ASSET PURCHASE AGREEMENT
BETWEEN
MAGNETEK, INC.,
AND
JEFFERSON ELECTRIC, INC.
DATED AS OF AUGUST ____, 1996
SALE OF JEFFERSON ELECTRIC DIVISION OF MAGNETEK, INC.
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS. . . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 2. CLOSING; PURCHASE PRICE ADJUSTMENT . . . . . 6
2.1 Sale and Transfer of the Assets . . . . . . . . . . . . . . . . . . . 6
2.2 Assets Not Transferred. . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Assumed and Excluded Liabilities. . . . . . . . . . . . . . . . . . . 8
2.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Tax Allocation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.7 Sales and Use Tax . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 3. CONDITIONS TO CLOSING . . . . . . . . 12
3.1 Buyer's Obligation. . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2 Seller's Obligation . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER. . . . 14
4.1 Authority; Corporate Matters; No Conflicts; Governmental Consents . . 14
4.2 Financial Statements; Absence of Changes. . . . . . . . . . . . . . . 15
4.3 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Assets Other than Real Property Interests . . . . . . . . . . . . . . 17
4.5 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.6 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.8 Litigation; Decrees . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.9 Employee and Related Matters. . . . . . . . . . . . . . . . . . . . . 19
4.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . 19
4.11 Employee and Labor Relations. . . . . . . . . . . . . . . . . . . . . 19
4.12 Assets of the Business. . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BUYER. . . . 20
5.1 Authority; No Conflicts; Governmental Consents. . . . . . . . . . . . 20
5.2 Actions and Proceedings, etc. . . . . . . . . . . . . . . . . . . . . 21
5.3 Buyer's Acknowledgment. . . . . . . . . . . . . . . . . . . . . . . . 21
5.4 No Knowledge of Seller's Breach . . . . . . . . . . . . . . . . . . . 21
5.5 Exon-Florio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 6. COVENANTS OF SELLER. . . . . . . . . 22
6.1 Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2 Ordinary Conduct. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.4 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . 22
6.5 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.6 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . 23
6.7 Seller Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.8 Supply Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.9 Product Support . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 7. COVENANTS OF BUYER. . . . . . . . . . 24
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.3 Waiver of Bulk Sales Law Compliance . . . . . . . . . . . . . . . . . 25
7.4 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.6 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 8. MUTUAL COVENANTS. . . . . . . . . . 26
8.1 Permits and Consents. . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.3 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.4 Reasonable Efforts; Further Assurances. . . . . . . . . . . . . . . . 27
8.5 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.6 Access to Former Business Records . . . . . . . . . . . . . . . . . . 28
8.7 Use of Trademark and Trade Names. . . . . . . . . . . . . . . . . . . 28
8.8 Required Modifications or Replacements of Products. . . . . . . . . . 28
ARTICLE 9. EMPLOYEE BENEFIT MATTERS. . . . . . . . 29
9.1 Employee Retention. . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.2 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . 29
9.3 Vacation, Holiday and Severance Pay . . . . . . . . . . . . . . . . . 30
9.4 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . 30
9.5 Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 10. INDEMNIFICATION. . . . . . . . . . 31
10.1 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . 31
10.2 Indemnification by Buyer. . . . . . . . . . . . . . . . . . . . . . . 31
10.3 Indemnification for Environmental Matters . . . . . . . . . . . . . . 32
10.4 Losses Net of Insurance, etc. . . . . . . . . . . . . . . . . . . . . 32
10.5 Termination of Indemnification. . . . . . . . . . . . . . . . . . . . 33
10.6 Procedures Relating to Indemnification (Other Than for Tax Claims). . 33
10.7 Procedures Relating to Indemnification of Tax Claims. . . . . . . . . 34
10.8 Survival of Representations . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 11. GENERAL PROVISIONS. . . . . . . . . 35
11.1 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.2 No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . 35
11.3 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.5 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.6 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.8 Interpretation; Exhibits and Schedules. . . . . . . . . . . . . . . . 38
11.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.10 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.11 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
EXHIBITS AND SCHEDULES
EXHIBITS:
EXHIBIT A Bill of Sale, Assignment and Assumption Agreement. . . . A-1
EXHIBIT B Opinion of Baker, Donelson, Bearman & Caldwell . . . . . B-1
EXHIBIT C Opinion of General Counsel of Seller . . . . . . . . . . C-1
EXHIBIT D Opinion of Schober & Radtke S.C. . . . . . . . . . . . . D-1
SCHEDULES:
Schedule 2.1(b) Leased Property; Milwaukee Facility and Brownsville Facility
Schedule 2.1(e) Intellectual Property
Schedule 2.6 Tax Allocation
Schedule 4.1(b) Jurisdictions
Schedule 4.1(c) Accelerations, Default
Schedule 4.2 Financial Statements
Schedule 4.3 Taxes and Tax Exempt Use Property
Schedule 4.4 Liens on Assets
Schedule 4.5 Business Property
Schedule 4.6 Intellectual Property
Schedule 4.7 Contracts
Schedule 4.8 Litigation
Schedule 4.9 Seller Plans
Schedule 4.11 Employee and Labor Relations
Schedule 5.1(b) Buyer Conflicts
Schedule 6.2 Exceptions to Ordinary Course of Business
Schedule 9.2 Rates Applicable to Employee Benefit Plans
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of August ____, 1996 between MAGNETEK,
INC., a Delaware corporation ("Seller" or "MagneTek"), and JEFFERSON
ELECTRIC, INC., a Wisconsin corporation, ("Buyer").
Seller, through its Jefferson Electric Division (the "Division"), is
engaged in the business (the "Business") of developing, manufacturing,
selling and distributing various products, including dry type transformers.
The parties hereto desire that MagneTek sell, transfer, convey and assign to
Buyer all of the assets, properties, interests in properties and rights used
in, held for use in or otherwise relating to the Business, and that Buyer
purchase and acquire the same, subject to the assumption by Buyer of certain
liabilities and obligations of Seller relating to the Business, upon the
terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth,
the parties hereto hereby agree as follows:
ARTICLE 1. DEFINITIONS
1.1 Certain Defined Terms. As used in this Asset Purchase 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" has the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act by the SEC as in effect on the date hereof.
"Assets" has the meaning set forth in Section 2.1.
"Assigned Contracts" has the meaning set forth in Section 2.1(f).
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Bill of Sale, Assignment and Assumption Agreement" means a Bill of
Sale, Assignment and Assumption Agreement in substantially the form attached
hereto as Exhibit A.
"Business" has the meaning set forth in the preamble.
"Business Day" means a day other than a Saturday or a Sunday or
other day on which commercial banks in Wisconsin are authorized or required
by law to close.
"Business Employee" means any employee of Seller working
exclusively for the Business on the Closing Date, including any employee on
vacation, illness, or FMLA leave on such date.
"Business Property" has the meaning set forth in Section 4.5 hereto.
"Closing Balance Sheet" has the meaning set forth in Section 2.5.
"Closing Date" means the day on which the Closing occurs pursuant
to Section
2.4.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Confidential Information" has the meaning set forth in Section 6.7.
"Contract" means any contract, agreement, license, lease, sales or
purchase order or other legally binding commitment, whether written or oral,
to which MagneTek or the Business is a party and relating exclusively to the
Business.
"Contractual Obligation" means, as to Person, any provision or any
note, bond or security issued by such Person or of any mortgage, indenture,
deed or 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 Benefit Arrangements" means each and all pension,
supplemental pension, accidental death and dismemberment, life and health
insurance and benefits (including medical, dental, vision and
hospitalization), short and long-term disability, savings, bonus, deferred
compensation, incentive compensation, holiday, vacation, severance pay,
salary continuation, sick pay, sick leave, tuition refund, service award,
company car, scholarship, relocation, patent award, fringe benefit, flexible
spending account programs and other employee benefit arrangements, plans,
contracts, policies or practices providing employee or executive compensation
or benefits to Business Employees, other than the Employee Benefit Plans.
"Employee Benefit Plans" means each and all "employee benefit
plans," as defined in Section 3(3) of ERISA, maintained or contributed to by
Seller or in which Seller participates or participated and which provides
benefits to Business Employees, including (1) any such plans that are
"employee welfare benefit plans" as defined in Section 3(1) of ERISA and
(ii) any such plans that are "employee pension benefit plans" as defined in
Section 3(2) or ERISA.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Resource Conservation
and Recovery Act of 1976, as amended, and any other applicable statutes,
regulations, rules, ordinances or codes which relate to the protection of
human health or the environment from the effects of Hazardous Materials.
"Equipment" has the meaning set forth in Section 2.1(c).
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"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.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.3.
"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 Material" means any substance: (i) which is defined as
a hazardous waste, hazardous substance, pollutant or contaminant under any
Environmental Law; (ii) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and
is regulated by any Governmental Authority; or (iii) which contains gasoline,
diesel fuel or other petroleum hydrocarbons.
"Indemnified Person" means, with respect to any Loss, the Person
seeking indemnification hereunder.
"Indemnifying Person" means, with respect to any Loss, the Person
from whom indemnification is being sought hereunder.
"Intellectual Property" has the meaning set forth in Section 2.1(e).
"Inventory" has the meaning set forth in Section 2.1(d).
"Knowledge of Seller" with reference to any of the representations
and warranties of Seller means the actual knowledge of any "officer" of
MagneTek, as such term is defined in 17 C.F.R. 240.16a-1(f), and of any
other employee of Seller who is charged with overall responsibility for a
department of MagneTek, on a company-wide level, to the extent such officer
or employee had, on the date hereof, responsibility for matters that are the
subject of such representation and warranty; provided, however, that, unless
such officer had (a) actual knowledge to the contrary or (b) direct
responsibility at the Jefferson Electric Division for the subject matter
thereof, but to exclude Mike J. Buckna and Thomas Klink and to exclude any
other officer (as defined) of Buyer, such knowledge is based solely upon
information and materials supplied to Seller by personnel of Buyer, deemed
for this purpose to include Mike J. Buckna and Thomas Klink.
"Leased Property" has the meaning set forth in Section 2.1(b).
"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 10.4.
"March Balance Sheet" means the unaudited balance sheet of the
Business as of March 31, 1996, attached hereto as part of Schedule 4.2.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, property or condition (financial or other) of the
Business, taken as a whole or (b) the ability of Seller to consummate the
Transactions.
"Permits" has the meaning set forth in Section 2.1(g).
"Person" means an individual, partnership, corporation, business
trust, joint
stock company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.
"Purchase Note" has the meaning set forth in Section 2.4.
"Purchase Price" has the meaning set forth in Section 2.4.
"Records" has the meaning set forth in Section 2.1(h).
"Required Modification" means, with respect to any product, a
modification, improvement or enhancement which is (a) required by any
Requirement of Law or (b) otherwise necessary or advisable in Seller's sole
discretion to permit Seller to meet any duty or obligation owing by Seller to
remedy defects or hazards in such products or to provide any warning with
respect to any such defects or hazards. Required Modifications may also
include, but shall not be limited to, modifications, improvements or
enhancements necessary to meet industry standards, or to implement design
improvements, or modifications of or supplements to the product's design,
quality, components, safety features, labeling, warnings or instructions.
Required Modification shall in no event mean or include any modification,
improvement or enhancement required by any written warranty covering the
relevant product.
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational 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.
"SEC" means the Securities and Exchange Commission.
"Seller" has the meaning set forth in the preamble hereto.
"Seller Plans" means each and all Employee Benefit Plans and
Employee Benefit Arrangements sponsored or maintained by Seller under which
any Business Employee participates or is entitled to receive benefits.
"Tax" or "Taxes" means, with respect to any Person, any federal,
state, local or foreign net income, gross income, gross receipts, sales, use,
ad valorem, value-added, capital, unitary, intangible, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
transfer, occupation, premium, property or windfall profit tax, custom, duty
or other tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax or
additional amount imposed by any jurisdiction or other taxing authority, on
such Person.
"Tax Returns" has the meaning set forth in Section 4.3.
"Transaction Documents" means (i) this Agreement and (ii) the Bill
of Sale, Assignment and Assumption Agreement.
"Transactions" means the transactions contemplated by the
Transaction Documents.
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 not defined or to the extent
not defined, shall have the respective meaning given to them under GAAP.
(c) Unless express reference is made to Business Days, references
to days shall be to calendar days.
ARTICLE 2. CLOSING; PURCHASE PRICE ADJUSTMENT
2.1 Sale and Transfer of the Assets. Subject to the terms and
conditions of this Agreement, on the Closing Date Seller will sell, convey,
transfer, assign and deliver to Buyer all of Seller's right, title and
interest in and to the following assets (except the Excluded Assets) of
Seller, to the extent that they are used exclusively in the operations of the
Business, as the same shall exist on the Closing Date (collectively referred
to herein as the "Assets"):
(a) (intentionally left blank)
(b) the leasehold interest used by the Business at 427 East
Stewart Street, Milwaukee, WI 53207 (the "Milwaukee Facility") listed on
Schedule 2.1(b) and the leasehold interest used by the Business at 300 Magnetek
Drive, Brownsville, TX 78521 (the "Brownsville Facility") listed on
Schedule 2.1(b) (the Brownsville Facility, together with the Milwaukee Facility,
called the "Leased Property");
(c) all tangible personal property, including, without limitation,
the fixtures, furnishings, furniture, office supplies, vehicles, rolling
stock, tools, machinery, equipment, computer equipment (including software),
located upon or affixed to or normally located in, at or upon, even if
temporarily removed from, any of the Leased Property (collectively, including
the fixtures, the "Equipment");
(d) all inventory, wherever stored, including without limitation,
raw materials, work-in-process, finished goods, packaging materials, spare
parts and supplies (the "Inventory");
(e) all trademarks, trade names, patents, service marks,
copyrights (whether registered or unregistered) and pending applications for
the foregoing listed on Schedule 2.1(e) and attached hereto (the
"Intellectual Property");
(f) all Contracts (including but not limited to all Contracts
listed on Schedule 4.7 and all Contracts entered into by the Business through
the Closing Date) (the "Assigned Contracts");
(g) all transferable business licenses and permits used
exclusively in or relating exclusively to the Business or the Assets (the
"Permits");
(h) all books and records (other than historical accounting,
financial and Tax records) wherever stored, plans and specifications, surveys
and title policies relating to the Business Property, sales literature,
product information, employment records and files and all other information
and/or data related to or used by Seller exclusively in connection with the
Assets and the operation of the Business and located at either of the Leased
Properties (the "Records");
(i) all insurance proceeds paid or payable by any insurance
provider, other than Seller or any Affiliate of Seller, for any Asset that is
destroyed or damaged after the date hereof and prior to the Closing;
(j) all accounts receivable;
(k) all prepaid expenses (other than prepaid Taxes), advances and
deposits (including utility deposits);
(l) all telephone, telex and telecopier numbers and all existing
listings in all telephone books and directories;
(m) all warranties and guaranties received from vendors, suppliers
or manufacturers with respect to the Assets or the Business; and
(n) all goodwill appurtenant to the foregoing Assets.
2.2 Assets Not Transferred. Notwithstanding anything herein to the
contrary, the following assets are not included in the Assets and shall be
retained by Seller (the "Excluded Assets"):
(a) all cash and cash equivalent items (except as described in
Section 2.1(i) and (k)) including, without limitation, checking accounts,
bank accounts, certificates of deposit, time deposits, securities, and the
proceeds of accounts receivable, including uncashed checks in payment
thereof, received by Seller on or prior to the Closing Date;
(b) all rights, properties, and assets which have been used or
held for use in connection with the Business and which shall have been
transferred (including transfers by way of sale) or otherwise disposed of
prior to the Closing, provided such transfers and disposals shall have been
in the ordinary course of the business of the Business as conducted at the
date hereof;
(c) rights to or claims for refunds or rebates of Taxes and other
governmental charges for periods ending on or prior to the Closing Date and
the benefit of net operating loss carry-forwards, carrybacks or other credits
of Seller, whether or not attributable to the Business;
(d) claims or rights against third parties not described in
Section 2.1(m), except those arising with respect to events or breaches
occurring after the Closing Date under the Assigned Contracts; provided,
however, that any rights of indemnification, contribution or reimbursement
that may exist under the Assigned Contracts in respect of Excluded Assets or
Excluded Liabilities hereunder shall be Excluded Assets;
(e) except as set forth in Section 2.1(i), all insurance policies
and rights thereunder, including but not limited to, rights to any
cancellation value as of the Closing Date;
(f) proprietary or confidential business or technical information,
records and policies that relate generally to Seller and are not used
exclusively in the Business, including, without limitation, organization
manuals and strategic plans;
(g) subject to the limited rights granted in Section 8.7, all
"MagneTek" marks, including any and all trademarks or service marks, trade
names, slogans or other like property relating to or including the name
"MagneTek," the mark MagneTek or any
derivative thereof and the MagneTek logo or any derivative thereof,
proprietary computer programs or other software, including but not limited to
Seller's proprietary data bases, accounting and reporting formats, systems
and procedures;
(h) all Records relating to pending lawsuits (other than any
included in the Assumed Liabilities) to which Seller is a party and which
involve the Business; and
(i) all other assets used primarily in connection with Seller's
corporate functions (including but not limited to the corporate charter,
taxpayer and other identification numbers, seals, minute books and stock
transfer books), whether or not used for the benefit of the Business.
2.3 Assumed and Excluded Liabilities. On the Closing Date, Buyer shall
execute and deliver to Seller the Bill of Sale, Assignment and Assumption
Agreement pursuant to which Buyer shall assume and agree to pay, perform and
discharge when due, all the liabilities and obligations of Seller arising out
of the Business, of any kind or nature, whether absolute, contingent, accrued
or otherwise, and whether arising before or after the Closing including,
without limitation, (i) all liabilities for Taxes assumed by Buyer under
Section 2.7, (ii) all liabilities under the Assigned Contracts, (iii) all
liabilities and obligations of Buyer set forth in Article 9 hereof, and (iv)
all liabilities and obligations of Seller, as tenant, under the Leased
Properties (collectively, the "Assumed Liabilities"); provided, however, that
the Assumed Liabilities shall in no event include the following liabilities
(the "Excluded Liabilities"):
(a) any liability in respect of litigation pending or threatened
against Seller in respect of the Business prior to the Closing Date,
provided, that such pending or threatened liability is set forth on Schedule
4.8 hereto;
(b) any liability, responsibility or obligation with respect to
any Seller Plan, except as provided in Article 9, and excluding any Assigned
Contract;
(c) any liability for (i) warranty claims made after the Closing
Date for service, repair, replacement and similar work required under
Seller's written warranties with respect to products sold or services
provided prior to the Closing, the expenses of which, at shop level cost
(direct materials plus labor), in the aggregate exceed the warranty reserve
on the Closing Balance Sheet, (ii) claims under health insurance plans of
Seller for covered Business Employees with respect to services rendered prior
to the Closing Date or (iii) any product liability or tort claims for
injuries, property damage or other Losses, arising prior to the Closing Date
but only if written notice of such claims described in clause (i), (ii) or
(iii) shall have been delivered by Buyer to Seller within the two-year period
following the Closing Date; and
(d) any liability for Taxes for any period ending on or prior to
the Closing Date, excluding the Taxes covered by Section 2.7.
2.4 Closing. The closing (the "Closing") of the purchase and sale of
the Assets shall be held at the offices of Reinhart, Boerner, Van Deuren,
Norris & Rieselbach, S.C., 1000 N. Water Street, Milwaukee, WI 53202 at 10:00
a.m. on August 30, 1996, or if the conditions to Closing set forth in Article
III shall not have been satisfied or waived by such date, subject to Section
11.3, 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." At the Closing, Buyer shall deliver to Seller
Buyer's promissory note (the "Purchase Note") in form and substance
acceptable to Seller and shall deliver to Seller
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 $2,300,000.00 (Two Million Three Hundred
Thousand and no/100ths Dollars), plus or minus an estimate, if the parties
mutually agree prior to the Closing Date with respect thereto, of any
adjustment to the aggregate purchase price under Section 2.5 (the aggregate
purchase price plus or minus such estimate of any adjustment under Section
2.5 being hereinafter called the "Closing Date Amount," and the aggregate
purchase price, so adjusted, and the Purchase Note, being hereinafter
referred to as the "Purchase Price"), and such other documents as are
required by this Agreement.
At the Closing, Seller shall deliver or cause to be delivered to Buyer
(a) the Bill of Sale, Assignment and Assumption Agreement, (b) a Sublease
Agreement pertaining to the Brownsville Facility, and (c) such other
instruments of transfer and documents as Buyer may reasonably request, and
Buyer shall deliver to Seller (a) the Bill of Sale, Assignment and Assumption
Agreement, (b) a Sublease Agreement pertaining to the Brownsville Facility,
and (c) such other instruments of assumption and documents as Seller may
reasonably request. In addition, Seller shall deliver to Buyer at the
Closing an affidavit in form and substance reasonably satisfactory to Buyer,
duly executed and acknowledged, certifying that Seller is not a foreign
person within the meaning of Section 1445(f)(3) of the Code, and any
corresponding affidavit required for state tax purposes.
2.5 Purchase Price Adjustment.
(a) Within 60 days after the Closing Date, Buyer shall prepare and
deliver to Seller a balance sheet of the Business as of the close of business
on the Closing Date comprising the Assets and the outstanding Assumed
Liabilities (the "Closing Balance Sheet").
During the 30 days immediately following Seller'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 Seller access at all reasonable times to its
personnel, properties, books and records to the extent relevant. The Closing
Balance Sheet shall become final and binding upon the parties on the
thirtieth day following delivery thereof unless Seller gives written notice
to Buyer of its disagreement with the method of presentation of the Closing
Balance Sheet (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 the 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
hereto 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, Seller 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, Seller
and Buyer shall each have access to the other party's working papers prepared
in connection with the other party's preparation of a Notice of Disagreement.
At the end of such 30-day period, Seller and Buyer shall submit to an
independent accounting firm (the "Accounting Firm") for review and resolution
any and all matters which remain in dispute and which were properly included
in any Notice of Disagreement, and the Accounting Firm shall reach a final,
binding resolution of all matters which remain in dispute. The Closing
Balance Sheet, with such adjustments necessary to reflect the Accounting
Firm's resolution of the matters in dispute, shall become final and binding
on Buyer and Seller on the date the Accounting Firm delivers its final
resolution to the parties. The Accounting Firm shall be Arthur Anderson LLP,
or if such firm is unable or unwilling to act, such other nationally
recognized independent public accounting firm as shall be 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 2.5 shall be
borne 50% by Buyer and 50% by Seller.
(b) The Purchase Price shall be $3.5 million, based upon the March
31, 1996 Balance Sheet (unaudited). This price shall be adjusted up or down,
as set forth in paragraph (a) above, based upon the net increase or decrease
in net worth as shown on the March 31, 1996 Balance Sheet (unaudited), as
compared to the Closing Balance Sheet (unaudited), reflecting on both only
the Assets being purchased and the Assumed Liabilities (the "Purchase Price
Adjustments").
The payment thereof shall occur as follows:
(i) At Closing, $2.3 million by wire transfer, plus or
minus any estimate of any adjustment under Section 2.4 and subsection (a),
above, if such estimate is agreed to by the parties hereto, with such amount
to be adjusted and finally determined as set forth in subsection (a), above,
after the final Closing Balance Sheet has been determined and the final
amount due at Closing is determined. Interest on the principal amount of the
cash portion of the Purchase Price not paid at Closing shall be calculated
from and after the Closing Date and paid pursuant to any resolution of a
Notice of Disagreement. Interest shall be calculated at an annual rate based
upon the prime rate of interest announced by Firstar Bank Milwaukee, N.A., on
the Closing Date for the period from the Closing Date to the date of payment,
fluctuating with changes as announced in said rate, computed on the basis of
a 360-day year and actual days elapsed. Payment shall be made by the Buyer
to the Seller, or by the Seller to the Buyer, as the case may be, with
accrued interest as aforesaid, in immediately available funds, as to amounts
owing pursuant to the Purchase Price Adjustments not later than 3 Business
Days following the 30 days during which Seller may review the Closing Balance
Sheet, if no Notice of Disagreement is given by Seller to Buyer, and if a
Notice of Disagreement is given by Seller to Buyer, within 3 Business Days of
final resolution thereof.
(ii) At Closing, the Purchase Note for the balance, being in
the amount of $1,200,000.
(c) The Closing Balance Sheet shall be prepared in accordance with
GAAP, except as set forth in Schedule 4.6, and applied in a manner consistent
with that followed in the preparation of the Financial Statements (as defined
in Section 4.6).
(d) Buyer agrees, with respect to Purchase Price Adjustments, that
following the Closing, Buyer will not take any actions with respect to the
accounting books, records, policies and procedures of the Business on which
the Closing Balance Sheet is to be based that are not consistent with GAAP
applied in the manner consistent with the past practices of the Business.
(e) Notwithstanding the foregoing provisions of this Section 2.5,
no adjustment to the Purchase Price pursuant to this Section 2.5 shall be
made unless such adjustment would exceed $50,000, and if such adjustment
would exceed $50,000 than the full amount of such adjustment shall be made.
The estimated adjustment paid on the Closing Date, if any, shall be taken
into account to determine whether such threshold is met.
2.6 Tax Allocation. Buyer and Seller shall allocate the Purchase Price
plus the Assumed Liabilities (to the extent identifiable or reasonably
estimable as of the date hereof) to broad categories constituting components
of the Assets and the covenant not to compete contained in Section 6.6 hereof
in accordance with Schedule 2.6 (as the same may be
updated as of the Closing to reflect changes in the Assets or Assumed
Liabilities occurring after the date thereof and prior to the Closing Date).
Buyer and Seller shall report the purchase and sale of the Assets in
accordance with the agreed upon allocation among such broad categories for
all Tax purposes (including the filing of the forms prescribed under Section
1060 of the Code and the Treasury Regulations promuLgated thereunder), but
such allocation shall not constrain reporting for other purposes.
2.7 Sales and Use Tax. Buyer and Seller shall cooperate in preparing,
executing and filing use and sales Tax returns relating to, and at the
Closing, Buyer and Seller each shall pay one-half, of any and all sales, real
estate, transfer or use Tax due with regard to, the purchase and sale of the
Assets. To the extent such Taxes cannot be accurately computed at the
Closing, the parties shall each pay their respective one-half of such Taxes
when they are due. Such Tax Returns shall be prepared in a manner that is
consistent with the allocation of the Purchase Price and Assumed Liabilities
contemplated by Section 2.6. Buyer shall also furnish Seller with a form of
resale certificate that complies with the requirements of the Wisconsin
Statutes and other applicable state taxation laws.
ARTICLE 3. CONDITIONS TO CLOSING
3.1 Buyer's Obligation. The obligations of Buyer to purchase and pay
for the Assets are subject to the satisfaction (or waiver by Buyer) as of the
Closing of the following conditions:
(a) The representations and warranties of Seller 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, as though made on and as of the Closing Date, and Seller
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 Seller by the time of the Closing; and Seller shall have
delivered to Buyer a certificate dated the Closing Date and signed by an
authorized officer of Seller confirming the foregoing.
(b) Buyer shall have received an opinion dated the Closing Date of
Baker, Donelson, Bearman & Caldwell, Counsel to Seller, as to the matters set
forth in Exhibit B, and an opinion dated the Closing Date of Samuel A. Miley,
Esq., General Counsel of Seller, as to the matters set forth in Exhibit C,
which opinions shall be reasonably satisfactory in form to Buyer.
(c) No injunction or order shall have been granted by any court or
administrative agency or instrumentality of competent jurisdiction that would
restrain or prohibit any of the Transactions or that would impose damages as
a result thereof, and no action or proceeding shall be pending before any
court or administrative agency or instrumentality 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).
3.2 Seller's Obligation. The obligation of Seller to sell and deliver
the Assets to Buyer is subject to the satisfaction (or waiver by Seller) as
of the Closing of the following conditions:
(a) The representations and warranties of Buyer 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, as though made on and as of the Closing
Date, and Buyer 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 Buyer by the time of
the Closing; and Buyer shall have delivered to Seller a certificate dated the
Closing Date and signed by an authorized officer of Buyer confirming the
foregoing.
(b) Seller shall have received an opinion dated as of the Closing
Date of Schober & Radtke S.C., counsel to Buyer, as to the matters set forth
in Exhibit D, which opinion shall be reasonably satisfactory in form to
Seller.
(c) No injunction or order shall have been granted by any court or
administrative agency or instrumentality of competent jurisdiction that would
restrain or prohibit the Transactions or that would impose damages as a
result thereof, and no action or proceeding shall be pending before any court
or administrative agency or instrumentality 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).
(d) Seller shall have received from Buyer insurance certificates
in compliance with Section 7.5 and evidence confirming the establishment of
Buyer's Benefit Plans in compliance with Section 9.2.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
4.1 Authority; Corporate Matters; 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 the Transaction
Documents and to consummate the Transactions. All corporate acts and other
proceedings required to be taken by Seller to authorize the execution,
delivery and performance of the Transaction Documents and the consummation of
the Transactions have been duly and properly taken. This Agreement has been,
and the Transaction Documents, when executed, will be, duly executed and
delivered by Seller and constitutes 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) Schedule 4.1(b) sets forth a true and complete list of all
jurisdictions in which the Business engages in the regular, systematic
solicitation of orders, maintains any sales offices or sales staff or other
physical presence or derives any material revenues.
(c) The execution and delivery of this Agreement does not and of
the other Transaction Documents will not, and the consummation of the
Transactions and compliance with the terms of the Transaction Documents 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 under, any provision of (i) the Certificate of
Incorporation or By-Laws of Seller, (ii) subject to the matters disclosed in
Schedule 4.1(c), any Contractual Obligation of Seller or (iii) any judgment,
order or decree or, subject to the matters described in clauses (A)-(D)
below,
Requirement of Law applicable to Seller or its 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. 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 Seller in connection with the execution and delivery of the
Transaction Documents or the consummation of the Transactions contemplated
hereby, other than (A) compliance with and filings under Section 13(a) or
15(d), as the case may be, of the Exchange Act, (B) compliance with and
filings and notifications under applicable Environmental Laws, (C) those that
may be required solely by reason of Buyer's participation in the transactions
contemplated hereby, (D) those that, if not made or obtained, individually or
in the aggregate, would not have a Material Adverse Effect.
4.2 Financial Statements; Absence of Changes. To the Knowledge of
Seller,
(a) Schedule 4.2 contains a true and complete copy of the
unaudited balance sheet of the Business as at March 31, 1996, and the related
unaudited statements of income and retained earnings and cash flows for the
period then ended.
The financial statements described in the foregoing clause are referred
to herein as the "Financial Statements." Except as set forth on Schedule
4.2, the Financial Statements: (A) were prepared in accordance with the
books and records of the Business, (B) fairly present the financial position
of the Business in each case at and as of the dates indicated, and the
results of operations, retained earnings and cash flows of the Business for
the periods indicated and (C) except as otherwise set forth on Schedule 4.2,
were prepared in accordance with GAAP consistently applied throughout the
periods covered thereby (subject to the absence of notes and to normal
year-end adjustments).
(b) Absence of Changes. Except as set forth on Schedule 4.2,
since the March Balance Sheet Date the Business has been operated in the
ordinary course and consistent with past practice, and there have not been
any:
(i) material adverse changes in the assets (including,
without limitation, levels of working capital and the material components
thereof), liabilities, earnings or financial condition of the Business;
(ii) occurrences resulting in the damage, destruction or
loss (whether or not covered by insurance) affecting any tangible asset or
property of the Business in excess of $50,000 in the aggregate;
(iii) material increases in, or changes in the method of
computing, the compensation of Business Employees (including, without
limitation, increases pursuant to or change in method under any bonus,
pension, profit sharing, deferred compensation arrangement or other plan or
commitment), or increase in compensation payable to any officer, employee,
consultant or agent of MagneTek employed in the Business, or entering into of
any employment contract with or making of any loan to, or engagement in any
transaction with, any officer or employee of MagneTek employed in the
Business, in each case other than in the ordinary course of the business of
the Business and consistent with past practice;
(iv) material changes in the manner in which the Business
extends discounts or credits to customers or otherwise deals with customers;
(v) changes in the accounting methods or practices followed
by or
with respect to the Business, or any changes in depreciation or amortization
policies or rates theretofore adopted;
(vi) agreements or commitments to merge or consolidate with
or otherwise acquire any other Person, or any part or division thereof;
(vii) cancellation or termination of any insurance policy
maintained by or with respect to the Business;
(viii) material incurrence of indebtedness for borrowed money;
(ix) other material transactions relating to the Business,
other than in the ordinary course of the Business and consistent with past
practice; or
(x) agreements or understandings, whether in writing or
otherwise, for Seller to take any of the actions specified in items (i)
through (ix) above.
4.3 Taxes.
(a) Except as disclosed on Schedule 4.3, Seller, and any
affiliated group within the meaning of Section 1504 of the Code, of which
Seller is or has been a member (the "Affiliated Group," but only for the
taxable period during which Seller has been a member thereof), have filed or
caused to be filed in a timely manner (within any applicable extension
periods) with the appropriate Governmental Authority: (i) all Tax returns,
reports and forms (collectively, "Tax Returns") required to be filed by the
Code or by applicable laws, (ii) all Taxes shown on such Tax Returns have
been timely paid in full by the due date thereof, (iii) no Tax Liens or
assessments have been filed by any Tax authority against any property or
assets of the Business and (iv) no claims are being asserted in writing with
respect to any Taxes relating to the Business.
(b) Except as set forth in Schedule 4.3, (i) none of the Assets
comprises "tax exempt use property" within the meaning of Section 168(h) of
the Code and (ii) the Assigned Contracts do not include any lease made
pursuant to former Section 168(f)(8) of the Internal Revenue Code of 1954.
(c) Seller is not a "foreign person" within the meaning of Section
1445(f)(3) of the Code.
4.4 Assets Other than Real Property Interests. Seller has good and
valid title to all assets reflected on the March Balance Sheet or thereafter
acquired, except those sold or otherwise disposed of since the date of such
March Balance Sheet in the ordinary course of business consistent with past
practice, in each case free and clear of all Liens except: (a) such as are
disclosed on Schedule 4.4 and (b) mechanics', carriers', workmen's,
repairmen's or other like Liens arising or incurred in the ordinary course of
business, Liens arising under original purchase price conditional sales
contracts and equipment leases with third parties entered into in the
ordinary course of business, Liens for Taxes and other governmental charges
which are not due and payable or which may thereafter be paid without
penalty, and 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
described in the preceding clause (b) are hereinafter referred to
collectively as "Permitted Liens").
This Section 4.4 does not relate to real property or interests in real
property, such
items being the subject of Section 4.5.
]XG Real Property. Schedule 4.5 sets forth a complete list of Leased
Properties and identifies any leases relating thereto (sometimes referred to
herein individually as a "Business Property").
4.6 Intellectual Property. Schedule 4.6 sets forth a list of all
Intellectual Property used in the Business (excluding any such Intellectual
Property that is included in Excluded Assets). With respect to registered
trademarks, Schedule 4.6 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 4.6, to the Knowledge of Seller,
Seller owns or has the right to use, without payment to any other party, the
Intellectual Property listed on such Schedule 4.6. Except as set forth on
Schedule 4.8, no claims are pending or, to the Knowledge of Seller,
threatened against Seller by any person with respect to the ownership,
validity, enforceability or use of any Intellectual Property listed on
Schedule 4.6 or otherwise challenging or questioning the validity or
effectiveness of any such Intellectual Property.
4.7 Contracts. Schedule 4.7 sets forth a list of each of the following
types of Contracts to which the Business is a party or to which MagneTek is a
party and which relate primarily to the Business:
(a) any employment or severance agreement that has an aggregate
future liability in excess of $100,000 and is not terminable by notice of not
more than 60 days for a cost of less than $50,000;
(b) any employee collective bargaining agreement or other contract
with any labor union covering Business Employees;
(c) to the Knowledge of Seller, any Contract pursuant to which the
aggregate of payments to become due from or to Seller is equal to or exceeds
$20,000, and which is not terminable by no more than 60 days' notice for a
cost of less than $10,000;
(d) any lease or similar agreement under which Seller is a lessor
or sublessor of, or makes available for use by any third party (including
another division of Seller), any Business Property or premises otherwise
occupied by the Business;
(e) any distributor, dealer, sales, advertising, agency,
manufacturer's representative, franchise or similar Contract or any other
contract requiring the payment of any commissions in excess of $50,000 per
year;
(f) any indenture, mortgage, promissory note, loan agreement or
other agreement or commitment for the borrowing of money, for a line of
credit or for any leasing transaction of a type required to be capitalized in
accordance with Statement of Financial Accounting Standards No. 13 issued by
the Financial Accounting Standards Board;
(g) any option or other agreement to purchase or otherwise acquire
or sell or otherwise dispose of any interest in real property;
(h) any guaranty of the obligations of third parties;
(i) any agreement which restricts the Business from conducting its
business anywhere in the world;
(j) any agreement under which it has agreed to indemnify any third
party with respect to, or to share, the Tax liability of any third party; or
(k) any other agreement or contract which is material to the
Business, the Assets or Assumed Liabilities, other than this Agreement and
the Transaction Documents.
Except as disclosed on Schedule 4.7, each Contract listed on Schedule
4.7 is valid, binding and in full force and effect and is enforceable by
Seller in accordance with its terms. Except as disclosed in Schedule 4.7, to
the Knowledge of Seller, Seller has performed all material obligations
required to be performed by it to date under the Contracts and is not (with
or without the lapse of time of the giving of notice, or both) in breach or
default in any material respect thereunder and, to the Knowledge of Seller,
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.
4.8 Litigation; Decrees. Schedule 4.8 sets forth a list, as of the
date of this Agreement, of all pending and, to the Knowledge of Seller,
threatened lawsuits or claims with respect to which Seller has contacted in
writing the defendant or been contacted in writing by the claimant or by
counsel for the claimant by or against Seller relating to the Business which
(a) involves a claim by or against Seller of more than $50,000, (b) seeks any
injunctive relief or (c) relates to the Transactions. To the Knowledge of
Seller, except as disclosed on Schedule 4.8, Seller is not in default under
any judgment, order or decree of any court, administrative agency or
commission or other Governmental Authority applicable to the Business, except
where the default would not have a Material Adverse Effect.
4.9 Employee and Related Matters. Schedule 4.9 sets forth each
material Seller Plan. Seller has made available to Buyer true, complete and
correct copies of (i) each material Seller Plan (or, in the case of any
unwritten material Seller Plans, descriptions thereof) and (ii) the most
recent summary plan description for each material Seller Plan for which such
a summary plan description is required.
4.10 Environmental Matters. Except as previously disclosed in writing
by Seller to Buyer, to the Knowledge of Seller, as to the Business and the
Business Property:
(a) Seller is not in material violation of any applicable
Environmental Law nor is Seller under investigation or review by any
Governmental Authority with respect to compliance therewith, or with respect
to the generation, use, treatment, storage or disposal, or the spillage or
other release of any Hazardous Material;
(b) There is no Hazardous Material that is likely to pose any
material risk to safety, health or the environment, and there has heretofore
been no spillage, discharge, release or disposal of any such Hazardous
Material on or under the Business Property in an amount and of a nature which
could reasonably be expected to result in material liability to the Business;
and
(c) There are no pending citations, fines, penalties or claims
have been asserted against Seller under any Environmental Law which could
reasonably be expected to have a Material Adverse Effect and which have not
been reflected in the March Balance Sheet.
4.11 Employee and Labor Relations. Except as set forth on Schedule 4.11:
(a) there is no labor strike, dispute, or work stoppage or lockout
pending, or, to the Knowledge of Seller, threatened, involving the Business;
(b) to the Knowledge of Seller, no union organization campaign is
in progress with respect to the employees of the Business, and no question
concerning representation exists respecting such employees;
(c) there is no unfair labor practice charge or complaint against
Seller pending, or, to the Knowledge of Seller, threatened, before the
National Labor Relations Board involving the Business;
(d) there is no pending, or, to the Knowledge of Seller,
threatened, grievance involving an employee of the Business that, if
adversely decided, would have a Material Adverse Effect; and
(e) no charges with respect to or relating to Seller is 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 involving
the Business, other than those which, if so determined would not have a
Material Adverse Effect.
4.12 Assets of the Business. Except for any Assets that may not be
transferred to Buyer pursuant to Section 2.2 or Section 8.1, the Assets and
the rights conferred by the Transaction Documents comprise all the properties
and assets used by Seller exclusively in the operation of the Business as
conducted on the date hereof. EXCEPT AS EXPRESSLY PROVIDED HEREIN, SELLER
MAKES NO REPRESENTATION OR WARRANTY CONCERNING THE ASSETS OR THE BUSINESS,
INCLUDING AS TO THE QUALITY, CONDITION, MERCHANTABILITY, SALABILITY,
OBSOLESCENCE, WORKING ORDER OR FITNESS FOR A PARTICULAR PURPOSE THEREOF.
EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE ASSETS ARE SOLD TO BUYER "AS IS AND
WHERE IS."
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
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 Wisconsin. Buyer has all
requisite corporate power and authority to enter into the Transaction
Documents and to consummate the Transactions. All corporate acts and other
proceedings required to be taken by Buyer to authorize the execution,
delivery and performance of the Transaction Documents and the Transactions
have been duly and properly taken. This Agreement has been, and the
Transaction Documents, when executed, will be, duly executed and delivered by
Buyer and constitute valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective 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 principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or law).
(b) Except as disclosed on Schedule 5.1(b), the execution and
delivery of this Agreement does not and of the other Transaction Documents
will not, and the consummation of the Transactions and compliance with the
terms of the Transaction Documents 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 the Buyer under, any provision of (i) the Certificate
of Incorporation or By-Laws of Buyer, (ii) any Contractual Obligation of
Buyer or (iii) any judgment, order or decree or, subject to the matters
described in clauses (A)-(D) below, statute, law, ordinance, rule or
regulation applicable to Buyer or its property or assets. No material
consent, approval, license, permit, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other Governmental Authority is required to be obtained or made
by or with respect to Buyer or its Affiliates in connection with the
execution and delivery of the Transaction Documents or the consummation by
Buyer of the Transactions, other than (A) compliance with and filings under
Section 13(a) and l5(d), as the case may be, of the Exchange Act, (B)
compliance with and filings and notifications under applicable state
environmental laws, and (C) those that may be required solely by reason of
Seller'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 court, governmental
agency or arbitration tribunal against Buyer or (b) actions, suits, claims or
legal, administrative or arbitration proceedings or investigations pending
or, to the knowledge of Buyer, threatened against Buyer.
5.3 Buyer's Acknowledgment. Buyer acknowledges and agrees that, (a)
other than the representations and warranties of Seller specifically
contained in this Agreement, there are no representations or warranties of
Seller either expressed or implied with respect to such Seller, the Business
or the Transactions and (b) it shall have a right to indemnification solely
as provided in Article 10 hereof and shall have no claim or right to
indemnification with respect to any information, documents or materials
furnished by either Seller or any of its officers, directors, employees,
agents or advisors, or otherwise available to Buyer.
5.4 No Knowledge of Seller's Breach. Neither Buyer nor, to the
knowledge of Buyer, any of its Affiliates, has knowledge of any breach of any
representation or warranty by Seller or of any other condition or
circumstance that would excuse Buyer from its timely performance of its
obligations hereunder. If any information relevant to the representations
and warranties of Seller under this Agreement shall come to Buyer's attention
on or before the Closing on the Closing Date (whether through Seller or
otherwise), then for the purposes of Seller's liability under such
representations and warranties the effect shall be as if the representations
and warranties were so modified in this Agreement, and no claim for
indemnification maybe made under Article 10 hereof to the extent such claim
would not arise under such modified representation or warranty.
5.5 Exon-Florio. Buyer is not a "foreign person" for purposes of
Exon-Florio Amendment to the Defense Production Act of 1950.
ARTICLE 6. COVENANTS OF SELLER
Seller covenants and agrees as follows:
6.1 Access. Subject to the provisions of Section 7.1 hereof, prior to
the Closing, Seller will give Buyer and its representatives, employees,
counsel and accountants, together with representatives of Persons providing
financing to Buyer for the Transactions, with reasonable access, during
normal business hours and upon reasonable notice, to the personnel,
properties, books and records of the Business for purposes of investigating
its assets, operations, prospects, obligations and liabilities; provided,
however, that such access
does not unreasonably disrupt the normal operations of the Business.
Additionally, subject to the provisions of Section 7.1 hereof and to prior
notification and the consent (which will not be unreasonably withheld or
delayed) of Buyer, Buyer and such representatives may contact the principal
customers and suppliers of the Business for purposes of the foregoing
investigation.
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 agrees
to cause the business of the Business to be conducted in the ordinary course
in substantially the same manner as presently conducted and will make all
reasonable efforts, consistent with past practices, to preserve relationships
with customers, suppliers and others with whom the Business deals. Except as
contemplated by this Agreement, Seller will not, without the prior written
consent of Buyer, which consent will not be unreasonably withheld or delayed,
take any action which would cause the representations and warranties of
Seller herein to be untrue in any material respect.
6.3 Insurance. Seller shall keep, or cause to be kept, all insurance
policies presently maintained relating to the Business and its properties, or
replacements therefor, in full force and effect through the close of business
on the Closing Date. Buyer will not have any rights under any such insurance
policies from and after the Closing Date, other than as afforded pursuant to
Section 2.1(i).
6.4 Acquisition Proposals. From and after the date hereof until the
termination hereof, without the written consent of Buyer, Seller shall not:
(i) solicit or initiate discussions with any Person, other than the Buyer,
its Affiliates and their respective designees and agents, relating to the
possible acquisition, whether by way of merger, reorganization, purchase of
capital stock, purchase of assets or otherwise (any such acquisition being
referred to in this section as an "Acquisition Transaction"), of any material
interest in the Business or any material Asset, (ii) provide Confidential
Information with respect to the Business or any material Asset to any Person,
other than Buyer, its Affiliates and their respective designees and agents,
in connection with a possible Acquisition Transaction or (iii) enter into a
transaction with any Person, other than Buyer, its Affiliates and their
respective designees and agents, concerning a possible Acquisition
Transaction.
6.5 Accounts Receivable. Seller agrees within 15 days of receipt of
any accounts receivable of Buyer to forward to Buyer any and all proceeds
from such accounts receivable of the Business that are received by Seller
after the Closing Date. If, after the Closing Date, Seller receives any
payment from any Person who at the time of such payment has outstanding
accounts payable to Seller, on the one hand (for the purposes of this
Section, "Seller Accounts Receivable"), and to the Buyer, on the other hand
(for the purposes of this Section, "Buyer Accounts Receivable"), and the
payment (a) does not indicate whether it is in respect of Seller Accounts
Receivable or Buyer Accounts Receivable or (b) indicates that it is in
payment of both Seller Accounts Receivable and Buyer Accounts Receivable
without specifying the portion to be allocated to each, then Seller 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 Seller Accounts Receivable and
Buyer Accounts Receivable in chronological order based upon the period of
time such accounts receivable have existed on the books of Seller or Buyer,
as the case may be.
6.6 Covenant Not to Compete.
(a) Subject to the terms, conditions and exceptions of this
Section 6.6, Seller hereby covenants and agrees that neither it nor any
Affiliate controlled by it (a "Seller
Affiliate"), for a period of time ending on the earlier of (i) that day when
there is a default by Buyer under the Purchase Note; and (ii) five (5) years
from and after the Closing Date, will engage, directly or indirectly, whether
as a principal, consultant, investor, or otherwise, in a business which is
competitive with the Business as now being operated. Notwithstanding anything
to the contrary in this Section 6.6, the acquisition by Seller of (i) any
Person less than 10% of the gross revenues of which are derived from a
business competitive with the Business as presently operated (a "Competitive
Business"); or (ii) no more than 5% of any class of securities of any Person,
if such securities are traded in any public market, or 15% of any class of
privately held securities of any Person, in a Competitive Business, shall not
constitute a breach of this Section 6.6. The restrictive covenant in this
Section 6.6(a) shall apply to, and shall be limited to, the United States.
(b) Seller agrees that, in connection with the purchase by Buyer
of the Business, the time and geographic restrictions set forth above are
reasonable. Seller agrees that the remedy at law for any breach by it of this
Section 6.6 will be inadequate and the Buyer shall be entitled to injunctive
relief. The parties intend that the unenforceability or invalidity of any
term or provision of this Section 6.6 shall not render any other term or
provision contained herein unenforceable or invalid. If the activities
described in this Section 6.6 or the term of time or the geographical area
covered by this Section 6.6 should be deemed too extensive, then the parties
intend that this Section 6.6 be construed to cover the maximum scope of
business activities, period of time and geographical area (not exceeding
those specifically set forth herein) as may be permissible under applicable
law.
6.7 Seller Financing. At Closing, Seller will accept the Purchase Note
of Buyer, in form and substance acceptable to Seller, and subject to Buyer's
compliance with all other terms hereof.
6.8 Supply Contracts. Provided Buyer is not in default under the
Purchase Note, Seller shall make what it deems to be commercially reasonable
efforts to introduce Buyer's representatives to Seller's copper, aluminum,
and lamination steel vendors in an attempt to permit Buyer access to the same
material and at comparable prices as Seller. Seller's obligation pursuant to
this Section 6.8 will terminate six months from the Closing Date.
6.9 Product Support. Provided Buyer is not in default under the
Purchase Note, Seller will allow Buyer the use of Seller's "800" telephone
number for product support and will forward all inquiries to Buyer. Seller's
obligation pursuant to this Section 6.9 will terminate one year from the
Closing Date.
ARTICLE 7. COVENANTS OF BUYER
Buyer covenants and agrees as follows:
7.1 Confidentiality. Buyer acknowledges that the information being
provided to it by Seller is subject to the terms of a confidentiality
agreement between Buyer and Seller (the "Confidentiality Agreement"), the
terms of which are incorporated herein by reference. 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 provided, further, however, that Buyer acknowledges that any and all
other information provided to it by Seller or Seller's representatives
concerning Seller shall remain subject to the terms and conditions of the
Confidentiality Agreement after the date of the Closing.
7.2 Accounts Receivable. Buyer agrees within 15 days of receipt of any
accounts
receivable of Seller to forward or cause to be forwarded to Seller any and
all proceeds from such accounts receivable of Seller that are received by
Buyer after the Closing Date. If, after the Closing Date, Buyer receives any
payment from any person who at the time of such payment has outstanding
accounts payable to Seller, on the one hand (for the purposes of this
Section, "Seller Accounts Receivable"), and to Buyer, on the other hand (for
the purposes of this Section, "Buyer Accounts Receivable"), and the payment
(a) does not indicate whether it is in respect of Seller Accounts Receivable
or Buyers Accounts Receivable or (b) indicates that it is in payment of both
Seller Accounts Receivable and Buyer Accounts Receivable without specifying
the portion to be allocated to each, then Seller 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 Seller Accounts Receivable and Buyer Accounts
Receivable in chronological order based upon the period of time such accounts
receivable have existed on the books of Seller or Buyer, as the case may be.
7.3 Waiver of Bulk Sales Law Compliance. Buyer hereby waives
compliance by Seller with the requirements, if any, of Article 6 of the
Uniform Commercial Code as in force in any state in which Assets are located
and all other similar Requirements of Law applicable to bulk sales and
transfers, to the extent applicable to the Transactions.
7.4 Excluded Assets. If, after the Closing Date, Excluded Assets shall
remain on the premises utilized or controlled by Buyer, then Buyer shall take
reasonable steps at the expense of Seller to deliver such Excluded Assets to
such Seller, 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.
7.5 Insurance. Buyer shall secure insurance with respect to the
Business from the Closing Date covering general liability and products
liability in amounts customary for the industry in which the Business
operates.
7.6 Board of Directors. Buyer shall take all actions necessary to
cause the Board of Directors of Buyer to include one (1) person as a
representative of the Seller, to be designated by Seller, and approved by
Buyer, for so long as the Purchase Note is outstanding. John P. Colling has
been designated by Seller as such person and is acceptable to Buyer. Any
person other than Colling is subject to the approval of the Board of
Directors of Buyer, which approval shall not be unreasonably withheld.
Buyer, at the Closing, shall deliver agreements from each of the shareholders
of Buyer, duly executed by each such shareholder, to this effect, in form and
substance satisfactory to Seller.
ARTICLE 8. MUTUAL COVENANTS
Each of Seller and Buyer covenant and agree as follows:
8.1 Permits and Consents.
(a) As promptly as practicable after the date hereof, Buyer and
Seller shall make all filings with governmental bodies and other regulatory
authorities, if any, and use all reasonable efforts to obtain all permits,
approvals, authorizations and consents of all third parties, required to
consummate the Transactions. Buyer and Seller shall furnish promptly to each
other all information that is not otherwise available to the other party and
that such party may reasonably request in connection with any such filing.
Buyer and Seller shall use reasonable efforts to obtain such consents to the
assignment of the Assigned Contracts as may be required. Buyer acknowledges
that consents to the Transactions may be required
from parties to the Assigned Contracts, that such consents have not been
obtained and that, notwithstanding any other provision hereof, Seller will
not assign to Buyer at the Closing any Assigned Contract that by its terms
requires, prior to such assignment, the consent of any other contracting
party thereto unless such consent has been obtained prior to the Closing Date.
(b) Buyer agrees that Seller shall have no liability whatsoever to
Buyer arising out of or relating to the failure to obtain any consents to the
assignment of Contracts that may be required in connection with the
Transactions or because of the default, acceleration or termination of any
Assigned Contract as a result thereof. Buyer further agrees that no
representation, warranty or covenant of Seller contained herein shall be
breached or deemed breached, and no condition shall be deemed not satisfied,
as a result of (i) the failure to obtain any such consent or as a result of
any such acceleration or termination or (ii) any lawsuit, action, claim,
proceeding or investigation commenced or threatened by or on behalf of any
Person arising out of or relating to the failure to obtain any such consent
or any such acceleration or termination. Seller shall cooperate with Buyer
in any reasonable manner in connection with Buyer obtaining any such
consents; provided, however, that such cooperation shall not include any
requirement that Seller commence any litigation or offer or grant
accommodation (financial or otherwise) to any third party. The Purchase
Price shall not be subject to adjustment by reason of any such consents that
are not obtained.
(c) With respect to each such Assigned Contract not assigned on
the Closing Date, after the Closing Date Seller shall continue to deal with
the other contracting party(ies) to such Assigned Contract as the prime
contracting party, and Buyer and such Seller shall continue to use reasonable
efforts to obtain the consent of all required parties to the assignment of
such Assigned Contract. Such Assigned Contract shall be promptly assigned by
Seller to Buyer after receipt of such consent after the Closing Date.
Notwithstanding the absence of any such consent, Buyer shall be entitled to
the benefits of such Assigned 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 such benefits are so provided,
Buyer agrees to perform at its sole expense all of the obligations of Seller
to be performed under such Assigned Contract after the Closing Date.
8.2 Cooperation. Buyer and Seller 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 Seller or the Business that might result from the
Transactions. Neither party shall be required by this Section 8.2 to take
any action that would unreasonably interfere with the conduct of its business.
8.3 Publicity. Seller and Buyer agree that, from the date hereof
through the Closing Date and thereafter for 90 days, no public release or
announcement concerning the Transactions shall be issued without the prior
delivery of such release or announcement to the other party, including any
release or announcement which may be required by or pursuant to any
Requirement of Law. The party making the release or announcement shall allow
the other party reasonable time to comment on such release or announcement in
advance of such issuance.
8.4 Reasonable Efforts; Further Assurances. Subject to the terms and
conditions of this Agreement (including the limitations set forth in Section
8.1), each party will use all reasonable efforts to cause the Closing to
occur, and, following the Closing, each party, from time to time, shall
execute and deliver such additional instruments, documents, conveyances, or
assurances, and take such other actions as shall be necessary, or otherwise
reasonably
requested by the other party, to confirm and assure the rights and
obligations provided for in this Agreement and in any other Transaction
Document and render effective the consummation of the Transactions.
8.5 Records. On the Closing Date, Seller shall deliver or cause to be
delivered to Buyer all Records and materials that would be Records if located
at a Business Property which are material to and used exclusively in the
Business (to the extent not then in the possession of the Business), except
any Records relating to Excluded Liabilities (including, without limitation,
to Seller's Tax liability or to any litigation or claim not assumed by Buyer
hereunder). After the Closing, upon reasonable written notice and at Buyer's
sole expense, Seller agrees to furnish or cause to be furnished to Buyer and
its representatives (including its auditors), access at reasonable times and
during normal business hours to such information relating to the Business in
such Seller's possession 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 such Seller.
8.6 Access to Former Business Records. For a period of seven (7) years
following the Closing, Buyer will retain all Records in the Buyer's
possession. During such period, Buyer will afford authorized representatives
of Seller (including its auditors) access to such Records at reasonable times
and during normal business hours at the principal business office of the
Business, 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 Seller
at such Seller's sole cost and expense. During such period, Buyer will, at
Seller's expense (limited, however, to Buyer's reasonable out-of-pocket
expenditures without regard to any employee cost or other overhead expenses),
cooperate with Seller in furnishing information, evidence, testimony, and
other reasonable assistance in connection with any action, proceeding, Tax
audit, or investigation to which such Seller or any of its Affiliates is
subject relating to the business of the Business prior to the Closing. The
term "Record" as used in this Section 8.6 shall include any data processing
files or other computerized data.
8.7 Use of Trademark and Trade Names.
(a) Notwithstanding anything to the contrary in this Agreement,
Buyer may continue to use the name "MagneTek" and related trademarks,
corporate names, and trade names incorporating "MagneTek," and the stylized
"MagneTek" logos (i) in displays, signage and postings for the period after
the Closing Date necessary to permit the removal of such names as promptly as
is reasonably feasible, and only to the extent such displays, signage or
postings exist on the Closing Date; (ii) for a period of two years, to state
the Business' former affiliation with MagneTek (e.g., "formerly a division of
MagneTek, Inc.") and (iii) to the extent any such trade names, trademarks,
service marks or logos appear on stationery, packaging materials, supplies or
inventory on hand as of the Closing Date or on order at the time of the
Closing, until such is exhausted.
(b) Notwithstanding anything to the contrary in this Agreement,
Seller may continue to use, and Buyer grants an exclusive royalty free
worldwide license to Seller to use, the name "Jefferson" and related
trademarks and tradenames incorporating "Jefferson" and any stylized
"Jefferson" logos for a period of two (2) years from the Closing Date in
Seller's sign and neon ballast business and any other business of the Seller
which does not compete with the Business. Buyer shall have no right to use
such name, trademarks, tradenames or logos in the sign and neon ballast
business prior to the expiration of the two (2) year period from the Closing
Date.
8.8 Required Modifications or Replacements of Products. The following
provisions of this Section 8.8 shall govern the responsibilities of Buyer and
Seller regarding Required Modifications:
(a) Buyer shall advise Seller promptly after becoming aware of any
Required Modifications to the products shipped by the Business prior to the
Closing Date to the extent Seller would be required to indemnify Buyer for
any claims in respect of such products.
(b) Whether or not Buyer gives the foregoing notice, Buyer shall
make any Required Modifications to products shipped by the Business prior to
the closing Date which are necessary or advisable, in the reasonable
discretion of Seller. If the cost to Seller under Section 8.8(c) of
implementing any such Required Modification exceeds the cost to Seller of
replacing such products, Buyer shall replace such products. The obligation
of Buyer hereunder shall include, but not be limited to, such actions as
Seller may reasonably request for (i) the notification of customer and other
third parties in possession of the applicable products, (ii) the shipping of
such products, if necessary, to and from Buyer's facilities for modification,
improvement, enhancement or replacement, (iii) production of replacement
products, parts or supplies necessary for the implementation of the product
modification, enhancement, improvement or placement, (iv) the installation,
modification or replacement of the product by personnel of Buyer, either at
the customer's location or at Buyer's facilities, as appropriate, and (v)
recordkeeping and reports with respect to such product modifications,
enhancements, improvements or replacements to the extent required by law or
reasonably requested by Seller.
(c) Seller shall reimburse Buyer for direct manufacturing,
installation, labor and materials costs incurred by Buyer in installing or
implementing any Required Modification under Section 8.8(b) or in producing
any replacement products, parts or supplies under Section 8.8(b), together
with all reasonable out-of-pocket shipping, postage and printing costs
incurred by Buyer in connection therewith.
ARTICLE 9. EMPLOYEE BENEFIT MATTERS
9.1 Employee Retention. Buyer shall offer employment to commence as of
the Closing Date to all Business Employees, at the same salaries and wages
(including division-level, but not MagneTek-wide bonus and incentive
programs) and on substantially the same terms and conditions as those in
effect immediately prior to the Closing Date. Buyer has no present intention
(subject to its discretion as to employee performance) to terminate the
employment of any Business Employee within the sixty (60) days following the
Closing Date, and Buyer assumes all obligations and liabilities, if any,
under the Worker Adjustment and Retraining Notification Act (the "WARN Act")
arising out of the Transactions. Buyer also agrees to comply with the terms
of the WARN Act and any similar state legislation following the Closing Date.
9.2 Employee Benefit Plans. Effective as of the Closing Date, (a)
Business Employees shall cease accruing any benefits under any Seller Plan,
and Seller shall take, or cause to be taken, all such action, if any, as may
be necessary to effect such cessation of participation and (b) to the extent
permitted by applicable law, Seller shall cause the Business Employees to be
fully vested in their accrued benefits under the FlexCare Plus Retirement
Pension Plan and the FlexCare Plus Retirement Savings Plan, including
pro-rata contributions to the pension plan based upon Business Employee
earnings to the Closing Date. On and after the Closing Date, Buyer shall
establish employee benefit plans (the
"Buyer's Benefit Plans") for the Business Employees who presently have such
benefits, or as Buyer deems appropriate; provided, however, in all events, on
or before January 1, 1997, Buyer shall establish a group health (medical and
dental) plan or plans for those Business Employees who, immediately prior to
the Closing, are covered under a group health plan of Seller. Buyer shall
cause such group health plan to waive any exclusions or limitations with
respect to pre-existing conditions and actively-at-work exclusions and shall
provide that any 1996 expenses incurred by a Business Employee or his covered
dependents under a Seller Plan shall be taken into account under such Buyer's
group health plans for purposes of satisfying applicable deductible,
coinsurance and maximum out of pocket provisions.
With respect to Buyer's Benefit Plans, Buyer shall grant eligible
Business Employees from and after the Closing Date credit for all service
with Seller and its affiliates and their respective predecessors prior to the
Closing Date for all purposes (other than the accrual of benefits under a
defined benefit pension plan; however, this proviso shall not preclude Buyer
from granting such credit) for which such service was recognized by Seller
and its affiliates.
Seller shall, as required by applicable law, offer all eligible Business
Employees and their eligible dependents continued coverage under the terms of
COBRA. Buyer agrees to remit COBRA premiums on behalf of all Business
Employees who elect such coverage. COBRA premiums are listed on Schedule 9.2
as provided by the Seller on August 27, 1996. Buyer's failure to remit
required COBRA premiums on a timely basis will result in a penalty, payable
by Buyer to Seller, equal to 10% of the applicable month's total premium for
each month, or fraction of a month, premium payment is delayed. Buyer agrees
to provide all eligible Business Employees with appropriate COBRA election
forms as prepared by Seller, and to remit all properly executed forms on a
timely basis to Seller. Buyer acknowledges that only those Business
Employees currently covered under a Seller Plan are eligible for COBRA. In
no event does Seller agree to provide COBRA coverage to any Business Employee
who fails to complete and remit a properly executed COBRA election form on a
timely basis.
9.3 Vacation, Holiday and Severance Pay. As of the Closing Date, Buyer
shall assume all of Seller's obligations for vacation, holiday and severance
pay to all Business Employees.
9.4 Access to Information. Commencing with the date hereof and
continuing to the Closing Date and thereafter, Seller shall make reasonably
available to Buyer such actuarial, financial, personnel and related
information as may be reasonably requested by Buyer with respect to any
Seller Plan as it relates to a Business Employee, including, but not limited
to, compensation and employment histories.
9.5 Third-Party Beneficiaries. No provision of this Article 9 shall
create any third-party beneficiary rights in any employee of former employer
or the Business (including any beneficiary or dependent thereof), including,
without limitation, any right to continued employment or employment in any
particular position with Buyer for any specified period of time after the
Closing Date.
ARTICLE 10. INDEMNIFICATION
10.1 Indemnification by Seller. Subject to the terms and conditions of
this Article 10, Seller shall indemnify Buyer and each of its officers,
directors, employees and agents against, and hold them harmless from, any
Loss suffered or incurred by any such Indemnified Person (other than any
relating to environmental matters, for which
indemnification provisions are set forth in Section 10.3) to the extent
arising from (a), if the Closing occurs, any breach of any representation or
warranty of Seller 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 contained in this Agreement
requiring performance after the Closing Date or (c), if the Closing occurs,
the existence of, or the failure of Seller to pay, perform and discharge when
due, any of the Excluded Liabilities (including, without limitation, any
Losses as a result of the failure of Seller to comply with any Bulk Sales
Laws referred to in Section 7.3); provided, however, that Seller shall have
no liability under this Section 10.1 unless the aggregate of all Losses
relating thereto for which Seller would, but for this proviso, be liable
exceeds on a cumulative basis with Losses for which Buyer is indemnified
under Section 10.3, an amount equal to $25,000 (and then only to the extent
of any such excess); and provided further, however, that Seller's aggregate
liability under this Section 10.1 and Section 10.3 shall in no event exceed
$1,500,000; and provided further, anything to the contrary contained in this
Agreement notwithstanding, Seller shall not be liable under the
indemnification provisions of this Section 10.1 or otherwise have any
liability for any misrepresentation or breach of warranty (to include, but
not be limited to, breaches of representations and warranties regarding the
Financial Statements) or covenant under this Agreement or otherwise have any
liability in connection with the transactions described herein to the extent
that the existence of such liability, the breach of warranty or covenant or
the falsity of the representation upon which such liability would be based is
known to the Buyer or to any officer of the Buyer prior to or on the Closing
Date.
10.2 Indemnification by Buyer. Subject to the terms and conditions of
this Article 10, Buyer shall indemnify Seller and each of its officers,
directors, employees and agents against, and hold them harmless from, any
Loss suffered or incurred by any such Indemnified Person (other than any
relating to environmental matters, for which indemnification provisions are
sst forth in Section 10.3) to the extent arising from (a), if the Closing
occurs, any breach of any representation or warranty of Buyer 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 contained in this Agreement requiring
performance after the Closing Date, (c), if the Closing occurs, the existence
of, or the failure of Buyer to pay, perform and discharge when due, any of
the Assumed Liabilities and (d), if the Closing occurs, the ongoing
operations of Buyer and the Assets after the Closing Date; provided, however,
that Buyer shall not have any liability under this Section 10.2 unless the
aggregate of all Losses relating thereto for which Buyer would, but for this
proviso, be liable exceeds on a cumulative basis with Losses for which Seller
are indemnified under Section 10.3, an amount equal to $25,000 (and then only
to the extent of such excess); and provided further, however, that Buyer's
aggregate liability under clauses (a) and (b) of this Section 10.2 shall in
no event exceed $1,500,000.
10.3 Indemnification for Environmental Matters. Subject to the terms
and conditions of this Article 10, Seller shall indemnify and hold Buyer
harmless from and against all Losses resulting from claims or demands by any
Governmental Agency or any third party which is unrelated to Buyer or its
Affiliates arising under any Environmental Law to the extent such Losses (a)
are attributable to either Seller's use and/or occupancy of any premises
owned or used by Seller prior to the Closing Date (a "Seller Facility") or to
Hazardous Materials transported offsite from a Seller Facility for treatment,
storage or disposal prior to the Closing and (b) exceed, on a cumulative
basis with Losses for which Buyer is indemnified under Section 10.1, an
amount equal to $25,000; but only to the extent of such excess and provided,
further, that Seller's aggregate liability under this Section 10.3 and
Section 10.1 shall in no event exceed $1,500,000. Seller's indemnification
liability hereunder shall in no event be construed to extend to or include
any remediation or other liability arising as a result of the presence of
asbestos in or upon any of the improvements
located in or on any Business Property at any time. Seller's obligation to
indemnify Buyer under this Section 10.3 shall expire on the first anniversary
of the Closing Date, and Buyer hereby expressly releases Seller from and
after such first anniversary from any liability in respect of the matters
covered by such indemnification, whether arising by statute or common law, or
otherwise. Seller shall have no obligation to indemnify Buyer with respect
to conditions that existed prior to Seller's use or occupancy of any Seller
Facility. Buyer shall indemnify and hold Seller harmless from and against
all Losses resulting from claims or demands by any Governmental Agency or
private party arising under any Environmental Law to the extent such Losses
are attributable to Buyer's use and/or occupancy of any Seller Facility.
10.4 Losses Net of Insurance, etc.
(a) The amount of any Loss for which indemnification is provided
under this Article 10 shall be net of any amounts recovered or recoverable by
the Indemnified Person under insurance policies with respect to such Loss and
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 Loss, the Indemnifying Person shall be
subrogated, to the extent of such payment, 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 Indemnifying Person shall, in any event, be liable to the other
party 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 as to
any matter under, relating to or arising out of the Transactions.
(d) The parties hereto agree that the indemnification provisions
of this Article 10 are intended to provide the exclusive remedy as to all
Losses which may occur arising from or relating to the Transactions, and each
party hereby waives, to the extent they may do so, any other rights or
remedies that may arise under any applicable statute, rule or regulation.
10.5 Termination of Indemnification. The obligations to indemnify and
hold harmless a party hereto, (A) pursuant to Sections 10.1(a) and 10.2(a),
shall terminate when the applicable representation or warranty terminates
pursuant to Section 10.8, (B) pursuant to Section 10.3, shall terminate as
set forth therein and (C) pursuant to Sections 10.1(b) and 10.2(b), shall
terminate on the first anniversary of the Closing Date; provided, however,
that as to clauses (A), (B) and (C) 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.
10.6 Procedures Relating to Indemnification (Other Than for Tax Claims).
In order for an Indemnified Person to be entitled to any indemnification
provided for under this Agreement (other than for Tax Claims) 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 30 Business Days 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 (5) 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.
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 select 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 making employees available
on a mutually convenient basis in the manner specified in Section 8.6 hereof
to provide additional information and explanation of any material provided
hereunder. Notwithstanding the foregoing, in the event a Third Party Claim
is made against Seller as to which Seller is entitled to seek indemnification
under this Article 10 and Seller concludes, in its reasonable judgment, that
Buyer lacks the financial and personnel resources to vigorously defend Seller
from such Third Party Claim, such Seller may elect to retain the defense of
such Third Party Claim and shall be entitled to be reimbursed by Buyer for
its Losses incurred in such defense, such expenditures to be reimbursed
promptly after submission of invoices therefor. 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
10.7) shall be governed by Section 10.7.
10.7 Procedures Relating to Indemnification of Tax Claims.
(a) If a claim shall be made by any Tax authority, which, if
successful, might result in an indemnity payment to any Person hereunder (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 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, 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 pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any taxing 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 30 days'
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 a material 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 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.
10.8 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 10.1(a) and 10.2(a)
and, except as set forth in the following two sentences, shall terminate at
the close of business on that day which is fifteen (15) months after the
Closing Date. The representations and warranties in Section 4.1 shall
terminate on the fifth (5th), and the representations and warranties in
Section 4.3 shall terminate on the seventh (7th), anniversary of the Closing
Date. The representations and warranties relating to environmental matters
in Section 4.10 shall not survive the Closing.
ARTICLE 11. GENERAL PROVISIONS
11.1 Assignment. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by Buyer (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 Buyer without the prior written consent of Seller; provided
further, however, that no assignment shall limit or affect Buyer's
obligations hereunder.
11.2 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.
11.3 Termination.
(a) Anything contained herein to the contrary notwithstanding,
this Agreement may be terminated (except as set forth in Section 11.3(c)) and
the Transactions abandoned at any time prior to the Closing Date:
(i) by mutual written consent of Seller and Buyer;
(ii) by Seller if any of the conditions set forth in Section
3.l shall have become incapable of fulfillment, and shall not have been
waived by Seller;
(iii) by Buyer if any of the conditions set forth in Section
3.2 shall
have become incapable of fulfillment, and shall not have been waived by
Buyer; or
(iv) by either party hereto, if the Closing does not occur
on or prior to August 31, 1996.
(b) In the event of termination by Seller or Buyer pursuant to
this Section 11.3, written notice thereof shall forthwith be given to the
other party and the Transactions shall be terminated, without further action
by either party. If the Transactions are terminated as provided herein:
(i) Buyer shall return all documents and copies and other
material received from Seller relating to the Transactions, whether so
obtained before or after the execution hereof, to Seller;
(ii) all confidential information received by Buyer with
respect to the Business and Seller 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 11.3, 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 to keep
confidential certain information and data obtained by it, (ii) Section 11.4
relating to certain expenses, (iii) Section 8.3 relating to publicity, (iv)
Section 11.5 relating to attorneys' fees and expenses, (v) Section 11.11
relating to finder's fees and broker's fees and (vi) this Section 11.3.
Nothing in this Section 11.3 shall be deemed to release either party from any
liability for any breach by such party of the terms and provisions of this
Agreement or to impair the right of either party to compel specific
performance by the other party of its obligations under this Agreement.
11.4 Expenses. Whether or not the transactions contemplated hereby are
consummated, and except as otherwise provided in this Section 11.4, Section
2.7 or elsewhere 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.
11.5 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 court in such litigation or in a separate action brought
for that purpose.
11.6 Amendments. No amendment to this Agreement shall be effective
unless it shall be in writing and signed by both parties hereto.
11.7 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 prepaid telex, cable or telecopy, or sent, postage prepaid, by
registered, certified or express mail, or reputable overnight courier service
and shall be deemed given when so delivered by hand, telexed, cabled or
telecopied, or if mailed, three days after mailing (one business day in the
case of express mail or overnight courier service), as follows:
(i) if to Buyer, to:
Jefferson Electric, Inc.
3621 West Maplecrest Drive
Franklin, WI 53132
with a copy to:
Schober & Radtke S.C.
15525 West National Avenue
P.O. Box 510155
New Berlin, WI 53151-0155
Attention: Thomas G. Schober, Esq.
Telephone: (414) 872-1820
Telecopier: (414) 872-1073
(ii) if to Seller, to:
MagneTek, Inc.
26 Century Boulevard,
Post Office 290159
Nashville, Tennessee 37229-0159
Attention: Samuel A. Miley, Esq.
General Counsel
Telephone: (615) 316-5260
Telecopier: (615) 316-5192
with a copy to:
Baker, Donelson, Bearman & Caldwell
511 Union Street, Suite 1700
Nashville, Tennessee 37219
Attention: James L. Beckner, Esq.
Telephone: (615) 726-5720
Telecopier: (615) 726-0464
11.8 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.
11.9 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 party.
11.10 Entire Agreement. This Agreement and the Confidentiality
Agreement 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.
11.11 Fees. Each party hereto hereby represents and warrants to the
other party
hereto that no brokers or finders have acted for such party in connection
with this Agreement or the Transactions contemplated hereby or otherwise may
be entitled to any brokerage fee, finder's fee or commission in respect
thereof.
11.12 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.
11.13 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Wisconsin applicable to
agreements made and to be performed entirely within such State, without
regard to the conflicts of law principles of such State. IN WITNESS
WHEREOF, the parties have caused this Agreement to be duly executed as of the
date first written above.
SELLER:
MAGNETEK, INC.
By:
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Name:
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Title:
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BUYER:
JEFFERSON ELECTRIC, INC.
By:
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Name: Mike J. Buckna
Title: President