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ASSET PURCHASE AGREEMENT
DATED AS OF
JULY 9, 1999
BETWEEN
▇▇▇▇▇ CORPORATION
AND
TRANSTECHNOLOGY CORPORATION
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TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS ...................................................1
ARTICLE 2 SALE AND PURCHASE OF ASSETS ...................................8
2.1 Transferred Assets ......................................8
2.2 Excluded Assets ........................................10
2.3 Non-Transferability of Certain Assets ..................11
ARTICLE 3 LIABILITIES ..................................................11
3.1 Assumption of Liabilities ..............................11
3.2 Retained Liabilities ...................................12
3.3 Reimbursement for Certain Payments .....................13
ARTICLE 4 PURCHASE PRICE ...............................................13
4.1 Purchase Price .........................................13
4.2 Payment at Closing .....................................14
4.3 Adjustment to the Purchase Price .......................14
4.4 Allocation of the Purchase Price .......................16
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE SELLER .................16
5.1 Organization, Existence and Standing ...................16
5.2 Corporate Authority ....................................16
5.3 Financial Statements ...................................16
5.4 Accounts Receivable ....................................17
5.5 Inventory ..............................................17
5.6 Real Property ..........................................17
5.7 Title to Personal Property .............................18
5.8 Condition and Sufficiency of Transferred Assets ........18
5.9 Contracts ..............................................18
5.10 Proprietary Rights .....................................20
5.11 Tax Matters ............................................21
5.12 Environmental Matters ..................................21
5.13 No Breach of Contract, No Violations of Law,
No Prior Approval ......................................22
5.14 Litigation .............................................22
5.15 Finders, Brokers and Investment Bankers ................22
5.16 No Material Adverse Change .............................23
5.17 Governmental Permits and Licenses; Compliance
with Laws ..............................................23
5.18 Insurance ..............................................23
5.19 Employees; Labor Relations .............................23
5.20 Employee Benefits ......................................24
5.21 Residency of Seller Subsidiaries; GST Registration .....25
5.22 Liabilities ............................................25
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5.23 Employee Safety ........................................26
5.24 Customer Assets; Location of Assets ....................26
5.25 Year 2000 Compliance ...................................26
5.26 Disclaimer; Cross References ...........................26
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE BUYER ..................27
6.1 Organization, Existence and Standing of the Buyer ......27
6.2 Corporate Authority ....................................27
6.3 No Breach of Contract, No Violations of Law,
No Prior Approval ......................................27
6.4 Litigation .............................................28
6.5 Finders, Brokers and Investment Bankers ................28
6.6 Financing ..............................................28
6.7 GST ....................................................28
6.8 Disclaimer .............................................28
ARTICLE 7 COVENANTS OF THE SELLER ......................................29
7.1 Conduct of Business to Closing Date ....................29
7.2 Access by the Buyer to Properties and
Records; Furnishing Information ........................30
7.3 Compliance with Conditions .............................31
7.4 Third-Party Consents ...................................31
7.5 Notification to the Buyer of Damage or Destruction
of Transferred Assets or Material Changes ..............31
7.6 Transfer of Warranties .................................31
7.7 HSR/Competition Act Filings; Other Governmental
Filings ................................................32
7.8 Transitional Use of Trade Names, Trademarks
and Logos ..............................................32
7.9 Negotiations with Third Parties ........................32
7.10 Update of Schedules ....................................33
7.11 Covenant Not to Compete ................................33
7.12 Assignment of Confidentiality Agreements ...............33
ARTICLE 8 COVENANTS OF THE BUYER .......................................34
8.1 Compliance with Conditions .............................34
8.2 Cooperation in Obtaining Consents ......................34
8.3 HSR/Competition Act Filings; Other Governmental
Filings ................................................34
8.4 Make Records and Personnel Available ...................35
8.5 Buyer Qualification ....................................35
8.6 London Sales Office ....................................35
8.7 Operation Covenant .....................................35
ARTICLE 9 MUTUAL COVENANTS .............................................37
9.1 GST Election ...........................................37
9.2 Election Regarding Accounts Receivable .................37
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9.3 Transitional Services Agreement ........................37
9.4 Payments Received ......................................37
9.5 Further Assurances .....................................38
9.6 Certain Tax Payments and Returns .......................38
9.7 Covenant Regarding Personnel ...........................38
9.8 Supply Agreement .......................................39
9.9 Assignment and Assumption of Real Property Leases ......39
9.10 Guarantee of Performance ...............................39
9.11 Joint Environmental Investigation ......................39
ARTICLE 10 EMPLOYEES AND EMPLOYEE BENEFITS ..............................40
10.1 Offer of Employment ....................................40
10.2 Severance Payment Responsibilities .....................40
10.3 Welfare Benefit Responsibilities .......................41
10.4 Seller's Responsibilities and Obligations as
to Certain Pensions ....................................46
10.5 Buyer's Responsibilities and Obligations as to
Certain Pensions .......................................47
10.6 Transfer of Share Purchase and Investment
Plan Responsibilities. .................................50
10.7 Transfer of Savings Plan Responsibilities ..............52
10.8 Allocation of Canadian Savings Plan
Responsibilities .......................................53
10.9 Incentive Compensation .................................53
10.10 Foreign Employment Liabilities .........................54
10.11 Vacation Responsibilities ..............................54
10.12 Retained Liability and Successor Liability .............54
10.13 Reimbursement For Other Party's Liabilities ............54
10.14 No Third-Party Beneficiaries ...........................54
ARTICLE 11 CERTAIN REAL ESTATE MATTERS ..................................55
11.1 Title Commitment; Title Policy .........................55
11.2 Objections .............................................55
ARTICLE 12 ENVIRONMENTAL MATTERS ........................................56
12.1 Allocation of Environmental Liabilities ................56
12.2 Seller's Environmental Indemnification .................57
12.3 Buyer's Environmental Indemnification ..................58
12.4 Release ................................................58
12.5 Notice of Claim ........................................58
12.6 Acceptance of Responsibility ...........................59
12.7 Party Declines Responsibility ..........................59
12.8 Cooperation ............................................59
12.9 The Seller's Indemnity and the Buyer's Re-Sale of
Real Property ..........................................60
12.10 No Consequential Damages ...............................60
12.11 Access to the Real Property and Documents ..............60
12.12 The Seller's Pursuit of Third Parties ..................60
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12.13 Limitations ............................................60
12.14 Agency Contact .........................................61
12.15 Survival ...............................................61
ARTICLE 13 CONDITIONS TO OBLIGATIONS OF THE BUYER .......................61
13.1 HSR/Competition Act Compliance .........................61
13.2 No Litigation ..........................................62
13.3 No Casualty ............................................62
13.4 Retail Sales Tax Certificate ...........................62
13.5 Truth of Representations and Warranties ................62
13.6 Performance by the Seller ..............................62
13.7 Statutory Prohibition ..................................63
13.8 No Material Adverse Change .............................63
13.9 Real Estate Matters ....................................63
13.10 Landlord Consent .......................................63
ARTICLE 14 CONDITIONS TO OBLIGATIONS OF THE SELLER ......................63
14.1 HSR/Competition Act Compliance .........................63
14.2 No Litigation ..........................................64
14.3 Truth of Representation and Warranties .................64
14.4 Performance by the Buyer ...............................64
14.5 Statutory Prohibition ..................................64
14.6 Landlord Consent .......................................64
ARTICLE 15 CLOSING ......................................................64
15.1 The Closing Date .......................................64
15.2 Deliveries by the Buyer ................................65
15.3 Deliveries by the Seller ...............................65
15.4 Rights to Possession ...................................66
ARTICLE 16 SALES AND TRANSFER TAXES .....................................66
ARTICLE 17 BULK SALES ...................................................66
ARTICLE 18 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS ........66
18.1 Survival ...............................................66
18.2 Notice of Claim ........................................67
ARTICLE 19 INDEMNIFICATION ..............................................67
19.1 Indemnification of the Buyer ...........................67
19.2 Indemnification of the Seller ..........................67
19.3 Eligible Claim, Threshold Amount, Payment ..............68
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19.4 Procedures for Claims ..................................68
19.5 Third-Party Claims .....................................68
19.6 Exclusive Remedy .......................................69
19.7 Payment of Amounts .....................................69
19.8 Tax and/or Insurance Offset ............................69
19.9 No Indemnification For Known Breaches of
Representations and Warranties .........................70
19.10 Maximum Amount of Any Indemnification ..................70
19.11 Indemnification with Respect to Certain Liabilities ....70
ARTICLE 20 TERMINATION ..................................................70
20.1 Grounds ................................................70
20.2 Effect .................................................71
20.3 Letter of Credit .......................................71
ARTICLE 21 EXPENSES .....................................................72
ARTICLE 22 DISPUTE RESOLUTION ...........................................72
22.1 Notice of Dispute ......................................72
22.2 Investigation; ADR .....................................72
22.3 Selection of Neutral ...................................73
22.4 Prehearing Conference ..................................73
22.5 Written Summary of Position ............................73
22.6 Hearing ................................................73
22.7 Commitment to ADR ......................................74
22.8 Fees ...................................................74
22.9 Confidentiality ........................................74
ARTICLE 23 MISCELLANEOUS ................................................74
23.1 Notices ................................................74
23.2 Waiver .................................................75
23.3 Captions ...............................................75
23.4 Successors and Assigns .................................75
23.5 Enforceability .........................................75
23.6 No Third-Party Beneficiaries or Right to Rely ..........76
23.7 Counterparts ...........................................76
23.8 Governing Law ..........................................76
23.9 Time of Essence ........................................76
23.10 No Strict Construction .................................76
23.11 Public Announcements ...................................76
23.12 Currency/Method of Payment .............................76
23.13 Subsequent Legal Fees ..................................76
23.14 Exclusive Jurisdiction and Consent
to Service of Process ..................................76
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23.15 Miscellaneous ..........................................77
23.16 Entire Agreement; Amendment ............................77
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EXHIBIT CORRESPONDING
INDEX AGREEMENT SECTION NUMBER
Buyer Guaranty .......................................... Article 1
Assumption Agreement .......................................... 3.1
Services Agreement ............................................ 9.3
Leased Real Property Assignment and Assumption Agreements ..... 9.9
Supplemental Phase II .........................................9.11
General Assignment and ▇▇▇▇ of Sale ........................15.3(a)
LIST OF CORRESPONDING
SCHEDULES TITLE SECTION NUMBER
Individuals with Actual Knowledge of the Business ........ Article 1
Seller's Accounting Principles ........................... Article 1
Owned Real Property ......................................... 2.1(b)
Leased Real Property ........................................ 2.1(c)
Personal Property and Personal Property Leases .............. 2.1(d)
Proprietary Rights .......................................... 2.1(h)
Other Assets ................................................ 2.1(m)
Excluded Proprietary Rights ................................. 2.2(b)
Other Excluded Assets ....................................... 2.2(i)
Exceptions to Seller's Accounting Principles for
Closing Balance Sheet .................................. 4.3(a)
Allocation of the Purchase Price ............................ 4.4
Financial Statements ........................................ 5.3
Adjustments to Pro Forma Financial Statements ............... 5.3
Accounts Receivable Exceptions .............................. 5.4
Real Property Exceptions .................................... 5.6(a)
Leased Real Property Exceptions and Defaults ................ 5.6(b)
Other Real Property Used in the Business .................... 5.6(c)
Personal Property Exceptions ................................ 5.7
Material Contracts .......................................... 5.9
Proprietary Rights Exceptions ............................... 5.10
Environmental Exceptions .................................... 5.12
Consents; Creation of Lien on Transferred Assets ......... 5.13(a)
Litigation .................................................. 5.14
Material Adverse Changes .................................... 5.16
Collective Bargaining Agreements ......................... 5.19(b)
Employee Claims .......................................... 5.19(c)
Employee Benefit Plans ...................................... 5.20
Claims Respecting Certain Plans .......................... 5.20(d)
Liabilities ................................................. 5.22
Employee Safety ............................................. 5.23
List of Customer or Third Party Assets ................... 5.24(a)
Asset Location Exceptions ................................ 5.24(b)
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LIST OF CORRESPONDING
SCHEDULES TITLE SECTION NUMBER
Year 2000 Compliance ........................................ 5.25
Other Permitted Contracts ................................. 7.1(d)
Retained Employees ......................................... 10.1
Severance Obligations ...................................... 10.2
Seller Welfare Plans ....................................... 10.3
Contribution Threshold .................................. 10.5(j)
Seller's 1999 Incentive Plans .............................. 10.9
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into as of July 9,
1999, between ▇▇▇▇▇ Corporation, an Ohio corporation (the "Seller"), and
TransTechnology Corporation, a Delaware corporation (the "Buyer").
RECITALS:
A. The Seller is engaged in the design, manufacture and marketing of
metal fasteners, plastic fasteners, retaining rings, metal light ▇▇▇▇▇▇▇ and
automotive headlamp adjusters (the "Business") by and through the Seller's
Engineered Fasteners Division (the "Division"); and
B. The Seller, directly, and indirectly through (i) ▇▇▇▇▇ MDH Company,
Inc., a corporation organized under the laws of the State of Delaware ("Eaton
MDH"), (ii) Eaton Yale Ltd., a corporation organized under the laws of the
Province of Ontario, Canada ("Eaton Yale") and (iii) Eaton ETN Offshore Ltd., a
corporation organized under the laws of the Province of Ontario, Canada ("ETN
Offshore," and together with Eaton MDH and Eaton Yale, the "Seller
Subsidiaries"), owns or leases the assets used in the conduct of the Business of
the Division, including, without limitation, trade accounts receivable,
inventory, land, buildings, fixtures, machinery and equipment, contract rights,
customer and supplier lists, records and related information, patents, trade
secrets and trademarks; and
C. The Seller desires to sell, and to cause the Seller Subsidiaries to
sell, and the Buyer desires to purchase, and shall cause its wholly-owned
subsidiary, currently named Palnut Fasteners, Inc., a Delaware corporation
("Fasteners"), to purchase, substantially all of the assets and assume
substantially all of the liabilities of the Division with respect to its U.S.
operations and shall cause a wholly-owned subsidiary to be formed as an Ontario
corporation ("Canadian Sub," and together with Fasteners, the "Buyer
Subsidiaries"), to purchase, substantially all of the assets and assume
substantially all of the liabilities of the Division with respect to its
Canadian operations in accordance with the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the payments herein provided for
and the covenants herein contained, the Parties hereby agree as follows.
ARTICLE 1
DEFINITIONS
Unless elsewhere defined herein, the following terms shall have the
meanings set forth in this Article 1.
"ACCOUNTS RECEIVABLE" means all of the Division's trade and other accounts
receivable including all accounts receivable, if any, that are owed by the
Seller or by any Subsidiary or Affiliate of the Seller.
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"AFFILIATE" shall mean, with respect to any Person, at the time in question, any
other Person controlling, controlled by or under common control with such
Person. For purposes of this definition, "control" (including the terms
"controlling," "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
"AGREEMENT" means this Asset Purchase Agreement.
"APRIL 30 BALANCE SHEET" means the pro forma interim balance sheet of the
Business as of April 30, 1999 included in the Financial Statements.
"ASSUMED LIABILITIES" has the meaning set forth in Section 3.1.
"BUSINESS" has the meaning set forth in Recital A.
"BRUNSWICK FACILITY" has the meaning set forth in Section 2.1(c).
"BUYER" has the meaning set forth in the first paragraph of this Agreement.
"BUYER GUARANTY" means the Guaranty in the form of Corresponding Exhibit A under
which Buyer guarantees any and all obligations of the Buyer Subsidiaries under
any Related Agreements to which the Buyer Subsidiaries are parties.
"BUYER SUBSIDIARIES" has the meaning set forth in Recital C.
"CAA" means the Clean Air Act, 42 U.S.C. Section 7401, et seq., as amended.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601, et seq., as amended by, among
other things, the Superfund Amendments and Reauthorization Act of 1986.
"CLOSING" means the closing of the transactions contemplated by this Agreement.
"CLOSING BALANCE SHEET" has the meaning set forth in Section 4.3(a).
"CLOSING DATE" has the meaning set forth in Section 15.1.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, including the rules and regulations promulgated thereunder.
"COLLECTIVE BARGAINING AGREEMENTS" has the meaning set forth in Section 5.19(b).
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"CONTRACTS" means all purchase orders, sales orders, distributor agreements,
franchise agreements, sales representation agreements, warranty agreements,
service agreements, collective bargaining agreements and other contracts with
labor unions or employee associations, if any, employment and consulting
agreements, guaranty agreements, confidentiality agreements and other
agreements, contracts and commitments of any sort whatever except for leases and
licenses with respect to the Leased Real Property.
"CORRESPONDING EXHIBIT" means an exhibit which is numbered, captioned or named
to correspond to the number, caption or name of the section of this Agreement
which refers to that exhibit.
"CORRESPONDING SCHEDULE" means a schedule which is numbered, captioned or named
to correspond to the number, caption or name of the section of this Agreement
which refers to that schedule.
"CWA" means the Federal Water Pollution Control Act, 33 U.S.C. Section 1251, et
seq., as amended.
"DAMAGES" has the meaning set forth in Section 12.2.
"DIVISION" has the meaning set forth in Recital A.
"DIVISION EMPLOYEES" means all persons employed by the Seller or the Seller
Subsidiaries in the conduct of the Business as of the Closing Date.
"EMPLOYEE BENEFIT PLAN" means each employee bonus, retirement, pension, profit
sharing, stock option, stock appreciation, stock purchase, incentive, deferred
compensation, hospitalization, medical, dental, vision, life and other health
and disability (whether provided by insurance or otherwise), severance,
termination and other plan, program, arrangement, policy or payroll practice
providing any remuneration or benefits (other than current cash compensation),
including, without limitation, each ERISA Plan (other than a multiemployer plan
within the meaning of Section 3(37) of ERISA) or each employee benefit plan
within the meaning of the Pension Benefits Act (Ontario), which is both (a) (i)
maintained by the Seller or any Seller Subsidiary or any Person that would be
aggregated with, or treated as the same employer as, the Seller for any purpose
under the Tax Code or ERISA (an "ERISA Affiliate") or (ii) to which the Seller,
any Seller Subsidiary or any ERISA Affiliate contributes or has contributed and
(b) one under which any Division Employee or former Division Employee
participates or had accrued any rights or under which the Seller or any Seller
Subsidiary is liable in respect of a Division Employee or former Division
Employee with respect to his employment with the Division.
"ENVIRONMENTAL CONDITION" means the use, generation, handling, storage,
emission, discharge, processing, reclamation, recycling, release, transportation
or disposal of any Regulated Substance related to the operation of the Business,
or the presence of any of them in any environmental medium (air, water, soil,
sediments, subsurface strata or groundwater) on, in or under any real property.
"ENVIRONMENTAL LAWS" means all laws, ordinances, regulations, rules, orders,
permits, approvals, decisions or decrees, and any common law rules, orders,
permits, approvals, decisions or decrees,
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and any common or civil law concerning the subject of the introduction,
emission, discharge or release of pollutants or contaminants into the air, soil,
or surface or ground water; the transportation, handling, use, storage,
treatment or disposal of waste materials; or the remediation or investigation of
contamination of air, soil, or surface or ground water by pollutants,
contaminants or waste materials; or exposure to hazardous substances, hazardous
waste, or toxic substances; including, but not limited to, CERCLA, RCRA, CWA,
SWDA, CAA, TSCA, and EPCRA, and similar federal, state, provincial, territorial,
local, municipal and foreign laws, but will not include laws, ordinances,
regulations, rules, orders, permits, approvals, decisions or decrees, and any
common law concerning primarily worker health or safety, including, but not
limited to, OSHA and similar state, provincial, territorial, local, municipal
and foreign laws.
"EPCRA" means the Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. Section 11001, et seq., as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
including the rules and regulations promulgated thereunder.
"ERISA PLAN" has the meaning set forth in section 3(3) of ERISA with respect to
Employee Benefits Plans which are subject to ERISA.
"EXCLUDED ASSETS" has the meaning set forth in Section 2.2.
"FACILITIES" has the meaning set forth in Section 2.1(c).
"FINANCIAL STATEMENTS" means each of the pro forma unaudited balance sheets for
each of the three fiscal years of the Business most recently completed prior to
the date of this Agreement, the pro forma statements of income for each of the
years ended on the date of each of the balance sheets and a pro forma interim
balance sheet of the Business as of April 30, 1999 and the pro forma income
statement of the Business for the interim period then ended.
"FINAL NET ASSETS" has the meaning set forth in Section 4.3(a).
"GAAP" means generally accepted accounting principles in the United States of
America.
"GLOW AVENUE AGREEMENT" means the Agreement of Purchase and Sale, dated June 9,
1999, relating to the purchase by Eaton Yale of real property municipally known
as ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇.
"GST LEGISLATION" means the Excise Tax Act (Canada), Part IX.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, including the rules and regulations promulgated thereunder.
"HAMILTON FACILITY" has the meaning set forth in Section 2.1(b).
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"INACTIVE EMPLOYEES" means Division Employees who are temporarily absent from
active employment by reason of disability, illness, injury, workers'
compensation, military leave, approved leave of absence or layoff.
"INDEPENDENT ACCOUNTANT" means PricewaterhouseCoopers LLP.
"INTELLECTUAL PROPERTY" means the following items, in each case related
exclusively or primarily to the operation of the Business:
(a) all inventions (whether patentable or unpatentable, and
whether or not reduced to practice), all improvements thereto, and all
patents, patent applications, and invention disclosures, together with
all reissues, continuations, continuations-in-part, revisions,
extensions, divisions, and reexaminations thereof;
(b) all trademarks and service marks (whether common law or
registered), trade dress, logos, trade names, and corporate names,
together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith,
and all applications, registrations, and renewals in connection
therewith;
(c) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith;
(d) all trade secrets and confidential business information
(including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and
marketing plans and proposals);
(e) computer software, including source code to the extent
assignable, disks, documentation, operating manuals, related systems
data, source programs, record layouts, program libraries, and any other
documentation in those application areas that may pertain to any data
processing system or operation; and
(f) all copies and tangible embodiments of any of the
foregoing (in whatever form or medium).
"INVENTORY" means all of the Division's inventory of raw materials,
work-in-process and finished goods, as the same shall exist on the Closing Date,
whether in the Seller's or any Seller Subsidiary's possession, in transit to or
from the Seller or any Seller Subsidiary or held by any third party.
"KNOWLEDGE" means the actual knowledge of the individuals set forth on
Corresponding Schedule A and any other Division management personnel with
compliance responsibility.
"LEASED REAL PROPERTY" has the meaning set forth in Section 2.1(c).
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"LEASED REAL PROPERTY ASSIGNMENT AND ASSUMPTION AGREEMENTS" has the meaning set
forth in Section 9.9.
"LIEN" means any lien, mortgage, charge, pledge, security interest, restriction,
reservation or condition on transferability, easement, defect of title or other
claim, encroachment or other encumbrance of any nature whatsoever on any Real
Property or Personal Property or property interest.
"MASSILLON FACILITY" has the meaning set forth in Section 2.1.
"MATERIAL ADVERSE EFFECT" means (a) any effect that is materially adverse to the
value of the Transferred Assets taken as a whole or materially adverse to the
Business, the condition (financial or otherwise), or results of operations of
the Business in each case taken as a whole, or (b) any effect that would,
individually or in the aggregate, materially impair, hinder or otherwise
materially and adversely affect the ability of the Seller or the Buyer, as the
case may be, to effect the Closing, to perform any of their material obligations
under this Agreement or any of the Related Agreements, or to receive all
material benefits of the transactions contemplated by this Agreement.
"MATERIAL CONTRACTS" has the meaning set forth in Section 5.9(b).
"NON-TRANSFERABLE ASSETS" has the meaning set forth in Section 2.3(a).
"OSHA" means the Occupational Safety and Health Act of 1970, 29 U.S.C. Section
651, et seq.
"OWNED REAL PROPERTY" has the meaning set forth in Section 2.1(b).
"PARTY" means the Buyer or the Seller, referred to individually, and "Parties"
means the Buyer and the Seller referred to collectively.
"PERMITS" has the meaning set forth in Section 2.1(j).
"PERSON" means an individual, corporation, limited liability company,
partnership, association, estate, trust, unincorporated organization,
governmental or quasi-governmental agency or body or other entity or
organization.
"PERSONAL PROPERTY" means all of the Division's personal property, including,
without limitation, all machinery, equipment, computer hardware, vehicles,
tools, dies, repair and replacement parts, and office furniture, fixtures and
equipment owned by the Seller or the Seller Subsidiaries, except to the extent
disposed of in the ordinary course of business prior to the Closing Date, and
such additional items as are acquired in the ordinary course of business prior
to the Closing Date, in each case consistent with the terms and conditions of
this Agreement.
"PERSONAL PROPERTY LEASES" means all leases covering any Personal Property.
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"PERSONAL PROPERTY PERMITTED EXCEPTIONS" has the meaning set forth in Section
5.7.
"PRE-CLOSING ENVIRONMENTAL CONDITION" means the presence as of the Closing of
any hazardous substance, hazardous waste or toxic substance, as defined under
the Environmental Laws, as existing and in effect as of the Closing, in any
environmental medium (air, water, soil, sediments, subsurface strata or
groundwater) on, in or under the Real Property or off the Real Property as a
result of migration from the Real Property, in either case in violation of the
Environmental Laws, as existing and in effect as of the Closing; provided,
however, that "Pre-Closing Environmental Condition" shall not include under any
circumstances (a) the presence of any such hazardous substance, hazardous waste
or toxic substance that was generated, or caused by a spill or release
occurring, off the Real Property, or (b) any matter or condition for which the
Seller has not received notice from the Buyer pursuant to Section 12.5 prior to
the third anniversary of the Closing Date.
"PRIME RATE" means the rate per annum equal to the publicly announced prime
commercial lending rate of KeyBank National Association (or any successor
thereof) in effect from time to time, changing as such publicly announced rate
changes, effective as of the date KeyBank National Association publicly
announces each change.
"PROPRIETARY RIGHTS" has the meaning set forth in Section 2.1(h).
"PROPRIETARY RIGHTS EXCEPTIONS" has the meaning set forth in Section 5.10.
"PURCHASE PRICE" has the meaning set forth in Section 4.1.
"RCRA" means the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
Section 6901, et seq., as amended.
"REAL PROPERTY" means the Owned Real Property and the Leased Real Property,
collectively.
"REAL PROPERTY PERMITTED EXCEPTIONS" has the meaning set forth in Section
5.6(a).
"REGULATED SUBSTANCE" means any hazardous or extremely hazardous chemical,
hazardous substance, hazardous or special waste (or waste requiring special
handling), oil, petroleum or petroleum products or residue, pollutant or
contaminant or toxic substance, all as defined under any of the applicable
Environmental Laws.
"RELATED AGREEMENTS" means the related agreements contemplated by this Agreement
including those attached to this Agreement as Corresponding Exhibits.
"RETAINED LIABILITIES" has the meaning set forth in Section 3.2.
"SELLER" has the meaning set forth in the first paragraph of this Agreement.
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"SELLER'S ACCOUNTING PRINCIPLES" means the accounting principles currently used
by the Seller in preparing the Financial Statements which principles are in
accordance with GAAP except as set forth on Corresponding Schedule B.
"SELLER SUBSIDIARIES" has the meaning set forth in Recital B.
"SETTLEMENT DATE" has the meaning set forth in Section 4.3(f).
"SERVICES AGREEMENT" has the meaning set forth in Section 9.3.
"SUBSIDIARY" means any corporation, the capital stock of which represents more
than 50% of the general voting power under ordinary circumstances of such
corporation, which is directly or indirectly owned or controlled by another
corporation.
"SWDA" means the Solid Waste Disposal Act, 42 U.S.C. Section 6901, et seq., as
amended.
"TAX CODE" means the Internal Revenue Code of 1986, as amended.
"TERMINATION DATE" means November 1, 1999.
"THIRD PARTY" means any Person not a signatory to this Agreement other than a
Buyer Subsidiary or a Seller Subsidiary.
"TRANSFERRED ASSETS" has the meaning set forth in Section 2.1.
"TSCA" means the Toxic Substances Control Act, 15 U.S.C. Section 52601, et seq.,
as amended.
ARTICLE 2
SALE AND PURCHASE OF ASSETS
2.1 TRANSFERRED ASSETS. On the terms and subject to the conditions of
this Agreement, and for the consideration set forth in Article 4, the Seller
shall, and shall cause the Seller Subsidiaries to, on the Closing Date, sell,
transfer and convey to the Buyer or the Buyer Subsidiaries, free and clear of
all Liens, other than the Assumed Liabilities, the Real Property Permitted
Exceptions, the Personal Property Permitted Exceptions and the Proprietary
Rights Exceptions, all of the Seller's and the Seller Subsidiaries' respective
rights, titles and interests in and to the assets that are used exclusively or
primarily to operate the Business as currently operated by the Seller or the
Seller Subsidiaries, wherever such assets are located and whether real, personal
or mixed, tangible or intangible, and whether or not such assets have any value
for accounting purposes or are carried or reflected on or specifically referred
to in the books or financial statements of the Seller, with such changes,
deletions or additions thereto as may occur from the date hereof to the Closing
Date consistent with the terms and conditions of this Agreement, subject in each
case to Section 2.2 and
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Section 2.3 (the "Transferred Assets"), including, to the extent used
exclusively or primarily to operate the Business as currently operated, the
following:
(a) ACCOUNTS RECEIVABLE. All of the Accounts Receivable;
(b) OWNED REAL PROPERTY. All of the real property owned by the
Seller or any of the Seller Subsidiaries, including land, buildings,
structures and improvements thereon or appurtenances thereto, such
real property being located at Massillon, Ohio (the "Massillon
Facility") and ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, (the "Hamilton Facility"),
as the same shall exist on the Closing Date (the "Owned Real
Property") with a legal description of each parcel of Owned Real
Property included on the Corresponding Schedule;
(c) LEASED REAL PROPERTY. All real property, including,
without limitation, the facility located at Brunswick, Ohio (the
"Brunswick Facility," which together with the Massillon Facility and
the ▇▇▇▇▇▇▇▇ Facility may be referred to hereinafter as the
"Facilities") listed on the Corresponding Schedule, which real
property is leased or subleased or the rights or benefits thereof are
licensed by the Seller or any of the Seller Subsidiaries, as the same
shall exist on the Closing Date (the "Leased Real Property");
(d) PERSONAL PROPERTY. All Personal Property and Personal
Property Leases including those items and leases identified on the
Corresponding Schedule;
(e) INVENTORY. All Inventory and any packaging, supplies and
spare parts;
(f) CONTRACTS. All rights and claims under all Contracts
including those identified on the Corresponding Schedule A to Section
5.9;
(g) LISTS AND RECORDS. All of the Seller's and the Seller
Subsidiaries' books and records, customer and supplier lists, sales,
cost and shipping records and other lists and documents, other than
the corporate minute books, stock books and stock transfer ledgers of
the Seller and the Seller Subsidiaries and other than tax records,
litigation files and any records related to Excluded Assets or
Retained Liabilities;
(h) PATENTS, TRADEMARKS, INTELLECTUAL PROPERTY, ETC. All of
the Intellectual Property, including those items identified on the
Corresponding Schedule (the "Proprietary Rights");
(i) PREPAID ITEMS. All of the Division's prepaid expenses and
deposits;
(j) GOVERNMENTAL PERMITS AND LICENSES. All of the permits,
licenses, certifications, approvals, consents, and other governmental
authorizations (the "Permits") issued to the Seller or any Seller
Subsidiary, subject to Section 2.3;
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(k) VENDOR PAYMENT IDENTIFICATION NUMBERS, AND UPC CODES. All
UPC codes or the similar vendor payment identification numbers used by
the Seller or the Seller Subsidiaries for remittances from customers;
(l) CLAIMS AGAINST THIRD PARTIES. All claims, actions, suits,
proceedings or choses in action, except those relating to Excluded
Assets or Retained Liabilities; and
(m) OTHER ASSETS. Those other assets, whether or not used
exclusively or primarily in the Business, identified on the
Corresponding Schedule as Transferred Assets (the "Other Assets").
2.2 EXCLUDED ASSETS. Notwithstanding the foregoing, the following
assets (the "Excluded Assets") shall be retained by the Seller or the Seller
Subsidiaries, as the case may be, and shall not be included in the Transferred
Assets:
(a) all cash (other than ▇▇▇▇▇ cash located at the
Facilities), cash equivalents, marketable securities and bank accounts;
(b) any intellectual property owned, licensed or otherwise
used by the Seller or any Seller Subsidiary which is not used
exclusively or primarily in the conduct of the Business, including,
without limitation any patents or pending applications, trade secrets,
the trade names and trademarks "Eaton" and "▇▇▇▇▇ Corporation" and any
other trade names, trademarks, corporate names and logos incorporating
in any way the foregoing names or affiliated therewith and trademarks
and other intellectual property as identified on the Corresponding
Schedule;
(c) any Non-Transferable Assets for which consent or approval
to transfer has not been obtained prior to the Closing Date;
(d) all claims and rights of, relating to or arising from any
of the Excluded Assets or the Retained Liabilities;
(e) all rights, properties and assets of the Division which
shall have been transferred or disposed of by the Seller or any of the
Seller Subsidiaries prior to the Closing in transactions occurring in
the ordinary course of the Business and consistent with the terms of
this Agreement;
(f) except as provided in Article 10, all assets held by or
on behalf of the Seller or any Seller Subsidiary in trust, reserve or
otherwise, in respect of Employee Benefit Plans or any other
obligations pertaining to Division Employees;
(g) all rights to the refund of any tax, of any kind,
including, without limitation, Canadian workers compensation rebates
paid by Seller or any of the Seller Subsidiaries prior to the Closing
Date;
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(h) all office furniture and furnishings located at Seller's
Administrative and Marketing Center in Southfield, Michigan; and
(i) all assets, whether or not used exclusively or primarily
in the conduct of the Business, specifically identified on the
Corresponding Schedule as Excluded Assets or identified on the
Corresponding Schedule A to Section 5.24 as property owned by a
customer or other Third Party (the "Other Excluded Assets").
2.3 NON-TRANSFERABILITY OF CERTAIN ASSETS.
(a) To the extent that there are certain assets used in the Business,
including without limitation the Permits, which are not assignable without the
consent or approval of Persons other than the Seller or the Seller Subsidiaries
("Non-Transferable Assets"), and such consents or approvals are not obtained by
the Closing Date, this Agreement and the Closing shall not constitute an
assignment or agreement to assign or transfer such assets without such consent
or approval.
(b) For a reasonable period following the Closing Date, the Seller
agrees to cooperate in good faith with the Buyer to enter into any reasonable
arrangement (other than an arrangement under which the Seller or any of the
Seller Subsidiaries would incur or retain any financial obligation with respect
to the Non-Transferable Assets) designed to provide the Buyer the benefit of
such Non-Transferable Assets, including the enforcement for the benefit and at
the expense of the Buyer of any rights previously enjoyed by the Seller or a
Seller Subsidiary in connection with any such assets. Provided that the Seller
so cooperates and proceeds in good faith to obtain such consents and provide
such arrangements, the Seller shall not be deemed to be in breach of any of its
obligations under this Agreement by reason of the failure to obtain any consent
or approval. Except as reimbursed by the Buyer, in no event shall compliance by
the Seller with this Section 2.3 be deemed to require that the Seller or any of
the Seller Subsidiaries incur any obligation or pay any monies to Third Parties
in connection with such efforts.
(c) To the extent that the Buyer is provided the benefits pursuant to
this Section 2.3 of any Permit or approval or the like or any contract, lease,
license or other agreement, the Buyer shall perform the obligations of the
Seller or the Seller Subsidiary under or in connection with such Permit or
approval or the like or any contract, lease, license or other agreement.
ARTICLE 3
LIABILITIES
3.1 ASSUMPTION OF LIABILITIES. Upon the transfer of the Transferred
Assets on the Closing Date in accordance with this Agreement, the Buyer shall,
by an Assumption Agreement in the form set forth on the Corresponding Exhibit
(the "Assumption Agreement"), assume and agree to pay,
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discharge or perform, as appropriate, all of the liabilities and obligations of
the Seller and the Seller Subsidiaries in respect of the Business (the "Assumed
Liabilities"), including but not limited to:
(a) all liabilities and obligations of the Seller and the
Seller Subsidiaries, including accounts payable and accrued liabilities
arising in the ordinary course of business, in respect of the Business
on or prior to the Closing;
(b) all liabilities and obligations of the Seller and the
Seller Subsidiaries in respect of the Contracts which are Transferred
Assets, the leases for the Leased Real Property, the Personal Property
Leases and the Permits which are Transferred Assets;
(c) all liabilities and obligations of the Seller and the
Seller Subsidiaries in respect of customer returns and customer
warranty claims for products sold by the Seller or any of the Seller
Subsidiaries on or prior to the Closing;
(d) product liability and similar claims for injury to person
or property (including death), in connection with any products sold by
the Seller or any of the Seller Subsidiaries on or prior to the Closing
and any products included in Inventory as of the Closing;
(e) subject to, and in accordance with the terms of, Article
12, all liabilities and obligations in respect of any Environmental
Condition on, in or under any Real Property, including the Buyer's
share of any Pre-Closing Environmental Condition; and
(f) all liabilities and obligations assumed by the Buyer
pursuant to Article 10.
3.2 RETAINED LIABILITIES. Notwithstanding the foregoing, the Seller
or any of the Seller Subsidiaries, as the case may be, shall retain and shall
pay and timely discharge without liability to the Buyer or the Buyer
Subsidiaries, the following liabilities of the Seller or the Seller Subsidiaries
(the "Retained Liabilities"):
(a) any liability or obligation under or in connection with
the Excluded Assets and any liability or obligation of the Seller or
any of the Seller Subsidiaries with respect to any Retained Liability;
(b) any federal, state, local, provincial or other foreign
income, capital gain or other tax payable with respect to the
Business, the Transferred Assets or the Assumed Liabilities for any
period prior to the Closing;
(c) all liabilities and obligations of the Seller and the
Seller Subsidiaries arising out of claims or similar suits, actions or
proceedings by any Transferred Employee (as defined in Article 10)
pursuant to governmental workers' compensation or similar law, or
occupational disease or injury which arise out of the Business on or
prior to the Closing;
(d) any indebtedness of the Seller or any of the Seller
Subsidiaries or any Affiliate of the Seller for borrowed money;
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(e) any liability for the failure to comply with the bulk
sales laws of any jurisdiction, except any such liability arising out
of the failure of the Buyer to pay any Assumed Liability;
(f) any fees and expenses incurred by the Seller or any of the
Seller Subsidiaries in connection with negotiating, preparing, closing
and carrying out this Agreement and the transactions contemplated by
this Agreement, including, without limitation, the fees, disbursements
and expenses for the Seller's investment bankers, attorneys,
accountants and consultants;
(g) all liabilities and obligations retained by the Seller
pursuant to Article 10, including, without limitation, (i) all
withdrawal liability (both for any complete or partial withdrawal)
under any multiemployer plan (as defined in Sections 3(37) and
4001(a)(3) of ERISA) to which Seller has at any time made
contributions, and (ii) all liability to any single-employer plan (as
defined in Sections 3(31) and 4001(a)(15) of ERISA) to which Seller has
at any time made contributions and (iii) all liabilities and
obligations of the Seller pursuant to Section 10.3(d);
(h) subject to, and in accordance with the terms of, Article
12, all liabilities and obligations in respect of the Seller's share of
any Pre-Closing Environmental Condition; and
(i) all liabilities and obligations in respect of any
Environmental Condition on, in or under any real property, other than
the Real Property, previously owned, leased or otherwise used in or by
the Business prior to the Closing or to which any Regulated Substance
generated by the Business was transported or disposed prior to the
Closing.
3.3 REIMBURSEMENT FOR CERTAIN PAYMENTS. If the Seller or any of the
Seller Subsidiaries pay any of the Assumed Liabilities, then the Buyer shall
reimburse the Seller or the appropriate Seller Subsidiary by wire transfer
within two business days of receipt by the Buyer of a demand for reimbursement,
together with corresponding documentation of such payment, from the Seller. If
the Buyer or any of the Buyer Subsidiaries pay any of the Retained Liabilities,
then the Seller shall reimburse the Buyer or the applicable Buyer Subsidiary by
wire transfer within two business days of receipt by the Seller of a demand for
reimbursement, together with corresponding documentation of such payment, from
the Buyer.
ARTICLE 4
PURCHASE PRICE
4.1 PURCHASE PRICE. The aggregate purchase price for the Transferred
Assets shall be $173,000,000 (the "Purchase Price"), subject to any adjustment
as provided for in Section 4.3, and the assumption by the Buyer of the Assumed
Liabilities.
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4.2 PAYMENT AT CLOSING. At the Closing, the Buyer shall wire transfer
the Purchase Price to the Seller and/or the Seller Subsidiaries as may be
designated by the Seller in writing prior to the Closing, in immediately
available funds to a bank account or at bank accounts designated by the Seller
in writing prior to the Closing.
4.3 ADJUSTMENT TO THE PURCHASE PRICE.
(a) Following the Closing Date, the Seller shall prepare or cause to
be prepared, at its sole expense, a balance sheet of the Business dated as of
the Closing (the "Closing Balance Sheet") setting forth the net book value of
the Transferred Assets (excluding amounts for depreciation and amortization
expense since April 30, 1999) and the Assumed Liabilities as of the Closing (the
"Final Net Assets") determined in accordance with the Seller's Accounting
Principles except as set forth on the Corresponding Schedule. The Seller shall
deliver the Closing Balance Sheet to the Buyer within 90 days after the Closing.
(b) The Buyer and its representatives at the Buyer's sole expense
shall have the right to observe the work performed by the Seller or its
representatives in connection with the preparation of the Closing Balance Sheet,
and shall have the right to examine and make copies of the work papers used in
connection with the preparation of the Closing Balance Sheet; provided, however,
that to the extent such work papers are prepared by outside independent
auditors, the Buyer shall have the right to examine, but not make copies of,
such work papers, unless otherwise permitted by applicable accounting standards.
(c) The Buyer shall have 30 days after the delivery of the Closing
Balance Sheet to review the Closing Balance Sheet. If within said 30-day period,
the Buyer notifies the Seller in writing that it is unwilling to accept any
item(s) on the Closing Balance Sheet, specifically identifying the item(s) and
amount(s) in dispute and the basis for such dispute, the Parties shall use their
reasonable efforts to reach agreement within the 30 days following the delivery
of the Buyer's notice of dispute, or such longer period as may be agreed upon by
the Parties, with respect to such disputed item(s). Any items on the Closing
Balance Sheet not identified in writing as a disputed item within the foregoing
30-day period as provided above shall be deemed to have been accepted by the
Buyer and not subject to any further review or change.
(d) If the Parties fail to reach a mutually agreeable determination
with respect to the Closing Balance Sheet within the foregoing 30-day period, or
such longer period as may have been agreed upon, the disputed item(s) shall be
submitted to a partner having relevant expertise and practicing at the
Cleveland, Ohio office of the Independent Accountant for resolution. The
Independent Accountant's determination shall be made using the Seller's
Accounting Principles, shall be final and binding on both Parties, and judgment
on such determination may be entered in any court having jurisdiction, in
accordance with Section 23.14. The costs and expenses of the Independent
Accountant will be paid by the Party against whom the disputed item(s) are
resolved, or shall be prorated between the Parties by the Independent Accountant
to the extent disputed item(s) are resolved in favor of each Party based on
their relative degree of success and shall be paid promptly following the
Settlement Date.
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(e) The resolution of any disputed item(s) shall be combined with
the undisputed items from the Closing Balance Sheet to re-calculate the Closing
Balance Sheet. The Parties shall request that such determination by the
Independent Accountant be resolved as promptly as possible.
(f) Upon the later of the expiration of the 30-day period referred
to above, during which time the Buyer may notify the Seller of any disputed
item(s) in the Closing Balance Sheet, or, in the event the Buyer provides the
Seller with written notice of disputed item(s) in accordance with the foregoing,
the final determination of such disputed item(s), either by agreement of the
Parties or a final determination by the Independent Accountant (the "Settlement
Date"), the Parties shall make the adjustments, if any, to the Purchase Price
provided for in subsections (g) and (h) below. Between the Closing Date and the
Settlement Date, the Buyer shall, during regular business hours, afford the
Seller and its representatives reasonable access to all books, records,
correspondence, files, financial statements, operating data, and all other
information with respect to the Business, and shall provide to the Seller and
its representatives such operating and financial data and any other information
with respect to the Business as it or they may from time to time reasonably
request for the purpose(s) of preparing the Closing Balance Sheet and resolving
any disputed item(s). The Buyer shall cause the personnel of the Buyer to
perform such procedures and measures as are reasonably necessary to prepare the
Closing Balance Sheet. The Seller and its representatives shall be provided with
offices at the Business and telephones, facilities, office equipment and
miscellaneous office supplies, as the Seller reasonably requests subsequent to
the Closing Date until the Settlement Date. The Buyer shall make reasonably
available during regular business hours the appropriate officers and employees
of the Business after the Closing for purposes of the Seller or its
representatives interviewing the same in connection with the preparation of the
Closing Balance Sheet and resolving any disputed item(s). During the 30-day
period following the initial delivery of the Closing Balance Sheet to the Buyer
by the Seller, the Seller shall make reasonably available during regular
business hours its relevant officers and employees to address questions
regarding the preparation of the Closing Balance Sheet.
(g) If the Final Net Assets exceed the net book value of the
Transferred Assets and the Assumed Liabilities as of April 30, 1999 as set forth
on the April 30 Balance Sheet, the Buyer shall pay to the Seller and/or the
Seller Subsidiaries (as may be designated by the Seller) within three business
days following the Settlement Date the amount of the excess, with interest on
such amount calculated at the Prime Rate (net of any applicable tax withholding)
accruing from the Closing through the Settlement Date by wire transfer of
immediately available funds to an account or accounts designated in writing to
the Buyer by the Seller.
(h) If the Final Net Assets are less than the net book value of the
Transferred Assets and the Assumed Liabilities as of April 30, 1999 as set forth
on the April 30 Balance Sheet, the Seller shall pay to the Buyer within three
business days following the Settlement Date the amount of the deficit, with
interest on such amount calculated at the Prime Rate (net of any applicable tax
withholding) accruing from the Closing through the Settlement Date by wire
transfer of immediately available funds to an account or accounts designated in
writing to the Seller by the Buyer.
(i) The Parties agree and acknowledge that the Closing Balance Sheet
shall be prepared solely for the purpose of determining the value of the Final
Net Assets of the Business and the final
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Purchase Price to be paid to the Seller and/or the Seller Subsidiaries, and that
such valuations do not reflect or indicate the price to be paid for any, or any
class or category, of the Transferred Assets.
4.4 ALLOCATION OF THE PURCHASE PRICE. The Purchase Price, as
adjusted, shall be allocated among the Transferred Assets as set forth on the
Corresponding Schedule. Such allocation shall be used in the preparation and
filing of Internal Revenue Service Form 8594 and any other domestic or any
foreign income tax returns with respect to the transactions contemplated hereby,
and no Party hereto shall take or assert any position inconsistent therewith.
The Buyer and the Seller shall cooperate in connection with the preparation,
execution and filing with the Internal Revenue Service of all necessary
information returns required by Section 1060 of the Tax Code and comparable
provisions under applicable foreign law relating to the allocation of the
consideration for the Transferred Assets.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE SELLER
As of the date hereof, the Seller makes the following representations
and warranties to the Buyer.
5.1 ORGANIZATION, EXISTENCE AND STANDING. The Seller and each of the
Seller Subsidiaries is a corporation duly organized and validly existing under
the laws of the jurisdiction of its incorporation and has full corporate power
and authority to own or lease the Transferred Assets owned or leased by it, to
carry on the Business as it is now conducted by it and to consummate the
transactions contemplated by this Agreement and the Related Agreements. The
Seller and each of the Seller Subsidiaries is duly qualified to do business in
all of the jurisdictions in which the nature of the Transferred Assets owned or
leased by it, or the conduct of the Business conducted by it, requires it to be
so qualified, except where the failure to be so qualified would not have a
Material Adverse Effect.
5.2 CORPORATE AUTHORITY. The entering into and the execution and
delivery of this Agreement and the Related Agreements and the consummation of
the transactions contemplated hereby and thereby (a) have been duly and validly
authorized by requisite corporate action of the Seller and prior to the Closing
Date will have been duly and validly authorized by requisite corporate action of
each of the Seller Subsidiaries, and (b) constitutes the legal, valid, and
binding obligation of each (to the extent a party to this Agreement and/or any
of the Related Agreements), and no additional corporate or shareholder
authorization or consent is or will be required.
5.3 FINANCIAL STATEMENTS. Copies of the Financial Statements have
been delivered to the Buyer and are attached to Corresponding Schedule A. The
Financial Statements (i) have been prepared from information contained in the
books and records of the Seller, (ii) present fairly, in all material respects,
for those items listed therein, the financial position of the Division as of the
dates shown, and the results of the Division's operations (as the same are set
forth on the Corresponding Schedule) for the periods then ended, and (iii) have
been prepared in accordance with the Seller's
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Accounting Principles applied on a consistent basis, except as set forth on
Corresponding Schedule B.
5.4 ACCOUNTS RECEIVABLE. The Accounts Receivable included in the
Financial Statements constitute all of the Accounts Receivable of the Seller or
the Seller Subsidiaries, as the case may be, that relate to the Business as of
April 30, 1999. Other than those reserved for in the allowance for doubtful
accounts on the Financial Statements, all of such Accounts Receivable are, and
those existing on the Closing Date will be, valid and existing accounts
receivable arising in the ordinary course of business. Except as set forth on
the Corresponding Schedule, to the Seller's Knowledge, none of such Accounts
Receivable is or will be at the Closing Date subject to any counterclaim or
set-off except to the extent reserved for in the allowance for doubtful accounts
on the Financial Statements.
5.5 INVENTORY. The Inventory included in the Financial Statements
consists only of raw materials, work-in-process and finished goods of a quality
and quantity usable and saleable in the ordinary course of business, as
determined in accordance with the Seller's Accounting Principles. Except where
the book value of such Inventory has been written down on or prior to the
Closing Date, the Inventory is valued in the Financial Statements in accordance
with the Seller's Accounting Principles.
5.6 REAL PROPERTY.
(a) OWNED REAL PROPERTY. Except as set forth on the Corresponding
Schedule, the Seller, with respect to the Massillon Facility, and ▇▇▇▇▇ Yale,
with respect to the ▇▇▇▇▇▇▇▇ Facility, each has good and marketable fee simple
title to such Owned Real Property free and clear of all Liens, except (i) Liens
for real estate taxes and assessments, both general and special, not yet due and
payable, for which adequate reserves have been established on the Financial
Statements or which are being contested in good faith, (ii) easements for
electricity, water, gas and telephone lines serving only the real property and
the business conducted thereon and easements of record; (iii) any laws,
regulations or ordinances (including, but not limited to, those related to or
affecting zoning, building and environmental matters) adopted or imposed by any
governmental authority or agency, (iv) workmen's or other similar Liens imposed
by law and arising or incurred in the ordinary course of business, (v) public or
private rights, if any, in such portion of the Real Property as may be presently
used, laid out or dedicated in any manner whatsoever, for street, roadway and/or
alley purposes, and (vi) other Liens, the cost of which to remove, individually
or in the aggregate, is not in excess of $20,000. The exceptions set forth in
clauses (i) through (vi) above shall be referred to as the "Real Property
Permitted Exceptions."
(b) LEASED REAL PROPERTY. Except as set forth on the Corresponding
Schedule, the Seller has good and valid leaseholds as to the Leased Real
Property, free and clear of all Liens except Real Property Permitted Exceptions.
Each of the leases for the Leased Real Property is in full force and effect, and
the Seller has provided the Buyer with complete copies of all such leases.
Except as disclosed on the Corresponding Schedule, the Seller has in all
material respects performed and is performing all obligations required to be
performed by it under the leases, and neither the Seller, nor, to the Seller's
Knowledge, any other party thereto, is in default of any material obligation
under any
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of the leases. Except as disclosed on the Corresponding Schedule, the Seller has
not received any written notice of default under any of the leases, nor to the
Seller's Knowledge has any event occurred which with notice or lapse of time or
both would constitute a material default by the Seller thereunder.
(c) REAL PROPERTY. Except as described on the Corresponding Schedule,
the Real Property constitutes all of the real property used by the Seller or the
Seller Subsidiaries in connection with the conduct of the Business. There are no
pending or, to the Seller's Knowledge, threatened condemnation or eminent domain
proceedings involving the Real Property or any portion thereof, or for a sale in
lieu thereof.
5.7 TITLE TO PERSONAL PROPERTY. Except as set forth on the
Corresponding Schedule, the Seller or the Seller Subsidiaries, as the case may
be, have good and marketable title to all of the Personal Property included in
the Transferred Assets, free and clear of all Liens, except for (a) Liens for
taxes not yet due and payable or which are being contested in good faith, and
(b) Liens, the cost of which to remove, individually or in the aggregate, is not
in excess of the greater of (i) $10,000 or (ii) ten percent (10%) of the asset's
original purchase price. The exceptions set forth in subsections (a) and (b)
above shall be referred to as the "Personal Property Permitted Exceptions."
5.8 CONDITION AND SUFFICIENCY OF TRANSFERRED ASSETS. Except for
matters that would not have a Material Adverse Effect and matters set forth on
the Corresponding Schedule to Section 5.12 and Item (v) of Corresponding
Schedule A to Section 5.9, (a) the Transferred Assets currently used in the
operation of the Business are in such condition and repair, reasonable wear and
tear excepted, as is suitable for the purposes for which they are presently used
in the Business, and (b) the Transferred Assets, together with the Buyer's
rights and interests under the Related Agreements, constitute all of the assets,
rights and interests which are related primarily or exclusively to the Business
(other than Excluded Assets) and are sufficient, together with the items set
forth on Corresponding Schedule to Section 5.24(a), for the operation of the
Business.
5.9 CONTRACTS.
(a) Except as set forth on the Corresponding Schedule A, neither the
Seller nor any of the Seller Subsidiaries is a party to or bound by any
agreement or contract, whether written or oral, of the following types that
involve the Business, the Transferred Assets or the Assumed Liabilities nor are
any such agreements or contracts presently being negotiated or discussed:
(i) Any contract, lease, agreement, plan or arrangement (other
than blanket purchase orders from customers) involving commitments to
others to make capital expenditures or purchases or sales involving
$50,000 or more in any one case or $100,000 in the aggregate in any
period of 12 consecutive months which are not cancelable by the Seller
or the Seller Subsidiaries, without penalty, on less than 90 days
prior written notice and any blanket purchase orders from customers
involving $100,000 or more which are not cancelable by the Seller or
the Seller Subsidiaries, without penalty, on less than 90 days prior
written notice;
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(ii) Any contract, lease, agreement, plan or arrangement
relating to any direct or indirect indebtedness for borrowed money
(including loan agreements, lease purchase arrangements, guarantees,
agreements to purchase goods or services or to supply funds or other
undertakings on which others rely in extending credit), or any
conditional sales contracts, chattel mortgages, equipment lease
agreements and other security arrangements with respect to personal
property with an obligation in excess of $50,000 in any one case or
$100,000 in the aggregate in any period of 12 consecutive months which
are not cancelable by the Seller or the Seller Subsidiaries, without
penalty, on less than 90 days prior written notice;
(iii) Any contract, lease, agreement, plan or arrangement
between the Division and the Seller or any of the Seller Subsidiaries
or any Affiliate of the Seller or any of the Seller Subsidiaries or
related party in their respective individual capacities;
(iv) Any employment, consulting or management services
contract or any confidentiality or proprietary rights agreements with
any employee of the Seller or any of the Seller Subsidiaries or any
Third Party;
(v) Any contract containing covenants limiting the freedom of
the Seller or any of the Seller Subsidiaries to compete in any line of
business with any Person or in any area or territory;
(vi) Any license agreement, either as licensor or licensee, or
any other agreement or arrangement of any type relating to any patent,
trademark or trade name or other Transferred Asset;
(vii) Any contract, agreement or arrangement of any kind
whatsoever, whether exclusive or otherwise, with any sales agent, sales
representative, franchisee or distributor;
(viii) Any contract or arrangement of any kind whatsoever
which requires the payment of royalties;
(ix) Any prime contract with any government or any agency or
instrumentality thereof; and
(x) Any other legally binding contract, agreement, plan or
arrangement not of the type covered by any of the other items of this
Section 5.9 involving money or property having an obligation in excess
of $50,000 in any one case or $100,000 in the aggregate in any period
of 12 consecutive months which are not cancelable by the Seller or the
Seller Subsidiaries, without penalty, on less than 90 days prior
written notice.
(b) "MATERIAL CONTRACTS" shall mean those contracts listed on the
Corresponding Schedule A. All of the Material Contracts are in full force and
effect and are valid, binding and enforceable in accordance with their terms as
to (i) the Seller or the Seller Subsidiaries, as the case may be, and (ii) to
the Seller's Knowledge, the other parties to such Material Contracts. Except as
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disclosed on the Corresponding Schedule B, the Seller and each of the Seller
Subsidiaries, to the extent a party to the Material Contracts, has in all
material respects performed and is performing all obligations required to be
performed by it under the Material Contracts, and neither the Seller or any of
the Seller Subsidiaries, to the extent a party to the Material Contracts, nor,
to the Seller's Knowledge, any other party thereto, is in default of any
material obligation under any of the Material Contracts. Except as disclosed on
the Corresponding Schedule B, neither the Seller nor any of the Seller
Subsidiaries has received any written notice of default under any of the
Material Contracts, nor has any event occurred which with notice or lapse of
time or both would constitute a default by the Seller or any of the Seller
Subsidiaries, as applicable, thereunder.
(c) Except as disclosed on the Corresponding Schedule C, neither the
Seller nor any of the Seller Subsidiaries has received any written or verbal
notice of intent to terminate any Material Contract.
5.10 PROPRIETARY RIGHTS. The Seller or the Seller Subsidiaries are
the sole owners of all of the Proprietary Rights listed as "OWNED" on the
Corresponding Schedule to Section 2.1(h), and the Seller or the Seller
Subsidiaries has the right, under valid, binding and subsisting license,
technology or similar agreements to employ or otherwise use the Proprietary
Rights listed as "licensed" on the Corresponding Schedule to Section 2.1(h).
Except as disclosed on the Corresponding Schedule (the "Proprietary Rights
Exceptions"):
(a) Neither the Seller nor any of the Seller Subsidiaries or,
to the Seller's Knowledge, any other party thereto, is in default of
any material obligation under any such license, technology or similar
agreement;
(b) Neither the Seller nor any of the Seller Subsidiaries has
granted any right or interest to any Person, other than a Seller
Subsidiary, in connection with any of the Proprietary Rights;
(c) Neither the Seller nor any of the Seller Subsidiaries is
obligated to pay any amount, whether as a royalty, license fee or other
payment, to any Person in order to use any of the Proprietary Rights in
the conduct of the Business or the ownership of the Transferred Assets;
(d) The Seller and the Seller Subsidiaries have acquired sole
and exclusive ownership of all Proprietary Rights listed as "owned" on
the Corresponding Schedule to Section 2.1(h) and applications thereof
(whether or not patentable) and have the right to use or license the
use of such Proprietary Rights on the products or services on, or in
respect of which, they are now being used and all of such patents and
registrations and applications therefor are free and clear of any
Liens; and
(e) Except with respect to the software for which the Seller
and the Seller Subsidiaries have been granted standard form end-user
licenses or licensed proprietary rights and for routine patent
prosecutions in various patent offices, (i) none of the Proprietary
Rights and none of the applications therefor set forth on the
Corresponding Schedule to
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Section 2.1(h) are subject to any pending or, to the Seller's
Knowledge, threatened challenge, claim or dispute, (ii) none of the
Proprietary Rights and none of the applications therefor set forth on
the Corresponding Schedule to Section 2.1(h) have during the prior
five years been the subject of any challenge, claim or dispute, (iii)
to the Seller's Knowledge, the operation of the Business and the
ownership of the Transferred Assets does not infringe upon or
otherwise violate any right of any Third Party, (iv) to the Seller's
Knowledge, none of the Proprietary Rights is being infringed by any
Third Party; (v) to the Seller's Knowledge, there are no impediments
to the ability of the Seller or the Seller Subsidiaries, as the case
may be, to maintain and, where lawful, to renew the Proprietary
Rights, (vi) none of the Proprietary Rights is subject to any
outstanding order, decree, judgment or stipulation, and (vii) neither
the Seller nor any of the Seller Subsidiaries has received any notice
of conflict with asserted proprietary rights of others.
5.11 TAX MATTERS.
(a) The Seller and the Seller Subsidiaries have filed all tax returns
and tax reports required to be filed by them with respect to the Business or the
Transferred Assets, including, without limitation, those returns and reports
pertaining to federal, state, provincial, local, foreign or other income taxes,
gross receipt taxes, ad valorem taxes, transfer taxes, excise taxes, sales and
use taxes, payroll taxes, unemployment insurance payroll premiums, withholding
taxes, occupation taxes, property taxes and franchise taxes, and all taxes,
interest and penalties shown or claimed to be due thereon have been paid. There
are no Liens for taxes (other than for current real and personal property taxes
not yet due and payable) on the Transferred Assets or with respect to the
Business.
(b) None of the Transferred Assets, directly or indirectly, secures
any debt the interest on which is tax-exempt under Section 103(a) of the Tax
Code. None of the Transferred Assets is "tax-exempt use property" within the
meaning of Section 168(h) of the Tax Code.
5.12 ENVIRONMENTAL MATTERS. Except for matters described on the
Corresponding Schedule or except as would not have a Material Adverse Effect (a)
the Business and the Real Property are operated in compliance with all
applicable Environmental Laws, (b) to the Seller's Knowledge, no Real Property
contains, with respect to the ownership and operations of the Business, any
Regulated Substances in any environmental medium (air, water, soil, sediments,
subsurface strata or groundwater) to an extent or in a manner or condition now
requiring remediation under any currently applicable Environmental Law existing
and in effect as of the Closing Date, (c) no judicial or administrative
proceeding is pending or, to the Seller's Knowledge, threatened relating to
liability with respect to the Business for any off-site disposal of any
Regulated Substance, (d) none of the Seller or any of the Seller Subsidiaries
has received in writing within three years prior to the Closing any claims or
notices alleging it is not in compliance with or liable with respect to the
Business under any Environmental Law, and (e) the Corresponding Schedule sets
forth all those Permits that Seller or the Seller Subsidiaries now holds in
connection with the operation of the Business pursuant to Environmental Laws.
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5.13 NO BREACH OF CONTRACT, NO VIOLATIONS OF LAW, NO PRIOR APPROVAL.
(a) Neither the execution and delivery of this Agreement or any
Related Agreement nor compliance with their terms and provisions will conflict
with, result in the breach or violation of, or constitute a default under, any
of the terms, conditions or provisions of (i) the Seller's or any of the Seller
Subsidiaries' Articles of Incorporation or Regulations (or comparable charter
documents); (ii) any agreement or instrument to which the Seller or any of the
Seller Subsidiaries is a party, or by which either the Seller or any of the
Seller Subsidiaries is bound or to which any of the Transferred Assets or
Assumed Liabilities are subject except as identified on the Corresponding
Schedule; or (iii) any law applicable to the Seller, any of the Seller
Subsidiaries or any of the Transferred Assets, other than, in the case of
clauses (ii) and (iii) of this Section 5.13(a), conflicts, breaches, violations
or defaults which would not, individually or in the aggregate, have a Material
Adverse Effect. Except as identified on the Corresponding Schedule, neither the
execution and delivery of this Agreement nor compliance with its terms and
provisions will result in the creation or imposition of any Lien upon any of the
Transferred Assets.
(b) Other than the filing of a pre-merger notification report under
the HSR Act, filings to be made under the Competition Act (Canada) with the
Commissioner of Competition, and those filings, Permits, authorizations,
consents and approvals identified on the Corresponding Schedule or addressed in
Section 5.12, no filing with, or Permit, authorization, consent or approval of,
any domestic or foreign government authority is required for the consummation by
the Seller of the transactions contemplated by this Agreement, except for any
filings, Permits, authorizations, consents or approvals the failure to make,
file, give or obtain which would not, individually or in the aggregate, have a
Material Adverse Effect; provided, however, that the representation given in
this Section 5.13(b) is limited to the Seller's Knowledge with respect to
foreign Permits, filings, authorizations, consents or approvals.
5.14 LITIGATION. Except as set forth on the Corresponding Schedule or
on the Corresponding Schedule to Section 5.10 or 5.12, there is no pending or,
to the Seller's Knowledge, threatened claim, litigation, proceeding or order of
any court or governmental agency or arbitrator or governmental investigation
relating to the Business or any of the Transferred Assets. Except as set forth
on the Corresponding Schedule or on the Corresponding Schedule to Section 5.10
or 5.12, no claim, litigation, proceeding or order listed on the Corresponding
Schedule would, if adversely determined, have a Material Adverse Effect, and
there is no existing or, to the Seller's Knowledge, threatened order, judgment
or decree of any court, governmental agency or arbitrator that specifically
applies to the Business or the Transferred Assets.
5.15 FINDERS, BROKERS AND INVESTMENT BANKERS. Other than ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, a division of First Union Capital Markets Corp., whose fees
will be the responsibility of the Seller, no finder, broker or investment banker
acting or who has acted on behalf of the Seller or any of the Seller
Subsidiaries in connection with the transactions contemplated by this Agreement
is entitled to receive any commission or finder's fee in connection with such
transactions, and, to the Seller's Knowledge, no other Person is entitled to
receive any commission or finder's fee from the Seller or any of the Seller
Subsidiaries in connection with such transactions.
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5.16 NO MATERIAL ADVERSE CHANGE. Except as disclosed on the
Corresponding Schedule, since April 30, 1999, the Seller and each of the Seller
Subsidiaries have conducted the Business in the ordinary course consistent with
past practices and there has not occurred:
(a) any Material Adverse Effect;
(b) any uninsured damage to, destruction or loss of any
Transferred Asset that could reasonably be expected to have a Material
Adverse Effect;
(c) any material change by the Seller to the Seller's
Accounting Principles, except changes mandated by GAAP;
(d) any material revaluation by the Seller or any of the
Seller Subsidiaries of any of the Transferred Assets, including,
without limitation, writing down the value of Inventory or writing off
notes or Accounts Receivable other than in the ordinary course of
business;
(e) any other action or event that would have required the
consent of the Buyer pursuant to Section 7.1 had such action or event
occurred after the date of this Agreement; or
(f) any sale or transfer of a material amount of the
Transferred Assets, other than sales of inventory in the ordinary
course of business.
5.17 GOVERNMENTAL PERMITS AND LICENSES; COMPLIANCE WITH LAWS. Except
for matters which would not have a Material Adverse Effect and except for those
matters addressed by Section 5.12, (a) the Seller and the Seller Subsidiaries
have all of the Permits required to own the Transferred Assets and to carry on
the Business as presently conducted, and, assuming proper action by the other
party thereto or by the issuer thereof, all such Permits are valid and in
effect, and (b) to the Seller's Knowledge, neither the ownership of the
Transferred Assets by the Seller or the Seller Subsidiaries, nor the operation
of the Business by the Seller or the Seller Subsidiaries as it is presently
conducted, violates any applicable order, law, ordinance, code or regulation.
Except for those matters set forth on the Corresponding Schedule to Section
5.12, neither the Seller nor any Seller Subsidiary has received any written
notice from any governmental authority of any such violation.
5.18 INSURANCE. The Seller has adequately insured all of the
Transferred Assets against loss or damage resulting from fire or other risks
insured against by extended coverage and public liability insurance of a kind
and in an amount customarily obtained by similar businesses.
5.19 EMPLOYEES; LABOR RELATIONS.
(a) Seller has provided to Buyer a complete list which sets forth,
as of the date so indicated, the name, position, salary, length of service and
location of all persons employed (including persons who are temporarily absent
from active employment by reason of disability, illness, injury, workers'
compensation, military leave, approved leave of absence or layoff) by the Seller
or the Seller Subsidiaries in the conduct of the Business. The Seller and the
Seller
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Subsidiaries have paid in full or accrued in the Financial Statements all wages,
salaries, commissions, bonuses, benefits, and other compensation due to any
employee of the Division or otherwise arising under any employment related
policy, practice, agreement, plan, program, statute or law.
(b) The Corresponding Schedule sets forth a correct and complete list
of all collective bargaining agreements (the "Collective Bargaining
Agreements"), complete copies of which have been made available to the Buyer,
covering employees of the Division.
(c) With respect to the Business, neither the Seller nor any of the
Seller Subsidiaries has received any written notice of any unfair labor practice
complaints or any other action, suit, complaint, charge, arbitration, inquiry,
proceeding or investigation pending before the National Labor Relations Board or
the Ontario Labour Relations Board or any other agency having jurisdiction
thereof and, to the Seller's Knowledge, no such complaint has been threatened.
Neither the Seller nor any Seller Subsidiary has received any written notice of
any activities or proceedings of any labor union (or representatives thereof) to
organize any non-union employees of the Division, or of any strikes, slowdowns,
work stoppages, lockouts or threats thereof, by or with respect to any employees
of the Division of the Seller and, within the 12 months prior to the date of
this Agreement, no such proceedings or, to the Seller's Knowledge, activities
are or were underway nor has the Seller or any of the Seller Subsidiaries been
the subject of any strikes, slowdowns, work stoppages, lockouts or, to the
Seller's Knowledge, threats thereof. With respect to the employees of the
Division, except as set forth on the Corresponding Schedule, there are no
material unsatisfied claims, grievances, arbitration proceedings or workers'
compensation proceedings other than standard employee medical, temporary total,
permanent partial and applications for increase in permanent partial disability
benefits. Except as set forth on the Corresponding Schedule, neither the Seller
nor any of the Seller Subsidiaries is a party to or otherwise bound by, any
consent decree with, or order or citation by, any government agency relating to
any employee of the Division or employment practices, wages, hours, and terms
and conditions of employment with respect to the Business.
5.20 EMPLOYEE BENEFITS.
(a) The Corresponding Schedule lists or describes all material
Employee Benefit Plans maintained by the Seller. Each Employee Benefit
Plan has been maintained in all material respects in accordance with
its terms and with applicable law. The Corresponding Schedule sets
forth all Employee Benefit Plans maintained by the Seller which are
intended to be qualified within the meaning of Section 401 (a) of the
Tax Code.
(b) The Seller has delivered or made available to the Buyer
a true and complete copy of:
(i) each Employee Benefit Plan identified on the
Corresponding Schedule to Section 5.20(a);
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(ii) each current summary plan description as to each
Employee Benefit Plan that is described in clause (i) and is
subject to the reporting and disclosure requirements of ERISA.
(c) The Seller shall, prior to the Closing, deliver or make
available to the Buyer a true and complete copy of:
(i) the most recent determination letters for Seller's
Investment Plan (as defined in Section 10.6) and Seller's Savings
Plan (as defined in Section 10.7) and documentation that
demonstrates that Seller's RRSP (as defined in Section 10.8) is
registered under applicable governmental requirements;
(ii) the most recent Form 5500 that was filed on behalf of
Seller's Investment Plan and Seller's Savings Plan;
(iii) all insurance policies owned by the Seller or any
Seller Subsidiary providing benefits or funding the benefits
under an Employee Benefit Plan; and
(iv) each material notice that was given by the Internal
Revenue Service or the Department of Labor to the Seller or any
Seller Subsidiary with respect to Seller's Investment Plan or
Seller's Savings Plan during the prior three-year period, the
subject or content of which remains outstanding as of the
Closing.
(d) Except as set forth on the Corresponding Schedule, there
are no material actions, suits, investigations or claims pending or, to
the Seller's Knowledge, threatened with respect to or affecting
Division Employees under Seller's Investment Plan or Seller's Savings
Plan, other than routine claims for benefits.
(e) Neither Seller nor any of the Seller Subsidiaries makes,
nor are any of them obligated to make, contributions or payments of
withdrawal liability to any multi-employer plan (as defined under
Section 3(37) of ERISA) covering current or former employees of the
Division which could result in liability to the Buyer or any Buyer
Subsidiary.
5.21 RESIDENCY OF SELLER SUBSIDIARIES; GST REGISTRATION. Neither
Eaton Yale nor ETN Offshore are non-residents of Canada under the Income Tax Act
(Canada), and Eaton Yale is registered for the purposes of the GST Legislation.
5.22 LIABILITIES. Except as set forth and adequately reserved for in
the Financial Statements or as set forth on the Corresponding Schedule or on the
Corresponding Schedules to
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Sections 5.10, 5.12, 5.14 or 5.19(c), to the Seller's Knowledge, neither the
Seller nor any of the Seller Subsidiaries have any outstanding claims,
liabilities or indebtedness, fixed or contingent, or obligations of any nature,
whether accrued, absolute, contingent, threatened or otherwise, whether due or
to become due, with respect to the Business, other than (a) liabilities incurred
in the ordinary course and conduct of the Business since April 30, 1999, which
do not involve borrowings, and (b) claims, liabilities or indebtedness of the
type not required to be disclosed in the Financial Statements or notes thereto
in accordance with GAAP, but in no event in excess of $50,000.
5.23 EMPLOYEE SAFETY. Except as set forth on the Corresponding
Schedule, during the past three years neither the Seller nor the Seller
Subsidiaries, with respect to the Business, (a) is or has been subject to an
investigation by the U.S. or Canadian Department of Labor or similar state,
provincial or other foreign or local agencies over compliance with OSHA or any
similar state, provincial, foreign or local statute and the rules and
regulations promulgated thereunder ("Safety Laws"), or (b) has received or has
paid any fine, penalty or citation relating to or arising out of a violation or
alleged violation of any Safety Laws during the past three years.
5.24 CUSTOMER ASSETS; LOCATION OF ASSETS.
(a) Except as disclosed on the Corresponding Schedule, no material
Personal Property owned by a customer of the Business or owned by any other
Third Party currently is located at Owned Real Property or Leased Real Property.
To the Seller's Knowledge, there are no impediments to the ability of the Seller
or any of the Seller Subsidiaries to use the Personal Property identified on the
Corresponding Schedule in the manner in which it is currently being used in the
Business.
(b) Except as disclosed on the Corresponding Schedule, all Personal
Property owned by the Seller or a Seller Subsidiary and included in the
Transferred Assets is located at Owned Real Property or Leased Real Property,
except for immaterial Personal Property the aggregate value of which is not in
excess of $25,000.
5.25 YEAR 2000 COMPLIANCE. Except as disclosed on the Corresponding
Schedule, to the Seller's Knowledge, all hardware, software and embedded systems
("Systems") required by Seller to operate the Business are currently "Year 2000
Compliant" or are projected to be Year 2000 Compliant by August 15, 1999, as
shown on the Corresponding Schedule. For the purposes of this Agreement, "Year
2000 Compliant" means that the Systems will consistently and accurately process
date information before, during and after January 1, 2000, and between dates
before and after January 1, 2000.
5.26 DISCLAIMER; CROSS REFERENCES.
(a) EXCEPT FOR REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER IN
ARTICLE 5 OF THIS AGREEMENT, THE SELLER HAS MADE AND MAKES NO REPRESENTATIONS OR
WARRANTIES, EITHER EXPRESS OR IMPLIED, CONCERNING THE SUBJECT MATTER OF THIS
AGREEMENT, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, ALL
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SUCH WARRANTIES BEING EXPRESSLY DISCLAIMED, AND THE BUYER HAS NOT RELIED ON ANY
SUCH REPRESENTATIONS AND WARRANTIES, EXCEPT FOR THOSE MADE BY THE SELLER IN
ARTICLE 5 OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE COVERED BY THE
WARRANTIES PROVIDED BY ARTICLE 2 OF THE UNIFORM COMMERCIAL CODE, THE SALE OF
GOODS ACT (ONTARIO), OR ANY SIMILAR LAWS OF ANY JURISDICTION. THIS PROVISION
SHALL NOT IN ANY WAY AFFECT OR DIMINISH ANY AGREEMENT OR COVENANT CONTAINED IN
ANY OTHER SECTION OF THIS AGREEMENT.
(b) Information to be disclosed in any one Corresponding Schedule
herein referred to may be supplied in any Corresponding Schedule by cross
reference to any other Corresponding Schedule.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer makes the following representations and warranties to the
Seller.
6.1 ORGANIZATION, EXISTENCE AND STANDING OF THE BUYER. Each of the
Buyer and the Buyer Subsidiaries is a corporation duly organized and validly
existing under the laws of the jurisdiction of its incorporation and has full
corporate power and authority to own or lease its assets, to carry on its
business as it is now conducted and to consummate the transactions contemplated
by this Agreement and the Related Agreements.
6.2 CORPORATE AUTHORITY. The entering into and the execution and
delivery of this Agreement and the Related Agreements and the consummation of
the transactions contemplated hereby and thereby (a) have been duly and validly
authorized by requisite corporate action of the Buyer and prior to the Closing
Date will have been duly and validly authorized by requisite corporate action of
each of the Buyer Subsidiaries, and (b) constitutes the legal, valid, and
binding obligation of each (to the extent a party to this Agreement and/or any
of the Related Agreements) and no additional corporate or stockholder
authorization or consent is or will be required.
6.3 NO BREACH OF CONTRACT, NO VIOLATIONS OF LAW, NO PRIOR APPROVAL.
(a) Neither the execution and delivery of this Agreement or any
Related Agreement nor compliance with their terms and provisions will conflict
with, result in the breach or violation of, or constitute a default under, any
of the terms, conditions, or provisions of (i) the Buyer's or Buyer
Subsidiaries' Certificate of Incorporation or By-laws (or comparable charter
documents); (ii) any agreement or instrument to which the Buyer or any Buyer
Subsidiary is a party or by which the Buyer or any Buyer Subsidiary is bound; or
(iii) any law applicable to the Buyer or any Buyer Subsidiary, other than, in
the case of clauses (ii) and (iii) of this Section 6.3(a), conflicts, breaches,
violations or defaults which would not, individually or in the aggregate, have a
Material Adverse Effect.
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(b) Other than the filing of a pre-merger notification report under
the HSR Act and the Competition Act (Canada) and the Investment Canada Act, no
filing with, or Permit, authorization, consent or approval of, any domestic or
foreign government authority is required for the consummation by the Buyer of
the transactions contemplated by this Agreement.
6.4 LITIGATION. There is no pending, or to the Buyer's knowledge,
threatened claim, litigation, proceeding or order of any court or governmental
agency or arbitrator or governmental investigation relating to the Buyer or any
Buyer Subsidiary, their business or their assets which, if adversely determined,
would, individually or in the aggregate, materially impair, hinder or otherwise
materially and adversely affect the ability of the Buyer to effect the Closing,
or to perform any of its material obligations under this Agreement or any of the
Related Agreements.
6.5 FINDERS, BROKERS AND INVESTMENT BANKERS. No finder, broker or
investment banker acting or who has acted on behalf of the Buyer or the Buyer
Subsidiaries in connection with the transactions contemplated by this Agreement
is entitled to receive any commission or finder's fee in connection with such
transactions, and to the Buyer's Knowledge, no other Person is entitled to
receive any commission or finder's fee from the Buyer or any Buyer Subsidiary in
connection with such transactions.
6.6 FINANCING. The Buyer, on the Closing Date and on the Settlement
Date, will have sufficient funds available to it to pay to the Seller and/or the
Seller Subsidiaries, as the case may be, the Purchase Price and to otherwise
satisfy all of its obligations under this Agreement and the Related Agreements.
Buyer has received from BankBoston, N.A. a commitment letter representing the
funds necessary to pay the Purchase Price and to otherwise satisfy all of
Buyer's obligations under this Agreement and the Related Agreements. Buyer has
delivered a copy of such commitment letter to Seller.
6.7 GST. The Buyer or a Buyer Subsidiary, as required, will be, as
of the Closing Date, registered for the purposes of the GST Legislation and is
acquiring under this Agreement ownership, possession or use of all or
substantially all of the property that reasonably can be regarded as being
necessary for the Buyer to be capable of carrying on the Business following the
Closing.
6.8 DISCLAIMER. EXCEPT FOR REPRESENTATIONS AND WARRANTIES MADE BY
THE BUYER IN ARTICLE 6 OF THIS AGREEMENT, THE BUYER HAS MADE AND MAKES NO
REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED, CONCERNING THE SUBJECT
MATTER OF THIS AGREEMENT, AND THE SELLER HAS NOT RELIED ON ANY REPRESENTATIONS
AND WARRANTIES EXCEPT FOR THOSE MADE BY THE BUYER IN ARTICLE 6 OF THIS
AGREEMENT. THIS AGREEMENT SHALL NOT BE COVERED BY THE WARRANTIES PROVIDED BY
ARTICLE 2 OF THE UNIFORM COMMERCIAL CODE, THE SALE OF GOODS ACT (ONTARIO) OR ANY
SIMILAR LAWS OF ANY JURISDICTION. THIS PROVISION SHALL NOT IN ANY WAY AFFECT OR
DIMINISH ANY AGREEMENT OR COVENANT CONTAINED IN ANY OTHER SECTION OF THIS
AGREEMENT.
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ARTICLE 7
COVENANTS OF THE SELLER
The Seller covenants and agrees with the Buyer as follows.
7.1 CONDUCT OF BUSINESS TO CLOSING DATE. Except upon the written
consent of the Buyer, which consent shall not be unreasonably withheld or
delayed, the Seller shall and shall cause the Seller Subsidiaries to, from and
after the date hereof until the Closing Date, carry on the Business in
substantially the same manner as it has heretofore been conducted, including,
without limitation, doing the following:
(a) MAINTAIN TRANSFERRED ASSETS. Consistent with the
Seller's past practice, the Seller shall maintain and keep, and shall
cause the Seller Subsidiaries to maintain and keep, the Transferred
Assets in at least as good condition and repair, reasonable wear and
tear excepted, as the condition and repair the Transferred Assets are
in as of the date hereof.
(b) DISPOSITION OF ASSETS. The Seller shall not, and shall
not permit the Seller Subsidiaries to, sell, lease, pledge, mortgage
or otherwise dispose of or encumber any of the Transferred Assets
except for (i) the sale, lease, pledge, mortgage or disposal or
encumbrance of any of the Transferred Assets, including Inventory, in
a manner consistent with the Seller's past practice and in the
ordinary course of business which would not, individually or in the
aggregate, be material to the operation of the Business, (ii) the
disposal of any obsolete, unusable or unsalable Inventory (as
determined in accordance with the Seller's Accounting Principles)
consistent with the Seller's past practice, or (iii) any sale, lease,
pledge, mortgage or disposal or encumbrance of any of the Transferred
Assets that would not have a Material Adverse Effect.
(c) PERFORM CONTRACTS AND OTHER OBLIGATIONS. The Seller
shall, and shall cause the Seller Subsidiaries to, perform all of its
or their, as the case may be, material obligations under the Material
Contracts and any and all other agreements relating to or affecting
the Transferred Assets or the Business.
(d) OTHER CONTRACTS. Except as set forth on the Corresponding
Schedule, the Seller shall not, and shall not permit the Seller
Subsidiaries to, with respect to the Business (i) enter into any
Material Contract outside the ordinary course of business, (ii) modify
or change any Material Contract, (iii) cancel any debts or waive any
claims or rights where such cancellation or waiver would have a
Material Adverse Effect, (iv) make any capital expenditure or
commitment exceeding $150,000 in any one instance or $500,000 in the
aggregate, other than as identified in the Division's 1999 Capital
Expenditure Budget included as part of the Corresponding Schedule,
which budget shall not be amended or modified, or (v) make any loan to,
or enter into any business transaction, agreement, arrangement or
understanding of any other nature with, any employee of the Business or
any officer or director of the Seller or any of the Seller Subsidiaries
or any Affiliate or associate of any such officer or director.
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(e) WAGES OR SALARY INCREASES. The Seller shall not, and
shall not permit the Seller Subsidiaries to (i) grant any increases in
wages, salaries or benefits of any of the Seller's or the Seller
Subsidiaries' employees, as the case may be, employed exclusively in
the conduct of the Business, except increases in the ordinary course
of business in accordance with the Seller's or the applicable Seller
Subsidiary's existing policies and except for increases in wages
and/or benefits as required by the Collective Bargaining Agreements,
(ii) enter into any employment agreements with respect to any
employees of the Business, (iii) pay or agree to pay any pension,
retirement allowance or other employee benefit not required by any
existing plan, agreement or arrangement to any officer or employee of
the Business, whether past or present, or (iv) with respect to the
employees of the Division, commit itself to any additional pension,
profit-sharing, bonus, incentive, deferred compensation, group
insurance, severance pay, retirement or other employee benefit plan,
agreement or arrangement, or to any employment or consulting agreement
with or for the benefit of any employee of the Division, or to
terminate or amend any of such plans or any of such agreements in
existence on the date of this Agreement.
(f) MAINTAIN RELATIONSHIPS OF CUSTOMERS AND SUPPLIERS. The
Seller shall, and shall cause the Seller Subsidiaries to, use its or
their reasonable efforts to maintain satisfactory relationships with
all of the existing customers and suppliers of the Business.
(g) TRANSFER OF THE TRANSFERRED ASSETS. The Seller shall
not, and shall not permit the Seller Subsidiaries to, take any action
that would prevent the transfer of the Transferred Assets to the Buyer
pursuant to the terms of this Agreement free and clear of all Liens,
other than Assumed Liabilities, Real Property Permitted Exceptions and
Personal Property Permitted Exceptions.
(h) BOOKS AND RECORDS. The Seller shall, and shall cause the
Seller Subsidiaries to, maintain their books, accounts and records with
respect to the Business and the Transferred Assets in the usual,
regular and ordinary manner, on a basis consistent with prior years,
and comply with all laws, the enforcement of which, if the Seller or
the Seller Subsidiaries were not in compliance, would have a Material
Adverse Effect.
(i) PERMITS. The Seller shall, and shall cause the Seller
Subsidiaries to, keep and maintain all Permits in full force and
effect, continue their business pursuant to such Permits and take all
steps necessary to meet requirements on pending applications for
Permits, except where the lapse of any such Permits would not have a
Material Adverse Effect.
7.2 ACCESS BY THE BUYER TO PROPERTIES AND RECORDS; FURNISHING
INFORMATION.
(a) Following the date hereof, authorized representatives of the
Buyer shall have reasonable access during normal business hours to all premises,
properties, books, contracts and documents of the Seller and the Seller
Subsidiaries relating to the Business, the Transferred Assets and the Assumed
Liabilities. Such access shall be arranged through a representative designated
in writing by the Seller and shall be coordinated in such a manner to not
materially interfere with the Seller's or any Seller Subsidiary's operations. In
order to assist the Buyer, the Seller's designated
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representatives may attend all meetings held between the Buyer or its authorized
representatives and any officers and employees or customers and suppliers of the
Seller or any representatives thereof. At no time prior to the Closing shall the
Buyer contact any of the Seller's or any of the Seller Subsidiaries' customers
or suppliers or employees (other than the Seller's designated representatives)
with respect to any matters related to the content of this Agreement or the
transactions contemplated hereby, unless accompanied by a representative of the
Seller or upon the written consent of the Seller.
(b) Consistent with and without limiting Section 7.2(a), the Buyer's
access to the premises, properties, books, contracts and documents of the Seller
and the Seller Subsidiaries relating to the Business, the Transferred Assets and
the Assumed Liabilities shall expressly include all reasonable access necessary
to evaluate the environmental liabilities of the Business. Seller further
expressly covenants to transfer upon Closing, all books, files and records,
including any audits, site assessments, site investigation reports, and any
other materials relating to environmental matters with respect to the Business,
provided, however, Seller may retain copies of such books, files and records.
(c) From and after the Closing Date, the Seller will make available
to the Buyer, from time to time as the Buyer may reasonably request, copies of
such of the records retained by the Seller or the Seller Subsidiaries relating
to the Business, the Transferred Assets and the Assumed Liabilities as may be
reasonably required to enable the Buyer to defend against or assert claims
related to or arising from ownership of the Transferred Assets, the assumption
of the Assumed Liabilities or the conduct of the Business by the Seller and the
Seller Subsidiaries prior to the Closing and to handle tax and financial audits
involving the Division or the Business thereof; provided, however, that the
Buyer agrees to hold such records in confidence, except to the extent required
to defend or assert such claims and to handle such audits, and to return the
same to the Seller promptly upon the conclusion of their use by the Buyer for
the purposes herein specified.
7.3 COMPLIANCE WITH CONDITIONS. The Seller shall use its reasonable
efforts to cause the conditions in Article 14 to be satisfied at or prior to the
Closing Date.
7.4 THIRD-PARTY CONSENTS. The Seller shall use its reasonable efforts
to obtain, on or prior to the Closing Date, all consents and approvals of Third
Parties.
7.5 NOTIFICATION TO THE BUYER OF DAMAGE OR DESTRUCTION OF TRANSFERRED
ASSETS OR MATERIAL CHANGES. The Seller shall give the Buyer written notice
promptly upon becoming aware of any damage or destruction of any material
portion of the Transferred Assets.
7.6 TRANSFER OF WARRANTIES. In the event that any of the Transferred
Assets are under any warranty or vendor's indemnification agreement from the
manufacturer or the original seller thereof, the Buyer shall be entitled to the
benefit of the warranty or vendor's indemnification agreement to the extent that
the warranty or vendor's indemnification agreement is available to the
transferee, and the Seller shall execute such instruments as may be required to
transfer the warranty to the Buyer.
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7.7 HSR/COMPETITION ACT FILINGS; OTHER GOVERNMENTAL FILINGS.
(a) The Seller, within five business days following the date of this
Agreement, or as the Buyer and the Seller may otherwise agree, will submit (i)
to the United States Department of Justice and the Federal Trade Commission all
of the requisite forms and information required of Seller and any of the Seller
Subsidiaries and applicable to this transaction under the HSR Act and (ii) all
filings required of Seller and any of the Seller Subsidiaries to be made under
the Competition Act (Canada) to the Commissioner of Competition and/or other
governmental authority under such Act. Following such submissions, the Seller
shall respond promptly to any appropriate request by any of such agencies or
authorities for additional information or data and shall take such other
reasonable actions as may be required or necessary in order to comply with such
laws. The Seller will request early termination of the applicable waiting period
requirements under the HSR Act.
(b) The Seller shall also comply with the laws of any country and
province, including Canada, which are applicable to the transactions
contemplated by this Agreement and pursuant to which governmental notification
and/or approval of such transactions is required. The Seller and the Buyer shall
cooperate in providing any requisite information and data regarding the Seller
or the Buyer, as the case may be, and making such filings as may be required in
any such jurisdictions in connection with obtaining any required governmental
approval or providing any required notice and shall take such other reasonable
actions as may be required or necessary in order to comply with such laws.
7.8 TRANSITIONAL USE OF TRADE NAMES, TRADEMARKS AND LOGOS. The Buyer
and the Seller recognize that certain Inventory, labels and containers therefor
and promotional material being sold to the Buyer under this Agreement (as well
as Inventory manufactured by the Buyer after the Closing Date with tooling or
other assets to the extent permitted by the last sentence of this paragraph) may
bear the trade names "▇▇▇▇▇ Corporation" or "Eaton," and may bear logos or marks
associated therewith, which trade names, logos and marks are not being assigned
or licensed to the Buyer. The Seller agrees that the Buyer shall be permitted to
sell such Inventory and use such labels, containers and promotional material for
a period not exceeding six months after the Closing Date. Thereafter, internal
storage and material handling containers that currently bear such trade names,
logos or marks may continue to be used only if such trade names, logos or marks
are removed or covered so that they cannot be viewed. In no event shall the
Buyer be entitled to the use of the trade names and untransferred logos and
trademarks in advertising such Inventory. The Buyer shall remove the Seller's,
any of the Seller Subsidiaries' and their Affiliate's trade names and
untransferred logos and trademarks from signage no later than three months from
the Closing Date and from tooling or other assets used in production no later
than six months from the Closing Date.
7.9 NEGOTIATIONS WITH THIRD PARTIES. From the date hereof through
the Closing Date or the earlier termination of this Agreement, neither the
Seller nor any of the Seller Subsidiaries or any of their respective officers,
directors, agents or employees will initiate or solicit proposals or conduct
negotiations for the sale, transfer or other disposition of the Division with
any prospective purchasers other than the Buyer; provided, however, that nothing
contained in this Section 7.9 shall prohibit the Board of Directors of the
Seller from furnishing information to or entering into discussions or
negotiations with, any Person that makes an unsolicited bona fide proposal in
writing, not subject
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to any financing condition, to acquire the assets of the Division, if, and only
to the extent that (a) the Board of Directors determines in good faith and upon
written advice of outside counsel to the Seller that such action is required for
the Board of Directors to comply with its fiduciary duties to shareholders
imposed by law, (b) prior to furnishing such information to, or entering into
discussions or negotiations with, such Person, the Seller provides written
notice to the Buyer to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such Person, and (c) the Seller
keeps the Buyer informed of the status (not the terms) of any such discussions
or negotiations.
7.10 UPDATE OF SCHEDULES. The Seller shall promptly notify the Buyer,
prior to the Closing Date, of any changes in the information contained in the
Corresponding Schedules or Corresponding Exhibits or in any document or
information supplied to the Buyer pursuant to a Corresponding Schedule. Such
information shall be deemed to amend such Corresponding Schedules, and, to the
extent the Seller first becomes aware of such information after the date of this
Agreement, shall not be deemed a breach of this Agreement.
7.11 COVENANT NOT TO COMPETE. The Seller agrees that for a period of
four years after the Closing Date, neither it, any of the Seller Subsidiaries,
nor any Affiliate shall, directly or indirectly, own, manage, operate, join,
control or participate in the ownership, management, operation or control of any
business whether in corporate, proprietorship or partnership form or otherwise
as more than a five percent (5%) owner in such business where such business is
competitive with the Business as conducted on or prior to the Closing Date (a
"Competitive Business). The covenant contained in the immediately preceding
sentence shall not be deemed to have been violated by any sale by the Seller,
any of the Seller Subsidiaries or any Affiliate, of fasteners or retaining rings
sold either (a) as a component of a larger product sold by such Seller, Seller
Subsidiary or Affiliate or (b) as a replacement part for a component of a larger
product sold by such Seller, Seller Subsidiary or Affiliate, so long as such
fasteners or retaining rings are not manufactured by Seller, any of the Seller
Subsidiaries or any Affiliate. The provisions of this Section 7.11 shall not
prevent the Seller, any of the Seller Subsidiaries, or any Affiliate from
acquiring a business engaged in a Competitive Business (an "Acquired Business");
provided that such Competitive Business constitutes less than 20% of the
revenues of the Acquired Business. If Seller, any Seller Subsidiaries or any
Affiliate acquires an Acquired Business, then Seller shall promptly notify Buyer
of such transaction and afford Buyer the opportunity to make an offer to
purchase the Competitive Business. Seller shall consider Buyer's offer for such
Competitive Business in good faith, but shall not be under any obligation to
accept such offer. The Seller specifically acknowledges and agrees that the
remedy at law for any breach of this Section 7.11 will be inadequate and that
the Buyer, in addition to any other relief available to it, shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
actual damage. In the event that the provisions of this Section 7.11 should ever
be deemed to exceed the limitation provided by applicable law, then the Parties
agree that such provisions shall be reformed to set forth the maximum
limitations permitted.
7.12 ASSIGNMENT OF CONFIDENTIALITY AGREEMENTS. At Closing, subject to
the exceptions set forth below in this Section 7.12, the Seller shall assign to
the Buyer all of the Seller's right, title and interest in each confidentiality
agreement entered into by Seller or its Subsidiaries or Affiliates and each
entity (other than Buyer or its Subsidiaries or Affiliates) to whom confidential
information was
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provided in connection with the sale of the Business (collectively, the "Sale
Confidentiality Agreements"). Notwithstanding the foregoing, (i) the Seller
shall not assign, and shall retain, all right, title and interest with respect
to the provisions of Sections 11, 12, 13 and 14 of each of the Sale
Confidentiality Agreements and (ii) both the Seller and the Buyer shall have the
benefit of the provisions of Section 15 of each of the Sale Confidentiality
Agreements.
ARTICLE 8
COVENANTS OF THE BUYER
The Buyer covenants and agrees with the Seller as follows.
8.1 COMPLIANCE WITH CONDITIONS. The Buyer shall use its reasonable
efforts to cause the conditions in Article 13 to be satisfied at or prior to the
Closing Date.
8.2 COOPERATION IN OBTAINING CONSENTS. The Buyer shall take all steps
reasonably requested by the Seller to help secure the consents and approvals
referred to in Section 7.4 hereof.
8.3 HSR/COMPETITION ACT FILINGS; OTHER GOVERNMENTAL FILINGS.
(a) The Buyer, within five business days following the date of this
Agreement, or as the Buyer and the Seller may otherwise agree, will submit (i)
to the United States Department of Justice and the Federal Trade Commission all
of the requisite forms and information required of Buyer and the Buyer
Subsidiaries and applicable to this transaction under the HSR Act and (ii) all
filings required of Buyer and the Buyer Subsidiaries to be made under the
Competition Act (Canada) to the Commissioner of Competition and/or other
governmental authority under such Act and the Investment Canada Act. Following
such submissions, the Buyer shall respond promptly to any appropriate request by
any of such agencies or authorities for additional information or data and shall
take such other reasonable actions as may be required or necessary in order to
comply with such laws. The Buyer will pay all filing fees in connection with
filings and submissions under the Competition Act. Each Party will pay its own
filing fees in connection with filings and submissions under the HSR Act. The
Buyer will request early termination of the applicable waiting period
requirements under the HSR Act.
(b) The Buyer shall also comply with the laws of any country and
province, including Canada, which are applicable to the transactions
contemplated by this Agreement and pursuant to which governmental notification
and/or approval of such transactions is required. The Seller and the Buyer shall
cooperate in providing any requisite information and data regarding the Seller
or the Buyer, as the case may be, and making such filings as may be required in
any such jurisdictions in connection with obtaining any required governmental
approval or providing any required notice and shall take such other reasonable
actions as may be required or necessary in order to comply with such laws.
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8.4 MAKE RECORDS AND PERSONNEL AVAILABLE. From and after the Closing
Date, the Buyer shall make available to the Seller, from time to time as the
Seller may reasonably request, employees of the Business and copies of such of
the records transferred to the Buyer by the Seller pursuant to this Agreement as
may be reasonably required to enable the Seller to defend against or assert
claims related to or arising from ownership of the Transferred Assets or the
conduct of the Business by the Seller and the Seller Subsidiaries prior to the
Closing Date and to handle tax and financial audits involving the Division or
the Business thereof; provided, however, that the Seller agrees to hold such
records in confidence, except to the extent required to defend or assert such
claims and to handle such audits, and to return the same to the Buyer promptly
upon the conclusion of their use by the Seller for the purposes herein specified
and the Seller shall reimburse the Buyer or any Buyer Subsidiary for reasonable
expenses incurred by any employees of the Buyer or any Buyer Subsidiary who may
be made available to the Seller in accordance with the foregoing.
8.5 BUYER QUALIFICATION. The Buyer and each Buyer Subsidiary shall
be qualified under applicable Canadian or other foreign law to accept the
portion of the Transferred Assets to be accepted by the Buyer or such Buyer
Subsidiary.
8.6 LONDON SALES OFFICE. The Buyer shall establish office space in
the United Kingdom for the sales personnel of the Business currently located in
the United Kingdom at such location and upon such terms and conditions as Buyer
shall determine in its sole discretion. The Buyer acknowledges that the Seller's
current arrangements for such office space with respect to the Business shall
terminate as of the Closing Date.
8.7 OPERATION COVENANT.
(a) The Buyer shall within 12 months of the Closing Date (i) form
the Engineered Components Division, consisting of the operations of the Seller's
Engineered Fasteners Division in its Massillon Facility, Brunswick Facility and
▇▇▇▇▇▇▇▇ Facility, together with the Buyer's operations at The Palnut Company
("Palnut"), under the direction of those senior managers of the Engineered
Fasteners Division who execute employment agreements with a Buyer Subsidiary on
or prior to the Closing Date and who do not thereafter terminate their
respective employment agreements of their own accord at any time after the
Closing or are terminated for cause under those agreements (the "Existing
Management Team"), and reporting to the President of the Domestic Industrial
Products Group of the Buyer and (ii) consolidate the operations of the
respective sales offices located in Southfield, Michigan of Palnut and the
Engineered Fasteners Division. Thereafter during the period expiring on the
third anniversary of the Closing Date, the Buyer shall implement and/or maintain
(A) the Engineered Components Division with headquarters at the Brunswick
Facility, managed by the Existing Management Team and reporting to the President
of the Domestic Industrial Products Group of the Buyer, (B) the consolidated
Southfield, Michigan sales office, (C) the consolidation of accounts receivable,
customer service, sales and marketing activities for the facilities of the
Engineered Fasteners Division and Palnut into the Brunswick Facility, (D)
operation of the facilities at the present locations in Massillon, Brunswick and
▇▇▇▇▇▇▇▇ and (E) employment levels substantially consistent with operations as
they existed on the Closing Date at the facilities identified in the preceding
clause (D).
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(b) The Buyer shall be relieved of its obligations under this
Section in the event the Facilities fail to achieve 90% of the forecasted net
sales set out in Chart B, Summary Pro Forma Financial Results, of the Tinnerman
Engineered Fasteners Confidential Information Memorandum dated April 1999.
(c) The Buyer agrees that, in the event that the Buyer materially
breaches any of the covenants set out in this Section, the Buyer shall pay the
amount of $2,500,000 (the "Damages Amount") into an account to be distributed,
in a form and manner to be agreed upon jointly by the Buyer and the Seller in
good faith, among employees who were employed at the Facilities and the
Southfield, Michigan sales office on the Closing Date and who continued to be so
employed as of the time of such breach or who were terminated without cause
within 60 days prior to the time of such breach. The Damages Amount shall
constitute liquidated damages to the reputation of the Seller and not a penalty,
the parties hereby acknowledging and agreeing that the amount of the Seller's
actual damages in the event of a breach by the Buyer of this Section would be
difficult if not impossible to ascertain, and that the establishment of an
account for the benefit of the employees described above in the amount set out
herein constitutes both a reasonable estimate of the harm the Seller would
suffer and an appropriate remedy therefor. The establishment of such account
shall be the sole and exclusive remedy of the Seller with respect to any breach
by the Buyer of its obligations under this Section. Without limiting the general
applicability of Section 23.6 of this Agreement to the other terms and
provisions of this Agreement, the provisions of Section 23.6 shall apply to the
provisions of this Section.
(d) If the Seller believes that the Buyer has breached any of the
covenants set forth in this Section, then the Seller may give written notice
thereof to the Buyer. Within 15 calendar days after receipt of such notice, the
Buyer shall by written notice to the Seller either concede liability or deny
liability. If the Buyer fails to give written notice denying liability within
such 15-day period, the Buyer shall be deemed to have conceded liability. If the
Parties are not able to resolve any dispute over a claim brought under this
Section 8.7 within 15 days after the Seller receives written notice from the
Buyer denying liability, the Parties shall submit the dispute to the dispute
resolution procedure set forth in Article 22. In the event that it is determined
that the Buyer has liability under this Section, the Parties shall negotiate in
good faith to reach agreement with respect to the form and manner in which the
Damages Amount shall be distributed to the employees described in paragraph (c)
of this Section. If the Parties cannot reach such agreement within 15 days after
the determination of the Buyer's liability, the Parties shall submit the dispute
to the dispute resolution procedure set forth in Article 22. Within 10 calendar
days after the Parties reach agreement with respect to the form and manner in
which the Damages Amount shall be distributed or, in the event of a dispute,
within 10 calendar days after resolution of such dispute, the Buyer shall pay
the Damages Amount into the account described in paragraph (c) of this Section.
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ARTICLE 9
MUTUAL COVENANTS
9.1 GST ELECTION. ▇▇▇▇▇ Yale and the Buyer agree to jointly elect
under Section 167 of the GST Legislation to have Subsection 167(l.1) of the GST
Legislation apply to the sale under this Agreement. The Buyer shall file the
election in the manner and within the time prescribed by the GST Legislation. In
the event that an election under Section 167 of the GST Legislation cannot be
validly made, or Revenue Canada does not accept in whole or in part such an
election, the Buyer (i) shall pay to ▇▇▇▇▇ Yale, in addition to any amounts
payable by the Buyer under this Agreement, all goods and services tax payable
pursuant to the GST Legislation on or in respect of the property and services
supplied hereunder including, without limitation, such tax calculated on or in
respect of the value of the consideration paid or payable by the Buyer under
this Agreement, and (ii) shall indemnify and save harmless ▇▇▇▇▇ Yale from any
penalties and interest which may be payable by or assessed against the Seller or
▇▇▇▇▇ Yale under the GST Legislation due to the supplies made under this
Agreement not being eligible for the Section 167 election.
9.2 ELECTION REGARDING ACCOUNTS RECEIVABLE. ▇▇▇▇▇ Yale and the Buyer
shall, as soon as possible after the Closing Date, jointly execute an election
under Section 22 of the Income Tax Act (Canada) as to the sale of the Accounts
Receivable sold by ▇▇▇▇▇ Yale, shall designate therein the face value of the
Accounts Receivable sold by ▇▇▇▇▇ Yale and the applicable portion of the
Purchase Price, consistent with the provisions of Section 4.4, as the
consideration paid by the Buyer therefor and shall each file such election with
Revenue Canada forthwith after execution thereof (and, in any event, with their
respective Canadian income tax returns for the year of sale) to make such
election.
9.3 TRANSITIONAL SERVICES AGREEMENT. At Closing, the Seller and the
Buyer shall enter into a Transitional Services Agreement (if required) in
substantially the form set forth on the Corresponding Exhibit, with such
additions to Schedule A thereto as shall be mutually agreed and with such
deletions to Schedule A thereto as Buyer shall notify Seller not less than 10
days prior to the Closing Date (the "Services Agreement"). The Services
Agreement relates to the provision of certain services by the Seller for the
Buyer on an interim basis following the Closing Date.
9.4 PAYMENTS RECEIVED. The Seller and the Buyer agree that, after the
Closing Date, they shall hold and shall promptly transfer and deliver to the
other, from time to time as and when received by them and in the currency
received by them, any cash, checks with appropriate endorsements (using their
best efforts not to convert such checks into cash), or other property that they
may receive on or after the Closing Date which properly belongs to the other
Party, including, without limitation, any payments of accounts receivable and
insurance proceeds, and shall account to the other for all such receipts. From
and after the Closing Date, the Buyer shall have the right and authority to
endorse without recourse the name of the Seller or any of the Seller
Subsidiaries on any check or any other evidences of indebtedness received by the
Buyer on account of the Business and the Transferred Assets transferred to the
Buyer under this Agreement. In the event of a dispute between the Parties
regarding their respective obligations hereunder, the Parties shall cooperate
and
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act in good faith to promptly resolve such dispute and, in connection with such
cooperation, allow each other reasonable access to the records of the other
relating to such disputed item.
9.5 FURTHER ASSURANCES. From time to time after the Closing Date,
the Buyer and the Seller shall, and the Seller shall cause the Seller
Subsidiaries to, at its own expense, execute and deliver, or cause to be
executed and delivered, all such other instruments, including instruments of
conveyance, assignment and transfer and to make all filings with and to obtain
all consents, approvals or authorizations of any governmental or regulatory
authority or any other Person under any Permit and take all such other actions
as such Party may reasonably be requested to take by the other Party to this
Agreement, consistent with the terms of this Agreement, in order to effectuate
better the provisions and purposes of this Agreement and the transactions
contemplated by this Agreement.
9.6 CERTAIN TAX PAYMENTS AND RETURNS. Each of the Seller and the
Buyer shall be responsible for the preparation and filing of any tax returns
which it is required by law to file. If either Party receives a refund of taxes
that is an asset of the other Party subsequent to the Closing, the receiving
Party shall pay such refund to the other Party within two business days after
receipt (reduced by the amount of income taxes, if any, imposed on such
receiving Party on account of the refund).
9.7 COVENANT REGARDING PERSONNEL.
(a) Except as contemplated by Section 10.1 of this Agreement, the
Seller agrees that, for a period of two years after the Closing, it shall not,
and shall cause the Seller Subsidiaries and Affiliates not to, without first
obtaining the written consent of the Buyer, which consent may be withheld for
any reason, directly or indirectly solicit or attempt to solicit any person who
is employed by the Buyer or the Buyer Subsidiaries or Affiliates in the Business
to leave his or her employer or to become an employee of the Seller or any of
the Seller Subsidiaries or Affiliates. The foregoing shall not prohibit (i) the
Seller or the Seller Subsidiaries or Affiliates from soliciting or employing any
individual who has received notice of termination from, or ceases to be employed
by, the Buyer or the Buyer Subsidiaries or Affiliates prior to the first time
such individual discussed with any representative of the Seller or the Seller
Subsidiaries or Affiliates employment by such party, and (ii) the Seller or the
Seller Subsidiaries or Affiliates from employing an individual who responds to a
general solicitation of employment by such party.
(b) Except as contemplated by this Agreement, the Buyer agrees that,
for a period of two years after the Closing, it shall not, and shall cause the
Buyer Subsidiaries and Affiliates not to, without first obtaining the written
consent of the Seller, which consent may be withheld for any reason, employ, or
offer employment to any current or former employee of the Seller or any of the
Seller Subsidiaries or Affiliates, including without limitation (i) any Division
Employee who does not become a Transferred Employee for any reason, including,
without limitation, because of his refusal of the Buyer's offer of employment
pursuant to Section 10.1, or (ii) any former employee of the Business whose
employment with the Seller or a Seller Subsidiary previously terminated for any
reason, including without limitation, retirement under any pension plan of the
Seller or a Seller Subsidiary on or prior to the Closing. Except with respect to
current or former employees of the
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Business, the foregoing sentence shall not prohibit (i) the Buyer or the Buyer
Subsidiaries or Affiliates from soliciting or employing any individual who has
received notice of termination from, or ceases to be employed by, the Seller or
the Seller Subsidiaries or Affiliates prior to the first time such individual
discussed with any representative of the Buyer or the Buyer Subsidiaries or
Affiliates employment by such party, and (ii) the Buyer or the Buyer
Subsidiaries or Affiliates from employing an individual who responds to a
general solicitation of employment by such party.
9.8 SUPPLY AGREEMENT. For a period of 18 months after the Closing
Date, the Buyer shall cause the Business to continue to sell to the Seller and
its Affiliates any and all products presently supplied by the Business to other
businesses of the Seller and its Affiliates. Such products shall be sold upon
the same terms and conditions as presently apply and at the same prices
presently charged by the Business for such products, except to the extent that
(i) different prices are agreed upon by the Parties or (ii) the price of a
particular product is increased to all customers.
9.9 ASSIGNMENT AND ASSUMPTION OF REAL PROPERTY LEASES. At Closing,
the Seller and the Buyer shall enter into an Assignment and Assumption of Lease
in the form set forth on the Corresponding Exhibit with respect to each lease
for the Leased Real Property (collectively, the "Leased Real Property Assignment
and Assumption Agreements").
9.10 GUARANTEE OF PERFORMANCE.
(a) The Buyer hereby irrevocably and unconditionally guarantees to
the Seller the full, faithful and prompt performance by the Buyer Subsidiaries
of all obligations, when due, which are, by this Agreement, obligations of (i)
the Buyer Subsidiaries or (ii) the Buyer, but which have been assigned or
transferred to the Buyer Subsidiaries, whether such obligations are in the
nature of the payment of money, the providing of services or otherwise ("Buyer
Obligations"). The obligations of the Buyer hereunder are direct and primary and
shall not be discharged until all of the Buyer Obligations have been discharged
by the Buyer Subsidiaries or the Buyer, and such obligations of the Buyer
hereunder shall not be discharged, released or affected by any bankruptcy,
insolvency, dissolution, liquidation, reorganization or similar circumstances of
or relating to the Buyer Subsidiaries.
(b) The Seller hereby irrevocably and unconditionally guarantees to
the Buyer the full, faithful and prompt performance by the Seller Subsidiaries
of all obligations, when due, which are, by this Agreement, obligations of (i)
the Seller Subsidiaries or (ii) the Seller, but which have been assigned or
transferred to the Seller Subsidiaries, whether such obligations are in the
nature of the payment of money, the providing of services or otherwise ("Seller
Obligations"). The obligations of the Seller hereunder are direct and primary
and shall not be discharged until all of the Seller Obligations have been
discharged by the Seller Subsidiaries or the Seller, and such obligations of the
Seller hereunder shall not be discharged, released or affected by any
bankruptcy, insolvency, dissolution, liquidation, reorganization or similar
circumstances of or relating to the Seller Subsidiaries.
9.11 JOINT ENVIRONMENTAL INVESTIGATION. Promptly after the signing of
this Agreement, the Buyer and the Seller shall retain a mutually agreeable
environmental consulting and engineering firm
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to conduct the site investigation at the Massillon Facility described in the
Corresponding Exhibit to this Section 9.11 ("Supplemental Phase II"), and they
shall jointly direct and share equally the cost thereof. The Parties further
covenant that neither the consulting firm nor project manager selected for the
Supplemental Phase II shall thereafter be engaged to conduct either any further
site investigation or any remedial or other response activity at the Massillon
Facility without the written concurrence of both Parties.
ARTICLE 10
EMPLOYEES AND EMPLOYEE BENEFITS
10.1 OFFER OF EMPLOYMENT. The Buyer shall offer, and agrees to cause
the Buyer Subsidiaries to offer, immediate employment (so that no period of
unemployment shall occur between employment with the Seller or a Seller
Subsidiary prior to the Closing and employment with the Buyer or a Buyer
Subsidiary on and after the Closing) to all of the Division Employees,
including, without limitation, the Inactive Employees, other than those Division
Employees identified on the Corresponding Schedule, with such employment to
commence on the Closing. Employment for Division Employees who are subject to
the Collective Bargaining Agreements shall be offered on the terms and
conditions of the Collective Bargaining Agreements. The Buyer shall become a
signatory to, and shall assume all obligations of the Seller and the Seller
Subsidiaries under, the Collective Bargaining Agreements. Employment for
Division Employees who are not subject to a Collective Bargaining Agreement (the
"Non-Union Division Employees") shall be offered on terms and conditions which
are substantially similar in the aggregate (without taking into account the
post-retirement welfare benefits provided by the Seller and the Seller
Subsidiaries) to such terms and conditions provided for and on behalf of such
Division Employees immediately prior to the Closing by the Seller or a Seller
Subsidiary in accordance with the Seller's or a Seller Subsidiary's then
established plans, programs, practices, and arrangements. Further, the
employment terms and conditions described in the preceding sentence, except as
otherwise provided in this Article 10, shall be continued on a comparable basis
in all material respects for a period of at least three years following the
Closing. The Division Employees whose employment is transferred on an
uninterrupted basis from the Seller or a Seller Subsidiary to the Buyer or a
Buyer Subsidiary as a result of the Closing and the acceptance of the Buyer's
offer of employment by each such Division Employee shall be hereinafter referred
to as "Transferred Employees."
10.2 SEVERANCE PAYMENT RESPONSIBILITIES. The Corresponding Schedule
identifies or sets forth a description of the Seller's severance obligations,
plans, programs and/or policies as related to the Non-Union Division Employees
of the Business. As of and after the Closing, the Buyer shall assume all
liabilities, responsibilities, and obligations for severance payments or other
separation benefits to which any Non-Union Division Employee who becomes a
Transferred Employee may be or become entitled or claim to be entitled as a
result of the Buyer's acquisition of the Business,
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including, without limitation, any such claim which might be made against either
the Seller or any Seller Subsidiary or the Buyer or any Buyer Subsidiary at any
time:
(a) by such Transferred Employee because of the transfer of
his employment from the Seller or any Seller Subsidiary to the Buyer or
any Buyer Subsidiary;
(b) because of any action(s) taken by the Buyer or the Buyer
Subsidiaries as of or after the Closing, including, without limitation,
any termination of such Transferred Employee's employment with the
Buyer or the Buyer Subsidiaries, or any change which the Buyer or the
Buyer Subsidiaries may make in such Transferred Employee's
compensation, fringe benefit coverage, or employment position; or
(c) by any such Transferred Employee or by any "qualified
beneficiary" (as defined under COBRA) with respect to such Transferred
Employee (a "Qualified Beneficiary") for any claim made for
continuation of benefits pursuant to COBRA.
The severance payments and separation benefits provided by the Buyer to
any Transferred Employee as of and after the Closing shall be substantially
similar in the aggregate to the payments and benefits that would have been
provided to such Transferred Employee under the obligations, plans, programs and
policies described in the Corresponding Schedule. If any Transferred Employee
claims to be, or becomes, entitled to any severance pay benefits, or other
separation benefits or payments of any sort, from the Seller or a Seller
Subsidiary or otherwise, as a result of the Buyer's acquisition of the Business,
the Buyer agrees to, and shall, indemnify and hold harmless the Seller and the
Seller Subsidiaries from and against any and all expenses, liabilities,
obligations, and costs of any sort associated therewith.
10.3 WELFARE BENEFIT RESPONSIBILITIES.
(a) The Plans, programs, practices and arrangements for welfare
and/or fringe benefits provided by the Seller or a Seller Subsidiary to or with
respect to the Division Employees and/or Qualified Beneficiaries immediately
prior to the Closing are listed on the Corresponding Schedule (the "Seller
Welfare Plans"). Except as otherwise provided pursuant to the terms of a
Collective Bargaining Agreement, the Buyer shall establish and maintain a
program of welfare and fringe benefits to satisfy its obligations as provided in
Section 10.1 above (the "Buyer Welfare Plans"), for the Eligible Individuals (as
defined below) commencing on the Closing, as follows: (1) the medical, dental
and health benefits provided to Eligible Individuals shall be substantially
similar in the aggregate (without taking into account the post-retirement
welfare benefits provided by the Seller and the Seller Subsidiaries) to those
provided under the Seller Welfare Plans and shall be provided without evidence
of insurability or any pre-existing physical or mental condition restrictions,
subject to Section 10.3(g) below, other than any such restrictions in effect for
any Eligible Individual immediately prior to the Closing under the Seller
Welfare Plans and without any increase in the contribution required to be paid
by such Eligible Individual based upon the contribution schedules under the
Seller Welfare Plans immediately prior to the Closing; and (2) welfare and
fringe benefits other than those described in clause (1), above, shall be
provided to the Eligible Individuals on a basis that is substantially similar in
the aggregate (without taking into account the post-retirement
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welfare benefits provided by the Seller and the Seller Subsidiaries) to the
benefits provided under the Seller Welfare Plans immediately prior to the
Closing. Any Eligible Individual's period of employment with the Seller and/or
any Seller Subsidiary, or any predecessor employer thereof, and any and all
periods of any Eligible Individual's coverage under, and/or participation in,
the Seller Welfare Plans shall be deemed to be employment with the Buyer, and
coverage under and/or participation in, the Buyer Welfare Plans, respectively,
for all purposes of establishing such Eligible Individual's eligibility for
participation and benefit entitlement under the Buyer Welfare Plans. The extent
to which an Eligible Individual (either as an individual or as a family member)
has satisfied in whole or in part any Seller Welfare Plan annual deductible, or
has paid any out-of-pocket expenses pursuant to any Seller Welfare Plan
co-insurance provision, shall be counted toward the satisfaction of any
applicable deductible or out-of-pocket expense maximum, respectively, under any
of the Buyer Welfare Plans. Such provision of welfare benefits by the Buyer
shall be applicable to the payment of any otherwise eligible benefit claim which
is incurred on or after the Closing, except as may otherwise be provided in the
following Section 10.3(b). For the purpose of this Article 10, the term
"Eligible Individuals" shall mean (i) the Transferred Employees, (ii) any
Qualified Beneficiary, and (iii) the dependents and/or other beneficiaries of
the Transferred Employees, who were eligible for any such welfare benefit
coverage under and pursuant to the Seller Welfare Plans immediately prior to the
Closing, or who would have become so eligible on or after the Closing in
accordance with the eligibility and participation provisions of the Seller
Welfare Plans. To assist the Buyer and the Buyer Subsidiaries in satisfying the
requirements of this Section 10.3(a) as to medical, dental and health benefits,
the Seller shall, or shall cause a Seller Subsidiary to, provide the Buyer and
the Buyer Subsidiary with access to the applicable Seller Welfare Plans during
the Welfare Transition Period (as defined below) such that the provision of such
benefits by the Buyer for the Eligible Individuals shall be provided through the
applicable Seller Welfare Plans, provided that the Buyer pays the Seller the
monthly Coverage Cost (as defined below) for such benefits. For purposes of this
Section 10.3(a): (i) the term "Welfare Transition Period" means the period
calendar months beginning on the Closing and ending on the last day of the
calendar month for which the Coverage Cost has been paid to the Seller except
that in no event shall the applicable Seller Welfare Plans pay benefits with
respect to claims Incurred (as defined below) after December 31, 1999; and (ii)
the term "Coverage Cost" is the amount determined by Seller in good faith to be
the actual claims Incurred on or after the Closing and paid during a given month
in connection with providing the coverage to the Eligible Individuals, plus 8%
to cover administrative costs. For any month in the Transition Period, Seller
shall provide the Buyer with a written statement of the Coverage Cost for such
month and, within five (5) business days after receipt of such written
statement, the Buyer shall pay Seller the Coverage Cost indicated thereon.
Subject to the requirement that the Seller and the Seller Subsidiaries shall
administer the Seller Welfare Plans in good faith in accordance with their
terms, Buyer agrees to, and shall, indemnify and hold harmless the Seller and
the Seller Subsidiaries from and against any and all expenses, liabilities,
obligations and costs of any sort associated therewith involving any claim or
claim dispute with respect to the coverage of any Eligible Individual during the
Welfare Transition Period, whether asserted by the Eligible Individual or any
third party, which is or relates to a claim that is Incurred on or after the
Closing. For purposes of the preceding sentence, a claim is "Incurred" at the
time the goods and materials are actually provided to or the services are
performed for the individual. Any amounts paid or payable from the Buyer to the
Seller under this Section 10.3(a) shall not be subject to Section 19.3 or
Section 19.10 and shall be disregarded entirely in applying such Sections.
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(b) Notwithstanding the preceding Section 10.3(a), the Seller shall
retain all liabilities, responsibilities, and obligations under the applicable
Seller Welfare Plans on the basis of the eligibility and benefit entitlement
provisions of such Seller Welfare Plans as in effect immediately prior to the
Closing, with respect to any Eligible Individual for the provision of:
(i) life, accidental death and dismemberment, and/or business
travel accident insurance benefits which may become payable with
respect to any qualified death or accident of such Eligible Individual
which occurs prior to the Closing;
(ii) salary continuation or other short-term disability
benefits which may become payable with respect to any qualified
disability of such Eligible Individual which commenced prior to the
Closing, but only for such benefits payable for any period of such
qualified disability, which period occurred prior to the Closing;
(iii) long-term disability benefits payable with respect to
any qualified disability of such Eligible Individual which commenced
prior to the Closing and continues thereafter on an uninterrupted
basis, provided that the claim for such benefits was filed and properly
approved under the applicable Seller Welfare Plan prior to the Closing;
and
(iv) hospital, medical, and/or dental care benefits which may
become payable with respect to any goods, supplies and/or services
which are actually provided to the Eligible Individual prior to the
Closing.
(c) The Seller and the Buyer agree that except as otherwise
specifically provided pursuant to Section 10.3(a), the preceding Section 10.3(b)
and the following Section 10.3(d):
(i) welfare benefit coverage of the Eligible Individuals under
the Buyer Welfare Plans pursuant to this Section 10.3 shall for all
purposes, including, without limitation, the Buyer's provision of
welfare benefit continuation coverage pursuant to COBRA, commence as of
the Closing, and coverage and eligibility of the Eligible Individuals
for welfare benefit coverage or payments under any applicable Seller
Welfare Plan, including, without limitation, COBRA continuation
coverage, shall cease as of the day immediately prior to the Closing;
and
(ii) on and after the Closing no welfare benefit coverage of
any kind shall be provided, and no welfare benefits of any kind shall
be paid, for or on behalf of any Eligible Individual under any Seller
Welfare Plan.
(d) The Seller and/or the Seller Subsidiaries shall retain all
responsibility, obligation and liability with respect to the provision of
post-retirement welfare benefits provided under the Seller Welfare Plans to
individuals who, prior to the Closing, retired from employment with the Division
and/or any former Division facility or operation on a basis entitling them to
such benefits, and the dependents and beneficiaries of such individuals. The
Seller shall assume responsibility and retain
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liability for post-retirement welfare benefit coverage for Future Division
Retirees (as defined below) as follows:
(i) Future Division Retirees (and their dependents and
beneficiaries as of the Closing) shall be provided with
post-retirement welfare benefits under the terms and conditions of the
applicable Seller Welfare Plan as in effect, from time to time, and
subject to any changes or modifications made subsequent to the
Closing, as if continuous and uninterrupted employment ending with
retirement from the Buyer or a Buyer Subsidiary were employment with
and retirement from Seller or a Seller Subsidiary, except as provided
in clause (ii) below; and
(ii) solely for purposes of determining any required
contribution levels by Future Division Retirees for post-retirement
welfare benefit coverage under the Seller Welfare Plan, service or
employment with the Buyer or a Buyer Subsidiary shall be disregarded.
For purposes of this Section 10.3(d) the term "Future Division Retirees" means a
Non-Union Division Employee who both:
(i) becomes a Transferred Employee; and
(ii) after the Closing, retires from employment with the Buyer
or a Buyer Subsidiary in a Qualifying Retirement.
For purposes of this Section 10.3(d), a "Qualifying Retirement" means, after
treating the individual's continuous and uninterrupted employment with the Buyer
or a Buyer Subsidiary and his/her retirement circumstances with the Buyer or a
Buyer Subsidiary as if, in each case, it were employment and retirement
circumstances with the Seller or a Seller Subsidiary, either: (i) the individual
actually retires from employment with the Buyer or a Buyer Subsidiary during the
period after the Closing and ending on the fifth anniversary of the day before
the Closing under circumstances which, if such continuous and uninterrupted
employment, retirement and retirement circumstance occurred with Seller or a
Seller Subsidiary, the individual would have met the eligibility requirements
for post-retirement welfare benefit coverage under Seller's Welfare Plans (and
the rules and regulations thereunder); or (ii) the individual retires after the
fifth anniversary of the day before the Closing, but would have been eligible as
described in clause (i) above had the individual's actual retirement date
occurred on or before such fifth anniversary (taking into account the
individual's service and age at such fifth anniversary and whether the
individual's subsequent actual retirement was voluntary or involuntary).
(e) With respect to the post-retirement welfare benefits payable to
or with respect to any current or former Division Employee who is or was subject
to a Collective Bargaining Agreement, the Buyer and/or the Buyer Subsidiaries
shall assume and bear all responsibilities, obligations and liabilities of the
Seller and any Seller Subsidiary with respect thereto and, from and after the
Closing, the Buyer and the Buyer Subsidiary shall be bound by and subject to the
applicable requirements of collective bargaining with respect thereto.
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(f) Any individual who is eligible for welfare benefit coverage
under any welfare plan maintained by the Buyer or a Buyer Subsidiary, without
regard to whether such individual is actually covered thereunder, shall not be
eligible for post-retirement welfare benefit coverage under the Seller's Welfare
Plans while he/she is so eligible under the Buyer or the Buyer Subsidiary
welfare plan.
(g) The Buyer and the Buyer Subsidiaries shall use their best efforts
to obtain insurance coverage consistent with the evidence of insurability and
the pre-existing condition requirements of the second sentence of Section
10.3(a) ("Insurability/Pre-Existing Condition Coverage"). In the event that the
Buyer and the Buyer Subsidiaries cannot, after using the best efforts described
in the preceding sentence, obtain insurance coverage that includes the
Insurability/Pre-Existing Condition Coverage for one or more Eligible
Individuals on a basis such that the aggregate premium for the entire group of
Eligible Individuals is acceptable to the Buyer, the Buyer shall promptly notify
the Seller of this circumstance. Upon receipt of the notice described in the
preceding sentence, the Seller shall promptly take reasonable steps to assist
the Buyer in identifying alternative opportunities for obtaining insurance
and/or HMO coverage for the group of Eligible Individuals that includes the
Insurability/Pre-Existing Condition coverage. In the event that one or more of
such alternative opportunities presented by the Seller to the Buyer provide
coverage on a basis that is consistent with the Insurability/Pre-Existing
Condition Coverage requirement of Section 10.3(a), the Buyer shall accept any
such alternative coverage (at its expense), but only if the projected aggregate
annual premium for the entire group of Eligible Individuals does not exceed the
projected aggregate annual premium for the group coverage for the Eligible
Individuals as quoted with any legally permissible exclusions from and/or
exceptions to the required Insurability/Pre-Existing Condition Coverage, by not
more than fifteen percent (15%) or such greater percentage as is acceptable to
the Buyer. If the group coverage that includes the Insurability/Pre-Existing
Condition Coverage is not mandated or accepted by the Buyer under the preceding
sentence, the Seller shall, under the Seller Welfare Plans, provide coverage
(for affected Eligible Individuals) for that portion of the coverage otherwise
required to be provided by the Buyer and/or a Buyer Subsidiary for the
Insurability/Pre-Existing Condition Coverage not available under the Buyer
and/or the Buyer Subsidiary Welfare Plans based upon a legally permissible
exclusion from or exception to the Buyer's insurance or HMO coverage in place
for the group of Eligible Individuals, subject to the following:
(i) The Buyer shall reimburse to the Seller the full amount of
the first$85,000 of claims paid under the Seller Welfare Plan as to
each affected Eligible Individual (i.e., determined separately with
respect to each such individual and not in the aggregate) during any
twelve-month period pursuant to the foregoing; and
(ii) For claims paid under the Seller Welfare Plan as to each
affected Eligible Individual (i.e., determined separately with respect
to each such individual and not in the aggregate) during such
twelve-month period in excess of the amount described in clause (i)
above, the Buyer shall reimburse to the Seller: (A) sixty percent (60%)
of the next $100,000 of claims paid as to the individual during such
period (i.e., sixty percent (60%) of claims paid as to the individual
that exceed $85,000 by no more than $100,000; and (B) fifty percent
(50%) of all remaining claims paid as to the individual during such
period (i.e., fifty percent (50%) of claims paid as to the individual
in excess of $185,000.
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The Seller shall determine the claims paid for purposes of determining the
foregoing reimbursement obligation of the Buyer in good faith and shall provide
the Buyer with a detailed written statement of such determination at such times
and such frequency as is determined by the Seller, but no less frequently than
quarterly. Within ten (10) business days following receipt of such written
statement, the Buyer shall pay to the Seller the amount shown on such statement.
Any such payment shall not be subject to Section 19.3 or Section 19.10 and shall
be disregarded entirely in applying such Sections.
10.4 SELLER'S RESPONSIBILITIES AND OBLIGATIONS AS TO CERTAIN PENSIONS.
(a) The Seller and/or the Seller Subsidiaries shall retain all
responsibility, obligation and liability with respect to the Pension Plan for
▇▇▇▇▇ Corporation Employees ("Seller's U.S. Pension Plan"), the ▇▇▇▇▇
Corporation Pension Plan For Salaried Employees of Certain Divisions and Plants
of ▇▇▇▇▇ Yale Ltd. ("Seller's Canadian Salaried Pension Plan") and the ▇▇▇▇▇
Yale Ltd. Pension Plan DF for Hourly-Rate Employees of the Engineered Fasteners
Division ("Seller's Canadian Hourly Pension Plan") (all such plans collectively
referred to as "Seller's Pension Plans").
(b) With respect to Transferred Employees who, immediately prior to
the Closing, are accruing (or most recently have accrued) benefits under
Seller's Canadian Salaried Pension Plan or under Appendix A of Seller's U.S.
Pension Plan ("Transferred Participants"), the benefits payable (and the terms
and conditions related thereto) with respect to each such Transferred
Participant under Seller's Canadian Salaried Pension Plan or under Appendix A of
Seller's U.S. Pension Plan, as the case may be, shall be determined and paid
pursuant to the terms thereof; provided, however, that except as provided in the
next following sentence: (i) continuous and uninterrupted employment with the
Buyer and/or a Buyer Subsidiary from the Closing through the date of the
individual's termination of employment with the Buyer and the Buyer Subsidiaries
(his "Buyer Termination Date") shall be treated as if it were employment for the
Seller and/or a Seller Subsidiary for purposes of determining the Transferred
Participant's level of vesting and eligibility for an early retirement
opportunity thereunder conditioned upon the attainment of a specified level of
service and/or a specified age during employment and for purposes of applying
pension plan provisions regarding the commencement and suspension of benefits;
and (ii) each such Transferred Participant's accrued retirement benefit under
the Seller's Pension Plan immediately prior to the Closing shall, for the period
from the Closing through the individual's Buyer Termination Date, be indexed to
increase at the Index Rate as defined below. The provisions of clause (i) and
(ii) of the preceding sentence shall not apply to a Transferred Participant
claiming a retirement benefit prior to termination of employment with the Buyer
and the Buyer Subsidiaries if eligibility for such benefit otherwise would
require termination of employment with the Seller and the Seller Subsidiaries.
For purposes of this Article 10, the term "Index Rate" means the lesser of: 4%
per annum; or the applicable maximum index rate permitted (i.e., the U.S.
Consumer Price Index and the Canadian Average Industrial Wage).
(c) With respect to Transferred Employees who, immediately prior to
the Closing are accruing (or most recently have accrued) benefits under Seller's
Canadian Hourly Pension Plan ("Transferred Canadian Hourly Participants"), the
benefits payable (and the terms and conditions related thereto) with respect to
each such Transferred Canadian Hourly Participant thereunder shall
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be determined and paid pursuant to the terms thereof, provided, however, that
except as provided in the next following sentence, continuous and uninterrupted
employment with the Buyer and/or a Buyer Subsidiary from the Closing through his
Buyer Termination Date shall be treated as if it were employment for the Seller
and/or a Seller Subsidiary for purposes of determining the Transferred
Participant's level of vesting and eligibility for an early retirement
opportunity thereunder that is conditioned upon the attainment of a specified
level of service and/or a specified age during employment, and for purposes of
applying pension plan provisions regarding the commencement and suspension of
benefits. The employment credit provision described in the preceding sentence
shall not apply to a Transferred Canadian Hourly Participant claiming a
retirement benefit prior to termination of employment with the Buyer and the
Buyer Subsidiaries if eligibility for such benefit otherwise would require
termination of employment with the Seller and the Seller Subsidiaries.
(d) With respect to Division Employees who immediately prior to the
Closing are accruing (or have most recently accrued) benefits under the Appendix
or other portion of the Seller's U.S. Pension Plan consisting of the plan which
previously separately existed as the ▇▇▇▇▇ Corporation Pension Plan A-3 For
Hourly-Rate Employees of the Engineered Fasteners Operations Massillon Division,
the benefits payable (and the terms and conditions related thereto) shall be
determined and paid pursuant to the terms thereof.
(e) In no event shall any Transferred Employee or Inactive Employee
who becomes an active employee of the Buyer or a Buyer Subsidiary receive under
any Seller Pension Plan any service credit for benefit accrual purposes for any
service with the Buyer and/or a Buyer Subsidiary.
10.5 BUYER'S RESPONSIBILITIES AND OBLIGATIONS AS TO CERTAIN PENSIONS.
(a) As of the Closing, and on or before December 31, 1999, the Buyer
shall or shall cause a Buyer Subsidiary, to establish defined contribution plans
or amend an existing defined contribution plan ("Buyer's DC Plans") to cover the
Transferred Employees and any Inactive Employee who becomes an active employee
of the Buyer or a Buyer Subsidiary other than any such person who is subject to
a Collective Bargaining Agreement (the "Non-Union DC Participants"). The Buyer's
DC Plans shall provide the Non-Union DC Participants with credit for service
with the Seller or a Seller Subsidiary for all purposes for which service is a
criterion. The Buyer's DC Plans shall also provide each Non-Union DC Participant
with a mandatory employer contribution for each Allocation Period (as determined
under Section 10.5(b) below) equal to the individual Non-Union DC Participant's
compensation (measured by wages subject to income tax withholding) for such
Allocation Period multiplied by his/her Required Allocation Percentage (as
defined below) for such Allocation Period. The mandatory contribution described
in the preceding sentence for an Allocation Period: shall not be subject to any
additional terms and/or conditions including, without limitation, terms and/or
condition relating to the profitability of the Buyer and/or the Buyer
Subsidiaries or the individual's level of hours or service during the Allocation
Period or employment status as of the end of the Allocation Period; and shall be
contributed to the applicable Buyer's DC Plan not later than the time prescribed
by law for allowing a tax deduction for the taxable year of the Buyer or the
Buyer Subsidiary, as the case may be, in which or with which such Allocation
Period ends. Any payment
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required to be made by the Buyer under this Section 10.3(a) shall not be subject
to Section 19.3 or 19.10 and shall be disregarded entirely in applying such
Sections.
(b) For purposes of this Section 10.5, the Allocation Periods, taken
together, shall span the five-year period (without gaps or overlap) commencing
on the Closing and ending on the fifth anniversary of the day before the
Closing, with the number of Allocation Periods and duration of each Allocation
Period determined pursuant to the following: (i) the first Allocation Period
shall commence on the Closing; (ii) the last Allocation Period shall end on the
fifth anniversary of the day before the Closing, and (iii) except as
specifically provided in clauses (i) and (ii) above, the beginning and end of
each Allocation Period shall correspond to the beginning and end of each plan
year of the applicable Buyer's DC Plan.
(c) Each Non-Union DC Participant's Required Allocation Percentage
for an Allocation Period shall equal his/her individual Defined Benefit
Equivalency Percentage minus the percentage of the Non-Union DC Participant's
compensation (measured by wages subject to income tax withholding) for the
Allocation Period otherwise contributed and allocated to the account of the
Non-Union DC Participant as an employer contribution with respect to the
Allocation Period (disregarding for this purpose, elective deferrals and
matching contributions) under the Buyer's DC Plans or any other tax-exempt
defined contribution plan of the Buyer or a Buyer Subsidiary.
(d) Each Non-Union DC Participant's individual Defined Benefit
Equivalency Percentage will be set forth on the schedule of the actual Defined
Benefit Equivalency Percentage provided by the Seller to the Buyer prior to the
Closing.
(e) In the event that the mandatory contribution for a Non-Union DC
Participant for an Allocation Period under Section 10.5(a), either standing
alone or in combination with any other contributions, would exceed any
contribution limit, discrimination rule or qualification requirement imposed by
the applicable tax or revenue laws on any such contributions, the mandatory
contribution for such Allocation Period shall be reduced by such excess, and
such excess shall be paid to the affected Non-Union DC Participant in cash not
later than the date the mandatory contribution would otherwise be contributed to
the applicable Buyer DC Plan.
(f) In addition to the foregoing requirements, the Buyer's DC Plan
covering the Non-Union DC Participants who, prior to the Closing, participated
in Seller's Canadian Hourly Pension Plan, shall, at least until the fifth
anniversary of the day before the Closing, be designed, administered and
maintained in a manner such that its existence and administration as a
"registered pension plan" will not directly or indirectly cause the partial or
full termination of the Seller's Canadian Hourly Pension Plan. Further, in the
event that the Buyer or any Buyer Subsidiary takes any action or refrains from
taking any action which, during the period through the fifth anniversary of the
day before the Closing, directly or indirectly causes the Ontario Superintendent
of Financial Services to require the partial or full wind up of Seller's
Canadian Hourly Pension Plan or Seller's Canadian Salaried Pension Plan, the
Buyer agrees to, and shall, indemnify and hold harmless the Seller and the
Seller Subsidiaries from and against any and all expenses, liabilities,
obligations and costs of any sort associated with any such partial or full wind
up (including, without limitation, the present value of any acceleration of
amounts not otherwise due as of the date preceding such partial or full wind-up)
other than expenses, liabilities, obligations and costs that: (1) otherwise
would have
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been paid or incurred in the normal course of plan operation or administration;
(2) result from the requirement under the Ontario Act (or regulations under the
Ontario Act) to separately deal with surplus plan assets; or (3) include or are
associated with plan underfunding to the extent any such underfunding exists
independent of such wind up; provided, however, that the Buyer's indemnification
obligation under this sentence shall be reduced by fifty percent (50%) if such
obligation first arises more than three years after the Closing.
(g) The Buyer shall notify the Seller at the end of each calendar
year quarter following the Closing of the names of any Transferred Employees
whose employment with the Buyer and the Buyer Subsidiaries has been terminated
for any reason during the calendar year quarter immediately preceding such date,
and shall provide to the Seller the reason for and the date of such termination,
and such other information as the Seller requires to administer such
individual's benefit interests under Seller's Pension Plans.
(h) Not later than 180 consecutive calendar days immediately
following the Closing:
(i) the Buyer shall apply for a determination by the Internal
Revenue Service of the United States ("IRS") that Buyer's DC Plan(s)
applicable to U.S. Non-Union DC Participants (as established or amended
pursuant to Section 10.5) and any related trusts qualify under Sections
401(a) and 501(a), respectively, of the Tax Code, and any regulations
issued under or pursuant to the Tax Code; and
(ii) the Buyer shall apply for registration of Buyer's DC
Plan(s) applicable to Canadian Non-Union DC Participants with the
Canadian Department of National Revenue ("Revenue Canada") and the
Financial Services Commission of Ontario ("FSCO") to establish
registration thereof under the Canada Income Tax Act (the "Canada Act")
and the Pension Benefits Act of Ontario ("Ontario Act") and the
applicable regulations under both such Acts;
and the Buyer agrees to act reasonably, promptly and in consultation with the
Seller to revise and/or amend any of Buyer's DC Plans as may be required by the
IRS, Revenue Canada and/or the FSCO in accordance with applicable governmental
requirements for the purpose of obtaining any such qualification or
registration. Copies of such filings by the Buyer or a Buyer Subsidiary (with
appropriate deletions of confidential information not relevant to Seller's
concern for the Transferred Employees) shall be furnished by the Buyer to the
Seller when first made, and a copy of the U.S. determination letter and the
Canadian acceptances of registration shall be furnished by the Buyer to the
Seller within a reasonable period of time following the receipt of each such
letter and acceptances by the Buyer or a Buyer Subsidiary.
(i) Notwithstanding any other provisions of this Agreement, the Buyer
hereby agrees that, through the fifth anniversary of the day before the Closing,
Buyer's DC Plans shall not be terminated or suspended with respect to coverage
thereunder of the Transferred Pension Participants, nor shall any amendment of a
Buyer's DC Plan be made which contradicts this Section 10.5 or otherwise
effectively decreases the total value of benefits to be provided under either
such Plan for any Non-Union DC Participant during such five year period, except
as may be required by the
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applicable governmental agency or by law or regulation to ensure continued
compliance with the Tax Code, ERISA, the Ontario Act or the Canada Act.
(j) To the extent that the aggregate amount contributed to all of
Buyer's DC Plans for an Allocation Period or otherwise paid pursuant to Section
10.5(e) above for such Allocation Period (expressed as each such Non-Union DC
Participant's compensation (measured by wages subject to income tax withholding)
for the Allocation Period multiplied by his/her Defined Benefit Equivalency
Percentage, without reduction under 10.5(c) above) exceeds the contribution
threshold set forth on the Corresponding Schedule (the "Contribution
Threshold"), the Seller shall, at the time described below, pay to the Buyer the
amount of such excess. After actual payment by the Buyer and/or a Buyer
Subsidiary of the aggregate amounts described in the preceding sentence for an
Allocation Period, the Buyer shall provide the Seller with a detailed written
statement explaining the calculation of the individual and aggregate amount of
such payments. Within thirty (30) days following the Seller's receipt of the
written statement described in the preceding sentence, the Seller shall
reimburse to the Buyer the amount determined under the first sentence of this
Section 10.5(j) for such Allocation Period. Any payment required to be made by
the Seller under this Section 10.5(j) shall not be subject to Section 19.3 or
Section 19.10 and shall be disregarded entirely in applying such Sections.
10.6 TRANSFER OF SHARE PURCHASE AND INVESTMENT PLAN RESPONSIBILITIES.
(a) As soon as is reasonably practicable after the Closing Date, and
effective as of the Closing, the Buyer shall or shall cause a Buyer Subsidiary
to establish a new defined contribution plan or amend an existing defined
contribution plan ("Buyer's Investment Plan") for the purpose of covering each
Division Employee and each former employee (and, if applicable, the spouse and
beneficiaries of such former employee) of the Business who, immediately prior to
the Closing, is eligible to be a participant in or has an account under
("Investment Plan Participant") the ▇▇▇▇▇ Corporation Share Purchase and
Investment Plan ("Seller's Investment Plan"). Buyer's Investment Plan shall be
designed to enable it to accept a transfer of assets and liabilities from the
Seller's Investment Plan in accordance with the applicable ERISA and Tax Code
requirements. The Buyer's Investment Plan will recognize service with the Seller
and the Seller Subsidiaries for all purposes for which service is a criterion in
the Buyer's Investment Plan. As soon as practicable after the Closing Date, the
Seller shall cause the Seller's Investment Plan to transfer and the Buyer shall
cause the Buyer's Investment Plan to accept a transfer of all assets and
liabilities associated with the Investment Plan Participants, with earnings
and/or losses credited to the account balances of such Investment Plan
Participants through a date that precedes the date of transfer by no more than
five business days. The amount transferred under the preceding sentence shall
include elective contributions and matching contributions accrued under the
Seller's Investment Plan through the day before the Closing. With respect to the
portion of an Investment Plan Participant's accounts consisting, as of the day
before the transfer, of plan loans and/or investment in ▇▇▇▇▇ Corporation common
stock, the transfer contemplated by this Section 10.6 shall be made in the form
of an in kind transfer by the Seller's Investment Plan to the Buyer's Investment
Plan. With respect to ▇▇▇▇▇ Corporation common stock transferred in kind under
the preceding sentence: (i) Buyer shall cause the Buyer's Investment Plan to
allow the Investment Plan Participants, for a period of eighteen (18) months
after such transfer, and on at least four (4) occasions during such period, to
direct that all or
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a portion of the amounts invested in their respective accounts in ▇▇▇▇▇
Corporation common stock be invested in an alternative investment otherwise
available under the Buyer's Investment Plan; (ii) as soon as practicable after
the end of the eighteen month period described in clause (i) above, the Buyer's
Investment Plan shall require that any ▇▇▇▇▇ Corporation common stock remaining
in the Investment Plan Participant accounts at the end of such period shall be
liquidated and the proceeds reinvested in an alternative investment otherwise
available under the Buyer's Investment Plan selected by the Investment Plan
Participant or, in the absence of a selection, the available default investment
alternative identified by the Seller; and (iii) to the extent that either the
Buyer or any Buyer Subsidiary is found liable for breach of a fiduciary duty
under ERISA with respect to the receipt and/or holding of the ▇▇▇▇▇ Corporation
common stock by the Buyer's Investment Plan or with respect to the foregoing
provisions of this sentence or a claim to the effect that such a breach has
occurred is made: (A) Seller agrees to, and shall, defend, indemnify and hold
harmless the Buyer and the Buyer Subsidiaries and their respective officers,
directors, employees and agents and the trustee of Buyer's Investment Plan from
and against any and all claims, expenses, liabilities, obligations and costs
related thereto (including, without limitation, attorneys fees and expenses);
and (B) the Seller's indemnification obligation under this sentence shall not be
subject to Section 19.3 or Section 19.10 and shall be disregarded entirely in
applying such Sections. After the transfer date, the Investment Plan
Participants shall only be eligible to receive benefits from, and in accordance
with, the Buyer's Investment Plan.
(b) Not later than December 31, 1999, the Buyer shall or shall cause
the Buyer Subsidiaries to apply for a determination by the IRS that Buyer's
Investment Plan (as established or amended pursuant to this Section 10.6)
qualifies under Sections 401(a) and 501(a), respectively, of the Tax Code, and
any regulations issued under or pursuant to the Tax Code. The Buyer further
agrees to act reasonably, promptly and in consultation with Seller to revise
and/or amend the Buyer's Investment Plan as may be required by IRS in accordance
with applicable governmental requirements for the purpose of obtaining any such
qualification. Copies of such filings by the Buyer or a Buyer Subsidiary (with
appropriate deletions of confidential information not relevant to Seller's
concern for the Transferred Employees) shall be furnished by the Buyer to the
Seller when first made, and a copy of the determination letter shall be
furnished by the Buyer to the Seller within a reasonable period of time
following the receipt of such letter by the Buyer or a Buyer Subsidiary. The
Buyer and the Seller acknowledge that the transfer of assets and liabilities,
respectively, from the Seller's Investment Plan to the Buyer's Investment Plan,
as provided for in this Section 10.6 may occur prior to the Buyer's receipt of a
favorable determination letter from the IRS with respect to the tax
qualification of the Buyer's Investment Plan pursuant to Section 401(a) and
Section 501(a), respectively, of the Tax Code. Accordingly, the Buyer hereby
represents and warrants that the Buyer's Investment Plan, as established and
maintained by the Buyer, will receive such favorable determination letter,
effective retroactively to the Closing, and the Buyer agrees to indemnify the
Seller for any liabilities which the Seller may incur as a result of such
transfer of assets and/or liabilities to the Buyer's Investment Plan, if the
Buyer's Investment Plan is determined by the IRS not to be a tax-qualified Plan.
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10.7 TRANSFER OF SAVINGS PLAN RESPONSIBILITIES.
(a) As soon as is reasonably practicable after the Closing Date, and
effective as of the Closing, the Buyer shall or shall cause a Buyer Subsidiary
to establish a new defined contribution plan or amend an existing defined
contribution plan ("Buyer's Savings Plan") for the purpose of covering each
Division Employee and each former employee (and, if applicable, the spouse and
beneficiaries of such former employee) of the Business who, immediately prior to
the Closing, is eligible to be a participant in or has an account under
("Savings Plan Participant") the ▇▇▇▇▇ Corporation 401(k) Savings Plan and Trust
("Seller's Savings Plan"). Buyer's Savings Plan shall be designed to enable it
to accept a transfer of assets and liabilities from the Seller's Savings Plan in
accordance with the applicable ERISA and Tax Code requirements. The Buyer's
Savings Plan will recognize service with the Seller and the Seller Subsidiaries
for all purposes for which service is a criterion in the Buyer's Savings Plan.
As soon as practicable after the Closing Date, the Seller shall cause the
Seller's Savings Plan to transfer and the Buyer shall cause the Buyer's Savings
Plan to accept a transfer of all assets and liabilities associated with the
Savings Plan Participants, with earnings and/or losses credited to the account
balances of such Savings Plan Participants through a date that precedes the date
of transfer by no more than five business days. The amount transferred under the
preceding sentence shall include elective contributions and matching
contributions accrued under the Seller's Savings Plan through the day before the
Closing. With respect to the portion of a Savings Plan Participant's accounts
consisting, as of the day before the Closing, of plan loans, the transfer
contemplated by this Section 10.7 shall be made in the form of an in kind
transfer by the Seller's Savings Plan to the Buyer's Savings Plan. After the
transfer date, the Savings Plan Participants shall only be eligible to receive
benefits from, and in accordance with, the Buyer's Savings Plan.
(b) Not later than December 31, 1999, the Buyer shall or shall cause
the Buyer Subsidiaries to apply for a determination by the IRS that Buyer's
Savings Plan (as established or amended pursuant to this Section 10.7) qualifies
under Sections 401(a) and 501(a), respectively, of the Tax Code, and any
regulations issued under or pursuant to the Tax Code. The Buyer further agrees
to act reasonably, promptly and in consultation with Seller to revise and/or
amend the Buyer's Savings Plan as may be required by IRS in accordance with
applicable governmental requirements for the purpose of obtaining any such
qualification. Copies of such filings by the Buyer or a Buyer Subsidiary (with
appropriate deletions of confidential information not relevant to Seller's
concern for the Transferred Employees) shall be furnished by the Buyer to the
Seller when first made, and a copy of the determination letter shall be
furnished by the Buyer to the Seller within a reasonable period of time
following the receipt of such letter by the Buyer or a Buyer Subsidiary. The
Buyer and the Seller acknowledge that the transfer of assets and liabilities,
respectively, from the Seller's Savings Plan to the Buyer's Savings Plan, as
provided for in this Section 10.7 may occur prior to the Buyer's receipt of a
favorable determination letter from the IRS with respect to the tax
qualification of the Buyer's Savings Plan pursuant to Section 401(a) and Section
501(a), respectively, of the Tax Code. Accordingly, the Buyer hereby represents
and warrants that the Buyer's Savings Plan, as established and maintained by the
Buyer, will receive such favorable determination letter, effective retroactively
to the Closing, and the Buyer agrees to indemnify the Seller for any liabilities
which the Seller may incur as a result of such transfer of assets and/or
liabilities to the Buyer's Savings Plan, if the Buyer's Savings Plan is
determined by the IRS not to be a tax-qualified Plan.
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(c) Notwithstanding any other provision of this Agreement, the
provisions of this Section 10.7 shall be subject to the applicable requirements
regarding collective bargaining.
10.8 ALLOCATION OF CANADIAN SAVINGS PLAN RESPONSIBILITIES.
(a) Effective as of the day before the Closing, the Seller shall
cause each Division Employee who is eligible to have an account as of such date
("RRSP Participant") under the ▇▇▇▇▇ Yale Ltd. Group Registered Retirement
Savings Plan ("Seller's RRSP") to have a fully nonforfeitable right to such
account.
(b) As soon as is reasonably practicable after the Closing Date, the
Buyer shall or shall cause a Buyer Subsidiary to establish a new group
registered retirement savings plan ("Buyer's RRSP") covering the Transferee
Canadian Participants and the Transferred Hourly Participants. The Seller and
the Buyer shall make reasonable efforts to cause the RRSP Participants, at their
option, to transfer their individual account balances to the new accounts that
the Buyer shall cause to be established on their behalf under Buyer's RRSP.
Buyer's RRSP will recognize service with the Seller and the Seller Subsidiaries
for all purposes for which service is a criterion in Buyer's RRSP, and Buyer or
a Buyer Subsidiary shall continue a plan providing a similar deferral
opportunity for a period of at least three years following the Closing.
10.9 INCENTIVE COMPENSATION. The Corresponding Schedule identifies or
sets forth a description of the cash incentive compensation and/or cash bonuses
related to the Transferred Employees for 1999 under the Seller's or a Seller
Subsidiary's plans, policies, programs or arrangements immediately prior to the
Closing, excluding any related deferral arrangements ("Seller's 1999 Incentive
Plans"). As of the Closing, the Buyer shall or shall cause a Buyer Subsidiary to
establish and implement plans that mirror the Seller's 1999 Incentive Plans, and
all obligations, responsibilities and liabilities with respect thereto shall be
assumed and/or accepted by the Buyer and/or a Buyer Subsidiary, in a manner such
that the Buyer and/or a Buyer Subsidiary shall provide the Transferred Employees
with cash incentive compensation and/or cash bonuses for 1999 at least equal to
the amounts that would have been paid for 1999 under the Seller's 1999 Incentive
Plans, assuming that the Seller's 1999 Incentive Plans remained in effect
through the end of 1999 and the transactions contemplated by this Agreement had
not occurred. Nothing contained in the preceding sentence shall in any way bind
or constrain the Buyer or any Buyer Subsidiary as to incentive compensation for
any period beginning after December 31, 1999. Commencing with January 1, 2000
and for the then remaining balance of the three-year period following the
Closing, the Buyer and/or a Buyer Subsidiary shall provide to those members of
the Existing Management Team (as defined in Section 8.7(a)) who, immediately
prior to the Closing, participate in Seller's 1999 Incentive Plan, an incentive
plan designed, established and maintained by the Buyer and/or a Buyer Subsidiary
for the purpose of providing some form of meaningful (as reasonably determined
by the Buyer) incentive compensation to such individuals.
10.10 FOREIGN EMPLOYMENT LIABILITIES. With respect to the letter
agreement between Seller or a Seller Subsidiary and ▇▇▇▇▇ ▇▇▇▇ dated May 13,
1997, the Buyer and/or a Buyer Subsidiary shall, as of the Closing, assume the
contractual obligations thereunder, except that the Buyer and/or the Buyer
Subsidiary shall have no obligation whatsoever with respect to: paragraphs 8, 9
or 10 of
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such letter agreement other than the obligations of the Buyer and/or the Buyer
Subsidiary arising pursuant to Section 10.1; or any claim or obligation that
does not specifically arise under the contractual provisions assumed by the
Buyer.
10.11 VACATION RESPONSIBILITIES. The Buyer shall be liable,
responsible, and obligated for the payment of all vacation benefits, as
determined in accordance with the Seller's vacation practices in effect on the
day before the Closing for Division Employees, and which have not been paid by
the Seller prior to the Closing, to the Transferred Employees. On and after the
Closing, the Buyer shall provide each Non-Union Division Employee who becomes a
Transferred Employee, on a going-forward basis, with an annual paid vacation
entitlement at least equal to the annual paid vacation entitlement available
under the Seller's vacation practices as in effect on the day before the
Closing, based upon the Transferred Employee's status and level of service with
the Seller and/or a Seller Subsidiary on such day.
10.12 RETAINED LIABILITY AND SUCCESSOR LIABILITY. With respect to any
pre-Closing liability of Seller or any Seller Subsidiary under any Employee
Benefit Plan or under the letter agreement referred to in Section 10.10 which is
retained by the Seller and/or Seller Subsidiary and is not assumed by the Buyer
and/or a Buyer Subsidiary under this Agreement, such liability shall be deemed a
Retained Liability and, notwithstanding the potential liability of Buyer and/or
a Buyer Subsidiary for any such Retained Liability under a successor liability
theory or otherwise, such Retained Liability shall be subject to the
indemnification provisions of Article 19.
10.13 REIMBURSEMENT FOR OTHER PARTY'S LIABILITIES. Notwithstanding any
other provisions of this Agreement, in the event that either the Seller (or the
Seller Subsidiaries) or the Buyer (or the Buyer Subsidiaries) shall be required,
by operation of law or regulation or by judicial or quasi-judicial determination
or by the operation of any contract or other agreement of any kind with any
insurance company or other Person, to pay or discharge directly, or indirectly
through any representative or benefit trust or other fund or otherwise, any
liability, responsibility, or obligation for the provision of any benefit or
other payment (including any benefit premium payment or other direct or indirect
cost with respect to any benefit coverage) which is the liability,
responsibility, and/or obligation of the other Party pursuant to this Article
10, the Party responsible for such payment agrees to reimburse promptly the
other Party, or any appropriate representative or benefit trust or other fund of
such Party as may be determined thereby, in full for any and all such payments
or discharges upon the presentation of written evidence thereof.
10.14 NO THIRD-PARTY BENEFICIARIES. Neither the Buyer nor the Seller
intend that this Article 10 create any rights or interests, except as between
the Buyer, the Buyer Subsidiaries, the Seller and the Seller Subsidiaries, and
no present or future employees (or any dependents or beneficiaries of such
employees) of either Party, or any of their Affiliates (including the Buyer
Subsidiaries and the Seller Subsidiaries) will be treated or deemed as
Third-Party beneficiaries in or under this Agreement.
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ARTICLE 11
CERTAIN REAL ESTATE MATTERS
11.1 TITLE COMMITMENT; TITLE POLICY.
(a) As soon as practicable following the date of this Agreement, the
Seller shall cause (i) Land America National Commercial Services - Lawyers Title
(the "Title Company") to issue and deliver to the Buyer its commitment for an
ALTA Owner's Policy of Title Insurance (Form B-1992) with respect to the
Massillon Facility and its commitment for an ALTA Leasehold Policy of Title
Insurance with respect to the Brunswick Facility (collectively the "U.S. Title
Policies"), together with a copy of all recorded documents referred to in the
U.S. Title Policies, committing the Title Company to issue the U.S. Title
Policies at Closing, insuring the Buyer as the holder of a fee simple title to
the Massillon Facility and a leasehold interest in the Brunswick Facility,
subject only to the Real Property Permitted Exceptions, in an amount equal to
the portion of the Purchase Price allocated to each such Facility, and (ii) the
Seller's Canadian counsel to deliver to the Buyer its opinion (the "Canadian
Title Opinion") as to title to the Hamilton Facility, which opinion shall be
addressed to the Buyer, its counsel and such other parties as may reasonably be
requested by the Buyer and shall provide that the Seller or the Seller
Subsidiaries, as the case may be, has good title in fee simple to the Hamilton
Facility, subject only to the Real Property Permitted Exceptions.
(b) Subject to Article 20, the cost and expense of the U.S. Title
Policy and the Canadian Title Opinion and any transfer or recording fees or
taxes, shall be shared equally by the Seller and the Buyer.
11.2 OBJECTIONS. The Buyer shall have ten days after receipt of all
of the documents referred to in Section 11.1 to give the Seller written notice
of any objections to the conditions or exceptions shown thereon other than Real
Property Permitted Exceptions. Failure to object to any additional condition or
exception within said period shall constitute an approval of such condition or
exception. If the Buyer gives such notice, the Seller shall have the obligation,
prior to the Closing, to use its reasonable efforts to remedy or remove the
objectionable condition or exception, or to provide the Buyer with evidence
reasonably satisfactory to the Buyer that such condition or exception shall be
removed or remedied prior to or concurrently with the Closing. If the Seller
cannot so remedy or remove such condition or exception prior to or concurrently
with the Closing and such condition or exception, individually or in the
aggregate, would have an adverse effect on the value of the Transferred Assets
in excess of an amount equal to five percent (5%) of the Purchase Price, the
Buyer shall have the right to either waive its objection to such condition or
exception and proceed towards the Closing or terminate this Agreement without
liability.
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ARTICLE 12
ENVIRONMENTAL MATTERS
12.1 ALLOCATION OF ENVIRONMENTAL LIABILITIES. Subject to and in
accordance with this Article 12 and Section 3.2(i), liability for Environmental
Conditions and for Pre-Closing Environmental Conditions shall be allocated as
follows:
(a) BUYER'S RESPONSIBILITY. The Buyer shall be responsible for and
shall perform or pay as due all obligations or liabilities, including any loss,
cost or expense of any nature whatsoever relating to or arising from:
(i) Any Environmental Conditions on, in or under any Real
Property that are not Pre-Closing Environmental Conditions;
(ii) Subject to Paragraph (b) of this Section 12.1, any
Pre-Closing Environmental Conditions, to the following extent:
(A) the first $500,000 in the aggregate from the Closing
Date necessary to spend to remediate or correct any Pre-Closing
Environmental Conditions; and
(B) one-half (i.e., 50%) of any and all loss, cost or
expense in excess of the sum of the $500,000 payable by Buyer
under Clause (A) above plus $500,000 payable by Seller under
Paragraph (b) of this Section 12.1 necessary to remediate or
correct any Pre-Closing Environmental Condition; and
(iii) Any Environmental Condition associated with the ▇▇ ▇▇▇▇
▇▇▇▇▇▇ property in Hamilton, Ontario.
(b) SELLER'S RESPONSIBILITY. The Seller shall be responsible for and
shall pay as due:
(i) The following sums in excess of the Buyer's initial
contribution under Clause (a)(ii)(A) above:
(A) the next $500,000 aggregate from the Closing Date
necessary to remediate or correct any Pre-Closing Environmental
Condition that is required to be investigated or remediated by a
regulatory authority consistent with requirements of
Environmental Law ("Required Cleanup");
(B) the remaining one-half (i.e., 50%) of any and all loss
cost or expense that is necessary to remediate or correct any
Pre-Closing Environmental Conditions that give rise to a Required
Cleanup and that is in excess of the sum of the Buyer's $500,000
initial contribution under Clause (A) of Subparagraph (a)(ii) of
this Section 12.1 and the Seller's contribution under Clause (A)
of this Subparagraph (b)(i); and
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(ii) Any and all loss, cost or expense for any Retained
Liability under Section 3.2(i); provided, however, that notwithstanding
any other provision of this Agreement, Seller shall have no liability
under this Agreement with respect to (A) ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ and (B) any claims for personal injury or property damage
(including economic loss) arising from alleged migration of Regulated
Substances from any Real Property, even though the alleged migration
may be the subject of a Required Cleanup subject to the cost-sharing
provisions of this Section 12.1.
(c) Those portions of any loss, cost or expense relating to or
arising from Environmental Conditions or Pre-Closing Environmental Conditions
that are allocated to the Buyer pursuant to this Section 12.1 are hereinafter
referred to as the "Buyer's Responsibility." Those portions of any loss, cost or
expense relating to or arising from Environmental Conditions or Pre-Closing
Environmental Conditions that are allocated to the Seller pursuant to this
Section 12.1 are hereinafter referred to as the "Seller's Responsibility."
12.2 SELLER'S ENVIRONMENTAL INDEMNIFICATION. Subject to the terms,
conditions and limitations of this Article 12, the Seller will indemnify, defend
and hold harmless the Buyer and its affiliates, officers, directors, employees
and agents from and against any liabilities, costs, damages, penalties, fines,
claims, judgments or proceedings, including necessary and reasonable legal fees
and costs of investigation (collectively "Damages"), arising from:
(a) breach of any representation or warranty in Section 5.12,
provided that the Buyer shall have given the Seller notice of such breach during
the relevant survival period stated in Section 18.1, without regard to Section
18.2; or
(b) any Seller's Responsibility, as defined in Section 12.1(c);
provided, however, that if the cost to remediate or correct any Pre-Closing
Environmental Conditions in the aggregate is reasonably anticipated to trigger
the Seller's Responsibility, Seller shall have full control in dealing and
negotiation with any Third Parties, including any regulatory authorities, in
order to resolve all matters associated with the Pre-Closing Environmental
Condition.
(c) For the purposes of determining whether the proviso regarding
Seller's control in Subsection (b) of this Section 12.2 is triggered, the
parties shall elicit from the consultant retained pursuant to Section 9.11
recommendations with respect to the identification, type and cost of any
remedial or other measure that the Supplemental Phase II indicates would be
necessary to fulfill requirements of Environmental Laws in effect and applicable
as of the Closing. The Parties shall, within 30 days of their receipt of this
recommendations, confer and reach agreement as to whether (and, if so, which of)
the consultant's recommendations shall be implemented. Failure of the Parties to
reach agreement within this 30-day period regarding which, if any, of the
consultant's recommendations shall be implemented will give rise to an
irrebuttable presumption that the Seller's Responsibility will be triggered
solely for purposes of the control proviso of Subsection 12.2(b) hereof, and
Seller will have the right to control.
Notwithstanding the foregoing, the Seller shall not be liable to and shall not
indemnify any party or otherwise be responsible for any Damages under this
Article 12 to the extent the same result from
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actions undertaken voluntarily rather than mandated by legal process or are
caused, contributed to, or exacerbated by the post-Closing actions or omissions
of the Buyer or the Buyer Subsidiaries, and the Buyer will be responsible for
that portion of any Damages attributable to such post-Closing acts or omissions.
12.3 BUYER'S ENVIRONMENTAL INDEMNIFICATION. Subject to the terms,
conditions and limitations of this Article 12, the Buyer will indemnify, defend
and hold harmless the Seller and any Seller Subsidiary and their respective
affiliates, officers, directors, employees and agents from and against any
Damages arising from:
(a) exercise by the Buyer of its right of access under Section 7.2(b)
relating to evaluation of any potential or suspected Environmental Condition; or
(b) any Buyer's Responsibility, as defined in Section 12.1(c).
Notwithstanding the foregoing, the Buyer shall not be liable to and shall not
indemnify any party or otherwise be responsible for any Damages under this
Article 12 to the extent that the same are caused, contributed to or exacerbated
by the post-Closing actions or omissions of the Seller or the Seller
Subsidiaries, and the Seller will be responsible for that portion of any damages
attributable to such acts or omissions.
12.4 RELEASE. THE BUYER EXPRESSLY WAIVES AND RELEASES THE SELLER AND
THE SELLER SUBSIDIARIES FROM, AND COVENANTS NOT TO ▇▇▇ THE SELLER OR ANY OF THE
SELLER SUBSIDIARIES FOR, ANY CLAIMS, WHETHER PURSUANT TO, OR AS PERMITTED OR
PROVIDED BY, THE ENVIRONMENTAL LAWS (EXPRESSLY INCLUDING, BUT NOT LIMITED TO,
CERCLA, RCRA, CWA, SWDA, CAA, TSCA, AND EPCRA) OR OTHERWISE WHICH THE BUYER OR
ANY BUYER SUBSIDIARY, OR ANY SUCCESSOR IN INTEREST TO THE BUYER WITH RESPECT TO
THE REAL PROPERTY, MAY HAVE IN CONNECTION WITH THE RELEASE OR PRESENCE OF ANY
REGULATED SUBSTANCE AFTER THE CLOSING DATE. After the Closing Date, the remedies
of the Buyer and the Seller provided for under Sections 12.1, 12.2 and 12.3
shall be the exclusive remedies of the Parties with respect to the matters
covered in this Article 12.
12.5 NOTICE OF CLAIM. The Parties agree that they will each promptly,
but in no event later than 30 calendar days from the date of their discovery of
facts or circumstances that are reasonably likely to give rise to a demand for
indemnification pursuant to Section 12.2 or Section 12.3, as the case may be,
notify the other in writing of such facts and potential claim. Any claim made
pursuant to this Article 12 shall cite with particularity the nature of the
claim, the specific basis for believing it is subject to indemnification under
this Article (including, in the case of a Pre-Closing Environmental Condition,
the basis for believing the condition constitutes a violation of Environmental
Law in effect as of the Closing), and the estimated total amount of Damages that
will be incurred with respect thereto. If any legal proceedings are instituted
or any claim is asserted in writing by, or on behalf of, a Third Party in
respect of which either Party, including any Subsidiary, believes it may be
entitled to indemnity hereunder, that Party shall give written notice thereof
within 30 days of service of process after institution of the legal proceedings
or within 30 days after the
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assertion of a claim in writing by, or on behalf of, the Third Party asserting
the claim. A delay in giving notice required by the preceding two sentences
shall relieve the other Party of liability only to the extent that it suffers
actual prejudice because of the delay. After notification, the Party notified
must within 60 days notify the other that it accepts responsibility for the
matters set forth in the notice, or the Party so notified will be deemed to have
declined to accept responsibility for such matters.
12.6 ACCEPTANCE OF RESPONSIBILITY. If the Party notified accepts
responsibility for any Third Party claim under this Article 12:
(a) that Party may in its sole discretion and at its own expense
assume control of, and be responsible for, the defense or settlement of the
claim;
(b) if the Party notified assumes control, the other Party may at
its own expense hire counsel to monitor the claim;
(c) the Party notified shall not, without the prior written consent
of the other Party, which consent will not be unreasonably withheld, settle the
claim or consent to entry of any judgment relating thereto which does not
include as a term thereof the giving by the claimant to the other Party of a
release from all liability in respect to the claim; and
(d) if a claim involves only an injunction or equitable relief, the
Party giving notice shall have the right to be represented, at its own expense,
by counsel of its choice in connection with the defense of the claim, and the
Party notified will not, without the prior written consent of the other Party,
which consent will not be unreasonably withheld, settle the claim or consent to
entry of any judgment relating thereto.
12.7 PARTY DECLINES RESPONSIBILITY. Prior to the expiration of the
60-day period under Section 12.5, and if the Party notified does not within that
time period accept responsibility for any Third Party claim under this Article
12 or declines to assume control:
(a) the Party giving notice may engage counsel to defend, settle or
otherwise dispose of such claim;
(b) the Party notified may at its own expense hire counsel to
monitor the claim;
(c) the Party receiving notice may notify the other Party at a
subsequent time that it is assuming responsibility for the claim, at which time
the provisions of Section 12.6 become applicable; and
(d) the right of either Party to contest the right of the other
Party to indemnification under this Agreement will respect to the proceeding or
claim shall not be extinguished.
12.8 COOPERATION. The Parties will cooperate fully with each other in
connection with the defense, negotiation or settlement of any Third Party claim
under this Article 12, provided, however,
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that in no event shall either Party have any right to privileged correspondence,
material or information of the other Party. Further, the Buyer agrees with
respect to any claim to provide the Seller written notice at least 30 days prior
to undertaking or commencing any investigation or testing that is intended, or
could reasonably be expected, to lead to discovery of any Pre-Closing
Environmental Condition. The undertaking and the scope of any such investigation
or testing shall be subject to the prior approval of the Seller, which approval
shall not be unreasonably withheld, or Seller shall have no liability or
responsibility for any Pre-Closing Environmental Condition thus discovered or
disclosed.
12.9 THE SELLER'S INDEMNITY AND THE BUYER'S RE-SALE OF REAL PROPERTY.
With respect to any matter for which the Seller is to indemnify the Buyer under
Section 12.2 that involves removal, remediation or cleanup of Regulated
Substances, the Seller's Responsibility shall be limited to curing the breach or
contributing to resolution of the Pre-Closing Environmental Condition under, and
only to the extent required by, the Environmental Laws in effect and applicable
at the Closing. The Buyer acknowledges and agrees that if a subsequent purchaser
or a change in law or land use requires additional cleanup or work at the Real
Property beyond that which may already have been initiated or completed by the
Seller, the Buyer will have the sole responsibility to satisfy those additional
requirements. Notwithstanding anything contained in this Agreement to the
contrary, the Seller will have no obligation or liability with regard to any
such additional cleanup or work or to any such purchaser under this Article 12.
12.10 NO CONSEQUENTIAL DAMAGES. Notwithstanding anything contained
herein to the contrary, in no event will either Party be liable to the other for
consequential, special or incidental Damages such as, by way of example and not
of limitation, reduction in market value of the Real Property, loss of profits,
loss of business opportunity or interruption-of-business losses.
12.11 ACCESS TO THE REAL PROPERTY AND DOCUMENTS. If the Seller and its
representatives and agents request, the Buyer or any Buyer Subsidiary shall
provide to the Seller access to the Real Property and the books, records and
employees of the Buyer or any Buyer Subsidiary relating to the Business to the
extent reasonably necessary to assist the Seller in investigating, assessing,
remediating, defending or settling any claim regarding any matter for which the
Buyer notifies the Seller under Section 12.5, provided that such access will be
sought in such manner so as not to interfere unreasonably with the operation of
the Buyer's or any Buyer Subsidiary's business.
12.12 THE SELLER'S PURSUIT OF THIRD PARTIES. If the Seller remediates,
or incurs any Damages with respect to, a matter for which a Third Party may be
responsible or liable, the Buyer and the Buyer Subsidiaries agree to cooperate
with the Seller in pursuing any claim against such Third Party and will use
reasonable efforts to assist the Seller in legally asserting such claim and in
recovering the Seller's Damages against such Third Party including, but not
limited to, acting as the real party in interest and assigning the Buyer's or
the Buyer Subsidiary's rights or any cause of action against any such Third
Party relating to such claim or the proceeds thereof to the Seller.
12.13 LIMITATIONS. In addition to the limitations and conditions on
indemnification stated in this Article 12, the limitations and conditions stated
in Sections 19.7, 19.8, 19.9 and 19.10 shall
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apply to indemnification under this Article 12. No other Sections of Article 19
shall apply to environmental matters addressed by Section 5.12 or this Article
12.
12.14 AGENCY CONTACT.
(a) The Buyer agrees that it will not engage in any contact, whether
written, verbal, or in person, with any governmental agency or agency
representative regarding any condition that it believes may constitute a matter
for which it may be entitled to indemnity under Section 12.2, unless:
(i) the contact is required under any Environmental Law;
(ii) a governmental agency or agency representative contacts
the Buyer regarding that matter; or
(iii) the Seller has approved the contact.
(b) If the Buyer believes it is entitled to contact a governmental
agency or agency representative regarding any condition that it believes may
constitute a matter for which it may be entitled to indemnity under Section
12.2, it shall notify the Seller as soon as it believes it will make the
contact, and the Seller shall have ten days from receipt of the Buyer's notice
in which to approve the contact and advise the Buyer if the Seller wishes to
participate in the contact. The Seller's failure to approve or disapprove the
contact within ten days of receipt of the Buyer's notice of the proposed contact
shall be deemed to be approval of the contact.
(c) Except as provided herein, the Seller will make all reports to
governmental agencies or other reports necessary or desirable in connection with
any condition or circumstance with respect to which the Buyer asserts any claim
for indemnity under Section 12.2.
12.15 SURVIVAL. The rights and obligations of the Parties set forth in
this Article 12 shall survive the Closing as set forth in Section 18.1 without
regard to Section 18.2.
ARTICLE 13
CONDITIONS TO OBLIGATIONS OF THE BUYER
The obligations of the Buyer under this Agreement are subject to the
satisfaction at or prior to the Closing Date of the following conditions, any of
which may be waived in whole or in part by the Buyer in its sole discretion by
delivery of a written notice to that effect to the Seller, which shall
constitute a release by the Buyer with respect to such condition.
13.1 HSR/COMPETITION ACT COMPLIANCE. All applicable governmental
pre-merger filing requirements under the HSR Act shall have been satisfied and
the applicable waiting period requirements under the HSR Act shall have been
terminated early or shall have expired. All filings
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required to be made under the Competition Act (Canada) shall have been made. The
applicable waiting periods under the Competition Act shall have expired or
(i) the Buyer shall have been advised in writing by the Commissioner
of Competition that he has determined not to take any action or
any proceeding, including making an application for an order
under Section 92 of the Competition Act, in respect of this
transaction; or
(ii) an advance ruling certificate shall have been issued under
Section 102 of the Competition Act in respect of this
transaction.
13.2 NO LITIGATION. At the Closing Date, no litigation, proceeding,
investigation, or inquiry shall be pending or threatened to enjoin or prevent
the consummation of the transactions contemplated by this Agreement, or
involving any of the Transferred Assets which, if sustained, would have a
Material Adverse Effect on the Buyer's right to retain the Transferred Assets or
to conduct the Business as it is currently conducted.
13.3 NO CASUALTY. Prior to the Closing Date, there shall not have
occurred any single uninsured casualty in or to any of the Transferred Assets as
a result of which the monetary amount of damage or destruction totals $1,000,000
or a lesser amount if such damage or destruction has a Material Adverse Effect,
unless the Seller agrees to replace the damaged or destroyed Transferred Assets
or unless the Parties mutually agree to an adjustment in the Purchase Price.
13.4 RETAIL SALES TAX CERTIFICATE. On or prior to the Closing, the
Seller shall deliver to the Buyer a certificate issued by the Minister of
Finance pursuant to Section 6 of the Retail Sales Tax Act (Ontario) to the
effect that each of Eaton Yale and ETN Offshore has paid all taxes collectable
or payable under such Act or has otherwise entered into arrangements
satisfactory to such Minister to pay any such taxes.
13.5 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Seller contained herein shall, if qualified by materiality, be
true and correct and, if not so qualified, be true and correct in all material
respects at and as of the Closing as if made as of the Closing, in each case,
except for any violations thereof which, individually or in the aggregate, would
not have an adverse effect on the value of the Transferred Assets in excess of
an amount equal to five percent (5%) of the Purchase Price; provided, that
representations and warranties that are made as of a specific date need be true
in all material respects only as of such date and that representations and
warranties with Corresponding Schedules amended pursuant to Section 7.10 need be
true in all material respects subject to any such amendment, in each case,
except for any violations thereof which, individually or in the aggregate, would
not have an adverse effect on the value of the Transferred Assets in excess of
an amount equal to five percent (5%) of the Purchase Price. The Seller shall
furnish the Buyer with an appropriate closing certificate, dated the Closing
Date, to that effect.
13.6 PERFORMANCE BY THE SELLER. All of the covenants and agreements
required by this Agreement to have been performed and complied with by the
Seller, if qualified by materiality, shall
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have been performed and complied with and, if not so qualified, shall have been
performed and complied with by the Seller in all material respects prior to or
on the Closing Date, in each case except where such nonperformance or
noncompliance, individually or in the aggregate, would not have an adverse
effect on the value of the Transferred Assets in excess of an amount equal to
five percent (5%) of the Purchase Price. The Seller shall have delivered to the
Buyer an appropriate certificate to that effect dated the Closing Date.
13.7 STATUTORY PROHIBITION. No written or published statute, rule,
regulation or order shall have been enacted, entered or deemed applicable by any
domestic or foreign government or governmental or administrative agency or court
which would make the transaction contemplated by this Agreement illegal.
13.8 NO MATERIAL ADVERSE CHANGE. There shall have not been any adverse
change in the financial condition or property of the Division or in the Business
as such is currently conducted, the effect of which is materially adverse to the
value of the Transferred Assets taken as a whole or materially adverse to the
Business, the condition (financial or otherwise) or results of operations of the
Business in each case taken as a whole.
13.9 REAL ESTATE MATTERS. The provisions in Section 11.2 shall have
been satisfied by the Seller or waived by the Buyer.
13.10 LANDLORD CONSENT. The landlord for the Brunswick Facility shall
have given its consent to the assignment to the Buyer or a Buyer Subsidiary of
the Seller's interest as tenant under the lease for the Brunswick Facility dated
March 29, 1994, as amended (the "Brunswick Landlord Consent").
ARTICLE 14
CONDITIONS TO OBLIGATIONS OF THE SELLER
The obligations of the Seller under this Agreement are subject to the
satisfaction at or prior to the Closing Date of the following conditions, any of
which may be waived in whole or in part by the Seller in its sole discretion by
delivery of a written notice to that effect to the Buyer, which shall constitute
a release by the Seller with respect to such condition.
14.1 HSR/COMPETITION ACT COMPLIANCE. All applicable governmental
pre-merger filing requirements under the HSR Act shall have been satisfied and
the applicable waiting period requirements under the HSR Act shall have been
terminated early or shall have expired. All filings required to be made under
the Competition Act (Canada) shall have been made. The applicable waiting
periods under the Competition Act shall have expired or
(i) the Buyer shall have been advised in writing by the Commissioner
of Competition that he has determined not to take any action or
any proceeding, including making an
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application for an order under Section 92 of the Competition Act
in respect of this transaction; or
(ii) an advance ruling certificate shall have been issued under
Section 102 of the Competition Act in respect of this
transaction.
14.2 NO LITIGATION. At the Closing Date, no litigation, proceeding,
investigation, or inquiry shall be pending or threatened to enjoin or prevent
the consummation of the transactions contemplated by this Agreement.
14.3 TRUTH OF REPRESENTATION AND WARRANTIES. The representations and
warranties of the Buyer contained herein shall, if qualified by materiality, be
true and correct and, if not so qualified, be true and correct in all material
respects at and as of the Closing as if made as of the Closing, in each case,
except for any violations thereof which, taken as a whole, would not reasonably
be likely to have a Material Adverse Effect; provided, that representations and
warranties that are made as of a specific date need be true in all material
respects only as of such date, except for any violations thereof which, taken as
a whole, would not reasonably be likely to have a Material Adverse Effect. The
Buyer shall furnish the Seller with an appropriate closing certificate, dated
the Closing Date, to that effect.
14.4 PERFORMANCE BY THE BUYER. All of the covenants and agreements
required by this Agreement to have been performed and complied with by the
Buyer, if qualified by materiality, shall have been performed and complied with
and, if not so qualified, shall have been performed and complied with by the
Buyer in all material respects prior to or on the Closing Date, in each case,
except where such nonperformance or noncompliance, taken as a whole, would not
reasonably be likely to have a Material Adverse Effect. The Buyer shall have
delivered to the Seller an appropriate certificate to that effect dated the
Closing Date.
14.5 STATUTORY PROHIBITION. No written or published statute, rule,
regulation or order shall have been enacted, entered or deemed applicable by any
domestic or foreign government or governmental or administrative agency or court
which would make the transaction contemplated by this Agreement illegal.
14.6 LANDLORD CONSENT. The landlord for the Brunswick Facility shall
have given the Brunswick Landlord Consent.
ARTICLE 15
CLOSING
15.1 THE CLOSING DATE. The Closing shall take place at the offices of
the Seller, at Eaton Center, Cleveland, Ohio, at 10:00 a.m. on August 2, 1999
(but effective as of 12:01 a.m., Cleveland, Ohio local time on August 1, 1999),
or, if the conditions specified in Articles 13 and 14 have not been fulfilled or
waived by such date, on the last business day of the month in which the
fulfillment
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or waiver of such conditions occurs or at such other place or on such other day
as the Buyer and the Seller shall agree upon in writing. Such date is herein
called the "Closing Date." If all of the conditions specified in Articles 13 and
14 shall have been fulfilled or waived in writing by the Buyer or by the Seller,
as the case may be, on or by the Closing Date, then, on the Closing Date, the
Buyer and the Seller shall make the following deliveries.
15.2 DELIVERIES BY THE BUYER. Subject to the terms and conditions of
this Agreement, at the Closing, the Buyer shall deliver or cause to be delivered
to the Seller:
(a) the Purchase Price required by Section 4.1 of this
Agreement;
(b) the Assumption Agreement;
(c) the Services Agreement;
(d) the Leased Real Property Assignment and Assumption
Agreements;
(e) the Buyer Guaranty;
(f) the certificates referred to in Section 14.3 and Section
14.4; and
(g) any other documents required to be delivered by Buyer under
this Agreement or any Related Agreement.
15.3 DELIVERIES BY THE SELLER. Subject to the terms and conditions of
this Agreement, at the Closing, the Seller shall deliver or cause to be
delivered to the Buyer:
(a) a general assignment and ▇▇▇▇ of sale in the form set forth
on the Corresponding Exhibit;
(b) assignments of the Seller's ownership rights to each of the
Proprietary Rights in form mutually satisfactory to counsel for the
Buyer and the Seller hereunder and in recordable form to the extent
necessary to assign such rights;
(c) a limited warranty deed of transfer for the Massillon
Facility and a transfer deed for the ▇▇▇▇▇▇▇▇ Facility, in each case
subject to the Real Property Permitted Exceptions and each in form
acceptable for filing with and recording in the records of the
appropriate office or land registry office of the township, county,
state or province where such real estate is located, and such other
documents required to be delivered by the Seller under Article 11;
(d) the Services Agreement;
(e) the Brunswick Landlord Consent;
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(f) the Leased Real Property Assignment and Assumption
Agreements;
(g) the certificates referred to in Section 13.5 and Section
13.6;
(h) separate assignments or other appropriate instruments of
transfer to the Buyer of any of the Transferred Assets not
appropriately transferred by the documents referred to in clauses (a)
through (h) above; and
(i) any other documents required to be delivered by Seller under
this Agreement or any Related Agreement.
15.4 RIGHTS TO POSSESSION. The Buyer's right to possession of the
Transferred Assets shall commence at the close of business on the Closing Date,
and the Buyer or the Buyer Subsidiaries shall take possession of the Transferred
Assets at the places they are located on the Closing Date.
ARTICLE 16
SALES AND TRANSFER TAXES
The Seller and the Buyer shall share equally all sales, use, transfer
and documentary taxes and recording and filing fees, if any, including, without
limitation, all provincial land transfer taxes, provincial sales taxes, other
than Canadian Goods and Services Taxes under Part IX of the Excise Tax Act
(Canada), and any other charges applicable to the transfer of the Transferred
Assets and the assumption of the Assumed Liabilities provided for by this
Agreement. The Buyer's and the Seller's respective obligations with respect to
the GST Legislation are set forth in Section 9.1.
ARTICLE 17
BULK SALES
The Buyer hereby waives compliance by the Seller with any applicable
bulk sales or bulk transfer law applicable in any jurisdiction where the
Transferred Assets are located, and the Seller hereby agrees that the provisions
of Section 19.1 shall apply to any losses, damages, costs, charges or expenses
which the Buyer may sustain as a consequence of the Seller not complying with
such bulk sales or bulk transfer laws.
ARTICLE 18
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
18.1 SURVIVAL. The representations, warranties, covenants and
agreements contained in this Agreement shall survive the Closing only for the
applicable period set forth in this Article 18. All
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of the representations and warranties of the Seller and the Buyer contained in
this Agreement and all unasserted claims and causes of action with respect
thereto shall terminate upon expiration of the eighteenth month following the
Closing Date, except that:
(a) the representations and warranties in Section 5.11 (Tax
Matters), shall terminate upon the expiration of the applicable
statute of limitations;
(b) the representations and warranties in Section 5.12
(Environmental Matters) shall terminate upon the expiration of 36
months following the Closing Date; and
(c) the representations and warranties in Section 5.1
(Organization, Existence and Standing of the Seller), Section 5.2
(Corporate Authority), Section 5.6(a) (Owned Real Property), Section
5.7 (Title to Personal Property), Section 6.1 (Organization, Existence
and Standing of the Buyer), and Section 6.2 (Corporate Authority)
shall survive indefinitely.
The covenants and agreements contained in this Agreement which do not
have specific time periods of applicability shall survive the Closing Date
indefinitely. Covenants and agreements contained in this Agreement which have
specific time periods of applicability shall survive the Closing Date for the
periods set forth therein.
18.2 NOTICE OF CLAIM. No party shall have an obligation to indemnify
the other for breach of any representation, warranty, covenant or agreement
unless notice of a claim for indemnification with respect to such breach has
been submitted to the Indemnifying Party (as defined in Section 19.4) in
accordance with Article 19 prior to the end of the applicable survival period.
ARTICLE 19
INDEMNIFICATION
19.1 INDEMNIFICATION OF THE BUYER. Subject to Article 12, Article 18
and to compliance with Sections 19.3, 19.4, 19.10 and 19.11 of this Agreement,
the Seller agrees to indemnify the Buyer and the Buyer Subsidiaries against any
loss, cost, liability or expense (including, without limitation, costs and
expenses of investigation and litigation and, to the extent permitted by law,
actual attorney's fees) (collectively, "Indemnified Losses") incurred by the
Buyer or any Buyer Subsidiary by reason of (a) any breach of any representation,
warranty, covenant or agreement of the Seller (other than any such breach
relating to matters addressed in Section 5.12 or Article 12), or in any
certificate or other closing document furnished by the Seller, pursuant to this
Agreement, (b) the provision contained in Article 17, or (c) the assertion
against the Buyer or any Buyer Subsidiary of any of the Retained Liabilities or
liabilities retained or assumed by the Seller under Article 10.
19.2 INDEMNIFICATION OF THE SELLER. Subject to Article 12, Article 18
and to compliance with Sections 19.3, 19.4, 19.10 and 19.11 of this Agreement,
the Buyer agrees to indemnify the Seller and the Seller Subsidiaries against any
Indemnified Losses incurred by the Seller or any Seller Subsidiary by reason of
(a) any breach of any representation, warranty, covenant or agreement of the
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Buyer, or in any certificate or other closing document furnished by the Buyer,
pursuant to this Agreement, or (b) the assertion against the Seller or any
Seller Subsidiary of any of the Assumed Liabilities (other than those relating
to any Environmental Condition) or liabilities assumed by the Buyer under
Article 10.
19.3 ELIGIBLE CLAIM, THRESHOLD AMOUNT, PAYMENT. A Party may bring a
claim seeking indemnification (the "Indemnified Party") under the terms and
provisions of this Article 19 only if such claim exceeds $25,000 (an "Eligible
Claim"). Further, a Party may bring an Eligible Claim seeking indemnification
under the terms and provisions of this Article 19 only if such Eligible Claim,
either alone or when aggregated with other Eligible Claims for indemnification
by such party, exceeds 2% of the Purchase Price, as adjusted pursuant to Section
4.3 (the "Threshold Amount"). Until such time as a Party can bring an Eligible
Claim or Eligible Claims in the aggregate amount in excess of the Threshold
Amount, no right to indemnification under this Article 19 shall arise. In the
event that a Party brings an Eligible Claim or Eligible Claims for an amount in
excess of the Threshold Amount, such Party shall be entitled to indemnification
for the full amount of all Indemnified Losses up to the maximum amount referred
to in Section 19.10.
19.4 PROCEDURES FOR CLAIMS. Subject to Section 19.3, any Indemnified
Party shall provide written notice of any Eligible Claim to the Party from which
it seeks indemnification (the "Indemnifying Party") within 30 days of such Party
becoming aware of the existence of such Eligible Claim stating the amount
claimed to be due and payable or an estimate of the claim if contingent or
unliquidated, the basis of the claim and the provision or provisions of this
Agreement under which such claim is asserted. Within 30 calendar days after
receipt of such notice, the Indemnifying Party shall by written notice to the
Indemnified Party either (a) concede liability in whole as to the amount claimed
in such notice, (b) deny liability in whole as to such amount, or (c) concede
liability in part and deny liability in part. If the Parties are not able to
resolve any dispute over a claim brought under this Article 19 within 30 days
after the Indemnified Party receives written notice from the Indemnifying Party
denying liability in whole or in part, the Parties shall submit the dispute to
the dispute resolution procedure set forth in Article 22.
19.5 THIRD-PARTY CLAIMS.
(a) An Indemnifying Party shall have the right, exercisable by
written notice to the Indemnified Party within 30 days of receipt of written
notice from the Indemnified Party of the commencement of or assertion of any
lawsuit filed or instituted against the Indemnified Party asserting any claim
for which the Indemnifying Party may be responsible under this Agreement (each,
a "Third Party Claim"), to assume and conduct the defense of each Third Party
Claim with counsel selected by the Indemnifying Party and reasonably acceptable
to the Indemnified Party; provided, however, that such Third Party Claim
involves (and continues to involve) solely monetary damages (the "Litigation
Condition").
(b) If the Indemnifying Party does not assume the defense of such
Third Party Claim in accordance with this Section 19.5, the Indemnified Party
may continue to defend the Third Party Claim. If the Indemnifying Party has
assumed the defense of a Third Party Claim as provided in this Section 19.5, the
Indemnifying Party shall not be liable for any legal expenses subsequently
incurred
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by the Indemnified Party in connection with the defense thereof; provided,
however, that if (i) the Litigation Condition ceases to be met, or (ii) the
Indemnifying Party fails to take reasonable steps necessary to defend diligently
such Third Party Claim within 30 calendar days (or such shorter period as may be
required to defend diligently such Third Party Claim) after receiving written
notice from the Indemnified Party that the Indemnified Party believes the
Indemnifying Party has failed to take such steps, the Indemnified Party may
assume its own defense, and the Indemnifying Party shall be liable for all
reasonable costs or expenses paid or incurred in connection therewith.
(c) Without the Indemnified Party's prior written consent or
authorization, which consent or authorization will not be unreasonably withheld,
the Indemnifying Party shall not consent to a settlement of, or the entry of any
judgment arising from, any Third Party Claim which does not include as a term
thereof the giving by the claimant to the Indemnified Party of a release from
all liability in respect of such Third Party Claim. If the Indemnifying Party
does not assume the defense of any such Third Party Claim or litigation
resulting from such claim in accordance with the terms of this Section 19, the
Indemnified Party may defend against such claim or litigation in such manner as
it may deem appropriate, including settling such claim or litigation, after
giving notice of the same to the Indemnifying Party, on such terms as the
Indemnified Party may deem appropriate. If the Indemnifying Party seeks to
question the manner in which the Indemnified Party defended such Third Party
Claim or litigation resulting from such claim or the amount of or nature of any
such settlement, the Indemnifying Party shall have the burden to prove by a
preponderance of the evidence that the Indemnified Party did not defend such
claim in a reasonably prudent manner.
19.6 EXCLUSIVE REMEDY. Except as otherwise expressly provided for in
this Agreement, following the Closing, the indemnification provided by this
Article 19 shall be the exclusive remedy for the Buyer or the Seller, as the
case may be, with respect to this Agreement (other than those matters addressed
by Article 12) and the transactions contemplated by this Agreement, except
claims for fraud or intentional misrepresentation shall not be limited by the
provisions in this Article 19.
19.7 PAYMENT OF AMOUNTS. If any amount is determined to be due and
owing to a Party as a result of any occurrence which gives rise to
indemnification obligations under this Section 19, such amount shall be paid by
the Indemnifying Party to the Indemnified Party in immediately available funds.
All indemnification payments under this Article 19 (or under Article 12 as set
forth therein) shall be deemed adjustments to the Purchase Price.
19.8 TAX AND/OR INSURANCE OFFSET. The amount of any Indemnified Losses
suffered by an Indemnified Party shall be reduced by the net effect of any
tax-related benefits or insurance coverage which may be realized by such Party
following the date of such Indemnified Losses in respect of or as a result of
such Indemnified Losses or the facts or circumstances relating thereto.
Notwithstanding the foregoing, it is understood and agreed that the
determination of the net tax effect and/or insurance coverage benefit of any
Indemnified Losses, if any, shall not delay payment or indemnification of such
Indemnified Losses by the Indemnifying Party. All Indemnified Losses shall be
paid or reimbursed promptly upon determination; the Indemnified Party shall
reimburse the Indemnifying Party for the net tax effect benefit of such
Indemnified Losses, if any, upon the date
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of filing of the tax return with respect to which such tax benefit is realizable
or upon the date of recovery of any insurance proceeds.
19.9 NO INDEMNIFICATION FOR KNOWN BREACHES OF REPRESENTATIONS AND
WARRANTIES. Notwithstanding any provision to the contrary contained in this
Agreement, including Article 12 hereof, in the event that the Seller proves that
the Buyer had actual knowledge, on or before the Closing Date, of the specific
facts upon which a claim for indemnification by the Buyer is based, then the
Seller shall have no liability for any Indemnified Losses resulting from or
arising out of such claim.
19.10 MAXIMUM AMOUNT OF ANY INDEMNIFICATION. Notwithstanding anything
in this agreement to the contrary, no party shall be required to indemnify the
other for claims with respect to which indemnification (on a cumulative basis)
under this Article 19 would otherwise be available in excess of an amount equal
to 25% of the Purchase Price, as adjusted pursuant to Section 4.3.
19.11 INDEMNIFICATION WITH RESPECT TO CERTAIN LIABILITIES.
Notwithstanding anything in this Article 19 to the contrary, claims by the Buyer
against the Seller or any Seller Subsidiary in respect of the Retained
Liabilities, the Seller's liabilities under Article 10 or Article 17, whether
any of the foregoing liabilities are directly or indirectly related to any
representation or warranty herein, and claims by the Seller or any Seller
Subsidiary in respect of the Assumed Liabilities, or the Buyer's liabilities
under Article 10, whether any of the foregoing liabilities are directly or
indirectly related to any representation or warranty herein, shall not be
subject to any of the limitations on indemnification set forth in Sections 19.3
or 19.10, including, without limitation, those limitations relating to Eligible
Claims, the Threshold Amount or the maximum amount of indemnification.
ARTICLE 20
TERMINATION
20.1 GROUNDS. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned only under one of the following circumstances:
(a) At any time (by written notice delivered to the other
Party) prior to the Closing:
(i) By the Buyer (upon action by its Board of Directors) if
any of the conditions set forth in Article 13 of this Agreement
has become incapable of fulfillment on or before the Termination
Date;
(ii) By the Seller (upon action by its Board of Directors)
if any of the conditions set forth in Article 14 of this
Agreement has become incapable of fulfillment on or before the
Termination Date;
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(iii) By the Seller or the Buyer if the Closing has not
occurred on or prior to the Termination Date, unless the absence
of such occurrence shall be due to the delay or failure of the
Party seeking to terminate this Agreement (or its Subsidiaries or
Affiliates) to perform in all material respects each of its
obligations under this Agreement required to be performed by it
at or prior to the Closing; provided, however, that if the
Closing has not occurred by the Termination Date solely due to
the failure of the conditions set forth in Section 13.1 or 14.1
to be satisfied, then either of the Parties may extend the
Termination Date for such period of time as necessary to satisfy
such conditions, provided that such extension shall in no event
exceed 180 days after the date hereof without the prior written
consent of each of the parties;
(iv) By either the Buyer or the Seller, if a court of
competent jurisdiction or governmental, regulatory or
administrative agency or commission shall have issued an order,
decree or ruling or taken any other action, in each case
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and through no
failure, delay or fault of or breach by the terminating Party (or
its Subsidiaries or Affiliates), and such order, decree, ruling
or other action shall have become final and nonappealable; or
(v) By the Buyer at any time if the Seller amends any of the
Corresponding Schedules pursuant to Section 7.10 and such
amendment reflects information that would have or has had a
Material Adverse Effect.
(b) At any time by the mutual written consent of both the
Buyer and the Seller.
20.2 EFFECT.
(a) If any of the conditions to the obligations of the Buyer in
Article 13 or of the Seller in Article 14 have not been satisfied prior to the
Termination Date, the Buyer or the Seller, as the case may be, shall have the
right either (i) to terminate this Agreement pursuant to, and with liability
allocated as set forth in, this Article 20, or (ii) to waive and release their
respective conditions and to proceed with the Closing and the consummation of
the transactions contemplated by this Agreement without liability or further
obligation with respect to the nonfulfillment of such condition.
(b) In the event that this Agreement is terminated as permitted by
Section 20.1, all obligations of the Seller and the Buyer hereunder shall
terminate without liability or further obligations, except as provided in
Section 20.3.
(c) Notwithstanding the foregoing, any confidentiality agreement
entered into by the Parties, and any other agreements between the Parties that
do not expressly provide for their termination, shall survive the termination of
this Agreement.
20.3 LETTER OF CREDIT. Contemporaneously with execution of this
Agreement, the Buyer will cause BankBoston, N.A. to issue a letter of credit in
favor of the Seller in the amount of
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$4,000,000. Such letter of credit will be in form and substance reasonably
satisfactory to the Seller. If the conditions set forth in Article 13 have been
satisfied and the Closing has failed to occur within the time required under
this Agreement because the Buyer has failed to perform its obligations under
this Agreement, then the Seller shall have the right to draw upon the letter of
credit. In such event, the amount drawn on the letter of credit shall be
retained by the Seller as liquidated damages, and not as a penalty, the parties
hereby acknowledging and agreeing that the amount of the Seller's actual damages
in such circumstances would be difficult, if not impossible, to ascertain, that
the amount of the letter of credit constitutes a reasonable estimate thereof and
that other than the right of termination set forth in Sections 20.1(a)(ii) or
20.1(a)(iii) hereof, such liquidated damages shall be the sole and exclusive
remedy of the Seller with respect thereto.
ARTICLE 21
EXPENSES
Subject to Article 20, Section 9.1, Section 11.1(b), and Article 16,
whether or not the transactions contemplated hereby are consummated, each of the
Parties will, except in the case of any breach of the terms and provisions of
this Agreement for which either the Buyer or the Seller, as the case may be, may
be entitled to indemnification under Article 19 hereof, pay its respective
expenses, income and other taxes and costs (including, without limitation, the
reasonable commissions, fees, disbursements and expenses of its investment
bankers, attorneys, accountants and consultants) incurred by it in negotiating,
preparing, closing and carrying out this Agreement and the Related Agreements
and the transactions contemplated hereby and thereby.
ARTICLE 22
DISPUTE RESOLUTION
22.1 NOTICE OF DISPUTE. In the event of a dispute between the Parties
arising out of or related to this Agreement (except for matters to be resolved
by the Independent Accountant), either Party may invoke the procedures specified
in this Article 22 by giving written notice to the other Party. Such written
notice will describe briefly the nature of the dispute, the approximate amount
of any monetary claim and shall identify an individual with authority to settle
the dispute on behalf of that Party. The Party receiving such notice shall have
ten days within which to designate an individual with authority to settle the
dispute on its behalf and to notify the other Party of its designation (the
individuals so designated shall be referred to as the "Authorized Individuals").
The Authorized Individuals shall be elected officers of the Parties if the
amount claimed exceeds $5,000,000.
22.2 INVESTIGATION; ADR. The Authorized Individuals shall make
whatever investigation each deems appropriate and promptly thereafter, but no
later than 30 days from the date of the original notice invoking these
procedures, shall commence discussions concerning resolution of the dispute. If
the dispute has not been resolved within 60 days from the date of the original
notice
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invoking these procedures, the Parties shall submit the matter to alternative
dispute resolution ("ADR") in accordance with the following mini-trial
procedure.
22.3 SELECTION OF NEUTRAL. The Parties shall have ten days from
expiration of the periods referred to in this Section 22.3 or the agreement of
the Parties to submit the matter to ADR, whichever occurs first, within which to
agree upon a mutually acceptable person not then or previously affiliated in any
manner with either Party (the "Neutral"). If no Neutral has been selected within
that time period, either Party may request the Center for Public Resources, or
if the Buyer has previously objected to the use of the Center for Public
Resources, the American Arbitration Association, to supply within ten days a
list of at least three potential Neutrals with qualifications as specified in
the request, or as agreed to jointly by the Parties. Within seven days of
receipt of the list, the Parties shall rank the proposed candidates
independently, exchange rankings (ranked numerically with one being the most
desired) and select as the Neutral the individual who receives the highest
combined ranking who is available to serve. If two or more individuals have the
highest ranking and the Parties do not agree within five days as to whom to
select, the organization that provided the list of individuals shall select the
Neutral from among those individuals with the highest ranking.
22.4 PREHEARING CONFERENCE. Within 30 days after appointment of the
Neutral, the Parties agree to meet with the Neutral for a prehearing conference.
At such conference, the Parties shall arrange for the exchange of information in
the possession of the other Party, including certain limited depositions where
appropriate, and the stipulation of uncontested facts. The Parties shall
establish the extent of and schedule for the production of relevant documents,
sworn depositions and the identification of witnesses. Should a dispute arise
over the extent of document production, appropriate witnesses or the scheduling
of any activity, including the hearing location and date, the Neutral shall make
a final determination after hearing each Party's position. At such prehearing
conference, or at a later scheduled conference as agreed to by both Parties, the
location and date for the hearing shall be set which shall not, unless both
Parties agree, be more than 120 days from the date of the initial prehearing
conference.
22.5 WRITTEN SUMMARY OF POSITION. One week prior to the scheduled
hearing, each Party shall deliver to the Neutral and to the other Party a
written summary of its views on the matter in dispute. The summary shall be no
longer than twenty double-spaced pages unless the Parties agree otherwise.
22.6 HEARING. At the hearing each Party shall be represented by the
Authorized Individuals and also by counsel. Each Party shall have an agreed-upon
time, not to exceed four hours, in order to present its case. The Authorized
Individuals shall hear the presentation but shall not participate in them. The
Neutral will be permitted to ask questions during the presentation by each side
and the Authorized Individuals may ask questions after the conclusion of the
other Party's presentation. At the conclusion of such presentations, the
Authorized Individuals, without counsel, shall meet with the Neutral to discuss
the case in order to reach a resolution. If no settlement is reached, the
Neutral will orally summarize the dispute, the strengths and weaknesses of both
Parties' positions and give his opinion as to how much the Party seeking
recovery or other relief would receive if the matter
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were resolved through litigation. There shall be no stenographic, visual or
audio record made of the hearing.
22.7 COMMITMENT TO ADR. The Parties agree to participate in the ADR
to its conclusion as designated by the Neutral and not to terminate negotiations
concerning resolution of the matters in dispute until at least two weeks
thereafter. Each Party agrees not to commence a lawsuit or seek other remedies
prior to the conclusion of the two-week post-hearing negotiation period;
provided, however, that notwithstanding anything to the contrary in this Article
22 or elsewhere in this Agreement, either Party may commence litigation on any
date after which the commencement of litigation would be barred by an applicable
statute of limitations or in order to request equitable relief to prevent
irreparable harm or other injury for which equitable relief is appropriate. In
such event, the Parties agree (except as prohibited by court order) to continue
to participate in the ADR to its conclusion.
22.8 FEES. The fees of, and reasonable costs incurred by, the Neutral
shall be shared equally by the Parties. The Neutral shall be disqualified as a
witness, consultant, expert or counsel for any Party with respect to the matters
in dispute and any related matters.
22.9 CONFIDENTIALITY. The ADR is a compromise negotiation for purposes
of the Federal Rules of Evidence and state rules of evidence. The entire
procedure is confidential. All conduct, statements, promises, offers, views and
opinions, whether oral or written, made in the course of the ADR by any of the
Parties, their agents, employees, representatives or other invitees to the ADR
and by the Neutral, who is the Parties' joint agent for purposes of these
compromise negotiations, are confidential and shall, in addition and where
appropriate, be deemed to be work product and privileged. Such conduct,
statements, promises, offers, views and opinions shall not be discoverable or
admissible for any purposes, except impeachment, in any litigation or other
proceeding involving the Parties and shall not be disclosed to anyone not an
agent, employee, expert, witness, or representative for any of the Parties.
Evidence otherwise discoverable or admissible is not excluded from discovery or
admission as a result of its use in the ADR, and the Parties may request any
discovery to which they would otherwise be entitled without regard to the
documents, depositions or other discovery that occurred as part of the ADR.
ARTICLE 23
MISCELLANEOUS
23.1 NOTICES. Any notice, request, instruction, consent or other
document to be given hereunder by either Party to the other Party shall be in
writing and will be deemed duly given (i) when personally delivered, (ii) upon
receipt of a telephonic facsimile transmission with a confirmed telephonic
transmission answer back, (iii) three days after having been deposited in the
United States mail, certified or registered, return receipt requested, postage
prepaid, or (iv) one business day after having been dispatched by a nationally
recognized overnight courier service, addressed to such Party
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at the following address (or at such other address or number as is given in
writing by either Party to the other) as follows:
If to the Buyer: TransTechnology Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Seller: ▇▇▇▇▇ Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Office of the Secretary
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
23.2 WAIVER. None of the terms or conditions of this Agreement may be
waived except in writing, specifically so stating, at any time by the Party
which is entitled to the benefits thereof. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of such provision at
any time in the future or a waiver of any other provision hereof.
23.3 CAPTIONS. The captions set forth in this Agreement are for
convenience only and shall not be considered as part of this Agreement, nor
affect in any way the meaning of the terms and provisions hereof.
23.4 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the Parties hereto; provided, however, that this
Agreement may not be assigned by any Party without the express written consent
of the other Party hereto, except that either Party may assign all or part of
its rights and obligations under this Agreement to one or more Subsidiaries of
such Party, but any such assignment will not release such Party of any of its
obligations. Effective as of the Closing, the Buyer and the Buyer Subsidiaries
may pledge, assign and grant to the Buyer's institutional lenders, for the
benefit of such lenders, a continuing security interest and lien on all of the
Buyer's or the Buyers Subsidiaries' right, title and interest in and to this
Agreement as security for the payment and performance of all obligations of the
Buyer or Buyer Subsidiaries to such lenders by reason of borrowings or the
guaranty of such borrowings, subject to any defense, claim or right of offset
the Seller may have against the Buyer.
23.5 ENFORCEABILITY. If any provision of this Agreement as applied to
any Party or to any circumstance shall be adjudged by a court to be invalid or
unenforceable, the same shall in no way affect any other provision of this
Agreement, the application of such provision in any other circumstances, or the
validity or enforceability of this Agreement. The Parties intend this Agreement
to be enforced as written. If any such provision, or part thereof, however, is
held to be unenforceable because of the duration thereof or the area covered
thereby, the Seller and the Buyer agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision,
and/or to delete the specific words or phrases, and in its amended form such
provision
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shall then be enforceable and shall be enforced. If any provision of this
Agreement shall otherwise finally be determined to be unlawful, then such
provision shall be deemed to be severed from this Agreement and every other
provision of this Agreement shall remain in full force and effect.
23.6 NO THIRD-PARTY BENEFICIARIES OR RIGHT TO RELY. Notwithstanding
anything to the contrary in this Agreement, (a) nothing in this Agreement is
intended to or shall create for or grant to any Third Party (including without
limitation to any former, current or future employees or officers of any Party,
any Subsidiary or any labor union) any rights whatever, as a Third Party
beneficiary or otherwise, (b) no Third Party is entitled to rely on any of the
representations, warranties, covenants or agreements contained herein, and (c)
no Party hereto shall incur any liability or obligation to any Third Party
because of any reliance by such Third Party on any representation, warranty,
covenant or agreement herein.
23.7 COUNTERPARTS. This Agreement may be executed in more than one
counterpart, each of which shall for all purposes be deemed to be an original
and all of which shall constitute one and the same agreement. A signature to
this Agreement delivered by telecopy or other artificial means shall be deemed
valid.
23.8 GOVERNING LAW. This Agreement shall in all respects be
interpreted, construed and governed by and in accordance with the local laws of
the State of Ohio, without regard to principles of conflict of laws.
23.9 TIME OF ESSENCE. Time shall be of the essence with respect to
this Agreement.
23.10 NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the Parties hereto to express their
mutual intent, and no rule of strict construction will be applied against either
Party.
23.11 PUBLIC ANNOUNCEMENTS. The Buyer and the Seller shall agree on
the terms of the press releases to be issued upon the execution of this
Agreement and shall consult with each other before issuing any other press
releases with respect to this Agreement and the transactions contemplated
hereby, including without limitation, any termination of this Agreement for any
reason.
23.12 CURRENCY/METHOD OF PAYMENT. Unless otherwise specifically
provided herein, (a) all references to amounts of money shall be to lawful money
of the United States, and (b) all payments of money to be made by the Buyer or
the Seller, as the case may be, shall be made in immediately available funds.
23.13 SUBSEQUENT LEGAL FEES. In the event any action or proceeding is
initiated to enforce any of the terms and provisions of this Agreement, the
Party prevailing in said action shall be entitled to its reasonable attorney's
fees and costs.
23.14 EXCLUSIVE JURISDICTION AND CONSENT TO SERVICE OF PROCESS. The
Parties agree that any legal action, suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby, shall be
instituted in a federal or state court sitting in Cuyahoga County, Ohio,
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which shall be the exclusive jurisdiction and venue of said legal proceedings
and each Party hereto waives any objection which such Party may now or hereafter
have to the laying of venue of any such action, suit or proceeding, and
irrevocably submits to the jurisdiction of any such court in any such action,
suit or proceeding. Any and all service of process and any other notice in any
such action, suit or proceeding shall be effective against such Party when
transmitted in accordance with the notice provision herein. Nothing contained
herein shall be deemed to affect the right of any Party hereto to serve process
in any manner permitted by law.
23.15 MISCELLANEOUS. As used in this Agreement, the Corresponding
Schedules, the Corresponding Exhibits and the Related Agreements and as required
by the context: the singular and plural shall be deemed to include each other
and each gender, to include all genders; the terms herein, hereof, and hereunder
or other similar terms refer to this Agreement or the Related Agreements, in
which they appear as a whole and not only to the particular sentence, paragraph,
subsection or section in which any such term is used except as expressly more
specifically limited; and words and phrases defined in this Agreement have the
same meaning in the Corresponding Schedules, Corresponding Exhibits and Related
Agreements unless specifically provided to the contrary in any thereof.
23.16 ENTIRE AGREEMENT; AMENDMENT. This Agreement, including all
Corresponding Schedules and Corresponding Exhibits hereto, together with the
Related Agreements and the Confidentiality Agreement dated April 28, 1999
between the Seller and the Buyer, constitute the sole understanding of the
Parties with respect to the matters contemplated hereby and thereby and
supersedes and renders null and void all other prior agreements and
understandings, oral or written, between the Parties with respect to such
matters. No amendment, modification or alteration of the terms or provisions of
this Agreement, including all Corresponding Schedules and Corresponding Exhibits
hereto, shall be binding unless the same shall be in writing, specifically so
stating, and duly executed by the Party against whom such would apply.
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
duly executed and delivered by its duly authorized representatives as of the
date first written above.
▇▇▇▇▇ CORPORATION
BY: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------
Title: Senior Vice President and
-----------------------------
Group Executive - Automotive
AND BY: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Title: Secretary
-----------------------------
TRANSTECHNOLOGY CORPORATION
BY: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------
Title: Chairman, President &
Chief Executive Officer
-----------------------------
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AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
This Amendment No. 1 to Asset Purchase Agreement (the "Agreement") is
made this 31st day of August, 1999, between ▇▇▇▇▇ Corporation, an Ohio
corporation (the "Seller"), and TransTechnology Corporation, a Delaware
corporation (the "Buyer") and amends, supplements and modifies that certain
Asset Purchase Agreement dated as of July 9, 1999 between the parties hereto,
(the "Purchase Agreement"). Capitalized terms used but not otherwise defined
herein have the meanings ascribed to them in the Purchase Agreement.
1. A new Section 9.12 shall be added to the Purchase Agreement
which will read in its entirety as follows:
9.12 FICA AND UNEMPLOYMENT TAXES. Buyer agrees to be a successor
for purposes of payroll tax reporting and filings and thus carryover
the cumulative FICA and unemployment tax balances withheld from the
Transferred Employees (as defined in Section 10.1) pursuant to
applicable provisions of the Tax Code. Seller agrees to (1) provide
accurate data with respect to such tax balances to Buyer suitable for
proper tax filings and (2) indemnify Buyer for any loss, cost,
liability or expense (including, without limitation, costs and
expenses of investigation and litigation and, to the extent permitted
by law, actual attorney's fees) incurred as a result of any inaccurate
data provided by Seller with respect to such tax balances. The
indemnification provided pursuant to this Section 9.12 is subject to
the provisions of Article 19, except that it will not be subject to
any of the limitations on indemnification set forth in Sections 19.3
or 19.10, including, without limitation, those limitations relating to
Eligible Claims, the Threshold Amount or the maximum amount of
indemnification
2. Section 10.6(a) of the Purchase Agreement shall be amended by
deleting the following language in the first sentence of this Section:
"and each former employee (and, if applicable, the spouse and
beneficiaries of such former employee)".
3. Section 10.6(a) of the Purchase Agreement shall be further
amended by adding the following new sentence after the existing third sentence
of this Section:
"In addition, the Buyer's Investment Plan shall provide the
Investment Plan Participants with immediate eligibility as of the
Closing Date."
4. Section 15.1 of the Purchase Agreement shall be amended and
restated in its entirety to read as follows:
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"15.1 THE CLOSING DATE. The Closing shall take place at the
offices of the Seller, at Eaton Center, Cleveland, Ohio, at 10:00 a.m.
on the last business day of the month in which the fulfillment or
waiver of the conditions specified in Articles 13 and 14 occurs or at
such other place or on such other day as the Buyer and the Seller
shall agree upon in writing (the "Closing Date"). The Closing shall be
effective as of the close of business on the Closing Date. If all of
the conditions specified in Articles 13 and 14 shall have been
fulfilled or waived in writing by the Buyer or by the Seller, as the
case may be, on or by the Closing Date, then, on the Closing Date, the
Buyer and the Seller shall make the following deliveries."
5. Except as specifically provided herein, all terms, provisions
and conditions of the Purchase Agreement remain in full force and effect.
6. This Agreement may be executed in one or more counterparts, each
of which will be deemed to be an original but all of which together will
constitute one and the same document. This Agreement, once executed, may be
delivered to either party through the use of facsimile transmission. Any and all
signatures of the parties appearing on any facsimile copies of the signature
page of this Agreement shall be deemed, unless otherwise proved, the lawful and
valid signature of the executing party.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first above written.
▇▇▇▇▇ CORPORATION
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Title: Senior Vice President
----------------------------
AND BY: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇. ▇. ▇▇▇▇▇▇▇▇
-----------------------------
Title: Secretary
---------------------------
TRANSTECHNOLOGY CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Title: Vice President, Secretary
and General Counsel
----------------------------
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AMENDMENT NO. 2 TO ASSET PURCHASE AGREEMENT
This Amendment No. 2 to Asset Purchase Agreement (the "Agreement") is
made this 31st day of August, 1999, between ▇▇▇▇▇ Corporation, an Ohio
corporation (the "Seller"), and TransTechnology Corporation, a Delaware
corporation (the "Buyer") and amends, supplements and modifies that certain
Asset Purchase Agreement dated as of July 9, 1999 between the parties hereto,
(the "Purchase Agreement"). Capitalized terms used but not otherwise defined
herein have the meanings ascribed to them in the Purchase Agreement.
1. Section 10.7(a) shall be amended by deleting the second to last
sentence of such Section and replacing it with the following new sentences:
With respect to the portion of a Savings Plan Participant's
accounts consisting, as of the day before the transfer, of plan loans
and/or investment in ▇▇▇▇▇ Corporation common stock, the transfer
contemplated by this Section 10.7 shall be made in the form of an in
kind transfer by the Seller's Savings Plan to the Buyer's Savings
Plan. With respect to ▇▇▇▇▇ Corporation common stock transferred in
kind under the preceding sentence: (i) Buyer shall cause the Buyer's
Savings Plan to allow the Savings Plan Participants, for a period of
eighteen (18) months after such transfer, and on at least four (4)
occasions during such period, to direct that all or a portion of the
amounts invested in their respective accounts in ▇▇▇▇▇ Corporation
common stock be invested in an alternative investment otherwise
available under the Buyer's Savings Plan; (ii) as soon as practicable
after the end of the eighteen month period described in clause (i)
above, the Buyer's Savings Plan shall require that any ▇▇▇▇▇
Corporation common stock remaining in the Savings Plan Participant
accounts at the end of such period shall be liquidated and the
proceeds reinvested in an alternative investment otherwise available
under the Buyer's Savings Plan selected by the Savings Plan
Participants or, in the absence of a selection, the available default
investment alternative identified by the Seller; and (iii) to the
extent that either the Buyer or any Buyer Subsidiary is found liable
for breach of a fiduciary duty under ERISA with respect to the receipt
and/or holding of the ▇▇▇▇▇ Corporation common stock by the Buyer's
Savings Plan or with respect to the foregoing provisions of this
sentence or a claim to the effect that such a breach has occurred is
made: (A) Seller agrees to, and shall, defend, indemnify and hold
harmless the Buyer and the Buyer Subsidiaries and their respective
officers, directors, employees and agents and the trustee of Buyer's
Savings Plan from and against any and all claims, expenses,
liabilities, obligations and costs related thereto (including, without
limitation, attorneys fees and expenses); and (B) the Seller's
indemnification obligation under this sentence shall not be subject to
Section 19.3 or Section 19.10 and shall be disregarded entirely in
applying such Sections.
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2. A new Section 10.15 shall be added to the Purchase Agreement
which shall read in its entirety as follows:
10.15 RETIREMENT PLAN TRANSFER. Buyer and Seller agree to enter
into an agreement providing that, subject to actuarial
approval and agreement which will not be unreasonably
withheld, the assets and liabilities associated with the
Seller Plan Participants under the Seller Plan shall be
transferred to a new defined benefit plan established by
the Buyer (the "Buyer Plan"), with the assets so
transferred measured by the greater of: (a) the amount
required to be transferred under Code Section 414(1)
(determined using the assumptions used by the Pension
Benefit Guaranty Corporation with respect to plan
terminations occurring on the day before the Closing, such
assumptions being deemed reasonable under Tax Code
Regulation Section 1.414(1)-1(b)(9)); or (b) the projected
benefit obligation with respect to the Seller Plan
Participants, determined using the assumptions used by the
Seller's actuaries for financial statement purposes, except
that the discount rate that would otherwise be used for
such purposes (the reported yield of the ▇▇▇▇▇▇▇ ▇▇▇▇▇
AAA-AA Corporate Bond Index (15+ years)) shall be updated
to be the discount rate in effect as of the last day of the
month coincident with or preceding the Closing Date,
rounded to the nearest one-quarter percent. For purposes of
this Section 10.15; (a) the term "Seller Plan" means the
Pension Plan for ▇▇▇▇▇ Corporation Employees; and (b) the
term "Seller Plan Participants" means each Division
Employee, Division Retiree, former division employee with
deferred vested benefits and any other person entitled to
benefits with respect to any of the foregoing individuals
who, immediately prior to the Closing Date are accruing or
most recently had accrued benefits under the portion of the
Seller Plan which previously separately existed as the
▇▇▇▇▇ Corporation Pension Plan A-3 for Hourly Rate
Employees of the Engineered Fasteners Operations Massillon
Division ("Massillon Appendix") or are eligible to become
or may become participants or beneficiaries under the
Massillon Appendix. The agreement contemplated by this
Section 10.15 shall also provide that for individuals who
both (a) would be Seller Plan Participants but for the fact
that they had terminated employment prior to the Closing
Date without vested benefits; and (b) become employed by
the Buyer or a Buyer Subsidiary within one year after the
Closing Date with the right under the applicable plan terms
to have his/her lost credited service reinstated, the
liability for such individuals for such lost credited
service and corresponding amount of assets (determined in a
manner consistent with the foregoing methodology) shall be
transferred from the Seller Plan to the Buyer Plan in an
adjusting transfer.
2
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3. Except as specifically provided herein, all terms, provisions
and conditions of the Purchase Agreement remain in full force and effect.
4. This Agreement may be executed in one or more counterparts, each
of which will be deemed to be an original but all of which together will
constitute one and the same document. This Agreement, once executed, may be
delivered to either party through the use of facsimile transmission. Any and all
signatures of the parties appearing on any facsimile copies of the signature
page of this Agreement shall be deemed, unless otherwise proved, the lawful and
valid signature of the executing party.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first above written.
▇▇▇▇▇ CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Title: Attorney-in-Fact
------------------------------
AND BY: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Title: Attorney-in-Fact
------------------------------
TRANSTECHNOLOGY CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Title: Vice President, Secretary
and General Counsel
------------------------------
3