EXHIBIT 10.27
ASSET PURCHASE AND SALE AGREEMENT
Dated as of February 5, 2001
By and Between
LUDLOW BUILDING PRODUCTS, INC.
"Ludlow"
and
LYDALL EASTERN, INC.
"Lydall"
ASSET PURCHASE AND SALE AGREEMENT
This ASSET PURCHASE AND SALE AGREEMENT ("Agreement") dated February 5, 2001
is by and between Ludlow Building Products, Inc., a corporation organized under
the laws of the State of Virginia ("Ludlow"), and LYDALL EASTERN, INC., a
corporation organized under the laws of the State of Connecticut ("Lydall").
WITNESSETH:
WHEREAS, Lydall, through its Southern Products Division is engaged in the
business of producing and selling solid fiber material handling and packaging
products, at facilities located in Richmond, Virginia and Jacksonville, Florida,
with a sales office location in Lodi, California and warehouse space in
Stockton, California and Pomona, California, and
WHEREAS, Lydall desires to sell to Ludlow, and Ludlow desires to purchase
from Lydall, the Business (as defined in Article I) as a going concern and all
of the property and assets relating to the Business, subject to certain
liabilities, all upon the terms and subject to the conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth below, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.
-----------
As used in this Agreement, the following terms shall have the meanings set forth
below:
"Accounts Payable": as defined in Section 5.21.
"Affiliate": any person directly or indirectly controlling or controlled by
or under direct or indirect common control with, the person specified.
"Assets": as defined in Section 2.1.
"Assigned Contracts": as defined in Section 2.3(a).
"Assumed Obligations": as defined in Section 2.3.
"Balance Sheet": as defined in Section 5.4.
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"Balance Sheet Date": as defined in Section 5.4.
"▇▇▇▇ of Sale": as defined in Section 2.6.
"Books and Records": all books, records, files, documents and data related
solely to the conduct of the Business or the ownership of the Assets including
but not limited to customer and supplier lists, certificates and other
documents, computer tapes and files, customer proposals (including backup
documentation and work papers), product bills of material and product labor
estimates related to the Business; EXCEPT, that Books and Records shall not
include any books, records, files and other data of Lydall which relate to any
operation of Lydall other than the Business or to organizational and corporate
governance proceedings of Lydall or to income tax matters of Lydall, or to
personnel records and files.
"Business": The Business is the production and sale of solid fiber material
handling and packaging products presently undertaken and conducted at Lydall's
facilities in Richmond, Virginia, Jacksonville, Florida, Lodi California, and
Lydall's space in warehouses located in Stockton, California and Pomona,
California.
"Business Day": any day excluding Saturday, Sunday and any day on which
banks in Hartford, Connecticut, Richmond Virginia, or Jacksonville, Florida are
closed.
"Closing": as defined in Section 2.7.
"Closing Date": as defined in Section 2.7.
"Encumbrances": liens, security interests, options, rights of first
refusal, easements, mortgages, charges, debentures, indentures, deeds of trust,
rights-of-way, restrictions, agreements, encroachments, licenses, leases,
permits, security agreements, or any other encumbrances and other irregularities
in title restrictions or limitations on use of real or personal property.
"Excluded Assets": as defined in Section 2.2.
"Excluded Liabilities": as defined in Section 2.4.
"Facilities": the plants, offices, and warehouses where the Business is
operated, located in Richmond, Virginia and Jacksonville, Florida, the sales
office in Lodi, California, and the warehouse space in Stockton and Pomona,
California.
"Financial Statements": as defined in Section 5.4.
"GAAP": United States generally accepted accounting principles
"Intellectual Property": United States and foreign patents, patent
applications,
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patent licenses, registered and unregistered trademarks, trade names, service
marks and logos and applications therefore, registered and unregistered
copyrights and copyright applications, computer programs, software, data bases,
trade secrets and proprietary information, excluding the use of the Lydall name
as defined in Section 11.4.
"Loss": as defined in Section 12.2(b).
"Net Assets": as defined in Section 3.2(d)(iii).
"Non-Competition Agreement": as defined in Section 9.5.
"Non-Material Contract": any contract, commitment, lease, purchase order,
contract to purchase raw materials, contract for services and supplies, contract
to sell products or any other agreement (whether written or oral), in each case
which involves less than $5,000 per year or can be cancelled without penalty
within 30 days.
"Permits": as defined in Section 5.9.
"Permitted Encumbrances": as defined in Section 5.6.
"Purchase Price": as defined in Section 3.1.
"Returns": all returns, declarations, reports, statements and other
documents required to be filed in respect of Taxes.
"Taxes": all United States federal, state, local, foreign and other net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use, value added,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatever required to be filed by, or with respect to,
Lydall, the Business or the Assets, together with any interest and any
penalties, additions to tax or additional amounts.
ARTICLE II
THE TRANSACTION
2.1 Purchase and Sale of Assets.
---------------------------
Subject to the terms and conditions of this Agreement, Ludlow agrees to purchase
from Lydall, and Lydall agrees to sell, convey, transfer, assign and deliver to
Ludlow, on the Closing Date, against the receipt by Lydall of the consideration
specified in Section 3.1, the Assets of Lydall Eastern, Inc., Southern Products
Division, free and clear of any Encumbrances of any kind whatsoever except
Permitted Encumbrances. The term "Assets" shall mean all of the rights, title
and interests of Lydall in and to the assets used in or relating to the conduct
of the Business, tangible and intangible, real and personal
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wheresoever situated and whether or not specifically referred to in this
Agreement or in any instrument of conveyance delivered pursuant to this
Agreement and whether or not any of such Assets have any value for accounting
purposes or are carried or reflected on or referred to in the Financial
Statements, except for the Excluded Assets listed in Section 2.2. The Assets
shall include but are not limited to the following categories of assets:
(a) All of Lydall's right, and interest in and to the land and buildings,
improvements and fixtures located at Richmond, Virginia or Jacksonville,
Florida, sales offices in Lodi, California and warehouse space in Stockton and
Pomona, California in which facilities Lydall conducts the Business;
(b) plant, machinery, equipment, tools, dies, product tooling, test
equipment, supplies, furniture, furnishings, vehicles and other fixed assets
owned or leased by Lydall and used or held for use in the conduct of the
Business all of which fixed assets will be purchased on an "as is" basis,
without warranty by Lydall;
(c) all inventories, wherever located, including supplies, raw materials,
spare parts, samples, work in process and finished goods and products, owned by
Lydall and used or held for use in connection with the conduct of the Business;
(d) all the contracts (other than insurance and other contracts to the
extent that such other contracts relate solely to the Excluded Liabilities and
Excluded Assets), commitments, leases, purchase orders, contracts to purchase
raw materials, contracts for services and supplies, contracts to sell products
and all the other agreements (whether written or oral) solely relating to the
Business and set forth in Schedule 5.8 attached, and the full benefit of all
Non-Material Contracts;
(e) all Intellectual Property solely relating to the Business and all trade
secrets, know-how, manufacturing, engineering and other drawings, technology,
technical information, engineering data, design and engineering specifications
and similar data in writing relating to the conduct of the Business;
(f) Books and Records;
(g) the Business as a going concern;
(h) any rights of Lydall pertaining to any counterclaims, set-offs or
defenses it may have with respect to any Assumed Obligations set forth in
Section 2.3;
(i) all computers and related software owned by or used exclusively in the
Business;
(j) all prepaid claims and other prepaid expense items and deferred
charges, credits, advance payments, ▇▇▇▇▇ cash, security and other deposits made
by Lydall to any third party relating to the conduct of the Business;
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(k) all accounts receivable of the Business as of the Closing Date;
(l) all transferable licenses, permits, registrations and authorizations
with respect to the conduct of the Business; and
(m) all claims, causes of action, rights of recovery and rights of set-off of
any kind pertaining to, and arising out of, the Business prior to the
Closing Date, to the extent that they offset the Assumed Obligations.
2.2 Excluded Assets.
---------------
Notwithstanding anything stated to the contrary, the Assets shall not include,
and Ludlow shall not purchase, any of the following whether owned by, held by or
relating to Lydall or the Business (the "Excluded Assets"):
(a) (i) general books of account and books of original entry that comprise
Lydall's permanent or tax records and books and records that Lydall is required
to retain pursuant to any statute, rule or regulation, (ii) books and records
which do not relate to the Business or which relate exclusively to the Excluded
Liabilities and/or the Excluded Assets and (iii) those materials excluded from
the definition of Books and Records by the exception in the definition including
the corporate minute book, stock records and corporate seal;
(b) intercompany account balances between Lydall and any of its
Affiliates, and deferred taxes;
(c) All of Lydall's cash on hand, other than ▇▇▇▇▇ cash, and all cash
contained in any account of Lydall;
(d) third-party indemnities, policies of insurance, fidelity, surety or
similar bonds and the coverage afforded thereby relating solely to the Excluded
Liabilities and the Excluded Assets;
(e) assets associated with any employee benefit plans of Lydall;
(f) all insurance contracts or policies, third party indemnities,
fidelity, surety or similar bonds and the coverages afforded thereby of Lydall;
(g) all past, present and future claims, causes of action, rights of
recovery and rights of set-off of any kind, including tax credits, refunds and
prepayments arising with respect to the Business prior to Closing except to the
extent that they offset the Assumed Obligations; and
(h) all rights of Lydall under this Agreement and the agreements and
instruments delivered to Lydall by Ludlow pursuant to this Agreement.
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2.3 Assumption of Obligations.
-------------------------
Upon the sale of the Assets by Lydall, Ludlow shall assume and, agree to pay,
perform and discharge, in a timely manner and in accordance with the terms of
this Agreement, the following liabilities and obligations of Lydall exclusively
relating to the Business (the "Assumed Obligations"):
(a) all liabilities and obligations of Lydall which arise on or after the
Closing Date under the contracts, commitments, leases, purchase orders,
contracts to purchase raw materials, contracts for services and supplies,
contracts to sell products and all other agreements set forth in Schedule 5.8
attached which are being assigned to Ludlow (the "Assigned Contracts"), and the
Non-Material Contracts, but excluding any liability of Lydall for breach or non-
performance of any of the foregoing existing on or prior to the Closing Date;
(b) all Accounts Payable on or after the Closing Date;
(c) all liabilities and obligations resulting from product warranty claims
with respect to any product produced by the Business subject to Section
12.2(b)(iii);
(d) all liabilities and obligations arising out of the employment and/or
termination of employment of any employee of Ludlow or the Business on or after
the Closing Date;
(e) except to the extent the same constitutes an Excluded Liability or
arises from a breach of any representation, warranty, covenant or agreement of
Lydall contained in this Agreement, all liabilities and obligations of Ludlow
arising from the conduct of the Business subsequent to the Closing Date.
2.4 Excluded Obligations and Liabilities.
------------------------------------
Notwithstanding anything stated to the contrary, Ludlow does not and shall not
assume, pay, perform or discharge any of the following liabilities and
obligations (the "Excluded Liabilities"):
(a) all liabilities and obligations relating to any contract, commitment,
lease, purchase order, contract to purchase raw materials, contract for services
and supplies, contract to sell products or any other agreement (whether written
or oral) of Lydall which is not an Assigned Contract or a Non-Material Contract;
(b) all liabilities and obligations of Lydall which may arise by reasons of
or with respect to this Agreement or any of the transactions contemplated
(including, without limitation, legal, accounting, brokerage, investment banking
or finder's fees);
(c) all liabilities and obligations which are intercompany accounts
(between Lydall and any of its Affiliates);
(d) all liabilities and obligations arising out of the employment and/or
termination of employment of any employee of Lydall prior to the Closing Date;
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(e) all liabilities and obligations of Lydall for Taxes attributable to the
operations of the Business for any period ending prior to or on the Closing
Date;
(f) all liabilities and obligations under or with respect to any employee
benefit plan, program (including accrued vacation benefits), contract or
arrangement covering past or present employees of the Business and/or their
beneficiaries as of the Closing Date;
(g) all liabilities and obligations for infringement or misappropriation
arising from the use of Intellectual Property by Lydall on or prior to the
Closing Date;
(h) all liabilities and obligations arising out of Lydall's Economic Value
Added incentive compensation program;
(i) all liabilities and obligations resulting from product liability claims
for damage or injury to persons or property arising from ownership, possession
or use of any product manufactured by the Business prior to Closing;
(j) all liabilities and obligations resulting from environmental or safety
practices or claims for damage or injury to persons or property relating to the
conduct of the Business prior to Closing;
(k) the goodwill from purchased assets; and
(l) all liabilities and obligations of any nature relating to the Excluded
Assets.
2.5 Nonassignable Contracts and Leases.
----------------------------------
In the case of any Assigned Contracts which are not by their terms assignable,
Lydall agrees to use its reasonable efforts to obtain, or cause to be obtained,
prior to the Closing Date, any written consents necessary to convey to Ludlow
the benefit of those Contracts. Ludlow shall cooperate with Lydall in such
manner as may be reasonably requested. If any such consent is not obtained,
then Lydall shall cooperate with Ludlow in any reasonable arrangement requested
by Ludlow designed to provide Ludlow the benefits of any such Assigned
Contracts, including enforcement of any and all rights of Lydall, at Ludlow's
expense, against the third party arising out of breach or cancellation thereof
by the third party or otherwise. Nothing in this Agreement shall be construed
as an attempt or an agreement to assign or cause the assignment of any Assigned
Contract included in the Assets which is by law nonassignable without the
consent of the other party or parties, unless such consent shall have been
given. On and after the Closing Date, Ludlow shall, at the request of Lydall,
use its reasonable efforts to enter into agreements to remove Lydall from all
obligations and liabilities (whether primary or secondary) under all contracts
with continuing obligations, which includes any Non-Material Contract and each
contract, commitment, lease, purchase order, contract to purchase raw materials,
contract for services and supplies, contract to sell products or other agreement
set forth in Schedule 5.8 attached.
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2.6 Instruments of Transfer and Conveyance.
--------------------------------------
The sale, conveyance, transfer, assignment and delivery of the Assets shall be
effected by delivery on the Closing Date by Lydall to Ludlow (i) of such
instruments of transfer and conveyance, duly executed by Lydall, as Ludlow shall
reasonably deem necessary to vest in Ludlow good and marketable title to such
Assets free and clear of all Encumbrances except Permitted Encumbrances, and
such other documents as Ludlow may reasonably request to demonstrate
satisfaction of the conditions of and compliance with this Agreement by Lydall,
including, without limitation, the ▇▇▇▇ of Sale in substantially the form of
Exhibit A attached (the "▇▇▇▇ of Sale") and (ii) such documents as Lydall may
reasonably request to demonstrate satisfaction of the conditions and compliance
with this Agreement by Ludlow.
2.7 Closing.
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The closing of the transactions contemplated by this Agreement (the "Closing")
shall be effected by facsimile to be effective at 12:01 a.m., on February 5,
2001. Such time and date of delivery are referred to as the "Closing Date".
ARTICLE III
PAYMENT OF PURCHASE PRICE
-------------------------
3.1 Amount; Delivery.
----------------
The aggregated consideration to be paid by Ludlow to Lydall for the Assets and
the Business shall be Fifteen Million United States Dollars ($15,000,000) (the
"Purchase Price"), plus the assumption of the Assumed Liabilities.
The Purchase Price shall be paid by Ludlow to Lydall at the Closing as
follows:
Ludlow shall pay to Lydall Fifteen Million Dollars ($15,000,000) by wire
transfer of immediately available funds to the account or accounts designated in
writing by Lydall on the Closing Date.
3.2 Net Asset Adjustment.
--------------------
(a) Within 60 days after the Closing Date, Ludlow shall prepare and
deliver to Lydall a statement (the "Closing Date Statement") setting forth Net
Assets (as defined in Section 3.2d(iii)) as of the Closing Date ("Closing Date
Net Assets"). The Closing Date Statement shall also set forth a calculation of
the amount by which the Closing Date Net Assets exceed or are less than
$7,901,907, which is based on the September 30, 2000 balance sheet as detailed
in Schedule 3.2. This difference is the Net Asset Adjustment. Within 120 days
after the Closing Date, Lydall shall complete its examination of the Closing
Date Statement and shall deliver to Ludlow either a written acknowledgment of
Lydall accepting the Closing Date Statement and the Net Asset Adjustment or a
written report ("Adjustment Report") setting forth in detail any proposed
adjustments to the Closing Date Statement and the Net Asset Adjustment and the
reasons and supporting data therefore. In the event that Lydall fails to deliver
such acknowledgment or Adjustment Report within
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such one hundred twenty (120) day period, the Closing Date Statement (and each
of the Closing Date Net Assets and the Net Asset Adjustment set forth thereon)
delivered by Ludlow to Lydall shall be deemed to be correct and to have been
finally determined under Section 3.2 (b) below;
(b) If Lydall shall deliver an Adjustment Report to Ludlow within the
period set forth in Section 3.2 (a), Lydall and Ludlow shall attempt to resolve
any differences and agree upon the Net Asset Adjustment. In the event that
Ludlow and Lydall fail to agree on any or all of Lydall's proposed adjustments
to the Closing Date Statement contained in the Adjustment Report within 15 days
after Ludlow receives the Adjustment Report, then the parties shall select an
independent certified public accounting firm of national reputation (who shall
not be a firm previously or currently retained by Lydall or Ludlow) which is
mutually agreeable to the parties (the "Independent Auditors") to resolve any
dispute. The Independent Auditors, acting as independent auditors and not for
the benefit of Lydall or Ludlow, shall make the final determination with respect
to the calculation of the Closing Date Net Assets in light of the terms and
provisions of this Agreement within a period of less than 30 days. The decision
of the Independent Auditors shall be in writing and state the basis for the
finding and shall be final and binding on Lydall and Ludlow. The costs and
expenses of the Independent Auditors for their services rendered pursuant hereto
shall be borne equally by Lydall and Ludlow;
(c) The term "Final Closing Date Statement" shall mean the Closing Date
Statement delivered pursuant to Section 3.2(a), as adjusted, if at all, pursuant
to Section 3.2(a) or 3.2(b) and the "Settlement Date" shall mean the date on
which the Final Closing Date Statement is agreed to by the parties or finally
determined by the Independent Auditors, as the case may be. Until the Settlement
Date, Ludlow agrees to provide Lydall, its representatives and advisors, and the
Independent Auditors with access, during Ludlow's normal business hours and upon
reasonable advance notice, to the books and records of the Business for the
purpose of reviewing the Closing Date Statement and preparing any proposed
adjustments set forth in the Adjustment Report;
(d) (i) In the event that the Closing Date Net Assets set forth in the
Final Closing Date Statement exceeds $7,901,907, Ludlow agrees to pay to Lydall
within five (5) Business Days of the Settlement Date an amount equal to the
excess of the Closing Date Net Assets set forth in the Final Closing Date
Statement over $7,901,907 by wire transfer of immediately available funds to
Lydall's bank account;
(ii) In the event that the Closing Date Net Assets set forth in the
Final Closing Date Statement are less than $7,901,907 , Lydall agrees to pay to
Ludlow, within five (5) business days of the Settlement Date an amount equal to
the difference between $7,901,907 and the Closing Date Net Assets set forth in
the Final Closing Date Statement by wire transfer of immediately available funds
to Ludlow's bank account.
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(iii) For purposes of this Section 3.2, the term "Net Assets" shall
mean an amount equal to the difference between (x) the Assets (excluding the
impact of depreciation from 9/30/00 through Closing) and (y) the Assumed
Obligations, all determined in accordance with GAAP and on a basis consistent
with the way such amounts were determined for purposes of the 1999 Year End
Statements.
ARTICLE IV
Employees; Employee Welfare and Benefit Plans
---------------------------------------------
4.1 Employment; Life Insurance and Medical Benefits.
-----------------------------------------------
As of the Closing Date, Ludlow agrees to offer employment to each person listed
on Schedule 4.1b. With respect to any employee who accepts employment with
Ludlow, immediately after the Closing Ludlow shall provide the benefits listed
on Schedule 4.1.
4.2 Employee Pension Plans and Benefits.
-----------------------------------
Ludlow shall not assume any obligation for and shall have no liability to
provide to any employee or former employee of the Business pension benefits
earned or accrued prior to the Closing, if any, under any pension plan or any
other employee benefit plan maintained by Lydall with respect to service with
the Business or any other entity prior to the Closing. All such obligations and
liabilities, if any, shall remain the sole and exclusive responsibility of
Lydall. The 401(k) plan qualified under Section 401(a) of the Code maintained
by Ludlow on or after the Closing Date shall recognize all service by employees
of the Southern Products Division of Lydall or any affiliates thereof for
eligibility and vesting purposes under such plan.
4.3 Other Employee Pension Plans and Benefits.
-----------------------------------------
Ludlow shall not assume any obligation and shall have no liability whatsoever to
Lydall, the Business or any employee or former employee thereof or any other
person or entity with respect to the funding, payment or provision of pension or
profit-sharing or 401(k) benefits earned or accrued prior to the Closing Date,
if any, under any pension, profit-sharing or 401(k) plans sponsored by Lydall or
the Business, whether or not any employees become employees of Ludlow. Lydall
shall retain all such obligations, if any, and shall remain solely and
exclusively liable for all benefits earned or accrued prior to the Closing Date,
if any, under any such plans. Lydall agrees to vest all employees of the
Southern Products Division in their accounts under the Lydall, Inc. 401(k) Plan
and their accrued benefits under the Lydall, Inc. Pension Plan No. 1A.
4.4 Employee Welfare Plans, Worker's Compensation.
---------------------------------------------
Except as provided in Section 4.5, Ludlow shall have no liability whatsoever to
employees or former employees with respect to incurred worker's compensation
claims or to benefits earned or accrued under any welfare benefit plan sponsored
by either the Business or Lydall prior to the Closing Date. Ludlow shall not
assume any obligation and shall have no liability whatsoever with respect to any
welfare benefit claims, including without limitation medical claims incurred by
an Employee or his family prior to the Closing Date or worker's
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compensation claims incurred prior to the Closing Date. A medical claim shall be
deemed to be incurred when the services relating to that event that is the
subject of the claim were performed. A worker's compensation claim is deemed to
have been incurred on the date of accident. The welfare plans maintained by
Ludlow for the benefit of employees of the Southern Products Division shall not
include a waiting or eligibility period or a preexisting condition restriction
or limitation and, shall take into account, for purposes of any co-payment,
deductible and limitation on benefits, the payments made under Lydall's
comparable benefit plan for medical and dental services in the current calendar
year through the Closing Date.
4.5 Flexible Spending Account
-------------------------
Ludlow shall establish flexible spending accounts for health care expenses for
the benefit of employees, and shall credit such accounts with the amount
credited as of the Closing Date under comparable accounts maintained with Lydall
from the beginning of the plan year to the Closing Date. As soon as practicable
after the Closing Date, Lydall shall pay to Ludlow in cash the amount, if any,
by which aggregate contributions made by employees to Lydall's flexible spending
accounts exceeded the aggregate benefits provided to employees as of the Closing
Date. To the extent that aggregate benefits exceed contributions made by
employees, such amount shall be reflected as a prepaid asset on the Closing Date
Statement.
4.6 COBRA
-----
Lydall shall remain liable for the obligations under the current plans
maintained by Lydall under the Consolidated Omnibus Budget Reconciliation Act
(COBRA) under Section 4980B of the Code and the comparable provisions of ERISA
for all employees or former employees of Southern Products Division who are not
offered employment by Ludlow. Ludlow shall be responsible for the COBRA
obligations under Section 4980B of the Code and the comparable provisions of
ERISA for all employees of Southern Products Division who are offered employment
by Ludlow.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF LYDALL
Representations and Warranties of Lydall. Lydall represents, warrants and
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agrees as follows:
5.1 Existence and Good Standing.
---------------------------
Lydall is a corporation duly organized, validly existing and in good standing
under the laws of the State of Connecticut with full power and authority to own
and operate the Assets and, to carry on the Business as it is now being
conducted.
5.2 Authorization and Validity of Agreement.
---------------------------------------
Lydall has full power and authority to execute and deliver, to perform its
obligations under, and to consummate the transactions contemplated by this
Agreement and the ▇▇▇▇ of Sale.
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The execution, delivery and performance of this Agreement and the ▇▇▇▇ of Sale
by Lydall, and the consummation by it of the transactions contemplated, have
been duly and validly authorized and approved by all necessary corporate action
of Lydall. Each of this Agreement and the ▇▇▇▇ of Sale has been duly and validly
executed and delivered by Lydall and is a valid and binding obligation of Lydall
enforceable against Lydall in accordance with its terms, except to the extent
that its enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors rights generally and by general equitable principles.
5.3 Consents and Approvals; No Violations.
-------------------------------------
Except as set forth in Schedule 5.3 attached, the execution, delivery and
performance of this Agreement and the ▇▇▇▇ of Sale by Lydall and the
consummation by Lydall of the transactions contemplated will not, with or
without the giving of notice or the lapse of time or both: (a) violate, conflict
with, or result in a breach or default under any provision of the organizational
documents of Lydall; (b) to the knowledge of Lydall violate any statute,
ordinance, rule, regulation, order, judgment or decree of any court or of any
governmental or regulatory body, agency or authority applicable to Lydall or by
which its properties or assets or the Assets of the Business may be bound; (c)
to the knowledge of Lydall require any filing by Lydall with, or require Lydall
to obtain any permit, consent or approval of, or require Lydall to give any
notice to, any governmental or regulatory body, agency or authority or any other
third party; or (d) to the knowledge of Lydall result in a violation or breach
by Lydall of, conflict with, constitute (with or without due notice or lapse of
time or both) a default by Lydall (or give rise to any right of termination,
cancellation, payment or acceleration) under, or result in the creation of any
Encumbrance upon any of the properties or assets of Lydall or the Assets under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, agreement, lease, franchise agreement or
other instrument or obligation to which Lydall is a party, or by which it or any
of its properties or assets or the Assets may be bound.
5.4 Financial Statements; No Material Adverse Change.
------------------------------------------------
Lydall has furnished Ludlow with (i) the unaudited balance sheet of the Business
as of September 30, 2000 (the "Balance Sheet") and the related statements of
income for the nine (9) months then ended, (collectively "the Financial
Statements"). The Financial Statements have been prepared from the Books and
Records and in accordance with GAAP consistently followed throughout the periods
indicated. The Financial Statements fairly present in all material respects the
financial position of the Business as of September 30, 2000 and the results of
operations of the Business for the period indicated. Except as set forth in
Schedule 5.4 attached, since September 30, 2000 (the "Balance Sheet Date"),
there has been no material adverse change in the assets or liabilities, or in
the business or condition, financial or otherwise, or in the results of
operations of the Business, or in any substantial portion of the Assets. Since
the Balance Sheet Date, except as set forth in Schedule 5.4 attached, Lydall has
conducted the Business only in the ordinary course and in a manner consistent
with prior business practices.
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5.5 Books and Records.
-----------------
All accounts, books, ledgers, official and other records material to the
Business have been fully, properly and accurately kept and completed in all
material respects, and there are no material inaccuracies or discrepancies
contained or reflected in them, and collectively they fairly present in all
material respects the financial position of the Business. Except as set forth
in Schedule 5.5 attached, Lydall does not have any of the Business' Books and
Records recorded, stored, maintained, operated or otherwise wholly or partly
dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of
access) are not under the exclusive ownership and direct control of Lydall.
5.6 Title to Assets; Encumbrances; Condition.
----------------------------------------
Except as set forth in Schedule 5.6 attached Lydall has good, valid and
marketable title to each of the Assets free and clear of all Encumbrances of any
kind except for (i) Encumbrances for current Taxes, and other assessments or
governmental charges or levies on property not yet due and delinquent
(Encumbrances of the type described in clause (i) above are sometimes referred
to as "Permitted Encumbrances"). The Assets, together with the Excluded Assets,
include all of the assets, properties or other rights which are used in or
forming a part of the Business as presently conducted, and there are no other
assets, properties or rights necessary to the operation of the Business as
presently conducted. Except as set forth in Schedule 5.6 attached, all of the
Assets are located at Lydall's place of business in Richmond, Virginia;
Jacksonville, Florida; Lodi, California; Stockton, California and Pomona,
California and Lydall does not operate any part of the Business at any other
location.
5.7 Leases.
------
Schedule 5.7 attached contains an accurate and complete list of all leases to
which Lydall is a party (as lessee or lessor) with respect to any real or
personal property used in connection with the Business, a description of all
such leases to which Lydall is a party and identification of the parties. Each
lease set forth in Schedule 5.7 is in full force and effect; all rents and
additional rents due to date on each such lease have been paid; in each case,
except as set forth in Schedule 5.7, the lessee has been in peaceable possession
since the commencement of the original term of the lease and is not in default
and no waiver, indulgence of postponement of the lessee's obligations has been
granted by the lessor; and there exists no default or event of default or event,
occurrence, condition or act (including this sale of the Assets) which, with the
giving of notice, the lapse of time or the happening of any further event or
condition, would constitute a default or event of default under any such lease.
To Lydall's knowledge, Lydall has not violated any of the terms or conditions of
any such lease and, all of the covenants to be performed by any other party
under any such lease have been fully performed. There are no rental payments
required to be made under or in connection with any of the leases set forth to
which Lydall is a party as lessee, other than as set forth in Schedule 5.7. As
of the date of this Agreement, except as set forth in Schedule 5.7, to Lydall's
knowledge, Lydall has fulfilled all of its obligations required under any of the
leases set forth to which Lydall is a party as lessee. Except as set forth in
Schedule 5.3 or Schedule 5.7 attached, each lease set forth is assignable by
Lydall to Ludlow with notice and the consent of the Landlord.
13
5.8 Material Contracts.
------------------
Except as set forth in Schedule 5.8 attached, with respect to the Business,
Lydall is not a party to and is not bound by (a) any written agreement, contract
or commitment relating to the employment of any person by Lydall; (b) any
agreement, indenture or other instrument which contains restrictions with
respect to payment of profits, dividends or any other distribution in respect of
its business or its capital stock, as the case may be; (c) any agreement,
contract or commitment relating to capital expenditures in excess of $10,000;
(d) any loan or advance to, or investment in, any Person or any agreement,
contract or commitment relating to the making of any such loan, advance or
investment; (e) any guarantee or other contingent liability in respect of any
indebtedness or obligation of any Person involving obligations in excess of
$10,000 individually or $30,000 in the aggregate (other than the endorsement of
negotiable instruments for collection in the ordinary course of business); (f)
any management service, consulting or any other similar type contract; (g) any
agreement, contract or commitment limiting the freedom of Lydall to engage in
any line of business or to compete with any Person; or (h) any other agreement,
contract or commitment which might reasonably be expected to have a material
adverse effect, in each case relating to the Assets or the Business. Each
agreement, contract or commitment set forth in Schedule 5.8 is in full force and
effect and there exists no default or event of default or event, occurrence,
condition or act (including this sale of the Assets) which, with the giving of
notice, the lapse of time or the happening of any other event or condition,
would become a default or event of default. To the knowledge of Lydall, Lydall
has not violated any of the terms or conditions of any contract or agreement set
forth in Schedule 5.8 and, all of the covenants to be performed by any other
party have been fully performed. Except as set forth in Schedule 5.3 or
Schedule 5.8 attached, each agreement, contract or commitment set forth in
Schedule 5.8 is assignable by Lydall to Ludlow without the consent of any other
Person.
5.9 Permits.
-------
Lydall holds all governmental and other third party permits (including occupancy
permits), licenses, consents and authorizations ("Permits") required in
connection with the use, operation or ownership of the Assets and the conduct of
the Business as currently conducted, except to the extent that the failure to
hold any such Permits would not have a material adverse affect on the Business.
All such Permits are listed in Schedule 5.9 attached. Any application for the
renewal of any Permit due prior to the Closing Date has been, or will be, timely
filed prior to the Closing Date. All Permits are in full force and effect and
no proceeding to modify, suspend, revoke, withdraw, terminate or otherwise limit
any such Permit is pending or, to the best knowledge of Lydall, threatened. No
administrative or governmental action has been taken or, to the knowledge of
Lydall, threatened in connection with the expiration, continuance or renewal of
any such Permit. Lydall is in compliance with all Permits in all material
respects.
5.10 Restrictive Documents.
---------------------
Except as set forth in Schedule 5.10 attached, Lydall is not subject to, or a
party to, any charter, by-law, mortgage, lien, lease, license, permit,
agreement, contract, instrument, law, rule, ordinance, regulation, order,
judgment or decree, or any other restriction of any kind or
14
character which (i) would prevent consummation of the transactions contemplated
by this Agreement, (ii) would prevent the continued operation of the Business
after the Closing Date on substantially the same basis as operated to date or
(iii) would or does materially and adversely affect the Business or the Assets.
5.11 Litigation.
----------
Except as set forth in Schedule 5.11 attached, there is no action, suit,
proceeding at law or in equity, arbitration or administrative or other
proceeding by or before (or to the knowledge of Lydall, any investigation by)
any governmental or other instrumentality or agency, pending, or, to the
knowledge of Lydall, threatened, against or affecting the Assets, Assumed
Obligations or the Business; and Lydall does not know of any valid basis for any
such action, proceeding or investigation. There are no such suits, actions,
claims, proceedings or investigations pending or, to the best knowledge of
Lydall, threatened, seeking to prevent or challenging the transactions
contemplated by this Agreement. Lydall is not subject to any judgment, order or
decree entered in any lawsuit or proceeding which may have a material adverse
effect.
5.12 Returns; Taxes.
--------------
(a) There have been properly completed and filed on a timely basis and in
correct form all Returns required to be filed on or prior to the Closing Date.
As of the time of filing, the foregoing Returns correctly reflected in all
material respects the facts regarding the income, business, assets, operations,
activities, status or other matters of Lydall or any other information required
to be shown thereon. An extension of time within which to file any Return which
has not been filed has not been requested or granted.
(b) With regard to all amounts in respect of Taxes imposed upon Lydall or
for which Lydall is or could be liable, whether to taxing authorities (as, for
example, under law) or to other persons or entities (as, for example, under tax
allocation agreements), with respect to all taxable periods or portion of
periods ending on or before the Closing Date, all applicable tax laws and
agreements have been fully complied with, and all such amounts required to be
paid by Lydall to taxing authorities or others on or before the date of this
Agreement have been paid in full or adequately disclosed and fully provided for
in the books and financial statements of Lydall.
(c) The representations and warranties set forth in subsections (a) and
(b) of this Section 5.12 are not applicable to the extent neither the Assets nor
the Business can be made subject to Tax liens and Ludlow cannot be made liable
for Taxes relating to the matters constituting breaches of such representations
and warranties.
(d) Except as set forth in Schedule 5.12 attached, no examination of any
Return is currently in progress. There are no liens for Taxes on the Assets or
the Business and no tax authority or other governmental body or agency has or
will have the right to proceed against, attach or in any other manner encumber
or diminish Ludlow's use of the Assets.
15
5.13 Undisclosed Liabilities.
-----------------------
Except as set forth in Schedule 5.13 attached or on the Financial Statements, to
the knowledge of Lydall, Lydall does not have any outstanding claim, liability
or indebtedness in excess of an aggregate of $10,000, contingent or otherwise,
that are Assumed Liabilities. Except as set forth in Schedule 5.13 attached,
Lydall is not in default in respect of the terms or conditions of any
indebtedness.
5.14 Intellectual Properties.
-----------------------
Schedule 5.14 attached sets forth all Intellectual Property used in the
Business. Such Intellectual Property constitutes all Intellectual Property
necessary to conduct the Business as presently conducted. Except as otherwise
set forth in Schedule 5.14, Lydall owns all right, title and interest in and to
the Intellectual Property listed in Schedule 5.14. Schedule 5.14 also sets
forth all licenses, agreements and other rights granted by Lydall to any third
party with respect to Intellectual Property used in connection with the Business
and all licenses, agreements and other rights with respect to Intellectual
Property used in connection with the Business granted by any third party to
Lydall, in each case together with a description of the subject matter licensed.
Except as set forth in Schedule 5.14, (a) Lydall owns and possesses all right,
title and interest in and to, or has a written, enforceable license to use, all
of the Intellectual Property used in the operation of the Business as presently
conducted free and clear of all Encumbrances; (b) no claim by any third party
contesting the validity, enforceability, use or ownership of any Intellectual
Property owned or used by Lydall in connection with the Business has been made
or to Lydall's knowledge is threatened; (c) Lydall has not received any notice
of any infringement or misappropriation of, or other conflict with any third
party with respect to, any Intellectual Property used by Lydall in connection
with the Business, nor has Lydall received any claims of infringement or
misappropriation of, or conflict with, any Intellectual Property of any third
party in connection with the Business, nor is Lydall aware of any such
infringement, misappropriation or conflict; (d) all Intellectual Property used
in or forming a part of the Business prior to the Closing Date will be owned by
or available for use by Ludlow on identical terms and conditions immediately
subsequent to the Closing Date; and (e) Lydall has made all necessary filings
and recordation and has paid all required fees and taxes to record and maintain
its ownership of its patented or registered Intellectual Property in the United
States Patent and Trademark Office, the United States Copyright Office and,
where necessary to the conduct of the Business, all similar foreign agencies.
5.15 Compliance with Laws.
--------------------
Lydall is in compliance in all material respects with all applicable laws,
regulations, orders, judgments and decrees in connection with the Business or
the Assets.
5.16 Compensation of Employees.
-------------------------
Set forth in Schedule 5.16 attached is an accurate and complete list showing the
names of all persons whose annual salaries from Lydall exceeds an annualized
rate of $50,000 (excluding ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇), together with a statement of the
full amount of such compensation per employee and any changes out of ordinary
course since September 30, 2000.
16
5.17 Inventories.
-----------
Set forth in Schedule 5.17 attached is a complete list and description
(including book value, determined in accordance with GAAP) of all inventories of
the Business, including, without limitation, supplies, raw materials, spare
parts, samples, work in process and finished goods and products, as of December
31, 2000. Except for items which are in the possession or control of suppliers,
or located in public warehouses or at customer locations the inventories
included in the Assets are in the physical possession of Lydall at the
Facilities, or are in transit from suppliers of Lydall. Except as set forth in
Schedule 5.17 attached, to the knowledge of Lydall, the inventories of the
Business consist of items which are good and merchantable, and are of a quality
and quantity presently usable and salable in the ordinary course of business and
were purchased in the ordinary course of business.
5.18 Disclosure.
----------
None of this Agreement, the ▇▇▇▇ of Sale, the Financial Statements, any
Schedule, Exhibit or certificate attached or delivered in accordance with the
terms of those Agreements contains any untrue statement of a material fact, or,
to the best knowledge of Lydall, omits any statement of a material fact
necessary in order to make the statements contained in those documents not
misleading. There is no fact known to Lydall which materially and adversely
affects the assets, liabilities, business, condition (financial or otherwise),
results of operations or prospects of Lydall or the Business, or any of the
Assets, which has not been set forth in this Agreement, the Financial
Statements, the ▇▇▇▇ of Sale, any Schedule, Exhibit or certificate attached or
delivered in accordance with the terms of those agreements or any document or
statement in writing which has been supplied by or on behalf of Lydall in
connection with the transactions contemplated by this Agreement.
5.19 Accounts Receivable.
-------------------
The accounts receivable are reflected properly on its books and records, are
valid and existing receivables which arose in the ordinary course of business
and to the knowledge of Lydall are subject to no refunds or other adjustments
and to no defenses, rights of setoff, assignments, restrictions, encumbrances,
conditions enforceable by third parties, or counterclaims, to the knowledge of
Lydall are current and collectable, in accordance with their terms at their
recorded amounts subject to a reserve for bad debts as will be set forth in the
Closing Date Statement.
5.20 Absence of Certain Changes.
--------------------------
Except as set forth in Schedule 5.20 attached, during the period from September
30, 2000 to and including the Closing Date, except as expressly contemplated by
this Agreement, Lydall has not and will not have (a) incurred any material
liability or obligation of any nature relating to the Business or the Assets
(whether accrued, absolute, contingent or otherwise), except in the ordinary
course of its business, (b) permitted any of the Assets to be subjected to any
Encumbrance, (c) sold, transferred or otherwise disposed of any of its assets,
except in the ordinary course of business, (d) made any capital expenditure or
commitment with respect to the Business or the Assets, except in the ordinary
course of business, (e) granted any increase in the rate of wages, salaries,
bonuses or other remuneration of any executive employee or any other employee of
the Business, except in the ordinary course of business, (f) canceled or waived
any claims or rights of substantial
17
value relating to or affecting the Business or the Assets (g) made any change in
any method of accounting or auditing practice relating to or affecting the
Business or the Assets, (h) conducted the Business or entered into any
transaction relating to or affecting the Business or the Assets, except in the
usual and ordinary manner and in the ordinary course of business, (i) other than
in the ordinary course of business made any bonus or profit sharing distribution
or payment of any kind which relates to or affects the Business or, (j) agreed,
whether or not in writing, to do any of the foregoing.
5.21 Accounts Payable.
----------------
Set forth in Schedule 5.21 attached is a true and correct list and description
(including due date) of all accounts payable and accrued liabilities of Lydall
with respect to the Business (the "Accounts Payable") as of January 31, 2001.All
Accounts Payable arose in the ordinary course of business. There are no
material claims or disputes with respect to any of such Accounts Payable, except
as set forth on Schedule 5.21.
5.22 Labor Matters
-------------
(a) Except as set forth in Schedule 5.22 there are no (i) labor strikes,
disputes, slowdowns, representation campaigns or work stoppages with respect to
employees of the Business pending, or to the knowledge of Lydall, threatened
against or affecting the Business, (ii) grievance or arbitration proceedings
arising out of collective bargaining agreements to which Lydall is a party
(other than informal grievances), (iii) unfair labor practice complaints pending
or, to the knowledge of Lydall, threatened against the Business, or (iv)
collective bargaining agreements or other labor union contracts applicable to
persons employed by the Business and to the knowledge of Lydall, there are no
activities or proceedings of any labor union to organize any such employees.
(b) Except to the extent set forth in Schedule 5.22 hereto, Lydall is in
material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair labor practice.
5.23 Product Warranty
----------------
Except as set forth on Schedule 5.23, each product manufactured, sold, leased or
delivered by the Business has been in conformity with all applicable contractual
commitments and all express and implied warranties, and to the knowledge of
Lydall, Lydall does not have any liability (and there is no basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against any of them giving rise to any liability) for
replacement or repair thereof or other damages in connection therewith, other
than in the ordinary course of business. Except as set forth on Schedule 5.23,
no product manufactured, sold, or delivered by the Business is subject to any
guaranty, warranty, or other indemnity beyond the stated terms of the applicable
contract and any additional terms implied by law. Schedule 5.23 includes copies
of the standard terms and conditions of sale for the Business (containing
applicable guaranty, warranty, and indemnity provisions).
18
5.24 Customers and Suppliers
-----------------------
Schedule 5.24 contains a list setting forth the 10 largest customers of the
Business, by dollar amount, over the 12 months ended December 31, 2000, and the
10 largest suppliers of the Business, by dollar amount, over the 12 months ended
December 31, 2000. All purchase and sale orders and other commitments for
purchases and sales made by Lydall in connection with the Business have been
made in the ordinary course of business in accordance with past practices, and
no payments have been made to any supplier or customers or any of their
respective representatives other than payments to such suppliers or the payment
of the invoiced price of supplies purchased or goods sold in the ordinary course
of business.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF LUDLOW
Representations and Warranties of Ludlow. Ludlow represents, warrants and
agrees as follows:
6.1 Existence and Good Standing of Ludlow; Power and Authority.
----------------------------------------------------------
Ludlow is a corporation duly organized, validly existing and in good standing
under the laws of the State of Virginia. Ludlow has full power and authority to
execute and deliver this Agreement and the Non-Competition Agreement, to perform
its obligations and to consummate the transactions contemplated by these
Agreements. The execution, delivery and performance of this Agreement and the
Non-Competition Agreement by Ludlow, and the consummation by it of the
transactions contemplated, have been duly and validly authorized and approved by
all necessary corporate action of Ludlow. Each of this Agreement and the Non-
Competition Agreement has been duly and validly executed and delivered by Ludlow
and is a valid and binding obligation of Ludlow enforceable against Ludlow in
accordance with its terms, except to the extent that its enforceability may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles. Ludlow has delivered to Lydall true, complete and
correct copies of its certificate of incorporation and by-laws as currently in
effect and, with the exception of the amendment to its certificate of
incorporation to authorize the Preferred Stock, no action has been taken or
authorized to amend any of such documents.
6.2 Consents and Approvals; No Violations.
-------------------------------------
Except as set forth in Schedule 6.2 attached, the execution, delivery and
performance of this Agreement and the Non-Competition Agreement by Ludlow and
the consummation by Ludlow of the transactions contemplated will not, with or
without the giving of notice or the lapse of time or both: (a) violate, conflict
with, or result in a breach of default under any provision of the certificate of
incorporation or by-laws of Ludlow; (b) violate any statute, ordinance, rule,
regulation, order, judgment or decree of any court or of any governmental or
regulatory body, agency or authority applicable to Ludlow or by which any of its
properties or assets may be bound; (c) require any filing by Ludlow with, or
require Ludlow
19
to obtain any permit, consent or approval of, or require Ludlow to give any
notice to, any governmental or regulatory body, agency or authority or any other
Person; or (d) result in a violation or breach by Ludlow of, conflict with,
constitute (with or without due notice or lapse of time or both) a default by
Ludlow (or give rise to any right of termination, cancellation, payment or
acceleration)under, or result in the creation of any Encumbrance upon any of the
properties or assets of Ludlow under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, franchise, permit, agreement,
lease, franchise agreement or other instrument or obligation to which Ludlow is
a party, or by which it or any of its properties or assets may be bound; except,
in the case of clauses (b) and (d), for such violations, breaches, conflicts,
defaults or Encumbrances which would not have a material adverse effect on
Ludlow or on its ability to consummate the transactions contemplated.
6.3 Brokers.
-------
There has been no broker or finder involved in any manner in the negotiations
leading up to the execution of this Agreement, or the consummation of any
transactions contemplated as a result of any agreements or understandings made
by Ludlow; and
6.4 Financing.
---------
Ludlow has funds available (including those to be provided to it pursuant to
binding financing commitments) which are sufficient to pay the Purchase Price
and to pay all other amounts owing by it in connection with the transaction
contemplated by this Agreement. Ludlow has furnished reasonable substantiation
of the foregoing to Lydall.
6.5 Financial Statements.
--------------------
Attached as Schedule 6.5 are the unaudited financial statements of Ludlow for
the fiscal year ended September 30, 2000, which have been prepared in accordance
with generally accepted accounting principles ("GAAP") consistently applied
throughout the period indicated and fairly present in all respects the financial
position of Ludlow at and as of September 30, 2000, and the results of
operations for the fiscal year then ended.
6.6 Absence of Certain Changes or Events.
------------------------------------
Since December 31, 2000, except as disclosed to Lydall in Schedule 6.6, there
has not been any adverse change in the financial condition or results of
operations of Ludlow, and Ludlow has not engaged in any practice, taken any
action, or entered into any transaction having an adverse impact on Ludlow's
ability to consummate the transactions contemplated hereby;
6.7 Litigation or Claims.
--------------------
There is no litigation, proceeding, arbitration, alternate dispute matter,
assessment, governmental investigation or other claim pending, or so far as
known to Ludlow threatened, against or relating to Ludlow with respect to the
transactions contemplated by this Agreement or otherwise involving Ludlow that
would have an adverse effect on Ludlow's ability to consummate the transactions
contemplated hereby.
20
ARTICLE VII
COVENANTS OF LYDALL
Lydall covenants and agrees with Ludlow as follows:
7.1 Cooperation by Lydall.
---------------------
Subject to Section 2.5, Lydall shall use its reasonable efforts, and shall
cooperate with Ludlow, to secure all necessary consents, approvals,
authorizations, exemptions and waivers from third parties as shall be required
in order to enable Lydall to effect the transactions contemplated on its part,
and Lydall shall otherwise use its reasonable efforts to cause the consummation
of such transactions in accordance with the terms and conditions and to cause
all conditions contained in this Agreement over which it has control to be
satisfied. Lydall further agrees to deliver to Ludlow prompt written notice of
any event or condition known to Lydall, which if it existed on the date of this
Agreement, would result in any of the representations and warranties of Lydall
contained in this Agreement being untrue in any material respect.
7.2 Insurance.
---------
Lydall covenants that to the extent that the insurance policies owned by Lydall
and covering the Business before the Closing attached (i) insure against losses,
liabilities, damages or expenses relating to or arising out of
occurrences/accidents prior to the Closing Date and (ii) permit claims to be
made after the Closing Date with respect to such losses, liabilities, damages or
expenses relating to or arising out of occurrences/accidents prior to the
Closing Date, the parties will cooperate in submitting claims under such
insurance policies with respect to such losses, liabilities, damages or expenses
relating to occurrences/accidents prior to the Closing Date.
ARTICLE VIII
COVENANTS OF LUDLOW
Ludlow covenants and agrees with Lydall as follows:
8.1 Cooperation by Ludlow.
---------------------
(a) Ludlow shall use its reasonable efforts, and shall cooperate with
Lydall, to secure all necessary consents, approvals, authorizations, exemptions
and waivers from third parties as set forth in Schedule 6.2, if any, as shall be
required in order to enable Ludlow to effect the transactions contemplated on
its part, and Ludlow shall otherwise use its reasonable efforts to cause the
consummation of such transactions in accordance with the terms and conditions
and to cause all conditions contained in this Agreement over which it has
control to be satisfied. Ludlow further agrees to deliver to Lydall prompt
written notice of any event or condition known to Ludlow, which if it existed on
the date of this Agreement, would result in any of the representations and
warranties of Ludlow contained
21
in this Agreement being untrue in any material respect.
(b) After the Closing Date, Ludlow shall use its reasonable efforts, and
shall cooperate with Lydall and provide access to all necessary documents and
information with respect to any tax, securities, insurance, personnel, medical,
worker's compensation or long-term disability matters arising out of Lydall's
ownership of the Business prior to the Closing Date.
8.2 Insurance.
---------
Ludlow covenants that to the extent that the insurance policies owned by Ludlow
and covering the Business after the Closing (i) insure against losses,
liabilities, damages or expenses relating to or arising out of
occurrences/accidents before the Closing Date and (ii) permit claims to be made
after the Closing Date with respect to such losses, liabilities, damages or
expenses relating to or arising out of occurrences/accidents after the Closing
Date, the parties will cooperate in submitting claims under such insurance
policies with respect to such losses, liabilities, damages or expenses relating
to occurrences/accidents before the Closing Date.
ARTICLE IX
CONDITIONS TO LUDLOW'S OBLIGATIONS
The obligations of Ludlow under this Agreement to purchase the Assets and to
consummate the other transactions contemplated shall be subject to the
satisfaction (or waiver by Ludlow) on or prior to the Closing Date of all of the
following conditions:
9.1 Truth of Representations and Warranties.
---------------------------------------
The representations and warranties of Lydall contained in this Agreement, in the
▇▇▇▇ of Sale or in any Schedule or Exhibit delivered pursuant to such agreements
shall be true and correct in all material respects (except to the extent that
such representation or warranty is already qualified by reference to materiality
in which case such representation or warranty shall be true and correct as
written) on and as of the Closing Date.
9.2 No Litigation Threatened.
------------------------
No action or proceedings shall have been instituted before a court or other
governmental body or by any public authority to restrain or prohibit any of the
transactions contemplated.
9.3 Governmental Approvals.
----------------------
All governmental filings, notices, consents and approvals, if any, necessary to
permit the consummation of the transactions contemplated by this Agreement shall
have been made or received, as the case may be.
22
9.4 Consents.
--------
Each of the consents listed in Schedule 5.3 attached, which shall include
assignments of the Lease Agreements for the Richmond, Virginia and Jacksonville,
Florida facilities, shall have been received.
9.5 Non-Competition Agreement.
-------------------------
Lydall shall have executed and delivered to Ludlow a Non-Competition Agreement,
in substantially the form of Exhibit B attached.
9.6 No Material Adverse Change.
--------------------------
Prior to the Closing Date, there shall be no material adverse change in the
assets or liabilities, or in the Business or condition, financial or otherwise,
or in the results of operations or prospects of the Business, or in any
substantial portion of the Assets.
9.7 Absence of Insolvency.
---------------------
Immediately prior to, and immediately subsequent to, the consummation of the
sale of the Assets pursuant to the provisions of this Agreement, Lydall will be
solvent and have the ability to pay its debts (with respect to the Business or
otherwise) as they become due.
9.8 ▇▇▇▇ of Sale.
------------
Lydall shall have executed and delivered to Ludlow the ▇▇▇▇ of Sale, attached as
Exhibit A.
9.9 Proceedings.
-----------
All proceedings to be taken in connection with the transactions contemplated by
this Agreement and all related documents shall be reasonably satisfactory in
form and substance to Ludlow and its counsel, and Ludlow shall have received
copies of all such documents and other evidence as it or its counsel may
reasonably request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
ARTICLE X
CONDITIONS TO LYDALL'S OBLIGATIONS
The obligations of Lydall under this Agreement to sell the Assets and to
consummate the other transactions contemplated herein shall be subject to the
satisfaction (or waiver by Lydall) on or prior to the Closing Date of all of the
following conditions:
10.1 Truth of Representations and Warranties.
---------------------------------------
The representations and warranties of Ludlow contained in this Agreement, in any
of the Non-Competition Agreement or in any Exhibit delivered pursuant to this
Agreement shall be true and correct in all material respects on and as of the
Closing Date.
23
10.2 Absence of Insolvency.
---------------------
Immediately prior to, and immediately subsequent to, the consummation of the
sale of the Assets pursuant to the provisions of this Agreement, Ludlow will be
solvent and have the ability to pay its debts (with respect to the Business or
otherwise) as they become due.
10.3 No Litigation Threatened.
------------------------
No action or proceedings shall have been instituted before a court or other
governmental body or by any public authority to restrain or prohibit any of the
transactions contemplated.
10.4 Governmental Approvals.
----------------------
All governmental filings, notices, consents and approvals, if any, necessary to
permit the consummation of the transactions contemplated by this Agreement shall
have been made or received, as the case may be.
10.5 Consents.
--------
Any consents listed in Schedule 6.2 attached shall have been received.
10.6 Proceedings.
-----------
All proceedings to be taken in connection with the transactions contemplated by
this Agreement and all documents incident shall be reasonably satisfactory in
form and substance to Lydall and its counsel, and Lydall shall have received
copies of all such documents and other evidence as it or its counsel may
reasonably request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
ARTICLE XI
OTHER AGREEMENTS
11.1 Further Assurances.
------------------
Each party shall, at the reasonable request of the other, at any time and from
time to time following the Closing Date, execute and deliver to the requesting
party all such further instruments as may be reasonably necessary or appropriate
in order to more effectively (a) assign, transfer and convey to Ludlow, or to
perfect or record Ludlow's title to or interest in the Assets, (b) evidence and
confirm the assumption by Ludlow of the liabilities of Lydall to be assumed by
Ludlow pursuant to this Agreement, or (c) otherwise confirm or carry out the
provisions of this Agreement.
11.2 Books, Records and Information.
------------------------------
(a) Ludlow agrees that all Books and Records delivered to Ludlow by Lydall
pursuant to this Agreement shall be open for inspection by representatives of
Lydall at any time during regular business hours for a period of six years (or
for such longer period as may be required by law or as may be reasonably
necessary as a result of audits and Tax contests) following the Closing Date and
that Lydall may during such period make such copies as it may reasonably
request, all at Lydall's cost and expense. Lydall agrees that all
24
records, documents and other tangible items that are retained by Lydall and that
are related to the Assets or the Business shall be open for inspection by
representatives of Ludlow at any time during regular business hours for a period
of six years (or for such longer period as may be required by law or
governmental regulation or as may be reasonably necessary or desirable as a
result of audits and Tax contests) following the Closing Date and that Ludlow
may during such period make such copies as it may reasonable request, all at
Ludlow's cost and expense.
(b) Lydall and Ludlow shall (i) each provide the other with such assistance
as may reasonably be requested by either of them in connection with the
preparation of any Return, audit or other examination by a taxing authority or
judicial or administrative proceedings relating to liability for Taxes, (ii)
each retain and provide the other with any records or other information which
may be relevant to such Return, audit or examination, proceeding or
determination, and (iii) each provide the other with any final determination of
any such audit or examination, proceeding or determination that affects any
amount required to be shown on any Return of the other for any period. Without
limiting the generality of the foregoing, Ludlow shall retain and Lydall shall
retain, until the applicable statutes of limitations (including any extensions)
have expired, copies of all Returns, supporting work schedules and other records
or information which are relevant to such returns for all tax periods or
portions of tax periods ending before or including the Closing Date.
(c) Without limiting the generality of subsection (a) or (b) of this
Section 11.2, neither Ludlow nor Lydall shall destroy or give up possession of
any item referred to in subsection (a) or (b) without first offering to the
other the opportunity, at such other's expense (but without any other payment),
to obtain the same. Each party shall promptly notify the other when it shall
have no further need for such other party to maintain any of the items referred
to in subsection (a) or (b) and thereafter such other party shall be free to
dispose of the same as it deems fit.
(d) Lydall and Ludlow shall use their reasonable efforts to afford the
other access to (i) in the case of Lydall, employees of Lydall who remain
employees of Lydall following the Closing Date but are familiar with the Assets
or the Business and (ii) in the case of Ludlow, employees who were previously
employees of Lydall, in each case as such other shall reasonably request for its
proper corporate purposes, including, without limitation, the defense of legal
proceedings or the preparation and audit of tax returns. Such access may
include interviews or attendance at depositions or legal proceedings; provided,
---------
however, that in any event all out-of-pocket expenses (excluding wages and
-------
salaries) reasonably incurred by any party in connection with this Section
11.2(d) shall be paid or promptly reimbursed by the party requesting such
services.
(e) Each of Ludlow and Lydall shall maintain in confidence all documents
and other information not otherwise public which they may respectively acquire
as a consequence of the exercise of their respective rights pursuant to this
Section 11.2.
25
11.3 Mail; Payments.
--------------
Lydall authorizes and empowers Ludlow from and after the Closing Date to receive
and open all mail and other communications received by Ludlow, and to act with
respect to such communications in such manner as Ludlow may elect if such
communications relate to the Business, or, if such communications do not relate
to the Business, to forward the same promptly to Lydall. Lydall and Ludlow
shall promptly deliver to the other any cash, checks or other instruments of
payment to which the other is entitled and shall hold such cash, checks or other
instruments of payment in trust for the other until such delivery.
11.4 Use of Name.
-----------
Ludlow agrees that it will not use the name "Lydall": (a) at any time after the
Closing Date on letterhead or business cards; (b) at any time after the Closing
Date on packaging, boxes, skid tickets, purchase orders, acknowledgements,
invoices or any other documents which are not preprinted; (c) after six (6)
months following the Closing Date on brochures and samples, provided that during
the six months following the Closing Date stickers will be applied to brochures
and samples stating that Lydall Southern Products is now owned by Ludlow; and
(d) directly on products, except that inventory existing on the Closing Date
marked with the name "Lydall" may be sold without change.
ARTICLE XII
SURVIVAL AND INDEMNIFICATION
12.1 Survival of Representations, Covenants and Certain Indemnifications.
-------------------------------------------------------------------
The respective representations and warranties of Lydall and Ludlow contained in
this Agreement, the ▇▇▇▇ of Sale or the Non-Competition Agreement, or in any
Exhibit or Schedule to this Agreement and the respective indemnification
obligations set forth in Sections 12.2 (b)(i) and 12.2(c)(i) shall survive the
Closing Date, but shall expire on the eighteen month anniversary of the Closing
Date except that Lydall's representations and warranties in Sections 5.6 (Title
to Assets) and 5.12 (Tax Returns) shall expire sixty (60) days after the
expiration of all statutes of limitation applicable, and except with respect to,
and to the extent of, any claim of which written notice specifying, in
reasonable detail, the nature and amount of the claim has been given by one
party to the other prior to such expiration. The respective covenants and
agreements of Lydall and Ludlow as of the Closing Date contained in this
Agreement or in any Exhibit attached shall survive the consummation of the
transactions contemplated by this Agreement including, without limitation, the
respective indemnification obligations of Lydall and Ludlow set forth in
Sections 12.2(b)(ii) and (c)(ii).
12.2 Indemnification.
---------------
(a) The indemnifying party shall be obligated to indemnify the indemnified
party only when the amount to which the indemnified party shall be entitled to
receive as indemnification shall exceed $25,000 in the aggregate.
26
(b) Lydall shall indemnify, defend and hold harmless Ludlow and its parent
from and against any and all claims by third parties and any costs, losses,
damages or liabilities (including, without limitation, reasonable attorneys'
fees, interest and any penalties) relating to such claims (collectively,
"Losses" and individually, a "Loss") incurred or suffered by Ludlow with respect
to or in connection with:
(i) the failure of any representation or warranty, made in or pursuant
to this Agreement, the ▇▇▇▇ of Sale or in the Schedules or Exhibits attached by
Lydall, to be true and correct in all respects as of the Closing Date or any
breach or nonfulfillment of any covenant or obligation of Lydall under this
Agreement, other than any Loss which is asserted as a claim under subparagraph
(ii) of this Section 12.2(b); and
(ii) any claim which is made against Ludlow with respect to any
Excluded Assets or Excluded Liabilities and any suits, actions, proceedings and
assessments against Ludlow and costs and expenses incurred by Ludlow in the
defense, including reasonable attorneys' fees, incident to the matters referred
to in this subparagraph (ii).
(iii) any product warranty claim made against Ludlow with respect to
any finished goods produced by the Business prior to Closing.
Ludlow reserves the right to participate at its own expense in the defense of
any such claims falling within this Section 12.2(b), without relieving Lydall of
any of its obligations.
(c) Ludlow shall indemnify, defend and hold harmless Lydall and its parent
from and against any and all claims by third parties and any costs, losses,
damages or liabilities (including, without limitation, reasonable 'attorneys'
fees, interest and any penalties) relating to such claims (collectively,
"Losses" and individually, a "Loss") incurred or suffered by Lydall or its
parent with respect to or in connection with:
(i) the failure of any representation or warranty made in or pursuant
to this Agreement, the Non-Competition Agreement or in the Schedules and
Exhibits attached by Ludlow to be true and correct in all respects as of the
Closing Date or any breach of nonfulfillment of any covenant or obligation of
Ludlow under this Agreement, other than any Loss which is asserted as a claim
under subparagraph (ii) of this Section 12.2(c);
(ii) any claim which is made against Lydall with respect to the
Assumed Obligations and any suits, actions, proceedings and assessments against
Lydall and costs and expenses incurred by Lydall in the defense, including
reasonable attorneys' fees, incident to the matters referred to in this
subparagraph (ii); and
(iii) any claim which is made against Lydall with respect to product
warranty matters related to products made and sold from the Facilities after
Closing.
Lydall reserves the right to participate at its own expense in the defense of
any such claims falling within this Section 12.2(c), without relieving Ludlow of
any of its obligations.
27
ARTICLE XIII
MISCELLANEOUS
13.1 Entire Agreement.
----------------
This Agreement (including the Exhibits and Schedules which are incorporated
herein by this reference) sets forth the entire understanding of the parties
with respect to the subject matter hereof. Any previous agreements or
understandings between the parties regarding the subject matter are superseded
by this Agreement.
13.2 Successors and Assigns.
----------------------
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors of the parties; provided however, that
----------------
this Agreement, including the representations and warranties, may not be
assigned by either of the parties without the written consent of the other
party, except to a parent, subsidiary or Affiliate company of a party.
13.3 Counterparts.
------------
This Agreement may be executed in one or more counterparts, each of which shall
for all purposes be deemed to be an original and all of which shall constitute
the same instrument.
13.4 Headings.
--------
The headings of the Articles, Sections and paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction.
13.5 Modification and Waiver.
-----------------------
No amendment, modification or alteration of the terms or provisions of this
Agreement shall be binding unless the same shall be in writing and duly executed
by the parties, except that any of the terms or provisions of this Agreement may
be waived in writing at any time by the party which is entitled to the benefits
of such waived terms or provisions. No waiver of any of the provisions of this
Agreement shall be deemed to or shall constitute a waiver of any other provision
(whether or not similar). No delay on the part of either party in exercising
any right, power or privilege shall operate as a waiver.
13.6 No Third Party Beneficiary Rights.
---------------------------------
This Agreement is not intended to, and shall not be construed to, give any
Person other than the parties signatory any interest or rights (including,
without limitation, any third party beneficiary rights) with respect to or in
connection with any agreement or provision contained or contemplated herein.
13.7 Expenses.
--------
Lydall and Ludlow shall each pay all costs and expenses incurred by it or on its
behalf in connection with this Agreement and the transactions contemplated,
including, without
28
limiting the generality of the foregoing, fees and expenses of its own financial
consultants, accountants and legal counsel.
13.8 Notices.
-------
Any notice, request, instruction or other document to be given by any party to
any other party shall be in writing and delivered in person, sent by facsimile,
or sent by registered or certified mail, postage prepaid, as follows:
if to Ludlow: Ludlow Building Products, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
w/cc to: General Counsel
Tyco International, Inc.
▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
if to Lydall: Lydall Eastern, Inc.
c/o Lydall, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided shall be deemed to
have been duly given to the party to whom it is directed upon actual receipt by
such party. Any notice which is faxed in the manner provided shall be
conclusively presumed to have been given to the party to whom it is given upon
confirmation of such facsimile.
13.9 Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with the laws of
the State of Connecticut.
13.10 Publicity.
---------
Except as otherwise required by applicable laws or regulations, neither Lydall
nor Ludlow shall issue any press release or make any other public statement, in
each case relating to or connected with or arising out of this Agreement or the
matters contained herein, without obtaining the prior approval of the other
party including of the contents and the manner of presentation and publication.
13.11 Consent to Jurisdiction.
-----------------------
Any judicial proceeding brought against any of the parties to this Agreement on
any dispute arising out of this Agreement or any matter related may be brought
in any federal or state
29
court located in the State of Connecticut and, by execution and delivery of this
Agreement, each of the parties to this Agreement accepts for itself the
exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered in connection with this Agreement.
13.12 Severability.
------------
If any provision of this Agreement is invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transaction contemplated is not affected in
any manner adverse to any party. Upon such determination that any provision is
invalid, illegal or incapable of being enforced, the parties shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated are fulfilled.
13.13 Enforcement.
-----------
The parties agree that the remedy at law for any breach of this Agreement is
inadequate and that should any dispute arise concerning the sale of the Assets,
the Business or any other matter, this Agreement shall be enforceable in a court
of equity by an injunction or a decree of specific performance. Such remedies
shall, however, be cumulative and nonexclusive, and shall be in addition to any
other remedies which the parties may have.
13.14 Confidentiality.
---------------
Except as agreed upon, as otherwise required by applicable laws or regulations,
or as otherwise provided by the terms of this Agreement, each of Ludlow and
Lydall agrees to keep confidential the transaction described in this Agreement
and all non-public information relating to the other, the Assets and the
Business as set forth in the Agreement dated as of this date between the parties
attached as Exhibit C and incorporated herein by this reference.
30
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly
executed on its behalf as a sealed instrument as of the date first written
above.
LYDALL EASTERN, INC. LUDLOW BUILDING PRODUCTS, INC.
By:________________________ By:_______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Executive Vice President Authorized Representative
Finance and Administration,
Chief Financial Officer
Witness:___________________ Witness:__________________
Name:______________________ Name:_____________________
31
List of Exhibits
Exhibit A ▇▇▇▇ of Sale (2.6)(9.8)
Exhibit B Non-Competition Agreement (9.5)
Exhibit C Confidentiality Agreement (13.14)
32
List of Schedules
Schedule 3.2.............Net Asset Adjustment
Schedule 4.1.............Employee Benefits
Schedule 5.3.............Consents and Approvals; No Violations
Schedule 5.4.............Financial Statements; No Material Adverse Change
Schedule 5.5.............Books and Records
Schedule 5.6.............Title To Assets; Encumbrances; Condition
Schedule 5.7.............Leases
Schedule 5.8.............Material Contracts
Schedule 5.9.............Permits
Schedule 5.10............Restrictive Documents
Schedule 5.11............Litigation
Schedule 5.12............Returns; Taxes
Schedule 5.13............Undisclosed Liabilities
Schedule 5.14............Intellectual Properties
Schedule 5.16............Compensation of Employees
Schedule 5.17............Inventories
Schedule 5.20............Absence of Certain Changes
Schedule 5.21............Accounts Payable
Schedule 5.22............Labor Matters
Schedule 5.23............Product Warranty
Schedule 5.24............Customers and Suppliers
Schedule 6.2.............Consents and Approvals; No Violations
Schedule 6.5.............Financial Statements
Schedule 6.6.............Absence of Changes
33