SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
January 29, 1997
Date of Report (Date of earliest event reported)
Valmont Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-3701 47-0351813
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
Valley, Nebraska 68064
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (402) 359-2201
Page 1
Exhibit Index is on Page 4.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 29, 1997, pursuant to a stock purchase agreement between Valmont
Industries, Inc. (Valmont) and Chicago Miniature Lamp, Inc. (CHML),
dated January 3, 1997, Valmont completed the sale to CHML of all outstanding
stock of Valmont Electric, Inc. and CCC de Mexico for $26.9 million cash.
The sale price was determined in an arm's length negotiated transaction.
The sale of the subsidiaries' stock included Valmont's magnetic and
electronic ballast businesses located in El Paso, Texas and Juarez, Mexico.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION, AND EXHIBITS.
(b). Pro forma financial information. See pages F-1 through F-6.
(c). Exhibits:
2.1. Stock Purchase Agreement dated January 3, 1997 between
Valmont Industries, Inc. and Chicago Miniature Lamp, Inc.
Page 2
DISPOSITION OF MAGNETIC AND ELECTRONIC BALLAST BUSINESS
("VALMONT ELECTRIC INC.")
In accordance with the terms of the definitive agreement dated January 3,
1997, between Valmont Industries, Inc. ("Valmont" or "Company") and Chicago
Miniature Lamp, Inc. ("CHML"), Valmont sold the stock of its subsidiaries,
Valmont Electric, Inc., and CCC de Mexico, to CHML for $26.9 million in cash.
The sale included all of Valmont's magnetic and electronic ballast businesses
located in El Paso, Texas and Juarez, Mexico.
PRO FORMA
The following unaudited pro forma condensed consolidated information is based
on the historical consolidated financial statements of the Company adjusted
to give effect to the transaction described above.
The unaudited pro forma condensed consolidated balance sheet as of September
28, 1996 gives effect to the elimination of the disposed ballast business,
as well as other adjustments, assuming the transaction had taken place on
September 28, 1996, and the cash had been received at that time. The cash
proceeds received by the Company will be used to pay off short-term domestic
borrowings and to fund future capital expenditures.
The unaudited pro forma condensed consolidated statements of operations for
the year ended December 30, 1995 and thirty-nine weeks ended September 28,
1996 give effect to the elimination of the disposed ballast business as well
as other adjustments, assuming the dispositions had taken place as of the
beginning of each of those periods.
The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable.
The following unaudited pro forma consolidated financial statements have been
prepared in accordance with rules and regulations of the Securities and
Exchange Commission. Management does not believe that this pro forma
presentation is indicative of the financial position and results of
operations which would have occurred had the transaction occurred on the
dates indicated in the pro forma condensed consolidated financial statements
because of the hypothetical nature of the pro forma information and because
the Company may have operated its other remaining businesses differently
during those periods.
F - 1
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statement of Operations
Thirty-nine Weeks Ended September 28, 1996
(Dollars in thousands except per share amounts)
(Unaudited)
Pro Forma
Histor- Disposition Adjustments
ically ----------- -----------
Reported VE (a) (b) Pro Forma
-------- ----------- ----- ---- ---------
Net sales $463,811 68,378 -- -- $395,433
Cost of sales 339,316 57,986 -- -- 281,330
-------- ---------- ----- ----- ---------
Gross profit 124,495 10,392 114,103
Selling, general and admin-
istrative expenses 87,300 11,140 -- -- 76,160
-------- ---------- ----- ----- ---------
Operating income 37,195 (748) -- -- 37,943
-------- ---------- ----- ----- ---------
Other income (deductions):
Interest expense (2,999) -- 268 -- (2,731)
Interest income 267 -- -- -- 267
Miscellaneous (138) (9) -- -- (129)
-------- ---------- ----- ----- ---------
(2,870) (9) 268 -- (2,593)
-------- ---------- ----- ----- ---------
Earnings before income
taxes 34,325 (757) 268 -- 35,350
Income tax expense 12,300 (269) -- (96) 12,665
-------- ---------- ----- ----- ---------
Net Earnings $ 22,025 (488) 268 (96) 22,685
======== ========== ===== ===== =========
Net Earnings per share $ 1.58 1.62
======== =========
Weighted average number of
shares of common and common
equivalent shares outstand-
ing (000 omitted) 13,972 13,972
======== =========
See accompanying notes to pro forma condensed consolidated financial
statements.
F - 2
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 30, 1995
(Dollars in thousands except per share amounts)
(Unaudited)
Pro Forma
Histor- Disposition Adjustments
ically ----------- -----------
Reported VE (a) (b) Pro Forma
-------- ----------- ---- ---- ---------
Net sales $544,642 90,096 -- -- $454,546
Cost of sales 399,691 73,748 -- -- 325,943
-------- ---------- ----- ---- ---------
Gross profit 144,951 16,348 -- -- 128,603
Selling, general and admin-
istrative expenses 103,120 15,339 -- -- 87,781
-------- ---------- ----- ---- ---------
Operating income 41,831 1,009 -- -- 40,822
-------- ---------- ----- ---- ---------
Other income (deductions):
Interest expense (4,331) -- 67 -- (4,264)
Interest income 820 -- -- -- 820
Miscellaneous 139 217 -- -- (78)
-------- ---------- ----- ---- ---------
(3,372) 217 67 -- (3,522)
-------- ---------- ----- ---- ---------
Earnings before income
taxes 38,459 1,226 67 -- 37,300
Income tax expense 13,700 439 -- (24) 13,285
-------- ---------- ----- ---- ---------
Net Earnings $ 24,759 787 67 (24) $ 24,015
======== ========== ===== ==== =========
Net Earnings per share $ 1.80 $ 1.75
======== =========
Weighted average number of
shares of common and common
equivalent shares outstand-
ing (000 omitted) 13,733 13,733
======== =========
See accompanying notes to pro forma condensed consolidated financial
statements.
F - 3
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Thirty-nine weeks ended September 28, 1996 and Year ended
December 30, 1995
(Unaudited)
The preceding pro forma statements of operations present the consolidated
statements of operations of Valmont Industries, Inc. and Subsidiaries for
the thirty-nine weeks ended September 28, 1996 and year ended December 30,
1995 after eliminating the disposed Valmont Electric, Inc. and CCC de
Mexico, (VE), ballast businesses and after giving effect to the adjustments
described below.
The adjustments made to these pro forma statements of operations assume that
the transaction occurred as of the beginning of each period.
Management believes these pro forma results are not necessarily indicative
of the results which would have occurred had the disposition been made at
the beginning of each of these periods.
HISTORICALLY REPORTED
The historically reported column represents the historical consolidated
statements of operations of Valmont Industries, Inc. and Subsidiaries for
the thirty-nine weeks ended September 28, 1996 and year ended December 30,
1995, respectively.
DISPOSITIONS
The disposition represents the historical results of the disposed business
for the thirty-nine weeks ended September 28, 1996 and year ended December
30, 1995.
BALLAST BUSINESS
The historical results include only those allocated costs which
management believes will be eliminated as a direct result of the
transaction. Management believes that the method used to allocate
the costs and expenses is reasonable.
In connection with the transaction, the Company expects to record
an estimated after-tax loss of $10.1 million which represents
impairment of the assets held for sale in the disposed businesses.
This impairment loss will be included in the Company's 1996 results
of operations for the fourth quarter and the year ended December
28, 1996.
PRO FORMA ADJUSTMENTS
(a) This adjustment eliminates the interest expense on short-term
borrowings that would have been paid down with the proceeds from
the disposition of VE.
(b) This adjustment records the income tax provision on the pro
forma adjustments at the statutory rates of 35.8% and 35.6%
respectively.
F - 4
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Pro Forma Condensed Consolidated Balance Sheet
September 28, 1996
(Dollars in thousands)
(Unaudited)
Pro Forma
Histor- Disposition Adjustments
ically ----------- -----------
Reported VE (a) Pro Forma
-------- ----------- ----------- ---------
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 10,910 26,151 (7,900) $ 29,161
Receivables 93,823 (17,142) -- 76,681
Deferred income taxes 8,724 (2,126) -- 6,598
Inventories 86,070 (22,181) -- 63,889
Prepaid expenses 2,353 (259) -- 2,094
--------- ----------- ----------- ---------
Total current assets 201,880 (15,557) (7,900) 178,423
--------- ----------- ----------- ---------
Other assets:
Investments in nonconsol-
idated affiliates 3,947 -- -- 3,947
Other 7,438 (320) -- 7,118
--------- ----------- ----------- ---------
Total other assets 11,385 (320) -- 11,065
--------- ----------- ----------- ---------
Net property, plant and
equipment 125,020 (11,673) -- 113,347
--------- ----------- ----------- ---------
Total assets $ 338,285 (27,550) (7,900) $ 302,835
========= ============ =========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current installments of
long-term debt $ 8,045 -- -- $ 8,045
Notes payable to banks 12,051 -- (7,900) 4,151
Accounts payable 46,529 (4,996) -- 41,533
Accrued expenses 51,073 (11,870) -- 39,203
Dividends payable 1,363 -- -- 1,363
--------- ----------- ----------- ---------
Total current liabilities 119,061 (16,866) (7,900) 94,295
--------- ----------- ----------- ---------
Deferred income taxes 8,856 (374) -- 8,482
Long-term debt, excl. cur. 26,136 -- -- 26,136
Minority interest in consol-
idated subsidiaries 2,270 -- -- 2,270
Other noncurrent liabilities 3,410 (210) -- 3,200
Shareholders' equity:
Preferred stock -- -- -- --
Common stock of $1 par value 13,950 -- -- 13,950
Additional Paid-In Capital 6,042 -- -- 6,042
Retained Earnings 155,289 (10,100) -- 145,189
Currency translation adj. 3,337 -- -- 3,337
Treasury stock (19) -- -- (19)
Unearned restricted stock (47) -- -- (47)
--------- ----------- ----------- ---------
Total shareholders'
equity $ 178,552 (10,100) -- $ 168,452
--------- ----------- ----------- ---------
Total liabilities and share-
holders' equity $ 338,285 (27,550) (7,900) 302,835
========= =========== =========== =========
See accompanying notes to pro forma condensed consolidated financial
statements.
F - 5
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Pro Forma Condensed Consolidated Balance Sheet
As of September 28, 1996
(Unaudited)
The preceding pro forma balance sheet presents the consolidated financial
position as of September 28, 1996 after eliminating the disposed VE ballast
business and after giving effect to the adjustments described below.
The adjustments made to this pro forma balance sheet assume that the
transaction occurred as of September 28, 1996.
HISTORICALLY REPORTED
The historically reported column represents the unaudited historical
consolidated balance sheet as of September 28, 1996.
DISPOSITION
The disposition represents the historical balance sheet of VE and the
amounts related to the transaction as of September 28, 1996.
VE BALLAST BUSINESS
The historical balance sheet amounts for Valmont Electric, Inc.
and CCC de Mexico comprise the ballast business at the Company's
El Paso, Texas and Juarez, Mexico facilities. The historical
balance sheet includes all of the assets that will be sold in the
transaction. Also this column records the proceeds from the sale
of VE net of certain expenses and fees and records the loss on the
transaction net of applicable current and deferred taxes. The loss
on the transaction is estimated at $10.1 million, net of tax
estimated at $5.7 million.
PRO FORMA ADJUSTMENTS
(a) This adjustment records the pay down of short-term borrowings with
the proceeds from the transaction.
F - 6
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
VALMONT INDUSTRIES, INC.
By: /s/ Terry J. McClain
_______________________________
Terry J. McClain
Vice President and Chief
Financial Officer
Date: February 10, 1997
Page 3
EXHIBIT INDEX
Exhibit No. Exhibit
----------- -------
2.1. Stock Purchase Agreement dated
January 3, 1997 between Valmont
Industries, Inc. and Chicago
Miniature Lamp, Inc.
STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of January 3, 1997 by and between VALMONT
INDUSTRIES, INC., a Delaware corporation ("Seller") and CHICAGO MINIATURE
LAMP, INC., an Oklahoma corporation ("Buyer").
RECITALS:
This Agreement is made with reference to the following facts and
circumstances:
(a) Valmont Electric, Inc., a Delaware corporation ("the Company")
produces, markets and sells ballasts for the lighting industry
(the "Business").
(b) Seller owns all of the issued and outstanding capital stock of
the Company.
(c) Seller desires to sell, and Buyer desires to purchase, all of the
issued and outstanding shares of capital stock of the Company for
the consideration and upon the terms and conditions hereinafter
set forth.
AGREEMENT:
In consideration of the foregoing recitals and in further consideration
of the mutual covenants and agreements hereinafter contained, the
parties hereto agree, subject to the terms and conditions hereinafter
set forth, as follows.
1. Sale and Purchase of Stock. Subject to the terms and conditions
contained herein, at Closing (as defined in Section 3), Seller
will sell, transfer, assign, convey and deliver to Buyer, and Buyer
will purchase, accept and acquire (in its own name or through a
wholly-owned subsidiary) all of the shares of common stock of the
Company ("Purchased Stock").
2. Purchase Price; Payment.
2.1 Purchase Price. The purchase price payable by Buyer for the
Purchased Stock (the "Purchase Price") shall be an amount equal
to Twenty-Five Million Dollars ($25,000,000) plus (or minus) the
amount by which Closing Equity (as defined below) is greater than
(or less than) Thirty-Seven Million Three Hundred Seventy-Three
Thousand Dollars ($37,373,000). "Closing Equity" shall mean the
consolidated stockholders equity of the Company (plus any net
intercompany amounts due to Seller that are forgiven pursuant to
Section 12.2 hereof) as reflected in the Closing Balance Sheet
(as defined in Section 4.1).
2.2 Payment. Twenty-five Million Dollars ($25,000,000) of the Purchase
Price (the "Estimated Amount") shall be paid by wire transfer of
immediately available funds on the Closing Date (as defined in
Section 3). The balance of the Purchase Price, if any, shall be
paid on the Settlement Date (as defined in Section 4.2).
3. Closing. Subject to the terms and conditions contained in this
Agreement, the closing of the transactions contemplated hereby (the
"Closing") will occur at the offices of McGrath, North, Mullin &
Kratz, P.C., or by fax or mail if practical, as soon as practical
following satisfaction of the conditions set forth in Sections 9
and 10 below, or at such other place or time or on such other date
as the parties hereto may mutually agree (the "Closing Date").
Closing shall be effective as of 5:01 p.m. central time on the
Closing Date (the "Effective Time").
3.1 Buyer's Obligation at Closing. At the Closing, Buyer shall:
3.1.1 Purchase Price. Pay to Seller the Estimated Amount.
3.1.2 Legal Opinion. Cause to be delivered to Seller the legal
opinion of Bingham, Dana & Gould LLP, counsel for Buyer, in
a form mutually acceptable.
3.1.3 Certificate. Execute and deliver the certificate
contemplated in Section 9.3.
3.1.4 Transition Agreement. Execute and deliver the Transition
Agreement (as defined in Section 4.6).
3.2 Seller's Obligations at Closing. At the Closing, Seller shall:
3.2.1 Stock Certificates. Deliver, or cause to be delivered, to
Buyer or its nominees a certificate or certificates
representing all of the Purchased Stock and all shares of
CCC (as defined in Section 6.1) not held by the Company
(as to the latter in compliance with all applicable Mexican
laws and formalities), duly endorsed to the Buyer or its
nominees, free and clear of liens and encumbrances.
3.2.2 Legal Opinion. Cause to be delivered to Buyer the legal
opinion of McGrath, North, Mullin & Kratz, P.C., counsel for
Seller, in a form mutually acceptable.
3.2.3 Certificate. Execute and deliver the certificate
contemplated in Section 8.3.
3.2.4 Transition Agreement. Execute and deliver the Transition
Agreement.
3.2.5 Resignations. Deliver the resignations of all officers and
directors of the Company and the Subsidiaries, other than
those (if any) whom Buyer has indicated in writing need not
resign.
3.2.6 Corporate Records. Deliver to Buyer the original minute
books, stock record books, and other corporate records of the
Company and each of the Subsidiaries.
4. Post Closing Matters.
4.1 Closing Balance Sheet.
4.1.1 Year-End Audit. As soon as practicable following the Closing
Date, Seller shall prepare and cause to be delivered to Buyer
an audited consolidated balance sheet of the Company and the
Subsidiaries as of December 28, 1996 (the "1996 Audited
Balance Sheet") and the related statements of income,
stockholders equity and cash flows for the year then ended
(collectively, the "1996 Audited Financial Statements"),
together with the report of Deloitte & Touche LLP
("Deloitte")
in customary form stating that such consolidated financial
statements present fairly, in all material respects, the
financial position of the Company and the Subsidiaries as of
December 28, 1996, and the results of their operations and
their cash flows for such year in conformity with generally
accepted accounting principles (the "Deloitte Report"). The
incremental cost of such preparation and audit shall be shared
equally by Buyer and Seller.
4.1.2 Consent. Seller hereby consents to Buyer's use of the 1996
Audited Financial Statements subject, however, to Buyer
obtaining consent from Deloitte. Seller will cooperate with,
and use reasonable efforts to assist, Buyer in its efforts to
obtain consent from Deloitte to use the 1996 Audited Financial
Statements and the Deloitte Report. Buyer shall pay any out-
of-pocket costs associated with obtaining such consent from
Deloitte (including all costs and charges of Deloitte).
4.1.3 Preparation. As soon as practicable following the Closing
Date (and, in any event, after delivery to Buyer of the 1996
Audited Financial Statements and the Deloitte Report), Seller
shall prepare and deliver to Buyer the special purpose
consolidated balance sheet of the Company and its Subsidiaries
(as defined in Section 6.1) as at the Effective Time (the
"Preliminary Balance Sheet"). Buyer shall provide to Seller,
and shall cause the Company and the Subsidiaries to provide to
Seller, such assistance and access to books and records as is
necessary to timely prepare and deliver the Preliminary
Balance Sheet, including but not limited to access to the
Company's and the Subsidiaries' employees and books and
records. The Preliminary Balance Sheet shall be prepared in
accordance with generally accepted accounting principles,
applied in a manner consistent with the 1996 Audited Balance
Sheet; provided, however, (i) no accrual or reserve shall be
made with respect to any current Income Taxes (as hereinafter
defined at Section 6.11.3 hereof) payable, deferred Income
Taxes or with respect to any other liabilities of the Company
retained or indemnified by Seller, (ii) the aggregate reserve
for warranty claims shall be fixed at $2,874,000 and the
aggregate reserves with respect to obsolete and slow-moving
inventory shall be fixed at $2,084,000, (iii) no assets
(or reserves with respect thereto) shall be reflected that are
transferred to Seller pursuant to Section 8.1(e), (iv) all
amounts owing by, or owed to, the Company and/or the
Subsidiaries in respect of intercompany accounts with Seller
and/or any of its Affiliates shall be forgiven and treated as
part of contributed capital and (v) if the Settlement (as
defined in Section 8.5.1) occurs prior to Closing, the amount
of the EBT Payment (as defined in Section 8.5.2), less the
amount of the EBT Accrual (as defined in Section 8.5) shall
be treated as an asset of the Company. Each party shall make
available all documents or records reasonably requested by
the other (or its accountants) to permit the preparation and
review of the Preliminary Balance Sheet.
4.1.4 Objections. Within 20 business days following receipt
thereof,
Buyer shall submit to Seller in writing any objections that
it may have to the Preliminary Balance Sheet. Such notice
shall specify in reasonable detail the nature and basis of
each such objection. Buyer and Seller shall use reasonable
efforts to resolve such objections within 45 business days
following receipt by Seller of such objections; failing
which, such objections shall be submitted to Arthur Andersen,
LLP (the "Arbitrator") within ten days following such 45-day
period, for resolution pursuant to binding arbitration. The
Arbitrator as soon as practicable thereafter will resolve all
such objections and report such resolution to the parties in
writing. Each party shall pay one-half of the costs of the
arbitration, provided, that each party shall pay the fees and
expenses of its own counsel and accountants. Upon the
parties agreement to, or the resolution in accordance with
this paragraph of, such objections, Seller shall incorporate
such resolutions into the Preliminary Balance Sheet and shall
deliver to Buyer such resulting balance sheet (the "Closing
Balance Sheet") which shall then be final and binding for
purposes of this Agreement.
4.2 Settlement of Purchase Price. On the second business day following
(i) the expiration of 20 business days following receipt by Buyer
of the Preliminary Balance Sheet, if Buyer shall not have notified
Seller of objections thereto within such 20 business day period,
or (ii) in any other case, receipt by Buyer of the Closing Balance
Sheet pursuant to Section 4.1 (in either case, the "Settlement
Date"), Buyer shall pay to Seller an amount equal to the excess of
the Purchase Price over the Estimated Amount, or Seller shall pay
to Buyer an amount equal to the excess of the Estimated Amount over
the Purchase Price, as the case may be, in either case with interest
at an annual rate of six percent (6%) per annum from the Closing
Date through the date of payment. The payment required to be made
pursuant to this Section 4 shall be made by wire transfer of
immediately available funds.
4.3 Insurance Matters.
4.3.1 Coverage. Buyer acknowledges that the Company and the
Subsidiaries are covered by certain insurance policies and
insurable risk programs made available through Seller. As
of the Effective Time, such coverage shall be discontinued.
4.3.2 Insurance Claims. The parties acknowledge that certain claims
resulting from occurrences prior to Closing may be subject to
coverage under Seller's existing insurance program, policies
or agreements. From and after Closing, the Company and the
Subsidiaries shall be entitled to submit such claims to Seller
with respect to which insurance coverage existed under third
party insurance policies maintained by Seller applicable to
the Company and the Subsidiaries prior to the Closing, which
claims Seller shall forward to its insurance carriers, and
Buyer shall ensure that the Company and the Subsidiaries do
not submit claims directly to any such insurance carrier.
Subject to the provisions of Section 12 hereof, in no event
shall Seller be responsible or liable for such claims if not
paid or covered by insurance. Subject to the provisions
in Section 12, the Buyer and/or the Company shall be obligated
to pay and be responsible for any deductible or self-insured
retention with respect to such claims.
4.3.3 Defense of Claims. Buyer and the Company (including the
Company's employees) shall cooperate fully with Seller and its
insurance carriers in connection with such claims and the
defense thereof, shall make all records and personnel
available at no cost to Seller and its insurance carriers
which are reasonably necessary for handling such claims and
defense, and shall not take any action detrimental to such
defense. Seller shall keep Buyer informed with respect to
such matters and shall consult and cooperate with Buyer
in connection therewith.
4.4 Trademark and Trade Name. Seller specifically and exclusively
retains, and Buyer acknowledges that it will not acquire, and
that neither the Company nor any Subsidiary owns, any right, title
or interest to the trade name "Valmont" (or derivations thereof) or
to any logos or trademarks related thereto. Buyer agrees that
promptly after Closing it will cause the Company to change its name
to eliminate the name "Valmont" and, subject to the provisions of the
Transition Agreement (as defined in Section 4.6) to discontinue the
use of any advertising or other form of media that uses or references
any such names or logos. Buyer further agrees that as soon as
practicable, but in no event longer than three (3) months after the
Closing Date, it shall remove all outside signs which refers to
Valmont, and, subject to the provisions of the Transition Agreement
(as defined in Section 4.6) each of Buyer and Seller shall take all
such other action as may be reasonably necessary on its part to
dissociate the "Valmont" name and Seller with the operations of the
Company and the Subsidiaries after Closing.
4.5 Record Retention. Buyer will cause all material books and records
of the Company and the Subsidiaries (the "Records") to be retained
for seven (7) years after Closing. During such term, Buyer shall
allow Seller and its representatives access to inspect or copy the
Records during normal business hours upon reasonable prior notice.
In the event Buyer intends to destroy any Records at the end of such
seven-year term, Buyer shall first notify Seller at which time
Seller shall have the right to remove the Records at its own cost.
4.6 Transition Services. At Closing, Buyer shall execute the Transition
Services Agreement attached hereto as Exhibit 4.6 (the "Transition
Agreement").
5. Employee Matters.
5.1 General. As of the Effective Time, Buyer will cause the Company
and its Subsidiaries to continue to employ then existing employees
("Company Employees") as at-will employees on terms and conditions
then existing, subject, however, to the provisions set forth
below, and subject to changes as may be made by Buyer or the Company
after the Effective Time. Notwithstanding anything herein to the
contrary, Buyer, the Company and the Subsidiaries shall honor and
be responsible for all employee benefits that the Company
Employees are entitled to the extent accrued on the Closing Balance
Sheet. Subject to Section 12, Buyer, the Company and the
Subsidiaries shall be responsible for any and all liabilities,
obligations and claims of any kind arising out of employment
(or termination of employment, whether actual or constructive) of
the Company Employees on or after the Closing Date, including,
but not limited to, any severance, termination pay, or similar
obligations with respect to employees terminated (whether actually or
constructively) at or after the Effective Time or resulting from the
change in any benefits provided to the Company Employees, provided,
however, none of Buyer, the Company or the Subsidiaries shall have
any liability in respect of any of the benefit plans described
in Sections 5.2 and 5.3.
5.2 401(k) Plans. As of the Effective Time, Company Employees shall
cease to actively participate in the Valmont Employee Retirement
Savings Plan (the "401(k) Plan") and, except for contributions
due in respect of services performed through the Effective Time,
no further contributions shall be made to the 401(k) Plan for the
benefit of Company Employees. As of the Closing Date, the
interests of the Company Employees in the 401(k) Plan shall be one
hundred percent (100%) vested and shall be fully nonforfeitable.
In addition, Seller shall make all basic and supplemental
contributions to such plan for Company Employees, for the fiscal
year ended December 28, 1996.
5.3 Health Welfare Plans. The parties acknowledge that the Company
Employees participate in Seller's health and welfare benefit plans
and programs. As of the Effective Time, Company Employees shall
cease to participate in such health and welfare plans and programs.
Subject to the provisions of Section 5.5 below, Buyer shall cause
such Company Employees to be permitted to participate in Buyer's
employee benefits plans as promptly as possible following the
Closing.
5.4 WARN. Buyer shall be responsible for, and shall indemnify and hold
Seller harmless against and in respect of any liability, loss,
claim, damage or deficiency that arises pursuant to the Worker
Adjustment and Retraining Notification Act (29 U.S.C. Sections
2101-2109) or any similar foreign, state or local laws or
ordinances on account of, or in connection with, the termination
(whether actual or constructive) of employees at or after the
Effective Time. Seller shall be responsible for, and shall indemnify
and hold harmless Buyer, the Company, and the Subsidiaries against
and in respect of any such liability, loss, claim, damage, or
deficiency to the extent caused by or arising out of termination
of employees occurring before the Effective Time.
5.5 Buyer Plans. Buyer shall cause prior periods of service with the
Seller, Company and the Subsidiaries to count for purposes of
eligibility and vesting under any benefit plans provided to
Company Employees after Closing. With respect to currently insured
employees of the Company and the Subsidiaries, Buyer shall not
permit the health and welfare plans of the Company and the
Subsidiaries adopted in substitution for Seller's health and
welfare plans to impose any additional waiting period requirements
or any similar requirements and Buyer shall use its best efforts
to cause to be waived any pre-existing condition requirements,
evidence of insurability and similar provisions under such plans,
except to the extent that Seller's health and welfare plans would
have applied any such provisions to any such Company Employees had
the sale of the Purchase Stock not occurred. After Closing, Buyer
shall also use its best efforts to cause the Company and the
Subsidiaries to apply toward any deductible requirements and
out-of-pocket maximum limits under its employee welfare benefit
plans any amounts paid (or accrued) by each Company
Employee prior to Closing under welfare benefit plans of Seller
during the then-current plan year.
5.6 Cooperation. The parties shall cooperate with each other to
provide any information, filings or notices as appropriate with
respect to this Section 5. Buyer shall assist in providing any
information, filings or notices (including the notice required by
Section 204(h) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) as needed to cease the benefit accruals.
5.7 Satisfaction of Closing Conditions. Each of the parties shall use
its best efforts to cause the satisfaction, on or before the
Closing Date, of such of the conditions precedent to the other
party's obligations hereunder as impose obligations on such party
or require actions on its part.
5.8 Disclosure Supplements. From time to time prior to the Closing,
and in any event immediately prior to the Closing, Seller shall
promptly advise the Buyer in writing of any matter hereafter
arising or becoming known to it that, if existing, occurring, or
known at the date of this Agreement, would have been required to
be set forth or described in the Disclosure Schedule or that is
necessary to correct any information in the Disclosure Schedule that
is or has become inaccurate. No such disclosure shall be taken
into account in determining whether the conditions to Buyer's
obligations to consummate the transactions hereby contemplated
have been satisfied.
6. Representations and Warranties of Seller. Seller hereby
represents and warrants to and with Buyer, both as of the date
hereof and as of the Effective Time, as set forth below. Such
representations and warranties are made subject to those matters
set forth in the Seller Disclosure Schedule dated as of the date
hereof and delivered as a separate document but incorporated
herein by this reference (the "Disclosure Schedule"), provided,
that the representation(s) and warranty(ies) to which each such
exception relates is (are) specifically identified (by cross
-reference or otherwise) in the Disclosure Schedule as being
qualified by such exception, or the relevance of such exception
is apparent on the face of the disclosure of such exception set
forth in the Disclosure Schedule.
6.1 Organization, Good Standing and Corporate Power. The Company,
CCC de Mexico, S.A. de C.V. ("CCC") and VBT, Inc. ("VBT") (CCC
and VBT are herein sometimes referred to individually as a
"Subsidiary" and collectively as the "Subsidiaries") are each
corporations duly organized, validly existing and in good standing
under the laws of their respective jurisdictions of incorporation
and each has the corporate power to own, operate and lease its
properties and to carry on its business as now being conducted.
The Company and each Subsidiary is qualified to conduct its
business in all jurisdictions in which such qualification or
authorization is required, except for those jurisdictions in
which failure to be so qualified or authorized would not have
a material adverse effect on the consolidated business or
operations of the Company and the Subsidiaries.
6.2 Articles and By-Laws. Seller has previously furnished to Buyer
complete and correct copies of (a) the Certificates of
Incorporation of the Company and VBT as amended, certified by
the Secretary of State of Delaware; (b) the By-Laws of the
Company and the Subsidiaries as in effect on the date hereof,
certified by the Secretary of the Company; (c) the Articles of
Incorporation of CCC, as amended, certified by the Commercial
Registry of Mexico; and (d) the minute books and stock records
of the Company and the Subsidiaries. Such documents have not
been further amended and are in full force and effect, and
neither the Company nor any Subsidiary is in violation of
any provisions thereof.
6.3 Corporate Authorization; Binding Effect. This Agreement and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action
on the part of Seller (including approval by Seller's board of
directors and (if necessary) stockholders) and constitutes the
legal, valid and binding obligation of Seller enforceable in
accordance with its terms. Seller has previously furnished Buyer
with a copy of the resolutions of Seller's Board of Directors
authorizing the transactions contemplated herein, certified by the
Secretary or any Assistant Secretary of Seller.
6.4 Effect of Agreement. Subject to compliance with the HSR Act (as
defined below) and compliance with any applicable Mexican
anti-trust laws, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby will not, with or without the giving of notice or the
lapse of time or both, (a) violate any provision of law, statute,
rule or regulation to which Seller, the Company or any Subsidiary
is subject; (b) violate any judgment, order, writ or decree of
any court applicable to Seller, the Company or any Subsidiary;
or (c) result in the material breach of, or conflict in any
material respect with, any term, covenant or condition of, result
in the modification or termination of, constitute a material
default under, or result in the creation or imposition of any
lien, security interest or encumbrance upon any of the Company's
or any Subsidiary's assets, pursuant to Seller's, the Company's
or any Subsidiary's respective charter documents, or any
material contract or material agreement to which Seller, the
Company or any Subsidiary is a party.
6.5 No Government or Third-Party Authorization Required. Except for
compliance with the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), no consent, authorization or
approval of, or exemption by, or filings with, any governmental,
public or self-regulatory body or authority or any other Person
(as defined in Section 14.14 hereof) is required in connection
with the execution, delivery and performance of this Agreement
by Seller.
6.6 No Options, Warrants, Rights. The authorized and issued capital
stock of the Company and the Subsidiaries is set forth in the
Disclosure Schedule. Prior to Closing, Seller shall cause the
stock of CCC held by Seller to be transferred to the Company.
Any transfer taxes with respect to the transfer of CCC's shares
shall be paid by Seller. All such shares are duly authorized,
validly issued, fully paid and nonassessable and free and clear
of any and all liens and/or encumbrances and owned by the entities
listed in the Disclosure Schedule. Except as described in the
Disclosure Schedule, neither the Company nor any Subsidiary has
any outstanding or authorized options, warrants or any other
agreements of any character obligating it to issue any shares of
its capital stock or any securities convertible into or evidencing
the right to purchase any shares of its capital stock. Neither
Seller nor the Company is a party to any agreements, arrangements
or understandings with respect to the voting, transfer or
assignment of the Purchased Stock.
6.7 Title to Company Shares. Seller is the lawful and equitable owner
of all of the shares of Purchased Stock, free and clear of all
liens, claims, options, charges and encumbrances. The shares of
Purchased Stock constitute all of the authorized, issued and
outstanding shares of capital stock of the Company.
6.8 No Subsidiaries. Except for the Subsidiaries, the Company does
not control or own (legally and/or beneficially) any interest in
any corporation, partnership, limited liability company or other
entity (whether as direct subsidiaries or through intervening
subsidiaries).
6.9 Financial Statements. Seller has heretofore delivered to Buyer
copies of the unaudited consolidated balance sheets of the Company
and the Subsidiaries as of November 30, 1996, December 30, 1995
and December 31, 1994, and the related statements of income,
stockholders equity and cash flows for the respective eleven-month
period and years then ended (individually, the "Interim
Financial Statements," "1995 Financial Statements" and "1994
Financial Statements," respectively, and collectively, the
"Financial Statements"). Subject to the exceptions set forth in
the Disclosure Schedule, the Financial Statements present fairly,
in all material respects, the consolidated financial position of
the Company at their respective dates and the results of its
operations and its cash flows for the respective eleven-month
period and years then ended in conformity with generally accepted
accounting principles, consistently applied.
6.10 Conduct of Business Since December 30, 1995. Since December 30,
1995:
6.10.1 The Company and the Subsidiaries have conducted their
consolidated operations, in all material respects, in the
ordinary course of business consistent with past practices.
6.10.2 Other than personal property or inventory purchased, sold,
leased or consumed in the ordinary course of business
consistent with past practices and other than the transfer
of the "Danville Property" (as defined in Section 8.1.1(e))
to Seller, neither the Company nor any Subsidiary has
purchased, sold, leased, mortgaged, pledged or otherwise
acquired or disposed of any material properties or assets.
6.10.3 The Company has not declared or paid any dividend on, or
made any other distribution or payment (whether cash or in
kind) in redemption or otherwise in respect of, any shares
of stock or other securities (other than through settlements
of the intercompany accounts).
6.10.4 Except in the ordinary course of business consistent with
past practice or as required by any written employment
agreement entered into before December 31, 1995, there has
been no material increase or other material change made in
the rate or nature of the compensation, including wages,
salaries and bonuses, which has been paid, or will be paid
or payable, by the Company or any Subsidiary to any of its
directors, officers or employees.
6.10.5 There has been no material adverse change in the
consolidated financial condition, results of operations,
business or operations of the Company and the Subsidiaries.
6.11 Taxes and Tax Returns.
6.11.1 General Tax Representations.
(i) The Company and each Subsidiary has duly filed (or
has been included in) all material federal, state,
local and foreign Tax returns required to be filed
and the Company and the Subsidiaries have duly paid
all Taxes (as defined below) which are due and
payable pursuant to such returns;
(ii) All deficiencies asserted as a result of all foreign,
if any, U.S. federal, state and local Tax examinations
and relating to the Company or any Subsidiary have
been paid, fully settled or, with respect to non-Income
Taxes, adequately provided for as a current Tax
liability in the books and records of the Company or
such Subsidiary;
(iii)There are no pending examinations or claims asserted
for Taxes of the Company or any Subsidiary or
outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax
return of the Company or any Subsidiary for any period
or any pending Tax litigation or proceedings relating
to the Company or any Subsidiary;
(iv) Neither the Company nor any Subsidiary has filed either
a consent to the application of Section 341(f) of the
Code (as defined below) or an election to be treated
as a small business corporation under Subchapter S of
the Code; and
(v) The Company and each Subsidiary has complied in all
material respects for all prior and current periods
with the Tax withholding provisions of all applicable
federal, state, local and other laws.
(vi) None of the Company or the Subsidiaries has been a
United States real property holding corporation within
the meaning of Code Section 897(c)(2), during the
applicable period specified in Code Section 897(c)
(1)(A)(ii).
(vii)None of the property owned or used by the Company or
the Subsidiaries is subject to a tax benefit transfer
lease executed in accordance with Section 168(f)(8)
of the Internal Revenue Code of 1954, as amended by
the Economic Recovery Tax Act of 1981.
(viii)Except as set forth in the Disclosure Schedule, none
of the property owned by the Company or the
Subsidiaries is "tax-exempt use property" within the
meaning of Section 168(h) of the Code.
(ix) None of the Company or the Subsidiaries has made any
payments, is obligated to make any payments, or is a
party to any agreement that under certain circumstances
could obligate it to make any payments, that will not
be deductible under Code Section 162(m) or 280G.
6.11.2 Taxes Since December 30, 1995. Since December 30, 1995,
neither the Company nor any Subsidiary has incurred any
material Tax liability other than Taxes incurred in the
ordinary and regular course of its business.
6.11.3 Definitions. For purposes of this Agreement, (i) the term
"Tax" or "Taxes" shall mean all taxes, charges, fees, levies
or other assessments, including, without limitation, income,
gross receipts, excise, property, sales, use, license,
payroll, withholding, franchise, duties, business occupation,
transfer and recording taxes, fees and charges, imposed by
the United States, or any state, local or foreign authority
(including Mexico or any political subdivision or agency
thereof), government or subdivision or agency thereof whether
computed on a consolidated, unitary, combined, separate or
any other basis; and such term shall include any and all
interest, penalties and additions to tax, as well as any
primary or secondary liability for taxes (including, without
limitation, any liability under Treas. Reg.Sec.1.1502-6 or
any state, local or foreign analog thereof); (ii) the term
"Tax Return" shall mean any report, return or other document
or information required by law to be supplied to a taxing
authority in connection with Taxes; (iii) the term "Income
Taxes" shall mean all federal, state, local, foreign and
other governmental Taxes imposed on or with respect to gross
or net income; and (iv) the term "Code" means the Internal
Revenue Code of 1986, as amended.
6.12 Properties. The Disclosure Schedule sets forth the following
information:
6.12.1 A list identifying all real estate owned or leased by the
Company or any Subsidiary (collectively, the "Real Property").
6.12.2 A description of any equipment lease related to equipment or
vehicles leased by the Company or any Subsidiary that requires
an annual aggregate lease payment in excess of $50,000, or
that has a remaining term in excess of two (2) years and was
not entered into in the ordinary course of business.
The Company and each Subsidiary, as the case may be, has good title
to all property reflected in its books and records as owned, and the
Company and each Subsidiary, as the case may be, has valid leasehold
interest in all leased Real Property and leased personal property.
The properties and assets owned by the Company and any Subsidiary are
subject to no liens, mortgages, pledges, encumbrances or charges of
any kind except liens for real property taxes not delinquent or
being contested in good faith and, in either case, for which adequate
provision has been made, statutory mechanics and material man's liens
on the real estate for work or goods supplied thereto in the ordinary
course of business, liens, covenants, restrictions, easements and
encumbrances disclosed on the public record, and such other
exceptions as are disclosed in the Disclosure Schedule. The Company
has received no notice from public authority having jurisdiction
over such matters that there is currently existing any material
violation of any building code, zoning ordinance or similar laws
or regulations pertaining to Real Property or improvements owned
by the Company or any Subsidiary. The Seller has furnished to
Buyer copies of all leases referred to in the Disclosure Schedule.
6.13 Licenses, Permits and Orders. To Seller's knowledge, the Company
and each Subsidiary has all material registrations, approvals,
licenses and other permits (collectively, the "Permits") which are
necessary for the operation of its business as now being conducted.
To Seller's knowledge, neither the Company nor any Subsidiary is in
material breach or operating in material violation of any such
Permits or any condition to the grant or continued effectiveness
thereto. To Seller's knowledge, such Permits will be in full
force and effect immediately following the Effective Time.
6.14 Directors, Officers. The Disclosure Schedule contains a complete
and accurate list of all officers and directors of the Company and
each Subsidiary. Buyer acknowledges that Seller will retain and
close all bank accounts and lock box accounts presently used by
the Company and the Subsidiaries.
6.15 Litigation. The Disclosure Schedule contains a list of each pending
lawsuit, claim, administrative proceeding, arbitration or
governmental investigation to which the Company or any Subsidiary is
a party. To the knowledge of Seller, there are no other claims,
legal actions or governmental investigations threatened against the
Company or any Subsidiary which are reasonably likely to have a
material adverse effect on the Company's consolidated business.
There are no orders, decrees, judgments or agreements with any
court or governmental authority to which the Company or any
Subsidiary is a party or, to Seller's knowledge, by which the
Company's or any Subsidiary's operations or assets are bound.
6.16 Proprietary Rights. The Disclosure Schedule sets forth a list of
all patents, trademarks, trade names, service marks, copyrights
and pending applications for any of the foregoing that are material
to the Company's and the Subsidiaries' operations (the "Proprietary
Rights"). The Company or the Seller, as the case may be, owns those
issued registrations and those applications for registrations listed
in the Disclosure Schedule and has not sold, transferred, licensed
or encumbered any such issued registrations or applications. Seller
shall transfer to the Company any such registrations or applications
owned by Seller, other than the "Valmont Electric" and "Valmont
Electric plus design" marks which shall be retained by Seller. To
Seller's knowledge, all such issued registrations are valid and
subsisting. To the knowledge of Seller, there are no impediments to
the Company's and the Subsidiaries' continued right to use without
additional consideration the Proprietary Rights and other material
trade secrets currently used in their business. Neither the Company
nor any Subsidiary is bound by nor a party to any options, licenses
or agreements that affect the Company's or the Subsidiaries'
current use of the Proprietary Rights or other material trade
secrets. Neither the Company, any Subsidiary nor Seller have been
informed in writing of any claims or suits pending or threatened
against the Company or any Subsidiary which claim an infringement by
the Company or any Subsidiary of any patents, copyrights, licenses,
trademarks, service marks, trade names or trade secrets of third
parties, nor to Seller's knowledge is there any basis therefor.
6.17 Compliance with Laws. To Seller's knowledge, the Company and the
Subsidiaries are in compliance with all applicable federal, foreign
(including Mexico or any political subdivision or agency thereof),
state and local laws, ordinances, rules and regulations. The
Disclosure Schedule sets forth for the past twelve (12) months, in
respect to the Company and the Subsidiaries, all investigations,
inspections or citations received by the Company or the Subsidiaries,
or of which the Seller has knowledge, under any health,
environmental, safety or other applicable laws and regulations
and under any other federal, state or local laws or regulations,
together with the results thereof and a brief description of all
corrective or other action taken with respect thereto, together
with any such investigations, inspections or citations received
by the Company or the Subsidiaries during the four (4) years prior
to such twelve month period to the extent unresolved or unremedied.
6.18 List of Contracts and Other Data. The Disclosure Schedule sets
forth a listing of all contracts to which the Company or any
Subsidiary is a party, except: (a) purchase and sales orders entered
into in the ordinary course of business; (b) any contract which has
a remaining term of less than two (2) years from the date of this
Agreement involves an aggregate receipt or expenditure after the
date of this Agreement of less than $50,000; (c) any contract which
has a term in excess of two (2) years and involves an aggregate
receipt or expenditure by the Company or any Subsidiary of less
than $50,000 and was entered into in the ordinary course of business;
and (d) any contract that may be terminated by the Company or any
Subsidiary on no more than ninety (90) days notice without penalty
(collectively, the "Material Contracts"). Except as set forth in
the Disclosure Schedule:
(i) All Material Contracts are in full force and effect and are
valid and binding on the Company or Subsidiary party thereto,
and to Sellers' knowledge, all other parties thereto, and none
of them is subject to any material amendment or modification
that is not set forth within the four corners of the documents
that have been made available to Buyer pursuant to clause (iv)
below and listed in the Seller
Disclosure Schedule;
(ii) Neither the Company or any Subsidiary nor, to Seller's
knowledge, any other party to any Material Contract is in
material breach of any provision of, in material violation of,
or in default under the terms of any Material Contract.
(iii) No event has occurred which, with or without the giving of
notice or passage of time or otherwise, would constitute a
material default under or result in the material breach of
any Material Contract by the Company or any Subsidiary or
to Seller's knowledge by any other party.
(iv) Seller has made available to Buyer accurate and complete
copies of each Material Contract.
6.19 Related Party Transactions. The Disclosure Schedule sets forth a
description of all significant services provided by Seller or any of
its Affiliates to the Company or any Subsidiary, as well as material
transactions between the Company or any Subsidiary on one hand, and
Seller or any of its Affiliates on the other, except for those
services or transactions occurring in the ordinary course of
business on an arms' length basis.
6.20 Labor Relations. Neither the Company nor any Subsidiary is or has
been a party to or bound by any collective bargaining agreement.
There are no material controversies pending or, to the knowledge of
Seller, threatened between the Company or any Subsidiary and their
employees. There are no claims pending or, to Seller's knowledge,
threatened against the Company or any Subsidiary in respect to any
unfair labor practices or age, sex, religion or national origin
discrimination complaints before any federal, state or local
board, department, commission or agency. There are no existing
or, to the knowledge of Seller, threatened labor strikes or material
disputes or grievances affecting the Company or any Subsidiary.
To Seller's knowledge, the Company and each Subsidiary has complied
and is in compliance in all material respects with all foreign,
federal, state and local laws relating to employment, employment
discrimination, wages, hours, working conditions, collective
bargaining and the payment of social security, unemployment and
similar taxes, and neither the Company nor any Subsidiary is
liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing; and there are no
proceedings, investigations or citations pending or to Seller's
knowledge, threatened, before any court, governmental agency or
instrumentality or arbitrator relating to any failure to comply
therewith.
6.21 Employee Plans. For purposes of this Section 6.21, the term
"Employee Plan" includes all pension, retirement, disability,
medical, dental or other health insurance plans, life insurance
or other death benefit plans, profit sharing, deferred compensation,
stock option, bonus or other incentive plans, vacation benefit
plans, severance plans or other employee benefit plans or
arrangements, including, without limitation, any "pension plan"
("Pension Plan") as defined in Section 3(2) of ERISA, and any
"welfare plan", as defined in Section 3(1) of ERISA, whether or
not any of the foregoing is funded covering any current or former
employee, director or consultant of the Company or any Subsidiary,
(a) to which the Company or any Subsidiary is a party or by which
it is bound; or (b) with respect to which the Company or any
Subsidiary has made any payments or contributions; or (c) to
which the Company or any Subsidiary may otherwise have any
liability. "Employee Plan" shall not include any government
sponsored employee benefit arrangements. Except as reflected in
the Disclosure Schedule:
6.21.1 There are no Employee Plans.
6.21.2 The Company, each Subsidiary, each Employee Plan, and the
administrator and fiduciaries of each Employee Plan have
complied in all material respects with all applicable legal
requirements governing each Employee Plan. No material
lawsuits, investigations or complaints to, or by, any
person or government entity, are pending or to Seller's
knowledge, threatened, with respect to any Employee Plan.
6.21.3 Neither the Company, any Subsidiary, any Employee Plan,
nor to Seller's knowledge, any administrator or fiduciary
of any Employee Plan has taken any action, or failed to
take any action, that could subject it or him or her or
any other person to any material liability for any excise
tax or for breach of fiduciary duty with respect to or
in connection with any Employee Plan.
6.21.4 Neither the Company, any Subsidiary, any Employee Plan,
any administrator or fiduciary of any Employee Plan nor
any other person has any material liability to any plan
participant, beneficiary or other person under any
provision of ERISA or any other applicable law by reason
of any payment of benefits or other amounts or failure to
pay benefits or any other amounts, or by reason of any
credit or failure to give credit for any benefits or
rights (such as, but not limited to, vesting rights) with
respect to benefits under or in connection with any
Employee Plan.
6.21.5 Neither the Company nor any Subsidiary is a participating
employer in a multi-employer plan (as defined in Section
3(37) of ERISA) or has any liability (contingent or
otherwise) by reason of another employer's withdrawal
from any such plan.
6.21.6 None of the Pension Plans have incurred an "accumulated
funding deficiency" as defined in Section 412 of the
Code nor, in the case of any Pension Plan subject to
Title IV of ERISA, has "benefit liabilities" (as defined
in Section 4001 of ERISA) on a termination basis in excess
of its assets.
6.21.7 No liability under Subtitle C or D of Title IV of ERISA or
under any applicable Mexican law has been or is expected
to be incurred by the Company or any Subsidiary with
respect to any ongoing, frozen or terminated "single
employer plan", within the meaning of Section 4001(a)(15)
of ERISA.
6.21.8 All accrued obligations of the Company or any Subsidiary
for payments by it to trust or other funds or to any
governmental or administrative agency, with respect to
pension benefits, unemployment compensation benefits,
social security benefits or any other benefits for
employees of the Company or any Subsidiary have been paid
or adequate accruals therefor have been made in the
Financial Statements, and none of the foregoing has been
rendered not due by reason of any extension, whether at
the request of the Company or any Subsidiary or otherwise.
6.21.9 All obligations of the Company or any Subsidiary for
salaries, vacation and holiday pay, bonuses and other
forms of compensation which were payable to its officers,
directors or other employees have been paid or adequate
accruals therefor have been made in the Financial
Statements.
6.21.10The Company and the Subsidiaries are in compliance with the
requirements of Sections 162(k) (to the extent applicable
prior to its amendment by the Technical and Miscellaneous
Revenue Act of 1988) and 4980B of the Code and Section
601 of ERISA.
6.21.11No Employee Plan provides welfare benefits subsequent to
termination of employment to employees or their
beneficiaries (except to the extent required by applicable
state insurance laws and Title I, Part 6 of ERISA). No
benefits due under any Employee Plan have been forfeited
subject to the possibility of reinstatement (which
possibility would still exist at or after the Closing).
Neither the Seller, the Company nor any of its Subsidiaries
has undertaken to maintain any Employee Plan for any
specified period of time and each such plan is terminable
at the sole discretion of the sponsor thereof, subject only
to such constraints as may be imposed by applicable law.
6.21.12CCC has paid all monies due any governmental agency with
respect to any legally required social programs such as
health insurance, pensions and any other programs.
6.22 Environmental. To Seller's knowledge, (a) neither the Company nor
any Subsidiary: (i) has caused any releases of any hazardous
substance on, in, under, or at any real property now, or previously
owned, leased, or operated by the Company or any Subsidiary which
requires or may require remediation or clean-up pursuant to
applicable law, or (ii) has disposed of hazardous wastes in, at or
under the Real Property except in compliance with applicable laws,
and (b) no hazardous substances which require or may require
remediation or clean up pursuant to applicable law are present in,
at, or under the Real Property. To Seller's knowledge, neither the
Company nor any Subsidiary has conducted or engaged in any
operation or activity involving the use, storage or disposal of any
hazardous substance except as authorized by permit or applicable
law. There is no pending or, to Seller's knowledge, threatened,
lawsuit, action, claim or proceeding by any third party alleging or
asserting that the Company or any Subsidiary has violated or is
about to violate any applicable environmental law or regulation or
that the Company or any Subsidiary is responsible for the clean up
or remediation of any hazardous substances nor to Seller's
knowledge is there any basis therefor. There are no underground
storage tanks at any of the Real Properties.
6.23 Brokers and Finders. Except for Goldman, Sachs & Co. (whose fees
shall be paid by the Seller), neither Seller, the Company, or any
Subsidiary has employed any investment banker, broker or finder or
incurred any liability for any brokerage fees, commissions or
finders fees in connection with the transactions contemplated by
this Agreement.
6.24 Absence of Undisclosed Liabilities. Except to the extent reflected
or reserved against in the Interim Financial Statements, or incurred
in the ordinary course of business after the date of such financial
statements, to the knowledge of Seller, neither the Company nor any
of the Subsidiaries has any material liabilities or obligations of
any nature, whether accrued, absolute, contingent, or otherwise
(including without limitation liabilities as guarantor or otherwise
with respect to obligations of others) and whether due or to become
due, provided, that no representation or warranty is made in this
Section 6.24 with respect to warranty or product liability
obligations.
6.25 Accounts Receivable. All accounts and notes receivable reflected in
the Interim Financial Statements, and all accounts and notes
receivable arising subsequent to the date of such financial
statements, have arisen in the ordinary course of business of the
Company and the Subsidiaries and represent valid obligations to
them.
6.26 Suppliers and Customers. The Disclosure Schedule identifies the
ten largest suppliers and ten largest customers of the Company
and the Subsidiaries, taken as a whole, over the twelve-month
period ending on the date hereof.
6.27 Employment of Officers, Employees. The Disclosure Schedule sets
forth an accurate and complete list setting forth the name and
current annual salary and other compensation payable by the
Company or any of the Subsidiaries to each exempt non-hourly
employee of any of them, including any obligations of any of them
to increase such salary and/or other compensation in the future
(whether based on any contingency or otherwise).
6.28 Disclosure. To Seller's knowledge, the representations and
warranties of Seller in this Agreement (including the Disclosure
Schedule and the other exhibits and schedules hereto), do not
contain any untrue statement of a material fact or omit to state
a material fact required to be stated herein or therein or
necessary to make the statements contained herein not false or
misleading in light of the circumstance in which made.
6.29 Insurance. The Seller has not received any notices from any
insurer or its agent requiring performance of any work with
respect to any of the real property owned by the Company or any
Subsidiary (the "Owned Real Properties") or canceling or
threatening to cancel any policy of insurance.
6.30 Taxes; Special Assessments. There are no unpaid or outstanding
real estate or other taxes or assessments on or with respect to
any of the Owned Real Properties or any part thereof (except only
real estate taxes not yet due and payable). No abatement
proceedings are pending with reference to any real estate taxes
assessed against any of the Owned Real Properties. There are no
betterment assessments or other special assessments presently
pending with respect to any portion of any of the Owned Real
Properties, and Seller has not received any notice or has any
knowledge of any such special assessment being contemplated.
6.31 Eminent Domain. There are no pending eminent domain proceedings
against any of the Owned Real Properties or any part thereof, and
to the Seller's knowledge, no such proceedings are presently,
threatened or contemplated by any taking authority.
6.32 Construction Work. All contractors, subcontractors and other
persons or entities furnishing work, labor, materials, or
supplies for construction of or additions to any of the Owned
Real Properties, or for tenant improvements, have been paid in
full or provided for in a manner satisfactory to the Seller,
and to the Seller's knowledge, there are no claims pending in
connection therewith.
6.33 Space Leases. For all purposes of this Agreement the term Space
Leases shall mean leases, licenses, and agreements, whether
written or oral, relating to the use or occupation of space in or
on the Owned Real Properties by persons other than the Company or
any Subsidiary. All of the Space Leases are listed in the
Disclosure Schedule, and constitute the only agreements and
understandings relating to leasing or licensing of space in any
of the Owned Real Properties, and the copies of the Space Leases
furnished by the Seller to the Buyer are true and complete.
There are no occupancies, rights, privileges, or licenses in or
to any of the Owned Real Properties other than pursuant to the
Space Leases so listed in the Disclosure Schedule. The Space
Leases are unmodified and in full force and effect, in accordance
with their respective terms, without any default thereunder, nor
are there any defenses, counterclaims, offsets, concessions, or
rebates with respect thereto, and neither the Seller nor the
Company or any Subsidiary has given or made, or received, any
notice of default, or any claim, that remains uncured or
unsatisfied, with respect to any of the Space Leases and, to the
Seller's knowledge, there is no basis for any such claim or
notice of default by any tenant. No leasing, brokerage or like
commissions, fees or payments are due from the Seller, the Company
or any Subsidiary in respect of the Space Leases.
7. Representations and Warranties of Buyer. Buyer represents,
warrants and covenants to and with Seller as follows:
7.1 Organization, Power. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Oklahoma and has the corporate power to own, operate
and lease its properties and to carry on its business as now
being conducted.
7.2 Corporate Authorization; Binding Effect. This Agreement and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on
the part of Buyer and constitutes the legal, valid and binding
obligation of Buyer enforceable in accordance with its terms.
Buyer has previously furnished Seller with a copy of the
resolutions of Buyer's Board of Directors authorizing the
transactions contemplated herein, certified by the Secretary or
any Assistant Secretary of Buyer.
7.3 No Government or Third-Party Authorization Required. Except for
compliance with the HSR Act, and except for required Mexican
governmental filings, no consent, authorization or approval of,
or exemption by, or filings with, any governmental, public or
self-regulatory body or authority or any other Person is required
in connection with the execution, delivery and performance of
this Agreement by Buyer.
7.4 Brokers and Finders. Buyer has not employed any investment
banker, broker or finder or incurred any liability for any
brokerage fees, commissions or finders fees in connection with
the transactions contemplated by this Agreement.
7.5 Effect of Agreement. Subject to compliance with the HSR Act and
compliance with any applicable Mexican anti-trust laws, the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not,
with or without the giving of notice or the lapse of time or
both, (a) violate any provision of law, statute, rule or
regulation to which Buyer is subject; (b) violate any judgment,
order, writ or decree of any court applicable to Buyer; or (c)
to Buyer's knowledge result in the breach of, or conflict with,
any term, covenant or condition of, result in the modification
or termination of, or constitute a default under, any corporate
charter, by-law, contract or other material agreement to which
Buyer is a party.
7.6 Financing. Buyer has adequate financing as may be necessary
to pay the Purchase Price and to otherwise fulfill its financial
obligations set forth in this Agreement. The transactions
contemplated herein are not contingent upon Buyer's ability to
obtain financing from any third party.
7.7 Terms of Sale. Buyer acknowledges that EXCEPT AS OTHERWISE
SPECIFICALLY SET FORTH IN THIS AGREEMENT OR OTHER
AGREEMENTS OR DOCUMENTS EXECUTED AND DELIVERED BY
SELLER PURSUANT TO THIS AGREEMENT ("ANCILLARY
AGREEMENTS"), THE PURCHASED STOCK IS BEING SOLD TO BUYER
WITHOUT ANY REPRESENTATIONS, OR WARRANTIES, EXPRESS OR
IMPLIED, OTHER THAN THE REPRESENTATIONS AND WARRANTIES
EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY ANCILLARY
AGREEMENT. NO CLAIM SHALL BE MADE AGAINST SELLER IN
RESPECT OF ANY WARRANTY, REPRESENTATION, INDEMNITY,
COVENANT, UNDERTAKING OR OTHERWISE ARISING OUT OF OR IN
CONNECTION WITH THE TRANSACTIONS, OR OTHERWISE
RELATING TO THE COMPANY, THE SUBSIDIARIES OR THEIR
RESPECTIVE ASSETS, LIABILITIES OR OPERATIONS CONTEMPLATED
HEREIN EXCEPT WHERE THE SAME IS EXPRESSLY CONTAINED IN
THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, AND BUYER
CONFIRMS THAT IT HAS NOT RELIED ON ANY WARRANTY,
REPRESENTATION, INDEMNITY, COVENANT OR UNDERTAKING OF
ANY PERSON WHICH IS NOT EXPRESSLY CONTAINED IN THIS
AGREEMENT OR ANY ANCILLARY AGREEMENT.
8. Covenants.
8.1 Covenants of Seller.
8.1.1 Conduct of Business. During the period from the date hereof
to the Closing Date, Seller covenants that the Company and
the Subsidiaries shall conduct and operate their business in
the usual and ordinary course and shall not, without the
prior written consent of Buyer:
(a) Except in the ordinary course of business or as
required by any written employment agreement listed
in the Seller Disclosure Schedule, increase the
compensation of any employee's pay or agree to pay a
pension, retirement allowance or other employee
benefit to any employees not required by any existing
plan, agreement or arrangement to any such person;
(b) Execute any agreement the terms of which would be
violated by the consummation of the transactions
contemplated by this Agreement;
(c) Agree to become subject to any material liability or
obligation, except liabilities and obligations
incurred in the ordinary course of business;
(d) Enter into or terminate any material lease of real or
personal property;
(e) Sell, abandon or otherwise dispose of, or pledge,
mortgage or otherwise encumber any of the assets of
the other than in the ordinary course of business,
and other than the transfer of the property and assets
described on Exhibit 8 hereto (the "Danville
Property"), any fixed assets located at the Danville
Property and the note receivable from A.J. Glazer to
Seller;
(f) Amend any charter documents or by-laws or take any
action with respect to any such amendment;
(g) Enter into any collective bargaining agreement;
(h) Except as otherwise contemplated herein (and other
than adjustments in the intercompany accounts
consistent with past practices), declare or make any
payment or distribution to any shareholder, or
purchase, redeem or otherwise acquire, any shares of
Purchased Stock; or
(i) Merge or consolidate with any other corporation or
acquire or agree to acquire any stock or substantially
all of the assets of any other person, firm,
association, corporation or other business
organization.
8.1.2 Preservation of Business. Seller covenants that, from the
date hereof through the Closing Date, the Company and the
Subsidiaries shall use all reasonable efforts to preserve
intact their respective business organization, to keep
available the services of the present officers and key
employees thereof, and to preserve the good will of
those having business relationships with the Company.
8.1.3 Information and Access. Seller, the Company and the
Subsidiaries shall give Buyer and its counsel, accountants
and other representatives access during normal business hours
to all properties, books, contracts, documents and records
with respect to the affairs of the Company and the
Subsidiaries as Buyer may reasonably request at such times
and in such manner as will not disrupt or interfere with the
conduct of the Company's business. All such information
shall be held confidential by Buyer pursuant to the terms
of that certain confidentiality agreement dated October 7,
1996 between Seller and Buyer (the "Confidentiality
Agreement").
8.1.4 Cash Management. The Company and the Subsidiaries shall
continue to participate in Seller's cash management program
and, notwithstanding anything in this Agreement to the
contrary, all cash generated by the Company or the
Subsidiaries prior to the Effective Time (including all lock
box receipts) shall be retained by Seller and shall not be
included in the Preliminary Closing Balance Sheet or the
Closing Balance Sheet.
8.2 Additional Agreements. As soon as possible following the date
hereof (and in all events with respect to the HSR Act, no later
than seven (7) business days following the date hereof), each of
Buyer and Seller shall file all requisite documents and
notifications required under the HSR Act and any applicable
Mexican anti-trust laws. All filing fees required by the HSR Act
shall be paid by Buyer. Each of the parties hereto agrees to use
its 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
under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including
using its best efforts to satisfy the conditions precedent to the
obligations of any of the parties hereto, to obtain all necessary
waivers, consents and approvals required in connection with the
transactions contemplated hereby, to effect all necessary
registrations and filings (including, but not limited to, filings
under the HSR Act and any applicable Mexican anti-trust laws).
In order to obtain any necessary governmental or regulatory action
or non-action, waiver, consent, extension or approval, Buyer agrees
to take all reasonable actions and to enter into all reasonable
agreements as may be necessary to obtain timely governmental or
regulatory approvals and to take such further action in connection
therewith as may be necessary.
8.3 Certain Covenants. Seller shall comply and shall cause each of its
Affiliates to comply with all of the provisions of this Section 8.3.
(a) Confidential Information. Seller and its Affiliates shall
maintain the confidentiality of all confidential, sensitive,
or proprietary information of the Company and/or the
Subsidiaries, including without limitation with respect to
their respective businesses, finances, affairs, and
technology, which shall be and remain the exclusive property
of the Company and/or its Subsidiaries, as the case may be,
and unless previously authorized in writing by Buyer,
and except with respect to information that has otherwise
become public through no action or omission on the part of
Seller or any of its Affiliates, neither Seller nor any of
its Affiliates shall disclose any such information to any
third party, or use it for any purpose.
Notwithstanding the foregoing, if Seller or any of its
Affiliates is required by law or regulation to disclose any
confidential, sensitive, or proprietary information of the
Company and/or the Subsidiaries, the Seller or such Affiliate
will provide the Buyer with prompt notice of such disclosure
obligation so that it may seek a protective order or take
other appropriate action and/or waive compliance with this
section to the extent of such required disclosure. In the
absence of such a waiver, if Seller or any of its Affiliates
is, in the opinion of counsel, compelled to disclose any
such information upon pain of liability for contempt or other
censure or penalty, such Person may disclose such information
to the relevant court or other tribunal or governmental
authority without liability hereunder, but notwithstanding
such disclosure, such information shall remain confidential
under this section after such disclosure.
(b) Non-Competition, Etc. For a period of five years after the
Closing Date (which period shall automatically be extended
by a period of time equal to any period in which Seller
and/or any of its Affiliates is in breach of any obligations
under this Section 8.3; including any such extension, the
"Restricted Period"), neither Seller nor any of its Affiliates
shall engage, directly or indirectly, anywhere in the world
(Seller hereby acknowledging that the Company and the
Subsidiaries currently are doing business throughout the
world) as a proprietor, equityholder, investor (except as a
passive investor holding not more than 1% of the outstanding
capital stock of a publicly held company), lender, partner,
director, officer, employee, consultant, or representative,
or in any other capacity, in the development, manufacture,
marketing, or sale of ballasts for discharge lamps (the
"Restricted Business").
Notwithstanding the foregoing, in the event Seller acquires or
purchases during the Restricted Period, directly or
indirectly, any corporation, assets, business or division or
affiliate thereof, partnership, sole proprietorship, or any
other legal entity, engaged in a range of businesses that
includes a Restricted Business (provided that the Seller shall
not directly or indirectly acquire during the Restricted
Period any business that derives 50% or more of its aggregate
annual sales from the Restricted Business), the Buyer is
hereby given an exclusive option to acquire the Restricted
Business on an "Allocated Basis" at any time within 180 days
following Buyer's receipt of notice of such acquisition or
purchase. The Allocated Basis assigned to the Restricted
Business shall be determined by multiplying that fraction
consisting of the Restricted Business' sales as the numerator
and total sales of the acquired company as the denominator
times the total purchase price (including assumed debt) paid
by Seller. In the event Buyer elects not to acquire the
Restricted Business, Seller shall, within twenty-four (24)
months following receipt of written notice of such election,
either discontinue or sell the Restricted Business. Seller
shall have the right to operate the Restricted Business
during such period without restriction under this Section
8.3(b) or Section 8.3(d). Seller shall give Buyer prompt
notice of any business so acquired, together with such
information as may reasonably be required to permit Buyer to
determine whether to exercise its option to acquire the
Restricted Business.
(c) Non-Solicitation of Employees. For one (1) year following the
Closing Date, neither Seller nor any of its Affiliates shall,
without Buyer's prior consent, hire or, directly or
indirectly, recruit, solicit, induce, or attempt to induce
any of the employees of the Company or any of the Subsidiaries
to terminate their employment with the Company or such
Subsidiary.
(d) Non-Solicitation of Customers. During the Restricted Period,
neither Seller nor any of its Affiliates shall directly or
indirectly solicit, divert, take away, or attempt to divert
or take away, from the Company or any of the Subsidiaries any
of the business or patronage of any of their respective
customers or induce or attempt to induce any such Person to
reduce the amount of business it does with the Company or
any of the Subsidiaries, provided, however, that nothing in
this Section shall prevent or restrict Seller from operating
any Restricted Business pursuant to the second paragraph of
Section 8.3(b).
(e) Non-Disparagement. Neither Seller nor any of its Affiliates
shall disparage, deprecate, or make any negative comment
with respect to the Company or any of the Subsidiaries or
their respective businesses, operations, properties or
prospects.
(f) Equitable Remedies. Seller, for itself and each of its
Affiliates, hereby acknowledges that any breach by any of
them of their respective obligations under this Section 8.3
would cause substantial and irreparable damage to Buyer,
the Company, and the Subsidiaries, and that money damages
would be an inadequate remedy therefor, and accordingly,
acknowledges and agrees that Buyer, the Company, and/or
the Subsidiaries shall be entitled to an injunction,
specific performance, and/or other equitable relief to
prevent the breach of such obligations (in addition to
all other rights and remedies to which Buyer, the Company,
and/or the Subsidiaries may be entitled in respect of any
such breach).
(g) Modification. In the event that a court of competent
jurisdiction determines that any of the provisions of
this Section 8.3 would be unenforceable as written
because they cover too extensive a geographic area,
too broad a range of activities, or too long a period
of time, or otherwise, then such provisions shall
automatically be modified to cover the maximum geographic
area, range of activities, and period of time as may be
enforceable, and in addition, such court is hereby
expressly authorized so to modify this Agreement and
to enforce it as so modified. No invalidity or
unenforceability of any section of this Agreement or
any portion thereof shall affect the validity or
enforceability of any other section or of the remainder of
such section.
8.4 SEC Financial Statements. Seller acknowledges that Buyer may
request Deloitte to audit (at Buyer's sole cost and expense) the
consolidated balance sheet of the Company and the Subsidiaries
as of December 30, 1995 and/or December 31, 1994 together with the
related statements of income,
stockholders equity and cash flows for the years then ended. In
such event, Seller will reasonably cooperate with Buyer, will not
impede such an audit and will not withhold consent to such an
audit or to Buyer's use of such audited financial statements.
All out-of-pocket costs related to such audit (including, without
limitation, any costs or charges of Deloitte) shall be paid by
Buyer.
8.5 VBT/EBT. Seller represents that (i) the Company and Electronic
Ballast Technology, Inc. ("EBT") are parties to (x) an Exclusive
License Agreement dated July 14, 1988 (the "License Agreement"),
(y) a Joint Venture Agreement dated July 14, 1988 (the "Joint
Venture Agreement"), and (z) a Shareholder Agreement dated
November 9, 1988 (the "Shareholder Agreement") (such Agreements
referenced in (x), (y) and (z) hereafter collectively referred
to as the "EBT Agreements"), (ii) pursuant to the Joint Venture
Agreement and the Shareholder Agreement, the Company and EBT have
caused VBT, Inc. ("VBT") to be formed, (iii) 80% of the capital
stock of VBT is owned by the Company and 20% is owned by EBT,
(iv) pursuant to the License Agreement, the Company agreed to
pay certain royalties to EBT (the "Royalties"), (v) the
Company has paid no Royalties to EBT for sales made during
calendar years 1995 and 1996 and there is a dispute between
the Company and EBT with respect to whether such Royalties are
payable and, if so, in what amounts, (vi) notwithstanding the
non-payment of Royalties for sales made in 1995 and 1996, the
Company has accrued, and will continue to accrue, on a monthly
basis, a liability with respect to Royalties, which accrual, as
of November 30, 1996, was $948,075 (the "EBT Accrual"). With
respect to the foregoing, the parties hereto agree as follows:
8.5.1 Seller shall use commercially reasonable efforts pursuant to
the terms of this Section 8.5.1 to negotiate a settlement
with EBT on commercially reasonable terms as soon as
reasonably practicable pursuant to which (i) the Company
will acquire EBT's interest in VBT, (ii) the License
Agreement shall be deemed fully paid, and the Company and
its Affiliates shall not be required to pay any additional
Royalties and (iii) Seller will procure a release of the
Company and its Affiliates from liability under the License
Agreement, the Joint Venture Agreement and the Shareholder
Agreement (such settlement, and whether or not any such
settlement is reached, any and all royalty amounts paid or
payable in respect of sales during 1997 and 1998, and/or
any amounts that are finally determined by a court of
competent jurisdiction to be owed by the Company and the
Subsidiaries to EBT pursuant to the License Agreement, the
Joint Venture Agreement and/or the Shareholder Agreement
(net of any amounts determined pursuant to such settlement
or such final determination to be owed by EBT to the Company
and/or the Subsidiaries pursuant thereto) are herein called
the "Settlement").
8.5.2 The Company shall pay to EBT any amounts pursuant to the
Settlement (the "EBT Payments"). In the event the aggregate
EBT Payments are less than the sum of the accrual on the
Company's financial statements as of the Closing Date
relating to EBT royalties, plus One Million Dollars
($1,000,000) (such sum the "Accrual"), the Company or the
Buyer shall pay to Seller at Closing (or at such later
date to the extent the EBT Payments are made after Closing),
one-half () of the difference between the Accrual and the
EBT Payments. In the event the aggregate EBT Payments exceed
the Accrual, the Seller shall pay to the Buyer at Closing
(or at such later date to the extent EBT Payments are made
after Closing) one-half () of such excess.
8.5.3 Buyer acknowledges that Seller shall control the Settlement
and, subject to the other provisions of this Section 8.5,
Buyer shall reasonably cooperate with Seller in connection
with the Settlement. Notwithstanding any other provisions
hereof to the contrary, Seller shall not effect or enter
into any Settlement in excess of $2,000,000 without the
Buyer's prior consent, such consent not to be unreasonably
withheld.
8.5.4 Seller shall defend Buyer, the Company and the Subsidiaries
with respect to any claim or litigation involving the EBT
Agreements including without limitation the Royalties, and
Seller shall control and pay the costs and expenses relating
to such defense. All amounts owing to EBT which result from
said litigation (either through settlement or as determined
by the court hearing such matter) shall be paid pursuant to
the foregoing terms of this Section 8.5.
9. Conditions Precedent to Obligations of Buyer. The obligation of
Buyer to consummate the transactions contemplated herein is subject to the
satisfaction, as of the Closing Date, of all of the following conditions:
9.1 Accuracy of Representations and Warranties. The representations
and warranties of Seller contained in this Agreement shall have
been true in all material respects when made and, in addition,
shall be true in all material respects on and as of the Closing
Date with the same force and effect as though made on and as of
the Closing Date.
9.2 Performance of Agreements. Seller shall have performed all
material obligations and complied, in all material respects,
with all covenants and conditions contained in this Agreement
to be performed and complied with by it on or prior to the
Closing Date.
9.3 Certificate. At the Closing, Seller shall have delivered to
Buyer an officer's certificate, dated as of the Closing Date,
with respect to the obligations set forth in Sections 9.1 and 9.2.
9.4 HSR Act. All applicable waiting periods specified under any
applicable Mexican anti-trust laws, as well as all applicable
waiting periods specified in the HSR Act, shall have expired or
terminated early without receipt from the Mexican Federal
Competition Commission or the Federal Trade Commission or
Department of Justice, as the case may be, of any unwithdrawn
objection or notice of possible objection to the transactions
contemplated hereby.
10. Conditions Precedent to Obligations of Seller. The obligation of
Seller to consummate the transactions contemplated herein is subject to the
satisfaction, at or prior to the Closing Date, of all of the following
conditions:
10.1 Accuracy of Representations and Warranties. The representations
and warranties of Buyer contained in this Agreement shall have
been true in all material respects when made and, in addition,
shall be true in all material respects on and as of the Closing
Date with the same force and effect as though made on and as of
the Closing Date.
10.2 Performance of Agreements. Buyer shall have performed all
material obligations and complied, in all material respects,
with all covenants contained in this Agreement to be performed
and complied with by it at or prior to the Closing Date.
10.3 Certificate. At the Closing, Buyer shall have delivered to
Seller an officer's certificate, dated as of the Closing Date,
with respect to the obligations set forth in Sections 10.1 and
10.2.
10.4 HSR Act. All applicable waiting periods specified under any
applicable Mexican anti-trust laws, as well as all applicable
waiting periods specified in the HSR Act, shall have expired or
terminated early without receipt from the Mexican Federal
Competition Commission or the Federal Trade Commission or
Department of Justice, as the case may be, of any unwithdrawn
objection or notice of possible objection to the transactions
contemplated hereby.
11. Termination.
(a) By Consent of Parties. This Agreement may be terminated
at any time by agreement of Buyer and Seller.
(b) For Other Reasons. In the event that (i) the Federal
Trade Commission or Department of Justice or the Mexican
Federal Competition Commission raises any objection to the
transactions contemplated hereby, which objection is not
withdrawn within 45 days after notice thereof is given,
(ii) any temporary restraining order, preliminary or
permanent injunction, or other order issued by any court
of competent jurisdiction, or other binding legal
restraint or prohibition preventing the consummation of
the transactions contemplated hereby shall at any time
be in effect for a period of more than 20 consecutive
days, or (iii) the Closing does not occur on or before
March 1, 1997, either Buyer or Seller may terminate this
Agreement at any time after the close of business on the
date such termination right arises hereunder by delivering
written notice to the other, provided that such failure to
close is not a result of a breach by the terminating party
of any obligations hereunder.
(c) Effect of Termination; Survival of Certain Provisions.
Any termination of this Agreement shall not affect the
rights or obligations of any party arising, or based on
actions or omissions occurring, before such termination,
including without limitation any breach of any
representation or warranty set forth herein. The
provisions of Sections 6 ("Representations and Warranties
of Seller"), 7 ("Representations and Warranties of
Buyer"), 12 ("Releases and Indemnifications") other than
Section 12.2 ("Releases"), and 14 ("Miscellaneous") hereof
shall survive any termination of this Agreement. In
addition, that certain Confidentiality Agreement dated
October 7, 1996 shall survive.
12. Indemnification and Releases.
12.1 Indemnification by Seller.
(a) Subject to the limitations set forth in Section 12.6
hereof, Seller shall indemnify, defend, and hold harmless
Buyer, the Company, and each of the Subsidiaries, and each
of their respective directors, officers, employees,
representatives, and other Affiliates (collectively,
"Buyer Indemnified Parties"), from and against any and all
claims, liabilities, obligations, losses, damages, costs,
and expenses, including without limitation the fees and
disbursements of counsel (collectively, "Damages") related
to or arising out of or in connection with any of the
following:
(i) any breach by Seller of any of its representations,
warranties, covenants, agreements, obligations, and/or
undertakings in this Agreement (including the
Disclosure Schedule and the other exhibits and
schedules hereto), or any other agreement, instrument,
certificate, or other document delivered by or on
behalf of Seller in connection with this Agreement or
any of the transactions contemplated hereby; and/or
(ii) the Danville Property (including the ownership,
control, use, and/or environmental contamination of
such property by any Person, including the Company
and/or any of the Subsidiaries); and/or
(iii) the litigation described in Exhibit 12.1, but only
to the extent that such Damages exceed the
corresponding reserve, if any, therefor set forth
in the final Closing Balance Sheet; and/or
(iv) Damages in respect of any personal injury, death,
and/or property damage caused by product sold by
the Company and/or any of the Subsidiaries before
the Effective Time (except as set forth in Section
12.1(b)).
(b) Seller shall reimburse the Company and the Subsidiaries for
(i) one-half of the excess over $4,000,000 of the aggregate
amount of out-of-pocket costs actually paid by them or any
of them in calendar 1997, and (ii) one-half of the excess
over $4,000,000 of the aggregate amount of out-of-pocket
costs incurred by them or any of them in calendar year
1998, in respect of the refunds with respect to, or repair
and/or replacement of, defective products manufactured
and/or sold by the Company and/or any of the Subsidiaries
before the Effective Time (regardless of whether such
repairs and/or replacements are done under warranty, or
for purposes of customer goodwill, or otherwise). The
Buyer, the Company and/or the Subsidiaries shall be
responsible for the first $4,000,000 of such costs incurred
by them in each of calendar 1997 and 1998, and for one-half
of the excess of such costs over such $4,000,000/year
threshold. Buyer shall keep, or cause to be kept, and
shall make available to Seller and its representatives,
all books and records necessary to account for, and track,
all such costs (including information identifying the
products (and date of manufacture thereof) repaired or
replaced and identifying such costs with such products).
Buyer shall provide written monthly reports with respect
to all repair and replacement activity which shall set
forth in reasonable detail, the products repaired and
replaced and the cost thereof. Such reports shall be
delivered to the Seller within twenty-five (25) days
following each month end. Buyer shall use reasonable
commercial efforts to minimize such costs and shall not
manipulate the payment of such costs so as to aggregate
costs in any particular calendar year.
12.2 Releases.
(a) Effective as of the Effective Time, Seller, for itself and
each of its respective Affiliates, and all of their
respective successors and assigns, hereby fully and
irrevocably releases, remises, and discharges the Company,
each of the Subsidiaries, and each of their respective
officers, directors, employees, agents, representatives,
successors, and assigns, from any and all Damages,
regardless of whether known or unknown, unknowable, or
otherwise, and regardless of whether absolute, contingent,
or otherwise, and regardless of whether at law, in equity,
or otherwise, without limitation, whether now existing or
arising in the future, but in each case only to the extent
based on or relating to actions, omissions, or events
occurring before the Effective Time, including without
limitation any amounts owing by the Company and/or any
of the Subsidiaries to Seller or any of its Affiliates on
intercompany accounts and any claims for indemnification
or contribution, whether in connection with any
misrepresentation contained in, or other breach of, this
Agreement or any other agreement or document entered into
or delivered in connection herewith, or otherwise.
Furthermore, each of such releasing Persons hereby
irrevocably agrees not to sue, or to commence, maintain,
or aid in the prosecution of any litigation, arbitration,
or other action or proceeding against or adverse to any of
such released Persons, or otherwise to seek any recourse
against any of such released Persons, in respect of any
matter hereby released or purported or attempted to be
released.
(b) Effective as of the Effective Time, Buyer, for itself and
each of its respective Affiliates (including, without
limitation, the Company and the Subsidiaries), and all of
their respective successors and assigns, hereby fully and
irrevocably releases, remises, and discharges the Seller
and each of its respective officers, directors, employees,
agents, representatives, successors, and assigns, from any
and all Damages, regardless of whether known, unknown,
unknowable, or otherwise, and regardless of whether absolute,
contingent, or otherwise, and regardless of whether at law,
in equity or otherwise, without limitation, whether now
existing or arising in the future, but in each case only to
the extent based on or relating to actions, omissions, or
events occurring before the Effective Time, including without
limitation any amounts owing by the Seller or its Affiliates
on intercompany accounts and any claims for indemnification
or contribution, provided, however, nothing shall release
the Seller or its Affiliates from any liability or
obligation under this Agreement or any agreement,
instrument, certificate or other document delivered pursuant
hereto. Furthermore, each of such releasing Person hereby
irrevocably agrees not to sue, or to commence, maintain or
aid in the prosecution of any litigation, arbitration, or
other action or proceeding against or adverse to any of such
released Persons, or otherwise to seek any recourse against
any of such released Persons, or otherwise seek any recourse
against any of such released Persons, in respect of any
matter hereby released or purported or attempted to be
released.
12.3 Indemnification of Buyer. Subject to Section 12.6, Buyer shall
indemnify, defend, and hold harmless Seller and its Affiliates
and each of their respective officers, directors, employees,
agents, representatives, successors, and assigns, from and
against any and all Damages related to or arising out of any
breach by Buyer of any of its representations, warranties,
covenants, agreements, obligations, and/or undertakings in this
Agreement (including any schedule or exhibit hereto), or any
other agreement, instrument, certificate, or other document
delivered by or on behalf of Buyer in connection with this
Agreement or any of the transactions contemplated hereby.
12.4 Claims. In the event that any party hereto (the "Indemnified
Party") desires to make a claim against another party hereto
(the "Indemnifying Party," which term shall include all
indemnifying parties if more than one) in connection with
any third-party litigation, arbitration, action, suit, proceeding,
claim, or demand at any time instituted against or made upon it
for which it may seek indemnification hereunder (as "Third-Party
Claim"), the Indemnified Party shall promptly notify the
Indemnifying Party of such Third-Party Claim and of its claims
of indemnification with respect thereto, provided, that failure
to give such notice shall not relieve the Indemnifying Party of
its indemnification obligations under this Section 12 except to
the extent, if at all, that the Indemnifying Party shall have
been actually prejudiced thereby. Upon receipt of such notice
from the Indemnified Party, the Indemnifying Party shall be
entitled to participate in the defense of such Third-Party Claim,
and if the following conditions are satisfied:
(i) The Indemnifying Party confirms in writing that it is
obligated hereunder to indemnify the Indemnified Party
in full (subject to the limitations set forth in Section
12.6 hereof) in respect of such Third-Party Claim; and
(ii) The Indemnified Party does not give the Indemnifying Party
written notice that the Indemnified Party has determined,
in its reasonable opinion, that a conflict of interest
makes advisable the separate representation of the
Indemnified Party by its own counsel;
then the Indemnifying Party may assume the defense of such
Third-Party Claim, and in the case of such an assumption, the
Indemnifying Party shall have the authority to negotiate,
compromise, and settle such Third-Party Claim provided, that the
Indemnifying Party shall not agree to the settlement of such
Third Party Claim unless either (x) such settlement includes an
unconditional release of all liabilities of each Indemnified
Party with respect to such Third Party Claim, or (y) the
Indemnifying Party acknowledges and agrees to indemnify, defend
and hold harmless the Indemnified Party with respect to any
portion of such Third Party Claim that is not so released. The
Indemnified Party shall retain the right to employ its own
counsel and to participate in the defense of any Third-Party
Claim, the defense of which has been assumed by the Indemnifying
Party pursuant hereto, but such Indemnified Party shall bear
and shall be solely responsible for its own costs and expenses
in connection with such participation.
12.5 Payment of Claims. In the event of any claims for indemnification
under this Section 12, the claimant shall advise the party or
parties who are required to provide indemnification therefor in
writing of the amount and circumstances surrounding such claim.
The Indemnifying Party shall pay any amounts that it agrees is
owed to an Indemnifying Party within thirty (30) days following
such agreement.
12.6 Limitations of Liability.
(a) Seller shall not be required to indemnify Buyer Indemnified
Parties hereunder except to the extent that the aggregate
amount of Damages for which all Buyer Indemnified Parties
are otherwise entitled to indemnification pursuant to this
Section 12, exceeds $750,000, whereupon such Buyer
Indemnified Parties shall be entitled (subject to the other
limitations set forth in this Section 12.6) to
indemnification in the amount of the excess over $750,000
of the aggregate amount of all such Damages; provided, that
indemnification in respect of Damages related to or arising
directly or indirectly out of or in connection with:
(i) any inaccuracy in or breach of any representation or
warranty made by the Company in the first sentence of
Section 6.1 ("Organization, Good Standing and
Corporate Power"), or in Sections 6.3 ("Corporate
Authorization; Binding Effect"), 6.6 ("No Options,
Warrants, Rights"), 6.7 ("Title to Company Shares"),
6.11 ("Taxes and Tax Returns"), 6.21 ("Employee
Plans"), 6.23 ("Brokers and Finders") hereof; and/or
(ii) any breach of Sections 4.1 and/or 4.2 (which relate
to the Purchase Price adjustment based on the Closing
Equity), 5 ("Employee Matters"), 8.3 ("Certain
Covenants"), 8.4 ("SEC Financial Statements"), 8.5
("VBT/EBT") and/or 13 ("Special Tax Indemnity")
hereof; and/or
(iii) the matters referred to in Sections 12.1(a)(ii)-(iv)
and/or 12.1(b) hereof;
(collectively, all of the matters referred to in this
proviso, "Unlimited Claims"), shall not be subject to any
limitations.
(b) The aggregate Damages payable by Seller pursuant to this
Section 12 with respect to all claims for indemnification
shall not exceed Five Million Dollars ($5,000,000), except
that (i) this limitation shall not apply to any Damages
related to or arising directly or indirectly out of or in
connection with any Unlimited Claims, for which
indemnification hereunder shall not be subject to any
limitations, and (ii) any Damages related to or arising
directly or indirectly out of or in connection with any
Unlimited Claims shall not count towards such $5,000,000
limitation.
(c) Seller shall not be liable for any Damages pursuant to this
Section 12 unless a written claim for indemnification is
given by an Indemnified Party to the Indemnifying Party with
respect thereto within two years after the Closing Date;
provided, that these time limitations shall not apply to any
Unlimited Claims, for which indemnification shall have no
limitation except as otherwise imposed by law.
(d) The amount of any Damages otherwise payable to any
Indemnified Party in respect of any breach of the
representations and warranties set forth in Sections 6
and/or 7 of this Agreement shall be reduced to the extent
that such Indemnified Party actually realizes, by reason
of such Damages, any Tax benefit that is not offset by any
corresponding Tax detriment of such Indemnified Party (e.g.
a reduction of any Tax deduction available to such
Indemnified Party) in respect of such Damages).
(e) No Indemnifying Party shall be liable pursuant to this
Section 12 for lost profits or special or consequential
Damages, even if notified in advance of the possibility
thereof.
(f) Each party shall use commercially reasonable efforts to
mitigate the Damages for which it may become entitled to
indemnification hereunder.
(g) The provisions of this Section 12 and of Section 13 hereof
shall be the exclusive basis for the assertion of claims
against, or the imposition of liability on, either party in
respect of the breach of any provision of this Agreement.
12.7 No Third-Party Beneficiary. The parties hereto acknowledge and
agree that the provisions of this Section 12 are solely for the
benefit of the Indemnified Parties and are not intended, and shall
not create, any third party beneficiary rights in any other person
or entity.
13. Special Tax Indemnity.
13.1 Transfer Taxes. Buyer and Seller shall equally pay all non-Income
Tax ("Transfer Taxes") imposed on or in connection with the sale
of the Purchased Stock or the deemed or actual sale of assets of
the Company or any Subsidiary.
13.2 Tax Sharing Agreements. Any tax sharing or other allocation
agreement with respect to Taxes to which the Company or any
Subsidiary is a party is hereby terminated as of the Closing Date
and shall have no further effect for any taxable period. This
Section 13 and Section 6.11 above shall control all of the parties'
respective obligations for Taxes affecting the Company and the
Subsidiaries and supersede any and all prior agreements, contracts
or understandings regarding the Company's and any such Subsidiary's
Taxes.
13.3 Section 338(h)(10) Joint Election Tax Returns.
13.3.1 Section 338(h)(10) Joint Election. Buyer and Seller each
agree that they will make an election or join in making an
election under Section 338(h)(10) of the Code (and if the
Buyer makes a written request of the Seller, the Buyer and
the Seller will make an election or join in making an
additional election under Section 338(g) with respect to any
foreign Subsidiary), to treat the sale of the Purchased Stock
as a sale of all of the assets of the Company and all of the
assets of each of its Subsidiaries (including, if requested
by the Buyer, a Section 338(g) election with respect to any
foreign Subsidiary) (collectively, a "Section 338(h)(10)
Joint Election") for federal Income Tax purposes and an
election under the statutes of such states as permit an
equivalent election to treat the sale of the Purchased Stock
as a sale of all of the Company's assets (and as the sale of
the assets of its Subsidiaries) as provided by such states'
applicable laws for state Income Tax purposes. The parties
agree that the Purchase Price and the liabilities of the
Companies (plus other relevant items) shall be allocated to
the assets of the Companies in a manner mutually acceptable
that will provide Seller with an ordinary loss with respect
to the sale of the Company Stock. Each party covenants to
report gain or loss or cost basis, as the case may be, in a
manner consistent therewith for federal and state Income Tax
purposes. If required, the parties shall exchange mutually
acceptable IRS Forms 8594 (or equivalent federal and state
forms) reflecting such allocations which shall be filed with
the IRS and any applicable state or local Tax Authority.
Seller shall pay all Income Taxes incurred in connection with
the Section 338(h)(10) Joint Election (or its state
equivalent) described in this Section 13.3.1 and will
indemnify Buyer, the Company and the Subsidiaries against
any failure by Seller to pay such Taxes. Buyer and Seller
agree to take all reasonable actions necessary to effect any
Section 338(h)(10) Joint Election, including, without
limitation, the timely filing of IRS Form 8023-A or state
equivalent; provided, however, the parties hereby agree that
no equivalent election will be made or filed with any foreign
government or agency for any foreign Tax purposes.
13.3.2 Income Tax Returns. To the extent necessary under applicable
law, Buyer shall cause the Company and the Subsidiaries to
consent to join, for all Tax periods of the Company and the
Subsidiaries ending on or before the Closing Date (the
"Pre-Closing Period") for which the Company and the
Subsidiaries are eligible to do so, in any consolidated or
combined federal, state or local Income Tax Returns. Seller
shall cause to be prepared and timely filed any and all
consolidated or combined federal, state or local Income Tax
Returns as well as any separate federal, state, local or
foreign Income Tax Returns for the Company and the
Subsidiaries for all Tax periods of the Company and the
Subsidiaries ending on or before the Closing Date. Buyer
shall cause to be prepared and timely filed any and all
Income Tax Returns for Tax periods of the Company and
Subsidiaries ending after the Closing Date. The parties
agree to cooperate with each other and each other's
affiliates in the preparation of the portions of such returns
pertaining to the Company or the Subsidiaries. For state
Income Tax purposes and to the extent permitted under
applicable state law, the parties acknowledge and agree that
all state Income Tax Returns shall be filed on the basis
that the applicable state equivalent of the Section 338(h)
(10) Joint Election shall have terminated the Tax period
of the Company and the Subsidiaries as of the Effective Time.
The parties agree to cooperate with each other and each
other's affiliates in the preparation of the portions of
the returns pertaining to the Company and the Subsidiaries.
The parties shall also provide each other with full access to
applicable records to enable the preparation of said returns.
Seller shall pay on a timely basis all Income Taxes in
respect to the Pre-Closing Period shown as due on such
returns. The parties shall make available to each other
relevant copies of the portions of such returns relating to
the Company and the Subsidiaries for taxable years ending
before or including the Closing Date.
13.3.3 Non-Income Tax Returns. Seller shall cause to be prepared and
timely filed all non-Income Tax Returns of the Company and the
Subsidiaries due on or before the Closing Date. Buyer shall
cause the Company and the Subsidiaries to prepare and timely
file all non-Income Tax Returns due after the Closing Date.
The parties agree to cooperate with each other and their
affiliates in the preparation of such non-Income Tax Returns.
The parties shall also provide each other with full access to
applicable records to enable the preparation of such returns.
Except to the extent accrued as a current non-Income Tax
liability in the Closing Balance Sheet, Seller shall pay
on a timely basis all non-Income Taxes in respect of the
Pre-Closing Period as shown as due on such returns; provided,
that, Buyer shall pay or cause the Company and the
Subsidiaries to pay on a timely basis the portion of such
Pre-Closing Period non-Income Taxes which has been accrued
as a current non-Income Tax liability in the Company's and
the Subsidiaries' Closing Balance Sheet as of the Closing
Date. Buyer shall cause the Company and the Subsidiaries
to pay all non-Income Taxes to which such non-Income Tax
Returns relate for all periods after the Closing Date.
The parties shall make available to each other copies of
non-Income Tax Returns of the Companies and the Subsidiaries
covering Tax periods ending before or including the Closing
Date.
13.3.4 Allocations. Seller shall include the income and deductions
of the Company and the Subsidiaries (including any deferred
income triggered into income by Treas. Reg. Sec.1.1502-13 and
Treas. Reg. Sec. 1.1502-19, or equivalent provisions of state
or local law) on Seller's consolidated or combined federal,
state or local Income Tax Returns for all periods through the
Closing Date and shall pay any Taxes attributable thereto.
In any case where any Tax Return covers a Tax period beginning
before and ending after the Closing Date, the amount of Taxes
allocable between Seller on one hand, and Buyer, the Company
and the Subsidiaries on the other hand, shall be determined
by closing the books of the Company and the Subsidiaries as
of and including the Closing Date. If the allocation of an
item of income, deduction or credit or non-Income Tax cannot
be specifically allocated based on such closing of the books,
such item shall be apportioned on a daily basis; provided,
however, an appropriate adjustment shall be made with respect
to the Danville property and other property to be transferred
by the Company to Seller prior to the Closing Date. In case
of the Taxes attributable to the Pre-Closing Period, Seller
shall be liable for such Taxes except to the extent such
Taxes are accrued as a current Tax liability in the Closing
Balance Sheet. In case of (i) the Taxes attributable to the
portion of such Tax period following the Closing Date and
(ii) the portion of Taxes so accrued as a current Tax
liability, Buyer and the Company shall be jointly and
severally liable for such Taxes.
13.4 Allocation of Income Tax Benefits.
13.4.1 If any adjustments shall be made to any federal, state, local,
or foreign Income Tax returns relating to the Company, the
Subsidiaries or Seller for the Pre-Closing Period which
result in any Income Tax detriment to Seller or any affiliate
of Seller with respect to such period and any Income Tax
benefit to the Company, the Subsidiaries, Buyer or any
affiliate of Buyer for any period ending after the Closing
Date, Seller shall be entitled to the benefit of such
Income Tax benefit as and when actually realized by the
Buyer to the extent of the related Income Tax detriment,
and Buyer shall or shall cause the Company and the
Subsidiaries to pay to Seller such amount.
13.4.2 If any adjustment shall be made to any federal, state, local,
or foreign Income Tax returns relating to the Company or
any Subsidiary for any Tax period ending after the
Pre-Closing Period
which result in any Income Tax detriment to Buyer, the
Company, any Subsidiary or any affiliate of Buyer with
respect to such period and any Income Tax benefit to
Seller or any affiliate of Seller for any Pre-Closing
Period, Buyer shall be entitled to the benefit of such
Income Tax Benefits as and when actually realized by the
Seller to the extent of the related Income Tax detriment.
Seller shall pay to Buyer such amount.
13.5 Tax Indemnity. Seller shall be liable for, and agrees to indemnify,
defend and hold harmless each of the Buyer and the Company and the
Subsidiaries from and against all Taxes (and all related costs and
expenses) imposed on the Company or the Subsidiaries in respect to
the Pre-Closing Period, except to the extent accrued as a current
Tax liability on the Closing Balance Sheet. For purposes of
determining such Taxes, the principles of Section 13.3.4 hereof
shall apply.
13.6 Refunds. Any refunds of Taxes received by the Company or any
Subsidiary attributable to the periods through or including the
Closing Date shall be for the benefit of Seller. Buyer shall or
shall cause the Company to pay to Seller or its order any such
refunds within ten (10) days of receipt thereof. Any refunds
of Taxes received by the Seller attributable to periods beginning
after the Closing Date shall be for the benefit of the Buyer.
Seller shall pay to Buyer or its order any such refunds within ten
(10) days of receipt thereof.
13.7 Cooperation. After the Closing Date, Seller and Buyer shall make
available to the other, free of charge, cost or expense and as
reasonably requested, all information, records or documents
reasonably relevant to Tax liabilities or potential Tax liabilities
of the Company or the Subsidiaries for all periods prior to or
including the Closing Date (or any matter, transaction or event
occurring on or before the Closing Date that may affect such a Tax
liability) and each such person shall preserve all such available
information, records and documents until the expiration of any
applicable statute of limitations or extensions thereof. Each such
person shall provide, free of charge, cost or expense, the other(s)
with all available information and documentation reasonably
necessary to comply with all Tax audit information requests or
inquiries made of any such periods relevant to such Tax
liabilities or potential Tax liabilities (or any matter,
transaction or event occurring on or before the Closing date that
reasonably may affect such a Tax liability). Any information
obtained pursuant to this Section 13.7 shall be held in strict
confidence and shall be used solely in connection with the reason
for which it was requested.
13.8 Tax Audits. With respect to any Pre-Closing Period, Buyer shall
promptly notify Seller in writing upon receipt by Buyer, any
affiliate of Buyer, the Company, or any Subsidiary and Seller shall
promptly notify Buyer in writing upon receipt by Seller or any
affiliate of Seller, of notice of any pending or threatened federal,
state, local or foreign Tax audits, examinations or assessments of
the Company or any Subsidiary (other than consolidated or combined
Income Tax audits, examinations or assessments), so long as Pre-
Closing Period Taxable years remain open. Seller shall have the
sole right to represent the Company, the Subsidiaries and their
predecessors in any Tax audit or administrative or court proceeding
relating to the Pre-Closing Period, and to employ counsel of its
choice at its expense, from and after the date on which the Seller
confirms in writing that it is obligated hereunder to indemnify the
Buyer, the Company, and/or a Subsidiary, as applicable with respect
to the Taxes subject to such audit, examination, or assessment;
provided, that:
(a) Buyer may participate at its sole cost and expense therein,
but only with respect to issues directly related to a
Pre-Closing Period Tax liability (other than a federal
Income Tax liability or a state Income Tax liability to a
state with respect to which a Section 338(h)(10) Joint
Election was made hereunder) as to which such indemnification
applies (a "Covered Issue");
(b) Seller shall not enter into any compromise or agreement (a
"Settlement") with respect to any such Covered Issue without
providing the Buyer with a written description of the
proposed terms and conditions thereof (the "Settlement
Proposal") and without the prior written consent of the
Buyer (which consent
will not unreasonably be withheld) if such Settlement would
have an adverse effect on Buyer, the Company, or any
Subsidiary (after giving effect to Seller's indemnification
obligations hereunder and its obligations under Section 13.4)
(an "Adverse Tax Effect");
(c) For purposes of clause (b), consent will be treated as
reasonably withheld by Buyer as to any Covered Issue if
the Settlement Proposal is based on a trade-off where
decreased Tax detriments (or increased Tax benefits) for
Pre-Closing Periods would result in an increase in
Adverse Tax Effects, or vice versa; and
(d) Where consent to Settlement of one or more Covered Issues is
withheld by Buyer pursuant to clause (b) above, other than
in cases described in clause (c) above, (i) Buyer may
continue to initiate (and control the handling, disposition,
or settlement of) any further proceedings solely with respect
to such Covered Issues at its own cost and expense (the
parties agree that Seller shall continue to control the
handling, disposition or settlement of all other issues),
and (ii) the indemnification liability of the Seller under
Section 13.5 hereof in respect to those Covered Issues shall
not exceed the liability that would have resulted from
Seller's proposed Settlement as set forth in the Settlement
Proposal.
13.9 Buyer's Taxes. Buyer shall pay, or cause to be paid, and shall
indemnify and defend Seller and its affiliates against and hold
them harmless from any liability for Taxes for Tax periods of the
Company or any Subsidiary beginning, and portions of Tax periods
occurring after the Closing Date, including, without limitation,
any such liability with respect to operations of the Company and
the Subsidiaries and dispositions of assets by any of them after
the Closing Date. For purposes of such Taxes, the principles of
Section 13.3.4 hereof shall apply.
14. Miscellaneous. The following miscellaneous provisions shall apply to
this Agreement:
14.1 Notices. All notices, correspondence, requests, instructions, and
other documents to be given hereunder shall be in writing or by
written telecommunication, and shall be deemed to have been duly
given if (i) delivered personally (effective upon delivery), (ii)
mailed by registered or certified mail, return receipt requested,
postage prepaid (effective five business days after dispatch),
(iii) sent by a reputable, established courier service that
guarantees next business day delivery (effective the next business
day), or (iv) sent by facsimile telecopier following within 24 hours
by confirmation by one of the forgoing methods (effective upon
receipt of the telecopy in complete, readable form), addressed as
follows (or to such other address as the recipient party may
have furnished to the other party for the purpose pursuant to this
section):
(a) If to Seller:
Valmont Industries, Inc.
240 Guarantee Centre
8805 Indian Hills Drive
Omaha, Nebraska 68114
Attention; Vice President and Chief Financial Officer
Telecopier No. (402) 343-0668
with a copy sent at the same time and by the same means to:
Roger W. Wells, Esq.
McGrath, North, Mullin & Kratz, P.C.
Suite 1400, One Central Parka Plaza
Omaha, Nebraska 68102
Telecopier No. (402) 341-0216
(b) If to Buyer:
Chicago Miniature Lamp, Inc.
500 Chapman Street
Canton, Massachusetts 02021-2040
Attention: Frank Ward, Chief Executive Officer
Telecopier No. (617) 828-2012
with a copy sent at the same time and by the same means to:
David L. Engel, Esq.
Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110
Telecopier No. (617) 951-8736
14.2 Amendments and Waivers. This Agreement may not be modified or
amended, except by instrument or instruments in writing, signed by
the party against whom enforcement of any such modification or
amendment is sought. Either Seller or Buyer may, by an instrument
in writing, waive compliance by the other party with any term or
provision of this Agreement on the part of such other party to be
performed or complied with. No action taken pursuant to this
Agreement, including 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 representation, warranty or agreement
contained herein. The waiver by any party hereto of a breach of
any term or provision of this Agreement shall not be construed as
a waiver of any subsequent breach.
14.3 Expenses. Except as otherwise provided herein, whether or not this
Agreement shall be consummated, Seller and Buyer shall each pay its
own expenses incident to the preparation, execution and consummation
of this Agreement.
14.4 Entire Agreement. This Agreement, the Disclosure Schedule and the
Confidentiality Agreement constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral and
written, among the parties hereto with respect to the subject matter
hereof.
14.5 Applicable Law. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance
with the laws of the State of Delaware applicable to contracts made
and performed in Delaware.
14.6 Binding Effect; Benefits. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective
heirs, successors and assigns; nothing in this Agreement, express
or implied, is intended to confer on any person other than the
parties hereto or their respective heirs, successors and assigns,
any rights, remedies, obligations or liabilities under or by reason
of this Agreement.
14.7 Assignability. Neither this Agreement nor any of the parties'
rights or obligations hereunder shall be assignable or delegable
by any party hereto without the prior written consent of the other
party hereto, and any attempt to do so will be void, provided,
that Buyer may assign its rights, but not delegate its obligations,
hereunder to a wholly-owned subsidiary of Buyer.
14.8 Effect of Headings. The headings of the various sections and
subsections herein are inserted merely as a matter of convenience
and for reference and shall not be construed as in any manner
defining, limiting, or describing the scope or intent of the
particular sections to which they refer, or as affecting the
meaning or construction of the language in the body of such
sections.
14.9 Exhibits; Disclosure Schedule. All exhibits and disclosures
referred to in this Agreement are attached hereto and are
incorporated herein by reference as if fully set forth herein.
14.10 Severability. Any term or provision of this Agreement, which is
invalid or unenforceable in any jurisdiction, shall be ineffective
to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and
provisions of this Agreement or affecting the validity or
enforceability of any of the terms or other provisions of this
Agreement in any other jurisdiction.
14.11 Construction. For purposes of this Agreement, the phrases "Seller's
knowledge" or "to the knowledge of Seller" mean the actual knowledge
of Seller's executive officers after due inquiry of the persons
listed on Exhibit 15.13. The language in all parts of this
Agreement shall in all cases be construed as a whole according to
its fair meaning, strictly neither for nor against any party hereto,
and without implying a presumption that the terms thereof shall be
more strictly construed against one party by reason of the rule
of construction that a document is to be construed more strictly
against the person who himself drafted same. It is hereby agreed
that representatives of both parties have participated in the
preparation hereof.
14.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be regarded as an original and
all of which shall constitute one and the same agreement.
14.13 Publicity. The parties hereto agree that they will consult with
each other concerning any proposed press release or public
announcement pertaining to the transactions contemplated and shall
use their best efforts to agree upon the text of any such press
release or the making of such public announcement. Except
as mutually agreed, neither Buyer nor Seller shall disclose
(except as required by applicable law) the terms and conditions
contained in this Agreement.
14.14 Release of Guaranties; Indemnification. Buyer shall use its best
efforts to cause Seller to be released, as promptly as possible
following the Closing, from all obligations and liabilities under
or in respect of the Seller guaranties of the obligations of the
company and/or the Subsidiaries described in Section 6.12 of the
Disclosure Schedule as well as from all obligations and liabilities
under or in respect of Seller serving as tenant under the Denton,
Texas office lease, as also described in Section 6.12 of the
Disclosure Schedule (collectively, the "Seller Guaranties").
Buyer shall indemnify, defend and hold harmless Seller and its
Affiliates and each of their respective officers, directors,
employees, agents, representatives, successors and assigns from
and against any and all Damages related to or arising out of any
failure by Buyer to have Seller released from the Seller Guaranties.
14.15 Certain Defined Terms. As used in this Agreement, the following
terms have the following respective meanings:
"Affiliate" means, with respect to any Person, any other Person
that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with such
Person. "lien" (or its plurals, "liens") means any and all liens,
claims, mortgages, security interest, charges, encumbrances, and
restrictions on transfer of any kind, except, in the case of
references to securities, any of the same arising under applicable
securities laws solely by reason of the fact that such securities
were issued pursuant to exemptions from registration under such
securities laws.
"Person" means any natural person, entity, or association,
including without limitation any corporation, partnership,
limited liability company, government (or agency or subdivision
thereof), trust, joint venture, or proprietorship.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
VALMONT INDUSTRIES, INC. CHICAGO MINIATURE LAMP, INC.
a Delaware corporation an Oklahoma corporation
By: __Terry McClain_________________By: __Frank M. Ward____________________
Its: __C.F.O.________________________Its: __C.E.O.___________________________
