<PAGE>
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
Date of Report
(Date of earliest event reported)
May 23, 1996
Wynn's International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-7200 95-2854312
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
500 North State College Blvd., Suite 700, Orange, CA 92668
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 938-3700
<PAGE>
ITEM 2. Acquisition or Disposition of Assets
On May 23, 1996, Registrant's wholly-owned subsidiary, Wynn's Climate Systems,
Inc., a Texas corporation ("WCS"), sold its principal operating assets to Moog
Automotive, Inc. ("Moog"), a Missouri corporation and wholly-owned subsidiary of
Cooper Industries, Inc., an Ohio corporation. WCS is a Fort Worth, Texas-based
manufacturer of automotive air conditioning systems and components.
The assets acquired by Moog included substantially all of WCS' property, plant
and equipment, including WCS' Fort Worth manufacturing facility, and
intellectual property of WCS. Moog also acquired related operating assets of
Wynn's Climate Equipment Company, a Texas corporation and wholly-owned
subsidiary of WCS, and Wynn's (UK) Limited, a subsidiary of Registrant organized
under the laws of England ("Wynn's U.K."). Moog also assumed certain contracts
and real property leases of WCS and Wynn's U.K.
At the closing of the transaction, Moog paid $5.4 million in cash and assumed
certain liabilities totaling approximately $5.5 million. The amount paid at the
closing was based on the book value of the purchased assets less the amount of
assumed liabilities as of April 30, 1996, plus a small premium. The amount paid
will be adjusted based on a final net asset statement as of the closing date to
be prepared by the parties after the closing.
At the closing, Moog also advanced $3.5 million to WCS with respect to
anticipated sales of inventory. Thus, the total cash WCS received at the
closing was $8.9 million.
WCS expects to receive from Moog additional cash payments during the 12-month
period following the closing based on the disposition of the inventory and
accounts receivable of WCS. From all sources (including the amounts paid at
closing, as adjusted hereafter, and post-closing payments for inventory sold and
receivables collected), WCS expects to receive approximately $25 million in
connection with the transaction.
ITEM 7. Financial Statements and Exhibits
(a) Not applicable.
(b) Pro Forma Financial Information.
1
<PAGE>
A description of the transaction and the entities involved is presented in
Item 2 above. The accompanying unaudited pro forma consolidated condensed
statements of income disclose income from continuing operations and are
presented as if the sale of the WCS net assets had occurred on January 1,
1995 and January 1, 1996 for the fiscal year ended December 31, 1995 and the
three months ended March 31, 1996, respectively. The accompanying unaudited
pro forma consolidated condensed balance sheet is presented as if the sale
had occurred on March 31, 1996. The pro forma information should be read in
conjunction with the consolidated financial statements of Wynn's
International, Inc. ("Wynn's") included in Wynn's Form 10-K for the year
ended December 31, 1995 and with the unaudited consolidated condensed
financial statements included in Wynn's quarterly report on Form 10-Q for the
quarter ended March 31, 1996. The pro forma financial statements have been
prepared for informational purposes only and do not purport to be indicative
of what would actually have occurred had the sale of the WCS net assets
occurred on the dates noted above.
WYNN'S INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
December 31 December 31
1995 Pro Forma 1995
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Net sales $303,787 $(41,203) $262,584
Interest income 996 827 (a) 1,823
-------- -------- --------
304,783 (40,376) 264,407
-------- -------- --------
Cost and expenses:
Cost of sales 194,440 (37,042) 157,398
Selling, general & administrative 84,152 (5,873) 78,279
Interest expense 1,640 (82)(b) 1,558
-------- -------- --------
280,232 (42,997) 237,235
-------- -------- --------
Income before taxes based on income 24,551 2,621 27,172
Provision for taxes based on income 9,108 970 10,078
-------- -------- --------
Net income $ 15,443 $ 1,651 $ 17,094
======== ======== ========
Income per share of common stock:
Primary $1.68 $1.86
======== ========
Fully diluted $1.65 $1.83
======== ========
Average shares outstanding:
Primary 9,187 9,187
======== ========
Fully diluted 9,369 9,369
======== ========
</TABLE>
See accompanying notes
2
<PAGE>
WYNN'S INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
March 31 March 31
1996 Pro Forma 1996
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Net sales $ 83,085 $(11,622) $ 71,463
Interest income 274 93 (c) 367
-------- -------- --------
83,359 (11,529) 71,830
-------- -------- --------
Cost and expenses:
Cost of sales 52,464 (9,897) 42,567
Selling, general & administrative 23,156 (1,678) 21,478
Interest expense 52 - 52
-------- -------- --------
75,672 (11,575) 64,097
-------- -------- --------
Income before taxes based on income 7,687 46 7,733
Provision for taxes based on income 2,929 17 2,946
-------- -------- --------
Net income $ 4,758 $ 29 $ 4,787
======== ======== ========
Income per share of common stock:
Primary $ .50 $ .51
======== ========
Fully diluted $ .50 $ .51
======== ========
Average shares outstanding:
Primary 9,430 9,430
======== ========
Fully diluted 9,472 9,472
======== ========
</TABLE>
See accompanying notes
3
<PAGE>
WYNN'S INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
March 31 March 31
1996 Pro Forma 1996
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 18,059 $ 8,900 (d) $ 26,959
Accounts receivable, less allowance
for doubtful accounts 59,631 (11,741) 47,890
Inventories 38,210 (9,881) 28,329
Prepaid expenses and other current
assets 16,349 (889) 15,460
Net assets of discontinued operations - 18,539 (e) 18,539
-------- -------- --------
Total current assets 132,249 4,928 137,177
Property, plant and equipment, at
cost less accumulated depreciation
and amortization 49,107 (9,958) 39,149
Other assets 6,444 (121) 6,323
-------- -------- --------
$187,800 $ (5,151) $182,649
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,333 $ (2,714) $ 18,619
Dividends payable 3 - 3
Taxes based on income 3,447 955 4,402
Accrued liabilities 35,803 (1,472) 34,331
Long-term debt due within one year 90 - 90
-------- -------- --------
Total current liabilities 60,676 (3,231) 57,445
Long-term debt due after one year 49 - 49
Deferred taxes based on income 6,948 (420) 6,528
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value;
500,000 shares authorized,
none issued - - -
Common stock, $1 par value;
20,000,000 shares authorized,
9,614,523 shares issued 9,614 - 9,614
Capital in excess of par value 13,703 - 13,703
Retained earnings 102,469 (1,500)(f) 100,969
Equity adjustment from foreign
currency translation (1,807) - (1,807)
Unearned compensation (271) - (271)
Common stock held in treasury
520,875 shares, at cost (3,581) - (3,581)
-------- -------- --------
Total stockholders' equity 120,127 (1,500) 118,627
-------- -------- --------
$187,800 $ (5,151) $182,649
======== ======== ========
</TABLE>
See accompanying notes
4
<PAGE>
WYNN'S INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1) On May 23, 1996, the Company sold the principal operating assets
of Wynn's Climate Systems, Inc. (WCS) to Moog Automotive, Inc., a
wholly-owned subsidiary of Cooper Industries Inc. Under the terms
of the transaction, Moog acquired the main manufacturing facility in
Fort Worth, Texas, and WCS' leased facilities located elsewhere.
Moog paid $8.9 million at closing, including $3.5 million with
respect to inventory and assumed certain third party liabilities of
WCS. Wynn's expects to receive from Moog additional cash payments
over the next twelve months based on the disposition of the
inventory and accounts receivable of WCS. From all sources, Wynn's
expects to receive approximately $25 million in connection with the
transaction.
2) The unaudited pro forma consolidated condensed financial
statements represent the results of continuing operations and the
balance sheet, after giving effect to certain pro forma adjustments
related to the sale as if the sale had occurred January 1, 1995 for
the statement of income for the year ended December 31, 1995,
January 1, 1996 for the statement of income for the three months
ended March 31, 1996 and March 31, 1996 for the balance sheet.
3) The pro forma adjustments related to the sale are:
(a) Estimated interest income from investment activities
related to cash payments received at closing and over
the subsequent 12-month period related to the
disposition of the remaining net assets of WCS.
(b) Elimination of corporate interest expense for short-
term borrowings reflecting the use of proceeds to pay
off corporate borrowings during 1995.
(c) Estimated interest income from investment activities
related to cash received at closing.
(d) Cash received at closing.
(e) Net assets of discontinued operations consists
primarily of accounts receivable, inventory, income
taxes receivable and accrued liabilities. It is
anticipated that all amounts will be collected or paid
during the 12-month period following the closing of
the sale.
(f) The pro forma adjustment to retained earnings reflects
the estimated $1.5 million after tax loss (net of
income tax benefit of $5.5 million) from the sale.
The tax benefit includes $2.8 million related to the
tax deduction for $7.2 million of goodwill, which was
previously expensed with no tax benefit recognized.
5
<PAGE>
(c) Exhibits.
2.1 Asset Purchase Agreement, dated as of May 23, 1996, by and
between Moog Automotive, Inc. and Wynn's Climate Systems, Inc.,
Wynn's Climate Equipment Company and Wynn's (UK) Limited.
6
<PAGE>
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.
Dated: June 6, 1996 WYNN'S INTERNATIONAL, INC.
By: SEYMOUR A. SCHLOSSER
-----------------------------
Seymour A. Schlosser
Vice President-Finance
and Chief Financial Officer
7
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------- ----------------------
2.1 Asset Purchase Agreement, dated as of May 23, 1996, by and
between Moog Automotive, Inc. and Wynn's Climate Systems, Inc.,
Wynn's Climate Equipment Company and Wynn's (UK) Limited.
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
MOOG AUTOMOTIVE, INC.
AND
WYNN'S CLIMATE SYSTEMS, INC.,
WYNN'S CLIMATE EQUIPMENT COMPANY
AND
WYNN'S (UK) LIMITED
DATED AS OF MAY 23, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
1. CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . 8
3. LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . . . . . . . . 13
5. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . 23
6. EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7. OTHER AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8. CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10. GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11. DISPUTE RESOLUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
- i -
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered into
as of May 23, 1996, by and between MOOG AUTOMOTIVE, INC., a Missouri
corporation ("BUYER"), and WYNN'S CLIMATE SYSTEMS, INC., a Texas corporation
("WCS"), WYNN'S CLIMATE EQUIPMENT COMPANY, a Texas corporation ("WCEC"), and
WYNN'S (UK) LIMITED, a corporation organized under the laws of England ("WYNN'S
UK"). WCS, WCEC and Wynn's UK are hereinafter referred to as "SELLERS".
R E C I T A L S:
A. WCEC is a wholly owned subsidiary of WCS. Wynn's International, Inc.,
a Delaware corporation ("WII"), is the sole shareholder of WCS and a 99%
shareholder of Wynn's UK (Gregg M. Gibbons being the 1% shareholder of Wynn's
U.K.).
B. WCS is engaged in the business of manufacturing and selling automotive
air conditioning systems and components. WCS also is engaged in the business of
operating installation centers that install automotive air conditioners and
other accessories for automobile dealers and retail customers. Wynn's UK is
engaged in the business of assembling and selling automotive air conditioning
systems and components. WCEC owns certain equipment used by WCS in WCS'
manufacturing operations, but WCEC otherwise engages in no business.
C. Buyer is engaged in the business of manufacturing and selling
automotive steering, suspension and temperature control products.
D. Buyer desires to purchase, and Sellers desire to sell, certain assets
and real property owned by Sellers, upon the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. CERTAIN DEFINITIONS
1.1. "ADVANCE" is defined in Section 7.14.5.
1.2. "ADVERSE CONSEQUENCES" means all Claims, stipulations, settlements,
damages, dues, costs, amounts paid in settlement, Liabilities, obligations,
Taxes, liens, losses, expenses and fees, including all reasonable attorneys',
experts' and consultants' fees and court costs. With respect to damages for
which a Party is otherwise obligated to indemnify another Party pursuant to this
Agreement, the indemnifying party shall not be excused from its indemnification
obligations on the ground that such Liability to the third parties includes or
may include consequential, punitive or incidental damages, subject to Section
9.9 hereof.
- 1 -
<PAGE>
1.3. "AFFILIATE" means any Person that directly or indirectly controls,
is controlled by, or is under common control with, the referenced party.
1.4. "ASSETS" means the following assets owned by Sellers immediately
prior to the Effective Time: (a) the Owned Real Property and all improvements,
fixtures and fittings thereon, and easements, rights-of-way, and other
appurtenances thereto, (b) the items listed on Schedule 1.4 to be attached
hereto which shall be substantially in the same form as the list dated March 22,
1996, previously supplied to Buyer, including machinery, equipment, furniture,
supplies, automobiles, trucks, tractors, trailers, tools, jigs and dies, (c) the
Intellectual Property, licenses and sublicenses granted and obtained with
respect thereto and rights thereunder, remedies against infringements thereof,
and rights to protection of interests therein under the laws of all
jurisdictions, (d) the Assumed Contracts, (e) the prepaid rent and security
deposits with respect to the Real Property Leases, and prepaid maintenance fees
on WCS' computer equipment, all in the amount recorded on WCS' books as of the
date hereof, (f) the right to receive the proceeds of any insurance relating to
the Business to the extent that Buyer has assumed the liability of the Business
covered by such insurance, provided that in no event shall Buyer be entitled to
receive the proceeds of any such insurance to the extent Sellers have previously
compensated Buyer with respect to such liability so assumed, (g) all books,
records, ledgers, files, documents, correspondence, lists, plats, architectural
plans, drawings, and specifications, creative materials, advertising and
promotional materials, marketing and sales data, studies, reports, analyses and
other printed or written materials, other than Sellers' minute books, stock
ledgers and other corporate documents, (h) security interests and guaranties in
favor of Sellers other than security interests and guaranties that support or
relate to the Retained Assets (including, without limitation, deeds of trust),
and (i) the Permits to the extent assignable by their terms and under applicable
law.
1.5. "ASSUMED CONTRACTS" means (a) the Real Property Leases, (b) the
personal property leases, agreements, contracts, purchase and sales orders, and
commitments set forth in Part A of Schedule 1.5 attached hereto, and (c) the
contracts for employment set forth in Part B of Schedule 1.5 attached hereto.
1.6. "ASSUMED LIABILITIES" is defined in Section 3.1.
1.7. "BUSINESS" means the businesses Sellers are engaged in as of the
date hereof, specifically, (a) the manufacture and sale by WCS of automotive air
conditioning systems and components, (b) the operation by WCS of installation
centers that install automotive air conditioners and other accessories for
automobile dealers and retail customers, and (c) the assembly and sale by Wynn's
UK of automotive air conditioning systems and components.
1.8. "BUSINESS DAY" means any day other than a Saturday, Sunday or other
day on which banks are authorized or obligated to be closed in New York or
Texas.
1.9. "BUYER" means Moog Automotive, Inc., a Missouri corporation. To the
extent that references in this Agreement relate to any Assets to be purchased
from Wynn's UK, "BUYER" shall also mean any designated Affiliate of Moog
Automotive, Inc.
1.10. "BUYER'S LETTER" is defined in Section 2.5.
- 2 -
<PAGE>
1.11. "CLAIM" means any claim, demand, action, proceeding, hearing,
investigation, charge, complaint, suit, allegation, injunction, judgment, order,
decree or consent decree, penalty, fine, violation (whether administrative,
judicial or private in nature), or involuntary lien.
1.12. "CLOSING" means the meeting held on the date hereof at which the
Parties consummate the contemplated transactions.
1.13. "CLOSING PAYMENT" is defined in Section 2.2.
1.14. "CODE" means the Internal Revenue Code of 1986, as amended.
1.15. "DISCHARGE" means the accidental, unknowing, or intentional
spilling, leaking, pumping, pouring, emitting, leaching, escaping, depositing,
placing, emptying, dumping, releasing, burying, injecting, abandoning, migrating
or other discharge, release or threatened release of any Hazardous Material into
or on the Environment.
1.16. "DISCLOSURE SCHEDULE" means the Disclosure Schedule attached hereto.
1.17. "DISPOSAL" means the disposal, arranging for disposal, carrying for
disposal, or Discharge of any Hazardous Material in a landfill, surface
impoundment, waste pile, injection well, facility, salt dome or bed formation,
underground mine or cave, vault, bunker or other location (whether authorized or
unauthorized) for storage (whether temporary or permanent), disposal or any
other purpose, from which Hazardous Materials have entered or may enter the
Environment or be Discharged into the Environment.
1.18. "EFFECTIVE TIME" means 5:00 p.m. on the date hereof, at the location
of the Assets being transferred.
1.19. "EMPLOYEE" means Active Employees and Inactive Employees which,
respectively shall mean:
1.19.1. "ACTIVE EMPLOYEES" means any person employed by a Seller as
of the date hereof who is on (a) active status or (b) temporary layoff, leave of
absence or temporary short-term disability leave, for which the period of
absence has not exceeded or is not expected to exceed six (6) months.
1.19.2. "INACTIVE EMPLOYEES" means any person who is a former
employee of a Seller or who is a current employee of a Seller and is not an
Active Employee.
1.20. [INTENTIONALLY LEFT BLANK]
1.21. "ENCUMBRANCE" shall mean any security interest, mortgage, lien,
pledge, Claim, lease, agreement, right of first refusal, option, limitation on
transfer or use or assignment or licensing, restrictive easement, charge,
covenant or any other restriction of any kind with respect to any Asset
(tangible or intangible), including any restriction on the ownership, use,
voting, transfer, possession, receipt of income or other exercise of any
attributes of ownership of such
- 3 -
<PAGE>
Asset (whether tangible, intangible, real or personal), other than (a) liens for
current Taxes not yet due, and (b) Permitted Real Property Encumbrances.
1.22. "ENVIRONMENT" means the air, land, or Water, and any building,
building interior, fixture or equipment.
1.23. "ENVIRONMENTAL COSTS" means (i) all Adverse Consequences (including,
without limitation, the costs of (a) assessment of environmental damage and
preparation of clean-up plans and engineering and feasibility studies, (b)
remediation and monitoring of the Environment, and treatment or disposal of
Hazardous Materials, and (c) construction of permanent facilities to prevent the
spread of Hazardous Materials into the surrounding Environment), (ii) all
consequential damages suffered as a result of a business interruption, closing
or shutdown which, in the case of both (i) and (ii), are caused by or arise out
of (a) the necessity of resolving a liability under Environmental Laws or (b)
the ownership, use or operation of the Business and its properties and Assets,
or (iii) all Liabilities as a result of the Discharge or Disposal of Hazardous
Materials by the Business, directly or indirectly, at its properties or at other
locations on or prior to the date hereof.
1.24. "ENVIRONMENTAL LAWS" is defined in Section 4.21.
1.25. "FINAL CLOSING STATEMENT OF NET ASSETS" is defined in Section 2.9.
1.26. "FINAL NET ASSET AMOUNT" is defined in Section 2.9.
1.27. "FINANCIAL INFORMATION" is defined in Section 4.7.
1.28. "FINISHED GOODS" means finished goods of WCS and Wynn's UK that have
passed final testing by WCS or Wynn's UK.
1.29. "GAAP" means generally accepted accounting principles in the United
States.
1.30. "GOODS-IN-PROCESS" means all of WCS' and Wynn's UK's work-in-process
that are not yet Finished Goods.
1.31. "GOVERNMENTAL AGENCY" means any United States or foreign, national,
state, municipal or local government, any subdivision, agency, entity,
commission or authority thereof, or any quasi-governmental authority of the
foregoing exercising regulatory authority.
1.32. "HALENDA EMPLOYMENT AGREEMENT" means that certain Employment
Agreement, dated October 1, 1994, as amended by Amendment No. 1 thereto dated
April 2, 1996, by and between WCS and John J. Halenda.
1.33. "HAZARDOUS MATERIALS" means materials, substances, by-products, or
wastes considered or defined as "Hazardous Materials," "Hazardous Substances,"
"Hazardous Wastes," "Regulated Substances", "Solid Wastes" or other regulated
substances under any applicable Environmental Law.
- 4 -
<PAGE>
1.33A. "INITIAL PEG STATEMENT OF NET ASSETS" means the December 31, 1995,
statement of net assets attached hereto as Schedule 1.33a.
1.34. "INTELLECTUAL PROPERTY" means all (a) patents and patent
applications set forth in Item 4.13 of the Disclosure Schedule and improvements
thereto, (b) inventions (whether or not patentable and whether or not reduced to
practice) and invention disclosures owned by Sellers and used by Sellers in the
Business, and improvements thereto, (c) registered trademarks and service marks
set forth in Item 4.13 of the Disclosure Schedule, trade dress, logos, trade
names, unregistered trade marks and service marks and any applications for
registration thereof, other than the Retained Names, (d) copyrights and
registrations and applications for registration thereof, (e) computer software
licenses, data and documentation, (f) registered designs and utility models and
design rights, (g) trade secrets and confidential information pertaining to the
Assets, (h) any other rights of a like nature throughout the world, and (i)
copies and tangible embodiments thereof (in whatever form or medium).
1.35. "INVENTORY" means all Raw Materials, Goods-in-Process and Finished
Goods as of the date hereof, including, without limitation, the items set forth
in Schedule 1.35 to be prepared jointly by Sellers and Buyer promptly after the
date hereof using standard costs in effect as of January 31, 1996, which
schedule when prepared shall be attached hereto and made a part hereof.
1.36. "KNOWLEDGE" means the actual knowledge, after due inquiry, (a) as to
Buyer, of David A. White, and (b) as to Sellers, John J. Halenda, Terry Wilson,
Paul Miller, James Francescangeli, Bill R. Marcom, Timothy Worlitz, Mario
Zuchovicki, Mary Lu Herrington, James Carroll, Seymour A. Schlosser, Judy Vester
and Daniel Kekich. For purposes of this section, "due inquiry" means that the
executive officers have discussed with the individuals listed above (or as to
Buyer, have discussed with other appropriate individuals) the representations
and warranties set forth herein for which such individuals have responsibility.
1.37. "LEASED REAL PROPERTY" means the real property subject to the Real
Property Leases.
1.38. "LIABILITY" means any debt, account payable, adverse Claim,
liability, judgment, Tax and obligation, whether accrued, contingent or
otherwise and whether known or unknown, including those arising under any law
(including the common law) or any rule, order or regulation of any Governmental
Agency or imposed by any court or any arbitrator in a binding arbitration
resulting from, arising out of or relating to the assets, activities,
operations, actions or omissions of a Person or its Affiliates or its or their
employees or agents, or products manufactured or sold thereby or services
provided thereby, or under contracts, agreements (whether written or oral),
leases, commitments or undertakings thereof, whether based on negligence, strict
liability or other theory of liability.
1.39. "MODESTO PROPERTY" means the real property owned by WCS located on
Pelandale Road in Modesto, California.
1.40. "NEGATIVE STATEMENT OF NET ASSETS ADJUSTMENT AMOUNT" is defined in
Section 2.3.
- 5 -
<PAGE>
1.41. "OWNED REAL PROPERTY" means the real property identified in Item
4.12 of the Disclosure Schedule, together with all buildings, fixtures, and
improvements located thereon and all easements, right-of-way and appurtenances
thereto.
1.42. "PARTY" means Buyer or any Seller; "PARTIES" means Buyer and all
Sellers.
1.43. "PEG STATEMENT OF NET ASSETS" is defined in Section 2.2.
1.44. "PERMITS" means permits, licenses, approvals, orders, registrations,
certificates, variances, franchises and other authorizations and rights (other
than trademark and service mark registrations and letters patent) issued by a
Governmental Agency to a Seller in connection with such Seller's operation of
the Assets.
1.45. "PERMITTED REAL PROPERTY ENCUMBRANCES" means imperfections of title
and other Encumbrances upon the Owned Real Property as are not substantial in
character, amount or extent and which do not detract from the value of the Owned
Real Property.
1.45A. "PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a Governmental Agency.
1.46. "POSITIVE STATEMENT OF NET ASSETS ADJUSTMENT AMOUNT" is defined in
Section 2.3.
1.47. "PRELIMINARY CLOSING STATEMENT OF NET ASSETS" is defined in Section
2.4.
1.48. "PRODUCT" is defined in Section 4.17.
1.49. "PRODUCT LIABILITY CLAIM" is defined in Section 4.18.
1.50. "PURCHASE PRICE" is defined in Section 2.2.
1.51. "RAW MATERIALS" are raw materials and purchased and manufactured
parts of WCS and Wynn's UK used in the Business to manufacture or assemble
Finished Goods.
1.52. "REAL PROPERTY" means the Owned Real Property and the Leased Real
Property.
1.53. "REAL PROPERTY LEASES" means the real property leases and subleases
identified in Item 4.11 of the Disclosure Schedule.
1.54. "RETAINED ASSETS" means all assets of Sellers not comprising the
Assets, including, without limitation, the following assets of Sellers: (a)
cash on hand or in bank or other accounts of Sellers, (b) Sellers' accounts
receivable, notes receivable, refunds receivable, intercompany receivables and
other receivables, (c) prepaid insurance premiums and other prepaid amounts not
otherwise identified as an Asset (including prepaid income Taxes), (d) all
claims, causes of action, choses in action, rights of recovery, rights of set
off and rights of recoupment (including any such item relating to the payment of
Taxes by a Seller and any past
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infringement of the Intellectual Property), (e) the Inventory, (f) all claims
and rights and remedies of Sellers hereunder and under the other agreements and
instruments executed and delivered in connection herewith including without
limitation their right to receive the Purchase Price, (g) the Retained Names and
going concern value, if any, (h) the Modesto Property, (i) the U.S. Employee
Plans, (j) the Permits, (k) Sellers' insurance policies, and (l) all income
earned with respect to or from the disposition or operation or investment of any
Retained Asset. For the avoidance of doubt, the term "ASSETS" shall not include
any "RETAINED ASSETS."
1.55. "RETAINED LIABILITIES" is defined in Section 3.2.
1.56. "RETAINED NAMES" means the trademarks and names "Wynn's" or "Lone
Star" and any corporate name, trademark, service mark or logo that contains the
name "Wynn's" or "Lone Star".
1.57. "SALE" is defined in Section 7.14.3.
1.58. "SELLERS" means WCS, WCEC and Wynn's UK.
1.59. "SELLERS' LETTER" is defined in Section 2.6.
1.60. "STATEMENT OF NET ASSETS PAYMENT AMOUNT" is defined in Section 2.3.
1.61. "TAXES" shall mean all federal, state, local and foreign income,
profits, gross receipts, license, payroll, employment, franchise, unincorporated
business, withholding, capital, general corporate, customs duties, environmental
(including Taxes under Code Section 59A), disability, registration, alternative,
add-on, minimum, estimated, sales, use, occupation, property, severance,
production, excise, recording, ad valorem, gains, transfer, value-added,
unemployment compensation, social security, premium, privilege and any and all
other taxes (including interest, additions to tax and penalties thereon, and
interest on such additions to tax and penalties).
1.62. "TAX RETURN" means any return, declaration, report, claim for refund
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
1.62A. "U.K. ACTIVE EMPLOYEES" means all Active Employees who are employed
in the United Kingdom.
1.62B. "U.S. ACTIVE EMPLOYEES" means all Active Employees other than the
U.K. Active Employees.
1.62C. "U.K. EMPLOYEE PLAN" means all material terms of employment of the
U.K. Active Employees including pension and other rights under any retirement
benefits, life assurance or hospital insurance scheme and any stock option or
other scheme, either in operation or proposed whereby any of the U.K. Active
Employees is or is to be entitled to any commission or renumeration of any sort
calculated by reference to the turnover, profit or sales of any Seller or to any
shares.
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1.62D. "U.S. EMPLOYEE PLAN" means each employee pension benefit plan or
arrangement, profit sharing plan or savings plan (including any 401(k) plan),
each employee welfare benefit plan and each other bonus, incentive compensation,
deferred compensation, severance or similar plan, policy, contract or payroll
practice providing compensation or employee benefits to Employees of WCS
maintained by, on behalf of or for the benefit of Sellers or to which Sellers
are a participating employer or are obligated to contribute or have any legally
enforceable liability and in which any Employee of WCS participates or has
accrued any rights or under which Sellers are liable in respect of an Employee.
1.63. "WATER" means surface water, ground water, other water or any of
them.
1.64. "WCEC" means Wynn's Climate Equipment Company, a Texas corporation.
1.65. "WCS" means Wynn's Climate Systems, Inc., a Texas corporation.
1.66. "WII" means Wynn's International, Inc., a Delaware corporation.
1.67. "WYNN'S UK" means Wynn's (UK) Limited, a corporation organized under
the laws of England.
2. PURCHASE AND SALE OF ASSETS
2.1. PURCHASE AND SALE. Upon the terms and conditions of this Agreement,
as of the Effective Time, Sellers shall sell, and Buyer shall purchase, free of
all Encumbrances except as set forth in Item 4.12 of the Disclosure Schedule,
all of Sellers' right, title and interest in and to the Assets.
2.2. PURCHASE PRICE. In consideration of Sellers' sale of the Assets to
Buyer, Buyer shall (a) pay to Sellers Five Million Four Hundred Thousand Dollars
($5,400,000) (the "CLOSING PAYMENT"), as subsequently adjusted by the Statement
of Net Assets Payment Amount (as defined below) and the interest to be paid
thereon, and (b) assume the Assumed Liabilities pursuant to Section 3.1 below.
The amount of the Closing Payment is based on the net Assets as of April 30,
1996, as set forth in Schedule 2.2 (the "PEG STATEMENT OF NET ASSETS"), plus
Eight Hundred Fifty-Eight Thousand Dollars ($858,000). The Closing Payment, as
subsequently adjusted by the Statement of Net Assets Payment Amount and the
interest to be paid thereon, is referred to hereinafter as the "PURCHASE PRICE."
2.3. STATEMENT OF NET ASSETS PAYMENT AMOUNT. The "STATEMENT OF NET
ASSETS PAYMENT AMOUNT" is the amount by which the Final Net Asset Amount,
determined pursuant to Section 2.9, is more (a "POSITIVE STATEMENT OF NET ASSETS
ADJUSTMENT AMOUNT") or less (a "NEGATIVE STATEMENT OF NET ASSETS ADJUSTMENT
AMOUNT") than the net Assets reflected in the Peg Statement of Net Assets.
Within five days following the date on which the Final Net Asset Amount is
determined pursuant to Section 2.9, Buyer shall pay to Sellers the Positive
Statement of Net Assets Adjustment Amount or Sellers shall pay to Buyer the
Negative Statement of Net Assets Adjustment Amount, as the case may be, in
either case plus interest in the amount paid at the rate of 6.5% per annum from
the date hereof to the payment date.
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2.4. CLOSING STATEMENTS OF NET ASSETS. Within 45 days following the date
hereof, Sellers shall deliver to Buyer a statement of the net Assets as of the
Effective Time (the "PRELIMINARY CLOSING STATEMENT OF NET ASSETS"). After the
date hereof, Buyer shall grant Sellers access to the books and records relating
to the Assets and Assumed Liabilities for the purpose of assisting Sellers in
preparing the Preliminary Closing Statement of Net Assets. The Preliminary and
Final Closing Statements of Net Assets shall be prepared in accordance with the
provisions of this Section 2.4. In the event of a conflict or inconsistency
between Sections 2.4.1, 2.4.2 and 2.4.3 below, Section 2.4.3 shall take
precedence over Sections 2.4.1 and 2.4.2, and Section 2.4.2 shall take
precedence over Section 2.4.1.
2.4.1. The Preliminary and Final Closing Statements of Net Assets
shall, except as provided in Sections 2.4.2 and 2.4.3, be prepared in accordance
with the principles, practices and procedures that are the same as those that
were applied in preparing the Peg Statement of Net Assets. Assets and Assumed
Liabilities included in the Preliminary and Final Closing Statements of Net
Assets of a kind or type that were not included in the Peg Statement of Net
Assets shall be included in the Preliminary and Final Closing Statements of Net
Assets in accordance with normal principles, practices and procedures of Sellers
with regard to accounting for such an Asset or Assumed Liability as long as the
resulting amount of such Asset or Assumed Liability is in accordance with GAAP.
2.4.2. Notwithstanding anything to the contrary in Section 2.4.1,
if any of the principles, practices or procedures required by Section 2.4.1
produces a value for any Asset or Assumed Liability that is not in compliance
with GAAP, the Preliminary and Final Closing Statements of Net Assets shall
reflect an adjustment necessary to produce values for such Asset or Assumed
Liability consistent with GAAP.
2.4.3. Notwithstanding anything to the contrary in Section 2.4.2,
the following specific accounting rules shall control the preparation of the
Preliminary and Final Closing Statements of Net Assets:
2.4.3.1. The Preliminary and Final Closing Statements of
Net Assets will not include any Retained Asset or Retained Liability.
2.4.3.2. The Preliminary and Final Closing Statements of
Net Assets will reflect the results of a fixed asset physical existence test to
be conducted by Buyer and Sellers immediately following the Closing with respect
to selected fixed assets with a net book value greater than $25,000. Such test
shall be observed by such independent parties as any Party may elect. The net
book value of such selected fixed assets that the Parties cannot physically
locate will be excluded from the Preliminary and Final Closing Statements of Net
Assets.
2.4.3.3. No upward adjustment shall be made to the net
Assets on the Preliminary or Final Closing Statement of Net Assets with respect
to a decrease in any account payable or accrued liability included in the Peg
Statement of Net Assets if the decrease does not result from actual cash
settlement, returns to vendors or the provision of services.
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2.4.3.4. The Preliminary and Final Closing Statements of
Net Assets will not include any Liabilities, whether contingent or otherwise,
resulting from any litigation brought by any shareholder or debtholder of any
Seller or its Affiliates, or any reserves or accruals therefor.
2.4.3.5. The Preliminary and Final Closing Statements of
Net Assets will not include any severance or other termination payments to be
made to any Employee or officer of any Seller or its Affiliates, who may have a
written contract providing for termination or severance, or any reserves or
accruals therefor.
2.4.3.6. The Preliminary and Final Closing Statements of
Net Assets will not include any of the Sellers' obligations for product
liability claims related to products of the Business sold by any of the Sellers
before Closing or Finished Goods manufactured by any of the Sellers before
Closing but sold after Closing.
2.5. BUYER'S REVIEW. Buyer shall have 45 days following receipt from
Sellers of the Preliminary Closing Statement of Net Assets to review such
statement and to determine if, in Buyer's judgment, such statement has been
prepared in accordance with Section 2.4 above. If Buyer determines that
adjustments are necessary in order for such statement to be so prepared, Buyer
shall, within such 45-day period, deliver to Sellers a letter setting forth its
proposed adjustments, including the amount, nature and basis for the adjustments
("BUYER'S LETTER").
2.6. SELLERS' REVIEW. Sellers shall then have 30 days following receipt
of Buyer's Letter, if any, to review the proposed adjustments. Within such 30-
day period, Sellers shall deliver to Buyer a letter setting forth Sellers'
position with respect to each of Buyer's proposed adjustments ("SELLERS'
LETTER").
2.7. MEETING. Within 20 days after Buyer's receipt of Sellers' Letter,
representatives of the Parties shall meet and endeavor mutually to resolve the
adjustments, if any, that are in dispute.
2.8. ACCOUNTING ARBITRATOR. If any Party refuses to meet or the Parties
are unable to resolve their dispute at the meeting, then within 30 days
following the delivery to Buyer of Sellers' Letter or the date of the meeting
held pursuant to Section 2.7, whichever is later, the Parties jointly shall
engage the accounting firm of Deloitte & Touche (Dallas office) to act as the
arbitrator (the "ACCOUNTING ARBITRATOR"), subject to that firm's confirming that
it is independent of both Parties. The Parties shall furnish the Accounting
Arbitrator with a copy of this Agreement, the Peg Statement of Net Assets, the
Preliminary Closing Statement of Net Assets, Buyer's Letter, Sellers' Letter and
any other relevant correspondence between the Parties. The Accounting
Arbitrator must, within 30 days after the date it has received all of the
foregoing documents, complete its review and render a written report setting
forth its conclusion with respect to each adjustment in dispute. Buyer shall
provide to the Accounting Arbitrator access to the books and records of Buyer as
well as the working papers or other documents that any Party or its accountants
may have which relate to the Preliminary Closing Statement of Net Assets and any
other documents or information requested by the Accounting Arbitrator. The
Accounting Arbitrator's review shall be limited to the purpose of determining
whether, in respect of each disputed adjustment, Buyer's proposed adjustment or
Sellers' position with respect to
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Buyer's proposed adjustment is more nearly in accordance with the terms of this
Agreement. The Parties shall have the right to submit written materials to the
Accounting Arbitrator and to make oral presentations, all in accordance with
procedures to be set forth in the engagement letter between the Parties and the
Accounting Arbitrator. In arriving at its determination, the Accounting
Arbitrator must select for each adjustment either Buyer's proposed adjustment or
Sellers' position with respect to Buyer's proposed adjustment. The decision by
the Accounting Arbitrator shall be in writing and delivered to Buyer and
Sellers. The Accounting Arbitrator's decision shall be conclusive and binding
upon the parties and may be entered and enforced in any court of competent
jurisdiction. The Parties agree to submit to the jurisdiction of any such court
for the enforcement of such award or decision. The fees and expenses of the
Accounting Arbitrator shall be split evenly between Buyer on the one hand and
Sellers on the other.
2.9. FINAL NET ASSET AMOUNT. The Preliminary Closing Statement of Net
Assets shall be modified to reflect any adjustments agreed to by the Parties
pursuant to Section 2.7 and any adjustments determined by the Accounting
Arbitrator pursuant to Section 2.8. The Preliminary Closing Statement of Net
Assets, as modified to reflect such adjustments, will be the "FINAL CLOSING
STATEMENT OF NET ASSETS." The amount of the net Assets as reflected in the
Final Closing Statement of Net Assets is the "FINAL NET ASSET AMOUNT."
2.10. PAYMENT. Concurrently with the execution of this Agreement, Buyer
shall pay the Closing Payment in immediately available funds by wire transfer
(against receipt of the Assets) to Sellers' account as follows: Texas Commerce
Bank, Fort Worth, Texas, Account No. 07300175109, ABA #113000609. The Statement
of Net Assets Payment Amount and interest thereon shall be paid in immediately
available U.S. funds by wire transfer, if to Sellers at the account designated
above and if to Buyer at Chase Manhattan Bank, New York, New York, Account No.
910 1 144781, ABA #021000021.
2.11. CLOSING. The Closing shall take place on the date hereof at 10:00
a.m., Houston time, at the offices of Buyer in Houston, Texas, or at such other
place or time as Sellers and Buyer may mutually agree. The Closing shall be
effective as of the Effective Time.
2.12. TRANSFER AND RECORDING COSTS. With respect to the transfer of the
Assets contemplated hereby, Sellers and Buyer each shall pay one-half of any and
all transfer, sales, use, conveyance, stamp duty, or other similar Taxes imposed
by any Governmental Agency (which for the avoidance of doubt shall not include
United Kingdom corporation tax, capital gain tax or value added tax) and any
recording, filing or notarial fees incurred in connection with the transfer of
the Assets.
2.13. DELIVERIES AT THE CLOSING. Concurrently herewith, Sellers and Buyer
shall deliver to each other the documents referred to in Section 8.
3. LIABILITIES
3.1. ASSUMED LIABILITIES. Upon the terms and conditions set forth
herein, Sellers hereby transfer to Buyer, and Buyer hereby assumes and
undertakes to perform when due, the following Liabilities (the "ASSUMED
LIABILITIES"):
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3.1.1. Except for the Retained Liabilities and only to the extent
of the actual amount reserved or accrued on the Final Closing Statement of Net
Assets:
3.1.1.1. Trade accounts payable related to purchase orders,
operating leases and contracts to provide goods and services, payroll taxes,
commissions payable to third parties, sales taxes, property taxes in accordance
with Section 7.9 and other miscellaneous accrued liabilities of a kind and type
included in the Peg Statement of Net Assets and accrued in the normal course of
Sellers' operations; and
3.1.1.2. All of Sellers' respective obligations under
product warranties and customer service claims.
Notwithstanding the foregoing, the term "Assumed
Liabilities" shall include the liabilities described above in Sections 3.1.1.1
and 3.1.1.2 in excess of the amount accrued or reserved on the Final Closing
Statement of Net Assets for a specific liability or category described in
Sections 3.1.1.1 and 3.1.1.2, if, and only to the extent that, the total amount
of all such liabilities does not exceed the aggregate amount accrued or reserved
for all such liabilities on the Final Closing Statement of Net Assets.
3.1.2. Except for Retained Liabilities, all of Sellers' Liabilities
under the Assumed Contracts.
3.1.3. All product liability Claims relating to Raw Material and
Goods-In-Process with respect to which Buyer effects a Sale after the date
hereof pursuant to Section 7.14 below.
3.2. RETAINED LIABILITIES. All other obligations (whether absolute,
accrued, contingent, known, unknown, inchoate or otherwise) or Liabilities of
any nature whatsoever of Sellers which are not described in Section 3.1 above
(the "RETAINED LIABILITIES") will be retained and performed when due by Sellers,
including, without limitation, the following:
3.2.1. All short and long-term debt, notes payable, revolving
credit arrangements, loans, bonds, accrued interest payable and any other amount
with respect to an interest-bearing obligation of any Seller or its Affiliates;
3.2.2. All Liabilities, whether contingent or otherwise, resulting
from any litigation brought by any shareholder, bondholder or debtholder of any
Seller or its Affiliates in its capacity as such;
3.2.3. All Liabilities for Taxes for any period ending on or before
the date hereof to the extent not specifically accrued on the Final Closing
Statement and property taxes calculated in accordance with Section 7.9;
3.2.4. All severance and other termination payments and other
Liabilities, if any, claimed by John J. Halenda under the Halenda Employment
Agreement, as amended, Terry Wilson, Bill R. Marcom or Vicky Runyon under their
respective Supplemental Severance Agreements;
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3.2.5. All of Sellers' obligations for any earned salaries, wages
and commissions payable and earned, vacation and other liabilities for Employees
as of the date hereof;
3.2.6. All obligations for product liability Claims relating to
Finished Goods with respect to which Buyer effects a Sale pursuant to Section
7.14 below after the date hereof;
3.2.7. All Environmental Costs to the extent provided in Section
9.6;
3.2.8. All of Sellers' respective obligations under product
warranties and customer service claims to the extent not accrued on the Final
Closing Statement of Net Assets (except to the extent deemed to be Assumed
Liabilities pursuant to the last sentence of Section 3.1.1 above);
3.2.9. All Liabilities with respect to the litigation and claims
described in Item 4.16 of the Disclosure Schedule;
3.2.10. All Liabilities for Sellers' actions or inactions with
respect to the U.K. Employee Plans on or prior to the Effective Time, and all
Liabilities with respect to U.S. Employee Plans;
3.2.11. All Liabilities with respect to Inactive Employees;
3.2.12. All intercompany liabilities to WII and Sellers' Affiliates;
3.2.13. WCS' Liability with respect to its letter of credit in the
amount of L120,000 related to the payment of VAT; and
3.2.14. All other Liabilities of Sellers in excess of the actual
amount reserved or accrued on the Final Closing Statement of Net Assets (except
to the extent deemed to be Assumed Liabilities pursuant to the last sentence of
Section 3.1.1 above).
4. REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers represent and warrant
to Buyer as follows:
4.1. ORGANIZATION OF SELLERS. Each Seller is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each Seller is authorized to conduct business and is in good
standing under the laws of each jurisdiction in which the nature of its
businesses or the ownership or leasing of its properties requires such
qualification, except where the failure to so qualify or be in good standing
would not have a material adverse effect on Sellers. Each Seller has the
corporate power and corporate authority to carry on the businesses in which it
is engaged and to own and use the properties owned and used by it. No Seller is
in violation of any provision of its charter or bylaws. As of Closing, Wynn's
U.K. will be able to pay its debts within the meaning of Section 123 of the
Insolvency Act 1986 of the United Kingdom and will not, within 6 months
thereafter, become unable to pay its debts within the meaning of that section in
consequence of the sale of all or any of the Assets by Sellers to Buyer.
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4.2. CORPORATE RELATIONSHIPS AMONG SELLERS. WCEC is a wholly owned
subsidiary of WCS. WII is the sole shareholder of WCS and a 99% shareholder of
Wynn's UK. Wynn's UK operates as a division of WCS.
4.3. AUTHORIZATION. Each Seller has the corporate power and corporate
authority to execute and deliver this Agreement and to perform its respective
obligations hereunder. The execution, delivery and performance of this
Agreement have been duly authorized by all necessary corporate action on the
part of each Seller. This Agreement constitutes the legally valid and binding
obligation of each Seller, enforceable in accordance with its terms.
4.4. NON-CONTRAVENTION. Except as set forth in Item 4.4 of the
Disclosure Schedule, neither the execution and delivery by Sellers of this
Agreement, nor the consummation by Sellers of the transactions contemplated
hereby, will (a) to Sellers' Knowledge, violate in any material respect any
statute or regulation, rule, judgment, or decree of any court or other
Governmental Agency to which any of the Sellers is subject, or any provision of
the charter or bylaws of any Seller, or (b) violate, conflict with or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, result in the acceleration of, or create in any
party the right to accelerate, terminate, modify or cancel any Assumed Contract.
4.5. BROKERS' FEES. No Seller or WII has any liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated hereby, except pursuant to WII's agreement with Lehman
Brothers Inc.
4.6. CONSENTS AND APPROVALS. Except as set forth in Item 4.6 of the
Disclosure Schedule, no consent, license, permit, approval or authorization of,
notice to or declaration, filing or registration with, any Governmental Agency,
is, to Sellers' Knowledge, required to be obtained by any Seller in connection
with its execution and delivery of this Agreement or the consummation by Sellers
of the transactions contemplated hereby.
4.7. FINANCIAL INFORMATION. The financial information set forth in Item
4.7 of the Disclosure Schedule, the Initial Peg Statement of Net Assets and the
Peg Statement of Net Assets has been prepared from the books and records of
Sellers. The Assets and Liabilities as of December 31, 1995, and April 30,
1996, respectively, are reasonably reflected therein. There are no adjustments
which should be made to the financial information or the Peg Statement of Net
Assets to make them not misleading with regard to the information contained
therein.
4.8. PEG STATEMENT OF NET ASSETS.
4.8.1. The Peg Statement of Net Assets does not include any
Retained Assets or Retained Liabilities.
4.8.2. The Peg Statement of Net Assets does not include any
Liabilities, whether contingent or otherwise, resulting from any litigation
brought by any shareholder or debtholder of any Seller or its Affiliates, or any
reserves or accruals therefor.
4.8.3. The Peg Statement of Net Assets does not include any
severance or other termination payments to be made to any Employee or officer of
any Seller or its Affiliates, who
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may have a written contract providing for termination or severance, or any
reserves or accruals therefor.
4.8.4. The Peg Statement of Net Assets does not include any of the
Sellers' obligations for product liability claims related to products of the
Business sold by any of the Sellers before Closing or Finished Goods
manufactured by any of the Sellers before Closing but sold after Closing.
4.8.5. The Peg Statement of Net Assets has been prepared using the
same principles, practices and procedures as those that were applied in
preparing the Initial Peg Statement of Net Assets and in accordance with GAAP
consistently applied.
4.8.6. No upward adjustment has been made to the net Assets on the
Peg Statement of Net Assets with respect to a decrease in any account payable or
accrued liability included in the Initial Peg Statement of Net Assets if the
decrease does not result from actual cash settlement, returns to vendors or the
provision of services.
4.9. EVENTS SINCE DECEMBER 31, 1995. Except as set forth in Item 4.9 of
the Disclosure Schedule, since December 31, 1995, there has not been any
material adverse change in the Assets or Assumed Liabilities. Without limiting
the foregoing, since that date no Seller has, except as set forth in Item 4.9 of
the Disclosure Schedule:
4.9.1. Sold, leased, transferred or assigned any of the Assets,
other than (i) pursuant to intercompany transactions among Sellers or (ii) in
the ordinary course of business;
4.9.2. Entered into any contract, lease, sublease, license,
arrangement or sublicense (or series of the same), except in the ordinary course
of business;
4.9.3. Delayed or postponed the payment of accounts payable or any
other Assumed Liability in any amount, in total, in excess of $50,000, except in
the ordinary course of business;
4.9.4. Canceled, compromised, waived or released any material right
or claim with respect to an Asset;
4.9.5. To Sellers' Knowledge, experienced any damage, destruction
or loss (whether or not covered by insurance) to an Asset either involving more
than $50,000 for any individual Asset or more than $100,000 for all Assets;
4.9.6. Entered into any employment or collective bargaining
agreement, whether written or oral, or modified the terms of any existing
employment agreement;
4.9.7. Granted any increase in the compensation of any Employee,
other than routine salary or hourly pay increases in the ordinary course of
business consistent with past practice;
4.9.8. Adopted any (i) bonus, (ii) profit sharing, (iii) incentive
compensation, (iv) pension, (v) retirement, (vi) medical, hospitalization, life
or other insurance, (vii) severance or (viii) other plan, contract or commitment
for any of its employees or applicable to any Employee, or modified or
terminated any existing plan, contract or commitment for or applicable to any
Seller;
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4.9.9. Made any capital investment in, any loan to, or any
acquisition of, any other person or entity (or series of related capital
investments, loans and acquisitions); or
4.9.10. Committed to any of the foregoing.
4.10. TAX MATTERS. There are no Tax liens except liens for Taxes not yet
due upon, pending against or, to Sellers' Knowledge, threatened in writing
against any of the Assets that arose in connection with any failure to file a
Tax Return or to pay any Taxes. To Sellers' Knowledge, Sellers have withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any Employee or any current independent contractor of a
Seller. There is no dispute or claim concerning any Liability for Taxes
relating to any of the Assets either (a) claimed or raised by any authority in
writing, or (b) to Sellers' Knowledge, based on personal contact with any agent
of such authority.
4.11. REAL PROPERTY LEASES. Item 4.11 of the Disclosure Schedule lists
all real property leases and subleases to which any Seller is party (the "REAL
PROPERTY LEASES"). Sellers have delivered to Buyer correct and complete copies
of all written Real Property Leases (as amended to date). With respect to each
Real Property Lease and except as set forth in Item 4.11 of the Disclosure
Schedule:
4.11.1. To Sellers' Knowledge, such Real Property Lease is in full
force and effect and is a legally valid and binding obligation of the parties
thereto;
4.11.2. To Sellers' Knowledge, (i) no Seller is in breach or default
thereof, and no event has occurred which, with notice or lapse of time, would
constitute a material breach or default by any Seller or would permit
termination, modification or acceleration thereunder by the lessor or sublessor,
and, (ii) the lessor or the sublessor is not in breach or default thereunder,
and no event has occurred which, with notice or lapse of time, would constitute
a breach or default by the lessor or sublessor, or would permit termination,
modification or acceleration thereunder by any Seller;
4.11.3. To Sellers' Knowledge, since the commencement of the
respective lease terms of the Real Property Leases to which any Seller is a
party, no Seller has received any notice that it or the respective piece of
Leased Real Property is in violation of any existing law or any building,
zoning, health, safety or other ordinance, code or regulation with respect to
the respective piece of Leased Real Property; and
4.11.4. There are no (i) pending or, to Sellers' Knowledge,
threatened condemnation proceedings relating to the Leased Real Property, (ii)
pending or, to Sellers' Knowledge, threatened litigation or administrative
actions relating to the Leased Real Property, or (iii) to Sellers' Knowledge,
other matters materially and adversely affecting the current use, or occupancy
thereof.
4.12. OWNED REAL PROPERTY. Item 4.12 of the Disclosure Schedule
identifies all real property owned by Sellers, other than the Modesto Property.
Sellers have delivered to Buyer correct and complete copies of all deeds, title
policies, and related ownership documents in
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Sellers' actual or constructive possession relating to the Owned Real Property.
With respect to the Owned Real Property and except as set forth in Item 4.12 of
the Disclosure Schedule:
4.12.1. To Sellers' Knowledge, WCS has good and marketable title to
the Owned Real Property, free and clear of any Encumbrance. For the purposes of
this Section 4.12.1, "marketable title" shall mean that there are no impediments
to title that would prevent the sale of the Owned Real Property;
4.12.2. There are no (i) pending or, to Sellers' Knowledge,
threatened condemnation proceedings relating to the Owned Real Property, (ii)
pending or, to Sellers' Knowledge, threatened litigation or administrative
actions relating to the Owned Real Property, or (iii) to Sellers' Knowledge,
other matters materially and adversely affecting the current use, occupancy or
value thereof;
4.12.3. To Sellers' Knowledge, since the date of the respective
deeds conveying title to the Owned Real Property to WCS, no Seller has received
any notice that it or the respective piece of Owned Real Property is in current
violation of any existing law or any building, zoning, health, safety or other
ordinance, code or regulation (except with respect to Environmental Laws which
is addressed in Section 4.21) with respect to such Owned Real Property;
4.12.4. To Sellers' Knowledge, Item 4.12.4 of the Disclosure
Schedule lists all Permits with respect to the Owned Real Property;
4.12.5. There are no leases, subleases, licenses, concessions or
other agreements, written or oral, granting to any party or parties the right of
use or occupancy of any portion of the Owned Real Property;
4.12.6. There are no outstanding options or rights of first refusal
to purchase the Owned Real Property or any portion thereof or interest therein;
4.12.7. There are no parties other than WCS in possession of the
Owned Real Property;
4.12.8. All facilities located on the Owned Real Property are
supplied with utilities and other services necessary for the operation of such
facilities as currently operated by WCS; and
4.12.9. Except as set forth in Item 4.12.9 of the Disclosure
Schedule, to Sellers' Knowledge, each parcel of Owned Real Property abuts on and
has direct vehicular access to a public road or access to a public road via a
permanent, irrevocable, appurtenant easement benefitting the parcel of real
property.
4.13. INTELLECTUAL PROPERTY. Item 4.13 sets forth all patents, patent
applications, registered trademarks, registered service marks and registered
designs owned by Sellers as of the date hereof. Except as set forth in Item
4.13 of the Disclosure Schedule:
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4.13.1. Sellers own, free and clear of any Encumbrance, or are
licensed or otherwise have the right to use, the Intellectual Property;
4.13.2. In the last five years, no Seller has received notice of any
Claim pertaining to or is aware of any threatened legal proceedings that
challenge such Seller's ownership of the Intellectual Property or the right to
use any Intellectual Property; and
4.13.3. Seller is not aware of any infringement of the Intellectual
Property by others and in the last five years, has not received any notice of
any Claim pertaining thereto, and is not aware of any threatened legal
proceeding concerning infringement by others of the Intellectual Property.
4.14. TANGIBLE ASSETS. Each Seller has good and marketable title to the
tangible Assets, free and clear of all Encumbrances. Except as set forth in
Item 4.14 of the Disclosure Schedule, the machinery and equipment comprising the
Assets are in satisfactory operating condition for their current use by Sellers
and Sellers' presently anticipated levels of production. Except as set forth in
Item 4.14 of the Disclosure Schedule, there is no machinery, equipment, tools or
dies not owned or leased by Sellers but used in the Business as presently
conducted. For the purposes of this Section 4.14, "Assets" shall be deemed to
exclude the Owned Real Property.
4.15. ASSUMED CONTRACTS. Sellers have delivered to Buyer a correct and
complete copy of each Assumed Contract (or a written summary thereof if it is
oral). Except as set forth in Item 4.15 of the Disclosure Schedule, (i) each
Assumed Contract is in full force and effect and is a legally valid and binding
obligation of the Seller that is a party thereto, (ii) the Closing will not
cause a breach of any Assumed Contract, and to Sellers' Knowledge, each Assumed
Contract is legal, valid, binding and enforceable against any other party
thereto, and (iii) such Seller is not in material breach or default thereof, and
no event has occurred which, with notice or lapse of time, would constitute a
material breach or default by such Seller, or would permit termination,
modification or acceleration thereunder by the other party thereto, and, to
Sellers' Knowledge, no other party to such Assumed Contract is in breach or
default thereunder, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default by such other party, or would permit
termination, modification or acceleration thereunder by such Seller. Except as
set forth in Item 4.15 of the Disclosure Schedule, to Sellers' Knowledge, no
customer of Sellers having purchases of $250,000 or more from Sellers in 1995,
has indicated within the past year that it will stop, or materially decrease the
rate of, buying materials, products, or services from Sellers. For the purposes
of this Section 4.15, "ASSUMED CONTRACTS" shall be deemed to exclude the Real
Property Leases.
4.16. LITIGATION. Except as set forth in Item 4.16 of the Disclosure
Schedule, there is no unsatisfied judgment, order, decree, stipulation,
injunction or charge with respect to the Assets, nor is any Seller a party or,
to Sellers' Knowledge, threatened to be made a party to, any charge, complaint,
action, suit, proceeding, hearing or investigation of or in any court or
Governmental Agency or before any arbitrator with respect to the Assets.
4.17. PRODUCT WARRANTIES. Except as set forth in Item 4.17 of the
Disclosure Schedule, to Sellers' Knowledge, in the last five years, each product
manufactured and sold by
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WCS or assembled and sold by Wynn's UK (a "PRODUCT") has been in conformity with
all applicable contractual commitments and all express and implied warranties of
WCS or Wynn's UK, as the case may be, subject to the historical warranty claim
rates set forth in Item 4.17 of the Disclosure Schedule. Sellers have provided
to Buyer a correct and complete copy of each Seller's sales invoice, containing
general terms and conditions of sale.
4.18. PRODUCT LIABILITY. Except as set forth in Item 4.18 of the
Disclosure Schedule, (a) no Seller is as of the date hereof, or has been at any
time during the past three years, a party to any action, suit, proceeding,
hearing or governmental investigation arising out of any injury to persons or
damage to property as a result of the ownership, possession or use of any of the
Assets or any product substantially similar to the Inventory manufactured and
sold by Sellers or assembled and sold by Wynn's UK during the past three years
(a "PRODUCT LIABILITY CLAIM"), and (b) to Sellers' Knowledge, in the last five
years, no event has occurred which would be reasonably likely to give rise to a
Product Liability Claim.
4.19. EMPLOYEES.
4.19.1. Item 4.19.1 of the Disclosure Schedule sets forth a correct
and complete list of the names, current annual base salary, current incentive
arrangements, if any, and dates of birth and hire for each Active Employee.
4.19.2. Except as set forth in Item 4.19.2 of the Disclosure
Schedule, no current or former director, officer, shareholder or Employee of any
Seller or any agent or of the same has any interest in any Asset or has entered
into any transaction or agreement with any of them that constitutes an Assumed
Contract, including any contract for the furnishing of services by, or rental of
real or personal property from or to, or requiring payments to, any such
director, officer, shareholder, Employee or agent, other than for salaries or
wages earned in the ordinary course that result from employment with any Seller.
4.19.3. To Sellers' Knowledge, no key Active Employee or group of
Active Employees has any present plans to resign from his or her employment with
any Seller. For purposes of this Section 4.19.3, (i) "key Active Employee"
means any of the Employees referenced in Section 1.36(b), and (ii) "group" means
five (5) or more people working in a functionally related area.
4.19.4. No Seller is a party to or bound by any collective
bargaining agreement, nor has it experienced any strikes or other collective
bargaining disputes. To Sellers' Knowledge, no Seller has committed an unfair
labor practice within the meaning of the National Labor Relations Act. To
Sellers' Knowledge, there is no organizational effort presently being made or
threatened by or on behalf of any labor union with respect to the Active
Employees.
4.19.5. Except for any obligations for severance or other
termination payments referenced in Section 3.2.4, Sellers have no unsatisfied
obligations for severance liabilities for Employees as of the date hereof.
4.19.6. To Sellers' Knowledge, (i) Wynn's U.K. has forwarded in a
timely manner to the relevant Trustee under the Allied Dunbar Personal Pension
Plan and the Save &
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Prosper Personal Retirement Account programs all employee and employer
contributions, and (ii) Wynn's U.K. has paid in a timely manner all premiums
due and payable for supplemental health coverage.
4.19.7. The U.K. Active Employees are the only persons employed in
the Business in the United Kingdom. No Seller has offered a contract of
employment in the United Kingdom which remains capable of acceptance.
4.19.8. Sellers have in relation to each U.K. Active Employee
complied in all material respects with:
4.19.8.1. all obligations imposed on them by all statutes,
regulations and codes of conduct and practice relevant to the relations between
them and any U.K. Active Employee or trade union (including any obligations
under any health and safety legislation);
4.19.8.2. the terms and conditions of service of each of the
U.K. Active Employees;
4.19.8.3. all relevant orders, declarations and awards made
under any relevant statute, regulation or codes of conduct and practice
affecting the conditions of service of any of the U.K. Active Employees.
4.20. EMPLOYEE PLANS. Part A of Item 4.20 of the Disclosure Schedule is a
correct and complete list of each U.S. Employee Plan, and Part B of Item 4.20 of
the Disclosure Schedule is a correct and complete list of each U.K. Employee
Plan.
4.21. ENVIRONMENTAL MATTERS. The term "ENVIRONMENTAL LAWS," when used
herein, shall mean all applicable federal, state and local laws, rules,
regulations, or ordinances (including the common law) as of the date hereof
relating to health, safety, pollution control, or protection of the Environment,
including, without limitation, all laws governing the generation, use,
ownership, collection, treatment, storage, transportation, recovery, recycling,
removal, Discharge or Disposal of, or exposure to or investigation or
remediation of Hazardous Materials and all laws and regulations with regard to
record keeping, notification and reporting requirements respecting Hazardous
Materials. Except as set forth in Item 4.21 of the Disclosure Schedule:
4.21.1. To Sellers' Knowledge, Sellers are currently in compliance
in all material respects with all Environmental Laws in connection with the
operation of the Assets and storage and sale of the Inventory.
4.21.2. To the extent any of the Sellers has on the Real Property,
or uses in connection with the operation of the Assets or storage or sale of the
Inventory, Hazardous Materials, such Seller has obtained all material Permits
required with respect thereto and, to Sellers' Knowledge, is in compliance with
all of the terms, conditions and requirements of such Permits, a list of which
is set forth in Item 4.21.2 of the Disclosure Schedule, and there are no
proceedings to which any Seller is a party which are pending or, to Sellers'
Knowledge, threatened against Sellers seeking to revoke, cancel or suspend any
such Permit. All Permits
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will be assigned to Buyer in accordance with this Agreement, except to the
extent the same are not transferable under applicable law.
4.21.3. No Seller has received any notice from any Government Agency
or any other Person alleging any present violation of any applicable
Environmental Law in connection with the operation of the Assets or the storage
or sale of the Inventory. To Sellers' Knowledge, there is no investigational
proceeding against Sellers by any federal, state or local environmental or
health and safety enforcement agency in connection with the present operation of
the Assets or the storage or sale of the Inventory.
4.21.4. No Seller has been subject to any administrative or judicial
enforcement action pursuant to any Environmental Laws with respect to the
operation of the Assets or the storage or sale of the Inventory, either now or
at any time during the past five years.
4.21.5. To Sellers' Knowledge, no Seller is subject to any remedial
obligation with respect to the operation of the Assets or the storage or sale of
the Inventory, under a currently issued and applicable administrative order,
decree, or agreement pursuant to an Environmental Law.
4.21.6. Sellers have made or obtained all material Permits or
filings necessary or required to be obtained or made pursuant to applicable
Environmental Laws in connection with the operation of the Assets or the storage
or sale of the Inventory.
4.21.7. With respect to Sellers' facilities in Fort Worth, Texas,
and Rancho Cucamonga, California, Item 4.21.7 of the Disclosure Schedule lists
any contracts or other arrangements relating to the collection, storage,
transportation, treatment, recovery, recycling, or disposal of Hazardous
Materials to which any Seller is or has been a party, and to Sellers' Knowledge,
Item 4.21.7 of the Disclosure Schedule lists any such contracts or arrangements
relating to the other Real Property.
4.21.8. To Sellers' Knowledge, except as previously disclosed in
writing by Sellers to Buyer, no Hazardous Materials have been Discharged or
Disposed of by or on behalf of Sellers on the Real Property, and to Sellers'
Knowledge, Item 4.21.8 of the Disclosure Schedule sets forth all off site
locations where Hazardous Materials generated by Sellers at the Real Property
have been used, collected, treated, stored, transported, recovered, recycled,
Discharged or Disposed.
4.21.9. Sellers have received no notice that any Real Property or,
to Sellers' Knowledge, any other property to which Hazardous Materials generated
at the Real Property have been taken (including real property used for off site
waste Disposal), is listed on any federal list of Superfund or National
Priorities List sites or similar governmental lists regarding waste sites at
which there has been Disposal of Hazardous Materials, nor to Sellers' Knowledge
is the Real Property or such other waste disposal site subject to any
environmentally-related liens of record.
4.21.10. To Sellers' Knowledge, and other than as allowed by
Permits which have been obtained and are in full force and effect, the operation
of the Assets or the storage or sale
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of the Inventory, as presently operated, stored or sold, does not require the
emission or Discharge of any Hazardous Material into the air, soil, or into any
stream, creek, river, groundwater, or other body of water, or into any sewer
system or storm water drainage system. Except as set forth in Item 4.21 of the
Disclosure Schedule, to Sellers' Knowledge there have been no and are no
Disposal, injection or other Discharge wells or underground tanks on any Real
Property.
4.21.11. To Sellers' Knowledge, the Assets and inventory used in
the Business have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2 trans-dichloroethylene, dioxins and dibenzofurans.
4.22. OTHER PROPERTY. Item 4.22 of the Disclosure Schedule sets forth a
correct and complete list of all motor vehicles that are included among the
Assets.
4.23. LEGAL COMPLIANCE. Except as provided in Item 4.23 of the Disclosure
Schedule and except with respect to Environmental Laws which are addressed in
Section 4.21.1, to Sellers' Knowledge, in the last five years, Sellers have
complied in all material respects with all laws (including rules and regulations
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof) applicable to the operation of the Assets and the storage and sale of
inventory or the collection of receivables. In the last five years, no charge,
complaint, action, suit, proceeding, hearing, investigation, claim, demand or
notice has been filed or commenced against the Sellers alleging any failure to
comply with any such law, rule or regulation.
4.24. INTERCOMPANY AGREEMENTS. Item 4.24 of the Disclosure Schedule lists
a complete and accurate list of all agreements and transactions of any kind
(including transfers of assets or liabilities) between any Seller, on the one
hand, and its Affiliates (other than the other Sellers) on the other hand,
relating to the Assets, the Inventory, or the collection of receivables, that
were entered into or have occurred within one year prior to the date of this
Agreement.
4.25. RELOCATION. Except as set forth in Item 4.25 of the Disclosure
Schedule, no Assumed Contract restricts any Seller from relocating, closing or
terminating any of its operations or facilities.
4.26. PERMITS. Except with respect to Permits required by Environmental
Laws which are addressed in Section 4.21.2 above and except as disclosed in Item
4.26 of the Disclosure Schedule, to Sellers' Knowledge, each of the Sellers has
in effect all Permits necessary for the operation of the Assets and the storage
and sale of the Inventory as presently operated, stored and sold, a list of
which is set forth in Item 4.26 of the Disclosure Schedule, and there are no
proceedings to which any Seller is a party which are pending or, to Sellers'
Knowledge, threatened against a Seller seeking to revoke, cancel or suspend any
such Permit. All Permits will be assigned to Buyer in accordance with this
Agreement except to the extent that such assignment is not permissible under
applicable law.
4.27. TRANSFER OF ASSETS AND LIABILITIES. Since the date of the Initial
Peg Statement of Net Assets, none of the assets or liabilities of any Seller has
been transferred to any of its respective Affiliates except for sales of
finished products made in the ordinary course for fair consideration.
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4.28. PRODUCT RETURNS. Except as set forth in Item 4.28 of the Disclosure
Schedule, for the last five years, no Seller has had any significant product
returns or return authorizations. There are no outstanding product warranty
claims or any litigation relating thereto that indicates a repeated pattern of
product failure, product liability or product recall claims. To Sellers'
Knowledge, the Finished Goods conform to the standards of safety customary in
the industry of which the Business as conducted by the Sellers is a part. None
of the Finished Goods are, or, to Sellers' Knowledge, are threatened to be, the
subject of a product recall. Sellers have no products advertised or held out as
listed or approved by any safety or rating agency.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to
Sellers as follows:
5.1. ORGANIZATION OF BUYER. Buyer is duly organized, validly existing
and in good standing under the laws of the State of Missouri. Buyer is a wholly
owned subsidiary of Cooper Industries, Inc., an Ohio corporation.
5.2. AUTHORIZATION. Buyer has the corporate power and corporate
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement have been
duly authorized by all necessary corporate action on the part of Buyer. This
Agreement constitutes the legally valid and binding obligation of Buyer,
enforceable in accordance with its terms.
5.3. NON-CONTRAVENTION. Neither the execution and delivery by Buyer of
this Agreement, nor the consummation by Buyer of the transactions contemplated
hereby, will, to Buyer's Knowledge, violate in any material respect any statute
or regulation, rule, judgment, order or decree of any court or other
Governmental Agency to which Buyer is subject, or any provision of the charter
or bylaws of Buyer.
5.4. BROKERS' FEES. Buyer has no liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect to the transactions
contemplated hereby.
5.5. CONSENTS AND APPROVALS. No consent, license, permit, approval or
authorization of, notice to or declaration, filing or registration with, any
Governmental Agency, is, to Buyer's Knowledge, required to be obtained by Buyer
in connection with its execution and delivery of this Agreement or the
consummation by Buyer of the transactions contemplated hereby.
6. EMPLOYEES.
6.1. TERMINATION OF EMPLOYEES BY SELLERS. As of the Effective Time,
Sellers will terminate all U.S. Active Employees. In connection therewith,
Sellers will pay their Active Employees all accrued salaries, wages and vacation
pay owing to their Active Employees. Active Employees who are participants in
the Wynn's 401(k) Plan and the WII Retirement Plan will vest in such plans as of
the date hereof and Sellers will cause WII to retain responsibility for the
administration thereof with respect to the Active Employees after the Effective
Time. Active Employees who are participants in the WII Employee Stock Purchase
Plan will cease to
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be participants in such plan as of the date hereof and Sellers will cause WII to
refund to such Employees all amounts in their accounts as of the date hereof.
Active Employees will not be entitled to receive any benefits under the WII
Severance Pay Plan. At the request of Buyer, Sellers will continue to
administer certain employee benefit plans (the "TRANSITION PLANS") with respect
to the Active Employees for a period not to exceed ninety days after the date
hereof. The Transition Plans are identified on Item 6.1 of the Disclosure
Schedule. Buyer shall promptly pay or reimburse Sellers for the total direct
cost of the Transition Plans, including but not limited to the costs of claims,
premiums and administration which are incurred by Sellers at any time after the
date hereof. In the case of premiums for the Transition Plans, Buyer shall pay
Sellers the monthly premium in advance no later than the first day of the month
of coverage. Buyer acknowledges that premiums paid are not refundable, even if
coverage is cancelled before the end of the month. Buyer shall notify Seller of
the date upon which the Active Employees will cease participating in the
Transition Plans at least ten days prior to the date thereof.
6.2. EMPLOYMENT OF EMPLOYEES BY BUYER. As of the Effective Time, Buyer
shall offer to employ each U.S. Active Employee in a position, at a rate of base
pay and with employee benefits comparable in the aggregate to the position held
with and rate of base pay and employee benefits received from the employing
Seller immediately prior to the Effective Time; PROVIDED, HOWEVER, that (a)
Buyer shall enter into only such incentive compensation arrangements, if any,
that it deems reasonable or appropriate under Buyer's compensation policies and
procedures, (b) no Employee shall be a third party beneficiary of this
Agreement, and (c) Buyer shall offer to employ John J. Halenda, but shall not be
obligated to assume the Halenda Employment Agreement.
6.3. TRANSFER OF EMPLOYEES BY SELLERS. The Parties acknowledge that this
Agreement constitutes a relevant transfer under the Transfer of Undertakings
(Protection of Employment) Regulations 1981, as amended, of the United Kingdom,
("TUPE") and, in accordance with TUPE, the contracts of employment of each of
the Employees shall be transferred by Sellers to Buyer, and Buyer shall assume
the same, as of the Effective Time.
6.4. DEFINITION OF EMPLOYEES. Notwithstanding anything to the contrary
contained in this Agreement, Sections 6.1 and 6.2 above shall apply only to
those Employees located in the U.S., and Section 6.3 shall apply only to those
Employees located in the U.K.
6.5. FURTHER COVENANTS. At the Effective Time, Sellers shall take all
action necessary and within their power to cause Cooper (U.K.) Limited to be
appointed as a contributing employer (in respect of the U.K. Active Employees)
under the Allied Dunbar Personal Pension Plan and the Save & Prosper Personal
Retirement Account.
6.6. COBRA. Buyer shall permit each former employee of Sellers as of the
Effective Time who has elected or is eligible for continued group health
coverage under the PruCare of North Texas HMO medical plan and/or the Safeguard
Health Plans, Inc. dental plan pursuant to COBRA (a "COBRA BENEFICIARY") to
participate as a COBRA Beneficiary in the comparable successor or replacement
group health plan or plans established by Buyer after the Effective Time (the
"SUCCESSOR PLANS") upon payment of the required monthly premium by such COBRA
Beneficiary, PROVIDED, HOWEVER, that Buyer shall have no obligation to permit a
COBRA Beneficiary to continue to participate in the Successor Plans (i) after
the expiration of such
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COBRA Beneficiary's continuation period under COBRA, or (ii) if such COBRA
Beneficiary fails to pay any required monthly premium in full on a timely basis.
7. OTHER AGREEMENTS
7.1. GENERAL. If after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement or to implement the
transactions contemplated hereby, each Party will take such further action
(including the execution and delivery of such additional documents) as the other
Party may reasonably request. The Parties acknowledge and agree that from and
after the Closing, Buyer will be entitled to possession of all documents, books,
records, agreements and financial data of any sort pertaining to the Assets,
provided that if such items also pertain to any of the Retained Assets or
Retained Liabilities, Sellers may instead provide to Buyer a copy of such items.
Buyer shall maintain for a period of twelve (12) months following the date
hereof adequate accounting records to account for the Sale of the Inventory, the
collection of the retained receivables as provided in Section 7.7 and Warranty
Work performed, and shall provide a copy of such records to Sellers upon their
reasonable request.
7.2. LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any Claim in connection with (i) any
transaction contemplated hereby or (ii) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act or transaction on or prior to the Closing involving the
Business, the other Party will cooperate with the defending Party or its counsel
in connection therewith, make available its personnel and provide such testimony
and access to its books as shall be necessary in connection with the same. In
such case, the defending Party shall pay the reasonable out-of-pocket expenses
incurred by the cooperating Party (unless the contesting or defending Party is
entitled to indemnification therefor under Article 9).
7.3. TRANSITION. Sellers will not take any action designed or intended
to have the effect of discouraging any lessor, sublessor, licensor, customer,
supplier or other business associate of Sellers from maintaining the same
business relationships with Buyer after the Closing as were maintained with
Sellers prior to the Closing. After the Closing, Sellers will refer all
customer inquiries relating to the Assets and Business to Buyer.
7.4. CONFIDENTIALITY. Subject to the provisions of this Section 7.4, (i)
after the Closing Sellers shall refrain from using or disclosing confidential
information pertaining exclusively to the Assets and the Business ("BUYER'S
CONFIDENTIAL INFORMATION"), and (ii) Buyer shall refrain from using or
disclosing confidential information of Sellers not pertaining exclusively to the
Assets and Business ("SELLERS' CONFIDENTIAL INFORMATION" or, together with
Buyer's Confidential Information, "CONFIDENTIAL INFORMATION"). For purposes of
this Section 7.4, information that is generally available to the public
immediately prior to the time of disclosure is not Confidential Information.
Upon the Closing, each Party will deliver to the other Party or destroy (if
requested by the other Party and subject to applicable law) all tangible
embodiments and copies of the other Party's Confidential Information in such
Party's possession. If any Party is requested or required in connection with
any legal proceeding to disclose any of the other Party's Confidential
Information, such Party will notify the other Party promptly of such request or
requirement so that the other Party may seek an appropriate protective order or
waive its
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compliance with this Section 7.4. If, in the absence of a protective order or
the receipt of a waiver hereunder, such Party or its Affiliates is, on the
advice of counsel, compelled to disclose any of the other Party's Confidential
Information to any tribunal or else stand liable for contempt, such Party or its
Affiliates may disclose the Buyer's Confidential Information to the tribunal.
In such event, such Party or its Affiliates shall use its or their reasonable
efforts to obtain, at the reasonable request and expense of the other Party, an
order or other assurance that confidential treatment will be accorded to such
portion of the other Party's Confidential Information required to be disclosed
as the other Party shall designate.
7.5. CONSENTS. If any consent necessary to authorize, approve or permit
the full and complete sale, assignment and transfer of the Assets as
contemplated hereby has not been obtained as of the Closing, Sellers will (a)
use their reasonable best efforts and continue to take all reasonable action
after the date hereof, at no additional cost to Buyer, to obtain such consents,
and (b) cooperate with Buyer in any reasonable arrangement to provide Buyer with
the benefits under or with respect to the Asset as to which the consent was not
obtained.
7.6. ALLOCATION. The Purchase Price shall be allocated among the Assets
as set forth in Schedule 7.6 which allocation shall be adjusted to reflect the
change in the Assets shown on the Final Closing Statement of Net Assets. The
parties agree that such allocation is based on the fair market value of the
Assets. Each agrees to make all Tax reports, returns, claims and other
statements consistent with such allocation and each agrees not to make any
inconsistent statements on any Tax returns or during any Tax audit, except as
may be required by law. Each Party will promptly notify the other if any Tax
authority proposes a different allocation.
7.7. BUYER'S RECEIPT OF PAYMENTS IN RESPECT OF RETAINED RECEIVABLES. A
list of the accounts, notes, and other receivables that are being retained by
Sellers shall be prepared by Sellers and delivered to Buyer promptly after the
date hereof. When so delivered, such list shall be attached hereto as Schedule
7.7. Part A of Schedule 7.7 shall list only rolling receivables, in the amount
of approximately $800,000, and Part B of Schedule 7.7 shall list all other such
receivables. For a period of twelve (12) months following the date hereof,
Buyer shall use reasonable efforts, on behalf of Sellers, to collect the
receivables listed in Part A of Schedule 7.7, and shall use reasonable best
efforts, on behalf of Sellers, to collect the receivables listed in Part B of
Schedule 7.7. Any payments received by Buyer on customer accounts receivable
shall be applied first to the outstanding account receivable with Sellers until
such account is paid in full, and then the payment shall be applied to any
accounts receivable of Buyer with the same customer. Notwithstanding the
previous sentence, in the event that the customer requests that payment be
applied to customer's account with Buyer and such request is based on claims of
defective or damaged goods supplied to such customer by any Seller, then Buyer
shall apply the portion of the payment reflecting customer's claim against any
Seller as requested by the customer; the remainder of the payment shall be
applied in accordance with the immediately preceding sentence. On or before the
15th day of the month following the month that Buyer receives any such payment,
Buyer shall remit to Sellers an amount equal to the amount of such collections
received with respect to Sellers' accounts receivable, together with a statement
showing the invoices paid and the amount of each invoice. From time to time
upon Sellers' request, Sellers shall be entitled to audit Buyer's records with
respect to Sellers' receivables. Sellers reserve the right, at Sellers'
expense, to initiate any collection activities with respect to any and all past-
due receivables of Sellers. Notwithstanding the previous provisions of this
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Section 7.7, certain payments received shall be applied as follows: (i) payments
received by Buyer from Air Shop Orange, Inc. will be applied first to any
currently due accounts receivable of Buyer with any excess amount applied to
Sellers' accounts receivable, and, at Sellers' request, Buyer shall withhold
shipment of future orders if such customer fails to make reasonable excess
payments to apply to Sellers' accounts receivable; (ii) Sellers, Buyer and Mid-
Atlantic Accessories shall mutually agree on a payment plan for Sellers'
accounts receivable with payments received by Buyer from such customer applied
first to any currently due accounts receivable of Buyer with any excess amount
applied to Sellers' accounts receivable, provided that Buyer shall, at Sellers'
request, withhold shipment of future orders if the customer fails to make
reasonable excess payments to Sellers' accounts receivable; (iii) payments
received from Ranshu Inc. shall be applied first to Sellers' currently due or
past due accounts receivable with any excess applied to Buyer's accounts
receivable, and payments shall be applied to future due accounts receivable of
Sellers provided those payments are received as a direct result of an agreement
between Sellers and Ranshu, Inc. to liquidate future accounts receivable; and
(iv) with respect to Macon, Inc., Buyer and Sellers shall work together to reach
a negotiated settlement with such customer to achieve the collection of Sellers'
rolling receivables account with future payment application to be mutually
agreed upon by Buyer and Sellers.
7.8. TAX ASSISTANCE. Each Party shall (a) provide the other Party with
such assistance as may be reasonably requested by any of them in connection with
the preparation of any return, audit or other examination by any Tax authority
or judicial or administrative proceedings relating to liability for Taxes, (b)
retain and provide the other Party with any records or other information that
may be relevant to such return, audit or examination, proceeding or
determination, and (c) provide the other Party with any final determination of
any such audit or examination, proceeding or determination that affects any
amount required to be shown on any return of the other for any period. Without
limiting the foregoing, each Party shall retain, until the applicable statutes
of limitation (including any extensions) have expired, copies of all returns,
supporting work schedules and other records or information that may be relevant
to such returns for all Tax periods or portions thereof ending before or
including the date hereof and shall not destroy or otherwise dispose of any such
records without first providing the other Party with a reasonable opportunity to
review and copy the same.
7.9. CLOSING PRORATIONS. All real property and personal property taxes
and assessments ("PROPERTY TAXES") which are past due or become due upon the
Assets prior to the Closing shall be paid by Sellers (or if Sellers have
objected to such Taxes, Sellers shall assume responsibility for such Taxes),
together with any penalty or interest thereon. Property Taxes that arise or
become due after the Closing shall be prorated and adjusted between Buyer and
Sellers as of the Closing on a per diem basis on the best information available
at such time, and an appropriate adjustment in the Final Closing Statement of
Net Assets shall be made as necessary. If the amount of any such Property Taxes
as finally determined differs from the amount used for the proration made in
accordance with the previous sentence, the proration shall be recalculated and
the appropriate payment shall be made promptly to the other Party.
7.10. TAX PROCEEDINGS. Sellers shall exercise, at their expense, complete
control over the handling, disposition and settlement of any governmental
inquiry, examination or proceeding that could result in a determination with
respect to Taxes due or payable by Buyer, for which Sellers or their Affiliates
may be liable or against which Sellers may be required to indemnify Buyer
pursuant to this Agreement. Sellers shall promptly notify Buyer if, in
connection with
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any such inquiry, examination or proceeding, any Governmental Agency proposes in
writing to make any assessment or adjustment with respect to Tax items of
Sellers, which assessments or adjustments could affect the Assets following the
Closing, and shall consult with Buyer with respect to any such proposed
assessment or adjustment.
7.11. UNEMPLOYMENT TAX EXPERIENCE. Upon Buyer's request, Sellers shall
transfer to Buyer the state unemployment tax experience for Sellers' Employees.
Buyer may elect to transfer such unemployment tax experience separately for each
state in which Sellers had Employees immediately prior to the Closing. If Buyer
elects to transfer the aforementioned state unemployment tax experience in a
particular state, Sellers will timely execute the necessary governmental filings
to accomplish the transfer.
7.12. EMPLOYMENT TAX COMPLIANCE. Sellers and Buyer agree to use the
alternative procedure described in Section 5 of Revenue Procedure 84-77, 1984-2
Cum. Bull. 753, for preparing and filing Forms W-2, W-33, W-4, W-5 and 941 for
1996 with respect to the U.S. Active Employees, including (so far as is
relevant) the U.K. Active Employees. Each Party shall provide to the other
Party such assistance, cooperation and access to such books and records as may
be reasonably necessary to comply with this provision.
7.13. DISCHARGE OF WARRANTY OBLIGATIONS. Pursuant to Section 3.1.1.2,
Buyer has assumed Sellers' obligations with respect to product warranties and
customer service claims ("WARRANTY WORK") but only to the extent accrued on the
Final Closing Statement of Net Assets (except to the extent deemed to be Assumed
Liabilities pursuant to the last sentence of Section 3.1.1 above). Upon receipt
of a customer claim for Warranty Work (either to be performed by Buyer or
already performed by the customer and for which the customer seeks
reimbursement), Buyer shall review such claim for propriety in accordance with
procedures similar to those used by Sellers immediately prior to the Effective
Time. If Buyer performs Warranty Work, Buyer shall assign a cost to the same
using the Inventory Cost of the Inventory used to perform the Warranty Work plus
Buyer's out-of-pocket costs (including labor costs, manufacturing and other
overhead costs). If Buyer concludes that reimbursement for Warranty Work
performed by a customer is appropriate, then Buyer shall reimburse the customer
for the amount deemed appropriate. If the total costs to Buyer to perform the
Warranty Work and to reimburse customers for Warranty Work exceed the aggregate
amount accrued on the Final Closing Statement of Net Assets (except to the
extent deemed to be Assumed Liabilities pursuant to the last sentence of Section
3.1.1) ("EXCESS WARRANTY COSTS"), Buyer shall promptly notify Sellers of any
such Excess Warranty Costs. Sellers shall be entitled to review Buyer's books
and records regarding Excess Warranty Costs. Sellers shall, within five (5)
days after receipt of such notice, reimburse Buyer for the Excess Warranty Costs
confirmed by Sellers. Until further notice from Sellers, Buyer shall thereafter
continue to perform Warranty Work and/or reimburse customers for Warranty Work,
provided that Sellers reimburse Buyer for Excess Warranty Costs pursuant to the
foregoing provisions.
7.14. CONSIGNMENT AND SALES REPRESENTATIVE ARRANGEMENTS REGARDING
INVENTORY. WCS hereby consigns all of its Raw Materials and Goods-In-Process
and all of its Finished Goods other than the Fort Worth Finished Goods (as such
term is defined in Section 7.14.13 below), and Wynn's UK hereby consigns all of
its Raw Materials, Goods-In-Process and Finished Goods (all of such consigned
items are collectively referred to hereinafter as the "CONSIGNED INVENTORY"), to
Buyer as follows:
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7.14.1. DELIVERY OF CONSIGNED INVENTORY. The Consigned Inventory
shall be deemed delivered to Buyer at the Closing. Buyer shall physically
segregate all Consigned Inventory from post-Closing inventory.
7.14.2. TITLE TO CONSIGNED INVENTORY. Title to the Consigned
Inventory shall remain with WCS or Wynn's UK, as the case may be, until the
occurrence of a Sale (as defined below), at which point title shall pass to
Buyer. Sellers shall be responsible for any and all property taxes applicable
to the Consigned Inventory.
7.14.3. SALE OF CONSIGNED INVENTORY. During the twelve-month period
following the date hereof (the "CONSIGNMENT PERIOD"), Buyer shall use reasonable
best efforts to effect a Sale of the Consigned Inventory. For the purposes of
this Section 7.14, "reasonable best efforts" shall mean those that a prudent
business person would employ but in no event more than the efforts used by
Sellers as of the date hereof. Each of the following events shall be considered
a "Sale" of Consigned Inventory:
7.14.3.1. Buyer ships a Finished Good, excluding any Fort
Worth Finished Goods, to a customer or other third party;
7.14.3.2. Buyer issues a Raw Material to the production
floor and incorporates it into a product manufactured, or assembled by Buyer;
7.14.3.3. The expiration of thirty (30) days after the date
hereof with respect to all Goods-in-Process;
7.14.3.4. Buyer uses or consumes any item of Consigned
Inventory, including, without limitation, any Consigned Inventory reduced to
scrap or used in testing;
7.14.3.5. Buyer returns any item of Consigned Inventory to a
vendor for credit or refund in which case Buyer shall be entitled to the credit
or refund; PROVIDED, HOWEVER, that for the purposes of the Consigned Inventory
referenced in the immediately foregoing phrase, Inventory Cost shall be deemed
to be that amount actually credited or refunded to Buyer (less costs of shipping
and other incidentals), and (i) Buyer shall obtain Sellers' written consent, not
to be unreasonably withheld, prior to returning any item of Consigned Inventory
to a vendor for less than the Inventory Cost as defined in Section 7.14.5 but
(ii) Buyer need not obtain Sellers' written consent prior to returning any items
of Consigned Inventory to a vendor for credit or refund for Inventory Cost or
greater, where Inventory Cost is deemed to be that amount actually credited or
refunded to Buyer (less costs of shipping and other incidentals), as provided
above in this Section 7.14.3.5; and
7.14.3.6. Buyer ships any item of Consigned Inventory from
(a) the site where it resided as of the Effective Time or, if Buyer initially
relocates the Consigned Inventory en masse, the new site where the Consigned
Inventory is relocated, to (b) another warehouse, service center or other
facility of Buyer or any Affiliate of Buyer.
7.14.3.7. Notwithstanding anything to the contrary contained
in this Section 7.14, Buyer shall have no obligation under this Section 7.14.3
to effect Sales of
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Consigned Inventory (excluding the Wynn's U.K. Raw Materials, Goods-In-Process
and Finished Goods) during the Consignment Period once the Sales of the
aggregate Inventory Cost of all such Consigned Inventory totals $5,000,000
(excluding the Wynn's U.K. Raw Materials, Goods-In-Process and Finished Goods).
As of such time, any remaining Consigned Inventory shall be deemed to be "EXCESS
U.S. CONSIGNED INVENTORY" and no longer Consigned Inventory that Buyer shall use
reasonable best efforts to solicit sales pursuant to the provisions of Section
7.14.13 below.
7.14.4. DAILY CYCLE COUNTS; MONTHLY STATEMENTS. After the date
hereof, Buyer shall perform a daily physical count of selected Consigned
Inventory and Non-Consigned Inventory (as such term is defined below in Section
7.14.13) items, in substantially the same manner as that performed by Sellers
prior to the Closing. In addition, Buyer shall furnish Sellers with monthly
statements indicating all Sales of Consigned Inventory in the preceding month
and the amount of remaining Consigned Inventory. The monthly statements shall
be itemized by part number. Buyer shall deliver such monthly statement to
Sellers no later than the 15th day following each month.
7.14.5. ADVANCE AND PAYMENTS. Except as otherwise provided in
Section 7.14.3.5, Buyer shall be obligated to pay Sellers the inventory cost, as
to be reflected in Schedule 1.35 and as such cost may be adjusted from time to
time by mutual agreement of the Parties (the "INVENTORY COST"), for each item of
Consigned Inventory with respect to which a Sale occurs. Concurrently with the
execution hereof, Buyer shall advance to Sellers the amount of Three Million
Five Hundred Thousand Dollars ($3,500,000) (the "ADVANCE"). Buyer shall pay the
Advance by wire transfer of immediately available funds to Sellers' account
designated in Section 2.10 above. The Advance represents Buyer's prepayment to
Sellers of the Inventory Cost potentially payable as set forth above. Buyer
shall indicate in each monthly Inventory statement the Inventory Cost for Sales
occurring in the reported month (which shall be charged against the Advance) and
the cumulative amount of Inventory Cost for Sales made to date. For the month
in which the cumulative amount of Inventory Cost for Sales made exceeds
$3,500,000, Buyer shall remit to Sellers payment in the amount of such excess.
Thereafter, Buyer shall remit to Sellers with each monthly statement the amount
of the Inventory Cost for Sales occurring during the reported month.
7.14.6. LAST TIME BUYS. If Sellers determine that it would be
desirable to enter into a "last time buy" arrangement with an original equipment
manufacturer customer with respect to spare, discontinued, replacement and other
similar parts of the Consigned or Non-Consigned Inventory, Buyer shall use its
reasonable best efforts to effectuate such arrangement on terms reasonably
acceptable to Sellers and Buyer, subject to Section 7.14.3.7 above.
7.14.7. CREDIT SALES. Sales of Consigned Inventory by Buyer to
third party customers may be for cash or on such credit terms as Buyer may
establish in its sole discretion. Buyer exclusively shall bear the risk of non-
payment with respect to such credit extended to customers of Buyer.
7.14.8. RETURNS. For any item of Consigned or Non-Consigned
Inventory with respect to which a Sale of Consigned Inventory or sale of Non-
Consigned Inventory has been made and which a customer proposes to return for
credit, Buyer will offer the customer up to
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a 15% credit on the invoice amount due with respect to such item of Consigned or
Non-Consigned Inventory if the customer agrees to retain the item rather than
return it. If the customer accepts such offer, then upon written notice thereof
from Buyer, Sellers shall promptly reimburse Buyer in an amount equal to the
credit extended to such customer if the item was Consigned Inventory, or credit
the customer's account receivable with Sellers if the item was Non-Consigned
Inventory. If the customer does not accept such offer and insists on returning
the item, then (A) if the item was Consigned Inventory (i) the item shall be
deemed to belong to Sellers and returned to Consigned Inventory if the Sale
occurred within the first six (6) months of the Consignment Period, and (ii) the
item shall be deemed to belong to Buyer and not to be returned to Consigned
Inventory if the Sale occurred within the last six (6) months of the Consignment
Period, and (B) if the item was Non-Consigned Inventory, the item will be
returned to Non-Consigned Inventory. Notwithstanding the foregoing, Buyer shall
not, without obtaining prior approval of Sellers, offer such credit to any
customer that proposes to return Consigned or Non-Consigned Inventory that, in
the aggregate, was sold for an amount in excess of $25,000. With respect to any
item that constituted inventory of and was sold by Sellers prior to the date
hereof ("SELLERS' INVENTORY"), and which is returned to Buyer after the date
hereof:
7.14.8.1. If the customer has an open account receivable
with Sellers, Buyer shall credit Sellers' account receivable from that customer
in the amount of the customer's purchase price;
7.14.8.2. If the customer does not have an open account
receivable with Sellers, Buyer shall issue a refund to the customer in the
amount paid by the customer and shall deduct such amount from the amount that
Buyer otherwise would be obligated to remit to Sellers for accounts receivable
collected pursuant to Section 7.7;
7.14.8.3. Such returned item shall be considered to be
returned to Consigned Inventory, and if such item has not been assigned an
Inventory Cost, the Inventory Cost shall be the most recent cost used by Sellers
in determining the cost of goods sold for such item; and
7.14.8.4. If any customer proposes to return Sellers'
Inventory for a credit or refund in excess of $25,000, Buyer shall obtain
Sellers' written consent to the acceptance of the return of such inventory
before Buyer accepts the return thereof.
7.14.9. RISK OF LOSS/INSURANCE. Buyer shall be responsible for any
loss or damage to the Consigned or Non-Consigned Inventory while it is under
Buyer's control. Buyer shall maintain property damage insurance on the
Consigned or Non-Consigned Inventory in the amount of $10,000,000 on the date
hereof, which shall name WCS and Wynn's UK as additional insureds. Buyer may
reduce such insurance coverage based on Sales of Consigned Inventory and sales
of Non-Consigned Inventory.
7.14.10. EXPIRATION OF CONSIGNMENT PERIOD AND SALES AGENCY PERIOD.
If, at the end of the Consignment Period and Sales Agency Period, Buyer has been
unable to dispose of all of the Consigned and Non-Consigned Inventory despite
using its reasonable best efforts as required by Sections 7.14.3 and 7.14.13,
Buyer shall promptly return the remaining Consigned and Non-Consigned Inventory
to Sellers. In such case, Buyer, at Sellers' expense,
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shall pack the Consigned and Non-Consigned Inventory in a manner suitable for
shipping. Buyer shall ship such Consigned and Non-Consigned Inventory F.O.B.
Fort Worth to such destination(s) as may be designated by Sellers, and Sellers
shall pay for the cost of such shipping. If the total Inventory Cost with
respect to which Sales occurred in the Consignment Period is less than
$3,500,000, then within five (5) days of receipt of an invoice from Buyer,
Sellers shall pay to Buyer the difference between $3,500,000 and such total
Inventory Cost. Notwithstanding the preceding sentence, upon the expiration of
the Consignment Period, Buyer and Sellers may agree to continue the consignment
arrangement with respect to the remaining Consigned Inventory upon the terms set
forth above or upon other mutually agreeable terms.
7.14.11. PURCHASE OF CONSIGNED INVENTORY. In addition, during the
Consignment Period, Buyer shall be entitled to purchase the Consigned Inventory
at Inventory Costs, in the quantities required by Buyer subject to an aggregate
limitation of $5,000,000 taking into account Sales pursuant to Section 7.14.3.
7.14.12. ON-SITE VISITS. From time to time after the Closing,
Buyer shall permit representatives of Sellers to visit the locations at which
the Consigned and Non-Consigned Inventory is stored and at which Buyer keeps its
books and records pertaining to the Consigned and Non-Consigned Inventory and to
Sellers' receivables to be collected by Buyer pursuant to Sections 7.7 and
7.14.13 hereof. Such visits shall take place during Buyer's normal business
hours and only after Sellers have provided Buyer with at least 48 hours' notice
prior to each visit. The purpose of such visits shall be to enable Sellers to
monitor and audit Buyer's performance of its obligations under Sections 7.7 and
7.14 hereof. Without limiting the generality of the foregoing, Sellers
anticipate that, collectively, they will make such visits at least once per
month.
7.14.13. APPOINTMENT OF BUYER AS SALES REPRESENTATIVE. Sellers
hereby appoints Buyer to act as a sales representative with respect to the sale
of (i) WCS' Finished Goods located at its Fort Worth, Texas, facility (the "FORT
WORTH FINISHED GOODS") and (ii) the Excess U.S. Consigned Inventory
(collectively, the "NON-CONSIGNED INVENTORY"). Such appointment shall be
effective as of the Effective Time and shall continue during the twelve (12)
month period thereafter (the "SALES AGENCY PERIOD"). The Non-Consigned
Inventory shall be deemed delivered to Buyer at the Closing provided that title
shall remain with Seller. Buyer shall physically segregate all Non-Consigned
Inventory from post-Closing inventory of Buyer. During the Sales Agency Period:
(i) Buyer shall use reasonable best efforts to sell the Non-Consigned Inventory
on behalf of Sellers to customers of Sellers or Buyer on Buyer's commercially
reasonable terms; (ii) the sales price of the Non-Consigned Inventory shall be
at least Sellers' list price as attached hereto as Schedule 7.14.13, less normal
discounts, with any decreases therefrom approved in advance by Sellers; (iii)
Sellers shall be obligated to sell the Non-Consigned Inventory to any such
customer that offers at least such list price less normal discounts; (iv) upon
the sale of Non-Consigned Inventory, title thereto shall pass directly from
Sellers to the customer; (v) Sellers shall remain responsible for any and all
property or other taxes applicable to the Non-Consigned Inventory; (vi) all
accounts receivable arising from Non-Consigned Inventory Sales shall belong to
Sellers; (vii) Buyer shall use its reasonable best efforts to collect such
accounts receivable on behalf of Sellers; (viii) Buyer shall have no obligation
to purchase Non-Consigned Inventory from Sellers; and (ix) Buyer shall be
Sellers' exclusive sales representative in the United States and Canada with
respect to the Non-Consigned Inventory.
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Any payments received by Buyer on such accounts receivable shall be applied
first to the outstanding accounts receivable with Sellers until such account is
paid in full, and then the payment shall be applied to any accounts receivable
of Buyer with the same customer. On or before the 15th day of the month
following the month that Buyer receives any payment, Buyer shall remit to
Sellers an amount equal to the amount of such collections received with respect
to Sellers' outstanding accounts receivable, together with a statement showing
the invoices paid and the amount of each invoice. Sellers shall promptly inform
Buyer from time to time of the status of any such outstanding accounts
receivable. From time to time upon either party's request, the requesting party
shall be entitled to audit the records of the other party with respect to such
accounts receivable. Buyer reserves the right, at Buyer's expense, to initiate
any collection activities with respect to any and all past-due receivables of
Sellers created under this Section 7.14.13. During the Sales Agency Period,
Buyer's obligations under Section 7.14.4 with respect to monthly statements
shall be deemed to apply to sales of Non-Consigned Inventory. In consideration
of Buyer's services under this Section 7.14.13, Sellers shall pay Buyer a
commission equal to twenty-eight percent (28%) of the Net Sales Price of Non-
Consigned Inventory sold during the Sales Agency Period. The commissions shall
be paid monthly following receipt of proceeds from the sales. For purposes
hereof, "NET SALES PRICE" means the invoice price for the Non-Consigned
Inventory sold, excluding freight and delivery charges and sales and other taxes
identified in the invoice as being included in the price, less allowances for
returns actually made and trade discounts identified in the invoice. Buyer
shall subtract the commission due to Buyer from the amounts collected by Buyer
pursuant to this Section 7.14.13 provided that if the amounts collected in a
given month are inadequate to cover such commissions, Sellers shall pay Buyer
the shortfall.
7.15. USE OF RETAINED NAMES. Buyer shall not use the Retained Names in
any respect except that Buyer shall be entitled (i) to sell any Inventory in
existence on the date hereof bearing any of the Retained Names, and (ii) to use
any product packaging, promotional materials, letterhead and business cards
bearing any of the Retained Names, in existence as of the date hereof until the
earlier of the expiration of one year following the date hereof or the
exhaustion of the supply of such items.
7.16. "AS IS" TRANSACTION. Subject to Sellers' representations,
warranties and covenants expressly set forth herein, Buyer accepts the Assets
"AS IS" and "WITH ALL FAULTS." Buyer acknowledges that it has the right to make
such inspection of the Assets as it deems appropriate. Except as provided
herein, Buyer further acknowledges that Sellers, their agents and employees and
other persons acting on behalf of Sellers, have made no representation or
warranty of any kind, express or implied, in fact or by law, as to the
compliance status of the Assets under any law, including any Environmental Law,
or of merchantability, fitness for any particular purpose, condition, value, or
use of the Assets upon which Buyer has relied directly or indirectly for any
purpose.
7.17. SECURITY FOR VAT DEFERMENT GUARANTEE. Concurrently with the
execution of this Agreement, Buyer shall put into place a letter of credit or
other security arrangement with respect to the United Kingdom Value Added Tax
(VAT) Deferment Guarantee such that Wynn's UK would concurrently be permitted to
cancel, without penalty, that certain Irrevocable Standby Letter of Credit
issued by Lloyds Bank PLC in the amount of L120,000 expiring September 20, 1996.
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7.18. PERMITS. After the Closing, Buyer will take such steps as Buyer
deems necessary to effectuate the assignment to it of any or all of the Permits,
to the extent the same are assignable by their terms and under applicable law.
Sellers will take such actions as may be reasonably requested by Buyer to assign
to Buyer all such assignable Permits.
7.19. COVENANT NOT TO COMPETE. Sellers, on behalf of themselves and their
Affiliates (collectively, "SELLERS' GROUP"), in consideration of Buyer's
purchase of the Assets, promise not to compete with Buyer and its Affiliates
(collectively, "BUYER'S GROUP") from the date hereof in accordance with the
terms and conditions that follow.
7.19.1. Except with the consent in writing of Buyer, for a period of
three years after Closing, Sellers' Group agrees not to start up, acquire,
operate or otherwise compete with Buyer in a business that develops,
manufactures, markets or services the products or services of the Business as of
the date hereof, or any products having specifications similar to or performing
substantially the same functions as such products or services (the "COMPETING
BUSINESS") in those countries throughout the world where the products or
services of the Business have been provided; PROVIDED, HOWEVER, that (i)
Sellers' collective ownership of less than 10% of the outstanding stock of any
publicly traded corporation shall not be deemed to violate this covenant, and
(ii) Sellers may collectively acquire any business which derives no more than
20% of its revenues from products or services substantially similar to the
products or services of the Competing Business. Solely for the purposes of this
Section 7.19, the "BUSINESS" shall be defined as the manufacture of (i) heater
cores and (ii) automotive air conditioning systems and major components thereof,
namely compressors, condensers, evaporators, metal tubing and metal hose
assemblies, accumulators and receiver driers.
7.19.2. To ensure the greatest likelihood of enforceability of this
covenant, the Parties agree that: (i) the duration and area for which the
covenant is to be effective are reasonable; (ii) if any court determines that
the time period or the area, or both of them, are unreasonable, and that the
covenant is to that extent unenforceable, then the covenant shall remain in full
force and effect for the greatest time period, and in the greatest area that
would not render it unenforceable; and (iii) the covenant shall be deemed to be
a series of separate covenants, one for each country where the products or
services of the Business have been provided and for each and every state in the
U.S.
7.19.3. The obligations of Sellers' Group under this Section 7.19
are of special and unique character which give them a peculiar value to Buyer,
and Buyer cannot be reasonably or adequately compensated in damages in an action
at law in the event of breaches of such obligations. Sellers expressly agree
that, in addition to any other rights or remedies which Buyer may possess, Buyer
shall be entitled to (i) injunctive and other equitable relief in the form of
preliminary and permanent injunctions in the event of any actual or threatened
breach of the obligations of Sellers' Group regardless of whether Buyer can show
damages, and (ii) notwithstanding the general prohibition against assignment in
Section 10.3, freely assign, in whole or in part, Buyer's benefits under this
Section to any purchaser of all or any part of the Business from Buyer.
7.19.4. Nothing contained in the Section 7.19 shall prohibit
Sellers' Group from selling any Inventory returned to Sellers pursuant to
Section 7.14.10.
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7.20. COMPLETION OF PHASE II ENVIRONMENTAL INVESTIGATION. Buyer
acknowledges that if Sellers elect, at Sellers' own expense, to commence a Phase
II environmental investigation of the Owned Real Property, Buyer shall permit
Sellers and Sellers' representatives to have access to the Owned Real Property
after the Closing for the purpose of carrying out and completing such
investigation. Sellers shall cause their representatives to conduct its
investigation activities so as to (a) cause minimal disruption to Buyer's
operations on the Owned Real Property, and (b) provide ten (10) days advance
written notice to Buyer of such investigation.
7.21. U.K. PROPERTY.
7.21.1. Subject to the provisions of clause 7.21.3, the Real
Property Lease for Sellers' facility located in the U.K. (the "U.K. REAL
PROPERTY LEASE") will be assigned to Cooper (U.K.) Limited on the terms and
conditions set out in clause 7.21.5.
7.21.2. From and including the Closing Date until all consents
necessary to authorize the assignment of the U.K. Real Property Lease have been
obtained or the earlier termination of the license (the "LICENSE PERIOD"),
Sellers will permit Cooper (U.K.) Limited to use Sellers' facility located in
the U.K. (the "U.K. PROPERTY") as licensee on the following terms:
7.21.2.1. during the License Period, Buyer will procure that
Cooper (U.K.) Limited complies with the terms of the U.K. Real Property Lease
which are not inconsistent with the provisions of this Agreement;
7.21.2.2. Buyer undertakes that it will within five working
days of production of appropriate invoices pay to Sellers by way of license fee
a sum equivalent to the rent and other payments becoming due under the U.K. Real
Property Lease in respect of the License Period and all rates due in respect of
and all payments for the provision of utilities to the U.K. Property in respect
of the License Period and for any damage caused during the License Period to the
U.K. Property by Cooper (U.K.) Limited, its agents, employees or invitees;
7.21.2.3. the license shall not be capable of assignment;
7.21.2.4. the license shall end on the earliest of the
following three dates:
7.21.2.4.1 the date when all consents necessary to
authorize the assignment of the U.K. Real Property Lease have been obtained;
7.21.2.4.2 the date when this Agreement is
rescinded insofar as it relates to the U.K. Real Property Lease pursuant to
clause 7.21.4;
7.21.2.4.3 the date upon which Sellers serve
notice on Buyer terminating the license forthwith if at any time there is a
substantial breach of the license (other than the occupation of the U.K.
Property by Cooper (U.K.) Limited without the consent of the landlord under the
U.K. Real Property Lease).
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7.21.3. Buyer shall procure that Cooper (U.K.) Limited gives all
reasonable assistance to Sellers in connection with the application for all
consents necessary to authorize the assignment of the U.K. Real Property Lease
and Buyer shall (insofar as Sellers may reasonably require) provide to Sellers
accounts, references and other information relating to Cooper (U.K.) Limited.
7.21.4. If by the date three months after the Closing Date all
consents necessary to authorize the assignment of the U.K. Real Property Lease
have not been obtained or have been obtained subject to a condition or
conditions to which Buyer reasonably objects, then either Sellers or Buyer
(unless in breach of their respective obligations with regard to the obtaining
of such consents) may rescind this Agreement insofar as it relates to the U.K.
Real Property Lease (but not otherwise) by notice in writing to the other party
in which case neither party is to be treated as in breach of contract.
7.21.5. The terms and conditions for the assignment of the U.K. Real
Property Lease are as follows:
7.21.5.1. vacant possession of the whole of the U.K.
Property shall be given on the assignment of the U.K. Real Property Lease
subject to Cooper (U.K.) Limited's occupation as licensee;
7.21.5.2. Sellers will assign the U.K. Real Property Lease
with full title guarantee under the provisions of the Law of Property
(Miscellaneous Provisions) Act 1994 (as amended) of the United Kingdom;
7.21.5.3. the Standard Conditions of Sale (Third Edition)
adopted by the Law Society for England and Wales are incorporated herein as far
as they are applicable to a sale by private treaty and are not varied by or
inconsistent with the express terms of this Agreement and for the avoidance of
doubt it is agreed that the provisions relating to occupation by Buyer
(condition 5.2) and landlord's consent (condition 8.3) shall not apply;
7.21.5.4. the U.K. Real Property Lease will be assigned
subject to and with the benefit of the provisions of the U.K. Real Property
Lease insofar as they are still subsisting and capable of being enforced and
taking effect; and
7.21.5.5. Buyer shall procure that Cooper (U.K.) Limited
will be a party to any consent necessary to authorize such assignment and will
in such consent enter into any covenants reasonably required as a condition of
the grant thereof.
7.21.6. At any time during the License Period but prior to December
24, 1996, Buyer may serve notice on Sellers requiring them to terminate the U.K.
Real Property Lease on June 24, 1997, pursuant to clause 7 thereof and on
receipt of such notice, Sellers shall so terminate the U.K. Real Property Lease.
7.22. VAT. The parties intend that Section 49 of the Value Added Tax Act
1994 of the United Kingdom ("VATA") and paragraph 5 of the Value Added Tax
(Special Provisions)
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Order 1992 (as amended) of the United Kingdom will apply to the transfer of the
Assets of Wynn's U.K. and any other Assets in the United Kingdom and to that
intent:
7.22.1. The parties agree to use all reasonable endeavors to procure
that the transfer of the Assets under this Agreement is treated as neither a
supply of goods nor a supply of services for the purposes of value added tax.
7.22.2. Without prejudice to the other provisions of this Agreement,
Sellers will on Closing make available and, if possible, deliver to Buyer all
records referred to in Section 49 of the VATA and will not thereafter make a
request of HM Customs & Excise for any records delivered to Buyer to be taken
out of the custody of Buyer and Buyer agrees to preserve such records for such
period as may be required by law and during that period to permit Sellers to
inspect or make copies thereof.
7.23. ASBESTOS MATTERS. As soon as practicable after Closing, Sellers
shall remove or repair all asbestos containing material at the Owned Real
Property which is friable as of the Effective Time. The removal and/or repair
shall be performed in compliance with all Environmental Laws and Buyer shall
permit Sellers' representatives to have reasonable access to the Fort Worth
facility for the purposes of performing such removal and/or repair. As soon as
practicable after such removal and/or repair, Sellers shall provide to Buyer a
report from a certified asbestos abatement contractor summarizing the asbestos
related activities.
7.24. MOTOR VEHICLES. As soon as practicable after Closing, Sellers shall
deliver to Buyer all motor vehicle registration transfer forms and other
documents of transfer of title with respect to such Assets, executed by WCS and
Wynn's UK.
7.25. INVENTORY. As soon as practicable after Closing, a physical
inventory of the Consigned Inventory and the Non-Consigned Inventory shall be
taken by Buyer's designee and observed by Sellers' representative (collectively,
the "INVENTORY TAKERS"). Each party shall bear the cost of its designee to take
the physical inventory. Upon the completion of the inventory taking, the
Inventory Takers shall present to Sellers and Buyer a written report setting
forth the results of the inventory taken which shall be adjusted to reflect the
results of activity with respect to the Inventory from the date of Closing
through the date of the written report issued by the Inventory Takers. The
Inventory Takers shall use the Inventory Cost established pursuant to Section
7.14.5 in taking the physical inventory.
8. CLOSING DELIVERIES
8.1. BUYER DELIVERIES. Concurrently with the execution of this Agreement
by the Parties, Buyer shall deliver to Sellers the following:
8.1.1. The Closing Payment; and
8.1.2. The Advance.
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8.2. SELLERS DELIVERIES. Concurrently with the execution of this
Agreement by the Parties, Sellers deliver to Buyer the following:
8.2.1. Bills of Sale with respect to the Assets other than the
Owned Real Property, executed by WCS, Wynn's UK and WCES, respectively;
8.2.2. A special warranty deed with respect to each parcel of Owned
Real Property, executed by WCS;
8.2.3. Assignments executed by the appropriate Sellers for the
transfer to Buyer of the Intellectual Property including a separate assignment
of the Intellectual Property related to the United Kingdom;
8.2.4. Assignments executed by the appropriate Sellers for the
transfer of the Real Property Leases, including an assignment executed in escrow
(pending the obtaining of the consents necessary to authorize such assignment)
and the title deeds of the Real Property Lease for Sellers' facility located in
the U.K; and
8.2.5. A non-foreign affidavit pursuant to Section 1445 of the
Code, executed by WCS.
9. INDEMNIFICATION
9.1. SURVIVAL. All representations and warranties of the Parties
contained in this Agreement shall survive the Closing and continue in full force
and effect for eighteen (18) months after the date hereof, except for
representations and warranties with respect to environmental matters and Taxes,
which shall continue in full force and effect until the expiration of the
applicable statutes of limitations. All covenants and agreements of the Parties
contained in this Agreement (including, without limitation, those set forth in
Section 7 hereof) shall survive the Closing and continue thereafter until the
expiration of the applicable statutes of limitations, other than those which by
their terms shall terminate sooner.
9.2. ASSERTION OF CLAIMS. Each Party must assert any claim involving a
representation, warranty or covenant made by the other Party before the
expiration of the applicable survival period. Notwithstanding any contrary
provision, as long as a claim is asserted on a timely basis, the claim will
continue to be valid and assertible even though the survival period may
subsequently expire before the claim is resolved.
9.3. INDEMNIFICATION BY SELLERS. Subject to the provisions of this
Section 9, Sellers shall, and shall cause WII to, jointly and severally, defend,
indemnify and save harmless Buyer, its Affiliates and their respective
directors, officers and employees ("BUYER'S INDEMNIFIED GROUP") from and against
the entirety of any Adverse Consequences that any of Buyer's Indemnified Group
may suffer as of or after the Effective Time resulting from, arising out of,
relating to, in the nature of, or caused by (a) the breach of any of Sellers'
representations, warranties, covenants or agreements contained in this
Agreement, (b) any Retained Liability, and (c) any Claim or Liability for
brokerage or other commissions by reason of any claim by
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person or broker claiming to have been engaged by or on behalf of any Seller,
WII or any Affiliate thereof; and (d) any act or omission of Sellers that relate
to any other event or occurrence prior to the Effective Time for which Buyer is
liable by reason of TUPE including, without limitation, any such liabilities,
claims, damages, awards, costs or expenses relating to or arising out of any act
or omission occurring before the Effective Time by or in relation to any Seller
in respect of any contract of employment of any Employee which acts or omissions
is deemed to have been done by or in relation to the Buyer by virtue of TUPE.
9.4. INDEMNIFICATION BY BUYER. Subject to the provisions of this Section
9, Buyer shall defend, indemnify and save harmless Sellers, their Affiliates and
their respective directors, officers and employees ("SELLERS' INDEMNIFIED
GROUP") from and against the entirety of any Adverse Consequences that any of
Sellers' Indemnified Group may suffer as of or after the Effective Time
resulting from, arising out of, relating to, in the nature of, or caused by (a)
the breach of any of Buyer's representations, warranties, covenants or
agreements contained in this Agreement, (b) any Assumed Liability, (c) any Claim
or Liability for brokerage or other commissions by reason of any claim by any
person or broker claiming to have been engaged by or on behalf of Buyer or any
Affiliate of Buyer, and (d) any act or omission by or in relation to Buyer after
the Effective Time in respect of the Employees located in the U.K. Buyer shall
further indemnify Sellers for any amounts by which Buyer fails to collect
Sellers' accounts receivable created pursuant to Section 7.14.13.
9.5. MATTERS INVOLVING THIRD PARTIES. If any third party shall notify
any Party (the "INDEMNIFIED PARTY") with respect to any matter which may give
rise to a claim for indemnification against any other Party (the "INDEMNIFYING
PARTY") under this Section 9 or Section 10.12, then the Indemnified Party shall
notify the Indemnifying Party thereof promptly; PROVIDED, HOWEVER, that no
reasonable delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any liability or
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is damaged, after receiving notice from the third party. In the
event any Indemnifying Party notifies the Indemnified Party within 30 days after
the Indemnified Party has given notice of the matter that the Indemnifying Party
is assuming the defense thereof, (a) the Indemnifying Party will defend the
Indemnified Party against the matter with counsel of its choice reasonably
satisfactory to the Indemnified Party, (b) the Indemnified Party may retain
separate co-counsel at its sole cost and expense (except that the Indemnifying
Party will be responsible for the fees and expenses of the separate co-counsel
to the extent the third party seeks criminal sanctions), (c) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the matter without the written consent of the Indemnifying Party
(not to be unreasonably withheld), and (d) the Indemnifying Party will not
consent to the entry of any judgment with respect to the matter, or enter into
any settlement which does not include a provision whereby the plaintiff or
claimant in the matter releases the Indemnified Party from all liability with
respect thereto, without the written consent of the Indemnified Party (not to be
unreasonably withheld). In the event the Indemnifying Party has not notified
the Indemnifying Party within 30 days after the Indemnified Party has given
notice of the matter that the Indemnifying Party is assuming the defense
thereof, the Indemnified Party may defend against, or enter into any settlement
with respect to, the matter in any manner it reasonably may deem appropriate.
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9.6. ENVIRONMENTAL INDEMNITIES.
9.6.1. SELLERS' INDEMNIFICATION. Notwithstanding Section 9.3,
Sellers shall, and shall cause WII to, jointly and severally, indemnify, defend
and save harmless Buyer's Indemnified Group from and against any of the
following:
9.6.1.1. Any Environmental Costs, to the extent that such
Environmental Costs arise out of, result from, relate to, are in the nature of,
or are caused by (i) any failure of any Seller or the predecessors of any of
them at or before the Effective Time to comply with Environmental Laws with
respect to the operation of the Assets and storage and sale of the Inventory; or
(ii) any obligation of any Seller or the predecessors of any of them pursuant to
Environmental Laws as of the Effective Time arising from the presence, Discharge
or Disposal of Hazardous Materials at or prior to the Effective Time on or from
any Real Property.
9.6.1.2. Any Environmental Costs resulting from, arising
out of, relating to, in the nature of, or caused by the failure of any Seller to
have in effect at or as of the Effective Time any necessary Permit for the
continued conduct of the Business or the operation of the Assets as conducted or
operated at and as of the Effective Time.
9.6.1.3. Any Environmental Costs resulting from, arising
out of, in the nature of, or caused by third party Claims (including, without
limitation, toxic tort or property damage) pursuant to Environmental Laws
arising from the presence, Discharge or Disposal of Hazardous Materials at or
prior to the Effective Time on or from the Real Property.
9.6.1.4. Any Environmental Costs resulting from, arising
out of, relating to, or caused by the breach of any of Sellers' representations,
warranties, covenants or agreements contained in this Agreement.
9.6.1.5. Any Adverse Consequences resulting from, arising
out of, relating to, or caused by Sellers' completion of a Phase II
environmental investigation, as set forth in Section 7.20, or Sellers' control
and management of any assessment, remediation or other action mandated by a
Governmental Agency as set forth in Section 9.6.5, except to the extent caused
by Buyer's acts or omissions.
9.6.1.6. With respect to the Assets located in the United
Kingdom:
9.6.1.6.1 Any Environmental Costs to the extent
that such Environmental Costs arise out of, result from, relate to, or are in
the nature of, or are caused by (i) any failure of any Seller at or before the
Effective Time to comply with Environmental Laws with respect to the operation
of the Assets and storage and sale of the Inventory; or (ii) any obligation of
any Seller pursuant to Environmental Laws as of the Effective Time arising from
the Discharge or Disposal of Hazardous Materials on or from any Leased Real
Property during the period of occupancy by Sellers of such Leased Real Property.
9.6.1.6.2 Any Environmental Costs resulting from,
arising out of, relating to, in the nature of, or caused by the failure of any
Seller to have in effect at or
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as of the Effective Time any necessary Permit for the continued conduct of the
Business or the operation of the Assets as conducted or operated at and as of
the Effective Time.
9.6.1.6.3 Any Environmental Costs resulting from,
arising out of, in the nature of, or caused by third party Claims (including,
without limitation, toxic tort or property damage) pursuant to Environmental
Laws arising from the Discharge or Disposal of Hazardous Materials on or from
the Leased Real Property during the period of occupancy by Sellers of such
Leased Real Property.
9.6.1.6.4 For the purposes of this Section
9.6.1.6, the term "ENVIRONMENTAL LAWS" shall mean the laws, rules, regulations
or ordinances (including the common law) in the United Kingdom, as of the date
hereof relating to health, safety, pollution control, or protection of the
Environment, including, without limitation, all laws governing the generation,
use, ownership, collection, treatment, storage, transportation, recovery,
recycling, removal, Discharge or Disposal of, or exposure to or investigation or
remediation of Hazardous Materials and all laws and regulations with regard to
recordkeeping, notification, and reporting requirements respecting Hazardous
Materials.
9.6.2. CHANGES IN ENVIRONMENTAL LAWS. In the event that
contamination exists at the date hereof as a result of a presence, Discharge or
Disposal of Hazardous Materials on or from the Real Property for which Buyer or
any of its Affiliates is obligated under Environmental Laws in effect on the
date hereof to undertake or pay for remedial or corrective action after the date
hereof, and the applicable Environmental Laws are thereafter amended or new
applicable Environmental Laws are enacted after the date hereof relating to the
same condition, Buyer's Environmental Costs pursuant to such amended or new
Environmental Laws to accomplish remediation or correction of such condition
shall also be subject to indemnification pursuant to Section 9.6.1.
9.6.3. BUYER'S INDEMNIFICATION. Buyer shall indemnify, defend and
save harmless Sellers' Indemnified Group from and against any of the following:
9.6.3.1. Any Environmental Costs, to the extent that such
Environmental Costs arise out of, result from, or are caused by (i) any failure
of the Assets or their operation or the storage or sale of the Inventory to be
in compliance at or after the Effective Time with Environmental Laws other than
with respect to any condition that existed on or prior to the Effective Time;
(ii) any obligation pursuant to Environmental Laws arising from the Discharge of
Hazardous Materials after the Effective Time on any Real Property other than
with respect to any condition that existed on or prior to the Effective Time; or
(iii) the Disposal of Hazardous Materials from any Real Property after the
Effective Time.
9.6.3.2. Any Environmental Costs resulting from, arising
out of, in the nature of, or caused by third party Claims (including, without
limitation, toxic, tort or property damage) pursuant to Environmental Laws
arising from (i) the Discharge of Hazardous Materials on the Real Property after
the Effective Time other than with respect to any condition that existed on or
prior to the Effective Time; or (ii) the Disposal of Hazardous Materials from
the Real Property after the Effective Time.
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9.6.3.3. Any Environmental Costs resulting from, arising
out of, relating to, or caused by the breach of any of Buyer's representations,
warranties, covenants or agreements contained in this Agreement.
9.6.4. LIMITATION TO SELLERS' INDEMNIFICATION. Notwithstanding any
other provision of this Agreement, Sellers shall not be required to indemnify,
defend or save harmless Buyer's Indemnified Group from or against any of the
following:
9.6.4.1. Environmental Costs to the extent they are caused
by acts or omissions of any of Buyer's Indemnified Group or any third party as
of or after the Effective Time; PROVIDING, HOWEVER, that omissions by any of
Buyer's Indemnified Group with respect to conditions that existed on or prior to
the Effective Time shall not constitute a limitation to Seller's
indemnification;
9.6.4.2. Environmental Costs resulting from, arising out
of, or caused by the clean-up or remediation of Hazardous Materials to the
extent (A) such Environmental Costs are not actually incurred by Buyer's
Indemnified Group, (B) the clean-up or remediation is not performed pursuant to
an order of a Governmental Agency, or (C) the clean-up or remediation is not
performed in accordance with applicable Environmental Laws; and
9.6.4.3. Environmental Costs associated with Hazardous
Materials that (i) were incorporated into or comprise a part of any building,
fixture or piece of equipment that is included in the Assets, and (ii) were in
compliance with Environmental Laws at the Effective Time.
9.6.5. In addition, notwithstanding any other provision hereof to
the contrary, if an Environmental Cost involves the assessment of contamination,
the remediation of the same, the construction of facilities to prevent the
spread of contamination or the taking of any other action mandated by a
Governmental Agency with respect to the environmental condition of the Real
Property for which Buyer's Indemnified Group would otherwise be entitled to
indemnification from Sellers or WII pursuant to this Agreement, Sellers or WII
shall be obligated to indemnify Buyer's Indemnified Group for such Environmental
Cost only (i) to the extent necessary to meet the standards set by such
Governmental Agency and (ii) provided that Buyer permits Sellers to assume full
control and management of the assessment, remediation or other action mandated
by the Governmental Agency. Sellers shall cause its representatives to (a)
conduct its assessment, remediation, construction or other activities so as to
cause minimal disruption to Buyer's operations on the Real Property, and (b)
provide ten (10) days advance written notice to Buyer of such activities.
9.7. LIMITATIONS ON INDEMNIFICATION. No claim by either Party against
the other for indemnification arising hereunder shall be valid and assertible
unless and until such time, if any, as the aggregate Adverse Consequences in
respect of any individual event or occurrence or associated events or
occurrences giving rise to such Adverse Consequences suffered by the asserting
Party, or to which such Party becomes subject, shall exceed $2,500 (the "DE
MINIMIS AMOUNT"). The first claim by each Party for indemnification arising
hereunder shall not be made until the aggregate amount of all such valid and
assertible claims exceeds $75,000 (the "BASKET"). In such event, the Party shall
be entitled to assert claims only for amounts in excess
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of the Basket. In totaling such valid and assertible claims to determine if the
Basket threshold has been met, each claim in respect of an individual event or
occurrence or associated events or occurrences that does not exceed the De
Minimis Amount shall be excluded as set out above. Any claim with respect to
any breach or non-performance by any Party of any representation, warranty,
covenant or agreement shall be limited to the amount of the Adverse Consequences
sustained by the Indemnified Party by reason of such breach or non-performance
less the dollar amount of any insurance proceeds received by Buyer or any of its
Affiliates with respect to such losses. Notwithstanding anything to the
contrary contained in this Agreement in no event shall any Adverse Consequences
suffered by Buyer pursuant to Sellers' breach of its representations and
warranties contained in Sections 4.8.5, 4.8.6, 4.9.1, 4.24 and 4.27 be subject
to the Basket or the De Minimis Amount requirement, PROVIDED, HOWEVER, that
Buyer shall not be entitled to seek indemnification for any Adverse Consequences
resulting from a breach under Sections 4.8.5, 4.8.6, 4.9.1, 4.24 or 4.27 until
the amount of valid and assertible claims under any such section or a
combination of such sections, in the aggregate, exceeds $20,000.
9.8. TAX INDEMNIFICATION. Notwithstanding any provisions herein to the
contrary, until the expiration of all applicable statutes of limitations,
Sellers agree to indemnify and hold Buyer harmless from and against any
Liability for Taxes of Sellers with respect to the Business for any period
ending prior to the Effective Time, PROVIDED, HOWEVER, that such indemnification
shall not apply to the extent that a Liability for Taxes has been reserved and
is reflected on the Final Closing Statement of Net Assets. For avoidance of
doubt, the indemnification of Buyer set forth in this Section 9.8 shall not be
limited by Section 9.7 or any other provision of this Agreement.
9.9. PUNITIVE DAMAGES. Notwithstanding anything to the contrary
contained herein, in no event shall an Indemnifying Party be liable to an
Indemnified Party for Adverse Consequences suffered by the Indemnified Party to
the extent caused or exacerbated by actions of the Indemnified Party which
result in punitive damages.
9.10. EXCLUSIVE REMEDY. The foregoing indemnification provisions are the
exclusive remedies for, and are specifically meant to be in derogation of, any
statutory, common law or other remedy that a Party may have for breach of any
representation, warranty or covenant hereunder.
10. GENERAL MATTERS
10.1. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person or entity other than the Parties and their
respective successors and permitted assigns. Nothing contained herein shall be
construed as constituting any change, modification or alteration in the at-will
employment status of any Employee employed by Sellers or their Affiliates.
Employment of such Employees by Buyer or its Affiliates is acknowledged to be on
an at-will basis only and nothing herein shall be construed to the contrary or
as establishing any standard of termination of the employment relationship other
than the will of either party. Nothing in this Agreement, expressed or implied,
shall confer upon any Employee, legal representative thereof, or any collective
bargaining agent any rights or remedies, including, without limitation, any
right to employment, or continued employment for any specified period or the
benefits, terms and conditions thereof, of any nature or kind whatsoever under
or by reason of this Agreement.
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10.2. ENTIRE AGREEMENT. This Agreement (including the Schedules and
documents referred to herein) constitutes the entire agreement among the Parties
and supersedes any and all prior understandings, agreements, or representations
by or among the Parties, written or oral, that relate to the subject matter
hereof.
10.3. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors and
permitted assigns. Sellers may not assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of Buyer. Buyer may assign this Agreement and any of its rights, interests and
obligations hereunder upon written notice to Sellers, except that Buyer may not
assign any of its obligations hereunder without the prior written approval of
Sellers. Notwithstanding the foregoing, (i) Cooper (U.K.) Limited, a Delaware
corporation with a residency in the U.K., shall acquire the Assets located in
the United Kingdom, instead of Buyer, and (ii) any Party may, upon the giving of
15 days' prior written notice to the other Party or Parties (a) assign any of
its rights and interests under this Agreement to one or more of its Affiliates
and (b) designate one or more of its Affiliates to perform its obligations under
this Agreement (in any or all of which cases the assigning Party nonetheless
shall remain liable and responsible for the performance of all of its
obligations under this Agreement).
10.4. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10.5. HEADINGS. The article and section headings contained in this
Agreement and in the Schedules are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this Agreement.
10.6. NOTICES. All notices and other communications under this Agreement
shall be in writing and shall be deemed given (a) when delivered by hand or
mail, (b) when transmitted by facsimile, with written confirmation of receipt,
or (c) one day after being sent for overnight delivery by Express Mail, Federal
Express or other express delivery service, to the addressee at the following
addresses or facsimile numbers (or to such other address or facsimile number as
a Party may specify from time to time by notice hereunder):
IF TO SELLERS: Wynn's Climate Systems, Inc.
c/o Wynn's International, Inc.
500 North State College Boulevard
Suite 700
Orange, California 92668-1604
Attention: Vice President - Finance
Telephone: (714) 938-3700
Facsimile: (714) 938-3739
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IF TO BUYER Cooper Industries, Inc.
UNTIL AUGUST 31, 1996: 1001 Fannin
Suite 4000
Houston, Texas 77002
Attention: General Counsel
Telephone: (713) 739-5400
Facsimile: (713) 739-5909
IF TO BUYER Cooper Industries, Inc.
AFTER AUGUST 31, 1996: 600 Travis, Suite 5400
Houston, Texas 77002
Attention: General Counsel
Telephone: (713) 209-8400
10.7. AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Sellers. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
10.8. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
10.9. EXPENSES. Except as otherwise expressly provided herein, each Party
shall bear its own expenses (including all fees, costs and expenses of its
attorneys, consultants, investment bankers, accountants, advisers, brokers and
other agents or representatives) incident to or incurred in connection with the
preparation, negotiation, execution and delivery of this Agreement and the
performance of the Party's obligations hereunder and thereunder.
10.10. CONSTRUCTION. The language used in this Agreement will be deemed to
be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference
to any federal, provincial, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
10.11. SPECIFIC PERFORMANCE. Each Party acknowledges and agrees that the
other Party would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Each Party agrees
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that the other Party will be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof and any remedy to which they may
be entitled in any action instituted at law or in equity.
10.12. BULK SALES. The Parties hereby waive compliance with the provisions
of the bulk transfer and bulk sales laws of any applicable state or jurisdiction
(the "BULK SALES LAWS") in connection with the purchase and sale of the Assets
hereunder. Buyer shall indemnify and hold harmless Sellers, and shall reimburse
Sellers for, any Adverse Consequences that Sellers may suffer as a result of or
due to noncompliance with the provisions of the Bulk Sales Laws insofar as they
relate to any of the Assumed Liabilities. Sellers shall indemnify and hold
harmless Buyer, and shall reimburse Buyer for, any Adverse Consequences that
Buyer may suffer as a result of or due to noncompliance with the provisions of
the Bulk Sales Laws insofar as they relate to any of the Retained Liabilities.
10.13. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the substantive laws of the State of Texas
without regard to conflicts of laws principles.
11. DISPUTE RESOLUTION
11.1. SENIOR OFFICERS. Any Claim between Sellers and Buyer arising out of
or in connection with this Agreement or any alleged breach hereof (except those
to which the arbitration provisions in Section 2.8 apply) shall be submitted to
a senior officer of both WCS and Buyer, as designated by their respective chief
executive officers, who shall meet in person at a mutually convenient location
within 15 days of such submission to seek in good faith an amicable settlement.
The Claim shall be submitted within a reasonable time after the dispute,
controversy or claim has arisen, and in no event shall it be submitted after the
date when institution of legal or equitable proceedings based on such dispute,
controversy or claim in question would be barred by the applicable statute of
limitations under Texas law.
11.2. BINDING ARBITRATION.
11.2.1. GOVERNING PRINCIPLES. Any Claim not settled by the Parties
within 60 days after written notice of the Claim is first given by either Party
to the other shall be finally settled by binding arbitration through the
American Arbitration Association (the "AAA"). This agreement to arbitrate shall
be specifically enforceable under Texas law in any court of competent
jurisdiction.
11.2.2. SELECTION AND QUALIFICATION OF THE ARBITRATOR. If the Claim
does not exceed $1,000,000, there shall be one arbitrator. If the Claim exceeds
$1,000,000, there shall be three arbitrators (all arbitrators are hereafter
collectively referred to as the "Arbitrator"). The Parties shall endeavor to
agree on the selection of an Arbitrator, but if no agreement has been reached
within 30 days of claimant's demand, the Arbitrator shall be selected by the
American Arbitration Association. Promptly after expiration of respondent's
time to answer the claimant's demand, and before the beginning of arbitrator
selection, an administrative conference shall be
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held. The Arbitrator shall conduct himself or themselves as a neutral, and be
subject to disqualification pursuant to Section 19 of the Rules. The fees and
expenses of the arbitrator(s) shall be split evenly between Buyer on the one
hand and Sellers on the other.
11.2.3. PRELIMINARY HEARING. Within 15 days after the arbitrator
has been appointed, a preliminary hearing among the arbitrator and counsel for
the Parties shall be held for the purpose of evolving a written plan for the
management of the arbitration, which shall promote the efficient, expeditious
and cost-effective conduct of the proceeding.
11.2.4. INTERIM RELIEF FROM A COURT. Either Party may request a
court to provide interim or provisional relief, and such request shall not be
deemed incompatible with the agreement to arbitrate or as a waiver of that
agreement.
11.2.5. POWERS OF THE ARBITRATOR AND ARBITRATION PROCEDURES. The
Arbitrator shall permit and facilitate such discovery as it determines is
appropriate, including orders to protect the confidentiality of proprietary
information, trade secrets, and other sensitive information disclosed in
discovery. Paper, documents, and written communications shall be delivered by
the Parties directly to each other, the Arbitrator, and the AAA tribunal
administrator. Prior to and pending the arbitration, the arbitrator shall allow
each Party the opportunity to obtain discovery through any method allowed under
Texas law, including, without limitation, oral and written depositions,
interrogatories, inspection of documents, things and places, physical and mental
examinations, requests for admissions and simultaneous exchanges of expert
witness information. The arbitrator shall actively manage the arbitration
hearing to make it fair, expeditious, economical and less burdensome and
adversarial than a court trial. The arbitrator may limit the issues, limit the
time for each Party to present its case, exclude testimony and other evidence
that it deems irrelevant, cumulative or inadmissible, and order that the direct
testimony of witnesses be furnished by written sworn statement. All documents
that a Party proposes to offer in evidence, except for those objected to by an
opposing party, shall be self-authenticated. There shall be a stenographic
transcript of the arbitration hearing, the cost of which shall be borne equally
by the Parties, pending the final award. Any Claim submitted to arbitration
shall be resolved in accordance with Title 9 of the U.S. Code (U.S. Arbitration
Act) which shall govern the interpretation, enforcement and proceedings pursuant
to this arbitration provision.
11.2.6. RENDERING OF AWARD. The award rendered by the arbitrator
shall itemize the awards, shall not include punitive damages but may include all
or a part of a Party's reasonable attorneys' fees, and shall state the reasoning
on which it rests. Before rendering the final award, the arbitrator shall
submit to the Parties an unsigned draft of the proposed award, and each Party
may deliver, within 15 days after receipt of such draft, a written statement of
alleged errors of fact, computation, law or otherwise. The Arbitrator may
disregard any Party's statement to the extent that it is in substance an
application for reargument. Within 20 days after receipt of such Party
statements, the Arbitrator shall render the final award. Judgment upon the
arbitrator's final award may be entered in any court of competent jurisdiction.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first written above.
MOOG AUTOMOTIVE, INC.
By: DAVID A. WHITE
--------------------------------------
Title: AUTHORIZED SIGNATORY
-----------------------------------
WYNN'S CLIMATE SYSTEMS, INC.
By: JAMES CARROLL
--------------------------------------
Title: CHAIRMAN
-----------------------------------
WYNN'S CLIMATE EQUIPMENT COMPANY
By: JAMES CARROLL
--------------------------------------
Title: DIRECTOR
-----------------------------------
WYNN'S (UK) LIMITED
By: JAMES CARROLL
--------------------------------------
Title: MANAGING DIRECTOR
-----------------------------------
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<PAGE>
ACKNOWLEDGMENT
The undersigned, WYNN'S INTERNATIONAL, INC., a Delaware Corporation, hereby
agrees to be jointly and severally liable with the Sellers referenced in the
above Asset Purchase Agreement to Buyer and its Affiliates for any obligation or
Liability of Seller in this Asset Purchase Agreement.
WYNN'S INTERNATIONAL, INC.
By: JAMES CARROLL
-------------------------------
Name: James Carroll
-------------------------------
Title: President
-------------------------------
Date: May 23, 1996
-------------------------------
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<PAGE>
OMITTED SCHEDULES
ASSET PURCHASE AGREEMENT
DATED MAY 23, 1996 BY AND BETWEEN
MOOG AUTOMOTIVE, INC.
AND
WYNN'S CLIMATE SYSTEMS, INC.,
WYNN'S CLIMATE EQUIPMENT COMPANY
AND
WYNN'S (UK) LIMITED
SCHEDULE SUBJECT
1.4 Machinery, Equipment and Certain Other Assets
1.5 Assumed Contracts
Part A. Personal property leases, agreements, contracts,
purchase and sales orders and commitments
Part B. UK Employment Contracts
1.33a Initial Peg Statement of Net Assets, December 31, 1995
1.35 Inventory
2.2 Peg Statement of Net Assets, April 30, 1996
4.4 Non-Contravention
4.6 Consents and Approvals
4.7 Financial Information
4.8.5 December 31, 1995, Statement of Net Assets
4.9 Events Since December 31, 1995
4.11 Real Property Leases
4.12 Owned Real Property
4.13 Intellectual Property
4.14 Tangible Assets
4.15 Disclosures relating to Assumed Contracts
4.16 Litigation and Claims Relating to the Assets
<PAGE>
4.17 Product Warranties
4.18 Product Liability
4.19 Employees
4.20 Employee Plans
4.21 Environmental Matters
4.22 Other Property
4.23 Legal Compliance
4.24 Intercompany Agreements
4.25 Relocation
4.26 Permits
4.28 Product Returns
6.1 Transition Plans
7.6 Purchase Price Allocation
7.7 Retained Receivables
7.14.13 Sellers' List Price
2
