EXHIBIT 2.1
_________________________________
ASSET PURCHASE AGREEMENT
by and between
HOLCROFT L.L.C.
and
THERMO TERRATECH INC.
Dated as of October 10, 1997
---------------------------------
PAGE
TABLE OF CONTENTS
ARTICLE I PURCHASE AND SALE OF ASSETS
1.1 Assets
1.2 Excluded Assets
1.3 Assets of Affiliates
1.4 Limited Assumption of Liabilities
ARTICLE II CONSIDERATION AND MANNER OF PAYMENT
2.1 Purchase Price
2.2 Post-Closing Adjustment
2.3. Noncompetition Payments
2.4. Purchase Price Allocation
ARTICLE III SELLER'S REPRESENTATIONS AND WARRANTIES
3.1 Organization and Good Standing
3.2 Corporate Authorization
3.3 No Violation
3.4 No Consent Required
3.5 Financial Statements
3.6 Absence of Undisclosed Liabilities
3.7 Assets
3.8 Compliance with Laws; Permits
3.9 Property
3.10 Leases
3.11 Contracts
3.12 Intellectual Property
3.13 Employee Benefit Plans
3.14 Salaries
3.15 Personnel Agreements, Plans and Arrangements
3.16 Workers Compensation and Medical Claims
3.17 Suppliers
3.18 Customers
3.19 Interest of Seller in Customers, etc.
3.20 Intercompany Transaction
3.21 Books and Records
3.22 Insurance Policies
3.23 Bank Accounts
3.24 Taxes
3.25 Litigation
3.26 Product Warranties
3.27 Environmental and Safety Requirements
iPAGE
3.28 Conduct of the Business
ARTICLE IV BUYER'S REPRESENTATIONS AND WARRANTIES
4.1 Organization and Good Standing
4.2 Authorization
4.3 No Violation
4.4 No Consent Required
ARTICLE V COVENANTS AND AGREEMENTS
5.1. Further Actions
5.2. Noncompetition and Nondisclosure
5.3. Holcroft Name
5.4. Offer of Employment
5.5. WARN Act
5.6. Letters of Credit
ARTICLE VI CLOSING
6.1. Closing
6.2. Deliveries by the Seller
6.3. Deliveries by Buyer
ARTICLE VIICOVENANTS AFTER CLOSING
7.1 Indemnification by Seller
7.2 Indemnification by Buyer
7.3 Indemnification Procedure for Third Party Claims
7.4 Failure to Give Timely Notice
ARTICLE VIII MISCELLANEOUS
8.1 Notices, Consents, etc.
8.2 Public Announcements
8.3 Severability
8.4 Amendment and Waiver
8.5 Documents
8.6 Counterparts
8.7 Expenses
8.8 Construction
8.9 Headings
8.10 Assignment
8.11 Definitions
8.12 Entire Agreement
8.13 Third Parties
8.14 Interpretative Matters
iiPAGE
8.15 Knowledge
8.16 Brokers and Transaction Payments
8.17 No Strict Construction
8.18 Counterparts
iiiPAGE
GLOSSARY OF DEFINED TERMS
"90 Day Receivables"
"90 Day Receivables Note"
"Accountants"
"Agreement"
"Assets"
"Assumed Liabilities"
"Basket Threshold"
"Building and Fixtures"
"Business"
"Buyer Indemnified Party"
"Buyer"
"Cap"
"Chrysler Lease"
"Closing Date"
"Closing"
"Code"
"Contract Requiring Consent"
"Defense Counsel"
"Defense Notice"
"Employee Benefit Plans"
"Employee Pension Benefit Plan"
"Employee Welfare Benefit Plan"
"Employees"
"Environmental and Safety Requirements"
"ERISA"
"Estimated Net Book Value"
"Excluded Assets"
"Excluded Receivables"
"Excluded Liabilities"
"Final Net Book Value"
"Final Purchase Price"
"Final Purchase Price Adjustment Schedule"
"Financial Statements"
"GAAP"
"Hazardous Materials"
"Holcroft Division"
"Holdback Amount"
"Incurred But Not Reported"
"Indemnified Party"
"Indemnifying Party"
"Landlord"
"Lease"
"Letters of Credit"
"Liens"
"Losses"
"Material Contracts"
"Multi-employer Plan"
"Net Book Value"
"Note"
ivPAGE
"Permits"
"Plan Affiliate"
"Preliminary Net Book Value"
"Property"
"Proprietary Rights"
"Protest Notice"
"Purchase Price"
"Restrictive Covenants"
"Retained Receivables"
"Seller Indemnified Party"
"Seller"
"Severance Agreements"
"Sublease"
"Tax Returns"
"Tax"
"Term"
"Thermo"
"Third Party Claim"
"TMO Sublease"
"TMO"
"to the knowledge of Seller,"
"to the best knowledge of Seller"
"Transaction Documents"
"Union Contract"
vPAGE
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of
this 10th day of October, 1997, by and between THERMO TERRATECH
INC., a Delaware corporation ("Seller") and HOLCROFT L.L.C., a
Delaware limited liability company ("Buyer").
WHEREAS, the Holcroft division of Seller (the "Holcroft
Division") is engaged in the business of manufacturing, marketing
and servicing industrial heat treating furnaces (the "Business")
at its principal place of business located at 12068 Market
Street, Livonia, Michigan;
WHEREAS, Seller desires to sell to Buyer, and Buyer desires
to purchase from Seller, the Business and substantially all of
Seller's assets used in the Business, upon the terms and
conditions set forth below;
WHEREAS, Thermo Electron Corporation, a Delaware corporation
("Thermo") owns approximately eighty-one percent (81%) of the
issued and outstanding common stock of Seller.
NOW THEREFORE, in consideration of the mutual covenants of
the parties set forth in this Agreement and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Assets. On the terms and subject to the conditions set
forth in this Agreement, at the Closing, Seller is selling,
transferring and delivering to Buyer, free and clear of all
liens, mortgages, charges, security interests, pledges or other
encumbrances or adverse claims or interests of any nature
("Liens"), and Buyer is purchasing from Seller, the Business and
all of Seller's right, title and interest in and to all of the
assets of the Business (other than Excluded Assets) that are used
in or arise out of the conduct of the Business as of the Closing
Date, wherever located and whether or not all or any of said
assets appear on or are reflected upon Seller's books, records or
financial statements (collectively, the "Assets"), including, but
not limited to, the following:
(a) Tangible Personal Property. All molds and
fixtures, equipment and machinery, tools, real estate fixtures
(including, without limitation, cranes), vehicles (whether or not
registered under motor vehicle registration laws), furniture,
computer and EDP equipment, computer software, office furniture
and other similar personal property of Seller and leasehold
1PAGE
improvements, in each case, used in the Business;
(b) Inventories and Supplies. All inventory of Seller
held in connection with and used in the Business, including
without limitation, raw materials, work-in-process, finished
goods, merchandise for resale, spare parts, and office, operating
and other supplies, whether or not located at the Holcroft
Division's principal place of business;
(c) Receivables. All notes and accounts receivable of
Seller used in the Business and all notes, bonds and other
evidences of indebtedness of any entity or person held by Seller
arising from the Business of Seller, including, without
limitation, all trade, employee, officer and other accounts
(including unbilled work-in-progress) and monies receivable,
except for the Excluded Receivables and the Retained Receivables;
(d) Contracts. All rights Seller may have under any
and all agreements, contracts, purchase orders, licenses (other
than the license agreement dated as of 10/1/93 between Seller and
Thermo Remediation Inc., together with any and all assets related
thereto) and leases (other than the sublease between the Seller
and TMO, Inc. and the Chrysler Lease relating to the Property)
pertaining to the Business including, without limitation, the
labor agreement dated as of 10/1/95 between the Holcroft Division
and Carpenters District Council of Detroit, Wayne, Oakland,
Macomb, St. Claire, Sanilac and Monroe Counties of the United
Brotherhood of Carpenters and Joiners of America and United
Brotherhood of Carpenters and Joiners of America, Millmen's Local
Union No. 1452 (the "Union Contract") and the Material Contracts
set forth in Schedule 3.11, except that Buyer does not assume any
late penalties or loss contracts that are known to the Seller at
the time of the Closing unless such late payments or loss
contracts are specifically reserved for in the Final Net Book
Value;
(e) Intellectual Property. All proprietary
information of Seller used in connection with the Business
including, without limitation, the Holcroft name and assumed
names wherever used, all patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether
or not reduced to practice); all trademarks, service marks, trade
dress, trade names and corporate names; all registered and
unregistered statutory and common law copyrights; all
registrations, applications and renewals for any of the
foregoing; all trade secrets, confidential information, ideas,
formulae, compositions, know-how, manufacturing and production
processes and techniques, research and development information,
drawings, specifications, designs, plans, improvements,
proposals, technical and computer data, documentation and
software, financial, business and marketing plans, and customer
and supplier lists and related information and all other
proprietary rights relating to the manufacture, sale or service
of products by, and the conduct of, the Business (collectively,
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"Proprietary Rights");
(f) Records. All records, files, and papers of Seller
pertaining to the Business, including but not limited to, sales
and purchase correspondence, past and current insurance policies,
books of account and employment records of those employees of
Seller hired by Buyer;
(g) Licenses, Permits and Approvals. All rights of
Seller in and to transferable permits, licenses, approvals and
authorizations by or of governmental authorities or third parties
("Permits") relating primarily to, or necessary for the continued
conduct of, the Business or required in connection with ownership
or operation of the Assets, to the extent assignable;
(h) Claims. All causes of actions, claims,
warranties, guarantees, refunds, rights of recovery and set-off
of every kind and character of Seller related directly to the
Assets or the Business, including, without limitation, rights and
claims against suppliers of inventory and other assets
transferred hereunder;
(i) Customer Property. The custody of all assets
owned by a customer of the Business and held by Seller on behalf
of such customer;
(j) Prepaids. All deferred charges, advances,
deposits, credit and other prepaid assets and expenses of Seller
relating to, or arising out of, the Business;
(k) Insurance. All insurance, warranty and
condemnation proceeds received by Seller after the Closing Date
with respect to damage, nonconformance of or loss to the Assets
and all transferable insurance policies relating to the Business
acceptable to Buyer, except to the extent that such proceeds or
policies relate to Excluded Liabilities;
(l) Cash. All cash and cash equivalents of Seller
relating to the Business, including, without limitation, all cash
receipts, lockboxes and bank accounts;
(m) Software and License Agreements. With respect to
the Holcroft Division, all of Seller's rights and obligations (i)
with respect to software used in the Business, including, without
limitation under the Business Cooperation Agreement between the
Holcroft Division and SCR Creroiserat S.A. dated May 12, 1995,
(ii) under the License Agreement between the Holcroft Division
and Camlaw, Ltd. dated June 26, 1992 and (iii) under the Business
Cooperation Agreement between the Holcroft Division and Sanken
Sangyo Co., Ltd. dated January 20, 1995; and
(n) Other Assets. All other properties and assets
owned or held by the Seller that are used primarily in, or are
necessary for the continued conduct of, or are otherwise
3PAGE
customarily used in, the Business as of the Closing Date, whether
or not of a type falling within any of the categories of assets
or properties described above.
1.2 Excluded Assets. Notwithstanding the foregoing, the
following assets of Seller are retained by Seller and are
expressly excluded from the purchase and sale contemplated by
this Agreement (collectively, the "Excluded Assets"):
(a) Corporate Records and Tax Returns. The Seller's
formal corporate records, including Articles of Incorporation,
corporate seal, minute books, stock books and other records
having exclusively to do with the corporate organization of
Seller and all of Seller's Tax Returns and financial records;
(b) This Agreement. Seller's rights pursuant to or
under this Agreement;
(c) Nonassignable Permits. Any Permits which may not
be transferred without the consent, novation, waiver or approval
of a third person or entity and for which such consent, novation,
waiver or approval has not been obtained;
(d) Employment Agreements. All employment-related
agreements of Seller, and any and all rights and obligations
thereunder (except for the Union Contract);
(e) Certain Receivables. The Champion Credit Corp.
and Avtopromimport receivables totalling $845,940.90 at September
27, 1997 (the "Excluded Receivables") and those receivables set
forth on Schedule 1.2(e) totalling $2,007,003.04 at September 27,
1997 (the "Retained Receivables"). The Buyer agrees to promptly
remit any payments as received by Buyer on the Excluded
Receivables and the Retained Receivables to Seller.
(f) Insurance Policies. The insurance policies
obtained by Seller with respect to the Business or the Assets;
(g) Certain Property. All other properties and assets
owned or held by the Seller that are not used primarily in, or
are necessary for the continued conduct of, or are not otherwise
customarily used in, the Business as of the Closing Date,
including, without limitation, rights to the Seller's corporate
name and all assets related to remediation incinerators or soil
remediation technology;
(h) Employee Benefit Plans. All Employee Benefit
Plans of Seller; and
(i) License Agreement. The license agreement between
Seller and Thermo Remediation Inc., and any and all assets
relating thereto, including soil remediation technology.
4PAGE
1.3 Assets of Affiliates. The real estate and building
used by Seller as its principal place of business for the
Business (the "Property") is owned by W&C Investment Co. (the
"Landlord"), leased by the Landlord to TMO, Inc., a wholly-owned
subsidiary of Thermo Electron Corporation ("TMO") and subleased
by TMO to Seller. The Seller agrees to enter into a sublease in
the form of Exhibit 1.3 hereto (the "Sublease") with Buyer.
1.4 Limited Assumption of Liabilities.
(a) Subject to the terms and conditions contained in
this Agreement, Buyer shall, at the Closing, assume and agree to
pay or perform, or to cause to be paid or performed, only those
liabilities of Seller that (i) are accurately reflected on the
Estimated Net Book Value; (ii) have been incurred by the Holcroft
Division since September 27, 1997, but only to the extent such
liabilities are trade payables, accruals or tax liabilities and
have been incurred in the ordinary course of business consistent
with past practice; (iii) arise under any contract, lease,
license, permit or other agreement assumed by Buyer pursuant to
Section 1.1(d) hereof or otherwise pursuant to this Agreement;
(iv) arise out of warranty obligations undertaken by the Holcroft
Division with respect to products shipped or sold, or services
rendered, prior to the Closing; (v) with respect to product or
service liability claims, arise due to events occurring after the
Closing regardless of whether such products or services were
shipped or performed before the Closing except that Seller shall
remain liable for any and all claims, suits or actions which
arise due to events occurring prior to Closing and which arise or
result from the manufacture by Seller of remediation incinerators
and/or units, including but not limited to soil remediation
units, the GDC incinerators and the Burns and Roe (CJ 4447) or
any claims which arise from exposure to asbestos from products
manufactured by Seller (except for claims arising out of the
negligence of Buyer) regardless of whether such claim arises due
to events occurring prior to or after the Closing Date; (vi) are
assumed by Buyer pursuant to Section 5.4 hereof, and (vii) with
respect to medical claims of Employees of the Holcroft Division,
arise due to events occurring after the Closing including without
limitation the post-closing treatment of preexisting conditions;
Seller shall remain liable for all claims incurred (i.e., service
provided) prior to the Closing, regardless of when such claims
are filed ("Incurred But Not Reported") (collectively, the
"Assumed Liabilities"). Notwithstanding anything to the contrary
contained in this Agreement or in any agreement, document,
certificate or instrument being delivered pursuant to this
Agreement (collectively, the "Transaction Documents"), Buyer's
assumption of the Assumed Liabilities shall only be to the extent
that the existence of such liabilities or obligations is not
contrary to any covenant, representation or warranty of Seller
under this Agreement.
(b) Without limiting the terms of Section 1.4(a)
above, Buyer is expressly not assuming, and Seller shall remain
5PAGE
solely liable for, the following: (i) all environmental
liabilities or contamination which arise or result, directly or
indirectly, from conditions existing on or prior to the Closing
Date with respect to the Property, including, without limitation
all liabilities related to the Oakland Disposal/Bestway Recycling
litigation with respect to Waterford township; (ii) except as set
forth in Section 1.4(a), all claims, suits or actions which arise
due, directly or indirectly, to facts or circumstances existing
prior to the Closing; (iii) liability for checks written but not
yet cleared as of the Closing Date (unless such checks are
accurately reflected or included in the determination of the
Estimated Net Book Value); (iv) any liabilities or obligations
relating to medical claims of current or past employees of the
Holcroft Division arising due to events occurring prior to the
Closing, including, without limitation, run-off of claims and/or
deficit balances for reported claims arising due to events
occurring prior to the Closing and all liabilities Incurred But
Not Reported; (v) all product liability claims for any products
manufactured, or services performed, by Seller relating to
claims, suits or actions which arise due to events occurring
prior to the Closing, except that Seller shall remain liable for
any and all claims, suits or actions which arise or result from
the manufacture by Seller of remediation incinerators and/or
units, including but not limited to soil remediation units, the
GDC incinerators, and the Burns and Roe (CJ 4447) or any claims
which arise from exposure to asbestos from products manufactured
by Seller (except for claims arising out of the negligence of
Buyer) regardless of whether such claim arises prior to or after
the Closing Date; (vi) all liabilities which are assumed by
Seller pursuant to Section 5.4 hereof; and (vii) any liability
for Taxes with respect to taxable periods ending on or before the
Closing Date and the portion ending on the closing date of any
taxable period that begins before but has not ended on the
Closing Date (all such liabilities and obligations not being
assumed by Buyer, "Excluded Liabilities").
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Purchase Price.
(a) Subject to the provisions of Section 2.2 below,
the aggregate purchase price to be paid by Buyer to Seller for
the Business, the Assets and Seller's agreement to abide by the
Restrictive Covenants (as defined below) is (i) $13,000,000,
minus Excluded Receivables, minus the 90 Day Receivables (as
defined below), payable by Buyer at the Closing (net of the
Holdback Amount as defined in Section 2.1(b)) by wire transfer of
immediately available funds, plus (ii) $2,218,000, payable by
Buyer at the Closing by delivery of a promissory note in the form
of Exhibit 2.1(a)(ii) hereto (the "Note"), plus
(iii) $663,117.82, payable by Buyer at the Closing by delivery of
6PAGE
a promissory note in the form of Exhibit 2.1(a)(iii) hereto (the
"90 Day Receivables Note") which amount shall equal 90% of the
aggregate amount of those accounts receivable of Seller, set
forth on Schedule 2.1 (the "90 Day Receivables"), plus (iv)
Buyer's assumption of the Assumed Liabilities (the "Purchase
Price"). The parties agree that all cash receipts related to
assumed receivables or other activities (expressly excluding
Excluded Receivables and Retained Receivables) after September
27, 1997 are for the benefit of Buyer and within six days of the
date hereof, by mutual agreement of the parties, such cash
receipts between September 27, 1997 and the Closing Date, less
liabilities assumed by Buyer pursuant to Section 1.4(a)(ii) but
paid by Seller and any receivables that are Excluded Receivables
or Retained Receivables will be remitted by wire transfer from
Seller to Buyer. Any checks issued by Seller after September 27,
1997 for items that relate to Excluded Assets or Excluded
Liabilities and items that were not accrued for on the Estimated
Net Book Value will remain the responsibility of Seller.
(b) The parties agree that Buyer shall holdback
$520,000 of the Purchase Price (the "Holdback Amount") pursuant
to Section 2.2 hereof.
(c) Prior to the Closing, Seller delivered to Buyer a
statement of the Company's net book value (the "Net Book Value")
of the Assets and the Assumed Liabilities based on the Company's
unaudited balance sheet dated as of September 27, 1997 (the
"Estimated Net Book Value"), calculated in accordance with GAAP
consistently applied by Seller and set forth on Exhibit 2.1(c).
The Purchase Price is based on the assumption that the Estimated
Net Book Value is equal to $13,218,000 (the "Preliminary Net Book
Value", as such amount was calculated on March 29, 1997 and as
set forth on Exhibit 2.1(c)). Because the parties have
determined that the Estimated Net Book Value exceeds the
Preliminary Net Book Value by $2,007,003.04, the Purchase Price
shall be paid in accordance with this Section 2.1, and, in
addition, Seller shall retain all right, title and interest in
and to the Retained Receivables having an aggregate value of
$2,007,003.04, which amount shall be equal to the difference
between the Estimated Net Book Value and the Preliminary Net Book
Value.
2.2 Post-Closing Adjustment. In addition, the Purchase
Price shall be subject to final adjustment as follows:
(a) Purchase Price Adjustment Schedule. As soon as
practicable following the Closing Date, but not later than 30
days after the Closing Date, Buyer shall deliver to Seller a
schedule (the "Final Purchase Price Adjustment Schedule") setting
forth Buyer's final determination of the Purchase Price (the
"Final Purchase Price"), based upon a net book value calculation
as of September 27, 1997 (the "Final Net Book Value"), which
shall be calculated in accordance with GAAP consistently applied
by Seller.
7PAGE
(b) Protest Notice. Within 15 days of Buyer's
delivery of the Final Purchase Price Adjustment Schedule, Seller
may deliver written notice (the "Protest Notice") to Buyer of any
objections, and the basis therefor, that Seller may have to the
Final Purchase Price or the Final Net Book Value. The failure of
Seller to deliver such written notice within the prescribed time
period will constitute Seller's acceptance of the Final Purchase
Price and the Final Net Book Value, as determined by Buyer.
(c) Resolution of Buyer's Protest. If Buyer and
Seller are unable to resolve any disagreement between them within
10 days following Buyer's receipt of the Protest Notice, then the
items in dispute will be referred to a nationally recognized
independent accounting firm (other than Arthur Anderson, LLP or
Price Waterhouse LLP) (the "Accountants") for final
determination. If the Accountants determine that the Buyer's
calculation of the items in dispute is correct, the Seller shall
be liable for all of the fees and expenses of the Accountants of
the items in dispute. If the Accountants determine that the
Seller's calculation of the items in dispute is correct, the
Buyer shall be liable for all of the fees and expenses of the
Accountants. If the Accountants' final determination is between
the Buyer's calculation and Seller's calculation of the items in
dispute, the Accountants' fees and expenses will be allocated
between the Buyer and Seller by applying a pro rata, straight
line allocation based on the difference between both (i) each of
the Buyer's and Seller's calculation of the items in dispute on
the one hand, and (ii) the Accountants' final determination and
each of Buyer's and Seller's calculation of the items in dispute
on the other hand. For example, if the Buyer's calculation of
the items in dispute is $100,000, the Seller's calculation of the
items in dispute is $50,000 (thereby making the disputed
difference $50,000), and the Accountants' final determination is
$90,000, the Seller shall pay for 80% ($40,000 indicating the
difference between the Seller's and Accountants' determination
divided by $50,000 indicating the difference between the Buyer's
and Seller's calculation) and the Buyer shall pay for 20% of the
fees and expenses of the Accountants.
(d) Payment of Adjustment. Within 10 days following
the final determination of the Final Purchase Price and Final Net
Book Value pursuant to this Section 2.2:
(i) if the Final Net Book Value is less than
the Estimated Net Book Value, Buyer will be
entitled to receive, an amount equal to the
deficiency, up to the Holdback Amount net of any
amount for which Seller is liable pursuant to
Section 2.2(c) which deduction shall not exceed
$10,000.00; provided that any remaining balance of
the Holdback Amount shall be distributed to
Seller;
8PAGE
(ii) if the Final Net Book Value is equal to
the Estimated Net Book Value, the Buyer will
distribute to Seller the entire Holdback Amount;
and
(iii) if the Final Net Book Value is greater
than the Estimated Net Book Value, the Buyer will
distribute the entire Holdback Amount to Seller
and Buyer will pay Seller the excess in an amount
up to, but in no event to exceed, $520,000 net of
any amount for which Buyer is liable pursuant to
Section 2.2(c), which deduction shall not exceed
$10,000.00.
(e) Agreed Upon Amounts. Buyer and Seller agree that
both the Estimated Net Book Value and the Final Net Book Value
will (i) reflect or include reserves which are equal to, or
greater than, the reserves set forth in the Preliminary Net Book
Value, (ii) take into account any credits which Buyer and Seller
reasonably agree to be due to customers of Seller for products
shipped prior to the Closing, (iii) exclude capitalized research
and development costs in the amount of $287,748.00, (iv) exclude
non-depreciated fixed assets related to relocation costs in the
amount of $46,517.14 and (v) employee advances not expensed in
the amount of $46,567.82. Seller has reserved $200,000 on the
Estimated Net Book Value, representing 50% of $400,000 of slow
moving or obsolete inventory, for which no further purchase price
adjustment will be made. If there is any slow moving or obsolete
inventory in excess of $400,000 but less than $500,000, an
adjustment to the Final Net Book Value will be made to the extent
of 50% of such amount; for any amounts in excess of $500,000 a
100% adjustment will be made subject to Section 2.2(f) below.
(f) Limitation of Liability; Exclusive Remedy.
Notwithstanding anything to the contrary in this Agreement or any
Transaction Document, in no event shall any adjustment to the
Purchase Price in favor of Buyer exceed the aggregate of the
Holdback Amount and in no event shall any adjustment to the
Purchase Price in favor of Seller exceed $520,000. The
provisions of this Section 2.2 shall be the exclusive remedy by
which the parties may cause adjustments to the Purchase Price,
and neither party shall have any recourse to any other provision
of this Agreement or any Transaction Document to adjust the
Purchase Price to any extent not provided for in this Section
2.2; provided, however, that the foregoing shall not prevent (i)
the Buyer from asserting any claims for indemnification under
Article 7 hereof, to the extent that Buyer has not submitted a
claim for adjustment to the Purchase Price pursuant to this
Section 2.2 and did not, in good faith, know or believe, prior to
the time the Buyer delivers its Final Purchase Price Adjustment
Schedule, that such claims for indemnification existed or (ii)
the Seller from asserting any claims for indemnification under
Article 7 hereof.
9PAGE
2.3. Noncompetition Payments. Buyer and the Seller hereby
agree that $50,000 of the Purchase Price shall be in
consideration for Seller's agreement to abide by the Restrictive
Covenants (as defined herein).
2.4. Purchase Price Allocation. The Buyer and Seller shall
attempt to allocate the cash portion of the Purchase Price among
the Assets by mutual written agreement within one hundred and
eighty (180) days after the Closing. Seller and Buyer agree to
make all appropriate tax filings on a basis consistent with the
agreed allocation, if any.
ARTICLE III
SELLER'S REPRESENTATIONS AND WARRANTIES
As an inducement to Buyer to enter into and perform its
obligations under this Agreement, Seller represents and warrants
to and with Buyer, on the date hereof, as follows:
3.1 Organization and Good Standing. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Seller has full
corporate power and authority to execute and deliver the
Transaction Documents to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Seller is duly
licensed and qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the
location of the Assets or the character of the operations of the
Business requires such license or qualification, except for those
jurisdictions where the failure to be so qualified or in good
standing would not individually or in the aggregate have a
material adverse effect on the Assets or the operations of the
Business.
3.2 Corporate Authorization. The execution and delivery of
this Agreement and the other Transaction Documents, and the
performance by Seller of its obligations hereunder and
thereunder, have been duly authorized by all necessary corporate
action. This Agreement and the other Transaction Documents to
which Seller is a party constitute the legal, valid and binding
obligations of Seller, enforceable against Seller in accordance
with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, receivership, moratorium and other
similar laws affecting the rights and remedies of creditors
generally, and to general principles of equity, whether applied
by a court of law or equity.
3.3 No Violation. The execution, delivery and performance
by Seller of the Transaction Documents to which it is a party and
the consummation of the transactions contemplated herein and
therein will not:
10PAGE
(a) except as set forth in Schedule 3.3, result in the
breach of any of the terms or conditions of, or constitute a
default under, or in any manner release any party thereto from
any obligation under, any mortgage, note, bond, indenture,
contract, agreement, license or other instrument or obligation of
any kind or nature by which Seller, the Business or any of the
Assets may be bound.
(b) violate any order, writ, injunction, regulation,
statute or decree of any court, administrative agency, or
governmental body specifically applicable to Seller, the Assets
or the Business; or
(c) violate any provision of the Articles of
Incorporation, Bylaws or Charter Documents of Seller.
3.4 No Consent Required. Except as set forth on Schedule
3.4, no consent, approval, order or authorization of, or
declaration, filing or registration with, any person, entity or
governmental authority is required to be made or obtained by
Seller in connection with the authorization, execution, delivery
or performance of this Agreement, the other Transaction Documents
or the transactions contemplated hereby and thereby.
3.5 Financial Statements. Schedule 3.5 contains the
following financial statements of the Holcroft Division of Seller
(the "Financial Statements"):
(i) The unaudited financial statements for
fiscal years ended March 28, 1992 through March 29,
1997; and
(ii) The unaudited interim financial
statements for the six months ended September 27,
1997.
Each of the Financial Statements is complete and correct in
all material respects, is consistent with the books and records
of the Holcroft Division and fairly presents the Holcroft
Division's financial condition, assets and liabilities as of its
respective dates and the results of operations and cash flows for
the periods related thereto. The Financial Statements were
prepared in accordance with GAAP consistently applied by Seller
(except for footnote disclosure).
3.6 Absence of Undisclosed Liabilities. As of the Closin
Date, to Seller's knowledge, Seller will not have any material
debts, liabilities or obligations that can reasonably be expected
to have a material adverse effect on the Business or the Assets
(whether accrued, absolute, contingent, direct, indirect,
perfected, inchoate, unliquidated or otherwise and whether due or
to become due) arising out of transactions entered into on or
prior to the Closing Date, or any transaction, series of
11PAGE
transactions, action or inaction occurring on or prior to the
Closing Date, or any state of facts or condition existing on or
prior to the Closing Date (regardless of when such liability or
obligation is asserted), including, but not limited to,
liabilities or obligations on account of Taxes or governmental
charges or penalties, interest or fines thereon or in respect
thereof, except (a) as and to the extent clearly and accurately
reflected and accrued for or reserved against in the Estimated
Net Book Value, (b) for liabilities specifically delineated on
Schedule 3.6, (c) for liabilities expressly disclosed on any
Schedule hereto and (d) for liabilities incurred in the ordinary
course of business since September 27, 1997.
3.7 Assets.
(a) Title. Except for the Property which is the
subject of the Sublease and except as set forth on Schedule 3.7,
Seller owns all of the Assets and the Assets constitute all of
the property and assets which are considered part of the Business
and all of the assets deemed necessary by Seller to conduct the
Business as presently conducted. Seller has the right to convey,
and upon the consummation of the transactions contemplated by
this Agreement Seller will have conveyed and Buyer will be vested
with, good and marketable title and interest in and to the
Assets, free and clear of all Liens except as set forth on
Schedule 3.7.
(b) Inventories. Except as set forth on Schedule 3.7,
the inventories of Seller related to the Business are in good and
saleable condition, subject to the reserves used in determining
the Estimated Net Book Value, which reserves are sufficient to
cover all inventory which is not good and saleable in the
ordinary course of business, obsolete inventory, or materials
below standard quality. The inventories constituting raw
materials are of a type that are readily useable in connection
with the finished goods offered for sale by the Seller.
(c) Accounts Receivable. All of the Seller's accounts
receivable arising out of, or related to, the Business have
arisen in bona fide arm's-length transactions in the ordinary
course of business. Except to the extent of any reserves for bad
debts set forth in the determination of the Estimated Net Book
Value, which is sufficient to cover all bad debts, all such
receivables are valid and binding obligations of the account
debtors without any counterclaims, set-offs or other defenses
thereto and are collectible in the ordinary course of business.
(d) Condition and Location. Except as set forth in
Schedule 3.7, on the Closing Date, the tangible, personal
property comprising the Assets (other than inventory) is in good
operating condition and is useable in the ordinary course of
business. All of such tangible assets which are part of the
Assets are in good condition and repair, ordinary wear and tear
excepted. None of such Assets requires any repair or
12PAGE
replacement, except for maintenance in the ordinary course of
business. Except as set forth on Schedule 3.7, none of the
tangible personal property of the Seller used in the Business is
held under any lease, security agreement, conditional sales
contract or other title retention or security arrangement, or is
located other than at the Property.
(e) Unbilled Work-in-Progress. The current status of
the Company's contracts with respect to unbilled work-in-progress
is accurately reflected in the Estimated Net Book Value.
3.8 Compliance with Laws; Permits. Seller, with respect to
its Holcroft Division, is not in material violation of any law,
regulation or requirement applicable to it, the Assets, any
Employee Benefit Plans or the operation of the Business, nor has
the Seller received written notice of any such violation, that
individually or in the aggregate would have a material adverse
affect on the Assets or the operation of the Business. Seller
holds all of the material Permits necessary or desirable for the
current use, occupancy or operation of the Assets, except where
failure to obtain such Permits would not individually, or in the
aggregate, have a material adverse affect on the Assets or the
Business, and all of which are set forth on Schedule 3.8. Seller
is in compliance with each of such Permits, all of which are in
full force and effect. Except as set forth in Schedule 3.8, each
of the Permits is freely transferable and will constitute part of
the Assets. Seller further represents and warrants that all of
its employees at the Holcroft Division have proper citizenship
and/or work authorization documents.
3.9 Property. The Property constitutes all real property
used and occupied by Seller in connection with the Business. The
Property is subject to a lease between TMO and Landlord (the
"Lease"), and to a sublease between TMO and Seller (the "TMO
Sublease"). Each of the Lease and the TMO Sublease is in full
force and effect and no default by TMO or Seller has occurred
under the Lease or the TMO Sublease.
(a) Easements. Seller has all easements and rights
necessary to conduct the Business on the Property as presently
conducted;
(b) Condemnation. No portion of the Property is
subject to any pending condemnation proceeding or proceeding by
any public or quasi-public authority materially adverse to the
Property and, to the knowledge of Seller, there is no threatened
condemnation or proceeding with respect to the Property;
(c) Condition. To the knowledge of Seller, the
buildings and fixtures located on the Property including, without
limitation, heating, ventilation, mechanical, electrical, sewer,
sprinkler and air conditioning systems, roof, foundation and
floors (the "Building and Fixtures"), have been properly
maintained and are in operating condition. To the knowledge of
13PAGE
Seller, the Building and Fixtures are in good operating
condition, are substantially fit for the purposes for which they
are being utilized, and are not in need of any material repair or
replacement;
(d) Zoning. To the knowledge of Seller, except as
disclosed in Schedule 3.9(d), the Property (or the use, occupancy
and ownership thereof) does not violate any zoning, subdivision,
health, safety, handicapped persons, landmark preservation,
wetlands preservation, building, land use or other ordinances,
laws, codes or regulations or any covenants, restrictions or
other documents of record (including the Americans with
Disabilities Act), nor, has any such violation been claimed by,
nor has any notice of any violation been issued to Seller by any
governmental, public or quasi-public authority;
(e) Subleases. Except as set forth on Schedule
3.9(e), there are no leases, subleases, licenses, concessions or
other agreements, written or oral, granting to any party or
parties, other than Buyer, the right of use or occupancy of any
portion of the Property; and
(f) Utilities. The Property is supplied with
utilities and other services necessary for the operation of the
Business as presently conducted, and all such services are
adequate to conduct that portion of the Business presently
conducted at the Property and are, to the knowledge of Seller, in
accordance with all laws, ordinances, rules and regulations
applicable to Seller or the Property, except where failure to
comply with such laws, ordinances, rules and regulations would
not have individually or in the aggregate a material adverse
effect on the Assets or in the operations of the Business as
presently conducted.
3.10 Leases. All leases of the personal property leased by
Seller in connection with the Business, including all such leases
with related parties or affiliates, are listed on Schedule 3.10,
correct and complete copies of which previously have been
furnished to Buyer. All leases with affiliates and related
parties, if any, carry terms and conditions no less favorable nor
more favorable in all material respects to the Seller than those
which could have obtained in arm's-length transactions with
unrelated third parties. Seller enjoys peaceful and undisturbed
possession under all such leases, and all of such leases are
valid and in full force and effect and neither Seller, nor to the
knowledge of Seller, any other party thereto, is in default under
any of such leases and no event has occurred which with the
giving of notice or the passage of time or both could constitute
a default under any of such leases.
3.11 Contracts. Schedule 3.11 is a correct and complete
list of every material contract, agreement, purchase order,
relationship or commitment, written or oral, arising out of or
related to the Business, to which Seller is a party or by which
14PAGE
it or any of the Assets are bound (the "Material Contracts"),
correct and complete copies of which previously have been
provided to the Buyer. Except as set forth on Schedule 3.11,
each of the Material Contracts may be assigned to Buyer without
the consent, approval, novation or waiver of any third party.
Seller is not in default, and no event has occurred which with
the giving of notice or the passage of time or both would
constitute a default by Seller, under any Material Contract. To
the knowledge of Seller, no other party to the Material
Contracts, is in default under a Material Contract and no event
has occurred which with the giving of notice or the passage of
time or both could constitute a default under any of such
Material Contracts. Since March 29, 1997, there has been no
cancellation or threatened termination of a Material Contract.
For purposes of this Agreement the term "Material Contracts"
shall include all contracts which (i) require aggregate payments
to or by Seller in excess of $20,000 or (ii) have a term or
effective period longer than 1 (one) year in duration.
3.12 Intellectual Property. Schedule 3.12 contains a
complete and correct list of all Proprietary Rights owned by
Seller which are used in connection with the Business, including,
without limitation, filed and pending patent applications and
applications for the registration of other Proprietary Rights
owned or filed by Seller. Schedule 3.12 also contains a complete
and correct list of all licenses and other rights granted by
Seller to any third party with respect to the Proprietary Rights
and licenses and other rights granted by any third party to
Seller in connection with the Business. With respect to the
Proprietary Rights: (a) Seller owns and possesses all right,
title and interest in and to, or has a valid license to use, all
of the Proprietary Rights necessary for the operation of the
Business as presently conducted and none of such Proprietary
Rights have been abandoned; (b) no claim by any third party
contesting the validity, enforceability, use or ownership of any
such Proprietary Rights has been made, is currently outstanding
or, to the knowledge of Seller, is threatened and, to the
knowledge of Seller, there is no reasonable basis for any such
claim; (c) neither Seller nor any registered agents of Seller
have received any notices of, nor is Seller aware of any
reasonable basis for, an allegation of, any infringement or
misappropriation by, or conflict with, any third party with
respect to such Proprietary Rights, nor has Seller or any
registered agent of Seller received any written claims of
infringement or misappropriation of or other conflict with any
Proprietary Rights of any third party; and (d) Seller, in
operating the Holcroft Division, has not infringed,
misappropriated or otherwise violated any Proprietary Rights of
any third parties, and Seller is not aware of any infringement,
misappropriation or conflict which will occur as a result of the
continued operation of the Business.
3.13 Employee Benefit Plans. With respect to the employees
of the Holcroft Division and except as set forth in
15PAGE
Schedule 3.13, neither Seller nor any Plan Affiliate has
maintained, sponsored, adopted, made contributions to or
obligated itself to make contributions to or to pay any benefits
or grant rights under or with respect to any "Employee Pension
Benefit Plan" (as defined in Section 3(2) of ERISA), "Employee
Welfare Benefit Plan" (as defined in Section 3(1) of ERISA),
"Multi-employer Plan" (as defined in Section 3(37) of ERISA),
plan of deferred compensation, medical plan, life insurance plan,
long-term disability plan, dental plan or other plan providing
for the welfare of any of Seller's or any Plan Affiliate's
employees or former employees or beneficiaries thereof, personnel
policy (including but not limited to vacation time, holiday pay,
bonus programs, moving expense reimbursement programs and sick
leave), excess benefit plan, bonus or incentive plan (including
but not limited to stock options, restricted stock, stock bonus
and deferred bonus plans), salary reduction agreement,
change-of-control agreement, employment agreement, consulting
agreement, workers compensation law, unemployment compensation
law, social security law or any other benefit, program or
contract (all such plans listed on Schedule 3.13 collectively,
"Employee Benefit Plans"), whether written, voluntary or pursuant
to a collective bargaining agreement or law, which could give
rise to or result in Seller or such Plan Affiliate having any
debt, liability, claim or obligation of any kind or nature,
whether accrued, absolute, contingent, direct, indirect, known or
unknown, perfected or inchoate or otherwise and whether or not
due or to become due. Correct and complete copies of all
Employee Benefit Plans previously have been furnished to Buyer.
For purposes of this Agreement, "Plan Affiliate" means any person
or entity with which Seller constitutes all or part of a
controlled group of corporations, a group of trades or businesses
under common control or an affiliated service group, as each of
those terms are defined in Section 414 of the Code.
3.14 Salaries. Schedule 3.14 is a true, complete and
correct list setting forth, with respect to the Holcroft Division
(i) the names and current compensation rate and compensation of
all individuals presently employed by Seller on a salaried basis,
(ii) the names and current compensation rate of all individuals
presently employed by the Seller on an hourly or piecework basis
and (iii) the names and total annual compensation for all
independent contractors who render services on a regular basis to
the Seller whose current annual compensation is in excess of
$20,000. Except as set forth in Schedule 3.14, no person listed
thereon has received any bonus or increase in compensation since
March 29, 1997 and there has been no "general increase" in the
compensation or rate of compensation payable to any such
employees since March 29, 1997 nor since that date has there been
any promise to the employees listed on Schedule 3.14, orally or
in writing, of any bonus or increase in compensation, whether or
not legally binding, except for increases in the ordinary course
of business consistent with Seller's past compensation practices
and obligations incurred under existing Employee Benefit Plans
and pursuant to the Union Contract.
16PAGE
3.15 Personnel Agreements, Plans and Arrangements. Except
for the items listed in Schedule 3.15, Seller, with respect to
the Holcroft Division, is not a party to or obligated to any (a)
outstanding contracts with current or former employees, agents,
consultants, advisers, salesmen, sales representatives,
distributors, sales agents, independent contractors, or dealers,
or (b) collective bargaining agreements or contracts with any
labor union or other representative of employees or any employee
benefits provided for by any such agreement, correct and complete
copies of which previously have been furnished to Buyer. With
respect to the Holcroft Division, no strike, union organizational
activity, allegation, charge or complaint of employment
discrimination or other similar occurrence has occurred during
the past three fiscal years of Seller or is pending or, to the
knowledge of Seller, threatened against Seller nor does Seller
know any basis for any such allegation, charge, or complaint.
With respect to the Holcroft Division, Seller has complied in all
material respects with all applicable laws relating to the
employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the
payment of social security and other taxes. There are no
administrative charges or court complaints pending or, to the
knowledge of Seller, threatened against Seller, relating to the
Holcroft Division, before the U.S. Equal Employment Opportunity
Commission or any state or federal court or agency concerning
alleged employment discrimination or any other matters relating
to the employment of labor.
3.16 Workers Compensation and Medical Claims. Schedule 3.16
sets forth all expenses, obligations, duties and liabilities
relating to any claims by employees and former employees
(including dependents and spouses) of the Holcroft Division (or
predecessors) made since April 1, 1995 and the extent of any
specific accrual on or reserve therefor set forth on the
Financial Statements and used in determining the Estimated Net
Book Value, for (a) costs, expenses and other liabilities under
any workers compensation laws, regulations, requirements or
programs and (b) any other medical costs and expenses. Except as
set forth on Schedule 3.16, to the knowledge of Seller, no
claims, injuries, fact, event or condition exists which would
give rise to a material claim (individually or in the aggregate)
by employees and former employees (including dependents and
spouses) of the Holcroft Division of Seller under any Employee
Benefit Plans that comply with workers compensation laws,
regulations, requirements or programs or that provide for any
other medical costs and expenses or under any similar plans or
programs maintained or contributed to by Buyer following the
Closing Date.
3.17 Suppliers. Schedule 3.17 is a complete and correct
list of the ten largest suppliers to the Holcroft Division (in
terms of the Seller's purchases from such suppliers during the
fiscal year ended March 29, 1997) of key materials and services
17PAGE
and commodities, exclusive of utility services. In the last
twelve months, no such supplier has canceled or otherwise
terminated, or, to the knowledge of Seller, threatened to cancel
or terminate, its relationship with Seller. Seller has not
received any written notice or oral notice and has no knowledge
that any such supplier intends to cancel or otherwise modify its
relationship with Seller on account of the acquisition of the
Assets by Buyer or otherwise.
3.18 Customers. Schedule 3.18 is a complete list by dollar
volume of sales made or services provided within Seller's fiscal
years ended March 30, 1996 and March 29, 1997, to the twenty
largest customers of the Holcroft Division. In the last twelve
months, no such customer has canceled or otherwise terminated,
or, to the knowledge of Seller, threatened to cancel or otherwise
terminate, its relationship with Seller, or reduced, or
threatened to reduce, its business with the Seller. Seller has
not received any written or oral notice and has no knowledge that
any such customer intends to cancel or otherwise modify its
relationship with Seller on account of the acquisition of the
Assets by Buyer or otherwise. Seller represents and warrants
that, with respect to the Holcroft Division, (i) no credits (for
any reason, whether due to returns, discounts or otherwise) are
due to any customers that are not reflected in the Estimated Net
Book Value and (ii) no penalty payments resulting from Seller's
lack of performance under any contract are currently due and
owing, or, to the knowledge of Seller, will be due to any
customers that are not adequately reserved for in the Estimated
Net Book Value.
3.19 Interest of Seller in Customers, etc. Except as set
forth in Schedule 3.19, neither Seller nor any of its respective
affiliates has any direct or indirect interest in any competitor,
supplier or customer of the Holcroft Division or in any person
from whom or to whom the Holcroft Division leases any real or
personal property or in any other person with whom the Holcroft
Division has any business relationship.
3.20 Intercompany Transaction. Schedule 3.20 describes, in
respect of the Business, (i) all material management,
administrative, computer, telephone or other services provided by
any of Seller's affiliates to the Holcroft Division and all such
services provided by the Holcroft Division to any of Seller's
affiliates, and (ii) all other material contracts, agreements,
arrangements or transactions (including the purchase and sale of
inventory, supplies and other goods) between the Holcroft
Division, on the one hand, and any of Seller's affiliates on the
other hand, currently in effect, in each case setting forth the
terms thereof if not effected on an arm's-length basis.
3.21 Books and Records. All the books, records and accounts
included in the Assets are in all material respects accurate and
complete, are in accordance with good business practice and all
laws, regulations and rules applicable to the Business and
18PAGE
accurately present and reflect in all material respects all of
the transactions described therein.
3.22 Insurance Policies. Schedule 3.22 contains a correct
and complete list and description (including policy numbers), of
all past and present insurance policies owned by Seller
pertaining to the Business, including, without limitation, all
occurrence product liability policies covering the period
beginning January 1, 1992 and ending on the Closing Date. Copies
of all such insurance policies have been previously provided to
Buyer. The present insurance policies are in full force and
effect, and Seller is not in default under any of them. Seller
has not received any written or oral notice of cancellation or
intent to cancel or increase premiums with respect to present
insurance policies nor, to the knowledge of Seller, is there any
basis for any such action. Schedule 3.22 also contains a list of
all pending claims with any insurance Seller and any instances
within the previous three years of a denial of coverage of the
Seller by any insurance Seller which relate to the Business.
3.23 Bank Accounts. Schedule 3.23 is a complete and correct
list of each bank in which Seller has an account, safe deposit
box, or lockbox pertaining to the Business, the number of each
such account or box and the names of all persons authorized to
draw thereon or to have access thereto.
3.24 Taxes. Seller has filed all Tax Returns that it is
required to have filed prior to the Closing in connection with
the Assets or the operation of the Business and such returns are
true and correct. Seller has paid all Taxes, interest and
penalties, if any, reflected on such Tax Returns or otherwise due
and payable by it in connection with the Assets or the operation
of the Business. Except as set forth in the calculation of the
Estimated Net Book Value, Buyer does not have any liability
whatsoever for Taxes with respect to taxable periods ending on or
before September 27, 1997 and the portion ending on the closing
date of any taxable period that begins before but has not ended
on the Closing Date. Any deficiencies proposed as a result of
any governmental audits of such Tax Returns have been paid or
settled, and there are no present disputes as to Taxes payable by
Seller in connection with the Assets or the operation of the
Business.
3.25 Litigation. Except as set forth in Schedule 3.25,
there is no claim, counter-claim, action, suit, order, proceeding
or investigation pending or, to the knowledge of Seller,
threatened against or involving Seller (or pending or threatened
against any of the officers, directors or key employees of Seller
with respect to its business activities on behalf of Seller) or
any Employee Benefit Plan, with respect to or affecting the
Assets or the Business, or relating to the transactions
contemplated hereby, before any court, agency or other
governmental body; nor, to the knowledge of Seller, is there any
reason for any such claim, action, suit, proceeding or
19PAGE
governmental investigation. Seller is not, with respect to the
Assets or the Business, directly subject to or affected by any
order, judgment, decree or ruling of any court or governmental
agency. Seller does not have any reason to believe it is
exposed, from a legal standpoint, to any liability which may be
material to the Business or the Assets, except as set forth in
Schedule 3.25. Except as set forth in Schedule 3.25, Seller is
not engaged in any legal action to recover monies due it or for
damages sustained by it.
3.26 Product Warranties. To the knowledge of the Seller,
all products sold, serviced or distributed by the Holcroft
Division of Seller at any time on or prior to the Closing Date
have been in conformance with all applicable contractual
commitments and all express or implied warranties of Seller, and
no material liability exists for replacement thereof or other
damages in connection with such sales or deliveries at any time
prior to the Closing Date (except as may be reflected or reserved
for in the determination of the Estimated Net Book Value, which
is adequate to cover all potential product claims). Seller's
standard terms and conditions of sale with respect to the
Holcroft Division, including guarantee and warranty provisions,
are set forth in Schedule 3.26. Except as set forth in Schedule
3.26, no products sold, serviced or distributed by Seller through
the Holcroft Division prior to the Closing Date are subject to
any guarantee or warranty other than Seller's standard terms and
conditions of sale.
3.27 Environmental and Safety Requirements. With respect to
the Holcroft Division:
(a) No Hazardous Materials. Except as set forth in
Schedule 3.27, Seller has never generated, transported, treated,
stored, disposed of or otherwise handled any Hazardous Materials
at any site, location or facility used by Seller in the Business,
and no such Hazardous Materials are present on, in or under any
real property presently owned or used by Seller in the Business
(including the Properties), and such property does not contain
(including without limitation, containment by means of any
underground storage tank) any Hazardous Materials in violation of
any applicable Environmental and Safety Requirement. Except as
set forth on Schedule 3.27, to the Seller's knowledge there are
no underground storage tanks on the Property, and those listed on
Schedule 3.27 are maintained and monitored in compliance with all
applicable Environmental and Safety Requirements.
(b) No Actions or Proceedings. Except as set forth in
Schedule 3.27, Seller has not been subject to, nor has any Seller
received any notice (written or oral) of, any private,
administrative or judicial action, order, or investigation or any
notice (written or oral) of any intended private, administrative,
or judicial action, order or investigation relating to the
presence or alleged presence of Hazardous Materials in, under or
upon any real property owned or used by Seller in the Business,
20PAGE
and other than as set forth on Schedule 3.27, to the Seller's
knowledge there is no reasonable basis for any such notice or
action; and there are no pending or threatened actions,
investigations or orders or proceedings (or notices of potential
actions or proceedings) from any governmental agency or any other
entity regarding any matter relating to Environmental and Safety
Requirement.
(c) Other Condition. Except as set forth in Schedule
3.27, to the Seller's knowledge no facts, events or conditions
with respect to the past or present operations or facilities of
Seller, the Assets or the Business exist which could reasonably
be expected to interfere with or prevent continued compliance
with, or could give rise to any common law or statutory liability
or otherwise form the basis of any claim, action, suit,
proceeding, hearing or investigation against or involving the
Assets or the Business under any Environmental and Safety
Requirement based on any such fact, event or circumstance,
including, without limitation, liability for cleanup costs,
personal injury or property damage.
(d) Definitions. For purposes of this Agreement,
"Environmental and Safety Requirements" means all federal, state
and local laws, rules, regulations, ordinances, orders, statutes,
actions, policies and requirements relating to public health and
safety, worker health and safety, pollution or protection of the
environment, all through the Closing Date. For purposes of this
Agreement, "Hazardous Materials" means (i) hazardous substances,
extremely hazardous substances or hazardous wastes, as those
terms are defined by the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. S9601 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. S6901 et seq.,
and any other Environmental and Safety Requirements; (ii)
petroleum, including without limitation, crude oil or any
fraction thereof which is liquid at standard conditions of
temperature and pressure (60 degrees Fahrenheit and 14.7 pounds
per square inch absolute); (iii) any radioactive material,
including, without limitation, any source, special nuclear, or
by-product material as defined in 42 U.S.C. S2011 et seq.; (iv)
asbestos in any form or condition; and (v) any other material,
substance or waste to which liability or standards of conduct may
be imposed under any Environmental and Safety Requirements.
3.28 Conduct of the Business. Except as set forth on
Schedule 3.28, since March 29, 1997, Seller has conducted the
Business only in the ordinary course of business consistent with
past custom and practice, and has incurred no liabilities other
than in the ordinary course of business consistent with past
custom and practice and there has been no material adverse change
in the Assets, condition (financial or otherwise), operating
results, or the knowledge of Seller, employee or customer
relations, business activities or, business prospects of Seller
or the Business. Without limitation of the foregoing and except
as set forth on Schedule 3.28, since March 29, 1997, Seller has
21PAGE
not, in connection with the Business:
(a) Dispositions. Voluntarily or involuntarily sold,
transferred, abandoned, surrendered, subjected to a Lien or
otherwise disposed of any material assets or property rights
relating to or used in the operation of the Business other than
in the ordinary course of business, consistent with past action
and practice;
(b) Accounting. Changed any accounting principles,
methods or practices utilized by it or changed any of its
depreciation rates or amortization policies or rates;
(c) Loans. Other than as set forth on the Estimated
Net Book Value, made any loan or advance to any party;
(d) Indebtedness. Other than as set forth on the
Estimated Net Book Value, incurred debt, liabilities, or
obligations of any nature whether accrued, absolute, contingent,
direct, indirect, perfected or otherwise and whether due or to
become due other than in the ordinary course of business,
consistent with past action and practice;
(e) Material Transactions. Entered into any material
transaction involving a capital expenditure or commitment of more
than $25,000, other than in the ordinary course of business, and
if still in existence, properly disclosed in the Schedules
hereto.
(f) Other. Committed to any of the foregoing, except
in the ordinary course.
ARTICLE IV
BUYER'S REPRESENTATIONS AND WARRANTIES
As an inducement to Seller to enter into and perform its
obligations under this Agreement, Buyer hereby represents and
warrants to and with Seller (on the date hereof and as of the
Closing) as follows:
4.1 Organization and Good Standing. Buyer is duly
organized, validly existing and in good standing under the laws
of the State of Delaware and has full power and authority to
execute and deliver this Agreement and the other Transaction
Documents to be executed by it, to perform its obligations
hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. Buyer is duly licensed and
qualified to do business as a foreign limited liability company
and is in good standing in the state of Michigan.
4.2 Authorization. The execution and delivery of this
Agreement and the Transaction Documents, and the performance by
22PAGE
Buyer of its obligations hereunder and thereunder, have been duly
authorized by all necessary organizational action. This
Agreement and the other Transaction Documents to which Buyer is a
party constitute the legal, valid and binding obligations of
Buyer enforceable against Buyer in accordance with their
respective terms, subject to the applicable bankruptcy,
insolvency, reorganization, receivership, moratorium and other
similar laws affecting the rights and remedies of creditors
generally, and to general principles of equity, whether applied
by a court of law or equity.
4.3 No Violation. The execution, delivery and performance
by Buyer of this Agreement and the other Transaction Documents
and the consummation of the transactions contemplated herein and
therein will not:
(a) result in the breach of any of the terms or
conditions of, or constitute a default under, or in any manner
release any party thereto from any obligation under, any
mortgage, note, bond, contract, indenture, agreement, license or
other instrument or obligation of any kind or nature to which
Buyer is now a party or by which any of its properties or assets
may be bound;
(b) violate any order, writ, injunction regulation,
statute or decree of any court, administrative agency or
governmental body specifically applicable to Buyer; or
(c) violate any provision of the Buyer's Operating
Agreement.
4.4 No Consent Required. No consent, approval, order or
authorization of, or declaration, filing or registration with,
any person or governmental authority, including, but not limited
to, any Hart-Scott-Rodino filing, is required to be made or
obtained by Buyer in connection with the authorization,
execution, delivery or performance of this Agreement, the other
Transaction Documents or the transactions contemplated hereby and
thereby.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1. Further Actions.
(a) Each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and
to do, or cause to be done, all reasonable things necessary,
proper or advisable to consummate the transactions contemplated
by this Agreement and the Transaction Documents, including using
all reasonable efforts to: (i) give all notices and effect all
necessary registrations and filings; and (ii) defend any lawsuits
23PAGE
or other legal proceedings, whether judicial or administrative
and whether brought derivatively or on behalf of third parties
(including governmental agencies or officials), challenging this
Agreement, the Transaction Documents, or the consummation of the
transactions contemplated hereby and thereby. If at any time
after the Closing any further action is deemed necessary or
desirable by either party to carry out the purposes of this
Agreement or the Transaction Documents, the proper officers
and/or directors of Buyer and the Seller shall use all reasonable
efforts to take such action.
(b) To the extent that a third party consent or waiver
is necessary to assign to Buyer any claim, contract, agreement,
license, lease, commitment, purchase order or sales order that is
being transferred to Buyer pursuant to Section 1.1 hereof (a
"Contract Requiring Consent") and such consent or waiver is not
obtained prior to the Closing Date, Seller shall, commencing on
the Closing Date and continuing for the term of such Contract
Requiring Consent, use its (i) best efforts to provide to Buyer
the benefits of such Contract Requiring Consent and (ii)
reasonable efforts consistent with past practices, to enforce for
the benefit of Buyer, or allow Buyer to enforce (and, solely for
such purpose, Seller hereby constitutes and appoints Buyer as its
true and lawful attorney-in-fact until revoked in a writing
delivered by Seller to Buyer), with Buyer assuming Seller's
obligations thereunder, any and all rights of Seller under such
Contract Requiring Consent against the issuer thereof or the
other party or parties thereto. In addition, Seller will pay
promptly to Buyer when received all monies received by Seller
after September 27, 1997 under any Contract Requiring Consent to
the extent that Buyer would be entitled thereto pursuant to this
Agreement. Seller shall have no other duties or obligations with
respect to any such Contract Requiring Consent, and the failure
or inability to obtain any necessary consent or waiver with
respect thereto shall in no event (i) be a breach of this
Agreement so long as Seller has carried out its obligations under
this Section 5.1(b) or (ii) limit, or in any way affect, Buyer's
assumption of the liabilities that arise under such Contract
Requiring Consent pursuant to Section 1.4(a) hereof.
5.2. Noncompetition and Nondisclosure.
(a) Noncompetition. In furtherance of the sale of the
Assets and the Business to Buyer hereunder by virtue of the
transactions contemplated hereby and to more effectively protect
the value of the Assets and the Business so sold, Seller
covenants and agrees that, for a period ending on the fifth
anniversary of the Closing Date (the "Term"), neither Seller nor
any of its respective officers, directors or affiliates, will
(a) engage, directly or indirectly, in the Business anywhere
where Seller sold prior to the Closing or the Buyer sells, during
the Term, products and/or services relating to the Business;
provided, however, that Seller's Metallurgical Services Group may
(i) continue to engage in the heat treating of parts and
24PAGE
(ii) sell for its account that certain furnace having contract
job number 4664 to Wilson Tools; (b) solicit any party who is or
was a customer or supplier of the Holcroft Division, or who
becomes a customer or supplier of Buyer at any time during the
Term, for the purpose of engaging in, or assisting any person or
entity in engaging in, any business which competes directly or
indirectly with the Business, other than in connection with
Seller's Metallurgical Services Group's heat treating of parts;
or (c) solicit for employment any employee of Buyer (including
those of Seller's employees hired by Buyer). Notwithstanding the
foregoing, nothing contained in this Section 5.2 shall prohibit
Seller, or its respective officers, directors, affiliates from
owning not more than five percent (5%) of any class of stock
listed on a national securities exchange or traded in the
over-the-counter market or continuing to own any interest in any
noncompetitive business owned by Seller or such officer, director
or affiliate as of the Closing Date.
(b) Confidentiality. After the Closing, Seller and
its directors shall, and Seller shall cause its respective
officers, employees, agents and affiliates to, maintain the
confidentiality of all information, documents and materials
relating to the Business, the Assets or the transactions
contemplated by this Agreement which remain in their possession,
except to the extent disclosure of any such information is
required by law or authorized by Buyer or reasonably occurs in
connection with disputes over the terms of this Agreement. In
the event that Seller reasonably believes after consultation with
counsel that it is required by law to disclose any confidential
information described in this Section 5.2(b), it will (a) provide
Buyer with prompt notice before such disclosure in order that
Buyer may attempt to obtain a protective order or other assurance
that confidential treatment will be accorded to confidential
information, and (b) cooperate with Buyer in attempting to obtain
such order or assurance. The provisions of this Section 5.2(b)
shall not apply to any information, documents or materials which
are in the public domain or shall come into the public domain,
other than by reason of default by Seller or its affiliates of
this Agreement.
(c) Rights and Remedies Upon Breach. Upon a breach,
or threatened breach, of any of the provisions of Sections 5.2(a)
or 5.2(b) (the "Restrictive Covenants"), Buyer shall have the
right and remedy to have the Restrictive Covenants specifically
enforced by any court of competent jurisdiction, without the
necessity of posting a bond, it being agreed that any breach or
threatened breach of the Restrictive Covenants would cause
irreparable injury to Buyer and that money damages would not
provide an adequate remedy to Buyer. Buyer shall also have any
other rights and remedies available to Buyer under law or in
equity.
(d) Severability of Covenants. Seller acknowledges
and agrees that the Restrictive Covenants are reasonable and
25PAGE
valid in geographical and temporal scope and in all other
respects. If any court determines that any of the Restrictive
Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be
affected and shall be given full effect, without regard to the
invalid portions.
(e) Duration and Scope of Covenant. If any court
determines that any of the Restrictive Covenants, or any part
thereof, is unenforceable because of the duration or geographic
scope of such provision, such court shall have the power to
reduce the duration or scope of such provision to the maximum
extent allowed, as the case may be, and, in its reduced form,
such provision shall then be enforceable.
5.3. Holcroft Name. Seller acknowledges and agrees that all
of its rights in and to, and ownership of, the name "Holcroft,"
or any variations thereof shall be transferred hereunder to
Buyer. From and after the Closing, the Seller shall be prohibited
from using the Holcroft name or a name similar thereto.
5.4. Offer of Employment. Buyer shall offer employment with
Buyer to each employee of the Holcroft Division (collectively,
the "Employees") after the Closing (i) at the same base salary;
(ii) with a total benefits package which shall be comparable with
those benefits set forth on Schedule 5.4, except for the Seller's
employee stock purchase plan and the Seller's employee stock
option plan; and (iii) with comparable job responsibilities and
title as such employee had immediately prior to the Closing.
Buyer will give such employees credit for service with the
Holcroft Division with respect to (a) any of Buyer's benefit
plans which have vesting or length of service requirements,
except Buyer's equity appreciation rights program and (b) all
severance payments, if any, made in connection with a termination
following the Closing Date. Buyer shall comply with all terms of
the Union Contract, including, without limitation, seniority and
lay-off requirements. Buyer shall be responsible for, and hold
Seller harmless against, any payments that arise after Closing or
are properly accrued for on the Estimated Net Book Value
(including, without limitation, salaries, commissions, bonuses,
vacation pay, sick pay, severance pay, employee benefits and
unemployment taxes) that may be due by reason of termination of
employment of Employees at any time on or after the Closing Date.
Seller shall be responsible for any employment-related claims
filed by any Employees which were (i) filed prior to the Closing
Date or (ii) filed after the Closing Date but which arose from
facts and circumstances which existed prior to the Closing Date.
5.5. WARN Act. During the period commencing on the Closing
Date and ending ninety days after the Closing Date, Buyer shall
not take any action that independently, or in connection with any
action taken by Seller prior to the Closing Date, could be
construed as a "plant closing" or "mass layoff" within the
meaning of the WARN Act or the regulations enacted thereunder.
26PAGE
If Buyer takes any such action during such 90-day period, Buyer
shall be solely responsible for providing any notice required by
the WARN Act and for making payments, if any, which may be
required under the WARN Act and for any other liabilities related
to its failure to provide appropriate notice.
5.6. Letters of Credit. Buyer agrees that it will not take
any action to extend the terms of the letters of credit set forth
on Schedule 5.6 (the "Letters of Credit").
ARTICLE VI
CLOSING
Section 6.1. Closing
Closing. The transactions that are the
subject of this Agreement shall be consummated at a closing (the
"Closing") which shall be held at the offices of Katten Muchin &
Zavis, 525 West Monroe Street, Chicago, Illinois 60661, on
October 10, 1997, or at some other time and place as the parties
may mutually agree, which Closing will be effective as of 12:01
a.m., October 10, 1997 (the "Closing Date").
Section 6.2. Deliveries by the Seller. At the Closing,
the Seller shall deliver to Buyer, against payment of the
consideration set forth in Article II hereof:
(i) Such bills of sale with respect to the Seller's
ownership of Assets, assignments, endorsements and
other documents of title and other good and sufficient
instruments of conveyance and transfer, as shall be
effective to vest Buyer with full, complete and
marketable right, title and interest in and to the
Assets, subject to the Assumed Liabilities, in form and
substance reasonably satisfactory to Buyer;
(ii) To the extent obtained, copies of all written
consents necessary for the transfer of the Material
Contracts, in form and substance satisfactory to Buyer;
(iii) Certificates of good standing, dated not more
than ten days prior to the Closing Date, with respect
to Seller, issued by the office of the Secretary of
State of Delaware and by the Secretary of State of each
jurisdiction in which Seller, due to the operations of
the Holcroft Division, is qualified to do business as a
foreign corporation;
(iv) The opinion of Seth H. Hoogasian, Esq, counsel
for the Seller in substantially the form attached
hereto as Exhibit 6.2(iv). In giving its opinion,
counsel shall be entitled to rely on certificates of
the Seller, public officials or such other persons or
opinions of such other counsel (which other counsel
27PAGE
shall be identified by name) which such counsel shall
reasonably consider to be an appropriate and reliable
source of information which counsel's opinion is based,
which sources shall be specified in such opinion;
(v) The Sublease;
(vi) The written consent of TMO to the sublease of
the Property by Seller to Buyer pursuant to the terms
of the Sublease;
(vii) The Estoppel certificate in the form of Exhibit
6.2(vii) hereto, duly executed by the Landlord; and
(viii)Such other documents and instruments as Buyer
may reasonably require in order to effectuate the
transactions which are the subject of this Agreement.
All documents and instruments delivered to Buyer shall be in
form and substance reasonably satisfactory to Katten Muchin &
Zavis, counsel for Buyer.
Section 6.3.Deliveries by Buyer. At the Closing, Buyer
shall deliver to the Sellers:
28PAGE
(i) The cash consideration set forth in Section 2.1
hereof less the Holdback Amount provided in Section
2.1(b);
(ii) The Note in the form of Exhibit 2.1(a)(ii)
hereto;
(iii) Instruments of assumption of all Material
Contracts and Permits to be assumed hereunder and of
the Assumed Liabilities;
(iv) The opinion of Katten Muchin & Zavis, counsel
for Buyer, in substantially the form attached hereto as
Exhibit 6.3(iv). In giving its opinion, counsel shall
be entitled to rely on certificates of the Seller,
public officials or such other persons or opinions of
such other counsel (which other counsel shall be
identified by name) which such counsel shall reasonably
consider to be an appropriate and reliable source of
information which counsel's opinion is based, which
sources shall be specified in such opinion.;
(v) Copies of resolutions of the Buyer, certified by
the sole member as having been duly adopted and being
in current force and effect, authorizing the
transactions contemplated by this Agreement and the
Transaction Documents;
(vi) The Sublease;
(vii) An executed Severance Agreement between Buyer
and each of Douglas Bradford, Mary Anne Cesarone, Klaus
Doll, Robert Fox, John Lutz, Tim McMann, Frank Ragone
and Vera Roggen ("Severance Agreements");
(viii)The 90 Day Receivables Note; and
(ix) Such other documents and instruments as the
Seller may reasonably require in order to effectuate
the transactions which are the subject of this
Agreement.
All documents and instruments delivered to the Seller shall
be in form and substance reasonably satisfactory to Seth H.
Hoogasian, Esq., counsel for the Seller.
29PAGE
ARTICLE VII
COVENANTS AFTER CLOSING
7.1 Indemnification by Seller. Subject to the limitations
set forth in Section 7.5, from and after the Closing, Seller
agrees to indemnify, defend and save Buyer and its affiliates,
and each of their respective officers, directors, employees,
agents, and fiduciaries (each, a "Buyer Indemnified Party"),
forever harmless from and against any and all liabilities
(whether contingent, fixed or unfixed, liquidated or
unliquidated, or otherwise), obligations, deficiencies, demands,
claims, suits, actions, or causes of action, assessments, losses,
costs, expenses, interest, fines, penalties, actual or punitive
damages or costs or expenses of any and all investigations,
proceedings, judgments, remediations, settlements and compromises
(including reasonable fees and expenses of attorneys, accountants
and other experts) (individually and collectively, the "Losses")
sustained or incurred by any Buyer Indemnified Party relating to,
resulting from, arising out of or otherwise by virtue of any of
the following (provided that Buyer shall use reasonable efforts
to collect such Losses from its insurance policies and will
assign any insurance claims and any proceeds therefrom to Seller
to the extent that Seller has indemnified Buyer for any Losses to
which such insurance claims or proceeds relate):
(a) any misrepresentation or breach of a
representation or warranty made herein by Seller, or
non-compliance with or breach by Seller of any of the covenants
or agreements contained in this Agreement or the Transaction
Documents to be performed by Seller or any of its affiliates;
(b) any violations of or obligations under
Environmental and Safety Requirements relating to acts,
omissions, circumstances or conditions existing on or prior to
the Closing Date, including, but not limited to, all liabilities
arising out of or in connection with any treatment, storage, or
disposal of any Hazardous Materials, or the arranging therefor by
Seller and any discharge or release of any Hazardous Material
onto, at or under the Property or any other real property
previously owned or operated by Seller and used in connection
with the Business, whether or not such acts, omissions,
circumstances or conditions constituted a violation of or
obligation under Environmental and Safety Requirements as then in
effect;
(c) any liability or obligation of Seller or any
assertion against a Buyer Indemnified Party, arising out of or
relating, directly or indirectly, to any Excluded Liability;
(d) any claim for payment of fees and/or expenses as a
broker or finder in connection with the origin, negotiation,
execution or consummation of this Agreement based upon an alleged
agreement between claimant and Seller or any of its affiliates;
30PAGE
(e) up to an aggregate of $85,000 of any Losses
relating to, resulting from or arising out of any obligations of
Buyer under the Severance Agreements; or
(f) any action taken by Thermo, directly or
indirectly, which, if taken by Seller, would result in a
violation or breach of the representations and warranties set
forth in Section 5.2 hereof, except for sales by Thermo
Remediation of its soil remediation units and/or related
technology.
Seller agrees to promptly pay to or reimburse a Buyer
Indemnified Party for all Losses incurred by such Buyer
Indemnified Party.
7.2 Indemnification by Buyer. From and after the Closing,
Buyer agrees to indemnify, defend and save Seller and its
affiliates and their respective officers, directors, employees,
agents and fiduciaries (each, a "Seller Indemnified Party")
forever harmless from and against, and to promptly pay to a
Seller Indemnified Party or reimburse a Seller Indemnified Party
for, any and all Losses sustained or incurred by any Seller
Indemnified Party relating to, resulting from, arising out of or
otherwise by virtue of any of the following:
(a) any misrepresentation or breach of a
representation or warranty made herein by Buyer, or
non-compliance with or breach by Buyer of any of the covenants or
agreements contained in this Agreement or the Transaction
Documents to be performed by Buyer;
(b) any action, demand, proceeding, investigation or
claim (whenever made) by any third party (including governmental
agencies) against or affecting Seller which, if successful, would
give rise to or evidence the existence of or relate to a
misrepresentation or breach of any of the representations,
warranties or covenants of Buyer in this Agreement or any
Transaction Document;
(c) any claim arising out of Buyer's failure to pay,
satisfy or discharge the Assumed Liabilities, including, without
limitation, liabilities under the Union Contract;
(d) any claim for payment and/or expenses as a broker
or finder in connection with the origin, negotiation, execution
or consummation of this Agreement based upon an alleged agreement
between claimant and Buyer or any of its affiliates;
(e) any claim arising out of Buyer's failure to pay
any amounts owed to Seller pursuant to Sections 1.2(e), 2.1 or
2.2 hereof; or
(f) any claim for a Loss incurred by Seller relating
31PAGE
to the Letters of Credit.
Buyer agrees to promptly pay to or reimburse a Seller
Indemnified Party for all Losses incurred by such Seller
Indemnified Party.
7.3 Indemnification Procedure for Third Party Claims. In
the event that subsequent to the Closing any person or entity
entitled to indemnification under this Agreement (an "Indemnified
Party") asserts a claim for indemnification or receives notice of
the assertion of any claim or of the commencement of any action
or proceeding by any person or entity who is not a party to this
Agreement or an affiliate of a party to this Agreement
(including, but not limited to any domestic or foreign court or
governmental authority, federal, state or local) (a "Third Party
Claim") against such Indemnified Party, against which a party to
this Agreement is required to provide indemnification under this
Agreement (an "Indemnifying Party"), the Indemnified Party shall
give written notice together with a statement of any available
information regarding such claim to the Indemnifying Party within
thirty (30) days after learning of such claim (or within such
shorter time as may be necessary to give the Indemnifying Party a
reasonable opportunity to respond to such claim). The
Indemnifying Party shall have the right, upon written notice to
the Indemnified Party (the "Defense Notice") within thirty days
(30) after receipt from the Indemnified Party of notice of such
claim, which notice by the Indemnifying Party shall specify the
counsel it will appoint to defend such claim ("Defense Counsel"),
to conduct at its expense the defense against such claim in its
own name, or if necessary in the name of the Indemnified Party;
provided, however, that the Indemnified Party shall have the
right to approve the Defense Counsel, which approval shall not be
unreasonably withheld or delayed, and in the event the
Indemnifying Party and the Indemnified Party cannot agree upon
such counsel within ten (10) days after the Defense Notice is
provided, then the Indemnifying Party shall propose an alternate
Defense Counsel, which shall be subject again to the Indemnified
Party's approval pursuant to this Section 7.3.
(a) In the event that the Indemnifying Party shall
fail to give the Defense Notice within the time period described
above, it shall be deemed to have elected not to conduct the
defense of the subject claim, and in such event the Indemnified
Party shall have the right to conduct such defense in good faith
and to compromise and settle the claim without prior consent of
the Indemnifying Party and such Indemnifying Party will be liable
for all reasonable costs, expenses, settlement amounts or other
Losses paid or incurred in connection therewith.
(b) In the event that the Indemnifying Party does
deliver a Defense Notice within the time period described above
and thereby elects to conduct the defense of the subject claim,
the Indemnified Party will cooperate with and make available to
the Indemnifying Party such assistance and materials as it may
32PAGE
reasonably request, all at the expense of the Indemnifying Party,
and the Indemnified Party shall have the right at its expense to
participate in the defense assisted by counsel of its own
choosing, provided that the Indemnified Party shall have the
right to compromise and settle the claim only with the prior
written consent of the Indemnifying Party.
(c) Without the prior written consent of the
Indemnified Party, the Indemnifying Party will not enter into any
settlement of any Third Party Claim or cease to defend against
such claim, if pursuant to or as a result of such settlement or
cessation, (i) injunctive or other equitable relief would be
imposed against the Indemnified Party, or (ii) such settlement or
cessation would lead to liability or create any financial or
other obligation on the part of the Indemnified Party for which
the Indemnified Party is not entitled to indemnification
hereunder.
(d) Notwithstanding paragraph (b) above, the
Indemnifying Party shall not be entitled to control, and the
Indemnified Party shall be entitled to have sole control over,
the defense or settlement of any claim to the extent that claim
seeks an order, injunction or other equitable relief against the
Indemnified Party which, if successful, could materially
interfere with the business, operations, assets, condition
(financial or otherwise) or prospects of the Indemnified Party
(and the reasonable cost of such defense shall constitute an
amount for which the Indemnified Party is entitled to
indemnification hereunder). If the Indemnifying Party decides to
accept and agree to an offer to settle a Third Party claim, which
Third Party Claim the Indemnifying Party is permitted to settle
under this Section 7.3, the Indemnifying Party will give written
notice to the Indemnified Party to that effect within thirty (30)
calendar days after its receipt of such notice. If the
Indemnified Party fails to consent to such offer within 30
calendar days after its receipt of such notice, the Indemnified
Party may continue to contest or defend such Third Party Claim
and, in such event, the maximum liability of the Indemnifying
Party as to such Third Party Claim will not exceed the amount of
such settlement offer, plus reasonable costs and expenses paid or
incurred by the Indemnified Party through the end of such 30-day
period.
(e) Any final judgment entered or settlement agreed
upon in the manner provided herein shall be binding upon the
Indemnifying Party, and shall conclusively be deemed to be an
obligation with respect to which the Indemnified Party is
entitled to prompt indemnification hereunder.
7.4 Failure to Give Timely Notice. A failure by an
Indemnified Party to give timely, complete or accurate notice as
provided in Section 7.3 will not affect the rights or obligations
of any party hereunder except and only to the extent that, as a
33PAGE
result of such failure, any party entitled to receive such notice
was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise directly and
materially damaged as a result of such failure to give timely
notice.
7.5 Certain Limitations.
(a) Notwithstanding anything to the contrary set forth
in this Agreement (but subject to the terms of this Section 7.5),
Seller shall not be liable hereunder to Buyer as a result of any
misrepresentation of any representation or warranty contained in
this Agreement, unless and until the Losses incurred by all Buyer
Indemnified Parties, in the aggregate, as a result of such
misrepresentations under this Agreement shall exceed, in the
aggregate, $100,000 (the "Basket Threshold"); provided, however,
that once the Basket Threshold is reached, Seller shall fully
indemnify Buyer (or a Buyer Indemnified Party) for all Losses,
liabilities and damages incurred by Buyer (or a Buyer Indemnified
Party), including the $100,000 applied to the Basket Threshold.
The aggregate amount required to be paid by Sellers under Section
7.1(a) and 7.1(f) shall not exceed the Purchase Price (the
"Cap"). The parties agree that the (i) Basket Threshold and the
Cap shall not apply to any breach of the representations and
warranties contained in Sections 3.7(a), 3.13, 3.24 and 3.27; and
(ii) Basket Threshold shall not apply to Section 7.1(e).
(b) All of the representations and warranties set
forth in this Agreement or in any of the other Transaction
Documents shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby, regardless of any investigation, inquiry or examination
made for or on behalf of or any knowledge of Buyer or Sellers, or
any of their respective affiliates, officers, directors,
employees, agents, or representatives or the acceptance by any of
them of any certificate or opinion, for a period of two years
after the Closing and shall expire and terminate upon the
expiration of such two year period, except the warranties and
representations contained in (i) Section 3.7(a) concerning title
of the Assets shall survive indefinitely, (ii) Section 3.24
regarding Taxes shall survive until the expiration of all
applicable statutes of limitations (including extensions of said
statutes) and (iii) Section 3.27 regarding environmental
liabilities shall survive indefinitely. Seller shall only be
liable for claims of which it receives notice of from Buyer
within the applicable survival period. In the event Buyer incurs
a Loss and a claim is filed, prior to the end of such two year
period, the termination date shall be extended until such claim
is fully resolved and Buyer is appropriately indemnified for such
Loss. Unless a specified period is set forth in this Agreement
or in a Transaction Document (in which event such specified
period will control), all covenants contained in this Agreement
and in any Transaction Document will survive the Closing and
remain in effect indefinitely.
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(c) Seller's liability for any claims made with
respect to a breach or misrepresentation of the representations
and warranties contained in Section 3.7(b) will be subject to the
limitations set forth in Section 2.2(e), as well as the other
limitations of this Section 7.5.
ARTICLE VIII
MISCELLANEOUS
8.1 Notices, Consents, etc. Any notices, consents or other
communication required to be sent or given hereunder by any of
the parties shall in every case be in writing and shall be deemed
properly served if (a) delivered personally, (b) sent by
registered or certified mail, in all such cases with first class
postage prepaid, return receipt requested, (c) delivered by a
recognized overnight courier service, or (d) sent by facsimile
transmission to the parties at the addresses as set forth below
or at such other addresses as may be furnished in writing.
(a) If to Seller:
Thermo TerraTech Inc.
81 Wyman Street
Waltham, Massachusetts 02254-9046
Fax: (781) 622-1242
Attention: John P. Appleton, Ph.D.
with a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02254-9046
Fax: (781) 622-1283
Attention: General Counsel
(b) If to Buyer:
Holcroft L.L.C.
c/o Madison Capital Partners
150 North Wacker Drive, Suite 2360
Chicago, Illinois 60606
Fax: (312) 236-4367
Attention: Larry Gies
Scott Murray
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
Fax: (312) 902-1061
35PAGE
Attention: David R. Shevitz, Esq.
Karen A. Ruzic, Esq.
Date of service of such notice shall be (w) the date such notice
is personally delivered, (x) three (3) days after the date of
mailing if sent by certified or registered mail, (y) one (1) day
after date of delivery to the overnight courier if sent by
overnight courier or (z) the next succeeding business day after
transmission by facsimile.
8.2 Public Announcements. Except as required by law, no
party shall make any public announcement or filing with respect
to the transactions provided for herein without the prior consent
of the other parties hereto, such consent not to be unreasonably
withheld or delayed. To the extent reasonably feasible, any
press release or other announcement or notice regarding the
transactions contemplated by this Agreement shall be made jointly
by the parties.
8.3 Severability. The unenforceability or invalidity of
any provision of this Agreement shall not affect the
enforceability or validity of any other provision.
8.4 Amendment and Waiver. This Agreement may be amended,
or any provision of this Agreement may be waived, provided that
any such amendment or waiver will be binding on Buyer only if
such amendment or waiver is set forth in a writing executed by
Buyer, and provided that any such amendment or waiver will be
binding upon Seller only if such amendment or waiver is set forth
in a writing executed by Seller. The waiver by any party hereto
of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any other breach.
8.5 Documents. Each party will execute all documents and
take such other actions as any other party may reasonably request
in order to consummate the transactions provided for herein and
to accomplish the purposes of this Agreement.
8.6 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 agreement and shall become effective when one or
more counterparts have been signed by each of the parties hereto
and delivered to the other.
8.7 Expenses. Except as otherwise specifically provided
herein, each of the parties shall pay all costs and expenses
incurred or to be incurred by it in negotiating and preparing
this Agreement and in closing and carrying out the transactions
contemplated by this Agreement.
8.8 Construction. This Agreement shall be construed and
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enforced in accordance with, and all questions concerning the
construction, validity, interpretation and performance of this
Agreement shall be governed by, the laws of the State of Delaware
without giving effect to provisions thereof regarding conflict of
laws.
8.9 Headings. The subject headings of Articles and
Sections of this Agreement are included for purposes of
convenience only and shall not affect the construction or
interpretation of any of its provisions.
8.10 Assignment. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but will not be assignable or
delegable by any party without the prior written consent of the
other party; provided, however, that nothing in this Agreement is
intended to limit Buyer's ability to assign its rights or
delegate its responsibilities, liabilities and obligations under
this Agreement to any of its affiliates or to lenders as security
for borrowings, at any time whether prior to or following the
Closing Date without consent. Notwithstanding anything to the
contrary contained herein, Seller may not assign or delegate any
of its responsibilities, liabilities or obligations under this
Agreement, without the prior written consent of Buyer.
8.11 Definitions. For purposes of this Agreement, the
following terms have the meaning set forth below:
"Code" means the Internal Revenue Code of 1986, as
amended.
"Chrysler Lease" means the sublease dated October 1,
1995 between the Holcroft Division and Chrysler Corporation.
"ERISA" means the Employment Retirement Income Security
Act of 1974, as amended.
"GAAP" means generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or any successor authority) that are
applicable as the date of determination.
"Tax" means any federal, state, local or foreign
income, gross receipts, franchise, estimated, alternative
minimum, add-on minimum, sales, use, transfer, registration,
value added, excise, natural resources, severance, stamp,
occupation, premium, windfall profit, environmental, customs,
duties, real property, personal property, capital stock, social
security, unemployment, disability, payroll, license, employee or
other withholding, or other tax, of any kind whatsoever,
including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing; the foregoing
37PAGE
shall include any transferee or secondary liability for a Tax and
any liability assumed by agreement or arising as a result of
being (or ceasing to be) a member of any Affiliated Group, as
defined in Section 1504 of the Code, (or being included
(or required to be included) in any Tax Return relating thereto).
"Tax Returns" means returns, declarations, reports,
claims for refund, information returns or other documents
(including any related or supporting Schedules, statements or
information) filed or required to be filed in connection with the
determination, assessment or collection of any Taxes of any party
or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
8.12 Entire Agreement. This Agreement, the Preamble and all
the Schedules and Exhibits attached to this Agreement (all of
which shall be deemed incorporated in the Agreement and made a
part hereof) and the other Transaction Documents set forth the
entire understanding of the parties, and supersedes and preempts
all prior oral or written understandings and agreements, with
respect to the subject matter hereof, except for the
confidentiality provisions contained in that certain letter
agreement between Buyer and Seller dated July 3, 1997, and shall
not be modified or affected by any offer, proposal, statement or
representation, oral or written, made by or for any party in
connection with the negotiation of the terms hereof, and may be
modified only by instruments signed by all of the parties hereto.
8.13 Third Parties. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any
person or entity, other than the parties to this Agreement and
their respective permitted successors and assigns, any rights or
remedies under or by reason of this Agreement.
8.14 Interpretative Matters. Unless the context otherwise
requires, (a) all references to Articles, Sections or Schedules
are to Articles, Sections or Schedules in this Agreement,
(b) each accounting term not otherwise defined in this Agreement
has the meaning assigned to it in accordance with GAAP, and (c)
words in the singular or plural include the singular and plural,
pronouns stated in either the masculine, the feminine or neuter
gender shall include the masculine, feminine and neuter and (d)
the term "including" shall mean by way of example and not by way
of limitation.
8.15 Knowledge. Where any representation or warranty of
Sellers contained in this Agreement is expressly qualified by
reference "to the knowledge of Seller," or "to the best knowledge
of Seller" or similar phrases it refers to the knowledge of
Seller as to the existence or absence of facts that are the
subject of such representations and warranties after consultation
with and due inquiry of all officers, directors and senior
management of Seller and management of the Holcroft Division who
have executed Severance Agreements, it being understood that
38PAGE
Seller has not made any other independent investigation or
consulted with any outside third parties, other than Seller's
accountants, legal counsel and environmental consultants.
8.16 Brokers and Transaction Payments. Except for Michigan
Eagle Corp. who will receive a fee upon consummation of the
transactions contemplated hereby, which Buyer shall be
responsible for paying, each party warrants to the other that it
has not employed or used the services of or incurred any
liability to any broker, finder or other third party in
connection with the transaction contemplated by this Agreement.
8.17 No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict
construction will be applied against any party hereto by virtue
of such party being deemed to have drafted this Agreement.
8.18 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same agreement
and shall become effective when one or more counterparts have
been signed by each of the parties hereto.
39PAGE
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
SELLER:
THERMO TERRATECH INC.
By: /s/ John P. Appleton
Its: Chief Executive Officer
BUYER:
HOLCROFT L.L.C.
By: Holcroft Technologies L.P.
Its: Manager
By: Holcroft Management, Inc.
Its: General Partner
By: /s/ Larry W. Gies, Jr.
Its: Vice President