EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
VARLEN CORPORATION,
VARLEN INSTRUMENTS, INC.
AND
▇▇▇▇▇ INDUSTRIES, INC.
DATED AS OF JUNE 21, 1999
TABLE OF CONTENTS
Page
ARTICLE I Purchase and Sale of Shares............................................................ 1
1.1. Purchase of Shares.................................................................... 1
1.2. Preparation of Closing Date Schedule.................................................. 1
1.3. Adjustment of Purchase Price.......................................................... 2
ARTICLE II REPRESENTATIONS AND WARRANTIES......................................................... 3
2.1. Representations and Warranties of Seller.............................................. 3
2.2. Representations and Warranties of Buyer............................................... 17
ARTICLE III CLOSING; CONDITIONS OF CLOSING AND TERMINATION......................................... 18
3.1. Closing............................................................................... 18
3.2. Conditions to Obligations of Buyer.................................................... 18
3.3. Conditions to Obligations of Seller................................................... 19
ARTICLE IV INDEMNIFICATION........................................................................ 20
4.1. Indemnification of Buyer.............................................................. 20
4.2. Indemnification of Seller............................................................. 21
4.3. Survival.............................................................................. 22
4.4. Claims................................................................................ 22
4.5. Limitations........................................................................... 23
ARTICLE V CERTAIN POST CLOSING MATTERS........................................................... 24
5.1. Certain Tax Matters................................................................... 24
5.2. Income Tax Matters Generally.......................................................... 24
5.3. Access to Records After Closing....................................................... 26
5.4. Covenant Not to Compete............................................................... 27
5.5. Employee Matters...................................................................... 28
5.6. General, Auto and Product Liability................................................... 31
5.7. Cooperation on Claims................................................................. 31
5.8. Name Change........................................................................... 32
5.9. Letters of Credit..................................................................... 32
ARTICLE VI MISCELLANEOUS.......................................................................... 32
6.1. Further Actions....................................................................... 32
6.2. Brokerage............................................................................. 32
6.3. Expenses.............................................................................. 33
6.4. Entire Agreement...................................................................... 33
6.5. Descriptive Headings.................................................................. 33
6.6. Notices............................................................................... 33
6.7. Governing Law......................................................................... 34
6.8. Assignability......................................................................... 34
6.9. Waivers and Amendments................................................................ 34
6.10. Third Party Rights.................................................................... 34
6.11. Illegality............................................................................. 34
6.12. Release................................................................................ 34
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of June 21, 1999 (this "Agreement"), by
and among (i) VARLEN CORPORATION, a Delaware corporation ("Seller"), (ii) VARLEN
INSTRUMENTS INC., a Delaware corporation (the "Company") and (iii) ▇▇▇▇▇
INDUSTRIES, INC., a Delaware corporation ("Buyer"). Seller, the Company and
Buyer will be sometimes referred to herein as a "Party" and collectively as the
"Parties".
The Company is engaged in the design, manufacture and sale of petroleum
analytical instrumentation products and related services (the "Business").
Seller owns and has the legal right and authority to sell, transfer, assign and
deliver One Hundred (100) shares (the "Shares") of the capital stock of the
Company, which Shares constitute all of the issued and outstanding shares of the
capital stock of the Company, and Seller desires to sell, and Buyer desires to
purchase, all the Shares upon the terms and conditions set forth in this
Agreement. In addition, simultaneously with the execution and delivery of this
Agreement, (i) Seller is entering into an agreement with Buyer with respect to
the sale by Seller to ▇▇▇▇▇ Industries Deutschland GmbH i. Gr. of all the
outstanding capital stock of ▇▇▇▇▇▇ ▇▇▇▇▇▇ GmbH ("▇▇▇▇▇▇"), a German corporation
(the "German Sales Agreement"), and (ii) Seller and Acieries de Ploermel, a
French corporation, are entering into an agreement with Buyer and
Instrumentation Scientifique de Laboratoire with respect to the sale of a 99%
partnership interest of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Instruments (the "French Sales
Agreement").
NOW, THEREFORE, in consideration of the mutual benefits to be derived and
of the mutual promises, covenants, representations, warranties and agreements
herein contained, and intending to be legally bound hereby, Seller, the Company
and Buyer hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1. Purchase of Shares.
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Upon the terms and subject to the conditions set forth in this Agreement
and the representations and warranties herein made by each of the Parties to the
other, Seller agrees to sell to Buyer, free and clear of Liens (as defined in
Section 2.1(i)), and Buyer agrees to purchase from Seller, on the Closing Date
(as hereinafter defined), the Shares for a purchase price of $14,200,000,
subject to adjustment as hereinafter provided (the "Purchase Price"), payable in
cash at closing by wire transfer to an account designated by Seller to Buyer two
days prior to the Closing Date.
1.2. Preparation of Closing Date Schedule.
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(a) Within two days following the Closing Date, Buyer shall be
responsible for the taking of a physical inventory of all inventories of the
Company as of the close of business on the Effective Date; no goods or items in
inventory shall be moved while the physical inventory is being conducted.
Promptly after the Closing, Buyer shall prepare a schedule showing the working
capital of the Company as of the close of business on the Effective Date
(the "Closing Date Schedule"). Amounts on the Closing Date Schedule with respect
to inventories shall be derived from the physical inventory taken by Buyer. The
Closing Date Schedule shall be prepared with the accounting principles and
procedures used in the preparation of the Financial Statements described in
Section 2.1(g) hereof, except as noted in Section 2.1(g) of the Disclosure
Schedule. Buyer agrees to use all reasonable efforts to cause the Closing Date
Schedule to be prepared and delivered to Seller within 90 days after the
Closing.
(b) Seller and its authorized representatives and designees, at
Seller's expense, shall have the right to observe the physical inventory.
Seller and its authorized representatives and designees, at Seller's expense,
shall have the right to review the Closing Date Schedule and perform other
review procedures, including a review of any working papers with respect to its
preparation.
(c) Seller shall be deemed to have accepted the Closing Date
Schedule unless within thirty (30) days after delivery thereof to Seller, Seller
gives written notice to Buyer of Seller's objection to any item therein. In the
event Seller gives such written notice of objection, and Buyer and Seller have
been unable to resolve such dispute by a date twenty (20) days after delivery of
such notice of objection, either party may require that such dispute be resolved
by arbitration under the rules, but not the jurisdiction, of the American
Arbitration Association by one arbitrator (the "Arbitrator") who shall be a
certified public accountant and a partner in the Dallas, Texas, office of Price
Waterhouse Coopers.
(d) The Arbitrator shall have access to all documents and
facilities necessary to perform its function as Arbitrator. The Arbitrator's
determination with respect to any dispute shall be final and binding upon the
parties hereto. Seller and Buyer shall each pay one-half of the fees and
expenses of the Arbitrator for such services.
1.3. Adjustment of Purchase Price.
-----------------------------
(a) Within thirty (30) days after delivery of the Closing Date
Schedule to Seller pursuant to Section 1.2 hereof, or, if disputed, within ten
(10) days after the final resolution of such dispute pursuant to Section 1.2(c),
the Purchase Price shall be adjusted as follows. For the purposes of this
adjustment, Pro Forma Working Capital shall mean the working capital of the
Company calculated in the same manner as the working capital on the Financial
Statements described in Section 2.1(g) hereof, except as noted in Section 2.1(g)
of the Disclosure Schedule, but shall include all indebtedness of the Company
without regard to whether such indebtedness is classified as working capital
under United States generally accepted accounting principles ("GAAP"). To the
extent there is a liability which Seller has assumed or agreed to indemnify
Buyer for, the accrual for such item shall not be counted in the determination
of the Pro Forma Working Capital on the Closing Date Schedule. Any
intercompany indebtedness of the Company set forth on the Financial Statements
which has been cancelled as a contribution to capital as of a date prior to the
close of business on the Effective Date shall not be reflected on the Closing
Date Schedule.
(b) If Pro Forma Working Capital as set forth on the Closing Date
Schedule exceeds $4,094,000, the Purchase Price will be increased by, and Buyer
will pay to Seller, the amount of such excess.
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(c) If Pro Forma Working Capital as set forth on the Closing Date
Schedule is less than $4,094,000, the Purchase Price will be decreased by, and
Seller will pay to Buyer, the amount of such deficiency.
(d) All payments to be made pursuant to this Section shall (i) be
made by wire transfer of immediately available funds to an account designated by
the recipient at least two business days prior to the transfer, except that
payments of less than $10,000 may be made by check subject to collection and
(ii) be accompanied by a payment of interest thereon at the "Prime Rate" from
time to time in effect on such amount from the Closing Date until paid. As used
in this Agreement, "Prime Rate" means the rate of interest equal to the "Prime
Rate" reported from time to time in the "Money" column of The Wall Street
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Journal, and shall change from time to time effective with any changes in the
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reporting of such rate.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Simultaneously with the execution and delivery of this Agreement, Seller is
delivering to Buyer the Disclosure Schedule referred to herein.
2.1. Representations and Warranties of Seller.
-----------------------------------------
Except as and to the extent set forth in the specific section of the
Disclosure Schedule to which such representation and warranty relates, Seller
represents and warrants to Buyer, as of the Effective Date, as follows:
(a) Organization and Standing.
-------------------------
(i) Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. Seller is qualified to transact business as a
foreign corporation in each jurisdiction where it is required to qualify in
order to conduct its business as presently conducted.
(ii) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to carry on its business as it is now
being conducted. The Company is qualified to transact business as a foreign
corporation in the jurisdictions (which are listed on Section 2.1(a) of the
Disclosure Schedule hereto) where it is required to qualify in order to conduct
its business as presently conducted.
(b) Consents, Authorizations and Binding Effect. Each of Seller and
the Company has full corporate power and authority to execute, deliver and
perform its respective obligations under this Agreement without the necessity of
obtaining any consent, approval, authorization, advice or waiver or giving any
notice, except for such consents, approvals, authorizations, advice or waivers
(individually a "Consent" and collectively "Consents") which have been obtained
and are unconditional and in full force and effect and such notices
(individually a "Notice" and collectively "Notices") which have been duly given,
all of which
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are listed on Section 2.1(b) of the Disclosure Schedule, and except for Consents
and Notices which are required under immaterial contracts the absence of which
would not have a material adverse effect on the assets, business, financial
condition or results of operations of the Company or Seller. The board of
directors of each of Seller and the Company have duly authorized the execution,
delivery and performance of this Agreement by Seller and the Company. This
Agreement has been duly executed and delivered by each of Seller and the Company
and constitutes their respective legal, valid and binding obligations,
enforceable against them in accordance with its terms, except as may be limited
by bankruptcy, reorganization, insolvency and similar laws of general
application relating to or affecting the enforcement of rights of creditors. The
execution, delivery and performance of this Agreement by Seller and the Company,
and the consummation of the transactions contemplated thereby will not:
(i) conflict with, result in the breach of, or constitute a
default under, or the acceleration of any contract, agreement, commitment,
undertaking, restriction or instrument to which Seller or the Company is a party
or by which either of them may be bound or affected;
(ii) constitute a violation of any statute, judgment, order,
decree, regulation or rule of any court, governmental authority or arbitrator
applicable or relating to or binding upon Seller or the Company; or
(iii) violate any provision of the Articles of Incorporation or
Bylaws of Seller or the Company.
(c) Shares. Seller has good title to the Shares, and has the right,
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title, power and authority to sell and transfer to Buyer the Shares. The Shares
are owned by Seller, and are being transferred by Seller to Buyer, free and
clear of all Liens (as defined in Section 2.1(i)), other than customary
restrictions under Federal and state securities laws. There are no options,
proxies, voting trusts or other agreements or understandings with respect to the
issuance, transfer or voting of the Shares. All issuances, sales and
repurchases of equity interests by the Company have been effected in compliance
with all applicable laws, including, without limitation, applicable federal and
state securities laws.
(d) Capitalization of the Company.
-----------------------------
(i) The Company's total authorized capitalization consists
solely of 1,000 shares of Common Stock, par value $0.01 per share (the "Common
Stock"), of which a total of only 100 shares are presently issued and
outstanding, all of which are owned by Seller. The Company does not hold any
shares of its capital stock in its treasury. All of the issued and outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable.
(ii) There are no authorized, outstanding or existing:
(A) proxies or other agreements or understandings with
respect to the voting of any capital stock of the Company;
(B) depositary receipts of shares issued by the Company;
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(C) securities convertible into or exchangeable for any
capital stock of the Company (including notes, bonds or
debentures);
(D) options, warrants or other rights to purchase or
subscribe for any capital stock of the Company (other than this
Agreement), or securities convertible into or exchangeable for
any capital stock of the Company;
(E) agreements of any kind relating to the sale or
issuance of any capital stock of the Company, any such
convertible or exchangeable securities or any such options,
warrants or rights; or
(F) agreements of any kind which may obligate the Company
to sell, issue or purchase any of its securities.
Subsequent to January 31, 1999, the Company has not declared or paid, and has no
obligation to declare or pay, any dividends, and the Company has not made, and
has no obligation to make, any distribution or payment to the stockholders of
the Company or its affiliates, except that (x) to reduce the Buyer's risk with
respect to its acquisition of the Company, the Company has dividended, otherwise
distributed or sold to Seller or its designee all of the Company's accounts
receivable and cash as of the close of business on the day immediately prior to
the Effective Date and Seller is responsible for the collection of such
receivables, (y) the Company has distributed to Seller four small parcels of
real property that have nominal value, are not recorded in the Company's
Financial Statements, are not utilized in the Company's business operations and
are near to former operations of the Company and (z) the Company is indebted to
Seller to the extent set forth in the Financial Statements (as hereinafter
defined).
(e) The Company. The Company is engaged only in the Business and has
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no subsidiaries, except as set forth in Section 2.1(e) of the Disclosure
Schedule. Copies of the Articles of Incorporation and Bylaws of the Company
have heretofore been delivered to Buyer or Buyer's counsel and are correct and
complete and reflect all amendments or changes in effect.
(f) Minute Books and Stock Records. The minute books of the Company
------------------------------
have been furnished to Buyer for inspection and in the form so furnished are
correct and complete in all material respects and current (including
signatures). The stock record books of the Company are correct and complete in
all material respects and current (including signatures). Section 2.1(f) of the
Disclosure Schedule includes a list of the directors and officers of the
Company.
(g) Financial Statements and Financial Condition. Attached as Section
--------------------------------------------
2.1(g) of the Disclosure Schedule are the following financial statements:
(i) the unaudited balance sheets of the Company as of January
31, 1998 and 1999 and statements of income of the Company for the fiscal years
ended January 31, 1998 and 1999 (collectively, the "Annual Financial
Statements"); and
(ii) the unaudited balance sheet of the Company as of May 1,
1999, and statement of income of the Company for the period then ended (the
"Interim Financial
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Statements" and together with the Annual Financial Statements, sometimes
collectively referred to herein as the "Financial Statements").
The Financial Statements have been prepared in accordance with GAAP consistently
applied (except such deviations described in Section 2.1(g) of the Disclosure
Schedule) and the amounts set forth therein were used by Seller in connection
with the preparation of its financial statements. The Financial Statements are
consistent with the books and records of the Company. The Financial Statements
present fairly the financial condition and results of operations of the Company
at the dates and for the periods specified, except as otherwise noted therein
and subject, in the case of Interim Financial Statements, to recurring year-end
adjustments that are not expected to be material in amount.
As of the date hereof, the Company has no obligations or liabilities other than:
(A) those set forth or reserved against in the Financial
Statements;
(B) those incurred since May 1, 1999 in the ordinary course
of business in arms-length transactions and consistent in nature
and scope with past practice, which liabilities will not have, in
the aggregate, a material adverse effect upon the business,
operations or financial condition of the Company as it exists on
the Effective Date;
(C) those under the executory portion of contracts and
agreements to which the Company is a party or by which it is
bound that are listed in the Disclosure Schedule or are not
required by the terms of this Agreement to be listed in the
Disclosure Schedule; and
(D) those incurred in the ordinary course of business and
consistent in nature and scope with past practice, which
liabilities are not required by GAAP to be shown on a balance
sheet (other than in notes thereto) and which liabilities,
individually and in the aggregate, are not material.
The Company has maintained its books of account and other records in accordance
with applicable laws, rules and regulations, and such books and records are and,
during the periods covered by the Financial Statements and from May 1, 1999,
through the Effective Date were, correct and complete in all material respects,
and provide or provided a fair and accurate basis for the preparation of the
Financial Statements and the Closing Date Schedule and reflect all material
transactions to which the Company has been a party.
(h) Absence of Certain Changes. Etc. Since January 31, 1999, there
-------------------------------
has been no material adverse change in the business, operations, financial
condition or assets, of the Company. Without limiting the generality of the
foregoing, since January 31, 1999, except as set forth on the Disclosure
Schedule, the Company has not:
(i) issued, sold or delivered any shares of capital stock or
notes, bonds or other debt instruments of the Company, or granted any rights
calling for the issuance, sale or
6
delivery of any thereof (including without limitation options, warrants,
convertible securities, stock appreciation rights or similar rights);
(ii) made any payments or distribution of assets (other than
in cash or as otherwise described in this Agreement) in the form of management
fees or otherwise to Seller or any Affiliate of Seller or of the Company. (As
used herein, the term "Affiliate" means a person or entity which controls, is
controlled by or is under common control with the person with respect to which
the determination is being made. "Control" means the power to direct or cause
the direction of the management and policies of a person or entity through
voting securities, by contract or otherwise.)
(iii) purchased or redeemed any of the shares of capital stock
of the Company;
(iv) subdivided, combined, reclassified or recapitalized any
of the shares of capital stock of the Company;
(v) amended the Articles of Incorporation or Bylaws of the
Company or changed the Company's corporate name or permitted the use thereof by
any other person;
(vi) agreed to merge or consolidate the Company with any other
entity or to acquire any corporation, association, partnership, joint venture or
other entity;
(vii) changed the methods of accounting or accounting
principles or practices of the Company from those set forth in or reflected by
the Financial Statements or increased or experienced any adverse change in any
assumption underlying any method of calculating contingencies or other reserves
from that reflected in the Financial Statements;
(viii) cancelled or waived a claim of substantial value or sold,
transferred or otherwise disposed of (or agreed to sell, transfer or otherwise
dispose of) any assets of the Company, except for sales of inventory in the
ordinary course of business consistent with past practices or as otherwise set
forth on the Disclosure Schedule;
(ix) failed to maintain in full force and effect with respect
to the assets, employees and business of the Company all insurance coverage of
the types and in the amounts as were in effect on and as of January 31, 1999;
(x) made any legally binding commitment for additions to
property, plant or equipment having an individual cost in excess of $25,000 or
an aggregate cost of $75,000 for all such items taken together;
(xi) disposed of or permitted to lapse any right listed or
described on the Disclosure Schedule pursuant to Section 2.1(q);
(xii) made or agreed to make any increase in the compensation
payable to any of the officers, directors or employees of the Company, other
than in accordance with continuing obligations disclosed in the Disclosure
Schedule;
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(xiii) except as previously disclosed to Buyer, entered into or
amended any Company Plan (as that term is defined in Section 2.1(l));
(xiv) suffered any significant casualty, damage, destruction or
loss, or interruption in use, of any significant asset or property (whether or
not covered by insurance), on account of fire, flood, riot, strike or other
hazard or act of God;
(xv) hired or terminated any employee who has an annual salary
in excess of $30,000;
(xvi) imposed or permitted any Liens upon any of its assets,
tangible or intangible;
(xvii) without limitation by the enumeration of any of the
foregoing, entered into any agreement or transaction other than in the usual and
ordinary course of business in accordance with past practices, except for
actions taken in connection with the transactions contemplated by this
Agreement; or
(xviii) agreed, whether in writing or not, to do any of the
foregoing.
(i) Title and Condition of Assets. The Company has good and
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marketable title to all of its assets (other than leased assets), free and clear
of all Liens. The Company's tangible assets, taken as a whole, are in good
operating condition, ordinary wear and tear excepted and constitute all of the
assets necessary to conduct the Business of the Company as the same is presently
conducted. As used herein, "Liens" shall mean any mortgage, pledge, lien,
encumbrance, charge or other security interest, other than (a) mechanic's,
materialmen's and similar liens, (b) liens for Taxes (as defined in Section
2.1(m)) not yet due and payable or for Taxes that the taxpayer is contesting in
good faith through appropriate proceedings, (c) purchase money liens and liens
securing rental payments under capital lease arrangements, and (d) other liens
arising in the ordinary course of business and not incurred in connection with
the borrowing of money.
(j) Litigation; Compliance With Laws.
--------------------------------
(i) Except as set forth in the Disclosure Schedule, there are
no suits, actions, claims, arbitrations, administrative or legal or other
proceedings, whether in equity or at law, or governmental or administrative
investigations pending (i.e., where Seller or the Company has received service
of process or other formal action to commence such a proceeding) or, to the best
of Seller's knowledge, threatened (A) against or related to (x) Seller with
respect to the transactions contemplated by this Agreement, (y) the Company or
(z) any material asset or property owned, leased or used by the Company, or (B)
which question or challenge the validity of this Agreement or any action taken
or to be taken pursuant to this Agreement. Except as set forth on the Disclosure
Schedule, no material product liability claim is pending or, to the best of
Seller's knowledge, threatened against the Company with respect to the products
of the Company. The Disclosure Schedule lists all product liability claims with
respect to the products or services of the Company arising out of occurrences
from January 1, 1995 through the date of this Agreement.
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(ii) The Company is in compliance with federal, state or local
governmental or judicial laws, ordinances, permits, requirements, decrees,
rules, regulations, arbitration awards and orders applicable to the Company or
the business, operations or properties of the Company, except where
noncompliance would not have a material adverse effect on the Company. There is
no order, writ, injunction, judgment or decree of any court or Federal, state or
local department, official, commission, authority, board/bureau, agency, or
other instrumentality issued or pending against the Company. The Company has
duly filed all reports and returns required to be filed by it with governmental
authorities and obtained all governmental permits and licenses and other
governmental consents which are required in connection with the businesses and
operations of the Company; all of such permits, licenses and consents are in
full force and effect, and no proceedings for the suspension or cancellation of
any of them are pending or threatened, except where any of the above would not
have a material adverse effect on the Company.
(k) Company Contracts. Except as set forth on the Disclosure
-----------------
Schedule, all Company Contracts (as defined herein) are valid, subsisting, in
full force and effect and binding upon the parties thereto in accordance with
their terms, subject to the qualifications that enforcement of the rights and
remedies created thereby is subject to (A) bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and (B) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law), and the Company is not in default under any of them, nor does any
condition exist that with notice or lapse of time or both would constitute such
a default. To the knowledge of the Seller, no other party to any such Company
Contract is in default thereunder, nor does any condition exist that with notice
or lapse of time or both would constitute such a default. Subject to obtaining
any consents required under the terms of the Company Contracts, all of the
Company's rights under such Company Contracts will remain in full effect upon
consummation of the transactions contemplated by this Agreement. For purposes of
this Agreement, the term "Company Contracts" means and includes, and the
Disclosure Schedule lists, all contracts, mortgages, debt instruments, security
agreements, licenses, commitments, guaranties, leases, charters, franchises,
powers of attorney and agency and other agreements to which the Company is a
party or by which it is bound (excluding purchase and sale orders, inventory
acquisition agreements and product distribution agreements, in each case made in
the ordinary course of business in arms-length transactions and consistent in
nature and scope with prior practices of the Company) as of the date of this
Agreement and that:
(i) involve or would involve the payment by the Company of in
excess of $25,000 during any fiscal year, unless cancelable by the Company with
notice of less than six (6) months and premium or penalty of less than $10,000;
(ii) relate to the payment of royalties with respect to any
products sold by the Company;
(iii) guarantee, indemnify or otherwise cause the Company to be
liable for the obligations or liabilities of another;
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(iv) involve the borrowing or lending of money, or the
granting of any Lien;
(v) involve an agreement with any bank, finance company or
similar organization for the sale of any products of the Company on credit;
(vi) involve the sale by or to the Company of products on
consignment;
(vii) are or contain a power of attorney;
(viii) contain any renegotiation or redetermination provision;
(ix) require or are otherwise contingent upon the payment of
commissions or compensation to any person not a party to such Company Contract;
(x) concern the formation of a partnership or joint venture;
(xi) impose material noncompetition or confidentiality
obligations on the Company with respect to a third party;
(xii) involve any significant license agreement or arrangement;
or
(xiii) require the Company to supply any other party with such
party's requirements for products or services.
The Disclosure Schedule specifically describes the arrangements (formal and
informal, written or oral) between the Company and any Related Party (as defined
below) (including Seller) and the services or functions (administrative or
otherwise) provided to the Company by any Related Party. No Related Party owns
any assets which are used in the Company's business, and no Related Party which
is under the control of the Seller is engaged in any business which competes
with the Business. As used herein, the term "Related Party" means (A) Seller or
any Affiliate (as defined below) of Seller or the Company, or (B) any
corporation, partnership, association, limited liability company or other entity
(other than the Company), in which any of the foregoing persons has any relation
by blood or marriage, has any material interest, direct or indirect. As used
herein, "Affiliate" shall mean any person, firm, corporation, partnership,
association or entity that directly or indirectly or through one or more
intermediaries controls, is controlled by or is under common control with
another person, firm, corporation, partnership, association or entity.
(l) Pension and Other Employee Plans and Agreements.
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(i) "Varlen Affiliate Plan" shall mean each employee benefit
plan (within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), each employment, severance, salary
continuation or other similar contract, stock purchase plan, stock option plan,
stock appreciation plan, vacation, sick leave or other fringe benefit plan,
incentive plan, insurance plan or arrangement, bonus plan and any deferred
compensation agreement, plan, policy or funding arrangement sponsored,
maintained or to which contributions are made by the Seller or any of its
affiliates with respect to which the
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Seller or any of its affiliates has any potential liability. "Company Plan"
shall mean each Varlen Affiliate Plan which is sponsored, maintained or
contributed to by the Company for the benefit of employees or retirees of the
Company (or their dependents) or with respect to which the Company has or will
have any actual liability (a "Company Plan"). The Disclosure Statement lists
each Company Plan.
(ii) With respect to the Company Plans, Seller will deliver to
Buyer accurate and complete copies of the Company Plans and, to the extent
applicable, for each Company Plan, copies of the most recent, if any,
(A) determination letters,
(B) Form 5500 and any attachments required to be annexed
thereto (including any related actuarial valuation report, if
any) with respect to the last three plan years for each Company
Plan subject to section 401 of the Internal Revenue Code of 1986,
as amended (the "Code"),
(C) collective bargaining arrangements,
(D) Form 5310 and any related filings with the Pension
Benefit Guaranty Corporation (the "PBGC") with respect to the
last five plan years for each such Company Plan,
(E) related trust agreements,
(F) related insurance and/or "annuity contracts",
(G) summary plan descriptions,
(H) all communications to employees regarding any
Company Plan, which communications modify any such Company Plan,
(I) Form 990 for the past three (3) years, and
(J) PBGC Form-I with respect to the last three plan
years for each Company Plan subject to section 412 of the Code.
(iii) Except to the extent Buyer is indemnified under Section
4.1(e)(vii), each Company Plan (and any related trust agreements or annuity
contracts) has been administered in all material respects in accordance with its
terms and the Company and each Company Plan (and any related trust agreements or
annuity contracts) are in compliance in all material respects with the
applicable provisions of ERISA, the Code and other laws applicable thereto (or
is considered to be in compliance pursuant to any remedial amendment period
applicable to such plan pursuant to section 401(b) of the Code or any other
ruling, notice, or procedure issued by the Internal Revenue Service).
11
(iv) All reports, returns and similar documents with respect
to each Company Plan required to be filed with any governmental agency or
distributed to any participant of each Company Plan have been duly and timely
filed or distributed in all material respects.
(v) Each Company Plan which is an employee pension benefit
plan (as such term is defined in Section 3(2) of ERISA) intended to qualify
under section 401(a) of the Code has received a favorable determination letter
as to its qualification under the Code and each such favorable determination
letter remains in effect with respect to the form of the Company Plan other than
compliance as to any aspect of form with respect to which the applicable
remedial amendment period has not expired.
(vi) (A) No actions, suits or claims (other than routine
claims for benefits in the ordinary course, qualified domestic relations orders
or qualified medical child support orders) are pending or, to the best of
Seller's knowledge, threatened with respect to any Company Plan, (B) to the best
of Seller's knowledge, neither the Company, Seller nor any Company Plan
fiduciary has, with respect to the Company Plans, engaged in a non-exempt
prohibited transaction, as such term is defined in section 4975 of the Code or
section 406 of ERISA and (C) except with respect to this transaction or as set
forth on the Disclosure Schedule, for the current plan year and the immediately
preceding five consecutive plan years, no event or condition exists or may be
reasonably expected to occur prior to the Effective Date with respect to any
Company Plan that is subject to section 412 of the Code or the funding
requirements of section 302 of ERISA, which constitutes a reportable event
within the meaning of section 4043 of ERISA with respect to which the 30-day
notice requirement has not been waived. No event has occurred which presents a
material risk for which the Company would have any present or future liability
that any Company Plan subject to Title IV of ERISA has experienced a partial
termination within the meaning of section 411(d)(3) of the Code.
(vii) The Company has made all contributions or payments to or
under each Company Plan required by law or by the terms of such Company Plan.
The Company is not obligated to make any nondeductible contributions to any
Company Plan and no excise taxes are assessable against the Company as a result
of any other contributions made or not made to a Company Plan. The liabilities
of the Company with respect to each Company Plan are reported on the Financial
Statements in accordance with GAAP consistently applied except as set forth on
the Disclosure Schedule. As of May 28, 1999, the assets of the Union Plan (as
defined in Section 5.5 below) are reported at their fair market value on the
books and records of such Company Plan.
(viii) The Company has no obligation to make contributions to a
multiemployer plan (within the meaning of section 414(f)(1) of the Code), with
respect to its employees. The Company has no actual present or future liability
for post-retirement health or death benefits with respect to employees or
directors, past or present, other than with respect to one existing retiree
under the Retiree Health and Dental Insurance Plan.
(ix) The Company has incurred no liability to the PBGC as a
result of the voluntary or involuntary termination of any Company Plan which is
subject to Title IV of ERISA. There is currently no active filing with the PBGC
(and no proceeding has been
12
commenced by the PBGC) to terminate any Company Plan which is subject to Title
IV of ERISA. As of the Effective Date, the Company has no liability for unpaid
premium payments for Company Plans subject to Title IV of ERISA and all required
premium payments for the Company Plans for plan years commencing in the plan
year which would include the Effective Date and which are due on or before the
Effective Date have been made to the PBGC. No Company Plan subject to Title IV
of ERISA has suffered any accumulated funding deficiency within the meaning of
section 302 of ERISA or section 412 of the Code for which the Company would have
any present or future liability.
(x) No assets of the Company are subject to any lien under
section 302(f) or section 4068 of ERISA or under section 412(n) or section
401(a)(29) of the Code.
(xi) Solely as a result of the consummation of the
transactions contemplated by this Agreement, no payment required to be made to
any Company employee will, if made, constitute an excess parachute payment
within the meaning of section 280G of the Code and, except as set forth in the
Disclosure Schedule, no severance payment will become due and payable with
respect to any Company employee.
(xii) Neither the Company nor the Buyer shall incur any actual
liability attributable to those Varlen Affiliate Plans that are not also Company
Plans.
(m) Tax Matters.
-----------
(i) As used in this Agreement, the following terms shall have
the following meanings: (A) the term "Taxes" means all federal, state, local,
foreign and other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
windfall profits, customs, duties or other taxes, together with any interest and
any penalties, additions to tax or additional amounts with respect thereto; (B)
the term "Returns" means all returns, declarations, reports, statements and
other documents required to be filed in respect of Taxes; and (C) the term
"Sales and Use Tax" means all sales taxes, use taxes, retailer's occupation
taxes and other taxes commonly understood to be sales or use taxes. All
citations to the Code, or to the Treasury Regulations promulgated thereunder,
shall include any amendments or any substitute or successor provisions thereto.
Any reference in this Section to the Company includes a reference to a person or
entity acting on behalf of or with respect to the Company (including, without
limitation, Seller). The Company has duly and timely filed all Returns required
to have been filed by it prior to the Effective Date. Except for Taxes which
will be paid by Seller when due, all Taxes and Sales and Use Taxes required to
have been paid prior to the Effective Date, or accruing with respect to the
period ending on the Effective Date, have been fully paid on or prior to the due
date thereof, or will be fully accrued on the Closing Date Schedule. Except for
this Agreement, there are no tax sharing agreements to which the Company is a
party or by which the Company is affected.
(ii) The Company is not a party to or bound by any tax
indemnity, tax sharing or tax allocation agreement.
13
(iii) The Company has not agreed to make, nor is it required to
make, any adjustment under section 481(a) of the Code by reason of a change in
accounting method or otherwise.
(iv) The Company is not a party to or bound by any agreement,
contract, arrangement or plan that has resulted or would result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code.
(n) Environmental.
-------------
(i) The Company has complied with all Environmental Laws (as
defined herein), the failure to comply with which could result in Damages (as
defined herein) in excess of $25,000, and no action, suit, proceeding, hearing,
charge, complaint, claim, demand, or notice, and no investigation has been filed
or commenced against the Company alleging such failure.
(ii) Except (i) to the extent accrued in the Closing Balance
Sheet and (ii) liabilities for storage, handling, transportation, use and
disposal of Hazardous Substances (as defined herein) which are incurred by the
Company in the ordinary course of business, the Company has no liability for
Hazardous Substances (and has not handled, used, stored, recycled or disposed of
any Hazardous Substance (as defined herein)), arranged for the disposal of any
Hazardous Substance, exposed any employee or other individual to any Hazardous
Substance or condition, or owned or operated any property or facility, in any
manner that could reasonably be expected to form the basis for any present or
future action, suit, proceeding, hearing, investigations, charge, complaint,
claim or demand giving rise to any liability for Hazardous Substances,
including, without limitation, liability under CERCLA or similar state statutes,
which in each case could result in Damages in excess of $25,000 for any reason
under any Environmental Laws.
(iii) Except (i) to the extent accrued in the Closing Balance
Sheet and (ii) liabilities for storage, handling, transportation, use and
disposal of Hazardous Substances which are incurred by the Company in the
ordinary course of business, all properties and equipment used in the Business
are free of any amounts of Hazardous Substances, the use and disposal of which
could result in Damages (as defined herein) in excess of $25,000.
(iv) There are no in service or out of service underground
storage tanks located in or on real property owned by the Company or, to the
extent the Company is responsible for such tanks or any environmental damage
resulting therefrom, real property leased by the Company.
(v) The Company has not received notice and has no knowledge
of any reasonably likely claim under any Environmental Laws regarding the
Business, or any real property owned or leased by the Company.
(vi) As used herein, the term Environmental Laws shall mean
all federal, state and local laws, statutes, ordinances, rules, regulations,
decrees, orders and settlements regarding the protection of human health, safety
and the environment and pollution,
14
in effect as of the date of this Agreement and applicable to the Facilities and
the operations conducted thereon, including, but not limited to, the following
statutes, as amended, and any regulations promulgated thereunder, as they
existed on the date hereof:
(A) Clean Air Act, 42 USC (S)7401 et sec.;
-------
(B) Federal Water Pollution Control Act, as amended by
the Clean Water Act, 33 USC (S)1251 et sec.;
-------
(C) Resource Recovery and Conservation Act, 42 USC
(S)6901 et sec.;
-------
(D) Comprehensive Environmental Response, Compensation,
and Liability Act, 42 USC (S)9601 et sec. as amended by the
------
Superfund Amendments and Reauthorization Act of 1986 ("CERCLA");
(E) Toxic Substance Control Act, 15 USC (S)2601 et sec.;
-------
and
(F) applicable state or local statutes, regulations,
laws or ordinances pertaining to the subject matter embodied in
the Environmental Laws set forth in (D) above, as they existed on
the Closing Date.
"Hazardous Substances" shall mean materials, substances or wastes defined
by or regulated by applicable Environmental Laws.
(o) Receivables. To the knowledge of Seller, all of the accounts
-----------
receivable of the Company arose in the ordinary course of business, and are good
and collectable in the ordinary course of business, net of reserves therefor in
the Financial Statements.
(p) Inventories. The inventory of the Company consists of raw
-----------
materials and supplies, manufactured and purchased parts, goods in process and
finished goods, all of which is merchantable and fit for the purpose for which
it was procured or manufactured. The inventories of the Company have been
valued in the Financial Statements at the lower of cost (LIFO) or market and in
a consistent manner with respect to all periods covered thereby. Section 2.1(p)
of the Disclosure Schedule sets forth the Company's practices and procedures
with respect to the valuation of inventories which are consistent with those
used in the preparation of the Financial Statements (and will be used in the
preparation of the Closing Balance Sheet). The Company is not under any
liability or obligation with respect to the return of inventory or merchandise
in the possession of wholesalers, distributors, retailers or other customers.
Except as described on Section 2.1(p) of the Disclosure Schedule, no inventory
of the Company is on consignment.
(q) Intangible Assets. The Disclosure Schedule lists all material
-----------------
patents, trademarks and service marks, patent, trademark and service ▇▇▇▇
registrations and applications, trade names, copyrights, copyright registrations
and applications, and licenses with respect thereto owned by the Company or used
by the Company in its business operations (collectively, "Intellectual
Property"). Intellectual Property which is owned by a third party and used by
the Company has been duly licensed to the Company and the Company has sufficient
rights to use such Intellectual Property to conduct its business as presently
conducted. There is no material
15
item of Intellectual Property not owned by or licensed to the Company which is
necessary for the conduct of the Company's business as presently conducted.
There are no claims, demands or proceedings instituted, pending or, to the best
of Seller's knowledge, threatened pertaining to or challenging the right of the
Company to use any of the Intellectual Property or alleging that any of the
Intellectual Property infringes or otherwise violates the patent, trade name,
trademark, copyright or other rights of any other person. Except as set forth in
the Disclosure Schedule, the Company has not granted any licenses or other
rights under, or authorized or permitted anyone else to use, any of the
Intellectual Property.
(r) Customers. To the best of Seller's knowledge, since May 31,
---------
1999, there has not been any termination, cancellation or material limitation,
modification or change in the business relationship of the Company with any
significant customer of the Company.
(s) Employees. With respect to employees of the Company: (i) there
---------
is no pending, or to the best of Seller's knowledge threatened, unfair labor
practice charge or employee grievance charge; (ii) there is no request for union
representation, labor strike, dispute, slowdown or stoppage pending, or to the
best of Seller's knowledge threatened, against or directly affecting the Company
and (iii) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and no claims therefor exist.
Within the last 90 days, no key employee of the Company has advised Seller that
he intends to terminate his employment with the Company and Seller has not
encouraged any employee of the Company to terminate his employment with the
Company.
(t) Real Estate.
-----------
(i) The Company does not own any real estate.
(ii) The Disclosure Schedule lists and describes briefly all
real property leased to the Company. The Company has delivered to the Buyer
correct and complete copies of the leases listed in the Disclosure Schedule.
With respect to each lease listed in the Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect in accordance with its
terms.
(B) the Company is not, and to the knowledge of the
Company, no party to the lease or sublease is, in breach or
default, and no event has occurred and is continuing which, with
notice or lapse of time, would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(C) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease;
(D) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold; and
16
(E) all facilities leased thereunder have received all
approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and
have been operated and maintained in all material respects in
accordance with applicable laws, rules, and regulations.
(u) No Other Representations and Warranties by Seller; Specific
-----------------------------------------------------------
Disclosure.
----------
(i) Seller shall not be deemed to have made to Buyer any
representation or warranty other than as expressly made by Seller in this
Section 2.1.
(ii) Without limiting the generality of the foregoing, but
subject to the express representations and warranties made by Seller in Section
2.1, Seller is not making any representation and warranty with respect to:
(A) any projections, estimates or budgets of future
revenues, expenses or expenditures, results of operations (or any
component thereof) or financial condition (or any component
thereof) of the Company, or
(B) any other information or documents made available to
Buyer or any of its representatives or investors with respect to
the Company.
(iii) For purposes of this Agreement, references to the
"knowledge of Seller", "Seller's knowledge" or "Seller's awareness" or words of
similar import shall mean and include the actual knowledge of Seller after due
inquiry of the individuals listed on Section 2.1(u) of the Disclosure Schedule
with respect to the indicated matters.
(iv) A disclosure in one section of the Disclosure Schedule
shall not be effective with respect to another representation and warranty
unless such section is specifically cross-referenced.
2.2. Representations and Warranties of Buyer.
----------------------------------------
Buyer hereby represents and warrants to Seller, as of the Effective Date,
as follows:
(a) Organization and Good Standing. Buyer is a corporation duly
------------------------------
organized, validly existing, and in good standing under the laws of the State of
Delaware and has all requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. Buyer is qualified to do
business as a foreign corporation in each jurisdiction where it is required to
qualify in order to conduct its business as presently conducted.
(b) Consents, Authorizations and Binding Effect. Buyer has full
-------------------------------------------
corporate power and authority to execute, deliver and perform its obligations
under this Agreement without the necessity of obtaining any Consent or giving
any Notice, except for such Consents which have been obtained and are
unconditional and in full force and effect and such Notices which have been duly
given. The board of directors of Buyer has duly authorized the execution,
delivery and performance of this Agreement by Buyer. This Agreement has been
duly executed
17
and delivered by Buyer and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, except as may be limited by
bankruptcy, reorganization, insolvency and similar laws of general application
relating to or affecting the enforcement of rights of creditors. The execution,
delivery and performance of this Agreement by Buyer will not:
(i) conflict with, result in the breach of or constitute a
default under or the acceleration of any contract, agreement commitment,
undertaking, restriction or instrument to which Buyer is a party or by which
Buyer may be bound or affected, or
(ii) constitute a violation of any statute, judgment, order,
decree, regulation or rule of any court, governmental authority or arbitrator
applicable or relating to or binding upon Buyer, or
(iii) violate any provision of the Articles of Incorporation or
Bylaws of Buyer.
(c) Acquisition of Shares for Investment. Buyer acknowledges that in
------------------------------------
acquiring the Shares under this Agreement, Buyer has relied solely on its own
due diligence investigation, the representations and warranties set forth in
Section 2.1, including the information in the Disclosure Schedule related
thereto and the documents and information referred to therein, and the other
covenants and statements of Seller set forth in this Agreement, and not upon any
other representations, warranties, covenants or statements of any kind. Buyer
is an "accredited investor", as defined in Rule 501 of Regulation D under the
Securities Act of 1933, as amended (the "Securities Act"), and has sufficient
knowledge, experience and sophistication to enable it properly and fully to
evaluate and understand the merits and risks associated with its acquisition of
the Shares. Buyer is acquiring the Shares for its own account for investment and
with no present intention of distributing or reselling such Shares or any part
thereof in any transaction which would constitute a "distribution" within the
meaning of the Securities Act. Buyer understands that the Shares have not been
registered under the Securities Act or any state securities laws and may not be
sold or transferred except in compliance therewith or pursuant to an exemption
thereunder and are being transferred to Buyer, in part, in reliance on the
foregoing representation and warranty.
ARTICLE III
CLOSING; CONDITIONS OF CLOSING AND TERMINATION
3.1. Closing.
--------
The Closing and the sale, purchase and transfer of the Shares will take
place at the offices of Powell, Goldstein, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, 16/th/ Floor,
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, on June 21, 1999 (the
"Closing Date"), effective as of the close of business on June 18, 1999 (the
"Effective Date").
3.2. Conditions to Obligations of Buyer.
-----------------------------------
The obligations of Buyer to consummate the sale and purchase under this
Agreement are subject to the satisfaction of the following conditions, each of
which may be waived by Buyer.
18
(a) Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of Seller set forth in this Agreement shall be
true and correct in all material respects. Seller shall have performed in all
material respects the covenants and obligations necessary to be performed by it
under this Agreement prior to the Closing Date.
(b) Authorization of Agreement. All action necessary to authorize
--------------------------
the execution, delivery and performance of this Agreement by Seller shall have
been duly and validly taken, and Seller shall have full right, power and
authority to consummate the transactions contemplated hereby on the terms
provided herein.
(c) Security Interests, Encumbrances, Liens, etc. Buyer shall have
---------------------------------------------
received written advice to the effect that a search of the public records has
disclosed that no Liens, other than those reflected in Section 2.1(h) of the
Disclosure Schedule, have been filed or recorded with respect to the Company,
and all Liens requested by Buyer to have been released or satisfied shall have
been released or satisfied.
(d) Suits or Proceedings. No suit, proceeding or investigation shall
--------------------
have been commenced or threatened by any governmental authority to restrain,
enjoin or hinder, or to seek material damages on account of, the consummation of
the transactions herein contemplated.
(e) Corporate Matters. Buyer shall have received (i) such
-----------------
resignations of the directors and officers of the Company as it may have
requested, such resignations to be effective as of immediately following the
Closing and (ii) the minute books and stockholder registers and corporate seal
of the Company.
(f) Other Agreements. The sellers under the German Sales Agreement
----------------
and under the French Sales Agreement are closing the transactions contemplated
under such agreements simultaneously with the Closing.
(g) Shares. Buyer shall have received stock certificates for the
------
Shares, duly endorsed for transfer.
(h) Opinion. Buyer shall have received a legal opinion from Seller's
-------
General Counsel containing customary opinions with respect to the Company and
the transactions contemplated hereby.
3.3. Conditions to Obligations of Seller.
------------------------------------
The obligations of Seller to consummate the sale and purchase under this
Agreement are subject to the satisfaction of the following conditions, each of
which may be waived by Seller:
(a) Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of Buyer set forth in this Agreement shall be
true and correct in all material respects. Buyer shall have performed in all
material respects the covenants and obligations necessary to be performed by it
under this Agreement prior to the Closing Date.
(b) Authorization of Agreement. All action necessary to authorize the
--------------------------
execution, delivery and performance of this Agreement by Buyer shall have been
duly and
19
validly taken and Buyer shall have full right, power and authority to consummate
the transactions contemplated hereby on the terms provided herein.
(c) Suits or Proceedings. No suit, proceeding or investigation shall
--------------------
have been commenced or threatened by any governmental authority to restrain,
enjoin or hinder, or to seek material damages on account of, the consummation of
the transactions herein contemplated.
(d) Other Agreements. The buyers under the German Sales Agreement
----------------
and under the French Sales Agreement are closing the transactions contemplated
under such agreements simultaneously with the Closing.
(e) Purchase Price. Seller shall have received the Purchase Price.
--------------
(f) Opinion. Seller shall have received a legal opinion from Buyer's
-------
counsel with respect to Buyer and the transactions contemplated by this
Agreement.
ARTICLE IV
INDEMNIFICATION
4.1. Indemnification of Buyer.
-------------------------
Subject to the terms and conditions of this Article IV, Seller shall
defend, at its own expense, and shall indemnify Buyer and Company against, and
hold Buyer and Company harmless from, any and all loss, damage or liability, and
all expenses, including without limitation reasonable legal fees and costs of
investigation, remediation or other response action and other costs
(collectively "Damages"), asserted against or incurred by Buyer arising out of:
(a) a breach of the representations and warranties made by Seller in
this Agreement or in any certificate or other instrument furnished or to be
furnished to Buyer hereunder;
(b) the non-fulfillment of any agreement or covenant made by Seller
in or pursuant to this Agreement or in any certificate or other instrument
furnished or to be furnished to Buyer hereunder;
(c) all Income Taxes (as defined in Section 5.1 hereof) for all
periods (or portions thereof) ending on or before the Effective Date for which
the Company is liable;
(d) the Company having been a member of a consolidated, affiliated or
controlled group for Tax purposes (excluding the Company's own liabilities);
(e) the following liabilities:
(i) Any liability or obligation arising under that certain Asset
Purchase Agreement dated June 26, 1996, between the Company and Jouan, Inc., and
▇▇▇▇▇ ▇.▇.;
20
(ii) Any liability or obligation arising out of that certain
Asset Purchase Agreement between Seller, the Company and Boston Advanced
Technologies, dated October 31, 1997, relating to earnout or cost reduction
payments due or to be due thereunder;
(iii) Any liability or obligation arising out of that certain
Indenture dated August 25, 1947, through September 15, 1997, for property
commonly known as ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, which was the
subject of such lease;
(iv) Any liability or obligation arising out of that certain
litigation titled Expotech USA, Inc. v. Varlen Instruments, Inc., et al., Case
------------------------------------------------------
Civil Action No. 98-61449, pending in the ▇▇▇/▇▇/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇;
(v) Any liability or obligation arising out of the sale or
resale of laboratory appliance products to Iran, including any claims by the
United States Department of Commerce or others with respect to claims, fines or
similar penalties or in respect of any prohibition or restriction placed upon
the Company arising out of such activities;
(vi) Any liability or obligation arising out of ownership,
use, condition of or activities at the four parcels of real property formerly
owned by the Company described on Section 2.1(t)(i) of the Disclosure Schedule,
previously sold or transferred by the Company; or
(vii) Any liability arising out of the Retiree Health and
Dental Insurance Plan for one retiree described on the Disclosure Schedule or
deferred compensation obligations described in Section 5.5(h) or any liability
attributable to the disqualification of the Union Plan under section 401(a) of
the Code if such disqualification relates to events occurring on or after
January 1, 1998, and prior to the Effective Date.
(f) any liability or obligation of the Company arising out of or in
connection with the conduct of the Business prior to the Effective Date, except
to the extent such liability or obligation (i) is described in Paragraphs (A),
(B), (C) or (D) of Section 2.1(g) (without regard to any materiality qualifier
contained therein); or (ii) results in an indemnifiable claim for a breach of
representation and warranty for which Buyer otherwise recovers under Section
4.1(a) above.
4.2. Indemnification of Seller.
--------------------------
Subject to the terms and conditions of this Article IV, Buyer shall defend,
at its own expense, and shall indemnify Seller against, and hold Seller harmless
from, any and all Damages asserted against or incurred by Seller arising out of:
(a) any breach of the representations and warranties made by Buyer in
this Agreement or in any certificate or other instrument furnished or to be
furnished to Seller hereunder,
(b) the non-fulfillment of any agreement or covenant made by Buyer in
or pursuant to this Agreement,
(c) any liability arising under the letters of credit listed on
Section 2.1(b) of the Disclosure Schedule; or
21
(d) the operations of the Company following the Effective Date.
4.3. Survival.
---------
All representations and warranties contained herein or made pursuant
hereto, whether by Seller or Buyer, and the indemnification provided under
Section 4.1(f) shall survive the closing hereunder until the second anniversary
of the Closing Date, except that:
(a) the representations and warranties of Seller contained in or made
pursuant to Sections 2.1(a) (other than the last sentence thereof), 2.1(b),
2.1(c) and 2.1(d), and of Buyer contained in Sections 2.2(a), 2.2(b) and 2.2(c)
shall survive the Closing hereunder without any limitation as to time; and
(b) the representations and warranties of Seller contained in or made
pursuant to Section 2.1(m) hereof or otherwise with respect to Tax matters shall
survive the Closing until six months after the date on which the right to file
any claim in respect of such matters by the appropriate governmental or
administrative authority or any other Person has expired.
The expiration of any representation and warranty or any indemnification
obligation hereunder shall not affect any claim made by the giving of written
notice by a Party to the other in the manner provided by this Agreement, prior
to the date of such expiration. All covenants, indemnities and agreements shall
survive the Closing forever, subject to applicable time periods and limitations
specified in this Agreement.
4.4. Claims.
-------
(a) Promptly after receipt by an indemnified party of written notice
of the commencement of any investigation, claim, proceeding or other action in
respect of which indemnity may be sought from the indemnitor (an "Action"), such
indemnified party shall notify the indemnitor in writing of the commencement of
such Action; but the omission to so notify the indemnitor shall not relieve it
from any liability that it may otherwise have to such indemnified party, except
to the extent that the indemnitor is materially prejudiced or forfeits
substantive rights or defenses as a result of such failure. In connection with
any Action in which the indemnitor and any indemnified party are parties, the
indemnitor shall be entitled to participate therein, and may assume the defense
thereof. So long as the indemnifying party is diligently defending in good
faith any such Action, the indemnifying party may control the defense thereof;
in such event, the indemnified party may participate in the defense of the
Action at its own expense. Neither the indemnifying party nor the indemnified
party will settle or compromise the Action without the consent of the other,
which consent will not be unreasonably withheld.
(b) In the event a Party should have a claim for indemnification that
does not involve a claim or demand being asserted by a third party, the Party
seeking indemnification shall promptly send notice of such claim to the Party
from whom indemnification is sought. If the latter does not dispute such claim,
the latter shall pay such claim in full within 10 business days. If the latter
disputes such claim, such dispute shall be resolved by agreement of the Parties
or in any other manner available under law.
22
(c) The indemnified party shall make available to the indemnifying
party or its representatives all records and other materials reasonably required
by them for use in connection with any such claim and shall cooperate with the
indemnifying party in the defense of all third party claims.
4.5. Limitations.
------------
Any claims for breach of any representation or warranty made hereunder
shall be subject to the following limitations and adjustments:
(a) indemnification under Section 4.1(a) and 4.1(f) shall only be
required to be provided by Seller when the aggregate amount of all claims for
which indemnification is sought from Seller under Sections 4.1(a) and 4.1(f) of
this Agreement, the German Sales Agreement and the French Sales Agreement
exceeds US $250,000, in which case Seller shall be liable for all such amounts
in excess thereof.
(b) no individual claim for indemnity under Sections 4.1(f) may be
brought unless the aggregate Damages in respect of such claim exceeds US
$20,000, but in such event Damages shall be recoverable without regard to such
US $20,000 threshold, subject to any other limitations imposed under this
Section 4.5;
(c) no claim for indemnity under Sections 4.1 or 4.2 shall be
effective unless noticed, pursuant to Section 4.4, within the survival period
specified under Section 4.3;
(d) in no event shall Seller's indemnification obligation with
respect to a breach of representations and warranties under Section 4.1(a) (but
excluding Sections 2.1(a), except the last sentence thereof, 2.1(b), 2.1(c) and
2.1(d)) of this Agreement, the German Sales Agreement and the French Sales
Agreement exceed the amount of US $4,200,000. The indemnification obligations of
either Seller or Buyer respectively, for representations and warranties set
forth in Sections 2.1(a), except the last sentence thereof, 2.1(b), 2.1(c) and
2.1(d) and Sections 2.2(a), 2.2(b) and 2.2(c) of this Agreement, the German
Sales Agreement and the French Sales Agreement, shall not exceed the aggregate
purchase price under this Agreement, the German Sales Agreement and the French
Sales Agreement;
(e) in no event shall either Seller's or Buyer's respective
indemnification obligations under Section 4.1(f) or 4.2(d) exceed the amount of
US $5,000,000.
(f) under no circumstances shall any Party be liable to another Party
for punitive, consequential or non-compensatory damages;
(g) any indemnifiable claim shall be reduced by the amounts actually
recovered by the indemnified party from insurance carriers and any amount
recovered by the indemnified party subsequent to the payment by the indemnitor
with respect to the same claim shall be remitted to the indemnitor, provided
that such remittance shall not exceed the amount of such indemnification payment
by the indemnitor;
(h) notwithstanding the foregoing, the provisions of this Section 4.5
shall not apply to any indemnification obligations arising out of the
indemnities contained in Sections
23
4.1(b), 4.1(c), 4.1(d), 4.1(e), or 4.2(b) of this Agreement, but all such
indemnification obligations of either party shall be limited to and shall not
exceed the aggregate purchase price under this Agreement, the German Sales
Agreement and the French Sales Agreement; and
(i) the Parties agree that the sole liability and the sole remedy of
Seller, Buyer and the Company for any claim with respect to the transactions
contemplated under this Agreement (including without limitation under
Environmental Laws) shall be limited to indemnification under Article IV of this
Agreement, and in connection therewith each Party waives any and all statutory
and common law rights and remedies (including without limitation rights of
indemnification and contribution) which any such Party may have against another
Party (except equitable remedies such as injunction and specific performance).
(j) For purposes of this Section 4.5, any amounts paid as Damages
under the French Sales Agreement or the German Sales Agreement in foreign
currency shall be valued at the US Exchange rate on the Effective Date.
ARTICLE V
CERTAIN POST CLOSING MATTERS
5.1. Certain Tax Matters.
--------------------
The following will apply with respect to the Income Taxes (as hereinafter
defined) relating to the Company. The term "Income Taxes" shall mean (i) all
U.S. Federal income taxes and (ii) all taxes imposed by states, territories and
possessions of the United States and political subdivisions thereof which are
based on or measured by net income or net profits together with all interest,
penalties and additions imposed with respect to such taxes.
5.2. Income Tax Matters Generally.
-----------------------------
(a) Pre-Closing Tax Returns. The consolidated Federal and other
-----------------------
Income Tax returns, reports and filings of Seller and the Company shall include
all items of income, gain, loss, deduction or credit of the Company attributable
to all Income Tax periods (or portions thereof) ending on or prior to the
Effective Date, including transactions required to be recognized as a result of
the sale of the Shares hereunder (such periods or portions thereof being herein
referred to as the "Seller Income Tax Periods"); and Seller shall be responsible
for and shall pay all Income Taxes payable (other than in respect of deferred
Income Taxes) as a consequence of the inclusion or omission of such items in the
consolidated Income Tax returns, reports and filings of Seller for Seller Income
Tax Periods and shall timely file such tax returns and reports.
(b) Post-Closing Tax Returns. The Income Tax returns, reports and
------------------------
filings of Buyer or the Company shall include all items of income, gain, loss,
deduction or credit of Buyer or the Company attributable to all Income Tax
periods (or portions thereof) commencing after the Effective Date (such periods
or portions thereof being herein referred to as the "Buyer Income Tax Periods");
and Buyer shall be responsible for and shall pay all Income Taxes payable
(including without limitation any deferred Income Taxes) as a consequence of the
inclusion of such items in such Income Tax returns, reports and filings of Buyer
or the Company for Buyer Income Tax Periods.
24
(c) Tax Cooperation.
---------------
(i) With respect to the taxable year of the Company ended
January 31, 1999 and the short period ending on the Effective Date, Buyer shall
cause to be prepared and delivered to Seller (to the extent not already prepared
and delivered) in the normal timeframe followed by Seller and the Company
consistent with past practice and in all events within 15 days after it shall
have been requested by Seller, the package of income tax information materials
heretofore provided to Seller by the Company in accordance with past practice,
including past practice as to information schedules and work papers and as to
the method of computation of separate taxable income or other relevant measure
of income of the Company.
(ii) Without limiting the generality of the foregoing or of
Section 5.3 hereof, Buyer shall cause the employees of Buyer and the Company to
cooperate fully and to assist Seller (including without limitation allowing
access by Seller to the books and records of the Company relating to Seller
Income Tax Periods and any period (or portion thereof) ending on or before (or
including) the Effective Date, and the right to make copies thereof) in
connection with the preparation by Seller of its consolidated Income Tax
returns, reports and filings for the Seller Income Tax Periods or the resolution
of any Income Tax Dispute (as hereinafter defined); and Seller shall not be
charged with any cost or expense for the reasonable assistance rendered by
officers and employees of Buyer and the Company in connection therewith.
(iii) Refunds. Seller shall be entitled to all refunds of
-------
Income Taxes paid in connection with any Income Tax returns, reports and filings
of Seller and/or of the Company with respect to any Seller Income Tax Period.
Applications for refunds of such Income Taxes, and the filing of amended
returns, reports and filings, shall be made and prosecuted only by Seller; but
Buyer and the Company shall provide to Seller such cooperation and reasonable
assistance in connection therewith as shall be reasonably requested by Seller,
and Seller shall not be charged with any cost or expense for the assistance
rendered by officers and employees of the Company and Buyer in connection
therewith.
(d) Amendments. Neither Buyer nor the Company will amend, or take
----------
any similar action with respect to, any Federal, state or local Income Tax
returns, reports and filings filed with respect to any Seller Income Tax Period
without the prior written consent of Seller, which consent shall not be
unreasonably withheld. Seller shall not amend, or take any similar action with
respect to any Federal, state or local Income Tax returns, reports and filings
filed with respect to any Seller Income Tax Period which would result in adverse
tax consequences to Buyer without the prior written consent of Buyer, which
consent shall not be unreasonably withheld. Neither Buyer nor the Company will
extend the applicable statute of limitations with respect to any Federal, state
or local Income Tax returns, reports and filings filed with respect to any
Seller Income Tax Period without the prior written consent of Seller, which
consent shall not be unreasonably withheld. This Section shall not apply to any
amended return which may be required by law following resolution of an Income
Tax Dispute (as defined herein).
25
(e) Income Tax Disputes. Etc.
-------------------------
(i) Except as required by law (but subject to Section
5.2(e)(ii) hereof), neither Buyer nor the Company will take any position on any
Federal, state or local Income Tax return, report or filing for any tax period
which might result in any:
(A) increase for any Seller Income Tax Period in the
liability of Seller in respect of the consolidated Income Tax
liabilities of Seller for periods while the Company was part of
Seller's consolidated tax group; or
(B) reduction in any tax attributes as to which Seller
may receive a benefit with respect to any Seller Income Tax
Period.
(ii) Subsequent to the Closing, Buyer and the Company shall
promptly forward to Seller any notice received by Buyer or the Company of any
Federal, state or local pending or threatened Income Tax audit, examination or
proposed assessment or the like relating to the Company or Seller's consolidated
tax group with respect to any Seller Income Tax Period (an "Income Tax
Dispute"). Seller, Buyer and the Company shall cooperate with and assist each
other, and shall cause their respective counsel and accountants to cooperate
with and assist each other, in connection with any such Income Tax Dispute
(including without limitation any currently pending Income Tax Dispute involving
state or local Income Taxes of the Company). Any Income Tax Dispute relating to
any consolidated Income Tax return, report or filing made by the Seller
consolidated tax group shall be investigated, conducted, prosecuted, contested,
defended, settled or compromised by Seller with counsel and accountants chosen
by Seller at the expense of Seller. Neither Buyer nor the Company will settle or
compromise any Federal, state or local Income Tax Dispute, or any issue or
determination related thereto, without the prior written consent of Seller,
which consent shall not be unreasonably withheld.
(f) Tax Sharing Arrangements. All tax sharing arrangements and any
------------------------
other contracts with respect to Taxes between Seller (and its affiliates) and
the Company are terminated as of the Effective Date, and this Section 5.2 will
govern the obligations of Buyer and the Company to make payments of Taxes
applicable to the Company.
5.3. Access to Records After Closing.
--------------------------------
(a) Following the Closing, Buyer shall give to Seller, without
charge, reasonable access to (and the right to make copies at the expense of
Seller of) the books, files, records and tax returns of the Company to the
extent that such relate to the business and operations of the Company on or
prior to the Closing Date and are in the Company's possession on the Closing
Date or subsequently come into Buyer's possession, but any access pursuant to
this Section 5.3 shall be conducted by Seller in good faith, with a reasonable
purpose and in such manner as not to interfere unreasonably with the operations
of Buyer following the Closing. For a period of five years after the Closing,
Buyer shall maintain such books, files, records and tax returns and thereafter,
prior to destroying or disposing of any of them, Buyer shall give, or shall
cause the Company to give, 30 days' advance notice to Seller of their intended
destruction or disposition, and during such 30-day period Seller shall have the
right to take possession of the same or to make copies of the same, all at
Seller's expense.
26
(b) Following the Closing, Seller shall give to Buyer, without
charge, reasonable access to (and the right to make copies at the expense of
Buyer of) the books, files, records and tax returns of Seller to the extent that
such relate to the business and operations of the Company on or prior to the
Closing Date and are in Seller's possession on the Closing Date or subsequently
come into Seller's possession, but any access pursuant to this Section 5.3 shall
be conducted by Buyer in good faith, with a reasonable purpose and in such
manner as not to interfere unreasonably with the operations of Seller following
the Closing. For a period of five years after the Closing, Seller shall maintain
such books, files, records and tax returns and thereafter, prior to destroying
or disposing of any of them, Seller shall give, 30 days' advance notice to Buyer
of their intended destruction or disposition, and during such 30-day period
Buyer shall have the right to take possession of the same or to make copies of
the same, all at Buyer's expense.
(c) For a period of one hundred twenty (120) days following the
Closing, Buyer shall cause to be prepared and delivered to Seller (to the extent
not already prepared and delivered) in the normal time frame followed by Seller
and the Company consistent with past practice and in all events within fifteen
(15) days after it shall have been requested by Seller, the financial reporting
package for the Company (but only in respect of periods ending on or prior to
the Closing Date) for (i) the quarterly closing for Seller's fiscal quarter
ending July 31, 1999, and (ii) Seller's fiscal year ending January 31, 2000.
After such one hundred twenty (120) day period, Buyer shall cooperate and use
reasonable diligence to provide Seller with all information requested by Seller
to assist Seller in preparing a financial reporting package for the Company (but
only in respect of periods ending on or prior to the Effective Date) for (i) the
quarterly closing for Seller's fiscal quarter ending July 31, 1999, and (ii)
Seller's fiscal year ending January 31, 2000.
5.4. Covenant Not to Compete.
------------------------
As an inducement for Buyer to enter into this Agreement, Seller agrees
that:
(a) Non-Compete. For a period of three (3) years after the Closing,
-----------
Seller shall not do, and shall cause any Affiliate of Seller controlled by it
not to do, any one or more of the following, directly or indirectly:
(i) engage, manage, operate, finance, control or participate,
as an owner, partner, shareholder, member, consultant, or (without limitation by
the specific enumeration of the foregoing) otherwise, in any business whose
products or activities compete, in whole or in part, with the products or
activities which the Company manufactures or distributes (which products or
activities include those currently sold and under active development) on the
Effective Date (any such business is referred to herein as a "Competitive
Business"). For purposes of this Section, "active development" shall mean
efforts for which resources have been committed by the Company having a value in
excess of $50,000.
(ii) solicit or attempt to solicit, with respect to a
Competitive Business, any customer of Buyer which has been a customer of the
Company within the past three (3) years; or
27
(iii) except as set forth in the Disclosure Schedule, induce or
attempt to induce any person or entity that is an employee or agent of the
Company on the Effective Date to terminate his, her or its relationship with, or
employment by, the Company.
(b) Limitation. Notwithstanding the foregoing, the provisions of
----------
Section 5.4(a) hereof shall not be deemed to prohibit or restrict in any manner
(i) the acquisition by Seller or any Affiliate of Seller of any company
partially engaged in a Competitive Business, provided that if such Competitive
Business accounts for more than the lesser of $10,000,000 or five percent (5%)
of the net revenues of the acquired company, Seller or such Affiliate shall use
commercially reasonable efforts promptly after the consummation of the
acquisition to divest itself of the Competitive Business within eighteen (18)
months after such consummation, or (ii) acquisition or ownership by Seller or
any Affiliate of Seller of up to five percent (5%) of the debt or equity
interest in any company partially engaged in a Competitive Business whose
securities are traded on a national securities exchange or NASDAQ, so long as
such Competitive Business does not account for more than the lesser of
$10,000,000 or five percent (5%) of the net revenues of such company and neither
Seller nor an Affiliate of Seller is an Affiliate of such company.
(c) Modifications. Seller recognizes that the time and scope
-------------
limitations set forth in this Section 5.4 are reasonable and are required for
the protection of Buyer and in the event that any such territorial, time or
scope limitation is deemed to be unreasonable by a court of competent
jurisdiction, Buyer and Seller agree to the reduction of either of such time or
scope limitations to such a period or scope as such court shall deem reasonable
under the circumstances.
(d) Injunctive Relief. The Parties specifically recognize that any
-----------------
breach of Section 5.4(a) may cause irreparable injury and that actual damages
may be difficult to ascertain, and in any event, may be inadequate. Accordingly
(and without limiting the availability of legal or equitable, including
injunctive, remedies under any other provisions of this Agreement), each Party
agrees that in the event of any such breach, the other Party shall be entitled
to injunctive relief in addition to such other legal and equitable remedies that
may be available.
5.5. Employee Matters.
-----------------
(a) Union Plan. As of the Effective Date, the Company shall continue
----------
to sponsor and maintain the Precision Scientific Instruments and Precision
Scientific Petroleum Instruments Defined Benefit Pension Plan (the "Union
Plan"). The Seller shall make all contributions to the Union Plan that are
required to be made (whether by applicable law or by the terms of the Plan)
prior to the Effective Date, and the Seller shall be liable for no further
contributions to the Union Plan after such payments have been made. As soon as
practical after the Effective Date, but no more than 60 days thereafter, the
Buyer shall direct the Seller and the Seller shall transfer all Union Plan
assets and liabilities from the Varlen Corporation Defined Benefit Master Trust
("Varlen Master Trust") to an employee benefit trust to be established and
maintained by the Company. If there is any delay in the transfer of Union Plan
assets and liabilities beyond the 60-day period referred to above that is caused
by Buyer or its agents and administrators with respect to the transfer of Union
Plan assets from the Varlen Master Trust, Buyer shall reimburse Seller for all
costs and expenses associated with the Company's delayed
28
withdrawal from the Varlen Master Trust. If any dispute arises between the
Seller and the Buyer concerning the amount or nature of the Varlen Master Trust
assets which are attributable to the Union Plan, the matter shall be resolved by
a public accounting firm mutually selected by the Seller and Buyer.
(b) Defined Contribution Plans. Effective as of the Effective Date,
--------------------------
Company employees who are participants in the Varlen Corporation Profit-Sharing
and Retirement Savings Plan (the "Seller DC Plan") shall become participants in
one of the Buyer's defined contribution plans that has a qualified cash or
deferred arrangement under section 401(k) of the Code (the "Buyer DC Plan").
The Buyer DC Plan shall recognize for all purposes service recognized by the
Seller DC Plan on the Effective Date with respect to all employees of the
Company that are participants in the Seller DC Plan on the Effective Date. The
Buyer shall cause the Buyer DC Plan to accept the rollover contribution of any
Company employee who is a participant in the Seller DC Plan and who elects to
rollover his or her interest in the Seller DC Plan to the Buyer DC Plan. If,
consistent with the foregoing, a Company employee makes a rollover contribution
to the Buyer DC Plan, a corresponding transfer shall be made of that employee's
outstanding participant loan, if any, from the Seller DC Plan to the Buyer DC
Plan, and such transfer shall include such employee's repayment obligations
thereunder. Seller will make, within thirty (30) days of the Closing Date, any
matching or profit-sharing contribution with respect to the Company's current
fiscal year, at least to the extent of the accruals therefore on the Closing
Date Schedule, and the accrual for the same on the Closing Date Schedule shall
be eliminated.
(c) COBRA. Seller shall provide COBRA benefits, to the extent
-----
required by law, to any Company employee (or dependent thereof) who experiences
a qualifying event prior to the Effective Date. The Company or Buyer shall be
responsible to provide COBRA benefits, to the extent required by law, to any
Company employee (or dependent thereof) who experiences a qualifying event on or
after the Effective Date.
(d) Health Benefits.
---------------
(i) Seller's group health, dental and vision plans shall be
liable for any and all claims under such group health, dental or vision plan
(within the meaning of section 5000(b)(1) of the Code) maintained by Seller or
the Company for employees of the Company, and their dependents, with respect to
which covered health or medical service expenses were incurred prior to the
Effective Date. The Company shall be liable for any and all such claims with
respect to which any health or medical service was incurred on or after the
Effective Date, (1) as provided for in sub-paragraph (iii) below during the
period of time beginning on the Effective Date and ending on June 30, 1999 (the
"Extended Coverage Period"), and (2) on and after July 1, 1999, Buyer or Company
will provide a plan for employees of the Company, and their dependents, who are
covered by the corresponding group health, dental or vision plan of the Seller
on the Effective Date or otherwise within the Extended Coverage Period, which
will have no eligibility waiting periods, will waive pre-existing conditions and
"actively at work" requirements and which will credit any health or medical
service expenses incurred during the 1999 plan year and throughout the Extended
Coverage Period for purposes of applying the deductible and out of pocket limits
under the Company's or the Buyer's group health, dental or vision plan.
29
(ii) Seller's group health, dental and vision plans shall be
liable for any administrative expenses associated with such plans maintained by
the Seller or the Company for employees and retirees of the Company, and their
dependents, where such administrative expenses were incurred prior to the
Effective Date. The Company or Buyer shall be responsible for any administrative
expenses associated with establishing or maintaining a group health, dental or
vision plan for Company employees, and their dependents, on and after July 1,
1999, and shall be responsible for such administrative expenses as are provided
for in sub-paragraph (iii) below with respect to the Extended Coverage Period.
(iii) During the Extended Coverage Period, Company employees
and their dependents shall continue to be eligible for coverage under the
Seller's group health, dental and vision plans pursuant to the eligibility rules
of those plans; however, the Company or Buyer shall reimburse the Seller for (1)
its administrative expenses associated with providing such coverage to Company
employees and their dependents during the Extended Coverage Period, and (2) all
covered health or medical service expenses actually paid by the Seller, for
which the Seller does not otherwise receive reimbursements from an insurer, with
respect to covered health or medical service expenses by Company employees or
their dependents under such plans incurred during the Extended Coverage Period.
Company or Buyer shall deliver such reimbursements to Seller within thirty (30)
days of receipt of notice and supporting documentation from the Seller regarding
any such expenses.
(iv) The Company shall not be liable for (and, to the extent
applicable, shall not claim) any retrospective adjustments pertaining to the
operation of the Seller's group health, dental and vision plans for the 1999
plan year.
(e) Insured Welfare Benefits. Seller shall be liable for (A) any and
------------------------
all long-term disability benefits under the terms of its long term disability
plan, payable to all current and former employees of the Company who are
determined to have become disabled under such plan prior to the Effective Date;
and (B) any and all benefits payable to all current and former employees of the
Company or their dependents under any life insurance or accidental death and
dismemberment plan maintained by the Seller for the benefit of such employees,
or their dependents, where such benefits are payable with respect to events
occurring prior to the Effective Date. The Company or Buyer shall be liable for
any and all insured welfare benefits, to the extent required by law, payable to
all employees of the Company and their dependents who become entitled to such
benefits on or after the Effective Date.
(f) Workers Compensation. Seller shall be liable for any and all
--------------------
workers compensation claims (including reasonable administrative costs in
accordance with past practice) to the extent (A) of occurrences prior to the
Effective Date and (B) in excess of the reserves therefor on the Closing Date
Schedule to the extent the claims are made prior to the second anniversary of
the Effective Date. The Company shall be liable for any and all other workers
compensation claims (including administrative costs).
(g) Payments. Accruals under the management bonus plan for the
--------
current fiscal year shall be reflected on the Closing Date Schedule in a manner
consistent with past practice. The bonus plan will be terminated for Company
employees as of the Effective Date.
30
(h) Certain Obligations. Seller shall be liable for all obligations,
-------------------
whether or not accrued prior to the Effective Date (unless such obligations are
created by Buyer or the Company after the Closing Date) to employees or former
employees of the Company, and their dependents, under any Varlen Affiliate Plan
maintained by the Seller and/or the Company at any time prior to the Effective
Date to the extent such obligations constitute (i) retiree health obligations;
and (ii) deferred compensation obligations arising under any arrangement that is
not intended to be subject to section 401(a) of the Code. Seller shall be
liable for all severance obligations under any Varlen Affiliate Plan maintained
by Seller and/or the Company to the extent such obligations accrued prior to the
Closing Date or to the extent such obligations are attributable solely to the
transactions contemplated herein (unless such obligations are created by Buyer
or the Company after the Closing Date).
(i) Governmental Actions. Buyer and Seller shall take, or cause to be
--------------------
taken, such action as may be necessary or reasonably appropriate to accomplish
the actions described in this Section 5.5, such as notifying any agency of the
federal government which is required by law to receive such notice, and to
provide such further information or documents as the IRS (or any other agency)
may require. Further, Buyer and Seller agree to use their respective reasonable
efforts to obtain any necessary IRS (or other United States federal governmental
agency) approval without material modification of the transactions contemplated
hereby.
(j) Cooperation. Buyer and Seller agree to provide each other with
-----------
such records, information and assistance as they may reasonably request to carry
out their respective obligations under this Section or the administration of the
employee benefit plans (and, where applicable, their associated trusts) referred
to in this Section 5.5.
(k) No Employee Rights. No participating employee or other employee
------------------
of the Company, nor his spouse, former spouse or other beneficiary under any
employee benefit plan of Seller or the Company shall be entitled to assert any
claim under any provision of this Agreement (including, but not limited to, this
Section 5.5).
5.6. General, Auto and Product Liability.
------------------------------------
(a) Liability. Seller shall be liable for all general, auto and
---------
product liability claims with respect to occurrences on or before the Effective
Date to the extent such claims are made prior to the second anniversary of the
Effective Date.
(b) Insurance. In the event the proceeds of any insurance of Seller
---------
are available with respect to the matters covered by Sections 5.5 and 5.6(a),
such proceeds of insurance shall belong and inure to the benefit of Seller.
Buyer shall cooperate with Seller in all reasonable respects in recovering such
proceeds as long as Seller reimburses Buyer for any out-of-pocket expenses
incurred by Buyer in connection therewith.
5.7. Cooperation on Claims.
----------------------
Without limiting the generality of any other provision of this Agreement,
with respect to any claim of any kind for which Seller has retained liability
under this Agreement, (i) Buyer will not settle or compromise any such claim
without the consent of Seller, (ii) Buyer will make available to Seller, its
insurer and their respective representatives all records and other materials
31
as may be reasonably requested by them for use in handling any such claim and
(iii) Buyer will reasonably cooperate, and will use its best efforts to cause
its employees to cooperate, with Seller, its insurer and their respective
representatives in the handling of all such claims.
5.8. Name Change.
------------
Within two (2) days of the Closing Date, the Company shall file an
amendment to its Articles of Incorporation changing its name to one that does
not include "Varlen" or any variation thereof, and shall provide Seller with a
copy of such amendment upon its effectiveness. The Company shall have the right
to use the "Varlen" name or any variation thereof in connection with the
continuing conduct of the Business for a period of thirty (30) days (and for
such longer period as shall be reasonably required to consume existing
inventories of trademarked items, but in no event to exceed six months).
5.9. Letters of Credit.
------------------
Within thirty (30) days following the Closing Date, Buyer shall obtain a
stand-by letter of credit from a nationally recognized financial institution to
support the letters of credit reflected on Section 2.1(b) of the Disclosure
Schedule.
ARTICLE VI
MISCELLANEOUS
6.1. Further Actions.
----------------
From time to time, as and when requested by Buyer and at Buyer's expense,
Seller shall execute and deliver, or cause to be executed and delivered, all
such documents and instruments and shall take, or cause to be taken, all such
further or other actions as Buyer may reasonably deem necessary or desirable to
carry out the intent and purposes of this Agreement, to convey, transfer, assign
and deliver on the Closing Date to Buyer, and its successors and assigns, the
Shares (or to evidence the foregoing) and to consummate the other transactions
contemplated hereby.
6.2. Brokerage.
----------
Seller represents and warrants to Buyer that Seller has no obligation or
liability to any broker or finder by reason of the transactions which are the
subject of this Agreement; Seller shall indemnify Buyer and the Company against,
and shall hold Buyer and the Company harmless from, at all times after the date
hereof, any and all liabilities (including without limitation legal fees), and
shall pay any final judgment obtained by any person claiming brokerage
commissions or finder's fees, or rights to similar compensation, on account of
services purportedly rendered on behalf of Seller, or prior to Closing the
Company, in connection with this Agreement or the transactions contemplated
hereby. Buyer represents and warrants to Seller that Buyer has no obligation or
liability to any broker or finder by reason of the transactions which are the
subject of this Agreement; Buyer shall indemnify Seller against, and shall hold
Seller harmless from, at all times after the date hereof, any and all
liabilities (including without limitation legal fees), and shall pay any final
judgment obtained by any person claiming brokerage commissions or finder's fees,
or rights to similar compensation, on account of services
32
purportedly rendered on behalf of Buyer, or after Closing the Company, in
connection with this Agreement or the transactions contemplated hereby.
6.3. Expenses.
---------
Each of Buyer and Seller shall pay their respective expenses in connection
with the negotiation, execution, delivery and performance of this Agreement.
6.4. Entire Agreement.
-----------------
This Agreement, which includes the Schedules and Exhibits hereto and the
other documents, agreements and instruments executed and delivered pursuant to
or in connection with this Agreement, contains the entire agreement between
Buyer, the Company and Seller with respect to the transactions contemplated by
this Agreement and supersedes all prior arrangements or understandings with
respect thereto.
6.5. Descriptive Headings.
---------------------
The descriptive headings of this Agreement are for convenience only and
shall not control or affect the meaning or construction of any provision of this
Agreement.
6.6. Notices.
--------
All notices and other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
overnight delivery service or by registered or certified mail, postage prepaid,
addressed as follows:
If to Seller, or pre-Closing to the Company:
Varlen Corporation
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
General Counsel
If to Buyer, or post-Closing to the Company:
▇▇▇▇▇ Industries, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Any party may by notice change the address to which notices or other
communications to it are to be delivered or mailed.
33
6.7. Governing Law.
--------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware. Each of the parties hereto irrevocably submits
to the jurisdiction of the Courts of the State of Delaware, and of any Federal
Court located in the State of Delaware, in connection with any action or
proceeding arising out of or relating to, or breach of, this Agreement or of any
document or instrument delivered pursuant to or in connection with this
Agreement.
6.8. Assignability.
--------------
This Agreement shall not be assignable otherwise than by operation of law
by any Party without the prior written consent of the other Parties, and any
purported assignment by any Party without the prior written consent of the other
Parties shall be void. This Agreement shall inure to the benefit of and be
binding upon the Parties hereto and their respective successors and permitted
assigns.
6.9. Waivers and Amendments.
-----------------------
Any waiver of any term or condition, or any amendment or supplementation,
of this Agreement shall be effective only if in writing. A waiver of any breach
of any of the terms or conditions of this Agreement shall not in any way be
construed as a waiver of any subsequent breach.
6.10. Third Party Rights.
-------------------
This Agreement shall be effective only as between the Parties hereto, their
successors and permitted assigns.
6.11. Illegality.
-----------
In the event that any one or more of the provisions contained in this
Agreement shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of any such
provision in any other respect and the remaining provisions of this Agreement
shall not, at the election of the Party for whom the benefit of the provision
exists, be in any way impaired.
6.12. Release.
--------
As of the Effective Date, the Company hereby releases, acquits and forever
discharges each officer, director and stockholder of the Company from any and
all liabilities, obligations, claims, demands, actions and causes of action
which the Company ever had, now has or hereafter may have based upon, relating
to or arising out of any event, occurrence, act, omission or condition occurring
or existing as of or prior to the Effective Date in any way connected with such
officer's, director's or stockholder's status as such or actions taken in such
capacity. Buyer consents to the foregoing release. Seller and Buyer agree that
this release shall not in any manner limit or otherwise affect the rights and
obligations of Seller and Buyer under this Agreement.
34
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first above written.
Seller:
VARLEN CORPORATION
By:___________________________________________
Name:_________________________________________
Title:________________________________________
The Company:
VARLEN INSTRUMENTS INC.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
Buyer:
▇▇▇▇▇ INDUSTRIES, INC.
By:___________________________________________
Name:_________________________________________
Title:________________________________________