EXHIBIT 10.22
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ASSET PURCHASE AGREEMENT
By and Between
TEXTILE TECHNOLOGIES INDUSTRIES, INC.
and
LYDALL NEW YORK, INC.
Dated as of December 20, 1996
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ASSET PURCHASE AGREEMENT
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This Agreement (the "Agreement") made and entered into this 20 day of
December, 1996 by and between Lydall New York, Inc., a New York corporation
having a principal office in Green Island, New York ("Lydall") and Textile
Technologies Industries, Inc., a Delaware corporation having a principal office
in Hatboro, Pennsylvania, ("TTII").
W I T N E S S E T H :
WHEREAS, TTII is the owner and operator of two manufacturing facilities
which fabricate and manufacture advanced composite woven fabrics at leased
facilities located at: (i) ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and (ii) ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ( "TTII"); and
WHEREAS, TTII will consolidate all of the assets located at the two leased
facilities at its Hatboro location and at another location specified by Lydall
promptly after the execution of this Agreement, at the shared expense of TTII
and Lydall; and
WHEREAS, TTII desires to sell and transfer to Lydall, and Lydall desires to
purchase and assume from TTII, certain assets, certain liabilities and the
business as a going concern of TTII, upon the terms and subject to the
conditions set forth in this Agreement;
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NOW, THEREFORE, in consideration of the mutual premises hereinafter set
forth, the parties agree as follows:
1. PURCHASE AND SALE OF ASSETS. At the "Closing" of the transactions
contemplated (the "Closing") on the "Closing Date" (as these terms are defined
in Article 5), and upon the basis of the representations, warranties, covenants
and agreements in this Agreement, TTII shall sell, transfer, assign, convey and
deliver to Lydall, and Lydall shall purchase on the terms and conditions set
forth in this Agreement, all of TTII's right, title and interest in and to the
Assets. The "Assets" shall mean all real, personal and mixed properties, which
are owned by TTII on the Closing Date and used exclusively in the business of
TTII except as set forth in Article 2 below, including, without limitation:
1.01 Lease of Real Property. All of TTII's right, title and
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interest in and to the lease dated June 28, 1991, as modified, of the land and
buildings, improvements and fixtures located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ in which facility TTII conducts its business (the "Lease"). The Lease,
pursuant to an assumption of Lease dated March 22, 1993, is between TTII as
tenant and 2800 Associates, a Pennsylvania Limited partnership as landlord.
(The real property, improvements and fixtures which are the subject of the Lease
are referred to as the "Real Property");
1.02 Equipment and Personalty. All the fixtures, machinery,
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equipment, motor vehicles, spare parts, furniture, appliances, supplies,
computer hardware, software and other items
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of tangible personal property owned by TTII or used in the operation of TTII on
the Closing Date (the"Equipment and Personalty")including without limitation all
items set forth in a list and description of such Equipment and Personalty,
attached as Schedule 1.02;
1.03 Contract Rights and Leases. All rights, benefits and obligations
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of TTII under the contracts, purchase orders, agreements and leases in the
ordinary course (other than the Lease) in effect on the Closing Date entered
into by, or for the benefit of, TTII relating to the operation of TTII;
including without limitation those listed on Schedule 1.03 attached;
1.04 Prepaid Expenses and Deferred Costs. Except as provided by
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Sections 2.04 and 2.05, all rights to prepaid expenses and deferred costs of
TTII relating exclusively to the business of TTII and existing on the Closing
Date, including without limitation all items set forth on a list and description
of such prepaid expenses and deferred costs, as of the date specified being
attached as Schedule 1.04 (collectively, the "Prepaid Expenses");
1.05 Inventory. All of the usable raw materials, salable work in
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process, finished goods, spare parts and supplies inventory used by TTII in
connection with the operation of the business of TTII on the Closing Date (the
"Inventory"); including without limitation all items set forth on a list of such
inventory, with its pricing, as of the date specified, being attached as
Schedule 1.05, except such inventory as shall have
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been sold in the ordinary cause of TTII's business in the period from the date
of such list until the Closing Date;
1.06 Accounts Receivable. All of the accounts receivable of TTII
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attributable to the operation of its business as of the Closing Date including
the amount set forth in the Interim Statements (as defined in Section 8.06) as
"Due From Affiliate," to the extent that there is such an amount, which on
September 30, 1996 was $ 0 and which on December 31, 1995 was $313,002
(collectively the "Accounts Receivable"). TTII shall furnish within 10 days
prior to the Closing Date a list of the Accounts Receivable anticipated as of
the Closing Date, which list is attached hereto as Schedule 1.06.
1.07 Records. All books, accounts, documents and records (whether in
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printed or electronic form) of TTII relating exclusively to the operation of the
business of TTII whether located at the TTII facility or at facilities owned by
TTII's affiliate, Mutual Industries, Inc.;
1.08 Goodwill. The goodwill of the business of TTII, including its
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going concern value;
1.09 Intangible Property. All inventions, patents, formulae, know-
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how, patent applications, copyrights, trade secrets, trademarks, tradenames
drawings, designs, formulae, blue prints, computer programs, software and
manufacturing records owned by TTII, relating to products presently produced or
in development or used in the business of TTII;
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1.10 Customer and Supplier List. A complete and accurate list of the
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customers and suppliers of TTII, which shall include all accounts shipped to in
1993, 1994 and 1995 by dollar amount, plus all new customers added in 1996; a
copy of which is attached as Schedule 1.10;
1.11 TTII Names. Any right of TTII to use the names "Textile
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Technologies Industries, Inc." or "TTII" and any derivation and all related
names, marks, logos and abbreviations; and
1.12 Order Backlog. All orders for products of TTII pending on the
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date of the Close, including, but not limited to, those listed in Schedule 1.12.
2. ASSETS TO BE RETAINED BY TTII. Notwithstanding the foregoing, the
Assets to be sold, transferred, assigned or conveyed to Lydall shall not include
the following:
2.01 Cash. All of TTII's cash on hand and all cash contained in any
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account of TTII;
2.02 Certain Records. TTII's check registers and canceled checks, and
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such business records as relate to the assets and obligations of TTII retained
by TTII, provided, however, that TTII shall preserve and maintain such check
registers, canceled checks, and business records for a period of seven (7)
years, or until all open tax years are closed, from and after the Closing Date
and permit Lydall reasonable access to the
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same and not destroy or discard the same without Lydall's consent;
2.03 Insurance Policies. All insurance policies of TTII and rights in
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connection with such policies including, without limitation, any prepaid
premiums;
2.04 Employee Pension and Benefit Plans. Assets associated with any
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employee benefit plans of TTII, including but not limited to, welfare plans and
all contracts and insurance policies entered into or issued pursuant to any such
plan;
2.05 Tax Credits and Refunds. Local, state and federal income and
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franchise tax credits, refunds and prepayments arising with respect to the
property, business or income of TTII prior to the Closing, whether or not in
being or known at the Closing Date; and
2.06 Corporate Records. TTII's corporate minute book, stock record
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books and corporate seal.
2.07 Miscellaneous Assets. Those assets that are listed on Schedule
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2.07 attached hereto.
3. LIMITED ASSUMPTION OF LIABILITIES BY LYDALL.
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3.01 Obligations Under Contracts and Leases. As partial consideration
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for the sale of the Assets, Lydall will assume responsibility for and perform or
satisfy when due all liabilities, commitments and obligations of TTII , from the
closing and after under those contracts, purchase orders, agreements and other
leases referred to in Section 1.03 from the
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Closing and after and listed on Schedule 1.03; and excluding the Lease defined
in Section 1.01.
3.02 Accrued Vacation. Lydall shall recognize and provide credit for
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all accrued vacation as of the Closing Date of such employees of TTII only at
such amounts as are set forth in Schedule 3.02 (the "Employees"). At the
Closing, TTII will pay to Lydall the amount of the obligation or effect a
reduction in Purchase Price in such amount;
3.03 Trade Payables. Lydall shall assume responsibility for the
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specific trade payables and accrued expenses set forth in Schedule 3.03 (the
"Trade Payables");
3.04 Product Warranty and Return Obligations. (a) Lydall shall
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assume and be responsible for all liabilities and obligations relating to or
arising out of any replacements under any product warranty relating to, or the
return of, or any allowance given with respect to, any product of TTII
manufactured by Lydall and sold, distributed or otherwise disposed of by Lydall
after the Closing, except those described in paragraph 3.04(b)(ii).
(b) TTII shall continue to be responsible for all liabilities and
obligations relating to or arising out of any replacements under any product
warranty relating to, or the return of, or any allowance given with respect to,
any product of TTII (i) sold, distributed or otherwise disposed of by TTII at
any time prior to the Closing Date, including claims made after the Closing
Date, and (ii) in finished goods inventory on hand at
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the Closing Date and sold, distributed or otherwise disposed of by Lydall;
3.05 Personal Property Taxes. TTII will prepay to Lydall any unpaid
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property taxes that accrue prior to the Closing Date;
3.06 Post-Closing Responsibilities. Lydall shall be solely
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responsible for any and all liabilities and obligations directly or indirectly
arising out of or relating to the conduct of the business of TTII by Lydall on
and after the Closing and relating to periods from and after the Closing or
Lydall's ownership, possession, occupancy, use, sale or operation of any of the
Assets or Real Property on and after the Closing and relating to periods on and
after the Closing;
TTII shall be solely responsible for any and all liabilities and
obligations other than those liabilities specifically assumed in sections 3.01,
3.02, 3.03, 3.04 and 3.05 above directly or indirectly arising out of or
relating to the conduct of the business of TTII by TTII before the Closing and
relating to periods before the Closing or TTII's ownership, possession,
occupancy, use, sale or operation of any of the Assets or Real Property before
the Closing and relating to periods before the Closing;
3.07 Liabilities Not Assumed. All liabilities other than those listed
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in sections 3.01 through 3.06 are expressly not assumed by Lydall. TTII agrees
that it will remain responsible for all liabilities not assumed; and
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3.08 No Expansion of Third Party Rights. The assumption provided for
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in Sections 3.01 through 3.06 above shall in no way expand the rights or
remedies of any third party against Lydall, TTII or TTII as compared to the
rights and remedies which such third party would have had against TTII had
Lydall not assumed such liabilities.
4. COVENANTS NOT TO COMPETE.
4.01 Covenants Not to Compete of TTII and Its Principal Officers. A
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condition of Closing is that TTII, Mutual Industries North, Inc. and each of
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ Eurle shall
have executed and delivered Covenants Not to Compete running to the benefit of
Lydall and its parent, Lydall, Inc., a Delaware corporation having its principal
offices at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, in the form annexed
as Exhibit A-1 through A-7 respectively.
4.02 Covenants Not to Compete of Lydall New York, Inc. and Lydall,
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Inc. A condition of Closing is that Lydall and its parent Lydall, Inc. shall
have executed and delivered a Covenant Not to Compete running to the benefit of
Mutual Industries, Inc. in the form annexed as Exhibit A-8.
5. CLOSING; PURCHASE PRICE AND PAYMENT.
5.01 Closing Date, Place and Time. The transactions contemplated
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shall take place at 10:00 a.m. on December 20, 1996 at the law offices of Blank,
Rome, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, Four
▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, or at such other time, date and
place as are mutually determined by the parties. "Closing" shall mean the
meeting between the parties and their representatives at which title to the
Assets is transferred from TTII to Lydall and the transactions contemplated by
the Agreement are consummated, and "Closing Date" shall mean the date on which
the Closing takes place. The transactions contemplated by the Agreement shall be
deemed effective as of 11:59 p.m. on the Closing Date;
5.02 Purchase Price and Method of Payment. The purchase price for the
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Assets and the Covenants Not to Compete referred to in Article 4, net of the
specific liabilities assumed, (the "Purchase Price") shall be $11,750,000 which
will be payable as follows: (a) $2,000,000 by wire transfer of funds to TTII's
bank account in partial consideration for those assets that do not qualify for
installment sales reporting under section 453 of the Internal Revenue Code, (b)
a Promissory Note in the amount of $8,000,000 payable January 2, 1997, together
with a stand-by letter of credit for such note, in the forms attached as Exhibit
B-1 and b-2 and (c) an Indemnification Note in the amount of $1,750,000 which
will be payable as set forth is Section 13.01 below in the form attached as
Exhibit C The Purchase Price shall be subject to adjustment as set forth in
Section 5.05;
5.03 Allocation of Purchase Price. Lydall will allocate $500,000 to
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the Equipment and Personalty. With respect to the balance of the purchase
price, after the Closing Lydall
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and TTII shall attempt in good faith to agree on an allocation of the Purchase
Price (including liabilities, assumed by Lydall pursuant to Section 3) among the
Assets.. The parties shall cause appropriate filings reflecting the allocation
to be made with the Federal and State taxing authorities as shall be required by
law. In the event that Lydall and TTII do not agree on such allocation (other
than the allocation to the Covenant not to compete of TTII), each may allocate
the Purchase Price in its own discretion and file its tax return accordingly.
and
5.04 Risk of Loss. All risk of loss with respect to the Assets shall
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remain with TTII until the Closing and shall pass to Lydall when the
transactions contemplated are deemed effective as defined in 5.01 above.
5.05 Net Working Capital Purchase Price Adjustment.
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(a) Within 30 days after the Closing Date, TTII shall prepare and deliver to
Lydall a statement (the "Closing Date Statement") setting forth TTII's Net
Working Capital (as defined in Section 5.05(d)(iii)) as of the Closing Date
("Closing Date Net Working Capital"). The Closing Date Statement shall also set
forth a calculation of the amount by which Closing Date Net Working Capital
exceeds or is less than $1,599,657 ("Working Capital Adjustment"). Within 15
days after receipt of the Closing Date Statement, Lydall shall complete its
examination of the Closing Date Statement and shall deliver to TTII either a
written acknowledgment of Lydall accepting the Closing Date Statement and the
Working Capital Adjustment or a written report ("Adjustment
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Report") setting forth in detail any proposed adjustments to the Closing Date
Statement and the Working Capital Adjustment and the reasons and supporting data
therefor. In the event that Lydall fails to deliver such acknowledgment or
Adjustment Report within such fifteen (15) day period, the Closing Date
Statement (and each of the Closing Date Net Working Capital and the Working
Capital Adjustment set forth thereon) delivered by TTII to Lydall shall be
deemed to be correct and to have been finally determined under Section 5.05 (c)
below;
(b) If Lydall shall deliver an Adjustment Report to TTII within the period
set forth in Section 5.05(a), Lydall and TTII shall attempt to resolve any
differences and agree upon the Working Capital Adjustment. In the event that
TTII and Lydall fail to agree on any or all of Lydall's proposed adjustments to
the Closing Date Statement contained in the Adjustment Report within 15 days
after TTII receives the Adjustment Report, then BDO ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") shall,
or if ▇▇▇▇▇▇▇ shall be unavailable, the parties shall select an independent
certified public accounting firm of national reputation (who shall not be a firm
previously or currently retained by Lydall or TTII) which is mutually agreeable
to the parties (▇▇▇▇▇▇▇, or such other firm, the "(Independent Auditors") to,
resolve any dispute. The Independent Auditors, acting as independent auditors
and not for the benefit of Lydall or TTII, shall make the final determination
with respect to the correctness of the adjustments in Closing Date Net Working
Capital proposed by Lydall in the Adjustment
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Report in light of the terms and provisions of this Agreement. The decision of
the Independent Auditors shall be in writing and state the basis for the finding
and shall be final and binding on Lydall and TTII. The costs and expenses of the
Independent Auditors for their services rendered pursuant hereto shall be borne
equally by Lydall and TTII.
(c) The term "Final Closing Date Statement" shall mean the Closing Date
Statement delivered pursuant to Section 5.05(a), as adjusted, if at all,
pursuant to Section 5.05(a) or 5.05(b) and the "Settlement Date" shall mean the
date on which the Final Closing Date Statement is agreed to by the parties or
finally determined by the Independent Auditors, as the case may be. Until the
Settlement Date, Lydall agrees to provide TTII, its representatives and
advisors, and the Independent Auditors with access, during Lydall's normal
business hours and upon reasonable advance notice, to the books and records of
TTII for the purpose of preparing the Closing Date Statement and reviewing any
proposed adjustments set forth in the Adjustment Report.
(d)(i) In the event that the Closing Date Net Working Capital set forth
in the Final Closing Date Statement exceeds $1,599,657, Lydall agrees to pay to
TTII within 5 days of the Settlement Date an amount equal to the excess of the
Closing Date Net Working Capital set forth in the Final Closing Date Statement
over $1,599,657 by wire transfer of immediately available funds to TTII's bank
account;
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(ii) In the event that the Closing Date Net Working Capital set forth in
the Final Closing Date Statement is less than $1,599,657, the parties agree that
the amount of the difference shall be paid to Lydall within 5 days of the
Settlement Date;
(iii) For purposes of this Section 5.05, the term "Net Working Capital"
shall mean an amount equal to the difference between (x) the aggregate amount of
TTII's Accounts Receivable, less any applicable allowance for doubtful accounts
and other reserves, Inventory and Prepaid Expenses as of the Closing Date, and
(y) the amount of TTII's Trade Payables being assumed pursuant to Section 3.03
as of the Closing Date, all determined consistently with the way such amounts
were determined for purposes of the 1995 Year End Statements (as defined in
Section 8.06).
6. EMPLOYEES; EMPLOYEE PENSION AND WELFARE PLANS
6.01 Employment; Medical Benefits. With respect to any employee who
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becomes employed by Lydall, Lydall shall provide substantially the same benefits
as are presently provided by TTII;
6.02 Employee Pension Plans and Benefits. Lydall shall not assume any
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obligation for and shall have no liability to provide to any employee or former
employee of TTII pension benefits earned or accrued prior to the Closing, if
any, under any pension plan or any other employee benefit plan maintained by
TTII with respect to service with TTII or any other entity prior
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to the Closing. All such obligations and liabilities, if any, shall remain the
sole and exclusive responsibility of TTII;
6.03 Other Employee Pension Plans and Benefits. Lydall shall not
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assume any obligation and shall have no liability whatsoever to TTII or any
employee or former employee thereof or any other person or entity with respect
to the funding, payment or provision of pension or profit-sharing or 401(k)
benefits earned or accrued prior to the Closing, if any, under any pension,
profit-sharing or 401(k) plans sponsored by TTII, whether or not any employees
become employees of Lydall. TTII shall retain all such obligations, if any, and
shall remain solely and exclusively liable for all benefits earned or accrued
prior to the Closing, if any, under any such plans; and
6.04 Employee Welfare Plans, Worker's Compensation. Lydall shall have
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no liability whatsoever to employees or former employees of TTII with respect to
incurred worker's compensation claims or to benefits provided, earned or accrued
under any welfare benefit plan sponsored by TTII prior to the Closing. Lydall
shall not assume any obligation and shall have no liability whatsoever with
respect to any welfare benefit claims, including without limitation medical,
dental, life, or disability claims incurred by an employee or his family prior
to the Closing or workers compensation claims incurred prior to the Closing. A
medical or dental claim shall be deemed to be incurred when the services
relating to that event that is the subject of the claim were performed. A life
or disability claim is deemed to have
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been incurred on the date of death or disability. A worker's compensation claim
is deemed to have been incurred on the date of accident.
7. INSTRUMENTS OF CONVEYANCE AND ASSUMPTION.
7.01 Conveyance Documents. At the Closing, TTII shall deliver to
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Lydall such bills of sale, endorsements and assignments in the form of Exhibits
D-1 through D-3 attached hereto, and such other instruments of sale, conveyance,
transfer and assignment as may be reasonably requested by Lydall, in order to
convey to Lydall good title to the Assets, free and clear of all claims,
charges, equities, liens (including tax liens other than liens for taxes and
assessments not yet due and payable), security interests and encumbrances except
as described in Section 8.02 and except for minor imperfections of title and
liens, security interests, and encumbrances which, individually and in the
aggregate, do not materially detract from the value of or impair the use of the
Assets as currently utilized. TTII shall pay the costs for preparing the
instruments of conveyance. Lydall shall pay the costs for recording same. Any
sales, use, excise, transfer or other similar taxes, if any, imposed with
respect to the transfer of the Assets shall be the sole responsibility of TTII.
TTII has provided to Lydall a draft resale exemption certificate for the
purchased inventory; and
7.02 Assumption Documents. At the Closing, Lydall shall execute and
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deliver to TTII an Assumption Agreement in the form attached as Exhibit D-4 and
such other instruments or agreements
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of assumption as may be reasonably requested by TTII, in order to further
evidence the assumption by Lydall of the liabilities specified in Article 3.
Lydall shall pay the costs for preparing the instruments or agreements of
assumption.
8 REPRESENTATIONS AND WARRANTIES OF TTII. TTII represents,
warrants and agrees that:
8.01 Organization and Good Standing of TTII. TTII is a corporation
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duly organized, validly existing and in good standing under the laws of the
State of Delaware with full power and authority to own and operate the Assets
and to conduct the business of TTII as now being conducted and is duly qualified
to do business in Pennsylvania and all other jurisdictions where the nature of
the properties owned or leased by it or the business conducted by it require
that it be so qualified;
8.02 Title to and Condition of the Assets. TTII has good title to the
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Assets, free and clear of any claims, charges, equities, liens (including tax
liens), security interests and encumbrances except for (a) liens for taxes and
assessments not yet due and payable, (b) liens listed on Schedule 8.02, and (c)
minor imperfections of title and liens, security interests and encumbrances
which, individually and in the aggregate, do not materially detract from the
value of or impair the use of the Assets as currently utilized (collectively,
"Permitted Liens"). TTII has full right, power, capacity and authority to sell,
transfer, assign, convey and deliver good title to the Assets to Lydall as
provided in this Agreement, and delivery on the Closing
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Date will convey to Lydall good title to the Assets, free and clear of any
claims, charges, equities, liens (including tax liens), security interests and
encumbrances, except for Permitted Liens;
8.03 Contracts of TTII. Schedule 1.03 includes a correct and
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complete list of all written or oral contracts agreements or arrangements to
which TTII is a party relating to the operation of TTII, including any
agreements with TTII's shareholders, directors or officers. TTII has no
contracts in excess of $1,000 other than those listed on Schedule 1.03. TTII
has provided Lydall with true and correct copies of all such written contracts,
including the Lease and a true and complete summary of all oral contracts;
8.04 TTII's Authority and No Conflict. TTII has the full corporate
--------------------------------
right, power and authority, to execute, deliver and carry out the terms of this
Agreement and all documents and agreements necessary to give effect to the
provisions of this Agreement. This Agreement has been duly authorized, executed
and delivered by TTII. Except as set forth on Schedule 8.04, the execution of
this Agreement and the consummation of the transactions contemplated will not
result in any conflict with, breach, violation or termination of, or default
under any charter, by-law, law, statute, rule, regulation, judgment, order,
decree, mortgage, agreement, deed of trust, indenture or other instrument to
which TTII is a party or by which it is bound and TTII has obtained all
necessary material consents or approvals of
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governmental bodies, lenders, lessors or other third parties. All corporate
action and other authorizations prerequisite to the execution of this Agreement
by TTII and the consummation by TTII of the transactions contemplated by this
Agreement have been taken or obtained by TTII. The Agreement is a valid and
binding agreement of TTII, enforceable against TTII in accordance with its
terms;
8.05 Brokers. Except for Palisade Capital Securities, LLC, whose fee
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shall be paid by TTII, there has been no broker or finder involved in any manner
in the negotiations leading up to the execution of this Agreement or the
consummation of any transactions contemplated;
8.06 Financial Statements. Attached as Schedule 8.06 are the
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unaudited financial statements of TTII for the nine month period ended September
30, 1996 ("Interim Statements") and the audited financial statements for the
full fiscal years ended December 31, 1993, December 31, 1994 and December 31,
1995 ("Year-End Statements"). The Year-End Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied throughout the periods indicated and fairly present in all material
respects the financial position of TTII at and as of December 31, 1993, December
31, 1994 and December 31, 1995 respectively, and the results of operations for
the fiscal year then ended. Except as set forth in the Notes to the Interim
Statements, the Interim Statements have been prepared in accordance with GAAP,
do not
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reflect any material accounting principle changes from prior periods and fairly
present in all material respects the financial position of TTII at and as of
September 30, 1996 and the results of operations for the nine months then ended.
The information set forth in Schedule 1.10 is true and correct in all material
respects; and;
8.07 Taxes. TTII has filed, or caused to be filed, with the
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appropriate Federal, state and local governmental agencies all tax returns
required to be filed on or before the Closing Date, and has paid, or caused to
be paid all taxes, excise taxes, assessments, charges, penalties and interest
shown to be due and payable or claimed to be due and payable thereon prior to
Closing. TTII has paid, or caused to be paid, all applicable corporate franchise
taxes, unemployment taxes, payroll taxes, social security taxes, occupation
taxes, ad valorem taxes, property taxes, excise taxes and imposts, sales and use
taxes, and all other taxes of every kind, character or description which arise
out of the conduct of the business of TTII or relate to the Assets and which are
required to be paid on or prior to the Closing Date, and has received no notices
and is not otherwise aware of any deficiencies, adjustments or changes in
assessments with respect to any such taxes. TTII shall continue to be
responsible for all such taxes, until those tax years through the Closing Date
are closed and no longer subject to audit;
8.08 Litigation or Claims. There is no litigation, proceeding,
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arbitration, alternate dispute matter assessment,
20
governmental investigation or other claim pending, or so far as known to TTII,
threatened, against or relating to TTII or TTII with respect to the transaction
contemplated by this Agreement or otherwise involving TTII except as set forth
on Schedule 8.08;
8.09 Compliance with Law. TTII has complied with all applicable
--------------------
material statutes and regulations of all governmental authorities having
jurisdiction over TTII or any of the Assets. There is no outstanding order,
investigation, inquiry, writ, injunction or decree of any court or arbitrator,
government or governmental agency against, or affecting the business of TTII or
any of the Assets;
8.10 Absence of Certain Changes or Events
-------------------------------------
(a) Since December 31, 1995 except as disclosed to Lydall in Schedule 8.10
or in the Interim Statements TTII has not:
(i) incurred any obligation or liability (fixed or contingent),
except (a) trade or business obligations incurred in the ordinary course of
business, which are not in excess of $25,000 individually, and except (b)
obligations under contracts, agreements, leases and documents listed in Schedule
1.03;
(ii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (fixed or contingent), except current liabilities
included on the December 31, 1995 Balance Sheet or on the Interim Balance Sheet,
current liabilities incurred since the date of the December 31, 1995 Balance
Sheet in the ordinary course of business, and obligations and liabilities
21
under contracts, leases or documents referred to in Schedule 1.03 or Section
1.01.
(iii) mortgaged, pledged or subjected to lien, charge, security
interest or to any other encumbrance any of its assets or properties;
(iv) sold, transferred, leased or otherwise disposed of any of its
assets or properties, or entered into any option, contract or other commitment
to sell, transfer, lease or otherwise dispose of any of its assets or
properties, except for inventory sold for fair consideration in the ordinary
course of business;
(v) canceled or compromised any debt or claim except for
adjustments made with respect to contracts for the purchase of supplies or for
the sale of products in the ordinary course of business, which individually are
not material;
(vi) waived or released any rights of any material value;
(vii) transferred or granted any rights of TTII under any
concessions, leases, licenses, agreements, patents, inventions, trademarks,
trade names, copyrights, or with respect to know-how;
(viii) made or granted any general wage or salary increase or entered
into any employment contract with any officer or employee or increased any wage
or salary more than 5% since November 15, 1995;
22
(ix) entered into any transaction other than in the ordinary course
of business;
(x) suffered any operating loss or casualty loss or damage, whether
or not such loss or damage shall have been insured against;
(xi) suffered any material adverse change in its financial
condition, properties or business; and
(xii) made or entered into any contract or commitment to make any
capital expenditures in excess of $10,000 in the aggregate.
8.11. Environmental Matters.
----------------------
(a) The following definitions shall apply for purposes of this Section:
(i) "Environmental Laws" means any and all Federal, state, local or
--------------------
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, guidelines, policies or requirements of any governmental authorities
regulating or imposing standards of liability or standards of conduct (including
common laws) concerning air, water, solid waste, Hazardous Materials, worker and
community right-to-know, hazard communication, noise, resource protection,
subdivision, wetlands and watercourses, health protection and similar
environmental, health, safety, building, and land use concerns as may at any
time be in effect.
2. "Environmental Condition" means circumstances with
-------------------------
respect to soil, surface waters, groundwaters, stream
23
sediments, air and similar environmental media both on and off the Real Property
and any other real property which TTII owns, leases or operates or has ever in
the past owned, leased or operated (together "TTII Property") resulting from any
activity or inactivity, including but not limited to, storage, treatment,
transporation, disposal, or operations occurring on or off such real property,
that could require investigatory, corrective and/or remedial measures and/or
that may result in claims, demands and/or liabilities by TTII or third parties
including, but not limited to, governmental entities.
3. "Hazardous Materials" means any petroleum, petroleum
---------------------
products, fuel oil, derivatives of petroleum products or fuel oil, explosives,
reactive materials, ignitable materials, corrosive materials, hazardous
chemicals, hazardous wastes, hazardous substances, extremely hazardous
substances, toxic substances, toxic chemicals, radioactive materials, medical
waste, biomedical waste, infectious materials and any other element, compound
mixture, solution or substance which may pose a present or potential hazard to
human health or safety or to the environment.
4. "Release" means releasing, spilling, leaking, pumping,
---------
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping, or as otherwise defined under the Resource Conservation
and Recovery Act ("RCRA"), the Comprehensive Environmental Response Compensation
Liability Act ("CERCLA") or other Environmental Laws. This term shall be
24
interpreted to include the past, present and future tense, as appropriate.
(b) Except as set forth in Schedule 8.11,
(i) At no time have the Assets or TTII Property been used for the
generation, storage, transportation or disposal of Hazardous Materials or as a
landfill or other waste disposal site. There are not now underground storage
tanks on TTII Property.
(ii) TTII and TTII Property are in material compliance with
all Environmental Laws. No event has occurred which, with the passage of time
or the giving of notice or both, would constitute non-compliance with
Environmental Laws.
(iii) There are no agreements, consent orders, decrees, judgments,
licenses or permit conditions, or other directives, issued by a governmental
department or agency which require any change in the present condition of the
Assets or TTII Property.
(iv) There are no actions, suits, claims or proceedings, pending or
threatened, arising out of the condition of the Assets or TTII Property or
relating to a violation or non-compliance with any Environmental Law or with
respect to the generation, storage, disposal, discharge or release of Hazardous
Materials off-site or at or from the Assets or TTII Property or relating to
health or safety practices at TTII.
(v) TTII has not received any notice from its insurance carrier or
mortgagee as to recommendations made
25
regarding Hazardous Materials or safety issues at the Assets or TTII Property,
and TTII has not been denied insurance coverage (nor has any insurance coverage
been canceled) by reason of Hazardous Materials at the Assets or TTII Property
or for any other reason.
(vi) Neither the Assets nor TTII Property are a designated
landmark or in a designated Historic District, and TTII has not received any
notice that either the Assets or TTII Property are being considered for landmark
designation or are to be included within any contemplated Historic District.
(vii) All material zoning, use, building, housing, safety, fire
and health approvals, and all material permits and licenses necessary to
operate, occupy and use the Assets and TTII Property as intended by Lydall have
been issued and are in full force and effect, and TTII is in full compliance
therewith. TTII has not taken any action or made any improvements which would
require amending, modifying or supplementing the foregoing.
(viii) There has been no Release of any Hazardous Materials on,
upon or into the Assets or TTII Property and there has been no such release on,
upon or into any real property adjoining or in the vicinity of the Assets or
TTII Property which through air, soil or groundwater migration could have come
from sources located upon the Assets or TTII Property.
(ix) TTII has obtained all material permits, licenses and other
authorizations which are required under federal, state and local laws relating
to pollution or protection
26
of the environment, including laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, or hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes or any other Environmental Law, and all
permits, licenses and authorizations are valid and in full force and effect.
TTII is in full compliance with all terms and conditions of such required
permits, licenses and authorizations, and is also in full compliance with all
other material limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in those laws or
contained in any regulation, code, plan, order decree, judgment, notice or
demand letter issued, entered, promulgated or approved thereunder.
(x) TTII is not aware of, nor has TTII received notice of, any past,
present or future events, conditions, Environmental Conditions, circumstances,
activities, practices, incidents, actions or plans which may interfere with or
prevent continued compliance, or which may give rise to any common law or legal
liability, or otherwise form the basis of any claim, action, suit, proceeding,
hearing or investigation, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling, or the
27
emission, discharge, release or threatened release into the environment, of any
Hazardous Material in connection with the operation of TTII;
8.12 No Change in Business Relationships. Since December 31, 1995,
------------------------------------
there has not been any interruption in the business relationship of TTII with
any supplier, customer or other party with which TTII has or has had any
substantial business agreement or arrangement. Except as may be caused by
general economic conditions, TTII has no knowledge that any such party
contemplates termination of such party's business relationship with TTII or any
reduction in the volume of business carried on with TTII during the preceding
two years, except as set forth on Schedule 8.12;
8.13 Employment Agreements. (a) TTII has no:
----------------------
(i) collective bargaining agreement in effect with respect to
the employees of TTII, nor
(ii) employment agreement with any of the employees of TTII;
(b) With respect to employees of TTII:
(i) TTII is and has been in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation, any such laws
respecting employment discrimination, occupational safety and health, and unfair
labor practices;
28
(ii) there is no unfair labor practice complaint against TTII
pending or, to the best of TTII's knowledge, threatened before the National
Labor Relations Board or any comparable state, local or foreign agency;
(iii) there is no labor strike, dispute, slowdown or stoppage pending
or, to the best of TTII's knowledge, threatened against or directly affecting
TTII.
(iv) no union representation question exists and, to the best of
TTII's knowledge, no union organization effort is underway, respecting the
employees of TTII.
(v) TTII has not experienced any material work stoppage in the
last eighteen (18) months;
(vi) TTII is not delinquent in payments to any of its employees for
any wages, salaries, commissions, bonuses or other direct compensation for any
services performed by them to the Closing Date or amounts required to be
reimbursed to such employees;
(vii) to the best of TTII's knowledge, upon termination of the
employment of any of the employees of TTII by TTII, TTII will not be liable to
any of its employees for severance pay;
(viii) The employment of each of TTII's employees is terminable at
will without cost to TTII except for payments required under the Plans, welfare
plans and Employee Plans and payment of accrued salaries or wages and vacation
pay. No
29
employee or former employee has any right to be rehired by TTII prior to TTII
hiring a person not previously employed by TTII.
(xi) Schedule 8.13 contains a true and complete list of all employees
who are employed by TTII as of November 30, 1996, and said list correctly
reflects their salaries, wages, other compensation (other than benefits under
the Plans, welfare plans and Employee Plans), dates of employment and positions.
TTII does not owe any past or present employees any sum other than for accrued
wages or salaries for the current payroll period, and amounts payable under the
Plans, welfare plans or Employee Plans.
8.14 Patents, Trademarks, Trade Names and Copyrights. The business of
-----------------------------------------------
TTII as presently conducted does not infringe, interfere or contravene any
presently outstanding patents, patent licenses, trademarks, service marks, trade
names, brand names, applications or license rights or other proprietary rights
held by others; and TTII is not in violation of any such rights with respect to
any past events. All patents, patent licenses, trademarks, service marks, trade
names, brand names, and other proprietary rights owned by TTII or used by TTII
in the operation of its business are listed in Schedule 8.14;
8.15 Processes and Know-how. TTII possesses without restriction all
-----------------------
of the processes, know-how, technology, designs, patterns, blueprints,
franchises, licenses and applications, and rights in respect thereof, necessary
for the continued conduct of the business of TTII as presently conducted,
without the need for
30
patents or licenses other than as disclosed in Schedule 8.14 or listed under
Schedule 1.03;
8.16 Utilities. There is available to the real property which TTII
----------
presently leases, and such property is adequately serviced by, such public
utilities as are required to conduct the business of TTII as it presently is
being conducted, including, but not limited to, water, sewer, heat and
electricity; and all payments, assessments, deposits and other charges related
to such utilities and other existing on-site improvements have been paid in full
to the extent that they are due;
8.17 Licenses and Permits. Schedule 8.17 contains a complete and
--------------------
accurate list of all material permits, licenses, approvals, authorizations and
consents of any federal, state or municipal governmental agency or authority
held by TTII which are required for the conduct of the business of TTII as it is
now being conducted ("Licenses and Permits"); all such Licenses and Permits are
in full force and effect; and there is no claim, action, investigation or
proceeding pending or threatened, which would materially affect any of the
foregoing; TTII has no knowledge of any condition presently existing which
affects the validity of any of the Licenses and Permits. TTII shall transfer to
Lydall such Licenses and Permits as are transferable without the consent of a
third party. If any Licenses and Permits are not transferable to the Lydall,
TTII will cooperate with and
31
assist Lydall in applying for any such Licenses and
Permits as are not transferable, or obtaining such consents;
8.18 Absence of Undisclosed Liabilities - The Interim Statements have
----------------------------------
made, and the balance sheet contained in the Interim Statements ("the Interim
Balance Sheet") makes, full and adequate provision for all obligations and
liabilities of TTII as of the date of the Interim Balance Sheet to the extent
required by GAAP. As of that date, TTII had no obligations or liabilities of
any kind whatsoever (whether known or unknown, fixed or contingent) except (i)
to the extent reflected or reserved against on the Interim Balance Sheet or (ii)
incurred since the date of the Interim Balance Sheet in the ordinary course of
business, none of which are material, or (iii) disclosed in Schedule 8.18;
8.19 Inventory - The inventories of TTII as reflected on the Interim
---------
Statements consist, and the Inventory on hand on the Closing Date consist, of
items of a quality and quantity usable and salable in the ordinary course of its
business, except for obsolete items and items of below standard quality, all of
which have been written down to realizable market value or for which adequate
reserves have been provided. All such Inventory is of good and merchantable
quality, except for obsolete, defective or damaged items, if any. Any obsolete,
defective or damaged items have been written down to realizable market value.
Except as set forth on Schedule 8.19, an item of Inventory shall be considered
obsolete if such item is not expected to be
32
consumed in the manufacturing process or is not expected to be sold within a
nine month period following its date of acquisition or manufacture. "Realizable
market value" for items which are obsolete, defective or damaged shall mean the
value ascertained by valuing the item, if it is finished, at net selling price
(gross selling price less all discounts) less any related sale or delivery
expense, or if it constitutes work in process, at net selling price (gross
selling price less all discounts) less cost to complete and any related sales or
delivery expense, or if it constitutes manufacturing supplies, at market value
or if it constitutes raw material, at the lesser of cost or market value;
8.20 Accounts and Notes Receivable - The accounts receivable and notes
-----------------------------
receivable of TTII as reflected on the Interim Statements, and the accounts
receivable and notes receivable of TTII on the Closing Date, will be
collectible in the ordinary course of business at the aggregate face amounts
thereof. In the event that all of the accounts receivable and notes receivable
of TTII on the Closing Date are not paid in full prior to the one hundred and
twentieth (120th) day after the Closing Date, TTII shall repurchase, free and
clear of any encumbrance, all said unpaid accounts and notes (and any unpaid
portion of either) from Lydall for its or their then unpaid balance in
accordance with Section 12.02. The accounts receivable and notes receivable
shall be valid and enforceable, uncontested claims for goods delivered or
services performed,
33
with no offsets, defenses, counterclaims or disputes as to the amount owing,
except as specifically noted in Schedule 8.20;
8.21 Solvency. TTII is not insolvent as of the Closing Date and shall
--------
not be rendered insolvent as a result of the transactions contemplated by this
Agreement. The transactions contemplated hereby will not cause TTII to fail to
pay its debts as they become due, and will not cause the remaining assets of
TTII to be unreasonably small in relation to its business. For purposes of this
Agreement, the term "insolvent" shall have the same meaning such term has under
the Uniform Fraudulent Transfer Act, as adopted and in effect on the Closing
Date;
8.22 Subsidiaries. TTII has no subsidiaries and does not own,
-------------
directly or indirectly, any capital stock or other equity securities of any
corporation or other entity, or have any direct or indirect equity interest in
any business;
8.23 ERISA and COBRA Compliance. (a) Except for the plans disclosed
---------------------------
on Schedule 8.23 (the "Plans"), TTII neither maintains nor contributes to any
employee pension benefit or welfare plans, as defined in the Employee Retirement
Income Security Act of 1974 ("ERISA"), or any other severance, bonus, stock
option, stock appreciation, stock purchase, retirement, insurance, pension,
profit-sharing or deferred compensation plan, agreement or arrangement for the
benefit of TTII's employees (collectively, the "Employee Plans"), nor has TTII
nor any of its officers or directors taken any action directly or indirectly to
obligate TTII to institute any such Employee Plan. TTII has
34
complied with all terms and conditions of, and has no liabilities or obligations
with respect to, the Plans. As of the date of this Agreement, all benefits
relating to periods of service under the Plans are fully funded to the extent
required by law. To the best of TTII's knowledge, all Plans have been maintained
in full compliance with all laws, regulations and orders, including without
limitation, ERISA, of all governmental authorities.
(b) TTII, and any entity that is a member of a group described in Section
414(b),(c),(m), or (o) of the Code, which group includes TTII, maintain only the
group health plans listed in Schedule 8.23, covering employees of TTII. Except
as disclosed in Schedule 8.23 each such group health plan has been administered
in accordance with published requirements from and after the respective
publication dates of such requirements (and in good faith with requirements with
respect to issues and for periods prior to the dates on which published guidance
was available) relating to continuation coverage for people who would otherwise
lose coverage as a result of certain events set forth in the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA"), as amended by the Tax
Reform Act of 1986 and the Technical and Miscellaneous Revenue Act of 1988, and
proposed regulations thereunder;
8.24 Product Liability. TTII has not made any oral or written
-----------------
warranties with respect to the quality or absence of defects of its products or
services which it has sold or performed which are in force as of the date hereof
except as are
35
described in Schedule 8.24. There are no material claims pending or, to the best
of TTII's knowledge, anticipated or threatened against TTII with respect to the
quality of or absence of defects in such products or services. Schedule 8.24
sets forth a summary, which is accurate in all material respects, of all returns
of defective products during the period beginning December 31, 1994 and ending
on the date hereof, and all credits and allowances for defective products given
to customers during said period, and said summary in each case accurately
describes the defect which resulted in the return, allowance or credit. TTII has
no knowledge or reason to believe that the percentage of products sold and
services performed by TTII for which warranties are presently in effect and for
which warranty adjustments can be expected during unexpired warranty periods
which extend beyond the Closing Date will be higher than the percentage of such
products and services which TTII has sold and performed for which warranty
adjustments have been required in the past. TTII has not paid direct,
incidental, or consequential damages to any person in connection with any of
such products or services at any time during its existence;
8.25 Corrupt Practices. Neither TTII nor, to the best of TTII's
-----------------
knowledge, any of its former or current officers, directors, employees, agents
or representatives has made, directly or indirectly, with respect to TTII or its
business activities, any bribes or kickbacks, illegal political contributions,
payments from corporate funds not recorded on the
36
books and records of TTII, payments from corporate funds to governmental
officials, in their individual capacities, for the purpose of affecting their
action or the action of the government they represent, to obtain favorable
treatment in securing business or licenses or to obtain special concessions, or
illegal payments from corporate funds to obtain or retain business. Without
limiting the generality of the foregoing, TTII has not directly or indirectly
made or agreed to make (whether or not said payment is lawful) any payment to
obtain, or with respect to, sales other than usual and regular compensation to
its employees and sales representatives with respect to such sales;
8.26 Adequate Assets. The Assets conveyed to Lydall on the Closing
----------------
Date will be adequate to enable Lydall to continue to conduct the business of
TTII as it is presently being conducted; and
8.27 Condition of Equipment and Real Estate. Subject to Schedule
---------------------------------------
8.27, The Equipment and Real Estate are in good operating condition and repair
(ordinary wear and tear excepted). Subject to Schedule 8.27, The Equipment, Real
Estate and the buildings and other facilities located on the Real Estate are
free of any latent structural or engineering defects known to TTII or any patent
structural or engineering defects. TTII does not use in the conduct of its
business any property, assets, or rights, real or personal, tangible or
intangible, which are not either (i) owned by it and reflected in the 12/31/95
Year End Statements, (ii) leased by it under the Lease, or (iii) which it
37
otherwise has the right to use under contracts, licenses or agreements disclosed
to Lydall pursuant to Schedules to this Agreement.
9. REPRESENTATIONS AND WARRANTIES OF LYDALL. Lydall represents,
warrants and covenants that:
9.01 Organization and Good Standing. Lydall is a corporation duly
-------------------------------
organized, validly existing and in good standing under the laws of the State of
New York with full power and authority to own and operate the Assets and to
carry on the business of TTII as now being conducted;
9.02 Authority of Lydall. Lydall has the full corporate right, power
--------------------
and authority, to execute, deliver and carry out the terms of this Agreement
and all documents and agreements necessary to give effect to the provisions of
this Agreement. This Agreement has been duly authorized, executed and delivered
by Lydall and the execution of this Agreement and the consummation of the
transactions contemplated will not result in any conflict, breach, violation or
termination of or default under any charter, by-law, law, statute, rule,
regulation, judgment, order, decree, mortgage, agreement, deed of trust,
indenture or other instrument to which Lydall is a party or by which it is bound
and Lydall has obtained all necessary material consents, approvals of
governmental bodies, lenders, lessors, or other third parties. All corporate
action and other authorizations prerequisite to the execution and delivery of
this Agreement and the consummation of the transactions contemplated
38
by this Agreement have been taken or obtained by Lydall. This Agreement is a
valid and binding agreement of Lydall, enforceable against Lydall in accordance
with its terms; and
9.03 Brokers. Except for that noted in Section 8.05, there has been no
--------
broker or finder involved in any manner in the negotiations leading up to the
execution of this Agreement, or the consummation of any transactions
contemplated as a result of any agreements or understandings made by Lydall; and
9.04 Financing. Lydall has funds available (including those to be
----------
provided to it pursuant to binding financing commitments) which are sufficient
to pay the Purchase Price and to pay all other amounts owing by it in connection
with the transaction contemplated by this Agreement. Lydall has furnished
reasonable substantiation of the foregoing to TTII and will, from time to time
prior to the Closing at the reasonable request of TTII, provide to TTII
additional substantiation of the status thereof.
10. LYDALL'S CONDITIONS PRECEDENT TO CLOSING. Lydall's agreement to
purchase and pay for the Assets is subject to delivery at the Closing of the
deeds, bills of sale, endorsements, assignments, and other instruments of sale,
conveyance, transfer and assignment as contemplated by Section 7 and to the
occurrence of each of the following conditions (any of which may be waived by
Lydall):
10.01 Representations and Warranties. Each of the representations and
-------------------------------
warranties set forth in Article 8 and in the
39
Schedules delivered pursuant thereto shall be true and correct in all material
respects on the Closing Date, and TTII shall execute and deliver to Lydall a
certificate signed by authorized officers of TTII dated the Closing Date to such
effect;
10.02 Intentionally Omitted.
10.03 Execution of Covenants Not to Compete. TTII, Mutual Industries
--------------------------------------
North, Inc., Messrs. ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇
and ▇▇▇▇▇ Eurle shall have executed and delivered the Covenants Not to Compete
referred to in Section 4.01, in the form of Exhibit A1 to A7 attached;
10.04 Opinion of Counsel. On the Closing Date, Lydall shall have
-------------------
received from Blank, Rome, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, Counsel of TTII, an opinion,
dated the Closing Date, substantially in the form of Exhibit E attached and
certified resolutions of TTII's board of directors and shareholders;
10.05 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings. In the reasonable opinion of Lydall,
-------------------------
all necessary requirements of the provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act (15
U.S.C. (S)18A) and the regulations thereunder have been complied with, and any
"waiting periods" applicable to this transaction which are imposed by statute or
regulations shall have expired prior to the Closing Date or shall have been
terminated by the appropriate agency;
11. TTII'S CONDITIONS PRECEDENT TO CLOSING.
TTII's agreement to sell and deliver the Assets is subject to payment at the
Closing of the amount specified in Sections 5.02, the delivery at the Closing of
the instruments and agreements of
40
assumption as contemplated and to the occurrence of each of the following
conditions (any of which may be waived by TTII):
11.01 Representations and Warranties. Each of the representations and
-------------------------------
warranties set forth in Article 9 shall be true and correct in all material
respects on the Closing Date, and Lydall shall execute and deliver to TTII a
certificate signed by authorized officers of Lydall dated the Closing Date to
such effect; and
11.02 Intentionally Omitted.
11.03 Covenant Not to Compete of Lydall and Lydall, Inc. Lydall and its
-----------------------------------------------------------------
parent Lydall, Inc. shall have executed and delivered the Covenant Not to
-------------------------------------------------------------------------
Compete referred to in Section 4.02, in the form of Exhibit A-8 attached.
-------------------------------------------------------------------------
11.04 Opinion of Counsel. On the Closing Date, TTII shall have
-------------------
received from Murtha, Cullina, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, Counsel of Lydall, an
opinion, dated the Closing Date, substantially in the form of Exhibit F
attached; and
11.05 Employment Agreement of ▇▇▇▇▇▇ ▇. ▇▇▇▇. On the Closing Date,
---------------------------------------
TTII shall have received from Lydall, the Employment Agreement of ▇▇▇▇▇▇ ▇.
▇▇▇▇, substantially in the form of Exhibit G attached.
12. POST-CLOSING COVENANTS
12.01 Transition Period. During the transition of ownership from TTII
------------------
to Lydall beginning on the Closing Date and
41
continuing for a reasonable period thereafter, not to exceed one year, TTII
will:
(a) to the extent not included in the Assets, make available to
Lydall all information or records needed for the manufacture
of the Products and the operation of TTII including access
to all software or other computer systems used by TTII or
any entity under TTII's control in relation to TTII's
operation of TTII; and
(b) make available to Lydall its representatives for
conferences, assistance and meetings at reasonable times
during normal business hours, as Lydall shall reasonably
request;
(c) If Lydall requests information, records or assistance and
TTII elects to hire a third party (such as an outside
information systems contractor) to provide such information,
records or assistance, then TTII shall pay all expenses of
such third party. If Lydall elects to hire a third party
(such as an outside information systems contractor) to
assist Lydall, then Lydall shall pay all expenses of such
third party.
12.02 Collection of Receivables. If any Account Receivable listed on
--------------------------
Schedule 1.06 shall be or become overdue and
42
owing for a period in excess of one hundred twenty (120) days after date of
invoice, at Lydall's request, TTII shall repurchase said Account Receivable from
Lydall for its then unpaid balance, provided that TTII's obligation to
repurchase Accounts Receivable shall be subject to the following:
(a) Lydall shall promptly and diligently attempt to collect all
of the Accounts Receivable before the end of 120-day
collection period above referred to, but Lydall shall not be
required to institute legal proceedings for this purpose;
(b) any amounts received by Lydall with respect to an Account
Receivable from an account debtor shall first be applied
against the Accounts Receivable of such account debtor in
order of the age of the Accounts Receivable - i.e., oldest
Account Receivable shall be paid first, unless the account
debtor specifies a dispute as to the older Account
Receivable in which case it shall be applied to the next
oldest Account Receivable of such account debtor;
(c) Lydall agrees to permit TTII, including its attorneys,
accountants, agents and designees, such access to the
records of Lydall relating to the Accounts Receivable, and
Lydall's collection thereof during normal business hours as
TTII may deem necessary or desirable;
43
(d) if: (i) any products with respect to which there is an
Account Receivable are returned by a customer (other than
for repair or replacement) before Lydall receives payment
from TTII under this section 12.02, and (ii) such products
are reasonably marketable by Lydall, then the amount of the
Accounts Receivable related to such products that Lydall may
require TTII to repurchase shall be reduced by an amount
equal to the standard cost under TTII'S system that was
incurred by TTII in producing such returned products, less
any cost of rework incurred by Lydall and a reasonable
restocking charge. If such reasonable marketable products
are returned after Lydall instituted its rights to require
TTII to repurchase, Lydall shall reverse or eliminate such
repurchase to the extent of an amount equal to the standard
cost incurred by TTII in producing such goods less any cost
of rework incurred by Lydall and a reasonable restocking
charge. The return of any products which are not reasonably
marketable by Lydall shall not result in a reduction of the
amount of TTII's obligation under this Section 12.02.
(e) Lydall shall transfer to TTII all rights to the
Accounts Receivable with respect to which
44
Lydall has exercised its repurchase rights under this Section
12.02 as well as those Accounts Receivable which come within the
limitation set forth in Section 15.01. TTII may use all
commercially reasonable means of collecting the unpaid Accounts
Receivable, including, but not limited to, the institution of
legal action against the account debtor. TTII, in collecting the
unpaid Accounts Receivable will make best efforts to maintain
Lydall's relationship with the account.
(f) Notwithstanding anything to the contrary contained herein,
if a specific reserve is established for a particular Account
Receivable pursuant to Section 5.05 for purposes of computing
"Net Working Capital," or if a specific reserve exists on TTII's
books for such Account Receivable as listed in Schedule 1.06, the
unpaid balance for such Account Receivable shall be deemed to be
equal to the gross unpaid balance thereof less the specific
reserve. Notwithstanding anything to the contrary contained
herein, if (a) general or specific reserves are established for
Accounts Receivable listed on Schedule 1.06 pursuant to Section
5.05 for purposes of computing "Net Working Capital," or if
general or specific
45
reserves exist on TTII's books for such Accounts Receivable
listed on Schedule 1.06, and (b) Lydall's total collections of
all Accounts Receivable equal or exceed the total amount of all
Accounts Receivable less the total general and specific reserves
listed on Schedule 1.06, TTII shall not have any obligation to
repurchase any particular Account Receivable listed on Schedule
1.06 which is uncollected for a period in excess of one hundred
and twenty (120) days; in such event, any excess of such total
collections by Lydall over and above the total amount of all
Accounts Receivable less the total general and specific reserves,
shall be promptly paid to TTII.
12.03 Preservation of Records. Lydall covenants that for a period of
------------------------
seven years from and after the Closing Date, or until all open tax years of TTII
are closed, it shall preserve and maintain the records referred to in Section
1.07, shall permit TTII and/or ▇▇▇▇▇▇ ▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇ reasonable access to
such records, and shall not discard or destroy such records without written
consent;
12.04 Confidentiality. TTII and Lydall shall execute a Confidentiality
---------------
Agreement in the form of Exhibit H, attached;
12.05 Further Assurances. Each party shall, at the request of the
-------------------
other, execute and deliver to such other party all such further assignments,
assumptions, endorsements and other
46
documents and take such other actions as such other party may reasonably request
in order to effect the transactions contemplated; and
12.06 Product Warranty Costs. Upon TTII's request, Lydall shall
-----------------------
perform, in a workmanlike manner, any product warranty repair or replacement
obligation of TTII (not assumed by Lydall pursuant to Section 3.04) with respect
to products of TTII sold by TTII prior to the Closing and any finished or work-
in-process inventory acquired from TTII. TTII shall reimburse Lydall for its
actual costs for salaries, wages, employee benefits and actual out-of-pocket
costs to perform such warranty services on TTII's behalf.
13. INDEMNIFICATION BY TTII.
13.01 Indemnification Note. In accordance with paragraph 5.02 above,
--------------------
$1,750,000 of the Purchase Price will be in the form of an Indemnification Note.
Subject to Lydall's right of offset for TTII's obligations under Section 13, the
Indemnification Note will be paid as follows: (i) on April 30, 1997, the
amount of $500,000, (ii) on December 31, 1997, the amount of $500,000, and (iii)
on June 30, 1998, the balance of the Indemnification Note including interest
earned;, and
13.02 Indemnification Obligation. Subject to the conditions and
---------------------------
limitations set forth in this Agreement, TTII shall defend, indemnify and hold
Lydall harmless from and against any and all claims, actions, suits, demands,
assessments, judgments, damages, liabilities, damages losses, costs or
47
expenses (including, without limitation, fines, penalties, punitive damages and
attorneys' fees) (collectively, "Damages") actually incurred or suffered by
Lydall resulting from or arising out of (a) any inaccuracy or falsehood in any
representation or any breach of warranty or nonfulfillment of any covenant by
TTII that is contained in this Agreement or any certificate, document or
instrument delivered to Lydall in connection with this Agreement, (b) any breach
or failure to perform any covenant or other agreement of TTII that is contained
in this Agreement, (c) any failure by TTII to comply with any applicable bulk
sales laws or to discharge any claims asserted against Lydall under such laws,
(d) any debt, liability or obligation of TTII not expressly assumed by Lydall
pursuant to this Agreement, (e) any claim for a finder's fee or brokerage or
other commission arising by reason of any services alleged to have been rendered
to or at the request of TTII with respect to this Agreement, and (f) any claim
based on any action, transaction, condition or event occurring or existing in
connection with the TTII business or any of the Assets prior to the Closing
Date. "Claim" as used herein shall include without limitation any action by a
governmental authority to require the taking of an action or performance of an
act and any claim for environmental damage, product liability or workers
compensation.
14. INDEMNIFICATION BY LYDALL. Subject to the conditions and
limitations set forth in this Agreement, Lydall shall defend, indemnify and hold
TTII harmless from and against
48
any and all Damages actually incurred or suffered by TTII resulting from or
arising out of (a) any inaccuracy or falsehood in any representation or any
breach of warranty or nonfulfillment of any covenant by Lydall that is contained
in this Agreement or any certificate, document or instrument delivered to TTII
in connection with this Agreement, (b) any breach or failure to perform any
covenant or other agreement of Lydall that is contained in this Agreement, (c)
any of the debts, liabilities and obligations of TTII specifically assumed by
Lydall pursuant to this Agreement, and (d) any claim based on any action,
transaction, condition or event occurring or existing in connection with the
TTII business or any of the Assets after the Closing Date. "Claim" as used
herein shall include without limitation any action by a governmental authority
to require the taking of an action or performance of an act and any claim for
environmental damage, product liability or workers compensation.
15. LIMITATIONS ON INDEMNIFICATION. The obligation of the
indemnifying party to indemnify the indemnified party set forth in Sections 13
and 14 above shall be subject to the following limitations:
15.01 Limitation on Amount. The indemnifying party shall be obligated
---------------------
to indemnify the indemnified party only to the extent that the amount which the
indemnified party shall be entitled to receive as indemnification shall exceed
$62,500 in the aggregate, and then only to the extent of the excess over the
$62,500;
49
15.02 Survival of Representations and Warranties. Regardless of any
-------------------------------------------
investigation made by any party, each of the covenants, agreements, obligations,
representations and warranties listed on Schedule 15.02 will survive the Closing
and remain in full force and effect until the dates specified on Schedule 15.02,
at which respective times such specified representations and warranties shall
expire. Any claim for indemnification with respect to any of such matters that
is not asserted by a written notice that describes the claim and the underlying
facts and the alleged Damages relating thereto and that is not given by the
indemnified party to the indemnifying party by 5:00 p.m. (E.S.T) on the date
specified in the schedule for the obligation in question may not be pursued and
shall be irrevocably waived after such time. Any claim for which timely notice
has been given shall survive until that claim is finally resolved. The
covenants and agreements contained in this paragraph shall survive the Closing
and remain in effect in accordance with their terms.
15.03 Defense of Claims. In the event that any legal proceedings shall
------------------
be instituted or that any claim or demand shall be asserted by any person in
respect of which indemnification may be sought from the indemnifying party under
the provisions of Sections 13 and 14 above, the indemnifying party shall have
the right, at its option and at its own expense, to be represented by counsel of
its choice and to assume the defense of, negotiate, settle or otherwise deal
with any such legal proceeding, claim or
50
demand; provided, however, that if the liability or obligation which is the
subject matter of such claim shall arise out of a transaction or cover any
period or periods where in the indemnified party shall be responsible for part
of any such liability or obligation, then both parties jointly shall defend,
contest, litigate, settle and otherwise deal with any such claims, each bearing
its own expenses and each choosing its own counsel. After any final judgment or
award shall have been rendered by a court, arbitration board or administrative
agency of competent jurisdiction, or a settlement shall have been consummated,
or the parties shall have arrived at a mutually binding agreement with respect
to any matter which is the subject matter of an indemnity, the indemnified party
shall forward to the indemnifying party notice of any sums due and owing by it
with respect to such matter, and the indemnifying party shall pay all of the
sums so owing, by certified or bank cashier's check, within thirty (30) days
after the date of such notice. The parties agree to cooperate fully with each
other in connection with the defense, negotiation or settlement of any such
legal proceedings, claim or demand, and will not compromise or settle any such
legal proceeding, claim or demand without the prior written consent of the other
party, which consent shall not be unreasonably withheld or delayed.
15.04 Materiality. For purposes of this Agreement, the words
-----------
"material" or "materially adverse" or the like mean a misrepresentation,
violation or other noncompliance, or an
51
effect, loss, cost, expense or other damage as to particular matter or item, in
excess of $5,000.
15.05 Notwithstanding anything to the contrary set forth in this
Agreement, the following provisions shall apply and prevail over any conflicting
provisions of this Agreement:
a. there are no warranties or representations made by either party
to the other except as set forth in this Agreement;
b. the indemnification rights and remedies set forth in this
Agreement shall be the sole and exclusive rights and remedies of the parties
hereto with respect to any breach of a representation, warranty or covenant
contained herein;
c. the liability of TTII to Lydall hereunder or otherwise, other
than the Working Capital Adjustment, shall be limited to the then unpaid
principal amount (plus accrued but unpaid interest) of the Indemnification Note
referred to in Section 13.01 and TTII shall have no liability to Lydall, whether
hereunder or otherwise, for an amount in excess of the then unpaid principal
amount (plus accrued but unpaid interest) of the Indemnification Note referred
to in Section 13.01;
16. MISCELLANEOUS
16.01 Bulk Transfer Compliance. Lydall hereby waives compliance by TTII
------------------------
with the provisions of Article 6 of the Uniform Commercial Code Bulk Transfers
Laws of any state, and TTII warrants and agrees to pay and discharge when due
all claims of creditors which could be asserted against Lydall by reason of such
non-compliance to the extent that such liabilities are not
52
specifically assumed by Lydall under this Agreement. TTII hereby indemnifies and
agrees to hold Lydall harmless from, against and in respect of (and shall on
demand reimburse Lydall for) any loss, liability, cost or expense, including,
without limitation, attorneys' fees, suffered or incurred by Lydall by reason of
the failure of TTII to pay or discharge such claims;
16.02 Successors and Assigns. All the terms and provisions of this
-----------------------
Agreement shall be binding upon, and inure to the benefit of, and be enforceable
by, the respective successors and assigns of the parties, whether so expressed
or not;
16.03 Governing Law. This Agreement is to be governed by and
--------------
interpreted under the laws of the State of Delaware, without giving effect to
the principles of conflicts of laws;
16.04 Notices. All notices, requests, consents and other
--------
communications shall be in writing and shall be mailed first class, registered,
with postage prepaid as follows:
If to TTII, addressed to:
▇▇▇▇▇▇ ▇. ▇▇▇▇
Mutual Industries, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
Blank, Rome, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇
Four ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
If to Lydall, addressed to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Division President
53
Lydall New York, Inc.
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇▇
General Counsel and Secretary
Lydall, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or such other address as either party may request by notice given as aforesaid.
Notice sent as provided shall be deemed filed on the date mailed;
16.05 Payment of Expenses. Except as set forth in Section 8.05, TTII
--------------------
and Lydall shall each pay their own expenses, including without limitation, the
disbursements and fees of all their respective attorneys, accountants, advisors,
agents and other representatives incidental to the preparation and carrying out
of this Agreement, whether or not the transactions contemplated are consummated;
16.06 Entire Agreement; Amendment. This Agreement (including the
----------------------------
Schedules and Exhibits), and all other agreements and documents executed in
connection therewith constitute the entire agreement between the parties with
respect to the sale of the business of TTII. This Agreement supersedes all
prior agreements and/or understandings between the parties, including the non-
binding letters of intent. No amendment, alteration or modification of this
Agreement shall be valid unless in each instance such amendment, alteration or
modification is expressed in a written instrument duly executed by both parties;
54
16.07 Counterparts. This Agreement including any amendments,
-------------
alterations, and/or modifications may be executed simultaneously in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument;
16.08 Headings. The headings contained in this Agreement have been
---------
inserted for convenience of reference only and shall in no way restrict or
modify any of the terms or provisions;
16.09 Waiver. The failure of any party to insist, in any one or more
-------
instances, on performance of any of the terms and conditions of this Agreement
shall not be construed as a waiver or relinquishment of any rights granted or of
the future performance of any such term, covenant or condition, but the
obligations of the parties with respect to the term, covenant or condition shall
continue in full force and effect;
and
16.10 Separability. The provisions of this Agreement shall be deemed
-------------
separable. Therefore, if any part of this Agreement is rendered void, invalid
or unenforceable, the validity or enforceability of the remainder of this
Agreement shall not be affected unless the part or parts which are void, invalid
or unenforceable shall substantially impair the value of the whole Agreement to
either Party.
16.11 Disclosure Statement Regarding Schedules. Disclosure of any
-----------------------------------------
information in any Schedule or Exhibit hereto
55
shall be deemed to be disclosure in all Schedules hereto and shall qualify and
amplify each representation and warranty given herewith by TTII to the same
extent as if specific reference were made to such Schedule or Exhibit in the
warranty or representation.
56
WITNESS the due execution of this Asset Purchase Agreement as of the date
first above written.
TEXTILE TECHNOLOGIES INDUSTRIES, INC.
ATTEST: ▇▇▇▇▇▇ ▇. ▇▇▇▇ By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------- -------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
Treasurer
and
ATTEST: ▇▇▇▇▇▇ ▇. ▇▇▇▇ By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------- ------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
President
ATTEST: LYDALL NEW YORK, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------- ---------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Division President
57
INDEX OF SCHEDULES
------------------
Schedule 1.02 Equipment and Personalty
Schedule 1.03 Contract Rights and Leases
Schedule 1.04 Prepaid Expenses
Schedule 1.05 Inventory
Schedule 1.06 Accounts Receivable
Schedule 1.10 Customer and Supplier List
Schedule 1.12 Order Backlog List
Schedule 2.07 Excluded Miscellaneous Assets
Schedule 3.02 Accrued Vacation
Schedule 3.03 Trade Payables
Schedule 8.02 Title to and Condition of the Assets
Schedule 8.04 Required Consents
Schedule 8.06 Financial Statements
Schedule 8.08 Litigation or Claims
Schedule 8.10 Changes
Schedule 8.11 Environmental Matters
Schedule 8.12 No Change in Business Relationships
Schedule 8.13 Employment Agreements
Schedule 8.14 Patents, Trademarks
Schedule 8.17 Licenses and Permits
Schedule 8.18 Absence of Undisclosed Liabilities
Schedule 8.19 Inventory
Schedule 8.20 Disputed Accounts Receivable
Schedule 8.23 ERISA and COBRA Compliance
Schedule 8.24 Product Liability
Schedule 8.27 Condition of Equipment and Real Estate
Schedule 15.02 Time Periods of Obligations Indemnified
LIST OF EXHIBITS
----------------
Exhibit A1-7 Covenants Not to Compete of TTII, Mutual
Industries Inc. and certain individuals
(4.01), (10.03)
Exhibit A-8 Covenant Not to Compete
(4.02) (11.03)
Exhibit B-1 Promissory Note (5.02)
Exhibit B-2 Stand-by Letter of Credit
Exhibit C Indemnification Note (5.02)
Exhibit D-1 ▇▇▇▇ of Sale (7.01)
Exhibit D-2 Assignment of Trademarks (7.01)
Exhibit D-3 Assignment of Patent Applications (7.01)
Exhibit D-4 Assumption of Liabilities (7.02)
Exhibit E Opinion of Counsel from Blank, Rome,
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ (10.04)
Exhibit F Opinion of Counsel from Murtha, Cullina,
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ (11.03)
Exhibit G Employment Agreement for ▇▇▇▇▇▇ ▇. ▇▇▇▇
(11.04)
Exhibit H Mutual Confidentiality Agreement (12.04)