Exhibit 10.1
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STOCK PURCHASE AGREEMENT
BY AND BETWEEN
TECUMSEH PRODUCTS COMPANY
AND
SNOWSTORM ACQUISITION CORPORATION
OCTOBER 22, 2007
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND INTERPRETATIONS.................................. 1
Section 1.1 Definitions............................................... 1
Section 1.2 Interpretations........................................... 11
ARTICLE II PURCHASE AND SALE............................................... 12
Section 2.1 Purchase and Sale of Target Companies..................... 12
Section 2.2 Intercompany Accounts Receivable and Accounts Payable..... 12
Section 2.3 Purchase Price............................................ 12
Section 2.4 Closing................................................... 12
Section 2.5 Deliveries at Closing..................................... 13
Section 2.6 Working Capital Adjustment................................ 14
Section 2.7 Allocation................................................ 16
ARTICLE III SELLER'S REPRESENTATIONS AND WARRANTIES........................ 16
Section 3.1 Organization; Good Standing............................... 16
Section 3.2 Authorization of Transaction.............................. 16
Section 3.3 Noncontravention.......................................... 17
Section 3.4 Title to Target Shares.................................... 17
Section 3.5 Capitalization............................................ 17
Section 3.6 Financial Statements; Undisclosed Liabilities............. 18
Section 3.7 Assets.................................................... 18
Section 3.8 Subsequent Events......................................... 18
Section 3.9 Material Contracts........................................ 19
Section 3.10 Intellectual Property..................................... 20
Section 3.11 Real Property............................................. 21
Section 3.12 Tax Matters............................................... 22
Section 3.13 Legal Compliance; Permits................................. 23
Section 3.14 Litigation................................................ 23
Section 3.15 Product Warranty.......................................... 24
Section 3.16 Product Liability......................................... 24
Section 3.17 Customers and Suppliers................................... 24
Section 3.18 Environmental, Health and/or Safety Matters............... 24
Section 3.19 Labor and Employment Matters.............................. 25
Section 3.20 Employees Benefit Plans................................... 25
Section 3.21 Brokers' Fees............................................. 28
Section 3.22 Transactions With Affiliates.............................. 28
Section 3.23 Insurance................................................. 28
Section 3.24 Accounts Receivable....................................... 28
Section 3.25 Inventory................................................. 28
Section 3.26 Disclaimer of Other Representations and Warranties........ 28
ARTICLE IV BUYER'S REPRESENTATIONS AND WARRANTIES.......................... 29
Section 4.1 Organization of Buyer..................................... 29
Section 4.2 Authorization of Transaction.............................. 29
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Section 4.3 Noncontravention.......................................... 29
Section 4.4 Litigation................................................ 29
Section 4.5 Brokers' Fees............................................. 30
Section 4.6 Sufficient Funds.......................................... 30
Section 4.7 Investment................................................ 30
Section 4.8 Guaranty.................................................. 30
Section 4.9 Disclaimer of Other Representations and Warranties........ 30
ARTICLE V PRE-CLOSING COVENANTS............................................ 30
Section 5.1 Efforts; Cooperation...................................... 30
Section 5.2 Preservation of Business.................................. 31
Section 5.3 Operation of Business..................................... 31
Section 5.4 Notice of Developments.................................... 31
Section 5.5 Notice of Supplemental Disclosure......................... 32
Section 5.6 No Alternative Proposals.................................. 32
Section 5.7 Access.................................................... 32
Section 5.8 Press Releases and Public Announcements................... 33
Section 5.9 Pre-Closing Asset Transfers............................... 33
Section 5.10 Pre-Closing Employment Transfers.......................... 33
Section 5.11 Credit Support Requirements............................... 33
ARTICLE VI OTHER COVENANTS................................................. 34
Section 6.1 Cooperation............................................... 34
Section 6.2 Further Assurances........................................ 34
Section 6.3 Payments; Transition Services; Run-Off.................... 34
Section 6.4 Use of Name............................................... 35
Section 6.5 Access; Enforcement; Litigation Support................... 35
Section 6.6 Non-Competition........................................... 36
Section 6.7 Non-Solicitation of Employees............................. 36
Section 6.8 Covered Employees......................................... 37
Section 6.9 Transfer Taxes............................................ 38
Section 6.10 Tax Matters............................................... 39
Section 6.11 Insurance................................................. 40
Section 6.12 Bulk Transfer Laws........................................ 40
Section 6.13 Acknowledgements.......................................... 40
ARTICLE VII CONDITIONS TO OBLIGATION TO CLOSE.............................. 40
Section 7.1 Conditions to Buyer's Obligations......................... 40
Section 7.2 Conditions to Seller's Obligations........................ 41
Section 7.3 No Frustration of Closing Conditions...................... 42
ARTICLE VIII INDEMNIFICATION............................................... 42
Section 8.1 Survival of Representations and Warranties................ 42
Section 8.2 Indemnification Provisions for Buyer's Benefit............ 42
Section 8.3 Indemnification Provisions for Seller's Benefit........... 43
Section 8.4 Matters Involving Third Parties........................... 44
Section 8.5 Limitation on Indemnification; Calculation of Damages..... 45
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Section 8.6 Claims and Payment; Treatment of Payments................. 47
Section 8.7 Exclusive Remedy.......................................... 47
ARTICLE IX TERMINATION..................................................... 47
Section 9.1 Termination of Agreement.................................. 47
Section 9.2 Effect of Termination..................................... 48
ARTICLE X MISCELLANEOUS.................................................... 49
Section 10.1 Expenses.................................................. 49
Section 10.2 Entire Agreement.......................................... 49
Section 10.3 Incorporation of Annexes, Exhibits and Disclosure
Schedules.............................................. 49
Section 10.4 Amendments and Waivers.................................... 49
Section 10.5 Succession and Assignment................................. 49
Section 10.6 Notices................................................... 50
Section 10.7 Governing Law............................................. 51
Section 10.8 Submission to Jurisdiction; Service of Process............ 51
Section 10.9 Waivers of Jury Trial..................................... 51
Section 10.10 Specific Performance...................................... 51
Section 10.11 Severability.............................................. 51
Section 10.12 No Third Party Beneficiaries.............................. 52
Section 10.13 Mutual Drafting........................................... 52
Section 10.14 Disclosure Schedule....................................... 52
Section 10.15 Headings; Table of Contents............................... 52
Section 10.16 Counterparts; Facsimile Signatures........................ 52
Exhibit A - Form of License Agreement
Exhibit B - Form of Transition Services Agreement
Exhibit C - Form of IP Assignment Agreement
Annex A - Accounting Principles
Annex B - Business Financial Statements
Disclosure Schedule
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
October 22, 2007, by and between TECUMSEH PRODUCTS COMPANY, a corporation formed
under the laws of the State of Michigan ("Seller"), and SNOWSTORM ACQUISITION
CORPORATION, a corporation formed under the laws of the State of Delaware
("Buyer"). Seller and Buyer are referred to collectively herein as the
"Parties".
WITNESSETH:
WHEREAS, Seller directly owns all of the issued and outstanding capital
stock of Tecumseh Power Company, a corporation formed under the laws of the
State of Delaware ("Power"), and Motoco a.s., a corporation formed under the
laws of the Czech Republic ("Motoco" and together with Power, the "Target
Companies"), and Power directly owns all of the issued and outstanding capital
stock of Tecumseh Power International Limited, a corporation formed under the
laws of the United Kingdom ("Power UK" and together with the Target Companies,
each a "Company" and collectively the "Companies");
WHEREAS, Seller operates a small engine and transmission manufacturing,
assembly and marketing business that manufactures, assembles and/or markets
engines, transmissions and carburetors for snow, lawn and garden, generator and
tractor applications through the Companies (the "Business");
WHEREAS, Seller wishes to sell, and Buyer wishes to buy, the outstanding
capital stock of the Target Companies on the terms and subject to the conditions
set forth herein; and
WHEREAS, concurrently with the execution of this Agreement, and as a
condition to the willingness of Seller to enter into this Agreement, Buyer has
delivered to Seller the Guaranty (the "Guaranty") of Platinum Equity Capital
Partners, L.P., an affiliate of Buyer (the "Investor"), dated as of the date
hereof, pursuant to which the Investor has guaranteed to Seller the performance
of Buyer's obligations hereunder on the terms and subject to the conditions set
forth therein.
NOW, THEREFORE, in consideration of the mutual promises herein made, and in
consideration of the representations, warranties and covenants herein contained,
the Parties agree as follows.
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
Section 1.1 Definitions. For purposes of this Agreement:
"Accounting Principles" means the consistently applied accounting methods,
principles and calculations of the Companies pursuant to which the Financial
Statements were prepared, which are set forth in Annex A hereto, and include
GAAP. A specific method, principle or calculation specified in Annex A hereto is
intended to be applied in a consistent manner (to the extent applicable) in
accordance with such specific method, principle or calculation as has been used
by the Companies in the preparation of the Financial Statements. For purposes of
any
application of GAAP hereunder with the other Accounting Principles, where there
shall be any inconsistency between any specific Accounting Principles set forth
in Annex A hereto and GAAP, such specific Accounting Principles shall control
and GAAP shall be applied on a basis consistent with those specific Accounting
Principles.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act.
"Agreement" has the meaning set forth in the preamble.
"Alternative Proposal" means a proposal or offer from any Person (other
than Buyer or any of its Affiliates or Representatives) for the acquisition of
the Target Shares or all or any material part of the Business; provided,
however, that, notwithstanding anything to the contrary contained herein, a
proposal or offer from any Person relating to the direct or indirect acquisition
of the stock, assets or businesses of Seller or any of its businesses other than
the Business shall not constitute an Alternative Proposal so long as the
transactions contemplated thereby would not expressly be conditioned on the
termination of this Agreement and the obligations of Seller hereunder would
continue or be assumed by the Person making such proposal or offer upon
consummation of the transactions contemplated thereby.
"Approved Absence" means an approved leave of absence (including active
military service), short term and long term disability (including employees on
workers' compensation).
"Basket" has the meaning set forth in Section 8.5(a).
"Business" has the meaning set forth in the recitals.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banks located in New York, New York shall be authorized or required by law
to close.
"Buyer" has the meaning set forth in the preamble.
"Buyer DC Plan" has the meaning set forth in Section 6.8(e).
"Buyer Indemnified Party" has the meaning set forth in Section 8.2.
"Call Period" means the period from the date hereof until the earlier to
occur of (x) the eleventh (11th) Business Day following the date hereof or (y)
the first day on which the Investor shall have received the proceeds of all
capital calls made to consummate the transactions contemplated hereby.
"Cash" means cash, cash equivalents and liquid investments, net of any
outstanding checks or drafts written against such amounts.
"Closing" has the meaning set forth in Section 2.4.
"Closing Date" has the meaning set forth in Section 2.4.
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"Code" means the Internal Revenue Code of 1986.
"Companies" has the meaning set forth in the recitals.
"Company Plan" has the meaning set forth in Section 3.20(a).
"Conclusive Net Working Capital Statement" has the meaning set forth in
Section 2.6(b).
"Confidentiality Agreement" means the letter agreement, dated as of June
19, 2007, by and between Seller and Platinum Equity Advisors, LLC, an affiliate
of Buyer, regarding the terms and conditions on which Seller would make
available certain information to Platinum Equity Advisors, LLC.
"Contamination" has the meaning set forth in the definition of
Environmental Liabilities.
"Contract" means any binding agreement, contract, lease, sublease,
indenture, mortgage, instrument, guaranty, loan or credit agreement, note, bond,
customer order, purchase order, franchise, dealer and distributorship agreement,
supply agreement, development agreement, joint venture agreement, promotion
agreement, partnership agreement or other binding arrangement, understanding or
commitment, whether written or oral.
"Continuing Intercompany Accounts" has the meaning set forth in Section
2.2(b).
"Covered Employee" means any officer or employee of the Companies
(including officers or employees on leave of absence), excluding all employees
who are subject to the Pre-Closing Employment Transfers. For the avoidance of
doubt, James J. Bonsall shall not be deemed a Covered Employee for purposes of
this Agreement.
"Credit Support Requirements" means standby letters of credit, guarantees,
indemnity bonds, performance bonds, bid bonds, and any other financial
commitment or credit support instruments issued by third parties, Seller or any
of Seller's Subsidiaries other than a Company on behalf of Seller, any Company
or any of Seller's other Subsidiaries regarding the Business.
"Czech Facility" means all land, together with all buildings, structures,
improvements and fixtures located thereon, and all easements and other rights
appurtenant thereto, located at Krizikova 1, 370 01 Ceske Budejovice, Czech
Republic.
"Damages" has the meaning set forth in Section 8.2.
"Decree" means any judgment, decree, ruling, injunction, assessment,
attachment, undertaking, award, charge, writ, executive order, administrative
order or any other order of any Governmental Entity.
"Disclosure Schedule" has the meaning set forth in Article III.
"Disclosure Supplement" has the meaning set forth in Section 5.5.
"Disputed Item" has the meaning set forth in Section 2.6(b).
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"Disregarded Intercompany Accounts" has the meaning set forth in Section
2.2(a).
"Dunlap Facility" means all land, together with all buildings, structures,
improvements and fixtures located thereon, and all easements and other rights
appurtenant thereto, located at 510 Tram Trail Road, Dunlap, Tennessee.
"Effective Time" has the meaning set forth in Section 2.4.
"Employee Benefit Plan" means any "employee benefit plan" (as such term is
defined in Section 3(3) of ERISA) and any other employee benefit plan, program
or arrangement of any kind, whether or not subject to ERISA.
"Environmental, Health and/or Safety Requirements" means, as enacted and in
effect on or prior to the Closing Date, all federal, state, local and foreign
statutes, regulations, ordinances and other provisions having the force or
effect of law, all judicial and administrative orders, determinations,
directives or permit requirements, all contractual obligations, and all common
law concerning public health and safety, worker health and safety, pollution or
protection of the environment, including all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control or cleanup of any Hazardous Materials.
"Environmental Liabilities" means, with respect to or relating to any
facility, any claim or Liability (contingent or otherwise) of any kind or nature
or the duty to indemnify, defend or reimburse any Person with respect to: (i)
the presence at any time of any Hazardous Materials prior to, on or following
the Closing Date in the soil, groundwater, surface water, air or building
materials of such facility ("Contamination"); (ii) the migration at any time
prior to, on or after the Closing Date of Contamination to any other real
property, or the soil, groundwater, surface water, air or building materials
thereof; (iii) any activity involving Hazardous Materials conducted on such
facility at any time prior to, on or following the Closing Date; (iv) the
exposure of any Person to Hazardous Materials in the course of or as a
consequence of any activity involving Hazardous Materials conducted on such
facility at any time prior to, on or following the Closing Date or to
Contamination, without regard to whether any health effect of the exposure has
been manifested as of the Closing Date; (v) the violation of any Environmental,
Health and/or Safety Requirements in connection with the operations of any
business at such facility at any time prior to, on or following the Closing
Date; or (vi) any actions or proceedings brought or threatened by any third
party with respect to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" means any entity that is treated as a single employer
with any Company pursuant to Code Section 414(b) or 414(c) or ERISA Section
4001(a)(15).
"Exchange Act" means the Securities Exchange Act of 1934.
"Financial Statements" has the meaning set forth in Section 3.6(a).
"Former Facilities" means all land, together with all buildings,
structures, improvements and fixtures located thereon, and owned or leased by
Seller or any of its Subsidiaries with respect
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to the Business other than the Present Facilities. For avoidance of doubt, the
Grafton Facility and the New Holstein Facility shall be deemed Former
Facilities.
"GAAP" means United States generally accepted accounting principles.
"Grafton Facility" means all land, together with all buildings, structures,
improvements and fixtures located thereon, and all easements and other rights
appurtenant thereto, located at 900 North Street, Grafton, Wisconsin.
"Grafton Settlement Agreement" has the meaning set forth in Section 5.10.
"Grafton Union Contract" has the meaning set forth in Section 5.10.
"Governmental Entity" means any federal, state, local or foreign
governmental or regulatory authority, agency, commission, court, body or other
governmental entity.
"Guaranty" has the meaning set forth in the recitals.
"Hazardous Materials" means any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation.
"HMO" has the meaning set forth in Section 3.20(a)(vii).
"Horsepower Litigation" means the litigation titled as Ronnie Phillips et
al. v. Sears Roebuck Corporation et. al., No.04-L-334 (20th Judicial Circuit,
St. Clair County, IL).
"Indebtedness" means, as of any date of determination, without duplication,
(a) the principal amount of all indebtedness of a Company for borrowed money as
of such date and any unpaid interest thereon as of such date, (b) the principal
amount of any other indebtedness of a Company as of such date which is evidenced
by a note, bond, letter of credit, debenture or similar instrument and any
unpaid interest thereon as of such date, (c) all capital lease obligations of a
Company as of such date, in each case determined in accordance with GAAP, and
(d) pension or other similar post-retirement liabilities.
"Indemnified Party" has the meaning set forth in Section 8.4(a).
"Indemnifying Party" has the meaning set forth in Section 8.4(a).
"Initial Purchase Price" has the meaning set forth in Section 2.3.
"Intellectual Property" means (a) all patents and patent applications,
together with all reissuances, continuations, continuations-in-part, extensions
and reexaminations thereof; (b) all trademarks, service marks, trade dress,
logos, slogans, trade names and Internet domain names, together with all
goodwill associated therewith, and all applications, registrations, and renewals
in connection therewith; (c) all copyrightable works, all copyrights, and all
applications, registrations and renewals in connection therewith; (d) all trade
secrets, including inventions,
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know-how, formulas, compositions, methods, manufacturing and production
processes and techniques and technology, whether or not patentable; and (e) all
computer software.
"Inventory" shall mean the inventory (including raw materials, work in
process and finished goods) of the Companies.
"Investor" has the meaning set forth in the recitals.
"IP Assignment Agreement" has the meaning set forth in Section 2.5(a)(iv).
"IRS" means the Internal Revenue Service.
"Knowledge" of a Person (and other words of similar import) means the
actual knowledge, after reasonable inquiry, of (i) with respect to Seller, James
J. Bonsall, Randy Butler, Thomas Drainville, Daryl P. McDonald, James S.
Nicholson, Michael Taylor, Earl Johnson or Gregg Neumeyer, and (ii) with respect
to Buyer, any executive officer or division manager of Buyer.
"Leased Real Property" means all leasehold or subleasehold estates and
other rights to use or occupy any land, buildings, structures, improvements,
fixtures, or other interest in real property that is leased by any of the
Companies.
"Leases" means all leases, subleases, licenses, concessions and other
agreements, including all amendments, extensions, renewals, guaranties, and
other agreements with respect thereto, pursuant to which any of the Companies
holds any Leased Real Property.
"Liability" means any liability or obligation of whatever kind or nature
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether liquidated or unliquidated and whether due or to become
due), including any liability for Taxes.
"License Agreement" has the meaning set forth in Section 2.5(a)(ii).
"Lien" means any mortgage, pledge, lien, encumbrance, charge, security
interest, option, right of first refusal, easement, mortgage, license to third
party, security agreement or other encumbrance or restriction on the use or
transfer of any property.
"Litigation" means any action, cause of action, suit, claim, investigation,
audit, demand, hearing or proceeding, whether civil, criminal, administrative or
arbitral by or before any Governmental Entity.
"Material Adverse Effect" means, when used with respect to a Person or the
Business, any effect or change that individually or in the aggregate (i) would
be, or would reasonably be likely to be, materially adverse to the business,
assets, financial condition, operating results or operations of the Person and
its Subsidiaries (taken as a whole) or the Business as presently conducted, as
appropriate; provided, however, that no effects or changes arising or related to
any of the following shall be deemed to constitute, and none of the following
shall be taken into account in determining whether there has been, a Material
Adverse Effect when used with respect to the Business or the Companies: (a)
general business or economic conditions in North
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America or Europe; (b) general business or economic conditions affecting the
industry in which such Person or the Business, as appropriate, operates; (c)
national or international political or social conditions, including the
engagement by any country in North America or Europe in hostilities, whether or
not pursuant to the declaration of a national emergency or war, or the
occurrence of any military or terrorist attack in any country in North America
or Europe, or any of its territories, possessions or diplomatic or consular
offices or upon any military installation, equipment or personnel of any country
in North America or Europe; (d) financial, banking, credit, currency or
securities markets (including any disruption thereof or any decline in the price
of securities generally or any market or index); (e) changes in law or in United
States of America generally accepted accounting principles, except to the extent
that, in the case of (a), (b), (c) or (e), such Person or the Business, as
appropriate, is disproportionately affected thereby; (f) any action contemplated
by this Agreement or any other Related Agreement; (g) the announcement or
pendancy of this Agreement, (h) any failure of either Party hereto to provide
its consent to the taking of any action otherwise provided hereunder, (i) any
commodity prices or (j) the operational performance of the Business in September
2007 and through the Closing as reflected in any financial statements covering
any such period to the extent impacted from the reasons, changes or effects
disclosed to Buyer on or before the date hereof and set forth in Section 3.8 of
the Disclosure Schedule, including any differences in revenue, costs or earnings
for such month or period when compared against any forecasts for such month or
period or historical operational results for any period, or (ii) would, or would
be reasonably likely to, materially adversely affect the ability of such Person
to consummate the transactions contemplated by this Agreement or the other
Related Agreements on a timely basis.
"Material Contact" has the meaning set forth in Section 3.9.
"Most Recent Balance Sheet" means the balance sheet for the Most Recent
Fiscal Month End.
"Most Recent Financial Statements" has the meaning set forth in Section
3.6(a).
"Most Recent Fiscal Month End" has the meaning set forth in Section 3.6(a).
"Most Recent Fiscal Year End" has the meaning set forth in Section 3.6(a).
"Motoco" has the meaning set forth in the recitals.
"Net Working Capital" means (i) the (A) trade accounts receivable plus
inventories of the Business plus (B) unrestricted Cash of the Business
(including Cash in the United Kingdom and the Czech Republic) not distributed or
paid pursuant to the third sentence of Section 5.3, less (C) trade accounts
payable of the Business as determined in accordance with the Accounting
Principles, which have been used in preparing the illustrative determination of
the Net Working Capital included in Part B of Annex A hereto, minus (ii) the
amount of Indebtedness (to the extent not already included in clause (i)(B)
above). Notwithstanding anything to the contrary, all Disregarded Intercompany
Accounts shall be disregarded and all Continuing Intercompany Accounts shall be
included for purposes of determining the Net Working Capital.
"Neutral Arbitrator" has the meaning set forth in Section 2.6(b).
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"New Holstein Facility" means all land, together with all buildings,
structures, improvements and fixtures located thereon, and all easements and
other rights appurtenant thereto, located at 1604 Michigan Avenue, New Holstein,
Wisconsin.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice of the Business.
"Outside Date" has the meaning set forth in Section 9.1(c)(i).
"Owned Real Property" means all land, together with all buildings,
structures, improvements, and fixtures located thereon, and all easements and
other rights and interests appurtenant thereto, owned by any of the Companies.
"Party" has the meaning set forth in the preamble.
"PBGC" has the meaning set forth in Section 3.20(a)(iv).
"Permitted Lien" means (a) Liens for Taxes not yet delinquent or which are
being contested in good faith by appropriate proceedings (excluding Liens
arising under ERISA or Code Section 412); (b) mechanic's, workmen's,
repairmen's, warehousemen's, carrier's or other similar Liens, including all
statutory liens, arising or incurred in the Ordinary Course of Business if the
obligations secured thereby are not past due or are being contested in good
faith; (c) with respect to leased or licensed personal property, the terms and
conditions of the lease or license applicable thereto; (d) with respect to real
property, zoning, building codes and other land use laws regulating the use or
occupancy of such real property or the activities conducted thereon which are
imposed by any Governmental Entity having jurisdiction over such real property
which are not violated by the current use or occupancy of such real property or
the operation of the Business, except where any such violation would not
reasonably be expected to individually or in the aggregate materially impair the
use or operation of the affected property or the conduct of the Business thereon
as it is currently being conducted; (e) easements, covenants, conditions,
restrictions and other similar matters affecting title to real property and
other encroachments and title and survey defects that do not or would not
materially impair the use or occupancy of such real property in the operation of
the Business taken as a whole; and (f) other Liens, none of which, individually
or in the aggregate, materially impairs the use or operations of the affected
asset or the conduct of the Business therewith as it is currently being used and
conducted.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or any other entity, including any
Governmental Entity or any group of any of the foregoing or the media.
"Post-Closing Net Working Capital Statement" has the meaning set forth in
Section 2.6(a).
"Power" has the meaning set forth in the recitals.
"Power UK" has the meaning set forth in the recitals.
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"Pre-Closing Asset Transfers" has the meaning set forth in Section 5.9.
"Pre-Closing Employment Transfers" has the meaning set forth in Section
5.10.
"Pre-Closing Tax Period" has the meaning set forth in Section 6.10(c).
"Present Facilities" means the Czech Facility, the Dunlap Facility, the
Salem Facility and the UK Facility.
"Purchase Price" has the meaning set forth in Section 2.3.
"Related Agreements" means this Agreement, the License Agreement, the IP
Assignment Agreement, the Transition Services Agreement and all other Contracts,
schedules, certificates or other documents being delivered pursuant to or in
connection with this Agreement, the License Agreement, the IP Assignment
Agreement or the Transition Services Agreement.
"Representative" of a Person means the Person's controlled Affiliates and
the officers, directors, managers, employees, advisors, representatives
(including its legal counsel, financial advisors and accountants) and agents of
the Person and/or its controlled Affiliates.
"Resolution Period" has the meaning set forth in Section 2.6(b).
"Response Action" has the meaning set forth in Section 8.5(l).
"Retained Plans" has the meaning set forth in Section 6.8(h).
"Salem Facility" means all land, together with all buildings, structures,
improvements and fixtures located thereon, and all easements and other rights
appurtenant thereto, located at 1555 S. Jackson Street, Salem, Indiana.
"Securities Act" means the Securities Act of 1933.
"Seller" has the meaning set forth in the preamble.
"Seller Indemnified Party" has the meaning set forth in Section 8.3.
"Seller Marks" has the meaning set forth in Section 6.4(a).
"Seller Plan" means any material Employee Benefit Plan that Seller or any
of its Subsidiaries other than the Companies maintains or to which Seller or any
of its Subsidiaries other than the Companies contributes or has any obligation
to contribute and each retention, incentive, change in control, profit sharing,
deferred compensation, savings or pension plan sponsored by any of Seller or any
of its Subsidiaries other than the Companies or to which Seller or any of its
Subsidiaries other than the Companies is a party, in each case with respect to
the Covered Employees. For the sake of clarity, no Company Plan shall be
considered to be a Seller Plan.
"Sourced Engines Product Warranty Damages" has the meaning set forth in
Section 8.2(g).
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"Sourced Engines Special Basket" has the meaning set forth in Section
8.5(b).
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which,
directly or indirectly, (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity (other than a corporation), a majority of partnership or other
similar ownership interest thereof is at the time owned or controlled, directly
or indirectly, by that Person or one or more Subsidiaries of that Person or a
combination thereof and for this purpose, a Person or Persons owns a majority
ownership interest in such a business entity (other than a corporation) if such
Person or Persons shall be allocated a majority of such business entity's gains
or losses or shall be or control any managing director or general partner of
such business entity (other than a corporation).
"Target Net Working Capital Amount" has the meaning set forth in Section
2.6(c).
"Target Companies" has the meaning set forth in the recitals.
"Target Shares" means all of the issued and outstanding shares of capital
stock of each of the Target Companies.
"Tax" or "Taxes" means (i) any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated or other tax of any kind whatsoever,
whether computed on a separate or consolidated, unitary or combined basis or in
any other manner, (ii) any interest, penalty or addition with respect to any
item in clause (i), whether disputed or not, (iii) any successor or transferee
liability in respect of any items described in clauses (i) and/or (ii) under
Treasury Regulation 1502-6 (or any similar provision of state, local or foreign
law); and (iv) any amounts payable under any tax sharing agreement or
contractual arrangements.
"Tax Return" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8.4(a).
"Transfer Tax" has the meaning set forth in Section 6.10.
"Transferred Plan" means, to the extent set forth in Section 6.8(g) of the
Disclosure Schedule if required to be set forth thereon (as it relates to the
materiality thereof), any Company Plan sponsored or maintained by the Companies
or which will be assumed hereunder by Buyer (including pursuant to Section
6.8(f)) as a result of the transactions contemplated hereby.
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"Transition Services Agreement" has the meaning set forth in Section
2.5(a)(iii).
"TMT" means TMT Motoco do Brazil Ltda., a corporation incorporated under
the laws of Brazil and a Subsidiary of Seller.
"UK Facility" means all land, together with all buildings, structures,
improvements and fixtures located thereon, and all easements and other rights
appurtenant thereto, located at 152-154 Commercial Road, Staines, Middlesex,
United Kingdom.
"WARN Act" has the meaning set forth in Section 3.19.
Section 1.2 Interpretations. Unless otherwise indicated herein to the
contrary:
(a) When a reference is made in this Agreement to an Article, Section,
Annex, Exhibit, Schedule, clause or subclause, such reference shall be to an
Article, Section, Annex, Exhibit, Schedule, clause or subclause of this
Agreement.
(b) The words "include," "includes" or "including" and other words or
phrases of similar import, when used in this Agreement, shall be deemed to be
followed by the words "without limitation."
(c) The words "hereof," "herein" and "hereunder" and words of similar
import, when used in this Agreement, refer to this Agreement as a whole and not
to any particular provision of this Agreement.
(d) The word "if" and other words of similar import shall be deemed in
each case to be followed by the phrase "and only if."
(e) The use of "or" herein is not intended to be exclusive.
(f) Unless the context otherwise requires, the phrase "relating to the
Business" and other phrases of similar import will be deemed to mean "primarily
relating to the operation of the Business."
(g) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of names and pronouns shall
include the plural and vice versa.
(h) All terms defined in this Agreement have their defined meanings
when used in any certificate or other document made or delivered pursuant
hereto, unless otherwise defined therein.
(i) Any reference herein to law or to a legal requirement (or, with
respect to any statute, ordinance, code, rule or regulation, any provision
thereof) shall be deemed to include reference to all laws and or to such legal
requirement and any legal requirement promulgated thereunder (or provision
thereof, as applicable), including any successor thereto, respectively, as may
be amended from time to time.
11
(j) References herein to a Person are also to its permitted successors
and assigns. Any reference herein to a Governmental Entity shall be deemed to
include reference to any successor thereto.
(k) Any reference herein to "Dollars" or "$" shall mean United States
dollars.
(l) References in this Agreement to materials or information
"furnished to Buyer" and other phrases of similar import include all materials
or information made available to Buyer or its Representatives in the data room
prepared by Seller or provided to Buyer or its Representatives, including in
response to requests for materials or information.
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale of Target Companies. On the terms and subject
to the conditions of this Agreement, Buyer will purchase from Seller, and Seller
agrees to sell, transfer, assign, convey and deliver to Buyer at the Closing all
of the Target Shares free and clear of all Liens for the consideration specified
in this Article II.
Section 2.2 Intercompany Accounts Receivable and Accounts Payable.
(a) All intercompany accounts receivable, intercompany accounts
payable and other obligations due and owing between any of Seller or any of its
Affiliates (other than the Companies), on the one hand, and any Company, on the
other hand, other than the Continuing Intercompany Accounts (collectively, the
"Disregarded Intercompany Accounts"), shall be cancelled or otherwise
disregarded in perpetuity in a manner that does not give rise to any adverse Tax
consequences to any Company or to Buyer (including any cancellation of debt
income) beginning immediately prior to the Closing.
(b) All intercompany accounts receivable, intercompany accounts
payable and other obligations due and owing between any of Seller or any of its
Affiliates (other than the Companies), on the one hand, and any Company, on the
other hand, of the kind described on Section 2.2 of the Disclosure Schedule
(collectively, the "Continuing Intercompany Accounts") shall remain unaffected
by the Closing and shall remain in effect thereafter. Buyer shall, or shall
cause the Companies to, remit payment of the full amount of the payables portion
of all Continuing Intercompany Accounts to Seller, and Seller shall remit
payment of the full amount of the receivables portion of all Continuing
Intercompany Accounts to the Companies, in either case within ninety (90)
calendar days following the Closing.
Section 2.3 Purchase Price. Buyer agrees to pay to Seller at the Closing an
amount equal to Fifty-One Million United States Dollars ($51,000,000) (the
"Initial Purchase Price" and as further adjusted by the payment contemplated by
Section 2.6(c), if any, the "Purchase Price"), by wire transfer or other
immediately available funds to an account or accounts designated by Seller prior
to the Closing Date.
Section 2.4 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at offices of Kirkland & Ellis LLP
located at 153 East 53rd Street, New York, New York (or such other location as
shall be mutually agreed upon by Seller
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and Buyer) commencing at 10:00 a.m. local time on a date (the "Closing Date")
that is no later than the second (2nd) Business Day following the date on which
all conditions to the obligations of Seller and Buyer to consummate the
transactions contemplated hereby set forth in Article VII (other than conditions
with respect to actions Seller and/or Buyer will take at the Closing itself, but
subject to the satisfaction or waiver of those conditions) have been satisfied
or waived, or on such other date as shall be mutually agreed upon by Seller and
Buyer prior thereto; provided, however, that, without Buyer's consent otherwise,
if the Call Period has not ended at the time of such satisfaction or waiver of
such conditions, the Closing shall occur on the first (1st) Business Day
following the Call Period (subject in each case to the satisfaction or waiver of
the conditions to the obligations of Seller and Buyer to consummate the
transactions contemplated hereby set forth in Article VII) or, if such
conditions are not so satisfied or waived as of such date, as otherwise
determined pursuant to this sentence without giving effect to this proviso. The
Closing of the transactions contemplated hereby shall be deemed to have occurred
at 11:59 p.m. (Central time) on the Closing Date (the "Effective Time").
Section 2.5 Deliveries at Closing.
(a) At the Closing, Seller will deliver to Buyer the following duly
executed documents and other items:
(i) certificates representing all of the Target Shares, duly
endorsed or accompanied by stock transfer powers;
(ii) a Trademark License and Coexistence Agreement substantially
in the form of Exhibit A hereto (the "License Agreement");
(iii) a Transition Services Agreement substantially in the form
of Exhibit B hereto (the "Transition Services Agreement");
(iv) an Intellectual Property Assignment and License Agreement
substantially in the form of Exhibit C hereto (the "IP Assignment Agreement");
(v) a certificate to the effect that each of the conditions
specified in Section 7.1(a) and Section 7.1(b) is satisfied;
(vi) a copy of Seller's and each Company's certificate of
incorporation or other similar organizational document certified as of a date on
or within 15 calendar days before the Closing Date by the Secretary of State of
the State of Michigan or a similar Governmental Entity (provided, however, that
no such certified organizational document shall be required with respect to
Motoco and Power UK);
(vii) a copy of a certificate of good standing of Seller and each
Company issued as of a date on or within 15 calendar days before the Closing
Date by the Secretary of State of the State of Michigan or a similar
Governmental Entity (provided, however, that no such certificate shall be
required with respect to Motoco and Power UK);
(viii) a non-foreign affidavit dated as of the Closing Date,
sworn under penalty of perjury and in form and substance required under Treasury
Regulations issued
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pursuant to Section 1445 of the Code, stating that Seller is not a "foreign
person" as defined in Section 1445 of the Code;
(ix) the resignation, effective as of the Closing, of each
director (other than, at the election of Buyer, of Motoco) or person holding a
similar position on the equivalent governing body and each officer of each
Company (but only as to such position and without limiting Section 6.8);
provided that such resignation does not result in any severance obligation;
(x) evidence of the receipt of all third party consents or
sublicenses from third parties and notices to or from third parties that are
required to be delivered or obtained pursuant to Section 7.1(c) and delivered by
Seller; and
(xi) an acknowledgement of the receipt of the Initial Purchase
Price.
(b) At the Closing, Buyer will deliver to Seller the following duly
executed documents and other items:
(i) the License Agreement;
(ii) the Transition Services Agreement;
(iii) the IP Assignment Agreement;
(iv) a certificate to the effect that each of the conditions
specified in Section 7.2(a) and Section 7.2(b) are satisfied;
(v) a copy of Buyer's certificate of incorporation certified as
of a date on or within 15 calendar days before the Closing Date by the Secretary
of State of the State of Delaware;
(vi) a copy of a certificate of good standing of Buyer issued as
of a date on or within 15 calendar days before the Closing Date by the Secretary
of State of the State of Delaware;
(vii) the Initial Purchase Price; and
(viii) evidence of the receipt of all third party consents or
sublicenses from third parties and notices to or from third parties that are
required to be delivered or obtained pursuant to Section 7.2(c) and delivered by
Buyer.
Section 2.6 Working Capital Adjustment.
(a) Post-Closing Net Working Capital Statement. Within one hundred
twenty (120) calendar days after the Closing Date, Buyer shall cause to be
prepared and delivered to Seller a statement setting forth the Net Working
Capital as of the Effective Time, and the components and calculation thereof, as
of the Effective Time giving effect to the transactions contemplated hereby
prepared in accordance with the Accounting Principles (the "Post-Closing Net
Working Capital Statement").
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(b) Determination of Conclusive Net Working Capital. Seller will have
sixty (60) calendar days following the receipt of the Post-Closing Net Working
Capital Statement to review the Post-Closing Net Working Capital Statement.
During such time (and, in the case of clause (x) below, during the Resolution
Period, if applicable), (x) without limiting Section 6.5, Buyer shall give
Seller and its Representatives access to all books, records, facilities and
personnel of Buyer and its Subsidiaries (including the Companies and the
Business) as reasonably necessary to undertake such review and (y) Seller may
dispute any items set forth on the Post-Closing Net Working Capital Statement
(or specific calculations or methods contemplated thereby). Unless Seller
delivers written notice(s) to Buyer of dispute thereof on or prior to the
sixtieth (60th) calendar day after Seller's receipt of the Post-Closing Net
Working Capital Statement, Seller will be deemed to have accepted and agreed to
the Post-Closing Net Working Capital Statement and such statement will be final,
binding and conclusive. If Seller notifies Buyer in writing of disputed items
contained in the Post-Closing Net Working Capital Statement (or specific
calculations or methods contemplated thereby) within such sixty (60) calendar
day period, for thirty (30) calendar days following delivery of such notice by
Seller to Buyer (the "Resolution Period"), Buyer and Seller shall attempt in
good faith to resolve their differences with respect to the disputed items (the
"Disputed Items"). Any resolution by Buyer and Seller during the Resolution
Period as to any Disputed Items shall be set forth in writing and will be final,
binding and conclusive. If Buyer and Seller do not resolve all Disputed Items by
the end of the Resolution Period, then all Disputed Items remaining in dispute
will be submitted within thirty (30) calendar days after the expiration of the
Resolution Period to a national independent accounting firm as is mutually
acceptable to Buyer and Seller (the "Neutral Arbitrator"). The Neutral
Arbitrator shall act as an arbitrator to determine only those Disputed Items
remaining in dispute as of the end of the Resolution Period. In resolving such
Disputed Items, the Neutral Arbitrator may not assign a value to any Disputed
Item greater than the greatest value for such Disputed Item claimed by either
Party or less than the lowest value for such Disputed Item claimed by either
Party upon presentment to the Neutral Arbitrator. All fees and expenses relating
to the work, if any, to be performed by the Neutral Arbitrator will be allocated
between Buyer and Seller in the same proportion that the aggregate amount of the
Disputed Items so submitted to the Neutral Arbitrator that is unsuccessfully
disputed by each such Party (as finally determined by the Neutral Arbitrator)
bears to the total amount of such Disputed Items so submitted. In addition,
Buyer and Seller shall give the Neutral Arbitrator access to all books, records,
facilities and personnel of such Party as reasonably necessary to perform its
function as arbitrator. Buyer and Seller shall use their commercially reasonable
efforts to cause the Neutral Arbitrator to deliver to Buyer and Seller a written
determination (such determination to include a work sheet setting forth all
material calculations and methods used in arriving at such determination) of the
Disputed Items submitted to the Neutral Arbitrator within thirty (30) calendar
days of receipt of such Disputed Items, which determination will be final,
binding and conclusive and upon which judgment may be entered. The final,
binding and conclusive Post-Closing Net Working Capital Statement based either
upon agreement, deemed agreement by Buyer and Seller and/or the written
determination delivered by the Neutral Arbitrator in accordance with this
Section 2.6(b) will be the "Conclusive Net Working Capital Statement."
(c) Post-Closing Adjustment. If the amount of Net Working Capital on
the Conclusive Net Working Capital Statement is less than Sixty-Eight Million
United States Dollars ($68,000,000) (the "Target Net Working Capital Amount"),
Seller shall pay Buyer the amount of
15
the difference no later than the fifth (5th) Business Day following the date on
which Buyer and Seller agree, or are deemed to have agreed to, or the Neutral
Arbitrator delivers, the Conclusive Net Working Capital Statement. If the amount
of Net Working Capital on the Conclusive Net Working Capital Statement equals or
exceeds the Target Net Working Capital Amount, no payment shall be made pursuant
to this Section 2.6.
Section 2.7 Allocation. Seller and Buyer shall agree on the allocation of
the Purchase Price amongst the Target Shares within forty-five (45) calendar
days after the Closing Date. Buyer and Seller shall report, act and file Tax
Returns in all respects and for all purposes consistent with such allocation.
Neither Buyer nor Seller shall take any position (whether in audits, tax returns
or otherwise) which is inconsistent with such allocation unless required to do
so by applicable law.
ARTICLE III
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Buyer that the statements contained in
this Article III are true and correct, except as set forth in the disclosure
schedule accompanying this Agreement (the "Disclosure Schedule"), which is
further described in Section 10.14. The Disclosure Schedule will be arranged in
paragraphs corresponding to the Sections contained in this Article III and
Article V.
Section 3.1 Organization; Good Standing.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Michigan and has all requisite
corporate power and authority to own, lease and operate its assets and to carry
on its business as now being conducted.
(b) Each Company is duly organized, validly existing and, other than
with respect to Motoco and Power UK, in good standing under the laws of the
jurisdiction of its incorporation or formation and has all requisite corporate
or similar power and authority to own, lease and operate its assets and to carry
on its business as now being conducted.
(c) The copies of Seller's and each Company's articles of
incorporation and bylaws or other equivalent governing documents, each as
amended to date and each heretofore made available to Buyer and/or its agents,
are complete and correct, and no amendments thereto are pending.
Section 3.2 Authorization of Transaction.
(a) Seller has full power and authority to execute and deliver this
Agreement and all other agreements contemplated hereby to which it is a party
and to perform its obligations hereunder and thereunder.
(b) The execution, delivery and performance of this Agreement and all
other agreements contemplated hereby to which Seller is a party have been duly
authorized by Seller.
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(c) This Agreement constitutes the valid and legally binding
obligation of Seller, enforceable against Seller in accordance with its terms
and conditions, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity.
Section 3.3 Noncontravention. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) conflict with or result in a breach of the certificate of incorporation or
bylaws, or other organizational documents, of Seller nor any of the Target
Companies, (ii) violate in any material respect any material law or Decree to
which Seller or any of the Target Companies is, or its respective assets or
properties are, subject in respect of the Business, or (iii) conflict in any
material respect with, result in a material breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify in any material respect or cancel, or require any
notice under any Material Contract or any material permit held by the Companies.
Other than pursuant to antitrust or non-competition laws in jurisdictions
outside the United States and filings required under the Exchange Act, Seller is
not required to give any material notice to, make any material filing with, or
obtain any material authorization, consent or approval of any Governmental
Entity in order for Seller to consummate the transactions contemplated by this
Agreement or any other Related Agreement.
Section 3.4 Title to Target Shares. Each of the Target Shares is held of
record and owned beneficially by Seller free and clear of any Liens (other than
Permitted Liens). Neither Seller nor any of its Subsidiaries is a party to any
option, warrant, purchase right or other Contract (other than this Agreement)
that would require Seller or any of its Subsidiaries to sell, transfer, or
otherwise dispose of any capital stock or other equity interests of the
Companies. Neither Seller nor any of its Subsidiaries is a party to any voting
trust, proxy, or other agreement or understanding with respect to the voting of
any capital stock or other equity interests of the Companies. Upon the Closing,
Buyer will be the record and beneficial owner of all the Target Shares, free and
clear of all Liens (other than Liens imposed thereon by Buyer).
Section 3.5 Capitalization.
(a) Section 3.5 of the Disclosure Schedule sets forth for each of the
Companies (i) its name and jurisdiction of incorporation, (ii) the number of
authorized shares or other equity interests for each class of its capital stock
or other equity interests, and (iii) the number of issued and outstanding shares
or other equity interests of each class of its capital stock or other equity
interests, the names of the holders thereof, and the number of shares or other
equity interests held by each such holder.
(b) All of the issued and outstanding Target Shares of the Target
Companies have been duly authorized and are validly issued, fully paid, and
non-assessable (or of similar status to the extent such status exists with
respect to foreign Persons). There are no outstanding or authorized options,
commitments, preemptive rights, warrants, purchase rights, subscription rights,
conversion rights, exchange rights or other Contracts that provide for the
obligation to issue, sell, register or vote, or outstanding securities
convertible into or exchangeable for, any shares of capital stock or other
equity interests of the Companies. There are no outstanding or
17
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to any of the Companies.
(c) Except for Power UK, none of the Target Companies have any
Subsidiaries. All of the outstanding shares of Power UK are owned by Power.
Section 3.6 Financial Statements; Undisclosed Liabilities.
(a) Attached hereto as Annex B are the following financial statements
(collectively the "Financial Statements"): (i) unaudited combined balance
sheets, statements of income and statements of cash flow for the Companies as of
and for the fiscal year December 31, 2006 (the "Most Recent Fiscal Year End"),
and (ii) unaudited combined balance sheets, statements of income and statements
of cash flow for the Companies (the "Most Recent Financial Statements") as of
and for the eight months ended August 31, 2007 (the "Most Recent Fiscal Month
End"). During the periods presented by the Financial Statements, Seller has
maintained internal controls in a manner consistent with historical practice
except as required by law. The Financial Statements (w) reflect reserves
established in accordance with the Accounting Principles, (x) present fairly in
all material respects the financial condition of the Companies as of such dates
and the results of operations of the Companies for such periods consistent with
the Accounting Principles, (y) are correct and complete in all material
respects, and (z) are consistent in all material respects with the books and
records of the Companies, except in each case as disclosed thereon; provided,
however, that the Most Recent Financial Statements are subject to normal-year
end adjustments (which are not as of the date hereof, to Seller's Knowledge,
material) and lack of footnotes and other presentation items.
(b) Except as set forth on the Most Recent Balance Sheet, or except as
incurred in the Ordinary Course of Business, since the Most Recent Fiscal Month
End, the Companies have not incurred any Liabilities other than (x) those
liabilities contemplated hereby or (y) those Liabilities that, individually or
in the aggregate are not material to the Business.
(c) To Seller's Knowledge, the Companies do not have any Indebtedness.
Section 3.7 Assets. Except as set forth herein or as contemplated by the
Related Agreements, as of the Closing, the Companies will have good title to, or
a valid license to or leasehold interest in, the material tangible assets they
use regularly in the conduct of the Business as presently conducted and
consistent with past practices, free and clear of all Liens (other than
Permitted Liens) and such assets are, in the aggregate, in good working
condition, ordinary wear and tear excepted. The Companies have, and as of the
Closing will have, all assets required to conduct the Business as conducted
presently and as of the Closing Date, consistent with past practices.
Section 3.8 Subsequent Events. Except with respect to the transactions
contemplated hereby or, as of the Closing, for actions permitted to be taken
pursuant to Section 5.3 or taken subject to the receipt of Buyer's consent,
since the Most Recent Fiscal Month End, there has not been any Material Adverse
Effect on the Business. Without limiting the generality of the foregoing, except
with respect to the transactions contemplated hereby (including Section 5.9 and
Section 5.10) or, as of the Closing, for actions permitted to be taken pursuant
to Section 5.3
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or taken subject to the receipt of Buyer's consent, since the Most Recent Fiscal
Month End, neither Seller nor any of the Companies has:
(a) sold, leased, transferred or assigned any material assets related
to the Business outside the Ordinary Course of Business;
(b) other than with respect to the license of Intellectual Property or
Covered Employees (which matters are covered below), entered into or
accelerated, terminated, modified or cancelled any Material Contract outside the
Ordinary Course of Business;
(c) experienced any material damage, destruction or loss not covered
by insurance to its property related to the Business as presently conducted
(consistent with past practices);
(d) entered into any material agreement granting any exclusive license
to or transferring or assigning any material Intellectual Property related to
the Business;
(e) made any capital investment in, or any loan to, any other Person
in either case in excess of $100,000 related to the Business;
(f) entered into any other material transaction with any of Covered
Employee outside the Ordinary Course of Business;
(g) entered into any collective bargaining agreement related to any of
the Covered Employees or modified the terms of any existing such contract;
(h) granted any increase in the base compensation of any the Covered
Employees outside the Ordinary Course of Business;
(i) adopted or amended any bonus, profit sharing, incentive, severance
or other plan, contract or commitment for the benefit of any of the Covered
Employees outside the Ordinary Course of Business;
(j) made any other material change in employment terms for any of the
Covered Employees outside the Ordinary Course of Business; and
(k) changed in any material respect the normal business policies of
the Business related to the keeping books, accounts or records outside of the
Ordinary Course of Business.
Section 3.9 Material Contracts. Except as disclosed on Section 3.9 of the
Disclosure Schedule and other than the Related Agreements, neither Seller, with
respect to the Business, nor any Company is a party or subject to:
(a) any Contract for the lease of personal property to or from any
Person providing for lease payments unpaid as of the Closing Date in excess of
$50,000 per annum;
19
(b) any Contract requiring the purchase of all or substantially all of
its requirements for a particular product from a supplier;
(c) any Contract for the purchase or sale of raw materials,
commodities, supplies, products or other personal property, or for the
furnishing or receipt of services, the performance of which will extend over a
period of more than one year after the Closing Date or involve unpaid
consideration as of the Closing Date in excess of $100,000, but excluding all
purchase orders entered into in the Ordinary Course of Business;
(d) any Contract pursuant to which the Business sells any products
providing for any "most favored nation" pricing or other similar pricing;
(e) any Contract providing for a partnership or joint venture;
(f) any Contract under which it has created, incurred, assumed or
guaranteed any indebtedness for borrowed money to be outstanding as of the
Closing Date, or any net finance lease or capitalized lease obligation providing
for lease payments unpaid as of the Closing Date, in excess of $100,000;
(g) any Contract expressly restricting its ability (or which would,
after the Closing, restrict Buyer) from competing or purchasing supplies/raw
materials in any geographic region in any material respect;
(h) any collective bargaining agreement; or
(i) any Contract that is otherwise material to the operation of the
Business as currently conducted.
The Contracts listed on Section 3.9 of the Disclosure Schedule are referred to
as the "Material Contracts." Seller has made available to Buyer and/or its
Representatives true and complete copies of the Material Contracts. With respect
to each Material Contract: (A) such Material Contract constitutes the valid and
legally binding obligation of the Company (or Seller, as applicable) party
thereto and, to Seller's Knowledge, the counterparty thereto, is enforceable
against such Company (or Seller, as applicable) and, to Seller's Knowledge, the
counterparty thereto in accordance with its terms and conditions, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity; and (B) neither the Company
(or Seller, as applicable) party thereto nor, to Seller's Knowledge, the
counterparty thereto is in material breach or default that presently would
permit or give rise to a right of termination, modification or acceleration
thereunder or would give rise to contract damages of the Company party thereto
in excess of $100,000. No Company is party to any material oral Contract
relating to the Business.
Section 3.10 Intellectual Property. Section 3.10 of the Disclosure Schedule
lists (x) all patents and pending patent applications and all registrations and
applications for registration of copyrights, all Internet domain names, and all
registered and unregistered (common law) trademarks and service marks owned by
Seller or the Companies that are primarily related to the Business as presently
conducted and (y) all material licenses of Intellectual Property primarily
related to the Business to which Seller or any Company is a party (other than
standard, non-
20
customized "off the shelf" software with a replacement cost of less than
$25,000), whether as licensor or licensee, for which there is a written license
agreement. The Intellectual Property owned by Seller and the Companies, or to
which Seller or the Companies has the right of use, includes all of the
Intellectual Property used in the Ordinary Course of Business as currently
conducted, and there are no other items of Intellectual Property that are
necessary for the conduct of the Business in the Ordinary Course of Business.
Each item of Intellectual Property listed on Section 3.10 of the Disclosure
Schedule is in good standing and subsisting, and is in full force and effect,
except for those items of Intellectual Property that expire at the end of their
term prior to the Closing Date. To Seller's Knowledge, (a) no use of any
Intellectual Property owned by Seller or the Companies and used in the conduct
of the Business as presently conducted infringes the Intellectual Property
rights of any third party, and (b) no third party is infringing any Intellectual
Property owned by the Companies with respect to the Business as presently
conducted. No suit, action or proceeding is currently pending or, to Seller's
Knowledge, threatened in writing against Seller or the Companies that challenges
the ownership or use of any Intellectual Property owned or used by such Person
with respect to the Business as presently conducted or asserts that the conduct
of the Business as presently conducted infringes any third party's Intellectual
Property rights.
Section 3.11 Real Property.
(a) Section 3.11(a) of the Disclosure Schedule sets forth the address
and description of each parcel of Owned Real Property (excluding matters
contemplated by Section 5.9). With respect to each such parcel of Owned Real
Property, and except for matters that would not materially impact the use of
such Owned Real Property:
(i) one of the Companies has good and marketable fee simple
title, free and clear of all Liens as of the Closing Date (other than Permitted
Liens);
(ii) none of the Companies has leased or otherwise granted to any
Person the right to use or occupy such Owned Real Property or any portion
thereof; and
(iii) other than the rights of Buyer pursuant to this Agreement,
there are no sales contracts or unrecorded options, rights of first offer or
rights of first refusal to purchase such Owned Real Property or any portion
thereof or interest therein.
(b) Section 3.11(b) of the Disclosure Schedule sets forth the address
of each parcel of material Leased Real Property (excluding matters contemplated
by Section 5.9), and a true and complete list of all Leases for each such parcel
of Leased Real Property. With respect to each such Lease: (A) such Lease
constitutes the valid and legally binding obligation of the Company party
thereto and, to Seller's Knowledge, the counterparty thereto, enforceable
against such Company and, to Seller's Knowledge, the counterparty thereto in
accordance with its terms and conditions, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity; and (B) neither the Company party thereto nor, to
Seller's Knowledge, the counterparty thereto is in material breach or default
that would materially impact the use of such Leased Real Property. With respect
to each such parcel of Leased Real Property, the Companies have peaceful
possession thereof.
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Section 3.12 Tax Matters.
(a) All federal income tax returns and all other material Tax Returns
required to have been filed by Seller, the Target Companies and their
Subsidiaries have been duly and timely filed, and each such Tax Return was
correct and complete in all material respects and have been prepared in
substantial compliance with all applicable Laws. No unresolved claim has been
made by a Taxing Authority in a jurisdiction where Seller, the Target Companies
or any of their Subsidiaries does not file Tax Returns that it is or may be
subject to taxation or to a requirement to file Tax Returns in that
jurisdiction.
(b) All Taxes due and owing by Seller, the Target Companies or any of
their Subsidiaries (whether or not shown on any Tax Return) have been paid or
will be paid prior to Closing and the Company nor any of its Subsidiaries is not
currently delinquent with respect to the payment of any Tax.
(c) Seller, the Target Companies and their Subsidiaries have withheld
all amounts of Taxes required to be withheld from its employees, agents,
contractors, creditors, shareholders and third parties and remitted such amounts
to the proper Taxing authorities and filed all federal, state, local and foreign
returns and reports with respect to employee income Tax withholding, social
security, unemployment, and other similar Taxes, all in compliance with the
withholding provisions of the Code, or any prior provision of the Code and other
applicable Laws.
(d) To the Knowledge of Seller, the Target Companies or any of their
Subsidiaries, there is no audit, claim, action, suit, proceeding or
investigation currently pending against Seller, the Target Companies or their
Subsidiaries in respect of any Taxes nor have Seller or any of the Target
Companies or any of their Subsidiaries been informed in writing of the
commencement or anticipated commencement of any such activity. There are no
Liens on any of the assets of Seller, the Target Companies nor any of their
Subsidiaries that arose in connection with any failure (or alleged failure) to
pay any Tax, other than Liens for Taxes not yet due and payable. Neither Seller,
the Target Companies nor any of their Subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(e) Neither the Target Companies nor any of their Subsidiaries (x) has
been a member of any affiliated, consolidated, combined or unitary group filing
a consolidated or combined Tax Return (other than a group the common parent of
which was Seller) or (y) has any liability for the Taxes of any Person (other
than Seller or any of its Subsidiaries) under Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise. Neither Seller or any of the Target
Companies or their Subsidiaries is a party to any Tax allocation or sharing
agreement.
(f) Neither Seller, the Target Companies nor any of their Subsidiaries
will be required to include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any:
22
(i) change in method of accounting for a taxable period ending on
or prior to the Closing Date;
(ii) "closing agreement" as described in Code Section 7121 (or
any corresponding or similar provision of state, local or foreign income Tax
law) executed on or prior to the Closing Date;
(iii) intercompany transactions or any excess loss account
described in Treasury Regulations under Code Section 1502 (or any corresponding
or similar provision of state, local or foreign income Tax law);
(iv) installment sale or open transaction disposition made on or
prior to the Closing Date; or
(v) prepaid amount received on or prior to the Closing Date.
(g) Neither Seller, the Target Companies nor any of their Subsidiaries
is a party to any agreement, contract, arrangement, or plan that has resulted or
would result, separately or in the aggregate, in the payment of any "excess
parachute payment" within the meaning of Code Section 280G (or any corresponding
provision of state, local, or foreign Tax law) or in the imposition of an excise
Tax under Code Section 4999, (or any corresponding provisions of state, local or
foreign Tax law) or (B) will not be fully deductible as a result of Code 162(m)
(or any corresponding provision of state, local or foreign Tax law).
(h) Neither Seller, the Target Companies nor any of their Subsidiaries
has constituted either a "distributing corporation" or a "controlled
corporation" in a distribution of stock qualifying for tax free treatment under
Section 355 of the Code (i) in the two years prior to the date of this Agreement
or (ii) in a distribution which could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of Section 355(e) of the
Code) in connection with the Merger.
(i) Neither Seller, the Target Companies nor any of their Subsidiaries
has a Permanent Establishment in any jurisdiction outside the United States.
(j) Neither Seller, the Target Companies nor any of their Subsidiaries
is a party to any "listed transaction" within the meaning of Section 1.6011-4 of
the Treasury Regulations or any reportable transaction, within the meaning of
Section 6011, Section 6111 and Section 6112 of the Code and the Treasury
Regulations thereunder.
Section 3.13 Legal Compliance; Permits. To Seller's Knowledge, the
Companies are in compliance with all applicable laws, including all permits,
registrations, licenses, franchises, certificates and other approvals from
Governmental Entities necessary for conduct of the Business as presently
conducted. All such permits and approvals are valid and in full force and effect
in all material respects.
Section 3.14 Litigation. Section 3.14 of the Disclosure Schedule sets forth
each instance as of the date hereof in which the Companies (i) are subject to
any outstanding Decree
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or (ii) are a party or, to Seller's Knowledge, are threatened in writing to be
made a party to any material Litigation.
Section 3.15 Product Warranty. To Seller's Knowledge, substantially all of
the products manufactured, sold, leased, and delivered by the Business in the
last year have conformed in all material respects with all applicable
contractual commitments and all express and implied warranties, and the
Companies do not have any material Liability for replacement or repair thereof
or other damages in connection therewith (as of the Most Recent Fiscal Month
End, subject only to the reserve for product warranty claims set forth on the
Most Recent Balance Sheet, and as adjusted for operations and transactions
thereafter in accordance with the past custom and practice of the Business).
Section 3.15 of the Disclosure Schedule sets forth the spill charts of the
Business for 2006 and the first eight months of 2007. Substantially all of the
products manufactured, sold, leased or delivered by the Business in the last
year are subject to standard terms and conditions of sale or lease, true and
complete copies of which have been made available to Buyer as of the date
hereof.
Section 3.16 Product Liability. To Seller's Knowledge, the Business does
not have any material Liability arising out of any injury to individuals or
property as a result of the ownership, possession or use of any product
manufactured, sold, leased or delivered by the Business.
Section 3.17 Customers and Suppliers. Section 3.17 of the Disclosure
Schedule lists (i) the ten (10) largest customers (by revenue) of the Business
during the eight months ended August 31, 2007 and (ii) the twenty (20) largest
suppliers (by cost) of the Business during the eight months ended August 31,
2007. The Companies are not as of the date hereof engaged in any material
disputes with any such customer or supplier that would result in a material
decrease in the quantity of items purchased from the Business or in the quantity
of items made available for purchase by the Business, respectively.
Section 3.18 Environmental, Health and/or Safety Matters.
(a) To Seller's Knowledge, the Companies are, and during the five (5)
years prior to the date hereof have been, in material compliance with all
Environmental, Health and/or Safety Requirements with respect to the Present
Facilities and/or the Business. In addition to the foregoing, to Seller's
Knowledge, the Companies possess all permits, authorizations and approvals
required pursuant to applicable Environmental Health and/or Safety Requirements
with respect to the Present Facilities and/or Business.
(b) To Seller's Knowledge, none of the Companies has, during the five
(5) years prior to the date hereof, received any written notice, report or other
information (other than any of the foregoing which have been substantially
resolved prior to the date hereof) regarding any actual or alleged material
violation of Environmental, Health and/or Safety Requirements or any material
Liabilities relating to the Present Facilities and/or the Business arising under
Environmental, Health and/or Safety Requirements.
(c) To Seller's Knowledge, no Hazardous Materials are on, under or
migrating from any of the Present Facilities that could reasonably be expected
to result in any material Environmental Liabilities.
24
(d) To Seller's Knowledge, neither this Agreement nor the consummation
of the transactions contemplated hereby will require the notification to or
consent of government agencies or third parties, pursuant to the New Jersey
Industrial Site Recovery Act or any other so-called "transaction-triggered" or
"responsible property transfer" Environmental, Health and/or Safety
Requirements.
(e) Seller has made available to Buyer or its Representatives all
material environmental site assessments, reports, audits, work plans or similar
material documents relating to actual or potential material Environmental
Liabilities concerning the Present Facilities or the Business of which Seller
has Knowledge.
(f) Notwithstanding anything to the contrary set forth herein, the
representations and warranties set forth in this Section 3.18 are the exclusive
representations and warranties of Seller regarding environmental, health or
safety matters, including any arising under Environmental, Health and/or Safety
Requirements.
Section 3.19 Labor and Employment Matters.
(a) Section 3.19 of the Disclosure Schedule contains a complete and
accurate list of all Covered Employees as of the date indicated thereon, showing
for each such employee their name and job classification. The Companies are in
material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment, including wages and
hours, labor relations, employment discrimination, disability rights or
benefits, equal opportunity, plant closure and mass layoff - including the
Worker Adjustment and Retraining Notification Act of 1988 (the "WARN Act") and
similar state laws, affirmative action, leaves of absence, occupational health
and safety, workers compensation and unemployment insurance. There are no
material controversies, charges of unlawful harassment or discrimination, or
complaints or allegations of unlawful harassment or discrimination pending or,
to Seller's Knowledge, threatened against any Company. None of the Companies is
or for the past three (3) years has been a party to any collective bargaining
agreement or relationship applicable to its current or former employees. Seller
is in receipt of no petition or notice (written or oral) of any proceedings
instituted by an employee or group of employees of the Companies with any labor
relations board seeking recognition of a bargaining representative, and, to
Seller's Knowledge, no union organizing efforts are underway or being threatened
with respect to the employees of any Company. No Company is engaged, and for the
past three (3) years has not engaged, in any unfair labor practice. There is,
and for the past three (3) years there has been, no strike, slowdown, work
stoppage or lockout, or, to Seller's Knowledge, threat thereof, by or with
respect to any Company employees.
(b) Notwithstanding anything to the contrary set forth herein, the
representations and warranties set forth in this Section 3.19 are the exclusive
representations and warranties of Seller regarding labor and employment matters.
Section 3.20 Employees Benefit Plans.
(a) Section 3.20(a) of the Disclosure Schedule lists each (i) material
Employee Benefit Plan that any Company maintains, or has maintained, or to which
any
25
Company contributes to, or has or could otherwise have any obligation or
liability (ii) each retention, incentive, change in control, profit sharing,
deferred compensation, employment savings or pension plan or agreement sponsored
by any of the Companies or to which any of the Companies is a party, and (iii)
each material Transferred Plan, in each case with respect to the Covered
Employees (the "Company Plans"). The Companies have no commitments or current
plans to establish or enter into any new Company Plan or to modify any Company
Plan other than as required by applicable Laws. With respect to each Company
Plan:
(i) Such plan has been established, maintained, funded and
administered in accordance with the terms of such plan and complies in form and
in operation in all material respects with all applicable requirements of ERISA,
the Code and other applicable law.
(ii) All required reports and descriptions (including Form 5500
annual reports), summary annual reports, and summary plan descriptions) have
been timely filed and/or distributed in accordance with the applicable
requirements of ERISA and the Code in all material respects.
(iii) Such plan, if intended to meet the requirements of a
"qualified plan" under Section 401(a) of the Code, has received a favorable
determination letter from the Internal Revenue Service that such plan is so
qualified, and, to Seller's Knowledge, no event has occurred that would result
in the loss of such qualified status.
(iv) Except as set forth in Section 3.20(a)(iv) of the Disclosure
Schedule, none of the Companies or its ERISA Affiliates has maintained,
established, sponsored, participated in, contributed to, or otherwise incurred
any liability under any: (i) Employee Benefit Plan subject to Title IV of ERISA
or Code Section 412 or (ii) "multiemployer plan" within the meaning of Section
(3)(37) of ERISA. No Company has incurred any liability under Title IV of ERISA
or Code Section 412. With respect to any "defined benefit plan" within the
meaning of Section 3(35) of ERISA set forth in Section 3.20(a)(iv) of the
Disclosure Schedule: (A) no liability to the Pension Benefit Guaranty
Corporation ("PBGC") has been incurred (other than for premiums not yet due);
(B) no notice of intent to terminate any such plan has been filed with the PBGC
or distributed to participants and no amendment terminating any such plan has
been adopted; (C) no proceedings to terminate any such plan have been instituted
by the PBGC and no event or condition has occurred which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any such plan; (D) no "accumulated funding
deficiency," within the meaning of Section 302 of ERISA or Section 412 of the
Code, whether or not waived, has been incurred; (E) no "reportable event" within
the meaning of Section 4043 of ERISA (for which the 30-day notice requirement
has not been waived by the PBGC) has occurred within the last six years; (F) no
Lien has arisen under ERISA or the Code on the assets of any Company or ERISA
Affiliate; (G) there has been no cessation of operations at a facility subject
to the provisions of Section 4062(e) of ERISA within the last six years; and (H)
no event has occurred that places participants on actual or constructive notice
of the plan's termination. With respect to any multiemployer plan under Section
3(37) of ERISA set forth in Section 3.20(a)(iv) of the Disclosure Schedule: (A)
no Company or ERISA Affiliate has experienced a complete or partial withdrawal
from such multiemployer plan, and (B) no Company or ERISA Affiliate has been
notified by any such multiemployer plan that such
26
multiemployer plan is currently in reorganization or insolvency under and within
the meaning of Section 4241 or 4245 of ERISA or that such multiemployer plan
intends to terminate or has been terminated under Section 4041A of ERISA.
(v) Seller has made available to Buyer correct and complete
copies of: (i) all documents setting forth the terms of each Company Plan,
including the plan document and any amendments thereto; (ii) the most recent
summary plan description together with the summaries of material modifications
thereto, if any, required under ERISA; (iii) the most recent IRS determination
letter issued with respect to each Company Plan intended to be qualified under
Section 401(a) of the Code; (iv) the three most recent annual reports (Form
Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code; and (v) all correspondence to or from any
Governmental Entity relating to any Company Plan.
(vi) No material "prohibited transaction," within the meaning of
Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise
exempt under Section 408 of ERISA, has occurred and, to Seller's Knowledge, no
fiduciary (within the meaning of Section 3(21) of ERISA) of any Company Plan
subject to Part 4 of Title I of ERISA has committed a breach of fiduciary duty
that could subject the Companies to material liability taken as a whole. There
are no claims or proceedings pending, or, to Seller's Knowledge, threatened or
reasonably anticipated (other than routine claims for benefits), against any
Company Plan or against the Companies with respect to any Company Plan. There
are no audits, inquiries or proceedings pending or, to Seller's Knowledge,
threatened by the IRS, DOL, or the PBGC with respect to any Company Plan.
(vii) With respect to each Company Plan which is an employee
welfare benefit plan (within the meaning of Section 3(1) of ERISA), all claims
incurred by any Company are (i) insured pursuant to a contract of insurance
whereby the insurance company bears any risk of loss with respect to such
claims; (ii) covered under a contract with a health maintenance organization (an
"HMO") pursuant to which the HMO bears the liability for claims or (iii)
reflected as a liability or accrued for on the Financial Statements.
(viii) No Company Plan provides (except at no cost to any
Company), or reflects or represents any liability of the Companies to provide,
retiree life insurance, retiree health benefits or other retiree employee
welfare benefits to any Person for any reason, except as may be required by Part
6 of Title I of ERISA or other applicable laws.
(ix) Neither the execution of this Agreement nor the consummation
of the transactions will (either alone or upon the occurrence of any additional
or subsequent events) constitute an event under any Company Plan, that will or
may result (either alone or in connection with any other circumstance or event)
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Covered Employee.
(b) To the extent that any Company Plan constitutes a "non-qualified
deferred compensation plan" within the meaning of Section 409A of the Code, such
Plan has been
27
operated in reasonable good faith compliance with Section 409A of the Code and
IRS Notice 2005-1.
(c) Except as disclosed on Section 3.20(c) of the Disclosure Schedule,
none of the Companies maintains any Company Plan subject to laws other than
those of the United States.
(d) Notwithstanding anything to the contrary set forth herein, the
representations and warranties set forth in this Section 3.20 are the exclusive
representations and warranties of Seller regarding employee benefit matters.
Section 3.21 Brokers' Fees. Seller has not entered into any Contract to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement other than Rothschild Inc., which
obligations shall be borne by Seller.
Section 3.22 Transactions With Affiliates. There are no Contracts between
Seller with respect to the Business or any Company, on the one hand, and any
Person who is an Affiliate of Seller or any Company, on the other hand, that
would be required to be disclosed by the Companies under Item 404 of Regulation
S-K promulgated under the Securities Act of 1933 if the Companies were
themselves subject to such rule.
Section 3.23 Insurance. Seller has made available to Buyer or its
Representatives copies of all material insurance policies currently maintained
by Seller (with respect to the Business or the Companies) and the Companies, a
list of which is set forth on Section 3.23 of the Disclosure Schedules. All
policies are in full force and effect and neither Seller nor any Company is in
default with respect to its payment obligations under such policies or has
received written notice under any such policies regarding the termination or
cancellation of any such policy since the Most Recent Fiscal Month End.
Section 3.24 Accounts Receivable. All accounts receivable set forth or
reflected in the Most Recent Balance Sheet were as of the Most Recent Fiscal
Month End presented in accordance with the Accounting Principles with respect to
the inclusion of valid and enforceable obligations against the respective
account debtors.
Section 3.25 Inventory. All Inventory set forth or reflected in the Most
Recent Balance Sheet was as of the Most Recent Fiscal Month End presented in
accordance with the Accounting Principles with respect to the inclusion of items
of a quality and quantity usable or saleable by the Companies.
Section 3.26 Disclaimer of Other Representations and Warranties. Except for
the representations and warranties contained in this Agreement or expressly
contained in any other Related Agreement, neither Seller nor any other Person
shall be deemed to have made any representation or warranty, express or implied,
including, as to the accuracy or completeness of any information regarding any
of Seller, the Business, the Companies, any of Seller's other Affiliates, any of
the assets or Liabilities of any of the foregoing or any other matter.
Notwithstanding anything herein to the contrary, but without limitation of any
representation or warranty expressly contained in this Agreement or any other
Related Agreement, SELLER MAKES NO OTHER (AND HEREBY DISCLAIMS EACH OTHER)
REPRESENTATION,
28
WARRANTY OR GUARANTY WITH RESPECT TO THE VALUE, CONDITION OR USE OF THE
COMPANIES OR THEIR ASSETS, WHETHER EXPRESS OR IMPLIED.
ARTICLE IV
BUYER'S REPRESENTATIONS AND WARRANTIES.
Buyer represents and warrants to Seller that the statements contained in
this Article IV are true and correct.
Section 4.1 Organization of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate or similar power and authority to own, lease and
operate its assets and to carry on its business as now being conducted.
Section 4.2 Authorization of Transaction.
(a) Buyer has full power and authority (including full corporate or
other entity power and authority) to execute and deliver this Agreement and all
other agreements contemplated hereby to which it is a party and to perform its
obligations hereunder and thereunder.
(b) The execution, delivery and performance of this Agreement and all
other agreements contemplated hereby to which Buyer is a party have been duly
authorized by Buyer.
(c) This Agreement constitutes the valid and legally binding
obligation of Buyer, enforceable against Buyer in accordance with its terms and
conditions, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general principles of equity.
Section 4.3 Noncontravention. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) conflict with or result in a breach of the certificate of incorporation or
bylaws of Buyer, (ii) violate any law or Decree to which Buyer is, or its
respective assets or properties are, or (iii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify or cancel, or require any
notice under any Contract to which Buyer is a party or by which it is bound or
to which any of its assets is subject, except, in the case of either clause (ii)
or (iii), for such conflicts, breaches, defaults, accelerations, rights or
failures to give notice as would not, individually or in the aggregate, have a
Material Adverse Effect on Buyer. Other than pursuant to antitrust or
non-competition laws in jurisdictions outside the United States set forth on
Section 5.1(c) of the Disclosure Schedule, Buyer is not required to give any
notice to, make any filing with, or obtain any authorization, consent or
approval of any Governmental Entity in order for Buyer to consummate the
transactions contemplated by this Agreement or any of the other Related
Agreement, except where the failure to give notice, file or obtain such
authorization, consent or approval would not have a Material Adverse Effect on
Buyer.
Section 4.4 Litigation. There is no instance in which Buyer (i) is subject
to any outstanding Decree or (ii)is a party or, to Buyer's Knowledge, is
threatened in writing to be made
29
a party to any Litigation, except for such Decrees or Litigation which would not
(A) have a Material Adverse Effect on Buyer, (B) result in any material
Liability to Seller or the Companies, or (C) materially prevent, restrict or
delay the consummation of the transactions contemplated hereby or any other
Related Agreement.
Section 4.5 Brokers' Fees. Buyer has not entered into any Contract to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which Seller or any of its
Subsidiaries could become liable or obligated to pay.
Section 4.6 Sufficient Funds. As of the Closing, Buyer will have sufficient
funds to enable it to pay the Purchase Price hereunder.
Section 4.7 Investment. Buyer is not acquiring the Target Shares with a
view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act.
Section 4.8 Guaranty. Concurrently with the execution and delivery of this
Agreement, Buyer has delivered to Seller the Guaranty of the Investor.
Section 4.9 Disclaimer of Other Representations and Warranties. Except for
the representations and warranties contained in this Agreement or expressly
contained in any other Related Agreement, Buyer does not make any other
representation or warranty. express or implied.
ARTICLE V
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing (except as otherwise expressly
stated to apply to a different period):
Section 5.1 Efforts; Cooperation.
(a) Each of the Parties will use its commercially reasonable efforts
to take all action and to do all things necessary in order to consummate and
make effective the transactions contemplated by this Agreement as promptly as
practicable following the date hereof (including satisfaction, but not waiver,
of the conditions to the obligations of the Parties to consummate the
transactions contemplated hereby set forth in Article VII).
(b) Without limiting the generality of Section 5.1(a), Seller will
give any notices to third parties, and each of the Parties will reasonably
cooperate with the other Party hereto and use its commercially reasonable
efforts to obtain any third party consents or sublicenses, in connection with
the matters referred to in Section 5.1(b) of the Disclosure Schedule or as are
otherwise material and necessary and appropriate to consummate the transactions
contemplated hereby. The foregoing shall not require either Party to expend any
material amount of money or agree to any material restriction on the operation
of its business unless such expenditure or agreement is conditional upon the
consummation of the transactions contemplated hereby.
30
(c) Without limiting the generality of Section 5.1(a), each of the
Parties will give any notices to, make any filings with, reasonably cooperate
with the other Party hereto to, and use its reasonable best efforts to obtain
any authorizations, consents, clearances and approvals of Governmental Entities
in connection with the matters referred to in Section 5.1(c) of the Disclosure
Schedule or as are otherwise material and necessary and appropriate to
consummate the transactions contemplated hereby. If a suit or other action is
threatened or instituted by any Governmental Entity challenging the validity or
legality, or seeking to restrain the consummation of the transactions
contemplated by this Agreement, each Party shall use its commercially reasonable
efforts to avoid, resist, resolve or, if necessary, defend such suit or action.
Section 5.2 Preservation of Business. Except as otherwise contemplated
hereby or as required by law, Seller will cause the Companies to use
commercially reasonable efforts to keep the Business as presently conducted
substantially intact in all material respects, including maintaining its present
operations, physical facilities, working conditions and relationships with
suppliers, customers and employees.
Section 5.3 Operation of Business. Except as contemplated hereby, as set
forth on Section 5.3 of the Disclosure Schedule or as required by law, Seller
will not, and will cause the Companies not to, engage in any practice, take any
action or enter into any transaction with respect to the Business as presently
conducted outside the Ordinary Course of Business in any material respects
without the written consent of Buyer (which shall not be unreasonably withheld
or delayed). Without limiting the generality of the foregoing but subject to the
exceptions contemplated by the immediately preceding sentence, Seller (i) will
cause the Companies to pay their accounts payable and collect their accounts
receivable consistent with the cash management practices of the Business in
2007, and (ii) will not, and will cause the Companies not to, engage in any
practice, take any action or enter into any transaction that would have been
required to be disclosed as an exception to Section 3.8 if it had occurred prior
to the date hereof without the written consent of Buyer (which shall not be
unreasonably withheld or delayed). Notwithstanding anything to the contrary set
forth herein, within one (1) Business Day prior to the Closing (or as otherwise
takes place in the Ordinary Course of Business of the Business), any Company may
distribute or pay by way of any dividend or other distribution to its
stockholders (and liquidate any cash equivalents or liquid investments to the
extent applicable) any or all of its Cash (other than Cash in the United Kingdom
and the Czech Republic) except to the extent required to be maintained in any
Company pursuant to applicable law. Seller shall not, and shall not cause or
permit its Subsidiaries to, transfer any employee of Seller or any of its
Subsidiaries other than the Companies to the Companies without Buyer's consent.
Seller shall give Buyer prompt notice of the termination of employment of any
salaried Covered Employee. Notwithstanding anything to the contrary set forth
herein, nothing contained in this Agreement shall give to Buyer, directly or
indirectly, rights to control or direct the operations of the Companies or the
Business prior to the Closing.
Section 5.4 Notice of Developments. Each of Seller and Buyer will give
prompt written notice to the other Party of (i) the existence of any fact or
circumstance, or the occurrence of any event, of which it has Knowledge which
would be reasonably likely to cause a condition to a Party's obligations to
consummate the transactions contemplated hereby set forth in Article VII not to
be satisfied as of a reasonably foreseeable Closing Date, or (ii) the receipt of
any
31
material notice or other material communication from any Governmental Entity or
any securities market or securities regulator in connection with the
transactions contemplated by this Agreement; provided, however, that the
delivery of any such notice pursuant to this Section 5.4 shall not be deemed to
amend or supplement this Agreement and the failure to deliver any such notice
shall not constitute a waiver of any right or condition to the consummation of
the transactions contemplated hereby by either Party.
Section 5.5 Notice of Supplemental Disclosure. Without limiting Section
5.4, from and after the date hereof but prior to the fifth (5th) Business Day
prior to the Closing Date, Seller may inform Buyer pursuant to this Section 5.5
that any representation or warranty of Seller was or may have been inaccurate
when made as of the date hereof, and/or would be or may be inaccurate if made as
of the Closing Date, or any covenant with respect to the interim operation of
the Business was not or may not have been complied with, and provide a proposed
supplement to the Disclosure Schedule delivered as of the date hereof to correct
such actual or potential inaccuracy or noncompliance as if set forth on the
Disclosure Statement as of the date hereof (a "Disclosure Supplement"). If the
inaccuracies or noncompliance contemplated by such Disclosure Supplement is
sufficiently material to prevent, after a reasonable period in which to cure
such inaccuracy, the satisfaction of the condition set forth in Section 7.1(a)
or Section 7.1(b), as appropriate, Buyer may terminate this Agreement prior to
the Closing as and to the extent permitted pursuant to Section 9.1(b)(ii) with
respect thereto. Any amendment to the Disclosure Schedule by such Disclosure
Supplement shall not in any way affect Buyer's rights hereunder.
Section 5.6 No Alternative Proposals. Seller will not, and will ensure that
none of its Representatives will, (i) solicit, initiate or knowingly encourage
the submission of any Alternative Proposal, (ii) participate in any discussions
or negotiations regarding, or furnish any material non-public information with
respect to, any Alternative Proposal or (iii) enter into any agreement providing
for the transaction contemplated by any Alternative Proposal.
Section 5.7 Access.
(a) Upon request by Buyer, Seller will permit Buyer and its
Representatives to have reasonable access during normal business hours, and in a
manner so as not to interfere unreasonably with the normal business operations
of Seller, to all premises, properties, personnel, records and Contracts of or
related to the Business as presently conducted; provided, however, that (i) any
requests for such access or furnishing of information shall be made only to
James J. Bonsall (or such other Person as Seller shall expressly direct in
writing) and Seller shall not be required to provide any Person information or
access if Seller reasonably determines in good faith that (w) providing such
information or access would reasonably be expected to result in a waiver or
breach of any attorney/client privilege, or (x) providing such information or
access would reasonably be expected to result in violation of applicable law,
and (ii) Buyer shall not, and shall not permit any of its Representatives to,
conduct any environmental or workplace sampling or analysis of the sort commonly
referred to as Phase II environmental assessment work.
(b) Except in response to a request contemplated by Section 5.7(a),
during the period from the date hereof and ending on the Closing Date, Buyer
shall not, and shall cause its
32
Representatives not to, initiate or maintain contact with any employees,
customers, suppliers or licensors of the Companies or the Business in connection
with or pertaining to any subject matter of this Agreement except with the prior
written consent of Seller.
(c) All information obtained pursuant to this Section 5.7 shall be
Evaluation Material (as such term is defined in the Confidentiality Agreement)
subject to the terms and conditions of the Confidentiality Agreement.
Section 5.8 Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the existence or
subject matter of this Agreement without the prior written approval of the other
Party; provided, however, that either Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use commercially reasonable efforts to advise the other
Party prior to making the disclosure to the extent practicable and permissible
under applicable law).
Section 5.9 Pre-Closing Asset Transfers. At or prior to the Closing, Seller
shall, and shall cause the Companies and its other Subsidiaries (if applicable)
to, assign, transfer, convey and deliver all right, title and interest in and
to, and assume the obligations and liabilities of and under, the assets,
properties, facilities, rights and Contracts described in Section 5.9 of the
Disclosure Schedule (such transactions, the "Pre-Closing Asset Transfers")
pursuant to reasonable and customary agreements, documents and instruments.
Seller shall use its commercially reasonable efforts to cause the Pre-Closing
Asset Transfers to be consummated at or prior to the Closing and to obtain any
required written consent of any third party under, and comply with all
provisions of law with respect to, the Pre-Closing Asset Transfers.
Section 5.10 Pre-Closing Employment Transfers. Prior to the Closing Date,
Seller shall cause the Companies to transfer to Seller or one of its
Subsidiaries (other than the Companies) the employees at the Grafton Facility
covered by the Grafton Union Contract in connection with the related Pre-Closing
Asset Transfer involving the Grafton Facility (such transfer, the "Pre-Closing
Employment Transfers"). Prior to the Closing Date, Seller shall cause Power to
assign to Seller or one of its Subsidiaries (other than the Companies) and
shall, or shall cause such Subsidiary to, assume the Collective Bargaining
Agreement between Service Division of Tecumseh Power Company and District No. 10
of the International Association of Machinists, dated June 29, 2004, including
all appendices and memorandums of understanding (the "Grafton Union Contract"),
and the Settlement Agreement between Service Division of Tecumseh Power Company
and District No. 10 of the International Association of Machinists, dated June
28, 2007 (the "Grafton Settlement Agreement"). Seller shall use its commercially
reasonable efforts to obtain any required written consent of any third party
under and comply with all provisions of law with respect to, the Pre-Closing
Employment Transfers.
Section 5.11 Credit Support Requirements. Prior to and following the
Closing Date, Buyer and Seller shall cooperate to obtain a release in form and
substance reasonably satisfactory to Seller with respect to all Credit Support
Requirements set forth on Section 5.11 of the Disclosure Schedule. To the extent
Buyer is unable to make such arrangements with respect to any Credit Support
Requirements prior to the Closing, Buyer shall deliver to Seller at the Closing
an indemnification of Seller by Buyer and/or the Target Companies with respect
to such Credit
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Support Requirements, in form and substance reasonably satisfactory to Buyer.
Without limiting the generality of the foregoing, within ten (10) Business Days
following the Closing, Buyer shall provide replacement guarantees, standby
letters of credit or other assurances of payment with respect to all Credit
Support Requirements set forth on Section 5.11 of the Disclosure Schedule not
already released as contemplated by this Section 5.11, in form and substance
satisfactory to Seller and the respective counterparties or beneficiaries
sufficient to permit Seller and/or its Subsidiaries (as appropriate) to obtain a
release of any obligations under such Credit Support Requirements.
ARTICLE VI
OTHER COVENANTS
Section 6.1 Cooperation. The Parties shall cooperate with each other, and
shall use their good faith efforts to cause their respective Representatives to
cooperate with each other, to provide an orderly transition of the Business from
Seller to Buyer and to minimize the disruption to the Business and each of their
respective businesses resulting from the transactions contemplated hereby as
requested by either Party and at the requesting Party's sole cost and expense
(and without liability of any kind to the other Party cooperating with such
request in providing such requested actions other than arising from the
cooperating Party's gross negligence, willful misconduct or bad faith in
connection therewith).
Section 6.2 Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, subject to the terms and conditions of this Agreement, each Party
shall take such further action (including the execution and delivery to any
other Party of such other reasonable instruments of sale, transfer, conveyance,
assignment, assumption and confirmation, providing materials and information) as
another Party may reasonably request as shall be reasonably deemed necessary or
desirable to transfer, convey and assign to Buyer all of the Target Shares and
to carry out the other purposes of this Agreement and at the requesting Party's
sole cost and expense.
Section 6.3 Payments; Transition Services; Run-Off.
(a) Payments. If Seller receives any payment relating to any account
receivable outstanding on or after the Closing Date originating from the
Business, Seller shall promptly forward and remit such payment to Buyer. Seller
shall promptly endorse and deliver to Buyer any cash, checks or other documents
received by Seller on account of any such accounts receivable. Seller shall
cooperate with Buyer to transfer to Buyer or the Companies at or following the
Closing any dedicated account of Seller or any of its Subsidiaries other than
the Companies to which accounts receivable are paid with respect to the
Business, if any.
(b) From and after the Closing and until the one hundred twentieth
(120th) calendar days following the date thereof:
(i) Referral. Seller will use commercially reasonable efforts to
refer all customer or supplier inquiries received by Seller relating to the
Business to Buyer.
(ii) Services. Without limiting the generality of Section 6.1 and
subject to the terms and limitations thereof, Seller shall provide or cause to
be provided transition
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administrative payroll services to Buyer and the Companies as requested by Buyer
with respect to the Business.
Section 6.4 Use of Name. From and after the Closing and, solely with
respect to clause (a) and clause (c) below, except to the extent expressly
otherwise provided in the License Agreement:
(a) Corporate Names. As soon as commercially practicable after the
Closing Date, but in no event more than thirty (30) calendar days thereafter,
Buyer shall cause the Companies to (i) amend or terminate any organizational
document, business registration, certificate of assumed name and/or d/b/a
filings and any other documents as may be necessary to eliminate such Company's
right to use, or do business under the "Tecumseh" name and/or any other name or
mark owned or used by Seller or any Affiliate of Seller or any other name or
mark similar to, or any variations, abbreviations, acronyms or other formatives
of or based on or including, any of the foregoing, whether alone or in
combination with any other words, phrases or designs (collectively, the "Seller
Marks"), and thereafter, not to make any filings that would give any Company the
right to use, or do business under any Seller Mark
(b) Websites. As soon as commercially practicable after the Closing
Date, but in no event more than ninety (90) calendar days thereafter, Buyer
shall cause the Companies to remove any content, images and links on any of
their Internet pages or websites to the extent related to Seller, any of its
Subsidiaries or any of their respective businesses.
(c) Use of Marks. Buyer shall, and shall cause the Companies to, (i)
use commercially reasonable efforts to remove or sticker over the Seller Marks
from all assets of the Companies (including any vehicles, dies, tooling, molds,
machinery and equipment, business cards, schedules, stationery, packaging
materials, websites, displays, signs, promotional and marketing materials,
manuals, forms and computer software), and (ii) cease any and all uses of the
Seller Marks prior to or as of the Closing Date, and not commence or otherwise
make any uses of any of the Seller Marks thereafter.
(d) Affiliation. Buyer shall, and shall cause each of its Affiliates
to, cease to hold itself out as having any affiliation with Seller or any of its
Affiliates.
Section 6.5 Access; Enforcement; Litigation Support. From and after the
Closing, upon request by either Party, the other Party will permit the
requesting Party and its Representatives to have reasonable access during normal
business hours, and in a manner so as not to interfere unreasonably with the
normal business operations of the other Party, to all premises, properties,
personnel, books and records of or related to the Business, the Companies or any
of their assets or liabilities; provided, however, that, for avoidance of doubt,
the foregoing shall not require either Party to take any such action if such
Party reasonably determines in good faith that (w) providing such information or
access would reasonably be expected to result in a waiver or breach of any
attorney/client privilege, or (x) providing such information or access would
reasonably be expected to result in violation of applicable law. Such access
shall be for the purposes of (i) preparing Tax Returns, (ii) complying with the
requirements of any Governmental Entity, and (iii) providing reasonable
litigation support for the requesting Party, and such other reasonable and
customary purposes as the parties shall request from time to time
35
that do not have a material impact on the providing Party. In addition, each
Party shall reasonably cooperate with other requests that the other Party or its
Representatives may make with respect to contesting or defending against
litigation or other proceedings reasonably related to the Business or the
Companies for which the requesting Party is prohibited from contesting or
raising a defense or taking such other requested action, or unable to contest or
raise a defense or taking such other requested action, directly or without such
cooperation, including providing such testimony or other assistance, in each
such case all at the sole cost and expense of the requesting Party. Each Party
agrees to maintain the files or records which are contemplated by the first
sentence of this Section 6.5 in a manner consistent in all material respects
with its document retention and destruction policies, as in effect from time to
time, for six (6) years following the Closing.
Section 6.6 Non-Competition. For a period of five (5) years following the
Closing, Seller shall not, and shall ensure that none of its Subsidiaries will,
directly or indirectly (including as a stockholder, consultant, member or
partner) conduct the Business in North America or any other geographic region in
which the Companies have facilities as of the date hereof; provided, however,
that, for such purposes, no owner of less than five percent (5%) of the
outstanding stock or other equity or ownership interests of any Person and no
director (or other equivalent position on an equivalent governing body) of any
Person shall be deemed to be engaged in the business of such Person solely as a
result of holding such stock or such directorship. If a court of competent
jurisdiction declares in a final judgment that any term or provision of this
Section 6.6 is invalid or unenforceable, Buyer and Seller agree that the court
making the determination of invalidity or unenforceability shall have the power
to reduce the scope, duration or area of the term or provision, to delete
specific words or phrases or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.
Section 6.7 Non-Solicitation of Employees. For a period of twenty-four (24)
months following the Closing, Seller shall not, and shall ensure that none of
its Subsidiaries will, directly or indirectly, solicit the employment of any
Covered Employee as of the date hereof or as of the Closing Date; provided,
however, that the foregoing provision shall not prevent Seller or any of its
respective Subsidiaries from (x) soliciting any such Covered Employee by a
public advertisement placed by it or by a search firm retained by it (provided
that the search firm was not instructed or encouraged to target or focus on such
Covered Employees) or hiring any Covered Employee responding thereto, or (y)
soliciting or hiring any Covered Employee whose employment with the Business was
terminated by the Buyer at least three (3) months earlier. If a court of
competent jurisdiction declares in a final judgment that any term or provision
of this Section 6.7 is invalid or unenforceable, Buyer and Seller agree that the
court making the determination of invalidity or unenforceability shall have the
power to reduce the scope, duration or area of the term or provision, to delete
specific words or phrases or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.
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Section 6.8 Covered Employees.
(a) Continued Employment. Buyer acknowledges that by purchasing the
Target Shares, it shall, through the Companies, employ all of the Covered
Employees employed by the Companies (including those individuals on leave) as of
the Closing Date; provided, however, that subject to law, this Section 6.8 shall
not require Buyer or the Companies to continue the employment of any Covered
Employee for any specified period after the Closing Date.
(b) Compensation. For a period of twelve (12) months following the
Closing Date, Buyer shall provide, and shall cause the Companies to provide,
each Covered Employee, while employed by Buyer or any of its Subsidiaries
(including the Companies), with compensation and benefits that, in the
aggregate, are not materially less than his or her total compensation and
benefits (excluding, to the extent permissible by law, equity compensation,
defined benefit pension plans and retiree welfare benefits) immediately prior to
the Closing Date (or, as applicable, immediately prior to his or her Approved
Absence).
(c) Service Credit. With respect to Buyer's employee benefit plans,
programs and arrangements covering or otherwise benefiting any of the Covered
Employees on or after the Closing Date (other than any non-qualified retirement
or deferred compensation plans or equity-based compensation plans), service with
the Companies shall be counted for purposes of eligibility to participate and
vesting, and in determining the level of benefits with respect to vacation and
severance, to the same extent such service was counted under the corresponding
employee benefit plans, programs, or arrangements of Seller or the Companies
prior to the Closing Date.
(d) Buyer Welfare Plans. With respect to any benefit plans of Buyer
providing welfare benefits of the type described in Section 3(1) of ERISA to
Covered Employees on and after the Closing Date, such plans shall, except to the
extent restricted by the insurance carriers, (i) grant credit for amounts paid
by the Covered Employees (including applicable deductibles, copays, annual
out-of-pocket limits or similar costs) under corresponding Company Plans or
Seller Plans during the portion of the applicable plan year preceding the
Closing Date and (ii) waive any pre-existing condition exclusions, evidence of
insurability provisions, waiting period requirements or any similar provisions,
to the extent they were waived under corresponding Company Plans or Seller
Plans. For each month following the Closing Date and for the remainder of such
plan year, upon request by Buyer, Seller shall provide Buyer with information
regarding the amount of deductibles, copays, out-of-pocket limits or similar
costs incurred by each Covered Employee during the portion of the plan year
preceding such date.
(e) Buyer DC Plan. Effective as of the Closing Date, Buyer shall
cover, or cause the Companies to cover, Covered Employees under a defined
contribution plan and trust intended to qualify under Sections 401(a) and (k)
and Section 501(a) of the Code (the "Buyer DC Plan"). Buyer shall cause the
Buyer DC Plan to permit Covered Employees to make a direct rollover of their
account balances under the Tecumseh Products Company Salaried Retirement Savings
Plan and any other similar Employee Benefit Plan. Seller and Buyer shall
reasonably cooperate in good faith to effect such transfers or distributions as
soon as practicable after the Closing Date.
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(f) Bonus Plans. On and after the Closing Date, Buyer shall assume all
of the duties and obligations of Seller and/or the Companies under the Tecumseh
Power Key Employee Performance Incentive Plan with respect to Covered Employees
who participate in either such plan and under the Transferred Plans that are
sponsored and maintained by Seller or any of its Subsidiaries other than the
Companies and shall continue or cause to be continued such Transferred Plans on
terms and conditions no less favorable to each Covered Employee than those in
effect on the Closing Date for the current year.
(g) Transferred Plans. All Transferred Plans shall remain the
responsibility of and shall be operated by the Companies on and after the
Closing Date. All material Transferred Plans are set forth on Section 6.8(g) of
the Disclosure Schedule. Buyer shall assume all obligations pursuant to the
Transferred Plans as of the Closing.
(h) Retained Plans and Liabilities. With respect to the Seller Plans
and all Company Plans that are not Transferred Plans, Seller shall retain all of
the duties and obligations under all such plans (the "Retained Plans"). For the
avoidance of doubt, neither Buyer nor any Company shall be responsible for any
payments to any agents, employees or Representatives of Seller or any Company,
including any Covered Employee, for change of control bonus, transaction bonus
or other similar payments as a result of the transactions contemplated hereby.
Neither the Buyer nor, except as set forth on the Financial Statements, the
Companies shall have any Liability with respect to any of the Retained Plans.
Seller shall assume, indemnify and hold the Companies harmless from all
Liabilities associated with the Pre-Closing Employment Transfers, including any
obligations under the Grafton Union Contract, the Grafton Settlement Agreement,
other collective bargaining agreements and other union contracts, Company Plans,
severance or termination pay and applicable laws such as the WARN Act and
similar state laws.
(i) No Third Party Beneficiaries. The provisions of this Section 6.8
are for the benefit of the Parties only and shall not be construed to grant any
rights, as a third party beneficiary or otherwise, to any Person who is not a
party to this Agreement, nor shall any provision of this Agreement be deemed to
be the adoption of, or an amendment to, any Employee Benefit Plan, or otherwise
to limit the right of Seller, the Companies or any Subsidiary to amend, modify
or terminate any such Employee Benefit Plan. Nothing in this Agreement shall be
interpreted or construed to confer upon any employees any right with respect to
continuance of employment by the Companies or Buyer.
(j) Transition Services Agreement. To the extent any benefits
contemplated by this Section 6.8 to be provided to Covered Employees by Buyer
are provided pursuant to the Transition Services Agreement, Buyer's obligations
hereunder to provide any such benefit shall be satisfied by the provision of
such benefit through the Transition Services Agreement.
Section 6.9 Transfer Taxes. Buyer and Seller shall each pay one-half of any
stamp, documentary, registration, transfer, added-value or similar Tax,
including any sales and transfer taxes, recording charges, and similar fees,
taxes or changes imposed on the actual or deemed sale and transfer of any real
property to Buyer (a "Transfer Tax"), imposed under applicable law in connection
with the transactions contemplated hereby. Seller and Buyer shall cooperate to
prepare and timely file any Tax Returns required to be filed in connection with
Transfer Taxes described in the immediately preceding sentence.
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Section 6.10 Tax Matters.
(a) Tax-Sharing Agreements. Any tax-sharing agreement between Seller
and any of the Target Companies or their Subsidiaries shall be terminated as of
the Closing Date.
(b) Returns for Periods Through the Closing Date.
(i) Seller shall be responsible for the timely filing (taking
into account any extensions received from the relevant tax authorities) of all
Tax Returns required by law to include the Target Companies, including in a
consolidated, combined or unitary Tax Return filed by Seller or any Affiliate
(other than the Target Companies and their Subsidiary), with respect to any
taxable period ending prior to or including the Closing Date. All Taxes due and
payable with respect to such Tax Returns will be paid by Seller as and when
required by law.
(ii) Buyer shall cause the Target Companies and their Subsidiary
to furnish Tax information to Seller for inclusion in any Tax Return described
in clause (i) above in accordance with the past custom and practice of the
Target Companies and their Subsidiary.
(c) Tax Indemnification. Without regard to the limitations set forth
in clauses (a), (c) and (d) of Section 8.5, (i) Seller shall indemnify Buyer for
any additional Tax owed by Buyer (or any of its Subsidiaries) (including Tax
owed by Buyer (or any of its Subsidiaries) due to this indemnification payment)
resulting from any Taxes (or the non-payment thereof) of any of Seller, the
Target Companies or any of their Subsidiaries for any period ending on or before
the Closing Date and the portion through the Closing Date for any taxable period
that includes, but does not end on, the Closing Date (the "Pre-Closing Tax
Period"); and (ii) Buyer shall indemnify Seller for any additional Tax owed by
Seller (or any of its Subsidiaries) (including Tax owed by Seller (or any of its
Subsidiaries) due to this indemnification payment) resulting from (A) any
transaction engaged in by Buyer, the Target Companies or their Subsidiaries not
in the Ordinary Course of Business on the Closing Date after Buyer's purchase of
the Target Shares or (B) any action taken by Buyer, or after Closing by any
Target Company or any Subsidiary of a Target Company, during or in respect of a
taxable year of Seller that precedes or includes the Closing Date not in the
Ordinary Course of Business, in each case that affects the amount, timing or
character to Seller and its Subsidiaries of any Tax item relating to the Target
Companies or their Subsidiaries.
(d) Post-Closing Transactions Not in Ordinary Course. Buyer and Seller
shall report all transactions not in the Ordinary Course of Business relating to
the Target Companies or their Subsidiaries and occurring on the Closing Date
after Buyer's purchase of the Target Shares on Buyer's federal income Tax Return
to the extent permitted by Reg. Section 1.1502-76(b)(1)(ii)(B).
(e) Cooperation. Buyer, on the one hand, and Seller (on behalf of its
Affiliates), on the other, agree, in each case to the extent reasonably
requested by the other Party and at no cost to the other party, to (i) furnish
to the other party in a timely manner information and documents for purposes of
preparing any original or amended Tax Returns and contesting or defending any
audit, (ii) cooperate in any audit, (iii) retain and provide on demand books,
records, documentation or other information relating to any Tax Return until the
expiration of the
39
applicable statute of limitations (giving effect to any extension, waiver, or
mitigation thereof); and (iv) take such action as such other party may deem
appropriate in connection therewith.
Section 6.11 Insurance. Buyer acknowledges that, upon Closing, all
insurance coverage provided in relation to each Company and the Business that is
maintained by Seller or its Affiliates (other than the Companies) (whether such
policies are maintained with third party insurers or with Seller or its
Affiliates (other than the Companies)) shall cease to provide any coverage to
the Companies and the Business and no further coverage shall be available to any
Company or the Business as an Affiliate under any such policies.
Section 6.12 Bulk Transfer Laws. Buyer and Seller each agrees that neither
Party intends to comply with the provisions of any bulk transfer laws of any
jurisdiction in connection with the transactions contemplated by this Agreement.
Section 6.13 Acknowledgements. Buyer acknowledges that, except as expressly
set forth in this Agreement, without limiting the generality of Section 3.26,
neither Seller nor any other Person makes any representation or warranty,
express or implied, including as to the accuracy or completeness of any
information regarding any of Seller, the Business, the Companies, any of
Seller's other Affiliates, any of the assets or Liabilities of any of the
foregoing or any other matter. Without limiting any representation, warranty or
covenant of Seller expressly set forth herein, or Buyer's rights of access set
forth herein, Buyer acknowledges that it has waived and hereby waives as a
condition to Closing any further due diligence reviews, inspections or
examinations with respect to Seller, the Business, the Companies or any of their
respective assets or Liabilities or any other matter, including with respect to
engineering, environmental, title, survey, financial, operational, regulatory
and legal compliance matters.
ARTICLE VII
CONDITIONS TO OBLIGATION TO CLOSE
Section 7.1 Conditions to Buyer's Obligations. Buyer's obligation to
consummate the transactions contemplated hereby in connection with the Closing
is subject to satisfaction or waiver of the following conditions:
(a) the representations and warranties set forth in Article III shall
have been true and correct on the date hereof and shall be true and correct at
and as of the Closing Date as if made at and as of such time (in either case,
except to the extent expressly made as of an earlier date, in which case as of
such date as if made at and as of such date), except where the failure of such
representations and warranties to be so true and correct (without giving effect
to any limitation as to "material," "material adverse effect" or "Material
Adverse Effect" set forth therein) has not resulted in a Material Adverse Effect
on the Companies;
(b) Seller shall have performed and complied with its covenants
hereunder through the Closing in all material respects;
(c) (i) all notices to third parties contemplated by Section 5.1(b) of
the Disclosure Schedule to have been delivered on or prior to the Closing shall
have been delivered, and all third party consents or sublicenses contemplated by
Section 5.1(b) of the Disclosure Schedule to have been received on or prior to
the Closing shall have been received in either case
40
only if identified with an asterisk on such schedule that it is intended to be
considered for purposes of this Section 7.1(c), and (ii) Buyer shall have
received evidence of each of the foregoing reasonably satisfactory to it;
(d) (i) all applicable waiting periods (and any extensions thereof)
under any antitrust or non-competition law shall have expired or otherwise been
terminated and Seller and Buyer shall have received all other authorizations,
consents, clearances and approvals of Governmental Entities contemplated by
Section 5.1(c) of the Disclosure Schedule to have been received on or prior to
the Closing, and (ii) Buyer shall have received evidence of each of the
foregoing reasonably satisfactory to it;
(e) no material Decree or Litigation shall be pending which would be
reasonably expected to (i) prevent consummation of any of the transactions
contemplated by this Agreement, or (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation thereof;
(f) each delivery contemplated by Section 2.5(a) to be delivered to
Buyer shall have been delivered; and
(g) since the date hereof, there shall not have been a Material
Adverse Effect with respect to the Business.
Section 7.2 Conditions to Seller's Obligations. Seller's obligation to
consummate the transactions contemplated hereby in connection with the Closing
are subject to satisfaction or waiver of the following conditions:
(a) the representations and warranties set forth in Article IV shall
have been true and correct on the date hereof and shall be true and correct at
and as of the Closing Date as if made at and as of such time (in either case,
except to the extent expressly made as of an earlier date, in which case as of
such date as if made at and as of such date), except where the failure of such
representations and warranties to be so true and correct (without giving effect
to any limitation as to "material," "material adverse effect" or "Material
Adverse Effect" set forth therein) has not resulted in a material adverse effect
on the ability of Buyer to consummate the transactions contemplated hereby
without material delay or diminution of the benefits hereunder;
(b) Buyer shall have performed and complied with its covenants
hereunder through the Closing in all material respects;
(c) Seller shall have received the third-party consents set forth on
Section 7.2(c) of the Disclosure Schedule;
(d) (i) all applicable waiting periods (and any extensions thereof)
under any antitrust or non-competition law shall have expired or otherwise been
terminated and Seller and Buyer shall have received all other authorizations,
consents, clearances and approvals of Governmental Entities contemplated by
Section 5.1(c) of the Disclosure Schedule to have been received on or prior to
the Closing, and (ii) Seller shall have received evidence of each of the
foregoing reasonably satisfactory to it;
41
(e) no material Decree or Litigation shall be pending which would be
reasonably expected to (i) prevent consummation of any of the transactions
contemplated by this Agreement, or (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation thereof;
(f) with respect to each Credit Support Requirement, Buyer shall have
either (i) effected replacement arrangements, in accordance with Section 5.11,
reasonably satisfactory to Seller, or (ii) delivered to Seller the
indemnification by Buyer and/or the Target Companies in favor of Seller in
accordance with Section 5.11; and
(g) each delivery contemplated by Section 2.5(b) to be delivered to
Seller shall have been delivered.
Section 7.3 No Frustration of Closing Conditions. Neither Buyer nor Seller
may rely on the failure of any condition to its obligation to consummate the
transactions contemplated hereby set forth in Section 7.1 or Section 7.2, as the
case may be, to be satisfied if such failure was caused by such Party's failure
to use its commercially reasonable efforts to satisfy the conditions to the
consummation of the transactions contemplated hereby or other breach of a
representation, warranty or covenant hereunder.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Survival of Representations and Warranties. The representations
and warranties of the Parties will survive the Closing and will remain in full
force and effect thereafter until the eighteen (18) month anniversary of the
Closing Date, after which time they shall be of no further force or effect
(other than with respect to claims for indemnity therefor that have been
delivered by such anniversary) and upon which no further claim for
indemnification may be made with respect to breaches thereof; provided; however,
that the representations and warranties set forth in Section 3.1, Section 3.2,
Section 3.4, Section 3.5, Section 3.12, Section 4.1 and Section 4.2 shall
survive the Closing and remain in full force and effect thereafter until the
expiration of the applicable statute of limitations and the representations and
warranties set forth in Section 3.26 and Section 4.9 shall survive indefinitely.
Each Party acknowledges that it expressly intends to shorten the statute of
limitations for claims or causes of action based upon, directly or indirectly,
any of the representations and warranties contained in this Agreement as
provided in this Section 8.1.
Section 8.2 Indemnification Provisions for Buyer's Benefit. Subject to the
limits set forth in this Article VIII, from and after the Closing, Seller shall
defend and hold Buyer and its Affiliates and their respective officers,
directors, stockholders and Representatives (each, a "Buyer Indemnified Party")
harmless from and against any and all actual losses, claims, liabilities, debts,
damages, fines, penalties, costs (in each case including reasonable
out-of-pocket expenses (including reasonable fees and expenses of counsel)) that
they incur (collectively, "Damages") as a result of:
(a) any misrepresentation or breach of any representation or warranty
of Seller set forth in this Agreement or any other Related Agreement (other than
the License
42
Agreement, IP Assignment Agreement or the Transition Services Agreement or any
other Related Agreement arising under any of the foregoing);
(b) any failure to perform any covenant or agreement of Seller set
forth in this Agreement or any other Related Agreement (other than the License
Agreement, IP Assignment Agreement or the Transition Services Agreement or any
other Related Agreement arising under any of the foregoing); or
(c) (i) any Environmental Liabilities with respect to the Former
Facilities and (ii) any Environmental Liabilities with respect to the Present
Facilities arising from the conduct of the Business on or prior to the Closing;
(d) any liabilities asserted against Buyer or the Companies pursuant
to the judicial restructuring of TMT;
(e) any Liability asserted against Buyer or the Companies arising out
of any injury to individuals or property as a result of the ownership,
possession or use of any Product manufactured, sold, leased or delivered by the
Business prior to the Closing, including those Liabilities set forth in or
contemplated by Section 3.16 of the Disclosure Schedule (but excluding product
warranty claims);
(f) any Liability asserted against Buyer or the Companies arising out
of the Horsepower Litigation; or
(g) any product warranty Liabilities asserted against Buyer or the
Companies with respect to engines (other than the LV195, LV156, LV148, OV490 and
OV195 models) built at the Dunlap Facility between January 1, 2007 and the
Closing Date ("Sourced Engine Product Warranty Damages") other than those
Liabilities arising out of or relating to any actions by or at the direction of
Buyer or the Companies from and after the Closing (including any modification or
alteration to any such engines by or at the direction of Buyer or the Companies
from and after the Closing), for avoidance of doubt and without limiting Section
8.5(k) net of any amounts recovered from third party suppliers or other sources
with respect to such matters.
Section 8.3 Indemnification Provisions for Seller's Benefit. Subject to the
limits set forth in this Article VIII, from and after the Closing, Buyer shall
defend and hold Seller and its Affiliates and their respective officers,
directors, stockholders and Representatives (each, a "Seller Indemnified Party")
harmless from and against any and all Damages as a result of:
(a) any misrepresentation or breach of any representation or warranty
of Buyer set forth in this Agreement or any other Related Agreement (other than
the License Agreement, IP Assignment Agreement or the Transition Services
Agreement or any other Related Agreement arising under any of the foregoing);
(b) any failure to perform any covenant or agreement of Buyer set
forth in this Agreement or any other Related Agreement (other than the License
Agreement, IP Assignment Agreement or the Transition Services Agreement or any
other Related Agreement arising under any of the foregoing); or
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(c) the ownership or operation of the Business (as presently conducted
or as may be conducted from time to time) from and after the Closing Date,
including any Environmental Liabilities arising from the conduct of the Business
from and after the Closing.
Section 8.4 Matters Involving Third Parties.
(a) If any third party shall notify any Buyer Indemnified Party or
Seller Indemnified Party (the "Indemnified Party") of any matter (a "Third Party
Claim") which may reasonably give rise to a claim for indemnification against
Seller or Buyer, respectively (the "Indemnifying Party"), pursuant to this
Article VIII, the Indemnified Party shall promptly (and in any event within ten
(10) Business Days after receiving notice of the Third Party Claim or the
commencement of Litigation with respect thereto) notify the Indemnifying Party
thereof in writing stating that the Third Party Claim may give rise to a claim
for indemnification against the Indemnifying Party and specifying the facts
constituting the basis for such claim and the amount, to the extent known, of
the claim asserted; provided, however, that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(b) The Indemnifying Party will have the right at any time to assume
the defense against the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party and control the defense of such Third
Party Claim so long as the Indemnifying Party conducts such defense actively and
diligently.
(c) From and after the date that the Indemnifying Party has assumed
and is conducting the defense of the Third Party Claim in accordance with
Section 8.4(b), (A) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the Third Party Claim
(unless there are separate defenses available to the Indemnified Party that are
reasonably likely to be asserted by the Indemnified Party, in which case such
costs and expenses shall be borne by the Indemnifying Party); (B) the
Indemnifying Party and the Indemnified Party shall cooperate with each other and
their respective counsel in connection with the defense, negotiation or
settlement of any such Third Party Claim, including providing access to any
relevant books and records, properties and Representatives; provided, however,
that the foregoing shall not require either Party to waive, or take any action
which has the affect of waiving, its attorney-client privilege with respect
thereto; (C) the Indemnifying Party will not consent to the entry of any
judgment on or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (which shall not be
unreasonably withheld or delayed) unless the judgment or proposed settlement
involves only the payment of money damages by the Indemnifying Party and does
not impose an injunction or other equitable relief upon the Indemnified Party;
and (D) the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (which shall not be unreasonably
withheld or delayed).
(d) In the event that the Indemnifying Party has not assumed the
defense of the Third Party Claim after notice thereof within ninety (90)
calendar days of the notice of to the Indemnifying Party of the Third Party
Claim pursuant to this Section 8.4 (except to the extent
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that a shorter period of time (not to be less than the greater of (x) twenty
(20) Business Days after such notice or (y) five (5) Business Days after notice
by the Indemnified Party to the Indemnifying Party that further delay would
unreasonably prejudice the Indemnified Party) is required so as to not prejudice
the Indemnified Party), (A) the Indemnified Party may defend against the Third
Party Claim in any manner it reasonably may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, the
Indemnifying Party in connection therewith); (B) the Indemnifying Party will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses) to the extent such costs are Damages for which the Indemnified
Party is actually entitled to indemnification hereunder; and (C) the
Indemnifying Party will remain responsible for any costs the Indemnified Party
may incur resulting from the Third Party Claim to the extent such costs are
Damages for which the Indemnified Party is actually entitled to indemnification
hereunder.
Section 8.5 Limitation on Indemnification; Calculation of Damages.
Notwithstanding anything to the contrary set forth in this Article VIII:
(a) No Buyer Indemnified Party or Seller Indemnified Party shall be
entitled to recover from Seller or Buyer, respectively, for any claim for
indemnity in respect of Damages arising under Section 8.2(a) (other than with
respect to Sourced Engines Product Warranty Damages) or Section 8.3(a),
respectively, unless and until, and then only to the extent that, the total of
all such claims against Seller or Buyer, respectively, in respect of such
Damages exceeds one million five hundred thousand United States Dollars
($1,500,000) (the "Basket"), and in such event only to the amount of such
excess.
(b) No Buyer Indemnified Party shall be entitled to recover from
Seller for any claim for indemnity in respect of Damages arising under (x)
Section 8.2(g) or (y) solely with respect to Sourced Engines Product Warranty
Damages, Section 8.2(a), in either case unless and until, and then only to the
extent that, the total of all such claims against Seller in respect of such
Damages exceeds two million two hundred thousand United States Dollars
($2,200,000) (the "Sourced Engines Special Basket"), and in such event (x) only
to the amount of such excess for such aggregate Damages up to $2,000,000 in
excess of the Sourced Engines Special Basket and (y) for aggregate Damages in
excess of the sum of $2,000,000 plus the Sourced Engines Special Basket, only to
the amount of fifty percent (50%) of such excess of such sum, except in either
case as may be limited by Section 8.5(d).
(c) No Buyer Indemnified Party or Seller Indemnified Party shall be
entitled to recover from Seller or Buyer, respectively, or count toward the
Basket, any claim for indemnity in respect of any individual Damage arising
under Section 8.2(a) or Section 8.3(a), respectively, unless and until the claim
(or series of related claims) against Seller or Buyer, respectively, in respect
of such Damage exceeds fifty thousand United States Dollars ($50,000).
(d) The Buyer Indemnified Parties and the Seller Indemnified Parties
shall not be entitled to recover from Seller or Buyer, respectively, Damages
arising under Section 8.2(a) or Section 8.2(g) or Section 8.3(a), respectively,
greater than three million, eight hundred and twenty-five thousand United States
Dollars ($3,825,000) in the aggregate (for avoidance of
45
doubt, with respect to Buyer Indemnified Parties, to be determined when
considering Damages arising under Section 8.2(a) or Section 8.2(g) on a combined
basis).
(e) No Indemnified Party shall be entitled to recover more than the
full amount of any Damage under the provisions of this Agreement in respect of
any such Damage.
(f) The Buyer Indemnified Parties and the Seller Indemnified Parties
shall not be entitled to recover from Seller or Buyer, respectively, Damages
that are punitive Damages or consequential, exemplary or special Damages.
(g) The Buyer Indemnified Parties shall not be entitled to recover
from Seller Damages reflected as a current Liability on the Conclusive Net
Working Capital Statement. This Section 8.5(g) shall not serve to limit the
recovery of claims for indemnification for Sourced Engines Product Warranty
Damages pursuant to Section 8.2(g).
(h) The Buyer Indemnified Parties shall not be entitled to recover
from Seller Damages arising out of any change in the use of an asset of the
Companies or the operation of the Business following the Closing.
(i) The Buyer Indemnified Parties and the Seller Indemnified Parties
shall not be entitled to recover from Seller or Buyer, respectively, Damages
arising under Section 8.2(b) or Section 8.3(b), respectively, that arise from
the breach of a covenant in the case of a covenant to be performed on or prior
to the Closing (other than Section 2.1), unless the claim for indemnity therefor
has been delivered by the eighteen (18) month anniversary of the Closing Date.
(j) The amount of any Damages for which indemnification is provided
under this Article VIII shall be computed net of any third party insurance
proceeds and recoveries in respect of third party indemnification obligations
actually received by the Indemnified Party in connection with such Damages. Each
Indemnified Party agrees to use its commercially reasonable efforts to obtain
recovery in respect of any Damages from any third party insurance or third party
indemnity which is available in respect of Damages. If an Indemnified Party
receives such insurance proceeds or indemnification recoveries in connection
with Damages for which it has been indemnified hereunder, the Indemnified Party
shall refund to the Indemnifying Party the amount of such insurance proceeds or
indemnification recoveries when received, up to the amount for which
indemnification was paid hereunder.
(k) Each Indemnified Party shall take all reasonable steps to mitigate
any Damages in respect of which a claim could be made under this Article VIII.
(l) The Buyer Indemnified Parties shall not be entitled to recover
from Seller Damages with respect to any environmental investigation, monitoring,
clean-up, containment, restoration, removal or other corrective or response
action (each a "Response Action") unless such Response Action is required under
applicable Environmental Health and/or Safety Requirements and then only to the
extent such Response Action is reasonable, cost effective and employs and is in
accordance with risk-based remedial standards and institutional controls to the
extent allowed by Environmental Health and/or Safety Requirements, where such
standards or controls would not unreasonably interfere with industrial use at
the relevant property or facility.
46
Nothing in the foregoing sentence shall be construed as limiting the Buyer
Indemnified Parties from recovering from Seller for Response Actions necessary
to comply in a reasonably cost-effective manner with Environmental Health and/or
Safety Requirements. Seller shall either, at Seller's option, perform or cause
to be performed the Response Action, or shall authorize the Buyer Indemnified
Parties to perform such Response Action. The Buyer Indemnified Parties shall
provide Seller with reasonable access to the relevant property or facility for
purposes of completing the Response Action and shall reasonably cooperate with
Seller in connection therewith, provided that Seller shall undertake diligent
efforts to prevent unreasonable interference with industrial operations upon the
relevant property or facility in connection with the Response Action. Seller
shall have no obligation to indemnify any of the Buyer Indemnified Parties with
respect to any Response Action arising from (a) any conditions of contamination
identified through any environmental sampling or analysis, or (b) any report to
any governmental authority, in either case which is not required by
Environmental Health and/or Safety Requirements.
(m) The amount of any Damages for which indemnification is provided
under this Article VIII shall be computed net of any Tax benefit of the
Indemnified Party with respect to such indemnification based on the Indemnified
Party's Tax Liability for the taxable year in which it accrues the
indemnification payment, calculated on the basis of the facts and circumstances
actually pertaining to the Indemnified Party.
Section 8.6 Claims and Payment; Treatment of Payments. On each
occasion that any Indemnified Party shall be entitled to indemnification under
this Article VIII or Section 6.10(c), the Indemnifying Party shall, at each such
time, promptly pay the amount of such indemnification following the receipt of
notice of a claim therefor. All notices of claims for indemnification hereunder
by any Indemnified Party shall be made with reasonable particularity (including
the provisions hereunder on which such claim is based) and shall state the
amount of Damages sought thereunder. Any indemnification payments made pursuant
to this Agreement shall be treated for tax purposes as an adjustment to the
Purchase Price, unless otherwise required by applicable law.
Section 8.7 Exclusive Remedy. From and after the Closing, other than
in the event of fraud or as provided in Section 6.10(c), the remedies set forth
in this Article VIII shall be the sole or exclusive remedy (including with
respect to any Environmental Liabilities) of the Indemnified Parties for Damages
arising out of a breach of any representations or warranties set forth in this
Agreement or any other Related Agreement (other than the License Agreement, the
Transition Services Agreement, the IP Assignment Agreement or any other Related
Agreement arising under any of the foregoing) or otherwise with respect to the
transactions contemplated by this Agreement.
ARTICLE IX
TERMINATION
Section 9.1 Termination of Agreement. The Parties may terminate this
Agreement at any time prior to the Closing as provided below:
47
(a) Buyer and Seller may terminate this Agreement by mutual written
consent;
(b) Buyer may terminate this Agreement by giving written notice to
Seller:
(i) if the Closing shall not have occurred prior to the date that
is four (4) months from the date hereof (the "Outside Date"); provided, however,
that the right to terminate this Agreement under this Section 9.1(b)(i) shall
not be available to Buyer if its failure to fulfill any obligation under this
Agreement (including its obligations set forth in Section 5.1) has been the
cause of, or resulted in, the failure of the Closing to have occurred on or
before the Outside Date; or
(ii) if any event, circumstance, condition, fact or effect has
occurred or exists which (A) would result in a failure of a condition to Buyer's
obligations to consummate the transactions contemplated hereby set forth in
Section 7.1 (unless the failure results primarily from Buyer itself breaching
any representation, warranty or covenant set forth in this Agreement), and (B)
cannot reasonably be cured prior to the Outside Date; provided, however, that
Buyer shall have given Seller written notice, delivered at least ten (10)
Business Days prior to such termination stating its intention to terminate this
Agreement pursuant to this Section 9.1(b)(ii) and the basis for such termination
with reasonable particularity and provided Seller with the opportunity to cure
any breach giving rise to the effects set forth in clauses (A) and (B) above
during such time;
(c) Seller may terminate this Agreement by giving written notice to
Buyer:
(i) if the Closing shall not have occurred prior to the Outside
Date; provided, however, that the right to terminate this Agreement under this
Section 9.1(c)(i) shall not be available to Seller if its failure to fulfill any
obligation under this Agreement (including its obligations set forth in Section
5.1) has been the cause of, or resulted in, the failure of the Closing to have
occurred on or before the Outside Date; or
(ii) if any event, circumstance, condition, fact or effect has
occurred or exists which (A) would result in a failure of a condition to
Seller's obligations to consummate the transactions contemplated hereby set
forth in Section 7.2 (unless the failure results primarily from Seller itself
breaching any representation, warranty or covenant set forth in this Agreement),
and (B) cannot reasonably be cured prior to the Outside Date; provided, however,
that Seller shall have given Buyer written notice thereof, delivered at least
ten (10) Business Days prior to such termination stating its intention to
terminate this Agreement pursuant to this Section 9.1(c)(ii) and the basis for
such termination with reasonable particularity and provided Buyer with the
opportunity to cure any breach giving rise to the effects set forth in clauses
(A) and (B) above during such time.
Section 9.2 Effect of Termination. If either Party terminates this
Agreement pursuant to Section 9.1, all rights and obligations of the Parties
hereunder shall terminate upon such termination and shall become null and void
(except that Article I, Section 5.5, Section 5.7(c), Section 6.13, Article X and
this Section 9.2 shall survive any such termination) and no Party shall have any
Liability to the other Party hereunder; provided, however, that nothing in this
48
Section 9.2 shall relieve either Party from Liability for any willful breach
occurring prior to any such termination of any of the representations and
warranties or covenants set forth in this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.1 Expenses. Except as expressly set forth herein, each Party
will bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. For avoidance of doubt, the letter agreement, dated September 13, 2007,
by and between Seller and Platinum Equity shall be of no further force and
effect as of the execution and delivery of this Agreement and no amounts shall
be or become payable to Platinum Equity or any of its Representatives
thereunder.
Section 10.2 Entire Agreement. This Agreement, the other Related Agreements
and the Confidentiality Agreement constitute the entire agreement between the
Parties and supersede any prior understandings, agreements or representations
(whether written or oral) by or between the Parties, written or oral, with
respect to the subject matter hereof. For avoidance of doubt, the letter
agreement, dated October 13, 2007 and as extended on October 20, 2007, by and
between Seller and Platinum Equity shall be of no further force and effect as of
the execution and delivery of this Agreement.
Section 10.3 Incorporation of Annexes, Exhibits and Disclosure Schedules.
The Annexes and Exhibits to this Agreement and the Disclosure Schedule are
incorporated herein by reference and made a part hereof.
Section 10.4 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by each
Party except as expressly provided herein. No waiver of any breach of this
Agreement shall be construed as an implied amendment or agreement to amend or
modify any provision of this Agreement. No waiver by either Party of any
default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver, nor shall such waiver be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent default, misrepresentation or breach of warranty or
covenant. No conditions, course of dealing or performance, understanding or
agreement purporting to modify, vary, explain or supplement the terms or
conditions of this Agreement shall be binding unless this Agreement is amended
or modified in writing pursuant to the first sentence of this Section 10.4
except as expressly provided herein. Except where a specific period for action
or inaction is provided herein, no delay on the part of either Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
Section 10.5 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior written
approval of the other Party, except that Buyer may (provided that it remains
liable for its obligations hereunder) assign its rights hereunder (i) to any of
its
49
Affiliates, (ii) from and after the Closing, to any successor to the Business,
and (iii) to any of its lenders for security purposes.
Section 10.6 Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing except as expressly provided herein.
Any notice, request, demand, claim or other communication hereunder shall be
deemed duly given (i) when delivered personally to the recipient; (ii) one (1)
Business Day after being sent to the recipient by reputable overnight courier
service (charges prepaid); (iii) upon receipt of confirmation of receipt if sent
by facsimile transmission; or (iv) three (3) Business Days after being mailed to
the recipient by certified or registered mail, return receipt requested and
postage prepaid, and addressed to the intended recipient as set forth below:
If to Seller: Tecumseh Products Company
100 East Patterson Street
Tecumseh, Michigan 49286
Attention: Daryl P. McDonald, Esq.
Facsimile: (517) 423-8839
with a copy (which shall not constitute notice to Seller)
to:
Kirkland & Ellis LLP
Citigroup Center
153 East 53rd Street
New York, New York 10022
Attention: Thomas W. Christopher, Esq.
William B. Sorabella, Esq.
Facsimile: (212) 446-6460
If to Buyer: Snowstorm Acquisition Corporation
c/o Platinum Equity Advisors, LLC
360 North Crescent Drive, South Building
Beverly Hills, California 90210
Attention: Eva M. Kalawski, Esq.
Facsimile: (310) 712-1863
with a copy (which shall not constitute notice to Buyer)
to:
Paul, Hastings, Janofsky & Walker LLP
515 South Flower Street, 25th Floor
Los Angeles, California 90071
Attention: Robert A. Miller, Jr., Esq.
Facsimile: (213) 627-0705
Any Party may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other Party
notice in the manner set forth in this Section 10.6.
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Section 10.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF DELAWARE WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
Section 10.8 Submission to Jurisdiction; Service of Process. Each of the
Parties irrevocably and unconditionally submits to the exclusive jurisdiction of
any state or federal court sitting in New Castle County, Delaware in any
Litigation arising out of or relating to this Agreement or any other Related
Agreement and agrees that all claims in respect of such Litigation may be heard
and determined in any such court. Each Party also agrees not to bring any action
or proceeding arising out of or relating to this Agreement or any other Related
Agreement in any other court. Each of the Parties irrevocably and
unconditionally waives any objection to the laying of venue in, and any defense
of inconvenient forum to the maintenance of, any Litigation so brought and
waives any bond, surety or other security that might be required of any other
Party with respect thereto. Either Party may make service on the other Party by
sending or delivering a copy of the process to the Party to be served at the
address and in the manner provided for the giving of notices in Section 10.6;
provided, however, that nothing in this Section 10.8 shall affect the right of
either Party to serve legal process in any other manner permitted by law or in
equity. Each Party agrees that a final judgment in any Litigation so brought
shall be conclusive and may be enforced by Litigation or in any other manner
provided by law or in equity. The Parties intend that all foreign jurisdictions
will enforce any Decree of any state or federal court sitting in New Castle
County, Delaware in any Litigation arising out of or relating to this Agreement
or any other Related Agreement.
Section 10.9 Waivers of Jury Trial. EACH PARTY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 10.10 Specific Performance. Each Party acknowledges and agrees that
the other Party would be damaged irreparably in the event any provision of this
Agreement is not performed in accordance with its specific terms or otherwise
breached, so that, in addition to any other remedy that a Party may have under
law or equity, a Party shall be entitled to injunctive relief to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof.
Section 10.11 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement. In the event that any of the provisions
of this Agreement shall be held by a court or other tribunal of competent
jurisdiction to be illegal, invalid or unenforceable, such provisions shall be
limited or eliminated only to the minimum extent necessary so that this
Agreement shall otherwise remain in full force and effect.
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Section 10.12 No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
Section 10.13 Mutual Drafting. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring either Party by virtue of the authorship of any of
the provisions of this Agreement.
Section 10.14 Disclosure Schedule. All capitalized terms not defined in the
Disclosure Schedule shall have the meanings ascribed to them in this Agreement.
Buyer shall not be entitled to claim that any fact or combination of facts or
circumstance constitutes a breach of any of the representations, warranties or
covenants contained in this Agreement if and to the extent that such fact or
combination of facts or circumstance has been disclosed in any section of the
Disclosure Schedule in a manner sufficient to put a reasonable person on notice
of the relevance of the fact or combination of facts or circumstance so
disclosed. The inclusion of any item in any section of the Disclosure Schedule
(i) does not constitute an admission by Seller, or to otherwise imply, that any
such matter is material, is required to be disclosed under this Agreement or
falls within relevant minimum thresholds or materiality standards set forth in
this Agreement and (ii) does not represent a determination by Seller that such
item did not arise in the Ordinary Course of Business. In no event shall any
matter in the Disclosure Schedule be deemed or interpreted to expand the scope
of the Seller's representations, warranties and/or covenants set forth in this
Agreement or any condition to the obligations of either Party to consummate any
transaction contemplated hereby. No disclosure in the Disclosure Schedule of a
possible breach or violation of any Contract or law shall be construed as a
representation or admission that such breach or violation has occurred or
exists. The information and disclosures contained in each section of the
Disclosure Schedule (but not in the agreements or other documents listed or
described on the Disclosure Schedules, or incorporated by reference therein,
unless further information upon which relevance can be determined is provided)
shall be deemed to be disclosed and incorporated by reference in each other
section of the Disclosure Schedule to which the applicability of such disclosure
is reasonably apparent as though fully set forth in such other section. All
attachments to the Disclosure Schedule are incorporated by reference into the
Disclosure Schedule. The information contained in the Disclosure Schedule is in
all events provided to Buyer subject to the Confidentiality Agreement.
Section 10.15 Headings; Table of Contents. The section headings and the
table of contents contained in this Agreement and the Disclosure Schedule are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 10.16 Counterparts; Facsimile Signatures. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
but all of which together will constitute one and the same instrument. This
Agreement or any counterpart may be executed and delivered by facsimile copies,
each of which shall be deemed an original.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
TECUMSEH PRODUCTS COMPANY
By: /s/ James Bonsall
Name: James Bonsall
Title: Executive Vice President
Tecumseh Products Co.
SNOWSTORM ACQUISITION CORPORATION
By: /s/ Eva M. Kalawski
Name: Eva M. Kalawski
Title: Vice President & Secretary
Snowstorm Acquisition