1
EXHIBIT 2(a)
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ASSET TRANSFER AGREEMENT
among
CABOT SAFETY CORPORATION,
CABOT CANADA LTD.,
CABOT SAFETY LIMITED,
CABOT CORPORATION,
CABOT SAFETY HOLDINGS CORPORATION
and
CABOT SAFETY ACQUISITION CORPORATION
Dated as of June 13, 1995
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2
TABLE OF CONTENTS
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1. Transfer and Purchase of Assets; Assumption of Certain Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Transfer and Purchase of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3. Instruments of Conveyance and Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.4. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.5. Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.6. Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2. Closing; Exchange Consideration at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1. Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2. Exchange Consideration; Closing Date Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3. Net Operating Assets Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1. Representations and Warranties of Seller and Cabot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) Due Organization; Power; Capacity; Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Authorization and Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(c) No Governmental Approvals or Notices Required; No Conflict . . . . . . . . . . . . . . . . . . . . . . . 12
(d) Financial Information; Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(e) Title and Condition of Properties; Absence of Encumbrances . . . . . . . . . . . . . . . . . . . . . . . 13
(f) List of Properties, Contracts, Permits and Other Data . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(g) Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(h) Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(i) Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(j) Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(k) Government Licenses, Permits and Related Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(l) Compliance with Law and Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(m) Employee Benefit Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(n) Certain Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(o) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(p) Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(q) Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(r) Entire Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(s) Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(t) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(u) Capital Stock; Charter Documents; Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(v) Prohibited Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(w) Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.2. Representations and Warranties of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) Due Organization; Good Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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(b) Authorization and Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) Governmental Approvals; No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(d) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(e) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.3. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4. Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.1. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.2. Conduct of the Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.3. Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.4. Antitrust Improvements Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.5. Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.6. No Inconsistent Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.7. No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.8. Corporate Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.9. Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.10. Right to Update Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.11. Ancillary Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.12. Respirator Liability Retention Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.1. Conditions Precedent to Obligations of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(a) No Injunction, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(b) Antitrust Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(f) Management Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.2. Conditions Precedent to Obligations of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(a) Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(b) Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(c) Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(d) Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(e) Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(f) Consents, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(g) Actions and Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.3. Conditions Precedent to the Obligations of Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(a) Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(b) Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(c) Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(d) Actions and Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(e) Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6. Employees and Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.1. Offer of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.2. Existing Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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7. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.2. No Liabilities in Event of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.3. Return of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.1. Sellers and Cabot Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.2. Buyer Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.3. Procedures for Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.4. Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9. Indemnification for Taxes and Other Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.1. Indemnification for Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.2. Apportionment of Tax Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.1. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.2. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.4. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.5. Binding Effect; Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.6. Bulk Sales Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.7. Assignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.8. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.9. Amendment; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.10. Non-Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.11. Certain Securities Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.12. Section Headings; Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.15. APPLICABLE LAW; JURISDICTION; VENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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Schedules
Schedule 1.1A - Exchanged Assets
Schedule 1.6(d) - Chickasha Property
Schedule 2.2(e) - Assets Value Allocation
Schedule 3.1A - Knowledge Parties
Schedule 3.1(c) - Required Approvals and Consents
Schedule 3.1(d)(i) - Certain Financial Information
Schedule 3.1(d)(ii) - Business Plan
Schedule 3.1(e)(i) - Encumbrances on Real Property
Schedule 3.1(e)(ii) - Equipment
Schedule 3.1(f)(i) - Contracts
Schedule 3.1(f)(ii) - Owned and Leased Real Property
Schedule 3.1(f)(iii) - Certain Licenses, Permits, etc.
Schedule 3.1(f)(iv) - Intellectual Property
Schedule 3.1(h) - Legal Proceedings
Schedule 3.1(i) - Insurance; Discontinued Operations
Schedule 3.1(m)(i) - Employee Benefit Plans
Schedule 3.1(m)(viii) - Employment Agreements, Contracts, etc.
Schedule 3.1(m)(ix) - Collective Bargaining Agreements
Schedule 3.1(m)(x) - Welfare Benefit Fund Plans
Schedule 3.1(o) - Certain Events
Schedule 3.1(q) - Environmental Matters
Schedule 3.1(t) - Tax Matters
Schedule 3.1(u) - Capital Stock of Subsidiaries
Schedule 3.1(w) - Affiliate Transactions
Schedule 3.2(e) - Capital Stock and Holders
Schedule 9.4 - Schedule of Historical Tax Basis
Exhibits
Exhibit A - Form of Vestar Subscription Agreement
Exhibit B - Form of Trademark Coexistence Agreement
Exhibit C - Form of Stockholder Agreement
Exhibit D - Terms of Subordinated Notes
Exhibit E - Terms of Preferred Stock
Exhibit F - Form of Management Advisory Agreement
Exhibit G - Form of Closing Date Schedule
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Defined Terms Section
"Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4
"Antitrust Division" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
"Antitrust Improvement Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(q)
"Assumed Liabilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5
"Assumption Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5
"Benefit Arrangement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(m)(ii)
"Business Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)(ii)
"Buyer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"Cabot" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"Cash Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
"CGB" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"Chickasha Property" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2(g)
"Closing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Closing Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Closing Date Schedule" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
"COBRA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(m)(x)
"Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(m)(iii)
"Common Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
"CSC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"CSC Canada" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"Employee Benefit Programs" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(m)(ii)
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"Encumbrances" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(e)
"Environmental Laws" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(q)
"Environmental Permits" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(q)
"Equipment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(e)
"ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(m)(i)
"Exchanged Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
"Financial Information" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)(i)
"Foreign Sales Companies" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(g)
"FTC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
"GAAP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)(i)
"Group Health Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(m)(x)
"Hazardous Substances" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(q)
"Holdings Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
"Indebtedness" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6(a)
"Indianapolis Mortgage Indebtedness" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6(a)
"Intellectual Property" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(p)
"Investors Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(c)
"Inventory" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(f)
"IRB Indebtedness" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6(a)
"Material Adverse Effect" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a)
"Owned Real Property" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(f)(ii)
"Plans" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(m)(i)
"Preferred Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
8
Page
"Seller" and "Sellers" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"Transferred Employees" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
9
ASSET TRANSFER AGREEMENT, dated as of June 13, 1995 (this
"Agreement"), among CABOT SAFETY CORPORATION, a Delaware corporation ("CSC"),
CABOT CANADA LTD., an Ontario corporation ("CSC Canada"), CABOT SAFETY LIMITED,
a limited liability company formed under the laws of England ("CGB"; CSC, CGB
and CSC Canada, collectively, the "Sellers"; each, a "Seller"), CABOT
CORPORATION, a Delaware corporation ("Cabot"), CABOT SAFETY HOLDINGS
CORPORATION, a Delaware corporation ("Holdings"), and CABOT SAFETY ACQUISITION
CORPORATION, a Delaware corporation ("New Cabot Safety"; together with Holdings,
the "Buyer").
W I T N E S S E T H :
WHEREAS, Sellers own and operate a personal protection safety
equipment and noise, vibration and shock control products business conducted
through a Safety Products unit and a Specialty Composites unit (collectively,
the "Business");
WHEREAS, upon and subject to the terms and conditions set
forth herein, CSC desires to transfer certain assets to Holdings in exchange for
Holdings Stock (as defined in subsection 2.2(a) of this Agreement); and
WHEREAS, upon and subject to the terms and conditions set
forth herein, New Cabot Safety desires to buy (directly and through newly-formed
subsidiaries) and Sellers desire to sell the Business and all assets in
connection therewith (with exceptions as set forth herein), and New Cabot Safety
is willing to assume (including through newly-formed subsidiaries) certain
related liabilities and obligations of Sellers associated with the Business, all
as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants of the parties hereto, it is hereby agreed as follows:
1. Transfer and Purchase of Assets; Assumption of Certain Liabilities
1.1. Transfer and Purchase of Assets. On the basis of the
representations, warranties, covenants and agreements and subject to the
satisfaction (or waiver by the party whose obligations hereunder are subject to
such satisfaction) of the conditions set forth in this Agreement, on the Closing
Date (as defined in Section 2.1):
(i) CSC shall convey, assign, transfer and deliver to Holdings all of
its right, title and interest in and to those Assets (as defined below) listed
on Schedule 1.1A (the "Exchanged Assets") in exchange for (i) the Holdings Stock
(as defined in 2.2(a)) and (ii) $19,000,000, in a transaction which, together
with Holdings' issuance
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of Holdings Stock to the holders set forth on Schedule 3.2(e) hereto, the
parties intend to qualify as a transfer of Assets to a controlled corporation
within the meaning of Section 351(a) of the Internal Revenue Code of 1986, as
amended (the "Code") (a "Section 351 Transfer");
(ii) CSC shall sell, convey, assign, transfer and deliver to New Cabot
Safety (and, with respect to certain Assets identified by New Cabot Safety, one
or more wholly owned subsidiaries of New Cabot Safety designated in accordance
with Section 10.7) all of its right, title and interest in and to all the Assets
other than the Exchanged Assets in exchange for the Purchase Price (as defined
in subsection 2.2(e) of this Agreement);
(iii) CGB shall sell, convey, assign, transfer and deliver all of its
right, title and interest in and to the Assets to a United Kingdom subsidiary of
Buyer to which Buyer shall have assigned certain of its rights hereunder (the
"U.K. Assignee");
(iv) CSC Canada shall sell, convey, assign, transfer and deliver all of
its right, title and interest in and to the Assets to a Canadian subsidiary of
Buyer to which Buyer shall have assigned certain of its rights hereunder (the
"Canadian Assignee"); and
(v) each of Holdings, New Cabot Safety, and such assignees of New Cabot
Safety shall purchase, acquire and receive, as the case may be, from such
respective Sellers, all of the relevant Seller's right, title and interest in
and to the Assets.
For the purposes of this Agreement, the term "Assets" shall mean all of the
assets, rights, properties, claims, contracts and business of the Sellers of
every kind, nature, character and description, tangible and intangible, real,
personal or mixed, wherever located, that are used in, arise from or otherwise
relate to the Business, including, without limitation, the following to the
extent they are used in, arise from or otherwise relate to the Business, other
than the Excluded Assets:
(a) All contracts and agreements (whether or not entered into
in the ordinary course of the Seller's business), including all unfilled
purchase and sale orders, invoices, contracts and commitments;
(b) The leasehold interests in real property leased by each
Seller and listed on Schedule 3.1(f)(ii), including all buildings, structures
and other improvements situated thereon;
(c) The real property owned by each Seller and listed on
Schedule 3.1(f)(ii), including all buildings, structures and other improvements
situated thereon;
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(d) All accounts and notes receivable and other receivables
(the "Receivables"), other than intercompany accounts and notes receivable, of
each Seller in existence on or prior to the opening of business on the Closing
Date (whether or not billed);
(e) All equipment, furniture, furnishings, fixtures,
machinery, vehicles, telephones and other tangible personal property of each
Seller (collectively, the "Equipment") and all warranties and guarantees, if
any, express or implied, existing for the benefit of any Seller with respect to
the Equipment;
(f) All inventories or raw materials, work in progress and
finished goods and other supplies on hand, in transit or on order as of the
opening of business on the Closing Date, including, without limitation,
packaging material, stationery, forms, labels, directories and promotional
materials (the "Inventory");
(g) All of the issued and outstanding capital stock and rights
in respect of such capital stock of each entity listed in Schedule 3.1(u) and
not designated otherwise by Buyer prior to the Closing Date (the "Foreign Sales
Companies");
(h) All books and records, management information systems and
software, and customer lists, vendor lists, catalogs, research material,
technical information, technology, specifications, designs, drawings, processes,
and quality control data;
(i) All sales promotion and selling literature and promotional
and advertising materials;
(j) All licenses, permits or franchises issued by any domestic
or foreign governmental authority or other third party;
(k) All security (including cash) deposited with third parties
and security bonds which relate exclusively to the Business to the extent
included in the calculation of the Net Operating Asset Amount;
(l) All goodwill and going concern value;
(m) All prepaid expenses as of the opening of business on the
Closing Date;
(n) All claims against other parties, other than counterclaims
to claims included in the Excluded Liabilities; and
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(o) All of each Seller's right, title and interest in and to
the following types of property (including all rights to sue for past
infringement thereof) (collectively, the "Intellectual Property"):
(i) all United States and foreign registered and
unregistered trademarks and service marks, trademark and service mark
registrations, trademark and service mark applications for
registration, trade names and the like (including such use, and only
such use, of the "Cabot Safety" name as is permitted under the
Trademark Coexistence Agreement in the form attached hereto as Exhibit
B (the "Trademark Coexistence Agreement")), together with the goodwill
connected with the use of and symbolized by such marks, names,
registrations and applications for registration;
(ii) all United States and foreign patents, patent
applications, and all other patent rights, copyrights, copyright
registrations and copyright applications;
(iii) all information, recorded knowledge, surveys,
engineering reports, manuals, catalogues, research data, proprietary
information, know-how, trade and business secrets, photos, art work,
editorial materials, formats, syndicated market research data, sales
data and other similar information and all other intellectual property;
and
(iv) all non-governmental licenses, sublicenses,
covenants or agreements to which any Seller is a party, which relate in
whole or in part to any items of the categories mentioned above in
clauses (i) through (iii), including all trademark licenses.
1.2. Excluded Assets. Notwithstanding anything to the contrary
in Section 1.1, it is expressly understood and agreed that the Assets shall not
include the following assets (the "Excluded Assets"):
(a) assets (including, without limitation, assets of the type
listed in Section 1.1) used or owned in connection with Cabot's and CSC
Canada's carbon black business;
(b) any capital stock other than that of the Foreign Sales
Companies;
(c) the tax returns, corporate minute books and stock ledgers
of any Seller;
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(d) all cash and cash equivalents or similar type investments,
such as certificates of deposit, Treasury bills and other marketable securities,
of the Sellers (even if otherwise used in the Business);
(e) the intercompany notes held by the Sellers other than
intercompany notes between any Seller and any Foreign Sales Company;
(f) any accounts receivable due from Cabot or any of its
wholly or partially owned subsidiaries, other than accounts receivable due from
them to a Foreign Sales Company;
(g) the Chickasha Property;
(h) any use of the Cabot Safety or Cabot names not
specifically permitted under the Trademark Coexistence Agreement; and
(i) all services, agreements and contracts provided by Cabot
and Sellers to the Business.
1.3. Instruments of Conveyance and Transfer. On the Closing
Date, Sellers shall (a) deliver or cause to be delivered to Buyer such deeds,
bills of sale, endorsements, consents, assignments, and other good and
sufficient instruments of conveyance and assignment, all in recordable form,
where applicable, as are required under local custom and practice to vest in
Buyer all right, title and interest of Sellers in and to the Assets, free and
clear of any Lien (except for Permitted Encumbrances), and as will otherwise be
in form and substance reasonably satisfactory to Buyer and Buyer's counsel; and
(b) transfer to Buyer originals of all contracts, agreements, commitments,
books, records, files, certificates, licenses, permits, plans and specifications
and other data included in the Assets, including, without limitation, computer
tapes and computer-generated records. All materials referred to in subsection
(b) shall be delivered to Buyer in the form and order in which they are
maintained by Sellers. Notwithstanding the foregoing clause (a), with respect to
the Intellectual Property, Sellers shall deliver to Buyer at the Closing an
omnibus assignment of the Intellectual Property included in the Assets and shall
thereafter deliver to Buyer good and sufficient instruments of conveyance and
assignment, all in recordable form, for all registered trademarks, patents,
registered copyrights and pending applications with respect to any of the
foregoing.
1.4. Further Assurances. From time to time after the Closing
Date, Sellers, Cabot and any person that directly, or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with (an "Affiliate") Sellers or Cabot shall execute, acknowledge and deliver,
or cause to be executed, acknowledged and delivered, such other instruments of
conveyance,
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assignment, transfer and delivery and will take or cause to be taken such other
actions as Buyer may reasonably request in order more effectively to sell,
convey, assign, transfer, and deliver to Buyer any of the Assets, or to enable
Buyer to protect, exercise and enjoy all rights and benefits of Sellers with
respect thereto, and as otherwise may be appropriate to carry out the
transactions herein contemplated.
1.5. Assumed Liabilities. On the basis of the representations,
warranties, covenants and agreements, and subject to the satisfaction of the
conditions set forth in this Agreement and further subject to Section 1.6, on
the Closing Date Buyer (or its subsidiaries, as the case may be) shall deliver
to Sellers an assumption agreement (an "Assumption Agreement"), in form and
substance reasonably satisfactory to the Sellers and Buyer, pursuant to which
Buyer shall, on and as of the Closing Date, assume and agree to pay, perform and
discharge when due, all liabilities and obligations of the Sellers (other than
the Excluded Liabilities) relating to or arising out of the Business as
conducted through the Closing Date, whether direct or indirect, absolute or
contingent, contractual, tortious or otherwise. The liabilities and obligations
assumed by Buyer (or its subsidiaries, as the case may be) in accordance with
this Section 1.5 (other than the Excluded Liabilities described below) are
sometimes hereinafter referred to as the "Assumed Liabilities."
1.6. Excluded Liabilities. Notwithstanding the foregoing,
Buyer shall not assume any of the following liabilities (the "Excluded
Liabilities"):
(a) any liability or obligation in respect of any Indebtedness
other than the IRB Indebtedness and the Indianapolis Mortgage Indebtedness (for
the purposes hereof, "Indebtedness" shall mean (i) all indebtedness for borrowed
money, (ii) any other indebtedness evidenced by a note, bond, debenture or
similar instrument, (iii) all obligations in respect of banker's acceptances and
(iv) any guarantee of any of the foregoing; the "IRB Indebtedness" means
Indebtedness under the 6.4% Notes due 2003 under the Indenture in respect
thereof dated September 1, 1978, with the Bank of Delaware, as Trustee, and the
Bonds issued in connection with the Loan Agreement dated as of June 1, 1982,
between the City of Indianapolis and Cabot; and the "Indianapolis Mortgage
Indebtedness" means Indebtedness under the Note dated April 16, 1991, secured by
the mortgage covering the property at 5457 West 79th Street, Indianapolis,
Indiana);
(b) any liability or obligation relating to or otherwise
arising under any litigation, proceeding or other claim against any Seller or
any of their Affiliates which, to the best knowledge of Sellers or Cabot, is
pending on or threatened in writing on or prior to the Closing Date, other than
ordinary course product returns and warranty claims and other than accounts
payable assumed by Purchaser pursuant to Section 1.5;
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(c) any liability for or obligation in respect of Taxes, or
any liability for the payment of any "excess parachute payment", as defined in
Section 280G of the Code;
(d) any liability relating to the parcel of real property
located in Chickasha described on Schedule 1.6(d) or any improvements located
thereon (the "Chickasha Property");
(e) except as specifically provided in Section 6.2 or related
to accrued reimbursement, welfare, vacation and similar benefit obligations
incurred in the ordinary course of business and reflected in the Financial
Information, any liabilities or obligations relating to or arising under any
employee or retirement benefit plan, program, arrangement or agreement
maintained or contributed to by any Seller or their respective Affiliates;
(f) any cash overdraft liability;
(g) any liabilities or obligations that are not incidental to
or do not arise out of or were not incurred with respect to the Business;
(h) liabilities or obligations under any contract, agreement
or other arrangement not reflected in the Financial Information pursuant to
which Cabot, any Seller or any of their respective Affiliates prior to the
Closing Date agreed to sell any assets or business which was then owned by or
conducted by any Seller or was otherwise then associated with the Business
(other than sales of assets in the ordinary course of business), and any
liabilities not reflected in the Financial Information to the extent related to
any discontinued business of Sellers that is not included in the Business on the
Closing Date, it being understood that notwithstanding any general reference in
the Financial Information to the Rastronics business previously owned by
Sellers, liabilities and obligations under the agreement pursuant to which such
business was sold shall be an Excluded Liability;
(i) any liability or payable owing to Cabot or any of its
Affiliates, other than liabilities owed to them by a Foreign Sales Company; and
(j) in the event and for so long as Respirator Liability
Retention is in effect in accordance with Section 4.12, any liability or
obligation relating to or otherwise arising under any litigation, proceeding or
other claim against any Buyer or any Seller or any of their respective
Affiliates or other parties with whom any Seller directly or indirectly has
contractual liability sharing arrangements, which liability, proceeding or other
claim sounds in product liability or related causes of action arising out of
actual or alleged Respirator Medical Conditions caused or allegedly caused by
the use of respirators or similar devices sold by the Sellers or their
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predecessors (including, without limitation, American Optical Corporation and
its predecessors) prior to the Closing Date. "Respirator Medical Conditions" are
medical conditions involving exposure to asbestos, silica or silica products.
Respirator Medical Conditions are typically suspected to involve and/or
diagnosed as asbestosis, mesothelioma, silicosis or related long latency
diseases.
2. Closing; Exchange Consideration at Closing
2.1. Closing Date. On and subject to the conditions herein set
forth, the closing with respect to the transactions provided for in this
Agreement (the "Closing") shall take place at the offices of Simpson Thacher &
Bartlett, located at 425 Lexington Avenue, New York, New York 10017-3954, at 10
a.m., New York City time, as soon as practicable following the expiration or
termination of any waiting periods or extensions thereof under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "Antitrust
Improvements Act"), or at such other time and place as shall be agreed upon by
the parties hereto. The actual time and date of the Closing are herein referred
to as the "Closing Date".
2.2. Exchange Consideration; Closing Date Transactions. (a) In
exchange for the Assets transferred to it by CSC pursuant to subsection 1.1(i)
hereof, and subject to the terms and conditions of this Agreement, Holdings
shall on the Closing Date (i) issue and deliver to CSC 42,500 shares of common
stock of Holdings, par value $.01 (the "Common Stock"), (ii) issue and deliver
to CSC a number of shares of its Preferred Stock (as defined below) having an
aggregate initial stated value and liquidation preference equal to the Required
Preferred Amount (the capital stock of Holdings delivered pursuant to the
foregoing clauses (i) and (ii) being hereinafter referred to as the "Holdings
Stock") and (iii) transfer to CSC $19,000,000 in cash. For the purposes hereof,
the "Required Preferred Amount" shall be $22,500,000 if the funding contemplated
by subsection 5.2(e) includes a tranche of long-term high-yield securities
issued and sold by New Cabot Safety in the institutional high-yield debt market
("High Yield Securities"). If such funding does not include a tranche of High
Yield Securities, the Required Preferred Amount shall be $25,000,000. "Preferred
Stock" shall mean preferred stock of Holdings having the terms set forth in
Exhibit E hereto.
(b) In consideration for the Assets transferred to it by CSC
pursuant to subsection 1.1(ii) hereof, and subject to the terms and conditions
of this Agreement, New Cabot Safety shall on the Closing Date (i) assume the
Assumed Liabilities attributable to CSC (other than those being assumed by its
designated subsidiaries pursuant to subsections 2.2(c) or (d) or pursuant to
Section 10.7) as provided in Section 1.5 and (ii) pay to CSC a purchase price,
in cash, equal to the Cash Amount less the sum of the cash amounts set forth in
clauses 2.2(a)(iii), (c) and (d) below. If, and only if, the funding
contemplated by subsection 5.2(e) does not
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include a tranche of High Yield Securities, and the amount of funded senior bank
debt financing (not including the working capital facility contemplated by
subsection 5.2(e)) comprising such funding is equal to or greater than
$135,000,000 but less than $145,000,000, on the Closing Date New Cabot Safety
will issue and deliver to CSC Subordinated Notes in an aggregate principal
amount equal to the excess, if any, of $145,000,000 over the aggregate amount of
such senior bank debt financing provided on the Closing Date. For the purposes
hereof, the "Cash Amount" means an amount equal to $205 million less (i) $8.5
million (common equity contribution) less (ii) the agreed value (based, as
applicable, on the price per share of Common Stock paid by the other holders
thereof on the Closing Date) of the management equity incentives issued by
Holdings in substitution for equity options currently held by members of CSC
management less (iii) the Required Preferred Amount, less (iv) the amount equal
to the principal amount of IRB Indebtedness and Indianapolis Mortgage
Indebtedness outstanding on the Closing Date and accrued and unpaid interest
thereon at the Closing Date, less (v) the aggregate principal amount of
Subordinated Notes, if any, issued and delivered to CSC on the Closing Date, as
provided above. For purposes hereof, "Subordinated Notes" means the notes of New
Cabot Safety having the terms set forth in Exhibit D hereto.
(c) In consideration for the Assets transferred to it by CSC
Canada pursuant to subsection 1.1(iii), and subject to the terms and conditions
of this Agreement, the Canadian Assignee shall on the Closing Date (i) assume
the Assumed Liabilities attributable to CSC Canada as provided in Section 1.5
and (ii) pay to CSC Canada a purchase price, in cash, equal to the Canadian
Dollar equivalent of U.S. $6 million.
(d) In consideration for the Assets transferred to it by CGB
pursuant to subsection 1.1(iii), and subject to the terms and conditions of this
Agreement, the U.K. Assignee shall on the Closing Date (i) assume the Assumed
Liabilities attributable to CGB as provided in Section 1.5 and (ii) pay to CGB a
purchase price, in cash, equal to the British Pound Sterling equivalent of U.S.
$16 million.
(e) The value of the consideration paid or exchanged pursuant
to subsection 2.2(b), (c) and (d) above (the "Purchase Price") shall be
allocated among New Cabot Safety and its Subsidiaries in the manner set forth in
Schedule 2.2(e). Buyer and Sellers agree to act in accordance with such
allocations in all Tax returns, reports and filings unless otherwise required
under applicable law. All payments of the cash portion of the Purchase Price
delivered to the Buyer pursuant to this Section 2.2 shall be made to the order
of the Sellers on the Closing Date in New York City in immediately available
funds to such account or accounts as CSC shall have advised Buyer in writing no
less than two business days prior to the Closing Date.
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2.3. Net Operating Assets Adjustment. (a) Not later than 60
days following the Closing Date, Buyer shall cause a schedule (the "Closing Date
Schedule") in the form of Exhibit G setting forth the Net Operating Asset Amount
(as defined below) to be prepared. Upon the availability thereof, Buyer shall
deliver such Closing Date Schedule to CSC, accompanied by a certificate of the
chief financial officer of Buyer stating that the Closing Date Schedule has been
prepared in accordance with GAAP, consistently applied, and the requirements of
this Agreement and represents fairly in all material respects the Net Operating
Assets Amount. Sellers shall make available to Buyer, at Buyer's expense, such
books and records relating to the Business as are in the possession or under the
control of Sellers as are reasonably necessary to facilitate the preparation of
the Closing Date Schedule. Cabot, Sellers, and their independent accountants
shall be afforded access to any work papers prepared by Buyer or their
independent accountants in the preparation of the Closing Date Schedule. If the
Net Operating Assets Amount reflected on the Closing Date Schedule is less than
$72,000,000, CSC shall make a cash payment to Buyer within 12 months of the
Closing Date in the amount of such difference (as established in accordance with
paragraph (b) below, if necessary) together with interest from the Closing Date
to the date of payment at the federal funds rate. If the Net Operating Assets
Amount reflected on the Closing Date Schedule exceeds $72,000,000, Buyer shall
make a cash payment to CSC within 12 months of the Closing Date in the amount of
such difference (as established in accordance with paragraph (b) below, if
necessary) together with interest from the Closing Date to the date of payment
at the federal funds rate. Any dispute as to the Closing Date Schedule, the Net
Operating Assets Amount or the amount of any payment to be made pursuant to this
Section 2.3 shall be resolved in accordance with subsection (b) below. For the
purposes hereof, "Net Operating Assets Amount" shall mean (A) the sum of the
book value of (i) net accounts receivable, (ii) net inventory, (iii) other net
current assets and (iv) net property, plant and equipment less (B) the sum of
(i) payables, (ii) accrued liabilities and (iii) any other contingencies or
reserves for Assumed Liabilities which, in accordance with GAAP, should be
reflected on a balance sheet for the Business as of the close of business on the
Closing Date. The book value of each item included in the Closing Date Schedule
shall be prepared in accordance with GAAP and as otherwise specified in Exhibit
G, provided that in no event shall any item be reflected therein if such item is
not an Asset or is an Excluded Liability or if such item is a reserve or
allowance that does not relate to an Asset or Assumed Liability.
(b) In the event Sellers dispute the Closing Date Schedule,
the Net Operating Assets Amount or the amount of any payment to be made pursuant
to this Section 2.3, Sellers shall, no later than 60 days after the date of
delivery, describe to Buyer in reasonable written detail the basis for such
dispute, and Buyer and Sellers shall promptly negotiate in good faith to resolve
such dispute. If such dispute is not resolved within 30 days after Sellers have
notified Buyer of its basis for such
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dispute, then the specific matters in dispute shall be submitted to a nationally
recognized accounting firm mutually acceptable to Buyer and Sellers. Such firm
shall resolve such dispute on the basis of the requirements for the Closing Date
Schedule as set forth in this Agreement as applied to the books and records of
the Business. Such firm shall be requested to provide its resolution of the
matters in dispute within 30 days of the submission thereof to such firm. The
determination of such firm, whose costs and expenses shall be borne equally by
Buyer and Sellers, as to the Net Operating Assets Amount shall be final and
determinative.
3. Representations and Warranties
3.1. Representations and Warranties of Seller and Cabot. Each
Seller and Cabot jointly and severally represent and warrant to Buyer as follows
(provided that, as used herein, "to the best knowledge of Sellers and Cabot"
means that Sellers and Cabot will be deemed to have knowledge of those matters
(and only those matters) with respect to which any of the persons listed on
Schedule 3.1A have actual knowledge and that, as used herein, in the reasonable
judgment of Sellers and Cabot means the reasonable business judgment of any of
the persons listed on Schedule 3.1A):
(a) Due Organization; Power; Capacity; Good Standing. Each of
Cabot and each Seller is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization and has the
requisite corporate power and authority to own, lease and operate its properties
and assets and to conduct its business as now conducted by it. Each of Cabot and
each Seller has all requisite corporate and other power and authority to enter
into this Agreement and any other agreement contemplated hereby and to perform
its obligations hereunder and thereunder. Each Seller is duly authorized,
qualified or licensed to do business as a foreign corporation, and is in good
standing, in each of the jurisdictions in which its right, title or interest in
or to any of the assets held by it, or the conduct of its business, requires
such authorization, qualification or licensing, except where the failure to so
qualify or to be in good standing is a circumstance that would not reasonably be
expected to have a material adverse effect on the condition (financial or
other), results of operations, assets, properties, business or prospects of the
Business, the Assets or the Assumed Liabilities or materially impair Sellers' or
Cabot's ability to perform its respective obligations hereunder or under any
other agreement contemplated hereby (herein called a "Material Adverse Effect").
(b) Authorization and Validity. The execution, delivery and
performance by each of Cabot and each Seller of this Agreement and any other
agreements contemplated hereby and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by the respective
Board
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of Directors of such Seller and Cabot and the stockholders of such Seller, and
by all other necessary corporate action. No other corporate or stockholder
action is necessary for the authorization, execution, delivery and performance
by Sellers or Cabot of this Agreement and any other agreements contemplated
hereby and the consummation by Sellers and Cabot of the transactions
contemplated hereby or thereby. This Agreement has been, and such other
agreements will on the Closing Date be, duly executed and delivered by each of
Cabot and each Seller, as applicable, and constitutes, or will constitute, as
the cases may be, a valid and legally binding obligation of each of them,
enforceable against them in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws relating to or affecting
creditors' rights generally, by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
or by an implied covenant of good faith and fair dealing.
(c) No Governmental Approvals or Notices Required; No
Conflict. Except as set forth in Schedule 3.1(c), the execution, delivery and
performance of this Agreement and any other agreements contemplated hereby by
Sellers or Cabot and the consummation by Sellers and Cabot of the transactions
contemplated hereby and thereby (i) will not violate (with or without the giving
of notice or the lapse of time or both), or require any consent, approval,
filing or notice under, any provision of any law, rule or regulation, court or
administrative order, writ, judgment or decree applicable to any of the Assets,
any Seller or Cabot, or any of their respective assets or properties, except for
such violations the occurrence of which, and such consents, approvals, filings
or notices the failure of which to obtain or make, would not, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, and (ii) will not (with or without the giving of notice or the
lapse of time or both) (x) violate or conflict with, or result in the breach,
suspension or termination of any provision of, or constitute a default under, or
result in the acceleration of the performance of the obligations of Cabot or any
Seller under, or (y) result in the creation of any lien, mortgage, pledge,
security interest, claim, charge, cloud, imperfection or encumbrance or other
restriction of any kind or nature (collectively, "Encumbrances") upon all or any
portion of the Assets or the Business pursuant to, the charter or by-laws of
Cabot or any Seller or any indenture, mortgage, deed of trust, lease, agreement,
contract or instrument to which Cabot or any Seller is a party or by which Cabot
or any Seller or any of their respective assets or business comprising any part
of the Assets or Business is bound, except for such violations, conflicts,
breaches, suspensions, terminations, defaults, accelerations or Encumbrances
which, either individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect. Except as contemplated by Section 10.10, none
of Cabot or any of the Sellers is subject to any obligation, agreement,
commitment or restraint that in any way purports to limit the business that
Buyer may engage in following the Closing.
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(d) Financial Information; Liabilities. (i) The audited
combined balance sheets of the Business as at September 30 for each of the years
1991 through 1994 and the unaudited combined balance sheets of the Business as
at March 31, 1995 and the related combined statements of income and retained
earnings and combined statements of cash flows for the fiscal year or six-month
period ended on such dates, reported on (in the case of such audited financial
statements) by Coopers & Lybrand, copies of which have been furnished to Buyer,
present fairly the combined financial condition of the Business as at such dates
and the combined results of the operations of the Business for the fiscal year
or six-month period then ended, provided, that such interim statements do not
include notes required by GAAP and are subject to year-end adjustments. The
unaudited combined comparative balance sheets of the Business at March 31, 1995
and March 31, 1994, and the related unaudited combined statements of income of
the Business for the six months ended on each such date, copies of which have
been furnished to Buyer, present fairly the combined financial condition of the
Business as of such dates, and the combined results of the operations of the
Business for the periods then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with generally accepted
accounting principles in the United States as in effect from time to time,
applied consistently throughout the periods involved ("GAAP"), except as noted
therein. To the best knowledge of Sellers and Cabot, the Business did not have,
at the date of the most recent audited balance sheet referred to above, any
material contingent obligation, contingent liability or liability for taxes, or
any material long-term lease or unusual forward or long-term commitment not
reflected therein or in a footnote thereto or in the schedules to this
Agreement, including Schedule 3.1(d)(i). All such financial statements,
including the related schedules and notes thereto, are sometimes hereinafter
referred to as the "Financial Information."
(ii) Except to the extent set forth on the schedules to this
Agreement, in the unaudited financial statements for the fiscal quarter ended
March 31, 1995 included in the Financial Information or incurred since March 31,
1995 in the usual, regular and ordinary course of Sellers' or the Foreign Sales
Companies' business consistent with past practice or in accordance with the
Business Plan set forth on Schedule 3.1(d)(ii) (the "Business Plan"), none of
the Sellers or any Foreign Sales Company has, to the best knowledge of Sellers
and Cabot, any material liabilities or material obligations relating to the
Business (absolute, accrued, contingent or otherwise), whether due or to become
due other than capital commitments incurred in the ordinary course of business
or in accordance with the Business Plan.
(e) Title and Condition of Properties; Absence of
Encumbrances. (i) Sellers have, and Buyer on the Closing Date will receive, good
title to all the Assets (except for leased Assets, in which case the Seller has
and Buyer shall receive a valid leasehold interest) free and clear of all
Encumbrances and imperfections,
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except (1) Encumbrances for current taxes, assessments or governmental charges
not yet due and payable or being contested in good faith by appropriate
proceedings, and (2) with respect to the Owned Real Property described on
Schedule 3.1(f)(ii), Encumbrances set forth on Schedule 3.1(e)(i), (3) with
respect to the Assets, such imperfections of title, charges and encumbrances, if
any, as do not in the aggregate materially detract from the value or materially
interfere with the present use of such Assets or otherwise materially impair or
interfere with the Business, (4) statutory liens of landlords, carriers,
warehousemen, mechanics, materialmen and other liens imposed by law incurred in
the ordinary course of business for sums not yet delinquent, (5) liens incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance and other types of social security, or to
secure the performance of statutory obligations, surety and appeal bonds, bids,
leases, governmental contracts, performance and return of money bonds and other
similar obligations (other than obligations for the payment of borrowed money),
(6) other Encumbrances on the Assets arising out of the Assumed Liabilities
which Encumbrances are listed or disclosed in the Schedules hereto or in the
Financial Information and (7) Encumbrances disclosed on the schedules to this
Agreement (the Encumbrances described in Clauses (1) through (7), collectively,
the "Permitted Encumbrances"). Except as set forth in Schedule 3.1(f)(ii), none
of the Sellers, directly or indirectly, owns or occupies any real property that
is used in or as part of the Business.
(ii) To the best knowledge of Sellers and Cabot, Schedule
3.1(e)(ii) contains a complete and correct list as of a recent date specified in
such Schedule of all Equipment owned by any Seller and used in the Business,
where such Equipment was initially capitalized at an amount in excess of $5,000.
To the best knowledge of Sellers and Cabot, there is not any material defect in
the normal operating condition and repair of the Equipment that will prevent the
Business from being operated in the ordinary course in a manner consistent with
past practices. To the best knowledge of Sellers and Cabot, the Inventory
included in the Assets is good and, in the case of finished goods, saleable,
except to the extent of reserves therefor established as appropriate in the
Financial Information.
(f) List of Properties, Contracts, Permits and Other Data. To
the best knowledge of Sellers and Cabot:
(i) Schedule 3.1(f)(i) contains a complete and correct
list of all oral and written contracts, operating, non-competition,
acquisition, shareholder, marketing and servicing, loan, partnership,
advertising, distribution, solicitation and hardware/software
agreements, notes, guarantees, purchase commitments, promotional, lease
and other agreements to which any Seller is a party and which relate to
the Business or by which any of their respective assets or properties
used by or included in the Business (including
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the Assets) is bound and which is not cancelable on thirty days or less
notice (unless such cancellation would result in a penalty or liability
to Buyer) involving aggregate consideration, payable after the date
hereof, in excess of $100,000 in the case of any such agreement;
(ii) Schedule 3.1(f)(ii) contains a complete and correct
list of (i) all real property owned by any Seller and used by or
included in the Business and (ii) all real property agreements
(including any amendments thereto) pursuant to which any Seller leases,
subleases or otherwise occupies any real property used by or included
in the Business (the "Real Property Leases"), and pursuant to the Real
Property Leases such Sellers have validly existing and enforceable
leasehold, subleasehold or occupancy interests in the property leased
thereunder to the extent necessary for the operations of their
respective properties and the conduct of their respective businesses;
(iii) Schedule 3.1(f)(iii) contains a complete and correct
list of all licenses, permits and franchises issued by foreign or
domestic governmental authorities or other third parties and necessary
for, used in or affecting the conduct of the Business as currently
conducted, except those licenses, permits or franchises the absence of
which would not, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; and
(iv) Schedule 3.1(f)(iv) contains a complete and correct
list of (1) all registered trademarks and service marks, trademark and
service mark registrations and applications, tradenames and corporate
names, owned by any Seller, in each case used by or relating to the
Business, (2) patents, patent applications and all other patent rights,
copyrights, copyright registrations and applications owned by any
Seller, in each case used by or relating to the Business and (3) all
material non-governmental licenses or sublicenses granted by or to any
Seller and other covenants or agreements to which any Seller is a
party, which relate in whole or in part to any items of the categories
mentioned above in this clause (iv), in each case used by or relating
to the Business or to any other material proprietary rights, trade
secrets, ideas or know-how owned or licensed by any Seller, in each
case used by or relating to the Business, other than any of the
foregoing the absence of which would not, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
True and complete copies of all documents (including all amendments thereto and
waivers in respect thereof) referred to in the foregoing Schedules requested by
Buyer have been delivered to Buyer. To the best knowledge of Sellers and Cabot,
all rights, licenses, permits, leases, registrations, applications, contracts,
agreements, commitments and other arrangements referred to in such Schedules are
in full force
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and effect and are valid and enforceable in accordance with their respective
terms, except where the failure to be in full force and effect and valid and
enforceable would not, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. None of the Sellers is (and each
other party thereto is not) in breach or default in the performance of any
material obligation thereunder, and no event has occurred or has failed to occur
whereby, with or without the giving of notice or the lapse of time or both, a
default or breach will be deemed to have occurred thereunder or any of the other
parties thereto have been or will be released therefrom or will be entitled to
refuse to perform thereunder, except for such breaches, defaults and events
which, either individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect.
(g) Receivables. The Receivables of Sellers arose from bona
fide transactions in the ordinary course of business consistent with past
practice or the Business Plan.
(h) Legal Proceedings. To the best knowledge of Sellers and
Cabot, except as set forth in Schedule 3.1(h), there is no litigation,
proceeding or governmental investigation to which any Seller or Cabot is a party
pending or threatened against it or relating to the Assets or the Business or
the transactions contemplated by this Agreement which would, either individually
or in the aggregate, reasonably be expected to result in any Material Adverse
Effect or which seeks to restrain or enjoin the consummation of any of the
transactions contemplated hereby. To the best knowledge of Sellers and Cabot,
none of the Sellers is in violation of any term of any judgment, writ, decree,
injunction or order entered by any court or governmental authority (domestic or
foreign) and outstanding against any Seller or with respect to any of its assets
or properties which violation would reasonably be expected to have a Material
Adverse Effect.
(i) Labor. To the best knowledge of the Sellers and Cabot, (i)
each Seller is in compliance in all material respects with all applicable laws
relating to employment practices, terms and conditions of employment and wages
and hours; (ii) there are no actions pending or threatened between any Seller
and any of their respective employees, prospective employees, former employees,
retirees or labor unions or other collective bargaining representatives
representing their employees; (iii) no unfair labor practice complaints have
been filed and remain outstanding against any Seller, and no Seller has received
any notice or communication, in writing reflecting an intention or a threat to
file any such complaint; (iv) there is no labor strike, dispute, slow-down or
stoppage pending or threatened against any Seller; (v) no representation
petition is pending with the National Labor Relations Board (or any other labor
relations board) in respect of the Business; (vi) each Seller has paid in full
to all of its employees all wages, salaries, commissions, bonuses, benefits and
other compensation due to such employees in their customary payment cycles;
(vii)
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other than as set forth on Schedule 3.1(i), no Seller has closed any facility
used in connection with the Business within the past three years, nor has any
Seller committed to or announced any such action with respect to the Business
for the future; (viii) no promises of benefit improvements under the Plans (as
defined in subsection 3.1(m)) have been made by any Seller or any Affiliate
thereof to any employee of the Business; and (ix) Sellers are in compliance with
their respective obligations pursuant to the Worker Adjustment and Retraining
Notification Act of 1988, and all other notification and bargaining obligations
arising under any collective bargaining agreement, statute or otherwise, the
non-compliance with which would reasonably be expected to have a Material
Adverse Effect, in each case as the matters described in clauses (i) through
(ix) above relate to or affect the Business or the Assets.
(j) Intellectual Property. Sellers have, and will transfer to
Buyer on the Closing Date, good title to all the Intellectual Property, free and
clear of all Encumbrances other than Permitted Encumbrances. Except as set forth
on Schedule 3.1(h), to the best knowledge of Sellers and Cabot, no claims have
been asserted or are currently in dispute to the effect that the use of the
Intellectual Property by any Sellers infringes on any intellectual property of
any other person. Except as set forth in Schedule 3.1(f)(iv), to the best
knowledge of Sellers and Cabot, Sellers own all material Intellectual Property
used in Sellers' business as presently conducted.
(k) Government Licenses, Permits and Related Approvals. To the
best knowledge of Sellers and Cabot, each Seller has all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities required for the conduct of the Business as presently conducted,
except where the failure to have such licenses, permits, consents, approvals,
authorizations, qualifications and orders would not, either individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(l) Compliance with Law and Requirements. Except as set forth
on Schedule 3.1(l), to the best knowledge of Sellers and Cabot, each Seller has
conducted the Business in compliance in all material respects with all
applicable laws, ordinances, regulations, rights of concession, licenses,
know-how or other proprietary rights of others, the failure to comply with which
would, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(m) Employee Benefit Programs.
(i) Schedule 3.1(m)(i) identifies each "employee benefit
plan" as such term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and all
bonus, stock option, deferred compensation, severance, employment,
change-in-control and all
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other employee benefit plans, policies, agreements and arrangements
relating to the Business that are maintained, or otherwise contributed
to by any Seller or any Affiliate of any Seller for the benefit of the
employees or former employees of the Business (a "Plan" and,
collectively, the "Plans").
(ii) With respect to each Plan, Sellers have delivered to
Buyer a complete and accurate copy thereof and, to the extent
applicable, (A) any related trust agreement or other funding
instrument; (B) the most recent determination letter, if any; (C) the
most recent summary plan description; (D) the most recent Form 5500
(and attached schedules); and (E) the most recent actuarial valuation
reports.
(iii) Each Plan has been maintained and administered at
all times substantially in compliance with all the terms thereof and
all applicable laws, rules and regulations, including, without
limitation, ERISA and the Code. Each Plan intended to be qualified
under Section 401(a) of the Code is so qualified and has received a
favorable determination letter, or an application therefor has been
made, as to its qualification and nothing has occurred which would
cause the loss of such qualification.
(iv) No "reportable event" (as such term is used in
Section 4043 of ERISA), "prohibited transaction" (as such term is used
in Section 406 of ERISA or Section 4975 of the Code) or "accumulated
funding deficiency" (as such term is used in Section 412 or Section
4971 of the Code) or liability arising under Title IV of ERISA has
occurred with respect to any Plan which would reasonably be expected to
have a Material Adverse Effect.
(v) With respect to each of the Plans which is not a
multiemployer plan within the meaning of section 4001(a)(3) of ERISA
but is subject to Title IV of ERISA, as of the Closing Date the assets
of each such Plan are exceeded in value by the present value of the
accrued benefits (vested and unvested) of the participants in such Plan
on an ongoing basis by an amount not greater than $387,000 and on a
termination basis by an amount not greater than $1,376,000, based on
the actuarial methods and assumptions indicated in the most recent
actuarial valuation report (1994). All contributions required to be
made to each Plan which is maintained for the benefit of employees
located outside the United States (a "Foreign Plan") have been made and
the present value of benefits accrued under each Foreign Plan does not
exceed the value of the assets of such plan allocable to such accrued
benefits.
(vi) Sellers have not contributed to or participated in
any pension plan which is a "multiemployer plan," as defined in Section
3(37) of ERISA.
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(vii) No material litigation or administrative or other
proceedings involving the Plans have occurred, are pending or, to the
best knowledge of Sellers and Cabot, are threatened.
(viii) To the best knowledge of Sellers and Cabot, except
as set forth in Schedule 3.1(m)(viii), there are no other employment
agreements, contracts or understandings with any employee of the
Business.
(ix) Except as set forth in Schedule 3.1(m)(ix), there
are no collective bargaining agreements which any Seller or their
affiliates have entered into on behalf of any employees of the
Business.
(x) Except as set forth on Schedule 3.1(m)(x), with
respect to any Plan that is an employee welfare benefit plan, (1) no
such Plan is funded through a welfare benefits fund, as such term is
defined in Section 419(e) of the Code, (2) each such Plan that is a
group health plan ("Group Health Plan"), as such term is defined in
Section 4980B(g)(2) of the Code, substantially complies with the
applicable requirements of Section 4980B(f) of the Code ("COBRA") and
(3) each such Plan (excluding any such Plan covering union employees,
retirees or other former employees) may be amended or terminated
without material liability to Buyer on or at any time after the Closing
Date.
(xi) Except as indicated on Schedule 3.1(m)(viii), no
Plan exists which would result in the payment to any employee of the
Seller of any money or other property rights or accelerate or provide
any other rights or benefits to any such employee as a result of the
transactions contemplated by this Agreement.
(n) Certain Fees. With the exception of fees and expenses
payable to Merrill Lynch & Co., neither any Seller nor any of their officers,
directors or employees or Affiliates has employed any broker or finder or
incurred any other liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated hereby.
(o) Absence of Certain Changes or Events. To the best
knowledge of Sellers and Cabot, except as set forth in Schedule 3.1(o) or
otherwise contemplated by the Business Plan, since March 31, 1995, there has not
been (i) any material adverse change in the Assets or in the condition
(financial or other), results of operations, prospects or business of the
Business, (ii) any material damage, destruction or loss relating to the Business
or assets of the Business, whether or not insured, (iii) any liability created
or incurred which Buyer will assume under the Assumption Agreement other than
liabilities created or incurred in the ordinary
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course of business, (iv) any Encumbrances other than Permitted Encumbrances
created on any Asset, (v) except in the ordinary course of business or as may be
consented to by Buyer, any increase in, or commitment or plan adopted to
increase, the wages, salaries, compensation, pension or other benefits or
payments to Transferred Employees (as defined in Section 6.1), (vi) any material
capital expenditures or commitment to make any such expenditures with respect to
the Assets (except as may be necessary to maintain and protect the Assets or the
Business and which under GAAP are treated as capital expenditures) or as to
which Buyer will become obligated after the Closing pursuant to the Assumption
Agreement, (vii) any condemnation proceedings commenced with respect to any
Asset or notice received by any Seller as to the proposed commencement of any
such proceedings, (viii) any rights of substantial value waived with respect to
the Assets or the business of Sellers other than in the ordinary course of
business or (ix) any sale or transfer of any Assets other than sales of goods
and dispositions of obsolete property in the ordinary course of business. Since
March 31, 1995, other than acts relating to the transactions contemplated by
this Agreement, the Business has been conducted in all significant respects only
in the ordinary course of business consistent with past practice or in
accordance with the Business Plan.
(p) Disclosure. To the best knowledge of Sellers and Cabot,
this Agreement, together with all other documents and instruments to be executed
and delivered by Sellers in connection herewith, taken as a whole, does not
present the Business and the Assets in a manner which is materially misleading.
(q) Environmental Matters. Except as indicated on Schedule
3.1(q), as reflected in the Financial Information, or set forth in any
environmental study or survey performed on behalf of Cabot, Sellers or Buyer
copies of which have been previously provided to Buyer, to the best knowledge of
Sellers and Cabot:
(i) There are no actions, suits, proceedings,
governmental investigations as to which Cabot or Sellers have received
written notice, fines, penalties, liabilities or disabilities pending
or threatened, in writing, as a result of any condition relating to the
Business or any act or omission of Sellers with respect to the Business
or the Assets which failed to comply with any provision or
environmental cleanup standard under the Environmental Laws.
Environmental Laws means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended; the Resource
Conservation and Recovery Act; the Clean Air Act, the Water Pollution
Control Act (Clean Water Act); the Toxic Substances Control Act; the
Emergency Planning and Community Right to Know Act; the Solid Waste
Disposal Act and the relevant state counterparts
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of these laws and any regulations which are promulgated pursuant to
such laws.
(ii) No claim, lawsuit, agency, proceeding, or other
legal or administrative challenge has been brought concerning the
ownership or operation of the Business or the Assets or the existence
of any hazardous condition relating thereto during any Sellers' period
of ownership of the Business. No governmental entity has served upon
Seller any notice claiming any violation of any statute, ordinance or
regulation relating to the environment or noting the need for any
repair, construction, alteration or installation with respect to the
Business or Assets, or requiring any change in the means or methods of
conducting the operations of the Business or Assets.
(iii) The operations of the Business are and have
been in material compliance with all Environmental Laws and with all
permits issued pursuant to any Environmental Law and there is no
condition that would reasonably be expected to interfere with such
compliance in the future.
(iv) There has been no spill, discharge, release, or
leak of any Hazardous Substance on any real property included in the
Assets or used in connection with the Business during any Seller's
period of ownership of the Business or at any other time. During the
Sellers' period of ownership of the Business, Hazardous Substances have
not been disposed of in any manner or to any location that would
reasonably be expected to result in liability under any Environmental
Law other than the normal risk of liability associated with disposing
of Hazardous Substances at licensed sites.
Other than with respect to Routine Business Activities, no
Hazardous Substances have been used, stored, produced or disposed of in
connection with the Business. "Routine Business Activities" means the normal use
of heating oil or natural gas, lubrication, cleaning and other substances used
in manufacturing, building maintenance, office supplies in normal quantities,
consumer products and gardening supplies commonly used for normal landscaping.
"Hazardous Substance" shall mean petroleum, asbestos and any
substance which as of the date of this Agreement shall be listed as "hazardous"
or "toxic" in the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. Sections 9601 et seq., the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. Sections 6901 et seq., any
applicable state law, or in the regulations promulgated implementing the
foregoing.
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(r) Entire Business. On the Closing Date, Sellers will
transfer to Buyer all of the assets used by Sellers in and necessary for the
conduct by Buyer of the Business, except for (i) the assets excluded from
purchase hereunder pursuant to Section 1.2 and (ii) the services provided by
Cabot to Sellers described in subsection 1.2(i) which will be discontinued
pursuant thereto. There are no assets used in or otherwise comprising part of
the Business (other than as described in clauses (i) and (ii) of the preceding
sentence) that are owned by Affiliates of Cabot other than the Sellers. Since
September 30, 1994, no Seller has paid or declared any dividend or made any
distribution in respect of its stock other than cash dividends.
(s) Insolvency. After the Closing and upon any transfer of the
Purchase Price following the Closing, none of the Sellers will (i) be insolvent;
(ii) have unreasonably small capital with which to engage in its businesses; or
have incurred or plan to incur debts beyond its ability to pay as they become
absolute and matured.
(t) Tax Matters. Except as set forth on Schedule 3.1(t), (i)
there are no liens with respect to Taxes (except for Permitted Encumbrances)
upon any of the Assets; (ii) all Tax Returns required to have been filed (or
required to be filed before the Closing) by the Foreign Sales Companies have
been or will be timely filed; (iii) no extension of time within which to file
any such Tax Return has been requested, which Tax Return has not since been, or
will not be, timely filed; (iv) all Taxes required to be shown on such Tax
Returns or otherwise due or payable by any Foreign Sales Company have been or
will be timely paid; (v) all such Tax Returns are true, correct and complete in
all material respects; (vi) there are no pending or threatened actions or
proceedings for the assessment or collection of any Taxes against any Foreign
Sales Company that will have a Material Adverse Effect on the Foreign Sales
Companies either individually or in the aggregate; (vii) as of the Closing Date
none of the Foreign Sales Companies shall owe any amount pursuant to any Tax
sharing agreement or arrangement with Cabot or its Affiliates, nor will any
Foreign Sales Company have any liability after the Closing Date in respect of
any Tax sharing agreement or arrangement with Cabot or its Affiliates; and
(viii) the Sellers have paid all state, local and foreign sales, use, value
added, ad valorem or similar taxes or have adequate reserves in their respective
financial statements, or books and records, for the amount of any such sales,
use, value added, ad valorem or similar taxes that have not been paid, whether
or not such taxes are shown as being due on any return.
(B) For purposes of this Agreement, "Tax" or "Taxes" shall
mean any and all (i) income, franchise, profits, gross receipts, minimum,
alternative minimum, estimated, windfall profits, and gains taxes, or other
similar assessments of any kind, and (ii) interest, penalties and additions to
tax imposed with respect thereto; and "Returns" shall mean any and all returns,
reports, and information statements with
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respect to Taxes required to be filed with the Internal Revenue Service ("IRS")
or any other governmental entity or Tax authority or agency, whether domestic or
foreign, including, without limitation, consolidated, combined and unitary tax
returns. For the purposes of this Section 3.1(t), references to any Foreign
Sales Company shall include any former subsidiaries of any Foreign Sales Company
for the periods during which any such corporations were owned, directly or
indirectly, by such Foreign Sales Company.
(u) Capital Stock; Charter Documents; Subsidiaries. Schedule
3.1(u) sets forth all stock or other interest owned in any entity (other than a
Seller or Cabot International Capital Corporation) by any Seller as part of the
Business, together with a description of the business engaged in by each such
entity. Cabot owns 100% of the issued and outstanding capital stock of CSC. CSC
owns 100% of the issued and outstanding capital stock of CSC Canada.
(v) Prohibited Payments. To the best knowledge of Sellers and
Cabot, neither any Seller nor any of their respective officers, directors,
employees, agents or Affiliates has offered, paid, or agreed to pay to any
person or entity, including any government official, or solicited, received or
agreed to receive from any such person or entity, directly or indirectly, any
money or anything of value for the purpose of or with the intent of obtaining or
maintaining the Business.
(w) Affiliate Transactions. Schedule 3.1(w) lists all
transactions entered into and continuing in effect by any Seller with Cabot, any
Seller, any Affiliate of Cabot, or any directors, officers or employees of Cabot
or Sellers (i) relating to the Business or affecting any of the Assets and
involving aggregate consideration in the case of any such transaction or any
series of similar or related transactions in excess of $100,000 to be paid by or
to the Buyer after the Closing or (ii) the absence of which would be reasonably
expected to have a Material Adverse Effect.
3.2. Representations and Warranties of Buyer. Buyer represents
and warrants to Sellers and Cabot as follows:
(a) Due Organization; Good Standing and Power. Each of New
Cabot Safety and Holdings is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Each of New Cabot
Safety and Holdings has all requisite corporate and other power and authority to
enter into this Agreement and any other agreement contemplated hereby and to
perform its obligations hereunder and thereunder. Each of New Cabot Safety and
Holdings is duly authorized, qualified or licensed to do business as a foreign
corporation, and is in good standing, in each of the jurisdictions in which its
right, title or interest in or to any asset, or the conduct of its business,
requires such authorization, qualification
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or licensing, except where the failure to so qualify or to be in good standing
would not have an adverse effect on the ability of Buyer to perform its
obligations hereunder or under any other agreement contemplated hereby.
(b) Authorization and Validity. The execution, delivery and
performance by Buyer of this Agreement and any other agreements contemplated
hereby and the consummation by Buyer of the transactions contemplated hereby and
thereby have been duly authorized by its Board of Directors. No other corporate
or stockholder action is necessary for the authorization, execution, delivery
and performance by Buyer of this Agreement and any other agreement contemplated
hereby and the consummation by Buyer of the transactions contemplated hereby or
thereby. This Agreement has been duly executed and delivered by Buyer and
constitutes a valid and legally binding obligation of Buyer, enforceable against
Buyer in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law) or by an implied covenant of good faith and fair
dealing.
(c) Governmental Approvals; No Conflict. The execution,
delivery and performance of this Agreement and any other agreements contemplated
hereby by Buyer and the consummation by it of the transactions contemplated
hereby and thereby (i) will not violate (with or without the giving of notice or
the lapse of time or both), or require any consent, approval, filing or notice
under any provision of any law, rule or regulation, court or administrative
order, writ, judgment or decree applicable to Buyer or its assets or properties,
except for the requirements of the Antitrust Improvements Act and except for
such violations the occurrence of which, and such consents, approvals, filings
or notices the failure of which to obtain or make, would not, either
individually or in the aggregate, reasonably be expected to have an adverse
effect on Buyer's ability to perform its obligations hereunder, and (ii) will
not (with or without the giving of notice or the lapse of time or both) violate
or conflict with, or result in the breach, suspension or termination of any
provision of, or constitute a default under, or result in the acceleration of
the performance of the obligations of Buyer, under, or in the creation of any
Encumbrances pursuant to the charter or by-laws of Buyer or any indenture,
mortgage, deed of trust, lease, agreement, contract or instrument to which Buyer
is a party or by which Buyer or any of its assets or properties is bound, except
for such violations, conflicts, breaches, suspensions, terminations, defaults,
accelerations or Encumbrances which would not reasonably be expected to have an
adverse effect on Buyer's ability to perform its obligations hereunder.
(d) Brokers' Fees. With the exception of fees and expenses
payable to Vestar Capital Partners, neither Buyer nor any of its officers,
directors or
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employees, on behalf of Buyer, has employed any broker or finder or incurred any
other liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.
(e) Capitalization. All of the shares of capital stock to be
issued pursuant to Section 2.2, the Subscription Agreement and the agreements
entered into with members of management pursuant to Section 5.2(g), upon
issuance, will have been duly authorized and will be validly issued, fully paid
and non-assessable, free from all preemptive or similar rights of any
stockholder. Schedule 3.2(e), as updated on the Closing Date, sets forth a true
and complete list of the authorized, issued and outstanding capital stock of
Holdings, and all options in respect of capital stock of Holdings granted on or
prior to the Closing Date.
3.3. Survival of Representations. The representations,
warranties, covenants and agreements contained in this Agreement, and in any
agreements, certificates or other instruments delivered pursuant to this
Agreement, shall survive the Closing and shall remain in full force and effect,
regardless of any investigations made by or on behalf of any party, but subject
to all express limitations and other provisions contained in this Agreement.
4. Agreements
4.1. Access to Information. Sellers agree to (a) give or cause
to be given to Buyer and its employees, advisors and other representatives and
potential financing sources such access, during normal business hours, to the
offices, employees, properties, books and records of Sellers and the Foreign
Sales Companies relating to the Business as Buyer may from time to time
reasonably request and (b) furnish or cause to be furnished to Buyer such
financial and operating data and other information with respect to the Business
and its properties (including the Assets) of Sellers, as Buyer may from time to
time reasonably request. All such information and access shall be subject to the
confidentiality provisions of the letter agreement previously executed in
connection with the transactions contemplated hereby (the "Confidentiality
Letter"), between Vestar Equity Partners, L.P. and Cabot, provided, however,
that Cabot and CSC hereby agree that (i) the terms and provisions of such letter
agreement shall be of no further effect upon the Closing to the extent relating
to information regarding the Business and (ii) notwithstanding the provisions
thereof, Buyer may, in connection with the financing described in subsection
5.2(e), disclose information relating to the Business to prospective lenders and
purchasers of debt instruments, and arrangers, underwriters and placement agents
in respect thereof, and their respective advisors and representatives, and as
otherwise necessary in connection therewith provided that all persons to whom
such information is disclosed shall first agree to be subject to confidentiality
provisions
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substantially similar to the confidentiality provisions of the Confidentiality
Letter (subject to the proviso to the immediately preceding sentence). Buyer and
its employees, advisors and other representatives and potential sources of
financing shall have access, in consultation with Sellers, to such
representatives, officers and employees of Sellers and the Foreign Sales
Companies as Buyer may reasonably request. After Closing, Buyer agrees to
provide Sellers with reasonable access to information contained in the files and
records of Sellers and the Foreign Sales Companies transferred to Buyer at
Closing to the extent necessary for Sellers to prepare tax returns and other
government mandated filings and respond to audits thereof No such information,
files or records shall be destroyed by Buyer, without reasonable notice and
first offering all such information, files and records to Cabot and Sellers.
4.2. Conduct of the Business. Sellers and Cabot jointly and
severally agree that, except as required by this Agreement or otherwise
consented to in writing by Buyer, during the period commencing on the date
hereof and ending on the Closing Date, each of the Sellers shall and shall cause
each Foreign Sales Company to:
(a) operate the Business only in the ordinary course
consistent with past practice or in accordance with the Business Plan and use
its best efforts to preserve its present business organization intact, keep
available the services of its present employees and preserve its present
business relationships, in each case relating to the Business;
(b) maintain its books, accounts and records relating to the
Business in the usual, regular and ordinary manner consistent with past practice
or in accordance with the Business Plan and comply in all material respects with
all laws applicable to or affecting the Business;
(c) maintain in full force and effect its current insurance
with respect to its properties, employees and representatives;
(d) not enter into any contract, agreement or other
commitment, without prior notice to Buyer, that is not terminable by the parties
upon 30 days' notice or less or which involves aggregate consideration in excess
of $100,000.00 other than in the ordinary course of business or in accordance
with the Business Plan;
(e) not (i) dispose of or abandon any of the Assets, other
than in the ordinary course of business or in accordance with the Business Plan,
(ii) enter into, change, waive or otherwise modify any material contract or
agreement included in the Assumed Liabilities by which the Business or any Asset
is or will be bound,
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other than in the ordinary course of business on a consistent basis or in
accordance with the Business Plan, (iii) enter into or engage in any transaction
included in the Assumed Liabilities with any Affiliate by which the Business or
any Asset will be bound other than in the ordinary course of business or in
accordance with the Business Plan and on an arm's-length basis, or (iv) permit
any of its Affiliates to do, or agree, in writing or otherwise, to do, any of
the foregoing;
(f) not (i) permit or allow any of its properties and assets
included in the Business (other than excluded Assets) to become subject to any
Encumbrances other than Permitted Encumbrances, (ii) waive any material claims
or rights relating to the Business other than in the ordinary course of
business, (iii) except as set forth in Schedule 3.1(m)(viii) or (ix), grant any
increase in the compensation or benefits of employees of the Business (including
any such increase pursuant to any deferred compensation, severance, bonus,
pension, profit-sharing or other plan or commitment) other than in the ordinary
course of business or in accordance with the Business Plan, (iv) except as set
forth in Schedule 3.1(m)(viii) or (ix), establish, enter into or adopt any
employment agreement or collective bargaining agreement or other employee
benefits arrangements with respect to any of its employees of the Business or
modify or terminate any Plans, (v) enter into any agreements giving rise to
trade and barter obligations by which the Business of any of the Assets will be
bound or affected other than in the ordinary course of business or in accordance
with the Business Plan, or (vi) permit any of its Affiliates to do, or agree, in
writing or otherwise, to do, any of the foregoing;
(g) not acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial portion of the stock or
assets of, or by any other manner, any business or any corporation, partnership,
joint venture, association or other business organization or division thereof,
except to the extent not affecting the Business, the Assets or the Assumed
Liabilities;
(h) not incur any indebtedness for borrowed money, or
guarantee any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of any
Sellers or any Foreign Sales Company, guarantee any debt securities of another
person, enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, or make any loans, advances or capital
contributions to, or investments in, any other person, in each case if the
Business or any Asset would be bound or affected thereby after the Closing;
(i) except as contemplated by the Business Plan, not acquire
or agree to acquire any assets that are material, individually or in the
aggregate, to the Business or make or agree to make any capital expenditures
with respect to the
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Business except as may be necessary to maintain and protect the Business or the
Assets and which under GAAP are treated as capital expenditures other than in
the ordinary course of business;
(j) not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), of or affecting the Business, except for the payment, discharge or
satisfaction, of liabilities or obligations in the ordinary course of business
consistent with past practice or in accordance with the Business Plan or in
accordance with their terms as in effect on the date hereof, or transfer any
rights of material value or modify or change in any material respect any
existing material license, lease, contract or other document, in each case of or
affecting the Business, other than in the ordinary course of business consistent
with past practice or in accordance with the Business Plan;
(k) not change any material accounting principle relating to
the Business;
(l) not settle or compromise any litigation which is included
in the Assumed Liabilities;
(m) not terminate, without cause, any of John D. Curtin, Jr.,
Albert F. Young, Jr., or Bryan J. Carey as officers of CSC in the offices
currently held by them;
(n) not declare any dividend or make any distribution with
respect to its stock, other than cash dividends; and
(o) not authorize any of, or commit or agree to take any of,
the foregoing actions.
4.3. Further Actions. (a) Subject to the terms and conditions
hereof, Sellers and Buyer agree to use their reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement, including using its reasonable best efforts
(without payment of money, commencement of litigation or the assumption of any
material obligation): (i) to obtain at the earliest practicable date prior to
the Closing Date (pursuant to instruments reasonably satisfactory to Buyer in
form and substance) all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts,
leases, licenses or agreements with Sellers or its Affiliates as are necessary
for the consummation of the transactions contemplated hereby; (ii) to effect all
necessary registrations and filings; (iii) to furnish to each other such
information and assistance as reasonably may be requested
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in connection with the foregoing; and (iv) to assist Buyer in obtaining prior to
the Closing Date all governmental licenses, permits, consents, approvals,
authorizations, qualifications and orders as are necessary in order to enable
Buyer to conduct the business of Sellers in the ordinary course as of and from
the opening of business on the Closing Date. To the extent that any consent or
approval is not obtained with respect to any contract, lease, license or
agreement as contemplated above, this Agreement shall not constitute an
assignment or an attempted assignment thereof. In each such case, Sellers agree
to cooperate with Buyer in any reasonable arrangement designed to provide for
Buyer the benefits under any such contract, lease, license or agreement,
including enforcement at the cost and for the account of Buyer of any and all
rights of Sellers against the other party or otherwise, and, in the case of any
such lease, if Sellers and Buyer are unable to obtain the landlord's consent to
assignment, Buyer shall enter into a sublease with the applicable Seller (unless
landlord's consent to such sublease is required and cannot be obtained) which
shall contain the terms of the applicable lease.
(b) Cabot and Sellers acknowledge that the Buyer currently
intends that the financing contemplated by Section 5.2(e) will consist of
$100,000,000 aggregate principal amount of High Yield Securities and $50,000,000
aggregate principal amount of funded senior bank debt financing. Sellers will
provide customary assistance in connection with Buyer's efforts to raise such
financing, including without limitation making senior management available for
meetings with prospective lenders and investors.
(c) Buyer agrees that from and after the Closing, it will
cooperate with Cabot and Sellers and provide them such reasonable assistance as
they may reasonably request, including, without limitation access to employees,
books and records, in connection with the defense or prosecution of any suit,
claim, action or proceeding relating to the Excluded Liabilities or the Excluded
Assets. Cabot and Sellers agree that from and after the Closing, each of them
will cooperate with Buyer and provide Buyer such reasonable assistance as it may
reasonably request, including, without limitation access to employees, books and
records, in connection with the defense or prosecution of any suit, claim,
action or proceeding relating to the Assumed Liabilities or the Assets.
4.4. Antitrust Improvements Act. Sellers shall timely and
promptly make all filings which may be required by it in connection with the
consummation of the transactions contemplated hereby under the Antitrust
Improvements Act. Sellers shall furnish to Buyer such information and assistance
as Buyer may reasonably request in connection with Buyer's preparation of any
necessary filings or submissions by it to any governmental agency, including,
without limitation, any filings necessary under the provisions of the Antitrust
Improvements Act. Sellers shall provide Buyer with copies of all correspondence,
filings or communications (or
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memoranda setting forth the substance thereof) between Sellers or their
representatives, on the one hand, and the Federal Trade Commission ("FTC"), the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and their staffs, on the other hand, with respect to this Agreement
and the transactions contemplated hereby. Buyer shall timely and promptly make
all filings which may be required by it in connection with the consummation of
the transactions contemplated hereby under the Antitrust Improvements Act. Buyer
shall furnish to Sellers such information and assistance as Sellers may
reasonably request in connection with Sellers' preparation of any necessary
filings or submissions by it to any governmental agency, including, without
limitation, any filings necessary under the provisions of the Antitrust
Improvements Act. Buyer shall provide Sellers with copies of all correspondence,
filings or communications (or memoranda setting forth the substance thereof)
between Buyer or its representatives, on the one hand, and the FTC, the
Antitrust Division and their staffs, on the other hand, with respect to this
Agreement and the transactions contemplated hereby.
4.5. Notification. Sellers shall notify Buyer and keep it
advised of (i) any litigation or administrative proceeding pending or, to the
best knowledge of Sellers and Cabot, threatened against any Seller or any
Foreign Sales Company which would, if adversely determined, reasonably be
expected to have a Material Adverse Effect; (ii) any material damage or
destruction of any of the Assets; and (iii) any material adverse change in the
condition (financial or other), results of operations, assets, business or
prospects of the Business.
4.6. No Inconsistent Action. Subject to Sections 7.1 and 7.2,
the parties hereto shall not take any action inconsistent with their obligations
under this Agreement or which could materially hinder or delay the consummation
of the transactions contemplated by this Agreement.
4.7. No Solicitation. Sellers and Cabot shall not solicit,
initiate or knowingly encourage or take any action knowingly to facilitate the
submission of inquiries, proposals or offers from any person relating to any
acquisition or purchase of the Assets or the Business or the stock of CSC or the
Foreign Sales Companies (other than the provision of services in the ordinary
course of business), whether such transaction takes the form of a merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Business or participate in any discussions
or negotiations regarding, or furnish any information with respect to, any such
transaction, other than the transactions contemplated by this Agreement.
4.8. Corporate Name. Promptly following the Closing, CSC, CGB
and CSC Canada shall amend their respective certificates of incorporation to
change the name of such Seller set forth therein to any name not including the
word Safety
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or another name similar thereto. On the Closing Date, New Cabot Safety will
change its name to Cabot Safety Corporation. On the Closing Date, Cabot, the
Sellers and the Buyer shall enter into an agreement substantially in the form of
Exhibit B hereto with respect to the use of certain Intellectual Property.
4.9. Tax Matters. CSC and Cabot covenant and agree that: (i)
CSC shall not liquidate, and Cabot shall not permit or cause CSC to liquidate,
at any time within the three-year period following the Closing Date (the
"Restricted Period"); (ii) CSC shall not sell, distribute or otherwise transfer
any of the Holdings Stock that it received pursuant to this Agreement to Cabot
or any affiliate of Cabot during the Restricted Period or sell, distribute,
transfer or otherwise dispose of the Excluded Assets that it is retaining; (iii)
CSC shall not merge, and Cabot shall not permit or cause CSC to merge, with or
into Cabot, an affiliate of Cabot or any other entity during the Restricted
Period; (iv) CSC and Cabot will take all action necessary to properly make
and/or file a timely election under Section 197(f)(9)(b)(ii) of the Code to have
CSC recognize the full amount of the gain it realized on its transfer of the
Exchanged Assets and the Assets to Holdings or New Cabot Safety, as the case may
be, and to pay the amount of federal income tax that is required to be paid on
such gain under such Code Section. CSC has no current plan or intention to
liquidate or to distribute or dispose of any of the Holdings Stock received
pursuant to this Agreement, and CSC has no current plan or intention to sell,
distribute, transfer or otherwise dispose of the Excluded Assets that it is
retaining and Cabot has no current plan or intention to cause or permit CSC to
sell, distribute, transfer or otherwise dispose of such Excluded Assets.
Notwithstanding the foregoing, the provisions of this Section 4.9 shall not
apply to any transfer or distribution of cash by CSC, any transfer, sale or
distribution of the Chickasha Property or any sale, distribution or transfer of
the Excluded Assets by any Seller other than CSC, provided, however, that in the
event the carbon black business of CSC Canada is sold, distributed or
transferred by CSC Canada, the proceeds received in such transaction shall not
be directly or indirectly transferred by CSC Canada or CSC (other than pursuant
to a distribution from CSC Canada to CSC), provided, that the foregoing shall
not prevent a loan of such proceeds by CSC Canada or CSC.
4.10. Right to Update Schedules. Cabot and Sellers shall have
the right to revise and update the Schedules referred to in Article 3 of this
Agreement (other than Schedule 2.2(e), Schedule 3.1(d)(ii), or Schedule
3.1(m)(viii) (unless, in the case of Schedule 3.1(m)(viii), to reflect
previously unknown facts or circumstances in existence on the date hereof)) as
of the Closing Date in order to disclose in writing to Buyer any facts or
circumstances learned by them subsequent to the execution of this Agreement (and
which facts or circumstances were not otherwise known on the date hereof to any
of the individuals named in Schedule 3.1A) that make any representation or
warranty contained herein untrue or misleading. If any change made to any such
Schedule or any such disclosure is in
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the reasonable judgment of Buyer material, the Buyer may, as its sole and
exclusive remedy (subject to Section 7.2), elect not to consummate the
transactions contemplated by this Agreement.
4.11. Ancillary Agreements. On the Closing Date, Cabot, the
Sellers and the Buyer shall enter into each of (i) the Trademark Coexistence
Agreement, (ii) the Subscription Agreement, (iii) the Stockholders' Agreement
and (iv) the Management Advisory Agreement, substantially in the form of Exhibit
F.
4.12. Respirator Liability Retention Arrangements. (a) On the
Closing Date, the Buyer may by written notice and payment of the amounts payable
under this Section 4.12 for such period to Cabot cause the Respirator Liability
Retention arrangements described in this Section 4.12 to be in effect for the
initial three-month period following the Closing Date. If such notice is given,
Buyer shall pay to Cabot $100,000 for each three-month period during which the
Respirator Liability Retention is in effect, payable in advance in immediately
available funds. Effective as of the end of each consecutive three-month period
following the Closing Date, the period of Respirator Liability Retention shall
be extended for an additional three-month period by the Buyer's giving notice of
such extension by written notice and payment of $100,000 to Cabot no later than
ten days after the beginning of such three-month period. Buyer may at any time
terminate the Respirator Liability Retention arrangements, whereupon Cabot shall
promptly refund to Buyer the amount paid in respect thereof for the period from
the date of such termination to the end the then current three-month period,
based pro rata on the number of days elapsed. In the event such notice and
payment are not timely given and paid, the Respirator Liability Retention
arrangements shall be deemed terminated as of the end of the last three-month
period for which payment was made, and shall not thereafter be extended unless
Buyer and Cabot otherwise agree.
(b) During the period in which the Respirator Liability
Retention arrangements remain in effect, Sellers shall remain responsible for,
and shall indemnify Buyer in accordance with Section 8.1(i) in respect of, any
and all liabilities described in Section 1.6(j) provided, however, that Sellers'
indemnification responsibilities hereunder shall not apply to the portion, if
any, of any liability for a Respirator Medical Condition attributable to the use
of respirators or similar devices sold on or after the Closing Date. Following
the termination of such arrangements, Buyer shall as of the termination date
assume, be responsible for, and indemnify Sellers in accordance with Section
8.2(i) in respect of, any and all such liabilities not theretofore satisfied or
discharged, provided, that in no event shall such termination affect Sellers'
retention of the liabilities described in Section 1.6(b). Cabot agrees, during
any period that the Respirator Liability Retention arrangements are in effect,
to afford Buyer or its designees reasonable access, upon reasonable prior
notice, to
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all records pertaining to litigation or other proceedings or claims involving
Respirator Medical Conditions.
(c) It is understood and agreed that, without limiting any
other provision of this Agreement (including, without limitation, the foregoing
subsections 4.12(a) and (b)), Cabot will not provide to Buyer after the Closing
Date any of the insurance or self insurance arrangements currently provided by
Cabot or any Seller for the benefit of the Business.
5. Conditions Precedent
5.1. Conditions Precedent to Obligations of Parties. The
respective obligations of the parties hereto to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing Date of the following conditions:
(a) No Injunction, etc. No preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or governmental or
regulatory body nor any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority which restrains, enjoins or otherwise
prohibits any of the transactions contemplated hereby shall be in effect.
(b) Antitrust Matters. Any filings required to be made by
Buyer and Sellers under the Antitrust Improvements Act shall have been made, and
the specified waiting periods thereunder (and any extensions thereof) shall have
expired without the receipt of any objections from the appropriate governmental
agency.
(c) Stockholders', Subscription. The Stockholders' Agreement,
in substantially the form of Exhibit C hereto (the "Stockholders' Agreement"),
and the Subscription Agreement, in substantially the form of Exhibit A hereto
(the "Subscription Agreement") pursuant to which Vestar Equity Partners, L.P.
(and Leonard Lieberman, the Seelig Family Lifetime Trust and any other designees
approved by Cabot) shall have subscribed for 42,500 shares of Common Stock at an
aggregate price of $8,500,000 and Preferred Stock with an initial stated value
and purchase price equal to the Required Preferred Amount., shall have been
executed and delivered by the parties thereto, and the transactions required to
be consummated on the Closing Date pursuant thereto, including the equity
investments in Buyer as set forth therein, shall have been completed.
(e) Trademark Coexistence Agreement. The Trademark Coexistence
Agreement, in substantially the form of Exhibit B hereto (the "Trademark
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Coexistence Agreement"), shall have been executed and delivered by the parties
thereto.
(f) Management Arrangements. Each member of management
designated by Buyer and CSC shall have entered into option and stock
subscription and/or restricted stock grant arrangements satisfactory to the
Buyer and CSC, and Holdings shall have received cash consideration for stock and
equity incentives issued to them in an amount equal not less than $3 million
less the amount deducted in determining the Cash Amount pursuant to clause (ii)
of the last sentence of Section 2.2(b).
5.2. Conditions Precedent to Obligations of Buyer. The
obligations of Buyer to consummate the transactions contemplated by this
Agreement are subject to the satisfaction (or waiver by Buyer) at or prior to
the Closing Date of each of the following conditions:
(a) Accuracy of Representations and Warranties. All
representations and warranties of Sellers and Cabot contained herein or in any
certificate, instrument or other document delivered to Buyer pursuant hereto
shall be true and correct in all material respects on and as of the Closing
Date, with the same force and effect as though such representations and
warranties had been made on and as of the Closing Date, except to the extent
that any such representation and warranty is made as of a specified date, in
which case such representation and warranty shall have been true and correct as
of such date, and except to the extent that such representation or warranty has
been revised and accepted pursuant to Section 4.10.
(b) Performance of Obligations. Sellers and Cabot shall have
performed all obligations and agreements, and complied with all covenants and
conditions, contained in this Agreement to be performed or complied with by them
prior to the Closing Date.
(c) Officers' Certificate. Buyer shall have received a
certificate, dated the Closing Date, of each of the President of CSC and the
Treasurer or any Vice President of Cabot to the effect that the conditions
specified in subsections (a) and (b) above have been fulfilled.
(d) Opinion. Buyer shall have received an opinion dated the
Closing Date from counsel to Sellers, in form reasonably satisfactory to it.
(e) Funding. Buyer shall have received the proceeds of (i) at
least $135 million of debt financing and (ii) an additional committed working
capital facility for the Buyer of at least $15 million shall be in effect, in
each case on terms and conditions satisfactory to Buyer.
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(f) Consents, etc. All licenses, permits, consents, approvals,
authorizations and orders of governmental authorities and other third parties
necessary for the consummation of the transactions contemplated hereby, and the
continuation of the business transferred pursuant hereto as currently conducted
following such consummation, shall have been obtained.
(g) Actions and Proceedings. All corporate actions,
proceedings, instruments and documents of Sellers required to carry out the
transactions contemplated by this Agreement or incidental thereto and all other
related legal matters shall be reasonably satisfactory to counsel for Buyer, and
such counsel shall have been furnished with such certified copies of such
corporate actions and proceedings and such other instruments and documents as it
shall have reasonably requested.
5.3. Conditions Precedent to the Obligations of Sellers. The
obligations of Sellers and Cabot to consummate the transactions contemplated by
this Agreement are subject to the satisfaction (or waiver by Sellers and Cabot)
at or prior to the Closing Date of each of the following conditions:
(a) Accuracy of Representations and Warranties. All
representations and warranties of Buyer contained herein or in any certificate,
instrument or other document delivered to Sellers or Cabot pursuant hereto shall
be true and correct in all material respects on and as of the Closing Date, with
the same force and effect as though such representations and warranties had been
made on and as of the Closing Date, except to the extent that any such
representation and warranty is made as of a specified date, in which case such
representation and warranty shall have been true and correct as of such date.
(b) Performance of Obligations. Buyer shall have performed all
obligations and agreements, and complied with all covenants and conditions,
contained in this Agreement to be performed or complied with by it prior to the
Closing Date (including those contained in Article 6).
(c) Officer's Certificate. Sellers shall have received a
certificate, dated the Closing Date, of the President of Buyer to the effect
that the conditions specified in paragraphs (a) and (b) above have been
fulfilled.
(d) Actions and Proceedings. All corporate actions,
proceedings, instruments and documents of Buyer required to carry out the
transactions contemplated by this Agreement or incidental thereto and all other
related legal matters shall be reasonably satisfactory to counsel for Sellers,
and such counsel shall have been furnished with such certified copies of such
corporate actions and
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proceedings and such other instruments and documents as it shall have reasonably
requested.
(e) Opinion. Cabot and Sellers shall have received an opinion
dated the Closing Date from counsel to Buyer, in form reasonably satisfactory to
it.
6. Employees and Employee Benefits
6.1. Offer of Employment. Buyer shall offer employment,
commencing on the Closing Date on the same terms and conditions presently
offered by Sellers to all salaried and hourly employees employed by Sellers with
respect to the Business other than members of management, with respect to whom
Buyer shall offer Employment on such terms as Buyer and such individuals may
agree, provided that the foregoing shall not be deemed to restrict the Buyer's
right, after the Closing Date, to terminate the employment, or change the terms
or conditions thereof, of any Transferred Employee (as defined below). Those
employees to whom offers of employment are made and who commence employment as
of the Closing Date shall be collectively referred to as the "Transferred
Employees". However, Buyer represents that while it may change the elements of
compensation and benefits for Transferred Employees, it is Buyer's intention,
absent a change in circumstances, that the total compensation and benefit
package for Transferred Employees will be at least comparable to their present
total compensation and benefit package. For purposes of this section 6.1, any
person on short-term disability, vacation or leave of absence with a definite
date of return shall be considered offered employment as set forth in this
section; but any person on long-term disability, layoff or on a leave of absence
with no prior agreement or understanding to return to employment with Sellers at
the end of such disability, layoff or leave shall not be considered offered
employment. Sellers shall remain liable for any amounts to which any employee
(including a Transferred Employee) of the Sellers becomes entitled under any
benefit or severance policy, plan, agreement, arrangement or program which
exists or arises, or may be deemed to exist or arise, under any applicable law
or otherwise, as a result of, or in connection with, the transactions
contemplated by this Agreement.
6.2. Existing Benefit Plans. (a) Cash Balance and 401(k) Plan.
Buyer shall, on the Closing Date, assume sponsorship of the Cabot Safety
Corporation Employees' Retirement Account Plan and the Cabot Safety Corporation
Employees' 401(k) Savings Plan and the Specialty Composites Corporation Non-
Union Employees' Retirement Plan. Such plans shall be amended to reflect the
provisions agreed to in this paragraph (a).
(b) SERP. On the Closing Date, Buyer shall assume sponsorship
of the Cabot Safety Corporation Supplemental Executive Retirement Plan which
plan shall be amended to reflect such assumption.
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(c) Welfare Plans. On the Closing Date, Buyer shall assume
sponsorship of the "employee welfare benefit plans" (as defined in section 3(1)
of ERISA) sponsored by CSC pursuant to which any Transferred Employees may
receive health, dental, life insurance, accidental death and dismemberment and
disability benefits and CSC shall, at the election of Buyer and with the consent
of any insurer if required, assign to Buyer any contract of insurance pursuant
to which such benefits are provided. For at least two years after the Closing
Date, Buyer shall provide employee benefits for the benefit of the Transferred
Employees on terms no less favorable in the aggregate than those currently
provided under such employee welfare benefit plans and the retirement plans
referred to in paragraph (a) above.
(d) Information to be Supplied. With respect to plans the
sponsorship of which is assumed hereunder, Sellers shall promptly supply Buyer
with (i) all records concerning participation, vesting, accrual of benefits,
payment of benefits and election forms under the applicable plans and (ii) any
other information reasonably requested by Buyer that is necessary or appropriate
for the administration of the plans.
(e) Indemnity. Sellers agree to defend, indemnify and hold
harmless Buyer and any of its affiliates from and against any cost, liability
and expense actually incurred by any of them as a result of any claim made by
any employee of the Sellers for severance pay arising as a result of the
transactions contemplated by this Agreement (assuming compliance by Buyer with
Section 6.1).
(f) No Rights Conferred on Employees. Nothing herein expressed
or implied shall confer upon any Transferred Employee any rights or remedies,
including, without limitation, any right to employment, or continued employment
for any specified period, of any nature or kind whatsoever under or by reason of
this Agreement.
7. Termination
7.1. General. This Agreement may be terminated and the
transactions contemplated herein abandoned (a) by mutual consent of Buyer and
Sellers, (b) by Buyer, if there has been a material breach of Sellers' or
Cabot's covenants and agreements hereunder or if the conditions contained in
Section 5.2 cannot be fulfilled on or before the Closing Date, as extended by
agreement of the parties, (c) by Sellers, if there has been a material breach of
Buyer's covenants and agreements hereunder or if the conditions contained in
Section 5.3 cannot be fulfilled on or before the Closing Date, as extended by
agreement of the parties, (d) by Buyer or CSC by notice to the other parties in
the event that the Closing Date shall not have
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occurred on or before July 31, 1995, unless such date is extended by mutual
agreement of the parties or (e) by Buyer pursuant to Section 4.10.
7.2. No Liabilities in Event of Termination. In the event of
any termination of this Agreement pursuant to Section 4.10 or Section 7.1, this
Agreement shall forthwith become null and void and of no further force or effect
and there shall be no liability on the part of Buyer, Sellers or Cabot, except
that Section 10.2 of this Agreement shall remain in full force and effect, and
except that termination shall not preclude any party from suing any other party
for actual common law fraud or wilful breach of this Agreement.
7.3. Return of Documents. In the event of the termination of
this Agreement pursuant to this Section 7, Buyer agrees, upon request of
Sellers, to return all documents of Sellers previously provided to Buyer.
8. Indemnification
8.1. Sellers and Cabot Indemnity. Sellers and Cabot jointly
and severally agree to indemnify and hold Buyer and its Affiliates harmless
against and in respect of (i) all obligations and liabilities of Sellers or any
of their Affiliates, whether accrued, absolute, fixed, contingent or otherwise,
not assumed by Buyer pursuant to the Assumption Agreement or under any other
agreement executed and delivered by the parties in furtherance of the
transactions described herein; (ii) any claim, cost, loss, liability or damage
incurred or sustained by Buyer or its Affiliates as a result of any
misrepresentation or breach of warranty by Sellers or Cabot (except as disclosed
prior to the Closing pursuant to Section 4.10 and other than breaches of the tax
related representations and warranties contained in subsection 3.1(t) which are
dealt with in Article 9) or a breach by Sellers or Cabot of any covenant or
other agreement contained herein or under any other agreement executed and
delivered by the parties in furtherance of the transactions described herein;
and (iii) all reasonable costs and expenses (including reasonable attorneys'
fees and disbursements) incurred by Buyer or its Affiliates in connection with
any action, suit, proceeding, demand, assessment or judgment incident to any of
the matters indemnified against in this Section 8.1. In addition, in the event
that the A-O Purchase Agreement (as defined below) has not satisfactorily been
assigned to Buyer, Sellers and Cabot jointly and severally agree to indemnify
and hold Buyer and its Affiliates harmless against and in respect of any claim,
cost, loss, liability or damage incurred or sustained by Buyer or its Affiliates
in connection with (i) environmental matters affecting the Business to the
extent covered by any indemnity or similar agreement under or pursuant to the
Purchase Agreement, dated January 30, 1990 (the "A-O Purchase Agreement"),
between American Optical Corporation and Cabot Acquisition Corp., as amended (an
"A-O Environmental Loss") and (ii) at any and all
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times that the Respirator Liability Retention is not in effect as set forth in
Section 4.12, liabilities covered by Section 1.6(j) involving respirators or
similar devices manufactured by American Optical Corporation and its
predecessors and not constituting Excluded Liabilities under 1.6(b), to the
extent covered by any indemnity or similar agreement under or pursuant to the
A-O Purchase Agreement (an "A-O Respirator Loss"); provided, however, that
Sellers and Cabot shall not be liable to Buyer and its Affiliates for any such
indemnification unless and until, and then only to the extent that, Sellers and
Cabot have actually recovered under such A-O Purchase Agreement amounts in
respect of such A-O Environmental Loss or A-O Respirator Loss, as the case may
be, that exceed the aggregate loss, costs and expenses theretofore incurred by
Sellers or Cabot (other than in respect of their obligations hereunder) in
respect of such A-O Environmental Loss or A-O Respirator Loss, or in enforcing
their rights to indemnification for an A-O Environmental Loss or A-O Respirator
Loss, as the case may be, under such A-O Purchase Agreement. Cabot and Sellers
shall use their commercially reasonable best efforts to obtain any such recovery
to which any or all of Cabot or any of the Sellers are entitled under such A-O
Purchase Agreement in respect of any A-O Environmental Loss or A-O Respirator
Loss.
8.2. Buyer Indemnity. Buyer and its subsidiaries jointly and
severally agree to indemnify and hold Sellers and Cabot and their respective
Affiliates harmless against and in respect of (i) all obligations and
liabilities whether accrued, absolute, fixed, contingent or otherwise, assumed
by Buyer and its subsidiaries pursuant to this Agreement, the Assumption
Agreement or under any other agreement executed and delivered by the parties in
furtherance of the transactions described herein; (ii) any claim, cost, loss,
liability or damage incurred or sustained by Sellers or Cabot or their
respective Affiliates as a result of any misrepresentation or breach of warranty
by Buyer or a breach by Buyer of any covenant or other agreement contained
herein or under any other agreement executed and delivered by the parties in
furtherance of the transactions described herein; (iii) any claim, cost, loss,
liability or damage incurred or sustained by Cabot, Sellers or any Affiliate of
Sellers as a result of the operation of the business and Assets by Buyer
following the opening of business on the Closing Date; and (iv) all reasonable
costs and expenses (including reasonable attorneys' fees and allocable costs of
in-house legal staff and disbursements) incurred by Sellers or their Affiliates
in connection with any action, suit, proceeding, demand, assessment or judgment
incident to any of the matters indemnified against in this Section 8.2.
8.3. Procedures for Indemnification. Promptly after receipt by
an indemnified party under this Section 8 of notice of any claim, the
commencement of any action, or the discovery of any facts or circumstances which
could reasonably result in, if not attended to, a claim or commencement of any
action, the indemnified party shall, if a claim in respect thereof is to be or
may be made against the
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indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim, the commencement of that action or state of facts or
circumstances; but a delay in giving such notice shall not relieve the
indemnifying party of its indemnification obligations unless it has been
prejudiced by such delay. If any such claim shall be brought against an
indemnified party, the indemnifying party shall have the sole right to defend,
settle or otherwise dispose of such claim, on such terms as the indemnifying
party, in its sole discretion, shall deem appropriate; provided, however, that
the indemnifying party shall obtain the written consent of the indemnified
party, which shall not be unreasonably withheld or delayed, prior to ceasing to
defend, settling or otherwise disposing of any such claim if as a result thereof
the indemnified party would become subject to injunctive or other equitable
relief or the business of the indemnified party would be adversely affected in
any manner. After notice from the indemnifying party to the indemnified party of
its election to assume the defense of such claim or action, the indemnifying
party shall not be liable to the indemnified party under this Section 8 for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof; provided, however, that the indemnified
party shall have the right at its sole cost and expense to employ counsel to
represent it if, in the indemnified party's reasonable judgment, it is advisable
for the indemnified party to be represented by separate counsel. The parties
each agree to render to the other parties such assistance as may reasonably be
requested in order to insure the proper and adequate defense of any such claim
or proceeding.
8.4. Additional Agreements. (a) The indemnities provided in this
Section 8 shall survive the Closing, except that: (i) Sellers and Cabot shall
not be liable for any indemnification claim hereunder with respect to a
misrepresentation or a breach of any warranty contained in (1) subsection 3.1(m)
or (q), unless notice of such claim shall have been delivered in accordance with
this Section 8 on or before the third anniversary of the Closing Date and (2)
any subsection of Section 3.1 (other than subsections 3.1(m), (q) and (t)),
unless notice of such claim shall have been delivered in accordance with this
Section 8 on or before the date that is 18 months after the Closing Date; and
(ii) Buyer shall not be liable for any indemnification claim hereunder with
respect to a misrepresentation or a breach of any warranty contained in Section
3.2, unless notice of such claim shall have been delivered in accordance with
this Section 8 on or before the date that is 18 months after the Closing Date.
(b) Sellers and Cabot shall not be liable pursuant to this
Section 8 for any losses or claims in respect of any breach of representation or
warranty hereunder until the aggregate amount of all such losses and claims
referred to in this Section exceeds $3,000,000, at which time such parties shall
be liable in respect of all such losses and claims, including such $3,000,000.
The aggregate indemnification obligations of Sellers and Cabot under Section 8
for any claim or loss in respect of
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any breach of representation or warranty hereunder shall not exceed the amount
equal to the net cash proceeds to Sellers of the transactions contemplated
hereby remaining after giving effect to the repayment of indebtedness of Sellers
in connection therewith concurrently with the consummation of such transactions.
Such limitation shall not apply to Sellers' and Cabot's indemnification
obligations in respect of Taxes, which obligations are governed solely by the
provisions set forth in Section 9 below.
(c) Each party hereto agrees that indemnification pursuant to
this Section 8 (and, with respect to Taxes, under Section 9) shall be the
exclusive remedy of such party against another party hereto for breach of
representations and warranties under this Agreement.
9. Indemnification for Taxes and Other Tax Matters
9.1. Indemnification for Taxes. From and after the Closing
Date, Sellers shall save, defend, indemnify and hold Buyer and each of the
Foreign Sales Companies harmless from and against (a) any and all Taxes imposed
on any member of any consolidated, combined or unitary group that includes the
Sellers or any Foreign Sales Company for any taxable period or (b) any and all
Taxes with respect to which any Foreign Sales Company or any entity as successor
thereto is liable, in each case only to the extent such Taxes exceed, in the
aggregate, the accruals therefor in the Financial Information or on the books of
the Foreign Sales Companies, in the aggregate, and are attributable to, accrue
during or are otherwise allocable to (X) any taxable period ending on or prior
to the Closing Date, (Y) that portion of any taxable period prior to and
including the Closing Date (an "Interim Period") (Interim Periods and any
taxable years that end on or before the Closing Date being referred to
collectively hereinafter as "Pre-Closing Periods"), or (Z) any taxable period
that includes the Closing Date and which are not attributable to the income or
activities of the Foreign Sales Companies during the portion of such taxable
period after the Closing Date, (c) any and all claims, costs, losses,
liabilities or damages (including reasonable attorneys' fees and disbursements)
arising out of or resulting from (A) the inaccuracy or breach of any
representation or warranty made by Sellers or Cabot in clauses (i), (vii), or
(viii) of Section 3.1(t), or (B) the failure by Sellers or Cabot to perform or
observe any covenant or agreement contained in Section 4.9 and (d) any and all
claims, costs, losses, liabilities or damages arising out of or resulting from a
finding that the representations contained in the penultimate sentence of
Section 4.9 were untrue when made, provided that in the case of this clause (d),
Cabot and Sellers shall have no liability to Buyer unless it has been determined
by clear and convincing evidence in a court of competent jurisdiction that such
representations were fraudulently made.
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9.2. Apportionment of Tax Liability. In order appropriately to
apportion any Taxes of the Foreign Sales Companies relating to any taxable year
that includes an Interim Period, the parties hereto shall, at Cabot's option,
either (i) cooperate to elect with the relevant Taxing authority to treat for
all purposes the Closing Date as the last day of the taxable year of the Foreign
Sales Companies, and such Interim Period shall be treated as a short taxable
year and a Pre-Closing Period for purposes of this Agreement, or (ii) in the
case of any Tax imposed on gross or net income, to apportion such Taxes for an
Interim Period as if such Interim Period were a short taxable year. All other
Taxes of the Foreign Sales Companies that are attributable to a taxable year
that includes an Interim Period shall be apportioned to the period to which they
legally relate, or, if not capable of being so apportioned, shall be apportioned
based upon a fraction, the numerator of which is the number of days in the
Interim Period, and the denominator of which is the number of days in such
taxable year.
9.3. Allocation of Purchase Price. Within 180 days after the
Closing Date, Buyer shall provide to Sellers copies of Internal Revenue Service
Form 8594 and any required exhibits thereto with Buyer's proposed allocation of
the purchase price for the Assets based on the fair market value assigned to
such Assets by the Buyer ("Allocated Asset FMV").
9.4. Cash Flow Loans and Indemnification for Lost Tax
Benefits. (a) Cabot, Sellers and Buyer have entered into this transaction based
on (i) the Sellers' representation that Sellers' adjusted tax basis ("Historical
Basis") in the Assets which are "Section 197 intangibles" within the meaning of
Section 197(d) of the Code ("Section 197 Assets") and the remaining statutory
recovery period or useful life ("Historical Recovery Periods") with respect to
such Assets, in each case, as of June 30, 1995, are as set forth on Schedule 9.4
hereto; (ii) Sellers' representation that as of the Closing Date, such
Historical Basis and Historical Recovery Periods shall be reduced only to the
extent necessary to reflect the passage of time between July 1, 1995 and the
Closing Date; and (iii) Sellers' representation that, except as otherwise
indicated on Schedule 9.4, all such Section 197 Assets are depreciable for
United States federal income tax purposes under the U.S. income tax principles
in effect prior to the enactment of Section 197 of the Code.
(b) If the Historical Basis and/or Historical Recovery Periods
of the Section 197 Assets are adjusted as a result of an audit of Cabot's,
Seller's or Buyer's Return (hereinafter referred to, in each case, as an "Audit
Adjustment"), Cabot and Sellers shall make interest-free loans to Buyer (each a
"Cash Flow Loan") and shall jointly and severally reimburse and indemnify Buyer
for the aggregate amount of any additional Taxes that are imposed on the Buyer
(or any successor thereof) in respect of the Buyer's first twelve (12) taxable
years following the Closing Date ("Additional Taxes"), but only to the extent of
the Required Tax Indemnity Payment (as defined
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below) and Buyer shall repay such Cash Flow Loans and/or make payments to Cabot
and Sellers as hereinafter set forth.
(c) Within 30 days after each Determination Date, Arthur
Andersen & Co., or such other nationally recognized public accounting firm as
the parties may select for this purpose, shall calculate the Required Tax
Indemnity Payment, and the details of such calculation shall be furnished to
Cabot and Sellers. If Cabot objects to such calculations, it shall notify Buyer
within 15 business days after receipt thereof, specifying its objections in
reasonable detail. The parties shall meet promptly and negotiate in good faith
to resolve any differences; any unresolved differences shall be referred for
resolution to a nationally recognized public accounting firm selected by mutual
agreement.
(d) The party owing the Required Tax Indemnity Payment shall
make such payment or, in the case of Cabot or Sellers, a Cash Flow Loan equal to
the amount of such payment, within 10 business days after the receipt by Cabot
and Sellers of the calculation, in reasonable detail, of the Required Tax
Indemnity Payment or, in the event of a dispute as to such calculation, 3
business days after the resolution of such dispute.
(e) Instead of making a Required Tax Indemnity Payment,
Sellers may, at their option, elect to make a Cash Flow Loan to Buyer for the
amount of such payment; provided, however, that Buyer shall be required to repay
the aggregate principal amount of any such Cash Flow Loans only to the extent
that such principal amount, plus the aggregate amount of any Required Tax
Indemnity Payments made by Sellers which are not represented by such Cash Flow
Loans, if any, exceeds the aggregate amount of any Required Tax Indemnity
Payments made, or required to be made, by Sellers, as of the relevant
Determination Date. Cabot and Sellers shall forgive the repayment of the
principal amount of any Cash Flow Loans which Buyer is not required to repay
under the preceding sentence with respect to Buyer's twelfth Relevant Taxable
Year, and Cabot and Sellers shall make an additional payment to Buyer equal to
the amount of any Additional Taxes payable by Buyer as a result of Cabot's and
Sellers' forgiveness of such repayment and/or such additional payment.
(f) Notwithstanding any other provision of this Section 9.4,
Sellers and Cabot shall not be required to make any further Cash Flow Loans or
other payments to Buyer under this Section 9.4 after an initial public offering
of the stock of Holdings, New Cabot Safety or any successor has been
consummated.
(g) Cabot shall have the right, subject to any requirements of
the Code, to determine the characterization of any payment made under this
Section 9.4, and all parties shall file their Returns consistent with such
characterization.
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(h) The following definitions shall apply for purposes of this
Section 9.4:
"Required Tax Indemnity Payment" means, as of each
Determination Date, an amount equal to the Reimbursable Excess Income
Taxes calculated as of such date less the aggregate amount of all
Required Tax Indemnity Payments and Cash Flow Loans made in respect of
all previous Determination Dates. In the event such difference is a
positive number, Sellers and Cabot shall jointly and severally pay such
difference to Buyer or make a Cash Flow Loan to Buyer equal to such
amount. In the event such difference is a negative number, Buyer shall
pay such difference to Cabot or Sellers or repay a Cash Flow Loan, as
the case may be, but only to the extent that the aggregate amount of
Required Tax Indemnity Payments previously paid to Buyer, or Cash Flow
Loans made to Buyer, have not been previously repaid to Cabot or the
Sellers.
"Determination Date" means the date or dates each year on
which Buyer actually files its U.S. federal, state and local income or
franchise tax returns (or amended returns) and pays (or is deemed to
have paid) the taxes shown as due on such returns, or any other date on
which Buyer otherwise makes an actual payment of such taxes (other than
a payment of estimated taxes), following the date on which an Audit
Adjustment occurs.
"Reimbursable Excess Income Taxes" means, as of any
Determination Date, an amount equal to the excess, if any, of (a) the
Income Taxes Actually Paid in respect of all Relevant Taxable Years
that have ended on or prior to such Determination Date over (b) the sum
of (x) the amount of U.S. federal, state and local income or franchise
taxes (including all interest and penalties payable by Buyer with
respect to such taxes) that Buyer would have paid, net of refunds, for
all such Relevant Taxable Years but for an Audit Adjustment to the
Historical Basis and/or Historical Recovery Periods of the Sellers,
and/or the tax treatment of any loans and payments made by the parties
hereunder plus (y) $250,000 times the number of such Relevant Taxable
Years (or pro rata portion thereof in the case of any short Relevant
Taxable Years).
"Relevant Taxable Year" means each of the first twelve (12)
federal, state and local income or franchise taxable years of Buyer
commencing on or after the Closing Date.
"Income Taxes Actually Paid" means, in respect of a Relevant
Taxable Year, the sum of any U.S. federal, state and local income or
franchise taxes that were actually paid by Buyer, net of refunds, in
respect of such Relevant
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Taxable Year with respect to Buyer (including all interest and
penalties payable by Buyer with respect to such taxes) after giving
effect to any amended Returns filed by Buyer with respect to such
Relevant Taxable Year.
9.5. Transfer Taxes. All sales, motor vehicle or transfer
Taxes, if any, required to be paid in connection with the transfer of the Assets
(including any interest charge or penalty with respect thereto) shall be paid
when due by Buyer and Sellers, with 50% of each such amount payable by Buyer and
50% of each such amount payable by Sellers.
9.6. Preparation of Tax Returns and Payment of Taxes Shown as
Due Thereon. Sellers shall prepare and file, or cause to be prepared and filed,
any and all Returns for, including or required to be filed by any Foreign Sales
Company for any taxable period ending on or before the Closing Date and Sellers
shall pay (or cause to be paid) all Taxes that are due with respect to such
Returns. Buyer shall prepare and file, or cause to be prepared and filed, any
and all Returns for, including or required to be filed by any Foreign Sales
Company for any taxable period ending after the Closing Date and Buyer shall pay
(or cause to be paid) all Taxes that are due with respect to such Returns.
9.7. Cooperation and Audits. In connection with the
preparation of Tax Returns and audit examinations relating to the Foreign Sales
Companies by any governmental Taxing authority or administrative or judicial
proceedings resulting therefrom, Sellers, Buyer and the Foreign Sales Companies
shall cooperate fully with one another, including but not limited to the
furnishing or making available of records, personnel (as reasonably required),
books of account, powers of attorney or other materials necessary or helpful for
the preparation of returns, the conduct of audit examinations or the defense of
claims by Taxing authorities as to the imposition of Taxes. After the Closing
Date, CSC or Cabot shall control the conduct of all stages of any audit or other
administrative or judicial proceeding with respect to Taxes reflected on all Tax
Returns filed by the Foreign Sales Companies on or before the Closing Date, and
Buyer shall control the conduct of all other audits or other administrative or
judicial proceedings with respect to the Tax liability of the Foreign Sales
Companies.
9.8. Code Section 351 Transfer. CSC, Cabot and Buyer agree
that they shall treat CSC's transfer of the Exchanged Assets to Holdings in
exchange for Holdings Stock as a Section 351 Transfer.
9.9. Exclusivity and Survival. The indemnification obligations
of the Sellers under this Agreement with respect to Taxes and Section 3.1(t)
shall be governed solely by the provisions of this Section 9 and,
notwithstanding any other provision of this Agreement, the representations,
warranties, covenants and
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obligations of the Sellers contained in this Agreement relating to Taxes
(including any indemnification obligation pursuant to Section 9.4) shall survive
the Closing and shall remain in full force and effect until fully carried out or
until the expiration of any applicable statute of limitations that forecloses
the applicable Taxing authorities from assessing or imposing such Taxes
(including, without limitation, Additional Taxes as defined in Section 9.4),
provided that notice of such claim shall have been delivered to Cabot and
Sellers on or before (A) the expiration of the longest statute of limitations
applicable to claims against Seller by any relevant taxing authority in respect
of all representations and warranties made in subsection 3.1(t) other than in
clause (viii) thereof and (B) in respect of the representations and warranties
made in subsection 3.1(t)(viii), the earlier to occur of (x) the second
anniversary of the Closing Date, (y) the consummation of an Initial Public
Offering and (z) the earliest date on which Vestar Equity Partners, L.P. or an
Affiliate ceases to own an aggregate number of shares of Common Stock equal to
at least 51% of the aggregate number of shares of Common Stock owned by it on
the Closing Date. All claims for indemnification with respect to Taxes under
this Section 9 of the Agreement shall be made in accordance with the provisions
of Section 8.3 of this Agreement.
10. Miscellaneous
10.1. Public Announcements. No news release or other public
announcement pertaining in any way to the transactions contemplated by this
Agreement will be made by any party prior to the Closing Date without the prior
written consent of the other parties, unless in the opinion of counsel to such
party such release or announcement is required by law.
10.2. Expenses. In the event that the transactions
contemplated by this Agreement are not completed, each of the parties hereto
shall pay the fees and expenses incurred by it in connection with the
negotiation, preparation, execution and performance of this Agreement,
including, without limitation, attorneys' and accountants' fees; and except as
otherwise provided herein, all such fees and expenses shall be paid by the Buyer
in the event that the transactions contemplated by the Agreement are completed
and the Closing occurs.
10.3. Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally,
by courier service or mail (with receipts), as follows:
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(a) Prior to Closing, if to Sellers:
Cabot Safety Corporation
One Washington Mall
Boston, MA 01550
Telephone No. (617) 371-4200
Telecopy No. (617) 371-4233
Attention: General Counsel
with a copy to:
Cabot Corporation
75 State Street
Boston, MA 02109
Telephone No. 617-345-0100
Telecopy No. 617-342-6039
Attention: General Counsel
(b) After Closing, if to Sellers:
c/o Cabot Corporation
75 State Street
Boston, MA 02109
Telephone No. 617-345-0100
Telecopy No. 617-342-6039
Attention: General Counsel
(c) If to Buyer:
Cabot Safety Corporation
One Washington Mall
Boston, MA 01550
Telephone No. (617) 371-4200
Telecopy No. (617) 371-4233
with a copy to:
Vestar Equity Partners, L.P.
245 Park Avenue
New York, New York 10167
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Telephone No. (212) 949-6500
Telecopy No. (212) 808-4922
Attention: Norman W. Alpert
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telephone No. (212) 455-2000
Telecopy No. (212) 455-2502
Attention: Wilson S. Neely
or to such other address or to the attention of such other person as any party
shall have specified by notice in writing to the other parties. All such
notices, requests, demands and communications shall be deemed to have been
received on the date delivery is made or refused.
10.4. Entire Agreement. This Agreement (including the Exhibits
and Schedules hereto) and the Confidentiality Letter constitutes the entire
agreement between the parties hereto and supersedes all prior agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof.
10.5. Binding Effect; Benefit. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement. Cabot agrees to cause each
Seller to performance each of its respective obligations hereunder.
10.6. Bulk Sales Law. The parties agree to waive compliance
with the provisions of the bulk sales law of any jurisdiction. Sellers agree to
indemnify and hold harmless Buyer from and against any and all liabilities other
than Assumed Liabilities which may be asserted by third parties against Buyer as
a result of such noncompliance.
10.7. Assignability. This Agreement shall not be assignable,
in whole or in part, by any party hereto without the prior written consent of
the other parties hereto (except that Buyer may assign all or any portion of its
rights hereunder to an Affiliate).
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10.8. No Third Party Beneficiaries. Nothing herein expressed
or implied shall confer upon any of the employees of Sellers, Buyer, or any of
their Affiliates, any rights or remedies, including, without limitation, any
right to employment, or continued employment for any specified period, of any
nature or kind under or by reason of the Agreement.
10.9. Amendment; Waiver. This Agreement may be amended,
supplemented or otherwise modified only by a written instrument executed by the
parties hereto. No waiver by any party of any of the provisions hereof shall be
effective unless explicitly set forth in writing and executed by the party so
waiving. Except as provided in the preceding sentence, no action taken pursuant
to this Agreement, including without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representations, warranties, covenants, or
agreements contained herein, or in any documents delivered or to be delivered
pursuant to this Agreement or in connection with the Closing hereunder. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.
10.10. Non-Compete. In order that Buyer and its Affiliates may
have and enjoy the full benefit of the Assets, each of Sellers and Cabot agree
that, for a period of 5 years commencing on the Closing Date, neither Cabot nor
any of its subsidiaries (including Sellers) will, without the express written
approval of Buyer, directly or indirectly manage, own, operate or advise any
foreign or domestic business (including any corporation, partnership,
proprietorship, joint venture or other entity) which engages in any business,
anywhere in the world, that competes with the Business as it is conducted on the
Closing Date.
10.11. Certain Securities Representations. In connection with
its receipt of capital stock pursuant to Section 2.2, CSC represents that (i) it
is not an underwriter as such term is defined under the Securities Act of 1933
(the "Act") and it will receive the shares of Common Stock and Preferred Stock
of New Cabot Safety for its account for the purpose of investment and not with a
view to the distribution or resale thereof and (ii) it understands that such
shares have not been registered under the Act or under any state securities law
or blue sky law of any jurisdiction ("Blue Sky Law") and, therefore, none of
such shares can be sold, assigned, transferred, pledged or otherwise disposed of
without registration under the Act and under applicable Blue Sky Law or unless
an exemption from registration thereunder is available; and agrees that it shall
not sell, assign, transfer, pledge or otherwise dispose of any such shares (or
any interest therein) without registration under the Act and under applicable
Blue Sky Law or unless an exemption from registration thereunder is available.
CSC understands that the stock certificate evidencing such shares will bear a
legend to the effect of the foregoing.
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10.12. Section Headings; Table of Contents. The section
headings contained in this Agreement and the Table of Contents to this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
10.13. Severability. If any provision of this Agreement shall
be declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be affected and
shall remain in full force and effect.
10.14. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
10.15. APPLICABLE LAW; JURISDICTION; VENUE. THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
CABOT SAFETY CORPORATION
By /s/ JOHN D. CURTIN, JR.
-------------------------
Name: John D. Curtin, Jr.
Title:Chairman
CABOT CANADA, LTD.
By /s/ DANIEL L. CURTIS
-------------------------
Name: Daniel L. Curtis
Title:President
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CABOT SAFETY LIMITED
By /s/ IAN MITCHELL
-------------------------
Name: Ian Mitchell
Title:Managing Director
CABOT CORPORATION
By /s/ SAMUEL W. BODMAN
-------------------------
Name: Samuel W. Bodman
Title:Chairman
CABOT SAFETY HOLDINGS CORPORATION
By /s/ DANIEL O'CONNELL
-------------------------
Name: Daniel O'Connell
Title:President
CABOT SAFETY ACQUISITION
CORPORATION
By /s/ NORMAN W. ALPERT
-------------------------
Name: Norman W. Alpert
Title:President