AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
among
MAGNETEK NATIONAL ELECTRIC COIL, INC.
MAGNETEK, INC.
EASTERN ELECTRIC APPARATUS REPAIR COMPANY, INC.
and
GRAND EAGLE COMPANIES INC.
- -------------------------------------------------------------------------------
Dated as of February 27, 1996
- -------------------------------------------------------------------------------
Sale of Assets
of
Field Service Center and Fairfield Supply Businesses
of
MagneTek National Electric Coil, Inc.
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
1.1 Certain Defined Terms................................................ 1
1.2 Other Definitional Provisions........................................ 8
ARTICLE 2
CLOSING; PURCHASE PRICE ADJUSTMENT
2.1 Purchase and Sale of the Assets...................................... 9
2.2 Limited Assumption of Liabilities.................................... 12
2.3 Closing.............................................................. 14
2.4 Purchase Price Adjustment............................................ 15
2.5 Allocation of Purchase Price......................................... 18
ARTICLE 3
CONDITIONS TO CLOSING
3.1 Buyer's Obligation................................................... 18
3.2 Seller's Obligation.................................................. 22
3.3 Certain Costs........................................................ 23
3.4 Co-operation as to Surveys........................................... 24
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER AND MAGNETEK
4.1 Authority; No Conflicts; Governmental Consents....................... 24
4.2 The Assets........................................................... 26
4.3 Organization and Standing of Canada Sub.............................. 26
4.4 Capital Stock of Canada Sub.......................................... 26
4.5 Equity Interests; Subsidiaries....................................... 27
4.6 Financial Statements................................................. 27
4.7 Absence of Changes or Events......................................... 28
4.8 Taxes................................................................ 28
4.9 Assets Other than Real Property Interests............................ 30
4.10 Real Property........................................................ 30
4.11 Intellectual Property................................................ 30
4.12 Furniture, Fixtures, Machinery and Equipment......................... 31
4.13 Contracts............................................................ 31
4.14 Litigation; Decrees.................................................. 33
4.15 Employee Benefit Plans............................................... 33
4.16 Compliance with Applicable Laws...................................... 36
4.17 Environmental Matters................................................ 36
4.18 Employee and Labor Relations......................................... 36
4.19 Corporate Names...................................................... 37
4.20 Licenses and Permits................................................. 37
4.21 Directors, Officers and Employees of the Company..................... 37
4.22 Customers............................................................ 37
i
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER AND GRAND EAGLE
5.1 Authority; No Conflicts; Governmental Consents....................... 38
5.2 Actions and Proceedings, etc......................................... 39
5.3 Availability of Funds................................................ 39
5.4 Buyer's and Grand Eagle's Acknowledgment............................. 39
5.5 Exon-Florio.......................................................... 40
ARTICLE 6
COVENANTS OF SELLER AND MAGNETEK
6.1 Access............................................................... 40
6.2 Ordinary Conduct..................................................... 40
6.3 Insurance............................................................ 42
6.4 Accounts Receivable.................................................. 42
6.5 Confidentiality Agreements........................................... 43
6.6 No Solicitation...................................................... 43
6.7 Lien Searches........................................................ 43
6.8 Third Party Consents................................................. 43
6.9 Environmental Matters................................................ 44
6.10 Rancho Dominguez Lease Assignment.................................... 45
6.11 Rancho Dominguez Facility Project.................................... 46
6.12 Delivery of Schedules................................................ 46
ARTICLE 7
COVENANTS OF BUYER
7.1 Confidentiality...................................................... 46
7.2 Accounts Receivable.................................................. 47
7.3 Insurance............................................................ 47
7.4 Assets Remaining on Buyer's Property................................. 47
7.5 Change of Name of Canada Sub......................................... 48
ARTICLE 8
MUTUAL COVENANTS
8.1 Cooperation.......................................................... 48
8.2 Publicity............................................................ 48
8.3 Antitrust Notification............................................... 48
8.4 Records.............................................................. 49
8.5 Consents............................................................. 50
ARTICLE 9
EMPLOYEE BENEFIT MATTERS
9.1 Employee Benefit Matters............................................. 50
ARTICLE 10
ii
INDEMNIFICATION
10.1 Tax Indemnification.................................................. 53
10.2 Other Indemnification by Seller...................................... 54
10.3 Other Indemnification by Buyer....................................... 55
10.4 Indemnification for Environmental Matters............................ 55
10.5 Indemnification for Canada Sub....................................... 56
10.6 Losses Net of Insurance, Etc......................................... 57
10.7 Termination of Indemnification....................................... 58
10.8 Procedures Relating to Indemnification (Other than
Under Section 10-1)................................................ 58
10.9 Procedures Relating to Indemnification of Tax Claims................. 59
10.10 Survival of Representations.......................................... 60
10.11 Mandatory Setoff of Seller Note...................................... 61
ARTICLE 11
POST CLOSING MATTERS
11.1 Tax Matters.......................................................... 61
11.2 Access to Former Business Records.................................... 62
11.3 Use of Trademark and Trade Names..................................... 63
11.4 Further Assurances................................................... 63
ARTICLE 12
GENERAL PROVISIONS
12.1 Assignment........................................................... 64
12.2 No Third-Party Beneficiaries......................................... 64
12.3 Termination.......................................................... 64
12.4 Expenses............................................................. 65
12.5 Attorneys' Fees...................................................... 65
12.6 Amendments........................................................... 66
12.7 Notices.............................................................. 66
12.8 Interpretation; Exhibits and Schedules............................... 67
12.9 Counterparts......................................................... 68
12.10 Entire Agreement..................................................... 68
12.11 Fees................................................................. 68
12.12 Severability......................................................... 68
12.13 Governing Law........................................................ 68
iii
LIST OF EXHIBITS
Exhibit A Financial Statements
SCHEDULES
Schedule 2.1(d) (xiii) Excluded Agreements
Schedule 2.1(d) (xiv) Excluded Claims
Schedule 3.1(b) (ii) Title Commitment Amounts
Schedule 4.3 Jurisdictions
Schedule 4.6 Historical Financials
Schedule 4.4 Capital Stock of Canada Sub
Schedule 4.7 Changes of Events Since Balance Sheet Date
Schedule 4.8 Tax Exceptions
Schedule 4.9 Liens
Schedule 4.10 Company Properties
Schedule 4.11 Intellectual Property
Schedule 4.13 Certain Contracts
Schedule 4.14 Litigation
Schedule 4.15 Exceptions re Employee Plans
Schedule 4.15(a) Employee Plans
Schedule 4.16 Compliance with Laws
Schedule 4.17 Environmental Matters
Schedule 4.18 Labor Matters
Schedule 4.19 Corporate Names
Schedule 4.20 License and Permits
Schedule 4.21 Directors and Officers
Schedule 4.22 Customers
Schedule 6.2 Exceptions to Ordinary Course
Schedule 6.8 Third Party Consents
Schedule 6.9 Environmental Matters
Schedule 6.11 Facility Project
Schedule 7.4 Certain Excluded Assets Remaining on Premises
iv
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT dated as of February 27,
1996 (this "Agreement"), among MAGNETEK NATIONAL ELECTRIC COIL, INC., a
Delaware corporation ("Seller"), MAGNETEK, INC., a Delaware corporation
("MagneTek"), EASTERN ELECTRIC APPARATUS REPAIR COMPANY, INC., a Georgia
corporation ("Buyer"), and GRAND EAGLE COMPANIES INC., a Delaware corporation
("Grand Eagle").
Seller desires to sell to Buyer, and Buyer desires to purchase, all of
the Assets (as defined below).
Accordingly, the parties hereto hereby agree as follows:
Seller, MagneTek, Buyer and Grand Eagle hereby amend and restate their
agreement executed as of February 27, 1996, as set forth in this Agreement,
and supersede it entirely with this Agreement.
ARTICLE 1
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under the Exchange Act by the SEC, as in effect on the date hereof.
"Affiliated Group" means an affiliated group as defined in Section
1504(a) of the Code (or any analogous combined, consolidated or unitary group
defined under state, local or foreign income tax law) of which Seller or any
Subsidiary is or has been a member.
"Ancillary Agreement" means the Seller Note, the Non-Competition
Agreement, and the Bill of Sale and Assignment and Assumption Agreement.
"Assets" has the meaning set forth in Section 2.1(b).
"Assumed Liabilities" has the meaning set forth in Section 2.2 (a)
Page 1
"Bill of Sale and Assignment and Assumption Agreement" means such
document in Seller's customary form and reasonably satisfactory to Buyer.
"Business" means each of (a) MagneTek's field service business conducted
through Seller at Tucson, Arizona, Orlando, Florida, Joliet, Illinois, Rancho
Dominguez, California, New Orleans, Louisiana, Akron, Ohio, Pittsburgh,
Pennsylvania, Alcoa, Tennessee, Houston, Texas, and Spokane, Washington, and
through Canada Sub at St. Jean, Quebec, and (b) MagneTek's Fairfield Supply
business conducted through Seller at Fairfield, New Jersey.
"Business Day" means a day other than a Saturday or a Sunday or other
day on which commercial banks in New York or Chicago are authorized or
required by law to close.
"Canada Sub" means MagneTek National Electric Coil Limited, an Ontario
corporation.
"Canada Sub Plan" means any Employee Plan maintained or sponsored by the
Canada Sub or any of its ERISA Affiliates or to which Canada Sub or any of
its ERISA Affiliates has an obligation to contribute immediately prior to the
Closing Date which covers employees, former employees, or the dependents or
beneficiaries thereof of the Canada Sub.
"Canada Sub Shares" means the issued and outstanding capital stock of
Canada Sub.
"Cash Purchase Price" has the meaning set forth in section 2.1(a).
"Claim" means any claim, cause of action, chose in action, right of
recovery, right of set off, or right of recoupment (including any such item
relating to the payment of Taxes).
"Closing" has the meaning set forth in Section 2.3.
"Closing Balance Sheet" has the meaning set forth in Section 2.4(a).
"Closing Date" has the meaning set forth in Section 2.3.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Company Employee" means any person employed by MagneTek or an Affiliate
of MagneTek's other than Canada Sub on the Closing Date whose
responsibilities relate primarily to the Business, including, without
limitation, any person on lay-off, leave of
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absence, sick or short-term disability leave, but excluding any person on
long-term disability leave.
"Company Plan" means any Employee Plan maintained or sponsored by
MagneTek or Seller or any ERISA Affiliate of either of them or to which
MagneTek, Seller or any ERISA Affiliate of either of them has an obligation
to contribute immediately prior to the Closing Date which covers any Company
Employees, former employees, or the dependents or beneficiaries thereof.
"Company Property" has the meaning set forth in Section 4.10.
"Confidentiality Agreement" has the meaning set forth in Section 7.1.
"Contract" means any contract, agreement, license, lease, sales or
purchase order or other legally binding commitment, whether written or oral,
to which Seller or MagneTek is a party and relating primarily to the
Business, or to which Canada Sub is a party.
"Contractual Obligation" means, as to any Person, any provision of any
note, bond or security issued by such Person or of any mortgage, indenture,
deed of trust, lease, license, franchise, contract, agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property or assets is subject.
"Employee Plan" means any employment, collective bargaining agreement,
consulting, severance or other similar contract, arrangement or policy and
each plan, arrangement, program, agreement or commitment providing for fringe
benefits, vacation benefits, retirement benefits, life, health, disability or
accident benefits or other welfare benefits or for deferred compensation,
profit-sharing, bonuses, stock options, restricted stock, stock appreciation
rights, stock purchases or other forms of incentive compensation.
"Environmental Laws" means all currently applicable federal, state and
local and, with respect to Canada Sub, federal and provincial Canadian, laws,
rules, regulations, orders and ordinances relating to pollution or protection
of the environment, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Section 9601 ET SEQ., the Resource Conservation and Recovery Act of 1976
("RCRA"), 42 U.S.C. Section 6901 ET SEQ., the Emergency Planning and
Community Right-to-Know Act ("Right-to Know Act"), 42 U.S.C. Section 11001 et
SEQ., the Clean Air Act ("CAA"), 42 U.S.C. Section 7401 ET seq., the Federal
Water Pollution Control Act ("Clean Water Act"), 33 U.S.C. Section 1251 ET
SEQ., the Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section 2601 ET
SEQ., and
Page 3
the Safe Drinking Water Act, 42 U.S.C. Section 300f ET SEQ., each as amended,
and any regulations or rules adopted or promulgated pursuant thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means, with respect to any Person ("First Person"),
any other Person with whom the First Person constitutes all or part of a
controlled group, which would be treated with the First Person as under
common control or whose employees would be treated as employed by the First
Person, under Section 414 of the Code and any regulations, administrative
rulings and case law interpreting the foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations of the SEC promulgated from
time to time thereunder.
"Estimated Adjustment" has the meaning set forth in Section 2.3.
"Excluded Assets" has the meaning set forth in Section 2.1(d).
"Excluded Liabilities" has the meaning set forth in Section 2.2(b).
"Financial Statements" has the meaning set forth in Section 4.6(a).
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Hazardous Materials" means: hazardous substances, extremely hazardous
substances, Toxic Substances, as defined in TSCA, or hazardous wastes as
defined under any Environmental Laws and, for purposes of Canada Sub,
"contaminants" as defined in currently applicable federal and provincial
Canadian law.
"Historical Financials" has the meaning set forth in Section 4.6(a).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended from time to time.
Page 4
"Indemnified Buyer Affiliates" means Buyer, Grand Eagle, Canada Sub,
each Affiliate of each of the foregoing, and each of their respective
officers, directors, stockholders, employees and agents.
"Indemnified Seller Affiliates" means Seller, MagneTek, each Affiliate
of each of them, and each of their respective officers, directors,
stockholders, employees and agents.
"Indemnified Person" means any Indemnified Buyer Affiliate and any
Indemnified Seller Affiliate.
"Indemnifying Person" means any Person from whom indemnification is
being sought hereunder.
"Intellectual Property" has the meaning set forth in Section 4.11.
"IRS" means the Internal Revenue Service.
"Knowledge" with reference to any of the representations and warranties
of Seller or MagneTek means the actual knowledge of any "officer", as such
term is defined in 17 C.F.R. Section 240.16a1(f), of Seller or MagneTek, as
the case may be, and of any other employee of Seller or MagneTek, as the case
may be, who had, on the date of this Agreement, responsibility on a
company-wide level for matters that are the subject of such representation
and warranty.
"Larsen-Hogue Plan" means the MagneTek, Inc. Utilities and Power
Products Division Larsen-Hogue Electrical Service Repair Pension Plan, a
defined benefit pension plan maintained by MagneTek pursuant to a collective
bargaining agreement for certain Company Employees.
"Leased Property" has the meaning set forth in Section 4.10.
"Lien" means any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other) or other security agreement of any
kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement or any financing lease having
substantially the same economic effect as any of the foregoing).
"Loss" means any loss, liability, claim, damage or expense (including
reasonable attorneys' fees and disbursements and the costs of investigation).
Loss recoverable hereunder is subject to the limitations set forth in
Section 10.6.
"Material Adverse Effect" means, with respect to either or both of
Seller and Canada Sub, a material adverse effect on either
Page 5
(i) the business, operations, property or condition (financial or other) of
the Business, taken as a whole, or (ii) the ability of Seller or MagneTek to
consummate the transactions contemplated by this Agreement.
"Material Contracts" has the meaning set forth in Section 4.13.
"Non-Competition Agreement" has the meaning set forth in Section 3.1(p).
"Ordinary Course" means the ordinary course of business substantially in
the same manner as now conducted and consistent with past custom and practice
(including with respect to quantity and frequency).
"Other Agreement" means the Asset Purchase Agreement of even date
herewith among MagneTek, Grand Eagle, MagneTek Ohio Transformer, Inc. and OT
Acquisition Corp.
"Owned Property" has the meaning set forth in Section 4.10.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Lien" has the meaning set forth in Section 4.9).
"Permitted Title Exceptions" means, with respect to each Company
Property, (i) exceptions to title disclosed in a preliminary title report
delivered to Buyer and in any such preliminary title report previously
obtained by Buyer or delivered by Seller to Buyer, (ii) all leases, occupancy
agreements and other similar agreements to which Seller or Canada Sub, as
applicable, is a party, together with all modifications, extensions and
renewals thereof and any guarantees of any of the foregoing with respect to
or demising any part of the applicable Company Property, (iii) all matters
which would be disclosed in the Surveys that are referenced in Section 3.4 of
this Agreement, (iv) any matters created by or through Buyer or Grand Eagle,
their lenders or any of the affiliates or agents of any of the foregoing, (v)
general and special property taxes and assessments not yet delinquent as of
the Closing, and (vi) all matters of record in the official records of the
county in which the Company Property is located.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"Purchase Price" has the meaning set forth in Section 2.1(a).
Page 6
"Records" has the meaning set forth in Section 2.1(b)(xi).
"Requirement of Law" means, as to any Person, the Certificate or
Articles of Incorporation and By-Laws or other organization or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject, including, but not
limited to any law, treaty, rule, regulation or determination with respect to
public health and safety or worker health and safety, including, without
limitation, the Occupational Safety and Health Act, 42 U.S.C. Section 651 ET
SEQ.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, and the rules and regulations of the SEC promulgated from time to
time thereunder.
"Seller Facility" means any property owned, leased, used or occupied by
Seller or Canada Sub or any Affiliate of either of them at any time on or
before Closing.
"Seller Note" means a promissory note issued by Grand Eagle in customary
form and reasonably satisfactory to MagneTek and Grand Eagle.
"September Balance Sheet" has the meaning set forth in section 4.6(a).
"Stay and Pay Agreements" means any agreement, whether written or oral,
between MagneTek, Seller or Canada Sub, on the one hand, and any Company
Employee or employee of Canada Sub, on the other hand, to pay any amount upon
the termination of employment of the Company Employee or employee of Canada
Sub that is triggered by the transactions contemplated by this Agreement.
"Subsidiary" means, collectively, each corporation, limited liability
company, partnership, association and other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
to vote in the election of directors is at the time owned or controlled,
directly or indirectly, by Seller or one or more Subsidiaries, or a
combination thereof, or (ii) if a limited liability company, partnership,
association or other business entity, a majority of the partnership or other
similar ownership interest thereof is at the time owned or controlled (as
defined in Rule 405 under the Securities Act), directly or indirectly, by
Seller or one or more Subsidiaries or a combination thereof. For purposes
hereof, Seller or a Subsidiary shall be deemed to have a majority
Page 7
ownership interest in a limited liability company, partnership, association
or other business entity if Seller or one or more Subsidiaries or any
combination thereof shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Tax" or "Taxes" means with respect to any Person (a) all federal,
state, local, foreign or other taxes, including net income, gross income,
unitary, gross receipts, sales, use, intangible, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
transfer, occupation, premium, property or windfall profit tax, custom, duty
or other tax, governmental fee (similar to a tax) or other like assessment or
charge of any kind whatsoever, together with any interest or penalty or
addition to tax imposed by any jurisdiction or other Governmental Authority
(federal, state, local or foreign), on such Person, and (b) any transferee or
secondary liability of such Person for a Tax and any Tax liability assumed by
agreement or arising as a result of being (or ceasing to be) a member of any
Affiliated Group, or being included or required to be included in any Tax
Return relating thereto.
"Tax Returns" means all returns or material reports or forms required to
be filed with a Governmental Authority with respect to Taxes.
"Third Party Consents" has the meaning set forth in Section 6.8.
"WARN Act" means the Worker Adjustment and Retraining Act of 1986, as
amended from time to time.
"Warranty Claims" has the meaning set forth in Section 2.2 (a)(ii).
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Terms defined in this Agreement
in Sections other than Section 1.1 shall have the meanings as so defined when
used in this Agreement.
(b) As used herein, accounting terms relating to Seller or Canada
Sub not defined or to the extent not defined, shall have the respective
meanings given to them under GAAP.
(c) Unless express reference is made to Business Days, references
to days shall be to calendar days.
Page 8
ARTICLE 2
CLOSING; PURCHASE PRICE ADJUSTMENT
2.1 PURCHASE AND SALE OF THE ASSETS. (a) On the terms and subject to
the conditions of this Agreement, Seller will sell, transfer and deliver to
Buyer free and clear of any Liens (other than Permitted Liens), and Buyer
will purchase from Seller, all of Seller's right, title and interest in the
Assets, for the aggregate consideration of (i) Twelve Million Two Hundred
Seventy-Five Thousand Dollars ($12,275,000.00) subject to adjustment as set
forth in Section 2.4 (the "Cash Purchase Price"), and (ii) a Seller Note in
the principal amount of Two Million Seventy-Five Thousand Dollars
($2,075,000.00) (collectively, the "Purchase Price").
(b) In this Agreement, "Assets" means (A) the Canada Sub Shares
and (B) the assets of Seller used primarily in or arising primarily out of
the Business, other than the Excluded Assets, wherever located and whether or
not reflected in Seller's books, records or financial statements, including,
without limitation, all of Seller's:
(i) tangible personal property (such as machinery,
equipment, inventories of raw materials and supplies, manufactured and
purchased parts, goods in process and finished goods, furniture,
automobiles, trucks, tractors, trailers, test equipment, tools, jigs, and
dies), and rights as a lessee or conditional purchaser of any of the
foregoing; and
(ii) real property, improvements, fixtures and fittings
thereon, easements, rights-of-way, and other appurtenances thereto (such
as appurtenant rights in and to public streets), and leaseholds and
subleaseholds in any of the foregoing; and
(iii) leases, subleases, and rights thereunder; and
(iv) accounts, notes, and other receivables, and
(v) rights under Contracts; and
(vi) engineering, quality control, technical, and other
data, in whatever form maintained; and
(vii) the Business's Intellectual Property, logos, trade
dress, corporate names, trade secrets and other confidential business
information, and the goodwill
Page 9
associated therewith, licenses and sublicenses granted and obtained with
respect thereto, and rights thereunder, remedies against infringement
thereof, and rights to protection of interests therein under the laws of
all jurisdictions; and
(viii) non exclusive royalty-free licenses to any MagneTek
proprietary computer programs or other software used primarily in
connection with data and records included in the Assets; and
(ix) lists and records of Seller's customers and suppliers; and
(x) engineering plans, drawings, specifications, studies and
reports; and
(xi) the Business's books and records (including copies, to
the extent segregatable from other MagneTek records, of historical
accounting and financial records and the Tax records pertaining to Canada
Sub, but not other Tax records), files, studies, reports, catalogs,
documents, correspondence and other printed or written materials, and
copies of the employment records pertaining to the employees of the
Business (all of the foregoing being "Records"); and
(xii) copies of financial books and records and other books
and records maintained by MagneTek or other Affiliates of MagneTek other
than Seller and Canada Sub that pertain to the Business and its
employees; and
(xiii) franchises, approvals, authorizations, permits, licenses,
orders, registrations, certificates, variances, and similar rights
obtained from Governmental Authorities or other Persons; and
(xiv) Claims, deposits, prepayments, refunds, and warranties;
and
(xv) the right to continued custody of all assets owned by a
customer of Seller and held by Seller on behalf of such customer; and
(xvi) any and all assets related to the Larsen-Hogue Plan.
(c) To the extent any equipment, agreements, rights, or other
personal property, tangible or intangible, owned by MagneTek or any Affiliate
of MagneTek other than Seller or Canada Sub are used primarily in or arise
primarily out of the Business, they are included within the meaning of the
term "Assets" to the
Page 10
same extent as they would have been so included had they been owned by
Seller, and MagneTek agrees to convey, and cause each such Affiliate to
convey, all of its right, title and interest in and to such assets and
property to Buyer, or to Seller for conveyance to Buyer, on or prior to the
Closing, all without separate consideration from Buyer and otherwise in
accordance with the terms of this Agreement.
(d) Notwithstanding any contrary provision of this Agreement,
"Assets" shall not include, and Buyer does not purchase from Seller, any of
the following (collectively, the "Excluded Assets"):
(i) Seller's corporate charter, qualifications to conduct
business, arrangements with registered agents relating to qualifications
to conduct business, taxpayer and other identification numbers, seals,
minute books, stock transfer books, blank stock certificates, and other
documents relating solely to the organization, maintenance and existence
of Seller as a corporation; or
(ii) any of Seller's rights under this Agreement or any
other agreement between Seller, on the one hand, and Buyer or Grand
Eagle, on the other hand, entered into on or after the date of this
Agreement; or
(iii) any of Seller's assets, including rights under
agreements with buyers of business units of Seller, primarily arising
from or relating to business units of Seller other than the Business; or
(iv) financial books and records, other than Tax records of
Canada Sub, and other books and records maintained by MagneTek or other
Affiliates of MagneTek other than Seller or Canada Sub other than those
that pertain to the Business and its employees; or
(v) any interest in any Subsidiary other than Canada Sub; or
(vi) any cash, lockbox, bank or lockbox account of Seller; or
(vii) except as expressly provided herein, any interest in
the use of the name "MagneTek", the phrase "NEC" or the phrase "National
Electric Coil" in any trademark, service mark, trade name, slogan or
corporate name; or
(viii) any interest in the use of trademarks, service marks,
trade names, slogans or other like property in general
Page 11
use among Seller and MagneTek or other Affiliates of MagneTek in
connection with businesses other than the Business; or
(ix) rights to claims for refunds or rebates of Taxes and
other governmental charges and the benefit of net operating loss
carryforwards, carrybacks or other credits of Seller, whether or not
attributable to the Business; or
(x) all insurance policies and rights thereunder, including,
but not limited to, any rights to cancellation value as of the Closing
Date; or
(xi) proprietary or confidential business or technical
information, records and policies that relate generally to MagneTek and
its Affiliates and are not used primarily in the Business, including,
without limitation, organization manuals and strategic plans; or
(xii) MagneTek's proprietary computer programs or other
software, including but not limited to MagneTek's proprietary data bases,
accounting and reporting format, systems and procedures; or
(xiii) agreements, contracts, indentures, mortgages,
instruments, security interests, or guarantees listed on
Schedule 2.1(d)(xiii) to this Agreement; or
(xiv) any of the Claims listed on Schedule 2.1(d)(xiv) to this
Agreement; or
(xv) any assets associated with, or any of Seller's rights in
connection with, any Company Plan (other than the Larsen-Hogue Plan).
2.2 LIMITED ASSUMPTION OF LIABILITIES. (a) As of the close of
business on the Closing Date, Buyer will execute and deliver the Bill of Sale
and Assignment and Assumption Agreement and thereby assume and become
responsible for, pay and discharge when due, all of the liabilities and
obligations of Seller and MagneTek arising out of the Business of any kind or
nature, whether absolute, contingent, accrued or otherwise, excluding each
Excluded Liability (collectively, the "Assumed Liabilities"), including
without limitation, all of the following:
(i) accounts payable of the Business at Closing; and
(ii) all liabilities for warranty claims, whether made before
or after the Closing Date, for service, repair, replacement or similar
work pursuant to Seller's written
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warranties with respect to products sold or services provided by Seller
on or before the Closing Date ("Warranty Claims"), excluding Warranty
Claims described in Section 2.2(b)(i) of this Agreement; and
(iii) all other accrued liabilities reflected as "other short
term liabilities" on the Closing Balance Sheet; and
(iv) all obligations of Seller and MagneTek under the
Contracts.
(b) In this Agreement, "Excluded Liabilities" means:
(i) Warranty Claims of which Buyer has given Seller written
notice within the two-year period following the Closing Date and for
which Buyer's shop-level expenses (direct materials plus labor plus
variable overhead), together with such expenses of Buyer for Warranty
Claims previously assumed by Buyer, exceed the reserve for warranty claims
reflected on the Closing Balance Sheet; and
(ii) all Claims for product liability or workers' compensation
which arose or were incurred on or before the Closing Date or which are
based on events occurring on or before the Closing Date notwithstanding
that the Claim is asserted after the Closing Date; and
(iii) all Claims for personal injury, property damage and auto
physical damage which Claims arose or were incurred on or before the
Closing Date or which are based on events occurring on or before the
Closing Date notwithstanding that the Claim is asserted after the Closing
Date to the extent such Claims are covered by MagneTek's or Seller's
insurance policies in place on or before the Closing; and
(iv) all claims under health, dental, vision and disability
plans of Seller or MagneTek (or under any theory of recovery applicable
against MagneTek or Seller) for Company Employees or other covered
individuals with respect to services rendered on or prior to the Closing
Date (but not in respect of any sick leave or short-term disability
benefits pertaining to any period after the Closing Date regardless of
when the relevant illness or condition arose); and
(v) any claims for health, dental or vision coverage arising
at any time, including after the Closing Date, for services rendered at
any time, including after the Closing Date, with respect to Persons
entitled on or before the Closing Date to COBRA benefits and coverage
from Seller or
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MagneTek or any liabilities arising from the failure of Seller or
MagneTek to comply with COBRA; and
(vi) any liability for Taxes (excluding the tax items covered
by Section 3.3) as to which indemnification is provided pursuant to
clause (i) of Section 10.1(a); and
(vii) any liability under (A) any litigation pertaining to
the Business as to which a complaint has been filed in state or federal
court, or an administrative charge or complaint has been filed with a
governmental agency, in each case prior to the Closing (including,
without limitation, all litigation set forth on Schedule 4.14), or (B) any
threatened litigation with respect to any matter or claim set forth on
Schedule 4.14 as to which a complaint is filed in state or federal court,
or an administrative charge or complaint is filed with a governmental
agency after the Closing; and
(viii) any liability of MagneTek or Seller under or arising in
connection with any Employee Plan except to the extent assumed by Buyer
pursuant to Article 9 hereunder; and
(ix) any and all other debts, liabilities and obligations of
MagneTek or any Affiliate of MagneTek, including Seller and its
Subsidiaries, with respect to any bank credit facility or letter of
credit, and all documents in connection therewith; and
(x) any and all liabilities arising from any Stay and Pay
Agreement in existence at or prior to Closing; and
(xi) any and all liabilities in connection with the Excluded
Assets or any real estate previously owned, leased, used or occupied by
MagneTek or any of its Affiliates in connection with the Business which
are not owned, leased, used or occupied by the Business at the Closing;
and
(xii) any liability arising from any business owned or operated
by Seller other than the Business.
(c) Under no circumstances herein or in any of the Ancillary
Agreements or any agreement, document, certificate or instrument being
delivered pursuant to this Agreement or any Ancillary Agreement, or any
schedule or exhibit hereto or thereto shall the term "Assumed Liabilities" be
interpreted to include any Excluded Liabilities, nor shall Buyer be deemed to
have assumed any Excluded Liabilities.
2.3 CLOSING.
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(a) The closing (the "Closing") of the transactions contemplated
by this Agreement shall be held at the offices of Sidley & Austin, One First
National Plaza, 55th Floor, Chicago, Illinois, at 10:00 a.m. on March 27,
1996, or if the conditions to Closing set forth in Article 3 shall not have
been satisfied or waived by such date, subject to Section 12.3, as soon as
practicable after such conditions shall have been satisfied or waived. The
date on which the Closing shall occur is hereinafter referred to as the
"Closing Date" and the Closing shall be deemed to have occurred at the close
of business, Central time, on the Closing Date. Events occurring after the
Closing shall be deemed to have occurred after the Closing Date.
(b) At the Closing, Buyer shall deliver to Seller (a) by wire
transfer (to a bank account designated at least two Business Days prior to
the Closing Date in writing by Seller) immediately available funds in an
amount equal to the sum of (i) the Cash Purchase Price plus or minus an
estimate, to the extent mutually agreed to by Seller and Buyer prior to the
Closing Date (the "Estimated Adjustment"), of any adjustments to the Purchase
Price under Section 2.4 and (ii) the payment in the amount of One Hundred
Fifty Thousand Dollars ($150,000.00) required under the Non-Competition
Agreement and (b) a duly executed Seller Note in the original principal
amount of Two Million Seventy-Five Thousand Dollars ($2,075,000.00).
(c) At the Closing, Seller and MagneTek shall deliver or cause to
be delivered to Buyer the executed and, as appropriate, acknowledged
assignments and other instruments of transfer referred to in Section 3.1 of
this Agreement.
2.4 PURCHASE PRICE ADJUSTMENT. (a) Within 60 days after the Closing
Date, Buyer at its own expense shall prepare and deliver to MagneTek a
consolidated pro forma balance sheet of the Business as of the close of
business on the Closing Date (the "Closing Balance Sheet"). For purposes of
preparing the Closing Balance Sheet, Buyer shall have access to Seller's and
MagneTek's Records relating to the Business or otherwise relevant to the
preparation of the Closing Balance Sheet, and Seller and MagneTek shall make
the appropriate personnel reasonably available to Buyer. During the 30 days
immediately following MagneTek's receipt of the Closing Balance Sheet, Seller
shall be entitled to review the Closing Balance Sheet and Buyer's working
papers relating to the Closing Balance Sheet, and Buyer shall provide
MagneTek access at all reasonable times to its personnel, properties and
Records to the extent comprising Assets for such purpose. The Closing
Balance Sheet shall become final and binding upon the parties on the
thirtieth day following delivery thereof unless MagneTek gives written notice
to Buyer of its disagreement with the method of
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presentation thereof or with the determination of any amount thereon (a
"Notice of Disagreement") prior to such date. Any Notice of Disagreement
shall specify in reasonable detail the nature of any disagreement so
asserted. If a timely Notice of Disagreement is received by Buyer with
respect to the Closing Balance Sheet, then such Closing Balance Sheet (as
revised in accordance with clause (x) or (y) below), shall become final and
binding upon the parties on the earlier of (x) the date the parties resolve
in writing any differences they have with respect to any matter specified in
a Notice of Disagreement or (y) the date any matters properly in dispute are
finally resolved in writing by the Accounting Firm (as defined below).
During the 30 days immediately following the delivery of any Notice of
Disagreement, MagneTek and Buyer shall seek in good faith to resolve in
writing any differences which they may have with respect to any matter
specified in such Notice of Disagreement. During such period and during any
subsequent period of arbitration by the Accounting Firm, MagneTek shall have
access to Buyer's working papers relating to the Closing Balance Sheet and to
Buyer's Records to the extent comprising Assets, and Buyer shall have access
to Seller's working papers relating to the Notice of Disagreement and to
Seller's and MagneTek's Records related to the Business or otherwise relevant
to the preparation of the Closing Balance Sheet. At the end of such 30-day
period (or such longer period on which Seller and Buyer may from time to time
agree in writing), Seller and Buyer shall submit to an independent accounting
firm (the "Accounting Firm") for review and resolution any and all matters
that remain in dispute and which were properly included in any Notice of
Disagreement, an the Accounting Firm shall reach a final, binding resolution
of all matters which remain in dispute. The Closing Balance Sheet, adjusted
in accordance with the parties' mutual written agreement, and with such
adjustments necessary to reflect the Accounting Firm's resolution of the
matters in dispute, shall become final and binding on the parties on the date
the Accounting Firm delivers its final resolution to the parties. The
Accounting Firm shall be KPMG Peat Marwick, or if such firm is unable or
unwilling to act, such other nationally recognized independent public
accounting firm as shall be mutually agreed upon by the parties hereto in
writing. The cost of any arbitration (including the fees and expenses of the
Accounting Firm) pursuant to this Section 2.4 shall be borne 50% by Buyer and
50% by MagneTek.
(b) The Purchase Price will be adjusted as follows:
(i) If:
(A) the excess of total tangible assets over the sum
of payables and other short term liabilities shown on the final and
binding Closing Balance Sheet, minus
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the Estimated Adjustment (if the Estimated Adjustment increased the
Cash Purchase Price paid at Closing) or plus the Estimated Adjustment
(if the Estimated Adjustment reduced the Cash Purchase Price paid at
Closing),
exceeds:
(B) the excess of total tangible assets over the sum
of payables and other short term liabilities shown on the September
Balance Sheet,
Buyer will pay to Seller an amount equal to such excess (plus interest
thereon from the Closing Date at a rate equal to the prime rate announced
from time to time by NationsBank, N.A. (Carolinas)) by wire transfer or
delivery of other immediately available funds within three Business Days
after the date on which the Closing Balance Sheet becomes final and
binding on the parties.
(ii) If:
(A) the excess of total tangible assets over the sum
of payables and other short term liabilities shown on the final and
binding Closing Balance Sheet, minus the Estimated Adjustment (if
the Estimated Adjustment increased the Cash Purchase Price paid at
Closing) or plus the Estimated Adjustment (if the Estimated
Adjustment reduced the Cash Purchase Price paid at Closing),
is less than:
(B) the excess of total tangible assets over the sum
of payables and other short term liabilities shown on the September
Balance Sheet,
MagneTek will pay to Buyer an amount equal to such deficiency (plus
interest thereon from the Closing Date at a rate equal to the prime rate
announced from time to time by NationsBank, N.A.(Carolinas)) by wire
transfer or delivery of other immediately available funds within three
Business Days after the date on which the Closing Balance Sheet becomes
final and binding on the parties.
(c) The Closing Balance Sheet shall be prepared in accordance with
GAAP, applied in a manner consistent with that followed in the preparation of
the Financial Statements (as defined in Section 4.6).
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(d) Notwithstanding the foregoing provisions of this Section 2.4,
no adjustment to the Purchase Price pursuant to this Section 2.4 shall be
made unless such adjustment would exceed $100,000, and if the adjustment
would exceed $100,000, then the full amount of the adjustment shall be made.
(e) Buyer agrees that it will not take any actions with respect to
its accounting books, Records, policies and procedures of the Business which
would impede the preparation of the Closing Balance Sheet on the basis
provided in this Agreement.
2.5 ALLOCATION OF PURCHASE PRICE. The parties shall endeavor to
allocate the Purchase Price, and any adjustment thereto, among the Assets in
the manner required by Section 1060 of the Code. Buyer and Seller agree to be
bound by any such agreed-upon fair market value determination and allocation
and to complete and attach Internal Revenue Service Form 8594 to their
respective tax returns accordingly. Buyer and Seller agree that in all
events Five Hundred Thousand Dollars ($500,000.00) shall be allocated to the
Canada Sub Shares.
ARTICLE 3
CONDITIONS TO CLOSING
3.1 BUYER'S OBLIGATION. The obligations of Buyer to consummate the
transactions contemplated by this Agreement are subject to the satisfaction
(or waiver by Buyer) as of the Closing of the following conditions:
(a) TRANSFER DOCUMENTS. Buyer shall have received instruments,
including the Bill of Sale and Assignment and Assumption Agreement, with
respect to Seller's ownership of Assets, assignments, endorsements and other
documents of title and other good and sufficient instruments of conveyance
and transfer, as shall be effective to vest Buyer with all of Seller's right,
title and interest in and to the Assets, in form and substance reasonably
satisfactory to Buyer.
(b) TITLE DOCUMENTS - SELLER. With respect to each Owned Property
of Seller, Buyer shall have received:
(i) An executed, acknowledged and recordable deed to such
Owned Property in form and substance reasonably satisfactory to Buyer.
(ii) A commitment for an ALTA (1970 Form B) Owner's Policy
of Title Insurance issued by First American or another title insurer
selected by Buyer and approved by Seller in an amount set forth on
Schedule 3.1(b)(ii), insuring fee simple
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title to such Owned Property to be in Buyer. Each commitment delivered
under this Section 3.1(b)(ii) shall (A) insure title to the Owned Property
and all recorded appurtenant easements benefiting such Owned Property to
be vested in Buyer subject only to (x) Permitted Title Exceptions and (y)
such other limitations and exceptions as shall not unreasonably interfere
with the use of the respective Owned Property in the Ordinary Course.
This condition shall be deemed satisfied as to each Owned Property unless
Buyer notifies Seller to the contrary within five Business Days after
Buyer shall have received a current title commitment for such Owned
Property.
(iii) All other documentation (including and trust
declarations) which Buyer may reasonably request in connection with the
transfer of title to the Owned Property.
(c) TITLE DOCUMENTS - CANADA SUB. With respect to each Owned
Property of Canada Sub, Buyer shall have received, at its expense, customary
assurances under local practice and reasonably satisfactory to Buyer that fee
title to such Owned Property is vested in Canada Sub as of the Closing Date.
(d) LEASE DOCUMENTS. With respect to each Leased Property as to
which a consent to assignment or sublease is a Third Party Consent as defined
in Section 6.8, Buyer shall have received an assignment (and novation if
feasible) of the lease, or a sublease, in either case in form and substance
reasonably satisfactory to Seller and Buyer, and in a recordable form,
together with:
(i) the written consent of the landlord to such assignment
or sublease, if required, and
(ii) an estoppel certificate from the landlord in form and
substance reasonably satisfactory to Seller and Buyer.
(e) TRADEMARK ASSIGNMENTS. Buyer shall have received trademark
assignments, in form and substance satisfactory to Buyer, conveying to the
Buyer all of Seller's right, title and interest in and to any trademarks of
Seller included among the Assets.
(f) LIEN SEARCHES. Buyer shall have received copies of the
searches required by Section 6.7 of this Agreement, in form and substance
satisfactory to Buyer.
(g) STOCK OF CANADA SUB. Buyer shall have received stock
certificates representing all of the shares of stock of
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Canada Sub, endorsed in blank or accompanied by duly executed assignment
documents.
(h) RESIGNATIONS - CANADA SUB. Buyer shall have received duly
signed resignations, effective as of the Closing, of all directors and
officers of Canada Sub, and duly signed mutual releases between Canada Sub
and its officers and directors in customary form reasonably satisfactory to
Buyer.
(i) OFFICER'S CERTIFICATES. The representations and warranties of
Seller and MagneTek made in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as specifically
contemplated by this Agreement, on and as of the Closing Date, as though made
on and as of the Closing Date, and Seller and MagneTek shall have performed
or complied in all material respects with all obligations and covenants
required by this Agreement to be performed or complied with by them by the
time of the Closing; and Seller and MagneTek shall have delivered to Buyer
and Grand Eagle a certificate dated the Closing Date and signed by an
authorized officer of each of them confirming the foregoing.
(j) OPINIONS. Buyer and Grand Eagle shall have received an
opinion dated the Closing Date of Gibson, Dunn & Crutcher, counsel to Seller,
of Samuel A. Miley, Esq., General Counsel of Seller, and of Seller's Canadian
counsel, in each case as to matters customary in transactions of this kind
and which opinions shall be reasonably satisfactory to Buyer.
(k) NO INJUNCTION. No injunction or order shall have been granted
by any Governmental Authority of competent jurisdiction that would restrain
or prohibit the purchase and sale of the Assets or that would impose damages
as a result of the purchase and sale of the Assets, and no action or
proceeding shall be pending before any Governmental Authority of competent
jurisdiction in which any Person seeks such a remedy (if in the opinion of
counsel to Buyer there exists a reasonable risk of a materially adverse
result in such pending action or proceeding).
(l) HART-SCOTT-RODINO. The waiting period under the HSR Act, if
applicable to the purchase and sale of the Assets, shall have expired or been
terminated, and all requirements of Canadian and provincial law with respect
to the transfer of the stock of Canada Sub shall have been satisfied.
(m) CERTIFICATE OF INCORPORATION. At the Closing, Seller shall
have delivered to Buyer a copy of the certificate of incorporation of Seller,
certified by the Secretary of State of Delaware as of a date not more than
five days prior to the Closing Date.
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(n) SECRETARY'S CERTIFICATES. At the Closing, Seller shall have
delivered to Buyer copies of each of the following for each of Seller and
Canada Sub, in each case certified to be in full force and effect on the date
of the Closing by the Secretary of Seller or Canada Sub, as the case may be:
(i) the by-laws, code of regulations, or similar document of such
Person; and
(ii) in the case of Seller, resolutions of the Board of Directors
and stockholders of Seller authorizing the execution and delivery of this
Agreement and any related agreements and the transactions contemplated
under this Agreement, and, in the case of Canada Sub, resolutions of the
directors and shareholder of Canada Sub approving the transfer of the
Canada Sub Shares to Buyer.
(o) GOOD STANDING CERTIFICATES. At the Closing, Seller shall have
delivered to Buyer a certificate of good standing with respect to Seller from
the Secretary of State of Delaware, and the closest equivalent document with
respect to Canada Sub from the appropriate officials of the Provinces of
Ontario and Quebec, in each case as of a date not more than five days prior
to the Closing.
(p) NON-COMPETITION AGREEMENT. Seller and MagneTek shall have
executed and delivered to Buyer a non-competition agreement in Seller's
customary form (the "Non-Competition Agreement").
(q) CONSENTS. All Third Party Consents shall have been obtained,
and Buyer shall have received copies of them.
(r) TRANSITION AGREEMENT. Buyer shall have received agreements,
reasonably satisfactory to it, permitting it to occupy at no cost to Buyer
the office space in Columbus, Ohio, used as of the date of this Agreement by
Company Employees, for a period not longer than ninety days.
(s) TAX AFFIDAVITS. Seller shall have executed and deliver to
Buyer at the Closing an affidavit in form and substance satisfactory to Buyer
certifying that Seller is not a foreign person within the meaning of Section
1445(f)(3) of the Code, and evidence of an application for a certificate
under Section 116 of the Income Tax Act (Canada) in respect of the sale of
the Canada Sub Shares containing a "certificate limit" at least equal to the
portion of the purchase price allocated to the Canada Sub Shares under
Section 2.5 of this Agreement.
(t) OTHER CLOSING. The closing shall have occurred under the
Other Agreement.
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(u) SUBORDINATION. Grand Eagle's obligations under the Seller
Note shall be subordinated to Grand Eagle's and Buyer's obligations to their
senior bank lender on customary terms reasonably satisfactory to MagneTek and
to Grand Eagle's senior bank lender.
3.2 SELLER'S OBLIGATION. The obligations of Seller to consummate the
transactions contemplated by this Agreement are subject to the satisfaction
(or waiver by Seller) as of the Closing of the following conditions:
(a) BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT. Seller
and MagneTek shall have received such instruments, including the Bill of Sale
and Assignment and Assumption Agreement, with respect to Seller's assumption
of the Assumed Liabilities and the acquisition of the Assets, as to
effectively assume such liabilities and acquire such assets, in form and
substance reasonably satisfactory to Seller and MagneTek.
(b) OFFICER'S CERTIFICATE. The representations and warranties of
Buyer and Grand Eagle made in this Agreement shall be true and correct in all
material respects as of the date hereof and on and as of the Closing Date, as
though made on and as of the Closing Date, and Buyer and Grand Eagle shall
have performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by them
by the time of the Closing; and Buyer and Grand Eagle shall have delivered to
Seller a certificate dated the Closing Date and signed by an authorized
officer of each of them confirming the foregoing.
(c) OPINION. Seller shall have received an opinion dated the
Closing Date of Fitzpatrick Eilenberg & Zivian, counsel to Buyer, as to
matters customary in transactions of this kind and which opinion shall be
reasonably satisfactory to Seller.
(d) NO INJUNCTION. No injunction or order shall have been granted
by any Governmental Authority of competent jurisdiction that would restrain
or prohibit the purchase and sale of the Assets or that would impose damages
as a result of the purchase and sale of the Assets, and no action or
proceeding shall be pending before any Governmental Authority of competent
jurisdiction in which any Person seeks such a remedy (if in the opinion of
counsel to Seller there exists a reasonable risk of a materially adverse
result in such pending action or proceeding).
(e) HART-SCOTT-RODINO. The waiting period under the HSR Act, if
applicable to the purchase and sale of the Assets, shall have expired or been
terminated, and all requirements of
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Canadian and provincial law with respect to the transfer of the stock of
Canada Sub shall have been satisfied.
(f) CERTIFICATE OF INCORPORATION. At the Closing, Buyer shall
have delivered to Seller copies of the certificates of incorporation of Buyer
and Grand Eagle, certified by the Secretaries of State of Georgia and
Delaware, respectively, as of a date not more than five days prior to the
Closing Date.
(g) SECRETARY'S CERTIFICATES. At the Closing, Buyer shall have
delivered to Seller copies of each of the following for each of Buyer and
Grand Eagle, in each case certified to be in full force and effect on the
date of the Closing by the Secretary of Buyer or Grand Eagle, as the case may
be:
(i) the by-laws of Buyer or Grand Eagle, as the case may be; and
(ii) resolutions of the Boards of Directors of Buyer and Grand
Eagle authorizing the execution and delivery of this Agreement and any
related agreements and the transactions contemplated under this Agreement.
(h) GOOD STANDING CERTIFICATES. At the Closing, Buyer shall have
delivered to Seller certificates of good standing with respect to Buyer and
Grand Eagle from the Secretaries of State of the states of Georgia and
Delaware, respectively, as of a date not more than five days prior to the
Closing.
(i) CONSENTS. All Third Party Consents shall have been obtained.
(j) PERFORMANCE BONDS. Seller shall have been replaced or
released from any obligation or liability in respect of any performance bond,
letter of credit or similar instrument pertaining to the Business.
(k) INSURANCE CERTIFICATES. Seller shall have received insurance
certificates reflecting Buyer's compliance with Section 7.3.
3.3 CERTAIN COSTS. Seller shall pay, or reimburse Buyer for, (a)
one-half of the premium for the standard form of the title insurance policies
described in Section 3.1, (b) the cost of the searches described in Section
3.1(f), and (c) one-half the cost of any real estate transfer or sales Taxes
due in respect of the conveyance of the Assets. Buyer shall pay the
remaining one-half of such transfer Taxes, and for any additional title
insurance it elects to acquire.
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3.4 CO-OPERATION AS TO SURVEYS. Seller shall provide to Buyer and
its employees, agents and representatives access, at all reasonable times
requested by Buyer prior to the Closing, to each Company Property for
purposes of permitting Buyer to perform, at its own expense, any surveys of
such properties as it deems desirable.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER AND MAGNETEK
Each of Seller and MagneTek hereby jointly and severally represents and
warrants to each of Buyer and Grand Eagle as follows:
4.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS. (a) Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Seller has all requisite corporate power and
authority to enter into this Agreement and those Ancillary Agreements to
which Seller is a party and to consummate the transactions contemplated
hereby and thereby. All corporate acts and other proceedings required to be
taken by Seller to authorize the execution, delivery and performance of this
Agreement and those Ancillary Agreements to which Seller is a party and the
consummation of the transactions contemplated hereby and thereby have been
duly taken. Without limiting the generality of the foregoing, the board of
directors and the stockholder of Seller have each duly authorized the
execution, delivery and performance by Seller of this Agreement and of those
Ancillary Agreement to which Seller is a party. This Agreement has been duly
executed and delivered by Seller and constitutes, and when executed and
delivered by Seller at the Closing each of the Ancillary Agreements to which
Seller is a party will constitute, a valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(b) MagneTek is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. MagneTek has all
requisite corporate power and authority to enter into this Agreement and
those Ancillary Agreements to which MagneTek is a party and to consummate the
transactions contemplated hereby and thereby. All corporate acts and other
proceedings required to be taken by MagneTek to
Page 24
authorize the execution, delivery and performance of this Agreement and those
Ancillary Agreements to which MagneTek is a party and the consummation of the
transactions contemplated hereby and thereby have been duly taken. This
Agreement has been duly executed and delivered by MagneTek and constitutes, and
when executed and delivered by MagneTek at the Closing each of the Ancillary
Agreements (if any) to which MagneTek is a party will constitute, a valid and
binding obligation of MagneTek, enforceable against MagneTek in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors, rights generally or by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(c) The execution and delivery of this Agreement does not, and the
execution and delivery of those Ancillary Agreements to which Seller or
MagneTek is a party will not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the terms hereof and
thereof will not conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to
loss of a benefit under, or result in the creation of any Lien upon any of
the properties or assets of Seller or Canada Sub under, any provision of (i)
the Certificate of Incorporation or By-Laws or similar organizational
documents of MagneTek or Seller or Canada Sub, (ii) subject to the matters
disclosed in Schedule 6.8, any Contractual Obligation to which MagneTek or
Seller or Canada Sub is a party or by which any of their respective
properties or assets are bound or (iii) any judgment, order or decree or,
subject to the matters described in clauses (A) - (E) below, Requirement of
Law applicable to MagneTek or Seller or Canada Sub or the property or assets
of any of them, other than, in the case of clauses (ii) and (iii) above, any
such conflicts, violations, defaults, rights or Liens that, individually or
in the aggregate, would not have a Material Adverse Effect. No consent,
approval, license, permit, order or authorization of, or registration,
declaration or filing with, any Governmental Authority is required to be
obtained or made by or with respect to MagneTek, Seller or Canada Sub in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, other than (A)
compliance with and filings under the HSR Act, (B) compliance with and
filings under Section 13(a) or 15(d), as the case may be, of the Exchange
Act, (C) compliance with and filings and notifications under applicable
Environmental Laws, (D) those that may be required solely by reason of
Buyer's participation in the transactions contemplated hereby, (E) filings
and notifications required to be made by Buyer under the Investment Canada
Act, and
Page 25
(F) those that, if not made or obtained, individually or in the aggregate, would
not have a Material Adverse Effect.
4.2 THE ASSETS. Except for the Excluded Assets, the Assets constitute
all of the property and assets which are used by Seller, MagneTek and its
other Affiliates to conduct the Business as conducted on the Closing Date.
4.3 ORGANIZATION AND STANDING OF CANADA SUB. Canada Sub is a
corporation duly organized and validly existing under the laws of the
province of Ontario. Canada Sub has all requisite corporate power and
authority and possesses all governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to carry on its business
as now conducted other than such franchises, licenses, permits,
authorizations and approvals the lack of which, individually or in the
aggregate, would not have a Material Adverse Effect. Canada Sub is duly
qualified and in good standing to do business in each jurisdiction in which
the nature of its business or the ownership, leasing or holding of its
properties makes such qualification necessary, except such jurisdictions
where the failure to be so qualified or in good standing, individually or in
the aggregate, would not have a Material Adverse Effect. All such
jurisdictions are listed on Schedule 4.3 hereto. Seller has made available to
Buyer (i) the Certificate of Incorporation or similar charter document, as
amended to date, and the By-Laws or similar document, as in effect on the
date hereof, of Canada Sub, and (ii) the share certificate and transfer books
and the minute books of Canada Sub. Immediately following the consummation
of the transactions contemplated by this Agreement, Buyer or Canada Sub will
own all of the assets used prior to the Closing in the conduct of the
Business on the Closing Date other than the Excluded Assets.
4.4 CAPITAL STOCK OF CANADA SUB. The authorized, issued and
outstanding capital stock of Canada Sub is as set forth on Schedule 4.4. The
Canada Sub Shares are duly authorized and validly issued and outstanding,
fully paid and nonassessable. MagneTek is the record owner of the Canada Sub
Shares. Except for the Canada Sub Shares, there are no shares of capital
stock or other equity securities of Canada Sub outstanding. The Canada Sub
Shares have not been issued in violation of, and none of the Canada Sub
Shares is subject to, preemptive or subscription rights. There are no
outstanding warrants, options, "phantom" stock rights, agreements,
convertible or exchangeable securities or other commitments (other than this
Agreement) pursuant to which Canada Sub is or may become obligated to issue,
sell, purchase, return or redeem any shares of capital stock or other
securities of Canada Sub, and no equity securities of Canada Sub are reserved
for issuance for any purpose. Other than this Agreement, the Canada Sub
Shares are not subject to any voting
Page 26
trust agreement or other Contractual Obligation restricting or otherwise
relating to the voting, dividend rights or disposition of the Canada Sub
Shares.
4.5 EQUITY INTERESTS; SUBSIDIARIES. Canada Sub does not own directly
or indirectly any capital stock of or other equity interests in any Person.
4.6 FINANCIAL STATEMENTS. (a) Attached to this Agreement as Exhibit A
is the unaudited Field Service & Fairfield Supply Consolidated Balance Sheet
Excluding Division Allocations of Seller as of September 30, 1995. Schedule
4.6 contains the unaudited Field Service & Fairfield Supply Consolidated
Income Statement Excluding Division Allocations of Seller for the years ended
June 30, 1993, 1994, 1995, and the three months ended September 30, 1994 and
1995 (the "Historical Financials" and, together with the September Balance
Sheet, the "Financial Statements").
(b) The Financial Statements have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby and
fairly present in all material respects, on a pro forma basis, the combined
financial condition and results of operations of Seller and Canada Sub as of
the respective dates thereof and for the respective periods covered thereby,
except for the absence of footnotes and except that:
(i) Excluded Assets and Excluded Liabilities are excluded; and
(ii) intercompany advances and receivables (other than those
resulting from the sale of products or services) are excluded from the
assets; and
(iii) intercompany liabilities (other than those resulting from
the sale of products or services) are excluded from liabilities; and
(iv) accruals for retiree health and welfare benefits are
excluded from the liabilities; and
(v) long-term liabilities, current maturities of long-term
liabilities, and accrued Taxes are excluded from the liabilities; and
(vi) the exclusion of division allocations from the Historical
Financials.
Page 27
4.7 ABSENCE OF CHANGES OR EVENTS. Except as set forth on Schedule 4.7
and the elimination of Excluded Assets, since September 30, 1995, there has
not been a material adverse change in the business, financial condition or
results of operations of Seller or Canada Sub other than changes relating to
the economy in general. Except as disclosed on Schedule 4.7 or as
contemplated by this Agreement, since September 30, 1995, Seller has
conducted the Business, and has caused Canada Sub to conduct its Business, in
the Ordinary Course, and neither Seller nor Canada Sub has taken any action
that, if taken after the date hereof, would constitute a breach of any of the
covenants set forth in Section 6.2.
4.8 TAXES. Except as set forth on Schedule 4.8:
(a) PAYMENT OF TAXES. Each of Seller and Canada Sub has filed all
material Tax Returns that it is required to have filed on or prior to the
date hereof and such Tax Returns are materially true and correct. All Tax
Returns required to be filed on or prior to the Closing Date by Seller or
Canada Sub shall be filed on or prior to Closing and such Tax Returns shall
be materially true and correct. All material amounts of Taxes imposed on
Seller or Canada Sub or for which Seller or Canada Sub is or could be liable
have been (or, as of the Closing, will be) paid or have been accrued for or
fully reserved against on the consolidated books of MagneTek.
(b) AUDIT HISTORY. To the Knowledge of each of Seller and
MagneTek, no material issues have been raised and are currently pending by
any Governmental Authority in connection with any of the Tax Returns of
Seller or Canada Sub. No currently valid waivers of statutes of limitations
with respect to the Tax Returns of Seller or Canada Sub have been given by
Seller or Canada Sub. No Tax Returns of Seller or Canada Sub are or have
been the subject of an examination for any year for which the applicable
statute of limitations with respect to Taxes remains open. All deficiencies
asserted or assessments made as a result of any such examination have been
fully paid. There are no Liens for Taxes (other than for current Taxes not
yet due and payable) on the Assets or the assets of Canada Sub.
(c) TAX-SHARING OR ALLOCATION AGREEMENTS; TAX ELECTIONS. Any
tax-indemnity, tax-sharing, tax allocation or similar agreements between
Canada Sub, on one hand, and Seller, MagneTek or their Affiliates ( on the
other hand) and any liability or obligation of Canada Sub under such
agreements will terminate as of the Closing Date and be of no further force
or effect. All tax-indemnity, tax-sharing, tax-allocation or similar
agreements to which Canada Sub is a party and which are now in effect (other
than any such agreement with a customer,
Page 28
supplier or lessor of property to Canada Sub entered into in the ordinary
Course) are listed on Schedule 4.8.
(d) SECTION 341(f) CONSENT. Canada Sub has not filed a consent
pursuant to the collapsible corporation provisions of Section 341(f) of the
Code (or any corresponding provision of any state, local or foreign income
Tax law) and has not agreed to have Section 341(f)(2) of the Code (or any
corresponding provision of any state, local or foreign income Tax law) apply
to any disposition of any asset owned by Canada Sub.
(e) SAFE HARBOR LEASE PROPERTY. None of the assets of Canada Sub
is property that Canada Sub is required to treat as being owned by any other
Person pursuant to the "safe harbor lease" provisions of former Section
168(f)(8) of the Code.
(f) TAX-EXEMPT PROVISIONS. None of the Assets or the assets of
Canada Sub (i) directly or indirectly secures any debt the interest on which
is tax-exempt under Section 103(a) of the Code or (ii) is "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(g) DEEMED DIVIDEND AND CONSENT DIVIDEND ELECTIONS. Canada Sub
has not made and will not make as of the Closing a consent dividend election
under Section 565 of the Code.
(h) ADJUSTMENTS UNDER SECTION 481. Canada Sub has not agreed to
make and is not required to make any adjustment under Section 481(a) of the
Code by reason of a change in accounting method or otherwise.
(i) MISCELLANEOUS. Canada Sub (i) has not participated in and
will not participate as of the Closing in an international boycott within the
meaning of Section 999 of the Code, (ii) is not a party to any Contractual
Obligation that has resulted or will result as of the Closing, separately or
in the aggregate, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code, or (iii) except as set forth on
Schedule 4.8, is not a party to any joint venture, partnership, or other
arrangement or contract that could be treated as a partnership for federal
income tax purposes.
(j) CONSOLIDATION. Canada Sub has never been a member of an
Affiliated Group.
(k) COPIES OF TAX RETURNS. Canada Sub has true, correct and
complete copies of all income Tax Returns filed by it or any other Person on
behalf of it for the years beginning July 1, 1991, and thereafter.
Page 29
4.9 ASSETS OTHER THAN REAL PROPERTY INTERESTS. Either Seller or Canada
Sub has good and marketable title to all assets reflected on the September
Balance Sheet, except those sold or otherwise disposed of since the date of
the September Balance Sheet in the Ordinary Course, in each case free and
clear of all Liens except (a) such as are disclosed on Schedule 4.9, (b)
mechanics', carriers', workmen's, repairmen's or other like Liens arising or
incurred in the Ordinary Course, (c) Liens arising under original purchase
price conditional sales contracts and equipment leases with third parties
entered into in the Ordinary Course, (d) Liens for Taxes and other
governmental charges which are not due and payable or which may thereafter be
paid without penalty, and (e) other imperfections of title, restrictions or
encumbrances, if any, which Liens, imperfections of title, restrictions or
other encumbrances do not, individually or in the aggregate, materially
impair the continued use and operation of the specific assets to which they
relate (the Liens hereinabove described are hereinafter referred to
collectively as "Permitted Liens").
This Section 4.9 does not relate to real property or interests in real
property, such items being the subject of Section 4.10. This Section 4.9
does not relate to intellectual property, which is the subject of Section 4.11.
4.10 REAL PROPERTY. Schedule 4.10 sets forth a complete list of all
real property and interests in real property owned in fee by either Seller or
Canada Sub and in each case used primarily in the Business (individually, an
"Owned Property"), and a complete list of all real property and interests in
real property leased by either Seller or Canada Sub and in each case used
primarily in the Business (individually, a "Leased Property" and, together
with the owned Properties, individually as a "Company Property" and
collectively as "Company Properties"), and as to Leased Property, identifies
any leases relating thereto. True and complete copies of all such leases
have been made available to Buyer.
4.11 INTELLECTUAL PROPERTY. Schedule 4.11 sets forth a list of all
patents, trademarks (registered or unregistered), trade names, service marks
and copyrights and applications for any of the foregoing, other than those
relating to generally commercially available computer software (collectively,
"Intellectual Property"), owned, used, filed by or licensed to Seller or
Canada Sub. With respect to trademarks, Schedule 4.11 contains a list of all
jurisdictions in which such trademarks are registered or applied for and all
registration and application numbers. Except as disclosed on Schedule 4.11,
either Seller or Canada Sub owns or has the right to use, without payment to
any other party, the Intellectual Property listed on such Schedule 4.11, and
the consummation of the transactions contemplated
Page 30
hereby will not alter or impair any such Intellectual Property. Except as
disclosed on Schedule 4.11, neither Seller nor Canada Sub has licensed to any
third party, on an exclusive basis or otherwise, the right to use or exploit
any Intellectual Property in any jurisdiction or otherwise transferred or
assigned any Intellectual Property to any third party in any jurisdiction.
Except as set forth on Schedule 4.11, neither Seller nor MagneTek has
received written notice of any claims which are pending or, to the Knowledge
of either Seller or MagneTek, threatened against either Seller or Canada Sub
by any person with respect to the ownership, validity, enforceability or use
of any Intellectual Property listed on Schedule 4.11 or otherwise challenging
or questioning the validity or effectiveness of any such Intellectual
Property and, to the Knowledge of each of Seller and MagneTek, no basis in
fact exists to support any such claim.
4.12 FURNITURE, FIXTURES, MACHINERY AND EQUIPMENT. All material
furniture, fixtures, machinery and equipment used by Seller and Canada Sub in
their businesses is in the possession or under the control of Seller or
Canada Sub and is, with the exception of automobiles, trucks and other
highway vehicles in transit and items that are offsite for repairs, located
at one of the places of business of Seller or Canada Sub. All items of such
furniture, fixtures, machinery and equipment are in good operating condition,
subject to normal wear and tear, and adequate for the present uses thereof.
4.13 CONTRACTS. Schedule 4.13 sets forth a list of each of the
following Contracts to which either Seller or Canada Sub is a party (the
"Material Contracts"):
(a) any written employment contract that is not terminable by
notice of not more than 30 days for a cost of less than $25,000;
(b) any Stay and Pay Agreements;
(c) any employee collective bargaining agreement or other Contract
with any labor union;
(d) any Contractual Obligation that restricts the ability of
either Seller or Canada Sub to compete in any line of business in any place
in the world;
(e) any Contractual Obligation between (i) either Seller or Canada
Sub, on the one hand, and MagneTek or any Affiliate of MagneTek, on the other
hand, or (ii) Seller, Canada Sub or MagneTek and any officer or director of
Seller or Canada sub (other than agreements covered by paragraph (a) above)
involving consideration to either party with a value of at least $25,000;
Page 31
(f) any lease or similar agreement under which either Seller or
Canada Sub is a lessor or sublessor of, or makes available for use by any
third party, any real property owned or leased by Seller or Canada Sub or any
portion of premises otherwise occupied by Seller or Canada Sub;
(g) any Contractual Obligation under which either Seller or Canada
Sub has borrowed or loaned any money or issued any note, bond, indenture or
other evidence of indebtedness or directly or Indirectly guaranteed
indebtedness, liabilities or obligations of others (other than endorsements
for the purpose of collection in the Ordinary Course);
(h) any mortgage, pledge, conditional sales contract (for a value
in excess of $25,000), security agreement (with respect to property in excess
of $25,000), factoring agreement or other similar agreement with respect to
any property or assets of either Seller or Canada Sub;
(i) any Contract (other than agreements covered by paragraph (a)
above) that provides for the payment of any severance compensation to any
Company Employee or employee of Canada Sub, or for the provision, vesting
and/or acceleration of any employee benefits following a change of ownership
or control of either Seller or Canada Sub;
(j) any license, royalty, franchise, service (other than with
respect to services provided by Seller or Canada Sub in the Ordinary Course),
sales agency or representative or distribution Contractual Obligation (which
Contractual Obligation is not cancelable without penalty on not more than 30
days' notice or has an aggregate annual payment obligation of more than
$25,000);
(k) any Contract for the sale of any asset other than in the
Ordinary Course or for the grant of any right of first refusal or similar
preferential right to purchase any asset of either Seller or Canada Sub;
(l) any executory Contract or commitment for capital expenditures
over $25,000;
(m) any Contract between either Seller or Canada Sub and any
person which has previously purchased any business from Seller or Canada Sub;
or
(n) any other Contract which has an aggregate future payment
obligation in excess of $25,000 and is not terminable by notice of not more
than 60 days for a cost of less than $50,000 (other than purchase contracts
and orders for inventory in the Ordinary Course).
Page 32
Except as disclosed on Schedule 4.13, each Contract listed thereon is
valid, binding and in full force and effect and is enforceable by Seller or
Canada Sub, as the case may be, in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors, rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law). Except as
disclosed in Schedule 4.13, and with respect to the contracts listed or
described under "Intellectual Property Agreements" in Schedule 4.11, except
as disclosed on Schedule 4.11, Seller and Canada Sub have performed all
material obligations required to be performed by them to date under the
Contracts and are not (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder and,
to the Knowledge of either Seller or MagneTek, no other party to any of the
Contracts is (with or without the lapse of time or the giving of notice or
both) in breach or default in any material respect thereunder.
4.14 LITIGATION; DECREES. Schedule 4.14 sets forth a list, as of the
date of this Agreement, of all pending or, to the Knowledge of MagneTek,
threatened actions, suits, claims or legal, administrative or arbitration
proceedings or investigations with respect to which either Seller or Canada
Sub has been contacted in writing by the claimant or by counsel for the
claimant against Seller or Canada Sub or any of their respective properties,
assets, operations or businesses or against any Canada Sub Plan or any
Company Plan which (a) involves a claim by or against Seller or Canada Sub or
against any Canada Sub Plan or any Company Plan of more than $50,000, (b)
seeks any injunctive relief pertaining to the Assets or the Business or any
Canada Sub Plan or any Company Plan, or (c) relates to the transactions
contemplated by this Agreement. To the Knowledge of MagneTek's General
Counsel, Schedule 4.14 also lists all pending actions, suits, claims or legal
or administrative or arbitration proceedings to which Seller is a party in
respect of the Business, or to which Canada Sub is a party, in each case
involving claims by such Person against a third party. To the Knowledge of
either Seller or MagneTek, except as disclosed on Schedule 4.14, neither
Seller nor Canada Sub is in default under any judgment, order or decree of
any court, administrative agency or commission or other Governmental
Authority applicable to it or any of its properties, assets, operations or
businesses. This Section 4.14 does not relate to environmental matters,
which are the subject of Section 4.17.
4.15 EMPLOYEE BENEFIT PLANS. Except as set forth on Schedule 4.15:
Page 33
(a) Schedule 4.15(a) contains a listing of each material Company
Plan and material Canada Sub Plan.
(b) A complete copy of each material written Canada Sub Plan and
the Larsen-Hogue Plan as amended to the Closing, together with audited
financial statements and/or actuarial reports for the three (3) most recent
plan years, if any; a copy of each trust agreement, insurance contract, if
any, or any other funding vehicle with respect to each such plan; a copy of
any and all determination letters, rulings or notices issued by any
Governmental Authority with respect to such plan; a copy of the Form 5500
Annual Report and any PBGC Form 1 for the three (3) most recent plan years or
any comparable form, if any, under Canadian or provincial law; any summary
plan description and/or summary of material modifications; and a copy of each
and any general explanation or communication which was required to be
distributed or otherwise provided to participants and which modifies or
amends any material provisions of such plan, will, within five Business Days
after the date of this Agreement, have been made available to Buyer. A
description of the material terms of any unwritten material Canada Sub Plan
and any unwritten material Company Plan will, no later than the date
schedules are required to be delivered to Buyer pursuant to Section 6.12 of
this Agreement, have been made available to Buyer and such plan will be
listed on Schedule 4.15(a).
(c) The Larsen-Hogue Plan and each Canada Sub Plan (i) has been
and currently is in material compliance in form (other than any amendments
due to changes in the Code for which the period for adopting such amendments
has not expired) and in operation in all respects with all applicable laws;
(ii) has been and is operated and administered in material compliance with
its terms (except as otherwise required by law); (iii) where applicable, has
been and is operated, administered, maintained and funded in material
compliance with the applicable requirements of the Code and ERISA (or
comparable Canadian or provincial laws) in such a manner as to qualify, where
appropriate, for both Federal and state purposes (or where applicable,
Canadian federal and provincial), for income tax exclusions to its
participants, tax-exempt income for its funding vehicle, and the allowance of
deductions and credits with respect to contributions thereto; and (iv) where
applicable, has received a favorable determination letter from the IRS.
(d) As of the Closing Date and with respect to the Larsen Hogue
Plan and each Canada Sub Plan, none of the Buyer, Seller or Canada Sub could
have any liability for: (i) any "prohibited transaction," as such terms are
defined under ERISA or the Code (or comparable Canadian or provincial laws);
(ii) any fiduciary breach; (iii) any failure to act or comply in connection
with the administration or investment of the assets of
Page 34
such plans; or (iv) a civil penalty assessed pursuant to Section 502(i) of
ERISA (or comparable Canadian or provincial laws).
(e) Each Canada Sub Plan, if any, which provides post-retirement
welfare benefits, may be terminated by Canada Sub, on and after the Closing
without further liability for benefit claims incurred after such termination.
(f) To the Knowledge of either Seller or MagneTek, no person has
made any statements, whether oral or in writing, regarding any Canada Sub
Plan or the Larsen-Hogue Plan which will result in any liability under such
Canada Sub Plan or the Larsen-Hogue Plan in excess of any current or
potential liability under such Canada Sub Plan or the Larsen-Hogue Plan
previously disclosed to Buyer pursuant to this Section 4.15.
(g) Neither Seller nor Canada Sub nor any of their ERISA
Affiliates has any liability (including any potential liability) with respect
to any "multiemployer plan" as defined in Section 4001 or Section 3(37) of
ERISA, "multiple employer plan" within the meaning of Code Section 413(c) or
"multiple employer welfare arrangement" within the meaning of Section 3(40)
of ERISA.
(h) The Larsen-Hogue Plan has not incurred any "accumulated
funding deficiency" as such term is defined in Section 302 of ERISA or
Section 412 of the Code, whether or not waived. No liability to the PBGC
(except for payment of premiums) has been incurred with respect to the
Larsen-Hogue Plan, no reportable event within the meaning of Section 4043 of
ERISA (excluding any event described in Section 4043(c)(9) thereof) has
occurred with respect to the Larsen Hogue Plan, the PBGC has not threatened
or instituted the termination of the Larsen-Hogue Plan and the Larsen-Hogue
Plan has not been completely or partially terminated.
(i) With respect to the Larsen-Hogue Plan and each Canada Sub
Plan, all material payments, premiums, contributions, reimbursements and
expenses, calculated in the ordinary Course (as determined by MagneTek's
independent actuary, where applicable), required to be paid for all periods
ending on or prior to December 31, 1995, have been paid or shall be accrued
on the Closing Balance Sheet.
(j) None of Seller, Canada Sub nor any of their ERISA Affiliates
has incurred any liability to the PBGC, the IRS, the Department of Labor (or
any comparable Canadian or provincial Governmental Authority) or otherwise
with respect to any Company Plan that has not been satisfied in full, or with
respect to which, to the Knowledge of either Seller or MagneTek, a condition
exists that presents a material risk to Buyer or Canada Sub.
Page 35
4.16 COMPLIANCE WITH APPLICABLE LAWS. Except as set forth in Schedule
4.16 attached hereto, each of Seller and Canada Sub is in compliance with all
applicable Requirements of Law, except for such incidents of noncompliance
which, individually and in the aggregate, would not have a Material Adverse
Effect. Except as set forth in Schedule 4.16 hereto, since July 1, 1994, to
the Knowledge of either Seller or MagneTek, neither Seller nor Canada Sub nor
MagneTek has received any written communication from a Governmental Authority
that alleges that either Seller or Canada Sub is not in compliance with any
Requirement of Law, except where noncompliance would not have a Material
Adverse Effect. This Section 4.16 does not relate to Environmental Laws,
which are the subject of Section 4.17, or matters with respect to Taxes, which
are the subject of Section 4.8.
4.17 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 4.17
attached hereto:
(a) Seller is in compliance with all Environmental Laws, except
any non-compliance which would not have a Material Adverse Effect on Seller.
Without limiting the generality of the preceding sentence, Seller has
obtained and is in material compliance with all of the terms and conditions
of all permits, licenses, certificates and other authorizations which are
required under all Environmental Laws.
(b) Seller has not received any written or, to the Knowledge of
Seller or MagneTek, oral notice of, any private, administrative or judicial
action, or written or, to the Knowledge of Seller or MagneTek, oral notice of
any intended private, administrative, or judicial action relating to the
presence or alleged presence of Hazardous Materials in, at, under or upon any
Company Property; and there are no pending or, to the Knowledge of Seller or
MagneTek, threatened actions or proceedings (or, to the Knowledge of Seller
or MagneTek, notices of threatened actions or proceedings) against Seller
from any Governmental Authority regarding any matter relating to any
Environmental Laws.
4.18 EMPLOYEE AND LABOR RELATIONS. Except as set forth on Schedule 4.18:
(a) there is no labor strike, dispute, or work stoppage or lockout
pending, or to the Knowledge of either Seller or MagneTek, threatened,
against Seller or Canada Sub;
(b) to the Knowledge of either Seller or MagneTek, no union
organization campaign is in progress with respect to any Company Employees or
employees of Canada Sub, and no question concerning representation exists
respecting such Company Employees or employees of Canada Sub;
Page 36
(c) there is no unfair labor practice charge or complaint against
Seller or Canada Sub pending, or to the Knowledge of either Seller or
MagneTek, threatened, before the National Labor Relations Board;
(d) there is no pending, or to the Knowledge of either Seller or
MagneTek, threatened, grievance that, if adversely decided, would have a
Material Adverse Effect; and
(e) no charges with respect to or relating to Seller or Canada Sub
are pending before the Equal Employment Opportunity Commission or any other
Governmental Authority responsible for the prevention of unlawful employment
practices as to which there is a reasonable likelihood of adverse
determination, other than those which, if so determined would not have a
Material Adverse Effect.
4.19 CORPORATE NAMES. Neither Seller nor Canada Sub has used in the
past six years or is currently using any corporate or fictitious name, other
than the names listed in Schedule 4.19.
4.20 LICENSES AND PERMITS. Attached hereto as Schedule 4.20 is a
complete and accurate list and description of all material licenses, permits
and other authorizations of governmental authorities, domestic and foreign,
and other third Persons used or required, and held by Seller or any Canada
Sub, in the conduct of its business. To the Knowledge of MagneTek, Seller,
or Canada Sub, none of Seller, Canada Sub or MagneTek has received any notice
that revocation is being considered with respect to any of such licenses,
permits or authorizations. This Section 4.20 does not relate to permits
required under any Environmental Laws which are addressed in Section 4.17.
4.21 DIRECTORS, OFFICERS AND EMPLOYEES OF THE COMPANY.
Schedule 4.21 contains a true, correct and complete list of all
directors and officers of Canada Sub showing each office held by each such
Person. Concurrently with the delivery of Schedules, Seller will deliver to
Buyer a substantially complete list of all current employees of Seller and
Canada Sub, and the salary or hourly compensation each such employee receives.
4.22 CUSTOMERS. Schedule 4.22 sets forth a complete list of Seller's
and Canada Sub's ten largest customers (measured by revenue to Seller and
Canada Sub) for the 1995 fiscal year, and for the first two fiscal quarters
of the 1996 fiscal year.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER AND GRAND EAGLE
Each of Buyer and Grand Eagle hereby jointly and severally represents
and warrants to each of Seller and MagneTek as follows:
Page 37
5.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS. (a) Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Georgia. Grand Eagle is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. Each of Buyer and Grand Eagle has all requisite corporate power
and authority to enter into this Agreement and those Ancillary Agreements to
which it is a party and to consummate the transactions contemplated hereby
and thereby. All corporate acts and other proceedings required to be taken
by each of Buyer and Grand Eagle to authorize the execution, delivery and
performance of this Agreement and those Ancillary Agreements to which each of
them is a party and the consummation of the transactions contemplated hereby
and thereby have been duly taken. This Agreement has been duly executed and
delivered by Buyer and Grand Eagle and constitutes, and when executed and
delivered by Buyer or Grand Eagle, as the case may be, at the Closing each of
the Ancillary Agreements to which Buyer or Grand Eagle is a party will
constitute, a valid and binding obligation of each of Buyer and Grand Eagle,
as the case may be, enforceable against it in accordance with its terms,
except as enforceability may be limited by Bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally or by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
(b) The execution and delivery of this Agreement does not, and the
execution and delivery of those Ancillary Agreements to which Buyer or Grand
Eagle is a party will not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the terms hereof and
thereof will not, conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon
any of the properties or assets of Buyer or Grand Eagle under, any provision
of (i) the Certificate of Incorporation or By-laws of Buyer or Grand Eagle,
(ii) any Contractual Obligation to which Buyer or Grand Eagle is a party or
by which any of its properties or assets are bound, or (iii) any judgment,
order or decree or, subject to the matters described in clauses (A)-(D)
below, Requirement of Law applicable to Buyer or Grand Eagle or their
respective property or assets, other than, in the case of clauses (ii) and
(iii) above, any such conflicts, violations, defaults, rights or Liens that,
individually or in the aggregate, would not have a material adverse effect on
the ability of Buyer or Grand Eagle to consummate the transactions
contemplated hereby. No material
Page 38
consent, approval, license, permit, order or authorization of, or
registration, declaration or filing with any Governmental Authority is
required to be obtained or made by or with respect to Buyer or Grand Eagle in
connection with the execution and delivery of this Agreement or the
consummation by Buyer and Grand Eagle of the transactions contemplated
hereby, other than (A) compliance with and filings under the HSR Act, (B)
compliance with and filings and notifications under applicable Environmental
Laws, (C) filings and notifications required to be made by Buyer under the
Investment Canada Act, and (D) those that may be required solely by reason of
Seller's or MagneTek's (as opposed to any other third party's) participation
in the transactions contemplated hereby.
5.2 ACTIONS AND PROCEEDINGS, ETC. There are no (a) outstanding
judgments, orders, writs, injunctions or decrees of any Governmental
Authority against Buyer or Grand Eagle which have a material adverse effect
on the ability of Buyer and Grand Eagle to consummate the transactions
contemplated hereby or (b) actions, suits, claims or legal, administrative or
arbitration proceedings or investigations pending or, to the knowledge of
Buyer or Grand Eagle, threatened against Buyer or Grand Eagle, which have or
could have a material adverse effect on the ability of Buyer and Grand Eagle
to consummate the transactions contemplated hereby.
5.3 AVAILABILITY OF FUNDS. Buyer and Grand Eagle have, or shall as of
the Closing have, all funds required to consummate the transactions
contemplated hereby and by the Other Agreement.
5.4 BUYER'S AND GRAND EAGLE'S ACKNOWLEDGMENT. Each of Buyer and Grand
Eagle acknowledges and agrees that, (a) other than the representations and
warranties of Seller and MagneTek specifically contained in this Agreement,
there are no representations or warranties of Seller or MagneTek either
expressed or implied with respect to Seller, Canada Sub, MagneTek, or the
transactions contemplated hereby and (b) it shall have a right to
indemnification solely as provided in Article 10 hereof and, except as
provided in this Agreement, it shall have no claim or right to
indemnification with respect to any information, documents or materials
furnished by or on behalf of Seller or MagneTek or any of its officers,
directors, employees, agents or advisors to Buyer or Grand Eagle, including,
without limitation, the Confidential Offering Memorandum, March 1994,
prepared by Lehman Brothers or any information, documents or material made
available to Buyer in certain "data rooms,"
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management presentations or any other form in expectation of the transactions
contemplated by this Agreement.
5.5 EXON-FLORIO. Buyer is not a "foreign person" for purposes of the
Exon-Florio Amendment to the Defense Production Act of 1950.
ARTICLE 6
COVENANTS OF SELLER AND MAGNETEK
Each of Seller and MagneTek covenants and agrees as follows:
6.1 ACCESS. Subject to the provisions of Section 7.1 hereof, prior to
the Closing, Seller and MagneTek will, and will cause Canada Sub to, give
Buyer and its representatives, employees, counsel and accountants reasonable
access, during normal business hours and upon reasonable notice, to the
personnel, customers, suppliers, properties and Records of Seller and Canada
Sub; PROVIDED, HOWEVER, that such access does not unreasonably disrupt the
normal operations of Seller and Canada Sub.
6.2 ORDINARY CONDUCT. Except as contemplated by this Agreement or as
set forth in Schedule 6.2, from the date hereof to the Closing, Seller and
MagneTek will, and will cause Canada Sub to, conduct the Business in the
Ordinary Course and will make all reasonable efforts consistent with past
practices to preserve relationships with customers, suppliers and others with
whom Seller or Canada Sub deals. Except as contemplated by this Agreement,
Seller will not, in respect of the Business, and MagneTek will not permit
Seller to, and Seller and MagneTek will not permit Canada Sub to, do any of
the following without the prior written consent of Buyer, which consent will
not be unreasonably withheld or delayed:
(a) with respect only to Canada Sub, amend its constitutive
documents;
(b) with respect only to Canada Sub, redeem or otherwise acquire any
shares of its capital stock or issue any capital stock or any option, warrant
or right relating thereto or any securities convertible into or exchangeable
for any share of capital stock;
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(c) with respect only to Canada Sub, sell or otherwise dispose of
any treasury shares;
(d) terminate, adopt or amend in any material respect any Company
Plan or Canada Sub Plan or collective bargaining agreement, except as required
by law or insofar as a collective bargaining agreement is then subject to
negotiation in advance of its expiration in the Ordinary Course;
(e) enter into or amend any Contract or Contractual Obligation with
a value or commitment exceeding $50,000;
(f) incur or assume any liabilities, obligations or indebtedness for
borrowed money or guarantee any such liabilities, obligations or indebtedness,
other than in the Ordinary Course; PROVIDED that in no event shall Seller or
Canada Sub incur, assume or guarantee any long-term indebtedness for borrowed
money;
(g) encumber any of its assets or grant any security interests or
increase or expand the collateral in connection with any of its existing
secured liabilities or obligations other than in the Ordinary Course;
(h) make any change in any method of accounting or accounting
practice or policy other than those required by GAAP;
(i) acquire or agree to acquire by merging or consolidating with, or
by purchasing the stock of, or a substantial portion of the assets of, or by
any other manner, any Person;
(j) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets (other than the Excluded Assets),
except in the Ordinary Course and except for sales, leases or dispositions of
assets that, individually, have a value of less than $25,000 and, in the
aggregate, have a value of less than $100,000;
(k) enter into any lease of real property, except any renewals of
existing leases and a lease in respect of its Tucson facility;
(l) grant any increase in the compensation of officers or employees,
whether now or hereafter payable, including any such increase pursuant to any
bonus, pension, profit sharing,
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incentive compensation, expense reimbursement, deferred compensation,
retirement or similar plan or agreement or employ any additional executive or
management personnel or enter into or amend any severance agreement or grant
any general increase in wage or salary rates or in employee benefits (except
in the Ordinary Course or as required by existing agreements, plans or
arrangements) or enter into any employment contract which Buyer, Seller or
Canada Sub do not have the right to terminate without liability or adopt (or
amend in any manner which would increase the benefits under) any bonus, profit
sharing, compensation, employment or other employee benefit plan, agreement,
contract, commitment or arrangement for the benefit or welfare of any employee
or employees of Seller or Canada Sub;
(m) organize any Subsidiary or acquire any equity or other interest
in any Person; or
(n) agree, whether in writing or otherwise, to do any of the
foregoing.
6.3 INSURANCE. Seller shall keep, or cause to be kept, all insurance
policies presently maintained relating to Seller, Canada Sub and their
respective properties, or replacements therefor, in full force and effect
through the close of business on the Closing Date. None of Buyer, Seller or
Canada Sub will have any rights under any such insurance policies from and
after the Closing Date.
6.4 ACCOUNTS RECEIVABLE. Each of MagneTek and Seller agrees to forward
to Buyer, within three business days after receipt thereof, any and all
proceeds from accounts receivable of Seller or Canada Sub that are received by
Seller, MagneTek or any other Affiliate of MagneTek after the Closing Date.
If, after the Closing Date, Seller or MagneTek or any other Affiliate of
MagneTek receives any payment from any person who at the time of such payment
has outstanding accounts payable to MagneTek, on the one hand (for the
purposes of this Section, "MagneTek Accounts Receivable"), and to Buyer,
Seller or Canada Sub, on the other hand (for purposes of this Section, "Buyer
Accounts Receivable"), and the payment (a) does not indicate whether it is in
respect of MagneTek Accounts Receivable or Buyer Accounts Receivable or (b)
indicates that it is in payment of both MagneTek Accounts Receivable and Buyer
Accounts Receivable without specifying the portion to be allocated to each,
then MagneTek and Buyer shall consult with one another to determine the proper
allocation of such payment; and, if they are unable to reach agreement on the
Page 42
proper allocation, such payment shall be applied so as to retire MagneTek
Accounts Receivable and Buyer Accounts Receivable in chronological order based
upon the period of time such accounts receivable have existed on the books of
MagneTek, Seller, Buyer or Canada Sub, as applicable.
6.5 CONFIDENTIALITY AGREEMENTS. After the date of this Agreement, each
of Seller and MagneTek shall take all actions and do all things reasonably
necessary (but not including the commencement of litigation) to preserve and
enforce its rights under the terms of any confidentiality agreements entered
into between Seller, MagneTek and third parties who were provided information
relating to Seller and Canada Sub in connection with MagneTek's efforts to
sell the business, assets or stock of Seller or Canada Sub; PROVIDED, HOWEVER,
that upon Buyer's request and at its expense in the event of a dispute, Seller
or MagneTek will either (a) assign to Buyer its rights under any such specific
agreement or (b) serve as the named party in any legal action for Buyer's
benefit under such an agreement.
6.6 NO SOLICITATION. None of MagneTek, Seller, Canada Sub or their
respective Affiliates shall, and none of them shall permit any of their
respective directors, officers, employees, agents or representatives to,
solicit, initiate, encourage, entertain or consider any inquiries or proposals
concerning any merger, consolidation or acquisition or purchase of all or any
substantial portion of the assets or capital stock of Seller or Canada Sub
(other than the Excluded Assets), whether separately or as part of a larger
transaction, or any other transaction which could reasonably be expected to
preclude the consummation of any or all of the transactions contemplated by
this Agreement.
6.7 LIEN SEARCHES. Prior to the Closing, Seller shall obtain at its
expense and deliver to Buyer Uniform Commercial Code, tax lien and judgment
searches (or, in the case of foreign jurisdictions, comparable searches) for
Seller and Canada Sub at the state and county level (or, in the case of
foreign jurisdictions, the appropriate filing offices) for each location at
which Seller or Canada Sub presently conducts business or has conducted
business during the past five years. Such searches shall be conducted under
the present names of Seller and Canada Sub and such other names as they used
during the past five years.
6.8 THIRD PARTY CONSENTS. Prior to the Closing, Seller shall use
commercially reasonable efforts to procure all consents, approvals or
authorizations from third Persons
Page 43
necessary to consummate the transactions contemplated by this Agreement and all
consents, approvals or authorizations from third Persons required under
Contracts for any reason as a result of the transactions contemplated herein the
failure to obtain of which may reasonably expected to have a Material Adverse
Effect (all of which are referred to herein as "Third Party Consents"). Each of
Seller and MagneTek hereby represents and warrants to Buyer that Schedule 6.8 is
a true, correct and complete list of all Third Party Consents. Each of Buyer
and Seller and MagneTek shall, and Seller shall cause Canada Sub to, cooperate
with the other parties in any reasonable manner in connection with obtaining any
consents; provided, however, that such cooperation shall not include any
requirement of any party to commence any litigation or offer or grant any
accommodation (financial or otherwise) to any third party.
6.9 ENVIRONMENTAL MATTERS.
(a) As to the Seller Facilities located in Orlando, Florida, New
Orleans, Louisiana, and Houston, Texas, after the Closing Date Seller shall
conduct, at its sole cost, such response (investigation and cleanup) or
containment activities as are required by regulatory authorities pursuant to
applicable Environmental Laws concerning such soil and/or groundwater
contamination as has been determined prior to the Closing Date to exist at
such Facilities as specified on Schedule 6.9 hereto ("Existing
Contamination"), and, in the case of the Houston Facility (defined below),
such response (investigation and cleanup) and containment activities as will
be set forth as recommendations in the Houston Phase II Report. Seller's
responsibility for Existing Contamination shall be concluded with respect to a
Facility when either of the following events occurs: (i) Seller obtains from
the lead regulatory agency written confirmation that all necessary response
actions have been completed at the Facility with respect to the Existing
Contamination; or (ii) Seller demonstrates to the reasonable satisfaction of
Buyer through test data that Existing Contamination levels do not exceed
applicable state or federal standards requiring remediation.
(b) Buyer shall cooperate fully with Seller's efforts to conduct
response activities pursuant to this Agreement. Seller and its contractors
shall be afforded access to the Facilities at all reasonable times for the
purpose of conducting necessary response activities. Seller and MagneTek
shall cause their contractors to supply Buyer with certificates of insurance
Page 44
reflecting such coverage, and in such amounts, as Buyer shall reasonably
require, consistent with the customs in the industry. Seller shall be
responsible for managing all communications with Governmental Authorities
concerning response activities taken pursuant to this Section 6.9, and Buyer
shall not initiate any communications with Governmental Authorities or other
third parties concerning such response activities. Seller and MagneTek shall
inform Buyer from time to time at Buyer's request of the status of Seller's
response activities taken pursuant to this Section 6.9 and, at Buyer's
request, will supply Buyer with copies of material communications from
governmental authorities concerning response activities taken pursuant to this
Section 6.9.
(c) Contemporaneously with the completion of the tank farm
relocation project currently under way at the Seller Facility at 10010 Gulf
Freeway, Houston, Texas (the "Houston Facility"), Seller agrees to retain, at
its expense, Dames & Moore, or another reputable environmental consulting firm
selected by Seller and reasonably satisfactory to Buyer, to perform a
comprehensive Phase II environmental study of the soils and groundwater at the
Houston Facility and to obtain the resulting Phase II report (the "Houston
Phase II Report") from such consulting firm as promptly as practicable.
Seller will deliver to Buyer a copy of the Houston Phase II Report. Promptly
after it receives the Houston Phase II Report, if required to do so under
applicable law, Seller will report to the Texas Natural Resource Conservation
Commission in writing the impact to soils and groundwater reflected in the
Houston Phase II Report. Upon completion of the Houston Phase II Report,
Seller will comply with the requirements of Section 6.9(a) above as to the
Houston Facility.
(d) Seller will use reasonable efforts to obtain and deliver to
Buyer at Closing the consent of Dames & Moore (or such other consultant as
shall have prepared the Houston Phase II Report) to reliance by Buyer and
Grand Eagle upon the Phase II Report prepared in respect of the Seller
Facilities listed in Section 6.9.
6.10 RANCHO DOMINGUEZ LEASE ASSIGNMENT. In the event Seller is unable to
obtain from Westinghouse Electric Corporation either a complete novation or an
assignment of its leasehold interest (the "Westinghouse Lease") in the Company
Property at 18020 South Santa Fe Avenue, Rancho Dominguez, California, Seller
agrees to enter into a sublease or similar arrangement in which Seller will
Page 45
undertake to convey to Buyer its benefits under the environmental protections
and indemnifications Seller has under the Westinghouse Lease, provided that
Seller shall be required only to use commercially reasonable efforts to
enforce such rights on Buyer's behalf, and that all actions pertaining to such
enforcement shall be at Buyer's sole expense.
6.11 RANCHO DOMINGUEZ FACILITY PROJECT. Promptly after the date hereof,
Seller shall obtain an estimate for the work described on Schedule 6.11 hereto
and shall commence such work. If the Closing occurs, Buyer shall reimburse
Seller for one-half of the expense of such work.
6.12 DELIVERY OF SCHEDULES. Buyer shall, by March 15, 1996, deliver to
Seller Schedule 3.1 and any schedules referred to in Buyer's representations
and warranties in Article 5 hereof. By March 15, 1996, Seller and MagneTek
shall deliver to Buyer and Grand Eagle all remaining Schedules described in
this Agreement.
ARTICLE 7
COVENANTS OF BUYER
Buyer covenants and agrees as follows:
7.1 CONFIDENTIALITY. Buyer acknowledges that the information regarding
the Business heretofore and hereafter provided to it by MagneTek or Seller is
subject to the terms of a confidentiality agreement between MagneTek and an
Affiliate of Buyer dated as of March 21, 1994 (the "Confidentiality
Agreement"), the terms of which are incorporated herein by reference except
that the expiration is extended by 18 months from the date hereof. Effective
upon, and only upon, the Closing, the Confidentiality Agreement will
terminate; provided, however, that Buyer acknowledges that the Confidentiality
Agreement will terminate only with respect to information relating solely to
the Business and Canada Sub; and provided, further, however, that Buyer
acknowledges that any and all other provisions shall remain in effect, and all
information provided to it by MagneTek or its representatives concerning
MagneTek shall remain subject to the terms and conditions of the
Confidentiality Agreement after the date of the Closing.
Page 46
7.2 ACCOUNTS RECEIVABLE. Buyer agrees to forward or cause to be
forwarded to MagneTek, within three business days after the receipt thereof,
any and all proceeds from accounts receivable of MagneTek that are received by
Buyer or Canada Sub after the Closing Date. If, after the Closing Date, Buyer
or Canada Sub receives any payment from any Person who at the time of such
MagneTek Accounts Receivable and Buyer Accounts Receivable, and the payment
(a) does not indicate whether it is in respect of MagneTek Accounts Receivable
or Buyer Accounts Receivable or (b) indicates that it is in payment of both
MagneTek Accounts Receivable and Buyer Accounts Receivable without specifying
the portion to be allocated to each, then MagneTek and Buyer shall consult
with one another to determine the proper allocation of such payment; and, if
they are unable to reach agreement on the proper allocation, such payment
shall be applied so as to retire MagneTek Accounts Receivable and Buyer
Accounts Receivable in chronological order based upon the period of time such
accounts receivable have existed on the books of MagneTek, Buyer, Seller or
Canada Sub, as applicable.
7.3 INSURANCE. Buyer shall secure insurance with respect to the Assets
and shall cause Canada Sub to secure insurance with respect to its assets from
the Closing Date covering general liability and products liability in amounts
customary for the industry in which Buyer and Canada Sub operate.
7.4 ASSETS REMAINING ON BUYER'S PROPERTY. If, after the Closing Date,
the Excluded Assets listed on Schedule 7.4 remain on the premises utilized or
controlled by Buyer or Canada Sub, then Buyer shall take reasonable steps at
the expense of MagneTek to deliver such Excluded Assets to MagneTek, and so
long as such assets remain in Buyer's control, shall exercise reasonable care
with respect thereto, and in no event less care than with respect to its own
properties or than MagneTek or Seller is contractually required to exercise
(but only to the extent set forth on Schedule 7.4). MagneTek shall take
reasonable steps to remove all such assets from premises utilized or
controlled by Buyer and Canada Sub promptly after Closing, and in any case not
later than ninety days after the Closing Date. After such date, Buyer and
Canada Sub may move and store any such assets, at the expense of MagneTek, to
and at locations off the premises utilized or controlled by Buyer and Canada
Sub, and thereafter shall have no further responsibility to MagneTek with
respect to such assets.
Page 47
7.5 CHANGE OF NAME OF CANADA SUB. On the Closing Date, Buyer shall
cause the name of Canada Sub to be changed so as to eliminate the name
"MagneTek".
ARTICLE 8
MUTUAL COVENANTS
Each of Seller and MagneTek covenants and agrees with Buyer and Grand
Eagle, and each of Buyer and Grand Eagle covenants and agrees with Seller and
MagneTek as follows:
8.1 COOPERATION. MagneTek, Buyer, Seller and Grand Eagle shall
cooperate with each other and shall cause their officers, employees, agents,
auditors and representatives to cooperate with each other after the Closing to
ensure the orderly transition of the Business to Buyer and to minimize any
disruption to the respective businesses of MagneTek, Buyer and Canada Sub that
might result from the transactions contemplated hereby. No party shall be
required by this Section 8.1 to take any action that would unreasonably
interfere with the conduct of its business. Subject to the terms and
conditions of this Agreement, each party will use all reasonable efforts to
cause the Closing to occur.
8.2 PUBLICITY. MagneTek, Seller, Buyer and Grand Eagle agree that, from
the date hereof through the Closing Date, no public release or announcement
concerning the transactions contemplated hereby shall be issued by any party
without the prior consent of the other parties (which consent shall not be
unreasonably withheld or delayed), except as such release or announcement may
be required by law or the rules or regulations of any United States or foreign
securities exchange, in which case the party required to make the release or
announcement shall allow the other party reasonable time to comment on such
release or announcement in advance of such issuance.
8.3 ANTITRUST NOTIFICATION. Each of MagneTek and Grand Eagle will as
promptly as practicable, but in no event later than ten Business Days
following the execution and delivery of this Agreement, file with the United
States Federal Trade Commission (the "FTC") and the United States Department
of Justice (the "DOJ") the notification and report form, if any, required for
the transactions contemplated hereby and any supplemental information
requested in connection therewith pursuant to the HSR Act. Any such
notification and report form and supplemental information
Page 48
will be in substantial compliance with the requirements of the HSR Act. Each
of MagneTek and Grand Eagle shall furnish to the other such necessary
information and reasonable assistance as the other may request in connection
with its preparation of any filing or submission which is necessary under the
HSR Act. MagneTek and Grand Eagle shall keep each other apprised of the status
of any communication with, and inquiries or requests for additional
information from the FTC and the DOJ and shall comply promptly with any such
inquiry or request. Each of MagneTek and Grand Eagle will use its best efforts
to obtain any clearance required under the HSR Act for the purchase and sale
of the Assets.
8.4 RECORDS. (a) On the Closing Date, MagneTek and Seller shall deliver
or cause to be delivered to Buyer all Records not in the possession or control
of Canada Sub and all corporate records pertaining to the business and
operations of Canada Sub, subject to the following exceptions:
(i) Buyer recognizes that certain Records may contain incidental
information relating to Seller or Canada Sub or may relate primarily to
subsidiaries or divisions of MagneTek other than Seller or Canada Sub or
businesses of MagneTek or Seller previously sold, and that MagneTek and
Seller may retain such Records and shall provide copies of the relevant
portions thereof to Buyer;
(ii) MagneTek and Seller may retain all Records prepared in
connection with the sale of the Assets, including bids received from
other parties and analyses relating to Seller and Canada Sub;
(iii) MagneTek and Seller may retain any Tax Returns and supporting
documents and work papers, and upon reasonable request Buyer shall be
provided with copies of such Tax Returns and supporting documents and
work papers for the three Tax years prior to the Closing Date, and any
other Tax Returns and supporting documents and work papers only to the
extent that they relate (A) to Seller's or Canada Sub's separate Tax
Returns or separate Tax liability or (B) to the computation of Seller's
or Canada Sub's potential Tax liability for (I) any period ending on or
after the Closing, (II) any period for which Buyer is responsible for
filing Tax Returns, or (III) any period to which Canada Sub may
Page 49
carryback any net operating loss, capital loss or other Tax item; and
(iv) MagneTek may deliver within a reasonable time after the Closing
(in no event more than five (5) Business Days) such Records as to which
it desires to retain copies and requires additional time in which to make
such copies.
(b) After the Closing, upon reasonable written notice, MagneTek,
Buyer, Seller and Grand Eagle agree to furnish or cause to be furnished to
each other and their representatives, employees, counsel and accountants
access, during normal business hours, to such information (including Records
pertinent to Seller or Canada Sub) and assistance relating to Seller or Canada
Sub as is reasonably necessary for financial reporting and accounting matters,
the preparation and filing of any Tax Returns, reports or forms or the defense
of any Tax claim or assessment; PROVIDED, HOWEVER, that such access does not
unreasonably disrupt the normal operations of MagneTek, Seller, Buyer or
Canada Sub.
8.5 CONSENTS. With respect to each Contract not assigned on the Closing
Date, after the Closing Date Seller shall, if necessary, continue to deal with
the other contracting party as the prime contracting party, and Buyer and
Seller shall continue to use reasonable efforts to obtain the consent of the
required parties to the assignment of such Contract to Buyer. Notwithstanding
the absence of any such consent, 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,
and to the extent benefits are so provided, Buyer agrees to perform at its
sole expense all of the obligations of Seller to be performed under such
Contract after the Closing Date, and such obligations and Contracts shall
comprise Assumed Liabilities.
ARTICLE 9
EMPLOYEE BENEFIT MATTERS
9.1 EMPLOYEE BENEFIT MATTERS.
(a) On or prior the Closing Date Buyer shall offer employment to
commence on the Closing Date to all Company Employees and shall set initial
salaries, wages and material employee benefits that, in the aggregate, are
generally
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comparable to those provided to the Company Employees by Seller immediately
prior to the Closing Date as disclosed to Buyer. Notwithstanding the
foregoing, Buyer shall not be obligated to provide to the Company Employees
benefits comparable to those provided under the MagneTek Flexcare Retirement
Pension Plan or the MagneTek Flexcare Savings (401(k)) Plan. Buyer assumes
all obligations and liabilities, if any, under the WARN Act (and any similar
state or foreign law) arising out of the transactions contemplated by this
Agreement. Buyer also agrees to comply with the terms of the WARN Act and any
comparable state laws with respect to any action that under any such laws
would require any notice or filing prior to the Closing Date, or would give
rise to any liability of Seller or MagneTek thereafter.
(b) On the Closing Date, Buyer shall establish a group health plan
for Company Employees which shall waive any exclusion or limitation with
respect to pre-existing conditions and actively-at-work exclusions and shall
provide that any out-of-pocket health expenses incurred by a Company Employee
or his covered dependents during 1996 prior to the Closing Date shall be taken
into account under Buyer's group health plan for the remainder of 1996 for
purposes of satisfying applicable deductible, coinsurance and maximum covered
health benefit claims by Company Employees and their covered dependents for
services rendered on or after the Closing Date. Neither Buyer nor its group
health plan for Company Employees shall be liable for any claims for health
benefits for services rendered on or prior to the Closing Date regardless of
when such claim is reported.
(c) As soon as practicable, but effective as of the Closing Date,
Buyer shall, or shall cause an Affiliate to, accept sponsorship of the
Larsen-Hogue Plan, and MagneTek and Seller shall take or cause to be taken all
such action as may be necessary to effect said change in sponsorship.
MagneTek will transfer to or at the direction of Buyer or such Affiliate any
related contracts, insurance policies or other agreements or documentation as
are necessary or appropriate for the customary operation of the Larsen-Hogue
Plan. As of the Closing Date, Buyer shall assume all of MagneTek's and
Seller's liability with respect to the Larsen-Hogue Plan. Neither MagneTek,
Seller nor any of their ERISA Affiliates shall have any liability with respect
to the Larsen-Hogue Plan after the Closing Date.
(d) Effective as of the Closing Date, Canada Sub shall cease to be a
participating employer under each Company Plan, the Company Employees shall
cease accruing any additional benefits
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under all Company Plans (other than the Larsen-Hogue Plan), and MagneTek and
Seller shall take or cause to be taken, all such action as may be necessary to
effect such cessation of participation. To the extent permitted by law, as of
the Closing Date MagneTek and Seller will vest the Company Employees in their
accrued benefits under all Company Plans that are qualified under Section
401(a) of the Code as if each such employee had remained employed by MagneTek
or an ERISA Affiliate of MagneTek through the vesting periods applicable to
all of such employee's benefits accrued through the Closing Date.
(e) With respect to all Company Plans other than the Larsen-Hogue
Plan and except as provided in Sections 9.1(f) and 9.1(g), MagneTek shall
remain responsible and be liable for, and none of Grand Eagle, Buyer or Canada
Sub shall assume or be responsible for, any obligations or liabilities
thereunder.
(f) VACATION, HOLIDAY, SICK, SHORT-TERM DISABILITY AND SEVERANCE
PAY. On the Closing Date, Buyer shall assume Seller's liability for vacation,
holiday, sick, short-term disability and severance pay with respect to all
Company Employees (other than any such benefits arising under any Stay and Pay
Agreements in effect at or prior to the Closing) to the extent such
obligations are reflected on the Closing Balance Sheet.
(g) With respect to the Buyer's Employee Plans, Buyer shall, and
shall cause Canada Sub to, grant all Company Employees credit, effective as of
the Closing Date, for all service with MagneTek and its ERISA Affiliates
(including Seller and Canada Sub) and their respective predecessors prior to
the Closing Date for all purposes (other than service for benefit accrual
purposes under a defined benefit pension plan; however, this shall not
preclude Buyer from granting such credit) for which such service was
recognized by MagneTek and its ERISA Affiliates (including Seller and Canada
Sub) under any corresponding Company Plan.
(h) CANADA SUB PLANS. Canada Sub shall remain responsible and be
liable for all Canada Sub Plans. Neither MagneTek nor Seller shall have any
liability with respect to a Canada Sub Plan after the Closing Date.
(i) COMPANY EMPLOYEES COVERED BY A COLLECTIVE BARGAINING AGREEMENT.
On, and effective as of, the Closing Date Buyer shall expressly recognize any
collective bargaining representative recognized by MagneTek or Seller as of
the Closing Date for any collective bargaining units that include Company
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Employees ("Bargaining Employees") and shall either (i) assume such collective
bargaining agreements existing on the Closing Date with respect to such
Bargaining Employees, or (ii) negotiate with any such collective bargaining
representative a new collective bargaining agreement covering such Bargaining
Employees; provided, however, in either case, Buyer shall assume and discharge
all of MagneTek's and Seller's obligations (except for obligations for payroll
wages earned for periods prior to the Closing Date) with respect to the
Bargaining Employees under any such collective bargaining agreement on or
after the Closing Date. Notwithstanding anything in this Section 9.1 to the
contrary, effective on the Closing Date, Buyer shall adopt or establish for
the benefit of the Bargaining Employees all such employee benefit plans,
programs and policies as are required by such collective bargaining agreements.
(j) NO THIRD-PARTY BENEFICIARIES. No provision of this Section 9.1
shall create third-party beneficiary rights in any Company Employee (or Canada
Sub employee), including, without limitation, any right to continued
employment or employment in any particular position with Buyer (or Canada Sub)
for any specified period of time after the Closing Date.
ARTICLE 10
INDEMNIFICATION
10.1 TAX INDEMNIFICATION.
(a) Subject to all of the terms and conditions of this Article 10,
Seller and MagneTek shall jointly and severally indemnify and hold harmless
each Indemnified Buyer Affiliate from (i) all liability for Taxes of Seller or
Canada Sub for Pre-Closing Tax Periods (as defined below) other than any
liability for Taxes (a) included as a payable or other short-term liability
for purposes of preparing the Closing Balance Sheet, (b) that is an Assumed
Liability, or (c) with respect only to Canada Sub, arising on, or as a result
of events occurring on, the Closing Date as a result of actions taken by or at
the direction of Buyer or any Affiliate of Buyer, and (ii) all liability for
reasonable legal fees and expenses incurred with respect to any item
indemnified pursuant to clause (i) of this Section 10.1(a) other than the cost
of preparing Tax Returns described in Section 11.1. "Pre-Closing Tax Period"
shall mean any taxable period
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ending on or before the Closing Date and the portion ending at the close of
business on the Closing Date of any taxable period that includes (but does not
end on) the closing Date.
(b) Buyer shall, and shall cause Canada Sub to, jointly and
severally indemnify and hold harmless each Indemnified Seller Affiliate from
(i) all liability for Taxes of Buyer and, with respect to Taxes attributable
to periods or portions thereof following the Pre-Closing Tax Period, Canada
Sub, (ii) all liability for Taxes that are included as a payable or other
short-term liability for purposes of preparing the Closing Balance Sheet or
that are Assumed Liabilities, (iii) all liabilities of Canada Sub arising on,
or as a result of events occurring on, the Closing Date as a result of actions
taken by or at the direction of Buyer or any Affiliate of Buyer, and (iv) all
liability for reasonable legal fees and expenses incurred with respect to any
item indemnified pursuant to clauses (i) through (iii) of this Section 10.1(b)
other than the cost of preparing Tax Returns described in Section 11.1.
10.2 OTHER INDEMNIFICATION BY SELLER. Subject to all of the terms and
conditions of this Article 10, each of Seller and MagneTek shall jointly and
severally indemnify and hold harmless each Indemnified Buyer Affiliate from
any Losses suffered or incurred by such Indemnified Buyer Affiliate (other
than any relating to (i) liabilities for Taxes, and (ii) the specified
liabilities and obligations identified and described in Sections 10.4 and
10.5) to the extent arising from, (a) if the Closing occurs, any breach of any
representation or warranty of Seller or MagneTek contained in this Agreement
which survives the Closing or in any certificate, instrument or other document
delivered pursuant hereto, (b) any breach of any covenant of Seller or
MagneTek contained in this Agreement requiring performance after the Closing
Date or (c) any Excluded Liability. Seller and MagneTek shall not have any
liability under clause 10.2(a) or 10.2(b) above unless the aggregate of all
Losses for which Seller and MagneTek would, but for this proviso, be liable
pursuant to this Section 10.2(a) and 10.2(b), together with the aggregate of
all Losses for which Seller and MagneTek are liable pursuant to Sections
10.2(a) and (b) of the Other Agreement, exceeds $220,000 on a cumulative basis
(and then only to the extent of any such excess). Seller's and MagneTek's
aggregate liability under Sections 10.2(a) and (b) of this Agreement and
Sections 10.2(a) and (b) of the Other Agreement shall in no event exceed
$5,500,000. MagneTek's liability under Section 10.2(c) is only limited as set
forth in Section 10.6. The foregoing
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provisions notwithstanding, nothing in this Agreement shall in any manner
amend, modify or limit any obligation of Seller or MagneTek existing at the
Closing Date to indemnify or hold harmless any officer, director, employee or
agent of Canada Sub.
10.3 OTHER INDEMNIFICATION BY BUYER. Subject to all of the terms and
conditions of this Article 10, Buyer shall, and shall cause Canada Sub to,
indemnify and hold harmless each Indemnified Seller Affiliate from any Losses
suffered or incurred by such Indemnified Seller Affiliate (other than any
relating to Tax matters, for which indemnification is provided in Section 10.1
or environmental matters, for which indemnification is provided in Section
10.4) to the extent arising from, (a) if the Closing occurs, any breach of any
representation or warranty of Buyer or Grand Eagle contained in this Agreement
which survives the Closing or in any certificate, instrument or other document
delivered pursuant hereto or in connection herewith, (b) any breach of any
covenant of Buyer or Grand Eagle contained in this Agreement requiring
performance after the Closing Date, (c) any Assumed Liability or (d) the
ongoing operations of Buyer and the Assets after the Closing occurs. Buyer
and Canada Sub shall not have any liability under clause (a) or (b) above
unless the aggregate liability of Buyer and Canada Sub under such clauses (a)
and (b), together with the aggregate liability of the buyer pursuant to
Section 10.3(a) and (b) of the Other Agreement, shall exceed $220,000 on a
cumulative basis (and then only to the extent of any such excess). Buyer's
and Canada Sub's aggregate liability under Section 10.3(a) and (b), together
with the aggregate liability of Buyer (as defined in the other Agreement)
under Section 10.3(a) and (b) of the Other Agreement, shall in no event exceed
$5,500,000.
10.4 INDEMNIFICATION FOR ENVIRONMENTAL MATTERS.
(a) Subject to all the terms and conditions of this Article 10.4,
Seller and MagneTek shall jointly and severally indemnify and hold harmless
each Indemnified Buyer Affiliate from and against all Losses resulting from
claims or demands by any Governmental Authority or any third party which is
unrelated to Buyer or its Affiliates arising under any Environmental Law to
the extent such claims or demands relate to:
(i) Seller's failure to perform any of its obligations as provided
in Section 6.9 herein;
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(ii) Seller's arrangement for treatment, storage, recycling or
disposal, prior to the Closing Date, of any Hazardous Materials at any
offsite disposal facility; or
(iii) conditions as of the Closing Date at any Seller Facility.
Seller and MagneTek shall not have any liability under clause (ii)
or (iii) above unless the aggregate of all Losses for which Seller and
MagneTek would, but for this proviso, be liable under such clauses (ii) and
(iii) and under Sections 10.4(a)(ii) and (iv) of the Other Agreement shall
exceed $100,000 on a cumulative basis (and then only to the extent of any such
excess). Seller's and MagneTek's aggregate liability under Sections
10.4(a)(ii)and (iii) and under Sections 10.4(a)(ii) and (iv) of the Other
Agreement shall in no event exceed $1,500,000. Such $100,000 deductible and
$1,500,000 maximum indemnification shall be unrelated to the $220,000
deductible and $5,500,000 maximum indemnification provided under Sections 10.2
of this and the Other Agreement. Except as provided in Section 10.6(f), there
shall be no limitation on the maximum amount of indemnification provided under
Section 10.4(a)(i) of this Agreement. The indemnification provided by Section
10.4(a)(ii) and Section 10.4(a)(iii) will expire on the third anniversary of
the Closing Date.
Notwithstanding anything in this Agreement to the contrary, Seller's
and MagneTek's indemnification liability hereunder shall in no event be
construed to extend to or include any remediation or other liability arising
as the result of the presence of asbestos in or upon the improvements located
on any Seller Facility at any time.
(b) Buyer shall indemnify and hold harmless each Indemnified Seller
Affiliate from and against all Losses resulting from claims or demands by any
Governmental Authority or third party arising under any Environmental Law to
the extent such Losses are attributable to Buyer's use or occupancy of any
Seller Facility after the Closing Date.
10.5 INDEMNIFICATION FOR CANADA SUB. Subject to all of the terms and
conditions of this Article 10, Seller and MagneTek shall jointly and severally
indemnify and hold harmless the Indemnified Buyer Affiliates from any Losses
suffered or incurred by any of the Indemnified Buyer Affiliates (a) to the
extent arising from any matter involving Canada Sub which would, if such
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matter involved Seller or Buyer, be an Excluded Liability, and (b) arising
from Canada Sub's status as an ERISA Affiliate of MagneTek or of any Affiliate
of MagneTek. Such indemnification is limited as provided in Section 10.6.
10.6 LOSSES NET OF INSURANCE, ETC.
(a) The amount of any Loss for which indemnification is provided
under this Article 10 shall be net of all amounts recovered by the Indemnified
Person under insurance policies with respect to such Loss and shall be net of
any reserve in respect thereof reflected on the Closing Balance Sheet.
(b) If the Indemnifying Person makes any payment under this Article
10 in respect of any Losses, the Indemnifying Person shall be subrogated, to
the extent of such payment and except to the extent that such subrogation is
not permitted by the terms of any insurance policy, to the rights of the
Indemnified Person against any insurer or third party with respect to such
Losses.
(c) Notwithstanding anything to the contrary elsewhere in this
Agreement, no party shall, in any event, be liable to any Indemnified Person
for any consequential damages, including, but not limited to, loss of revenue
or income, cost of capital, diminution in value or loss of business reputation
or opportunity relating to the breach or alleged breach of this Agreement.
Each party agrees that it will not seek punitive damages from any Indemnified
Person as to any matter under, relating to or arising out of the transactions
contemplated by this Agreement.
(d) The parties hereto agree that the indemnification provisions of
this Article 10 are intended to provide the exclusive remedy as to all Losses
each may incur arising from, or relating to the transactions contemplated
hereby and each party hereby waives, to the extent it may do so, any other
rights or remedies that may arise under any applicable statute, rule or
regulation. Notwithstanding the foregoing, (i) Buyer may exercise any rights
or remedies it may have under or with respect to the Non-Competition Agreement
and (ii) the rights of any party under this Article 10 are not exclusive with
respect to fraudulent representations, actions or omissions by another party.
(e) Any indemnification payment for Taxes required under this
Article 10 shall for purposes of federal, state and local income Taxes, be
treated as a purchase price adjustment.
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(f) The parties agree that the aggregate liability of Seller and
MagneTek under all provisions of this Agreement, including all indemnification
provisions of this Article 10, shall in no event exceed the sum of the Cash
Purchase Price and all amounts paid or otherwise due under the Seller Note (in
cash or by offset under Section 10.11) prior to the date of the claim for
indemnification hereunder.
10.7 TERMINATION OF INDEMNIFICATION. The obligations to indemnify and
hold harmless a party hereto, (w) pursuant to Sections 10.1, 10.2(c), 10.3(c)
and (d) and 10.5 shall not terminate, (x) pursuant to Sections 10.2(a) and
10.3(a), shall terminate when the applicable representation or warranty
terminates pursuant to Section 10.10, (y) pursuant to Section 10.4, shall
terminate as set forth therein and (z) pursuant to clauses 10.2(b) and
10.3(b), shall terminate on the third anniversary of the Closing Date;
PROVIDED, HOWEVER, that as to clauses (w), (x), (y) and (z) above, such
obligations to indemnify and hold harmless shall not terminate with respect to
any item as to which the Person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice (stating in reasonable detail the basis of such claim) to the
Indemnifying Person.
10.8 PROCEDURES RELATING TO INDEMNIFICATION (OTHER THAN UNDER SECTION
10.1). In order for an Indemnified Person to be entitled to any
indemnification provided for under this Agreement (other than under Section
10.1) in respect of, arising out of or involving a claim or demand made by any
Person against the indemnified Person (a "Third Party Claim"), such
Indemnified Person must notify the Indemnifying Person in writing, and in
reasonable detail, of the Third Party Claim within 10 Business Days (30
calendar days in respect of claims under Section 10.4) after receipt by such
Indemnified Person of written notice of the Third Party Claim; PROVIDED,
HOWEVER, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the Indemnifying
Person shall have been actually prejudiced as a result of such failure (except
that the Indemnifying Person shall not be liable for any Losses incurred
during the period in which the Indemnified Person failed to give such notice).
Thereafter, the Indemnified Person shall deliver to the Indemnifying Person,
within five Business Days after the Indemnified Person's receipt thereof,
copies of all notices and documents (including court papers) received by the
Indemnified Person relating to the Third Party Claim.
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If a Third Party Claim is made against an Indemnified Person, the
Indemnifying Person will be entitled to participate in the defense thereof
and, if it so chooses, to assume the defense thereof with counsel selected by
the Indemnifying Person and reasonably satisfactory to the Indemnified Person.
Should the Indemnifying Person so elect to assume the defense of a Third
Party Claim, the Indemnifying Person will not be liable to the Indemnified
Person for legal fees and expenses subsequently incurred by the Indemnified
Person in connection with the defense thereof. If the Indemnifying Person
assumes such defense, the Indemnified Person shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Person, it being
understood that the Indemnifying Person shall control such defense. The
Indemnifying Person shall be liable for the fees and expenses of counsel
employed by the Indemnified Person for any period during which the
Indemnifying Person has not assumed the defense thereof (other than during any
period in which the Indemnified Person shall have failed to give notice of the
Third Party Claim as provided above). If the Indemnifying Person chooses to
defend or prosecute any Third Party Claim, all the parties hereto shall
cooperate in the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the Indemnifying Person's request) the
provision to the Indemnifying Person of Records and information which are
reasonably relevant to such Third Party Claim, and employees available on
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Whether or not the Indemnifying Person shall
have assumed the defense of a Third Party Claim, the Indemnified Person shall
not admit any liability with respect to, or settle, compromise or discharge,
such Third Party Claim without the Indemnifying Person's prior written consent
(which consent shall not be unreasonably withheld or delayed). All Tax Claims
(as defined in Section 10.9) shall be governed by Section 10.9.
10.9 PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS.
(a) If a claim shall be made by any Governmental Authority, which,
if successful, might result in an indemnity payment to any Person hereunder
pursuant to Section 10.1 (a "Tax Indemnitee"), the Tax Indemnitee shall
promptly notify the party against whom indemnification is sought (the "Tax
Indemnitor") in writing of such claim (a "Tax Claim"). If notice of a Tax
Claim is not given to the Tax Indemnitor within a sufficient period of time to
allow the Tax Indemnitor to effectively contest such Tax
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Claim, or in reasonable detail to apprise the Tax Indemnitor of the nature of
the Tax Claim, in each case taking into account the facts and circumstances
with respect to such Tax Claim, the Tax Indemnitor shall not be liable to the
Tax Indemnitee to the extent that the Tax Indemnitor's ability to effectively
contest such Tax Claim is actually prejudiced as a result thereof.
(b) With respect to any Tax Claim for which a Tax Indemnitee seeks
indemnification hereunder, the Tax Indemnitor shall control all proceedings
taken in connection with such Tax Claim (including, without limitation,
selection of counsel) and, without limiting the foregoing, may in its sole
discretion (and at its sole cost and expense) pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with any
Governmental Authority with respect thereto and may, in its sole discretion,
either pay the Tax claimed and sue for a refund where applicable law permits
such refund suits or contest the Tax Claim in any permissible manner;
PROVIDED, HOWEVER, that the Tax Indemnitor shall not settle or compromise a
Tax Claim without giving prior notice to the Tax Indemnitee and without the
Tax Indemnitee's consent, which shall not be unreasonably withheld or delayed,
if such settlement or compromise would have an adverse effect on the Tax
liabilities of the Tax Indemnitee, its Affiliates or any member of its
Affiliated Group. The Tax Indemnitee, and each of its Affiliates, shall
cooperate with the Tax Indemnitor in contesting any Tax Claim, which
cooperation shall include, without limitation, the retention and (upon the Tax
Indemnitor's request) the provision to the Tax Indemnitor of Records and
information which are reasonably relevant to such Tax Claim, and making
employees available on a mutually convenient basis to provide additional
information or explanation of any material provided hereunder or to testify at
proceedings relating to such Tax Claim.
(c) In no case shall Buyer or Canada Sub settle or otherwise
compromise any Tax Claim for which indemnification is sought hereunder without
MagneTek's prior written consent, which consent shall not be unreasonably
withheld.
10.10 SURVIVAL OF REPRESENTATIONS. The representations and warranties
in this Agreement and in any other document delivered in connection herewith
shall survive the Closing solely for purposes of Sections 10.2(a) and 10.3(a)
and shall terminate at the close of business three years following the Closing
Date, except that the representations and warranties in Sections 4.8, 4.15 and
4.17 shall not survive the Closing.
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10.11 MANDATORY SETOFF OF SELLER NOTE. (a) Each of the parties agrees,
on its own behalf and (with respect to MagneTek and Seller) on that of any
permitted transferee of the Seller Note, that to the extent any amount is due
in respect of indemnification to an Indemnified Buyer Affiliate under this
Agreement or the Other Agreement, such amount shall be offset against the
interest and principal due under the Seller Note and the similar note issued
under the Other Agreement, with offsets applied first to interest payments
then due in the order of their maturity and then to principal payments in the
order of their maturity, before any amount shall be payable by Seller or
MagneTek. In the event any such offset is contested by MagneTek, the matter
shall be resolved in the same fashion as any other dispute under this
Agreement.
ARTICLE 11
POST CLOSING MATTERS
11.1 TAX MATTERS.
(a) For any taxable period of Canada Sub ending after the Closing
Date, Buyer shall timely prepare and file, or cause to be timely prepared and
filed, with the appropriate Governmental Authorities all Tax Returns required
to be filed by Canada Sub and will pay all Taxes due with respect to such
Returns; PROVIDED that Seller will reimburse Buyer, within thirty (30) days of
such payment, for any amount owed by Seller pursuant to Section 10.1 with
respect to any Pre-Closing Tax Period covered by such Returns. For any
taxable period of Seller and Canada Sub that ends on or before the Closing
Date, Seller shall timely prepare and file, or cause to be timely prepared and
filed, with the appropriate Governmental Authorities all Tax Returns required
to be filed and will pay all Taxes due with respect to such Tax Returns;
provided that Buyer will reimburse Seller, within thirty (30) day's of such
payments, for any amount owed by Buyer or Canada Sub pursuant to Section 10.1.
All Tax Returns of Seller and Canada Sub prepared pursuant to this Section
11.1(a) shall be prepared accurately and in a manner consistent with such Tax
Returns for prior periods.
(b) Any refunds or credits of Taxes of Canada Sub paid with respect
to any taxable period or portion thereof ending on or before the Closing Date
shall be for the account of Seller unless such refund or credit results from a
net operating loss or
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other carryback incurred after the Closing Date. Any refunds or credits of
Taxes of Canada Sub paid with respect to any taxable period or portion thereof
beginning after the Closing Date shall be for the account of Canada Sub.
Buyer and Seller shall cooperate to effect the purposes of the foregoing
provisions. Any amounts payable to Buyer or Seller to effect the provisions of
this clause (b) shall be net of any tax cost or benefit to the payor
attributable to the receipt of such refund and/or the payment of such amounts
(for this purpose a cost shall not include the inability to carry back future
losses due to prior refunds); in no event shall such payment exceed the amount
of the refund. Notwithstanding the foregoing, the control of the prosecution
of a claim for refund of Taxes attributable to Pre-Closing Tax Periods paid
pursuant to a deficiency assessed subsequent to the Closing Date as a result
of an audit shall be governed by the provisions of Section 10.9.
(c) MagneTek shall be responsible for filing any amended
consolidated, combined or unitary Tax Returns (whether original or amended) in
which Canada Sub was included for any taxable period or portion thereof ending
on or prior to the Closing Date which are required as a result of examination
adjustments made by the IRS or by the applicable state, local or foreign
taxing authorities for such taxable years as finally determined. For those
jurisdictions in which separate Tax Returns are filed by Canada Sub, any
required amended returns resulting from such examination adjustments, as
finally determined, shall be prepared by MagneTek and furnished to Canada Sub
and Buyer for approval (which approval shall not be unreasonably withheld or
delayed), signature and filing at least 10 days prior to the due date for
filing such returns.
(d) Except as otherwise specifically provided for in this Agreement,
all other Taxes shall be payable by and be the responsibility of the party on
whom such Taxes are imposed. Seller shall pay any stock transfer taxes due as
a result of the sale of the Canada Sub Shares.
(e) Buyer shall not, and shall cause its Affiliates not to, make or
cause to be made an election pursuant to Section 338 of the Code with respect
to the purchase of the stock of Canada Sub pursuant to this Agreement.
11.2 ACCESS TO FORMER BUSINESS RECORDS. For a period of seven (7) years
following the Closing, Buyer will retain all Records of Seller and Canada Sub
existing as of the Closing and
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in its possession or control. During such period, Buyer will afford
authorized representatives of MagneTek access to all of such Records at
reasonable times and during normal business hours at the principal business
office of Buyer or Grand Eagle, as applicable, or at such other location or
locations at which such Records may be stored or maintained from time to time,
and will permit such representatives to make abstracts from, or copies of, any
of such Records, or to obtain temporary possession of any thereof as may be
reasonably required by MagneTek at MagneTek's sole cost and expense. During
such period, Buyer will, at MagneTek's expense (in respect of any
out-of-pocket expenses), cooperate with MagneTek in furnishing information,
evidence, testimony and other reasonable assistance in connection with any
action, proceeding or investigation relating to the Business or Canada Sub
prior to the Closing.
11.3 USE OF TRADEMARK AND TRADE NAMES. Notwithstanding anything to the
contrary in this Agreement, Buyer and Canada Sub may continue to use the name
"MagneTek" and related trademarks, corporate names, and tradenames
incorporating "MagneTek", and the stylized "MagneTek" logos, and (to the
extent permitted by agreements between Seller and other persons previously
delivered to Buyer) the phrases "NEC" and "National Electric Coil" and related
trademarks, corporate names, tradenames and logos (i) in displays, signage and
postings for sixty (60) days after the Closing Date to the extent such
displays, signage or postings exist on the Closing Date; (ii) for a period of
two (2) years, to state the former affiliation of Canada Sub and of the
Business as conducted by Buyer with MagneTek and Seller (e.g., formerly a
subsidiary of "MagneTek, Inc." or "formerly [name of Seller or Canada Sub]");
and (iii) to the extent the trade names, trademarks, service marks or logos of
any of Seller's affiliates or of Seller appear on the stationery, packaging
materials, supplies or inventory of Canada Sub on hand as of the Closing Date
or on order at the time of the Closing or included in the Assets, until such
is exhausted.
11.4 FURTHER ASSURANCES. If at any time after the Closing Date any
further action is reasonably necessary or desirable to carry out the purposes
of this Agreement, then promptly upon the request of the other party, Seller,
MagneTek, Buyer or Grand Eagle, as the case may be, shall take such action
(including, but not limited to, the execution of additional documents and
instruments).
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ARTICLE 12
GENERAL PROVISIONS
12.1 ASSIGNMENT. This Agreement and the rights and obligations hereunder
shall not be assignable or transferable by Buyer prior to the Closing
(including by operation of law in connection with a merger, or sale of
substantially all the assets, of Buyer) without the prior written consent of
Seller; PROVIDED, HOWEVER, that Buyer may assign its right to purchase the
Assets hereunder to an Affiliate of Grand Eagle without the prior written
consent of Seller; PROVIDED FURTHER, HOWEVER, that no assignment shall limit
or affect the assignor's obligations hereunder.
12.2 NO THIRD-PARTY BENEFICIARIES. Except as provided in Article 10 as
to Indemnified Persons, this Agreement is for the sole benefit of the parties
hereto and their permitted assigns and nothing herein expressed or implied
shall give or be construed to give to any person or entity, other than the
parties hereto and such assigns, any legal or equitable rights hereunder.
12.3 TERMINATION.
(a) Anything contained herein to the contrary notwithstanding, this
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing Date:
(i) by mutual written consent of all parties; or
(ii) by any party hereto, if the Closing does not occur on or prior
to April 5, 1996; or
(iii) by Buyer within six Business Days after Seller shall have
notified Buyer that Buyer has received all of the Schedules described in
this Agreement; provided, however, that the Buyer may only so terminate
this Agreement if the Schedules disclose a matter, not previously
disclosed to Buyer in writing by MagneTek or Seller, which has a Material
Adverse Effect. In the event Buyer exercises the right to terminate this
Agreement under this Section 12.3(a)(iii), the Other Agreement shall
automatically terminate.
(b) In the event of termination by any party pursuant to this
Section 12.3, written notice thereof shall forthwith be
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given to the other parties and the transactions contemplated by this Agreement
shall be terminated, without further action by either party. If the
transactions contemplated by this Agreement are terminated as provided herein:
(i) Buyer and Grand Eagle shall return to Seller all documents and
copies and other material received from Seller, MagneTek or Canada Sub
relating to the transactions contemplated hereby, whether so obtained
before or after the execution hereof; and
(ii) All confidential information received by Buyer or Grand Eagle
with respect to the businesses of Seller and Canada Sub shall be treated
in accordance with the Confidentiality Agreement which shall remain in
full force and effect notwithstanding the termination of this Agreement.
(c) If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 12.3, this
Agreement shall become void and of no further force and effect, except for the
provisions of (i) Section 7.1 relating to the obligation of Buyer and Grand
Eagle to keep confidential certain information and data obtained by it, (ii)
Section 12.4 relating to certain expenses, (iii) Section 12.5 relating to
attorney fees and expenses, (iv) Section 8.2 relating to publicity, (v)
Section 12.11 relating to finder's fees and broker's fees and (vi) this
Section 12.3. Nothing in this Section 12.3 shall be deemed to release any
party from any liability for any breach by such party of the terms and
provisions of this Agreement or to impair the right of any party to compel
specific performance by the other parties of its obligations under this
Agreement.
12.4 EXPENSES. Whether or not the transactions contemplated hereby are
consummated, and except as otherwise provided in this Agreement, all fees,
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
fees, costs or expenses.
12.5 ATTORNEYS' FEES. Should any litigation be commenced concerning this
Agreement or the rights and duties of any party with respect to it, the party
prevailing shall be entitled, in addition to such other relief as may be
granted, to a reasonable sum for such party's attorney fees and expenses
determined by the
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court in such litigation or in a separate action brought for that purpose.
12.6 AMENDMENTS. No amendment to this Agreement shall be effective
unless it shall be in writing and signed by all parties hereto.
12.7 NOTICES. All notices or other communications required or permitted
to be given hereunder shall be in writing and shall be delivered by hand or
sent, postage prepaid, by registered or certified mail, and shall be deemed
given when so delivered, as follows:
(i) if to Buyer or Grand Eagle,
Eastern Electric Apparatus
Repair Company, Inc.
OR Grand Eagle Companies Inc.
(AS THE CASE MAY BE)
130 East Randolph Drive, 29th Floor
Chicago, Illinois 60601
Attention: Jerry O. Williams, President and CEO
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with a copy to:
Fitzpatrick Eilenberg & Zivian
20 North Wacker Drive, Suite 2200
Chicago, Illinois 60606
Attention: Carol Pegnato, Esq.
(ii) if to Seller or MagneTek,
MagneTek National Electric Coil, Inc.
OR MagneTek, Inc.
(AS THE CASE MAY BE)
26 Century Boulevard
P.O. Box 290159
Nashville, Tennessee 37229-0159
Attention: Samuel A. Miley, Esq., General Counsel
with a copy to:
MagneTek, Inc.
26 Century Boulevard
P.O. Box 290159
Nashville, Tennessee 37229-0159
Attention: John P. Colling, Jr., Vice President and Treasurer
and with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071
Attention: Jennifer Bellah, Esq.
12.8 INTERPRETATION; EXHIBITS AND SCHEDULES. The headings contained in
this Agreement, in any Exhibit or Schedule hereto and in the table of contents
to this Agreement, are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Any matter disclosed in
one schedule hereto shall be deemed incorporated by reference into each other
schedule hereto and disclosed in each such Schedule. All Exhibits and
Schedules annexed hereto or referred to herein are hereby incorporated in and
made a part of this Agreement as if set forth in full herein. Any capitalized
terms used in any Schedule or Exhibit, but not otherwise defined therein,
shall have the meaning as defined in this Agreement.
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12.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
12.10 ENTIRE AGREEMENT. This Agreement, the Non-Competition Agreement
and the Confidentiality Agreement, together with all Exhibits and Schedules
hereto and thereto, contain the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersede all
prior oral and written agreements and understandings relating to such subject
matter, including without limitation the letter of intent between MagneTek and
Grand Eagle dated December 13, 1995.
12.11 FEES. Each party hereto hereby represents and warrants that (a)
the only brokers or finders that have acted for such party in connection with
this Agreement or the transactions contemplated hereby or that may be entitled
to any brokerage fee, finder's fee or commission in respect thereof are Lehman
Brothers with respect to Seller and MagneTek, and PaineWebber Incorporated and
Mega Capital Corp. with respect to Buyer and Grand Eagle, and (b) such parties
will pay all fees or commissions which may be payable to the Persons so named.
12.12 SEVERABILITY. If any provision of this Agreement or the
application of any such provision to any Person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
12.13 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflicts of law principles of such State.
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IN WITNESS WHEREOF, the parties have caused this Asset Purchase Agreement
to be duly executed as of the date first written above.
MAGNETEK NATIONAL ELECTRIC COIL,
INC., a Delaware corporation
By:
-----------------------------
John P. Colling, Jr.,
Vice President
MAGNETEK, INC., a Delaware
corporation
By:
-----------------------------
John P. Colling, Jr.,
Vice President
EASTERN ELECTRIC APPARATUS REPAIR
COMPANY, INC., a Georgia
corporation
By:
-----------------------------
Jerry O. Williams, President
GRAND EAGLE COMPANIES INC., a
Delaware corporation
By:
-----------------------------
Jerry O. Williams, President
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