EXHIBIT 1
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ASSET PURCHASE AGREEMENT
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AMONG
SHILOH INDUSTRIES, INC.,
SHILOH AUTOMOTIVE, INC.
AND
MTD PRODUCTS INC
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DATED AS OF JUNE 21, 1999
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TABLE OF CONTENTS
ASSET PURCHASE AGREEMENT
RECITALS.................................................... A-1
ARTICLE I - SALE AND PURCHASE OF THE ASSETS................. A-1
1.1 Assets....................................... A-1
1.2 Excluded Assets.............................. A-2
ARTICLE II - THE CLOSING.................................... A-2
2.1 Place and Date............................... A-2
2.2 Purchase Price............................... A-3
2.3 Purchase Price Adjustment.................... A-3
2.4 Allocation of Purchase Price................. A-4
2.5 Assumption of Liabilities.................... A-4
2.6 Excluded Liabilities......................... A-4
2.7 Consent of Third Parties..................... A-5
2.8 Earnout...................................... A-5
ARTICLE III - REPRESENTATIONS AND WARRANTIES................ A-6
3.1 Representations and Warranties of Seller..... A-6
3.2 Representations and Warranties of the Buyer
and Parent................................... A-19
ARTICLE IV - COVENANTS...................................... A-20
4.1 Covenants of Seller.......................... A-20
4.2 Covenants of the Buyer....................... A-23
4.3 Covenants of Buyer and Seller................ A-24
4.4 Additional Agreements........................ A-24
ARTICLE V - CONDITIONS PRECEDENT............................ A-27
5.1 Conditions to Obligations of Each Party...... A-27
5.2 Conditions to Obligations of the Buyer and
Parent....................................... A-27
5.3 Conditions to Obligations of Seller.......... A-29
ARTICLE VI - EMPLOYEE MATTERS............................... A-30
6.1 Employment of Seller's Employees............. A-30
6.2 Defined Benefit Plans........................ A-30
6.3 Employee Benefits............................ A-31
6.4 Retained Defined Contribution Plan
Transactions................................. A-31
ARTICLE VII - TERMINATION................................... A-31
7.1 Termination.................................. A-31
7.2 Effect of Termination........................ A-32
ARTICLE VIII - DEFINITIONS.................................. A-32
8.1 Definition of Certain Terms.................. A-32
ARTICLE IX - INDEMNIFICATION................................ A-39
9.1 Indemnification By Seller.................... A-39
9.2 Indemnification By the Buyer................. A-40
9.3 Indemnification Procedures................... A-40
9.4 Time Limitation.............................. A-40
9.5 Survival of Representations, Warranties,
Covenants and Agreements..................... A-40
i
ARTICLE X - MISCELLANEOUS................................... A-41
10.1 Expenses..................................... A-41
10.2 Severability................................. A-41
10.3 Notices...................................... A-41
10.4 Headings..................................... A-42
10.5 Entire Agreement............................. A-42
10.6 Counterparts................................. A-42
10.7 Governing Law, etc........................... A-42
10.8 Binding Effect............................... A-43
10.9 Assignment................................... A-43
10.10 No Third Party Beneficiaries................. A-43
10.11 Amendment; Waivers. etc...................... A-43
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SCHEDULES
SCHEDULE 1.1(a) Tangible Property
SCHEDULE 1.1(c) Assumed Contracts
SCHEDULE 1.1(h) Government Approvals
SCHEDULE 1.1(i) Licenses, Permits, etc.
SCHEDULE 1.1(j) Claims
SCHEDULE 1.2(a) Certain Excluded Assets
SCHEDULE 2.5(a) Certain Assumed Liabilities
SCHEDULE 3.1(b) Jurisdictions
SCHEDULE 3.1(c) No Conflicts, etc.
SCHEDULE 3.1(d) Financial Statements
SCHEDULE 3.1(e) Undisclosed Liabilities
SCHEDULE 3.1(f) Taxes
SCHEDULE 3.1(g) Absence of Certain Changes
SCHEDULE 3.1(h) Litigation
SCHEDULE 3.1(i) Compliance with Laws, etc.
SCHEDULE 3.1(j) Operation of Business
SCHEDULE 3.1(k) Assets
SCHEDULE 3.1(l) Contracts
SCHEDULE 3.1(m) Territorial Restrictions
SCHEDULE 3.1(n) Inventories
SCHEDULE 3.1(o) Customers
SCHEDULE 3.1(p) Suppliers
SCHEDULE 3.1(q) Product Warranties
SCHEDULE 3.1(s) Intellectual Property
SCHEDULE 3.1(t) Insurance
SCHEDULE 3.1(u) Real Property
SCHEDULE 3.1(v) Environmental Matters
SCHEDULE 3.1(w) Labor Matters
SCHEDULE 3.1(x) Employee Benefits
SCHEDULE 3.1(z) Guarantees
SCHEDULE 3.1(dd) Accounts Receivable
SCHEDULE 3.2(b) No Conflicts, etc.
SCHEDULE 4.4(a) Transfer Costs -- Automotive Products
SCHEDULE 4.4(b) Price Concessions
SCHEDULE 4.4(d) Capital Expenditures
SCHEDULE 4.4(e) Transfer Costs -- Lawnmower Blades
SCHEDULE 6.1 New Employees
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of June 21, 1999, among Shiloh
Industries, Inc., a Delaware corporation (the "Parent"), Shiloh Automotive,
Inc., an Ohio corporation ("Buyer"), and MTD Products Inc, an Ohio corporation
("Seller").
RECITALS
WHEREAS, Seller is in the business of manufacturing and marketing
engineered stamped products for the automotive industry through an
unincorporated division (the "Division") of Seller; and
WHEREAS, the Buyer wishes to purchase or acquire from Seller, and Seller
wishes to sell, assign and transfer to the Buyer, substantially all of the
assets and properties held in connection with, necessary for, or material to the
business and operations of the Division (except for the Excluded Assets) (the
"Business"), and the Buyer has agreed to assume the Assumed Liabilities, all for
the purchase price and upon the terms and subject to the conditions hereinafter
set forth; and
WHEREAS, certain capitalized terms used herein shall have the meanings set
forth in Article VIII; and
NOW, THEREFORE, in consideration of the mutual covenants, representations
and warranties made herein, and of the mutual benefits to be derived hereby, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
SALE AND PURCHASE OF THE ASSETS
1.1 Assets. Subject to and upon the terms and conditions set forth in this
Agreement, at the Closing, Seller will sell, transfer, convey, assign and
deliver to the Buyer, and the Buyer will purchase or acquire from Seller, all
right, title and interest of Seller in and to the properties, assets and rights
of every nature, kind and description, tangible and intangible (including
goodwill), whether real, personal or mixed, whether accrued, contingent or
otherwise and whether now existing or hereinafter acquired (other than the
Excluded Assets) primarily relating to or used or held for use in connection
with the Business as the same may exist on the Closing Date (collectively, the
"Assets"), including, without limitation, all those items in the following
categories that conform to the definition of the term "Assets":
(a) All machinery, equipment, presses, computer hardware, computer
software, furniture, furnishings, automobiles, trucks, forklifts, vehicles,
tools, dies, jigs, molds and parts and similar property (including, but not
limited to, any of the foregoing purchased subject to any conditional sales
or title retention agreement in favor of any other Person), including those
items listed on Schedule 1.1(a);
(b) All inventories of raw materials, work in process, finished
products, goods, spare parts, replacement and component parts, and office
and other supplies (collectively, the "Inventories"), including Inventories
held at any location controlled by Seller and Inventories previously
purchased and in transit to Seller at such locations;
(c) All rights and incidents of interest of, and benefits accruing to,
Seller in and to the contracts or agreements listed or described on
Schedule 1.1(c) (collectively, the "Assumed Contracts");
(d) All credits, prepaid expenses, deferred charges, advance payments,
security deposits and prepaid items;
(e) All notes and accounts receivable held by Seller and all notes,
bonds and other evidences of indebtedness of and rights to receive payments
from any Person held by Seller;
(f) Other than the rights of Seller in and to the ▇▇▇▇ "MTD" and the
grass sprig trademark, all Intellectual Property and all rights thereunder
or in respect thereof primarily relating to or used or held for use in
connection with the Business, including, but not limited to, rights to ▇▇▇
for and remedies against past, present and future infringements thereof,
and rights of priority and protection of interests therein under the
laws of any jurisdiction worldwide and all tangible embodiments thereof
(together with all Intellectual Property rights included in the other
clauses of this Section 1.1, the "Intellectual Property Assets");
(g) All books, records, manuals and other materials (in any form or
medium), including, without limitation, all records and materials
maintained at the headquarters of Seller, advertising matter, catalogues,
price lists, correspondence, mailing lists, lists of customers,
distribution lists, photographs, production data, sales and promotional
materials and records, purchasing materials and records, personnel records,
manufacturing and quality control records and procedures, shop drawings,
specifications, tool drawings, engineering data, equipment manuals, test
data, blueprints, research and development files, records, data and
laboratory books, Intellectual Property disclosures, media materials,
accounting records, sales order files and litigation files (except for any
documents which the delivery to Buyer or Parent would negate a claim of
attorney-client privilege for Seller with respect to such documents);
(h) To the extent their transfer is permitted by Applicable Law, all
Governmental Approvals, including all applications therefor, including
those listed or described on Schedule 1.l(h);
(i) All Real Property and all licenses, permits, approvals and
qualifications relating to any Real Property issued to Seller by any
Governmental Authority, including, without limitation, those licenses,
permits, approvals and qualifications listed or described on Schedule
1.1(i);
(j) All rights to causes of action, lawsuits, judgments, claims and
demands of any nature available to or being pursued by Seller with respect
to the Business or the ownership, use, function or value of any Asset,
whether arising by way of counterclaim or otherwise, excluding those listed
or described on Schedule 1.1(j); and
(k) All guarantees, warranties, indemnities and similar rights in
favor of Seller with respect to any Asset.
Subject to the terms and conditions hereof, at the Closing, the Assets
shall be transferred or otherwise conveyed to the Buyer free and clear of all
liabilities, obligations, liens and encumbrances except for the Assumed
Liabilities and Permitted Liens.
1.2 Excluded Assets. Seller will retain and not transfer, and the Buyer
will not purchase or acquire, the following assets (collectively, the "Excluded
Assets"):
(a) The assets listed on Schedule 1.2(a);
(b) The rights of Seller under, and the funds and other property held
in trust or under any funding vehicle with respect to, any of the Plans;
(c) All cash and cash equivalents, other than ▇▇▇▇▇ cash, held on the
Closing Date;
(d) All of Seller's rights and incidents of interest in and to any
Actions and Orders of any nature whatsoever and whenever maturing or
asserted, to the extent that they relate to or arise out of the Excluded
Assets or the Excluded Liabilities;
(e) All rights and incidents of interest of, and benefits accruing to,
Seller in and to any contracts or agreements of Seller other than the
Assumed Contracts; and
(f) Any accounts receivable excluded from the Closing Net Working
Capital.
ARTICLE II
THE CLOSING
2.1 Place and Date. The closing of the sale and purchase of the Assets (the
"Closing") shall take place at the offices of Wegman, Hessler, ▇▇▇▇▇▇▇▇▇▇ &
▇'▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
on the first Business Day following the satisfaction or waiver of each of the
conditions set forth in Article V (other than those conditions that are to be
satisfied at the Closing) or such other time and place
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upon which the parties may agree. The day on which the Closing actually occurs
is herein sometimes referred to as the "Closing Date".
2.2 Purchase Price. On the terms and subject to the conditions set forth in
this Agreement and subject to adjustment as provided in Section 2.3, the Buyer
agrees to (a) pay or cause to be paid to Seller an aggregate of $20,000,000.00
in cash and (b) assume the Assumed Liabilities. In addition, Parent agrees, on
behalf of Buyer, to issue or cause to be issued to Seller an aggregate number of
shares of common stock, par value $0.01 per share, of Parent ("Parent Common
Stock") equal to (1) $20,000,000.00 divided by (2) the greater of (i) $14.00 or
(ii) to the extent the Average Closing Price exceeds $14.50, the Average Closing
Price. The consideration payable by Buyer and Parent, on behalf of Buyer, to
Seller pursuant to clause (a) and the immediately preceding sentence is
hereinafter collectively referred to as the "Purchase Price". The cash portion
of the Purchase Price shall be payable at the Closing by wire transfer of
immediately available funds to such bank account or accounts as per written
instructions of Seller, given to Buyer at least five days prior to the Closing.
No fractional shares of Parent Common Stock shall be issued pursuant to this
Section 2.2. If Seller would be entitled to a fractional share of Parent Common
Stock pursuant to clause (b) above, Seller shall receive an amount in cash equal
to the product of (A) such fractional share multiplied by (B) the greater of (i)
$14.00 or (ii) to the extent the Average Closing Price exceeds $14.50, the
Average Closing Price.
2.3 Purchase Price Adjustment. (a) Subject to Section 2.3(d) below, the
Purchase Price shall be adjusted by an amount (the "Adjustment Amount") equal to
the absolute difference, if any, between the Initial Net Working Capital and the
Closing Net Working Capital.
(b)(i) Within 90 calendar days after the Closing Date, Buyer will
cause PricewaterhouseCoopers LLP to deliver (1) an audited balance sheet of
the Business as of the Closing Date (the "Audited Closing Date Balance
Sheet"), prepared in accordance with GAAP consistent with the Audited
Financial Statements and (2) a calculation of the Closing Net Working
Capital based on the Audited Closing Date Balance Sheet. Buyer's
accountants shall be given timely access to all books, records, other data,
personnel and representatives of Seller for purposes of preparing the
Audited Closing Date Balance Sheet within the time period set forth in this
Section 2.4(b)(i). In connection with the review by Seller's accountants of
the Audited Closing Date Balance Sheet and Buyer's calculation of the
Closing Net Working Capital, Buyer shall, promptly upon request, provide to
Seller and its agents access to the work papers of Buyer's accountants
relating to the Audited Closing Date Balance Sheet and Buyer's calculation
of the Closing Net Working Capital and any and all documentation related
thereto.
(ii) Unless Seller gives Buyer a notice of objection ("Notice of
Objection") to the Audited Closing Date Balance Sheet and/or Buyer's
calculation of the Closing Net Working Capital within 45 calendar days
after receiving the Audited Closing Date Balance Sheet (the "Objection
Period"), which notice shall specify in reasonable detail each specific
objection of Seller, the Audited Closing Date Balance Sheet and Buyer's
calculation of the Closing Net Working Capital shall be final, conclusive
and binding on the parties to this Agreement.
(iii) If Seller delivers a Notice of Objection within the Objection
Period, Buyer and Seller shall use reasonable efforts to resolve all
disputes regarding the objections of Seller set forth in the Notice of
Objection. If Buyer and Seller are not able to resolve all disputes
regarding the objections of Seller set forth in the Notice of Objection
within 14 calendar days after delivery by Seller of the Notice of
Objection, the remaining disputed items shall be submitted for final
resolution to Deloitte, Touche, LLP (the "Independent Accountants"). If
Deloitte, Touche, LLP is unwilling or unable to act in such capacity, the
Independent Accountants shall be KPMG Peat Marwick, LLP (or if both of such
firms are unable or unwilling to act in such capacity, the Independent
Accountants shall be such other Big Five accounting firm selected by
agreement of Seller and Buyer). After offering Seller and Seller's
representatives and Buyer and Buyer's representatives the opportunity to
present their positions as to the disputed items, which opportunity shall
not extend for more than 10 calendar days after submission of such disputed
items to the Independent Accountants, the Independent Accountants shall
deliver a written report resolving all disputed items and setting forth the
basis for such resolution within 30 calendar days after Seller and Buyer
have presented their positions as to the disputed items. The resolution of
the Independent Accountants shall be final, conclusive
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and binding upon the parties to this Agreement and shall be reflected in
any necessary revisions to the Audited Closing Date Balance Sheet and
Buyer's calculation of the Closing Net Working Capital. Notwithstanding
anything in this Agreement to the contrary, the scope of the Independent
Accountants' review of any dispute between Buyer and Seller regarding the
Audited Closing Date Balance Sheet and/or the calculation of Closing Net
Working Capital pursuant to this Section 2.3 shall be limited solely to the
resolution of the objections of Seller set forth in the Notice of Objection
and Buyer shall have no right to change, revise or otherwise modify the
Audited Closing Date Balance Sheet or its calculation of the Closing Net
Working Capital except as agreed to in writing by Seller or as required by
the Independent Accountants.
(c) One-half of the fees, costs and expenses of (i)
PricewaterhouseCoopers LLP to prepare the Audited Closing Date Balance
Sheet and (ii) the Independent Accountants for services rendered pursuant
to Section 2.3(b), shall be paid by Seller and one-half of such fees, costs
and expenses shall be paid by Buyer.
(d) If the Closing Net Working Capital (as finally determined pursuant
to this Section 2.3) is greater than the Initial Net Working Capital, no
adjustment shall be made to the Purchase Price. If the Closing Net Working
Capital (as finally determined pursuant to this Section 2.3) is less than
the Initial Net Working Capital, Seller shall pay or cause to be paid the
Adjustment Amount (plus interest as determined pursuant to Section 2.3(e))
to Buyer on the Payment Date, by wire transfer of immediately available
funds to an account designated by Buyer. "Payment Date" means (i) if no
Notice of Objection is timely delivered by Seller to Buyer, three Business
Days after the earlier of (A) the expiration of the Objection Period and
(B) the date of delivery by Seller to Buyer of a notice that Buyer's
calculation of the Closing Net Working Capital will be accepted by Seller
without objection; or (ii) if a Notice of Objection with respect to Audited
Closing Date Balance Sheet and/or Buyer's calculation of the Closing Net
Working Capital is timely delivered to Buyer, three Business Days after the
date all disputed items are finally resolved pursuant to Section 2.3(b).
(e) The Adjustment Amount shall bear interest compounded monthly from
the Closing Date until the date of payment at the prime rate publicly
announced from time to time by National City Bank, Cleveland, Ohio.
Interest shall be computed on the basis of a 365-day year and the actual
number of days elapsed.
2.4 Allocation of Purchase Price. (a) The parties agree to allocate the
aggregate of the Purchase Price (as adjusted pursuant to Section 2.3) and the
Assumed Liabilities (collectively, the "Aggregate Purchase Price") among the
Assets, in accordance with an allocation schedule to be prepared jointly by the
Buyer and Seller. Such allocation schedule shall be prepared in accordance with
section 1060 of the Code and shall be based on an appraisal or appraisals
conducted by an independent appraiser or appraisers chosen by the Buyer.
(b) In connection with the determination of the foregoing appraisal or
appraisals and allocation schedules, the parties shall cooperate with each
other and provide such information as any of them shall reasonably request.
The parties will each report the federal, state and local and other Tax
consequences of the purchase and sale contemplated hereby (including the
filing of Internal Revenue Service Form 8594) in a manner consistent with
such allocation schedules.
2.5 Assumption of Liabilities. (a) Subject to the terms and conditions set
forth herein, at the Closing the Buyer shall assume and agree to pay, honor and
discharge when due all of the following liabilities relating to the Assets and
existing at or arising on or after the Closing Date (collectively, the "Assumed
Liabilities"):
(i) any and all liabilities, obligations and commitments arising out
of the Assumed Contracts, but not including any obligation or liability for
any breach thereof occurring prior to the Closing Date; and
(ii) the liabilities set forth on Schedule 2.5(a).
(b) At the Closing, the Buyer shall assume the Assumed Liabilities relating
to the Business by executing and delivering to Seller an assumption agreement in
a form reasonably satisfactory to Seller (the "Assumption Agreement").
2.6 Excluded Liabilities. Notwithstanding the provisions of Section 2.5 or
any other provision hereof or any schedule or exhibit hereto and regardless of
any disclosure to the Buyer, the Buyer shall not assume any liabilities,
obligations or commitments of Seller relating to or arising out of the operation
of the Business or the ownership of the Assets prior to the Closing other than
the Assumed Liabilities (the "Excluded Liabilities").
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2.7 Consent of Third Parties. Notwithstanding anything to the contrary in
this Agreement, this Agreement shall not constitute an agreement to assign or
transfer any Governmental Approval, instrument, contract, lease, permit or other
agreement or arrangement or any claim, right or benefit arising thereunder or
resulting therefrom if an assignment or transfer or an attempt to make such an
assignment or transfer without the consent of a third party would constitute a
breach or violation thereof or affect adversely the rights of the Buyer or
Seller thereunder; and any transfer or assignment to the Buyer by Seller of any
interest under any such instrument, contract, lease, permit or other agreement
or arrangement that requires the consent of a third party shall be made subject
to such consent or approval being obtained. In the event any such consent or
approval is not obtained on or prior to the Closing Date, Seller shall continue
to use all reasonable efforts to obtain any such approval or consent after the
Closing Date until such time as such consent or approval has been obtained, and
Seller will reasonably cooperate with the Buyer in any lawful and commercially
reasonable arrangement to provide that the Buyer shall receive the interest of
Seller in the benefits under any such instrument, contract, lease or permit or
other agreement or arrangement, including performance by Seller as agent, if
commercially reasonable, provided that the Buyer shall undertake to pay in a
timely manner or satisfy the corresponding liabilities for the enjoyment of such
benefit to the extent the Buyer would have been responsible therefor hereunder
if such consent or approval had been obtained. Seller shall pay and discharge,
and shall indemnify and hold the Buyer harmless from and against, any and all
out-of-pocket costs of seeking to obtain or obtaining any such consent or
approval whether before or after the Closing Date. Nothing in this Section 2.7
shall be deemed a waiver by the Buyer of its right to have received on or before
the Closing an effective assignment of all of the Assets nor shall this Section
2.7 be deemed to constitute an agreement to exclude from the Assets any assets
described under Section 1.1.
2.8 Earnout. (a) If the First Year EBITDA exceeds $8,500,000, then the
Buyer shall pay, or cause to be paid, to Seller aggregate consideration equal to
the product of (i) the excess of the First Year EBITDA over $8,500,000
multiplied by (ii) four (the "Excess Earnout Amount"). If the First Year EBITDA
is less than $8,500,000, then the Seller shall pay, or cause to be paid, to
Buyer aggregate consideration equal to the product of (i) the excess of
$8,500,000 over the First Year EBITDA multiplied by (ii) four (the "Shortfall
Earnout Amount"). The Excess Earnout Amount and the Shortfall Earnout Amount
shall hereinafter be referred to, as the context requires, as the "Earnout
Amount". Notwithstanding the foregoing, in no event shall the Excess Earnout
Amount exceed $28,000,000 or the Shortfall Earnout Amount exceed $15,000,000.
(b) On the Earnout Payment Date:
(i) In the case of an Excess Earnout Amount, Buyer shall pay or cause
to be paid to Seller one-half of the Excess Earnout Amount in cash, and
Parent, on behalf of Buyer, shall issue or cause to be issued to Seller an
aggregate number of shares of Parent Common Stock equal to (1) one-half of
the Excess Earnout Amount divided by (2) the greater of (A) $14.00 or (B)
to the extent the Average Closing Price exceeds $14.50, the Average Closing
Price; provided, however, that in no event shall the number of shares of
Parent Common Stock issued pursuant to this clause (i) exceed 1,000,000
shares (the "Parent Common Stock Cap"). If the number of shares of Parent
Common Stock to be issued pursuant to this clause (i) exceeds the Parent
Common Stock Cap then the portion of the Excess Earnout Amount that would
have been payable in Parent Common Stock shall be paid in cash.
(ii) In the case of a Shortfall Earnout Amount, Seller shall pay or
cause to be paid to Buyer one-half of the Shortfall Earnout Amount in cash
and transfer or cause to be transferred to Buyer, an aggregate number of
shares of Parent Common Stock equal to (1) one-half of the Shortfall
Earnout Amount divided by (2) the greater of (i) $14.00 or (ii) to the
extent the Average Closing Price exceeds $14.50, the Average Closing Price.
(iii) The cash portion of any Earnout Amount shall be payable by wire
transfer of immediately available funds to such bank account or accounts as
per written instructions of Seller or Buyer, as the case may be, given to
the other party at least five days prior to the Earnout Payment Date. No
fractional shares of Parent Common Stock shall be issued or transferred
pursuant to clause (i) or (ii) above. If any party would be entitled to a
fractional share of Parent Common Stock pursuant to clause (i) or (ii)
above, such party shall
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receive an amount in cash equal to the product of (A) such fractional share
multiplied by (B) the greater of (i) $14.00 or (ii) to the extent the
Average Closing Price exceeds $14.50, the Average Closing Price.
(iv) Buyer shall have the right to withhold and set-off against any
Excess Earnout Amount the amount of any claim for indemnification or
payment of Losses provided for in Section 9.1 or any amounts payable by
Seller to Buyer pursuant to Section 4.4. The exercise by Buyer in good
faith of its right of set-off, whether or not ultimately determined to be
justified, shall not constitute a breach of Buyer's obligations under this
Section 2.8.
(c) The EBITDA Committee will review the Business's annualized EBITDA after
the Closing Date at the following intervals: (i) as soon as the audited
financial statements of Parent for the fiscal year ended October 31, 1999 become
available and (ii) as soon as the interim unaudited financial statements of the
Parent for the fiscal quarters ending January 31, 2000, April 30, 2000 and July
31, 2000, become available.
(d)(i) Within 30 calendar days after the first anniversary of the Closing
Date, Buyer shall deliver a certificate certifying as to the First Year EBITDA
and the determination of the Earnout Amount, if any (the "Earnout Certificate").
If Seller has any objections to the Earnout Certificate, then Seller shall
provide written notice of such objection(s) ("Earnout Objection Notice") within
30 calendar days after receiving the Earnout Certificate (the "Earnout Objection
Period"), which notice shall specify in reasonable detail each specific
objection of Seller. Unless an Earnout Objection Notice is received by Buyer
within the Earnout Objection Period, the determination of the Earnout Amount set
forth in the Earnout Certificate shall be final, conclusive and binding on the
parties to this Agreement.
(ii) If Seller delivers an Earnout Objection Notice within the Earnout
Objection Period, Buyer and Seller shall use reasonable efforts to resolve
all disputes regarding the objections of Seller set forth in the Earnout
Objection Notice. If Buyer and Seller are not able to resolve all disputes
regarding the objections of Seller set forth in the Earnout Objection
Notice within 14 calendar days after delivery by Seller of the Earnout
Objection Notice, the remaining disputed items shall be submitted for final
resolution to the Independent Accountants. After offering Seller and
Seller's representatives and Buyer and Buyer's representatives the
opportunity to present their positions as to the disputed items, which
opportunity shall not extend for more than 30 calendar days after
submission of such disputed items to the Independent Accountants, the
Independent Accountants shall deliver a written report resolving all
disputed items and setting forth the basis for such resolution within 30
calendar days after Seller and Buyer have presented their positions as to
the disputed items. The resolution of the Independent Accountants shall be
final, conclusive and binding upon the parties to this Agreement and shall
be reflected in any necessary revisions to the Earnout Certificate and/or
the Earnout Amount. Notwithstanding anything in this Agreement to the
contrary, the scope of the Independent Accountants' review of any dispute
between Buyer and Seller regarding the Earnout Certificate and/or the
Earnout Amount pursuant to this Section 2.8 shall be limited solely to the
resolution of the objections of Seller set forth in the Earnout Objection
Notice.
(e) One-half of the fees, costs and expenses of the Independent Accountants
for services rendered pursuant to Section 2.8(c) shall be paid by Seller and
one-half of such fees, costs and expenses shall be paid by Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Seller. Seller represents and
warrants to the Buyer and Parent as follows:
(a) Authorization, etc. Seller has the corporate power and authority
to execute and deliver this Agreement and each of the Collateral Agreements
to which it will be a party, to perform fully its obligations thereunder,
and to consummate the transactions contemplated thereby. The execution and
delivery by Seller of this Agreement, and the consummation of the
transactions contemplated hereby, have been, and on the Closing Date the
execution and delivery by Seller of each of the Collateral Agreements to
which it will be a party and the consummation of the transactions
contemplated thereby will have been, duly authorized by all requisite
corporate and shareholder action of the Seller. Seller has duly executed
and delivered this
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Agreement and on the Closing Date Seller will have duly executed and
delivered each of the Collateral Agreements to which it is a party. This
Agreement is, and on the Closing Date each of the Collateral Agreements to
which Seller is a party will be, legal, valid and binding obligations of
Seller, enforceable against it in accordance with their respective terms.
(b) Corporate Status. (i) Seller is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation, with full corporate power and authority to carry on the
Business and to own or lease and to operate its properties as and in the
places where the Business is conducted and such properties are owned,
leased or operated.
(ii) Seller is duly qualified or licensed to do business and is in
good standing in each of the jurisdictions specified opposite its name
in Schedule 3.1(b), which are the only jurisdictions in which the
operation of the Business or the character of the properties owned,
leased or operated by it in connection with the Business makes such
qualification or licensing necessary.
(iii) Seller has delivered to the Buyer complete and correct copies
of its articles of incorporation and code of regulations or other
organizational documents, in each case, as amended and in effect on the
date hereof. Seller is not in violation of any of the provisions of its
articles of incorporation or code of regulations or other organizational
documents.
(c) No Conflicts, etc. The execution, delivery and performance by
Seller of this Agreement and each of the Collateral Agreements to which it
is a party, and the consummation of the transactions contemplated thereby,
do not and will not conflict with or result in a violation of or a default
under (with or without the giving of notice or the lapse of time or both)
(i) any Applicable Law applicable to Seller or any Affiliate thereof or any
of the properties or assets of Seller (including but not limited to the
Assets), (ii) the articles of incorporation or code of regulations or other
organizational documents of Seller or (iii) except as set forth in Schedule
3.1(c), any Contract or other contract, agreement or other instrument to
which Seller or any Affiliate thereof is a party or by which Seller or any
of its properties or assets, including but not limited to the Assets, may
be bound or affected. Except as specified in Schedule 3.1(c), no
Governmental Approval or other Consent is required to be obtained or made
by Seller in connection with the execution and delivery of this Agreement
and the Collateral Agreements or the consummation of the transactions
contemplated hereby or thereby.
(d) Financial Statements. Seller has delivered to the Buyer (a)
audited consolidated financial statements of the Business as at and for the
period ended July 31, 1998 and the balance sheet of the Business as at July
31, 1997, together with a report thereon by Seller's Accountants (the
"Audited Financial Statements"), and (b) unaudited financial statements of
the Business for the trailing twelve-month period ended April 30, 1999 (the
"Unaudited Financial Statements"), including in each of clause (a) and (b)
a balance sheet, statements of income and retained earnings and a statement
of cash flows (the Audited Financial Statements and the Unaudited Financial
Statements, collectively, the "Financial Statements;" the Financial
Statements are attached hereto as Schedule 3.1(d)). The Audited Financial
Statements are complete and correct in all material respects and have been
prepared in accordance with GAAP applied throughout the periods indicated.
The Unaudited Financial Statements have been prepared consistent with
Seller's prior practices and in all material respects on a basis consistent
with the Audited Financial Statements, except that the Unaudited Financial
Statements do not contain notes and may be subject to normal audit
adjustments. Except for the Excluded Assets, the balance sheets included in
the Financial Statements do not include any material assets or liabilities
not intended to constitute a part of the Business or the Assets after
giving effect to the transactions contemplated hereby, and present fairly
the financial condition of the Business as at their respective dates. The
statements of income and retained earnings and statements of cash flows
included in the Financial Statements do not reflect the operations of any
entity or business not intended to constitute a part of the Business after
giving effect to all such transactions, reflect all material costs that
historically have been incurred by the Business (other than the Excluded
Liabilities) and present fairly the results of operations and cash flows of
the Business for the periods indicated.
(e) Absence of Undisclosed Liabilities. To the knowledge of Seller,
Seller has no liabilities or obligations of any nature, absolute, accrued,
contingent or otherwise and whether due or to become due,
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arising out of or relating to the Business, except (a) as set forth in
Schedule 3.1(e), (b) as and to the extent disclosed or reserved against in
the Audited Balance Sheet (excluding the notes thereto) and (c) for
liabilities and obligations that (i) were incurred after the Audited
Balance Sheet Date in the ordinary course of business consistent with prior
practice and (ii) individually and in the aggregate are not material to the
Business and have not had or resulted in, and will not have or result in,
individually or in the aggregate, a Material Adverse Effect.
(f) Taxes. (i) Seller has (or by the Closing will have) duly and
timely filed all Tax Returns relating to the Business for periods ending
after January 1, 1994 required to be filed on or before the Closing Date
("Covered Returns"). Except for Taxes set forth on Schedule 3.1(f), which
are being contested in good faith and by appropriate proceedings, all Taxes
owed by Seller and relating to the Business, whether or not shown on a
Covered Return ("Covered Taxes"), have (or by the Closing Date will have)
been duly and timely paid. All Taxes required to be withheld by or on
behalf of the Seller for periods ending after January 1, 1994 in connection
with amounts paid or owing to any employee, independent contractor,
creditor or other party with respect to the Business ("Withholding Taxes")
have been withheld and either duly and timely paid to the proper
Governmental Authorities or set aside in accounts for such purpose.
(ii) Except as set forth on Schedule 3.1(f), no agreement or other
document extending, or having the effect of extending, the period of
assessment or collection of any Covered Taxes or Withholding Taxes, and
no power of attorney with respect to any such Taxes, has been filed with
the IRS or any other Governmental Authority.
(iii) Except as set forth on Schedule 3.1(f), (i) there are no
Covered Taxes or Withholding Taxes asserted in writing by any
Governmental Authority to be due and (ii) no issue has been raised in
writing by any Governmental Authority in the course of any audit with
respect to Covered Taxes or Withholding Taxes. Except as set forth on
Schedule 3.1(f), no Covered Returns are currently under audit by any
Governmental Authority. Except as set forth on Schedule 3.1(f), neither
the IRS nor any other Governmental Authority is now asserting or, to the
knowledge of Seller, threatening to assert against Seller any deficiency
or claim for additional Covered Taxes or any adjustment of Covered Taxes
that would, if paid by the Buyer, have individually or in the aggregate
a Material Adverse Effect, and there is no reasonable basis for any such
assertion of which Seller is or reasonably should be aware.
(iv) Except as set forth on Schedule 3.1(f), there is no litigation
or administrative appeal pending or, to the knowledge of Seller,
threatened against or relating to Seller in connection with Covered
Taxes.
(g) Absence of Changes. Except as set forth in Schedule 3.1(g), since
the Audited Balance Sheet Date, the Seller has conducted the Business only
in the ordinary course consistent with prior practice and has not, on
behalf of, in connection with or relating to the Business or the Assets:
(i) suffered any Material Adverse Effect;
(ii) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except current
liabilities for trade or business obligations incurred in connection
with the purchase of goods or services in the ordinary course of
business consistent with prior practice, none of which liabilities,
individually or in the aggregate, could have a Material Adverse Effect;
(iii) discharged or satisfied any Lien other than those then
required to be discharged or satisfied, or paid any obligation or
liability, absolute, accrued, contingent or otherwise, whether due or to
become due, other than current liabilities shown on the Audited Balance
Sheet and current liabilities incurred since the date thereof in the
ordinary course of business consistent with prior practice;
(iv) mortgaged, pledged or subjected to Lien, any property,
business or assets, tangible or intangible, held in connection with the
Business;
(v) sold, transferred, leased to others or otherwise disposed of
any of the Assets, except for inventory sold in the ordinary course of
business, or canceled or compromised any debt or claim, or waived or
released any right of substantial value;
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(vi) received any notice of termination of any contract, lease or
other agreement or suffered any damage, destruction or loss (whether or
not covered by insurance) which, individually or in the aggregate, has
had a Material Adverse Effect;
(vii) transferred or granted any rights under, or entered into any
settlement regarding the breach or infringement of, any Intellectual
Property, or modified any existing rights with respect thereto;
(viii) made any change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable, or paid or
agreed or orally promised to pay, conditionally or otherwise, any bonus,
incentive, retention or other compensation, retirement, welfare, fringe
or severance benefit or vacation pay, to or in respect of any
shareholder, director, officer, employee, salesman, distributor or agent
of Seller relating to the Business;
(ix) encountered any labor union organizing activity, had any
actual or threatened employee strikes, work stoppages, slowdowns or
lockouts, or had any material change in its relations with its
employees, agents, customers or suppliers;
(x) failed to replenish the Division's inventories and supplies in
a normal and customary manner consistent with its prior practice and
prudent business practices prevailing in the industry, or made any
purchase commitment in excess of the normal, ordinary and usual
requirements of its business or at any price in excess of the then
current market price or upon terms and conditions more onerous than
those usual and customary in the industry, or made any change in its
selling, pricing, advertising or personnel practices inconsistent with
its prior practice and prudent business practices prevailing in the
industry;
(xi) made any capital expenditures or capital additions or
improvements in excess of an aggregate of $8,000,000;
(xii) instituted, settled or agreed to settle any litigation,
action or proceeding before any court or governmental body relating to
the Business or the Assets other than in the ordinary course of business
consistent with past practices but not in any case in which the
settlement would impose future affirmative obligations on the Business
other than the payment of money and not in any case involving amounts in
excess of $5,000;
(xiii) entered into any transaction, contract or commitment other
than in the ordinary course of business or paid or agreed to pay any
legal, accounting, brokerage, finder's fee, Taxes or other expenses in
connection with, or incurred any severance pay obligations by reason of,
this Agreement or the transactions contemplated hereby; or
(xiv) taken any action or omitted to take any action that would
result in the occurrence of any of the foregoing.
(h) Litigation. Except as set forth on Schedule 3.1(h), there is no
action, claim, demand, suit, proceeding, arbitration, grievance, citation,
notice of violation, notice of potential liability, summons, subpoena,
inquiry or investigation of any nature, civil, criminal, regulatory or
otherwise, in law or in equity (collectively, "Actions"), and there are no
Orders, pending or, to the knowledge of Seller, threatened against or
relating to Seller in connection with the Assets or the Business or against
or relating to the transactions contemplated by this Agreement, and Seller
does not know nor does Seller have any reason to be aware of any basis for
the same. Except as set forth in such Schedule 3.1(h), no citations, fines
or penalties have been asserted against Seller with respect to the Division
under any Environmental Law or any foreign, federal, state or local law
relating to occupational health or safety.
(i) Compliance with Laws; Governmental Approvals and Consents;
Governmental Contracts. (i) Except as disclosed in Schedule 3.1(i), since
January 1, 1994, Seller has complied in all material respects with all
Applicable Laws applicable to the Business or the Assets, and Seller has
not received any notice alleging any such conflict, violation, breach or
default.
(ii) Schedule 3.1(i) sets forth all Governmental Approvals and
other Consents necessary for, or otherwise material to, the conduct of
the Business. Except as set forth in Schedule 3.1(i), all such
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Governmental Approvals and Consents have been duly obtained or submitted
and are in full force and effect, and Seller is in compliance with each
of such Governmental Approvals and Consents held by it with respect to
the Assets and the Business.
(iii) Schedule 3.1(i) sets forth all Contracts with any
Governmental Authority.
(iv) To the knowledge of Seller, there are no proposed laws, rules,
regulations, ordinances, orders, judgments, decrees, governmental
takings, condemnations or other proceedings which would be applicable to
the business, operations or properties of the Division and which might
materially adversely affect the properties, assets, liabilities,
operations or prospects of the Division, either before or after the
Closing Date.
(j) Operation of the Business. Except as set forth in Schedule 3.1(j),
(a) Seller has conducted the Business only through Seller and not through
any other divisions or any direct or indirect subsidiary or affiliate of
Seller and (b) no part of the Business is operated by Seller through any
entity other than Seller.
(k) Assets. Except as disclosed in Schedule 3.1(k), the Seller has
good and valid title to all the Assets free and clear of any and all Liens
other than Permitted Liens. The Assets comprise all assets and services
required for the continued conduct of the Business by the Buyer as now
being conducted. The Assets, taken as a whole, constitute all the
properties and assets relating to or used or held for use in connection
with the Business during the past twelve months (except Inventory sold,
cash disposed of, accounts receivable collected, prepaid expenses realized,
Contracts fully performed, properties or assets replaced by equivalent or
superior properties or assets, in each case in the ordinary course of
business, employees not hired by the Buyer and the Excluded Assets). Except
for Excluded Assets, there are no assets or properties used in the
operation of the Business and owned by any Person other than the Seller
that will not be leased or licensed to the Buyer under valid, current
leases or license arrangements. Except as disclosed in Schedule 3.1(k), the
Assets are in all material respects adequate for the purposes for which
such assets are currently used or are held for use, and are in reasonably
good repair and operating condition (subject to normal wear and tear) and,
to the knowledge of the Seller, there are no facts or conditions affecting
the Assets which could, individually or in the aggregate, interfere in any
material respect with the use, occupancy or operation thereof as currently
used, occupied or operated, or their adequacy for such use.
(l) Contracts. (i) Schedule 3.1(l) contains a complete and correct
list of all agreements, contracts, commitments and other instruments and
arrangements (whether written or oral) of the types described below (x) by
which any of the Assets are bound or affected or (y) to which Seller is a
party or by which it is bound in connection with the Business or the Assets
(the "Contracts"):
(A) Leases, licenses, permits, franchises, insurance policies,
Governmental Approvals and other contracts concerning or relating to the
Real Property;
(B) Employment, consulting, agency, collective bargaining or other
similar contracts, agreements, and other instruments and arrangements
relating to or for the benefit of current, future or former employees,
officers, directors, sales representatives, distributors, dealers,
agents, independent contractors or consultants;
(C) Loan agreements, indentures, letters of credit, mortgages,
security agreements, pledge agreements, deeds of trust, bonds, notes,
guarantees and other agreements and instruments relating to the
borrowing of money or obtaining of or extension of credit;
(D) Licenses, licensing arrangements and other contracts providing
in whole or in part for the use of, or limiting the use of, any
Intellectual Property;
(E) Brokerage or finder's agreements;
(F) Joint venture, partnership and similar contracts involving a
sharing of profits or expenses (including, but not limited to, joint
research and development and joint marketing contracts);
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(G) Asset purchase agreements and other acquisition or divestiture
agreements, including but not limited to any agreements relating to the
sale, lease or disposal of any Assets (other than sales of inventory in
the ordinary course of business) or involving continuing indemnity or
other obligations;
(H) Orders and other contracts for the purchase or sale of
materials, supplies, products or services, each of which involves
aggregate payments in excess of $500,000 in the case of purchases or
$1,000,000 in the case of sales;
(I) Contracts with respect to which the aggregate amount that could
reasonably be expected to be paid or received thereunder in the future
exceeds $500,000 per annum or $1,000,000 in the aggregate;
(J) Sales agency, manufacturer's representative, marketing or
distributorship agreements;
(K) Contracts, agreements or arrangements with respect to the
representation of the Business in foreign countries;
(L) Master lease agreements providing for the leasing of both (A)
personal property primarily used in, or held for use primarily in
connection with, the Business and (B) other personal property;
(M) Contracts, agreements or commitments with any employee,
director, officer, stockholder or Affiliate of Seller; and
(N) Any other contracts, agreements or commitments that are
material to the Business.
(ii) The Seller has delivered to the Buyer complete and correct copies
of all written Contracts (other than Seller's Loan Agreement and insurance
documents), together with all amendments thereto, and accurate descriptions
of all material terms of all oral Contracts, set forth or required to be
set forth in Schedule 3.1(l).
(iii) All Contracts are in full force and effect and enforceable
against each party thereto. There does not exist under any Contract any
event of default or event or condition that, after notice or lapse of time
or both, would constitute a violation, breach or event of default
thereunder on the part of Seller or, to the knowledge of Seller, any other
party thereto except as set forth in Schedule 3.1(l) and except for such
events or conditions that, individually and in the aggregate, (i) has not
had or resulted in, and will not have or result in, a Material Adverse
Effect and (ii) has not and will not materially impair the ability of
Seller to perform its obligations under this Agreement and under the
Collateral Agreements. Except as set forth in Schedule 3.1(l), no consent
of any third party is required under any Contract as a result of or in
connection with, and the enforceability of any Contract will not be
affected in any manner by, the execution, delivery and performance of this
Agreement or any of the Collateral Agreements or the consummation of the
transactions contemplated hereby or thereby.
(iv) Seller does not have outstanding any power of attorney relating
to the Business.
(m) Territorial Restrictions. Except as set forth in Schedule 3.1(m),
the Seller is not restricted by any written agreement or understanding with
any other Person from carrying on the Business anywhere in the world. The
Buyer, solely as a result of its purchase of the Business from the Seller
pursuant hereto and the assumption of the Assumed Liabilities, will not
thereby become restricted in carrying on any business anywhere in the
world.
(n) Inventories. All Inventories consist of a quality and quantity
usable and salable in the ordinary course of business except for obsolete
items and items of below-standard quality, all of which have been written
off or written down to net realizable value in the Financial Statements or
on the accounting records of Seller, as the case may be. Except as set
forth on Schedule 3.1(n), (a) all Inventories are of such quality as to
meet the quality control standards of Seller and any applicable
governmental or customer quality control standards, (b) all Inventories
that are finished goods are saleable as current inventories at the current
prices thereof in the ordinary course of business, and (c) all Inventories
not written off are recorded on the books of the Business at the lower of
cost or market value determined in accordance with GAAP. Schedule 3.1(n)
lists the locations of all Inventories.
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(o) Customers. Schedule 3.1(o) sets forth with respect to the Division
(a) the names of all customers of Seller that ordered goods and services
from Seller with an aggregate value for each such customer of $1,000,000 or
more during the twelve-month period ended March 31, 1999 and (b) the amount
for which each such customer was invoiced during such period. Other than
matters of general economic or political nature which affect the Business
and the general economy, Seller has not received any written notice nor has
any knowledge that any significant customer of Seller (i) has ceased, or
will cause, to use the products, goods or services of the Division, (ii)
has substantially reduced or will substantially reduce, the use of
products, goods or services of the Division or (iii) has sought, or is
seeking, to reduce the price it will pay for products, goods or services of
the Division, including in each case after the consummation of the
transactions contemplated hereby. To the knowledge of the Seller, no
customer of the Division described in clause (a) of the first sentence of
this section has otherwise threatened to take any action described in the
preceding sentence as a result of the consummation of the transactions
contemplated by this Agreement and the Collateral Agreements.
(p) Suppliers; Raw Materials. Schedule 3.1(p) sets forth (a) the names
of all suppliers (including without limitation Seller and any Affiliates
thereof) from which the Division ordered raw materials, supplies,
merchandise and other goods and services with an aggregate purchase price
for each such supplier of $250,000 or more during the twelve-month period
ended March 31, 1999 and (b) the amount for which each such supplier
invoiced the Division during such period. Other than matters of general
economic or political nature which affect the Business and the general
economy, Seller has not received any written notice nor has any knowledge
that there has been any material adverse change in the price of such raw
materials, supplies, merchandise or other goods or services, or that any
such supplier will not sell raw materials, supplies, merchandise and other
goods to the Buyer at any time after the Closing Date on terms and
conditions similar to those used in its current sales to the Division,
subject to general and customary price increases. To the knowledge of the
Seller, no supplier of the Division described in clause (a) of the first
sentence of this section has otherwise threatened to take any action
described in the preceding sentence as a result of the consummation of the
transactions contemplated by this Agreement and the Collateral Agreements.
(q) Product Warranties. Except as set forth in Schedule 3.1(q) and for
warranties under Applicable Law, (a) there are no warranties express or
implied, written or oral, with respect to the products of the Business and
(b) there are no pending or threatened claims with respect to any such
warranty, and Seller has no liability with respect to any such warranty,
whether known or unknown, absolute, accrued, contingent or otherwise and
whether due or to become due.
(r) Absence of Certain Business Practices. None of the Seller, any
officer, employee or agent of Seller, or any other person acting on their
behalf, has, directly or indirectly, within the past five years given or
agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other person who is or may be in a position to
help or hinder the Business (or assist Seller in connection with any actual
or proposed transaction relating to the Business) (i) which subjected or
might have subjected Seller to any damage or penalty in any civil, criminal
or governmental litigation or proceeding, (ii) for any of the purposes
described in Section 162 (c) of the Code or (iii) for the purpose of
establishing or maintaining any concealed fund or concealed bank account.
(s) Intellectual Property. (i) Schedule 3.1(s) contains a complete and
correct list of all Intellectual Property that is owned by Seller and
primarily related to, used in, held for use in connection with, or
necessary for the conduct of, or otherwise material to the Business (the
"Owned Intellectual Property") other than (i) inventions, trade secrets,
processes, formulas, compositions, designs and confidential business and
technical information and (ii) Intellectual Property that is both not
registered or subject to application for registration and not material to
the Business. Except as set forth on Schedule 3.1(s), the Seller owns or
has the exclusive right to use pursuant to license, sublicense, agreement
or permission all Intellectual Property Assets, free from any Liens other
than Permitted Liens and free from any requirement of any past, present or
future royalty payments, license fees, charges or other payments, or
conditions or restrictions whatsoever. The Intellectual Property Assets
comprise all of the Intellectual Property materially necessary for the
Buyer to conduct and operate the Business as now being conducted by the
Seller.
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(ii) Subject to Section 4.1(i), immediately after the Closing,
Buyer will own all of the Owned Intellectual Property and will have a
right to use all other Intellectual Property Assets, free from any Liens
(other than Permitted Liens) and on the same terms and conditions as in
effect prior to the Closing.
(iii) To the knowledge of Seller, the conduct of the Business does
not infringe or otherwise conflict with any rights of any Person in
respect of any Intellectual Property. To the knowledge of the Seller,
none of the Intellectual Property Assets is being infringed or otherwise
used or available for use, by any other Person.
(iv) Schedule 3.1(s) sets forth all agreements or arrangements (i)
pursuant to which Seller has licensed Intellectual Property Assets to,
or the use of Intellectual Property Assets is otherwise permitted
(through non-assertion, settlement or similar agreements or otherwise)
by, any other Person and (ii) pursuant to which Seller has had
Intellectual Property licensed to it, or has otherwise been permitted to
use Intellectual Property (through non-assertion, settlement or similar
agreements or otherwise). All of the agreements or arrangements set
forth on Schedule 3.1(s) (x) are in full force and effect in accordance
with their terms and no default exists thereunder by Seller, or to the
knowledge of Seller, by any other party thereto, (y) are free and clear
of all Liens, and (z) except as set forth on Schedule 3.1(s), do not
contain any change in control or other terms or conditions that will
become applicable or inapplicable as a result of the consummation of the
transactions contemplated by this Agreement. Seller has delivered to the
Buyer true and complete copies of all licenses and arrangements
(including amendments) set forth on Schedule 3.1(s). All royalties,
license fees, charges and other amounts payable by, on behalf of, to, or
for the account of, the Seller in respect of any Intellectual Property
are disclosed in the Audited Financial Statements.
(v) No claim or demand of any Person has been made nor is there any
proceeding that is pending, or to the knowledge of the Seller,
threatened, nor is there a reasonable basis therefor, which (i)
challenges the rights of the Seller in respect of any Intellectual
Property Assets, (ii) asserts that Seller is infringing or otherwise in
conflict with, or is, except as set forth in Schedule 3.1(s), required
to pay any royalty, license fee, charge or other amount with regard to,
any Intellectual Property, or (iii) claims that any default exists under
any agreement or arrangement listed on Schedule 3.1(s). None of the
Intellectual Property Assets is subject to any outstanding order,
ruling, decree, judgment or stipulation by or with any court,
arbitrator, or administrative agency, or has been the subject of any
litigation within the last five years, whether or not resolved in favor
of the Seller.
(vi) If so identified on Schedule 3.1(s), the referenced Owned
Intellectual Property has been duly registered with, filed in or issued
by, as the case may be, the United States Patent and Trademark Office,
United States Copyright Office or such other filing offices, domestic or
foreign, and the Seller has taken such other actions, to ensure full
protection under any applicable laws or regulations, and such
registrations, filings, issuances and other actions remain in full force
and effect, in each case to the extent material to the Business.
(vii) Except as set forth in Schedule 3.1(s), there are, and
immediately after the Closing will be, no contractual restriction or
limitations pursuant to any orders, decisions, injunctions, judgments
pursuant to any orders, decisions, injunctions, judgments, awards or
decrees of any Governmental Authority on the Buyer's right to use the
name and ▇▇▇▇ "MTD Automotive" in the conduct of the business as
presently carried on by the Seller or as such Business may be extended
by the Buyer.
(t) Insurance. Schedule 3.1(t) contains a complete and correct list
and summary description of all insurance policies maintained by Seller for
the benefit of or in connection with the Assets or the Business, including,
without limitation, any occurrence-based liability policies in effect at
any time during Seller's operation of the Business. The Seller has made
available to the Buyer complete and correct copies of all such policies
together with all riders and amendments thereto. Such policies are in full
force and effect, and all premiums due thereon have been paid. The Seller
has complied in all material respects with the terms and provisions of such
policies. The insurance coverage provided by such policies is adequate and
customary for the Business. Schedule 3.1(t) sets out all claims made by the
Seller under any policy of insurance during the
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past two years with respect to the Business and to the knowledge of Seller,
there is no basis on which a claim should or could be made under any such
policy with respect to it.
(u) Real Property. (i) Schedule 3.1(u) contains a complete and correct
list of all Owned Real Property setting forth the address and owner of each
parcel of Owned Real Property and describing all improvements thereon
including, without limitation, the properties reflected as being so owned
on the Audited Financial Statements. Seller has, and on the Closing Date
will have, good, valid and marketable fee simple title to the Owned Real
Property indicated on Schedule 3.1.(u) as being owned by it, free and clear
of all Liens other than Permitted Liens. There are no outstanding options
or rights of first refusal to purchase the Owned Real Property, or any
portion thereof or interest therein.
(ii) Schedule 3.1(u) contains a complete and correct list of (i)
all Leases setting forth the address, landlord and tenant for each Lease
and (ii) all Other Leases, setting forth the address, landlord and
tenant for each Other Lease. Seller has delivered to the Buyer correct
and complete copies of the Leases and the Other Leases. Each Lease and
Other Lease is legal, valid, binding, enforceable, and in full force and
effect, except as may be limited by bankruptcy, insolvency,
reorganization and similar Applicable Laws affecting creditors generally
and by the availability of equitable remedies. To the knowledge of
Seller, neither Seller nor any other party is in default, violation or
breach in any respect under any Lease or Other Lease, and no event has
occurred and is continuing that constitutes or, with notice or the
passage of time or both, would constitute a default, violation or breach
in any respect under any Lease or Other Lease. Each Lease grants the
tenant under the Lease the exclusive right to use and occupy the demised
premises thereunder. The Seller has good and valid title to the
leasehold estate under each Lease free and clear of all Liens other than
Permitted Liens. Seller enjoys peaceful and undisturbed possession under
its respective Leases for the Leased Real Property.
(iii) Except for the Excluded Assets, the Real Property constitutes
all the fee and leasehold interests in real property held for use in
connection with, necessary for the conduct of, or otherwise material to,
the Business.
(iv) There are no eminent domain or other similar proceedings
pending or threatened affecting any portion of the Real Property. There
is no writ, injunction, decree, order or judgment outstanding, nor any
action, claim, suit or proceeding, pending or threatened, relating to
the ownership, lease, use, occupancy or operation by any Person of any
Real Property.
(v) Except as set forth on Schedule 3.1(u), the use and operation
of the Real Property in the conduct of the Business does not violate in
any material respect any instrument of record or agreement affecting the
Real Property. Except as set forth on Schedule 3.1(u), there is no
violation of any covenant, condition, restriction, easement or order of
any Governmental Authority having jurisdiction over such property or of
any other Person entitled to enforce the same affecting the Real
Property or the use or occupancy thereof. No damage or destruction has
occurred with respect to any of the Real Property since January 1, 1994
that would, individually or in the aggregate, have a Material Adverse
Effect.
(vi) Except as set forth on Schedule 3.1(u), the Real Property is
in full compliance with all applicable building, zoning, subdivision and
other land use and similar Applicable Laws affecting the Real Property
(collectively, the "Real Property Laws"), and Seller has not received
any notice of violation or claimed violation of any Real Property Law.
There is no pending or, to the knowledge of Seller, anticipated change
in any Real Property Law that will have or result in a material adverse
effect upon the ownership, alteration, use, occupancy or operation of
the Real Property or any portion thereof. Except as set forth on
Schedule 3.1(u), no current use by Seller of the Real Property is
dependent on a nonconforming use or other Governmental Approval the
absence of which would materially limit the use of such properties or
assets held for use in connection with, necessary for the conduct of, or
otherwise material to, the Business.
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(vii) Each parcel included in the Real Property is assessed for
real property tax purposes as a wholly independent tax lot, separate
from adjoining land or improvements not constituting a party of that
parcel.
(viii) No approvals are necessary to subdivide the Owned Real
Property from any Real Property included in the Excluded Assets.
(v) Environmental Matters. (i) All Environmental Permits shall be
validly transferred to the Buyer on the Closing Date. Seller has not been
notified by any relevant Governmental Authority that any Environmental
Permit will be modified, suspended, canceled or revoked, or cannot be
renewed in the ordinary course of business.
(ii) Except as set forth in Schedule 3.1(v), Seller and its
Affiliates have complied and are in compliance in all material respects
with all Environmental Permits and all applicable Environmental Laws
pertaining to the Real Property (and the use, ownership or
transferability thereof) and the Business. No Person has alleged any
violation by Seller or its Affiliates of any Environmental Permits or
any applicable Environmental Law relating to the conduct of the Business
or the use, ownership or transferability of the Real Property.
(iii) Except as set forth in Schedule 3.1(v), neither Seller nor
any of its Affiliates has caused or taken any action that has resulted
or may result in, or has been or is subject to, any liability or
obligation relating to (i) the environmental conditions on, under, or
about any Real Property, the Assets or other properties or assets owned,
leased or used by Seller held for use in connection with, necessary for
the conduct of, or otherwise material to, the Business, or (ii) the past
or present use, management, handling, transport, treatment, generation,
storage or Release of any Hazardous Substances at any location.
(iv) Except as set forth in Schedule 3.1(v):
(1) None of current or past operations, or any by-product
thereof, and none of the currently or formerly owned or operated
property or assets of Seller used in the business, including, without
limitation, the Assets and the Real Property, is or has been related
to or subject to any investigation or evaluation by any Governmental
Authority, as to whether any Remedial Action is needed to respond to
a Release or threatened Release of any Hazardous Substances, nor, to
the knowledge of Seller, are there any conditions with respect to
such property or assets which could give rise to such an
investigation or evaluation in the future.
(2) Seller is not subject to any outstanding order, judgment,
injunction, decree or writ from, or contractual or other obligation
to or with, any Governmental Authority or other Person in respect of
which the Buyer may be required to incur any Environmental
Liabilities and Costs arising from the Release or threatened Release
of a Hazardous Substance.
(3) None of the Real Property is, and neither Seller nor any of
its Affiliates has transported or arranged for transportation
(directly or indirectly) of any Hazardous Substances relating to the
Assets or the Real Property to any location that is, listed or
proposed for listing under CERCLA, or on any similar state list, or
the subject of federal, state or local enforcement actions or
investigations or Remedial Action regardless of whether such location
was listed or proposed for listing at the time of transportation.
(4) No work, repair, construction or capital expenditure is
required or planned in respect of the Assets pursuant to or to comply
with any Environmental Law, nor has Seller or its Affiliates received
any notice of any such requirement, except for such work, repair,
construction or capital expenditure which is not material to the
Business and is in the ordinary course of business.
(v) The Seller has disclosed and made available to the Buyer all
information, including without limitation all studies, analyses and test
results, in the possession, custody or control of Seller and its
Affiliates relating to (i) the environmental conditions on, under or
about the Real Property, and (ii) Hazardous Substances used, managed,
handled, transported, treated, generated, stored or Released
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by Seller or any other Person at any time on any Real Property, or
otherwise in connection with the use or operation of the properties or
assets used in or held for use in connection with the Business.
(w) Employees, Labor Matters, etc. Except as set forth in Schedule
3.1(w), Seller is not a party to or bound by any collective bargaining
agreement and there are no labor unions or other organizations
representing, purporting to represent or attempting to represent any
employees employed in the operation of the Business. Since January 1, 1994
there has not occurred or, to the knowledge of Seller, been threatened any
material strike, slowdown, picketing, work stoppage, concerted refusal to
work overtime or other similar labor activity with respect to any employees
employed in the operation of the Business. Except as set forth on Schedule
3.1(w), there are no labor disputes currently subject to any grievance
procedure, arbitration or litigation and there is no representation
petition pending or, to the knowledge of Seller, threatened with respect to
any employee employed in the operation of the Business. Seller has complied
with all provisions of Applicable Law pertaining to the employment of
employees, including, without limitation, all such Laws relating to labor
relations, equal employment, fair employment practices, entitlements,
prohibited discrimination or other similar employment practices or acts,
except for any failure so to comply that, individually or together with all
such other failures, has not and will not result in a material liability or
obligation on the part of the Buyer or the Business, and has not had or
resulted in, and will not have or result in, individually or in the
aggregate, a Material Adverse Effect.
(x) Employee Benefit Plans and Related Matters. (i) Schedule 3.1(x)
sets forth a true and complete list of each "employee benefit plan," as
such term is defined in section 3(3) of the ERISA, whether or not subject
to ERISA, and each bonus, incentive or deferred compensation, severance,
termination, retention, change of control, stock option, stock
appreciation, stock purchase, phantom stock or other equity-based,
performance or other employee or retiree benefit or compensation plan,
program, arrangement, agreement, policy or understanding, whether written
or unwritten, in each case, other than employee benefit plans that relate
exclusively to employees other than those employed in the Business, that
provides or may provide benefits or compensation in respect of any employee
or former employee employed or formerly employed in the operation of the
Business or the beneficiaries or dependents of any such employee or former
employee (such employees, former employees, beneficiaries and dependents
collectively, the "Employees") or under which any Employee is or may become
eligible to participate or derive a benefit and that is or has been
maintained or established by Seller or any other trade or business, whether
or not incorporated, which, together with Seller is or would have been at
any date of termination occurring within the preceding six years treated as
a single employer under section 414 of the Code (such other trades and
businesses collectively, the "Related Persons"), or to which Seller or any
Related Person contributes or is or has been obligated or required to
contribute or with respect to which Seller or the Business may have any
liability or obligation (collectively, the "Plans"). With respect to each
such Plan, Seller has provided the Buyer complete and correct copies of:
all written Plans; descriptions of all unwritten Plans; all trust
agreements, insurance contracts or other funding arrangements; the two most
recent actuarial and trust reports; the two most recent Forms 5500 and all
schedules thereto; the most recent IRS determination letter; current
summary plan descriptions; all material communications received from or
sent to the IRS, the Pension Benefit Guaranty Corporation or the Department
of Labor (including a written description of any oral communication); an
actuarial study of any post-employment life or medical benefits provided
under any such Plan, if any; statements or other communications regarding
withdrawal or other multiemployer plan liabilities, if any; and all
amendments and modifications to any such document. Seller has not
communicated to any Employee any intention or commitment to modify any Plan
or to establish or implement any other employee or retiree benefit or
compensation arrangement.
(ii) Each Plan intended to be qualified under section 401(a) of the
Code, and the trust (if any) forming a part thereof, has received a
favorable determination letter from the IRS as to its qualification
under the Code and to the effect that each such trust is exempt from
taxation under section 501(a) of the Code, and nothing has occurred
since the date of such determination letter that could adversely affect
such qualification or tax-exempt status.
(iii) The consummation of the transactions contemplated by this
Agreement or the Collateral Agreements will constitute "the disposition
by a corporation of substantially all of the assets (within
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the meaning of section 409(d)(2) of the Code used by such corporation in
a trade or business of such corporation" within the meaning of Section
401(k)(10)(A)(iii) of the Code. In addition, the defined contribution
plans of Seller with respect to the New Employees (the "Retained Defined
Contribution Plans") provide that such a disposition of assets within
the meaning of Section 401(k)(10)(A)(iii) of the Code is a distribution
event for purposes of the Retained Defined Contribution Plans.
(iv) No Plan has incurred an accumulated funding deficiency within
the meaning of Section 302 of ERISA or Section 412 of the Code, nor has
any waiver of the minimum funding standards of Section 302 of ERISA and
Section 412 of the Code been requested of or granted by the Internal
Revenue Service with respect to any Plan, nor has any lien in favor of
any Plan arisen under Section 412 of the Code or Section 302(f) of
ERISA.
(v) The Seller has not been required to provide security to any
defined benefit plan pursuant to Section 401(a)(29) of the Code.
(vi)(A) The Pension Benefit Guaranty Corporation ("PBGC") has not
instituted proceedings to terminate any Plan that is a "defined benefit
plan" within the meaning of Section 3(35) of ERISA of Seller or its
subsidiaries or members of their "controlled group" or to appoint a
trustee or administrator of such defined benefit plan, (B) no known
circumstances exist that constitute grounds under Section 4044 of ERISA
entitling the PBGC to institute any such proceedings, (C) no liability
to the PBGC or under Title IV of ERISA has been incurred or is expected
with respect to any such defined benefit plan that could result in
liability to any member of the "controlled group" or Seller other than
for premiums pursuant to Section 4007 which are not yet due and payable,
and (D) no such defined benefit plan has been terminated by Seller, its
subsidiaries or members of their "controlled group".
(vii) There has been no "reportable event" within the meaning of
Section 4043 of ERISA and the regulations and interpretations thereunder
which has not been fully and accurately reported in a timely fashion, as
required, or which, whether or not reported, would constitute grounds
for the PBGC to institute termination proceedings with respect to any
Plan.
(viii) As of the last valuation date for which a report has been
completed, the fair value of the assets of each Plan that is a defined
benefit plan exceeds the accumulated benefit obligation thereunder (all
determined in accordance with Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 87).
(ix) No liability has been or is expected to be incurred by Seller,
any Related Person or the Business (either directly or indirectly,
including as a result of an indemnification obligation) under or
pursuant to Title I or IV of ERISA or the penalty, excise tax or joint
and several liability provisions of the Code relating to employee
benefit plans that could, following the Closing, become or remain a
liability of the Business or become a liability of the Buyer or of any
employee benefit plan established or contributed to by the Buyer and, to
the knowledge of Seller, no event, transaction or condition has occurred
or exists that could result in any such liability to the business or,
following the Closing, the Buyer.
(x) Each of the Plans has been operated and administered in all
respects in compliance with all Applicable Laws, except for any failure
so to comply that, individually or together with all other such
failures, has not and will not result in a material liability or
obligation on the part of the Business, or, following the Closing, the
Buyer, and has not had or resulted in, and will not have or result in,
individually or in the aggregate, a Material Adverse Effect. There are
no material pending or, to the knowledge of Seller, threatened claims by
or on behalf of any of the Plans, by any Employee or otherwise involving
any such Plan or the assets of any Plan (other than routine claims for
benefits).
(xi) No Plan or any other benefit program sponsored by Seller or
any member of its controlled group is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA or is a "multiple employer plan"
within the meaning of section 4063 or 4064 of ERISA.
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(xii) All contributions required to have been made by Seller and
each related Person to any Plan under the terms of any such Plan or
pursuant to any applicable collective bargaining agreement or Applicable
Law have been made within the time prescribed by any such Plan,
agreement or Applicable Law.
(xiii) The consummation of the transactions contemplated by this
Agreement or the Collateral Agreements will not result in an increase in
the amount of compensation or benefits or the acceleration of the
vesting or timing of payment of any compensation or benefits payable to
or in respect of any Employee.
(xiv) There is no pending or threatened assessment, complaint,
proceeding, or investigation of any kind in any court or government
agency with respect to any Plan (other than routine claims for
benefits), nor is there any basis for one.
(y) [INTENTIONALLY OMITTED]
(z) No Guarantees. Except as set forth on Schedule 3.1(z), none of the
obligations or liabilities of the Business or of the Seller incurred in
connection with the operation of the Business is guaranteed by or subject
to a similar contingent obligation of any other Person. Seller has not
guaranteed or become subject to a similar contingent obligation in respect
of the obligations or liabilities of any other person. There are no
outstanding letters of credit, surety bonds or similar instruments of
Seller or any of its Affiliates in connection with the Business or the
Assets.
(aa) Records. The minute books of the Seller insofar as they relate to
or affect the Business and the Assets are substantially complete and
correct in all material respects. The books of account of the Seller,
insofar as they relate to or affect the Business and the Assets, are
sufficient to prepare the Financial Statements in accordance with GAAP.
(bb) Brokers, Finders, etc. All negotiations relating to this
Agreement, the Collateral Agreements, and the transactions contemplated
hereby and thereby, have been carried on without the participation of any
Person acting on behalf of Seller or its Affiliates in such manner as to
give rise to any valid claim against the Buyer or any of its Subsidiaries
for any brokerage or finder's commission, fee or similar compensation, or
for any bonus payable to any officer, director, employee, agent or sales
representative of or consultant to Seller or its Affiliates upon
consummation of the transactions contemplated hereby or thereby.
(cc) Disclosure. No representation or warranty by Seller contained in
this Agreement nor any statement or certificate furnished or to be
furnished by or on behalf of any Seller to the Buyer or its representatives
in connection herewith or pursuant hereto contains or will contain any
untrue statement of a material fact, or omits or will omit to state any
material fact required to make the statements contained herein or therein
not misleading. There is no fact (other than matters of a general economic
or political nature which affect the Business and the general economy)
known to Seller that has not been disclosed by Seller to the Buyer that
might reasonably be expected to have or result in a Material Adverse
Effect.
(dd) Receivables. All of the Seller's receivables (including accounts
receivable, loans receivable and advances) which have arisen in connection
with the Business and which are reflected in the Audited Financial
Statements, and all such receivables which will have arisen since the
Audited Balance Sheet Date and are reflected on the accounting records of
Seller (collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. Unless paid prior to
the Closing Date, the Accounts Receivable are or will be as of the Closing
current and collectible. Each of the Accounts Receivable either has been or
will be collected in full, without any set-off, within 90 days after the
day on which it first becomes due and payable. There is no contest, claim
or right of set-off under any contract or agreement with any obligor of any
Accounts Receivable relating to the amount or validity of such Account
Receivable. Seller has no knowledge of any facts or circumstances generally
(other than general economic conditions) which would result in any material
increase in the uncollectability of such receivables as a class in excess
of the reserves therefor set forth on the Audited Financial Statements.
Schedule 3.1(dd) hereto accurately lists as of the most recent practicable
date prior to the date of this Agreement, all receivables arising out of or
relating to the Division,
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the amount owing and the aging of such receivable, the name and last known
address of the party from whom such receivable is owing, and any security
in favor of Seller for the repayment of such receivable which Seller
purports to have. Seller shall provide to Buyer an updated list of such
receivables as of the Closing Date.
(ee) Year 2000 Compliance. The systems and software used in the
business of the Business and included in the Assets on and after January 1,
2000 will be Year 2000 Compliant.
(ff) Deep Draw Technology. To the knowledge of Seller, there is no
technology currently available or expected to become available during the
next 12 months that would replace or materially reduce the need for or the
use of deep draw technology. Seller has not been advised, orally or in
writing, by Ford that its utilization of deep draw technology will be
materially reduced during the next 12 months.
(gg) Information in Proxy Statement. None of the information supplied
in writing by Seller specifically for inclusion in the Proxy Statement
will, at the date mailed to shareholders of Buyer and at the time of the
Shareholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
(hh) Investment Intent. The shares of Parent Common Stock being
acquired by Seller pursuant to this Agreement are being acquired for
Seller's own account and not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the
Securities Act of 1933. Seller understands that the Parent Common Stock to
be issued pursuant to this Agreement will not be registered under the
Securities Act of 1933 by reason of its issuance in transactions exempt
from the registration and prospectus delivery requirements of the
Securities Act of 1933 pursuant to Section 4(2) thereof. The Seller has
made an independent investigation of the Parent and an independent
evaluation of the risks and merits of purchasing or acquiring the Parent
Common Stock. The Parent has afforded to Seller and its representatives
access to information (financial and other) concerning the Parent and its
business. The Parent has made available to Seller and its representatives
the officers, accountants and employees of the Company for the purpose of
discussing and responding to questions concerning the Parent and its
business. The Parent has furnished to Seller and its representatives copies
of all instruments, agreements, financial statements or other documents
pertaining to Parent and its business that Seller requested. The Seller
understands that the Parent Common Stock being acquired by Seller pursuant
to this Agreement has not been registered under the Securities Act of 1933
and, therefore, cannot be resold unless such common stock is registered
under the Securities Act of 1933 or unless an exemption from registration
is available.
3.2 Representations and Warranties of the Buyer and Parent. Each of the
Buyer and Parent represents and warrants to Seller as follows:
(a) Corporate Status; Authorization, etc. Each of Buyer and Parent is
a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation with full corporate power
and authority to execute and deliver this Agreement and the Collateral
Agreements to which it is a party, to perform its obligations thereunder
and to consummate the transactions contemplated thereby. The execution and
delivery by each of Buyer and Parent of this Agreement, and the
consummation of the transactions contemplated hereby, have been, and on the
Closing Date the execution and delivery by the Buyer and Parent of the
Collateral Agreements to which it is a party will have been, duly
authorized by all requisite corporate action of Buyer and Parent, as the
case may be, subject, in the case of the Share Issuance, to the Shareholder
Approval. Each of the Buyer and Parent has duly executed and delivered this
Agreement and on the Closing Date will have duly executed and delivered the
Collateral Agreements to which it is a party. This Agreement is, and on the
Closing Date each of the Collateral Agreements to which the Buyer and
Parent is a party will be, valid and legally binding obligations of the
Buyer and the Parent, as the case may be, enforceable against the Buyer and
the Parent, as the case may be, in accordance with their respective terms.
(b) No Conflicts, etc. The execution, delivery and performance by each
of Buyer and Parent of this Agreement and each of the Collateral Agreements
to which it is a party, and the consummation of the
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transactions contemplated hereby and thereby, do not and will not conflict
with or result in a violation of or under (with or without the giving of
notice or the lapse of time, or both) (i) the certificate or articles of
incorporation or by-laws or code of regulations or other organizational
documents of Buyer or Parent, as the case may be, (ii) any Applicable Law
applicable to Buyer or Parent, as the case may be, or any of their
respective Affiliates or any of their respective properties or assets or
(iii) any contract, agreement or other instrument applicable to Buyer or
Parent, as the case may be, or any of their respective Affiliates or any of
their respective properties or assets, except, in the case of clause (iii),
for violations and defaults that, individually and in the aggregate, have
not and will not materially impair the ability of Buyer or Parent, as the
case may be, to perform its obligations under this Agreement or under any
of the Collateral Agreements to which it is a party. Except as specified in
Schedule 3.2(b), no Governmental Approval or other Consent is required to
be obtained or made by Buyer or Parent, as the case may be, in connection
with the execution and delivery of this Agreement or the Collateral
Agreements or the consummation of the transactions contemplated hereby or
thereby.
(c) Litigation. There is no action, claim, suit or proceeding pending,
or to the Buyer's or Parent's knowledge, threatened, by or against or
affecting Buyer or Parent in connection with or relating to the
transactions contemplated by this Agreement or of any action taken or to be
taken in connection herewith or the consummation of the transactions
contemplated hereby.
(d) Brokers, Finders, etc. All negotiations relating to this
Agreement, the Collateral Agreements, and the transactions contemplated
hereby and thereby, have been carried on without the participation of any
Person (other than ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. Incorporated) acting on behalf of
Buyer or Parent or their Affiliates in such manner as to give rise to any
valid claim against Seller for any brokerage or finder's commission, fee or
similar compensation and the fees of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. Incorporated
will be paid by Buyer and Parent.
(e) Proxy Statement. The Proxy Statement at the date mailed to
Parent's shareholders and at the time of the Shareholders Meeting will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading and will comply in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder;
except that no representation is made by Parent or Buyer with respect to
statements made in the Proxy Statement based on information supplied in
writing by Seller specifically for inclusion in the Proxy Statement.
(f) Parent Common Stock. The Parent Common Stock issued to Seller
pursuant to this Agreement will be validly issued, fully paid and
nonassessable and will be issued free of any Liens.
ARTICLE IV
COVENANTS
4.1 Covenants of Seller.
(a) Conduct of Business. From the date hereof to the Closing Date,
except as expressly permitted or required by this Agreement or as otherwise
consented to by the Buyer in writing, Seller will:
(i) carry on the Business in, and only in, the ordinary course, in
substantially the same manner as heretofore conducted, and use all
reasonable efforts to preserve intact its present business organization,
maintain its properties in good operating condition and repair, keep
available the services of its present officers and significant
employees, and preserve its relationship with customers, suppliers and
others having business dealings with it, to the end that its goodwill
and going business shall be in all material respects in the same
condition as on the date of this Agreement following the Closing;
(ii) pay accounts payable and other obligations of the Business
when they become due and payable in the ordinary course of business
consistent with prior practice;
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(iii) perform in all material respects all of its obligations under
all Contracts and other agreements and instruments relating to or
affecting the Business or the Assets, and comply in all material
respects with all Applicable Laws applicable to it, the Assets or the
Business;
(iv) not enter into or assume any agreement, contract or instrument
relating to the Business involving an amount in excess of $50,000, or
enter into or permit any material amendment, supplement, waiver or other
modification in respect thereof;
(v) not grant (or commit to grant) any increase in the compensation
(including incentive or bonus compensation) of any employee employed in
the operation of the Business or institute, adopt or amend (or commit to
institute, adopt or amend) any compensation or benefit plan, policy,
program or arrangement or collective bargaining agreement applicable to
any such employee; and
(vi) not take any action or omit to take any action, which action
or omission would result in a breach of any of the representations and
warranties set forth in Section 3.1(g).
(b) No Solicitation. During the term of this Agreement, none of the
Seller, any of its Affiliates or any Person acting on their behalf shall
(i) solicit or encourage any inquiries or proposals for, or enter into any
discussions with respect to, the acquisition of any properties and assets
held for use in connection with, necessary for the conduct of, or otherwise
material to, the Business or (ii) furnish or cause to be furnished any
non-public information concerning the Business to any Person (other than
the Buyer and its agents and representatives and Seller's agents and
advisors), other than in the ordinary course of business or pursuant to
Applicable Law and after prior written notice to the Buyer. Seller shall
not sell, transfer or otherwise dispose of, grant any option or proxy to
any Person with respect to, create any Lien upon, or transfer any interest
in, any Asset, other than in the ordinary course of business and consistent
with this Agreement.
(c) Access and Information. (i) So long as this Agreement remains in
effect, Seller will (and will cause each of its Affiliates and its and its
Affiliates' respective accountants, counsel, consultants, employees and
agents) after reasonable prior notice give the Buyer, the Buyer's lenders,
and their respective accountants, counsel, consultants, employees and
agents, full access during normal business hours to, and furnish them with
all documents, records, work papers and information with respect to, all of
such Person's properties, assets, books, contracts, commitments, reports
and records relating to the Division or the Business, as the Buyer shall
from time to time reasonably request. In addition, the Seller will permit
the Buyer, and its accountants, counsel, consultants, employees and agents,
reasonable access to such personnel of the Seller during normal business
hours after reasonable prior notice as may be necessary or useful to the
Buyer in its review of the properties, assets and business affairs of the
Division and the Business and the above-mentioned documents, records and
information. The Seller will keep the Buyer generally informed as to any
material developments pertaining to the Business.
(ii) Seller will retain all books and records relating to the
Division in accordance with Seller's record retention policies as
presently in effect. During the seven-year period beginning on the
Closing Date, Seller shall not dispose of or permit the disposal of any
such books and records not required to be retained under such policies
without first giving 60 days' prior written notice to the Buyer offering
to surrender the same to the Buyer at the Buyer's expense.
(d) Public Announcements. Except as required by Applicable Law, the
Seller shall not, and it shall not permit any Affiliate to, make any public
announcement in respect of this Agreement or the transactions contemplated
hereby without the prior written consent of the Buyer.
(e) Further Actions. (i) Seller agrees to use all reasonable good
faith efforts to take all actions and to do all things necessary, proper or
advisable to consummate the transactions contemplated hereby by the Closing
Date, including, without limitation, causing the release of any and all
Liens (other than Permitted Liens) on or affecting the Assets.
(ii) The Seller will, as promptly as practicable, file or supply,
or cause to be filed or supplied, all applications, notifications and
information required to be filed or supplied by any of them pursuant to
Applicable Law in connection with this Agreement, the Collateral
Agreements, the sale and transfer of
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the Assets pursuant to this Agreement and the consummation of the other
transactions contemplated thereby, including, but not limited to,
filings pursuant to the HSR Act.
(iii) Seller, as promptly as practicable, will use all reasonable
efforts to obtain, or cause to be obtained, all Consents (including,
without limitation, all Governmental Approvals and any Consents required
under any Contract) necessary to be obtained by it in order to
consummate the sale and transfer of the Assets pursuant to this
Agreement and the consummation of the other transactions contemplated
hereby.
(iv) Seller will, and will cause its Affiliates to, coordinate and
cooperate with the Buyer in exchanging such information and supplying
such assistance as may be reasonably requested by the Buyer in
connection with the filings and other actions contemplated by Section
4.2(b).
(v) At all times prior to the Closing, Seller shall promptly notify
the Buyer in writing of any fact, condition, event or occurrence that
will or may result in the failure of any of the conditions contained in
Sections 5.1 and 5.2 to be satisfied, promptly upon Seller becoming
aware of the same.
(f) Further Assurances. Following the Closing, the Seller shall, and
shall cause each of its Affiliates to, from time to time, execute and
deliver such additional instruments, documents, conveyances or assurances
and take such other actions as shall be necessary, or otherwise reasonably
requested by the Buyer, to confirm and assure the rights and obligations
provided for in this Agreement and in the Collateral Agreements and render
effective the consummation of the transactions contemplated hereby and
thereby.
(g) Liability for Transfer Taxes. The Sellers shall be responsible for
the timely payment of, and shall indemnify and hold harmless the Buyer
against, all sales (including, without limitation, bulk sales, if
applicable), use, value added, documentary, stamp, gross receipts,
registration, transfer, conveyance, excise, recording, license and other
similar Taxes and fees ("Transfer Taxes"), arising out of or in connection
with or attributable to the transactions effected pursuant to this
Agreement and the Collateral Agreements. The Seller shall prepare and
timely file all Tax Returns required to filed in respect of Transfer Taxes
(including, without limitation, all notices required to be given with
respect to bulk sales taxes), provided that the Buyer shall be permitted to
prepare any such Tax Returns that are the primary responsibility of the
Buyer under Applicable Law. The Buyer's preparation of any such Tax Returns
shall be subject to Seller's approval, which approval shall not be withheld
unreasonably.
(h) Certificates of Tax Authorities. On or before the Closing Date,
the Seller shall provide to the Buyer copies of certificates from the
appropriate taxing authority stating that no Taxes are due to any state or
other taxing authority for which the Buyer could have liability to withhold
or pay Taxes with respect to the transfer of the Assets or the Business,
provided that any failure to provide such certificates to the Buyer which
is not the fault of the Seller shall not relieve the Buyer of its
obligations to enter into and complete the Closing. If the Seller shall
fail to provide such certificates, the Buyer shall withhold or, where
appropriate, escrow such amount as necessary based upon the Buyer's
reasonable estimate of the amount of such potential liability, or as
determined by the appropriate taxing authority, to cover such Taxes until
such time as certificates are provided.
(i) Use of Business Name. After the Closing, Seller will not, directly
or indirectly, use or do business, or allow any Affiliate to use or do
business, or assist any third party in using or doing business, under the
name and marks "MTD Automotive" (or any other name confusingly similar to
such names and marks); provided, however, that Seller shall be entitled to
use the name and ▇▇▇▇ "MTD Automotive" for a period of 120 days after the
Closing in connection with its transition out of the Business and
thereafter with the prior written consent of Buyer. Buyer shall not receive
any right to use (a) the name "MTD" by itself or in combination with any
other words or letters other than "Automotive" or (b) the grass sprig
trademark.
(j) Environmental Assessment. Seller shall retain environmental
consultants and attorneys satisfactory to the Buyer to conduct an
environmental assessment of the Real Property and the other assets,
equipment and facilities owned, leased, operated or used by the Seller in
the Business (the "Environmental Assessment"), to include physical
inspections of the Real Property and such assets, equipment and facilities,
review of all relevant records in the possession or custody or under the
control of any Seller, review of
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relevant governmental agency records and contact with governmental agency
personnel, conduct of sampling activities and any other investigatory
activities of a scope satisfactory to the Buyer. The costs of the
Environmental Assessment shall be borne by the Seller.
(k) Automobile Leases. All leases related to automobiles used by
executives and other employees of Seller who become New Employees shall be
assumed by Buyer and remain in full force and effect until expiration or
earlier termination of such leases. After the expiration or earlier
termination of such leases any subsequent automobile leases for any New
Employees will be provided pursuant to Parent's automobile leasing program.
(l) Product Liability Insurance. Seller has maintained product
liability coverage with respect to products manufactured, delivered or sold
by Seller prior to the Closing Date for a period of 20 years. Such
insurance has provided and shall provide coverage of at least $1,250,000
per occurrence and $4,500,000 in the aggregate, without a deductible.
(m) Audited Financial Statements. Seller shall cause its accountants,
PriceWaterhouseCoopers LLP, at Seller's sole cost and expense, to prepare
for Buyer audited financial statements for the Business for its fiscal year
ended July 31, 1999 (the "1999 Audited Financial Statements"). Such
financial statements shall be prepared in accordance with GAAP consistent
with the Audited Financial Statements and shall include the unqualified
audit opinion of PriceWaterhouseCoopers LLP. Such audited financial
statements shall be delivered to Buyer promptly upon completion of the
audit but in no event later than October 31, 1999.
(n) Fiscal 1999 Bonuses. Seller shall determine the amount and pay to
each New Employee any bonuses and/or commissions which such New Employee is
entitled to receive for services rendered for Seller during Seller's fiscal
year 1999. Such payment shall be made at the time such payment would have
been made if such New Employee had remained an employee of Seller.
(o) Modern Tool & Die Sales Corporation. Seller shall transfer all of
the assets of Modern Tool & Die Sales Corporation to the Division at or
prior to the Closing Date (the "Subsidiary Asset Transfer") and cause such
assets to be conveyed to Buyer pursuant to this Agreement.
(p) Tools and Dies. All rights Seller may have in the tools and dies
currently or formerly used by Seller in the Business which are in the
possession of Seller as of the Closing but owned by other Persons shall,
effective on the Closing Date, be hereby transferred to Buyer. Seller shall
take any and all actions reasonably requested by Buyer to effect and/or
document such transfer. Buyer shall be entitled to use the tools and dies
utilized to manufacture lawnmower blades for so long as it manufactures
blades on behalf of Seller pursuant to Section 4.4(e) of this Agreement.
Buyer shall utilize such tools and dies in accordance with operating
practices and procedures consistent with past practices of the Division,
ordinary wear and tear excepted.
4.2. Covenants of the Buyer.
(a) Public Announcements. Prior to the Closing, except as required by
Applicable Law, the Buyer shall not, and shall not permit its Affiliates
to, make any public announcement in respect of this Agreement or the
transactions contemplated hereby without the prior written consent of
Seller.
(b) Further Actions. (i). The Buyer agrees to use all reasonable good
faith efforts to take all actions and to do all things necessary, proper or
advisable to consummate the transactions contemplated hereby by the Closing
Date.
(ii) The Buyer will, as promptly as practicable, file or supply, or
cause to be filed or supplied, all applications, notifications and
information required to be filed or supplied by Buyer pursuant to
Applicable Law in connection with this Agreement, the Collateral
Agreements, the Buyer's acquisition of the Assets pursuant to this
Agreement and the consummation of the other transactions contemplated
hereby and thereby, including, but not limited to, filings pursuant to
the HSR Act.
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(iii) The Buyer will coordinate and cooperate with the Seller in
exchanging such information and supplying such reasonable assistance as
may be reasonably requested by the Seller in connection with the filings
and other actions contemplated by Section 4.1(e).
(iv) At all times prior to the Closing, the Buyer shall promptly
notify Seller in writing of any fact, condition, event or occurrence
that will or may result in he failure of any of the conditions contained
in Sections 5.1 and 5.3 to be satisfied, promptly upon becoming aware of
the same.
(v) Buyer shall cooperate with Seller in the prosecution of the
lawsuits or claims set forth in Schedule 1.1(j), including making
available its personnel and providing such testimony and access to books
and records as shall be necessary, all at the sole cost and expense of
Seller.
(vi) Buyer will collect all amounts paid in respect of accounts
receivable which constitute Excluded Assets and shall remit such amounts
to Seller on a monthly basis.
(c) Further Assurances. Following the Closing, the Buyer shall, and
shall cause its Affiliates to, from time to time, execute and deliver such
additional instruments, documents, conveyances or assurances and take such
other actions as shall be necessary, or otherwise reasonably requested by
the Seller, to confirm and assure the rights and obligations provided for
in this Agreement and in the Collateral Agreements and render effective the
consummation of the transactions contemplated hereby and thereby.
(d) ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇. If, after the Closing Date, Seller sells its
warehouse facility located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇ to an
unaffiliated third party, Buyer shall remove all inventory owned by Buyer
and stored at such facility within 60 days of receipt of written notice
from Seller of the execution of a definitive agreement providing for such
sale.
4.3 Covenants of Buyer and Seller. (a) As soon as practicable following the
date of this Agreement, Parent and Buyer shall prepare and file with the
Securities and Exchange Commission ("SEC"), and Seller shall cooperate with
Parent and Buyer in such preparation and filing of, the Proxy Statement. Parent
shall cause the Proxy Statement to be mailed to its shareholders as promptly as
practicable after the Proxy Statement is cleared by the staff of the SEC for
mailing to Parent's shareholders.
(b) Parent shall, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
shareholders (the "Shareholders Meeting") in accordance with law, Parent's
Certificate of Incorporation and By-laws for the purpose of obtaining
Shareholder Approval and shall, through the Board of Directors of Parent,
recommend to its shareholders the approval of the issuance of the Parent
Common Stock pursuant to Sections 2.2 and 2.8 of this Agreement ("Share
Issuance").
(c) Seller agrees that (i) it will provide Parent with all information
concerning Seller necessary or reasonably appropriate to be included in the
Proxy Statement and (ii) at the Shareholders Meeting, if held, or any
postponement or adjournment thereof (or at any other meeting at which the
Share Issuance is considered by shareholders of Parent), it will vote, or
cause to be voted, all of the shares of Parent Common Stock then owned by
it or any of its other subsidiaries in favor of the approval of the Share
Issuance.
4.4 Additional Agreements.
(a) Transfer Costs -- Automotive Parts. Effective as of the Closing
Date through and including October 31, 2001, Seller shall sell to the Buyer
the parts listed on Schedule 4.4(a) at the respective unit cost set forth
opposite such parts on Schedule 4.4(a) in such quantities and at such times
as the Buyer shall request in writing. From and after October 31, 2001,
Seller and Buyer shall negotiate in good faith to continue the supply
arrangements set forth in the immediately preceding sentence on such terms
and conditions as the parties shall hereafter agree.
(b) Price Concessions. For the calendar years ended December 31, 1999,
2000, 2001 and 2002, any yearly price concession or concessions implemented
by a customer of the Buyer with respect to the Division's business as set
forth on Schedule 4.4(b)(i) shall be paid by Seller to the Buyer in cash
within 30 days of receipt of written notice from the Buyer of the amount of
such concession. Such written notice shall specify in detail, as available
to Buyer, the basis for such price concession or concessions. The Buyer
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shall conduct all negotiations regarding such price concessions and their
payment with its customers in good faith consistent with the Business's
past practices after a review of such price concessions by, and
consultation with, Seller. Attached as Exhibit 4.4(b)(ii) is a history of
the business's price concessions for fiscal years 1996, 1997 and 1998,
which shall be utilized by Buyer and Seller solely as evidence of the
Business's past practices. Notwithstanding the foregoing, in no event shall
Seller be liable for more than $500,000 of such price concessions per
customer per year. Notwithstanding anything in this Section 4.4(b) to the
contrary, for the calendar years ended December 31, 1999 and 2000, Seller
shall not be obligated to pay the portion of any price concession that
relates to the period commencing on the Closing Date and ending on the
first anniversary of the Closing Date if the First Year EBITDA is less than
8,500,000.
(c) Windstar Costs. Seller shall pay to the Buyer any and all amounts
requested to be paid to Ford Motor Company ("Ford") in connection with the
delay associated with Seller's launch of its products for the Ford Windstar
vehicle model ("Ford Costs") in December 1998 caused by the Seller's
inability to commence operation of its 2500-ton Verson press at its W.
130th facility. Such amounts shall be paid to the Buyer by Seller within 30
days of receipt of written notice from the Buyer detailing such amounts
owed to Ford. The Buyer shall conduct all negotiations with Ford regarding
such costs in good faith consistent with the Business's past practices for
costs of this type after review by, and consultation with, Seller.
(d) Capital Expenditures. The capital expenditures for the Business
set forth on Schedule 4.4(d) for fiscal years 1999 through 2002 (the
"Projected Capital Expenditures") are sufficient to achieve the
corresponding revenue projections for the Business for such fiscal years as
set forth on Schedule 4.4(d). If, in any fiscal year through 2002, the
Buyer must incur capital expenditures in excess of the amounts set forth in
Schedule 4.4(d) to achieve the corresponding revenue projections ("Actual
Capital Expenditures"), then Seller shall pay to the Buyer in cash an
amount equal to the excess of Actual Capital Expenditures over the
Projected Capital Expenditures for such fiscal year. Seller shall make such
payment to the Buyer in cash within 30 days after receipt of a written
notice detailing the capital expenditures required and the calculation of
the amount required to be paid by Seller. For purposes of this Section
4.4(d), (i) "Actual Capital Expenditures" shall exclude costs associated
with plant and facility rationalizations, and (ii) the revenue projections
set forth in Schedule 4.4(d) shall be reduced to the extent agreed to by
the parties in good faith in connection with any plant and facility
rationalizations.
(e) Transfer Costs -- Lawnmower Blades. Effective as of the Closing
Date through and including October 31, 2001, Buyer shall sell to Seller the
parts listed on Schedule 4.4(e) at the respective unit cost set forth
opposite such parts on Schedule 4.4(e) in such quantities and at such times
as Seller shall request in writing. Prior to the Closing, Seller and Buyer
shall negotiate in good faith to enter into an agreement regarding the
supply arrangements set forth in the immediately preceding sentence after
October 31, 2001 on such terms and conditions as the parties shall
hereafter agree and if no agreement can be reached prior to the Closing,
then from and after October 31, 2001, Seller and Buyer shall negotiate in
good faith to continue such supply arrangements on such terms and
conditions as the parties shall hereinafter agree; provided, however, if by
October 31, 2000, Seller and Buyer are not able to execute a written
agreement as to the terms and conditions of such continued supply
arrangements commencing after October 31, 2001, at any time following
October 31, 2000 through October 31, 2001 Seller shall have the right and
option to purchase the Blade Line Equipment as identified in Schedule
4.4(e)(ii), along with any additional enhancements, improvements and
upgrades of the Blade Line Equipment installed after the Closing Date which
are dedicated to the manufacture of the lawnmower blade parts. Seller may
also exercise this right and option to purchase at any time after October
31, 2001 regardless of whether the parties entered into a prior agreement
as to the supply arrangement on or before October 31, 2000 unless such an
agreement establishes a different time schedule for exercising the right
and option. The purchase price for the Blade Line Equipment and
improvements will be as set forth on Schedule 4.4(e)(ii), payable on the
date of transfer of title. Buyer will grant Seller a security interest in
said Blade Line Equipment (and improvements thereto) to secure Buyer's
performance of its obligations under this Section 4.4(e), and will
cooperate with Seller in the execution and filing of UCC financing
statements to record said security interest as of the Closing Date. Seller
shall coordinate with Buyer the removal of the equipment commencing at the
date as determined by Seller. Buyer shall allow Seller access to the
premises for Seller to remove such equipment at Seller's expense. Seller
shall
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cause the relevant portion of the premises to be left in a "broom clean"
condition (without removal of an foundations or filling of any pits).
Seller shall take reasonable efforts to minimize interruption of Buyer's
operations of its business. During the period which Buyer is manufacturing
such parts, Buyer shall manufacture the parts consistent with Seller's
quality assurance standards in effect at Closing. In addition, Buyer will
operate and maintain the Blade Line Equipment consistent with industry
standards and Seller's prior practices, ordinary wear and tear excepted.
Seller acknowledges and agrees that Seller owns (and is not transferring
ownership of) certain patents with regard to the manufacture of the parts
listed on Schedule 4.4(e)(i) and that Seller is hereby providing to Buyer a
royalty free, non-exclusive license to make, use and sell the products only
to the extent that such products are sold to Seller or its subsidiaries.
(f) Dispute Resolution Procedure. If a party has any objections as to
the determination of any matters set forth in Sections 4.4(a) through (e)
(each, a "Covenant Determination"), which determination shall be set forth
in writing, such party shall provide written notice of such objections
("Covenant Objection Notice") within 30 calendar days after receipt of such
determination (the "Covenant Objection Period"). Unless a Covenant
Objection Notice is received by the party making the Covenant Determination
within the Covenant Objection Period, such Covenant Determination shall be
final, conclusive and binding on the parties to this Agreement. If a party
delivers a Covenant Objection Notice within the Covenant Objection Period,
the parties shall use reasonable efforts to resolve all such objections. If
the parties are not able to resolve all the objections set forth in the
Covenant Objection Notice within 14 calendar days after delivery of the
Covenant Objection Notice, the remaining disputed items shall be submitted
for final resolution to the Independent Accountants. After offering Seller
and Seller's representatives and Buyer and Buyer's representatives the
opportunity to present their positions as to the disputed items, which
opportunity shall not extend for more than 30 calendar days after
submission of such disputed items to the Independent Accountants, the
Independent Accountants shall deliver a written report resolving all
disputed items and setting forth the basis for such resolution within 30
calendar days after Seller and Buyer have presented their positions as to
the disputed items. The resolution of the Independent Accountants shall be
final, conclusive and binding upon the parties to this Agreement.
Notwithstanding anything in this Agreement to the contrary, the scope of
the Independent Accountants' review of any dispute between Buyer and Seller
set forth in this Section 4.4 shall be limited solely to the resolution of
the objections set forth in the Covenant Objection Notice.
(g) Costs and Expenses. One-half of the fees, costs and expenses of
the Independent Accountants for services rendered pursuant to Section
4.4(f), shall be paid by Seller and one-half of such fees, costs and
expenses shall be paid by Buyer.
(h) Certain Environmental Matters. After the Closing, Buyer shall
provide Seller with such access to the real property located at ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (▇▇▇ "Liverpool Facility") and ▇▇▇▇ ▇. ▇▇▇▇▇ (▇▇▇ "▇▇▇▇
▇▇▇▇▇ Facility"), to the extent owned by Buyer after the Closing, as
reasonably necessary for Seller to conduct any Onsite Remedial Action.
Seller's use of the Liverpool Facility and/or the West 130th Facility with
respect to such Onsite Remedial Action shall, to the greatest extent
feasible, avoid (or if not feasibly avoidable, minimize) any material
Facility Impact and Seller's use of the Liverpool Facility and/or the West
130th Facility with respect to such Onsite Remedial Action shall not
violate any Environmental Law or contribute to or cause a violation of any
Environmental Law by Buyer. Seller shall, prior to any entry onto the
Liverpool Facility and/or the West 130th Facility, provide such advance
notice to Buyer (including the proposed date and time of such entry,
nature, location and scope of sampling, testing or other Response activity
to be conducted at such facilities during such entry) as is reasonably
sufficient to permit Buyer and Seller to coordinate such entry and actions
with plant operations so as to avoid, to the greatest extent commercially
feasible, disruption of or interference with, operations at the Liverpool
Facility and/or the West 130th Facility. Seller and its representatives may
enter only on the dates and times specified in such notices. Buyer and its
representatives shall have the right to accompany and observe Seller and
its representatives during the performance of all such work and activities
at the Liverpool Facility and/or West 130th Facility, but Buyer and its
representations will not unreasonably interfere with such work and
activities. If and to the extent that any Response activity interferes with
or disrupts Buyer's use of or operations at the Liverpool Facility and/or
the West 130th Facility, then Seller shall promptly attempt to
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minimize such interference or disruption (provided that Seller shall be
responsible for any of Buyer's incremental expenses including, without
limitation, costs of outsourcing production or maintain continuity of
supply to customers to the extent such expenses and costs constitute
Losses) or as a result of such interference or disruption making operations
at the Liverpool Facility and/or the West 130th Facility more costly or
less efficient. Buyer shall, in all events, be obligated to use
commercially reasonable efforts to mitigate the consequences of such
disruption or interference; provided, however, that Seller shall be
obligated to reimburse Buyer for any incremental costs and expenses
incurred by Buyer to mitigate such consequences to the extent such expenses
and costs constitute Losses. In addition, to the extent that such
disruption or interference results in a suspension of any operations at the
Liverpool Facility and/or the West 130th Facility, Seller shall be
obligated to pay to Buyer lost profits on products which Buyer may incur
from such disruption or interferences and despite Buyer's efforts to
mitigate, would have been produced and sold by Buyer to the extent such
lost profits constitute Losses.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions to Obligations of Each Party. The obligations of the parties
to consummate the transactions contemplated hereby shall be subject to the
fulfillment on or prior to the Closing Date of the following conditions:
(a) HSR Act Notification. In respect of the notifications of the Buyer
and Seller pursuant to the HSR Act, if any, the applicable waiting period
and any extensions thereof shall have expired or been terminated.
(b) No Injunction, etc. Consummation of the transactions contemplated
hereby shall not have been restrained, enjoined or otherwise prohibited by
any Applicable Law, including any order, injunction, decree or judgment of
any court or other Governmental Authority. No court or other Governmental
Authority shall have determined any Applicable Law to make illegal the
consummation of the transactions contemplated hereby or by the Collateral
Agreements, and no proceeding with respect to the application of any such
Applicable Law to such effect shall be pending.
(c) Shareholder Approval. The Shareholder Approval shall have been
obtained.
5.2. Conditions to Obligations of the Buyer and Parent. The obligations of
the Buyer and Parent to consummate the transactions contemplated hereby shall be
subject to the fulfillment (or waiver by the Buyer) on or prior to the Closing
Date of the following additional conditions, which Seller agrees to use
reasonable good faith efforts to cause to be fulfilled:
(a) Representations, Performance. The representations and warranties
of the Seller contained in this Agreement and in the Collateral Agreements
(i) shall be true and correct in all respects (in the case of any
representation or warranty containing any materiality qualification) or in
all material respects (in the case of any representation or warranty
without any materiality qualification) at and as of the date hereof, and
(ii) shall be repeated and shall be true and correct in all respects (in
the case of any representation or warranty containing any materiality
qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) on and as
of the Closing Date with the same effect as though made on and as of the
Closing Date. Seller shall have duly performed and complied in all material
respects with all covenants, agreements and conditions required by this
Agreement and each of the Collateral Agreements to be performed or complied
with by it prior to or on the Closing Date. Seller shall have delivered to
the Buyer a certificate, dated the Closing Date and signed by its duly
authorized officers, to the foregoing effect.
(b) Consents. Seller shall have obtained and shall have delivered to
the Buyer copies of (i) all Governmental Approvals required to be obtained
by Seller in connection with the execution and delivery of this Agreement
and the Collateral Agreements and the consummation of the transactions
contemplated hereby or thereby and (ii) all Consents (including, without
limitation, all Consents required under any Contract) necessary to be
obtained in order to consummate the sale and transfer of the Assets
pursuant to this Agreement and the consummation of the other transactions
contemplated hereby and by the Collateral
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Agreements, unless the failure to obtain such Consent would not,
individually or in the aggregate, have a Material Adverse Effect or if
waived by Buyer including under Section 2.7.
(c) No Material Adverse Effect. No event, occurrence, fact, condition,
change, development or effect shall have occurred, exist or come to exist
since the date of this Agreement that, individually or in the aggregate,
has constituted or resulted in, or could reasonably be expected to
constitute or result in, a Material Adverse Effect.
(d) Collateral Agreements. Seller or one of its Affiliates, as the
case may be, shall have entered (i) a transitional services agreement with
the Buyer (the "Transitional Services Agreement") and (ii) personal
property sublease or sublease with Buyer, in form and substance reasonably
satisfactory to Buyer (the "Personal Property Sublease).
(e) Corporate Proceedings. All corporate and other proceedings of the
Seller in connection with this Agreement and the Collateral Agreements and
the transactions contemplated hereby and thereby, and all documents and
instruments incident thereto, shall be reasonably satisfactory in substance
and form to the Buyer and its counsel, and the Buyer and its counsel shall
have received all such documents and instruments, or copies thereof,
certified if requested, as may be reasonably requested.
(f) Transfer Documents. Seller shall have delivered to the Buyer at
the Closing all documents, certificates and agreements necessary to
transfer to the Buyer good and valid or marketable, as the case may be,
title to the Assets, free and clear of any and all Liens thereon, other
than Permitted Liens, including without limitation:
(i) A ▇▇▇▇ of sale, assignment and general conveyance, in form and
substance reasonably satisfactory to the Buyer, dated the Closing Date,
with respect to the Assets, (other than any Asset to be transferred
pursuant to any of the instruments referred to in any other clause of
this Section 5.2(f));
(ii) Assignments of all Contracts, Intellectual Property and any
other agreements and instruments constituting Assets, dated the Closing
Date, assigning to the Buyer all of Seller's right, title and interest
therein and thereto, with any required Consent endorsed thereon;
(iii) A general warranty deed, dated as of the Closing Date, with
respect to each parcel of Owned Real Property that constitutes
Designated Property in the form and substance reasonably satisfactory to
Buyer and Seller, together with any necessary transfer declarations or
other filings;
(iv) An assignment of lease, dated as of the Closing Date, with
respect to each Lease and with respect to each Other Lease, together
with any necessary transfer declarations or other filings, each in form
and substance reasonably satisfactory to Buyer and Seller;
(v) Certificates of title to all motor vehicles included in the
Assets to be transferred to the Buyer hereunder, duly endorsed for
transfer to the Buyer as of the Closing Date; and
(vi) A lease, dated as of the Closing Date, with respect to the
West 130th Facility in the form and substance reasonably satisfactory to
Buyer and Seller.
(g) Environmental Assessment. The Buyer shall have received the
Environmental Assessment which shall be in form and substance reasonably
satisfactory to the Buyer.
(h) Title Policies. The Buyer shall have received from a nationally
recognized title insurance company (the "Title Company") satisfactory to
the Buyer, at Seller's expense, (a) a fee owner's title insurance policy
issued to the Buyer, and a mortgagee's policy issued to one or more lenders
designated by the Buyer, with respect to each Designated Property that is
an Owned Real Property, and (b) a leasehold title insurance policy issued
to the Buyer, and a mortgagee's policy issued to one or more lenders
designated by the Buyer, with respect to each Designated Property that is a
Leased Real Property, in each case in form and substance satisfactory to
the Buyer and the Buyer's lenders, together with endorsements reasonably
requested by the Buyer, including, without limitation, access, zoning,
comprehensive and contiguity endorsements, in an amount determined by the
Buyer, insuring the Buyer and the Buyer's lenders and issued as of the
Closing Date by the Title Company, showing the Buyer or one of the other
Buyer Parties to have a
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fee simple title to each Designated Property that is an Owned Real
Property, and a valid leasehold estate in each Designated Property that is
a Leased Real Property, in each case subject only to Permitted Liens.
Seller shall have delivered to the Title Company any affidavits or
indemnities required by the Title Company in connection with the delivery
of the owner's title policies, leasehold title policies and any mortgagee
title policies issued to the Buyer's lenders.
(i) Surveys. The Buyer shall have received, at Seller's expense, a
survey of each Designated Property, dated within 30 days of the Closing
Date, prepared by a certified or registered surveyor reasonably acceptable
to the Buyer and the Title Company and certified to the Buyer, the Title
Company and the Buyer's lenders, in form and substance satisfactory to the
Buyer, the Title Company and the Buyer's lenders, complying with the
current Minimum Standard Detail Requirements for ALTA/ACSM Land Title
Surveys, including Table A requirements 1-3, 6, 7(a) and (b), 8-11, 14 and
16 and (a) setting forth an accurate description of each parcel of
Designated Property, (b) locating all improvements, Liens (setting forth
the recording information of any recorded instruments), setback lines,
alleys, streets and roads, (c) showing any encroachments upon or by any
improvements on the Designated Property, and (d) showing all dedicated
public streets providing access to the Designated Property and the
municipal address of any improvements located on the Designated Property.
(j) Consents and Estoppels. The Buyer shall have received consents
from the lessor of each Lease listed on Schedule 3.1(u) to the assignment
of such Lease to the Buyer. The Buyer shall also have received estoppel
certificates addressed to the Buyer and the Buyer's lenders from the lessor
of each Lease, dated within 30 days of the Closing Date, identifying the
Lease documents and any amendments thereto, stating that the Lease is in
full force and effect and, to the best knowledge of the lessor, that the
tenant is not in default under the Lease and no event has occurred that,
with notice or lapse of time or both, would constitute a default by the
tenant under the Lease and containing any other information reasonably
requested by the Buyer or the Buyer's lenders.
(k) FIRPTA Certificate. The Buyer shall have received a certificate of
Seller, dated the Closing Date and sworn to under penalty of perjury,
setting forth the name, address and federal tax identification number of
Seller and stating that Seller is not a "foreign person" within the meaning
of section 1445 of the Code, such certificate to be in the form set forth
in the Treasury Regulations thereunder.
(l) Collective Bargaining Agreements. The Agreement, effective May 13,
1996, between Modern Tool & Die Company, a Division of MTD Products Inc.,
and International Union, United Automobile, Aerospace and Agricultural
Implement Workers of America UAW, Local Union No. 2015, and the Agreement,
effective August 25, 1997, between Modern Tool & Die Company, Liverpool
Division of MTD Products Inc., and International Union, United Automobile,
Aerospace and Agricultural Implement Workers of America UAW, Local Union
No. 1619, shall each be amended in form and substance reasonably
satisfactory to Buyer and Buyer shall otherwise be reasonably satisfied
with relations with such unions.
(m) Subsidiary Asset Transfer. At or prior to the Closing, Seller
shall have consummated the Subsidiary Asset Transfer.
5.3. Conditions to Obligations of Seller. The obligation of Seller to
consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by Seller), on or prior to the Closing Date, of the
following additional conditions, which the Buyer agrees to use reasonable good
faith efforts to cause to be fulfilled.
(a) Representations, Performance, etc. The representations and
warranties of the Buyer contained in this Agreement and the Collateral
Agreements (i) shall be true and correct in all respects (in the case of
any representation or warranty containing any materiality qualification) or
in all material respects (in the case of any representation or warranty
without any materiality qualification) at and as of the date hereof and
(ii) shall be repeated and shall be true and correct in all respects (in
the case of any representation or warranty containing any materiality
qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) on and as
of the Closing Date with the same effect as though made at and as of such
time. Buyer shall have duly performed and complied in all material respects
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with all agreements, covenants and conditions required by this Agreement
and the Collateral Agreements to be performed or complied with by it prior
to or on the Closing Date. Buyer shall have delivered to Seller a
certificate, dated the Closing Date and signed by its duly authorized
officer, to the foregoing effect.
(b) Assumption Agreement. Seller shall have received from the Buyer
the Assumption Agreement.
(c) Corporate Proceedings. All corporate proceedings of Buyer in
connection with this Agreement and the Collateral Agreements and the
transactions contemplated hereby and thereby, and all documents and
instruments incident thereto, shall be reasonably satisfactory in substance
and form to Seller, and its counsel, and Seller and its counsel shall have
received all such documents and instruments, or copies thereof, certified
if requested, as may be reasonably requested.
(d) Consents and Approvals. The Seller shall have obtained all
Governmental Approvals necessary to consummate the transactions
contemplated hereby.
(e) Collateral Agreements. The Buyer shall have entered into the
Transitional Services Agreement and the Personal Property Sublease.
ARTICLE VI
EMPLOYEE MATTERS
6.1 Employment of Seller's Employees. Seller will use all reasonable
efforts to cause the employees listed on Schedule 6.1 to make available their
employment services to the Buyer. For a period of three years from the Closing
Date, Seller will not, and will not permit any of its Affiliates to, solicit,
offer to employ or retain the services of or otherwise interfere with the
relationship of Buyer with any Person employed by or otherwise engaged to
perform services for Buyer in connection with the operation of the Business.
Effective as of the Closing Date, Buyer shall offer employment to each employee
of Seller listed on Schedule 6.1, which shall be delivered at least 5 business
days prior to Closing. Buyer shall be responsible for all future obligations to
such employees listed on Schedule 6.1 which obligations occur and result from
actions or events which occur after the Closing Date and relate to Buyer's
operation of the Business after the Closing Date. The term "New Employee" as
used in this Agreement shall mean each employee of Seller who becomes employed
with Buyer after the Closing Date. Notwithstanding the foregoing, Buyer
expressly reserves the right to evaluate its work force needs and the work force
needs of Buyer and to terminate with or without cause the employment of any New
Employee after the Closing Date at Buyer's sole cost and expense.
6.2. Defined Benefit Plans.
(a) As of the date of the Closing, Seller shall take all action
necessary and advisable to spin off from the Retirement Plan for Hourly
Employees (No. 312) of Modern Tool & Die Company Liverpool Division of MTD
Products Inc. (the "Liverpool Plan") a plan ("New Plan 1") that will
include assets and liabilities attributable to the Liverpool Transferred
Employees (as defined below) as of the Closing ( the "Transfer Date"). The
assets transferred from the Liverpool Plan to the New Plan 1 shall be equal
to 100% of the Transfer Plan Liabilities. For purposes of this Section
6.2(a), the "Transfer Plan Liabilities" shall be equal to the actuarial
present value of the accrued plan benefits with respect to the Liverpool
Transferred Employees who were participants in the Liverpool Plan
immediately prior to the Closing, calculated as of the Transfer Date and
using the actuarial assumptions pursuant to Section 414(1) of the Internal
Revenue Code and the regulations thereunder; provided, however, that for
purposes of determining the Transfer Plan Liabilities the interest rate
assumption shall be an interest rate mutually agreed to by the parties and
the mortality table assumption shall be the GAM-83 mortality table. For
purposes of this Agreement, "Liverpool Transferred Employees" shall mean
the active hourly employees of Seller covered by the applicable collective
bargaining agreement between the Seller and the International Union, United
Automobile, Aerospace, and Agricultural Workers of America, Local Union No.
1619 who are employed by the Buyer after the Closing but shall specifically
exclude those deferred vested participants and retirees currently receiving
benefits under the Liverpool Plan.
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(b) Seller shall take all action necessary and advisable to spin off
from the Retirement Plan for Hourly Employees (No. 313) of the Parma Plant
of the Modern Tool & Die Company (the "Parma Plan") a plan ("New Plan 2")
that will include assets and liabilities attributable to the Parma
Transferred Employees (as defined below) as of the Transfer Date. The
assets transferred from the Parma Plan to the New Plan 2 shall be equal to
100% of the "Transfer Plan Liabilities". For purposes of this Section
6.2(b), the Transfer Plan Liabilities shall be equal to the actuarial
present value of the accrued plan benefits with respect to the Parma
Transferred Employees who were participants in the Parma Plan immediately
prior to the Closing, calculated as of the Transfer Date and using the
actuarial assumptions pursuant to Section 414(1) of the Internal Revenue
Code and the regulations thereunder; provided, however, that for purposes
of determining the Transfer Plan Liabilities the interest rate assumption
shall be an interest rate mutually agreed to by the parties and the
mortality table assumption shall be the GAM-83 mortality table. For
purposes of this Agreement, "Parma Transferred Employees" shall mean the
active hourly employees of Seller covered by the applicable collective
bargaining agreement between the Seller and the International Union, United
Automobile, Agricultural Implement Workers of America, Local Union No. 2015
who are employed by the Buyer after the Closing but shall specifically
exclude those deferred vested participants and retirees currently receiving
benefits under the Parma Plan.
6.3 Employee Benefits. Except as provided in Section 6.2, Seller shall
retain all liabilities and obligations with respect to New Employees and any
other current or former employees of Seller under the Plans and any other
employee benefit plans of Seller, other than pursuant to Applicable Laws.
Without limiting the generality of the preceding sentence or of Section 2.6
hereof, except as provided in Section 6.2, Buyer shall have no liability or
obligation whatsoever under the Plans and any other employee benefit plans of
Seller, nor shall Buyer have any obligation to provide any employee benefits to
any New Employees.
6.4 Retained Defined Contribution Plan Transactions. Upon the consummation
of the transactions contemplated by this Agreement and the Collateral
Agreements, Seller shall cause the Retained Defined Contribution Plans to
provide that any New Employee who was a participant in the Retained Defined
Contribution Plans immediately prior to the date of Closing shall be entitled to
receive a "lump sum distribution" as defined in, and in accordance with, the
provisions of Section 401(k)(10) of the Code from the Retained Defined
Contribution Plans. Buyer shall cause a defined contribution plan or plans
sponsored by Buyer to accept direct rollovers (described in Section 402(c) of
the Code) of lump sum distributions to which New Employees are entitled under
the Retained Defined Contribution Plans.
ARTICLE VII
TERMINATION
7.1. Termination. This Agreement may be terminated at any time prior to the
Closing Date:
(a) by the written agreement of the Buyer and Seller;
(b) by either Seller or the Buyer by written notice to the other party
if the transactions contemplated hereby shall not have been consummated
pursuant hereto by 5:00 p.m. Cleveland, Ohio time on September 1, 1999,
unless such date shall be extended by the mutual written consent of Seller
and the Buyer;
(c) by the Buyer by written notice to Seller if (i) the
representations and warranties of Seller shall not have been true and
correct in all respects (in the case of any representation or warranty
containing any materiality qualification) or in all material respects (in
the case of any representation or warranty without any materiality
qualification) as of the date when made or (ii) any of the conditions set
forth in Sections 5.1 or 5.2 shall not have been satisfied as of the
Closing Date, or satisfaction of any such condition becomes impossible,
unless such failure shall be due to the failure of the Buyer to perform or
comply with any of the covenants, agreements or conditions hereof to be
performed or complied with by it prior to the Closing;
(d) by Seller by written notice to the Buyer if (i) the
representations and warranties of the Buyer shall not have been true and
correct in all respects (in the case of any representation or warranty
containing any materiality qualification) or in all material respects (in
the case of any representation or warranty without
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any materiality qualification) as of the date when made or (ii) any of the
conditions set forth in Section 5.1 or 5.3 shall not have been satisfied as
of the Closing Date, or satisfaction of any such condition becomes
impossible, unless such failure shall be due to the failure of Seller to
perform or comply with any of the covenants, agreements or conditions
hereof to be performed or complied with by it prior to the Closing; or
(e) by either Seller or Buyer if the Shareholders Meeting (including
any adjournment or postponement thereof) shall have concluded and the
Shareholder Approval shall not have been obtained.
7.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to the provisions of Section 7.1, this Agreement shall become
void and have no effect, without any liability to any Person in respect hereof
or of the transactions contemplated hereby on the part of any party hereto, or
any of its directors, officers, employees, agents, consultants, representatives,
advisers, stockholders or Affiliates, except as specified in Section 10.1 with
respect to Transaction Expenses and except for any liability resulting from such
party's willful or intentional breach of this Agreement.
ARTICLE VIII
DEFINITIONS
8.1. Definition of Certain Terms. The terms defined in this Section 8.1,
whenever used in this Agreement (including in the Schedules), shall have the
respective meanings indicated below for all purposes of this Agreement. All
references herein to a Section, Article or Schedule are to a Section, Article or
Schedule of or to this Agreement, unless otherwise indicated.
Accounts Receivable: as defined in Section 3.1(dd).
Actions: as defined in Section 3.1(h).
Actual Capital Expenditures: as defined in Section 4.4(d).
Adjustment Amount: as defined in Section 2.3(a).
Affiliate: of a Person means a Person that directly or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first Person. "Control" (including the terms "controlled by"
and "under common control with") means the possession, directly or indirectly,
of the power to direct or cause the direction of the management policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, as trustee or executor, or otherwise.
Aggregate Purchase Price: as defined in Section 2.4(a).
Agreement: this Asset Purchase Agreement, including the Schedules hereto.
Applicable Law: all applicable provisions of all (i) constitutions,
treaties, statutes, laws (including the common law), rules, regulations,
ordinances, codes or orders of any Governmental Authority, (ii) Governmental
Approvals and (iii) orders, decisions, injunctions, judgments, awards and
decrees of or agreements with any Governmental Authority.
Assets: as defined in Section 1.1.
Assumed Contracts: as defined in Section 1.1(c).
Assumed Liabilities: as defined in Section 2.5(a).
Assumption Agreement: as defined in Section 2.5(b).
Audited Balance Sheet: the balance sheet contained in the Audited Financial
Statements.
Audited Balance Sheet Date: July 31, 1998.
Audited Closing Date Balance Sheet: as defined in Section 2.3(b)(i).
Audited Financial Statements: as defined in Section 3.1(d).
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Average Closing Price: means (i) with respect to Section 2.2, the average
closing price for a share of Parent Common Stock as quoted on the Nasdaq
National Market during the period of the fifteen most recent trading days ending
on the first Business Day immediately preceding the Closing Date or (ii) with
respect to Section 2.8, (A) the sum of the average closing price for a share of
Parent Common Stock as quoted on the Nasdaq National Market during the period of
the fifteen most recent trading days ending on each of the three-month,
six-month, nine-month and one-year anniversaries of the Closing Date divided by
(B) four.
Benefit Liabilities: all past, present and future obligations and
liabilities of Seller arising out of contract or law (i) with respect to each
Plan and (ii) with respect to all employees and former employees of Seller in
connection with any event commencing, occurring or failing to occur on or prior
to the Closing Date.
Business: as defined in the Recitals to this Agreement.
Business Day: shall mean a day other than a Saturday, Sunday or other day
on which commercial banks in Cleveland, Ohio are authorized or required to
close.
Buyer: as defined in the first paragraph of this Agreement.
Buyer Indemnities: as defined in Section 9.1.
CERCLA: the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. 9601 et seq.
Closing: as defined in Section 2.1.
Closing Date: as defined in Section 2.1.
Closing Net Working Capital: the difference between (a) the sum of the
aggregate (i) prepaid expenses, (ii) accounts receivable (excluding any
receivable outstanding over 90 calendar days and net of any reserves) and
(iii)inventory (excluding any finished goods held over 90 calendar days and any
raw materials held over 120 calendar days) of the Business as of the close of
business on the Closing Date reduced by (b) the sum of the aggregate (i)
accounts payable and (ii) accrued liabilities of the Business as of the close of
business on the Closing Date, in each case as reflected in the Audited Closing
Date Balance Sheet.
Code: the Internal Revenue Code of 1986, as amended.
Collateral Agreements: the agreements and other documents and instruments
described in Sections 5.2(d) and 5.3(e).
Consent: any consent, approval, authorization, waiver, permit, grant,
franchise, concession, agreement, license, exemption or order of, registration,
certificate, declaration, application or filing with, or report or notice to,
any Person, including, but not limited to, any Governmental Authority.
Contamination: means (i) any Hazardous Substances which, on or prior to the
Closing Date, is or was present in, on or under the Liverpool Facility and/or
the West 130th Facility and (ii) any Hazardous Substance which, on or prior to
the Closing Date is or was present, in, on or under the Liverpool Facility
and/or the West 130th Facility and which prior to the Closing Date Migrated or
after the Closing Date Migrates from the Liverpool Facility and/or the West
130th Facility.
Contract: as defined in Section 3.1(l).
Covenant Determination: as defined in Section 4.4(f).
Covenant Objection Notice: as defined in Section 4.4(f).
Covenant Objection Period: as defined in Section 4.4(f).
Covered Returns: as defined in Section 3.1(f).
Covered Taxes: as defined in Section 3.1(f).
Designated Properties: the real property located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇.
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Division: as defined in the Recitals to this Agreement.
$ or dollars: lawful money of the United States.
Earnout Amount: as defined in Section 2.8(a).
Earnout Certificate: as defined in Section 2.8(d)(i).
Earnout Objection Notice: as defined in Section 2.8(d)(i).
Earnout Objection Period: as defined in Section 2.8(d)(i).
Earnout Payment Date: shall means (i) if no Earnout Objection Notice is
timely delivered by Seller to Buyer, three Business Days after the earlier of
(A) the expiration of the Earnout Objection Period and (B) the date of delivery
by Seller to Buyer of a notice that an Earnout Certificate will be accepted by
Seller without objection; or (ii) if an Earnout Objection Notice is timely
delivered to Buyer, three Business Days after the date all disputed items are
finally resolved pursuant to Section 2.8(d).
EBITDA: means earnings before all interest expenses, income tax expenses,
depreciation and amortization (including depreciation/amortization on all fixed
assets, tooling, special equipment, intangible assets and reusable containers),
in accordance with GAAP consistent with the accounting policies utilized in the
Audited Financial Statements. In addition, EBITDA shall be computed on a
historical accounting basis, which excludes the impact of purchase accounting
adjustments on future earnings. EBITDA shall also exclude all Buyer transaction
costs, legal fees, advisory fees and corporate overhead/support charges.
EBITDA Committee: a committee comprised of two designees of Seller and two
designees of Buyer, which designees may be changed at any time by Buyer or
Seller, as the case may be, formed to review the Business's EBITDA for a one
year period commencing the Closing Date.
Employees: as defined in Section 3.1(x).
Environmental Assessment: as defined in Section 4.1(j).
Environmental Laws: all Applicable Laws relating to the protection of the
environment, to human health and safety, or to any emission, discharge,
generation, processing, storage, holding, abatement, existence, Release,
threatened Release or transportation of any Hazardous Substances, including,
without limitation, (i) all requirements pertaining to reporting, licensing,
permitting, investigation or remediation of emissions, discharges, releases or
threatened releases of Hazardous Substances into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, sale, treatment, receipt, storage, disposal, transport or handling of
Hazardous Substances, and (ii) all other requirements pertaining to the
protection of the health and safety of employees or the public.
Environmental Liabilities and Costs: all Losses, whether direct or
indirect, known or unknown, current or potential, past, present or future,
imposed by, under or pursuant to Environmental Laws, including, without
limitation, all Losses and oversight costs of Governmental Authorities related
to Remedial Actions, and all fees, disbursements and expenses of counsel,
experts, personnel and consultants based on, arising out of or otherwise in
respect of: (i) the ownership or operation of the Business, Real Property or
Other Leases or any other real properties, assets, equipment or facilities, by
Seller, or any of its predecessors or Affiliates; (ii) the environmental
conditions existing on the Closing Date on, under, above, or about any Real
Property or property subject to Other Leases or any other real properties,
assets, equipment or facilities currently or previously owned, leased or
operated by Seller, or any of its predecessors or Affiliates; (iii) the
treatment, storage or disposal of Hazardous Substances generated by Seller or
any of its Affiliates; and (iv) expenditures necessary to cause any Real
Property or any aspect of the Business to be in compliance with any and all
requirements of Environmental Laws as of the Closing Date, including, without
limitation, all Environmental Permits issued under or pursuant to such
Environmental Laws, and reasonably necessary to make full economic use of any
Real Property.
Environmental Permits: any federal, state and local permit, license,
registration, consent, order, administrative consent order, certificate,
approval, application or other authorization necessary for the lawful conduct of
the Business as currently conducted or previously conducted under any
Environmental Law.
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ERISA: the Employee Retirement Income Security Act of 1974, as amended.
Excess Earnout Amount: as defined in Section 2.8(a).
Excluded Assets: as defined in Section 1.2.
Excluded Liabilities: as defined in Section 2.6.
Facility Impact: means (i) causing damage to or alteration of any part of
the Liverpool Facility and/or the West 130th Facility, including, without
limitation by the construction or installation of any remediation or monitoring
equipment, devices or systems, (ii) limiting or restricting any current or
future use, expansion, construction, renovation, improvement or closure of all
or any part of all the Liverpool Facility and/or the West 130th Facility, (iii)
limiting, restricting, interfering with or disrupting current or future use of
or operations at the Liverpool Facility and/or the West 130th Facility including
the present and future permit status of the Liverpool Facility and/or the West
130th Facility, or (iv) causing the Liverpool Facility and/or the West 130th
Facility or any use or operations at the Liverpool Facility and/or the West
130th Facility to be in violation of any Environmental Law.
Financial Statements: each of the financial statements required to be
provided by Section 3.1(d).
First Year EBITDA: the EBITDA of the Business for the twelve-month period
ending on the first anniversary of the Closing Date.
Ford: as defined in Section 4.4(c).
Ford Costs: as defined in Section 4.4(c).
GAAP: generally accepted accounting principles as in effect in the United
States.
Governmental Approval: any Consent of, with or to any Governmental
Authority, including, without limitation, any Environmental Permit.
Governmental Authority: any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including, without limitation, any government authority, agency, department,
board, commission or instrumentality of the United States, any State of the
United States or any political subdivision thereof, and any tribunal or
arbitrator(s) of competent jurisdiction, and any self-regulatory organization.
Hazardous Substances: any substance that: (i) is or contains asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls, petroleum or
petroleum-derived substances or wastes, radon gas or related materials, (ii)
requires investigation, removal or remediation under any Environmental Law, or
is defined, listed or identified as a "hazardous waste," "hazardous material,"
"toxic substance" or "hazardous substance" thereunder, or (iii) is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic, or otherwise hazardous and is regulated by any Governmental Authority
or Environmental Law.
HSR Act: the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended.
Indemnified Party: as defined in Section 9.3.
Indemnifying Party: as defined in Section 9.3.
Independent Accountants: as defined in Section 2.3(b)(iii).
Initial Net Working Capital: means $27,000,000.
Intellectual Property: any and all United States and foreign: (a) patents
(including design patents, industrial designs and utility models) and patent
applications (including docketed patent disclosures awaiting filing, reissues,
divisions, continuations-in-part and extensions), patent disclosures awaiting
filing determination, inventions and improvements thereto, (b) trademarks,
service marks, trade names, trade dress, logos, business and product names,
slogans, and registrations and applications for registration thereof; (c)
copyrights (including software) and registrations thereof; (d) inventions,
processes, designs, formulae, trade secrets, know-how, industrial models,
confidential and technical information, manufacturing, engineering and technical
drawings,
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product specifications and confidential business information, including any such
matters under development and for which subsection (a) above is not applicable;
(e) mask work and other semiconductor chip rights and registrations thereof; (f)
intellectual property rights (including common law rights) similar to any of the
foregoing; and (g) copies and tangible embodiments thereof (in whatever form or
medium, including electronic media).
Intellectual Property Assets: as defined in Section 1.1(f).
Inventories: as defined in Section 1.1(b).
IRS: the Internal Revenue Service.
knowledge: actual knowledge after reasonable inquiry.
Leased Real Property: means all interests leased pursuant to the Leases.
Leases: means the real property leases, subleases, licenses and occupancy
agreements related to the Business and pursuant to which Seller is the lessee,
sublessee, licensee or occupant other than real property leases, subleases,
licenses and occupancy agreements included in Excluded Assets.
Lien: any mortgage, pledge, hypothecation, right of others, claim, security
interest, encumbrance, lease, sublease, license, occupancy agreement, adverse
claim or interest, easement, covenant, encroachment, burden, title defect, title
retention agreement, voting trust agreement, interest, equity, option, lien,
right of first refusal, charge or other restrictions or limitations of any
nature whatsoever, including, but not limited to, such as may arise under any
Contracts.
Liverpool Facility: as defined in Section 4.4(h).
Liverpool Plan: as defined in Section 6.2(a).
Liverpool Transferred Employees: as defined in Section 6.2(a).
Losses: as defined in Section 9.1.
Material Adverse Effect: any event, occurrence, fact, condition, change or
effect that is materially adverse to the business, operations, prospects,
results of operations, condition (financial or otherwise), properties (including
intangible properties), assets (including intangible assets) or liabilities of
the Business.
Migration: means seeping, leaching or other movement of Hazardous
Substances through the soil, land, surface or subsurface strata, sediments,
surface water or ground water.
New Employees: as defined in Section 6.1.
New Plan 1: as defined in Section 6.2(a).
New Plan 2: as defined in Section 6.2(b).
Notice of Objection: as defined in Section 2.3(b)(ii).
Objection Period: as defined in Section 2.3(b)(ii).
Onsite Remedial Action: means any investigatory, remedial, cleanup,
corrective or compliance action undertaken pursuant to Environmental Laws after
the Closing Date at, or, or with respect to conditions emanating or migrating
from, the Liverpool Facility and/or the West 130th Facility.
Orders: any order, judgment, injunction, award, decree, ruling, charge or
writ of any Governmental Authority.
Other Leases: the leases, subleases, licenses and occupancy agreements
pursuant to which Seller is a lessor, sublessor or licensor of any part of the
Real Property.
Owned Intellectual Property: as defined in Section 3.1(s).
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Owned Real Property: the real property owned by Seller and used in the
Business, together with all structures, facilities, improvements, fixtures,
systems, equipment and items of property located thereon, attached or
appurtenant thereto and all easements, licenses, rights and appurtenances
relating to the foregoing other than owned real property, if any, included in
Excluded Assets.
Parent: as defined in the first paragraph of this Agreement.
Parent Common Stock: as defined in Section 2.2.
Parent Common Stock Cap: as defined in Section 2.8(b)(i).
Parma Plan: as defined in Section 6.2(b).
Payment Date: as defined in Section 2.3(d).
PBGC: as defined in Section 3.1(x).
Permitted Liens: (i) Liens reserved against in the Audited Balance Sheet,
to the extent so reserved, (ii) Liens for Taxes not yet due and payable or which
are being contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on Seller's books in accordance
with GAAP, (iii) Liens that, individually and in the aggregate, do not and would
not materially detract from the value of any of the property or assets of the
Business or materially interfere with the use thereof as currently used or
contemplated to be used or otherwise; or (iv) Liens listed in the title policies
provided pursuant to Section 5.2(h).
Person: any natural person, firm, partnership, association, corporation,
limited liability company, trust, business trust, Governmental Authority or
other entity.
Personal Property Sublease: as defined in Section 5.2(d).
Plan: as defined in Section 3.1(x).
Projected Capital Expenditures: as defined in Section 4.4(d).
Purchase Price: as defined in Section 2.2.
Real Property: the Owned Real Property and the Leased Real Property.
Real Property Laws: as defined in Section 3.1(u).
Related Persons: as defined in Section 3.1(x).
Release: any releasing, disposing, discharging, injecting, spilling,
leaking, leaching, pumping, dumping, emitting, escaping, emptying, seeping,
dispersal, migration, transporting, placing and the like, including, without
limitation, the moving of any materials through, into or upon, any land, soil,
surface water, ground water or air, or otherwise entering into the environment.
Remedial Action: all actions required to (i) clean up, remove, treat or in
any other way remediate any Hazardous Substances; (ii) prevent the release or
migration of Hazardous Substances so that they do not endanger or threaten to
endanger public health or welfare or the environment; or (iii) perform studies,
investigations and care related to any such Hazardous Substances.
Response: means "response" as defined in 42 U.S.C. Section 9601(25), to the
extent necessary to comply with Environmental Law, and includes all ancillary
activities reasonably or necessarily required to investigate the nature and
extent of Contamination and to implement such response action, including but not
limited to: (i) obtaining access agreements, Governmental Authority approvals,
and permits required by federal, state or local law; (ii) preparing and
submitting reports required by any Governmental Authority order or requirement;
(iii) operation and maintenance activities associated with any treatment system;
(iv) monitoring activities; (v) oversight costs of a Governmental Authority; and
(vi) investigative, remedial and monitoring work in, on, under or about
properties as to which actual or suspected Migration of Hazardous Substances has
or may have occurred.
Retained Defined Contribution Plan: as defined in Section 3.1(x)(iii).
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SEC: as defined in Section 4.3(a).
Seller: as defined in the first paragraph of this Agreement.
Seller Indemnities: as defined in Section 9.2.
Share Issuance: as defined in Section 4.3(b).
Shareholder Approval: the approval of the Share Issuance by (i) a majority
of the total votes cast in person or by proxy at the Special Meeting and (ii) a
majority of the total votes cast in person or by proxy at the Special Meeting
excluding the votes of Seller and any other interested stockholder as determined
by Buyer prior to the Special Meeting.
Shareholder Meeting: as defined in Section 4.3(b).
Shortfall Earnout Amount: as defined in Section 2.8(a).
Subsidiaries: each corporation or other Person in which a Person owns or
controls, directly or indirectly, capital stock or other equity interests
representing at least 50% of the outstanding voting stock or other equity
interests.
Subsidiary Asset Transfer: as defined in Section 4.1(o).
Tax: any federal, state, provincial, local, foreign or other income,
alternative, minimum, accumulated earnings, personal holding company, franchise,
capital stock, net worth, capital, profits, windfall profits, gross receipts,
value added, sales, use, goods and services, excise, customs duties, transfer,
conveyance, mortgage, registration, stamp, documentary, recording, premium,
severance, environmental (including taxes under Section 59A of the Code), real
property, personal property, ad valorem, intangibles, rent, occupancy, license,
occupational, employment, unemployment insurance, social security, disability,
workers compensation, payroll, health care, withholding, estimated or other
similar tax, duty or other governmental charge or assessment or deficiencies
thereof (including all interest and penalties thereon and additions thereto
whether disputed or not).
Tax Return: any return, report, declaration, form, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Title Company: as defined in Section 5.2(h).
Transaction Expenses: as defined in Section 10.1.
Transfer Date: as defined in Section 6.2(a).
Transfer Plan Liabilities: as defined in Section 6.2(b).
Transfer Taxes: as defined in Section 4.1(g).
Transitional Services Agreement: as defined in Section 5.2(d).
Treasury Regulations: the regulations prescribed pursuant to the Code.
Unaudited Financial Statements: as defined in Section 3.1(d).
West 130th Facility: as defined in Section 4.4(h).
Withholding Taxes: as defined in Section 3.1(f).
Year 2000 Compliant: the systems and software are able (i) to accurately
process date/time data (including, but not limited to, calculation, comparing
and sequencing) from, into and between the twentieth and twenty-first centuries
and during the years 1999 and 2000, including leap year calculations) and (ii)
to function accurately and without interruption before, during and after January
1, 2000 without any change in operations associated with the advent of the
twenty-first century.
1999 Audited Financial Statements: as defined in Section 4.1(u).
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ARTICLE IX
INDEMNIFICATION
9.1 Indemnification By Seller. Seller covenants and agrees to defend,
indemnify and hold harmless the Buyer and Parent and their respective officers,
directors, employees, agents, advisers, representatives and Affiliates
(collectively, the "Buyer Indemnitees") from and against, and pay or reimburse
the Buyer Indemnitees for, any and all claims, liabilities, obligations, losses,
fines, costs, royalties, proceedings, deficiencies or damages (whether absolute,
accrued, conditional or otherwise and whether or not resulting from third party
claims), including out-of-pocket expenses and reasonable attorneys' and
accountants' fees incurred in the investigation or defense of any of the same or
in asserting any of their respective rights hereunder (collectively, "Losses"),
resulting from or arising out of:
(i) any inaccuracy of any representation or warranty made by Seller
herein or under any Collateral Agreement or in connection herewith or
therewith;
(ii) any failure of Seller to perform any covenant or agreement
hereunder or under any Collateral Agreement or fulfill any other obligation
in respect hereof or thereof;
(iii) any Excluded Liabilities or Excluded Assets;
(iv) any and all Benefit Liabilities;
(v) all Environmental Liabilities and Costs arising out of the
operation of the Business prior to the Closing Date or relating to the
Excluded Assets;
(vi) any product liability claim with respect to products
manufactured, delivered or sold or events occurring prior to the Closing;
(vii) any failure of the Seller to comply with applicable bulk sales
laws, if any (in consideration of which indemnification obligation the
Buyer hereby waives compliance by the Seller with any applicable bulk sales
laws);
(viii) any Actions or Orders, whether commenced or asserted or
instituted before or after the Closing Date, against the Buyer or Parent or
any of their Subsidiaries (including, without limitation, the Actions and
Orders described on Schedule 3.1(h), Actions or Orders related to
environmental and health and safety matters and workers' compensation
matters) brought by any Person or Governmental Authority relating to or
resulting from events or occurrences on or before the Closing Date with
respect to the Business and/or the Assets;
(ix) any matters described or referred to in Schedule 3.1(v) or in any
documents or reports listed on Schedule 3.1(v); and
(x) the failure of the Assets or Business to be Year 2000 Compliant
(except to the extent such failure is the result of actions taken by Buyer
after the Closing Date).
Except for Losses based on any inaccuracy in any representation or warranty
made or contained in Sections 3.1(f), (k) (with respect to the first sentence
only), (v), (x) and (bb), which shall not be subject to the following
limitations, Seller shall not be obligated to indemnify the Buyer Indemnities
for any Losses pursuant to Section 9.1(i) unless and until the aggregate amount
of all such Losses in respect of any individual event or occurrence giving rise
to such Losses exceeds $15,000, in which event the Buyer Indemnities shall be
entitled to recover all Losses resulting from or arising out of such claim to
the extent such Losses exceed $15,000. Except for Losses based on any inaccuracy
in any representation or warranty made or contained in Sections 3.1(f), (k)
(with respect to the first sentence only), (v), (x) and (bb), which shall not be
subject to the following limitation, in no event shall the aggregate liability
of Seller for Losses pursuant to Section 9.1(i) exceed $10,000,000.
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9.2 Indemnification By the Buyer. The Buyer covenants and agrees to defend,
indemnify and hold harmless Seller and its officers, directors, employees,
agents, advisers, representatives and Affiliates (collectively, the "Seller
Indemnities") from and against any and all Losses resulting from or arising out
of:
(i) any inaccuracy in any representation or warranty by the Buyer or
Parent made or contained in this Agreement or any Collateral Agreement or
in connection herewith or therewith;
(ii) any failure of Buyer or Parent to perform any covenant or
agreement made or contained in this Agreement or any Collateral Agreement
or fulfill any other obligation in respect thereof;
(iii) the Assumed Liabilities; and
(iv) the operation of the Business by the Buyer or the Buyer's
ownership, operation or use of the Assets following the Closing Date,
except, in the case of clause (iv), to the extent such Losses result from
or arise out of the Excluded Liabilities or constitute Losses for which
Seller is required to indemnify the Buyer Indemnities under Section 9.1.
9.3 Indemnification Procedures. In the case of any claim asserted by a
third party against a party entitled to indemnification under this Agreement
(the "Indemnified Party"), notice shall be given by the Indemnified Party to the
party required to provide indemnification (the "Indemnifying Party") within ten
days after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and the Indemnified Party shall permit the Indemnifying
Party (at the expense of such Indemnifying Party) to assume the defense of any
claim or any litigation resulting therefrom, provided that (i) the counsel for
the Indemnifying Party who shall conduct the defense of such claim or litigation
shall be reasonably satisfactory to the Indemnified Party, (ii) the Indemnified
Party may participate in such defense at such Indemnified Party's expense, and
(iii) the omission by any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its indemnification obligation under
this Agreement except to the extent that such omission results in a failure of
actual notice to the Indemnifying Party and such Indemnifying Party is
materially damaged as a result of such failure to give notice. Except with the
prior written consent of the Indemnified Party, no Indemnifying Party, in the
defense of any such claim or litigation, shall consent to entry of any judgment
or enter into any settlement that provides for injunctive or other nonmonetary
relief affecting the Indemnified Party or that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation. In the event that the Indemnified Party shall in good faith
reasonably determine that the conduct of the defense of any claim subject to
indemnification hereunder or any proposed settlement of any such claim by the
Indemnifying Party might be expected to affect adversely the Indemnified Party's
Tax liability or the ability of the Indemnified Party to conduct its business,
or that the Indemnified Party may have available to it one or more defenses or
counterclaims that are inconsistent with one or more of those that may be
available to the Indemnifying Party in respect of such claim or any litigation
relating thereto, the Indemnified Party shall have the right at all times to
take over and assume control over the defense, settlement, negotiations or
litigation relating to any such claim at the sole cost of the Indemnifying
Party, provided that if the Indemnified Party does so take over and assume
control, the Indemnified Party shall not settle such claim or litigation without
the written consent of the Indemnifying Party, such consent not to be
unreasonably withheld. In the event that the Indemnifying Party does not accept
the defense of any matter as above provided, the Indemnified Party shall have
the full right to defend against any such claim or demand and shall be entitled
to settle or agree to pay in full such claim or demand. In any event, the
Indemnifying Party and the Indemnified Party shall cooperate in the defense of
any claim or litigation subject to this Section 9.3 and the records of each
shall be available to the other with respect to such defense.
9.4 Time Limitation. All claims for indemnification under Section 9.1 or
Section 9.2 must be asserted prior to the termination of the respective survival
periods set forth in Section 9.5.
9.5 Survival of Representations, Warranties, Covenants and Agreements.
(a) The representations and warranties contained in this Agreement shall surviv
the execution and delivery of this Agreement, any
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examination by or on behalf of the parties hereto and the completion of the
transactions contemplated herein, but only to the extent specified below:
(i) except as set forth in clauses (ii) and (iii) below, the
representations and warranties contained in Section 3.1 and Section 3.2
shall survive for a period of three years following the Closing Date;
(ii) the representations and warranties contained in Sections 3.1(a),
(b), (c), (k) (with respect to the first sentence only), (v) and (bb) and
Sections 3.2(a), (b) and (d) shall survive without limitation; and
(iii) the representations and warranties of Seller contained in
Section 3.1(f) and (x) shall survive for so long as any applicable statute
of limitations remains open, in whole or in part, including, without
limitation, by reason of waiver of such statute of limitations.
(b) The covenants and agreements of the parties hereby shall survive the
Closing in accordance with their terms or until the expiration of the applicable
statute of limitations. Notwithstanding the foregoing, Seller's and Buyer's
indemnification obligations pursuant to Section 9.1 and Section 9.2,
respectively, shall not terminate.
ARTICLE X
MISCELLANEOUS
10.1 Expenses. Seller, on the one hand, and the Buyer and Parent, on the
other hand, shall bear their respective expenses, costs and fees (including
attorneys' and auditors' fees) in connection with the transactions contemplated
hereby, including the preparation, execution and delivery of this Agreement and
compliance herewith (the "Transaction Expenses"), whether or not the
transactions contemplated hereby shall be consummated; provided, however, that
the filing fee with respect to any HSR Act filing shall be paid one-half by
Buyer and one-half by Seller.
10.2 Severability. If any provision of this Agreement, including any
phrase, sentence, clause, Section or subsection is inoperative or unenforceable
for any reason, such circumstances shall not have the effect of rendering the
provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein contained
invalid, inoperative, or unenforceable to any extent whatsoever.
10.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, or (c) sent by next-day or overnight mail or
delivery or (d) sent by telecopy or telegram.
(i) if to the Parent or Buyer to,
Shiloh Industries, Inc.
P. O. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
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(ii) if to Seller to:
MTD Products Inc
▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wegman, Hessler, ▇▇▇▇▇▇▇▇▇▇ & ▇'▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other communications shall
be deemed to have been received (w) if by personal delivery on the day after
such delivery, (x) if by certified or registered mail, on the seventh business
day after the mailing thereof, (y) if by next-day or overnight mail or delivery,
on the day delivered, (z) if by telecopy or telegram, on the next day following
the day on which such telecopy or telegram was sent, provided that a copy is
also sent by certified or registered mail.
10.4 Headings. The headings contained in this Agreement are for purposes of
convenience only and shall not affect the meaning or interpretation of this
Agreement.
10.5 Entire Agreement. This Agreement (including the Schedules and Exhibits
hereto), the Collateral Agreements (when executed and delivered) and any other
documents executed pursuant to this Agreement constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
10.6 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original and all of which shall together
constitute one and the same instrument.
10.7 Governing Law, etc. This Agreement shall be governed in all respects,
including as to validity, interpretation and effect, by the internal laws of the
State of Ohio, without giving effect to the conflict of laws rules thereof.
Except for the resolution of the Purchase Price Adjustment as set forth in
Section 2.3, the Earnout Amount as set forth in Section 2.8 and the Covenant
Determinations set forth in Section 4.4, any controversy arising under or out of
this Agreement shall be settled by arbitration in accordance with the governing
rules of the American Arbitration Association as administered through the
Cleveland, Ohio office. The commercial arbitration rules of the American
Arbitration Association shall apply and the controversy shall be governed by the
laws of the State of Ohio. The arbitrator shall be selected by the parties by
mutual agreement at the time a claim is submitted for arbitration. The award
rendered by the arbitrator shall be final and judgment may be entered upon it in
accordance with Applicable Law in any court having jurisdiction thereof,
including a federal district court, pursuant to the Federal Arbitration Act. In
preparation for the arbitration hearing, each party may utilize all methods of
discovery authorized by the Ohio Rules of Civil Procedure, and may enforce the
right to such discovery in the manner provided by said Rules and/or by the Ohio
Arbitration Law. The arbitrator may order a pre-hearing exchange of information
by the parties, including, without limitation, production of requested
documents, exchange of summaries of testimony of proposed witnesses and
examination by deposition of witnesses and parties. Unresolved discovery
disputes may be brought to the attention of the arbitrator and may be disposed
of by the arbitrator. The arbitration hearing shall be conducted in Cleveland,
Ohio. The arbitrator shall have the authority to award any remedy or relief a
court of the State of Ohio could order or grant, including, without limitation,
specific performance of any obligation created under this Agreement, the
awarding of the issuance of an injunction or the imposition of sanctions of
abuse or frustration of the arbitration process. Judgment upon the award of the
arbitrator may be entered in any court of competent jurisdiction and enforced
with full judicial effect thereafter. All fees and expenses of the arbitration
shall be borne by the parties equally.
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However, each party shall bear the expense of its own counsel, experts,
witnesses, and preparation and presentations. The arbitrator is authorized to
award any party such sums as shall be deemed proper for the time, expense and
inconvenience of arbitration, including arbitration fees and attorney fees.
10.8 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns.
10.9 Assignment. This Agreement shall not be assignable or otherwise
transferable by any party hereto without the prior written consent of the other
party hereto, provided that the Buyer may assign this Agreement to any
Subsidiary of the Buyer or Parent, provided, further, that no assignment shall
in any way affect the Buyer's obligations or liabilities under this Agreement.
10.10 No Third Party Beneficiaries. Nothing in this Agreement shall confer
any rights upon any person or entity other than the parties hereto and their
respective heirs, successors and permitted assigns.
10.11 Amendment; Waivers. etc. This Agreement may be amended by the parties
at any time before or after the Shareholder Approval; provided, however, that,
after such Shareholder Approval, there is not to be made any amendment that by
law requires further approval by the shareholders of Parent without further
approval of such shareholders. No amendment, modification or discharge of this
Agreement, and no waiver hereunder, shall be valid or binding unless set forth
in writing and duly executed by the party against whom enforcement of the
amendment, modification, discharge or waiver is sought. Any such waiver shall
constitute a waiver only with respect to the specific matter described in such
writing and shall in no way impair the rights of the party granting such waiver
in any other respect or at any other time. Neither the waiver by any of the
parties hereto of a breach of or a default under any of the provisions of this
Agreement, nor the failure by any of the parties, on one or more occasions, to
enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions, rights or
privileges hereunder. The rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies that any party may otherwise have at
law or in equity. The rights and remedies of any party based upon, arising out
of or otherwise in respect of any inaccuracy or breach of any representation,
warranty, covenant or agreement or failure to fulfill any condition shall in no
way be limited by the fact that the act, omission, occurrence or other state of
facts upon which any claim of any such inaccuracy or breach is based may also be
the subject matter of any other representation, warranty, covenant or agreement
as to which there is no inaccuracy or breach. The representations and warranties
of Seller shall not be affected or deemed waived by reason of any investigation
made by or on behalf of the Buyer or Parent (including but not limited to by any
of its advisors, consultants or representatives).
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
SHILOH INDUSTRIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief
Executive Officer
SHILOH AUTOMOTIVE, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
MTD PRODUCTS INC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
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