ASSET PURCHASE AGREEMENT by and between Curtiss-Wright Electro-Mechanical Corporation, a Delaware corporation and Flowserve US Inc., a Delaware corporation November 1, 2004
Exhibit
10.54
EXECUTION VERSION
by and between
▇▇▇▇▇▇▇-▇▇▇▇▇▇ Electro-Mechanical Corporation,
a Delaware corporation
and
Flowserve US Inc.,
a Delaware corporation
November 1, 2004
TABLE OF CONTENTS
| Page | ||||||||||
| 1. | DEFINITIONS | 1 | ||||||||
| 2. | PURCHASE AND SALE | 6 | ||||||||
| (a) | Closing | 6 | ||||||||
| (b) | Purchase and Sale; Deliverables | 6 | ||||||||
| (c) | Excluded Assets | 8 | ||||||||
| (d) | Purchase Price; Payment; Assumed Liabilities; Excluded Liabilities; Allocation | 8 | ||||||||
| (e) | Closing Balance Sheet | 11 | ||||||||
| (f) | Fairfield Assets | 11 | ||||||||
| (g) | Intellectual Property Assets Transfer | 12 | ||||||||
| (h) | Adjustments As a Result of the Closing Date | 12 | ||||||||
| (i) | Adjustment of Purchase Price | 12 | ||||||||
| 3. | REPRESENTATIONS AND WARRANTIES OF SELLER | 13 | ||||||||
| (a) | Organization | 13 | ||||||||
| (b) | Authorization; Enforceability | 14 | ||||||||
| (c) | Financial Statements | 14 | ||||||||
| (d) | Government Approvals | 15 | ||||||||
| (e) | Fixed Assets; Properties; Liens | 15 | ||||||||
| (f) | [Reserved] | 15 | ||||||||
| (g) | Condition of Assets | 15 | ||||||||
| (h) | Taxes | 15 | ||||||||
| (i) | Current Employees | 16 | ||||||||
| (j) | Labor Relations | 16 | ||||||||
| (k) | Compliance With Legal Requirements | 16 | ||||||||
| (l) | Legal Proceedings; Orders | 16 | ||||||||
| (m) | Absence of Certain Changes and Events | 16 | ||||||||
| (n) | Intellectual Property Assets | 17 | ||||||||
| (o) | Contracts; No Defaults | 17 | ||||||||
| (p) | Insurance | 22 | ||||||||
| (q) | Leased Real Property | 22 | ||||||||
| (r) | Brokerage | 23 | ||||||||
| (s) | Accounts Receivable | 23 | ||||||||
| (t) | Accounts Payable; Contracts with Suppliers | 23 | ||||||||
| (u) | Inventory | 23 | ||||||||
| (v) | Environmental Status; Permits | 24 | ||||||||
| (w) | Purchased Assets | 25 | ||||||||
| (x) | No Undisclosed Liabilities | 25 | ||||||||
| (y) | Disclosure | 25 | ||||||||
| 4. | REPRESENTATIONS AND WARRANTIES OF BUYER | 25 | ||||||||
| (a) | Organization | 25 | ||||||||
| (b) | Authorization; Enforceability | 25 | ||||||||
| (c) | Government Approvals | 26 | ||||||||
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| Page | |||||||||||
| (d) | Economic Ability | 26 | |||||||||
| (e) | Brokerage | 26 | |||||||||
| 5. | COVENANTS OF SELLER | 26 | |||||||||
| (a) | Access and Investigation | 26 | |||||||||
| (b) | Conduct of Business | 27 | |||||||||
| (c) | Required Approvals | 27 | |||||||||
| (d) | No Negotiation | 27 | |||||||||
| (e) | Additional Information | 27 | |||||||||
| (f) | Confidentiality | 28 | |||||||||
| (g) | Reasonable Efforts | 28 | |||||||||
| (h) | Non Solicitation; Non-Interference | 28 | |||||||||
| (i) | Notice of Events or Circumstances | 29 | |||||||||
| 6. | COVENANTS OF BUYER | 29 | |||||||||
| (a) | Required Approvals | 29 | |||||||||
| (b) | Employees | 29 | |||||||||
| (c) | Confidentiality | 30 | |||||||||
| (d) | Reasonable Efforts | 31 | |||||||||
| (e) | Notices and Consents | 31 | |||||||||
| (f) | Notice of Events or Circumstances | 31 | |||||||||
| 7. | CONDITIONS TO BUYER’S OBLIGATIONS | 31 | |||||||||
| (a) | Accuracy of Representations and Warranties | 32 | |||||||||
| (b) | Seller’s Performance | 32 | |||||||||
| (c) | Officer’s Certificate | 32 | |||||||||
| (d) | Secretary’s Certificate | 32 | |||||||||
| (e) | Governmental Consents | 32 | |||||||||
| (f) | No Injunctions | 32 | |||||||||
| (g) | Conveyances | 32 | |||||||||
| (h) | Technology Transfer Agreement | 32 | |||||||||
| (i) | Lease Assignment | 32 | |||||||||
| (j) | Transition Services Agreement | 32 | |||||||||
| (k) | Supply Agreement | 32 | |||||||||
| (l) | Physical Inventory | 33 | |||||||||
| 8. | CONDITIONS TO SELLER’S OBLIGATIONS | 33 | |||||||||
| (a) | Accuracy of Representations and Warranties | 33 | |||||||||
| (b) | Buyer’s Performance | 33 | |||||||||
| (c) | Officer’s Certificate | 33 | |||||||||
| (d) | Secretary’s Certificate | 33 | |||||||||
| (e) | Governmental Consents | 33 | |||||||||
| (f) | No Injunctions | 33 | |||||||||
| (g) | Purchase Price | 33 | |||||||||
| (h) | Assumption Agreement | 33 | |||||||||
| (i) | Lease Assignment | 33 | |||||||||
| (j) | Technology Transfer Agreement | 34 | |||||||||
| (k) | Transition Services Agreement | 34 | |||||||||
| (l) | Supply Agreement | 34 | |||||||||
| (m) | Guaranty | 34 | |||||||||
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| Page | ||||||||||||
| (n | ) | Resale Certificate | 34 | |||||||||
| 9. | POST-CLOSING COVENANTS | 34 | ||||||||||
| (a | ) | Further Assurances | 34 | |||||||||
| (b | ) | Retention of Records | 34 | |||||||||
| (c | ) | Novations of Government Contracts | 34 | |||||||||
| (d | ) | Employment Tax Filings | 35 | |||||||||
| (e | ) | Failure to Obtain Consents or Novations | 35 | |||||||||
| (f | ) | Warranty Claims of the Business | 36 | |||||||||
10.
|
NONCOMPETITION | 37 | ||||||||||
| (a | ) | Noncompetition | 37 | |||||||||
| (b | ) | Breach | 37 | |||||||||
| (c | ) | Severability | 37 | |||||||||
| 11. | TERMINATION AND ABANDONMENT | 37 | ||||||||||
| (a | ) | Termination | 37 | |||||||||
| (b | ) | No Waiver | 38 | |||||||||
| (c | ) | Return of Information | 38 | |||||||||
| 12. | INDEMNIFICATION | 38 | ||||||||||
| (a | ) | Indemnification Definitions | 38 | |||||||||
| (b | ) | Indemnity by Seller | 39 | |||||||||
| (c | ) | Indemnity by Buyer | 40 | |||||||||
| (d | ) | Actions Related to Indemnifiable Claims | 40 | |||||||||
| (e | ) | Deductible; Limits on Indemnification | 41 | |||||||||
| (f | ) | Survival of Representations, Warranties and Covenants | 41 | |||||||||
| (g | ) | Third-Party Claims Against Buyer Indemnified Parties | 41 | |||||||||
| (h | ) | Third-Party Claims Against Seller Indemnified Parties | 42 | |||||||||
| (i | ) | Indemnification Limitations | 43 | |||||||||
| (j | ) | Sole Remedy | 44 | |||||||||
| 13. | MISCELLANEOUS | 44 | ||||||||||
| (a | ) | Expenses | 44 | |||||||||
| (b | ) | Public Announcements | 44 | |||||||||
| (c | ) | Confidentiality | 44 | |||||||||
| (d | ) | Notices | 44 | |||||||||
| (e | ) | Entire Agreement | 45 | |||||||||
| (f | ) | Waiver and Amendment | 46 | |||||||||
| (g | ) | No Third Party Rights or Remedies Beneficiary | 46 | |||||||||
| (h | ) | Severability | 46 | |||||||||
| (i | ) | Headings and Interpretation | 46 | |||||||||
| (j | ) | Governing Law | 46 | |||||||||
| (k | ) | Dispute Resolution | 46 | |||||||||
| (l | ) | Assignment | 47 | |||||||||
| (m | ) | Taxes | 47 | |||||||||
| (n | ) | Attorneys’ Fees | 47 | |||||||||
| (o | ) | Counterparts | 47 | |||||||||
| (p | ) | Bulk Transfer Laws | 48 | |||||||||
| (q | ) | Waiver of Jury Trial | 48 | |||||||||
iii
| EXHIBITS: | ||
Exhibit A -
|
Assumption Agreement | |
Exhibit B -
|
Financial Statements | |
Exhibit C -
|
Technology Transfer Agreement | |
Exhibit D -
|
Lease Assignment | |
Exhibit E -
|
Supply Agreement | |
Exhibit F -
|
Transition Services Agreement | |
Exhibit G -
|
▇▇▇▇ of Sale | |
Exhibit H -
|
Guaranty |
| SCHEDULES: | ||
Schedule 1.1
|
Products | |
Schedule 1.2
|
Patterns | |
Schedule 2(b)(i)(C)
|
Tangible Personal Property | |
Schedule 2(b)(i)(I)
|
Leases of Equipment and Personal Property | |
Schedule 2(c)(i)
|
Certain Excluded Assets | |
Schedule 2(d)(iii)
|
Assumed Contracts and Other Obligations | |
Schedule 3(b)
|
Conflicts | |
Schedule 3(d)
|
Governmental Approvals | |
Schedule 3(e)
|
Scheduled Liens | |
Schedule 3(g)
|
Condition of Assets | |
Schedule 3(h)
|
Taxes | |
Schedule 3(i)
|
Current Employees | |
Schedule 3(j)
|
Labor Disputes | |
Schedule 3(k)
|
Legal Requirements | |
Schedule 3(l)
|
Legal Proceedings | |
Schedule 3(m)
|
Absence of Certain Changes and Events | |
Schedule 3(n)
|
Intellectual Property Assets Exceptions | |
Schedule 3(o)(i)
|
Contracts | |
Schedule 3(o)(ii)
|
Binding Contract Exceptions | |
Schedule 3(o)(iii)
|
Exceptions to Schedule 3(o)(i) | |
Schedule 3(o)(iv)
|
Government Contract Compliance | |
Schedule 3(o)(v)
|
Government Investigations | |
Schedule 3(o)(vi)
|
Absence of Claims | |
Schedule 3(o)(vii)
|
Eligibility; Systems Compliance | |
Schedule 3(o)(viii)
|
Test and Inspection Results | |
Schedule 3(o)(ix)
|
Government Furnished Equipment | |
Schedule 3(o)(xi)
|
Government Intellectual Property Assets | |
Schedule 3(o)(xiii)
|
Estimated Completion Costs | |
Schedule 3(p)
|
Insurance | |
Schedule 3(q)
|
Leased Real Property | |
Schedule 3(r)
|
Brokerage | |
Schedule 3(s)
|
Accounts Receivable | |
Schedule 3(t)
|
Accounts Payable; Contracts with Suppliers |
iv
Schedule 3(v)
|
Environmental Status; Permits | |
Schedule 3(w)
|
Sufficiency of Purchased Assets | |
Schedule 3(x)
|
Undisclosed Liabilities | |
Schedule 4(c)
|
Governmental Approvals | |
Schedule 5(b)
|
Conduct of Business Exceptions | |
Schedule 6(b)(i)
|
Union Employees |
v
THIS ASSET PURCHASE AGREEMENT (this “Agreement”), is dated as of November 1, 2004, by
and between ▇▇▇▇▇▇▇-▇▇▇▇▇▇ Electro-Mechanical Corporation, a Delaware corporation
(“Buyer”), and Flowserve US Inc., a Delaware corporation (“Seller”).
RECITALS
A. Seller, through its Government Marine Business Unit, designs, develops, manufactures and
services pumps and related equipment for use in a variety of nuclear and non-nuclear United States
Navy and commercial applications;
B. Seller desires to sell, transfer and convey to Buyer, and Buyer desires to purchase and
acquire from Seller the Purchased Assets and Buyer has agreed to assume the Assumed Liabilities,
all for the Purchase Price and upon the terms and subject to the conditions set forth in this
Agreement;
C. In connection with such sale and purchase of the Purchased Assets and to enable Buyer to
utilize such Purchased Assets and operate the business heretofore conducted by Seller’s Government
Marine Business Unit, Seller further desires to make available to the Buyer, and Buyer desires to
acquire from Seller, the use of certain patents, engineering software, information technology
software, documents, trademarks, service marks, trade names and other intellectual property used by
Seller’s Government Marine Business Unit;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS
The following terms, when used in this Agreement, shall have the meanings indicated below:
“Accounts Receivable” shall have the meaning ascribed to such term in Section 2(b)
hereof.
“Acquisition Agreements” shall mean this Agreement, the Technology Transfer Agreement,
the Assumption Agreement, the Lease Assignment, the Transition Services Agreement, the Supply
Agreement, the Guaranty and any other agreements or instruments which are executed in connection
with this Agreement in order to effectuate the transfer of any of the Purchased Assets or the
assumption of any of the Assumed Liabilities, collectively.
An “Affiliate” of any Person shall mean any other Person, which, directly or
indirectly, controls or is controlled by or is under common control with such Person. A person
shall be deemed to “control,” be “controlled by,” or be “under common control with” any other person if
such other person possesses, directly or indirectly, power to direct or cause the direction of the
1
management or policies of such person whether through the ownership of voting securities,
partnership interests, member interests, profits interests, by contract, or otherwise. For
purposes of this definition, “Person” shall mean an individual, partnership, corporation, limited
liability company, trust, unincorporated organization, association, or joint venture.
“Assumed Liabilities” shall have the meaning ascribed to such term in Section 2(d)
hereof.
“Assumption Agreement” shall mean the Assumption Agreement to be entered into between
Buyer and Seller with respect to the assumption of the Assumed Liabilities in substantially the
form of Exhibit A hereto.
“Balance Sheet” shall mean the unaudited balance sheet of the Business as of December
31, 2003, annexed hereto as part of the Financial Statements in Exhibit B hereto.
“▇▇▇▇ of Materials” shall mean the ▇▇▇▇ of material, if any, associated with each
Product.
“Business” shall mean (i) the Products and technology related thereto to manufacture
such Products that Seller, through its Government Marine Business Unit, offers for sale for United
States government naval nuclear and non-nuclear applications and foreign government naval
non-nuclear applications; (ii) the Products and technology related thereto to manufacture such
Products that Seller, through its Government Marine Business Unit, offers for sale for commercial
applications and (iii) the servicing of the Products and products sold pursuant to the Supply
Agreement. Any Product of Seller that is not identified on Schedule 1.1 shall not be considered
part of the Business.
“Closing” and “Closing Date” shall have the meanings ascribed to such terms in
Section 2(a) hereof.
“Closing Balance Sheet” shall have the meaning ascribed to such term in Section 2(e)
hereof.
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Confidentiality Agreement” shall have the meaning ascribed to such term in Section
6(c) hereof.
“Contracts” shall have the meaning ascribed to such term in Section 2(b)(i)(E) hereof.
“Current Employees” shall have the meaning ascribed to such term in Section 3(i)
hereof.
“Drawings” shall mean the Drawings identified with Products on Schedule 1.1 hereto
that relate to the Products as set forth in such Schedule 1.1.
“Employees” shall mean those Persons who on the Closing Date, are employed by the
Seller in connection with the Business and who become employees of Buyer or any of its Affiliates.
2
“Environmental Law” shall mean any law relating to the protection of the air, surface
water, groundwater or land, and/or governing the handling, use, generation, treatment, storage or
disposal of Hazardous Materials, both domestic and foreign, but not including any law relating to
matters administered by the Occupational Safety and Health Administration (or by any state,
provincial, local, domestic or foreign equivalent of the Occupational Safety and Health
Administration).
“Excluded Assets” shall have the meaning ascribed to such term in Section 2(c) hereof.
“Excluded Liabilities” shall have the meaning ascribed to such term in Section
2(d)(iv) hereof.
“Facility” shall mean the buildings and land situated within the complex known as the
Phillipsburg Commerce Park and located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
used in the operations of the Business and which are described more particularly in the Lease
Assignment.
“Fairfield Assets” shall mean the Tangible Personal Property identified on Schedule
2(b)(i)(C) and which is located at Seller’s Fairfield, New Jersey facility.
“Files and Records” shall have the meaning ascribed to such term in Section 2(b)
hereof.
“Financial Statements” shall have the meaning ascribed to such term in Section 3(c)
hereof.
“GAAP” shall mean generally accepted U.S. accounting principles, applied on an accrual
basis consistent with the basis on which the Balance Sheet and the other Financial Statements were
prepared.
“Government Bid” shall mean, with respect to the Business, any quotation, bid or
proposal submitted to the U.S. Government or any proposed prime contractor or higher-tier
subcontractor of the U.S. Government.
“Governmental Body” shall mean any federal, state, local, foreign or other
governmental or administrative body, instrumentality, department or agency or any court, tribunal,
administrative hearing, arbitration panel, commission or similar dispute resolving panel or body
but shall not include any such entity in its capacity as a customer of the Business.
“Government Contract” shall mean, with respect to the Business, any prime contract,
subcontract, teaming agreement or arrangement, joint venture, basic ordering agreement, pricing
agreement, letter contract, purchase order, delivery order, change order, Government Bid or other
arrangement of any kind between or involving a party or any of its subsidiaries and (i) the U.S.
Government (acting on its own behalf or on behalf of another country or international
organization), (ii) any prime contractor of the U.S. Government or (iii) any subcontractor
with respect to any Contract of a type described in clauses (i) or (ii) above.
“Guarantor” shall mean ▇▇▇▇▇▇▇-▇▇▇▇▇▇ Corporation, a New York corporation.
3
“Guaranty” shall mean the Guaranty by Guarantor in substantially the form of Exhibit H
hereto.
“Hazardous Materials” means each and every element, compound, chemical mixture,
contaminant, pollutant, material, waste or other substance which is defined, determined or
identified as hazardous or toxic by a Governmental Body or the release of which is regulated.
Without limiting the generality of the foregoing, the term will include (a) “hazardous substances”
as defined in CERCLA, (b) “extremely hazardous substances” as defined in Title III of the United
States Superfund Amendments and Reauthorization Act, each as amended, and regulations promulgated
thereunder, (c) “hazardous waste” as defined in the United States Resource Conservation and
Recovery Act of 1976, as amended, and regulations promulgated thereunder, (d) “hazardous materials”
as defined in the United States Hazardous Materials Transportation Act, as amended, and regulations
promulgated thereunder and (e) “chemical substance or mixture” as defined in the United States
Toxic Substances Control Act, as amended, and regulations promulgated thereunder.
“Intellectual Property Assets” shall mean the Drawings, the Patterns and the Bills of
Materials.
“Inventories” shall have the meaning ascribed to such term in Section 2(b) hereof.
“Leases” shall mean, collectively, the material leases of equipment and personal
property listed on Schedule 2(b)(i)(I), in effect as of the date hereof, used or held for use
exclusively in connection with the Business.
“Lease Assignment” shall mean the partial assignment of Seller’s lease in
Phillipsburg, New Jersey pursuant to the Partial Assignment and Assumption of Lease to be executed
by Buyer and Seller in substantially the form annexed hereto as Exhibit D.
“Legal Requirement” shall mean any federal, state, local, foreign or other
administrative order, constitution, law, ordinance, regulation or statute.
“Material Adverse Effect” shall mean a material adverse effect on the condition,
results of operations, properties, or assets of the Business. “Material Adverse Effect” shall
exclude any effects to the extent resulting from (i) changes in the United States or foreign
economies in general, (ii) changes in industries relating to the Business in general and not
specifically relating to the Business, (iii) the announcement by Seller of its intention to sell
the Business or (iv) the execution of this Agreement (including the identity of Buyer) or any of
the Acquisition Agreements and the consummation of the transactions contemplated hereby or thereby.
“Novation Agreements” shall have the meaning ascribed to such term in Section 9(c)
hereof.
“Parties” shall mean Buyer and Seller.
“Patterns” shall mean each Pattern identified on Schedule 1.2 hereto that is located
at the location set forth on such Schedule 1.2.
4
“Permits” shall have the meaning ascribed to such term in Section 2(b)(i)(H) hereof.
“Permitted Liens” shall have the meaning ascribed to such term in Section 3(e) hereof.
“Person” shall mean any individual, corporation (including any nonprofit corporation),
general or limited partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity or Governmental Body.
“Prepaid Expenses” shall have the meaning ascribed to such term in Section 2(b)
hereof.
“Primary Working Capital” shall mean the sum of (i) Accounts Receivable, plus (ii)
Inventories, minus (iii) accounts payable of the Business, in each case as of October 31, 2004.
“Proceeding” shall mean any action, arbitration, investigation, litigation, or suit
(including any civil, criminal, administrative, investigative, or appellate proceeding) commenced,
brought, conducted, or heard by or before any third party or Governmental Body.
“Product” shall mean each of the products identified on Schedule 1.1 hereto by the
serial number of such product or, if such product on Schedule 1.1 does not have a serial number,
then by the order number for such product.
“Purchased Assets” shall have the meaning ascribed to such term in Section 2(b)
hereof.
“Purchase Price” shall have the meaning ascribed to such term in Section 2(d) hereof.
“Representative” shall mean with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such Person, including
legal counsel, accountants, and financial advisors.
“Seller Plan” shall have the meaning set forth in Section 2(d)(iv).
“Seller’s Knowledge” shall mean those facts of which (i) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ are aware in the normal exercise of their duties and (ii)
with respect to Proceedings, ▇▇▇▇▇▇ ▇▇▇▇▇ is aware in the normal exercise of his duties as the
General Counsel of Seller.
“Supply Agreement” shall mean the Supply Agreement to be entered into between Buyer
and Seller at the Closing in substantially the form of Exhibit E hereto.
“Tangible Personal Property” shall have the meaning ascribed to such term in Section
2(b) hereof.
“Tax” or “Taxes” means any federal, state, provincial, local or foreign net
income, gross income, gross receipts, sales, use, goods and services or other value-added or ad
valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall profits, capital,
consumption,
5
worker’s compensation, customs, duties or other tax, fee, assessment or charge,
including any related interest, penalty or addition thereto.
“Tax Liabilities” shall mean any and all costs, liabilities obligations and damages
incurred by Buyer or its Affiliates involving Taxes related to (i) the operation of the Business by
Seller prior to Closing or (ii) the use of the Purchased Assets by Seller prior to Closing.
“Technology Transfer Agreement” shall mean the Technology Transfer Agreement to be
entered into between Buyer and Seller at the Closing in substantially the form of Exhibit C hereto.
“Transition Services Agreement” shall mean the Transition Services Agreement to be
entered into between Buyer and Seller at the Closing in substantially the form of Exhibit F hereto.
“Union Contract” shall mean the Contract between Flowserve Corporation and the United
Steelworkers of America, AFL-CIO-CLC Local 8228 dated January 7, 2004.
“U.S. Government” shall mean the federal government of the United States of America
and any of its branches and instrumentalities, including its departments, agencies, bureaus,
commissions, boards, courts, corporations, offices, and other entities, and divisions thereof.
2. PURCHASE AND SALE
(a) Closing. The purchase and sale (the “Closing”) provided for in this
Agreement shall take place at 10:00 a.m. (Eastern Standard Time), on November 10, 2004 at ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. Notwithstanding the actual date of the Closing,
Buyer and Seller agree that the sale of the Business shall be deemed to be effective as of 12:01
a.m. (Eastern Standard Time) on November 1, 2004 ( the “Closing Date”). Subject to the
provisions of Article 11, failure to consummate the purchase and sale provided for in this
Agreement on the date, time or at the place determined pursuant to this Section 2(a) will not
result in the termination of this Agreement and will not relieve any party of any obligation under
this Agreement.
(b) Purchase and Sale; Deliverables.
(i) At the Closing, Seller will sell, convey, transfer, assign and deliver to Buyer or its
designee(s), and Buyer will purchase or will cause its designee(s) to purchase from Seller,
all of Seller’s right, title and interest in and to the operating assets of the Business set
forth in this Section 2(b)(i) (collectively, the “Purchased Assets”):
(A) All prepaid assets and prepaid expenses existing exclusively on the
accounting records of the Business as of the Closing Date (the “Prepaid
Expenses”);
(B) All accounts receivable of the Business created in the ordinary course of
business of Seller, and of the nature of those accounts receivable set
6
forth on the
Balance Sheet as of the Closing Date, and as identified on Schedule 3(s)
(collectively, the “Accounts Receivable”);
(C) (i) All items of tangible personal property of Seller used exclusively in
the ordinary course of business of the Business identified on Schedule 2(b)(i)(C)
and on hand as of the Closing Date including, without limitation, tooling,
machinery, equipment, furniture and fixtures and office equipment (collectively, the
“Tangible Personal Property”); (ii) all assignable warranties and licenses
issued to Seller in connection with the Tangible Personal Property; and (iii) any
assignable claims, credits and rights of recovery with respect to the Tangible
Personal Property;
(D) (i) The inventories of finished goods, raw materials, work in progress,
repair stock, parts and supplies maintained by Seller exclusively for the Business
which are on hand as of the Closing Date (the “Inventories”); (ii) all
assignable warranties and licenses issued to Seller in connection with the
Inventories; and (iii) any assignable claims, credits and rights of recovery with
respect to the Inventories;
(E) All of Seller’s interest in contracts, agreements, licenses, leases,
commitments, sales order, and purchase orders (“Contracts”) relating
exclusively to the Business, listed on Schedule 3(o)(i) hereto and all other
contracts that arise exclusively out of the conduct of the Business;
(F) All Intellectual Property Assets, subject to the terms of the Technology
Transfer Agreement;
(G) All papers and records in Seller’s care, custody or control which relate
exclusively to any or all of the Purchased Assets or to the Business, other than
papers and records relating to Excluded Liabilities, whether in hard copy, magnetic
tape or other format including, without limitation, files relating to the United
States governmental naval operations, vendor and prospective vendor files,
maintenance records, United States governmental naval warranty and support
obligation records, sales material, documentation, specifications, technical
manuals, outstanding proposals, accounting and financial records and redacted
personnel records (collectively, “Files and Records”); provided,
that Seller shall be entitled to make and retain copies of any Files and Records
that Seller is permitted to retain in compliance with Legal Requirements;
(H) To the extent assignable, all of Seller’s rights to all of Seller’s
certificates, licenses, permits, authorizations and approvals issued by any
governmental authority, agency or other instrumentality exclusively in connection
with the Business (“Permits”); and
(I) All Leases.
(ii) At the Closing, Seller will execute, acknowledge and deliver, or will cause to be
executed, acknowledged and delivered to Buyer, the following:
7
(A) A ▇▇▇▇ of Sale in the form annexed hereto as Exhibit G;
(B) The Technology Transfer Agreement;
(C) The Lease Assignment;
(D) The Transition Services Agreement; and
(E) The Supply Agreement.
(iii) At the Closing, Buyer will execute, acknowledge and deliver, or will cause to be
executed, acknowledged and delivered to Seller, the following:
(A) The Assumption Agreement;
(B) The Lease Assignment;
(C) The Technology Transfer Agreement;
(D) The Transition Services Agreement;
(E) The Supply Agreement;
(F) The Guaranty. and
(G) A sale for resale certificate with respect to the Inventories.
(c) Excluded Assets.
There shall be excluded from the Purchased Assets the following (collectively, the
“Excluded Assets”):
(i) All those excluded assets set forth on Schedule 2(c)(i) hereto;
(ii) Any product not identified on Schedule 1.1 hereto;
(iii) Any assets of the Business that are not listed in Section 2(b)(i) hereof; and
(iv) Any asset or property the assignment or attempted assignment of which would be
invalid or would constitute a breach of contract; provided, however, that
any asset or property referred to in this clause which is not an Excluded Asset but which is
a Purchased Asset shall be held and/or received by Seller for the use and at the direction
and for the benefit of Buyer or its designee(s).
(d) Purchase Price; Payment; Assumed Liabilities; Excluded Liabilities; Allocation.
(i) In consideration for the purchase of the Purchased Assets, Buyer will pay, or will
cause its designee(s) to pay, the “Purchase Price” as set forth in Section 2(d)(ii)
8
hereof, and Buyer will assume, or will cause its designee(s) to assume, at the Closing the
Assumed Liabilities specified in Section 2(d)(iii) hereof.
(ii) At the Closing, (i) Buyer will deliver, or will cause its designee(s) to deliver
the sum of Twenty-Eight Million US Dollars ($28,000,000.00) (the “Purchase Price”)
via wire transfer to the following account:
(iii) Effective as of the Closing Date and in addition to any other liabilities
expressly assumed by Buyer under this Agreement, Buyer shall assume responsibility for the
performance and satisfaction of the following (the “Assumed Liabilities”):
(A) All obligations and liabilities arising on or after the Closing Date and
related to (i) the ownership, use, possession or condition of the Purchased Assets,
or (ii) all operations and activities related to the Business (including under
Environmental Law, except to the extent that such liabilities relate to acts and
omissions of Seller prior to the Closing Date);
(B) All of the obligations and liabilities reflected on the Closing Balance
Sheet prepared in accordance with Section 2(e);
(C) All Taxes relating to the Purchased Assets or the operations and activities
related to the Business with respect to any period or part thereof commencing
immediately after the Closing Date. For the avoidance of doubt, Buyer shall not be
liable or responsible for any Taxes for the Business incurred during all periods
prior to the Closing Date, but which are required to be filed after the Closing
Date;
(D) All Contracts and other obligations identified on Schedule 2(d)(iii)
attached hereto;
(E) Those liabilities and obligations of the Seller with respect to the
Employees which Buyer has expressly agreed to assume pursuant to Section 6(b) of
this Agreement;
(F) All obligations, liabilities and commitments of Seller under the Permits to
the extent such obligations, liabilities and commitments relate to the period from
and after the Closing;
(G) All accounts payable incurred in the ordinary course of business of the
Business that are outstanding on the Closing Date; and
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(H) All obligations, liabilities and commitments for refunds, adjustments,
allowances, repairs (other than warranty repairs, which are addressed in Section
9(f)), exchanges and returns or similar claims in respect of any and all products
sold by the Business prior to the Closing Date.
The assumption by Buyer of the Assumed Liabilities shall be effective upon the Closing
Date (except for the Assumed Liabilities set forth in Section 2(d)(iii)(E), which shall be
assumed by Buyer as of the date of Closing), unless the terms hereof expressly state that
such Liability shall transfer at another time. If Seller shall receive a request for
payment of any Assumed Liability after the Closing, Seller shall promptly forward such
request for payment to Buyer and Buyer shall promptly satisfy such Assumed Liability.
(iv) The Buyer will not assume, and will not be deemed to have assumed, any other
obligation or liability of the Seller whatsoever other than as set forth in Section
2(d)(iii) (collectively, the “Excluded Liabilities”), including, without limitation:
(A) Except as expressly set forth in this Agreement, any liabilities or
obligations of the Seller under any employee pension benefit plans, material
employee welfare benefit plans and any other material employee benefit arrangements
or payroll practices (including employment agreements and severance agreements)
maintained by the Seller or to which the Seller contributes or has any existing
liability, in each case with respect to any Employees (collectively, the “Seller
Plans”). For the avoidance of doubt, Buyer specifically excludes any
liabilities associated with claims for benefits under post-retirement medical plans
provided by Seller (or Seller’s predecessor), and for which Seller has continuing
obligations.
(B) Subject to the obligations of the Buyer pursuant to Section 6(b) of this
Agreement, any liabilities or obligations with respect to Employees for periods
prior to the Closing Date that are not set forth on the Closing Balance Sheet.
(C) Any liabilities or obligations (i) pertaining to the Business and relating
to the violation of any Legal Requirement prior to the Closing, or (ii) except as
expressly set forth herein, any third party or Governmental Body claim arising from
any act, omission or circumstance that took place prior to the Closing.
(D) Any liabilities based on products liability (including, but not limited to,
design defect), claims under product warranty or breach of warranty or other similar
liabilities related to Products manufactured by the Seller at any time prior to the
Closing (subject to Buyer’s undertakings pursuant to Section 9(f)), except in the
event (a) such Products are modified in any manner by Buyer, (b) are sold or sent
out by Buyer into the stream of commerce for use not as intended originally by
Seller, (c) are sent out by Buyer into the stream of commerce in a
manner inconsistent with Seller’s past practices, or (d) are serviced,
refurbished or rebuilt after the Closing Date.
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(E) Any liability arising prior to the Closing Date relating to or arising out
of any real property and/or environmental conditions.
(F) Any liability (a) related to a release, or threatened release, of Hazardous
Materials by the Seller, or any predecessor of Seller (x) at the Facility or (y) any
location at which Hazardous Materials were generated, manufactured, refined,
transferred, used or processed by the Business or any Person for whose conduct the
Business was or may be responsible, prior to Closing, or (b) arising from a breach
or violation of any Environmental Law by Seller, or any predecessor of Seller, or
any Person for whose conduct Seller is or may be responsible, prior to Closing.
(G) Any intercompany liabilities.
(H) The Tax Liabilities.
(I) Any liabilities not expressly assumed by Buyer pursuant to the Acquisition
Agreements.
The Seller shall be responsible for, and will pay, perform and discharge when due each
of the Excluded Liabilities.
(v) Purchase Price Allocation. Within 60 days after the Closing Date, Buyer
shall provide Seller with an allocation of the total consideration (including liabilities
assumed) among the Purchased Assets and the covenant not to compete described in Article 10.
If Seller does not agree with such allocation, Seller and Buyer shall use good faith
efforts to agree on an estimate, but if after good faith negotiations between the parties,
agreement has not been reached within thirty (30) days after Seller’s receipt of Buyer’s
allocation, Buyer and Seller agree that such allocation shall be resolved pursuant to the
dispute resolution mechanism in Section 13(k). Seller (and its Affiliates) and Buyer (and
its Affiliates) agree to file all Tax returns consistent with the final versions of the
allocations and forms described in this Section 2(d)(v).
(e) Closing Balance Sheet. Seller will prepare, in good faith and in accordance with
the pro forma accounting policies and estimates used to prepare the Balance Sheet, an unaudited pro
forma balance sheet of the Business (in accordance with GAAP except to the extent described in the
footnotes thereto) as of October 31, 2004 (the “Closing Balance Sheet”). In the
preparation of the Closing Balance Sheet, Inventory value will be based upon a physical count as of
October 12, 2004. Seller shall deliver the Closing Balance Sheet to Buyer at or prior to the date
of Closing.
(f) Fairfield Assets. Although title to all of the Fairfield Assets will be
transferred to Buyer at the Closing, for a period of six (6) months (the “Fairfield
Period”) the Fairfield Assets will remain at Seller’s Fairfield, New Jersey facility while
Seller performs certain servicing operations for Buyer with respect to servicing Trim and Drain
Pumps for the United States Navy pursuant to the Transition Services Agreement. Seller shall be
responsible for any risk of loss of the Fairfield Assets during the Fairfield Period. Seller shall
be responsible for maintenance of the Fairfield Assets during the Fairfield Period; provided that
Buyer shall be responsible for the
11
expense of any non-routine maintenance and repair of the
Fairfield Assets during the Fairfield Period. Within fifteen (15) days after the end of the
Fairfield Period, Buyer shall at its sole risk and expense remove the Fairfield Assets from
Seller’s premises.
(g) Intellectual Property Assets Transfer. Although title to all of the Intellectual
Property Assets will be transferred to Buyer at the Closing, the physical transfer of the
Intellectual Property Assets will be effected pursuant to the Transition Services Agreement, the
Supply Agreement and the Technology Transfer Agreement.
(h) Adjustments As a Result of the Closing Date. The date of Closing will occur after
the Closing Date and it is the intention of the parties that all costs associated with the
operation of the Business after October 31, 2004 shall be borne by Buyer and all benefits of the
Business after such date shall accrue to Buyer.
(i) All amounts received by Seller with respect to any of the Purchased Assets on or
after the Closing Date shall be forwarded by Seller to Buyer within five business days of
receipt. All amounts received by Buyer with respect to any of the Excluded Assets shall be
forwarded by Buyer to Seller within five business days of receipt.
(ii) With respect to the Current Employees, Buyer shall within five business days of
invoicing by Seller reimburse Seller for the fully loaded and allocated costs of such
Current Employees (including all benefit plans and fringe benefits) from the Closing Date
through the date of Closing.
(iii) On the Closing Date, Buyer shall pay to Seller, in reimbursement of rent with
respect to the premises covered under the Lease Assignment after the Closing Date, $156,448.
(iv) With respect to any other out of pocket expenses incurred by Seller in the
ordinary course of the Business paid by Seller with respect to the period from the Closing
Date through the date of Closing, Buyer shall within five business days of invoicing by
Seller reimburse Seller for such expenses.
(v) The indemnity obligations of Buyer under Section 12(c) hereof, including with
respect to all Current Employees, shall not be affected by the fact that Seller has
operational control of the Purchase Assets and the Business from the Closing Date through
the date of Closing, except that no Seller Indemnified Party shall be indemnified for its
gross negligence or willful misconduct.
(i) Adjustment of Purchase Price.
(i) Within 45 days after the date of the Closing, Buyer shall prepare and deliver, or
cause to be prepared and delivered, to Seller a statement of Primary Working Capital as of
the date of the Closing Date Balance Sheet (the “Working Capital Statement”). The
Working Capital Statement shall be prepared in accordance with the preparation of the
Closing Date Balance Sheet.
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(ii) Within 45 days following receipt by Seller of the Working Capital Statement,
Seller shall deliver written notice to Buyer of any dispute it has with respect to the
preparation or content of the Working Capital Statement. In the event that Seller does not
notify Buyer of a dispute with respect to the Working Capital Statement within such 30-day
period, such Working Capital Statement will be final, conclusive and binding on the parties.
In the event of such notification of a dispute, Buyer and Seller shall negotiate in good
faith to resolve such dispute. If Buyer and Seller, notwithstanding such good faith effort,
fail to resolve such dispute within 45 days after Seller advises Buyer of its objections,
then Buyer and Seller jointly shall engage the firm of Ernst & Young LLP (the
“Arbitration Firm”) to resolve such dispute. All determinations made by the
Arbitration Firm shall be final, conclusive and binding on the parties. Buyer and Seller
shall share equally the fees and expenses of the Arbitration Firm.
(iii) For purposes of complying with the terms set forth in this Section 2(i), Buyer
and the Business, on the one hand, and Seller, on the other hand, shall cooperate with and
make available to the other party and its representatives all information, records, data and
working papers, and will permit access to their facilities and personnel, as may be
reasonably required in connection with the preparation and analysis of the Working Capital
Statement and the resolution of any disputes thereunder.
(iv) The parties agree that no claim for an adjustment of the Purchase Price shall be
made by either party unless the absolute value of the difference between Primary Working
Capital as of the date of the Closing Date Balance Sheet and $9,440,000 is greater than
$300,000. Accordingly (i) if Primary Working Capital as of the date of the Closing Date
Balance Sheet (as finally determined pursuant to Section 2(i)(ii)) is less than $9,140,000,
then the Purchase Price shall be adjusted and Seller shall pay or caused to be paid, by
bank wire transfer of immediately available funds to an account designated in writing by
Buyer, an amount in cash equal to such shortfall, within five business days from the date on
which Primary Working Capital is finally determined pursuant to Section 2(i)(ii); and (ii)
if Primary Working Capital as of the date of the Closing Date Balance Sheet (as finally
determined pursuant to Section 2(i)(ii)) is greater than $9,740,000, then the Purchase Price
shall be adjusted and Buyer shall pay or cause to be paid by bank wire transfer of
immediately available funds to an account, designated in writing by Seller, an amount in
cash equal to such excess, within five business days from the date on which Primary Working
Capital is finally determined pursuant to Section 2(i)(ii).
3. REPRESENTATIONS AND WARRANTIES OF SELLER
With respect to the sale of the Business, Seller represents and warrants (it being understood
that, except in such cases as the Schedules and Exhibits expressly refer to a different date, the
Schedules and Exhibits have been prepared through October 18, 2004 and the representations and
warranties with respect to such Schedules and Exhibits are at and as of such date) to Buyer that:
(a) Organization. Seller is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization and is licensed or qualified to transact
business
13
and in good standing, under the laws of all jurisdictions where the Business would require
it to be so licensed or qualified.
(b) Authorization; Enforceability. Seller has all requisite corporate power and authority to enter into this Agreement and the
other Acquisition Agreements to which it is a party and to perform its obligations hereunder and
thereunder. All corporate acts required to be taken by Seller to authorize the execution and
delivery of the Acquisition Agreements to which it is a party, and the consummation of the
transactions contemplated herein and therein, have been taken, and no other corporate proceedings
on the part of Seller are necessary to authorize such execution, delivery and performance. This
Agreement has been duly executed and delivered by Seller and constitutes a legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms, except to the extent
such enforceability may be limited by applicable bankruptcy and other laws affecting creditors’
rights, or by general equitable principles. Each Acquisition Agreement to which Seller is a party
will be, as of the Closing, duly executed and delivered by Seller and will constitute a legal,
valid and binding obligation of Seller in accordance with its terms, except to the extent such
enforceability may be limited by applicable bankruptcy and other laws affecting creditors’ rights,
or by general equitable principles. The execution and performance of each Acquisition Agreement,
and the compliance with the provisions hereof and thereof by Seller, will not conflict with,
violate or result in the breach of any of the terms, conditions or provisions of the Articles of
Incorporation of Seller, or any judgment, order, injunction, decree, law, regulation or ruling of
any Governmental Body to which Seller, the Purchased Assets and/or the Business are subject, except
where the same would not impede Seller’s ability to perform its obligations under the Acquisition
Agreements or have a Material Adverse Effect. Except as indicated on Schedule 3(b) hereto, the
execution and performance of each Acquisition Agreement, and the compliance with the provisions
hereof and thereof by Seller, will not result in any breach of any of the terms or conditions of,
or constitute a default under, any material license, indenture, mortgage, agreement or other
instrument to which Seller is a party or by which it is bound, except where such breach or default
would not impede Seller’s ability to perform its obligations under the Acquisition Agreements.
(c) Financial Statements. Exhibit B hereto contains (a) true and correct copy of
Seller’s unaudited pro forma Balance Sheet of the Business dated December 31, 2003 (excluding the
Fairfield portion of the Business), and (b) the unaudited pro forma Statement of Income of the
Business for the period ended December 31, 2003 (collectively referred to as the “Financial
Statements”). Such Financial Statements (i) are in accordance with the books and records of
Seller, (ii) are accurate in all material respects, and (iii) fairly present, in all material
respects, the financial condition and the results of operations of the Business as at and for the
period ended December 31, 2003. The Financial Statements have been prepared in accordance with
GAAP consistently applied in accordance with past practice, except to the extent described in the
footnotes thereto. Seller does not have any material debt, liability or obligation of any nature,
whether accrued, absolute, contingent or otherwise, whether due or to become due, related to the
Business, that is not reflected or reserved against in the Financial Statements or set forth in the
Exhibits and Schedules hereto. The Closing Balance Sheet (i) is in accordance with the books and
records of Seller, (ii) is accurate in all material respects, and (iii) fairly presents, in all
material respects, the financial condition of the Business as at the date thereof. The Closing
Balance Sheet has been prepared on a basis consistent with the Balance Sheet. Since the date of
14
the Closing Balance Sheet, there has not occurred any change in the Business that would constitute
a Material Adverse Effect.
(d) Government Approvals. Except as set forth in Schedule 3(d) hereto, Seller is not
required to submit any notice, report or other filing with, or obtain any consent, approval or
waiver from, any Governmental Body in connection with its execution, delivery or performance of the
Acquisition Agreements, or the consummation of the transactions contemplated herein or therein,
except where the failure to make such submission or obtain such consent, approval or waiver, would
not have a Material Adverse Effect on the condition, results of operations, properties, assets or
business of Seller, taken as a whole and would not impede Buyer’s ability to perform its
obligations under the Acquisition Agreements. For the avoidance of doubt, this representation does
not relate to consents by the United States Navy as a customer of the Business.
(e) Fixed Assets; Properties; Liens. Seller owns and has title to, leases or has
rights to use, subject only to the terms of the Contracts, all the personal property and tangible
fixed assets included in the Purchased Assets. All Purchased Assets will at Closing be free and
clear of all liens, except (i) such liens as are set forth in Schedule 3(e), (ii) mechanics’,
carriers’, workmen’s, repairmen’s or other like liens arising or incurred in the ordinary course of
business, (iii) liens arising under original purchase price conditional sales Contracts or
equipment leases with third parties entered into in the ordinary course of business, (iv) liens for
Taxes and other governmental charges that are not due and payable or that may thereafter be paid
and (v) other imperfections of title, licenses or encumbrances, if any, which do not materially
impair the continued use and operation of the assets to which they relate in the conduct of the
Business as currently conducted (the liens described in clauses (i) through (v) above are referred
to collectively as “Permitted Liens”).
(f) [Reserved]
(g) Condition of Assets. Except as set forth in Schedule 3(g) hereto, to Seller’s
Knowledge the buildings, plants, structures, and equipment included in the Purchased Assets or to
be assumed under any lease agreements by Buyer are structurally sound and are in reasonable
operating condition, ordinary wear and tear excepted.
(h) Taxes. Except as set forth on Schedule 3(h), there are no security interests of
any type on the Purchased Assets that have arisen in connection with any failure (or alleged
failure) by the Seller to pay any Tax and there are no judgments against Seller for or with respect
to any Taxes arising out of the operation of the Business. The Seller has filed or will file or
cause to be filed, within the applicable period prescribed by law, all federal, provincial, local
foreign or other tax returns, required by such law to be filed by Seller with respect to the
Business for all taxable periods ending on or prior to the Closing Date, or the Seller has filed
valid extensions of time for filing such tax returns. Seller has paid within the time and manner
prescribed by law, all Taxes shown as due on all such tax returns, and (i) Seller is not delinquent
in the payment of any Taxes
relating to the Business, (ii) no deficiencies for any Taxes have been asserted against
Seller, and (iii) no such deficiencies have been threatened. There are no actions, suits,
proceedings, investigations or claims pending or, to Seller’s Knowledge, threatened against, Seller
is respect
15
of Taxes relating to the Business, nor are there any material matters under discussion
with any governmental authority relating to Taxes relating to the Business.
(i) Current Employees. Schedule 3(i) lists as of September 30, 2004, for each
employee engaged exclusively in the Business (collectively, the “Current Employees”), the
name, starting date, current annual salary (including bonus), and other special benefits (including
the use of an automobile). Except as identified on Schedule 3(i), Seller is not party to any
written employment agreement with any of the Current Employees. Except as set forth on Schedule
3(i), Seller is not in violation of or restricted, directly or indirectly, by any agreement to
which it is a party regarding confidentiality, non-competition, non-interference or
non-solicitation, from carrying on the Business anywhere in the United States for any period of
time. Subject to Buyer’s performance of its obligations under this Agreement, neither the
execution and delivery of this Agreement, the performance of the provisions hereof nor the
consummation of the transactions contemplated hereby will trigger any severance pay obligation to
Buyer under any agreement or under any law. Except as set forth on Schedule 3(i), on the Closing
Date, there will be no bonuses or severance payments owed to employees, directors or officers of
the Business. On or prior to the Closing Date, the Current Employees will be terminated from their
current employment with Seller.
(j) Labor Relations. Except as set forth on Schedule 3(j), there are no disputes,
claims or actions pending or threatened between the Seller and any Current Employee or any labor or
other collective bargaining unit representing any Current Employee, in each case that could
reasonably be expected to result in a labor strike, slow-down or work stoppage. Except as set
forth on Schedule 3(j), with respect to the Business, Seller has complied with all Legal
Requirements relating to employment, equal employment opportunity, nondiscrimination, absence of
sexual or other harassment, immigration, wages, hours, benefits, collective bargaining, the payment
of social security and similar taxes, occupational safety and health, and plant closings, except
for such noncompliance as would not, individually or in the aggregate, have a Material Adverse
Effect.
(k) Compliance With Legal Requirements. Except as set forth in Schedule 3(k) hereto,
Seller it has conducted the Business in compliance with all applicable Legal Requirements, except
for such noncompliance as would not, individually or in the aggregate, have a Material Adverse
Effect.
(l) Legal Proceedings; Orders. Except as set forth on Schedule 3(l) hereto, there are
no Proceedings pending or to the Knowledge of Seller threatened, involving affecting or relating to
the Business, the Current Employees, the Purchased Assets or the transactions contemplated by this
Agreement. Except as
set forth in Schedule 3(l), there is no judgment, order, injunction or decree of any
Governmental Body relating to the Business to which Seller or any of the Purchased Assets is
currently subject.
(m) Absence of Certain Changes and Events. Except as set forth in Schedule 3(m)
hereto, since December 31, 2003, Seller has conducted the Business only in the ordinary course of
business and no event, circumstance or condition has occurred that has caused a Material Adverse
Effect.
16
(n) Intellectual Property Assets. Except as set forth on Schedule 3(n), Seller owns
or possesses and is hereby transferring to the Buyer adequate rights to use the Intellectual
Property Assets and the intellectual property licensed pursuant to the Technology Transfer
Agreement necessary to conduct the Business as presently conducted. Except as set forth on
Schedule 3(n) and except with respect to the rights of the U.S. Government, Seller owns each of the
Intellectual Property Assets, free and clear of all liens. Seller has not received written notice
of any claims, disputes, actions, proceedings, suits or appeals with respect to any Intellectual
Property Assets and none has been overtly threatened, in writing or otherwise, within the last
twelve months.
(o) Contracts; No Defaults. (i) Schedule 3(o)(i) contains an accurate and
complete list and, except for certain Government Contracts identified by Seller to Buyer,
Seller has made available to Buyer accurate and complete copies of, the following contracts
related exclusively to the Business:
(A) each Contract that involves performance of services or delivery of goods or
materials by Seller of a remaining amount or value in excess of $200,000;
(B) each Contract that involves performance of services or delivery of goods or
materials to Seller of a remaining amount or value in excess of $50,000;
(C) each Contract that was not entered into in the ordinary course of business
and that involves expenditures or receipts of Seller in excess of $50,000.00;
(D) each Contract affecting the ownership of, leasing of, title to, use of or any
leasehold or other interest in any real or personal property by Seller involving an
annual cost in excess of $100,000;
(E) each Contract with Seller and any labor union or other employee
representative of a group of employees relating to wages, hours and other conditions
of employment, including the agreement between Seller and United Steelworkers of
America, AFL-CIO-CLC, Local 8228, a copy of which has been made available to Buyer;
(F) each Contract (however named) involving a sharing of profits, losses, costs
or liabilities by Seller with any other Person;
(G) to Seller’s Knowledge, each Contract containing covenants that in any way
purport to restrict Seller’s business activity or limit the freedom of Seller to
engage in any line of business activity or limit the freedom of Seller to engage in
any line of business or to compete with any Person;
(H) each Contract providing for payments to or by any Person based on sales,
purchases or profits of Seller, other than direct payments for goods;
17
(I) except where the failure to disclose would not have a Material Adverse
Effect, each Power of Attorney of Seller that is currently effective and
outstanding;
(J) each Contract entered into that contains or provides for an express
undertaking by Seller to be responsible for consequential damages;
(K) each Contract for capital expenditures by Seller in excess of $50,000.00;
(L) each Contract of Seller not denominated in U.S. dollars;
(M) except where the failure to disclose would not have a Material Adverse Effect,
each written warranty, guaranty and/or other similar undertaking with respect to
contractual performances extended by Seller other than in the ordinary course of
business; and
(N) except where the failure to disclose would not have a Material Adverse
Effect, each amendment, supplement and modification (whether oral or written) in
respect of any of the foregoing.
With respect to each Contract required to be listed on Schedule 3(o)(i), such Schedule
sets forth reasonably complete details concerning any Government Contract a copy of which
has not been made available to Buyer, including the parties to such Government Contract and
the amount of the remaining commitment of Seller under such Government Contract.
(ii) Except as set forth in Schedule 3(o)(ii):
(A) each Contract identified in Schedule 3(o)(i) and which is to be assigned to
or assumed by Buyer under this Agreement is in all material respects valid, binding
and in full force and effect and is enforceable by Seller in accordance with its
terms subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting creditors’ rights generally and to general
equitable principles; and
(B) to the Knowledge of Seller, no Contract identified in Schedule 3(o)(i) and
which is to be assigned to or assumed by Buyer under this Agreement will upon
completion or performance thereof have a Material Adverse Effect on the Business or
Purchased Assets.
(iii) Except as set forth in Schedule 3(o)(iii):
(A) Seller is, and at all times since December 31, 2003, has been, in
compliance with all applicable material terms and requirements of each Contract
which is being assumed by Buyer;
18
(B) to Seller’s Knowledge, each other Person that has or had any obligation or
liability under any Contract which is being assigned to Buyer is, and at all times
since December 31, 2003, has been, in compliance with all material applicable terms
and requirements of such Contract;
(C) no event has occurred or circumstance exists that (with or without notice
or lapse of time) may materially contravene, conflict with or result in a breach of,
or give Seller or any other Person the right to declare default or exercise any
remedy under, or to accelerate the maturity or performance of, or payment under, or
to cancel, terminate or modify any material Contract that is being assigned to or
assumed by Buyer;
(D) to Seller’s Knowledge, no event has occurred or circumstance exists under
or by virtue of any Contract that (with or without notice or lapse of time) would
cause the creation of any encumbrance affecting any of the Purchased Assets other
than Permitted Liens;
(E) Seller has not given to or received from any other Person, at any time
since December 31, 2003, any notice or other communication (whether oral or written)
regarding any actual, alleged, possible or potential violation or breach of, or
default under, any Contract which is being assigned to or assumed by Buyer; and
(F) there are no renegotiations of or attempts to renegotiate any material
amounts paid or payable to Seller under current or completed Contracts with any
Person having the contractual or statutory right to demand or require such
renegotiation and no such Person has made written demand for such renegotiation.
(iv) Government Contract Compliance. Except as set forth on Schedule 3(o)(iv),
with respect to each Government Contract related to the Business to which Seller is a party
(each, a “Seller Government Contract”) and each pending Government Bid related to
the Business submitted by Seller (each, a “Seller Bid”), (i) Seller has complied
with all material requirements of all Laws, standards or agreements pertaining to such
Seller Government Contract or Seller Bid, including, without limitation, the Cost Accounting
Standards, the Truth in Negotiations Act and the False Claims Act; (ii) all representations
and certifications executed, acknowledged or set forth in or pertaining to such Seller
Government Contract or Seller Bid were complete and correct in all material respects as of
their effective date and Seller
has complied in all material respects with all such representations and certifications;
(iii) neither any Governmental Body nor any prime contractor, subcontractor or other Person
has notified Seller, either in writing or, to the Knowledge of Seller, orally, that Seller
has breached or violated any Law, certification, representation, clause, provision or
requirement pertaining to such Seller Government Contract or Seller Bid; (iv) no termination
for convenience, termination for default, cure notice or show cause notice is currently in
effect or has been issued within the past three (3) years pertaining to any such Seller
Government Contract or Seller Bid; (v) other than pursuant to Government Contract
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requirements for withholding of fees under cost plus fixed fee contracts and labor
withholdings under time and materials/labor hour contracts, no money currently due to Seller
pertaining to such Seller Government Contract or Seller Bid has been withheld or set off nor
has any current claim been made to withhold or set off money, and Seller is entitled to all
progress payments received with respect thereto; (vi) Seller has complied in all material
respects with all of the provisions of such Seller Government Contract or Seller Bid
(including the clauses in General Services Administration multiple award schedule contracts
relating to Price Reductions and Commercial Sales Practices); (vii) to Seller’s Knowledge,
no material cost incurred by Seller pertaining to such Seller Government Contract or Seller
Bid has been formally questioned or challenged, is the subject of any investigation or has
been disallowed by the U.S. Government; (viii) with respect to any Seller Government
Contract or Seller Bid, Seller is not a guarantor or otherwise liable for any liability or
obligation (including indebtedness) of any other Person other than Seller or any of its
subcontractors; (ix) with respect to any Seller Government Contract or Seller Bid, there
have not been any requests by any Governmental Body for a contract price adjustment based on
a claimed disallowance by any Governmental Body or at the direction of any Governmental Body
or written notice of defective pricing; (x) with respect to any Seller Government Contract
or Seller Bid, there have not been any claims or equitable adjustments by Seller against the
U.S. Government or any third party in excess of $50,000; and (xi) with respect to any Seller
Government Contract or Seller Bid, there have not been any written notices challenging,
questioning or disallowing any costs.
(v) Government Investigations. Except as set forth on Schedule 3(o)(v), (i)
Seller and, to Seller’s Knowledge, any of its directors, officers or employees are not
under, and at any time since December 31, 2000 have not been under, administrative, civil or
criminal investigation, indictment or writ of information by any Governmental Body or any
audit or investigation by any Governmental Body, with respect to any alleged irregularity,
misstatement, omission or noncompliance arising under or relating to any Government Contract
or Laws applicable to Government Contracts; and (ii) since December 31, 2000, Seller has not
conducted or initiated any internal investigation or made a voluntary disclosure to any
Governmental Body, with respect to any alleged material irregularity, misstatement, omission
or noncompliance arising under or relating to any Government Contract or any Law applicable
to Government Contracts (including ITAR and ODTC). Except as set forth on Schedule 3(o)(v),
there exists no material irregularity, misstatement, omission or noncompliance arising under
or relating to any Government Contract or any Law applicable to Government Contracts that
has led or could lead to any of the consequences set forth in clause (i) or (ii) of the immediately preceding sentence or any other
material damage, penalty assessment, recoupment of payment or disallowance of cost.
(vi) Absence of Claims. Except as set forth on Schedule 3(o)(vi), with respect
to Seller, there exist (i) no outstanding claims against Seller, either by any Governmental
Body or by any prime contractor, subcontractor, vendor or other third party, arising under
or relating to any Seller Government Contract; and (ii) no disputes between Seller and any
Governmental Body under the Contract Disputes Act or any other federal statute or between
Seller and any prime contractor, subcontractor or vendor arising under or
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relating to any
Seller Government Contract. Seller has no interest in any pending claim against any
Governmental Body or any prime contractor, subcontractor or vendor arising under or relating
to any Seller Government Contract. Schedule 3(o)(vi) lists each Seller Government Contract
which, to Seller’s Knowledge, is currently under audit (other than routine audits conducted
in the ordinary course of business) by the U.S. Government or any other person that is a
party to such Government Contract.
(vii) Eligibility; Systems Compliance. Except as set forth on Schedule
3(o)(vii), since December 31, 2000, neither Seller nor any of its management has been (i)
debarred or suspended from participation in the award of Contracts with the United States
Department of Defense or any other Governmental Body (excluding for this purpose
ineligibility to bid on certain contracts due to generally applicable bidding requirements)
or (ii) subject to any debarment or suspension inquiry. To Seller’s Knowledge, there exist
no facts or circumstances that would warrant the institution of suspension or debarment
proceedings or the finding of non responsibility or ineligibility on the part of Seller with
respect to any prior, current or future Government Contract. To Seller’s Knowledge, no
payment or other benefit has been made or conferred by Seller or by any Person on behalf of
Seller in connection with any Government Contract in violation of applicable Laws (including
procurement Laws or the U.S. Foreign Corrupt Practices Act). Except as set forth on
Schedule 3(o)(vii), Seller’s cost accounting, materials management and procurement systems,
and the associated entries reflected in the Financial Statements, with respect to the Seller
Government Contracts and the Seller Bids are in compliance in all material respects with all
applicable Laws.
(viii) Test and Inspection Results. Except as set forth on Schedule
3(o)(viii), all test and inspection results or other reports provided by Seller to any
Governmental Body pursuant to any Seller Government Contract or to any other Person pursuant
to a Seller Government Contract or as a part of the delivery to the U.S. Government or to
any other Person pursuant to a Seller Government Contract for any article, spare part,
apparatus or any intangible (including software and databases) which were designed,
developed, engineered or manufactured by Seller or any of its subcontractors, were complete
and correct in all material respects as of the date so provided. Except as set forth on
Schedule 3(o)(viii), Seller to its Knowledge
has provided all test and inspection results to the U.S. Government or to any other
Person pursuant to the Seller Government Contracts as required by applicable Law and the
terms of the applicable Seller Government Contract.
(ix) Government Furnished Equipment. Schedule 3(o)(ix) hereto, identifies by
description or inventory number and contract all material equipment and fixtures used
exclusively in the Business and loaned, bailed or otherwise furnished to or held by Seller
(or by subcontractors on behalf of Seller) by or on behalf of the U.S. Government as of the
date stated therein (said equipment and fixtures are herein referred to as the
“GFE”). Seller has certified to the U.S. Government in a timely manner that all GFE
is in good working order, reasonable wear and tear excepted, and otherwise meets the
requirements of the applicable contract. There are no outstanding loss, damage or
destruction reports that have been or should have been submitted to any Governmental Body in
respect of any GFE.
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(x) Closed Years; Forward Rates. Seller has reached agreement with the
responsible U.S. Government contracting officers and applicable agencies approving and
closing all overhead and other costs charged to Seller Government Contracts for the years
prior to and through December 31, 2000, and those years are closed. Seller has submitted to
the responsible U.S. Government contracting officers and applicable agencies as to all
forward pricing indirect rates to be bid, billed and charged under Seller Government
Contracts for the years ended December 2001 and 2002, which such indirect rates have been
disclosed to Buyer. In addition, Seller has submitted to the responsible U.S. Government
contracting officers and applicable agencies incurred cost submissions for the year ended
December 2001, which such indirect rates have been disclosed to Buyer.
(xi) Intellectual Property. Schedule 3(o)(xi) hereto, identifies (a) all
Intellectual Property Assets used exclusively in the Business that were developed, in whole
or in part, with full- or partial-funding from a Governmental Body, including, without
limitation, to the U.S. Government, or any agency thereof or in efforts with other entities
receiving full- or partial-funding from a Governmental Body or any agency thereof, and (b)
all rights that such Governmental Body has with respect to such Intellectual Property
Assets.
(xii) Contracting Activity. Each Contract relating to the sale, design,
manufacture or provision of products or services of the Business has been entered into in
the ordinary course of business of Seller and has been entered into without the commission
of any act alone or in concert with any other Person, or any consideration having been paid
or promised, that is or would be in violation of any material Legal Requirement.
(xiii)
Estimates to Complete. Schedule 3(o)(xiii) sets forth for twelve specified Government Contracts Seller’s good
faith estimate of all costs and expenses not reflected on the Balance Sheet that remain to
be paid after September 30, 2004 through the date of completion thereof (“ETC’s”). The ETC’s
are based upon and appropriately and accurately reflect Seller’s books and records, its
experience through September 30, 2004 with such Contract, including any actual or reasonably
anticipated supply, labor, delivery, installation or other performance problems, and any
other relevant and material information known to Seller. The Parties acknowledge and agree,
however, that the ETC’s are good faith estimates only, and do not accurately reflect all of
the costs and expenses that Buyer may actually incur to complete such Contracts.
(p) Insurance. Schedule 3(p) is a true and complete list of all insurance policies
held by the Seller exclusively in connection with the Business. All such insurance policies are in
full force and effect.
(q) Leased Real Property. Schedule 3(q) describes in reasonable detail all the real
property subject to Lease used exclusively in connection with the Business. With respect to such
real property subject to Lease, except as set forth on Schedule 3(q):
(i) Seller has a valid leasehold interest in the real property subject to Lease, free
and clear of all liens;
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(ii) Seller has not received written notice of any condemnation proceedings, lawsuits
or administrative actions relating to the real property subject to Lease;
(iii) Seller has not received written notice that Seller’s use or occupancy of the real
property subject to Lease violates any Law, covenant, condition or restriction that
encumbers such property, or that any such property is subject to any restriction for which
any Permits or facility certifications necessary to the current use thereof have not been
obtained; and
(iv) Except for the routine provision of office space to government employees in
connection with Seller’s performance of certain Government Contracts and an office presently
occupied by the landlord of the Phillipsburg, New Jersey facility, there are no subleases,
licenses, concessions or other agreements granting to any Person the right of use or
occupancy of any portion of the real property subject to Lease.
(r) Brokerage. Except as described in Schedule 3(r), Seller has not incurred,
directly or indirectly, any obligation or liability, contingent or otherwise, for any brokerage
fees, finder’s fees, agent’s commissions or other like payment in connection with this Agreement,
or the transactions contemplated herein.
(s) Accounts Receivable. Except as described in Schedule 3(s), none of the accounts
receivable of the Business is subject to assignments, pledges, liens or other interests of third
parties, nor is any subject to any material counterclaim or set-off. All accounts receivable of
the Business as of October 31, 2004 (i) are listed on Schedule 3(s), together with an aging
analysis as of October 31, 2004; (ii) arose in the regular course of business; and (iii) represent
valid obligations.
(t) Accounts Payable; Contracts with Suppliers. Schedule 3(t) lists the accounts
payable of the Business as of October 31, 2004 and, as of September 30, 2004 each outstanding
purchase order and each agreement between the Business and its suppliers involving an aggregate
purchase price of ten thousand Dollars ($10,000) or more by (i) name of vendor, (ii) description of
goods or services, (iii) purchase order value, and (iv) balance due to vendor. Except as provided
in Schedule 3(t), no such order is subject to any escalation, renegotiation, redetermination,
rebate or similar provision. For a period of one hundred-eighty (180) days after Closing, should
the Buyer be presented with a valid invoice from a supplier relating to the delivery of goods or
services prior to the Closing Date, and which is not reflected on the Closing Balance Sheet or on
Schedule 3(t) as updated or was not incurred in the ordinary course of business of the Business
after the date of the Closing Balance Sheet, subject to the provisions of Article 12, the Buyer
shall be entitled to reimbursement from Seller for such amounts paid.
(u) Inventory. All amounts shown for inventory on the Balance Sheet have been
determined consistently in accordance with GAAP (except to the extent described in the footnotes
thereto) and Seller’s historical practices in all material respects, including but not limited to
adjustments for scrap, excess and/or obsolete material and the Inventory is useable in the Business
as presently conducted and has been maintained in accordance with industry standards.
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(v) Environmental Status; Permits. Except as disclosed in Schedule 3(v):
(i) Seller, is and at all times has been in full compliance with, and has not been and
is not in violation or liable under, any Environmental Law. Seller has no basis to expect,
nor has any other Person for whose conduct it is or may be held to be responsible received,
any actual or threatened order, notice or other communication from (i) any
Governmental Body or private citizen acting in the public interest or (ii) the current
or prior owner or operator of the Facility, of any actual or potential violation or failure
to comply with any Environmental Law, or of any actual or threatened obligation to undertake
or bear the cost of any Environmental Liabilities with respect to the Facility or other
property or asset (whether real, personal or mixed) in which the Business has or had an
interest, or with respect to any property or Facility at or to which Hazardous Materials
were generated, manufactured, refined, transferred, imported, used or processed by Seller
for the Business or any other Person for whose conduct it is or may be held responsible, or
from which Hazardous Materials have been transported, treated, stored, handled, transferred,
disposed, recycled or received.
(ii) There are no pending or, to the Seller’s Knowledge, threatened claims,
encumbrances, or other restrictions of any nature resulting from any environmental, health
and safety liabilities or arising under or pursuant to any Environmental Law with respect to
or affecting the Facility or any other property or asset (whether real, personal or mixed)
in which the Business has or had an interest.
(iii) Neither Seller, nor any other Person for whose conduct Seller is or may be held
responsible, has received any citation, directive, inquiry, notice, order, summons, warning
or other communication that relates to hazardous activity, Hazardous Materials, or any
alleged, actual, or potential violation or failure to comply with any Environmental Law, or
of any alleged, actual, or potential obligation to undertake or bear the cost of any
environmental liabilities with respect to the Facility or property or asset (whether real,
personal or mixed) in which the Business has or had an interest, or with respect to any
property or facility to which Hazardous Materials are or at any time were generated,
manufactured, refined, transferred, imported, used or processed by Seller for the Business
or any other Person for whose conduct it is or may be held responsible, have been
transported, treated, stored, handled, transferred, disposed, recycled or received.
(iv) Neither Seller nor any other Person for whose conduct Seller is or may be held
responsible has violated any Environmental Law with respect to the Facility, with respect to
any other property or asset (whether real, personal or mixed) in which the Business (or any
predecessor) has or had an interest, or at any property geologically or hydrologically
adjoining any facility or any such other property or asset.
(v) Seller has provided Buyer with access to true and complete copies and results of
any reports, studies, analyses, tests, or monitoring possessed or initiated by Seller
pertaining to Hazardous Materials or hazardous activities in, on, or under the Facility or
concerning compliance by Seller or any other Person for whose conduct Seller is or may be
held responsible, with Environmental Laws.
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(vi) Seller has not used, generated, stored or disposed of, on, under or about the
Facility any hazardous waste or toxic substances, except in compliance with applicable law.
The Seller has not generated or disposed of at any off-site locations any hazardous waste or
toxic substances except in compliance with applicable law.
(vii) Schedule 3(v) (i) contains a list of (i) all foreign, federal, state and
municipal environmental permits applied for and received for the Seller’s tenancy of its
real property including identification of issuing agency, permit number, and expiration
date, (ii) all citations or enforcement actions received by the Seller in relation to the
Seller’s leased property for violation of any foreign, state, federal, or local laws or
regulations issued since December 31, 2000, including description and identification of
type, date, and final resolution, and (iii) all known spills and discharges by the Seller of
hazardous or environmentally objectionable substances, including identification of exact
location and remedial action taken. All licenses, permits, registrations, approvals and
other governmental authorizations held by the Business are listed on Schedule 3(v) and are
valid and sufficient for the business being conducted.
Notwithstanding any other provisions of this Agreement, Buyer acknowledges and agrees that the
representations and warranties contained in this Section 3(v) are the only representations and
warranties given by Seller with respect to environmental matters or compliance with Environmental
Laws and Hazardous Materials and no other provisions of this Agreement shall be interpreted as
containing any representation or warranty with respect thereto.
(w) Purchased Assets. Except as set forth on Schedule 3(w) and Schedule 2(c)(i) and
except for certain assets at Seller’s Fairfield, New Jersey facility, at the Closing, the Purchased
Assets and the rights, assets, products and services to be provided by Seller under the agreements
listed in Section 2(b)(ii) will include all of the assets, rights, products and services necessary
to operate the Business immediately after the Closing, consistent with past practice.
(x) No Undisclosed Liabilities. Except as disclosed in Schedule 3(x), with respect to
the Business Seller has no material liability except for liabilities reflected and reserved for in
the Financial Statements and the Closing Balance Sheet and current liabilities incurred in the
ordinary course of business.
(y) Disclosure. To Seller’s Knowledge, there is no fact that has specific application
to Seller (other than general economic or industry conditions) and that would reasonably be likely
to have a Material Adverse Effect on the Purchased Assets or Business that has not been set forth
in this Agreement or in the schedules attached hereto.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
(a) Organization. Buyer is duly organized, validly existing and in good standing
under the laws of its jurisdictions of organization.
(b) Authorization; Enforceability. Buyer has all requisite corporate power and
authority to enter into each Acquisition Agreement, and to perform
its obligations hereunder and
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thereunder. All acts required to be taken by Buyer to authorize the execution and delivery of each
Acquisition Agreement, and the consummation of the transactions contemplated herein and therein,
has been taken, and no other corporate proceedings on the part of Buyer are necessary to authorize
such execution, delivery and performance. This Agreement has been duly executed and delivered by
Buyer and constitutes a legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except to the extent such enforceability may be limited by applicable
bankruptcy and other laws affecting creditors’ rights, or by general equitable principles. Each
Acquisition Agreement will be, as of the Closing, duly executed and delivered by Buyer, and will
constitute legal, valid and binding obligations of Buyer in accordance with its terms, except to
the extent such enforceability may be limited by applicable bankruptcy and other laws affecting
creditors’ rights, or by general equitable principles. The execution and performance of each
Acquisition Agreement, and the compliance with the provisions hereof and thereof by Buyer, will not
conflict with, violate or result in the breach of any of the terms, conditions or provisions of the
Certificate of Incorporation or by-laws of Buyer, or any judgment, order, injunction, decree, law,
regulation or ruling of any Governmental Body to which Buyer is subject, except where the same
would not impede Buyer’s ability to perform its obligations under the Acquisition Agreements or
have a material adverse effect on the condition, results of operations, properties, assets or
business of Buyer, taken as a whole. The execution and performance of each Acquisition Agreement,
and the compliance with the provisions hereof and thereof by Buyer, will not result in any breach
of any of the terms or conditions of, or constitute a default under, any material license,
indenture, mortgage, agreement or other instrument to which Buyer is a party or by which it is
bound, except where such breach or default would not impede Buyer’s ability to perform its
obligations under the Acquisition Agreements or have a material adverse effect on the condition,
results of operations, properties, assets or business of Buyer, taken as a whole.
(c) Government Approvals. Except as set forth in Schedule 4(c) hereto, Buyer is not
required to submit any notice, report or other filing with, or obtain any consent, approval or
waiver from, any Governmental Body in connection with its execution, delivery or performance of the
Acquisition Agreements, or the consummation of the transactions contemplated herein or therein,
except where the failure to make such submission or obtain such consent, approval or waiver, would
not have a material adverse effect on the condition, results of operations, properties, assets or business of
Buyer, taken as a whole and would not impede Buyer’s ability to perform its obligations under the
Acquisition Agreements.
(d) Economic Ability. Buyer has the economic ability to fund the Purchase Price
payments described herein.
(e) Brokerage. Buyer has not incurred, directly or indirectly, any obligation or
liability, contingent or otherwise, for any brokerage fees, finder’s fees, agent’s commissions or
other like payment in connection with this Agreement, or the transactions contemplated herein.
5. COVENANTS OF SELLER
(a) Access and Investigation. Except for certain Government Contracts and Government
Bids identified by Seller to Buyer or as may be prohibited by Contract or Legal Requirements,
between the date of this Agreement and the Closing Date, Seller will (a) afford
26
Buyer and its
Representatives, access to Seller’s personnel, properties, Contracts, books and records relating
exclusively to the Business (other than Excluded Assets), on reasonable notice and during regular
business hours, and (b) furnish Buyer with such additional financial, operating, and other data and
information relating exclusively to the Business (other than Excluded Assets) in the Seller’s
possession as Buyer may reasonably request.
(b) Conduct of Business. Prior to the Closing Date, except as set forth in Schedule
5(b), Seller will with respect to the Business (a) conduct the Business only in the ordinary course
of business and consistent with past practice; and (b) use its reasonable efforts to preserve
intact its current business organization, retain the services of the Current Employees, agents and
sales representatives, and preserve the relations and goodwill with its suppliers, customer,
landlords, creditors, Current Employees, agents and others having business relations with the
Seller; (c) consult with Buyer and obtain its prior written consent before making any single
commitment or series of interdependent commitments for capital expenditures exceeding $50,000; (d)
refrain from entering into any leases, licenses, contracts or other agreements relating to the
Business, except product sales contracts and materials supply contracts in the ordinary cause of
business, committing Buyer to expend more than $50,000 in any one or a series of related
transactions; (e) refrain from selling or transferring any of the Purchased Assets other than in
the ordinary course of business; (f) account for, make appropriate filing with respect to, and pay
when due all Taxes, assessments and other governmental charges against the Purchased Assets or in
respect of the Business; (g) except in the ordinary course of business consistent with past
practices, not grant or agree to grant any bonuses, general increase in the rates of salaries or
compensation or any specific increase to any Current Employee or provide for any new employment
benefits to any Current Employees; and (h) provide Buyer, promptly after obtaining Seller’s Knowledge thereof,
with written notice of any event or condition pertaining to the Business or the Purchased Assets
that has resulted in a Material Adverse Effect or which can reasonably expect to cause a Material
Adverse Effect, and all claims, regulatory proceedings and litigation (whether actual or
threatened) against or possibly involving the Purchased Assets, the Seller or Buyer.
(c) Required Approvals. As promptly as practicable after the date of this Agreement,
Seller will make any and all filings required by Legal Requirements to be made by it in order to
consummate the contemplated transactions. Between the date of this Agreement and the Closing Date,
Seller will (a) cooperate with Buyer with respect to any filings that Buyer is required by Legal
Requirements to make in connection with the transactions contemplated hereby, and (b) cooperate
with Buyer in obtaining all consents identified in Schedule 4(c) hereto.
(d) No Negotiation. Until such time, if any, as this Agreement is terminated pursuant
to Article 11, Seller will not, nor will Seller permit any entity that it controls or any of its
Representatives to, directly or indirectly solicit, initiate, or encourage any inquiries or
proposals from, discuss or negotiate with, provide any non-public information to any Person (other
than Buyer) relating to any transaction involving the sale of the Business.
(e) Additional Information. Seller shall promptly furnish to Buyer all such financial
and operating reports with respect to the Business as may be prepared by the Seller from time to
time between the date hereof and the Closing Date as Buyer may reasonably request. Seller shall
make available to Buyer information with respect to any document, event,
27
transaction or condition
entered into or occurring after the date hereof which, had it occurred or been in effect on or
prior to the date hereof, would have been included on the Schedules to this Agreement, and any such
information which would have been included on a Schedule shall be deemed to amend the relevant
Schedule when so provided.
(f) Confidentiality. From and after the Closing Date, Seller shall not disclose to
any Person (other than any Affiliates, agents or representatives of Seller) any Business
Information (as defined below) that is known to Seller on the Closing Date. The term “Business
Information” means any trade secret information exclusively concerning the Business or the
Purchased Assets that is confidential or proprietary and is necessary for the conduct of the
Business, other than information that (i) is or becomes generally available to the public other
than as a result of a disclosure by Seller after the Closing Date or (ii) Seller is required to
disclose by Law or legal process or (iii) is disclosed in the ordinary course of business in
connection with the Supply Agreement, the Transition Services Agreement or the Technology Transfer
Agreement. In the event that Seller is requested in any proceeding to disclose any Business
Information, Seller shall give Buyer prompt written notice of such request so that Buyer may seek
an appropriate protective order. If in the absence of a protective order Seller is requested in a
proceeding to disclose Business Information, Seller
may disclose such portion of the Business Information that in the opinion of Seller’s counsel
Seller is required to disclose, without liability under this Agreement, provided that Seller shall
give Buyer written notice of the Business Information to be disclosed as far in advance of its
disclosure as is practicable and shall use commercially reasonable efforts to obtain assurances
that confidential treatment will be accorded to such Business Information. The provisions of this
Section 5(f) shall not restrict Seller from using Business Information in performing its
obligations under, or enforcing the terms of, this Agreement or any Acquisition Agreement, or in
exercising its rights relating hereto or thereto or to the transactions contemplated hereby or
thereby.
(g) Reasonable Efforts. Seller will use its reasonable efforts to effectuate the
transactions hereby contemplated and to fulfill the conditions to Buyer’s obligations under Article
7 of this Agreement.
(h) Non Solicitation; Non-Interference. At no time after the date hereof until the
third anniversary of the Closing Date shall the Seller and/or any Affiliate:
(i) directly or indirectly, in any capacity or in association with any other person,
solicit, induce, or in any manner attempt to solicit or induce, any Employees then employed
by Buyer to terminate his or her employment or to become their employees. An employee shall
be deemed not to have been solicited for employment if such employee responded to a general
solicitation; or
(ii) directly or indirectly, interfere with Buyer’s relationship with, cause the
cancellation, discontinuation, termination or alteration (in a manner detrimental to Buyer)
of Buyer’s relationship with any party who is a customer, supplier, or manufacturer with
respect to the Business; provided, that Seller shall have the right to terminate or
alter its relationship with any party from which it is obtaining goods or services in
connection with the Supply Agreement or the Technology Transfer Agreement.
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(i) Notice of Events or Circumstances. Seller will promptly notify Buyer promptly
after learning of the occurrence of any event or circumstance which would reasonably be expected to
cause any condition to the Closing not to be satisfied. In such event, the parties will negotiate
in good faith during the fifteen (15) calendar day period immediately after such notice to
determine the consequences of such circumstance, and Seller or Buyer, as applicable, may elect to
terminate this Agreement after the expiration of such fifteen (15) calendar day period.
6. COVENANTS OF BUYER
(a) Required Approvals. As promptly as practicable after the date of this Agreement,
Buyer will, and will cause each of its applicable Affiliates to, make any and all filings required
by Legal Requirements to be made by them in order to consummate the contemplated transactions.
Between the date of this Agreement and the Closing Date, Buyer will, and will cause each of its
applicable Affiliates to, (a) cooperate with Seller and the Affiliates with respect to any filings
that Seller and the Affiliates are required by Legal Requirements to make in connection with the
transactions contemplated hereby, and (b) cooperate with Seller in obtaining all consents
identified in Schedule 3(d) hereto.
(b) Employees.
(i) Buyer shall offer employment as of the Closing Date to each Current Employee,
including employees on vacation, leave of absence, including maternity, family, sick or
short-term (but not long-term) disability leave, and temporary layoff, at the same location
where such Current Employee was employed immediately prior to the Closing Date for
substantially equivalent total cash compensation, and on such other terms and conditions
that are substantially similar to those in effect immediately prior to the Closing Date;
provided, however, in addition to and not in limitation of the foregoing,
with respect to each Current Employee listed on Sections (A) or (B) of Schedule 6(b)(i),
Buyer shall (x) offer total cash compensation of not less than 101.5% of the cash
compensation currently payable under the Union Contract, and (y) not terminate without cause
(as “cause” is defined in the Union Contract) such Current Employee’s employment during the
twelve (12) months following the Closing Date; and, provided further, that with respect to
each Current Employee listed on Section (A) of Schedule 6(b)(i), Buyer shall amend the
pension plan maintained by Buyer in which such Current Employees shall participate from and
after the Closing to include the “75/80” provisions of the Union Contract and part B-7 of
the Flowserve Pension Plan (the “75/80 Provisions”); provided further,
however, with respect to each Current Employee listed on Sections (A) or (B) of
Schedule 6(b)(i), if any such Current Employee is terminated for cause and it is
subsequently determined that such termination was without cause ( as “cause” is defined in
the Union Contract), Buyer shall indemnify Seller for all damages, costs and expenses
incurred by Seller with respect to the 75/80 Provisions and the costs to defend any claim in
connection with such 75/80 Provisions. With respect to each such Current Employee who
accepts Buyer’s offer of employment (an “Employee”), Buyer shall (i) credit periods
of service with Seller or an Affiliate of Seller (or a predecessor of any of them) prior to
the Closing (“Pre-Closing Employment”), for purposes of determining eligibility,
vesting, benefit entitlement and benefit amounts under severance, vacation, and all other
compensation and benefit plans, programs and policies maintained
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by Buyer for the
benefit of such Employees after the Closing , except for any defined benefit pension plan
maintained by Buyer, and (ii) indemnify and hold harmless the Seller Indemnified Parties
with respect to any severance benefit liabilities payable by Seller or its Affiliates
arising out Buyer’s breach of its obligation hereunder to offer employment in accordance
with the provisions of this Agreement. With respect to each Employee, Buyer shall credit
periods of Pre-Closing Employment for purposes of determining eligibility, vesting, and
benefit entitlement under any defined benefit pension plan maintained by Buyer in which such
Employees may participate after the Closing Date, but shall not take such Pre-Closing
Employment into account in determining the amount of benefit payable to an Employee under
such a plan, except to the extent required to meet all conditions for payment and benefit
accrual of the 75/80 Provisions referenced above. For one (1) year after the Closing Date,
if an Employee ceases to be employed by Buyer and Buyer obtains a release from such
Employee, Buyer shall use its best efforts to obtain for Seller the same release as it
obtains for Buyer. Notwithstanding anything to the contrary, Buyer shall not assume any
existing benefit plans or benefit plan liabilities to which Seller is a party. Buyer agrees
to indemnify, defend and hold the Seller Indemnified Parties harmless from any claims that
Seller violated the Worker Adjustment and Retraining Notification Act (“WARN”)
and/or the New Jersey Administrative Code 12:40-1.1, 12:40-1.2, and 12:17-3.5. Buyer agrees
that it will not terminate or significantly reduce the operation of the Business at the
Phillipsburg, New Jersey facility during the twelve months following the Closing Date.
(ii) In the event that any Current Employee listed on Schedule 6(b)(i) makes a claim
against Seller for retirement benefits under the 75/80 Provisions, Seller shall with the
cooperation of Buyer defend such claim (it being understood that Seller shall control the
defense and settlement of such claim after consultation with Buyer). With respect to any
such claim that is first made more than twelve months following the Closing Date, Buyer
agrees to indemnify the Seller Indemnified Parties for 50% of all damages, costs and
expenses (including retirement benefits and all defense costs) in connection with such
claim.
(c) Confidentiality.
(i) Buyer confirms and agrees that, with respect to any information directly or
indirectly furnished by or on behalf of Seller, whether before, on or after the date hereof,
Buyer shall continue to be bound by the terms of the Confidentiality Agreement, dated as of
July 2, 2002, by and between Seller and Buyer (the “Confidentiality Agreement”)
notwithstanding that the term of the Confidentiality Agreement may have expired.
(ii) Buyer understands and agrees that Seller is making available confidential
information and trade secrets to Buyer concerning the operations of Seller and the Business,
which information would be damaging to Seller and its Affiliates if disclosed to a
competitor or made available to any other Person, and that such information has been
divulged in confidence. Buyer acknowledges that Seller has permitted Buyer to conduct due
diligence and/or a review of the premises of the Business. Buyer shall not disclose to
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any
Person, other than Buyer’s attorneys, accountants and consultants, any contents or results
of any due diligence or investigation by or on behalf of Buyer, including any information
concerning any alleged violation of any Environmental Law, without obtaining prior written
approval from Seller, except as may be required by Law, in which case Buyer will notify
Seller in writing of Buyer’s intent to make such disclosure and whereupon Seller shall have
the option of making such disclosure jointly with Buyer. Buyer agrees that Seller would be
irreparably harmed by any violation, or threatened violation, of this Section 6(c) and that,
therefore, Seller shall be entitled to an injunction prohibiting Buyer from any violation,
or threatened violation, of this Section 6(c).
(iii) From and after the Closing, the provisions of Sections 6(c)(i) and 6(c)(ii) above
shall not apply to or restrict in any manner Buyer’s use of confidential information of the
Seller relating to any of the Purchased Assets or the Assumed Liabilities.
(d) Reasonable Efforts. Buyer will use its reasonable efforts to effectuate the
transactions hereby contemplated and to fulfill the conditions to Seller’s obligations under
Article 8 of this Agreement.
(e) Notices and Consents. Buyer will, prior to the Closing Date, give all notices to
third parties and will, at Buyer’s expense, obtain all third party approvals, consents, novations
and waivers that are required to be obtained in connection with the transactions contemplated by
this Agreement. Seller hereby agrees to reasonably cooperate with the Buyer in Buyer’s efforts to
obtain such third party consents; provided that the Seller will not be obligated hereunder to pay
any consideration to the third party from whom such consent is requested. Notwithstanding any
other provision of this Agreement, the failure by the parties to obtain any Novation Agreement, or
any consent, waiver, confirmation, novation or approval with respect to any Contract, shall not
relieve either party from its obligation to consummate at the Closing the transactions contemplated
by this Agreement. Buyer acknowledges that a substantial portion of the Contracts will require the
consent or a Novation Agreement of the other party or parties thereto by virtue of the execution
and delivery of this Agreement or the consummation of the transactions contemplated hereby. Buyer
agrees and acknowledges that it shall be the obligation of Buyer (and not Seller) to obtain such
consents and Novation Agreements. Seller will, however, use reasonable good faith efforts to
assist Buyer in obtaining such consents and Novation Agreements.
(f) Notice
of Events or Circumstances. Buyer will promptly notify Seller promptly after learning of the occurrence of any event or
circumstance which would reasonably be expected to cause any condition to the Closing not to be
satisfied. In such event, the parties will negotiate in good faith during the fifteen (15)
calendar day period immediately after such notice to determine the consequences of such
circumstance, and Seller or Buyer, as applicable, may elect to terminate this Agreement after the
expiration of such fifteen (15) calendar day period.
7. CONDITIONS TO BUYER’S OBLIGATIONS
The obligations of Buyer to consummate the transactions contemplated at the Closing are
subject to the fulfillment, at the Closing, of each of the following conditions, any or all of
which may be waived in whole or in part at or prior to the Closing by Buyer:
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(a) Accuracy of Representations and Warranties. All the representations and
warranties of Seller contained in this Agreement shall be accurate at and as of the Closing Date as
though such representations and warranties were made at and as of such time, except to the extent
such representations and warranties expressly relate to an earlier date (in which case such
representations and warranties shall be true and correct on and as of such earlier date), and
except for such changes therein as are contemplated by this Agreement, and in each case except for
breaches as to matters that would not reasonably be expected to have a Material Adverse Effect.
(b) Seller’s Performance. Seller shall have performed and complied in all material
respects with all agreements and conditions on its part required by this Agreement to be performed
or complied with prior to or at the Closing Date.
(c) Officer’s Certificate. Buyer shall have received a certificate of an officer of
Seller, dated the Closing Date, certifying on behalf of Seller as to the fulfillment of the
conditions specified in Sections 7(a) and 7(b) hereof.
(d) Secretary’s Certificate. A certificate of the Secretary or Assistant Secretary of
the Seller, identifying the name and title and bearing the signatures of the officers of Seller
authorized to execute and deliver this Agreement and the other agreements and instruments
contemplated thereby.
(e) Governmental Consents. Seller shall have made all filings and petitions required
to be made by it prior to the Closing Date (and all applicable waiting periods shall have expired),
as set forth on Schedule 3(d).
(f) No Injunctions. No court, agency or other authority shall have issued any order,
decree or judgment to set aside, restrain, enjoin or prevent the performance of Buyer’s obligations
hereunder, nor shall there be pending any suit, action or proceeding requesting such relief or
remedy.
(g) Conveyances. Buyer shall have received all conveyances, assignments, bills of
sale, confirmations, and further instruments as shall be necessary in order to complete the
conveyances, transfers, assignments and deliveries provided for herein and to convey to Buyer the
Purchased Assets.
(h) Technology Transfer Agreement. Seller shall have executed and delivered to Buyer
the Technology Transfer Agreement.
(i) Lease Assignment. Buyer and Seller shall have executed the Lease Assignment.
(j) Transition Services Agreement. Buyer and Seller shall have executed the
Transition Services Agreement.
(k) Supply Agreement. Buyer and Seller shall have executed the Supply Agreement.
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(l) Physical Inventory. Buyer shall have performed a physical count of the Inventory
which confirms the accuracy of the reported balance to Buyer’s satisfaction.
8. CONDITIONS TO SELLER’S OBLIGATIONS
All obligations of Seller under this Agreement are subject to the fulfillment, at the Closing,
of each of the following conditions, any or all of which may be waived in whole or in part at or
prior to the Closing by Seller:
(a) Accuracy of Representations and Warranties. All the representations and
warranties of Buyer contained in this Agreement shall be accurate in all material respects at and
as of the Closing Date as though such representations and warranties were made at and as of such
time, except for such changes therein as are contemplated by this Agreement, and except to the
extent such representations and warranties expressly relate to an earlier date (in which case such
representations and warranties shall be true and correct on and as of such earlier date).
(b) Buyer’s Performance. Buyer shall have performed and complied in all material
respects with all agreements and conditions on its part required by this Agreement to be performed
or complied with prior to or at the Closing Date.
(c) Officer’s Certificate. Seller shall have received a certificate of an officer of
Buyer, dated the Closing Date, certifying on behalf of Buyer as to the fulfillment of the
conditions specified in Sections 8(a) and 8(b) hereof.
(d) Secretary’s Certificate. A certificate of the Secretary or Assistant Secretary of
the Buyer, identifying the name and title and bearing the signatures of the officers of Buyer
authorized to execute and deliver this Agreement and the other agreements and instruments
contemplated thereby.
(e) Governmental Consents. Buyer shall have made all filings and petitions required
to be made by it prior to the Closing Date (and all applicable waiting periods shall have expired),
set forth on Schedule 4(c).
(f) No Injunctions. No court, agency or other authority shall have issued any order,
decree or judgment to set aside, restrain, enjoin or prevent the performance of Seller’s
obligations hereunder, nor shall there be pending any suit, action or proceeding requesting such
relief or remedy.
(g) Purchase Price. Seller shall have received the Purchase Price payable to it from
Buyer pursuant to Section 2(d) hereof, by wire transfer of immediately available funds to a bank
account designated by it.
(h) Assumption Agreement. Buyer shall have executed and delivered to Seller the
Assumption Agreement.
(i) Lease Assignment. Buyer and Seller shall have executed the Lease Assignment.
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(j) Technology Transfer Agreement. Buyer shall have executed and delivered to Seller
the Technology Transfer Agreement.
(k) Transition
Services Agreement. Buyer and Seller shall have executed the Transition Services Agreement.
(l) Supply Agreement. Buyer and Seller shall have executed the Supply Agreement.
(m) Guaranty. Guarantor shall have executed and delivered to Seller the Guaranty.
(n) Resale Certificate. A sale for resale certificate with respect to the
Inventories.
9. POST-CLOSING COVENANTS
(a) Further Assurances. From and after the Closing Date, each party to this Agreement
shall, at any time and from time to time, at the requesting party’s cost and expense, make, execute
and deliver, or cause to be made, executed and delivered, such assignments, assumptions, deeds,
bills of sale, filings and other instruments, consents and assurances and take or cause to be taken
all such action as the other party may reasonably request to carry out the terms of the Acquisition
Agreements. Buyer shall use its commercially reasonable efforts to cause Seller to be released
from liability under the Contracts. In addition, each party agrees to cooperate fully with the
other party in connection with any Proceeding which relates to the operation or activities of the
Business prior to the Closing Date.
(b) Retention of Records. After the Closing, Seller shall, upon reasonable notice to
Buyer, have access during usual business hours to the books and records of the Business for all
periods prior to the Closing Date for all reasonable business and tax purposes, and Seller may make
copies or extracts from such books and records for all reasonable purposes. Buyer agrees to retain
the books and records of the Business prior to the Closing Date and after the Closing Date for at
least three (3) years after the Closing Date except where longer record retention is required by
applicable law (including Code requirements).
(c) Novations of Government Contracts.
(i) Without limiting the generality of Section 9(a), as soon as practicable following
the execution of this Agreement, Buyer shall prepare (with Seller’s assistance, as
necessary), in accordance with Federal Acquisition Regulations Part 42, 142.12 and any
applicable agency regulations or policies, a written request for the novation of the
Government Contracts meeting the requirements of the Federal Acquisition Regulations Part
42, as reasonably interpreted by the Responsible Contracting Officer (as such term is
defined in Federal Acquisition Regulations Part 42, 142.1202(a)). The request for novation
shall be submitted by Buyer to each Responsible Contracting Officer for the United States
government (or, in the case of Government Contracts not subject to the Federal Acquisition
Regulations, Buyer and Seller shall cooperate in seeking to cause the applicable
Governmental Authority) to (i) recognize Buyer as Seller’s successor in interest to the
Government Contracts and all the Purchased Assets used in the performance of the Government
Contracts and (ii) enter into one or more novation
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agreements (collectively, “Novation
Agreements”) in form and substance reasonably satisfactory to Buyer, Seller and their
respective counsel, pursuant to which all of Seller’s right, title and interest in and to,
and all of Seller’s liabilities under, each such Government Contract shall be validly
conveyed, transferred and assigned and novated to Buyer by all parties thereto. Seller
shall promptly provide to Buyer any information regarding Seller required in connection with
such request.
(ii) Seller and Buyer will cooperate and use their respective commercially reasonable
efforts to obtain as promptly as practicable all consents required for the purpose of
processing, entering into and completing the Novation Agreements with regard to any of the
Government Contracts, including responding to any requests for information from the United
States government with regard to such Novation Agreements.
(iii) From the Closing Date until, with respect to each Government Contract, the sixth
year following the earlier of the release date or notice of final payment for such
Government Contract, Buyer agrees to provide Seller and its accountants, counsel and other
representatives access, during normal business hours, to such information, personnel and
assistance relating to the performance by Buyer of the Government Contracts and its
respective liabilities under the Novation Agreements as Seller shall reasonably request from
time to time.
(d) Employment Tax Filings. Buyer and Seller agree that, with respect to each
Employee, each of Buyer and Seller will follow the standard procedures for tax filings that are set
out in Section 4 of IRS Rev. Proc. 96-60. Buyer shall take into account wages paid by Seller to
each Employee in determining whether each such Employee has reached the Old Age Disability
Insurance taxable wage base for the 2004 calendar year.
(e) Failure to Obtain Consents or Novations.
(i)If any and all third party approvals, consents, novations and waivers (including
Novation Agreements) that are required to be obtained in connection with the transactions
contemplated by this Agreement as described in Sections 6(e) and 9(c) hereof shall not have
been obtained prior to the Closing Date, then as of the Closing, this Agreement, to the
extent permitted by Legal Requirements, shall constitute full and equitable assignment by
Seller to Buyer of all of right, title and interest of Seller in and to, and all obligations
and liabilities of Seller under, such Purchased Assets, and, in the case of the Contracts,
Buyer shall be deemed Seller’s agent for purpose of completing, fulfilling and discharging
all liabilities of Seller from and after the Closing Date under any such Contract. The
Parties shall take all necessary steps and actions consistent with Legal Requirements to
provide Buyer with the benefits of such Purchased Assets, and to relieve Seller of the
performance and other obligations thereunder, including entry into subcontracts as permitted
for the performance thereof. Buyer agrees to pay, perform and discharge, and indemnify
Seller against and hold Seller harmless from, all obligations and liabilities of Seller
relating to such performance or failure to perform under such Purchased Assets.
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(ii) In the event that Seller shall be unable to make the equitable assignment
described in Section 9(e)(i), or if such attempted assignment would give rise to any right
of termination, or would otherwise adversely affect the rights of Seller or Buyer under any
such Purchased Asset, or would not assign all of the rights of Seller thereunder at the
Closing, Seller and Buyer shall continue to cooperate and use all reasonable efforts to
provide Buyer with all such rights. To the extent that any such third party approvals,
consents, novations and waivers (including Novation Agreements) are not obtained, or until
the impediments to such assignment are resolved, Seller shall use all reasonable commercial
efforts (without the expenditure, in the aggregate, of any material sum), to the extent
permitted by Legal Requirements, to (A) provide to Buyer, at the request of Buyer, the
benefits of any such Purchased Asset, (B) cooperate in any lawful arrangement designed to
provide such benefits to Buyer and (C) enforce, at the request of and for the account of
Buyer, any rights of Seller arising from any such Purchased Asset against any third party
(including any Governmental Body), including the right to elect to terminate in accordance
with the terms thereof upon the advice of Buyer. To the extent that Buyer is provided the
benefits of any Purchased Asset referred to herein (whether from Seller or otherwise), Buyer
shall perform at the direction of Seller and for the benefit of any third party (including
any Governmental Body), and shall assume the liabilities and obligations of Seller
thereunder or in connection therewith. Buyer agrees to pay, perform and discharge, and
indemnify Seller against and hold Seller harmless from, all liabilities and obligations of
Seller relating to such performance or failure to perform.
(f) Warranty Claims of the Business.
(i) Except as provided in Section 2(d)(iv)(D), with respect to any Product manufactured
by Seller, prior to the Closing, Seller shall be responsible for any warranty claims for
such Products. Buyer shall notify Seller of any purported warranty claim for such Products
within five (5) business days of its receipt of any purported warranty claim for such
Products and provide Seller with all information available to Buyer relating to such
purported warranty claim. Seller shall evaluate such purported warranty claim in good
faith. If Seller accepts such warranty claim as valid, Seller shall be responsible for the
resolution of such claim. If Seller rejects such purported warranty claim, Seller shall be
responsible for the defense of such claim as against the claimant.
(ii) At the written request and direction of Seller, Buyer agrees to effect servicing
and repair of any Product warranty claim that Seller has determined is valid pursuant to
Section 9(f)(i). Seller shall pay to Buyer the reasonable costs of effecting such servicing
and repair, such costs not to exceed the lesser of estimates approved in advance in writing
by Seller and the costs that Buyer would charge to a continuing significant customer of the
Business requesting “out of warranty” servicing and repair.
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10. NONCOMPETITION
(a) Noncompetition. Seller covenants and agrees that, for a period of five (5) years
from the Closing Date, neither it nor its Affiliates will, anywhere in the world, (i) directly or
indirectly manufacture, sell or service any of the Products (ii) or sell or service any pump
products (other than valves and seals) to or for the benefit of the United States government’s
naval operations; provided, however, that the foregoing covenant shall not limit
Seller’s activities with respect to (y) Product warranties that are not assumed by Buyer; or (z)
pursuant to the Transition Services Agreement or the Supply Agreement; and provided
further, however, that the foregoing covenant shall not apply if either (i) Seller is
acquired by a Person (an “Acquiring Person”) through a merger or consolidation or sale of
all or substantially all of its assets and the Acquiring Person was engaged in the Business prior
to the acquisition, or (ii) Seller acquires a Person (an “Acquired Person”) by merger or
consolidation or purchase of all or substantially all of the assets of the Acquired Person and the
Acquired Person was engaged in the Business prior to the acquisition and the Business constitutes
less than twenty-five percent (25%) of the revenues of the Acquired Person.
(b) Breach. In the event of a breach, or threatened breach of the provisions of this Article 10, in
addition to any other remedies Buyer may have at law or in equity, Buyer shall be entitled to seek
an injunction or similar remedy so as to enable it specifically to enforce such provisions.
(c) Severability. It is the desire and intent of the parties hereto that the
provisions of this Article 10 be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any
particular portion of this Article 10 should be adjudicated to be invalid or unenforceable, such
portion shall be deleted and such deletion shall apply only with respect to the operation of this
Article 10 in the particular jurisdiction in which such adjudication is made. To the extent any
provision hereof is deemed unenforceable by virtue of its scope in terms of area or length of time,
but may be enforceable with limitations thereon, the parties agree that the same shall,
nevertheless, be enforceable to the fullest extent permissible under the laws and public policies
applied in such jurisdiction in which enforcement is sought.
11. TERMINATION AND ABANDONMENT
(a) Termination. This Agreement may be terminated at any time prior to or on the
Closing Date:
(i) By mutual consent of Buyer and Seller;
(ii) By either Buyer or Seller, if the Closing has not occurred (other than through the
failure of any party seeking to terminate this Agreement to comply fully with its
obligations) on or before December 31, 2004, or such later date as Buyer and Seller may
agree;
(iii) By Buyer, if (A) there has been a material violation or breach by Seller of any
agreement, representation or warranty contained in this Agreement and no cure of such
violation or
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breach within thirty (30) days of written notice of such violation or breach
from Buyer, or (B) the satisfaction of any condition to the obligations of Buyer hereunder
becomes impossible, and such condition has not been waived by Buyer; or
(iv) By Seller, if (A) there has been a material violation or breach by Buyer of any
agreement, representation or warranty contained in this Agreement and
no cure of such violation or breach within thirty (30) days of written notice of such violation or
breach from Seller, or (B) if the satisfaction of any condition to the obligations of Seller
hereunder becomes impossible, and such condition has not been waived by Seller.
(b) No Waiver. No termination pursuant to Section 11(a) hereof shall be deemed to
constitute a release or waiver by any party to this Agreement of any claim against another party
hereto based on any breach by such party of its agreements, representations and warranties
contained herein.
(c) Return of Information. In the event of termination by Seller or Buyer pursuant to
Section 11(a), written notice thereof shall forthwith be given to the other party and the
transactions contemplated by this Agreement shall be terminated, without further action by any
party. If the transactions contemplated by this Agreement are terminated as provided herein:
(i) Buyer shall, and shall cause each of its directors, officers, employees, agents,
representatives and advisors to, return to Seller all documents and other material received
from Seller relating to the transactions contemplated hereby, whether so obtained before or
after the execution hereof; and
(ii) all confidential information received by Buyer, its directors, officers,
employees, agents, representatives or advisors with respect to the businesses of Seller and
its affiliates (including with respect to the Business) shall be treated in accordance with
the Confidentiality Agreement, which shall remain in full force and effect notwithstanding
the termination of this Agreement.
12. INDEMNIFICATION
(a) Indemnification Definitions. For the purposes of this Article 12, the following
terms shall have the following meanings:
“Indemnitee” shall mean the party or other person seeking indemnification pursuant to
this Agreement.
“Indemnitor” shall mean the party which is required or requested to provide
indemnification pursuant to this Agreement.
“Indemnifiable
Claim” means any claim or other proceeding with respect to which an Indemnitee may be entitled to indemnity hereunder.
“Buyer Indemnified Parties” shall mean Buyer, and any officer, director, employee,
agent and Affiliate of Buyer.
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“Seller Indemnified Parties” shall mean Seller and any officer, director, employee,
agent and Affiliate of Seller.
(b) Indemnity by Seller.
(i) Seller agrees to indemnify and hold harmless the Buyer Indemnified Parties from and
against, and to reimburse the Buyer Indemnified Parties on demand with respect to, any and
all loss, damage, liability, claims, cost and expense, including reasonable attorneys’,
accountants’ and experts’ fees, incurred by the Buyer Indemnified Parties by reason of or
arising out of or in connection with (i) the breach of any representation or warranty
contained in Article 3 hereof or the representations and warranties made by Seller in the
other Acquisition Agreements; provided however, that if any such
representation or warranty is not qualified as to materiality, then this indemnification
shall only apply in the event of a material breach of such representation or warranty; (ii)
the failure of Seller to perform any agreement required by any Acquisition Agreement to be
performed by it; and (iii) the Excluded Liabilities.
(ii) Buyer agrees to give prompt notice to Seller of the allegation by any third party
of the existence of any liability, obligation, contract, other commitment or state of facts
referred to in this Section 12(b), except that a failure to provide such prompt notice shall
not be a defense against a claim for indemnity unless Seller can demonstrate that it was
materially prejudiced by the failure to provide such notice.
(iii) Except as provided in Section 12(g), Seller shall be entitled to control the
contest, defense, settlement or compromise of any such claim (including engagement of
counsel in connection therewith), at its own cost and expense, including the cost and
expense of attorneys’, accountants’ and experts’ fees in connection with such contest,
defense, settlement or compromise; provided that Seller provides Buyer with written notice
of its election to control such contest, defense, settlement or compromise within ten days
of Buyer’s delivery of notice to Seller of its intention to seek indemnification hereunder,
and Buyer shall have the right to participate in the contest, defense, settlement or
compromise of any such claim at its own cost and expense, including the cost and expense of
attorneys’, accountants’ and experts’ fees in connection with such participation;
provided,
however, that, Seller shall not settle or compromise any such claim that would
affect the future operation of the Business by Buyer without the prior written consent of
Buyer.
(iv) If prior to sixty (60) months after the Closing Date (y) the Securities and
Exchange Commission shall make a specific final finding that there has been a material
accounting error with respect to the Business prior to the Closing Date (“SEC Accounting
Error”) and (z) based on the specific facts in the SEC Accounting Error, the DCAA asserts a
claim against Buyer, then subject to the Indemnity Deductible and the Indemnity Cap Seller
will indemnify and hold Buyer harmless with respect to such claim in accordance with this
Section 12(b) and Section 12(g).
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(c) Indemnity by Buyer.
(i) Buyer agrees to indemnify and hold harmless the Seller Indemnified Parties from and
against, and to reimburse the Seller Indemnified Parties on demand with respect to, any and
all loss, damage, liability, claims, cost and expense, including reasonable attorneys’,
accountants’ and experts’ fees, incurred by Seller or the Seller Indemnified Parties by
reason of or arising out of or in connection with (i) the material breach of any
representation or warranty contained in Article 4 hereof or the representations and
warranties made by Buyer in the other Acquisition Agreements, (ii) the failure of Buyer to
perform any agreement required by any Acquisition Agreement to be performed by it, (iii) the
Assumed Liabilities; and (iv) any liability, obligation or expense arising out of or in
connection with any action, suit, claim, charge, complaint, proceeding or investigation to
the extent arising out of or in connection with the use of the Purchased Assets or the
operations of the Business on or after the Closing Date, including, without limitation, any
claims for severance of Employees terminated by Buyer or its Affiliates and any liability
under or associated with the Worker Adjustment and Retraining Notification Act which may be
assessed against or imputed to Seller.
(ii) Seller agrees to give prompt notice to Buyer of the allegation by any third party
of the existence of any liability, obligation, contract, other commitment or state of facts
referred to in this Section 12(c), except that a failure to provide such prompt notice shall
not be a defense against a claim for indemnity unless Buyer can demonstrate that it was
materially prejudiced by the failure to provide such notice.
(iii)
Except as provided in Section 12(h), Buyer shall be entitled to control the contest,
defense, settlement or compromise of any such claim (including the engagement of counsel in
connection therewith), at its own cost and expense, including the cost and expense of
attorneys’, accountants’ and experts’ fees in connection with such contest, defense,
settlement or compromise; provided that Buyer provides Seller with written notice of its
election to control such contest, defense, settlement or compromise within ten days of
Seller’s delivery of notice to Buyer of its intention to seek indemnification hereunder, and
Seller shall have the right to participate in the contest, defense, settlement or compromise
of any such claim at its own cost and expense, including the cost and expense of attorneys’,
accountants’ and experts’ fees in connection with such participation; provided, however,
that, Buyer shall not settle or compromise any such claim without the prior written consent
of Seller, which consent shall not be unreasonably withheld.
(d) Actions Related to Indemnifiable Claims. In the event of the occurrence of an
event which any party asserts constitutes an Indemnifiable Claim, the Indemnitee shall make
available to the Indemnitor all relevant information which is material to the Indemnifiable Claim
and which is in the possession of the Indemnitee. An Indemnitee’s failure to furnish the Indemnitor
with any relevant data and documents in connection with any third-party claim shall not constitute
a defense (in part or in whole) to any claim for indemnification by such party, except and only to
the extent that such failure shall result in any material prejudice to the Indemnitor.
40
(e) Deductible; Limits on Indemnification. The indemnification obligations of Seller
shall be subject to a cumulative deductible of $400,000 (the “Indemnification Deductible”)
such that Seller’s indemnification obligation pursuant to Section 12(b) above shall not take effect
until the cumulative amount of actual damages for events which are indemnifiable hereunder exceeds
in the aggregate the amount of $400,000. In no event shall the Buyer Indemnified Parties or any
person, business or entity claiming by or through Buyer, individually or collectively, be entitled
to recover a combined aggregate total in excess of $14,000,000 (the “Indemnification Cap”),
whether directly or indirectly through actions, damages, indemnifications or otherwise, and
allowing no duplication with regard to damages or amounts paid by or remedies obtained against any
other person or entity or otherwise, in relation to this Agreement or any Acquisition Agreement or
any transaction contemplated herein or therein. Notwithstanding the foregoing, any claim of
indemnification for (i) any breach of representations and warranties contained in Sections 3(a),
3(b), 3(e), 3(h), 3(r) and 3(v); (ii) the Tax Liabilities; and (iii) the Excluded Liabilities shall
not be subject to the Indemnification Deductible or the Indemnification Cap.
(f) Survival of Representations, Warranties and Covenants. All representations and
warranties made by Seller or the Buyer as to any fact or condition existing on or before the
Closing Date in this Agreement or any Acquisition Agreement, in any Exhibit, Schedule, certificate
or other document delivered pursuant hereto or thereto, shall survive the Closing for a period of
fifteen (15) months, except (i) representations and warranties
contained in Sections 3(a), 3(b), 3(e), 3(r), 4(a), 4(b) and 4(e) hereof, which shall not
expire, (ii) all representations and warranties regarding Taxes shall survive until the later of
(x) the expiration of the applicable limitation period within which any assessment, reassessment or
other determination of an amount owing can be made or (y) six (6) months after such time as a final
determination of such assessment, reassessment or other determination of an amount owing has been
made and all appeal rights have been exhausted or no appeal has been made within the time
prescribed for any such appeal, and (iii) representations and warranties contained in Section 3(v)
hereof shall survive the Closing for a period of sixty (60) months. Notwithstanding the foregoing,
any claim for indemnification for breach of representations and warranties properly made pursuant
to Article 12 prior to the expiration of the survival period of the applicable representations and
warranties set forth in this Section 12(f) shall survive until such claim is finally resolved.
(g) Third-Party Claims Against Buyer Indemnified Parties.
(i) If any claim which is covered by Section 12(a) above is made by a third party
against any Buyer Indemnified Party, Buyer shall give prompt written notice of such claim to
the Seller. The Seller shall have 10 days from the receipt of such notice to give written
notice to Buyer indicating whether the Seller intends to direct the defense or dispute of
such claim. If such notice is given by Seller within such ten (10) day period, the Seller
shall have the right to direct the defense of any such claim through counsel of its own
choosing, and if Seller so elects to direct the defense of such claim, such election will
conclusively establish for purposes of this Agreement that the claims made in such third
party claim are within the scope of and subject to indemnification by Seller hereunder.
41
(ii) If such notice is given by Seller within such 10-day period, the Seller shall have
the right to direct the defense of any such claim through counsel of its own choosing.
(iii) Notwithstanding the foregoing provisions, Seller may not control the settlement
of a claim which involves obtaining injunctive relief against a Buyer Indemnified Party.
(iv) If prior to (i) Buyer’s giving notice to the Seller of an indemnified third-party
claim or (ii) the expiration of such 10-day period, Buyer takes any action with respect to
such claim indemnified hereunder, the Buyer shall surrender and waive its indemnification
rights hereunder, but only to the extent Seller is prejudiced by such action.
(v) If the Seller (a) fails to give written notice to Buyer within such 10-day period
indicating whether it intends to direct the defense of such claim, or (b) gives such notice
but fails to direct the defense of such claim diligently and continuously, then Buyer or the
Buyer Indemnified Party shall have the right to compromise or defend such claim through
counsel of its own choosing, and the right to reimbursement of such expenses and damages
shall be resolved as a dispute in accordance with Section 13(k).
(vi) So long as the Seller is contesting any Indemnifiable Claim in good faith, the
Buyer Indemnified Party shall not pay or settle such claim without the Seller’s written
consent.
(h) Third-Party Claims Against Seller Indemnified Parties.
(i) If any claim which is covered by Section 12(b) above is made by a third party
against any Seller Indemnified Party, the Seller shall give prompt written notice of such
claim to the Buyer. The Buyer shall have 10 days from the receipt of such notice to give
written notice to Seller indicating whether the Buyer intends to direct the defense or
dispute of such claim. If such notice is given by Buyer within such ten (10) day period,
the Buyer shall have the right to direct the defense of any such claim through counsel of
its own choosing, and if Buyer so elects to direct the defense of such claim, such election
will conclusively establish for purposes of this Agreement that the claims made in such
third party claim are within the scope of and subject to indemnification by Buyer hereunder.
(ii) If such notice is given by Buyer within such 10-day period, the Buyer shall have
the right to direct the defense of any such claim through counsel of its own choosing.
(iii) Notwithstanding the foregoing provisions, Buyer may not control the settlement of
a claim which involves obtaining injunctive relief against a Seller Indemnified Party.
(iv) If prior to (i) Seller’s giving notice to the Buyer of an indemnified third-party
claim or (ii) the expiration of such 10-day period, Seller takes any action with
42
respect to
such claim indemnified hereunder, the Seller shall surrender and waive its
indemnification rights hereunder, but only to the extent Buyer is prejudiced by such
action.
(v) If the Buyer (a) fails to give written notice to Seller within such 10-day period
indicating whether it intends to direct the defense of such claim, or (b) gives such notice
but fails to direct the defense of such claim diligently and continuously, then Seller or
the Seller Indemnified Party shall have the right to compromise or defend such claim through
counsel of its own choosing, and the right to reimbursement of such expenses and damages
shall be resolved as a dispute in accordance with Section 13(k).
(vi) So long as Buyer is contesting any Indemnifiable Claim in good faith, the Seller
Indemnified Party shall not pay or settle such claim without the Buyer’s written consent,
which consent shall not be reasonably withheld.
(i) Indemnification Limitations.
(i) Neither party hereto will be liable to the other hereunder or with respect to this
Agreement for any punitive or consequential or incidental damages (including loss of revenue
or income, business interruption, cost of capital or loss of business reputation or
opportunity) relating to any claim for which either such party may be entitled to recover
under this Agreement (other than indemnification, whether pursuant to this Article 12 or
otherwise at law or equity, of amounts paid or payable to third parties or any Governmental
Body in respect of any third party or Governmental Body claim). No claim for the recovery
of losses based upon breach of any representation, warranty, covenant or agreement may be
asserted by Seller Indemnified Parties or Buyer Indemnified Parties against the Buyer or the
Seller, as the case may be, if any of the Seller Indemnified Parties or the Buyer
Indemnified Parties, as the case may be, had Knowledge of such breach on or before the
Closing Date.
(ii) Buyer acknowledges and agrees that, (i) other than the representations and
warranties of Seller specifically contained in Article 3 of this Agreement, none of Seller,
any of its Affiliates or any other person has made any representation or warranty either
expressed or implied (A) with respect to the Businesses, the Purchased Assets, the Assumed
Liabilities or the transactions contemplated hereby or (B) as to the accuracy or
completeness of any information regarding the Business, the Purchased Assets, the Assumed
Liabilities or the transactions contemplated hereby furnished or made available to Buyer and
its representatives and (ii) Buyer shall have no claim or right to indemnification pursuant
to this Article 12 and none of Seller, any of its Affiliates or any
other person shall have or be subject to any liability to Buyer or any other person
with respect to any information, documents or materials furnished by Seller, any of its
Affiliates or any of their respective officers, directors, employees, agents or advisors to
Seller, any information, documents or material made available to Seller and its
representatives in certain “data rooms”, management presentations or any other form in
expectation of the transactions contemplated hereby. Without limiting the generality of the
foregoing, Buyer acknowledges and agrees that, except for the representations and warranties
contained in Article 3 and the express representations and warranties made by
43
Seller in the
other Acquisition Agreements, SELLER DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES
RELATING TO THE MAINTENANCE, REPAIR, CONDITION, DESIGN, PERFORMANCE OR MARKETABILITY OF ANY
ASSET, INCLUDING MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. SELLER ACKNOWLEDGES
AND AGREES THAT IT SHALL OBTAIN RIGHTS IN THE TRANSFERRED ASSETS IN THEIR PRESENT CONDITION
AND STATE OF REPAIR, “AS IS” AND “WHERE IS”.
(j) Sole Remedy. Each of Buyer and Seller further acknowledges and agrees that,
should the Closing occur, its sole and exclusive remedy with respect to any and all claims relating
to this Agreement, the other Acquisition Agreements, the Business, the Purchased Assets, the
Excluded Assets, the Assumed Liabilities, the Excluded Liabilities or the transactions contemplated
hereby (other than claims of, or causes of action arising from, fraud) shall be pursuant to the
indemnification provisions set forth in this Article 12. In furtherance of the foregoing, Buyer
and Seller each hereby waives, from and after the Closing, any and all rights, claims and causes of
action (other than claims of, or causes of action arising from, fraud) that Buyer or any other
Buyer Indemnified Parties or Seller or any other Seller Indemnified Parties, respectively, may have
against Buyer or Seller or any of their respective Affiliates or any of their respective directors,
officers and employees arising under or based upon any Federal, state, provincial, local or foreign
statute, law, ordinance, rule or regulation or otherwise (except pursuant to the indemnification
provisions set forth in this Article 12).
13. MISCELLANEOUS
(a) Expenses. Except as otherwise expressly provided in this Agreement, each party to
this Agreement agrees to pay, without right of reimbursement from the other party, the costs
incurred by it incident to the performance of its obligations under this Agreement and the
consummation of the transactions contemplated hereby including, without limitation, costs incident
to the preparation of this Agreement, and the fees and disbursements of counsel, accountants and
consultants employed by such party in connection herewith.
(b) Public Announcements.
Buyer and Seller shall consult with one another before issuing any press release or public
announcement about the transactions contemplated by this Agreement and except as may be required by
applicable Legal Requirements, no party shall issue any such press release or other public
announcement without the prior written consent of the other party.
(c) Confidentiality. The Confidentiality Agreement will remain in full force and
effect until the Closing occurs, and all information received by Buyer, its Affiliates or
Representatives relating to the Business, whether orally or in writing, shall be subject thereto.
(d) Notices. All notices, consents, waivers, claims and other communications
hereunder shall be in writing and shall be deemed to have been duly given at the time (a)
personally delivered, (b) one business day after having been deposited, prepaid in a nationally
established overnight delivery firm such as Federal Express, (c) five business days after having
been mailed by certified mail, return receipt requested, or (d) transmitted by facsimile (which
44
shall be confirmed by a writing sent by certified mail on the same business day as such
facsimile is sent), as follows:
As to Buyer:
▇▇▇▇▇▇▇-▇▇▇▇▇▇ Corporation
▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Attn: General Counsel
▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Attn: General Counsel
and
▇▇▇▇▇▇▇-▇▇▇▇▇▇ Flow Control Corporation
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: President
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: President
With a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
As to Seller:
Flowserve US Inc.
▇▇▇▇ ▇. ▇’▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇’▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
or to any other address that such party may have subsequently communicated to the other party by a
notice given in accordance with the provisions of this Section 13(d).
(e) Entire Agreement. This Agreement, the Exhibits and Schedules attached hereto, the Confidentiality Agreement, and
the other Acquisition Agreements contain every obligation and understanding between the parties
relating to the subject matter hereof and merge all prior discussions, negotiations and agreements,
if any, between them, and none of the parties shall be
45
bound by any representations, warranties,
covenants or other understandings, other than as expressly provided herein or therein.
(f) Waiver and Amendment. Any representation, warranty, covenant, term or condition
of this Agreement which may legally be waived, may be waived, or the time of performance thereof
extended, at any time by the party hereto entitled to the benefit thereof, and any term, condition
or covenant hereto may be amended by the parties hereto at any time. Any such waiver, extension or
amendment shall be evidenced by an instrument in writing executed on behalf of the appropriate
party by a Person who has been authorized by such party to execute waivers, extensions or
amendments on its behalf. No waiver by any party hereto, whether express or implied, of its rights
under any provision of this Agreement shall constitute a waiver of such party’s rights under such
provisions at any other time or a waiver of such party’s rights under any other provision of this
Agreement. No failure by any party hereto to take any action against any breach of this Agreement
or default by another party shall constitute a waiver of the former party’s right to enforce any
provision of this Agreement or to take action against such breach or default or any subsequent
breach or default by such other party.
(g) No Third Party Rights or Remedies Beneficiary. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon or give any Person other than the
parties hereto and their respective Affiliates, successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
(h) Severability. In the event that any one or more of the provisions contained in
this Agreement shall be declared invalid, void or unenforceable, the remainder of the provisions of
this Agreement shall remain in full force and effect, and such invalid, void or unenforceable
provision shall be interpreted as closely as possible to the manner in which it was written.
(i) Headings and Interpretation. The titles and headings of articles and sections
herein are inserted for convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement. The Schedules and Exhibits referred to
herein shall be construed with and as an integral part of this Agreement to the same extent as if
they were set forth verbatim herein. Any disclosure made on any individual schedule to this
Agreement shall be deemed to be made for purposes of all schedules to this Agreement to which such
disclosure is applicable.
(j) Governing Law. This Agreement shall be interpreted and construed in accordance with the laws of New York
without giving effect to the principles of conflicts of laws thereof.
(k) Dispute Resolution. In the event of a dispute relating to this Agreement, the
Parties shall make a good faith effort to promptly settle any differences without resorting to
arbitration. If settlement of the dispute is not possible, any and all disputes shall be resolved
by arbitration. However, the Party wishing to initiate arbitration shall give 30 days prior
written notice to the other Party. During this 30-day period, senior management of the Parties
shall further attempt to resolve the dispute. Any unresolved dispute arising out of or related to
this Agreement, including its interpretation, validity, scope and enforceability, shall be resolved
by
46
binding arbitration to be held exclusively in New York City, New York and such arbitration shall
be the Parties’ exclusive remedy.
Arbitration shall be conducted in accordance with the then existing Commercial Dispute
Resolution Procedures of the American Arbitration Association. The arbitration shall be conducted
by one arbitrator to be named by the Parties. Should the Parties fail to agree as to the naming of
such arbitrator, the arbitrator shall be determined in accordance with the applicable rules of the
American Arbitration Association.
The arbitrator shall decide each issue presented in writing. The decision of the arbitrator
shall be final and binding. The arbitrator shall divide all costs in conducting the arbitration in
the final award in accordance with what is just and equitable under the circumstances. Except as
otherwise herein provided, each Party shall bear the burden of its own counsel fees incurred in
connection with the arbitration proceedings under this Agreement.
All information relating to or disclosed by any Party in connection with the arbitration of
any dispute relating to this Agreement shall be treated by the Parties, the representatives of the
Parties and the arbitrator as confidential business information and no disclosure of such
information shall be made by either Party or the arbitrator without the prior written consent of
the Party furnishing such information in connection with the arbitration proceeding.
Judgment upon award rendered by the arbitrator may be entered in any court having jurisdiction
over the Parties or their assets; or application may be made to such court for judicial acceptance
of the award and an order of enforcement, as the case may be. None of the Parties to this
Agreement shall be liable for any incidental, consequential or punitive damages arising out of or
related any breach of this Agreement.
(l) Assignment. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, provided that this Agreement may not be
assigned by either party to any Person without the prior written consent of the other party.
Notwithstanding the foregoing, Buyer may assign any of its rights under this Agreement, in whole or
in part, to one or more Affiliates of Buyer. Any party so assigning this Agreement shall remain
fully liable to the other party for the performance by any designee or assignee of any obligation
of such party delegated to such designee or assignee.
(m) Taxes. Any U.S. taxes in the nature of sales or transfer taxes, documentary
stamps or similar taxes payable on the sale or transfer of all or any portion of the assets,
properties or business being transferred hereunder or the consummation of any other transaction
contemplated hereby, shall be paid by Seller.
(n) Attorneys’ Fees. Subject to the provisions of Section 13(k), if any action at law
or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party
shall be entitled to reasonable attorneys’ fees, costs and disbursements in addition to any other
relief to which such party may be entitled.
(o) Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which taken together shall constitute a single
agreement.
47
(p) Bulk Transfer Laws. Buyer hereby waives compliance by Seller with the provisions
of any so-called “bulk transfer laws” of any jurisdiction in connection with the sale of the
Purchased Assets to Buyer.
(q) Waiver of Jury Trial. EACH PARTY HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR DISPUTES RELATING HERETO.
[The remainder of this page intentionally left blank.]
48
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement the day and year
first above written.
| ▇▇▇▇▇▇▇-▇▇▇▇▇▇ ELECTRO-MECHANICAL CORPORATION, |
||||||
| a Delaware corporation | ||||||
| By: | /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ | |||||
| Name: | ▇▇▇▇▇ ▇. ▇▇▇▇▇ | |||||
| Title: | Vice President and General Manager | |||||
| FLOWSERVE US INC., | ||||||
| a Delaware corporation | ||||||
| By: | /s/ ▇▇▇▇▇▇ ▇▇▇▇▇ | |||||
| Name: | ▇▇▇▇▇▇ ▇▇▇▇▇ | |||||
| Title: | Vice President | |||||
49