EXHIBIT 10.6
ASSET PURCHASE AGREEMENT
dated as of February 2, 2003
between
ROLLS-ROYCE CORPORATION
and
FASTENTECH, INC.
TABLE OF CONTENTS
Page
----
ARTICLE I THE ASSET PURCHASE...................................................1
Section 1.1. Purchase and Sale of Assets.................................1
Section 1.2. Assumption of Liabilities...................................2
Section 1.3. Sale Price..................................................2
Section 1.4. The Closing.................................................2
Section 1.5. Closing Payment Amount......................................3
Section 1.6. Post-Closing Adjustments....................................3
Section 1.7. Earnout.....................................................6
Section 1.8. Further Assurances..........................................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER........................7
Section 2.1. Organization, Qualification, and Corporate Power............7
Section 2.2. Authorization of Transaction................................8
Section 2.3. Noncontravention............................................8
Section 2.4. Financial Statements........................................8
Section 2.5. Absence of Certain Changes..................................9
Section 2.6. Undisclosed Liabilities....................................10
Section 2.7. Ownership of Assets; Condition.............................10
Section 2.8. Brokers' Fees..............................................11
Section 2.9. Intellectual Property......................................11
Section 2.10. Inventory..................................................12
Section 2.11. Contracts..................................................12
Section 2.12. Litigation.................................................14
Section 2.13. Employees..................................................14
Section 2.14. Employee Benefits..........................................14
Section 2.15. Environmental Matters......................................15
Section 2.16. Legal Compliance...........................................16
Section 2.17. Customers and Suppliers....................................16
Section 2.18. Permits....................................................16
Section 2.19. Government Contracts.......................................16
Section 2.20. Accounts Receivable........................................17
Section 2.21. Products Liability.........................................17
Section 2.22. Leased Property............................................17
Section 2.23. Related Party Transactions.................................18
Section 2.24. Insurance..................................................19
Section 2.25. Disclosure.................................................19
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER.......................19
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Section 3.1. Organization and Corporate Power...........................19
Section 3.2. Authorization of the Transaction...........................19
Section 3.3. Noncontravention...........................................19
Section 3.4. Broker's Fees..............................................20
ARTICLE IV PRE-CLOSING COVENANTS..............................................20
Section 4.1. Closing Efforts............................................20
Section 4.2. Governmental and Third-Party Notices and Consents..........20
Section 4.3. Operation of Business......................................21
Section 4.4. Access to Information......................................22
Section 4.5. Notice of Breaches.........................................22
Section 4.6. Bulk Transfers Law.........................................23
Section 4.7. Agreed Records.............................................23
Section 4.8. 2002 Financial Statements..................................23
ARTICLE V CONDITIONS TO CLOSING...............................................23
Section 5.1. Conditions to Obligations of the Buyer.....................23
Section 5.2. Conditions to Obligations of the Seller....................25
ARTICLE VI ADDITIONAL AGREEMENTS..............................................26
Section 6.1. Disclaimer of Warranties; No Other Representations or
Warranties.................................................26
Section 6.2. Sharing of Data............................................27
Section 6.3. Tax Matters................................................27
Section 6.4. Cooperation in Litigation..................................28
Section 6.5. Employee and Employee Benefit Matters......................29
Section 6.6. Receivables................................................30
Section 6.7. Non-Competition............................................30
Section 6.8. Product Warranty Liability.................................31
Section 6.9. Post Closing...............................................31
ARTICLE VII INDEMNIFICATION...................................................32
Section 7.1. Indemnification by the Seller..............................32
Section 7.2. Indemnification by the Buyer...............................32
Section 7.3. Indemnification Claims.....................................32
Section 7.4. Survival of Representations and Warranties.................35
Section 7.5. Limitations................................................36
Section 7.6. Treatment of Indemnity Payments............................37
ARTICLE VIII TERMINATION......................................................37
Section 8.1. Termination of Agreement...................................37
Section 8.2. Effect of Termination......................................37
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ARTICLE IX DEFINITIONS........................................................38
ARTICLE X MISCELLANEOUS.......................................................48
Section 10.1. Press Releases and Announcements...........................48
Section 10.2. No Third Party Beneficiaries...............................48
Section 10.3. Entire Agreement...........................................48
Section 10.4. Succession and Assignment..................................48
Section 10.5. Counterparts and Facsimile Signature.......................49
Section 10.6. Headings...................................................49
Section 10.7. Notices....................................................49
Section 10.8. Governing Law..............................................50
Section 10.9. Amendments and Waivers.....................................50
Section 10.10. Severability...............................................50
Section 10.11. Expenses...................................................50
Section 10.12. Dispute Resolution.........................................50
Section 10.13. Incorporation of Exhibits and Schedules....................52
Section 10.14. Specific Performance.......................................52
Section 10.15. Construction...............................................52
Exhibits
--------
Exhibit A - ▇▇▇▇ of Sale
Exhibit B - Instrument of Assumption
Exhibit C - License Agreement
Schedules
---------
Schedule 1.1(a) - Certain Acquired Assets
Schedule 1.1(b) - Certain Excluded Assets
Schedule 6.6 - Business Employees
Disclosure Schedule
-------------------
Section 2.3. Noncontravention................................................6
Section 2.5. Absence of Certain Changes......................................6
Section 2.6. Undisclosed Liabilities.........................................6
Section 2.7. Ownership of Assets.............................................7
Section 2.9. Intellectual Property...........................................7
Section 2.11. Contracts.......................................................9
Section 2.12. Litigation.....................................................10
Section 2.13. Employees......................................................10
Section 2.15. Environmental Matters..........................................10
Section 2.16. Legal Compliance...............................................11
Section 2.17. Customers and Suppliers........................................11
Section 2.18. Permits........................................................12
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into as of February 2, 2003 by and
between FastenTech, Inc., a Delaware corporation (the "Buyer"), and Rolls-Royce
Corporation, a Delaware corporation (the "Seller").
W I T N E S S E T H:
WHEREAS, the Seller is engaged in, among other things, the business of
designing, manufacturing and selling high performance high nickel alloy
structures suitable for use in extreme operating environments (the "Business")
at the Rolls Royce Evansville Fabrication Facility located in Evansville,
Indiana (the "Facility");
WHEREAS, the Buyer wishes to purchase and the Seller wishes to sell
substantially all of the assets associated with the Business;
WHEREAS, the Parties contemplate that, effective upon the closing of the
transactions contemplated hereby, they will execute and deliver certain
additional agreements;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth herein, and for other good and valuable consideration, the receipt and
the sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
THE ASSET PURCHASE
Section 1.1. Purchase and Sale of Assets.
(a) Upon and subject to the terms and conditions of this Agreement,
the Buyer shall purchase from the Seller, and the Seller shall sell, transfer,
convey, assign, and deliver to the Buyer, at the Closing, for the consideration
specified below in this Article I, all right, title, and interest in, to, and
under the Acquired Assets (including those assets listed on Schedule 1.1(a) to
the Disclosure Schedule) and only those assets and no others, free and clear of
liens except Permitted Encumbrances.
(b) Notwithstanding the provisions of Section 1.1(a), the Acquired
Assets shall not include the Excluded Assets (including those assets listed on
Schedule 1.1(b) to the Disclosure Schedule).
Section 1.2. Assumption of Liabilities.
(a) Upon and subject to the terms and conditions of this Agreement,
the Buyer shall assume and become responsible for, from and after the Closing,
the Assumed Liabilities and only those liabilities and no others.
(b) Notwithstanding the terms of Section 1.2(a) or any other
provision of this Agreement to the contrary, the Buyer shall not assume or
become responsible for, and the Seller shall remain liable for, the Retained
Liabilities.
Section 1.3. Sale Price. The sale price to be paid by the Buyer for
the Business shall be equal to the Initial Sale Price plus the Earnout Payment.
Section 1.4. The Closing.
(a) The Closing shall take place at the offices of ▇▇▇▇▇ ▇▇▇▇▇▇▇
LLP in Indianapolis, Indiana commencing at 9:00 a.m. local time on the Closing
Date. All transactions at the Closing shall be deemed to take place
simultaneously, and no transaction shall be deemed to have been completed and no
documents or certificates shall be deemed to have been delivered until all other
transactions are completed and all other documents and certificates are
delivered.
(b) At the Closing:
(i) the Seller shall deliver to the Buyer the various certificates,
instruments, and documents referred to in Section 5.1;
(ii) the Buyer shall deliver to the Seller the various certificates,
instruments, and documents referred to in Section 5.2;
(iii) the Seller shall execute and deliver to the Buyer a ▇▇▇▇ of
sale in substantially the form attached hereto as Exhibit A, and such other
instruments of conveyance (such as assigned certificates or documents of title)
as the Buyer may reasonably request in order to effect the sale, transfer,
conveyance, and assignment to the Buyer of valid ownership of the Acquired
Assets;
(iv) the Buyer shall execute and deliver to the Seller an instrument
of assumption in substantially the form attached hereto as Exhibit B and such
other instruments as the Seller may reasonably request in order to effect the
assumption by the Buyer of the Assumed Liabilities;
(v) the Buyer shall pay to the Seller, payable by wire transfer or
other delivery of immediately available funds to an account designated by the
Seller at least two days prior to the Closing Date, the Closing Payment Amount;
(vi) the Seller shall deliver to the Buyer, or otherwise put the
Buyer in
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possession and control of, all of the Acquired Assets of a tangible nature;
(vii) the Buyer and the Seller shall execute and deliver to each
other a cross-receipt evidencing the transactions referred to above; and
(viii) the Buyer and the Seller shall execute and deliver to each
other a license agreement in substantially the form attached hereto as Exhibit
C.
Section 1.5. Closing Payment Amount. The amount payable at the
Closing shall be equal to Nine Million Five Hundred Thousand Dollars
($9,500,000), which is an estimate of Book Value at Closing (the "Closing
Payment Amount" or "Estimated Closing Book Value").
Section 1.6. Post-Closing Adjustments.
(a) The Initial Sale Price shall be determined after the Closing
Date as follows:
(i) Within 30 days after the Closing Date, the Seller shall prepare
and deliver to the Buyer the Draft Statement of Working Capital and Fixed
Assets. The Seller shall prepare the Draft Statement of Working Capital and
Fixed Assets setting forth the Working Capital and Fixed Assets of the Business
as of the close of business on the Closing Date (the "Book Value"), which shall
be prepared in accordance with the books and records of the Seller in respect of
the Business and shall be based upon an unaudited balance sheet as of that date
that is prepared in accordance with GAAP Consistently Applied. Seller
acknowledges and agrees that Buyer desires that the foregoing balance sheet be
audited by Ernst & Young LLP, and agrees to cooperate with Ernst & Young LLP's
audit of the balance sheet, including by providing to Ernst & Young LLP a signed
management representation letter with respect thereto in the form customarily
requested and obtained by Ernst & Young LLP.
A physical inventory shall be conducted by the Seller consistent with
past practice on or no more than three days before the Closing Date for the
purpose of assisting in the preparation of the Draft Statement of Working
Capital and Fixed Assets, and the Buyer and their respective independent
auditors shall have the right to observe the taking of such physical inventory.
(ii) The Buyer shall deliver to the Seller, by the Objection
Deadline Date, either a notice indicating that the Buyer accepts the Draft
Statement of Working Capital and Fixed Assets or a detailed statement describing
its objections (if any) to the Draft Statement of Working Capital and Fixed
Assets. If the Buyer delivers to the Seller a notice accepting the Draft
Statement of Working Capital and Fixed Assets, or the Buyer does not deliver a
written objection to the Draft Statement of Working Capital and Fixed Assets by
the Objection Deadline Date, then, effective as of either the date of delivery
of such notice of acceptance or as of the close of business on the Objection
Deadline Date, the Draft Statement of Working Capital and Fixed Assets shall be
deemed to be the Final Closing Balance Sheet. If the Buyer timely objects
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to the Draft Statement of Working Capital and Fixed Assets, in accordance with
this Section 1.6(a), such objections shall be resolved as follows:
(1) The Buyer and the Seller shall first use Reasonable Best
Efforts to resolve such objections.
(2) If the Buyer and the Seller do not reach a resolution of all
objections set forth on the Buyer's statement of objections within 30 days after
delivery of such statement of objections, any remaining disagreements shall be
referred to the chief financial officers of Rolls-Royce plc and FastenTech (each
of whom may designate another senior officer of such company to hear such
dispute), who shall use reasonable efforts to resolve such objections.
(3) If all objections set forth on the Buyer's statement of
objections have not been resolved within 30 days after the referral of such
objections to the senior officers designated in or pursuant to Section
1.6(a)(ii)(B), the Buyer and the Seller shall, within 30 days following the
expiration of such 30-day period, engage the Accountant, pursuant to an
engagement agreement executed by the Buyer, the Seller, and the Accountant, to
resolve any remaining objections set forth on the Buyer's statement of
objections (the "Unresolved Objections").
(4) The Buyer and the Seller shall jointly submit to the
Accountant, within 10 days after the date of the engagement of the Accountant
(as evidenced by the date of the engagement agreement), a copy of the Draft
Statement of Working Capital and Fixed Assets, a copy of the statement of
objections delivered by the Buyer to the Seller, and a statement setting forth
the resolution of any objections agreed to by the Buyer and the Seller and by
the senior officers designated in or pursuant to Section 1.6(a)(ii)(B). Each of
the Buyer and the Seller shall submit to the Accountant (with a copy delivered
to the other Party on the same day), within 45 days after the date of the
engagement of the Accountant, a memorandum (which may include supporting
exhibits) setting forth their respective positions on the Unresolved Objections.
Each of the Buyer and the Seller may (but shall not be required to) submit to
the Accountant (with a copy delivered to the other Party on the same day),
within 60 days after the date of the engagement of the Accountant, a memorandum
responding to the initial memorandum submitted to the Accountant by the other
Party. Unless requested by the Accountant in writing, neither Party may present
any additional information or arguments to the Accountant, either orally or in
writing. In resolving any Unresolved Objections, the Accountant (i) shall be
bound by the principles set forth in this Section 1.6, (ii) shall further limit
its review to whether the Draft Statement of Working Capital and Fixed Assets
contained mathematical errors and was calculated in accordance with this Section
1.6 and (iii) shall not assign a value to any item greater than the greatest
value for such item claimed by any party or less than the smallest value for
such item claimed by either party.
(5) Within 90 days after the date of its engagement hereunder, the
Accountant shall determine whether the objections raised by the Buyer are
appropriate and shall issue a ruling that shall include a balance sheet,
comprised of the Draft Statement of Working Capital and Fixed Assets as adjusted
pursuant to any resolutions to objections agreed upon by the Buyer
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and the Seller and pursuant to the Accountant's resolution of the Unresolved
Objections. Such balance sheet shall be deemed to be the Final Closing Balance
Sheet.
(6) The resolution by the Accountant of the Unresolved Objections
shall be conclusive and binding upon the Buyer and the Seller. The Buyer and the
Seller agree that the procedure set forth in this Section 1.6(a) for resolving
disputes with respect to the Draft Statement of Working Capital and Fixed Assets
shall be the sole and exclusive method for resolving any such disputes; provided
that this provision shall not prohibit either Party from instituting litigation
in court to enforce the ruling of the Accountant.
(7) The Buyer and the Seller shall share the fees and expenses of
the Accountant based upon what portion of the changes called for in the Buyer's
statement of objections are reflected in the Final Closing Balance Sheet, as
follows: (1) the Buyer shall be responsible for an amount equal to the total
amount of such fees and expenses multiplied by a fraction, the numerator of
which is the excess (if any) of (w) the Book Value as shown on the Draft
Statement of Working Capital and Fixed Assets (after adjusting the Draft
Statement of Working Capital and Fixed Assets to reflect all of the changes
called for in the Buyer's statement of objections) over (x) the Book Value as
shown on the Final Closing Balance Sheet, and the denominator of which is the
excess of (y) the Book Value as shown on the Draft Statement of Working Capital
and Fixed Assets (after adjusting the Draft Statement of Working Capital and
Fixed Assets to reflect all of the changes called for in the Buyer's statement
of objections) over (z) the Book Value as shown on the Draft Statement of
Working Capital and Fixed Assets (after adjusting the Draft Statement of Working
Capital and Fixed Assets to reflect all changes to the Book Value requested by
Buyer, except the Unresolved Objections); and (2) the Seller shall be
responsible for the balance of such fees and expenses.
(b) Upon completion of the Final Closing Balance Sheet, the
"Initial Sale Price" shall be determined as follows:
(i) if the Book Value as shown on the Final Closing Balance Sheet
is less than Estimated Closing Book Value, the Initial Sale Price shall be
decreased by such difference; and
(ii) if the Book Value as shown on the Final Closing Balance Sheet
exceeds the Estimated Closing Book Value, the Initial Sale Price shall be
increased by such excess amount.
The cumulative net adjustment to the aggregate Purchase Price pursuant
to clauses (i) through (ii) above, whether positive or negative, is the "Final
Adjustment Amount."
(c) Within 10 business days after the Final Closing Balance Sheet
becomes final and binding upon the Parties (i) if the Final Adjustment Amount
results in an increase in the Initial Sale Price, the Buyer shall make a cash
payment to the Seller by wire transfer in immediately available funds to an
account or accounts designated in writing by the Seller, and (ii) if the Final
Adjustment Amount results in a decrease in the Initial Sale Price, the Seller
shall
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make a cash payment to the Buyer by wire transfer in immediately available funds
to an account or accounts designated in writing by the Buyer, in either case
under clause (i) or (ii) of this Section 1.6(c), in an amount equal to the sum
of (X) the Final Adjustment Amount and (Y) interest thereon at a rate equal to
five percent (5%) per annum calculated from and including the Closing Date to,
but not including, the date of payment.
Section 1.7. Earnout.
(a) The Buyer shall pay the Seller an earnout payment (the "Earnout
Payment"). The Earnout Payment shall be calculated and paid as follows:
(i) If the aggregate EBITDA of the Business for the period from
April 1, 2003 through March 31, 2006 (the "Earnout Period") is greater than
$13,500,000 but less than $17,500,000, then the Buyer shall pay the Seller the
amount of $3,000,000.
(ii) If the aggregate EBITDA of the Business for the Earnout Period
is greater than $17,500,000, then the Buyer shall pay the Seller the amount of
$5,000,000.
(iii) The Buyer shall make any payment required by clauses (i) or
(ii) of this Section 1.7(a) no later than sixty days following the end of the
Earnout Period.
(b) "EBITDA" shall mean the following (all determined in accordance
with GAAP) with respect to the Business for the applicable period: (a) net
income of the Business (excluding any corporate charges in excess of $500,000
annually made by the Buyer or any of its Affiliates for the provision of
services to the Business) for such period, plus (b) interest expense of the
Business for such period, plus (c) federal, state, local and foreign income
taxes and other taxes on income of the Business for such period, plus (d)
depreciation and amortization of the Business for such period, plus (e) all
costs related to information technology supplied to the Business, minus (f) the
product of (A) 25% and (B) the aggregate dollar amount of each Non-Maintenance
Capital Expenditure incurred during the Earnout Period and (C) the number of
days remaining in the Earnout Period on the date such Non-Maintenance Capital
Expenditure is incurred divided by 1,095; plus or minus (g) any extraordinary
expenses or extraordinary income, respectively, incurred or earned by the
Business that is not reasonably expected to occur in the future or was not
incurred in the ordinary course of business; provided, that in the case of any
items referred to in clauses (b) through (d) and (f) (with respect to
extraordinary expenses), only to the extent such item was included as a
deduction (or other charge to income) in calculating net income and in the case
of any item referred to in clause (f) (with respect to extraordinary income)
only to the extent such item was included in calculating net income. For
purposes of this Section 1.7, the term EBITDA shall not include or be calculated
with reference to any revenues, income or expenses of (x) any business, division
or operation acquired by the Buyer or its subsidiaries after the Closing Date
and (y) any business, division, operations or product line owned by any
affiliate of Buyer and consolidated into and with the Buyer or any of its
subsidiaries following the Closing Date. The parties understand and agree that
the Buyer shall have complete discretion with respect to the operation,
marketing, pricing and distribution of all of the Buyer's products and services
and that the Buyer or its subsidiaries may eliminate or
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otherwise alter at any time or from time to time any or all of such products or
services. "Non-Maintenance Capital Expenditures" means, for any period, the
aggregate expenditures (whether paid in cash or accrued as a liability) of the
Business during such period on account of property, plant, equipment or similar
fixed assets that, in conformity with GAAP, are required to be reflected in the
balance sheet of the Business, including any acquisition, construction or
installation of properties or for any additions and improvements thereto and
payments under any lease of property (whether real, personal or mixed) which, in
conformity with GAAP, is accounted for as a capital lease, but in any event
excluding routine repair and maintenance expenditures.
(c) The Buyer shall maintain separate books and records for the
Business sufficient to calculate the Earnout Payment. During the Earnout Period,
the Buyer shall prepare a summary income statement for the Business no less
frequently than annually and shall provide that statement to the Seller within
90 days after the end of the fourth fiscal quarter of such year, such statement
to include a calculation of EBITDA for such year. The Seller shall have the
right during normal business hours and at its sole expense, to examine any books
and records of the Buyer relating to the Business; provided, that such right may
be exercised only once during any twelve-month period and such access shall not
unreasonable interfere with the operation of Buyer's business. The Seller may
exercise such right through an agent or employee designated by the Seller in
writing or by any independent public accountant or firm including independent
public accountants so designated. The Seller shall not disclose or make use of,
and shall cause any such agent or representative not to disclose or make use of
any knowledge, information, or documents obtained during such review. This right
to financial information and access shall terminate upon the payment of the
Earnout Payment, provided that the amount of the Earnout Payment has been
approved by the Seller.
Section 1.8. Further Assurances. At any time and from time to time
after the Closing, at the request of the Buyer and without further
consideration, the Seller shall execute and deliver such other instruments of
sale, transfer, conveyance, and assignment and take such actions as the Buyer
may reasonably request to more effectively transfer, convey, and assign to the
Buyer, and to confirm the Buyer's rights to, title in, and ownership of, the
Acquired Assets and to place the Buyer in actual possession and operating
control thereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer that the statements contained in
this Article II are true and correct, except to the extent any such statements
are specifically qualified in the Disclosure Schedule. The Disclosure Schedule
shall be arranged in sections and subsections corresponding to the numbered and
lettered sections and subsections contained in Article II of this Agreement.
Section 2.1. Organization, Qualification, and Corporate Power. The
Seller is a corporation duly organized, validly existing, and in good standing
under the laws of the State of
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Delaware. The Seller has all requisite corporate power and authority to carry on
the Business and to own and use the assets and properties owned and used by it
in the Business. The Seller is qualified to do business and is in good standing
as a foreign corporation in Indiana, which is the only jurisdiction where the
nature of the property owned or leased by the Seller or the nature of the
business conducted by the Seller in connection with the Business makes such
qualification necessary.
Section 2.2. Authorization of Transaction. The Seller has all
requisite power and authority to execute and deliver this Agreement and the
Ancillary Agreements and to perform its obligations hereunder and thereunder.
The execution, delivery, and performance by the Seller of this Agreement and the
Ancillary Agreements and the consummation by the Seller of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of the Seller. This Agreement has been
duly and validly executed and delivered by the Seller and constitutes, and each
of the Ancillary Agreements, upon its execution and delivery by the Seller, will
constitute, a valid and binding obligation of the Seller, enforceable against
the Seller in accordance with its terms.
Section 2.3. Noncontravention. Except as set forth in Section 2.3 of
the Disclosure Schedule, neither the execution and delivery by the Seller of
this Agreement or the Ancillary Agreements, nor the consummation by the Seller
of the transactions contemplated hereby or thereby, will (a) conflict with or
violate any provision of the Certificate of Incorporation or by-laws of the
Seller, (b) require on the part of the Seller any notice to or filing with, or
any permit, authorization, consent, or approval of, any Governmental Entity,
except for any notice, filing, permit, authorization, consent, or approval, the
absence of which, individually or in the aggregate, would not have a Business
Material Adverse Effect, (c) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of obligations under, create in any party the right to
terminate, modify, or cancel, or require any notice, consent, or waiver under,
any contract or instrument to which the Seller is a party or by which the
Seller, or the Acquired Assets is bound or to which any of its assets is
subject, except for (i) any conflict, breach, default, acceleration,
termination, modification, or cancellation which, individually or in the
aggregate, would neither have a Business Material Adverse Effect and nor would
adversely affect the consummation of the transactions contemplated hereby or
(ii) any notice, consent, or waiver the absence of which, individually or in the
aggregate, would neither have a Business Material Adverse Effect nor would
adversely affect the consummation of the transactions contemplated hereby, (d)
result in the imposition of any Encumbrance upon any of the Acquired Assets, or
(e) violate any order, writ, injunction, decree, statute, rule, or regulation
applicable to the Seller, or any of its properties or assets.
Section 2.4. Financial Statements. The books of account and related
records of the Seller in respect to the Business fairly reflect in reasonable
detail the assets, liabilities and transactions of the Business. Seller has
previously provided to Buyer (i) the audited balance sheets of the Business as
of December 31, 2000 and 2001, (ii) the related audited statements of income and
retained earnings and cash flows for the years ended December 31, 2000 and 2001,
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(iii) the unaudited balance sheet of the Business as of December 31, 2002, (iv)
the related unaudited statements of income and retained earnings and cash flows
for the 12-month period ended December 31, 2002, and (v) the Most Recent
Month-End Management Accounts (clauses (i) through (v), collectively the
"Financial Statements"). The Financial Statements (i) are true and correct in
all material respects, (ii) were prepared in accordance with GAAP (except as
otherwise noted therein), (iii) present fairly the financial position, results
of operations and cash flows of the Business as of such dates and for the
periods then ended and (iv) in the case of the financial statements provided
pursuant to clauses (i) and (ii) of this Section 2.4, conform to the
requirements of Regulation S-X of the Securities and Exchange Commission. The
unaudited balance sheet of the Business at December 31, 2002 is referred to as
the "Balance Sheet".
Section 2.5. Absence of Certain Changes. Except as set forth in
Section 2.5 of the Disclosure Schedule, since December 31, 2002 (the "Balance
Sheet Date"), the Seller has conducted the Business only in the ordinary course
and in accordance with past practices, and there has been no Business Material
Adverse Effect. Without limiting the foregoing, except as reflected in the
Balance Sheet, since the Balance Sheet Date with respect to the Business:
(a) neither the Seller nor any of its Affiliates has made or
promised to make any increase in any salaries, rates of pay or other
compensation or benefits of any employees of the Business, except for customary
increases and progressions for employees which increases and progressions were
made in the ordinary course of business;
(b) neither the Seller nor any of its Affiliates has suffered any
damage, destruction or loss of any tangible assets or properties which would
have been included as Acquired Assets but for such damage, destruction or loss
(whether or not covered by insurance) in an aggregate amount less than $100,000;
(c) the Seller has not suffered any strike or other labor trouble,
or has entered into any material agreement or material negotiation with any
labor union or other collective bargaining representative of any employees;
(d) there has not been any change or any threat of any change in
any of its relations with, or any loss or threat of loss of, any of the
suppliers, distributors or customers of the Business which, individually or in
the aggregate, has had or reasonably could be expected to have a Business
Material Adverse Effect;
(e) there has not been any cancellation or waiver of any right
under any contract, lease, agreement, license or permit which right is or was,
prior to such cancellation or waiver, material to the Business;
(f) there has not been any sale, transfer or other disposition of,
or subjection to any encumbrance of, any assets, properties or rights of the
Business, except for sales of obsolete or damaged equipment or retirement of
equipment, in each case in the ordinary course of business;
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(g) there has not been any making or authorization of any capital
expenditures in excess of $100,000 in the aggregate;
(h) there has not been any payment, discharge or satisfaction of
any liability or obligation (whether accrued, absolute, contingent or otherwise)
of the Business, other than the payment, discharge or satisfaction, in the
ordinary course of business, of liabilities or obligations shown or reflected on
the Balance Sheet or incurred in the ordinary course of business since the
Balance Sheet Date;
(i) there have not been any write-offs as uncollectible of any
notes or accounts receivable of Seller or any of its Affiliates with respect to
the Business or write-downs of the value of any assets by Seller or any of its
Affiliates with respect to the Business other than in immaterial amounts or in
the ordinary course of business consistent with past practice;
(j) there has not been any change by Seller in any method of
accounting or keeping its books of account or accounting practices;
(k) there has not been any disposition of or failure to keep in
effect any rights in, to or for the use of any trademark, service ▇▇▇▇, trade
name or copyright of the Business, or any disclosure to any person not an
employee or other disposal of any trade secret, process or know-how of the
Business; or
(l) there has not been any transaction, agreement or event to which
Seller or any of its Affiliates is a party or a participant outside the ordinary
course of Seller's business or inconsistent with past practice relating to the
Business which could reasonably be anticipated to result in a Business Material
Adverse Effect.
Section 2.6. Undisclosed Liabilities. Neither the Seller nor any of
its Affiliates has any liability, whether due or to become due, absolute,
contingent or otherwise with respect to the Business, including liabilities for
or in respect of Taxes and any interest or penalties related thereto, except (a)
to the extent reflected as a liability on the Balance Sheet, (b) incurred in the
ordinary course of business since the Balance Sheet Date and fully reflected as
liabilities on Seller's books of account, none of which individually or in the
aggregate, has been or could have been a Business Material Adverse Effect or (c)
disclosed on Section 2.6 of the Disclosure Schedule.
Section 2.7. Ownership of Assets; Condition.
(a) The Seller is the true and lawful owner, and has good and
marketable title to, all of the Acquired Assets, free and clear of all
Encumbrances, except Permitted Encumbrances. Upon execution and delivery by the
Seller to the Buyer of the instruments of conveyance referred to in Section
1.4(b)(iii), the Buyer will become the true and lawful owner of, and will
receive good and marketable title to, the Acquired Assets, free and clear of all
Encumbrances other than (i) zoning, entitlement, and other land use and
environmental regulations by any Governmental Entity in respect of real
property, if such regulations have not
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been violated and do not interfere with the continued use of the applicable
Leased Real Property in the manner presently used, (ii) such other imperfections
in title, charges, easements, restrictions, and encumbrances in respect of real
property that do not render title unmarketable and do not detract significantly
from the value of or interfere with the continued use of any Leased Real
Property in the manner such property is presently being used and (iii) those set
forth in Section 2.7(a) of the Disclosure Schedule (clauses (i) through (iii),
collectively the "Permitted Encumbrances").
(b) Immediately prior to Closing, Seller will own or have legal
rights to use as currently used in the Business, and Seller will convey to Buyer
pursuant to the transactions contemplated pursuant to this Agreement and the
Ancillary Agreements, those assets, both tangible and intangible, which are
necessary and sufficient to conduct the Business as currently conducted.
(c) All Acquired Assets have historically been adequate for the
purposes for which they are presently used in the conduct of the Business, are
usable in a manner consistent with their respective current use, comply with
applicable laws and currently have the volume capacity necessary to permit the
manufacture of all products presently manufactured by the Business in sufficient
quantities to have met the total overall annual and seasonal volume requirements
of the customers of the Business for fiscal year ending December 31, 2002.
(d) Section 2.7(d) of the Disclosure Schedule lists individually
all Acquired Assets which are fixed assets (within the meaning of GAAP) having a
book value greater than $50,000, indicating the cost, accumulated book
depreciation (if any), and the book value of each such fixed asset as of the
date of the Most Recent Month-End Management Accounts.
Section 2.8. Brokers' Fees. Neither the Seller nor any Affiliate has
any liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
Section 2.9. Intellectual Property.
(a) Section 2.9(a) of the Disclosure Schedule lists all
proprietary knowledge, processes, techniques, methodologies, formulae, designs,
know-how and trade secrets used by the Seller in the Business (the "Business
Trade Secrets"). Such Business Trade Secrets shall be licensed to the Buyer in
accordance with the terms included in the license agreement referred to in
Section 1.4(b)(viii) of this Agreement.
(b) Except as set forth in Section 2.9(b) of the Disclosure
Schedule, the Business Trade Secrets and the Acquired Assets constitute all of
the intellectual property used in and necessary to the conduct of the Business
as presently conducted by the Seller.
(c) The operation of the Business as currently conducted by the
Seller, including but not limited to the design, development, use, manufacture
and sale of the products, technology or services, does not infringe,
misappropriate or otherwise violate the patents,
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industrial design rights, trademarks, service marks, trade names, trade dress,
copyrights, trade secrets or other intellectual property rights (collectively,
"Intellectual Property Rights") of any third party. The Seller has not received,
and knows of no basis for, any claim, demand, suit, threat, notice or other
action alleging that the operation of the Business infringes or otherwise
violates the Intellectual Property Rights used in the Business. The Seller has
not made, and knows of no basis for, any claim, demand, suit, threat, notice or
other action alleging that any third party has violated or infringed any of the
Intellectual Property Rights used in the Business. The Seller has provided to
the Buyer complete and accurate copies of all written documentation in the
Seller's possession relating to claims or disputes known to the Seller
concerning any Intellectual Property Rights used by the Seller in the Business.
(d) To the knowledge of the Seller, none of the Business Trade
Secrets or other confidential or proprietary information used in the Business
has been disclosed to any person or entity unless such disclosure was necessary
and made pursuant to an appropriate confidentiality agreement. None of the
Business Trade Secrets has been, directly or indirectly, sold, assigned,
licensed, delivered or otherwise conveyed to any third party, and the Seller is
not aware of the use by any third party of the Business Trade Secrets except as
disclosed at Section 2.9(d) of the Disclosure Schedule.
Section 2.10. Inventory. Except for the Excluded Assets, the Acquired
Assets include all the inventory of the Seller held for use primarily in the
Business. All inventories of the Business not written-off have been priced at
the lower of cost or market on an average actual cost basis. The quantities of
each type of inventory, whether raw materials, work-in-progress, or finished
goods, are not excessive in the present circumstances of the Business. All of
the inventories of the Seller reflected in the Balance Sheet and all inventories
acquired since the Balance Sheet Date consist of items that are marketable and
fit for their particular use, are not defective and are of a quality and
quantity usable and saleable in the ordinary course of the Seller's business and
all of the raw materials and work in process inventory of the Seller reflected
on the Balance Sheet and all such inventories acquired since the Balance Sheet
Date can reasonably be expected to be consumed in the ordinary course of
business within a reasonable period of time. Section 2.10 of the Disclosure
Schedule is a summary of the Seller's inventory of finished goods, work in
process and raw materials as of January 31, 2003.
Section 2.11. Contracts.
(a) Section 2.11 of the Disclosure Schedule lists the following
agreements (written or oral) to which the Seller or any of its Affiliates is a
party as of the date of this Agreement that relate primarily to the Business:
(i) any agreement (or group of related agreements) for the lease of
personal property from or to third parties providing for lease payments;
(ii) any agreement (or group of related agreements) for the sale of
products or for the furnishing of services by the Seller;
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(iii) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed (or may create, incur, assume, or
guarantee) indebtedness (including capitalized lease obligations);
(iv) any agreement for the disposition of any significant portion of
the assets or business of the Seller (other than sales of products in the
Ordinary Course of Business) or any agreement for the acquisition of the assets
or business of any other entity (other than purchases of inventory or components
in the Ordinary Course of Business);
(v) any agreement concerning confidentiality or noncompetition;
(vi) any employment or consulting agreement;
(vii) any agreement under which the consequences of a default or
termination would reasonably be expected to have a Business Material Adverse
Effect;
(viii) any agreement that contains any provisions requiring the Seller
to indemnify any other party;
(ix) any other agreement (or group of related agreements) either
involving more than $50,000 or not entered into in the Ordinary Course of
Business;
(x) any agreement concerning a partnership, joint venture,
strategic alliance, collaboration, agency, or distributorship; and
(xi) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of its current or former directors, officers or employees, including
the APRA ("annual performance related award") arrangement to which ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ is a party.
(b) The Seller has delivered to the Buyer a complete and accurate
copy of each agreement listed in Section 2.11 of the Disclosure Schedule. With
respect to each agreement so listed, except as set forth in such sections of the
Disclosure Schedule: (i) if such agreement is a legal, valid, binding, and
enforceable obligation of each party thereto other than the Seller, then such
agreement is a legal, valid, binding, and enforceable obligation of the Seller
(except in so far as enforceability may be limited by bankruptcy, insolvency, or
other similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity); (ii) for those agreements to which the Seller
is a party, the agreement is assignable by the Seller to the Buyer without the
consent or approval of any party (except as set forth in Section 2.3 of the
Disclosure Schedule) and to the knowledge of the Seller, will continue to be
legal, valid, binding, and enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing; and (iii) neither the Seller nor, to the
knowledge of the Seller, any other party is in breach or violation of, or
default under, any such agreement, and no event has occurred, is pending or, to
the knowledge of the Seller, is threatened, that, after the giving of notice,
with lapse of time, or otherwise, would
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constitute a breach or default by the Seller or, to the knowledge of the Seller,
any other party under such agreement.
Section 2.12. Litigation. Except as described in Section 2.12 of the
Disclosure Schedule, there is no Legal Proceeding that is pending or has to the
knowledge of the Seller been threatened against the Seller or any of its
Affiliates related to the Business that (a) seeks either damages in excess of
$50,000 or equitable relief or (b) in any manner challenges or seeks to prevent,
enjoin, alter, or delay the transactions contemplated by this Agreement. There
are no material judgments, orders, rulings, judgments, settlements, arbitration
awards or decrees outstanding against the Seller or any of its Affiliates
related to the Business.
Section 2.13. Employees.
(a) With respect to the Business Employees: (i) Section 2.13 of the
Disclosure Schedule contains a list of all employees, along with the position
and the hourly rate of compensation of each such person, and (ii) to the
knowledge of the Seller, no such employee has any plans to terminate employment
with the Seller (other than for the purpose of accepting employment with the
Buyer following the Closing) or not to accept employment with the Buyer.
(b) The Seller is a party to or bound by the collective bargaining
agreement pertaining to the Business as set forth in Section 2.13(b) of the
Disclosure Schedule. Except as described in Section 2.13(b) of the Disclosure
Schedule, the Seller is not now, and has not during the past two (2) years,
experienced any strikes, lockouts, work stoppages, work slowdowns or other such
concerted activity relating or pertaining to the Business.
(c) Except as described in Section 2.13(c) of the Disclosure
Schedule, neither the Seller nor any Affiliate has implemented a "plant closing"
or "mass layoff" with respect to the Business within the meaning of the Worker
Adjustment and Retraining Notification Act ("WARN Act"). Section 2.13(c) of the
Disclosure Schedule lists all employees connected to the Business who have
experienced, during the ninety (90) day period immediately preceding the Closing
Date, an "employment loss" within the meaning of the WARN Act.
Section 2.14. Employee Benefits. The Seller and each of its ERISA
Affiliates is in compliance with ERISA, except where the failure to so comply
would not, individually or in the aggregate, have a Business Material Adverse
Effect.
(a) The only Employee Benefit Plans maintained by, or contributed
to by the Seller or any ERISA Affiliate, for the benefit of employees or former
employees of the Business, including any multiemployer plan as defined in
Section 3(37) of ERISA, are those listed in Section 2.14 of the Disclosure
Schedule (the "Benefit Plans").
(b) The Seller and each of its ERISA Affiliates is in compliance
with ERISA, and those provisions of the Code applicable to the Benefit Plans,
except where the failure to so comply would not, individually, or in the
aggregate, have a Business Material Adverse Effect.
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(c) Without limiting the generality of Section 2.14(b) above, and
except as would not, individually or in the aggregate, be reasonably expected to
have a Business Material Adverse Effect:
(i) No asset of the Seller or any ERISA Affiliate, which is to be
acquired by Buyer pursuant to this Agreement, is subject to any lien under Code
section 401(a)(29), ERISA Section 302(f) or Code section 412(n), ERISA Section
4068 or arising out of any action filed under ERISA Section 4301(b).
(ii) Neither the Seller nor any ERISA Affiliate has incurred any
liability which could subject Buyer or any asset to be acquired by Buyer
pursuant to this Agreement to liability under Section 4062, 4063 or 4064 of
ERISA.
(iii) Neither the Seller nor any ERISA Affiliate is, or within the
seven years immediately preceding the date of this Agreement was, required to
contribute to any multiemployer plan with respect to employees of the Business,
within the meaning of Section 4001(a)(3) of ERISA. Neither the Seller nor any
Affiliate, while an Affiliate, has incurred any withdrawal liability with
respect to employees of the Business, within the meaning of Section 4201 of
ERISA, including any contingent liability under Section 4204 of ERISA, to any
multiemployer pension plan, which liability has not been fully paid as of the
date hereof.
Section 2.15. Environmental Matters. Except as set forth in Section
2.15 of the Disclosure Schedule:
(a) The Seller has complied and is in compliance with all
Environmental Laws applicable to the Business, except for violations of
Environmental Laws that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Business Material Adverse Effect.
(b) The Seller does not have any liabilities or obligations
related in any way to the Business or past operations at or near the properties
subject to the Real Property Lease arising from the Release of any Materials of
Environmental Concern into the environment, except for liabilities or
obligations that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Business Material Adverse Effect.
(c) There is no pending or, to the knowledge of the Seller,
threatened civil or criminal litigation, notice of violation, formal
administrative proceeding, or investigation, inquiry, or information request by
any Governmental Entity, relating in any way to the Business or, to the
knowledge of the Seller, adjacent to any properties subject to Real Property
Leases, under any Environmental Law. The Seller is not a party to or bound by
any court order, administrative order, consent order, or other agreement between
the Seller and any Governmental Entity entered into in connection with any legal
obligation or liability arising under any Environmental Law, in each case
related in any way to the Business or, to the Seller's knowledge, adjacent to
any properties subject to Real Property Leases, which could reasonably be
expected to have a Business Material Adverse Effect.
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(d) Set forth in Section 2.15(d) of the Disclosure Schedule is a
list of all documents (whether in hard copy or electronic form) that contain any
environmental reports, investigations, and audits relating to the properties
subject to the Real Property Lease conducted by or on behalf of the Seller
during the past two years. A complete and accurate copy of each such document
has been provided to the Buyer.
Section 2.16. Legal Compliance. Except as set forth in Section 2.16
of the Disclosure Schedule, the Seller is currently conducting, and has at all
times since May 31, 1999 conducted, the Business in compliance with each
applicable law (including rules and regulations thereunder) of any federal,
state, local, or foreign government, or any Governmental Entity, except for any
violations or defaults that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Business Material Adverse Effect.
Except as set forth in Section 2.16 of the Disclosure Schedule, the Seller has
not received any notice, citation, summons, order or communication from any
Governmental Entity alleging noncompliance with any law, rule, or regulation, no
complaint has been filed and served, no penalty has been assessed and notice
thereof given, and no investigation or review is pending or, to the knowledge of
the Seller, threatened with respect to the Business, by any Governmental Entity
with respect to any alleged (a) violation by the Seller of any law, ordinance,
rule, regulation or order, or (b) failure by the Seller to have any permit,
license or authorization required in connection with the conduct of or otherwise
applicable to the Business.
Section 2.17. Customers and Suppliers. Section 2.17 of the Disclosure
Schedule sets forth a list of (a) each customer that accounted for more than 1%
of the consolidated revenues of the Business during the last full fiscal year
and the amount of revenues accounted for by such customer during such period and
(b) each supplier that is the sole supplier of any significant product or
service to the Business. No purchase order or commitment of the Seller included
in the Assigned Contracts is in excess of normal requirements, nor are prices
provided therein in excess of current market prices for the products or services
to be provided thereunder.
Section 2.18. Permits. Section 2.18 of the Disclosure Schedule sets
forth a list of all Permits. Each such Permit is in full force and effect; the
Seller is in compliance with the terms of each such Permit (except for such
instances of noncompliance that, individually or in the aggregate, have not had
and would not reasonably be expected to have a Business Material Adverse
Effect); and, to the knowledge of the Seller, no suspension or cancellation of
such Permit is threatened and there is no basis for believing that such Permit
will not be renewable upon expiration.
Section 2.19. Government Contracts. With respect to the Business:
(a) The Seller has not been suspended or debarred from bidding on
contracts or subcontracts with any Governmental Entity; and, to the knowledge of
the Seller, no such suspension or debarment has been threatened or initiated.
Except for audits by the Defense Contract Audit Agency in the Ordinary Course of
Business and ongoing "spot" audits of procedures by resident Quality Assurance
Representatives of the Defense Contract Management Agency, the Seller is not now
being audited or investigated by the United States Government
-16-
Accounting Office, the United States Department of Defense or any of its
agencies, the Defense Contract Audit Agency, the contracting or auditing
function of any Governmental Entity with which it is contracting, the United
States Department of Justice, the Inspector General of the United States
Governmental Entity, or any prime contractor with a Governmental Entity; and,
with the exceptions noted above and to the knowledge of the Seller, no such
audit or investigation has been threatened. To the knowledge of the Seller,
there is no valid basis for (i) the suspension or debarment of the Seller from
bidding on contracts or subcontracts with any Governmental Entity or (ii) any
claim (including any claim for return of funds to the Government) pursuant to an
audit or investigation by any of the entities named in the foregoing sentence.
The Seller has no agreements, contracts, or commitments which require it to
obtain or maintain a security clearance with any Governmental Entity.
(b) To the knowledge of the Seller, no basis exists for any of the
following with respect to any of its contracts or subcontracts with any
Governmental Entity: (i) a Termination for Default (as provided in 48 C.F.R.
Ch.1 Section 52.249-8, 52.249-9 or similar sections), (ii) a Termination for
Convenience (as provided in 48 C.F.R. Ch.1 Section52.241-1, 52.249-2 or similar
sections), or a Stop Work Order (as provided in 48 C.F.R. Ch.1 Section52.212-13
or similar sections); and the Seller has no reason to believe that funding may
not be provided under any contract or subcontract with any Governmental Entity
in the upcoming federal fiscal year.
Section 2.20. Accounts Receivable. All of the trade accounts and
notes receivable of the Business reflected on the Balance Sheet or acquired
after the date thereof and on or before the Closing Date represent amounts
receivable for merchandise actually delivered or services actually provided (or,
in the case of non-trade accounts or notes, represent amounts receivable in
respect of other bona-fide business transactions) net of reserves, have arisen
in the ordinary course of business, are not subject to any counterclaims or
offsets and have been billed and are generally due within 30 days after such
billing. Section 2.20 of the Disclosure Schedule sets forth (a) the total amount
of accounts receivable of Seller outstanding as of January 31, 2003 and (b) the
aging of such receivables based on the following schedule: 0-30 days, 31-60
days, 61-90 days, and over 90 days, from the due date thereof.
Section 2.21. Products Liability. Except as set forth on Section 2.21
of the Disclosure Schedule, there are no: (i) liabilities of the Seller or the
Business, fixed or contingent, asserted or, to the knowledge of the Seller,
unasserted, with respect to any product liability or any similar claim that
relates to any product manufactured by the Business on or prior to the Closing
Date; or (ii) liabilities of the Seller or the Business, fixed or contingent,
asserted or, to the knowledge of the Seller , unasserted, with respect to any
claim for the breach of any express or implied product warranty or any other
similar claim with respect to any product manufactured by the Business on or
prior to the Closing Date, other than standard warranty obligations (to replace,
repair or refund) in the ordinary course of the conduct of the Business, none of
which individually involves a claim for money, property or services in excess,
in the aggregate, of the amount specifically reserved therefor in the Balance
Sheet.
Section 2.22. Leased Property.
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(a) Section 2.22(a) of the Disclosure Schedule is an accurate
description of the lease pursuant to which the Seller leases or subleases any
real property or interest therein in relation to the Business (the "Real
Property Lease"). The Seller is the lessee under the Real Property Lease, and no
party other than the Seller has any right to possession, occupancy or use of the
property demised under the Real Property Lease. A true and correct copy of the
Real Property Lease has been delivered to Buyer, together with all amendments
and modifications thereto, and all subordination, non-disturbance and/or
attornment agreements related thereto, and no changes have been made thereto
since the date of delivery. The Real Property Lease is valid and in full force
and effect and is binding and enforceable in accordance with its terms. Except
as set forth in Section 2.22(a) of the Disclosure Schedule, there are no
existing defaults under any provision of the Real Property Lease, and no event
has occurred which (with or without notice, lapse of time or both) would
constitute a default thereunder.
(b) Except as set forth in Section 2.22(b) of the Disclosure
Schedule, the Seller is in actual possession of the property demised under the
Real Property Lease. The Seller has good, valid and indefeasible title to all
the leasehold estates conveyed under the Real Property Lease free and clear of
all Encumbrances, including, without limitation, leases, subleases, rights of
occupancy, chattel mortgages, conditional sales contracts, deed restrictions,
collateral security arrangements and other title or interest retention
arrangements, and are not, with respect to the property demised under the Real
Property Lease, subject to any rights of way, building use restrictions,
exceptions, variances, reservations or limitations of any nature whatsoever
except Permitted Encumbrances. To the knowledge of the Seller, except as
disclosed on Section 2.22(b) of the Disclosure Schedule, no portion of any of
the improvements erected by or under the direction of the Seller on the
properties demised under the Real Property Lease encroaches on adjoining
property or public streets, and no portion of the property demised under the
Real Property Lease are, or have been, subjected to an ad valorem tax valuation
such that a change in ownership or use (whether now existing or in the future)
has caused or will cause additional ad valorem taxes to be imposed upon the
properties demised under the Real Property Lease.
(c) Except as set forth in Section 2.22(c) of the Disclosure
Schedule, the basic rent and all additional rent payable under the Real Property
Lease have been paid to date and not more than one (1) month in advance. All
work required to be performed under the Real Property Lease by the landlords
thereunder or by the Seller has been performed, and, to the extent that the
Seller is responsible for payment of such work, has been fully paid for, whether
directly to the contractor performing such work or to such landlord as
reimbursement therefor, except for items which the Seller is disputing in good
faith (which items are set forth in Section 2.22 of the Disclosure Schedule).
Section 2.23. Related Party Transactions. Except as disclosed in
Section 2.23 of the Disclosure Schedule, no Related Party as of the date hereof:
(i) has any contractual or other claim, express or implied, or of any kind
whatsoever against the Business or any of the Acquired Assets; (ii) has any
interest in the Business or any of the Acquired Assets; or (iii) is engaged in
any other transaction with or in respect of the Business or any of the Acquired
Assets.
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Section 2.24. Insurance. With respect to the Business, neither the
Seller nor any of its Affiliates has been refused any property and casualty
insurance, nor have any of its coverages been limited by any insurance carrier
to which it has applied for insurance or with which has carried insurance during
the last two years.
Section 2.25. Disclosure. There is no fact or series of facts known
to the Seller that has specific application to the Business (other than general
economic or industry conditions) and that materially adversely affects or, as
far as the Seller can reasonably foresee, materially threatens, the assets,
business, prospects, financial condition, or results of the Business that has
not been disclosed in this Agreement or the Disclosure Schedule. For purposes of
this Section, a fact or series of facts shall not be deemed (1) to materially
affect the assets, business, prospects, financial condition, or results of the
Business unless, on the date hereof or on the Closing Date, as the case may be,
its impact on the assets, business, prospects, financial condition, or results
of the Business is reasonably estimated to exceed $750,000, or (2) to materially
threaten the assets, business, prospects, financial condition, or results of the
Business unless, on the date hereof or on the Closing Date, as the case may be,
its impact on the assets, business, prospects, financial condition, or results
of the Business is reasonably estimated to exceed $750,000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
Section 3.1. Organization and Corporate Power. The Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. The Buyer has all requisite corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it.
Section 3.2. Authorization of the Transaction. The Buyer has all
requisite power and authority to execute and deliver this Agreement and the
Ancillary Agreements and to perform its obligations hereunder and thereunder.
The execution, delivery, and performance by the Buyer of this Agreement and the
Ancillary Agreements and the consummation by the Buyer of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of the Buyer. This Agreement has been
duly and validly executed and delivered by the Buyer and constitutes, and each
of the Ancillary Agreements, upon its execution and delivery by the Buyer, will
constitute, a valid and binding obligation of the Buyer, enforceable against the
Buyer in accordance with its terms.
Section 3.3. Noncontravention. Except as set forth on Section 3.3 of
the Disclosure Schedule, neither the execution and delivery by the Buyer of this
Agreement or the Ancillary Agreements, nor the consummation by the Buyer of the
transactions contemplated hereby or thereby, will (a) conflict with or violate
any provision of the Certificate of Incorporation or by-laws of the Buyer, (b)
require on the part of the Buyer any filing with, or permit, authorization,
consent, or approval of, any Governmental Entity, (c) conflict with, result
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in breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of obligations under, create in any
party any right to terminate, modify, or cancel, or require any notice, consent,
or waiver under, any contract or instrument to which the Buyer is a party or by
which it is bound or to which any of its assets is subject, except for (i) any
conflict, breach, default, acceleration, termination, modification or
cancellation which would not adversely affect the consummation of the
transactions contemplated hereby or (ii) any notice, consent or waiver the
absence of which would not adversely affect the consummation of the transactions
contemplated hereby, or (d) violate any order, writ, injunction, decree,
statute, rule, or regulation applicable to the Buyer or any of its properties or
assets.
Section 3.4. Broker's Fees. Neither the Buyer nor any Affiliate has
any liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
ARTICLE IV
PRE-CLOSING COVENANTS
Section 4.1. Closing Efforts. Each of the Parties shall use its
Reasonable Best Efforts to take all actions and to do all things necessary,
proper, or advisable to consummate the transactions contemplated by this
Agreement, including using its Reasonable Best Efforts to ensure that (i) its
representations and warranties remain true and correct in all material respects
through the Closing Date and (ii) the conditions to the obligations of the other
Party to consummate the transactions contemplated by this Agreement are
satisfied.
Section 4.2. Governmental and Third-Party Notices and Consents.
(a) Each Party shall use its Reasonable Best Efforts to obtain, at
its expense, all waivers, permits, consents, approvals, or other authorizations
from Governmental Entities, and to effect all registrations, filings, and
notices with or to Governmental Entities, as may be required for such Party to
consummate the transactions contemplated by this Agreement and to otherwise
comply with all applicable laws and regulations in connection with the
consummation of the transactions contemplated by this Agreement.
(b) The Parties agree that neither Party is under any obligation to
defend against any suits, actions or proceedings, judicial or administrative,
challenging this Agreement or the Ancillary Agreements or the consummation of
the transactions contemplated hereby or thereby, including actions seeking to
vacate or reverse any temporary restraining order, preliminary injunction or
other legal restraint or prohibition entered or imposed by any court or other
Governmental Entity or any such actions or proceedings commenced by any
Governmental Entity in respect of the antitrust, competition, merger control or
similar laws, rules or regulations.
(c) The Seller shall use its Reasonable Best Efforts to obtain, at
its expense, all such waivers, consents, or approvals from third parties, and to
give all such notices to third parties, as are required to be listed in the
Disclosure Schedule.
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(d) If (i) any of the Assigned Contracts or other assets or rights
constituting Acquired Assets may not be assigned and transferred by the Seller
to the Buyer (as a result of either the provisions thereof or applicable law)
without the consent or approval of a third party, (ii) the Seller, after using
its Reasonable Best Efforts, is unable to obtain such consent or approval prior
to the Closing, and (iii) the Closing occurs nevertheless, then (A) such
Assigned Contracts and/or other assets or rights shall not be assigned and
transferred by the Seller to the Buyer at the Closing and the Buyer shall not
assume the Seller's liabilities or obligations with respect thereto at the
Closing, (B) the Seller shall continue to use its Reasonable Best Efforts to
obtain the necessary consent or approval as soon as practicable after the
Closing, (C) upon the obtaining of such consent or approval, the Buyer and the
Seller shall execute such further instruments of conveyance (in substantially
the form executed at the Closing) as may be necessary to assign and transfer
such Assigned Contracts and/or other assets or rights (and the associated
liabilities and obligations of the Seller) to the Buyer, (D) from and after the
Closing until the assignment of each such Assigned Contract pursuant to clause
(C) above, the Seller shall hold such assets or rights in trust for the Buyer
and shall at the request and expense and under the direction of the Buyer take
all such action necessary or proper in order that such assets or rights of the
Buyer are preserved, (E) the Buyer shall perform and fulfill, on a subcontractor
basis, the obligations of the Seller to be performed under such Assigned
Contract, and the Seller shall promptly remit to the Buyer all payments received
by it under such Assigned Contract for services performed during such period,
and (F) the Buyer shall indemnify and hold harmless the Seller against all
liabilities, obligations and expenses arising in connection with the Assigned
Contracts, except to the extent such obligations (X) are due to the breach or
default by Seller prior to the Closing Date or (Y) relate to goods or services
received by the Business prior to the Closing Date.
Section 4.3. Operation of Business. Except as contemplated by this
Agreement, during the period from the date of this Agreement to the Closing, the
Seller shall conduct the Business in the Ordinary Course of Business and in
compliance with all applicable laws and regulations and, to the extent
consistent therewith, use its Reasonable Best Efforts to preserve intact the
Business's current business organization, keep the Business's physical assets in
good working condition, keep available the services of the Business's current
officers and employees and preserve the Business's relationships with customers,
suppliers, and others having business dealings with it. Without limiting the
generality of the foregoing, prior to the Closing, the Seller shall not, without
the written consent of the Buyer:
(a) (except for normal increases in the Ordinary Course of
Business) increase in any manner the compensation or fringe benefits of, or
materially modify the employment terms of, any Business Employee, or pay any
bonus or other benefit to any Business Employee, except for normal increases in
the Ordinary Course of Business and changes to the terms and conditions of
employment of such persons based on performance, merit, and suitability for
advancement;
(b) acquire, sell, lease, license, or dispose of any assets or
property used primarily in the Business, other than purchases and sales of
inventory in the Ordinary Course of
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Business;
(c) mortgage or pledge any of the property or assets used primarily
in the Business or subject any such property or assets to any Encumbrance, other
than Permitted Encumbrances;
(d) enter into, amend, terminate, take, or omit to take any action
that would constitute a violation of or default under, or waive any rights
under, any contract or agreement of a nature required to be listed in Section
2.11 or Section 2.13 of the Disclosure Schedule;
(e) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
result in (i) any of the representations and warranties of the Seller set forth
in this Agreement becoming untrue or (ii) any of the conditions to the Closing
set forth in Article V not being satisfied; or
(f) agree in writing or otherwise to take any of the foregoing
actions.
Section 4.4. Access to Information. From the date hereof to the
Closing, the Seller shall permit representatives of the Buyer to have full
access (at all reasonable times, and in a manner so as not to interfere with the
normal business operations of the Seller) to all premises, properties,
financial, tax and accounting records (including the work papers of the Seller's
independent accountants), contracts, other records and documents, and personnel,
of or pertaining to the Business for the purpose of performing such inspections
and tests as the Buyer deems necessary or appropriate.
Section 4.5. Notice of Breaches.
(a) From the date of this Agreement until the Closing, the Seller
shall promptly deliver to the Buyer supplemental information concerning events
or circumstances occurring subsequent to the date hereof that would render any
representation, warranty, or statement in this Agreement or the Disclosure
Schedule inaccurate or incomplete in any material respect at any time after the
date of this Agreement until the Closing. No such supplemental information shall
be deemed to avoid or cure any misrepresentation or breach of warranty or
constitute an amendment of any representation, warranty, or statement in this
Agreement or the Disclosure Schedule; provided that if such supplemental
information relates to an event or circumstance occurring subsequent to the date
hereof in the Ordinary Course of Business (without breach of Section 4.3) and if
the Buyer would have the right to terminate this Agreement pursuant to Section
8.1(b) as a result of the information so disclosed (and, Seller shall confirm in
writing Buyer's right to terminate this Agreement with respect thereof) and it
does not exercise such right prior to the Closing, then such supplemental
information shall constitute an amendment of the representation, warranty, or
statement to which it relates for purposes of Article VI of this Agreement.
(b) From the date of this Agreement until the Closing, the Buyer
shall promptly deliver to the Seller supplemental information concerning events
or circumstances
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occurring subsequent to the date hereof that would render any representation or
warranty in this Agreement inaccurate or incomplete in any material respect at
any time after the date of this Agreement until the Closing. No such
supplemental information shall be deemed to avoid or cure any misrepresentation
or breach of warranty or constitute an amendment of any representation or
warranty in this Agreement; provided that if such supplemental information
relates to an event or circumstance occurring subsequent to the date hereof in
the Ordinary Course of Business and if the Seller would have the right to
terminate this Agreement pursuant to Section 8.1(c) as a result of the
information so disclosed (and, Buyer shall confirm in writing Seller's right to
terminate this Agreement with respect thereof) and it does not exercise such
right prior to the Closing, then such supplemental information shall constitute
an amendment of the representation or warranty to which it relates for purposes
of Article VI of this Agreement.
Section 4.6. Bulk Transfers Law. The Buyer and the Seller each
hereby waive compliance with the provisions of any applicable bulk transfers
statute.
Section 4.7. Agreed Records. Prior to the Closing Date, the Parties
shall work together cooperatively and in good faith to determine what books and
records relating to the Business are to be physically delivered to the Buyer at
the Closing (such records, the "Agreed Records").
Section 4.8. 2002 Financial Statements. On or before February 24,
2003, Seller shall deliver to Buyer (i) the audited balance sheet of the
Business as of December 31, 2002 and (ii) the related audited statements of
income and retained earnings and cash flows for the year ended December 31, 2002
(clauses (i) and (ii), collectively the "2002 Financial Statements"). The 2002
Financial Statements (i) are true and correct in all material respects, (ii)
were prepared in accordance with GAAP (except as otherwise noted therein), (iii)
present fairly the financial position, results of operations and cash flows of
the Business as of such dates and for the periods then ended and (iv) conform to
the requirements of Regulation S-X of the Securities and Exchange Commission.
ARTICLE V
CONDITIONS TO CLOSING
Section 5.1. Conditions to Obligations of the Buyer. The obligation
of the Buyer to consummate the transactions contemplated by this Agreement to be
consummated at the Closing is subject to the satisfaction of the following
conditions (any or all of which may be waived by the Buyer in whole or in part):
(a) the Seller shall have obtained at its own expense (and shall
have provided copies thereof to the Buyer) all of the waivers, permits,
consents, approvals, or other authorizations, and effected all of the
registrations, filings, and notices, referred to in Section 4.2 that are
required on the part of the Seller, except for any the failure of which to
obtain or effect would not, individually or in the aggregate, have a material
adverse effect on the right of the Buyer to own, operate, or control the
Acquired Assets following the Closing or on the ability of
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the Parties to consummate the transactions contemplated by this Agreement;
provided, however, that the Parties agree that the failure to obtain any and all
consents required by the Siemens Contract and the Real Property Lease would have
a material adverse effect on the right of the Buyer to own, operate, or control
the Acquired Assets following the Closing;
(b) the representations and warranties of the Seller set forth in
this Agreement shall be true and correct as of the date of this Agreement and
shall be true and correct as of the Closing as though made as of the Closing,
except to the extent that the inaccuracy of any such representation or warranty
is the result of events or circumstances occurring subsequent to the date of
this Agreement and any such inaccuracies, individually or in the aggregate,
would not have a material adverse effect on the right of the Buyer to own,
operate, or control the Acquired Assets or the Business following the Closing or
on the ability of the Parties to consummate the transactions contemplated by
this Agreement (it being agreed that any materiality qualifications in
particular representations and warranties shall be disregarded in determining
whether any such inaccuracies would have such a material adverse effect for
purposes of this Section 5.1(b));
(c) the Seller shall have performed or complied in all material
respects with its agreements and covenants required to be performed or complied
with under this Agreement as of or prior to the Closing;
(d) no Legal Proceeding shall be pending wherein an unfavorable
judgment, order, decree, stipulation, or injunction would (i) prevent
consummation of the transactions contemplated by this Agreement, (ii) cause the
transactions contemplated by this Agreement to be rescinded following
consummation, or (iii) affect adversely the right of the Buyer to own, operate,
or control any of the Acquired Assets, or to conduct the Business, following the
Closing, and no such judgment, order, decree, stipulation, or injunction shall
be in effect;
(e) the Seller shall have delivered to the Buyer the Seller
Certificate;
(f) the Seller shall have delivered to the Buyer an update, as of
the date immediately prior to the Closing Date, of each list contained in the
Disclosure Schedule that lists or describes Acquired Assets (including the lists
set forth in Sections 1.1(a), 2.7(c), 2.8, 2.9, 2.11, and 2.18 of the Disclosure
Schedule), such update to be effective as contemplated by Section 4.5(a) hereof;
(g) the Seller shall have delivered to the Buyer documents
evidencing the release or termination of all Encumbrances on the Acquired
Assets, and copies of filed UCC termination statements with respect to all UCC
financing statements evidencing Encumbrances, other than Encumbrances that are
listed in Section 2.7 of the Disclosure Schedule under the heading "Permitted
Encumbrances";
(h) the Seller shall have executed and delivered to the Buyer each
of the Ancillary Agreements;
(i) the Seller shall have executed and delivered to the Buyer a
FIRPTA
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Certificate;
(j) the Buyer shall have received such other certificates and
instruments (including a certificate of good standing of the Seller in its
jurisdiction of organization, and certificates as to the incumbency of officers
and the adoption of authorizing resolutions) as it shall reasonably request in
connection with the Closing;
(k) the Acquired Assets are in good operating condition and repair,
other than repairs and maintenance necessary to operate the Acquired Assets and
conduct the Business that in the aggregate for all such Acquired Assets would
not exceed $500,000;
(l) the International Union of United Automobile, Aerospace and
Agricultural Implement Workers of America ("UAW") shall have expressed a
willingness to extend the current Memorandum of Understanding contained in the
UAW collective bargaining agreement with respect to unionized employees of the
Business;
(m) the Seller shall have delivered to Buyer a written opinion,
dated as of the Closing Date, of ▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, in form and substance
reasonably satisfactory to Buyer and its counsel; and
(n) the Seller shall have delivered to Buyer the 2002 Financial
Statements.
Section 5.2. Conditions to Obligations of the Seller. The obligation
of the Seller to consummate the transactions contemplated by this Agreement to
be consummated at the Closing is subject to the satisfaction of the following
conditions (any or all of which may be waived by the Seller in whole or in
part):
(a) the representations and warranties of the Buyer set forth in
this Agreement shall be true and correct as of the date of this Agreement and
shall be true and correct as of the Closing as though made as of the Closing;
(b) the Buyer shall have performed or complied in all material
respects with its agreements and covenants required to be performed or complied
with under this Agreement as of or prior to the Closing;
(c) no Legal Proceeding shall be pending wherein an unfavorable
judgment, order, decree, stipulation, or injunction would (i) prevent
consummation of the transactions contemplated by this Agreement or (ii) cause
the transactions contemplated by this Agreement to be rescinded following
consummation;
(d) the Seller shall have obtained all of the waivers, permits,
consents, approvals, or other authorizations, and effected all of the
registrations, filings, and notices, referred to in Section 4.2 that are
required on the part of the Seller, except for any the failure of which to
obtain or effect would not, individually or in the aggregate, have a material
adverse
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effect on the Buyer following the Closing or on the ability of the Parties to
consummate the transactions contemplated by this Agreement;
(e) the Buyer shall have delivered to the Seller the Buyer
Certificate;
(f) the Buyer shall have delivered to Seller a written opinion,
dated as of the Closing Date, of Dechert, in form and substance reasonably
satisfactory to Seller;
(g) the Buyer shall have executed and delivered to the Seller each
of the Ancillary Agreements; and
(h) the Seller shall have received such other certificates and
instruments (including a certificate of good standing of the Buyer in its
jurisdiction of organization and certificates as to the incumbency of officers
and the adoption of authorizing resolutions) as it shall reasonably request in
connection with the Closing.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1. Disclaimer of Warranties; No Other Representations or
Warranties.
(a) EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT, ANY ANCILLARY
AGREEMENT, OR ANY OTHER AGREEMENT OR INSTRUMENT (INCLUDING THE BUYER CERTIFICATE
AND SELLER CERTIFICATE) DELIVERED HERETO OR THERETO, NONE OF THE SELLER OR ANY
AFFILIATE: (1) MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED
(INCLUDING THOSE REFERRED TO IN SECTION 2-312 OF THE INDIANA UNIFORM COMMERCIAL
CODE OR IN ANY STATUTE APPLICABLE TO REAL PROPERTY), OR (2) MAKES ANY
REPRESENTATION OR WARRANTY AS TO THE CONDITION OF ANY REAL PROPERTY,
IMPROVEMENTS TO REAL PROPERTY, OR FIXTURES, OR (3) MAKES ANY WARRANTY OF
MERCHANTABILITY, SUITABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY,
WITH RESPECT TO ANY OF THE TANGIBLE ASSETS BEING TRANSFERRED PURSUANT TO THIS
AGREEMENT, OR AS TO THE CONDITION OR WORKMANSHIP THEREOF OR THE ABSENCE OF ANY
DEFECTS THEREIN, WHETHER LATENT OR PATENT. EXCEPT AS OTHERWISE SET FORTH IN THIS
AGREEMENT, ANY ANCILLARY AGREEMENT, OR ANY OTHER AGREEMENT OR INSTRUMENT
(INCLUDING THE BUYER CERTIFICATE AND SELLER CERTIFICATE) DELIVERED HERETO OR
THERETO, THE SELLER EXPRESSLY DISCLAIMS ANY AND ALL SUCH WARRANTIES, AND ALL
SUCH PROPERTY, INCLUDING THE FACILITY ON THE LEASED REAL PROPERTY, IS BEING
TRANSFERRED ON AN "AS IS, WHERE IS" BASIS.
(b) The Seller shall not be deemed to have made any representation
or warranty to the Buyer other than as expressly set forth in this Agreement.
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Section 6.2. Sharing of Data.
(a) The Seller shall have the right for a period of three years
following the Closing Date to have reasonable access during normal working hours
to such books, records, and accounts, including financial and tax information,
correspondence, production records, employment records, and other records that
are transferred to the Buyer pursuant to the terms of this Agreement for the
limited purposes of concluding its involvement in the Business and for complying
with its obligations under applicable securities, tax, environmental,
employment, or other laws and regulations; provided, that the aforementioned
right with respect to tax-related information shall continue for a period of six
years. The Buyer shall have the right for a period of three years following the
Closing Date to have reasonable access to those books, records, and accounts,
including financial and accounting records (including the work papers of the
Seller's independent accountants), tax records, correspondence, production
records, employment records, and other records that are retained by the Seller
pursuant to the terms of this Agreement to the extent that any of the foregoing
is needed by the Buyer for the purpose of conducting the Business after the
Closing and complying with its obligations under applicable securities, tax,
environmental, employment, or other laws and regulations; provided, that the
aforementioned right with respect to tax-related information shall continue for
a period of six years. Neither the Buyer nor the Seller shall destroy any such
books, records, or accounts retained by it without first providing the other
Party with the opportunity to obtain or copy such books, records, or accounts at
such other Party's expense.
(b) Promptly upon request by the Buyer made at any time following
the Closing Date, the Seller shall authorize the release to the Buyer of all
files pertaining to the Seller, the Acquired Assets or the business or
operations of the Seller held by any federal, state, county or local
authorities, agencies, or instrumentalities.
Section 6.3. Tax Matters.
(a) Except to the extent Taxes are Assumed Liabilities, Seller
shall be liable for and shall pay all Taxes (whether assessed or unassessed)
applicable to the Business and the Acquired Assets, in each case attributable to
periods (or portions thereof) ending on or prior to the Closing Date. The Buyer
shall be liable for and shall pay all Taxes (whether assessed or unassessed)
applicable to the Business and the Acquired Assets, in each case attributable to
periods (or portions thereof) beginning after the Closing Date and all Taxes
that are Assumed Liabilities. For purposes of this paragraph (a), any period
beginning before and ending after the Closing Date shall be treated as two
partial periods, one ending on the Closing Date and the other beginning after
the Closing Date except that Taxes (such as property Taxes) imposed on a
periodic basis shall be allocated on a daily basis.
(b) The Seller or the Buyer, as the case may be, shall provide
reimbursement for any Tax paid by one party all or a portion of which is the
responsibility of the other party in accordance with the terms of this Section
6.3. Within a reasonable time prior to the payment of any said Tax, the party
paying such Tax shall give notice to the other party of the Tax payable and the
portion that is the liability of each party, although failure to do so will not
relieve the
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other party from its liability hereunder. Real property, personal property and
similar ad valorem Taxes shall be accrued as of the end of the Closing Date and
an adjustment shall be made to the Closing Payment Amount and the Initial Sales
Price to reflect such accruals and, if applicable, related prepaid Taxes.
(c) Buyer and Seller shall agree upon an allocation of the Initial
Sale Price (and all other items properly included in "consideration," as
described in Treasury Regulation 1.1060-1(c)(1), including the Earnout Payment)
for purposes of Taxes among the Acquired Assets in a manner consistent with the
principles set forth on Section 6.3 of the Disclosure Schedule (the
"Allocation"), as follows. Within ninety (90) calendar days following the
Closing Date (or, if later, within 30 days following the determination of the
Initial Sale Price pursuant to Section 1.6(b)), Buyer shall deliver to Seller a
draft schedule setting forth the Allocation (the "Allocation Schedule") prepared
in a manner consistent with Section 6.3 of the Disclosure Schedule. If there is
any dispute concerning the Allocation Schedule, Seller shall notify Buyer within
thirty (30) calendar days after receiving the Allocation Schedule. Buyer and
Seller shall attempt to resolve such dispute and if they have not done so within
thirty (30) calendar days after Seller provides notice of such dispute, all
unresolved items shall be submitted to the Accountant, who shall resolve all
such disputed items within thirty (30) calendar days, which resolution shall be
final and binding upon the parties. Buyer and Seller agree to act in accordance
with the final Allocation in the preparation and filing of all Tax Returns
(including, without limitation, filing Form 8594 or any supplements thereto with
their United States federal income Tax Returns for the taxable year that
includes the Closing Date) and in the course of any Tax audit relating thereto
and take no position and cause their Affiliates to take no position inconsistent
with the Allocation.
(d) Buyer and Seller each agree, with respect to persons who may be
employed by both of them for the calendar year that includes the Closing Date,
to follow the Standard Procedure set forth in Revenue Procedure 96-60, 1996-2
C.B. 399, whereby Seller shall be responsible for employment tax reporting for
such persons for all times during which they were employed by Seller.
(e) Seller shall deliver to Buyer at Closing a certificate prepared
and executed by Seller in accordance with section 1445 of the Code and the
regulations thereunder to the effect that Seller is not a foreign person (a
"FIRPTA Certificate").
Section 6.4. Cooperation in Litigation. From and after the Closing
Date, each Party shall fully cooperate with the other in the defense or
prosecution of any litigation or proceeding already instituted or which may be
instituted hereafter against or by such other Party relating to or arising out
of the conduct of the Business of the Seller or the Buyer prior to or after the
Closing Date (other than litigation or proceedings among the Parties and/or
their Affiliates arising out the transactions contemplated by this Agreement).
The Party requesting such cooperation shall pay the reasonable out-of-pocket
expenses incurred in providing such cooperation (including legal fees and
disbursements) by the Party providing such cooperation and by its officers,
directors, employees, and agents, but shall not be responsible for reimbursing
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such Party or its officers, directors, employees, and agents, for their time
spent in such cooperation.
Section 6.5. Employee and Employee Benefit Matters.
(a) Section 6.5 of the Disclosure Schedule contains a list of the
employees of the Seller to whom the Buyer intends to extend offers of employment
(the "Business Employees").
(b) Effective as of the Closing, the Seller shall terminate the
employment of each of the Business Employees whose terms and conditions of
employment are not the subject of a collective bargaining agreement. Buyer shall
offer employment to each such employee, terminable at the will of the Buyer,
with initial compensation and benefits substantially equivalent, in the
aggregate, to the compensation and benefits provided to such Business Employees
by Seller and its ERISA Affiliates as of the date of this Agreement.
(c) Effective as of the Closing, Seller shall terminate the
employment of each of the Business Employees whose terms and conditions of
employment are subject to a collective bargaining agreement. Buyer shall offer
employment to each such employee on the terms and conditions specified by the
collective bargaining agreement between Seller and UAW applicable to the
Facility, and shall provide initial compensation and benefits as provided by the
provisions of such collective bargaining agreement applicable to the Facility.
(d) The Seller hereby consents to the hiring by the Buyer of any
employees terminated pursuant to Sections 6.5(b) and (c) and waives, with
respect to the employment by the Buyer of such employees, any claims or rights
the Seller may have against the Buyer or any such employee under any
non-competition, confidentiality, or employment agreement.
(e) The parties recognize that the Business Employees are employees
at will of the Seller, and nothing herein shall require the Seller to continue
to employ such persons or to procure a replacement for any such person if he or
she terminates his or her employment with the Seller. The intent of this
provision is to permit the Seller to manage the Business in its reasonable
business judgment from the date hereof through the Closing and to hire, fire,
retain, and otherwise manage the Business Employees through the first date on
which the Buyer has a facility operational in Evansville, Indiana.
(f) The Buyer shall provide each Business Employee with credit for
all service with the Seller for purposes of determining eligibility to
participate, vesting or qualification or eligibility for any benefit or
privilege (including vacation) based on length of service under any Buyer
benefit plan (but excluding determining benefit accruals under any Buyer benefit
plan that is a defined benefit plan as defined under Section 3(35) of ERISA).
(g) Seller agrees to indemnify and hold harmless Buyer and its
ERISA Affiliates from and with respect to any and all claims, liabilities,
losses, damages, costs and expenses, including without limitation the reasonable
fees and disbursements of counsel arising
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out of the employment, or failure to employ, in the Business any individual by
Seller or any ERISA Affiliate for any period ending on or before the Closing
Date or arising out of any employee benefit plan or arrangement maintained by
Seller or any ERISA Affiliate.
(h) Buyer agrees to indemnify and hold harmless Seller and its
ERISA Affiliates from and with respect to any and all claims, liabilities,
losses, damages, costs and expenses, including without limitation the reasonable
fees and disbursements of counsel arising out of the employment, or failure to
employ, any individual by Buyer for any period after the Closing Date or arising
out of any employee benefit plan or arrangement maintained by Buyer after the
Closing Date.
Section 6.6. Receivables. The Seller shall assist the Buyer with the
collection of the accounts receivable generated prior to the Closing Date that
relate to the Business. If the Seller shall receive any remittance from or on
behalf of any person with respect to any such receivable, the Seller shall
endorse such remittance to the order of the Buyer and forward it to the Buyer
immediately upon receipt thereof.
Section 6.7. Non-Competition.
(a) In consideration of the Initial Sale Price and in order that
Buyer may enjoy the full benefits of the business, Seller covenants and agrees
that neither Seller nor any of Seller's Affiliates shall directly or indirectly
(i) for ten (10) years after the Closing Date own, manage, operate, join,
control or participate in the ownership, management, operation or control of, or
be connected as an officer, director, employee, stockholder, partner or
otherwise with, the business of selling, manufacturing or marketing industrial
gas turbine transitional ducts, AMNS panels or nozzle liners anywhere in the
world, or (ii) for three (3) years after the Closing Date solicit, interfere
with or attempt to entice away from Buyer or its Affiliates, any Business
Employee, or (iii) for one (1) year after the Closing Date employ or retain as a
consultant any Business Employee, or (iv) for three (3) years after the Closing
Date solicit, interfere with or attempt to entice away from Buyer or its
Affiliates, any person, firm or corporation which has been during the two-year
period ending on the Closing Date or is a customer of Buyer or Seller in
connection with the Business. Ownership of not more than 2% of the outstanding
stock of any publicly traded company shall not be a violation of this Section
6.7 so long as Seller and its Affiliates do not participate in the management of
such company.
(b) The parties acknowledge and agree that the restrictions and
covenants contained in this section are reasonable in view of the nature of the
Business. Notwithstanding anything contained herein to the contrary, if the
scope of any restriction or covenant, or the period thereof, contained in this
section is found by a court of competent jurisdiction to be too broad to permit
enforcement of such restriction or covenant to its full extent, then such
restriction or covenant shall be deemed to be modified to the extent necessary
in order that any such provision or portion thereof shall be legally enforceable
to the maximum extent permitted by law, and further agree that if any part of
this Section 6.7 shall be so found or deemed unreasonable, unlawful or
unenforceable, such unenforceability shall not affect the remaining portions of
this Section 6.7, which shall be fully enforced; and the parties do further
agree that
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any court of competent jurisdiction shall, and the Parties do hereby expressly
authorize, require and empower any court of competent jurisdiction to, enforce
any such provision or portion thereof in order that any such provision or
portion thereof shall be enforced to the fullest extent permitted by applicable
law.
(c) Each Party agrees that the other Party will suffer irreparable
damage and harm and will not have an adequate remedy at law in the event of any
breach by it of any covenant of this Agreement. Accordingly, in the event of
such a breach or of a threatened or attempted breach, in addition to all other
remedies to which the applicable Party is entitled to at law, the non-breaching
Party shall be entitled to a temporary and permanent injunction (without the
necessity of showing any actual damage) or a decree of specific performance of
the provisions hereof, and no bond or other security shall be required in that
connection. The remedies described in this Section shall not be exhaustive and
shall be in addition to all other remedies that the Buyer may have at law, in
equity or otherwise.
Section 6.8. Product Warranty Liability. Seller represents to Buyer
that the Balance Sheet contains a reserve for Product Warranty Claims in the
amount of $50,000 which the Seller believes is sufficient for paying the cost of
Product Warranty Claims as the Closing Date. The term "Product Warranty Claims"
shall mean any claim by an owner or user of products of the Business, or other
party having the right to such claim, for breach of warranty, or product defects
in respect of any products shipped by the Business, prior to the Closing Date,
relating to deficiencies in design, materials, or workmanship, or material
failure to perform as represented by the Business (including compliance with
OSHA, or initial EPA tests, or rated capacity of the product). In the event any
Product Warranty Claim is asserted [after the Closing Date], Buyer shall use its
reasonable efforts to perform the services or supply replacements required under
the applicable product warranty. Buyer shall be responsible for all costs
incurred by Buyer in respect of Product Warranty Claims of the Business up to an
aggregate amount of $50,000 (the "Warranty Maximum") and Seller shall be
responsible for, and reimburse Buyer for, all reasonable costs incurred by Buyer
in respect of Product Warranty Claims in excess of the Warranty Maximum subject
to the limitations of Section 7.5.
Section 6.9. Post Closing. Buyer may use the materials located at
the Business on the Closing Date which contain the Seller's name, including
manuals, sales literature, purchase orders, packaging, shipping materials and
invoices, for a period of 30 days after Closing; provided, however, that Buyer
shall replace such materials as soon as possible with materials not including
the Seller's name. No advertising containing the Seller's name may be conducted
by Buyer after Closing and all signage containing the Seller's name at the
Business shall be changed within five days after Closing. Seller shall, if
requested by the Buyer, supply the same level of services to the Business that
it has historically provided (other than legal, payroll system processing,
intranet access, human resources (other than administrative), purchasing and
logistics advice and environmental assistance) for a period of 90 days after
Closing (or such longer period as Buyer and Seller shall mutually agree);
provided, that Buyer shall reimburse Seller for all outside charges for such
services and Buyer shall pay Seller a commercially reasonable fee for the cost
of providing services by the Seller (the aggregate of
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such fees in no event to exceed $35,000 per month); provided, further, that
Seller shall continue to supply payroll system data to Buyer for a period of 120
days.
ARTICLE VII
INDEMNIFICATION
Section 7.1. Indemnification by the Seller. The Seller shall
indemnify the Buyer in respect of, and hold the Buyer harmless against, Damages
incurred or suffered by the Buyer or any Affiliate thereof resulting from,
relating to, or constituting:
(a) any breach of any representation or warranty of the Seller
contained in this Agreement, any Ancillary Agreements, or any other agreement or
instrument (including the Seller Certificate) furnished by the Seller to the
Buyer pursuant to this Agreement;
(b) any failure to perform any covenant or agreement of the Seller
contained in this Agreement, any Ancillary Agreement, or any agreement or
instrument furnished by the Seller to the Buyer pursuant to this Agreement
(c) any violation of or liability arising under any applicable bulk
transfers statute or similar laws related to the transactions contemplated
hereby, except for Assumed Liabilities to be paid by Buyer; or
(d) any Retained Liabilities.
Section 7.2. Indemnification by the Buyer. The Buyer shall indemnify
the Seller in respect of, and hold it harmless against, any and all Damages
incurred or suffered by the Seller resulting from, relating to, or constituting:
(a) any breach of any representation or warranty of the Buyer
contained in this Agreement, any Ancillary Agreement, or any other agreement or
instrument (including the Buyer Certificate) furnished by the Buyer to the
Seller pursuant to this Agreement;
(b) any failure to perform any covenant or agreement of the Seller
contained in this Agreement, any Ancillary Agreement, or any other agreement or
instrument furnished by the Buyer to the Seller pursuant to this Agreement; or
(c) any Assumed Liabilities.
Section 7.3. Indemnification Claims.
(a) An Indemnified Party shall give written notification to the
Indemnifying Party of the commencement of any Third Party Action. Such
notification shall be given within 20 days after receipt by the Indemnified
Party of notice of such Third Party Action, and shall describe in reasonable
detail (to the extent known by the Indemnified Party) the facts constituting
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the basis for such Third Party Action and the amount of the claimed damages;
provided, however, that no delay or failure on the part of the Indemnified Party
in so notifying the Indemnifying Party shall relieve the Indemnifying Party of
any liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within 20 days after
delivery of such notification, the Indemnifying Party may, upon written notice
thereof to the Indemnified Party, assume control of the defense of such Third
Party Action with counsel reasonably satisfactory to the Indemnified Party;
provided that (i) the Indemnifying Party may only assume control of such defense
if (A) it acknowledges in writing to the Indemnified Party that any damages,
fines, costs or other liabilities that may be assessed against the Indemnified
Party in connection with such Third Party Action constitute Damages for which
the Indemnified Party shall be indemnified pursuant to this Article VII and (B)
the ad damnum is less than or equal to the amount of Damages for which the
Indemnifying Party is liable under this Article VII and (ii) the Indemnifying
Party may not assume control of the defense of Third Party Action involving
criminal liability or in which equitable relief is sought against the
Indemnified Party. If the Indemnifying Party does not, or is not permitted under
the terms hereof to, so assume control of the defense of a Third Party Action,
the Indemnified Party shall control such defense. The Non-controlling Party may
participate in any such contest, defense, litigation or settlement conducted by
the Controlling Party, and be represented by counsel, at its own expense. The
Controlling Party shall keep the Non-controlling Party advised of the status of
such Third Party Action and the defense thereof and shall consider in good faith
recommendations made by the Non-controlling Party with respect thereto. The
Non-controlling Party shall furnish the Controlling Party with such information
as it may have with respect to such Third Party Action (including copies of any
summons, complaint, or other pleading that may have been served on such party
and any written claim, demand, invoice, billing, or other document evidencing or
asserting the same) and shall otherwise cooperate with and assist the
Controlling Party in the defense of such Third Party Action. The fees and
expenses of counsel to the Indemnified Party with respect to a Third Party
Action shall be considered Damages for purposes of this Agreement if (i) the
Indemnified Party controls the defense of such Third Party Action pursuant to
the terms of this Section 7.3(a) or (ii) the Indemnifying Party assumes control
of such defense and the Indemnified Party reasonably concludes that the
Indemnifying Party and the Indemnified Party have conflicting interests or
different defenses available with respect to such Third Party Action. The
Indemnifying Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such Third Party Action without the prior written
consent of the Indemnified Party, which shall not be unreasonably withheld,
conditioned, or delayed; provided that the consent of the Indemnified Party
shall not be required if the Indemnifying Party agrees in writing to pay any
amounts payable pursuant to such settlement or judgment and such settlement or
judgment includes a complete release of the Indemnified Party from further
liability and has no other adverse effect on the Indemnified Party. The
Indemnified Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such Third Party Action without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld,
conditioned, or delayed.
(b) In order to seek indemnification under this Article VII, an
Indemnified Party shall deliver a Claim Notice to the Indemnifying Party.
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(c) Within 20 days after delivery of a Claim Notice, the
Indemnifying Party shall deliver to the Indemnified Party the Response, in which
the Indemnifying Party shall: (i) agree that the Indemnified Party is entitled
to receive all of the Claimed Amount (in which case the written response shall
be accompanied by a payment by the Indemnifying Party to the Indemnified Party
of the Claimed Amount, by check or by wire transfer), (ii) agree that the
Indemnified Party is entitled to receive the Agreed Amount (in which case the
written response shall be accompanied by a payment by the Indemnifying Party to
the Indemnified Party of the Agreed Amount, by check or by wire transfer), or
(iii) dispute that the Indemnified Party is entitled to receive any of the
Claimed Amount. If the Response creates a Dispute, the Indemnifying Party and
the Indemnified Party shall follow the procedures set forth in Section 7.3(d)
for the resolution of such Dispute.
(d) During the 30-day period following the delivery of a Response
that reflects a Dispute, the Indemnifying Party and the Indemnified Party shall
use Reasonable Best Efforts to resolve the Dispute. If the Buyer and the Seller
do not reach a resolution of the Dispute within 30 days, any remaining
disagreements shall be referred to the chief financial officers of Rolls-Royce
plc and FastenTech (each of whom may designate another senior officer of such
company to hear the Dispute), who shall use reasonable efforts to resolve the
Dispute. If the Dispute has not been resolved within 30 days after the referral
of such objections to the senior officers designated in or pursuant to this
Section 7.3(d), the Indemnifying Party and the Indemnified Party shall discuss
in good faith the submission of the Dispute to an ADR Procedure. In the event
the Indemnifying Party and the Indemnified Party agree upon an ADR Procedure,
such parties shall, in consultation with the ADR Service, promptly agree upon a
format and timetable for the ADR Procedure, agree upon the rules applicable to
the ADR Procedure, and promptly undertake the ADR Procedure. The provisions of
this Section 7.3(d) shall not obligate the Indemnifying Party and the
Indemnified Party to pursue an ADR Procedure or prevent either such party from
pursuing the Dispute in a court of competent jurisdiction; provided that, if the
Indemnifying Party and the Indemnified Party agree to pursue an ADR Procedure,
neither the Indemnifying Party nor the Indemnified Party may commence litigation
or seek other remedies with respect to the Dispute prior to the completion of
such ADR Procedure. Any ADR Procedure undertaken by the Indemnifying Party and
the Indemnified Party shall be considered a compromise negotiation for purposes
of federal and state rules of evidence, and all statements, offers, opinions and
disclosures (whether written or oral) made in the course of the ADR Procedure by
or on behalf of the Indemnifying Party, the Indemnified Party or the ADR Service
shall be treated as confidential and, where appropriate, as privileged work
product. Such statements, offers, opinions and disclosures shall not be
discoverable or admissible for any purposes in any litigation or other
proceeding relating to the Dispute (provided that this sentence shall not be
construed to exclude from discovery or admission any matter that is otherwise
discoverable or admissible). The fees and expenses of any ADR Service used by
the Indemnifying Party and the Indemnified Party shall be shared equally by the
Indemnifying Party and the Indemnified Party. Notwithstanding anything to the
contrary contained herein, the Seller shall have the right at its sole
discretion, to conduct the remediation, cleanup, investigation or other response
action on the properties subject to the Real Property Lease with respect to any
environmental liabilities for which Buyer is entitled to indemnity under this
Agreement that
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which relates to the property subject to the Real Property Lease, provided, that
Seller (i) agrees to keep Buyer reasonably informed of the progress of such
actions; (ii) gives Buyer an opportunity to review and comment on proposed
remedial approaches and workplan, and incorporates Buyer's reasonable comments;
(iii) expeditiously and diligently implements the remediation, cleanup,
investigation or other response action; (iv) conducts remediation, cleanup,
investigation or other response action to a level necessary to comply with
Environmental Laws and, if applicable, resolve any third party claims; and (v)
does not interfere or disrupt the operations of the Business.
(e) Notwithstanding the other provisions of this Section 7.3, if a
third party asserts (other than by means of a lawsuit) that an Indemnified Party
is liable to such third party for a monetary or other obligation which may
constitute or result in Damages for which such Indemnified Party may be entitled
to indemnification pursuant to this Article VII, and such Indemnified Party
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) such Indemnified Party shall be entitled to satisfy such
obligation, without prior notice to or consent from the Indemnifying Party, (ii)
such Indemnified Party may subsequently make a claim for indemnification in
accordance with the provisions of this Article VII, and (iii) such Indemnified
Party shall be reimbursed, in accordance with the provisions of this Article
VII, for any such Damages for which it is entitled to indemnification pursuant
to this Article VII (subject to the right of the Indemnifying Party to dispute
the Indemnified Party's entitlement to indemnification, or the amount for which
it is entitled to indemnification, under the terms of this Article VII).
Section 7.4. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement, the Seller
Certificate or the Buyer Certificate shall (a) survive the Closing and (b) shall
expire on the date that is two years after the Closing Date, except that:
(a) the representations and warranties set forth in Sections 2.1,
2.2, 2.7, 3.1, and 3.2 (and any and all portions of the Seller Certificate or
the Buyer Certificate relating thereto) shall survive the Closing without
limitation; and
(b) the representations and warranties set forth in Sections 2.14
and 2.15, shall survive until sixty (60) days after the running of the
applicable statute of limitations (giving effect to any waiver or extension
thereof).
If an Indemnified Party delivers to an Indemnifying Party, before
expiration of a representation or warranty, either a Claim Notice based upon a
breach of such representation or warranty, or a an Expected Claim Notice, then
the applicable representation or warranty shall survive until, but only for
purposes of, the resolution of the matter covered by such notice. If the legal
proceeding or written claim with respect to which an Expected Claim Notice has
been given is definitively withdrawn or resolved in favor of the Indemnified
Party, the Indemnified Party shall promptly so notify the Indemnifying Party.
The rights to indemnification set forth in this Article VII should not be
affected by any investigation conducted by or on behalf of an Indemnified Party
or any knowledge of an Indemnified Party with respect to the inaccuracy or
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noncompliance with any representation, warranty, covenant or obligation that is
the subject of indemnification hereunder.
Notwithstanding anything contained herein to the contrary, no
limitation or condition of liability provided in this Article VII shall apply to
any misrepresentation or breach of warranty contained herein if such
misrepresentation or breach of warranty was made willfully or with intent to
deceive, or the covenants and agreements under this Agreement or in any
statement or certificate furnished or to be furnished pursuant hereto or in
connection with the transactions contemplated hereby. For purposes of
determining the existence of any misrepresentation, breach of warranty, or
nonfulfillment of any covenant or agreement, or calculating the amount of any
Damages incurred in connection with any such misrepresentation, breach of
warranty, or nonfulfillment of any covenant or agreement, any and all references
to material or Business Material Adverse Effect shall be disregarded.
Section 7.5. Limitations.
(a) Notwithstanding anything to the contrary herein, (i) the
aggregate liability of the Seller for Damages under Section 7.1(a) shall not
exceed $2,625,000, and (ii) the Seller shall not be liable under Section 7.1(a)
until the aggregate Damages for which it would otherwise be liable exceeds
$125,000, in which event the Seller will be liable for the excess over $125,000.
(b) Notwithstanding anything to the contrary herein, (i) the
aggregate liability of the Buyer for Damages under Section 7.2(a) shall not
exceed $2,625,000, and (ii) the Buyer shall not be liable under Section 7.2(a)
until the aggregate Damages for which it would otherwise be liable which exceeds
$125,000, in which event the Buyer will be liable for the whole amount and not
merely the excess over $125,000.
(c) Except with respect to claims based on fraud, after the
Closing, the rights of the Indemnified Parties under this Article VII shall be
the exclusive remedy of the Indemnified Parties with respect to claims resulting
from or relating to any misrepresentation, breach of warranty, or failure to
perform any covenant or agreement contained in this Agreement.
(d) The amount of Damages recoverable by an Indemnified Party under
this Article VII with respect to an indemnity claim shall be reduced by (i) any
proceeds received by such Indemnified Party or an Affiliate, with respect to the
Damages to which such indemnity claim relates, from an insurance carrier (net of
any increased premiums that may occur as a consequence thereof) and (ii) the
amount of any tax savings actually realized by such Indemnified Party or an
Affiliate, for the tax year in which such Damages are incurred, which are
clearly attributable to the Damages to which such indemnity claim relates (net
of any increased tax liability which may result from the receipt of the
indemnity payment or any insurance proceeds relating to such Damages).
Section 7.6. Treatment of Indemnity Payments. Any payments made to
an Indemnified Party pursuant to this Article VII shall be treated as an
adjustment to the Purchase
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Price for tax purposes.
ARTICLE VIII
TERMINATION
Section 8.1. Termination of Agreement. The Parties may terminate
this Agreement prior to the Closing, as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent;
(b) the Buyer may terminate this Agreement by giving written notice
to the Seller in the event the Seller is in breach of any representation,
warranty, or covenant contained in this Agreement, and such breach, individually
or in combination with any other such breach, (i) would cause the conditions set
forth in clauses (b) or (c) of Section 5.1 not to be satisfied and (ii) is not
cured within 30 days following delivery by the Buyer to the Seller of written
notice of such breach;
(c) the Seller may terminate this Agreement by giving written
notice to the Buyer in the event the Buyer is in breach of any representation,
warranty, or covenant contained in this Agreement, and such breach, individually
or in combination with any other such breach, (i) would cause the conditions set
forth in clauses (a) or (b) of Section 5.2 not to be satisfied and (ii) is not
cured within 30 days following delivery by the Seller to the Buyer of written
notice of such breach;
(d) the Buyer may terminate this Agreement by giving written notice
to the Seller if the Closing shall not have occurred on or before February 28,
2003 by reason of the failure of any condition precedent under Section 5.1 or
5.2 hereof (unless the failure results primarily from a breach by the Buyer of
any representation, warranty, or covenant contained in this Agreement); or
(e) the Seller may terminate this Agreement by giving written
notice to the Buyer if the Closing shall not have occurred on or before February
28, 2003 by reason of the failure of any condition precedent under Section 5.1
or 5.2 hereof (unless the failure results primarily from a breach by the Seller
of any representation, warranty, or covenant contained in this Agreement).
Section 8.2. Effect of Termination. If either Party terminates this
Agreement pursuant to Section 8.1, all obligations of the Parties hereunder
shall terminate without any liability of either Party to the other Party (except
for any liability of a Party for breaches of this Agreement).
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ARTICLE IX
DEFINITIONS
For purposes of this Agreement, each of the following terms shall have the
meaning set forth below.
"Accountant" shall mean BDO ▇▇▇▇▇▇▇, LLP, or such other independent certified
public accounting firm as shall be selected by the parties.
"Acquired Assets" shall mean all of the following assets, properties, and rights
as of the Closing Date:
(a) the goodwill of the Business;
(b) all assets reflected on the Balance Sheet as of the Closing,
except Excluded Assets;
(c) subject to Section 1.1(b) hereof, all books, records, manuals,
documents, books of account, correspondence, invoices, customer lists, supply
lists, mailing lists, literature, brochures, marketing or promotional material
and the like, including, without limitation, all discs, tapes and other media
storing data and other information of the Business (the "Agreed Records");
(d) all machinery, equipment (including spare parts used in the
Business at the Closing Date), fixtures, and other tangible personal property
listed on Section 1.1(a) of the Disclosure Schedule;
(e) all inventories of raw materials, work-in-progress, finished
goods, and consumables held for the purposes of the Business at the Closing Date
("Inventory");
(f) subject to Section 4.2(d) hereof and to the extent
transferable, all rights of the Seller or its Affiliates under the Assigned
Contracts;
(g) all assets, properties and rights in connection with the Real
Property Lease;
(h) all the Permits, to the extent such Permits may be assigned,
transferred, or conveyed to the Buyer under applicable law;
(i) subject to Section 1.1(b), all guarantees, warranties,
indemnities and similar rights with respect to any and all of the Acquired
Assets and all related claims, credits, rights of recovery and set off;
(j) subject to Section 1.1(b), all claims, choses in action, causes
of action and judgments of Seller or its Affiliates relating to the Acquired
Assets;
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(k) all trade and other accounts receivable that relate to the
Business and are payable to the Seller or its Affiliates and all rights to
products delivered or services provided that relate to the Business, together
with any security held by the Seller or any of its Affiliates for unbilled
amounts for payment thereof ("Accounts Receivable"); and
(l) all other assets and properties owned or held by the Seller or
its Affiliates relating primarily to the Business, whether or not specifically
referred to in this Agreement.
"ADR Procedure" shall mean a mutually acceptable alternative dispute resolution
procedure, which may be non-binding or binding upon the parties, as they agree
in advance.
"ADR Service" shall mean the chosen dispute resolution service for an ADR
Procedure.
"Affiliate" shall mean any affiliate as defined in Rule 12b-2 under the Exchange
Act of 1934.
"Agreed Amount" shall mean part, but not all, of the Claimed Amount.
"Allocation" has the meaning specified in Section 6.3(c).
"Allocation Schedule" has the meaning specified in Section 6.3(c).
"Ancillary Agreements" shall mean the ▇▇▇▇ of sale and other instruments of
conveyance referred to in Section 1.4(b)(iii) of this Agreement, the instrument
of assumption and other instruments referred to in Section 1.4(b)(iv) of this
Agreement, the license agreement referred to in Section 1.4(b)(viii) of this
Agreement.
"Assigned Contracts" shall mean:
(a) any contracts, agreements, bids, or tenders to which the Seller
is a party, whether with customers, suppliers, sub-contractors, agents, or
distributors, that relate primarily to the Business and that are listed in
Section 2.11 of the Disclosure Schedule;
(b) the Lease; and
(c) the collective bargaining agreement referred to in Section 2.13
of the Disclosure Schedule as it pertains to Business Employees.
"Assumed Liabilities" shall mean all of the following liabilities of the Seller:
(d) any trade accounts payable and accrued liabilities reflected as
current liabilities on the Balance Sheet ("Accounts Payable");
(e) all obligations of the Seller arising under the Assigned
Contracts to the extent such obligations arise out of the operation of the
Business after the Closing and (i) are not due to a breach or default by Seller
prior to Closing and (ii) related to goods or services
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received by the Business prior to the Closing Date; and
(f) liabilities in respect of product liability or similar claims
for products, or portions of products, manufactured or assembled by the Business
after Closing ("Assumed Product Liabilities");
provided, that in no event shall Accounts Payable include (i) any Taxes of
Seller attributable to any taxable period (or portion thereof) ending on or
before the Closing Date, other than real property, personal property and other
ad valorem Taxes accrued through the Closing Date as set forth in the last
sentence of Section 6.3(b), (ii) any and all Taxes for which Seller may be
liable (A) pursuant to Treasury regulation section 1.1502-6 by virtue of Seller
being a member of a consolidated group of corporations for federal income tax
purposes (or under analogous provisions of state or local law) at any time prior
to the Closing, (B) as a successor to another person or (C) as a result of any
agreement or arrangement of Seller to indemnify any other person for Taxes.
"Balance Sheet" has the meaning specified in Section 2.4.
"Balance Sheet Date" has the meaning specified in Section 2.5.
"Benefit Plans" has the meaning specified in Section 2.14(a).
"Book Value" has the meaning specified in Section 1.6(a).
"Business" has the meaning specified in the first recital to this Agreement.
"Business Employees" has the meaning specified in Section 6.5(a).
"Business Material Adverse Effect" means any circumstance or event which,
individually or in the aggregate with any other circumstance or event is
reasonably likely to be material and adverse to the Business, assets,
liabilities, condition (financial or otherwise), results of operations or
prospects of the Business, the Acquired Assets or the Assumed Liabilities.
"Business Trade Secrets" shall have the meaning specified in Section 2.9(a).
"Buyer" shall have the meaning set forth in the first paragraph of this
Agreement.
"Buyer Certificate" shall mean a certificate to the effect that each of the
conditions specified in clauses (a) through (c) (insofar as clause (c) relates
to Legal Proceedings involving the Buyer) of Section 5.2 of this Agreement is
satisfied.
"Buyer's Bank" shall have the meaning specified in Section 5.1(j).
"CERCLA" shall mean the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
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"Claimed Amount" shall mean the amount of any Damages incurred or reasonably
expected to be incurred by the Indemnified Party.
"Claim Notice" shall mean written notification that contains (i) a description
of the Damages incurred or reasonably expected to be incurred by the Indemnified
Party and the Claimed Amount of such Damages, to the extent then known and (ii)
a statement that the Indemnified Party is entitled to indemnification under
Article VII of this Agreement for such Damages and an explanation of the basis
therefor.
"Closing" shall mean the closing of the transactions contemplated by this
Agreement.
"Closing Date" shall mean February 28, 2003, or, if all of the conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(excluding the delivery at the Closing of any of the documents set forth in
Article V hereof) have not been satisfied or waived by such date, such mutually
agreeable later date as soon as practicable (and in any event not later than
three business days) after the satisfaction or waiver of all such conditions.
"Closing Payment Amount" has the meaning specified in Section 1.5.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Controlling Party" shall mean the party controlling the defense of any suit or
proceeding relating to a third party claim for which indemnification is sought
pursuant to Article VII of this Agreement.
"Damages" shall mean any and all debts, obligations, and other liabilities
(whether absolute, accrued, contingent, fixed, or otherwise, or whether known or
unknown, or due or to become due or otherwise), diminution in value, monetary
damages, fines, fees, penalties, interest obligations, deficiencies, losses, and
expenses (including amounts paid in settlement, interest, court costs, costs of
investigators, fees and expenses of attorneys, accountants, financial advisors,
and other experts, and other expenses of litigation.
"Disclosure Schedule" shall mean the disclosure schedule provided by the Seller
to the Buyer on the date hereof and attached hereto.
"Dispute" shall mean the dispute resulting if the Indemnifying Party in the
Response disputes its liability for all or part of the Claimed Amount.
"Draft Statement of Working Capital and Fixed Assets" shall mean a statement
reflecting only the Working Capital and fixed assets of the Business as of the
Closing (without giving effect to the transactions contemplated by this
Agreement).
"Earnout Payment" shall mean the payment computed and paid under Section 1.7.
"Earnout Period" shall have the meaning set forth in Section 1.7.
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"Employee Benefit Plan" shall mean any "employee pension benefit plan" (as
defined in Section 3(2) of ERISA), any "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA), and any other written or oral plan, agreement
or arrangement involving direct or indirect compensation, including insurance
coverage, severance benefits, disability benefits, deferred compensation,
bonuses, stock options, stock purchase, phantom stock, stock appreciation or
other forms of incentive compensation or post-retirement compensation.
"Encumbrance" shall mean any mortgage, pledge, security interest, encumbrance,
charge or other lien (whether arising by contract or by operation of law).
"Environmental Law" shall mean any federal, state, or local law, statute, rule,
or regulation or the common law relating to the environment or occupational
health and safety, including any statute, regulation, administrative decision,
or order pertaining to (i) treatment, storage, disposal, generation, and
transportation of industrial, toxic, or hazardous materials or substances or
solid or hazardous waste; (ii) air, water, and noise pollution; (iii)
groundwater and soil contamination; (iv) the release or threatened release into
the environment of industrial, toxic, or hazardous materials or substances, or
solid or hazardous waste, including emissions, discharges, injections, spills,
escapes, or dumping of pollutants, contaminants, or chemicals; (v) the
protection of wild life, marine life and wetlands, including all endangered and
threatened species; (vi) storage tanks, vessels, containers, abandoned or
discarded barrels, and other closed receptacles; (vii) health and safety of
employees and other persons; and (viii) manufacturing, processing, using,
distributing, treating, storing, disposing, transporting, or handling of
materials regulated under any law as pollutants, contaminants, toxic or
hazardous materials or substances, or oil or petroleum products or solid or
hazardous waste. As used above, the terms "release" and "environment" shall have
the meaning set forth in CERCLA.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean any entity which is, or at any applicable time was,
a member of (1) a controlled group of corporations (as defined in Section 414(b)
of the Code), (2) a group of trades or businesses under common control (as
defined in Section 414(c) of the Code), (3) an affiliated service group (as
defined under Section 414(m) of the Code), or (4) any other organization
required to be aggregated under Section 414(o) of the Code, any of which
includes or included the Seller.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
"Excluded Assets" shall mean the following assets of the Seller, whether or not
used in the conduct of the Business:
(g) the corporate charter, qualifications to conduct business as a
foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, and other documents relating to the organization and
existence of the Seller as a corporation;
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(h) all rights relating to refunds, recovery, or recoupment of
Taxes related to or arising from the conduct of the Business prior to the
Closing (except refunds relating to payments made by the Business in respect of
the Assumed Liabilities);
(i) any of the rights of the Seller under this Agreement or the
Ancillary Agreements;
(j) all securities owned by the Seller, including all capital stock
held by the Seller in any subsidiary;
(k) all claims, prepayments, deposits, refunds, causes of action,
chooses in action, rights of recovery, rights of setoff, and rights of
recoupment (other than warranty claims or other claims in respect of the
Acquired Assets);
(l) any common law copyrights;
(m) any and all computer software, data, and documentation of the
Seller's computer systems, except to the extent otherwise specifically provided
herein;
(n) trade names, except to the extent use of such trade names is
otherwise specifically permitted herein;
(o) any and all Permits, other than such of the Permits that may be
assigned, transferred, or conveyed to the Buyer under applicable law;
(p) all books and records of every kind, other than the Agreed
Records;
(q) all insurance policies of the Seller, as well as all proceeds
which may be payable thereunder;
(r) all rights of the Seller in and with respect to the assets
associated with its Employee Benefit Plans;
(s) all cash, cash equivalents and short-term investments;
(t) all intellectual property and know-how of the Business (which
shall be subject to a perpetual license for the benefit of Buyer); and
(u) those assets listed on Section 1.1(b) of the Disclosure
Schedule
"Expected Claim Notice" shall mean a notice that, as a result a legal proceeding
instituted by or claim made by a third party, the Indemnified Party reasonably
expects to incur Damages.
"FastenTech" shall mean FastenTech, Inc., a Delaware corporation.
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"Final Adjustment Amount" has the meaning specified in Section 1.6(b).
"Initial Sale Price" is equal to the Closing Payment Amount as adjusted in
accordance with Section 1.6 hereof.
"Final Closing Balance Sheet" shall mean the balance sheet determined pursuant
to the procedures set forth in Section 1.6(a)(ii) of this Agreement.
"Financial Statements" has the meaning specified in Section 2.4.
"FIRPTA Certificate" has the meaning specified in Section 6.3(e).
"GAAP" shall mean United States generally accepted accounting principles.
"GAAP Consistently Applied" means GAAP (A) using the same accounting methods,
policies, practices, and procedures, with consistent classification, judgments,
and estimation methodology, as were used by the Seller in preparing the Balance
Sheet, (B) not taking into account any changes in circumstances or events
occurring after the opening of business on the Closing Date, except to the
extent such changes provide indications of conditions on the Closing Date and
(C) in no event reducing the respective amounts or reserves and accruals for the
Seller from the amounts included in the Balance Sheet except to reflect (i) cash
payments made by the Seller subsequent to the date of the Balance Sheet and (ii)
changes in circumstances or events occurring between the date of the Balance
Sheet and the Closing Date, but only if such changes either definitively resolve
or otherwise conclusively establish the amount of the liability exposure with
respect to which the reserve in question has been established.
"Governmental Entity" shall mean any court, arbitral tribunal, administrative
agency or commission, or other governmental or regulatory authority or agency.
"Indemnified Party" shall mean a party entitled, or seeking to assert rights, to
indemnification under Article VII of this Agreement.
"Indemnifying Party" shall mean the party from whom indemnification is sought by
the Indemnified Party.
"Intellectual Property Rights" has the meaning specified in Section 2.9(c).
"knowledge", "to the knowledge" or "known" and words of similar import shall
mean the actual or constructive knowledge of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, after due inquiry.
"Legal Proceeding" shall mean any action, suit, proceeding, claim, arbitration,
or investigation before any Governmental Entity or before any arbitrator.
"Letter of Intent" means the letter, dated June 4, 2002, from the Buyer and
agreed and accepted by the Seller.
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"Materials of Environmental Concern" shall mean any chemicals, pollutants, or
contaminants, hazardous substances (as such term is defined under CERCLA), solid
wastes and hazardous wastes (as such terms are defined under the Resource
Conservation and Recovery Act), toxic materials, oil or petroleum and petroleum
products, or any other material subject to regulation under any Environmental
Law.
"Most Recent Month-End Management Accounts" shall mean the financial accounts
and information, derived from the Seller's management information system, as of
the end of the month most nearly preceding the Closing Date.
"Non-controlling Party" shall mean the party not controlling the defense of any
suit or proceeding relating to a third party claim for which indemnification is
sought pursuant to Article VII of this Agreement.
"Objection Deadline Date" shall mean the date 30 days after delivery by the
Buyer to the Seller of the Draft Statement of Working Capital and Fixed Assets.
"Ordinary Course of Business" shall mean the ordinary course of business
consistent with past custom and practice.
"Parties" shall mean the Buyer and the Seller.
"Permits" shall mean all permits, licenses, registrations, certificates, orders,
approvals, franchises, variances, and similar rights issued by or obtained from
any Governmental Entity, that are used primarily or held for use primarily in
the Business.
"Permitted Encumbrances" has the meaning specified in Section 2.7.
"Person" or "person" means an individual, corporation, partnership, association,
limited liability company, trust, unincorporated organization, other entity or
group (as group defined in Section 13(d)(3) of the Exchange Act.
"Product Warranty Claims" has the meaning specified in Section 6.8.
"Reasonable Best Efforts" shall mean best efforts, to the extent commercially
reasonable.
"Real Property Lease" means the real property lease listed in Section 2.22 of
the Disclosure Schedule.
"Related Party" means Seller, any subsidiary of Seller, any officer or director
of Seller or any subsidiary of Seller, or any of their respective officers or
directors, any relative (whether by blood, adoption or marriage), or any current
or former owner of any Affiliate of the foregoing.
"Release" means any release, threatened release, spill emission, leaking,
pumping, injecting, deposition, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment, including, in limitation, the
movement of materials of environmental concern, the
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ambient air, soil, surface water, groundwater, wetlands, land or subsurface
strata.
"Response" shall mean a written response containing the information provided for
in Section 7.3(c).
"Retained Liabilities" shall mean any and all liabilities or obligations
(whether known or unknown, absolute or contingent, liquidated or unliquidated,
due or to become due, and accrued or unaccrued, and whether claims with respect
thereto are asserted before or after the Closing) of the Seller or the Business
that are not Assumed Liabilities. The Retained Liabilities shall include all
liabilities and obligations of the Seller or the Business:
(v) except for those Taxes that are Assumed Liabilities, for Taxes
(i) attributable to Seller's ownership of the Acquired Assets or operation of
the Business for all taxable periods (or portions thereof) ending on or before
the Closing Date, (ii) imposed with respect to the transfer of the Acquired
Assets as set forth in Section 1.1, or (iii) for which Seller may be otherwise
liable for any taxable period prior to the Closing, including by reason of (A)
being a successor to another person, (B) being a party to a tax sharing, tax
indemnity or similar agreement, or (C) being a member of a consolidated,
combined or unitary group of corporations for tax purposes;
(w) for costs and expenses incurred in connection with this
Agreement or the consummation of the transactions contemplated by this
Agreement;
(x) under this Agreement or the Ancillary Agreements;
(y) under any agreements, contracts, leases, or licenses that are
listed on Section 1.1(b) of the Disclosure Schedule;
(z) in respect of product liability or similar claims for products
manufactured or assembled by the Business on or prior to Closing;
(aa) arising prior to the Closing under the Assigned Contracts, and
all liabilities for any breach, act, or omission by the Seller prior to the
Closing under any Assigned Contract (other than liabilities in respect of
Product Warranty Claims that are the responsibility of Buyer in accordance with
Section 6.8 and other than Assumed Product Liabilities);
(bb) for repair, replacement, or return of products sold prior to
the Closing (other than liabilities in respect of Product Warranty Claims that
are the responsibility of Buyer in accordance with Section 6.8);
(cc) arising out of events, conduct, or conditions first existing or
occurring prior to the Closing that constitute a violation of or non-compliance
with any law, rule, or regulation (including Environmental Laws) or that
otherwise impose liabilities or obligations under Environmental Law, regardless
of whether such events, conduct or conditions were caused, created or originated
by the Business, any other party, or a predecessor or prior occupant
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of the properties subject to the Real Property Lease, any judgment, decree, or
order of any Governmental Entity, or any Permit or that give rise to liabilities
or obligations with respect to Materials of Environmental Concern;
(dd) injury to or death of persons or damage to or destruction of
property occurring prior to the Closing (including any workers compensation
claim);
(ee) arising out of or relating to the employment practices of the
Seller and its Affiliates, including (1) the hiring, employment, promotion,
termination, work environment, and other labor practices of the Seller or its
Affiliates or any violation of any applicable law, rule, or regulation relating
thereto and (2) all Employee Benefit Plans of the Seller and its ERISA
Affiliates;
(ff) arising out of or relating to Seller's indebtedness, contingent
or otherwise, or Encumbrances related thereto;
(gg) arising out of or relating to any intra-group credit balances;
(hh) incurred by Seller or its Affiliates in connection with the
conduct of businesses other than the Business; and
(ii) the existence of which constitute a breach of the
representations, warranties or covenants of Seller contained in this Agreement
or the Ancillary Agreements.
"Seller" shall have the meaning set forth in the first paragraph of this
Agreement.
"Seller Certificate" shall mean a certificate to the effect that each of the
conditions specified in clauses (a) through (d) (insofar as clause (d) relates
to Legal Proceedings involving the Seller) of Section 5.1 of this Agreement is
satisfied.
"Siemens Contract" shall mean the Performance Agreement, dated December 17,
2001, between Siemens Westinghouse Power Corporation and the Seller.
"Taxes" shall mean all taxes, charges, fees, levies or other similar assessments
or liabilities, including income, gross receipts, ad valorem, premium,
value-added, excise, real property, personal property, sales, use, transfer,
withholding, employment, unemployment, insurance, social security, business
license, business organization, environmental, workers compensation, payroll,
profits, license, lease, service, service use, severance, stamp, occupation,
windfall profits, customs, duties, franchise and other taxes imposed by the
United States of America or any state, local or foreign government, or any
agency thereof, or other political subdivision of the United States or any such
government, and any interest, fines, penalties, assessments or additions to tax
resulting from, attributable to or incurred in connection with any tax or any
contest or dispute thereof and any transferee liability in respect of any item
described in this definition.
"Tax Returns" shall mean all reports, returns, declarations, statements or other
information
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required to be supplied to a taxing authority in connection with Taxes.
"Third Party Action" shall mean any suit or proceeding by a person or entity
other than a Party for which indemnification may be sought by a Party under
Article VII.
"Transition and Administrative Services Agreement" shall have the meaning
specified in Section 1.4(b)(ix).
"UAW" has the meaning specified in Section 5.1(o).
"Unresolved Objections" shall have the meaning specified in Section 1.6(b)(ii).
"WARN Act" has the meaning specified in Section 2.13(c).
"Working Capital" as of a given date shall mean the amount calculated by (i)
adding the Book Value of the Inventory plus the Accounts Receivable and (ii)
subtracting the Accounts Payable.
ARTICLE X
MISCELLANEOUS
Section 10.1. Press Releases and Announcements. Neither Party shall
issue any press release or public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Party, such
approval not to be unreasonably withheld; provided, however, that either Party
may make any public disclosure it believes in good faith is required by
applicable law, regulation, or stock market rule (in which case the disclosing
Party shall use reasonable effort to advise the other Party and provide it with
a copy of the proposed disclosure prior to making the disclosure).
Section 10.2. No Third Party Beneficiaries. Nothing in this
Agreement, express or implied, shall (i) confer on any Person other than the
Parties and their respective successors or permitted assigns any rights
(including third party beneficiary rights), remedies, obligations or liabilities
under or by reason of this Agreement, or (ii) constitute the parties hereto as
partners or as participants in a joint venture. This Agreement shall not provide
third parties with any remedy, claim, liability, reimbursement, cause of action
or other right in excess of those existing without reference to the terms of
this Agreement.
Section 10.3. Entire Agreement. This Agreement (including Ancillary
Agreements, the Confidentiality Agreement dated January 30, 2002, and other
documents referred to herein) constitutes the entire agreement between the
Parties and supersedes any prior understandings, agreements (including the
Letter of Intent), or representations by or between the Parties, written or
oral, with respect to the subject matter hereof.
Section 10.4. Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and
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permitted assigns. Neither Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, except that (i) FastenTech may, at its election, assign this
Agreement to any direct or indirect wholly owned subsidiary, and (ii) FastenTech
or any assignee may make a collateral assignment of its rights (but not its
obligations) under this Agreement to any lender providing financing to
FastenTech after the Closing.
Section 10.5. Counterparts and Facsimile Signature. This Agreement
may be executed in one or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
This Agreement and any agreement executed in connection herewith, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding effect
as if it were the original signed version thereof delivered in person. At the
request of any party hereto or any party to any such other agreement, each other
party hereto or thereto shall re-execute original forms thereof and deliver them
to all other parties. No party hereto or to any other such agreement shall claim
that this Agreement or such other agreement is invalid, not binding or
unenforceable based upon the use of a facsimile machine to deliver a signature,
or the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine, and each such party forever
waives any such claim or defense.
Section 10.6. Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 10.7. Notices. All notices, requests, demands, claims,
waiver, consent, approval and other communications hereunder shall be in writing
and shall be deemed duly given four business days after it is sent by registered
or certified mail, with return receipt requested and with postage, registration
or certification fees prepaid, when faxed during normal business hours, with
written confirmation of transmission having been received, or one business day
after it is sent for next business day delivery via a reputable nationwide
overnight courier service, in each case to the party at its address set forth
below (or at such other address for a party as shall be specified by such party
by like notice):
If to the Seller: Copy to:
-------------------------------------- ---------------------------------------
Rolls-Royce Corporation Rolls-Royce North America Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇
P. O. Box 420, Speed Code U-26A ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ Attn: General Counsel
Attn: W. ▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice President Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and Legal Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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If to the Buyer: Copy to:
-------------------------------------- ---------------------------------------
FastenTech, Inc. Dechert LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇, President ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Section 10.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of Delaware, without giving effect to any choice or conflict of law
provision or rule (whether of the State of Delaware or any other jurisdiction)
that would cause the application of laws of any jurisdictions other than those
of the State of Delaware.
Section 10.9. Amendments and Waivers. The Parties may mutually amend
any provision of this Agreement at any time prior to or after the Closing. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by each of the Parties. No waiver by either Party
of any right or remedy hereunder shall be valid unless the same shall be in
writing and signed by the Party giving such waiver. No waiver by either Party
with respect to any default, misrepresentation, or breach of warranty or
covenant hereunder shall be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
Section 10.10. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to limit
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified.
Section 10.11. Expenses. Except as set forth in Section 1.6, Article
VII and Section 10.12 each Party shall bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby. All sales, use, transfer or similar
Taxes incurred in connection with the transfer of the Acquired Assets hereunder
shall be the sole obligation of the Seller.
Section 10.12. Dispute Resolution. In the event that there shall be
any dispute arising out of or in any way relating to this Agreement, the
transactions contemplated hereby,
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any document referred to or incorporated herein by reference or centrally
related to the subject matter hereof, or the subject matter of any of the same,
the Parties covenant and agree as follows:
(a) The Parties shall first use their Reasonable Best Efforts to
resolve such dispute among themselves, with or without mediation.
(b) If the Parties are unable to resolve such dispute among
themselves, such dispute shall be submitted to binding arbitration in Chicago,
Illinois, under the auspices of the American Arbitration Association and
pursuant to its Commercial Arbitration Rules as then in effect, or such other
procedures as the Parties may agree to at the time, before a tribunal of three
(3) arbitrators, one of which shall be selected by the Seller, one of which
shall be selected by the Buyer, and the third of which shall be selected by the
two arbitrators so selected. All periods for selection of the arbitrators shall
be shortened so that the Seller and the Buyer shall each designate an arbitrator
within 15 days after the commencement of the arbitration and the third
arbitrator shall be selected within 40 days after the commencement of the
arbitration; if the Parties are unwilling to designate arbitrators or the
Party-designated arbitrators are unable to agree upon the third arbitrator, any
such arbitrator shall be selected in accordance with the rules of the American
Arbitration Association. Any award issued as a result of such arbitration shall
be final and binding between the Parties and shall be enforceable by any court
having jurisdiction over the Party against whom enforcement is sought. A ruling
by the arbitrators shall be non-appealable. The Parties agree to abide by and
perform any award rendered by the arbitrators. If either the Seller or the Buyer
seeks enforcement of the terms of this Agreement or seeks enforcement of any
award rendered by the arbitrators, then the prevailing Party (designated by the
arbitrators) to such proceeding(s) shall be entitled to recover its costs and
expenses from the non-prevailing Party, in addition to any other relief to which
it may be entitled. Either the Seller or the Buyer may cause an arbitration
proceeding to commence by giving the other Party notice in writing of such
arbitration, and the date of such notice shall be the date of the commencement
of the arbitration for the purposes of the second sentence of this sub-section.
The Seller and the Buyer covenant and agree to act as expeditiously as
practicable in order to resolve all disputes by arbitration. Notwithstanding
anything in this section to the contrary, neither the Seller nor the Buyer shall
be precluded from seeking court action in the event the action sought is either
injunctive action, a restraining order or other equitable relief that is
required in order to enforce this Agreement, to maintain the status quo, or to
aid the jurisdiction of the arbitrators until an arbitration award is rendered
or the controversy is otherwise resolved. The arbitration proceeding shall be
held in English.
(c) Legal process in any action or proceeding referred to in the
preceding section may be served on any Party anywhere in the world.
(d) Except as previously provided herein and except for injunctions
and other equitable remedies that are required in order to enforce this
Agreement, to maintain the status quo, or to aid the jurisdiction of the
arbitrators until an arbitration award is rendered or the controversy is
otherwise resolved, no action may be brought in any court of law and EACH OF THE
PARTIES WAIVES ANY RIGHTS THAT IT MAY HAVE TO BRING A CAUSE
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OF ACTION IN ANY COURT OR IN ANY PROCEEDING INVOLVING A JURY TO THE MAXIMUM
EXTENT PERMITTED BY LAW.
(e) Notwithstanding anything to the contrary, this Section 10.12
shall not apply to any disputes related to the Draft Statement of Working
Capital and Fixed Assets, which shall be resolved in accordance with Section
1.6.
Section 10.13. Incorporation of Exhibits and Schedules. The Exhibits
and Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
Section 10.14. Specific Performance. Each Party acknowledges and
agrees that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each Party agrees that the other
Party shall be entitled to an injunction and other equitable relief to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter, in addition to any other remedy to which it may be
entitled, at law or in equity.
Section 10.15. Construction.
(a) The language used in this Agreement 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 either Party.
(b) Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise.
(c) Any reference herein to "including" shall be interpreted
as "including without limitation".
(d) In determining whether a Business Material Adverse Effect
has occurred, account shall be taken of the liabilities retained by the Seller,
so that, for example, a Business Material Adverse Effect shall not exist or be
deemed to exist if there is a material increase in a liability related to the
Business that the Seller is retaining.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
ROLLS-ROYCE CORPORATION
By:
------------------------------------
Name:
Title:
FASTENTECH, INC.
By:
------------------------------------
Name:
Title:
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