decreased deductions,
losses or credits or such increases in income, gains or recapture of credits
would possibly be available.
10.2 Cooperation.
(a) Parent and Buyer shall endeavor in good faith to agree on
an allocation of the Purchase Price between the Shares of each of the Companies
and the Related IP prior to the Closing Date, to be evidenced in a schedule
signed and dated by Parent and Buyer, and Parent and Buyer shall (i) be bound by
any such allocation for purposes of determining any Taxes, (ii) prepare and file
their Tax Returns in a manner consistent with such allocation, and (iii) take no
position inconsistent with such allocation on any applicable Tax Return, in any
proceeding before any taxing authority or otherwise. In the event that any of
the allocations are disputed by any taxing authority, the party receiving notice
of the dispute shall promptly notify the other party concerning resolution of
the dispute.
(b) Parent, Seller, the Acquired Companies and Buyer shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the preparation and filing of Returns pursuant to Section
10.1 and any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include signing any Returns, amended Returns, claims or other
documents necessary to settle any Tax controversy, the retention and (upon the
other
-48-
party's request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder.
(c) Whenever any taxing authority asserts a claim, makes an
assessment, or otherwise disputes the amount of Taxes of any Acquired Company
for a Pre-Closing Period, Buyer shall promptly inform Parent, and Parent shall
have the right to control any resulting proceedings and to determine whether and
when to settle or otherwise dispose of any such claim, assessment or dispute to
the extent such proceedings or determinations may affect the amount of Taxes for
which Parent or Seller may be liable under this Agreement. Whenever any taxing
authority asserts a claim, makes an assessment or otherwise disputes the amount
of Taxes for a Post-Closing Period, Buyer shall have the right to control any
resulting proceedings and to determine whether and when to settle any such
claim, assessment or dispute to the extent such proceedings or determinations
affect the amount of Taxes for which Buyer may be liable under this Agreement.
Notwithstanding the foregoing, whenever any taxing authority asserts a claim,
makes an assessment or otherwise disputes the amount of Taxes for a Straddle
Period, then the party who is reasonably expected to be liable for the larger
amount of such Tax under this Agreement shall have the right to control any
resulting proceedings; provided, however, that (i) no settlement of such claim,
assessment, or dispute will be entered into without the prior written consent of
the other party, which consent shall not be unreasonably withheld or delayed,
and (ii) such other party shall have the right to participate in any such
proceedings and retain separate counsel of its choice for such purpose, at its
sole cost and expense.
(d) Parent, Seller, Buyer and the Acquired Companies agree,
upon request from the other party, to use their commercially reasonable best
efforts to obtain any certificate or other document from any Governmental Entity
or any other Person as may be necessary to mitigate, reduce or eliminate any Tax
that could be imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
(e) Parent and Seller shall consult with Buyer prior to taking
any action to eliminate the balances in the Intercompany Accounts pursuant to
Section 1.3(b)(ii) of this Agreement.
10.3 Transfer Taxes. Notwithstanding any other provision of this
Agreement, Buyer, on the one hand, and Parent, on the other hand, shall each pay
and be responsible for fifty (50%) of all transfer, documentary, sales, use,
stamp, registration, value added and other such Taxes and fees (including any
penalties and interest) incurred in connection with transactions contemplated by
this Agreement (including any real property transfer tax and any similar Tax).
Notwithstanding any other provision of this Article X, any Returns that must be
filed in connection with such Taxes shall be prepared and timely filed by the
party primarily or customarily responsible under the applicable local Law for
filing such Returns, and such party shall provide to the other party a true copy
of each such Return as filed and evidence of the timely filing thereof.
10.4 Section 338(h)(10) Election.
-49-
(a) Neither Buyer nor any of its Affiliates shall make an
election under Section 338(g) of the Code (or any similar provision of the Law
of any state or other taxing jurisdiction) with respect to any of the Acquired
Companies in connection with the transactions contemplated by this Agreement
without the prior written consent of Parent.
(b) With respect to the sale and acquisition of each of the
Companies, Krone Optical Systems, Inc, Krone Holding Inc, Krone USA
Incorporated, and Krone Incorporated (collectively, the "Eligible Companies"),
Parent and Buyer, and their respective Affiliates, hereby covenant and agree
with each other that they will join in making an election pursuant to Section
338(h)(10) of the Code, and the Treasury Regulations promulgated thereunder (a
"Section 338(h)(10) Election") and (i) at least 10 days prior to the Closing
Date, Parent and Buyer shall agree based on information then available on the
form and content of the IRS Forms 8023 (the "Forms 8023") on which the Section
338(h)(10) Elections shall be made; (ii) at or prior to the Closing, Buyer shall
deliver to Parent properly executed Forms 8023 containing information then
available, which Parent shall file with the Internal Revenue Service not later
than five days following the Closing Date; (iii) Seller and Buyer shall jointly
and timely make any elections under state or local tax law comparable to the
Section 338(h)(10) Elections (each such election, a "Comparable Election", and
collectively with any Section 338(h)(10) Election, an "Election") with respect
to the Eligible Companies; (iv) Parent and Buyer shall, as promptly as
practicable following the Closing Date, cooperate with each other to take all
other actions necessary and appropriate (including filing such forms, returns,
elections, schedules and other documents as may be required) otherwise to
effect, perfect and preserve timely Elections in accordance with the provisions
of Treasury Regulation Section 1.338(h)(10)-l (or any comparable provisions of
state or local tax law) or any successor provisions; and (v) Parent and Buyer,
and their respective Affiliates, shall report the sale and acquisition,
respectively, of the stock of the Eligible Companies pursuant to this Agreement
consistent with the Elections and shall take no position to the contrary thereto
in any Return, or in any proceeding before any taxing authority or otherwise.
(c) To the extent permissible or required by law, Parent and
Buyer, and their respective Affiliates, shall cooperate in the preparation and
timely filing of (i) any corrections, amendments or supplements to the Forms
8023 and (ii) any state or local forms or reports, in each case, that are
necessary or appropriate for purposes of complying with the requirements for
making any Election. To the extent necessary for the valid filing of any such
corrections, amendments, supplements, forms or reports, Parent and Buyer, and
their respective Affiliates, shall cooperate in the timely execution thereof.
(d) None of Parent, Seller, or Buyer shall, or shall permit
any of their Affiliates to, take any action to modify any of the forms or
reports (including any corrections, amendments or supplements thereto) that are
required for the making of the Elections after their execution or to modify or
revoke any of the Elections following the filing of the Forms 8023 without the
written consent of Parent, Seller or Buyer, as the case may be.
(e) Buyer will initially prepare a complete set of IRS Forms
8883 (and any comparable forms required to be filed under state, local or
foreign Tax Law) and any additional data or materials required to be attached to
Form 8883 pursuant to the Treasury Regulations promulgated under Section 338 of
the Code ("Asset Allocation Statements"). Buyer will deliver
-50-
the Asset Allocation Statements to Parent for review no later than 60 days prior
to the date on which such forms are required to be filed. In the event Parent
reasonably objects to the manner in which the Asset Allocation Statements have
been prepared, Parent will notify Buyer within 15 days of receipt of the Asset
Allocation Statements of such objection, and the parties will endeavor within
the next 15 days to resolve such dispute in good faith. If the parties are
unable to resolve such dispute within such 15-day period, Parent and Buyer will
submit such dispute to an independent accounting firm of recognized national
standing (the "Allocation Arbiter") selected jointly by Parent and Buyer, which
firm will not be the regular accounting firm of Parent or Buyer, and which firm
shall resolve such dispute in accordance with the procedures set forth in
Section 1.4(b). The Allocation Arbiter's Asset Allocation Statements will be
conclusive and binding upon the parties.
10.5 Survival. Notwithstanding anything to the contrary contained in
this Agreement, each of the provisions set forth in this Article X shall survive
until the expiration of the applicable statute of limitations, as such statute
may be extended, for the applicable Taxes or Return to which the provision
relates.
Article XI
Miscellaneous
11.1 Press Releases and Announcements. Except as otherwise required by
Law or the rules of any applicable securities exchange or NASDAQ, so long as
this Agreement is in effect, Buyer, Parent, Seller and the Companies will not,
and will not permit any of their respective affiliates or representatives to,
issue or cause the publication of any press release or make any other public
announcement (including without limitation, announcements to employees of the
Companies and the Subsidiaries) with respect to the transactions contemplated by
this Agreement without the consent of the other party, which consent shall not
be unreasonably withheld or delayed. Buyer and Parent will cooperate with each
other in the development and distribution of all press releases and other public
announcements with respect to this Agreement and the transactions contemplated
hereby, and will furnish the other with drafts of any such releases and
announcements as far in advance as possible.
11.2 Expenses. Except as otherwise expressly provided for herein,
Parent and Seller, on the one hand, and Buyer, on the other hand, will each pay
all expenses incurred by each such party (including, for purposes of this
Section 11.2, all expenses of the Companies as Parent or Seller expenses) in
connection with the transactions contemplated hereunder, including without
limitation legal, accounting, investment banking and consulting fees and
expenses ("Third Party Expenses") incurred in negotiating, executing and
delivering this Agreement (whether the transactions contemplated hereunder are
consummated or not).
11.3 Amendment and Waiver. This Agreement may not be amended or waived
except in a writing executed by the party against which such amendment or waiver
is sought to be enforced. No course of dealing between or among any Persons
having any interest in this Agreement will be deemed effective to modify or
amend any part of this Agreement or any rights or obligations of any Person
under or by reason of this Agreement.
-51-
11.4 Notices. All notices, demands and other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given (i) when delivered if personally
delivered by hand (with written confirmation of receipt), (ii) when received if
sent by a nationally recognized overnight courier service (receipt requested),
(iii) five business days after being mailed, if sent by first class mail, return
receipt requested, or (iv) when receipt is acknowledged by an affirmative act of
the party receiving notice, if sent by facsimile, telecopy or other electronic
transmission device (provided that such an acknowledgement does not include an
acknowledgment generated automatically by a facsimile or telecopy machine or
other electronic transmission device). Notices, demands and communications to
the parties will, unless another address is specified in writing, be sent to the
address indicated below:
Notices to Buyer: with a copy to:
---------------- --------------
ADC Telecommunications, Inc.. ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
P.O. Box 1101 ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Office of the General Counsel Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Notices to Parent, Seller and the Companies: with a copy to:
------------------------------------------- --------------
GenTek Inc. Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
Liberty Lane Four Times Square
Hampton, New Hampshire 03842 ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and:
GenTek Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Office of the General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
11.5 Interpretation. The language used in this Agreement and the other
agreements contemplated hereby shall be deemed to be the language chosen by the
parties to express their mutual intent, and no rule of strict construction shall
be applied against any party. The table of contents and headings of articles and
sections herein are for convenience of reference, do not constitute a part of
this Agreement, and shall not be deemed to limit or affect any of the provisions
hereof. For all purposes of and under this Agreement, the words "include,"
"includes" and "including," when used herein, shall be deemed in each case to be
followed by the words "without limitation." As used in this Agreement,
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with, such Person;
"Person" means any individual, corporation, limited liability company, limited
or general partnership, joint venture, association, joint stock company, trust,
-52-
unincorporated organization or other entity; "knowledge" means, with respect to
Parent, Seller, the Companies or any Subsidiary, the actual knowledge of the
individuals identified in Schedule 11.5 hereof, after such individuals have
reviewed this Agreement and made reasonable inquiry; and all amounts shall be
deemed to be stated in U.S. dollars, unless specifically referenced otherwise.
11.6 No Third Party Beneficiaries. Nothing in this Agreement shall
confer any rights upon any person or entity that is not a party or permitted
assignee of a party to this Agreement.
11.7 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
Law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable Law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
11.8 Complete Agreement. This Agreement (together with the Exhibits and
the Disclosure Schedule) and the Transition Services Agreement contain the
complete agreement between the parties and supersede any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way, other than the
confidential disclosure letter agreement between Buyer and Parent dated February
16, 2004 which will continue in full force and effect until the Closing and
shall survive any termination of this Agreement.
11.9 Assignment. This Agreement and all of the provisions hereof will
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned by any
party hereto without the prior written consent of the other parties hereto.
11.10 Counterparts. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument. A facsimile signature will be considered an original signature.
11.11 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the Laws of the State of Delaware, regardless of the Laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
11.12 Submission to Jurisdiction. Each of parties irrevocably agrees
that any legal action or proceeding with respect to this Agreement or for
recognition and enforcement of any judgment in respect hereof brought by the
other party hereto or its successors or assigns may be brought and determined in
the Chancery or other Courts of the State of Delaware, and each of parties
hereby irrevocably submits with regard to any such action or proceeding for
itself and in respect to its property, generally and unconditionally, to the
nonexclusive jurisdiction of the aforesaid courts.
11.13 Waiver of Jury Trial. EACH OF BUYER, PARENT, SELLER AND THE
COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
-53-
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF BUYER,
PARENT, SELLER AND THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE
AND ENFORCEMENT HEREOF.
[REMAINDER OF PAGE LEFT BLANK; SIGNATURE PAGE FOLLOWS]
-54-
IN WITNESS WHEREOF, the parties hereto have executed this Share
Purchase Agreement as of the day and year first above written.
ADC TELECOMMUNICATIONS, INC.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
______________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President and Chief
Financial Officer
KRONE INTERNATIONAL HOLDING INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
______________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Authorized Person
KRONE DIGITAL COMMUNICATIONS INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
______________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President and Chief
Financial Officer
GENTEK HOLDING CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
______________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President and Chief
Financial Officer
GENTEK INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
______________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President and Chief
Financial Officer