EXHIBIT 10.32
NOTE: THE ORIGINAL TEMPLATE, (NORMAL) COULD NOT BE FOUND. DOCUMENT HAS BEEN
ATTACHED TO BLANK.DOT TEMPLATE.
AMENDED AND RESTATED
ASSET PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
TELEDYNE INDUSTRIES, INC.
AND
J.F. LEHMAN EQUITY INVESTORS I, L.P.
DATED AS OF MAY 17, 1999
CONFIDENTIAL
AMENDED AND RESTATED
ASSET PURCHASE AND SALE AGREEMENT
THIS AMENDED AND RESTATED ASSET PURCHASE AND SALE AGREEMENT ("AGREEMENT"),
is dated and entered into as of May 17, 1999, by and among Teledyne Industries,
Inc., a California corporation (the "SELLER"), and J.F. Lehman Equity Investors
I, L.P., a Delaware limited partnership (the "PURCHASER"), with reference to the
following:
RECITALS
A. The Seller, through the McCormick Selph Ordnance business unit
("MCCORMICK SELPH") of its Teledyne Ryan Aeronautical division, is the owner of
certain assets more particularly described in this Agreement used by McCormick
Selph in the manufacture and distribution of advanced controlled pyrotechnic
components and systems for the aerospace industry and automotive safety products
for use in connection with airbags and seat belt safety systems (the "BUSINESS")
at the McCormick Selph facility located in Hollister, California (the
"FACILITY").
B. The Purchaser wishes to purchase the Business and certain of
the assets of McCormick Selph used in the Business, and the Seller is willing to
sell the Business and such assets of McCormick Selph, on the terms and
conditions set forth herein.
C. The Purchaser and the Seller are parties to an Asset Purchase
and Sale Agreement dated as of May 12, 1999 (the "Original Purchase Agreement")
with respect to the Business.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual representations, warranties, covenants, agreements, terms and conditions
set forth below, the receipt and adequacy of which are hereby acknowledged, the
parties, intending to be legally bound, hereby amend and restate the Original
Purchase Agreement and agree as follows:
SECTION 1: DEFINITIONS. For purposes of this Agreement, the following terms
have the meanings set forth below:
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the United States Securities Exchange Act of 1934,
as amended.
"Agreement" means this Asset Purchase and Sale Agreement, as the
same may be amended from time to time in accordance with the terms hereof.
"Ancillary Agreements" means, collectively, the Assignment
Agreement, the Assumption Agreement, the Bill of Sale and the Deed.
"Arbitrator" has the meaning set forth in Section 2.5(c).
"Assignment Agreement" has the meaning set forth in Section 3.3.
"Assumed Contracts" has the meaning set forth in Section 2.3(a).
"Assumed Obligations" has the meaning set forth in Section
2.3(a).
"Assumption Agreement" has the meaning set forth in Section 3.3.
"Bid" has the meaning set forth in Section 4.19(d).
"Bill of Sale" has the meaning set forth in Section 3.3.
"Business" has the meaning set forth in the Recitals to this
Agreement.
"Cap" has the meaning set forth in Section 10.2(c).
"Cash" means cash on hand or in banks and cash equivalents,
marketable securities and short-term investments.
"CERCLA" means the United States Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended.
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" has the meaning set forth in Section 3.2.
"Closing Statement" has the meaning set forth in section 2.5(b).
"COBRA Provisions" has the meaning set forth in Section 8(c).
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Competing Entity" has the meaning set forth in Section 7.5(a).
"Confidentiality Agreement" means the confidentiality letter
agreement dated October 2, 1998 from the Purchaser to Lincoln Partners LLC, on
behalf of Allegheny Teledyne Incorporated.
"Contracts" has the meaning set forth in Section 2.1(d).
"Deed" has the meaning set forth in Section 3.3.
"Disclosure Schedules" means, collectively, the various Schedules
referred to in this Agreement.
"Employee Benefit Plan" means an Employee Pension Benefit Plan or
an Employee Welfare Benefit Plan, where no distinction is required by the
context in which the term is used.
"Employee Pension Benefit Plan" has the meaning set forth in
Section 3(2) of ERISA.
"Employee Welfare Benefit Plan" has the meaning set forth in
Section 3(1) of ERISA.
"Employees" means all of the Seller's employees who are actively
employed on a full-time basis in connection with the Business on the Closing
Date, including those employees who are on temporary leave for purposes of jury
duty, vacation, annual military duty, short term
2
disability, workers' compensation or sick leave. Employees on short term
disability will be deemed to be Employees only at such time, if any, as such
employees are reinstated or reemployed by the Purchaser after the Closing Date.
Seller's employees on long term disability shall not be deemed to be Employees
for purposes of this definition.
"Environmental Condition" means (a) any condition arising out of
any Release of Hazardous Materials from or onto the Owned Real Property in
connection with the Business, (b) any condition at any third party location
arising out of any Release of Hazardous Materials which the Business generated,
(c) any violation by the Business of any Environmental Permit or of any
Environmental Law or (d) any condition at the Owned Real Property requiring
investigation or remediation under any Environmental Law.
"Environmental Law" means any Law relating to the protection of
the air, surface water, groundwater or land, and/or governing the handling, use,
generation, treatment, storage or disposal of Hazardous Materials, but not
including any Law relating to matters administered by the Occupational Safety
and Health Administration or by any state equivalent thereof.
"Environmental Losses" has the meaning set forth in Section
10.6(a).
"Environmental Permit" means each permit, license, order,
variance, registration or other authorization of any federal, state, or local
governmental agency issued, approved or required to be obtained under any
Environmental Law.
"Equipment" has the meaning set forth in Section 2.1(a).
"ERISA" means the United States Employee Retirement Income
Security Act of 1974, as amended.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section
2.3(b).
"Facility" has the meaning set forth in the Recitals to the
Agreement.
"Final Net Working Capital Amount" has the meaning set forth in
Section 2.5(a).
"Financial Statements" has the meaning set forth in Section 4.4.
"Government Contract" has the meaning set forth in Section
4.19(d).
"Governmental Entity" means any government or any governmental
agency, bureau, board, commission, department or political subdivision, whether
federal, state or local, domestic or foreign.
"Hart-Scott-Rodino Act" means the United States Hart-Scott-Rodino
Antitrust Improvement Act of 1976, as amended.
"Hazardous Materials" means each and every element, compound,
chemical mixture, contaminant, pollutant, material, waste or other substance
which is defined, determined or identified as hazardous or toxic under
Environmental Law or the Release of which is prohibited under any Environmental
Law. Without limiting the generality of the foregoing, the term will include (a)
"hazardous substances" as defined in CERCLA, (b) "extremely hazardous
substances" as defined in Title III of the United States Superfund Amendments
and Reauthorization Act, each as amended, and regulations promulgated
thereunder, (c) "hazardous waste" as defined in the United States Resource
Conservation and Recovery Act of 1976, as
3
amended, and regulations promulgated thereunder, (d) "hazardous materials" as
defined in the United States Hazardous Materials Transportation Act, as amended,
and regulations promulgated thereunder and (e) "chemical substance or mixture"
as defined in the United States Toxic Substances Control Act, as amended, and
regulations promulgated thereunder.
"Indemnified Party" has the meaning set forth in Section 10.4.
"Indemnifying Party" has the meaning set forth in Section 10.4.
"Intellectual Property" has the meaning set forth in Section
4.10.
"Inventories" has the meaning set forth in Section 2.1(b).
"Knowledge" as applied to the Seller means the actual conscious
knowledge of the members of the management of McCormick Selph or the Seller
identified on Schedule 1.1 of the Disclosure Schedules.
"Law" means any federal, state or local, domestic or foreign,
constitutional provision, statute, law, common law, rule, regulation, Permit,
decree, injunction, judgment, order or legally binding ruling, determination,
finding or writ of any Governmental Entity enacted as of the date hereof.
"Lien" means any lien, mortgage, pledge, security interest,
charge, claim or other encumbrance.
"Losses" has the meaning set forth in Section 10.2(a).
"McCormick Selph" has the meaning set forth in the Recitals to
this Agreement.
"Net Working Capital" means the difference between the sum of (a)
prepaid expenses, deposits, accounts receivable (less reserves), inventory (less
reserves) and other current assets of the Business included in the Purchased
Assets and (b) accounts payable, accrued expenses and other current liabilities
included in the Assumed Obligations all as determined in accordance with
generally accepted United States accounting principles ("GAAP") in a manner
consistent with the historic accounting principles of the Business, subject to
Section 6.3 hereof and Schedules 2.5 and 4.4. Working Capital shall be
determined without giving effect to the transactions contemplated by this
Agreement.
"Owned Real Property" has the meaning set forth in Section
2.1(g).
"Paying Party" has the meaning set forth in Section 8.2(d).
"Perchlorate-TCE Condition" shall mean any Environmental
Condition resulting from the presence at the Owned Real Property of perchlorate
and/or trichloroethylene, and any degradation products thereof, in the soil or
groundwater at levels above the applicable remediation action levels in effect
at the Closing Date under applicable Environmental Laws or that forms the basis
of any third party claim made under Environmental Laws.
"Permit" means any license, permit, franchise, certificate of
authority or order, certificate of occupancy, building, safety and fire and
health approval, or any waiver of the foregoing, issued by any Governmental
Entity.
"Permitted Lien" means (a) any Lien for Taxes, assessments or
governmental charges or claims that are not yet delinquent, (b) any mechanics',
materialmens' or similar Liens with respect to amounts that are not yet
delinquent, (c) any purchase money Lien or any Lien
4
securing rental payments under capital lease arrangements, (d) in the case of
the Owned Real Property, (i) utility and other easements, building and other
restrictions, and other non-monetary charges and encumbrances of record, or in
each case, if not of record, that do not (either individually or in the
aggregate) materially interfere with or detract from the use, marketability or
value of the Owned Real Property and (ii) provisions of any zoning or building
Laws or any similar Laws and (e) the Liens set forth on Schedule 1.2 of the
Disclosure Schedules.
"Person" means an individual, a partnership, a corporation, a
limited liability company or partnership, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization or a Governmental
Entity.
"Personal Injury" means any illness, disability, injury or death.
"Prepaid Items" has the meaning set forth in Section 2.1(i).
"Purchase Price" has the meaning set forth in Section 2.4(a).
"Purchased Assets" has the meaning set forth in Section 2.1.
"Purchaser" has the meaning set forth in the Preamble to this
Agreement.
"Purchaser Indemnified Parties" has the meaning set forth in
Section 10.2(a).
"Reference Net Working Capital Amount" has the meaning set forth
in Section 2.5(a), determined pursuant to the reference statement attached
hereto as Schedule 2.5 (a) of the Disclosure Schedules.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
discarding, burying, abandoning or disposing into the environment.
"Requester" has the meaning set forth in Section 7.3(h).
"Schedule" means, unless the context otherwise requires, the
referenced Schedule included in the Disclosure Schedules.
"Seller" has the meaning set forth in the Preamble to this
Agreement.
"Seller Indemnified Parties" has the meaning set forth in Section
10.3(a).
"Seller Plans" has the meaning set forth in Section 4.12.
"Tax" means any federal, state, local or foreign net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, lease, service, service use, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, windfall profits,
customs, duties or other tax, fee, assessment or charge, including any related
interest, penalty or addition thereto.
"Tax Return" means any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto.
"Transferred Employees" has the meaning set forth in Section
8(b).
"US Dollars" and "US$" and "$" means the lawful currency of the
United States of America.
"U.S. Government" has the meaning set forth in Section 4.19(d).
5
"WARN Act" means the United States Federal Worker Adjustment and
Retraining Notification Act, as amended.
SECTION 2: THE TRANSACTION.
2.1 Sale and Purchase of Assets. At the Closing, the Seller will
sell, transfer, assign, convey, set over and deliver to the Purchaser, and the
Purchaser will purchase, acquire and accept from the Seller all right, title and
interest of the Seller in and to all of the assets, rights and properties of
McCormick Selph, other than the Excluded Assets, that are owned or leased by the
Seller primarily in connection with the conduct of the Business (collectively,
the "PURCHASED ASSETS") including, without limitation, the following assets,
rights and properties owned or leased by the Seller as of the Closing Date and
primarily associated with the Business:
(a) all machinery, equipment, motor vehicles, tools, dies,
spare parts, furniture and fixtures, leasehold improvements, automobiles,
trucks, non-inventoried supplies and other miscellaneous tangible personal
property related to, used or held for use in connection with the Business as of
the Closing Date including those assets listed on Schedule 2.1(a) that are not
located at the Facility (collectively the "EQUIPMENT");
(b) all inventories of raw materials, work in process,
finished products, goods, spare parts, replacement and component parts, and
office, packaging and other supplies located at the Facility (collectively, the
"INVENTORIES");
(c) all accounts and notes receivable and other current
assets (other than the Inventories) of the Business, including without
limitation all trade and other debts owed to the Seller in connection with the
operation of the Business prior to the Closing Date;
(d) the benefit of (but subject to the burden of) all
contracts, agreements, leases, commitments, instruments, guaranties, bids,
orders and proposals to which the Seller is a party primarily in connection with
the Business as of the Closing Date, including the Assumed Contracts, but
excluding all corporate-wide purchasing arrangements which relate generally to
the Business and other divisions or business units of the Seller or any of its
Affiliates and any other arrangements with other divisions or business units of
the Seller or any of its Affiliates. Schedule 2.1(d) to this Agreement contains
a complete list of all such contracts and other agreements to be transferred to
the Purchaser hereunder (collectively, the "CONTRACTS");
(e) to the extent legally assignable, all Permits held by
the Seller in connection with the Business as of the Closing Date;
(f) all books, records (other than personnel records unless
consented to by the relevant Employees), ledgers, files, documents,
correspondence, lists, plats, drawings, creative materials, advertising and
promotional materials, studies, reports and other printed or written materials
used or held for use by the Seller primarily in connection with the Business
which are material to continuing the operation of the Business as a going
concern;
(g) the real property owned by the Seller described on
Schedule 4.8 of the Disclosure Schedules, together with all buildings,
structures, improvements and fixtures and fittings located on or attached to
such real property, and all rights appurtenant thereto (the "OWNED REAL
PROPERTY");
6
(h) Intellectual Property used by the Seller and relating
primarily to the Business, including the Seller's right to use the name
"McCormick Selph" and the patents identified on Schedule 4.10;
(i) all prepaid items, deposits and other similar rights to
future services or goods of the Seller relating to the Business (the prepaid
items, deposits and other similar items to be conveyed to the Purchaser pursuant
hereto are hereinafter collectively referred to as the "PREPAID ITEMS");
(j) all rights of the Seller relating to the Business under
express or implied warranties from suppliers with respect to the Purchased
Assets to the extent the same are assignable; and
(k) all other assets, whether tangible or intangible real or
personal which exist on the Closing Date and which are primarily used in the
Business.
2.2 Excluded Assets. Notwithstanding the provisions of Section
2.1, the Purchased Assets will not include any assets not used primarily in the
operation of the Business, including, without limitation, any of the following
assets, rights or properties (collectively, the "EXCLUDED ASSETS"):
(a) any and all assets, rights and properties of the Seller
or any of its Affiliates other than those used by McCormick Selph in connection
with the operation of the Business;
(b) any assets located at the Facility which are not owned
by the Seller and are identified on Schedule 2.2(b) of the Disclosure Schedules;
(c) any Cash of the Seller or any of its Affiliates,
including all bank accounts;
(d) any rights or claims of the Seller or any of its
Affiliates with respect to any Tax refund, carryback or carryforward or other
credits to the Seller for periods ending prior to the Closing Date;
(e) any property, casualty, workers' compensation or other
insurance policy or related insurance services contract relating to the Seller
or any of its Affiliates, and any rights of the Seller or any of its Affiliates
under any such insurance policy or contract, including, but not limited to,
rights to any cancellation value and any payments under such policies related to
claims made in connection with the 1998 explosion at the Facility;
(f) any rights of the Seller under this Agreement, the
Ancillary Agreements or under any other agreement between the Seller and the
Purchaser;
(g) all "Teledyne," "Allegheny Teledyne," "Teledyne Ryan
Aeronautical" and "Ryan Aeronautical" marks, including any and all trademarks or
service marks, trade names, registered and unregistered designs, slogans or
other like property relating to or including the names "Teledyne," "Allegheny
Teledyne," "Teledyne Ryan Aeronautical" and "Ryan Aeronautical," the marks
Teledyne, Allegheny Teledyne, Teledyne Ryan Aeronautical, Ryan Aeronautical and
any derivative thereof and the Teledyne, Allegheny Teledyne, Teledyne Ryan
Aeronautical and Ryan Aeronautical logos or any derivatives thereof and any and
all related trade dress; the Seller's proprietary computer programs or other
software, including but
7
not limited to the Seller's proprietary data bases (including environmental
databases), accounting and reporting formats, systems and procedures which are
not used primarily in the Business; and any documents or information which are
subject to the attorney-client or work product privilege;
(h) proprietary or confidential non-technical business
information, books, files, papers, records, data and policies of the Seller or
any of its Affiliates that do not relate primarily to the Business, including
proprietary business management software used by the Seller or any of its
Affiliates other than the Business, such as the Teledyne corporate directories,
management procedures and guidelines, proprietary data bases, accounting and
financial reporting formats, systems and procedures, instructions and
organization manuals;
(i) any claim, cause of action, suit, judgment, demand or
right of any nature against third parties to the extent relating to any Excluded
Liability or Excluded Asset and all attorney-client, work product and other
legal privileges of the Seller related thereto;
(j) any pension assets attributable to Employees or any
former employee of the Seller under any Seller Plans; and
(k) the consideration to be paid to the Seller pursuant to
this Agreement.
2.3. Assumption of Obligations.
(a) At the Closing the Purchaser will assume and become
responsible for, and will thereafter pay, perform and discharge when due, the
following specified liabilities and obligations, whether accrued, absolute,
contingent or otherwise, known or unknown (collectively, the "ASSUMED
OBLIGATIONS"):
(i) those liabilities and obligations of the Seller
arising on or after the Closing Date with respect to the Contracts listed on
Schedule 2.3(a)(i) (the "ASSUMED CONTRACTS");
(ii) those liabilities and obligations of the Seller
with respect to the Employees which the Purchaser has expressly agreed to assume
pursuant to this Agreement (including liability for accrued vacation to the
extent reflected on the Closing Statement), provided that the Purchaser shall
have no liability with respect to severance payments, if any, which may be due
and payable by the Seller or Allegheny Teledyne Incorporated to Patrick J.
Carroll;
(iii) all product warranty obligations with respect to
products manufactured or sold by Seller in connection with the Business, subject
to Section 7.6 hereof;
(iv) any claims for any commission or other
remuneration payable or alleged to be payable to any broker, agent or other
intermediary who acted for Purchaser in connection with the transactions
contemplated by this Agreement;
(v) all accounts payable, accrued liabilities, accrued
expenses and capital lease obligations of the Seller to the extent reflected in
the Closing Statement; and
8
(vi) all other debts, liabilities and obligations
arising out of or relating to events or transactions on or after the Closing
Date in connection with the operation of the Business by the Purchaser or use of
the Purchased Assets by the Purchaser.
(b) Except as otherwise expressly provided in Section 2.3(a)
of this Agreement, the Purchaser does not assume, agree to perform or discharge,
indemnify the Seller against or otherwise have any responsibility for any other
liabilities or obligations of the Seller, fixed or contingent and whether
arising prior to, on or after the Closing Date (the "EXCLUDED LIABILITIES").
Without limiting the generality of the foregoing, the Purchaser shall not be
deemed to have assumed any of the following, all of which are Excluded
Liabilities:
(i) any liabilities or obligations of the Seller under
the Seller Plans except those assumed pursuant to this Agreement;
(ii) any liabilities or obligations of the Seller
with respect to Taxes;
(iii) any liability or obligation of the Seller
arising out of (x) any litigation that is pending or threatened
as of the Closing Date (whether or not set forth on Schedule
4.11) or (y) any litigation arising from any negligent, reckless
or unlawful action or inaction of the Seller prior to the Closing
Date;
(iv) any liabilities or obligations arising out of
defects or alleged defects in or damages to persons or property
arising out of defects in products manufactured or sold by the
Seller prior to the Closing Date (whether or not set forth on
Schedule 4.21) exclusive of warranty obligations under
2.3(a)(iii) hereof;
(v) any other liabilities or obligations of the
Seller existing on the Closing Date which should have been
accrued on the Closing Statement in accordance with the
accounting principles utilized in preparing such Closing
Statement but which were not so accrued;
(vi) except as assumed pursuant to Sections 2.3(a)
(i) and (ii) hereof, any liability or obligation of the Seller to
any employee or former employee of the Seller on account of the
Seller's employment or termination of employment of that person
on or prior to the Closing Date and severance payments, if any,
which may be due and payable by the Seller or Allegheny Teledyne
Incorporated to Patrick J. Carroll;
(vii) any liabilities or obligations (whether
absolute, contingent or otherwise) relating to workers'
compensation claims made by any employee of the Business (whether
filed or presented prior to the Closing Date) in connection with
claims arising before the Closing Date; and
(viii) any liabilities or obligations (whether
absolute, contingent or otherwise) arising out of any violation
of any
9
Environmental Law or Environmental Permit or arising out of the
presence of Hazardous Materials or the existence of an
Environmental Condition at any present or former facility owned,
leased or operated in connection with the Business, or arising
solely from the Release of Hazardous Materials by Seller that
injures, or allegedly injures or otherwise exposes any person,
including current and former employees, at any present or former
facility owned, leased or operated in connection with the
Business, or arising solely from the Release of Hazardous
Materials by Seller attributable to the operation of the Business
that affects, or allegedly affects, any third-party property not
owned, leased, or operated by Seller or that injures, or
allegedly injures or otherwise exposes, any person at such
third-party properties, or arising solely from the Release of any
Hazardous Materials at any third-party property at which Seller
arranged for the disposal of any Hazardous Materials in each case
to the extent existing prior to the Closing Date, whether or not
listed on Schedule 4.14;
(ix) any liabilities or obligations arising out (a)
any violation or breach by the Seller of any Government Contract,
or (b) any violation by Seller of any Law applicable to any
Government Contract or Bid, in each case occurring prior to the
Closing Date, in each case whether or not listed on Schedule
4.19; and
(x) any liabilities or obligations arising out of
the payment by the Seller in connection with the Business (a) of
funds for unlawful contributions, gifts, entertainment or other
unlawful expenses, including but not limited unlawful expenses
related to political activity, or (b) of funds for any unlawful
payment to foreign or domestic government officials or employees
or to foreign or domestic political parties or campaigns or
violation of any provision of the Foreign Corrupt Practices Act
of 1977, as amended, in each case occurring prior to the Closing
Date, in each case whether or not listed on Schedule 4.20.
(c) Liability for Releases of Hazardous Materials by both
the Seller and the Purchaser shall be equitably allocated between the parties.
2.4 Determination and Payment of Consideration.
(a) In consideration of the sale and transfer of the
Purchased Assets to the Purchaser and the other undertakings of the Seller
hereunder, the Purchaser shall (i) pay the sum of Thirty Nine Million Dollars
($39,000,000) (the "PURCHASE PRICE") to the Seller at the Closing in immediately
available funds by wire transfer to a bank account specified by the Seller and
(ii) assume the Assumed Obligations.
(b) The Purchase Price payable by the Purchaser at the
Closing will be subject to adjustment as provided in Section 2.5.
2.5 Purchase Price Adjustment.
(a) The Purchase Price will be subject to adjustment upward
or downward, as the case may be, following the Closing, in the amount of the
difference, if any, between (i) $7,670,000, the estimated Net Working Capital as
of January 3, 1999 (the "REFERENCE NET WORKING CAPITAL AMOUNT") and (ii) the Net
Working Capital as of the Closing
10
Date as finally determined in accordance with the procedures specified below
(the "FINAL NET WORKING CAPITAL AMOUNT").
(b) Promptly after the Closing Date, Purchaser will prepare
and present to the Seller a statement in reasonable detail of the Net Working
Capital of the Business as of the Closing Date (the "CLOSING STATEMENT"). The
Closing Statement shall be delivered to the Seller no later than 30 days after
the Closing Date. The Purchase Price adjustment shall be made on the basis of
the Closing Statement.
(c) The Seller will deliver to the Purchaser a statement of
any objections relating to the Closing Statement and the related Purchase Price
adjustment, if any, as soon as practicable, but in any event not later than 30
days after the date of the delivery of the Closing Statement. The Purchaser and
the Seller shall cooperate and negotiate in good faith to reconcile any
disputes. In the event of any dispute or any failure to reach agreement with
respect to the objections of the Seller relating to the Closing Statement and
any related Purchase Price adjustment within 30 days after the date of delivery
by Seller to the Purchaser of Seller's statement of objections, the items in
dispute (and no other items) will be submitted to, and the amount of such
Purchase Price adjustment will be determined by, arbitration by Arthur Andersen,
LLP (the "ARBITRATOR"), certified public accountants. The Arbitrator will
deliver its written decision regarding any disputed items to both parties within
30 days after the submission of such dispute to the Arbitrator. The
determination of the Arbitrator will be in all respects final, binding and
conclusive on the parties hereto.
(d) Net Working Capital shall be deemed to have been finally
determined upon the first to occur of (i) acceptance of the Closing Statement,
(ii) the Seller's failure to object thereto within 30 days of receipt thereof,
(iii) resolution by mutual agreement of the parties after notice of a
disagreement or (iv) notification by the Arbitrator of its final determination
thereof.
(e) If the Final Net Working Capital Amount is greater than
the Reference Net Working Capital Amount, the Purchase Price will be increased
and Purchaser will pay the Seller the amount of such excess plus interest on
such excess from the Closing Date to the date of payment at a rate of interest
equal to the prime rate announced by PNC Bank as in effect from time to time. If
the Final Net Working Capital Amount is less than the Reference Net Working
Capital Amount, the Purchase Price payable will be decreased and the Seller will
pay the Purchaser the amount of such decrease plus interest on such decrease
from the Closing Date to the date of payment at a rate of interest equal to the
prime rate announced by PNC Bank as in effect from time to time.
(f) To the extent that any amounts payable under this
Section 2.5 are not affected by objections of the Seller, such amounts will be
paid by wire transfer of immediately available US Dollars not more than 30 days
after delivery of the Closing Statement to the Seller. To the extent that any
amounts payable under this Section 2.5 are affected by objections of the Seller,
such amounts will be paid by wire transfer of immediately available funds not
more than five days after the mutual agreement of the Purchaser and the Seller
or the final determination of the Arbitrator, as the case may be. The provisions
of this Section 2.5 will survive the Closing.
11
SECTION 3: CLOSING AND CLOSING DATE.
3.1. Closing. Subject to the provisions of Section 11, the
consummation of the transactions contemplated by this Agreement (the "CLOSING")
will take place at the offices of Gibson Dunn & Crutcher, LLP, Los Angeles,
California or, if specified by Purchaser at least three business days prior to
Closing, a location in New York, New York, at 10:00 a.m. local time, on June 24,
1999 or at such other place or on such other date as the Purchaser and the
Seller may agree. The Closing will be deemed effective as of 11:59 p.m.
Pittsburgh, Pennsylvania time, on the day before the Closing Date.
3.2. Closing Date. The date on which the Closing actually takes
place is referred to in this Agreement as the "CLOSING DATE."
3.3. Deliveries at the Closing. (a) At the Closing, (i) the
Seller will deliver to the Purchaser the various certificates, instruments and
documents referred to in Section 9.1, (ii) the Purchaser will deliver to the
Seller the various certificates, instruments and documents referred to in
Section 9.2, (iii) the Seller will execute, acknowledge (if appropriate) and
deliver, or cause to be executed, acknowledged (if appropriate) and delivered,
to the Purchaser (1) a Bill of Sale (the "BILL OF Sale") in the form attached to
this Agreement as Exhibit A, (2) a special warranty deed for the Owned Real
Property (the "DEED"), in the form attached to this Agreement as Exhibit B, (3)
an Assignment Agreement for Patents (the "ASSIGNMENT AGREEMENT") in the form
attached to this Agreement as Exhibit C, and (4) such other instruments of sale,
transfer, conveyance, and assignment as the Purchaser and its counsel may
reasonably request in form reasonably satisfactory to the Seller and the
Purchaser or as required by applicable Governmental Entities, (iv) the Purchaser
will execute, acknowledge and deliver to the Seller an Assumption Agreement (the
"ASSUMPTION AGREEMENT") in the form attached to this Agreement as Exhibit D, and
such other instruments of assumption as the Seller and its counsel reasonably
may request in form reasonably satisfactory to the Seller and the Purchaser or
as required by applicable Governmental Entities and (v) the Purchaser will
deliver to the Seller the Purchase Price as specified in Section 2.4 and the
Purchaser's share of any recording and filing fees required to be paid by the
Purchaser pursuant to Section 12.3.
(b) The Seller will deliver to the Purchaser all of the
Purchased Assets which are capable of transfer by delivery whereupon the title
thereto will pass to the Purchaser by such delivery.
(c) The Seller will deliver to the Purchaser the books and
records referred to in Section 2.2(e) above.
3.4. Allocation of Value. The Purchaser and the Seller hereby
agree that Exhibit E attached to this Agreement reflects the allocation of the
Purchase Price to the Purchased Assets and that such allocation shall be used by
the Purchaser and the Seller in preparing their respective Tax Returns and
neither the Purchaser nor the Seller shall dispute such allocation in connection
with any audit or other proceeding.
SECTION 4: REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants to the Purchaser as follows:
4.1. Organization of the Seller. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and is licensed or qualified to transact business as a foreign
corporation, and is in good standing, under the laws of
12
all states in the United States where the Business would require it to be so
licensed or qualified except where the failure to be so licensed or qualified
would not have a material adverse effect on the Business.
4.2. Authorization of Transaction. The Seller has full corporate
power and authority and has taken all requisite corporate action to enable it to
execute and deliver this Agreement and each of the Ancillary Agreements to which
it is a party and to perform its obligations hereunder and thereunder. This
Agreement constitutes, and each of the Ancillary Agreements when executed and
delivered by the Seller will constitute, the valid and legally binding
obligation of the Seller enforceable against the Seller in accordance with their
respective terms and conditions, subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar Laws now or hereafter in
effect relating to creditors' and landlords' rights and general principles of
equity, including commercial reasonableness, good faith and fair dealing.
4.3 Noncontravention; Consents. Neither the execution and
delivery of this Agreement or any of the Ancillary Agreements by the Seller, nor
the consummation by the Seller of the transactions contemplated hereby or
thereby, will violate any provision of the charter or bylaws of the Seller or
any Law to which the Seller is subject, except violations of Law which would not
have a material adverse effect on the Business or Seller's ability to consummate
the transactions contemplated by the Agreement. Except (i) as set forth on
Schedule 4.3 of the Disclosure Schedules, and (ii) consents which may be
required for the assignment of certain of the Contracts, neither the execution
and delivery of this Agreement or any of the Ancillary Agreements by the Seller,
nor the consummation by the Seller of the transactions contemplated hereby or
thereby, will constitute a violation of, constitute or create a default under or
result in the creation or imposition of any Lien upon any of the Purchased
Assets pursuant to any agreement or commitment to which the Seller is a party or
by which the Seller or any of the Purchased Assets is bound. As of the Closing
Date, except as set forth on Schedule 4.3 of the Disclosure Schedules, the
Seller will have given all required notices and obtained all material licenses,
permits, consents, approvals, authorizations, and orders of Governmental
Entities as are required in order to enable the Seller to perform its
obligations under this Agreement and each of the Ancillary Agreements.
4.4 Business Financial Statements. Set forth as Schedule 4.4 of
the Disclosure Schedules are correct and complete copies of the unaudited
balance sheet of the Business for the fiscal years ended as of December 28, 1997
and January 3, 1999 and the related statements of income for said periods (the
"FINANCIAL STATEMENTS"). Except as expressly provided in Section 6.3 or on
Schedule 4.4, the Financial Statements were prepared in accordance with GAAP,
consistently applied, and were derived in all material respects from the books
and records of the Business.
4.5. Subsequent Events. Since January 3, 1999, except as set
forth on Schedule 4.5 of the Disclosure Schedules, there has not been any
material adverse change in the business, financial condition, operations or
results of operations, assets or liabilities of the Business. Without limiting
the generality of the foregoing, since such date and in each case in connection
with the Purchased Assets and the Assumed Obligations, except as contemplated by
the Agreement:
13
(a) the Seller has not sold, leased, transferred or assigned
any of the assets, tangible or intangible, of the Business, other than in the
ordinary course of business and on a basis consistent with past practice;
(b) the Seller has not experienced any casualty damage,
destruction or loss (whether or not covered by insurance) to its property in
excess of $25,000 affecting any of the Purchased Assets used in the operations
of the Business as presently conducted;
(c) the Seller has not (i) entered into any employment,
deferred compensation or other similar agreement or arrangement with any of its
Employees or (ii) increased the compensation, bonus or other benefits payable to
any of its Employees, other than in the ordinary course of business and
consistent with past practice or as required by Law; and
(d) there has not been, with respect to the Business, any
(i) transaction by the Seller other than in the ordinary course of business and
consistent with past practice; (ii) mortgage, pledge or subjection to lien,
charge or encumbrance of any kind, of any of the Purchased Assets, except for
liens for Taxes not yet due and payable or being contested in good faith; or
(iii) alteration in the manner of keeping the Seller's books, accounts or
records, or in the accounting practices therein reflected, relating to or
affecting the Business.
4.6. Tax Matters.
(a) There are no Liens (other than Permitted Liens) on any
of the Purchased Assets that arose in connection with any failure or alleged
failure to pay any Tax.
(b) The Seller with respect to the Business has withheld and
paid all material Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor, creditor or
other party.
(c) To the Seller's Knowledge, there is no dispute or claim
concerning any Tax liability of the Seller with respect to the Business that
constitutes an Assumed Obligation.
4.7. Contracts.
(a) Except for the Contracts listed on Schedule 4.7 of the
Disclosure Schedules and the contracts and agreements of the Seller in
connection with the Business constituting Excluded Assets, the Seller with
respect to the Business has no liabilities or obligations under, and is not
otherwise bound by, any executory written (i) mortgage, indenture, note,
installment obligation or other instrument relating to the borrowing of money,
(ii) guarantee of any obligation, (iii) letter of credit, bond or other
indemnity (excluding endorsements of instruments for collection in the ordinary
course of the operation of the Business), (iv) agreement requiring the payment
by the Seller of more than $25,000 in any 12-month period for the purchase or
lease of any machinery, equipment or other capital assets, (v) collective
bargaining agreement, employment, international sales agent, representative or
consulting agreement or agreement providing for severance payments or other
additional similar rights or benefits (whether or not optional) in the event of
the sale of the Business, (vi) joint venture agreement, (vii) agreement
requiring the payment by the Seller with respect to the Business to any Person
(other than any division, unit or Affiliate of the Seller) of more than $25,000
in any 12-month period for the purchase of goods or services, or (viii)
agreement requiring the payment to the Seller by any Person (other than any
division, unit or Affiliate of the
14
Seller) of more than $25,000 in any 12-month period for the sale of goods or
services provided by the Business.
(b) The Seller has delivered or made available to the
Purchaser correct and complete copies of each written agreement listed on
Schedule 4.7 of the Disclosure Schedules.
(c) Each Contract listed on Schedule 4.7 of the Disclosure
Schedules is, to the Seller's Knowledge, a valid, binding and enforceable
obligation of the other party or parties thereto (subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar Laws affecting creditors' or landlords' rights and remedies generally
and subject as to enforceability to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing) and is in
full force and effect.
4.8. Owned Real Property. Schedule 4.8 of the Disclosure
Schedules lists and describes in reasonable detail the Owned Real Property. With
respect to the Owned Real Property, except as set forth on Schedule 4.8 of the
Disclosure Schedules:
(i) the Seller has good and valid title to such parcel,
free and clear of any Lien (other than Permitted Liens);
(ii) the Seller has not received written notice of any
condemnation proceedings, lawsuits or administrative actions relating to such
property, including any proposed special assessment or any proposed material
change in property tax, land use, or zoning laws affecting the Owned Real
Property;
(iii) the Seller has not received written notice that
the use or occupancy of such property violates any covenants, conditions or
restrictions that encumber such property, or that any such property is subject
to any restriction for which any Permits necessary to the current use thereof
have not been obtained;
(iv) there are no leases, subleases, licenses,
concessions or other agreements granting to any Person the right of use or
occupancy of any portion of the Owned Real Property; and
(v) the current use of the Owned Real Property by
Seller is in material compliance with all applicable zoning laws, covenants,
conditions and restrictions which encumber the Owned Real Property (whether or
not such covenants, conditions, or restrictions are set forth on Schedule 4.8).
4.9. Title. The Seller has and will convey to the Purchaser on
the Closing Date good and marketable title to all the Purchased Assets (other
than the Owned Real Property, as to which representations and warranties are
made pursuant to Section 4.8, and the Intellectual Property, as to which
representations and warranties are made pursuant to Section 4.10) free and clear
of all Liens (other than Permitted Liens).
4.10. Intellectual Property. Schedule 4.10 of the Disclosure
Schedules identifies all issued patents, patent applications, registered
trademarks, trademark registration applications, registered service marks,
and service mark registration applications forming a part of the Purchased
Assets in the United States Patent and Trademark Office or any state patent
or trademark registry, all material trade names used
15
primarily by the Business and all material license agreements relating
primarily to the Business (the "INTELLECTUAL PROPERTY"). With respect to
each item of Intellectual Property required to be identified in Schedule
4.10 of the Disclosure Schedules and any trade secrets or know-how relating
primarily to the Business, no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to the
Seller' Knowledge, threatened with challenges the legality, validity,
enforceability, use or ownership of the item. The Seller has not received
any written notice that the Seller is infringing upon the intellectual
property rights of others in connection with the Business or the Seller's
operation of the Business.
4.11. Litigation. Except as set forth on Schedule 4.11 of the
Disclosure Schedules, the Seller in connection with the Business is not (a)
subject to any unsatisfied judgment, order, decree, stipulation, injunction or
criminal charge or (b) a party to or, to the Seller's Knowledge, threatened to
be made a party to any complaint, action, suit, criminal charge, proceeding,
hearing or investigation of or in any court or quasi-judicial or administrative
agency of any Governmental Entity. There are no judicial or administrative
actions, proceedings or investigations pending or, to the Seller's Knowledge,
threatened that question the validity of this Agreement or any of the Ancillary
Agreements or any action taken or to be taken by the Seller in connection with
this Agreement or any of the Ancillary Agreements or that, if adversely
determined, would have a material adverse effect upon the Seller's ability to
enter into or perform its obligations under this Agreement or any of the
Ancillary Agreements to which it is a party.
4.12. Employee Benefits. Schedule 4.12 of the Disclosure
Schedules sets forth and identifies a complete and correct list of all Employee
Pension Benefit Plans, material Employee Welfare Benefit Plans and any other
material employee benefit arrangements or payroll practices (including
employment agreements and severance agreements) maintained by the Seller or to
which the Seller contributes or has any existing liability, in each case with
respect to any Employees (or, if the Seller has any existing liability, former
employees) of the Seller who are employed in connection with the Business
(collectively, the "SELLER PLANS").
4.13. Labor Relations.
(a) Except as set forth on Schedule 4.13 of the Disclosure
Schedules, there are no disputes, claims or actions pending or, to the Seller's
Knowledge, threatened between the Seller and any employee of the Business or any
labor or other collective bargaining unit representing any employee of the
Business, in each case that could reasonably be expected to result in a labor
strike, slow-down or work stoppage.
(b) The Seller has complied in all material respects with
all applicable Laws relating to the employment and termination of labor,
including those related to wages, hours, collective bargaining, workplace safety
and health (including without limitation the rules and regulations of the
Occupational Safety and Health Administration and any state equivalent thereof),
immigration and the payment and withholding of taxes and other sums as required
by appropriate governmental authorities. Except as set forth on Schedule 4.13,
there is no (i) unfair labor practice complaint against the Seller pending
before the National Labor Relations Board or any state or local agency or, to
the Seller's Knowledge, any threatened complaint; (ii) pending representation
question respecting the employees of the Business; or (iii) pending or, to the
16
Seller's Knowledge, threatened claim against the Seller regarding the discharge
or dismissal of any employee of the Business.
4.14. Environmental Matters. Except as set forth on Schedule 4.14
of the Disclosure Schedules, (a) there exists no material fact, condition or
occurrence concerning the Seller's compliance with or remediation obligations
under Environmental Laws or Environmental Permits relating to the Business; (b)
no unresolved complaint, notice of violation, citation, summons or order has
been issued or filed alleging any violation by the Seller of any Environmental
Law or Environmental Permit that is reasonably expected to have a material
adverse effect on the operations or financial condition of the Business; and (c)
the operation of the Business at the Facility by the Seller is and has been, for
the past three years, in compliance in all material respects with applicable
Environmental Laws. No Hazardous Material has been treated or stored on the
Owned Real Property except in material compliance with applicable Environmental
Laws. Except as disclosed on Schedule 4.14 or as permitted by applicable
Environmental Laws, no (A) Environmental Conditions, (B) asbestos-containing
materials or (C) polychlorinated biphenyls exist at the Facility, in each case,
that would reasonably be expected to have a material adverse effect on the
operations or financial condition of the Business. Except as disclosed on
Schedule 4.14, in each case, in connection with the operation of the Business,
(a) the Seller is not subject to liability under any Environmental Law for any
Hazardous Material disposal or contamination on any third party property; (b)
the Seller is not subject to any proceedings, actions, orders, decrees,
injunctions or other claims, or to the Knowledge of the Seller, any threatened
actions or claims, relating to liability under any Environmental Law; and (c)
the Seller has not assumed by agreement any liability for cleanup, compliance or
required capital expenditures pursuant to any Environmental Law. The Seller has
made available to Purchaser copies of all material environmental assessments,
audits and studies in its possession or reasonably available to it relating to
the Business or the Owned Real Property. There is no claim pending or, to the
Seller's Knowledge, threatened, for any Personal Injury or property damage
arising out of any exposure prior to the Closing to any Hazardous Materials
present at the Facility or Released from the Facility.
4.15. Legal Compliance. Except (a) with respect to compliance
with Environmental Law (which is governed by Section 4.14 above) and (b) as set
forth on Schedule 4.15 of the Disclosure Schedules, the operations of the
Business are in material compliance with all Laws applicable to the Business.
Except as set forth on Schedule 4.15 of the Disclosure Schedules, the Seller has
not received any notification of any asserted present or past failure by the
Seller to materially comply with any such Law, which has not been resolved.
4.16. Permits. The Seller holds all material Permits that are
required by any Government Entity to permit it to operate the Business and the
Purchased Assets as they are presently operated. Each such material Permit is
listed on Schedule 4.16 of the Disclosure Schedules.
4.17. Adequacy and Completeness of Purchased Assets. Except as
set forth on Schedule 4.17, the Purchased Assets including, without limitation,
the Permits and Intellectual Property, being sold or assigned to the Purchaser
pursuant to this Agreement are sufficient in all material respects for the
Purchaser to continue to operate the Business in the manner heretofore conducted
by the Seller, and the Seller has no Knowledge of any facts which can reasonably
be expected to give rise to an impediment to such operation of the Business
except as have been
17
disclosed in this Agreement or the Schedules hereto or as may arise from general
economic conditions or conditions affecting the Business' industry generally.
4.18. Customers and Suppliers. Schedule 4.18 lists the ten
largest customers of the Business and the ten largest suppliers of the Business
for the fiscal year ended January 3, 1999. Except as set forth on Schedule 4.18,
to Seller's Knowledge, since January 3, 1999, there has been no material adverse
change in the business relationship of the Business with any customer or
supplier named on Schedule 4.18. Except as set forth on Schedule 4.18, to
Seller's Knowledge and other than in the ordinary course of business, no
customer or supplier named on Schedule 4.18 has threatened or expressed an
intention to reduce materially the volume of its purchases from or sales to the
Business or otherwise materially, adversely modify its business relationship
with the Business.
4.19. Government Contracts.
(a) With respect to each Government Contract or Bid (in each
case as defined below) to which the Seller is a party and which relates to the
Business, to the Seller's Knowledge, (i) the Seller has fully complied with all
material terms and conditions and all applicable requirements of statute, rule,
regulation or order; (ii) no notice has been received alleging that the Seller
is in breach or violation of any statutory, regulatory or contractual
requirement; (iii) no written notice of termination for convenience, termination
for default, cure notice or show-cause notice has been received by the Seller;
and (iv) other than in the ordinary course of business, no money due to the
Seller has been (or has been threatened to be) withheld or set off.
(b) Except as set forth on Schedule 4.19, none of the Seller
nor any of the Seller's directors or officers or, to the Seller's Knowledge, any
employees, agents or consultants is (or for the last three years has been) (i)
under administrative, civil or criminal investigation, indictment or
information, or audit by the U.S. Government with respect to any alleged
irregularity, misstatement or omission regarding a Government Contract or Bid
relating to the Business; or (ii) suspended or debarred from doing business with
the U.S. Government or declared nonresponsible or ineligible for government
contracting. The Seller has not made, within the past three years, a voluntary
disclosure under the Department of Defense Voluntary Disclosure Program to the
U.S. Government with respect to any alleged irregularity, misstatement or
omission arising under or relating to any Government Contract or Bid relating to
the Business. To the Seller's Knowledge, there are no circumstances that would
warrant Department of Defense suspension or debarment proceedings or the finding
of nonresponsibility or ineligibility on the part of the Business.
(c) To the Seller's Knowledge, neither the U.S. Government
nor any prime contractor, subcontractor or vendor is asserting (or during the
last three years has asserted) in writing any claim or is initiating (or during
the last three years has the Seller initiated) any dispute proceeding against
the Seller relating to Government Contracts or Bids involving the Business, nor
is the Seller asserting (or during the last three years has the Seller asserted)
any claim or is initiating (or during the last three years has the Seller
initiated) any dispute proceeding directly or indirectly against any such party
concerning any Government Contract or Bid.
18
(d) For purposes of this Section 4.19 the following terms
shall have the meanings set forth below:
(i) "BID" means any outstanding quotation bid or
proposal by the Seller which, if accepted or awarded, would lead to a contract
with the U.S. Government or a prime contractor or a higher tier subcontractor to
the U.S. Government, for the design, manufacture or sale of products or the
provision of services by the Business directly or indirectly to the U.S.
Government.
(ii) "GOVERNMENT CONTRACT" means any prime contract,
subcontract, teaming agreement or arrangement, joint venture, basic ordering
agreement, letter contract, purchase order, delivery order, change order,
arrangement or other commitment of any kind relating to the Business between the
Seller and (A) the U.S. Government, (B) any prime contractor to the U.S.
Government or (C) any subcontractor with respect to any contract described in
clause (A) or (B).
(iii) "U.S. GOVERNMENT" means the United States
government including any and all agencies commissions, branches,
instrumentalities and departments thereof.
4.20. Certain Business Practices. To the Seller's Knowledge, none
of the Seller, any of its affiliates or any directors, officers, agents or
employees of the Seller or any of its affiliates has, within the past three
years, in each case in connection with the Business, (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses,
including but not limited to unlawful expenses related to political activity, or
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended.
4.21. Product Liability. Except as set forth on Schedule 4.21, no
action, suit, arbitration or other proceeding or claim, demand, demand letter,
lien or notice of noncompliance or violation has been asserted in writing
against the Seller for Personal Injury and, to Seller's Knowledge, no event or
circumstance has occurred that could reasonably be expected to constitute the
basis of any claim against the Seller for injury to any person or any property
suffered as a result of the manufacture, distribution or sale of any product or
material by the Seller in connection with the Business, including any claim
arising out of the allegedly defective or unsafe nature of any such product or
material, other than any claim (i) which would not have a material adverse
effect on the Business or (ii) which is within the scope and limits of coverage
of a policy of insurance covering the Business.
4.22. Inventory. Except for the excess or obsolete (unapplied)
work in process and raw materials inventory of the Business previously
identified by the Seller, as to which no representation is made, the quantities
of Inventory maintained by the Business are reasonable in the present
circumstances of the Business.
4.23. Accounts Receivable. The accounts receivable of the
Business included in the Purchased Assets arose out of or will have arisen out
of sales of inventory in the ordinary course of business and are collectable in
the ordinary course of Business in accordance with their respective terms, net
of any reserve for doubtful accounts.
19
4.24. Brokers' Fees. The Seller has no liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Purchaser could become
liable or obligated.
4.25. LIMITED WARRANTIES. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
IN THIS SECTION 4, THE SELLER MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER TO
THE PURCHASER, EXPRESS, IMPLIED OR STATUTORY, CONCERNING THE PURCHASED ASSETS,
THE ASSUMED OBLIGATIONS, THE FACILITY OR THE BUSINESS. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, THE SELLER MAKES NO REPRESENTATION OR WARRANTY AS
TO VALUE, QUALITY, QUANTITY, CONDITION, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, WORKING ORDER, COMPLIANCE WITH LAW, THE FUTURE PROFITABILITY
OF CONTRACTS OR COMMITMENTS, OR ANY PROJECTED FINANCIAL STATEMENTS OR OTHER
PROJECTED FINANCIAL INFORMATION, PROSPECTS OR FUTURE RESULTS OF OPERATIONS OF
THE BUSINESS. ANY WARRANTIES OTHER THAN THOSE EXPRESSLY PROVIDED FOR IN THIS
SECTION 4, WHETHER EXPRESS, IMPLIED OR STATUTORY, WRITTEN OR ORAL, ARE HEREBY
EXPRESSLY DISCLAIMED. THE PURCHASER ACKNOWLEDGES THAT IT HAS HAD AN OPPORTUNITY
TO INSPECT THE PURCHASED ASSETS.
SECTION 5: REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
Purchaser represents and warrants to the Seller as follows:
5.1. Organization of the Purchaser. The Purchaser is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware. At the Closing, the Purchaser shall be duly organized,
validly existing and in good standing under the laws of its jurisdiction of
formation, and if such jurisdiction is not California, shall be licensed or
qualified to transact business as a foreign entity, and shall be in good
standing as such a foreign entity under the laws of the State of California.
5.2. Authorization of Transaction. The Purchaser has full power
and authority under Delaware laws governing limited partnerships and has taken
all requisite partnership action to enable it to execute and deliver this
Agreement and each of the Ancillary Agreements to which it is a party and to
perform its obligations hereunder and thereunder. This Agreement constitutes,
and each of the Ancillary Agreements when executed and delivered by the
Purchaser will constitute, the valid and legally binding obligation of the
Purchaser enforceable against the Purchaser in accordance with their respective
terms and conditions, subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar Laws now or hereafter in effect relating
to creditors' and landlords' rights and general principles of equity, including
commercial reasonableness, good faith and fair dealing .
5.3. Noncontravention; Consents. Neither the execution and the
delivery of this Agreement or any of the Ancillary Agreements by the Purchaser,
nor the consummation by the Purchaser of the transactions contemplated hereby or
thereby, will violate any provision of the limited partnership agreement or any
other governing instrument of the Purchaser or any Law to which the Purchaser is
subject. Neither the execution and delivery of this Agreement or any of the
Ancillary Agreements by the Purchaser, nor the consummation by the Purchaser of
the transactions contemplated hereby or thereby, will constitute a violation of
or constitute or create
20
a default under, any agreement or commitment to which the Purchaser is a party
or by which the Purchaser or any of its properties are bound or to which the
Purchaser of any of such properties are subject. As of the Closing Date, the
Purchaser will have given all required notices and obtained all licenses,
Permits, consents, approvals, authorizations and orders of Governmental Entities
as are required in order to enable the Purchaser to perform its obligations
under this Agreement and each of the Ancillary Agreements.
5.4. Litigation. There are no judicial or administrative actions,
proceedings or investigations pending or, to the Purchaser's knowledge,
threatened that question the validity of this Agreement or any of the Ancillary
Agreements or any action taken or to be taken by the Purchaser in connection
with this Agreement or any of the Ancillary Agreements or that, if adversely
determined, would have a material adverse effect upon the Purchaser's ability to
enter into or perform its obligations under this Agreement or any of the
Ancillary Agreements to which it is a party.
5.5. Brokers' Fees. The Purchaser has no liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which the Seller could
become liable or obligated.
5.6 Financing. The Purchaser has cash resources or available
financing of $32,500,000 available to it and is highly confident of raising on a
timely basis the additional $6,500,000 necessary to consummate on a timely basis
the transactions contemplated by this Agreement.
SECTION 6: PRE-CLOSING COVENANTS. Between the date hereof and the
Closing:
6.1. General. Each of the parties will use its best efforts to
take all action and to do all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 9).
6.2. Notices and Consents. The Seller will prior to the Closing
Date give all notices to third parties and will use its reasonable efforts at
its expense to obtain all third party approvals, consents, novations and waivers
that are required to be obtained by the Seller in connection with the
transactions contemplated by this Agreement; provided that the Seller will not
be obligated hereunder to pay any consideration to the third party from whom
such approval, consent, novation or waiver is requested. The Purchaser hereby
agrees to cooperate with the Seller in its efforts to obtain such third party
consents and where necessary will give or procure the giving of security to a
contracting third party in order to obtain such approval, consent, novation or
waiver. On or before May 20, 1999, the Seller and the Purchaser will file a
Notification and Report Form and related material with the Federal Trade
Commission and the Antitrust Division of the United Stated Department of Justice
under the Hart-Scott-Rodino Act. The parties will use their best efforts to
obtain early termination of the applicable waiting period or otherwise obtain
clearance to consummate the transactions contemplated by this Agreement and will
make all further filings pursuant thereto that may be necessary, proper or
advisable. If prior to Closing KPMG Peat Marwick, in its due diligence on behalf
of the Purchaser, identifies any deviations from GAAP in the Financial
Statements (other than those identified in Item 2 of Schedule 4.4), the
Purchaser shall promptly notify the Seller of such deviations. If prior to
21
Closing the Purchaser encounters difficulty in raising the $6,500,000 referred
to in Section 5.6 hereof, the Purchaser will promptly notify the Seller.
6.3. Carry on in Regular Course. The Seller will carry on the
operations of the Business substantially in the same manner as heretofore
conducted. The Seller will not make or institute any material change in the
methods of manufacture, management, accounting or operation of the Business,
except that the Purchaser acknowledges that the Seller may adjust the reserve
created in connection with the 1998 explosion that occurred at the Facility. The
Purchaser further acknowledges that the Seller liquidated the warranty reserve
in 1998 and notwithstanding any provision in this Agreement to the contrary,
will not be required to implement a warranty reserve prior to or in connection
with this Agreement, including the Closing Statement.
6.4. Contracts and Commitments. The Seller in connection with the
Business will not enter into any material contract or commitment or engage in
any transaction, including any contract, commitment or engagement with any other
division, unit or Affiliate of the Seller, or effect any change to any program,
not in the usual and ordinary course of business and consistent with the past
operation of the Business. The Seller will extend existing open purchase orders
with Autoliv ASP (such purchase orders, as extended, referred to herein as the
"AUTOLIV PURCHASE ORDERS") for the purchase of RDC and HACN through June 30,
2000, which Autoliv Purchase Orders shall be deemed to be Assumed Contracts and
shall upon execution be deemed added to Schedule 2.3(a)(i) and Schedule 4.7. The
Seller will enter into an exclusive International Sales Representative Agreement
(the "TELEDYNE JAPAN AGREEMENT") with Teledyne Japan Kabushiki Kaisha ("TELEDYNE
JAPAN") which will formally document and provide for the continuation of the
existing relationship between Teledyne Japan and the Seller with respect to the
Business for a period of two years, which Teledyne Japan Agreement shall be
deemed to be an Assumed Contract and shall upon execution be deemed added to
Schedule 2.3(a)(i) and Schedule 4.7.
6.5. Sale of Capital Assets. Other than pursuant to this
Agreement and the sale or disposition of excess or obsolete equipment in the
usual and ordinary course of business consistent with the past operation of the
Business, the Seller will not sell or otherwise dispose of any capital asset
relating to the Business.
6.6. Access. The Seller will permit representatives of the
Purchaser to have access at reasonable times to the Purchased Assets, the
Employees and, after coordination with and approval by the Seller, the material
customers, distributors and suppliers of the Business. The Purchaser agrees that
it will use all reasonable efforts to schedule its review of such items and
meetings with such persons at such times which are not disruptive to the
operations of the Business. Prior to the Closing Date, the Purchaser will be
permitted to complete, at the sole cost and expense of the Purchaser, a Phase I
environmental study of the Owned Real Property; provided, however, that no such
Phase I or other environmental review by the Purchaser will involve sampling,
Phase II testing or invasive investigatory work without prior written consent of
the Seller. The Purchaser will deliver to the Seller a copy of any Phase I or
other third party report generated by any permitted environmental investigation.
The Purchaser will treat any environmental review of the Owned Real Property as
confidential information.
6.7. Tax Matters. No new elections with respect to Taxes, or
any changes in current elections with respect to Taxes, affecting the Business
and the Assumed Obligations will
22
be made by the Seller after the date of this Agreement without the prior written
consent of the Purchaser. The Seller will furnish the Purchaser, at the
Purchaser's request, an affidavit stating, under penalty of perjury, the
Seller's United States taxpayer identification number and that the Seller is not
a foreign person, pursuant to Section 1445(b)(2) of the Code.
6.8. Notice of Developments; Disclosure Schedules; Updating
Disclosure Schedules.
(a) Each party will give prompt written notice to the other
of any development occurring on or after the signing of this Agreement affecting
the ability or obligation of the parties to consummate the transactions
contemplated by this Agreement or any of the Ancillary Agreements. Except as
provided in Section 6.8(c), no such written notice of a development will be
deemed to have amended the Disclosure Schedules, to have qualified the
representations and warranties contained herein or to have cured any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of such material development.
(b) Complete copies of the Disclosure Schedules referred
herein are being delivered simultaneously with the execution of this Agreement.
(c) The Seller will deliver to the Purchaser prior to the
Closing Date a written update or supplement to the Disclosure Schedules
reflecting events occurring and contracts and agreements from the date of this
Agreement through the Closing Date. To the extent that such updated or
supplemental Disclosure Schedules reflect matters or events (i) which
constitute, and which are identified specifically as, Excluded Assets or
Excluded Liabilities or (ii) which have occurred after the date of this
Agreement in the ordinary course of business of the Business at the Facility,
which do not constitute a violation of any of Seller's covenants set forth in
Section 6 and which do not in the reasonable judgment of the Purchaser,
represent a material adverse change in the business, financial condition,
operations or results of operations of the Business at the Facility, then the
Disclosure Schedules shall be deemed to be amended as of the Closing Date to
include the information set forth on such updated or supplemental Disclosure
Schedules. To the extent that such updated or supplemental Disclosure Schedules
reflect matters or events which have occurred after the date of this Agreement
and which in the reasonable judgment of Purchaser, represent a material adverse
change in the business, financial condition, operations or results of operations
of the Business at the Facility, then (i) the parties will negotiate in good
faith during the seven-day period immediately after delivery of the update or
supplemental Disclosure Schedules to determine the consequences of such
disclosures, (ii) the Disclosure Schedules will be amended only to the extent
that the parties mutually agree as a result of such negotiation and (iii) the
Purchaser may elect to terminate this Agreement after the expiration of such
seven-day period, in which event the Seller and the Purchaser will have no
liability to the other as a result of such termination, except that in such case
and provided that the Seller's or McCormick Selph's management identified on
Schedule 1.1 had actual conscious knowledge as of the date of this Agreement of
the facts added to the updated or supplemented Disclosure Schedules representing
such material adverse change in the business, financial condition, operations or
results of operations of the Business at the Facility, the Seller shall promptly
after receipt of an itemized invoice reimburse the Purchaser for reasonable
out-of-pocket expenses incurred by the Purchaser in connection with the
transactions contemplated by
23
this Agreement and paid to outside attorneys, accountants, environmental
consultants and insurance consultants and the Hart-Scott-Rodino filing fee, up
to $250,000 in the aggregate.
6.9. Year 2000. The Seller shall continue its reasonable efforts
and make reasonable expenditures intended to cause computer systems used by the
Seller in the Business to be Year 2000 compliant, provided that the Seller shall
be obligated only to make expenditures of $200,000 for such purposes between the
date of this Agreement and the Closing, provided further, that to the extent
that such expenditures between the date of this Agreement and the Closing are
less than $200,000, the Purchaser will be entitled to a purchase price reduction
at the Closing equal to the difference between $200,000 and the amount of such
expenditures. The Purchaser understands and agrees that the Seller makes no
representations or warranties, express or implied, as to Year 2000 compliance or
readiness of the Business (including any products of the Business) or of any of
the Purchased Assets and that the Seller expressly disclaims and denies any
implication of any such representation or warranty that might arise from any
provisions of this Agreement, including but not limited to this Section 6.9, as
a matter of law or otherwise.
SECTION 7: POST-CLOSING COVENANTS. The parties agree as follows with
respect to the period following the Closing Date:
7.1. General. In case at any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as the other
party reasonably may request, at the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification therefor under
Section 10 of this Agreement).
7.2. Post-Closing Consents; Nonassignable Contracts.
(a) The Seller will use its reasonable efforts after the
Closing Date to obtain all third party approvals, consents, novations and
waivers that are not obtained prior to the Closing Date and that are required in
connection with the transactions contemplated by this Agreement; provided that
the Seller will not be obligated hereunder to pay any consideration to the third
party from whom such approval, consent, novation or waiver is required. The
Purchaser hereby agrees to cooperate with the Seller in its efforts to obtain
such third party approvals, consents, novations and waivers and where necessary
will give or procure the giving of security to obtain such third party approval,
consent, novation or waiver.
(b) To the extent that any Contract is not capable of being
transferred by the Seller to the Purchaser pursuant to this Agreement without
the consent of a third party and such consent is not obtained prior to Closing,
or if such transfer or attempted transfer would constitute a breach or a
violation of any Law, nothing in this Agreement will constitute a transfer or an
attempted transfer thereof. A true and complete listing of the material
Contracts that require consent of a third party to be transferred is set forth
on Schedule 7.2(b) hereto.
(c) In the event that any required consent is not obtained
on or prior to the Closing Date, the Seller will, subject to Section 7.2(b), use
its reasonable efforts to (i) provide to the Purchaser the benefits of the
applicable Contract, (ii) cooperate in any reasonable and lawful arrangement
designed to provide such benefits to the Purchaser and (iii) enforce at the
24
request and expense of the Purchaser and for the account of the Purchaser, any
rights of the Seller arising from any such Contract (including the right to
elect to terminate such Contract in accordance with the terms thereof upon the
request of the Purchaser).
(d) The Purchaser will perform the obligations arising under
all Contracts referred to in Section 7.2(b) for the benefit of the Seller and
the other party or parties thereto, except for any obligation under such
Contract that constitutes an Excluded Liability.
(e) After the Closing, the Seller, at the reasonable request
of the Purchaser, shall promptly execute and deliver to the Purchaser all such
further assignments, bills of sale, endorsements and other documents in form and
substances satisfactory to the Purchaser and its counsel as the Purchaser may
reasonably request in order to (i) vest in the Purchaser title to and possession
of the Purchased Assets and (ii) otherwise carry out or evidence the terms of
this Agreement.
7.3. Litigation Support; Tax Return Preparation; Records
Retention; Transitional Services.
(a) In the event and for so long as any party is actively
investigating, contesting, defending against or prosecuting any charge,
complaint, action, suit, contract appeal, proceeding, hearing, investigation,
claim, demand or audit (including routine audits and contract close-outs) in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or transaction on or prior
to the Closing Date involving the Business, the other party will cooperate with
the contesting or defending party and its counsel in the contest or defense,
make available its personnel and provide such testimony and access to its books
and records as may be reasonably necessary in connection with the contest or
defense.
(b) The Seller and the Purchaser will each provide the other
party with such assistance as may reasonably be requested in connection with the
preparation of any Tax Return, audit or other examination by any taxing
authority or judicial or administrative proceeding relating to liability for
Taxes and will provide to the other party all records and other information
which may be relevant to any such Tax Return, audit or examination, proceeding
or determination and with any final determination of any such audit or
examination, proceeding or determination that affects any amount required to be
shown on any Tax Return of the other party for any period.
(c) The Purchaser will cause appropriate Employees of the
Business to prepare usual and customary tax return packages with respect to the
tax periods beginning January 1, 1999 and ending as of the Closing Date. Such
tax return packages will be delivered to the Seller not later than sixty days
following the Closing Date.
(d) The Seller and the Purchaser agree that the Purchaser
has purchased substantially all of the property used in the Business, and in
connection therewith the Purchaser will employ individuals who immediately
before the Closing Date were employed in such trade or business by the Seller.
Accordingly, provided that the Seller provides the Purchaser with all necessary
payroll records for the calendar year which includes the Closing Date, the
Purchaser will furnish a Form W-2 to each employee employed by the Purchaser who
had been employed by the Seller, disclosing all wages and other compensation
paid for such
25
calendar year, and taxes withheld therefrom, and the Seller will be relieved of
the responsibility to do so.
(e) The Purchaser will provide reasonable assistance to the
Seller in connection with any Tax audits or other administrative or judicial
proceedings involving the Business and affecting such income Tax Returns or
declarations for any period all or any portion of which is prior to the Closing
Date, including the participation of the then current personnel of the Purchaser
in such audits and proceedings. The Purchaser will not, without the prior
written consent of the Seller, or except as required by Law, initiate any
contract or voluntarily enter into any agreements with, or volunteer any
information to, any taxing authorities with regard to specific items on such Tax
Returns or declarations.
(f) The Purchaser will, subject to Section 2.1(f), maintain
all original books, records, files, documents, papers and agreements pertaining
to the Purchased Assets, the Assumed Obligations or otherwise relating to the
Business as conducted before the Closing Date for at least seven years following
the Closing Date or such longer period as may be required by Law. Seller agrees
that it will maintain all original books, records, files, documents, papers and
agreements relating to any of the Purchased Assets or Assumed Obligations which
are not included in the Purchased Assets for at least seven years following the
Closing Date or such longer period as may be required by Law. Each of the Seller
and the Purchaser agree that before destroying or discarding any materials
required to be retained pursuant to this Section 7.3(f), it will notify the
other in writing (which notice will include a description of the materials to be
destroyed or discarded) and such other party may, at its expense, remove or make
copies of such materials within 90 days following the date of such written
notice. In the event the other party has not removed such materials within such
90-day period, the party desiring to destroy or discard such materials may
proceed with such action without any liability to the other.
(g) After the Closing Date the Purchaser will provide
services, assistance and reasonable cooperation to the Seller in connection
with:
(i) the completion and delivery of the financial
statements and the general ledger of the Business as of the Closing Date to the
Seller;
(ii) the preparation of quarterly, semi-annual and
annual reports required to be prepared by the Seller (either by Law or in
accordance with the Seller's internal reporting systems and procedures) in
connection with the operation of the Business prior to the Closing Date and with
the transactions provided for herein;
(iii) the preparation of audit information packages
required to be prepared by the Seller (either by Law or in accordance with the
Seller's internal reporting systems and procedures) in connection with the
operation of the Business prior to the Closing Date, the transactions provided
for in this Agreement and the Seller's year-end financial audit;
(iv) the Seller's administration of the Excluded
Liabilities; and
(v) such other services as the Seller may reasonably
request incidental to the orderly transfer of the Business and the Purchased
Assets to the Purchaser.
(h) If a request is made by a party (the "REQUESTER")
pursuant to this Section 7.3, the Requester shall reimburse the complying party
for all reasonable expenses
26
including any reasonable personnel expenses, incurred to comply with such
request. Furthermore, the Seller shall reimburse the Purchaser for all
reasonable out of pocket expenses incurred by the Purchaser to comply with
paragraphs (c) through (g) above.
7.4. Signage and Labels. The Purchaser will remove the Seller's
names from all exterior signs located at the Owned Real Property as soon as
practicable but in any event within two months after the Closing Date. The
Purchaser may use the Seller's name on finished goods inventory which
constitutes part of the Purchased Assets but will change or otherwise replace
the stamps and dies bearing the Seller's name as soon as reasonably practicable
after the Closing Date but in any event within six months of the Closing Date.
The Purchaser may not use publicly any business records described in Section
2.1(f) without first removing therefrom or obliterating all portrayals or
references to any of the Seller's trade names, trademarks or service marks or
other intangible property contained in such records, unless the Seller consents
to such usage.
7.5. Covenant Not to Compete.
(a) For a period of three (3) years after the Closing Date,
without the prior written consent of the Purchaser none of the Seller nor any of
its Affiliates will directly or indirectly (whether through any partnership of
which it is a member, through any trust in which it is a beneficiary or trustee
or through a corporation or other association in which it has any interest,
legal or equitable, or in any other capacity whatsoever) engage in the
manufacture or sale of products of the type now made and sold by the Business in
any county or any other political subdivision of any state of the United States
of America or of any other country in the world where the Seller conducted the
Business as of the Closing Date; provided, however, that the foregoing
restriction shall not prevent Seller and/or any of its Affiliates from (i)
acquiring or holding an interest of less than 10% of the outstanding equity
securities of any competing business (a "COMPETING ENTITY") whose equity
securities are listed on a national securities exchange, quoted on the NASDAQ
NMS or trade in the over-the-counter market, (ii) making or maintaining an
investment in any Competing Entity if the assets used by such Competing Entity
in the activity competitive with the Business constitute less than 20% in value
of the assets of such Competing Entity and the revenue derived from carrying on
the activity competitive with the Business constitutes less than 30% of the
revenues of the Competing Entity (calculated in each case on a consolidated
basis), (iii) making an acquisition of assets (and following such acquisition
carrying on the business and activities associated with the assets acquired) if
the portion of assets used in carrying on the activity competitive with the
Business constitutes less than 20% in value of the assets acquired and the
revenue associated with such competitive activity constitutes less than 30% in
value of the revenue derived from all of the assets acquired (calculated in each
case on a consolidated basis), or (iv) manufacturing, selling or distributing
(a) electronics that control or are otherwise used in pyrotechnic components and
systems, or (b) similar products, but only to the extent such products use
electronic and not pyrotechnic devices (other than expended unit indicators or
thermal batteries, all of which Seller shall be permitted to manufacture, sell
and/or distribute).
(b) During the term of this covenant not to compete, the
Seller agrees further that it shall not (i) solicit, directly or indirectly, any
person employed in the Business (other than John Kemble to whom the Seller has
offered employment) or (ii) attempt to induce any such employee or leave such
employment; provided, however, that the foregoing restrictions shall not
27
prohibit the Seller from advertising open positions in newspapers, trade
journals, on the internet and in media of general circulation and hiring any
individual who responds to such general solicitation.
(c) The parties hereto agree that the duration and area for
which the covenant not to compete set forth in this Section 7.5 is to be
effective are reasonable. In the event that any court determines that the time
period or the area or both of them, are unreasonable and that such covenant is
to that extent unenforceable, the parties hereto agree that the covenant shall
remain in full force and effect for the greatest time period and in the greatest
area that would not render it unenforceable. The parties intend that this
covenant shall be deemed to be a series of separate covenants one for each and
every county of each and every state of the United States of America and each
and every political subdivision of each and every country outside the United
States of America where this covenant is intended to be effective. The parties
hereto agree that damages are an inadequate remedy for any breach of this
covenant and that the Purchaser shall, whether or not it is pursuing any
potential remedies at law, be entitled to equitable relief in the form of
preliminary and permanent injunctions without bond or other security upon any
actual or threatened breach of this covenant.
7.6. Warranty Obligations. The Purchaser will use its best
efforts to perform the work necessary to fulfill contractual warranty
obligations with respect to the products manufactured and sold by the Seller in
connection with the Business prior to the Closing Date in an efficient and
workmanlike manner from and after the Closing Date; provided, however, that the
Seller shall reimburse the Purchaser for the actual out-of-pocket costs incurred
by the Purchaser and Purchaser's overhead directly related to fulfilling such
warranty obligations. For purposes of this Agreement, Seller's contractual
warranty obligations will include contractual warranty obligations to Autoliv
ASP with respect to micro gas generators sold by the Seller to Autoliv ASP.
Payments by the Seller shall be made on a quarterly basis against a reasonably
detailed Purchaser invoice within 45 days after such invoice is received by the
Seller; provided, however, the Purchaser agrees that it shall not invoice the
Seller for reimbursement under this Section 7.6 unless the aggregate amount
under any invoice to be reimbursed (in respect of one or more claims) exceeds
$10,000. Payment by the Seller under this Section 7.6 shall be counted against
and reduce the Larger Cap under Section 10.2(b).
7.7 Transition Services. The Seller will offer to Purchaser, at
Purchaser's expense as set below, the following transitional services for the
periods following Closing as set forth below:
(a) The Seller will offer to the Purchaser for a period of
up to six months following the Closing Date purchasing and accounts payable
services with respect to the Business (excluding distribution of accounts
payable checks) with such services to be substantially of the type, nature and
extent provided by Teledyne Ryan Aeronautical ("TRA") to the Business
immediately prior to Closing, and the Purchaser shall pay to the Seller $10,000
per month for such services, with payment due within thirty days of the end of
each one month period following the Closing Date. The Purchaser will establish
and fund checking accounts in its name upon which such checks will be drawn.
(b) The Seller will offer to the Purchaser for a period of
up to three months following the Closing Date payroll processing services with
respect to the Business as the interface to external ADP payroll processing and
maintenance of the benefits portion of the
28
payroll function of the Business with such services to be substantially of the
type, nature and extent provided by TRA to the Business immediately prior to
Closing and Purchaser shall pay to the Seller $6,000 per month for such
services, with payment due within thirty days of the end of each one month
period following the Closing Date. The Purchaser will establish and fund
checking accounts in its name upon which such checks will be drawn.
(c) The Seller will offer to the Purchaser for a period of
up to three months following the Closing Date internet access in connection with
the operation of the Business with such services to be substantially of the
type, nature and extent provided by TRA to the Business immediately prior to
Closing and Purchaser shall pay to the Seller $1,000 per month for such
services, with payment due within thirty days of the end of each one month
period following the Closing Date.
(d) The Purchaser will give written notice to the Seller at
least five business days prior to the end of each monthly service period if
services under any of Section 7.7(a), Section 7.7(b) or Section 7.7(c) are not
to be continued during the next succeeding monthly period.
(e) To the extent that any third party license or consent is
required to permit the Seller to provide any of the transition services under
any of Section 7.7(a), Section 7.7(b) or Section 7.7(c), the Seller shall use
its best efforts to obtain such licenses or consents and all costs of such
licenses or consents shall be borne by the Purchaser in addition to the payments
described above in this Section 7.7
(f) The Purchaser acknowledges that the Seller may sell TRA
and that the transition services identified in this Section 7.7 may be provided
by a Person or Persons other than TRA. Consequently, the Purchaser undertakes to
use its best efforts to bring the services provided under this Section 7.7
in-house or otherwise outsource them as soon as practicable after the Closing
Date. In no event shall the Seller be required to provide transition services
identified in this Section 7.7 beyond the respective periods specified in
Sections 7.7(a), (b) and (c). The Purchaser acknowledges and agrees that
employees of the Purchaser shall not have access to any system of the Seller (or
any other Person providing transition services) to the extent that information
of the Business is not segregated from information of the Seller (or other
Person providing transition services). Nothing in this Section 7.7 shall be
construed to require that the Seller (or any other Person providing transition
services) maintain any person in its employ.
SECTION 8: EMPLOYEE BENEFITS.
(a) Except as set forth on Schedule 8(a) on or prior to the
Closing Date, the Purchaser shall make offers of employment, effective as of the
Closing Date, to all salaried and hourly Employees of the Business. Schedule
8(a) of the Disclosure Schedules sets forth a list of Employees of the Business
as of the date hereof. The Purchaser and the Seller acknowledge that the Seller
has offered continued employment to John Kemble and, if such offer of employment
is accepted by Mr. Kemble on or prior to the Closing Date, the Purchaser shall
have no obligation to offer him employment.
29
(b) Except as may otherwise be expressly provided in this
subparagraph (b), the employees accepting offers of employment (the "TRANSFERRED
EMPLOYEES") shall be treated as newly hired employees of the Purchaser:
(i) The Purchaser shall provide such Transferred
Employees with substantially comparable wages and the benefits described on a
schedule to be delivered by the Purchaser to the Seller on or before June 15,
1999.
(ii) The Transferred Employees shall be eligible to
participate in all employee benefit plans in which similarly situated employees
of the Purchaser participate, and the Purchaser and such plans shall recognize
such Transferred Employees' service with the Seller prior to the Closing Date
for purposes of eligibility and vesting (but not for benefit accrual except that
the Purchaser will recognize accrued vacation as of the Closing Date with
respect to the Transferred Employees) under the Purchaser's said plans.
(iii) The eligibility of Transferred Employees to
participate in the Purchaser's health and life plans shall not be delayed or
limited in any way by pre-existing conditions. All claims incurred with regard
to any Transferred Employee before the Closing Date and which are covered under
the applicable health, life or accidental death and dismemberment plans of the
Seller shall be payable under the terms of the applicable plan of the Seller.
All other claims incurred with regard to any Transferred Employee and which are
covered under the applicable health, life or accidental death or dismemberment
plans of the Purchaser shall be payable under the terms of the applicable plan
of the Purchaser.
(iv) For purposes of the COBRA health continuation of
coverage provisions (hereafter referred to as the "COBRA PROVISIONS") contained
in Section 4980 (f) of the Code and in Section 601 through 608 of ERISA, the
Transferred Employees shall be considered to have undergone a termination of
employment with the Seller. It is the understanding and intention of the Seller
and the Purchaser that no group health plan maintained by the Purchaser shall
constitute a successor plan to any of the Seller's group health plans and the
Purchaser is not a successor employer with respect to any of the Seller's group
health plans and the Seller is not a predecessor employer with respect to the
Purchaser's group health plans, within the meaning of the COBRA Provisions. It
is the further understanding and intention of the Seller and the Purchaser,
however, that the health plan coverage to be afforded to the Transferred
Employees pursuant to Section 8(b)(iii) shall be coverage that, pursuant to
Section 602(2)(D)(i) of ERISA, terminates any continuation coverage rights the
Transferred Employees might otherwise have under the COBRA Provisions as a
result of termination of employment with the Seller.
SECTION 9: CLOSING CONDITIONS.
9.1. Conditions to Obligation of the Purchaser. The obligation of
the Purchaser to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Section
4 will be true and correct in all material respects at and as of the Closing
Date:
(b) the Seller will have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
30
(c) there will not be any action, suit or proceeding pending
or threatened before any Governmental Entity or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement
or any Ancillary Agreement, or (ii) cause any of the transactions contemplated
by this Agreement or Ancillary Agreement to be rescinded following consummation;
(d) all applicable waiting periods (and any extension
thereof) under the Hart-Scott-Rodino Act will have expired or otherwise been
terminated without the objection of any of the relevant federal authorities;
(e) the Seller will have delivered to the Purchaser a
certificate to the effect that each of the conditions specified above are
satisfied in all respects;
(f) the Seller will have executed and delivered to the
Purchaser the documents identified in Section 3.3;
(g) the Seller and Teledyne Japan will have entered into the
Teledyne Japan Agreement; and
(h) the Seller shall have entered into the Autoliv Purchase
Orders.
The Purchaser may waive any condition specified in this Section 9.1, other
than Section 9.1(d), if it executes a writing so stating at or prior to the
Closing.
9.2. Conditions to Obligation of the Seller. The obligation of
the Seller to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Section
5 will be true and correct in all material respects at and as of the Closing
Date;
(b) the Purchaser will have performed and complied with all
of its covenants hereunder in all material respects through the Closing;
(c) there will not be any action, suit or proceeding pending
or threatened before any Governmental Entity or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would (i)
prevent the consummation of any of the transactions contemplated by this
Agreement or any Ancillary Agreement or (ii) cause any of the transactions
contemplated by this Agreement or any Ancillary Agreement to be rescinded
following consummation.
(d) the Purchaser will have delivered to the Seller a
certificate to the effect that each of the conditions specified above is
satisfied in all respects;
(e) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act will have expired or otherwise been
terminated without the objection of any of the relevant federal authorities;
(f) the Purchaser will have executed and delivered to the
Seller the documents identified in Section 3.3; and
31
(g) the Purchaser will have delivered to the Seller the
Purchase Price.
The Seller may waive any conditions specified in this Section 9.2, other
than Section 9.2(e), if it executes a writing so stating at or prior to the
Closing.
SECTION 10: REMEDIES FOR BREACHES OF THIS AGREEMENT.
10.1. Survival. Except as otherwise provided herein, all of the
representations and warranties contained in this Agreement or in any certificate
delivered pursuant to this Agreement relating to the representations and
warranties contained in this Agreement will survive the Closing and continue in
full force and effect for a period of eighteen (18) months after the Closing
Date, provided, however, that (a) the representations and warranties contained
in Sections 4.6, 4.19, 4.20 and 4.21 shall survive until the expiration of the
applicable statutes of limitations; and (b) the representations and warranties
contained in Section 4.2 shall survive indefinitely. Notwithstanding the
foregoing, (i) any claims based on fraud or fraudulent misrepresentation shall
survive indefinitely, and (ii) any agreements and covenants herein which by the
terms of this Agreement survive shall survive as provided in this Agreement.
10.2. Indemnification Provisions for Benefit of the Purchaser.
(a) In the event the Seller breaches any of its
representations, warranties or covenants contained in this Agreement and
provided that the Purchaser within the applicable survival period makes a
written claim for indemnification against the Seller setting forth in reasonable
detail the circumstances regarding the claim and, if ascertainable, an estimate
of the amount thereof, then the Seller agrees to indemnify, defend and hold the
Purchaser harmless from and against the entirety of any losses, expenses
(including reasonable attorneys' fees and expenses), costs, damages, fines,
penalties and other liabilities (collectively, "LOSSES") the Purchaser or any of
its Affiliates, or any of their respective directors, officers, employees,
agents or representatives (collectively, the "PURCHASER INDEMNIFIED PARTIES"),
suffer to the extent such Losses result from, arise out of or are caused by such
breach.
(b) The Seller further agrees to indemnify, defend and hold
the Purchaser Indemnified Parties harmless from and against any Losses the
Purchaser Indemnified Parties suffer to the extent such Losses result from,
arise out of, or are caused by any Excluded Liability (which, in the context of
Losses arising under Environmental Law shall include, among other Losses subject
to Section 10.6, the necessary and reasonable costs of remediation and
compliance under any Environmental Law or in connection with any Hazardous
Materials); provided, however, that the Seller will not have any obligation to
indemnify the Purchaser Indemnified Parties with respect to any such Losses
arising (i) from breaches of Sections 4.19, 4.20 or 4.21, (ii) under
Environmental Law or (iii) from Excluded Liabilities to the extent such
aggregate Losses, together with the Losses subject to indemnification pursuant
to Section 10.2(a) above, exceed 50 percent of the Purchase Price (the "LARGER
CAP"). Seller's indemnification obligations under this Section 10.2(b) shall
survive until the expiration of the applicable statute of limitations with
respect to Excluded Liabilities, other than with respect to Losses which are
Environmental Losses, as to which the survival period is limited to the five
year period set forth in Section 10.6(g).
(c) The Seller will not have any obligation to indemnify the
Purchaser Indemnified Parties from and against any Losses (i) until the
Purchaser Indemnified Parties have suffered Losses by reason of all such
breaches which exceed, in the aggregate, one percent (1%)
32
of the Purchase Price (the "THRESHOLD"), after which point the Seller will be
obligated to indemnify the Purchaser from and against all Losses suffered by the
Purchaser Indemnified Parties relating back to the first dollar of such Losses,
provided, however, that Purchaser Indemnified Parties shall have no right to
indemnification with respect to any individual Loss which is less than $5,000
(the "Individual Loss Deductible") and no such Loss shall be taken into account
in determining whether or the extent to which the 1% of the Purchase Price
threshold has been exceeded, or (ii) to the extent the Losses the Purchaser
Indemnified Parties have suffered exceed, in the aggregate, an amount equal to
$7,500,000 (the "CAP") after which point the Seller will have no obligation to
indemnify the Purchaser Indemnified Parties from and against further Losses in
excess of such amount except as provided in Section 10.2(b). Notwithstanding the
foregoing, (i) the Cap shall not apply to any claims based on fraud or
fraudulent misrepresentation, and (ii) the Threshold shall not apply to Losses
to the extent such Losses result from, arise out of, or are caused by Excluded
Liabilities, provided, however, that the Individual Loss Deductible shall apply
to Losses described in this subpart (ii).
(d) The foregoing provisions of Section 10.2 shall not
govern, limit or restrict Taxes in any respect. The Seller shall indemnify the
Purchaser for any Taxes of the Business for periods up to and including the
Closing Date that may become liabilities of the Purchaser by operation of law or
otherwise. This indemnification obligation and the representations of the Seller
in Section 4.6 shall survive until the expiration of the applicable statute of
limitation.
10.3. Indemnification Provisions for Benefit of the Seller.
(a) In the event the Purchaser breaches any of its
representations, warranties or covenants contained in this Agreement or in any
certificate delivered by the Purchaser pursuant to this Agreement and provided
that the Seller makes a written claim for indemnification against the Purchaser
setting forth in reasonable detail the circumstances regarding the claim and, if
ascertainable, an estimate of the amount thereof, then the Purchaser agrees to
indemnify, defend and hold the Seller harmless from and against the entirety of
any Losses the Seller or any of its Affiliates, or any of their respective
directors, officers, employees, agents or representatives (collectively, the
"SELLER INDEMNIFIED PARTIES"), suffer to the extent such Losses result from,
arise out of or are caused by such breach.
(b) The Purchaser further agrees to indemnify, defend and
hold the Seller harmless from and against the entirety of any Losses the Seller
Indemnified Parties suffer to the extent such Losses result from, arise out of
or are caused by any Assumed Obligations.
(c) The Purchaser further agrees to indemnify, defend and
hold the Seller harmless from and against the entirety of any Losses the Seller
Indemnified Parties suffer to the extent such Losses result from, arise out of
or are caused by the operation of the Business or use of the Purchased Assets
after the Closing Date.
(d) The Purchaser will not have any obligation to indemnify
the Seller Indemnified Parties from and against any Losses (i) until the Seller
Indemnified Parties have suffered Losses by reasons of all such breaches which
exceed, in the aggregate, one percent (1%) of the Purchase Price, after which
point the Purchaser will be obligated to indemnify the Seller from and against
all Losses suffered by the Seller Indemnified Parties relating back to the first
dollar of such Losses; provided, however, that Seller shall have no right to
indemnification with
33
respect to any individual Loss which is less than $5,000 and no such Loss shall
be taken into account in determining whether or the extent to which the 1% of
the Purchase Price threshold has been exceeded, or (ii) to the extent the Losses
the Seller Indemnified Parties have suffered exceed, in the aggregate, 50
percent of the Purchase Price, after which point the Purchaser will have no
obligation to indemnify the Seller Indemnified Parties from and against further
Losses in excess of such amount. Notwithstanding the foregoing, the limitations
set forth above shall not apply to any claims based on fraud or fraudulent
misrepresentation.
10.4. Matters Involving Third Parties. If any third party
notifies any party hereto (the "INDEMNIFIED PARTY") with respect to any matter
which may give rise to a claim for indemnification against the other party
hereto (the "INDEMNIFYING Party") under this Section 10, then the Indemnified
Party will notify the Indemnifying Party thereof promptly and in any event
within 10 days after receiving any written notice from a third party; provided
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party will relieve the Indemnifying Party from any obligation hereunder unless,
and then solely to the extent that, the Indemnifying Party is prejudiced
thereby. Once the Indemnified Party has given notice of the matter to the
Indemnifying Party, the Indemnified Party may defend against the matter in any
manner it reasonably may deem appropriate. In the event the Indemnifying Party
notifies the Indemnified Party within 10 days after the date the Indemnified
Party has given notice of the matter that the Indemnifying Party is assuming the
defense of such matter (a) the Indemnifying Party will defend the Indemnified
Party against the matter with counsel of its choice reasonably satisfactory to
the Indemnified Party, (b) the Indemnified Party may retain separate counsel at
its sole cost and expense (except that the Indemnifying Party will be
responsible for the fees and expenses of such separate co-counsel to the extent
the Indemnified Party reasonably concludes in good faith that the Indemnified
Party has defenses available to it that may conflict with those of the
Indemnifying Party), (c) the Indemnified Party will not consent to the entry of
a judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld or delayed
unreasonably) and (d) the Indemnifying Party will not consent to the entry of a
judgment with respect to the matter or enter into any settlement which does not
include a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld or delayed unreasonably).
10.5. Indemnification Limitations. Neither party hereto will be
liable to the other hereunder for any punitive or consequential incidental
damages (including loss of revenue or income, business interruption, cost of
capital or loss of business reputation or opportunity) relating to any claim for
which either such party may be entitled to recover under this Agreement (other
than indemnification of amounts paid or payable to third parties in respect of
any third party claim for which indemnification hereunder is required). Neither
the Purchaser nor the Seller will file or otherwise commence any other action,
suit or proceeding against the other in respect of this Agreement or the
transactions contemplated hereby unless (a) such party notifies the other of its
intent to do so and (b) a period commencing with such notice and expiring on the
earlier of the date on which a meeting between officers of the Purchaser and the
Seller has been completed and 30 days after the date of such notice. Such
officers will meet at a mutually convenient time and location during such 30-day
period for the purpose of attempting to resolve in good faith the claims
described in such notice. No claim for the recovery of Losses based upon breach
of any representation, warranty, covenant or agreement may be asserted by Seller
34
Indemnified Parties or Purchaser Indemnified Parties against the Purchaser or
the Seller, as the case may be if any of the Seller Indemnified Parties or the
Purchaser Indemnified Parties, as the case may be, had actual conscious
knowledge of such breach on or before the Closing Date as a result of the review
of a written document.
10.6 Indemnification for Environmental Matters.
(a) With respect to any Losses relating to or arising from
any Environmental Law for which the Purchaser seeks indemnity ("ENVIRONMENTAL
LOSSES"), the Purchaser shall provide notice to the Seller pursuant to Section
12.9 hereof specifying in reasonable detail, to the extent known, the nature of
the Environmental Losses and, if the Losses relate to remedial liability, the
estimated amount to remediate the condition giving rise to the Environmental
Losses, to the extent it is then quantifiable (which estimate shall not be
conclusive of the final amount of any Environmental Losses).
(b) The Seller shall have the right to control and
investigate and/or remediate any condition giving rise to a claim or demand for
indemnification by the Purchaser under this Agreement with respect to any
Environmental Losses; provided, however, that if after written notice and a
reasonable opportunity to cure the Seller does not exercise such right, the
Purchaser may exercise such right. The Seller and its employees, contractors,
representatives and agents shall have reasonable access at reasonable times to
the Facility for the purpose of conducting any investigation and/or remediation,
including any sampling or monitoring required to be performed by the Seller
after the Closing Date. The Seller shall use all reasonable efforts to minimize
disruption to the Business as a result of conducting any such investigation or
remediation. The Seller shall undertake reasonable consultation with the
Purchaser with respect to matters materially affecting the Purchaser.
(c) The Purchaser shall use reasonable efforts to cooperate
with the Seller to minimize costs with respect to Environmental Losses. Nothing
in this Agreement shall require the Seller to perform any environmental
remediation activities or other environmental testing, sampling or monitoring
activities beyond the minimum required by applicable Environmental Laws to
permit the use of the Owned Real Property consistent with its current use, which
may include leaving Hazardous Materials in place or the use of deed
restrictions.
(d) The Purchaser and the Seller shall give prompt written
notice to each other of any report or other document submitted, whether
voluntarily or by requirement of a Government Entity, to a Governmental Entity
which describes any Environmental Condition existing prior to the Closing Date.
To the extent reasonably possible in the circumstances, the Seller or the
Purchaser, as the case may be, shall have the right to review and comment upon
any submission to a Governmental Entity which describes or addresses any
Environmental Condition for which the Purchaser or the Seller, as the case may
be, is claiming indemnification hereunder (and the parties will cooperate with
each other in responding to such requests, including making available all
relevant records in their possession or under their control), and the relevant
party shall revise such submission in accordance with the Seller's or
Purchaser's reasonable comments thereon. To the extent reasonably possible in
the circumstances, the parties shall give each other prompt written notice of,
and the Seller or the Purchaser, as the case may be, and/or its representatives
shall have the right to participate in, any phone call or meeting with any
Governmental Entity at which any Environmental Condition for which the Purchaser
or the
35
Seller, as the case may be, is claiming indemnification hereunder is to be
discussed or addressed in any manner.
(e) The Seller shall not have any obligation to indemnify
any Purchaser Indemnified Party from and against (i) any Environmental Losses
arising from or related to a use of the Facility that is not substantially a
continuation of the operation of the Business as conducted on the Closing Date
or any business currently operated by the Purchaser, or (ii) any change in the
use of the Owned Real Property from industrial use or (iii) any Environmental
Losses arising from a more stringent change in any Environmental Law from that
which is in effect on the date hereof. Notwithstanding anything to the contrary
contained herein, the Seller will not have any obligation to indemnify the
Purchaser Indemnified Parties from and against any Environmental Losses (i)
which are not asserted by a third party, or (ii) arising with respect to any
release of a Hazardous Material by the Purchaser, to the extent resulting from
any act or knowing failure to act of the Purchaser, its employees, contractors,
representatives or agents to further cause or exacerbate the leaking, migration
or release of any Hazardous Materials at the Facility. The Seller will not have
any obligation to indemnify the Purchaser with respect to ongoing operation,
maintenance, monitoring or reporting costs incurred in connection with any
remediation performed by the Seller for which the Purchaser seeks indemnity
unless such remediation is required by Environmental Law or by a Governmental
Entity. The Purchaser acknowledges that nothing contained herein absolves it of
any obligation under any Environmental Law for Environmental Losses with respect
to violations of Environmental Laws by the Purchaser, its employees,
contractors, representatives or agents.
(f) If the Purchaser undertakes environmental remediation
activities or other environmental testing, sampling or monitoring activities
which are not required by a Governmental Entity or Environmental Law or in
response to a third party claim asserting liability for an Environmental
Condition at the Facility arising from acts, events or circumstances existing or
occurring prior to the Closing, subject to the limitations contained in Section
10.2(c), the Seller shall only be obligated to indemnify the Purchaser in
respect of 50 cents out of each dollar of such Environmental Losses, to the
extent such Environmental Losses do not exceed $500,000; thereafter, the Seller
shall be liable for such Environmental Losses, subject to the limitations of
this Section 10.
(g) Notwithstanding anything in this Section 10 to the
contrary, the Seller's indemnification obligations with respect to Environmental
Losses under this Section 10.6 or otherwise, shall automatically terminate on
the fifth anniversary of the Closing Date except to the extent of and with
respect to claims for indemnification properly made in accordance with this
Section 10 prior to such fifth anniversary.
(h) Notwithstanding anything in this Agreement to the
contrary (including Section 10.6(g)), Seller's indemnification obligations with
respect to Environmental Losses resulting from the Perchlorate-TCE Condition
shall not be subject to the limitations set forth in Section 10.2(b), Section
10.2(c) or Section 10.6(g). To the extent that any remediation is necessary with
respect to the Perchlorate-TCE Condition, such remediation shall performed in
accordance with the other provisions of this Section 10.6.
10.7. EXCLUSIVE REMEDY. THE INDEMNIFICATION PROVISIONS CONTAINED IN THIS
SECTION 10 WILL CONSTITUTE THE SOLE AND EXCLUSIVE RECOURSE AND REMEDY OF THE
PARTIES FOR MONETARY DAMAGES WITH
36
RESPECT TO ANY BREACH OF ANY OF THE REPRESENTATIONS, WARRANTIES OR COVENANTS
CONTAINED IN THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS OR WITH RESPECT
TO ANY LOSSES RESULTING FROM, ARISING OUT OF, OR CAUSED BY EXCLUDED LIABILITIES.
THE PROVISIONS OF THIS SECTION 10 WILL NOT RESTRICT THE RIGHT OF ANY PARTY TO
SEEK SPECIFIC PERFORMANCE OR OTHER EQUITABLE REMEDIES IN CONNECTION WITH ANY
BREACH OF ANY OF THE COVENANTS CONTAINED IN THIS AGREEMENT OR ANY OF THE
ANCILLARY AGREEMENTS. THE PURCHASER ACKNOWLEDGES THAT IT HAS NO RIGHT TO RESCIND
THIS AGREEMENT EITHER FOR A BREACH OF CONTRACT OR FOR NEGLIGENT OR INNOCENT
MISREPRESENTATION. NOTWITHSTANDING ANY OTHER PROVISIONS OF THE AGREEMENT, THE
PROVISIONS OF THIS SECTION 10.7 SHALL NOT APPLY TO EXCLUDE OR LIMIT THE
LIABILITY OF THE SELLER TO THE EXTENT THAT ANY CLAIM ARISES BY REASON OF ANY
FRAUD OR FRAUDULENT MISREPRESENTATION OF ANY PARTY.
10.8 Minimizing Losses. Each party agrees to use all commercially
reasonable efforts to minimize all Losses for which it may seek indemnification
from the other party pursuant to this Section 10, and to minimize the amount of
such indemnification obligation by reasonably pursuing the maximum possible
insurance recovery or recovery from other available sources with respect to such
Losses and nothing herein will in any way diminish each party's common law duty
to mitigate its Loss.
SECTION 11: TERMINATION.
11.1. Termination of Agreement. The parties may terminate this
Agreement as provided below:
(a) the parties may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(b) the Purchaser may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing if the Closing has
not occurred on or before the later of (i) June 30, 1999 and (ii) the fifth full
business day after expiration or termination of the waiting period under the
Hart-Scott-Rodino Act, unless (x) failure results primarily from the Purchaser
itself breaching any representation, warranty or covenant contained in this
Agreement, or unless an extension is mutually agreeable to the Seller and the
Purchaser; and
(c) the Seller may terminate this Agreement by giving
written notice to the Purchaser at any time prior to the Closing if the Closing
has not occurred on or before the later of (i) June 30, 1999 and (ii) the fifth
full business day after expiration or termination of the waiting period under
the Hart-Scott-Rodino Act, unless (x) the failure results primarily from the
Seller itself breaching any representation, warranty or covenant contained in
this Agreement, or unless an extension is mutually agreeable to the Seller and
the Purchaser.
11.2. Effect of Termination. If any party terminates this
Agreement pursuant to Section 11.1, all obligations of the parties hereunder
will terminate without liability of any party to the other party (except,
subject to the provisions of Section 11.3, for any liability of any party then
in breach; it being understood and agreed that upon any termination of this
Agreement pursuant to Section 11.1(d) the Seller shall not be deemed to be in
breach of this Agreement);
37
provided that the provisions of Sections 12.1 and 12.3 of this Agreement and the
Confidentiality Agreement will survive termination and remain in full force and
effect thereafter.
11.3 Liquidated Damages in Certain Cases. In the event that the
Purchaser fails to consummate the acquisition of the Business as contemplated
herein in a timely manner notwithstanding its contractual obligations to do so
pursuant to the terms hereof (whether or not such failure is in whole or part a
result of the Purchaser's inability to raise the $6,500,000 in funds referred to
in Section 5.6), the Purchaser will pay to the Seller an amount equal to
$4,000,000 as liquidated damages, provided that the Purchaser's failure to
perform is not attributable, in whole or part, to Seller's failure to perform
its obligations hereunder. The parties acknowledge and agree that in the case of
such a termination the calculation of the Seller's damages would be difficult or
impossible and that payment of such amount represents reasonable liquidated
damages. In the case of any termination of this Agreement pursuant to this
Section 11.3, all obligations of the parties hereunder will terminate without
liability of any party to the other party; provided that the provisions of
Sections 12.1 and 12.3 of this Agreement and the Confidentiality Agreement will
survive termination and remain in full force and effect thereafter.
SECTION 12: MISCELLANEOUS.
12.1. Press Releases and Announcements. No party will issue any
press release or announcement relating to the subject matter of this Agreement
prior to the Closing Date without the prior approval of the other party;
provided that any party may make any public disclosure it believes in good faith
is required by Law or the rules of any national securities exchange or any
automated inter-dealer quotation system on which the securities of either party
(or any Affiliate thereof) are listed or admitted for trading (in which case the
disclosing party will advise the other party at least one business day prior to
making such disclosure).
12.2 Proration of Expenses and Prepaid Items. All accrued
expenses and prepaid items associated with the Purchased Assets, such as
deposits, advance payments, electricity, gas, water, sewer, telephone, property
taxes, security services and similar items, shall be prorated between the
Purchaser and the Seller as of the Closing Date.
12.3. Expenses; Transfer Taxes. Each of the parties hereto will
bear all legal, accounting, investment banking and other expenses incurred by it
or on its behalf in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. The Seller will pay
and hold the Purchaser harmless from payment of all taxes, recording and filing
fees applicable to the transfer of the Purchased Assets to the Purchaser.
12.4. Consent to Amendments. The provisions of this Agreement may
be amended or waived only by a written agreement executed and delivered by the
Seller and the Purchaser. No other course of dealing between the parties to this
Agreement or any delay in exercising any rights hereunder will operate as a
waiver of any rights of such parties.
12.5. Successors and Assigns. No party hereto may assign or
delegate any of such party's rights or obligations under or in connection with
this Agreement without the written consent of the other party hereto, provided
that the Purchaser upon written notice to the Seller not less than three
business days prior to Closing may assign or delegate its rights and obligations
under this Agreement to one or more Affiliates of the Purchaser, provided
further, however, such assignment or delegation shall not release the Purchaser
of any of its obligations
38
hereunder (including but not limited to the Purchaser's indemnification
obligations under Section 10 of this Agreement). Except as otherwise expressly
provided herein, all covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto will be binding upon and enforceable
against the respective successors and assigns of such party and will be
enforceable by and will inure to the benefit of the respective successors and
permitted assigns of such party.
12.6. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable Law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable Law, such provision will be ineffective only to
the extent of such prohibition of invalidity, without invalidating the remainder
of this Agreement.
12.7. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
12.8. Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
12.9. Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when delivered personally to
the recipient or when sent to the recipient by telecopy (receipt confirmed), one
business day after the date when sent to the recipient by reputable express
courier service (charges prepaid) or two business days after the date when
mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid. Such notices, demands and other communications
will be sent to the Purchaser and the Seller at the respective address indicated
below:
If to the Purchaser:
J.F. Lehman Equity Investors I, L.P.
c/o J.F. Lehman & Company
450 Park Avenue, Sixth Floor
New York, NY 10022
Attention: Donald Glickman
Telephone: (212) 634-1160
Telecopier: (212) 634-1155
With a copy to:
Gibson Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Attention: Kenneth M. Doran
Telephone: (213) 229-7000
Telecopier: (213) 229-7520
39
If to the Seller:
Teledyne Industries, Inc.
c/o Allegheny Teledyne Incorporated
1000 Six PPG Place
Pittsburgh, Pennsylvania 15222
Attention: Jon D. Walton
Senior Vice President, General Counsel and Secretary
Telephone: (412) 394-2836
Facsimile: (412) 394-3010
12.10. No Third-Party Beneficiaries. This Agreement will not
confer any rights or remedies upon any Person other than the parties hereto and
their respective successors and permitted assigns.
12.11. Entire Agreement. This Agreement, and the documents
referred to in it, constitute the entire Agreement and understanding of the
parties and supersede any previous agreement between the parties relating to the
subject matter of this Agreement. Each of the parties acknowledges and agrees
that in entering into this Agreement, and the documents referred to in it, it
does not rely on, and shall have no remedy in respect of any statement,
representation, warranty or understanding (whether negligently or innocently
made) of any person (whether party to this Agreement or not) other than as
expressly set out in this Agreement. The only remedy available to it for breach
of the warranties shall be for breach of contract under the terms of this
Agreement. Nothing in this sub-clause shall, however, operate to limit or
exclude any liability for fraud.
12.12. Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent
and no rule of strict construction will be applied against any party. The use of
the word "including" in this Agreement means "including without limitation" and
is intended by the parties to be by way of example rather than limitation.
12.13. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
12.14. Bulk Transfer Laws. The Purchaser acknowledges that the
Seller will not comply with the provisions of any bulk transfer laws of any
jurisdiction in connection with the transactions contemplated by this Agreement.
The Seller hereby covenants and agrees to indemnify and hold the Purchaser
harmless from and against any and all liabilities other than Assumed Liabilities
which the Purchaser may incur as a result of any failure to comply with any
applicable bulk transfer laws in connection with this Agreement.
12.15. WARN Act. The Purchaser represents and warrants to the
Seller that the Purchaser will continue to operate the Business for the period
immediately following the Closing Date and the Purchaser will be solely liable
for any and all obligations and liabilities arising under the WARN Act with
respect to consummation of the transactions contemplated by this Agreement. The
Purchaser shall comply with all requirements of the WARN Act in connection with
any discharge or lay off of Employees employed in the Business effected after
the Closing Date.
40
12.16. GOVERNING LAW. WITH RESPECT TO THE SELLER AND THE
PURCHASER, ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND
INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO WILL BE
GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF
DELAWARE.
12.17. TIME IS OF THE ESSENCE. With regard to all dates and time
periods set forth in this Agreement, time is of the essence.
12.18. Arbitration. Any dispute under this Agreement which is not
settled by mutual agreement among the parties hereto shall be finally settled by
binding arbitration conducted by and in accordance with the rules then in effect
of the American Arbitration Association. The costs of the arbitration, including
administrative and arbitrators' fees, shall be shared equally by the parties.
Each party shall bear its own costs and attorneys' and witnesses' fees. The
arbitration panel shall render its decision upon the basis of written
submissions by the parties and any written responses thereto. The award rendered
by the arbitration panel, as set forth in writing with the reasons therefor, may
include an allocation among the parties of the costs (including legal fees) of
the arbitration in such a manner as the arbitration panel deems to be equitable.
The arbitration shall be held in New Castle County, Delaware.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
41
IN WITNESS WHEREOF the parties hereto have executed and delivered this
Agreement on the date first written above.
TELEDYNE INDUSTRIES, INC.
By:________________________
Name:_________________________
Title:__________________________
J.F. LEHMAN EQUITY INVESTORS I, L.P.
By: JFL INVESTORS, L.L.C.,
its sole General Partner
By: ___________________________
Donald Glickman
Title: Managing Member
42
TABLE OF CONTENTS
Page
Section 1: Definitions............................................................................................1
Section 2: The Transaction........................................................................................6
2.1 Sale and Purchase of Assets..............................................................................6
2.2 Excluded Assets..........................................................................................7
2.3. Assumption of Obligations...............................................................................8
2.4 Determination and Payment of Consideration..............................................................10
2.5 Purchase Price Adjustment...............................................................................10
Section 3: Closing and Closing Date..............................................................................12
3.1. Closing................................................................................................12
3.2. Closing Date...........................................................................................12
3.3. Deliveries at the Closing..............................................................................12
3.4. Allocation of Value....................................................................................12
Section 4: Representations and Warranties of the Seller..........................................................13
4.1. Organization of the Seller.............................................................................13
4.2. Authorization of Transaction...........................................................................13
4.3 Noncontravention; Consents..............................................................................13
4.4 Business Financial Statements...........................................................................13
4.5. Subsequent Events......................................................................................14
4.6. Tax Matters............................................................................................14
4.7. Contracts..............................................................................................14
4.8. Owned Real Property....................................................................................15
4.9. Title..................................................................................................15
4.10. Intellectual Property.................................................................................15
4.11. Litigation............................................................................................16
4.12. Employee Benefits.....................................................................................16
4.13. Labor Relations.......................................................................................16
4.14. Environmental Matters.................................................................................17
4.15. Legal Compliance......................................................................................17
4.16. Permits...............................................................................................17
4.17. Adequacy and Completeness of Purchased Assets........................................................17
4.18. Customers and Suppliers...............................................................................18
4.19. Government Contracts..................................................................................18
4.20. Certain Business Practices............................................................................19
4.21. Product Liability.....................................................................................19
4.22. Inventory.............................................................................................19
4.23. Accounts Receivable...................................................................................19
4.24. Brokers' Fees.........................................................................................20
4.25. LIMITED WARRANTIES....................................................................................20
Section 5: Representations and Warranties of the Purchaser.......................................................20
5.1. Organization of the Purchaser..........................................................................20
5.2. Authorization of Transaction...........................................................................20
5.3. Noncontravention; Consents.............................................................................20
5.4. Litigation.............................................................................................21
5.5. Brokers' Fees..........................................................................................21
5.6 Financing...............................................................................................21
Section 6: Pre-Closing Covenants.................................................................................21
6.1. General................................................................................................21
6.2. Notices and Consents...................................................................................21
6.3. Carry on in Regular Course.............................................................................22
6.4. Contracts and Commitments..............................................................................22
6.5. Sale of Capital Assets.................................................................................22
6.6. Access.................................................................................................22
6.7. Tax Matters............................................................................................22
6.8. Notice of Developments; Disclosure Schedules; Updating Disclosure Schedules............................23
6.9. Year 2000..............................................................................................24
Section 7: Post-Closing Covenants................................................................................24
7.1. General................................................................................................24
7.2. Post-Closing Consents; Nonassignable Contracts.........................................................24
7.3. Litigation Support; Tax Return Preparation; Records Retention; Transitional Services...................25
7.4. Signage and Labels.....................................................................................27
7.5. Covenant Not to Compete................................................................................27
7.6. Warranty Obligations...................................................................................28
7.7 Transition Services.....................................................................................28
Section 8: Employee Benefits.....................................................................................29
Section 9: Closing Conditions....................................................................................30
9.1. Conditions to Obligation of the Purchaser..............................................................30
9.2. Conditions to Obligation of the Seller.................................................................31
Section 10: Remedies for Breaches of this Agreement..............................................................32
10.1. Survival..............................................................................................32
10.2. Indemnification Provisions for Benefit of the Purchaser...............................................32
10.3. Indemnification Provisions for Benefit of the Seller..................................................33
10.4. Matters Involving Third Parties.......................................................................34
10.5. Indemnification Limitations...........................................................................34
10.6 Indemnification for Environmental Matters..............................................................35
10.7. EXCLUSIVE REMEDY......................................................................................36
10.8 Minimizing Losses......................................................................................37
Section 11: Termination..........................................................................................37
11.1. Termination of Agreement..............................................................................37
11.2. Effect of Termination.................................................................................37
11.3 Liquidated Damages in Certain Cases....................................................................38
Section 12: Miscellaneous........................................................................................38
12.1. Press Releases and Announcements......................................................................38
12.2 Proration of Expenses and Prepaid Items................................................................38
12.3. Expenses; Transfer Taxes..............................................................................38
12.4. Consent to Amendments.................................................................................38
12.5. Successors and Assigns................................................................................38
12.6. Severability..........................................................................................39
12.7. Counterparts..........................................................................................39
12.8. Descriptive Headings..................................................................................39
12.9. Notices...............................................................................................39
12.10. No Third-Party Beneficiaries.........................................................................40
12.11. Entire Agreement.....................................................................................40
12.12. Construction.........................................................................................40
12.13. Incorporation of Exhibits and Schedules..............................................................40
12.14. Bulk Transfer Laws...................................................................................40
12.15. WARN Act.............................................................................................40
12.16. GOVERNING LAW........................................................................................41
12.17. TIME IS OF THE ESSENCE...............................................................................41
12.18. Arbitration..........................................................................................41
LIST OF EXHIBITS AND SCHEDULES
Exhibit A: Form of Bill of Sale
Exhibit B: Form of Deed
Exhibit C: Form of Assignment Agreement of Patents
Exhibit D: Form of Assignment and Assumption Agreement
Exhibit E: Allocation of Purchase Price
Schedule 1.1: Persons with Knowledge
Schedule 1.2: Permitted Liens
Schedule 2.1(a): Purchased Assets Not At Facility
Schedule 2.1(d): Contracts to be Transferred
Schedule 2.2(b): Certain Excluded Assets
Schedule 2.3(a)(i): Assumed Contracts
Schedule 2.5(a): Reference Statement
Schedule 4.3: Required Consents
Schedule 4.4: Financial Statements
Schedule 4.5: Material Adverse Changes
Schedule 4.7: Contracts
Schedule 4.8: Owned Real Property
Schedule 4.10: Intellectual Property
Schedule 4.11: Litigation
Schedule 4.12: Employee Benefits
Schedule 4.13: Labor Relations
Schedule 4.14: Environmental Matters
Schedule 4.15: Legal Compliance
Schedule 4.16: Permits
Schedule 4.17 Adequacy and Completeness of Purchased Assets
Schedule 4.18: Customers and Suppliers
Schedule 4.19 Government Contracts
Schedule 4.21: Product Liability
Schedule 7.2(b): Contracts Requiring Third Party Consent to Transfer
Schedule 8(a): Employees of Business