________________________________________________________________________________
ACQUISITION AGREEMENT
AMONG
ALCOA INC.,
THE FAIRCHILD CORPORATION,
FAIRCHILD HOLDING CORP.
AND
SHEEPDOG, INC.
Dated as of July 16, 2002
________________________________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.........................................................2
SECTION 1.1 "Actual Transferred Subsidiary Debt"....................2
SECTION 1.2 "Advisor"...............................................2
SECTION 1.3 "Affiliates"............................................2
SECTION 1.4 "After Tax Amount"......................................2
SECTION 1.5 "Agreement".............................................2
SECTION 1.6 "Airbus"................................................2
SECTION 1.7 "Allocation"............................................2
SECTION 1.8 "Ancillary Agreements"..................................3
SECTION 1.9 "Assigned Receivables"..................................3
SECTION 1.10 "Assumed Fastener Business Liabilities".................3
SECTION 1.11 "Authorizations"........................................3
SECTION 1.12 "Base Claim"............................................4
SECTION 1.13 "Bill of Sale"..........................................4
SECTION 1.14 "Boeing"................................................4
SECTION 1.15 "business day"..........................................4
SECTION 1.16 "Buyer".................................................4
SECTION 1.17 "Buyer DB Plans"........................................4
SECTION 1.18 "Buyer Closing Receivables Notice"......................4
SECTION 1.19 "Buyer DC Plans"........................................4
SECTION 1.20 "Buyer Indemnified Parties".............................4
SECTION 1.21 "CERCLA"................................................4
SECTION 1.22 "Class A Common Stock"..................................4
SECTION 1.23 "Class B Common Stock"..................................4
SECTION 1.24 "Closing"...............................................4
SECTION 1.25 "Closing Date"..........................................4
SECTION 1.26 "Closing Date Balance Sheet"............................5
SECTION 1.27 "Code"..................................................5
SECTION 1.28 "Commercial Aircraft"...................................5
SECTION 1.29 "Confidentiality Agreement".............................5
SECTION 1.30 "Consideration".........................................5
SECTION 1.31 "Covenant Period".......................................5
SECTION 1.32 "CPR"...................................................5
SECTION 1.33 "Damages"...............................................5
SECTION 1.34 "Debt Tender Offer".....................................5
SECTION 1.35 "Department of Justice".................................5
SECTION 1.36 "DGCL"..................................................6
SECTION 1.37 "Direct Claim"..........................................6
SECTION 1.38 "Discontinued Operations"...............................6
SECTION 1.39 "Dispute"...............................................6
SECTION 1.40 "Draft Schedule 2.9"....................................6
SECTION 1.41 "Earn-Out"..............................................6
SECTION 1.42 "Effective Time"........................................6
SECTION 1.43 "Environmental Action"..................................6
SECTION 1.44 "Environmental Contamination"...........................6
SECTION 1.45 "Environmental Claim"...................................6
SECTION 1.46 "Environmental Law".....................................6
SECTION 1.47 "Environmental Permits".................................6
SECTION 1.48 "ERISA".................................................6
SECTION 1.49 "ERISA Affiliate".......................................6
SECTION 1.50 "Escrow Agreement"......................................6
SECTION 1.51 "Escrow Amount".........................................7
SECTION 1.52 "Estimated Transferred Fastener Subsidiary Debt"........7
SECTION 1.53 "Exchange Act"..........................................7
SECTION 1.54 "Excluded Assets".......................................7
SECTION 1.55 "Excluded Fastener Business Liabilities"................8
SECTION 1.56 "Fastener Business".....................................8
SECTION 1.57 "Fastener Business Acquisition Proposal"................8
SECTION 1.58 "Fastener Business Assets"..............................8
SECTION 1.59 "Fastener Business Bank Accounts".......................9
SECTION 1.60 "Fastener Business Books and Records"...................9
SECTION 1.61 "Fastener Business Contracts"...........................9
SECTION 1.62 "Fastener Business Employees"...........................9
SECTION 1.63 "Fastener Business Financial Statements"................9
SECTION 1.64 "Fastener Business Intellectual Property"...............9
SECTION 1.65 "Fastener Business Intellectual Property Licenses".....10
SECTION 1.66 "Fastener Business Inventory"..........................10
SECTION 1.67 "Fastener Business Leases".............................10
SECTION 1.68 "Fastener Business Product Liability Insurance"........11
SECTION 1.69 "Fastener Business Real Properties"....................11
SECTION 1.70 "Fastener Environmental Condition".....................11
SECTION 1.71 "Fastener Environmental Liability".....................11
SECTION 1.72 "Final Allocation".....................................11
SECTION 1.73 "FTC"..................................................11
SECTION 1.74 "Fullerton Property"...................................11
SECTION 1.75 "GAAP".................................................11
SECTION 1.76 "Government"...........................................11
SECTION 1.77 "Greenslet Report".....................................11
SECTION 1.78 "Hazardous Materials"..................................11
SECTION 1.79 "HSR Act"..............................................11
SECTION 1.80 "Indemnifiable Losses".................................12
SECTION 1.81 "Indemnifying Party"...................................12
SECTION 1.82 "Indemnitee"...........................................12
SECTION 1.83 "Indemnity Payment"....................................12
SECTION 1.84 "Independent Accountants"..............................12
SECTION 1.85 "Intercompany Accounts"................................12
SECTION 1.86 "IRS"..................................................12
SECTION 1.87 "best knowledge of the Sellers"........................12
SECTION 1.88 "Law"..................................................12
SECTION 1.89 "Licenses and Permits".................................12
SECTION 1.90 "Lien".................................................12
SECTION 1.91 "March Pro Forma Balance Sheet"........................12
SECTION 1.92 "Material Adverse Effect"..............................12
SECTION 1.93 "Net Working Capital"..................................13
SECTION 1.94 "Newco California".....................................13
SECTION 1.95 "Noncompetition Agreement".............................13
SECTION 1.96 "Noncompetition and Consulting Agreement"..............13
SECTION 1.97 "Non-Conveyed Contracts"...............................13
SECTION 1.98 "Overdue Closing Receivables"..........................13
SECTION 1.99 "Parent"...............................................13
SECTION 1.100 "Parent Affiliates"....................................13
SECTION 1.101 "Parent Common Stock"..................................13
SECTION 1.102 "Parent DB Plans"......................................13
SECTION 1.103 "Parent DC Plans"......................................14
SECTION 1.104 "Parent Pension Plans".................................14
SECTION 1.105 "Parent SEC Filings"...................................14
SECTION 1.106 "Permitted Exceptions".................................14
SECTION 1.107 "Person"...............................................14
SECTION 1.108 "Fairchild Holding"....................................14
SECTION 1.109 "Plans"................................................14
SECTION 1.110 "Pre-Closing Off-Site Disposal Locations"..............14
SECTION 1.111 "Preliminary Closing Date Balance Sheet"...............15
SECTION 1.112 "Product Claim"........................................15
SECTION 1.113 "Proxy Statement"......................................15
SECTION 1.114 "Receivables"..........................................15
SECTION 1.115 "Receivables Certificate"..............................15
SECTION 1.116 "Release"..............................................15
SECTION 1.117 "Remedial Action"......................................15
SECTION 1.118 "Remediation Standards"................................15
SECTION 1.119 "Representative".......................................15
SECTION 1.120 "Remaining Cash".......................................15
SECTION 1.121 "Rules"................................................15
SECTION 1.122 "SDI"..................................................15
SECTION 1.123 "SEC"..................................................15
SECTION 1.124 "Securities Act".......................................15
SECTION 1.125 "Sellers"..............................................15
SECTION 1.126 "Shareholder Approval".................................15
SECTION 1.127 "Special Shareholders Meeting".........................16
SECTION 1.128 "Stockholder"..........................................16
SECTION 1.129 "Straddle Period"......................................16
SECTION 1.130 "subsidiary"...........................................16
SECTION 1.131 "Taxes"................................................16
SECTION 1.132 "Tax Benefit"..........................................16
SECTION 1.133 "Tax Indemnitee".......................................16
SECTION 1.134 "Tax Indemnitor".......................................16
SECTION 1.135 "Tax Returns"..........................................17
SECTION 1.136 "10 3/4% Indenture"....................................17
SECTION 1.137 "Third Party Claim"....................................17
SECTION 1.138 "Title IV Plans".......................................17
SECTION 1.139 "Transferred Employees"................................17
SECTION 1.140 "Transferred Fastener Subsidiaries"....................17
SECTION 1.141 "Transferred U.S. Employees"...........................17
SECTION 1.142 "Undertaking and Indemnity Agreement"..................17
SECTION 1.143 "Voting Agreement".....................................17
SECTION 1.144 "WARN".................................................17
SECTION 1.145 "WARN Obligations".....................................17
ARTICLE II THE CLOSING.......................................................17
SECTION 2.1 Time and Place of Closing..............................17
SECTION 2.2 Purchase and Sale of the Fastener Business Assets......18
SECTION 2.3 Consideration Payable for the Fastener Business
Assets and the Stock and Membership Interests of
the Transferred Fastener Subsidiaries..................18
SECTION 2.4 Escrow Fund............................................18
SECTION 2.5 Deliveries by the Sellers..............................19
SECTION 2.6 Delivery by the Buyer..................................20
SECTION 2.7 Post-Closing Adjustments...............................21
SECTION 2.8 Earn-Out...............................................24
SECTION 2.9 Allocation of Consideration............................25
SECTION 2.10 Treatment of Accounts Receivable At the Closing........26
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER.....................27
SECTION 3.1 Organization; Qualification............................27
SECTION 3.2 Capital Stock and Membership Interests of the
Transferred Fastener Subsidiaries......................27
SECTION 3.3 Equity Investments.....................................28
SECTION 3.4 Authority Relative to this Agreement...................29
SECTION 3.5 Consents and Approval; No Violation....................29
SECTION 3.6 Financial Statements & Parent SEC Filings..............30
SECTION 3.7 Absence of Undisclosed Liabilities.....................30
SECTION 3.8 Absence of Certain Changes or Events...................31
SECTION 3.9 Title and Related Matters..............................31
SECTION 3.10 Contracts..............................................31
SECTION 3.11 Leases.................................................32
SECTION 3.12 Intellectual Property..................................32
SECTION 3.13 Employee Benefit Plans; ERISA..........................34
SECTION 3.14 Government and Third Party Authorizations and
Regulations............................................37
SECTION 3.15 Assets Necessary to Business...........................37
SECTION 3.16 Litigation.............................................37
SECTION 3.17 Intentionally Omitted..................................37
SECTION 3.18 State Takeover Statutes................................37
SECTION 3.19 Voting Requirement.....................................38
SECTION 3.20 Intentionally Omitted..................................38
SECTION 3.21 Accounts Receivable....................................38
SECTION 3.22 Taxes..................................................38
SECTION 3.23 Insurance..............................................40
SECTION 3.24 Environmental Matters..................................40
SECTION 3.25 Fastener Business Inventory............................41
SECTION 3.26 Product Warranty.......................................42
SECTION 3.27 Product Liability......................................42
SECTION 3.28 No Conflict of Interest................................42
SECTION 3.29 Accounting Controls....................................42
SECTION 3.30 Indebtedness To and From Officers, Directors,
Stockholders and Others................................43
SECTION 3.31 Brokers................................................43
SECTION 3.32 Newco California Property..............................43
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER.......................44
SECTION 4.1 Organization...........................................44
SECTION 4.2 Ownership of the Parent Common Stock...................44
SECTION 4.3 Authority Relative to this Agreement...................44
SECTION 4.4 Consents and Approvals; No Violation...................44
SECTION 4.5 Financing..............................................45
SECTION 4.6 Brokers................................................45
ARTICLE V COVENANTS OF THE PARTIES...........................................45
SECTION 5.1 Conduct of Business of the Sellers.....................45
SECTION 5.2 Transfer of Excluded Assets............................48
SECTION 5.3 Access and Cooperation.................................48
SECTION 5.4 Expenses...............................................49
SECTION 5.5 Commercially Reasonable Efforts........................49
SECTION 5.6 Further Assurances.....................................51
SECTION 5.7 Disclosure Supplements; Schedules and Exhibits.........51
SECTION 5.8 Public Announcements...................................51
SECTION 5.9 Sales, Use and Transfer Taxes and Fees................52
SECTION 5.10 Noncompetition.........................................52
SECTION 5.11 No Solicitation........................................53
SECTION 5.12 Special Shareholders Meeting...........................54
SECTION 5.13 Proxy Statement........................................55
SECTION 5.14 Repayment of Debt......................................55
SECTION 5.15 Use of Fairchild Fastener Name.........................56
SECTION 5.16 Transfers Not Effected at the Closing..................56
SECTION 5.17 June 30, 2002 Audited Financial Statements.............56
SECTION 5.18 Takeover Statutes......................................57
SECTION 5.19 Product Liability Insurance............................57
SECTION 5.20 Post-Closing Treatment of Accounts Receivables.........57
SECTION 5.21 Continued Existence....................................58
SECTION 5.22 Fairchild Fasteners Europe Simmonds....................59
SECTION 5.23 Environmental Permits..................................59
SECTION 5.24 United Kingdom Subsidiaries............................59
SECTION 5.25 Transfer of Fastener Business Real Property............59
SECTION 5.26 Accrued Expenses.......................................59
SECTION 5.27 Fullerton Property.....................................59
SECTION 5.28 Intellectual Property..................................60
ARTICLE VI SELLER EMPLOYEES..................................................60
SECTION 6.1 Employment.............................................60
SECTION 6.2 Assumption of Plans....................................61
ARTICLE VII CLOSING CONDITIONS...............................................65
SECTION 7.1 Conditions to Each Party's Obligations to Effect
the Transactions Contemplated Hereby...................65
SECTION 7.2 Conditions to the Obligations of the Sellers to
Effect the Transactions Contemplated Hereby............65
SECTION 7.3 Conditions to the Obligations of the Buyer to
Effect the Transactions Contemplated Hereby............66
SECTION 7.4 Certificates...........................................66
ARTICLE VIII CERTAIN TAX MATTERS.............................................67
SECTION 8.1 Tax Returns............................................67
SECTION 8.2 Payment of Taxes.......................................67
SECTION 8.3 Allocation of Straddle Period Taxes....................68
SECTION 8.4 Refunds................................................68
SECTION 8.5 Tax Indemnification....................................69
SECTION 8.6 Certain Post-Closing Settlement Payments...............70
SECTION 8.7 Cooperation............................................70
SECTION 8.8 Contests...............................................71
SECTION 8.9 French SAS.............................................72
ARTICLE IX TERMINATION AND ABANDONMENT.......................................72
SECTION 9.1 Termination............................................72
SECTION 9.2 Procedure and Effect of Termination....................74
ARTICLE X MISCELLANEOUS PROVISIONS...........................................75
SECTION 10.1 Delivery of Schedules..................................75
SECTION 10.2 Amendment and Modification.............................75
SECTION 10.3 Waiver of Compliance; Consents.........................75
SECTION 10.4 No Third Party Beneficiary Rights......................75
SECTION 10.5 Notices................................................75
SECTION 10.6 Assignment.............................................76
SECTION 10.7 Designated Subsidiary..................................76
SECTION 10.8 Governing Law..........................................76
SECTION 10.9 Counterparts...........................................77
SECTION 10.10 Interpretation.........................................77
SECTION 10.11 Entire Agreement.......................................77
SECTION 10.12 Severability...........................................77
ARTICLE XI INDEMNIFICATION...................................................77
SECTION 11.1 Survival of Representations and Warranties.............77
SECTION 11.2 Indemnification........................................78
SECTION 11.3 Limitations on Liability...............................80
SECTION 11.4 Defense of Claims......................................81
SECTION 11.5 Exclusive Remedies.....................................82
SECTION 11.6 Seller Environmental Indemnity.........................83
SECTION 11.7 Resolution of Indemnification Disputes.................86
SECTION 11.8 Indemnity Tax Credit Amount............................87
Exhibit A Bill of Sale..........................................A-1
Exhibit B Undertaking and Indemnity Agreement...................B-1
Exhibit C Escrow Agreement......................................C-1
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT, dated as of July 16, 2002 (the "Agreement"),
among Alcoa Inc., a Pennsylvania corporation (the "Buyer"), The Fairchild
Corporation, a Delaware corporation (the "Parent"), Fairchild Holding Corp., a
Delaware corporation and an indirect, wholly owned subsidiary of the Parent
("Fairchild Holding"), and Sheepdog, Inc., a Delaware corporation and an
indirect, wholly owned subsidiary of the Parent ("SDI" and, together with the
Parent, Fairchild Holding and the subsidiaries of the Parent set forth on
Schedule 1.125, collectively, the "Sellers").
W I T N E S S E T H:
WHEREAS, the Sellers are in the business of manufacturing,
distributing, selling, importing and exporting (i) fasteners and fastening
systems, including, without limitation, automatic fastening systems, blind
bolts, special bolts, fluid fittings, inserts, installation tooling, latches,
clamps, nuts, panel fasteners, pins, collars, rivets, screws, specials and
studs, (ii) fastener components, and (iii) latching devices, in each case for
use in the construction and maintenance of military and commercial aircraft, as
well as in applications for other industries, including, without limitation, the
automotive industry, the electronics industry, the installation-tooling industry
and other non-aerospace industries (such business being conducted by the Sellers
being referred to herein as the "Fastener Business");
WHEREAS, the Buyer wishes to acquire from the Sellers the Fastener
Business Assets;
WHEREAS, the Sellers are willing to transfer (i) the Fastener Business
Assets (other than the Fastener Business Assets owned or held by the Transferred
Fastener Subsidiaries, the capital stock and membership interests, as the case
may be, of which are being transferred directly or indirectly by Fairchild
Holding to the Buyer) and (ii) the capital stock and membership interests, as
the case may be, of the Transferred Fastener Subsidiaries to the Buyer in
exchange for (A) the assumption by the Buyer of the Assumed Fastener Business
Liabilities and (B) the payment to the Parent of (x) the Consideration and (y)
the Earn-Out;
WHEREAS, as a condition and inducement to the Buyer for entering into
this Agreement and incurring the obligations set forth herein, concurrently with
the execution and delivery of this Agreement, the Buyer is entering into a
Voting Agreement, dated as of the date hereof (the "Voting Agreement"), with
certain stockholders of the Parent (each, a "Stockholder"), pursuant to which,
among other things, each Stockholder has agreed to vote the shares of Parent
Common Stock then owned by such Stockholder in favor of the transactions
contemplated by this Agreement; and
WHEREAS, as a condition and inducement to the Buyer for entering into
this Agreement and incurring the obligations set forth herein, the Buyer is
requiring that certain executive officers of the Fastener Business enter into a
Noncompetition and Consulting Agreement with the Buyer, to be effective as of
the Closing, pursuant to which, among other things, such executive officers
agree for a period of four years (a) to provide consulting services to the
Fastener Business, and (b) to restrict their ability to compete with the Buyer
in the Fastener Business (the "Noncompetition and Consulting Agreement").
NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations, warranties, covenants, agreements and conditions
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, each of the following terms shall have the
following meaning:
SECTION 1.1 "Actual Transferred Subsidiary Debt" shall have the meaning set
forth in Section 2.7(a)(iii).
SECTION 1.2 "Advisor" shall have the meaning set forth in Section 8.8(b).
SECTION 1.3 "Affiliates" shall mean, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under direct or
indirect common control with such Person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of management or policies of a Person, whether
through the ownership of securities or partnership interests, control of the
board or other governing body of the Person, or other ownership interests, by
operation of Law, operation of by-laws or articles or certificate of
incorporation, contract or otherwise.
SECTION 1.4 "After Tax Amount" shall have the meaning set forth in Section
8.5(d).
SECTION 1.5 "Agreement" shall have the meaning ascribed thereto in the
Introduction.
SECTION 1.6 "Airbus" shall mean Airbus S.A.S., a company governed according to
the laws of France, and its successors.
SECTION 1.7 "Allocation" shall have the meaning set forth in Section 2.9(a).
SECTION 1.8 "Ancillary Agreements" shall mean the Bill of Sale, the Undertaking
and Indemnity Agreement, the Voting Agreement and the Escrow Agreement,
collectively.
SECTION 1.9 "Assigned Receivables" shall have the meaning set forth in Section
5.20.
SECTION 1.10 "Assumed Fastener Business Liabilities" shall mean and include only
the following liabilities:
(a) The dollar amount of all liabilities of the Fastener Business reflected on
the Closing Date Balance Sheet.
(b) Fastener Environmental Liabilities and all litigation matters affecting the
Fastener Business, including the litigation matters set forth on Schedule 3.16,
in an amount in all cases not to exceed $8,450,000, which shall be the amount of
the reserve for environmental, health, safety and litigation on the Closing Date
Balance Sheet. Notwithstanding the foregoing, the Buyer shall not have assumed
and shall have no responsibility, directly or indirectly, for any Damages, past,
present or future, of the Parent, the Sellers' or any of their respective
Affiliates, in respect of (i) any Discontinued Operations, (ii) any Pre-Closing
Off-Site Disposal Locations, (iii) any Third Party Claims to the extent arising
from or related to activities of the Fastener Business prior to the Closing for
asbestos-related illness, injuries or other harms, which Third Party Claims are
not set forth on Schedule 3.16 or, (iv) any Third Party Claims by any Person
(other than a Government agency) to the extent arising from or related to
activities of the Fastener Business prior to the Closing for personal injury or
property damage arising out of exposure to Hazardous Materials.
(c) Liabilities with respect to the Fastener Business Employees expressly
assumed by the Buyer pursuant to Article VI.
(d) Liabilities for Taxes expressly assumed by the Buyer pursuant to Section 5.9
and Article VIII.
(e) All obligations and liabilities attributable to periods after the Closing
Date pursuant to the Fastener Business Contracts, the Fastener Business Leases
and the Fastener Business Intellectual Property Licenses.
(f) All obligations and liabilities arising from, or relating to, the Buyer's
ownership of the Fastener Business Assets after the Closing Date, subject to the
Parent's obligations to indemnify the Buyer pursuant to Article XI of this
Agreement.
(g) All other obligations and liabilities expressly assumed by the Buyer
pursuant to this Agreement.
SECTION 1.11 "Authorizations" shall have the meaning set forth in Section
3.14(a).
SECTION 1.12 "Base Claim" shall have the meaning set forth in Section 11.3(a).
SECTION 1.13 "Bill of Sale" shall mean the bill of sale substantially in the
form of Exhibit A attached hereto.
SECTION 1.14 "Boeing" shall mean The Boeing Company, a Delaware corporation, and
its successors.
SECTION 1.15 "business day" shall mean any day other than Saturday, Sunday and
any day which is a legal holiday or a day on which banking institutions in New
York City are authorized by Law or other Government action to close.
SECTION 1.16 "Buyer" shall have the meaning ascribed thereto in the
Introduction.
SECTION 1.17 "Buyer DB Plans" shall have the meaning set forth in Section
6.2(h).
SECTION 1.18 "Buyer Closing Receivables Notice" shall have the meaning set forth
in Section 2.10.
SECTION 1.19 "Buyer DC Plans" shall have the meaning set forth in Section
6.2(g).
SECTION 1.20 "Buyer Indemnified Parties" shall have the meaning set forth in
Section 11.6(a).
SECTION 1.21 "CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended.
SECTION 1.22 "Class A Common Stock" shall have the meaning set forth in Section
3.19.
SECTION 1.23 "Class B Common Stock" shall have the meaning set forth in Section
3.19.
SECTION 1.24 "Closing" shall mean the consummation of the transactions
contemplated by Article II of this Agreement in accordance with the terms and
upon the conditions set forth in Article VII.
SECTION 1.25 "Closing Date" shall mean the fifth business day following the
later to occur of (i) expiration or termination of all waiting periods,
including any extensions thereof, if any, which are applicable to the
transactions contemplated by this Agreement pursuant to the HSR Act and (ii) the
satisfaction of all of the conditions to each party's obligations hereunder
(other than the condition set forth in Section 7.1(e) which shall be satisfied
on the Closing Date) or the waiver thereof by the party entitled to the benefit
thereof; or such other date as the parties hereto agree upon in writing.
SECTION 1.26 "Closing Date Balance Sheet" is the Preliminary Closing Date
Balance Sheet after the acceptance thereof by the Parent or the resolution of
all disputes with respect thereto in accordance with Section 2.7(c).
SECTION 1.27 "Code" shall mean the Internal Revenue Code of 1986, as amended.
SECTION 1.28 "Commercial Aircraft" shall mean non-regional, commercial airplanes
manufactured by (i) Boeing with a make/model number of 717-200, 737-300,
737-400, 737-500, 737-600, 737-700, 737-800, 737-900, 747-400, 757-200, 757-300,
767-2/300, 767-400, 777-200, 777-300, MD-80, MD-90 and MD-11, and (ii) Airbus
with a make/model number of A-300, A-310, A-318, A-319, A-320, A-321, A-330/200,
A-330/300, A-340/2/300, A-340/500, A-340/600 and A-380/800, and such other
non-regional, commercial airplanes manufactured by Boeing or Airbus, subject to
the limitations set forth in Section 2.8(d), in each case as reported in the
Commercial Market Forecast by "The Airline Monitor."
SECTION 1.29 "Confidentiality Agreement" shall have the meaning set forth in
Section 5.3(a).
SECTION 1.30 "Consideration" shall mean an amount in cash equal to $657,050,000.
SECTION 1.31 "Covenant Period" shall have the meaning set forth in Section
5.10(a).
SECTION 1.32 "CPR" shall have the meaning set forth in Section 11.7.
SECTION 1.33 "Damages" shall mean all losses, amounts paid in settlement,
claims, damages, liabilities, judgments and reasonable out-of-pocket costs
(including costs of investigation and enforcement) and expenses (including,
without limitation, reasonable attorneys' fees and expenses); provided that
Damages shall not include (i) any consequential, special or punitive damages,
except in the case of fraud or to the extent actually awarded to a third party
by a court or Government entity in connection with a Third Party Claim or (ii)
any internal fees and expenses of the indemnified party (including, without
limitation, in-house counsel's fees and expenses).
SECTION 1.34 "Debt Tender Offer" shall have the meaning set forth in Section
5.14(a).
SECTION 1.35 "Department of Justice" shall have the meaning set forth in Section
5.5(a).
SECTION 1.36 "DGCL" shall mean the Delaware General Corporation Law.
SECTION 1.37 "Direct Claim" shall have the meaning set forth in Section 11.4(c).
SECTION 1.38 "Discontinued Operations" shall have the meaning set forth in
Section 1.54.
SECTION 1.39 "Dispute" shall have the meaning set forth in Section 11.7.
SECTION 1.40 "Draft Schedule 2.9" shall have the meaning set forth in Section
2.9(a).
SECTION 1.41 "Earn-Out" shall mean the payments required to be made by the Buyer
to the Parent pursuant to Section 2.8.
SECTION 1.42 "Effective Time" shall mean the close of business on the Closing
Date at which time the Closing and all transactions contemplated thereby shall
be deemed to have occurred simultaneously; provided, the Closing has actually
occurred.
SECTION 1.43 "Environmental Action" shall have the meaning set forth in Section
11.6(e)(i).
SECTION 1.44 "Environmental Contamination" shall have the meaning set forth in
Section 11.6(e)(ii).
SECTION 1.45 "Environmental Claim" shall have the meaning set forth in Section
3.24(g)(i).
SECTION 1.46 "Environmental Law" shall have the meaning set forth in Section
3.24(g)(ii).
SECTION 1.47 "Environmental Permits" shall have the meaning set forth in Section
3.24(a).
SECTION 1.48 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
SECTION 1.49 "ERISA Affiliate" shall have the meaning set forth in Section
3.13(a).
SECTION 1.50 "Escrow Agreement" shall mean the Escrow Agreement to be entered
into among the Buyer, the Parent and the Escrow Agent substantially in the form
of Exhibit C attached hereto.
SECTION 1.51 "Escrow Amount" shall have the meaning set forth in Section 2.4.
SECTION 1.52 "Estimated Transferred Fastener Subsidiary Debt" shall have the
meaning set forth in Section 2.3(b) and all agreements relating to such
Estimated Fastener Subsidiary Debt shall be set forth on Schedule 2.3(b).
SECTION 1.53 "Exchange Act" shall have the meaning set forth in Section 3.6(b).
SECTION 1.54 "Excluded Assets" shall mean (i) all cash and cash equivalents
(except for the Remaining Cash, if any); (ii) all contracts of insurance
insuring the Fastener Business, the Fastener Business Assets, the Assumed
Fastener Business Liabilities or the employees of the Fastener Business,
including, without limitation, the contracts of insurance listed on Schedule
3.23 (except with respect to insurance proceeds or rights to insurance coverage
under all insurance policies to the extent they relate to the Fastener Business,
the Fastener Business Assets, the Assumed Fastener Business Liabilities or the
Transferred Employees which are in effect prior to the Effective Time,
including, without limitation, the Fastener Business Product Liability Insurance
Policies); (iii) all rights to all refunds or credits of Taxes levied or imposed
upon, or in connection with, the Fastener Business Assets or the Fastener
Business with respect to any taxable period or portion thereof that ends on or
before the Effective Time, except to the extent that any such refunds or credits
are taken into account in preparing the Closing Date Balance Sheet; (iv) all
owned or leased real property and all the assets related thereto comprising the
discontinued operations and facilities of the Fastener Business that do not
manufacture goods for the Fastener Business or facilities that formerly
manufactured or held for use or resale goods for the Fastener Business or were
otherwise owned or held by the Fastener Business that have been abandoned,
closed, sold, transferred or otherwise disposed of by any of the Sellers or any
of their respective subsidiaries, including, without limitation, the facilities
set forth on Schedule 1.54 (the "Discontinued Operations") which Discontinued
Operations shall not be deemed to be part of the Fastener Business; (v) all
rights, claims and privileges of the Sellers and their respective subsidiaries
(including rights to recover under all insurance policies of any of the Sellers
to the extent they do not relate to the Fastener Business, the Fastener Business
Assets or the Assumed Fastener Business Liabilities or the employees of the
Fastener Business), except to the extent they relate to the Fastener Business,
the Fastener Business Assets, the Assumed Fastener Business Liabilities or the
Transferred Employees; (vi) Fairchild Aerostructures Company; (vii) the APS
division of Fairchild Holding; (viii) the Overdue Closing Receivables identified
in the Buyer Closing Receivables Notice; and (ix) those contracts, agreement,
leases and other assets listed on Schedule 1.54 or on Schedule 1.61(b).
SECTION 1.55 "Excluded Fastener Business Liabilities" shall mean all liabilities
of the Parent and its Affiliates relating to or arising out of the Fastener
Business or the Fastener Business Assets and any claims in respect thereof,
other than the Assumed Fastener Business Liabilities.
SECTION 1.56 "Fastener Business" shall have the meaning set forth in the first
preamble.
SECTION 1.57 "Fastener Business Acquisition Proposal" shall have the meaning set
forth in Section 5.11(a).
SECTION 1.58 "Fastener Business Assets" shall mean all of the property and
assets (other than the Excluded Assets) owned by or used primarily in the
Fastener Business whether or not reflected in the March Pro Forma Balance Sheet,
including, without limitation the Fastener Business Real Properties, the
Fastener Business Intellectual Property, the Fastener Business Intellectual
Property Licenses, the Fastener Business Inventory, the Remaining Cash, if any,
plants, machinery, equipment, tools, supplies, spare parts, furniture, fixtures,
leasehold improvements, motor vehicles, accounts and notes receivable and
prepaid expenses (and including all items which would be included on the March
Pro Forma Balance Sheet except for the fact that such items are fully
depreciated or expensed), plus all items of a nature customarily carried as
assets in the accounts of the Fastener Business which have been or will be
acquired in accordance with the terms of this Agreement between the date of the
March Pro Forma Balance Sheet and the Effective Time, less any items which have
been or will be disposed of or consumed in accordance with the terms of this
Agreement between the date of the March Pro Forma Balance Sheet and the
Effective Time, and the Fastener Business Assets shall also include:
(a) the Fastener Business Bank Accounts;
(b) the Fastener Business Books and Records;
(c) the Fastener Business Contracts;
(d) the Fastener Business Leases;
(e) the outstanding capital stock and membership interests, as the case may be,
of the Transferred Fastener Subsidiaries; and
(f) all rights, claims and privileges of the Sellers and their respective
subsidiaries to the extent they relate to the Fastener Business, the Fastener
Business Assets, the Assumed Fastener Business Liabilities or the Transferred
Employees (including rights to insurance coverage, insurance proceeds and rights
to recovery under all insurance policies to the extent they relate to the
Fastener Business, the Fastener Business Assets, the Assumed Fastener Business
Liabilities or the Transferred Employees which are in effect prior to the
Effective Time, including without limitation, rights to recovery under the
Fastener Business Product Liability Insurance).
SECTION 1.59 "Fastener Business Bank Accounts" shall mean all of the bank
accounts of the Sellers and their respective subsidiaries utilized for the
Fastener Business, including the bank accounts and lock boxes of Fairchild
Finance Ireland, all of which are listed on Schedule 1.59.
SECTION 1.60 "Fastener Business Books and Records" shall mean all of the books
and records of the Sellers and their respective subsidiaries primarily relating
to the operations of the Fastener Business, as well as copies of those books and
records of the Sellers and their respective subsidiaries that are necessary to
the operation of the Fastener Business, including, without limitation, all books
and records relating to the Fastener Business Employees, the purchase of
materials, supplies and services, financial, Tax, legal, environmental, software
licenses, operating keys for any proprietary software or source codes,
accounting and operations matters, product engineering, research and
development, manufacture and sale of products and dealings with vendors,
suppliers, Government entities, third parties and customers of the Fastener
Business. As used herein, books and records shall include but not be limited to
all computerized books and records and other computerized storage media and the
software used in connection therewith.
SECTION 1.61 "Fastener Business Contracts" shall mean all right, title and
interest of the Sellers or any of their respective subsidiaries to all
contracts, agreements and commitments of the Sellers and their respective
subsidiaries only to the extent any relate to the Fastener Business, including,
without limitation, the contracts, agreements and commitments listed on Schedule
1.61(a) and all contracts, agreements and commitments of each of the Sellers
relating to the Fastener Business which are entered into between the date of
this Agreement and the Effective Time and expressly permitted by this Agreement,
excluding, however, all contracts, agreements and commitments which (i) expire
in accordance with their terms prior to the Effective Time without extension or
renewal in the ordinary course of business or are terminated in the ordinary
course of the Fastener Business; (ii) are listed in Schedule 1.61(b); or (iii)
are Excluded Assets.
SECTION 1.62 "Fastener Business Employees" shall have the meaning set forth in
Section 6.1(a).
SECTION 1.63 "Fastener Business Financial Statements" shall mean (i) the
Fairchild Fasteners Fiscal 2001 -- Analysis of Fiscal 2001 Results -- As
Reported and Businesses Not Divested included as Schedule 1.63(a), (ii) the
Fairchild Fasteners Trailing 12 Months Ended December 30, 2001 -- As Reported
and Businesses Not Divested included as Schedule 1.63(b), (iii) the March Pro
Forma Balance Sheet -- As Reported and As Adjusted included as Schedule 1.90,
(iv) the Fairchild Fasteners Nine Months Ended March 2002 -- As Reported and
Businesses Not Divested included as Schedule 1.63(c), and (v) the Fairchild
Fastener Twelve Months Ended June 30, 2002 -- As Reported and Businesses Not
Divested included as Schedule 1.63(d).
SECTION 1.64 "Fastener Business Intellectual Property" shall mean all (a)
inventions (whether patentable or unpatentable and whether or not reduced to
practice), improvements thereto, and patents, patent applications, inventor's
certificates and patent disclosures, together with reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof; (b)
trademarks, service marks, brand names, certification marks, trade dress, logos,
trade names, assumed names, corporate names, Internet domain names and other
indications of origin, including, without limitation, translations, adaptations,
derivations, and combinations thereof; (c) original works of authorship,
copyrights and moral rights; (d) trade secrets and confidential business
information (including, without limitation, ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, discoveries, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals); (e) computer software, including, without
limitation, programs, applications, source and object codes, databases, data,
models, algorithms, tables and documentation related to the foregoing; (f)
rights in confidentiality and licensing agreements with regard to any of the
foregoing; (g) legal claims and defenses related to any of the foregoing; (h)
other similar intangible property or proprietary rights, information and
technology and copies and tangible embodiments thereof (in whatever form or
medium); (i) applications to register, registrations and renewals or extensions
of the foregoing; and (j) goodwill associated with each of the foregoing, in
each case that are used or held for use in the operation of the Fastener
Business including, without limitation, (x) all items listed on Schedules
3.12(a) and 3.12(b) referred to in Sections 3.12(a) and 3.12(b), and (y) all
such items which are acquired or developed for use in the business of the
Fastener Business between the date of this Agreement and the Effective Time,
excluding, however, all such items which prior to the Effective Time expire in
the ordinary course of the Fastener Business consistent with past practice or
are terminated in accordance with the terms of this Agreement, unless such items
are subject to extension or renewal in the ordinary course of the Fastener
Business consistent with past practice.
SECTION 1.65 "Fastener Business Intellectual Property Licenses" shall have the
meaning set forth in Section 3.12(b).
SECTION 1.66 "Fastener Business Inventory" shall mean all inventories owned by
the Sellers or their respective subsidiaries primarily relating to the Fastener
Business or the Fastener Business Assets, wherever located, including all
packaging, finished goods, raw materials, supplies, work in process, spare parts
and other miscellaneous items of tangible property normally considered part of
"inventory" under GAAP, consistently applied, which inventories shall be
included on the March Pro Forma Balance Sheet along with such other inventories
which are manufactured, produced, purchased or otherwise acquired by the Sellers
in connection with the Fastener Business between the date hereof and the
Effective Time.
SECTION 1.67 "Fastener Business Leases" shall mean all leases of the Sellers and
their respective subsidiaries primarily relating to the Fastener Business
(whether entered into as lessor or lessee), including, without limitation, (a)
the leases listed on Schedule 1.67 which list shall also contain the names of
the landlord and tenant entities pursuant to each Fastener Business Lease, and
(b) all leases of the Sellers and their respective subsidiaries relating to the
Fastener Business that are entered into between the date of this Agreement and
the Effective Time and expressly permitted by this Agreement, excluding,
however, all leases which (i) will expire in accordance with their terms prior
to the Effective Time, (ii) are set forth on Schedule 1.54 or (iii) are Excluded
Assets.
SECTION 1.68 "Fastener Business Product Liability Insurance" shall have the
meaning set forth in Section 5.19.
SECTION 1.69 "Fastener Business Real Properties" shall mean all of the real
properties owned by the Sellers or their respective subsidiaries which are
listed on Schedule 3.9, which list shall also contain the name of the entity
which owns record title to each such Fastener Business Real Properties
excluding, however, all owned and leased real property set forth on Schedule
1.54.
SECTION 1.70 "Fastener Environmental Condition" shall have the meaning set forth
in Section 11.6(e)(iii).
SECTION 1.71 "Fastener Environmental Liability" shall have the meaning set forth
in Section 11.6(e)(iv).
SECTION 1.72 "Final Allocation" shall have the meaning set forth in Section
2.9(a).
SECTION 1.73 "FTC" shall have the meaning set forth in Section 5.5(a).
SECTION 1.74 "Fullerton Property"shall have the meaning set forth in Section
5.27.
SECTION 1.75 "GAAP" shall mean United States generally accepted accounting
principles.
SECTION 1.76 "Government" shall mean any agency, division, subdivision, audit
group or procuring office of the government of the United States, any state or
territory thereof, or any city, county or municipality thereof or any foreign
government, including the employees or agents thereof.
SECTION 1.77 "Greenslet Report" shall mean the report published by Edmund
Greenslet in The Airline Monitor which sets forth the number of deliveries of
Commercial Aircraft by manufacturers of such Commercial Aircraft, or such
successor publication or report which is commonly accepted as being comparable
thereto.
SECTION 1.78 "Hazardous Materials" shall have the meaning set forth in Section
3.24(g)(iii). SECTION 1.79 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder.
SECTION 1.80 "Indemnifiable Losses" shall have the meaning set forth in Section
11.1(b).
SECTION 1.81 "Indemnifying Party" shall have the meaning set forth in Section
11.1(b).
SECTION 1.82 "Indemnitee" shall have the meaning set forth in Section 11.1(b).
SECTION 1.83 "Indemnity Payment" shall have the meaning set forth in Section
11.1(b).
SECTION 1.84 "Independent Accountants" shall mean an impartial internationally
recognized independent certified public accounting firm.
SECTION 1.85 "Intercompany Accounts" shall mean all amounts, regardless of their
nature, that are (a) owed by any of the Transferred Fastener Subsidiaries or the
Fastener Business to the Sellers or any subsidiaries of the Sellers, other than
a Transferred Fastener Subsidiary, or (b) owed by the Sellers or any
subsidiaries of the Sellers, other than the Transferred Fastener Subsidiaries,
to any of the Transferred Fastener Subsidiaries or the Fastener Business.
SECTION 1.86 "IRS" shall have the meaning set forth in Section 3.22(c).
SECTION 1.87 "best knowledge of the Sellers" shall mean the actual knowledge of
any of Jeffrey Steiner, Eric Steiner, Donald Miller, John Flynn, Eugene Juris,
Olivier Jarrault, Michael Hodge, Roger Peterson, Edward Johnson, Martin Ryan,
Daniel Weber, Craig Brown, Bruce Finkenhagen, Gregory Harwell, Claude Lurati,
Ernest Marhenke and Fran Lampman, in all cases, after due inquiry.
SECTION 1.88 "Law" shall have the meaning set forth in Section 3.5.
SECTION 1.89 "Licenses and Permits" shall mean the permits, authorizations and
licenses issued by any Government in connection with the Fastener Business.
SECTION 1.90 "Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or other), conditional sale agreement, option or
right of refusal, first offer, termination, participation or purchase.
SECTION 1.91 "March Pro Forma Balance Sheet" shall mean the pro forma balance
sheet of the Fastener Business as of March 31, 2002 included as Schedule 1.91.
SECTION 1.92 "Material Adverse Effect" shall mean any event, change or effect
having a material adverse effect on the condition (financial or otherwise),
business, results of operations, properties, assets or liabilities of the
Fastener Business, taken as a whole, except for such events, changes or effects
resulting from (a) conditions affecting the United States economy or the world
economy or financial or capital markets generally, (b) conditions affecting the
industry of the Fastener Business generally, except to the extent that such
conditions affect the Fastener Business in a disproportionate manner, (c) the
announcement or pendency of this Agreement, the Voting Agreement or the
transactions contemplated hereby or thereby, or (d) changes in GAAP attributable
to new accounting pronouncements issued by the Financial Accounting Standards
Board, the Emerging Issues Task Force or the SEC.
SECTION 1.93 "Net Working Capital" shall mean (i) the amount of "current assets"
which shall include only "accounts receivable" plus "inventory, net" plus "other
current assets" minus (ii) the amount of "current liabilities" which shall
include only "accounts payable" plus "accrued expenses," in each case as such
amounts are reflected on the Closing Date Balance Sheet. The items to be
included in "other current assets" are set forth on Schedule 1.93(a). The items
to be included in "accounts payable" are set forth on Schedule 1.93(b). The
items to be included in "accrued expenses" are set forth on Schedule 1.93(c).
For avoidance of doubt, the calculation of "Net Working Capital" shall not
include either the line item entitled "Allowance for Doubtful Accounts" or any
amounts associated with such reserve.
SECTION 1.94 "Newco California" shall mean CST LLC, a limited liability company
existing under the laws of California.
SECTION 1.95 "Noncompetition Agreement" shall have the meaning set forth in
Section 5.10(a).
SECTION 1.96 "Noncompetition and Consulting Agreement" shall have the meaning
set forth in the fifth preamble.
SECTION 1.97 "Non-Conveyed Contracts" shall have the meaning set forth in
Section 5.5(c).
SECTION 1.98 "Overdue Closing Receivables" shall have the meaning set forth in
Section 2.10.
SECTION 1.99 "Parent" shall have the meaning ascribed thereto in the
Introduction.
SECTION 1.100 "Parent Affiliates" shall have the meaning set forth in Section
3.28.
SECTION 1.101 "Parent Common Stock" shall have the meaning set forth in Section
3.19.
SECTION 1.102 "Parent DB Plans" shall have the meaning set forth in Section
6.2(h).
SECTION 1.103 "Parent DC Plans" shall have the meaning set forth in Section
6.2(g).
SECTION 1.104 "Parent Pension Plans" shall have the meaning set forth in Section
6.2(b).
SECTION 1.105 "Parent SEC Filings" shall have the meaning set forth in Section
3.6(b).
SECTION 1.106 "Permitted Exceptions" shall mean (i) those exceptions to title to
the Fastener Business Assets listed on Schedule 3.9 referred to in Section 3.9;
(ii) secured debt on the March Pro Forma Balance Sheet or which are Liens
securing all or a portion of the purchase price of a Fastener Business Asset
which arose in connection with the purchase of such Fastener Business Asset
after the date of the March Pro Forma Balance Sheet and which purchase price
remains owing; (iii) statutory Liens for Taxes not yet due or delinquent or the
validity of which is being contested in good faith by appropriate proceedings;
(iv) carriers', warehousemen's, mechanics' and materialmen's and other similar
Liens arising in the ordinary course of the Fastener Business consistent with
past practice for sums not yet due and payable or delinquent or the validity of
which is being contested in good faith by appropriate proceedings; (v) all
exceptions, restrictions, easements, rights of way and encumbrances set forth in
the title insurance policies listed on Schedule 3.23 referred to in Section
3.23; and (vi) other Liens that are not material in amount or do not materially
detract from the value of or materially impair the use of the property affected
by such Lien for the Fastener Business.
SECTION 1.107 "Person" shall mean any individual, corporation, limited liability
company, partnership, joint venture, association, joint stock company, trust,
unincorporated organization or Government.
SECTION 1.108 "Fairchild Holding" shall have the meaning ascribed thereto in the
Introduction.
SECTION 1.109 "Plans" shall have the meaning set forth in Section 3.13(a).
SECTION 1.110 "Pre-Closing Off-Site Disposal Locations" shall mean any location,
other than the Fastener Business Real Properties or property leased pursuant to
the Fastener Business Leases, to where the Parent, the Sellers or any of their
respective Affiliates, or the Fastener Business, transported or arranged for the
transport of Hazardous Materials prior to the Closing Date, for any purpose
other than the sale of products manufactured by any of such Persons. Without
limiting the foregoing, the term Pre-Closing Off-Site Disposal Locations also
includes, to the extent that the involvement of the Fastener Business relates to
the Release of Hazardous Materials at or from Fastener Business Real Properties
or property leased pursuant to the Fastener Business Leases, or the San Gabriel
Valley Superfund Site.
SECTION 1.111 "Preliminary Closing Date Balance Sheet" shall mean the pro forma
consolidated balance sheet for the Fastener Business as of the Effective Time
prepared in accordance with Section 2.7.
SECTION 1.112 "Product Claim" shall have the meaning set forth in Section
11.2(b).
SECTION 1.113 "Proxy Statement" shall mean the proxy statement relating to the
Special Shareholders Meeting.
SECTION 1.114 "Receivables" shall have the meaning set forth in Section 5.20.
SECTION 1.115 "Receivables Certificate" shall have the meaning set forth in
Section 5.20.
SECTION 1.116 "Release" shall have the meaning set forth in Section 11.6(e)(v).
SECTION 1.117 "Remedial Action" shall have the meaning set forth in Section
11.6(e)(vi).
SECTION 1.118 "Remediation Standards" shall have the meaning set forth in
Section 11.6(e)(vii).
SECTION 1.119 "Representative" shall have the meaning set forth in Section
11.6(c).
SECTION 1.120 "Remaining Cash" shall have the meaning set forth in Section
2.7(a)(iv).
SECTION 1.121 "Rules" shall have the meaning set forth in Section 11.7.
SECTION 1.122 "SDI" shall have the meaning ascribed thereto in the Introduction.
SECTION 1.123 "SEC" shall mean the United States Securities and Exchange
Commission.
SECTION 1.124 "Securities Act" shall have the meaning set forth in Section
3.6(b).
SECTION 1.125 "Sellers" shall mean the Parent, Fairchild Holding, SDI and each
of the subsidiaries of the Parent listed on Schedule 1.125, collectively.
SECTION 1.126 "Shareholder Approval" shall have the meaning set forth in Section
3.19.
SECTION 1.127 "Special Shareholders Meeting" shall have the meaning set forth in
Section 5.12.
SECTION 1.128 "Stockholder" shall have the meaning set forth in the fourth
preamble.
SECTION 1.129 "Straddle Period" shall have the meaning set forth in Section
8.1(b).
SECTION 1.130 "subsidiary" shall mean, with respect to any Person, another
Person under the control of such Person (where "control" means the direct or
indirect possession of the power to elect at least a majority of the board of
directors or other governing body or appoint the managing member of a Person
through the ownership of voting securities, ownership, membership or partnership
interests, by contract or otherwise, or if no such governing body or managing
member exists, the direct or indirect ownership of 50% or more of the equity
interests of a Person).
SECTION 1.131 "Taxes" shall mean all taxes, however denominated, including any
interest, penalties or additions to tax (including under Chapter 68 of the Code)
that may become payable in respect thereof, imposed by any Government, which
taxes shall include, without limitation, all income taxes, payroll and employee
withholding taxes, unemployment, insurance, social security, sales and use
taxes, excise taxes, franchise taxes, gross receipt taxes, occupation taxes,
real and personal property taxes, stamp taxes, transfer taxes, workmen's
compensation taxes and other obligations of the same or a similar nature,
whether arising before, on or after the Effective Time; and "Tax" shall mean any
one of the foregoing.
SECTION 1.132 "Tax Benefit" shall mean the Tax savings attributable to any
deduction, expense, loss, credit or refund to the indemnified party or its
affiliates, when incurred or received; provided, however, that if such benefit
is reasonably expected to arise or be utilized after the year in which
indemnification occurs pursuant to this Agreement, then it means the present
value of such Tax savings (discounted using one year LIBOR (as published in The
Wall Street Journal) and a Tax rate equal to the sum of the highest marginal
U.S. federal corporate income Tax rate or rates applicable to ordinary income or
capital gain, as the case may be, in effect for the taxable period in issue plus
five percent (or, in the case of a Transferred Fastener Subsidiary, the highest
marginal corporate income Tax rate or rates in the country of organization of
such Transferred Fastener Subsidiary applicable to ordinary income or capital
gain, as the case may be, in effect for the taxable period in issue)).
SECTION 1.133 "Tax Indemnitee" shall have the meaning set forth in Section
8.8(a).
SECTION 1.134 "Tax Indemnitor" shall have the meaning set forth in Section
8.8(a).
SECTION 1.135 "Tax Returns" shall mean all returns, reports, schedules and other
information filed or required to be filed with any taxing authority with respect
to Taxes.
SECTION 1.136 "10 3/4% Indenture" shall have the meaning set forth in
Section 5.14(a).
SECTION 1.137 "Third Party Claim" shall have the meaning set forth in Section
11.1(b).
SECTION 1.138 "Title IV Plans" shall have the meaning set forth in Section
3.13(c).
SECTION 1.139 "Transferred Employees" shall have the meaning set forth in
Section 6.1(a).
SECTION 1.140 "Transferred Fastener Subsidiaries" shall mean those subsidiaries
of the Parent (including Newco California) the capital stock or membership
interests, as the case may be, of which are being transferred directly or
indirectly by the Sellers to the Buyer, each of which is listed on Schedule
1.140.
SECTION 1.141 "Transferred U.S. Employees" shall have the meaning set forth in
Section 6.2(e).
SECTION 1.142 "Undertaking and Indemnity Agreement" shall have the meaning set
forth in Section 2.5(i).
SECTION 1.143 "Voting Agreement" shall have the meaning set forth in the fourth
preamble.
SECTION 1.144 "WARN" shall mean the Worker Adjustment and Retraining
Notification Act.
SECTION 1.145 "WARN Obligations" shall have the meaning set forth in Section
6.2(f).
ARTICLE II
THE CLOSING
SECTION 2.1 Time and Place of Closing. Subject to the terms and conditions
of this Article II, the Closing will take place at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, Four Times Square, New York, New York, at 9:30 A.M.
(local time) on the Closing Date or at such other place or time or both as the
parties may agree.
SECTION 2.2 Purchase and Sale of the Fastener Business Assets. Subject to
the terms and conditions of this Agreement (including, without limitation,
Section 10.7) (or, with respect to any condition not satisfied, the waiver
thereof by the party for whose benefit the condition exists) at the Closing, the
Sellers will sell, convey, assign, transfer and deliver, or cause to be sold,
conveyed, assigned, transferred and delivered to the Buyer or one of its wholly
owned subsidiaries, all of their direct and indirect right, title and interest
at the Effective Time in and to the Fastener Business Assets (other than the
Fastener Business Assets owned or held by the Transferred Fastener
Subsidiaries), in all cases free and clear of all Liens (other than Permitted
Exceptions), and the outstanding capital stock and membership interests, as the
case may be, of each of the Transferred Fastener Subsidiaries, and the Buyer
will, directly or indirectly, purchase, acquire, accept and pay for, as
hereinafter provided, the Fastener Business Assets, free and clear of all Liens
(other than Permitted Exceptions), and the outstanding capital stock and
membership interests, as the case may be, of each of the Transferred Fastener
Subsidiaries and will assume the Assumed Fastener Business Liabilities.
Notwithstanding anything to the contrary contained herein, neither the Buyer nor
any of its Affiliates shall purchase, assume or be bound by, or be obligated or
responsible for, any Excluded Fastener Business Liabilities or Excluded Assets.
SECTION 2.3 Consideration Payable for the Fastener Business Assets and the
Stock and Membership Interests of the Transferred Fastener Subsidiaries.
(a) The Buyer shall: (i) pay to the Parent an amount in cash equal to the
Consideration minus the amount of the Actual Transferred Fastener Subsidiary
Debt assumed by the Buyer pursuant to Sections 2.3(b) and 2.7(a)(iii), if any,
minus the amount of the Overdue Closing Receivables identified in the Buyer
Closing Receivables Notice pursuant to Section 2.10 plus the payments made
pursuant to the Earn-Out, plus the Remaining Cash, if any, for (A) the Fastener
Business Assets (other than the Fastener Business Assets owned or held by the
Transferred Fastener Subsidiaries) and (B) the capital stock and membership
interests, as the case may be, of the Transferred Fastener Subsidiaries and (ii)
assume the Assumed Fastener Business Liabilities attributable to the Fastener
Business Assets.
(b) At least five business days prior to the Closing Date, the Parent shall
notify the Buyer in writing whether it intends for the Buyer to assume the
outstanding debt as of the Closing Date of the Transferred Fastener Subsidiaries
incorporated in jurisdictions located outside of the United States as set forth
on Schedule 2.3(b) (the "Estimated Transferred Fastener Subsidiary Debt"). The
Parent's written notification shall include a good faith estimate of the amount
of the Estimated Transferred Fastener Subsidiary Debt to be reflected on the
Fastener Business Books and Records as of the Closing Date. In the event the
Parent notifies the Buyer that it intends for the Buyer to assume the Estimated
Transferred Fastener Subsidiary Debt, at the Closing the Buyer shall deliver to
the Parent an amount in cash equal to the Consideration calculated in accordance
with Section 2.3(a).
SECTION 2.4 Escrow Fund. On or prior to the Effective Time, the Buyer and
the Parent shall enter into the Escrow Agreement. At the Closing, the Buyer
shall deposit with the Escrow Agent, as defined in the Escrow Agreement,
$25,000,000 of the Consideration (the "Escrow Amount"). The Escrow Agent shall
hold, invest, reinvest and disburse the Escrow Fund in accordance with the terms
of the Escrow Agreement.
SECTION 2.5 Deliveries by the Sellers. At the Closing, the Parent,
Fairchild Holding or SDI shall deliver, or cause the subsidiaries of the Parent
set forth on Schedule 1.125 to deliver, the following to the Buyer:
(a) Stock certificates representing all of the shares of capital stock and
membership interests representing all of the membership interests, as the case
may be, of each of the Transferred Fastener Subsidiaries, in each case
accompanied by stock powers duly executed in blank or duly executed instruments
of transfer;
(b) Special warranty deeds, in recordable form, with respect to the Fastener
Business Real Properties owned by the Sellers or any of their respective
subsidiaries (other than the Transferred Fastener Subsidiaries);
(c) Duly executed Bill of Sale together with such other appropriate instruments
of transfer as the Buyer may reasonably request, transferring to the Buyer all
of the personal and intangible property owned or held by the Sellers as of the
Effective Time which is included in the Fastener Business Assets (other than the
Fastener Business Assets owned or held by the Transferred Fastener
Subsidiaries).
(d) Duly executed instruments of assignment of the Fastener Business Leases to
which certain of the Sellers or their respective subsidiaries (other than the
Transferred Fastener Subsidiaries) are a party, in recordable form, if and to
the extent necessary, with respect to those relating to real property or
interests therein;
(e) Duly executed instruments of assignment of the Fastener Business Contracts
to which the Sellers or any of their respective subsidiaries (other than the
Transferred Fastener Subsidiaries) are a party;
(f) (i) Duly executed general instruments of assignment or transfer of the
Fastener Business Intellectual Property to the Buyer from any of the Sellers or
any of their respective subsidiaries (other than the Transferred Fastener
Subsidiaries), (ii) with respect to the Fastener Business Intellectual Property
registered or applied for with offices in the United States, instruments of
assignment or transfer to Buyer from any of the Sellers or any of their
respective subsidiaries in form suitable for recording in such offices (it being
understood that Sellers will use their best efforts to deliver to the Buyer all
other instruments of assignment or transfer promptly after Closing, including,
without limitation, instruments of assignment or transfer for the Fastener
Business Intellectual Property registered or applied for with offices outside
the United States in form suitable for recording in the appropriate offices and
bureaus outside of the United States), (iii) the original certificates, if
available, of such Fastener Business Intellectual Property, (iv) any powers of
attorney, in each case as necessary to make the conveyances contemplated herein
effective in the United States (it being understood that the Sellers will use
their best efforts to deliver to the Buyer all other powers of attorney after
the Closing, including, without limitation, powers of attorney as necessary to
make conveyance contemplated herein effective outside the United States), and
(v) any other documents reasonably requested by the Buyer to protect the Buyer's
right, title and interest in and to the Fastener Business Intellectual Property,
including, without limitation, to cure any defect in the chain-of-title of the
Fastener Business Intellectual Property;
(g) Duly executed instruments of assignment of the Fastener Business Bank
Accounts of any of the Sellers or any of their respective subsidiaries (other
than the Transferred Fastener Subsidiaries);
(h) Copies of any consents obtained as contemplated by Section 5.5(a)(i) or set
forth on Schedule 7.3(d) and obtained as contemplated by Section 7.3(d);
(i) The Undertaking and Indemnity Agreement substantially in the form of Exhibit
B attached hereto (the "Undertaking and Indemnity Agreement") duly executed by
Parent, Fairchild Holding and SDI;
(j) The Escrow Agreement duly executed by the Parent;
(k) Duly executed lease agreement between the Buyer and the Parent with respect
to the Fullerton Property as contemplated by Section 5.27;
(l) Such other and further instruments of conveyance, assignment and transfer as
the Buyer may reasonably request for the more effective conveyance and transfer
of any of the Fastener Business Assets and the outstanding capital stock or
membership interests, as the case may be, of each of the Transferred Fastener
Subsidiaries; and
(m) The certificates contemplated by Sections 7.3 and 7.4.
SECTION 2.6 Delivery by the Buyer. At the Closing,
---------------------
(a) the Buyer shall deliver, or cause to be delivered, the following to the
Parent:
(i) An amount in cash equal to the Consideration minus the Escrow Amount
minus the Estimated Transferred Fastener Subsidiary Debt pursuant to
the Parent's written notification delivered to the Buyer in accordance
with Section 2.3(b), if any, and minus the amount of the Overdue
Closing Receivables identified in the Buyer Closing Receivables Notice
pursuant to Section 2.10, if any, by wire transfer of immediately
available funds to a bank account designated in writing by the Parent
at least two business days prior to the Closing Date in any bank in the
continental United States or by such other means as are agreed to in
writing by the Buyer and the Parent;
(ii) Copies of any consents obtained as contemplated by Sections 5.5(a)(i);
(iii) The Undertaking and Indemnity Agreement duly executed by the Buyer;
(iv) The Escrow Agreement duly executed by the Buyer;
(v) Duly executed lease agreement between the Buyer and the Parent with
respect to the Fullerton Property as contemplated by Section 5.27; and
(vi) The certificates contemplated by Sections 7.2 and 7.4.
(b) the Buyer shall deliver to the Escrow Agent the Escrow Amount pursuant
to the terms of the Escrow Agreement.
SECTION 2.7 Post-Closing Adjustments.
(a) Within 60 days following the Effective Time, the Buyer shall at its
expense prepare or cause to be prepared and delivered to the Parent the
Preliminary Closing Date Balance Sheet and the calculation of Net
Working Capital. The Preliminary Closing Date Balance Sheet (1) will
present fairly the consolidated financial position of the Fastener
Business as of the Closing Date, (2) will be in conformity with GAAP,
and (3) will be prepared in a manner consistent with and using the same
principles and line items as those set forth on the March Pro Forma
Balance Sheet -- As Adjusted, including those principles set forth on
Schedule 2.7(a), and no categories of assets or liabilities shall be
included on or excluded from the Preliminary Closing Date Balance Sheet
that were not included on or excluded from the March Pro Forma Balance
Sheet -- As Adjusted except as provided in Sections 2.7(a)(iii), (iv),
(v), (vi), (vii), (viii) and (ix) and Schedules 1.93(a), (b) and (c);
provided, however, that the following additional principles shall in
any event govern the preparation of the Preliminary Closing Date
Balance Sheet:
(i) All intradivisional account balances, including receivables and
payables, among the Fastener Businesses shall be in balance (i.e., net
to zero when consolidated within the Fastener Business) and all
Intercompany Accounts payable or receivable shall be settled prior to
the Closing Date and no such amounts shall be reflected on the
Preliminary Closing Date Balance Sheet.
(ii) All inventory shall be valued in a manner consistent with the
principles set forth on Schedule 2.7(a). On, or immediately following
the Closing Date, the Buyer shall have the right to have physical
inventories conducted and observed by its representatives and
representatives of the Sellers as well as audit testing of physical
inventory cycle counts at the Buyer's expense. The results of this
activity will be reflected on the Preliminary Closing Date Balance
Sheet.
(iii) In the event the Parent notifies the Buyer that it intends for the
Buyer to assume the Estimated Transferred Fastener Subsidiary Debt
pursuant to Section 2.3(b), there shall be included on the Preliminary
Closing Date Balance Sheet an amount equal to the actual amount of the
debt of the Transferred Fastener Subsidiaries as of the Closing Date,
plus the amount of all costs associated with the Buyer assuming the
debt of the Transferred Fastener Subsidiaries, including, without
limitation, interest rate step ups, make whole payments, prepayment
penalties and any other payment required to be made upon a "change of
control" (the "Actual Transferred Subsidiary Debt"). None of the
Actual Transferred Subsidiary Debt shall be recorded on the Preliminary
Closing Date Balance Sheet as a "Current Liability" or otherwise
included in the calculation of Net Working Capital.
(iv) There shall be no cash or cash equivalents recorded on the Preliminary
Closing Date Balance Sheet in respect of the United States Fastener
Business. In the event there is any cash or cash equivalents on the
Fastener Business Books and Records that has not been distributed as
of the Closing Date out of the Transferred Fastener Subsidiaries
organized in jurisdictions outside of the United States there shall be
recorded on the Closing Date Balance Sheet under "Current Assets" the
amount of such cash and cash equivalents (the "Remaining Cash");
provided, however, the amount of such cash and cash equivalents shall
not be included in the calculation of Net Working Capital.
(v) The dollar amount of the Overdue Closing Receivables retained by the
Sellers at the Closing pursuant to the Buyer Closing Receivables Notice
shall be recorded as a separate line item to be part of "current
assets" on the Preliminary Closing Date Balance Sheet solely for
purposes of ensuring that the Parent does not pay twice for the Overdue
Closing Receivables and not for purposes of including such Overdue
Closing Receivables in the Fastener Business Assets or Assumed Fastener
Business Liabilities. In addition, there shall be no "Allowance for
Doubtful Accounts" reserve recorded on the Preliminary Closing Date
Balance Sheet.
(vi) The amount of the reserve for environmental, health, safety and
litigation on the Preliminary Closing Date Balance Sheet shall be equal
to $8,450,000 but shall not be included in the calculation of Net
Working Capital.
(vii) The Multivision Investment, the Other Asset - Purchase
Accounting/Restructuring Account and the Other Asset - Cash Clearing
Account at Aichach, in each case as set forth on Schedule 1.54, shall
not be included on the Preliminary Closing Date Balance Sheet.
(viii) "Other Liabilities" recorded on the Preliminary Closing Date Balance
Sheet shall include only long-term liabilities recorded on the Fastener
Business Books and Records of the Transferred Fastener Subsidiaries
incorporated outside of the United States as shown on Schedule
2.7(a)(viii).
(ix) There shall be no amount recorded on the Preliminary Closing Date
Balance Sheet for any Excluded Fastener Business Liabilities.
(b) Upon receipt of the Preliminary Closing Date Balance Sheet, the Parent
and the Parent's independent public accountants shall have the right
during the succeeding 45-day period to review, at the Parent's expense,
the Preliminary Closing Date Balance Sheet and to examine and review
all records and work papers and other supporting documents used to
prepare such Preliminary Closing Date Balance Sheet. The Parent shall
notify the Buyer, in writing (including, but not limited to, by fax or
e-mail), on or before the last day of the 45-day period, of any
objections to the Preliminary Closing Date Balance Sheet, setting forth
a reasonably specific description of the Parent's objections and the
dollar amount of each objection. If the Parent does not deliver such
notice within such 45-day period, the Preliminary Closing Date Balance
Sheet shall be deemed to have been accepted by the Parent.
(c) If the Parent objects to the Preliminary Closing Date Balance Sheet,
the Buyer and the Parent shall attempt to resolve any such objections
by applying the principles set forth in Section 2.7(a) within 20
business days following the Buyer's receipt of the Parent's objections.
If the Buyer and the Parent are unable to resolve the matter within
such 20 business day period, they shall jointly appoint Independent
Accountants mutually acceptable to the Parent and the Buyer (or, if
they cannot agree on a mutually acceptable firm, they shall cause their
respective accounting firms to select such firm) within two business
days following the end of such 20 business day period to resolve all
disputed matters. The Buyer and the Parent shall provide to the
Independent Accountants full cooperation. The Independent Accountants
shall be instructed to reach their conclusion regarding the dispute
within 20 business days. The conclusion reached by the Independent
Accountants shall be conclusive and binding on the Parent and the
Buyer. All fees payable to the Independent Accountants in connection
with the resolution of any objections raised to the Preliminary Closing
Date Balance Sheet shall be divided equally between the Parent and the
Buyer.
(d) If the amount of Net Working Capital is less than $212,301,000, the
amount of the Consideration shall be reduced by the amount of such
deficit. Any adjustments in the Consideration pursuant to this Section
2.7(d) shall be paid by the Parent to the Buyer by wire transfer of
immediately available funds to a bank account designated by the Buyer.
Any payment required to be paid pursuant to this Section 2.7(d) shall
be made within five business days after the Closing Date Balance Sheet
becomes final and binding on the parties.
(e) If the amount of Net Working Capital exceeds $216,301,000, the amount
of the Consideration shall be increased by such excess. Any adjustments
in the Consideration pursuant to this Section 2.7(e) shall be paid by
the Buyer to the Parent by wire transfer of immediately available funds
to a bank account designated by the Sellers. Any payment required to be
paid pursuant to this Section 2.7(e) shall be made within five business
days after the Closing Date Balance Sheet becomes final and binding on
the parties.
(f) If the amount of Net Working Capital is between $212,301,000 and
$216,301,000 there shall be no adjustment to the Consideration pursuant
to this Section 2.7.
(g) In addition to the adjustment to Net Working Capital provided in
Sections 2.7(d) and (e), the Buyer shall pay to the Parent as
additional Consideration the amount of the Remaining Cash, if any,
reflected on the Closing Date Balance Sheet.
(h) If the amount of the Estimated Transferred Subsidiary Debt is less than
the amount of the Actual Transferred Subsidiary Debt then the Parent
shall remit to the Buyer the difference between such amounts. If the
amount of the Estimated Transferred Subsidiary Debt is greater than the
amount of the Actual Transferred Subsidiary Debt then the Buyer shall
remit to the Parent the difference between such amounts.
(i) Unless otherwise required by Law, the parties shall treat any
adjustment made pursuant to Sections 2.7(d), 2.7(e), 2.7(g) and 2.7(h)
as an adjustment to the Consideration for federal, state and local
income Tax purposes.
SECTION 2.8 Earn-Out.
(a) Beginning with calendar year 2003, the Parent shall be entitled to receive
from the Buyer additional cash payments for Commercial Aircraft actually
delivered by Boeing and Airbus in calendar years 2003, 2004, 2005 and 2006 in
excess of the Threshold Level set forth below in Section 2.8(b). Should the
Greenslet Report cease publishing its Airline Monitor Report, the parties will
use their best efforts to mutually agree on another third party reporting
service to verify deliveries made by Boeing and Airbus each year. If the parties
cannot agree, the Buyer and the Parent will have the joint right to seek
verification directly from Boeing and Airbus of their deliveries of Commercial
Aircraft for the prior year.
(b) For purposes of this Section 2.8, the Threshold Level for each calendar year
is set forth in the chart below:
- -------------------------------------------------
Calendar Year Threshold Level
- -------------------------------------------------
2003 505
- -------------------------------------------------
2004 515
- -------------------------------------------------
2005 570
- -------------------------------------------------
2006 650
- -------------------------------------------------
(c) To the extent that the aggregate number of Commercial Aircraft actually
delivered by Boeing and Airbus in each calendar year as reported in the
Greenslet Report during the four year Earn-Out period exceeds the Threshold
Level for such calendar year, the Buyer shall pay $400,000 to the Parent for
each Commercial Aircraft actually delivered by Boeing and Airbus in such
calendar year in excess of the Threshold Level for such calendar year; provided,
however, in respect of each calendar year the Buyer shall only be obligated to
pay a maximum amount of $12,500,000 regardless of the number of Commercial
Aircraft actually delivered in any calendar year or during the four year
Earn-Out period; provided, further, however, that all or a portion of any amount
to be paid by the Buyer to the Parent pursuant to the terms of this Section
2.8(c) shall be deposited in escrow if required pursuant to the terms of the
Escrow Agreement. In the event the number of Commercial Aircraft delivered in
any calendar year included in the Earn-Out period exceeds the Threshold Level
such excess number may not be carried over or back to any calendar year included
in the Earn-Out period in which the applicable Threshold Level is not met. Any
Earn-Out payment required to be made by the Buyer to the Parent shall be made by
wire transfer to an account designated by the Parent within ten business days
after publication of the first Greenslet Report containing actual deliveries of
Boeing and Airbus Commercial Aircraft for the prior calendar year except to the
extent all or a portion of such Earn-Out payment is deposited in escrow as
required pursuant to the terms of the Escrow Agreement. For avoidance of doubt,
a hypothetical calculation of the Earn-Out is set forth on Schedule 2.8 together
with a copy of the Greenslet Report (Table 3) published for January/February
2002.
(d) If Boeing or Airbus acquire, merge or combine with any other producer of
Commercial Aircraft, the total amount of Commercial Aircraft that shall be
calculated as having been delivered by Boeing and Airbus for purposes of this
Section 2.8 shall not include the make/model numbers of Commercial Aircraft of
any producer of Commercial Aircraft acquired, merged or combined with Boeing or
Airbus following the date of this Agreement; provided, however, that each of
Boeing and Airbus may acquire production facilities or transfer production to
production facilities owned by Boeing or Airbus, as the case may be, to
manufacture Boeing or Airbus Commercial Aircraft, and any Commercial Aircraft
manufactured at such facilities will count for purposes of this Section 2.8.
SECTION 2.9 Allocation of Consideration.
(a) Within the 160 day period following the Closing, the Buyer shall deliver to
the Parent a draft Schedule 2.9 (the "Draft Schedule 2.9") for the Parent's
review and approval which shall not be unreasonably withheld. The Draft Schedule
2.9 shall allocate the Consideration among the Fastener Business Assets in
accordance with Section 1060 of the Code and Treasury Regulations promulgated
thereunder (the "Allocation"). Within the 10 day period following receipt of the
Draft Schedule 2.9, the Parent shall notify the Buyer in writing of its approval
or of any objections that it may have. If the Parent approves the Draft Schedule
2.9, such schedule shall become the final Schedule 2.9 (the "Final Allocation").
If the Parent objects to the Draft Schedule 2.9, the Buyer and the Parent shall
use their good faith efforts to resolve the matter within the 10 day period
following receipt by the Buyer of the Parent's objection to the Draft Schedule
2.9. If the Buyer and the Parent are unable to resolve the matter within such
period each party shall use their own allocation and there shall be no Final
Allocation.
(b) If the parties agree on a Final Allocation: (i) the Buyer and the Parent
shall each report the transactions contemplated under this Agreement and any
related agreements for all Tax purposes consistent with the Final Allocation;
(ii) the Buyer and the Parent shall (A) file Form 8594 in accordance with the
requirements (including permitted extensions) of Section 1060 of the Code (or
state or local Tax law, as the case may be), (B) be bound by the Final
Allocation for purposes of determining Taxes, (C) prepare and file, and cause
its affiliates to prepare and file, its Tax Returns on a basis consistent with
the Final Allocation, and (D) take no position, and cause its affiliates to take
no position, inconsistent with the Final Allocation on any applicable Tax
Return, in any audit or proceeding before any Taxing Authority, or in any report
made for Tax purposes, except as required by a final determination or resolution
of any dispute with any taxing authority concerning the Final Allocation; and
(iii) in the event the Final Allocation is disputed by any Taxing Authority, the
party receiving notice of the dispute shall promptly notify the other parties
hereto of (x) the assertion of a dispute and (y) the resolution of such dispute.
SECTION 2.10 Treatment of Accounts Receivable At the Closing. At least five
business days prior to the Closing Date, the Parent shall deliver to the Buyer
Schedule 2.10 which shall set forth for each receivable of the Fastener Business
as of the close of business on the immediately preceding Friday, the name of the
payor, the date the receivable was booked by the Fastener Business, the original
amount of the receivable, the date the receivable was or is due and the amount
of the receivable on such Friday. Schedule 2.10 shall also indicate each
receivable which, as of such Friday, is more than ninety days past due and the
obligor of which is subject to bankruptcy or similar insolvency proceedings (the
"Overdue Closing Receivables"). The Buyer shall have the option to require that
at the Closing the Sellers retain and not transfer to the Buyer any or all of
the Overdue Closing Receivables, and the Buyer shall reduce the amount of the
Consideration payable to the Sellers pursuant to Section 2.6(a)(i) by the
aggregate amount of the Overdue Closing Receivables that the Sellers retain. The
Buyer shall notify the Sellers in writing at least two business days prior to
the Closing Date which Overdue Closing Receivables on Schedule 2.10 the Sellers
shall retain (the "Buyer Closing Receivables Notice"). After the Closing, the
Buyer will provide reasonable access to all documentation and personnel
necessary for the Parent to pursue collection of the Overdue Closing Receivables
retained by the Sellers. The Parent will have the right to make copies of any
documentation necessary for such collection at the Parent's expense. If the
customer pays the Buyer in respect of an Overdue Closing Receivable retained by
the Sellers, the Buyer shall promptly remit such payment to the Parent by wire
transfer of immediately available funds to a bank account designated by the
Parent for such purpose.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Each of the Sellers, jointly and severally, represents and warrants to
the Buyer as follows:
SECTION 3.1 Organization; Qualification.
(a) Each of the Sellers and the Transferred Fastener Subsidiaries (other than
Newco California) is a legal entity duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Upon its formation and as
of the Effective Time, Newco California will be duly organized, validly existing
and in good standing under the Laws of California, respectively, and will have
all requisite corporate power and authority to own, lease and operate its
properties.
(b) Each of the Sellers and the Transferred Fastener Subsidiaries is, or upon
the creation of and as of the Effective Time in the case of Newco California
will be, duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except in
those jurisdictions where the failure to be so duly qualified or licensed and in
good standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(c) Each of the Sellers has heretofore made available to the Buyer complete and
correct copies of the certificate of incorporation and by-laws (or other similar
charter, by-law or organizational documents), as currently in effect, of such
Sellers and each of the Transferred Fastener Subsidiaries or, in the case of
Newco California, the Sellers will make available the organizational documents
of Newco California immediately following such entity's formation in its
jurisdiction of formation.
SECTION 3.2 Capital Stock and Membership Interests of the Transferred
---------------------------------------------------------
Fastener Subsidiaries.
- ----------------------
(a) The authorized, issued and outstanding capital stock of each of the
Transferred Fastener Subsidiaries (excluding Newco California for the purposes
of this Section 3.2(a)) is set forth on Schedule 3.2(a). Except as set forth on
Schedule 3.2(a), all of the outstanding shares of capital stock of each of the
Transferred Fastener Subsidiaries are duly authorized, validly issued, fully
paid and non-assessable and owned of record and beneficially directly or
indirectly by the Sellers. Except for the transactions contemplated by this
Agreement and as set forth on Schedule 3.2(a), (i) there are no shares of
capital stock of any of the Transferred Fastener Subsidiaries authorized or as
of the date of this Agreement issued or outstanding, (ii) there are no
authorized or outstanding options, warrants, calls, preemptive rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Transferred
Fastener Subsidiaries obligating any Transferred Fastener Subsidiary to issue,
transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or other equity interest in it or any other Transferred Fastener
Subsidiary or securities convertible into or exchangeable for such shares or
equity interests, or obligating any Transferred Fastener Subsidiary to grant,
extend or enter into any such option, warrant, call, subscription or other
right, agreement, arrangement or commitment, and (iii) there are no outstanding
contractual obligations of any Transferred Fastener Subsidiary to repurchase,
redeem or otherwise acquire any capital stock of any of the Transferred Fastener
Subsidiaries or to provide funds to make any investment (in the form of a loan,
capital contribution or otherwise) in any other entity.
(b) Except as set forth on Schedule 3.2(b), upon the formation of Newco
California, all of the membership interests of such entity shall be duly
authorized, validly issued, fully paid and non-assessable and owned directly or
indirectly by the Sellers. Except for the transactions contemplated by this
Agreement and as set forth on Schedule 3.2(b), upon the formation of Newco
California, (i) there will be no authorized or outstanding options, warrants,
calls, preemptive rights, subscriptions or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
membership interests of Newco California obligating any Transferred Fastener
Subsidiary to issue, transfer or sell or cause to be issued, transferred or sold
any membership interests in Newco California or securities convertible into or
exchangeable for such membership interests, or obligating any Transferred
Fastener Subsidiary to grant, extend or enter into any such option, warrant,
call, subscription or other right, agreement, arrangement or commitment, and
(ii) there are no outstanding contractual obligations of any Transferred
Fastener Subsidiary to repurchase, redeem or otherwise acquire any membership
interests of Newco California or to provide funds to make any investment (in the
form of a loan, capital contribution or otherwise) in any other entity. At the
Closing the Sellers will be transferring to the Buyer, good, valid, and
marketable title in the membership interests of Newco California free and clear
of any Liens (other than Permitted Exceptions). At the Closing Date the Sellers
shall not have assigned, transferred, or otherwise disposed of the interests of
Newco California or any of its respective rights. The membership interests in
Newco California being transferred to the Buyer pursuant to this Agreement
constitute all the outstanding membership interests in Newco California. Newco
California shall be formed by the Sellers as soon as practicable following the
date of this Agreement. Prior to the Closing Date, Newco California shall not
conduct any business other than with respect to the assets currently listed on
Schedule 3.32.
SECTION 3.3 Equity Investments.
(a) Schedule 3.3(a) sets forth: (i) the name of each corporation, partnership,
joint venture or other entity (other than the Transferred Fastener Subsidiaries)
in which each of the Sellers or any subsidiary of such Sellers has, or pursuant
to any agreement has, the right to acquire by any means, directly or indirectly,
an equity interest or investment and which, in each case, is a Fastener Business
Asset; and (ii) in the case of each of such Person described in the foregoing
clause (i), either (x) a listing of the relevant agreement or agreements
pursuant to which such Seller or their respective subsidiary has acquired such
right or such interest or investment or (y) (A) the jurisdiction of
incorporation and (B) the authorized and outstanding capitalization thereof and
the number and the percentage of each class of voting capital stock owned by
such Seller or their respective subsidiaries.
(b) Except as set forth on Schedule 3.3(b), each Seller's interest in each of
the Persons listed on Schedule 3.3(a) which are stated to be owned directly or
indirectly by such Seller (except for the directors' qualifying shares set forth
on Schedule 3.3(b), if any, which such Seller will cause to be transferred at
the Effective Time to nominees of the Buyer), will, after giving effect to the
transactions contemplated hereby, be owned by the Buyer, directly or indirectly,
in each case free and clear of all Liens (other than Permitted Exceptions).
SECTION 3.4 Authority Relative to this Agreement. Other than the
Shareholder Approval, each of the Sellers has the corporate power and authority
to enter into this Agreement and the Ancillary Agreements to which such Seller
is to be party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Ancillary
Agreements to which such Seller is to be party and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the Board of Directors of each of the Sellers and, other than the
Shareholder Approval, no other corporate proceedings on the part of the Sellers
are necessary to authorize this Agreement or the Ancillary Agreements or to
consummate the transactions contemplated hereby and thereby. This Agreement has
been, and the Ancillary Agreements to which such Seller is to be a party will be
at the Closing, duly and validly executed and delivered by each of the Sellers
and constitute, or will constitute at the Closing, assuming this Agreement
constitutes, and the Ancillary Agreements to which such Seller is to be party
will constitute at the Closing, legal, valid, binding and enforceable agreements
of the Buyer, legal, valid and binding agreements of each of the Sellers,
enforceable against them in accordance with their terms, except as limited, (a)
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar Laws affecting creditors' rights generally and (b) by general principles
of equity (regardless of whether enforcement is sought in equity or at law).
SECTION 3.5 Consents and Approval; No Violation. Subject to obtaining the
Shareholder Approval and the filings, permits, authorizations, consents and
approvals set forth on Schedule 3.5 or as may be required under the applicable
requirements of the HSR Act or the competition Laws or regulations of the
European Union or any foreign supranational authority in any jurisdiction in
which the Sellers or the Buyer (directly or through subsidiaries, in each case)
has assets or conducts operations, none of the execution, delivery or
performance of this Agreement or the Ancillary Agreements to which such Seller
is to be a party by each of the Sellers, the consummation by each of the Sellers
of the transactions contemplated hereby and thereby, or compliance by the
Sellers with any of the provisions hereof or thereof will (i) conflict with or
result in any breach of any provision of the certificate of incorporation,
bylaws or similar organizational documents of any of the Sellers or their
respective subsidiaries, (ii) require any filing with, or permit, authorization,
consent or approval of, any Government entity or its regulatory authorities and
agencies or any other Person, (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration)
under, or result in the creation of a Lien (other than Permitted Exceptions) on
any Fastener Business Asset pursuant to, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which any of the Sellers or their
respective subsidiaries is a party or by which any of them or any of their
properties or assets may be bound, or (iv) violate any order, writ, injunction,
decree, judgment, permit, license, ordinance, law, common law, statute, code,
standard, requirement, rule or regulation ("Law") applicable to any of the
Sellers, any of the Transferred Fastener Subsidiaries, any of the Fastener
Business Assets or the Fastener Business, with such exceptions in the case of
the foregoing clauses (ii), (iii) and (iv) as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 3.6 Financial Statements & Parent SEC Filings.
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(a) The Parent has previously furnished to the Buyer the Fastener Business
Financial Statements. Except as set forth on Schedule 3.6, the Fastener Business
Financial Statements have been prepared from the Fastener Business Books and
Records in accordance with GAAP and each balance sheet included therein presents
fairly, in all material respects, the financial position of the Fastener
Business as of the date thereof, and each statement of income included therein
presents fairly, in all material respects, the results of operations of the
Fastener Business for the respective periods therein set forth. The March Pro
Forma Balance Sheet was prepared pursuant to the principles and policies set
forth in Section 2.7 and on Schedule 2.7(a).
(b) Since June 30, 2000, the Parent has filed with the SEC all forms, reports
and documents required to be filed by it pursuant to the Securities Act of 1933,
as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations promulgated under
each such Act (the "Parent SEC Filings"), all of which, as of respective filing
dates, complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act. None of the Parent SEC Filings as of the
respective dates on which they were filed with the SEC contained any untrue
statement of material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
circumstances under which they were made, not misleading.
SECTION 3.7 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 3.7, none of the Sellers or any of their respective subsidiaries has
any liability or obligation (whether absolute, accrued, contingent or otherwise)
that is a liability or obligation of the Fastener Business and in each case is
of a nature required by GAAP to be reflected or reserved against in a balance
sheet or disclosed in the notes thereto, except such liabilities, obligations or
contingencies (a) that are accrued or reserved against in the March Pro Forma
Balance Sheet, or (b) which were incurred after the date of the March Pro Forma
Balance Sheet in the ordinary course of the Fastener Business consistent with
past practice and which individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect.
SECTION 3.8 Absence of Certain Changes or Events. Except as set forth in
Schedule 3.8, since June 30, 2001, there has not been: (a) any Material Adverse
Effect; or (b) any state of facts, event, change or condition which would
reasonably be expected to cause a Material Adverse Effect.
SECTION 3.9 Title and Related Matters. Except as set forth in Schedule 3.9
and subject to other Permitted Exceptions: (a) each of the Sellers has, or one
of its subsidiaries has, and immediately after the Effective Time, the Buyer or
one of its subsidiaries will have, good and valid, legal and beneficial title
to, or a valid leasehold or contractual interest in, free and clear of all
Liens, all of the Fastener Business Assets (other than the Fastener Business
Real Properties); and (b) each of the Sellers has, or one of its subsidiaries
has, and immediately after the Effective Time, the Buyer or one of its
subsidiaries will have, good and marketable, legal and beneficial title (such as
any licensed title insurance company licensed to do business in the jurisdiction
in which such Fastener Business Real Property is located will approve and insure
subject only to Permitted Exceptions) to all of the Fastener Business Real
Properties. Schedule 3.9 contains (x) a complete and correct list of all
Fastener Business Real Properties and (y) a complete and correct list of each
title insurance policy insuring title to any of the Fastener Business Real
Properties.
SECTION 3.10 Contracts.
(a) Schedule 3.10(a) sets forth a complete and correct list with respect to the
Fastener Business of each (i) collective bargaining agreement; (ii) employment,
termination, severance or consulting agreement or contract with an employee or
individual consultant or a consulting agreement or contract with a consulting
firm or other organization (other than employment agreements that are created as
a matter of Law or do not provide for any severance, termination, change of
control or retention payments or benefits) to any individual in an amount in
excess of $100,000; (iii) agreement or contract containing any covenant limiting
the freedom of any Seller or any of their subsidiaries to engage in any line of
business or compete with any Person; (iv) agreement or contract providing for
aggregate future payments of more than $1,000,000, except for any agreement or
contract with a customer or supplier that relates to the purchase or delivery of
Fastener Business product unless such customer or supplier purchased or
delivered, or committed to purchase or deliver, at least $1,000,000 of products
produced by the Fastener Business in the preceding fiscal year pursuant to such
agreement or contract; (v) loan agreement, credit agreement, promissory note,
guarantee, subordination agreement, letter of credit or other similar types of
contract; or (vi) other agreement or contract material to the business,
operations or financial condition of the Fastener Business, taken as a whole.
(b) Except as set forth in Schedule 3.10(b), (i) each Fastener Business Contract
is in full force and effect, and (ii) there is not, with respect to the Fastener
Business Contracts, any existing default, or event of default, or event which
with or without due notice or lapse of time or both would constitute a default
or event of default, on the part of any of the Sellers or their respective
subsidiaries or, to the best knowledge of the Sellers, any other party thereto,
except where the failure to be in full force and effect or where such default or
event of default would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
SECTION 3.11 Leases. Schedule 3.11 sets forth a complete and correct list
of each Fastener Business Lease which (i) relates to real property or (ii) is
material to the business, operations or financial condition of the Fastener
Business, taken as a whole. Except as set forth on Schedule 3.11, there is not,
with respect to the Fastener Business Leases, any existing default, or event of
default, or event which with or without due notice or lapse of time or both
would constitute a default or an event of default, on the part of any of the
Sellers or any of their respective subsidiaries or, to the best knowledge of the
Sellers, any other party thereto, which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect. At the Effective Time,
the Fastener Business Leases will be valid, binding and enforceable by the
Buyer, one of its subsidiaries designated pursuant to Section 10.7 as the
assignee thereof or a Transferred Fastener Subsidiary in accordance with their
respective terms, except for those Fastener Business Leases as to which the
failure to be valid, binding and enforceable would not reasonably be expected to
have a Material Adverse Effect.
SECTION 3.12 Intellectual Property.
(a) Schedule 3.12(a) sets forth a complete and accurate list of all applications
to secure issuance or registration of patents, trademarks, trade names, service
marks, or copyrights, Internet domain names, issued patents, registered
trademarks, trade names, and service marks, copyright registrations and Internet
domain names throughout the world, as well as all material unregistered
trademarks and copyrights, and any software and applications (other than
software held under commercially available shrink-wrap licenses) that are
included in the Fastener Business Intellectual Property. Schedule 3.12(a) shall
include the identity of the agent, attorney and/or law firm that is or was, of
record, responsible for prosecuting each item of the Fastener Business
Intellectual Property set forth on Schedule 3.12(a).
(b) Schedule 3.12(b) sets forth a complete and accurate list of all agreements
under which any Fastener Business Intellectual Property is licensed to any of
the Sellers or any of their respective subsidiaries (other than licenses for
commercially available shrink-wrap software), or licensed by any of the Sellers
or any of their respective subsidiaries to a third party (collectively, the
"Fastener Business Intellectual Property Licenses"), indicating the parties to
such agreement. The Fastener Business Intellectual Property Licenses are valid
and binding obligations of all parties thereto, enforceable in accordance with
their terms, and there exists no event or condition which will result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default by any party under any such Fastener Business
Intellectual Property License except where such violation, breach or default
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. No royalties, honoraria or other fees are payable by
the Sellers or any of their respective subsidiaries to any third parties for the
use of or right to use any Fastener Business Intellectual Property except
pursuant to the Fastener Business Intellectual Property Licenses.
(c) Except as set forth on Schedules 3.12(a) and 3.12(b), (i) with respect to
the Fastener Business Intellectual Property owned by any of the Sellers or any
of their respective subsidiaries, such Seller or its subsidiary has good and
valid title free and clear of all Liens (other than Permitted Exceptions), and
(ii) with respect to all Fastener Business Intellectual Property held by any of
the Sellers or any of their respective subsidiaries under license, such Seller
or its subsidiary has the right to use such Fastener Business Intellectual
Property, subject to any restrictions imposed pursuant to the terms of such
license, free from any Lien (other than Permitted Exceptions).
(d) Except as set forth on Schedule 3.12(d), the Sellers or their respective
subsidiaries are listed in the records of the appropriate United States, state,
or foreign registry as the sole current owner of record for the Fastener
Business Intellectual Property listed on Schedule 3.12(a). The Fastener Business
Intellectual Property owned by the Sellers or any of their respective
subsidiaries and, to the best knowledge of Sellers, any Fastener Business
Intellectual Property used by the Sellers or any of their respective
subsidiaries, is subsisting, in full force and effect, and has not been
cancelled, expired, or abandoned, and, to the best knowledge of the Sellers, is
valid and enforceable. Except as set forth on Schedule 3.12(d), with respect to
any Fastener Business Intellectual Property, each of the Sellers has a policy to
secure, and has secured, from all consultants, contractors and employees who
contribute or have contributed to the creation or the development of the
Fastener Business Intellectual Property, valid written assignments by such
Persons to the Sellers of the rights to such contribution, except, with respect
to consultants and contractors, where the failure to secure such valid written
assignments would not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect. Except as set forth on Schedule 3.12(d),
each of the Sellers has taken reasonable steps to protect and preserve the
confidentiality of all of its trade secrets. Except as set forth on Schedule
3.12(d), to the best knowledge of the Sellers, (i) there are no unauthorized
uses, disclosures or infringements of any part of the Fastener Business
Intellectual Property, (ii) all use by or disclosure to any Person of trade
secrets that comprise any part of the Fastener Business Intellectual Property
has been made pursuant to the terms of a written agreement with such Person, and
(iii) all use by the Sellers of trade secrets owned by another Person has been
made pursuant to the terms of a written non-disclosure agreement with such
Person or is otherwise lawful.
(e) Except as disclosed in Schedule 3.12(e), to the best knowledge of the
Sellers: (i) the activities, products and services of each of the Sellers or any
of their respective subsidiaries in connection with the Fastener Business,
including, without limitation, the Fastener Business Intellectual Property, do
not infringe upon or otherwise violate, the intellectual property of any other
Person; (ii) there are no claims or suits pending, nor has there been notice
provided or any claims threatened, alleging that the Sellers or any of their
respective subsidiaries or any of their respective activities, products or
services in connection with Fastener Business infringe upon, violate or
constitute the unauthorized use of any other Person's intellectual property, or
challenging the Sellers' ownership of, or right to use the Fastener Business
Intellectual Property, the validity, enforceability or registerability of the
Fastener Business Intellectual Property, or the validity or enforceability or
effectiveness of any Fastener Business Intellectual Property License; (iii) none
of the Fastener Business Intellectual Property is being infringed or violated or
otherwise used or available for use by any other Person (except pursuant to
Fastener Business Intellectual Property Licenses); and (iv) the consummation of
the transactions contemplated by this Agreement will not result in the loss of
any Fastener Business Intellectual Property and, following the consummation of
this Agreement, no party will have any rights to any of the Fastener Business
Intellectual Property except pursuant to Fastener Business Intellectual Property
Licenses.
(f) The non-threaded version of the drive nut used in connection with the
Accu-Lok fastener (other than the size 5 version) has been tested, made and
offered for sale to customers of the Fastener Business. The size 5 non-threaded
version of the drive nut used in connection with the Accu-Lok fastener has been
made and is being tested. The threaded version of the drive nut used in
connection with the Accu-Lok fastener (other than the size 5 version) has not
been and is not intended to be offered for sale to customers of the Fastener
Business. The different versions of the Accu-Lok fastener are described in U.S.
patent applications numbers 09/825,711, 09/849,184 and 09/997,500.
SECTION 3.13 Employee Benefit Plans; ERISA.
(a) Schedule 3.13(a) contains a complete and correct list of each deferred
compensation, incentive compensation or equity compensation plan; "welfare
plan," fund or program (within the meaning of Section 3(1) of ERISA); "pension
plan," fund or program (within the meaning of Section 3(2) of ERISA); and each
other material employee benefit plan, fund, program, agreement or arrangement,
in each case, that is sponsored, maintained or contributed to or required to be
contributed to by the Sellers or by any trade or business (other than plans of
the foreign subsidiaries of the Parent maintained under or required by
applicable Law), whether or not incorporated (an "ERISA Affiliate"), that
together with the Sellers would be deemed a "single employer" within the meaning
of Section 4001(b) of ERISA, for the benefit of any employee or former employee
employed in the Fastener Business (the "Plans"). With respect to each Plan, the
Sellers have heretofore delivered or made available to Buyer true and complete
copies of each Plan and any amendments thereto (or if such Plan is not a written
Plan, a description thereof), any related trust or other funding vehicle, the
most recently filed reports or summaries required under ERISA or the Code and
the most recent determination letter received from the Internal Revenue Service
with respect to each Plan intended to qualify under Section 401 of the Code.
Schedule 3.13(a) also contains a complete and correct list of each employment,
termination or severance agreement for the Fastener Business Employees (other
than employment agreements that (i) are created as a matter of Law or (ii) do
not provide for any severance, termination, change in control or retention
payments or benefits) (each, an "Individual Agreement").
(b) Except as disclosed on Schedule 3.13(b), no Plan is or has been subject to
Title IV or Section 302 of ERISA or Section 412 of the Code. None of the Sellers
or any ERISA Affiliate has incurred any unsatisfied liability under Title IV of
ERISA or Section 412 of the Code, and, to the best knowledge of the Sellers, no
condition exists that presents a material risk to the Buyer of incurring any
such liability, other than liability for premiums due the Pension Benefit
Guaranty Corporation (which premiums have been paid when due).
(c) Except as set forth on Schedule 3.13(c), no Plan that is subject to Section
412 of the Code or Title IV of ERISA (each, a "Title IV Plan") is a
"multiemployer pension plan," as defined in Section 3(37) of ERISA, nor is any
Title IV Plan a plan described in Section 4063(a) of ERISA.
(d) Except as set forth on Schedule 3.13(d), no Plan or Individual Agreement
provides medical, surgical, hospitalization, death or similar benefits (whether
or not insured) for employees or former employees of the Sellers or Parent any
Subsidiary for periods extending beyond their retirement or other termination of
service, other than (i) coverage mandated by applicable Law, (ii) death benefits
under any "pension plan," or (iii) benefits the full cost of which is borne by
the current or former Fastener Business Employee (or his beneficiary).
(e) Except as set forth on Schedule 3.13(e), no amounts payable under the Plans
or Individual Agreement will fail to be deductible for federal income tax
purposes by virtue of Section 280G of the Code.
(f) Except as would not reasonably be expected to have a Material Adverse
Effect, each Plan and Individual Agreement has been operated and administered in
accordance with its terms and applicable Law in all material respects, including
but not limited to ERISA and the Code, and each Plan intended to be "qualified"
within the meaning of Section 401(a) of the Code has received or timely applied
for an IRS determination that it is so qualified and that the trusts maintained
thereunder are exempt from taxation under Section 50l(a) of the Code. (g)
Schedule 3.13(g) sets forth each Plan and Individual Agreement under which as a
result of the consummation of the transactions contemplated by this Agreement,
either alone or in combination with another event, (i) any current or former
Fastener Business Employee may become entitled to severance pay or any other
payment, except as expressly provided in this Agreement, or (ii) any
compensation due any such employee or officer from the Fastener Business may be
increased or the time of payment or vesting may become accelerated.
(h) Except as disclosed in Schedule 3.13(h), there are no pending, or to the
best knowledge of the Sellers, threatened claims by or on behalf of any Plan or
under an Individual Agreement, by any Fastener Business Employee or beneficiary
covered under any such Plan or Individual Agreement, or otherwise involving any
such Plan or Individual Agreement (other than routine claims for benefits). With
respect to each Plan and Individual Agreement, all payments due from any of the
Sellers or any of their respective subsidiaries have been timely made and all
amounts which become due and payable under such Plans and Individual Agreements
will be paid in full by the Sellers in accordance with the terms of such Plans
or such Individual Agreement, as applicable.
(i) Except as set forth on Schedule 3.13(i), none of the Sellers have
disseminated in writing or otherwise broadly or generally notified current or
former employees of the Fastener Business of any intent or commitment (whether
or not legally binding) to create or implement any additional plans, funds,
programs, agreements or arrangements for the benefit of any current or former
employees of the Fastener Business or to materially amend, modify or terminate
any existing Plan or Individual Agreement.
(j) Except as set forth on Schedule 3.13(j), none of the Sellers are party to
any collective bargaining agreements. Except as set forth on Schedule 3.13(j),
to the best knowledge of the Sellers, there are no labor unions, groups,
associations, works councils or other organizations representing, purporting to
represent or attempting to represent, any Fastener Business Employee. There is
not pending, or to the best knowledge of the Sellers, threatened, any labor
dispute, strike, work stoppage or other concerted labor activity against any of
the Sellers or any of their respective subsidiaries involving any Fastener
Business Employees. During the three year period preceding the date hereof, to
the best knowledge of the Sellers, there have been no organizing activities
conducted by any labor unions, groups, associations, works councils or other
organizations with respect to any Fastener Business Employee. None of the
Sellers or any of their respective subsidiaries has committed any unfair labor
practices or violated in any material respect any applicable employment Laws in
connection with the operation of the Fastener Business and, except as disclosed
on Schedule 3.13(j), there is not pending or, to the best knowledge of the
Sellers, threatened, any charge, complaint, investigation or proceeding against
the Sellers by or before the National Labor Relations Board, the Department of
Labor, the Equal Employment Opportunity Commission, the Occupational Health and
Safety Administration or any comparable foreign, state or municipal agency by or
on behalf of any Fastener Business Employee or class of employees or by or
before any Government entity relating to a purported violation of any applicable
employment Laws.
(k) With respect to all of the employee benefit plans which are subject to Laws
other than those of the United States, except as would not reasonably be
expected to have a Material Adverse Effect, such plans are in compliance with
any applicable Laws, including relevant Tax Laws, and the requirements of any
trust deed under which they are established, (i) all employer and employee
contributions to each such plan required by Law or by the terms of such plan
have been made, or, if applicable, accrued, in accordance with normal accounting
practices; and (ii) the fair market value of the assets of each funded plan, the
liability of each insurer for any plan funded through insurance or the book
reserve established for any plan, together with any accrued contributions, is
sufficient to procure or provide for the accrued benefit obligations, as of the
Effective Time, with respect to all current and former participants in such
plan.
(l) Schedule 3.13(l) lists each Fastener Business Employee employed in the
Fastener Business who has an annual base salary in excess of $100,000.
SECTION 3.14 Government and Third Party Authorizations and Regulations.
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(a) All Government and other third party permits (including occupancy permits),
licenses, franchises, permits, registrations, approvals and other authorizations
or consents held by any of the Sellers and their respective subsidiaries to
operate the Fastener Business (herein collectively called "Authorizations") are
valid and sufficient to conduct the Fastener Business conducted by them in the
manner presently being conducted, except where the failure to hold such
Authorizations would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect (provided that no representation or
warranty is made in this Section 3.14(a) with respect to Environmental Laws).
(b) Except as set forth on Schedule 3.14(b), the Fastener Business is being, and
since June 30, 2001 has been, conducted in material compliance with all
applicable Laws of all Government entities relating to the operation, conduct or
ownership of the Fastener Business (provided that no representation or warranty
is made in this Section 3.14(b) with respect to Environmental Laws).
SECTION 3.15 Assets Necessary to Business. Except as set forth on Schedule
3.15 and except for the Excluded Assets, the Fastener Business Assets, together
with the assets of the Transferred Fastener Subsidiaries, constitute all the
assets and properties used or held for use in connection with, necessary for, or
material to the business and operations of the Fastener Business as presently
conducted.
SECTION 3.16 Litigation. Except as set forth on Schedule 3.16, there are no
material claims, actions, suits, proceedings or investigations pending or, to
the best knowledge of the Sellers, threatened against the Transferred Fastener
Subsidiaries, the Fastener Business or the Fastener Business Assets. Except as
set forth on Schedule 3.16, there are no Government legal proceedings pending
which challenge the legality of this Agreement or the transactions contemplated
hereby. None of the Sellers, the Transferred Fastener Subsidiaries, the Fastener
Business or the Fastener Business Assets are subject to any outstanding order,
writ, injunction or decree which has had or would reasonably be expected to have
a Material Adverse Effect.
SECTION 3.17 Intentionally Omitted.
SECTION 3.18 State Takeover Statutes. The Board of Directors of each of the
Sellers has approved the terms of this Agreement, the Ancillary Agreements to
which such Seller is to be a party and the consummation of the transactions
contemplated hereby or thereby, and such approval represents all the action
necessary to render inapplicable to this Agreement and the transactions
contemplated hereby, the provisions of Section 203 of the DGCL. No other state
takeover statute or similar statute or regulation applies to or purports to
apply to this Agreement or the transactions contemplated hereby.
SECTION 3.19 Voting Requirement. The affirmative vote of a majority of
outstanding shares of the Parent's Class A common stock, par value $.10 per
share (the "Class A Common Stock"), and Class B common stock, par value $.10 per
share (the "Class B Common Stock", and together with the Class A common stock,
the "Parent Common Stock"), voting together as a single class, at a stockholder
meeting (the "Shareholder Approval") is the only vote of the Parent's capital
stock necessary to approve and adopt the transactions contemplated by this
Agreement under any applicable Law or pursuant to the requirements of the
Parent's Certificate of Incorporation and Bylaws.
SECTION 3.20 Intentionally Omitted.
SECTION 3.21 Accounts Receivable. All accounts receivable of the Fastener
Business that are reflected on the March Pro Forma Balance Sheet or are or will
be generated between the date hereof and the Closing Date (i) represent or will
represent valid obligations, free and clear of any Liens (other than Permitted
Exceptions), arising from bona fide transactions entered into in the ordinary
course of business and (ii) are valued and carried on the March Pro Forma
Balance Sheet or will be carried on the Closing Date Balance Sheet, as the case
may be, in accordance with GAAP except as set forth on Schedule 3.6.
SECTION 3.22 Taxes. Except as set forth in Schedule 3.22:
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(a) Each of the Sellers and each of the Transferred Fastener Subsidiaries have
duly filed all Tax Returns and the Sellers and each of the Transferred Fastener
Subsidiaries have duly paid or caused to be duly paid all Taxes shown due on
such Tax Returns. All such Tax Returns are correct and complete in all material
respects. To the best knowledge of the Sellers, none of the Sellers nor any of
the Transferred Fastener Subsidiaries has received written notice of any claim
made by an authority in a jurisdiction where none of the Sellers or any of the
Transferred Fastener Subsidiaries file Tax Returns, that the Sellers or any of
the Transferred Fastener Subsidiaries are or may be subject to Taxation by that
jurisdiction.
(b) Each of the Sellers and each of the Transferred Fastener Subsidiaries has
withheld and timely paid all material amounts of Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party.
(c) The U.S. Federal income Tax Returns of the Sellers have been examined by the
Internal Revenue Service ("IRS") (or the applicable statutes of limitation for
the assessment of U.S. Federal income Taxes for such periods have expired) for
all periods, and no material deficiencies were asserted as a result of such
examinations that have not been resolved or fully paid.
(d) No Federal, state, local or foreign audits, examinations or other
administrative proceedings have been commenced or, to the best knowledge of the
Sellers, are pending with regard to any Taxes or Tax Returns of any of the
Sellers or of any of the Transferred Fastener Subsidiaries. To the best
knowledge of the Sellers, no written notification has been received by the
Sellers or by any of the Transferred Fastener Subsidiaries that such an audit,
examination or other proceeding is pending or threatened with respect to any
Taxes due from or with respect to or attributable to any of the Sellers or any
of the Transferred Fastener Subsidiaries or any Tax Return filed by or with
respect to the Sellers or any Transferred Fastener Subsidiary. There is no
dispute or claim concerning any Tax liability of the Sellers, or any of its
Transferred Fastener Subsidiaries either claimed in writing or raised by any
taxing authority in writing.
(e) None of the Sellers or any of the Transferred Fastener Subsidiaries has
waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.
(f) None of the Sellers or any of the Transferred Fastener Subsidiaries has
filed a consent pursuant to Section 341(f) of the Code (or any predecessor
provision) concerning collapsible corporations, or agreed to have Section
341(f)(2) of the Code apply to any disposition of a "subsection (f) asset" (as
such term is defined in Section 341(f)(4) of the Code) owned by the Sellers or
any Transferred Fastener Subsidiary.
(g) None of the Sellers or any of the Transferred Fastener Subsidiaries has
agreed to make, or has been notified in writing of a requirement to make, any
adjustment under Section 481 of the Code (or comparable provision under other
Laws) by reason of a change in accounting method or otherwise.
(h) None of the Sellers or any of the Transferred Fastener Subsidiaries is a
party to any Tax sharing, Tax indemnity or other agreement or arrangement with
any entity not included in the Parent's consolidated financial statements most
recently filed by the Parent with the SEC.
(i) Since January 1, 1996, none of the Sellers, or any of the Transferred
Fastener Subsidiaries has been a member of any affiliated group within the
meaning of Section 1504(a) of the Code, or any similar affiliated or
consolidated group for Tax purposes under state, local or foreign Law (other
than a group the common parent of which is the Parent).
(j) To the best knowledge of the Sellers, there are no Liens (other than
Permitted Exceptions) for Taxes (other than for current Taxes not yet due and
payable) on any assets of the Sellers or any of the Transferred Fastener
Subsidiaries.
(k) None of the Sellers or any of the Transferred Fastener Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation" in
a distribution of stock to any Person qualifying for tax-free treatment under
Section 355 of the Code (x) in the two years prior to the date of this Agreement
or (y) in a distribution which could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of Section 355(e) of the
Code) in conjunction with the transaction contemplated under this Agreement.
SECTION 3.23 Insurance. Schedule 3.23 contains a complete and correct
description of all policies of property, fire, casualty, product liability,
workers' compensation and other forms of insurance owned or held by any of the
Sellers or any of their respective subsidiaries covering the Fastener Business
or the Fastener Business Assets.
SECTION 3.24 Environmental Matters. Except as set forth on Schedule 3.24:
---------------------
(a) Each of the Sellers and the Transferred Fastener Subsidiaries has
obtained all licenses, permits, authorizations, approvals and consents
from Government entities which are required under any applicable
Environmental Law and necessary for it to carry on the Fastener
Business as now conducted ("Environmental Permits"), except for such
failures to have Environmental Permits which, individually or in the
aggregate, are not reasonably expected to have a Material Adverse
Effect. Each of such Environmental Permits is in full force and effect,
and each of the Sellers and the Transferred Fastener Subsidiaries is in
compliance with the terms and conditions of all such Environmental
Permits and with all applicable Environmental Laws, except for such
failures to be in full force and effect or to be in compliance which,
individually or in the aggregate, are not reasonably expected to have a
Material Adverse Effect. None of the Sellers or any of their
subsidiaries is currently or, to the best knowledge of the Sellers, has
in the past manufactured, sold or distributed any product containing
asbestos.
(b) There are no Environmental Claims with respect to the Fastener Business
pending, or to the best knowledge of the Sellers, threatened, against
any of the Sellers or the Transferred Fastener Subsidiaries, or, to the
best knowledge of the Sellers, any Person whose liability for any such
Environmental Claim the Sellers or any of the Transferred Fastener
Subsidiaries have or may have retained or assumed, either contractually
or by operation of Law, except for Environmental Claims identified on
Schedule 3.24(b) or that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
(c) There are no past or present actions, activities, conditions or events
including, without limitation, the Release or threatened Release of any
Hazardous Material, that would form the basis of any Environmental
Claim relating to the Transferred Fastener Business against the Sellers
or their respective subsidiaries, except for such liabilities which,
individually or in the aggregate, are not reasonably expected to have a
Material Adverse Effect.
(d) To the best knowledge of the Sellers, no site or facility now or
previously owned, operated or leased by the Sellers or any of the
Transferred Fastener Subsidiaries is listed or proposed for listing on
the National Priorities List promulgated pursuant to CERCLA or
equivalent state statutes.
(e) No Liens (other than Permitted Exceptions) have been recorded under or
pursuant to any Environmental Law on any site or facility now owned,
operated or leased by the Sellers or any of their respective
subsidiaries for use by the Fastener Business, except for such Liens
which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect, and no action of any Government
entity has been taken or, to the best knowledge of the Sellers, is in
process which would reasonably be expected to subject any of such
properties to such Liens, except for any such action which,
individually or in the aggregate, is not reasonably expected to have a
Material Adverse Effect.
(f) To the best knowledge of the Sellers, each of the Sellers has made
available to the Buyer copies of all material environmental site
assessment reports and environmental audits in their possession
prepared by or on behalf of the Seller or any of its subsidiaries
relating to environmental matters of the Fastener Business or the
Fastener Business Real Properties.
(g) As used in this Agreement:
(i) "Environmental Claim" means any claim, action, lawsuit or proceeding by
any Person which seeks to impose liability (including, without
limitation, liability for investigatory costs, cleanup costs,
Government response costs, natural resources damages, property damages,
personal injuries or penalties) pursuant to any Environmental Law.
(ii) "Environmental Law" means any Law of any Government entity, or any
binding agreement with any Government entity, relating to (a) pollution
or protection of the environment or natural resources, including,
without limitation, those relating to cleanup, preservation or
reclamation thereof, any Release or threatened Release of Hazardous
Materials; or the presence, handling, use, manufacture, distribution,
treatment, storage, disposal, or recycling of or exposure to Hazardous
Materials, (b) workplace health or safety or (c) exposure of persons or
property to Hazardous Materials.
(iii) "Hazardous Materials" means any pollutant, contaminant, waste,
substance, chemical or material, including, without limitation,
petroleum or petroleum products, radioactive materials or friable
asbestos, regulated or which can give rise to liability under
applicable Environmental Law.
SECTION 3.25 Fastener Business Inventory. The Fastener Business Inventory
is reflected on the March Pro Forma Balance Sheet and will be reflected on the
Preliminary Closing Date Balance Sheet, and such Fastener Business Inventory has
been and will be accounted for in accordance with GAAP consistently applied as
described in the Parent's inventory accounting policies and procedures on
Schedule 2.7(a). Obsolete inventory has been fully reserved for or is recorded
in accordance with GAAP consistently applied as described in Parent's inventory
accounting policies and procedures on Schedule 2.7(a). No changes to these
policies and procedures will be recorded in the Fastener Business Books and
Records between March 2002 and the Closing Date. For external reporting
purposes, the Parent may record additional entries at the Parent company level
in order to reflect a change in accounting policy from LIFO to FIFO but these
entries shall not impact the calculation of Net Working Capital.
SECTION 3.26 Product Warranty. Except as set forth on Schedule 3.26 and
except for returns of products by customers in the ordinary course of the
Fastener Business consistent with past practice, each Fastener Business product
manufactured, sold, leased, or delivered by the Sellers has been in conformity
in all material respects with all applicable contractual commitments, regulatory
requirements and all express and implied warranties, and the Sellers have no
material liability (and to the best knowledge of the Sellers, there is no
reasonable basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against any of them giving
rise to any liability) for replacement or repair thereof or other damages in
connection therewith. Except as set forth on Schedule 3.26, no Fastener Business
product manufactured, sold, leased or delivered by any of the Sellers is subject
to any guaranty, warranty, or other indemnity beyond the applicable standard
terms and conditions of sale and lease. Schedule 3.26 includes copies of the
standard terms and conditions of sale or lease for the products of the Fastener
Business (containing applicable guaranty warranty and indemnity provisions).
SECTION 3.27 Product Liability. Except as set forth on Schedule 3.27, each
of the Sellers has no material liability (and to the best knowledge of the
Sellers, there is no reasonable basis for, and each of the Sellers is not aware
of, any present or future suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any liability)
arising out of any injury to any individuals or property as a result of the
ownership, possession, or use of any Fastener Business product manufactured,
sold, leased or delivered by the Sellers or any of their subsidiaries.
SECTION 3.28 No Conflict of Interest. Except as set forth on Schedule 3.28,
no officer or director of the Parent and no immediate family member of such
officer or director (collectively, the "Parent Affiliates"), and no enterprise,
firm, corporation or trust of which any of the Parent Affiliates is an officer,
trustee, director, employee, agent, or 5% stockholder, has any ownership
interest in or contract, agreement or other similar arrangement with the
Fastener Business, any Fastener Business Assets or Transferred Fastener
Subsidiary, except as a stockholder of the Parent, or, has any contract,
agreement or arrangement with the Parent or any of its subsidiaries relating to
the Fastener Business. None of the Parent Affiliates has 5% or more ownership or
stock interest in any Person which is engaged in a business that directly
competes with the Fastener Business as currently conducted.
SECTION 3.29 Accounting Controls. None of the Sellers nor any of their
respective subsidiaries, nor, to the best knowledge of the Sellers, any of their
respective directors, officers or employees, or any other Person acting on
behalf of any of them, has: (i) made any unlawful contributions, payments,
gifts, entertainment or other unlawful expenses, or provided unlawful services
or other unlawful favors in order to obtain preferential treatment or
consideration by any Government entity or any other Person with respect to any
aspect of the Fastener Business or (ii) made any political contributions that
would not be lawful under the Laws of the United States, any foreign country or
any jurisdiction within the United States or any foreign country. None of the
Sellers nor any of their respective subsidiaries nor, to the best knowledge of
the Sellers, any or their respective directors, officers or employees, or any
other Person, acting on behalf of any of them has been, or is the subject of,
any investigation by any Government entity in connection with any such unlawful
contributions, payments, gifts, entertainment or other unlawful expenses, or
provided unlawful services or other unlawful favors in order to obtain
preferential treatment or consideration by any Government entity or any other
Person, with respect to any aspect of the Fastener Business. No unrecorded fund
or asset of the Fastener Business has been established for any such purpose, and
no accumulation or use of corporate funds of the Fastener Business has been made
without being properly accounted for in the books and records of the Fastener
Business.
SECTION 3.30 Indebtedness To and From Officers, Directors, Stockholders and
Others. Except as set forth on Schedule 3.30 and except for intercompany debt
which will be settled prior to the Closing in accordance with the terms of this
Agreement, neither the Fastener Business nor any of the Transferred Fastener
Subsidiaries is indebted to any stockholder, director, officer, employee or
agent of the Parent or any subsidiary of the Parent, except for reimbursement
obligations with respect to travel and similar business expenses incurred in the
ordinary course of the Fastener Business consistent with past practice; and no
stockholder, director, officer, employee or agent of the Parent or any
subsidiary of the Parent is indebted to the Fastener Business or any Transferred
Fastener Subsidiary, except for personal charges with respect to telephone and
similar business expenses incurred in the ordinary course of the Fastener
Business consistent with past practice.
SECTION 3.31 Brokers. Except for Lane, Berry & Co. International and Morgan
Lewins & Co., Inc., no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of any of the Sellers, that is or will be payable by any of the
Sellers. The Parent is solely responsible for all fees and expenses of any
broker, finder, investment banker or agent payable in connection with the
transactions contemplated by this Agreement.
SECTION 3.32 Newco California Property. Newco California has or, prior to
the Closing will have, (i) good and valid, legal, marketable and beneficial
title to, or a valid leasehold or contractual interest in, free and clear of all
Liens, all of the Fastener Business Assets set forth on Schedule 3.32 and (ii)
obtained all necessary consents, permits, authorizations and approvals from any
third party relating to the transfer or assignment to Newco California of the
Fastener Business Assets that consist of fixed assets (other than any Fastener
Business Lease) set forth on Schedule 3.32.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to each of the Sellers as follows:
SECTION 4.1 Organization. (a) The Buyer is a corporation duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
(b) The Buyer is duly qualified or licensed and in good standing to do business
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification necessary,
except in those jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not adversely affect the ability of the
Buyer to consummate the transactions contemplated by this Agreement or perform
its obligations hereunder.
SECTION 4.2 Ownership of the Parent Common Stock. Immediately prior to
entering into this Agreement, neither the Buyer nor any of its subsidiaries
owned any shares of the Parent Common Stock.
SECTION 4.3 Authority Relative to this Agreement. The Buyer has the
corporate power and authority to enter into this Agreement and the Ancillary
Agreements to which the Buyer is to be a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Ancillary Agreements to which the Buyer is to be a party and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by the Board of Directors of the Buyer and no other
corporate proceedings on the part of the Buyer are necessary to authorize this
Agreement and the Ancillary Agreements or to consummate the transactions
contemplated hereby and thereby. This Agreement has been, and the Ancillary
Agreements to which the Buyer is to be a party will be at the Closing, duly and
validly executed and delivered by the Buyer and constitute, or will constitute
at the Closing, assuming this Agreement constitutes, and the Ancillary
Agreements to which the Buyer is to be a party will constitute at the Closing
legal, valid, binding and enforceable agreements of each of the Sellers, legal,
valid and binding agreements of the Buyer, enforceable against it in accordance
with its terms.
SECTION 4.4 Consents and Approvals; No Violation. Subject to the filings,
permits, authorizations, consents and approvals set forth on Schedule 4.4 or as
may be required under the applicable requirements of the HSR Act or the
competition Laws or regulations of the European Union or any foreign
supranational authority in any jurisdiction in which the Sellers or the Buyer
(directly or through subsidiaries, in each case) has assets or conducts
operations, none of execution, delivery or performance of this Agreement or the
Ancillary Agreements to which the Buyer is to be a party by the Buyer, the
consummation by the Buyer of the transactions contemplated hereby and thereby or
compliance by the Buyer with any of the provisions hereof or thereof will (i)
conflict with or result in any breach of any provision of the articles of
incorporation, bylaws or similar organization documents of the Buyer, (ii)
require any filing with, or permit, authorization, consent or approval of, any
Government entity or its regulatory authorities and agencies or any other
Person, (iii) result in the violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, pursuant
to any of the terms, conditions, or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Buyer or any of its subsidiaries is a party or by which any of
their properties or assets may be bound, or (iv) violate any Law applicable to
the Buyer, with such exceptions in the case of the foregoing clauses (ii), (iii)
and (iv) as would not adversely affect the ability of the Buyer to consummate
the transactions contemplated by this Agreement or perform its obligations
hereunder.
SECTION 4.5 Financing. The Buyer will have sufficient financial resources
available to pay the Consideration at the Closing Date and the Earn-Out when
due.
SECTION 4.6 Brokers. Except for Salomon Smith Barney Inc., no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this
Agreement. The Buyer is solely responsible for all fees and expenses of Salomon
Smith Barney Inc. payable in connection with the transactions contemplated in
this Agreement.
ARTICLE V
COVENANTS OF THE PARTIES
SECTION 5.1 Conduct of Business of the Sellers. Except as otherwise
contemplated by this Agreement or as disclosed on Schedule 5.1, during the
period from the date of this Agreement to the Effective Time, the Sellers will,
and will cause the Transferred Fastener Subsidiaries to, (1) conduct the
Fastener Business only in the ordinary and usual course of the Fastener Business
consistent with past practice, (2) use commercially reasonable efforts to
preserve intact all rights, privileges, franchises and other authority adequate
for the conduct of the Fastener Business as currently conducted, (3) use
commercially reasonable efforts to keep available the services of the Fastener
Business Employees, and (4) use commercially reasonable efforts to maintain
satisfactory relationships with licensors, licensees, suppliers, contractors,
distributors, customers and others having significant business relationships
with the Fastener Business. Without limiting the generality of the foregoing
and, except as otherwise expressly provided in this Agreement, prior to the
Effective Time without the prior written consent of the Buyer which will not be
unreasonably withheld or delayed the Sellers will not permit either the Fastener
Business or any Transferred Fastener Subsidiary to:
(a) create, incur or assume any long-term debt (including obligations in respect
of capital leases), or, except in the ordinary course consistent with past
practice of the Fastener Business under existing lines of credit, create, incur
or assume any short-term debt; assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other Person if such assumption, guarantee, endorsement or
other liability would constitute a liability of the Fastener Business (other
than the guarantee of product warranties in the ordinary course of the Fastener
Business consistent with past practice); provided that (i) the Fastener Business
may create, incur, assume, guarantee, endorse or otherwise become liable or
responsible for any such debt or obligations that will be repaid or otherwise
released on or before the Closing and (ii) the Transferred Fastener Subsidiaries
may endorse negotiable instruments in the ordinary course of the Fastener
Business consistent with past practice;
(b) (i) increase in any manner the compensation of any of the Fastener Business
Employees, except such increases as are granted in the ordinary course of the
Fastener Business in accordance with its customary practices (which shall
include normal periodic performance reviews and related compensation and benefit
increases but not any general across-the-board increases); (ii) declare, pay or
make any commitment or obligation for the payment of additional salary or
similar compensation to any of the Fastener Business Employees (except in
accordance with current written policies in effect on the date hereof and
consistent with past practice); (iii) pay bonuses to the Fastener Business
Employees except in an amount not to exceed $1,700,000 in the aggregate and
which are paid prior to the Closing; (iv) pay or agree to pay any pension,
retirement allowance or other employee benefit not required by any existing Plan
or modify or agree to modify any benefits provided under the Plans; or (v)
commit itself to adopt any additional Plans or, except as otherwise expressly
required or permitted by Article VI, to amend or terminate any of such Plans in
existence on the date hereof;
(c) subject to Section 5.19, permit any of its current insurance (or
reinsurance) policies to be cancelled or terminated or any of the coverage
thereunder to lapse if such policy covers Fastener Business Assets or insures
risks, contingencies or liabilities which could result in a liability of the
Fastener Business, unless simultaneously with such termination, cancellation or
lapse, replacement policies providing coverage equal to or greater than the
coverage remaining under those cancelled, terminated or lapsed are in full force
and effect; provided that (i) in no event will the Sellers be required to enter
into any replacement policy the premiums of which exceed 200% of the premiums of
its current policies, and (ii) the refusal of any insurer to renew any such
policy will not constitute a breach of this paragraph. Notwithstanding the
foregoing, in the event replacement policies providing coverage equal to or
greater than the cancelled, terminated or lapsed policies are not available at
premiums less than 200% of the premiums of the current policies in effect as of
the Closing Date, the Parent shall be required to enter into replacement
policies providing the maximum coverage available for premiums equal to 200% of
the premiums of the current policies in effect on the Closing Date;
(d) except in the ordinary course of the Fastener Business consistent with past
practice, (i) sell, transfer, or otherwise dispose of or agree to sell,
transfer, or otherwise dispose of, any Fastener Business Assets which have a
sales price in excess of $5,000,000, individually or in the aggregate, or (ii)
mortgage, pledge or otherwise encumber any Fastener Business Assets except for
such mortgages or encumbrances which constitute Permitted Exceptions;
(e) (i) sell, transfer, out-license (whereby the Sellers or any of their
respective subsidiaries license intellectual property to third parties) or
otherwise dispose of, or agree to sell, transfer or otherwise dispose of any of
the Fastener Business Intellectual Property or (ii) in-licensing (whereby third
parties license intellectual property to any of the Sellers or any of their
respective subsidiaries) any of the Fastener Business Intellectual Property
except in the ordinary course of the Fastener Business consistent with past
practice;
(f) (i) enter into any agreements, commitments or contracts relating to the
Fastener Business except agreements, commitments or contracts made in the
ordinary course of the Fastener Business consistent with past practice;
provided, however, neither the Fastener Business nor any Transferred Fastener
Subsidiary will (x) enter into any hedging contract or derivative arrangement or
(y) any joint venture arrangements, including those set forth on Schedule 5.1,
or (ii) amend any agreements, commitments or contracts relating to the debt of
any Transferred Fastener Subsidiary;
(g) voluntarily consent to the termination of any material Fastener Business
Contract, material Fastener Business Lease or material Fastener Business
Intellectual Property License by any other party thereto; or voluntarily
terminate by its own actions any material Fastener Business Contract, material
Fastener Business Lease or material Fastener Business Intellectual Property
License; or voluntarily withdraw any application for any material Fastener
Business Intellectual Property;
(h) make any capital expenditures in excess of (i) $1,000,000 for any single
project or (ii) $5,000,000 in the aggregate; provided, however, the Sellers
shall be able to make commitments in respect of maintaining the Fastener
Business Assets in the ordinary course of business in amounts not to exceed
$500,000 in the aggregate;
(i) amend its charter documents in a manner that adversely affects the
transactions contemplated hereby;
(j) waive or release any rights of material value of or with respect to the
Fastener Business or any Fastener Business Asset;
(k) change the accounting principles used in connection with the Fastener
Business unless required by GAAP;
(l) sell or offer for sale the size 5 threaded version of the drive nut used in
connection with the Accu-Lok fastener; and
(m) enter into any agreement, contract, commitment, understanding, undertaking
or arrangement to do any of the foregoing.
Notwithstanding the provisions of this Section 5.1, nothing in
this Agreement shall be construed or interpreted to prevent the Sellers or any
subsidiary of the Sellers from (i) paying or making regular or special dividends
or other distributions consisting of cash, marketable securities or property
that is not a Fastener Business Asset or any combination thereof (other than
pursuant to Section 5.21); (ii) making, accepting or settling intercompany loans
or advances, or (iii) engaging in any other transaction incident to the normal
cash management procedures of the Sellers and their respective subsidiaries,
including short-term investments in time-deposits, certificates or deposit and
banker's acceptances made in the ordinary course of the Fastener Business.
SECTION 5.2 Transfer of Excluded Assets. During the period between the date
of this Agreement and the Closing Date, the Parent shall transfer or cause to
be transferred all of the Excluded Assets that are owned by a Transferred
Fastener Subsidiary to the Parent or any of the Parent's subsidiaries other than
a Transferred Fastener Subsidiary. The transfer of the Excluded Assets will not
create, give rise to or result in any liability or obligation to the Buyer. The
Parent will, on or prior to the Closing Date with respect to any transfer of
Excluded Assets that occurs and is consummated on or prior to the Closing Date,
pay or cause to be paid or satisfy or cause to be satisfied all liabilities and
obligations arising from or otherwise attributable to the transfer of the
Excluded Assets.
SECTION 5.3 Access and Cooperation.
(a) During the period from the date of this Agreement until the Closing Date,
the Sellers will permit the Buyer and its representatives reasonable access on
reasonable notice during normal business hours to the business and operations,
properties, personal property, personnel, books and records, contracts and
commitments of the Fastener Business, the Fastener Business Assets and the
Assumed Fastener Business Liabilities (including the access to customers of the
Fastener Business, provided that such access is strictly to facilitate the
obtaining of any Government approvals), including the right to make copies of
such Fastener Business Books and Records, Fastener Business Contracts, Fastener
Business Leases and Fastener Business Intellectual Property Licenses. During
such period the Parent will cause its representatives and those of the Fastener
Business to consult as reasonably requested by the Buyer on a regular basis with
such representatives of the Buyer and to discuss the ongoing operations of the
Fastener Business including with respect to environmental matters. The Parent
will promptly notify the Buyer of any significant change in the normal course of
the Fastener Business and of any complaints, investigations or hearings (or
communications indicating that the same may be contemplated) by or of any
Government entity, or the institution or threat of any significant litigation,
in each case involving the Fastener Business, and will keep the Buyer fully
informed of such events and permit the Buyer's representatives access to all
material prepared in connection therewith. In the event that any record or other
information requested by the Buyer is subject to a confidentiality agreement
with a third party, attorney-client privilege, or other legal restriction or
privilege, the Sellers and the Buyer will endeavor to find means of disclosing
as much information as practicable that is needed by the Buyer to prepare for
the transfer of the Fastener Business, but the Sellers will not be obligated to
breach such restriction or privilege. All information given or obtained by the
Buyer and its representatives pursuant to this Section 5.3 shall be subject to
the terms of the Confidentiality Agreement, dated December 17, 2001, between the
Buyer and the Parent (the "Confidentiality Agreement"). The Buyer shall return
all copies of such Fastener Business Books and Records, Fastener Business
Contracts, Fastener Business Leases and Fastener Intellectual Property Licenses
and commitments promptly upon the request of any Seller if for any reason the
Closing does not occur and this obligation shall survive the termination of this
Agreement. The access provided by the Sellers to the Buyer pursuant to this
Section 5.3(a) shall include the right of the Buyer to conduct any environmental
investigation that the Buyer deems prudent, provided that the Buyer shall not
undertake any environmental testing or sampling prior to the Closing Date.
Representatives of the Buyer and the Sellers shall meet prior to the performance
of any additional environmental inspection to discuss the schedule and scope of
such work.
(b) Except for Taxes covered in Section 8.7, for a period of seven years after
the Closing, the Buyer and the Sellers shall provide the other with reasonable
access during normal business hours, upon reasonable notice, to all Fastener
Business Books and Records to the extent they relate to the condition or
operation of the Fastener Business Assets, the Transferred Fastener Subsidiaries
or the Assumed Fastener Business Liabilities prior to the Closing (including,
but not limited to, any accounts receivable that the Sellers retain pursuant to
Section 2.10 or that are transferred and assigned to the Parent pursuant to
Section 5.20), to respond to Third Party Claims or for any other legitimate
purpose specified in writing. Each of the Sellers and the Buyer shall have the
right, at its own expense, to make copies of any such books and records. No
party hereto shall destroy any books or records to the extent that they relate
to the condition or operation of the Fastener Business Assets, the Transferred
Fastener Subsidiaries or the Assumed Fastener Business Liabilities prior to the
seventh anniversary of the Closing without first offering to turn over
possession to the other parties by written notice at least ninety days prior to
the proposed date of destruction.
SECTION 5.4 Expenses. Except as otherwise provided by this Agreement,
whether or not the transactions contemplated hereby are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby will be paid by the party incurring such costs and expenses.
Notwithstanding the provisions of this Section 5.4, the Parent and the Buyer
agree that any costs, including, without limitation, filing fees and attorneys'
fees and expenses, incurred in connection with curing any defect in the
chain-of-title of the Fastener Business Intellectual Property shall be shared
equally by the parties.
SECTION 5.5 Commercially Reasonable Efforts.
(a) Subject to the terms and conditions of this Agreement and applicable Law,
each of the parties shall act in good faith and use commercially reasonable
efforts to take, or cause to be taken, all appropriate actions, and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement as soon as
practicable. Without limiting the foregoing, the parties shall, and shall cause
their respective subsidiaries, and use commercially reasonable efforts to cause
their directors, officers, employees, agents, attorneys, accountants and
representatives (and their respective subsidiaries' directors, officers,
employees, agents, attorneys, accountants and representatives), to (i) obtain
all consents, approvals, waivers, licenses, permits, authorizations,
registrations, qualifications or other permissions or actions by, and give all
necessary notices to, and make all filings with and applications and submissions
to, any Government entity (including promptly filing with the United States
Federal Trade Commission (the "FTC") and the Antitrust Division of the United
States Department of Justice (the "Department of Justice") pursuant to the HSR
Act all requisite documents and notifications in connection with the
transactions contemplated by this Agreement) or other Person necessary in
connection with the consummation of the transactions contemplated by this
Agreement as soon as reasonably practicable; (ii) provide all such information
concerning such party, its subsidiaries and its officers, directors, employees,
partners and Affiliates as may be necessary or reasonably requested in
connection with any of the foregoing including clause (i) above; (iii) avoid the
entry of, or have vacated or terminated, any injunction, decree, order, or
judgment that would restrain, prevent, or delay the consummation of the
transactions contemplated hereby. Notwithstanding anything to the contrary in
this Agreement, the Buyer shall not be required to agree to any divestiture by
the Buyer or any of the Sellers or any of their respective subsidiaries (A) of
shares of capital stock or membership interests, or (B) of any of their
respective businesses, assets, properties or product lines, or the imposition of
any material limitation on the ability of any of them to conduct their
respective businesses (including the Fastener Business) or to own or exercise
control of such business, assets, properties, product lines or stock.
(b) The Parent and the Buyer shall keep the other reasonably apprised of the
status of matters relating to the completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by either of them or by any of their respective
subsidiaries, from any third party and/or any Government entity with respect to
the transactions contemplated by this Agreement.
(c) In the case of any Fastener Business Contracts, Fastener Business
Intellectual Property Licenses or Fastener Business Leases, or any other
contracts to which a Transferred Fastener Subsidiary is a party at the Effective
Time which are not by their terms assignable or which require the consent of a
third party in connection with the transactions contemplated by this Agreement,
each of the Sellers agrees to use its commercially reasonable efforts to cause
such assignment or to procure such consent. In those cases where consents have
not been obtained prior to Closing Date (collectively, the "Non-Conveyed
Contracts"), each of the Sellers shall, at the Buyer's request, provide the
Buyer with the benefit of such Non-Conveyed Contracts, including, but not
limited to, (i) enforcing, at the request and expense of the Buyer, any rights
of the Seller, arising with respect thereto (including, without limitation, the
right to terminate a Non-Conveyed Contract in accordance with the terms thereof
upon the advice of the Buyer) or (ii) permitting the Buyer to enforce any rights
arising with respect thereto as if such Non-Conveyed Contracts had been sold,
conveyed, assigned and delivered to the Buyer. The provisions of this Section
5.5(c) shall not affect the right of the Buyer not to consummate the
transactions contemplated by this Agreement if the condition to its obligations
hereunder contained in Section 7.3(d) have not otherwise been fulfilled.
SECTION 5.6 Further Assurances. From time to time, without further
consideration, each of the Sellers will, at the Buyer's expense, execute and
deliver such documents to the Buyer as the Buyer may reasonably request in order
more effectively to consummate the transactions contemplated hereby and to vest
in the Buyer or a Transferred Fastener Subsidiary title to the Fastener Business
Assets (including, without limitation, assistance in the reduction to possession
of any thereof). From time to time, without further consideration, the Buyer
will, at the Seller's expense, execute and deliver such documents as the Sellers
may reasonably request in order more effectively to consummate the transactions
contemplated hereby and to perfect the assumption by the Buyer of the Assumed
Fastener Business Liabilities.
SECTION 5.7 Disclosure Supplements; Schedules and Exhibits. From time to
time after the date of this Agreement and prior to the Effective Time, the
Sellers will promptly supplement or amend the schedules referred to in Article
III (other than Schedule 3.16 with respect to asbestos claims or personal injury
or property damage arising from exposure to Hazardous Materials) and Article VI
with respect to any matter hereafter arising which, if existing or occurring at
or prior to the date of this Agreement, would have been required to be set forth
or described in a schedule or which is necessary to correct any information in a
schedule or in any representation and warranty of the Sellers that has been
rendered inaccurate thereby. From time to time after the date of this Agreement
and prior to the Effective Time, the Buyer will promptly supplement or amend the
schedules referred to in Article IV with respect to any matter hereafter arising
which, if existing or occurring at or prior to the date of this Agreement, would
have been required to be set forth or described in a schedule or which is
necessary to correct any information so previously disclosed or in any
representation and warranty of the Buyer which has been rendered inaccurate
thereby. For purposes of determining the accuracy of the representations and
warranties of each of the Sellers contained in Article III and the accuracy of
the representations and warranties of the Buyer contained in Article IV in order
to determine the fulfillment of the conditions set forth in Sections 7.3(a) and
7.2(a), respectively, the schedules delivered by the Sellers and the schedules
delivered by the Buyer shall be deemed to include only that information
contained therein on the date of this Agreement and shall be deemed to exclude
any information contained in any subsequent supplement or amendment thereto.
SECTION 5.8 Public Announcements. The Buyer and the Sellers agree that
none of them will issue any press release or otherwise make any public statement
or respond to any press inquiry with respect to this Agreement or the
transactions contemplated hereby without the other party's prior written
consent, except for such press releases or public statements as may be required
by applicable Law or the rules of any stock exchange on which such party's
securities are listed, in which case the other party shall nonetheless be
consulted prior to the issuance of any such press release or public statement.
SECTION 5.9 Sales, Use and Transfer Taxes and Fees. The parties agree that
all sales, use and transfer Taxes and related fees (including real estate,
transfer Taxes, stamp or other Taxes of the same or similar nature, and patent
and trademark transfer Taxes and recording fees but excluding, without
limitation, any Taxes arising from the failure of the German spin-off to qualify
as tax-free which shall solely be the responsibility of the Sellers) incurred in
connection with this Agreement and transactions contemplated hereby will be
borne equally by the Sellers and the Buyer. The Buyer and the Sellers shall file
all necessary Tax Returns and other documentation with respect to all such
sales, use and transfer Taxes and fees. The Sellers shall obtain any other
documentation (including, without limitation, reseller or other certificates)
requested by the Buyer.
SECTION 5.10 Noncompetition.
(a) From and after the Effective Time, until the fourth anniversary of the
Closing Date (the "Covenant Period"), each of the Sellers agree that neither it
nor any of its respective subsidiaries will anywhere in the world (i) directly
or indirectly engage in the Fastener Business, or (ii) directly or indirectly
invest in, manage, consult with, operate, participate in or control as a
partner, stockholder or consultant, or otherwise have an equity interest
exceeding five percent in, any Person that competes with the Fastener Business
(the "Noncompetition Agreement"). Without limiting the foregoing, during the
Covenant Period, none of the Sellers or any of their respective subsidiaries
shall (i) directly or indirectly serve as a consultant to any of the Sellers',
the Buyer's or any of their then subsidiaries competitors that compete with the
Fastener Business, or (ii) engage or participate in any effort or act to induce
any of the customers, suppliers, associates or independent contractors of the
Fastener Business, the Buyer or any of the Buyer's subsidiaries to take any
action or refrain from taking any action or inaction that could be reasonably be
foreseen to be disadvantageous to the Fastener Business, the Buyer or the
Buyer's subsidiaries, including without limitation, the solicitation of any of
such parties to cease doing business with the Fastener Business, the Buyer or
the Buyer's subsidiaries. Notwithstanding the foregoing, during the Covenant
Period, none of the Sellers or any of their subsidiaries shall be prohibited
from (i)(x) acquiring a business if no more than 10% of its revenues are derived
from activities that are competitive with the Fastener Business or (y) acquiring
a business if more than 10% of its revenues are derived from activities that are
competitive with the Fastener Business so long as the Sellers or their
subsidiaries use commercially reasonable efforts to sell, discontinue or
otherwise dispose of such business within a reasonable period of time after it
is acquired (but no later than 12 months after such acquisition) or (ii)
engaging in the businesses operated by Fairchild Aerostructure Company and the
APS division of Fairchild Holding as such businesses are operated as of the
Closing Date.
(b) For a period of four years after the Effective Time, neither the Parent nor
any of its subsidiaries shall solicit or rehire (other than as a result of a
public advertisement or general solicitation not specifically targeted at
Fastener Business Employees) any Fastener Business Employees, unless the Buyer
consents in writing to such solicitation or rehire, provided that the foregoing
will not (i) prevent the Parent from soliciting or rehiring any such Fastener
Business Employees after the termination of such employee's employment by the
Buyer or any of its subsidiaries, (ii) prohibit the Parent from placing public
advertisements or conducting any other form of general solicitation which is not
specifically targeted at Fastener Business Employees or (iii) prohibit the
Parent from soliciting or rehiring any Fastener Business Employee if such
employee has not been employed by the Buyer for 12 consecutive months. For a
period of four years after the Effective Time, neither the Buyer nor any of its
subsidiaries shall solicit or hire any employee of the Parent or any of its
subsidiaries, unless the Parent consents in writing to such solicitation or
hire, provided that the foregoing will not (i) prevent the Buyer from soliciting
or hiring any such employee of the Parent after the termination of such
employee's employment by the Parent or any of its subsidiaries, (ii) prohibit
the Buyer from placing public advertisements or conducting any other form of
general solicitation which is not specifically targeted at employees of the
Parent, (iii) prohibit the Buyer from soliciting or hiring any employee of the
Parent if such employee has not been employed by the Parent for 12 consecutive
months or (iv) prohibit the Buyer from hiring any Transferred Employees in
accordance with Section 6.1(a).
(c) It is the intention of the parties to this Agreement that the provisions of
this Section 5.10 shall be enforced to the fullest extent permissible under the
Laws and public policies applied in each jurisdiction in which enforcement is
sought. If any particular provisions or portion of this Section 5.10 shall be
adjudicated to be invalid or unenforceable, this Section shall be deemed amended
to delete therefrom such provision or portion adjudicated to be invalid or
unenforceable; such amendment to apply only with respect to the operation of
such Section in the particular jurisdiction in which such adjudication is made.
(d) Each of the Sellers acknowledges that the Buyer would be irreparably harmed
by any breach of this Section 5.10 and that there would be no adequate remedy at
Law or in damages to compensate the Buyer for any such breach. Each of the
Sellers agrees that the Buyer shall be entitled to injunctive relief requiring
specific performance by each of the Sellers of this Section 5.10, and such
Sellers consent to the entry thereof.
SECTION 5.11 No Solicitation.
(a) Each of the Sellers agrees that it will not, directly or indirectly through
any officer, subsidiary, Affiliate, director, employee, stockholder,
representative, agent or other Person, (i) seek, initiate, solicit or encourage
any Person to make an inquiry or proposal with respect to the purchase or other
acquisition (including by way of a merger, consolidation, stock purchase, asset
purchase or share exchange) of a significant portion of the Fastener Business
Assets or any substantially similar transaction, in each case other than the
transactions contemplated by this Agreement (a "Fastener Business Acquisition
Proposal"), (ii) engage in negotiations or discussions concerning a Fastener
Business Acquisition Proposal with any Person or group, (iii) disclose any
non-public information relating to the Sellers or give access to the properties,
employees, books or records of the Sellers or any of its subsidiaries to any
Person or group in connection with any Fastener Business Acquisition Proposal or
(iv) approve or recommend or agree to approve or recommend any Fastener Business
Acquisition Proposal; provided that nothing herein shall prevent the Board of
Directors of the Parent from (a) furnishing information to any Person that has
made a Fastener Business Acquisition Proposal not solicited in violation of this
Section 5.11 or (b) subject to the other provisions of this Section 5.11,
entering into or participating in discussions or negotiations concerning a
Fastener Business Acquisition Proposal not solicited in violation of this
Section 5.11 so long as, in each case, (x) the Board of Directors of the Parent
shall have concluded in good faith, after receiving and considering the advice
of its outside legal counsel, that failing to participate in such discussions or
negotiations or furnishing such information would cause the Board of Directors
of the Parent to be in breach of its fiduciary responsibilities to its
stockholders under applicable Law, and (y) prior to participating in such
discussions or negotiations or furnishing any such information, such Seller and
the party making such offer agrees to a confidentiality agreement that is no
more favorable to the party receiving information than the Confidentiality
Agreement and the Buyer is given concurrent or advance written notice thereof.
The Board of Directors of the Parent may (A) fail to make, withdraw, or modify
in a manner adverse to the Parent its recommendation to its stockholders
referred to in Section 5.12 hereof, (B) take and disclose to its stockholders a
position contemplated by Rule 14e-2 under the Exchange Act or otherwise
complying with its disclosure obligations and/or (C) take any non-appealable,
final action ordered to be taken by the Parent by any court of competent
jurisdiction, but in each case only if the Board of Directors of the Parent
shall have concluded in good faith, after consultation with its outside legal
counsel, that such action is required in the exercise of its fiduciary duties
under applicable Law.
(b) The Parent shall notify the Buyer in writing no later than the end of the
next business day after receipt thereof of the receipt of any Fastener Business
Acquisition Proposal (including providing a copy thereof if in writing), the
terms and conditions of such Fastener Business Acquisition Proposal and the
identity of the Person making it. The Parent also shall promptly notify the
Buyer no later than the end of the next business day of any change to or
modification of such Fastener Business Acquisition Proposal.
(c) Subject to the provisions of Section 5.11(a), the Sellers shall, and shall
cause each of their respective subsidiaries and their respective advisors,
employees and other agents to, cease immediately and cause to be terminated any
and all existing activities, discussions or negotiations, if any, with any third
party conducted prior to the date hereof with respect to any Fastener Business
Acquisition Proposal.
SECTION 5.12 Special Shareholders Meeting. The Parent shall take all action
necessary in accordance with applicable Law and its certificate of incorporation
and bylaws to convene a special meeting of its shareholders as promptly as
possible for the purpose of obtaining the Shareholder Approval of the
transactions contemplated by this Agreement (the "Special Shareholders
Meeting"). The Proxy Statement shall contain the recommendation of the Board of
Directors of the Parent that the shareholders of the Parent vote to adopt a
resolution embodying the transactions contemplated by this Agreement pursuant to
Section 271 of the DGCL, subject to clause (A) of the last sentence of Section
5.11(a). The Board of Directors of the Parent shall at all times recommend such
adoption and shall take all reasonable action necessary or appropriate to
solicit such adoption, subject to clause (A) of the last sentence of Section
5.11(a).
SECTION 5.13 Proxy Statement.
(a) Promptly after the execution of this Agreement, the Parent shall use
reasonable best efforts to prepare and, as soon as is reasonably practicable,
file with the SEC the Proxy Statement, together with appropriate forms of proxy,
with respect to the Special Shareholders Meeting. The Buyer and its outside
counsel shall be given the opportunity to review and comment on the Proxy
Statement before it is filed with the SEC. The Parent shall use its reasonable
best efforts to have the Proxy Statement cleared by the SEC as promptly as
practicable after filing and, as promptly after the Proxy Statement has been so
cleared, shall mail the Proxy Statement to the stockholders of the Parent as of
the record date for the Special Shareholders Meeting. The Buyer and the Parent
each agree to correct any information provided by it for use in the Proxy
Statement which shall have become false or misleading in any material respect
and shall take all steps necessary to cause the Proxy Statement as so corrected
to be filed with the SEC, and to be disseminated to the stockholders of the
Parent Common Stock to the extent required by applicable Law.
(b) The Parent shall notify the Buyer promptly of the receipt by it of any
comments of the SEC and of any request by the SEC for amendments or supplements
to the Proxy Statement and will supply the Buyer with copies of all
correspondence between the Parent and its representatives, on the one hand, and
the SEC or the members of its staff or any other Government official, on the
other hand, with respect to the Proxy Statement. The Buyer and the Parent shall
use all reasonable efforts to respond promptly to any comments made by the SEC
or any other Government official with respect to the Proxy Statement.
SECTION 5.14 Repayment of Debt.
(a) Sufficiently in advance of the Closing, the Parent will commence a cash
tender offer for all of the outstanding principal amount of the Parent's 10 3/4%
Senior Subordinated Notes due 2009 in accordance with the terms of the
Indenture, dated as of April 20, 1999 pursuant to which such Notes were issued
(the "10 3/4% Indenture"), (the "Debt Tender Offer") on terms and conditions
which shall be reasonably satisfactory to the Buyer. In addition, the Parent
will purchase all Notes validly tendered in the Debt Tender Offer.
(b) Concurrently with the Closing, the Parent shall repay in full all
outstanding indebtedness under the Credit Agreement, dated as of April 20, 1999,
as amended.
SECTION 5.15 Use of Fairchild Fastener Name. From and after the Closing,
the Sellers and their respective subsidiaries shall (i) not operate any business
under or otherwise use the Fairchild Fastener name or any trademark or Internet
domain name set forth on Schedule 3.12(a), (ii) adopt new trade names,
trademarks, service marks, logos, slogans, designs and Internet domain names, as
appropriate, which are not confusingly similar to the Fairchild name or any
trademark or Internet domain name set forth on Schedule 3.12(a) and (iii) not
use the Fairchild name in any fastener business.
SECTION 5.16 Transfers Not Effected at the Closing.
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(a) In the event that record or beneficial ownership or possession of any
Excluded Asset has been transferred to the Buyer on the Closing Date, the Buyer
shall use its commercially reasonable efforts to transfer, or cause to be
transferred, to the Sellers such Excluded Asset, and pending such transfer to
the Sellers, the Buyer shall hold such Excluded Asset and provide to the Sellers
all of the benefits and liabilities associated with the ownership and operation
of such Excluded Asset and, accordingly, the Buyer shall cause such Excluded
Asset to be operated or retained as may reasonably be instructed by the Sellers
and the Sellers shall indemnify the Buyer for the Damages resulting from such
operation or retention so long as such operation or retention are in accordance
with the Sellers' instructions; provided, however, that the Sellers shall not
indemnify the Buyer for any Damages arising from such operation or retention
which are judicially determined to have resulted primarily from willful
misconduct or gross negligence on the part of the Buyer.
(b) In the event that record or beneficial ownership or possession of any
Fastener Business Assets has not been transferred to the Buyer on the Closing
Date, the Sellers shall use their commercially reasonable efforts to transfer,
or cause to be transferred, to the Buyer such Fastener Business Assets, and
pending such transfer to the Buyer, the Sellers shall hold such Fastener
Business Assets and provide to the Buyer all of the benefits and liabilities
associated with the ownership and operation of such Fastener Business Assets
and, accordingly, the Sellers shall cause such Fastener Business Assets to be
operated or retained as may reasonably be instructed by the Buyer and the Buyer
shall indemnify the Sellers for the Damages resulting from such operation or
retention so long as such operation or retention are in accordance with the
Buyer's instructions; provided, however, that the Buyer shall not indemnify the
Sellers for any Damages arising from such operation or retention which are
finally judicially determined to have resulted primarily from willful misconduct
or gross negligence on the part of the Sellers.
SECTION 5.17 June 30, 2002 Audited Financial Statements. The Parent will
communicate as promptly as possible to the Buyer all proposed audit adjustments
related to the Fastener Business which are over $1,000,000 individually or
$5,000,000 in the aggregate that are identified as part of the June 30, 2002
audit of the Parent. In addition, the Parent will provide to the Buyer any sworn
statements filed by the Parent with the SEC from the date of this Agreement
through the Closing Date.
SECTION 5.18 Takeover Statutes. If any "fair price," "moratorium," "control
share acquisition" or other form of anti-takeover statute or regulation shall
become applicable to the transactions contemplated hereby, the Parent and the
Buyer and the members of their respective Boards of Directors shall grant such
approvals and take such actions as are reasonably necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise act to eliminate or minimize the
effects of such statute or regulation on the transactions contemplated hereby.
SECTION 5.19 Product Liability Insurance. Beginning on the Closing Date
until at least the fifth anniversary of the Closing Date, the Parent agrees to
maintain noncancelable run-off policies in a form reasonably satisfactory to the
Buyer covering product liability for aviation products and non-aviation products
of the Fastener Business, subject to the next sentence. The product run-off
policies covering product liability for aviation products shall be written
annually with limits of not less than $100,000,000 and the product run-off
policies covering product liability for non-aviation products shall annually be
written with limits of not less than $50,000,000; provided, that (i) in no event
will the Parent be required to enter into any replacement policy the premiums of
which exceed 200% of the premiums of the run-off policies in effect on the
Closing Date, and (ii) the refusal of any insurer to provide quotes or write
coverage for renewals of any such run-off policy or replacement policy will not
constitute a breach of this Section 5.19. Notwithstanding the foregoing, in the
event that, during such five year period, replacement policies providing the
minimum coverage required by this Section 5.19 are not available at premiums
less than 200% of the premiums of the run-off policies in effect on the Closing
Date, the Parent shall be required to enter into replacement policies providing
the maximum coverage available at premiums equal to 200% of the premiums of the
run-off policies in effect on the Closing Date. The Parent and all Transferred
Fastener Subsidiaries shall be named insureds, and the Buyer shall be named as
an additional insured on the Parent's run-off product liability policies. The
Parent shall provide the Buyer with copies of the policies and any renewals
thereof. At the Closing and annually thereafter, the Parent shall provide the
Buyer with evidence of compliance with this obligation under this Section 5.19.
The product run-off policies maintained by the Parent pursuant to this Section
5.19 shall be written on an occurrence policy form and shall be referred to
herein as the "Fastener Business Product Liability Insurance."
SECTION 5.20 Post-Closing Treatment of Accounts Receivables. Following the
Closing, the Buyer shall, or shall cause each of its Affiliates to, use its
commercially reasonable efforts to collect the accounts receivable outstanding
as of the Closing Date, which shall represent all the account receivables of the
Fastener Business included on the Closing Date Balance Sheet (the
"Receivables"). Upon the earlier of the completion of the Closing Date Balance
Sheet by the Buyer or ninety days following the Closing Date, the Buyer shall
have the right to transfer and assign any or all of the uncollected portion of
any Receivable which is at least ninety days past due as of such date to the
Parent by delivering an executed assignment agreement together with a
certificate of an officer of the Buyer that sets forth the amount of each such
Receivable, the date of invoice and the invoice number for each such Receivable
being so assigned (the "Assigned Receivable") and certifies that no portion of
the Receivables being transferred and assigned to the Parent has been collected
by the Buyer or its Affiliates and that the Buyer and its Affiliates have
otherwise complied with this Section 5.20 (the "Receivables Certificate").
Within five business days after receipt of the Receivables Certificate, the
Parent agrees to remit to the Buyer an amount equal to (x) the dollar amount of
such Assigned Receivable as set forth in the Receivables Certificate minus (y)
$3,832,000 by wire transfer of immediately available funds to a bank account
designated by the Buyer for such purpose. On the 180th day following the Closing
Date, the Buyer shall have the right to transfer and assign to the Parent any or
all of the uncollected portion of any and all other Receivables that remain
uncollected together with a Receivables Certificate with respect to any or all
other Receivables that remain uncollected as of such date. To the extent that
the aggregate amount of the Assigned Receivables transferred and assigned to the
Parent pursuant to this Section 5.20 is less than $3,832,000, the Buyer shall
promptly remit to the Parent the difference between the aggregate amount of the
Assigned Receivables transferred to the Parent and $3,832,000 by wire transfer
of immediately available funds to a bank account designated by the Parent for
such purpose. If the customer pays the Buyer in respect of an Assigned
Receivable, the Buyer shall promptly remit such payment to the Parent by wire
transfer of immediately available funds to a bank account designated by the
Parent for such purpose. The Buyer hereby agrees that it shall not, and shall
cause its Affiliates not to, take any action or omit to take any action that
would (i) waive the Parent's right to collect, release or otherwise forgive any
Assigned Receivables or (ii) result in any legal restrictions on the Parent's
ability to pursue and collect any Assigned Receivables. The Buyer hereby
acknowledges that the Parent shall have the exclusive right to pursue and
collect any Assigned Receivables. Subject to Section 5.3, the Buyer will provide
access to all documentation and personnel necessary for the Parent to pursue
collection of the Assigned Receivables. The Parent will have the right to make
copies of any documentation necessary for such collection.
SECTION 5.21 Continued Existence. For a period of five years after the
Closing Date, the Parent shall (i) maintain its corporate existence, (ii) not
authorize or take any other action to implement or effect a voluntary or
involuntary, liquidation, dissolution or winding up of the Parent, and (iii) not
authorize or take any action to declare or pay any dividends on the Parent
Common Stock, whether in cash, property or securities; provided, however, that
nothing in this Section 5.21 shall prevent the Parent from engaging in a merger,
sale of substantially all its assets or other business combination after the
Closing Date if prior to the consummation of such transaction, the successor in
interest to the Parent (or the purchaser of such assets, as the case may be) in
such transaction agrees in writing (for the benefit of the Buyer Indemnified
Parties) to assume and become fully responsible for, pursuant to an agreement
reasonably satisfactory in form and substance to Buyer, all of the Parent's
obligations under this Agreement (including, without limitation, the Parent's
obligations under Articles VI, VIII and XI). Notwithstanding the foregoing,
nothing in this Section 5.21 shall prevent the Board of Directors of the Parent
from taking any action that, after receiving and considering the advice of its
outside legal counsel, is required in order for the Board to properly exercise
its fiduciary responsibilities to the stockholders of the Parent under
applicable Law.
SECTION 5.22 Fairchild Fasteners Europe Simmonds. Prior to the Closing
Date, the Sellers shall convert, or shall cause to be converted, Fairchild
Fasteners Europe Simmonds S.A.R.L. into an SAS for French corporate purposes.
SECTION 5.23 Environmental Permits. In cooperation with the Buyer, the
Sellers shall take all reasonable commercial actions to transfer to the Buyer
all Environmental Permits effective as of the Effective Time, or, if such
Environmental Permits are not transferable, have such Environmental Permits
reissued to the Buyer effective as of the Effective Time, provided that the
Sellers shall have no obligation hereunder to the extent that applicable
Environmental Law would allow the Buyer to own and operate the Fastener Business
after the Closing Date without the transfer or reissuance of such Environmental
Permits prior to the Closing Date.
SECTION 5.24 United Kingdom Subsidiaries. Prior to the Closing, the Sellers
and the Buyer shall cause their respective subsidiaries to execute all documents
that are reasonably necessary to transfer all shares of Fairchild Fasteners UK
Ltd., a wholly owned indirect subsidiary of the Parent, to a subsidiary of the
Buyer organized under the laws of the United Kingdom. There shall be no
additional consideration payable by the Buyer to the Sellers in connection with
the transfer contemplated by this Section 5.25.
SECTION 5.25 Transfer of Fastener Business Real Property. Prior to the
Closing, the Sellers shall, or shall cause their respective subsidiaries to,
cause any Plan with any right, title or interest in any Fastener Business Real
Properties or Fastener Business Leases to sell, convey, assign, transfer and
deliver such right, title and interest in such Fastener Business Real Properties
or Fastener Business Leases to the Sellers, free and clear of all Liens.
SECTION 5.26 Accrued Expenses. The parties agree that within 30 days of the
date of this Agreement each party shall agree on the items set forth on Schedule
5.26 to be included in "Accrued Expenses" for purposes of calculating of Net
Working Capital for purposes of the Closing Date Balance Sheet as set forth on
Schedule 1.93(c).
SECTION 5.27 Fullerton Property. Effective as of the Effective Time, (a)
the Parent shall have exercised its option to purchase the real property located
at 800 S. State College Boulevard, Fullerton, California 92831 (the "Fullerton
Property"), and shall have closed on the purchase of the Fullerton Property; and
(b) the Buyer shall have entered into a lease agreement with the Parent pursuant
to which the Buyer shall lease the Fullerton Property from the Parent upon the
same terms and conditions set forth in the Parent's present lease with respect
to the Fullerton Property (lease dated December 31, 1979, as amended dated July
1, 1997 and June 28, 1985 with 800 State College Partners c/o Black Equities
other than (i) the renewal options, (ii) the purchase option and (iii) the right
of first offer to purchase). Prior to the end of the term of the Parent's lease
with the Buyer for the Fullerton Property, the Buyer and the Parent shall enter
into good faith negotiations with respect to a new lease on commercially
reasonable terms.
SECTION 5.28 Intellectual Property. The Sellers will continue to develop
and test the size 5 non-threaded version of the drive nut used in connection
with the Accu-Lok fastener. The Sellers have filed or will file promptly, but in
no event later than the Closing Date, applications for patent for the Accu-Lok
fastener using the non-threaded version of the drive nut in the European Patent
Office, Canada, France, Germany, Spain and the United Kingdom.
ARTICLE VI
SELLER EMPLOYEES
SECTION 6.1 Employment.
(a) Effective as of the Effective Time, each employee of the Sellers actively
employed in the Fastener Business immediately prior to the Effective Time and
listed on Schedule 6.1 (which Schedule may be updated as of the Closing Date to
reflect new employees of the Fastener Business, if any) (the "Fastener Business
Employees") shall cease to be an employee of the Sellers and the Buyer shall
offer or cause to be offered employment, on an at-will basis, to all Fastener
Business Employees. Effective as of the Effective Time and until December 31,
2003, and subject to Section 6.2(a), the Buyer shall cause the Fastener Business
Employees, as a group, who accept and commence employment with the Buyer or a
subsidiary of the Buyer as of the Effective Time (the "Transferred Employees")
to be provided with employee benefit arrangements that shall, in the aggregate,
be no less favorable than as provided by the Sellers to such Transferred
Employees, as a group, immediately prior to the Effective Time, provided that in
no event shall the Buyer be required to continue any of the Sellers' Plans and
benefits; provided, further, that this provision shall not apply to those
Fastener Business Employees who are based outside the United States.
(b) The Buyer shall cause the Transferred Employees to be given full credit for
all service with the Parent or any subsidiary of the Parent prior to the
Effective Time for purposes of eligibility and vesting (but not for purposes of
benefit accrual) under any employee benefit plans or arrangements of the Buyer
or any subsidiary of the Buyer in which such Transferred Employees participate
from and after the Effective Time to the same extent such service was recognized
by the Parent or any subsidiary of the Parent under a corresponding Plan of the
Parent or, if applicable, of a subsidiary of the Parent immediately prior to the
Effective Time. The Buyer shall, or shall cause a subsidiary of the Buyer to,
(i) waive all limitations as to preexisting conditions, exclusions and waiting
periods with respect to participation and coverage requirements applicable to
Transferred Employees under the medical and life insurance plans in which such
employees may be eligible to participate after the Effective Time in connection
with the transfer of employment to Buyer, other than limitations or waiting
periods that are already in effect with respect to such employees and that have
not been satisfied as of the Effective Time under any welfare plan of the Parent
or any subsidiary of the Parent in which Transferred Employees participate
immediately prior to the Effective Time, and (ii) provide each Transferred
Employee with credit for any co-payments and deductibles paid prior to the
Effective Time in satisfying any applicable deductible or out-of-pocket
requirements for the year in which the Effective Time occurs under any welfare
plans in which such employees are eligible to participate after the Effective
Time, as if those deductibles or co-payments had been paid under the welfare
plans in which such employees are eligible to participate after the Effective
Time.
(c) Subject to Section 6.2, the Sellers shall remain responsible for, and shall
indemnify and hold harmless the Buyer against, any and all Damages relating to
or arising out of any of the Sellers' Plans, programs, agreements or
arrangements or obligations thereunder accrued or related to circumstances
existing on, or prior to, the Effective Time. Subject to Section 6.2, the Buyer
shall be responsible for, and shall indemnify and hold harmless the Sellers
against, any and all Damages relating to or arising out of any of the Buyer's
employee benefit arrangements or obligations thereunder, as well as employee
benefit arrangements that are assumed by the Buyer pursuant to Section 6.2
hereof, which Damages relate to events that occur after the Effective Time.
SECTION 6.2 Assumption of Plans.
(a) Effective as of the Closing Date, the Buyer shall assume the Sellers'
post-retirement welfare benefit plans solely with respect to Transferred
Employees and the former employees of the Fastener Business (which former
employees are listed on Schedule 6.2(a)). The Sellers shall continue to provide
all administrative services, at the Buyer's expense, with respect to the benefit
obligations assumed by the Buyer pursuant to this Section 6.2(a) through
December 31, 2003. With respect to the Sellers' provision of administrative
services pursuant to this Section 6.2(a), the Sellers shall deliver to the Buyer
on a monthly basis, an invoice reflecting the costs actually incurred by the
Sellers with respect to their provisions of such services. The Buyer shall pay
the Sellers the amount indicated in such invoice within ten business days
following receipt of such invoice. Nothing herein shall limit the right of the
Buyer, following the Closing Date, to amend or terminate the programs under
which such benefits are provided, subject to applicable Law.
(b) The Parent shall retain each of its pension plans (whether or not qualified)
("Parent Pension Plans") and shall retain and be responsible for, and the
Sellers shall indemnify and hold harmless the Buyer against, any and all Damages
with respect to, any Parent Pension Plan and any benefits under such plan to
which any Transferred Employee or any former employee of the Fastener Business
is currently entitled or may become entitled after the Effective Time. The Buyer
shall provide such information as the Sellers or their designee may reasonably
request, from time to time, in connection with the administration of the Parent
Pension Plans.
(c) (i) The Sellers shall retain and be responsible for all liabilities and
obligations, and the Sellers shall indemnify and hold harmless the Buyer against
any and all Damages, arising or related to any employment, change of control or
severance contract (including all payments thereunder) between the Sellers and
any Fastener Business Employee including, but not limited to, those set forth on
Schedule 6.2(c)(i). Following the Closing, the Buyer agrees to make available an
aggregate amount equal to $5,000,000 for payments to a group of Fastener
Business Employees identified on Schedule 6.2(c)(ii) (the "Payment Pool"). As
promptly as possible following the date of this Agreement, representatives of
the Buyer and representatives of the Seller shall enter into good faith
discussions regarding the allocation of the Payment Pool among the individuals
identified on Schedule 6.2(c)(ii); provided, however, the Buyer shall have the
right in its sole discretion to determine the specific Fastener Business
Employees to receive any such payment and the amount of such payment; and
provided, further, that any Fastener Business Employee who does not receive a
payment from the Buyer pursuant to this Section 6.2(c) may be retained as an
employee of the Sellers following the Closing. The Sellers must provide the
Buyer with written notice of those Fastener Business Employees the Sellers
intend to retain pursuant to this Section 6.2(c) at least five business days
prior to the Closing Date. (ii) In the event the amount of money allocated from
the Payment Pool to any Fastener Business Employee set forth on Schedule
6.2(c)(ii) is less than the aggregate amount of the change of control, stay pay
and other retention payments payable to such employee under his contract with
the Fastener Business, the Parent shall pay such difference to the Fastener
Business Employee in accordance with the terms of such person's contract, and
the Buyer shall have no obligation with respect to any such change of control,
stay pay and other retention payments. In the event that any Fastener Business
Employee set forth on Schedule 6.2(c)(i) becomes a Transferred Employee and such
Transferred Employee remains employed with the Buyer for a period of six months
following the Closing Date, the Buyer agrees to pay such employee the amount of
the severance obligations in accordance with the terms of such Employee's
employment agreement. In the event that any Fastener Business Employee set forth
on Schedule 6.2(e)(i) becomes a Transferred Employee and such Transferred
Employee is terminated by the Buyer prior to the sixth month anniversary of the
Closing Date, (a) the Sellers shall remain fully liable for payment of the full
amount of such employee's severance payments under his employment agreement and
(b) the Buyer shall not rehire such terminated Transferred Employee as an
employee or a consultant for a two year period following such employee's date of
termination.
(d) The Sellers shall be fully responsible for the payment of any benefits due
any Transferred Employee under any Plan of the Sellers or their respective
Affiliates and each Individual Agreement to which the Sellers or their
respective Affiliates are a party in the nature of interim benefits to motivate
the Fastener Business Employees to become Transferred Employees, including any
payments made pursuant to a retention contract or other retention bonus
arrangement but the Seller may use the Payment Pool to satisfy its obligations
to pay such benefits due to the Transferred Employees.
(e) The Sellers shall be fully responsible for any benefits in the nature of
severance pay due to any Fastener Business Employee under any Plan or Individual
Agreement who does not accept an offer of employment described in Section 6.1(a)
hereof. The severance benefits provided by the Buyer to any Transferred Employee
who is based in the United States (each, a "Transferred U.S. Employee") whose
employment with the Buyer is involuntarily terminated (other than for cause) by
the Buyer or a Buyer subsidiary within twelve months following the Effective
Time shall not be less favorable than the severance benefits set forth on
Schedule 6.2(e) (which are the benefits that a Fastener Business Employee would
have been entitled to had his or her employment been terminated by the Sellers
or any subsidiaries of the Sellers (as the case may be) immediately prior to the
Effective Time).
(f) To the extent that any obligations might arise under WARN, 29 U.S.C. Section
2101 et seq., or under any similar provision of any Law (hereinafter referred to
collectively as "WARN Obligations") as a consequence of the transactions
contemplated by this Agreement, the Sellers shall be responsible for any WARN
Obligations arising as a result of any employment losses occurring prior to the
Effective Time, and the Buyer shall be responsible for any WARN Obligations
arising as a result of any employment losses occurring on or after the Effective
Time. At the Closing Date, the Sellers will deliver to the Buyer a list
reflecting the number of Fastener Business Employees who suffered an employment
loss during the ninety day period prior to the Closing.
(g) Effective as of the Effective Time, each Transferred Employee shall not be
eligible to make contributions (or have contributions made on his behalf) to the
Sellers' defined contribution plans (the "Parent DC Plans"), other than
contributions payable for periods prior to the Closing Date which have not been
remitted as of the Closing Date. The Sellers shall cause each Transferred
Employee to be fully vested in such Transferred Employees account balance in the
Parent DC Plan in which such Transferred Employee participates as of the Closing
Date. The Buyer shall establish or designate one or more defined contribution
plans in which Transferred U.S. Employees shall be eligible to participate as
soon as practicable after the Closing Date (the "Buyer DC Plans"). Each
Transferred Employee shall be permitted to receive a distribution of such
Transferred Employee's full account balance from the Parent DC Plans or have
such distribution "rolled over" in cash to an eligible retirement plan
(including the Buyer DC Plan), as soon as practicable after the Closing Date.
(h) Effective as of the Effective Time, each Transferred U.S. Employee shall
cease to accrue additional benefits under Sellers' defined benefit pension plans
listed on Schedule 6.2(h) (the "Parent DB Plans"). Each Transferred U.S.
Employee shall be permitted to receive a distribution of such Transferred U.S.
Employee's accrued benefit, actuarially adjusted for commencement before normal
retirement age, in accordance with the terms of the applicable Plan from the
Parent DB Plan in which such Transferred U.S. Employee participates as of the
Closing Date, as soon as practicable after the Closing Date. As soon as
practicable (but not later than six months) after the Closing Date, the Buyer
shall establish or designate one or more defined benefit pension plans to cover
those Transferred U.S. Employees who, immediately prior to the Effective Time,
participated in any Parent DB Plan, effective as of the Closing Date (the "Buyer
DB Plans").
(i) The Sellers shall be responsible for and pay any and all workers'
compensation and other similar statutory claims asserted by or with respect to
any Transferred Employees in respect of any injury or other compensable event or
occupational illness or disease which occurred or is attributable to any event,
state of facts or condition which existed or occurred in whole on or before the
Closing Date. The Buyer shall be responsible for and pay any and all workers'
compensation and other similar statutory claims asserted by or with respect to
any Transferred Employees hired by the Buyer in respect of any injury or other
compensable event or occupational illness or disease which occurred or is
attributable to any event, state of facts or condition which existed or occurred
in whole after the Closing Date. If any such injury or other compensable event
or occupational illness or disease of a Transferred Employee who is employed by
the Sellers before the Closing Date and by the Buyer after the Closing Date is
attributable in part to causes occurring before the Closing Date and in part to
causes after the Closing Date and is the basis of a workers' compensation or
other similar statutory claim, the liability for any such claims shall be shared
by the Sellers and the Buyer in the proportion of the periods of exposure in
respect of the occupational illness or disease of such Transferred Employee
which occurred before the Closing Date and that which occurred after the Closing
Date except for California employees. For Transferred Employees working in
California, if any such injury or other comparable event or occupational illness
or disease of a Transferred Employee who is employed by the Sellers before the
Closing Date and by the Buyer after the Closing Date is attributable in part to
causes occurring before the Closing Date and in part to causes occurring after
the Closing Date and is the basis of a workers' compensation or other similar
statutory claim, the liability for any such claims shall be shared by the
Sellers and the Buyer in the proportion of the periods of exposure as would be
taken into account under the applicable provisions of the California Labor Code
in respect of the occupational illness or disease of such Transferred Employee
which occurred before the Closing Date and that which occurred after the Closing
Date. If the Buyer pays or is otherwise held responsible for the Sellers'
allocated portion of any workers' compensation or other similar statutory claim,
the Sellers will reimburse the Buyer for such portion paid by the Buyer. The
Buyer's obligations under this Section 6.2(i) shall not preclude the Buyer's
right to indemnification under Article XI for any breach of any representation
or warranty made by the Sellers in this Agreement.
(j) Treatment of Foreign Plans and Employees. Effective as of the Closing Date,
the Buyer shall assume Sellers' liabilities and obligations, and shall receive
the assets, under each of the Plans that are based outside of the United States
and cover exclusively Transferred Employees who are based outside of the United
States.
(k) Administrative Services. The Sellers shall continue to provide all
administrative services at the Buyer's expense with respect to the Buyer's
provision of health, dental and disability benefits to the Transferred U.S.
Employees through December 31, 2003. With respect to the Sellers' provision of
administrative services pursuant to this Section 6.2(k), the Sellers shall
deliver to the Buyer, on a monthly basis, an invoice reflecting the costs
actually incurred by the Sellers with respect to their provision of such
services. The Buyer shall pay the Sellers the amount indicated in such invoice
within ten business days following its receipt of such invoice.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.1 Conditions to Each Party's Obligations to Effect the
Transactions Contemplated Hereby. The respective obligations of each party to
effect the transactions contemplated hereby shall be subject to the fulfillment
at or prior to the Effective Time of the following conditions:
(a) To the extent required by applicable Law, each of the Sellers and the Buyer
and any other Person (as defined in the HSR Act) required in connection with the
transactions contemplated hereby to file a Notification and Report Form for
Certain Mergers and Acquisitions with the Department of Justice and the FTC
pursuant to the HSR Act shall have made such filing and all applicable waiting
periods with respect to each such filing (including any extensions thereof)
shall have expired or been terminated;
(b) To the extent required by applicable Law, each of the Sellers and the Buyer
and any other Person required in connection with the transactions contemplated
hereby to file any filings with any Government entity outside the U.S. shall
have made such filings and such Government entities outside the U.S. shall have
approved or cleared all such filings;
(c) No statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or enforced by any court or
Government entity which prohibits the consummation of the transactions
contemplated hereby substantially on the terms contemplated hereby or has the
effect of making the acquisition of the Fastener Business by the Buyer or any of
its Affiliates illegal;
(d) The transactions contemplated by this Agreement shall have received the
requisite vote required for the Shareholder Approval; and
(e) The Parent shall have repaid that certain indebtedness described in Section
5.14(b) in the manner set forth and in accordance with the provisions of Section
5.14(b).
SECTION 7.2 Conditions to the Obligations of the Sellers to Effect the
Transactions Contemplated Hereby. The obligations of the Sellers to effect the
transactions contemplated hereby shall be further subject to the fulfillment at
or prior to the Effective Time of the following conditions, any one or more of
which may be waived by the Sellers:
(a) All of the representations or warranties of the Buyer set forth in the
Agreement that are qualified by materiality or material adverse effect shall be
true and correct, and all of the representations and warranties of the Buyer set
forth in the Agreement that are not so qualified shall be true and correct in
all material respects, in each case, as if such representations or warranties
were made on and as of the date hereof and as of the Effective Time (except to
the extent such representations and warranties speak as of a specific date or as
of the date hereof, in which case such representations and warranties shall be
so true and correct or true and correct in all material respects, as the case
may be, as of such specific date or as of the date hereof, respectively);
(b) The Buyer shall have performed and complied in all material respects with
all agreements and obligations required by this Agreement to be performed and
complied with by it on or prior to the Closing Date; and
(c) The Buyer shall have furnished a certificate of an executive officer of the
Buyer to evidence compliance with the conditions set forth in Sections 7.2(a)
and (b) of this Agreement.
SECTION 7.3 Conditions to the Obligations of the Buyer to Effect the
Transactions Contemplated Hereby. The obligations of the Buyer to effect the
transactions contemplated hereby shall be further subject to the fulfillment at
or prior to the Effective Time of the following conditions, any one or more of
which may be waived by the Buyer:
(a) All of the representations or warranties of the Sellers set forth in the
Agreement that are qualified by materiality or Material Adverse Effect shall be
true and correct in all respects, and all of the representations and warranties
of the Sellers set forth in the Agreement that are not so qualified shall be
true and correct in all material respects, in each case, as if such
representations or warranties were made on and as of the date hereof and as of
the Effective Time (except to the extent such representations and warranties
speak as of a specific date or as of the date hereof, in which case such
representations and warranties shall be so true and correct or so true and
correct in all material respects, as the case may be, as of such specific date
or as of the date hereof, respectively);
(b) The Sellers shall have performed and complied in all material respects with
all agreements and obligations required by this Agreement to be performed and
complied with by it on or prior to the Closing Date; provided, however, that the
Sellers shall have performed and complied with its obligations pursuant to
Section 5.14(a) in all respects;
(c) The Sellers shall have furnished a certificate of an executive officer of
the Sellers to evidence compliance with the conditions set forth in Sections
7.3(a) and (b) of this Agreement;
(d) Each of the consents listed on Schedule 7.3(d) shall have been obtained; and
(e) The Sellers shall have completed the transfer of all Excluded Assets as
contemplated by Section 5.2.
SECTION 7.4 Certificates. Each of the parties hereto will furnish to the
other party such certificates of such party's officers or others and such other
documents to evidence fulfillment of the conditions set forth in this Article
VII as the other party may reasonably request.
ARTICLE VIII
CERTAIN TAX MATTERS
SECTION 8.1 Tax Returns.
(a) The Sellers shall timely prepare and file (or cause to be filed) when due
(taking into account extensions) (i) all Tax Returns that are required to be
filed on or before the Closing Date by or with respect to the Fastener Business
Assets and each of the Transferred Fastener Subsidiaries for taxable years or
periods ending on or before the Closing Date, and (ii) all consolidated,
combined, unitary and similar Tax Returns that include one or more of the
Transferred Fastener Subsidiaries as members of the "affiliated group" (within
the meaning of Section 1504(a) of the Code or similar provision of state, local
or non-U.S. law) of which the Parent (or any predecessor or successor) is the
common parent. The Sellers shall timely prepare, or cause to be timely prepared,
any such Tax Returns due after the Closing Date (taking into account extensions)
for a taxable period ending on or prior to the Closing Date and deliver such Tax
Returns to the Buyer for filing.
(b) The Buyer shall timely prepare and file (or cause to be filed) when due
(taking into account extensions) all Tax Returns that are required to be filed
by or with respect to the Fastener Business Assets and each of the Transferred
Fastener Subsidiaries (other than returns that include one or more of the
Transferred Fastener Subsidiaries as members of the "affiliated group" (within
the meaning of Section 1504(a) of the Code or similar provision of state, local
or non-U.S. law) of which the Parent (or any predecessor or successor) is the
common parent) for taxable years or periods beginning after the Closing Date and
any taxable period that includes (but does not end on) the Closing Date (a
"Straddle Period").
(c) The Buyer shall make available to the Sellers for review and approval any
Tax Returns required to be prepared by the Buyer for any taxable year or period
that includes a Straddle Period. The Buyer shall use its reasonable best efforts
to make such Tax Returns available for review and approval as required under
this paragraph sufficiently in advance of the due date for filing such Tax
Returns (but in no event less than 30 days prior to their due dates) to provide
the Sellers with a meaningful opportunity to review and approve such Tax Returns
and have such Tax Returns modified before filing, provided that such approval
shall not be unreasonably withheld. The Buyer and the Sellers shall attempt in
good faith to resolve any issues arising out of the review of such Tax Returns.
If a Tax Return is due before the date a disputed item is resolved hereunder, it
shall be filed as prepared and resolved items shall be reflected on an amended
Tax Return or other applicable Tax adjustment request.
SECTION 8.2 Payment of Taxes. Except as otherwise provided in this
Agreement and except to the extent any such Taxes are taken into account in
preparing the Closing Date Balance Sheet, the Sellers shall pay or cause to be
paid, on a timely basis, all Taxes due with respect to the Tax liability of the
Fastener Business Assets and the Transferred Fastener Subsidiaries for taxable
periods ending on or before the Closing Date and the portion of any Straddle
Period ending on the Closing Date. The Sellers shall pay directly to or at the
direction of the Buyer, at least ten days prior to the date payment thereof is
due, the portion of such Taxes for that portion of any Straddle Period which
ends on the Closing Date (calculated pursuant to Section 8.3). The Buyer shall
pay or cause to be paid, on a timely basis, all Taxes due with respect to the
Tax liability of the Fastener Business Assets and the Transferred Fastener
Subsidiaries for taxable periods beginning after the Closing Date and the
portion of any Straddle Period beginning on the day after the Closing Date.
SECTION 8.3 Allocation of Straddle Period Taxes. In the case of any
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Straddle Period:
(a) Periodic Taxes. (i) The periodic Taxes of the Fastener Business Assets and
the Transferred Fastener Subsidiaries that are not based on income or receipts
(e.g., property Taxes) for the portion of any Straddle Period which ends on the
Closing Date shall be computed based on the ratio of the number of days in such
portion of the Straddle Period and the number of days in the entire taxable
period, and (ii) the periodic Taxes of the Fastener Business Assets and the
Transferred Fastener Subsidiaries that are not based on income or receipts for
the portion of any Straddle Period beginning on the day after the Closing Date
shall be computed based on the ratio of the number of days in such portion of
the Straddle Period and the number of days in the entire taxable period.
(b) Non-Periodic Taxes. (i) The Taxes of the Fastener Business Assets and the
Transferred Fastener Subsidiaries for that portion of any Straddle Period ending
on the Closing Date (other than Taxes described in Section 8.3(a) above), shall
be computed on a "closing-of-the-books" basis as if such taxable period ended as
of the close of business on the Closing Date, and (ii) the Taxes of the Fastener
Business Assets and the Transferred Fastener Subsidiaries for that portion of
any Straddle Period beginning after the Closing Date (other than Taxes described
in Section 8.3(a) above), shall be computed on a "closing-of-the-books" basis as
if such taxable period began on the day after the Closing Date.
SECTION 8.4 Refunds.
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(a) Any Tax refund (including any interest in respect thereof) received by the
Buyer, any of its Affiliates or any of the Transferred Fastener Subsidiaries,
and any amounts credited against Tax to which the Buyer, any of its Affiliates
or any of the Transferred Fastener Subsidiaries becomes entitled (including by
way of any amended Tax Returns or any carryback filing), that relate to any
taxable period, or portion thereof, for which the Sellers are liable pursuant to
Section 8.2, except to the extent that such refund or credit against Tax relates
to Taxes for which the liability is assumed by the Buyer, shall be for the
account of the Sellers, and the Buyer shall pay over to the Sellers any such
refund or the amount of any such credit within ten days after receipt of such
credit or entitlement thereto. The Buyer shall pay the Sellers interest at the
rate prescribed under Section 6621(a)(1) of the Code, compounded daily, on any
amount not paid when due under this Section 8.4.
(b) Any Tax refund (including any interest in respect thereof) received by the
Sellers or any of their Affiliates, and any amounts credited against Tax to
which the Sellers or any of their Affiliates becomes entitled (including by way
of any amended Tax Returns or any carryback filing), that relate to any taxable
period, or portion thereof, for which the Buyer is liable pursuant to Section
8.2, or that relate to any Tax for which the liability is assumed by the Buyer
shall be for the account of the Buyer, and the Sellers shall pay over to the
Buyer any such refund or the amount of any such credit within ten days after
receipt of such credit or entitlement thereto. The Sellers shall pay the Buyer
interest at the rate prescribed under Section 6621(a)(1) of the Code, compounded
daily, on any amount not paid when due under this Section 8.4.
(c) Each of the Sellers and the Buyer shall cooperate, and cause each of its
Affiliates to cooperate, in obtaining any Tax refund that the other party
reasonably believes should be available, including through filing appropriate
forms with the applicable Tax authority.
SECTION 8.5 Tax Indemnification.
(a) Notwithstanding any other provision of this Agreement or any Ancillary
Agreement, each of the Sellers will jointly and severally indemnify, defend and
hold harmless the Buyer, the Transferred Fastener Subsidiaries, the Buyer's
other subsidiaries and their respective directors, officers, employees, agents
and representatives (including, without limitation, any predecessor or successor
to any of the foregoing) from and against any and all Indemnifiable Losses
relating to, resulting from or arising out of (i) Taxes levied or imposed upon,
or in connection with, the Fastener Business Assets or the Fastener Business
with respect to any taxable period or portion thereof ending on or before the
Closing Date, (ii) Taxes imposed on or payable by the Sellers, any Seller
Affiliate or the Transferred Fastener Subsidiaries with respect to any taxable
period or portion thereof ending on or before the Closing Date, (iii) Taxes of
the Sellers or its Transferred Fastener Subsidiaries imposed on the Sellers or
any of the Transferred Fastener Subsidiaries as members of the "affiliated
group" (within the meaning of Section 1504(a) of the Code) of which Parent (or
any predecessor or successor) is the common parent that arises under Treasury
Regulation Section 1.1502-6(a) or comparable provisions of foreign, state or
local law, and (iv) Taxes for which Sellers are responsible for in Section 5.9,
in each case except to the extent any such Taxes are taken into account in
preparing the Closing Date Balance Sheet.
(b) Notwithstanding any other provision of this Agreement or any Ancillary
Agreement, the Buyer will indemnify and hold harmless the Parent and its
subsidiaries other than the Transferred Fastener Subsidiaries and their
respective directors, officers, employees, agents and representatives
(including, without limitation, any predecessor or successor to any of the
foregoing) from and against any and all Indemnifiable Losses relating to,
resulting from or arising out of (i) Taxes described in Section 8.5(a)(i) and
(ii) to the extent such Taxes are taken into account in preparing the Closing
Date Balance Sheet, (ii) Taxes for which Buyer is responsible for in Section
5.9, and (iii) Taxes described in the last sentence of Section 8.2.
(c) The Sellers agree to indemnify the Buyer against and hold it harmless from
all income Taxes, expenses or other losses arising out of the failure of the
Sellers to perform any of the agreements it is required to perform under this
Article VIII, and the Buyer agrees to indemnify the Sellers and hold them
harmless from all Taxes, expenses or other losses arising out of the failure by
the Buyer to perform any of the agreements it is required to perform under this
Article VIII.
(d) Any indemnification obligation of the Buyer or the Sellers pursuant to this
Section 8.5 shall be net of any Tax Benefit realized by the indemnified party or
its Affiliates and increased by the relevant After Tax Amount. For purposes of
this Agreement, "After Tax Amount" means any additional amount necessary to
reflect the Tax consequences of the receipt or accrual of such reimbursement
payment (including the payment of an additional amount or amounts hereunder)
determined by using the actual marginal federal, state, foreign or local rates
for the relevant taxable period.
(e) The Buyer and the Sellers agree to treat any payment under this Section 8.5
as an adjustment to the Consideration.
SECTION 8.6 Certain Post-Closing Settlement Payments.
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(a) If the examination of any federal, state, local or other Tax Return of the
Buyer under Section 8.1(b) shall result (by settlement or otherwise) in any
adjustment which permits the Sellers or its Affiliates to increase deductions,
losses or Tax credits or decrease the income, gains or recapture of Tax credits
which would otherwise (but for such adjustments) have been reported or taken
into account (including by way of any increase in basis) by the Sellers or its
Affiliates for one or more periods for which it is required to file a Tax
Return, the Buyer shall notify the Sellers and provide it with adequate
information so that the Sellers can reflect on its or the appropriate
Affiliate's Tax Returns such increases in deductions, losses or Tax credits or
decreases in income, gains or recapture of Tax credits. The Sellers shall pay to
the Buyer, within 30 days of the receipt of such information, the amount of any
resulting Tax Benefits.
(b) If the examination of any federal, state, local or other Tax Return of the
Sellers under Section 8.1(a) shall result (by settlement or otherwise) in any
adjustment which permits the Buyer or its Affiliates to increase deductions,
losses or Tax credits or decrease the income, gains or recapture of Tax credits
which would otherwise (but for such adjustments) have been reported or taken
into account (including by way of any increase in basis) by the Buyer or its
Affiliates for one or more periods for which it is required to file a Tax
Return, the Sellers shall notify the Buyer and provide it with adequate
information so that the Buyer can reflect on its or the appropriate Affiliate's
Tax Returns such increases in deductions, losses or Tax credits or decreases in
income, gains or recapture of Tax credits. The Buyer shall pay to the Sellers,
within 30 days of the receipt of such information, the amount of any resulting
Tax Benefits.
SECTION 8.7 Cooperation. After the Closing Date, each of the Sellers and
the Buyer shall (and shall cause their respective Affiliates to) (i) assist the
other party in preparing any Tax Returns which such other party is responsible
for preparing and filing in accordance with Section 8.1(a), (ii) cooperate fully
in preparing for any audits of, or disputes with Tax authority regarding, any
Tax Returns of any of the Fastener Business Assets and Transferred Fastener
Subsidiaries and (iii) as requested by the Buyer, the Parent shall make, or
cause to be made, elections under Section 754 of the Code for the taxable years
of Transferred Fastener Subsidiaries ending on or including the Closing Date. In
connection therewith, the Buyer shall not dispose of any Tax work papers, books
or records relating to any of the Fastener Business Assets and Transferred
Fastener Subsidiaries during the six-year period following the Closing Date, and
thereafter shall give the Sellers reasonable written notice, and the opportunity
to make copies of any such items, before disposing of such items.
SECTION 8.8 Contests.
(a) Notice. After the Closing Date, the Buyer and the Sellers each shall notify
the other party in writing within 10 days of the commencement of any Tax audit
or administrative or judicial proceeding affecting the Taxes of any of the
Fastener Business Assets or Transferred Fastener Subsidiaries, which, if
determined adversely to the Taxpayer ("Tax Indemnitee") or after the lapse of
time would be grounds for indemnification under Section 8.5 of this Agreement by
the other party ("Tax Indemnitor"). Such notice shall contain factual
information describing any asserted Tax liability in reasonable detail and shall
include copies of any notice or other document received from any Tax authority
in respect of any such asserted Tax liability. If either the Buyer or the
Sellers fails to give the other party prompt notice of an asserted Tax liability
as required under this Agreement, then (i) if the Tax Indemnitor is precluded by
the failure to give prompt notice from contesting the asserted Tax liability in
any administrative or judicial forums, then such party shall not have any
obligation to indemnify the other party for any losses arising out of such
asserted Tax liability, and (ii) if the Tax Indemnitor is not so precluded from
contesting, if such failure to give prompt notice results in a detriment to the
Tax Indemnitor, then any amount which the Tax Indemnitor is otherwise required
to pay pursuant to Section 8.5 of this Agreement with respect to such liability
shall be reduced by the amount of such detriment.
(b) Control of Contests Involving Pre-Closing Periods. (i) In the case of an
audit or administrative or judicial proceeding involving any asserted liability
for (A) Taxes of the Sellers or their Affiliates with respect to the Fastener
Business Assets or (B) the U.S. federal, state or local Tax liability of or with
respect to the Transferred Fastener Subsidiaries relating to any taxable years
or periods ending on or before the Closing Date, the Sellers shall have the
right, at their expense, to control the conduct of such audit or proceeding;
provided, however, that if such audit or proceeding would be reasonably expected
to result in a material increase in Tax liability of or with respect to the
Transferred Fastener Subsidiaries for taxable periods ending after the Closing
Date or with respect to the Fastener Business Assets for which the Buyer (or its
Affiliates) would be liable, the Sellers shall not settle any such audit or
proceeding without the consent of the Buyer, which consent shall not be
unreasonably withheld, conditioned or delayed and (ii) in the case of an audit
or administrative or judicial proceeding involving any asserted liability for
Taxes addressed in Section 5.9 or with respect to the foreign Tax liability of
the Transferred Fastener Subsidiaries relating to any taxable years or periods
ending on or before the Closing Date or any Straddle Period, the Buyer and the
Parent shall have joint control of and shall cooperate in the conduct of such
audit or proceeding; such joint control shall include strategic decision-making
regarding audits, selection of an appropriate spokesperson to interface with the
applicable Tax authority, and selection of advisors with respect to such
periods. If the Buyer and the Parent cannot agree with respect to any matter
relating to the conduct of an audit or administrative or judicial proceeding
described in Section 8.8(b)(ii), they shall jointly appoint an impartial
nationally recognized Tax lawyer (the "Advisor") mutually acceptable to the
Parent and the Buyer (or, if they cannot agree on a mutually acceptable Tax
lawyer, they shall cause their respective law firms to select such lawyer). The
Buyer and the Parent shall provide to the Advisor full cooperation. The Advisor
shall be instructed to reach its conclusion regarding the dispute within 15
business days. The conclusion reached by the Advisor shall be conclusive and
binding on the Parent and the Buyer. All fees payable to the Advisor in
connection with the resolution of such disagreements shall be divided equally
between the Parent and the Buyer.
(c) Control of Contests Involving Post-Closing Periods or Straddle Periods. In
the case of an audit or administrative or judicial proceeding involving any
asserted liability for Taxes (A) of the Buyer or its Affiliates with respect to
the Fastener Business Assets, (B) of the Transferred Fastener Subsidiaries
relating to any taxable years or periods beginning after the Closing Date or (C)
for any Straddle Period (other than a foreign Tax Straddle Period which is
governed by Section 8.8(b)(ii)), the Buyer shall have the right to control the
conduct of such audit or proceeding; provided, however, that if such audit or
proceeding would be reasonably expected to result in a material increase in Tax
liability of any Fastener Business Assets or Transferred Fastener Subsidiaries
for which the Sellers would be liable, in the case of any Straddle Period (other
than a foreign Tax Straddle Period, which is governed by Section 8.8(b)(ii)) the
Sellers may participate in the conduct of such audit or proceeding at their own
expense and in each case the Buyer shall not settle any such audit or proceeding
without the consent of the Parent which consent shall not be unreasonably
withheld, conditioned or delayed.
SECTION 8.9 French SAS. The Buyer hereby agrees that it will not, and will
not permit any of its subsidiaries or Affiliates to, convert Fairchild Fasteners
Europe-Simmonds S.A.S. into a French S.A.R.L. prior to the second anniversary of
the Closing Date.
ARTICLE IX
TERMINATION AND ABANDONMENT
SECTION 9.1 Termination. Subject to the parties' obligations as provided in
Section 5.5, this Agreement may be terminated at any time prior to the Effective
Time:
(a) by mutual consent of the Parent and the Buyer;
(b) by the Parent or the Buyer, (i) at any time after January 31, 2003 if the
conditions set forth in Article VII shall not have been satisfied or waived,
provided that the right to terminate this Agreement pursuant to this Section
9.1(b)(i) shall not be available to any party whose breach of any provision of
this Agreement results in the Closing Date not occurring by January 31, 2003;
(ii) a statute, rule, regulation or executive order shall have been enacted,
entered or promulgated prohibiting the consummation of the transactions
contemplated by this Agreement substantially on the terms contemplated hereby or
having the effect of making the acquisition of the Fastener Business by the
Buyer and its Affiliates illegal; or (iii) an order, decree, ruling or
injunction shall have been entered permanently restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement substantially on the terms contemplated hereby or having the effect of
making the acquisition of the Fastener Business by the Buyer and its Affiliates
illegal and such order, decree, ruling or injunction shall have become final and
non-appealable; provided, that the party seeking to terminate this Agreement
pursuant to this Section 9.1(b)(iii) shall have used its reasonable best efforts
to remove such order, decree, ruling or injunction subject to the provisions of
Section 5.5;
(c) by the Buyer, if there has been a material violation or breach by the
Sellers of any agreement, representation or warranty contained in this Agreement
that has rendered the satisfaction of any condition to the obligations of the
Buyer impossible and such violation or breach has not been waived by the Buyer;
(d) by the Parent, if there has been a material violation or breach by the Buyer
of any agreement, representation or warranty contained in this Agreement that
has rendered the satisfaction of any condition to the obligations of the Sellers
impossible and such violation or breach has not been waived by the Parent;
(e) by the Parent or the Buyer, if at the Special Shareholders Meeting, the
transactions contemplated by this Agreement and any other transactions
contemplated hereby that are required to be approved or adopted by the
stockholders of the Parent shall fail to receive the vote required by the
Shareholder Approval;
(f) by the Buyer, if the Parent shall (i) withdraw, modify or amend in any
respect its approval or recommendation of the transactions contemplated by this
Agreement that are required to be approved or adopted by the stockholders of the
Parent, (ii) failed to included in the Proxy Statement such recommendation
(including the recommendation that the stockholders of the Parent vote in favor
of the transactions contemplated by this Agreement), (iii) taken any public
position inconsistent with such recommendation, or (iv) if the Board of
Directors of the Parent shall have resolved to do any of the foregoing; or
(g) by the Parent, if (i) the Parent shall have received a Fastener Business
Acquisition Proposal not solicited in violation of Section 5.11 and (ii) the
Board of Directors of the Parent shall have concluded in good faith, after
receiving and considering the advice of its outside legal counsel, that such
Fastener Business Acquisition Proposal is more favorable to its stockholders
than the transactions contemplated by Article II of this Agreement.
SECTION 9.2 Procedure and Effect of Termination.
(a) In the event of termination of this Agreement and abandonment of the
transactions contemplated hereby by either or both of the parties
pursuant to Section 9.1, written notice thereof shall forthwith be
given to the other party and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned, without further
action by either of the parties hereto. If this Agreement is terminated
as provided herein:
(i) upon request therefor, each party will redeliver all documents, work
papers and other material of any other party relating to the
transactions contemplated hereby, whether obtained before or after the
execution hereof, to the party furnishing the same;
(ii) each party hereto will use its best efforts to prevent disclosure to
third Persons of all information received by either party with respect
to the business of the other party or its subsidiaries (other than
information which is a matter of public knowledge or which has
heretofore been or is hereafter published in any publication for public
distribution or filed as public information with any Government entity)
except (i) as may be required by Law; and (ii) as is permitted by this
Agreement; and
(iii) neither party hereto shall have any liability or further obligation to
the other party to this Agreement pursuant to this Agreement except as
stated in this Section 9.2, provided that nothing herein shall relieve
any party from liability for its willful breach of this Agreement
(including, but not limited to, Section 5.4 and Section 5.5) or of the
Confidentiality Agreement.
(b) In addition, in the event of termination of this Agreement and
abandonment of the transactions contemplated hereby by the Parent or
any Seller pursuant to Section 9.1(g), then simultaneously with any
such termination, the Parent shall deliver, or shall cause to be
delivered, to the Buyer an amount of cash equal to $25,000,000 by wire
transfer of immediately available funds to a bank account designated in
writing by the Buyer in any bank in the continental United States or by
such other means as are agreed in writing by the Parent and the Buyer.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 Delivery of Schedules. The schedules required to be delivered
pursuant to this Agreement are being delivered simultaneously with the execution
and delivery of this Agreement.
SECTION 10.2 Amendment and Modification. Subject to applicable Law, this
Agreement may be amended, modified or supplemented only by written agreement of
each of the Sellers and the Buyer at any time prior to the Effective Time with
respect to any of the terms contained herein.
SECTION 10.3 Waiver of Compliance; Consents. Except as otherwise provided
in this Agreement, any failure of either of the parties to comply with any
obligation, covenant, agreement or condition herein may be waived by the party
entitled to the benefits thereof only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
a party, such consent shall be given in writing in a manner consistent with the
requirements for a waiver of compliance as set forth in this Section 10.3.
SECTION 10.4 No Third Party Beneficiary Rights. This Agreement is not
intended to and shall not be construed to give any Person (other than the
parties to this Agreement) any interest or rights (including, without
limitation, any third party beneficiary rights) with respect to or in connection
with any agreement or provision contained herein or contemplated hereby.
SECTION 10.5 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested), postage prepaid,
telecopied (and which is confirmed) or sent by reputable courier (providing
proof of delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice, provided that notices
of a change of address shall be effective only upon receipt thereof):
(a) if to the Sellers, to
The Fairchild Corporation
45025 Aviation Drive, Suite 400
Dulles, Virginia 20166-7516
Telecopy: (703) 478-5775
Attention: General Counsel
with a copy to
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopy: (212) 269-5420
Attention: James J. Clark, Esq.
Luis R. Penalver, Esq.
(b) if to the Buyer, to
Alcoa Inc.
390 Park Avenue
New York, New York 10022-4608
Telecopy: (212) 836-2809
Attention: General Counsel
with a copy to
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
Telecopy: (212) 735-2000
Attention: J. Michael Schell, Esq.
Margaret L. Wolff, Esq.
SECTION 10.6 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties, nor
is this Agreement intended to confer upon any other Person except the parties
hereto any rights or remedies hereunder; provided, however, that the Buyer may
assign its rights to purchase the Fastener Business Assets to one or more of its
wholly owned subsidiaries (including a single member limited liability company
of the Buyer), as provided in Section 10.7.
SECTION 10.7 Designated Subsidiary. Anything in this Agreement to the
contrary notwithstanding, the Parent agrees that the Buyer may cause one or more
of its direct or indirect, wholly owned subsidiaries (including corporations or
single member limited liability companies) designated by the Buyer to carry out
all or part of the transactions contemplated by this Agreement; provided,
however, that no such designation shall affect or diminish the liability of the
Buyer under this Agreement.
SECTION 10.8 Governing Law. This Agreement shall be governed by the laws of
the State of Delaware (regardless of the laws that might otherwise govern under
applicable principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.
SECTION 10.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 10.10 Interpretation. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 10.11 Entire Agreement. This Agreement, including the exhibits
hereto, the Ancillary Agreements, the Confidentiality Agreement, and the
Noncompetition and Consulting Agreement and the documents, schedules,
certificates and instruments referred to herein, embody the entire agreement and
understanding of the parties hereto in respect of the transactions contemplated
by this Agreement. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein or therein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such transactions.
SECTION 10.12 Severability. If for any reason any term or provision of this
Agreement is held to be invalid or unenforceable, all other valid terms and
provisions hereof shall remain in full force and effect, and all of the terms
and provisions of this Agreement shall be deemed to be severable in nature. If
for any reason any term or provision containing a restriction set forth herein
is held to cover an area or to be for a length of time which is unreasonable, or
in any other way is construed to be too broad or to any extent invalid, such
term or provision shall not be determined to be null, void and of no effect, but
to the extent the same is or would be valid or enforceable under applicable Law,
any court of competent jurisdiction shall construe and interpret or reform this
Agreement to provide for a restriction having the maximum enforceable area, time
period and other provisions (not greater than those contained herein) as shall
be valid and enforceable under applicable Law.
ARTICLE XI
INDEMNIFICATION
SECTION 11.1 Survival of Representations and Warranties.
------------------------------------------
(a) Subject to Section 11.5 hereof, each of the representations and warranties
contained in Articles III and IV will survive the Closing and remain in full
force and effect until December 31, 2003; provided, however, that the
representations and warranties set forth in Sections 3.1, 3.2, 4.1 and 4.2 will
survive the Closing and remain in full force and effect until the expiration of
the applicable statute of limitations, and the representations and warranties
set forth in Section 3.27 will survive the Closing and remain in full force and
effect until the fifth anniversary of the Closing Date. Notwithstanding the
foregoing, the representations and warranties set forth in Sections 3.12 (but
only to the extent they relate to the Accu-Lok fastener), 3.22 and 3.24 shall
not survive the Closing but the Buyer shall be entitled instead to
indemnification pursuant to Section 11.2(a)(iii) and Article VII and Section
11.6, respectively.
(b) For purposes of this Agreement, (i) "Indemnity Payment" means Indemnifiable
Losses required to be paid pursuant to this Agreement, (ii) "Indemnitee" means
any Person entitled to indemnification under this Agreement, (iii) "Indemnifying
Party" means any Person required to provide indemnification under this
Agreement, (iv) "Indemnifiable Losses" means any and all losses, damages,
charges, deficiencies, penalties, claims, demands, actions, suits or
proceedings, settlements and compromises relating thereto and reasonable
attorneys' fees and expenses in connection therewith; provided that,
Indemnifiable Losses shall not include (A) any consequential, special or
punitive damages, except in the case of fraud or to the extent actually awarded
by a court or Government entity in connection with a Third Party Claim, (B) any
internal fees and expenses of the indemnified party (including, without
limitation, in-house counsel's fees and expenses) or (C) any adjustments made
pursuant to Section 2.7, to the extent paid in accordance therewith, and (v)
"Third Party Claim" means any claim, demand, action, suit or proceeding made or
brought by any Person or entity who or which is not a party to this Agreement or
an Affiliate of a party to this Agreement.
SECTION 11.2 Indemnification.
(a) Subject to Sections 11.1, 11.3, 11.4 and 11.5, each of the Sellers will
jointly and severally indemnify, defend and hold harmless the Buyer,
the Transferred Fastener Subsidiaries, the Buyer's other Affiliates and
their respective directors, officers, employees, agents and
representatives (including, without limitation, any predecessor or
successor to any of the foregoing) from and against any and all
Indemnifiable Losses relating to, resulting from or arising out of:
(i) any breach by any of the Sellers of any of the representations,
warranties or covenants of any of the Sellers contained in this
Agreement and the Ancillary Agreements (other than the Voting
Agreement) or any certificate delivered by any of such Persons pursuant
to this Agreement;
(ii) any Third Party Claim to the extent arising from or related to
activities of the Fastener Business prior to the Closing (other than
the Assumed Fastener Business Liabilities), including, without
limitation, any Third Party Claims for (A) asbestos claims other than
those set forth on Schedule 3.16 and (B) claims of personal injury or
property damage arising out of exposure to Hazardous Materials;
(iii) any claim by Monogram Industries Inc. or any of its Affiliates or any
of their successors of infringement of U.S. patent numbers 4,659,271,
4,747,202, 4,772,167, 4,967,463, 5,066,179, and any foreign patents
corresponding and/or claiming priority to such U.S. patents, arising
from (A) Sellers' or any of their respective subsidiaries' use,
manufacture, offering for sale, sale or importing of the Accu-Lok
fastener (the different version of which are described in U.S. patent
application numbers 09/825,711, 09/849,184 and 09/997,500) and (B)
Buyer's or any of their respective subsidiaries' use, manufacture,
offering for sale, sale or importing of the non-threaded version of the
drive nut used in connection with the Accu-Lok fastener in accordance
with Sellers' specifications for the Accu-Lok fastener;
(iv) (A) subject to Section 11.6, the Fastener Environmental Liabilities and
(B) all litigation matters arising out of or resulting from the conduct
of the Fastener Business prior to the Effective Time, including the
litigation matters set forth on Schedule 3.16, in all cases for
purposes of both clause (A) and (B) to the extent the amount of Damages
thereof exceeds the amount of the reserve for environment, health,
safety and litigation on the Closing Date Balance Sheet;
(v) the ownership, use and possession of the Excluded Assets prior to, on
or after the Closing Date;
(vi) the Excluded Fastener Business Liabilities other than Third Party
Claims for which indemnification is provided pursuant to Section
11.2(a)(ii); or
(vii) any Third Party Claim arising from or related to any current or former
business, activities or operations of the Sellers, their respective
current and former subsidiaries and any predecessors of such companies,
including without limitation, any (A) Discontinued Operations, (B)
Pre-Closing Off-Site Disposal Locations, but not including the business
activities and operations of the Fastener Business Assets and the
Assumed Fastener Business Liabilities.
(b) Subject to Section 11.4, each of the Sellers will jointly and severally
indemnify, defend and hold harmless the Buyer, the Transferred Fastener
Subsidiaries, the Buyer's other subsidiaries and their respective
directors, officers, employees, agents and representatives (including,
without limitation, any predecessor or successor to any of the
foregoing) from and against any and all Indemnifiable Losses relating
to, resulting from or arising out of any Third Party Claim for product
liability or product warranty with respect to any Fastener Business
products manufactured by the Sellers or any of their respective
subsidiaries prior to the Closing (a "Product Claim"). The
indemnification obligations of the Sellers under this Section 11.2(b)
shall terminate on the fifth anniversary of the Closing Date, except
with respect to any Indemnifiable Losses relating to a Product Claim
for which the Buyer has provided written notice to the Parent prior to
the fifth anniversary of the Closing Date of the facts underlying such
Indemnifiable Losses with reasonable specificity. For purposes of this
Section 11.2(b), any Indemnifiable Losses relating to a Product Claim
shall include all costs actually incurred by the Indemnitee due to
recalls of products including, without limitation, all costs associated
with the removal and replacement of installed products manufactured and
sold by the Sellers prior to the Effective Time. For purposes of this
Section 11.2(b), a Product Claim shall not include any Damages in
respect of customer returns of Fastener Business products manufactured
by the Sellers or any of their respective subsidiaries prior to the
Closing which returns are made in the ordinary course of the Fastener
Business until the customer returns the same such completed product
with an aggregate purchase price of $500,000 during the five-year
indemnification period following the Closing Date. Once such customer
has returned $500,000 of the same such completed product, the Buyer
shall be entitled to make a Product Claim in respect of the full amount
of all the same such product returns by such customer.
(c) Subject to Sections 11.1, 11.3, 11.4 and 11.5, the Buyer will
indemnify, defend and hold harmless the Parent and its subsidiaries
other than the Transferred Fastener Subsidiaries and their respective
directors, officers, employees, agents and representatives (including,
without limitation, any predecessor or successor to any of the
foregoing) from and against any and all Indemnifiable Losses relating
to, resulting from or arising out of (i) any breach by the Buyer of any
of the representations, warranties or covenants of the Buyer contained
in this Agreement or the Ancillary Agreements (other than the Voting
Agreement) or in any certificate delivered by the Buyer pursuant to
this Agreement, (ii) the Assumed Fastener Business Liabilities or (iii)
any changes to or termination of or other action effecting, or any
attempt to change or terminate or otherwise effect, any benefit plans
assumed by the Buyer hereunder.
SECTION 11.3 Limitations on Liability.
(a) Notwithstanding any other provision in this Agreement or of any applicable
Law, no Indemnitee will be entitled to make a claim against an Indemnifying
Party under Sections 11.2(a)(i) or 11.2(c)(i), as applicable, unless (x) such
claim is made within the applicable survival period set forth in Section 11.1(a)
and (y) until the aggregate amount of Indemnifiable Losses incurred by the
Indemnitee with respect to an event or occurrence and all other events or
occurrences caused by the same circumstances exceeds $50,000 (a "Base Claim"),
in which event (subject to the following provisions of this Section 11.3) such
Indemnitee may assert its right to indemnification hereunder to the full extent
of its Indemnifiable Losses in respect thereof.
(b) No Indemnitee will be entitled to make a claim against an Indemnifying Party
under Sections 11.2(a)(i) or 11.2(c)(i), as applicable, unless (x) such claim is
made within the applicable survival period set forth in Section 11.1(a) and (y)
until the aggregate amount of all of its Base Claims which may be asserted for
Indemnifiable Losses under Sections 11.2(a)(i) or 11.2(c)(i), as applicable,
exceeds $5,000,000, in which event (subject to the following provisions of
Section 11.3), such Indemnitee may assert its right to indemnification hereunder
to the full extent of all such Indemnifiable Losses.
(c) Notwithstanding any other provision of this Agreement, the indemnification
obligations of the Sellers, under Section 11.2(a)(i), on the one hand, and of
the Buyer, under Section 11.2(b)(i), on the other hand, will not exceed
$250,000,000.
(d) Notwithstanding any other provision of this Agreement or of any applicable
Law, the Buyer will be entitled to make a claim against any of the Sellers under
Section 11.2(a)(ii), (iii) or (iv) until the fifth anniversary of the Closing
Date.
(e) Notwithstanding any other provision of this Agreement, the amount of any
Indemnifiable Loss for which indemnification is provided under this Article XI
shall be net of (i) any amount actually received by the Indemnitee or paid to
Third Parties on behalf of the Indemnitee under insurance policies of the
Indemnifying Party with respect to such Indemnifiable Loss (and the Indemnitee
shall be required to submit a claim under such insurance policies with respect
to such Indemnifiable Loss) and (ii) any Tax Benefit actually realized as a
result of such Indemnifiable Loss.
(f) The Indemnifying Party shall be subrogated to the rights of the Indemnified
Party in respect of any insurance relating to the Indemnifiable Losses to the
extent of any indemnification payments made hereunder.
SECTION 11.4 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion or commencement of any
Third Party Claim against such Indemnitee with respect to which an Indemnifying
Party is obligated to provide indemnification under this Agreement, the
Indemnitee will give such Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than 30 calendar days after receipt of such
notice of such Third Party Claim. Such notice by the Indemnitee will describe
the Third Party Claim in reasonable detail, will include copies of all material
written evidence thereof and will indicate the estimated amount, if reasonably
practicable, of the Indemnifiable Loss that has been or may be sustained by the
Indemnitee. The Indemnifying Party will have the right to participate in, or, by
giving written notice to the Indemnitee, to assume, the defense of any Third
Party Claim (other than Product Claims which only the Sellers shall have the
right to participate in) at such Indemnifying Party' s own expense and by such
Indemnifying Party's own counsel (reasonably satisfactory to the Indemnitee),
and the Indemnitee will cooperate in good faith in such defense.
(b) If, within ten calendar days after giving notice of a Third Party Claim to
an Indemnifying Party pursuant to Section 11.4(a), an Indemnitee receives
written notice from the Indemnifying Party that the Indemnifying Party has
elected to assume the defense of such Third Party Claim (other than Product
Claims) as provided in the last sentence of Section 11.4(a), the Indemnifying
Party will not be liable for any legal expenses subsequently incurred by the
Indemnitee in connection with the defense thereof; provided, however, that if
the Indemnifying Party fails to take reasonable steps necessary to defend
diligently such Third Party Claim within ten calendar days after receiving
written notice from the Indemnitee that the Indemnitee believes the Indemnifying
Party has failed to take such steps, the Indemnitee may assume its own defense,
and the Indemnifying Party will be liable for all reasonable costs or expenses
paid or incurred in connection therewith. Without the prior written consent of
the Indemnitee, the Indemnifying Party will not enter into any settlement of any
Third Party Claim. If a firm offer is made to settle a Third Party Claim without
leading to liability or the creation of a financial or other obligation on the
part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder and the Indemnifying Party desires to accept and agree
to such offer, the Indemnifying Party will give written notice to the Indemnitee
to that effect. If the Indemnitee fails to consent to such firm offer within ten
calendar days after its receipt of such notice, the Indemnitee may continue to
contest or defend such Third Party Claim and, in such event, the maximum
liability of the Indemnifying Party as to such Third Party Claim will not exceed
the amount of such settlement offer.
(c) Any claim by an Indemnitee on account of an Indemnifiable Loss which does
not result from a Third Party Claim (a "Direct Claim") will be asserted by
giving the Indemnifying Party reasonably prompt written notice thereof, but in
any event not later than 30 calendar days after the Indemnitee becomes aware of
such Direct Claim. Such notice by the Indemnitee will describe the Direct Claim
in reasonable detail, will include copies of all material written evidence
thereof and will indicate the estimated amount, if reasonably practicable, of
the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The
Indemnifying Party will have a period of 30 calendar days within which to
respond in writing to such Direct Claim. If the Indemnifying Party does not so
respond within such 30 calendar day period, the Indemnifying Party will be
deemed to have rejected such claim, in which event the Indemnitee will be free
to pursue such remedies as may be available to the Indemnitee on the terms and
subject to the provisions of this Agreement.
(d) A failure to give timely notice or to include any specified information in
any notice as provided in Sections 11.4(a), 11.4(b) or 11.4(c) will not affect
the rights or obligations of any party hereunder except and only to the extent
that, as a result of such failure, any party which was entitled to receive such
notice was deprived of its right to recover any payment under its applicable
insurance coverage or was otherwise prejudiced as a result of such failure.
SECTION 11.5 Exclusive Remedies. If the Closing occurs, then the remedies
provided in this Article XI shall constitute the sole and exclusive remedies
with respect to all Indemnifiable Losses contemplated by Section 11.2 and all
claims for breach of any representation or warranty or covenant or agreement to
be performed on or prior to the Closing Date contained in this Agreement, except
for fraud or other willful dishonesty. Notwithstanding the foregoing, with
respect to any matter, liability or obligation as to which the Buyer has neither
expressly assumed liability pursuant to this Agreement nor has agreed to provide
indemnification to the Sellers (or, where the Buyer has assumed liability or
agreed to provide indemnification, any matters, liabilities or obligations that
fall outside of the scope of such assumed or indemnified liabilities), the Buyer
expressly retains all rights it may possess under any applicable Law.
Furthermore, the provisions of this Article XI shall not affect the rights of
any party hereto against any third party (including a third party whose claim
against a party hereto is the basis of a claim for indemnification hereunder)
and shall not inure to the benefit of any third party. Notwithstanding anything
in Article XI, Article VIII will be the exclusive agreement among the parties
with respect to indemnification, procedures and remedies with respect to Tax
matters.
SECTION 11.6 Seller Environmental Indemnity.
(a) Subject to the provisions of Sections 11.5 and 11.6, from and after the
Closing Date, each of the Sellers will jointly and severally indemnify,
defend and hold harmless the Buyer, the Transferred Fastener
Subsidiaries, the Buyer's other subsidiaries and their respective
directors, officers, employees, agents and representatives (including,
without limitation, any predecessor or successor to any of the
foregoing) (collectively, the "Buyer Indemnified Parties") from and
against any and all Fastener Environmental Liabilities in excess of the
amount of the reserve for environmental, health, safety and litigation
on the Closing Date Balance Sheet, provided, that any claims for
indemnification related to Discontinued Operations or Pre-Closing
Off-Site Disposal Locations shall not be subject to any deductible for
the amounts in the reserve for environmental, health, safety and
litigation.
(b) The indemnification obligations of the Sellers under this Section 11.6
shall terminate on the fifth anniversary of the Closing Date, except
with respect to (i) any Fastener Environmental Liability for which the
Buyer has provided written notice to any of the Sellers prior to the
fifth anniversary of the Closing Date of the facts underlying such
Fastener Environmental Liability with reasonable specificity, (ii) any
claim related to a Pre-Closing Off-Site Disposal Location and (iii) any
claim related to Discontinued Operations.
(c) Prior to the Closing, the Sellers and the Buyer will each designate a
representative (each, a "Representative") to receive information and
consult with the other with respect to Fastener Environmental
Liabilities (in accordance with the terms of Section 5.3). From and
after the Closing, the Buyer will conduct and control all Remedial
Action and negotiations with any Government entity in respect of all
Fastener Environmental Conditions that are subject to indemnification
pursuant to Section 11.6. Such Remedial Actions shall be performed in a
commercially reasonable manner consistent with the use of the Fastener
Business Assets as of the Closing Date, including, to the extent
allowed or authorized by applicable Environmental Law or the Government
agency with jurisdiction over a Remedial Action, the use of Remediation
Standards that are applicable to such properties based on the use and
location of such properties as of the Closing Date. The Buyer will make
its environmental personnel and consultants reasonably available to the
Sellers and the Sellers' Representative to discuss Fastener
Environmental Conditions. The Buyer will provide the Sellers'
Representative and the Sellers' environmental consultants with
reasonable access to the properties of the Fastener Business and copies
of all non-privileged information with respect to the Remedial Actions
to be taken in respect of such Environmental Actions. The Buyer will
select consultants and contractors to implement such Remedial Actions
(who shall be reasonably acceptable to Parent) and will also provide
the Sellers' Representative and its environmental consultants with
copies of all reports, analytical data, correspondence, directives,
orders and documents submitted to or received by the Buyer from any
Government entity in connection with the Remedial Action and other
non-privileged documents created or received by or on behalf of the
Buyer in connection with the Remedial Action. The Buyer shall afford
the Sellers a reasonable opportunity to comment on the Buyer's proposed
response to a Fastener Environmental Condition, and the Buyer shall not
unreasonably refuse to incorporate the Sellers' comments.
(d) The Buyer shall inform any of the Sellers promptly in writing of any
Fastener Environmental Condition or Environmental Action in respect of
which the Sellers may have an indemnification obligation under this
Section 11.6, provided, that the failure of the Buyer to so promptly
inform any of the Sellers shall not affect the rights of the Buyer
except to the extent that such failure to give prompt notice adversely
affects the rights and obligations of any of the Sellers under this
Section 11.6.
(e) For purposes of this Agreement, the following terms will have the
following meanings:
(i) "Environmental Action" means any notice of any violation of any
Environmental Law or any claim, citation, summons or any investigation,
action, lawsuit or proceeding by any Person which seeks to impose
liability (including, without limitation, liability for investigatory
costs, cleanup costs, governmental response costs, natural resources
damages, property damages, personal injuries or penalties) pursuant to
any Environmental Law.
(ii) "Environmental Contamination" means the presence, whether known or
unknown, of any Hazardous Materials in soils, surface water,
groundwater, sediments or other environmental media, including the
movement or migration of said Hazardous Materials in such media.
(iii) "Fastener Environmental Condition" means any (A) Environmental
Contamination or threatened Environmental Contamination arising out of
any Release or threatened Release of Hazardous Materials arising out of
the Fastener Business (which includes the Fastener Business Real
Properties listed on Schedule 3.9), on-site (owned or leased) or at
off-site, non-owned or non-leased locations that occurred on or prior
to the Effective Time including, without limitation, at Pre-Closing
Off-Site Disposal Locations; (B) Environmental Contamination at or
migrating from the Fastener Business Assets prior to the Closing Date,
whether or not such Environmental Contamination came into existence as
a result of the Fastener Business or any other Person (including a
predecessor owner or operator of the Fastener Business Assets); (C) any
violation or alleged violation of, or noncompliance or alleged
noncompliance with, applicable Environmental Law with respect to the
Fastener Business that commenced prior to the Effective Time; or (D)
any other circumstance or condition that occurred on or prior to the
Effective Time that forms the basis for any Environmental Action
against the Fastener Business or any Transferred Fastener Subsidiary
(or any of their respective predecessors or successors).
(iv) "Fastener Environmental Liability" means all losses, damages, charges,
liabilities, costs, expenses, deficiencies, fines, penalties, claims,
demands, actions, suits or proceedings, including reasonable attorneys'
and consultants' fees and expenses in connection therewith, and
expenses of investigation incurred by a Buyer Indemnified Party after
the Effective Time based on any applicable Environmental Laws existing
on the Closing Date in respect of any Fastener Environmental Condition;
provided that with respect to Environmental Contamination at a Fastener
Business Asset, applicable Environmental Law shall include the
Remediation Standards in each relevant jurisdiction that would be
applicable or acceptable to properties such as the Fastener Business
Real Properties or the properties leased pursuant to the Fastener
Business Leases, based on the use and location of such properties as
of the Closing Date, such that the performance of Remedial Action on
such properties if Environmental Contamination is discovered above such
standards shall be subject to indemnification under this Section 11.6
(subject to any other limitations in this Agreement). Fastener
Environmental Liability shall not include (i) any consequential,
special or punitive damages, except in the case of fraud or to the
extent actually awarded to a third party by a court in connection with
a Third Party Claim, or (ii) any internal fees and expenses (including,
without limitation, in-house counsel's fees and expenses). In
addition, to the extent that the Buyer contributes to or exacerbates a
Fastener Environmental Condition as a result of its actions or
omissions, including, without limitation, its unreasonable failure to
mitigate any violation or noncompliance with applicable Environmental
Law, any material increase in losses, damages, charges, liabilities,
costs or expenses resulting from said exacerbation or failure to
mitigate shall not be a Fastener Environmental Liability. For purposes
of this Agreement, Third Party Claims to the extent arising from or
related to activities of the Fastener Business prior to the Closing
Date for asbestos-related illnesses, injuries or other harm or personal
injury or property damage arising from exposure to Hazardous Materials,
are not deemed to be within the scope of the term "Fastener
Environmental Liability." Such claims are subject to indemnification
pursuant to Section 11.2(a)(ii) of this Agreement.
(v) "Release" means any releasing, spilling, seeping, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of any Hazardous Materials into the
environment (including the abandonment or discarding of barrels,
containers, tanks or other receptacles containing Hazardous Materials).
(vi) "Remedial Action" means (a) 'remedial action' as such term is defined
in CERCLA and its analogous state Laws, and (b) all other actions
required by any Government entity: (i) to clean up, remove, treat,
abate or in any other way address any Hazardous Materials in the
environment; (ii) to prevent the Release or threat of Release or
minimize the further Release of any Hazardous Materials so that it does
not migrate or endanger or threaten to endanger public health, welfare
or the environment, and (iii) to perform studies and investigations in
connection with, or as a precondition to, clause (i) or (ii) above.
(vii) "Remediation Standards" means numerical or narrative standards ((A)
resulting from an enacted statute, promulgated rule or regulation
issued by a Government regulatory agency, in each case existing on the
Closing Date, or (B) developed on a case-by-case basis through a risk
assessment or other methodology (and taking into account any relevant
guidance issued by a Government regulatory agency), which are
commercially reasonable for companies in the fastener industry and
which are commercially reasonable for the use and given the location of
the properties as of the Closing Date) that define the concentrations
of Hazardous Materials that are acceptable for any environmental media,
including, without limitation, standards that are based on the use
and location of a particular property.
(f) Except for certain Fastener Environmental Liabilities assumed pursuant
to Section 1.10(b), the Buyer expressly retains all rights it may
possess under any applicable Law with respect to Fastener Environmental
Liabilities. Notwithstanding the foregoing, the provisions of this
Section 11.6 shall not affect the rights of any party hereto against
any third party (including a third party whose claim against a party
hereto is the basis for indemnification hereunder) and shall not inure
to the benefit of any third party.
SECTION 11.7 Resolution of Indemnification Disputes. If a dispute arises
in connection with determining the validity or amount of a claim for
indemnification for an Indemnifiable Loss under this Agreement ("Dispute"), and
if the Dispute cannot be settled through direct discussions between
representatives of the Parent and representatives of the Buyer within thirty
days following receipt of notice of a Dispute, the parties agree first to
endeavor to settle the dispute in an amicable manner by mediation administered
under the CPR Mediation Procedure established by the CPR Institute for Dispute
Resolution ("CPR") before resorting to arbitration. If a Dispute cannot be
resolved through such mediation process within thirty days following the
appointment of the mediator, the Dispute will be settled finally by arbitration
under the CPR Rules for Non-Administered Arbitration (the "Rules"), then in
effect, by a sole arbitrator, chosen by agreement of the parties within twenty
days of the receipt by the respondent of a copy of the Notice of arbitration.
Any arbitrator appointed by CPR shall be a retired judge or a practicing
attorney with no less than fifteen years of experience with large commercial
cases and an experienced arbitrator. The arbitration will be governed by the
Federal Arbitration Act, 9 U.S.C. ss. 1 et seq. The hearing on the merits shall
be held no later than six months after the appointment of the arbitrator unless
the parties otherwise agree or the arbitrator extends such time period for good
cause shown. The award shall be in writing and shall state the findings of fact
and conclusions of law on which it is based. The award of the arbitrator shall
be final and binding on the parties and judgment upon the award may be entered
and enforced in any court having jurisdiction. Unless the parties otherwise
agree in writing, the mediation and arbitration will be held in New York, New
York. Each party shall bear its own costs and expenses (including fees and
disbursements of counsel) and the Buyer and the Parent shall each bear one-half
of the costs and expenses payable to the mediator and arbitrator.
SECTION 11.8 Indemnity Tax Credit Amount. The Sellers' indemnification
obligations under Section 8.5 and this Article XI shall be credited by the net
cumulative amount of (i) any Tax Benefits recognized by the Buyer (or its
Affiliates) resulting from the actual utilization in any Tax period beginning
after the Closing Date by the Buyer (or its Affiliates) of any French or German
net operating loss of a Transferred Fastener Subsidiary organized in France or
Germany (as the case may be) that the Buyer or its Affiliates carry forward from
a Tax period ending on or before the Closing Date and that may no longer be
subject to possible disallowance by any French or German Taxing authority minus
(ii) any such Tax Benefit amounts that have previously been used to reduce any
of the Sellers' indemnification obligations.
IN WITNESS WHEREOF, the Buyer and each of the Sellers have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
ALCOA INC.
By: /s/ Barbara Jeremiah
----------------------
Name: Barbara Jeremiah
Title: Executive Vice President
THE FAIRCHILD CORPORATION
By: /s/ Jeffrey Steiner
----------------------
Name: Jeffrey Steiner
Title: Chief Executive Officer
FAIRCHILD HOLDING CORP.
By: /s/ Eric Steiner
---------------------
Name: Eric Steiner
Title: President
SHEEPDOG, INC.
By: /s/ Donald E. Miller
---------------------
Name: Donald E. Miller
Title: Vice President
FAIRCHILD DATA CORP.
By: /s/ John Flynn
---------------------
Name: John Flynn
Title: Vice President
FAIRCHILD TRADING CORP.
By: /s/ John Flynn
---------------------
Name: John Flynn
Title: Vice President
MARSON CREATIVE FASTENER, INC.
By: /s/ John Flynn
--------------------
Name: John Flynn
Title: Vice President
RHI HOLDINGS, INC.
By: /s/ Donald E. Miller
--------------------
Name: Donald E. Miller
Title: Vice President
SUCHOMIMOUS TERENSIS, INC.
By: /s/ John Flynn
--------------------
Name: John Flynn
Title: Vice President
FAIRCHILD FINANCE COMPANY
By: /s/ John Flynn
--------------------
Name: John Flynn
Title: Director
FAIRCHILD FASTENERS GROUP LTD.
By: /s/ John Flynn
-------------------
Name: John Flynn
Title: Director