Exhibit 2.1
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT, dated as of August 3, 1998
("Agreement"), by and between Johnson Controls, Inc., a Wisconsin
corporation, having a principal place of business at 49200 Halyard
Drive, Plymouth, MI 48170 ("JCI"), Hoover Universal, Inc., a
Michigan corporation having a principal place of business at 49200
Halyard Drive, Plymouth, MI 48170 ("Hoover") (JCI and Hoover,
together with certain of their foreign, wholly owned subsidiaries
set forth on Schedule 0.1 being hereinafter collectively referred
to as "Seller"), and Cincinnati Milacron Inc., a Delaware
corporation, having a principal place of business at 4701 Marburg
Avenue, Cincinnati, Ohio 45209-1025 ("Purchaser").
WHEREAS, Seller is engaged in the line of business comprised of
the manufacture and sale of machinery which produces plastic
containers and other similar products (the "Business"); and
WHEREAS, Seller desires to sell or to cause to be sold to
Purchaser and Purchaser desires to purchase from Seller, subject
to the assumption by Purchaser of certain liabilities of Seller
relating to the Business, on the terms and conditions hereinafter
set forth, all of the assets and properties used in, held for use
in, or otherwise relating to, the Business as a going concern
which includes, without limitation, all of the issued and
outstanding capital stock of the Purchased Subsidiaries (the
"Purchased Shares").
In consideration of the premises and of the mutual agreements
hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
Purchase and Sale
1.1 Purchased Assets and Purchased Shares:
(a) On the terms and subject to the conditions set forth in this
Agreement, Seller hereby agrees to sell, transfer, convey, assign
and deliver to Purchaser, or cause to be sold, transferred,
conveyed, assigned and delivered to Purchaser, as a going concern,
and Purchaser agrees to purchase, acquire and accept from Seller
free and clear (except as described in Section 8.5(a) below) of
all Encumbrances, as hereinafter defined, all of Seller's right,
title and interest in, to, and under the assets, properties,
rights, claims and contracts of every nature, kind and
description, whether real, personal or mixed, tangible or
intangible (including goodwill), and whether now existing or
acquired prior to Closing, including without limitation, all of
the assets reflected on the books and records of Seller on the
Closing Date which are primarily used in, held for use in, or
primarily pertain to, the Business, as hereinafter defined (other
than Excluded Assets, as hereinafter defined), wherever located,
as the same shall exist immediately prior to the Closing, as
hereinafter defined, including, without limitation, the following
assets of the Business:
(i) the real property listed on Schedule 8.5(a), together with all
easements, rights of way, appurtenances thereon and thereto and
all buildings and other structures, fixtures and improvements
located thereon (collectively, the "Owned Real Property");
(ii) subject to Section 5.1(e) below, the real property leases
listed on Schedule 8.5(b) (collectively, the "Leases"), together
with all of Seller's interest in all of the structures, fixtures
and improvements located on the real property covered by such
Leases (collectively, the "Leased Real Property"; and, together
with the Owned Real Property, the "Real Property");
(iii) all other tangible assets and properties of the Business
including machinery and equipment, including, without limitation,
all manufacturing, production, maintenance, packaging, testing and
other machinery, tooling (including dies and molds) and equipment,
vehicles, spare or replacement parts, computer equipment,
furniture, fixtures, plant and office equipment, supplies and
other tangible personal property (collectively, the "Purchased
Equipment"), physically located at the Real Property or elsewhere,
or used or held for use in the Business;
(iv) all inventories of the Business, including, without
limitation, raw materials, samples, work-in-process, finished
goods, component parts, returned goods, stores and supplies,
packaging, shipping containers and other materials wherever
located (collectively, the "Purchased Inventories");
(v) all accounts and notes receivable of any nature whatsoever,
deferred charges and other rights to receive payments, whether
recorded or unrecorded arising from the Business (collectively,
the "Purchased Receivables") except Factored Receivables (as
hereinafter defined);
(vi) all prepayments, claims for refunds and prepaid expenses
relating to the Business, the Purchased Subsidiaries, the
Purchased Assets or the Assumed Liabilities, as hereinafter
defined, including prepaid Taxes, as hereinafter defined,
advances, credits and security, utility and other deposits
(collectively, the "Purchased Prepaid Items");
(vii) subject to Section 5.1(e) below, all rights in and under all
contracts set forth on Schedule 8.7 and all contracts,
arrangements, licenses, leases, commitments, purchase orders,
sales orders and other agreements relating to the Business,
including, without limitation, all rights to receive payment for
products sold or shipped before the Closing Date or services
rendered, and to receive goods and services, pursuant to such
agreements, and to assert claims and take other rightful actions
in respect of breaches, defaults and other violations thereof, in
each case except to the extent related to Retained Liabilities
(collectively, the "Assigned Contracts");
(viii) all operating records, data and other materials maintained
by the Business, including, without limitation, all books,
records, sales and sales promotional data, advertising materials,
customer lists and records, credit information. cost and pricing
information, supplier lists and records, business plans, catalogs,
mailing lists, distribution lists, photographs, production data,
engineering records, personnel and payroll records, manufacturing
and quality control records and procedures, research and
development files, intellectual property disclosures, accounting
records, and other materials related to any of the foregoing items
wherever located (collectively, the "Purchased Records");
(ix) subject to Section 1.2(f) below, all patents and patent
applications and foreign counterparts thereof and related licenses
and other agreements, used or held for use in connection with the
Business or any Purchased Asset, including without limitation,
those listed in Schedule 8.11 (collectively, the "Purchased
Patents");
(x) all trademarks, trade names, service marks and service names,
and registrations and applications for registration thereof and
foreign counterparts thereof and related licenses and other
agreements (collectively, the "Purchased Trademarks") used or held
for use in connection with the Business or any Purchased Asset,
including, without limitation, the name Uniloy and all other names
listed in Schedule 8.11;
(xi) all copyrights and applications therefor, registrations and
foreign counterparts thereof and related licenses and other
agreements (collectively, the "Purchased Copyrights") used or held
for use in connection with the Business or any Purchased Asset,
including, without limitation, those listed in Schedule 8.11;
(xii) all inventions, discoveries, trade secrets, improvements,
formulae, practices, processes, methods, technology and know-how,
whether or not patented or patentable, including any of the
foregoing in the process of development, and similar proprietary
rights and related licenses and other agreements that are used or
held for use in connection with the Business or any Purchased
Asset (collectively, the "Purchased Know-How" and, together with
the Purchased Patents, and the Purchased Trademarks, and the
Purchased Copyrights, the "Purchased Rights");
(xiii) subject to Section 1.2(c) below, all computer and automatic
machinery, software, firmware, programs and source disks, program
documentation, tapes, manuals, forms, guides and other materials
with respect thereto and related licenses and other agreements
used or held for use in connection with the Business or any
Purchased Asset;
(xiv) subject to Section 1.2(b) below, all permits, concessions,
grants, approvals, authorizations, franchises, licenses or other
rights granted by governmental authorities and all consents,
grants, rights to emission credits and other rights of every
character whatsoever that are used or held for use in, or
necessary for the lawful ownership or operation of, the Business
or any Purchased Asset (collectively, the "Permits") as hereinafter
defined;
(xv) all rights, recoveries, refunds, counterclaims, rights of set-
off claims in bankruptcy, choses in action, indemnification
agreements with and indemnification rights against third parties,
offsets and other Claims, as hereinafter defined (known or
unknown, accrued or contingent), against third parties, including,
without limitation, warranty and other contractual claims arising
out of or related to the Business or any Purchased Assets or the
Assumed Liabilities (collectively, the "Purchased Claims"), other
than any of the foregoing which relate solely to the Excluded
Assets or Retained Liabilities, as hereinafter defined;
(xvi) all warranties, guarantees and letters of credit received
from vendors, suppliers or manufacturers;
(xvii) all of the Purchased Shares;
(xviii) all goodwill of the Business;
(xix) Seller's covenant not to compete, as further
described in Section 15.5;
(xx) rights to all net operating loss, carry forwards,
credits and carrybacks which exist in the Purchased Subsidiaries; and
(xxi) rights to proceeds of any insurance policy maintained by
Seller, if any, to which Seller is entitled in respect of the
Assumed Liabilities.
(b) All assets, properties, interests in properties and rights
that are to be sold, transferred, conveyed and assigned to
Purchaser by Seller hereunder, including without limitation, the
Purchased Shares, shall be collectively referred to as the
"Purchased Assets". As used in this Agreement, the term
"Encumbrances" means, any security interests, judgments, liens
(other than for taxes not yet payable), pledges, escrows, claims,
mortgages, charges, restrictions, easements or other encumbrances
of any kind or nature; the term "Claim" means any claim, demand,
action, suit or proceeding; and the term "Affiliate" means any
other person or entity that, directly or indirectly, is controlled
by or is under common control with such person.
1.2 Excluded Assets: There are excepted from the assets and
properties of the Business to be sold to Purchaser pursuant to
this Agreement and the term "Purchased Assets" does not mean or
include the following assets (collectively, the "Excluded
Assets"):
(a) All cash and cash equivalent items of Seller in the Business
or the Purchased Subsidiaries on hand or on deposit as of the
Closing Date of this Agreement, except for such cash reflected on
the Closing Statement of Net Assets, which cash shall be
reimbursed by Purchaser to Seller at Closing;
(b) all federal, state and local permits, licenses and other
authorizations relating to the Business to the extent they are not
assignable or transferable as a matter of law;
(c) the assets listed in Schedule 1.2(c);
(d) claims for refunds, overpayments or rebates of income taxes
and other governmental charges for periods ending on or prior to
the Closing Date, other than refunds, overpayments or rebates that
result in an increase in Taxes that are allocated to the Purchaser
pursuant to Section 13.2;
(e) all insurance policies;
(f) the right to use the names "Johnson Controls" and "Hoover" and
their registered and unregistered trademarks and logos; and
(g) all assets and properties of Seller not used in, held for use
in, or pertaining to the Business.
ARTICLE II
Liabilities
2.1 Assumption of Liabilities: Subject to the terms and conditions
of this Agreement, on the Closing Date, as hereinafter defined,
Seller shall assign to Purchaser, and Purchaser shall, except as
set forth in Section 2.2 below, assume and agree to perform and
discharge the following liabilities and obligations of Seller
and/or the Business:
(a) obligations of the Business for the sale and delivery of
products not shipped prior to the close of business on the Closing
Date under open sales orders, open bids and sales contracts
included in the Assigned Contracts, which were accepted or made in
the ordinary course of business of the Business prior to the close
of business on the Closing Date;
(b) obligations of the Business for the purchase of raw materials,
supplies and repair and maintenance materials not received prior
to the close of business on the Closing Date and not included in
the Purchased Inventory under open supply contracts, purchase
orders and commitments included in the Assigned Contracts, which
were given or made in the ordinary course of business of the
Business;
(c) liabilities and obligations arising under the Assigned
Contracts in accordance with their respective terms, excluding (A)
payables owed by the Business to Seller or any of its Affiliates
on the Closing Date, (B) any liability or obligation which arises
from the Closing of the transaction contemplated hereby or (C) any
Retained Liability, except to the extent that (B) or (C) are
reflected in the Reference Statement of Net Assets);
(d) except with respect to Seller's environmental covenants
contained in Section 13.6 hereto, liabilities arising in
connection with environmental matters relating to the Business;
provided, however, that this provision shall not affect
Purchaser's rights to indemnifications as set forth in Article XVI
hereof,
(e) liabilities and covenants arising from obligations to
employees and former employees of the Business to the extent
specifically assumed by Purchaser in Article XII of this
Agreement;
(f) liability for suits, claims, proceedings and actions made or
commenced after the Closing Date resulting from actual or alleged
harm, injury or damage to persons, property or business by
products manufactured, sold or shipped by the Business
("Products") on or after the Closing Date;
(g) liability for express or implied warranties of the Business,
including obligations to repair, replace, rework or to make
refunds of amounts paid for Products regardless of when such
Products were manufactured, sold or distributed or when defects
became or become apparent;
(h) liability for the recall, notification, retrofit or other post-
manufacture remedial or corrective actions relating to Products,
regardless of when such Products were manufactured, sold or
shipped; and
(i) any other liabilities of the Business not specifically set
forth as Retained Liabilities under Section 2.2 below.
The foregoing liabilities and obligations of Seller being assumed
by Purchaser hereunder shall be collectively referred to as the
"Assumed Liabilities". In addition to the foregoing, the parties
acknowledge and agree that except as specifically set forth in
Section 2.2 below, Purchaser assumes all liabilities of the
Purchased Subsidiaries by virtue of the fact that Purchaser is
acquiring the shares of the Purchased Subsidiaries.
2.2 Retained Liabilities: Seller shall retain, and shall remain
exclusively responsible for paying, performing and discharging
when due, and regardless of any disclosure to Purchaser, Purchaser
shall not assume or have any responsibility for:
(a) all liabilities and obligations (including all Taxes) relating
to or arising, whether before, on or after the Closing, out of the
Excluded Assets;
(b) all liabilities and obligations for Pre-Closing Taxes;
(c) all claims by and all liabilities and obligations to employees
and former employees not specifically assumed by Purchaser in
Article XII of this Agreement;
(d) all indebtedness to third party financial institutions;
(e) obligations of the Business for all intercompany obligations,
including Intercompany Notes Payable as the same may be reflected
on the Closing Statement of Net Assets;
(f) liability for suits, claims, proceedings and actions made or
commenced before or after the Closing Date resulting from actual
or alleged harm, injury or damage to persons, property or business
by products shipped by the Business prior to the Closing Date;
(g) liabilities arising in connection with environmental matters
identified on Schedule 8.13 hereof, as addressed in Section 13.6
hereof.;
(h) all obligations of Seller under this Agreement including the
indemnification obligations contained in Article XVI; and
(i) all liabilities relating to the case entitled Warren
Distribution. Inc. v. Johnson Controls Inc. and any settlement or
other resolution thereof, to the extent any liabilities remain.
The liabilities and obligations of Seller which do not constitute
Assumed Liabilities and will be retained by Seller hereunder shall
be collectively referred to as the "Retained Liabilities".
ARTICLE III
Purchase Price
3.1 Purchase Price: The purchase price payable by Purchaser to
Seller for the Purchased Assets (the "Purchase Price") shall be
Two Hundred Ten Million Dollars ($210,000,000) plus the Assumed
Liabilities, subject to adjustment as provided in Article IV of
this Agreement.
3.2 Payment at Closing: At the Closing, Purchaser shall transfer
to a bank account designated by Seller the Purchase Price (the
"Closing Payment") by a wire transfer of immediately available
funds in U.S. currency.
ARTICLE IV
Determination and Allocation of Adjusted
Purchase Price
4.1 Closing Statement of Net Assets: Within sixty (60) calendar
days after the Closing Date, Seller shall prepare, and shall
deliver to Purchaser an audited balance sheet (the "Closing
Statement of Net Assets") of the Business as at the close of
business on the business day immediately preceding the Closing
Date, certified by Price Waterhouse. The Closing Statement of Net
Assets shall be prepared on a basis consistent with the Reference
Statement of Net Assets, which Reference Statement of Net Assets
was prepared in accordance with Generally Accepted Accounting
Principles ("GAAP"), and otherwise in accordance with Seller's
accounting principles set forth on Schedule 8.4 (collectively,
"Seller's Accounting Principles"), and shall include an adjusting
entry based on the results of a physical inventory, which
Purchaser and its representatives shall have the right to observe,
taken on August 31, 1998 with respect to European operations and
July 26, 1998 with respect to the U.S. operations, and rolled
forward in advance of the Closing Date.
4.2 Review of Closing Statement of Net Assets: Purchaser shall
have the right to review the Closing Statement of Net Assets and
to notify Seller of its dispute of such Closing Statement,
provided that the scope of such dispute shall be limited to
whether (i) the Closing Statement of Net Assets has been prepared
in accordance with Seller's Accounting Principles; (ii) there
exist mathematical errors in the Closing Statement of Net Assets;
and/or (iii) Seller failed to reflect balance sheet items arising
subsequent to the Reference Statement of Net Assets, in accordance
with Seller's Accounting Principles (collectively, "Disputable
Items"). If Purchaser does not notify Seller of any such dispute
within thirty (30) days after the date the Closing Statement of
Net Assets is delivered to Purchaser, then the Closing Statement
of Net Assets delivered by Seller shall be deemed to be final,
conclusive and binding on the parties. During the thirty (30) day
period following the Purchaser's receipt of the Closing Statement
of Net Assets, the Purchaser and its representatives shall have
the right to review all books and working papers of Seller and its
accountants related to the preparation of the Closing Statement of
Net Assets. If, however, Purchaser notifies Seller in writing
within such period that it believes there is a Disputable Item
with respect to the Closing Statement of Net Assets and specifies
(a) the Disputable Item(s) and (b) the amount of the adjustment it
proposes with respect to each Item, the parties will then
negotiate in good faith to resolve their differences with respect
thereto. If the parties are unable to resolve their dispute, the
disputed items shall be referred, within 120 days after the date
the Closing Statement of Net Assets is delivered to Purchaser, to
Arthur Andersen, certified public accountants, or if such firm is
unable or unwilling to serve, to another "Big Five" accounting
firm selected by the firm declining to serve; provided such
selected firm is not the regular independent auditor of Seller or
Purchaser (the "Firm"). The Firm shall only be asked to verify the
validity of the Disputable Item(s) and the related adjustment
needed, if any, to the Closing Statement of Net Assets, and report
to Seller and Purchaser within 30 days after such referral. The
decision of the Firm shall be final, conclusive and binding on the
parties hereto. Notwithstanding the final acceptance of the
Closing Statement of Net Assets, such acceptance shall not
prohibit or limit in any way any right of Purchaser to
indemnification hereunder for the breach of any representation and
warranty by Seller in Article VIII hereof. The fees and expenses
of the Firm shall be allocated equally between Seller and
Purchaser.
4.3 Cooperation: Representatives of Seller shall be given
reasonable access to all books, records and other data of the
Business necessary for the purpose of preparing and auditing the
Closing Statement of Net Assets. Personnel of the Purchaser may be
consulted from time to time by such representatives.
4.4 Settlement of Adjusted Purchase Price: Within 10 days after
the final determination of the Closing Statement of Net Assets in
accordance with Section 4.2, Seller shall pay to Purchaser the
amount by which the Net Asset Value of the Business as set forth
on the Reference Statement of Net Assets exceeds the Net Asset
Value of the Business as set forth on the Closing Statement of Net
Assets, or Purchaser shall pay to Seller the amount by which the
Net Asset Value of the Business as set forth on the Closing
Statement of Net Assets exceeds the Net Asset Value, as set forth
on the Reference Statement of Net Assets, as the case may be. The
amount of the payments described in this Section 4.4 shall be paid
by Seller to Purchaser, or by Purchaser to Seller, as the case may
be, with interest thereon from the Closing Date to the date of
such payment, calculated at a rate equal to the "Prime Rate"
quoted by The Chase Manhattan Bank, N.A., New York, New York on
the Closing Date, in immediately available funds remitted by wire
transfer to a bank designated by the payee thereof. The parties
understand and agree that the adjusted purchase price mechanism
described in these Sections 4.1 - 4.4 is not intended to apply to
disputes or questions regarding the Reference Statement of Net
Assets or the preparation thereof; which disputes or questions
instead shall be evaluated under the terms of Article VIII (to the
extent such provisions of Article VIII apply).
4.5 Net Asset Value. Except as otherwise specifically described in
this Section 4.5, the term "Net Asset Value", with respect to the
Business shall mean the total assets of the Business minus the
total liabilities, in each case as reflected on the Reference
Statement of Net Assets or the Closing Statement of Net Assets, as
the case may be, as "Equity".
4.6 Allocation of Purchase Price:. The Seller and Purchaser will
negotiate in good faith to allocate the Purchase Price among the
Purchased Assets (including the portion allocated to each
Purchased Subsidiary). If the Seller and Purchaser are unable to
reach an agreement, they will engage a mutually agreeable
appraiser, whose appraisal shall be conclusively binding on the
parties. Seller and Purchaser agree to use the agreed upon
allocation for all purposes in any Federal and state income or
franchise tax return filed by them subsequent to the Closing Date,
including the determination by Seller of taxable gain or loss on
the sale of the Purchased Assets and the determination by
Purchaser of its tax basis with respect to the Purchased Assets.
Neither party will file any returns or reports in a manner which
is inconsistent with the allocation or appraisal as applicable.
ARTICLE V
Closing Matters
5.1 The Closing
(a) The purchase and sale (the "Closing") contemplated under this
Agreement shall take place at the offices of Seller, located at
49200 Halyard Drive, Plymouth, Michigan, or at such other place as
the parties shall mutually agree upon, at 10:00 A.M. Local time on
September 30, 1998, or such other time or such earlier date as the
parties shall mutually agree upon, or such later date as may be
required pursuant to paragraph (b) of this Section 5.1, or as soon
as practicable after the satisfaction (or to the extent permitted,
waiver) of the conditions set forth in Articles X and XI. The date
the Closing takes place is herein referred to as the "Closing
Date". The Closing shall be effective as of 12:01 a.m. on the
Closing Date.
(b) If all applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvement Act of 1976, as amended (the "HSR Act") and
all equivalent filings relating to the sale and purchase of the
Purchased Subsidiaries, have not expired or been otherwise
terminated, by the date set forth in paragraph (a) of this Section
5.1, the Closing shall, without the necessity of any action by or
consent of any party hereto, be postponed until five days after
the date of expiration or termination of the last such waiting
periods.
(c) At the Closing, Purchaser shall transfer to a bank account
designated by Seller the Closing Payment in accordance with
Section 3.2 above.
(d) At the Closing and effective on the Closing Date, Seller shall
execute and deliver (or cause to be executed and delivered) the
following documents to Purchaser (collectively, the "Conveyance
Instruments"):
(i) Such special warranty or limited covenant deed or deeds (in
recordable form and content reasonably acceptable to Purchaser,
together with any and all required real estate transfer tax forms
and other documents as may be necessary to enable the deeds to be
recorded and the transfer tax paid) as shall be effective to vest
in Purchaser good and marketable fee simple title to all of the
Owned Real Property, free and clear of all Encumbrances, except
for Permitted Owned Real Property Exceptions as listed on Schedule
8.5(a);
(ii) Bills of sale, endorsements, assignments and other good and
sufficient instruments of sale, transfer, conveyance and
assignment, together with all required consents obtained by
Closing, in form and substance reasonably satisfactory to
Purchaser, as shall be effective to vest in Purchaser good and
marketable title, free and clear of all Encumbrances, to the
Purchased Assets other than the Owned Real Property; and
(iii) Share certificates or other documents representing all of
Seller's ownership of the Purchased Subsidiaries properly endorsed
for transfer of Seller's record and beneficial ownership in and to
the Purchased Subsidiaries;
(iv) Such other documents as Purchaser or its counsel may
reasonably request to demonstrate satisfaction of the conditions
and compliance with the covenants set forth in this Agreement; and
(v) An ALTA Owner's Extended Coverage Title Insurance Policy with
respect to each Owned Real Property in the United States, issued
by a nationally recognized title insurance company, written and
marked-up as of the Closing Date, insuring Purchaser in such
amounts and together with such endorsements as Purchaser and
Seller shall mutually agree. Such title insurance policy shall
insure fee simple title to such Real Property, free and clear of
all Encumbrances and other matters other than Owned Real Property
Exceptions set forth on Schedule 8.5(a).
(e) This Agreement shall not constitute an agreement to assign,
and the Purchased Assets shall not include, any contract, license,
lease, commitment, sales order or purchase order or other
agreement if an assignment or attempted assignment of the same
without the consent of the other party thereto would constitute a
breach thereof or in any way impair the rights of Seller
thereunder.
(f) At the Closing, Seller shall deliver FIRPTA certificates for
each entity constituting the Business.
(g) At the Closing, Seller shall cause any directors or officers
of the Purchased Subsidiaries who are officers or employees of
Seller (other than full-time employees of the Business) to resign
or to be removed as directors and officers thereof.
(h) At the Closing, Seller shall deliver to Buyer organizational
documents in respect of each Seller.
5.2 Risk of Loss. Until the Closing, any loss or damage to the
Purchased Assets from fire, casualty or any other occurrence shall
be the sole responsibility of Seller.
ARTICLE VI
Transfer After the Closing
6.1 Further Instruments and Actions: From time to time after the
Closing Date, upon request of Purchaser, Seller, without further
consideration, shall exercise reasonable best efforts and
cooperate with Purchaser and shall duly execute, acknowledge and
deliver all such further deeds, assignments, transfers,
conveyances and powers of attorney and take such other actions and
give such assurances as may be reasonably required to convey to
and vest in Purchaser its right, title and interest in all the
assets, property and business of Seller intended to be assigned,
transferred and conveyed pursuant to and as provided in and
subject to the provisions of this Agreement. Seller shall promptly
pay or deliver to Purchaser any amounts or items which may be
received by Seller after the Closing which constitute Purchased
Assets.
6.2 Purchased Assets Requiring Consents: In the event any consent
of a third party legally required for the sale, assignment or
transfer to Purchaser of any Purchased Asset has not been obtained
by the Closing Date then such Purchased Asset shall not be deemed
to be sold, assigned or transferred to Purchaser at the Closing,
but
(a) Seller, at Seller's cost and expense, shall exercise best
efforts and cooperate with Purchaser in entering into any
reasonable arrangement reasonably acceptable to Purchaser and
sufficient to provide Purchaser with the economic claims, rights
and benefits of Seller's rights under or pursuant to such
Purchased Asset;
(b) Seller, at Seller's cost and expense, shall exercise
reasonable best efforts and cooperate with Purchaser in obtaining
any such required consent or waiver after the Closing;
(c) upon obtaining all required consents or waivers for such
Purchased Asset, such Purchased Asset shall be deemed to be sold
or transferred to Purchaser as of the receipt of such consents or
waivers and Seller shall execute, without further consideration
from Purchaser, any documents reasonably requested by Purchaser to
confirm that such Purchased Asset has been assigned to Purchaser;
and
(d) to the extent any Purchased Asset may not be assigned or
transferred to Purchaser by reason of the absence of any such
consent and to the extent Seller is unable to enter into an
arrangement pursuant to Section 6.2(a) above, Purchaser shall not
be required to assume any Assumed Liabilities arising under such
Purchased Asset.
ARTICLE VII
Actions Prior to Closing
7.1 Purchaser's Access: Prior to the Closing Date, Seller shall
grant to Purchaser or cause to be granted to Purchaser and its
representatives, employees, counsel and accountants reasonable
access, during normal business hours and upon reasonable notice,
to key personnel, properties, books, commitments, contracts, tax
returns and records of Seller relating to the transition of the
Business to Purchaser and to the due diligence review of the
Business and the Purchased Subsidiaries which could not be
accomplished prior to the date hereof; provided, however, that
such access does not unreasonably interfere with Seller's normal
operations.
7.2 Obtaining of Consents:
(a) As soon as possible after the date hereof, each party shall
(i) cooperate with the other to make all necessary filings,
including without limitation, filings under the HSR Act and
equivalent foreign laws and regulations, and (ii) use commercially
reasonable efforts to make all other necessary filings with all
Governmental Entities or other regulatory authorities to obtain
licenses, permits, approvals, authorizations and consents of all
third parties required for the sale, assignment or transfer to
Purchaser of any of the Purchased Assets or the consummation of
any of the transactions contemplated by this Agreement.
(b) Seller and Purchaser shall equally share the cost of complying
with or obtaining the consent to or approval of the transactions
contemplated hereby of any Governmental Entity, including without
limitation, any such approval or consent required by any
Environmental Requirement, safety, health, or other applicable law
or regulation. Seller alone shall bear the cost of obtaining all
consents from private third parties. Each party hereto shall
provide to the other party such information as the other party may
reasonably request in order to enable it to prepare such filings.
Each party hereto shall also use its respective reasonable best
efforts to expedite any governmental review and to obtain all such
necessary consents, approvals, licenses and permits as promptly as
practicable.
7.3 Actions of Seller and Conduct of Business:
(a) Seller shall use reasonable best efforts to perform its
obligations hereunder and satisfy all conditions to Closing to be
performed or satisfied by Seller under this Agreement by the
Closing Date or such other date by which performance is required
hereunder.
(b) From the date hereof through the Closing Date, unless
otherwise agreed in writing by Purchaser, Seller shall not and
shall cause each of the Purchased Subsidiaries not to, except as
required or expressly permitted pursuant to the terms hereof, make
any change in the conduct of the Business or the Purchased Assets
or enter into any transaction other than in the ordinary course of
business consistent with past practice and shall continue to
conduct the Business and cause each of the Purchased Subsidiaries
to conduct their respective businesses in the ordinary course of
business. Prior to the Closing, Seller shall confer, to the extent
reasonably practicable, with Purchaser on a regular basis as
Purchaser may request, and report on significant operational
matters and material decisions affecting the Business. Seller and
the Purchased Subsidiaries shall use all reasonable best efforts
to keep intact the Business, maintain its plants and machinery
consistent with past practice, comply with all material
requirements of law, rules, regulations, orders, ordinances and
directives, whether Federal, state, local or otherwise and
preserve the material third party relationships of the Business.
Seller shall take no steps intended to take managers or employees
from the Business.
(c) Without limiting the generality of the foregoing, from the
date hereof through the Closing Date, unless otherwise agreed
orally or in writing by Purchaser, Seller shall not with respect
to the Business, and shall not permit any Purchased Subsidiary to:
(i) sell, lease, license or otherwise dispose of, or agree to
sell, lease, license or otherwise dispose of, any interest in any
of the Purchased Assets of the Business with an aggregate value in
excess of One Hundred Thousand ($100,000) Dollars, except for
sales of inventory and the factoring of receivables in the
ordinary course of business consistent with past practice;
(ii) permit, allow or subject any of the Purchased Assets to any
Encumbrance or suffer such to be imposed, except for Permitted
Liens (as defined in Schedule 8.5(a));
(iii) except in the ordinary course of business consistent with
past practice or as required by law or contractual obligations or
other agreements existing on the date hereof, or as may be
implemented for all of Seller's employees under a general
amendment or modification to Seller's Benefit Plans, increase in
any manner the compensation of, or enter into any new bonus or
incentive agreement or arrangement with, any of the Business'
employees;
(iv) enter into a new agreement or contract which requires the
delivery by it of a performance bond in an amount in excess of One
Hundred Thousand ($100,000) Dollars;
(v) approve or make any capital expenditures exceeding, in the
aggregate Two Hundred Fifty Thousand ($250,000) Dollars, except to
the extent approved by Seller prior to signing in the ordinary
course of business consistent with past practices;
(vi) incur or assume any liabilities, obligations or indebtedness
for borrowed money or guarantee any such liabilities, obligations
or indebtedness, other than in the ordinary course of business and
consistent with past practice; provided, however, that in no event
shall the Business incur or assume any long-term indebtedness for
borrowed money;
(vii) cancel any material indebtedness (individually or in the
aggregate) or waive any claims or rights of substantial value;
(viii) except for intercompany transactions in the ordinary course
of business consistent with past practice, pay, loan or advance
any amount to, or sell, transfer or lease any of its assets to, or
enter into any agreement or arrangement with, Seller or any of its
Affiliates;
(ix) make any change in any method of accounting or accounting
practice or policy other than those required by GAAP or Seller's
Accounting Principles;
(x) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire any
assets (other than inventory) that are material, individually or
in the aggregate, to the Business; or
(xi) (a) take any position that is in any manner inconsistent with
any prior position taken in any filing, settlement or agreement
with respect to Taxes or (b) make any Tax election unless in each case,
such action would not have an adverse effect on Purchaser.
7.4 Actions of Purchaser: Purchaser shall use commercially
reasonable efforts to perform and satisfy all conditions to
Closing to be performed or satisfied by Purchaser under this
Agreement by the Closing Date or such other date by which
performance is required hereunder.
7.5 Public Announcements: From and after the date hereof and
through the Closing Date, Seller and Purchaser shall consult with
each other before issuing any press releases or otherwise making
any public statements with respect to this Agreement and the
transactions contemplated hereby. Neither Seller nor Purchaser
shall issue any press release or make any public statement prior
to obtaining the other party's approval, provided, however, that
in the event disclosure by either party may be required by law,
such party may make such disclosure, the contents of which shall
be subject to the reasonable review and comment of the other
party.
7.6 No Solicitation: From the date hereof, Seller and the
Purchased Subsidiaries shall not, nor shall either of them
authorize or permit any officer, director or employee of or any
investment banker, attorney, accountant or other representative
retained by any of them to, (i) solicit, initiate or encourage or
any "other bid", (ii) enter into any agreement with respect to any
other bid or (iii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be
expected to lead to, any other bid. Without limiting the
foregoing, it is understood that any violation of the restrictions
set forth in the preceding sentence by any executive officer of
Seller or any Purchased Subsidiary or any investment banker,
attorney or other advisor or representative of Seller or any
Purchased Subsidiary, whether or not such person is purporting to
act on behalf of Seller or any Purchased Subsidiary or otherwise,
shall be deemed to be a breach of this Section 7.6 by Seller.
Seller promptly shall advise Purchaser orally and in writing of
any other bid or any inquiry with respect to or which could lead
to any other bid and the identity of the person making any such
other bid or inquiry, provided such advisement does not violate a
confidentiality obligation of Seller. As used in this Section 7.6,
"other bid" shall mean any proposal to acquire in any manner any
of the assets of the Business (including, without limitation, the
Purchased Shares), other than (A) the transactions contemplated by
this Agreement and (B) the acquisition of Inventory in the
ordinary course of business consistent with past practice and not
in violation of this Agreement.
ARTICLE VIII
Representations and Warranties of Seller
Each Seller represents and warrants to Purchaser as follows:
8.1 Organization and Authority: Each Seller is a corporate entity
duly organized and validly existing, and where applicable, in good
standing under the laws of the state or country of their
incorporation, as the case may be and Seller has all requisite
corporate power and authority and possesses all governmental
franchises, licenses, permits, authorizations and approvals
necessary to enable it to own, lease and operate its properties
and to carry on its business as now being conducted, to execute
and deliver this Agreement and all other agreements, instruments
and documents to be delivered by Seller hereunder (the "Related
Documents") and to perform the obligations to be performed by it
hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. Each Seller is duly qualified to
do business as a foreign corporation in each jurisdiction where
the character of the Purchased Assets held by it or the nature of
the Business make such qualification necessary for it to conduct
the Business as currently conducted by it.
8.2 Purchased Subsidiaries: Except for the corporations listed on
Schedule 8.2 (the "Purchased Subsidiaries"), the Business is not
operated by or through any corporation or other entity. Schedule
8.2 correctly sets forth the corporate name and the jurisdiction
of incorporation with respect to each Purchased Subsidiary. Each
Purchased Subsidiary is a corporation duly organized, validly
existing and in good standing as applicable under the laws of its
jurisdiction of incorporation, has all requisite corporate power
and authority to own, lease and operate its properties and to
carry on its business as now being conducted and is duly qualified
to do business as a foreign corporation and is in good standing as
applicable in each jurisdiction in which the character of the
properties owned or leased by it or the nature of the business
conducted by it makes such qualification necessary. All the
outstanding shares of the capital stock of each class of each
Purchased Subsidiary have been validly issued and are fully paid
and nonassessable and are owned, beneficially and of record, by
the entities listed on Schedule 8.2, free and clear of all
Encumbrances.
8.3 Corporate Action; No Conflict: The execution and delivery by
Seller of this Agreement and the Related Documents and Seller's
performance of the transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate action of
Seller. This Agreement has been duly and validly executed and
delivered by Seller and is, and each of the Related Documents when
executed and delivered by Seller in accordance with its terms will
be, the valid and binding obligation of Seller, enforceable
against Seller in accordance with their respective terms, except
as limited by bankruptcy, insolvency, reorganization or similar
laws affecting creditors rights generally. Except as set forth in
Schedule 8.3, neither the execution, delivery or performance by
Seller of this Agreement or any of the Related Documents, nor the
consummation by Seller of the transactions contemplated hereby or
thereby, nor compliance by Seller with any provision hereof or
thereof will (i) conflict with or result in a breach of any
provision of the charter or by-laws of Seller or any Purchased
Subsidiary, (ii) violate any provision of law, statute, rule or
regulation, or any order, writ, injunction, permit, judgment or
decree of any court or other governmental or regulatory authority;
or (iii) conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or to
increased, additional, accelerated or guaranteed rights or
entitlements of any person under, or result in the creation of any
Encumbrance upon any of the properties or assets of Seller or any
of its subsidiaries under any provision of any Assigned Contract
to which Seller or any of the Purchased Subsidiaries is a party or
by which any of their respective properties or assets is bound. No
consent, approval, license, permit, order or authorization of, or
registration, declaration or filing with, any Federal, state,
local or foreign government or any court of competent
jurisdiction, administrative agency or other governmental
authority or instrumentality, domestic or foreign is required to
be obtained or made by or with respect to Seller or any of the
Purchased Subsidiaries in connection with the execution, delivery
and performance of this Agreement or any Related Documents or the
consummation of the transactions contemplated hereby and thereby
other than compliance with and filings under the HSR Act and the
equivalent foreign laws and regulations, and compliance with and
filings under Section 13(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act").
8.4 Financial Statements:
(a) Set forth in Schedule 8.4 hereto is an unaudited Statement of
Net Assets of the Business as at June 30, 1998 (the "Reference
Statement of Net Assets") and related unaudited statements of
income and cash flow of the Business for the nine (9) month period
ending June 30, 1998. Such financial statements are collectively
referred to herein as the "Financial Statements." The Financial
Statements have been prepared from the books and records of the
Business, in accordance with Seller's Accounting Principles
attached as Schedule 8.4 and fairly present the financial
condition and results of operations of the Business (including the
Purchased Subsidiaries) as of the date thereof and for the period
indicated.
(b) The Business does not have any liabilities or obligations
(whether accrued, absolute, contingent, unasserted or otherwise)
of a nature required by GAAP to be reflected on a consolidated
balance sheet of the Business or in the notes thereto, except (i)
as disclosed in the Reference Statement of Net Assets, and (ii)
for liabilities and obligations incurred in the ordinary course of
the Business consistent with past practice since the date of the
Reference Statement of Net Assets and not in violation of this
Agreement.
8.5 Real Property:
(a) Schedule 8.5(a! sets forth a list of all Owned Real Property.
Except for the Owned Real Property listed on said Schedule 8.5(a),
neither Seller nor any Purchased Subsidiary owns any real property
or interest therein that is used in, held for use in or otherwise
pertains to the Business. Except for matters listed on Schedule
8.5(a) (collectively, the "Permitted Owned Real Property
Exceptions"), Seller or a Purchased Subsidiary has good and
marketable fee title to the Owned Real Property, free and clear of
all Encumbrances or other matters affecting title.
(b) Schedule 8.5(b) sets forth a list of all Leases material to
the Business. Except as set forth on said Schedule 8.5(b), (i)
each Lease is in full force and effect and all rent and other sums
and charges payable thereunder by Seller or a Purchased
Subsidiary, as applicable, are current, (ii) no notice of default
by Seller or a Purchased Subsidiary, as applicable, or termination
under any Lease is outstanding, and (iii) neither the tenant nor
the landlord thereunder is in default, and no event has occurred
which, with the giving of notice or the passage of time or both,
would constitute a default or event of default thereunder. Except
for Permitted Liens in respect of the Lessor's interest, Seller
has good and valid title to the leasehold estates in all Leased
Real Property, free and clear of all Encumbrances.
8.6 Tangible Assets Other Than Owned Real Property: Other than
Owned Real Property, which is the subject of Section 8.5 hereof,
Seller and the Purchased Subsidiaries have good, valid and
marketable title to all the material tangible assets of the
Business (including without limitation, the Purchased Assets),
except those sold or otherwise disposed of in the ordinary course
of business consistent with past practice and not in violation of
this Agreement, free and clear of all Encumbrances, except for
Permitted Liens and those tangible assets subject to leases as set
forth on Schedule 8.7.
8.7 Contracts:
(a) Except as listed on Schedule 8.7, neither Seller nor any
Purchased Subsidiary is a party to or bound by any material
contracts, agreements, guarantees of payment or performance,
licenses, leases of personal property or conditional sales
contracts that are used, held for use primarily in, or that arise
primarily out of or relate to or affect the Business and which
extend beyond the Closing Date, other than (i) purchase orders and
sales orders entered into in the ordinary course of business and
(ii) contracts which involve a commitment for less than Two
Hundred Fifty Thousand ($250,000) Dollars. Seller and each
Purchased Subsidiary has in all material respects performed all
the obligations required to be performed by it to date, and is not
in default in any respect under any Assigned Contract except for
possible defaults which do not in any material respect impair the
ability of the Business to conduct its operations as heretofore
conducted.
(b) Except as set forth in the Assigned Contracts, no consent by
any third party is required under any of the Assigned Contracts as
a result of or in connection with the execution, delivery or
performance of this Agreement or the consummation of the
transactions contemplated hereby.
8.8 Litigation:
(a) Except as set forth on Schedule 8.8, there are no claims,
actions or suits pending, or to the Knowledge of Seller
threatened, and there are no investigations pending or, to the
Knowledge of Seller, threatened, against Seller or any Purchased
Subsidiary affecting or arising out of the conduct of the
Business, the Purchased Assets or Assumed Liabilities, or against
the transactions contemplated by this Agreement, at law or
in equity or before or by any court or other governmental agency
or instrumentality, domestic or foreign, or any arbitral body an
adverse outcome of which would have a Material Adverse Effect . As
used in this Agreement, Material Adverse Effect shall mean a
material adverse effect on the results of operations, condition
(financial or otherwise) business, assets, and business prospects
of the Business and the Purchased Subsidiaries ("Material Adverse
Effect").
(b) Except as set forth in Schedule 8.8, Seller is not a party or
subject to or in default under any judgment applicable to the
conduct of the Business or any Purchased Asset or Assumed
Liability. Except as set forth in Schedule 8.8, there is not any
proceeding or claim by Seller pending, or actionable claim for
which Seller intends to initiate litigation, against any other
person affecting or arising out of the conduct of the Business.
8.9 Compliance with Law: Except as listed on Schedule 8.9 or as
disclosed in Section 8.8 above, neither Seller nor any Purchased
Subsidiary is in violation in any material respect of any foreign,
federal, state or local law, statute, regulation or order
applicable to the operation of the Business or the Purchased
Assets. Except as set forth in Schedule 8.9, none of Seller and
the Purchased Subsidiaries has received any written or oral
communication from a Governmental Entity that alleges that the
Business is not currently in compliance in any material respect
with any applicable laws. Neither Seller nor the Purchased
Subsidiaries has received any written notice that any
investigation or review by any Governmental Entity with respect to
any Acquired Asset or the Business is pending or that any such
investigation or review is contemplated. The Business is in
possession of all material governmental permits, approvals and
authorizations necessary for the operation of the Business, and
all such Permits, are in full force and effect. This Section 8.9
does not relate to environmental matters, it being the intent of
the parties that the only Sections relating to environmental
matters shall be Sections 8.13 and 13.6.
8.10 Employee Benefit Plans:
(a) Schedule 8.10(a) lists each "employee pension benefit plan"
(as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (hereinafter a
"Pension Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA, hereinafter a "Welfare Plan"), and each
other material plan, arrangement or policy (written or oral)
relating to stock options, stock purchases, deferred compensation,
severance, fringe benefits or other employee benefits, in each
case maintained or contributed to, or required to be maintained or
contributed to, by the Seller or any other person or entity that,
together with the Seller, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code (each, together with
the Seller, a "Commonly Controlled Entity") for the benefit of any
present or former officers, employees, agents, directors or
independent contractors of the Business in the United States (all
the foregoing being herein called "Benefit Plans").
(b) Each Benefit Plan has been administered in all material
respects in accordance with its terms and all applicable laws
including ERISA and the Code and the transactions contemplated by
this Agreement will not result in any violation of such Benefit
Plan terms or applicable laws. There are no investigations by any
governmental agency, termination proceedings or other claims
(except claims for benefits payable in the normal operation of the
Benefit Plans), suits or proceedings against or involving any
Benefit Plan or asserting any rights to or claims for benefits
under any Benefit Plan that could give rise to any material
liability, and there are not any facts that could give rise to any
material liability, and there are not any facts that could give
rise to any material liability in the event of any such
investigation, claim, suit or proceeding.
(c) All contributions to the Benefit Plans that may have been
required to be made in accordance with Section 302 of ERISA or
Section 412 of the Code have been timely made. There has been no
application for or waiver of the minimum funding standards imposed
by Section 412 of the Code with respect to any Pension Plan. No
Pension Plan had an "accumulated funding deficiency" within the
meaning of Section 412(a) of the Code as of the end of the most
recently completed plan year. There is no actual or potential
liability under the Code or Title IV of ERISA (including by reason
of the transactions contemplated by this Agreement) with respect
to any Benefit Plan or any other benefit plan or any former
benefit plan maintained or sponsored by a Commonly Controlled
Entity to which a Commonly Controlled Entity was required to
contribute which would result in any material liability to the
Purchaser or its affiliates on or following the Closing.
(d) Each Pension Plan that is intended to be a tax-qualified plan
has been the subject of a determination letter from the Internal
Revenue Service to the effect that such Pension Plan is qualified
and exempt from Federal income taxes under Section 401(a) and
501(a), respectively, of the Code; no such determination letter
has been revoked, and, to the Knowledge of Seller, revocation has
not been threatened; no event has occurred and no circumstances
exist that would adversely affect the tax-qualification of such
Pension Plan; and such Pension Plan has not been amended since the
effective date of its most recent determination letter in any
respect that might adversely affect its qualification.
(e) Plastics USA, a Michigan corporation, does not have (and has
not had during the five-year period preceding the Closing Date)
any employees and does not maintain or sponsor or is required to
contribute to (and has not during the five-year period preceding
the Closing Date maintained or sponsored or been required to
contribute to) any Benefit Plan or former plan which, if still in
effect, would be deemed a Benefit Plan.
(f) No Commonly Controlled Entity maintains or contributes or has
maintained or contributed to, or is (or was) required to
contribute to, a multiemployer plan, as such term is defined in
Section 4001(a) of ERISA, in respect of current or former
employees of the Business.
(g) Seller does not maintain or contribute to and has not
maintained or contributed to a "multi-employer plan," as such term
is defined in Section 4001(a) of ERISA.
(h) Foreign Plans: Schedule 8.10(e) lists all pension plans
maintained or contributed to by Seller or the Business
(collectively, the "Foreign Plans") for the benefit of current
salaried and hourly non-U.S. employees ("Foreign Participants")
and persons claiming through them, as well as former salaried and
hourly non-U.S. employees of the Business other than a plan (or
contribution to a plan) that is a governmental plan or national
union plan. To the extent that there exist any Foreign Plans, they
are in compliance in all material respects with applicable laws
and regulations and there are no material unfunded liabilities
under such Foreign Plans with respect to which Purchaser will be
liable.
8.11 Purchased Rights:
(a) Schedule 8.11 sets forth a true and complete list of all
Purchased Patents, Purchased Copyrights and Purchased Trademarks,
owned, used, filed by or licensed to Seller or the Purchased
Subsidiaries and used, held for use or intended to be used
primarily in the operation or conduct of the Business. Except as
set forth in Schedule 8.11, (i) all the Purchased Rights have been
duly registered in, filed in or issued by the appropriate
Governmental Entity where such registration, filing or issuance is
necessary for the conduct of the Business as presently conducted,
(ii) Seller or the Purchased Subsidiaries is the sole and
exclusive owner of, and Seller and the Purchased Subsidiaries have
the right to use, execute, reproduce, display, perform, modify,
enhance, distribute, prepare derivative works of and sublicense,
without payment to any other person, all the Purchased Rights and
the consummation of the transactions contemplated hereby does not
and will not conflict with, alter or impair any such rights; and
(iii) to Seller's Knowledge during the past two (2) years neither
Seller nor the Purchased Subsidiaries has received any written or
oral communication from any person asserting ownership in any
Purchased Rights.
(b) Except as set forth on Schedule 8.11 hereof, neither Seller
nor the Purchased Subsidiaries has granted any license of any kind
relating to any Purchased Rights or the marketing or distribution
thereof. Neither Seller nor the Purchased Subsidiaries is bound by
or a party to any option, license or agreement of any kind
relating to the intellectual property of any other person for the
use of such intellectual property in the conduct of the Business,
except as set forth in Schedule 8.7, except for so-called "shrink-
wrap" license agreements relating to computer software licensed in
the ordinary course of the Business. To the Knowledge of Seller
the conduct of the businesses presently conducted does not
violate, conflict with or infringe the intellectual property
rights of any other person. Except as set forth in Schedule 8.11,
(i) no claims are pending against Seller or the Purchased
Subsidiaries by any person with respect to the ownership,
validity, enforceability, effectiveness or use in the Business of
any Purchased Rights and (ii) during the past two (2) years Seller
and its Affiliates have not received any written communication
alleging that Seller or any of its Affiliates has in the conduct
of the Business violated any rights relating to intellectual
property of any person.
(c) All material technology has been maintained in confidence in
accordance with protection procedures customarily used in the
industry to protect rights of like importance. All current members
of management and key personnel of Seller have executed and
delivered to Seller a proprietary information agreement
restricting such person's right to disclose proprietary
information of Seller and its Affiliates. No former or current
management and key personnel have any claim against Seller or the
Purchased Subsidiaries in connection with such person's
involvement in the conception and development of any technology
and no such claim has been asserted or is threatened. None of the
current officers and employees of Seller or the Purchased
Subsidiaries has any patents issued or applications pending for
any device, process, design or invention of any kind now used or
needed by Seller or the Purchased Subsidiaries in the furtherance
of the Business, which patents or applications have not been
assigned to Seller or the Purchased Subsidiaries, with such
assignment duly recorded in the United States Patent and Trademark
Office.
8.12 No Material Adverse Change: Except as set forth on Schedule
8.12, there has been no change in the sales, profits, business,
assets, condition, financial or otherwise, prospects or results of
operations of the Business since the date of the Reference
Statement of Net Assets which has had a Material Adverse Effect on
the Business taken as whole, except for any changes which will
result or have resulted exclusively from the announcement of the
sale of the Business to Purchaser and the transition efforts
conducted by Purchaser prior to Closing. Except as set forth in
Schedule 8.12, since the date of the Reference Statement of Net
Assets, Seller has caused the Business to be conducted in the
ordinary course and in substantially the same manner as previously
conducted and has made all reasonable efforts consistent with past
practices to preserve the relationships of the Business with
customers, suppliers and others with whom the Business deals.
8.13 Environmental Matters: Except as set forth on Schedule 8.13:
(a) Seller and the Purchased Subsidiaries are in compliance in all
material respects with all Environmental Requirements (as defined
below)
(b) Seller and the Purchased Subsidiaries hold and are in
compliance, in all material respects, with all permits, licenses,
authorizations and approvals from Governmental Entities (as
defined below) necessary for the conduct of the Business.
(c) There is no pending, or to Seller's Knowledge, threatened
investigation, notice of violation, claim, demand, order,
directive, cost recovery action or other cause of action by, or on
behalf of, any Governmental Entity or person against Seller in
relation to the Business, or against any of the Purchased
Subsidiaries alleging a failure to comply in any material respect
with any Environmental Requirements, or otherwise relating to
Environmental Requirements, and neither Seller nor any of the
Purchased Subsidiaries has received any written notice, report or
other information regarding any material liabilities or potential
material liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), arising under Environmental
Requirements, including any notices or requests for information
pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), as amended, or
analogous state or foreign law, or the common law and including
any other investigative, remedial or corrective obligations,
relating to the Business; provided that Seller shall have five (5)
business days from the date hereof to amend (a) Schedule 8.13 by
identifying any instances of receipt of information relating to
Seller's potential involvement at any sites under CERCLA or
analogous state or foreign law; and (b) the undertaking contained
in Section 13.6 to provide for Seller's management of the matter
through the CERCLA (or analogous foreign law) process;
(d) There have been no Releases (as defined below) or threatened
Releases at, from, under or proximate to the Real Property, nor
have there been any off-site Releases or threatened Releases in
connection with Seller, the Purchased Subsidiaries or the
Business;
(e) No Hazardous Materials (as defined below) have been generated,
transported, stored, treated, recycled or otherwise handled in any
way in the operation of the Business except in compliance with
Environmental Requirements;
(f) To Seller's Knowledge, no leaking underground storage tanks
(or related contamination) is now or has ever been located at any
property or facility currently or formerly owned or operated in
connection with the Business;
(g) To Seller's Knowledge, there is no equipment containing
polychlorinated biphenyls ("PCBs") or asbestos-containing
materials which are not in compliance with Environmental
Requirements or which require abatement or remediation located at,
on or under any property or facility owned or operated in
connection with the Business;
(h) This Section 8.13 contains the sole and exclusive
representations and warranties of Seller with respect to any
environmental matters, including without limitation any arising
under any Environmental Requirements. Except as set forth in
Article XVI with respect to Seller's obligation to indemnify
Purchaser and Article XIII with respect to Seller's environmental
convenants, Purchaser hereby waives any right, whether arising at
law or in equity, to seek contribution, cost recovery, damages, or
any other recourse or remedy from Seller, and hereby releases
Seller from any claim, demand or liability, regarding any such
environmental matter (including any arising under any
Environmental Requirements and including any arising under the
Comprehensive Environmental Response Compensation and Liability
Act, any analogous state or foreign law, or the common law).
As used herein, the term "Governmental Entity" means any foreign,
federal, state or local government or any court of competent
jurisdiction, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign.
As used herein, the term "Hazardous Materials" means all explosive
and radioactive substances or wastes, hazardous or toxic
substances or wastes, pollutants, and solid, liquid or gaseous
substances or wastes, including petroleum or petroleum
distillates, asbestos or asbestos-containing materials, PCB's, or
PCB-containing materials or equipment, radon gas, infectious or
medical wastes, and all other substances, wastes or emissions of
any nature regulated pursuant to any Environmental Requirement.
As used herein, "Environmental Requirements" shall mean all
foreign, federal, state and local statutes, rules, regulations,
codes, ordinances, decrees, orders and permits concerning
pollution, or protection of the environment, including without
limitation all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, or cleanup of, or exposure
to, any Hazardous Materials.
As used herein, the term " Release" means any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, disposing, depositing, dispersing,
emanating, or migrating of any Hazardous Material into the
environment.
8.14 Accounts Receivable: All notes and accounts receivable of the
Business as of the date of the Reference Statement of Net Assets
are reflected on the Reference Statement of Net Assets, and
represent actual indebtedness incurred by the applicable account
debtors and have arisen from bona fide transactions in the
ordinary course of the Business consistent with the past practice
and not in violation of this Agreement. Since the date of the
Reference Statement of Net Assets, there have not been any write-
offs as uncollectable of any receivables, except for write-offs in
the ordinary course of the Business consistent with past practice
and Seller's Accounting Principles, and not in violation of this
Agreement.
8.15 Tax Matters:
(a) In relation to the Purchased Subsidiaries and except as set
forth on Schedule 8.15, (i) Seller or the Purchased Subsidiaries
have paid all Taxes (as hereinafter defined) for which it or the
Purchased Subsidiaries could be held liable or required to pay
through the date hereof and will pay all Taxes required to be paid
by it or them for periods ending on or prior to the Closing Date
and Seller or the Purchased Subsidiaries have filed or will, prior
to the Closing, file all returns, declarations of estimated Tax,
Tax reports, information returns and statements required to be
filed by it or them prior to the Closing (other than those for
which extensions shall have been granted prior to Closing)
(collectively, "Returns"); (ii) the Returns correctly reflected
(and, as to any Returns not filed as of the date hereof, will
correctly reflect) the facts regarding the income, business,
assets, operations, activities and status of Seller and the
Purchased Subsidiaries and any other information required to be
shown therein; (iii) Seller or the Purchased Subsidiaries have
timely paid or, if not yet due, made provisions on its books and
records for all Taxes relating to the operations of the Business
that it or they are required to have paid; and (iv) Seller or the
Purchased Subsidiaries have adequately accrued on the Reference
Statement of Net Assets for any unpaid Taxes relating to any
period ending prior to the Closing Date.
(b) As of the Closing Date, there are no outstanding federal,
state, local, or foreign tax assessments from any taxing or
governmental authority against which the Purchased Assets have
been levied, or which have given rise to any security interest or
other encumbrance thereon. There are no Tax liens with respect to
any of the Purchased Assets or any asset of the Purchased
Subsidiaries.
(c) To Seller's Knowledge, neither Seller nor any of its
Affiliates has made with respect to any Purchased Asset or any
asset held by a Purchased Subsidiary, any consent under Section
341 of the Code, (ii) none of the Purchased Assets or any of the
assets of a Purchased Subsidiary is "tax exempt use property"
within the meaning of Section 168(h) of the Code, (iii) none of
the Purchased Subsidiaries are a party to any lease made pursuant
to Section 168(f) (8) of the Internal Revenue Code of 1954, and
(iv) (A) none of the Purchased Subsidiaries are required to make
any adjustment pursuant to Section 481 of the Code (or any similar
provision of other laws or regulations) by reason of a change in
accounting method or otherwise, none of the Purchased Subsidiaries
have an application pending with any taxing authority requesting
permission for any change in accounting method that relates to its
business or operations.
(d) Seller and each of its subsidiaries have complied in all
respects with all applicable laws, rules and regulations relating
to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441, 1442,
3121 and 3402 of the Code or similar provisions under state, local
or foreign laws) and have, within the time and the manner
prescribed by law, withheld from and paid over to the proper
governmental authorities all amounts required to be so withheld
and paid over under applicable laws.
(e) No Purchased Subsidiary is a real property holding company
within the meaning of Section 897 of the Code.
(f) Seller is not a "foreign person" within the meaning of Section
1445 of the Code.
(g) To Seller's Knowledge, no material claims are being asserted
in writing with respect to any Taxes of the Purchased
Subsidiaries. Each of the jurisdictions in which each of the
Purchased Subsidiaries are required to file tax returns are listed
on Schedule 8.15(c) and no taxing authority has notified the
Seller (or any subsidiary of Seller) that any Purchased Subsidiary
is required to file a tax return in a jurisdiction where it has
not done so.
(h) To Seller's Knowledge, the Returns have been examined by the
Internal Revenue Service (or a similar authority under foreign
law) for all taxable years as indicated on Schedule 8.15(h). Any
deficiencies resulting from such examinations have either been
paid or adequately provided for. Except for refund claims, no
material action, suit, proceeding, investigation, arbitration,
audit, claim or assessment is presently pending or has been
proposed or threatened to be asserted or commenced by any taxing
authority with regard to any Taxes that relate to the Purchased
Assets or for which the Purchased Subsidiaries may be liable.
(i) To Seller's Knowledge, there are no outstanding agreements or
waivers extending the statutory period of limitation applicable to
any material Returns required to be filed with respect to a
Purchased Subsidiary, the Seller or any of the Subsidiaries; no
Purchased Subsidiary (nor any affiliated, combined, consolidated
or unitary group, within the meaning of Section 1504 of the Code
or similar provision of state, local or foreign law. of which a
Purchased Subsidiary, is or has been a member), has requested any
extension of time within which to file any material Return which
return has not yet been filed except as indicated in Schedule
8.15(i).
(j) Except as otherwise indicated on Schedule 8.15(j), (i) none of
the Purchased Subsidiaries has ever been a member of a
consolidated, combined or unitary tax group (or corresponding
provisions under foreign law) other than the group in which it
currently is a member and (ii) none of the Purchased Subsidiaries
is a member of a Tax sharing or similar agreement or has any tax
indemnity obligations.
(k) None of the Purchased Subsidiaries will be required to include
in a taxable period ending after the Closing Date any taxable
income (whether earned by a Purchased Subsidiary or an Affiliate
of a Purchased Subsidiary) attributable to income that accrued in
a prior taxable period (or the portion of the taxable period that
ends on the Closing Date that was before the Closing Date) but was
not recognized in any prior taxable period as a result of the
installment method of accounting, the cash method of accounting or
Section 481 of the Code or comparable provisions of state, local
or foreign law, or for any other reason, unless the relevant
accrued income taxes were adequately reflected on the Reference
Statement of Net Assets.
(1) "Taxes" (and individually, "Tax") means all income taxes
(including any tax on or based upon net income, or gross income,
or income as specially defined, or earnings, or profits, or
selected items of income, earnings or profits) and all gross
receipts, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property or windfall profits taxes, real
property tax, alternative or add-on minimum taxes, customs duties
or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental
authority.
Section 8.16 Labor Matters: Except as disclosed on Schedule 8.16,
(a) neither Seller nor any Purchased Subsidiary is a party to or
subject to any collective bargaining agreement with any labor
organization with respect to any operations of the Business; and
there are, and to Seller's Knowledge have been no charges,
complaints or grievances including any unfair labor practices
charges which have been filed with the National Labor Relations
Board; (b) there are no agreements with labor unions, work
councils or associations representing employees of the Business;
and (c) there are no current, and to Seller's Knowledge
threatened, strikes, slowdowns, picketing, work stoppages or other
occurrences, events or conditions of a similar character in which
any of said employees are participating.
Section 8.17 Disclosure: No representation or warranty of Seller
or the Purchased Subsidiaries contained in this Agreement contains
or will contain any untrue statement of a material fact, or
intentionally omits or will omit to state any material fact
necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein
not misleading.
Section 8.18 Sufficiency of Purchased Assets: The Purchased Assets
(together with the Excluded Assets specified in Section 1.2),
comprise all the assets employed by Seller and the Purchased
Subsidiaries in connection with the Business. The Purchased Assets
(together with the Excluded Assets specified in Section 1.2) are
sufficient for the conduct of the Business immediately following
the Closing in substantially the same manner as currently
conducted.
Section 8.19 Transactions with Affiliates: Except as set forth in
Section 8.19, none of the Assigned Contracts between the Business,
on the one hand, and Seller or any of its Affiliates, on the other
hand, will continue in effect subsequent to the Closing. Except as
set forth in Schedule 8.19, after the Closing none of Seller's
Affiliates (other than Purchased Subsidiaries) will have any
interest in any property (real or personal, tangible or
intangible) or Assigned Contract used in or pertaining to the
Business. Except as set forth in Schedule 8.19, Seller provides no
material services to the Business.
Section 8.20 Suppliers: Except as set forth in Schedule 8.20,
between the date of the Reference Statement of Net Assets and the
date of this Agreement, in the conduct of the Business neither
Seller nor any of the Purchased Subsidiaries has entered into or
made any contract or commitment for the purchase of merchandise
other than in the ordinary course of business consistent with past
practice and not in violation of this Agreement. Except as set
forth in Schedule 8.20, since the date of the Reference Statement
of Net Assets there has not been (i) any material adverse change
in the business relationship of the Business with any material
supplier of merchandise to the Business, or (ii) any change in any
material term (including credit terms) of the supply agreements or
related arrangements with any such material supplier.
Section 8.21 Distributors and Sales Representatives: Schedule 8.7
sets forth a list of each distributor or sales representative of
the products of Seller.
Section 8.22 Employees: Seller has delivered to Purchaser a true
and complete list containing substantially all of the names of
each officer and manager/employee of the Business (including the
Purchased Subsidiaries) and the title or job classification and
current rate of compensation of each such person.
Section 8.23 Payments: Neither Seller or any Affiliate, officer,
agent or employee thereof nor any distributor or licensee thereof
nor any other person (including, without limitation, any associate
of Seller or any affiliate of Seller) acting on behalf of Seller
or any affiliate of Seller, directly or indirectly, has, during
the past five years, on behalf of or with respect to the Business,
(a) made any unlawful domestic or foreign political contributions,
(b) made any payment or provided services which were not legal to
make or provide or which Seller or any affiliate of Seller or any
such officer, employee or other person should have known were not
legal for the payee or the recipient of such services to receive,
(c) received any payment or any services which were not legal for
the payor or the provider of such services to make or provide, or
(d) had any off-book bank or cash accounts.
Section 8.24 Customers. Except for the customers named in Schedule
8.25, the Business does not have any customer to whom it made more
than 5% of its total sales, in the aggregate during its most
recent fiscal year.
ARTICLE IX
Representations and Warranties of Purchaser
Purchaser represents and warrants:
9.1 Organization and Authority: Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of
Delaware, and Purchaser has all requisite corporate power and
authority to own, lease and operate its properties and to carry on
its business as now being conducted, to execute and deliver this
Agreement and the Related Documents and to perform the obligations
to be performed by it hereunder and thereunder, and to consummate
the transactions contemplated hereby and thereby.
9.2 Corporate Action; No Conflict: The execution, delivery and
performance by Purchaser of this Agreement and the Related
Documents to be delivered by Purchaser and the consummation of the
transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action on the part
of Purchaser. This Agreement has been duly and validly executed
and delivered by Purchaser and is, and each of the Related
Documents when executed and delivered by Seller in accordance with
its terms will be, the valid and binding obligation of Purchaser,
enforceable in accordance with the terms thereof, except as
limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors rights generally and except that the term
"enforceable" shall not be deemed to include the availability of
the remedy of specific performance or any other equitable remedy
available in the discretion of a court. Neither the execution,
delivery or performance by Purchaser of this Agreement or any
Related Document, nor the consummation by Purchaser of the
transactions contemplated hereby or thereby, nor compliance by
Purchaser with any provision hereof or thereof will (i) conflict
with or result in a breach of any provision of the charter or by-
laws of Purchaser or (ii) violate any provision of law, statute,
rule or regulation or any order, writ, injunction, permit,
judgment or decree of any court or other governmental or
regulatory authority applicable to Purchaser.
9.3 Funding of Purchase Price: Purchaser will have funds available
sufficient to pay the Purchase Price.
ARTICLE X
Conditions to Obligations of Purchaser
The obligations of Purchaser under this Agreement are, at its
option, subject to the fulfillment, on or before the Closing Date,
of each of the following conditions precedent:
10.1 Performance of Covenants: Seller shall have performed and
complied with all terms, covenants and conditions required by this
Agreement to be performed or complied with by it on or before the
Closing Date, including without limitation the deliveries required
under Section 5.1(d).
10.2 Representations and Warranties: The representations and
warranties of Seller contained in this Agreement qualified as to
materiality shall be true and correct, and those not so qualified
shall be true and correct in all material respects as of the date
hereof and as of the Closing Date as though such representations
and warranties had been made as of the Closing Date, 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 of such representations and
warranties and covenants, after taking into account all
information contained or disclosed in any supplements,
modifications and updates to the Schedules by Seller prior to the
Closing as permitted by this Agreement, that, in the aggregate,
would not have a Material Adverse Effect on the Business taken as
a whole; and Purchaser shall have received at the Closing a
certificate of an officer of Seller, dated as of the Closing Date,
to such effect.
10.3 Opinion of Counsel: Purchaser shall have received from
Seller's counsel, an opinion dated the Closing Date, in a form
mutually agreed between the parties.
10.4 Government Filings: All applicable waiting periods (including
any extensions thereof) required under the HSR Act and, all
equivalent regulations which require filings to be made in respect
of the Purchased Subsidiaries, shall have expired or been
terminated, without the threat or initiation of legal action by
the relevant government authority.
10.5 No Proceedings:
(a) There shall not be pending or threatened, any claim, suit,
action or other proceeding brought by a governmental agency before
any court or Governmental Entity, seeking to prohibit or restrain
the transactions contemplated by this Agreement or seeking damages
in connection therewith.
(b) No law, rule, regulation, order, decree, injunction, stay or
restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or Governmental
Entity that prohibits the consummation of all or any material part
of the transactions contemplated hereby, and no action or
proceeding shall be pending or threatened by any Governmental
Entity or private person seeking any such order or decree or
seeking to recover any damages or obtain other relief as a result
of the consummation of such transactions.
10.6 Authorization: All action necessary to authorize the
execution, delivery and performance by Seller of this Agreement
and each of the Related Documents and the consummation of the
transactions contemplated hereby and thereby shall have been duly
and validly taken by Seller, and Seller shall have full power and
right to consummate the transactions contemplated hereby and
thereby.
10.7 Secretary's Certificate: Seller shall have delivered to
Purchaser a certificate of the Secretary or Assistant Secretary of
Seller as to the corporate resolutions authorizing the execution
and delivery of this Agreement and the transactions contemplated
thereby and the incumbency and authority of the person(s) signing
this Agreement and the Related Documents for Seller, in form and
substance reasonably satisfactory to Purchaser.
10.8 Transition of Services Agreement: The parties shall have
entered into the Transition Services Agreement in form and
substance satisfactory to Purchaser.
ARTICLE XI
Conditions to Obligations of Seller
The obligations of Seller under this Agreement are, at its option,
subject to the fulfillment, on or before the Closing Date, of each
of the following conditions precedent:
11.1 Performance of Covenants: Purchaser shall have performed and
complied with all terms, covenants and conditions required by this
Agreement to be performed or complied with by it on or before the
Closing Date.
11.2 Representations and Warranties: The representations and
warranties of Purchaser contained in this Agreement shall be true
and correct in all material respects as the date hereof and as of
the Closing Date, as through made on and as of the Closing Date,
except to the extent of changes or developments contemplated by
the terms of the Agreement, and except 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 Seller
shall have received at the Closing a certificate of an officer of
Purchaser, dated as of the Closing Date, to such effect.
11.3 Opinion of Counsel: Seller shall have received from Cravath,
Swaine & Moore, counsel to Purchaser, an opinion dated the Closing
Date.
11.4 Government Filings: All applicable waiting periods (including
any extensions thereof) required under the HSR Act and all
equivalent laws and regulations which require filings to be made
in respect of the Purchased Subsidiaries, shall have expired or
been terminated, without the threat or initiation of legal action
by the relevant government authority.
11.5 No Proceedings: There shall not be pending or, threatened,
any claim, suit, action or other proceeding by any Governmental
Entity before any court or governmental agency, seeking to
prohibit or restrain the transactions contemplated by this
Agreement or to obtain damages in connection therewith.
11.6 Authorization: All action necessary to authorize the
execution, delivery and performance of this Agreement and each of
the Related Documents, and the consummation of the transactions
contemplated hereby and thereby shall have been duly and validly
taken by Purchaser, and Purchaser shall have full power and right
to consummate the transactions contemplated hereby and thereby.
11.7 Secretary's Certificate: Purchaser shall have delivered to
Seller a certificate of the Secretary or Assistant Secretary of
Purchaser as to the corporate resolutions authorizing the
execution and delivery of this Agreement and the transactions
contemplated hereby and thereby, and incumbency and authority of
the persons signing this Agreement and the Related Documents for
Purchaser, in form and substance reasonably satisfactory to
Seller.
ARTICLE XII
Employee Matters
12.1 Scope of Section: This Article XII contains the covenants and
agreements of the parties with respect to (a) the status of
employment of the employees of Seller employed in the Business
(the "Employees"), and (b) employee benefit plans.
12.2 Employment Status: Purchaser shall offer employment to all of
the Employees who are actively employed in the Business on the
Closing Date (except those employees listed on Schedule 12.2, who
shall be treated in the manner described in such Schedule), it
being agreed that employees who are on layoff (or on an approved
leave of absence) and who have a right to return to work in the
Business or who are on short-term (including pregnancy leave) or
workers compensation medical disability or military leave are to
be considered actively employed, but that employees on long-term
medical and/or permanent workers compensation disability (and are
not expected to be released to return to work within six (6)
months after the Closing Date), and employees whose employment has
terminated or will terminate prior to the Closing Date without any
right to return to work are not to be considered actively
employed. For the purposes of this Agreement (i) the terms
"layoff", "right to return to work", "short-term disability",
"long-term disability", and "pregnancy leave'' shall be construed
in accordance with the personnel policies of the Business covering
Employees as of the Closing Date (if applicable), and (ii)
Employees who are actively employed in the Business on the Closing
Date, as herein defined, shall be referred to as "Active
Employees". Employees who accept Purchaser's offer of employment
are hereinafter collectively called "Transferred Employees".
Purchaser shall offer employment to each Active Employee at
compensation levels equivalent to his/her current compensation and
shall provide employee benefits, including, without limitation,
medical and dental benefits, which are not less favorable in the
aggregate than those benefits currently offered to similarly
situated employees of Purchaser. Seller shall deliver to Purchaser
as of the Closing Date all personnel files relating to Transferred
Employees.
12.3 Retiree Benefits: Seller shall retain all responsibility and
liability for retiree health and life benefits to those employees
of the Business who have qualified for such benefits and who
retire from Seller's employment prior to Closing. Purchaser shall
not assume any liability or obligation with respect to retiree
health or life benefits for current or former employees of the
Business.
12.4 Pension Plans: The Johnson Controls Pension Plan (the "U.S.
Pension Plan") covers all current Employees of the Business who
are employed in the United States ("U.S. Salaried Participants")
and persons claiming through them. Effective as of the Closing
Date, each Active Employee of the Business who has completed at
least one year of service as of the Closing Date (i) shall be
vested in their accrued benefit earned through the Closing Date,
and (ii) be eligible for a normal, early or deferred vested
retirement benefit under such U.S. Pension Plan, based upon such
Employees having terminated employment with Seller on the Closing
Date, and such Employee's age and years of service under the U.S.
Pension Plan as of that date. Distribution of the normal, early or
deferred vested retirement benefit accrued by any Active Employee,
including without limitation, the time of benefit payment and the
form in which the benefit is payable, shall be determined in
accordance with the U.S. Pension Plan.
12.5 Defined Contribution Plans: The accounts under the Johnson
Controls Savings and Investment Plan and the Johnson Controls,
Inc. Employee Stock Ownership Plan of all Transferred Employees of
the Business who participate in such Savings and Investment Plan
and the Johnson Controls, Inc. Employee Stock Ownership Plan on
the Closing Date shall be fully vested and distributable according
to the terms of such plans.
12.6 Tax Free Spending Plans: The accounts under the Johnson
Controls Tax Free Spending Plan of all Transferred Employees who
participate in such Spending Plan on the Closing Date, shall be
attributable according to the terms of such Plan for the
reimbursement of eligible claims incurred while the Transferred
Employee was covered under the Plan.
12.7 Union and Employment Contracts: Purchaser shall assume all
collective bargaining agreements and union affiliations in effect
with any Purchased Subsidiary, and all employment contracts
between Purchased Subsidiaries and their Employees. Purchaser
acknowledges that at Closing it will become a successor employer
under such collective bargaining agreements and/or union
affiliations and agrees to assume, perform and discharge all
obligations of Seller under such agreements upon Closing.
12.8 Severance. WARN Act and Other Liability: In addition to the
other obligations Purchaser is assuming under this Article XII,
Purchaser shall assume, discharge, pay and be solely liable for
(i) any earned vacation, holiday pay or other fringe benefits
relating to Active Employees for the period prior to the Closing
Date to the extent reflected on the Closing Statement of Net
Assets; (ii) any health, disability, life insurance coverage and
any medical and dental benefits payable at any time to Active
Employees and their dependents, except for claims for any such
benefits or coverage which are filed with Seller, in the manner
required by law or by the relevant Benefit Plans, prior to the
Closing Date, which claims shall remain Seller's responsibility;
(iii) severance pay, termination indemnity pay, salary
continuation, special bonuses or like compensation (including
without limitation executive incentive compensation pay bonuses
which shall be paid to the Active Employees in the amounts set
forth in Schedule 12.8) relating to Active Employees which arise
in connection with the transactions contemplated under this
Agreement to the extent accrued for on the Closing Statement of
Net Assets; (iv) any claim or liability relating to Active
Employees under the Worker Adjustment and Retraining Notification
Act arising from or relating to actions required by this
Agreement; (v) any workers compensation claim relating to Active
Employees except to the extent any such claim is filed within six
(6) months after the Closing Date and reasonably sufficient
evidence demonstrates the event or occurrence giving rise to the
claim arose prior to the Closing Date (which claims shall remain
Seller's responsibility); and (vi) any other claim or liability
arising out of the employment of the Active Employees except to
the extent any such claims have been (i) filed with Seller's
management in writing prior to the Closing Date, or (ii) are filed
within six (6) months after the Closing Date provided reasonably
sufficient evidence demonstrates the event or occurrence giving
rise to the claim arose prior to the Closing Date, which claims
shall remain Seller's responsibility.
12.9 Welfare Benefit Plans - Interim Services: Seller agrees, as
an accommodation to Purchaser, to continue to operate its medical,
dental, tax free spending, Seller's Savings and Investment Plan,
life insurance and disability plans ("Welfare Benefits") for the
benefit of the Transferred Employees during an interim period (the
"Interim Period") commencing on the Closing Date, and ending, for
each such benefit, on December 31, 1998 or such other date as
mutually agreed between the parties. It is agreed that
notwithstanding the provision contained in Section 12.5, Seller's
Savings and Investment Plan shall be included as a Welfare Benefit
which Seller shall continue to operate after Closing as set forth
in this Section 12.9; provided, however, that Seller shall have no
matching obligation with respect to Transferred Employees from and
after the Closing Date. The purpose of this arrangement is to
facilitate benefit coverage until Purchaser is able to establish
successor plans for the Business. The parties agree that, subject
to Section 12.8, Purchaser is fully responsible for all for claims
filed after the Closing Date as the result of the continued
operation of these plans for the Business. This Section 12.9 shall
not be construed to impose upon Seller any liability or
responsibility under Seller's or the Business plans except as
expressly set forth in this Agreement. During the Interim Period
such Welfare Benefits shall be provided to such Transferred
Employees, new hires and their respective eligible dependents
through the Seller's existing plans and shall be identical to the
benefits afforded such individuals under Seller's applicable
Welfare Benefit plans immediately prior to the Closing Date,
subject to any general amendments or modifications made by the
Seller to such Welfare Benefits. Purchaser agrees to pay Seller,
or if so determined by Seller, any administrative representative
of Seller, the premium rates and other direct costs actually
payable or incurred under, or contributions made to, Seller's or
the Business Welfare Benefit plans maintained by Seller under this
Section 12.9 for the Transferred Employees plus any third party
administrative service fees related to such premiums or direct
costs as well as any reasonable and necessary related
administrative and other expenses incurred by Seller for any such
continued coverage thereunder. The parties agree that the details
of Seller's provision of such Welfare Benefit services shall be
included in the Transition Services Agreement described in Section
13.3
12.10 Purchaser's Welfare Benefit Plans: Effective as soon as
practicable after the Closing Date, but in no event later than
January 1, 1999 or such other date as mutually agreed between the
parties, Purchaser shall establish welfare benefits for all
Transferred Employees, which benefits shall be no less favorable,
in the aggregate, than the welfare benefits covering similarly
situated employees of Purchaser as of the Closing Date. The
welfare benefits established by Purchaser as successor benefits to
cover such Employees (i) shall not exclude coverage or eligibility
to participate because of a condition, illness or disease existing
prior to the Closing Date; and (ii) shall recognize all covered
medical and prescription expenses incurred by such Employees and
their dependents during the Purchaser's benefit year of the
Closing for purposes of satisfying any required deductibles and co-
payment provisions.
12.11 Seller's Liability. Except as specifically set forth in this
Article XII, Seller shall have no liability in respect of the
Active Employees on and after the Closing Date.
ARTICLE XIII
Obligations After Closing
13.1 Seller's Access: In connection with any of the Retained
Liabilities or any financial audit of Seller or any Claim, tax
audit or other governmental investigation of Seller for any matter
relating to any period prior to the Closing, or for any other
reasonable and lawful purpose, Purchaser shall, upon reasonable
request, permit Seller and its representatives to have access, at
reasonable times during normal business hours and in a manner
which is not unreasonably disruptive to the operations of
Purchaser, to the Purchased Records and work papers, books and
records of Purchaser relating to the Business. Purchaser shall
maintain in an orderly manner, and shall not dispose of, the
Purchased Records or such work papers, books and records during
the six year period beginning with the Closing without Seller's
consent. Following the expiration of such six year period,
Purchaser may dispose of the Purchased Records or such work
papers, books and records at any time upon giving 90 days prior
written notice to Seller, unless Seller agrees to take possession
thereof within such 90 days at no expense to Purchaser.
13.2 Allocation of Taxes:
(a) All Taxes related to the Business, the Purchased Assets and
the Purchased Subsidiaries (including, without limitation, by
reason of Treasury Regulation Section 1.1502-6(a) or similar
provisions under state, local or foreign laws), based on the
income of Seller arising out of or relating to the operation of
the Business prior to the Closing Date shall be borne by Seller.
For this purpose, the Closing Date shall be treated as the last
day of a taxable period, whether or not the taxable period in fact
ends on such period. All Taxes related to the Business accrued or
accruable with respect to events occurring after the close of
business on the Closing Date will be borne by Purchaser.
(b) Seller and Purchaser shall each pay half of all transfer
Taxes, sales Taxes and other Taxes (including, without limitation,
value added, documentary, stamp gross receipts, registration,
conveyance, excise, records and similar Taxes) arising out of, in
connection with, or attributable to the transactions contemplated
by this Agreement.
(c) For purposes of this Agreement "Pre-Closing Taxes" shall mean
all taxes allocated to the Seller pursuant to this Section 13.2.
13.3 Transition Services: For a reasonable period of time
following the Closing, Seller agrees to provide to Purchaser such
support services as may be required for the transition of the
Business to Purchaser. The terms of such transition services shall
be mutually agreed and set forth in a separate transition services
agreement to be executed as of the Closing Date (the "Transition
Services Agreement").
13.4 Further Assurances: From time to time after the Closing,
without further consideration, the parties shall cooperate with
each other and shall execute and deliver instruments of transfer
or assignment, or such other documents to the other party as such
other party reasonably may request to evidence or perfect
Purchaser's right, title and interest to the Purchased Assets, and
otherwise carry out the transactions contemplated by this
Agreement.
13.5 Collection of Receivables:
(a) From and after the Closing, Purchaser shall have the right and
authority to collect for its own account all Purchased Receivables
and other related items that are included in the Purchased Assets
and to endorse with the name of Seller or the Purchased
Subsidiaries, as applicable, any checks or drafts received with
respect to any Purchased Receivables or such other related items.
Seller and the Purchased Subsidiaries shall promptly deliver to
Purchaser any cash or other property received directly or
indirectly by it with respect to the Purchased Receivables and
such other related items, including any amounts payable as
interest.
(b) From and after the Closing, Purchaser shall promptly deliver
to Seller any cash or other property received directly or
indirectly by it with respect to receivables transferred from the
Business, prior to Closing, in connection with Seller's factoring
arrangements ("Factored Receivables"). Seller shall, within seven
(7) days of the date hereof, provide Purchaser with an accurate
listing of all Factored Receivables. Purchaser shall retain the
exclusive right to enforce payment or collection of the Factored
Receivables, and Purchaser shall use its reasonable best efforts
to collect such Factored Receivables.
13.6 Seller's Environmental Covenants: With respect to the
environmental items set forth in Schedule 8.13, Seller shall, at
Seller's expense, satisfy the covenants set forth below
("Covenants") expeditiously in accordance with applicable
Environmental Requirements and shall employ all commercially
reasonable efforts to minimize interference with Purchaser's
operations in the course of doing so, Purchaser shall employ all
commercially reasonable efforts to cooperate with Seller's
performance of the Covenants. In addition, Purchaser shall have
the right to participate in all meetings with Governmental
Entities regarding the Covenants and to review drafts of all
documents at a reasonable period of time prior to their submittal
and all correspondence to and from Governmental Entities regarding
these matters.
1) Act 307 Delisting: Seller shall obtain formal State of Michigan
delisting from the State's Act 307 Contaminated Sites List for the
Manchester, Michigan facility.
2) Potential Contamination at City of Industry Site: In connection
with the potential environmental contamination issue identified in
Schedule 8.13, Seller shall (a) complete site characterization in
accordance with applicable Environmental Requirements, (b) achieve
resolution of the matter with applicable Governmental Entities
having jurisdiction over the matter and, if requested by
Purchaser, obtain the determination of a mutually acceptable
environmental consultant that "no further action" is likely to be
required by Environmental Requirements or by the Governmental
Entities having jurisdiction over the matter, and (c) conduct any
remediation to the extent required by Environmental Requirements
or requirements of Governmental Entities having jurisdiction over
the matter.
3) Continuing Compliance Matters: In connection with the Business'
operations in Italy, Seller shall:
(a) At the Milan, Italy operation, obtain any necessary permits,
authorizations or exemptions for (i) air emissions associated with
paint booths, (ii) wastewater discharges of sanitary and
noncontact cooling water, (iii) storage of paint, thinners and
other flammable liquids incidental to the assembly of the
equipment; and (iv) fire certification; and
(b) At the Florence, Italy operation, investigate and remove or
remediate any leaking underground storage tanks and associated
contamination as required by Environmental Requirements or
requirements of Governmental Entities having jurisdiction over the
matter, and if requested by Purchaser, obtain the determination of
a mutually acceptable environmental consultant that "no further
action" is likely to be required.
4) Achieve resolution of any potential liabilities, under CERCLA
or analogous state or foreign law, with respect to matters
identified to Purchaser by Seller in accordance with Section
8.13(c).
In addition to the foregoing, Seller shall be responsible for any
further investigation or remediation required by Environmental
Requirements arising out of the environmental conditions
associated with the covenants contained in this Section 13.6, in
exchange for Purchaser's agreement that it shall not take any
affirmative steps solely for the purpose of uncovering matters of
environmental concern relating to such conditions.
13.7 Supplemental Disclosure. Seller shall have the continuing
obligation until the Closing promptly to supplement or amend the
Schedules with respect to any matter hereafter arising or
discovered that, if existing or known at the date of this
Agreement, would have been required to be set forth or described
in the Schedules; provided, however, that no supplement or
amendment to such Schedules shall have any effect for the purpose
of determining the satisfaction of the conditions set forth in
Article X or for purposes of determining whether any person is
entitled to indemnification pursuant to Article XVI.
13.8 Purchaser's Cooperation. Purchaser agrees that it shall, upon
reasonable request of Seller, cooperate with and assist Seller
with respect to Seller's defense and settlement of the product
liability claims retained by Seller under this Agreement, and
Seller agrees that upon request by Purchaser, Seller shall
reimburse Purchaser for out-of-pocket costs in connection with
providing such assistance. By way of example, such assistance may
include cooperation in connection with corrective or preventative
solutions for defective products for which Purchaser shall be
reimbursed its out-of-pocket costs.
ARTICLE XIV
Notices
All notices, consents, approvals or other notifications required
of the parties under this Agreement shall be in writing and shall
be deemed properly served if delivered personally or sent by
registered or certified mail (return receipt requested), facsimile
or nationally recognized courier or overnight delivery service
addressed to such other party at the address set forth below, or
at such other address as may hereafter be designated by either
party in writing, and shall be deemed delivered (i) five business
days after being sent by mail or (ii) when actually delivered if
sent by mail, facsimile, courier or overnight delivery service (or
the next business day if delivered after regular business hours or
on a Saturday, Sunday or holiday).
(a) If to Seller:
Johnson Controls, Inc.
49200 Halyard Rd.
Plymouth, MI 48167
Attention: Group Vice President and General Counsel
Facsimile: (734) 254-6914
(b) If to Purchaser:
Cincinnati Milacron
4701 Marburg Avenue
Cincinnati, Ohio 45209-1025
Attention: General Counsel
Facsimile: (513) 841-8008
with a copy to: Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Daniel Cunningham
Facsimile: (212) 474-3700
ARTICLE XV
Further Covenants
15.1 Cooperation by Purchaser: In the event Seller is
required to defend against, any action, suit or proceeding arising
out of a claim pertaining to the business or operations of the
Business prior to the Closing Date, Purchaser shall provide such
assistance and cooperation, including, without limitation,
witnesses and documentary or other evidence as may reasonably be
requested by Seller in connection with its defense. Seller shall
reimburse Purchaser for its reasonable out-of-pocket expenses
incurred in providing such assistance and cooperation.
15.2 Cooperation by Seller: In the event Purchaser is required to
defend against, any action, suit or proceeding arising out of a
claim pertaining to an Assumed Liability or Purchased Asset
pursuant to this Agreement relating to the business or operations
of the Business, Seller shall provide such assistance and
cooperation, including without limitation, witnesses and
documentary or other evidence, as may reasonably be requested by
Purchaser in connection with its defense. Purchaser shall
reimburse Seller for its reasonable out-of-pocket expenses
incurred in providing such assistance.
15.3 Cooperation on Tax, Accounting and Other Matters:
(a) Purchaser and Seller agree to furnish or cause to be furnished
to each other, upon request, as promptly as practicable, such
information (including access to books and records) and assistance
relating to the Business as is reasonably necessary for the filing
of any return, for the preparation for any audit, for the
prosecution or defense of any claim relating to any proposed
adjustment with respect to Taxes, for year-end accounting
requirements and any reports or documents to be filed with any
regulatory agency or for any other reasonable purpose. Neither
Purchaser nor Seller shall agree to settle or permit the
settlement of any Tax liability or compromise any claims with
respect to Taxes, which settlement or compromise may materially
affect the liability for Taxes (or right to Tax benefits of the
other party, without such other party's prior consent, which
consent shall not be unreasonably withheld. Purchaser and Seller
will not make, revoke or amend any Tax election or amend any Tax
Return of the other party without such other party's consent.
(b) Purchaser and Seller agree to retain or cause to be retained
all books and records pertinent to the Business (including the
Returns, documents and records relating to the assets and
properties of both) until the applicable period for assessment
under applicable law (giving effect to any and all properly
claimed and valid extensions or waivers) has expired, and to abide
by or cause the compliance with all record retention agreements
entered into with any governmental or taxing authority; provided,
however, that no party shall destroy any books and records
pertinent to the Business without the prior written consent of the
other parties hereto.
(c) Purchaser and Seller shall cooperate with each other in the
conduct of any audit or other proceedings involving the Business
for any Tax and shall execute and deliver such powers of attorney
and other documents as are necessary to carry out the intent of
this Section 15.3.
(d) Seller shall have the right and obligation to timely prepare
and file, and cause to be timely prepared and filed when due, any
Tax return that is required to include the operations, ownership,
assets or activities of the Purchased Subsidiaries for any period
ending on or prior to the Closing Date.
(e) Purchaser and Seller will, upon request, provide the other
with all information that is required to report pursuant to
Section 6043 of the Code and all Treasury Department Regulations
promulgated thereunder.
15.4 Confidentiality:
(a) Purchaser acknowledges that all information provided to any of
it and its Affiliates, agents and representatives by Seller and
its Affiliates, agents and representatives is subject to the terms
of a confidentiality agreement between or on behalf of Seller and
Purchaser dated as of July 6, 1998 (the "Confidentiality
Agreement"), the terms of which are hereby incorporated herein by
reference. Effective upon, and only upon, the Closing, the
Confidentiality Agreement shall terminate; provided. however, that
Purchaser acknowledges that the Confidentiality Agreement shall
terminate only with respect to information provided to any of
Purchaser and its Affiliates, agents or representatives that
relates solely to the Business; and provided further, however,
that Purchaser acknowledges that any and all information provided
or made available to any of it and its Affiliates, agents and
representatives by or on behalf of the Sellers (other than
information relating solely to the Business) shall remain subject
to the terms and conditions of the Confidentiality Agreement after
the Closing Date.
(b) Purchaser agrees that, after the Closing Date, Purchaser
shall, and shall use all reasonable efforts to cause their
respective directors, officers, employees, advisors and Affiliates
to, keep the Seller Information (as defined below) confidential
following the Closing Date, except that any such Seller
Information required by law or legal or administrative process to
be disclosed may be disclosed without violating the provisions of
this Section 15.4. For purposes of this Agreement, the term
"Seller Information" shall mean all information concerning the
Seller, of its Affiliates, including (A) any trade secrets, know-
how and other confidential technical, business and financial
information, other than information that relates exclusively to
the Business (and not to any Seller or any other business of
Seller) and other than any such information that is available to
the public on the Closing Date, or thereafter becomes available to
the public other than as a result of a breach of this Section 15.4
and (B) the terms of this Agreement.
(c) Seller agrees that, after the Closing Date, Seller shall, and
shall use all reasonable efforts to cause its Affiliates and its
and their officers, directors, employees and advisors to keep
confidential, all information relating to the Business, the
Purchased Subsidiaries and the Purchased Assets, except as
required by law or administrative process and except for
information that is available to the public on the Closing Date,
or thereafter becomes available to the public other than as a
result of a breach of this Section 15.4(c).
15.5 Covenant Not to Compete: In consideration of the benefits to
Seller hereunder and in order to induce Purchaser to enter into
this Agreement, each Seller hereby covenants and agrees:
(a) that for a period of three (3) years after the Closing Date,
Seller shall not, and shall cause its Affiliates to not, directly
or indirectly, anywhere in North America or Europe, engage in,
conduct, manage, operate or control, or participate, in any manner
whatsoever, in the ownership, management, operation or control of,
any business which competes with the Business as it is conducted
as of the Closing Date, except that this noncompete obligation
shall not apply as follows:
(i) Ownership of not more than 5% of the issued and outstanding
shares of a class of securities of a corporation the securities of
which are traded on a national securities exchange or in the over-
the-counter market shall not be deemed ownership of the issuer of
such shares for the purposes of this Section; and
(ii) The provisions of this Section 15.5 shall not preclude Seller
from acquiring control of an entity which has as a portion of its
business which competes with the Business (the "Competing
Business"), but which primarily is engaged in other lines of
business; provided further, however, that in the event Seller
directly or indirectly acquires such a Competing Business during
such period, then whatever entity has acquired such Competing
Business either shall (i) limit the competing Business solely to
the production of competing products which the Competing Business
was obligated to produce pursuant to contracts which were entered
into prior to, and not in anticipation of such acquisition, it
being understood and agreed that the Competing Business will not
renew any such contract upon expiration of the term or any
extended term in effect at the time of such acquisition and (ii)
discontinue the Competing Business or dispose of the Competing
Business to a non-affiliated entity within twelve (12) months of
the date of such acquisition.
(b) that for a period of eighteen (18) months after the Closing
Date, Seller shall not, and shall cause its Affiliates to not
solicit, recruit or hire, or engage the services directly or
indirectly, without the consent of Purchaser, of any employee of
the Business. Notwithstanding the foregoing, it is agreed there
shall be no restriction on Seller or its Affiliates to hire any
employee of the Business who (i) was terminated or otherwise
separated by Purchaser, or (ii) left his position with Purchaser
more than six (6) months prior to the date of hire by Seller,
provided Seller has not deliberately solicited such employee to
leave Purchaser's employ.
(c) Notwithstanding any other provision of this Agreement, it is
understood and agreed that the remedy of indemnity payments
pursuant to Article XVI and other remedies at law may be
inadequate in the case of any breach of the covenants contained in
Section 15.5. Purchaser may be entitled to equitable relief,
including the remedy of specific performance, with respect to any
breach or attempted breach of such covenants.
15.6 Seller's Assistance. Seller shall provide reasonable counsel
and advice, from time to time, regarding the effective
implementation of the Manufacturing Pro System for the Business.
15.7 Delivery of Surveys. Seller shall use reasonable best efforts
to deliver to Purchaser an ALTA survey of the Manchester, Michigan
Owned Real Property.
ARTICLE XVI
Survival of Representations and Warranties
and Indemnification
16.1 The representations and warranties in this Agreement shall
survive the Closing for a period of one (1) month from the Closing
Date, except as follows: (i) the representations and warranties
contained in Section 8.13 shall survive the Closing for a period
lasting until the close of business forty-two (42) months
following the Closing Date; and (ii) the representations and
warranties contained in Sections 8.15 and 8.2, and those portions
of Sections 8.5 and 8.6 which specifically address Seller's good
and marketable title shall survive the Closing for a period
lasting until the expiration of the applicable statute of
limitations (with these four referenced representations and
warranties collectively referred to as the "Surviving
Representations"). Except as specifically provided herein,
Purchaser may not and shall not make any claim against Seller in
respect of the representations and warranties contained in this
Agreement.
16.2 Indemnification by Seller:
(a) From and after the Closing Date, Seller shall defend,
indemnify and hold harmless Purchaser and its affiliates and each
of their respective officers, directors, employees, stockholders,
agents, consultants, affiliates and representatives, and
successors and assigns from and against any and all loss,
liability, damage, claim, obligation, deficiency, cost or expense
(including reasonable legal fees and expenses), but excluding
consequential damages, lost profits or punitive damages
(individually a "Loss" and collectively "Losses"), Purchaser
actually incurs as a result of (i) any breach of any
representation or warranty of Seller that survives the Closing for
the survival periods set forth in Section 16.1; (ii) any Retained
Liabilities; (iii) any breach of any covenant contained in this
Agreement; (iv) the failure to comply with statutory provisions
relating to bulk sales and transfers, if applicable; and (v) any
fees, expenses or other payments incurred or owed by Seller to any
brokers, financial advisors or compatible other persons retained
or employed by it in connection with the transactions contemplated
by this Agreement. The materiality standards contained in the
various representations and warranties in Article VIII hereof
shall not be interpreted or otherwise used by Seller to negate or
eliminate the Indemnification Deductible.
(b) (i) The amount of any Losses incurred by Purchaser shall be
reduced as follows:
(a) by the net amount Purchaser recovers (after deducting all
attorneys' fees, expenses and other costs of recovery) or could
have recovered had the claim been timely filed, from any insurer
or other third party liable for such Losses;
(b) where and to the extent the issue giving rise to any such
Losses was provided or reserved for in the Closing Statement of
Net Assets or gave rise to the payment to Purchaser of a post-
closing adjustment amount as described in Section 4.4; and
(c) by an amount calculated by applying the applicable corporate
tax rate to the portion of any such Losses which can be treated as
a deductible expense by Purchaser to the extent such deduction
actually reduces Purchaser's Tax liability.; and
(ii) the amount of any Losses incurred by Purchaser shall be
increased to take into account any net Tax cost incurred by
Purchaser arising from the receipt of any indemnity payments
hereunder (grossed up for such increase).
(c) Purchaser shall be entitled to indemnification under this
Section 16.2 only (x) to the extent that the aggregate amount of
such Losses (adjusted as provided in paragraph (b) of this Section
16.2 exceeds a deductible amount of U.S. $1,000,000 (the
"Indemnification Deductible"), in which event the Losses shall be
the amount, if any, which exceeds the Indemnification Deductible;
and (y) to the extent that each and any specific, individual Loss
which counts towards the Indemnification Deductible exceeds U.S.
$10,000 (the "Deminimus Amount"), provided the aggregate amount
payable in respect of indemnification under this Section 16.2
shall not exceed a cap of U.S. $100,000,000. Seller acknowledges
and agrees that none of the Indemnification Deductible, the
Deminimus Amount or the cap shall apply in respect of (i) the
Surviving Representations (except with respect to the
representations and warranties contained in Section 8.13 regarding
Environmental Matters towards which the Indemnification
Deductible, the Deminimus Amount and the cap shall apply) (ii)
Retained Liabilities, (iii) Pre-Closing Taxes, and (iv) the
Covenants contained in Section 13.6.
(d) The indemnity provided in this Section 16.2 shall be the sole
and exclusive remedy of Purchaser after the Closing Date with
respect to any and all claims relating to the subject matter of
this Agreement. In furtherance of the foregoing, Purchaser hereby
waives, from and after the Closing, to the fullest extent
permitted under applicable law, any and all rights, claims and
causes of action it may have against Seller relating to the
subject matter of this Agreement arising under or based upon any
federal, state, local or foreign statute law, ordinance, rule or
regulation or otherwise; provided, however, that Purchaser does
not hereby waive any tort claims it may have against Sellers for
intentional and fraudulent misrepresentation.
16.3 Indemnification by Purchaser: Purchaser shall indemnify and
hold harmless Seller and its directors, shareholders, officers,
employees, agents, consultants, representatives, Affiliates,
successors and assigns from and against any and all Losses which
any of them may incur arising out of any Assumed Liabilities.
16.4 Indemnification Procedure:
(a) Any party seeking indemnification hereunder (the "Indemnitee")
shall notify the parties liable for such indemnification (each an
"Indemnitor") in writing of any event, omission or occurrence
which the Indemnitee has determined has given or could give rise
to Losses which are indemnifiable hereunder (such written notice
being hereinafter referred to as a "Notice of Claim"). In all
cases, such notice shall be given promptly, in accordance with the
relevant provisions of the Agreement regarding notice; provided,
that the failure of any Indemnitee to give notice as provided in
this Section 16.4 shall not relieve the Indemnitor of its
obligations under this Article XVI unless such failure shall
materially adversely affects the Indemnitor. A Notice of Claim
shall specify in reasonable detail the nature and any particulars
of the event, omission or occurrence giving rise to a right of
indemnification. The Indemnitor shall satisfy its obligations
hereunder, as the case may be, within 30 days of its receipt of a
Notice of Claim; provided, however, that so long as the Indemnitor
is in good faith defending a claim pursuant to Section 16.3(b)
below, its obligation to indemnify the Indemnitee with respect
thereto shall be suspended. To the extent the parties disagree as
to whether any Loss or Losses are indemnifiable hereunder, such
matters shall be resolved pursuant to Section 17.1 1 hereunder.
(b) With respect to any third party claim, demand, suit, action or
proceeding which is the subject of a Notice of Claim, the
Indemnitor shall, in good faith and at its own expense, defend,
contest or otherwise protect against any such claim, demand, suit,
action or proceeding with legal counsel of its own selection and
approved by the Indemnitee. The Indemnitee shall have the right,
but not the obligation, to participate, at its own expense, in the
defense thereof through counsel of its own choice and shall have
the right, but not the obligation, to assert any and all cross
claims or counterclaims it may have. The Indemnitee shall be
entitled to employ separate counsel to represent the Indemnitee
if, in the Indemnity's reasonable judgment, a conflict of interest
between the Indemnitee and the Indemnitor exists in respect of
such claim or for claims seeking equitable relief from the
Indemnitee and in each such event, the reasonable fees and
expenses of such separate counsel shall be paid by the Indemnitor.
So long as the Indemnitor is defending in good faith any such
third party claim, demand, suit, action or proceeding, the
Indemnitee shall at all times cooperate in all reasonable ways
with, make its relevant files and records reasonably available for
inspection and copying by, and make its employees reasonably
available or otherwise render reasonable assistance to, the
Indemnitor. In the event that the Indemnitor fails to timely
defend, contest or otherwise protect against any such third party
claim, demand, suit, action or proceeding, the Indemnitee shall
have the right, but not the obligation, at the expense and for the
account of the Indemnitor, to defend, contest, assert cross claims
or counterclaims, or otherwise protect against, the same and may
make any compromise or settlement thereof and be entitled to all
amounts paid as a result of such third party claim, demand, suit
or action or any compromise or settlement thereof. The Indemnitor
shall not settle any third party claim the defense, appeal or
settlement of which is controlled by it without the Indemnitee's
prior written consent, unless the terms of such settlement or
compromise release such Indemnitee from any and all liability or
obligation with respect to such third party claim.
ARTICLE XVII
Miscellaneous
17.1 Broker Compensation: Each of the parties hereto agrees to
indemnify the other against and hold the other harmless from any
and all liabilities (including, without limitation, cost of
counsel fees in defending against such liabilities) for brokerage
commissions or finder's fees in connection with the transactions
contemplated by this Agreement, insofar as such claims shall be
based on arrangements or agreements made or claimed to have been
made by or on behalf of Seller or Purchaser, respectively. Seller
shall pay the fee of Salomon Smith Barney for its services in
connection with the transactions contemplated by this Agreement,
and Purchaser shall pay the fee of J. P. Morgan for its services
in connection with the transactions contemplated by this
Agreement.
17.2 Bulk Sales Act: Purchaser waives compliance by Seller with
any bulk sales law which may be applicable to the transactions
contemplated by this Agreement; provided, however that Seller
agrees to indemnify Purchaser and hold it harmless from any loss,
damage, liability, and expenses (including reasonable legal fees)
resulting from such noncompliance.
17.3 Expenses: Each of the parties hereto shall pay its own
expenses in connection with the negotiation and preparation of
this Agreement and the Related Documents.
17.4 Binding Agreement: This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns, provided that neither party shall assign
this Agreement without the prior written consent of the other
party hereto, and in no event will any assignment relieve the
assigning party of its obligations hereunder. Notwithstanding the
foregoing, (a) Purchaser may assign the Purchased Shares or its
right to purchase the Purchased Assets or any portion thereof
hereunder to a wholly-owned Affiliate of Purchaser without the
prior written consent of Seller.
17.5 Entire Agreement: This Agreement (including the Exhibits and
Schedules hereto and the side letters between the parties
regarding tax allocation, Key Employees and the Lemelson claim
dated as of the date hereof) (a) constitutes the entire agreement
between the parties hereto with respect to the purchase and sale
of the Purchased Assets and the other transactions contemplated
hereby, (b) supersedes all prior negotiations and oral or written
understandings, if any, and (c) may not be amended or supplemented
except by an instrument in writing signed by both parties hereto.
Neither party makes any representation or warranty except as
provided herein.
17.6 Governing Law: This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of
Michigan.
17.7 No Rights of Third Parties: Except as provided in Article
XVI, nothing in this Agreement is intended to confer any right on
any person other than the parties to it and their respective
successors and assigns; nor is anything in this Agreement intended
to modify or discharge the obligation or liability of any third
person to any party to this Agreement, nor shall any provision
give any third person any right of subrogation or action over
against any party to this Agreement.
17.8 Counterparts: This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
17.9 Headings: Table of Contents: The headings of the sections of
this Agreement and the table of contents at the forepart of this
Agreement are inserted for convenience only and shall not
constitute a part hereof nor affect the rights of the parties
hereto.
17.10 Termination:
(a) Termination Events. Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated and the
transactions contemplated hereby abandoned under any of the
following circumstances.
(i) by the mutual written consent of Seller and Purchaser at any
time prior to the Closing Date;
(ii) by Seller if any of the conditions set forth in Article XI
shall have become incapable of fulfillment at any time or are not
fulfilled at Closing, and shall not have been waived by Seller;
(iii) by Purchaser if any of the conditions set forth in Article X
shall have become incapable of fulfillment at any time or are not
fulfilled at Closing, and shall not have been waived by Purchaser;
(iv) upon damage, destruction or condemnation of any Owned Real
Property or Leased Real Property in which manufacturing operations
are located and cannot be relocated to another site without a
Material Adverse Effect on the Business taken as a whole. or
(v) by Purchaser or Seller if the Closing does not occur on or
prior to December 31, 1998.
Notwithstanding the foregoing, the party seeking termination
pursuant to clause (ii) or (iii) above may not terminate this
Agreement if such party is in breach of any of its
representations, warranties, covenants or agreements contained in
this Agreement and such breach has been a cause of the basis cited
for termination.
(b) Notice of Termination. In the event of termination of this
Agreement by Seller or Purchaser pursuant to this Section 17.10,
written notice thereof shall forthwith be given to the other party
and the transactions contemplated by this Agreement shall be
abandoned, without further action by any party. If the
transactions contemplated by this Agreement are abandoned as
provided herein:
(i) Purchaser shall return all documents and copies and other
materials received from or on behalf of Seller relating to the
transactions contemplated hereby, whether so obtained before or
after the execution hereof, to the Seller; and
(ii) all confidential information received by Purchaser with
respect to the Business shall be treated in accordance with the
Confidentiality Agreement, which shall remain in full force and
effect notwithstanding the termination of this Agreement.
(iii) If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section
17.10, this Agreement shall become void and of no further force
and effect, except for the provisions of (i) Section 15.4 relating
to the obligation of Buyer to keep confidential certain
information and data obtained by it, (ii) Section 7.5 relating to
publicity, (iii) Section 17.3 relating to certain expenses, (iv)
Section 17.1 relating to broker's or finder's fees, and (v) this
Section 17.10. Nothing in this Section 17.10 shall be deemed to
release any party from any liability for any breach by such of the
terms and provisions of this Agreement, to impair the right of any
party to compel specific performance by another party or its or
their obligations under this Agreement, or to waive any rights of
any party under law not otherwise waived in this Agreement.
17.11 Dispute Resolution.
(a) Negotiation. In the event of any dispute or disagreement
between Seller and Purchaser as to the interpretation of any
provision of this Agreement, the performance of obligations
hereunder, or any other disputed matter, such matter, upon written
request of either party, shall be referred to representatives of
the parties for decision, each party being represented by a senior
executive officer who has no direct operational responsibility for
the matters contemplated by this Agreement (the
"Representatives"). The Representatives shall promptly meet in a
good faith effort to resolve the dispute. If the Representatives
do not agree upon a decision within thirty (30) calendar days
after reference of the matter to them, either Purchaser or Seller
shall be free to exercise the remedies available to them under
Section 17.1 l(b) below.
(b) Arbitration. Each of the parties agrees that any dispute,
controversy or claim arising out of or in connection with this
Agreement or any alleged breach hereof shall be settled by
arbitration in Chicago, Illinois, pursuant to the Commercial
Arbitration Rules of the American Arbitration Association ("AAA").
If Purchaser and Seller cannot jointly select a single arbitrator
to determine the matter, one arbitrator shall be chosen by each of
Purchaser and Seller (or, if a party fails to make a choice on
behalf of the AAA on behalf of such party) and the two arbitrators
so chosen will select a third (or, if they fail to make a choice,
by the AAA). The decision of the single arbitrator jointly
selected by Purchaser and Seller, or, if three arbitrators are
selected, the decision of any two of them will be final and
binding upon the parties and the judgment of a court of competent
jurisdiction may be entered thereon. The arbitrator or arbitrators
shall award the costs and expenses of the arbitration, including
reasonable attorneys' fees, disbursements, arbitration expenses,
arbitrators' fees and the administrative fee of the AAA, to the
prevailing party as shall be determined by the arbitrator or
arbitrators.
17.12 Representation by Counsel; Interpretation. The Seller and
Purchaser acknowledge that each of them has been represented by
counsel in connection with this Agreement and the transactions
contemplated hereby. Accordingly, any rule of law or any legal
decision that would require interpretation of any claimed
ambiguities in this Agreement against the party that drafted it
has no application and is expressly waived.
17.13 Knowledge of Seller. The term "Knowledge of Seller" and "to
Seller's Knowledge" as used in this Agreement means the actual
knowledge of Seller's management employees who shall be defined as
those employees listed on Schedule 17.13.
17.14 Severability. If any provision of this Agreement (or any
portion thereof) or the application of any such provision (or any
portion thereof) to any person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of
competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision hereof (or
the remaining portion thereof) or the application of such
provision to any other persons or circumstances.
17.15 No Waiver of Rights. A failure or delay in exercising any
right, power or privilege in respect of this Agreement will not be
presumed to operate as a waiver, and a single or partial exercise
of any right, power or privilege will not be presumed to preclude
any subsequent or further exercise of that right, power or
privilege or the exercise of any other right, power or privilege.
17.16 Additional Definitions. (i) "business day" means a day,
other than a Saturday or Sunday, on which the principal commercial
banks located in New York, New York are open for business during
normal banking hours; (ii) "including" means including, without
limitation; and (iii) "person" means any individual, firm,
corporation, partnership, limited liability company, trust, joint
venture, Governmental Entity or other entity.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
ATTEST: JOHNSON CONTROLS, INC.
on its own behalf and on behalf of
the Other Sellers
ATTEST: HOOVER UNIVERSAL, INC.
ATTEST: CINCINNATI MILACRON INC.