EXHIBIT 2.1
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STOCK PURCHASE AND REDEMPTION AGREEMENT
among
RAYOVAC CORPORATION
(Company),
CERTAIN AFFILIATES OF
▇▇▇▇▇▇ ▇. ▇▇▇ COMPANY,
(Purchasers)
and
ALL THE SHAREHOLDERS
OF COMPANY
(Redemption Shareholders)
Dated as of September 12, 1996
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TABLE OF CONTENTS
1. PURCHASE, SALE AND REDEMPTION OF SHARES............................... 2
1.1. Purchase and Sale of Investment Shares........................... 2
1.2. Redemption by the Company........................................ 2
1.3. Closing.......................................................... 3
1.4. Determination of Purchase Price.................................. 3
2. REPRESENTATIONS AND WARRANTIES OF
REDEMPTION SHAREHOLDERS............................................... 4
2.1. Representations and Warranties by Redemption Shareholders........ 4
2.2. Representations and Warranties by the Company.................... 6
3. REPRESENTATIONS AND WARRANTIES OF PURCHASERS.......................... 23
3.1. Organization and Good Standing................................... 23
3.2. Power............................................................ 23
3.3. Authorization.................................................... 23
3.4. No Conflict...................................................... 23
3.5. No Consent....................................................... 24
3.6. Litigation....................................................... 24
3.7. Brokers, Finders, etc............................................ 24
3.8. Purchase for Investment.......................................... 24
4. MUTUAL COVENANTS...................................................... 24
4.1. Capitalization................................................... 24
4.2. Transaction and Closing Fees..................................... 25
4.3. RABBI Trusts..................................................... 25
4.4. Records.......................................................... 25
4.5. Further Actions.................................................. 25
5. CLOSING............................................................... 26
5.1. Deliveries by Redemption Shareholders............................ 26
5.2. Deliveries by Purchasers......................................... 29
5.3. Deliveries by Company............................................ 29
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6. INDEMNIFICATION....................................................... 29
6.1. By Redemption Shareholders....................................... 29
6.2. By Purchasers.................................................... 30
6.3. By Company....................................................... 30
6.4. Indemnification of Third-Party Claims............................ 30
6.5. Payment.......................................................... 32
6.6. Limitations on Indemnification................................... 32
6.7. Certain Tax Matters.............................................. 34
6.8. Reporting Indemnity Payments..................................... 40
7. MISCELLANEOUS......................................................... 41
7.1. Expenses......................................................... 41
7.2. Assignment; Successors........................................... 41
7.3. Amendment and Modification....................................... 41
7.4. Entire Agreement................................................. 41
7.5. Severability..................................................... 41
7.6. Notices.......................................................... 42
7.7. No Third Party Beneficiaries..................................... 43
7.8. Headings......................................................... 43
7.9. Governing Law.................................................... 43
7.10. Counterparts.................................................... 43
7.11. Knowledge....................................................... 44
7.12. Remedies........................................................ 44
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SCHEDULES
Schedule 2.1(d) No Conflict (Redemption Shareholders)
Schedule 2.2(c) Qualification
Schedule 2.2(d) Subsidiaries
Schedule 2.2(e) Outstanding Rights
Schedule 2.2(f) No Conflict, etc. (Company)
Schedule 2.2(h) Insurance
Schedule 2.2(i) Litigation
Schedule 2.2(k) Taxes
Schedule 2.2(m) Absence of Certain Changes
Schedule 2.2(n)(i) Owned Real Property
Schedule 2.2(n)(ii) Leased Real Property
Schedule 2.2(n)(iii) Liens
Schedule 2.2(o) Material Contracts
Schedule 2.2(p) Employee Benefit Plans
Schedule 2.2(q) Intellectual Property
Schedule 2.2(r) Labor Relations
Schedule 2.2(s) Undisclosed Liabilities
Schedule 2.2(u) Environmental Matters
Schedule 2.2(v) Product Liability
Schedule 2.2(w) Triggering Events
Schedule 2.2(aa) DISC Agreements
Schedule 5.1(d) Required Consents
EXHIBITS
Exhibit A Purchasers
Exhibit B Redemption Shareholders
Exhibit C Shareholder Appointment of Agent and Power of
Attorney
Exhibit D Form of New Shareholders Agreement
Exhibit E Form of ▇▇▇▇▇ & Lardner Opinion
Exhibit F Form of Confidentiality, Non-Competition, No-
Solicitation and No-Hire Agreement
Exhibit G Form of Non-Competition Agreement
Exhibit H Form of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
Opinion
Exhibit I Purchaser Appointment of Agent and Power of
Attorney
Exhibit J Form of Accountant's Letter
Exhibit K Form of Intellectual Property Opinion
Exhibit L Form of Consulting Agreement
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STOCK PURCHASE AND REDEMPTION AGREEMENT
Stock Purchase and Redemption Agreement (this "Agreement") dated as of
September 12, 1996, by and among Rayovac Corporation, a Wisconsin corporation
(the "Company"), certain affiliates of ▇▇▇▇▇▇ ▇. ▇▇▇ Company listed on Exhibit A
(individually a "Purchaser" and together the "Purchasers") and the existing
shareholders of the Company, all of whom are listed on Exhibit B (individually a
"Redemption Shareholder" and together the "Redemption Shareholders").
W I T N E S S E T H :
---------------------
WHEREAS, the Company has 18,000,000 shares of capital stock, par value $.01
per share (the "Shares"), authorized for issuance (all of which are designated
common stock), 9,902,000 shares of which are issued and outstanding (the
"Outstanding Shares"); and
WHEREAS, Redemption Shareholders own all of the Outstanding Shares; and
WHEREAS, Purchasers wish to purchase certain Outstanding Shares, on the
terms and conditions and for the consideration described in this Agreement; and
WHEREAS, Redemption Shareholders wish to have a portion of their
Outstanding Shares either redeemed by the Company or sold to certain Purchasers,
on the terms and conditions and for the consideration described in this
Agreement, such that the Redemption Shareholders would retain 20% of the common
equity interest in the Company after the transactions described in this
Agreement; and
WHEREAS, Redemption Shareholders, other than the ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇
Charitable Remainder Trust created September 10, 1996, have designated ▇▇▇▇▇▇ ▇.
▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "Redemption Shareholders' Agents") as their
agents and attorneys-in-fact with the authority to act on their behalf,
individually or collectively, in connection with the transactions contemplated
hereby, pursuant to Shareholder Appointment of Agents and Power of Attorneys, a
copy of which is attached hereto as Exhibit C (the "Powers of Attorney"); and
WHEREAS, a Purchaser has designated ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ (the "Purchaser's Agent") as its agent and attorney-in-fact with the
authority to act on its behalf, individually or collectively, in connection with
the transactions contemplated hereby, pursuant to Purchaser Appointment of Agent
and Power of Attorney, a copy of which is attached hereto as Exhibit I; and
WHEREAS, immediately after the transactions contemplated by this Agreement,
the Company is amending its Restated Articles of Incorporation to effect, among
other things, a 5 for 1 stock split (the "Stock Split").
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties made herein and of the mutual benefits to be
derived herefrom, the parties hereto agree as follows:
1. PURCHASE, SALE AND REDEMPTION OF SHARES
1.1. Purchase and Sale of Investment Shares. In reliance upon the
representations, warranties and covenants contained herein, at the Closing (as
hereinafter defined), the Redemption Shareholders will sell an aggregate of
9,089,581 Outstanding Shares ("Investment Shares") to Purchasers, and Purchasers
will purchase the Investment Shares from the Redemption Shareholders, for an
aggregate purchase price of Seventy-Two Million Dollars ($72,000,000) (the
"Investment Price"). The number of Investment Shares being purchased by each
Purchaser and who the Purchaser is buying the Investment Shares from is set
forth opposite such Purchaser's name on Exhibit A.
1.2. Redemption by the Company. In reliance upon the representations,
warranties and covenants contained herein, the Company agrees to redeem from
Redemption Shareholders, and Redemption Shareholders agree to deliver and sell
5,807,904 Outstanding Shares ("Redemption Shares"), for the per share purchase
price described in Section 1.4 below (the "Purchase Price"), in an amount such
that together with the sale of Investment Shares by the Redemption Shareholders
to certain Purchasers, the Redemption Shareholders as a group will retain 20% of
the outstanding Shares. The number of Redemption Shares being redeemed by the
Company from each Redemption Shareholder and the number of Shares being sold to
the Purchasers (and which Purchasers such Shares are being sold to) is set forth
opposite such Redemption Shareholder's name on Exhibit B.
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1.3. Closing. The closing (the "Closing") of the transactions
described herein shall take place immediately upon execution hereof at the
office of ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇, Chicago, Illinois, at 9:00 a.m., local time. For
all accounting, tax and other purposes, the Closing shall be effective as of the
close of business on the date hereof and is referred to herein as the "Closing
Date". At the Closing, the following will simultaneously occur:
(a) The Redemption Shareholders will deliver to Purchasers the
Investment Shares duly endorsed in blank or accompanied by a stock power or
other proper instrument of assignment duly executed in blank and having all
requisite stock transfer stamps attached.
(b) Purchasers will deliver or cause to be delivered the Investment
Price to Redemption Shareholders' Agents through a wire transfer of immediately
available funds to the account or accounts designated by Redemption
Shareholders' Agents.
(c) The Company will repay all of its outstanding long-term debt as of
the Closing Date, which outstanding debt is described in Schedule
2.2(o)(vi)(b)-(f) (the "Long-Term Debt").
(d) Redemption Shareholders will deliver to Company the Redemption
Shares, duly endorsed in blank or accompanied by a stock power or other proper
instrument of assignment duly executed in blank and having all requisite stock
transfer stamps attached.
(e) The Company will deliver its portion of the Purchase Price to
Redemption Shareholders' Agents through a wire transfer of immediately available
funds to the account or accounts designated by Redemption Shareholders' Agents.
(f) The parties will deliver any other document or take any other
action set forth in Article 5.
1.4. Determination of Purchase Price. The Purchase Price shall equal
$217,425,400. The per share Purchase Price is approximately $21.94.
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2. REPRESENTATIONS AND WARRANTIES OF REDEMPTION SHAREHOLDERS
2.1. Representations and Warranties by Redemption Shareholders.
Redemption Shareholders make the following representations and warranties to
Company and Purchasers:
(a) Power. Each Redemption Shareholder has full power, legal right and
authority to enter into, execute and deliver this Agreement and the other
agreements, instruments and documents contemplated hereby (such other documents
sometimes referred to herein as "Ancillary Instruments"), to perform such
Redemption Shareholder's obligations hereunder and thereunder, and to carry out
the transactions contemplated hereby and thereby. Pursuant to the Powers of
Attorney, each of the Redemption Shareholders has designated ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as their agents and attorneys-in-fact with the authority
to act on their behalf, individually or collectively, with respect to the
matters referred to herein. The Powers of Attorney are sufficient to authorize
the Redemption Shareholders' Agents to act on behalf of the Redemption
Shareholders with respect to the execution, delivery and performance of this
Agreement and the Ancillary Instruments and the consummation of the transactions
contemplated hereby and thereby.
(b) Authorization, etc. The execution and delivery of this Agreement
and the Ancillary Instruments and the consummation of the transactions
contemplated herein and therein have been duly authorized by each Redemption
Shareholder. Upon execution by the parties hereto, this Agreement and the
Ancillary Instruments to which such Redemption Shareholder is a party will
constitute the legal, valid and binding obligations of such Redemption
Shareholder enforceable against him/her in accordance with their respective
terms, except to the extent enforceability may be limited by (i) the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights and remedies of
creditors generally, (ii) general principles of equity, whether such
enforceability is considered in a proceeding in equity or at law, and the
discretion of the court before which any proceeding therefor may be brought, and
(iii) the unenforceability under certain circumstances under law or court
decisions of provisions providing for the indemnification of a party with
respect to a liability where such indemnification is contrary to public policy.
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(c) Title to Stock, etc. Each Redemption Shareholder is the record and
beneficial owner of and has good, valid and marketable title to its Outstanding
Shares, free and clear of any lien, pledge, security interest, encumbrance,
title retention agreement, adverse claim, option or other encumbrance of any
nature whatsoever ("Lien"), and upon the delivery of and payment for the
Redemption Shares and Investment Shares being sold by Redemption Shareholders to
Purchasers at the Closing as provided for in this Agreement, each Redemption
Shareholder will transfer good, valid and marketable title thereto, free and
clear of any Lien (other than a Lien created by the Purchasers). Exhibit B sets
forth the names and record owners of all Outstanding Shares.
(d) No Conflict. Except as set forth in Schedule 2.1(d), the execution
and delivery of this Agreement by each Redemption Shareholder and the
consummation of the transactions contemplated hereby do not and will not
conflict in any material respect with (i) any note, bond, mortgage, indenture,
license agreement, lease or other agreement, instrument or obligation to which
such Redemption Shareholder is a party or to which any of such Redemption
Shareholder's properties or assets may be bound or (ii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to such
Redemption Shareholder, except for conflicts, violations or defaults that would
not reasonably be expected to impair in any material respect the performance by
such Redemption Shareholder of such Redemption Shareholder's obligations
hereunder.
(e) No Consent. No Consent (hereinafter defined) is required
to be obtained by the Redemption Shareholders in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for Consents which, if not obtained, would not in
the aggregate reasonably be expected to impair in any material respect the
Redemption Shareholders' performance of their obligations hereunder.
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2.2. Representations and Warranties by the Company.
The Schedules to this Section 2.2 are arranged in subsections
corresponding to the numbered and lettered subsections contained in this Section
2.2 and the disclosure in any subsection shall qualify only the corresponding
subsection in this Section 2.2. The Company makes the following representations
and warranties to Purchasers:
(a) Organization. Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Wisconsin.
(b) Corporate Power and Authorization.
(i) Company has all requisite corporate power and authority to
own, operate and lease its properties and to carry on its business as
and where such is now being conducted. Company has the requisite
corporate power and authority to enter into, execute and deliver this
Agreement and each Ancillary Instrument to which it is a party, to
perform its obligations hereunder and thereunder, and to carry out the
transactions contemplated hereby and thereby.
(ii) The execution and delivery of this Agreement and the
Ancillary Instruments and the consummation of the transactions
contemplated herein and therein have been duly authorized by the
Company. Upon execution by the parties hereto, this Agreement and the
Ancillary Instruments to which the Company is a party constitute the
legal, valid and binding obligations of the Company, enforceable
against it in accordance with their respective terms, except to the
extent enforceability may be limited by (i) the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights and remedies
of creditors generally, (ii) general principles of equity, whether
such enforceability is considered in a proceeding in equity or at law,
and the discretion of the court before which any proceeding therefor
may be brought, and (iii) the unenforceability under certain
circumstances under law or court decisions of provisions providing for
the indemnification of a party with respect to a liability where such
indemnification is contrary to public policy.
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(c) Qualification. Company is duly licensed or qualified to do
business as a foreign corporation, and is in good standing, in each jurisdiction
wherein the character of the properties owned or leased by it, or the nature of
its business, makes such licensing or qualification necessary. The states in
which Company is licensed or qualified to do business are listed in Schedule
2.2(c).
(d) Subsidiaries. Schedule 2.2(d) sets forth the name, jurisdiction of
incorporation, capitalization, ownership and officers and directors of each
corporation in which the Company has a direct or indirect equity interest
("Subsidiaries"). Each Subsidiary is in good standing in its jurisdiction of
incorporation and is duly licensed or qualified to do business as a foreign
corporation, and is in good standing, in each jurisdiction wherein the character
of the properties owned or leased by it, or the nature of its business, makes
such licensing or qualification necessary. Except as listed in Schedule 2.2(d),
the Company does not own, directly or indirectly, any capital stock or other
equity securities of any corporation or have any direct or indirect equity or
other ownership interest in any entity or business. Except as listed on Schedule
2.2(d), all of the outstanding shares of capital stock of each Subsidiary are
owned directly by the Company or a Subsidiary. All outstanding shares of capital
stock of each Subsidiary are free and clear of any Liens and are validly issued,
fully paid, nonassessable and free of preemptive rights with no personal
liability attaching to the ownership thereof. There are no (a) securities
convertible into or exchangeable for the capital stock or other securities of
any Subsidiary, (b) options, warrants or other rights to purchase or subscribe
to capital stock or other securities of any Subsidiary or securities which are
convertible into or exchangeable for capital stock or other securities of any
Subsidiary or, (c) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance, sale or transfer of any
capital stock or other equity securities of any Subsidiary, any such convertible
or exchangeable securities or any such options, warrants or other rights. Each
Subsidiary (i) is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, (ii) has full corporate
power and authority to carry on its business as it is now being conducted and to
own and lease the properties and assets it now owns and leases, and (iii) is in
good standing and is duly qualified or licensed to do business as a foreign
corporation in each of the jurisdictions listed opposite the name of such
Subsidiary in Schedule 2.2(d), which are the only jurisdictions in which such
Subsidiary is required to be so qualified or licensed. The term "Company" as
used hereinafter
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means the Company and its Subsidiaries, except where the context or specific
provision provide otherwise.
(e) Capitalization of Company. The authorized capital stock of the
Company (not including Subsidiaries) consists of $18,000,000 shares of capital
stock, par value $.01 per share, all of which are designated common stock, of
which 9,902,000 shares are issued and outstanding and owned beneficially and of
record by Redemption Shareholders. The Outstanding Shares have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights with no personal liability attaching to the ownership thereof
except to the extent provided by Section 180.0622(2)(b) of the Wisconsin
Business Corporation Law. There are 100,000 Shares held in the Company's
treasury. Except as set forth in Schedule 2.2(e), there are no outstanding
options, warrants, conversion or other rights, and there are no agreements or
commitments of any kind (other than this Agreement) obligating Redemption
Shareholders, or the Company, as the case may be, contingently or otherwise, to
issue or sell any shares, options, warrants or conversion or other rights. The
Investment Shares have been duly authorized and reserved for issuance and, when
issued pursuant to the terms of this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable (except as provided by Section
180.0622(2)(b) of the Wisconsin Business Corporation Law).
(f) No Conflict, etc. Except as set forth in Schedule 2.2(f), the
execution and delivery of this Agreement and the Ancillary Instruments to which
the Company is a party, the performance by the Company of its obligations
hereunder and thereunder, and the consummation of the transactions contemplated
hereby and thereby do not and will not conflict in any respect with, or result
in any violation of or default (or give rise to any right of termination,
cancellation or acceleration) under (i) any provision of the charter documents
or by-laws of the Company, (ii) any note, bond, mortgage, indenture, lease or
other agreement of the Company or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Company, except (in the
case of clauses (ii) and (iii)) for conflicts, violations and defaults that,
individually and in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. The term "Material Adverse Effect" shall mean any
event, occurrence, fact, condition, change or effect that is materially adverse
to the business, assets, liabilities, results of operations, or financial
condition of the Company and Subsidiaries, taken as a whole. No consent,
approval, authorization, order, filing, registration or
8
qualification with or to any person including, but not limited to, any
governmental authority ("Consent") is required to be obtained by the Company in
connection with the execution and delivery of this Agreement and the Ancillary
Instruments to which the Company is a party, the performance by the Company of
its obligations hereunder and thereunder or the consummation of the transactions
contemplated hereby and thereby other than any Consent in respect of which the
failure to obtain such Consent, either individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect or materially
impair the ability of the Company to perform its obligations hereunder.
(g) Financial Statements. Redemption Shareholders' Agents have
delivered to Purchasers complete and correct copies of the audited combined
consolidated financial statements of the Company for the years ended June 30,
1994, 1995 and 1996 (collectively, the "Financial Statements" and for the year
ended June 30, 1996, the "1996 Consolidated Financial Statements"), in each
case, audited by Coopers & ▇▇▇▇▇▇▇ L.L.P., independent certified public
accountants, whose audit reports thereon are included therein consisting of
combined consolidated balance sheets as of such respective dates and the related
combined consolidated statements of income and retained earnings, and cash flows
for each of the fiscal years then ended. The Financial Statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
throughout the periods involved, and present fairly, in all material respects,
the consolidated financial position, consolidated results of operations and cash
flows of the Company, as at and for the periods indicated.
(h) Insurance. Schedule 2.2(h) contains a complete and correct list
and summary description of all insurance policies maintained at present by or on
behalf of the Company. The Company has made available to Purchasers complete and
correct copies of all such policies together with all riders and amendments
thereto. Such policies are in full force and effect, and all premiums due
thereon have been paid. The Company has complied in all material respects with
the terms and provisions of such policies, and no notice of cancellation or
termination has been received with respect to any such policy. Such policies are
sufficient for compliance with all requirements of law and of all agreements to
which the Company is a party; are valid, outstanding and enforceable policies.
The Company has not been refused any insurance with respect to its assets or
operations, nor has its coverage been limited, by any insurance carrier to which
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it has applied for any such insurance or with which it has carried insurance
during the past two (2) years.
(i) Litigation. Except as set forth in Schedule 2.2(i) or Schedule
2.2(u), there are no judicial or administrative actions, suits, proceedings,
claims, arbitrations or investigations pending or, to the Knowledge (hereinafter
defined) of the Company, threatened against the Company or any Redemption
Shareholder (i) which, either individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect, (ii) which question the validity
of this Agreement, or (iii) which seek to enjoin any action taken or to be taken
in connection herewith or the consummation of the transactions contemplated
hereby.
(j) Compliance with Laws. Except as set forth in Section 2.2(u), (i)
to the Knowledge of the Company, it is not in violation of or in default under
any judgment, order, writ, injunction or decree of any court or administrative
agency or any statute, law, ordinance, rule or regulation, and (ii) the Company
has not received any written notice alleging any such violation or default.
(k) Tax Matters.
(i) The term "Tax" shall mean any federal, state, local or
foreign income, alternative, minimum, accumulated earnings, personal
holding company, franchise, capital stock, profits, windfall profits,
gross receipts, sales, use, value added, transfer, registration,
stamp, premium, excise, customs duties, severance, environmental
(including taxes under section 59A of the Internal Revenue Code of
1986, as amended ("Code")), real property, personal property, ad
valorem, occupancy, license, occupation, employment, payroll, social
security, disability, unemployment, workers' compensation,
withholding, estimated or other similar tax, duty, fee, assessment or
other governmental charge or deficiencies thereof (including all
interest and penalties thereon and additions thereto). The term "Tax
Return" shall mean any tax return, report, information, return,
schedule or other document (including any related or supporting
information) filed or required to be filed with respect to Taxes.
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(ii) Except as set forth on Schedule 2.2(k):
(A) (1) all Tax Returns relating to the Company and the business
or assets thereof that were required to be filed on or before the
Closing Date have been duly and timely filed, (2) the Company has paid
or made adequate provision for all Taxes that are due or claimed to be
due by any taxing authority and (3) the Company is not currently the
beneficiary of any extension of time within which to file any Tax
Return;
(B) there has been no claim or issue (other than a claim or issue
that has been finally settled) concerning any material liability for
Taxes of the Company asserted, raised or threatened by any taxing
authority;
(C) the Company has not (1) waived any statute of limitations or
(2) agreed to any extension of the period for assessment or
collection;
(D) there are no liens for Taxes upon any assets of the Company
except for statutory liens for current Taxes not yet due;
(E) the statutes of limitations for all Tax Returns of the
Company have expired for all federal, state, local and foreign Tax
purposes, or Tax Returns of the Company have been examined by the
appropriate taxing authorities for all periods;
(F) no power of attorney has been executed by the Company with
respect to any matter relating to Taxes that is currently in force;
(G) the Company is not a party to any agreement, contract, or
other arrangement that would result, separately or in the aggregate,
in the requirement to pay any "excess parachute payment" within the
meaning of Section 280G of the Code; and
(H) all Taxes that the Company is required by law to withhold or
to collect for payment have been duly withheld and
11
collected, and have been paid or accrued, reserved against and
entered on the books of the Company.
(l) Brokers, Finders, etc. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried out without
the intervention of any person acting on behalf of Redemption Shareholders or
the Company in such manner as to give rise to any valid claim against
Purchasers, Redemption Shareholders or the Company for any brokerage or finder's
commission, fee or similar compensation, except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.
(m) Absence of Certain Changes. Except as set forth on Schedule
2.2(m) or as otherwise contemplated by this Agreement, since the 1996
Consolidated Financial Statements (i) there has been no change that has had or
would reasonably be expected to have a Material Adverse Effect, except for any
change resulting from general and publicly known economic, financial or market
conditions, (ii) there has been no physical damage, destruction or loss that,
after taking into account any insurance recoveries payable in respect thereof,
has had or would reasonably be expected to have, a Material Adverse Effect,
(iii) there has been no sale, assignment or transfer of any material assets of
the Company except in the ordinary course of business, (iv) except as required
by GAAP, the Company has not changed any of its accounting principles or the
methods by which such principles are applied for tax or financial reporting
purposes, and (v) the Company has not entered into any agreement to do any of
the things described in this Section 2.2(m).
(n) Title to Properties, etc. Schedule 2.2(n)(i) contains a
complete and correct list of all real property currently owned by the Company,
and Schedule 2.2(n)(ii) sets forth a complete and correct list of any lease
pursuant to which the Company currently leases real property (collectively, the
"Real Property"). The Company has:
(i) good, valid and marketable title to all of its respective
owned real property listed on Schedule 2.2(n)(i);
(ii) valid leasehold interests in all real properties listed on
Schedule 2.2(n)(ii); and
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(iii) legal and beneficial ownership of its personal properties,
including, without limitation, all those reflected in the combined
consolidated balance sheet of the Company contained in the 1996
Consolidated Financial Statement ("Balance Sheet") or acquired after
such date (except for inventories and other assets sold or otherwise
disposed of in the ordinary course of business since the 1996
Consolidated Financial Statements),
in each case free and clear of all Liens (and, in the case of Real Property, not
subject to any rights of way, building use restrictions, reservations or
encumbrances of any nature) other than (u) with respect to leasehold interests,
all matters and encumbrances affecting landlord's fee interest in the real
properties, which to the Knowledge of the Company are not in violation of the
applicable lease; (v) Liens shown on the Balance Sheet as securing specified
liabilities or obligations, and Liens incurred in connection with the purchase
of property and/or assets, if such purchase was effected after the date of the
Balance Sheet, in either case with respect to which no default exists; (w) Liens
for taxes and assessments not yet due and payable or which are being contested
in good faith and by appropriate proceedings; (x) Liens that are set forth in
Schedule 2.2(n)(iii); (y) Liens and imperfections in title which individually or
in the aggregate do not materially detract from the value, or impair in any
significant manner the use, of the property subject thereto or the operations of
the Company; and (z) statutory Liens incurred in the ordinary course of
business, none of which is substantial in amount and which individually or in
the aggregate do not materially detract from the value, or impair in any
significant manner the use, of the property subject thereto or the operations of
the Company. All leases with respect to the leasehold interests listed on
Schedule 2.2(n)(ii) are valid, binding and enforceable in accordance with their
terms, and are in full force and effect; there are no existing defaults by the
Company thereunder; no event of default has occurred which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute a default thereunder by the Company, except such defaults as
would not reasonably be expected, either individually or in the aggregate, to
have a Material Adverse Effect on the business of the Company.
13
(o) Material Contracts. Schedule 2.2(o) contains a list of:
(i) all contracts and agreements with current officers, other
employees, consultants, agents, contractors, advisors, sales
representatives, distributors, or dealers of the Company other than
(x) contracts which by their terms are cancelable by the Company with
notice of not more than 60 days and (y) contracts which provide for
payments based solely on products sold and require no minimum
payments;
(ii) all collective bargaining agreements with any labor union
currently representing employees of the Company;
(iii) all mortgages, indentures, pledges or security agreements,
notes, loan agreements or guarantees of the obligations of third
parties binding upon the Company or similar documents relating to
borrowed money (including without limitation interest rate or currency
swaps, ▇▇▇▇▇▇ or straddles or similar transactions) to which the
Company is a party or by which any of its assets are bound, restricted
or encumbered in excess of $100,000;
(iv) joint venture and limited partnership agreements of the
Company;
(v) distribution and marketing agreements of the Company
involving in excess of $500,000 worth of product per year;
(vi) license or other agreements of the Company providing in
whole or in part for the use of any patents, trademarks, trade names,
service marks, copyrights, inventions, trade secrets or other
proprietary know-how or other intellectual property, whether the
Company is the licensor or the licensee thereunder, and all
settlements, consents or forbearance to ▇▇▇ agreements relating
thereto; and
(vii) any contract or agreement entered into involving an
estimated total future payment or payments to or from the Company in
excess of $500,000.
14
The contracts set forth on Schedule 2.2(o) are collectively
referred to as the "Material Contracts." The Company has made available to Buyer
true and correct copies of all Material Contracts. To the Knowledge of the
Company, neither the Company nor any other person is in default under any
Material Contract, except for such defaults as would not reasonably be expected,
either individually or in the aggregate, to have a Material Adverse Effect on
the business of the Company.
(p) Compliance with ERISA.
(i) Schedule 2.2(p)(i) contains a complete list of each pension,
retirement, profit-sharing, deferred compensation, bonus or other
incentive, medical, health, life insurance, disability or other
welfare or severance plan, agreement or arrangement sponsored or
contributed to by the Company or by any trade or business, whether or
not incorporated (an "ERISA Affiliate"), that together with the
Company would be deemed a "single employer" within the meaning of
section 4001 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), for the benefit of any employee or terminated
employee of the Company or any ERISA Affiliate (individually a "Plan"
and collectively, the "Plans"). All Plans comply with the applicable
requirements of law, including but not limited to ERISA and the Code,
except for failures to comply that, either individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect. No Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA has incurred any "accumulated funding deficiency," whether or
not waived, within the meaning of section 302 of ERISA or section 412
of the Code and all contributions required to be made with respect
thereto on or prior to the Closing Date have been timely made. Neither
the Company nor any ERISA Affiliate has incurred any material
liability pursuant to Title IV of ERISA with respect to any Plan and
no condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring liability under such Title. Neither
the Company nor any ERISA Affiliate, nor any Plan, trust created
thereunder or trustee or administrator thereof has engaged in a
transaction in connection with which the Company or any ERISA
Affiliate, any Plan, any such trust, or any trustee or administrator
thereof, or any party dealing with any
15
Plan or any such trust could be subject to either a material civil
penalty assessed pursuant to section 409 or 502(i) or ERISA or a
material tax imposed pursuant to section 4975 or 4976 of the Code.
(ii) Except as provided on Schedule 2.2(p)(ii), no plan is a
"multiemployer pension plan," as defined in section 3(37) of ERISA,
nor is any Plan a plan described in section 4063(a) of ERISA. With
respect to any ERISA Plan that is a "multiemployer pension plan," as
such term is defined in section 3(37) of ERISA, covering employees of
the Company or any ERISA Affiliate, (i) neither the Company nor any
ERISA Affiliate has, since September 26, 1980, made or suffered a
"complete withdrawal" or a "partial withdrawal," as such terms are
respectively defined in sections 4203 and 4205 of ERISA, (ii) no event
has occurred that presents a material risk of a partial withdrawal,
(iii) neither the Company nor any ERISA Affiliate has any contingent
liability under section 4204 of ERISA, and (iv) the aggregate
withdrawal liability of the Company and the ERISA Affiliates, computed
as if a complete withdrawal by the Company and the ERISA Affiliates
had occurred under each such Plan on the date hereof, would not exceed
$25,000. Each Plan intended to be "qualified" within the meaning of
section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under section 501(a) of the Code.
No amounts payable under the Plans or under any employment, severance
or other agreements or arrangements maintained by the Company will
fail to be deductible for federal income tax purposes by virtue of
section 280G of the Code.
(iii) Except as provided on Schedule 2.2(p)(iii), no plan
provides benefits, including without limitation death or medical
benefits (whether or not insured), with respect to current or former
employees of the Company or any ERISA Affiliate beyond their
retirement or other termination of service (other than (i) coverage
mandated by applicable law or (ii) death benefits or retirement
benefits under any "employee pension plan," as that term is defined in
section 3(2) of ERISA). To the Knowledge of the Company, there are no
pending, threatened or anticipated claims by or on behalf of any Plan,
by any employee or beneficiary covered under any such
16
Plan, or otherwise involving any such Plan (other than routine claims
for benefits).
(iv) Schedule 2.2(p)(iv) sets forth the life insurance policies
to be transferred to the Rabbi Trust (defined in Section 4.3) and
remaining premiums to be paid under such policies by the Company.
(q) Intellectual Property.
(i) Schedule 2.2(q)(i) sets forth a list of all (A) registered
and applied for trademarks, trade names, service marks and (B)
registered and applied for copyrights, including registrations and
applications to register or renew the registration of any of the
foregoing, (C) patents and patent applications, and (D) inventions,
trademarks, trade names, and service marks, trade secrets, copyrights
(whether registered or unregistered), know-how and any other
intellectual property ("Intellectual Property") owned by the Company
and used in or material to the conduct of the Company's business as
currently conducted (collectively, the "Owned Intellectual Property").
Owned Intellectual Property shall include, but Schedule 2.2(q) need
not disclose, inventions, trade secrets and know-how and nonmaterial
unregistered copyrights.
(ii) Except as set forth on Schedule 2.2(q)(ii), (A) the Company
is the sole and exclusive and record and beneficial owner of the Owned
Intellectual Property, free and clear of all Liens, subject only to
such third party rights as are set forth in the Material Contracts
listed in Schedule 2.2(o), and, to the Knowledge of the Company, the
Company's use of the Owned Intellectual Property does not infringe on
the rights of any third party; (B) there is no claim or demand of any
person or entity pertaining to, or any proceeding which is pending or,
to the Knowledge of the Company, threatened that challenges the rights
of the Company with respect to any Owned Intellectual Property, other
than infringements, claims, demands, or defaults that, either
individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect; (C) there are no royalties, honoraria,
fees or other payments payable by the Company to any person by reason
of ownership, use, licensure or sale
17
of any product embodying any Owned Intellectual Property or the
conduct of the business as currently conducted except as set forth in
the Material Contracts listed in Schedule 2.2(o); (D) the Company has
not entered into and is not otherwise bound by any consent,
forbearance to ▇▇▇ or settlement agreement which limits the Company's
rights to use, sell or license any Owned Intellectual Property, except
as set forth in the Material Contracts listed in schedule 2.2(o); (E)
the patents, registrations and applications set forth on Schedule
2.2(q) are not subject to any pending or, to the Knowledge of the
Company, threatened opposition, cancellation or similar proceeding
before any court or registration authority; (F) to the Knowledge of
the Company, no person has infringed, misappropriated or misused any
of the Owned Intellectual Property and the Company has not asserted
any claim of infringement, misappropriation or misuse against any
person within the past three (3) years which remains unresolved; and
(G) to the Knowledge of the Company, all issued patents and
registrations set forth on Schedule 2.2(q) are valid and enforceable.
(iii) Schedule 2.2(q)(iii) sets forth a list of all written
licenses (x) material to the conduct of the Company's business as
presently conducted, (y) pursuant to which the use by any person or
entity of Owned Intellectual Property is permitted by the Company, or
(z) pursuant to which the use by the Company of Intellectual Property
is permitted by any person. All such licenses are in full force and
effect. To the Knowledge of Company, the Company is not in default
under any such license.
(r) Labor Relations and Employment. Except to the extent set
forth in Schedule 2.2(r), (i) there is no labor strike, dispute, slowdown,
stoppage or lockout pending or, to the Knowledge of the Company, threatened
against or affecting the Company; (ii) to the Knowledge of the Company, no union
claims to represent the employees of the Company; (iii) the Company is not a
party to or bound by any collective bargaining or similar agreement with any
labor organization, or work rules or practices agreed to with any labor
organization or employee association applicable to employees of the Company;
(iv) none of the employees of the Company is represented by any labor
organization and to the Knowledge of the Company, there is not any current union
organizing activities
18
among the employees of the Company nor does any question concerning
representation exist concerning such employees; (v) there is no unfair labor
practice charge or complaint against the Company or, to the Knowledge of the
Company, threatened before the National Labor Relations Board or any similar
state or foreign agency; (vi) there is no grievance arising out of any
collective bargaining agreement or other grievance procedure which, if adversely
determined, would have a Material Adverse Effect; (vii) no charges with respect
to or relating to the Company are pending before the Equal Employment
Opportunity Commission or any other agency responsible for the prevention of
unlawful employment practices which, if adversely determined, would have a
Material Adverse Effect; (viii) the Company has not received written notice of
the intent of any federal, state, local or foreign agency responsible for the
enforcement of labor or employment laws to conduct an investigation of the
Company nor is such an investigation in progress; (ix) there are no complaints,
lawsuits or other proceedings pending or, to the Knowledge of the Company,
threatened in any forum by or on behalf of any present or former employee of the
Company which, if adversely determined or resolved would individually or in the
aggregate, would have a Material Adverse Effect; and (x) no employee of the
Company has suffered an "employment loss" (as defined in the Worker Adjustment
and Restraining Notification Act) during the ninety (90) days prior to the date
hereof.
(s) Absence of Undisclosed Liabilities. Except (i) as disclosed
in Schedule 2.2(s), (ii) as and to the extent disclosed or reserved against in
the 1996 Consolidated Financial Statements, or (iii) liabilities incurred after
the date of the 1996 Consolidated Financial Statements in the ordinary course of
the Company's business consistent with past practice the Company does not have
any liabilities or obligations of any nature which, individually or in the
aggregate, have had and would not reasonably be expected to have a Material
Adverse Effect.
(t) Assets of the Company. The Company owns, or otherwise has
legally enforceable rights to use, all of the properties and assets material to
the conduct of the business of the Company as it is currently conducted.
(u) Environmental Matters.
(i) Except as set forth in Schedule 2.2(u), to the Knowledge of
the Company, (A) the Company is in substantial compliance with all
provisions of all statutes, laws, rules, regulations,
19
ordinances, codes or orders of any recognized governmental authority
that are applicable to the business of the Company or the Real
Property owned or leased by the Company relating to pollution or the
protection of human health or the environment, or to any generation,
processing, storage, holding, abatement, existence, release,
threatened release or transportation of any Hazardous Substances
(hereinafter defined), as in effect on the date hereof ("Environmental
Laws"), except for such violations and defaults that, either
individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect (B) there are no circumstances that may
prevent or interfere with such continued compliance in the future and
(C) the Company has not received any written notice or other
communication that alleges that the Company is not in such compliance,
except for allegations that have been finally resolved without any
material obligation on the part of the Company;
(ii) Schedule 2.2(u) sets forth all material Consents necessary
for the conduct of the business of the Company as currently conducted
pursuant to Environmental Laws (the "Environmental Permits"). The
Company has duly obtained all such Environmental Permits, and all such
Environmental Permits are in full force and effect. To the Knowledge
of the Company, the Company is in substantial compliance with all
Environmental Permits held by it, except for such failures to so
possess or comply that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect;
(iii) Except as set forth on Schedule 2.2(u), to the Knowledge of
Company, the Company has not received any written notification
pursuant to any Environmental Law that the Company, any operations of
the business of the Company, or its Real Property, is or may be the
subject of any proceeding, investigation, claim, lawsuit or order by
any governmental authority or other Person as to whether (x) any
remedial action is or may be needed to respond to a release or (y) the
Company is or may be a "potentially responsible party" pursuant to any
Environmental Law;
(iv) Except as set forth on Schedule 2.2(u), to the Knowledge of
the Company, the Company has not entered into any
20
written agreement with, or been issued any order by, any governmental
authority by which the Company has assumed responsibility, either
directly or as a guarantor or surety, for the remediation of any
condition arising from or relating to a release or threatened release
on or with respect to its Real Property or any other location; and
(v) Except as set forth on Schedule 2.2(u), to the Knowledge of
the Company there is not now and has not been at any time in the past
a release in connection with the conduct of the business of the
Company of Hazardous Substances (x) for which the Company may be
responsible and (y) which would reasonably be expected to have a
Material Adverse Effect. The term "Hazardous Substances" shall mean
any substance that requires investigation, removal or remediation
under any Environmental Law, or is defined, listed or identified as a
"hazardous waste" or "hazardous substance" or otherwise regulated
thereunder.
(v) Product Liability. Except as set forth in Schedule 2.2(v), there
is no action, suit, inquiry, proceeding or investigation by or before any court
or governmental or other regulatory or administrative agency or commission
pending or, to the Knowledge of the Company, threatened against or involving the
Company relating to any product alleged to have been manufactured or sold by the
Company and alleged to have been defective or improperly designed or
manufactured.
(w) No Triggering Events. Except under the agreements set forth on
Schedule 2.2(o)(i)(a) and (c) and any split dollar insurance agreements listed
on Schedule 2.2(w) with the Company's executives, the execution and delivery by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby will not constitute a triggering event
(including a "first trigger") under any employment, bonus, deferred
compensation, incentive compensation, stock purchase, stock option, stock
appreciation right, restricted stock, performance unit, severance or termination
pay, hospitalization or other medical, life or other insurance, supplemental
unemployment benefit, flexible benefit, profit-sharing, pension, employee stock
ownership or retirement plan, program, fund, trust, agreement or arrangement
sponsored, maintained, contributed to, required to be contributed to or entered
into by the Company (or any trade or business, whether or not incorporated, that
together with the Company
21
would be deemed a "single employer" within the meaning of section 4001(b)(1) of
ERISA, and the rules and regulations promulgated thereunder) that will, or upon
the occurrence of subsequent events would, accelerate the time of payment or
vesting or increase the amount of compensation or benefits due to any director,
officer, employee or former employee (or any dependent of a former employee) of
the Company.
(x) Relationship with ROV Ltd. The agreements listed on Schedule
2.2(o)(ix)(g)-(j) are the only agreements between the Company and ROV Ltd., true
and complete copies of which have been delivered to Purchasers.
(y) Consolidated Net Worth. The Consolidated Net Worth as of June 30,
1996 and as of the Closing Date is a minimum of $59,000,000. The term
Consolidated Net Worth shall mean the consolidated net worth of the Company and
its Subsidiaries on a GAAP basis and consistent with the Company's past
practices, adding back, to the extent charged to income and not capitalized on
or prior to the date hereof, the following amounts: (i) $2,253,980 representing
any debt prepayment penalties for retiring the long-term debt (ii) $3,750,000
representing the fees and expenses for the purchase of bridge securities and not
syndicating the senior bank debt; and (iii) $170,000 representing ordinary
losses of the Company between June 30 and August 30, 1996 due to annual plant
closing.
(z) Plant and Equipment. The plants, structures and equipment of the
Company are structurally sound with no known defects and are in good operating
condition and repair (except for ordinary wear and tear, and except for assets
which do not materially impair the business of the Company) and are adequate for
the uses to which they are being put; and none of such plants, structures or
equipment are in need of maintenance or repairs except for ordinary, routine
maintenance and repairs. To the Knowledge of the Company, the Company has not
received notification that it is in violation of any applicable building, zoning
or similar ordinance or regulation in respect of its plants or structures or
their operations and no such violation exists.
(aa) Relationship with Rayovac International Corp. The agreements
listed on Schedule 2.2(aa) are the only agreements between the Company and
Rayovac International Corp., copies of which have been delivered to Purchasers.
22
3. REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Purchasers represent and warrant to the Redemption Shareholders and
Company as of the date hereof as follows:
3.1. Organization and Good Standing. Such Purchaser purporting to be a
partnership is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization.
3.2. Power. Each Purchaser has full power, legal right and authority
to enter into, execute and deliver this Agreement and the Ancillary Instruments,
to perform such Purchaser's obligations hereunder and thereunder, and to carry
out the transactions contemplated hereby and thereby.
3.3. Authorization. The execution and delivery of this Agreement and
the Ancillary Instruments and the consummation of the transactions contemplated
herein and therein have been duly authorized by each Purchaser. Upon execution
by the parties hereto, this Agreement and the Ancillary Instruments will
constitute the legal, valid and binding obligation of each Purchaser,
enforceable against each Purchaser in accordance with its terms, except to the
extent enforceability may be limited by (a) the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting the rights and remedies of creditors generally,
(b) general principles of equity, whether such enforceability is considered in a
proceeding in equity or at law, and the discretion of the court before which any
proceeding thereof or may be brought, and (c) the unenforceability under certain
circumstances under law or court decisions of provisions providing for the
indemnification of a party with respect to a liability where such
indemnification is contrary to public policy.
3.4. No Conflict. The execution and delivery of this Agreement by each
Purchaser and the consummation of the transactions contemplated hereby do not
and will not conflict in any respect with or result in any violation of or
default under (a) any note, bond, mortgage, indenture, license agreement, lease
or other agreement, instrument or obligation to which Purchaser is a party or
(c) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to such Purchaser, except in the case of clauses (b) and (c) for
conflicts, violations or defaults that would not materially impair Purchaser's
ability to perform his/her/its obligations hereunder.
23
3.5. No Consent. No Consent is required to be obtained by any
Purchaser in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby except for Consents which,
if not obtained, would not impair any Purchaser's ability to perform his/her/its
obligations hereunder.
3.6. Litigation. There are no judicial or administrative actions,
suits, proceedings or investigations pending, or to the knowledge of such
Purchaser, threatened (a) which question the validity of this Agreement or (b)
which prevent such Purchaser from consummating the transactions contemplated
hereby.
3.7. Brokers, Finders, etc. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried out without
the intervention of any person acting on behalf of Purchasers in such manner as
to give rise to any valid claim against Purchasers, Redemption Shareholders or
the Company for any brokerage or finder's commission, fee or similar
compensation.
3.8. Purchase for Investment. The Investments Shares purchased by
Purchasers pursuant to this Agreement are being acquired for investment only and
not with a view to any public distribution thereof in violation of any of the
requirements of the Securities Act of 1933, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder.
4. MUTUAL COVENANTS. Each of the Company, Purchasers and Redemption
Shareholders covenants and agrees as follows:
4.1. Capitalization. After giving effect to the transactions
contemplated by this Agreement and the Stock Split, the authorized capital stock
of the Company shall consist of 27,000,000 shares of Common Stock, par value
$.01 per share, 20,510,480 shares of which shall be issued and outstanding.
Exhibits A and B describe the record and beneficial owners of such shares. The
parties acknowledge the cancellation prior to Closing by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇ of options to purchase 10,000 and 8,000 Shares, respectively, in
consideration for the payment of a bonus to ▇▇. ▇▇▇▇▇▇▇▇ and the Company's
agreement to grant an option for 40,000 shares of Common Stock to ▇▇. ▇▇▇▇ (such
number adjusted to reflect the Stock Split).
24
4.2. Transaction and Closing Fees. The Company shall pay all
transaction fees, including those set forth in Section 1.4. It shall also pay to
the ▇▇▇▇▇▇ ▇. ▇▇▇ Company ("THL") and its affiliates, pursuant to a Management
Agreement between the Company and THL, a closing fee not to exceed $3.25 Million
Dollars.
4.3. RABBI Trusts. The Company has established a rabbi trust ("Rabbi
Trust") pursuant to that certain Rayovac Corporation Irrevocable Trust Under
Supplemental Retirement and Survivor Income Plan, dated September 12, 1996, as
an unfunded plan maintained for the purpose of providing benefits to the
participants in the Rayovac Corporation Supplemental Retirement and Survivor
Income Plan (the "SRSIP"). Pursuant to the Rabbi Trust, the Company shall
contribute to the Rabbi Trust the life insurance policies listed on Schedule
2.2(p)(iv) hereto ("Policies"). The Company shall, thereafter, pay the remaining
premiums with respect to the Policies, also set forth on Schedule 2.2(p)(iv)
hereto as they come due. The Company shall make no further contributions to the
Rabbi Trust.
4.4. Records. After the Closing, upon reasonable written notice,
Purchasers and Company shall furnish or cause to be furnished to Redemption
Shareholders' Agents and their representatives, employees, counsel and
accountants access to, during normal business hours, such assistance and
information, including all original agreements, documents, books, records and
files relating to the business of the Company in the possession of Purchasers or
Company, as the case may be (collectively, "Records"), as is reasonably
necessary for financial reporting and accounting matters, the preparation and
filing of any tax returns, reports or forms or the defense of any tax claim or
assessment controlled by the Company or Redemption Shareholders; provided,
however, that such access does not unreasonably disrupt the normal operations of
Purchasers or the Company and provided further that Redemption Shareholders'
Agents shall have entered into a reasonable confidentiality agreement with the
Company concerning the Records made available to them.
4.5. Further Actions. Each of the parties agrees to use all reasonable
efforts to take or cause to be taken all actions, and to do or cause to be done
all other things, necessary, proper or advisable to consummate and make
effective the transactions contemplated hereby including, without limitation,
obtaining all Consents from third parties required to be obtained by such party
for the consummation of the transactions contemplated hereby, other than, in the
case
25
of Purchasers, any Consents, the failure of which to be obtained, either
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect or materially impair the ability of Purchasers to
perform their obligations hereunder.
5. CLOSING
5.1. Deliveries by Redemption Shareholders. Redemption Shareholders
are herewith delivering to Purchasers or the Company or otherwise causing the
Company to take the actions indicated below.
(a) Investment Shares. The issuance by the Company or delivery by
Redemption Shareholders (and subsequent issuance by the Company) of certificates
representing the Investment Shares to Purchasers as provided in Section 1.1
hereto.
(b) Redemption Shares. All of the certificates for the Redemption
Shares as provided in Section 1.2 hereto.
(c) Resignation of Directors. The resignations of all directors and
officers of the Company whose resignations have been requested by Purchasers not
less than five (5) days prior to the Closing Date.
(d) Consents. Originally executed instruments evidencing the consents
required by Purchasers to consummate the transactions contemplated hereby and
listed on Schedule 5.1(d).
(e) Repayment of Indebtedness. All indebtedness and other amounts
outstanding as of the Closing Date of the Company listed in Schedule
2.2(o)(vi)(b)-(f) or required to be so listed shall have been paid in full.
(f) Old Shareholders Agreement. Copies of instruments terminating each
Amended and Restated Shareholders Agreement between the Company, ▇▇▇▇ and each
Redemption Shareholder.
(g) New Shareholders Agreement. The Shareholders' Agreement by and
between the Company, the Purchasers and each Redemption Shareholder who will be
a shareholder of the Company immediately after the Closing, dated as of the
Closing Date, in substantially the form of Exhibit D attached hereto.
26
(h) Opinions. The opinion of ▇▇▇▇▇ & Lardner, dated the Closing Date
and addressed to Purchasers, in substantially the form of Exhibit E attached
hereto, along with the opinion of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, General Counsel of the
Company, and addressed to Purchasers, in substantially the form of Exhibit K,
relating to intellectual property matters.
(i) Recapitalization Accounting. A letter of Coopers & ▇▇▇▇▇▇▇ L.L.P.,
the Company's independent auditors, dated the Closing Date and addressed to
Purchasers, stating that the transactions contemplated by this Agreement will
qualify for recapitalization accounting.
(j) Options. Appropriate instruments evidencing no outstanding
options, warrants or other rights to purchase or subscribe to capital stock or
other securities of the Company or securities which are convertible or
exchangeable for capital stock or other securities of the Company.
(k) Resolutions. Copies of the resolutions of the Company's Board
of Directors, authorizing and approving the execution of, delivery and
performance under this Agreement and Ancillary Instruments, the issuance of
Investment Shares, redemption of Redemption Shares and the consummation of the
transactions contemplated hereby and thereby, certified as true and correct by
its Secretary or any Assistant Secretary.
(l) Articles; Good Standing Certificate. A certificate from the State
of Wisconsin certifying the valid organization and existence of the Company and
Articles of Incorporation of Company certified by an appropriate government
official as of a recent date.
(m) By-Laws. Company's Bylaws, certified by the Secretary or any
Assistant Secretary of Company as of the date hereof.
(n) Consulting and Non-Competition Agreement. An executed Consulting
Agreement in the form of Exhibit L and Confidentiality, Non-Competition,
No-Solicitation, and No-Hire Agreement, each by and between Company and ▇▇▇▇▇▇
▇. ▇▇▇▇, ▇▇., dated the Closing Date, in substantially the form of Exhibit F
attached hereto and a Confidentiality, Non-Competition, No-Hire and
No-Solicitation Agreement by and between the Company and ▇▇▇▇▇▇ ▇▇▇▇, dated the
Closing Date in substantially the form of Exhibit F attached hereto.
27
(o) Non-Competition Agreements. Executed Non-Competition Agreements by
and between the Company and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇, dated the Closing
Date, in substantially the form of Exhibit G, attached hereto.
(p) Certain Assets. Originally executed instruments evidencing the
Company's sale, distribution or assignment of (i) that certain Aircraft Lease
dated May 30, 1996 between Fleet National Bank and the Company; (ii) that
certain sublease for airport facilities and land between Big Sky Partners and
the Company dated March 19, 1993; (iii) membership at La Quinta Country Club;
(iv) the Company's rights to the luxury box at ▇▇▇▇ ▇▇▇▇▇▇▇ Stadium, floor seats
at the ▇▇▇▇ Center, and Chicago Bulls season tickets; (v) condominium in the
Dominican Republic; and (vi) the office furniture of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇, to
certain executives of the Company or entities controlled by the ▇▇▇▇ Group.
(q) FIRPTA Certificate. Each Redemption Shareholder shall have
delivered to Purchasers a certificate, as contemplated under and meeting the
requirements of Section 1.1445-2(b)(2)(i) of the Treasury Regulations, to the
effect that such Redemption Shareholder is not a "foreign person" within the
meaning of the Code and applicable Treasury Regulations.
(r) Accountant's Letter. An accountant's letter of Coopers & ▇▇▇▇▇▇▇
L.L.P., dated within five days of the Closing Date and addressed to Purchasers,
in substantially the form of Exhibit J hereto.
(s) Releases. Such documents, instruments or writings in the form
satisfactory to Purchasers' counsel evidencing the release of the Company from
any indemnity or other obligations with respect to any assets transferred
pursuant to Section 5.1(p).
(t) Officer's Certificates. An officer's certificate of the Chief
Financial Officer of the Company certifying that the estimated Closing Date
balance sheet of the Company, attached thereto, is true and correct in all
material respects (such balance sheet indicating that the Company's Consolidated
Net Worth is an amount in excess of $59,000,000) as well as an officer's
certificate of the Chief Financial Officer of the Company with respect to the
solvency of the Company.
28
5.2. Deliveries by Purchasers. Purchasers are hereby delivering to
Redemption Shareholders or the Company the following:
(a) Investment Price. The Investment Price by wire transfer to the
Company and Shareholders' Agent.
(b) Opinion. The opinion of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇,
dated the Closing Date and addressed to Redemption Shareholders, in
substantially the form of Exhibit H attached hereto.
(c) New Shareholders Agreement. The executed Shareholders' Agreement
between the Company, Redemption Shareholders who will be a shareholder of the
Company immediately after the Closing and each Purchaser, dated the Closing
Date, in substantially the form of Exhibit D attached hereto.
5.3. Deliveries by Company. The Company is hereby delivering to
Redemption Shareholders or Purchasers the following:
(a) Investment Shares. To the Purchasers, stock certificates (in such
denominations as described on Exhibit A) representing the Investment Shares. All
stock certificates representing the Investment Shares delivered to Purchasers
shall reflect the Stock Split and shall bear an appropriate legend as set forth
in the Shareholders Agreement. In addition, the Company shall deliver to all
Redemption Shareholders who will remain shareholders of the Company after the
date hereof, new stock certificates which shall reflect the Stock Split and
shall bear an appropriate legend as set forth in the Shareholders Agreement.
(b) Purchase Price. The Purchase Price by wire transfer to the
Redemption Shareholders' Agent in accordance with Section 1.2 hereof.
6. INDEMNIFICATION
6.1. By Redemption Shareholders. Subject to the terms and conditions
of this Article 6, each Redemption Shareholder severally but not jointly hereby
agrees to indemnify, defend and hold harmless each Purchaser and the Company
from and against all Claims asserted against, resulting to, imposed upon, or
incurred by each Purchaser or the Company, directly or indirectly, by reason of,
arising out of or resulting from (a) the inaccuracy or breach of any
representation or warranty (including the Schedules to this Agreement) of any
29
Redemption Shareholder or Company contained in or made pursuant to this
Agreement or (b) the breach of any covenant or other agreement of any Redemption
Shareholder contained in this Agreement. Regardless of the foregoing, however,
breaches of representations and warranties contained in Section 2.1 hereof shall
be subject only to several indemnification by the respective Redemption
Shareholders who shall have made and breached such representations and
warranties. As used in this Article 6, the term "Claim" shall include (i) all
debts, liabilities and obligations; (ii) all losses, damages (including, without
limitation, consequential damages), judgments, awards, settlements, costs and
expenses (including, without limitation, interest (including prejudgment
interest in any litigated matter), penalties, court costs and attorneys fees and
expenses); and (iii) all demands, claims, suits, actions, costs of
investigation, causes of action, proceedings and assessments, whether or not
ultimately determined to be valid. In this Article 6, for purposes of
determining the existence of the inaccuracy or breach of any representation or
warranty of any Redemption Shareholder or the Company, any requirement in any
representation or warranty that an event or fact be material, meet a certain
minimum dollar threshold or have a Material Adverse Effect in order for such
event or fact to constitute breach of a representation or warranty shall be
disregarded.
6.2. By Purchasers. Subject to the terms and conditions of this
Article 6, Purchasers, severally hereby agree to indemnify, defend and hold
harmless each Redemption Shareholder from and against all Claims asserted
against, resulting to, imposed upon or incurred by any such person, directly or
indirectly, by reason of or resulting from (a) the inaccuracy or breach of any
representation or warranty of any Purchaser contained in or made pursuant to
this Agreement or (b) the breach of any covenant or other agreement of any
Purchaser contained in this Agreement.
6.3. By Company. Subject to the terms and conditions of this Article
6, Company hereby agrees to indemnify, defend and hold harmless each Redemption
Shareholder from and against all Claims asserted against, resulting to, imposed
upon or incurred by any such person, directly or indirectly, by reason of or
resulting from the breach of any post-closing covenant or other agreement of the
Company contained in this Agreement.
6.4. Indemnification of Third-Party Claims. The obligations and
liabilities of any party to indemnify any other under this Article 6 with
respect to
30
Claims relating to third parties shall be subject to the following terms and
conditions:
(a) Notice and Defense. The party or parties to be indemnified
(whether one or more, the "Indemnified Party") will give the party or
parties from whom indemnification is sought (whether one or more, the
"Indemnifying Party") prompt written notice of any such Claim
providing reasonable specificity of the nature of the Claim, the
parties involved and the facts giving rise to Claim, and the
Indemnifying Party will undertake the defense thereof by
representatives chosen by it and reasonably acceptable to the
Indemnified Party. The Indemnified Party shall have the right to
employ one counsel of its choice to represent such Indemnified Party
if it reasonably believes a conflict of interest between such
Indemnified Party and such Indemnifying Party exists in respect of a
Claim or if the amount of such Claim, after taking into account other
Claims, may exceed the maximum amount set forth in Section 6.5(c) and
in that event the reasonable fees and expenses of such separate
counsel shall be paid by such Indemnifying Party for representation
with respect to such Claim. In any event, the Indemnified Party shall
have the right to participate at its own expense in the defense of
such Claim. In all matters concerning the Redemption Shareholders, the
Redemption Shareholders' Agent shall give and receive notice and
otherwise act in all respects on their behalf. Failure to give such
notice shall not affect the Indemnifying Party's duty or obligations
under this Article 6, except to the extent the Indemnifying Party is
prejudiced thereby. So long as the Indemnifying Party is defending any
such Claim actively and in good faith, the Indemnified Party shall not
settle such Claim. The Indemnifying Party may not settle a Claim
without the written consent of the Indemnified Party unless such
settlement provides solely for money damages or other money payments
for which such Indemnified Party is entitled to indemnification
hereunder and includes as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect of such Claim. The Indemnified Party shall
make available to the Indemnifying Party or its representatives all
records and other materials reasonably required by them and in the
possession or under the control of the Indemnified Party, for the use
of the Indemnifying Party and its representatives in
31
defending any such Claim and shall in other respects give reasonable
cooperation in such defense. The Indemnifying Party shall make
available to the Indemnified Party or its representatives, all records
and other materials reasonably required by them and in the possession
or under the control of the Indemnifying Party, for the use of the
Indemnified Party and its representatives in defending any such Claim
and shall in other respects give reasonable cooperation in such
defense.
(b) Failure to Defend. If the Indemnifying Party, within a
reasonable time after notice of any such Claim, fails to defend such
Claim actively and in good faith, the Indemnified Party will (upon
further notice) have the right to undertake the defense, compromise or
settlement of such Claim or consent to the entry of a judgment with
respect to such Claim, on behalf of and for the account and risk of
the Indemnifying Party, and the Indemnifying Party shall thereafter
have no right to challenge the Indemnified Party's defense,
compromise, settlement or consent to judgment therein.
6.5. Payment. The Indemnifying Party shall pay the Indemnified Party
any amount due under this Article 6. Upon judgment, determination, settlement or
compromise of any third party Claim, the Indemnifying Party shall pay promptly
on behalf of the Indemnified Party, and/or to the Indemnified Party in
reimbursement of any amount theretofore required to be paid by it, the amount so
determined by judgment, determination, settlement or compromise and all other
Claims of the Indemnified Party with respect thereto, unless in the case of a
judgment an appeal is made from the judgment. If the Indemnifying Party desires
to appeal from an adverse judgment, then the Indemnifying Party shall post and
pay the cost of the security or bond to stay execution of the judgment pending
appeal. Upon the payment in full by the Indemnifying Party of such amounts, the
Indemnifying Party shall succeed to the rights of such Indemnified Party for
such Claim, to the extent not waived in settlement, against the third party who
made such third party Claim.
6.6. Limitations on Indemnification.
(a) Time Limitation. No notice of a Claim for breach of a
representation or warranty shall be made under this Article 6 after
the lapse of the earlier of (i) the completion of the audit covering
32
fiscal 1997, or (ii) September 30, 1997. Regardless of the foregoing,
however, or any other provision of this Agreement:
(i) There shall be no time limitation on claims on actions
brought for breach of any representation or warranty made by
Redemption Shareholders pursuant to Section 2.1(c) and 2.2(e).
(ii) Except as provided below, any claim or action brought
for breach of any representation or warranty made by Shareholders
in Section 2.2(k) may be brought at any time until the underlying
tax obligation is barred by the applicable period of limitation
under applicable law.
(b) Amount Limitation. Except with respect to claims for breaches
of representations or warranties contained in Section 2.2(y), an
Indemnified Party shall only be entitled to indemnification under this
Article 6 for inaccuracy or breach of a representation or warranty if
the amount for a particular inaccuracy or breach of a representation
or warranty exceeds Fifty Thousand Dollars ($50,000), and then only if
and to the extent that the aggregate amount of the Indemnifying
Party's indemnification obligations to the Indemnified Party pursuant
to this Article 6 is in excess of Five Hundred Thousand Dollars
($500,000).
(c) Maximum Liability. Shareholders' collective indemnification
obligations to the Purchasers pursuant to this Article 6 (other than
pursuant to Section 2.1(c)) shall not exceed in the aggregate Twenty
Million Dollars ($20,000,000).
(d) Tax and Benefits. The indemnification obligation of an
Indemnifying Party shall be reduced by any insurance recovery received
by the Indemnified Party for the Claim and by a tax benefit the
satisfaction of the Claim provides the Indemnified Party at the
maximum applicable rate whether or not the Indemnified Party is in a
tax paying position.
33
(e) Several Liability. Subject to the limitations in Section
6.6(c), the liability of an Indemnifying Party with respect to any
individual Claim shall in no event exceed an amount equal to the
product of the amount of such Claim and the percentage set forth
opposite such Purchaser's name on Exhibit A under the heading
"Percentage of Investment" or opposite such Redemption Shareholder's
name on Exhibit B under the heading "Pre-Sale Ownership; %age of
Total."
6.7. Certain Tax Matters.
(a) Indemnification.
(i) Subject to Section 6.6(c), each Redemption
Shareholder severally hereby agrees to indemnify, defend and
hold the Company, each Purchaser and its affiliates harmless
from and against any and all Taxes with respect to the
Company that are imposed upon such Indemnified Party, to the
extent the aggregate amount of such Taxes exceeds $1.025
million, with respect to (1) any taxable period ending on or
before June 30, 1996 (such Taxes are hereinafter referred to
as "Pre-Closing Taxes" and such periods as "Pre-Closing
Periods") and (2) one half of the aggregate amount of any
real property transfer or gains, sales, use, transfer,
value-added, stock transfer and stamp Taxes, any transfer,
recording, registration and other fees, and any similar
Taxes that are required to be paid in connection with the
transactions contemplated herein (collectively, "Transfer
Taxes"), in each case, together with all reasonable legal
fees, costs and expenses incurred by the Company, Purchasers
or their affiliates, as the case may be, in connection
therewith.
(ii) Purchasers severally hereby agree to indemnify,
defend and hold each Redemption Shareholder harmless from
and against any and all Taxes (other than Transfer Taxes)
with respect to the Company that are imposed upon such
Redemption Shareholder with respect to (1) any taxable
period beginning after June 30, 1996, and (2) one half of
the aggregate amount of any Transfer Taxes, in each case,
34
together with all reasonable legal fees, costs and expenses
incurred by each Redemption Shareholder and its affiliates
in connection therewith.
(iii) The indemnity provided for in this Section 6.6
shall be independent of any other indemnity provision in the
Agreement and, anything in the Agreement to the contrary
notwithstanding, shall survive until the expiration of the
applicable statutes of limitation for the Taxes referred to
herein (giving effect to any extensions or waivers thereto).
(b) Control of Contests.
(i) If a notice of deficiency, proposed adjustment,
adjustment, assessment, audit, examination, suit, dispute or
other claim (a "Tax Claim") shall be delivered, sent,
commenced, or initiated to or against Company or Purchasers
or any of their affiliates by any taxing authority (whether
foreign or domestic) with respect to Taxes for which Company
or Purchasers or their affiliates are entitled to
indemnification under this Section 6.6, Purchasers shall
promptly notify Redemption Shareholders' Agents in writing
of the Tax Claim. If a Tax Claim shall be delivered, sent,
commenced or initiated to or against any of the Redemption
Shareholders by any taxing authority (whether foreign or
domestic) with respect to Taxes for which one party to this
Agreement is entitled to indemnification under this Section
6.6, such Redemption Shareholders shall promptly notify
Purchasers in writing of such Tax Claim.
(ii) If Redemption Shareholders' Agents notify
Purchasers in writing within 20 days of receiving notice of
a Tax Claim involving solely Pre-Closing Taxes (the "Control
Notice"), Redemption Shareholders' Agents shall be entitled
to control, at their sole cost and expense, the defense of
any such Tax Claim, provided, however, that (1) Redemption
Shareholders' Agents shall keep Purchasers informed about,
and shall allow them to participate in (but not control), at
their sole expense, the defense of any such
35
Tax Claim; (2) Redemption Shareholders' Agents shall
not pay, discharge, settle, compromise, litigate or
otherwise dispose (collectively, "dispose") of any such Tax
Claim without obtaining the prior written consent of
Purchasers, which shall not be unreasonably withheld or
delayed; and (3) if Purchasers disagree with any proposed
disposition of any such Tax Claim, Purchasers shall have the
right, at their sole expense, to litigate such Tax Claim;
provided, however, that Purchasers shall not settle such Tax
Claim without the prior written consent of Redemption
Shareholders' Agents, which shall not be unreasonably
withheld or delayed; provided, further, that (A) Redemption
Shareholders' indemnification obligation with respect to
such Tax Claim shall be no greater than such obligation
would have been had such Tax Claim been disposed of in the
manner originally contemplated by Redemption Shareholders'
Agents and (B) Purchasers severally shall indemnify, defend
and hold harmless Redemption Shareholders from and against
any liability for Taxes with respect to the Company that are
imposed upon such Indemnified Party in excess of the
liability for Taxes, if any, that otherwise would have
resulted had such Tax Claim been disposed of in the manner
originally contemplated by Redemption Shareholders' Agents.
(iii) If Redemption Shareholders' Agents do not provide
Purchasers with the Control Notice within the 20-day period
prescribed in subparagraph (b)(ii) above, Purchasers shall
control the defense of any Tax Claim involving solely
Pre-Closing Taxes and (1) shall consult with Redemption
Shareholders' Agents and keep Redemption Shareholders'
Agents informed of all material developments and events
relating to such Tax Claim and (2) shall not dispose of such
Tax Claim without the written consent of Redemption
Shareholders' Agents, which shall not be unreasonably
withheld or delayed.
(iv) If the Company, Purchasers or Redemption
Shareholders receive notice of a Tax Claim involving an
adjustment of any item in both a Pre-Closing Period and any
36
taxable period beginning after June 30, 1996, Purchasers
shall be entitled to control the defense of any such Tax
Claim, provided however, that (1) Purchasers shall keep
Redemption Shareholders' Agents informed about, and shall
allow them to participate in (but not control) at their sole
expense, the defense of any such Tax Claim; (2) Purchasers
shall not dispose of any such Tax Claim without obtaining
the prior written consent of the Redemption Shareholders'
Agents, which consent shall not be unreasonably withheld or
delayed; and (3) if Redemption Shareholders' Agents disagree
with any proposed disposition of any such Tax Claim,
Redemption Shareholders' Agents shall have the right, at
their sole expense, to litigate such Tax Claim provided,
however, that Redemption Shareholders' Agents shall not
settle such Tax Claim without the prior written consent of
Purchasers, which consent shall not be unreasonably withheld
or delayed; provided, further, that (A) Purchaser's
indemnification obligation with respect to such Tax Claim
shall be no greater than such obligation would have been had
such Tax Claim been disposed of in the manner originally
contemplated by Purchasers and (B) each Redemption
Shareholder severally shall indemnify, defend and hold
harmless the Company, each Purchaser and its affiliates from
and against any liability for Taxes with respect to the
Company that are imposed upon such Indemnified Party in
excess of the liability for Taxes, if any, that otherwise
would have resulted had such Tax Claim been disposed of in
the manner originally contemplated by Purchasers.
(v) Purchasers, in their sole discretion, shall be
entitled to control the defense and disposition of all other
Tax Claims.
(vi) Indemnifying Party shall pay to the Indemnified
Party all indemnity amounts in respect of any Tax Claim
within ten (10) business days after such Tax Claim is
disposed of or a Final Determination has been made with
respect thereto. "Final Determination" shall mean (1) the
37
entry of a decision of a court of competent jurisdiction at
such time as an appeal may no longer be taken from such
decision or (2) the execution of a closing agreement or its
equivalent between the particular taxpayer and the
particular relevant taxing authority.
(c) Preparation and Filing of Tax Returns; Payment of Taxes.
(i) On or prior to the Closing Date, (1) Redemption
Shareholders' Agents shall prepare or cause to be prepared
and file or cause to be filed on a timely basis and in a
manner consistent with past practice all Tax Returns of the
Company for all Pre-Closing Periods, which Tax Returns are
due (giving effect to any extensions thereto) on or before
the Closing Date (excluding state and federal income Tax
Returns for the taxable year ended June 30, 1996) and (2)
Redemption Shareholders' Agents or the Company shall be
responsible for and shall timely pay all Taxes shown to be
due thereon prior to the Closing Date.
(ii) After the Closing Date, Purchasers shall prepare
or cause to be prepared and shall file or cause to be filed
on a timely basis all other Tax Returns with respect to the
Company and shall pay or cause to be paid the Taxes shown
due thereon; provided, however, that Purchasers shall allow
Redemption Shareholders' Agents to review any Tax Return for
a Pre-Closing Period and shall not file any such Tax Return
without first obtaining the prior written consent of
Redemption Shareholders' Agents, which consent shall not be
unreasonably withheld or delayed, provided, however, that if
Redemption Shareholders' Agents do not consent to the filing
of any such Tax Return, Purchasers shall be entitled to file
such Tax Return, and any disputed items relating to such Tax
Return shall be subject to the dispute resolution procedures
set forth in subparagraph (f).
(iii) The party responsible for filing any Tax Return
with respect to Transfer Taxes shall prepare or cause to be
38
prepared and shall file or cause to be filed on a timely
basis such Tax Return and shall pay or cause to be paid the
Transfer Taxes shown due thereon. The filing party shall
provide the other party with a schedule calculating in
reasonable detail such other party's indemnification
obligation pursuant to subsection (a) hereof, which amounts
shall be paid to the filing party within five days of
receiving such schedule.
(d) Termination of Tax Sharing Agreements. Redemption
Shareholders hereby agree and covenant that any obligation under
any tax sharing agreement or arrangement of the Company shall be
terminated on or before the Closing Date, and no payments
pursuant to any such tax sharing agreement or arrangement shall
be made after such termination.
(e) Mutual Cooperation. Each of Purchasers and Redemption
Shareholders' Agents shall provide the other, and, after the
Closing Date, Purchasers shall cause the Company to provide
Redemption Shareholders' Agents, with such assistance as may
reasonably be requested by either of them in connection with the
preparation of any Tax Return, any audit or other examination by
any taxing authority, any judicial or administrative proceedings
relating to liability for Taxes, or any Tax Claim, and each will
retain and provide the other with any records or information that
may be relevant to such Tax Return, audit or examination,
proceedings or determination. Such assistance shall include
making employees available on a mutually convenient basis to
provide additional information and explanation of any material
provided hereunder and shall include providing copies of any
relevant Tax Returns and supporting work schedules.
(f) Dispute Resolution. If Purchasers and Redemption
Shareholders' Agents cannot agree as to the amount of any party's
indemnification obligation under subsection (a) hereof or the
interpretation of any provision of this Section 6.6, Purchasers
and Redemption Shareholders' Agents shall choose an independent,
"Big Six" accounting firm, acceptable to each of them (the
"Selected Accounting Firm"), and the decision of the Selected
Accounting Firm
39
as to the amount of such party's indemnification obligation, if
any, or the interpretation of any such provision shall be
conclusive and binding. Any indemnification payment required
under subsection (a) hereof by one party to the other shall be
made within ten (10) days of the agreement by the parties or the
decision by the Selected Accounting Firm, as the case may be,
with interest at the applicable Base Rate as announced from time
to time by Bank of America National Trust and Savings Association
(the "Base Rate") from the date on which the disputed amount was
required to be paid to the relevant taxing authority to the date
of payment. The foregoing shall not limit or relieve each
Redemption Shareholder's obligation to indemnify the Company,
each Purchaser and its affiliates pursuant to subsection (a)
hereof with respect to any Tax Claim.
(h) Miscellaneous.
(i) Any payment required by this Section 6.6 which is
not made on or before the date provided shall bear interest
after such date at the Base Rate plus three (3) percent.
(ii) Any and all costs and expenses of the Selected
Accounting Firm shall be borne by Purchasers and Redemption
Shareholders in proportion to the amount of each party's
liability for the amount in dispute pursuant to subsection
(a) hereof.
6.8. Reporting Indemnity Payments. Any payment made by the Redemption
Shareholders to the Purchasers pursuant to this Section 6 shall be treated as if
it reduced each of the Investment Price and the Purchase Price by the amount of
the payment, and any payment made by the Purchasers to the Redemption
Shareholders pursuant to this Section 6 shall be treated as if it increased each
of the Purchase Price and the Investment Price by the amount of the payment.
Each of Purchasers and Redemption Shareholders agree to report all such payments
for all foreign, federal, state and local income tax purposes in a manner
consistent with the treatment described above and to notify each other promptly
in the event that any taxing authority proposes to disallow such treatment.
40
7. MISCELLANEOUS
7.1. Expenses. Except as otherwise provided in this Agreement, the
Company and Redemption Shareholders on the one hand, and Purchasers on the other
hand, will each bear its own expenses, costs and fees (including attorneys' and
auditors' fees) in connection with the transactions contemplated hereby,
including the preparation and execution of this Agreement.
7.2. Assignment; Successors. This Agreement shall not be assigned by
any party without the prior written consent of the other party, and any
purported assignment or other transfer without such consent shall be void and
unenforceable, except by operation of law. In the case of such consent, this
Agreement shall inure to the benefit of, and be binding on and enforceable
against, the successors and assigns of the respective parties hereto.
7.3. Amendment and Modification. Neither this Agreement nor any term
hereof may be changed, waived, discharged or terminated orally, other than by an
agreement in writing signed by the parties hereto (in the case of the Redemption
Shareholders, by one of the Redemption Shareholders' Agents acting in such).
7.4. Entire Agreement. This Agreement, including the Schedules and
Exhibits to this Agreement (which are hereby incorporated by reference and made
a part of this Agreement) sets forth the entire agreement and understanding of
the parties hereto with respect to the subject matter hereof, supersedes all
other prior agreements, understandings, representations and warranties, oral or
written, between the parties in respect of the subject matter hereof (including
without limitation the letter of intent dated July 26, 1996), except that this
Agreement does not supersede the Confidentiality Agreement, the terms and
conditions of which are the parties expressly reaffirm.
7.5. Severability. If any provision of this Agreement is inoperative
or unenforceable for any reason, such circumstances shall not have the effect of
rendering the provision in question inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatsoever. The
invalidity of any one or more phrases, sentences, clauses, Sections or
subsections of this Agreement shall not affect the remaining portions of this
Agreement.
41
7.6. Notices. Any notice or other communication required or permitted
to be given hereunder or for the purposes hereof to any party shall be in
writing and shall be sufficiently given if (a) delivered personally, (b) mailed
certified or registered mail, postage prepaid, (c) transmitted by facsimile with
"answer-back" confirmation (and confirmed by mail) or (d) sent by next-day or
overnight mail or delivery to:
(a) Redemption Shareholders: ▇▇▇▇ Group
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) Purchasers: ▇▇▇▇▇▇ ▇. ▇▇▇ Company
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
42
With a copy to: Skadden, Arps, Slate,
▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address or to such other person's attention as the party to
whom such notice is to be given shall have last notified to the party giving the
same in the manner provided in this Section. Any notice so delivered to the
party to whom it is addressed shall be deemed to have been given and received
(i) if by personal delivery, on the day of such delivery, (ii) if by certified
or registered mail, on the seventh day after mailing thereof, (iii) if by
facsimile, the day on which such facsimile was sent or (iv) if by next-day or
overnight mail delivery, on the day delivered, provided that if any such day is
not a business day then the notice shall be deemed to have been given and
received on the business day next following such day.
7.7. No Third Party Beneficiaries. Nothing in this Agreement shall
confer any rights upon any person or entity which is not a party or a successor
or permitted assignee of a party to this Agreement.
7.8. Headings. The section headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or affect the
meaning or interpretation of any provision of this Agreement.
7.9. Governing Law. This Agreement shall be governed by, construed and
performed in accordance with the internal laws of the State of Wisconsin
applicable to agreements made and to be performed entirely within such state,
without regard to the conflicts of law principles of such state.
7.10. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument.
43
7.11. Knowledge. With respect to any matter herein, the term
"Knowledge" shall mean the actual knowledge after due inquiry of any of ▇▇▇▇▇▇
▇. ▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
7.12. Remedies. Each party shall be entitled to obtain specific
performance of the obligations of another party hereunder and immediate
injunctive relief, and in the event any action or proceeding is brought in
equity to enforce this Agreement, no party will urge as a defense, that there is
an adequate remedy of law. Such remedies shall be cumulative and not exclusive
and shall be in addition to any other remedies which any party may have under
this Agreement or otherwise.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
RAYOVAC CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Chairman of the Board, President and
Chief Executive Officer
REDEMPTION SHAREHOLDERS:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
-------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., as agent and attorney-
in-fact under Shareholder Appointment of
Agents and Power of Attorneys dated
March 1, 1996 executed by each of the
Redemption Shareholders, and not in his
individual capacity
44
THE ▇▇▇▇▇▇ AND ▇▇▇▇▇▇ ▇▇▇▇
CHARITABLE REMAINDER TRUST
CREATED SEPTEMBER 10, 1996
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., Trustee
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, Trustee
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, Trustee
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
--------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III, Trustee
▇▇▇▇▇▇ ▇. ▇▇▇ EQUITY FUND III,
L.P.
By: THL EQUITY ADVISORS III
LIMITED PARTNERSHIP,
as General Partner
By: THL EQUITY TRUST III,
as General Partner
By: /s/ ▇.▇. ▇▇▇▇▇, ▇▇.
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: Trustee
45
▇▇▇▇▇▇ ▇. ▇▇▇ FOREIGN FUND III, L.P.
By: THL EQUITY ADVISORS III
LIMITED PARTNERSHIP,
as General Partner
By: THL EQUITY TRUST III,
as General Partner
By: /s/ ▇.▇. ▇▇▇▇▇, ▇▇.
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: Trustee
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
THL-CCI LIMITED PARTNERSHIP
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., as agent and attorney-
in-fact under Purchaser Appointment of
Agent and Power of Attorney dated
September 3, 1996 executed by THL-CCI
Limited Partnership, and not in his
individual capacity
46
EXHIBIT A
==============================================================================
Number of Investment Shares Being Purchased
------------------------------------------------------------------------------
Percentage of Adjusted For
Name of Purchaser At Closing Investment Stock Split*
-------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇ Equity Fund III, L.P. 2,772,827 84.46% 13,864,135
-------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇ Foreign Fund III, L.P. 171,790 5.24% 858,950
-------------------------------------------------------------------------------
THL-CCI Limited Partnership 291,481 8.90% 1,457,405
-------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇ 45,579 1.39% 227,895
-------------------------------------------------------------------------------
Total 3,281,677 100% 16,408,385
===============================================================================
-------------------
* A 5 for 1 stock split shall occur immediately after the Closing.
47
Exhibit B
======================================================================================================================
Pre-Sale Sold in Transaction Post- Adjusted For
Ownership Closing Stock Split
----------------------------------------------------------------------------------------------------------------------
Shareholders Shares % of Total # Shares Purchaser of Shares # Shares # Shares
----------------------------------------------------------------------------------------------------------------------
x5
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 175,000 1.77% 61,053 Fund 113,947 569,735
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 175,000 1.77% 133,979 Fund 41,021 205,105
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 100,000 1.01% 17,958 Fund 82,042 410,210
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 50,000 0.50% 8,979 Fund 41,021 205,105
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇ 50,000 0.50% 27,211 Fund 22,789 113,945
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 50,000 0.50% 50,000 Fund 0 0
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 25,000 0.25% 15,884 Fund 9,116 45,580
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 25,000 0.25% 6,768 Fund 18,232 91,160
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇ 100,000 1.01% 100,000 Fund 0 0
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 25,000 0.25% 4,490 Fund 20,510 102,550
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 40,000 0.40% 5,816 Fund 34,184 170,920
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 25,000 0.25% 0 Fund 25,000 125,000
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇ 10,000** 0.02% 2,000 Fund 8,000 40,000
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇ 7,071,845 71.42% 6,667,288 Company 5,807,904 404,557 2,022,785
Fund 813,805
▇▇▇▇▇ 45,579
---------
6,667,288
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III 165,000 1.67% 165,000 Fund 0 0
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇ Charitable Trust 1,823,155 18.40% 1,823,155 Fund 0 0
----------------------------------------------------------------------------------------------------------------------
9,910,000 100.00% 9,089,581 820,419 4,102,095
======================================================================================================================
Fund = ▇▇▇▇▇▇ ▇. ▇▇▇ Equity Fund III, L.P., ▇▇▇▇▇▇ ▇. ▇▇▇ Foreign Fund III, L.P.
and THL-CCI Limited Partnership
Company = Rayovac Corporation
▇▇▇▇▇ = ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
* A 5 for 1 stock split shall occur immediately after the Closing.
** Includes 2,000 shares and 8,000 shares of underlying options (pre-split).
48