ASSET PURCHASE AGREEMENT
Dated as of July 21, 1994
By and Between
THE EASTERN COMPANY
as Purchaser
and
PRESTOLOCK INTERNATIONAL, LTD.
as Seller
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ASSET PURCHASE AGREEMENT
AGREEMENT made as of the 21st day of July, 1994, by and among THE EASTERN
COMPANY, a Connecticut corporation having its principal office at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter the "Purchaser"), and
PRESTOLOCK INTERNATIONAL LTD., a Michigan corporation having an office at ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter the "Seller").
W I T N E S S E T H:
WHEREAS, the Seller is engaged in the business of developing, manufacturing
and selling various locks and latching devices (hereinafter the "Seller's
Business"); and
WHEREAS, included in the Seller's Business is a padlock product line
marketed under the name "Prestolock" and variations thereof (hereinafter the
"Padlock Product Line"); and
WHEREAS, the Purchaser desires to acquire certain assets of the Seller
constituting or utilized in the production and marketing of the Padlock Product
Line and thereafter to manufacture, develop and market the Padlock Product Line.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements hereinafter contained, the parties hereto agree as follows:
ARTICLE I
SALE OF ASSETS
1.1 Sale of Assets. Seller agrees that, subject to the terms and conditions
of this Agreement, Seller will convey, sell, assign, transfer and deliver to the
Purchaser at the Closing hereinafter specified, whatever right, title and
interest Seller possesses in and
to all of the following categories of assets and properties of the Seller which
are used solely in connection with the Padlock Product Line of every kind and
description wherever located, owned or controlled by the Seller as of the close
of business on the Closing Date (excluding assets of the Seller used in
connection with its other product lines and those assets specified below)
including without limitation, the following:
(a) Equipment. All of the machinery and equipment listed in SCHEDULE 1.1
(a) attached hereto and made a part hereof, together with all related
components, spare parts, tools, dies, jigs, fixtures and equipment used for the
maintenance and repair thereof or otherwise used by the Seller in its Padlock
Product Line operations;
(b) Tooling. All tooling utilized to manufacture the various padlocks
constituting the Padlock Product Line, wherever located, whether in the
possession of Seller or in the possession of third party vendors or others;
(c) Intellectual Property. All United States and foreign patents, patent
applications, copyrights, trade names, trademarks and service marks, registered
or unregistered, trade secrets and confidential and proprietary information,
related to or used in connection with the Padlock Product Line, including, in
particular, the names "Hot Lock," "Jock Lock," and "Travel Lock," but, subject
to Section 1.5 below, excluding the names "Presto-Lock" and "Presto." Without
limiting the foregoing, it is understood that the Purchaser will acquire all
right, title and interest of the Seller in the so-called "gun lock" patent (and,
if available, the "back to zero" patent) as part of the intellectual property
being transferred;
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(d) Certain Records & Software. All blueprints, engineering drawings,
manuals and similar records, plans, research records, computer programs,
software, vendor lists, customer lists, marketing information, advertising,
artwork and promotional material, studies, reports and technical specifications,
and all other material, records, files, documents, correspondence, reports and
data belonging to or, subject to the owner's rights therein, used by the Seller
with respect to the Padlock Product Line;
(e) Inventory. All inventory pertaining to the Padlock Product Line
consisting of finished goods, finished parts, spare parts, replacement and
component parts;
(f) Government Rights. To the extent permitted by law, all governmental
licenses, permits, certificates, approvals, applications or registrations and
similar rights obtained from governments and governmental agencies;
(g) Claims and other Intangibles. All claims, causes of action, judgments,
rights of recovery, license and technology agreements, designs, processes,
procedures, and manufacturing know-how pertaining to the Padlock Product Line.
The assets and properties to be conveyed, transferred, assigned and
delivered as set forth in this Section 1 are hereinafter collectively referred
to as the "Assets", and shall include, without limitation, all property of the
Seller hereafter acquired by the Seller prior to the Closing Date, which is
intended to be used as part of the Assets, but shall not include, under any
circumstances, the following assets (hereinafter the "Excluded, Assets"):
(A) All cash, cash equivalents, securities and tax refunds,
(B) All accounts receivable,
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(C) Real estate and improvements thereon,
(D) All other assets of the Seller not described in Subsections 1.1(a)
through 1.1(9) above, and
(E) All records relating to the Excluded Assets.
1.2. Price and Consideration. The purchase price of the Assets (herein
called the "Purchase Price") shall be FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($50O,000.00). The Purchase Price shall be allocated as set forth in SCHEDULE
1.2(a) attached hereto and paid at Closing subject to Section 7.2 below with
respect to exchange of consideration.
1.3. Excluded Liabilities. The Purchaser shall not assume, and shall not be
responsible for the payment, performance or discharge of any debts, liabilities
or obligations of the Seller of any kind or nature whatsoever, whether existing
or hereafter arising, other than the Assumed Obligations, as hereinafter
defined. All of the foregoing liabilities covered by this Section 1.3 shall
hereinafter be referred to as the "Excluded Liabilities". Notwithstanding the
foregoing, the Purchaser will assume all customer contracts which it believes
will not be a loss or break-even and will, in its discretion, assume any supply
orders which it determines will be needed for the production and sale of the
Padlock Product Line (the "Assumed Obligations"). The Purchaser shall review all
customer contracts and supply orders promptly and shall give notice of those it
will not assume as soon as possible, in no event later than July ___, 1994.
Seller may cancel or otherwise deal with such customer contracts and supply
orders which Purchaser determines not to assume after such date as it deems
appropriate. The parties shall
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execute and deliver at the Closing an Assignment and Assumption Agreement in the
form of EXHIBIT 1.3 attached hereto and take such other action and execute such
documents as may be necessary or reasonably requested by either party to assure
the effective assignment of and assumption of the Assumed Obligations.
1.4. Non-Competition Agreement. There shall be delivered at Closing a
Non-Competition Agreement in the form of EXHIBIT 1.4 attached hereto executed by
the Seller and Purchaser. The parties agree that the undertaking by the Seller
not to compete with the Purchaser is a material part of this Agreement and
therefore shall be a Purchasers' condition of closing.
1.5 License Agreement. There shall be delivered at Closing a Trademark/
Trade Name License Agreement in the form of EXHIBIT 1.5 attached hereto,
executed by the Seller and Purchaser. The Parties agree that the undertaking by
the Seller to provide Purchaser with this License Agreement is a material part
of this Agreement and therefore shall be a Purchaser's condition of Closing.
1.6 Sales Service Consulting Agreement. Seller and Purchaser shall, at the
Closing, enter into a Sales Service Consulting Agreement in the form of EXHIBIT
1.6 attached hereto.
ARTICLE II
REPRESENTATIONS & WARRANTIES
2.0 Representations of Seller. Seller represents, warrants and agrees as
follows:
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2.1 Seller. The Seller is a corporation duly organized, validly existing
and in good standing under the laws of the state of Michigan and has the
corporate power and authority to make, execute, deliver and perform this
Agreement, and this Agreement has been duly authorized and approved by all
required corporate action of Seller.
2.2 Options. Except as set forth in SCHEDULE 2.2, attached hereto, there
are no outstanding options, calls or contracts relating to the Assets.
2.3 Consents. Except as set forth in SCHEDULE 2.3, no consents or approvals
of any public body or authority and no consents or waivers from other parties to
licenses, franchises, permits, indentures, agreements or other instruments are
(i) required for the lawful consummation of the transactions contemplated
hereby, or (ii) necessary in order that the Padlock Product Line business can be
conducted by the Purchaser. The consummation of the transactions contemplated
hereby will not cause a default in any contract or agreement to which the Seller
is a party or by which it or the Assets are bound.
2.4 Books and Records. Except as set forth in SCHEDULE 2.4 attached hereto,
the records and books of account of the Seller which have been (or will
hereafter be) made available to Purchaser are, and will be, correct and
complete, and have been, and to the Closing Date will be, regularly kept and
maintained on a consistent basis with preceding years. The Seller does not have
any of its records, systems, controls, data or information recorded, stored,
maintained, operated or otherwise wholly or partly dependent upon or held by any
means (including any electronic, mechanical or photographic process, whether
computerized or not) which are not under the exclusive
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ownership and direct control of the Seller (including all means of access
thereto and therefrom).
2.5 Machinery and Equipment. Except as set forth in SCHEDULE 2.5 attached
hereto, all machinery, equipment, tools and other related tangible personal
property (other than inventory) included in the Assets are in reasonable working
condition and repair, ordinary wear and tear excepted, and are owned by the
Seller. Except as disclosed in SCHEDULE 2.5 attached hereto, the tooling
utilized to manufacture the products of the Padlock Product Line is in
reasonable working condition, available for delivery at Closing or in the
possession of suppliers who are obligated to turn over such tooling to the
Seller or its designee.
2.6 Title to Properties; Encumbrances. Except as set forth in SCHEDULE 2.6
attached hereto, the Seller has good, valid and marketable title to, and is
owner of all of Assets being sold under this Agreement (tangible and
intangible), in each case subject to no encumbrance, lien, security interest,
charge or other restriction or adverse right of any kind or character arising,
created or attaching on or after February 25, 1994. Copies of all title transfer
documents and agreements have been delivered to Purchaser and are true, correct
and complete.
2.7 Restrictive Documents. Except as set forth in SCHEDULE 2.7 attached
hereto, the Seller is not subject to, or a party to, any mortgage, lien, lease,
license, permit, agreement, contract, instrument, law, rule, ordinance,
regulation, order, judgment or decree, or, to Seller's knowledge, any other
restriction of any kind or character which materially and adversely affects the
Padlock Product Line or any of the Assets, or which
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would prevent consummation of the transactions contemplated by this Agreement,
compliance by the Seller with the terms, conditions and provisions hereof or the
continued operation of the Seller's Padlock Product Line business after the date
hereof or the Closing Date (as hereinafter defined) on substantially the same
basis as heretofore operated or which would restrict the ability of the Seller
to acquire any property or conduct business in any area.
2.8 Litigation. Except as set forth in SCHEDULE 2.8 attached hereto, there
is no action, suit, proceeding at law or in equity, arbitration or
administrative or other proceeding by or before (or to the best knowledge,
information and belief of the Seller any investigation by) any court,
governmental or other instrumentality or agency, or, to the best knowledge,
information and belief of the Seller, threatened against the Seller, or any of
its rights which could materially and adversely affect the right or ability of
the Purchaser to carry on the Padlock Product Line business, or which could
materially and adversely affect the rights of the Purchaser to exploit the
intellectual property being acquired. The Seller is not subject to any judgment,
order or decree entered in any lawsuit or proceeding which may have a material
adverse effect on any of its operations or business practices or on its ability
to convey the Assets or conduct the Padlock Product Line business in any area.
2.9 Product Warranty. To Seller's knowledge, each product manufactured,
sold, leased, installed, delivered or service performed by the Seller has been
in conformity with all applicable contractual commitments and all express and
implied warranties. No product manufactured, sold, leased, installed, delivered
or service
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performed by the Seller is subject to any guaranty, warranty or other indemnity
beyond the applicable standard express terms and conditions of sale or lease,
copies of which have been delivered to the Purchaser.
2.10 Product Liability. To Seller's knowledge, Seller has no liability (and
knows of no basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim or demand against the Seller which
could give rise to any liability) arising out of any injury to persons or
property as a result of the ownership, possession or use of any Padlock Product
Line product manufactured, sold, leased, installed or delivered by the Seller.
2.11 Intellectual Property. The operation of the Padlock Product Line
business requires no rights under Intellectual Property (as hereinafter defined)
other than rights under Intellectual Property of the Seller listed on Part I of
SCHEDULE 2.11 attached hereto and rights granted to the Seller pursuant to
agreements listed on Part II of SCHEDULE 2.11. Within the six month period
immediately prior to the date of this Agreement, the business of the Seller made
use of no Intellectual Property rights other than rights under Intellectual
Property of the Seller listed on Part I of SCHEDULE 2.11 and rights granted to
the Seller pursuant to agreements listed on Part II of SCHEDULE 2.11. Except as
otherwise set forth on Part III of SCHEDULE 2.11, the Seller owns all right,
title and interest in the Intellectual Property listed on SCHEDULE 2.11
including, without limitation, exclusive rights to use and license the same.
Each item of Intellectual Property listed on Part I of SCHEDULE 2.11 has been
duly registered with, filed in, or issued by the appropriate domestic or foreign
governmental agency, to the extent
9
required, and each such registration, filing and issuance remains in full force
and effect. Except as set forth on Part III of SCHEDULE 2.11, no claim adverse
to the interests of the Seller in the Intellectual Property or agreements listed
in SCHEDULE 2.11 has been made. To the best knowledge, information and belief of
the Seller, no such claim has been threatened or asserted, no basis exists for
any such claim, and no Person has infringed or otherwise violated the Seller's
rights in any of the Intellectual Property or agreements listed on Part I or
Part II of SCHEDULE 2.11, except as set forth on Part III of SCHEDULE 2.1 1. No
person or entity has any rights in the name Presto-Lock (or any variation
thereof) except as set forth in Part III of SCHEDULE 2.11. Except as set forth
on Part III of SCHEDULE 2.11, no litigation is pending wherein the Seller is
accused of infringing or otherwise violating the Intellectual Property rights of
another, or of breaching a contract conveying rights under Intellectual
Property. To the best knowledge, information and belief of the Seller, no such
claim has been asserted or threatened against the Seller, nor are there any
facts that would give rise to such a claim. For purposes of this Section 2. 11,
"Intellectual Property" means domestic and foreign patents, patent applications,
registered and unregistered trade marks and service marks, registered and
unregistered copyrights, proprietary or copyrighted computer programs,
proprietary or copyrighted data bases, trade secrets and proprietary
information.
2.12 Compliance with Laws. To Seller's knowledge, Seller is in compliance
in all material respects with all applicable laws, regulations, orders,
judgments and decrees which would affect the Padlock Product Line business.
Except as set forth in SCHEDULE 2.12, the Seller is not now under investigation
with respect to any violation
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of any applicable law, regulation, order or requirement which would impair
Purchaser's ability to operate the Padlock Product Line business. The Seller has
filed all reports required to be filed with any governmental, regulatory or
administrative agency or authority in connection with its operation of the
Padlock Product Line business.
2.13 Interests in Clients, Suppliers Etc, Except as set forth in SCHEDULE
2.13 attached hereto, the Seller does not possess, directly or indirectly, any
financial interest in, or is a director, officer or employee of, any
corporation, firm, association or business organization which is a client,
supplier, customer, lessor, lessee, or competitor of the Seller. Ownership of
securities of a company whose securities are registered under the Securities
Exchange Act of 1934 not in excess of 1% of any class of such securities shall
not be deemed to be a financial interest for purposes of this Section 2.13.
2.14 Disclosure. None of this Agreement, any Schedule, Exhibit or
certificate attached hereto or delivered in accordance with the terms hereof or
any document or statement in writing which has been supplied by or on behalf of
the Seller in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact, or omits any statement of a
material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact known to the Seller which materially
and adversely affects the business or prospects of the Padlock Product Line,
which has not been set forth either in this Agreement, or in a Schedule, Exhibit
or certificate attached hereto or delivered in accordance with the terms hereof
or in a document or statement in writing which has been supplied by or on behalf
of the Seller in connection with the transactions contemplated by this
Agreement.
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2.15 Broker's or Finder's Fees. No agent, broker, person or firm acting on
behalf of the Seller is, or will be, entitled to any commission or broker's or
finder's fees from any of the parties hereto, or from any Person controlling,
controlled by or under common control with any of the parties hereto, in
connection with any of the transactions contemplated by this Agreement.
2.16 Copies of Documents. The Seller has caused to be made available for
inspection and copying by the Purchaser and its advisers, true, complete and
correct copies of all documents referred to in this Article II or in any
Schedule attached hereto.
ARTICLE III
REPRESENTATIONS OF PURCHASER
3.0 Representations of Purchaser. Purchaser represents, warrants and agrees
as follows:
3.1 Existence and Good Standing of Purchaser, Power and Authority. The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the state of Connecticut and has the corporate power and
authority to make, execute, deliver and perform this Agreement, and this
Agreement has been duly authorized and approved by all required corporate action
of Purchaser.
3.2 Restrictive Documents. The Purchaser is not subject to any charter,
by-law, mortgage, lien, lease, agreement, instrument, order, law, rule,
regulation, judgment or decree, or any other restriction of any kind or
character, which would prevent consummation of the transactions contemplated by
this Agreement.
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3.3 Broker's or Finder's Fees. No agent, broker, person or firm acting on
behalf of the Purchaser is, or will be, entitled to any commission or broker's
or finder's fees from any of the parties hereto, or from any Person controlling,
controlled by or under common control with any of the parties hereto, in
connection with any of the transactions contemplated by this Agreement.
ARTICLE IV
CONDUCT OF BUSINESS; EXCLUSIVE DEALING; REVIEW
4.1 Conduct of Business of the Company. During the period from the date of
this Agreement to the Closing Date, the Seller shall conduct its Padlock Product
Line business only by selling finished goods from inventory in the ordinary and
usual course of business with Purchaser's consent, and agrees to use its best
efforts to preserve intact its sales organization and maintain satisfactory
relationships with licensors, suppliers, distributors, clients, sales
representatives and others having business relationships with it with respect to
the Padlock Product Line. Notwithstanding the immediately preceding sentence,
prior to the Closing Date, except as may be first approved by Purchaser or as is
otherwise permitted or required by this Agreement, the Seller agrees with
respect to the Padlock Product Line business:
(a) to refrain from entering into any customer order, contract or
commitment or any contracts which involve the licensing of Intellectual
Property,
(b) to duly comply with all laws and regulations applicable to it in the
conduct of its business, including without limitation federal export and import
laws and the rules, orders, regulations and guidelines thereunder so far as they
may be applicable,
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(c) to use its best efforts to maintain the Assets in substantially their
present order and condition, subject only to normal wear and tear,
(d) not to take any action, or omit to take any action, which would cause
the representations and warranties contained in Article II hereof to be untrue
or incorrect.
During the period from the date of this Agreement to the Closing Date, the
Seller shall confer on a regular and frequent basis with one or more designated
representatives of Purchaser to report material matters and to report the
general status of ongoing Padlock Product Line operations. The Seller shall
notify Purchaser of any unexpected emergency or other change in the normal
course of its business or in the operation of its properties and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or adjudicatory proceedings
involving the Padlock Product Line and shall keep Purchaser fully informed of
such events and permit its representatives prompt access to all materials
prepared in connection therewith.
4.2 Exclusive Dealing. During the period from the date of this Agreement to
the completion of the Closing, the Seller will not:
(a) solicit, initiate or encourage the submission of any proposal or offer
from any person relating to any (i) liquidation, dissolution or
recapitalization, (ii) merger or consolidation, (iii) acquisition or purchase of
securities or assets, or (iv) similar transaction or business combination
involving the Seller; or
(b) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any
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effort or attempt by any person to do or seek any of the foregoing. The Seller
will notify the Purchaser immediately if any person makes any proposal, offer,
inquiry or contact with respect to any of the foregoing.
4.3 Review of the Seller. Purchaser may, prior to the Closing Date, through
its representatives, make such review of the properties, books and records of
the Seller pertaining to the Padlock Product Line and its financial and legal
condition as they deem necessary or advisable to familiarize themselves with
such properties and other matters. Should the Purchaser, its accountants or
agents, however, ascertain any facts that are not as represented in this
Agreement, they shall immediately disclose said facts to the Seller, who may
undertake to take such action as will cause the warranties and representations
to be true and correct as of the Closing Date. The Seller shall permit Purchaser
and its representatives to have, after the date of execution of this Agreement,
full access to the premises and to all the books and records of the Seller, and
the Seller will furnish Purchaser with such financial and operating data and
other information with respect to the Padlock Product Line business and the
Assets as Purchaser shall from time to time reasonably request. In the event of
termination of this Agreement, Purchaser shall keep confidential any material
information obtained from the Seller concerning the Sellers properties,
operations and business (unless readily ascertainable from public or published
information or trade sources) until the same ceases to be material (or becomes
so ascertainable) and, at the request of the Seller, shall return to the Seller
all copies of any schedules, statements, documents or other written information
obtained in connection therewith.
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ARTICLE V
CONDITIONS TO PURCHASER'S OBLIGATIONS
5.0 Conditions to Purchaser's Obligations. The purchase of the Assets by
Purchaser on the Closing Date is conditioned upon satisfaction, on or prior to
the Closing, of the following conditions:
5.1 Opinion of the Company's Counsel. The Seller shall have furnished
Purchaser with a favorable opinion, dated as of the Closing Date, of ▇▇▇▇▇▇ &
▇▇▇▇▇▇, counsel to Seller, in form and substance satisfactory to Purchaser and
its counsel, to the effect set forth in EXHIBIT 5.1 attached hereto.
5.2 No Material Adverse Change. Since the date hereof and prior to the
Closing, there shall have been no material adverse change in the assets or
liabilities, the business or condition, financial or otherwise, of the Seller
with respect to the Padlock Product Line, and the Seller shall have delivered to
Purchaser a certificate, dated as of the Closing, to such effect.
5.3 Truth of Representations and Warranties. The representations and
warranties of the Seller contained in this Agreement or in any Schedule attached
hereto shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, and the Seller shall have delivered to Purchaser a certificate, dated
as of the Closing Date, to such effect.
5.4 Performance of Agreements. All of the agreements of the Seller to be
performed on or before the Closing pursuant to the terms hereof shall have been
duly
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performed, and the Seller shall have delivered to Purchaser a certificate, dated
as of the Closing, to such effect.
5.5 No Litigation Threatened. No action or proceedings shall have been
instituted or, to the best knowledge, information and belief of the Seller,
threatened before a court or other government body or by any public authority to
restrain or prohibit any of the transactions contemplated hereby, and the Seller
shall have delivered to Purchaser a certificate, dated as of the Closing, to
such effect.
5.6 Non-Competition. The Seller shall have entered into and delivered a non
competition agreement in the form of EXHIBIT 1.4.
5.7 License Agreements. The Seller shall have entered into a license
agreement with the Purchaser, in the form of EXHIBIT 1.5 attached hereto.
5.8 Sales Service Consulting Agreement. The Seller shall have entered into
a sales service consulting agreement with the Purchaser, in the form of EXHIBIT
1.6 attached hereto
5.9 Certificates. The Seller shall have delivered to the Purchaser a
certificate from the Secretary of State of the state of Michigan to the effect
that Seller is in good standing in such state and a certificate from the
Secretary or an Assistant Secretary of the Seller certifying that this Agreement
and the transactions contemplated herein have been duly and validly authorized
by required corporate action.
5.10 Absence of Insolvency Action. There shall be no action pending or
threatened by any creditor of the Seller under the laws of any jurisdiction
pertaining to bankruptcy, insolvency or receivership which materially affects
the ability of the Seller to
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operate the business or which would deprive the Purchaser of the benefits of
this Agreement.
ARTICLE VI
CONDITIONS TO SELLER'S OBLIGATIONS
6.0 Conditions to Seller's Obligations. The sale of the Assets by the
Seller on the Closing is conditioned upon satisfaction, on or prior to such
date, of the following conditions:
6.1 Opinion of Purchaser's Counsel. Purchaser shall have furnished Seller
with an opinion, dated as of the Closing Date, of ▇▇▇▇▇ & ▇▇▇▇▇, counsel to
Purchaser, in form and substance satisfactory to Seller and its counsel, to the
effect set forth in EXHIBIT 6.1 attached hereto.
6.2 Certificates. Purchaser shall have delivered to Seller a certificate
from the Secretary of State of the state of Connecticut to the effect that
Purchaser is in good standing in such state, and a certificate from the
Secretary or an Assistant Secretary of the Purchaser certifying that this
Agreement and the transactions contemplated herein have been duly and validly
authorized by required corporate action.
6.3 Truth of Representations and Warranties. The representations and
warranties of Purchaser contained in this Agreement shall be true and correct on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of such date, and Purchaser shall have
delivered to Seller a certificate, dated the Closing Date, to such effect.
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6.4 Performance of Agreements. All of the agreements of Purchaser to be
performed on or before the Closing pursuant to the terms hereof shall have been
duly performed, and Purchaser shall have delivered to Seller a certificate,
dated the Closing, to such effect.
6.5 Non-Competition Agreement. The Purchaser shall have entered into the
Non-Competition Agreement with the Seller as provided in Section 1.4 above.
ARTICLE VII
CLOSING AND EXCHANGE OF CONSIDERATION
7.1 Closing. The Closing of this Agreement shall take place at the offices
of Messrs. ▇▇▇▇▇ & ▇▇▇▇▇, One Exchange Place, Waterbury, Connecticut, at 10:00
a.m., local time, July __, 1994, or at such other time, date and place as the
parties may agree upon in writing. Such time and dates are herein referred to as
the "Closing Date." The parties, however, agree to use their best efforts to
exchange documents by mail or courier, to be received simultaneously on or
before the Closing Date, in which event funds will be wire transferred to the
Seller as required by Section 7.2 below.
7.2 Exchange of Consideration. In reliance on the representations and
warranties contained herein, and subject to the terms and conditions of this
Agreement, on the Closing Date:
(a) The Purchaser will deliver to the Seller by certified or bank check or
by wire transfer the sum of S500,000. Closing by mail or courier shall require
wire transfer.
(b) As provided in Article I, the Seller will assign, transfer and deliver
to the Purchaser all of Seller's right, title and interest in and to the Assets,
which Assets shall
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be free and clear of all liens, charges, encumbrances, security interests,
restrictions and adverse rights of any kind arising or created on or after
February 25, 1994. Purchaser shall not be required to pay any transfer taxes.
All Assets shall be delivered FOB Seller's place of business, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, except those Assets listed in SCHEDULE 7.2(b) attached
hereto which shall be delivered FOB the location specified in said SCHEDULE
7.2(b).
(c) The Purchaser shall assume the contractual liabilities of Seller for
customer purchase contracts and supply orders which it has not rejected, as
provided in Section 1.3 hereinabove, by one or more agreements in the form of
EXHIBIT 1.3 attached hereto.
(d) The Purchaser and Seller shall enter into the Non-Competition Agreement
in the form of EXHIBIT 1.4 attached hereto.
(e) The Purchaser and Seller shall enter into the License Agreement in the
form of EXHIBIT 1.5 attached hereto.
(f) The Purchaser and Seller shall enter into the Sales Service Consulting
Agreement in the form of EXHIBIT 1.6 attached hereto.
(g) The Seller will deliver to the Purchaser the various certificates,
instruments and documents referred to in Article V above.
(h) The Purchaser will deliver to the Seller the various certificates,
instruments, and documents referred to in Article Vl above.
7.3 Instruments of Transfer and Delivery. The Seller agrees that the
transfer of the Assets will be effected by bills of sale, endorsements,
assignments and such other
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good and sufficient instruments of transfer in form and substance satisfactory
to Purchaser and its counsel, as shall be effective to convey and vest in the
Purchaser all of Seller's right, title and interest in said Assets, free and
clear of all liens, encumbrances, security interests, charges, restrictions,
adverse rights, liabilities or obligations created or arising after February 25,
1994. Seller further agrees that it will, at reasonable times on or after the
Closing Date, upon the request of the Purchaser, do, execute, acknowledge and
deliver, or cause to be done, executed, acknowledged and delivered all such
further acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may be reasonably required to transfer Seller's right, title and
interest in the Assets to the Purchaser.
(a) The Seller further agrees to deliver to the Purchaser at the Closing
all of its customer order lists, contracts and commitments, books, records and
other data relating to the Padlock Product Line business to the extent provided
in Section 1.1 above, and including, without limitation, all its notebooks and
other records relating to trade secrets, inventions, processes, discoveries and
improvements, whether or not patentable.
(b) The Seller agrees that simultaneously with the aforesaid delivery, all
such steps will be taken as may be requisite to put the Purchaser in actual
possession and operating control of all the Assets wherever located. It is
understood, however, that the Purchaser shall have a period of ten (10) days
commencing on the Closing Date to remove all tools, equipment and inventory
constituting part of the Assets from the Premises of the Seller
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(c) After the Closing, at reasonable times and on reasonable notice, the
Seller shall have access to the Padlock Product Line books and records delivered
to Purchaser pertaining to the Seller's operations and business prior to the
Closing, and the Purchaser shall have access to the books and records retained
by the Seller pertaining to the Padlock Product Line business prior to the
Closing.
7.4 Post Closing Agreements. The parties agree that from and after the
Closing Date the following agreements will take effect:
(a) All responsibility for termination, severance, benefits and questions
relating thereto with respect to Seller's employees while they were employed by
Seller will remain the obligation of the Seller, and the Seller agrees to
indemnify and hold the Purchaser harmless from and against all loss, cost,
damages, claims and liabilities with respect thereto.
(b) All debts, obligations and liabilities of the Seller (including those
purchase contracts and supply orders, if any, which Purchaser elects not to
assume pursuant to Sect on 1.3 hereof, but excluding the Assumed Obligations)
shall not be assumed by the Purchaser hereunder and shall remain the full
responsibility and liability of the Seller. The Seller agrees, without
limitation of the foregoing, to make payment in full to all of its suppliers and
sales representatives as to debts, obligations and liabilities of the Seller
owed to them with respect to products or services rendered in connection with
the Padlock Product Line within thirty (30) days after the Closing. The Seller
hereby agrees to indemnify and hold the Purchaser harmless from and against any
and all debts, obligations and liabilities of the Seller. For purposes of this
Agreement, "debts,
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obligations and liabilities" of the Seller shall not include debts, obligations
or liabilities of third parties which in any way predate February 26, 1994.
(c) All liabilities of the Seller assumed by the Purchaser herein shall
become and all liabilities of the Purchaser shall remain the full responsibility
and liability of the Purchaser. The Purchaser hereby agrees to indemnify and
hold the Seller harmless from and against any and all debts, obligations and
liabilities of the Seller assumed by the Purchaser herein and all liabilities of
the Purchaser.
(d) Seller will pay, perform, discharge and satisfy any product warranty
claims or demands for products manufactured or sold by it or for its account
prior to the Closing, and the Seller will indemnify and hold the Purchaser
harmless from and against all loss, cost, damages, claims and liabilities with
respect thereto. If Seller requires replacement padlocks to satisfy its
obligations under this Subsection (d) which are made by the Purchaser (or in its
inventory), then Purchaser agrees to sell such padlocks to the Seller at the
Purchasers actual cost plus ten percent (10%).
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS: INDEMNITY
8.1. Survival of Representations The respective representations and
warranties of the Seller and Purchaser contained in this Agreement or in any
Schedule attached hereto shall survive the Closing contemplated hereby, but
shall expire and be of no further force and effect (except as to then pending
claims for indemnity) after January 31, 1996.
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8.2 Indemnification by Seller. The Seller agrees to indemnify and hold
Purchaser harmless from and against and in respect of any and all damages,
losses, claims, demands, liabilities, costs and expenses (including, without
limitation, reasonable counsel fees and expenses) suffered or paid, directly or
indirectly, (i) as a result of or arising out of the failure of any
representation or warranty made by the Seller in this Agreement, in any Schedule
attached hereto, or in any certificate or other instrument furnished to the
Purchaser in connection herewith to be true and correct in all respects as of
its date or (ii) as a result of or arising out of the nonfulfillment of any
obligation, covenant or condition on the part of the Seller to be paid,
performed or delivered pursuant to this Agreement (including, without
limitation, Sellers obligations under Section 7.4 above).
8.3 Indemnification by Purchaser. Purchaser agrees to indemnify and hold
the Seller harmless from and against all damages, losses, costs, claims, demands
and liabilities (including, without limitation, reasonable counsel fees and
expenses) suffered or paid, directly or indirectly, (i) as a result of or
arising out of the failure of any representation or warranty made by Purchaser
in this Agreement to be true and correct in all respects as of the date of this
Agreement, and (ii) as a result of or arising out of the nonfulfillment of any
obligation, covenant or condition on the part of the Purchaser to be performed
or delivered pursuant to this Agreement (including, without limitation,
Purchaser's obligations under Section 7.4 above).
8.4 Limitations. The obligations to indemnify and hold harmless pursuant to
Sections 8.2 and 8.3 shall survive the consummation of the transactions
contemplated
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by this Agreement for the period provided in Section 8.1, except the obligations
to indemnify as to claims presented within said respective periods shall
continue until resolved.
(a) Notwithstanding the foregoing, as to any claim involving intentional
misrepresentation by or on behalf of the Seller, the Seller's obligation of
indemnification set forth in Section 8.2 shall continue without time limit
except as provided by the applicable state statute of limitations.
(b) A claim will be deemed covered by Section 8.2 or Section 8.3 if it
arises within the period set forth in Section 8.1 and notice is given to the
party against whom it is made no later than fifteen (15) days after expiration
of said period.
(c) Any recovery by Purchaser for indemnification shall be limited as
follows:
(i) Purchaser shall not be entitled to recover any amount for
indemnification claims under this Article VIII unless and until the
aggregate amount which Purchaser is entitled to recover in respect to such
claims exceeds S25,000.00 (the "Deductible"), in which event the entire
amount which Purchaser is entitled to recover in respect of all such
claims, less the Deductible, shall be payable; and
(ii) The maximum amount recoverable by Purchaser for indemnification
claims under this Article VIII shall in the aggregate be equal to
S250,000.00.
(d) The indemnification provided in this Article VIII shall be the sole and
exclusive legal remedy for any inaccuracy or any breach of representation or
warranty made by any party in this Agreement and no party hereto shall seek any
other legal remedy which might otherwise be available to either party.
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(e) A claim will not be covered by Section 8.2 or Section 8.3 unless the
party entitled to assert such claim gives notice to the other party against whom
it is made within sixty (60) days from the date on which the claiming party
discovers such claim. This limitation, however, shall not affect calculation of
the Deductible, nor shall any such claim not presented within said 60 days be
applied to reduce the maximum amount recoverable under Section 8.4(c).
8.5 Matters Involving Third Parties. If any third party shall notify any
party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnification against any other party (the "Indemnifying
Party") under this Article V111, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged. In the
event any Indemnifying Party notifies the Indemnified Party within fifteen (15)
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, then:
(a) the Indemnifying Party will defend the Indemnified Party against the
matter with counsel of its choice reasonably satisfactory to the Indemnified
Party,
(b) the Indemnified Party may retain separate co-counsel at its sole cost
and expense,
(c) the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the matter without the written consent
of the
26
Indemnifying Party (not to be withheld unreasonably), and
(d) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all liability with respect thereto, without the written
consent of the Indemnified Party.
In the event no Indemnifying Party notifies the Indemnified Party within
fifteen (15) days after the Indemnified Party has given notice of the matter
that the Indemnifying Party has the option to assume the defense thereof, the
Indemnified Party may defend against, or enter into any settlement with respect
to, the matter in any manner it reasonably may deem appropriate.
8.6 Purchaser's Right of Setoff. In the event that the Purchaser reasonably
believes that it is entitled to indemnification from the Seller under this
Agreement, then the Purchaser shall be entitled to withhold payments coming due
under the Non-Competition Agreement in an amount reasonably sufficient to cover
the full amount of the claim until such time as the actual liability of the
Seller to make indemnification is finally determined. The Purchaser shall notify
Seller promptly of its intention to withhold payments and the amount which it
considers reasonably sufficient to cover the claim which has arisen. If the
Seller does not believe the amount is reasonable and if thereafter the parties
cannot negotiate a mutually acceptable amount to be withheld, then the matter
shall be referred to arbitration at Hartford, Connecticut before a single
arbitrator in accordance with the rules of commercial arbitration established by
the American Arbitration Association then in effect. The parties may, however,
by mutual agreement
27
submit said issue to some other Alternative Dispute Resolution process. In any
event, the determination by said arbitrator or other ADR body shall be binding
and conclusive on the parties and not subject to appeal to any court or other
tribunal. In the event it is thereafter determined that the Purchaser is
entitled to indemnification from the Seller, the Purchaser may first setoff
against such withheld payments, and then against future payments if the withheld
payments are insufficient, the amount of the liability of the Seller to it. Said
withholding and/or setoff shall be evidenced by written notice given to the
Seller in the manner provided in Section 9.5 below. If it is determined however
that the Purchaser was not entitled to indemnification then the amount withheld
shall be promptly paid to the Seller, together with interest at the rate of 7%
per annum from the date of withholding; likewise if the amount of such
indemnification as finally determined is less than the amount withheld then said
excess amount plus interest at said rate on said excess amount shall be paid
over to the party entitled thereto.
ARTICLE IX
MISCELLANEOUS
9.1 Expenses. The parties hereto shall pay all of their own expenses
relating to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel, accountants and
financial advisers.
9.2 Governing Law. The interpretation and construction of this Agreement,
and all matters relating hereto, shall be governed by the laws of the State of
Connecticut applicable to agreements executed and to be performed solely within
such State.
9.3 Captions. The Article, Section and other captions used herein are for
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reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
9.4 Notices. Any notice or other communication required or permitted
hereunder shall be sufficiently given if delivered in person or sent by national
courier service, by telex, telecopy or by Express, registered or certified mail,
postage prepaid, addressed as follows:
If to the Seller, at:
Prestolock International, Ltd. FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Chairman
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
Bloomfield Hills, Ml 48304
and a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇ FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
The ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
1400 North ▇▇▇▇▇▇▇▇ Avenue
Bloomfield Hills, Ml 48304-2856
If to Purchaser, at:
The Eastern Company FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Vice President
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and a copy to:
▇▇▇▇▇ & ▇▇▇▇▇ FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
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or such other address or number as shall be furnished in writing by any such
party, and such notice or communication shall be deemed to have been given as of
the date so delivered, sent by telecopier, telex or mailed.
9.5 Parties in Interest. This Agreement may not be transferred, assigned,
pledged or hypothecated by any party hereto, other than by operation of law.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
9.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one instrument.
9.7 Entire Agreement. This Agreement, together with the Schedules and
Exhibits attached hereto and the other documents referred to herein which form a
part hereof, contains the entire understanding of the parties hereto with
respect to the subject matter hereof and the transactions contemplated herein.
This Agreement supersedes all prior negotiations, agreements and understandings
between the parties with respect to such subject matter and transactions.
9.8 Amendments. This Agreement may not be waived, amended, supplemented or
modified orally, but only by an agreement in writing signed by the Purchaser and
the Seller
9.9 Severability. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof will not in any way be affected or impaired
thereby.
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9.10 Third Party Beneficiaries. Each party hereto intends that neither this
Agreement, nor any portion thereof or anything expressed or implied, shall
benefit or create any right, remedy or cause of action in or on behalf of any
Person other than the parties hereto.
9.11 Unanimity. This Agreement shall not become valid or effective or a
binding legal obligation on any party hereto until duly executed by the
Purchaser and the Seller. Until such complete execution, it shall constitute a
continuing offer by the Purchaser which may be withdrawn at any time.
IN WITNESS WHEREOF, Purchaser and Seller have caused their respective
corporate names to be hereunto subscribed by their respective officers thereunto
duly authorized, all as of the day and year first above written.
SELLER: PURCHASER:
PRESTOLOCK INTERNATIONAL, LTD THE EASTERN COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ By /s/ ▇.▇. ▇▇▇▇▇▇▇
------------------------- ----------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its Chairman Its Vice President
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