Exhibit 99
EXECUTION COPY
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PURCHASE AGREEMENT
between
THE BLACK & DECKER CORPORATION
and
PENTAIR, INC.
dated as of
July 16, 2004
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TABLE OF CONTENTS
Page
1. PURCHASE AND SALE.......................................................1
1.1. Purchase and Sale...............................................1
2. PURCHASE PRICE; PAYMENT.................................................1
2.1. Purchase Price and Payment......................................1
2.2. Determination of Net Asset Value; Post-Closing Adjustment.......2
2.3. Allocation......................................................4
3. REPRESENTATIONS AND WARRANTIES..........................................5
3.1. Representations and Warranties of Parent........................5
3.2. Representations and Warranties of Buyer........................14
3.3. Expiration of Representations and Warranties...................15
3.4. No Other Representations or Warranties; Memorandum;
Projections....................................................15
4. COVENANTS PRIOR TO CLOSING.............................................16
4.1. Access to Information Concerning Properties and Records;
Confidentiality................................................16
4.2. Conduct of Business Pending the Closing........................17
4.3. Further Actions................................................18
4.4. Best Efforts...................................................18
4.5. Notification...................................................19
4.6. Certain Equity Interest Transfers..............................19
4.7. Guarantee Releases.............................................19
4.8. Indebtedness...................................................19
4.9. Exclusivity....................................................20
4.10. Resignations...................................................20
4.11. Agreements with Affiliates.....................................20
5. ADDITIONAL COVENANTS...................................................20
5.1. Tax Matters....................................................20
5.2. [Intentionally Omitted]........................................24
5.3. Employee Matters...............................................24
5.4. Post-Closing Access to Information.............................33
5.5. Further Assurances.............................................33
5.6. Corporate Name and Logo........................................33
5.7. No Competition.................................................34
5.8. Insurance......................................................34
5.9. Delta Tupelo Closure...........................................36
5.10. Ellerbrake Litigation..........................................37
5.11. Assignment of Contracts and Rights.............................37
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS............................38
6.1. Accuracy of Representations and Warranties; Performance of
Obligations....................................................38
6.2. No Orders or Actions...........................................38
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6.3. HSR Act and Other Approvals....................................38
6.4. Guarantee Releases and Indebtedness............................38
6.5. Licenses, Etc..................................................39
7. CONDITIONS PRECEDENT TO PARENT'S OBLIGATIONS...........................39
7.1. Accuracy of Representations and Warranties; Performance of
Obligations....................................................39
7.2. No Orders or Actions...........................................39
7.3. HSR Act and Other Approvals....................................39
7.4. Guarantee Releases.............................................39
8. INDEMNIFICATION........................................................39
8.1. Indemnification by Parent......................................39
8.2. Indemnification By Buyer.......................................41
8.3. Procedures Relating to Indemnification Between Buyer and
Parent.........................................................42
8.4. Procedures Relating to Indemnification for Third Party
Claims.........................................................42
8.5. Insurance and Tax Effect.......................................44
8.6. Exclusive Remedy...............................................45
9. CLOSING................................................................45
9.1. Closing Date...................................................45
9.2. Documents to be Delivered by Parent and the Subsidiaries.......46
9.3. Documents to be Delivered by Buyer.............................46
10. PERMITTED TERMINATION..................................................47
10.1. General........................................................47
10.2. Post-Termination Obligations...................................47
10.3. No Liabilities in Event of Permitted Termination...............48
11. MISCELLANEOUS..........................................................48
11.1. Publicity......................................................48
11.2. Assignment.....................................................48
11.3. Parties in Interest............................................48
11.4. Law Governing Agreement........................................49
11.5. Amendment and Modification.....................................49
11.6. Waivers........................................................49
11.7. Notices........................................................49
11.8. Expenses.......................................................50
11.9. Schedules......................................................50
11.10. Knowledge......................................................51
11.11. Section Headings; Table of Contents............................51
11.12. Severability...................................................51
11.13. No Strict Construction.........................................51
11.14. Jurisdiction; Venue; Waiver of Jury Trial......................51
11.15. Entire Agreement...............................................52
11.16. Counterparts...................................................52
11.17. Definitions....................................................52
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SCHEDULES
Schedule 1.1 - Schedule of Sellers and Purchasers
Schedule 2.2(b) - Closing Statement Exceptions
Schedule 3.1(c) - Subsidiaries
Schedule 3.1(d) - Toolz Limited
Schedule 3.1(e) - Title
Schedule 3.1(f) - Violation, Conflict, Default
Schedule 3.1(g) - Financial Statements
Schedule 3.1(h) - Tax Matters
Schedule 3.1(i) - Certain Changes
Schedule 3.1(j) - Off-Balance Sheet Liabilities
Schedule 3.1(k) - Litigation Matters
Schedule 3.1(l) - Non-Compliance with Laws
Schedule 3.1(m) - Licenses and Permits
Schedule 3.1(n) - Environmental Matters
Schedule 3.1(o) - Liens; Sufficiency of Assets
Schedule 3.1(p) - Material Contracts
Schedule 3.1(q) - Subsidiary Benefit Plans; Labor
Schedule 3.1(r) - Intellectual Property Rights
Schedule 3.1(t) - Properties
Schedule 3.1(u) - Bank Accounts; Powers of Attorney
Schedule 4.2 - Exceptions Concerning Conduct of Business
Schedule 5.3(a) - Assumed Retention Agreements
Schedule 5.8 - Captive Insured Subsidiaries; Claims Handling
Procedures
Schedule 6.5 - Licenses, Etc.
Schedule 11.10 - Knowledge of Parent
Schedule 11.17 - Determination of Agreed Base Equity
EXHIBITS
Exhibit 9.2(b) - Canadian Assumption Agreement
Exhibit 11.17(a) - Asia Water Lease Contract
Exhibit 11.17(b) - Asia Enclosure Lease Contract
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PURCHASE AGREEMENT
PURCHASE AGREEMENT (this "Agreement"), dated July 16, 2004,
between The Black & Decker Corporation, a Maryland corporation ("Buyer"), and
Pentair, Inc., a Minnesota corporation ("Parent").
R E C I T A L S
WHEREAS, Parent, through the Subsidiaries, is engaged in the
design, manufacture, marketing, distribution and sale of portable power tools,
stationary and benchtop woodworking tools, tool accessories, pressure washers,
air compressors and generators (the "Business").
WHEREAS, Buyer desires to acquire, directly or indirectly,
from Parent and the Sellers (i) the U.S. Intellectual Property, (ii) all of the
outstanding shares of capital stock, membership interests and other ownership
interests (the "Equity Interests") held by Parent and its Affiliates in each of
the Transferred Subsidiaries, (iii) the Canadian Assets, subject to the Canadian
Liabilities, and (iv) the Toolz Shares, and Parent desires to sell and transfer
the U.S. Intellectual Property, the Equity Interests, the Canadian Assets,
subject to the Canadian liabilities, and the Toolz Shares to Buyer and its
Affiliates.
WHEREAS, capitalized terms not defined in the context in the
Section in which such terms first appear shall have the meaning set forth in
Section 11.17.
NOW THEREFORE, in consideration of the foregoing 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:
1. PURCHASE AND SALE
1.1. Purchase and Sale.
Subject to the terms and conditions of this Agreement, on the Closing Date,
Parent shall sell and cause each of its Affiliates designated on Schedule 1.1
(each a "Seller" and, collectively, the "Sellers") to sell to Buyer or those of
Buyer's Affiliates designated on Schedule 1.1 (each a "Purchaser" and
collectively, the "Purchasers"), and Buyer shall purchase or shall cause its
Affiliates to purchase from Parent and its Affiliates, the U.S. Intellectual
Property, the Equity Interests, the Canadian Assets, subject to the Canadian
Liabilities, and the Toolz Shares, as set forth on Schedule 1.1.
2. PURCHASE PRICE; PAYMENT
2.1. Purchase Price and Payment.
The purchase price (the "Purchase Price") payable by Buyer and the
Purchasers to Parent and the Sellers in consideration for the transactions
described herein shall be in the amount of $775,000,000, subject to the
following adjustments:
(a) Increase. An increase equal to the amount, if any, by
which the Net Asset Value as reflected on the Estimated Closing Statement is
greater than the Agreed Base Equity; and
(b) Decrease. A decrease equal to the amount, if any, by which
the Net Asset Value as reflected on the Estimated Closing Statement is less than
the Agreed Base Equity.
Buyer shall pay, or shall cause the Purchasers to pay, the Purchase Price
payable pursuant to this Section 2.1 on the Closing Date by one or more wire
transfers of immediately available funds to an account the Parent has
designated, at least (2) business days prior to the Closing Date, in writing to
Buyer.
2.2. Determination of Net Asset Value; Post-Closing Adjustment.
(a) Estimated Closing Statement. For purposes of determining
an estimate of the Net Asset Value to be reflected on the Closing Statement and
the Purchase Price payable by Buyer at the Closing, not less than five (5)
business days prior to the Closing Date, Parent shall, in consultation with
Buyer, prepare and deliver to Buyer a reasonable estimate of the Closing
Statement prepared in a manner consistent with the requirements for the
preparation of the Closing Statement. In the event Buyer shall object to any of
the information set forth in such estimate as presented by Parent, the parties
shall negotiate in good faith and attempt to agree on appropriate adjustments so
that such estimate reflects a reasonable estimate of the Closing Statement and
of the Net Asset Value to be reflected on the Closing Statement, but in the
absence of such agreement or manifest error, the good faith determination of the
estimate by Parent shall control (the estimate as agreed to by the parties
pursuant to this subsection, or in the absence of such agreement or manifest
error, the estimate as prepared and delivered by Parent, is herein referred to
as the "Estimated Closing Statement"). In connection with the determination of
the Estimated Closing Statement, Parent shall provide to Buyer such information
and detail as Buyer shall reasonably request.
(b) Closing Statement. Within forty five (45) days following
the Closing, Parent shall prepare, or cause to be prepared, and deliver to Buyer
an unaudited consolidated combined balance sheet of the Subsidiaries (the
"Closing Statement"), which shall set forth the Net Asset Value as of the
Closing Date and, except as set forth on Schedule 2.2(b), shall be prepared in
accordance with GAAP as in effect on the date of the preparation of the Recent
Balance Sheet applied on a basis consistent with the accounting methods,
policies, practices and principles used in the preparation of the Recent Balance
Sheet. The Closing Statement shall be prepared based only on information
relating to the content of the Closing Statement that (i) is known to Buyer or
Parent on the Closing Date or (ii) becomes known by Buyer or Parent after the
Closing Date if such information relates to an event that occurred prior to the
Closing Date. Within ten days following the Closing, Parent shall conduct a
physical count of the inventory of the Subsidiaries which count may be observed
by the Buyer's employees and accountants. Such physical count of the inventory,
adjusted for changes since the Closing Date, shall be used in the preparation of
the Closing Statement.
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(c) Disputes Regarding Closing Statement. Following delivery
of the Closing Statement to the Buyer, Parent shall, and shall cause its
employees and accountants who were involved in the preparation of the Closing
Statement to provide promptly to the Buyer and its employees and accountants
full access during normal business hours to the financial books and records used
in the preparation of the Closing Statements including all working papers of
Parent and its accountants. Buyer shall, within forty-five (45) days after the
delivery by Parent of the Closing Statement, complete its review of the Net
Asset Value derived from the Closing Statement. If Buyer determines that the
Closing Statement has not been prepared in accordance with Section 2.2(b), then
Buyer shall inform Parent on or before the last day of such 45-day period by
delivering a notice to Parent ("Buyer's Objection") (i) setting forth a specific
description of the basis of Buyer's Objection and the adjustments to Net Asset
Value that Buyer believes should be made and (ii) only including objections
based on mathematical errors or based on the Closing Statement not being
prepared in accordance with Section 2.2(b). Parent shall then have thirty (30)
days to review and respond to Buyer's Objection. Parent and Buyer shall seek in
good faith to resolve in writing any differences which they may have with
respect to any matter specified in Buyer's Objection and Parent shall have full
access to the working papers of Buyer prepared in connection with Buyer's
preparation of Buyer's Objection. If Parent and Buyer are unable to resolve all
of their disagreements with respect to the determination of the foregoing items
within twenty (20) days following Parent's response to Buyer's Objection, then
Parent and Buyer shall refer their remaining differences to an internationally
recognized firm of independent public accountants as to which Parent and Buyer
mutually agree, which may not be the firm performing the appraisal pursuant to
Section 2.3 (the "CPA Firm"), who shall, acting as experts and not as
arbitrators, determine on the basis of the standards set forth in Section
2.2(b), and only with respect to the remaining accounting-related differences so
submitted by Buyer to Parent (and not by independent review), whether and to
what extent, if any, Net Asset Value as derived from the Closing Statement
requires adjustment. In connection with the engagement of the CPA Firm, each of
the parties shall execute reasonable engagement letters with the CPA Firm.
Parent and Buyer shall direct the CPA Firm to use its reasonable best efforts to
render its determination within forty-five (45) days. The CPA Firm's
determination shall be conclusive and binding upon Buyer and Parent. The fees
and disbursements of the CPA Firm shall be shared equally by Buyer and Parent.
Buyer and Parent shall make readily available to the CPA Firm all relevant books
and records and any work papers (including those of the parties' respective
accountants) relating to the Recent Balance Sheet and the Closing Statement and
all other items reasonably requested by the CPA Firm. The "Final Closing
Statement" shall be (i) the Closing Statement in the event that (x) no Buyer's
Objection is delivered to Parent during the 30-day period specified above, or
(y) Parent and Buyer so agree, (ii) the Closing Statement, adjusted in
accordance with Buyer's Objection in the event that Parent does not respond to
Buyer's Objection within the 30-day period following receipt by Parent of
Buyer's Objection, or (iii) the Closing Statement, as adjusted by either (x) the
agreement of Parent and Buyer or (y) the CPA Firm.
(d) Cooperation. Buyer agrees that, following the Closing, it
will not take any actions with respect to the accounting books, records,
policies and procedures of the Subsidiaries that would obstruct or prevent the
preparation of the Closing Statement. Buyer shall cooperate with Parent in the
preparation of the Closing Statement including, but not limited to, (i)
providing Parent and Parent's representatives with full access during normal
business hours to the books, records (including work papers, schedules,
memoranda and other documents), facilities and employees of the Subsidiaries,
(ii) causing employees of the Subsidiaries to provide
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Parent as promptly as practicable following the Closing Date (but in no event
later than thirty (30) days after the Closing Date) with normal year-end closing
financial information for the Subsidiaries for the period ending as of the close
of business on the Closing Date, and (iii) cooperating fully with Parent's
representatives, including the provision on a timely basis of all other
information necessary or useful in connection with the preparation of the
Closing Statement. Buyer and its accountants shall have full access to all
information used by Parent in preparing the Closing Statement, including the
work papers of its accountants.
(e) Adjustment Payment to Buyer. In the event the Net Asset
Value as derived from the Final Closing Statement is less than the Net Asset
Value as reflected on the Estimated Closing Statement, Parent shall make an
adjustment payment to Buyer in an amount equal to the difference between (i) the
Net Asset Value as reflected on the Estimated Closing Statement and (ii) the Net
Asset Value as derived from the Final Closing Statement. Any payment required by
the first sentence of this Section 2.2(e) shall be made by Parent to Buyer,
together with interest thereon at an annual rate equal to the U.S. prime
interest rate of lending as set forth in The Wall Street Journal as of the
Closing Date (the "Applicable Rate") calculated on the basis of the number of
days elapsed from and including the Closing Date to and excluding the date of
payment, in immediately available funds within five (5) business days after the
determination of the Final Closing Statement.
(f) Adjustment Payment to Parent. In the event the Net Asset
Value as derived from the Final Closing Statement is greater than the Net Asset
Value as reflected on the Estimated Closing Statement, Buyer shall make an
adjustment payment to Parent in an amount equal to the difference between (i)
the Net Asset Value as reflected on the Estimated Closing Statement and (ii) the
Net Asset Value as derived from the Final Closing Statement. Any payment
required by the first sentence of this Section 2.2(f) shall be made by Buyer to
Parent, together with interest thereon at the Applicable Rate calculated on the
basis of the number of days elapsed from and including the Closing Date to and
excluding the date of payment, in immediately available funds within five (5)
business days after the determination of the Final Closing Statement.
2.3. Allocation.
The Purchase Price, as finally determined, shall be allocated among the
various Equity Interests, the assets of the Subsidiaries that are U.S. entities
and subject to the election described in Section 5.1(e), the U.S. Intellectual
Property, the Canadian Assets and the Toolz Shares in accordance with an
appraisal performed by either (i) the appraisal division of
PricewaterhouseCoopers, (ii) the appraisal division of KPMG, or (iii) the
American Appraisal Company, as selected by the Buyer. The appraisal will be
performed in accordance with the standards of the American Society of
Appraisers. Within a reasonable period of time before such appraisals are
finalized, Buyer shall provide Parent a draft copy of such appraisals and Buyer
shall in good faith consider any comments made by Parent with respect thereto.
Parent, the Buyer and their respective Affiliates shall (i) be bound by such
allocation for purposes of determining any Taxes, (ii) prepare and file all Tax
Returns to be filed with any Taxing Authority in a manner consistent with such
allocation and (iii) take no position inconsistent with such allocation in any
Tax Return, any proceeding before any taxing authority or otherwise. Appropriate
adjustments shall be made to such allocation and to specific categories of
assets
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within such allocation to reflect any Purchase Price adjustment pursuant to
Section 2.2. In the event that such allocation is disputed by any Taxing
Authority, the party receiving notice of such dispute shall promptly notify the
other party of such dispute, and Parent and the Buyer shall cooperate in good
faith in responding to such challenge in order to preserve the effectiveness of
such allocation.
3. REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of Parent.
Parent makes the following representations and warranties to Buyer:
(a) Due Organization and Power. Each of Parent and the Sellers
is a corporation or limited liability company duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization. Each of Parent and the Sellers has all requisite corporate power
and authority to own, operate and lease its properties and to carry on its
business as and where such is now being conducted. Parent has all requisite
corporate power to enter into this Agreement and the other documents and
instruments to be executed and delivered by Parent and to carry out the
transactions contemplated hereby and thereby. Each of the Sellers is duly
licensed or qualified to do business as a foreign corporation or limited
liability company, and is in good standing, in each jurisdiction wherein the
character of the properties owned or leased by it, or the nature of its
business, makes such licensing or qualification necessary.
(b) Authority. The execution and delivery of this Agreement
and the other documents and instruments to be executed and delivered by Parent
pursuant hereto and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the Board of Directors of Parent. No other
corporate act or proceeding on the part of Parent or its shareholders is
necessary to authorize this Agreement or the other documents and instruments to
be executed and delivered by Parent pursuant hereto or the consummation of the
transactions contemplated hereby and thereby. This Agreement constitutes, and
when executed and delivered, the other documents and instruments to be executed
and delivered by Parent pursuant hereto will constitute, valid and binding
agreements of Parent, enforceable in accordance with their respective terms,
except as such may be limited by bankruptcy, insolvency, reorganization or other
Laws affecting creditors' rights generally, and by general equitable principles.
As of the Closing, the execution and delivery of the documents and instruments
to be executed and delivered by each Seller pursuant hereto and the consummation
of the transactions contemplated thereby shall have been duly authorized by the
Board of Directors and, to the extent required by applicable Law, the
stockholder of such Seller. No other corporate act or proceeding on the part of
such Seller or its shareholders shall be necessary to authorize the documents
and instruments to be executed and delivered by such Seller pursuant hereto or
the consummation of the transactions contemplated thereby. When executed and
delivered, the documents and instruments to be executed and delivered by each
Seller pursuant hereto will constitute valid and binding agreements of such
Seller, enforceable in accordance with their respective terms, except as such
may be limited by bankruptcy, insolvency, reorganization or other Laws affecting
creditors' rights generally, and by general equitable principles.
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(c) Subsidiaries. Schedule 3.1(c) sets forth the name,
jurisdiction of incorporation or organization, capitalization and ownership of
each Subsidiary as of the date hereof. Except as listed in Schedule 3.1(c), the
Subsidiaries do not own, directly or indirectly, any capital stock or other
equity securities of any corporation or have any direct or indirect equity or
other ownership interest in any entity or business. Each Subsidiary (A) is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of its state or other jurisdiction of incorporation or
organization, (B) has full corporate or other power and authority to carry on
its business as it is now being conducted and to own and lease the properties
and assets it now owns and leases and (C) is in good standing and is duly
qualified or licensed to do business as a foreign corporation or other entity in
each jurisdiction wherein the character of the properties owned or leased by it,
or the nature of its business makes such licensing or qualification necessary.
(d) Toolz Limited. Except as set forth on Schedule 3.1(d), the
Toolz Shares are owned by Asia Holdings, free and clear of any Liens, and are
validly issued, fully paid and nonassessable. Upon payment of the Purchase Price
payable in accordance with Section 2.1, the Sellers will convey to the Purchaser
designated in Schedule 1.1 the Toolz Shares, free and clear of all Liens (other
than Liens created by the Buyer or any of the Purchasers).
(e) Title. Except as listed in Schedule 3.1(e), the Sellers
have title to the U.S. Intellectual Property, the Equity Interests and the
Canadian Assets free and clear of all Liens. Upon payment of the Purchase Price
payable in accordance with Section 2.1, the Sellers will convey to the
Purchasers the U.S. Intellectual Property, the Equity Interests and the Canadian
Assets as designated in Schedule 1.1, free and clear of all Liens (other than
Liens created by the Buyer or any of the Purchasers). All of the Equity
Interests of each of the Transferred Subsidiaries are owned by the Sellers or by
another Transferred Subsidiary and are free and clear of any Liens, and are
validly issued, fully paid and nonassessable. There are no (i) securities
convertible into or exchangeable for the capital stock or other securities of
any Transferred Subsidiary; (ii) options, warrants or other rights to purchase
or subscribe to capital stock or other securities of any Transferred Subsidiary
or securities which are convertible into or exchangeable for capital stock or
other securities of any Transferred Subsidiary; or (iii) contracts, commitments
or agreements relating to the issuance, sale or transfer of any capital stock or
other equity securities of any Transferred Subsidiary, any such convertible or
exchangeable securities or any such options, warrants or other rights.
(f) No Violation. Except as set forth on Schedule 3.1(f),
neither the execution and delivery of this Agreement or the other documents and
instruments to be executed and delivered by Parent or the Sellers pursuant
hereto nor the consummation by Parent or the Sellers of the transactions
contemplated hereby and thereby (a) will violate any Law or any Order of any
Government Entity applicable to Parent, the Sellers, or the Subsidiaries, (b)
except for applicable requirements of the HSR Act and any other applicable
Competition Laws, will require any authorization, consent or approval by, filing
with or notice to any Government Entity except for such authorizations,
consents, approvals, filings or notice requirements that become applicable
solely as a result of the specific regulatory status of Buyer or any of its
Affiliates, or (c) subject to obtaining the consents referred to in Schedule
3.1(f), will violate or conflict with, or constitute
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a default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or will result in the termination of, or accelerate
the performance required by, or result in the creation of any Liens upon any of
the assets of the Subsidiaries, including the U.S. Intellectual Property, the
Equity Interests, the Canadian Assets or the Toolz Shares under, any term or
provision of the respective charter or organizational documents of the Sellers
or the Subsidiaries or of the terms of any Contract to which Parent, the Sellers
or the Subsidiaries are a party or by which Parent, the Sellers or any
Subsidiary or any of their respective assets or properties may be bound or
affected.
(g) Financial Statements. Schedule 3.1(g) contains (a) audited
combined balance sheets of the Subsidiaries as of December 31, 2003 and 2002 and
audited combined statements of income, cash flows and changes in shareholders'
equity for the fiscal years ended December 31, 2003, 2002 and 2001 and notes
thereto (the "Audited Financial Statements"); (b) audited balance sheets of each
of Jointech Corporation Ltd. and Hangtech Limited as of December 31, 2003 and
audited statements of operations, changes in stockholders' equity and cash flows
of each of such companies for the year ended December 31, 2003 and notes
thereto, and audited balance sheets of each of Joinery Industrial Co., Ltd.,
Qingdao Sungun Power Tool Co., Ltd., Wintech Corporation Ltd. and Wisetech
Industrial Co., Ltd. (Suzhou) as of December 31, 2003 and 2002 and audited
statements of operations, changes in stockholders' equity and cash flows of each
of such companies for the years ended December 31, 2003 and 2002 and notes
thereto, (c) an unaudited, pro-forma combined balance sheet of the Subsidiaries
as of April 3, 2004 reflecting the April 5, 2004 acquisition of the remaining
stock of the Asian Subsidiaries by Parent (the "Recent Balance Sheet") and (d)
combined statements of income and cash flows of the Subsidiaries for the quarter
ended April 3, 2004. The financial statements described in the preceding
sentence are collectively referred to as the "Financial Statements". Except as
set forth in Schedule 3.1(g), the Financial Statements were prepared in
accordance with GAAP, as in effect on the date of such Financial Statements and
applied on a consistent basis in such Financial Statements (except as may be
indicated in the notes to the Audited Financial Statements), and such Financial
Statements fairly present, in all material respects, the consolidated financial
position and operating income results of the Subsidiaries as of their respective
dates and for the respective periods covered thereby, giving effect to certain
estimated allocations and charges for certain centralized shared services
disclosed on Schedule 3.1(g).
(h) Tax Matters.
(i) All material Tax Returns required to be filed by or
on behalf of the Subsidiaries have been timely filed or will be timely filed
(within the time permitted by any timely filed extension), and when filed were
complete and accurate. All material Taxes due and owing by the Subsidiaries have
been paid or adequately accrued. The Subsidiaries have materially complied with
all rules and regulations relating to the withholding of Taxes, have withheld or
collected all material Taxes that they were required to withhold or collect and,
to the extent required, have paid them over to the appropriate Governmental
Entity.
(ii) Except as set forth on Schedule 3.1(h), as of the
date hereof, (A) there is no Tax Audit with respect to any material Taxes due
and owing by the Subsidiaries, and (B) there are no outstanding agreements or
waivers extending the statutory period of limitations for a Tax assessment
applicable to any Tax Return or report with respect to a taxable period for
which such statute of limitations is still open.
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(iii) Schedule 3.1(h) lists every year Parent or one of
the Subsidiaries were each a member of the same Affiliated Group that filed a
consolidated federal income Tax Return for which the statute of limitations
specified in Code Section 6501(a) does not bar a federal income Tax assessment,
and each corporation that was part of such group.
(i) Absence of Certain Changes. Except as and to the extent
set forth in Schedule 3.1(i), and except as required or contemplated by this
Agreement, since the date of the Recent Balance Sheet, there has not been (i)
any Material Adverse Effect; (ii) any material increase in the compensation,
salaries or wages payable or to become payable to any officer or key employee of
the Subsidiaries, except in the ordinary course of business or as required under
employment or retention agreements in effect as of the date hereof; (iii) any
entry by the Subsidiaries into any employment, severance or termination
agreement with any such officer or key employee, or any amendment thereto; (iv)
any declaration, setting aside or payment of any dividend or any other
distribution in respect of the Subsidiaries' capital stock; (v) any sale, lease
or other transfer or disposition of any material properties or assets of the
Subsidiaries, except for the sale of inventory items in the ordinary course of
business; (vi) any indebtedness for borrowed money incurred or guaranteed by the
Subsidiaries other than intercompany borrowings from Parent or another
Subsidiary in the ordinary course of business; or (vii) any material damage,
destruction or extraordinary losses (whether or not covered by insurance) with
regard to the business of the Subsidiaries; (viii) any capital expenditures or
commitments in an amount in excess of the unspent portion of the Business'
capital budget for the current year; (ix) any change in the charter, bylaws or
other organizational documents of the Subsidiaries.
(j) Absence of Undisclosed Liabilities. Except as disclosed in
the Recent Balance Sheet or in Schedule 3.1(j), the Subsidiaries do not have any
liabilities, commitments or obligations (secured or unsecured, and whether
accrued, absolute, contingent or otherwise), other than (i) liabilities
reflected or reserved for on the Recent Balance Sheet, (ii) liabilities that are
not required by GAAP to be reflected on the Recent Balance Sheet, (iii)
executory obligations under or arising out of (but not liabilities for breaches
of) (A) Contracts disclosed on Schedule 3.1(p), (B) Contracts that are not
required to be disclosed on Schedule 3.1(p) or (C) Contracts entered into after
the date of this Agreement in accordance with the terms and conditions of this
Agreement, (iv) liabilities disclosed in this Agreement or any other Schedule to
this Agreement, or that are of the type or kind required to be disclosed in a
Schedule to this Agreement but are not disclosed solely because they fall below
the minimum threshold amount, term or materiality of the disclosures required by
the terms of this Agreement to be set forth in such Schedules, and (v)
liabilities that have arisen after the date of the Recent Balance Sheet in the
ordinary course of business or otherwise as expressly contemplated by the terms
and conditions of this Agreement.
(k) No Litigation. Except as set forth in Schedule 3.1(k), as
of the date hereof, there is no action, suit, arbitration, proceeding or
investigation pending or, to the knowledge of Parent, threatened in writing
against the Subsidiaries, and there is no outstanding Order of any Government
Entity against or affecting the Subsidiaries.
(l) Compliance With Laws and Orders. The business of the
Subsidiaries is not being conducted in violation of any Laws applicable to the
Subsidiaries, except as described on Schedule 3.1(l).
8
(m) Licenses and Permits. The Subsidiaries have all licenses,
permits, approvals, authorizations and consents of all Government Entities
required for the conduct of the business of the Subsidiaries as presently
conducted and the operation of the Subsidiary Facilities. Except as set forth in
Schedule 3.1(m), the Subsidiaries are in compliance with all such permits and
licenses, approvals, authorizations and consents. Except as set forth in
Schedule 3.1(m), the transactions contemplated by this Agreement will not lead
to the revocation, cancellation, termination or suspension of any permits and
licenses, approvals, authorizations and consents that are material and necessary
for the conduct of the Business.
(n) Environmental Matters. Parent makes no representation or
warranty in this Agreement as to any matters relating to the environment,
Hazardous Substances or Environmental Laws except in this Section 3.1(n). Except
as disclosed in Schedule 3.1(n) and the documents identified therein:
(i) All of the Subsidiaries' operations in, on or at the
Subsidiary Facilities (other than the Delta Tupelo Facility) comply with
applicable Environmental Laws and the Subsidiaries have all permits, licenses,
registrations and other authorizations required under Environmental Laws to
operate such facilities as they are currently operated;
(ii) To the knowledge of Parent, no Hazardous Substances
have been produced, sold, used, stored, transported, handled, released,
discharged or disposed of by the Subsidiaries or at or from the Subsidiary
Facilities (other than the Delta Tupelo Facility) by any person in a manner that
violated any applicable Environmental Law; and
(iii) Except with regard to the Delta Tupelo Facility,
the Subsidiaries have not received written notice from any Government Entity
that any of the Subsidiary Facilities are in violation or allegedly in violation
of, do not comply or allegedly do not comply with, or are the basis for
liability or alleged liability (including off-site liabilities) under any
applicable Environmental Law.
(o) Title to and Sufficiency of Assets; Liens. Except as
disclosed in Schedule 3.1(o), the Subsidiaries own (with valid title in the case
of real property) all of their respective properties and assets, including those
properties and assets reflected in the Recent Balance Sheet, except for property
and assets sold since the date of the Recent Balance Sheet in the ordinary
course of business consistent with past practice. Except as disclosed in
Schedule 3.1(o), or as reflected in the Recent Balance Sheet, such properties
and assets are held free and clear of any Liens, except (i) for Liens for Taxes
and assessments not yet due and payable or being contested in good faith by
appropriate proceedings, (ii) for Liens reflected in title records relating to
real property owned by the Subsidiaries that do not materially adversely impair
the present use or occupancy of the property subject thereto, (iii) for
mechanics', workmen's, repairmen's, warehousemen's, carriers' or other similar
Liens arising in the ordinary course of business, and (iv) for Liens that,
individually or in the aggregate, do not materially detract from the value, or
impair in any material manner the use, of the property or assets subject
thereto. Except as set forth on Schedule 3.1(o), the assets owned or leased by
the Subsidiaries constitute all of the tangible and intangible assets used
primarily in the Business, and upon the Buyer's and the Purchasers' acquisition
of the U.S. Intellectual Property, the Canadian Assets, the Equity
9
Interests and the Toolz Shares, the Buyer will be able to continue to conduct
the Business after Closing in the manner in which the Business has been
conducted by the Subsidiaries. Except with respect to the representations and
warranties contained in this Section 3.1, Buyer is acquiring the assets of
Companies and the Subsidiaries being transferred to Buyer upon the acquisition
by Buyer of the Shares and the LLC Interests AS IS, WHERE IS. PARENT MAKES NO
OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE
DESIGN, CONDITION, CAPACITY, VALUE, UTILITY, PERFORMANCE OR QUALITY OF SUCH
ASSETS (INCLUDING INVENTORY), AND PARENT MAKES NO IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT THERETO, OR AS
TO THE CONDITION OR THE ABSENCE OF ANY DEFECTS THEREIN. For the avoidance of
doubt, the two preceding sentences shall not affect the determination or
valuation of assets and liabilities (including reserves and accruals) included
on the Final Closing Statement determined in accordance with GAAP as provided in
Section 2.2.
(p) Material Contracts. Schedule 3.1(p) sets forth a list as
of the date hereof of each of the following types of written Contracts to which
the Subsidiaries are a party (each, a "Material Contract"):
(i) Any collective bargaining agreement or other Contract
to or with any labor union or other employee representative of a group of
employees;
(ii) Any employment Contract with any officer or key
employee of the Subsidiaries that has future liability in any year in excess of
$200,000 or its foreign currency equivalent on the date hereof;
(iii) Any joint venture or partnership Contract;
(iv) Any Contract containing covenants that restrict the
business activity of the Subsidiaries;
(v) Any Contract relating to the borrowing of money in
excess of $1,000,000 or its foreign currency equivalent on the date hereof; or
(vi) Any real or personal property lease to which the
Subsidiaries are subject that has future liability in any year in excess of
$1,000,000 or its foreign currency equivalent on the date hereof.
Except as set forth in Schedule 3.1(p), each Material Contract is in full force
and effect and is valid and enforceable by the Subsidiaries in accordance with
its terms. Except as set forth in Schedule 3.1(p), the Subsidiaries are in
compliance in all material respects with all material terms and requirements of
each Material Contract and the Subsidiaries are not in default or breach under
any Material Contract, and no event has occurred that, with notice or lapse of
time or both, would constitute such a default thereunder by the Subsidiaries.
10
(q) Employee Benefit Plans; Labor.
(i) Schedule 3.1(q) lists each currently in effect and
material "employee benefit plan" (within the meaning of Section 3(3) of ERISA),
stock option, stock appreciation right, phantom stock, restricted stock,
disability, severance, or deferred compensation, retirement or benefit plan,
program, agreement, arrangement or understanding (except any such plan, program,
agreement, arrangement or understanding required by Law or by works custom)
maintained or contributed to by the Subsidiaries or by Parent or an ERISA
Affiliate for the benefit of current and former employees of the Subsidiaries
(the "Subsidiary Benefit Plans"), other than Subsidiary Benefit Plans for the
benefit of current or former employees located outside of North America. With
respect to each of the Subsidiary Benefit Plans, complete and accurate copies of
all Subsidiary Benefit Plans and all related trust agreements, insurance
contracts, determination letters, annual reports for the last three years for
each employee pension benefit plan, as defined in ERISA, the most recent annual
report for each employee welfare benefit plan, as defined in ERISA, the most
recent actuarial reports and summary plan descriptions, have been made available
to the Buyer.
(ii) Except as set forth on Schedule 3.1(q) each
Subsidiary Benefit Plan has been administered in accordance with its terms and
the Subsidiary Benefit Plans are in compliance in all respects with all
provisions of ERISA, the Code, or their foreign equivalents, and other Laws
applicable to the Subsidiary Benefit Plans, including the data privacy
requirements of the Health Insurance Portability and Accountability Act (HIPAA).
Except as set forth on Schedule 3.1(q), the Internal Revenue Service has issued
a currently effective favorable determination letter with respect to each
Subsidiary Benefit Plan that is intended to be a "qualified plan" within the
meaning of Code Section 401(a). Except as set forth on Schedule 3.1(q), with
respect to each Subsidiary Benefit Plan, and with respect to each other benefit
plan maintained or contributed to by an ERISA Affiliate, subject to Title IV of
ERISA, ERISA Section 302 or Code Sections 412 or 4971(a), there does not exist
(A) an "accumulated funding deficiency" within the meaning of ERISA Section 302
or Code Section 412 or (B) a "reportable event" within the meaning of ERISA
Section 4043(c), excluding any such event for which a filing under ERISA Section
4043 is not required, or which may arise by reason of the transactions
contemplated hereby, and no circumstances exist that could reasonably be
expected to result in the imposition of any lien under Code Section 412 by
reason of failure of any of the Subsidiaries or an ERISA Affiliate to make
timely installments or other payments required by Code Section 412. Within the
last three years, no Subsidiary Benefit Plan that is subject to Title IV of
ERISA has been terminated, and none of the Subsidiaries or any ERISA Affiliate
has incurred any liabilities under Section 4062, 4063 or 4064 of ERISA with
respect to any Subsidiary Benefit Plan.
(iii) Except as set forth on Schedule 3.1(q), there are
no claims (except claims for benefits payable in the ordinary course of business
and proceedings with respect to qualified domestic relations orders), suits or
proceedings pending, or to the knowledge of the Subsidiaries and the Parent,
threatened, against or involving any Subsidiary Benefit Plan or asserting any
rights or claims to benefits under any Subsidiary Benefit Plan, or asserting any
claims against any administrator, fiduciary or sponsor thereof and, to the
knowledge of the Subsidiaries and the Parent, there are no pending or threatened
investigations by any Government Entity involving any Subsidiary Benefit Plans.
11
(iv) All contributions or premiums required to be made to
or benefit liabilities arising under the terms of each Subsidiary Benefit Plan
for all periods through the Closing Date have been adequately accrued against in
the Audited Financial Statements.
(v) Except as set forth on Schedule 3.1(q), as of the
date hereof, no "prohibited transactions" (within the meaning of ERISA Sections
406 or 407 or Code Section 4975) have occurred with respect to any Subsidiary
Benefit Plan which have not been corrected or for which a statutory or
administrative exemption does not exist.
(vi) Except as set forth on Schedule 3.1(q), none of the
Subsidiary Benefit Plans, nor any other benefit plan maintained or contributed
to at any time by an ERISA Affiliate, subject to Title IV of ERISA is or was a
"multiemployer plan" as defined in ERISA Section 4001(a)(3), and during the last
three years none of the Subsidiaries has withdrawn from any multiemployer plan
in a complete or partial withdrawal, and no ERISA Affiliate has withdrawn from
any multiemployer plan in a complete or partial withdrawal under circumstances
where any withdrawal liability was not satisfied in full.
(vii) Except as disclosed on Schedule 3.1(q), none of the
Subsidiaries are a party to any labor or collective bargaining agreement and
none of the employees of the Subsidiaries are represented by a labor
organization. No labor organization or group of employees of the Subsidiaries
has pending a demand for recognition, and there are no representation
proceedings or petitions seeking a representation proceeding presently pending
or, to the knowledge of Parent, threatened to be brought or filed, with the
National Labor Relations Board or any other labor relations tribunal. Except as
set forth on Schedule 3.1(q), there are no pending grievances, labor
arbitrations or other labor disputes relating to employees of the Subsidiaries.
To the knowledge of Parent, none of the Subsidiaries have engaged in any unfair
labor practices, as defined in the National Labor Relations Act, and there is no
unfair labor practice charge or complaint against any of the Subsidiaries
pending or, to the knowledge of Parent, threatened before the National Labor
Relations Board or any similar state agency.
(viii) Except as set forth on Schedule 3.1(q), no
employees or groups of employees of any of the Subsidiaries have engaged in any
strike, picketing, labor disturbance, slowdown or work stoppage affecting the
Subsidiaries during the three (3) year period preceding the date of this
Agreement and to the knowledge of Parent, no such labor action has been
threatened. To the knowledge of Parent, there is no union organizing effort
under way, pending or threatened with respect to any of the Subsidiaries.
(ix) Except as set forth on Schedule 3.1(q), with respect
to current or former employees or directors of the Subsidiaries, no benefits,
including death or medical benefits (whether or not insured) are provided beyond
retirement or other termination of service, other than (i) coverage mandated
solely by applicable Law, (ii) death benefits or retirement benefits accrued as
liabilities under any "employee pension benefit plan" as defined in Section 3(2)
of ERISA, or (iii) deferred compensation benefits.
(x) Except as set forth on Schedule 3.1(q), the
execution, delivery or performance of this Agreement or the consummation of the
Closing will not (i) increase any benefits otherwise payable under any
Subsidiary Benefit Plan, (ii) result in the
12
acceleration of the time of payment or vesting of any such benefits, or (iii)
give rise to an obligation with respect to the payment of any severance pay, or
other payments in the nature of severance pay, unless and to the extent such
events will result from actions taken by Buyer or any of its Affiliates.
(r) Intellectual Property Rights. Schedule 3.1(r) sets forth a
complete list, as of the date hereof, of all United States and foreign patents,
registered trademarks, trade names and copyrights owned by or (as indicated by
asterisks on Schedule 3.1(r)) licensed to the Subsidiaries (the "Intellectual
Property Rights"). The Intellectual Property Rights include all of the United
States and foreign patents, registered trademarks, trade names and copyrights
used in the conduct of the Business. Except as set forth in Schedule 3.1(r), (i)
the Subsidiaries own or possess adequate licenses or other valid rights to use
all Intellectual Property Rights and (ii) the conduct of the Business as now
being conducted does not conflict with any valid patents, trademarks, trade
names or copyrights or involve the misappropriation of trade secrets of others.
(s) Fees. Except for the fees payable to Goldman, Sachs & Co.,
neither Parent nor the Subsidiaries have paid or become obligated to pay any fee
or commission to any broker or finder in connection with the transactions
provided for herein or in connection with the negotiation thereof.
(t) Properties. Schedule 3.1(t) sets forth a complete list of
all manufacturing facilities and distribution centers leased or owned by the
Subsidiaries.
(u) Banks; Powers of Attorney. Schedule 3.1(u) sets forth (i)
the names and locations of all banks, trust companies, savings and loan
associations and other financial institutions at which the Subsidiaries maintain
safe deposit boxes or accounts of any nature, the number assigned to each such
account and the names of all persons authorized to draw thereon, make
withdrawals therefrom or have access thereto and (ii) the names of all persons
to whom the Subsidiaries have granted any power of attorney, together with a
description thereof.
(v) Conduct of the Business. Except as set forth in Schedule
3.1(v) and except as expressly contemplated by this Agreement, since the date of
the Recent Balance Sheet, each of the Subsidiaries has conducted its business in
the ordinary course and consistent with past practice.
(w) Corporate Records. The minute books of the Subsidiaries
have been made available to the Buyer prior to the Closing and accurately
reflect all minutes of proceedings of and material actions taken by the
directors of the Subsidiaries or any committee of the Boards of Directors of the
Subsidiaries and all records of meetings of and actions taken by the
shareholders of the Subsidiaries.
(x) Internal Control Over Financial Reporting.
(i) Since December 31, 2003, there has been no change in
the Subsidiaries' internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Subsidiaries'
internal control over financial reporting.
13
(ii) The Subsidiaries have implemented a process to
complete the comprehensive documentation of their internal control over
financial reporting as contemplated by Section 404 of the Sarbanes-Oxley Act of
2002 (as interpreted by the rules and regulations of the Securities and Exchange
Commission thereunder) by December 31, 2004.
(iii) To the extent that the Subsidiaries' documentation
of their internal control over financial reporting results in the identification
of any material weaknesses or significant deficiencies in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the Subsidiaries' ability to record, process,
summarize and report financial information, their process for the documentation
of their internal control over financial reporting is sufficient to permit the
Subsidiaries to take appropriate remedial action to correct such material
weaknesses or significant deficiencies by December 31, 2004.
3.2. Representations and Warranties of Buyer. Buyer makes the
following representations and warranties to Parent:
(a) Due Organization and Power. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Maryland.
Buyer has all requisite corporate power to enter into this Agreement and the
other documents and instruments to be executed and delivered by Buyer and to
carry out the transactions contemplated hereby and thereby.
(b) Authority. The execution and delivery of this Agreement
and the other documents and instruments to be executed and delivered by Buyer
pursuant hereto and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the Board of Directors of Buyer. No other
corporate act or proceeding on the part of Buyer or its shareholders is
necessary to authorize this Agreement or the other documents and instruments to
be executed and delivered by Buyer pursuant hereto or the consummation of the
transactions contemplated hereby and thereby. This Agreement constitutes, and
when executed and delivered, the other documents and instruments to be executed
and delivered by Buyer pursuant hereto will constitute, valid and binding
agreements of Buyer, enforceable in accordance with their respective terms,
except as such may be limited by bankruptcy, insolvency, reorganization or other
Laws affecting creditors' rights generally, and by general equitable principles.
(c) No Violation. Neither the execution and delivery of this
Agreement or the other documents and instruments to be executed and delivered by
Buyer pursuant hereto nor the consummation by Buyer of the transactions
contemplated hereby and thereby (a) will violate any Law or any Order of any
Government Entity applicable to Buyer, except for such violations, the
occurrence of which would not, individually or in the aggregate, have a material
adverse effect on Buyer's ability to perform its obligations hereunder, (b)
except for applicable requirements of the HSR Act and any other applicable
Competition Laws, will require any authorization, consent or approval by, filing
with or notice to any Government Entity, except for such authorizations,
consents, approvals, filings or notices, the failure of which to obtain or make
would not, individually or in the aggregate, have a material adverse effect on
Buyer's ability to perform its obligations hereunder, or (c) will violate or
conflict with, or constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a
14
default) under, or will result in the termination of, or accelerate the
performance required by, any term or provision of the charter or bylaws of Buyer
or of the express terms of any Contract to which Buyer is a party or by which
Buyer or any of its assets or properties may be bound or affected, except for
such violations, conflicts, defaults, terminations or accelerations that would
not, individually or in the aggregate, have a material adverse effect on Buyer's
ability to perform its obligations hereunder.
(d) Financial Capacity. Buyer has disclosed to Parent the
manner in which Buyer has or will have sufficient funds to enable it to perform
its obligations under this Agreement, which disclosure is true, complete and
correct, and there has not been any event, circumstance or change that would
adversely impact Buyer's ability to obtain or have such funds available as of
the Closing.
(e) Fees. Buyer has not paid or become obligated to pay any
fees or commissions to any broker or finder in connection with the transactions
provided for herein or in connection with the negotiation thereof.
3.3. Expiration of Representations and Warranties.
Except as expressly set forth in this Agreement, the representations and
warranties of Parent and the Buyer set forth in this Agreement and in any
certificate or other document delivered prior to or on the Closing Date
(including, without limitation, the certificate described in Section 6.1 duly
executed by an officer of the Parent and the certificate described in Section
7.1 duly executed by an officer of the Buyer), and the right to make a claim
hereunder with respect thereto, shall survive the Closing and the consummation
of the transactions contemplated hereby and continue until the date which is the
second anniversary of the Closing Date, at which time they shall expire.
Notwithstanding the foregoing, (i) the representations and warranties of Parent
set forth in Section 3.1(h) as to Tax matters shall survive for the period of
the applicable statute of limitations, (ii) the representations and warranties
of Parent set forth in Section 3.1(q) as to employee matters shall survive until
the third anniversary of the Closing Date and (iii) the representations and
warranties contained in Sections 3.1(b), 3.1(d) and 3.1(e) shall survive the
Closing and the consummation of the transactions contemplated thereby without
limitation.
3.4. No Other Representations or Warranties; Memorandum; Projections.
Buyer acknowledges that the detailed representations and warranties
contained herein have been negotiated at arm's length among sophisticated
business entities. Except for the representations and warranties contained in
Section 3.1, Buyer acknowledges that none of Parent, the Sellers or any other
person or entity, acting on behalf of Parent or the Sellers, makes or has made
any other express or implied representation or warranty to Buyer as to the
accuracy or completeness of any information regarding Parent, the Sellers or the
Subsidiaries or the business of the Subsidiaries or any other matter. Except as
expressly set forth herein, Buyer further agrees that none of Parent, the
Sellers or any other person or entity will have or be subject to any liability
to Buyer or any other person resulting from the distribution to Buyer, or
Buyer's use, of any such information, including the Confidential Memorandum
prepared by Parent and Goldman, Sachs & Co. dated March 2004 and any
information, document or material made
15
available or provided to Buyer in certain management presentations or any other
form in expectation of the transactions contemplated by this Agreement.
Without limitation, in connection with Buyer's investigation of the
Subsidiaries, Buyer has received from or on behalf of Parent certain
projections, including, without limitation, projected statements of operating
revenues and income from operations of the Subsidiaries for the fiscal years
ending December 31, 2004 through December 31, 2008 and certain business plan
information for such fiscal year and succeeding fiscal years. Buyer acknowledges
that there are uncertainties inherent in attempting to make such estimates,
projections and other forecasts and plans, that Buyer is familiar with such
uncertainties, that Buyer is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all estimates, projections and other
forecasts and plans so furnished to it (including the reasonableness of the
assumptions underlying such estimates, projections and forecasts), and that
Buyer shall have no claim against Parent or any other person acting on behalf of
Parent with respect thereto. Accordingly, none of Parent, the Sellers or any
person acting on their behalf makes any representation or warranty with respect
to such estimates, projections and other forecasts and plans (including the
reasonableness of the assumptions or the accuracy of the information underlying
such estimates, projections and forecasts).
4. COVENANTS PRIOR TO CLOSING
4.1. Access to Information Concerning Properties and Records;
Confidentiality.
Except (a) for information relating to the trade secrets of the
Subsidiaries, (b) for information which, if provided, would adversely affect the
ability of Parent or the Subsidiaries to assert attorney-client or attorney work
product privilege or other similar privilege, (c) for information that, in the
reasonable opinion of Parent's legal counsel, may result in a violation of any
Law applicable to Parent or the Subsidiaries and (d) for information that Parent
reasonably believes is competitively sensitive, Parent agrees to cause the
Subsidiaries, during the period commencing on the date hereof and ending on the
Closing Date, to furnish or cause to be furnished to Buyer and its
representatives, at reasonable times and, upon reasonable notice, (i) such
access (except to conduct environmental investigations, assessments or
monitoring), during normal business hours, to the Subsidiary Facilities as Buyer
may from time to time reasonably request with due regard to minimizing
disruption of the business of the Subsidiaries; (ii) such access to the books
and records of Parent and the Subsidiaries relating to the Subsidiaries as Buyer
may from time to time reasonably request; and (iii) such access to financial and
operating data and other information with respect to the Subsidiaries, including
access to the work papers of Parent's independent auditors (with the consent of
such auditors, which Parent shall use its commercially reasonable efforts to
obtain), as Buyer may from time to time reasonably request. During such period,
Parent shall, and shall cause the Subsidiaries to, allow Buyer and Buyer's
accountants full access to the Subsidiaries' internal control over financial
reporting documentation and any corrective actions or other procedures conducted
with respect to their internal control over financial reporting. Parent shall,
and shall cause the Subsidiaries to, comply with any reasonable recommendation
made by the Buyer or its accountants with respect to (i) the documentation by
the Subsidiaries of their internal control over financial reporting, and (ii)
any corrective actions to be made prior to the Closing to their internal control
over financial
16
reporting; provided, however, that nothing in this Agreement shall require
Parent to, or cause the Subsidiaries to, undertake or complete an assessment of
the Subsidiaries' internal control over financial reporting prior to the
Closing. Buyer shall be solely responsible for the costs, whether or not the
Closing takes place in accordance herewith, that Parent or the Subsidiaries may
incur as the result of their compliance with such recommendations of Buyer or
its accountants over the costs that they would otherwise incur in complying with
Section 404 of the Sarbanes-Oxley Act of 2004. Further, during such period, upon
reasonable advance notice to and with the prior consent of Parent in each
instance (which consent shall not be unreasonably withheld), Buyer and its
representatives shall be entitled to such access to the officers and key
employees of the Subsidiaries as Buyer may reasonably request. Buyer agrees that
it will treat all information obtained from Parent or the Subsidiaries or
otherwise obtained in its due diligence investigation of the Subsidiaries as
"Evaluation Material" under the letter agreement entered into between Buyer and
Parent dated February 18, 2004 (the "Letter Agreement") and will continue to
honor its obligations thereunder.
4.2. Conduct of Business Pending the Closing.
From the date hereof until the Closing, except as required or contemplated
by this Agreement and except for any actions taken by the Subsidiaries consented
to by Buyer, the Parent shall cause each of the following to occur and shall
promptly notify the Buyer upon Parent's knowledge of the failure of any of the
following to occur:
(a) The Subsidiaries will operate the business of the
Subsidiaries only in the usual, regular and ordinary manner, on a basis
consistent with past practice;
(b) The Subsidiaries shall not adopt or amend in any material
respect any Subsidiary Benefit Plan and shall not grant any increase in the
compensation, salaries or wages payable to employees of the Subsidiaries, except
for reasonable increases in the ordinary course of business and consistent with
past practice or as a result of contractual arrangements or sales compensation
plans existing on the date hereof, or as otherwise necessary to implement the
provisions of Section 5.3, or as otherwise required by applicable Laws;
(c) The Subsidiaries shall not issue or authorize the issuance
of, or agree to issue or sell any shares of their capital stock of any class;
(d) The Subsidiaries shall not sell, lease, license or
otherwise transfer or dispose of any material properties or assets of the
Subsidiaries, or any of the Intellectual Property Rights, except for the sale of
assets in the ordinary course of business;
(e) The Subsidiaries shall not initiate or settle any lawsuit
or claim if such lawsuit or settlement imposes a material continuing
non-monetary obligation on the Business other than the recognition of the
intellectual property rights of another party; and
(f) The Subsidiaries shall maintain in effect all insurance
policies in effect on the date hereof or replace such policies with policies
providing comparable coverage and issued by insurers of comparable ratings so
long as such insurance policies are reasonably available on comparable terms in
the insurance market generally.
17
4.3. Further Actions.
Subject to the terms and conditions hereof, Parent and Buyer shall use
their reasonable best efforts to take, or cause to be taken, all action and to
do, or cause to be done, and to cooperate fully with each other with respect to,
all things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement, including using all reasonable best
efforts: (a) to obtain prior to the Closing Date all licenses and permits that
may be required to enable the Buyer and its Affiliates, including the
Subsidiaries and the Purchaser of the Canadian Assets, to operate the Business
after the Closing Date in the same manner as it was operated prior to the
Closing Date, (b) to obtain prior to the Closing Date all consents, approvals,
authorizations, qualifications and orders of Government Entities (subject to
Section 4.4) and parties to Contracts with the Subsidiaries that are necessary
for the consummation of the transactions contemplated hereby and (c) to effect
all necessary registrations and filings (subject to Section 4.4); provided,
however, that such assistance shall not include any requirement of Parent, the
Buyer or the Subsidiaries to expend money, commence any litigation or offer or
grant any accommodation (financial or otherwise) to any other party.
4.4. Best Efforts.
Buyer and Parent shall each make or cause to be made, as promptly as
practicable, (a) an appropriate filing of a Notification and Report Form
pursuant to the HSR Act with respect to the transactions contemplated hereby
(which filing shall be made in any event within ten (10) business days following
the date hereof) and (b) all other necessary filings with other Government
Entities under other applicable Competition Laws relating to the transactions
contemplated hereby, and, in each case, Buyer and Parent shall bear the costs
and expenses of their respective filings; provided, however, that Buyer shall
pay any filing fees in connection therewith. Buyer and Parent shall use their
respective best efforts to respond at the earliest practicable date to any
requests for additional information made by the Federal Trade Commission, the
United States Department of Justice or any other Government Entities, to use
their commercially reasonable best efforts to persuade such authorities to cause
the waiting periods under the HSR Act and any other applicable Competition Laws
to terminate or expire at the earliest possible date, including by advocating at
each of their respective cost and expense, that the transactions contemplated
hereby do not constitute a violation of the Competition Laws so as to attempt to
enable the Closing to occur as soon as reasonably possible (and in any event no
later than the date specified in Section 10.1(b)), all to the end of expediting
consummation of the transactions contemplated hereby. Each of Buyer and Parent
shall use its commercially reasonable best efforts to facilitate the expiration
of any applicable waiting period under any Competition Law, to secure the
termination of any investigation by any Governmental Entity under any
Competition Law, to avoid the filing of any suit or proceeding under any
Competition Law by any Governmental Entity seeking to enjoin the transactions
contemplated herein or to avoid the entry of, or to effect the dissolution of,
any injunction, temporary restraining order or other Order in any suit or
proceeding under any Competition Law that would otherwise have the effect of
restraining, preventing or delaying the consummation of the transactions
contemplated herein. The commercially reasonable best efforts required of a
party by this Section 4.4 shall be determined by that party in its sole and
absolute discretion and shall not be subject to challenge, judicial or
otherwise. Each of Buyer and Parent shall promptly inform the other of any
material communication from any Governmental Entity regarding any of the
transactions contemplated
18
hereby and shall permit the other to review in advance any proposed
communication to any Governmental Entity. Each of Buyer and Parent shall consult
with the other prior to any meetings, by telephone or in person, with the staff
of the Federal Trade Commission, the United States Department of Justice or any
other Government Entities, and each of Buyer and Parent shall have the right to
have a representative present at any such meeting unless antitrust counsel to
the party having such meetings, after consultation with antitrust counsel to the
other party, recommends against the presence of the other party at such meeting.
4.5. Notification.
(a) Prior to the Closing, Parent shall promptly notify Buyer
(after Parent has notice thereof) and Buyer shall promptly notify Parent (after
Buyer has notice thereof) and keep such other party advised as to (i) any
litigation or administrative proceeding pending and known to such party or, to
its actual knowledge, threatened against such party that challenges the
transactions contemplated hereby and (ii) any material adverse change in the
results of operations or financial condition of the Subsidiaries taken as a
whole or Buyer, as the case may be.
(b) Prior to the Closing, Buyer shall promptly notify Parent
if Buyer obtains knowledge that any representation and warranty of Parent in
this Agreement and the Schedules hereto are not true and correct in all material
respects, or if Buyer obtains knowledge of any material errors in, or omissions
from, the Schedules to this Agreement or of any other condition or circumstance
that would excuse Buyer from its timely performance of its obligations hereunder
or give rise to a claim hereunder.
4.6. Certain Equity Interest Transfers.
Prior to the Closing, Parent shall cause (i) the redemption of all of the
equity interests of Pentair Canada, Inc. owned by Delta International Machinery
Corp. and (ii) the proceeds of such redemption to be distributed to Parent.
4.7. Guarantee Releases.
Prior to or at the Closing, Parent shall obtain and deliver to the Buyer
unconditional releases of all guarantees by any of the Transferred Subsidiaries
of any obligations of Parent or any of its Affiliates other than another
Transferred Subsidiary.
4.8. Indebtedness.
Prior to or at the Closing, Parent shall repay or cause the Transferred
Subsidiaries to repay all indebtedness for borrowed money, including for money
borrowed from Parent or any of its Affiliates, other than a Transferred
Subsidiary, to the end that, as of the Closing, none of the Transferred
Subsidiaries shall have any liabilities for indebtedness for borrowed money,
including, without limitation, obligations under Capital Leases and obligations
with respect to any Deferred Acquisition Price.
19
4.9. Exclusivity.
During the period from the date of this Agreement until the Closing Date or
the earlier termination of this Agreement, Parent shall not, and shall cause its
Affiliates and each of their officers, directors, employees, representatives and
agents not to, directly or indirectly, encourage, solicit, initiate, engage or
participate in discussions or negotiations with any person or entity (other than
the Buyer) concerning any merger or consolidation involving the Subsidiaries,
any sale of material assets by the Subsidiaries not in the ordinary course of
business, any direct or indirect sale of the capital stock of the Subsidiaries
or any other business combination involving the Subsidiaries other than in
preparation for any direct or indirect sale or transfer of the capital stock of
the Subsidiaries in a capital markets transaction, provided that Parent may not
make public disclosure of any such capital markets transaction until after this
Agreement has been terminated in accordance with Article 10.
4.10. Resignations.
Effective upon the Closing, Parent shall cause all of its own employees,
directors and attorneys and all employees, directors and attorneys of its
Affiliates (other than the Subsidiaries) to resign from the boards of directors
of the Transferred Subsidiaries and from all positions as officers of the
Transferred Subsidiaries.
4.11. Agreements with Affiliates.
Except as contemplated in the Transaction Services Agreement, effective
upon the Closing, all agreements between the Transferred Subsidiaries, on the
one hand, and Parent or any of Parent's Affiliates (other than the Transferred
Subsidiaries), on the other hand, shall be deemed to have been terminated.
5. ADDITIONAL COVENANTS
5.1. Tax Matters.
(a) Returns and Payments.
(i) Parent shall pay and be responsible for, and shall be
entitled to all refunds and credits of (A) all Income or Franchise Taxes with
respect to any of the Subsidiaries for any Pre-Closing Period, including any
liability for Taxes arising out of the inclusion of any of the Subsidiaries in
any Consolidated Returns, (B) all Taxes with respect to an Affiliated Group of
which the Subsidiaries were members immediately prior to the Closing Date for
all taxable periods whatsoever, and (C) all Taxes imposed on any Seller with
respect to gain or other income from its sale of the Equity Interests, the U.S.
Intellectual Property, the Canadian Assets or the Toolz Shares hereunder, and
all taxes imposed on any deferred items triggered into income by Treas. Reg.
ss.1.1502-13 and any excess loss account taken into income under Treas. Reg.
ss.1.1502-19 on Parent's consolidated federal income tax return for all periods
through the end of the Closing Date. Parent shall be responsible for the timely
preparation and filing of all Income or Franchise Tax Returns for Taxes of any
Pre-Closing Period. "Pre-Closing Period" means any taxable period that ends on
or before the Closing Date. "Consolidated Returns" means all Tax Returns with
respect to any Affiliated Group. "Affiliated Group" means one or
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more corporations which (A) included any of the Subsidiaries prior to the
Closing Date and (B) for purposes of the Tax laws of any Governmental Entity
were required to or elected to file Consolidated Returns with one or more
Affiliates of Parent other than another Subsidiary. The Buyer and Parent (i)
agree that the Transferred Subsidiaries shall not carry back in respect of any
consolidated, combined or unitary Tax Return any item of loss, deduction or
credit which arises in any taxable period ending after the Closing Date to any
taxable period ending on or before the Closing Date, and (ii) that Buyer shall
not allow the amendment of any Tax Returns with respect to Taxes of any of the
Transferred Subsidiaries for any period ending on or prior to the Closing Date
without Parent's prior written consent.
(ii) The Buyer shall prepare and timely file or shall
cause to be prepared and timely filed all Tax Returns with respect to the
Transferred Subsidiaries other than Tax Returns for which Parent is responsible
under Section 5.1(a)(i).
(iii) If any of the Transferred Subsidiaries are
permitted or required under applicable Tax Laws relating to Income or Franchise
Taxes to treat the Closing Date as the last day of a taxable period, the Buyer
and Parent shall cause such day to be treated as the last day of a taxable
period and will take such actions as may be necessary to treat the Transferred
Subsidiaries as if they ceased to be part of an Affiliated Group as of the close
of business on the Closing Date.
(iv) In any case where applicable law relating to Income
or Franchise Taxes does not permit or require the election or agreement
described in Section 5.1(a)(iii) to be made, then, for purposes of this
Agreement, a taxable year or taxable period which begins before the Closing Date
and ends after the Closing Date (a "Straddle Period") shall be allocated between
Parent and the Buyer using an interim-closing-of-the-books method assuming that
such taxable period ended at the close of business on the Closing Date, except
that (A) exemptions, allowances or deductions that are calculated on an annual
basis (such as the deduction for depreciation) shall be apportioned on a per
diem basis and (B) in the case of a franchise Tax not based on income, Parent
shall be responsible for the amount of franchise Tax for the taxable year that
would have been imposed if such Tax were determined based on the assets and
liabilities of the Transferred Subsidiaries as of the Closing, or the amount of
franchise Tax for the taxable year based on the number of shares of stock
outstanding as of the Closing, whichever amount is applicable, in each case
multiplied by a fraction, the numerator of which shall be the number of days
from the beginning of the taxable year to the Closing Date and the denominator
of which shall be the number of days in the taxable year. Upon prior timely
written notice, Parent shall pay any amounts owed to Buyer pursuant to this
Section 5.1(a)(iv) within ten (10) days of such written notice or ten (10) days
prior to the date on which Buyer is required to cause to be paid the related
Income or Franchise Tax liability, whichever is later. The Buyer shall be
responsible for the timely preparation and filing of all Tax Returns and the
payment of all Income or Franchise Taxes due, if any, of the Transferred
Subsidiaries for any such period except that Parent shall be responsible for the
payment of all estimated Income or Franchise Taxes due from any of the
Subsidiaries relating to periods ending on or before the Closing Date and the
preparation and filing of all returns, notices, reports or other documents
required to be filed with such estimated Income or Franchise Taxes and Parent
shall provide copies thereof to Buyer. The Income and Franchise Tax Returns
shall be prepared on a basis consistent with the last previous such return of
the Transferred Subsidiaries (as applicable) and the Buyer shall
21
consult Parent concerning each such Tax Return and report all items with respect
to the portion of the period ending on the Closing Date in accordance with the
instructions of Parent. The Buyer shall cause the Transferred Subsidiaries to
provide Parent with a copy of each proposed Tax Return and such additional
information regarding such Tax Return as may be reasonably requested by Parent
at least 30 days prior to the filing of such Tax Return, except that in the case
of a Tax Return related to a monthly taxable period, the copy shall be provided
to Parent at least 10 days prior to the filing of such Tax Return. Within ten
(10) days of the Buyer providing Parent with a copy of any such Tax Return and a
copy of Buyer's detailed calculation of the Income or Franchise Taxes
attributable to the period prior to the Closing Date determined in accordance
with the first sentence of this Section 5.1(a)(iv), Parent shall pay to the
Buyer the Income or Franchise Taxes attributable to such period by wire transfer
of immediately available funds to the account designated by the Buyer.
(v) Parent will prepare and deliver to the Buyers at
least sixty days prior to the due date thereof (taking into account any
applicable extensions) a pro forma Income or Franchise Tax return for the period
from January 1st of the year in which the Closing occurs through the Closing
Date, for each taxing jurisdiction for which the Subsidiaries must file a full
calendar year return. Any difference between the Income or Franchise Tax
liability as reflected on the pro forma Tax return and the estimated Tax
payments previously remitted by Parent shall be paid to the Buyer if such pro
forma Tax liability exceeds the estimated Tax payments. Any difference between
the Tax liability as reflected on the pro forma Tax return and estimated Income
or Franchise Tax payments previously remitted by Parent shall be paid to Parent
if such pro forma Tax liability is less than the estimated Tax payments.
(vi) In preparing the Tax Returns referenced in this
Section 5.1(a), neither party shall make or cause to be made any material Tax
election or change any material income Tax accounting method or period without
giving prior written notice to and receiving prior written consent of the other
party (which consent shall not be unreasonably withheld or delayed); provided,
however, such prior written consent shall not be required if and to the extent
such change or election (A) is required by Law and no other reasonable method
exists to comply with such Law or (B) will not materially increase the amount of
Taxes that would be owing for periods covered by a Tax Return for which the
other party has filing responsibility or for which the other party is allocated
Taxes hereunder.
(b) Tax Audits. Buyer shall promptly notify Parent in writing
upon receipt by Buyer or any Affiliate of Buyer (including the Transferred
Subsidiaries) of notice of any pending or threatened Income or Franchise Tax
audits, examination or assessments ("Tax Audit") that may affect the Income or
Franchise Tax liabilities of the Subsidiaries for any Pre-Closing Period. Parent
shall have the right, at its own expense, to control any Tax Audit, to initiate
any claim for refund, to contest, resolve and defend against any assessment,
notice of deficiency, or other adjustment or proposed adjustment relating to any
and all Tax liabilities of the Subsidiaries for any Pre Closing Period. Parent
shall not settle any Tax Audit to the extent that it relates to the Transferred
Subsidiaries in a manner which would materially adversely affect them after the
Closing Date without the prior written consent of Buyer, which consent shall not
unreasonably be withheld. Where consent to a settlement is withheld by Buyer
pursuant to this Section 5.1(b), Buyer may continue any current proceeding or
initiate any further proceedings at its own expense, provided that any liability
of Parent with respect to such Tax
22
Audit, shall not exceed the liability that would have resulted had Buyer not
withheld its consent. The Buyer shall have the right, at its own expense, to
control any other Tax Audit, initiate any other claim for refund, and contest,
resolve and defend against any other assessment, notice of deficiency, or other
adjustment or proposed adjustment relating to Income or Franchise Taxes with
respect to the Transferred Subsidiaries; provided that, with respect to any
state, local or foreign Taxes for any Straddle Period, the Buyer shall consult
with Parent with respect to the resolution of any issue that would affect
Parent, and not settle any such issue, or file any amended Tax Return relating
to such issue, without the prior written consent of Parent, which consent shall
not unreasonably be withheld. Where consent to a settlement is withheld by
Parent pursuant to this Section 5.1(b), Parent may continue any current
proceeding or initiate any further proceedings at its own expense, provided that
any liability of Buyer with respect to such Tax Audit, shall not exceed the
liability that would have resulted had Parent not withheld its consent.
(c) Cooperation. Buyer, Parent and their respective Affiliates
shall cooperate in the preparation of all Tax Returns for any Tax periods for
which one party could reasonably require the assistance of the other party in
obtaining any necessary information. Such cooperation shall include but not be
limited to: (i) furnishing prior years' Tax Returns together with accompanying
schedules, (ii) provision of schedules, and related documentation necessary to
complete all Tax returns for Pre-Closing Periods, (iii) provision of powers of
attorney for the purpose of signing Tax Returns and defending Tax Audits; and
(iv) promptly forwarding copies of appropriate notices and forms or other
communications received from or sent to any applicable Taxing Authority that
relate to the Subsidiaries. The parties and their respective Affiliates shall
make their respective employees and facilities available to the other party on a
mutually convenient basis to explain any documents or information provided
hereunder. The Buyer shall prepare and provide to Parent a package of Tax
information materials, including, without limitation, schedules, work papers and
a limited power of attorney (the "Tax Package") requested by Parent to enable
Parent to prepare and file (or merely prepare) all tax returns required to be
prepared and filed (or merely prepared) by Parent for periods prior to and
including the Closing Date. Parent shall provide the request for the Tax Package
within ninety (90) days of the Closing Date and the completed Tax Package shall
be delivered to parent within ninety (90) days of such request.
(d) Termination of Tax-Sharing Agreements. All Tax sharing
agreements or similar arrangements with respect to or involving the Transferred
Subsidiaries shall be terminated prior to the Closing Date and, after the
Closing Date, none of the Transferred Subsidiaries shall be bound thereby or
have any liability thereunder for amounts due in respect of periods ending on or
before the Closing Date.
(e) Section 338(h)(10) Election. Parent and the Buyer shall
join, and shall cause each of their Affiliates to join, in making an election
under Section 338(h)(10) of the Code and any corresponding elections under state
or local tax laws, with respect to the Purchaser's purchase of the Equity
Interests in all of the Transferred Subsidiaries that are eligible U.S.
entities, other than DeVilbiss, for federal income tax purposes. Subject to the
allocations determined under Section 2.3, Parent and Buyer shall cause each of
the Sellers and the Purchasers to cooperate fully with each other in the making
of such Section 338(h)(10) Election on Form 8023 and in the timely filing of
executed copies of Forms 8023 and 8883, the required
23
schedules thereto and any similar state or local forms with the proper Taxing
Authorities. Parent and the Buyer shall report, and shall cause their Affiliates
to report, the transactions contemplated by this Agreement in a manner
consistent with the making of such Section 338(h)(10) election.
Within 120 days after the Closing Date, but not later than
thirty days prior to the filing due date, the Buyer shall prepare and deliver to
Parent a draft of Forms 8023 and 8883 and Buyer shall in good faith consider any
comments made by Parent in preparing final drafts of such Forms.
(f) Section 338(g) Election. Buyer may make or cause to be
made, with prior written consent of Parent, which consent shall not be
unreasonably withheld or delayed, a Code Section 338(g) election (the "Section
338(g) Election") with respect to the sale and purchase of the Foreign
Subsidiaries. Buyer shall pay all Taxes which result by reason of any such
Section 338(g) Election.
(g) Buyer's Taxes. Buyer shall pay, or cause to be paid, and
Buyer and the Subsidiaries shall jointly and severally indemnify Parent and its
Affiliates against and hold them harmless from any Liability for Taxes (which
shall include, but not be limited to, the utilization of any net operating loss
or capital loss or the utilization of any tax credits or other Tax attributes)
arising from any action by Buyer or its Affiliates (including the Subsidiaries)
from and after the Closing, including, without limitation, any events or
transactions referenced in Treasury Regulation Section 1.1502-76(b)(ii), any
sale or other disposition of assets of or by the Subsidiaries after the Closing
or any Section 338(g) Election made by Buyer with respect to the transactions
contemplated by this Agreement without the prior written consent of Parent
("Buyer's Taxes").
5.2. [Intentionally Omitted]
5.3. Employee Matters.
(a) General.
(i) On the Closing Date, all of the Active Employees of
Pentair Canada, Inc. primarily involved in the Business shall be transferred to
the Purchaser of the Canadian Assets and the employment of such Active Employees
shall be considered continuous under applicable Law. Except as otherwise
provided herein with respect to specific plans, programs or arrangements, for
the six-month period immediately following the Closing, Buyer shall, or shall
cause the Transferred Subsidiaries and the Purchaser of the Canadian Assets to,
provide benefit plans, programs and arrangements that are reasonably comparable
in the aggregate to the Subsidiary Benefit Plans, other than the Excluded Plans
and other than any Subsidiary Benefit Plan or portion thereof pursuant to which
benefits are provided in the form of Parent stock, rights to such stock, or
payments or other benefits directly derived from or directly based upon the
value of such stock.
(ii) Retention, Severance and Other Agreements. Parent
shall reimburse Buyer, within five (5) business days of receipt of written
notice from Buyer, for all obligations under the retention agreements of Parent
set forth on Schedule 5.3(a), and all other
24
obligations to pay severance benefits, if any are due, to any Former Employee.
Except as otherwise provided herein, from and after the Closing, Buyer shall or
shall cause the Transferred Subsidiaries to honor in accordance with their terms
all existing individual employment, severance, bonus, consulting or other
individual compensation agreements or contracts between any Transferred
Subsidiary and any Active Employee in accordance with their terms.
(iii) Service Credit. Without limiting any other covenant
herein, and except as provided under Section 5.3(b)(ii) with respect to Active
Employees participating in the DeVilbiss Cash Balance Plan, all service credited
to Active Employees participating in the Parent Pension Plan through the Closing
Date and all service credited to Active Employees of Pentair Canada, Inc.
primarily involved in the Business through the Closing Date shall be recognized
by Buyer, the Transferred Subsidiaries and the Purchaser of the Canadian Assets
for purposes of eligibility, participation, vesting and benefit accrual without
application of any preexisting condition or similar exclusion that did not apply
to such employees immediately prior to the Closing Date.
(b) Parent Pension Plan.
(i) General. Parent maintains a defined benefit pension
plan that covers its eligible employees and the eligible employees of its
Affiliates including certain of the Subsidiaries (the "Parent Pension Plan").
The Parent Pension Plan has two separate benefit formulas that apply to
different current employees of the Subsidiaries: (A) a cash balance formula that
in general covers eligible employees of DeVilbiss; and (B) a final average pay
benefit formula that in general covers eligible employees of Porter-Cable and
Pentair Tool & Equipment Sales Co. As of the Closing Date, as applicable, the
Transferred Subsidiaries shall cease to be participating employers under the
Parent Pension Plan and Parent shall take, or cause to be taken, all such action
as may be necessary to effect such cessation of participation.
(ii) Cash Balance and Related Benefits.
(A) Upon the Closing Date, Parent shall cause the
benefits accrued through such Closing Date by all Active Employees of DeVilbiss
who are participants in the cash balance formula under the Parent Pension Plan
(the "DeVilbiss Cash Balance Plan") to become fully vested. Subsequently, upon
qualification of any such participant to receive retirement benefits from the
Parent Pension Plan, Parent shall cause the appropriate fiduciary to pay such
retirement benefits pursuant to the terms of the DeVilbiss Cash Balance Plan.
Neither the Buyer nor any Affiliate of the Buyer (including any of the
Subsidiaries) or any of their plans shall have any responsibility for any
benefits or other obligations under or attributable to the DeVilbiss Cash
Balance Plan.
(B) The Buyer agrees to enroll the Active Employees of
the Subsidiaries who are participants as of the Closing Date in the DeVilbiss
Cash Balance Plan in a defined benefit pension plan, which shall be
tax-qualified under Code Section 401(a), maintained by the Buyer or an Affiliate
of the Buyer ("Buyer Pension Plan"); and Buyer agrees that such employees'
service with the Subsidiaries or any of their ERISA Affiliates prior to the
Closing Date shall be recognized under the Buyer Pension Plan for eligibility
and vesting purposes, but not for benefit accrual purposes.
25
(iii) Traditional Plan.
(A) As soon as practicable after the Closing Date and
after complete compilation and transmittal by the Transferred Subsidiaries of
relevant information to determine the amount to be transferred with respect to
the liabilities described in this Section 5.3(b)(iii)(A), Parent shall cause the
transfer from the Parent Pension Plan to the Buyer Pension Plan of assets (in
accordance with paragraphs (B) and (C) below) and liabilities which are
attributable to the Active Employees who are participants as of the Closing Date
in the Parent Pension Plan, other than those Active Employees who are
participants in the DeVilbiss Cash Balance Plan.
(B) The amount of assets to be transferred from the
Parent Pension Plan shall be equal to the amount determined as of the Closing
Date pursuant to Code Section 414(1), using the actuarial assumptions used by
the Pension Benefit Guaranty Corporation pursuant to Section 1.414(1)-(b)(5)(ii)
of the Treasury Regulations which is attributable to the Active Employees, other
than the Active Employees who are participants in the DeVilbiss Cash Balance
Plan, who are participants as of the Closing Date in the Parent Pension Plan
(the "Transfer Amount"). The above described calculation of the amount to be
transferred from the Parent Pension Plan to the Buyer Pension Plan shall be made
by the Parent's actuary. The Buyer's actuary may comment with respect to the
calculation of the amount to be so transferred, and any such comments shall, in
good faith, be taken into account by Parent's actuary. Within a reasonable
period of time before the transfer, Parent's actuary shall provide such other
information as may be reasonably necessary to permit Buyer's actuary to comment
with respect to the calculation of such amount.
(C) All assets transferred under this Section 5.3(b)(iii)
shall consist of cash and marketable and other liquid securities (other than
Parent stock or other securities). The transfer contemplated herein shall comply
with all requirements of Code Sections 414(l) and 401(a)(12). Pending completion
of the transfers contemplated by this Section 5.3(b)(iii), any benefits that are
payable to Active Employees under the Parent Pension Plan shall be paid out of
such plan. Interest shall be paid on the Transfer Amount for the period from the
Closing Date to the date of transfer at the rate of 5.0%, and the transfer
amount shall be adjusted to reflect benefit payments and expenses paid after the
Closing Date by the Parent Pension Plan which are related to the obligations
being transferred to the Buyer Pension Plan. Pending the completion of such
transfers, Parent will cooperate with the Buyer with respect to plan
administration, disbursement of benefits and other pertinent information.
(D) The Buyer agrees to enroll the Active Employees
described in paragraph (B) immediately preceding who are participants in the
Buyer Pension Plan, and the Buyer Pension Plan shall be liable for benefits with
respect to such Active Employees accrued under the Parent Pension Plan prior to
the Closing Date, including any early retirement benefits and ancillary benefits
related to their accrued benefits under the Parent Pension Plan as of the
Closing Date, to the extent of the liabilities transferred in accordance with
this Section 5.3(b)(iii). The Buyer agrees that neither Parent nor the Parent
Pension Plan shall have any further responsibility for any benefits or other
obligations with respect to the liabilities so transferred.
26
(c) Porter-Cable Hourly Plan. Porter-Cable maintains the
Retirement Plan for Hourly-Rated Employees of Porter-Cable (the "Porter-Cable
Hourly Plan") for hourly-rated employees and former employees and their
beneficiaries. As of and following the Closing Date, Porter-Cable shall retain
responsibility for the Porter-Cable Hourly Plan, including the funding and
administration thereof; provided, however, as soon as reasonably possible after
the Closing, Buyer shall designate or establish a separate qualified funding
vehicle to hold the assets of the Porter-Cable Hourly Plan. Subject to Parent's
verification of such funding vehicle and receipt from Buyer of Buyer's
commitment that it will take or cause to be taken all steps as are reasonably
necessary to ensure that such funding arrangement is tax exempt under Code
Section 501(a), Parent shall cause the trustee of the Master Trust which holds
the assets of the Porter-Cable Hourly Plan to transfer the assets of such trust
allocable to the Porter-Cable Hourly Plan to the trustee or other appropriate
fiduciary or custodian of the funding vehicle so established. Subject to ERISA
and other applicable Law, the assets so transferred shall consist of cash,
marketable and other liquid securities (other than Parent stock or other
securities). Pending such transfer, Porter-Cable shall continue to process
benefit applications and the like under the Porter-Cable Hourly Plan consistent
with past practice, except as otherwise required by Law, and shall be solely
responsible for such processing, and the applicable fiduciary under the Master
Trust shall pay such benefits as so processed. Buyer agrees that from and after
the transfer date, neither Parent nor any Affiliate of Parent or any of their
plans shall have any responsibility for any benefits or other obligations
accrued under the Porter-Cable Hourly Plan, whether accrued before or after the
Closing.
(d) Delta Tupelo Hourly Plan. Delta International Machinery
Corp. sponsors the Delta Tupelo Hourly-Rated Employees Pension Plan (the "Delta
Tupelo Hourly Plan") for bargaining employees and former employees of Delta
Tupelo and their beneficiaries. On or prior to the Closing Parent shall, or
shall cause Delta International Machinery Corp. to, transfer sponsorship of the
Delta Tupelo Hourly Plan to Parent or an Affiliate of Parent, other than a
Subsidiary. Parent agrees that neither Buyer nor any of its Affiliates,
including the Subsidiaries, shall have any liability or responsibility for any
benefits or other obligations accrued under the Delta Tupelo Hourly Plan,
whether accrued before or after the Closing.
(e) 401(k) Plan.
(i) As of the Closing Date, the Subsidiaries shall cease
to be participating employers under the Pentair, Inc. Retirement Savings and
Stock Incentive Plan (the "Parent 401(k) Plan") and Parent shall take, or cause
to be taken, all such action as may be necessary to effect such cessation of
participation. Notwithstanding such cessation, however, the Subsidiaries shall
timely transmit to the trustee of the Parent 401(k) Plan and properly account
for, in accordance with the customary procedures, amounts withheld from Active
Employees' salary, wages, or other covered compensation, for deposit with such
trustee.
(ii) As soon as administratively practicable after the
Closing Date, Buyer shall, enroll the active employees of the Subsidiaries who,
as of the Closing Date, are participants, (or are otherwise eligible to
participate in the Parent 401(k) Plan) in a profit-sharing plan maintained by
the Buyer that is qualified under Code Section 401(a) and that includes a cash
or deferred arrangement which qualifies under Code Section 401(k) and the
opportunity to receive a matching contribution (the "Buyer 401(k) Plan").
27
(iii) The Buyer 401(k) Plan shall be tax-qualified under
Code Section 401(a), and shall provide Active Employees with credit for service
completed (A) with Parent and its ERISA Affiliates (including the Subsidiaries
for periods ending with the Closing Date) and their respective predecessors for
periods prior to the Closing Date and (B) with Buyer and its ERISA Affiliates
for periods after the Closing Date) for purposes of vesting, benefit accrual and
eligibility to participate under the Buyer 401(k) Plan.
(iv) As soon as administratively practicable after the
Closing Date, and after complete compilation and transmittal by the Subsidiaries
of relevant information to determine the amount to be transferred for Active
Employees who are participants under Parent 401(k) Plan (and any person deriving
benefits through such a participant including, without limitation, an Alternate
Payee), Parent shall cause the transfer of (A) the account balances of the
Active Employees and (B) assets having a value equal to said account balances
(the "401(k) Plan Transfer") to the Buyer 401(k) Plan. Such transfer shall
include a contribution for Active Employees to be made by Parent prior to said
transfer in an amount equal to the sum of (x) Employer Matching Contributions
attributable to the Participant Before-Tax Matched Deposits (as such terms are
defined in the Parent 401(k) Plan) for the Active Employees for the period from
January 1st of the year in which the Closing occurs through the Closing Date,
plus (y) an Employer Discretionary Contribution (as such term is defined in the
Parent 401(k) Plan) for the period from January 1st of the year in which the
Closing occurs through the Closing Date. The amount of both of said
contributions shall be determined in accordance with the relevant provisions of
Parent 401(k) Plan. The transfer from the Parent 401(k) Plan shall be in the
form of cash, marketable and other liquid securities (other than Parent stock or
other securities). Outstanding participant loans shall, subject to the approval
of the appropriate fiduciary of the Buyer 401(k) Plan, be transferred "in kind."
Parent shall cause all of such employees to become fully vested in the assets
transferred to the Buyer 401(k) Plan pursuant to this Section 5.3(e). The Buyer
shall, prior to the Closing, notify Parent in writing of the identity of the
Buyer 401(k) Plan and thereafter shall cause the Buyer 401(k) Plan to accept the
transfers referred to above. The Buyer shall assume all responsibility for the
management and administration of the account balances of the Active Employees of
the Subsidiaries to the extent of the assets transferred to the Buyer 401(k)
Plan from the Parent 401(k) Plan. Neither the Buyer nor any of its Affiliates
shall assume any obligations or liabilities under or attributable to the Parent
401(k) Plan. Prior to the transfer of assets contemplated by this Section
5.3(e), Buyer or its applicable Affiliate, if consented to by the affected
employee, shall withhold from such employee's pay loan repayments relating to
any outstanding loans to such employee under the Parent 401(k) Plan, and shall
promptly forward such withholding to the Parent 401(k) Plan and, subject to
approval of the appropriate fiduciary, the Parent 401(k) Plan shall accept and
properly credit such repayment to said participant's loan.
(v) Pending the 401(k) Plan Transfer, and except as
otherwise required to effect such transfer, Active Employees (and any person
deriving benefits through such an employee including, without limitation, an
Alternate Payee) may continue to exercise such rights as are otherwise available
to inactive participants under the Parent 401(k) Plan with respect to their
account balances; provided, however, such an Active Employee shall not be
considered to have severed or otherwise terminated employment for purposes of
entitlement to request a distribution under Parent 401(k) Plan so long as such
individual is employed by a Subsidiary, Buyer or any ERISA Affiliate of Buyer.
Buyer shall, or shall cause the Subsidiaries
28
to, cooperate with Parent with respect to any reasonable request made by Parent
or the trustee of the Parent 401(k) Plan to effectuate any such administrative
procedures pending such plan transfer, including such procedures as may be
appropriate for the processing of repayments with respect to participant loans.
(vi) After the 401(k) Plan Transfer, none of Parent, the
Parent 401(k) Plan, any fiduciary of the Parent 401(k) Plan or any of their
agents or assigns shall have any responsibility or obligation to pay or
otherwise provide to the Active Employees whose account balances were included
in the 401(k) Plan Transfer (and any person deriving benefits through such
employee including, without limitation, an Alternate Payee) any benefits accrued
or provided for under the Parent 401(k) Plan to the extent of the assets so
transferred. To the extent relevant contributions made by the Active Employees
whose account balances were transferred to the Buyer 401(k) Plan as provided
herein must be taken into account by the Parent 401(k) Plan in applying
applicable discrimination tests under the code for the prior year which includes
the Closing Date, Parent may direct that any return, refund or forfeiture
necessary to satisfy such test may be taken before, and be reflected in the
amount of, the 401(k) Plan Transfer. If such return, refund or forfeiture is to
be made after the 401(k) Plan Transfer, Buyer shall cause the Buyer 401(k) Plan
to take such steps as are reasonably requested by Parent to effectuate such
action.
(vii) ESOP.
(A) As of the Closing Date, the Subsidiaries shall cease
to be participating employers under the Parent Employee Stock Ownership Plan
(the "ESOP") and Parent shall take, or cause to be taken, all such action as may
be necessary to effect such cessation of participation.
(B) As soon as reasonably possible after the Closing
Date, Active Employees with account balances under the ESOP shall be entitled to
request a lump sum distribution of such account balances and, if requested by
such an individual, the Buyer 401(k) Plan, or such other tax-qualified defined
contribution plan as may be designated or established by Buyer (the "Buyer
Rollover Plan") shall accept a direct transfer pursuant to Code Section
401(a)(31) or a participant rollover of such account balances; provided,
however, (A) no such distribution or transfer shall be made solely by reason of
the sale of the shares to the extent such a distribution or transfer may
adversely affect the qualified status of the ESOP or the Buyer Rollover Plan,
(B) any such distribution or transfer shall be subject to the otherwise
applicable benefit payment rules and procedures under the ESOP and (C) in no
event shall the Buyer Rollover Plan be obligated to accept a direct transfer or
rollover unless made in cash or a cash equivalent. Pending such a distribution
or transfer or, in the event such a distribution or transfer is not made and
except as otherwise required under the Code or ERISA, Active Employees shall be
entitled to retain or receive their benefits under the ESOP subject to such
rules, procedures and limitations which apply to them or which otherwise apply
to terminated vested participants under the ESOP.
29
(f) Other Retirement Plan Arrangements.
(i) As of the Closing Date, the Transferred Subsidiaries
shall cease to be participating employers under the Excluded Plans, and Parent
shall take, or cause to be taken, all such actions as may be necessary to
effectuate such cessation of participation.
(ii) As soon as administratively practicable following
the Closing Date, Parent shall transfer, or shall cause to be transferred, to a
trust or other account arrangement established or designated by Buyer to hold
the assets so transferred, which may be a general asset account of the Buyer or
an Affiliate, (the "Buyer NQ Funding Arrangement"), the entire value of each
Active Employee's (and any person deriving benefits through them) account under
the Pentair Non-Qualified Deferred Compensation Plan (the "Parent NQ 401(k)
Plan"), except as to any Active Employee who thirty (30) days prior to the
transfer date has terminated all employment (and by then not returned to such
employment) with Buyer and any of its ERISA Affiliates, including the
Transferred Subsidiaries (the "NQ 401(k) Plan Transfer"). With respect to Active
Employees whose accounts are part of such plan transfer, subject to applicable
Law, the transfer shall consist of cash, marketable and other liquid securities
(other than Parent stock or other securities), or, as agreed to by the
appropriate fiduciary under the Parent NQ 401(k) Plan and Buyer or its designee.
The Buyer NQ Funding Arrangement shall provide to such Active Employees the
opportunity to earn a reasonable rate of return on the assets transferred.
(iii) Pending the NQ 401(k) Plan Transfer, and except as
otherwise required to effect such transfer, Active Employees (and any person
deriving benefits through them) may continue to exercise such rights as are
otherwise available to them under the Parent NQ 401(k) Plan, with respect to
their account balances thereunder; provided, however, an Active Employee shall
not be considered to have severed or otherwise terminated employment for
purposes of entitlement to request a distribution under the Parent NQ 401(k)
Plan as long as such individual is employed by a Subsidiary, Buyer or any ERISA
Affiliate of Buyer. Buyer shall or shall cause the Transferred Subsidiaries to
cooperate with Parent with respect to any request made by Parent or the trustee
of the Parent NQ 401(k) Plan to effectuate any such administrative procedures
pending such plan transfer, including such procedures as may be appropriate for
the processing of repayments with respect to participant loans.
(iv) None of Parent, the Parent NQ 401(k) Plan or any
fiduciary of the Parent NQ 401(k) Plan shall have any liability or obligation to
pay or otherwise provide to the Active Employees whose account balances were
included in the NQ 401(k) Plan Transfer (and any person deriving benefits
through them) to the extent of the assets so transferred, and Buyer shall assume
full liability for such benefits.
(v) Parent shall assume the obligation of the
Subsidiaries, to provide benefits under the Parent NQ 401(k) Plan to any Former
Employee (and any person deriving benefits through them), and any assets held to
pay such benefits shall be retained by the grantor trust related to the Parent
NQ 401(k) Plan. After the Closing Date, none of Buyer or the Transferred
Subsidiaries shall have any liability or obligation to pay or otherwise provide
any benefits accrued or provided for under the Parent Supplemental Executive
Retirement Plan or the Parent Restoration Plan and Parent shall assume full
responsibility and liability for such benefits.
30
(g) Health and Welfare Benefit Plans.
(i) Termination of Coverage. Effective on the Closing
Date, Parent will cause the cessation of coverage under all insurance policies,
contracts, programs or similar arrangements through which Parent has provided
health or welfare benefits to or on behalf of Active Employees, or directors of
the Subsidiaries (each such policy, contract, program or similar arrangement a
"Parent Sponsored Benefit Plan").
(ii) With respect to any Active Employees or Former
Employees of the Subsidiaries, and any beneficiaries or dependents thereof, the
Parent shall retain (i) all liabilities and obligations arising under any life,
accident, medical, dental or disability plan or similar arrangement (whether or
not insured) to the extent that such liability or obligation relates to claims
incurred (whether or not reported) on or prior to the Closing Date, under a
Parent Sponsored Benefit Plan, and (ii) all liabilities and obligations arising
under any worker's compensation laws to the extent such liability or obligation
relates to claims incurred on or prior to the Closing Date provided that, in the
case of Active Employees, the claims therefore are made prior to the earlier of
(A) ninety (90) days after the Closing or (B) the date on which the closure of
the facility at which the claiming employee works is announced. Parent shall
retain responsibility for providing health, medical, dental, hospitalization,
life insurance or similar benefits (including, without limitation, reimbursement
for Medicare premiums) to any employee or Former Employee of the Subsidiaries
eligible therefore who retires or has retired on or before the Closing Date
subject to the terms and conditions of the Parent Sponsored Benefit Plans under
which said retiree benefits are provided. Buyer shall be responsible for
providing any post-retirement medical, life or similar benefits to Active
Employees as of the Closing if and only to the extent Buyer, in its sole
discretion, agrees to provide such post-retirement benefits. Buyer shall not be
obligated by this Agreement to provide post-retirement, health, medical, dental,
hospitalization, life insurance or similar benefits (including, without
limitation, reimbursement for Medicare premiums), or any particular level of
such benefits, to Active Employees of the Transferred Subsidiaries as of the
Closing Date.
(iii) Parent Flexible Benefit Plan. After the Closing
Date, Buyer shall, or shall cause the Subsidiaries to, make available a
cafeteria plan within the meaning of Code Section 125 and under such plan, shall
honor claims thereafter made or outstanding claims that have not yet then been
reimbursed but which have been made by Active Employees who were, prior to
Closing, participants in Parent's Flexible Benefit Plan with respect to
deferrals made by such participants during such portion of the plan year which
had elapsed prior to the Closing Date. As soon as reasonably practicable after
the Closing Date, Parent shall transfer to Buyer all amounts Parent has received
in respect of such deferrals, net of any amounts previously paid by Parent to
said participants as reimbursement for eligible medical and dependent care
expenses incurred during said plan year, together with such books and records of
Parent as are specific to the eligible Active Employees and necessary to permit
Buyer to administer such plan. Buyer agrees that from and after the transfer
date, neither Parent nor Parent's Flexible Benefit Plan shall have any
responsibility for any benefits or other obligations with respect to the amounts
so transferred.
(iv) WARN Act. Parent shall be responsible for all
obligations or liabilities under the WARN Act, under any other Laws which may
provide to employees
31
protections similar to the WARN Act or under any Contracts, which may arise from
actions taken before the Closing Date including the Delta Tupelo Closure. Buyer
shall be responsible for all other obligations or liabilities under the WARN
Act, or under any other Laws which provide to employees protections similar to
the WARN Act, resulting from actions taken by Buyer or the Transferred
Subsidiaries on or after the Closing Date, including the relocation of any U.S.
operations from their current location.
(h) Cooperation. With respect to such actions as may be
necessary to effectuate the provisions of this Section 5.3, but only to the
extent otherwise consistent with each party's duties and responsibilities with
respect to employee benefit plans under applicable Law, Parent and Buyer shall,
and Buyer shall cause the Transferred Subsidiaries to, reasonably cooperate with
each other with respect to such matters, including but not limited to (i)
sharing notices or other information related to employee benefit plans to be
filed or provided to Government Entities pursuant to the Code or ERISA with
respect to the sale of the Equity Interests and the transactions described in
this Section 5.3, including without limitation any notice required under ERISA
Section 4043, (ii) gathering information necessary for each party to file annual
reports with the Internal Revenue Service or such other governmental filing as
may be required with respect to employee benefit plans for reporting periods
ending in or with the plan year which includes the Closing Date, (iii) properly
effectuating any blackout notice and procedures required pursuant to 29 CFR
ss.2520.101-3(b) in connection with the applicable plan asset transfers
hereunder and (iv) providing access to files and records as needed to permit
each party to fulfill their obligations under, or otherwise implement the
relevant provisions of, this Agreement.
(i) Transition Services.
(i) From and after the Closing until the later of June
30, 2005 or six months after the Closing, Buyer shall cause the Subsidiaries to,
subject to the terms and conditions of this Section 5.3(i), provide Parent such
administrative and advisory services with respect to the Subsidiary Benefit
Plans retained by Parent as Parent reasonably requests (the "Benefit Plan
Services"). Upon prior written notice, Parent may, at its option, direct Buyer
and/or the Subsidiaries to no longer provide all or any of such Benefit Plan
Services.
(ii) Buyer shall cause the Subsidiaries to make available
to Parent such personnel as are reasonably required to perform the Benefit Plan
Services at no cost to Parent; provided, however, that Parent shall reimburse
Buyer for Buyer's or the Subsidiaries' actual, documented out-of-pocket expenses
with respect to such Benefit Plan Services within thirty (30) days of receipt of
an invoice for such expenses.
(iii) Buyer shall, and shall cause the Subsidiaries to,
cooperate with and provide assistance to Parent consistent with the terms and
conditions hereof to enable (A) the full performance of all obligations
hereunder and (B) the review of books and records of the Subsidiaries as they
relate to the provision of Benefit Plan Services; such cooperation and
assistance to include without limitation providing Parent, its representatives
and its agents with reasonable access, during normal business hours and upon
reasonable advance notice, to their employees, representatives and agents and
their books, records and offices relating to the Benefit Plan Services provided
under this Section 5.3(i).
32
5.4. Post-Closing Access to Information.
For a period of seven (7) years following the Closing Date, or, with
respect to records relating to Tax liabilities of the Subsidiaries, if shorter,
until the expiration of any applicable statute of limitations for assessment or
refund of Taxes of assessments thereof, each party hereto shall provide, and
shall cause its appropriate personnel to provide, when reasonably requested to
do so by another party hereto, access to all tax, financial, accounting and
personnel records of or relating to the Subsidiaries and the right to make
copies or extracts therefrom at its expense. No party shall, nor shall it permit
its Affiliates to, intentionally dispose of, alter or destroy any such books,
records and other data without giving thirty (30) days' prior written notice to
the other parties and permitting the other parties hereto, at their expense, to
examine, duplicate or repossess such records, files, documents and
correspondence. Notwithstanding the provisions of this Section 5.4, while the
existence of an adversarial proceeding between the parties will not abrogate or
suspend the provisions of this Section 5.4 as to such records or other
information directly pertinent to such dispute, the parties may not utilize this
Section 5.4 but rather, absent agreement, must utilize the rules of discovery.
5.5. Further Assurances.
From and after the Closing, the parties agree to execute and deliver, or to
cause to be executed and delivered, all further documents and instruments and to
take all further action as shall be reasonably necessary or appropriate to
confirm or carry out the provisions and intent of this Agreement.
5.6. Corporate Name and Logo.
Buyer acknowledges that Parent and its Affiliates have the absolute and
exclusive proprietary right to all names, trade names, trade marks, service
names and service marks incorporating "Pentair" and Parent's corporate logo or
any derivation thereof and any corporate symbols or logos related thereto. Buyer
agrees that it will not, and will cause the Transferred Subsidiaries not to, use
the name "Pentair" or Parent's corporate logo or any symbol or logo
incorporating such name in connection with the sale of any products or services
or otherwise in the conduct of their businesses. As soon as possible following
the Closing, Buyer shall cause each Transferred Subsidiary with a name including
the word "Pentair" to file with an appropriate Government Entity an amendment to
such Transferred Subsidiary's charter or other organizational documents
eliminating the word "Pentair" from such Subsidiary's name. Notwithstanding the
foregoing, for a reasonable period of time following the Closing Date not to
exceed one (1) year, the Buyer and its Affiliates, including the Transferred
Subsidiaries, shall be permitted to use, sell and distribute any products,
packaging, promotional and advertising materials, letterhead, stationary,
business cards and other personal property that bears the name and/or the
corporate logo of Parent to the extent that such items (i) are owned by the
Subsidiaries as of the Closing Date, or (ii) were used by the Subsidiaries prior
to the Closing Date and cannot be ordered or acquired by the Subsidiaries
without such name or logo without unreasonable cost or delay. As soon as
possible following the Closing, Parent shall cause each of its Affiliates,
including Porter-Cable de Mexico S.A. de C.V. if it is not dissolved prior to
the Closing Date, with a name that includes a trademark or a trade name
associated with the Business to file with
33
an appropriate Government Entity an amendment to such Affiliate's charter or
other organizational documents eliminating such word or words from such
Affiliate's name.
5.7. No Competition.
(a) During the period commencing on the Closing Date and
ending on the fifth anniversary of the Closing Date, Parent will not, and will
cause its Affiliates not to, directly or indirectly, conduct or engage in the
Business (a "Competitive Business"). Notwithstanding the foregoing, nothing in
this Agreement shall prohibit Parent or any of its Affiliates from (a) owning
securities of corporations engaged in a Competitive Business that are listed on
a national securities exchange or traded in the national over-the-counter market
in an amount which shall not exceed five percent (5%) of the outstanding shares
of any such corporation or (b) acquiring any corporation or other entity
partially engaged in a Competitive Business; provided that such activities do
not exceed ten percent (10%) of the revenues or net equity of the acquired
corporation or other entity and that Parent shall use reasonable efforts to
divest the Competitive Business as soon as practicable.
(b) During the period commencing on the Closing Date and
ending on the third anniversary of the Closing Date, neither the Parent nor any
of its Affiliates will, directly or indirectly employ, engage, contract for or
solicit the services in any capacity of any person who is employed by any of the
Subsidiaries at any time as Parent or its Affiliates seeks to employ, engage,
contract for or solicit the services of such person.
5.8. Insurance.
(a) Commercial General Liability/Products Liability. Prior to
the Closing Date, commercial general liability, including products liability,
insurance coverage has been provided to certain Subsidiaries listed on Schedule
5.8 (the "CGL Captive Insured Subsidiaries") under insurance policies (the "CGL
Policies") issued by Penwald Insurance Company, a captive insurance company of
the Parent ("Penwald"). Coverage under the CGL Policies and all other insurance
coverage for the Subsidiaries shall be canceled effective on the Closing Date
and neither Parent nor Penwald shall have any further obligation to provide
insurance coverage for occurrences, accidents or diseases, as the case may be,
taking place or arising after the Closing Date. However, to the extent the CGL
Policies afford coverage, or continue to afford coverage, for occurrences,
accidents or diseases, as the case may be, taking place on or prior to the
Closing Date (collectively, "CGL Pre-Closing Occurrences"), Buyer shall, and
shall cause the CGL Captive Insured Subsidiaries to:
(i) Comply with all terms and conditions of the claims
handling procedures set forth in Schedule 5.8, as such may be amended by Penwald
from time to time with written notice to Buyer, for any CGL Pre-Closing
Occurrences covered by the CGL Policies;
(ii) Comply with all terms and conditions of any CGL
Policies and any other umbrella or excess insurance policies affording coverage
for CGL Pre-Closing Occurrences; and
34
(iii) Provide Penwald, at no cost to Penwald, reasonable
access to the CGL Captive Insured Subsidiaries' (A) product engineers and other
personnel and (B) documents, documentation and other records, when, and as
necessary, for consultation relative to CGL Pre-Closing Occurrence claims
issues. This access shall include, but is not limited to, access for the purpose
of reviewing and preparing claims and litigation reports, providing written
analyses and consultation relative to product design and construction and
serving as witnesses relative to claims and litigation arising from or based
upon CGL Pre-Closing Occurrences.
Without limiting the foregoing, Buyer agrees that the CGL Captive Insured
Subsidiaries may only submit claims for payment under the CGL Policies with
respect to CGL Pre-Closing Occurrences if and to the extent Buyer and the CGL
Captive Insured Subsidiaries have complied with all terms and conditions of the
Claims Handling Procedures set forth in Schedule 5.8.
(b) Workers Compensation/Commercial Automobile Insurance
Coverage Issued by Penwald. Prior to the Closing Date, primary workers
compensation and automobile deductible reimbursement insurance coverage has been
provided to certain Subsidiaries listed on Schedule 5.8 (the "WC/Auto Captive
Insured Subsidiaries") under insurance policies (the "Deductible Reimbursement
Policies") issued by Penwald. On the Closing Date, all Deductible Reimbursement
Policies shall be cancelled flat and Penwald shall afford no further coverage,
nor be liable for any additional payments, to the WC/Auto Captive Insured
Subsidiaries for any losses or expenses based upon, arising from or attributable
to claims, occurrences, accidents or diseases, as the case may be (collectively,
"WC/Auto Occurrences"), regardless of when such WC/Auto Occurrences first arose
(or arise), or were (or are) first reported to or discovered by the WC/Auto
Captive Insured Subsidiaries or Penwald.
(c) Workers Compensation/Commercial Automobile Insurance
Coverage Issued by Insurers Other Than Penwald. To the extent there is insurance
coverage that was issued prior to the Closing Date (other than coverage issued
by Penwald) that affords coverage, or continues to afford coverage, for any
workers compensation and employers liability or commercial automobile liability
occurrences, accidents or diseases, as the case may be (collectively,
"Pre-Closing WC/Auto Occurrences"), attributable to the WC/Auto Captive Insured
Subsidiaries, Buyer shall, and shall cause the WC/Auto Captive Insured
Subsidiaries to:
(i) Cooperate with all insurers affording such coverage
to the full extent provided in any policies affording coverage for Pre-Closing
WC/Auto Occurrences, to include cooperation in the continuing provision and
administration of any and all ongoing claims related services relative to the
Pre-Closing WC/Auto Occurrences, as may be required by the insurers; and
(ii) Comply with all other terms and conditions of any
workers compensation and employers liability or commercial automobile liability
insurance policies affording coverage to the WC/Auto Captive Insured
Subsidiaries, it being understood that Parent shall be responsible for the
payment of all obligations attributable to the WC/Auto Captive Insured
Subsidiaries, including any claims expense (both allocated loss adjustment
expense and unallocated loss adjustment expense) and loss invoices under the
terms and conditions of any workers compensation and employers liability or
commercial automobile liability insurance policy affording coverage for
Pre-Closing WC/Auto Occurrences.
35
(d) Limitation of Coverage. Nothing in this Section 5.8 shall
be construed to expand the coverage provided under the CGL Policies nor the
Deductible Reimbursement Policies. The coverage under the CGL Policies and the
Deductible Reimbursement Policies shall be strictly limited to their respective
terms, conditions and exclusions. Notwithstanding the preceding, it is also
expressly understood and agreed that no CGL Policy issued by Penwald shall
afford any coverage for:
(i) bodily injury, personal injury or medical payments
caused by any latent disease including, but not limited to, asbestosis,
silicosis, mesothelioma, emphysema, pneumoconiosis, pulmonary fibrosis,
pleuritis, endothelioma or any lung disease or any ailment caused by, or
aggravated by exposure, inhalation, consumption or absorption of asbestos fibers
or dust or silica dust;
(ii) any property damage due to or arising out of the
actual or alleged presence of asbestos or silica dust in any form, including the
costs of remedial investigations or feasibility studies, or to the costs of
testing, monitoring, cleaning or removal of any property or substance; or
(iii) bodily injury, property damage, advertising injury,
personal injury or medical payments or any other action based upon the
supervision, removal, instructions, recommendations, warranties (expressed or
implied), warnings or advice given or withheld regarding asbestos fibers or dust
or silica dust.
5.9. Delta Tupelo Closure.
Parent shall use its commercially reasonable best efforts to complete its
plans for the closure of the Delta Tupelo Facility including the transfer of the
manufacturing operations and production equipment previously located at the
Delta Tupelo Facility to other Subsidiary Facilities and the termination of all
Employees employed at the Delta Tupelo Facility (the "Delta Tupelo Closure") by
the Closing Date or as soon thereafter as is reasonably practicable. There are
thirty-two (32) components (the "Delta Parts") currently produced at the Delta
Tupelo Facility that have not yet been the subject of an alternate sourcing
arrangement. If Parent has not otherwise arranged for alternative sourcing for
the Delta Parts (including by relocation of the manufacturing operations and
production equipment used in producing such parts to another Subsidiary
Facility) by the Closing, Parent shall assure that Buyer will have a supply of
the Delta Parts and such other parts as are currently being produced at the
Delta Tupelo Facility sufficient to produce the products that use the Delta
Parts through March 31, 2005 in the volumes of such products contemplated by the
Business' manufacturing forecasts as of the Closing Date. If, in order to comply
with its obligations under the preceding sentence, Parent is required to
continue the operation of the Delta Tupelo Facility after the Closing, Parent
shall also manufacture such other parts used in the Business as Parent would
manufacture if it were operating the Delta Tupelo Facility for its own account
and Buyer shall pay to Parent the full cost of the manufacturing of the Delta
Parts and such other parts after the Closing Date. Buyer and Parent shall
cooperate in formulating a plan for alternative sourcing for the Delta Parts
(including by the relocation, after the Closing, of such manufacturing
operations to another Subsidiary Facility or any other facility designated by
Buyer; provided that Buyer shall be responsible for all costs of such relocation
in excess of the costs to relocate such manufacturing operations to Jackson,
36
Tennessee). Such cooperation shall include an obligation of Buyer to use its
commercially reasonable best efforts during the period after the Closing and
prior to July 1, 2005 to find an alternative source for the Delta Parts. Buyer
agrees that Parent shall not be required to continue manufacturing of Delta
Parts after December 31, 2004. If Buyer has not otherwise arranged for
alternative sourcing for all or substantially all of the Delta Parts (including
by relocation of the manufacturing operations and production equipment use in
producing such parts to another facility) by April 1, 2005, Parent shall pay to
Buyer the sum of $100,000. If Buyer has not otherwise arranged for alternative
sourcing for all or substantially all of the Delta Parts (including by
relocation of the manufacturing operations and production equipment use in
producing such parts to another facility) by July 1, 2005, Parent shall pay to
Buyer the sum of $50,000. Prior to the Closing, Parent shall either sell the
Delta Tupelo Facility to a third party or transfer ownership of the Delta Tupelo
Facility to Parent or an Affiliate of Parent other than a Subsidiary. Parent
shall be responsible for all costs related to the Delta Tupelo Closure and shall
indemnify the Buyer and its Affiliates against all such costs.
5.10. Ellerbrake Litigation.
After the Closing, the Buyer will, or will cause its Affiliates, including
the Transferred Subsidiaries, to continue to administer the performance of the
terms of the settlement of the Ellerbrake Litigation subject to compliance by
Parent of Parent's obligation to indemnify the Buyer with respect thereto
pursuant to Section 8.1.
5.11. Assignment of Contracts and Rights.
(a) Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
Contract or any claim or right or any benefit arising thereunder or resulting
therefrom if an attempted assignment thereof or the change in control of a
Transferred Subsidiary, without the consent of a third party thereto, would
constitute a breach or other contravention thereof, be ineffective with respect
to any party thereto or in any way adversely affect the rights of Parent, a
Subsidiary, Buyer, or any Affiliates of Parent or Buyer hereunder.
(b) In addition to the consents required pursuant to Section
6.5, with respect to any Contract or any claim, right or benefit arising
thereunder or resulting therefrom, promptly after the date hereof, to the extent
reasonably requested by Buyer, Parent will use its commercially reasonable best
efforts to obtain the written consent of the other parties to any such Contract
for any contemplated assignment thereof to a Purchaser or to the change in
control of any Transferred Subsidiary, or written confirmation from such parties
reasonably satisfactory in form and substance to Buyer and Parent confirming
that such consent is not required; provided, however, that such commercially
reasonable assistance shall not include any requirement of Parent or its
affiliates to expend money, commence any litigation or offer or grant any
accommodation (financial or otherwise) to any other party.
(c) If such consent, waiver or confirmation is not obtained
with respect to any such Contract the assignment of which is contemplated
herein, as among the parties hereto and their Affiliates, the intended assignee
thereof will obtain from the intended assignor thereof through a subcontracting
arrangement, the purchase of inventory in advance of
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the Closing or otherwise, and subject to applicable Law and the terms of such
Contract, the claims, rights and benefits of the intended assignor thereof and,
to the extent possible, the intended assignee will be responsible for the
obligations of the intended assignor under such Contracts in accordance with
this Agreement, and the intended assignor will enforce at the request of, at the
cost of and for the benefit of the intended assignee, any and all claims and
rights against a third party arising from any such Contract (including the right
to elect to terminate such Contract in accordance with the terms thereof upon
the request of the intended assignee).
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer under this Agreement is subject to the
satisfaction (or waiver by Buyer) prior to or at the Closing of each of the
following conditions:
6.1. Accuracy of Representations and Warranties; Performance of
Obligations.
The representations and warranties of Parent made in this Agreement shall
be true and correct as of the date hereof and on and as of the Closing Date, as
though made on and as of the Closing Date, and Parent shall have performed or
complied with all obligations and covenants required by this Agreement to be
performed or complied with by Parent by the time of the Closing, except (a) for
representations and warranties that speak as of a specific date or time (which
need only be true and correct as of such date or time), (b) for breaches of such
representations and warranties and covenants that, in the aggregate, would not
have a Material Adverse Effect, and (c) for breaches that have been cured
(including without limitation through the granting of a post-Closing indemnity
for any damages related to such breaches) and Parent shall have delivered to
Buyer a certificate dated the Closing Date and signed by an officer of Parent in
the officer's capacity as such confirming the foregoing to the best of such
officer's knowledge.
6.2. No Orders or Actions.
No Order shall have been enforced or issued by any court of competent
jurisdiction or Government Entity and remain in effect that would, and no
action, suit or proceeding shall be pending that, in the reasonable legal
opinion of counsel to the Buyer, would, or be expected to result in an Order
that would, on a temporary or permanent basis: (a) restrain, enjoin or otherwise
prohibit the transactions contemplated hereby; (b) cause any of the transactions
contemplated hereby to be rescinded following their consummation; or (c)
adversely affect the right of the Buyer and the Purchasers to own the Equity
Interests, the Transferred Subsidiaries, the U.S. Intellectual Property, the
Canadian Assets and the Toolz Shares and to operate the Business.
6.3. HSR Act and Other Approvals.
All applicable waiting periods under the HSR Act and any other applicable
Competition Laws shall have expired or terminated.
6.4. Guarantee Releases and Indebtedness.
The actions contemplated by Section 4.7 and Section 4.8 shall have been
completed.
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6.5. Licenses, Etc.
All licenses, permits, consents, approvals, authorizations, qualifications,
orders, registrations and filings listed in Schedule 6.5 shall have been
received, issued or made unless the failure of such items to have been so
received, issued or made would not, individually or in the aggregate, have a
Material Adverse Effect.
7. CONDITIONS PRECEDENT TO PARENT'S OBLIGATIONS
Each and every obligation of Parent under this Agreement is subject to the
satisfaction (or waiver by Parent) prior to or at the Closing of the following
conditions:
7.1. Accuracy of Representations and Warranties; Performance of
Obligations.
The representations and warranties of Buyer made in this Agreement shall be
true and correct in all material respects as of the date hereof and on and as of
the Closing Date, as though made on and as of the Closing Date, and Buyer shall
have performed or complied with all obligations and covenants required by this
Agreement to be performed or complied with by Buyer by the time of the Closing,
except (a) for representations and warranties that speak as of a specific date
or time (which need only be true and correct as of such date or time) and (b)
for breaches that have been cured; and Buyer shall have delivered to Parent a
certificate dated the Closing Date and signed by an officer of Buyer in the
officer's capacity as such confirming the foregoing to the best of such
officer's knowledge.
7.2. No Orders or Actions.
No Order shall have been enforced or issued by any court of competent
jurisdiction or Government Entity and remain in effect that would, and no
action, suit or proceeding shall be pending that, in the reasonable legal
opinion of counsel to Parent, would, or be expected to result in an Order that
would, on a temporary or permanent basis, restrain, enjoin or otherwise prohibit
the transactions contemplated hereby.
7.3. HSR Act and Other Approvals.
All applicable waiting periods under the HSR Act and any other applicable
Competition Laws shall have expired or terminated.
7.4. Guarantee Releases.
The actions contemplated by Section 4.7 shall have been completed.
8. INDEMNIFICATION
8.1. Indemnification by Parent.
(a) If the Closing occurs and subject to the terms and
conditions of this Article 8, Parent shall indemnify, defend and hold harmless
Buyer, and its directors, officers, employees, affiliates and controlling
persons, from and against all Losses asserted against,
39
resulting to, imposed upon or incurred by any such person, directly or
indirectly, by reason of or resulting from (i) any breach of any of the
representations and warranties of Parent; (ii) any breach of any covenant of
Parent contained in this Agreement or (iii) any Indemnified Liability. For the
avoidance of doubt, Buyer and its directors, officers, employees, affiliates and
controlling persons, shall not be entitled to recover Losses under any of
clauses (i) or (ii) of this Section 8.1(a) to the extent Parent has an
indemnification obligation under clause (iii) of this Section 8.1(a).
(b) Parent's obligations under Section 8.1(a) shall be subject
to the following limitations:
(i) Except as provided in clause (ii) and clause (x) of
this Section 8.1(b), Parent's obligations under Section 8.1(a)(iii) with respect
to Specified Liabilities shall not be subject to the limitations provided in
this Section 8.1(b);
(ii) Parent's liability for Losses arising out of clause
(v) of the definition of Specified Liabilities in Section 11.17 at any of the
Subsidiary Facilities other than the Delta Tupelo Facility ("On-Site
Contamination") shall be limited to 75% of the first $8,000,000 of Losses
sustained by the Indemnified Parties as a result thereof, provided that once
such Losses exceed $8,000,000 Parent shall be liable for 100% of all further
Losses and provided, further, that Parent shall be liable for 100% of all Losses
arising out of any contamination of the soil or ground water at the Delta Tupelo
Facility by Hazardous Substances;
(iii) Parent shall not have any liability for Losses for
any breach of the representations and warranties of Parent or for any
Indemnified Liabilities unless the Loss arising therefrom exceeds $50,000,
provided that for purposes of determining whether the Losses arising out of a
breach of a representation or warranty of Parent or for any Indemnified
Liability exceed $50,000 breaches arising out of a series of related events
shall be aggregated;
(iv) Parent shall not have any liability for Losses for
any breach of the representations and warranties of Parent or for any
Indemnified Liabilities unless and until the aggregate of all Losses relating
thereto for which Parent would, but for this clause (iv), be required to
indemnify Buyer (excluding Losses for which Parent has no liability as a result
of clause (iii) of this Section 8.1(b)) exceeds on a cumulative basis an amount
equal to $5,000,000, at which point Parent, subject to clause (v) of this
Section 8.1(b), shall indemnify Buyer for such Losses, but only to the extent
such Losses exceed $5,000,000;
(v) Parent shall not have any liability for Losses for
any breach of the representations and warranties of Parent or for Indemnified
Liabilities to the extent the aggregate amount of Losses for which Parent would
otherwise be liable exceeds $100,000,000;
(vi) Parent shall not have any liability for Losses for
any breach of the representations and warranties if Buyer had knowledge of such
breach at the time of the Closing and failed to notify Parent of such breach in
accordance with Section 4.5(b);
(vii) Buyer shall have no right to indemnification under
Section 8.1(a)(i) with respect to any Loss or alleged Loss if Buyer requested a
reduction in the Net Asset
40
Value reflected on the Closing Statement on account of any matter forming the
basis for such Loss or alleged Loss;
(viii) If a liability or reserve was reflected on the
Final Closing Statement relating to any matter for which Buyer would otherwise
be entitled to indemnification under Section 8.1(a)(i) or Section 8.1(a)(iii),
then the calculation of Buyer's Losses in respect of such matter shall be
reduced by the full amount of such liability or reserve as reflected in the
calculation of Net Asset Value on the Final Closing Statement and Buyer shall
have no right to indemnification with respect to the amount of such Loss
reflected as a liability or reserve on the Final Closing Statement;
(ix) The obligations to indemnify and hold Buyer harmless
pursuant to Section 8.1(a)(i) shall terminate as set forth in Section 3.3 and
the obligations to indemnify and hold Buyer harmless pursuant to Section
8.1(a)(iii) shall terminate ten (10) years after the Closing Date, except that
Parent's obligations with respect to Specified Liabilities (other than as
provided in clause (x) of this Section 8.1(b)) shall not be subject to the
foregoing limitation; provided, however, that such obligations to indemnify and
hold harmless shall not terminate with respect to any item as to which Buyer
shall have, prior to the expiration of such ten (10) year period, previously
made a claim by delivering a notice that constitutes an Indemnification Notice
and complies with the requirements therefor; and
(x) The obligations to indemnify and hold Buyer harmless
pursuant to Section 8.1(a)(iii) with respect to Losses arising out of On-Site
Contamination shall terminate ten (10) years after the Closing Date; provided,
however, that such obligations to indemnify and hold harmless shall not
terminate with respect to any Remedial Action with respect to any On-Site
Contamination if a plan of remediation was adopted with respect to such On-Site
Contamination prior to the expiration of such ten (10) year period and Buyer has
complied with the requirements of Section 8.3 and Section 8.4.
8.2. Indemnification By Buyer.
If the Closing occurs and subject to the terms and conditions of this
Article 8, Buyer shall indemnify, defend and hold harmless Parent, and its
directors, officers, employees, affiliates and controlling persons, from and
against all Losses asserted against, resulting to, imposed upon or incurred by
any such person, directly or indirectly, by reason of or resulting from (a) the
breach of the representations and warranties of Buyer described in Section 3.2,
(b) any breach of any covenant of Buyer contained in this Agreement or (c) the
operation or ownership by Buyer of the business of the Transferred Subsidiaries
following the Closing. Notwithstanding the foregoing, the obligations to
indemnify and hold Parent harmless pursuant to Section 8.2(a) shall terminate
when the representations and warranties of Buyer terminate pursuant to Section
3.3; provided, however, that such obligations to indemnify and hold harmless
shall not terminate with respect to any items as to which Parent shall have,
prior to the expiration of the applicable period, previously made a claim by
delivering a notice that constitutes an Indemnification Notice and complies with
the requirements therefor.
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8.3. Procedures Relating to Indemnification Between Buyer and Parent.
Following the discovery of any facts or conditions which could reasonably
be expected to give rise to a Loss or Losses for which indemnification under
this Article 8 can be obtained, the party seeking indemnification under this
Article 8 (the "Indemnified Party") shall, as promptly as possible and in no
event later than thirty (30) days thereafter, provide written notice to the
party from whom indemnification is sought (the "Indemnifying Party"), setting
forth the specific facts and circumstances, in reasonable detail, relating to
such Loss or Losses, the amount of Loss or Losses (or a statement to the effect
that the amount of Loss or Losses is not known if the actual amount is not known
or not capable of reasonable calculation) and the specific Section(s) of this
Agreement upon which the party seeking indemnification is relying in seeking
such indemnification ("Indemnification Notice"), provided, however, that no
delay on the part of the Indemnified Party in notifying the Indemnifying Party
shall relieve the Indemnifying Party from any obligation hereunder unless (and
then solely to the extent that) the Indemnifying Party is thereby materially
prejudiced.
8.4. Procedures Relating to Indemnification for Third Party Claims.
(a) If an Indemnified Party receives notice of a claim or
demand made by any other person, firm, Government Entity or corporation (a
"Third Party Claim"), the Indemnified Party shall provide an Indemnification
Notice to the Indemnifying Party relating to the Third Party Claim as promptly
as possible and in no event later than thirty (30) days after receipt by such
Indemnified Party of notice of the Third Party Claim. Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, within five (5)
business days after the Indemnified Party's receipt thereof, copies of all
notices and documents (including court papers) received by the Indemnified Party
relating to the Third Party Claim. Notwithstanding the foregoing, no delay on
the part of the Indemnified Party in notifying the Indemnifying Party as
required by this Section 8.4(a) shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent that) the
Indemnifying Party is thereby materially prejudiced.
(b) Subject to Section 8.4(c), if a Third Party Claim is made
against the Indemnified Party, the Indemnifying Party shall be entitled to
participate in the defense thereof and, if the Indemnifying Party so chooses
and, within ten (10) business days after the provision of the Indemnification
Notice acknowledges in writing its obligation to indemnify the Indemnified Party
therefor, to assume the defense thereof with counsel selected by the
Indemnifying Party and reasonably satisfactory to the Indemnified Party.
Notwithstanding any acknowledgment made pursuant to the immediately preceding
sentence, Parent shall continue to be entitled to assert any limitation on its
indemnification responsibility contained in Section 8.1(b). Should the
Indemnifying Party so elect to assume the defense of a Third Party Claim, the
Indemnifying Party shall not be liable to the Indemnified Party for legal
expenses subsequently incurred by the Indemnified Party in connection with the
defense thereof. If the Indemnifying Party assumes such defense, then the
Indemnified Party shall have the right to participate in the defense thereof and
to employ counsel, at its own expense, separate from the counsel employed by the
Indemnifying Party, it being understood, however, that the Indemnifying Party
shall control such defense. The Indemnifying Party shall be liable for the fees
and expenses of counsel employed by the Indemnified Party for any period during
which the Indemnifying Party
42
has not assumed the defense thereof. If the Indemnifying Party chooses to defend
any Third Party Claim, all the parties hereto shall cooperate in the defense or
prosecution of such Third Party Claim. Such cooperation shall include the
retention and (upon the Indemnifying Party's request) the provision to the
Indemnifying Party of records that are reasonably relevant to such Third Party
Claim, and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. If
the Indemnifying Party, within a reasonable time after receipt of an
Indemnification Notice relating to a Third Party Claim, chooses not to assume
defense of a Third Party Claim or fails to defend such Third Party Claim
actively and in good faith, the Indemnified Party will (upon further notice)
have the right to undertake the defense, compromise or settlement of such Third
Party Claim or consent to the entry of judgment with respect to such Third Party
Claim, on behalf of, and for the account and risk of, the Indemnifying Party,
and the Indemnifying Party shall have no right to challenge the Indemnified
Party's defense, compromise, settlement or consent to judgment.
(c) Notwithstanding any other provisions of this Agreement, in
the case of matters relating to On-Site Contamination, whether or not such
matters constitute a Third Party Claim, the following provisions shall apply:
(i) Buyer shall be entitled to manage all such matters
and Parent shall have the right to participate (at its own cost and expense).
Parent shall have the right to participate in all decisions regarding any such
matter, including reasonable access to sites where any action relating to such
matter is being conducted, reasonable access to all documents, correspondence,
data, reports or information regarding the matter, reasonable access to
employees and consultants of the Buyer with knowledge of relevant facts about
the matter, the right (with reasonable prior notice to Parent) to attend all
meetings and participate in any telephone or other conferences with any
Government Entity or other third party regarding the matter and the right to
review and comment in advance on all work plans, investigations and other
environmental remediation activities and Buyer shall incorporate all such
reasonable comments of Parent. Neither party shall agree to any settlement of
any such action, suit proceeding or claim without the prior written consent of
the other, which consent shall not be unreasonably withheld or delayed.
(ii) Parent shall not have any liability under this
Agreement with respect to any Losses relating to or arising from any
Environmental Laws or Hazardous Substance for which Buyer seeks indemnity under
Section 8.1 resulting from Buyer or its agents and representatives conducting
investigations, sampling, monitoring or remediation of the Subsidiary Facilities
(a "Remedial Action") unless such Remedial Action (i) has been initiated prior
to the Closing, (ii) is required by Environmental Laws or any Governmental
Entity, (iii) is required by a prospective purchaser, lender or secured creditor
of the Subsidiary Facilities, or (iv) is a Prudent Remedial Action (as
hereinafter defined). A "Prudent Remedial Action" is a Remedial Action that (A)
is undertaken in response to Material Facts (as hereinafter defined), (B) where
Buyer has, prior to commencing the Remedial Action, requested and obtained
Parent's consent subject to the provisions of this Section 8.4(c) and (C) where
the scope of the Remedial Action undertaken is reasonable in relation to the
perceived risk. At the time Buyer requests the consent of Parent pursuant to
clause (B) of the preceding sentence, Buyer shall disclose to Parent all
material information relating to the proposed Remedial Action and the basis for
conducting the Remedial Action. Parent's consent shall not be unreasonably
withheld or delayed; however,
43
(1) the reasonableness of Parent's decision will be determined based solely upon
the information disclosed to or known by Parent at the time such consent is
requested; (2) evidence that a Hazardous Substance may be present shall not
result in any presumption that the Hazardous Substance would reasonably be
expected to present a significant risk to human health or the environment; and
(3) the parties recognize that a determination not to further investigate
evidence indicating that a Hazardous Substance is present may, under some
circumstances, be a reasonable determination. "Material Facts" shall mean
material facts that represent reliable objective evidence indicating that a
Hazardous Substance is present in a manner that would reasonably be expected to
present a significant risk to human health or the environment. Buyer agrees that
the facts disclosed in the Schedules hereto (including documents incorporated by
reference therein) do not represent, in and of themselves, reliable objective
evidence indicating that a Hazardous Substance is present in amounts that would
reasonably be expected to prevent a significant risk to human health or the
environment.
(iii) In addressing any On-Site Contamination, the
parties agree to cooperate to minimize the costs of any investigation or
remediation and nothing in this Agreement shall require actions beyond the
minimum action and efforts required by Environmental Laws. The Parties agree
that deed or use restrictions and institutional controls shall be implemented
when such measures are allowed by Environmental Laws and minimize the costs of
any investigation or remediation.
(iv) Parent shall have no liability for Losses arising
from or related to the use of the Subsidiary Facilities for other than
industrial or commercial uses, which, for purposes of clarity shall not include
any residential uses.
(d) The parties shall, and shall cause their Affiliates to,
reasonably cooperate with each other in connection with the prosecution,
defense, settlement or performance of their agreements in this Article 8.
Without limiting the generality of the foregoing, as to all matters with respect
to which a party controls pursuant to this Section 8.4, upon such party's
request, the other party shall, and shall cause its Affiliates to, (i) assign
(to the extent assignable) to the controlling party (or its designee) all
existing contracts with independent consultants and other advisors relating to
such matters, (ii) use its reasonable best efforts to waive all professional
conflicts and take other reasonable steps necessary to allow any counsel
representing the other party with respect to such matters to represent the
controlling party (or its designee) with respect to such matters, (iii) make
available to the controlling party evidence within the other party's control and
persons needed as witnesses employed by the other party or its Affiliates, as
reasonably requested by the controlling party for such prosecution, defense,
settlement or performance and (iv) sign such documents, assign such rights, and
take such actions as the controlling party may reasonably request attendant to
the defense or resolution of the matter.
8.5. Insurance and Tax Effect.
The obligation of any Indemnifying Party to indemnify the Indemnified Party
against any Loss arising under this Article 8 shall be reduced (a) by the amount
of any insurance proceeds irrevocably received from third party insurers by the
Indemnified Party with respect to such Loss or the underlying factors with
respect thereto under any applicable policy and (b) to take into
44
account any net Tax benefits receivable by the Indemnified Party as a result of
Loss or the underlying reasons therefor and taking into account (without
duplication) the effect of receiving indemnification hereunder.
Parent and Buyer agree to treat all indemnification payments made by Parent
pursuant to this Agreement as adjustments to the Purchase Price for all income
Tax purposes and to take no position contrary thereto in any Tax Return or
proceeding before any Taxing Authority, except as otherwise required by
applicable Law or any applicable Order.
8.6. Exclusive Remedy.
Except for rights expressly provided in Article 6, Article 7 and Article 10
and remedies available at law or in equity for the breach of the obligations of
the parties under Article 5, the indemnification provisions of this Article 8
shall be the sole and exclusive remedy with respect to any and all claims
arising out of or relating to Buyer's investigation of the Subsidiaries, this
Agreement, the negotiation and execution of this Agreement or any Contract
entered into pursuant hereto (except to the extent otherwise expressly set forth
therein) or the performance by the parties of its or their terms, and no other
remedy shall be had pursuant to any contract, fraud, misrepresentation or other
tort theory or otherwise by Buyer or Parent and their respective officers,
directors, employees, agents, affiliates, attorneys, consultants, successors and
assigns, all such remedies being hereby expressly waived to the fullest extent
permitted under applicable Law. Without limitation, the procedures set forth in
this Article 8 constitute the sole and exclusive remedy of Buyer and Parent
arising out of any breach or claimed breach of the representations and
warranties set forth in Section 3.1 or Section 3.2 made as of the date of this
Agreement relating to events occurring on or prior to the date hereof that
become known to Buyer on or prior to the Closing Date. In furtherance of the
foregoing, except as provided above, Buyer hereby waives, to the fullest extent
permitted under applicable Law, any and all rights, claims and causes of action
it may have against Parent relating to Buyer's investigation of the
Subsidiaries, this Agreement, the negotiation and execution of this Agreement or
any Contract entered into pursuant hereto (except to the extent otherwise
expressly set forth therein) or the performance by the parties of its or their
terms arising under or based upon any Law or otherwise. In addition to the
foregoing, the amount of indemnification obligations of Parent set forth in this
Article 8 shall be the maximum amount of indemnification obligations set forth
hereunder and Buyer shall not be entitled to a rescission of this Agreement (or
any related agreements) or any further indemnification rights or claims of any
nature whatsoever, all of which Buyer hereby waives.
9. CLOSING
9.1. Closing Date.
Unless this Agreement shall have been terminated and the transactions
herein contemplated shall have been abandoned pursuant to Section 10.1, and
provided that the conditions to the Closing set forth in Article 6 and Article 7
are satisfied or waived, the closing with respect to the transaction (the
"Closing") shall take place at the offices of Foley & Lardner LLP, 777 East
Wisconsin Avenue, Milwaukee, Wisconsin, at 10:00 A.M., Central Standard Time, on
the fifth business day immediately following the satisfaction or waiver of the
45
conditions to the Closing set forth in Section 6.3 and Section 7.3, or at such
other time and place as the parties hereto shall agree upon. The actual date of
the Closing is referred to in this Agreement as the "Closing Date".
9.2. Documents to be Delivered by Parent and the Subsidiaries.
At the Closing, Parent shall deliver to Buyer the following documents, in
each case duly executed or otherwise in proper form:
(a) Instruments of Transfer. Duly endorsed stock certificates
or other instruments transferring all of the Sellers' right, title and interest
in the U.S. Intellectual Property, the Canadian Assets, the Toolz Shares and the
Equity Interests to Buyer, duly executed by an officer of the appropriate
Seller.
(b) Assumption Agreement. The Assignment and Assumption
Agreement in the form attached hereto as Exhibit 9.2(b) (the "Canadian
Assumption Agreement"), duly executed by Pentair Canada, Inc.
(c) Compliance Certificate. The certificate described in
Section 6.1, duly executed by an officer of Parent.
(d) Certified Resolutions. Certified copies of the resolutions
of the Board of Directors of Parent authorizing and approving this Agreement and
the consummation of the transactions contemplated by this Agreement.
(e) Releases. The releases described in Section 4.7.
(f) Resignations. The resignations described in Section 4.10,
effective as of the Closing Date.
(g) Other Documents. All other documents, instruments or
writings required to be delivered to Buyer at or prior to the Closing pursuant
to this Agreement and such other certificates of authority, instruments of
transfer and documents as Buyer may reasonably request.
9.3. Documents to be Delivered by Buyer.
At the Closing, Buyer shall deliver to Parent the following documents, in
each case duly executed or otherwise in proper form:
(a) Cash Purchase Price. To Parent, via wire transfer, the
cash payment required by Section 2.1.
(b) Assumption Agreements. The Canadian Assumption Agreement,
duly executed by Black & Decker Canada Inc.
(c) Compliance Certificate. The certificate described in
Section 7.1, duly executed by an officer of Buyer.
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(d) Certified Resolutions. A certified copy of the resolutions
of the Board of Directors of Buyer authorizing and approving this Agreement and
the consummation of the transactions contemplated by this Agreement.
(e) Other Documents. All other documents, instruments or
writings required to be delivered to Parent at or prior to the Closing pursuant
to this Agreement and such other certificates of authority and documents as
Parent may reasonably request.
10. PERMITTED TERMINATION
10.1. General.
This Agreement may be terminated, and the transactions contemplated herein
may be abandoned, only:
(a) By mutual written agreement of Buyer and Parent;
(b) By Parent or Buyer in the event that the Closing shall not
have occurred on or before December 31, 2004; provided, however, that either
party may extend such date for a period not to exceed ninety (90) calendar days
to the extent necessary for (i) Parent and Buyer to substantially comply with
any request for additional information made by any Governmental Entity with
respect to compliance with any applicable Competition Law or (ii) any applicable
waiting period under the HSR Act to expire or terminate up to a thirty (30) day
maximum following substantial compliance with a request for additional
information made by any Governmental Entity with respect to compliance with any
applicable Competition Law provided, further, that if a party seeking
termination pursuant to Section 10.1(b) is in breach in any material respect of
any of its representations and warranties, covenants or agreements contained in
this Agreement, then that party may not terminate this Agreement pursuant to
Section 10.1(b); or
(c) By either party if the other party is in material breach
of any of its covenants or other agreements hereunder and has failed to cure
such breach within ten (10) days following the giving of notice thereof by the
non-breaching party and such breach materially adversely affects the ability of
the parties to consummate the transactions contemplated hereby.
10.2. Post-Termination Obligations
In the event of a permitted termination by Parent or Buyer pursuant to
Section 10.1 written notice thereof shall forthwith be given to the other party
and the transactions contemplated by this Agreement shall be terminated, without
further action by any party, and:
(a) Buyer shall return all documents and copies and other
materials received from or on behalf of Parent relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to Parent; and
(b) All information received or accumulated by Buyer shall be
treated as "Evaluation Material" in accordance with the Letter Agreement (as
modified or supplemented
47
by this Agreement), which shall remain in full force and effect, as modified or
supplemented by this Agreement, notwithstanding the termination of this
Agreement.
10.3. No Liabilities in Event of Permitted Termination.
(a) In the event of any permitted termination of this
Agreement as provided in Section 10.1(a) and Section 10.1(b), this Agreement
shall forthwith become wholly void and of no further force and effect and there
shall be no liability on the part of Buyer or Parent, except that the respective
obligations of Buyer and Parent, as the case may be, under Sections 4.1, 10.2,
11.1 and 11.8 shall remain in full force and effect. Termination under Section
10.1(c) shall not preclude any party from suing the other party for willful
breach of this Agreement or impair the right of any party to compel specific
performance by another party of its obligations under this Agreement.
11. MISCELLANEOUS
11.1. Publicity.
Parent and Buyer agree that, from the date hereof through the Closing Date,
no public release or announcement concerning the transactions contemplated
hereby shall be issued or made by any party without the prior consent of the
other party (which consent shall not be unreasonably withheld), except (a) as
such release or announcement may, in the judgment of the releasing party, be
required by Law or any Rule or regulation of any United States securities
exchange on which the releasing party is listed, in which case the party
required to make the release or announcement shall allow the other party
reasonable time to comment on such release or announcement in advance of such
issuance, and (b) that Parent and the Subsidiaries may make such announcements
to their respective employees. Notwithstanding the foregoing, Buyer and Parent
may each issue a press release at the time of the signing of this Agreement and
on the Closing Date provided that the party issuing the release shall allow the
other party reasonable time to comment on such release in advance of such
issuance. Parent and Buyer agree to keep the terms of this Agreement
confidential, except to the extent required by applicable Law or for financial
reporting purposes and except that the parties may disclose such terms to their
respective accountants and other representatives as necessary in connection with
the ordinary conduct of their respective businesses and to representatives of
financial institutions that provide credit facilities to the parties (so long as
such persons agree to keep the terms of this Agreement confidential).
11.2. Assignment.
Except as expressly provided herein, the rights and obligations of a party
hereunder may not be assigned, transferred or encumbered without the prior
written consent of the other parties.
11.3. Parties in Interest.
This Agreement shall be binding upon, inure to the benefit of, and be
enforceable by the respective successors and permitted assigns of the parties
hereto including, in the case of the Buyer, each of the Purchasers. Nothing
contained herein shall be deemed to confer upon any other person any right or
remedy under or by reason of this Agreement.
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11.4. Law Governing Agreement.
This Agreement may not be modified or terminated orally, and shall be
construed and interpreted according to the internal laws of the State of
Delaware, excluding any choice of law rules that may direct the application of
the laws of another jurisdiction.
11.5. Amendment and Modification.
The parties hereto may amend, modify and supplement this Agreement in such
manner as may be agreed upon in writing among the parties hereto.
11.6. Waivers.
No waiver by any party of any of the provisions hereof shall be effective
unless explicitly set forth in writing and executed by the party so waiving.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including without limitation any investigation by or on behalf of any
party, shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants, or agreements
contained herein, and in any documents delivered or to be delivered pursuant to
this Agreement and in connection with the Closing hereunder. The waiver by any
party hereto of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any subsequent breach.
11.7. Notices.
All notices, requests, demands and other communications hereunder shall be
given in writing and shall be personally delivered; sent by telecopier or
facsimile transmission; or sent to the parties at their respective addresses
indicated herein by registered or certified U.S. mail, return receipt requested
and postage prepaid, or by private overnight mail courier service; as follows:
(a) If to Buyer, to:
The Black & Decker Corporation
701 E. Joppa Road
Towson, Maryland 21286
Attention: Charles E. Fenton
Facsimile: (410) 716-2660
(with a copy to)
Miles & Stockbridge, P.C.
101 Bay Street
Easton, Maryland 21601
Attention: Robert M. Cattaneo
Facsimile: (410) 385-3700
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(b) If to Parent, to:
Pentair, Inc.
5500 Wayzata Boulevard
Suite 800
Golden Valley, Minnesota 55416
Attention: Louis L. Ainsworth
Facsimile: (763) 656-5403
(with a copy to)
Foley & Lardner LLP
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5306
Attention: Benjamin F. Garmer, III, Esq.
Facsimile: (414) 297-4900
or to such other person or address as any party shall have specified by notice
in writing to the other parties. If personally delivered, such communication
shall be deemed delivered upon actual receipt; if sent by telecopier or
facsimile transmission, such communication shall be deemed delivered the next
business day after transmission (and sender shall bear the burden of proof of
delivery); if sent by overnight courier pursuant to this paragraph, such
communication shall be deemed delivered upon receipt; and if sent by U.S. mail
pursuant to this paragraph, such communication shall be deemed delivered as of
the date of delivery indicated on the receipt issued by the relevant postal
service, or, if the addressee fails or refuses to accept delivery, as of the
date of such failure or refusal.
11.8. Expenses.
Regardless of whether or not the transactions contemplated hereby are
consummated and except as otherwise stated in this Agreement, all expenses
incurred by the parties hereto shall be borne solely and entirely by the party
that has incurred such expenses.
11.9. Schedules.
Any fact or item disclosed on any Schedule to this Agreement shall be
deemed disclosed on all other Schedules to this Agreement to which such fact or
item may reasonably apply so long as such disclosure is in sufficient detail to
enable a party hereto to identify the facts or items to which it applies. Any
fact or item disclosed on any Schedule hereto shall not by reason only of such
inclusion be deemed to be material or to have a Material Adverse Effect and
shall not be employed as a point of reference in determining any standard of
materiality under this Agreement. Prior to the Closing, Parent shall have the
right to supplement, modify or update the Schedules hereto to reflect changes in
the ordinary course of the business of the Subsidiaries prior to the Closing;
provided, however, that any such supplements, modifications or updates shall be
subject to Buyer's rights under Section 6.1.
50
11.10. Knowledge.
The term "knowledge" when used in the phrases "to the knowledge of Parent"
or "Parent has no knowledge" or words of similar import shall mean, and shall be
limited to, the knowledge of the individuals listed on Schedule 11.10 and shall
include their actual knowledge obtained in their respective capacities with
Parent and/or a Subsidiary.
11.11. Section Headings; Table of Contents.
The Section headings contained in this Agreement and the Table of Contents
to this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
11.12. Severability.
If any provision of this Agreement shall be declared by any court of
competent jurisdiction to be illegal, void or unenforceable, then all other
provisions of this Agreement shall not be affected and shall remain in full
force and effect.
11.13. No Strict Construction.
Notwithstanding the fact that this Agreement has been drafted or prepared
by one of the parties, each of the parties confirms that both it and its counsel
have reviewed, negotiated and adopted this Agreement as the joint agreement and
understanding of the parties, and the language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any person.
11.14. Jurisdiction; Venue; Waiver of Jury Trial.
Each of Parent and the Buyer irrevocably and unconditionally submits to the
exclusive jurisdiction of any State or Federal court sitting in the City of
Wilmington, Delaware, over any suit, action or proceeding arising out of or
relating to this Agreement. Without limitation of other means of service, each
party agrees that service of any process, summons, notice or document with
respect to any action, suit or proceeding may be served on it in accordance with
the notice provisions set forth herein. Each of Parent and Buyer irrevocably and
unconditionally waives any objection to the laying of venue of any such suit,
action or proceeding brought in any such court and any claim that such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum. Each of Parent and Buyer agrees that a final judgment in any
such suit, action or proceeding brought in any such court shall be conclusive
and binding upon it and may be enforced in any other courts to whose
jurisdiction it is or may be subject, by suit upon such judgment. Each of Parent
and Buyer hereby waives its rights to a trial by jury of any claim or cause of
action arising out of or relating to Buyer's investigation of the business of
the Subsidiaries, this Agreement, the negotiation and execution of this
Agreement or any Contract entered into pursuant hereto (except to the extent
otherwise expressly set forth therein) or the performance by the parties of its
or their terms in any action, proceeding or other litigation of any type brought
by one party against the other, regardless of the basis of the claim or cause of
action.
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11.15. Entire Agreement.
This Agreement (including the Schedules and Exhibits hereto) and the Letter
Agreement constitute the entire agreement between the parties hereto and
supersede all prior agreements and understandings, oral and written, between the
parties hereto with respect to the subject matter hereof.
11.16. Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
11.17. Definitions.
For purposes of this Agreement, the term:
"401(k) Plan Transfer" shall have the meaning set forth in Section
5.3(e)(iv).
"Active Employee" shall mean any employee of the Subsidiaries other
than at the Delta Tupelo Facility who is actively employed as of the Closing
Date by the Subsidiaries or who is not so actively employed due to vacation,
illness, short term disability, military leave or layoff with recall rights or
authorized leave of absence.
"Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
of the Securities Exchange Act of 1934, as amended.
"Affiliated Group" shall have the meaning set forth in Section 5.1(a).
"Agreed Base Equity" shall mean $730,858,000, which (a) has been
determined as set forth in Schedule 11.17, the detailed back-up for which has
been reviewed by the parties, and (b) shall be subject to adjustment by the
amount by which the net asset value of the Asian Subsidiaries reflected in the
audited balance sheet of the Asian Subsidiaries as of April 5, 2004 is greater
or lesser than the net asset value of the Asian Subsidiaries as included in the
calculations set forth in Schedule 11.17.
"Alternate Payee" shall have the meaning set forth in ERISA Section
205(d)(3), and shall be limited to those individuals whose assigned benefits
under an employee benefit plan are not separated from the benefits of the
participant from which such benefits derive or are dependent on the survival of
the participant.
"Applicable Rate" shall have the meaning set forth in Section 2.2(e).
"Asia Holdings" shall mean Pentair Asia Holdings S.A.R.L., a
corporation organized under the laws of Luxembourg.
"Asian Subsidiaries" shall mean Hangtech Limited, a Hong Kong
corporation, Joinery Industrial Co., Ltd., a Taiwanese corporation, Jointech
Corporation, Ltd., a Cayman Islands corporation, Wisetech Industrial Limited, a
corporation organized under the laws of the
52
Peoples Republic of China, Wintech Corporation, a Cayman Islands corporation,
and Qingdao Sungun Power Tool Co., Ltd., a corporation organized under the laws
of the Peoples Republic of China.
"Audited Financial Statements" shall have the meaning set forth in
Section 3.1(g).
"Benefit Plan Services" shall have the meaning set forth in Section
5.3(i)(i).
"Business" shall have the meaning set forth in the recitals to this
Agreement.
"Buyer" shall have the meaning set forth in the preamble of this
Agreement.
"Buyer 401(k) Plan" shall have the meaning set forth in Section
5.3(e)(ii).
"Buyer NQ Funding Arrangement" shall have the meaning set forth in
Section 5.3(f)(ii).
"Buyer Pension Plan" shall have the meaning set forth in Section
5.3(b)(ii)(B).
"Buyer's Objection" shall have the meaning set forth in Section
2.2(c).
"Buyer Rollover Plan" shall have the meaning set forth in Section
5.3(e)(vii)(B).
"Buyer's Taxes" shall have the meaning set forth in Section 5.1(g).
"Canadian Assets" shall mean all of the business, assets and rights of
Pentair Canada, Inc. primarily related to the Business whether or not reflected
on the books of Pentair Canada, Inc., including, without limitation, each of the
following that relates to the Business as of the Closing Date: (i) all customer
and supplier lists, accounts receivable, advertising material, pre paid
expenses, deposits and credits, inventory (including work-in-process, raw
material and finished goods), machinery, land, buildings, vehicles, equipment,
tools, supplies, furniture, fixtures, leasehold improvements and other tangible
property, (ii) all books and records, (iii) all rights in and to transferable
permits, licenses, approvals and authorizations by or of governmental
authorities or third parties, (iv) all causes of action, claims, warranties,
guarantees, refunds, rights of recovery and set-offs of every kind and
character, (v) all telephone numbers, telex numbers, e-mail addresses, Internet
sites and domain names, post office boxes, drawings, goodwill, intellectual
property and other intangibles, and (vi) all of Pentair Canada, Inc.'s rights
under leases, contracts, agreements and other documents related to the Business.
"Canadian Assumption Agreement" shall have the meaning set forth in
Section 9.2(b).
"Canadian Liabilities" shall mean those liabilities of Pentair Canada,
Inc. that (i) relate primarily to the Business and (ii) are not Indemnified
Liabilities.
"Capital Leases" shall mean leases classified as a capital lease
pursuant to Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 13, Accounting for Leases; provided, however, that
Parent and Buyer agree that the leases for the
53
Subsidiary Facilities located in Jackson, Tennessee and West Jefferson, North
Carolina shall not be deemed to be Capital Leases.
"Captive Insured Subsidiaries" shall have the meaning set forth in
Section 5.8.
"CGL Captive Insured Subsidiaries" shall have the meaning set forth in
Section 5.8(a).
"CGL Policies" shall have the meaning set forth in Section 5.8(a).
"CGL Pre-Closing Occurrences" shall have the meaning set forth in
Section 5.8(a).
"Closing" shall have the meaning set forth in Section 9.1.
"Closing Date" shall have the meaning set forth in Section 9.1.
"Closing Statement" shall have the meaning set forth in Section
2.2(b).
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended, 29 U.S.C. 4980B, et.seq.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Competition Law" shall mean the HSR Act and all other federal, state
and foreign Laws and Orders that are designed or intended to prohibit, restrict
or regulate (i) actions having the purpose or effect of monopolization or
restraint or trade or lessening of competition or (ii) foreign investment.
"Competitive Business" shall have the meaning set forth in Section
5.7.
"Consolidated Returns" shall have the meaning set forth in Section
5.1(a).
"Contract" shall mean any indenture, mortgage, deed of trust, lease,
licensing agreement, contract, instrument or other agreement.
"CPA Firm" shall have the meaning set forth in Section 2.2(c).
"Deductible Reimbursement Policies" shall have the meaning set forth
in Section 5.8(b).
"Deferred Acquisition Price" shall mean any obligation of Parent or
any of its Affiliates, including the Subsidiaries, for amounts due to any person
who sold to Parent or any of its Affiliates a business or an entity that is
included in the Business or is a Subsidiary or a predecessor thereof with
respect to such sale that is not contingent upon the performance (financial or
otherwise) of such business or entity.
"Delta Parts" shall have the meaning set forth in Section 5.9.
54
"Delta Tupelo" shall mean the Tupelo, Mississippi location of Delta
International Machinery Corp., a Minnesota corporation.
"Delta Tupelo Closure" shall have the meaning set forth in Section
5.9.
"Delta Tupelo Facility" shall mean all real property, leaseholds or
other interests owned or operated by any of the Subsidiaries in connection with
the Tupelo, Mississippi location of Delta International Machinery Corp., a
Minnesota corporation, and any buildings, plants or structures located thereon.
"Delta Tupelo Hourly Plan" shall have the meaning set forth in Section
5.3(d).
"DeVilbiss" shall mean DeVilbiss Air Power Company, a Delaware
corporation.
"DeVilbiss Cash Balance Plan" shall have the meaning set forth in
Section 5.3(b)(ii)(A).
"Earn-Out Obligation" shall mean any obligation of Parent or any of
its Affiliates, including the Subsidiaries, for amounts due to any person who
sold to Parent or any of its Affiliates a business or an entity that is included
in the Business or is a Subsidiary or a predecessor thereof with respect to such
sale that is contingent upon the performance (financial or otherwise) of such
business or entity.
"Ellerbrake Litigation" shall mean the case of Stephen A. Ellerbrake
v.Campbell-Hausfield, et al including DeVilbiss Air Power Company (Circuit Court
for St. Clair County, IL, Case #01-L-0540).
"Environmental Laws" shall mean all Laws regarding protection of the
environment, including, without limitation, those protecting the quality of or
requiring the cleanup or remediation of the ambient air, soil, surface water or
groundwater, in effect, to the extent applicable, at any time.
"Equity Interests" shall have the meaning set forth in the recitals to
this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean any entity that is, as of the date
hereof, a member of a controlled group of corporations (as defined in Code
Section 414(b)) of which any Subsidiary is a member, or an unincorporated trade
or business under common control with any Subsidiary (as determined under Code
Section 414(c)).
"ESOP" shall have the meaning set forth in Section 5.3(e)(vii).
"Estimated Closing Statement" shall have the meaning set forth in
Section 2.2(a).
55
"Excluded Plans" shall mean the Parent NQ 401(k) Plan, the Pentair
Supplemental Executive Retirement Plan and the Pentair Restoration Plan.
"Final Closing Statement" shall have the meaning set forth in Section
2.2(c).
"Financial Statements" shall have the meaning set forth in Section
3.1(g).
"Foreign Subsidiary" means any Subsidiary (i) organized under the laws
of a jurisdiction other than the United States or a state thereof and (ii) which
conducts substantially all of its business and operations in a jurisdiction
other than the United States.
"Former Employee" is an individual, other than an Active Employee and
an individual who would be an Active Employee if Parent or an Affiliate other
than a Subsidiary were substituted for the Subsidiaries in applying the
definitions relevant to such term, who was an employee of the Subsidiaries or
their respective predecessors immediately before he or she last terminated
employment with Parent or any of its Affiliates.
"GAAP" shall mean generally accepted accounting principles in the
United States.
"Government Entities" shall mean any court, arbitrator, department,
commission, board, bureau, agency, authority, instrumentality or other body,
whether federal, state, municipal, foreign or other.
"Hazardous Substance" shall mean all pollutants, contaminants,
chemicals, compounds or industrial, toxic, hazardous or petroleum or
petroleum-based substances or wastes, waste waters or byproducts, including,
without limitation, asbestos, polychlorinated biphenyls or urea formaldehyde,
and any other substances subject to regulation under any Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Income or Franchise Taxes" shall mean all foreign, federal, state or
local Taxes payable on gross or net income, net worth, surplus, franchise,
capital, or capital stock, together with any interest and any penalties,
additions to Tax or additional amounts imposed by any Tax Authority.
"Indemnified Liabilities" shall mean all liabilities and obligations
of the Subsidiaries including, without limitation, the Specified Liabilities,
whether known or unknown, absolute or contingent, with respect to events,
occurrences, conditions or transactions arising on or before the Closing Date
other than the Transferred Liabilities.
"Indemnification Notice" shall have the meaning set forth in Section
8.3.
"Indemnified Party" shall have the meaning set forth in Section 8.3.
"Indemnifying Party" shall have the meaning set forth in Section 8.3.
56
"Intellectual Property Rights" shall have the meaning set forth in
Section 3.1(r).
"Laws" shall mean any federal, state, local, foreign or other statute,
law, ordinance, Rule or regulation.
"Letter Agreement" shall have the meaning set forth in Section 4.1.
"Lien" shall mean any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind.
"Losses" shall include (i) all debts, liabilities and obligations owed
to or at the behest of any other party; (ii) all losses, damages, judgments,
awards, penalties and settlements; (iii) all demands, claims, suits, actions,
causes of action, proceedings and assessments, whether or not ultimately
determined to be valid; and (iv) all costs and expenses (including, without
limitation, interest (excluding prejudgment interest in any litigated or
arbitrated matter other than that payable to a third party), court costs and
reasonable fees and expenses of attorneys and expert witnesses) of
investigating, defending or asserting any of the foregoing, but shall exclude,
in each of clauses (i) through (iv) above, consequential, incidental, special or
punitive damages or lost profits other than those actually paid by an
Indemnified Party to a person or entity other than an Indemnified Party.
"Master Trust" shall mean the master trust established by Parent to
hold the assets of certain defined benefit plans maintained by Parent or its
Affiliates for the funding and payment of benefits under such plans.
"Material Adverse Effect" shall mean a material adverse effect on the
business, results of operations or financial condition or prospects of the
Subsidiaries taken as a whole, provided that no material adverse effect shall be
deemed to have occurred with respect to the prospects of the Subsidiaries taken
as a whole unless an event has occurred that will have a material adverse effect
in the future on the business, results of operation or financial condition of
the Subsidiaries taken as a whole other than changes or effects resulting from
developments or occurrences relating to or affecting United States or foreign
economies in general or the industry of any Subsidiary in general other than
such developments or occurrences that disproportionately affect the Subsidiaries
taken as a whole.
"Material Contract" shall have the meaning set forth in Section
3.1(p).
"Material Facts" shall have the meaning set forth in Section
8.4(c)(ii).
"Net Asset Value" shall mean the book value of (i) the assets of the
Transferred Subsidiaries, plus (ii) the Canadian Assets minus (x) the
Transferred Liabilities and (y) the Canadian Liabilities, in each case as
reflected on the Estimated Closing Statement, the Closing Statement or the Final
Closing Statement, as the case may be, and determined in accordance with Section
2.2. All references to "Net Asset Value" in this Agreement shall be deemed to
refer to the Subsidiaries giving effect to the transactions contemplated by
Section 4.6.
"NQ 401(k) Plan Transfer" shall have the meaning set forth in Section
5.3(f)(ii).
57
"On-Site Contamination" shall have the meaning set forth in Section
8.1(b)(ii).
"Orders" shall mean any order, writ, injunction, judgment, plan or
decree.
"Parent" shall have the meaning set forth in the preamble of this
Agreement.
"Parent 401(k) Plan" shall have the meaning set forth in Section
5.3(e)(i).
"Parent NQ 401(k) Plan" shall have the meaning set forth in Section
5.3(f)(ii).
"Parent Pension Plan" shall have the meaning set forth in Section
5.3(b)(i).
"Parent Sponsored Benefit Plan" shall have the meaning set forth in
Section 5.3(g)(i).
"Penwald" shall have the meaning set forth in Section 5.8.
"Pre-Closing Period" shall have the meaning set forth in Section
5.1(a).
"Prudent Remedial Action" shall have the meaning set forth in Section
8.4(c)(ii).
"Policies" shall have the meaning set forth in Section 5.8.
"Porter-Cable" shall mean Porter-Cable Corporation, a Delaware
corporation.
"Porter-Cable Hourly Plan" shall have the meaning set forth in Section
5.3(c).
"Potentially Harmful Substances or Conditions" shall mean any (a)
allegedly toxic or harmful material including, without limitation, asbestos or
silica or (b) noise, vibration or electromagnetic radiation, in each case in
connection with a claim for indemnification pursuant to Section 8.1(a)(iii) with
respect to clause (ii) of the definition of Specified Liabilities under this
Section 11.17.
"Pre-Closing Period" shall have the meaning wet forth in Section
5.1(a).
"Pre-Closing WC/Auto Occurrences" shall have the meaning set forth in
Section 5.8(c).
"Purchase Price" shall have the meaning set forth in Section 2.1.
"Purchaser" shall have the meaning set forth in Section 1.1.
"Recent Balance Sheet" shall have the meaning set forth in Section
3.1(g).
"Remedial Action" shall have the meaning set forth in Section
8.4(c)(ii).
"Section 338(g) Election" shall have the meaning set forth in Section
5.1(f).
"Seller" shall have the meaning set forth in Section 1.1.
58
"Specified Liabilities" shall mean all liabilities and obligations of
any Subsidiary other than Transferred Liabilities arising out of or with respect
to each of the following: (i) bodily injury, death or other damage occurring
before the Closing relating to products manufactured or sold before the Closing;
(ii) bodily injury or death resulting, in whole or in part, from the presence of
or exposure to Potentially Harmful Substances or Conditions relating to the use
of products manufactured prior to the Closing Date; (iii) corrective actions
required by the Consumer Products Safety Act or similar laws relating to
products manufactured before the Closing; (iv) guarantees of any obligations of
any third party, including those of Parent or any of its Affiliates other than
another Transferred Subsidiary; (v) the handling, presence, storage, treatment,
release, discharge, migration, transportation, removal or disposal (whether
on-site or off-site) of Hazardous Substances or the violation of any
Environmental Law in each case prior to the Closing Date, (vi) liabilities and
obligations arising before the Closing Date of the Subsidiaries (or any of their
predecessors) with respect to former or current employees (or their dependents
or beneficiaries) of any Subsidiary for which Buyer or any Subsidiary is not
responsible in accordance with Section 5.3; (vii) any products, facilities or
operations that are not part of the Business as conducted on the Closing Date;
(viii) Taxes relating to a pre-Closing period; (ix) indebtedness for borrowed
money, including under Capital Leases and any Deferred Acquisition Price; (x)
amounts due to Parent or any of its Affiliates, other than another Subsidiary,
except for accounts payable relating to the purchase of products prior to the
Closing in the ordinary course of business and except for the Lease Contract to
be entered into between Wisetech Industrial Co., Ltd. (Suzhou) and Pentair Water
(Suzhou) Company Ltd., substantially in the form attached as Exhibit 11.17(a),
and the Lease Contract to be entered into between Qingdao Sungun Power Tools
Company, Ltd. and Pentair Qingdao Enclosure Co., Ltd., substantially in the form
attached as Exhibit 11.17(b); (xi) patent, copyright or trademark infringement
or misappropriation of trade secrets as the result of actions taken or events
occurring prior to the Closing and with respect to which a lawsuit or
administrative proceeding has been instituted prior to the Closing; (xii) the
Delta Tupelo Closure, including all obligations with respect to any former or
current employee of the Delta Tupelo Facility; (xiii) any Earn-Out Obligation;
(xiv) the Ellerbrake Litigation; (xv) all obligations to pay insurance premiums
on a retroactive basis with respect to any of the foregoing and (xvi) all Third
Party Claims relating to any of the foregoing, whether or not such Third Party
Claims are successful.
"Straddle Period" shall have the meaning set forth in Section
5.1(a)(iv).
"Subsidiary" shall mean any corporation or other entity engaged in the
Business of which securities or other ownership interests having ordinary voting
power to elect a majority of directors or other persons performing similar
functions are directly or indirectly owned by Parent all of which are listed in
note 1 to the Audited Financial Statements other than Pentair Tools Group, Inc.
Porter-Cable Argentina, LLC, Porter-Cable de Mexico S.A. de C.V. and Surewood
Acquisition Corporation.
"Subsidiary Benefit Plans" shall have the meaning set forth in Section
3.1(q).
"Subsidiary Facilities" shall mean any real property, leaseholds or
other interests currently owned or operated by the Subsidiaries and any
buildings, plants or structures currently owned or operated by the Subsidiaries.
59
"Taxes" shall mean any and all federal, state, local, foreign or other
taxes of any kind (together with any and all interest, penalties, additions to
tax and additional amounts imposed with respect thereto) imposed by any taxing
authority, including, without limitation, taxes or other charges on or with
respect to income, franchises, windfall or other profits, gross receipts,
property, sales, use, capital stock, payroll, employment, social security,
workers' compensation, unemployment compensation, or net worth, and taxes or
other charges in the nature of excise, withholding, ad valorem or value added.
"Tax Audit" shall have the meaning set forth in Section 5.1(b).
"Taxing Authority" shall have the meaning set forth in Section 5.1(c).
"Tax Package" shall have the meaning set forth in Section 5.1(c).
"Tax Return" shall mean each report, return, declaration, statement,
form or other information required to be supplied to a Taxing Authority in
connection with Taxes.
"Third Party Claim" shall have the meaning set forth in Section
8.4(a).
"Toolz Shares" shall mean the 382,848 shares of Series C Preference
Shares and the 357,142 shares of Series D Preference Shares, issued by Toolz
Ltd., a company organized under the laws of Hong Kong, to Asia Holdings.
"Transfer Amount" shall have the meaning set forth in Section
5.3(b)(iii)(B).
"Transferred Liabilities" shall mean (i) liabilities and obligations
of the Subsidiaries, accruals for which are included in the Final Closing
Statement in accordance with Schedule 2.2(b), (ii) liabilities and obligations
of the Subsidiaries incurred in the ordinary course of business of the
Subsidiaries under operating contracts and leases in effect on the Closing Date
that were incurred in the ordinary course of business or were disclosed in an
appropriate Schedule to this Agreement or that are of the type or kind required
to be disclosed in a Schedule to this Agreement but are not disclosed solely
because they fall below the minimum threshold amount, term or materiality of the
disclosures required by the terms of this Agreement to be set forth in such
Schedule, (iii) liabilities and obligations of the Subsidiaries with respect to
Taxes for which Parent is not responsible in accordance with Section 5.1, (iv)
liabilities and obligations of the Subsidiaries (or any of their predecessors)
with respect to former or current employees of any Subsidiary for which Parent
is not responsible in accordance with Section 5.3, (v) Earn-Out Obligations of
up to $6,800,000 arising under (A) an Amendment of Stock Purchase Agreement
dated March 12, 2004 by and between Asia Holdings and Chang Lee-Cheng relating
to the purchase of shares of Jointech Corporation Ltd., (B) a Letter Agreement
dated April 14, 2004 by and between Porter-Cable Corporation and Nanette Rizzo
relating to the purchase of membership interests in Orion LLC, (C) a Letter
Agreement dated April 14, 2004 by and between Porter-Cable Corporation and Mark
Strahler relating to the purchase of membership interests in Orion LLC, and (D)
a Stock Purchase Agreement dated September 23, 2001 by and among Pentair, Inc.,
Surewood Acquisition Company, Oldham Saw Co., Inc., The Woodworkers Choice Inc.,
and the Shareholders of the Companies, (vi) obligations under the agreement
settling the Ellerbrake Litigation to the extent that the expenditures with
respect to such settlement, whether before or after the Closing, have not
exceeded $4,000,000, (vii) liabilities and obligations of the
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Subsidiaries arising out of bodily injury, death or other damage relating to
products manufactured prior to the Closing, including all Third Party Claims
relating to such bodily injury, death and other damage, whether or not such
Third Party Claims are successful, other than liabilities and obligations set
forth in clauses (i), (ii) and (iii) of the definitions of Specified Liabilities
in this Section 11.17, and (viii) liabilities and obligations of the
Subsidiaries for claims by or on behalf of, or obligations owing to, Buyer or
any of its affiliates.
"Transferred Subsidiaries" shall mean each of the Subsidiaries other
than Pentair Canada, Inc.
"U.S. Intellectual Property" shall mean the U.S. Patent Rights and the
U.S. Trademark Rights.
"U.S. Patent Rights" shall mean all rights under the laws of the
United States of America of the Subsidiaries other than DeVilbiss and, to the
extent that they relate to the Business, of Parent or any of its other
Affiliates, to all patents, patent applications, copyrights, technology,
know-how, processes, trade secrets, inventions, proprietary data, designs,
formulae, research and development data, computer software programs, all
registrations and applications for registration thereof under the laws of the
United States of America, all recordings, licenses and common-law rights
relating thereto, and all rights to sue at law or in equity for any infringement
or other impairment thereof.
"U.S. Trademark Rights" shall mean all rights under the laws of the
United States of America and of any state therein of the Subsidiaries other than
DeVilbiss and, to the extent that they relate to the Business, of Parent or any
of its other Affiliates to all trademarks, trade dress, trade names, service
marks and service names, all registrations and applications for registration
thereof under the laws of the United States of America, all recordings,
licenses, and of common-law rights relating thereto, and all rights to sue at
law or in equity for any infringement or other impairment thereof.
"WC/Auto Occurrences" shall have the meaning set forth in Section
5.8(b).
"WC/Auto Captive Insured Subsidiaries" shall have the meaning set
forth in Section 5.8(b).
"Workers Compensation Policies" shall have the meaning set forth in
Section 5.9(b).
Where any group or category of items or matters is defined
collectively in the plural number, any item or matter within such definition may
be referred to using such defined term in the singular number, and vice versa.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
THE BLACK & DECKER CORPORATION
("Buyer")
/s/ CHARLES E. FENTON
------------------------------
By: Charles E. Fenton
Title: Senior Vice President
and General Counsel
PENTAIR, INC.
"Parent"
/s/ RANDALL J. HOGAN, III
------------------------------
By: Randall J. Hogan, III
Title: Chief Executive Officer
62