EXHIBIT 10(b)
ASSET PURCHASE AGREEMENT
Dated June 8, 2000
By and Between
TYCO INTERNATIONAL (US) INC.,
LUDLOW BUILDING PRODUCTS, INC.
as Buyer
TYCO PLASTICS SERVICES AG
as IP Buyer
and
K2 INC.,
as Seller
TABLE OF CONTENTS
Page
----
1. Agreement to Sell and Agreement to Purchase.........................................................1
1.1 Other Definitional Provisions..........................................................1
1.2 Excluded Assets........................................................................3
1.3 Further Assurances.....................................................................3
2. Consideration to be Paid by Buyer...................................................................3
2.1 Purchase Price for Acquisition Assets..................................................3
2.2 Adjustment to Purchase Price...........................................................4
2.3 Assumed Liabilities....................................................................5
2.4 Liabilities Not Assumed by Buyer.......................................................6
2.5 Allocation of Purchase Price...........................................................8
3. Representations and Warranties of Seller............................................................8
3.1 Organization and Good Standing.........................................................8
3.2 Authorization of Agreement.............................................................8
3.3 Ownership of Acquisition Assets........................................................9
3.4 Financial Condition....................................................................9
3.4.1 Financial Statements......................................................9
3.4.2 Accounting Standards......................................................9
3.4.3 Absence of Certain Changes................................................9
3.5 Property of Seller....................................................................10
3.5.1 Real Property............................................................10
3.5.2 Tangible Personal Property...............................................11
3.5.3 Intangible Personal Property.............................................11
3.6 Agreement Not in Breach of Other Instruments..........................................12
3.7 Labor and Employment Matters; Pension and Employee Benefit Plans......................12
3.8 Litigation and Compliance with Laws...................................................13
3.8.1 Litigation Pending or Threatened.........................................13
3.8.2 Violation of Law.........................................................14
3.8.3 Environmental Matters....................................................14
3.9 Contracts and Other Instruments.......................................................15
3.10 Compensation of and Indebtedness to and from Officers.................................16
3.11 Insurance.............................................................................16
3.12 Brokerage.............................................................................17
3.13 Knowledge.............................................................................17
3.14 Taxes.................................................................................17
3.15 Product Liability and Recalls.........................................................17
3.16 Undisclosed Liabilities...............................................................18
3.17 Restrictions on Business Activities...................................................18
3.18 No Illegal or Improper Transactions...................................................18
3.19 Inventory.............................................................................18
3.20 No Implied Warranties.................................................................18
4. Representations and Warranties of Buyer............................................................19
4.1 Organization; Good Standing; and Corporate Authority..................................19
i
Page
----
4.2 Agreement Not in Breach of Other Instruments..........................................19
4.3 Regulatory Approvals..................................................................19
4.4 Brokerage.............................................................................19
4.5 Sufficient Funds......................................................................19
4.6 Reliance on Representations and Warranties............................................20
5. Closing ......................................................................................20
6. Certain Understandings and Agreements of the Parties...............................................20
6.1 Access................................................................................20
6.1.1 For the Buyer............................................................20
6.1.2 For the Seller...........................................................21
6.2 Confidentiality and Public Announcements..............................................21
6.2.1 Confidentiality..........................................................21
6.2.2 Public Announcements.....................................................21
6.3 Conduct of Business of Division.......................................................21
6.4 Preservation of Organization..........................................................21
6.5 Current Information...................................................................22
6.6 Contracts.............................................................................22
6.7 Completion of Transaction; Hart-Scott-Rodino..........................................22
6.8 Accounts Receivable...................................................................22
6.9 Condition to Transfer of Certain Contracts............................................22
6.10 Waiver of Compliance with Bulk Sales Laws.............................................23
6.11 Employees.............................................................................23
6.12 Taxes.................................................................................24
6.13 Covenant Not to Compete...............................................................24
6.14 Cooperation with Litigation...........................................................24
6.15 Product Claims........................................................................24
7. Conditions to Obligations of Seller................................................................25
7.1 Correctness of Representations and Warranties.........................................25
7.2 Performance of Covenants and Agreements...............................................25
7.3 Opinion of Counsel for Buyer..........................................................25
7.4 Additional Closing Documents..........................................................25
7.5 No Legal Bar..........................................................................25
7.6 HSR Expiration/Termination............................................................25
7.7 Michigan Department of Environmental Quality, Waste Management Division
Approval..............................................................................26
8. Conditions to Obligations of Buyer.................................................................26
8.1 Correctness of Representations and Warranties.........................................26
8.2 Performance of Covenants and Agreements...............................................26
8.3 Opinion of Counsel for Seller.........................................................26
8.4 No Legal Bar..........................................................................26
8.5 Transfer Documents....................................................................26
8.6 HSR Expiration/Termination............................................................27
9. Survival; Indemnification..........................................................................27
ii
Page
----
9.1 Survival..............................................................................27
9.2 Indemnification by Seller.............................................................27
9.3 Indemnification by Buyer..............................................................27
9.4 General Indemnification Limitations; Remediation......................................27
9.5 Notice of Claims......................................................................28
9.7 Third Party Claims....................................................................28
9.7 Payments..............................................................................29
9.8 Remedies Exclusive....................................................................29
9.9 Certain Damages.......................................................................29
10. Termination of Agreement...........................................................................29
10.1 Events of Termination.................................................................29
10.2 Rights and Obligations on Termination.................................................30
11. Miscellaneous Provisions...........................................................................30
11.1 Construction..........................................................................30
11.2 Notices...............................................................................30
11.3 Assignment............................................................................31
11.4 Amendments and Waivers................................................................31
11.5 Remedies..............................................................................31
11.6 Attorneys' Fees.......................................................................31
11.7 Binding Nature of Agreement...........................................................32
11.8 Expenses..............................................................................32
11.9 Entire Agreement......................................................................32
11.10 Severability .........................................................................32
11.11 Counterparts .........................................................................32
11.12 Section Headings......................................................................32
iii
Exhibits
Exhibit A Opinion of Buyer's Counsel
Exhibit B Opinion of Seller's Counsel
SCHEDULES
Schedule 1.1(c) Location of Inventory on Consignment
Schedule 1.1(e) Contracts, Leases, Sales Orders, Purchase Orders, Etc.
Schedule 1.1(f) Motor Vehicles and Other Rolling Stock
Schedule 1.1(g) Machinery and Equipment
Schedule 1.1(h) Intangible Personal Property
Schedule 1.1(i) Owned Real Estate
Schedule 2.5 Purchase Price Allocation
Schedule 3.3 Ownership of Acquisition Assets
Schedule 3.4.1 Financial Statements
Schedule 3.4.2 Accounting Standards
Schedule 3.4.3(i) Capital Expenditures
Schedule 3.5.1 Leased Real Estate
Schedule 3.5.2 Tangible Personal Property
Schedule 3.6 Agreement Not in Breach of Other Instruments
Schedule 3.7 Employee Plans and Agreements
Schedule 3.7(c) Labor Complaints, etc.
Schedule 3.8.1 Litigation
Schedule 3.8.2 Licenses, Permits and Authorizations
Schedule 3.8.3 Environmental Matters
Schedule 3.9.1 Contract Defaults
Schedule 3.10.1 Officers' and Employees' Compensation
Schedule 3.10.2 Indebtedness to Insiders
Schedule 3.11 Insurance
Schedule 3.13 Knowledge
Schedule 3.15 Product Liabilities
Schedule 3.17 Restrictions on Business Activities
Schedule 6.1.1(a) Employees That Can Be Contacted by Buyer
Schedule 6.1.1(b) Sensitive Information
Schedule 6.11 Transferred Employees
APPENDICES
Appendix A Closing Date Balance Sheet and Net Assets
iv
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of this 8th day of June, 2000 by and between Tyco International (US)
Inc., a Massachusetts corporation ("TYCO"), Ludlow Building Products, Inc., a
Virginia corporation ("BUYER"), Tyco Plastics Services AG, a Swiss
corporation ("IP BUYER"), and K2 Inc., a Delaware corporation ("SELLER").
(Except as used in this paragraph and Sections 1, 4.1, 9 and 11.3 of this
Agreement, the term "Buyer" is used herein to refer to Tyco, Buyer and IP
Buyer collectively.)
RECITALS
1. Seller's division, Simplex Products (the "DIVISION"), is engaged
in the business of manufacturing and selling a variety of industrial and
building products, including exterior sheathing and housewrap, recycled
chipboard, exterior insulative finishing systems ("EIFS"), industrial
flexible packaging materials, paperboard products and container components.
2. Tyco desires to cause Buyer and IP Buyer to acquire, and Seller
desires to sell, all of the assets (tangible and intangible), properties and
goodwill of Seller used or held for use primarily in the Division, on the
terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1. AGREEMENT TO SELL AND AGREEMENT TO PURCHASE.
1.1 ASSETS TO BE CONVEYED. On the Closing Date (as
hereinafter defined) Seller shall convey, transfer, assign, sell and deliver
to Buyer and IP Buyer, and Tyco shall cause Buyer and IP Buyer to acquire,
accept and purchase, all of the assets, properties and rights of Seller used
or held for use primarily in the Division (hereinafter collectively referred
to as the "ACQUISITION ASSETS") including, but not limited to, the following:
(a) Prepaid items and deposits of the Division;
(b) Accounts receivable, notes and notes
receivable arising from the conduct of the Division's business (the "ACCOUNTS
RECEIVABLE");
(c) Inventories of raw material, work-in-process
and finished goods of the Division (collectively, the "INVENTORY"), whether
located at the premises of the Division or elsewhere, including, without
limitation, inventory of the Division held by third parties on consignment at
the locations listed in SCHEDULE 1.1(c) attached hereto;
(d) Office supplies, drums, containers, tote bins
and other packaging material, spare parts, safety equipment, maintenance
supplies and other similar items of the Division;
1
(e) Subject to Section 6.9 hereof, real property
leases (including, but not limited to, leases relating to the Leased Real
Estate (as hereinafter defined)), equipment or other leases, licenses,
contracts, agreements, purchases or sales orders or commitments, written or
oral (collectively, the "CONTRACTS"), including, without limitation, those
set forth on SCHEDULE 1.1.(e);
(f) Motor vehicles and other rolling stock used by
the Division, including those which are listed in SCHEDULE 1.1(f) attached
hereto;
(g) Machinery, equipment, tooling, dies, tools,
furniture, fixtures, cranes and craneways owned or used by the Division on
the Closing Date (hereinafter referred to collectively with the motor
vehicles and other rolling stock owned or used by Seller as the "FIXED
ASSETS"), whether or not fully depreciated on the books and records of
Seller, including, without limitation, those assets set forth in SCHEDULE
1.1(g) attached hereto;
(h) Domestic and foreign patents, patent
applications, copyrights, copyright applications, trademarks, trademark
applications, service marks, service mark applications, trade names
(including without limitation the names "THERMO-PLY," "BREATHEDRY,"
"FINESTONE," "BARRICADE," "R-WRAP" and all derivatives and variants thereof)
and trade name registrations (in any such case, whether registered or to be
registered in the United States of America or elsewhere) and processes,
inventions, trade secrets, trade names, computer programs, formulae, know how
and other intangible personal property (all of the foregoing in this Section
1.1(h) being hereinafter referred to collectively as "INTANGIBLE PERSONAL
Property") used or held for use primarily in the Division, including, without
limitation, those items set forth in SCHEDULE 1.1(h) attached hereto;
(i) The real property commonly known as the
Adrian, Michigan plant, the Constantine, Michigan plant and the Jacksonville,
Florida facility (the "OWNED REAL ESTATE") and more particularly described on
SCHEDULE 1.1(i) attached hereto, including without limitation all
improvements and fixtures located thereon and all rights and interests
appurtenant thereto (such real property, improvements, fixtures and
appurtenant rights and interests being hereinafter referred to collectively
with the Leased Real Estate as the "REAL PROPERTY");
(j) All federal, state, local and foreign
licenses, permits and other governmental authorizations relating to the
Division, including without limitation those listed in SCHEDULE 3.8.2;
(k) All goodwill of the Division, customer lists,
sales brochures, computer software, books, records and accounts,
correspondence, production records, employment records and any confidential
information relating to or arising out of the Division, it being understood
that Seller will retain duplicate copies of such books, records, accounts and
other information as it may deem appropriate for its tax and other ongoing
record keeping requirements;
(l) All rights of Seller under express or implied
warranties from the suppliers of Seller with respect to the Acquisition
Assets; and
(m) computer systems, equipment and other assets,
properties or rights of Seller used in the Division.
2
With respect to the Acquisition Assets listed above, IP Buyer will acquire
those Acquisition Assets referred to in Section 1.1(h).
1.2 EXCLUDED ASSETS. Notwithstanding Section 1.1 hereof,
Seller is not selling, and Buyer is not purchasing, pursuant to this
Agreement, any of the following (the "EXCLUDED ASSETS"), all of which shall
be retained by Seller:
(a) Cash, cash equivalents and marketable
securities;
(b) Rights of Seller under this Agreement and the
agreements, instruments and certificates delivered in connection with this
Agreement;
(c) Seller's minute books, tax returns and other
corporate documents;
(d) Seller's duplicate copy of the books, records
and accounts of the Division;
(e) All rights to claims, available to or being
pursued by Seller for refunds of or credits against income taxes attributable
to the Division for taxable periods ending on or before the Closing Date and
for the portion ending on the Closing Date of any taxable period that
includes but does not end on the Closing Date (the "PRE-CLOSING TAX PERIODS")
(determined as if such taxable period ended as of the close of business on
the Closing Date).
(f) The name and mark "K2" and any name or mark
derived from or including the foregoing and any other name or mark owned by
the Seller and not used by the Division;
(g) All rights of Seller under any liability
insurance policies except for those disclosed in SCHEDULE 3.11 attached
hereto; and
(h) Computer programs, systems, equipment,
intangible personal property and any other assets, properties or rights of
Seller used generally in the conduct of Seller's business and not used or
held for use in the Division.
1.3 FURTHER ASSURANCES. On the Closing Date and from time
to time thereafter, Seller will execute and deliver to Buyer such instruments
of sale, transfer, conveyance, assignment and delivery, consents, assurances,
powers of attorney and other instruments as may be reasonably requested by
Buyer in order to vest in Buyer all right, title and interest in and to the
Acquisition Assets and otherwise in order to carry out the purpose and intent
of this Agreement.
2. CONSIDERATION TO BE PAID BY BUYER.
2.1 PURCHASE PRICE FOR ACQUISITION ASSETS. The aggregate
purchase price for the Acquisition Assets (the "PURCHASE PRICE") shall be
$27,500,000, subject to adjustment under Section 2.2. The Purchase Price
shall be paid to Seller by wire transfer at the Closing (as hereinafter
defined) to an account designated by Seller at least three (3) business days
prior to the Closing Date.
3
2.2 ADJUSTMENT TO PURCHASE PRICE. The Purchase Price shall
be subject to adjustment after the Closing in accordance with the following
procedure:
(a) As soon as practicable (but in no event later
than forty-five (45) days after the Closing Date), Seller, with Buyer's
cooperation, shall prepare and deliver an unaudited balance sheet of the
Division as of the Closing Date (the "CLOSING DATE BALANCE SHEET") including
a calculation of the Net Assets, as of the Closing Date. As used herein, "NET
ASSETS" shall mean the net assets of the Division as shown on the Closing
Balance Sheet. In connection with the Closing Date Balance Sheet, the
physical inventory of the Acquisition Assets shall be jointly conducted by
Seller and Buyer. The Closing Date Balance Sheet and Net Asset calculation:
(i) shall include only the Acquisition Assets and Assumed Liabilities of the
Division, (ii) shall be prepared in accordance with GAAP, except as set forth
on SCHEDULE 3.4.2, and (iii) in all cases where there is a permissible choice
among accounting principles and procedures in accordance with GAAP, shall be
prepared on a basis consistent with Seller's Balance Sheet as of April 2,
2000, except as indicated on APPENDIX A. Attached hereto as APPENDIX A is
statement of Net Assets of the Division, as of April 2, 2000, which
illustrates, and shall be used as a model, in preparing the statement of Net
Assets as of the Closing Date. Seller's Chief Financial Officer shall certify
that the Closing Date Balance Sheet fairly reflects the financial position of
the Division as of the Closing Date (exclusive of the Excluded Assets) and is
prepared in accordance with the provisions of this Section 2.2(a).
(b) If the Net Assets of the Division set forth in
the Closing Date Balance Sheet are less than $24,827,000, the Purchase Price
shall be reduced to the extent of the difference. If the Net Assets of the
Division set forth in the Closing Date Balance Sheet are more than
$24,827,000, the Purchase Price shall be increased to the extent of the
difference. The amount of any increase in the Purchase Price shall be paid by
Buyer to Seller within five (5) days after final determination of the Net
Assets, with interest from the date of Closing at the prime rate of Bank of
America N.T.S.A., as in effect from time to time. The amount of any reduction
in the Purchase Price shall be refunded by Seller to Buyer within five (5)
days after such final determination, with interest for the period and at the
rate set forth in the preceding sentence. Any amounts payable hereunder shall
be payable by wire transfer in immediately available funds to an account
designated by the party entitled to such payment at least one day before the
wire transfer.
(c) Buyer shall have a reasonable time, not in
excess of thirty (30) days, to review the Closing Date Balance Sheet and the
Net Assets and Seller shall cooperate in furnishing all such working papers
and accounting records as Buyer shall reasonably request for such purpose. If
Buyer does not timely deliver a "Contest Notice" (as hereinafter defined) in
accordance with Section 2.2(d), the Closing Date Balance Sheet, Net Assets
and the Purchase Price adjustment derived therefrom will be final and binding
on the parties. If a Contest Notice is so delivered, the Closing Date Balance
Sheet, Net Assets and any adjustment to the Purchase Price shall be
determined as set forth below.
(d) In the event that Buyer contests any part of
the Purchase Price as adjusted, as set forth above, Buyer shall give Seller
written notice of its objections thereto (a "CONTEST NOTICE") within thirty
(30) days following the delivery of the Closing Date Balance Sheet. Any such
Contest Notice shall specify in reasonable detail the nature of any
disagreement
4
asserted and the amount claimed by Buyer. Buyer's right to contest the
Purchase Price, as adjusted hereunder, shall be limited to the inclusion on
the Closing Date Balance Sheet of assets that do not exist. Without limiting
the generality of the foregoing, Buyer expressly waives any right to
challenge the amount of any reserve or accrual reflected on the Closing Date
Balance Sheet so long as there is no downward movement in such reserve or
accrual reflected in Seller's Balance Sheet as of April 2, 2000.
(e) During the period of thirty (30) days
following the timely delivery of any such Contest Notice, Buyer and Seller
shall attempt to resolve any differences which Buyer and Seller may have with
respect to any matter specified in the Contest Notice (which resolution, if
any, shall be final and binding on all the parties). If, at the end of such
thirty (30) day period, Buyer and Seller shall fail to reach written
agreement with respect to all of such matters, then the matters specified in
any Contest Notice with respect to which such written agreement has not been
reached (the "DISPUTED MATTERS") shall be submitted for determination by an
independent certified public accounting firm of national standing (the
"ACCOUNTANTS") mutually selected by Buyer's accountants and Seller's
accountants, respectively. The Accountants shall consider only the Disputed
Matters. The Accountants shall not be required to follow any particular rules
of procedure, it being the intention of the parties to create a flexible,
practical and expeditious method for resolving any disagreement hereunder.
The Accountants' decision with respect to all Disputed Matters shall be final
and binding upon the parties hereto.
(f) Each party shall bear its own costs and
expenses for its independent auditors. The fees and expenses of the
Accountants incurred in connection with its review and determination of any
Disputed Matters shall be borne one-half by Buyer and one-half by Seller.
2.3 ASSUMED LIABILITIES. As further consideration for
consummation of the transactions contemplated hereby, subject to Section 2.4
hereof, at the Closing, Buyer shall assume and agree to thereafter pay when
due and discharge and indemnify Seller and hold Seller harmless with respect
to the following liabilities (the "ASSUMED LIABILITIES"):
(a) All obligations and liabilities of Seller
under Contracts that are to be acquired by Buyer pursuant to the provisions
of this Agreement;
(b) All accounts payable owed by Seller arising
out of operations of the Division or otherwise in respect of the Division;
(c) All obligations and liabilities (other than
non-contractual product liability claims for defective products) in respect
of any and all products made (if the date of manufacture is readily
determinable) and sold by the Division on or after the Closing Date,
including obligations and liabilities for refunds, adjustments, allowances,
rebates, repairs, exchanges, returns and warranties of merchantability and
other contractual warranty claims;
(d) All non-contractual obligations and
liabilities in respect of product liability claims relating to any and all
defective products (other than building products) made (if the date of
manufacture is readily determinable) and sold by the Division on or after the
Closing Date, including obligations and liabilities for property damage and
related refunds, adjustments, allowances, repairs, exchanges, returns, claims
of warranty of merchantability and other claims;
5
(e) All non-contractual obligations and
liabilities in respect of product liability claims for any and all defective
building products made (if the date of manufacture is readily determinable)
and sold by the Division on or after the Closing Date, including obligations
and liabilities for property damage and related refunds, adjustments,
allowances, repairs, exchanges, returns, claims of warranty of
merchantability and other claims;
(f) Environmental Liabilities related to the real
property included in the Acquired Assets relating to any facts or
circumstances arising on or after the Closing Date;
(g) All obligations and liabilities in respect of
personal injury or property damage claims with respect to any real property
included in the Acquired Assets as to which the date of such damage or injury
(as determined in a manner consistent with the determination of the date of
loss under an "occurrence based" insurance policy) was on or after the
Closing Date;
(h) All obligations and liabilities arising under
or in connection with (i) accrued payroll and accrued vacation with respect
to all Transferred Employees; (ii) accrued benefits other than severance
benefits, if any, under the Paper Industry Union Management Pension Fund (the
"PAPER INDUSTRY PLAN"); (iii) severance of any Transferred Employee who is
terminated as a result of or in connection with the transactions contemplated
hereby, who does not accept Buyer's offer of employment pursuant to Section
6.11 hereof or who terminates employment with Buyer after the Closing Date;
(iv) post-retirement medical benefits for Transferred Employees pursuant to
the terms of any applicable Collective Bargaining Agreement; and (v) any
wrongful termination, grievance or other employment related claim brought by
any Transferred Employee whose employment is terminated following the Closing
Date to the extent that such claim is solely attributable to the actions of
Buyer subsequent to the Closing Date; provided, however, that (A) (x) accrued
payroll with respect to all Transferred Employees, (y) accrued vacation with
respect to all hourly employees and (z) the monthly liabilities with respect
to the Paper Industry Plan accrued through the Closing Date shall only be
included to the extent reflected or reserved on the Closing Balance Sheet and
(B) with respect to claims arising pursuant to benefits described in clause
(iv) of this Section 2.3(h), Buyer will administer all such claims and Seller
shall reimburse Buyer for the portion of any payments attributable to the
Transferred Employees based upon years of service prior to the Closing Date;
and
(i) All other liabilities, contingent or
otherwise, owed by Seller, to the extent arising prior to the Closing Date
out of the conduct of the Division Business by Seller and to the extent that
they are reflected or reserved on the Closing Date Balance Sheet (including,
without limitation, obligations and liabilities in respect of products sold
by the Division prior to the Closing Date). In addition to the foregoing, to
the extent of the unused Basket Amount referred to in Section 9.4(a), Buyer
shall assume obligations and liabilities of the kind referred to in Section
2.3(c) above in respect of products sold by the Division prior to the Closing
Date.
2.4 LIABILITIES NOT ASSUMED BY BUYER. Buyer shall not be
deemed by anything contained in this Agreement to have assumed and Seller
hereby agrees to fully pay and perform in a prompt and timely manner and to
indemnify Buyer and hold Buyer harmless with respect to the following
excluded liabilities (the "EXCLUDED LIABILITIES"):
6
(a) Any liability of Seller to any person or
entity the existence of which constitutes a breach of any covenant,
agreement, representation or warranty of Seller contained in this Agreement;
(b) Any liability of Seller for any federal,
state, local, foreign or other taxes, except to the extent liabilities or
reserves therefor are included on the Closing Date Balance Sheet;
(c) Any non-contractual obligations and
liabilities in respect of product liability claims related to any defective
products (other than building products) made (if the date of manufacture is
readily determinable) or sold by the Division prior to the Closing Date,
including obligations and liabilities for property damage and related
refunds, adjustments, allowances, repairs, exchanges, returns, claims of
warranty of merchantability and other claims;
(d) Any non-contractual obligations and
liabilities in respect of product liability claims related to any defective
building products made (if the date of manufacture is readily determinable)
or sold by the Division prior to the Closing, including obligations and
liabilities for property damage and related refunds, adjustments, allowances,
repairs, exchanges, returns, claims of warranty of merchantability and other
claims
(e) All Environmental Liabilities relating to the
real property included in the Acquired Assets arising out of any facts or
circumstances existing or arising prior to the Closing Date;
(f) All obligations arising in respect of personal
injury or property damage claims with respect to any real property included
in the Acquired Assets as to which the date of such injury or loss (as
determined in a manner consistent with the determination of the date of loss
under an "occurrence based" insurance policy) was prior to the Closing Date;
(g) Except as set forth in SECTION 2.3(h) or
2.3(i) and except for liabilities under Contracts to be acquired by Buyer as
a part of the Acquired Assets, any liability of Seller under any "EMPLOYEE
BENEFIT PLANS" for any event occurring prior to the Closing Date or any
obligation for benefits accrued prior to the Closing Date. "Employee Benefit
Plans" means any employee pension benefit plans (as defined in Section (3)(2)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), employee welfare benefit plans (as defined in Section 3(1) of
ERISA, bonus, deferred compensation, incentive compensation, stock ownership,
phantom stock, disability, death, dependent care, employee assistance,
scholarship or other plan or program, arrangement or understanding (whether
or not covered by ERISA) maintained in whole or in part, contributed to, or
required to be contributed to by Seller for the benefit of any present or
former officer, employee, or director of Seller or any entity which is under
common control with Seller within the meaning of Section 414 of the Internal
Revenue Code of 1986 (the "CODE"), any such entity being hereafter referred
to as a "COMMONLY CONTROLLED ENTITY");
(h) Any liability or obligation relating to claims
related to wrongful termination, occupational safety, workers' or workmen's
compensation or grievance proceedings arising out of events occurring on or
before the Closing Date except to the extent any of the foregoing (i) arise
in connection with the termination of any Transferred Employee following the
Closing Date or (ii) are reflected on the Closing Date Balance Sheet;
7
(i) Any liability arising under or in connection
with the matters set forth in Schedules 3.8.1, 3.8.2 and 3.15 attached
hereto, except, in each case, to the extent of any reserve therefor set forth
on Closing Balance Sheet and except, in the case of Section 3.15, to the
extent referred to in the last sentence of Section 2.3(i); and
(j) Any liability or obligation arising as a
result of any breach by Seller prior to the Closing Date of its obligations
under that certain Contract dated December 26, 1995 between the Division and
the Michigan Department of Environmental Quality Waste Management Division
(the "Michigan Contract").
2.5 ALLOCATION OF PURCHASE PRICE. The parties hereto agree
to allocate the Purchase Price prior to the Closing among the Acquisition
Assets. Seller and Buyer shall jointly complete and separately file Form 8594
with their respective federal income tax returns for the tax year in which
the Closing Date occurs in accordance with such allocation, and unless
required by law, each of the parties shall refrain from taking a position on
any income, transfer or gains tax return, before any governmental agency
charged with the collection of any such tax or in any judicial proceeding
that is in any manner inconsistent with the terms of any such allocation
without written consent of the other in each instance.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power to carry on the business of the
Division as it is now and has since its organization been conducted and to
own, lease or operate the Acquisition Assets and is duly licensed or
qualified to do business and in good standing as a foreign corporation under
the laws of every jurisdiction in which the name of the activities conducted
by Seller and/or the character of the assets owned or leased by Seller makes
such qualification or license necessary, except for those jurisdictions where
the failure to be so qualified would not have a Material Adverse Effect . As
used in this Agreement, "MATERIAL ADVERSE EFFECT" means any change in or
effect on the business or properties of the Division that (a) is or is
reasonably likely to be materially adverse to the business, operations,
properties, condition (financial or otherwise), assets or liabilities of the
Division taken as a whole (excluding adverse changes that are the result of:
(i) economic factors affecting the economy as a whole and (ii) the
announcement and pendency of the transactions contemplated hereby) or (b)
materially impairs or prohibits the ability of Seller and Buyer to consummate
the transactions contemplated by this Agreement.
3.2 AUTHORIZATION OF AGREEMENT. Seller has all requisite
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement and all other agreements and
instruments to be executed by Seller in connection herewith have been (or
upon execution will have been) duly executed and delivered by Seller, have
been effectively authorized by all necessary action, corporate or otherwise,
and constitute (or upon execution will constitute) legal, valid and binding
obligations of Seller, enforceable against Seller in accordance with their
respective terms.
8
3.3 OWNERSHIP OF ACQUISITION ASSETS. Seller is the lawful
owner of or, in the case of leased assets, has the right to use and transfer
to Buyer each of the Acquisition Assets, and the Acquisition Assets are free
and clear of all mortgages, pledges, liens, security interests, encumbrances
and restrictions of every kind and nature (collectively, "LIENS"), other than
Liens disclosed pursuant to this Agreement and encumbrances and restrictions
affecting real property which do not materially interfere with the present
use thereof. The delivery to Buyer of the instruments of transfer of
ownership contemplated by this Agreement will vest good and marketable title
to the Acquisition Assets in Buyer, free and clear of all Liens, except as
referred to in the preceding sentence. The Acquisition Assets include all
assets, rights and interests necessary for the conduct of the Division, as
presently conducted, except as disclosed in SCHEDULE 3.3.
3.4. FINANCIAL CONDITION.
3.4.1 FINANCIAL STATEMENTS. Seller has furnished
to Buyer unaudited financial statements of the Division, consisting of
balance sheets as of December 31, 1999 and consolidated statements of income
and cash flows for the year then ended (the "FINANCIAL STATEMENTS"). The
Financial Statements, including the footnotes thereto, are attached hereto as
Schedule 3.4.1.
3.4.2 ACCOUNTING STANDARDS. The Financial
Statements: (i) have been prepared in accordance with the books and records
of Seller; (ii) have been prepared in accordance with GAAP in a manner
consistent with past practice, except for adjustments as set forth on
SCHEDULE 3.4.2; and (iii) present fairly the financial position and results
of operations of the Division at and for the fiscal periods indicated
therein; except for the absence of certain information and footnotes required
for complete financial statements prepared in accordance with GAAP and except
as disclosed in the footnotes thereto.
3.4.3 ABSENCE OF CERTAIN CHANGES. Since December
31, 1999, there has not been relating to the Division:
(a) any sale, distribution, transfer or
subjection to any Lien of any of Seller's assets, except sales of inventory
in the ordinary and usual course of business;
(b) any increase in the salary or other
compensation or benefits payable or to become payable to any officer,
director or employee, other than routine increases in the ordinary course of
business consistent with past practices;
(c) any adoption of a new benefit plan or
any amendment to an existing benefit plan for the employees or officers of
the Division;
(d) any transaction by Seller not in the
ordinary and usual course of business;
(e) any Material Adverse Effect;
(f) any damage, destruction or loss,
whether or not covered by insurance, which has a Material Adverse Effect;
9
(g) any material alteration in the manner
in which Seller keeps its books, accounts or records or in the accounting
practices therein reflected, including the recognition and computation of
accrued expenses;
(h) the incurrence of any indebtedness
for borrowed money or any commitment to borrow money or any guaranty, direct
or indirect, of indebtedness of others, or any prepayment of long-term debt;
(i) except as listed on SCHEDULE 3.4.3(i)
or as provided elsewhere herein, any acquisition or lease of or commitment to
acquire or lease any realty, or any capital expenditure in excess of $50,000
individually or in the aggregate; or
(j) any change in the operations,
business or manner of conducting the Division, other than changes in the
ordinary and usual course of business consistent with prior practice, none of
which, individually or in the aggregate, has had or is expected to have a
Material Adverse Effect.
3.5 PROPERTY OF SELLER.
3.5.1 REAL PROPERTY.
(a) Except for the Owned Real Estate and
the real property commonly known as the (i) Jacksonville, Florida sales
office, which constitutes the leased premises under the Lease between Seller
as lessee and Beach Marine as lessor (the "JACKSONVILLE OFFICE LEASE"), (ii)
Jacksonville, Florida warehouse, which constitutes the leased premises under
the Lease between Seller as lessee and Eastport Partner as lessor (the
"JACKSONVILLE WAREHOUSE LEASE"), (iii) Adrian, Michigan railsiding, which
constitutes the leased premises under the Lease between Seller as lessee and
Norfolk & Western as lessor (the "ADRIAN RAILSIDING LEASE"), (iv) Adrian,
Michigan Group headquarters, which constitutes the leased premises under the
Lease between Seller as lessee and Mangold LLC as lessor (the "ADRIAN
HEADQUARTERS LEASE") and (v) Seattle, Washington office, which constitutes
the leased premises under the Lease between Seller as lessee and Gabriel
Enterprises as lessor (the "SEATTLE LEASE" and together with the Jacksonville
Office Lease, the Jacksonville Warehouse Lease, the Adrian Railsiding Lease
and the Adrian Headquarters Lease, the "LEASED REAL ESTATE"), each as more
fully described in SCHEDULE 3.5.1, there is no parcel of real property,
building or other improvement owned or leased by Seller and used by the
Division. Seller owns the Owned Real Estate free and clear of all Liens and
such other covenants, restrictions, easements and imperfections of title as
do not materially interfere with the present use of such property;
(b) All of the buildings, fixtures and
other improvements located on the Real Property are, in all material
respects, in satisfactory operating condition and repair, and the operation
thereof as presently conducted is not in material violation of any applicable
building code, zoning ordinance or other law or regulation;
(c) Seller holds valid and effective
certificates of occupancy, underwriters' certificates relating to electrical
work, zoning, building, housing, safety, fire
10
and health approvals and all other material permits and licenses required by
applicable law relating to the operation of the Real Property;
(d) Seller has not experienced during the
two (2) years preceding the date hereof any material interruption in the
delivery of adequate quantities of any utilities (including, without
limitation, electricity, natural gas, potable water, water for cooling or
similar purposes and fuel oil) or other public services (including, without
limitation, sanitary and industrial sewer service) required by Seller in the
operation of the Division during such period; and
(e) There is no condemnation or eminent
domain proceeding pending which relates to the Real Property, and, to the
knowledge of Seller, there is no such proceeding threatened by any relevant
governmental authority nor any such proceeding to which Seller is not a party
but as to which its properties are subject which materially and adversely
affects any of such properties.
3.5.2 TANGIBLE PERSONAL PROPERTY. SCHEDULE 1.1(f)
or SCHEDULE 1.1(g) lists each item of tangible personal property (other than
Inventory) owned by Seller or in the possession of Seller which is to be
transferred to Buyer pursuant hereto and an identification of the owner of,
and any agreement relating to the use of, each item of tangible personal
property the rights to which are to be transferred to Buyer pursuant hereto
under leases or other similar agreements included in the Contracts. Except as
otherwise indicated on SCHEDULE 3.5.2, Seller owns all of the tangible
personal property used in the Division free and clear of all Liens, and
except as set forth in Section 1.2, all such property will be transferred to
Buyer at the Closing free and clear of all Liens. Each item of such tangible
personal property is located on the Real Property and is in satisfactory
operating condition and repair subject to normal wear and tear.
3.5.3 INTANGIBLE PERSONAL PROPERTY. SCHEDULE
1.1(h) lists (i) an identification of each domestic and foreign patent,
patent application, copyright, copyright application, trademark, trademark
application, service mark, service mark application and trade name (the
"INTELLECTUAL PROPERTY") owned by Seller or used by Seller in the conduct of
the business of the Division and (ii) a true and complete list of all
licenses or similar agreements or arrangements to which Seller is a party
either as licensee or licensor for each such item of Intellectual Property.
Except as otherwise indicated on SCHEDULE 1.1(h), Seller owns or has a valid
license to use all of such Intellectual Property free and clear of all Liens,
and, all such Intellectual Property will be transferred to Buyer at the
Closing free and clear of all Liens.
(a) There have not been any actions or
other judicial or adversary proceedings involving Seller concerning any of
the Intangible Personal Property included in the Acquisition Assets, nor, to
the knowledge of Seller, is any such action or proceeding threatened;
(b) Seller has the right and authority to
use all items of Intangible Personal Property included in the Acquisition
Assets in connection with the conduct of the Division in the manner presently
conducted and to convey such right and authority to Buyer, and such use does
not, to the knowledge of Seller, conflict with, infringe upon or violate any
patent, copyright, trademark, service mark, trade secret, trade name or other
11
right of any other person, firm or corporation;
(c) There are no outstanding, nor, to the
knowledge of Seller, are there any threatened, disputes or disagreements with
respect to any licenses or similar agreements or arrangements included in the
Intangible Personal Property included in the Acquisition Assets and the
consummation of the transactions contemplated hereby will not impair any
right or privilege enjoyed by Seller under any license granted to Seller by
others, or give rise to the termination or cancellation thereunder except as
disclosed in Schedule 1.1(h) attached hereto;
(d) The conduct of the business of the
Division does not, to the knowledge of Seller, conflict with any patent,
copyright, trademark, service mark, trade secret, trade name or other similar
rights of others; and
(e) To the knowledge of Seller (i) there
is no person, firm or corporation engaging in any activity or using any of
the Intellectual Property that infringes upon, or conflicts with, the rights
of the Division, and (ii) there has been no misappropriation of any material
trade secrets or other confidential rights of the Division by any person,
firm or corporation.
3.6 AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS. Except as
set forth in SCHEDULE 3.6, the execution, delivery and performance of this
Agreement by Seller and the consummation of the transactions contemplated
hereby will not result in a breach of any of the terms and provisions of, or
constitute a default under, or conflict with, any Contract or any other
material agreement, indenture or other instrument to which Seller is a party
or by which Seller is bound, the Certificate of Incorporation or Bylaws of
Seller, or any judgment, decree, order or award of any court, governmental
body or arbitrator, or any law, rule or regulation applicable to Seller.
3.7 LABOR AND EMPLOYMENT MATTERS; PENSION AND EMPLOYEE
BENEFIT PLANS.
(a) Except as set forth in SCHEDULE 3.7 attached
hereto, there is no (i) collective bargaining agreement or other labor
agreement to which Seller is a party or by which it is bound; (ii)
employment, profit sharing, deferred compensation, bonus, stock option, stock
purchase, retainer, consulting, retirement, welfare, incentive or severance
plan, policy or contract to which Seller is a party or by which it is bound;
or (iii) each employee benefit plan and arrangement including plans described
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), in which Transferred Employees (as defined in Section
6.11) currently participate. Seller has made available to Buyer copies of all
current documents and instruments governing such plans;
(b) Each of the plans listed in Schedule 3.7 have
been administered in compliance with their terms and with all filings,
reporting, disclosure and other requirements of ERISA and the Internal
Revenue Code of 1986, as amended (the "Code") and each plan (together with
its related funding instrument) which is an employee pension benefit plan is
qualified under Section 401 of the Code and the regulations issued
thereunder, and each plan and its related funding instrument have been the
subject of a favorable determination letter issued by the
12
Internal Revenue Service holding that such plan and its related funding
instrument are so qualified;
(c) Other than routine claims for benefits made in
the ordinary course of business, there are no pending claims, investigations,
or causes of action ("Claims") and to the best knowledge of Seller and its
affiliates, no such claims are threatened against any plan listed in Schedule
3.7 or fiduciary of any such plan by any participant, beneficiary or
governmental agency with respect to the qualification or administration of
such plan;
(d) No withdrawal liability (as defined in Section
4021, 4063 or 4064 of the Code or ERISA) has been, or will be, incurred as a
result of the transactions contemplated by this agreement with respect to,
any defined benefit plan or multi-employer plan covering the Transferred
Employees;
(e) No party to any such agreement, plan or
contract is in default with respect to any material term or condition
thereof, nor has any event occurred which through the passage of time or the
giving of notice, or both, would constitute a default thereunder or would
cause the acceleration of any obligation of any party thereto; and
(f) Seller has complied in all material respects
with all applicable laws, rules and regulations relating to the employment of
labor, including those related to wages, hours, collective bargaining and the
payment and withholding of taxes and other sums as required by appropriate
governmental authorities and has withheld and paid to the appropriate
governmental authorities or is holding for payment not yet due to such
authorities, all amounts required to be withheld from such employees of
Seller and is not liable for any arrearages of wages, taxes, penalties or
other sums for failure to comply with any of the foregoing. Except as set
forth in SCHEDULE 3.7(c) attached hereto, there is no: (i) unfair labor
practice complaint against Seller pending before the National Labor Relations
Board or any state or local agency or any basis for any such complaint; (ii)
pending labor strike or other material labor trouble affecting the Division;
(iii) labor grievance pending against Seller or any basis for any such
grievance; (iv) pending representation question respecting the employees of
the Division; (v) pending arbitration proceedings arising out of or under any
collective bargaining agreement to which Seller is a party; (vi) to the
knowledge of Seller, any basis for which a claim may be made under any
collective bargaining agreement to which Seller is a party; or (vii) pending
or, to the knowledge of Seller, threatened claim against Seller regarding the
discharge or dismissal of any employee based on discrimination or for any
other reason and, to the knowledge of Seller there is no basis for any such
claim. All reasonably anticipated obligations of Seller (whether arising by
operation of law, by contract, by past custom or otherwise), for salaries,
vacation and holiday pay, sick pay, bonuses and other forms of compensation
payable to the officers, directors or other employees of the Division in
respect of the services rendered by any of them have been paid or adequate
accruals therefor have been made in the ordinary course of business in the
books and records of Seller.
3.8 LITIGATION AND COMPLIANCE WITH LAWS.
3.8.1 LITIGATION PENDING OR THREATENED. Except as
set forth in SCHEDULE 3.8.1, there is no action, suit, arbitration,
proceeding, grievance or investigation, pending or (to
13
the knowledge of Seller) threatened, before any court, tribunal, panel,
master or governmental agency, authority or body in which Seller is a party
or to which the Division is subject, nor is Seller, or any officer or
employee of Seller enjoined from any action or subject to any continuing
restriction which may adversely affect the Division.
3.8.2 VIOLATION OF LAW. Seller is not in material
violation of any provision of any law, decree, order or regulation
(including, without limitation, those relating to antitrust or prohibiting
other anti-competitive business practices, those relating to employment
practices, such as discrimination, health and safety, and those relating to
minority business enterprises), applicable to the Division. Seller has all
material federal, state, local, foreign and other licenses, permits and other
governmental authorizations required in the conduct of the business of the
Division and the operation of its properties. Such licenses, permits and
other governmental authorizations, including those obtained under applicable
Environmental Laws (as hereinafter defined) are listed in SCHEDULE 3.8.2.
Except as provided by this Agreement, no notice to, filing with, or approval
or consent of, any governmental agency or body issuing any of the permits,
licenses or other governmental authorizations, or otherwise having
jurisdiction over Seller or the Division or the operations or properties of
the Division, is required in order to permit the execution, delivery or
performance of this Agreement, the consummation of the transactions
contemplated hereby or the sale, transfer and delivery of the Acquisition
Assets or the continuation of the Division after the Closing. No present or,
to the knowledge of Seller, prospective zoning or use restriction will
adversely affect the business of the Division as now conducted or as
presently proposed to be conducted hereafter, and the present conduct of the
business of the Division is not dependent upon any so-called "non-conforming
use" exception or any other exception which would terminate or otherwise be
impaired by the transactions contemplated hereby. Seller is not a party to
any consent decree issued by any governmental agency, authority or body
relating to the Division.
3.8.3 ENVIRONMENTAL MATTERS. Except as set forth
in SCHEDULE 3.8.3 attached hereto:
(a) Seller is in compliance in all
material respects with all Environmental Laws (as defined below) which are
applicable to the business, operations or assets of the Division;
(b) Seller holds, and is in compliance in
all material respects with, all permits, licenses, franchises, approvals and
authorizations by governmental or regulatory authorities or bodies
(collectively, "PERMITS") required under Environmental Laws for Seller to
conduct the business of the Division conducted by it;
(c) Prior to the date of this Agreement,
(i) to Seller's knowledge, there are no events, conditions, actions, or
omissions relating to the conduct of the business of the Division that have
given or will give rise to any Environmental Liability (as defined below)
based on or related to the use, processing, generation, treatment, storage,
disposal, transport, emission, discharge, release or threatened release of
any Hazardous Substance (as defined below), and (ii) Seller has not received
any written notice of the institution or pendency of any lawsuit, action,
proceeding, investigation or claim by any person alleging any Environmental
Liability arising from or relating to the
14
conduct of the business of the Division;
(d) As used herein:
"ENVIRONMENTAL LAWS" means any domestic
or foreign, federal, state, interstate or local statute, law or regulation
having the force of law and in effect and promulgated as such as of the
Closing Date (collectively, "PRE-CLOSING ENVIRONMENTAL LAWS AND REGULATIONS")
or any order, injunction, judgment, decree, common law or other enforceable
requirement of any governmental entity, except to the extent that it sets
forth more stringent or additional requirements than those authorized by
Pre-Closing Environmental Laws and Regulations, and relating to the
protection of human health, safety or the environment, including any of the
foregoing related to: (i) Remedial Actions (as defined below); (ii) the
reporting, licensing, permitting, or investigating of the emission,
discharge, release or threatened release of Hazardous Substances into the
air, surface water, groundwater or land; (iii) the manufacture, release,
distribution, use, generation, treatment, storage, disposal, transport or
handling of Hazardous Substances; or (iv) the protection of the health and
safety of employees or the public;
"ENVIRONMENTAL LIABILITY" means any
liability or obligation arising under Environmental Laws in connection with
the Acquired Assets or the business or operation of the Division to the
extent arising from any condition existing or any act or omission of Seller
at or prior to the Closing Date, including claims, demands, assessments,
judgments, orders, causes of action (including toxic tort suits), notices of
actual or alleged violations or liability (including such notices regarding
the disposal or release of Hazardous Substances on the premises or
elsewhere), proceedings and any associated costs, assessments, losses,
damages (except consequential damages), obligations, liabilities, awards,
fines, sanctions, penalties, or amounts paid in settlement (including
reasonable costs, fees and expenses of attorneys, accountants, consultants
and other agents of such person);
"HAZARDOUS SUBSTANCE" means any substance
or material: (i) that is defined as a "hazardous waste" or "hazardous
substance" under any Environmental Law; (ii) that is considered toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic or
mutagenic or otherwise regulated under any Environmental Law; or (iii) that
contains gasoline, diesel fuel or other petroleum hydrocarbons,
polychlorinated biphenyls or asbestos; and
"REMEDIAL ACTION" means any response
action, removal action, remedial action, corrective action, monitoring
program, sampling program, investigation or other cleanup activity required
by any Environmental Law to clean up, remove, remediate, treat or abate any
Hazardous Substance in the environment.
3.9 CONTRACTS AND OTHER INSTRUMENTS.
3.9.1 Except as set forth in SCHEDULE 3.9.1
attached hereto, there has not occurred any material default under any
Contract on the part of Seller or, to the knowledge of Seller, on the part of
the other parties thereto, and no event has occurred which, with the giving
of notice or the lapse of time, or both, would constitute any default under
any Contract. Except as set forth in SCHEDULE 3.6 attached hereto, no consent
of any party to any Contract is required in
15
order to permit the execution, delivery or performance of this Agreement, the
consummation of the transactions contemplated hereby, or the sale, transfer
or delivery of the Acquisition Assets or the assumption of the liabilities to
be assumed by Buyer under Section 2.3, nor will the execution, delivery or
performance of this Agreement, the consummation of the transactions
contemplated hereby or the sale, transfer and delivery of the Acquisition
Assets or the assumption of the liabilities to be assumed by Buyer, result in
a material breach of any of the terms and provisions of, or constitute a
default under, or conflict with, or result in a modification of, any Contract
of Seller, except for such breaches, defaults, conflicts or modifications
that would not in the aggregate reasonably be expected to have a Material
Adverse Effect.
3.9.2 SCHEDULE 1.1(e) attached hereto lists each
Contract, except: (a) agreements for the purchase by Seller of goods,
materials, supplies or services in the ordinary course of business involving
less than $50,000 in consideration in each such case; and (b) agreements for
the sale of goods or services in the ordinary course of business in which the
sales price of the goods to be sold and the services to be rendered pursuant
to each such agreement is less than $50,000 for each such agreement. True and
complete copies of each of the Contracts, or where they are oral, true and
complete written summaries thereof, have been delivered to Buyer by Seller.
3.10 COMPENSATION OF AND INDEBTEDNESS TO AND FROM OFFICERS.
3.10.1 SCHEDULE 3.10.1 attached hereto sets forth
a true and complete list of the names of and offices held by the officers of
the Division. The current compensation of each of the officers and employees
of the Division (including salary, bonus, other incentive compensation and
other perquisites and benefits) has been disclosed in writing to Buyer,
except for any officer or employee whose aggregate compensation is less than
$50,000 per annum.
3.10.2 Except as set forth in SCHEDULE 3.10.2,
Seller has no financial obligation and is not otherwise indebted to any
person who is an officer or employee of the Division, or to any relative of
any such person or to any entity controlled directly or indirectly by, or
otherwise affiliated with, such person, in any amount whatsoever other than
for compensation for services rendered since the start of the current pay
period of Seller and for business expenses.
3.11 INSURANCE. SCHEDULE 3.11 sets forth a true and correct
list of all insurance policies of any nature whatsoever maintained by Seller
relating solely to the Division at any time during the three (3) years prior
to the date of this Agreement and the annual or other premiums payable
thereunder. Except as disclosed in Schedule 3.11, attached hereto, there are
no outstanding requirements or recommendations by any insurance company that
issued any policy of insurance applicable, in whole or in part, to the
properties or operations of the Division or by any Board of Fire Underwriters
or other similar body exercising similar functions or by any governmental
authority exercising similar functions which requires or recommends any
changes in the conduct of the Division of, or any repairs or other work to be
done on or with respect to any of the properties or assets of, Seller. Seller
has not received any notice or other communication from any such insurance
company within the two (2) years preceding the date hereof canceling or
materially amending or materially increasing the annual or other premiums
16
payable under any of said insurance policies, and to the knowledge of Seller,
no such cancellation, amendment or increase of premiums is threatened.
3.12 BROKERAGE. Seller has not dealt with, and is not
obligated to make any payment to, any finder, broker, investment banker or
financial advisor other than Salomon Smith Barney in connection with any of
the transactions contemplated by this Agreement or the negotiations looking
toward the consummation of such transactions.
3.13 KNOWLEDGE. Certain of the representations and
warranties are made "to the knowledge." The parties hereto agree that the
meaning of such expression shall in all cases be understood as comprising
actual knowledge and belief of the persons identified on SCHEDULE 3.13 after
reasonable inquiry of the Division's employees and representatives and
reasonable review of the Division's files, books and records.
3.14 TAXES.
(a) DEFINITIONS. For purposes of this Agreement:
(i) The term "Taxes" means all federal,
state, local, foreign, and other 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 taxes, fees, assessments or charges
of any kind whatsoever, together with any interest and any penalties,
additions to taxes, or additional amounts with respect thereto, and the
term "Tax" means any one of the foregoing Taxes;
(ii)The term "Returns" means all returns,
declarations, reports, statements, and other documents required to be
filed in respect of Taxes, and the term "Return" means any one of the
foregoing Returns;
(iii) The term "Code" means the Internal
Revenue Code of 1986, as amended. All citations to the Code or to the
regulations promulgated thereunder shall include any amendments or any
substitute or successor provisions thereto.
(b) Seller has paid or will pay when due or
finally settled all Taxes relating to the Division or to the Acquisition
Assets which are or become due or payable for all periods up to and including
the Closing Date (other than those to be paid by Buyer hereunder). Seller has
properly filed on a timely basis, or so will file when due, all Returns
relating to the Division or the Acquisition Assets for all periods up to and
including the Closing Date (other than those to be filed by Buyer hereunder).
(c) LIENS. There are no liens for Taxes (other
than for current Taxes not yet due and payable) on the Acquisition Assets.
(d) FOREIGN PERSON. Seller is not a person other
than a United States person within the meaning of the Code.
3.15 PRODUCT LIABILITY AND RECALLS.
17
(a) Except as set forth in SCHEDULE 3.15 attached
hereto, there is no action, suit, claim, inquiry, proceeding, or investigation
in any case by or before any court or governmental body pending or, to the best
knowledge of Seller, threatened, against or involving the Division relating to
any product alleged to have been designed, manufactured, or sold by the Division
and alleged to have been defective or improperly designed or manufactured.
(b) Except as set forth in SCHEDULE 3.15 attached
hereto, there is no pending, or to the best knowledge of Seller, threatened
recall or investigation of any product sold by Seller in connection with the
Division.
3.16 UNDISCLOSED LIABILITIES. Seller has no liabilities or
obligations, whether accrued, absolute, contingent or otherwise, that would be
required to be reflected on a balance sheet prepared in accordance with GAAP,
except (i) to the extent reflected or reserved for on the Financial Statements;
(ii) liabilities or obligations disclosed in the Schedules thereto; or (iii)
liabilities or obligations incurred in the ordinary course of business since the
date of the Financial Statements or reflected on the Closing Date Balance Sheet.
3.17 RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement or as set forth in SCHEDULE 3.17 attached hereto, to the best
knowledge of Seller, there is no agreement, judgment, injunction, order or
decree binding upon Seller which has or could reasonably be expected to have the
effect of prohibiting or impairing any business practice of Seller, acquisition
of property by Seller, or the conduct of business by Seller as currently
conducted by Seller.
3.18 NO ILLEGAL OR IMPROPER TRANSACTIONS. To Seller's
knowledge, neither the Seller nor any stockholder, officer, or employee of
Seller, has directly or indirectly, used funds or other assets of the Division,
or made any promise or undertaking in such regards, for (a) illegal
contributions, gifts, entertainment or other expenses relating to political
activity; (b) illegal payments to or for the benefit of governmental officials
or employees, whether domestic or foreign; (c) illegal payments to or for the
benefit of any person, firm, corporation, or other entity, or any director,
officer, employee, agent, or representative thereof; (d) gifts, entertainment,
or other expenses that materially jeopardize the normal business relations
between the Division and any of its customers; or (e) the establishment or
maintenance of a secret or unrecorded fund which would violate any material law.
3.19 INVENTORY. The inventory reflected in the most recent
financial statements of the Division is carried at an amount not in excess of
the lower of cost or net realizable value, in each case, net of applicable
reserves. The inventory is merchantable and fit for the purpose for which it was
procured or manufactured, and no inventory is obsolete, damaged or defective, or
not usable or saleable within one year after the Closing Date in the ordinary
course of business of the Division as heretofore conducted, except to the extent
reflected in applicable reserves.
3.20 NO IMPLIED WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH
HEREIN, SELLER MAKES NO REPRESENTATION OR WARRANTY CONCERNING THE ACQUISITION
ASSETS, INCLUDING AS TO THE QUALITY, CONDITION, MERCHANTABILITY, SALABILITY,
OBSOLESCENCE, WORKING ORDER OR
18
FITNESS FOR A PARTICULAR PURPOSE THEREOF. EXCEPT AS SO SET FORTH, THE
ACQUISITION ASSETS ARE SOLD TO BUYER "AS IS AND WHERE IS."
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller that:
4.1 ORGANIZATION; GOOD STANDING; AND CORPORATE AUTHORITY.
Tyco is a corporation duly organized, validly existing and in good standing
under the laws of the State of Massachusetts. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Massachusetts. IP Buyer is a corporation duly organized, validly existing and in
good standing under the laws of Switzerland. Each of Tyco, Buyer and IP Buyer
has the full corporate power and authority to conduct all of the business and
activities conducted by it and to own or license all of the assets owned or
leased by it, and is duly licensed or qualified to do business and in good
standing as a foreign corporation under the laws of every jurisdiction in which
the nature of the activities conducted by it, and/or the character of the assets
owned or leased by it, makes such qualification or license necessary, except for
those jurisdictions where the failure to be so qualified would not have a
Material Adverse Effect on Tyco, Buyer or IP Buyer. Each of Tyco, Buyer and IP
Buyer has all requisite power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. This Agreement and all other
agreements herein contemplated to be executed in connection herewith have been
(or upon execution will have been) duly executed and delivered by each of Tyco,
Buyer and IP Buyer, have been effectively authorized by all necessary action,
corporate or otherwise, and constitute (or upon execution will constitute)
legal, valid and binding obligations of each of Tyco, Buyer and IP Buyer,
enforceable against each of them in accordance with their respective terms.
4.2 AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS. The
execution, delivery and performance of this Agreement by Buyer and the
consummation of the transactions contemplated hereby will not result in a breach
of any of the terms or provisions of, or constitute a default under, or conflict
with, any agreement, indenture or other instrument to which Buyer is a party or
by which it is bound, Buyer's Articles of Incorporation and Bylaws or other
governing instruments, any judgment, decree, order or award of any court,
governmental body or arbitrator, or any law, rule or regulation applicable to
Buyer.
4.3 REGULATORY APPROVALS. All consents, approvals,
authorizations and other requirements prescribed by any law, rule or regulation
which must be obtained or satisfied by Buyer and which are necessary for the
consummation of the transactions contemplated by this Agreement have been
obtained and satisfied.
4.4 BROKERAGE. Buyer has not dealt with, and is not
obligated to make any payment to, any finder, broker or investment banker or
financial advisor in connection with any of the transactions contemplated by
this Agreement or the negotiations looking toward the consummation of such
transactions.
4.5 SUFFICIENT FUNDS. Buyer has sufficient funds
available for the payment of the Purchase Price upon consummation of the
transactions contemplated hereby.
19
4.6 RELIANCE ON REPRESENTATIONS AND WARRANTIES. Buyer
acknowledges that it enters into this Agreement and agrees to consummate the
transactions contemplated hereby in sole reliance on the express representations
and warranties contained in this Agreement and not upon any other information
furnished to Buyer by Seller. BUYER ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY SET
FORTH HEREIN, SELLER MAKES NO REPRESENTATION OR WARRANTY CONCERNING THE
ACQUISITION ASSETS, INCLUDING AS TO THE QUALITY, CONDITION, MERCHANTABILITY,
SALABILITY, OBSOLESCENCE, WORKING ORDER OR FITNESS FOR A PARTICULAR PURPOSE
THEREOF AND BUYER IS PURCHASING THE ACQUISITION ASSETS "AS IS AND WHERE IS."
5. CLOSING. The closing of the transactions herein contemplated (the
"CLOSING") shall, unless another date, time or place is agreed to in writing by
the parties hereto, take place at the offices of Gibson, Dunn & Crutcher LLP,
333 South Grand Avenue, 47th Floor, Los Angeles, California 90071 at 10:00 a.m.,
Los Angeles time, on June 30, 2000 or, if later, the third business day
following expiration of the waiting period under the HSR Act, as defined below
(the "CLOSING DATE").
6. CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES.
6.1 ACCESS.
6.1.1 FOR THE BUYER.
(a) Between the date hereof and the Closing Date, (i)
Buyer's authorized representatives shall have reasonable access during normal
business hours to all properties, operations, books, records, contracts, and
documents of Seller relating to the Division, (ii) Seller will furnish and
request its accountants and outside legal counsel to furnish to Buyer all
information with respect to its affairs and the business of the Division that
Buyer may reasonably request, (iii) Buyer shall have the right to discuss the
affairs and the business of the Division with the employees of Seller and (iv)
authorized representatives of Buyer shall have reasonable access during normal
business hours to all Real Property in order to conduct environmental surveys
and tests; provided: (1) without the prior written approval of Seller, Buyer
shall not communicate with any employee of Seller or the Division, other than
the employees listed on Schedule 6.1.1, attached hereto; (2) Buyer will not
enter any of the premises of the Division, without first making arrangements
with Seller, and any such visits shall be minimized to the extent practicable to
avoid disruption of the Business; (3) that all surveys and tests shall be
conducted in such a manner as to minimize the disruption to the business of the
Division; (4) that at least two days prior to entering any parcel of Real
Property, Buyer shall provide Seller with written notice of its intention to
enter a specific parcel of Real Property and a description of and schedule for
the proposed activities it plans to undertake; (5) that Buyer shall cause the
work to be done by qualified employees, consultants and contractors who are
reasonably acceptable to Seller; and (6) that Buyer shall, at its own expense
and immediately after completion of the investigating activities, restore the
Real Property to substantially the same condition it was in prior to Buyer's
entry.
(b) Prior to the execution and delivery of this
Agreement, Seller has not provided Buyer with access to certain competitively
information concerning the Division, as set
20
forth on SCHEDULE 6.1.1 attached hereto ("Sensitive Information"). Promptly
following the date of this Agreement, and in no event later than [INSERT DATE]
, Seller shall provide Buyer access to the Sensitive Information. Buyer
agrees that it shall implement internal procedures to assure that the
Sensitive Information will not be made available, until completion of the
transactions contemplated hereby, to any person engaged in sales or
marketing, or in the establishment of pricing or pricing policy in any
activity of Buyer which is engaged in competition with the Division.
6.1.2 FOR THE SELLER. After the Closing Date, upon
reasonable prior notice, (i) authorized representatives of Seller shall have
reasonable access during normal business hours to all books, records, contracts
and documents of Buyer pertaining to periods prior to the Closing and relating
to the Division, and may make copies thereof, to the extent that Seller
reasonably determines necessary in connection with the preparation of Seller's
tax returns, or in connection with any tax, insurance, litigation or other
proceeding or activity and (ii) in connection therewith, Seller shall have
reasonable access to discuss the relevant affairs and business of the Division
with the employees of Buyer.
6.2 CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS.
6.2.1 CONFIDENTIALITY. The Confidentiality Agreement
between Buyer and Seller dated April 25, 2000 shall continue in full force and
effect and shall apply to all information concerning the Division obtained by
Buyer pursuant hereto.
6.2.2 PUBLIC ANNOUNCEMENTS. Any public announcement
or similar publicity with respect to this Agreement or the transactions
contemplated hereby will be issued, if at all, at such time and in such manner
as the parties jointly determine. Seller will consult with Buyer concerning the
means by which Seller's employees will be informed of the transactions
contemplated by this Agreement, and Buyer shall have the right to be present for
any such communication.
6.3 CONDUCT OF BUSINESS OF DIVISION. The business of the
Division shall be conducted from the date hereof through the Closing Date in
accordance with prior practice and in the ordinary course of the business of the
Division, and without limiting the generality of the foregoing, Seller shall not
(except with the prior written consent of Buyer) do or cause or permit to occur
any act, event or other occurrence which is represented or warranted not to have
occurred since December 31, 1999 in Section 3.4.3 hereof. Not later than five
(5) days prior to Closing, Seller shall update all Schedules hereto to reflect
changes occurring subsequent to signing this Agreement with respect to any
matter hereafter arising or discovered which, if existing or known at the date
of this Agreement, would have been required to be set forth or described in such
schedules. Such supplement or amendment will be deemed to have amended the
applicable schedule to have qualified the representations and warranties
contained in Article 3 and to have cured any misrepresentation or breach of
warranty that otherwise might have existed hereunder by reason of the matter(s)
set forth in the amendment or supplement..
6.4 PRESERVATION OF ORGANIZATION. Seller shall use its
best efforts to preserve the business of the Division and the organization of
Seller, to keep available to Buyer the
21
services of Seller's present employees, and to preserve for Buyer Seller's
favorable business relationships with its suppliers, its customers and others
with whom business relationships exist.
6.5 CURRENT INFORMATION. Seller will advise Buyer in writing
immediately, but in any event prior to the Closing, of:
(a) the occurrence of any event which renders any of
the representations or warranties set forth herein inaccurate in any material
respect or the awareness of Seller that any representation or warranty set forth
herein was not accurate in all material respects when made; and
(b) the failure of Seller to comply with or
accomplish any of the covenants or agreements set forth herein in any material
respect. Seller will also provide Buyer, promptly on becoming available, copies
of all operating and financial reports prepared by, or in the normal conduct of
business of, the Division.
6.6 CONTRACTS. Between the date hereof and the Closing
Date, Seller will not, without the prior written consent of Buyer, (a) amend in
any material respect or terminate any Contract listed on SCHEDULE 1.1(e), or (b)
enter into or become a party to or submit any bid or proposal for any contract,
agreement, instrument, arrangement, purchase order or commitment with any
customer of the Division under which the reasonably anticipated costs and
expenses of the Division will exceed its anticipated receipts.
6.7 COMPLETION OF TRANSACTION; HART-SCOTT-RODINO. Buyer
and Seller shall use all necessary efforts to complete the transaction
contemplated hereby. Buyer and Seller acknowledge that the transactions
contemplated by this Agreement require filings with the Federal Trade Commission
(the "FTC") and the Antitrust Division of the United States Department of
Justice (the "ANTITRUST DIVISION") under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended, and the rules and regulations promulgated
under such Act (the "HSR ACT"). Buyer and Seller shall each promptly file with
the FTC and the Antitrust Division the notifications and reports required to be
filed pursuant to the HSR Act and shall undertake in good faith to file promptly
any supplemental information which may be requested in connection therewith
which notifications and reports will comply in all material respects with the
requirements of the HSR Act. Buyer and Seller shall each furnish to the other
such information as either may reasonably request to make such filings.
6.8 ACCOUNTS RECEIVABLE. If Seller receives any payments
on Accounts Receivable of the Division after the Closing Date, Seller shall
promptly forward such amounts to Buyer.
6.9 CONDITION TO TRANSFER OF CERTAIN CONTRACTS.
(a) Seller shall use commercially reasonable efforts
to procure all consents, approvals or waivers which must be obtained by Seller
and which are necessary for completion of the transactions described herein,
including all required consents from third parties under the Contracts or
otherwise and all required consents of any governmental agency or body issuing
any permits, licenses or other governmental authorizations affecting Seller or
its businesses or properties so that the Division may continue to be operated by
Buyer without
22
interruption or any adverse effect following the Closing. However, nothing
herein shall require Seller to make any material payment in connection with
the foregoing.
(b) Notwithstanding anything herein to the contrary,
the parties hereto acknowledge and agree that at the Closing Seller will not
assign to Buyer any such Contract which by its terms requires the consent of any
other contracting party thereto unless each such consent has been obtained prior
to the Closing Date. With respect to each such unassigned Contract, after the
Closing Date Seller shall continue to deal with the other contracting party(ies)
to such Contract as the prime contracting party and shall use its best efforts
to obtain the consent of all required parties to the assignment of such
Contract, but Buyer shall be entitled to the benefits of such Contract accruing
after the Closing Date to the extent that Seller may provide Buyer with such
benefits without violating the terms of such Contract. Buyer agrees to perform
at its sole expense all of the obligations of Seller to be performed under any
such Contract the benefits of which Buyer is receiving after the Closing Date.
6.10 WAIVER OF COMPLIANCE WITH BULK SALES LAWS. Buyer and
Seller hereby waive compliance with the requirements of the Michigan Bulk
Transfer Law and Florida Bulk Transfer Law and any other applicable bulk sales
laws of any other jurisdiction.
6.11 EMPLOYEES.
(a) Buyer shall offer employment commencing on the
Closing Date, on substantially similar compensation terms as those offered by
Seller, to any individual who is actively employed by the Division as of the
Closing Date (collectively, the "TRANSFERRED EMPLOYEES"). An employee of the
Division who is absent on the Closing Date due to vacation or holiday or who has
been absent as a result of a short-term or long-term disability prior to the
Closing Date shall be considered actively at work on the Closing Date. On and
after the Closing Date, Buyer shall comply, at its expense, with all employment
laws with respect to the Transferred Employees employed as of the Closing Date,
including, but not limited to, the Family and Medical Leave Act, the American
Disability Act, and all federal or state laws on military leave. Transferred
Employees shall be enumerated in SCHEDULE 6.11. Subject to paragraph (b) below,
nothing herein shall limit the right of Buyer to make such changes in
compensation, position, or responsibilities of employees of the Division as it
may deem appropriate following the Closing.
(b) Buyer agrees that as of the Closing Date and for
a six-month period thereafter, Buyer shall provide the Transferred Employees,
for so long as they remain employees of the Division, with employee benefits
that are no less favorable in the aggregate than those provided to them
immediately prior to the Closing Date. With respect to Buyer's benefit plans,
service accrued by Transferred Employees while employed by Seller shall be
recognized for all purposes except to the extent necessary to prevent
duplication of benefits. With respect to any medical, dental or other welfare
benefits that are provided at any time to Transferred Employees, any applicable
pre-existing exclusions shall be waived and any expenses incurred before such
time under Seller's comparable plan shall be taken into account under Buyer's
plan for purposes of satisfying applicable deductible, co-payment and maximum
out-of-pocket provisions, provided that such information is provided to Buyer
within 90 days following the Closing Date.
23
(c) All Transferred Employees shall cease active
participation in Seller's Employee Benefit Plans as of the Closing Date except
to the extent required under Section 4980(B) of the Internal Revenue Code of
1986, as amended. Seller shall be responsible under the Anthony Industries Inc.
Life, AD&D, Medical and Dental Insurance and workers' compensation for claims
incurred by Transferred Employees and their eligible dependents on or prior to
the Closing Date.
6.12 TAXES. Seller and Buyer shall share equally any
transfer, sales or use or similar taxes relating to the transactions
contemplated hereby upon the consummation of such transactions.
6.13 COVENANT NOT TO COMPETE.
(a) Seller agrees that, as part of the consideration
for payment by Buyer of the Purchase Price, for a period of five years
immediately following the Closing Date, neither Seller nor any of its divisions
or subsidiaries will, directly or indirectly, operate, perform, have any
interest in, or otherwise be engaged in or concerned with a business which
develops, manufactures, prepares, sells, installs, or distributes products or
performs services in competition with the Division. For these purposes,
ownership of securities of a company whose securities are publicly traded under
a recognized securities exchange not in excess of 10% of any class of such
securities shall not be considered to be competition with Buyer.
(b) Further, Seller agrees that for a period of three
years following the Closing Date, neither Seller nor any of its related or
affiliated entities will induce any of Seller's employees hired by Buyer on the
Closing Date to terminate his or her relationship with Buyer and to work in a
business that competes with the Business.
(c) Each of Seller and Buyer acknowledges the
restrictions on its activities under Sections 6.13(a) and (b) hereof (as the
case may be) and constitute a material inducement to Buyer's entering into and
performing this Agreement. Each of Seller and Buyer further acknowledges,
stipulates, and agrees that a breach of any of such obligations and agreements
will result in irreparable harm and continuing damage to the other party for
which there will be no adequate remedy at law and further agrees that in the
event of any breach of said obligations and agreements, the other party and its
successors and assigns will be entitled to injunctive relief and to such other
relief as is proper under the circumstances.
6.14 COOPERATION WITH LITIGATION. After the Closing Date,
Buyer shall cooperate with Seller and give Seller reasonable access during
normal business hours to all properties, operations books, records, contracts,
and documents of Buyer relating to proceedings for which Seller retains
responsibility pursuant to the terms of this Agreement and shall furnish and
request its accountants and outside legal counsel to furnish to Seller all
information with respect to such proceedings as Seller may reasonably request.
Seller shall also have the right to discuss such proceedings with the employees
of Buyer after the Closing Date.
6.15 PRODUCT CLAIMS. Buyer and Seller shall enter into
mutually acceptable arrangements for the handling and review of obligations and
liabilities (other than non-contractual product liability claims for defective
products) in respect of products sold by the Division prior to the Closing,
whether or not constituting Assumed Liabilities, in order that: (i)
24
for so long as Buyer continues to engage in the Division business, at the
request (and in the discretion) of Seller, all such claims shall be
administered by Buyer, and warranty, replacement and repair work will be
performed or provided for by Buyer in respect of Excluded Liabilities on the
same basis as performed or provided in the case of Assumed Liabilities, with
Seller to reimburse Buyer for all costs in respect of Excluded Liabilities
and (ii) Seller shall have a reasonable right to review and audit Buyer's
records pertaining to such obligations and liabilities.
7. CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller to
make the deliveries contemplated at the Closing shall, in addition to the
conditions set forth elsewhere herein, be subject to satisfactory completion on
or prior to the Closing Date of each of the following conditions, any of which
may be waived by Seller:
7.1 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES. All of
the representations and warranties of Buyer contained in this Agreement shall
have been true and complete in all material respects on the date hereof and
shall be true and complete in all material respects on the Closing Date with the
same effect as if made on the Closing Date, and Buyer shall have executed and
delivered to Seller at Closing a certificate to such effect.
7.2 PERFORMANCE OF COVENANTS AND AGREEMENTS. All of the
covenants and agreements of Buyer contained in this Agreement and required to be
performed by Buyer on or before the Closing Date shall have been performed in
all material respects, and Buyer shall have executed and delivered to Seller at
Closing a certificate to such effect.
7.3 OPINION OF COUNSEL FOR BUYER. Seller shall have
received an opinion of counsel for Buyer, M. Brian Moroze, Esq., substantially
in the form of EXHIBIT A hereto and otherwise in form and substance reasonably
satisfactory to and addressed to Seller and dated the Closing Date. In rendering
such opinion, counsel may rely upon certificates of public officials and upon
certificates of officers of Buyer as to factual matters and on opinions of other
counsel of good standing whom such counsel believes to be reliable as to matters
with respect to which the laws of jurisdictions other than Delaware and
California are applicable.
7.4 ADDITIONAL CLOSING DOCUMENTS. Buyer shall have
delivered to Seller at or prior to the Closing such documents (including a
certificate of officers of Buyer) as Seller may reasonably request in order to
enable Seller to determine whether the conditions to Seller's obligations under
this Agreement have been met and otherwise to carry out the provisions of this
Agreement.
7.5 NO LEGAL BAR. None of the parties hereto shall be
prohibited by any order, writ, injunction or decree of any governmental body of
competent jurisdiction from consummating the transactions contemplated by this
Agreement, and no action or proceeding shall then be pending which questions the
validity of this Agreement, any of the transactions contemplated hereby or any
action which has been taken by any of the parties or any corporate entity, in
connection herewith, or in connection with any of the transactions contemplated
hereby.
7.6 HSR EXPIRATION/TERMINATION. The waiting period (and
any statutory extension thereof) under the HSR Act shall have expired or been
terminated and no action, suit
25
or proceeding shall have been initiated by the Antitrust Division or the FTC
challenging the transactions provided in this Agreement under the Clayton Act
or the Sherman Act.
7.7 MICHIGAN DEPARTMENT OF ENVIRONMENTAL QUALITY, WASTE
MANAGEMENT DIVISION APPROVAL. The Michigan Department of Environmental Quality,
Waste Management Division (the "Department") shall have approved the
transactions contemplated hereby pursuant to the Department's rights under the
Michigan Contract.
8. CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to make
the deliveries contemplated at the Closing shall, in addition to conditions set
forth elsewhere herein, be subject to the satisfactory completion on or prior to
the Closing Date of each of the following conditions, any of which may be waived
by Buyer:
8.1 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Seller contained in this Agreement shall have
been true and complete in all material respects on the date hereof and shall be
true and complete in all material respects on the Closing Date with the same
effect as if made on the Closing Date (except for any breach of such
representations and warranties, which when combined with all other breaches of
such representations and warranties, would not result in a Material Adverse
Effect), and Seller shall have executed and delivered to Buyer at Closing a
certificate to that effect.
8.2 PERFORMANCE OF COVENANTS AND AGREEMENTS. All of the
covenants and agreements of Seller contained in this Agreement and required to
be performed on or before the Closing Date shall have been performed in all
material respects, and Seller shall have delivered to Buyer at Closing a
certificate to that effect.
8.3 OPINION OF COUNSEL FOR SELLER. Buyer shall have
received an opinion of counsel for Seller, Gibson, Dunn & Crutcher LLP,
substantially in the form of EXHIBIT B hereto and otherwise in form and
substance reasonably satisfactory to and addressed to Buyer and dated the
Closing Date. In rendering such opinion, counsel may rely upon certificates of
public officials and upon certificates of officers of Seller as to factual
matters and on opinions of other counsel of good standing whom such counsel
believes to be reliable as to matters with respect to which the laws of
jurisdictions other than Delaware or California are applicable.
8.4 NO LEGAL BAR. None of the parties hereto shall be
prohibited by any order, writ, injunction or decree of any governmental body of
competent jurisdiction from consummating the transactions contemplated by this
Agreement and no action or proceeding shall then be pending which questions the
validity of this Agreement, any of the transactions contemplated hereby or any
action which has been taken by any of the parties in connection herewith or in
connection with any of the transactions contemplated hereby.
8.5 TRANSFER DOCUMENTS. Seller shall have executed and
delivered to Buyer such bills of sale and other instruments of sale, transfer,
conveyance, assignment and delivery covering the Acquisition Assets or any part
thereof as Buyer may reasonably require to assure the full and effective sale,
transfer, conveyance, assignment and delivery to Buyer of the Acquisition
Assets.
26
8.6 HSR EXPIRATION/TERMINATION. The waiting period (and any
statutory extension thereof) under the HSR Act shall have expired or been
terminated and no action, suit or proceeding shall have been initiated by the
Antitrust Division or the FTC challenging the transactions provided in this
Agreement under the Clayton Act or the Sherman Act.
9. SURVIVAL; INDEMNIFICATION.
9.1 SURVIVAL. The representations and warranties contained
in this Agreement and in any document delivered in connection herewith shall
survive the Closing Date solely for the purposes of this Section 9 and shall
terminate at the close of business eighteen (18) months following the Closing
Date; provided, that the representations and warranties contained in Sections
3.2, 3.3, 3.8.3 and 3.14 shall survive until the applicable statute of
limitations runs. No claim may be asserted by Tyco, Buyer or IP Buyer for any
breach of representation or warranty herein after the survival period
therefor.
9.2 INDEMNIFICATION BY SELLER. Seller shall indemnify and
hold harmless Tyco, Buyer, IP Buyer and their directors, officers, employees,
agents, successors, affiliates and assigns (the "BUYER PARTIES") from and
against, and reimburse the Buyer Parties on demand with respect to, any and
all loss, damage (including any decrease in the value of property or
securities acquired hereunder), liability, claims, cost and expense,
including reasonable attorneys', accountants', consultants' and engineers'
fees (collectively, "DAMAGES"), incurred by a Buyer Party by reason of or
arising out of or in connection with (a) the breach of any representation or
warranty contained in Section 3, or in any certificate expressly delivered to
Buyer pursuant to this Agreement; provided, that, Seller shall not indemnify
and hold harmless the Buyer Parties from and against any Damages incurred by
a Buyer Party to the extent that an item that is the subject of a breach of a
representation or warranty is reflected on the Closing Date Balance Sheet;
(b) the failure of Seller to perform any agreement or covenant required by
this Agreement to be performed by it; or (c) any failure of Seller to pay,
perform or discharge any of the Excluded Liabilities in accordance with the
terms thereof.
9.3 INDEMNIFICATION BY BUYER. Tyco, Buyer and IP Buyer
agree to indemnify and hold harmless Seller and its directors, officers,
employees, agents, successors, affiliates and assigns (the "SELLER PARTIES")
from and against, and to reimburse the Seller Parties on demand with respect
to, any and all Damages incurred by a Seller Party by reason of or arising
out of or in connection with (a) the breach of any representation or warranty
contained in Section 4, or in any certificate expressly delivered by Tyco,
Buyer and/or IP Buyer to Seller under this Agreement; (b) the failure of
Tyco, Buyer or IP Buyer to perform any agreement or covenant required by this
Agreement to be performed by it; or (c) the failure of Tyco, Buyer or IP
Buyer to pay, perform or discharge any of the Assumed Liabilities in
accordance with the terms thereof.
9.4 GENERAL INDEMNIFICATION LIMITATIONS; REMEDIATION.
(a) No claim for indemnification by a Buyer Party
pursuant to Section 9.2 or a Seller Party pursuant to Section 9.3 shall be
asserted until (i) with respect to claims by a Buyer Party, the aggregate
amount of all Damages incurred by the Buyer Parties under such
indemnification provisions exceed $350,000 (the "BASKET AMOUNT") (at which
point only Damages in excess of such first $350,000 of Damages shall be paid)
and (ii) with respect to
27
claims by a Seller Party, the aggregate amount of all Damages incurred by the
Seller Parties under such indemnification provisions exceed $350,000 (at
which point only damages in excess of such $350,000 of Damages shall be
paid). Seller's liability in respect of all claims for breach of
representations and warranties hereunder shall not exceed $5,000,000 in the
aggregate (the "CAP"). The Basket Amount and the Cap shall not be applicable
to claims arising under Sections 3.2, 3.3, 3.8.3 and 3.14 hereof or with
respect to Excluded Liabilities, provided that the Basket Amount shall apply
to obligations and liabilities in respect of products sold by the Division
prior to the Closing Date and referred to in Section 2.3(i) hereof. The
Basket Amount shall be reduced to the extent of any obligations and
liabilities incurred by Buyer pursuant to the last sentence of Section 2.3
(i), above.
(b) Seller's liability with respect to remediation
of Hazardous Substances shall be limited to liability for remediation to
standards required by any governmental authority with jurisdiction over
Seller under applicable Environmental Laws, taking into account current and
reasonably foreseeable uses of the property. Seller shall have the right to
conduct and control any such remediation. Seller shall provide to Buyer
copies of any correspondence, reports or other documents between Seller and
any governmental authority, and any drilling logs and sample or other test
results, regarding any such remediation. In undertaking any such remediation,
Seller shall cause the work to be done by qualified employees, consultants
and contractors who are reasonably acceptable to Buyer. Buyer shall provide
Seller reasonable access to its property for that purpose; provided that all
remediation shall be conducted in such a manner as to minimize the disruption
to Buyer's business, to the extent it is commercially reasonable to do so.
9.5 NOTICE OF CLAIMS. Whenever any claim shall arise for
indemnification hereunder, the party entitled to indemnification (the
"indemnified person") shall promptly notify the other party (the
"indemnifying person") of the claim, such notice to be in writing and to
describe (a) the Damages allegedly incurred, (b) the amount thereof, if
known, (c) any complaints, subpoena or other documents served against the
indemnified person in connection with such Damages, and (d) the method of
computation of such Damages (but the failure so to notify an indemnifying
person shall not relieve it from any liability which it may have under this
Section 9 except to the extent that it has been prejudiced in any material
respect by such failure or from any liability which it might otherwise have).
An indemnified person shall not settle or compromise any claim by a third
party for which such indemnified person is entitled to indemnification
hereunder without the prior written consent (not to be unreasonably withheld)
of the indemnifying person, unless suit in respect of such claim shall have
been instituted against the indemnified person, the indemnifying person shall
not have taken control of such suit pursuant to Section 9.6 after
notification thereof and the indemnifying person shall have received written
notice of the proposed settlement and the terms thereof.
9.6 THIRD PARTY CLAIMS. In the case of any third party
claim, action or suit as to which indemnification is sought, the indemnifying
person shall have the right at any time to notify the indemnified person that
it elects to conduct and control such action or suit. If the indemnifying
person does not give the foregoing notice and/or until the indemnifying party
gives such notice, the indemnified person shall have the right to defend and
contest such action or suit in the exercise of its exclusive discretion and
settle or compromise such suit, subject to the provisions of the last
sentence of Section 9.5. The indemnifying person shall, upon request from
28
any indemnified person, promptly pay to such indemnified person in accordance
with the other terms of this Section 9 the amount of any Damages. If the
indemnifying person gives the foregoing notice, the indemnifying person shall
have the right to undertake, conduct and control, through counsel of its own
choosing and at the sole expense of the indemnifying person, the conduct and
settlement of such action or suit (other than a settlement which requires or
prohibits any action on the part of, or involves any admission by, the
indemnified person, in which event the consent of such indemnified person
shall be required, but shall not be unreasonably withheld), and the
indemnified person shall cooperate with the indemnifying person in connection
with any such action or suit; provided, that (a) the indemnifying person
shall permit the indemnified person to participate in such conduct or
settlement through counsel chosen by the indemnified person, but the fees and
expenses of such counsel shall be borne, after the indemnifying person has
given notice that it elects to conduct and control such action or suit, by
the indemnified person and (b) the indemnifying person shall agree promptly
to reimburse to the extent required under this Section 9 the indemnified
person for the full amount of any Damages resulting from such action or suit,
except fees and expenses of counsel for the indemnified person incurred after
the assumption of the conduct and control of such action or suit by the
indemnifying person. So long as the indemnifying person is contesting any
such action or suit in good faith, the indemnified person shall not pay or
settle any such action or suit.
9.7 PAYMENTS. All payments made under this Section 9 shall
be made by wire transfer in immediately available funds in U.S. dollars.
9.8 REMEDIES EXCLUSIVE. If the Closing occurs, the remedies
provided in this Section 9 shall be the exclusive remedy for monetary damages
(whether at law or in equity) with respect to this Agreement and the
transactions contemplated herein.
9.9 CERTAIN DAMAGES. Notwithstanding anything else
contained in this Section 9, no Buyer Party or Seller Party shall be entitled
to consequential Damages hereunder.
10. TERMINATION OF AGREEMENT
10.1 EVENTS OF TERMINATION. This Agreement may be
terminated and the transactions contemplated by it abandoned at any time
prior to the Closing:
(a) by mutual agreement of Seller and Buyer; or
(b) by Buyer, following payment to Seller of the
amount required by Section 11.8(b), on or before the expiration of 5 business
days following the time on which Seller shall have provided Buyer access to
the Sensitive Information, if based upon such review Buyer determines, in
good faith, that the facts are materially different from those considered by
it in determining to enter into this Agreement:
(c) by Buyer, if the conditions set forth in
Section 8 shall not have been complied with or performed in any material
respect and such noncompliance or nonperformance shall not have been cured or
eliminated (or by its nature cannot be cured or eliminated) or if the Closing
has not occurred within 75 days of the date of this Agreement; or
(d) by Seller, if the conditions set forth in Section
7 shall not have been
29
complied with or performed in any material respect and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its nature
cannot be cured or eliminated) or if the Closing has not occurred within 75
days of the date of this Agreement.
10.2 RIGHTS AND OBLIGATIONS ON TERMINATION. Except as
otherwise provided in Section 11.8(b), any termination pursuant to Section
10.1 shall not affect any rights (at law or in equity) that any party may
have against any other party hereto as a result of any breach by such other
party of its obligations hereunder. If this Agreement is terminated and
abandoned as provided in this Section 10, each party will redeliver all
documents, work papers and other materials of any other party relating to the
transactions contemplated by this Agreement, whether so obtained before or
after the execution of this Agreement, to the party furnishing the same, and
all information received by any party to this Agreement with respect to the
business of any other party shall not at any time be used for the advantage
of, or disclosed to third parties by, such party to the detriment of the
party furnishing such information; provided, however, that the foregoing
restriction shall not apply to any documents, work papers, material or
information which is a matter of public knowledge or is otherwise in the
public domain.
11. MISCELLANEOUS PROVISIONS.
11.1 CONSTRUCTION. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of the State of
Delaware, without giving effect to the conflicts of laws provisions thereof.
11.2 NOTICES. All notices, requests, demands and other
communications called for or contemplated hereunder shall be in writing and
shall be deemed to have been duly given when delivered to the party to whom
addressed or when sent by telecopy, telegram, telex or wire (if promptly
confirmed by registered or certified mail, return receipt requested, prepaid
and addressed) to the parties, their successors in interest, or their
assignees at the following addresses, or at such other addresses as the
parties may designate by written notice in the manner aforesaid:
If to Buyer: Ludlow Building Products, Inc.
10351 Verdon Road
P.O. Box 2002
Doswell, VA 23047
Fax: (804) 876-3139
Attention: President
With copies to: Tyco International (US) Inc.
One Tyco Park
Exeter, NH 03833
Fax: (603) 778-2823
Attention: General Counsel
30
If to IP Buyer: Tyco Plastics Services AG
Schwertstrasse-9
CH-8200, Schaffhausen, Switzerland
Fax: 41 52 633-0259
Attention: Managing Director
If to Seller: K2 Inc.
4900 South Eastern Avenue
Suite 200
Los Angeles, California 90040
Fax: (323) 724-0470
Attention: Richard M. Rodstein
With copies to: Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Suite 4800
Los Angeles, California 90071
Fax: (213) 229-7520
Attention: Andrew E. Bogen
11.3 ASSIGNMENT. Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof nor any
of the documents executed in connection herewith may be assigned by any party
without the consent of the other parties; PROVIDED, HOWEVER, that either
Buyer or IP Buyer may assign its rights and obligations, in whole or in part,
to an affiliate without Seller's consent. Nothing contained herein, express
or implied, is intended to confer upon any person or entity other than the
parties hereto and their successors in interest any rights or remedies under
or by reason of this Agreement unless so stated herein to the contrary.
11.4 AMENDMENTS AND WAIVERS. This Agreement and all
Exhibits and Schedules hereto may be modified only by a written instrument
duly executed by each party. No condition to any party's obligations and no
breach of any covenant, agreement, warranty or representation shall be deemed
waived unless expressly waived in writing by the party whose obligations are
subject to such condition or who might assert such breach. No waiver of any
right hereunder shall operate as a waiver of any other right or of the same
or a similar right on another occasion.
11.5 REMEDIES. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy.
Each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder now or hereafter existing at law or in equity or
by statute or otherwise, and the election by a party of one or more remedies
shall not constitute a waiver of the party's right to pursue any other
available remedies.
11.6 ATTORNEYS' FEES. In the event that any action or
proceeding, including arbitration, is commenced by any party hereto for the
purpose of enforcing any provision of this Agreement, the parties to such
action, proceeding or arbitration may receive as part of any
31
award, judgment, decision or other resolution of such action, proceeding or
arbitration their costs and reasonable attorneys' fees as determined by the
person or body making such award, judgment, decision or resolution. Should
any claim hereunder be settled short of the commencement of any such action
or proceeding, including arbitration, the parties in such settlement shall be
entitled to include as part of the damages alleged to have been incurred
reasonable costs of attorneys or other professionals in investigating or
counseling on such claim.
11.7 BINDING NATURE OF AGREEMENT. The Agreement includes
each of the Schedules and Exhibits which are referred to herein or attached
hereto, all of which are incorporated by reference herein. All the terms and
provisions of this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective executors, heirs, legal
representatives, successors and assigns.
11.8 EXPENSES.
(a) The costs and expenses of Seller, including
the legal fees and disbursements of Gibson, Dunn & Crutcher LLP shall be
borne by Seller. The costs and expenses of Buyer, including legal fees and
disbursements, shall be borne by Buyer.
(b) In the event Buyer shall terminate this
Agreement pursuant to Section 10.1(b), Buyer shall promptly make payment to
Seller of the sum of $1,000,000 as full compensation to Seller for its costs
and expenses in connection with this Agreement and the damage to its business
which will result from a termination of this Agreement pursuant to Section
10.1(b).
11.9 ENTIRE AGREEMENT. This Agreement and the
Confidentiality Agreement contain the entire understanding of the parties and
supersede all prior agreements and understandings relating to the subject
matter hereof.
11.10 SEVERABILITY. Any provision of this Agreement which
is invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions
hereof in such jurisdiction or rendering that or any other provision of this
Agreement invalid, illegal or unenforceable in any other jurisdiction.
11.11 COUNTERPARTS. This Agreement may be executed by the
parties in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
11.12 SECTION HEADINGS. The headings of each Section,
subsection or other subdivision of this Agreement are for reference only and
shall not limit or control the meaning thereof.
32
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first above written.
SELLER: K2 Inc.,
a Delaware corporation
By: ________________________
Name: ________________________
Title: ________________________
TYCO: Tyco International (US) Inc.
By: ________________________
Name: ________________________
Title: ________________________
BUYER: Ludlow Building Products, Inc.
By: ________________________
Name: ________________________
Title: ________________________
IP BUYER: Tyco Plastics Services AG
a Swiss corporation
By: ________________________
Name: ________________________
Title: ________________________
33