<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 2, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-10233
__________________
MAGNETEK, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-3917584
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
26 CENTURY BOULEVARD
P.O. BOX 290159
NASHVILLE, TENNESSEE 37229-0159
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 316-5100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -----------------------
Common Stock, $.01 par value New York Stock Exchange
8% Convertible Subordinated Notes Due 2001 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates
of the Registrant (based on the closing price of such stock, as reported by the
New York Stock Exchange, on September 15, 1995) was $304,457,416.
The number of shares outstanding of the Registrant's Common Stock, as
of September 15, 1995, was 24,684,017 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the MagneTek, Inc. 1995 Annual Report to Shareholders for
the year ended July 2, 1995 are incorporated by reference into Part II of this
Form 10-K. With the exception of those portions which are expressly
incorporated by reference in the Annual Report on Form 10-K, the MagneTek, Inc.
1995 Annual Report to Shareholders is not deemed filed as part of this Report.
Portions of the MagneTek, Inc. definitive Proxy Statement to be filed
with the Securities and Exchange Commission within 120 days after the close of
the fiscal year ended July 2, 1995 are incorporated by reference into Part III
hereof.
<PAGE>
MAGNETEK, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JULY 2, 1995(1)
PAGE
----
ITEM 1. BUSINESS.. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ITEM 2. PROPERTIES.. . . . . . . . . . . . . . . . . . . . . . . . . . .6
ITEM 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . .8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . . . .10
ITEM 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . .11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . .11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . . . . .11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . . . . .11
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . .12
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . .14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . .14
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . .14
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . .15
- --------------------
(1) The Company uses a 52-53 week fiscal year which ends on the Sunday nearest
June 30. Accordingly, the Company's 1995 fiscal year ended on July 2, 1995
and contained 52 weeks. For clarity of presentation, all periods are
presented and discussed as if each fiscal year ended on June 30. The year
ended July 3, 1994 contained 53 weeks and the year ended June 27, 1993
contained 52 weeks.
ii
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
The electrical equipment industry is characterized by diversity of
markets, global competition and relatively high barriers to entry due to
intensive capital requirements and required access to market channels. From its
inception in 1984, MagneTek pursued a growth strategy designed to achieve the
size necessary to compete with domestic and foreign electrical equipment
manufacturers. During the late 1980s and early 1990s the Company grew rapidly,
primarily through acquisitions of electrical equipment businesses supplemented
by internal growth. While this growth enabled the Company to achieve a
significant share of several electrical product and service markets, and enhance
efforts to reduce manufacturing costs through economies of scale and vertical
integration, the use of debt to finance the majority of the acquisitions left
the Company with a relatively high degree of financial leverage in its balance
sheet.
During the fiscal year ended June 30, 1994, MagneTek's Board of
Directors approved a plan to focus the Company's resources on fewer product
lines and reduce debt. The restructuring program approved by the Board included
the sale of certain businesses comprised primarily of the Company's utility,
military, controls and custom motor segments (See Note 2 of Notes to
Consolidated Financial Statements). As of June 30, 1995, the Company has sold
its military, controls and custom motor businesses in a series of transactions,
as well as certain product lines of its utility business. Subsequent to fiscal
1995 year end, the Company sold its medium power transformer business, which
represented most of the remainder of the utility business. The Company is
continuing the process of disposing of certain minor remaining operations slated
for divestiture.
The Company operates in two business segments: Ballasts and
Transformers, including lighting products (magnetic and electronic lighting
ballasts), power supplies and small transformer products; and Motors and
Controls, which includes fractional and integral horsepower electric motors,
medium voltage generators and variable speed electronic drives.
BALLASTS AND TRANSFORMERS SEGMENT
GENERAL. The Ballasts and Transformers segment accounted for 57%
of the Company's net revenues in fiscal 1995. This segment manufactures a broad
range of equipment in the United States and Europe within two general product
categories: Lighting products, including fluorescent (both magnetic and
electronic) and high intensity discharge ("HID") ballasts; and Transformer
products, inclusive of electronic power supplies, various small component and
specialty transformers, and dry type distribution transformers. The Company's
European operations, concentrated primarily in magnetic lighting ballasts and
electronic power supplies, accounted for 24% of the segment's total net sales in
fiscal 1995. One customer, Lithonia Lighting, a lighting fixture OEM, accounted
for 9% of the segment's total net sales in fiscal 1995.
LIGHTING PRODUCTS. During fiscal 1995, sales of Lighting products
represented 80% of the segment's total net sales. The Company is an industry
leader, measured by market share, in magnetic fluorescent ballasts both
domestically and in Europe, and in electronic flourescent ballasts domestically.
Sales of magnetic ballasts (including HID) accounted for 42% (35% in the U.S.
and 7% in Europe) of the segment's total net sales in fiscal 1995.
1
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Magnetic ballasts are typically used in standard fluorescent lighting fixtures
in office, commercial and residential applications, and in various types of
specialty lighting applications, including both indoor and outdoor displays and
signs. High intensity discharge (HID) ballasts are utilized in lighting
fixtures in industrial and municipal applications, such as street lighting,
outside security and parking lot lighting, factory and warehouse indoor
illumination and sports lighting. Electronic solid state fluorescent ballasts
afford savings over standard magnetic ballasts through reduced energy
consumption, but have higher initial costs. Sales of electronic ballasts,
primarily in the U.S., accounted for 32% of the segment's total net sales in
fiscal 1995. The Company anticipates a continued shift in demand toward
electronic ballasts from magnetic products, as end users focus on long term cost
efficiency and the cost of electronic ballasts declines.
In the U.S., approximately 61% of the Company's fluorescent and
HID ballasts are sold through MagneTek's direct sales force to OEMs with the
balance sold through independent manufacturers' representatives to more than
4,000 independent electrical distributors nationwide. In Europe, sales are made
through a combination of the Company's direct sales force and sales agents,
primarily to OEMs.
TRANSFORMER PRODUCTS. Sales of Transformer products in fiscal
1995 accounted for 20% of the segment's total net sales. Sales of Transformer
products in Europe, primarily electronic power supplies which are custom
designed for use in electronic business machines, computers and industrial
equipment, accounted for 11% of the segment's net sales in fiscal 1995. The
Company also manufactures dry type distribution transformers used primarily in
building applications as well as various component and specialty transformers.
Marketing of the Company's various Transformer products is done through a direct
sales force and independent manufacturers' representatives directly to OEMs and
(in the U.S.) through independent electrical distributors.
BACKLOG. The Company's backlog in the Ballasts and Transformers
segment as of June 30, 1995, was $126.5 million compared to $98.6 million as of
the end of fiscal 1994. The increase in the backlog resulted from increased
levels of demand for electronic ballasts. Backlog in electronic ballasts was
$36.4 million as of June 30, 1995 compared to $15.1 million as of June 30, 1994.
Backlog represents purchase orders received by the Company which are subject
to cancellation.
COMPETITION. The principal competitors of the Company in Lighting
products in the U.S. are Advance Transformer Company (a division of North
American Phillips Corp.), Electronic Ballast Technology (an affiliate of North
American Phillips Corp.), Valmont Industries and Motorola, and in Europe,
Schwabe, Helvar and Zumtobel. Competitors in Transformer products are Advance
Transformer Company and Astec. Certain of the Company's competitors in the
Ballasts and Transformers segment have substantially greater resources than the
Company. The Company competes principally on the basis of customer service and
engineering capabilities, quality and price.
MOTORS AND CONTROLS SEGMENT
GENERAL. The Motors and Controls segment, which accounted for 43%
of net sales in fiscal 1995, manufactures equipment in two general product
categories: Motors and Generators, including fractional and integral horsepower
electric motors and medium voltage generators and Drives and Systems, including
electronic adjustable speed
2
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drives and drive systems. The Company's European operations are not significant
to the segment, representing less than 3% of the segment's total net sales in
fiscal 1995. One customer, Caterpillar, Inc., accounted for 13% of the segment's
total net sales in fiscal 1995.
MOTOR AND GENERATOR PRODUCTS. During fiscal 1995, sales of Motor
and Generator products represented 84% of the segment's total net sales. The
Company's electric motors, most of which use AC power, range in size from 1/8 to
500 horsepower. Motors ranging in size from 1/8 to 5 horsepower (dependent on
frame size) are designated fractional horsepower ("FHP") motors. FHP motors are
used both in residential applications, primarily in appliances such as room air
conditioners, dehumidifiers and ventilators, as well as pool and spa pumps, and
in commercial applications such as heating, ventilating and air conditioning
("HVAC"), food service and agribusiness. AC motors ranging in size from 1 to
500 horsepower, designated integral horsepower ("IHP") motors, are used
primarily in commercial HVAC, mining, petrochemical and commercial laundry
applications. The Company also manufactures DC motors, ranging in size from 1/6
to 3 horsepower, used in variable speed applications such as conveyors, material
handling and packaging equipment, exercise equipment and machine tools.
Approximately 66% of the Company's motors are sold to OEMs primarily through the
Company's direct sales force. The remaining motors are marketed through a
network of approximately 2,600 distributors, primarily for the purpose of
replacement.
Generators manufactured by the Company range in size from 50
kilowatt ("KW") to 2,250 KW. Over 90% of generator sales are to Caterpillar,
Inc., which manufactures and sells engine generator units for prime and standby
power applications.
DRIVES AND SYSTEMS PRODUCTS. Sales of Drives and Systems products
accounted for 16% of the segment's total net sales for fiscal 1995. The
Company's electronic adjustable speed drives and drive systems adjust and
control the speed and output of electric motors. They are used in applications
involving HVAC, paper converting, wire drawing, elevators, machine
tools and material handling equipment. Drives and drive systems are sold
primarily to OEMs and end users through a specialized engineering oriented sales
force as well as through electrical distributors.
BACKLOG. The Company's backlog in the Motors and Controls
segment as of June 30, 1995 was $97.5 million compared to $71.1 million at the
end of fiscal 1994. Increased backlog was primarily in the area of commercial
fractional motors and drives products.
COMPETITION. The principal competitors of the Company in Motor
and Generator products are Emerson Electric Company, General Electric Company,
Franklin Electric Company, Baldor Electric Company, A.O. Smith and Onan. The
principal competitors in Drives and Systems are Emerson Electric Company, Allen
Bradley and Eaton Corporation. Certain of these competitors have substantially
greater resources than the Company. The Company competes principally on the
basis of customer service and engineering capabilities, quality and price.
INTERNATIONAL OPERATIONS
The Company conducts the majority of its international activities
in Europe. European operations include ballast and power supply production in
Germany and Italy and motor manufacturing in the United Kingdom and Hungary. The
Company's international
3
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sales, including sales from domestic operations, during fiscal 1995 accounted
for 20% of the Company's total net sales.
SUPPLIERS AND RAW MATERIALS
The Company manufactures many of the materials and components used
in its products, including ballast and motor laminations and capacitors. The
Company also draws its own magnet wire primarily for products in the Ballasts
and Transformers segment.
Virtually all materials and components purchased by the Company
are available from multiple suppliers. During fiscal 1995, approximately 61% of
the Company's cost of sales was for the purchase of direct materials.
Production requirements are heavily dependent on steel, copper and aluminum, as
well as certain electronic components. The Company generally negotiates prices
with steel vendors on an annual basis. The Company purchases copper for the
Ballasts and Transformers segment primarily in rod form for drawing its own
magnet wire and for the Motors and Controls segment in the form of finished
magnet wire. The Company seeks to mitigate its exposure to fluctuations in
copper prices through short-term hedging programs as well as through forward
contract arrangements with magnet wire suppliers. The Company purchases its
aluminum requirements based upon the spot prices at delivery.
RESEARCH AND DEVELOPMENT
Research and development activities are conducted by the
respective operating divisions and are directed toward enhancement of existing
products and development of new products. Advanced technologies are being
developed in four main development centers and future development is sponsored
by the Company and conducted by leading Universities. Total research and
development expenditures were approximately $23.6 million, $17.5 million and
$17.4 million, respectively, for the 1995, 1994 and 1993 fiscal years.
TRADEMARKS AND PATENTS
The Company holds numerous patents which, although of value, are
not considered by management to be essential to the Company's business. The
Company believes that it holds all the patent, trademark and other intellectual
property rights necessary to conduct its business.
4
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EMPLOYEES
At the end of fiscal 1995, the Company had approximately 2,100
salaried employees and approximately 12,600 hourly employees, of whom
approximately 6,100 were covered by collective bargaining agreements with
various unions. The Company believes that its relationships with its employees
are favorable.
ENVIRONMENTAL MATTERS
GENERAL. The Company has from time to time discovered
contamination by hazardous substances at certain of its facilities. In response
to such a discovery, the Company conducts remediation activities to bring the
facility into compliance with applicable laws and regulations. Except as
described below, the Company's remediation activities for fiscal 1995 did not
entail material expenditures, and its remediation activities for fiscal 1996 are
not expected to entail material expenditures. Future discoveries of
contaminated areas could entail material expenditures, depending upon the extent
and nature of the contamination.
CENTURY ELECTRIC (MCMINNVILLE, TENNESSEE). Prior to its purchase
by the Company in 1986, Century Electric, Inc. ("Century Electric") acquired a
business from Gould Inc. ("Gould") in May 1983 which included a leasehold
interest in a fractional horsepower electric motor manufacturing facility
located in McMinnville, Tennessee. In connection with this acquisition, Gould
agreed to indemnify Century Electric from and against liabilities and expenses
arising out of the handling and cleanup of hazardous waste, including but not
limited to cleaning up any PCBs at the McMinnville facility (the "1983
Indemnity"). Investigation revealed the presence of PCBs in portions of the
soil and in the groundwater underlying the facility and in certain offsite soil.
Century Electric has kept the Tennessee Department of Environment and
Conservation, Division of Superfund, apprised of test results from the
investigation. The McMinnville plant has been listed as a Tennessee Superfund
Site, a report on that site has been presented to the Tennessee legislature, and
community officials and plant employees have been notified of the presence of
PCBs as above described. In July 1993, Gould submitted to the State of
Tennessee a Feasibility Study recommending a cleanup of certain onsite soil with
an estimated cost of $4.7 million. This estimate does not include ancillary
costs of onsite cleanup, which are expected to be significant. Based upon
currently available information, the aggregate costs for cleanup of certain
onsite soil, including ancillary costs of onsite cleanup, are not expected to
exceed $15 million. Subsequent to June 30, 1994, Gould contracted for certain
onsite cleanup. In August and October 1994, Gould requested that the Company
bear an unspecified portion of these costs, and the Company declined. Gould, at
its own expense, arranged for the onsite cleanup to be performed during the
period from September 1994 through January 1995. Gould also conducted
preliminary investigation and cleanup of certain offsite contamination. The
cost of any further investigation and cleanup of offsite contamination cannot
presently be determined. The Company believes that the costs for further onsite
cleanup, including ancillary costs of onsite cleanup, and the costs for any
further offsite cleanup, are covered by the 1983 Indemnity. While the Company
believes that Gould will continue to perform under its indemnity obligations,
Gould's failure to perform such obligations could have a material adverse effect
on the Company.
OFFSITE LOCATIONS. The Company has been identified by the United
States Environmental Protection Agency and certain state agencies as a
potentially responsible party for cleanup costs associated with alleged past
waste disposal practices at several offsite locations. Due, in part, to the
existence of indemnification from the former owners
5
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of certain acquired businesses for cleanup costs at certain of these sites, and
except as described below, the Company's estimated share in liability (if any)
at the offsite facilities is not expected to be material. It is possible that
the Company will be named as a potentially responsible party in the future with
respect to other sites.
CROWN INDUSTRIES SITE (PIKE COUNTY, PENNSYLVANIA). In March 1992,
the Company was informed by the Pennsylvania Department of Environmental
Resources ("DER") that its Universal Manufacturing division is one of a number
of potentially responsible parties with respect to a planned environmental
investigation and cleanup at the Crown Industries site in Pike County,
Pennsylvania. The DER has provided a non-binding preliminary allocation of
liability in connection with the site that assigned the Company a 30 percent
share. The aggregate expense of cleaning up the site is not currently known,
but some preliminary indications suggest a range of $5 million to $15 million.
To date, the DER has sought reimbursement of approximately $500,000 in the
aggregate from the Company and the other potentially responsible parties. In
connection with the February 1986 acquisition of Universal Manufacturing, the
Company and the seller, Farley Northwest Industries, Inc. (the predecessor to
Fruit of the Loom, Inc., hereinafter collectively with such successor referred
to as "FOL") executed an environmental agreement. The Company has concluded
that at least 90 percent of any liability it may incur relating to this site is
covered by the indemnification provisions of its environmental agreement with
FOL, and FOL has acknowledged such indemnity and is currently defending its own
and the Company's interest in this site.
FOL's failure to perform its obligations with respect to the Crown
Industries site under the environmental agreement could have a material adverse
effect on the Company.
INDEMNIFICATION OBLIGATIONS FROM RESTRUCTURING. In selling
certain business operations, the Company from time to time has agreed, subject
to various conditions and limitations, to indemnify buyers with respect to
environmental liabilities associated with the acquired operations. The
Company's indemnification obligations pursuant to such agreements did not entail
material expenditures for fiscal 1995, and its indemnification obligations for
fiscal 1996 are not expected to entail material expenditures. Future
expenditures pursuant to such agreements could be material, depending upon the
nature of asserted claims subject to indemnification.
ITEM 2. PROPERTIES.
The Company's headquarters and each of its principal facilities
for the continuing operations of the Company are listed below, each of which is
owned by the Company unless indicated as being leased.
<TABLE>
<CAPTION>
Approximate
Location Lease Term Size (Sq. Ft.) Principal Use
-------- ---------- -------------- -------------
<S> <C> <C> <C>
Altavista, Virginia -- 108,000 Motor manufacturing
Blytheville, Arkansas 1998 plus options 114,000 Ballast manufacturing
to 2008
Bridgeport, Connecticut 1999 100,000 Capacitor manufacturing
</TABLE>
6
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<TABLE>
<CAPTION>
Approximate
Location Lease Term Size (Sq. Ft.) Principal Use
-------- ---------- -------------- -------------
<S> <C> <C> <C>
Gainsborough Lincolnshire, -- 44,000 Motor manufacturing
England
Gallman, Mississippi 1999 plus options 130,000 Wire mill
to 2073
Goodland, Indiana -- 75,000 Component transformer
manufacturing
Huntington, Indiana -- 211,000 Converter, power supply and
specialty ballast
manufacturing
Huntington, Indiana -- 54,000 Technology center
Huntsville, Alabama -- 75,000 Electronic ballast
manufacturing
Juarez, Mexico Various 220,000 Motor manufacturing
LaVergne, Tennessee 1999 188,000 Distribution center
Lexington, Tennessee -- 449,000 Motor and generator
manufacturing
Mainaschaff, Germany -- 60,331 Administrative and
ballast, ignition coil
and transformer
manufacturing
Mainaschaff, Germany Various 209,257 Ballast, ignition coil
and transformer
manufacturing
Matamoros, Mexico Various 320,000 Ballast, wiring harness
and transformer
manufacturing
McMinnville, Tennessee Options to 2021 275,000 Motor manufacturing
Mendenhall, Mississippi 1997 251,600 Fluorescent ballast
assembly and
distribution center
Milan, Italy -- 53,000 Ballast manufacturing
Nashville, Tennessee 2005 60,000 Corporate headquarters
New Berlin, Wisconsin 2008 122,400 Drives and systems
manufacturing
</TABLE>
7
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<TABLE>
<CAPTION>
Approximate
Location Lease Term Size (Sq. Ft.) Principal Use
-------- ---------- -------------- -------------
<S> <C> <C> <C>
Owosso, Michigan -- 198,000 Motor manufacturing
Ripley, Tennessee -- 84,000 Motor manufacturing
St. Louis, Missouri 2000 plus option 51,000 Administration,
to 2005 marketing and
accounting personnel
Terranuova Bracciolini, -- 149,000 Power supply
Italy manufacturing
</TABLE>
The Company believes its facilities are in satisfactory condition
and are adequate for its present operations.
ITEM 3. LEGAL PROCEEDINGS.
PENSION MATTERS. Primarily in 1985, the Company entered into
agreements with Executive Life Insurance Company ("ELIC") under which ELIC
assumed accrued pension obligations under certain defined benefit retirement
plans (collectively, the "Plan") pursuant to an annuity purchase agreement. The
Plan paid approximately $25.3 million to ELIC under these agreements. In April
1991, the California Insurance Commissioner (the "Commissioner") was named
conservator of ELIC and the Los Angeles Superior Court issued orders providing
that ELIC would pay 70% of the monthly payments due to the Company's retirees
under the ELIC annuity contract.
Under the terms of a plan of rehabilitation, which includes an
enhancement agreement between the Commissioner and the National Organization of
Life and Health Guaranty Associations ("NOLHGA") to augment the benefits paid to
ELIC policyholders, individual annuitants with account values up to $100,000
will receive 100% of their benefits, resulting in the payment by the
rehabilitated ELIC and NOLHGA of substantially all of the required payments to
the Company's employees who are covered under the ELIC annuities. The
rehabilitation plan provides for reimbursement from the rehabilitated ELIC and
from NOLHGA to the Company of shortfall payments the Company had been providing
from April 1991 to September 1993. The Company received reimbursement for a
portion of such shortfall payments during fiscal year 1995, and has reflected
the reimbursement of the remainder of such shortfall payments in other assets in
its consolidated financial statements.
Effective on July 22, 1992, the Company entered into agreements
settling all claims with respect to two complaints filed by the Department of
Labor and by a labor union against various defendants including the Company.
The settlement agreements required the Company, among other things, to provide
back-up insurance coverage in the form of an annuity purchased from an approved
insurance company equal to 30% of the obligation to existing retirees. The
Company also agreed to purchase additional coverage in the event payments from
third parties to annuitants fall below 70% of the required amount. If annuity
benefits under the back-up annuity are not needed to provide full benefit
payments to covered annuitants, the proceeds will be remitted to the Company on
an annual basis. On July 31, 1992, the Company purchased such an annuity from
8
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Metropolitan Life Insurance Company for approximately $9.8 million. Such
annuity will only be used for retiree benefits in the event the combined
payments by the rehabilitated ELIC and NOLHGA fall below 100% of the required
benefits.
The Company does not expect that the above transactions will have
a material effect on the Company. However, should ELIC (or its successor)
and/or NOLHGA fail to make required annuity payments in the future, such
transactions could have a material adverse effect upon the Company.
OTHER LITIGATION. Four substantially identical actions were filed
in 1993 against the Company and certain of its directors and officers. The four
actions were subsequently consolidated in a single amended complaint. The suit
purported to be a class action on behalf of purchasers of the Company's common
stock from October 22, 1992 through August 6, 1993. The complaint asserted
claims under the federal securities laws, and alleged that the Company
artificially inflated the price of its common stock during the class period by
failing to disclose adverse developments in the Company's business. The
complaint did not specify the amount of damages sought. In July 1994, counsel
for the Company defendants and the plaintiffs reached an agreement in principle
to settle the litigation. The Court in April 1995 granted final approval of the
settlement and dismissed the plaintiffs' claims with prejudice. The
Consolidated Statement of Income for the year ended June 30, 1994 reflected a
pretax charge of $2.65 million representing costs to the Company including legal
fees associated with the settlement.
The Company was one of numerous defendants in a suit filed in 1993
by multiple plaintiffs claiming damages for personal injuries allegedly
resulting from exposure to emissions allegedly generated by the defendants'
manufacturing facilities in or near Brownsville, Texas. The plaintiffs did not
specify the damages sought nor the particular emissions they contended
implicated the Company. The Company settled the case with the plaintiffs in
June 1995. The Consolidated Statement of Income for the year ended June 30,
1995 reflects a pretax charge of $1 million representing costs to the Company
including legal fees associated with the settlement.
The Company is a party to a number of product liability lawsuits,
many of which involve fires allegedly caused by defective ballasts. All of
these cases are being defended by the Company's insurers, and management
believes that its insurers will bear all legal costs and liability, except for
applicable deductibles, and that none of these proceedings individually or in
the aggregate will have a material adverse effect on the Company. In addition,
the Company is frequently named in asbestos-related lawsuits which do not
involve material amounts individually or in the aggregate.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to the stockholders of the Company
during the quarter ended July 2, 1995.
9
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The following table sets forth the high and low sales prices of
the Company's Common Stock during each quarter of fiscal 1994 and 1995:
<TABLE>
<CAPTION>
QUARTER ENDING HIGH LOW
-------------------------------------------------
<S> <C> <C>
September 30, 1994 14-7/8 12-5/8
December 31, 1994 15-1/8 12-3/8
March 31, 1995 14-7/8 12-5/8
June 30, 1995 16-1/2 12-3/8
September 30, 1993 19-3/8 12-1/2
December 31, 1993 15-1/2 12-1/4
March 31, 1994 16-3/4 13-1/8
June 30, 1994 15-1/8 13-1/8
</TABLE>
The Company's Common Stock is traded on the New York Stock
Exchange under the ticker symbol "MAG." As of the date of this Annual Report,
there were approximately 360 record holders of its Common Stock. No cash
dividends have been paid on the Common Stock.
The Company has not paid any cash dividends on its Common Stock
and does not anticipate paying cash dividends in the near future. The ability
of the Company to pay dividends on its Common Stock is restricted by provisions
in the Company's loan agreements. Under the Company's 1995 bank loan agreement,
the Company may not declare or pay any dividend or make any distribution with
respect to its capital stock (i) unless no event of default exists or would
result from such declaration and payment, and (ii) the ratio of the Company and
certain subsidiary's Funded Debt to Capitalization (as such terms are defined in
the bank loan agreement) is not more than 0.55 to 1.00. Under the Indenture
relating to the Company's 10-3/4% Senior Subordinated Debentures due 1998, the
Company may not declare or pay any dividend or make any distribution with
respect to its Common Stock (other than through the issuance of Qualified
Capital Stock (as defined in the 10-3/4% Indenture and which includes Common
Stock)), unless after giving effect to such dividend or distribution, (i) the
Company is in compliance with the covenants contained in the 10-3/4% Indenture
and (ii) the aggregate amount of all Restricted Payments (as defined in the 10-
3/4% Indenture) declared or made after September 30, 1991 would not exceed
(a) 50% of the aggregate Consolidated Net Income (as defined in the 10-3/4%
Indenture) of the Company subsequent to September 30, 1991 minus 100% of the
amount of any write-downs, write-offs, other negative revaluations and other
negative extraordinary charges not otherwise reflected in such Consolidated Net
Income, plus (b) the aggregate Net Proceeds (as defined in the 10-3/4%
Indenture) to the Company from the sale of Qualified Capital Stock subsequent to
September 30, 1991 (excluding any such Net Proceeds from the sale of Qualified
Capital Stock by a Company subsidiary and excluding Qualified Capital Stock paid
as a dividend on, or issued upon or in exchange for other Capital Stock (as
defined in the 10-3/4% Indenture) or as a payment of interest on indebtedness of
the Company), plus (c) $25 million.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information called for by Part II, items 5, 6, 7 and 8, except
for information regarding the Company's dividend policy and related matters,
which is provided in response to Item 5, above, is hereby incorporated by
reference to the Financial Statements and the Report of Ernst & Young LLP,
Independent Auditors of the Company's 1995 Annual Report to Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
11
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the
current executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Andrew G. Galef 62 Chairman of the Board of Directors and
Chief Executive Officer
Antonio Canova 53 Executive Vice President
Brian R. Dundon 49 Executive Vice President
Ronald W. Mathewson 58 Executive Vice President
David P. Reiland 41 Executive Vice President and
Chief Financial Officer
Alexander Levran, Ph.D. 45 Senior Vice President, Technology
John E. Steiner 51 Senior Vice President, Strategic
Planning and Business Development
John P. Colling, Jr. 39 Vice President and Treasurer
Thomas R. Kmak 45 Vice President and Controller
Samuel A. Miley 38 Vice President, General Counsel and
Secretary
Robert W. Murray 56 Vice President, Communications and
Investor Relations
Dennis L. Hatfield 47 Assistant Vice President, Facilities
and Environmental Affairs
</TABLE>
Mr. Galef has been the Chairman of the Board of Directors since
July 1984 and Chief Executive Officer of the Company since September 1993. He
also is the Chairman of the Nominating Committee. He has been President of The
Spectrum Group, Inc. ("Spectrum"), a private investment and management firm,
since its incorporation in California in 1978 and Chairman and Chief Executive
Officer since 1987. Prior to the formation of Spectrum, Mr. Galef was engaged
in providing professional interim management services to companies with serious
operating and financial problems. Mr. Galef is presently a director of Warnaco,
Inc., a diversified apparel manufacturer, and its parent, The Warnaco Group,
Inc., and was formerly Chairman of Aviall, Inc., a company providing aircraft
engine refurbishment and related products and services, and Exide Corporation, a
manufacturer of automotive and industrial batteries. Mr. Galef was the Chairman
of Gran Tree Corporation when, during the 1990 fiscal year, it filed a voluntary
petition for reorganization under Federal bankruptcy law. Mr. Galef also serves
as chairman or a director of other privately held companies.
12
<PAGE>
Mr. Canova has been Executive Vice President of the Company since
October 1993 and serves as president of MagneTek's Power Electronics Group. He
has served as managing director of MagneTek S.p.A. in Italy since March 1991.
He held the same position with Plessey S.p.A. from 1988 until March 1991 when
Plessey S.p.A. was acquired by the Company. From 1969 to 1988, Mr. Canova
served as general manager of Plessey S.p.A.
Mr. Dundon serves as president of MagneTek's Motors and Controls
Group. He has been Executive Vice President since July 1993 and served as
Executive Vice President of the Company's Motors and Controls business from
November 1986 when Century Electric, Inc. was acquired by the Company until July
1993. Prior to the acquisition Mr. Dundon had been with Century Electric since
1971, serving in various capacities.
Mr. Mathewson, who serves as president of MagneTek's Lighting
Products Group, joined the Company in June 1994 as Executive Vice President.
For more than five years prior to joining the Company, Mr. Mathewson served in
various executive officer positions with Manville Corporation, a diversified
holding company, and its subsidiary Schuller International, a fiberglass
manufacturing company. Prior to that Mr. Mathewson was with General Electric
for twenty-seven years, including six years in general management positions in
its lamp business.
Mr. Reiland has been Executive Vice President since July 1993 and
Chief Financial Officer of the Company since July 1988. Mr. Reiland was also a
Senior Vice President of the Company from July 1989 until July 1993. He was
Controller of the Company from August 1986 to October 1993, and was Vice
President, Finance from July 1987 to July 1989. Prior to joining the Company,
Mr. Reiland was an Audit Manager with Arthur Andersen & Co. where he served in
various capacities since 1980.
Dr. Levran joined the Company in July 1993 as Vice President,
Technology. From 1991 to June 1993, Dr. Levran was employed by EPE
Technologies, Inc., a subsidiary of Groupe Schneider, as Vice President of
Engineering and Technology with worldwide engineering responsibilities. From
1981 to 1991, he held various engineering management positions with Teledyne
Inet, a subsidiary of Teledyne, Inc., most recently as Vice President of
Engineering. Dr. Levran received his Ph.D. in electrical engineering from the
Polytechnic Institute of New York in 1981.
Mr. Steiner joined the Company in September 1987 and since July
1994 has been the Vice President, Strategic Planning and Business Development.
He has also served as vice president of the Company's Drives and Magnetics
business since November 1993, as vice president and general manager of the
Company's Drive Systems business from October 1990 to November 1993 and as vice
president, marketing of the Company's Systems and Technology business from
September 1987 to October 1990. Prior to joining the Company in 1987,
Mr. Steiner had been with Westinghouse Electric Corporation, an electrical
products manufacturing company, where he served in various capacities since
1967.
Mr. Colling has been Vice President of the Company since July
1990, Treasurer of the Company since June 1989 and was assistant treasurer of
the Company from July 1987 to June 1989. Prior to that, Mr. Colling was the
assistant treasurer of Century Electric, where he served in various capacities
since August 1981.
13
<PAGE>
Mr. Kmak has been Vice President of the Company since October
1993, Controller since November 1994 and Operations Controller from October 1993
to November 1994. Mr. Kmak was the vice president, finance of the Company's
Motors and Controls business from November 1986 when Century Electric was
acquired by the Company until July 1992 and served as vice president,
operational finance of the Company's Motors and Controls business from July 1992
until October 1993. Prior to the acquisition Mr. Kmak had been with Century
Electric since 1976, serving in various capacities.
Mr. Miley joined the Company in February 1990 as Vice President,
General Counsel and Secretary. Prior to that time, he was an attorney with the
law firms of Sheppard, Mullin, Richter & Hampton in Los Angeles, California
(March 1986 to January 1990) and Sidley & Austin in Chicago, Illinois (May 1982
to March 1986).
Mr. Murray joined the Company in April 1987 and currently serves
as the Vice President, Communications and Investor Relations. From 1976 until
April 1987 he held various positions with Whittaker Corporation, a diversified
aerospace manufacturing company, most recently as Vice President, Corporate
Communications.
Mr. Hatfield joined the Company in August 1992 as Assistant Vice
President, Facilities and Environmental Affairs. Prior to that he was a
principal in the industrial environmental consulting firms of Patterson Schafer,
Inc. (February 1989 to December 1990) and Schafer Environmental Associates, Inc.
(March 1991 to July 1992). From July 1985 to February 1989, Mr. Hatfield served
as Director of Environmental Affairs of the Specialty Chemicals Group at Morton
Thiokol, Inc.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Part III, Items 10, 11, 12 and 13,
is hereby incorporated by reference to the Company's definitive Proxy Statement
to be mailed to Stockholders in September 1995, except for information regarding
the Executive Officers of the Company, which is provided in response to Item 10,
above.
14
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Index to Consolidated Financial Statements, Consolidated
Financial Statement Schedules and Exhibits:
Annual
Report To
Form 10-K Stockholders
Page Page
--------- ---------------
1. Consolidated Financial Statements
Consolidated Statements of Income 19
for Years Ended June 30, 1995, 1994
and 1993
Consolidated Balance Sheets at June 20
30, 1995 and 1994
Consolidated Statements of 22
Stockholders' Equity for Years
ended June 30, 1995, 1994 and 1993
Consolidated Statements of Cash 23
Flows for Years Ended June 30,
1995, 1994 and 1993
Notes to Consolidated Financial 24
Statements
Report of Ernst & Young LLP, 40
Independent Auditors
2. Consolidated Financial Statement
Schedules
Report of Ernst & Young, LLP, S-1
Independent Auditors
II -- Valuation and Qualifying S-2
Accounts
All other schedules have been omitted since the required information
is not present or is not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the
Consolidated Financial Statements and related notes.
3. Exhibit Index E-1 - E-6
15
<PAGE>
The following exhibits are filed as part of this Annual Report
Form 10-K, or are incorporated herein by reference. Where an exhibit is
incorporated by reference, the number which precedes the description of the
exhibit indicates the documents to which the cross-reference is made.
EXHIBIT
NUMBERS DESCRIPTION OF EXHIBIT
------- ----------------------
3.1 (1) Restated Certificate of Incorporation of the Company, as
filed with the Delaware Secretary of State on November 21,
1989.
3.2 (2) By-laws of the Company, as amended and restated.
4.1 (3) Indenture between MagneTek, Inc. and The Bank of New York,
as Trustee, dated as of September 15, 1991 for $75,000,000
in principal amount of 8% Convertible Subordinated Notes due
2001 including form of Note.
4.2 (4) Form of Indenture between MagneTek, Inc. and Union Bank, as
Trustee, dated as of November 15, 1991 for $125,000,000
Senior Subordinated Debentures Due 1998 including form of
Debenture.
4.3 (5) Specimen Common Stock Certificate.
4.4 (6) Form of Indemnification and Release Agreements entered into
between the Company, MagTek Partners and Champlain
Associates as of January 30, 1991.
10.1 (7) Registration Rights Agreement dated as of April 29, 1991
among the Company, Andrew G. Galef, Frank Perna, Jr. and the
other entities named therein.
10.2 (8) Executive Management Agreement dated as of July 1, 1994, by
and between the Company and The Spectrum Group, Inc.
10.3 (9) Lease on Mendenhall, Mississippi facility of Universal
Manufacturing.
10.4 (9) Lease on Gallman, Mississippi facility of Universal
Manufacturing.
10.5 (9) Lease on Bridgeport, Connecticut facility of Universal
Manufacturing.
10.6 (10) Lease on McMinnville, Tennessee facility of Century
Electric.
10.7 (11) Security Agreement dated March 1, 1993 between the
Industrial Development Board of the City of Huntsville (the
"Huntsville IDB") and the Company ("Huntsville Security
Agreement").
10.8 (11) Equipment Lease Agreement of even date with the Huntsville
Security Agreement among the parties thereto.
10.9 (9) Environmental Agreement among the Company, Universal
Manufacturing Corporation and Farley Northwest Industries,
Inc., as amended.
16
<PAGE>
10.10 (9) Letter Agreement dated as of January 9, 1986, between the
Company and Farley Northwest Industries, Inc., pursuant to
Stock Purchase Agreement.
10.11 (9) Tax Agreement dated as of February 12, 1986, between the
Company and Farley Northwest Industries, Inc.
10.12 (9) Agreement dated as of January 9, 1986, between the Company
and Farley/Northwest Industries, Inc. relating to the Totowa
facility.
10.13 (12) 1987 Stock Option Plan of MagneTek, Inc. ("1987 Plan").
10.14 (7) Amendments No. 1 and 2 to 1987 Plan.
10.15 (13) Amendments No. 3 and 4 to 1987 Plan.
10.16 (14) Second Amended and Restated 1989 Incentive Stock
Compensation Plan of MagneTek, Inc.
10.17 (15) Standard Terms and Conditions Relating to Non-Qualified
Stock Options, revised as of October 23, 1991, pertaining to
the 1987 Plan and the 1989 Plan.
10.18 (12) Senior Executive Medical Expense Reimbursement Plan for the
Company.
10.19 (16) Stock Purchase Agreement dated as of January 9, 1986,
between the Company and Farley/Northwest Industries, Inc.,
with list of omitted exhibits and schedules.
10.20 (16) Stock Purchase Agreement dated as of June 20, 1986, between
the Company and Better Coil and Transformer Corporation,
with list of omitted exhibits.
10.21 (17) Purchase Agreement dated as of October 22, 1986, by and
among the Company, Century and certain Securityholders.
10.22 (18) Purchase Agreement dated as of December 15, 1986, between
the Company and all the remaining Securityholders of
Century.
10.23 (18) Asset Purchase Agreement dated as of December 30, 1986,
between the Company and Universal Electric.
10.24 (18) Agreement for the Sale of Stock dated as of December 30,
1986, between the Company and Cooper.
10.25 (19) Lease of St. Louis, Missouri administration, marketing and
engineering personnel facility dated January 1, 1988.
10.26 (19) Lease of Matamoros, Mexico fluorescent ballast manufacturing
facility dated January 1, 1988.
17
<PAGE>
10.27 (20) Lease and Agreement between the City of Blytheville,
Arkansas and the Company, dated as of November 1, 1988.
10.28 (7) First Supplemental Lease and Agreement between City of
Blytheville, Arkansas and the Company dated as of
December 1, 1989, for the Blytheville, Arkansas facility.
10.29 (21) Lease of facility in New Berlin, Wisconsin.
10.30 (7) Third Modification of Lease dated as of December 31, 1990,
for the New Berlin, Wisconsin facility.
10.31 (22) Fourth Modification of Lease dated as of February 12, 1993
for the New Berlin, Wisconsin facility.
10.32 (23) Amendment to Equipment Lease Agreement dated as of August 1,
1993 between The Industrial Development Board of the City of
Huntsville (the "Huntsville IDB") and the Company.
10.33 (23) First Supplemental Security Agreement dated as of August 1,
1993 by and between the Huntsville IDB and The CIT
Group/Equipment Financing, Inc. ("CIT").
10.34 (23) Second Amendment to Equipment Lease Agreement dated as of
October 1, 1993 between the Huntsville IDB and the Company.
10.35 (23) Second Supplemental Security Agreement dated as of
October 1, 1993 by and between the Huntsville IDB and CIT.
10.36 (2) Lease on Nashville, Tennessee headquarters facility dated
as of June 30, 1995.
10.37 (22) First Amendment dated August 28, 1991 and Second Amendment
dated February 5, 1993 to Lease on Lavergne, Tennessee
facility.
10.38 (7) 1991 Director Incentive Compensation Plan of the Company.
10.39 (8) First Amendment to the 1991 Director Incentive Compensation
Plan of the Company.
10.40 (13) 1991 Discretionary Director Incentive Compensation Plan of
the Company.
10.41 (24) Lease Agreement dated as of November 1, 1988 between the
Huntsville IDB and Burnett-Nickelson Investments ("Lease
Agreement") as to which the Registrant succeeded to the
lessee's obligations.
10.42 (25) First, Second and Third Amendments to Lease Agreement.
10.43 (22) Fourth Amendment to Lease Agreement.
18
<PAGE>
10.44 (25) Indenture dated as of November 1, 1988 relating to First
Mortgage Industrial Revenue Bonds (Burnett-Nickelson Project
Series 1988) between Huntsville IDB and First Alabama Bank,
as Trustee, relating to the Huntsville facility (the
"Indenture").
10.45 (25) First, Second and Third Supplemental Indentures to the
Indenture.
10.46 (22) Fourth Supplemental Indenture to the Indenture.
10.47 (25) Bond Guaranty Agreement between MagneTek, Inc., as Guarantor
and First Alabama Bank dated as of February 1, 1993 relating
to the Lease Agreement.
10.48 (22) Restricted Stock Agreement pursuant to 1989 Plan entered
into between Ronald W. Mathewson and the Company as of July
27, 1994.
10.49 (26) Lease of Lavergne, Tennessee facility.
10.50 (27) Severance and General Release Agreement dated as of
April 21, 1995 by and between the Company and C. Ore Davis.
10.51 (27) Credit Agreement dated as of March 31, 1995 between the
Company, Lenders, NationsBank of Texas, N.A., CIBC Inc., The
First National Bank of Chicago and LTCB Trust Company.
10.52 (27) Amendment dated as of January 25, 1995 to the Executive
Management Agreement between the Company and The Spectrum
Group, Inc.
10.53 (2) Asset Purchase Agreement dated as of May 27, 1994, between
the Company and The Louis Allis Company.
10.54 (2) Asset Purchase Agreement dated as of June 17, 1994, among
the Company, MagneTek Controls, Inc. and Controls
Acquisition Corporation.
10.55 (2) Asset Purchase Agreement dated as of October 31, 1994, among
the Company, MagneTek National Electric Coil, Inc. and Rail
Products International, Inc.
10.56 (2) Asset Purchase Agreement dated as of November 8, 1994,
between the Company and MAS Acquiring Corp.
10.57 (2) Purchase and Sale Agreement dated November 18, 1994, by and
among the Company, MagneTek Tempe, Inc., MagneTek
Deutschland Holding GmbH and PTS, Inc.
10.58 (2) Asset Purchase Agreement dated as of March 6, 1995, by and
between the Company and GN Acquisition Partners, L.P.
10.59 (2) Asset Purchase Agreement dated as of March 13, 1995, among
the Company, MagneTek National Electric Coil, Inc. and 800
King Avenue Acquisition Corp.
10.60 (2) Asset Purchase Agreement dated as of May 31, 1995, between
MagneTek National Electric Coil, Inc. and The Guardian
Resin Corporation.
19
<PAGE>
10.61 (2) Agreement of Sale dated as of June 23, 1995, between General
Signal Corporation and the Company.
10.62 (2) Asset and Stock Purchase Agreement dated as of September 14,
1995, among the Company, MagneTek National Electric Coil,
Inc. and National Electric Coil Company, L.P.
13 (2) 1995 Annual Report to Stockholders (pp. 15-40).
21 (2) Subsidiaries of the Company.
23 (2) Consent of Ernst & Young LLP, Independent Auditors.
27 (2) Financial Data Schedule.
___________________
(1) Previously filed with the Registration Statement on Form S-3 filed
on August 1, 1991, Commission File No. 33-41854.
(2) Filed herewith.
(3) Previously filed with Form 10-Q for quarter ended September 30,
1991.
(4) Previously filed with Amendment No. 1 to Registration Statement
filed on November 8, 1991, Commission File NO. 43-43856.
(5) Previously filed with Amendment No. 1 to Registration Statement
filed on May 10, 1989.
(6) Previously filed with Form 8-K dated January 30, 1991.
(7) Previously filed with Form 10-K for Fiscal Year ended June 30, 1991.
(8) Previously filed with Form 10-Q for quarter ended March 31, 1994.
(9) Previously filed with Amendment No. 1 to Registration Statement
filed on February 14, 1986.
(10) Previously filed with Post-Effective Amendment No. 1 to Registration
Statement, filed on August 3, 1987.
(11) Previously filed with Form 10-Q for quarter ended March 31, 1993.
(12) Previously filed with Form 10-K for Fiscal Year ended June 30, 1987.
(13) Previously filed with Form 10-K for Fiscal Year ended June 30, 1992.
(14) Previously filed with Form 10-Q for quarter ended December 31, 1994.
(15) Previously filed with Form 10-Q for quarter ended December 31, 1991.
(16) Previously filed with Form 10-K for Fiscal Year ended June 30, 1986.
20
<PAGE>
(17) Previously filed with Form 10-Q for quarter ended September 30,
1986.
(18) Previously filed with Form 8-K dated December 30, 1986.
(19) Previously filed with Form 10-K for Fiscal Year ended July 3, 1988.
(20) Previously filed with the Registration Statement filed on
April 18, 1989.
(21) Previously filed with the Registration Statement filed on May 3,
1985.
(22) Previously filed with Form 10-K for Fiscal Year ended July 3, 1994.
(23) Previously filed with Form 10-Q for quarter ended September 30,
1993.
(24) Previously filed with Form 8-K dated January 5, 1990.
(25) Previously filed with Form 10-K for fiscal year ended June 27, 1993.
(26) Previously filed with Form 10-K for Fiscal Year ended July 2, 1989.
(27) Previously filed with Form 10-Q for quarter ended March 31, 1995.
(b) Reports on Form 8-K:
The Company filed no Reports on Form 8-K during the last
quarter of the 1995 fiscal year.
(c) Refer to (a) 3 above.
(d) Refer to (a) 2 above.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Nashville, State of Tennessee, on the 26th day of September, 1995.
MagneTek, Inc.
(Registrant)
/S/ ANDREW G.GALEF
--------------------------------------------
Andrew G. Galef
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ANDREW G. GALEF Chairman of the Board, September 26, 1996
- ------------------------------ Chief Executive Officer
Andrew G. Galef and Director (Principal
Executive Officer)
/s/ DAVID P. REILAND Chief Financial Officer September 26, 1996
- ------------------------------ (Principal Financial
David P. Reiland Officer)
/s/ THOMAS R. KMAK Vice President and September 26, 1996
- ------------------------------ Controller (Principal
Thomas R. Kmak Accounting Officer)
/s/ DEWAIN K. CROSS Director September 26, 1996
- ------------------------------
Dewain K. Cross
/s/ PAUL J. KOFMEHL Director September 26, 1996
- ------------------------------
Paul J. Kofmehl
/s/ A. CARL KOTCHIAN Director September 26, 1996
- ------------------------------
A. Carl Kotchian
/s/ CROCKER NEVIN Director September 26, 1996
- ------------------------------
Crocker Nevin
/s/ KENNETH A. RUCK Director September 26, 1996
- ------------------------------
Kenneth A. Ruck
/s/ MARGUERITE W. SALLEE Director September 26, 1996
- ------------------------------
Marguerite W. Sallee
22
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We have audited the consolidated finanacial statements of MagneTek, Inc. as of
June 30, 1995 and 1994, and for each of the three years in the period ended June
30, 1995, and have issued our report thereon dated August 14, 1995 (incorporated
by reference elsewhere in this Annual Report on Form 10-K). Our audits also
included the financial statement schedule listed in Item 14(a) of this Annual
Report on Form 10-K. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
St. Louis, Missouri ERNST & YOUNG LLP
August 14, 1995
S-1
<PAGE>
<TABLE>
<CAPTION>
Schedule II
MAGNETEK INC.
VALUATION AND QUALIFYING ACCOUNTS
Years ended June 30, 1993, 1994 and 1995
(amounts in thousands)
Balance at Additions Deductions Balance
beginning charged to from at end
June 30, 1993 of year earnings Allowance Other(a) of year
------------- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful
receivables $3,963 $3,070 $(3,294) $247 $3,986
June 30, 1994
-------------
Allowance for
doubtful
receivables $3,986 $2,878 $(2,980) $861 $4,745
June 30, 1995
-------------
Allowance for
doubtful
receivables $4,745 $4,099 $(4,249) $(174) $4,421
<FN>
(a) Represents primarily opening allowances for doubtful accounts balances of
acquired companies and Foreign Translation Adjustments.
</TABLE>
S-2
<PAGE>
BY-LAWS
OF
MAGNETEK, INC.
<PAGE>
BY-LAWS
OF
MAGNETEK, INC.
TABLE OF CONTENTS
Page
----
ARTICLE I - OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1 Registered Office. . . . . . . . . . . . . . . . . . . . 1
Section 2 Other Offices. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - MEETINGS OF STOCKHOLDERS. . . . . . . . . . . . . . . . . . 1
Section 1 Place of Meetings . . . . . . . . . . . . . . . . . . . 1
Section 2 Annual Meeting of Stockholders. . . . . . . . . . . . . 1
Section 3 Quorum; Adjourned Meetings and
Notice Thereof . . . . . . . . . . . . . . 2
Section 4 Voting. . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 5 Proxies . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 6 Special Meetings. . . . . . . . . . . . . . . . . . . . 3
Section 7 Notice of Stockholders' Meetings. . . . . . . . . . . . 4
Section 8 Maintenance and Inspection
of Stockholder List. . . . . . . . . . . . 4
Section 9 Stockholder Action by Written
Consent Without a Meeting. . . . . . . . . 5
Section 10 Advance Notice of Stockholder
Proposals and Stockholder
Nominations. . . . . . . . . . . . . . . . 6
ARTICLE III - DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1 Number and Qualification of Directors . . . . . . . . . 10
Section 2 Vacancies . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3 Powers. . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4 Place of Directors' Meetings. . . . . . . . . . . . . . 12
Section 5 Regular Meetings. . . . . . . . . . . . . . . . . . . . 12
Section 6 Special Meetings. . . . . . . . . . . . . . . . . . . . 12
Section 7 Quorum. . . . . . . . . . . . . . . . . . . . . . . . . 13
i
<PAGE>
Section 8 Action Without Meeting. . . . . . . . . . . . . . . . . 13
Section 9 Telephonic Meetings . . . . . . . . . . . . . . . . . . 14
Section 10 Committees of Directors . . . . . . . . . . . . . . . . 14
Section 11 Minutes of Committee Meetings . . . . . . . . . . . . . 15
Section 12 Compensation of Directors . . . . . . . . . . . . . . . 15
Section 13 Indemnification . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IV - OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 1 Officers. . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2 Election of Officers. . . . . . . . . . . . . . . . . . 21
Section 3 Subordinate Officers. . . . . . . . . . . . . . . . . . 22
Section 4 Compensation of Officers. . . . . . . . . . . . . . . . 22
Section 5 Term of Office; Removal
and Vacancies. . . . . . . . . . . . . . . 22
Section 6 Chairman of the Board . . . . . . . . . . . . . . . . . 22
Section 7 President . . . . . . . . . . . . . . . . . . . . . . . 23
Section 8 Vice President. . . . . . . . . . . . . . . . . . . . . 23
Section 9 Secretary . . . . . . . . . . . . . . . . . . . . . . . 24
Section 10 Assistant Secretaries . . . . . . . . . . . . . . . . . 24
Section 11 Treasurer . . . . . . . . . . . . . . . . . . . . . . . 25
Section 12 Assistant Treasurer . . . . . . . . . . . . . . . . . . 25
Section 13 Vacancy of President's Office . . . . . . . . . . . . . 26
ARTICLE V - CERTIFICATES OF STOCK. . . . . . . . . . . . . . . . . . . . 26
Section 1 Certificates. . . . . . . . . . . . . . . . . . . . . . 26
Section 2 Signatures on Certificates. . . . . . . . . . . . . . . 26
Section 3 Statement of Stock Rights,
Preferences and Privileges . . . . . . . . 27
Section 4 Lost Certificates . . . . . . . . . . . . . . . . . . . 28
Section 5 Transfers of Stock. . . . . . . . . . . . . . . . . . . 28
Section 6 Fixing Record Date. . . . . . . . . . . . . . . . . . . 29
Section 7 Registered Stockholders . . . . . . . . . . . . . . . . 29
ARTICLE VI - GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . 30
Section 1 Dividends . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2 Payment of Dividends; Directors'
Duties . . . . . . . . . . . . . . . . . . 30
Section 3 Checks. . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . 30
Section 5 Corporate Seal. . . . . . . . . . . . . . . . . . . . . 31
Section 6 Manner of Giving Notice . . . . . . . . . . . . . . . . 31
Section 7 Waiver of Notice. . . . . . . . . . . . . . . . . . . . 33
Section 8 Annual Statement. . . . . . . . . . . . . . . . . . . . 33
Section 9 Exemption from Section 203,
Delaware G.C.L . . . . . . . . . . . . . . 34
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ARTICLE VII - AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 1 Amendments by Directors
or Stockholders. . . . . . . . . . . . . . 33
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BY-LAWS
OF
MAGNETEK, INC.
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office shall be in the City
of Dover, County of Kent, State of Delaware.
Section 2. OTHER OFFICES. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of stockholders shall be held at
any place within or outside the State of Delaware designated by the Board of
Directors. In the absence of any such designation, stockholders' meetings shall
be held at the principal executive office of the corporation.
Section 2. ANNUAL MEETING STOCKHOLDERS. The annual meeting of
stockholders shall be held each year on a date and a time designated by the
Board of Directors. At each annual meeting
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directors shall be elected and any other proper business may be transacted.
Section 3. QUORUM; ADJOURNED MEETINGS AND NOTICE THEREOF. A majority of
the stock issued and outstanding and entitled to vote at any meeting of
stockholders, the holders of which are present in person or represented by
proxy, shall constitute a quorum for the transaction of business except as
otherwise provided by law, by the Certificate of Incorporation, or by these By-
Laws. A quorum, once established, shall not be broken by the withdrawal of
enough votes to leave less than a quorum and the votes present may continue to
transact business until adjournment. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, a majority of the
voting stock represented in person or by proxy may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified. If the adjournment is
for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote thereat.
Section 4. VOTING. When a quorum is present at any meeting, the vote of
the holders of majority of the stock having
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voting power present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which by express
provision of the statutes, or the Certificate of Incorporation, or these By-
Laws, a different vote is required in which case such express provision shall
govern and control the decision of such question.
Section 5. PROXIES. At each meeting of the stockholders, each stockholder
having the right to vote may vote in person or may authorize another person or
persons to act for him by proxy appointed by an instrument in writing subscribed
by such stockholder and bearing a date not more than three years prior to said
meeting, unless said instrument provides for a longer period. All proxies must
be filed with the Secretary of the corporation at the beginning of each meeting
in order to be counted in any vote at the meeting. Each stockholder shall have
one vote for each share of stock having voting power, registered in his name on
the books of the corporation on the record date set by the Board of Directors as
provided in Article V, Section 6 hereof. All elections shall be had and all
questions decided by a plurality vote.
Section 6 SPECIAL MEETINGS. Special meetings of the stockholders, for any
purpose, or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President and shall be called
by the President or the Secretary at the request in writing of a majority of the
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<PAGE>
Board of Directors, or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding, and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 7. NOTICE OF STOCKHOLDERS' MEETINGS. Whenever stockholders are
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given which notice shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. The written notice of any meeting shall be given
to each stockholder entitled to vote at such meeting not less than ten nor more
than sixty days before the date of the meeting. If mailed, notice is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation.
Section 8 MAINTENANCE AND INSPECTION OF STOCKHOLDER LIST. The officer who
has charge of the stock ledger of the corporation shall prepare and make, at
least ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares
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<PAGE>
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 9. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Unless otherwise provided in the Certificate of Incorporation, any action
required to be taken at any annual or special meeting of stockholders of the
corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action so
taken and bearing the dates of signature of the stockholders who signed the
consent or consents, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted and shall be delivered to the corporation by delivery to
its registered office in the state of Delaware, or the corporation's principal
place of
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business, or an officer or agent of the corporation having custody of the book
or books in which proceedings of meetings of the stockholders are recorded.
Delivery made to the corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. All consents properly
delivered in accordance with this section shall be deemed to be recorded when so
delivered. No written consent shall be effective to take the corporate action
referred to therein unless, within sixty days of the earliest dated consent
delivered to the corporation as required by this section, written consents
signed by the holders of a sufficient number of shares to take such corporate
action are so recorded. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. Any action taken pursuant to
such written consent or consents of the stockholders shall have the same force
and effect as if taken by the stockholders at a meeting thereof.
Section 10. ADVANCE NOTICE OF STOCKHOLDER PROPOSALS AND STOCKHOLDER
NOMINATIONS. (a) At any meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who complies with the notice procedures set forth in this Section
10(a). Only such business shall be conducted at a special
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meeting of stockholders as shall have been brought before the meeting pursuant
to the corporation's notice of meeting, as provided by Section 6 of this Article
II. Nominations of persons for election to the Board of Directors may be made
at a special meeting of stockholders at which directors are to be elected
pursuant to the corporation's notice of meeting, in accordance with clause (b)
of this Section 10. For business to be properly brought before any annual
meeting of the stockholders by a stockholder, it must be a proper matter for
stockholder action and the stockholder must have given timely notice thereof in
writing to the Secretary of the corporation. For such notice to be timely in
respect of an annual meeting, it must be delivered to the Secretary at the
principal executive office of the corporation not later than the close of
business on the 120th day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the annual
meeting is more than 30 days before or more than 60 days after such anniversary
date, notice by the stockholder to be timely must be so delivered not later than
the close of business on the 120th day prior to such annual meeting or, if
later, the close of business on the 10th day following the date on which public
announcement of the date of such meeting is first made by the corporation. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the meeting (1) a brief description of the
business desired to be brought before the meeting and the reasons for
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<PAGE>
conducting such business at the meeting, (2) the name and address, as they
appear on the corporation's books, of the stockholder proposing such business,
(3) the class and number of shares of the corporation that are beneficially
owned by the stockholder, and (4) any material interest of the stockholder in
such business. In addition, the stockholder making such proposal shall promptly
provide any other information reasonably requested by the corporation.
Notwithstanding anything in these By-laws to the contrary, no business shall be
conducted at any meeting of the stockholders except in accordance with the
procedures set forth in this Section 10(a). The Chairman of any such meeting
shall direct that any business not properly brought before the meeting shall not
be considered.
(b) Nominations for the election of directors may be made by the Board of
Directors or a committee thereof, or by any stockholder entitled to vote in the
election of directors; provided, however, that a stockholder may nominate a
person for election as a director at a meeting only if written notice of such
stockholder's intent to make such nomination has been timely given to the
Secretary of the corporation. Such notice shall be timely as to an annual
meeting if it complies with clause (a) of this Section 10, and shall be timely
as to a special meeting if it is received by the Secretary at the principal
executive office of the corporation not later than the close of business on the
120th day prior to the date of the special meeting or, if later,
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<PAGE>
the close of business on the 10th day following the first public announcement of
the date of such meeting. Each such notice shall set forth (1) the name and
address of the stockholder who intends to make the nomination and of the person
or persons to be nominated, (2) a representation that the stockholder is a
holder of record of stock of the corporation entitled to vote at such a meeting
and intends to appear in person or by proxy at the meeting and nominate the
person or persons specified in the notice, (3) a description of all arrangements
or understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder, (4) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the United
States Securities and Exchange Commission had the nominee been nominated, or
intended to be nominated, by the Board of Directors, and (5) the consent of each
nominee to serve as a director of the corporation if so elected. In addition,
the stockholder making such nomination shall promptly provide any other
information reasonably requested by the corporation. No person shall be
eligible for election as a director of the corporation unless nominated in
accordance with the procedures set forth in this Section 10(b). The Chairman of
any meeting of stockholders shall direct that any nomination not made in
accordance with these procedures be disregarded. For purposes of
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this Section 10, "public announcement" shall mean disclosure in a press release
reported by the Dow Jones New Service, Associated Press or comparable national
news service or in a document publicly filed by the corporation with the
Securities and Exchange Commission.
ARTICLE III
DIRECTORS
Section 1. NUMBER AND QUALIFICATION OF DIRECTORS. The Board of Directors
shall consist of not less than five or more than nine persons and the specific
number of directors shall be as fixed by resolution of the Board of Directors
from time to time. The directors need not be stockholders. The directors shall
be elected at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each director elected shall hold office until his
successor is elected and qualified; provided, however, that unless otherwise
restricted by the Certificate of Incorporation or by law, any director or the
entire Board of Directors may be removed, either with or without cause, from the
Board of Directors at any meeting of stockholders by a majority of the stock
represented and entitled to vote thereat.
Section 2 VACANCIES. Vacancies on the Board of Directors by reason of
death, resignation, retirement, disqualification, removal from office, or
otherwise, and newly created
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directorships may be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director. The directors so
chosen shall hold office until the next annual election of directors and until
their successors are duly elected and shall qualify, unless sooner displaced.
If there are no directors in office, then an election of directors may be held
in the manner provided by statute. If, at the time of filling any vacancy or
newly created directorship, the directors then in office shall constitute less
than a majority of the whole Board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office.
Section 3 POWERS. The property and business of the corporation shall be
managed by or under the direction of its Board of Directors. In addition to the
powers and authorities by these By-Laws expressly conferred upon them, the Board
may exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders.
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Section 4. PLACE OF DIRECTORS' MEETINGS. The directors may hold their
meetings and have one or more offices, and keep the books of the corporation
outside of the State of Delaware.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board.
Section 6. SPECIAL MEETINGS. (a) Special meetings of the Board of
Directors (or of any Committee of the Board of Directors) shall be held whenever
called by (i): a majority of the authorized number of Directors, or (ii) the
Chairman of the Board (or, in the case of a special meeting of a Committee of
the Board of Directors, the Chairman of such Committee).
(b) Except as otherwise provided by law or by these By-Laws, written
notice of the time and place of each such special meeting shall be given to each
Director (or, in the case of a special meeting of a Committee of the Board of
Directors, each Director who sits on such Committee): (i) by first class mail,
postage prepaid, addressed to him or her at his or her address as it is shown
upon the records of the corporation, at least five days before the date of such
meeting, or (ii) by personal delivery, telecopy, electronic mail (if the
Director and the corporation are then connected for electronic mail
transmission), or orally in person or by telephone, in each case
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if received by the Director at least twenty-four (24) hours prior to the time of
the holding of the meeting.
Section 7. QUORUM. At all meetings of the Board of Directors a majority
of the authorized number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the vote of a majority
of the directors present at any meeting at which there is a quorum, shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by statute, by the Certificate of Incorporation or by these By-Laws. If a
quorum shall not be present at any meeting of the Board of Directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
If only one director is authorized, such sole director shall constitute a
quorum.
Section 8. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
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Section 9. TELEPHONIC MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of a conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such a
meeting.
Section 10. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each such committee to consist of one or more of the directors of
the corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member of
a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation,
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and may authorize the seal of the corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority in
reference to amending the Certificate of Incorporation, adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the By-Laws of the corporation; and,
unless the resolution or the Certificate of Incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
Section 11. MINUTES OF COMMITTEE MEETINGS. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
Section 12. COMPENSATION OF DIRECTORS. Unless otherwise restricted by the
Certificate of Incorporation or by these By-Laws, the Board of Directors shall
have the authority to fix the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as a director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving
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compensation therefor. Members of special or standing committees may be given
compensation for serving on such committees.
Section 13. INDEMNIFICATION. (a) The corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with
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respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no such indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the Court of Chancery of Delaware
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such Court of Chancery or such other court
shall deem proper.
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(c) To the extent that a director, officer, employee or agent of the
corporation shall be successful on the merits or otherwise in defense, of any
action, suit or proceeding referred to in paragraphs (a) and (b), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in paragraphs (a) and (b). Such determination shall be
made (1) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) if
such quorum is not obtainable, or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (3)
by the stockholders.
(e) Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding, if authorized by the Board of Directors,
may be paid by the corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if it shall
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ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Section. Such expenses incurred by other
employees or agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by this
Section 13 shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any by-
law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(g) The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Section 13.
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(h) For the purposes of this Section 13, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Section with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include service
as a director, officer, employee or agent of the corporation which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants or beneficiaries; and
a person who acted in good faith and in a manner he reasonably believed to be in
the
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interest of the partcipants and beneficiaries of an employee beieft plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation."
ARTICLE IV
OFFICERS
Section 1. OFFICER. The officers of this corporation shall be chosen by
the Board of Directors and shall include a President, a Secretary, and a
Treasurer. The corporation may also have at the discretion of the Board of
Directors such other officers as are desired, including a Chairman of the Board,
one or more Vice Presidents, one or more Assistant Secretaries and Assistant
Treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 3 hereof. In the event there are two or more Vice
Presidents, then one or more may be designated as Executive Vice President,
Senior Vice President, or other similar or dissimilar title. At the time of the
election of officers, the directors may by resolution determine the order of
their rank. Any number of offices may be held by the same person, unless the
Certificate of Incorporation of these By-Laws otherwise provide.
Section 2. ELECTION OF OFFICERS. The Board of Directors, at its first
meeting after each annual meeting of stockholders, shall choose the officers of
the corporation.
21
<PAGE>
Section 3. SUBORDINATE OFFICERS. The Board of Directors may appoint such
other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
Section 4. COMPENSATION OF OFFICERS. The salaries of all officers and
agents of the corporation shall be fixed by the Board of Directors.
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES. The officers of the
corporation shall hold office until their successors are chosen and qualify in
their stead. Any officer elected or appointed by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the Board of
Directors. If the office of any officer or officers becomes vacant for any
reason, the vacancy shall be filled by the Board of Directors.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
officer be elected, shall, if present, preside at all meetings of the Board of
Directors and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or prescribed by these
By-Laws. If so designated by the Board of Directors, the chairman of the Board
may in addition be the Chief Executive
22
<PAGE>
Officer of the corporation and have such powers and duties prescribed by the
Board of Directors.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall, subject to the control of the Board of
Directors, have general supervision, direction and control of the business and
officers of the corporation and, if so designated by the Board of Directors, be
the Chief Executive Officer of the corporation. He shall preside at all
meetings of the stockholders and, in the absence of the Chairman of the Board,
or if there be none, at all meetings of the Board of Directors. He shall be an
ex-officio member of all committees and shall have the general powers and duties
of management usually vested in the office of President and, if so designated,
Chief Executive Officer of the corporation, and shall have such other powers and
duties as may be prescribed by the Board of Directors or these By-Laws.
Section 8. VICE PRESIDENT. In the absence or disability of the President,
the Vice Presidents in order of their rank as fixed by the Board of Directors,
or if not ranked, the Vice President designated by the Board of Directors, shall
perform all the duties of the President, and when so acting shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
Presidents shall have such other duties as
23
<PAGE>
from time to time may be prescribed for them, respectively, by the Board of
Directors.
Section 9. SECRETARY. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose; and shall
perform like duties for the standing committees when required by the Board of
Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these By-Laws. He shall keep
in safe custody the seal of the corporation, and when authorized by the Board,
affix the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by his signature.
Section 10. ASSISTANT SECRETARIES. The Assistant Secretary, or if there
be more than one, the Assistant Secretaries in the order determined by the Board
of Directors, or if there be no such determination, the Assistant Secretary
designated by the Board of Directors, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and
24
<PAGE>
have such other powers as the Board of Directors may from time to time
prescribe.
Section 11. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys, and other valuable effects in the name and to the credit of
the corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the Board of Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as Treasurer and of
the financial condition of the corporation. If required by the Board of
Directors, he shall give the corporation a bond, in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors, for the
faithful performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 12. ASSISTANT TREASURER. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors, or if there be no
25
<PAGE>
such determination, the Assistant Treasurer designated by the Board of
Directors, shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
Section 13. VACANCY OF PRESIDENT'S OFFICE. Wherever an action is
required, by these By-Laws or otherwise, to be taken by the President of the
corporation and such office is vacant, such action may, to the extent permitted
under the General Corporation Law of the State of Delaware, be taken by the
Chairman of the Board or by any Executive Vice President.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. CERTIFICATES. Every holder of stock of the corporation shall
be entitled to have a certificate signed by, or in the name of the corporation
by, the Chairman or Vice Chairman of the Board of Directors, or the President or
a Vice President, and by the Secretary or Assistant Secretary, or the Treasurer
or an Assistant Treasurer of the corporation, certifying the number of shares
represented by the certificate owned by such stockholder in the corporation.
Section 2. SIGNATURES ON CERTIFICATES. Any or all of the signatures on
the certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose
26
<PAGE>
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent, or registrar at the date of issue.
Section 3. STATEMENT OF STOCK RIGHTS, PREFERENCES AND PRIVILEGES. If the
corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in Section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests the power, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
27
<PAGE>
Section 4. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5. TRANSFERS OF STOCK. Upon surrender to the corporation, or the
transfer agent of the corporation, of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation, subject to the terms of the
agreement under which such shares were purchased if the corporation is a party
thereto, to issue a new certificate to the person entitled thereto, cancel the
old certificate and record the transaction upon its books.
28
<PAGE>
Section 6. FIXING RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
the stockholders, or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 7. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and accordingly shall not be bound to recognize any equitable or other
claim or interest in such share on the part of any other person, whether or not
it shall have express or other notice thereof, save as expressly provided by the
laws of the State of Delaware.
29
<PAGE>
ARTICLE VI
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the capital stock of the
corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES. Before payment of any
dividend there may be set aside out of any funds of the corporation available
for dividends such sum or sums as the directors from time to time, in their
absolute discretion, think proper as a reserve fund to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to
the interests of the corporation, and the directors may abolish any such
reserve.
Section 3. CHECKS. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
30
<PAGE>
Section 5. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the corporation, the year of its organization and the words
"Corporate Seal, Delaware." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
Section 6. MANNER OF GIVING NOTICE. (a) In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be the close of business on the next day preceding the day on
which notice is given, or if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held. A determination of
stockholders or record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing
31
<PAGE>
without a meeting, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be more than ten
days after the date upon which the resolution fixing the record date is adopted
by the Board of Directors. If no record date has been fixed by the Board of
Directors, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is required by statute, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by statute, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
32
<PAGE>
(c) In order that the corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment or any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purposes of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall not be more than sixty days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section 7. WAIVER OF NOTICE. Whenever any notice is required to be given
under the provisions of the statutes or of the Certificate of Incorporation or
of these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
Section 8. ANNUAL STATEMENT. The Board of Directors shall present at each
annual meeting, and at any special meeting of the stockholders when called for
by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
33
<PAGE>
Section 9. EXEMPTION FROM SECTION 203, DELAWARE G.C.L. The corporation
expressly elects not to be governed by Section 203 of the General Corporation
Law of Delaware. This Section of the By-Laws shall not be further amended by
the Board of Directors of the corporation.
ARTICLE VII
AMENDMENTS
Section 1. AMENDMENTS BY DIRECTORS OR STOCKHOLDERS. These By-Laws may be
altered, amended or repealed or new By-Laws may be adopted by the stockholders
or by the Board of Directors, when such power is conferred upon the Board of
Directors by the Certificate of Incorporation, at any regular meeting of the
stockholders or of the Board of Directors or at any special meeting of the
stockholders or of the Board of Directors if notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of such
special meeting. If the power to adopt, amend or repeal By-Laws is conferred
upon the Board of Directors by the Certificate of Incorporation it shall not
divest or limit the power of the stockholders to adopt, amend or repeal By-Laws.
34
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AGREEMENT OF LEASE
between
WILLS CORROON CORPORATION OF TENNESSEE,
as Landlord
and
MAGNETEK, INC.
as Tenant
____________________
Dated as of
June 30, 1995
____________________
Premises:
Fifth and Sixth Floors (North Plaza and atrium bridge area)
Willis Corroon Plaza
26 Century Boulevard
Nashville, Tennessee
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INDEX OF DEFINED TERMS
SECTION IN
DEFINITION WHICH DEFINED
- ---------- -------------
Additional Rent ................................................. 4.01
Allotted Kilowatt Hours ......................................... 6.01
Alteration ...................................................... 8.01
Auditorium ...................................................... 7.02
Bankruptcy Code ................................................. 14.01
Base Operating Expenses ......................................... 1.01
Base Rent ....................................................... 1.01, 4.02
Base Taxes ...................................................... 1.01
Broker .......................................................... 1.01
Building ........................................................ 1.01
Building Rentable Area .......................................... 1.01
Building Rules .................................................. 16.01
Building Services ............................................... 5.01
Building Systems ................................................ 8.01
Business Days ................................................... 25.09
Business Hours .................................................. 25.09
Commencement Date ............................................... 2.02
Common Areas .................................................... 2.01
Conference Center ............................................... 7.02
Consent ......................................................... 25.08
Date of this Lease .............................................. 1.01
Electrical Allowance ............................................ 6.01
Environmental Activity .......................................... 10.02
Excess Kilowatt Hours ........................................... 6.01
Expiration Date ................................................. 1.01, 2.02
Facility ........................................................ 7.02
First-Class Office Buildings .................................... 3.01
Food Facility ................................................... 7.02
Food Facility Provider .......................................... 7.02
Force Majeure ................................................... 23.05
Garage .......................................................... 24.01
Gross Rent ...................................................... 4.01
Hazardous Materials ............................................. 10.02
Holidays ........................................................ 25.09
Land ............................................................ 1.01
Landlord ........................................................ Introduction,
23.02
Landlord Services ............................................... 7.01
Landlord's Address for Notices .................................. 4.03
Landlord's Agents ............................................... 9.02
Landlord's Statement ............................................ 5.01
Lease ........................................................... Introduction
Legal Requirements .............................................. 10.01
Monument ........................................................ 16.03
Net Consideration ............................................... 12.02
<PAGE>
SECTION IN
DEFINITION WHICH DEFINED
- ---------- -------------
Net Operating Losses ............................................ 7.02
New Tenant ...................................................... 21.02
Operating Expenses .............................................. 5.01
Ordinary Equipment .............................................. 6.01
Original Tenant ................................................. 16.03
Partnership Tenant .............................................. 23.03
Payment Dates ................................................... 5.03
PCBs ............................................................ 10.02
Premises ........................................................ 1.01
Project ......................................................... 19.01
Punch List Items ................................................ 2.03
Qualified Alteration ............................................ 8.01
Real Estate Taxes ............................................... 5.01
Related Corporation ............................................. 12.01
Rent Commencement Date .......................................... 1.01
Senior Interest Holder .......................................... 13.02
Signage Rules ................................................... 16.02
Signs ........................................................... 16.02
Stipulated Rate ................................................. 4.03
Strip ........................................................... 16.03
Subordinated Mortgage ........................................... 13.01
Successor Landlord .............................................. 13.02
Superior Leases ................................................. 13.01
Superior Lessor ................................................. 13.01
Superior Mortgagee .............................................. 13.01
Superior Mortgages .............................................. 13.01
Tax Protest Request ............................................. 5.03
Tax Year ........................................................ 5.01
Tenant .......................................................... Introduction
Tenant Parties .................................................. 9.02
Tenant Share .................................................... 1.01
Tenant's Basic Cost ............................................. 12.02
Tenant's Estimated Operating Payment ............................ 5.02
Tenant's Operating Payment ...................................... 5.02
Tenant's Property ............................................... 8.02
Tenant's Share .................................................. 5.01
Tenant's Tax Payment ............................................ 5.03
Term ............................................................ 2.02
Termination Notice .............................................. 26.01
Third Party Approvers ........................................... 16.02
Transfer Notice ................................................. 12.02
Transferee ...................................................... 23.02
WCCT ............................................................ 7.02
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 -- BASIC LEASE INFORMATION AND DEFINITIONS ...................... 1
1.01. Basic Lease Information ...................................... 1
1.02 Other Definitions ............................................ 2
ARTICLE 2 -- PREMISES; TERM ............................................... 2
2.01 Demise ....................................................... 2
2.01 Term ......................................................... 3
2.03 Delivery of Premises ......................................... 3
ARTICLE 3 -- USE .......................................................... 3
3.01 Use .......................................................... 3
3.02 Permits ...................................................... 3
ARTICLE 4 -- RENT ......................................................... 3
4.01 Gross Rent ................................................... 3
4.02 Base Rent .................................................... 3
4.03 Manner of Payment ............................................ 4
4.04 Occupancy Tax ................................................ 5
ARTICLE 5 -- ESCALATIONS .................................................. 5
5.03 Tenant's Tax Payment ......................................... 7
5.04 Records ...................................................... 8
5.05 Landlord's Statements ........................................ 8
5.06 Survival ..................................................... 8
ARTICLE 6 -- TENANT ELECTRICITY ........................................... 8
6.01 Tenant Electricity ........................................... 8
6.02 Termination of Service ....................................... 10
6.03 Electric Fixtures ............................................ 11
i
<PAGE>
PAGE
----
ARTICLE 7 -- LANDLORD COVENANTS ........................................... 11
7.01 Standard of Operation, Landlord Services ..................... 11
7.02 Conference Center, Auditorium and Cafeteria .................. 12
7.03 Access ....................................................... 13
7.04 Cleaning ..................................................... 13
7.05 Service Interruption ......................................... 13
ARTICLE 8 -- ALTERATIONS .................................................. 13
8.01 Alterations .................................................. 13
8.02 Tenant's Property ............................................ 14
8.03 Effect of Landlord's Approval ................................ 14
8.04 Survival ..................................................... 14
ARTICLE 9 -- REPAIRS ...................................................... 14
9.01 Repairs by Landlord .......................................... 14
9.02 Repairs by Tenant ............................................ 15
9.03 Changes in Facilities ........................................ 15
9.04 Landlord Access .............................................. 15
ARTICLE 10 -- COMPLIANCE WITH LAWS ........................................ 15
10.01 Compliance with Laws by Tenant ............................... 15
10.02 Environmental ................................................ 16
10.03 Right to Contest ............................................. 16
10.04 Compliance with Laws by Landlord ............................. 17
ARTICLE 11 -- RIGHT TO PERFORM TENANT COVENANTS ........................... 17
11.01 Right to Perform Tenant Covenants ............................ 17
ARTICLE 12 -- ASSIGNMENT AND SUBLETTING ................................... 17
12.01 Assignment; Etc. ............................................. 17
12.02 Assignment and Subletting Procedures ......................... 18
ii
<PAGE>
PAGE
----
12.03 Additional Assignment and Subleasing Conditions .............. 20
ARTICLE 13 -- SUBORDINATION ............................................... 21
13.01 Subordination ................................................ 21
13.02 Attornment ................................................... 22
13.03 Right to Cure ................................................ 22
ARTICLE 14 -- CONDITIONS OF LIMITATION .................................... 23
14.01 Default ...................................................... 23
14.02 Intentional Default .......................................... 24
14.03 Re-entry by Landlord ......................................... 24
14.04 Damages ...................................................... 24
14.05 Right to Injunction .......................................... 25
14.06 Other Remedies ............................................... 25
14.07 Certain Waivers .............................................. 25
14.08 No Waiver .................................................... 25
14.09 Attorneys' Fees .............................................. 25
ARTICLE 15 -- QUIET ENJOYMENT ............................................. 26
15.01 Quiet Enjoyment .............................................. 26
ARTICLE 16 -- RULES OF THE BUILDING ....................................... 26
16.01 Building Rules ............................................... 26
16.02 Signs ........................................................ 26
16.03 Monument ..................................................... 27
16.04 Use of Building Name ......................................... 27
ARTICLE 17 -- INSURANCE ................................................... 28
17.01 Compliance with Insurance Standards .......................... 28
17.02 Landlord Insurance ........................................... 28
17.03 Tenant Insurance ............................................. 28
iii
<PAGE>
PAGE
----
17.04 Waiver of Subrogation ........................................ 29
17.05 Policy Requirements .......................................... 29
ARTICLE 18 -- NONLIABILITY AND INDEMNIFICATION ............................ 30
18.01 Exculpation .................................................. 30
18.02 Indemnity .................................................... 30
18.03 Limitation of Landlord's Personal Liability .................. 31
ARTICLE 19 -- CONDEMNATION ................................................ 31
19.01 Condemnation ................................................. 31
ARTICLE 20 -- CASUALTY .................................................... 32
20.01 Casualty ..................................................... 32
20.02 Tenant Right to Terminate .................................... 32
20.03 Landlord Right to Terminate .................................. 33
20.04 Disclaimer ................................................... 33
20.05 Tenant Default ............................................... 33
ARTICLE 21 -- SURRENDER ................................................... 33
21.01 Surrender .................................................... 33
21.02 Holding Over ................................................. 34
ARTICLE 22 - ESTOPPEL CERTIFICATES ........................................ 34
22.01 Estoppal Certiflcates ........................................ 34
ARTICLE 23 -- PARTIES BOUND ............................................... 35
23.01 Successors and Assigns ....................................... 35
23.02 Landlord for Time Being ...................................... 35
23.03 Partnership Tenant ........................................... 35
23.04 No Offer ..................................................... 36
23.05 Inability to Perform ......................................... 36
ARTICLE 24 -- PARKING ..................................................... 36
iv
<PAGE>
PAGE
----
24.01 Parking ...................................................... 36
ARTICLE 25 -- MISCELLANEOUS PROVISIONS .................................... 37
25.01 Waiver of Counterclaims and Jury Trial ....................... 37
25.02 Notices ...................................................... 37
25.03 Severability ................................................. 37
25.04 Mercer, Amendments ........................................... 37
25.05 No Joint Venture ............................................. 38
25.06 Broker ....................................................... 38
25.07 Applicable Law ............................................... 38
25.08 Consents and Approvals ....................................... 38
25.09 Business Hours ............................................... 38
25.10 Exhibits ..................................................... 38
25.11 Memorandum ................................................... 38
ARTICLE 26 -- LEASE TERMINATION OPTION .................................... 39
26.01 Lease Termination Option ..................................... 39
v
<PAGE>
AGREEMENT OF LEASE
This AGREEMENT OF LEASE, dated as of June 30, 1995 (this
"LEASE"), is entered into between WILLIS CORROON CORPORATION OF TENNESSEE,
a Tennessee corporation, having an address c/o Willis Corroon Corporation,
26 Century Boulevard, Nashville, Tennessee 37214 ("LANDLORD"), as landlord,
and MAGNETEK, INC., having an address at Willis Corroon Plaza, 26 Century
Boulevard, Nashville, Tennessee 37214 ("TENANT"), as tenant.
W I T N E S S E T H:
Landlord and Tenant agree as follows:
ARTICLE 1 -- BASIC LEASE INFORMATION AND DEFINITIONS
1.01. BASIC LEASE INFORMATION. The following sets forth the
basic data with respect to this Lease and constitutes the definitions of such
terms where used throughout this Lease. Any conflicts between this Section
1.01 and the other provisions of this Lease shall be resolved in favor of
such other provisions.
DEFINED TERM BASIC INFORMATION AND DEFINITION
- ------------ --------------------------------
DATE OF THIS LEASE June 30, 1995
LANDLORD Willis Corroon Corporation of Tennessee, a
Tennessee corporation
LANDLORD'S ADDRESS c/o Willis Corroon Corporation
FOR NOTICES Real Estate and Facilities Planning
P.O. Box 305026
Nashville, Tennessee 37230-5026
Attention: Ms. JoAnne C. Mathis
with a copy to:
Shearman & Sterling
153 East 53rd Street
New York, New York 10022
Attention: Real Estate Group Notices
9150/10-BJW
TENANT MagneTek, Inc.
TENANT'S ADDRESS MagneTek, Inc.
FOR NOTICES 26 Century Boulevard
P.O. Box 290159
Nashville, Tennessee 37229-0159
Attention: Mr. David A. Reiland
LAND The land more particularly described on
EXHIBIT "A" attached hereto.
<PAGE>
BUILDING The building located on the Land and known as
Willis Corroon Plaza, having the street address
at 26 Century Boulevard, Nashville, Tennessee
37214, and all appurtenances to and improvements
to the Building, including the Garage and all paved
areas and driveways.
BUILDING RENTABLE AREA Approximately 433,307 rentable square feet.
PREMISES The rentable area shown crosshatched on
EXHIBIT "B" hereto located on the fifth and
sixth floors of the North Plaza and the atrium
bridge area of the Building (including conference
rooms 5S001, 5S003, 5S004 and 5S006 on the fifth
floor bridge and conference rooms 6S001 and 6S004
on the sixth floor bridge).
PREMISES RENTABLE AREA Approximately 60,321 rentable square feet.
TERM The period beginning on the Commencement Date
and expiring on the Expiration Date.
COMMENCEMENT DATE As defined in SECTION 2.02.
RENT COMMENCEMENT DATE September 1, 1995
EXPIRATION DATE August 31, 2005, unless sooner terminated in
accordance with the terms and conditions of
this Lease.
BASE RENT $1,025,457.00 per annum (that is, $17.00 per
rentable square foot per annum, or $85,454.75
per month), subject to escalation in accordance
with SECTION 4.02.
BASE OPERATING EXPENSES Operating Expenses paid or incurred for the
calendar year 1996.
BASE TAXES Real Estate Taxes payable for the Tax Year
commencing January 1, 1996 and ending
December 31, 1996.
TENANT'S SHARE 14%, determined as set forth in SECTION 5.01
hereof.
BROKER Cushman & Wakefield of Georgia, Inc., representing
Landlord.
1.02 OTHER DEFINITIONS. Set forth immediately preceding the
table of contents to this Lease, is an index of certain defined terms used in
this Lease. Such terms shall have the respective meanings specified in the
sections of this Lease set forth after such terms; PROVIDED, HOWEVER, that
the failure to list on said index any term used in this Lease shall not
affect in any way the use of a defined term in this Lease.
ARTICLE 2 -- PREMISES; TERM
2.01 DEMISE. Landlord hereby leases to Tenant, and Tenant
hereby hires from Landlord, subject to the covenants and agreements contained
in this Lease, the Premises. Landlord and Tenant agree that (a) the rentable
area of the Premises equals the Premises Rentable Area and (b) the total
rentable area of the Building equals the Building Rentable Area. Tenant
shall have, as an appurtenance to the Premises, the nonexclusive right to
use, and permit its
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invitees to use, in common with others, the common areas of the Land and the
Building (including access driveways and walkways, the Garage and the
Building lobby), and if the portion of the Premises on any floor includes
less than the entire floor, the common toilets, corridors and elevator lobby
on such floor (collectively, the "COMMON AREAS"), but such rights shall
always be subject to the rights of Landlord pursuant to SECTION 9.03 and to
the Building Rules.
2.02 TERM. The term of this Lease (the "TERM") shall
commence on July 1, 1995 (the "COMMENCEMENT DATE"), and subject to ARTICLE 26
hereof, shall end, unless sooner terminated as herein provided, on August 31,
2005 (the "EXPIRATION DATE").
2.03 DELIVERY OF PREMISES. Tenant presently is in occupancy
of the Premises and is familiar with the condition of every part thereof.
Tenant agrees that, except as expressly provided herein, (a) it enters into
this Lease without any representations, warranties or promises by Landlord,
its agents, representatives, employees. servants or any other person in
respect of the Building or the Premises, (b) no rights. easements or licenses
are acquired by Tenant by implication or otherwise and (c) Tenant will accept
the Premises on the Commencement Date "AS IS" in the condition existing on
such date, and such acceptance by Tenant shall be deemed to be a
representation by Tenant that the Premises are in the condition agreed to by
Landlord and Tenant for commencement of the Term hereof. Landlord shall have
no obligation to do any work in order to make the Premises suitable and ready
for occupancy and use by Tenant, such work (if any) to be performed by Tenant
subject to compliance with the terms and conditions of this Lease.
ARTICLE 3 -- USE
3.01 USE. The Premises shall be used and occupied by Tenant
(and its permitted assignees and subtenants) solely as general,
administrative and executive offices (including such ancillary uses in
connection therewith as shall be reasonably required and as are consistent
with other first-class office buildings located in Nashville, Tennessee
("FIRST-CLASS OFFICE BUILDINGS")) and for no other purpose (including in such
prohibition the purposes prohibited under the Building Rules). The Premises
shall not be used for any purpose which is inconsistent with the first-class
character of the Building, creates excessive elevator use, exceeds the floor
loads for which the Building was designed, materially impairs or interferes
with any of the Building operations or the proper and economic operation of
the Building Systems or the proper and economic cleaning or other servicing
of the Building (other than to a de minimis extent), interferes with the use
of the other areas of the Building by any other tenants or occupants, or
impairs the appearance of the Building.
3.02 PERMITS. Tenant shall, at its sole cost and expense,
obtain and maintain all governmental licenses or permits required for the
proper and lawful conduct of any permitted Alterations and for the conduct of
Tenant's business in the Premises and shall submit the same to Landlord for
inspection. Tenant shall at all times comply with the terms and conditions
of each such license or permit. In no event shall Tenant's failure to
procure or maintain such license or permit relieve Tenant from its
obligations under this Lease.
ARTICLE 4 -- RENT
4.01 GROSS RENT. The "GROSS RENT" shall consist of (a) Base
Rent as defined and adjusted pursuant to SECTION 4.02 and (b) additional rent
("ADDITIONAL RENT") consisting of all other sums of money that shall become
due from and payable by Tenant to Landlord hereunder.
4.02 BASE RENT. (a) As used herein, "BASE RENT" means the
amount set forth in Section 1.01, as such amount shall be increased as of
September 1, 1996 and on each anniversary
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thereof during the term of this Lease (a "CPI ADJUSTMENT DATE"), by an amount
equal to fifty percent (50%) of the product of (i) the Base Rent in effect on
the CPI Adjustment Date (i.e., the Base Rent as previously adjusted pursuant
to this SECTION 4.02) and (ii) a fraction (A) the numerator of which is the
difference (but never less than zero) between the Index (as hereinafter
defined) for the month immediately preceding the month in which the CPI
Adjustment Date occurs and the Index for the month immediately preceding the
month in which the Commencement Date occurs and (B) the denominator of which
shall be the Index for the month immediately preceding the month in which the
Commencement Date occurs; PROVIDED, HOWEVER, that for purposes of determining
Base Rent in any September through August period, Base Rent for the period
commencing September 1, 1996 shall not exceed 102.5% of Base Rent for the
previous 12 month period, and the maximum Base Rent for any subsequent
September through August fiscal period shall not exceed 102.5% of the maximum
Base Rent for the immediately preceding September through August fiscal
period. Notwithstanding the foregoing, in no event shall the Base Rent (as
previously adjusted pursuant to this SECTION 4.02) be decreased at any time
based upon the operation of the foregoing adjustment provisions. For
purposes of this Lease, "INDEX" shall mean the "All-Items" consumer price
index for All Urban Consumers (CPI-U) in the Nashville, Tennessee
metropolitan area, determined by the Bureau of Labor Statistics of the United
States Department of Labor (1982-1984=100), or if such index is discontinued,
the most comparable index (reflecting changes in costs of housing, energy and
services) published by any other Federal, New York State or New York City
governmental authority.
(b) Tenant shall pay Base Rent in twelve (12) equal monthly
installments in advance on the first day of each calendar month during the
Term commencing on the Rent Commencement Date (appropriately prorated in the
case of the first installment if the Rent Commencement Date is not the first
day of the month) and on the first day of each calendar month thereafter.
4.03 MANNER OF PAYMENT. (a) Tenant shall pay the Base Rent
and Additional Rent by unendorsed check, subject to collection, payable to
Landlord at the address set forth in Section 1.01 as Landlord's Address for
Notices, or at such other place as Landlord shall designate by notice to
Tenant. At the request of Landlord, Tenant shall make all future payments of
Base Rent and/or Additional Rent by wire transfer of immediately available
federal funds to the account of Landlord at the office of the bank set forth
in the request to Tenant.
(b) Tenant covenants to pay all Gross Rent as the same shall
become due and payable under this Lease at the times and in the manner
provided herein without notice or demand and without set off, abatement,
deduction or counterclaim, except as expressly provided in this Lease.
Landlord shall have the same rights for default in the payment of Additional
Rent as for default in the payment of Base Rent hereunder. If Tenant shall
fail to pay any installment of Base Rent or Additional Rent for five (5)
Business Days after the date such amounts are due, (i) Tenant shall pay
interest thereon from the date when such amount became due and payable to the
date of Landlord's receipt thereof at a rate per annum (the "STIPULATED
RATE") equal to the lesser of (A) two percentage points (2%) above the rate
from time to time announced by Citibank, N.A. as its "base rate" to be in
effect at its principal office in New York, New York or (B) the maximum rate
permitted by applicable law; provided that if Tenant shall fail to pay any
installment of Base Rent or Additional Rent when due two (2) times during any
period of twelve (12) consecutive months during the Term, then, thereafter,
if Tenant shall fail to pay any installment of Base Rent or Additional Rent
when due, Tenant shall pay interest thereon from the date when such Base Rent
or Additional Rent became due and payable to the date of Landlord's receipt
thereof at the Stipulated Rate; and (ii) Tenant shall pay to Landlord a late
charge equal to six percent (6%) of the amount that is then overdue to
compensate Landlord for the administrative expenses incurred.
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(c) No payment by Tenant or receipt or acceptance by
Landlord of a lesser amount than the correct Base Rent or Additional Rent
shall be deemed to be other than a payment on account, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment be deemed an accord and satisfaction, and Landlord may accept such
check or payment without prejudice to Landlord's right to recover the balance
or to pursue any other remedy in this Lease or at law provided.
4.04 OCCUPANCY TAX. Tenant shall pay to Landlord upon demand
any occupancy tax or tax in lieu thereof related to Tenant's occupancy of the
Premises if the same shall become payable by Landlord in the first instance
or is at any time required to be paid by Landlord.
ARTICLE 5 -- ESCALATIONS
5.01 DEFINITIONS. As used in this Lease:
(a) "LANDLORD'S STATEMENT" means a statement furnished by
Landlord to Tenant containing a computation of any Additional Rent due
pursuant to the provisions of this Article.
(b) "CERTAIN EXPENSES" means, without duplication, all costs
and expenses (and taxes thereon, if any) paid or incurred by or on behalf of
Landlord with respect to the ownership, operation, cleaning, repair, safety,
management, administration, security and maintenance of the Land and the
Building or with respect to the provision of services to tenants (all of the
foregoing. collectively, being "BUILDING SERVICES"), including and excluding
the items described on EXHIBIT "E" hereto. If during all or part of any
calendar year, Landlord shall not incur any particular Operating Expense or
furnish any particular item of Building Services (the cost of which would
otherwise constitute an Operating Expense) due to the fact that (i) any
portion of the Building is not occupied or leased, (ii) an item of Building
Services is not required or desired by the tenant of any portion of the
Building, (iii) any tenant of the Building is itself obtaining and providing
a particular item of Building Services or is itself incurring the expense
that would constitute an Operating Expense, or (iv) for any similar reason,
then, for the purposes of computing Operating Expenses, the cost of Operating
Expenses for such period shall be deemed to be increased by an amount equal
to the additional costs and expenses which would reasonably have been
incurred during such period by Landlord if it had at its own expense
furnished such items of Building Services or incurred such Operating Expenses
and the Building had been 100% leased and occupied.
(c) "REAL ESTATE TAXES" means all real estate, ad valorem
and personal properly taxes, assessments (special or otherwise), sewer and
water rents, rates and charges, transit taxes or fees, county taxes and any
other governmental levies, impositions or charges of any nature, whether
general, special, ordinary, extraordinary, foreseen or unforeseen, which may,
be or become payable by Landlord with respect to, or be assessed, levied or
imposed upon, all or any part of the Building (excluding all personal
property of tenants). If due to a future change in the method of taxation
any franchise, income (other than an income tax which is applicable to other
parties in addition to owners of real property), gross receipts, profit or
other tax shall be levied against Landlord in substitution in whole or in
part for, or in lieu of, or in lieu of an increase in, or in addition to (but
only to the extent the same are levied only against owners of interests in
real property), any tax which would otherwise constitute a Real Estate Tax,
or a tax or excise shall be imposed upon or measured by rents, such
franchise, income, profit or other tax, or tax or excise imposed upon or
measured by rents, shall be deemed to be a Real Estate Tax for the purposes
hereof. If any assessment is due and payable over time, Landlord shall elect
to pay the same in installments over the longest period permitted by law
without incurring a penalty,
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and each such installment and the interest thereon, if applicable, shall be
deemed to be a Real Estate Tax for the purposes hereof.
(d) "TAX YEAR" means each period of twelve (12) months
commencing on January 1st of each year, or such other period of twelve (12)
months as hereafter may be adopted as the fiscal year for real estate tax
purposes in the County of Davidson, Tennessee, that includes any part of the
Term, with appropriate adjustment in the event of any change in such fiscal
year.
(e) "TENANT'S SHARE" means, for any period, and for purposes
of Section 1.01 has been calculated based upon, a fraction whose numerator is
the number of square feet of rentable area in the Premises and whose
denominator is the number of square feet of rentable area of the Building.
5.02 TENANT'S OPERATING PAYMENT. (a) If the Operating
Expenses for any calendar year during the Term shall exceed Base Operating
Expenses, Tenant shall pay as Additional Rent a sum ("TENANT'S OPERATING
PAYMENT") equal to Tenant's Share of such excess; PROVIDED, HOWEVER, that for
purposes of determining Operating Expenses in any year and Tenant's Operating
Payment as a result thereof, the Operating Expenses for the 1997 calendar
year shall not exceed 105% of Base Operating Expenses, and the maximum
Operating Expenses for any subsequent calendar year shall not exceed 105% of
the maximum Operating Expenses for the immediately preceding year. If the
Commencement Date or Expiration Date shall occur on a date other than
January 1 or December 31, respectively, Tenant's Operating Payment shall be
appropriately prorated for such years.
(b) Prior to the beginning of each calendar year during the
Term (other than for the calendar year 1996). Landlord shall present to
Tenant an estimate in reasonable detail of (i) Operating Expenses for such
calendar year and (ii) Tenant's Operating Payment for such calendar year
("TENANT'S ESTIMATED OPERATING PAYMENT"), which estimate shall be based on
actual expenses for the prior calendar year and reasonably anticipated
changes therein for the current calendar year. Tenant shall pay Tenant's
Estimated Operating Payment for each calendar year in twelve (12) equal
monthly installments in advance commencing on January 1. 1997 and on the
first day of each calendar month thereafter. Tenant's Estimated Operating
Payment for any calendar year, and Tenant's monthly installments may be
adjusted from time to time during such calendar year, by notice from Landlord
to Tenant. Within fifteen (15) Business Days after Tenant's Estimated
Operating is adjusted, Tenant shall pay to Landlord an amount equal to the
product of (A) the increase in the monthly installment of Tenant's Estimated
Operating Payment and (B) the number of months that have elapsed in such
calendar year prior to the adjustment of Tenant's Estimated Operating
Payment. In the event that Tenant's Estimated Operating Payment with respect
to any calendar year during the Term shall not have been established in
accordance with this SUBSECTION (B) prior to the beginning of the applicable
calendar year, then Tenant's Estimated Operating Payment for such year shall
be deemed to be equal to the most recent Tenant's Estimated Operating Payment
for the immediately preceding calendar year. Until such time as Landlord
shall have delivered to Tenant Landlord's Statement for calendar year 1996,
Tenant's Estimated Operating Payment for calendar year 1997 shall be based
upon Landlord's reasonable estimate of (i) Operating Expenses for calendar
year 1996 and (ii) Operating Expenses for calendar year 1997. After delivery
of Landlord's Statement, Tenant's Estimated Operating Payment shall be
adjusted to reflect actual expenses for calendar year 1996. If Tenant's
Estimated Operating Payment prior to the adjustment thereof to reflect actual
expenses for calendar year 1996 exceeds Tenant's Estimated Operating Payment,
as so adjusted. Landlord shall credit such excess against the next due
installment(s) of Base Rent and Additional Rent. If Tenant's Estimated
Operating Payment prior to the adjustment thereof to reflect actual expenses
for calendar year 1996 is less than Tenant's Estimated Operating Payment, as
so adjusted.
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Tenant shall pay to Landlord, within fifteen (15) Business Days of demand
therefor, an amount equal to such difference.
(c) As soon as reasonably practicable after the end of each
calendar year during any part of the Term, Landlord shall deliver to Tenant a
Landlord's Statement showing the Operating Expenses for such calendar year,
computed on an accrual basis and comparing Tenant's Estimated Operating
Payment with Tenant's Operating Payment. If Tenant's Estimated Operating
Payment exceeds Tenant's Operating Payment for such calendar year, Landlord
shall credit the amount of such excess against the installment(s) of Base
Rent and Additional Rent next due or, if neither Base Rent nor Additional
Rent is to thereafter become due, Landlord shall pay Tenant within fifteen
(15) Business Days after the rendering of such statement the amount of such
excess. If Tenant's Operating Payment exceeds Tenant's Estimated Operating
Payment for such calendar year, Tenant shall pay to Landlord, within fifteen
(15) Business Days of receipt of the statement, an amount equal to such
difference.
5.03 TENANT'S TAX PAYMENT. (a) If Real Estate Taxes payable
during any Tax Year shall exceed Base Taxes, Tenant shall pay as Additional
Rent for such Tax Year a sum ("TENANT'S TAX PAYMENT") equal to Tenant's Share
of such excess. If the Commencement Date or the Expiration Date shall occur
on a date other than January 1 or December 31, respectively, Tenant's Tax
Payment shall be appropriately prorated.
(b) When Real Estate Taxes payable during a Tax Year have
been determined, Landlord shall deliver to Tenant a Landlord's Statement,
accompanied by copies of the relevant tax bills, setting forth Tenant's Tax
Payment for such Tax Year and the dates on which Landlord is obligated under
law to pay the Real Estate Taxes in respect of such Tax Year (the "PAYMENT
DATES"), with the percentage of the Real Estate Taxes payable on each Payment
Date. Subject to the next succeeding sentence, Tenant shall pay to Landlord
fifteen (15) days before each Payment Date the same percentage of Tenant's
Tax Payment payable in such Tax Year as the percentage of Real Estate Taxes
for such Tax Year payable by Landlord on such Payment Date. In no event
shall Tenant be obligated to make any payment of Tenant's Tax Payment sooner
than ten (10) days after receipt by Tenant of the relevant Landlord's
Statement.
(c) If there shall be any increase or decrease in or refund
of Real Estate Taxes paid or payable during any Tax Year, whether during or
after such Tax Year, Landlord shall furnish to Tenant a revised Landlord's
Statement for such Tax Year, and Tenant's Tax Payment for such Tax Year shall
be adjusted. The amount of any overpayment by Tenant reflected in such
Landlord's Statement shall be credited against succeeding installments of
Base Rent and Additional Rent next due or, if neither Base Rent nor
Additional Rent is to thereafter become due, Landlord shall pay Tenant within
fifteen (15) Business Days after the rendering of such statement the amount
of such overpayment. The amount of any underpayment reflected in such
Landlord's Statement shall be paid by Tenant within thirty (30) days after
receipt of such Landlord's Statement.
(d) For purposes of this Lease, the amount of any decrease
in or refund of Real Estate Taxes paid or payable during any Tax Year shall
be reduced by the sum (without duplication of such amount having previously
been billed and paid for by Tenant) of (i) all costs and expenses, including
counsel fees, incurred by Landlord in connection with such decrease
(including, without limitation, costs and expenses related to any application
or proceeding brought by or on behalf of Landlord) and (ii) all such costs
and expenses incurred by Landlord in connection with efforts to reduce Real
Estate Taxes for any other Tax Years (whether or not any reduction was
actually obtained) not theretofore recovered through tax refunds for such
other Tax Years or otherwise. Nothing herein contained shall obligate
Landlord to bring any application or proceeding seeking a reduction in Real
Estate Taxes or assessed valuation. Tenant, for itself and
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its immediate and remote subtenants and successors in interest hereunder,
hereby waives, to the fullest extent permitted by applicable law, any right
Tenant may now or in the future have to protest or contest any Real Estate
Taxes or to bring any application or proceeding seeking a reduction in Real
Estate Taxes or assessed valuation or otherwise challenging the determination
thereof; PROVIDED, HOWEVER, that if Tenant, together with every other tenant
in the Building that is leasing at least 20,000 rentable square feet of space
in the Building shall submit a request (the "TAX PROTEST REQUEST") to
Landlord to protest or contest any Real Estate Taxes, which Tax Protest
Request shall provide that the tenants making the Tax Protest Request have
agreed to pay all costs and expenses of a nature described in clause (i)
above in connection with such protest or contest then, provided that (A) such
Tax Protest Request is submitted no later than thirty (30) days after the
date of delivery of the applicable Landlord's Statement described in SECTION
5.03(B) above and in any event prior to the date that is fifteen (15) days
prior to the last date that such protest or contest may be filed, and (B)
Landlord shall not state in writing, within fifteen (15) days after receipt
of the Tax Protest Request, that Landlord refuses to engage in such protest
or contest for valid business reasons, Landlord shall protest or contest the
applicable Real Estate Taxes, and Tenant shall pay to Landlord the costs and
expenses described in CLAUSE (I) above in connection with such protest or
contest within fifteen (15) Business Days after demand by Landlord (with the
right of reimbursement against the other tenants that signed the Tax Protest
Request to the extent set forth in said Tax Protest Request) and Tenant shall
be bound by the results of such protest or contest.
5.04 RECORDS. Landlord shall maintain in an orderly manner
all of its records pertaining to Tenant's Operating Payment and Tenant's Tax
Payment for a period of three (3) years after the completion of each calendar
year, or Tax Year, as the case may be. Upon reasonable prior written request
from Tenant, such records shall be available to Tenant or its representatives
for purposes of review during Landlord's regular business hours at the
offices of Landlord. In connection with any examination by Tenant of
Landlord's records. Tenant agrees to treat, and to instruct its employees,
accountants and agents to treat, all information as confidential and not
disclose it to any other person and to confirm and, if requested, cause its
employees, accountants and agents to confirm such agreement in a separate
written agreement if requested by Landlord.
5.05 LANDLORD'S STATEMENTS. Landlord's failure to render a
Landlord's Statement as provided in this ARTICLE 5 shall not prejudice
Landlord's right to thereafter render such a statement with respect to such
calendar year or Tax Year or any calendar year or Tax Year thereafter. Each
Landlord's Statement so delivered shall be conclusive and binding upon Tenant
unless Tenant notifies Landlord within ninety (90) days after receipt thereof
that it disputes the correctness of such Landlord's Statement. specifying to
the extent then practical the particular respects in which the same is
claimed to be incorrect. Notwithstanding any such dispute, Tenant shall pay
Additional Rent in accordance with such Landlord's Statement, without
prejudice to Tenant's position.
5.06 SURVIVAL. The obligations of Landlord and Tenant under
this ARTICLE 5 shall survive the expiration or sooner termination of this
Lease.
ARTICLE 6 -- TENANT ELECTRICITY
6.01 TENANT ELECTRICITY. (a) Subject to the provisions of
this Article, Landlord shall furnish to Tenant electric energy on a "rent
inclusion" basis through feeders, risers, wiring and other electrical
facilities presently installed in the Building for Tenant's reasonable use of
normal office equipment such as typewriters, lamps, personal computers and
other low energy-consuming office machines and equipment ("ORDINARY
EQUIPMENT"); provided that the amount of
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electrical energy being furnished on a "rent inclusion" basis shall not
exceed the Electric Allowance (as defined below).
(b) Landlord may install a submeter or submeters in the
Premises to monitor separately Tenant's connected load for electric energy in
the Premises. Landlord may, in the alternative, at Landlord's option, from
time to time cause an electrical engineer or utility consultant selected by
Landlord to make a survey of the electric lighting and power load to
determine the connected load in the Premises. Such determinations shall take
into account, among other things, any special electrical requirements of
Tenant and use by Tenant of electrical energy at times other than during
ordinary business hours (as hereinafter defined). The findings of the
engineer or consultant shall be binding upon the parties, subject to
adjustment as provided in SECTION 6.01(C) below.
(c) In the event Tenant shall dispute any findings under
this Article of the engineer or consultant designated by Landlord, Tenant
may, within thirty (30) days of receiving notice of such findings, designate
by notice to Landlord an independent electrical engineer or utility
consultant to make, at Tenant's sole cost and expense, another determination
of the connected load. If the electrical engineer or utility consultant
selected by Tenant shall determine that such connected load is less than as
determined by Landlord's engineer or consultant and the two are unable to
adjust such difference within twenty (20) days after the determination made
by Tenant's engineer or consultant is delivered to Landlord, Landlord and
Tenant shall meet to resolve such dispute. Pending a final determination
pursuant to such arbitration, however, Tenant shall pay to Landlord for any
Excess Kilowatt Hours (as defined below) based on the determination of
Landlord's engineer or consultants; and, if it is determined that Tenant has
overpaid, Landlord shall reimburse Tenant for any overpayment at the
conclusion of such arbitration. In any such arbitration, the arbitrator to
be appointed shall be an electrical engineer having at least five (5) years
experience in similar matters in Nashville, Tennessee. If Tenant shall not
dispute the findings as provided in this SECTION 6.01, the determination by
Landlord's engineer or consultants shall be deemed final and conclusive.
(d) The cost of the installation of submeter(s) or the
making of the survey shall be borne by Landlord, unless it is determined that
there are Excess Kilowatt Hours at the Premises, in which event Tenant shall
pay the reasonable cost thereof within fifteen (15) Business Days after
demand by Landlord.
(e) After installation of submeter(s) or the making of such
survey as set forth in this SECTION 6.01, Tenant shall pay Landlord for the
cost of the Excess Kilowatt Hours, if any, in the Premises during each
calendar month. The cost of the Excess Kilowatt Hours shall be computed by
multiplying the Excess Kilowatt Hours in the Premises during such calendar
month by the average cost per kilowatt hour for all electricity purchased by
Landlord for use within the Building during such period. Landlord shall
furnish bills once a month to Tenant in respect of the Excess Kilowatt Hours,
if any, in the Premises. Such bills shall set forth Landlord's average cost
per kilowatt hour for the calendar month to which such bill relates and the
number of Excess Kilowatt Hours during said calendar month and shall be
payable to Landlord as Additional Rent within fifteen (15) Business Days of
receipt by Tenant thereof. There shall be no separate charge to Tenant for
connected load in the Premises of electrical energy up to the Allotted
Kilowatt Hours (as defined below) in each calendar month, and such allowance
shall be referred to as the "ELECTRICAL ALLOWANCE". "ALLOTTED KILOWATT HOURS"
for the Premises demised by this Lease for any calendar month shall mean a
number of kilowatt hours necessary to operate for Ordinary Equipment during
ordinary business hours (i.e., 45 hours per week) with Landlord providing an
average connected load of 4-1/2 watts of electricity for all purposes per
Rentable Square Foot; and "EXCESS KILOWATT HOURS" for the Premises for any
calendar month shall mean the excess of
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the total number of kilowatt hours of electric power in the Premises during
such calendar month over the Allotted Kilowatt Hours for the Premises for
such calendar month.
(f) Tenant's use of electrical energy shall never exceed the
capacity of the then existing feeders to the Building or the risers or wiring
installations therein as properly allocable to the Premises based on rentable
square foot area of the Premises and at no time shall Tenant's electrical
demand load in the Premises exceed that for which the Premises have been
designed. Without the prior consent of Landlord, Tenant shall not perform or
permit any Alteration (as defined in SECTION 8.01) to wiring installations or
other electrical facilities in or serving the Premises or make any additions
to the electrical fixtures, business machines or electrical office equipment
or appliances in the Premises (other than Ordinary Equipment). Upon
Landlord's consent to expand the electrical capacity of the Premises, which
consent shall not be unreasonably withheld if, in Landlord's judgment, the
same will not (i) create a hazardous condition, (ii) entail excessive repairs
or expense to Landlord, (iii) interfere with or disturb other tenants other
than to a DE MINIMIS extent, (iv) preclude other tenants from proportionately
expanding their electrical capacity or (v) violate any Legal Requirement or
the provisions of any insurance policy with respect to the Premises or the
Building, Landlord shall provide and install additional risers required to
supply Tenant's electrical requirements and all other equipment necessary in
connection therewith and the cost thereof shall be paid by Tenant within
fifteen (15) Business Days after being billed therefor. Landlord may require
Tenant to furnish to Landlord such security as Landlord shall reasonably deem
necessary to assure payment for any such work prior to Landlord commencing
the same.
(g) Landlord shall have no liability to Tenant for any loss,
damage or expense sustained or incurred by reason of any change, failure,
inadequacy, unsuitability or defect in the supply or character of the
electrical energy furnished to the Premises or if the quantity or character
of the electrical energy is no longer available or suitable for Tenant's
requirements, except for any actual damage suffered by Tenant by reason of
any such failure, inadequacy or defect caused by the gross negligence or
willful misconduct of Landlord or Landlord's agents, and then only after
actual notice of such failure, inadequacy or defect. In such event, Tenant,
and those claiming by or through Tenant, waive, to the fullest extent
permitted by applicable law, any consequential damages resulting therefrom.
Tenant shall be responsible for any repair, maintenance or replacement of any
electrical panel board and all wires and wiring located within and serving
the Premises, all at Tenant's expense; PROVIDED, that Landlord shall perform
any repairs to such panelboard or wiring to the extent same may, in
Landlord's reasonable judgment, impact upon Building electrical systems.
Tenant shall pay Landlord's reasonable charges for such repairs within
fifteen (15) Business Days after demand by Landlord.
6.02 TERMINATION OF SERVICE. (a) Landlord reserves the
right to terminate the furnishing of electrical energy at any time, upon
thirty (30) days' prior notice to Tenant; PROVIDED, HOWEVER, that (i) such
termination date shall be extended, to the extent not prohibited by the
public utility or other supplier of the same, for such period of time as
shall reasonably be necessary for Tenant to make arrangements for and obtain
electric service directly from the public utility company serving the
Building, and (ii) Landlord shall not terminate the furnishing of electrical
energy to Tenant unless Landlord terminates the furnishing of electrical
energy to all other tenants in the Building (excluding Willis Corroon
Corporation of Tennessee and its affiliates). If Landlord shall discontinue
furnishing electrical energy, (A) Tenant shall arrange to obtain same
directly from the public utility company furnishing electrical energy to the
Building, (B) Landlord shall permit the existing feeders, risers, wiring and
other electrical facilities serving the Premises to be used by Tenant, to the
extent available, suitable and safe, (C) from and after the effective date of
such discontinuance. Landlord shall not be obligated to furnish electrical
energy to Tenant, (D) this Lease shall otherwise remain in full force and
effect and such discontinuance shall be without liability of Landlord to
Tenant therefor and (E) if Landlord shall
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discontinue furnishing electrical energy as a result of any (1) requirement
by the public utility or other entity supplying the same, (2) Legal
Requirement or (3) Insurance Requirement. Landlord shall, at Tenant's
expense, install and maintain at locations in the Building selected by
Landlord any necessary electrical metering equipment, panel boards, feeders,
risers, wiring and other conductors and equipment to enable Tenant to obtain
electrical energy directly from the public utility supplying the same.
(b) Landlord reserves the right to elect that electricity be
furnished (i) by Landlord on a submetering basis or (ii) by the public
utility on a direct metering basis. In the event that Landlord elects CLAUSE
(I), then Landlord shall, at Landlord's expense, install and maintain at
locations in the Building selected by Landlord any necessary electrical
metering equipment, panel boards, feeders, risers, wiring and other
conductors and equipment to enable Tenant to measure Tenant's connected load
for electrical energy. In the event that Landlord elects CLAUSE (II), then
the provisions of SECTION 6.02(A) shall apply except that, so long as
Landlord shall not be required to make such election by any entity or
requirement described in SECTION 6.02(A)(E)(1), (2) OR (3), Landlord shall
have the obligation under SECTION 6.02(A)(E) to make the installation and
perform the maintenance of the matters and items described therein, at
Landlord's expense without inclusion of such expense in Operating Expenses.
(c) In the event Landlord elects to terminate the furnishing
of electrical energy in accordance with this Section 6.02, the annual Base
Rent shall be reduced by the annual value of the Electrical Allowance and
there shall be excluded from Base Operating Expenses and Operating Expenses
the cost of electricity furnished to tenants (including Tenant) as reasonably
determined by Landlord.
6.03 ELECTRIC FIXTURES. Landlord or its designee shall
furnish and install all replacement lighting, tubes, lamps, starters, bulbs
and ballasts required in the Premises and Tenant shall pay to Landlord or its
designee within thirty (30) days after demand therefor the then established
reasonable charges therefor.
ARTICLE 7 -- LANDLORD COVENANTS
7.01 STANDARD OF OPERATION, LANDLORD SERVICES. Landlord
shall operate and maintain the Building in a manner consistent with the
standards of other First-Class Office Buildings, and, subject to curtailment
as required by Legal Requirements, shall furnish to Tenant commencing on the
date Tenant occupies the Premises for the conduct of its business with the
following services ("LANDLORD SERVICES"):
(a) reasonably adequate supplies of (i) cold domestic water
and (ii) hot water to the core lavatories on the floors on which the
Premises are located, in either case, for ordinary lavatory, cleaning
and drinking use;
(b) heat, ventilation and air conditioning on Business Days
(as defined in SECTION 25.09) during Business Hours (as defined in
SECTION 25.09) as may be required for comfortable occupancy of the
Premises in accordance with the specifications set forth in EXHIBIT "D"
attached hereto; and upon written request by Tenant received by
Landlord prior to 12:00 noon on the Business Day for which such
service is requested (or if such service is requested for a day other
than a Business Day then prior to 3:00 P.M. on the Business Day
immediately preceding the day for which such service is requested),
Landlord shall furnish air conditioning and heating at times other
than the times specified above, in which event Tenant shall pay to
Landlord Landlord's then established reasonable charge for furnishing
such over-time services within fifteen (15) Business Days after demand
therefor;
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(c) cleaning service for the Premises (except any portion
thereof used for preparing and dispensing of food or beverages (other
than pantries), including, without limitation, flues and related
equipment, or as computer areas) in accordance with the specifications
previously delivered to Tenant or such commercially reasonable cleaning
specifications as Landlord may adopt for general application to tenants
of the Building;
(d) (i) nonexclusive passenger elevator service to the Premises
on a 24-hour, 365/366-day year basis, (ii) freight elevator service to
the Premises and access to the Building's loading dock(s), in each case
on a reservation basis upon at least 48 hours prior notice, subject to
availability, PROVIDED, HOWEVER, that (A) use during Business Hours
shall be subject to cancellation based upon Landlord's needs for the
maintenance, use, operation or repair of the Building, and (B) Tenant
shall pay to Landlord then established reasonable charge (based upon
Landlord's actual out-of-pocket cost therefor) for supplying such
freight elevator and loading dock service within fifteen (15) Business
Days after demand therefor; and
(e) in the event that Landlord shall provide a Building
directory in the lobby of the building, Landlord shall provide to Tenant
listings proportionate to the size of the Premises.
7.02 CONFERENCE CENTER, AUDITORIUM AND CAFETERIA. (a) Subject
to Section 7.02(b) hereof, Tenant shall have non-exclusive use of:
(i) the Conference Center located on the colonnade level of the
Building (the "CONFERENCE CENTER") and the Auditorium located on the
level below the colonnade level of the Building (the "Auditorium", the
Conference Center and the Auditorium, each a "FACILITY"); PROVIDED,
HOWEVER, that (A) Tenant's use and access to each Facility shall be
subject to the Building Rules (including PART III of EXHIBIT "C"
hereto), and (B) Tenant shall pay to Landlord within fifteen (15)
Business Days after Landlord's demand therefor Landlord's then
established charge for the use of such Facility (which charge Landlord
agrees shall be the amount Landlord charges to clients of Landlord for
such use); and
(ii) a food service facility, which presently is a cafeteria
located on the colonnade level of the Building, but in the future may
be a larger or smaller facility, the scope, size and service to be
determined solely in the judgment and discretion of Landlord so long
as the same does not merely consist of vending machines (the "FOOD
FACILITY"); PROVIDED, HOWEVER, that (A) Tenant and Tenant's employees
shall be charged the then current prices for food and beverages in the
Food Facility, which prices shall not exceed the prices charged to
other patrons of the Food Facility (including Landlord and Landlord's
employees) and (B) Tenant shall pay to Landlord Tenant's Share of
Landlord's net operating losses ("NET OPERATING LOSSES") for the
operation of the Food Facility provided that Tenant's Share of Net
Operating Losses shall not exceed $5,000 per year (as the same may be
adjusted by changes in the Index (as defined and in the manner described
in SECTION 4.02 hereof)). Contemporaneously with Landlord's delivery of
Landlord's Statement pursuant to SECTION 5.02(C) hereof, Landlord shall
deliver to Tenant a reasonably detailed statement of Landlord's Net
Operating Losses for the previous calendar year and Tenant shall pay to
Landlord Tenant's Share of the Net Operating Losses (subject to the cap
described above) within fifteen (15) Business Days of receipt thereof.
(b) Notwithstanding anything to the contrary set forth
in SECTION 7.02(A) hereof, (i) Landlord shall have the right to
terminate Tenant's rights under SECTION 7.02(A) with respect to any or
both Facilities (it being agreed that this SECTION 7.02(B)(I)
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shall not apply to the Food Facility but SECTION 7.02(B)(II) shall apply
to the Food Facility) at any time, in its sole judgment and discretion,
and (ii) in the event of a sale or transfer by WCCT of the Land or the
Building or of its interest as Landlord under this Lease, and in
connection therewith WCCT (or its affiliate or any other person) (any
of the foregoing being a "FOOD FACILITY PROVIDER") shall retain a
leasehold interest in all or any portion of the Building, including
the Food Facility, then at the election of the new Landlord and provided
that the Food Facility Provider shall agree to make available a Food
Facility upon the same terms as set forth in SECTION 7.02(A)(II) hereof,
Landlord's obligation under SECTION 7.02(A)(II) shall be terminated
and Tenant, at the request of Landlord, shall execute an agreement
confirming such termination.
7.03 ACCESS. Subject to the terms and conditions of this
Lease and to security measures with withheld by Landlord on a Building-wide
base, Landlord shall provide Tenant with reasonable access to the Premises on
a 24-hour, 365/366-day year basis.
7.04 CLEANING. (a) Landlord's cleaning contractor and its
employees shall have access to the Premises, and the use of Tenant's light,
power and water therein, at all times, except that such access shall not be
made in a manner which would unreasonably interfere with the operation of
Tenant's business.
(b) Landlord shall have the right to cause any area in the
Premises used for the storage, preparation, service or consumption of food or
beverages (including pantries to be exterminated for vermin by a reputable
extermination contractor selected by Landlord with such frequency as shall be
reasonably satisfactory to Landlord and Tenant shall pay the cost thereof
(which cost shall be commercially reasonable) to Landlord within fifteen (15)
Business Days after demand. Tenant shall pay to Landlord within fifteen (15)
Business Days after demand Landlord's then reasonably established charges for
(i) cleaning work in the Premises or the Building required because of (A)
misuse or neglect or use of portions of the Premises for special purposes
requiring greater or more difficult cleaning work than office areas, or (B)
increases in frequency or scope in any of the items of cleaning service
requested by Tenant; and (ii) cleaning work in the Premises or the Building
occasioned by after hours use of the Premises on other than an occasional
basis.
7.05 SERVICE INTERRUPTION. Subject to SECTION 18.01(B)
hereof, Landlord shall not be liable for damages to either person or property
nor shall Landlord be deemed to have evicted Tenant nor shall there be any
abatement of Gross Rent nor shall Tenant be relieved from performance of any
covenant on its part to be performed hereunder by reason of (a) failure by
Landlord to furnish Landlord Services, (b) breakdown of equipment or
machinery utilized in supplying any Landlord Services or (c) cessation of any
Building Service due to causes or circumstances beyond the boundaries of the
Land. Landlord shall use reasonable diligence to make such repairs as may be
required to machinery or equipment within the Building to provide restoration
of any Building Service and, where the cessation or interruption of such
Building Service has occurred due to circumstances or conditions beyond the
Land boundaries, to cause the same to be restored by diligent application or
request to the provider.
ARTICLE 8 -- ALTERATIONS
8.01 ALTERATIONS. (a) Tenant shall not (i) make or allow to
be made any (A) alterations in connection with Tenant's initial occupancy of
the Premises or (B) any other alterations or physical additions, including,
without limitation, fixtures, to the Premises other than normal painting,
carpeting, wallcoverings and office decorations or (ii) place safes, vaults,
filing systems, libraries or other heavy furniture or equipment within the
Premises, without in
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each such case first obtaining the consent of Landlord (any action described
in CLAUSE (I) OR (II) being herein referred to as an "ALTERATION").
(b) Landlord's consent shall not be unreasonably withheld in
the case of an Alteration (a "QUALIFIED ALTERATION") which (i) is not
structural in nature and has no effect on the Building's structure, curtain
wall or systems, including, without limitation, the mechanical, electrical,
plumbing, HVAC, fire safety, fire protection or elevator systems of the
Building (collectively, "BUILDINGS SYSTEMS"); (ii) is not visible from the
exterior of the Premises; (iii) does not result in a violation of, or require
a change in, any certificate of occupancy for the Building; (iv) does not
affect any area of the Building outside of the Premises; and (v) does not, in
Landlord's reasonable judgment, affect the value, utility or efficiency of
the Building. Landlord shall be entitled to retain independent consultants
to review the plans and specifications for and the progress of construction
of any proposed Alteration and to reimbursement from Tenant, within fifteen
(15) Business Days after request therefor, for all of the reasonable fees of
such consultants and other out-of-pocket costs incurred by Landlord in
connection with such proposed Alteration. In performing Alterations or any
other repairs or work with respect to the Premises, Tenant shall be bound by
and observe all the terms hereof and all of the Building Rules therefor
(including the rules and conditions set forth in PART IV to the Building
Rules attached hereto as EXHIBIT "C").
(c) Tenant shall indemnity and hold harmless Landlord from
and against all costs (including, without limitation, reasonable attorneys'
fees and disbursements), losses, liabilities or causes of action arising out
of or relating to any Alteration, including, without limitation, any
mechanics' or materialmen's liens asserted in connection with such Alteration.
8.02 TENANT'S PROPERTY. All Alterations shall be and remain
part of the Premises and be deemed property of Landlord except such
Alterations as are installed at the expense of Tenant and which may be
removed without material damage to the Premises (collectively, "TENANT'S
PROPERTY"). Notwithstanding anything to the contrary set forth herein, all
work stations, demountable walls and other property delivered to Tenant with
the Premises shall remain the property of Landlord and may not be removed by
Tenant. Tenant may remove Tenant's Property from the Premises during the
Term and Tenant shall repair, or shall reimburse Landlord upon demand for the
cost of repairing, any damage to the Premises or the Building occasioned by
such removal. Any structural repairs or repairs to Building Systems
necessitated by the removal of Tenant's Property shall be performed by
Landlord and Tenant shall reimburse Landlord for the cost thereof within
fifteen (15) Business Days after demand therefor.
8.03 EFFECT OF LANDLORD'S APPROVAL. Landlord's approval of
plans or specifications or consent to the making of Alterations in the
Premises shall not be deemed to be (a) an agreement or representation by
Landlord that the contemplated Alterations comply with any Legal Requirements
or the certificate of occupancy for the Building; (b) an approval of the
sufficiency, completeness or effective coordination of the proposed
Alteration, or (c) a waiver by Landlord of compliance by Tenant with any of
the other terms of this Lease.
8.04 SURVIVAL. Tenant's obligations under this ARTICLE 8
shall survive the expiration or sooner termination of this Lease.
ARTICLE 9 -- REPAIRS
9.01 REPAIRS BY LANDLORD. Landlord shall make all repairs,
interior or exterior, structural or non-structural, ordinary or
extraordinary, needed to keep the Building (including the Premises and the
Building Systems) in reasonably good order and repair, excluding, however,
repairs which Tenant is obligated to make pursuant to SECTION 9.02 or the
other terms of this
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Lease. No liability of Landlord to Tenant shall accrue under this SECTION
9.01 with respect to any repair within the Premises or to any Building System
servicing the Premises unless and until Tenant has given notice to Landlord
of the specific repair required to be made or of the failure properly to
furnish any Landlord's Services and Landlord's failure, subject to Force
Majeure, thereafter promptly to remedy the same.
9.02 REPAIRS BY TENANT. Tenant, at its expense, shall take
good care of and maintain the Premises, any Alterations and Tenant's
Property; PROVIDED, HOWEVER, that Tenant shall only be responsible for
exterior or structural repairs if the need for same arises out of (a) the
making, installation, use, operation or existence of Alterations, Tenant's
Property or other equipment by or on behalf of Tenant, (b) the moving of
Tenant's Property in or out of the Building or the Premises, (c) the
negligence of Tenant or any other occupant of the Premises or any of Tenant's
employees, contractors, agents, licensees or invitees (collectively, the
"TENANT PARTIES") or their manner of use or occupancy of the Premises or
access to or use of the Building, subject, however, in the case of fire or
other insured casualty, to the waiver set forth in SECTION 17.04, (d) any
cause or condition created by or at the instance of Tenant or any of the
Tenant Parties or (e) Tenant's compliance or noncompliance with Legal
Requirements in accordance with SECTION 10.01. Any repairs to the Building
or Building Systems shall be performed by Landlord at Tenant's expense
(including a supervisory charge, in addition to charges for general
conditions, equal to ten percent (10%) of the trade cost of such repairs),
unless Landlord elects by notice to Tenant to have Tenant perform such
repairs. In no event shall Tenant be required to make, be responsible for,
or pay for any repairs which are required as a result of the negligent act or
negligent omission or willful misconduct of Landlord or Landlord's agents,
servants, employees or contractors (collectively, "LANDLORD'S AGENTS").
9.03 CHANGES IN FACILITIES. Landlord reserves the right, at
any time and without any liability to Tenant, to make changes in or additions
to the Building. including, without limitation. any changes to the Common
Areas, as it may deem necessary or desirable provided that (a) any such
change does not deprive Tenant of access to the Premises, (b) such change
does not materially interfere with the use of the Premises and does not
affect the first-class nature of the Project and (c) Landlord uses reasonable
efforts to minimize the extent and duration of any interference with Tenant's
use and occupancy of the Premises. Landlord may install and maintain pipes,
fans, ducts, shafts, wires and conduits within or through the walls, floors
or ceilings of the Premises.
9.04 LANDLORD ACCESS. Landlord and Landlord's Agents shall
have the right, upon reasonable prior notice to Tenant (except in an
emergency, in which case Landlord shall use reasonable efforts to provide
such notice as is possible under the circumstances), to enter the Premises to
inspect, clean or perform such work as Landlord may reasonably deem necessary
or to exhibit the Premises to prospective purchasers, mortgagees or, during
the last eighteen (18) months of the Term, tenants, or for any other purpose
as Landlord may deem necessary or desirable. Landlord shall use reasonable
efforts to minimize the adverse effect on Tenant of any entry by Landlord on
the Premises for any reason. Tenant shall not be entitled to any abatement
or reduction of Gross Rent by reason of such entry.
ARTICLE 10 -- COMPLIANCE WITH LAWS
10.01 COMPLIANCE WITH LAWS BY TENANT. Tenant, at its expense,
shall comply with all laws and ordinances and all rules, orders or
regulations (present, future, ordinary, extraordinary, foreseen or
unforeseen) of any governmental authority or of any insurer (provided that
any requirement of an insurer is on an industry-wide basis) with respect to
the Building and Land (including those imposed by the Occupational Safety and
Health Administration relating to indoor air quality) (collectively, "LEGAL
REQUIREMENTS"), at any time duly issued and in force,
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affecting or related to the Premises or any part thereof; PROVIDED, HOWEVER,
that nothing contained in this SECTION 10.01 shall require Tenant to make any
structural changes unless the same (a) are necessitated by a cause or
condition which has been created by, or at the instance of, Tenant or any of
the Tenant Parties, (b) are attributable to the use, other than as permitted
by SECTION 3.01, or manner of use of the Premises or manner of conduct of
Tenant's business, including, without limitation, use as a "place of public
accommodation" as defined in the Americans with Disabilities Act, or (c) are
necessitated by reason of a breach of Tenant's obligations hereunder. Tenant
need not comply with any Legal Requirement so long as Tenant shall be
diligently contesting the validity or applicability thereof in accordance,
with SECTION 10.03. Landlord shall cooperate with Tenant in connection with
the performance of Tenant's obligations under this SECTION 10.01.
10.02 ENVIRONMENTAL. (a) Throughout the Term, Tenant shall
not undertake or permit any Environmental Activity (as defined below) to be
undertaken in the Premises, Building or on the Land by any Tenant Party other
than (i) in compliance with all applicable Legal Requirements (as defined in
SECTION 10.01), (ii) as is customary for general office tenants in
First-Class Office Buildings and (iii) in such a manner as shall avoid any
liability on the part of Landlord and shall keep the Premises, Building and
Land free from any lien imposed pursuant to any Legal Requirement in respect
of such Environmental Activity. Tenant shall take all necessary steps to
ensure that any Environmental Activity undertaken or permitted at the
Premises is undertaken in a manner as to provide prudent safeguards against
potential risks to human health or the environment. Tenant shall notify
Landlord within 24 hours of the release of any Hazardous Materials (as
hereinafter defined) from or at the Premises which could form the basis of
any claim, demand or action by any party. Landlord shall have the right from
time to time to conduct an environmental audit of the Premises and Tenant
shall cooperate in the conduct of such environmental audit. If Tenant shall
breach the covenants provided in this Section, then, in addition to any other
rights and remedies which may be available to Landlord under this Lease or
otherwise at law, Landlord may require Tenant to take all actions, or to
reimburse Landlord for the costs of any and all actions taken by Landlord, as
are necessary or reasonably appropriate to cure such breach. The obligations
of Tenant under this Section 10.02 shall survive the expiration or sooner
termination of this Lease.
(b) Landlord represents that to the best of Landlord's
knowledge, there are no Hazardous Materials present at or in the Building,
the nature, concentration or condition of which violates any Legal
Requirement.
(c) "ENVIRONMENTAL ACTIVITY" means any use, storage,
installation, existence, release, threatened release, discharge, generation,
abatement, removal, disposal, handling or transportation from, under, into or
on the Premises of any Hazardous Materials. "HAZARDOUS MATERIALS" means
(i) any "hazardous substance" as defined in Section 101(14) of the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601(14), as amended; (ii) any asbestos or asbestos-containing
materials or polychlorinated biphenyls ("PCBS") or substances or materials
containing PCBs; (iii) petroleum. crude oil or any fraction thereof, natural
gas or synthetic gas used for fuel; and (iv) any additional substances or
materials which at such time are classified or considered to be hazardous or
toxic under the laws of the State of Tennessee or any other Legal
Requirements.
10.03 RIGHT TO CONTEST. Tenant, at its expense, after notice
to Landlord, may contest, by appropriate proceedings prosecuted diligently
and in good faith, the validity or applicability of any Legal Requirement,
provided that: (a) neither Landlord nor any Senior Interest Holder nor any of
their respective officers, directors, partners, shareholders, agents or
employees shall be subject to civil or criminal penalty or to prosecution for
a crime. nor shall the Building or any part thereof be subject to being
condemned or vacated, or subject to any lien or
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encumbrance, by reason of non-compliance or otherwise by reason of such
contest: (b) before the commencement of such contest, Tenant shall furnish to
Landlord the bond of a surety company reasonably satisfactory to Landlord, in
form, substance and amount reasonably satisfactory to Landlord, and shall
indemnity Landlord against the cost of such compliance and liability
resulting from or incurred in connection with such contest or non-compliance
(including the costs and expenses in connection with such contest); (c) such
noncompliance or contest shall not constitute or result in any violation of a
Superior Mortgage or Superior Lease (each as defined in SECTION 13.01) or if
any Senior Interest Holder (as defined in SECTION 13.02) shall condition such
non-compliance or contest upon the taking of action or furnishing of security
by Landlord, such action shall be taken and such security shall be furnished
at the expense of Tenant; and (d) Tenant shall keep Landlord regularly
advised as to the status of such proceedings.
10.04 COMPLIANCE WITH LAWS BY LANDLORD. Landlord, at its
expense, shall comply with all Legal Requirements applicable to the Premises
which are not the obligation of Tenant pursuant to SECTION 10.01, but may
defer compliance so long as Landlord shall be contesting in good faith by
appropriate proceedings the validity or applicability thereof. Landlord may
also contest Legal Requirements with which Landlord is required to comply
pursuant to this SECTION 10.04.
ARTICLE 11 -- RIGHT TO PERFORM TENANT COVENANTS
11.01 RIGHT TO PERFORM TENANT COVENANTS. If Tenant shall fail
to perform any of its obligations under this Lease, Landlord may perform the
same at the expense of Tenant (a) immediately and without notice in the case
of emergency or in case such failure unreasonably interferes with the use of
space by any other tenant in the Building or with the provision of Landlord's
Services or may result in a violation of any Legal Requirement and (b) in any
other case if such failure continues after ten (10) days from the date of the
giving by Landlord to Tenant of notice of Landlord's intention so to perform
the same. Tenant shall reimburse Landlord within five (5) Business Days of
Landlord's demand therefor all reasonable costs and expenses incurred by
Landlord in performing Tenant's obligations. Tenant's obligations under this
Section shall survive the expiration or sooner termination of this Lease.
ARTICLE 12 -- ASSIGNMENT AND SUBLETTING
12.01 ASSIGNMENT; ETC. (a) Subject to SECTION 12.02, neither
this Lease nor the term and estate hereby granted, nor any part hereof or
thereof, shall be assigned, mortgaged, pledged, encumbered or otherwise
transferred, and neither the Premises nor any part thereof shall be subleased
or be encumbered in any manner by reason of any act or omission on the part
of Tenant without the prior consent of Landlord. Transfer of a controlling
interest in the stock or other ownership interests of Tenant shall be deemed
to be a transfer of this Lease excepting only where such transfers of stock
are effected through the "over-the-counter" market or through any recognized
stock exchange or in connection with a public offering of shares of Tenant.
No consent of Landlord to any assignment or other transfer of this Lease and
the term and estate hereby granted, and no consent by Landlord to any
subletting of all or any portion of the Premises, shall be construed to
relieve Tenant of its obligation to obtain such consent to any further
assignment, other transfer or subletting. In addition, neither any
assignment of this Lease nor any subletting, occupancy or use of the Premises
or any part thereof by any person other than Tenant (whether or not consented
to by Landlord), nor any collection of rent by Landlord from any person other
than Tenant, nor any application of any such rent as provided in this
Article, shall be deemed a waiver of any of the provisions of this Article or
relieve, impair, release or discharge Tenant of its obligation fully to
perform the terms of this Lease on Tenant's part to be performed, and Tenant
shall remain fully and primarily liable hereunder.
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(b) Tenant may permit any corporation or other business
entity which controls, is controlled by or is under common control (and which
at all times so remains) with Tenant (a "RELATED CORPORATION") to sublet all
or part of the Premises upon prior written notice to Landlord setting forth
the name of such Related Corporation and the providing of reasonably
satisfactory evidence to Landlord from time to time upon request that such
subtenant is a Related Corporation. Such subletting shall not vest in any
such Related Corporation any right or interest in this Lease nor shall it
discharge any of Tenant's obligations hereunder. For purposes hereof,
"control" means ownership of 100% of the voting stock of a corporate tenant
or 100% of the beneficial interests of any other tenant.
12.02 ASSIGNMENT AND SUBLETTING PROCEDURES. (a) If Tenant
intends to assign this Lease or to sublet the Premises or any part thereof,
Tenant shall give Landlord notice of such intent. Tenant's notice (the
"TRANSFER NOTICE" ) shall be accompanied by (i) a certified description of
all material terms upon which Tenant intends to assign or sublet (including,
consideration, base rent and all other financial terms, rental abatements.
allowances and other concessions and other material terms) and (ii) a
statement setting forth in reasonable detail the identity of the proposed
assignee or sublessee, the nature of its business and its proposed use of the
Premises (to the extent a proposed assignee or subtenant has been identified)
and current financial information with respect to any such proposed assignee
or subtenant. Tenant shall provide Landlord with any additional information
or documents reasonably requested (within ten (10) days after receiving
Tenant's notice) by Landlord.
(b) Landlord shall then have the option, exercisable by
notice to Tenant within thirty (30) days after receipt of such additional
information (or the date of Tenant's original notice if Landlord does not
timely request additional information) to (i) in the case of a proposed
assignment or a proposed subletting for all or substantially all of the Term,
to terminate this Lease by Tenant, in which event Tenant shall be relieved of
all further obligations hereunder (except those which pursuant to this Lease
expressly survive such termination), or (ii) permit Tenant to assign this
Lease or sublet such space, subject, however, to Landlord's prior approval of
the proposed assignee or sublessee, which approval shall not be unreasonably
withheld or delayed so long as (A) the use of the Premises by such proposed
assignee or sublessee would be permitted under SECTION 3.01, (B) the proposed
assignee or sublessee is of sound financial condition as reasonably
determined by Landlord given the obligations to be assumed by such assignee
or sublessee under this Lease, (C) the terms of such assignment or subletting
shall be no more beneficial to the assignee or subtenant than the terms set
forth in the Transfer Notice, (D) the proposed sublessee or assignee is a
reputable person or entity of good character and Landlord has been furnished
with reasonable evidence thereof, (E) neither the proposed subtenant or
assignee nor any one controlling, controlled by or under common control with
such proposed subtenant or assignee is then an occupant of any portion of the
Building or is a person with whom Landlord is then negotiating to lease space
in the Building; PROVIDED, HOWEVER, that the condition set forth in this
clause (F) shall not apply to any proposed sublease or assignment unless
there shall be available space in the Building comparable to the space
proposed to be sublet or assigned within twelve (12) months after the
anticipated effective date of the proposed sublease or assignment, (F) the
form of the proposed sublease or assignment is reasonably satisfactory to
Landlord, (G) there shall be no more than two (2) occupants of the Premises,
including Tenant, and (H) the proposed subtenant shall not be (1) entitled,
directly or indirectly, to diplomatic or sovereign immunity unless
effectively waived and shall be subject to the service of process in, and the
jurisdiction of the courts of, the State of Tennessee or (2) a charitable,
religious, union or other not-for-profit organization or any tax exempt
entity within the meaning of Section 1680)(4)(A) of the Internal Revenue Code
of 1986, as amended, or any successor or substitute statute, or rule or
regulation applicable thereto (as the same may be amended).
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(c) If the aggregate amount payable by a subtenant under a
sublease of any part of the Premises (including any sums received by Tenant
for the sale or rental of Tenant's Property, less, in the case of a sale
thereof, the then net, unamortized or undepreciated cost thereof determined
on the basis of Tenant's Federal income tax returns) shall be in excess of
Tenant's Basic Cost (as hereinafter defined) therefor, then, within ten (10)
days after the collection thereof, Tenant shall pay to Landlord, as
Additional Rent, an amount equal to fifty percent (50%) of such excess.
Tenant shall deliver to Landlord within sixty (60) days after the end of each
calendar year and within sixty (60) days after the expiration or earlier
termination of each sublease a statement specifying each sublease in effect
at any time during such calendar year or partial calendar year, the number of
square feet of rentable area deemed thereby, the term thereof and a
computation in reasonable detail showing the calculation of the amounts paid
and payable by Tenant to Landlord with respect to such sublease for the
period covered by such statement. "TENANT'S BASIC COST" for sublet space at
any time means the sum of (i) the portion of the Base Rent, Tenant's
Operating Payment and Tenant's Tax Payment which is attributable to the
sublet space for the period covered by the payment by the applicable
subtenant, plus (ii) the amount of any out-of-pocket costs reasonably
incurred by Tenant in making changes in the layout and finish of the sublet
space for the subtenant amortized on a straight-line basis over the term of
the sublease plus (iii) the amount of any customary brokerage commissions and
legal fees and disbursements paid by Tenant in connection with the sublease
amortized on a straight-line basis over the term of the sublease.
(d) Upon any assignment of this Lease pursuant to the terms
hereof, Tenant shall pay to Landlord 50% of the Net Consideration (as
hereinafter defined) received by Tenant in respect of such assignment or
otherwise from such assignee. For purposes hereof, "NET CONSIDERATION" means
all sums paid by the assignee in consideration of such assignment minus all
customary and reasonable closing expenses (including, without limitation,
customary and reasonable legal and brokerage expenses) and the amount of any
out-of-pocket allowances or other incentives to the assignee, in any case
reasonably incurred by Tenant in connection with such assignment. "Net
Consideration" shall include any sums paid for the purchase or rental of any
of Tenant's Property, less, in die case of a sale thereof, the then net,
unamortized or undepreciated cost thereof determined on the basis of Tenant's
Federal income tax returns.
(e) No assignment made pursuant to this SECTION 12.02 shall
be valid unless, within ten (10) days after the execution thereof, Tenant
shall deliver to Landlord a duplicate original instrument of assignment and
assumption, duly executed by Tenant and by the assignee and in form and
substance reasonably satisfactory to Landlord, wherein such assignee shall
assume performance of all terms of this Lease on Tenant's part to be
performed.
(f) Tenant shall, within ten (10) days after (i) the
commencement of the term of a permitted sublease, give Landlord notice of
such commencement, or (ii) the effective date of a permitted assignment, give
Landlord notice of the effectiveness of such assignment.
(g) If Landlord elects to permit Tenant, pursuant to SECTION
12.02(B)(II), to assign or sublet (subject to the terms and conditions of
this SECTION 12.02), then (i) Tenant shall not enter into any assignment or
subletting without Landlord's consent in accordance with SECTION
12.02(B)(II)(A)-(H) hereof, and any request for Landlord's consent shall not
be valid unless such request shall contain all of the information required by
SECTION 12.02(A) (specifically including the information set forth in SECTION
12.02(A)(II) and the second sentence of SECTION 12.02(A) with respect to the
actual assignee or subtenant) and (ii) if Tenant does not enter into an
assignment or subletting within one hundred eighty (180) days after the date
of the Transfer Notice, then Tenant shall again comply with all of the
provisions and conditions of SECTIONS 12.02(A) and (B) before assigning this
Lease or subletting all or any part of the Premises.
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(h) If Landlord shall decline to consent to any proposed
assignment or sublease as permitted by this Lease, or if Landlord shall
exercise its option under this Section to terminate this Lease or take an
assignment or sublease of the proposed sublet premises, Tenant hereby agrees
to indemnity Landlord against any and all liability arising from any claims
that may be made against Landlord by the proposed assignee or subtenant or by
any broker, finder or other person claiming a commission or other
compensation in connection with the proposed assignment or sublease.
12.03 ADDITIONAL ASSIGNMENT AND SUBLEASING CONDITIONS. (a)
If this Lease is assigned, whether or not in violation of the terms of this
Lease, Landlord may collect rent from the assignee. If the Premises or any
part thereof is sublet or used or occupied by anybody other than Tenant,
Landlord may, after default by Tenant, collect rent from such subtenant or
occupant. In either event, Landlord may apply the net amount collected to the
rents herein reserved. The consent by Landlord to an assignment, transfer,
mortgage, pledge, encumbering or subletting pursuant to any provision of this
Lease shall not relieve Tenant or any assignee or subtenant from obtaining
the express prior consent of Landlord to any other or further assignment,
transfer. mortgage, pledge, encumbering or subletting. Tenant agrees to pay
to Landlord reasonable attorneys' fees and disbursements incurred by Landlord
in connection with any proposed assignment or subletting.
(b) No subletting shall be for a term ending later than the
day prior to the Expiration Date and any portion of a proposed term of any
sublease or any renewal or extension thereof which purports to extend beyond
such date, or the date of sooner termination of the Term, is hereby deemed to
be a nullity.
(c) If Landlord shall recover or come into possession of the
Premises before the Expiration Date, Landlord shall have the right to take
over any sublease made by Tenant and to succeed to all rights of Tenant
thereunder, Tenant hereby assigning (effective as of the date of Landlord's
succession to Tenant's estate in the Premises) such subleases as Landlord may
elect to take over. Every subletting hereunder shall be subject to the
condition that, from and after the termination of this Lease or re-entry by
Landlord hereunder or other succession by Landlord to Tenant's estate in the
Premises, the subtenant shall waive any right to surrender possession or to
terminate the sublease and, at Landlord's election, shall be bound to
Landlord for the balance of the term thereof and shall attorn to and
recognize Landlord, as its landlord, under all of the then executory terms of
such sublease, except that Landlord shall not (i) be liable for any previous
act. omission or negligence of Tenant as sublandlord, under such sublease,
(ii) be subject to any counterclaim, defense or offset theretofore accruing
to such subtenant against Tenant, (iii) be bound by any previous modification
or amendment of such sublease made without Landlord's consent or by any
previous prepayment of more than one month's rent and additional rent unless
paid as provided in the sublease, or (iv) be obligated to perform any repairs
or other work in the subleased space or the Building beyond Landlord's
obligations under this Lease. Each subtenant shall promptly execute and
deliver such instruments as Landlord may reasonably request to evidence and
confirm such attornment.
(d) Tenant shall reimburse Landlord on demand for all
reasonable costs (including all reasonable legal fees and disbursements, as
well as the costs of making investigations as to the acceptability of a
proposed assignee or subtenant) which may be incurred by Landlord in
connection with a request by Tenant that Landlord consent to any proposed
assignment or sublease.
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ARTICLE 13 -- SUBORDINATION
13.01 SUBORDINATION. (a) Provided that Tenant shall have
received a subordination. non-disturbance and attornment agreement in form
and substance that complies with the terms of this ARTICLE 13 and that is
otherwise commercially reasonable and is executed and acknowledged by each
Superior Mortgage or Superior Lessor, as applicable (each, a "NON-DISTURBANCE
AGREEMENT"), this Lease and Tenant's rights hereunder are subject and
subordinate to: (i) all present and future ground leases, operating leases,
superior leases, overriding leases and underlying leases and grants of term
of the Building or any portion thereof (collectively, including the
applicable items set forth in CLAUSE (IV) of this SUBSECTION (A), "SUPERIOR
LEASES"); (ii) all mortgages and building loan agreements, including
leasehold mortgages and spreader and consolidation agreements, which may now
or hereafter affect all or any portion of the Building or any Superior Lease
(collectively, including the applicable items set forth in CLAUSES (III) and
(IV) of this SUBSECTION (A), "SUPERIOR MORTGAGES"), whether or not a Superior
Mortgage shall also cover other lands or buildings or leases, except that a
mortgage on the Land only shall not be a Superior Mortgage so long as there
is in effect a Superior Lease which is not subordinate to such mortgage;
(iii) each advance made under any Superior Mortgage; and (iv) all renewals,
modifications, replacements, substitutions and extensions of any Superior
Lease or Superior Mortgage. Provided that Tenant shall have received a
Non-Disturbance Agreement that is executed and acknowledged by each Superior
Mortgagee or Superior Lessor, as applicable, the provisions of this
subsection shall be self-operative and no further instrument of subordination
shall be required.
(b) Tenant shall, within ten (10) days after request
therefor, execute and deliver, at its expense, any instrument, in recordable
form if requested, that Landlord, any holder of a Superior Mortgage (a
"SUPERIOR MORTGAGE ") or any lessor under a Superior Lease (a "SUPERIOR
LESSOR") may reasonably request, from time to time, to evidence and confirm
the subordination provided in SUBSECTION (A) of this SECTION 13.01 provided
Tenant shall have received a Non-Disturbance Agreement from such Superior
Mortgagee or Superior Lessor, as applicable.
(c) Any Superior Mortgagee may elect that this Lease shall
have priority over the mortgage held by such Superior Mortgagee (such
mortgage, upon such election by the applicable Superior Mortgagee, is
referred to herein as a "SUBORDINATED MORTGAGE") and, upon notification by
such Superior Mortgagee to Tenant, this Lease shall be deemed to have
priority over such Subordinated Mortgage, whether this Lease is dated prior
to or subsequent to the date of such Subordinated Mortgage and, to the extent
that such an election is made by a Superior Mortgagee, the provisions of this
Article shall not be applicable to such Subordinated Mortgage (except as
otherwise provided), but such Superior Mortgagee shall remain a Superior
Mortgagee for the purpose of all other provisions of this Lease. Tenant and
such Superior Mortgagee shall promptly, upon the notification by such
Superior Mortgagee, execute and deliver an instrument in recordable form to
evidence and confirm such priority.
(d) If, in connection with obtaining, continuing or renewing
financing for which the Building, the Land or the interest of the lessee
under any Superior Lease represents collateral, in whole or in part, the
Superior Mortgagee or proposed Superior Mortgagee (including any which may
elect that this Lease shall have priority over such Superior Mortgage) shall
request reasonable modifications of this Lease as a condition of such
financing, Tenant shall not unreasonably withhold its consent thereto,
provided that such modifications do not increase Tenant's obligation to pay
Base Rent or Additional Rent, shorten or lengthen the Term and do not
materially increase any other obligations or materially diminish any other
rights of Tenant under this Lease.
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(e) Landlord represents and warrants that, as of the date
hereof, neither the Land nor the Building is (i) subject to any Superior
Lease or (ii) encumbered by or otherwise subject to any Superior Mortgage.
13.02 ATTORNMENT. (a) If at any time any Superior Lessor or
Superior Mortgagee (each a "SENIOR INTEREST HOLDER") or any other person or
the successors or assigns of any of the foregoing (such Senior Interest
Holder and any such other person being herein collectively referred to as
"SUCCESSOR LANDLORD") shall succeed to the rights of Landlord under this
Lease, Tenant agrees, at the election and upon the request of any such
Successor Landlord, from time to time, fully and completely to attorn to and
recognize any such Successor Landlord as Tenant's landlord under this Lease
upon the then executory terms of this Lease, PROVIDED such Successor Landlord
shall agree in writing to accent Tenant's attornment pursuant to a
Non-Disturbance Agreement. The foregoing provisions of this SECTION 13.02
shall inure to the benefit of any such Successor Landlord, shall apply
notwithstanding that, as a matter of law, this Lease may terminate upon the
termination of the Superior Lease and shall be self-operative upon any such
request, and, provided that Tenant shall have received a Non-Disturbance
Agreement that is executed and acknowledged by each Superior Mortgagee or
Superior Lessor, as applicable, no further instrument shall be required to
give effect to said provisions. Upon the request of any such Successor
Landlord, Tenant shall execute and deliver, from time to time, instruments
reasonably satisfactory to any such Successor Landlord, in recordable form if
requested, to evidence and confirm the provisions of this SECTION 13.02,
acknowledging such attornment and setting forth the terms and conditions of
its tenancy, including the terms and conditions set forth in SECTION 13.02(B).
(b) Upon any attornment described in SECTION 13.02(A), this
Lease shall continue in full force and effect as a direct lease between such
Successor Landlord and Tenant upon all of the then executory terms of this
Lease except that such Successor Landlord shall not be: (i) liable for any
act or omission or negligence of any prior Landlord (other than to cure any
default of a continuing nature), (ii) subject to any counterclaim, defense or
offset which theretofore shall have accrued to Tenant against any prior
Landlord; (iii) bound by the payment of any Base Rent or Additional Rent for
more than one month in advance (unless actually received by such Successor
Landlord); (iv) bound by any modification or amendment of this Lease unless
such modification or amendment shall have been approved in writing by the
Senior Interest Holder, of which Tenant has been given notice, through or by
reason of which the Successor Landlord shall have succeeded to the rights of
Landlord under this Lease or unless the modification or amendment shall have
occurred prior to the creation of such Senior Interest, (v) obligated to
construct any improvements or to grant any credit toward the cost of any
improvements; (vi) in the event of damage to the Building by fire or other
casualty, obligated to repair the Premises or the Building or any part
thereof beyond such repair as may be reasonably accomplished from the net
proceeds of insurance actually made available to Landlord; or (vii) in the
event of partial condemnation, obligated to repair the Premises or the
Building or any part thereof beyond such repair as may be reasonably
accomplished from the net proceeds of any award actually made available to
Landlord as consequential damages allocable to the part of the Premises or
the Building not taken. Nothing contained in this SECTION 13.02 shall be
construed to impair any right otherwise exercisable by any such Successor
Landlord.
13.03 RIGHT TO CURE. Subject to the provisions of Section
18.01(b) hereof, if any act or omission by Landlord shall give Tenant the
right, immediately or after the lapse of time, to cancel or terminate this
Lease in whole or in part or to claim such cancellation or termination on the
basis of a partial or total eviction, Tenant shall not exercise any such
right until (a) it shall have given written notice of such act or omission to
each Senior Interest Holder whose name and address shall have been previously
furnished to Tenant, and (b) a reasonable period for remedying such act or
omission shall have elapsed following such notice and following the time when
such
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Superior Mortgagee or Superior Lessor shall have become entitled under such
Superior Mortgage, Subordinated Mortgage or Superior Lease, as the case may
be, to remedy the same.
ARTICLE 14 -- CONDITIONS OF LIMITATION
14.01 DEFAULT. This Lease and the term and estate hereby
granted are subject to the limitation that:
(a) if Tenant shall default in the payment of Base Rent or
Additional Rent on any date upon which the same becomes due and such default
shall continue for a period of five (5) days after Landlord shall have given
Tenant a notice specifying such default, or
(b) if any event shall occur or any contingency shall arise
whereby this Lease or the estate hereby granted or the unexpired balance of
the Term would. by operation of law or otherwise, devolve upon or pass to any
person other than Tenant except as is expressly permitted under ARTICLE 12, or
(c) if Tenant shall default in the keeping, observance or
performance of any covenant or agreement (other than a default of the
character referred to in SECTIONS 14.01(A) and/or 14.01(B)), and if such
default shall continue and shall not be cured within thirty (30) days after
Landlord shall have given to Tenant a notice specifying the same, or, in the
case of a default which for causes beyond Tenant's reasonable control, cannot
with due diligence be cured within such period of thirty (30) days, if Tenant
(i) shall not, promptly upon the giving of such notice, advise Landlord of
Tenant's intention duly to institute all steps necessary to cure such default
or (ii) shall not duly institute and thereafter diligently prosecute to
completion all steps necessary to cure the same and, in any event, cure such
default within ninety (90) days of receipt of Landlord's notice of such
default by Tenant, or
(d) if the Premises or any substantial portion thereof shall
be abandoned or become vacant for a period of twenty (20) consecutive
Business Days (except as a result and to the extent of a casualty or
condemnation), or
(e) if Tenant shall make an assignment for the benefit of
creditors or shall seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of Tenant or of all or any part of Tenant's
property or if a petition is filed by or against (with Tenant's consent)
Tenant under the United States Bankruptcy Code, 11 U.S.C. Sections 101-1330,
as amended, or any successor thereto (the "BANKRUPTCY CODE"), or if a petition
is filed against Tenant under the Bankruptcy Code without the consent of
Tenant and has not been dismissed within ninety (90) days after such filing,
or
(f) if, within ninety (90) days after the appointment of any
trustee, receiver or liquidator of Tenant or of all or any part of Tenant's
property, without the consent of Tenant, such appointment shall not have been
vacated or otherwise discharged, or if any execution or attachment shall be
issued against Tenant or any of Tenant's property pursuant to which the
Premises shall be taken or occupied or attempted to be taken or occupied,
then, in any of such cases, Landlord shall, in addition to any other remedies
available to it at law or in equity, be entitled to give to Tenant a notice
of intention to end the Term at the expiration of three (3) days from the
date of the giving of such notice, and in the event such notice is given,
this Lease and the Term and estate hereby granted shall terminate upon the
expiration of such three (3) days with the same effect as if the last of such
three (3) days were the Expiration Date, but Tenant shall remain liable for
damages as provided herein or pursuant to law.
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14.02 INTENTIONAL DEFAULT. Tenant expressly recognizes that
Tenant's due and punctual performance of all of its obligations under this
Lease throughout the Term is of importance to Landlord, and, without limiting
the foregoing provisions of SECTION 14.01, Tenant agrees that, if Tenant
shall default in the timely payment of Base Rent or Additional Rent, and such
default shall continue or be repeated for three (3) consecutive months or for
a total of four (4) months in any period of twelve (12) consecutive months,
then, notwithstanding that such defaults shall have each been cured within
the applicable period, if any, as above provided, any further similar default
shall be deemed to be deliberate and Landlord thereafter may serve the
termination notice described in SECTION 14.01 hereof upon Tenant without
affording to Tenant an opportunity to cure such further default.
14.03 RE-ENTRY BY LANDLORD. If this Lease shall terminate as
provided in SECTION 14.01, Landlord or Landlord's agents and servants may
immediately or at any time thereafter re-enter into or upon the Premises, or
any part thereof in the name of the whole, either by summary dispossess
proceedings or by any suitable action or proceeding at law, without being
liable to indictment, prosecution or damages therefor, and may repossess the
same, and may remove any persons therefrom, to the end that Landlord may
have, hold and enjoy the Premises again as and of its first estate and
interest therein. The words "re-enter" and "re-entering" as used in this
Lease are not restricted to their technical legal meanings.
14.04 DAMAGES. In the event of a termination of this Lease,
Tenant shall pay to Landlord as damages, at the election of Landlord, either:
(a) a sum which, at the time of such termination, represents
the then present value (employing a discount rate equal to the then
current rate of United States Treasury Bills or Notes, as applicable,
maturing on the Expiration Date or the next maturity date for such bills
or notes occurring after the Expiration Date) of the excess, if any of
(i) the aggregate of the Base Rent and Additional Rent which would have
been payable hereunder by Tenant, had this Lease not terminated, for the
period commencing with the day following the date of such termination
and ending with the Expiration Date over (ii) the aggregate fair rental
value of the Premises for the same period (for the purposes of this
SUBSECTION (A), the amount of Additional Rent which would have been
payable by Tenant under ARTICLE 5 shall, for each calendar year ending
after such termination, be deemed to be an amount equal to the amount of
Tenant's Operating Payment and Tenant's Tax Payment payable by Tenant
for the calendar year and Tax Year, respectively, immediately preceding
the calendar year in which such termination shall occur), or
(b) sums equal to the aggregate Gross Rent which would have
been payable by Tenant had this Lease not terminated, payable upon
the due dates therefor specified herein until the Expiration Date,
PROVIDED, HOWEVER, that if Landlord shall relet all or any part of the
Premises for all or any part of the period commencing on the day
following the date of such termination and ending on the Expiration
Date, Landlord shall credit Tenant with the net rents received by
Landlord from such reletting, such net rents to be determined by
first deducting from the gross rents as and when received by Landlord
from such reletting the expenses incurred or paid by Landlord in
terminating this Lease and re-entering the Premises and securing
possession thereof, as well as the expenses of reletting, including
altering and preparing the Premises for new tenants, brokers'
commissions, and all other expenses properly chargeable against the
Premises and the rental therefrom in connection with such reletting,
it being understood that any such reletting may be for a period equal
to or shorter or longer than said period and that Landlord shall have
no obligation to so relet the Premises; and PROVIDED FURTHER that (i) in
no event shall Tenant be entitled to receive any excess of such net
rents over the sums payable by Tenant to Landlord hereunder, (ii) in no
event shall Tenant be entitled, in any suit for the collection of
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damages pursuant to this SUBSECTION (B), to a credit in respect of any
net rents from a reletting except to the extent that such net rents are
actually received by Landlord, and (iii) if the Premises or any part
thereof should be relet in combination with other space, then proper
apportionment on a square foot rentable area basis shall be made of the
rent received from such reletting and of the expenses of reletting.
Suit or suits for the recovery of any damages payable hereunder by Tenant, or
any installments thereof, may be brought by Landlord from time to time at its
election, and nothing contained herein shall require Landlord to postpone
suit until the date when the Term would have expired but for such termination.
14.05 RIGHT TO INJUNCTION. In the event of a breach or
threatened breach on the part of Tenant with respect to any of the covenants
or agreements on the part of or on behalf of Tenant to be kept, observed or
performed, Landlord shall also have the right to seek an injunction.
14.06 OTHER REMEDIES. (a) Landlord shall have the right,
following any breach of or default under this Lease by Tenant, to elect to
keep this Lease in full force and effect, with Tenant retaining the right to
possession of the Premises (notwithstanding the fact that Tenant may have
abandoned the Premises). In such event Landlord, besides all other rights
and remedies Landlord may have at law or equity, shall have the right to
enforce all of Landlord's rights and remedies under this Lease, including the
right to recover the installments of Gross Rent as they become due under this
Lease. Notwithstanding any such election to have this Lease remain in full
force and effect, Landlord may at any time thereafter elect to terminate
Tenant's right to possession of the Premises and thereby terminate this Lease
for any previous breach or default which remains uncured, or for any
subsequent breach or default.
(b) Nothing herein contained shall be construed as limiting
or preventing the recovery by, Landlord against Tenant of any sums or damages
to which, in addition to the damages particularly provided above, Landlord
may lawfully be entitled by reason of any default hereunder on the part of
Tenant. The specified remedies to which Landlord may resort hereunder are
cumulative and are not intended to be exclusive of any other remedies or
means of redress to which Landlord may lawfully be entitled at any time, and
Landlord may invoke any remedy allowed at law or in equity as if specific
remedies were not herein provided.
14.07 CERTAIN WAIVERS. Tenant waives and surrenders all right
and privilege which it might have under or by reason of any present or future
law to redeem the Premises or to have a continuance of this Lease for the
Term after Tenant is dispossessed or ejected therefrom by process of law.
14.08 NO WAIVER. Failure of Landlord to declare any default
immediately upon its occurrence or delay in taking any action in connection
with such default shall not waive such default but Landlord shall have the
right to declare any such default at any time thereafter. Any amounts paid
by Tenant to Landlord may be applied by Landlord, in its sole discretion, to
any items then owing by Tenant to Landlord under this Lease and receipt of a
partial payment shall not be deemed to be an accord and satisfaction or
waiver of the failure to make full payment.
14.09 ATTORNEYS' FEES. In the event Landlord places the
enforcement of this Lease, or any part thereof, or the collection of any rent
due, or to become due, hereunder, or recovery of the possession of the
Premises in the hands of an attorney, or files suit upon the same, Tenant
shall reimburse Landlord within fifteen (15) Business Days after demand
therefor for its reasonable attorneys' fees and disbursements and court costs.
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ARTICLE 15 -- QUIET ENJOYMENT
15.01 QUIET ENJOYMENT. Landlord covenants that, so long as
Tenant is not in default in the payment or performance of any of its
obligations under this Lease beyond any applicable grace period, Tenant shall
and may peaceably and quietly have, hold and enjoy the Premises. This
covenant and any and all other covenants of Landlord contained in this Lease
shall be binding upon Landlord and its successors and assigns only with
respect to breaches which occur during its and their respective ownership of
Landlord's interest.
ARTICLE 16 -- RULES OF THE BUILDING
16.01 BUILDING RULES. Tenant shall comply with, and Tenant
shall cause the Tenant Parties to comply with the rules of the Building
reasonably adopted and altered by Landlord from time to time (the "BUILDING
RULES") for the safety, care and cleanliness of the Premises and the Building
and for preservation of good order therein, all of which shall be
communicated by Landlord to Tenant and shall be thereafter carried out and
observed by Tenant and the Tenant Parties. Landlord shall not enforce or
modify the Building Rules in a manner which discriminates against Tenant.
The initial Building Rules are set forth in EXHIBIT "C". If any Building
Rule shall conflict with any provision of this Lease, such Lease provision
shall govern.
16.02 SIGNS. (a) GENERAL. No signs, numerals, letters,
notices, logos, pictures, names, advertisements or other graphics shall be
used or permitted on the exterior of, or which may be visible from outside,
the Premises, unless approved in advance of installation by (i) Landlord and
(ii) any governmental, quasi-governmental, association or other third person
or entity, having approval rights (whether pursuant to any Legal
Requirements, insurance requirements, contract or agreement or recorded
instrument) (collectively, "THIRD PARTY, APPROVERS").
(b) FULL FLOOR TENANTS. Subject to Landlord's prior written
approval and provided all Signs are in keeping with the quality, design and
style of Signs under any rules established by Landlord (in its sole judgment
and discretion) in respect of the Building ("SIGNAGE RULES"), Tenant, if the
Premises comprise an entire floor of the Building, at its sole cost and
expense, may install identification Signs anywhere in the Premises including
in the elevator lobby of the Premises, provided that such signs must not be
visible from the exterior of the Building or in the atrium of the Building.
(c) MULTI-TENANT FLOOR TENANTS. If Tenant occupies less
than the entire floor on which the Premises is located, Tenant's identifying
Signs shall be provided by Landlord, at Tenant's sole cost and expense, and
such Signs shall be comparable to Chat used by Landlord for other similar
floors in the Building and shall comply with the Signage Rules. Any
additions, deletions or modifications to such Building standard signage shall
be at Tenant's sole expense and subject to the prior written approval of
Landlord, in its sole discretion.
(d) PROHIBITED SIGNS AND OTHER ITEMS. Any Signs which are
installed and that have not been individually approved by Landlord or other
person or entity having the right of approval may be removed by Landlord
without notice at the sole expense of Tenant. Subject to SECTION 16.03
hereof, Tenant may not install any Signs on the exterior or roof of the
Building or the Common Areas of the Building or the Land. Any Signs, window
coverings or blinds (even if the same are located behind Landlord approved
window coverings for the Building), or other items visible from the exterior
of the Premises or Building are subject to the prior written approval of
Landlord, in its sole discretion.
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16.03 MONUMENT. Landlord shall have no obligation to install
on the Land any monument sign (a "Monument") listing the names of tenants in
the Building on the Monument except as set forth in this SECTION 16.03. In
the event that Landlord shall erect a Monument which is not for the exclusive
use of the owner of the Land and/or Building or a tenant occupying one
hundred thousand (100,000) or more rentable square feet of space in the
Building, and MagneTek, Inc. (the "ORIGINAL TENANT") shall request to have
its name affixed to such Monument, then, provided that all Third Party
Approvers shall have approved the Monument and any conditions for such
approval shall have been complied with, Landlord shall not unreasonably
withhold its consent to such request subject to compliance with the following
terms and conditions:
(a) The right to have a name so affixed shall be determined
based upon the number of rentable square feet leased by the relevant
tenant, so that if there shall be a limited number of name
identifications (each herein referred to as a "STRIP"), then the
Original Tenant may not have the right to a Strip if the number of
tenants with more rentable square feet in the Building than the
Original Tenant shall be equal to or greater than the number of Strips
(PROVIDED, HOWEVER, that Landlord agrees to use all reasonable efforts
to ensure that there is room on the Monument for a Strip for the
Original Tenant;
(b) The design, size, location, specifications, graphics,
materials, colors, and lighting with respect to any Monument and Strip
shall be determined by Landlord in its sole discretion;
(c) Landlord shall have the right to remove, relocate,
redesign and/or reconstruct the Monument from time to time;
(d) Tenant shall reimburse Landlord, on demand from time to
time, for a pro-rata share of all costs attributable to (i) the normal
operation, maintenance and repair of the Monument and Strips, and
(ii) the construction and/or installation of the Monument or Strips.
Such pro rata share shall be a fraction, the numerator of which is
one (1), and the denominator of which is the number of tenant names or
logos on the Monument or of tenants who have requested and been approved
to have their names or logos on the Monument at the time that such cost
has been incurred, PROVIDED, HOWEVER, that Landlord may elect, in its
reasonable judgment, to require any tenant requesting its name or logo
to be added to a Monument that was constructed prior to such request (or
approval thereof) to contribute its pro rata share of the construction
cost, determined as if such tenant's name or logo were on the Monument
at the time of construction,
(e) The rights granted to the Original Tenant under this
SECTION 16.03 shall be personal to the Original Tenant, and may not
be exercised by or assigned to. any assignee or sublessee, or any other
person or entity; and
(f) Upon termination or expiration of this Lease (including
pursuant to ARTICLE 26 hereof) or upon the earlier termination of the
Original Tenant's rights under this SECTION 16.03, Landlord shall have
the right, at the Original Tenant's sole cost and expense, to
(i) permanently remove the Strip, and to repair all damage to the
Monument resulting from such removal or (ii) in the case where the
Original Tenant shall have the sole remaining name or logo on the
Monument to permanently remove the Monument, and to repair all damage
resulting therefrom.
16.04 USE OF BUILDING NAME. Notwithstanding anything set
forth in this Lease, Landlord shall have the right to name or refer to the
Building, in Landlord's sole judgment and discretion, and Landlord shall have
the right to use such name or reference to the Building or the
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address of the Building in its sole discretion, including on any ground floor
signage, and Landlord shall not be required to include Tenant's name in
connection with the marketing, operation, or other identification of the
Building; PROVIDED, HOWEVER, that (a) upon the sale of the Land and Building
by WCCT, the signs in front of the Building and in the atrium of the Building
referring to the Building as "WILLIS CORROON PLAZA" shall be removed and (b)
the Building shall not be named for any tenant or other corporate entity.
ARTICLE 17 -- INSURANCE
17.01 COMPLIANCE WITH INSURANCE STANDARDS. Tenant shall not
occupy or use the Premises, or permit any portion of the Premises to be
occupied or used, for any business or purpose which is unlawful, disreputable
or deemed to be hazardous on account of fire or other hazards. Landlord
shall not be liable for the acts or omissions of other tenants or parties
which are in violation of the provisions of this Section.
17.02 LANDLORD INSURANCE. (a) Landlord shall obtain and keep
in full force and effect insurance against loss or damage by fire and other,
casualty to the Building, excluding any Alterations of Tenant and Tenant's
Property, as may be insurable under then available standard forms of
"all-risk" insurance policies, in an amount at least equal to eighty percent
(80%) of the replacement value thereof with such commercially reasonable
deductible(s) as may be determined by Landlord in its reasonable discretion.
Tenant shall notify Landlord of the completion of any such alterations and of
the cost thereof, and shall maintain adequate records with respect to such
Alterations to facilitate the adjustment of any insurance claims with respect
thereto. Tenant shall cooperate with Landlord and Landlord's insurance
companies in the adjustment of any claims for any damage to the Building or
such Alterations.
(b) Landlord shall have the right to satisfy its obligations
under SUBSECTION (A) of this SECTION 17.02 by means of any so-called blanket
policy or policies of insurance covering the Building and other properties of
Landlord or its affiliates.
17.03 TENANT INSURANCE. (a) Tenant, at Tenant's sole cost
and expense, shall obtain and keep in full force and effect insurance against
loss or damage by fire and other casualty to all existing improvements to the
Premises (i.e., all improvements to the Premises in excess of the Building
shell) (the "EXISTING IMPROVEMENTS"), Alterations and Tenant's Property under
then available standard forms of "all-risk" insurance policies, in an amount
equal to one hundred percent (100%) of the replacement value thereof, with
such commerciallv reasonable deductible(s) as may be determined bv Tenant in
its reasonable discretion.
(b) Tenant, at Tenant's sole cost and expense, shall obtain
and maintain in full force and effect throughout the term a commercial
general liability insurance policy (ISO form or equivalent) insuring Tenant
and naming Landlord at Landlord's request, any Senior Interest Holder and any
managing agent of Landlord as additional insured(s), against any liability
for bodily injury, death or property damage occurring on or about the
Premises, with limits of liability of not less than $5,000,000 with respect
to bodily injury and property damage arising from any one occurrence and
$5,000,000 from the aggregate of all occurrences within each policy year with
such commercially reasonable deductible as may be reasonably agreed to by
Landlord and Tenant. Such policy shall include a provision that such
aggregate limit shall apply separately at the Premises and that such insurer
will provide notice to Landlord if the available portion of such aggregate is
reduced to less than $5,000,000 by either payment of claims or the
establishment of reserves for claims. Tenant agrees that if the aggregate
limit applying to the Premises is reduced by the payment of a claim or
establishment of a reserve Tenant shall take immediate commercially
reasonable steps to have the required aggregate limit restored by endorsement
to the existing policy or the purchase of an additional insurance policy.
Such policy
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shall also include a provision that no act or omission of Tenant shall affect
or limit the obligations of the insurance company in respect of any
additional insured.
(c) Tenant shall not carry separate or additional insurance
with respect to the risks covered by the insurance required by this ARTICLE
17, concurrent in form or contributing in the event of any loss or damage
with any insurance required to be obtained by Tenant under this Lease. Tenant
may carry any insurance coverage required of it hereunder pursuant to blanket
policies of insurance so long as the coverage afforded Landlord and the other
named insured thereunder shall not be less than the coverage which would be
provided by direct policies.
17.04 WAIVER OF SUBROGATION. The parties hereto (a) shall use
all reasonable efforts to procure an appropriate clause in, or endorsement
on, any all-risk insurance covering the Premises, the Building and personal
property, fixtures and equipment located thereon or therein, pursuant to
which the insurance companies issuing same waive subrogation or consent to a
waiver of right of recovery, and (b) subject to obtaining such clause or
endorsement of waiver of subrogation or consent to a waiver of right of
recovery, hereby agree not to make any claim against or seek to recover from
the other for any loss or damage to its property or the property of others
resulting from fire or other hazards covered by such fire and extended
coverage insurance; PROVIDED, HOWEVER, that the release, discharge,
exoneration and covenant not to sue herein contained shall be limited by and
coextensive with the terms and provisions of the waiver of subrogation clause
or endorsement or clause or endorsement consenting to a waiver of right of
recovery. If the payment of an additional premium is required for the
inclusion of such waiver of subrogation or consent to waiver provision, each
party shall advise the other of the amount of any such additional premiums
and the other party at its own election may, but shall not be obligated to,
pay the same. If such other party shall not elect to pay such additional
premium, the first party shall not be required to obtain such waiver of
subrogation or consent to waiver provision. Tenant acknowledges that
Landlord shall not carry insurance (i) on, and shall not be responsible for
damage to, Tenant's Property, and (ii) against, or be responsible for any
loss suffered by Tenant due to, interruption of Tenant's business.
17.05 POLICY REQUIREMENTS. The insurance required to be
obtained by Tenant under this Article: (a) shall be issued by an insurance
company of recognized reputability licensed to do business in the State of
Tennessee, which is rated A-/X or better by Best's Key Rating Guide. and (b)
shall be primary and not be concurrent in form or contributing with any other
coverage which Tenant or Landlord may carry, and (c) shall name Landlord and
each Senior Interest Holder as an additional insured on Tenant's commercial
general liability insurance policy. Neither the issuance of any insurance
policy required under this Lease, nor the minimum limits specified herein
with respect to Tenant's insurance coverage, shall be deemed to limit or
restrict in any way Tenant's liability arising under this Lease. The dollar
amounts set forth in this Article shall be subject to review by Landlord and
each Senior Interest Holder from time to time during the term and may be
increased by Landlord in accordance with the requirements generally imposed
by landlords from time to time at First-Class Office Buildings. With respect
to each insurance policy required to be obtained by Tenant under this
Article, within ten (10) days after written request from Landlord, Tenant
shall deliver to Landlord satisfactory evidence that such insurance is in
effect and satisfies the requirements of this Article, together with evidence
of payment of all applicable premiums. Each insurancer) policy required to
be carried hereunder by or on behalf of Tenant shall provide (and any,
certificate evidencing the existence of each such insurance policy shall
certify) that such insurance policy shall not be cancelled or modified unless
Landlord shall have received thirty (30) days' prior written notice of such
cancellation or modification. Landlord shall have the right to require
Tenant to cause to be delivered a copy (certified by Tenant as a true,
correct and complete copy) of any required policy and shall not be limited to
accepting a certificate of insurance.
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ARTICLE 18 -- NONLIABILITY AND INDEMNIFICATION
18.01 EXCULPATION. (a) Neither Landlord nor any Senior
Interest Holder, nor any of their agents, officers, directors, shareholders,
partners or principals (disclosed or undisclosed) shall be liable to Tenant
and the Tenant Parties in connection with any injury to Tenant or to any
other person or for any damage to, or loss (by theft or otherwise) of, any of
Tenant's Property or of the property of Tenant or any other person arising
from or in connection with the use by Tenant or such other person of the
Premises or the Project, irrespective of the cause of such injury, damage or
loss, it being understood that no property, other than such as might normally
be brought upon or kept in the Premises as incidental to the reasonable use
of the Premises for the purposes herein permitted will be brought upon or be
kept in the Premises. Any employee to whom any property shall be entrusted
by or on behalf of Tenant shall be deemed to be acting as Tenant's agent with
respect to such property and neither Landlord nor any Senior Interest Holder
nor their respective agents shall be liable for any loss of or damage to any
such property by theft or otherwise. No representation, guaranty or warranty
is made that the communications or security systems, devices or procedures of
the Building will be effective to prevent injury to Tenant or any other
person or damage to, or loss (by theft or otherwise) of, any of the property
of Tenant or the property of any other person, and Landlord reserves the
right to discontinue or modify), at any time such communications or security
systems or procedures without liability to Tenant.
(b) Notwithstanding anything to the contrary contained in
this Lease, if due to (i) the breach by Landlord of any of its obligations
under this Lease (other than by reason of Force Majeure), (ii) the negligent
acts or omissions or wilful misconduct of Landlord or any of Landlord's
employees, agents, contractors or representatives, (iii) the exercise by
Landlord of its rights of access to the Premises pursuant to this Lease, or
(iv) the failure, stoppage, interruption or suspension in the furnishing of
any Landlord Services (other than by reason of Force Majeure), (A) the
Premises or any portion thereof shall be rendered untenantable or
inaccessible (the Premises or any such portion so affected being referred to
herein as the "AFFECTED PORTION"), for a period of fifteen (15) consecutive
Business Days, and (B) Tenant shall not have been using or occupying such
Affected Portion for the conduct of its business during such period, then the
Base Rent and Additional Rent payable with respect to such Affected Portion
shall be abated in the proportion that such Affected Portion bears to the
total rentable area of the Premises on a per diem basis for each day
commencing on the date that the same became an Affected Portion and
terminating on the earlier to occur of (I) the date that such Affected
Portion shall become tenantable and accessible and Tenant's ability to
conduct its business therein shall no longer be materially impaired or (II)
the date Tenant commences to use such Affected Portion for the conduct of its
business.
18.02 INDEMNITY. To the fullest extent permined by applicable
law, Tenant hereby agrees to indemnity and hold harmless Landlord, each
Senior Interest Holder and any managing agent of Landlord, and their
respective agents, officers, directors, shareholders, partners and
principals, from and against any and all claims, losses, actions, damages,
liabilities and expenses (including, without limitation, reasonable
attorneys' fees and disbursements) that arise out of or in connection with
(a) the possession, use, occupancy, management, repair, maintenance or
control of the Premises, or any portion thereof, or the business conducted by
Tenant in the Premises, or (b) any willful or negligent act or omission of
Tenant or anyone for whom Tenant is responsible, or (c) any, default, breach,
violation or nonperformance of this Lease by Tenant or any subtenant of
Tenant or any officer, employee. agent or contractor of Tenant or any
subtenant of Tenant, or (d) any Environmental Activity by Tenant or anyone
for whom Tenant is responsible at the Building, or (e) any injury or death to
individuals or damage to property sustained (i) on or about the Land or the
Building by any Tenant Parties, or (ii) on or about the Premises; PROVIDED,
HOWEVER, that nothing contained in this Section shall obligate
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Tenant to indemnity Landlord from any claim, loss, damage, liability or
expense resulting from the negligence or willful misconduct of Landlord or
Landlord's Agents. Tenant shall, at its own cost and expense, upon notice
thereof from Landlord defend any and all actions, suits and proceedings which
may be brought against any one or more of the aforesaid parties with respect
to the foregoing or in which any one or more of the aforesaid parties may be
impleaded. Tenant shall pay, satisfy and discharge any and all final money
judgments which may be recovered against Landlord in connection with the
foregoing. The commercial general liability insurance policy required by
SECTION 17.03(B) hereof shall also cover Tenant for liability assumed by
contract, specifically including CLAUSE (E) of this SECTION 18.02. The
obligations of Tenant under this SECTION 18.02 shall survive the expiration
or sooner termination of this Lease.
18.03 LIMITATION OF LANDLORD'S PERSONAL LIABILITY. Tenant
shall look solely to Landlord's interest in the Building (and the proceeds of
any voluntary or involuntary sale or other transfer thereof but only for a
maximum period of three (3) months after such sale or transfer) for the
recovery of any judgment against Landlord, and if Landlord is a partnership,
its partners, whether general or limited, or if Landlord is a corporation,
its directors, officers or shareholders. shall never be personally liable for
any such judgment; PROVIDED, HOWEVER, that even if due to any such negligence
of Landlord, Landlord's Agents or any Senior Interest Holder or its agents or
breach by Landlord of its obligations under this Lease, Tenant waives, to the
full extent permitted by applicable law, any claim for consequential damages
in connection therewith. Landlord and any Senior Interest Holder and their
respective agents shall not be liable, to the extent of Tenant's insurance
coverage, for any loss or damage to any person or property even if due to the
negligence of Landlord or any Senior Interest Holder or their agents.
ARTICLE 19 -- CONDEMNATION
19.01 CONDEMNATION. (a) If the whole of the Land and
Building (the "PROJECT") shall be acquired or condemned for any public or
quasi-public use or purpose for a period in excess of four (4) months, this
Lease and the Term shall end as of the date of the vesting of title with the
same effect as if said date were the Expiration Date. If the whole of the
Land and Building shall be so acquired or condemned for a period of less than
four (4) months, then this Lease and the Term shall continue in force and
effect but from and after the date of the temporary vesting of title, Gross
Rent shall be abated for such period. If only a part of the Land and
Building shall be so acquired or condemned, then:
(i) except as hereinafter provided in this paragraph, this
Lease and the Term shall continue in force and effect but, if a part
of the Premises is included in the part of the Project so acquired or
condemned, then from and after the date of the vesting of title, Gross
Rent shall be reduced in the proportion which the area of the part of
the Premises so acquired or condemned bears to the total area of the
Premises immediately prior to such acquisition or condemnation; and
(ii) if the part of the Project so acquired or condemned shall
be of such scope that (A) the untaken part of the Project (whether or
not the Premises are affected by the taking) would in Landlord's
reasonable judgment be uneconomic to operate and (B) leases (including
this Lease, pursuant to this CLAUSE (II)) of tenants (other than
Landlord and its affiliates) occupying at least fifty percent (50%) of
the rentable area of the Building are terminated in connection with such
taking, Landlord, at Landlord's option, may give to Tenant, within
thirty (30) days next following the date upon which Landlord shall
have received notice of vesting of title, a five (5) days' notice of
termination of this Lease; and
(iii) if the part of the Project so acquired or condemned shall
contain more than thirty percent (30%) or more of the rentable area of
the Premises included under this
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Lease as of the date of such acquisition or condemnation which, as of
immediately prior to such acquisition or condemnation, Tenant was
occupying or intending within one year to occupy, or if, by reason of
such acquisition or condemnation, Tenant no longer has reasonable means
of access to the Premises or the Premises are no longer reasonably
suitable for the conduct of Tenant's business therein, Tenant, at
Tenant's option, may give to Landlord within thirty (30) days next
following the date upon which Tenant shall have received notice of
vesting of title, a five (5) days' notice of termination of this Lease.
If any such five (5) days' notice of termination is given, then this Lease
and the Term shall come to an end and expire upon the expiration of said five
(5) days with the same effect as if the date of expiration of said five (5)
days was the Expiration Date. If a part of the Project shall be so acquired
or condemned and this Lease and the Term shall not be terminated pursuant to
the foregoing provisions of this SECTION 19.01, Landlord shall restore the
part of the Premises and the common and service areas of the Building not so
acquired or condemned to a condition befitting First-Class Office Buildings.
In the event of any termination of this Lease pursuant to this paragraph, the
Gross Rent shall be prorated and adjusted as of such termination date.
(b) In the event of any such acquisition or condemnation of
all or any part of the Project, Landlord shall be entitled to receive the
entire award for any such acquisition or condemnation, Tenant shall liave no
claim against Landlord or the condemning authority for the value of any
unexpired portion of the Term, and Tenant hereby expressly assigns to
Landlord all of its right in and to any such award. Nothing contained in
this SUBSECTION (B) shall be deemed to prevent Tenant from making a claim in
any condemnation proceedings for moving expenses, interruption of its
business and the then value of any furniture, furnishings and fixtures
installed by Tenant, provided that such award shall not reduce the amount of
the award otherwise payable to Landlord.
ARTICLE 20 -- CASUALTY
20.01 CASUALTY. If (a) the Premises or any part thereof shall
be damaged or rendered untenantable by fire or other insured casualty, (b)
Tenant gives notice of such damage or destruction to Landlord and (c) this
Lease is not to be terminated pursuant to this ARTICLE 20, Landlord shall
proceed with the repair of such damage with reasonable diligence after the
collection of the insurance proceeds attributable to such damage, but (i)
only to the extent of available insurance proceeds and (ii) Landlord shall
only be required to deliver the Premises in its shell condition (with
Building Systems stubbed to the perimeter). Except as provided in SECTION
20.05, the rent shall be equitably abated to the extent that all or any part
of the Premises shall have been rendered untenantable, from the date of the
damage to the date that is the earlier of (A) the date Tenant occupies any
portion of the damaged portion of the Premises and (B) the date that Landlord
delivers the Premises in the condition described in clause (ii) above;
PROVIDED, HOWEVER, that if Tenant reoccupies a portion of the Premises during
the period of repair, the rent allocable to such reoccupied portion, based
upon the proportion which the reoccupied portion of the Premises bears to the
total area of the Premises, shall be payable by Tenant from the date of such
occupancy.
20.02 TENANT RIGHT TO TERMINATE. If the Premises shall be
totally damaged or rendered wholly untenantable by fire or other casualty,
Landlord has not terminated this Lease pursuant to SECTION 20.03 and Landlord
has not substantially completed repairing the Premises within nine (9) months
from the date of such damage or destruction and such additional time after
such date (but in no event to exceed six (6) months), if any, as shall equal
the aggregate period Landlord may have been delayed by Force Majeure or
adjustment of insurance, Tenant may serve notice on Landlord of its intention
to terminate this Lease and if within thirty (30) days thereafter
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Landlord shall not have substantially completed the required repairs, this
Lease shall terminate on the expiration of such thirty (30) day period as if
such termination date were the Expiration Date.
20.03 LANDLORD RIGHT TO TERMINATE. If the Premises shall be
totally damaged or rendered wholly untenantable by fire or other casualty or
if the Building shall be so damaged by fire or other casualty that
substantial alteration or reconstruction of the Building shall, in Landlord's
sole opinion, be required (whether or not the Premises shall have been
damaged by such fire or other casualty) or the insurance proceeds available
to Landlord, in Landlord's sole opinion, shall not be reasonably sufficient
to repair the damage, then in any such event Landlord may, at its option,
terminate this Lease by giving Tenant thirty (30) days' notice of such
termination at any time within one hundred twenty (120) davs after the date
of such fire or other casualty. If such notice of termination shall be
given, this Lease shall terminate as of the date provided in such notice
(whether or not the Term shall have commenced) with the same effect as if
that date were the Expiration Date. If at any time prior to the giving of
the notice of termination or the commencement of repairs pursuant to SECTION
20.01, there shall be a Successor Landlord (as hereinafter defined), such
Successor Landlord shall have a further period of sixty), (60) days from the
date of its taking possession or from the expiration of the one hundred
twenty (120) day period established above, whichever is earlier, to terminate
this Lease by thirty (30) days' notice to Tenant, in which event this Lease
shall terminate as of the date provided in such notice (whether or not the
Term shall have commenced) with the same effect as if that date were the
Expiration Date.
20.04 DISCLAIMER. Landlord shall not be liable for any
inconvenience or annoyance to Tenant or injury to the business of Tenant
occasioned by damage by fire or other casualty or the repair thereof.
Landlord will not carry insurance of any kind on Tenant's Property, the
Existing Improvements. the Alterations made by or on behalf of Tenant in the
Premises, and notwithstanding anything to the contrary in this ARTICLE 20,
Landlord shall not be obligated to repair any damage to Tenant's Property or
to said Improvements or to replace the same.
20.05 TENANT DEFAULT. Notwithstanding any of the foregoing
provisions of this ARTICLE 20, if, by reason of some action or inaction on
the part of Tenant or any of the Tenant Parties, either (a) Landlord or the
Senior Interest Holders shall be unable to collect all of the insurance
proceeds (including rent insurance proceeds) applicable to damage or
destruction of the Premises or the Building by fire or other casualty or (b)
the premises or the Building shall be damaged or destroyed or rendered
completely or partially untenantable on account of fire or other casualty
then, without prejudice to any other remedy which may be available against
Tenant, the abatement of rent provided for in this Article shall not be
effective (i) in the case of SUBSECTION (B) above, to the extent of the
uncollected insurance proceeds, and (ii) in the case of SUBSECTION (B) above,
to the extent of the excess of the cost of repair over the amount of the
collected insurance proceeds, but excluding in the case of clause (i) hereof
any amount not collected from insurance because Landlord has failed to obtain
the coverage required under this Lease.
ARTICLE 21 -- SURRENDER
21.01 SURRENDER. On the Expiration Date or upon the sooner
termination of this Lease or upon any re-entry by Landlord, Tenant shall, at
its expense, quit, surrender, vacate and deliver the Premises to Landlord
"broom clean" and in good order, condition and repair, ordinary wear, tear
and damage by fire or other insured casualty excepted, together with all
Existing Improvements and Alterations (except as otherwise provided for in
this Lease). Tenant shall, at its expense, remove from the Building (a) all
of Tenant's Property, (b) any internal staircases, vaults, safes, raised
computer floors, computer installations, kitchens, libraries, file rooms,
conveyors, dumbwaiters, specially finishes and private bathrooms and any
other unusual
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improvements and restore the Premises to their condition prior to the making
of such improvements and (c) any personal property of Tenant or persons
claiming through or under Tenant, and shall repair or pay the cost of
repairing all damage to the Premises and the Building occasioned by such
removal. Any Tenant's Property or other personal property which shall remain
in the Premises after the Expiration Date or after the termination of this
Lease shall be deemed to have been abandoned and either may be retained by
Landlord as its property or may be disposed of as Landlord may see fit. If
such property not so removed shall be sold, Landlord may receive and retain
the proceeds of such sale and apply the same, at its option, against the
expeises of the sale, moving and storage, arrears of rent and any damages to
which Landlord may be entitled. Any excess proceeds shall be the property of
Landlord. Any expense incurred by Landlord in removing or disposing of such
property shall be reimbursed to Landlord by Tenant as Additional Rent on
demand. The obligations of Tenant under this SECTION 21.01 shall survive the
expiration or sooner termination of the Lease.
21.02 HOLDING OVER. In the event of any holding-over by
Tenant after expiration or termination of this Lease without the consent of
Landlord, Tenant shall:
(a) pay as holdover rental for each month of the holdover
tenancy an amount equal to the greater of (i) the fair market rental value of
the Premises for such month (as reasonably determined by Landlord or (ii)
150% of the Gross Rent which Tenant was obligated to pay for the month
immediately preceding the end of the Term; and
(b) be liable to Landlord for (i) any payment or rent
concession which Landlord may be required to make to any tenant obtained by
Landlord for all or any part of the Premises (a "NEW TENANT") in order to
induce such New Tenant not to terminate its lease by reason of the
holding-over by Tenant and (ii) the loss of the benefit of the bargain if any
New Tenant shall terminate its lease by reason of the holding-over by Tenant.
No holding-over by Tenant after the Term shall operate to expend the Term. In
the event of any unauthorized holding-over, Tenant shall indemnify and hold
harmless Landlord against all claims for damages by any other tenant to whom
Landlord may have leased all or any part of the Premises effective upon the
termination of this Lease. Anything in this Article to the contrary
notwithstanding, the acceptance of any rent paid by Tenant pursuant to this
Section 21.02 shall not preclude Landlord from commencing and prosecuting a
holder or summary eviction proceeding.
ARTICLE 22 -- ESTOPPEL CERTIFICATES
22.01 ESTOPPEL CERTIFLCATES. Landlord and Tenant agree at any
time and from time to time upon ten (10) days' prior notice from the
requesting party to execute, acknowledge and deliver to the requesting party
and to such other persons and entities as such requesting party may
reasonably designate, a statement certifying (a) that this Lease is
unmodified and in full force and effect, or if there have been modifications,
that this Lease is in full force and effect as modified and stating the
modifications, (b) the date to which the Base Rent has been paid and the
current amount of Base Rent, (c) whether all Additional Rent that is due and
payable on or before such date has been paid in full, (d) that, to the best
of the certifying party's knowledge, the requesting party is not in default
in observing, performing or complying with any term, covenant or condition
contained in this Lease on such party's part to be observed, performed or
complied with or, if the certifying party has knowledge of any such default,
specifying each such default, (e) that, to the best of the certifying party's
knowledge, the certifying party has not made and does not have any claim
against the requesting party under this Lease or, if so, the nature and the
dollar amount, any, of such claim, (f) that, to the best of the certifying
party's knowledge, there do not exist any offsets, defenses or counterclaims
against enforcement of any of the terms,
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covenants or conditions of this Lease to be observed, performed or complied
with on the part of the requesting party, or, if such do exist, specifying
the same and the dollar amount thereof, and (g) in the case of a request by
Landlord, such further information with respect to this Lease or the Premises
as Landlord may reasonably request. Any such statement delivered pursuant to
this SECTION 22.01 shall be binding on the certifying party and may be relied
upon by the requesting party and any designee of the requesting party,
including, without limitation, any prospective purchaser of the Premises, any
mortgagee or prospective mortgagee of the Premises, or any lessor or
prospective lessor under any underlying lease of the Premises or any assignee
or prospective assignee of any such mortgagee or lessor.
ARTICLE 23 -- PARTIES BOUND
23.01 SUCCESSORS AND ASSIGNS. The terms of this Lease shall
bind and benefit the successors and assigns of the parties with the same
effect as if mentioned in each instance where a party is named or referred
to, except that no violation of the provisions of ARTICLE 12 shall operate to
vest any right in any successor or assignee of Tenant and that the provisions
of this Article shall not be construed as modifying the conditions of
limitation contained in ARTICLE 13 or ARTICLE 14.
23.02 LANDLORD FOR TIME BEING. The term "LANDLORD" shall mean
only the owner at the time in question of the present landlord's interest in
the Building and, in the event of a sale or transfer of the Building (by
operation of law or otherwise), or in the event of the making of a lease from
all or substantially all of the Building, or in the event of a sale or
transfer (by operation of law or otherwise) of the leasehold estate under any
such lease, the grantor, transferor or lessor, as the case may be, shall be
and hereby is (to the extent of the interest or portion of the Building or
leasehold estate sold, transferred or leased) automatically and entirely
released and discharged, from and after the date of such sale, transfer or
leasing, of all liability in respect of the performance of any of the terms
of this Lease on the part of Landlord thereafter to be performed; PROVIDED
that the purchaser, transferee or lessee (collectively, "TRANSFEREE") shall
have assumed and agreed to perform, subject to the limitations of this
Article and, in the case of a Successor Landlord, the provisions of SECTION
13.02 and only during and in respect of the Transferee's period of ownership
of Landlord's interest under this Lease, all of the terms of this Lease on
the part of Landlord to be performed during such period of ownership.
23.03 PARTNERSHIP TENANT. If Tenant is a partnership (or is
comprised of two (2) or more persons, individually or as co-partners of a
partnership) or if Tenant's interest in this Lease shall be assigned to a
partnership (or to two (2) or more persons, individually or as co-partners of
a partnership), any such partnership and such persons being referred to as a
"PARTNERSHIP TENANT", the following provisions of this Section shall apply to
such Partnership Tenant: (a) the liability of each of the parties comprising
Partnership Tenant shall be joint and several, (b) each of the parties
comprising Partnership Tenant hereby consents in advance to, and agrees to be
bound by, any written instrument which may hereafter be executed, changing,
modifying or discharging this Lease, in whole or in part, or surrendering all
or any part of the Premises to Landlord or renewing or extending this Lease
and by any notices, demands, requests or other communications which may
hereafter be given by Partnership Tenant or by any of the parties comprising
Partnership Tenant, (c) any bills, statements, notices, demands, requests or
other communications given or rendered to Partnership Tenant or to any of the
parties comprising Partnership Tenant shall be deemed given or rendered to
Partnership Tenant and to all such parties and shall be binding upon
Partnership Tenant and all such parties, (d) if Partnership Tenant shall
admit new partners, all of such new partners shall, by their admission to
Partnership Tenant, be deemed to have assumed performance of all of the
terms, covenants and conditions of this Lease on Tenant's part to be observed
and performed, and, upon demand of Landlord, shall confirm such assumption in
a writing satisfactory to Landlord, and (e) Partnership Tenant shall
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give prompt notice to Landlord of the admission of any such new partners,
and, upon demand of Landlord, shall cause each such new partner to execute
and deliver to Landlord an agreement in form satisfactory to Landlord,
wherein each such new partner shall assume performance of all of the terms,
covenants and conditions of this Lease on Tenant's part to be observed and
performed (but neither Landlord's failure to request any such agreement nor
the failure of any such new partner to execute or deliver any such agreement
to Landlord shall vitiate the provisions of this Section).
23.04 NO OFFER. The submission of this Lease to Tenant shall
not constitute an offer and shall not bind the parties hereto in any manner
whatsoever until (a) Tenant has duly executed and delivered duplicate
counterparts to Landlord and (b) Landlord has executed and delivered one
fully executed counterpart to Tenant.
23.05 INABILITY TO PERFORM. (a) This Lease and the
obligations of Tenant to pay Gross Rent and perform all of the other terms of
this Lease on the part of Tenant to be performed shall in no way be affected
because Landlord is unable or delayed in fulfilling any of its obligations
under this Lease by reason of Force Majeure. Landlord shall in each instance
exercise reasonable diligence to effect performance when and as soon as
possible; PROVIDED, HOWEVER. that Landlord shall be under no obligation to
employ overtime or premium labor.
(b) For purposes of this Lease, "FORCE MAJEURE" shall mean
any and all causes beyond the reasonable control of Landlord or Tenant, as
the case may be, including delays caused by the other party hereto or other
tenants, Legal Requirements and other forms of governmental restrictions,
regulations or controls (including energy and water conservation measures),
labor disputes, accidents. mechanical breakdowns, shortages or inability to
obtain labor. fuel. steam, water, electricity or materials through ordinary
sources, acts of God, war sabotage, embargo, enemy action, civil commotion,
fire or other casualty, but shall not include lack of funds or financial
inability to perform.
ARTICLE 24 -- PARKING
24.01 PARKING. (a) At all times during the Term, Landlord
agrees to furnish to Tenant for the use of its employees without charge to
Tenant parking rights for 180 vehicles (10 on a reserved or assigned basis)
in the general parking area designated by Landlord in the parking garage
facility located in the Building (the "GARAGE"), PROVIDED, HOWEVER, that if
Landlord constructs additional surface parking on the Land to accommodate the
parking needs of Landlord and tenants in the Building, Landlord reserves the
right to designate up to 30 of Tenant's parking rights to the surface parking
area. No specific spaces in the Garage are to be assigned to Tenant, but
Landlord will issue to Tenant the aforesaid number of parking stickers and/or
cards, each of which will authorize parking in the Garage of a vehicle on
which the sticker is displayed, or Landlord will provide a reasonable
alternative means of identifying and controlling vehicles authorized to be
parked in the Garage. Landlord may designate the area within which each such
vehicle may be parked, and Landlord may change such designations from time to
time. Access to and use of the Garage and other parking areas by Tenant and
the Tenant Parties shall be subject to the Building Rules (the present
Building Rules with respect to parking are set forth in PART II of EXHIBIT
"C" hereto).
(b) If the parking spaces described above are not available
to Tenant during any portion of the Term due to causes beyond the reasonable
control of Landlord (including, without limitation, as the result of a
casualty or condemnation), this Lease shall continue without abatement of
Gross Rent, and Landlord shall use reasonable efforts to make available to
Tenant sufficient substitute unassigned parking spaces (in the number of
those spaces not available to Tenant) on the Land.
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ARTICLE 25 -- MISCELLANEOUS PROVISIONS
25.01 WAIVER OF COUNTERCLAIMS AND JURY TRIAL. In the event
Landlord commences any summary proceeding or action for non-payment of rent,
Tenant covenants and agrees not to interpose, by consolidation of actions or
otherwise, any counterclaim in any such proceeding (provided that the claim
to be asserted in any such counterclaim would not be waived by Tenant's
failure to raise such claim), it being agreed that nothing contained herein
shall be deemed to prevent Tenant from bringing a separate proceeding with
respect to such counterclaim or be deemed a waiver thereof. To the extent
permitted by applicable law, Landlord and Tenant hereby waive trial by jury
in any matter arising out of or in any way connected with this Lease. The
provisions of this SECTION 25.01 shall survive the termination of this Lease.
25.02 NOTICES. Except as otherwise expressly provided in this
Lease or pursuant to any Legal Requirement, any bills, statements, notices,
demands, requests, consents or other communications given or required to be
given under or in connection with this Lease or pursuant to any Legal
Requirement shall be effective only if in writing and
(a) if to Tenant, then, at the option of Landlord,
(i) sent by registered or certified mail, return receipt
requested, postage prepaid, addressed to Tenant's Address for
Notices as set forth in SECTION 1.01 or to such other address as
Tenant may designate for such purpose by like notice, or
(ii) delivered by hand to Tenant at the Premises or at
the address to which a mailed notice would be sent pursuant to
clause (i) above;
(b) if to Landlord, sent by registered or certified mail,
return receipt requested, postage prepaid, addressed to Landlord's
Address for Notices as set forth in SECTION 1.01, or to such other
address or addresses as Landlord may designate for such purpose by,
like notice; and
(c) if to any other person, sent by registered or certified
mail, return receipt requested and postage prepaid, addressed to such
address or addresses as such person may designate to Landlord and Tenant
as its address or addresses for such purpose by like notice.
Any such bill, statement, notice, demand, request, consent or other
communication shall be deemed to have been rendered or given (A) on the date
delivered, if delivered to Tenant by hand, or (B) on the earlier of (1) the
date actually received or (2) the third (3rd) Business Day after mailing.
25.03 SEVERABILITY. If any term or provision of this Lease,
or the application thereof to any person or circumstances, shall to any
extent be invalid or unenforceable, the remainder of this Lease, or the
application of such provision to persons or circumstances other than those as
to which it is invalid or unenforceable, shall not be affected, and each
provision of this Lease shall be valid and shall be enforceable to the extent
permitted by law.
25.04 MERGER; AMENDMENTS. This Lease embodies the entire
understanding between the parties with respect to the subject matter hereof,
and all prior agreements, understandings and statements, oral or written,
with respect thereto are merged in this Lease. Landlord and Tenant hereby
agree that the Lease Agreement, dated August 4, 1994, between Willis Corroon
Corporation and MagneTek, Inc. is hereby terminated, such termination to be
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effective as of June 30, 1995. This Lease may not be altered, changed or
amended except by an instrument in writing signed by the party to be charged.
25.05 NO JOINT VENTURE. This Lease shall not be deemed or
construed to create or establish any relationship of partnership or joint
venture or similar relationship or arrangement between Landlord and Tenant.
25.06 BROKER. Each party represents to the other that it has
dealt with no broker in connection with this Lease or the Building other than
the Broker (as defined in SECTION 1.01). Tenant shall indemnity and hold
harmless Landlord from and against all loss, cost, liability and expense
(including, without limitation, reasonable attorneys' fees and disbursements)
arising out of any claim for a commission or other compensation by any broker
(other than the Broker) who has dealt with Tenant in connection with this
Lease or the Building (Tenant agrees not to make any settlement with any such
broker without Landlord's consent). Landlord shall indemnity and hold
harmless Tenant from and against all loss, cost, liability and expense
(including, without limitation, reasonable attorneys' fees and disbursements)
arising out of any claim for a commission or other compensation by any broker
who has dealt with Landlord in connection with this Lease or the Building
(Landlord agrees not to make any settlement with any such broker without
Tenant's consent). Landlord shall pay the Broker a commission in accordance
with a separate agreement with the Broker. The obligations of Landlord and
Tenant under this SECTION 25.06 shall survive the expiration or sooner
termination of this Lease.
25.07 APPLICABLE LAW. This Lease shall be construed and
enforced according to the laws of the State of Tennessee.
25.08 CONSENTS AND APPROVALS. (a) Wherever it is specifically
provided in this Lease that a party's consent or approval shall not be
unreasonably withheld, a response to a request for such consent or approval
shall also not be unreasonably delayed. If either Landlord or Tenant
considers that the other has unreasonably withheld or delayed a consent or
approval, it shall so notify the other party within ten (10) days after
receipt of notice of denial of the requested consent or approval or, in case
notice of denial is not received, within fifteen (15) days after making its
request for the consent or approval. "CONSENT" shall mean the prior written
approval or consent of the applicable party.
(b) Tenant hereby waives any claim against Landlord which it
may have based upon any assertion that Landlord has unreasonably withheld or
unreasonably delayed any consent or approval that, pursuant to the terms of
this Lease, is not to be unreasonably withheld and Tenant agrees that its
sole remedy shall be an action or proceeding to enforce any such provision or
for specific performance, injunction or declaratory judgment. In the event
of such a determination, the requested consent or approval shall be deemed to
have been granted.
25.09 BUSINESS HOURS. As used in this Lease "BUSINESS DAYS"
means any days which are not Saturdays, Sundays or Federal, state or local
holidays ("HOLIDAYS") and "BUSINESS HOURS" means the hours between 7:00 A.M.
and 6:00 P.M. on Business Days and 8:00 A.M. to 2:00 P.M. on Saturdays.
25.10 EXHIBITS. The terms and provisions of EXHIBITS A
through E, inclusive, attached to this Lease are made a part of this Lease
for all purposes.
25.11 MEMORANDUM. Simultaneously herewith, Landlord and
Tenant are executing a memorandum of lease with respect to this Lease which
shall be recorded in the records of Davidson County, Tennessee (and the
parties agree to execute and exchange such other documents as may be
necessary to cause the recordation of such memorandum upon demand).
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Upon the termination or expiration of this Lease, Tenant agrees to execute
(in recordable form), a notice of termination of this Lease within five (5)
Business Days after Tenant's receipt of a commercially reasonable form of
notice of termination from Landlord, and to indemnity and hold harmless
Landlord from and against any losses, claims, liabilities or expenses arising
out of the failure of Tenant to timely comply with the foregoing.
ARTICLE 26 -- LEASE TERMINATION OPTION
26.01 LEASE TERMINATION OPTION. Tenant may terminate this
Lease as of August 31, 2000 by given written notice (a "TERMINATION NOTICE")
to Landlord in accordance with the provisions of this Lease on or before
August 31, 1999 (as to which date, TIME IS OF THE ESSENCE) and by paying to
Landlord a termination fee equal to FOUR HUNDRED AND SEVENTY THOUSAND AND
00/XX DOLLARS ($470,000.00), which fee shall be payable as follows: (a) ten
percent (10%) ($47,000) shall be paid contemporaneously with the giving of
the Termination Notice, and (b) the remaining $423,000 shall be paid on the
earlier of June 30, 2000 or the date Tenant begins to permanently move out of
the Premises. If Tenant shall deliver a Termination Notice on or prior to
August 31, 1999 then this Lease shall terminate effective as of August 31,
2000 as if such date were the original Expiration Date set forth herein. If
Tenant shall fail to give such Termination Notice and payment on or prior to
August 31, 1999, then Tenant shall have no further right to terminate
pursuant to this ARTICLE 26. The obligations of Tenant under this ARTICLE 26
shall survive the termination or expiration of this Lease.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this
Lease as of the day and year first above written.
LANDLORD
WILLIS CORROON CORPORATION OF TENNESSEE
BY:______________________________________________
NAME: BART R. SCHWARTZ
TITLE: VICE PRESIDENT AND ASSISTANT SECRETARY
TENANT
MAGNETEK, INC.
BY:______________________________________________
NAME: DAVID P. REILAND
TITLE: EXECUTIVE VICE PRESIDENT/C.F.O.
TENANT'S FEDERAL TAX I.D. NO.:
95-3917584
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- -------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BETWEEN
MAGNETEK, INC.
AND
THE LOUIS ALLIS COMPANY
-----------------------------------------
DATED AS OF MAY 27, 1994
-----------------------------------------
SALE OF LOUIS ALLIS DIVISION
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . 6
ARTICLE II CLOSING; PURCHASE PRICE ADJUSTMENT . . . . . . . . . . . . . . . . 6
2.1 Sale and Transfer of the Assets . . . . . . . . . . . 6
2.2 Assets Not Transferred. . . . . . . . . . . . . . . . 8
2.3 Assumed and Excluded Liabilities. . . . . . . . . . . 9
2.4 Closing . . . . . . . . . . . . . . . . . . . . . . .11
2.5 Purchase Price Adjustment . . . . . . . . . . . . . .12
2.6 Tax Allocation. . . . . . . . . . . . . . . . . . . .15
2.7 Sales and Use Tax . . . . . . . . . . . . . . . . . .15
ARTICLE III CONDITIONS TO CLOSING. . . . . . . . . . . . . . . . . . . . . . .16
3.1 Buyer's Obligation. . . . . . . . . . . . . . . . . .16
3.2 Seller's Obligation . . . . . . . . . . . . . . . . .16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . .17
4.1 Authority; No Conflicts; Governmental
Consents. . . . . . . . . . . . . . . . . . . . . . .17
4.2 Financial Statements. . . . . . . . . . . . . . . . .18
4.3 Taxes . . . . . . . . . . . . . . . . . . . . . . . .19
4.4 Assets Other than Real Property
Interests . . . . . . . . . . . . . . . . . . . . . .19
4.5 Real Property . . . . . . . . . . . . . . . . . . . .20
4.6 Intellectual Property . . . . . . . . . . . . . . . .20
4.7 Contracts . . . . . . . . . . . . . . . . . . . . . .20
4.8 Litigation; Decrees . . . . . . . . . . . . . . . . .21
4.9 Employee and Related Matters. . . . . . . . . . . . .21
4.10 Environmental Matters . . . . . . . . . . . . . . . .22
4.11 Employee and Labor Relations. . . . . . . . . . . . .22
4.12 Assets of the Division. . . . . . . . . . . . . . . .23
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . . .23
5.1 Authority; No Conflicts; Governmental
Consents. . . . . . . . . . . . . . . . . . . . . . .23
5.2 Actions and Proceedings, etc. . . . . . . . . . . . .24
5.3 Availability of Funds . . . . . . . . . . . . . . . .24
5.4 Buyer's Acknowledgment. . . . . . . . . . . . . . . .24
5.5 Exon-Florio . . . . . . . . . . . . . . . . . . . . .24
5.6 No Knowledge of Seller's Breach . . . . . . . . . . .25
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5.7 Management Ownership. . . . . . . . . . . . . . . . .25
ARTICLE VI COVENANTS OF SELLER. . . . . . . . . . . . . . . . . . . . . . . .25
6.1 Access. . . . . . . . . . . . . . . . . . . . . . . .25
6.2 Ordinary Conduct. . . . . . . . . . . . . . . . . . .25
6.3 Insurance . . . . . . . . . . . . . . . . . . . . . .26
6.4 Environmental Study and Remediation . . . . . . . . .26
6.5 Title Commitment. . . . . . . . . . . . . . . . . . .27
6.6 Acquisition Proposals . . . . . . . . . . . . . . . .27
6.7 Accounts Receivable . . . . . . . . . . . . . . . . .27
6.8 Non-Competition . . . . . . . . . . . . . . . . . . .28
ARTICLE VII COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . .29
7.1 Confidentiality . . . . . . . . . . . . . . . . . . .29
7.2 Accounts Receivable . . . . . . . . . . . . . . . . .29
7.3 Waiver of Bulk Sales Law Compliance . . . . . . . . .30
7.4 Excluded Assets and Inventory . . . . . . . . . . . .30
7.5 Insurance . . . . . . . . . . . . . . . . . . . . . .30
7.6 Covenant Not to Compete . . . . . . . . . . . . . . .30
7.7 Surety Bond . . . . . . . . . . . . . . . . . . . . .31
ARTICLE VIII MUTUAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . .32
8.1 Permits and Consents. . . . . . . . . . . . . . . . .32
8.2 Cooperation . . . . . . . . . . . . . . . . . . . . .33
8.3 Reasonable Efforts. . . . . . . . . . . . . . . . . .33
8.4 Records . . . . . . . . . . . . . . . . . . . . . . .33
8.5 Access to Former Business Records . . . . . . . . . .34
8.6 Use of Trademark and Trade Names. . . . . . . . . . .34
8.7 Required Modifications or
Replacements of Products. . . . . . . . . . . . . . .35
8.8 Conduct of Business . . . . . . . . . . . . . . . . .36
ARTICLE IX EMPLOYEE BENEFIT MATTERS . . . . . . . . . . . . . . . . . . . . .36
9.1 Employee Retention. . . . . . . . . . . . . . . . . .36
9.2 Employee Benefit Plans. . . . . . . . . . . . . . . .36
9.3 Employees Covered by the Collective
Bargaining Agreement. . . . . . . . . . . . . . . . .37
9.4 Bargaining Benefit Plans. . . . . . . . . . . . . . .37
9.5 Vacation and Holiday Pay. . . . . . . . . . . . . . .37
9.6 Access to Information . . . . . . . . . . . . . . . .37
9.7 Third-Party Beneficiaries . . . . . . . . . . . . . .37
ARTICLE X INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . .38
10.1 Indemnification by Seller . . . . . . . . . . . . . .38
10.2 Indemnification by Buyer. . . . . . . . . . . . . . .38
10.3 Indemnification for Environmental
Matters.. . . . . . . . . . . . . . . . . . . . . . .39
10.4 Losses Net of Insurance, Etc. . . . . . . . . . . . .40
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10.5 Termination of Indemnification. . . . . . . . . . . .40
10.6 Procedures Relating to Indemnification
(Other than for Tax Claims) . . . . . . . . . . . . .41
10.7 Procedures Relating to
Indemnification of Tax Claims.. . . . . . . . . . . .42
10.8 Survival of Representations . . . . . . . . . . . . .43
ARTICLE XI GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . .43
11.1 Assignment. . . . . . . . . . . . . . . . . . . . . .43
11.2 No Third-Party Beneficiaries. . . . . . . . . . . . .44
11.3 Termination . . . . . . . . . . . . . . . . . . . . .44
11.4 Expenses. . . . . . . . . . . . . . . . . . . . . . .45
11.5 Attorneys' Fees . . . . . . . . . . . . . . . . . . .45
11.6 Amendments. . . . . . . . . . . . . . . . . . . . . .45
11.7 Notices . . . . . . . . . . . . . . . . . . . . . . .45
11.8 Interpretation; Exhibits and
Schedules . . . . . . . . . . . . . . . . . . . . . .46
11.9 Counterparts. . . . . . . . . . . . . . . . . . . . .46
11.10 Entire Agreement. . . . . . . . . . . . . . . . . . .46
11.11 Fees. . . . . . . . . . . . . . . . . . . . . . . . .47
11.12 Severability. . . . . . . . . . . . . . . . . . . . .47
11.13 Governing Law . . . . . . . . . . . . . . . . . . . .47
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EXHIBITS
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EXHIBIT A Bill of Sale, Assignment and Assumption Agreement. . . . . . . . A-1
EXHIBIT B Form of Exclusive Manufacturing Agreement. . . . . . . . . . . . B-1
EXHIBIT C Form of Sublease . . . . . . . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D Opinion of Gibson, Dunn & Crutcher . . . . . . . . . . . . . . . D-1
EXHIBIT E Opinion of General Counsel of Seller . . . . . . . . . . . . . . E-1
EXHIBIT F Opinion of Foley & Lardner . . . . . . . . . . . . . . . . . . . F-1
EXHIBIT G Form of License Agreement. . . . . . . . . . . . . . . . . . . . G-1
SCHEDULES
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Schedule 1.1 December Balance Sheet
Schedule 2.1(a) Owned Property
Schedule 2.1(b) Leased Property
Schedule 2.1(e) Intellectual Property
Schedule 2.1(j) Certain Excluded Assets
Schedule 2.2(l) Accounts Receivable and Bank Accounts
Schedule 2.6 Purchase Price Allocation
Schedule 4.1(b) Conflicts (Seller)
Schedule 4.3 Taxes
Schedule 4.4 Liens
Schedule 4.5 Division Properties
Schedule 4.6 Intellectual Property
Schedule 4.7 Certain Contracts
Schedule 4.8 Litigation
Schedule 4.9 Seller Plans
Schedule 4.11 Labor Matters
Schedule 5.1(b) Conflicts (Buyer)
Schedule 6.2 Exceptions to Ordinary Course
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of May 27, 1994, between
MAGNETEK, INC., a Delaware corporation ("Seller"), and THE LOUIS ALLIS COMPANY,
a Wisconsin corporation ("Buyer").
Seller desires to sell to Buyer certain assets (other than
excluded assets) relating to the Louis Allis division (the "Division") of
Seller. Buyer desires to purchase such assets and is willing to assume certain
associated obligations and liabilities.
Accordingly, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" has the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act by the SEC, as in effect on the date hereof.
"Assets" has the meaning set forth in Section 2.1.
"Assigned Contracts" has the meaning set forth in Section 2.1(f).
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Bill of Sale, Assignment and Assumption Agreement" means a Bill of
Sale, Assignment and Assumption Agreement in substantially the form attached
hereto as Exhibit A.
"Brownsville Facility" has the meaning set forth in Section 2.1(b).
"Business Day" means a day other than a Saturday or a Sunday or
other day on which commercial banks in Los Angeles are authorized or required by
law to close.
"Closing Balance Sheet" has the meaning set forth in Section 2.5.
<PAGE>
"Closing Date" means the day on which the Closing occurs pursuant
to Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Collective Bargaining Agreement" means the Labor Agreement between
Seller and the International Union of Electronic, Electrical, Salaried, Machine
and Furniture Workers Local No. 1131 ("Union"), dated June 1, 1991 and all
schedules, appendices and letters of understanding (including as the same relate
to any "effects bargaining") related thereto.
"Contract" means any contract, agreement, license, lease, sales or
purchase order or other legally binding commitment, whether written or oral, to
which Seller or the Division is a party and relating primarily to the Division.
"Contractual Obligation" means, as to any Person, any provision of
any note, bond or security issued by such Person or of any mortgage, indenture,
deed of trust, lease, license, franchise, contract, agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property or assets is subject.
"December Balance Sheet" means the unaudited balance sheet of the
Division as of December 31, 1993, attached hereto as Schedule 1.1.
"Division Employee" means any employee of Seller working
exclusively for the Division on the Closing Date, including any employee on
vacation or illness leave on such date.
"Employee Benefit Arrangements" means each and all pension,
supplemental pension, accidental death and dismemberment, life and health
insurance and benefits (including medical, dental, vision and hospitalization),
short and long-term disability, savings, bonus, deferred compensation, incentive
compensation, holiday, vacation, severance pay, salary continuation, sick pay,
sick leave, tuition refund, service award, company car, scholarship, relocation,
patent award, fringe benefit, flexible spending account programs and other
employee benefit arrangements, plans, contracts, policies or practices providing
employee or executive compensation or benefits to Division Employees, other than
the Employee Benefit Plans.
"Employee Benefit Plans" means each and all "employee benefit
plans," as defined in Section 3(3) of ERISA, maintained or contributed to by
Seller or in which Seller participates or participated and which provide
benefits to Division Employees,
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including (i) any such plans that are "employee welfare benefit plans" as
defined in Section 3(1) of ERISA and (ii) any such plans that are "employee
pension benefit plans" as defined in Section 3(2) of ERISA.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Resource Conservation
and Recovery Act of 1976, as amended, and any other applicable statutes,
regulations, rules, ordinances or codes which relate to the protection of human
health or the environment from the effects of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the SEC promulgated
from time to time thereunder.
"Excluded Assets" has the meaning set forth in Section 2.2(b).
"Excluded Inventory" has the meaning set forth in Section 2.2(c).
"Excluded Liabilities" has the meaning set forth in Section 2.3.
"Exclusive Manufacturing Agreement" means the Agreement between
Buyer and Seller, substantially in the form of Exhibit B.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Material" means any substance: (i) which is defined as
a hazardous waste, hazardous substance, pollutant or contaminant under any
Environmental Law; (ii) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is
regulated by any Governmental Authority; or (iii) which contains gasoline,
diesel fuel or other petroleum hydrocarbons.
"Knowledge of Buyer" means the actual knowledge of any one or more
of: Daniel E. Stetler, Philip Beltran, Jerry
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Borman, Susan Dertz, David Gaylord, Ronald Gray, Michael Gurch or Walter
Marquardt.
"Knowledge of Seller" means the actual knowledge of any "officer"
of Seller as such term is defined in 17 C.F.R. Section 240.16a-1(f), to the
extent such officer had, on the date hereof, responsibility for matters that are
the subject of such representation and warranty; PROVIDED, HOWEVER, that unless
such an officer had (a) actual knowledge to the contrary or (b) direct
responsibility at the Division level for the subject matter thereof, such
knowledge is based solely upon the representation and warranty in Section 5.6
hereof.
"Indemnified Person" means, with respect to any Loss, the Person
seeking indemnification hereunder.
"Indemnifying Person" means, with respect to any Loss, the Person
from whom indemnification is being sought hereunder.
"IRS" means the Internal Revenue Service.
"License Agreement" means the License Agreement between Buyer and
Seller in substantially the form of Exhibit G hereto, relating to the use of
certain names.
"Lien" means any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other) or other security agreement of any kind
or nature whatsoever (including, without limitation, any conditional sale or
other title retention agreement or any financing lease having substantially the
same economic effect as any of the foregoing).
"Loss" means any loss, liability, claim, damage or expense
(including reasonable attorneys' fees and disbursements and the costs of
investigation). Loss recoverable hereunder is subject to the limitations set
forth in Section 10.4.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, property or condition (financial or other) of the
Division, taken as a whole or (b) the ability of Seller to consummate the
transactions contemplated by this Agreement.
"Milwaukee Facility" has the meaning set forth in Section 2.1(a).
"Owned Property" has the meaning set forth in Section 2.1(a).
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust,
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unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Phase II Report" has the meaning set forth in Section 4.10.
"ReCHILL Products" has the meaning set forth on Schedule 2.2(b).
"Records" has the meaning set forth in Section 2.1(h).
"Required Modification" means, with respect to any product, a
modification, improvement or enhancement which is (a) required by any
Requirement of Law or (b) otherwise necessary or advisable in Seller's
reasonable judgment to permit Seller to meet any duty or obligation owing by
Seller to remedy defects or hazards in such products or to provide any warning
with respect to any such defects or hazards. Required Modifications may also
include, but shall not be limited to, modifications, improvements or
enhancements necessary to meet industry standards, or to implement design
improvements, or modifications of or supplements to the product's design,
quality, components, safety features, labeling, warnings or instructions.
Required Modification shall in no event mean or include any modification,
improvement or enhancement required by any written warranty covering the
relevant product.
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"SEC" means the Securities and Exchange Commission.
"Seller Plans" means each and all Employee Benefit Plans and
Employee Benefit Arrangements sponsored or maintained by Seller under which any
Division Employee participates or is entitled to receive benefits.
"Sublease" means the agreement between Buyer and National Electric
Coil, Inc. relating to the Brownsville Facility in substantially the form of
Exhibit C.
"Tax" or "Taxes" means, with respect to any Person, any federal,
state, local or foreign net income, gross income, gross receipts, sales, use,
transfer, registration, ad valorem, value-added, alternative or add-on minimum,
capital, unitary, intangible, franchise, profits, license, withholding, payroll,
social security, Medicare, employment, disability, real
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property, personal, excise, severance, stamp, transfer, occupation, premium,
property, windfall profit tax, environmental, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, addition to tax or additional amount
imposed by any jurisdiction or other taxing authority, whether or not disputed,
on such Person.
"Tax Returns" has the meaning set forth in Section 4.3.
"Transaction Documents" means (i) this Agreement, (ii) the Bill of
Sale, Assignment and Assumption Agreement, (iii) the warranty deeds of
conveyance of Owned Property, (iv) the Exclusive Manufacturing Agreement,
(v) the Sublease and (vi) the License Agreement.
"Transactions" means the transactions contemplated by the
Transaction Documents.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Terms defined in this Agreement in Sections other
than Section 1.1 shall have the meanings as so defined when used in this
Agreement.
(b) As used herein, accounting terms not defined or to
the extent not defined, shall have the respective meanings given to them under
GAAP.
(c) Unless express reference is made to Business Days,
references to days shall be to calendar days.
ARTICLE II
CLOSING; PURCHASE PRICE ADJUSTMENT
2.1 SALE AND TRANSFER OF THE ASSETS. Subject to the terms and
conditions of this Agreement, on the Closing Date Seller will sell, convey,
transfer, assign and deliver to Buyer all of Seller's right, title and interest
in and to the following assets (except the Excluded Assets) of Seller, to the
extent that they are used primarily in the operations of the Division, as the
same shall exist on the Closing Date (collectively, the "Assets"):
(a) the real property (including all buildings,
improvements and structures located thereon and all rights, privileges,
easements and appurtenances thereto) located at 385 and 427 East Stewart Street,
Milwaukee, Wisconsin (the "Milwaukee Facility") described on Schedule 2.1(a)
(the "Owned Property");
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(b) an interest, pursuant to the Sublease, in the
leasehold interest relating to the facility used by the Division in Brownsville,
Texas (the "Brownsville Facility") listed on Schedule 2.1(b) (the "Leased
Property");
(c) all tangible personal property, including, without
limitation, the fixtures, furnishings, furniture, office supplies, vehicles,
rolling stock, tools, patterns, machinery, equipment, computer equipment
(including software), located upon or affixed to or normally located in, at or
upon, even if temporarily removed from, any of the Division Property
(collectively, including the fixtures, the "Equipment");
(d) all inventory, including without limitation, raw
materials, work-in-process, finished goods, packaging materials, spare parts and
supplies (the "Inventory");
(e) subject to the limited rights retained in
Section 8.6, the trademarks, trade names, patents, service marks, copyrights
(whether registered or unregistered) and pending applications for the foregoing
listed on Schedule 2.1(e) (the "Intellectual Property");
(f) all Contracts (including but not limited to all
Contracts listed on Schedule 4.7 and all Contracts entered into by the Division
through the Closing Date), provided that any Contract that requires the consent
to assignment of a party thereto which consent has not been obtained prior to
the Closing Date pursuant to Section 8.1 shall be deemed Assigned Contracts only
to the extent therein provided (the "Assigned Contracts");
(g) all transferable business licenses and permits used
primarily in or relating primarily to the Division or the Assets (the
"Permits");
(h) all books and records (other than historical
accounting, financial and Tax records), plans and specifications, surveys and
title policies relating to the Owned Property, sales literature, product
information, employment, records and files and all other information and/or data
related to or used by Seller primarily in connection with the Assets and the
operation of the Division and located at the Milwaukee Facility (the "Records");
(i) all insurance proceeds paid or payable by any
insurance provider for any Asset that is destroyed or damaged after the date
hereof and prior to the Closing Date;
(j) all accounts receivable and notes receivable of
Seller on the Closing Date arising exclusively out of the activities of the
Division, all cash and cash equivalents (except for amounts required to cover
payment of outstanding
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<PAGE>
checks) in Division bank accounts on the Closing Date, all prepaid items and
deposits paid by Seller exclusively in connection with the Division (to the
extent reflected on the Closing Balance Sheet) a list of which, as of April 2,
1994, together with the names of the Division's bank accounts (noting which such
accounts may not be transferred to Buyer), is attached hereto as
Schedule 2.1(j); and
(k) all goodwill appurtenant to the foregoing Assets.
2.2 ASSETS NOT TRANSFERRED. Notwithstanding anything herein to
the contrary, the following assets are not included in the Assets and shall be
retained by Seller (the "Excluded Assets"):
(a) all rights, properties, and assets which have been
used or held for use in connection with the Division and which shall have been
transferred (including transfers by way of sale) or otherwise disposed of prior
to the Closing, provided such transfers and disposals shall have been in the
ordinary course of the business of the Division;
(b) all rights of Seller relating to "ReCHILL"
Products, including, without limitation, all rights of Seller under its
agreement with The Trane Company, as more fully described on Schedule 2.2(b),
and all related Records (including records that would constitute Records under
the definition thereof set forth in Section 2.1(h) if such records related to an
Asset), provided that, in the event such Records cannot be segregated in a
commercially reasonable manner from the Records or Assets or from records or
assets of Buyer generated or acquired on or after the Closing Date, Seller shall
have access to such Records pursuant to Section 8.5 hereof;
(c) the inventory of the Division (wherever located) on
the Closing Date of Louis Allis explosion-proof motors and "EVIG" finished good
inventories (the "Excluded Inventory");
(d) rights to or claims for refunds or rebates of Taxes
and other governmental charges and the benefit of net operating loss
carryforwards, carrybacks or other tax benefits or credits of Seller, in each
case whether or not attributable to the Division;
(e) claims or rights against third parties, including,
without limitation, claims or counterclaims arising in respect of the litigation
titled WRIGHT-SCHUCART VS. MAGNETEK, ET AL., (including the existing judgment in
Seller's favor) other than claims or rights against third parties arising with
respect to events or breaches occurring after the Closing
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<PAGE>
Date under the Assigned Contracts; PROVIDED, HOWEVER, that any rights of
indemnification, contribution or reimbursement that may exist under the Assigned
Contracts solely in respect of Excluded Assets or Excluded Liabilities hereunder
shall be Excluded Assets;
(f) except as set forth in Section 2.1(i), all
insurance policies and rights thereunder, including but not limited to, rights
to any cancellation value as of the Closing Date;
(g) proprietary or confidential business or technical
information, records and policies that relate generally to Seller or any of its
Affiliates and are not used primarily in the Division, including, without
limitation, organization manuals and strategic plans;
(h) subject to the limited rights granted in
Section 8.6, all "MagneTek" marks, including any and all trademarks or service
marks, trade names, slogans or other like property relating to or including the
name "MagneTek," the mark MagneTek or any derivative thereof and the MagneTek
logo or any derivative thereof, and Seller's proprietary computer programs or
other software, including but not limited to Seller's proprietary data bases,
accounting and reporting formats, systems and procedures;
(i) all Records relating to pending lawsuits to which
Seller is a party and which involve the Division;
(j) the "back-up" annuity policy of Seller purchased
from Metropolitan Life Insurance Company for the benefit of certain retirees who
previously were employed in the business of the Division;
(k) all other assets of Seller, including but not
limited to assets used by Seller or its Affiliates in other businesses of Seller
or its Affiliates and assets used primarily in connection with Seller's
corporate functions (including but not limited to the corporate charter,
taxpayer and other identification numbers, seals, minute books and stock
transfer books), whether or not used for the benefit of the Division.
2.3 ASSUMED AND EXCLUDED LIABILITIES.
(a) On the Closing Date, Buyer shall execute and
deliver to Seller the Bill of Sale, Assignment and Assumption Agreement pursuant
to which Buyer shall assume and agree to pay, perform and discharge when due,
only the following liabilities and obligations of Seller pertaining to the
Assets and the Division (collectively, the "Assumed Liabilities"):
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(i) all of the accounts payable, accrued pay,
other accrued expenses and any other items shown as "current
liabilities" on the Closing Balance Sheet;
(ii) all liabilities and obligations of Seller
which pertain to or are to be performed during the period following
the Closing Date and which arise under any of the Assigned Contracts;
(iii) the liabilities expressly assumed by Buyer
in Section 2.7 and Article IX of this Agreement, and any other
liabilities expressly assumed by Buyer hereunder;
(iv) all liabilities and obligations under open
purchase orders that were entered into by Seller on behalf of the
Division and which provide for the delivery of goods or services (and
in either case for payment) subsequent to the Closing Date;
(v) all obligations and liabilities in respect
of real or personal property Taxes, utilities, gas and other services
pertaining to periods after the Closing Date;
(vi) all liabilities for (a) warranty claims
made after the Closing Date for service, repair, replacement and
similar work with respect to products sold or services provided
before the Closing Date, unless written notice of such claim has been
delivered to Seller within the two-year period following the Closing
Date; (b) workers compensation claims made after the Closing Date,
regardless of the date of injury; (c) product liability claims made
after the Closing Date for injuries, property damage or other Losses
arising with respect to products sold or services provided before the
Closing Date, unless written notice of such claim has been delivered
to Seller within the two-year period following the Closing Date; and
(d) all litigation, arbitration, civil or governmental proceedings,
labor grievances or complaints or similar matters filed after the
Closing Date and not referred to on Schedule 4.8 or Schedule 4.11,
regardless of the date on which the related claim or Loss arose;
(vii) all liabilities and obligations arising
from the operation of the Division from and after the Closing Date.
(b) Notwithstanding Section 2.3(a) above, the Assumed
Liabilities shall in no event include the following liabilities (the "Excluded
Liabilities"):
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(i) any liability of Seller arising under or
relating to the settlements entered into in 1992 in respect of the
lawsuits filed against Seller by the United States Department of
Labor and by the International Union of Electronic, Electrical,
Salaried, Machine and Furniture Workers;
(ii) any liability in respect of litigation
currently pending against Seller;
(iii) any liability, responsibility or obligation
with respect to (a) any Seller Plan (including, without limitation,
for any retirement benefits due with respect to persons previously
employed by the Division and who retired prior to the Closing Date),
except as provided in Article IX, and excluding any Assigned Contract
and (b) any payments required to be made by virtue of retention bonus
plans or agreements of Seller disclosed on Schedule 4.7 as "Stay and
Pay Agreements";
(iv) any liability for (a) warranty claims made
after the Closing Date for service, repair, replacement and similar
work required under Seller's written warranties with respect to
products sold or services provided prior to the Closing, the expenses
of which, at shop level cost (direct materials plus labor and
variable overhead), in the aggregate exceed the warranty reserve on
the Closing Balance Sheet, (b) claims under health insurance plans of
Seller for covered Division Employees with respect to services
rendered prior to the Closing Date or (c) any product liability
claims for injuries, property damage or other Losses, arising with
respect to products sold or services provided prior to the Closing
Date, but only if written notice of such claims described in
clause (a), (b) or (c) shall have been delivered to Seller within the
two-year period following the Closing Date;
(v) any liability for Taxes attributable to the
ownership or operation of the Division for any period ending on or
prior to the Closing Date, excluding the Taxes covered by
Section 2.7; and
(vi) any liability arising under a Contractual
Obligation of Seller which is required to be, but is not, disclosed
on Schedule 4.7.
2.4 CLOSING. The closing (the "Closing") of the purchase and
sale of the Assets shall be held at the offices of Foley & Lardner, 777 East
Wisconsin Avenue, Milwaukee, Wisconsin, at 9:00 a.m. on May 27, 1994, or if the
conditions to Closing set forth in Article III shall not have been satisfied
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or waived by such date, subject to Section 11.3, as soon as practicable after
such conditions shall have been satisfied or waived. The date on which the
Closing shall occur is hereinafter referred to as the "Closing Date." At the
Closing, Buyer shall deliver to Seller by wire transfer (to a bank account
designated at least two business days prior to the Closing Date in writing by
Seller) immediately available funds in an amount equal to the sum of $8,300,000
(eight million three hundred thousand dollars, hereinafter, the "Purchase
Price"), plus or minus an estimate, if the parties mutually agree prior to the
Closing Date with respect thereto, of any adjustment to the Purchase Price under
Section 2.5 (the Purchase Price plus or minus such estimate of any adjustment
under Section 2.5 being hereinafter called the "Closing Date Amount"), and such
other documents as are required by this Agreement.
At the Closing, Seller shall deliver or cause to be delivered to
Buyer (a) the Bill of Sale, Assignment and Assumption Agreement, (b) warranty
deeds in recordable form for the Owned Property, (c) the documents and
agreements referred to in Section 3.1(d) hereof and (d) such other instruments
of transfer and documents required by this Agreement or as Buyer may reasonably
request, and Buyer shall deliver to Seller (a) the Bill of Sale, Assignment and
Assumption Agreement, (b) the documents and agreements referred to in
Sections 2.7 and 3.2 hereof, (c) insurance certificates evidencing compliance
with Section 7.5 hereof and (d) such other instruments of assumption and
documents required by this Agreement or as Seller may reasonably request. In
addition, Seller shall deliver to Buyer at the Closing a certificate in form and
substance satisfactory to Buyer, duly executed and acknowledged, certifying that
Seller is not a foreign person within the meaning of Section 1445(f)(3) of the
Code, and any corresponding affidavit or certificate required for state tax
purposes.
2.5 PURCHASE PRICE ADJUSTMENT.
(a) Within 60 days after the Closing Date, Seller shall
prepare and deliver to Buyer a balance sheet of the Division as of the close of
business on the Closing Date comprising the Assets and the outstanding Assumed
Liabilities (the "Closing Balance Sheet"). For purposes of preparing the
Closing Balance Sheet, Buyer shall make Division Employees available to Seller
(without charge) and such employees shall, for the purpose of assisting Seller
in preparing the Closing Balance Sheet, be instructed by Buyer to act at
Seller's direction.
During the 30 days immediately following Buyer's receipt of
the Closing Balance Sheet, Buyer shall be entitled to review the Closing Balance
Sheet and Seller's working papers relating to the Closing Balance Sheet, and
Seller shall provide
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Buyer access at all reasonable times to its personnel, properties, books and
records to the extent relevant and not comprising Assets. The Closing Balance
Sheet shall become final and binding upon the parties on the thirtieth day
following delivery thereof unless Buyer gives written notice to Seller of its
disagreement with the method of presentation of the Closing Balance Sheet (a
"Notice of Disagreement") prior to such date. Any Notice of Disagreement shall
specify in reasonable detail the nature of any disagreement so asserted. If a
timely Notice of Disagreement is received by Seller with respect to the Closing
Balance Sheet, then the Closing Balance Sheet (as revised in accordance with
clause (x) or (y) below), shall become final and binding upon the parties on the
earlier of (x) the date the parties hereto resolve in writing any differences
they have with respect to any matter specified in a Notice of Disagreement or
(y) the date any matters properly in dispute are finally resolved in writing by
the Accounting Firm (as defined below). During the 30 days immediately
following the delivery of any Notice of Disagreement, Seller and Buyer shall
seek in good faith to resolve in writing any differences which they may have
with respect to any matter specified in such Notice of Disagreement. During
such period, Buyer and Seller shall each have access to the other party's
working papers prepared in connection with the other party's preparation of a
Notice of Disagreement. At the end of such 30-day period, Seller and Buyer
shall submit to an independent accounting firm (the "Accounting Firm") for
review and resolution any and all matters which remain in dispute and which were
properly included in any Notice of Disagreement, and the Accounting Firm shall
reach a final, binding resolution of all matters which remain in dispute. The
Closing Balance Sheet, with such adjustments necessary to reflect the Accounting
Firm's resolution of the matters in dispute, shall become final and binding on
Buyer and Seller on the date the Accounting Firm delivers its final resolution
to the parties. The Accounting Firm shall be Arthur Andersen, or if such firm
is unable or unwilling to act, such other nationally recognized independent
public accounting firm as shall be agreed upon by the parties hereto in writing.
The cost of any arbitration (including the fees and expenses of the Accounting
Firm) pursuant to this Section 2.5 shall be borne 50% by Buyer and 50% by
Seller.
(b) The Purchase Price shall be adjusted (after giving
effect to the payment of the Closing Date Amount) such that the Purchase Price
is (i) increased, to the extent that (A) current Assets of the Division increase
(B) Assumed Liabilities of the Division decrease or (C) the aggregate net book
value of plant and equipment increases, in each case from the amount reflected
on the December Balance Sheet, and (ii) decreased, to the extent that
(x) current Assets of the Division decrease, (y) Assumed Liabilities increase or
(z) the aggregate net book value of plant and equipment decreases, in
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each case from the amount reflected on the December Balance Sheet. The
adjustments referred to in the foregoing clauses (i) and (ii) shall be
cumulative as to each category. The Purchase Price shall be adjusted upward or
downward, dollar for dollar, in respect of any such negative or positive
adjustment; PROVIDED, HOWEVER, that no adjustment to the Purchase Price pursuant
to this Section 2.5 shall be made unless such adjustment would exceed $50,000,
and if the adjustment would exceed $50,000, then the full amount of the
adjustment shall be made; provided, however, that the estimated adjustment, if
any, included in the Closing Date Amount shall be taken into account in
determining whether such threshold is met. Any required adjustment to the
Purchase Price pursuant to this Section 2.5 shall be referred to as the
"Purchase Price Adjustment."
(c) The Closing Balance Sheet shall be prepared in
accordance with GAAP, applied in a manner consistent with that followed in the
preparation of the December Balance Sheet, subject to the following:
(i) inventory shall be reduced by
book value on the Closing Date of the Excluded Inventory,
but only to the extent that such inventory is in
merchantable condition on the Closing Date, and is
maintained in accordance with Section 7.4 hereof;
(ii) the Closing Balance Sheet shall
not reflect any provision for Taxes (whether as an asset or
a liability);
(iii) intercompany accounts receivable
and intercompany liabilities shall not be eliminated;
(iv) all Excluded Assets (and related
depreciation and reserves) shall be eliminated; and
(v) all Excluded Liabilities (and
related reserves) shall be eliminated.
(d) Buyer agrees, with respect to Purchase Price
Adjustments, that following the Closing, Buyer will not take any actions with
respect to the accounting books, records, policies and procedures of the
Division on which the Closing Balance Sheet is to be based that are not
consistent with GAAP applied in the manner consistent with the past practices of
the Division.
(e) Within thirty (30) days after the receipt by Buyer
of the Closing Balance Sheet in accordance with Section 2.5(a) hereof, Buyer
shall remit to Seller or Seller
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shall remit to Buyer, as the case may be, in immediately available funds, any
undisputed amount as to which there is required to be a Purchase Price
Adjustment. With respect to any items that are the subject of a Notice of
Disagreement, payment shall be made in immediately available funds within three
(3) Business Days after the resolution thereof pursuant to Section 2.5(a). Each
payment pursuant to this Section 2.5 shall be made with interest on the amount
of the payment at an annual rate equal to the reference rate quoted by the San
Francisco branch of Bank of America on the Closing Date for the period from the
Closing Date to the date of payment, computed on the basis of a 360-day year and
actual days elapsed.
(f) Gas, utility, real estate Taxes and similar
obligations that are being assumed by Buyer shall be prorated between the
parties based upon the days elapsed in the applicable payment period and
reflected in Purchase Price Adjustments.
2.6 TAX ALLOCATION. Buyer and Seller shall allocate the
Purchase Price plus the Assumed Liabilities (to the extent identifiable or
reasonably estimable as of the date hereof) to broad categories constituting
components of the Assets in accordance with Schedule 2.6 (as the same may be
updated as of the Closing to reflect changes in the Assets or Assumed
Liabilities occurring after the date thereof and prior to the Closing Date).
Buyer and Seller shall report the purchase and sale of the Assets in accordance
with the agreed-upon allocation among such broad categories for all Tax purposes
(including the filing of the forms prescribed under Section 1060 of the Code and
the Treasury Regulations promulgated thereunder). Within ten days from the
filing thereof, Buyer and Seller shall provide each other with IRS Forms 8594
(and any state or local equivalent form) reflecting such allocation which shall
be filed with the IRS and any applicable Governmental Authority.
2.7 SALES AND USE TAX. Buyer and Seller shall share equally
and shall cooperate in preparing, executing and filing use and sales Tax returns
relating to, and shall share equally and pay when due, any and all sales, real
estate, transfer, use or similar Tax due with regard to, the purchase and sale
of the Assets. The Closing Date Amount shall, to the extent reasonably
feasible, reflect the parties' estimates with regard to such Taxes. Such Tax
Returns shall be prepared in a manner that is consistent with the allocation of
the Purchase Price and Assumed Liabilities contemplated by Section 2.6. Buyer
shall also furnish Seller with a form of resale certificate that complies with
the requirements of Wisconsin, Texas and other applicable state taxation laws.
Buyer and Seller shall cooperate and use reasonable efforts to minimize the Tax
liabilities referred to in this Section 2.7.
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ARTICLE III
CONDITIONS TO CLOSING
3.1 BUYER'S OBLIGATION. The obligations of Buyer to purchase
and pay for the Assets are subject to the satisfaction (or waiver by Buyer in
writing) as of the Closing of the following conditions:
(a) The representations and warranties of Seller made
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as specifically contemplated by this Agreement, on and
as of the Closing, as though made on and as of the Closing Date, and Seller
shall have performed or complied in all material respects with all obligations
and covenants required by this Agreement to be performed or complied with by
Seller by the time of the Closing; and Seller shall have delivered to Buyer a
certificate dated the Closing Date and signed by an authorized officer of Seller
confirming the foregoing.
(b) Buyer shall have received an opinion dated the
Closing Date of Gibson, Dunn & Crutcher, counsel to Seller, as to the matters
set forth in Exhibit D, an opinion dated the Closing Date of Samuel A. Miley,
Esq., General Counsel of Seller, as to the matters set forth in Exhibit E, and
an opinion dated the Closing Date of Richards, Layton & Finger, special Delaware
counsel to Seller, which opinions shall be reasonably satisfactory in form to
Buyer.
(c) No injunction or order shall have been granted by
any court or administrative agency or instrumentality of competent jurisdiction
that would restrain or prohibit any of the Transactions or that would impose
damages as a result thereof, and no action or proceeding shall be pending before
any court or administrative agency or instrumentality of competent jurisdiction
in which any person seeks such a remedy (if in the written opinion of counsel to
Buyer there exists a reasonable risk of a material adverse result in such
pending action or proceeding).
(d) Seller shall have executed and delivered the
Exclusive Manufacturing Agreement, the Sublease and the License Agreement.
3.2 SELLER'S OBLIGATION. The obligations of Seller to sell and
deliver the Assets to Buyer are subject to the satisfaction (or waiver by Seller
in writing) as of the Closing of the following conditions:
(a) The representations and warranties of Buyer made in
this Agreement shall be true and correct in all material
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respects as of the date hereof and on and as of the Closing, as though made on
and as of the Closing Date, and Buyer shall have performed or complied in all
material respects with all obligations and covenants required by this Agreement
to be performed or complied with by Buyer by the time of the Closing; and Buyer
shall have delivered to Seller a certificate dated the Closing Date and signed
by an authorized officer of Buyer confirming the foregoing.
(b) Seller shall have received an opinion dated the
Closing Date of Foley & Lardner, counsel to Buyer, as to the matters set forth
in Exhibit F, which opinion shall be reasonably satisfactory in form to Seller.
(c) No injunction or order shall have been granted by
any court or administrative agency or instrumentality of competent jurisdiction
that would restrain or prohibit the Transactions or that would impose damages as
a result thereof, and no action or proceeding shall be pending before any court
or administrative agency or instrumentality of competent jurisdiction in which
any person seeks such a remedy (if in the written opinion of counsel to Seller
there exists a reasonable risk of a materially adverse result in such pending
action or proceeding).
(d) Buyer shall have executed and delivered the
Exclusive Manufacturing Agreement, the Sublease and the License Agreement.
(e) Continental Bank Letter of Credit No. C7242246 in
the amount of $847,500 issued to Seller in respect of the Division shall have
been returned to Seller and replaced (or the obligation to maintain such letter
of credit extinguished) by Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
4.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS.
(a) Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Seller
has all requisite corporate power and authority to enter into the Transaction
Documents and to consummate the Transactions. All corporate acts and other
proceedings required to be taken by Seller to authorize the execution, delivery
and performance of the Transaction Documents and the consummation of the
Transactions have been duly and
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properly taken. This Agreement has been duly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(b) The execution and delivery of this Agreement does
not and of the other Transaction Documents will not, and the consummation of the
Transactions and compliance with the terms of the Transaction Documents will
not, conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a benefit under, or
result in the creation of any Lien upon any of the properties or assets of
Seller under, any provision of (i) the Certificate of Incorporation or By-Laws
of Seller, (ii) subject to the matters disclosed in Schedule 4.1(b), any
Contractual Obligation of Seller or (iii) any judgment, order or decree or,
subject to the matters described in clauses (A)-(C) below, Requirement of Law
applicable to Seller or its property or assets, other than, in the case of
clauses (ii) and (iii) above, any such conflicts, violations, defaults, rights
or Liens that, individually or in the aggregate, would not have a Material
Adverse Effect. No consent, approval, license, permit, order or authorization
of, or registration, declaration or filing with, any Governmental Authority is
required to be obtained or made by or with respect to Seller in connection with
the execution and delivery of the Transaction Documents or the consummation of
the Transactions contemplated hereby, other than (A) compliance with and filings
under Section 13(a) or 15(d), as the case may be, of the Exchange Act,
(B) compliance with and filings and notifications under applicable Environmental
Laws, (C) those that may be required solely by reason of Buyer's participation
in the transactions contemplated hereby, and (D) those that, if not made or
obtained, individually or in the aggregate, would not have a Material Adverse
Effect.
4.2 FINANCIAL STATEMENTS. To the Knowledge of Seller, the
December Balance Sheet was prepared in accordance with GAAP consistently
applied, and fairly presents the financial condition of the Division as of
December 31, 1993 except: (a) as set forth therein, (b) for the absence of
footnotes and (c) for normal recurring adjustments.
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4.3 TAXES.
(a) Except as disclosed on Schedule 4.3, Seller, and
any affiliated group within the meaning of Section 1504 of the Code, of which
Seller is or has been a member (the "Affiliated Group," but only for the taxable
period during which Seller has been a member thereof), have filed or caused to
be filed in a timely manner (within any applicable extension periods) with the
appropriate Governmental Authority (i) all Tax returns, reports and forms
(collectively, "Tax Returns") required to be filed by the Code or by applicable
laws, (ii) all Taxes shown on such Tax Returns have been timely paid in full by
the due date thereof, (iii) no Tax Liens or assessments have been filed by any
Tax authority against any property or assets of the Division, and (iv) to the
Knowledge of Seller, no claims are being asserted in writing with respect to any
Taxes relating to the Division.
(b) Except as set forth in Schedule 4.3, (i) no
property of the Division is "tax exempt use property" within the meaning of
Section 168(h) of the Code, and (ii) the Assigned Contracts do not include any
lease made pursuant to former Section 168(f)(8) of the Internal Revenue Code of
1954.
(c) Seller is not a "foreign person" within the meaning
of Section 1445(f)(3) of the Code.
4.4 ASSETS OTHER THAN REAL PROPERTY INTERESTS. Seller has good
and valid title to all Assets reflected on the December Balance Sheet or
thereafter acquired, except those sold or otherwise disposed of since the date
of such December Balance Sheet in the ordinary course of business consistent
with past practice, in each case free and clear of all Liens except (a) such as
are disclosed on Schedule 4.4 and (b) mechanics', carriers', workmen's,
repairmen's or other like Liens arising or incurred in the ordinary course of
business, Liens arising under original purchase price conditional sales
contracts and equipment leases with third parties entered into in the ordinary
course of business, Liens for Taxes and other governmental charges which are not
yet due and payable or which may thereafter be paid without penalty, and other
imperfections of title, restrictions or encumbrances, if any, which Liens,
imperfections of title, restrictions or other encumbrances do not, individually
or in the aggregate, materially impair the continued use and operation of the
specific assets to which they relate (the Liens described in the preceding
clause (b) are hereinafter referred to collectively as "Permitted Liens").
This Section 4.4 does not relate to real property or interests in
real property, such items being the subject of Section 4.5.
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4.5 REAL PROPERTY. Schedule 4.5 sets forth a complete list of
all Owned Properties and a complete list of all Leased Properties and, as to
Leased Property, identifies any leases relating thereto (an Owned Property or
Leased Property being sometimes referred to herein individually as a "Division
Property" and collectively as "Division Properties"). Seller has good,
marketable and insurable fee title to all Owned Property, free and clear of all
Liens, easements, covenants, rights-of-way and other similar restrictions of any
nature whatsoever, except (i) Permitted Liens, (ii) easements, covenants,
rights-of-way and other similar restrictions of record, and (iii) (A) zoning,
building and other similar restrictions, (B) Liens that have been placed by any
developer, landlord or other third party on property over which Seller has
easement rights or on any Leased Property and subordination or similar
agreements relating thereto and (C) unrecorded easements, covenants, rights-of-
way or other similar restrictions, none of which items set forth in clauses (A),
(B) and (C) above, individually or in the aggregate, materially impair the
continued use and operation of the property to which they relate.
4.6 INTELLECTUAL PROPERTY. Schedule 4.6 sets forth a list of
all Intellectual Property (excluding any such Intellectual Property that is
included in Excluded Assets). With respect to registered trademarks,
Schedule 4.6 contains a list of all jurisdictions in which such trademarks are
registered or applied for and all registration and application numbers. Except
as disclosed on Schedule 4.6, Seller owns or has the right to use, without
payment to any other party, the Intellectual Property listed on such
Schedule 4.6. Except as set forth on Schedule 4.8, no claims are pending or, to
the Knowledge of Seller, threatened against Seller by any person with respect to
the ownership, validity, enforceability or use of any Intellectual Property
listed on Schedule 4.6 or otherwise challenging or questioning the validity or
effectiveness of any such Intellectual Property.
4.7 CONTRACTS. Schedule 4.7 sets forth a list of each of the
following types of Contracts:
(a) any employment or severance agreement that has an
aggregate future liability in excess of $100,000 and is not terminable by notice
of not more than 60 days for a cost of less than $50,000 (including any
contracts or agreements with Division Employees that relate to the transactions
contemplated by this Agreement);
(b) any employee collective bargaining agreement or
other contract with any labor union covering Division Employees;
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(c) to the Knowledge of Seller, any Contract other than
in the ordinary course of business pursuant to which the aggregate of payments
to become due from or to Seller is equal to or exceeds $200,000, and which is
not terminable by no more than 60 days' notice for a cost of less than $100,000;
(d) any lease or similar agreement under which Seller
is a lessor or sublessor of, or makes available for use by any third party
(including another division of Seller), any Division Property or premises
otherwise occupied by the Division.
Except as disclosed on Schedule 4.7, each Contract listed on
Schedule 4.7 is valid, binding and in full force and effect and is enforceable
by Seller in accordance with its terms. Except as disclosed in Schedule 4.7, to
the Knowledge of Seller, Seller has performed all material obligations required
to be performed by it to date under the Contracts and is not (with or without
the lapse of time of the giving of notice, or both) in breach or default in any
material respect thereunder and, to the Knowledge of Seller, no other party to
any of the Contracts is (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder.
4.8 LITIGATION; DECREES. To the Knowledge of Seller,
Schedule 4.8 sets forth a list, as of the date of this Agreement, of all pending
and threatened lawsuits or claims with respect to which Seller has contacted in
writing the defendant or been contacted in writing by the claimant or by counsel
for the claimant by or against Seller relating to the Division which
(a) involves a claim by or against Seller of more than $100,000, (b) seeks any
injunctive relief or (c) relates to the Transactions. To the Knowledge of
Seller, except as disclosed on Schedule 4.8, Seller is not in default under any
judgment, order or decree of any court, administrative agency or commission or
other Governmental Authority applicable to the Division; except where the
default would not have a Material Adverse Effect.
4.9 EMPLOYEE AND RELATED MATTERS. Schedule 4.9 sets forth each
material Employee Benefit Plan. Seller has made available to Buyer true,
complete and correct copies of (i) each Seller Plan (or, in the case of any
unwritten Seller Plans, descriptions thereof), (ii) the most recent annual
report on Form 5500 filed with the IRS with respect to Seller's Pension Plan and
(iii) the most recent summary plan description for each Seller Plan for which
such a summary plan description is required. Except as disclosed on
Schedule 4.7, as provided in Section 9.2 or as provided in the Collective
Bargaining Agreement, no Division Employee is entitled to any benefit under any
Seller Plan by reason of the Transactions.
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4.10 ENVIRONMENTAL MATTERS. Except as disclosed in (i) the
Phase I Report regarding the Milwaukee Facility prepared by Dames & Moore (the
"Phase I Report"), (ii) the report based on further investigation (the "Phase II
Report") or (iii) otherwise in writing by Seller addressed to Buyer, to the
Knowledge of Seller, as to the Division and the operation of the Milwaukee
Facility and Brownsville Facility:
(a) Seller is not in material violation of any
applicable Environmental Law nor is Seller under investigation or review by any
Governmental Authority with respect to compliance therewith, or with respect to
the generation, use, treatment, storage or disposal, or the spillage or other
release of any Hazardous Material;
(b) there is no Hazardous Material that is likely to
pose any material risk to safety, health or the environment, and there has
heretofore been no spillage, discharge, release or disposal of any such
Hazardous Material on or under the Division Property in an amount and of a
nature which could reasonably be expected to result in material liability to the
Division; and
(c) there are no pending citations, fines, penalties or
claims have been asserted against Seller under any Environmental Law which could
reasonably be expected to have a Material Adverse Effect and which have not been
reflected in the December Balance Sheet.
4.11 EMPLOYEE AND LABOR RELATIONS. Except as set forth on
Schedule 4.11:
(a) there is no labor strike, dispute, or work stoppage
or lockout pending, or, to the Knowledge of Seller, threatened, involving the
Division;
(b) to the Knowledge of Seller, no union organization
campaign is in progress with respect to the employees of the Division, and no
question concerning representation exists respecting such employees;
(c) there is no unfair labor practice charge or
complaint against Seller pending, or, to the Knowledge of Seller, threatened,
before the National Labor Relations Board involving the Division;
(d) there is no pending, or, to the Knowledge of
Seller, threatened, grievance involving an employee of the Division that, if
adversely decided, would have a Material Adverse Effect; and
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(e) no charges with respect to or relating to Seller
are pending before the Equal Employment Opportunity commission or any other
Governmental Authority responsible for the prevention of unlawful employment
practices as to which there is a reasonable likelihood of adverse determination
involving the Division, other than those which, if so determined would not have
a Material Adverse Effect.
4.12 ASSETS OF THE DIVISION. Except for any Assets that may not
be transferred to Buyer pursuant to Section 2.2 or Section 8.1, the Assets and
the rights conferred by the Transaction Documents comprise all the properties
and assets used by Seller primarily in the operation of the business of the
Division as conducted on the date hereof. Except as expressly provided herein
or in any of the Transaction Documents, Seller makes no representation or
warranty concerning the Assets or the Division, including as to the quality,
condition, merchantability, salability, obsolescence, working order or fitness
for a particular purpose thereof. Except as expressly provided herein, the
Assets are sold to Buyer "as is and where is."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS.
(a) Buyer is a corporation duly organized, validly
existing and in active status under the laws of the State of Wisconsin. Buyer
has all requisite corporate power and authority to enter into the Transaction
Documents and to consummate the Transactions. All corporate acts and other
proceedings required to be taken by Buyer to authorize the execution, delivery
and performance of the Transaction Documents and the consummation of the
Transactions have been duly and properly taken. This Agreement has been duly
executed and delivered by Buyer and constitutes a valid and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally or by general principles (regardless of whether such enforceability is
considered in a proceeding in equity or law).
(b) Except as disclosed on Schedule 5.1(b), the
execution and delivery of this Agreement does not and of the other Transaction
Documents will not, and the consummation of the Transactions and compliance with
the terms of the
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Transaction Documents will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of the properties or assets of Buyer under, any provision of (i) the Certificate
of Incorporation or By-Laws of Buyer, (ii) any Contractual Obligation of Buyer
or (iii) any judgment, order or decree or, subject to the matters described in
clauses (A)-(C) below, or Requirement of Law applicable to Buyer or its property
or assets. No material consent, approval, license, permit order or
authorization of, or registration, declaration or filing with, any Governmental
Authority is required to be obtained or made by or with respect to Buyer or its
Affiliates in connection with the execution and delivery of the Transaction
Documents or the consummation by Buyer of the Transactions, other than
(A) compliance with and filings under Section 13(a) and 15(d), as the case may
be, of the Exchange Act, (B) compliance with and filings and notifications under
applicable Environmental Laws and (C) those that may be required solely by
reason of Seller's (as opposed to any other third party's) participation in the
transactions contemplated hereby.
5.2 ACTIONS AND PROCEEDINGS, ETC. There are no (a) outstanding
judgments, orders, writs, injunctions or decrees of any court, governmental
agency or arbitration tribunal against Buyer or (b) actions, suits, claims or
legal, administrative or arbitration proceedings or investigations pending or,
to the Knowledge of Buyer, threatened against Buyer.
5.3 AVAILABILITY OF FUNDS. Buyer has currently effective
commitments, subject to customary exceptions and conditions, as to the
availability to Buyer of all funds required to consummate the Transactions.
5.4 BUYER'S ACKNOWLEDGMENT. Buyer acknowledges and agrees
that, (a) other than the representations and warranties of Seller specifically
contained in this Agreement, there are no representations or warranties of
Seller either expressed or implied with respect to Seller, the Division or the
Transactions, and (b) it shall have a right to indemnification solely as
provided in Article X hereof and shall have no claim or right to indemnification
with respect to any information, documents or materials furnished by Seller or
any of its officers, directors, employees, agents or advisors, or otherwise
available to Buyer.
5.5 EXON-FLORIO. Buyer is not a "foreign person" for purposes
of the Exon-Florio Amendment to the Defense Production Act of 1950.
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5.6 NO KNOWLEDGE OF SELLER'S BREACH. To the Knowledge of
Buyer, the representations and warranties of Seller herein (and the Schedules
pertaining thereto) are true and accurate in all material respects and, to the
Knowledge of Buyer, Seller is not in breach of any of its representations or
warranties or of any other condition or circumstance that would excuse Buyer
from its timely performance of its obligations hereunder.
5.7 MANAGEMENT OWNERSHIP. Buyer is a corporation of which at
least 51% of the equity securities are owned (or the voting thereof is
controlled) by individuals who are officers or key employees of the Buyer.
ARTICLE VI
COVENANTS OF SELLER.
Seller covenants and agrees as follows:
6.1 ACCESS. Subject to the provisions of Section 7.1 hereof,
prior to the Closing, Seller will give Buyer and its representatives, employees,
counsel and accountants, together with representatives of Persons providing
financing to Buyer for the Transactions, with reasonable access, during normal
business hours and upon reasonable notice, to the personnel, properties, books
and records of the Division for purposes of investigating its assets,
operations, prospects, obligations and liabilities; provided, however, that such
access does not unreasonably disrupt the normal operations of the Division.
Additionally, subject to the provisions of Section 7.1 hereof and to prior
notification, and the consent (which will not be unreasonably withheld or
delayed), of Seller, Buyer and such representatives may contact the principal
customers and suppliers of the Division for purposes of the foregoing
investigation.
6.2 ORDINARY CONDUCT. Except as contemplated by this Agreement
or as set forth in Schedule 6.2, from the date hereof to the Closing, Seller
will cause the business of the Division to be conducted in the ordinary course
in substantially the same manner as presently conducted and will make all
reasonable efforts consistent with past practices to preserve relationships with
customers, suppliers and others with whom the Division deals. Except as
contemplated by this Agreement, Seller will not do any of the following with
respect to the Division without the prior written consent of Buyer, which
consent will not be unreasonably withheld or delayed:
(a) adopt or amend in any material respect any Seller
Plan or collective bargaining agreement, except as required by law or insofar as
a collective bargaining agreement
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is then subject to negotiation in advance of its expiration in the ordinary
course;
(b) sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any material portion of its assets (other
than Excluded Assets), except in the ordinary course of business consistent with
past practice;
(c) enter into any lease of real property, except any
renewals of existing leases; or
(d) agree, whether in writing or otherwise, to do any
of the foregoing.
6.3 INSURANCE. Seller shall keep, or cause to be kept, all
insurance policies presently maintained relating to the Division and its
properties, or replacements therefor, in full force and effect through the close
of business on the Closing Date. Buyer will not have any rights under any such
insurance policies from and after the Closing Date.
6.4 ENVIRONMENTAL STUDY AND REMEDIATION.
(a) Seller agrees to retain Dames & Moore, or another
reputable environmental consulting firm selected by Seller, to perform a
Phase II environmental study of the Milwaukee Facility, and to obtain the Phase
II Report from such consulting firm as promptly as possible (without incurring
any additional charge over such firm's customary fees). The Phase II Report
shall indicate that Buyer may rely upon such Phase II Report. Seller further
agrees, at its own expense, to conduct any remediation suggested by the Report
to the extent required, in Seller's reasonable judgment, to cause the Milwaukee
Facility to conform to currently applicable standards applied by Governmental
Authorities. If Seller so determines that remediation is required and the same
is not completed by Seller prior to the Closing, Seller shall complete such
remediation as promptly as is reasonably feasible thereafter, and in a manner
that will minimize, consistent with reasonable commercial practices, the
disruption of the business of the Division. Buyer will cooperate with Seller
and will provide access to the Milwaukee Facility in order to permit Seller to
perform its obligations hereunder.
(b) In the event that as a result of the Phase II
investigation referred to above there is determined to be Hazardous Material
contamination at the Milwaukee Facility, Seller shall perform or cause to be
performed any further remedial investigation, clean-up, removal or other
remedial action necessary, in Seller's reasonable judgment, to cause the
Milwaukee Facility to conform to currently applicable standards applied by
Governmental Authorities ("Remedial Work"); PROVIDED,
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HOWEVER, that if such contamination is discovered prior to the Closing Date,
Seller shall have the right to terminate this Agreement prior to the Closing
Date in the event Seller reasonably determines that Remedial Work will cost in
excess of $500,000 in addition to amounts expended in connection with its
Phase I and II investigations; PROVIDED, HOWEVER, that in the event Seller so
terminates this Agreement, Seller shall reimburse Buyer (within 60 days of
Buyer's submission of itemized invoices in reasonable detail) for its out-of-
pocket expenses incurred to date in connection with the Transactions, but in no
event to exceed $100,000. In the event Seller does not so elect to terminate
this Agreement, Seller shall proceed to perform the Remedial Work in the manner
described in the penultimate sentence of Section 6.4(a) above, and Buyer shall
comply with the final sentence thereof.
6.5 TITLE COMMITMENT. Seller has furnished to Buyer a standard
form commitment for an owner's policy of title insurance (the "Title
Commitment") issued by Lawyers Title Insurance Corporation dated March 26, 1994
in the amount of $3,000,000. Buyer shall reimburse Seller for one-half of the
expense of the Title Commitment.
6.6 ACQUISITION PROPOSALS. Neither Seller nor any Person
authorized by Seller shall solicit, initiate or encourage any acquisition
proposal or engage in any discussion with respect thereto or provide information
to any other person, concerning a possible sale of the Assets or the business of
the Division.
6.7 ACCOUNTS RECEIVABLE. Seller agrees promptly to forward to
Buyer any and all proceeds from accounts receivable of the Division that are
received by Seller after the Closing Date. If, after the Closing Date, Seller
receives any payment from any Person who at the time of such payment has
outstanding accounts payable to Seller, on the one hand (for the purposes of
this Section, "Seller Accounts Receivable"), and to Buyer, on the other hand
(for the purposes of this Section, "Buyer Accounts Receivable"), and the payment
(a) does not indicate whether it is in respect of Seller Accounts Receivable or
Buyer Accounts Receivable or (b) indicates that it is in payment of both Seller
Accounts Receivable and Buyer Accounts Receivable without specifying the portion
to be allocated to each, then Seller and Buyer shall consult with one another to
determine the proper allocation of such payment; and, if they are unable to
reach agreement on the proper allocation, such payment shall be applied so as to
retire undisputed Seller Accounts Receivable and undisputed Buyer Accounts
Receivable in chronological order based upon the period of time such accounts
receivable have existed on the books of Seller, the Company or the Subsidiaries,
as applicable.
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6.8 NON-COMPETITION.
(a) Subject to the terms, conditions and exceptions of
this Section 6.8, Seller hereby covenants and agrees that neither it nor any
Affiliate controlled by it (a "Seller Affiliate"), for a period of five (5)
years from and after the Closing Date, will engage, directly or indirectly,
whether as principal, consultant, investor or otherwise, in the design,
development, fabrication, test or delivery of (i) 500-frame and larger motors,
(ii) mine motors, (iii) Navy service motors, (iv) secondary propulsion motors,
(v) synchronous motors and (vi) synchronous condensers in excess of 1,500 KVAR.
Notwithstanding anything to the contrary in this Section 6.8, the acquisition by
Seller of (a) any Person, less than 10% of the gross revenues of which are
derived from a business involving the production of any of the foregoing
products (a "Competitive Business"); PROVIDED that the foregoing business is not
thereafter expanded such that its revenues exceed 20% of the gross revenues of
such Person or (b) no more than 5% of any class of securities of a Person, if
such securities are traded in any public market (within or outside the United
States) or 15% of any class of privately held securities of a Person, in either
case if such Person derives 10% or more of its gross revenues from a Competitive
Business, shall not constitute a breach of this Section 6.8.
(b) Notwithstanding the provisions of Section 6.8(a),
nothing herein shall prohibit Seller or any Seller Affiliate from (i) selling,
marketing or servicing the products described in Section 6.8(a) or
(ii) designing, developing, fabricating, testing, delivering, selling, marketing
or servicing any ReCHILL Products. In addition, nothing herein shall prohibit
Seller or any Seller Affiliate from servicing any product it owns and uses or
from selling spare parts for products that it is permitted to sell hereunder.
(c) The prohibition in Section 6.8(a) shall apply to
all counties in the State of California and all similar political subdivisions
or regions in all states of the United States and all other geographical areas
worldwide. Seller agrees that, in connection with the purchase by Buyer of the
Assets and the Division, the time and geographic restrictions set forth above
are reasonable. Seller agrees that the remedy at law for any breach by it of
this Section 6.8(c) will be inadequate and that Buyer shall be entitled to
injunctive relief. The parties intend that the unenforceability or invalidity
of any term or provision of this Section 6.8(c) shall not render any other term
or provision contained herein unenforceable or invalid. If the activities
described in Section 6.8(a) or the period of time or the geographical area
covered by this Section 6.8 should be deemed too extensive, then the parties
intend that this Section 6.8 be construed to cover
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the maximum scope of business activities, period of time and geographical area
(not exceeding those specifically set forth herein) as may be permissible under
applicable law.
ARTICLE VII
COVENANTS OF BUYER
Buyer covenants and agrees as follows:
7.1 CONFIDENTIALITY. Buyer acknowledges that the information
being provided to it by Seller is subject to certain provisions regarding
confidentiality set forth in a letter of intent between Buyer and Seller dated
February 7, 1994 (the "Letter of Intent"), which provisions are incorporated
herein by reference. Effective upon, and only upon, the Closing, such
provisions will terminate; PROVIDED, HOWEVER, that Buyer acknowledges that such
provisions will terminate only with respect to information relating solely to
the Division; and PROVIDED, FURTHER, HOWEVER, that Buyer acknowledges that any
and all other information provided to it by Seller or Seller's representatives
concerning Seller shall remain subject to the confidentiality provisions of the
Letter of Intent after the Closing Date.
7.2 ACCOUNTS RECEIVABLE. Buyer agrees to promptly forward or
cause to be forwarded to Seller any and all proceeds from accounts receivable of
Seller that are received by Buyer or the Division after the Closing Date. If,
after the Closing Date, Buyer or the Company receives any payment from any
person who at the time of such payment has outstanding accounts payable to
Seller, on the one hand (for the purposes of this Section, "Seller Accounts
Receivable"), and to Buyer, on the other hand (for the purposes of this Section,
"Buyer Accounts Receivable"), and the payment (a) does not indicate whether it
is in respect of Seller Accounts Receivable or Buyers Accounts Receivable or
(b) indicates that it is in payment of both Seller Accounts Receivable and Buyer
Accounts Receivable without specifying the portion to be allocated to each, then
Seller and Buyer shall consult with one another to determine the proper
allocation of such payment; and, if they are unable to reach agreement on the
proper allocation, such payment shall be applied so as to retire undisputed
Seller Accounts Receivable and undisputed Buyer Accounts Receivable in
chronological order based upon the period of time such accounts receivable have
existed on the books of Seller or Buyer, as applicable.
7.3 WAIVER OF BULK SALES LAW COMPLIANCE. Buyer hereby waives
compliance by Seller with the requirements, if any, of Article 6 of the Uniform
Commercial Code as in force in any state in which Assets are located and all
other similar
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Requirements of Law applicable to bulk sales and transfers, to the extent
applicable to the Transactions.
7.4 EXCLUDED ASSETS AND INVENTORY. If, after the Closing Date,
Excluded Assets shall remain on the premises utilized or controlled by Buyer,
then (subject to the following sentence) Buyer shall take reasonable steps at
the expense of Seller to deliver such Excluded Assets to Seller, and so long as
such assets remain in Buyer's control, shall exercise reasonable care with
respect thereto, and in no event less care than with respect to its own
properties; PROVIDED, HOWEVER, that Buyer shall not be deemed to have any duty
to obtain insurance for such Excluded Assets (unless so required by the
Exclusive Manufacturing Agreement) to the extent they are not automatically
covered by Buyer's insurance policies. Notwithstanding the foregoing, the
Excluded Inventory shall remain at the Milwaukee Facility in an appropriate
location, at no charge to Buyer, until the earlier of (i) its sale by Seller and
(ii) the first anniversary of the Closing Date, and shall be afforded the degree
of care referred to in the preceding sentence. At the end of such time, either
Seller shall remove such inventory (at Seller's expense) or Buyer may charge a
reasonable warehousing fee to Seller for its continued storage.
7.5 INSURANCE. Buyer shall secure insurance with respect to
the Division from the Closing Date covering general liability and products
liability in amounts customary for the industry in which the Division operates.
7.6 COVENANT NOT TO COMPETE.
(a) Subject to the terms, conditions and exceptions of
this Section 7.6, Buyer hereby covenants and agrees that neither it nor any
Affiliate controlled by it (a "Buyer Affiliate"), for a period of five (5) years
from and after the Closing Date, will engage, directly or indirectly, whether as
principal, consultant, investor or otherwise, in the design, development,
fabrication, testing, delivery, sale, marketing or servicing of ReCHILL
Products.
(b) Notwithstanding the provisions of Section 7.6(a),
nothing herein shall prohibit Buyer from engaging in the activities contemplated
by the Exclusive Manufacturing Agreement. In addition, nothing herein shall
prohibit Buyer or any Buyer Affiliate from servicing any product it owns and
uses.
(c) The prohibition in Section 7.6(a) shall apply to
all counties in the State of California and all similar political subdivisions
or regions in all states of the United States and all other geographical areas
worldwide. Buyer agrees that, in connection with the purchase by Buyer of the
Assets and
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the Division, the time and geographic restrictions set forth above are
reasonable. Nothing contained in this section shall be construed to prohibit
Buyer or any Buyer Affiliate from investing in debt or equity securities of any
company engaged in any activity described in Section 7.6(a), the capital stock
of which company is listed on a national securities exchange or traded in the
over-the-counter markets, provided that the aggregate stock holdings of Buyer
and such Buyer Affiliates are less than ten percent (10%) of the outstanding
capital stock of such company. Buyer agrees that the remedy at law for any
breach by it of this Section 7.6 will be inadequate and that Buyer shall be
entitled to injunctive relief. The parties intend that the unenforceability or
invalidity of any term or provision of this Section 7.6 shall not render any
other term or provision contained herein unenforceable or invalid. If the
activities described in Section 7.6(a) or the period of time or the geographical
area covered by this Section 7.6 should be deemed too extensive, then the
parties intend that this Section 7.6 be construed to cover the maximum scope of
business activities, period of time and geographical area (not exceeding those
specifically set forth herein) as may be permissible under applicable law.
7.7 SURETY BOND. Buyer agrees that:
(a) On or before the 30th day following the Closing
Date, Buyer shall effect the release or cancellation of the existing Seller
surety bond in the amount of $1,350,000 for the benefit of Divane Brothers
Electric Company, and Seller shall have no further liability under such bond;
and
(b) On or before the 30th day following the Closing
Date, Buyer shall effect the release or cancellation of the existing Seller
surety bond in the amount of $847,500 for the benefit of EBARA Corporation, and
Seller shall have no further liability under such bond. On or before such 30th
day following the Closing Date, Buyer shall reimburse Seller for any theretofore
unreimbursed portion of the $22,310 purchase price thereof.
ARTICLE VIII
MUTUAL COVENANTS
Seller and Buyer each covenant and agree as follows:
8.1 PERMITS AND CONSENTS.
(a) As promptly as practicable after the date hereof,
Buyer and Seller shall make all filings with governmental bodies and other
regulatory authorities, and use all reasonable efforts to obtain all permits,
approvals,
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authorizations and consents of all third parties, required to consummate the
Transactions. Buyer and Seller shall furnish promptly to each other all
information that is not otherwise available to the other party and that such
party may reasonably request in connection with any such filing. Seller and
Buyer shall use reasonable efforts to obtain such consents to the assignment of
the Assigned Contracts as may be required. Buyer acknowledges that consents to
the Transactions may be required from parties to the Assigned Contracts, that
such consents have not been obtained and that Seller will not assign to Buyer at
the Closing any Assigned Contract that by its terms requires, prior to such
assignment, the consent of any other contracting party thereto unless such
consent has been obtained prior to the Closing Date.
(b) Buyer agrees that Seller shall not have any
liability whatsoever to Buyer arising out of or relating to the failure to
obtain any consents to the assignment of Contracts that may be required in
connection with the Transactions or because of the default, acceleration or
termination of any Assigned Contract as a result thereof. Buyer further agrees
that no representation, warranty or covenant of Seller contained herein shall be
breached or deemed breached, and no condition shall be deemed not satisfied, as
a result of (i) the failure to obtain any such consent or as a result of any
such acceleration or termination or (ii) any lawsuit, action, claim, proceeding
or investigation commenced or threatened by or on behalf of any Person arising
out of or relating to the failure to obtain any such consent or any such
acceleration or termination. Seller shall cooperate with Buyer in any
reasonable manner in connection with Buyer obtaining any such consents;
PROVIDED, HOWEVER, that such cooperation shall not include any requirement that
Seller commence any litigation or offer or grant any accommodation (financial or
otherwise) to any third party. The Purchase Price shall not be subject to
adjustment by reason of any such consents that are not obtained.
(c) With respect to each such Assigned Contract not
assigned on the Closing Date, after the Closing Date Seller shall continue to
deal with the other contracting party(ies) to such Assigned Contract as the
prime contracting party, and Buyer and Seller shall continue to use reasonable
efforts to obtain the consent of all required parties to the assignment of such
Assigned Contract. Such Assigned Contract shall be promptly assigned by Seller
to Buyer after receipt of such consent after the Closing Date. Notwithstanding
the absence of any such consent, Buyer shall be entitled to the benefits of such
Assigned Contract accruing after the Closing Date to the extent that Seller may
provide Buyer with such benefits without violating the terms of such contract;
and to the extent such benefits are so provided, Buyer agrees to perform at its
sole
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expense all of the obligations of Seller to be performed under such Assigned
Contract after the Closing Date.
8.2 COOPERATION. Buyer and Seller shall cooperate with each
other and shall cause their officers, employees, agents, auditors and
representatives to cooperate with each other after the Closing to ensure the
orderly transition of the Division to Buyer and/or its designated subsidiaries
and to minimize any disruption to the respective businesses of Seller or the
Division that might result from the transactions contemplated hereby. Neither
party shall be required by this Section 8.2 to take any action that would
unreasonably interfere with the conduct of its business.
8.3 REASONABLE EFFORTS. Subject to the terms and conditions of
this Agreement (including the limitations set forth in Section 8.1), each party
will use all reasonable efforts to cause the Closing to occur.
8.4 RECORDS. On the Closing Date, Seller shall deliver or
cause to be delivered to Buyer all Records (including copies of any material
records that would constitute Records under the definition thereof set forth in
Section 2.1(h) if such material records were located at the Milwaukee Facility)
included in the Assets, which are in the possession of Seller to the extent not
then in the possession of the Division, except any records relating to Excluded
Liabilities (including, without limitation, to any Seller Tax liability or to
any litigation or claim not assumed by Buyer hereunder). After the Closing,
upon reasonable written notice and at Buyer's sole expense, Seller agrees to
furnish or cause to be furnished to Buyer and its representatives (including its
auditors), access at reasonable times and during normal business hours to such
information relating to the Division in Seller's possession as is reasonably
necessary for financial reporting and accounting matters, the preparation and
filing of any Tax Returns, reports or forms or the defense of any Tax Claim or
assessment; PROVIDED, HOWEVER, that such access does not unreasonably disrupt
the normal operations of Seller.
8.5 ACCESS TO FORMER BUSINESS RECORDS.
(a) For a period of seven (7) years following the
Closing, Buyer will retain all Records (including any (i) records that relate to
Excluded Assets but would constitute Records if such records related to an Asset
and (ii) Records that cannot be segregated in a commercially reasonable manner
from the Assets or from records or assets of Buyer generated or acquired on or
after the Closing Date). During such period, Buyer will afford authorized
representatives of Seller (including its auditors) access to such Records at
reasonable times and during normal business hours at the principal business
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office of the Division, or at such other location or locations at which such
Records may be stored or maintained from time to time, and will permit such
representatives to make abstracts from, or copies of, any of such Records, or to
obtain temporary possession of any thereof as may be reasonably required by
Seller at Seller's sole cost and expense. During such period, Buyer will, at
Seller's expense (limited, however, to Buyer's reasonable out-of-pocket
expenditures without regard to any employee cost or other overhead expenses),
reasonably cooperate with Seller in furnishing information, evidence, testimony,
and other reasonable assistance in connection with any action, proceeding, Tax
audit, or investigation to which Seller or any of its Affiliates is subject
relating to the business of the Division prior to the Closing. The term
"Record" as used in this Section 8.5 shall include any data processing files or
other computerized data.
(b) Buyer acknowledges that there is currently pending
on appeal a judgment in favor of Seller in a matter arising from the Division's
activities titled WRIGHT-SCHUCART V. MAGNETEK, ET AL. (the "Litigation"). Buyer
acknowledges, without limiting the generality of the foregoing provisions of
this Section 8.5, that its obligations of cooperation with Seller, in the event
the Litigation is remanded for retrial, may include extensive devotion of time
(including travel, at the reasonable expense of Seller) of senior executives of
Buyer. Buyer expressly covenants to make such personnel as may be reasonably
requested by Seller available in the event of such retrial or of other future
proceedings relating to the Litigation.
8.6 USE OF TRADEMARK AND TRADE NAMES.
(a) Notwithstanding anything to the contrary in this
Agreement, Buyer may continue to use the name "MagneTek" and related trademarks,
corporate names, and trade names incorporating "MagneTek," and the stylized
"MagneTek" logos (i) in displays, signage and postings for the period after the
Closing Date necessary to permit the reasonably prompt removal of such names,
and only to the extent such displays, signage or postings exist on the Closing
Date; (ii) for a period of two years, to state the Company's former affiliation
with MagneTek (e.g., "formerly a division of MagneTek, Inc.") and (iii) to the
extent any such trade names, trademarks, service marks or logos appear on
stationery, packaging materials, supplies or inventory on hand as of the Closing
Date or on order at the time of the Closing, until such is exhausted.
(b) Notwithstanding anything to the contrary in this
Agreement, pursuant and subject to the terms of the License Agreement, until the
third anniversary of the Closing Date, Seller may continue to use the name
"Louis Allis" and related
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trademarks and tradenames incorporating "Louis Allis," and any stylized "Louis
Allis" logos to the extent permitted in the License Agreement.
8.7 REQUIRED MODIFICATIONS OR REPLACEMENTS OF PRODUCTS. The
following provisions of this Section 8.7 shall govern the responsibilities of
Buyer and Seller regarding Required Modifications:
(a) Buyer shall advise Seller promptly after becoming
aware of any Required Modifications to the products shipped by the Division on
or prior to the Closing Date to the extent Seller would be required to indemnify
Buyer for any claims in respect of such products.
(b) Whether or not Buyer gives the foregoing notice,
Buyer shall make any Required Modifications to products shipped by the Division
on or prior to the Closing Date which are necessary or advisable, in the
reasonable discretion of Seller. If the cost to Seller under Section 8.7(c) of
implementing any such Required Modification exceeds the cost to Seller of
replacing such products, Buyer shall replace such products. The obligation of
Buyer hereunder shall include, but not be limited to, such actions as Seller may
reasonably request for (i) the notification of customer and other third parties
in possession of the applicable products, (ii) the shipping of such products, if
necessary, to and from Buyer's facilities for modification, improvement,
enhancement or replacement, (iii) production of replacement products, parts or
supplies necessary for the implementation of the product modification,
enhancement, improvement or placement, (iv) the installation, modification or
replacement of the product by personnel of Buyer, either at the customer's
location or at Buyer's facilities, as appropriate, and (v) recordkeeping and
reports with respect to such product modifications, enhancements, improvements
or replacements to the extent required by law or reasonably requested by Seller.
(c) Seller shall reimburse Buyer for direct
manufacturing, installation, labor and materials costs incurred by Buyer in
installing or implementing any Required Modification under Section 8.7(b) or in
producing any replacement products, parts or supplies under Section 8.7(b),
together with all reasonable out-of-pocket shipping, postage and printing costs
incurred by Buyer in connection therewith.
8.8 CONDUCT OF BUSINESS. Effective on the Closing Date, Seller
shall cease conducting business at the Milwaukee Facility and shall execute any
forms reasonably required to evidence such cessation to the Taxing authorities
of the State of Wisconsin.
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ARTICLE IX
EMPLOYEE BENEFIT MATTERS
9.1 EMPLOYEE RETENTION. Buyer shall offer employment to
commence as of the Closing Date to all Division Employees, at the same
salaries and wages (including bonus and incentive programs) and on
substantially the same terms and conditions as those in effect immediately
prior to the Closing Date except (i) as to post-retirement health benefits
and (ii) the compensation payable to sales personnel. Buyer has no present
intention (subject to its discretion as to employee performance) to terminate
the employment of any Division Employee within the sixty (60) days following
the Closing Date, and Buyer assumes all obligations and liabilities, if any,
under the Worker Adjustment and Retraining Notification Act (the "WARN Act")
arising out of the Transactions. Buyer also agrees to comply with the terms
of the WARN Act following the Closing Date.
9.2 EMPLOYEE BENEFIT PLANS. Effective as of the Closing Date,
(a) Division Employees shall cease accruing any benefits under any Seller Plan,
and Seller shall take, or cause to be taken, all such action, if any, as may be
necessary to effect such cessation of participation and (b) Buyer shall
establish employee benefit plans for its employees not covered by the Collective
Bargaining Agreement providing benefits which in the aggregate are substantially
the same as the benefits provided to such Division Employees under Seller Plans
for such employees (the "Buyer's Benefit Plans"). All Division Employees will
be fully vested in their accrued benefits under Seller Plans qualified under
Code Section 401(k) and shall be treated as having terminated employment under
such Seller Plans for all applicable purposes; PROVIDED, HOWEVER, that nothing
herein shall be deemed to give rise to a claim for severance under the
Collective Bargaining Agreement. With respect to the Buyer's Benefit Plans,
Buyer shall grant all Division Employees from and after the Closing Date credit
for all service with Seller and its Affiliates and their respective predecessors
prior to the Closing Date for all purposes (other than the accrual of benefits
under a defined benefit or contributory pension plan, however, this proviso
shall not preclude Buyer from granting such credit) for which such service was
recognized by Seller and its Affiliates. With respect to Buyer's Benefit Plans
(and any plan established pursuant to Section 9.4) that provide medical or
dental benefits after the Closing Date, such plans shall waive any exclusions or
limitations with respect to pre-existing conditions and actively-at-work
exclusions. Buyer shall also cause its health plan(s) to be responsible for all
health benefit claims by Division Employees and their covered dependents for
services rendered after the Closing Date. Notwithstanding the foregoing, to the
extent services are rendered after the Closing Date, Buyer shall be responsible
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therefor, except as to Division Employees who have a condition prior to Closing
and who are covered pursuant to Seller's health maintenance organization
contract, which expires June 1, 1994, to the extent coverage is provided under
such health maintenance organization contract.
9.3 EMPLOYEES COVERED BY THE COLLECTIVE BARGAINING AGREEMENT.
Prior to, but effective as of, the Closing Date Buyer shall have entered into a
new collective bargaining agreement ("New CBA") covering the Division Employees
who are presently covered by the Collective Bargaining Agreement ("Bargaining
Employees") and, except for the matters set forth on Schedule 4.11, shall
expressly assume any and all of Seller's obligations and liabilities under the
Collective Bargaining Agreement arising on or after the Closing Date, except any
claims thereunder (without conceding any merit thereof) with respect to
severance pay or plant closing which are based upon the Transactions.
9.4 BARGAINING BENEFIT PLANS. Effective as of the Closing
Date, Buyer shall establish for the benefit of the Bargaining Employees such
employee benefit plans as are required by the New CBA.
9.5 VACATION AND HOLIDAY PAY. As of the Closing Date, Buyer
shall assume all of Seller's obligations for vacation and holiday pay to all
Division Employees.
9.6 ACCESS TO INFORMATION. Commencing with the date hereof and
continuing to the Closing Date and thereafter, Seller shall make reasonably
available to Buyer such actuarial, financial, personnel and related information
as may be reasonably requested by Buyer with respect to any Seller Plan as it
relates to a Division Employee, including, but not limited to, compensation and
employment histories.
9.7 THIRD-PARTY BENEFICIARIES. No provision of this Article IX
shall create any third-party beneficiary rights in any employee or former
employer of the Division (including any beneficiary or dependent thereof),
including, without limitation, any right to continued employment or employment
in any particular position with Buyer for any specified period of time after the
Closing Date.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY SELLER. Subject to the terms and
conditions of this Article X, Seller shall indemnify Buyer and each of its
officers, directors, employees and agents against, and hold them harmless from,
any Loss suffered or
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incurred by any such Indemnified Person (other than any relating to
environmental matters, for which indemnification provisions are set forth in
Section 10.3) to the extent arising from (a) if the Closing occurs, any breach
of any representation or warranty of Seller contained in this Agreement which
survives the Closing or in any certificate, instrument or other document
delivered pursuant hereto, (b) any breach of any covenant of Seller contained in
this Agreement requiring performance after the Closing Date or (c) if the
Closing occurs, the existence of, or the failure of Seller to pay, perform and
discharge when due, any of the Excluded Liabilities (including, without
limitation, any Losses as a result of the failure of Seller to comply with any
Bulk Sales Laws referred to in Section 7.3); PROVIDED, HOWEVER, that Seller
shall not have any liability under this Section 10.1 unless the aggregate of all
Losses relating thereto for which Seller would, but for this proviso, be liable
exceeds on a cumulative basis with Losses for which Buyer is indemnified under
Section 10.3, an amount equal to $50,000 (and then only to the extent of any
such excess); and PROVIDED FURTHER, HOWEVER, that Seller's aggregate liability
under this Section 10.1 and Section 10.3 shall in no event exceed $5,000,000.
Notwithstanding the foregoing, (i) Seller shall have no obligation to indemnify
Buyer for Losses, whether or not they result from the breach of a representation
or warranty of Seller, if Buyer's representation and warranty in Section 5.6 has
been breached as to the same matter, and the Losses sustained by Buyer in such
matter shall not be cumulatively counted towards the $50,000 threshold, (ii) the
covenant of Seller to perform remediation pursuant to Section 6.4 shall not be
subject to any minimum or maximum liability in the event of indemnification of
Buyer for Seller's breach thereof and (iii) Seller shall have no obligation to
indemnify Buyer with respect to any Loss, including but not limited to, any
breach of the representations set forth in Section 4.5, which is within the
scope of the Title Commitment, and Buyer agrees that its sole recourse with
respect to such matters shall be against the issuer of the Title Commitment.
10.2 INDEMNIFICATION BY BUYER. Subject to the terms and
conditions of this Article X, Buyer shall indemnify Seller and each of its
officers, directors, employees and agents against, and hold them harmless from,
any Loss suffered or incurred by any such Indemnified Person (other than any
relating to environmental matters, for which indemnification provisions are set
forth in Section 10.3) to the extent arising from (a) if the Closing occurs, any
breach of any representation or warranty of Buyer contained in this Agreement
which survives the Closing or in any certificate, instrument or other document
delivered pursuant hereto or in connection herewith, (b) any breach of any
covenant of Buyer contained in this Agreement requiring performance after the
Closing Date, (c) if the Closing occurs, the existence of, or the failure of
Buyer to pay, perform and
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discharge when due, any of the Assumed Liabilities and (d) if the Closing
occurs, the ongoing operations of Buyer and the Assets after the Closing Date;
PROVIDED, HOWEVER, that Buyer shall not have any liability under this
Section 10.2 unless the aggregate of all Losses relating thereto for which Buyer
would, but for this proviso, be liable exceeds on a cumulative basis with Losses
for which Seller is indemnified under Section 10.3, an amount equal to $50,000
(and then only to the extent of such excess); and PROVIDED FURTHER, HOWEVER,
that Buyer's aggregate liability under clauses (a) and (b) of this Section 10.2
shall in no event exceed $5,000,000.
10.3 INDEMNIFICATION FOR ENVIRONMENTAL MATTERS. Subject to the
terms and conditions of this Article X, Seller shall indemnify and hold Buyer
harmless from and against all Losses resulting from claims or demands by any
Governmental Agency or any third party which is unrelated to Buyer or its
Affiliates arising under any Environmental Law to the extent such Losses (a) are
attributable to Seller's use and/or occupancy of any premises owned or used by
Seller prior to the Closing Date (a "Seller Facility") or to Hazardous Materials
transported offsite from a Seller Facility for treatment, storage or disposal
prior to the Closing, (b) are not attributable to acts or omissions (whether
before or after the Closing) that are within the Knowledge of Buyer and
(c) exceed, on a cumulative basis with Losses for which Buyer is indemnified
under Section 10.1, an amount equal to $50,000; but only to the extent of such
excess and PROVIDED, FURTHER, that Seller's aggregate liability under this
Section 10.3 and Section 10.1 shall in no event exceed $5,000,000. Seller's
indemnification liability hereunder (and its remediation obligation under
Section 6.4) shall in no event be construed to extend to or include any
remediation or other liability arising as a result of the presence of asbestos
in or upon any of the improvements located on the Division Property at any time.
Seller's obligation to indemnify Buyer under this Section 10.3 (but not the
covenant of Seller to perform remediation pursuant to Section 6.4, which is
governed by Section 10.1 hereof) shall expire on the second anniversary of the
Closing Date, and Buyer hereby expressly releases Seller from and after such
second anniversary from any liability in respect of the matters covered by such
indemnification, whether arising by statute or common law, or otherwise. Seller
shall have no obligation to indemnify Buyer with respect to conditions that
existed prior to Seller's use or occupancy of any Seller Facility. Buyer shall
indemnify and hold Seller harmless from and against all Losses resulting from
claims or demands by any Governmental Agency or private party arising under any
Environmental Law to the extent such Losses are attributable to Buyer's use
and/or occupancy of any Seller Facility.
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10.4 LOSSES NET OF INSURANCE, ETC.
(a) The amount of any Loss for which indemnification is
provided under this Article X shall be net of any amounts recovered or
recoverable by the Indemnified Person under insurance policies with respect to
such Loss and of any reserve in respect thereof reflected on the Closing Balance
Sheet.
(b) If the Indemnifying Person makes any payment under
this Article X in respect of any Loss, the Indemnifying Person shall be
subrogated, to the extent of such payment, to the rights of the Indemnified
Person against any insurer or third party with respect to such Losses.
(c) Notwithstanding anything to the contrary elsewhere
in this Agreement, no Indemnifying Person shall, in any event, be liable to the
other party for any consequential damages, including, but not limited to, loss
of revenue or income, cost of capital, or loss of business reputation or
opportunity relating to the breach or alleged breach of this Agreement. Each
party agrees that it will not seek punitive damages as to any matter under,
relating to or arising out of the Transactions.
(d) The parties hereto agree that the indemnification
provisions of this Article X are intended to provide the exclusive remedy as to
all Losses either may incur arising from or relating to the Transactions, and
each party hereby waives, to the extent they may do so, any other rights or
remedies that may arise under any applicable statute, rule or regulation.
10.5 TERMINATION OF INDEMNIFICATION. The obligations to
indemnify and hold harmless a party hereto, (A) pursuant to Sections 10.1(a)
and 10.2(a), shall terminate when the applicable representation or warranty
terminates pursuant to Section 10.8, (B) pursuant to Section 10.3, shall
terminate as set forth therein and (C) pursuant to Sections 10.1(b) and
10.2(b), shall terminate on the second anniversary of the Closing Date;
PROVIDED, HOWEVER, that as to clauses (A), (B) and (C) above, such
obligations to indemnify and hold harmless shall not terminate with respect
to any item as to which the person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice (stating in reasonable detail the basis of such claim) to the
Indemnifying Person. For avoidance of doubt, in the event any of the
remediation required to be performed by Seller pursuant to Section 6.4 is not
completed prior to the second anniversary of the Closing Date, any breach of
such covenant occurring after such second anniversary shall nevertheless give
rise to an indemnification obligation on the part of Seller, and
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the other provisions of this Article X shall continue to govern any claim of
Buyer for indemnification in respect thereof.
10.6 PROCEDURES RELATING TO INDEMNIFICATION (OTHER THAN FOR TAX
CLAIMS). In order for an Indemnified Person to be entitled to any
indemnification provided for under this Agreement (other than for Tax Claims) in
respect of, arising out of or involving a claim or demand made by any Person
against the Indemnified Person (a "Third-Party Claim"), such Indemnified Person
must notify the Indemnifying Person in writing, and in reasonable detail, of the
Third-Party Claim within 10 Business Days after receipt by such Indemnified
Person of written notice of the Third-Party Claim; PROVIDED, HOWEVER, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Person shall have been actually
prejudiced as a result of such failure (except that the Indemnifying Person
shall not be liable for any Losses incurred during the period in which the
Indemnified Person failed to give such notice). Thereafter, the Indemnified
Person shall deliver to the Indemnifying Person, within five Business Days after
the Indemnified Person's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Person relating to the
Third-Party Claim.
If a Third-Party Claim is made against an Indemnified Person, the
Indemnifying Person will be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Person and reasonably satisfactory to the Indemnified Person.
Should the Indemnifying Person so elect to assume the defense of a Third-Party
Claim, the Indemnifying Person will not be liable to the Indemnified Person for
legal fees and expenses subsequently incurred by the Indemnified Person in
connection with the defense thereof. If the Indemnifying Person assumes such
defense, the Indemnified Person shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Person, it being understood that the
Indemnifying Person shall control such defense. The Indemnifying Person shall
be liable for the fees and expenses of counsel employed by the Indemnified
Person for any period during which the Indemnifying Person has not assumed the
defense thereof (other than during any period in which the Indemnified Person
shall have failed to give notice of the Third-Party Claim as provided above).
If the Indemnifying Person chooses to defend or prosecute any Third-Party Claim,
all the parties hereto shall cooperate in the defense or prosecution thereof.
Such cooperation shall include the retention and (upon the Indemnifying Person's
request) the provision to the Indemnifying Person of records and information
which are reasonably relevant to such Third-Party Claim, and making employees
available on a
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mutually convenient basis in the manner specified in Section 8.5 hereof to
provide additional information and explanation of any material provided
hereunder. Notwithstanding the foregoing, in the event a Third-Party Claim is
made against Seller as to which Seller is entitled to seek indemnification under
this Article X and Seller concludes, in its reasonable judgment, that Buyer
lacks the financial and personnel resources to vigorously defend Seller from
such Third-Party Claim, Seller may elect to retain the defense of such
Third-Party Claim and shall be entitled to be reimbursed by Buyer for its Losses
incurred in such defense, such expenditures to be reimbursed promptly after
submission of invoices therefor. Whether or not the Indemnifying Person shall
have assumed the defense of a Third-Party Claim, the Indemnified Person shall
not admit any liability with respect to, or settle, compromise or discharge,
such Third-Party Claim without the Indemnifying Person's prior written consent
(which consent shall not be unreasonably withheld or delayed). All Tax Claims
(as defined in Section 10.7) shall be governed by Section 10.7.
10.7 PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS.
(a) If a claim shall be made by any Tax authority,
which, if successful, might result in an indemnity payment to any Person
hereunder (a "Tax Indemnitee"), the Tax Indemnitee shall promptly notify the
party against whom indemnification is sought (the "Tax Indemnitor") in writing
of such claim (a "Tax Claim"). If notice of a Tax Claim is not given to the Tax
Indemnitor within a sufficient period of time to allow the Tax Indemnitor to
effectively contest such Tax Claim, or in reasonable detail to apprise the Tax
Indemnitor of the nature of the Tax Claim, in each case taking into account the
facts and circumstances with respect to such Tax Claim, the Tax Indemnitor shall
not be liable to the Tax Indemnitee to the extent that the Tax Indemnitor's
ability to effectively contest such Tax Claim is actually prejudiced as a result
thereof.
(b) With respect to any Tax Claim, the Tax Indemnitor
shall control all proceedings taken in connection with such Tax Claim
(including, without limitation, selection of counsel) and, without limiting the
foregoing, may in its sole discretion (and at its sole cost and expense) pursue
or forego any and all administrative appeals, proceedings, hearings and
conferences with any taxing authority with respect thereto and may, in its sole
discretion, either pay the Tax claimed and sue for a refund where applicable law
permits such refund suits or contest the Tax Claim in any permissible manner;
PROVIDED, HOWEVER, that the Tax Indemnitor shall not settle or compromise a Tax
Claim without giving 30 days' prior notice to the Tax Indemnitee, and without
the Tax Indemnitee's consent, which shall not be unreasonably withheld or
delayed, if such settlement or compromise would have a material adverse effect
on
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the Tax liabilities of the Tax Indemnitee, its Affiliates or any member of its
affiliated group. The Tax Indemnitee, and each of its Affiliates, shall
cooperate with the Tax Indemnitor in contesting any Tax Claim, which cooperation
shall include, without limitation, the retention and (upon the Tax Indemnitor's
request) the provision to the Tax Indemnitor of Records and information which
are reasonably relevant to such Tax Claim, and making employees available on a
mutually convenient basis to provide additional information or explanation of
any material provided hereunder or to testify at proceedings relating to such
Tax Claim.
10.8 SURVIVAL OF REPRESENTATIONS. The representations and
warranties in this Agreement and in any other document delivered in connection
herewith shall survive the Closing solely for purposes of Sections 10.1(a) and
10.2(a) and shall terminate at the close of business on the second anniversary
of the Closing Date except for the representations and warranties in Section 4.3
hereof, which shall survive until the expiration of the applicable statute of
limitations. Representations and warranties relating to environmental matters
in Section 4.10 shall not survive the Closing; however, the covenant in
Section 6.4 shall be governed by Section 10.1 and Seller and Buyer's
indemnification obligations as to environmental matters, which are not covered
by Section 6.4, shall be governed by Section 10.3.
ARTICLE XI
GENERAL PROVISIONS
11.1 ASSIGNMENT. Prior to the Closing, this Agreement and the
rights and obligations hereunder shall not be assignable or transferable by
Buyer (including by operation of law in connection with a merger or sale of
substantially all the assets, of Buyer) without the prior written consent of
Seller; PROVIDED, HOWEVER, that Buyer may assign its right to purchase the
Assets hereunder to an Affiliate of Buyer that can accurately make all of
Buyer's representations and warranties as of the Closing without the prior
written consent of Seller; PROVIDED FURTHER, HOWEVER, that no assignment shall
limit or affect Buyer's obligations hereunder.
11.2 NO THIRD-PARTY BENEFICIARIES. Except as provided in
Article X as to Indemnified Persons, this Agreement is for the sole benefit of
the parties hereto and their permitted assigns and nothing herein expressed or
implied shall give or be construed to give to any person or entity, other than
the parties hereto and such assigns, any legal or equitable rights hereunder.
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11.3 TERMINATION.
(a) Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated (except as set forth in
Section 11.3(c)) and the Transactions abandoned at any time prior to the Closing
Date:
(i) by mutual written consent of
Seller and Buyer;
(ii) by Seller pursuant to Section 6.4
or if any of the conditions set forth in Section 3.1
shall have become incapable of fulfillment, and shall
not have been waived by Seller;
(iii) by Buyer if any of the conditions
set forth in Section 3.2 shall have become incapable of
fulfillment, and shall not have been waived by Buyer; or
(iv) by either party hereto, if the
Closing does not occur on or prior to May 27, 1994.
(b) In the event of termination by Seller or Buyer
pursuant to this Section 11.3, written notice thereof shall forthwith be given
to the other party and the Transactions shall be terminated, without further
action by either party. If the Transactions are terminated as provided herein:
(i) Buyer shall return all documents
and copies and other material received from Seller
relating to the Transactions, whether so obtained before
or after the execution hereof, to Seller;
(ii) all confidential information
received by Buyer with respect to the Division and
Seller shall be treated in accordance with the
applicable provisions of the Letter of Intent which
shall remain in full force and effect notwithstanding
the termination of this Agreement.
(c) If this Agreement is terminated and the
transactions contemplated hereby are abandoned as described in this
Section 11.3, this Agreement shall become void and of no further force and
effect, except for the provisions of (i) Section 7.1 relating to the obligation
of Buyer to keep confidential certain information and data obtained by it,
(ii) Section 11.4 relating to certain expenses, (iii) Section 12.5 relating to
attorney fees and expenses,
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(iv) Section 11.11 relating to finder's fees and broker's fees and (v) this
Section 11.3. Nothing in this Section 11.3 shall be deemed to release either
party from any liability for any breach by such party of the terms and
provisions of this Agreement which occurred prior to its termination or to
impair the right of either party to compel specific performance by the other
party of its obligations under this Agreement.
11.4 EXPENSES. Whether or not the Transactions are consummated,
and except as otherwise provided in this Agreement, all fees, costs and expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such fees, costs or expenses.
11.5 ATTORNEYS' FEES. Should any litigation be commenced
concerning this Agreement or the rights and duties of any party with respect to
it, the party prevailing shall be entitled, in addition to such other relief as
may be granted, to a reasonable sum for such party's attorney fees and expenses
determined by the court in such litigation or in a separate action brought for
that purpose.
11.6 AMENDMENTS. No amendment to this Agreement shall be
effective unless it shall be in writing and signed by both parties hereto.
11.7 NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent prepaid telex, cable or telecopy, or sent, postage prepaid, by
registered, certified or express mail, or reputable overnight courier service
and shall be deemed given when so delivered by hand, telexed, cabled or
telecopied, or if mailed, three days after mailing (one business day in the case
of express mail or overnight courier service), as follows:
(i) if to Buyer, to:
The Louis Allis Company
427 East Stewart Street
P.O. Box 2020
Milwaukee, Wisconsin 53201-2020
Attention: Daniel E. Stetler, President
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5367
Attention: Luke E. Sims, Esq.
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(ii) if to Seller, to:
MagneTek, Inc.
11150 Santa Monica Boulevard
15th Floor
Los Angeles, California 90025
Attention: Samuel A. Miley, Esq.
General Counsel
with a copy to:
Gibson, Dunn & Crutcher
2029 Century Park East
Suite 4200
Los Angeles, California 90067
Attention: Jennifer Bellah, Esq.
11.8 INTERPRETATION; EXHIBITS AND SCHEDULES. The headings
contained in this Agreement, in any Exhibit or Schedule hereto and in the table
of contents to this Agreement, are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Any matter
disclosed in one Schedule hereto shall be deemed incorporated by reference into
each other Schedule hereto and disclosed in each such Schedule. All Exhibits
and Schedules annexed hereto or referred to herein are hereby incorporated in
and made a part of this Agreement as if set forth in full herein. Any
capitalized terms used in any Schedule or Exhibit, but not otherwise defined
therein, shall have the meaning as defined in this Agreement.
11.9 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each of the parties and delivered to the other party.
11.10 ENTIRE AGREEMENT. This Agreement and the other Transaction
Documents contain the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior oral
and written agreements and understandings (including, without limitation, the
Letter of Intent except as to the confidentiality provisions thereof) relating
to such subject matter.
11.11 FEES. Each party hereto hereby represents and warrants
that no broker or finder has acted for such party in connection with this
Agreement or the transactions contemplated hereby or may be entitled to any
brokerage fee, finder's fee or commission in respect thereof.
11.12 SEVERABILITY. If any provision of this Agreement or the
application of any such provision to any person
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or circumstance shall be held invalid, illegal or unenforceable in any respect
by a court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision hereof.
11.13 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
MAGNETEK, INC.
By:/s/John P. Colling, Jr.
------------------------
Name: John P. Colling, Jr.
Title: Vice President and
Treasurer
THE LOUIS ALLIS COMPANY
By:/s/Daniel E. Stetler
------------------------
Name: Daniel E. Stetler
Title: President
47
<PAGE>
[Execution Copy]
- -------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
among
MAGNETEK, INC.,
MAGNETEK CONTROLS, INC.
and
CONTROLS ACQUISITION CORPORATION
-----------------------------------------
Dated as of June 17, 1994
-----------------------------------------
SALE OF MAGNETEK CONTROLS, INC.
AND THE MAGNETEK TRANSDUCERS DIVISION
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . . . 7
ARTICLE II CLOSING; PURCHASE PRICE ADJUSTMENT. . . . . . . . . . . . 7
2.1 Sale and Transfer of the Assets . . . . . . . . . . . . . 7
2.2 Assets Not Transferred. . . . . . . . . . . . . . . . . . 9
2.3 Assumed Liabilities . . . . . . . . . . . . . . . . . . . 10
2.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.5 Purchase Price Adjustment . . . . . . . . . . . . . . . . 14
2.6 Tax Allocation. . . . . . . . . . . . . . . . . . . . . . 17
2.7 Sales and Use Tax . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . 18
3.1 Buyer's Obligation. . . . . . . . . . . . . . . . . . . . 18
3.2 Sellers' Obligation . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . 21
4.1 Authority; Corporate Matters;
No Conflicts; Governmental Consents . . . . . . . . . . . 21
4.2 Financial Statements; Absence of Changes. . . . . . . . . 22
4.3 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.4 Assets Other than Real Property Interests . . . . . . . . 25
4.5 Real Property . . . . . . . . . . . . . . . . . . . . . . 26
4.6 Intellectual Property . . . . . . . . . . . . . . . . . . 27
4.7 Contracts . . . . . . . . . . . . . . . . . . . . . . . . 28
4.8 Litigation; Decrees . . . . . . . . . . . . . . . . . . . 29
4.9 Employee and Related Matters. . . . . . . . . . . . . . . 30
4.10 Environmental Matters . . . . . . . . . . . . . . . . . . 30
4.11 Employee and Labor Relations. . . . . . . . . . . . . . . 31
4.12 Assets Owned by Affiliates. . . . . . . . . . . . . . . . 31
4.13 Compliance with Law; Governmental Authorizations. . . . . 32
4.14 Assets of the Business. . . . . . . . . . . . . . . . . . 32
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . 32
5.1 Authority; No Conflicts; Governmental Consents. . . . . . 32
5.2 Actions and Proceedings, Etc. . . . . . . . . . . . . . . 33
5.3 Inconsistent Representations. . . . . . . . . . . . . . . 33
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ARTICLE VI COVENANTS OF SELLERS. . . . . . . . . . . . . . . . . . . 34
6.1 Access. . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.2 Ordinary Conduct. . . . . . . . . . . . . . . . . . . . . 35
6.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 35
6.4 Title Commitment. . . . . . . . . . . . . . . . . . . . . 35
6.5 Acquisition Proposals . . . . . . . . . . . . . . . . . . 36
6.6 Accounts Receivable . . . . . . . . . . . . . . . . . . . 36
6.7 Disclosure of Information; Non-Competition. . . . . . . . 37
6.8 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.9 Removal of Liens. . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VII COVENANTS OF BUYER. . . . . . . . . . . . . . . . . . . . 39
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . 39
7.2 Accounts Receivable . . . . . . . . . . . . . . . . . . . 39
7.3 Excluded Assets . . . . . . . . . . . . . . . . . . . . . 40
7.4 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VIII MUTUAL COVENANTS. . . . . . . . . . . . . . . . . . . . . 40
8.1 HSR Filings; Permits and Consents . . . . . . . . . . . . 40
8.2 Cooperation . . . . . . . . . . . . . . . . . . . . . . . 41
8.3 Publicity . . . . . . . . . . . . . . . . . . . . . . . . 42
8.4 Reasonable Efforts. . . . . . . . . . . . . . . . . . . . 42
8.5 Records . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.6 Access to Former Business Records . . . . . . . . . . . . 42
8.7 Use of Trademark and Trade Names. . . . . . . . . . . . . 43
8.8 Required Modifications or Replacements of Products. . . . 43
8.9 Assumed Litigation. . . . . . . . . . . . . . . . . . . . 44
8.10 Waiver of Bulk Sales Law Compliance . . . . . . . . . . . 45
8.11 Further Instruments and Assurances. . . . . . . . . . . . 45
ARTICLE IX EMPLOYEE BENEFIT MATTERS. . . . . . . . . . . . . . . . . 46
9.1 Employee Retention. . . . . . . . . . . . . . . . . . . . 46
9.2 Employee Benefit Plans. . . . . . . . . . . . . . . . . . 46
9.3 Vacation and Holiday Pay. . . . . . . . . . . . . . . . . 47
9.4 Access to Information . . . . . . . . . . . . . . . . . . 47
9.5 No Third Party Beneficiary. . . . . . . . . . . . . . . . 47
ARTICLE X INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 48
10.1 Indemnification by Sellers. . . . . . . . . . . . . . . . 48
10.2 Indemnification by Buyer. . . . . . . . . . . . . . . . . 48
10.3 Indemnification for Environmental Matters.. . . . . . . . 49
10.4 Losses Net of Insurance, Etc. . . . . . . . . . . . . . . 50
10.5 Termination of Indemnification. . . . . . . . . . . . . . 51
10.6 Procedures Relating to Indemnification (Other than
for Tax Claims) . . . . . . . . . . . . . . . . . . . . . 51
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10.7 Procedures Relating to Indemnification of Tax Claims. . . 53
10.8 Survival of Representations . . . . . . . . . . . . . . . 54
10.9 Parties Free to Refer to Obligations of the Other . . . . 54
10.10 Interest. . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE XI GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . 54
11.1 Benefits of Agreement; Assignment . . . . . . . . . . . . 54
11.2 No Third-Party Beneficiaries. . . . . . . . . . . . . . . 55
11.3 Termination . . . . . . . . . . . . . . . . . . . . . . . 55
11.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 56
11.5 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . 56
11.6 Amendment, Modification and Waiver. . . . . . . . . . . . 57
11.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.8 Interpretation; Exhibits and Schedules. . . . . . . . . . 58
11.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 58
11.10 Entire Agreement. . . . . . . . . . . . . . . . . . . . . 58
11.11 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.12 Severability. . . . . . . . . . . . . . . . . . . . . . . 59
11.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . 59
EXHIBIT A Form of Bulk Bill of Sale, Assignment and
Assumption Agreement. . . . . . . . . . . . . . . . . . . 1
EXHIBIT B Supply Agreement. . . . . . . . . . . . . . . . . . . . . 1
EXHIBIT C Escrow Agreement. . . . . . . . . . . . . . . . . . . . . 1
EXHIBIT D Form of Opinion of Gibson, Dunn & Crutcher. . . . . . . . 1
EXHIBIT E Form of Opinion of General Counsel of MagneTek, Inc.. . . 1
EXHIBIT F Form of Opinion of O'Sullivan Graev & Karabell. . . . . . 1
iii
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SCHEDULES
- ---------
Schedule 2.1(a) Owned Property
Schedule 2.1(b) Leased Property
Schedule 2.6 Purchase Price Allocation [post signing]
Schedule 4.1(b) Jurisdictions where the Business does business
Schedule 4.1(c) Capital Stock Owned By Controls
Schedule 4.1(d) Seller Consents
Schedule 4.2(a) Financial Statements
Schedule 4.2(b) Additional Liabilities
Schedule 4.2(c) Changes since December 31, 1993
Schedule 4.3 Taxes
Schedule 4.4 Liens
Schedule 4.5 Real Property and Leases
Schedule 4.6 Intellectual Property
Schedule 4.7 Contracts
Schedule 4.8 Litigation
Schedule 4.9(a),(b) Employee and Related Matters
Schedule 4.11 Labor Matters
Schedule 4.12 Assets Owned by Affiliates
Schedule 4.13 Compliance with Law
Schedule 5.1(b) Conflicts
Schedule 6.2 Exceptions to Ordinary Course
Schedule 6.7 Products Covered by Noncompete Agreement
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of June 17, 1994, between MAGNETEK,
INC., a Delaware corporation ("MagneTek"), MAGNETEK CONTROLS, INC., a Delaware
corporation ("Controls"; and together with MagneTek, the "Sellers") and CONTROLS
ACQUISITION CORPORATION, a Delaware corporation (the "Buyer").
MagneTek, through its MagneTek Transducers Division (the "Division"),
and Controls are engaged in the business (the "Business") of developing,
manufacturing, selling and distributing various products, including rotary cam
limit switches, programmable limit switches, tank monitoring systems, industrial
brakes, pressure and position transducers, accelerometers, programmable logic
controllers and other products related to the foregoing. The parties hereto
desire that the Sellers sell, transfer, convey and assign to the Buyer all of
the assets, properties, interests in properties and rights used primarily in,
held for use primarily in or otherwise relating to the Business, and that the
Buyer purchase and acquire the same, subject to the assumption by the Buyer of
certain liabilities and obligations of the Sellers relating to the Business,
upon the terms and subject to the conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Affiliate" has the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act by the SEC, as in effect on the date hereof.
"Assets" has the meaning set forth in Section 2.1.
"Assigned Contracts" has the meaning set forth in Section 2.1(f).
"Assumed Liabilities" has the meaning set forth in Section 2.3.
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"Assumed Litigation" has the meaning set forth in Section 2.3(b).
"Bill of Sale, Assignment and Assumption Agreement" means a Bill of
Sale, Assignment and Assumption Agreement in substantially the form attached
hereto as Exhibit A.
"Business" has the meaning set forth in the preamble.
"Business Day" means a day other than a Saturday or a Sunday or other
day on which commercial banks in New York are authorized or required by law to
close.
"Business Employee" means any individual actively employed by either
Seller working primarily for the Business on the Closing Date, including any
such employee on vacation or illness leave on such date.
"Business Property" has the meaning set forth in Section 4.5 hereto.
"Claim" means any claim, demand, assessment, action, arbitration,
suit, proceeding, investigation, cause of action, litigation, judgment, order or
decree.
"Closing Balance Sheet" has the meaning set forth in Section 2.5.
"Closing Date" means the day on which the Closing occurs pursuant to
Section 2.4.
"Closing Net Assets" has the meaning set forth in Section 2.5(a).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Confidential Information" has the meaning set forth in Section 6.7.
"Contract" means any contract, agreement, instrument, license, lease,
sales or purchase order or other legally binding commitment or undertaking,
whether written or oral, to which Controls is a party or to which MagneTek or
the Business is a party and relating primarily to the Business.
"Contractual Obligation" means, as to any Person, any provision of any
note, bond or security issued by such Person or of any mortgage, indenture, deed
of trust, lease, license, franchise, contract, agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property or assets is subject.
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"December Balance Sheet" means the unaudited balance sheet of the
Business as of December 31, 1993, attached hereto as part of Schedule 4.2, which
shows the adjustments made to the Interim Balance Sheet to arrive at the
December 31 Balance Sheet.
"Employee Benefit Arrangements" means each and all pension,
supplemental pension, accidental death and dismemberment, life and health
insurance and benefits (including medical, dental, vision and hospitalization),
short and long-term disability, savings, bonus, deferred compensation, incentive
compensation, holiday, vacation, severance pay, salary continuation, sick pay,
sick leave, tuition refund, service award, company car, scholarship, relocation,
patent award, fringe benefit, flexible spending account programs and other
employee benefit arrangements, plans, contracts or policies or practices
providing employee or executive compensation or benefits to Business Employees,
other than the Employee Benefit Plans.
"Employee Benefit Plans" means each and all "employee benefit plans,"
as defined in Section 3(3) of ERISA, maintained or contributed to by Sellers or
in which Sellers participate or participated and which provides benefits to
Business Employees, including (i) any such plans that are "employee welfare
benefit plans" as defined in Section 3(1) of ERISA and (ii) any such plans that
are "employee pension benefit plans" as defined in Section 3(2) of ERISA.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Resource Conservation
and Recovery Act of 1976, as amended, and any other applicable statutes,
regulations, rules, ordinances or codes or any order, decree, consent decree or
similarly binding instrument from a court or other Governmental Authority which
relate to the protection of human health or the environment, including but not
limited to, any of the foregoing regulating the presence, manufacture, transfer,
generation, production, refinement, pumping, processing, distribution, use,
treatment, storage, transport, handling, abatement, remediation, clean up or
removal of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Escrow Agent" means Commerce Escrow Agent (or other party serving as
successor escrow agent under the Escrow Agreement).
"Escrow Agreement" means an escrow agreement to be entered into by
Sellers and Buyer on the Closing Date relating
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to the escrow of $2,300,000 of the purchase price pending final determination
thereof in substantially the form of Exhibit C hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations of the SEC promulgated from
time to time thereunder.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.3.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means any nation or government, any state,
local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Hazardous Material" means any substance: (i) which is defined as a
hazardous waste, hazardous substance, pollutant or contaminant under any
Environmental Law, (ii) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is
regulated by any Governmental Authority, or (iii) which contains gasoline,
diesel fuel or other petroleum hydrocarbons.
"Hired Employees" has the meaning set forth in Section 9.1.
"Knowledge of Sellers" with reference to any of the representations
and warranties of Sellers means (i) the actual knowledge of the following
individuals: David P. Reiland, John P. Colling, Jr., Samuel A. Miley, Dennis
Hatfield, Brian Dundon, Dennis Berndt, Thomas Kmak, John Steiner and Kent
Kirchstein; PROVIDED, HOWEVER, that any such individual shall be deemed to have
had actual knowledge of any matter that would have been apparent to a reasonable
person of comparable education, background and responsibilities under the
circumstances and (ii) in addition, insofar as either Blair Simmons or Richard
Baumhauer (the "Business Representatives") has reviewed or prepared, and
provided written materials to MagneTek for use in connection with this
Agreement, the actual knowledge of either such Business Representative;
PROVIDED, HOWEVER, that in the absence of actual knowledge (including deemed
actual knowledge) of either Seller as defined in the preceding clause (i) to the
contrary on any subject covered
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thereby, such written materials shall be conclusive evidence as to the knowledge
of Sellers.
"Indemnified Person" means, with respect to any Loss, the Person
seeking indemnification hereunder.
"Indemnifying Person" means, with respect to any Loss, the Person from
whom indemnification is being sought hereunder.
"Intellectual Property Rights" has the meaning set forth in
Section 4.6.
"Interim Balance Sheet" has the meaning set forth in Section 4.2.
"Lien" means any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other), option, right of first refusal or right
of first offer or other security interest or agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement or any financing lease having substantially the same
economic effect as any of the foregoing).
"Loss" means any loss, cost, liability, claim, damage, or expense
(including reasonable attorneys' fees and disbursements and the costs of
investigation).
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, results of operations, property, assets, liabilities or
condition (financial or other) of the Business, taken as a whole or (b) the
ability of Sellers to consummate the Transactions.
"Owned Property" has the meaning set forth in Section 2.1(a).
"Permits" has the meaning set forth in Section 4.13.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Records" has the meaning set forth in Section 2.1(h).
"Required Modification" means, with respect to any product, a
modification, improvement or enhancement which is (a) required by any
Requirement of Law or (b) otherwise necessary or advisable in Sellers'
reasonable discretion to permit Sellers to meet any duty or obligation owing by
Sellers to remedy defects or hazards in such products or to provide any warning
with respect to any such defects or hazards. Required
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Modification shall in no event mean or include any modification,
improvement or enhancement required by any written warranty covering the
relevant product.
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, statute, treaty, rule, regulation, ordinance, order,
decree, consent decree or similar instrument or determination of an arbitrator
or a court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or assets or to which such
Person or any of its property or assets is subject.
"SEC" means the Securities and Exchange Commission.
"Sellers" has the meaning set forth in the preamble hereto.
"Sellers' Plans" means each and all Employee Benefit Plans and
Employee Benefit Arrangements sponsored or maintained by Sellers under which any
Business Employee participates or is entitled to receive benefits.
"Specifically Excluded Liabilities" has the meaning set forth in
Section 2.3.
"Supply Agreement" means the agreement between Buyer and Sellers
relating to the supply of certain components relating to the Allispede product
line, in form and substance reasonably satisfactory to Buyer and Sellers,
containing the terms set forth on the summary attached hereto as Exhibit B.
"Tax" or "Taxes" means, with respect to any Person, any federal,
state, local or foreign net income, gross income, gross receipts, sales, use, ad
valorem, value-added, capital, unitary, intangible, franchise, profits, license,
withholding, payroll, employment, unemployment, excise, severance, stamp,
transfer, occupation, premium, property or windfall profit tax, custom, duty or
other tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax or additional
amount imposed by any jurisdiction or other taxing authority, on such Person.
"Tax Returns" has the meaning set forth in Section 4.3.
"Transaction Documents" means (i) this Agreement, (ii) the Bill of
Sale, Assignment and Assumption Agreement, (iii) the special warranty deeds of
conveyance of Owned Property and the other instruments of conveyance furnished
pursuant to
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Section 2.4, (iv) the Escrow Agreement and (v) the Supply Agreement.
"Transactions" means the transactions contemplated by the Transaction
Documents.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Terms defined in this Agreement in Sections other than
Section 1.1 shall have the meanings as so defined when used in this Agreement.
(b) As used herein, accounting terms not defined or to the
extent not defined, shall have the respective meanings given to them under GAAP.
(c) Unless express reference is made to Business Days,
references to days shall be to calendar days.
ARTICLE II
CLOSING; PURCHASE PRICE ADJUSTMENT
2.1 SALE AND TRANSFER OF THE ASSETS. Subject to the terms and
conditions of this Agreement, on the Closing Date Sellers will sell, convey,
transfer, assign and deliver to Buyer all of Sellers' right, title and interest
in, to and under the assets, properties, interests in properties and rights of
Sellers of every kind, nature and description, whether real, personal or mixed,
tangible or intangible, used primarily in, held for use primarily in or
otherwise primarily relating to the Business (other than the Excluded Assets),
wherever located, as the same shall exist on the Closing Date (the "Assets"),
including, without limitation, the following:
(a) the real property (including all buildings, improvements and
structures located thereon and all rights, privileges, easements and
appurtenances thereto) located at the Clawson and Peck facilities in Michigan
(respectively, the "Clawson Facility" and the "Peck Facility") described on
Schedule 2.1(a) hereto (the "Owned Property");
(b) the leasehold interest relating to the facility used by the
Business at 650 Easy Street, Simi Valley, California (the "Simi Valley
Facility") listed on Schedule 2.1(b) (the "Leased Property");
(c) all tangible personal property, including, without
limitation, all fixtures, furnishings, furniture, office supplies, vehicles,
rolling stock, tools, machinery, equipment, computer equipment (including
software) (collectively, including the fixtures, the "Equipment");
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(d) all inventory, including without limitation, raw materials,
work-in-process, finished goods, packaging materials, spare parts and supplies
(the "Inventory");
(e) all Intellectual Property Rights, including such rights as
to the names "Gemco," "B/W Controls," "Industrial Brake Products," "Rayelco" and
the trademarks, trade names, patents, service marks, copyrights (whether
registered or unregistered) and pending applications for the foregoing listed on
Schedule 4.6;
(f) all Contracts (including but not limited to all Contracts
listed on Schedule 4.7, except to the extent indicated on such Schedule 4.7, and
all Contracts entered into by the Business through the Closing Date) (the
"Assigned Contracts");
(g) all transferable Permits used primarily in or relating
primarily to the Business or the Assets;
(h) all books and records either in original or photostatic form
(except in the case of computer software, which shall be in the form in which it
is used in the Business) (including copies, to the extent segregatable from
other MagneTek records and/or located at the Clawson, Peck or Simi Valley
Facilities, of historical accounting, financial and Tax records), Controls'
proprietary accounting and reporting formats, data bases, systems and
procedures, plans and specifications, surveys and title policies relating to the
Owned Property, sales literature, product information, engineering drawings and
records, employment records and files and all other information and/or data
related to or used by Sellers primarily in connection with the Assets and the
operation of the Business (the "Records");
(i) all insurance proceeds paid or payable by any insurance
provider, other than Sellers or any Affiliate of Sellers, for any Asset that is
destroyed or damaged after the date hereof and prior to the Closing;
(j) all accounts receivable;
(k) all prepaid expenses (other than prepaid Taxes, except
prepaid property Taxes pertaining to post-Closing Date periods), advances and
deposits (including utility deposits);
(l) all telephone, telex and telecopier numbers and all existing
listings in all telephone books and directories;
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(m) all warranties and guaranties received from vendors,
suppliers or manufacturers with respect to the Assets or the Business;
(n) all transferable rights (including transferable experience
ratings) with respect to unemployment and workers' compensation insurance
reserves, in each case relating to Business Employees who become Hired
Employees; and
(o) all goodwill appurtenant to the foregoing Assets.
Anything contained in this Agreement to the contrary notwithstanding, but
subject to the provisions of Section 2.2, to the extent that any asset,
property, interest in property or right used primarily in, held for use
primarily in or otherwise primarily relating to the Business is owned by any
Affiliate of either Seller, such asset, property, interest in property or right
shall be deemed to be an Asset for all purposes of this Agreement, and Sellers
shall do, and shall cause any such other Affiliate of any Seller to do, all
things required to be done to effect the transfer thereof as if such Asset were
referred to above.
2.2 ASSETS NOT TRANSFERRED. Notwithstanding anything herein to the
contrary, the following assets are not included in the Assets and shall be
retained by Sellers (the "Excluded Assets"):
(a) all cash and cash equivalent items (except as described in
Section 2.1(i) and (k), including, without limitation, checking accounts, bank
accounts, certificates of deposit, time deposits, securities, and the proceeds
of accounts receivable, including uncashed checks in payment thereof, received
by either Seller on or prior to the Closing Date; PROVIDED, HOWEVER, that
accounts receivable on the Closing Balance Sheet do not include any such
accounts receivable as to which Seller has received proceeds, to the extent of
such proceeds;
(b) all rights, properties, and assets which have been used or
held for use in connection with the Business and which shall have been
transferred (including transfers by way of sale) or otherwise disposed of prior
to the Closing, provided such transfers and disposals shall have been in the
ordinary course of the business of the Business as conducted at the date hereof;
(c) rights to or claims for refunds or rebates of Taxes and
other governmental charges for periods ending on or prior to the Closing Date
and the benefit of net operating loss
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carryforwards, carrybacks or other credits of Sellers, whether or not
attributable to the Business;
(d) Claims or rights against third parties arising from breaches
of any of the Assigned Contracts (other than those described in Section 2.1(m))
on or prior to the Closing Date; PROVIDED, HOWEVER, that any rights of
indemnification, contribution or reimbursement that may exist under the Assigned
Contracts in respect of Excluded Assets or Excluded Liabilities hereunder shall
also be Excluded Assets regardless of the period to which they pertain;
(e) except as set forth in Sections 2.1(i) and 2.1(n), all
insurance policies and rights thereunder, including but not limited to, rights
to any cancellation value as of the Closing Date;
(f) proprietary or confidential business or technical
information, records and policies that relate generally to either Seller and are
not used primarily in, held for use primarily in or otherwise primarily relating
to the Business, including, without limitation, organization manuals and
strategic plans;
(g) subject to the limited rights granted in Section 8.7, all
"MagneTek" marks, including any and all trademarks or service marks, trade
names, slogans or other like property relating to or including the name
"MagneTek," the mark MagneTek or any derivative thereof and the MagneTek logo or
any derivative thereof, the name "MagneTek Controls"; and MagneTek's proprietary
computer programs or other software not primarily used in the Business,
including but not limited to Sellers' proprietary data bases, accounting and
reporting formats, systems and procedures;
(h) all Records relating to pending lawsuits (other than any
included in the Assumed Liabilities) to which either Seller is a party and which
involve the Business; and
(i) all other assets used primarily in connection with the
Sellers' corporate functions (including but not limited to the corporate
charter, taxpayer and other identification numbers, seals, minute books and
stock transfer books), whether or not used for the benefit of the Business.
2.3 ASSUMED LIABILITIES. On the Closing Date, Buyer shall execute
and deliver to Sellers the Bill of Sale, Assignment and Assumption Agreement
pursuant to which Buyer shall assume and agree to pay, perform and discharge
when due, only the following liabilities and obligations of Sellers pertaining
to the Assets and the Business (collectively, the "Assumed Liabilities"):
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(a) all of the accounts payable, accrued pay, other accrued
expenses and any other items accrued or otherwise reflected as "current
liabilities" on the Closing Balance Sheet in accordance with Section 2.5;
(b) all liabilities and obligations of each Seller which pertain
to or are to be performed during the period following the Closing Date and which
arise under any of the Assigned Contracts (i) listed on Schedule 4.7, (ii) not
required to be listed on Schedule 4.7 either (A) pursuant to the provisions of
Section 4.7 or (B) because they were entered into after the date hereof and on
or before the Closing Date, but in each case only to the extent effectively
assigned and transferred to Buyer pursuant to the provisions hereof or the
benefits of which are provided to Buyer pursuant to Section 8.1(c) and subject
to the subsequent assignment thereof pursuant to Section 8.1(c);
(c) the liabilities expressly assumed by Buyer in Section 2.7,
Section 8.9, Article IX and Section 11.4 of this Agreement, and any other
liabilities expressly assumed by Buyer hereunder;
(d) all liabilities and obligations under open purchase orders
that were entered into by Seller on behalf of the Business and which provide for
the delivery of goods or services (and in either case for payment) subsequent to
the Closing Date;
(e) all obligations and liabilities for Taxes, utilities, gas
and other services arising out of, or in connection with, or attributable to the
Business for any periods after the Closing Date, including the Taxes covered by
Section 2.7;
(f) all liabilities for (i) warranty claims made after the
Closing Date for service, repair, replacement and similar work pursuant to
Sellers' written warranties with respect to products sold or services provided
before the Closing Date, unless written notice of such claim has been delivered
to Sellers within the two-year period following the Closing Date and the
warranty reserve on the Closing Balance Sheet has been exhausted (based upon
expenses at shop level cost (direct materials plus labor)); (ii) workers'
compensation claims relating to injury occurring after the Closing Date; and
(iii) warranty and product liability claims made after the Closing Date for
injuries, property damage or other Losses arising after the Closing Date;
(g) all liabilities and obligations (fixed or contingent, known
or unknown, matured or unmatured, whether arising by operation of law, by
contract or otherwise) arising
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from the operation of the Business from and after the Closing Date; and
(h) all liabilities and obligations of Buyer relating to the
transactions contemplated hereby, including, without limitation, finders, legal
and accounting fees and expenses incurred by Buyer in connection with the
Transactions, to the extent required to be paid for by Buyer pursuant to the
provisions of this Agreement.
Buyer is not assuming any liabilities or obligations (fixed or
contingent, known or unknown, matured or unmatured) of Sellers, whether related
to the Assets or the Business or not, or of the Business, other than the Assumed
Liabilities (such other liabilities or obligations being referred to as the
"Excluded Liabilities," which term includes, but is not limited to, the
Specifically Excluded Liabilities) and the Assumed Liabilities shall in no event
include the following liabilities (the "Specifically Excluded Liabilities"):
(i) all Claims, liabilities and obligations arising under
or with respect to (A) any Contract that is not an Assigned Contract, or
any Assigned Contract to the extent not assumed pursuant to Section 2.3(b);
(B) except as provided in Section 2.3(f), products liability, warranty,
personal injury, property damage, workers' compensation, labor grievance
proceedings, auto physical damage claims, medical claims or any other
Claims not expressly included in the Assumed Liabilities which arose or
were incurred on or before the Closing Date or which are based on events
occurring on or before the Closing Date notwithstanding that the date on
which the Claim, liability or obligation is asserted is after the Closing
Date; and (C) violations of any Requirement of Law for which either Seller
is responsible;
(ii) all liabilities and obligations of any nature
whatsoever of Sellers to any of their respective Affiliates;
(iii) except to the extent included in the Assumed
Liabilities, including pursuant to Article IX, all Claims by and all
liabilities and obligations to employees and independent contractors for
periods prior to and including the Closing Date, including, without
limitation, any Claims, liabilities and obligations arising (x) out of any
of Sellers' Plans, (y) from any bonus plans or agreements of Sellers
disclosed on Schedule 4.7 as "Bonus Agreements" and (z) from Sellers'
failure to deposit or fund any amounts withheld from employees pursuant to
any of Sellers' Plans;
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(iv) all liabilities and obligations of Sellers to financial
institutions or other Persons for borrowed money or with respect to
indebtedness and obligations of others which any Seller has directly or
indirectly guaranteed;
(v) all liabilities and obligations of Sellers relating to
the Excluded Assets or with respect to the transactions contemplated
hereby, including, without limitation, legal and accounting fees and
expenses incurred by Sellers in connection with the Transactions, except to
the extent required to be paid for by Buyer pursuant to the provisions of
this Agreement;
(vi) any liability or obligation for Taxes, utilities, gas
and other services arising out of, or in connection with, or attributable
to the Business for any period ending on or prior to the Closing Date,
excluding the Taxes covered by Section 2.7; and
(vii) any liability or obligation of any nature
whatsoever of Sellers relating to any business of Sellers (other than the
Business) or any employees of Sellers (other than the Hired Employees),
including, without limitation, under any employee plans, benefits contracts
or arrangements that would be Sellers' Plans if any Business Employee were
participating or entitled to benefits thereunder.
2.4 CLOSING. The closing (the "Closing") of the purchase and sale of
the Assets shall be held at the offices of Gibson, Dunn & Crutcher, 2029 Century
Park East, Suite 4000, Los Angeles, California, at 10:00 a.m. on June 30, 1994
or, if the waiting period referred to in Section 3.1(k) has not theretofore
expired, on July 1, 1994, provided that the conditions to Closing set forth in
Article III have been satisfied or waived by such date, or on such other date as
the parties may agree upon in writing. The foregoing date on which the Closing
shall occur is hereinafter referred to as the "Closing Date." At the Closing,
Buyer shall deliver:
(a) to Sellers by wire transfer (to a bank account designated at
least two business days prior to the Closing Date in writing by Sellers)
immediately available funds in an amount equal to the sum of $43,700,000 (forty-
three million seven-hundred thousand dollars); and
(b) to the Escrow Agent, an amount equal to $2,300,000 (two
million three hundred thousand dollars) (the "Escrow Amount").
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At the Closing, the Sellers shall deliver or cause to be delivered to
Buyer (a) the Bill of Sale, Assignment and Assumption Agreement, (b) special
warranty deeds in recordable form for the Owned Property, (c) the Escrow
Agreement, (d) the Supply Agreement and (e) such other instruments of transfer
and documents as Buyer may reasonably request, and Buyer shall deliver to Seller
(a) the Bill of Sale, Assignment and Assumption Agreement, (b) the Escrow
Agreement, (c) a favorable opinion of counsel in accordance with the terms
hereof and (d) such other instruments of assumption and documents as Sellers may
reasonably request. In addition, the Sellers shall deliver to Buyer at the
Closing an affidavit in form and substance reasonably satisfactory to Buyer,
duly executed and acknowledged, certifying that neither Seller is a foreign
person within the meaning of Section 1445(f)(3) of the Code, and any
corresponding affidavit required for state tax purposes.
2.5 PURCHASE PRICE ADJUSTMENT.
(a) Within 60 days after the Closing Date, MagneTek shall
prepare and deliver to Buyer (i) a balance sheet of the Business as of the close
of business on the Closing Date comprising the Assets and the outstanding
Assumed Liabilities in the manner set forth in Section 2.5(c) (the "Closing
Balance Sheet") and (ii) the Sellers' calculation of the Closing Net Assets. As
used herein, the term "Closing Net Assets" means the difference between the
total amount of Assets at the Closing Date and the total amount of the Assumed
Liabilities at the Closing Date, in each case as reflected on the Closing
Balance Sheet. For purposes of preparing the Closing Balance Sheet, Buyer shall
make the necessary Business Employees reasonably available to Sellers (without
charge) during normal business hours of the Business and without unduly
disrupting the normal operations of the Business and such employees shall, for
the purpose of assisting Sellers in preparing the Closing Balance Sheet, be
instructed by Buyer to act at Sellers' direction consistent herewith.
During the 30 days immediately following Buyer's receipt of the
Closing Balance Sheet, Buyer and Deloitte & Touche (the "Buyer's Accountants")
shall be entitled to review the Closing Balance Sheet and Sellers' working
papers, trial balances and similar materials relating to the Closing Balance
Sheet, and Sellers shall provide Buyer and Buyer's Accountants with timely
access during Sellers' normal business hours and without unduly disrupting the
normal operation of the Sellers' business the necessary personnel, properties,
books and records to the extent relevant and not comprising Assets. The Closing
Balance Sheet shall become final and binding upon the parties on the
thirty-first day following delivery thereof unless Buyer gives written notice to
Sellers of its disagreement with the Closing Balance Sheet (a "Notice of
Disagreement") prior to such
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date. Any Notice of Disagreement shall specify in reasonable detail the nature
of any disagreement so asserted. If a timely Notice of Disagreement is received
by Sellers with respect to the Closing Balance Sheet, then the Closing Balance
Sheet (as revised in accordance with clause (x) or (y) below), shall become
final and binding upon the parties on the earlier of (x) the date the parties
hereto resolve in writing any differences they have with respect to any matter
specified in a Notice of Disagreement or (y) the date any matters in dispute are
finally resolved in writing by the Accounting Firm (as defined below) (the date
on which the Closing Balance Sheet so becomes final and binding being
hereinafter referred to as the "Final Determination Date"). During the 30 days
immediately following the delivery of any Notice of Disagreement, Sellers and
Buyer shall seek in good faith to resolve in writing any differences which they
may have with respect to any matter specified in such Notice of Disagreement.
During such period, Buyer and Sellers shall each have access to the other
party's working papers, trial balances and similar materials prepared in
connection with the other party's preparation of the Closing Balance Sheet and
the Notice of Disagreement, as the case may be. At the end of such 30-day
period, Sellers and Buyer shall submit to an independent "Big 6" public
accounting firm (the "Accounting Firm") for review and resolution any and all
matters which remain in dispute and which were included in any Notice of
Disagreement, and the Accounting Firm shall reach a final, binding resolution of
all matters which remain in dispute, which final resolution shall be (A) in
writing, (B) furnished to Buyer and Sellers as soon as practicable after the
items in dispute have been referred to the Accounting Firm, (C) made in
accordance with this Agreement and (D) conclusive and binding upon Buyer and
Sellers. The Closing Balance Sheet, with any adjustments necessary to reflect
the Accounting Firm's resolution of the matters in dispute, shall become final
and binding on Buyer and Sellers on the date the Accounting Firm delivers its
final resolution to the parties. The Accounting Firm shall be Arthur Andersen,
or if such firm is unable or unwilling to act, such other independent Big 6
public accounting firm as shall be agreed upon by the parties hereto in writing
or, if Buyer and Sellers cannot so agree within the 30-calendar day period
referred to above, by lot from among the remaining independent Big 6 public
accounting firms willing to act. Each party shall pay its own costs and
expenses incurred in connection with such arbitration, provided that the fees
and expenses of the Accounting Firm shall be borne 50% by Buyer and 50% by
Sellers.
(b) Upon the final determination of the Closing Balance Sheet in
accordance with this Section 2.6, the following Additional Payment or Seller
Refund (in each case as hereinafter defined) will be payable, as applicable, in
accordance with Section 2.5(e): (i) if the Closing Net Assets are greater than
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or equal to $29,240,470 (the "Target Amount"), then the Escrow Agent shall pay
to Sellers from the funds held in escrow an amount equal to the Escrow Amount
and Buyer shall pay to Sellers the amount, if any, by which the Closing Net
Assets exceed the Target Amount, (ii) if the Closing Net Assets are less than
the Target Amount by an amount less than or equal to the Escrow Amount, then the
Escrow Agent shall pay to Sellers from the funds held in escrow an amount equal
to the Escrow Amount less the amount, if any, by which the Target Amount exceeds
the Closing Net Assets and to Buyer the balance of the Escrow Amount, and
(iii) if the Closing Net Assets are less than the Target Amount by an amount
greater than the Escrow Amount, then Sellers shall pay to Buyer an amount equal
to the amount by which the Target Amount exceeds the Closing Net Assets and the
Escrow Agent shall pay the Escrow Amount to Buyer from the funds held in escrow.
Any required adjustment to the purchase price pursuant to this Section 2.5 shall
be in an amount equal to the difference between the Closing Net Assets and the
Target Amount and shall be referred to as the "Purchase Price Adjustment."
(c) The Closing Balance Sheet shall be prepared in accordance
with GAAP, applied in a manner consistent with that followed in the preparation
of the Interim Balance Sheet, subject to the following:
(i) the Closing Balance Sheet shall not reflect
any provision for Taxes (whether as an asset or a
liability), except in the case of taxes that are an Asset or
an Assumed Liability;
(ii) intercompany accounts receivable and
intercompany liabilities shall be eliminated; and
(iii) all Excluded Assets (and related
depreciation and reserves) shall be eliminated and all
Excluded Liabilities (and related reserves) shall be
eliminated;
(iv) all accounts payable as to which checks
written on the accounts included in the Excluded Assets are
outstanding shall be eliminated;
(v) all accounts receivable as to which proceeds
have been received shall be eliminated to the extent of such
proceeds; and
(vi) vacation and holiday pay accrued in respect
of any employee who is not a Hired Employee shall be
eliminated.
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(d) Buyer agrees, solely with respect to the calculation of
Purchase Price Adjustments, and without restricting in any manner whatsoever
Buyer's right to take any such action that would not affect such calculation,
that following the Closing, Buyer will not take any actions with respect to the
accounting books, records, policies and procedures of the Business on which the
Closing Balance Sheet is to be based that are not consistent with GAAP applied
in the manner consistent with the past practices of the Business.
(e) Within thirty-three (33) days after the receipt by Buyer of
the Closing Balance Sheet in accordance with Section 2.5(a) hereof, Buyer and
the Escrow Agent shall remit to Sellers and the Escrow Agent or Sellers shall
remit to Buyer, as the case may be, in immediately available funds, any
undisputed amounts constituting Purchase Price Adjustments. With respect to any
items that are the subject of a Notice of Disagreement, payment shall be made in
immediately available funds within three (3) business days after the Final
Determination Date. Each payment not pursuant to the Escrow Agreement made
pursuant to this Section 2.5 shall be made with interest on the amount of the
payment at an annual rate equal to the reference rate quoted by the San
Francisco branch of Bank of America on the Closing Date for the period from the
Closing Date to the date of payment, computed on the basis of a 360-day year and
actual days elapsed.
2.6 TAX ALLOCATION. As promptly as practicable after the date
hereof, Buyer and Sellers shall agree in writing upon the allocation of the
Purchase Price plus the Assumed Liabilities in a manner consistent with
applicable law to broad categories constituting components of the Assets and the
covenant not to compete contained in Section 6.7 hereof. Such allocation shall
be attached hereto as Schedule 2.6 and shall be updated by a similar mutual
writing as of the Closing to reflect changes in the Assets or Assumed
Liabilities occurring after the date thereof and prior to the Closing Date. The
same procedure shall apply to any changes necessary as a result of the Purchase
Price Adjustment, if any, on the Final Determination Date pursuant to
Section 2.5(b)). Buyer and Sellers shall report the purchase and sale of the
Assets in accordance with the applicable agreed-upon allocation among such broad
categories for all Tax purposes (including the filing of the forms prescribed
under Section 1060 of the Code and the Treasury Regulations promulgated
thereunder), and none of Buyer and Sellers shall take a position inconsistent
with such allocation for Tax or other purposes.
2.7 SALES AND USE TAX. Buyer and Sellers shall cooperate in
preparing, executing and filing use and sales Tax returns relating to, and at
the Closing, Buyer shall pay one-half, and Sellers shall pay one-half of any and
all sales,
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real estate, transfer or use Tax due with regard to, the purchase and sale of
the Assets. To the extent such Taxes cannot be accurately computed at the
Closing, the parties shall each pay their respective shares of such Taxes when
they are due. Such Tax Returns shall be prepared in a manner that is consistent
with the allocation of the Purchase Price and Assumed Liabilities contemplated
by Section 2.6. Buyer shall also furnish Sellers with a form of resale
certificate that complies with the requirements of the California Taxation and
Revenue Code and other applicable state taxation laws, and Sellers shall furnish
any information or assistance reasonably requested by Buyer in obtaining such
certificates.
ARTICLE III
CONDITIONS TO CLOSING
3.1 BUYER'S OBLIGATION. The obligations of Buyer to purchase and pay
for the Assets are subject to the satisfaction (or waiver by Buyer) as of the
Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties of Sellers made in this Agreement shall be true
and correct in all material respects (except to the extent that any
representation is qualified by materiality, in which case, to such extent, the
representation shall be true and correct in all respects) as of the date hereof
and, except as specifically contemplated by this Agreement, on and as of the
Closing, as though made on and as of the Closing Date, and Sellers shall have
performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by Sellers
by the time of the Closing; and Sellers shall have delivered to Buyer a
certificate dated the Closing Date and signed by an authorized officer of the
respective Seller confirming the foregoing.
(b) SECRETARY'S CERTIFICATES. Sellers shall each have delivered
to Buyer a certificate of the Secretary of such Seller, as the case may be, as
to the Certificate of Incorporation, By-laws, corporate resolutions and
incumbency of certain officers of such Seller, in each case in form and
substance reasonably satisfactory to Buyer.
(c) CONSENTS, AUTHORIZATIONS, ETC. All material consents,
authorizations, orders or approvals of, and filings or registrations with, any
Governmental Authority or other Person which are required for or in connection
with the execution and delivery by each of Sellers of the Transaction Documents
to which each of them is or will be a party and the consummation by
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Sellers of the transactions contemplated hereby and thereby shall have been
obtained or made.
(d) INSTRUMENTS OF TRANSFER, CONVEYANCE AND ASSIGNMENT. Buyer
shall have received a duly executed Bill of Sale, Assignment and Assumption
Agreement, deeds and such other duly executed conveyance instruments, in form
and substance reasonably satisfactory to Buyer, as are necessary or desirable to
effect the sale, transfer, conveyance and assignment of the Assets to Buyer in
accordance herewith.
(e) FINANCING. The closing of the financing necessary for the
consummation of the transactions contemplated hereby and the payment of all
costs and expenses incurred in connection therewith (the "Financing") to be
provided by one or more financial institutions or other investors (the
"Lenders") shall have occurred.
(f) SUPPLY AGREEMENT. MagneTek shall have executed and
delivered to Buyer the Supply Agreement.
(g) ESCROW AGREEMENT. Sellers shall have executed and delivered
to Buyer the Escrow Agreement.
(h) TITLE POLICIES. Buyer shall have obtained an ALTA owner's
policy of title insurance (the "Title Policies") with respect to each parcel of
Owned Property in form and substance reasonably acceptable to Buyer and in
accordance with the Title Commitment for such Owned Property referred to in
Section 6.4.
(i) OPINIONS OF COUNSEL. Buyer shall have received an opinion
dated the Closing Date of Gibson, Dunn & Crutcher, counsel to Sellers, and an
opinion dated the Closing Date of Samuel A. Miley, Esq., General Counsel of
Sellers, covering the matters referred to in Exhibits D and E, respectively,
which opinions shall be reasonably satisfactory in form and substance to Buyer.
(j) LEGAL RESTRAINT. No injunction or order shall have been
granted by any Governmental Authority of competent jurisdiction that would
restrain, delay or prohibit any of the Transactions or that would impose damages
as a result thereof, and no action or proceeding shall be pending before any
Governmental Authority of competent jurisdiction in which any Person seeks such
a remedy (if in the opinion of counsel to Buyer there exists a reasonable risk
of a materially adverse result in such pending action or proceeding).
(k) HSR ACT. The waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") shall have
expired or been terminated.
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3.2 SELLERS' OBLIGATION. The obligation of Sellers to sell and
deliver the Assets to Buyer are subject to the satisfaction (or waiver by
Sellers) as of the Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties of Buyer made in this Agreement shall be true and
correct in all material respects (except to the extent that any representation
is qualified by materiality, in which case, to such extent, the representation
shall be true and correct in all respects) as of the date hereof and on and as
of the Closing, as though made on and as of the Closing Date, and Buyer shall
have performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by Buyer
by the time of the Closing; and Buyer shall have delivered to Sellers a
certificate dated the Closing Date and signed by an authorized officer of Buyer
confirming the foregoing.
(b) SECRETARY'S CERTIFICATES. Buyer shall have delivered to
Sellers a certificate of the Secretary of Buyer as to the Charter, By-laws,
corporate resolutions and incumbency of certain officers of Buyer, in form and
substance reasonably satisfactory to Sellers.
(c) CONSENTS, AUTHORIZATIONS, ETC. All material consents,
authorizations, orders or approvals of, and filings or registrations with, any
Governmental Authority or other Person which are required for or in connection
with the execution and delivery by Buyer of the Transaction Documents to which
it is or will be a party and the consummation by Buyer of the transactions
contemplated hereby and thereby shall have been obtained or made.
(d) INSTRUMENTS OF TRANSFER, CONVEYANCE AND ASSIGNMENT. Sellers
shall have received a duly executed Bill of Sale, Assignment and Assumption
Agreement and such other duly executed conveyance instruments, in form and
substance reasonably satisfactory to Sellers, as are necessary or desirable to
effect the assumption of the Assumed Liabilities.
(e) SUPPLY AGREEMENT. Buyer shall have executed and delivered
to MagneTek the Supply Agreement.
(f) ESCROW AGREEMENT. Buyer shall have executed and delivered
to Sellers the Escrow Agreement.
(g) OPINIONS OF COUNSEL. Sellers shall have received an opinion
dated as of the Closing Date of O'Sullivan Graev & Karabell, counsel to Buyer,
covering the matters referred to in Exhibit F, which opinion shall be reasonably
satisfactory in form and substance to Sellers.
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(h) LEGAL RESTRAINT. No injunction or order shall have been
granted by any Governmental Authority of competent jurisdiction that would
restrain or prohibit the Transactions or that would impose damages as a result
thereof, and no action or proceeding shall be pending before any Governmental
Authority of competent jurisdiction in which any Person seeks such a remedy (if
in the opinion of counsel to Sellers there exists a reasonable risk of a
materially adverse result in such pending action or proceeding).
(i) HSR ACT. The waiting period under the HSR Act shall have
expired or been terminated.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller hereby, jointly and severally, represents and warrants to
Buyer as follows:
4.1 AUTHORITY; CORPORATE MATTERS; NO CONFLICTS; GOVERNMENTAL
CONSENTS.
(a) Each Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each
Seller has all requisite corporate power and authority to enter into the
Transaction Documents and to consummate the Transactions. All corporate acts
and other proceedings required to be taken by each Seller to authorize the
execution, delivery and performance of the Transaction Documents and the
consummation of the Transactions have been duly and properly taken. This
Agreement has been, and each of the Transaction Documents, when executed and
delivered, will be, duly executed and delivered by each Seller and constitutes
(or will constitute) a valid and binding obligation of such Seller, enforceable
against such Seller in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally or by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(b) Schedule 4.1(b) sets forth a true and complete list of all
jurisdictions in which Sellers are qualified to do business, and Sellers are
qualified to do business in all jurisdictions where the conduct of the Business
or the ownership of the Assets requires such qualification, except where the
failure to so qualify would not have a Material Adverse Effect.
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(c) Controls does not currently have any subsidiaries and, except as
set forth on Schedule 4.1(c), does not currently own any capital stock or other
proprietary interest, directly or indirectly, in any Person.
(d) The execution and delivery of this Agreement does not and of
the other Transaction Documents will not, and the consummation of the
Transactions and compliance with the terms of the Transaction Documents will not
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a benefit under, or
result in the creation of any Lien upon any of the properties or assets of
Sellers under, any provision of (i) the Certificate of Incorporation or By-Laws
of either Seller, (ii) subject to the matters disclosed in Schedule 4.1(d), any
Contractual Obligation of either Seller or (iii) any judgment, order or decree
or, subject to the matters described in clauses (A)-(D) below, any Requirement
of Law applicable to either Seller or their respective property or assets, other
than, in the case of clause (ii) above, any such conflicts, violations,
defaults, rights or Liens that, individually and in the aggregate, would not
have a Material Adverse Effect. No consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority is required to be obtained or made by or with respect to either Seller
in connection with the execution and delivery of the Transaction Documents or
the consummation of the Transactions contemplated hereby, other than
(A) compliance with and filings under Section 13(a) or 15(d), as the case may
be, of the Exchange Act, (B) as set forth on Schedule 4.1(d), (C) those that may
be required solely by reason of Buyer's participation in the transactions
contemplated hereby and (D) compliance with and filings under the HSR Act.
4.2 FINANCIAL STATEMENTS; ABSENCE OF CHANGES.
(a) Schedule 4.2(a) contains true and complete copies of the
following:
(i) the unaudited balance sheet of the Business as at
June 30, 1993, and the related unaudited statements of income and
retained earnings and cash flows for the fiscal year then ended;
(ii) the unaudited balance sheet of the Business as at
December 31, 1993 (the "Interim Balance Sheet"), and the related
statements of income and retained earnings and cash flows for the
six-month period ended
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December 31, 1993 (the "Interim Balance Sheet Date"); and
(iii) the December Balance Sheet.
The financial statements described in the foregoing clauses (i), (ii) and (iii)
are collectively referred to herein as the "Financial Statements." Except as
set forth on Schedule 4.2(a) (including as indicated by any PRO FORMA
calculations made thereon), the Financial Statements (A) were prepared in
accordance with the books and records of the Business (whether maintained by
MagneTek or Controls or otherwise), (B) fairly present the financial position of
the Business in each case at and as of the dates indicated and the results of
operations, retained earnings and cash flows of the Business for the periods
indicated (in each case other than the December Balance Sheet) and (C) except as
otherwise set forth on Schedule 4.2 and except for the adjustments made to
arrive at the December Balance Sheet, were prepared in accordance with GAAP
consistently applied throughout the periods covered thereby (subject to the
absence of notes and to normal year-end adjustments).
(b) ABSENCE OF UNDISCLOSED LIABILITIES. To the Knowledge of
Sellers, except (i) as set forth on Schedule 4.2(b), (ii) any and all
Specifically Excluded Liabilities and (iii) liabilities incurred in the ordinary
course of the Business since the Interim Balance Sheet Date, there are no
liabilities of any nature (matured or unmatured, fixed or contingent) affecting
or relating to the Business which were not provided for or disclosed on the
Interim Balance Sheet.
(c) ABSENCE OF CHANGES. Except as set forth on Schedule 4.2(c),
since the Interim Balance Sheet Date the Business has been operated in the
ordinary course and consistent with past practice, and there have not been any:
(i) material adverse changes in the business,
operations, results of operations, assets (including, without
limitation, levels of working capital and the material components
thereof), liabilities, earnings or financial condition (financial
or otherwise) of the Business;
(ii) to the Knowledge of Sellers, occurrences resulting
in the damage, destruction or loss (whether or not covered by
insurance) affecting any tangible asset or property of the
Business in excess of $100,000 in the aggregate;
(iii) material increases in, or, to the Knowledge
of Sellers, changes in the method
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of computing, the compensation of employees of MagneTek or Controls
who are employed in the Business (including, without limitation,
increases pursuant to or change in method under any bonus, pension,
profit sharing, deferred compensation arrangement or other plan or
commitment), or increase in compensation payable to any officer,
employee, consultant or agent of MagneTek or Controls who are employed
in the Business, or entering into of any employment contract with or
making of any loan to, or engagement in any transaction with, any
officer or employee of MagneTek or Controls who are employed in the
Business, in each case other than in the ordinary course of the
business of the Business and consistent with past practice;
(iv) to the Knowledge of Sellers, material changes in
the manner in which the Business extends discounts or credits to
customers or otherwise deals with customers;
(v) changes in the accounting methods or practices
followed by or with respect to the Business, or, to the Knowledge
of Sellers, any changes in depreciation or amortization policies
or rates theretofore adopted;
(vi) agreements or commitments to merge or consolidate
with or otherwise acquire any other Person, or, to the Knowledge
of Sellers, any part or division thereof;
(vii) cancellation or termination of any insurance
policy maintained by or with respect to the Business;
(viii) incurrence of indebtedness for borrowed money
or the guaranty thereof (in either case, involving amounts
exceeding $100,000) in respect of such indebtedness of an
Affiliate;
(ix) termination of employment of any key Business
Employee, or, to the Knowledge of the Sellers, any expression of
intention by any key Business Employee to terminate his
employment in the immediate future;
(x) to the Knowledge of Sellers, sales or other
dispositions of any material tangible or intangible assets of the
Business, other than in the ordinary course of the business
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of the Business and consistent with past practice;
(xi) other material transactions relating to the
Business, other than in the ordinary course of the Business and
consistent with past practice; or
(xii) agreements or understandings, whether in
writing or otherwise, for either Seller to take any of the
actions specified in items (i) through (xi) above.
4.3 TAXES.
(a) Except as disclosed on Schedule 4.3, each Seller, and any
affiliated group within the meaning of Section 1504 of the Code, of which each
Seller is or has been a member (the "Affiliated Group," but only for the taxable
period during which such Seller has been a member thereof), have filed or caused
to be filed in a timely and accurate manner (within any applicable extension
periods) with the appropriate Governmental Authority (i) all Tax returns,
reports and forms (collectively, "Tax Returns") required to be filed by the Code
or by applicable laws, (ii) all Taxes shown on such Tax Returns have been timely
paid in full by the due date thereof, (iii) no Tax Liens or assessments have
been filed by any Tax authority against any property or assets of the Business
and (iv) no claims have been asserted, proposed or assessed in writing with
respect to any Taxes relating to the Business.
(b) Except as set forth in Schedule 4.3, (i) none of the Assets
comprises "tax exempt use property" within the meaning of Section 168(h) of the
Code, and (ii) the Assigned Contracts do not include any lease made pursuant to
former Section 168(f)(8) of the Internal Revenue Code of 1954.
(c) Neither Seller is a "foreign person" within the meaning of
Section 1445(f)(3) of the Code.
4.4 ASSETS OTHER THAN REAL PROPERTY INTERESTS. Sellers have good and
valid title to all of the Assets, free and clear of all Liens except (a) such as
are disclosed on Schedule 4.4 and (b) mechanics', carriers', workmen's,
repairmen's or other like Liens arising or incurred in the ordinary course of
business and securing Claims that (i) are either not yet due and payable or are
being contested in good faith or by appropriate proceedings with appropriate
reserves having been established therefor to the extent required by GAAP and
(ii) are not or will not, as of the Closing Date, be Excluded Liabilities, Liens
arising under original purchase price conditional sales contracts and equipment
leases with
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third parties entered into in the ordinary course of business, Liens for Taxes
and other governmental charges which are not due and payable or which may
thereafter be paid without penalty, and other imperfections of title,
restrictions or encumbrances, if any, which Liens, imperfections of title,
restrictions or other encumbrances do not, individually or in the aggregate,
materially impair the continued use and operation of the specific assets to
which they relate or secure a payment obligation not described above (the Liens
described in the preceding clause (b) are hereinafter referred to collectively
as "Permitted Liens"). Except as set forth on Schedule 4.4, there does not
exist any Contractual Obligation of either Seller, or Requirement of Law
applicable to the Business, in each case which is not of broad or customary
application to Persons or businesses similarly situated, as the case may be,
which materially interferes with the use of any tangible personal property
included in the Assets. All of the Assets are in reasonably good operating
condition, normal wear and tear excepted.
This Section 4.4 does not relate to real property or interests in real
property, such items being the subject of Section 4.5, or to Intellectual
Property Rights, such items being the subject of Section 4.6.
4.5 REAL PROPERTY. Schedule 4.5 sets forth a list of all Owned
Properties and a list of all Leased Properties and, as to Leased Property,
identifies any leases relating thereto (an Owned Property or Leased Property
being sometimes referred to herein individually as a "Business Property" and
collectively as "Business Properties"), which lists collectively comprise a
complete list of Sellers' interests in real property of all types used or held
for use primarily in the Business. Sellers have good, marketable and insurable
fee title to all Owned Property, free and clear of all Liens, easements,
covenants, rights-of-way and other similar restrictions of any nature
whatsoever, except (i) Permitted Liens, (ii) easements, covenants, rights-of-way
and other similar restrictions of record and (iii) (A) zoning, building and
other similar restrictions. Except as set forth on Schedule 4.5, (A) each lease
pursuant to which Sellers lease Leased Property (a "Lease") is in full force and
effect and all rent and other sums and charges payable thereunder are current,
and (B) no lessor under any Lease has any Lien under any Lease or otherwise
against Sellers. Except for the matters listed on Schedule 4.5, the leasehold
estate under and leasehold interest in each Lease is held free and clear of all
Liens. Sellers have made available to Buyer true and complete copies of all
Leases. Except as set forth on Schedule 4.5, (A) the improvements on the Real
Property are in reasonably good operating condition, normal wear and tear
excepted, and to the Knowledge of Sellers, there does not exist any Requirement
of Law or Contractual Obligation
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applicable to the Business in each case which is not of broad or customary
application to Persons or businesses similarly situated, as the case may be,
which materially interferes with the economic value or use thereof, and (B) none
of the buildings and structures located on the Real Property, the appurtenances
thereto or the equipment therein or the operation or maintenance thereof
violates any material restrictive covenant applicable thereto.
4.6 INTELLECTUAL PROPERTY.
(a) Schedule 4.6 sets forth a list of all patents, trademarks,
trade names, material service marks, service mark registrations, material
registered copyrights and pending applications for the foregoing, in each case
included in the Assets. Except as set forth on Schedule 4.6, Sellers own all
right, title and interest in and to the patents and trademarks set forth on
Schedule 4.6, free and clear of all Liens other than Permitted Liens. With
respect to registered trademarks, Schedule 4.6 contains a list of all
jurisdictions in which such trademarks are registered or applied for and all
registration and application numbers.
(b) Except as disclosed on Schedule 4.6 , Sellers own or have
the right to use, without payment to any other party, the Intellectual Property
Rights included in the Assets. Except as set forth on Schedule 4.8, (i) to the
Knowledge of Sellers, no product currently manufactured, marketed, distributed
or sold or developed and held for future manufacture, marketing, distribution or
sale by the Business violates or will (as to such developed products held for
future sale) violate any license or infringes or will (as to such developed
products held for future sale) infringe upon any Intellectual Property Rights of
any other Person, and (ii) no Claims are pending or, to the Knowledge of
Sellers, threatened against either Seller by any person with respect to the
ownership, validity, enforceability or use of any Intellectual Property Rights
or otherwise challenging or questioning the validity or effectiveness of any
such Intellectual Property Rights. As used herein, the term "Intellectual
Property Rights" means all intellectual property rights, including, without
limitation, patents, patent rights, trademarks, trade names, service marks,
copyrights (statutory and common law), all applications and registrations with
respect to any of the foregoing, logos, franchises, licenses, layouts,
proprietary processes, formulae, patentable inventions, trade secrets, know-how
and other proprietary rights and all documentation and media constituting,
describing or relating to any of the foregoing, including, without limitation,
manuals, memoranda and records.
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4.7 CONTRACTS. Schedule 4.7 sets forth a list of all Contracts of
the following types to which Controls is a party or to which MagneTek or the
Business is a party and which relate to the Business:
(a) any employment or severance Contract that has an aggregate
future liability in excess of $100,000 and is not terminable by notice of not
more than 60 days for a cost of less than $50,000 (including any contracts or
agreements with certain employees that relate to the transactions contemplated
by this Agreement which are not being assumed by Buyer, referred to as "Stay and
Pay" Agreements);
(b) any employee collective bargaining agreement or other
Contract with any labor union covering Business Employees;
(c) any Contract pursuant to which the aggregate of payments to
become due from or to the applicable Seller is equal to or exceeds $200,000, and
which is not terminable by no more than 60 days' notice for a cost of less than
$100,000;
(d) (i) any lease or similar Contract under which either Seller
is a lessor or sublessor of, or makes available for use by any third party
(including another division of such Seller), any Business Property or premises
otherwise occupied by the Business and (ii) any Lease;
(e) any distributor, dealer, sales, advertising, agency,
manufacturer's representative, franchise or similar Contract or any other
Contract requiring the payment of any commissions in excess of $100,000 per
year;
(f) any indenture, mortgage, promissory note, loan agreement or
other agreement or commitment for the borrowing of money, for a line of credit
or for any leasing transaction of a type required to be capitalized in
accordance with Statement of Financial Accounting Standards No. 13 issued by the
Financial Accounting Standards Board;
(g) any option or other Contract to purchase or otherwise
acquire or sell or otherwise dispose of any interest in real property;
(h) any guaranty of the obligations of third parties;
(i) any Contract which restricts the Business from conducting
its business anywhere in the world;
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(j) any Contract under which either Seller has agreed to
indemnify any third party with respect to, or to share, the Tax liability of any
third party; or
(k) any other Contract which is material to the Business, the
Assets or Assumed Liabilities, other than this Agreement and the other
Transaction Documents.
Except as disclosed on Schedule 4.7, (i) each Contract listed on
Schedule 4.7 is valid, binding and in full force and effect and is enforceable
by Sellers in accordance with its terms, (ii) to the Knowledge of Sellers, each
Seller has performed all material obligations required to be performed by it to
date under the Contracts and is not (with or without the lapse of time of the
giving of notice, or both) in breach or default in any material respect
thereunder and, to the Knowledge of Sellers, no other party to any of the
Contracts is (with or without the lapse of time or the giving of notice, or
both) in breach or default in any material respect thereunder, (iii) no Seller
has received from any party to any Contract notice of its intention to cancel,
terminate or fail to renew such Contract, (iv) there are no Contracts pertaining
to returns, guaranteed sales, advertising commitments, customer chargebacks or
commissions or other payments due to sales representatives which are not
reflected upon or reserved against in the Closing Balance Sheet and (v) to the
Knowledge of Sellers, the terms of Sellers' written warranties with respect to
products sold or services provided before the Closing Date do not exceed one (1)
year in duration.
4.8 LITIGATION; DECREES. Schedule 4.8 sets forth a list, as of the
date of this Agreement, of all pending and, to the Knowledge of Sellers,
threatened lawsuits, claims, demands, consent decrees, actions, suits,
proceedings, litigation, arbitration or mediation by or against such Seller
before any Governmental Authority or arbitrator or mediator relating to the
Business (including the Assets or the Assumed Liabilities) which (a) involves a
claim by or against such Seller of more than $100,000, (b) seeks any injunctive
relief or (c) relates to the Transactions. To the knowledge of Sellers, except
as disclosed on Schedule 4.8,neither Seller is in default under any judgment,
order, decree or award of any court, administrative agency or commission or
other Governmental Authority or any arbitrator or mediator applicable to the
Business (including the Assets or the Assumed Liabilities). For purposes of
this Section 4.8, a "pending" matter does not include any litigation as to which
a complaint has been filed but has not been served. Sellers have made available
to Buyer, subject to matters of privilege based upon the advice of counsel, all
documents and correspondence relating to matters referred to in Schedule 4.8.
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4.9 EMPLOYEE AND RELATED MATTERS.
(a) Schedule 4.9(a) sets forth a list of each material Employee
Benefit Plan.
(b) To the Knowledge of Sellers, there are no material Employee
Benefit Arrangements providing employee or executive compensation or benefits to
Business Employees employed at the Clawson Facility or the Peck Facility except
as set forth on Schedule 4.9(b).
(c) There are no material Employee Benefit Arrangements
providing employee or executive compensation or benefits to Business Employees
employed at the Simi Valley Facility except as set forth in the MagneTek
Transducer Products Handbook for Associates.
(d) Sellers have delivered to Buyer true, complete and correct
copies of (i) descriptions of any material unwritten Seller Plans and (ii) the
most recent summary plan description for each material Seller Plan for which
such a summary plan description is required. Such summary plan descriptions are
attached to Schedule 4.9 and accurately describe in all material aspects the
respective Seller Plans to which they relate.
4.10 ENVIRONMENTAL MATTERS. Except as disclosed in the Phase I Report
prepared by Dames & Moore and provided to Buyer, to the Knowledge of Sellers, as
to the Business and the Business Property:
(a) Neither Seller is in violation of any applicable
Environmental Law nor is either Seller under investigation or review by any
Governmental Authority with respect to compliance therewith, or with respect to
the generation, use, treatment, storage or disposal, or the spillage or other
release of any Hazardous Material which could reasonably be expected to result
in material liability to the Business;
(b) There is no Hazardous Material that is likely to pose any
material risk to safety, health or the environment, and there has heretofore
been no spillage, discharge, release or disposal of any such Hazardous Material
on or under any Business Property in an amount and of a nature which could
reasonably be expected to result in material liability to the Business;
(c) No oral or written notification of the inadvertent spillage
by either Seller of a Hazardous Material
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has been filed by or on behalf of any Seller in the conduct of the Business;
(d) Sellers have made available to Buyer at the respective
Business Properties its files of manifests pertaining to the transportation of
Hazardous Materials to locations not on Business Property.
(e) There are no pending citations, fines, penalties or Claims
that have been asserted against either Seller under any Environmental Law which
could reasonably be expected to have a Material Adverse Effect and which have
not been reflected in the December Balance Sheet.
4.11 EMPLOYEE AND LABOR RELATIONS. Except as set forth on
Schedule 4.11:
(a) there is no labor strike, dispute, or work stoppage or
lockout pending, or, to the Knowledge of Sellers, threatened, involving the
Business;
(b) to the Knowledge of Sellers, no union organization campaign
is in progress with respect to the Business Employees, and no question
concerning representation exists respecting such employees;
(c) there is no unfair labor practice charge or complaint
against either Seller pending, or, to the Knowledge of Sellers, threatened,
before the National Labor Relations Board involving the Business;
(d) there is no pending, or, to the Knowledge of Sellers,
threatened, grievance involving an employee of the Business that, if adversely
decided, would have a Material Adverse Effect; and
(e) no charges with respect to or relating to either Seller are
pending before the Equal Employment Opportunity Commission or any other
Governmental Authority responsible for the prevention of unlawful employment
practices as to which there is a reasonable likelihood of adverse determination
involving the Business, other than those which, if so determined would not have
a Material Adverse Effect.
4.12 ASSETS OWNED BY AFFILIATES. Except as disclosed on Schedule 4.12
or as to any Excluded Assets, no Affiliate of any Seller owns any assets,
properties, interests in properties or rights, of any kind or description, used
primarily in, held for use primarily in or otherwise primarily related to the
Business.
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4.13 COMPLIANCE WITH LAW; GOVERNMENTAL AUTHORIZATIONS.
(a) Except as set forth on Schedule 4.13(a), no Seller is in
violation of any Requirement of Law applicable to the Business that could
reasonably be expected to result in a material liability to the Business.
(b) Except as set forth on Schedule 4.13(b), (A) each Seller has
all licenses, permits, orders, approvals and other authorizations of or from all
Governmental Authorities which are necessary in the conduct of the Business
(collectively, the "Permits"), (B) such Permits are in full force and effect,
and (C) no violations or claimed violations are pending before any Governmental
Authority with respect to any such Permit.
4.14 ASSETS OF THE BUSINESS. Except for any Assets that may not be
transferred to Buyer pursuant to Section 2.2 or Section 8.1, the Assets and the
rights conferred by the Transaction Documents comprise all the properties and
assets used primarily, or held for use by Sellers primarily, in the operation of
the Business as conducted on the date hereof. EXCEPT AS EXPRESSLY PROVIDED
HEREIN, SELLERS MAKE NO REPRESENTATION OR WARRANTY CONCERNING THE ASSETS OR THE
BUSINESS, INCLUDING AS TO THE QUALITY, CONDITION, MERCHANTABILITY, SALABILITY,
OBSOLESCENCE, WORKING ORDER OR FITNESS FOR A PARTICULAR PURPOSE THEREOF. EXCEPT
AS EXPRESSLY PROVIDED HEREIN, THE ASSETS ARE SOLD TO BUYER "AS IS AND WHERE IS."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
5.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS.
(a) Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Buyer has all
requisite corporate power and authority to enter into the Transaction Documents
and to consummate the Transactions. All corporate acts and other proceedings
required to be taken by Buyer to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and properly taken. This Agreement has been,
and the Transaction Documents, when executed and delivered, will be, duly
executed and delivered by Buyer and constitutes (or will constitute) a valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
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affecting creditors' rights generally or by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or law).
(b) Except as disclosed on Schedule 5.1(b), the execution and
delivery of this Agreement does not and of the other Transaction Documents will
not, and the consummation of the Transactions and compliance with the terms of
the Transaction Documents will not, conflict with, or result in any violation of
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of the Buyer under, any provision of
(i) the Certificate of Incorporation or By-Laws of Buyer, (ii) any Contractual
Obligation of Buyer or (iii) any judgment, order or decree or, subject to the
matters described in clauses (A)-(C) below, any Requirement of Law applicable to
Buyer or its property or assets. No material consent, approval, license, permit
order or authorization of, or registration, declaration or filing with, any
Governmental Authority is required to be obtained or made by or with respect to
Buyer or its Affiliates in connection with the execution and delivery of the
Transaction Documents or the consummation by Buyer of the Transactions, other
than (A) as disclosed on Schedule 5.1(b), (B) compliance with and filings under
the HSR Act and (C) those that may be required solely by reason of Sellers' (as
opposed to any other third party's) participation in the transactions
contemplated hereby.
5.2 ACTIONS AND PROCEEDINGS, ETC. There are no (a) outstanding
judgments, orders, writs, injunctions or decrees of any court, governmental
agency or arbitration tribunal against Buyer or (b) actions, suits, claims or
legal, administrative or arbitration proceedings or investigations pending or,
to the knowledge of Buyer, threatened against Buyer.
5.3 INCONSISTENT REPRESENTATIONS. In connection with the Financing,
Buyer intends to enter into loan documentation which will contain
representations and warranties and related disclosure schedules ("Buyer's
Schedules") relating to the Business. Prior to the Closing, Buyer will provide
to MagneTek copies of the sections of the applicable loan documentation
containing such representations and warranties and any sections thereof
necessary to interpret such representations and warranties and copies of the
related Buyer's Schedules. If any such representation or warranty or the
material contained on any such Buyer's Schedule, when fairly interpreted in the
context of such loan documentation, would, if true, evidence a breach of any of
the representations and warranties of Sellers in this Agreement, then Sellers
shall be permitted to modify the Schedules hereto to include information
contained in such
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Buyer's Schedule to the extent that such inclusion would cure such breach. For
purposes of the rights and obligations of the parties hereunder, any Schedule so
modified shall be deemed to have been modified as of the date of this Agreement.
Nothing in this Section 5.3 should be construed to imply that as of the date
hereof, Buyer is aware of or intends to make any representation or warranty that
would permit Sellers to make any such modification to the Schedules hereto.
ARTICLE VI
COVENANTS OF SELLERS
Sellers covenant and agree as follows:
6.1 ACCESS. Subject to the provisions of Section 7.1 hereof, prior
to the Closing, Sellers will give, and with respect to clause (ii) below, will
cause Sellers' Accountants to give, Buyer and its representatives, employees,
counsel and accountants, together with representatives of Persons providing
financing to Buyer for the Transactions, with reasonable access, during normal
business hours and upon reasonable notice, to the personnel, properties, books
and records (including portions pertaining primarily to the Business or Sellers'
Tax returns most recently filed and those in preparation, audit work papers and
other records of Sellers' Accountants and financial and other operating data and
information to the extent relating primarily to the Business, the Assets or the
Assumed Liabilities) of the Business for purposes of investigating its assets,
operations, prospects, obligations and liabilities; provided, however, that such
access does not unreasonably disrupt the normal operations of the Business.
Notwithstanding anything contained herein to the contrary, neither (i) any such
investigation nor (ii) the direct or indirect ownership of any interest in Buyer
by any Person providing any information on behalf of Seller in connection with
such investigation or the participation by any such Person in the preparation of
the Schedules hereto shall affect or otherwise diminish or obviate in any
respect any of the representations and warranties of Sellers or their respective
indemnification obligations contained in this Agreement or any Transaction
Document to which either Seller is or will be a party, except that any
representation or warranty qualified by reference to the Knowledge of Sellers
shall be subject to the provision of the definition of such term with respect to
the knowledge of Blair Simmons and Richard Baumhauer. Additionally, subject to
the provisions of Section 7.1 hereof and to prior notification and the consent
(which will not be unreasonably withheld or delayed) of Buyer, Buyer and such
representatives may contact the principal customers and suppliers of the
Business for purposes of the foregoing investigation.
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6.2 ORDINARY CONDUCT. Except as contemplated by this Agreement or as
set forth in Schedule 6.2, from the date hereof to the Closing, Seller agrees to
cause the business of the Business to be conducted in the ordinary course in
substantially the same manner as presently conducted and will make all
reasonable efforts, consistent with past practices to preserve intact the
present organization of the Business and its relationships with customers,
suppliers, employees and agents and others with whom the Business deals. Except
as contemplated by this Agreement, Sellers will not, without the prior written
consent of Buyer, which consent will not be unreasonably withheld or delayed,
take any action, or deliberately omit to take any action which in the ordinary
course it would have taken, in either case which would cause the representations
and warranties of Sellers herein to be untrue in any material respect except
insofar as either Seller may enter into a Contract which would be required to be
listed on Schedule 4.7 hereto were it in existence on the date hereof.
6.3 INSURANCE. Sellers shall keep, or cause to be kept, all
insurance policies presently maintained relating to the Business and its
properties, or replacements therefor, in full force and effect through the close
of business on the Closing Date with their current insurers, or other
financially sound insurers, insuring against the types of risks currently
insured against in at least such amounts as are currently insured against.
Buyer will not have any rights under any such insurance policies from and after
the Closing Date.
6.4 TITLE COMMITMENT. Buyer intends to obtain, prior to the Closing
and at the shared expense of Sellers and Buyer, a standard form commitment for
an owner's policy of title insurance (the "Title Commitment") issued by Chicago
Title Insurance Company in amounts equal to the appraised value of the Clawson
Facility and the Peck Facility as set forth in customary, third-party
appraisals, such appraisals to be procured at Buyer's expense. The Title
Commitment shall not contain any material exceptions to title except (a) the
standard exceptions to title customarily contained in such title commitments in
Michigan and which cannot be omitted on the basis of one or more affidavits of
the applicable Seller, (b) Permitted Liens, except without duplication, and
(c) such other Liens of record, if any, provided the same are consented to in
writing by Buyer. No later than five (5) Business Days prior to the Closing,
Buyer shall notify Sellers if it believes the Title Commitment fails to conform
to the foregoing, and in the absence of such notification, the Title Commitment
will be deemed for all purposes hereof so to conform. In the event of any such
objection which is appropriate and remediable by Sellers, Sellers shall
remediate the problem unless the required actions would entail expenditures in
excess of $500,000, in which case Buyer shall have the option, exercisable
within two
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(2) Business Days, of terminating this Agreement or accepting the property with
a further purchase price adjustment of $500,000. If the Buyer so elects to
proceed, the Title Commitment shall be deemed for all purposes hereof to conform
with this Section 6.4.
6.5 ACQUISITION PROPOSALS. From and after the date hereof until the
termination hereof, without the written consent of Buyer, neither Seller shall
(i) solicit or initiate discussions with any Person, other than the Buyer, its
Affiliates and their respective designees and agents, relating to the possible
acquisition, whether by way of merger, reorganization, purchase of capital
stock, purchase of assets or otherwise (any such acquisition being referred to
in this section as an "Acquisition Transaction"), of any material interest in
the Business or any material Asset, (ii) provide Confidential Information with
respect to the Business or any Asset to any Person, other than Buyer, its
Affiliates and their respective designees and agents, in connection with a
possible Acquisition Transaction or (iii) enter into a transaction with any
Person, other than Buyer, its Affiliates and their respective designees and
agents, concerning a possible Acquisition Transaction. If either Seller
receives an unsolicited offer or proposal relating to an Acquisition
Transaction, such Seller shall immediately reject such offer and notify Buyer
and provide information to Buyer as to the identity of the party making any such
offer or proposal and the specific terms of such offer or proposal. The parties
recognize and acknowledge that a breach by any Seller of Section 6.5 will cause
irreparable and material loss and damage for Buyer, the amount of which cannot
be readily determined and as to which it will not have any adequate remedy at
law or in damages. Accordingly, in addition to any remedy Buyer may have in
damages by an action at law, it shall be entitled to the issuance of an
injunction restraining any such breach or any other remedy at law or in equity
for any such breach.
6.6 ACCOUNTS RECEIVABLE. Each Seller agrees promptly to forward to
Buyer any and all proceeds from accounts receivable of the Business that are
received by such Seller after the Closing Date. If, after the Closing Date,
either Seller receives any payment from any Person who at the time of such
payment has outstanding accounts payable to such Seller, on the one hand (for
the purposes of this Section, "Seller Accounts Receivable"), and to the Buyer,
on the other hand (for the purposes of this Section, "Buyer Accounts
Receivable"), and the payment (a) does not indicate whether it is in respect of
Seller Accounts Receivable or Buyer Accounts Receivable or (b) indicates that it
is in payment of both Seller Accounts Receivable and Buyer Accounts Receivable
without specifying the portion to be allocated to each, then such Seller and
Buyer shall consult with one another to determine the proper
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allocation of such payment; and, if they are unable to reach agreement on the
proper allocation, such payment shall be applied so as to retire Seller Accounts
Receivable and Buyer Accounts Receivable in chronological order based upon the
invoice date thereof.
6.7 DISCLOSURE OF INFORMATION; NON-COMPETITION.
(a) From and after the Closing, Sellers shall not use or
disclose to any Person, except as required by any Requirement of Law, any
Confidential Information (as hereinafter defined), for any reason or purpose
whatsoever, nor shall they make use of any of the Confidential Information for
their own purposes or for the benefit of any Person except Buyer or any of its
Affiliates. For purposes of this Agreement, "Confidential Information" shall
mean all information of a proprietary nature relating to Controls, the Business
or the Assets (other than information which is in the public domain at the time
of receipt thereof by the receiving Person or is in such Person's possession at
the time of its use or disclosure by Sellers, in either case other than as a
result of the breach by the Sellers of its agreement hereunder).
(b) Each of the Sellers acknowledges and recognizes that the
Business has been conducted by the Sellers, and substantial sales of its
products have been made, throughout the United States, and further acknowledges
and recognizes the highly competitive nature of the industry in which the
Business is involved. Accordingly, in consideration of the premises contained
herein and the consideration to be received hereunder, and in consideration of
and as an inducement to the Buyer to consummate the transactions contemplated
hereby, the Sellers shall not from and after the Closing until the third
anniversary of the Closing Date (i) directly or indirectly engage, whether or
not such engagement shall be as a partner, stockholder, Affiliate or other
participant, in any Competitive Business, or represent in any way any
Competitive Business, whether or not such engagement or representation shall be
for profit, (ii) interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between the Buyer and any other Person, including,
without limitation, any customer, supplier or employee of the Buyer, (iii)
induce any employee of the Buyer or the Business to terminate his employment
with the Buyer or the Business or to engage in any Competitive Business in any
manner described in the foregoing clause (i) (as well as an officer or director
of any Competitive Business), or (iv) affirmatively assist or induce any other
Person to engage in any Competitive Business in any manner described in the
foregoing clause (i) (as well as an officer or director of any Competitive
Business). As used herein, "Competitive Business" shall mean any business
involving the sale of any of the products described on Schedule 6.7 hereto in
any city or county in any state of the
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United States or anywhere outside the United States. Notwithstanding the
foregoing, nothing in this Agreement shall be construed to prohibit MagneTek
from manufacturing, marketing or distributing any medium-voltage starter
products after the first anniversary of the Closing Date, PROVIDED, that, with
respect to such product, during the period prior to the third anniversary
MagneTek will not market to or solicit sales from the principal existing
customer of the Business for such product. MagneTek will not be permitted,
however, to incorporate in any manner whatsoever into its medium-voltage starter
products any technology that is included in the Assets, except to the extent
such technology is in the public domain. Anything contained in this Section 6.7
to the contrary notwithstanding, the acquisition by any of the Sellers of any
Person, less than 10% of the gross revenues of which are derived in a
Competitive Business, shall not constitute a breach of this Section 6.7 if such
Competitive Business of such Person is sold or otherwise disposed of or
discontinued within the year following such acquisition. In addition, nothing
in this Agreement shall prohibit either Seller from acquiring (i) no more than
15%, in the case of a privately held Person and (ii) no more than 5%, in the
case of a Person whose securities are actively traded in any securities market
worldwide, of the securities of any class, of a Person engaged in a Competitive
Business.
(c) It is the desire and intent of the parties that the
provisions of this Section 6.7 be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of this
Section 6.7 shall be adjudicated to be invalid or unenforceable, such provision
shall be deemed amended to the extent necessary in order that such provision be
valid and enforceable, such amendment to apply only with respect to the
operation of such provision of this Section 6.7 in the particular jurisdiction
in which such adjudication is made.
(d) The parties recognize and acknowledge that a breach by any
Seller of this Section 6.7 will cause irreparable and material loss and damage
to Buyer, the amount of which cannot be readily determined and as to which it
will not have an adequate remedy at law or in damages. Accordingly, in addition
to any remedy Buyer may have in damages by an action at law, it shall be
entitled to the issuance of an injunction restraining any such breach or any
other remedy at law or in equity for any such breach.
6.8 ASSETS. If, after the Closing Date, Assets shall remain on the
premises utilized or controlled by Sellers or any Affiliate thereof, then
Sellers shall take reasonable steps at the expense of Sellers to deliver such
Assets to Buyer, and so
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long as such assets remain in such Seller's or Affiliates' control, shall
exercise reasonable care with respect thereto, and in no event less care than
with respect to its own properties.
6.9 REMOVAL OF LIENS. Following the date hereof, Sellers shall use
commercially reasonable efforts to (a) remove any Liens listed on Schedule 4.4
that are indicated as requiring removal prior to the Closing Date and (b) obtain
all assignments necessary to vest in the Sellers all right, title and interest
in and to the Intellectual Property Rights listed on Schedule 4.6 that are not
currently held in the name of Sellers.
ARTICLE VII
COVENANTS OF BUYER
Buyer covenants and agrees as follows:
7.1 CONFIDENTIALITY. Buyer acknowledges that the information being
provided to it by Sellers is subject to the terms of a confidentiality agreement
between Buyer and Sellers (the "Confidentiality Agreement"), the terms of which
are incorporated herein by reference. Effective upon, and only upon, the
Closing, the Confidentiality Agreement will terminate and be of no further
effect; PROVIDED, HOWEVER, that Buyer acknowledges that the Confidentiality
Agreement will terminate only with respect to information relating to the
Business; and PROVIDED, FURTHER, HOWEVER, that Buyer acknowledges that any and
all other information provided to it by Sellers or Sellers' representatives
concerning either Seller shall remain subject to the terms and conditions of the
Confidentiality Agreement after the date of the Closing.
7.2 ACCOUNTS RECEIVABLE. Buyer agrees to promptly forward or cause
to be forwarded to the applicable Seller any and all proceeds from accounts
receivable of such Seller that are received by Buyer after the Closing Date.
If, after the Closing Date, Buyer receives any payment from any person who at
the time of such payment has Seller Accounts Receivable and Buyer Accounts
Receivable, and the payment (a) does not indicate whether it is in respect of
Seller Accounts Receivable or Buyers Accounts Receivable or (b) indicates that
it is in payment of both Seller Accounts Receivable and Buyer Accounts
Receivable without specifying the portion to be allocated to each, then Sellers
and Buyer shall consult with one another to determine the proper allocation of
such payment; and, if they are unable to reach agreement on the proper
allocation, such payment shall be applied so as to retire Seller Accounts
Receivable and Buyer Accounts Receivable in chronological order based upon the
invoice dates.
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7.3 EXCLUDED ASSETS. If, after the Closing Date, Excluded Assets
shall remain on the premises utilized or controlled by Buyer, then Buyer shall
take reasonable steps at the expense of the applicable Seller to deliver such
Excluded Assets to such Seller, and so long as such assets remain in Buyer's
control, shall exercise reasonable care with respect thereto, and in no event
less care than with respect to its own properties.
7.4 INSURANCE. Buyer shall secure insurance with respect to the
Business from the Closing Date covering general liability and products liability
in amounts customary for the industry in which the Business operates.
ARTICLE VIII
MUTUAL COVENANTS
Each of Seller and Buyer covenant and agree as follows:
8.1 HSR FILINGS; PERMITS AND CONSENTS.
(a) Each Seller and Buyer have filed with the United States
Federal Trade Commission (the "FTC") and the United States Department of Justice
(the "DOJ") the notification and report form, if any, required for the
Transactions and any supplemental information requested in connection therewith
pursuant to the HSR Act. Any such notification and report form and supplemental
information will be in substantial compliance with the requirements of the HSR
Act. Each Seller and Buyer shall furnish to the other party necessary
information and reasonable assistance as the other may request in connection
with its preparation of any filing or submission which is necessary under the
HSR Act. Sellers and Buyer shall keep each other apprised of the status of any
communications with, and inquiries or requests for additional information from,
the FTC and the DOJ and shall comply promptly with any such inquiry or request.
Each Seller and Buyer will use all reasonable efforts to obtain any clearance
required under the HSR Act for the Transactions.
(b) As promptly as practicable after the date hereof, Buyer and
Sellers shall make all other filings with Governmental Authorities, and use all
reasonable efforts to obtain all permits, approvals, authorizations and consents
of all third parties, required to consummate the Transactions. Buyer and
Sellers shall furnish promptly to each other all information that is not
otherwise available to the other party and that such party may reasonably
request in connection with any such filing. Buyer and Sellers shall use
commercially reasonable efforts to obtain such consents to the assignment of
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the Assigned Contracts as may be required; PROVIDED, HOWEVER, that such
commercially reasonable efforts shall not include any requirement that Buyer or
Sellers commence any litigation or offer or grant any accommodation (financial
or otherwise) to any third party. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement or
attempted agreement to transfer, sublease or assign any Contract or any Claim or
right with respect to any benefit arising thereunder or resulting therefrom, or
any Permit, if an attempted transfer, sublease or assignment thereof, without
the required consent of any other party thereto, would constitute a breach
thereof or in any way affect the rights or obligations of Buyer or Sellers
thereunder. Except as set forth in Section 2.7 or 11.4, Sellers shall be
responsible for the cost of complying with or obtaining the consent to or
approval of the Transactions contemplated hereby of any Person or Governmental
Authority including, without limitation, any such approval or consent required
by any safety, health, environmental or other Requirement of Law which is
applicable to the Business.
(c) With respect to each such Assigned Contract not assigned on
the Closing Date, after the Closing Date the applicable Seller shall continue to
deal with the other contracting party(ies) to such Assigned Contract as the
prime contracting party, and Buyer and such Seller shall continue to use
reasonable efforts to obtain the consent of all required parties to the
assignment of such Assigned Contract. Such Assigned Contract shall be promptly
assigned by the applicable Seller to Buyer after receipt of such consent after
the Closing Date. Notwithstanding the absence of any such consent, Buyer shall
be entitled to the benefits of such Assigned Contract accruing after the Closing
Date to the extent that the applicable Seller may provide Buyer with such
benefits without violating the terms of such contract; and to the extent such
benefits are so provided, Buyer agrees to perform at its sole expense all of the
obligations of such Seller to be performed under such Assigned Contract after
the Closing Date.
8.2 COOPERATION. Buyer and Sellers shall cooperate with each other
and shall cause their officers, employees, agents, auditors and representatives
to cooperate with each other after the Closing to ensure the orderly transition
of the Business to Buyer and to minimize any disruption to the respective
businesses of Sellers or the Business that might result from the Transactions,
including that to the extent that Continental Illinois National Bank and Trust
Company of Chicago and Bank of America in Simi Valley agree to transfer to Buyer
the lock boxes maintained by Sellers with such banks (respectively, lock box no.
98438 and 53768), Sellers shall cooperate in such transfers.. Neither party
shall be required by this Section 8.2 to take any action that would unreasonably
interfere with the conduct of its business.
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8.3 PUBLICITY. Sellers and Buyer agree that, from the date hereof
through the Closing Date, no public release or announcement concerning the
Transactions shall be issued without the prior consent of Sellers, on the one
hand, or Buyer, on the other hand (which consent shall not be unreasonably
withheld or delayed), except as such release or announcement may be required by
any Requirement of Law, in which case the party required to make the release or
announcement shall allow the other party reasonable time to comment on such
release or announcement in advance of such issuance.
8.4 REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement (including the limitations set forth in Section 8.1), each party will
use all reasonable efforts to cause the Closing to occur.
8.5 RECORDS. On the Closing Date, Sellers shall deliver or cause to
be delivered to Buyer all Records (to the extent not then in the possession of
the Business), except any Records relating primarily to Excluded Liabilities
(including, without limitation, to Sellers' Tax liability or to any litigation
or claim not assumed by Buyer hereunder). After the Closing, upon reasonable
written notice and at Buyer's sole expense, Sellers agree to furnish or cause to
be furnished to Buyer and its representatives (including its auditors), access
at reasonable times and during normal business hours to all such information
relating to the Business in such Seller's possession as is reasonably necessary
for financial reporting and accounting matters, the preparation and filing of
any Tax Returns, reports or forms or the defense of any Tax Claim or assessment
and will permit such representatives to make abstracts from or copies of any
such records, the out-of-pocket expense of which shall be entirely borne by
Sellers; PROVIDED, HOWEVER, that such access does not unreasonably disrupt the
normal operations of such Seller. Buyer shall, and shall cause its
representatives to, use the information provided pursuant hereto solely for the
purposes for which it may be requested set forth herein.
8.6 ACCESS TO FORMER BUSINESS RECORDS. Buyer will retain all
historical accounting, financial and Tax Records and all Records relating to the
manufacture of products sold by the Business prior to the Closing Date for a
period of seven (7) years following the Closing, and Buyer will retain all other
material Records for a period of at least three (3) years following the Closing.
During such periods, upon reasonable written notice and at Buyer's sole expense,
Buyer will afford authorized representatives of either Seller (including their
respective auditors) access to such Records at reasonable times and during
normal business hours at the principal business office of the Business, or at
such other location or locations at which such Records may be stored or
maintained from time to
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time, and will permit such representatives to make abstracts from, or copies of,
any of such Records, at such Seller's sole cost and expense. During such
periods, Buyer will, upon the reasonable request of either Seller and at such
Seller's expense (limited, however, to Buyer's reasonable out-of-pocket
expenditures without regard to any employee cost or other overhead expenses),
cooperate with such Seller in furnishing information, evidence, testimony, and
other reasonable assistance in connection with any action, proceeding, Tax
audit, or investigation to which such Seller or any of its Affiliates is subject
relating to the business of the Business prior to the Closing; PROVIDED,
HOWEVER, that such access does not unreasonably disrupt the normal operations of
Buyer. Sellers shall, and shall cause their representatives to, use the
information provided pursuant hereto solely for the purposes for which it may be
requested as set forth herein. Following the expiration of the aforesaid
three-year or seven-year period as applicable, Buyer may dispose of such work
papers, books and records at any time upon giving 30 days' prior written notice
to Sellers, unless Sellers agree to take possession of such work papers, books
and records within such 30 days at no expense to Buyer.
8.7 USE OF TRADEMARK AND TRADE NAMES.
(a) Notwithstanding anything to the contrary in this Agreement,
Buyer may continue to use the name "MagneTek" and related trademarks, corporate
names, and trade names incorporating "MagneTek," and the stylized "MagneTek"
logos (i) in displays, signage and postings for the period after the Closing
Date necessary to permit the removal of such names as promptly as is reasonably
feasible, and only to the extent such displays, signage or postings exist on the
Closing Date; (ii) for a period of two years, to state the Business' former
affiliation with MagneTek (e.g., "formerly a division of MagneTek, Inc.") and
(iii) to the extent any such trade names, trademarks, service marks or logos
appear on stationery, packaging materials, supplies or inventory on hand as of
the Closing Date or on order at the time of the Closing, until such is
exhausted.
(b) Notwithstanding anything to the contrary in this Agreement,
Sellers may continue to use the name "MagneTek Controls" and related trademarks
and trade names incorporating "MagneTek Controls," and any stylized "MagneTek
Controls" logos.
8.8 REQUIRED MODIFICATIONS OR REPLACEMENTS OF PRODUCTS. The
following provisions of this Section 8.8 shall govern the responsibilities of
Buyer and Sellers regarding Required Modifications:
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(a) Buyer shall advise the appropriate Seller promptly after an
officer of Buyer shall have concluded that there is a reasonable likelihood that
a Required Modification to any product shipped by the Business prior to the
Closing Date would materially affect the amount or likelihood of any related
liability with respect to such product for which Sellers would be obligated to
indemnify Buyer.
(b) Whether or not Buyer gives the foregoing notice, Buyer shall
make any Required Modifications, at the reasonable request and expense pursuant
to Section 8.3(c) of the applicable Sellers, to products shipped by the Business
prior to the Closing Date which are necessary or advisable, in the reasonable
discretion of the applicable Seller. If the cost to such Seller under
Section 8.8(c) of implementing any such Required Modification exceeds the cost
to such Seller of replacing such products, Buyer shall replace such products.
The obligation of Buyer hereunder shall include, but not be limited to, such
actions as such Seller may reasonably request for (i) the notification of
customer and other third parties in possession of the applicable products, (ii)
the shipping of such products, if necessary, to and from Buyer's facilities for
modification, improvement, enhancement or replacement, (iii) production of
replacement products, parts or supplies necessary for the implementation of the
product modification, enhancement, improvement or placement, (iv) the
installation, modification or replacement of the product by personnel of Buyer,
either at the customer's location or at Buyer's facilities, as appropriate, and
(v) recordkeeping and reports with respect to such product modifications,
enhancements, improvements or replacements to the extent required by law or
reasonably requested by Seller.
(c) The applicable Seller shall reimburse Buyer for direct
manufacturing, installation, labor and materials costs incurred by Buyer in
installing or implementing any Required Modification under Section 8.8(b) or in
producing any replacement products, parts or supplies under Section 8.8(b),
together with all reasonable out-of-pocket shipping, postage and printing and
other costs incurred by Buyer in connection therewith.
8.9 ASSUMED LITIGATION. Notwithstanding any other provision of this
Agreement, upon the Closing Buyer will assume, to the extent herein set forth,
liability for claims alleging personal injury, illness or other Loss based upon
exposure or alleged exposure prior to or following the Closing Date to asbestos
occurring in the industrial brake product line no longer manufactured by the
Business ("Asbestos Claims"), only as follows:
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(a) during the two (2) years immediately succeeding the Closing
Date, Buyer shall assume responsibility (with commercially reasonable assistance
as to information, case histories and similar matters from Sellers) for the
administration of Asbestos Claims and all related litigation, such that, by the
end of such two-year period, the administration thereof shall have become
Buyer's responsibility entirely;
(b) during the five (5) years immediately succeeding the Closing
Date, the Losses from Asbestos Claims and/or related litigation shall be shared
equally as between Sellers, on the one hand, and Buyer, on the other hand,
PROVIDED, that notwithstanding anything to the contrary contained herein,
Buyer's share of such Losses shall not exceed $100,000 during either the first
or second twelve-month periods or $200,000 during any of the third, fourth or
fifth twelve-month periods of such five (5) year period; and notwithstanding
anything to the contrary in Article X, amounts so expended shall not be
considered to contribute to or count against the minimum and aggregate maximum
amounts for which indemnification is provided in Article X hereof; and
(c) from and after the fifth anniversary of the Closing Date,
Buyer shall be liable for all Losses arising from Asbestos Claims, and,
notwithstanding anything to the contrary in Article X, Seller shall be
indemnified therefor under Section 10.2(c) without application of any minimum or
aggregate maximum amount for which indemnification is so provided in Article X.
8.10 WAIVER OF BULK SALES LAW COMPLIANCE. Buyer hereby waives
compliance by Sellers with the requirements, if any, of Article 6 of the Uniform
Commercial Code as in force in any state in which Assets are located and all
other similar Requirements of Law applicable to bulk sales and transfers, to the
extent applicable to the Transactions (the "Bulk Sale Laws").
8.11 FURTHER INSTRUMENTS AND ASSURANCES. Sellers shall, at any time
and from time to time after the Closing, upon the reasonable request of and at
the expense of Buyer, do, execute, acknowledge, deliver and file, or cause to be
done, executed, acknowledged, delivered and filed, all such further acts,
transfers, conveyances, assignments or assurances as may reasonably be required
for better selling, transferring, conveying, assigning and assuring to Buyer, or
for aiding and assisting in the collection of or reducing to possession by
Buyer, any of the Assets. Similarly, Buyer shall, at any time and from time to
time after the Closing, upon the reasonable request of and at the expense of
Sellers, do, execute, acknowledge, deliver and file, or cause to be done,
executed,
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acknowledged, delivered and filed, all such further acts, transfers,
conveyances, assignments or assurances as may reasonably be required for better
effectuating the assumption by Buyer of the Assumed Liabilities.
ARTICLE IX
EMPLOYEE BENEFIT MATTERS
9.1 EMPLOYEE RETENTION. Buyer shall offer employment to commence as
of the Closing Date to all Business Employees, at substantially the same
salaries and wages (including division-level, but not MagneTek-wide bonus and
incentive programs) and except as provided in Section 9.2, on substantially the
same terms and conditions as those in effect immediately prior to the Closing
Date (any such employees who accept such offer of employment being referred to
herein as the "Hired Employees"). Buyer shall have no obligation to offer
employment to and shall have no other liability to any Business Employee who, on
the Closing Date, is not actively employed or is on disability, leave of absence
(but not vacation, illness leave or maternity leave), military service leave or
lay-off (whether or not with recall rights), or whose employment has been
terminated (voluntarily or involuntarily) or who has retired prior to the
Closing Date. Buyer has no present intention (subject to its discretion as to
employee performance) to terminate the employment of any Business Employee
within the sixty (60) days following the Closing Date, and Buyer assumes all
obligations and liabilities, if any, under the Worker Adjustment and Retraining
Notification Act (the "WARN Act") arising out of the Transactions but no other
actual or potential liability of Sellers, whether by Contract or Requirement of
Law, relating to termination or severance of Business Employees.
9.2 EMPLOYEE BENEFIT PLANS.
(a) Effective as of the Closing Date, (i) Hired Employees shall
cease accruing any benefits under any Seller Plan, and Sellers shall take, or
cause to be taken, all such action, if any, as may be necessary to effect such
cessation of participation and (ii) Buyer shall establish employee benefit plans
providing benefits which in the aggregate are substantially the same as the
benefits provided to Business Employees under the Seller's Plans listed on
Schedule 4.9(a), (b) and (c) as described to Buyer in the materials referred to
in Section 4.9 (provided that Buyer shall have no obligation to, and shall not,
establish a defined benefit pension plan or a retiree health or life insurance
benefit plan) (the "Buyer's Benefit Plans"). With respect to the Buyer's
Benefit Plans, Buyer shall grant all Hired Employees from and after the Closing
Date credit for all service with the applicable Seller and its Affiliates and
their respective predecessors prior to the
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Closing Date for all purposes for which such service was recognized by either
Seller and its Affiliates. With respect to Buyer's Benefit Plans that provide
medical or dental benefits after the Closing Date, such plans shall waive any
exclusions or limitations with respect to pre-existing conditions and actively-
at-work exclusions and shall provide that any expenses incurred on or before the
Closing Date by a Hired Employee or his covered dependents shall be taken into
account under such Buyer's Benefit Plans for purposes of satisfying applicable
deductible, coinsurance and maximum out-of-pocket provisions. Buyer shall also
cause its health plan(s) to be responsible for all health benefit claims by
Hired Employees and their covered dependents for services rendered after the
Closing Date.
(b) On or prior to the Closing Date, Sellers shall cause all
Business Employees to be fully vested in all benefits accrued as of the Closing
Date under the MagneTek, Inc., FlexCare Plus Retirement Pension Plan and the
MagneTek, Inc., FlexCare Plus Retirement Savings Plan.
(c) Sellers shall be solely responsible for and shall pay when
due any amounts payable under any Sellers' Plan in respect of the Transactions
including, without limitation, under the Bonus Agreements. Notwithstanding the
foregoing, no Hired Employee shall be entitled to receive, and no Seller shall
be required by the terms of this Agreement to pay to any Hired Employee, any
portion of the executive incentive compensation plan for fiscal years 1994 or
1995.
9.3 VACATION AND HOLIDAY PAY. As of the Closing Date, Buyer shall
assume all of Sellers' obligations for vacation and holiday pay to all Hired
Employees.
9.4 ACCESS TO INFORMATION. Commencing with the date hereof and
continuing to the Closing Date and thereafter, Sellers shall make reasonably
available to Buyer such actuarial, financial, personnel and related information
as may be reasonably requested by Buyer with respect to any Seller Plan as it
relates to a Business Employee, including, but not limited to, compensation and
employment histories.
9.5 NO THIRD PARTY BENEFICIARY. Nothing contained in this Article IX
or elsewhere herein shall confer upon any Hired Employee or Business Employee
any rights or remedies of any nature or kind whatsoever under or by reason of
this Agreement, including, without limitation, any right to employment or
continued employment or to any benefits that may be provided, directly or
indirectly, under any employee benefit plan, policy or arrangement of either
Seller or of Buyer, nor shall anything contained in this Article IX or elsewhere
herein constitute a limitation on or restriction against the right of either
Seller
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or of Buyer to amend, modify or terminate any such plan, policy or arrangement
or the terms or conditions of employment.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY SELLERS. Subject to the terms and conditions
of this Article X, Sellers shall, jointly and severally, indemnify Buyer and
each of its officers, directors, employees, agents, Affiliates and successors
and assigns in respect of all or substantially all of the Business, against, and
hold them harmless from, any Loss sustained, suffered or incurred by any such
Indemnified Person (other than any relating to environmental matters, for which
indemnification provisions are set forth in Section 10.3) to the extent arising
from (a) if the Closing occurs, any breach of any representation or warranty of
either Seller contained in this Agreement which survives the Closing or in any
certificate, instrument or other document delivered pursuant hereto, (b) any
breach of any covenant or agreement of either Seller contained in this Agreement
or any other Transaction Document or (c) if the Closing occurs, the existence
of, or the failure of such Seller to pay, perform and discharge when due, any of
the Excluded Liabilities (including, without limitation, any Losses as a result
of the failure of such Seller to comply with any Bulk Sales Laws referred to in
Section 8.10); PROVIDED, HOWEVER, that neither Seller shall have any liability
under clause (a) of this Section 10.1 unless the aggregate of all Losses
relating thereto for which Sellers would, but for this proviso, be liable
exceeds on a cumulative basis together with Losses for which Buyer is
indemnified under Section 10.3, an amount equal to $500,000 (and then only to
the extent of any such excess); and PROVIDED FURTHER, HOWEVER, that Sellers'
aggregate liability under clause (a) of this Section 10.1, clause (c) of this
Section 10.1 (with respect to Excluded Liabilities other than Specifically
Excluded Liabilities) and Section 10.3 shall in no event exceed $15,000,000.
Sellers shall have no obligation to indemnify Buyer with respect to any Loss,
including but not limited to, any breach of the representations set forth in
Section 4.5, which are within the scope of the Title Policy procured in
accordance with the Title Commitment referred to in Section 6.4, and Buyer
agrees that its sole recourse with respect to such matters shall be against the
issuer of such Title Policy.
10.2 INDEMNIFICATION BY BUYER. Subject to the terms and conditions of
this Article X, Buyer shall indemnify Sellers and each of their respective
officers, directors, employees, agents, Affiliates and successors and assigns in
respect of all or substantially all of the Business, against, and hold them
harmless from, any Loss sustained, suffered or incurred by any such Indemnified
Person (other than any relating to
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environmental matters, for which indemnification provisions are set forth in
Section 10.3) to the extent arising from (a) if the Closing occurs, any breach
of any representation or warranty of Buyer contained in this Agreement which
survives the Closing or in any certificate, instrument or other document
delivered pursuant hereto or in connection herewith, (b) any breach of any
covenant or agreement of Buyer contained in this Agreement or any other
Transaction Document, (c) if the Closing occurs, the existence of, or the
failure of Buyer to pay, perform and discharge when due, any of the Assumed
Liabilities and (d) any violation of a Requirement of Law with respect to the
Business for which Buyer is responsible other than those for which
indemnification of Sellers by Buyer is provided in Section 10.3; PROVIDED,
HOWEVER, that Buyer shall not have any liability under clause (a) of this
Section 10.2 unless the aggregate of all Losses relating thereto for which Buyer
would, but for this proviso, be liable exceeds on a cumulative basis, together
with Losses for which Sellers are indemnified under Section 10.3, an amount
equal to $500,000 (and then only to the extent of such excess); and PROVIDED
FURTHER, HOWEVER, that Buyer's aggregate liability under clause (a) of this
Section 10.2 shall in no event exceed $15,000,000.
10.3 INDEMNIFICATION FOR ENVIRONMENTAL MATTERS. Subject to the terms
and conditions of this Article X, Sellers, jointly and severally, shall
indemnify and hold Buyer harmless from and against all Losses (i) resulting from
claims or demands by any Governmental Authority or any third party which is
unrelated to Buyer or its Affiliates arising under (A) any Environmental Law, or
(B) under any common law tort claim theory applicable to Hazardous Materials or
(ii) Hazardous Materials remediation otherwise specifically required to be
performed or conducted by any Environmental Law, in each case to the extent such
Losses (a) are attributable, based on events, facts or circumstances existing or
occurring prior to the Closing Date, to the Business or any premises owned,
operated or otherwise used by either Seller prior to the Closing Date including,
without limitation, any Business Property (a "Seller Facility") or to Hazardous
Materials transported offsite from a Seller Facility for treatment, storage,
disposal or otherwise prior to the Closing Date and (b) exceed, on a cumulative
basis together with Losses for which Buyer is indemnified under clause (a) of
Section 10.1, an amount equal to $500,000 (but only to the extent of such
excess); and PROVIDED, FURTHER, that Sellers' aggregate liability under
clause (a) of this Section 10.3, Section 10.1 and clause (c) of Section 10.1
(with respect to Excluded Liabilities other than Specifically Excluded
Liabilities) shall in no event exceed $15,000,000. Sellers' indemnification
liability hereunder shall in no event be construed to extend to or include any
remediation arising as a result of the presence of asbestos in or upon any of
the improvements located on the Business Property at any time, other
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than any reasonably necessary to remediate or contain friable asbestos at the
Closing Date, which shall be included in the indemnification provided in this
Section 10.3. Sellers' obligation to indemnify Buyer under this Section 10.3
shall expire on the third anniversary of the Closing Date, and Buyer hereby
expressly releases Sellers, but not any Person (other than successors and
assigns of, or Indemnified Persons related to, either Seller) from and after
such third anniversary from any liability in respect of the matters covered by
such indemnification, whether arising by statute or common law, or otherwise.
Buyer shall indemnify and hold Sellers harmless from and against all Losses
resulting from claims or demands by any Governmental Authority or private party
that is unrelated to Sellers arising under any Environmental Law, or under any
common tort claim theory applicable to Hazardous Materials to the extent such
Losses are attributable to Buyer's operation of any Business Property (but not
as to Hazardous Materials present at such property on or prior to the Closing
Date) or conduct of the Business (whether by commission or omission) after the
Closing Date. Nothing in this Section 10.3 shall be interpreted to limit
Buyer's obligations in respect of the Asbestos Claims as set forth in
Section 8.9.
10.4 LOSSES NET OF INSURANCE, ETC.
(a) The amount of any Loss for which indemnification is provided
under this Article X shall be net of any amounts recovered or recoverable by the
Indemnified Person under insurance policies with respect to such Loss and of any
reserve in respect thereof reflected on the Closing Balance Sheet.
(b) If the Indemnifying Person makes any payment under this
Article X in respect of any Loss, the Indemnifying Person shall be subrogated,
to the extent of such payment, to the rights of the Indemnified Person against
any insurer or third party with respect to such Losses.
(c) Each party agrees that it will not seek punitive damages as
to any matter under, relating to or arising out of the Transactions.
(d) The parties hereto agree that the indemnification provisions
of this Article X are intended to provide the exclusive remedy as to all Losses
either may incur arising from or relating to the Transactions, and each party
hereby waives, to the extent they may do so, any other rights or remedies that
may arise under any applicable statute, rule or regulation; PROVIDED, HOWEVER,
that the foregoing shall not be interpreted to limit the types of remedies,
including specific performance or other equitable remedies, which may be sought
by an Indemnified Person in connection with a breach of any
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covenant or agreement contained in this Agreement, or in respect of any third
party, regardless of the monetary Loss such Indemnified Person has sustained,
provided that the Losses of such person in connection with the pursuit of such
remedy shall be subject to all of the provisions of this Article X.
10.5 TERMINATION OF INDEMNIFICATION. The obligations to indemnify and
hold harmless a party hereto, (A) pursuant to Sections 10.1(a) and 10.2(a),
shall terminate when the applicable representation or warranty terminates
pursuant to Section 10.8 and (B) pursuant to Section 10.3, shall terminate as
set forth therein; PROVIDED, HOWEVER, that as to clauses (A) and (B) above, such
obligations to indemnify and hold harmless shall not terminate with respect to
any item as to which the person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice (stating in reasonable detail the basis of such claim) to the
Indemnifying Person.
10.6 PROCEDURES RELATING TO INDEMNIFICATION (OTHER THAN FOR TAX
CLAIMS). In order for an Indemnified Person to be entitled to any
indemnification provided for under this Agreement (other than for Tax Claims) in
respect of, arising out of or involving a claim or demand made by any Person
against the Indemnified Person (a "Third-Party Claim"), such Indemnified Person
must notify the Indemnifying Person in writing, and in reasonable detail, of the
Third-Party Claim promptly, and in all events within ten (10) Business Days
after receipt by such Indemnified Person of actual notice of such Third-Party
Claim; PROVIDED, HOWEVER, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
Indemnifying Person shall have been actually prejudiced as a result of such
failure. Thereafter, the Indemnified Person shall deliver to the Indemnifying
Person, within five (5) Business Days after the Indemnified Person's receipt
thereof, copies of all notices and documents (including court papers) received
by the Indemnified Person relating to the Third-Party Claim; PROVIDED, HOWEVER,
that failure to provide such notices and documents shall not affect the
indemnification provided hereunder except to the extent the Indemnifying Person
shall have been actually prejudiced as a result of such failure.
If a Third-Party Claim is made against an Indemnified Person, the
Indemnifying Person will be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Person and reasonably satisfactory to the Indemnified Person by
sending a written notice to the Indemnified Person within 30 days of delivery of
the Claims Notice notifying him or it that the Indemnifying Person acknowledges
its indemnification liability with respect to Losses, if any, of the Indemnified
Person arising from the Third-Party Claim and is assuming the defense
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of such Third-Party Claim; PROVIDED, HOWEVER, that in the event that the named
parties to any such action or proceeding (including any impleaded parties)
include both the Indemnified Person and the Indemnifying Person and the former
shall have been advised in writing by counsel (with a copy to the Indemnifying
Person) that there is actually or is reasonably likely to be a conflict among or
between the Indemnified Person and Indemnifying Persons, the Indemnified Person
may obtain separate counsel reasonably satisfactory to the Indemnifying Person
(but in no event more than one such counsel at the expense of the Indemnifying
Party in any matter) and the Indemnified Person shall cause such counsel to
cooperate with the Indemnifying Party in the defense of the overall action.
Should the Indemnifying Person so elect to assume the defense of a Third-Party
Claim, the Indemnifying Person will not be liable to the Indemnified Person for
legal fees and expenses subsequently incurred by the Indemnified Person in
connection with the defense thereof except to the extent set forth in the
preceding sentence. If the Indemnifying Person assumes such defense, the
Indemnified Person shall have the right to participate in the defense thereof
and to employ counsel, at its own expense, separate from the counsel employed by
the Indemnifying Person, it being understood that the Indemnifying Person shall
control such defense. The Indemnifying Person shall be liable for the fees and
expenses of counsel employed by the Indemnified Person for any period during
which the Indemnifying Person has not assumed the defense thereof. If the
Indemnifying Person chooses to defend or prosecute any Third-Party Claim, all
the parties hereto shall cooperate in the defense or prosecution thereof. Such
cooperation shall include the retention and (upon the Indemnifying Person's
request) the provision to the Indemnifying Person of records and information
which are reasonably relevant to such Third-Party Claim, and making employees
available on a mutually convenient basis in the manner specified in Section 8.6
hereof to provide additional information and explanation of any material
provided hereunder. Whether or not the Indemnifying Person shall have assumed
the defense of a Third-Party Claim, (i) the Indemnified Person shall not admit
any liability with respect to, or settle, compromise or discharge, such
Third-Party Claim without the Indemnifying Person's prior written consent (which
consent shall not be unreasonably withheld or delayed) and (ii) the Indemnifying
Person shall not enter into any such settlement, compromise or discharge that
does not include, as one of its terms, the unconditional release of the
Indemnified Person. Anything to the contrary contained in the first sentence of
this Section 10.6 notwithstanding, the Indemnifying Person's acknowledgment of
indemnification liability with respect to any Third Party Claim shall not
preclude the Indemnifying Person from later contesting its indemnification
liability vis-a-vis the Indemnified Person with respect to such Third Party
Claim on the basis of developments following delivery of the Claims
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Notice; PROVIDED, FURTHER, that the failure of the Indemnifying Person to send
the Claims Notice within the 30 days set forth in the first sentence of this
Section 10.6 shall not affect the indemnification provided hereunder except to
the extent the Indemnified Person shall have been actually prejudiced as a
result of such failure. All Tax Claims (as defined in Section 10.7) shall be
governed by Section 10.7.
10.7 PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS.
(a) If a claim shall be made by any Tax authority, which, if
successful, might result in an indemnity payment to any Person hereunder (a "Tax
Indemnitee"), the Tax Indemnitee shall promptly notify the party against whom
indemnification is sought (the "Tax Indemnitor") in writing of such claim (a
"Tax Claim"). If notice of a Tax Claim is not given to the Tax Indemnitor
within a sufficient period of time to allow the Tax Indemnitor to effectively
contest such Tax Claim, or in reasonable detail to apprise the Tax Indemnitor of
the nature of the Tax Claim, in each case taking into account the facts and
circumstances with respect to such Tax Claim, the Tax Indemnitor shall not be
liable to the Tax Indemnitee to the extent that the Tax Indemnitor's ability to
effectively contest such Tax Claim is actually prejudiced as a result thereof.
(b) With respect to any Tax Claim, the Tax Indemnitor shall
control all proceedings taken in connection with such Tax Claim (including,
without limitation, selection of counsel) and, without limiting the foregoing,
may in its sole discretion pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any taxing authority with respect
thereto and may, in its sole discretion, either pay the Tax claimed and sue for
a refund where applicable law permits such refund suits or contest the Tax Claim
in any permissible manner, provided, however, that the Tax Indemnitor shall not
admit liability or settle, compromise or discharge a Tax Claim without giving 30
days' prior notice to the Tax Indemnitee, and without the Tax Indemnitee's
consent, which shall not be unreasonably withheld or delayed; provided, however,
that the failure of the Tax Indemnitor to give such notice to the Tax Indemnitee
shall not affect the indemnification provided hereunder except to the extent the
Tax Indemnitee shall have been actually prejudiced as a result of such failure.
The Tax Indemnitee, and each of its Affiliates, shall cooperate with the Tax
Indemnitor in contesting any Tax Claim, which cooperation shall include, without
limitation, the retention and (upon the Tax Indemnitor's request) the provision
to Tax Indemnitor of Records and information which are reasonably relevant to
such Tax Claim, and making employees available on a mutually convenient basis in
the manner in Section 8.6 to provide additional information or explanation of
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any material provided hereunder or to testify at proceedings relating to such
Tax Claim.
10.8 SURVIVAL OF REPRESENTATIONS. The representations and warranties
in this Agreement and in any other Transaction Document delivered in connection
herewith shall survive the Closing solely for purposes of Sections 10.1(a) and
10.2(a) and, except as set forth in the next sentence, shall terminate at the
close of business eighteen months after the Closing Date. The representations
and warranties in Section 4.1(a), 4.4, the second sentence of Section 4.6(a) and
5.1(a) shall not terminate and shall remain in full force and effect without
time limit, and the representations and warranties in Section 4.3 shall
terminate upon expiration of the applicable statute of limitations (including
any extensions thereof agreed to by Sellers). The representations and
warranties relating to environmental matters in Section 4.10 shall not survive
the Closing.
10.9 PARTIES FREE TO REFER TO OBLIGATIONS OF THE OTHER.
Notwithstanding anything to the contrary herein, neither Sellers nor Buyer shall
be prohibited or restricted from asserting any defense vis-a-vis a third party
to any liability or obligation with respect to any Excluded Liabilities or
Assumed Liability, as the case may be, including, without limitation, asserting
that any such Excluded Liability or Assumed Liabilities, as the case may be, is
the liability or obligation of the other party or parties.
10.10 INTEREST. Any amounts determined to be owing to any
Indemnified Person for indemnification under this Article X shall bear interest
at the reference rate announced from time to time by the San Francisco branch of
Bank America from the date that the subject Loss was suffered or incurred until
the date paid to such Indemnified Person.
ARTICLE XI
GENERAL PROVISIONS
11.1 BENEFITS OF AGREEMENT; ASSIGNMENT. The terms and provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Anything
contained herein to the contrary notwithstanding, this Agreement shall not be
assignable by any party hereto without the consent of the other parties hereto;
PROVIDED, HOWEVER, that (a) MagneTek may assign this Agreement to any Person who
acquires substantially all of the assets of MagneTek and (b) Buyer may transfer
or assign, in whole or from time to time in part, to one or more of its
Affiliates, any of its rights in, to and under this Agreement, including,
without limitation, the right to purchase all or any
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part of the Purchased Assets, but in no event shall any such transfer or
assignment relieve Buyer of its obligations under this Agreement, and (c) Buyer
may assign its rights hereunder to or for the benefit of any Person holding a
financial obligation of Buyer issued in connection with the Financing of the
transactions contemplated thereby or in connection with any renewal, extension,
modification, amendment, refinancing, refunding or replacement of any such
financial obligation.
11.2 NO THIRD-PARTY BENEFICIARIES. Except as provided in Article X as
to Indemnified Persons, this Agreement is for the sole benefit of the parties
hereto and their permitted assigns and nothing herein expressed or implied shall
give or be construed to give to any person or entity, other than the parties
hereto and such assigns, any legal or equitable rights hereunder.
11.3 TERMINATION.
(a) Anything contained herein to the contrary notwithstanding,
this Agreement may be terminated (except as set forth in Section 11.3(c)) and
the Transactions abandoned at any time prior to the Closing Date:
(i) by mutual written consent of each Seller and
Buyer;
(ii) by either Seller if any of the conditions set
forth in Section 3.2 shall have become incapable of fulfillment,
and shall not have been waived by such Seller;
(iii) by Buyer if any of the conditions set forth in
Section 3.1 shall have become incapable of fulfillment, and shall
not have been waived by Buyer; or
(iv) by either party hereto, if the Closing does not
occur on or prior to June 30, 1994; PROVIDED, HOWEVER, that such
date shall be extended to July 1, 1994 solely in the event the
waiting period under the HSR Act shall not have been terminated
prior to June 30, 1994.
(b) In the event of termination by Sellers or Buyer pursuant to
this Section 11.3, written notice thereof shall forthwith be given to the other
party and the Transactions shall be terminated, without further action by either
party. If the Transactions are terminated as provided herein:
(i) Buyer shall return all documents and copies and
other material received from each
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Seller relating to the Transactions, whether so obtained before or
after the execution hereof, to such Seller;
(ii) all confidential information received by Buyer with
respect to the Business and Sellers shall be treated in accordance
with the Confidentiality Agreement which shall remain in full
force and effect notwithstanding the termination of this Agreement.
(c) If this Agreement is terminated pursuant to its terms and
the transactions contemplated hereby are abandoned as described in this Section
11.3, this Agreement shall become void and of no further force and effect,
except for the provisions of (i) Section 7.1 relating to the obligation of Buyer
to keep confidential certain information and data obtained by it, (ii) Section
11.4 relating to certain expenses, (iii) Section 8.3 relating to publicity,
(iv) Section 12.5 relating to attorneys' fees and expenses, (v) Section 11.11
relating to finder's fees and broker's fees and (vi) this Section 11.3. Nothing
in this Section 11.3 shall be deemed to release either party from any liability
for any breach by such party of the terms and provisions of this Agreement or to
impair the right of either party to compel specific performance by the other
party of its obligations under this Agreement.
11.4 EXPENSES. Whether or not the transactions contemplated hereby are
consummated, and except as otherwise provided in this Section 11.4, Section 2.7
or elsewhere in this Agreement, all fees, costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such fees, costs or expenses. Notwithstanding the
foregoing, Sellers, on the one hand, and Buyer, on the other hand, shall share
equally all transfer, sales, use or other transaction Taxes, charges or
impositions, title charges, survey costs, lien search and similar fees relating
to the sale of the Assets (but not such as relate to (i) the financing thereof
by Buyer, such as loan commitment fees and expenses of its financing sources,
all of which shall be borne entirely by Buyer) or (ii) any Tax imposed on the
net income of either Seller as a result of the Transactions; PROVIDED, HOWEVER,
that each party shall pay its own HSR Act filing fees.
11.5 ATTORNEYS' FEES. Should any litigation be commenced concerning
this Agreement or the rights and duties of any party with respect to it, the
party prevailing shall be entitled, in addition to such other relief as may be
granted, to a reasonable sum for such party's attorney fees and expenses
determined by the court in such litigation or in a separate action brought for
that purpose.
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11.6 AMENDMENT, MODIFICATION AND WAIVER. No amendment to this
Agreement shall be effective unless it shall be in writing and signed by both
parties hereto. The waiver by one party of the performance of any covenant,
condition or promise shall not invalidate this Agreement, nor shall it be
considered as a waiver by such party of any other covenant, condition or
promise. The delay in pursuing any remedy or in insisting upon full performance
for any breach or failure of any covenant, condition or promise shall not
prevent a party from later pursuing any remedies or insisting upon full
performance for the same or any similar breach or failure, subject to the
provisions of Article X in respect of any remedy available thereunder and to all
defenses a party may have in respect of such delay.
11.7 NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent prepaid telex, cable or telecopy, or sent, postage prepaid, by
registered, certified or express mail, or reputable overnight courier service
and shall be deemed given when so delivered by hand, telexed, cabled or
telecopied, or if mailed, three days after mailing (one business day in the case
of express mail or overnight courier service), as follows:
(i) if to Buyer, to:
Controls Acquisition Corporation
c/o First Atlantic Capital, Ltd.
135 East 57th Street
New York, New York 10022
Attention: Mr. James A. Long
Telephone: (212) 750-0300
Telecopier: (212) 750-0954
with a copy to:
O'Sullivan Graev & Karabell
30 Rockefeller Plaza
New York, New York 10112
Attention:Frederick M. Bachman, Esq.
Telephone: (212) 408-2400
Telecopier: (212) 408-2467
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(ii) if to Seller, to:
MagneTek, Inc.
11150 Santa Monica Boulevard
15th Floor
Los Angeles, California 90025
Attention: Samuel A. Miley, Esq.
General Counsel
Telephone: (310) 473-6681
Telecopier: (310) 477-9105
with a copy to:
Gibson, Dunn & Crutcher
2029 Century Park East
Suite 4200
Los Angeles, California 90067
Attention:Jennifer Bellah, Esq.
Telephone: (310) 557-8178
Telecopier: (310) 277-5827
11.8 INTERPRETATION; EXHIBITS AND SCHEDULES. The headings contained
in this Agreement, in any Exhibit or Schedule hereto and in the table of
contents to this Agreement, are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Any matter
disclosed in one Schedule hereto shall be deemed incorporated by reference into
each other Schedule hereto and disclosed in each such Schedule to the extent
such disclosure may be fairly interpreted as pertaining to matters addressed in
other Schedules without reference to any undisclosed facts, and the failure to
cross-reference Schedules is inadvertent. All Exhibits and Schedules annexed
hereto or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. Any capitalized terms used in any
Schedule or Exhibit, but not otherwise defined therein, shall have the meaning
as defined in this Agreement.
11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other party.
11.10 ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreement contain the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior oral
and written agreements and understandings (including, without limitation, the
letter of intent dated February 14, 1994, as amended to the date hereof)
relating to such subject matter.
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11.11 FEES. Each party hereto hereby represents and warrants that
(a) the only brokers or finders that have acted for such party in connection
with this Agreement or the transactions contemplated hereby or that may be
entitled to any brokerage fee, finder's fee or commission in respect thereof are
set forth on Schedule 11.11 hereto and (b) each party agrees that it will pay
all fees or commissions which may be payable to such firm(s) retained by it or
to which it is obligated.
11.12 SEVERABILITY. If any provision of this Agreement or the
application of any such provision to any person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
11.13 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
SELLERS:
-------
MAGNETEK, INC.
By: /S/JOHN P. COLLING, JR.
------------------------
Name: John P. Colling, Jr.
Title: Vice President and
Treasurer
MAGNETEK CONTROLS, INC.
By: /S/JOHN P. COLLING, JR.
------------------------
Name: John P. Colling, Jr.
Title: Vice President and
Treasurer
BUYER:
-----
CONTROLS ACQUISITION CORPORATION
By: /S/BLAIR SIMMONS
------------------------
Name: Blair Simmons
Title: President and Chief
Executive Officer
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- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
among
MAGNETEK, INC.,
MAGNETEK NATIONAL ELECTRIC COIL, INC.
and
RAIL PRODUCTS INTERNATIONAL, INC.
----------------------------------------------
Dated as of October , 1994
--
----------------------------------------------
SALE OF NEC RAILROAD STRATEGIC BUSINESS UNIT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . 7
ARTICLE II CLOSING; PURCHASE PRICE ADJUSTMENT. . . . . . . . . . . . . . 8
2.1 Sale and Transfer of the Assets . . . . . . . . . . . . . . . 8
2.2 Assets Not Transferred. . . . . . . . . . . . . . . . . . . . 9
2.3 Assumed and Excluded Liabilities. . . . . . . . . . . . . . . 11
2.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.5 Purchase Price Adjustment; Assignment of Accounts
Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.6 Tax Allocation. . . . . . . . . . . . . . . . . . . . . . . . 19
2.7 Sales and Use Tax . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE III CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . 20
3.1 Buyer's Obligation. . . . . . . . . . . . . . . . . . . . . . 20
3.2 Sellers' Obligation . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MAGNETEK. . . . . . . . . . 22
4.1 Authority; No Conflicts; Governmental Consents. . . . . . . . 22
4.2 Financial Statements. . . . . . . . . . . . . . . . . . . . . 23
4.3 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.4 Assets Other than Real Property Interests . . . . . . . . . . 24
4.5 Real Property . . . . . . . . . . . . . . . . . . . . . . . . 25
4.6 Intellectual Property . . . . . . . . . . . . . . . . . . . . 26
4.7 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.8 Litigation; Decrees . . . . . . . . . . . . . . . . . . . . . 27
4.9 Employee and Related Matters. . . . . . . . . . . . . . . . . 28
4.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . 28
4.11 Employee and Labor Relations. . . . . . . . . . . . . . . . . 29
4.12 Assets of the Railroad SBU. . . . . . . . . . . . . . . . . . 29
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . 30
5.1 Authority; No Conflicts; Governmental Consents. . . . . . . . 30
5.2 Actions and Proceedings, etc. . . . . . . . . . . . . . . . . 31
5.3 Availability of Funds . . . . . . . . . . . . . . . . . . . . 31
5.4 Buyer's Acknowledgment. . . . . . . . . . . . . . . . . . . . 31
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5.5 Exon-Florio . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.6 No Knowledge of Sellers' Breach . . . . . . . . . . . . . . . 32
ARTICLE VI COVENANTS OF MAGNETEK . . . . . . . . . . . . . . . . . . . . 33
6.1 Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.2 Ordinary Conduct. . . . . . . . . . . . . . . . . . . . . . . 33
6.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.4 Subdivision of King Avenue Facility . . . . . . . . . . . . . 34
6.5 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . 36
6.6 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . 36
6.7 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . 37
6.8 Offsite Assets. . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VII COVENANTS OF BUYER. . . . . . . . . . . . . . . . . . . . . . 38
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 38
7.2 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . 39
7.3 Waiver of Bulk Sales Law Compliance . . . . . . . . . . . . . 40
7.4 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . 40
7.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VIII MUTUAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 41
8.1 Permits and Consents. . . . . . . . . . . . . . . . . . . . . 42
8.2 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.3 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.4 Reasonable Efforts and Further Assurances . . . . . . . . . . 44
8.5 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.6 Access to Former Business Records; Cooperation in
Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.7 Use of Trademarks and Trade Names . . . . . . . . . . . . . . 45
8.8 Required Modifications or Replacements of Products. . . . . . 46
ARTICLE IX EMPLOYEE BENEFIT MATTERS. . . . . . . . . . . . . . . . . . . 47
9.1 Employee Retention. . . . . . . . . . . . . . . . . . . . . . 47
9.2 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . 48
9.3 Employees Covered by Collective Bargaining Agreements . . . . 49
9.4 Bargaining Plans. . . . . . . . . . . . . . . . . . . . . . . 50
9.4 Bargaining Plans. . . . . . . . . . . . . . . . . . . . . . . 50
9.6 Access to Information . . . . . . . . . . . . . . . . . . . . 50
9.7 Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . 50
ARTICLE X INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 51
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10.1 Indemnification by MagneTek . . . . . . . . . . . . . . . . . 51
10.2 Indemnification by Buyer. . . . . . . . . . . . . . . . . . . 53
10.3 Indemnification for Environmental Matters . . . . . . . . . . 54
10.4 Losses Net of Insurance, etc. . . . . . . . . . . . . . . . . 55
10.5 Termination of Indemnification. . . . . . . . . . . . . . . . 56
10.6 Procedures Relating to Indemnification (Other than for Tax
Claims) . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.7 Procedures Relating to Indemnification of Tax Claims. . . . . 60
10.8 Survival of Representations . . . . . . . . . . . . . . . . . 60
ARTICLE XI GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 61
11.1 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.2 No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . 62
11.3 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 62
110. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.5 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . 64
11.6 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
11.8 Interpretation; Exhibits and Schedules. . . . . . . . . . . . 66
11.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 67
11.10 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 67
11.11 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
11.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 67
11.13 NEC Covenants . . . . . . . . . . . . . . . . . . . . . . . . 68
11.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 68
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EXHIBITS
- --------
EXHIBIT A Bill of Sale, Assignment and Assumption
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B Opinion of Gibson, Dunn & Crutcher. . . . . . . . . . . . . . . B-1
EXHIBIT C Opinion of General Counsel of MagneTek. . . . . . . . . . . . . C-1
EXHIBIT D Opinion of Stanley L. Waldbaum. . . . . . . . . . . . . . . . . D-1
EXHIBIT E Form of Supply Agreement. . . . . . . . . . . . . . . . . . . . E-1
EXHIBIT F Form of Ground Lease. . . . . . . . . . . . . . . . . . . . . . F-1
EXHIBIT G Form of Reciprocal Easement Agreement.. . . . . . . . . . . . . G-1
EXHIBIT H Term Sheet for Subcontract Agreement. . . . . . . . . . . . . . H-1
EXHIBIT I Form of Key Employee Certificate. . . . . . . . . . . . . . . . I-1
EXHIBIT J Form of Services Agreement. . . . . . . . . . . . . . . . . . . J-1
SCHEDULES
- ---------
Schedule 1.1(a) December Balance Sheet
Schedule 1.1(b) Railroad SBU Employees
Schedule 2.1(a) Owned Property
Schedule 2.1(b) Leased Property
Schedule 2.1(i) Assets on Retained Property
Schedule 2.2(i) Certain Excluded Assets
Schedule 2.6 Purchase Price Allocation
Schedule 4.1(b) Conflicts (Seller)
Schedule 4.3 Taxes
Schedule 4.4 Liens
Schedule 4.5 Railroad SBU Properties
Schedule 4.6 Intellectual Property
Schedule 4.7 Certain Contracts
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Schedule 4.8 Litigation
Schedule 4.9 Seller Plans
Schedule 4.11 Labor Matters
Schedule 5.1(b) Conflicts (Buyer)
Schedule 6.2 Exceptions to Ordinary Course
Schedule 11.11 Sellers' and Buyer's Brokers and Finders
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of October 31, 1994, among MAGNETEK,
INC., a Delaware corporation ("MagneTek"), MagneTek National Electric Coil Inc.,
a Delaware corporation ("NEC" and together with MagneTek, "Sellers"), and Rail
Products International, Inc., an Ohio corporation ("Buyer").
NEC, a wholly-owned subsidiary of MagneTek, is engaged, through its NEC
Railroad Strategic Business Unit (the "Railroad SBU"), in the business of
developing, manufacturing, remanufacturing, selling and distributing motors and
motor components for use in electric locomotives. Sellers desire to sell to
Buyer certain assets (other than excluded assets) relating to the Railroad SBU.
Buyer desires to purchase such assets and is willing to assume certain
associated obligations and liabilities.
Accordingly, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" has the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act by the SEC, as in effect on the date hereof.
"Assets" has the meaning set forth in Section 2.1.
"Assigned Contracts" has the meaning set forth in Section 2.1(f).
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Assumed Litigation" has the meaning set forth in Section 2.3.
"Bill of Sale, Assignment and Assumption Agreement" means a Bill of
Sale, Assignment and Assumption Agreement in substantially the form attached
hereto as Exhibit A.
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"Business Day" means a day other than a Saturday or a Sunday or other
day on which commercial banks in New York are authorized or required by law to
close.
"Buyer Indemnified Person" has the meaning set forth in Section 10.1.
"Closing Balance Sheet" has the meaning set forth in Section 2.5.
"Closing Date" means the day on which the Closing occurs pursuant to
Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collective Bargaining Agreement" means the Agreement between MagneTek
National Electric Coil, Columbus, Ohio, and International Union of Electrical,
Radio & Machine Workers, AFL-CIO-CLC and its Local No. 545, dated March 4, 1993
and all schedules, appendices and letters of understanding related thereto.
"Contract" means any contract, agreement, license, lease, sales or
purchase order or other legally binding commitment, whether written or oral, to
which MagneTek or NEC is a party and relating exclusively to the Railroad SBU.
"Contractual Obligation" means, as to any Person, any provision of any
note, bond or security issued by such Person or of any mortgage, indenture, deed
of trust, lease, license, franchise, contract, agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property or assets is subject.
"December Balance Sheet" means the unaudited balance sheet of the
Railroad SBU as of December 31, 1993, attached hereto as Schedule 1.1(a).
"Dublin Road Dispute" means the claim asserted by the Dublin Road
Partnership that it is entitled to recover against MagneTek in respect of
certain contamination allegedly caused by MagneTek (whether or not such
contamination actually occurred or was so caused), as set forth in greater
detail in the correspondence dated July 7, 1993, February 3, 1994 and July 27,
1994 and in the Complaint filed on July 29, 1994.
"Dublin Road Facility" means the facility leased by MagneTek from the
Dublin Road Partnership and located at 1160 Dublin Road, Columbus, Ohio 43216.
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"Dublin Road Partnership" means 1160 Dublin Road Associates, an Ohio
limited partnership.
"Employee Benefit Arrangements" means each and all pension,
supplemental pension, accidental death and dismemberment, life and health
insurance and benefits (including medical, dental, vision and hospitalization),
disability, holiday, vacation, sick pay, sick leave, tuition refund, service
award and other employee benefit arrangements, plans, contracts or policies
providing employee or executive compensation or benefits to Railroad SBU
Employees, other than the Employee Benefit Plans.
"Employee Benefit Plans" means each and all "employee benefit plans,"
as defined in Section 3(3) of ERISA, maintained or contributed to by either
Seller or in which either Seller participates or participated and which, in each
case, provides benefits to Railroad SBU Employees, including (i) any such plans
that are "employee welfare benefit plans" as defined in Section 3(1) of ERISA
and (ii) any such plans that are "employee pension benefit plans" as defined in
Section 3(2) of ERISA.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Resource Conservation
and Recovery Act of 1976, as amended, and any other applicable statutes,
regulations, rules, ordinances or codes which relate to the protection of the
environment from the effects of Hazardous Substances.
"Equipment" has the meaning set forth in Section 2.1(c).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations of the SEC promulgated from
time to time thereunder.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.3.
"GAAP" means generally accepted accounting principles in the United
States of America.
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"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Ground Lease" means the Ground Lease to be entered into by NEC and
Buyer in substantially the form of Exhibit F hereto.
"Hazardous Substance" means any substance which is defined as a
hazardous waste or hazardous substance under any Environmental Law.
"Indemnified Person" means, with respect to any Loss, the Person
seeking indemnification hereunder.
"Indemnifying Person" means, with respect to any Loss, the Person from
whom indemnification is being sought hereunder.
"Intellectual Property" has the meaning set forth in Section 2.1(e).
"Inventory" has the meaning set forth in Section 2.1(d).
"Knowledge of Seller" with reference to any of the representations and
warranties of MagneTek means the actual knowledge of any "officer" of MagneTek
as such term is defined in 17 C.F.R. Section 240.16a-1(f), to the extent such
officer had, on the date hereof, responsibility for matters that are the subject
of such representation and warranty; PROVIDED, HOWEVER, that unless such an
officer had (a) actual knowledge to the contrary or (b) direct responsibility at
the Railroad SBU level for the subject matter thereof, such knowledge is based
solely upon information and materials supplied to MagneTek by Railroad SBU
personnel.
"Lien" means any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other) or other security agreement of any kind
or nature whatsoever (including, without limitation, any conditional sale or
other title retention agreement or any financing lease having substantially the
same economic effect as any of the foregoing).
"Loss" means any loss, liability, claim, damage or expense (including
reasonable attorneys' fees and disbursements and the costs of investigation).
Loss recoverable hereunder is subject to the limitations set forth in
Section 10.4.
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"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property or condition (financial or other) of the Railroad
SBU, taken as a whole or (b) the ability of Sellers to consummate the
transactions contemplated by this Agreement.
"Owned Property" has the meaning set forth in Section 2.1(a).
"Permits" has the meaning set forth in Section 2.1(g).
"Permitted Liens" has the meaning set forth in Section 4.4.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Purchase Price" has the meaning set forth in Section 2.4.
"Railroad SBU Employee" means any employee of MagneTek or NEC working
primarily for the Railroad SBU on the Closing Date or the Termination Date,
including any such employee on vacation or illness leave on either such date.
Schedule 1.1(b) sets forth a list of Railroad SBU Employees as of the date set
forth thereon.
"Railroad SBU Property or Properties" has the meaning set forth in
Section 4.5.
"Reciprocal Easement Agreement" means the Reciprocal Easement Agreement
to be entered into by NEC and Buyer in substantially the form of Exhibit G
hereto.
"Records" has the meaning set forth in Section 2.1(h).
"Required Modification" means, with respect to any product, a
modification, improvement or enhancement which is (a) required by any
Requirement of Law or (b) otherwise necessary or advisable in MagneTek's sole
discretion to permit MagneTek to meet any duty or obligation owing by NEC to
remedy defects or hazards in such products or to provide any warning with
respect to any such defects or hazards. Required Modifications may include, but
shall not be limited to, modifications, improvements or enhancements necessary
to meet industry standards, or to implement design improvements, or
modifications of or supplements to the product's design, quality, components,
safety features, labeling, warnings or
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instructions. Required Modification shall in no event mean or include any
modification, improvement or enhancement required by any written warranty
covering the relevant product.
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"SEC" means the Securities and Exchange Commission.
"Seller Plans" means each and all Employee Benefit Plans and Employee
Benefit Arrangements sponsored or maintained by NEC or MagneTek under which any
Railroad SBU Employee participates or is entitled to receive benefits.
"Services Agreement" means the Agreement between MagneTek and Buyer in
respect of certain services to be rendered by MagneTek personnel at the Dublin
Road Facility in substantially the form of Exhibit J hereto.
"Subcontract Arrangement" means the arrangement relating to NEC's
St. Jean, Quebec operations to be entered into by NEC and Buyer as generally
described on Exhibit H hereto.
"Supply Agreement" means the bilateral supply agreement to be entered
into by NEC and Buyer in substantially the form of Exhibit E hereto.
"Tax" or "Taxes" means, with respect to any Person, any federal, state,
local or foreign net income, gross income, gross receipts, sales, use, ad
valorem, value-added, capital, unitary, intangible, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, transfer,
occupation, premium, property or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, addition to tax or additional amount
imposed by any jurisdiction or other taxing authority, on such Person.
"Tax Returns" has the meaning set forth in Section 4.3.
"Termination Date" has the meaning set forth in Section 9.1.
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"Transaction Documents" means (i) this Agreement, (ii) the Bill of
Sale, Assignment and Assumption Agreement; (iii) the Supply Agreement; (iv) the
Ground Lease; (v) the Reciprocal Easement Agreement and (vi) the Services
Agreement.
"Transactions" means the transactions contemplated by the Transaction
Documents.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Terms defined in this Agreement in Sections other than
Section 1.1 shall have the meanings as so defined when used in this Agreement.
(b) As used herein, accounting terms not defined or to the
extent not defined, shall have the respective meanings given to them under GAAP.
(c) Unless express reference is made to Business Days,
references to days shall be to calendar days.
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ARTICLE II
CLOSING; PURCHASE PRICE ADJUSTMENT
2.1 SALE AND TRANSFER OF THE ASSETS. Subject to the terms and
conditions of this Agreement, on the Closing Date NEC and, to the extent
applicable, MagneTek, will sell, convey, transfer, assign and deliver to Buyer
all of their respective right, title and interest in and to the following assets
(except the Excluded Assets), to the extent that they are used exclusively in
the operations of the Railroad SBU, as the same shall exist on the Closing Date
(the "Assets"):
(a) a leasehold interest under the Ground Lease in a portion of
the real property (including all buildings, improvements and structures located
on such portion and all rights, privileges, easements and appurtenances thereto)
located at 800 King Avenue, Columbus, Ohio 43212 (the "King Avenue Facility")
described on Schedule 2.1(a) hereto (the "Owned Property"), subject to the
provisions of Section 6.4 hereof;
(b) all tangible personal property, including, without
limitation, the fixtures, furnishings, furniture, office supplies, vehicles,
rolling stock, tools, tooling and forms, machinery, equipment, computer
equipment (including software), located upon or affixed to or normally located
in, at or upon, even if temporarily removed from, any of the Railroad SBU
Properties or the Dublin Road Facility (collectively, including the fixtures,
the "Equipment");
(c) all inventory, including without limitation, raw materials,
work-in-process, finished goods, packaging materials, spare parts and supplies
(the "Inventory");
(d) any trademarks, trade names, patents, service marks,
copyrights (whether registered or unregistered) and pending applications for the
foregoing listed on Schedule 4.6 (the "Intellectual Property");
(e) all Contracts (including but not limited to all Contracts
listed on Schedule 4.7 and all Contracts entered into by the Railroad SBU
through the Closing Date), except for any Contract that requires the consent to
assignment of a party thereto which consent has not been obtained prior to the
Closing Date pursuant to Section 8.1 (the "Assigned Contracts");
(f) all transferable business licenses and permits used
exclusively in or relating exclusively to the Railroad SBU or the Assets (the
"Permits");
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(g) all books and records (other than historical accounting,
financial and Tax records), drawings, data, plans and specifications, surveys
and title policies relating to the Owned Property, sales literature, market
analysis, product information, documents, manuals, software, employment records
and files and all other information and/or data related to or used by Sellers
exclusively in connection with the Assets and the operation of the Railroad SBU
and located at the King Avenue or Dublin Road Facility; provided that as to the
Dublin Road Dispute, no Records shall be transferred to Buyer (the "Records");
(h) all insurance proceeds paid or payable by any insurance
provider, other than Sellers or any Affiliate of Sellers, for any Asset that is
destroyed or damaged after the date hereof and prior to the Closing;
(i) those assets used by the Railroad SBU Division and currently
located at NEC's facilities at King Avenue, Columbus, Ohio, St. Jean, Quebec and
Brownsville, Texas, in each case as set forth on Schedule 2.1(i), respectively;
and
(j) all goodwill appurtenant to the foregoing Assets.
2.2 ASSETS NOT TRANSFERRED. Notwithstanding anything herein to the
contrary, the following assets are not included in the Assets and shall be
retained by Sellers (the "Excluded Assets"):
(a) all cash and cash equivalent items (except as described in
Section 2.1(i) and except for deposits and prepaid expenses reflected on the
Closing Balance Sheet and relating to Assumed Liabilities) of Sellers,
including, without limitation, checking accounts, bank accounts, lock box files,
certificates of deposit, time deposits, securities, and the proceeds of accounts
receivable, including uncashed checks in payment thereof received by Sellers on
or prior to the Closing Date, in each case whether or not relating to the
Railroad SBU;
(b) all rights, properties, and assets which have been used or
held for use in connection with the Railroad SBU and which shall have been
transferred (including transfers by way of sale) or otherwise disposed of prior
to the Closing, provided such transfers and disposals shall have been in the
ordinary course of the business of the Railroad SBU as conducted at the date
hereof;
(c) rights to or claims for refunds or rebates of Taxes and
other governmental charges for periods ending on
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or prior to the Closing Date and the benefit of net operating loss
carryforwards, carrybacks or other credits of Sellers, whether or not
attributable to the Railroad SBU;
(d) claims or rights against third parties, except those arising
with respect to events or breaches occurring after the Closing Date under the
Assigned Contracts; PROVIDED, HOWEVER, that any rights of indemnification,
contribution or reimbursement that may exist under the Assigned Contracts in
respect of Excluded Assets or Excluded Liabilities hereunder shall be Excluded
Assets;
(e) except as set forth in Section 2.1(h), all insurance
policies and rights thereunder, including but not limited to, rights to any
cancellation value as of the Closing Date;
(f) proprietary or confidential business or technical
information, records and policies that relate generally to Sellers or any of its
Affiliates and are not used exclusively in the Railroad SBU, including, without
limitation, organization manuals and strategic plans but excluding the software
program developed for and used by NEC and the Railroad SBU;
(g) subject to the limited rights granted in Section 8.7, all
"MagneTek" and "NEC" marks, including any and all trademarks or service marks,
trade names, slogans or other like property relating to or including the names
"MagneTek or NEC," the mark MagneTek or NEC, or any derivative thereof, and the
MagneTek or NEC logo or any derivative thereof, and Sellers' proprietary
computer programs or other software, including but not limited to Sellers'
proprietary data bases, accounting and reporting formats, systems and
procedures;
(h) all Records relating to the Dublin Road Dispute;
(i) those assets described in Schedule 2.2(i);
(j) all accounts receivable of the Railroad SBU in existence as
of the Closing Date which accounts receivable, as of October 2, 1994, aggregated
approximately $3,315,000;
(k) the lease in respect of the Dublin Road Facility (the
"Retained Lease");
(l) all other assets of Sellers not expressly included in the
Assets to be sold hereunder, including but not limited to assets used by Sellers
or their Affiliates in other businesses of Sellers or their Affiliates and
assets used
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primarily in connection with Sellers' corporate functions (including but not
limited to the corporate charter, taxpayer and other identification numbers,
seals, minute books and stock transfer books), whether or not used for the
benefit of the Railroad SBU.
2.3 ASSUMED AND EXCLUDED LIABILITIES. On the Closing Date, Buyer
shall execute and deliver to Sellers the Bill of Sale, Assignment and Assumption
Agreement pursuant to which Buyer shall assume and agree to pay, perform and
discharge when due, all the liabilities and obligations of Sellers arising out
of the business of the Railroad SBU, of any kind or nature, whether absolute,
contingent, accrued or otherwise, and whether arising before or after the
Closing including, without limitation, all liabilities (i) for Taxes assumed by
Buyer under Section 2.7, (ii) under the Assigned Contracts, (iii) relating to
the claims described on Schedules 4.8 and 4.11 (such matters referred to in this
clause (iii) being hereinafter collectively referred to as the "Assumed
Litigation") and (iv) all liabilities and obligations of Buyer set forth in
Article IX hereof (collectively, the "Assumed Liabilities"); PROVIDED, HOWEVER,
that the Assumed Liabilities shall in no event include the following liabilities
(the "Excluded Liabilities"):
(a) any liability, responsibility or obligation with respect to
any Seller Plan, except (i) as provided in Article IX, and (ii) pursuant to any
Assigned Contract;
(b) any liability for (i) warranty claims made after the Closing
for service, repair, replacement and similar work required under Sellers'
written warranties with respect to products sold or services provided prior to
the Closing, the expenses of which, at shop level cost (direct materials, direct
labor and factory overhead), in the aggregate exceed the warranty reserve on the
Closing Balance Sheet, (ii) workers' compensation claims with respect to
injuries prior to the Closing, (iii) claims under health insurance plans of
Sellers for covered Railroad SBU Employees with respect to services rendered
prior to the Closing (but not in respect of any sick leave or disability
benefits pertaining to any period after the Closing Date regardless of when the
relevant illness or condition arose) or (iv) any product liability claims for
injuries, property damage or other Losses, arising with respect to products sold
or services provided prior to the Closing, but only if written notice of such
claims described in clause (i), (ii), (iii) or (iv) shall have been delivered to
Sellers within the two-year period following the Closing Date;
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(c) any liability for Taxes for any period ending on or prior to
the Closing Date, excluding the Taxes covered by Section 2.7; and
(d) any liability under the Retained Lease.
2.4 CLOSING. The closing (the "Closing") of the purchase and sale of
the Assets shall be held at offices to be specified by Buyer in Columbus, Ohio,
at 10:00 a.m. on October 31, 1994, or if the conditions to Closing set forth in
Article III shall not have been satisfied or waived by such date, subject to
Section 11.3, as soon as practicable after such conditions shall have been
satisfied or waived. The date on which the Closing shall occur is hereinafter
referred to as the "Closing Date." At the Closing, Buyer shall deliver to
Sellers by wire transfer (to a bank account designated at least two business
days prior to the Closing Date in writing by Sellers) immediately available
funds in an amount equal to the sum of $11,800,000 (Eleven Million Eight Hundred
Thousand dollars, hereinafter, the "Purchase Price"), plus or minus an estimate,
if the parties mutually agree prior to the Closing Date with respect thereto, of
any adjustment to the Purchase Price under Section 2.5 (the Purchase Price plus
or minus such estimate of any adjustment under Section 2.5 being hereinafter
called the "Closing Date Amount"), and such other documents as are required by
this Agreement.
At the Closing, Sellers shall deliver or cause to be delivered to Buyer
(a) the Bill of Sale, Assignment and Assumption Agreement, (b) the Ground Lease
and Reciprocal Easement Agreement, (c) the Supply Agreement, (d) the Services
Agreement, (e) the documents and agreements referred to in Section 3.1 hereof
and (f) such other instruments of transfer and documents as Buyer may reasonably
request, and Buyer shall deliver to Sellers (i) the documents and agreements
referred to in the preceding clauses (a) through (d) and in Section 3.2 hereof
and (ii) such other instruments of assumption and documents as Sellers may
reasonably request. In addition, Sellers shall deliver to Buyer at the Closing
affidavits in form and substance satisfactory to Buyer, duly executed and
acknowledged, certifying that neither Seller is a foreign person within the
meaning of Section 1445(f)(3) of the Code, and any corresponding affidavit
required for state tax purposes.
2.5 PURCHASE PRICE ADJUSTMENT; ASSIGNMENT OF ACCOUNTS RECEIVABLE.
(a) Within 60 days after the Closing Date, MagneTek shall
prepare and deliver to Buyer a balance sheet of the Railroad SBU as of the close
of business on the Closing Date comprising the Assets and the outstanding
Assumed
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Liabilities (the "Closing Balance Sheet"). For purposes of preparing the
Closing Balance Sheet, Buyer shall make Railroad SBU Employees available to
MagneTek (without charge) and such employees shall, for the purpose of assisting
MagneTek in preparing the Closing Balance Sheet, be instructed by Buyer to act
at MagneTek's direction.
During the 30 days immediately following Buyer's receipt of the Closing
Balance Sheet, Buyer shall be entitled to review the Closing Balance Sheet and
MagneTek's working papers relating to the Closing Balance Sheet, and MagneTek
shall provide Buyer access at all reasonable times to its personnel, properties,
books and records to the extent relevant and not comprising Assets. The Closing
Balance Sheet shall become final and binding upon the parties on the thirtieth
day following delivery thereof unless Buyer gives written notice to MagneTek of
its disagreement with the Closing Balance Sheet (a "Notice of Disagreement")
prior to such date. Any Notice of Disagreement shall specify in reasonable
detail the nature of any disagreement so asserted. If a timely Notice of
Disagreement is received by MagneTek with respect to the Closing Balance Sheet,
then the Closing Balance Sheet (as revised in accordance with clause (x) or (y)
below), shall become final and binding upon the parties on the earlier of
(x) the date the parties hereto resolve in writing any differences they have
with respect to any matter specified in a Notice of Disagreement or (y) the date
any matters properly in dispute are finally resolved in writing by the
Accounting Firm (as defined below). During the 30 days immediately following
the delivery of any Notice of Disagreement, MagneTek and Buyer shall seek in
good faith to resolve in writing any differences which they may have with
respect to any matter specified in such Notice of Disagreement. During such
period, Buyer and MagneTek shall each have access to the other party's working
papers prepared in connection with the other party's preparation of a Notice of
Disagreement. At the end of such 30-day period, MagneTek and Buyer shall submit
to an independent accounting firm (the "Accounting Firm") for review and
resolution any and all matters which remain in dispute and which were properly
included in any Notice of Disagreement, and the Accounting Firm shall reach a
final, binding resolution of all matters which remain in dispute. The Closing
Balance Sheet, with such adjustments necessary to reflect the Accounting Firm's
resolution of the matters in dispute, shall become final and binding on Buyer
and MagneTek on the date the Accounting Firm delivers its final resolution to
the parties. The Accounting Firm shall be Arthur Anderson, or if such firm is
unable or unwilling to act, such other nationally recognized independent public
accounting firm with offices in Columbus, Ohio, as shall be agreed upon by the
parties hereto in writing. The cost of any arbitration (including the fees and
expenses of
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the Accounting Firm) pursuant to this Section 2.5 shall be borne 50% by Buyer
and 50% by MagneTek.
(b) The Closing Balance Sheet shall be prepared in accordance
with GAAP, applied in a manner consistent with that followed in the preparation
of the December Balance Sheet, subject to the following:
(i) the Closing Balance Sheet shall not reflect any
provision for Taxes (whether as an asset or a liability);
(ii) intercompany advances shall be eliminated; and
(iii) all Excluded Assets, including, without limitation,
the accounts receivable included therein (and all related depreciation
and reserves) shall be eliminated and all Excluded Liabilities (and
related reserves) shall be eliminated.
(c) The Purchase Price shall be adjusted (after giving effect to
the estimation, if any, reflected in the Closing Date Amount) such that the
Purchase Price is (i) increased, to the extent that (A) current Assets of the
Railroad SBU increase (B) current Assumed Liabilities of the Railroad SBU
decrease or (C) the aggregate net book value of plant and equipment increases,
in each case from the amount reflected on the December Balance Sheet, and
(ii) decreased, to the extent that (x) current assets of the Railroad SBU
decrease, (y) current Assumed Liabilities increase or (z) the aggregate net book
value of plant and equipment decreases, in each case from the amount reflected
on the December Balance Sheet. The adjustments referred to in the foregoing
clauses (i) and (ii) shall be cumulative as to each category. In addition, the
Purchase Price shall be adjusted in accordance with Section 2.5(d) hereof in
respect of the assignment of certain accounts receivable to Buyer, if
applicable. The Purchase Price shall be adjusted upward or downward, dollar for
dollar, in respect of any such negative or positive adjustment; PROVIDED,
HOWEVER, that no adjustment to the Purchase Price pursuant to this Section 2.5
shall be made unless such adjustment would exceed $100,000, and if the
adjustment would exceed $100,000, then the full amount of the adjustment shall
be made; PROVIDED, HOWEVER, that the estimated adjustment paid on the Closing
Date shall be taken into account in determining whether such threshold is met.
Any required adjustment to the Purchase Price pursuant to this Section 2.5 shall
be referred to as the "Purchase Price Adjustment."
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(d) The Purchase Price shall be further adjusted to reflect an
increase equal to (i) the face amount of all accounts receivable not sold to
Buyer and which were therefore eliminated from the Closing Balance Sheet which
accounts receivable have not been collected by Sellers on or prior to the 60th
day after the Closing Date less (ii) the amount of the reserve for uncollectible
accounts receivable that would have been reflected on such Closing Balance Sheet
had the related accounts receivable been so sold. Prior to such 60th day after
the Closing Date, Sellers shall use commercially reasonable efforts to collect
payment for such accounts receivable, and Buyer shall provide all commercially
reasonable assistance in respect thereto but no party shall be obligated to
institute litigation or incur any extraordinary expense in connection therewith.
(e) Buyer agrees, with respect to Purchase Price Adjustments,
that following the Closing, Buyer will not take any actions with respect to the
accounting books, records, policies and procedures of the Railroad SBU on which
the Closing Balance Sheet is to be based that are not consistent with GAAP
applied in the manner consistent with the past practices of the Railroad SBU.
(f) Within thirty days after the receipt by Buyer of the Closing
Balance Sheet in accordance with Section 2.5(a) hereof, Buyer shall remit to
Sellers or Sellers shall remit to Buyer, as the case may be, in immediately
available funds, any undisputed amounts constituting Purchase Price Adjustments.
With respect to any items that are the subject of a Notice of Disagreement,
payment shall be made in immediately available funds within three business days
after the resolution thereof pursuant to Section 2.5(a). Each payment pursuant
to this Section 2.5 shall be made with interest on the amount of the payment at
an annual rate equal to the reference rate quoted by the San Francisco branch of
Bank of America on the Closing Date for the period from the Closing Date to the
date of payment, computed on the basis of a 360-day year and actual days
elapsed.
2.6 TAX ALLOCATION. Buyer and Sellers shall allocate the Purchase
Price plus the Assumed Liabilities (to the extent identifiable or reasonably
estimable as of the date hereof) to broad categories constituting components of
the Assets in accordance with Schedule 2.6 (as the same may be updated as of the
Closing to reflect changes in the Assets or Assumed Liabilities occurring after
the date thereof and prior to the Closing Date). Buyer and Sellers shall report
the purchase and sale of the Assets in accordance with the agreed upon
allocation among such broad categories for all Tax purposes (including the
filing of the forms prescribed under Section 1060 of the Code and the Treasury
Regulations
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promulgated thereunder), but such allocation shall not constrain reporting for
other purposes.
2.7 SALES AND USE TAX. Buyer and Sellers shall cooperate in
preparing, executing and filing use and sales Tax returns relating to, and Buyer
and MagneTek shall share equally and pay when due, any and all sales, real
estate, transfer or use Tax due with regard to, the purchase and sale of the
Assets. Such Tax Returns shall be prepared in a manner that is consistent with
the allocation of the Purchase Price and Assumed Liabilities contemplated by
Section 2.6. Buyer shall also furnish Sellers with a form of resale certificate
that complies with the requirements of Ohio and other applicable state taxation
laws.
ARTICLE III
CONDITIONS TO CLOSING
3.1 BUYER'S OBLIGATION. The obligations of Buyer to purchase and pay
for the Assets are subject to the satisfaction (or waiver by Buyer) as of the
Closing of the following conditions:
(a) The representations and warranties of MagneTek made in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as specifically contemplated by this Agreement, on and as of
the Closing, as though made on and as of the Closing Date, and Sellers shall
have performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by Sellers
by the time of the Closing; and Sellers shall have delivered to Buyer
certificates dated the Closing Date and signed by an authorized officer of the
respective Sellers confirming the foregoing.
(b) Buyer shall have received an opinion dated the Closing Date
of Gibson, Dunn & Crutcher, counsel to Sellers, as to the matters set forth in
Exhibit B, and an opinion dated the Closing Date of Samuel A. Miley, Esq.,
General Counsel of MagneTek, as to the matters set forth in Exhibit C, which
opinions shall be reasonably satisfactory in form to Buyer.
(c) MagneTek shall have entered into the Services Agreement.
(d) No injunction or order shall have been granted by any court
or administrative agency or instrumentality of competent jurisdiction that would
restrain or prohibit any of the Transactions or that would impose
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damages as a result thereof, and no action or proceeding shall be pending before
any court or administrative agency or instrumentality of competent jurisdiction
in which any Person seeks such a remedy (if in the opinion of counsel to Buyer
there exists a reasonable risk of a materially adverse result in such pending
action or proceeding).
3.2 SELLERS' OBLIGATION. The obligations of Sellers to sell and
deliver the Assets to Buyer are subject to the satisfaction (or waiver by
Sellers) as of the Closing of the following conditions:
(a) The representations and warranties of Buyer made in this
Agreement shall be true and correct in all material respects as of the date
hereof and on and as of the Closing, as though made on and as of the Closing
Date, and Buyer shall have performed or complied in all material respects with
all obligations and covenants required by this Agreement to be performed or
complied with by Buyer by the time of the Closing; and Buyer shall have
delivered to Sellers a certificate dated the Closing Date and signed by an
authorized officer of Buyer confirming the foregoing.
(b) Sellers shall have received an opinion dated the Closing
Date of Stanley L. Waldbaum, Esq., counsel to Buyer, as to the matters set forth
in Exhibit D, which opinion shall be reasonably satisfactory in form to Sellers.
(c) MagneTek shall have received, from Messrs. Robert G. Barton,
Thomas P. Steuber and Robert B Hodge III, certificates relating to certain
environmental matters in the form attached hereto as Exhibit I (the "Key
Employee Certificates").
(d) No injunction or order shall have been granted by any court
or administrative agency or instrumentality of competent jurisdiction that would
restrain or prohibit the Transactions or that would impose damages as a result
thereof, and no action or proceeding shall be pending before any court or
administrative agency or instrumentality of competent jurisdiction in which any
Person seeks such a remedy (if in the opinion of counsel to Sellers there exists
a reasonable risk of a materially adverse result in such pending action or
proceeding).
(e) MagneTek shall have received from Buyer insurance
certificates reflecting compliance with the provisions of Section 7.5.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MAGNETEK
MagneTek hereby represents and warrants to Buyer as follows:
4.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS.
(a) Each Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each
Seller has all requisite corporate power and authority to enter into the
Transaction Documents and to consummate the Transactions. All corporate acts
and other proceedings required to be taken by each Seller to authorize the
execution, delivery and performance of the Transaction Documents and the
consummation of the Transactions have been duly and properly taken. This
Agreement has been duly executed and delivered by each Seller and constitutes a
valid and binding obligation of each Seller, enforceable against each Seller in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(b) The execution and delivery of this Agreement does not and of
the other Transaction Documents will not, and the consummation of the
Transactions and compliance with the terms of the Transaction Documents will not
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a benefit under, or
result in the creation of any Lien upon any of the properties or assets of
Sellers under, any provision of (i) the Certificate of Incorporation or By-Laws
of either Seller, (ii) subject to the matters disclosed in Schedule 4.1(b), any
Contractual Obligation of either Seller or (iii) any judgment, order or decree
or, subject to the matters described in clauses (A)-(D) below, any Requirement
of Law applicable to either Seller or its property or assets, other than, in the
case of clauses (ii) and (iii) above, any such conflicts, violations, defaults,
rights or Liens that, individually or in the aggregate, would not have a
Material Adverse Effect. No consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority is required to be obtained or made by or with respect to either Seller
in connection with the execution and delivery of the Transaction Documents or
the consummation of the Transactions, other than (A) compliance with and filings
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under Section 13(a) or 15(d), as the case may be, of the Exchange Act,
(B) compliance with and filings and notifications under applicable Environmental
Laws, (C) those that may be required solely by reason of Buyer's participation
in the Transactions and (D) those that, if not made or obtained, individually or
in the aggregate, would not have a Material Adverse Effect.
4.2 FINANCIAL STATEMENTS. To the knowledge of Seller, the December
Balance Sheet was prepared in accordance with GAAP consistently applied, and
fairly presents the financial condition of the Railroad SBU as of December 31,
1993 except: (a) as set forth therein; (b) for the absence of footnotes;
(c) for normal recurring adjustments; and (d) to the extent it was prepared on a
PRO FORMA basis, with allocations of certain assets and liabilities based upon
good faith estimates of management.
4.3 TAXES.
(a) Except as disclosed on Schedule 4.3, each Seller, and any
affiliated group within the meaning of Section 1504 of the Code, of which either
Seller is or has been a member (the "Affiliated Group," but only for the taxable
period during which either Seller has been a member thereof), have filed or
caused to be filed in a timely manner (within any applicable extension periods)
with the appropriate Governmental Authority (i) all Tax returns, reports and
forms (collectively, "Tax Returns") required to be filed by the Code or by
applicable laws, (ii) all Taxes shown on such Tax Returns have been timely paid
in full by the due date thereof, (iii) no Tax Liens have been filed by any Tax
authority against any property or assets of the Railroad SBU, and (iv) to the
Knowledge of Seller, no claims are being asserted in writing with respect to any
Taxes relating to the Railroad SBU.
(b) Except as set forth in Schedule 4.3, (i) no property of the
Railroad SBU is "tax exempt use property" within the meaning of Section 168(h)
of the Code, and (ii) the Assigned Contracts do not include any lease made
pursuant to former Section 168(f)(8) of the Code.
(c) Neither Seller is a "foreign person" within the meaning of
Section 1445(f)(3) of the Code.
4.4 ASSETS OTHER THAN REAL PROPERTY INTERESTS. NEC has good and
valid title to all assets reflected on the December Balance Sheet or thereafter
acquired, except those sold or otherwise disposed of since the date of such
December Balance Sheet in the ordinary course of business consistent with past
practice, in each case free and clear of all Liens
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except (a) such as are disclosed on Schedule 4.4 and (b) mechanics', carriers',
workmen's, repairmen's or other like Liens arising or incurred in the ordinary
course of business, Liens arising under original purchase price conditional
sales contracts and equipment leases with third parties entered into in the
ordinary course of business, Liens for Taxes and other governmental charges
which are not yet due and payable or which may thereafter be paid without
penalty, and other imperfections of title, restrictions or encumbrances, if any,
which Liens, imperfections of title, restrictions or other encumbrances do not,
individually or in the aggregate, materially impair the continued use and
operation of the specific assets to which they relate (the Liens described in
the preceding clause (b) are hereinafter referred to collectively as "Permitted
Liens").
This Section 4.4 does not relate to real property or interests in real
property, such items being the subject of Section 4.5.
4.5 REAL PROPERTY. Schedule 4.5 sets forth a complete list of all
Owned Properties (an Owned Property being sometimes referred to herein
individually as a "Railroad SBU Property" and collectively as "Railroad SBU
Properties"). NEC has good, marketable and insurable fee title to all Owned
Property, free and clear of all Liens, easements, covenants, rights-of-way and
other similar restrictions of any nature whatsoever, except (i) Permitted Liens,
(ii) easements, covenants, rights-of-way and other similar restrictions of
record, (iii) (A) zoning, building and other similar restrictions, (B) Liens
that have been placed by any developer, landlord or other third party on
property over which NEC has easement rights and (C) unrecorded easements,
covenants, rights-of-way or other similar restrictions, none of which items set
forth in clauses (A), (B) and (C) above, individually or in the aggregate,
materially impair the continued use and operation of the property to which they
relate and (iv) subject to the provisions of Section 6.4 hereof.
4.6 INTELLECTUAL PROPERTY. To the Knowledge of Seller, Schedule 4.6
sets forth a list of all Intellectual Property (excluding any such Intellectual
Property that is included in Excluded Assets). With respect to registered
trademarks, if any, Schedule 4.6 contains a list of all jurisdictions in which
such trademarks are registered or applied for and all registration and
application numbers. Except as disclosed on Schedule 4.6, to the Knowledge of
Seller, NEC owns or has the right to use, without payment to any other party,
the Intellectual Property listed on such Schedule 4.6. Except as set forth on
Schedule 4.8, no claims are pending or, to the Knowledge of Seller, threatened
against
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NEC by any person with respect to the ownership, validity, enforceability or use
of any Intellectual Property listed on Schedule 4.6 or otherwise challenging or
questioning the validity or effectiveness of any such Intellectual Property.
4.7 CONTRACTS. Schedule 4.7 sets forth a list of each of the
following types of Contracts:
(a) any employment or severance agreement that has an aggregate
future liability in excess of $100,000 and is not terminable by notice of not
more than 60 days for a cost of less than $50,000 (including any contracts or
agreements with certain Railroad SBU Employees that relate to the Transactions;
(b) any employee collective bargaining agreement or other
contract with any labor union covering Railroad SBU Employees;
(c) to the Knowledge of Seller, any Contract other than in the
ordinary course of business pursuant to which the aggregate of payments to
become due from or to either Seller is equal to or exceeds $200,000, and which
is not terminable by no more than 60 days' notice for a cost of less than
$100,000;
(d) any lease or similar agreement under which NEC is a lessor
or sublessor of, or makes available for use by any third party (including
another division of either Seller), any Railroad SBU Property or premises
otherwise occupied by the Railroad SBU.
Except as disclosed on Schedule 4.7, each Contract listed on
Schedule 4.7 is valid, binding and in full force and effect and is enforceable
by NEC in accordance with its terms. Except as disclosed in Schedule 4.7, to
the Knowledge of Seller, NEC has performed all material obligations required to
be performed by it to date under the Contracts and is not (with or without the
lapse of time of the giving of notice, or both) in breach or default in any
material respect thereunder and, to the Knowledge of Seller, no other party to
any of the Contracts is (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder.
4.8 LITIGATION; DECREES. To the Knowledge of Seller, Schedule 4.8
sets forth a list, as of the date of this Agreement, of all pending and
threatened lawsuits or claims with respect to which NEC has contacted in writing
the defendant or been contacted in writing by the claimant or by counsel for the
claimant by or against NEC relating to the Railroad SBU which (a) involves a
claim by or against either
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Seller of more than $50,000, (b) seeks any injunctive relief or (c) relates to
the Transactions. To the Knowledge of Seller, except as disclosed on
Schedule 4.8, NEC is not in default under any judgment, order or decree of any
Governmental Authority applicable to the Railroad SBU; except where the default
would not have a Material Adverse Effect.
4.9 EMPLOYEE AND RELATED MATTERS. Schedule 4.9 sets forth each
material Employee Benefit Plan. Sellers have made available to Buyer true,
complete and correct copies of (i) each Employee Benefit Plan (or, in the case
of any unwritten Employee Benefit Plans, descriptions thereof) and (ii) the most
recent summary plan description for each material Employee Benefit Plan for
which such a summary plan description is required. Except as disclosed on
Schedule 4.9, no Railroad SBU Employee is entitled to any benefit under any
Seller Plan by reason of the Transactions.
4.10 ENVIRONMENTAL MATTERS. Except as has been alleged by the Dublin
Road Partnership in connection with the Dublin Road Dispute, to the Knowledge of
Seller, as to the Railroad SBU and the Railroad SBU Property:
(a) NEC is not in material violation of any applicable
Environmental Law and is not under investigation or review by any Governmental
Authority with respect to compliance therewith, or with respect to the
generation, use, treatment, storage or disposal, or the spillage or other
release of any Hazardous Substance;
(b) There is no Hazardous Substance that is likely to pose any
material risk to safety, health or the environment, and there has heretofore
been no spillage, discharge, release or disposal of any such Hazardous Substance
by NEC on or under the Railroad SBU Property in an amount and of a nature which
could reasonably be expected to result in material liability to the Railroad
SBU; and
(c) No pending citations, fines, penalties or claims have been
asserted against NEC under any Environmental Law which could reasonably be
expected to have a Material Adverse Effect and which have not been reflected in
the December Balance Sheet.
4.11 EMPLOYEE AND LABOR RELATIONS. Except as set forth on
Schedule 4.11:
(a) there is no labor strike, dispute, or work stoppage or
lockout pending, or, to the Knowledge of Seller, threatened, involving the
Railroad SBU;
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(b) there is no unfair labor practice charge or complaint
against NEC pending, or, to the Knowledge of Seller, threatened, before the
National Labor Relations Board involving the Railroad SBU;
(c) there is no pending, or, to the Knowledge of Seller,
threatened, grievance involving an employee of the Railroad SBU that, if
adversely decided, would have a Material Adverse Effect; and
(d) no charges with respect to or relating to NEC are pending
before the Equal Employment Opportunity commission or any other Governmental
Authority responsible for the prevention of unlawful employment practices as to
which there is a reasonable likelihood of adverse determination involving the
Railroad SBU, other than those which, if so determined would not have a Material
Adverse Effect.
4.12 ASSETS OF THE RAILROAD SBU. Except for (i) any Assets that may
not be transferred to Buyer pursuant to Section 2.2 or Section 8.1 and (ii) as
limited by the provisions of Section 6.4, the Assets and the rights conferred by
the Transaction Documents comprise all the properties and assets used by Sellers
exclusively in the operation of the business of the Railroad SBU as conducted on
the date hereof. EXCEPT AS EXPRESSLY PROVIDED HEREIN, SELLERS MAKE NO
REPRESENTATION OR WARRANTY CONCERNING THE ASSETS OR THE RAILROAD SBU, INCLUDING
AS TO THE QUALITY, CONDITION, MERCHANTABILITY, SALABILITY, OBSOLESCENCE, WORKING
ORDER OR FITNESS FOR A PARTICULAR PURPOSE THEREOF. EXCEPT AS EXPRESSLY PROVIDED
HEREIN, THE ASSETS ARE SOLD TO BUYER "AS IS AND WHERE IS."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
5.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS.
(a) Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Ohio. Buyer has all requisite
corporate power and authority to enter into this Agreement and to consummate the
Transactions. All corporate acts and other proceedings required to be taken by
Buyer to authorize the execution, delivery and performance of this Agreement and
the consummation of the Transactions have been duly and properly taken. This
Agreement has been duly executed and delivered by Buyer and constitutes a valid
and binding obligation of Buyer, enforceable against Buyer in accordance with
its terms except as enforceability may be limited by bankruptcy, insolvency,
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reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally or by general principles (regardless of whether such
enforceability is considered in a proceeding in equity or law).
(b) Except as disclosed on Schedule 5.1(b), the execution and
delivery of this Agreement does not and of the other Transaction Documents will
not, and the consummation of the Transactions and compliance with the terms of
the Transaction Documents will not, conflict with, or result in any violation of
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of the Buyer under, any provision of
(i) the Certificate of Incorporation or By-Laws of Buyer, (ii) any Contractual
Obligation of Buyer or (iii) any judgment, order or decree or, subject to the
matters described in clauses (A)-(C) below, any Requirement of Law applicable to
Buyer or its property or assets. No material consent, approval, license, permit
order or authorization of, or registration, declaration or filing with, any
Governmental Authority is required to be obtained or made by or with respect to
Buyer or its Affiliates in connection with the execution and delivery of the
Transaction Documents or the consummation by Buyer of the Transactions, other
than (A) compliance with and filings under Section 13(a) and 15(d), as the case
may be, of the Exchange Act, (B) compliance with and filings and notifications
under applicable Environmental Laws and (C) those that may be required solely by
reason of Sellers' (as opposed to any other third party's) participation in the
Transactions.
5.2 ACTIONS AND PROCEEDINGS, ETC. There are no (a) outstanding
judgments, orders, writs, injunctions or decrees of any court, governmental
agency or arbitration tribunal against Buyer or (b) actions, suits, claims or
legal, administrative or arbitration proceedings or investigations pending or,
to the knowledge of Buyer, threatened against Buyer.
5.3 AVAILABILITY OF FUNDS. Buyer has all funds, or binding
commitments as to the availability to Buyer of all funds, required to consummate
the Transactions.
5.4 BUYER'S ACKNOWLEDGMENT. Buyer acknowledges and agrees that,
(a) other than the representations and warranties of MagneTek specifically
contained in this Agreement, there are no representations or warranties of
either Seller either expressed or implied with respect to either Seller, the
Railroad SBU or the Transactions, (b) it shall have a right to indemnification
solely as provided in Article X hereof and
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shall have no claim or right to indemnification with respect to any information,
documents or materials furnished by either Seller or any of its officers,
directors, employees, agents or advisors, or otherwise available to Buyer and
(c) NEC has no obligations with respect to these Transactions other than as set
forth in Section 11.13 hereof.
5.5 EXON-FLORIO. Buyer is not a "foreign person" for purposes of the
Exon-Florio Amendment to the Defense Production Act of 1950.
5.6 NO KNOWLEDGE OF SELLER'S BREACH. Neither Buyer nor, to the best
knowledge of Buyer, any of its Affiliates, has knowledge of any breach of any
representation or warranty by MagneTek or of any other condition or circumstance
that would excuse Buyer from its timely performance of its obligations
hereunder. If any information relevant to the representations and warranties of
MagneTek under this Agreement shall come to Buyer's attention before the Closing
Date (whether through Sellers or otherwise), then for the purposes of MagneTek's
liability under such representations and warranties the effect shall be as if
the representations and warranties were so modified in this Agreement, and no
claim for indemnification may be made under Article X hereof to the extent such
claim would not arise under such modified representation or warranty.
ARTICLE VI
COVENANTS OF MAGNETEK AND NEC
MagneTek and NEC severally, and not jointly, covenant and agree as
follows:
6.1 ACCESS. Subject to the provisions of Section 7.1 hereof, prior
to the Closing, NEC will give Buyer and its representatives, employees, counsel
and accountants, together with representatives of Persons providing financing to
Buyer for the Transactions, reasonable access, during normal business hours and
upon reasonable notice, to the personnel, properties, books and records of the
Railroad SBU for purposes of investigating its assets, operations, prospects,
obligations and liabilities; PROVIDED, HOWEVER, that such access does not
unreasonably disrupt the normal operations of the Railroad SBU. Additionally,
subject to the provisions of Section 7.1 hereof and to prior notification, and
the consent (which will not be unreasonably withheld or delayed) of Buyer, Buyer
and such representatives may contact the principal customers and suppliers of
the Railroad SBU for purposes of the foregoing investigation.
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6.2 ORDINARY CONDUCT. Except as contemplated by this Agreement or as
set forth in Schedule 6.2, from the date hereof to the Closing, NEC will cause
the business of the Railroad SBU to be conducted in the ordinary course in
substantially the same manner as presently conducted and will make all
reasonable efforts consistent with past practices to preserve relationships with
customers, suppliers and others with whom the Railroad SBU deals. Except as
contemplated by this Agreement, NEC will not do any of the following with
respect to the Railroad SBU without the prior written consent of Buyer, which
consent will not be unreasonably withheld or delayed:
(a) adopt or amend in any material respect any NEC Plan or
collective bargaining agreement, except as required by law or insofar as a
collective bargaining agreement is then subject to negotiation in advance of its
expiration in the ordinary course;
(b) sell, lease or otherwise dispose of, or agree to sell, lease
or otherwise dispose of, any material portion of its assets (other than Excluded
Assets), except in the ordinary course of business consistent with past
practice;
(c) enter into any lease of real property, except any renewals
of existing leases; or
(d) agree, whether in writing or otherwise, to do any of the
foregoing.
6.3 INSURANCE. MagneTek shall keep, or cause to be kept, all
insurance policies presently maintained relating to the Railroad SBU and its
properties, or replacements therefor, in full force and effect through the close
of business on the Closing Date. Buyer will not have any rights under any such
insurance policies from and after the Closing Date.
6.4 SUBDIVISION OF KING AVENUE FACILITY. Buyer acknowledges that the
Owned Property at the King Avenue Facility has not heretofore been subdivided
and that such subdivision may not prove feasible after Closing. Accordingly,
NEC and Buyer agree as follows:
(a) On the Closing Date, Buyer and NEC shall enter into the
Ground Lease and Reciprocal Easement Agreement.
(b) Following the Closing Date, MagneTek shall use commercially
reasonable efforts to effect the subdivision of the Owned Property from the
remaining King Avenue property of NEC in the manner reflected upon the survey
obtained by MagneTek in September 1994. NEC and Buyer shall be bound by the
Reciprocal Easement Agreement. MagneTek shall pursue all
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zoning variances and other local approvals required to effect such subdivision
and shall seek appropriate appellate review if any such approval is denied.
Notwithstanding the foregoing, (i) MagneTek shall not be required to effect such
subdivision if the terms imposed by any local authority would be significantly
more burdensome as to NEC from those provided for in the Ground Lease and
(ii) in no event will MagneTek be required to incur fees and expenses, including
the fees and expenses incurred prior to the date hereof (but excluding the title
insurance premium referred to in paragraph (c) below) in excess of an aggregate
of $25,000; PROVIDED, HOWEVER, that if such amount is exceeded, Buyer may
continue to pursue the subdivision at its own expense, subject to MagneTek's and
NEC's rights set forth in clause (i) of this paragraph (b). Such $25,000 shall
include an amount, not to exceed $2,500, to be expended in connection with the
separation of underground drainage.
(c) Whether or not the subdivision is achieved, MagneTek shall
also pay one-half of Buyer's expense in obtaining a title insurance policy in
respect of the Ground Lease and, if the subdivision is effected, in respect of
the portion of the King Avenue Facility acquired pursuant to the subdivision
(such title policy or policies being hereinafter referred to as the "Title
Commitment"). If the subdivision is effected, NEC shall deliver a quit-claim
deed to Buyer.
(d) Whether or not the subdivision is achieved, within 180 days
of the Closing Buyer shall, at Buyer's sole expense, (i) cause all utilities
provided to Buyer at the King Avenue Facility to be separately metered and until
the same is accomplished, the provisions of the Ground Lease in respect of
utilities set forth in Section 17.1 thereof shall continue to apply,
notwithstanding any prior termination of the Ground Lease and (ii) Buyer shall
arrange for the Owned Property and the remainder of the King Avenue Property of
NEC to be separately assessed in respect of property taxes.
6.5 ACQUISITION PROPOSALS. Neither Seller nor any Person authorized
by Sellers shall solicit, initiate or encourage any acquisition proposal or
engage in any discussion with respect thereto or provide information to any
other person, concerning a possible sale of the Assets or the business of the
Railroad SBU, unless MagneTek has made a reasonable determination that Buyer
will not consummate the transaction provided for hereunder and has given notice
to Buyer of such determination.
6.6 ACCOUNTS RECEIVABLE. Sellers agree promptly to forward to Buyer
any and all proceeds from accounts receivable of the Railroad SBU that are
received by either Seller to the
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extent they pertain to products sold or services provided after the Closing
Date. If, after the Closing Date, either Seller receives any payment from any
Person who at the time of such payment has outstanding accounts payable to
either Seller, on the one hand (for the purposes of this Section, "Seller
Accounts Receivable"), and to Buyer, on the other hand (for the purposes of this
Section, "Buyer Accounts Receivable"), and the payment (a) does not indicate
whether it is in respect of Seller Accounts Receivable or Buyer Accounts
Receivable or (b) indicates that it is in payment of both Seller Accounts
Receivable and Buyer Accounts Receivable without specifying the portion to be
allocated to each, then Sellers and Buyer shall consult with one another to
determine the proper allocation of such payment; and, if they are unable to
reach agreement on the proper allocation, such payment shall be applied so as to
retire undisputed Seller Accounts Receivable and undisputed Buyer Accounts
Receivable in chronological order based upon the period of time such accounts
receivable have existed on the books of Sellers or the Buyer, as applicable.
6.7 NON-COMPETITION.
(a) Subject to the terms, conditions and exceptions of this
Section 6.7, MagneTek hereby agrees that neither MagneTek nor any Affiliate then
controlled by MagneTek (a "MagneTek Affiliate"), for a period of three years
from and after the Closing Date, will engage, directly or indirectly, whether as
principal, consultant, investor or otherwise, in the design, development,
fabrication, test or delivery of any of the products (which products are not
sold by any other Division or Affiliate of MagneTek) currently sold by the
Railroad SBU in the railroad market. Notwithstanding anything to the contrary
in this Section 6.7, the acquisition by MagneTek of (i) any Person, less than
10% of the gross revenues of which are derived from a business involving the
production of any of the products (which products are not sold by any other
Division or Affiliate of MagneTek) currently sold by the Railroad SBU in the
railroad market (a "Competitive Business") or (ii) no more than 5% of any class
of securities of a Person, if such securities are traded in any public market
(within or outside of the United States) or 15% of any class of privately held
securities of a Person, in either case if such Person derives 10% or more of its
gross revenues from a Competitive Business, shall not constitute a breach of
this Section 6.7.
(b) The prohibition in Section 6.7(a) shall apply to all
counties in the State of California and all similar political subdivisions or
regions in all states of the United States and all geographical areas worldwide.
MagneTek agrees that, in connection with the purchase by Buyer of the
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Assets (including the goodwill) of the Railroad SBU, the time and geographic
restrictions set forth above are reasonable. MagneTek agrees that the remedy at
law for any breach by MagneTek of this Section 6.7 will be inadequate and that
Buyer shall be entitled to injunctive relief. The parties intend that the
unenforceability or invalidity of any term or provision of this Section 6.7
shall not render any other term or provision contained herein unenforceable or
invalid. If the activities described in Section 6.7(a) or the period of time or
the geographical area covered by this Section 6.7 should be deemed too
extensive, then the parties intend that this Section 6.7 be construed to cover
the maximum scope of business activities, period of time and geographical area
(not exceeding those specifically set forth herein) as may be permissible under
applicable law.
6.8 OFFSITE ASSETS.
(a) To the extent the Assets set forth on Schedule 2.1(i) hereto
remain at NEC facilities that are not being transferred to Buyer, NEC agrees to
exercise reasonable care in respect thereof, and in no event less than it
exercises with respect to its own assets. In the event Buyer wishes to remove
such Assets, NEC shall cooperate in all reasonable respects, but Buyer shall
bear all expenses associated therewith in excess of an aggregate (cumulated with
any expenditures by MagneTek pursuant to Section 7.4 hereof) of $200,000, to be
paid by MagneTek; (b) the Assets set forth on Schedule 2.1(i) shall be removed
in accordance with the following schedule: (i) the Assets identified on
Schedule 2.1(i) as the King Avenue Assets shall be removed by RPI within
120 days of the Closing Date; (ii) the Assets identified on Schedule 2.1(i) as
the St. Jean Assets shall be removed by RPI within 60 days of termination of the
Subcontract Agreement; (iii) the Assets identified on Schedule 2.1(i) as the
Brownsville Assets shall be removed by RPI within 60 days of termination of the
Supply Agreement; (iv) the Assets identified on Schedule 2.1(i) as the Dublin
Road Assets shall be removed by RPI within 60 days of termination of the Service
Agreement.
ARTICLE VII
COVENANTS OF BUYER
Buyer covenants and agrees as follows:
7.1 CONFIDENTIALITY. Buyer acknowledges that the information being
provided to it by Sellers is subject to the terms of a confidentiality agreement
between a representative of Buyer and Sellers dated as of January 24, 1994 (the
"Confidentiality Agreement"), the terms of which are
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incorporated herein by reference. Buyer hereby assumes all of the obligations
of such representative under the Confidentiality Agreement. Effective upon, and
only upon, the Closing, the Confidentiality Agreement will terminate; PROVIDED,
HOWEVER, that Buyer acknowledges that the Confidentiality Agreement will
terminate only with respect to information relating solely to the Railroad SBU;
and PROVIDED, FURTHER, HOWEVER, that Buyer acknowledges that any and all other
information provided to it by Sellers or Sellers' representatives concerning
Sellers shall remain subject to the terms and conditions of the Confidentiality
Agreement after the date of the Closing.
7.2 ACCOUNTS RECEIVABLE. Buyer agrees to promptly forward or cause
to be forwarded to MagneTek any and all proceeds from accounts receivable of
either Seller (including those comprising Excluded Assets) that are received by
Buyer or the Railroad SBU after the Closing Date. If, after the Closing Date,
Buyer receives any payment from any Person who at the time of such payment has
outstanding accounts payable to Sellers, on the one hand (for the purposes of
this Section, "Seller Accounts Receivable"), and to Buyer, on the other hand
(for the purposes of this Section, "Buyer Accounts Receivable"), and the payment
(a) does not indicate whether it is in respect of Seller Accounts Receivable or
Buyers Accounts Receivable or (b) indicates that it is in payment of both Seller
Accounts Receivable and Buyer Accounts Receivable without specifying the portion
to be allocated to each, then Sellers and Buyer shall consult with one another
to determine the proper allocation of such payment; and, if they are unable to
reach agreement on the proper allocation, such payment shall be applied so as to
retire undisputed Seller Accounts Receivable and undisputed Buyer Accounts
Receivable in chronological order based upon the period of time such accounts
receivable have existed on the books of the Sellers or Buyer, as applicable.
7.3 WAIVER OF BULK SALES LAW COMPLIANCE. Buyer hereby waives
compliance by NEC with the requirements, if any, of Article 6 of the Uniform
Commercial Code as in force in any state in which Assets are located and all
other similar Requirements of Law applicable to bulk sales and transfers, to the
extent applicable to the Transactions. MagneTek shall indemnify Buyer in
connection with the foregoing matters pursuant to Section 10.1(c) hereof.
7.4 EXCLUDED ASSETS. If, after the Closing Date, Excluded Assets
shall remain on the premises utilized or controlled by Buyer, then (subject to
the following sentence) Buyer shall take reasonable steps, at its own expense,
(provided that MagneTek shall pay up to $200,000 cumulatively with expenditures
under Section 6.8 hereof) to deliver such
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Excluded Assets to Sellers, and so long as such assets remain in Buyer's
control, shall exercise reasonable care with respect thereto, and in no event
less care than with respect to its own properties.
7.5 INSURANCE. Buyer shall secure insurance with respect to the
Railroad SBU from the Closing Date covering general liability and products
liability in amounts customary for the industry in which the Railroad SBU
operates.
(28) Includes list of omitted Schedules and Exhibits, which will be
provided by the Registrant upon request.
ARTICLE VIII
MUTUAL COVENANTS
Each of Sellers and Buyer covenants and agrees as follows:
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8.1 PERMITS AND CONSENTS.
(a) As promptly as practicable after the date hereof, Buyer and
Sellers shall make all filings with governmental bodies and other regulatory
authorities, and use all reasonable efforts to obtain all permits, approvals,
authorizations and consents of all third parties, required to consummate the
Transactions. Buyer and Sellers shall furnish promptly to each other all
information that is not otherwise available to the other party and that such
party may reasonably request in connection with any such filing. Sellers and
Buyer shall use reasonable efforts to obtain such consents to the assignment of
the Assigned Contracts as may be required. Buyer acknowledges that consents to
the Transactions may be required from parties to the Assigned Contracts and that
Sellers will not assign to buyer at the Closing any Assigned Contract that by
its terms requires, prior to such assignment, the consent of any other
contracting party thereto unless such consent has been obtained prior to the
Closing Date.
(b) Buyer agrees that Sellers shall not have any liability
whatsoever to buyer arising out of or relating to the failure to obtain any
consents to the assignment of Contracts that may be required in connection with
the transactions or because of the default, acceleration or termination of any
Assigned Contract as a result thereof. Buyer further agrees that no
representation or warranty of MagneTek or covenant of MagneTek or of NEC
contained herein shall be breached or deemed breached, and no condition shall be
deemed not satisfied, as a result of (i) the failure to obtain any such consent
or as a result of any such acceleration or termination or (ii) any lawsuit,
action, claim, proceeding or investigation commenced or threatened by or on
behalf of any person arising out of or relating to the failure to obtain any
such consent or any such acceleration or termination. Sellers shall cooperate
with Buyer in any reasonable manner in connection with Buyer obtaining any such
consents; PROVIDED, HOWEVER, that such cooperation shall not include any
requirement that Sellers commence any litigation or offer or grant any
accommodation (financial or otherwise) to any third party. The Purchase Price
shall not be subject to adjustment by reason of any such consents that are not
obtained.
(c) With respect to each such Assigned Contract not assigned on
the Closing Date, after the Closing Date sellers shall continue to deal with the
other contracting party(ies) to such Assigned Contract as the prime contracting
party, and Buyer and Sellers shall continue to use reasonable efforts to obtain
the consent of all required parties to the assignment of such Assigned Contract.
Such Assigned Contract
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shall be promptly assigned by Sellers to Buyer after receipt of such consent
after the Closing Date. Notwithstanding the absence of any such consent, Buyer
shall be entitled to the benefits of such Assigned Contract accruing after the
Closing Date to the extent that Sellers may provide Buyer with such benefits
without violating the terms of such contract; and to the extent such benefits
are so provided, Buyer agrees to perform at its sole expense all of the
obligations of Sellers to be performed under such Assigned Contract after the
Closing Date.
8.2 COOPERATION. Buyer and Sellers shall cooperate with each other
and shall cause their officers, employees, agents, auditors and representatives
to cooperate with each other after the Closing to ensure the orderly transition
of the Railroad SBU to Buyer and to minimize any disruption to the respective
businesses of Sellers or the Railroad SBU that might result from the
Transactions. Neither party shall be required by this Section 8.2 to take any
action that would unreasonably interfere with the conduct of its business.
8.3 PUBLICITY. Sellers and Buyer agree that, from the date hereof
through the Closing Date, no public release or announcement concerning the
Transactions shall be issued by any party without the prior consent of the other
parties (which consent shall not be unreasonably withheld or delayed), except as
such release or announcement may be required by any Requirement of Law, in which
case the party required to make the release or announcement shall allow the
other parties reasonable time to comment on such release or announcement in
advance of such issuance.
8.4 REASONABLE EFFORTS AND FURTHER ASSURANCES. Subject to the terms
and conditions of this Agreement (including the limitations set forth in
Section 8.1), each party will use all reasonable efforts to cause the Closing to
occur. Sellers and Buyer shall, at any time and from time to time after the
Closing, upon the reasonable request of another party, execute, acknowledge,
deliver and file all such further acts, transfers, conveyances, assignments and
assurances as may reasonably be required to effect the transactions.
8.5 RECORDS. On the Closing Date, Sellers shall deliver or cause to
be delivered to Buyer all records (including copies of any material records that
would constitute Records under the definition thereof set forth in
Section 2.1(g) if such material records were located at the King Avenue or
Dublin Road facility) included in the assets, which are in the possession of
MagneTek or NEC to the extent not then in the possession of the Railroad SBU,
except any Records relating to Excluded Liabilities (including, without
limitation, to any Tax liability of Sellers or to any
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litigation or claim not assumed by Buyer hereunder). After the Closing, upon
reasonable written notice and at Buyer's sole expense, Sellers agree to furnish
or cause to be furnished to Buyer and its representatives (including its
auditors), access at reasonable times and during normal business hours to such
information relating to the Railroad SBU in Sellers' possession as is reasonably
necessary for financial reporting and accounting matters, the preparation and
filing of any Tax Returns, reports or forms or the defense of any Tax Claim or
assessment; PROVIDED, HOWEVER, that such access does not unreasonably disrupt
the normal operations of Sellers, Buyer or the Railroad SBU.
8.6 ACCESS TO FORMER BUSINESS RECORDS; COOPERATION IN LITIGATION.
(a) For a period of seven years following the Closing, Buyer
will retain all records. During such period, Buyer will afford authorized
representatives of Sellers (including their auditors) access to such records at
reasonable times and during normal business hours at the principal business
office of the Railroad SBU, or at such other location or locations at which such
Records may be stored or maintained from time to time, and will permit such
representatives to make abstracts from, or copies of, any of such records, or to
obtain temporary possession of any thereof as may be reasonably required by
Sellers at Sellers' sole cost and expense. During such period, Buyer will, at
Sellers' expense (limited, however, to Buyer's reasonable out-of-pocket
expenditures without regard to any employee cost or other overhead expenses),
cooperate with Sellers in furnishing information, evidence, testimony, and other
reasonable assistance in connection with any action, proceeding, Tax audit, or
investigation to which Sellers or any of their Affiliates is subject relating to
the business of the Railroad SBU prior to the Closing. The term "Record" as
used in this Section 8.6 shall include any data processing files or other
computerized data.
(b) Buyer acknowledges the existence of the Dublin Road Dispute.
Buyer further acknowledges, without limiting the generality of the foregoing
provisions of this Section 8.6, that its obligations of cooperation with Sellers
may include extensive devotion of time (including travel, at the reasonable
expense of MagneTek) of employees of Buyer and may otherwise involve
investigation and remediation activities that are disruptive to the business of
the Railroad SBU. Buyer expressly covenants to make such personnel as may be
reasonably requested by Sellers available in the event of such pre-trial
proceedings and/or litigation.
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8.7 USE OF TRADEMARKS AND TRADE NAMES. Notwithstanding anything to
the contrary in this Agreement, Buyer may continue to use the name "MagneTek"
and related trademarks, corporate names, and trade names incorporating "MagneTek
and NEC," and the stylized "MagneTek and NEC" logos (i) in displays, signage and
postings for the period after the closing date necessary to permit the
reasonably prompt removal of such names, and only to the extent such displays,
signage or postings exist on the Closing Date; (ii) for a period of two years,
to state the Railroad SBU's former affiliation with NEC (e.g., formerly a
division of "MagneTek National Electric Coil, Inc.") and (iii) to the extent any
such trade names, trademarks, service marks or logos appear on stationery,
packaging materials, supplies or inventory on hand as of the Closing Date or on
order at the time of the Closing, until such is exhausted.
8.8 REQUIRED MODIFICATIONS OR REPLACEMENTS OF PRODUCTS. The
following provisions of this Section 8.8 shall govern the responsibilities of
Buyer and MagneTek regarding Required Modifications:
(a) Buyer shall advise MagneTek promptly after becoming aware of
any Required Modifications to the products shipped by the Railroad SBU prior to
the Closing Date to the extent MagneTek would be required to indemnify Buyer for
any claims in respect of such products.
(b) Whether or not Buyer gives the foregoing notice, Buyer shall
make any Required Modifications to products shipped by the Railroad SBU prior to
the Closing Date which are necessary or advisable, in the reasonable discretion
of MagneTek. If the cost to MagneTek under Section 8.8(c) of implementing any
such Required Modification exceeds the cost to MagneTek of replacing such
products, Buyer shall replace such products. The obligation of Buyer hereunder
shall include, but not be limited to, such actions as MagneTek may reasonably
request for (i) the notification of customer and other third parties in
possession of the applicable products, (ii) the shipping of such products, if
necessary, to and from Buyer's facilities for modification, improvement,
enhancement or replacement, (iii) the production of replacement products, parts
or supplies necessary for the implementation of the product modification,
enhancement, improvement or replacement, (iv) the installation, modification or
replacement of the product by personnel of Buyer, either at the customer's
location or at Buyer's facilities, as appropriate, and (v) recordkeeping and
reports with respect to such product modifications, enhancements, improvements
or replacements to the extent required by law or reasonably requested by
MagneTek.
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(c) MagneTek shall reimburse Buyer for direct materials, direct
labor and factory overhead incurred by Buyer in installing or implementing any
Required Modification under Section 8.8(b) or in producing any replacement
products, parts or supplies under section 8.8(b), together with all reasonable
out-of-pocket shipping, postage and printing costs incurred by Buyer in
connection therewith.
ARTICLE IX
EMPLOYEE BENEFIT MATTERS
9.1 EMPLOYEE RETENTION. Buyer shall offer employment to commence as
of the Closing Date to all Railroad SBU Employees other than those set forth on
Schedule I to the Services Agreement, at the same salaries and wages and on
substantially the same terms and conditions as those in effect immediately prior
to the Closing Date. Effective upon termination of the Services Agreement (the
"Termination Date"), Buyer shall similarly offer employment to commence on such
date to all Railroad SBU Employees set forth on Schedule I to the Services
Agreement, at the same salaries and wages and on substantially the same terms
and conditions as those in effect immediately prior to the Termination Date.
Buyer has no present intention (subject to its discretion as to employee
performance) to terminate the employment of any Railroad SBU Employee within the
sixty (60) days following the later of the Closing Date and the Termination
Date, and Buyer assumes all obligations and liabilities, if any, under the
Worker Adjustment and Retraining Notification Act (the "WARN Act") and any
analogous Ohio legislation relating to or arising out of the Transactions.
Buyer also agrees to comply with the terms of the WARN Act and any analogous
Ohio legislation following the Closing Date.
9.2 EMPLOYEE BENEFIT PLANS. Effective as of the Closing Date or the
Termination Date, as applicable, (a) Railroad SBU Employees shall cease accruing
any benefits under any Seller Plan, and MagneTek shall take, or cause to be
taken, all such action, if any, as may be necessary to effect such cessation of
participation and (b) with respect to Railroad SBU Employees who are not members
of a collective bargaining unit, Buyer shall establish employee benefit plans
providing benefits which in the aggregate are substantially the same as the
benefits provided to such Railroad SBU Employees under Seller Plans (the
"Buyer's Benefit Plans"). With respect to the Buyer's Benefit Plans, Buyer
shall grant all Railroad SBU Employees from and after the Closing Date (or the
Termination Date, as applicable) credit for all service with Sellers and their
Affiliates and their respective predecessors prior to the Closing Date for all
purposes (other than the accrual of benefits under a defined benefit pension
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plan, however, this proviso shall not preclude Buyer from granting such credit)
for which such service was recognized by Sellers and their Affiliates. With
respect to Buyer's Benefit Plans (and any plan established or adopted pursuant
to Section 9.4) that provide medical or dental benefits after the Closing Date
(or the Termination Date, as applicable), such plans shall waive any exclusion
or limitation with respect to pre-existing conditions and actively-at-work
exclusions and shall provide that any expenses incurred on or before the Closing
Date by a Railroad SBU Employee or his covered dependents shall be taken into
account under such health plans for purposes of satisfying applicable
deductible, coinsurance and maximum out-of-pocket provisions. Buyer shall also
cause its health plan(s) to be responsible for all health benefit claims by
Railroad SBU Employees and their covered dependents for services rendered after
the Closing Date or the Termination Date, as applicable.
9.3 EMPLOYEES COVERED BY COLLECTIVE BARGAINING AGREEMENTS. On, and
effective as of, the Closing Date or the Termination Date, as applicable, Buyer
shall expressly recognize any collective bargaining representative recognized by
Sellers as of the Closing Date (or the Termination Date, as applicable) for any
units that include Railroad SBU Employees and shall either: (i) assume any
collective bargaining agreements existing on the Closing Date with respect to
Railroad SBU employees ("Bargaining Employees"), or (ii) negotiate with any such
collective bargaining representative(s) a new collective bargaining agreement(s)
covering such Bargaining Employees; PROVIDED, HOWEVER, in either case, Buyer
shall assume and discharge all of Sellers' obligations (except for obligations
to make salary and similar payments due prior to the Closing Date (or the
Termination Date, as applicable)) with respect to the Bargaining Employees under
any such bargaining agreements (including the Collective Bargaining Agreement),
on or after the Closing Date or the Termination Date, as applicable.
9.4 BARGAINING PLANS. Effective as of the Closing Date and the
Termination Date, as applicable, Buyer shall establish for the benefit of the
Bargaining Employees such employee benefit plans as are required by the
collective bargaining agreement that includes the Railroad SBU ("Buyer's
Bargaining Plans").
9.5 VACATION, HOLIDAY AND SEVERANCE PAY. As of the Closing Date and
the Termination Date, as applicable, Buyer shall assume all of Sellers'
obligations for vacation (including accrued vacation), holiday and severance (if
any) pay to all Railroad SBU Employees.
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9.6 ACCESS TO INFORMATION. Sellers shall make reasonably available
to Buyer such actuarial, financial, personnel and related information as may be
reasonably requested by Buyer with respect to any Seller Plan as it relates to a
Railroad SBU Employee, including, but not limited to, compensation and
employment histories.
9.7 THIRD-PARTY BENEFICIARIES. No provision of this Article IX shall
create any third-party beneficiary rights in any employee or former employee of
the Railroad SBU (including any beneficiary or dependent thereof), including,
without limitation, any right to continued employment or employment in any
particular position with Buyer for any specified period of time after the
Closing Date or Termination Date.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY MagneTek. Subject to the terms and conditions
of this Article X, MagneTek shall indemnify Buyer and each of its officers,
directors, employees and agents (each, a "Buyer Indemnified Person") against,
and hold them harmless from, any Loss suffered or incurred by any such Buyer
Indemnified Person (other than any Loss relating to environmental matters, for
which indemnification provisions are set forth in Section 10.3) to the extent
arising from (a) if the Closing occurs, any breach of any representation or
warranty of MagneTek contained in this Agreement which survives the Closing or
in any certificate, instrument or other document delivered pursuant hereto,
(b) any breach of any covenant of MagneTek contained in this Agreement or the
Services Agreement requiring performance after the Closing Date or (c) if the
Closing occurs, the existence of, or the failure of Sellers to pay, perform and
discharge when due, any of the Excluded Liabilities (including, without
limitation, any Losses as a result of the failure of NEC to comply with any bulk
sales laws referred to in Section 7.3); PROVIDED, HOWEVER, that MagneTek shall
not have any liability under this Section 10.1 unless the aggregate of all
Losses relating thereto for which MagneTek would, but for this proviso, be
liable exceeds on a cumulative basis with Losses for which Buyer is indemnified
under Section 10.3, an amount equal to $50,000 (and then only to the extent of
any such excess); and PROVIDED FURTHER, HOWEVER, that MagneTek's aggregate
liability under this Section 10.1 and Section 10.3 shall in no event exceed
$6,000,000. Notwithstanding the foregoing, MagneTek shall have no obligation to
indemnify Buyer with respect to any Loss, including but not limited to, any
breach of the representations set forth in Section 4.5, which are within the
scope of the Title Commitment, and Buyer agrees that its sole
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recourse with respect to such matters shall be against the issuer of the Title
Commitment. Moreover, for avoidance of doubt, the parties agree that the
indemnification provided for in this Section 10.1 in respect of a breach of the
Services Agreement includes an indemnification (subject to all of the terms and
conditions of this Article X) for any Loss incurred as a result of any legal
claim, action, proceeding or demand that may be made or asserted against Buyer
by the Dublin Road Partnership, its successors or assigns, or a mortgagee
thereof in connection with the Services Agreement or which may frustrate the
performance by either party thereof, whether or not such claim, action,
proceeding or demand can be attributed to any direct or indirect breach by
MagneTek of such Services Agreement.
10.2 INDEMNIFICATION BY BUYER. Subject to the terms and conditions of
this Article X, Buyer shall indemnify Sellers and each of their respective
officers, directors, employees and agents (each, a "Seller Indemnified Person")
against, and hold them harmless from, any Loss suffered or incurred by any such
Seller Indemnified Person (other than any relating to environmental matters, for
which indemnification provisions are set forth in Section 10.3) to the extent
arising from (a) if the Closing occurs, any breach of any representation or
warranty of Buyer contained in this Agreement which survives the Closing or in
any certificate, instrument or other document delivered pursuant hereto or in
connection herewith, (b) any breach of any covenant of Buyer contained in this
Agreement or the Services Agreement requiring performance after the Closing
Date, (c) if the Closing occurs, the existence of, or the failure of Buyer to
pay, perform and discharge when due, any of the Assumed Liabilities and (d) if
the Closing occurs, the ongoing operations of Buyer and the Assets after the
Closing Date; PROVIDED, HOWEVER, that Buyer shall not have any liability under
this Section 10.2 unless the aggregate of all Losses relating thereto for which
Buyer would, but for this proviso, be liable exceeds on a cumulative basis with
Losses for which Seller is indemnified under Section 10.3, an amount equal to
$50,000 (and then only to the extent of such excess); and PROVIDED FURTHER,
HOWEVER, that Buyer's aggregate liability under clauses (a) and (b) of this
Section 10.2 shall in no event exceed $6,000,000.
10.3 INDEMNIFICATION FOR ENVIRONMENTAL MATTERS.
(a) Subject to the terms and conditions of this Article X and
except as set forth below in Section 10.3(b), MagneTek shall indemnify and hold
Buyer Indemnified Persons harmless from and against all Losses resulting from
claims or demands by any Governmental Authority or any third party which is
unrelated to Buyer or its
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Affiliates arising under any Environmental Law to the extent such Losses (a) are
attributable to the use and/or occupancy of any premises owned or used by
Sellers prior to the Closing Date (a "Seller Facility") or to Hazardous
Substances transported offsite from a Seller Facility for treatment, storage or
disposal prior to the Closing and (b) exceed, on a cumulative basis with Losses
for which Buyer is indemnified under Section 10.1, an amount equal to $50,000;
but only to the extent of such excess and PROVIDED, FURTHER, that MagneTek's
aggregate liability under this Section 10.3(a), Section 10.3(b) and Section 10.1
shall in no event exceed $6,000,000. MagneTek's indemnification liability
hereunder shall in no event be construed to extend to or include any remediation
or other liability arising as a result of the presence or removal of asbestos in
or upon any of the improvements located on the Railroad SBU Property at any
time. MagneTek's obligation to indemnify Buyer under this Section 10.3(a) shall
expire on the second anniversary of the Closing Date, and Buyer hereby expressly
releases MagneTek from and after such second anniversary from any liability in
respect of the matters covered by such indemnification, whether arising by
statute or common law, or otherwise. Notwithstanding the foregoing and except
as set forth below in Section 10.3(b), MagneTek shall have no obligation to
indemnify any Buyer Indemnified Person with respect to conditions that existed
prior to the utilization of the King Avenue Facility that commenced in 1933.
Buyer shall indemnify and hold each Seller Indemnified Person harmless from and
against all Losses resulting from claims or demands by any Governmental
Authority or third-party arising under any Environmental Law to the extent such
Losses are attributable to Buyer's use and/or occupancy of any Seller Facility.
Moreover, notwithstanding Section 10.3(b) or any other provision hereof, no
Buyer Indemnified Person shall be indemnified or held harmless by MagneTek, and
Buyer shall indemnify and hold harmless each Seller Indemnified Person, to the
extent any representation or warranty in any Key Employee Certificate shall
prove untrue in any material respect.
(b) Notwithstanding the foregoing, solely in respect of the
Dublin Road Facility, MagneTek shall indemnify and hold each Buyer Indemnified
Person harmless from and against all Losses resulting from claims or demands by
any Governmental Authority or any third-party which is unrelated to Buyer or its
Affiliates arising under any Environmental Law including, without limitation,
any Losses resulting from the Dublin Road Dispute, to the extent such Losses
exceed, independent of matters for which Buyer is indemnified under Section 10.1
or Section 10.3(a), an amount equal to $25,000, but only to the extent of such
excess and PROVIDED, FURTHER, that MagneTek's aggregate liability under this
Section 10.3(b), Section 10.3(a) and Section 10.1 shall in no
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event exceed $6,000,000. The indemnification in this Section 10.3(b) shall
extend to and include events which occurred prior to NEC's occupation of the
Dublin Road Facility. MagneTek's obligation to indemnify Buyer Indemnified
Persons under this Section 10.3(b) shall expire on the fifteenth anniversary of
the Closing Date, and Buyer hereby expressly releases MagneTek from and after
such fifteenth anniversary from any liability in respect of the matters covered
by such indemnification, whether arising by statute or common law, or otherwise.
10.4 LOSSES NET OF INSURANCE, ETC.
(a) The amount of any Loss for which indemnification is provided
under this Article X shall be net of any amounts recovered or recoverable by the
Indemnified Person under insurance policies with respect to such Loss and of any
reserve in respect thereof reflected on the Closing Balance Sheet.
(b) If the Indemnifying Person makes any payment under this
Article X in respect of any Loss, the Indemnifying Person shall be subrogated,
to the extent of such payment, to the rights of the Indemnified Person against
any insurer or third party with respect to such Losses. The Indemnified Person
shall execute any required documents or instruments, serve as a named plaintiff,
or take any other similar steps necessary to effectuate such subrogation.
(c) Notwithstanding anything to the contrary elsewhere in this
Agreement, no Indemnifying Person shall, in any event, be liable to the other
party for any consequential damages, including, but not limited to, loss of
revenue or income, business interruption, cost of capital, or loss of business
reputation or opportunity relating to the breach or alleged breach of this
Agreement. Each party agrees that it will not seek punitive damages as to any
matter under, relating to or arising out of the Transactions. The foregoing
shall not be interpreted, however, to limit indemnification for Losses incurred
as a result of the assertion by a claimant (other than the parties hereto and
their successors and assigns), in a Third-Party Claim (as defined below) of
claims for damages of the foregoing type.
(d) The parties hereto agree that the indemnification provisions
of this Article X are intended to provide the exclusive remedy as to all Losses
any Indemnified Person may incur arising from or relating to the Transactions,
and each party hereby waives, to the extent they may do so, any other rights or
remedies that may arise under any applicable statute, rule or regulation.
Moreover, notwithstanding anything to the contrary in this Agreement,
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Buyer waives no rights it may have or come to have or to pursue against any
predecessors of MagneTek or NEC.
10.5 TERMINATION OF INDEMNIFICATION. The obligations to indemnify and
hold harmless a party hereto, (A) pursuant to Sections 10.1(a) and 10.2(a),
shall terminate when the applicable representation or warranty terminates
pursuant to Section 10.8, (B) pursuant to Section 10.3, shall terminate as and
to the extent set forth therein and (C) pursuant to Sections 10.1(b) and
10.2(b), shall terminate on the second anniversary of the Closing Date (except
as to Section 6.7, which shall survive for the period set forth therein and
Section 8.6(b) which shall survive until the fifteenth anniversary of the
Closing Date; PROVIDED, HOWEVER, that as to clauses (A), (B) and (C) above, such
obligations to indemnify and hold harmless shall not terminate with respect to
any item as to which the person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice (stating in reasonable detail the basis (whether or not the amount of
Losses related to such claim is then known or estimable) of such claim) to the
Indemnifying Person.
10.6 PROCEDURES RELATING TO INDEMNIFICATION (OTHER THAN FOR TAX
CLAIMS). In order for an Indemnified Person to be entitled to any
indemnification provided for under this Agreement (other than for Tax Claims) in
respect of, arising out of or involving a claim or demand made by any Person
against the Indemnified Person (a "Third-Party Claim"), such Indemnified Person
must notify the Indemnifying Person in writing, and in reasonable detail, of the
Third-Party Claim within 10 Business Days after receipt by such Indemnified
Person of written notice of the Third-Party Claim; PROVIDED, HOWEVER, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Person shall have been actually
prejudiced as a result of such failure (except that the Indemnifying Person
shall not be liable for any Losses incurred during the period in which the
Indemnified Person failed to give such notice). Thereafter, the Indemnified
Person shall deliver to the Indemnifying Person, within five Business Days after
the Indemnified Person's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Person relating to the
Third-Party Claim. It is hereby acknowledged that MagneTek has received notice
of the Dublin Road Dispute.
If a Third-Party Claim is made against an Indemnified Person, the
Indemnifying Person will be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Person and reasonably satisfactory to the
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Indemnified Person. Should the Indemnifying Person so elect to assume the
defense of a Third-Party Claim, the Indemnifying Person will not be liable to
the Indemnified Person for legal fees and expenses subsequently incurred by the
Indemnified Person in connection with the defense thereof. If the Indemnifying
Person assumes such defense, the Indemnified Person shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Person, it being
understood that the Indemnifying Person shall control such defense. The
Indemnifying Person shall be liable for the fees and expenses of counsel
employed by the Indemnified Person for any period during which the Indemnifying
Person has not assumed the defense thereof (other than during any period in
which the Indemnified Person shall have failed to give notice of the Third Party
Claim as provided above). If the Indemnifying Person chooses to defend or
prosecute any Third-Party Claim, all the parties hereto shall cooperate in the
defense or prosecution thereof. Such cooperation shall include the retention
and (upon the Indemnifying Person's request) the provision to the Indemnifying
Person of records and information which are reasonably relevant to such Third-
Party Claim, and making employees available on a mutually convenient basis in
the manner specified in Section 8.6 hereof to provide additional information and
explanation of any material provided hereunder. Notwithstanding the foregoing,
in the event a Third-Party Claim is made against either Seller as to which
MagneTek is entitled to seek indemnification under this Article X and MagneTek
concludes, in its reasonable judgment, that Buyer lacks the financial and
personnel resources to vigorously defend MagneTek from such Third-Party Claim,
MagneTek may elect to retain the defense of such Third-Party Claim and shall be
entitled to be reimbursed by Buyer for its Losses incurred in such defense, such
expenditures to be reimbursed promptly after submission of invoices therefor.
Whether or not the Indemnifying Person shall have assumed the defense of a
Third-Party Claim, the Indemnified Person shall not admit any liability with
respect to, or settle, compromise or discharge, such Third-Party Claim without
the Indemnifying Person's prior written consent (which consent shall not be
unreasonably withheld or delayed). It is acknowledged that the Dublin Road
Dispute is an Assumed Liability as to which Buyer is indemnified pursuant to
Section 10.3(b) and that MagneTek has assumed the defense thereof and has full
control of such defense. All Tax Claims (as defined in Section 10.7) shall be
governed by Section 10.7.
10.7 PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS.
(a) If a claim shall be made by any Tax authority, which, if
successful, might result in an indemnity
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payment to any Person hereunder (a "Tax Indemnitee"), the Tax Indemnitee shall
promptly notify the party against whom indemnification is sought (the "Tax
Indemnitor") in writing of such claim (a "Tax Claim"). If notice of a Tax Claim
is not given to the Tax Indemnitor within a sufficient period of time to allow
the Tax Indemnitor to effectively contest such Tax Claim, or in reasonable
detail to apprise the Tax Indemnitor of the nature of the Tax Claim, in each
case taking into account the facts and circumstances with respect to such Tax
Claim, the Tax Indemnitor shall not be liable to the Tax Indemnitee to the
extent that the Tax Indemnitor's ability to effectively contest such Tax Claim
is actually prejudiced as a result thereof.
(b) With respect to any Tax Claim, the Tax Indemnitor shall
control all proceedings taken in connection with such Tax Claim (including,
without limitation, selection of counsel) and, without limiting the foregoing,
may in its sole discretion pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any taxing authority with respect
thereto and may, in its sole discretion, either pay the Tax claimed and sue for
a refund where applicable law permits such refund suits or contest the Tax Claim
in any permissible manner, provided, however, that the Tax Indemnitor shall not
settle or compromise a Tax Claim without giving 30 days' prior notice to the Tax
Indemnitee, and without the Tax Indemnitee's consent, which shall not be
unreasonably withheld or delayed, if such settlement or compromise would have a
material adverse effect on the Tax liabilities of the Tax Indemnitee, its
Affiliates or any member of its affiliated group. The Tax Indemnitee, and each
of its Affiliates, shall cooperate with the Tax Indemnitor in contesting any Tax
Claim, which cooperation shall include, without limitation, the retention and
(upon the Tax Indemnitor's request) the provision to Tax Indemnitor of records
and information which are reasonably relevant to such Tax Claim, and making
employees available on a mutually convenient basis to provide additional
information or explanation of any material provided hereunder or to testify at
proceedings relating to such Tax Claim.
10.8 SURVIVAL OF REPRESENTATIONS. The representations and warranties
in this Agreement and in any other document delivered in connection herewith
shall survive the Closing solely for purposes of Sections 10.1 and 10.2 and
shall terminate at the close of business on the second anniversary of the
Closing Date. Notwithstanding the foregoing, (a) representations and warranties
relating to environmental matters in Section 4.10 shall not survive the Closing
and (b) Buyer's acknowledgment pursuant to Section 5.4 shall not expire.
Nothing in this Section 10.8 shall limit the duration of Section 10.3(a) or (b).
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ARTICLE XI
GENERAL PROVISIONS
11.1 ASSIGNMENT. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by Buyer other than by
operation of law, including by way of stock sale or merger, except to a Buyer of
substantially all the assets of Buyer, without the prior written consent of
Seller; PROVIDED, HOWEVER, that (a) Buyer may assign its right to purchase the
Assets hereunder to an Affiliate of Buyer that can accurately make all of
Buyer's representations and warranties as of the Closing without the prior
written consent of Seller, but in no event shall any such assignment limit or
affect Buyer's obligations hereunder and (b) Buyer may assign its rights
(including its indemnification rights) hereunder or grant a security interest in
this Agreement, or both, to or for the benefit of any Person holding a financial
obligation of Buyer issued in connection with the financing of the Transactions
or in connection with any renewal, extension, modification, amendment,
refinancing, refunding or replacement of any such financial obligation.
11.2 NO THIRD-PARTY BENEFICIARIES. Except as provided in Section 11.1
as to permitted assignees and in Article X as to Indemnified Persons, this
Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein expressed or implied shall give or be construed to
give to any Person, other than the parties hereto and such assigns, any legal or
equitable rights hereunder.
11.3 TERMINATION.
(a) Anything contained herein to the contrary notwithstanding,
this Agreement may be terminated (except as set forth in Section 11.3(c)) and
the Transactions abandoned at any time prior to the Closing Date:
(i) by mutual written consent of Sellers and Buyer;
(ii) by Sellers if any of the conditions set forth in
Section 3.1 shall have become incapable of fulfillment, and shall
not have been waived by Sellers;
(iii) by Buyer if any of the conditions set forth in
Section 3.1 shall have become incapable of fulfillment, and shall
not have been waived by Buyer; or
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(iv) by Sellers or Buyer, if the Closing does not
occur on or prior to November 4, 1994; PROVIDED, HOWEVER, that the
party seeking termination pursuant to clause (ii), (iii) or (iv)
is not materially in breach (after having been given written
notice and a five-Business Day cure period, if such breach is
susceptible of cure) of any of its representations, warranties,
covenants or agreements contained in this Agreement.
(b) In the event of termination by Sellers or Buyer pursuant to
this Section 11.3, written notice thereof shall forthwith be given to the other
party and the Transactions shall be terminated, without further action by either
party. If the Transactions are terminated as provided herein:
(i) Buyer shall return all documents and copies and
other material received from Sellers relating to the Transactions,
whether so obtained before or after the execution hereof, to
Sellers;
(ii) all confidential information received by Buyer
with respect to the Railroad SBU and Sellers shall be treated in
accordance with the Confidentiality Agreement which shall remain
in full force and effect notwithstanding the termination of this
Agreement.
(c) If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 11.3, this
Agreement shall become void and of no further force and effect, except for the
provisions of (i) Section 7.1 relating to the obligation of Buyer to keep
confidential certain information and data obtained by it, (ii) Section 11.4
relating to certain expenses, (iii) Section 8.3 relating to publicity,
(iv) Section 11.5 relating to attorney fees and expenses, (v) Section 11.11
relating to finder's fees and broker's fees and (vi) this Section 11.3. Nothing
in this Section 11.3 shall be deemed to release Sellers or Buyer from any
liability for any breach by such party of the terms and provisions of this
Agreement or to impair the right of Sellers or Buyer to compel specific
performance by the other party of its obligations under this Agreement.
11.4 EXPENSES. Whether or not the Transactions are consummated, and
except as otherwise provided in this Agreement, all fees, costs and expenses
incurred in connection
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with the Transaction Documents and the Transactions shall be paid by the party
incurring such fees, costs or expenses.
11.5 ATTORNEYS' FEES. Should any litigation be commenced concerning
this Agreement or the rights and duties of any party with respect to it, the
party prevailing shall be entitled, in addition to such other relief as may be
granted, to a reasonable sum for such party's attorney fees and expenses
determined by the court in such litigation or in a separate action brought for
that purpose.
11.6 AMENDMENTS. No amendment to this Agreement shall be effective
unless it shall be in writing and signed by both parties hereto.
11.7 NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent prepaid telex, cable or telecopy, or sent, postage prepaid, by
registered, certified or express mail, or reputable overnight courier service
and shall be deemed given when so delivered by hand, telexed, cabled or
telecopied, or if mailed, three days after mailing (one business day in the case
of express mail or overnight courier service), as follows:
(i) if to Buyer, to:
Mr. Robert G. Barton
Rail Products International
800 King Avenue
Columbus, OH 43212
with a copy to:
Stanley L. Waldbaum, Esq.
12 Hawk Street
Spring Valley, NY 10977
(ii) if to MagneTek prior to
November 7, 1994, to:
MagneTek, Inc.
11150 Santa Monica Boulevard
15th Floor
Los Angeles, California 90025
Attention: Samuel A. Miley, Esq.
General Counsel
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and after November 7, 1994, to:
MagneTek, Inc.
26 Century Boulevard
P.O. Box 290159
Nashville, Tennessee 37229-0159
Attention: Samuel A. Miley, Esq.
General Counsel
with a copy to:
Gibson, Dunn & Crutcher
2029 Century Park East
Suite 4200
Los Angeles, California 90067
Attention: Jennifer Bellah, Esq.
(iii) if to NEC, to:
MagneTek National Electric Coil, Inc.
c/o 26 Century Boulevard
P.O. Box 290159
Nashville, Tennessee 37229-0159
Attention: Samuel A. Miley, Esq.
Secretary
11.8 INTERPRETATION; EXHIBITS AND SCHEDULES. The headings contained
in this Agreement, in any Exhibit or Schedule hereto and in the table of
contents to this Agreement, are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Any matter
disclosed in one Schedule hereto shall be deemed incorporated by reference into
each other Schedule hereto and disclosed in each such Schedule. All Exhibits
and Schedules annexed hereto or referred to herein are hereby incorporated in
and made a part of this Agreement as if set forth in full herein. Any
capitalized terms used in any Schedule or Exhibit, but not otherwise defined
therein, shall have the meaning as defined in this Agreement. All of the
Transaction Documents shall be interpreted in such a manner as to harmonize and
give effect to the provisions thereof. Without limiting the generality of the
foregoing, no provision of this Agreement in respect of the Dublin Road Facility
shall be interpreted to conflict with or contradict any provision in the
Services Agreement.
11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other party.
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11.10 ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreement contain the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior oral
and written agreements and understandings relating to such subject matter.
11.11 FEES. Each party hereto hereby represents and warrants that
(a) the only brokers or finders that have acted for such party in connection
with this Agreement or the transactions contemplated hereby or that may be
entitled to any brokerage fee, finder's fee or commission in respect thereof are
set forth in Schedule 11.11 and (b) each party agrees that it will pay all fees
or commissions which may be payable to such firm(s) retained by it or to which
it may be obligated.
11.12 SEVERABILITY. If any provision of this Agreement or the
application of any such provision to any Person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
11.13 NEC COVENANTS. Buyer acknowledges that MagneTek is currently
negotiating for the sale of NEC. Buyer acknowledges that MagneTek is
accordingly the sole indemnitor in respect of representations and warranties
pertaining to the Railroad SBU hereunder, and that NEC's future liability
hereunder is limited to its obligations under Sections 2.1, 2.4, 2.5, 6.1, 6.4,
6.8, 8.1, 8.2, 8.4, 8.5 and 8.7. Any claim for indemnification by Buyer in
respect thereof shall be governed by the provisions of Article X pertaining to
indemnification of Buyer in respect of breaches of covenants.
11.14 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflicts of law principles of such State.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
MAGNETEK, INC.
By:
------------------------
Name: John P. Colling, Jr.
Title: Vice President and Treasurer
RAIL PRODUCTS INTERNATIONAL, INC.
By:
------------------------
Name: Robert G. Barton
Title: President
As to matters enumerated in Section 11.13
MAGNETEK NATIONAL ELECTRIC COIL, INC.
By:
------------------------
Name: John P. Colling, Jr.
Title: Vice President & CFO
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- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BETWEEN
MAGNETEK, INC.,
AND
MAS ACQUIRING CORP.
--------------------------------------
DATED AS OF NOVEMBER 8, 1994
--------------------------------------
SALE OF AIRPORT GROUND SUPPORT SYSTEMS DIVISION
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS.................................................. 1
1.1 Certain Defined Terms........................................ 1
1.2 Other Definitional Provisions................................ 5
ARTICLE II CLOSING; PURCHASE PRICE ADJUSTMENT........................... 6
2.1 Sale and Transfer of the Assets.............................. 6
2.2 Assets Not Transferred....................................... 7
2.3 Assumed and Excluded Liabilities............................. 8
2.4 Closing...................................................... 10
2.5 Purchase Price Adjustment; Assignment of
Accounts Receivable.......................................... 11
2.6 Tax Allocation............................................... 13
2.7 Sales and Use Tax............................................ 14
ARTICLE III CONDITIONS TO CLOSING........................................ 14
3.1 Buyer's Obligation........................................... 14
3.2 Seller's Obligations......................................... 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MAGNETEK................... 15
4.1 Authority; No Conflicts; Governmental
Consents..................................................... 15
4.2 Financial Statements......................................... 16
4.3 Assets Other than Real Property Interests.................... 16
4.4 Intellectual Property........................................ 17
4.5 Contracts.................................................... 17
4.6 Litigation; Decrees.......................................... 18
4.7 Assets of the Division....................................... 18
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER...................... 18
5.1 Authority; No Conflicts; Governmental
Consents..................................................... 18
5.2 Actions and Proceedings, Etc. ............................... 19
5.3 Availability of Funds........................................ 19
5.4 Buyer's Acknowledgment....................................... 20
5.5 Exon-Florio.................................................. 20
5.6 No Knowledge of Seller's Breach.............................. 20
ARTICLE VI COVENANTS OF MAGNETEK........................................ 20
6.1 Access....................................................... 20
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6.2 Teledyne Agreement........................................... 20
6.3 Reserved..................................................... 21
6.4 Reserved..................................................... 21
6.5 Accounts Receivable.......................................... 21
6.6 Non-Competition.............................................. 21
6.7 Cessation of Manufacture..................................... 22
ARTICLE VII COVENANTS OF BUYER........................................... 23
7.1 Accounts Receivable.......................................... 23
7.2 Waiver of Bulk Sales Law Compliance.......................... 23
7.3 Insurance.................................................... 23
7.4 Guaranty relating to MagneTek Belgium........................ 23
7.5 Saudi Letters of Credit...................................... 24
ARTICLE VIII MUTUAL COVENANTS............................................. 25
8.1 Permits and Consents......................................... 25
8.2 Cooperation.................................................. 26
8.3 Publicity.................................................... 26
8.4 Reasonable Efforts and Further Assurances.................... 26
8.5 Records...................................................... 27
8.6 Access to Former Business Records;
Cooperation in Litigation.................................... 27
8.7 Use of Trademarks and Trade Names............................ 28
8.8 MagneTek Belgium............................................. 28
ARTICLE IX EMPLOYEE BENEFIT MATTERS..................................... 28
9.1 Employee Retention........................................... 28
9.2 Employee Benefit Plans....................................... 29
9.3 Vacation, Holiday and Severance Pay.......................... 29
9.4 Teledyne Pension Credits..................................... 29
9.5 Third-Party Beneficiaries.................................... 29
ARTICLE X INDEMNIFICATION.............................................. 30
10.1 Indemnification by MagneTek.................................. 30
10.2 Indemnification by Buyer..................................... 31
10.3 Losses Net of Insurance, Etc. ............................... 31
10.4 Termination of Indemnification............................... 32
10.5 Procedures Relating to Indemnification (Other
than for Tax Claims)......................................... 32
10.6 Procedures Relating to Indemnification of Tax
Claims....................................................... 34
10.7 Survival of Representations.................................. 35
ARTICLE XI GENERAL PROVISIONS........................................... 35
11.1 Assignment................................................... 35
11.2 No Third-Party Beneficiaries................................. 35
11.3 Termination.................................................. 35
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11.4 Expenses..................................................... 37
11.5 Attorneys' Fees.............................................. 37
11.6 Amendments................................................... 37
11.7 Notices...................................................... 37
11.8 Interpretation; Exhibits and Schedules....................... 38
11.9 Counterparts................................................. 38
11.10 Entire Agreement............................................. 38
11.11 Fees......................................................... 39
11.12 Severability................................................. 39
11.13 Governing Law................................................ 39
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EXHIBITS
- --------
EXHIBIT A Form of Bill of Sale, Assignment and
Assumption Agreement...................................... A-1
EXHIBIT B Form of Confidentiality Agreement........................... B-1
EXHIBIT C Form of License Agreement................................... C-1
EXHIBIT D Form of Promissory Note..................................... D-1
EXHIBIT E Form of Warranty Services Agreement......................... E-1
SCHEDULES
- ---------
Schedule 1.1 November Balance Sheet
Schedule 2.2(d) Certain Excluded Assets
Schedule 2.3(b) Certain Product claims; notification
Schedule 2.3(d) Certain contractual claims
Schedule 2.6 Purchase Price Allocation
Schedule 4.1(b) Consents
Schedule 4.4 Intellectual Property
Schedule 4.5 Contracts
Schedule 5.1(b) Consents
Schedule 6.1 Certain Confidential Information
Schedule 6.6 Non-Compete Products
Schedule 7.4 Letter regarding Belgium Obligations
Schedule 8.1(a) Contracts to be Novated
Schedule 9.1 Division Employees
Schedule 11.11 Brokerage Fee
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of November 8, 1994, between
MAGNETEK, INC., a Delaware corporation ("Seller" or "MagneTek"), and MAS
ACQUIRING CORP., a Nevada corporation ("Buyer").
MagneTek is engaged, through its Airport Ground Support Systems
division (the "Division"), in the business of manufacturing, servicing and
selling aircraft ground support equipment comprised primarily of
pre-conditioned air and power supply products. Seller desires to sell to
Buyer certain assets (other than excluded assets) relating to the Division.
Buyer desires to purchase such assets and is willing to assume certain
associated obligations and liabilities.
Accordingly, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms
defined):
"Affiliate" has the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act by the SEC, as in effect on the date
hereof.
"Assets" has the meaning set forth in Section 2.1.
"Assigned Contracts" has the meaning set forth in Section 2.1(d).
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Bill of Sale, Assignment and Assumption Agreement" means a Bill of
Sale, Assignment and Assumption Agreement in substantially the form attached
hereto as Exhibit A.
"Business Day" means a day other than a Saturday or a Sunday or
other day on which commercial banks in California are authorized or required
by law to close.
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"Buyer Indemnified Person" has the meaning set forth in
Section 10.1.
"Closing Balance Sheet" has the meaning set forth in Section 2.5.
"Closing Date" means the day on which the Closing occurs pursuant
to Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Confidentiality Agreement" means a Confidentiality Agreement in
substantially the form attached hereto as Exhibit B.
"Contract" means any contract, agreement, license, lease, sales or
purchase order or other legally binding commitment, whether written or oral,
pertaining to the Division.
"Division Employee" means any employee of MagneTek Belgium and any
employee of MagneTek working for the Division on the Closing Date, including
any employee on leave on such date.
"Employee Benefit Arrangements" means each and all pension,
supplemental pension, accidental death and dismemberment, life and health
insurance and benefits (including medical, dental, vision and
hospitalization), disability, holiday, vacation, sick pay, sick leave,
tuition refund, service award and other employee benefit arrangements, plans,
contracts or policies providing employee or executive compensation or
benefits to Division Employees, other than the Employee Benefit Plans.
"Employee Benefit Plans" means each and all "employee benefit
plans," as defined in Section 3(3) of ERISA, maintained or contributed to by
Seller or in which Seller participates or participated and which, in each
case, provides benefits to Division Employees, including (i) any such plans
that are "employee welfare benefit plans" as defined in Section 3(1) of ERISA
and (ii) any such plans that are "employee pension benefit plans" as defined
in Section 3(2) of ERISA.
"Environmental Laws" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, and any other applicable
statutes, regulations, rules, ordinances or codes which relate to the
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protection of the environment from the effects of hazardous materials.
"Equipment" has the meaning set forth in Section 2.1(a).
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the SEC
promulgated from time to time thereunder.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.3.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Indemnified Person" means, with respect to any Loss, the Person
seeking indemnification hereunder.
"Indemnifying Person" means, with respect to any Loss, the Person
from whom indemnification is being sought hereunder.
"Intellectual Property" has the meaning set forth in Section 2.1(c).
"Knowledge of Seller" with reference to any of the representations
and warranties of MagneTek means the actual knowledge of any "officer" of
MagneTek as such term is defined in 17 C.F.R. Section 240.16a-1(f) (excluding
Robert E. Tupack), to the extent such officer had, on the date hereof,
responsibility for matters that are the subject of such representation and
warranty; PROVIDED, HOWEVER, that unless such an officer had (a) actual
knowledge to the contrary or (b) direct responsibility at the Division level
for the subject matter thereof, such knowledge is based solely upon the
written and oral information supplied to MagneTek in respect of this
Agreement by Division Employees.
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"License Agreement" means the license agreement with respect to the
"INET" tradename to be entered into by Seller and Buyer in substantially the
form of Exhibit C hereto.
"Lien" means any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other) or other security agreement of any
kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement or any financing lease having
substantially the same economic effect as any of the foregoing).
"Loss" means any loss, liability, claim, damage or expense
(including reasonable attorneys' fees and disbursements and the costs of
investigation). Loss recoverable hereunder is subject to the limitations set
forth in Section 10.3.
"MagneTek Belgium" means MagneTek Belgium, S.A., a Belgian company.
"Material Adverse Effect" means a material adverse effect on (a)
the business, operations, property or condition (financial or other) of the
Division, taken as a whole or (b) the ability of Seller to consummate the
transactions contemplated by this Agreement.
"November Balance Sheet" means the unaudited balance sheet of the
Division as of the close of business on November 2, 1994, attached hereto as
Schedule 1.1.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Promissory Note" means the promissory note in the principal amount
of $250,000 to be executed by Buyer in substantially the form of Exhibit D
hereto.
"Purchase Price" means the adjusted price derived pursuant to
Section 2.5.
"Records" has the meaning set forth in Section 2.1(f).
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in
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each case applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject.
"SEC" means the Securities and Exchange Commission.
"Subsidiary Stock" means the issued and outstanding capital stock
of MagneTek Belgium.
"Tax" or "Taxes" means, with respect to any Person, any federal,
state, local or foreign net income, gross income, gross receipts, sales, use,
ad valorem, value-added, capital, unitary, intangible, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
transfer, occupation, premium, property or windfall profit tax, custom, duty
or other tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax or
additional amount imposed by any jurisdiction or other taxing authority, on
such Person.
"Teledyne" means Teledyne Industries, Inc., a California
corporation.
"Teledyne Agreement" means the Asset Purchase Agreement among
Teledyne, MagneTek Belgium, Teledyne Belgium, S.A. and MagneTek dated as of
July 31, 1992.
"Transaction Documents" means (i) this Agreement; (ii) the Bill of
Sale, Assignment and Assumption Agreement; (iii) the Promissory Note; (iv)
the License Agreement; (v) the Warranty Services Agreement; and (vi) the
Confidentiality Agreement.
"Transactions" means the transactions contemplated by the
Transaction Documents.
"Warranty Services Agreement" means the agreement to be entered
into between Buyer and Seller relating to performance by Buyer of certain
warranty obligations of Seller in substantially the form of Exhibit E hereto.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Terms defined in this Agreement in Sections other than
Section 1.1 shall have the meanings as so defined when used in this Agreement.
(b) As used herein, accounting terms not defined or to the
extent not defined, shall have the respective meanings given to them under
GAAP.
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(c) Unless express reference is made to Business Days,
references to days shall be to calendar days.
ARTICLE II
CLOSING; PURCHASE PRICE ADJUSTMENT
2.1 SALE AND TRANSFER OF THE ASSETS. Subject to the terms and
conditions of this Agreement, on the Closing Date MagneTek will sell, convey,
transfer, assign and deliver to Buyer all of MagneTek's right, title and
interest in and to the Subsidiary Stock (and as soon as possible after the
Closing Date will cause the shares thereof now or formerly held by Frank
Perna, Jr. to be transferred to Buyer or its assignee), and on the Closing
Date MagneTek will sell, convey, transfer, assign and deliver to Buyer all of
MagneTek's right, title and interest in and to the following assets (except
the Excluded Assets) of MagneTek, to the extent that they are used
exclusively in the operations of the Division, as the same shall exist on the
Closing Date (collectively, including the Subsidiary Stock, the "Assets"):
(a) all tangible personal property, including, without
limitation, the fixtures, furnishings, furniture, office supplies, vehicles,
rolling stock, tools, machinery, equipment and computer equipment (including
transferable software);
(b) all inventory, including, without limitation, raw
materials, work-in-process, finished goods, packaging materials, spare parts
and supplies;
(c) any trademarks, trade names, patents, service marks,
copyrights (whether registered or unregistered) and pending applications for
the foregoing listed on Schedule 4.4 (the "Intellectual Property");
(d) all Contracts (including, but not limited to, all
Contracts listed on Schedule 4.5 and all Contracts entered into by the
Division through the Closing Date), provided that any Contract that requires
the consent to assignment of a party thereto which consent has not been
obtained prior to the Closing Date pursuant to Section 8.1 shall be deemed
Assigned Contracts only to the extent therein provided (the "Assigned
Contracts");
(e) all transferable business licenses and permits used
exclusively in or relating exclusively to the Division or the Assets;
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(f) all books and records (other than historical accounting,
personnel, financial and Tax records), plans and specifications, sales
literature, product information and files and all other information and/or
data related to or used by Seller exclusively in connection with the Assets
and the operation of the Division (the "Records");
(g) all accounts receivable and notes receivable of Seller
with respect to the operation of the Division on the Closing Date; and
(h) all goodwill appurtenant to the foregoing Assets.
2.2 ASSETS NOT TRANSFERRED. Notwithstanding anything herein to
the contrary, the following assets are not included in the Assets and shall
be retained by Seller and/or assigned or otherwise conveyed to Seller by
MagneTek Belgium on or prior to the Closing Date (the "Excluded Assets"):
(a) all cash and cash equivalent items (except for deposits
and prepaid expenses reflected on the Closing Balance Sheet and relating to
Assumed Liabilities) of Seller and MagneTek Belgium, including, without
limitation, checking accounts, bank accounts, lock box files, certificates of
deposit, time deposits, securities, and the proceeds of accounts receivable,
including uncashed checks in payment thereof received by Seller or MagneTek
Belgium on or prior to the Closing Date, in each case whether or not relating
to the Division;
(b) all rights, properties, and assets which have been used
or held for use in connection with the Division and which shall have been
transferred (including transfers by way of sale) or otherwise disposed of
prior to the Closing, provided such transfers and disposals shall have been
in the ordinary course of the business of the Division as conducted at the
date hereof;
(c) rights to or claims for refunds or rebates of Taxes and
other governmental charges for periods ending on or prior to the Closing Date
and the benefit of net operating loss carryforwards, carrybacks or other
credits of Seller or MagneTek Belgium, whether or not attributable to the
Division;
(d) the accounts receivable, inventory, tangible personal
property and Contracts set forth on Schedule 2.2(d) or identified on Schedule
1.1 as the property of, or to be retained by, Seller;
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(e) all insurance policies and rights thereunder, including
but not limited to, rights to any cancellation value as of the Closing Date;
(f) proprietary or confidential business or technical
information, records and policies that relate generally to Seller or any of
its Affiliates and are not used exclusively in the Division, including,
without limitation, organization manuals and strategic plans;
(g) subject to the limited rights granted in Section 8.7 and
in the License Agreement and to any matters referred to in the Teledyne
Agreement relating to the "INET" mark, all "MagneTek" and "INET" marks,
including any and all trademarks or service marks, trade names, slogans or
other like property relating to or including the name "MagneTek" or "INET,"
the mark "MagneTek" or "INET," or any derivative thereof, and the MagneTek or
NET logo or any derivative thereof, and Seller's proprietary computer
programs or other software, including but not limited to Seller's proprietary
data bases, accounting and reporting formats, systems and procedures;
(h) except as expressly provided in Article IX, the pension
credits provided by Teledyne to MagneTek under the Teledyne Agreement;
(i) except as expressly provided in Section 6.2, MagneTek's
and MagneTek Belgium's rights against Teledyne under the Teledyne Agreement;
(j) any rights under any lease or otherwise in respect of any
real property heretofore used or occupied by the Division in the United
States;
(k) any shares of the capital stock of America West Airlines,
Inc. and any derivatives thereof or rights appurtenant thereto; and
(l) all other assets of Seller not expressly included in the
Assets to be sold hereunder, including but not limited to assets used by
Seller or its Affiliates in other businesses of Seller or its Affiliates and
assets used primarily in connection with Seller's corporate functions
(including but not limited to the corporate charter, taxpayer and other
identification numbers, seals, minute books and stock transfer books),
whether or not used for the benefit of the Division.
2.3 ASSUMED AND EXCLUDED LIABILITIES. On the Closing Date, Buyer
shall execute and deliver to Seller the Bill of Sale, Assignment and
Assumption Agreement pursuant
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to which Buyer shall assume and agree to pay, perform and discharge when due,
all the liabilities and obligations of Seller arising out of the business of
the Division, of any kind or nature, whether absolute, contingent, accrued or
otherwise, and whether arising before or after the Closing including, without
limitation, all liabilities (i) for Taxes assumed by Buyer under Section 2.7,
(ii) under the Assigned Contracts, (iii) for services to be provided pursuant
to the Warranty Services Agreement and (iv) all liabilities and obligations
of Buyer set forth in Article IX hereof (collectively, the "Assumed
Liabilities"); PROVIDED, HOWEVER, that the Assumed Liabilities shall in no
event include the following liabilities (the "Excluded Liabilities"):
(a) any liability, responsibility or obligation with respect
to any Seller Plan, except (x) as provided in Article IX, and (y) pursuant to
any Assigned Contract;
(b) up to $1,200,000 in potential liability for the
Teledyne-related product liability or warranty claims relating to the product
failures described in Schedule 2.3(b) hereof;
(c) any liability, responsibility or obligation arising out
of the following administrative matters, except those matters which any
employee of the Division had actual knowledge of and did not disclose to the
Seller prior to the Closing Date:
(i) Taxes for any period ending on or prior to the
Closing Date, excluding the Taxes covered by Section 2.7;
(ii) advances by, or loans, notes or other obligations
to, financial institutions (including interest incurred on advances, loans,
notes and other obligations) except any of the foregoing entered into by an
employee of the Division at any time;
(iii) Seller's failure to obtain licenses or permits, pay
fees or make appropriate disclosure, required by any Requirement of Law,
except any that could have been obtained, paid or made, respectively, by an
employee of the Division;
(iv) Seller's failure to implement or maintain any
companywide policy or program required by any Requirement of Law;
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(v) any misrepresentation or non-compliance by Seller
or any of its Affiliates with respect to matters covered by the Securities
Act of 1933, as amended, the Exchange Act, as amended, or any state
securities or "blue sky" law; and
(vi) workers' compensation or product liability claims
based upon injuries or malfunctions occurring prior to the Closing Date;
PROVIDED that written notice of such claim is delivered to Seller within the
two-year period following the Closing Date;
(d) any and all liabilities and obligations of Seller or any
of its Affiliates of any kind, character or description, whether known or
unknown, accrued, absolute, contingent or otherwise, that are (i) not
attributable to the Division or the Assets or (ii) expressly reserved as to
the Stearns contracts as set forth on Schedule 2(3)(d) hereof;
2.4 CLOSING. The closing (the "Closing") of the purchase and sale
of the Assets shall be held at the offices of Gibson, Dunn & Crutcher, 2029
Century Park East, Suite 4000, Los Angeles, California 90067, at 10:00 a.m.
on November 8, 1994, or if the conditions to Closing set forth in Article III
shall not have been satisfied or waived by such date, subject to Section
11.3, as soon as practicable after such conditions shall have been satisfied
or waived. The date on which the Closing shall occur is hereinafter referred
to as the "Closing Date." At the Closing, Buyer shall deliver to Seller (i)
by wire transfer (to a bank account designated at least two business days
prior to the Closing Date in writing by Seller) immediately available funds
in an amount equal to the sum of (a) $250,000 plus (b) an amount equal to the
tangible book value of the Division determined on the basis of the November
Balance Sheet, plus or minus an estimate, if the parties mutually agree prior
to the Closing Date with respect thereto, of any adjustment of the purchase
price under Section 2.5 (the "Closing Date Amount") and (ii) the Promissory
Note, and such other documents as are required by this Agreement.
At the Closing, MagneTek shall deliver or cause to be delivered to
Buyer (a) the Bill of Sale, Assignment and Assumption Agreement, (b) the
License Agreement, (c) the Warranty Services Agreement, (d) the
Confidentiality Agreement, (e) the documents and agreements referred to in
Section 3.1 hereof and (f) such other instruments of transfer and documents
as Buyer may reasonably request, and Buyer shall deliver to Seller (i) the
documents and agreements referred to in the preceding clauses (a) through
(d) and in Section 3.2 hereof and (ii) such other
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instruments of assumption and documents as Seller may reasonably request. In
addition, Seller shall deliver to Buyer at the Closing an affidavit in form
and substance satisfactory to Buyer, duly executed and acknowledged,
certifying that Seller is not a foreign person within the meaning of Section
1445(f)(3) of the Code, and any corresponding affidavit required for state
tax purposes.
2.5 PURCHASE PRICE ADJUSTMENT; ASSIGNMENT OF ACCOUNTS RECEIVABLE.
(a) Within 60 days after the Closing Date, MagneTek shall
prepare and deliver to Buyer a balance sheet as of the close of business on
the Closing Date comprising the Assets and the outstanding Assumed
Liabilities (the "Closing Balance Sheet"). For purposes of preparing the
Closing Balance Sheet, Buyer shall make Division Employees available to
MagneTek (without charge) and such employees shall, for the purpose of
assisting MagneTek in preparing the Closing Balance Sheet, be instructed by
Buyer to act at MagneTek's direction.
During the 30 days immediately following Buyer's receipt of
the Closing Balance Sheet, Buyer shall be entitled to review the Closing
Balance Sheet and MagneTek's working papers relating to the Closing Balance
Sheet, and MagneTek shall provide Buyer access at all reasonable times to
its personnel, properties, books and records to the extent relevant and not
comprising Assets. The Closing Balance Sheet shall become final and binding
upon the parties on the thirtieth day following delivery thereof unless
Buyer gives written notice to MagneTek of its disagreement with the Closing
Balance Sheet (a "Notice of Disagreement") prior to such date. Any Notice
of Disagreement shall specify in reasonable detail the nature of any
disagreement so asserted. If a timely Notice of Disagreement is received by
MagneTek with respect to the Closing Balance Sheet, then the Closing Balance
Sheet (as revised in accordance with clause (x) or (y) below), shall become
final and binding upon the parties on the earlier of (x) the date the
parties hereto resolve in writing any differences they have with respect to
any matter specified in a Notice of Disagreement or (y) the date any matters
properly in dispute are finally resolved in writing by the Accounting Firm
(as defined below). During the 30 days immediately following the delivery
of any Notice of Disagreement, MagneTek and Buyer shall seek in good faith
to resolve in writing any differences which they may have with respect to
any matter specified in such Notice of Disagreement. During such period,
Buyer and MagneTek shall each have access to the other party's working
papers prepared in connection with the Buyer's preparation of a
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Notice of Disagreement. At the end of such 30-day period, MagneTek and Buyer
shall submit to an independent accounting firm (the "Accounting Firm") for
review and resolution any and all matters which remain in dispute and which
were properly included in any Notice of Disagreement, and the Accounting Firm
shall reach a final, binding resolution of all matters which remain in
dispute. The Closing Balance Sheet, with such adjustments necessary to
reflect the Accounting Firm's resolution of the matters in dispute, shall
become final and binding on Buyer and MagneTek on the date the Accounting
Firm delivers its final resolution to the parties. The Accounting Firm shall
be Arthur Andersen & Company, or if such firm is unable or unwilling to act,
such other nationally recognized independent public accounting firm as shall
be agreed upon by the parties hereto in writing. The cost of any arbitration
(including the fees and expenses of the Accounting Firm) pursuant to this
Section 2.5 shall be borne 50% by Buyer and 50% by MagneTek.
(b) The Closing Date Amount shall be adjusted such that the
Purchase Price is increased, or decreased, as the case may be, to the extent
that tangible book value of the Division increases or decreases from the
amount reflected on the November Balance Sheet. The Closing Date Amount
shall be adjusted upward or downward, dollar for dollar, in respect of any
such negative or positive adjustment. Any required adjustment to the
Closing Date Amount pursuant to this Section 2.5 shall be referred to as the
"Purchase Price Adjustment."
(c) The Closing Balance Sheet shall be prepared in
accordance with GAAP, applied in a manner consistent with that followed in
the preparation of the November Balance Sheet, subject to the following
(without duplication with any estimated adjustments made to determine the
Closing Date Amount):
(i) the Closing Balance Sheet shall not
reflect any provision for Taxes (whether as an asset or
a liability);
(ii) intercompany advances shall be
eliminated;
(iii) adjustments will be made for certain
doubtful receivables, overvalued inventory and
equipment, and a warranty reserve (without any provision
pertaining to the Denver Airport or the claims referred
to in Section 2.3(b)) will be established as reflected
on the November Balance Sheet;
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(iv) the Closing Balance Sheet shall reflect
a $20,000 prepaid asset relating to certain technology
attributable to the Agreement dated as of December 18,
1992, by and among FCX Systems, Inc., certain
shareholders of FCX Systems, Inc., and MagneTek, and a
prepaid asset equal to the amounts due from an employee
in respect of expenses to be reimbursed to the Division;
and
(v) all Excluded Assets (and all related
depreciation and reserves) shall be eliminated and all
Excluded Liabilities (and related reserves) shall be
eliminated.
(d) Buyer agrees, with respect to Purchase Price
Adjustments, that following the Closing, Buyer will not take any actions
with respect to the accounting books, records, policies and procedures of
the Division on which the Closing Balance Sheet is to be based that are not
consistent with GAAP applied in the manner consistent with the past
practices of the Division.
(e) Within thirty days after the receipt by Buyer of the
Closing Balance Sheet in accordance with Section 2.5(a) hereof, Buyer shall
remit to MagneTek or MagneTek shall remit to Buyer, as the case may be, in
immediately available funds, any undisputed amounts constituting Purchase
Price Adjustments. With respect to any items that are the subject of a
Notice of Disagreement, payment shall be made in immediately available funds
within three business days after the resolution thereof pursuant to
Section 2.5(a). Each payment pursuant to this Section 2.5 shall be made
with interest on the amount of the payment at an annual rate equal to the
reference rate quoted by the San Francisco branch of Bank of America on the
Closing Date for the period from the Closing Date to the date of payment,
computed on the basis of a 360-day year and actual days elapsed.
2.6 TAX ALLOCATION. Buyer and Seller shall agree upon an allocation
of the Purchase Price plus the Assumed Liabilities (to the extent
identifiable or reasonably estimable as of the date hereof) to broad
categories constituting components of the Assets, upon delivery to Seller of
the resale certificate provided for in Section 2.7 and concurrently
therewith Buyer and Seller shall attach to this Agreement a Schedule 2.6
setting forth such allocation. Buyer and Seller shall report the purchase
and sale of the Assets in accordance with the agreed upon allocation among
such broad categories for all Tax purposes (including the filing of the
forms prescribed under Section 1060 of the
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Code and the Treasury Regulations promulgated thereunder), but such
allocation shall not constrain reporting for other purposes.
2.7 SALES AND USE TAX. Buyer and Seller shall cooperate in
preparing, executing and filing use and sales Tax returns relating to, and
Buyer and Seller shall share equally and pay when due, any and all sales,
stamp or stock transfer or use Tax due with regard to, the purchase and sale
of the Assets. Such Tax Returns shall be prepared in a manner that is
consistent with the allocation of the Purchase Price and Assumed Liabilities
contemplated by Section 2.6. Not later than seven days after the Closing
Date, Buyer shall furnish Seller with a form of resale certificate that
complies with the requirements of California and other applicable state
taxation laws.
ARTICLE III
CONDITIONS TO CLOSING
3.1 BUYER'S OBLIGATION. The obligations of Buyer to purchase and
pay for the Assets are subject to the satisfaction (or waiver by Buyer) as of
the Closing of the following conditions:
(a) The representations and warranties of MagneTek made
in this Agreement shall be true and correct in all material respects as of
the date hereof and, except as specifically contemplated by this Agreement,
on and as of the Closing, as though made on and as of the Closing Date, and
Seller shall have performed or complied in all material respects with all
obligations and covenants required by this Agreement to be performed or
complied with by Seller by the time of the Closing; and Seller shall have
delivered to Buyer certificates dated the Closing Date and signed by an
authorized officer of the Seller confirming the foregoing.
(b) No injunction or order shall have been granted by
any court or administrative agency or instrumentality of competent
jurisdiction that would restrain or prohibit any of the Transactions or that
would impose damages as a result thereof, and no action or proceeding shall
be pending before any court or administrative agency or instrumentality of
competent jurisdiction in which any Person seeks such a remedy (if in the
opinion of counsel to Buyer there exists a reasonable risk of a materially
adverse result in such pending action or proceeding).
3.2 SELLER'S OBLIGATIONS. The obligations of Seller to sell and
deliver the Assets to Buyer are subject
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to the satisfaction (or waiver by Seller) as of the Closing of the following
conditions:
(a) The representations and warranties of Buyer made in
this Agreement shall be true and correct in all material respects as of the
date hereof and on and as of the Closing, as though made on and as of the
Closing Date, and Buyer shall have performed or complied in all material
respects with all obligations and covenants required by this Agreement to be
performed or complied with by Buyer by the time of the Closing; and Buyer
shall have delivered to Seller a certificate dated the Closing Date and
signed by an authorized officer of Buyer confirming the foregoing.
(b) Buyer shall have either assumed or replaced (in
compliance with the underlying Contract) all performance bonds, letters of
credit or other surety obligations to which MagneTek is a party or as to
which it has liability as a guarantor or otherwise and which relate to the
Assets or Assumed Liabilities, except as provided in Sections 7.4 and 7.5.
(c) Buyer shall have furnished Seller with insurance
certificates reflecting compliance with the provisions of Section 7.3.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MAGNETEK
MagneTek hereby represents and warrants to Buyer as follows:
4.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS.
(a) MagneTek is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
MagneTek has all requisite corporate power and authority to enter into the
Transaction Documents and to consummate the Transactions. All corporate
acts and other proceedings required to be taken by MagneTek to authorize the
execution, delivery and performance of the Transaction Documents and the
consummation of the Transactions have been duly and properly taken. This
Agreement has been duly executed and delivered by MagneTek and constitutes
a valid and binding obligation of MagneTek, enforceable against MagneTek in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles (regardless of whether such
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enforceability is considered in a proceeding in equity or at law).
(b) The execution and delivery of this Agreement does
not and of the other Transaction Documents will not, and the consummation of
the Transactions and compliance with the terms of the Transaction Documents
will not conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
benefit under, or result in the creation of any Lien upon any of the
properties or assets of MagneTek under, any provision of (i) the Certificate
of Incorporation or By-Laws of MagneTek, (ii) subject to the matters
disclosed in Schedules 4.1(b) or 7.4, any Contract binding upon MagneTek or
(iii) any judgment, order or decree or, subject to the matters described in
clauses (A)-(D) below, any Requirement of Law applicable to MagneTek or its
property or assets, other than, in the case of clauses (ii) and (iii) above,
any such conflicts, violations, defaults, rights or Liens that, individually
or in the aggregate, would not have a Material Adverse Effect. No consent,
approval, license, permit, order or authorization of, or registration,
declaration or filing with, any Governmental Authority is required to be
obtained or made by or with respect to MagneTek in connection with the
execution and delivery of the Transaction Documents or the consummation of
the Transactions, other than (A) compliance with and filings under
Section 13(a) or 15(d), as the case may be, of the Exchange Act,
(B) compliance with and filings and notifications under applicable
Environmental Laws, (C) those that may be required solely by reason of
Buyer's participation in the Transactions and (D) those that, if not made or
obtained, individually or in the aggregate, would not have a Material
Adverse Effect.
4.2 FINANCIAL STATEMENTS. To the Knowledge of Seller, the
November Balance Sheet was prepared in accordance with GAAP consistently
applied, and fairly presents the financial condition of the Division as of
November 2, 1994 except: (a) as set forth herein; (b) for the absence of
footnotes; (c) for normal recurring adjustments; and (d) to the extent it was
prepared on a PRO FORMA basis, with allocations of certain assets and
liabilities based upon good faith estimates of management.
4.3 ASSETS OTHER THAN REAL PROPERTY INTERESTS. Seller has good
and valid title to the Assets, subject to such Liens as may exist. To the
Knowledge of Seller, Seller has not incurred any indebtedness for borrowed
money in connection with any borrowing for general corporate
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purposes, in connection with which a Lien on any of the Assets was imposed,
other than any Lien of which any Division Employee has actual knowledge.
This Section 4.3 does not relate to Intellectual Property, such Assets being
the subject of Section 4.4.
4.4 INTELLECTUAL PROPERTY. To the Knowledge of Seller, Schedule
4.4 sets forth a list of all Intellectual Property (excluding any such
Intellectual Property that is included in Excluded Assets). Except as
disclosed on Schedule 4.4, to the Knowledge of Seller, MagneTek owns or has
the right to use, without payment to any other party, the Intellectual
Property listed on such Schedule 4.4.
4.5 CONTRACTS. To the Knowledge of Seller, Schedule 4.5 sets
forth a list of each of the following types of Contracts of Seller or
MagneTek Belgium:
(a) any employment or severance agreement for a Division
Employee that has an aggregate future liability in excess of $50,000 and is
not terminable by notice of not more than 60 days for a cost of less than
$50,000 (including any contracts or agreements with certain Division
Employees that relate to the Transactions);
(b) any employee collective bargaining agreement or
other contract with any labor union covering Division Employees;
(c) any Contract other than in the ordinary course of
business pursuant to which the aggregate of payments to become due from or
to Seller is equal to or exceeds $50,000, and which is not terminable by no
more than 60 days' notice for a cost of less than $50,000; and
(d) any Contract of the size referred to in clause (c)
above as to which the consent of a party is required to effectuate the
Transactions (excluding the assignment of the respective Contract).
Except as disclosed on Schedule 4.5, each Contract listed on
Schedule 4.5 is valid, binding and in full force and effect and is
enforceable by Seller or MagneTek Belgium in accordance with its terms.
Except as disclosed in Schedule 4.5, to the Knowledge of Seller, Seller or
MagneTek Belgium has performed all material obligations required to be
performed by it to date under the Contracts and is not (with or without the
lapse of time of the giving of notice, or both) in breach or default in any
material respect thereunder and, to the Knowledge of Seller, no other party
to any of the Assigned Contracts is (with or without the lapse of time or
the giving of notice, or both) in breach or
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default in any material respect thereunder. MagneTek has previously notified
Teledyne as to the existence of the claims referred to in Section 2.3(b), a
copy of which notification is included in Schedule 2.3(b).
4.6 LITIGATION; DECREES. To the Knowledge of Seller, as of the date
of this Agreement there are no pending or threatened lawsuits or claims with
respect to which MagneTek or MagneTek Belgium has contacted in writing the
defendant or been contacted in writing by the claimant or by counsel for the
claimant by or against MagneTek relating to the Division which (a) involves
a claim by or against Seller or MagneTek Belgium of more than $50,000,
(b) seeks any injunctive relief or (c) relates to the Transactions, other
than any pending or threatened lawsuit or claim of which any Division
Employee has actual knowledge. To the Knowledge of Seller, neither MagneTek
nor MagneTek Belgium is in default under any judgment, order or decree of
any Governmental Authority applicable to the Division, except where the
default would not have a Material Adverse Effect, other than any default of
which any Division Employee has actual knowledge.
4.7 ASSETS OF THE DIVISION. Except for any Assets that may not be
transferred to Buyer pursuant to Section 2.2 or Section 8.1, the Assets and
the rights conferred by the Transaction Documents comprise all the properties
and assets used by Seller exclusively in the operation of the business of the
Division as conducted on the date hereof. EXCEPT AS EXPRESSLY PROVIDED
HEREIN, SELLER MAKES NO REPRESENTATION OR WARRANTY CONCERNING THE ASSETS
(INCLUDING THE SUBSIDIARY STOCK) OR THE DIVISION, INCLUDING AS TO THE
QUALITY, CONDITION, MERCHANTABILITY, SALABILITY, OBSOLESCENCE, WORKING ORDER
OR FITNESS FOR A PARTICULAR PURPOSE THEREOF. EXCEPT AS EXPRESSLY PROVIDED
HEREIN, THE ASSETS ARE SOLD TO BUYER "AS IS AND WHERE IS."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS.
(a) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada. Buyer
has all requisite corporate power and authority to enter into this Agreement
and to consummate the Transactions. All corporate acts and other
proceedings required to be taken by Buyer to authorize the execution,
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delivery and performance of this Agreement and the consummation of the
Transactions have been duly and properly taken. This Agreement has been
duly executed and delivered by Buyer and constitutes a valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally or by general principles (regardless of whether
such enforceability is considered in a proceeding in equity or law).
(b) Except as disclosed on Schedule 5.1(b), the
execution and delivery of this Agreement does not and of the other
Transaction Documents will not, and the consummation of the Transactions and
compliance with the terms of the Transaction Documents will not, conflict
with, or result in any violation of or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material
benefit under, or result in the creation of any Lien upon any of the
properties or assets of the Buyer under, any provision of (i) the
Certificate of Incorporation or By-Laws of Buyer, (ii) any Contract binding
upon Buyer or (iii) any judgment, order or decree or, subject to the matters
described in clauses (A)-(C) below, any Requirement of Law applicable to
Buyer or its property or assets. No material consent, approval, license,
permit order or authorization of, or registration, declaration or filing
with, any Governmental Authority is required to be obtained or made by or
with respect to Buyer or its Affiliates in connection with the execution and
delivery of the Transaction Documents or the consummation by Buyer of the
Transactions, other than (A) compliance with and filings under Section 13(a)
and 15(d), as the case may be, of the Exchange Act, (B) compliance with and
filings and notifications under applicable Environmental Laws and (C) those
that may be required solely by reason of Seller's (as opposed to any other
third party's) participation in the Transactions.
5.2 ACTIONS AND PROCEEDINGS, ETC. There are no (a) outstanding
judgments, orders, writs, injunctions or decrees of any court, governmental
agency or arbitration tribunal against Buyer or (b) actions, suits, claims or
legal, administrative or arbitration proceedings or investigations pending
or, to the knowledge of Buyer, threatened against Buyer.
5.3 AVAILABILITY OF FUNDS. Buyer has all funds, or binding
commitments as to the availability to Buyer of all funds, required to
consummate the Transactions.
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5.4 BUYER'S ACKNOWLEDGMENT. Buyer acknowledges and agrees that,
(a) other than the representations and warranties of MagneTek specifically
contained in this Agreement, there are no representations or warranties of
Seller either expressed or implied with respect to Seller, the Division, the
Assets or the Transactions and (b) it shall have a right to indemnification
from MagneTek solely as provided in Article X hereof and shall have no claim
or right to indemnification with respect to any information, documents or
materials furnished by either Seller or any of its officers, directors,
employees, agents or advisors, or otherwise available to Buyer.
5.5 EXON-FLORIO. Buyer is not a "foreign person" for purposes of
the Exon-Florio Amendment to the Defense Production Act of 1950.
5.6 NO KNOWLEDGE OF SELLER'S BREACH. Neither Buyer nor, to the
best knowledge of Buyer, any of its Affiliates, has knowledge of any breach
of any representation or warranty by MagneTek or of any other condition or
circumstance that would excuse Buyer from its timely performance of its
obligations hereunder. If any information relevant to the representations
and warranties of MagneTek under this Agreement shall come to Buyer's
attention before the Closing Date (whether through Seller or otherwise), then
for the purposes of MagneTek's liability under such representations and
warranties the effect shall be as if the representations and warranties were
so modified in this Agreement, and no claim for indemnification may be made
under Article X hereof to the extent such claim would not arise under such
modified representation or warranty.
ARTICLE VI
COVENANTS OF MAGNETEK
MagneTek covenants and agrees as follows:
6.1 ACCESS. Following the Closing, MagneTek will give Buyer and
its representatives reasonable access, during normal business hours and upon
reasonable notice, to the personnel files of MagneTek relating to Division
Employees, and to the confidential information described on Schedule 6.1;
PROVIDED, HOWEVER, that Buyer shall restrict its use of such information in
accordance with the Confidentiality Agreement.
6.2 TELEDYNE AGREEMENT. On or prior to the Closing Date, MagneTek
will notify Teledyne Industries, Inc. ("Teledyne") that it has assigned its
rights under the Teledyne Agreement as they pertain to the Division to Buyer,
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except its rights pertaining to the claims referred to in Section 2.3(b).
Buyer agrees to comply with and be bound by the provisions of the Teledyne
Agreement to which the rights so assigned relate. As between Buyer and
Seller, it is agreed to and acknowledged that to the extent the
indemnification provided by the Teledyne Agreement is subject to a deductible
and/or a maximum, the rights assigned to Buyer hereunder shall be deemed
subject only to a share of such deductible equal to $50,000, and a maximum of
$2,000,000. Buyer shall have the sole responsibility for establishing any
claim (including such deductible) vis-a-vis Teledyne, PROVIDED that MagneTek
will confirm to Teledyne the matters set forth in this Section 6.2 and
provide Teledyne with any assurances it may reasonably request in respect of
the bifurcation of indemnity contemplated hereby.
6.3 RESERVED.
6.4 RESERVED.
6.5 ACCOUNTS RECEIVABLE. Seller agrees promptly to forward to
Buyer any and all proceeds from accounts receivable of the Division that are
received by Seller to the extent they pertain to accounts receivable included
in the Assets or to products sold or services provided after the Closing
Date. If, after the Closing Date, Seller receives any payment from any
Person who at the time of such payment has outstanding accounts payable to
Seller, on the one hand ("Seller Accounts Receivable"), and to Buyer, on the
other hand ("Buyer Accounts Receivable"), and the payment (a) does not
indicate whether it is in respect of Seller Accounts Receivable or Buyer
Accounts Receivable or (b) indicates that it is in payment of both Seller
Accounts Receivable and Buyer Accounts Receivable without specifying the
portion to be allocated to each, then Seller and Buyer shall consult with one
another to determine the proper allocation of such payment; and, if they are
unable to reach agreement on the proper allocation, such payment shall be
applied so as to retire undisputed Seller Accounts Receivable and undisputed
Buyer Accounts Receivable in chronological order based upon the period of
time such accounts receivable have existed on the books of Seller or the
Buyer, as applicable.
6.6 NON-COMPETITION.
(a) Subject to the terms, conditions and exceptions of
this Section 6.6, MagneTek hereby agrees that neither MagneTek nor any
Affiliate controlled by MagneTek (a "MagneTek Affiliate"), for a period of
five years from and after the Closing Date, will engage, directly or
indirectly, whether as principal, consultant, investor or otherwise, in
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the design, development, manufacture, marketing, fabrication, test or
delivery of any of the commercial products designed and manufactured for
aircraft ground support systems described on Schedule 6.6 hereto.
Notwithstanding anything to the contrary in this Section 6.6, the acquisition
by MagneTek of (i) any Person, less than 5% of the gross revenues of which
are derived from a business involved in the production of any of the products
described on Schedule 6.6 hereto (a "Competitive Business") or (ii) no more
than 5% of any class of securities of a Person, if such securities are traded
in any public market (within or outside of the United States) or 15% of any
class of privately held securities of a Person, in either case if such Person
derives 5% or more of its gross revenues from a Competitive Business, shall
not constitute a breach of this Section 6.6.
(b) The prohibition in Section 6.6(a) shall apply to all
counties in the State of California and all similar political subdivisions
or regions in all states of the United States and all geographical areas
worldwide (each, a "Territory"). MagneTek agrees that the remedy at law for
any breach by MagneTek of this Section 6.6 will be inadequate and that Buyer
shall be entitled to injunctive relief. The provisions of Section 6.6(a)
have been negotiated by sophisticated commercial parties with equal
bargaining power and the parties agree that such provisions are reasonable
under the circumstances. The provisions set forth in Section 6.6(a) are
intended as separate covenants with respect to each of the restricted
activities and each Territory. If the provisions of Section 6.6(a) should
ever be adjudicated to exceed the time, geographic, service or product
limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum
time, geographic, service or product limitations permitted by applicable
law. If any one of such provisions is declared invalid for any reason
whatsoever, and if any one of such provisions cannot be reformed as
aforesaid, such ruling shall not affect the validity of the remainder of the
provisions. The other provisions shall remain in effect as if the
provisions had been executed without the invalid provisions. The parties
hereby declare that they intend that the remaining provisions continue to be
effective without any that have been declared invalid and not reformed as
aforesaid.
6.7 CESSATION OF MANUFACTURE. MagneTek agrees that if it does not
sell the PTS Division of MagneTek to the Carlyle Group and it ceases to
manufacture any of the products identified on Schedule 6.1 of this Agreement,
it will provide to Buyer on commercially reasonable terms all drawings, test
specifications and procedures, technical
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data, pc board drawings, wiring, diagrams, schematic diagrams, parts lists,
technical manuals and parts, specifications and other data necessary for
Buyer to manufacture or arrange for the manufacture of any such product which
Seller no longer manufactures.
ARTICLE VII
COVENANTS OF BUYER
Buyer covenants and agrees as follows:
7.1 ACCOUNTS RECEIVABLE. Buyer agrees to promptly forward or
cause to be forwarded to Seller any and all proceeds from accounts receivable
of Seller (including those comprising Excluded Assets) that are received by
Buyer or the Division after the Closing Date. If, after the Closing Date,
Buyer receives any payment from any Person who at the time of such payment
has outstanding Seller Accounts Receivable and Buyer Accounts Receivable, and
the payment (a) does not indicate whether it is in respect of Seller Accounts
Receivable or Buyers Accounts Receivable or (b) indicates that it is in
payment of both Seller Accounts Receivable and Buyer Accounts Receivable
without specifying the portion to be allocated to each, then Seller and Buyer
shall consult with one another to determine the proper allocation of such
payment; and, if they are unable to reach agreement on the proper allocation,
such payment shall be applied so as to retire undisputed Seller Accounts
Receivable and undisputed Buyer Accounts Receivable in chronological order
based upon the period of time such accounts receivable have existed on the
books of the Seller or Buyer, as applicable.
7.2 WAIVER OF BULK SALES LAW COMPLIANCE. Buyer hereby waives
compliance by Seller with the requirements, if any, of Article 6 of the
Uniform Commercial Code as in force in any state in which Assets are located
and all other similar Requirements of Law applicable to bulk sales and
transfers, to the extent applicable to the Transactions. MagneTek shall
indemnify Buyer in connection with the foregoing matters pursuant to Section
10.1(c) hereof.
7.3 INSURANCE. Buyer shall secure insurance with respect to the
Division from the Closing Date covering general liability and products
liability in amounts customary for the industry in which the Division
operates.
7.4 GUARANTY RELATING TO MAGNETEK BELGIUM. As promptly as
practicable, and in any event not later than 14 calendar days after the
Closing Date, Buyer will cause to be released all of the obligations of
Seller evidenced by or
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undertaken in accordance with the letter of MagneTek to NV Kredietbank dated
March 24, 1993, a copy of which is attached as Schedule 7.4 (the "Belgium
Obligations"), including but not limited to the guarantee obligation of
Seller of up to 28,546,473 Belgian Francs, with Seller having no liability in
respect thereof after the release. If such obligations are not released
within such 14-day period, Seller shall be credited with the sum of $1,000,
to be applied against its future obligations under the Warranty Services
Agreement, for each full or partial seven calendar day period that elapses
after the expiration of the 14-day period until the Belgium Obligations are
released.
7.5 SAUDI LETTERS OF CREDIT. Buyer shall use its best efforts
after the Closing to cause to be released those certain letters of credit
issued by Bank of America in favor of the Al Henaki Trading Corporation
relating to a Contract or Contracts of MagneTek, with Seller having no
liability in respect thereof, until such letters of credit expire or are
released. Until the release or expiration of such letters of credit, Buyer,
without cost to Seller, shall timely perform all of the obligations under the
Contract or Contracts to which the letters of credit relate and shall take
all other actions required to prevent Seller from incurring any liability in
respect of such letters of credit.
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ARTICLE VIII
MUTUAL COVENANTS
Seller and Buyer covenant and agree as follows:
8.1 PERMITS AND CONSENTS.
(a) As promptly as practicable after the date hereof,
Buyer and Seller shall make all filings with governmental bodies and other
regulatory authorities, and use all reasonable efforts to obtain all
permits, approvals, authorizations and consents of all third parties,
required to consummate the Transactions. Buyer and Seller shall furnish
promptly to each other all information that is not otherwise available to
the other party and that such party may reasonably request in connection
with any such filing. Seller and Buyer shall use reasonable efforts to
obtain such consents to the assignment of the Assigned Contracts as may be
required. As to the Assigned Contracts on Schedule 8.1(a), Buyer shall use
commercially reasonable efforts to cause the other party to such Contract to
agree to a complete novation as to Seller in respect thereof. Buyer
acknowledges that consents to the Transactions may be required from parties
to the Assigned Contracts and that Seller will not assign to Buyer at the
Closing any Assigned Contract that by its terms requires, prior to such
assignment, the consent of any other contracting party thereto unless such
consent has been obtained prior to the Closing Date.
(b) Buyer agrees that Seller shall not have any
liability whatsoever to Buyer arising out of or relating to the failure to
obtain any consents to the assignment of Contracts that may be required in
connection with the Transactions or because of the default, acceleration or
termination of any Assigned Contract as a result thereof. Buyer further
agrees that no representation or warranty of MagneTek or covenant of
MagneTek contained herein shall be breached or deemed breached, and no
condition shall be deemed not satisfied, as a result of (i) the failure to
obtain any such consent or as a result of any such acceleration or
termination or (ii) any lawsuit, action, claim, proceeding or investigation
commenced or threatened by or on behalf of any Person arising out of or
relating to the failure to obtain any such consent or any such acceleration
or termination. Seller shall cooperate with Buyer in any reasonable manner
in connection with Buyer obtaining any such consents; PROVIDED, HOWEVER,
that such cooperation shall not include any requirement that Seller commence
any litigation or offer or grant any accommodation (financial or otherwise)
to any third party. The Purchase
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Price shall not be subject to adjustment by reason of any such consents that
are not obtained.
(c) With respect to each such Assigned Contract not
assigned on the Closing Date, after the Closing Date Seller shall continue
to deal with the other contracting party(ies) to such Assigned Contract as
the prime contracting party, and Buyer and Seller shall continue to use
reasonable efforts to obtain the consent of all required parties to the
assignment or novation of such Assigned Contract. Such Assigned Contract
shall be promptly assigned by Seller to Buyer after receipt of such consent
after the Closing Date. Notwithstanding the absence of any such consent,
Buyer shall be entitled to the benefits of such Assigned Contract accruing
after the Closing Date to the extent that Seller may provide Buyer with such
benefits without violating the terms of such contract; and to the extent
such benefits are so provided, Buyer agrees to perform at its sole expense
all of the obligations of Seller to be performed under such Assigned
Contract after the Closing Date.
8.2 COOPERATION. Buyer and Seller shall cooperate with each other
and shall cause their officers, employees, agents, auditors and
representatives to cooperate with each other after the Closing to ensure the
orderly transition of the Division to Buyer and to minimize any disruption to
the businesses of Seller or the Division that might result from the
Transactions. Neither party shall be required by this Section 8.2 to take
any action that would unreasonably interfere with the conduct of its business.
8.3 PUBLICITY. Seller and Buyer agree that prior to the Closing
Date, no public release or announcement concerning the Transactions shall be
issued by any party without the prior consent of the other parties (which
consent shall not be unreasonably withheld or delayed), except as such
release or announcement may be required by any Requirement of Law, in which
case the party required to make the release or announcement shall allow the
other parties reasonable time to comment on such release or announcement in
advance of such issuance.
8.4 REASONABLE EFFORTS AND FURTHER ASSURANCES. Subject to the
terms and conditions of this Agreement (including the limitations set forth
in Section 8.1), each party will use all reasonable efforts to cause the
Closing to occur. Seller and Buyer shall, at any time and from time to time
after the Closing, upon the reasonable request of another party, execute,
acknowledge, deliver and file all such further acts, transfers, conveyances,
assignments and
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assurances as may reasonably be required to effect the transactions.
8.5 RECORDS. On the Closing Date, Seller shall deliver or cause
to be delivered to Buyer all Records included in the Assets, which are in the
possession of MagneTek to the extent not then in the possession of the
Division, except any Records relating to Excluded Liabilities (including,
without limitation, to any Tax liability of Seller or to any litigation or
claim not assumed by Buyer hereunder). After the Closing, upon reasonable
written notice and at Buyer's sole expense, Seller agrees to furnish or cause
to be furnished to Buyer and its representatives (including its auditors),
access at reasonable times and during normal business hours to such
information relating to the Division in Seller's possession as is reasonably
necessary for financial reporting and accounting matters, the preparation and
filing of any tax returns, reports or forms or the defense of any tax claim
or assessment; PROVIDED, HOWEVER, that such access does not unreasonably
disrupt the normal operations of Seller, Buyer or the Division.
8.6 ACCESS TO FORMER BUSINESS RECORDS; COOPERATION IN LITIGATION.
(a) For a period of seven years following the Closing,
Buyer will retain all Records. During such period, Buyer will afford
authorized representatives of Seller (including its auditors) access to such
Records at reasonable times and during normal business hours at the
principal business office of the Division, or at such other location or
locations at which such Records may be stored or maintained from time to
time, and will permit such representatives to make abstracts from, or copies
of, any of such Records, or to obtain temporary possession of any thereof as
may be reasonably required by Seller at Seller's sole cost and expense.
During such period, Buyer will, at Seller's expense (limited, however, to
Buyer's reasonable out-of-pocket expenditures without regard to any employee
cost or other overhead expenses), cooperate with Seller in furnishing
information, evidence, testimony, and other reasonable assistance in
connection with any action, proceeding, Tax audit, or investigation to which
Seller or any of its Affiliates is subject relating to the business of the
Division prior to the Closing. The term "Record" as used in this
Section 8.6 shall include any data processing files or other computerized
data.
(b) Buyer acknowledges the existence of the Seller's
claims against Teledyne, and further acknowledges, without limiting the
generality of this Section 8.6, that
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its obligations hereunder may include the involvement of Buyer management
and/or key employees in the assistance of MagneTek in pursuing such existing
claims.
8.7 USE OF TRADEMARKS AND TRADE NAMES. Notwithstanding anything
to the contrary in this Agreement, Buyer may continue to use the name
"MagneTek" and related trademarks, corporate names, and trade names
incorporating "MagneTek," and the stylized "MagneTek" logo (i) in displays,
signage and postings for the period after the Closing Date necessary to
permit the reasonably prompt removal of such names, and only to the extent
such displays, signage or postings exist on the Closing Date; (ii) for a
period of two years, to state the Company's former affiliation with MagneTek
(e.g., formerly a division of "MagneTek, Inc.") and (iii) to the extent any
such trade names, trademarks, service marks or logos appear on stationery,
packaging materials, supplies or inventory on hand as of the Closing Date or
on order at the time of the Closing, until such is exhausted. Buyer shall
also have the rights to the use of the "INET" name provided for and as
limited by the License Agreement.
8.8 MAGNETEK BELGIUM. As soon as practicable after the Closing,
MagneTek will cause the Conseil D'Administration of MagneTek Belgium to
resign and will cause the capital stock of MagneTek Belgium now or formerly
owned by Frank Perna, Jr. to be assigned to Buyer or its designee. Promptly
after the Closing, Buyer will cause MagneTek Belgium to be renamed so as not
to use the name "MagneTek."
ARTICLE IX
EMPLOYEE BENEFIT MATTERS
9.1 EMPLOYEE RETENTION. Buyer shall offer employment to commence
as of the Closing Date to the Division Employees set forth on Schedule 9.1.
Buyer assumes all obligations and liabilities, if any, under the Worker
Adjustment and Retraining Notification Act (the "WARN Act") and under Belgian
law as to Division Employees who are not so offered employment, and to all
Division Employees to the extent any rights in any jurisdiction arise as a
result of a disparity in salary or other terms of employment offered by Buyer
as compared to the current terms. Buyer also agrees to comply with the terms
of the WARN Act and applicable Belgian law following the Closing Date. Seller
will retain all obligations and liabilities arising from the termination of
employees of the Division after April 1, 1994 and prior to the Closing Date,
including, without limitation,
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obligations and liabilities under the WARN Act and applicable Belgian law;
PROVIDED, HOWEVER, that Seller shall not retain any obligations and
liabilities resulting from any violation of any Requirement of Law or human
resources or personnel policy of MagneTek in connection with any such
termination, and any such obligations and liabilities shall be assumed by
Buyer.
9.2 EMPLOYEE BENEFIT PLANS. Effective as of the Closing Date,
Division Employees shall cease accruing any benefits under any Seller Plan,
and MagneTek shall take, or cause to be taken, all such action, if any, as
may be necessary to effect such cessation of participation. To the extent
provided for under the terms of any Seller Plan, Division Employees will be
or remain vested therein, but only to the extent so provided for under the
terms thereof.
9.3 VACATION, HOLIDAY AND SEVERANCE PAY. As of the Closing Date,
Buyer shall assume all of Seller's and MagneTek Belgium's obligations for
vacation (including accrued vacation), holiday and severance (if any) pay to
all Division Employees.
9.4 TELEDYNE PENSION CREDITS. MagneTek will deliver to Buyer
funds in an amount equal to the unallocated portion of the pension transition
credits under the MagneTek FlexCare Plus Retirement Pension Plan (the
"MagneTek Plan") acquired from Teledyne (the "Teledyne Benefits")
attributable to the Division Employees who are former Teledyne employees as
soon as reasonably practicable after MagneTek's actuaries complete the
actuarial determinations required in connection with the calculation of such
amount; provided, however, that MagneTek shall not be required to deliver
such funds prior to the release of the Belgium Obligations in accordance with
Section 7.4. Buyer will provide the Teledyne Benefits to the Division
Employees who are former Teledyne employees in a manner that is designed to
preserve the substantive economic benefit provided to such employees with
respect to the "Transition Credits" set forth in Section C4.2 of the MagneTek
Plan, as in effect on the Closing Date. Nothing herein shall prevent Buyer
from providing all or part of the Teledyne Benefits to the former Teledyne
employees on a basis that is faster than that provided under the MagneTek
Plan, or in a manner that is not within a tax-qualified retirement plan, but
in no event shall Buyer fail to provide the former Teledyne employees, as a
group, the Teledyne Benefits.
9.5 THIRD-PARTY BENEFICIARIES. No provision of this Article IX shall
create any third-party beneficiary rights in any employee or former employee
of the Division (including any beneficiary or dependent thereof), including,
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without limitation, any right to continued employment or employment in any
particular position with Buyer for any specified period of time after the
Closing Date.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY MAGNETEK. Subject to the terms and
conditions of this Article X, MagneTek shall indemnify Buyer and each of its
officers, directors, employees and agents (each, a "Buyer Indemnified
Person") against, and hold them harmless from, any Loss suffered or incurred
by any such Buyer Indemnified Person to the extent arising from (a) if the
Closing occurs, any breach of any representation or warranty of MagneTek
contained in this Agreement which survives the Closing or in any certificate,
instrument or other document delivered pursuant hereto, (b) any breach of any
covenant of MagneTek contained in this Agreement requiring performance after
the Closing Date or (c) if the Closing occurs, (i) the existence of, or the
failure of MagneTek to pay, perform and discharge when due, any of the
Excluded Liabilities (including, without limitation, any Losses as a result
of the failure of MagneTek to comply with any bulk sales laws referred to in
Section 7.3) and (ii) the existence of liabilities of MagneTek Belgium that
comprise Excluded Liabilities, notwithstanding the structure of the
Transactions being a stock purchase as to MagneTek Belgium; PROVIDED,
HOWEVER, that MagneTek shall not have any liability under this Section 10.1
unless the aggregate of all Losses relating thereto for which MagneTek would,
but for this proviso, be liable exceeds on a cumulative basis, an amount
equal to $50,000 (and then only to the extent of any such excess); and
PROVIDED FURTHER, HOWEVER, that (x) MagneTek's aggregate liability under
clauses (a) and (b) of this Section 10.1 shall in no event exceed the lesser
of $500,000 or the aggregate, adjusted cash purchase price paid to Seller
(including payments actually made under the Promissory Note), (y) MagneTek
shall in addition be obligated to reimburse Buyer for up to $1,200,000 in
respect of the claims referred to in Section 2.3(b) and (z) MagneTek's
liability under clause (c) of this Section 10.1, on a cumulative basis with
the liability referred to in clause (x) preceding, shall in no event exceed
the aggregate, adjusted cash purchase price paid to Seller (including
payments actually made under the Promissory Note), except that the liability
of MagneTek in respect of Excluded Liabilities described in Section 2.3(c)
shall have no limit.
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10.2 INDEMNIFICATION BY BUYER. Subject to the terms and
conditions of this Article X, Buyer shall indemnify Seller and each of its
respective officers, directors, employees and agents (each, a "Seller
Indemnified Person") against, and hold them harmless from, any Loss suffered
or incurred by any such Seller Indemnified Person to the extent arising from
(a) if the Closing occurs, any breach of any representation or warranty of
Buyer contained in this Agreement which survives the Closing or in any
certificate, instrument or other document delivered pursuant hereto or in
connection herewith, (b) any breach of any covenant of Buyer contained in
this Agreement requiring performance after the Closing Date, (c) if the
Closing occurs, the existence of, or the failure of Buyer to pay, perform and
discharge when due, any of the Assumed Liabilities, (d) if the Closing
occurs, the ongoing operations of Buyer and the Assets after the Closing Date
and (e) if the Closing occurs, any breach or alleged breach by Seller of the
Belgium Obligations of Seller and any Loss incurred by Seller by reason of
its obligations in respect of the letters of credit referred to in Section
7.5; PROVIDED, HOWEVER, that Buyer shall not have any liability under clauses
(a) through (d) of this Section 10.2 unless the aggregate of all Losses
relating thereto for which Buyer would, but for this proviso, be liable
exceeds on a cumulative basis, an amount equal to $50,000 (and then only to
the extent of such excess); and PROVIDED FURTHER, HOWEVER, that Buyer's
aggregate liability under clauses (a) and (b) of this Section 10.2 shall in
no event exceed the aggregate, adjusted cash purchase price paid to Seller
(including payments actually made under the Promissory Note).
10.3 LOSSES NET OF INSURANCE, ETC.
(a) The amount of any Loss for which indemnification is
provided under this Article X shall be net of any amounts recovered or
recoverable by the Indemnified Person under insurance policies with respect
to such Loss and of any reserve in respect thereof reflected on the Closing
Balance Sheet.
(b) If the Indemnifying Person makes any payment under
this Article X in respect of any Loss, the Indemnifying Person shall be
subrogated, to the extent of such payment, to the rights of the Indemnified
Person against any insurer or third party with respect to such Losses.
(c) Notwithstanding anything to the contrary elsewhere
in this Agreement, no Indemnifying Person shall, in any event, be liable to
the other party for any
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consequential damages, including, but not limited to, loss of revenue or
income, cost of capital, or loss of business reputation or opportunity
relating to the breach or alleged breach of this Agreement. Each party
agrees that it will not seek punitive damages as to any matter under,
relating to or arising out of the Transactions.
(d) The parties hereto agree that the indemnification
provisions of this Article X are intended to provide the exclusive remedy as
to all Losses any Indemnified Person may incur arising from or relating to
the Transactions, and each party hereby waives, to the extent they may do
so, any other rights or remedies that may arise under any applicable
statute, rule or regulation.
10.4 TERMINATION OF INDEMNIFICATION. The obligations to indemnify
and hold harmless a party hereto, pursuant to Sections 10.1 and 10.2, shall
terminate on the second anniversary of the Closing Date (except as to
Sections 6.6 and 8.6, which shall survive for the respective periods set
forth therein, and as to Sections 7.4 and 7.5, which shall survive the
Closing Date indefinitely); PROVIDED, HOWEVER, that such obligations to
indemnify and hold harmless shall not terminate with respect to any item as
to which the person to be indemnified shall have, before the expiration of
the applicable period, previously made a claim by delivering a notice
(stating in reasonable detail the basis of such claim) to the Indemnifying
Person. Notwithstanding the foregoing, MagneTek's obligation to indemnify
and hold harmless a Buyer Indemnified Person from Losses resulting from the
existence of, or failure to pay, perform and discharge when due, Excluded
Liabilities described in Section 2.3(c) shall survive the Closing Date
indefinitely.
10.5 PROCEDURES RELATING TO INDEMNIFICATION (OTHER THAN FOR TAX
CLAIMS). In order for an Indemnified Person to be entitled to any
indemnification provided for under this Agreement (other than for Tax Claims)
in respect of, arising out of or involving a claim or demand made by any
Person against the Indemnified Person (a "Third-Party Claim"), such
Indemnified Person must notify the Indemnifying Person in writing, and in
reasonable detail, of the Third-Party Claim within 10 Business Days after
receipt by such Indemnified Person of written notice of the Third-Party
Claim; PROVIDED, HOWEVER, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
Indemnifying Person shall have been actually prejudiced as a result of such
failure (except that the Indemnifying Person shall not be liable for any
Losses incurred during the period in which the Indemnified Person failed to
give such notice). Thereafter, the Indemnified
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Person shall deliver to the Indemnifying Person, within five Business Days
after the Indemnified Person's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnified Person
relating to the Third-Party Claim.
If a Third-Party Claim is made against an Indemnified Person,
the Indemnifying Person will be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the Indemnifying Person and reasonably satisfactory to the
Indemnified Person. Should the Indemnifying Person so elect to assume the
defense of a Third-Party Claim, the Indemnifying Person will not be liable to
the Indemnified Person for legal fees and expenses subsequently incurred by
the Indemnified Person in connection with the defense thereof. If the
Indemnifying Person assumes such defense, the Indemnified Person shall have
the right to participate in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by the Indemnifying Person,
it being understood that the Indemnifying Person shall control such defense.
The Indemnifying Person shall be liable for the fees and expenses of counsel
employed by the Indemnified Person for any period during which the
Indemnifying Person has not assumed the defense thereof (other than during
any period in which the Indemnified Person shall have failed to give notice
of the Third Party Claim as provided above). If the Indemnifying Person
chooses to defend or prosecute any Third-Party Claim, all the parties hereto
shall cooperate in the defense or prosecution thereof. Such cooperation
shall include the retention and (upon the Indemnifying Person's request) the
provision to the Indemnifying Person of records and information which are
reasonably relevant to such Third-Party Claim, and making employees available
on a mutually convenient basis in the manner specified in Section 8.6 hereof
to provide additional information and explanation of any material provided
hereunder. Notwithstanding the foregoing, in the event a Third-Party Claim
is made against Seller as to which MagneTek is entitled to seek
indemnification under this Article X and MagneTek concludes, in its
reasonable judgment, that Buyer lacks the financial and personnel resources
to vigorously defend MagneTek from such Third-Party Claim, MagneTek may elect
to retain the defense of such Third-Party Claim and shall be entitled to be
reimbursed by Buyer for its Losses incurred in such defense, such
expenditures to be reimbursed promptly after submission of invoices therefor.
Whether or not the Indemnifying Person shall have assumed the defense of a
Third-Party Claim, the Indemnified Person shall not admit any liability with
respect to, or settle, compromise or discharge, such Third-Party Claim
without the Indemnifying
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Person's prior written consent (which consent shall not be unreasonably
withheld or delayed). All Tax Claims (as defined in Section 10.6) shall be
governed by Section 10.6.
10.6 PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS.
(a) If a claim shall be made by any Tax authority,
which, if successful, might result in an indemnity payment to any Person
hereunder (a "Tax Indemnitee"), the Tax Indemnitee shall promptly notify the
party against whom indemnification is sought (the "Tax Indemnitor") in
writing of such claim (a "Tax Claim"). If notice of a Tax Claim is not
given to the Tax Indemnitor within a sufficient period of time to allow the
Tax Indemnitor to effectively contest such Tax Claim, or in reasonable
detail to apprise the Tax Indemnitor of the nature of the Tax Claim, in each
case taking into account the facts and circumstances with respect to such
Tax Claim, the Tax Indemnitor shall not be liable to the Tax Indemnitee to
the extent that the Tax Indemnitor's ability to effectively contest such Tax
Claim is actually prejudiced as a result thereof.
(b) With respect to any Tax Claim, the Tax Indemnitor
shall control all proceedings taken in connection with such Tax Claim
(including, without limitation, selection of counsel) and, without limiting
the foregoing, may in its sole discretion pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with any
taxing authority with respect thereto and may, in its sole discretion,
either pay the Tax claimed and sue for a refund where applicable law permits
such refund suits or contest the Tax Claim in any permissible manner;
PROVIDED, HOWEVER, that the Tax Indemnitor shall not settle or compromise a
Tax Claim without giving 30 days' prior notice to the Tax Indemnitee, and
without the Tax Indemnitee's consent, which shall not be unreasonably
withheld or delayed, if such settlement or compromise would have a material
adverse effect on the Tax liabilities of the Tax Indemnitee, its Affiliates
or any member of its affiliated group. The Tax Indemnitee, and each of its
Affiliates, shall cooperate with the Tax Indemnitor in contesting any Tax
Claim, which cooperation shall include, without limitation, the retention
and (upon the Tax Indemnitor's request) the provision to Tax Indemnitor of
records and information which are reasonably relevant to such Tax Claim, and
making employees available on a mutually convenient basis to provide
additional information or explanation of any material provided hereunder or
to testify at proceedings relating to such Tax Claim.
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10.7 SURVIVAL OF REPRESENTATIONS. The representations and
warranties in this Agreement and in any other document delivered in
connection herewith shall survive the Closing solely for purposes of Sections
10.1 and 10.2 and shall terminate at the close of business on the last day of
the second year following the Closing Date.
ARTICLE XI
GENERAL PROVISIONS
11.1 ASSIGNMENT. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by Buyer other than by
operation of law, including by way of stock sale or merger, except to a buyer
of substantially all the assets of Buyer, without the prior written consent
of Seller; PROVIDED, HOWEVER, that (a) Buyer may assign its right to purchase
the Assets hereunder to an Affiliate of Buyer that can accurately make all of
Buyer's representations and warranties as of the Closing without the prior
written consent of Seller, but in no event shall any such assignment limit or
affect Buyer's obligations hereunder and (b) Buyer may assign its rights
(including its indemnification rights) hereunder or grant a security interest
in this Agreement, or both, to or for the benefit of any Person holding a
financial obligation of Buyer issued in connection with the financing of the
Transactions or in connection with any renewal, extension, modification,
amendment, refinancing, refunding or replacement of any such financial
obligation.
11.2 NO THIRD-PARTY BENEFICIARIES. Except as provided in Section
11.1 as to permitted assignees and in Article X as to Indemnified Persons,
this Agreement is for the sole benefit of the parties hereto and their
permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any Person, other than the parties hereto and such
assigns, any legal or equitable rights hereunder.
11.3 TERMINATION.
(a) Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated (except as set forth in
Section 11.3(c)) and the Transactions abandoned at any time prior to the
Closing Date:
(i) by mutual written consent of Seller
and Buyer;
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(ii) by Seller if any of the conditions
set forth in Section 3.1 shall have become
incapable of fulfillment, and shall not have been
waived by Seller;
(iii) by Buyer if any of the conditions
set forth in Section 3.1 shall have become
incapable of fulfillment, and shall not have been
waived by Buyer; or
(iv) by Seller or Buyer, if the Closing
does not occur on or prior to November 15, 1994;
PROVIDED, HOWEVER, that the party seeking
termination pursuant to clause (ii), (iii) or (iv)
is not materially in breach (after having been
given written notice and a five-Business Day cure
period, if such breach is susceptible of cure) of
any of its representations, warranties, covenants
or agreements contained in this Agreement.
(b) In the event of termination by Seller or Buyer
pursuant to this Section 11.3, written notice thereof shall forthwith be
given to the other party and the Transactions shall be terminated, without
further action by either party. If the Transactions are terminated as
provided herein:
(i) Buyer shall return all documents and
copies and other material received from Seller
relating to the Transactions, whether so obtained
before or after the execution hereof, to Seller;
(ii) all confidential information
received by Buyer with respect to the Division and
Seller and all confidential information received by
the Seller with respect to the Buyer shall be
treated in accordance with the Confidentiality
Agreement which shall remain in full force and
effect notwithstanding the termination of this
Agreement.
(c) If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 11.3, this
Agreement shall become void and of no further force and effect, except for
the provisions of (i) Section 7.1 relating to the obligation of Buyer to
keep confidential certain information and data obtained by it, (ii) Section
11.4 relating to certain expenses, (iii) Section 8.3 relating to publicity,
(iv) Section 11.5
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relating to attorney fees and expenses, (v) Section 11.11 relating to
finder's fees and broker's fees and (vi) this Section 11.3. Nothing in this
Section 11.3 shall be deemed to release Seller or Buyer from any liability
for any breach by such party of the terms and provisions of this Agreement or
to impair the right of Seller or Buyer to compel specific performance by the
other party of its obligations under this Agreement.
11.4 EXPENSES. Whether or not the transactions contemplated
hereby are consummated, and except as otherwise provided in this Agreement,
all fees, costs and expenses incurred in connection with the Transaction
Documents and the Transactions shall be paid by the party incurring such
fees, costs or expenses.
11.5 ATTORNEYS' FEES. Should any litigation be commenced
concerning this Agreement or the rights and duties of any party with respect
to it, the party prevailing shall be entitled, in addition to such other
relief as may be granted, to a reasonable sum for such party's attorney fees
and expenses determined by the court in such litigation or in a separate
action brought for that purpose.
11.6 AMENDMENTS. No amendment to this Agreement shall be
effective unless it shall be in writing and signed by both parties hereto.
11.7 NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent prepaid telex, cable or telecopy, or sent, postage prepaid, by
registered, certified or express mail, or reputable overnight courier service
and shall be deemed given when so delivered by hand, telexed, cabled or
telecopied, or if mailed, three days after mailing (one business day in the
case of express mail or overnight courier service), as follows:
(i) if to Buyer, to:
MAS Acquiring Corp.
1871 Chris Lane
Anaheim, California 92805
Attention: Robert E. Tupack
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with a copy to:
Graham & James
801 South Figueroa Street
14th Floor
Los Angeles, California 90017-5554
Attention: Hillel T. Cohn, Esq.
(ii) if to Seller, to
MagneTek, Inc.
26 Century Boulevard
P.O. Box 290159
Nashville, Tennessee 37229-0159
Attention: Samuel A. Miley, Esq.
General Counsel
with a copy to:
Gibson, Dunn & Crutcher
2029 Century Park East
Suite 4200
Los Angeles, California 90067
Attention: Jennifer Bellah, Esq.
11.8 INTERPRETATION; EXHIBITS AND SCHEDULES. The headings
contained in this Agreement, in any Exhibit or Schedule hereto and in the
table of contents to this Agreement, are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Any matter disclosed in one Schedule hereto shall be deemed incorporated by
reference into each other Schedule hereto and disclosed in each such
Schedule. All Exhibits and Schedules annexed hereto or referred to herein
are hereby incorporated in and made a part of this Agreement as if set forth
in full herein. Any capitalized terms used in any Schedule or Exhibit, but
not otherwise defined therein, shall have the meaning as defined in this
Agreement.
11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been
signed by each of the parties and delivered to the other party.
11.10 ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreement contain the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior oral
and
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written agreements and understandings relating to such subject matter.
11.11 FEES. Each party hereto hereby represents and warrants that
(a) the only brokers or finders that have acted for such party in connection
with this Agreement or the transactions contemplated hereby or that may be
entitled to any brokerage fee, finder's fee or commission in respect thereof
are set forth in Schedule 11.11 and (b) each party agrees that it will pay
all fees or commissions which may be payable to such firm(s) retained by it
or to which it may be obligated.
11.12 SEVERABILITY. If any provision of this Agreement or the
application of any such provision to any Person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not
affect any other provision hereof.
11.13 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
MAGNETEK, INC.
By:
-----------------------------
David P. Reiland
Executive Vice President
and Chief Financial Officer
MAS ACQUIRING CORP.
By:
-----------------------------
Robert E. Tupack
President
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PURCHASE AND SALE AGREEMENT
By and Among
MAGNETEK, INC.,
MAGNETEK TEMPE, INC.
MAGNETEK DEUTSCHLAND HOLDING GMBH
as Sellers,
and
PTS, INC.,
as Buyer,
for the Power Technology Systems Business, including EuroAtlas but
excluding Airport Systems, of MagneTek, Inc.
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I TERMS OF PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . 1
1.1 Purchase and Sale of Stock and Purchased Assets . . . . . . . . . . 1
1.2 Continued Use of Certain Assets . . . . . . . . . . . . . . . . . . 4
1.3 Transfer and Conveyance . . . . . . . . . . . . . . . . . . . . . . 4
1.4 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . 4
1.5 Retained Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.6 Retained Liabilities. . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Adjustments to Purchase Price . . . . . . . . . . . . . . . . . . . 7
2.3 Post-Closing Adjustments to Purchase Price. . . . . . . . . . . . . 7
2.4 Manner of Payment . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5 Allocation of Purchase Price. . . . . . . . . . . . . . . . . . . . 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS. . . . . . . . . . . . 10
3.1 Due Organization and Qualification. . . . . . . . . . . . . . . . . 10
3.2 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Government Contracts. . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 Patents, Trademarks, Etc. . . . . . . . . . . . . . . . . . . . . . 12
3.5 Governmental Authorizations; Consents.. . . . . . . . . . . . . . . 13
3.6 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . 13
3.7 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.8 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.9 Corporate Power and Authority . . . . . . . . . . . . . . . . . . . 14
3.10 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.11 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . 16
(a) Definitions. . . . . . . . . . . . . . . . . . . . . . . 16
(b) Representations. . . . . . . . . . . . . . . . . . . . . 16
3.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . 18
3.13 Availability of Documents . . . . . . . . . . . . . . . . . . . . . 18
3.14 Financial Condition and Results of Operations . . . . . . . . . . . 18
3.15 Assets of the Division. . . . . . . . . . . . . . . . . . . . . . . 19
3.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.17 Absence of Certain Changes or Events. . . . . . . . . . . . . . . . 22
3.18 Acquired Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 23
3.19 Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.20 Clearances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.21 Brokers Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.22 Warranty Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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PAGE
----
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . . 24
4.1 Due Organization and Qualification. . . . . . . . . . . . . . . . . 24
4.2 Corporate Power and Authority . . . . . . . . . . . . . . . . . . . 24
4.3 Governmental Authorizations; Consents . . . . . . . . . . . . . . . 25
4.4 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.5 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . 26
4.6 Buyer's Acknowledgment. . . . . . . . . . . . . . . . . . . . . . . 26
4.7 Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.8 HSR Act Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V COVENANTS OF SELLERS . . . . . . . . . . . . . . . . . . . . . . 26
5.1 Approvals of Third Parties. . . . . . . . . . . . . . . . . . . . . 26
5.2 Access to Books and Records . . . . . . . . . . . . . . . . . . . . 27
5.3 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . 27
5.4 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . 28
5.5 Tax Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.6 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.7 Supply Arrangements . . . . . . . . . . . . . . . . . . . . . . . . 30
5.8 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) No Solicitation. . . . . . . . . . . . . . . . . . . . . 30
(b) Notification . . . . . . . . . . . . . . . . . . . . . . 30
5.9 Access to Information . . . . . . . . . . . . . . . . . . . . . . . 30
5.10 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . 31
5.11 Payment of Taxes and Fees . . . . . . . . . . . . . . . . . . . . . 31
5.12 Closure/Remediation of Leer Paint Facility. . . . . . . . . . . . . 31
ARTICLE VI COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . 31
6.1 Approvals of Third Parties. . . . . . . . . . . . . . . . . . . . . 32
6.2 Access to Books and Records . . . . . . . . . . . . . . . . . . . . 32
6.3 Employee Benefit Matters. . . . . . . . . . . . . . . . . . . . . . 32
(a) Employee Retention . . . . . . . . . . . . . . . . . . . 32
(b) Employee Benefit Plans . . . . . . . . . . . . . . . . . 33
(c) Vacation, Holiday, Sick and Severance Pay. . . . . . . . 33
(d) Teledyne Pension Credits . . . . . . . . . . . . . . . . 33
(e) Third-Party Beneficiaries. . . . . . . . . . . . . . . . 34
6.4 Letters of Credit, Etc. . . . . . . . . . . . . . . . . . . . . . . 34
6.5 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . 34
6.6 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII MUTUAL COVENANTS OF SELLERS AND BUYER. . . . . . . . . . . . . . 36
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.2 Assignment of Contracts and Rights. . . . . . . . . . . . . . . . . 36
7.3 Use of Trademark and Trade Names. . . . . . . . . . . . . . . . . . 37
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PAGE
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7.4 Notification of Certain Matters . . . . . . . . . . . . . . . . . . 37
7.5 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 38
7.6 Profits of German Entities. . . . . . . . . . . . . . . . . . . . . 38
7.7 German Share Transfer Matters . . . . . . . . . . . . . . . . . . . 38
7.8 Agreements Pertaining to Retained German Pension Liability. . . . . 38
ARTICLE VIII CLOSING; CONDITIONS PRECEDENT; RISK OF LOSS. . . . . . . . . . 39
8.1 Date and Place of Closing . . . . . . . . . . . . . . . . . . . . . 39
8.2 Sellers' Performance. . . . . . . . . . . . . . . . . . . . . . . . 39
(a) Conveyances. . . . . . . . . . . . . . . . . . . . . . . 39
(b) Records. . . . . . . . . . . . . . . . . . . . . . . . . 39
(c) Opinions of Sellers' Counsel . . . . . . . . . . . . . . 39
(d) Consents . . . . . . . . . . . . . . . . . . . . . . . . 39
(e) Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 39
(f) Notice to German Counsel . . . . . . . . . . . . . . . . 40
(g) Charter Documents. . . . . . . . . . . . . . . . . . . . 40
(h) Releases of Liens. . . . . . . . . . . . . . . . . . . . 40
8.3 Buyer's Performance . . . . . . . . . . . . . . . . . . . . . . . . 40
(a) Purchase Price . . . . . . . . . . . . . . . . . . . . . 40
(b) Assignment and Assumption Agreement. . . . . . . . . . . 40
(c) Opinion of Counsel to Buyer. . . . . . . . . . . . . . . 40
(d) Release of Letters of Credit, Etc. . . . . . . . . . . . 40
(e) Consents . . . . . . . . . . . . . . . . . . . . . . . . 40
8.4 Other Instruments and Actions . . . . . . . . . . . . . . . . . . . 41
(a) Further Action by Sellers. . . . . . . . . . . . . . . . 41
(b) Further Action by Buyer. . . . . . . . . . . . . . . . . 41
8.5 Conditions To Sellers' Obligations. . . . . . . . . . . . . . . . . 41
(a) Representations, Warranties and Covenants. . . . . . . . 41
(b) No Proceedings, Litigation or Laws . . . . . . . . . . . 41
(c) Certificates . . . . . . . . . . . . . . . . . . . . . . 41
(d) Corporate Documents. . . . . . . . . . . . . . . . . . . 41
(e) Consents . . . . . . . . . . . . . . . . . . . . . . . . 41
(f) Other Agreements . . . . . . . . . . . . . . . . . . . . 41
(g) Officers Certificates. . . . . . . . . . . . . . . . . . 42
8.6 Conditions To Buyer's Obligations . . . . . . . . . . . . . . . . . 42
(a) Representations, Warranties and Covenants. . . . . . . . 42
(b) Consents; Assignment . . . . . . . . . . . . . . . . . . 42
(c) No Proceedings or Litigation . . . . . . . . . . . . . . 42
(d) Certificates . . . . . . . . . . . . . . . . . . . . . . 42
(e) Corporate Documents. . . . . . . . . . . . . . . . . . . 42
(f) Other Agreements . . . . . . . . . . . . . . . . . . . . 42
(g) German Federal Cartel Office Approval. . . . . . . . . . 43
8.7 Risk of Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
iii
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PAGE
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ARTICLE IX SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . 43
9.1 Expenses and Losses . . . . . . . . . . . . . . . . . . . . . . . . 43
9.2 Basket for Indemnification. . . . . . . . . . . . . . . . . . . . . 43
9.3 Indemnification by Sellers. . . . . . . . . . . . . . . . . . . . . 43
9.4 Indemnification by Buyer. . . . . . . . . . . . . . . . . . . . . . 48
9.5 Notice of Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.6 Defense of Claims . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.7 Indemnification Relating to Certain Product-Related Matters . . . . 51
9.8 Losses Net of Insurance, Taxes. . . . . . . . . . . . . . . . . . . 51
ARTICLE X MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(a) Termination. . . . . . . . . . . . . . . . . . . . . . . 52
(b) In the Event of Termination. . . . . . . . . . . . . . . 52
10.2 Expenses and Finders' Fees. . . . . . . . . . . . . . . . . . . . . 53
10.3 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.4 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . 53
10.5 Identical Counterparts. . . . . . . . . . . . . . . . . . . . . . . 53
10.6 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.7 Use of Certain Terms. . . . . . . . . . . . . . . . . . . . . . . . 53
10.8 Modification And Waiver . . . . . . . . . . . . . . . . . . . . . . 53
10.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.11 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . 55
10.12 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . 64
10.13 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE XI MEDIATION AND ARBITRATION. . . . . . . . . . . . . . . . . . . . 64
11.1 Negotiation and Mediation . . . . . . . . . . . . . . . . . . . . . 64
11.2 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.3 Binding Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 65
11.4 Selection of Arbitrator . . . . . . . . . . . . . . . . . . . . . . 65
11.5 Arbitration Hearing . . . . . . . . . . . . . . . . . . . . . . . . 65
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered
into as of the 18th day of November, 1994, by and between MAGNETEK, INC., a
Delaware corporation ("MagneTek"), MAGNETEK TEMPE, INC., an Arizona corporation
("Tempe"), and MAGNETEK DEUTSCHLAND HOLDING GMBH, a German corporation
("Deutschland") (each individually, a "Seller," and collectively, the
"Sellers"), and PTS, INC., a Delaware corporation ("Buyer").
WHEREAS, MagneTek, Tempe, the Company (as defined below), and the
German Entities (as defined below) have heretofore collectively and individually
engaged in the business of designing, developing and manufacturing power
generation and distribution systems, magnetic coils, transformers, power line
conditioners, inverters, converters and other products, and providing
engineering services with respect to such products, through MagneTek's Power
Technology Systems group, all generally described on Schedule 1 hereto (the
"Division") (hereinafter the above-referenced business of the Division is
referred to as the "Business");
WHEREAS, MagneTek owns all of the stock of the Company and Deutschland
owns all of the stock of the German Entities;
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to buy from
Sellers, the Division, such sale to be effected by the conveyance to Buyer of
(i) all of the stock of (x) MagneTek Power Technology Systems, Inc., a
California corporation (the "Company"), and (y) MagneTek EuroAtlas GmbH and
MagneTek JovyAtlas GmbH, each a German company (collectively, the "German
Entities") (such stock of the Company and the German Entities is hereinafter
collectively referred to as the "Stock"), and (ii) substantially all of the
assets, subject to certain liabilities, of the Division that are held by Persons
other than the Acquired Subsidiaries (as defined below); and
WHEREAS, certain capitalized terms used herein are defined in Article X
hereof.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements and upon the terms and subject to the
conditions hereinafter set forth, the parties hereby agree as follows:
ARTICLE I
TERMS OF PURCHASE AND SALE
1.1 PURCHASE AND SALE OF STOCK AND PURCHASED ASSETS. With the
understanding that Buyer may utilize one or more subsidiaries or affiliated
Persons controlled by Buyer to acquire the Purchased Assets and the Stock,
Sellers will sell, convey, transfer, assign and deliver to Buyer, and Buyer will
acquire and accept from Sellers, at the Closing
<PAGE>
(as defined in Section 8.1), all right, title and interest of Sellers in and to
the Purchased Assets and the Stock. The "Purchased Assets" shall mean all of
the Division Assets other than the Stock and the Division Assets owned by the
Acquired Subsidiaries. The "Division Assets" shall mean all rights, properties
and assets Used in the operations of the Division (excluding the Retained
Assets), including, without limitation, the following rights, properties and
assets (in each case, Used in the operations of the Division), as they shall
exist on the Closing Date, subject to the limitations set forth below with
respect to each described category of assets, free and clear of any and all
Encumbrances other than Permitted Encumbrances:
(a) all of the real property owned by Sellers or the Acquired
Subsidiaries described on Schedule 1.1A, including, without limitation,
buildings, improvements, rights-of-way, easements, rights, privileges and
appurtenances thereto or located thereon;
(b) all tangible assets and properties used in the operations of
the Division, wherever located and whether or not described or referred to
herein, including, without limitation, all equipment, machinery, tools,
vehicles, furniture, construction in progress (if any), replacement and spare
parts, operating supplies and other similar personal property used in connection
with such assets and properties, including those assets and properties described
on Schedule 1.1B(i), and all additions thereto prior to the Closing Date, except
to the extent of Inventory sold or consumed prior to the Closing Date in the
ordinary course of business (collectively, "Personal Property"); PROVIDED,
HOWEVER, that Personal Property will not include any interest of the U.S.
Government as identified on Schedule 1.1B(ii);
(c) all inventories of raw materials, work in process, finished
goods, supplies, fuel and other inventoried items that are (i) owned by Sellers
or the Acquired Subsidiaries and (ii) held for sale or used for consumption by
the Division, subject to any interest of the U.S. Government described on
Schedule 1.1B(ii) (collectively, "Inventory");
(d) the Contracts, bids, quotations and proposals of each
Seller and Acquired Subsidiary as of the Closing Date related to the Division,
including, without limitation, all of the Contracts, identified on Schedule 3.7
("Assigned Contracts"), but excluding those identified as "Non-Assigned
Contracts" on Schedule 1.1D (the "Non-Assigned Contracts");
(e) all intangible properties and rights wherever located and
whether or not described or referred to herein, including, without limitation,
all United States and foreign patents and patent applications, trade names,
trademark and service mark registrations and applications or registered trade
dress rights, common law trademarks and copyright registrations and applications
owned or used by Sellers or the Acquired Subsidiaries in the operations of the
Division (except for the names "MagneTek," "Energy Engineered" and the "Power M"
design, or any derivation thereof, subject to the limited rights granted in
Section 7.3) or which Sellers or any of the Acquired Subsidiaries is licensed
2
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to use relating to the Business or under which such entities possess any rights
under any Contract and all other intellectual property and rights, computer
applications and operating programs and proprietary information, know-how, trade
secrets, technical information and data, maps, computer discs and tapes, plans,
diagrams, blueprints and schematics relating to the operations of the Division,
including without limitation those described on Schedule 3.4 (collectively,
"Transferred Intellectual Property");
(f) all transferable (with or without consent) licenses,
permits, franchises, certificates and authorizations relating to the Division,
including those described on Schedule 1.1F;
(g) all accounts receivable, promissory notes, contract rights,
and similar rights to receive money of Sellers or the Acquired Subsidiaries
relating to the Division including, without limitation, those identified on
Schedule 1.1G;
(h) the Stock;
(i) all of Sellers' and the Acquired Subsidiaries' books and
records relating to or used in connection with the Division, including copies of
the Assigned Contracts and personnel records, and all records and supporting
documents required by applicable sales Tax statutes and regulations relating to
sales Taxes required to be collected and paid over by the Division and relating
to all exempt transactions of the Division for all periods open under applicable
statutes of limitations as of the Closing Date;
(j) all leasehold interests, leasehold improvements and rights
in and to personal property leases used in the operations of the Division
including, without limitation, those described on Schedule 1.1J;
(k) all rights against third parties relating to the Division,
whether pursuant to Contracts or otherwise, except to the extent any rights
against third parties relate exclusively to Retained Assets;
(l) all transferable warranties or similar rights of Sellers or
the Acquired Subsidiaries against manufacturers, suppliers or providers that
relate to the Division Assets;
(m) that certain trade show booth utilized by the Division;
(n) the goodwill associated with the Division, the Business and
the Division Assets; and
(o) any other asset reflected on the Adjusted July Balance Sheet
or the Final Closing Balance Sheet, except for current assets (including
Inventory) that are consumed or disposed of in the ordinary course of business
prior to the Closing Date.
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For purposes of the definition of Division Assets and the provisions of
this Section 1.1, the term "Used in the operations of the Division" as to any
asset means that (i) it is currently, or has been within the two years preceding
the Closing, used in connection with the business of the Division, and (ii) such
use is not merely incidental or isolated use of an asset principally used by the
non-Division operations of Sellers.
1.2 CONTINUED USE OF CERTAIN ASSETS. On or prior to Closing,
Sellers shall grant Buyer a royalty-free, perpetual, worldwide license to the
"Motogard" trademark, Registration No. 841,961, evidenced by a License Agreement
in form and substance mutually acceptable to Sellers and Buyer. Such license
shall be exclusive, except to the extent of rights to use the tradename
"Motogard" granted to Michigan Acquisition Corporation pursuant to that certain
Asset Purchase Agreement dated as of June 17, 1994, by and between MagneTek
Controls, Inc. and Controls Acquisition Corporation. On or prior to Closing,
Buyer shall grant Sellers a non-exclusive, royalty-free, perpetual, worldwide
license under the first two patents set forth on Schedule 3.4 (which patents are
being transferred to Buyer hereunder) to the extent Sellers' uses do not violate
the noncompetition agreement set forth in Section 5.3, such license to be
evidenced by a License Agreement in form and substance mutually acceptable to
Sellers and Buyer.
1.3 TRANSFER AND CONVEYANCE. The Stock and the Purchased Assets
will be conveyed to Buyer in accordance with Article VIII.
1.4 ASSUMPTION OF LIABILITIES. On the terms and subject to the
conditions of this Agreement, Buyer agrees to assume, effective as of the
Closing, and thereafter to pay, perform or discharge the Assumed Liabilities.
The "Assumed Liabilities" shall mean the Division Liabilities other than those
that constitute Liabilities of an Acquired Subsidiary (which Division
Liabilities will be assumed by operation of law insofar as the Acquired
Subsidiary's stock is purchased). The term "Division Liabilities" means all
Liabilities of Sellers or the Subsidiaries arising out of the operations of the
Division, whether arising before or after the Closing, other than Retained
Liabilities, and includes:
(a) Liabilities under the Assigned Contracts and the Transferred
Intellectual Property;
(b) accrued and unpaid payables of the Division, as set forth on
the Final Closing Balance Sheet, to the extent not paid prior to Closing;
(c) any obligation to repair or service any products of the
Division;
(d) all Liabilities for which Buyer has expressly assumed
responsibility pursuant to this Agreement, including Liabilities of Buyer under,
and relating to, Sections 5.6 and 6.3 hereof; and
(e) accrued and unpaid pension Liabilities of the German
Entities (the "Assumed German Pension Liabilities") other than the pension
liabilities (in the
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approximate amount of DM 1.4 million) owing to the former owner of EuroAtlas,
which will be a Retained Liability (the "Retained German Pension Liability").
1.5 RETAINED ASSETS. Notwithstanding anything herein to the
contrary, the following assets are not included in the Division Assets and shall
be retained by Sellers (the "Retained Assets"):
(a) all "cash and cash equivalents" as defined pursuant to the
accounting classifications used in the preparation of the Adjusted July Balance
Sheet and the Final Closing Balance Sheet (including, without limitation, cash
in checking accounts, bank accounts, certificates of deposit, lockboxes, time
deposits and securities, and any liability to cover "negative cash balances");
PROVIDED, HOWEVER, that an adjustment to the Purchase Price will be made for any
cash and cash equivalents generated by the Division subsequent to October 31,
1994, as set forth in Section 2.3(b);
(b) rights to or claims for refunds or rebates of Taxes to which
any Seller is entitled under Section 9.3(c) or Section 6.6(b);
(c) claims or rights against third parties and any rights of
indemnification, contribution or reimbursement to the extent they relate
exclusively to the Retained Assets or the Retained Liabilities;
(d) all insurance policies and rights thereunder, including, but
not limited to, rights to any cancellation value as of the Closing Date;
(e) proprietary or confidential business or technical
information, records and policies that relate to Sellers or any of their
Affiliates and are not used in the operations of the Division;
(f) subject to the limited rights granted in Section 7.3, all
"MagneTek" marks, including any and all trademarks or service marks, trade
names, slogans or other like property relating to or including the name
"MagneTek," the mark MagneTek or any derivative thereof and the MagneTek logo or
any derivative thereof, and the name "Energy Engineered," the "Power M" design,
and any derivative thereof;
(g) all Records relating to pending lawsuits that constitute
Retained Liabilities;
(h) all rights of Sellers with respect to Non-Assigned
Contracts;
(i) all rights of Sellers under this Agreement and the
agreements and instruments delivered to Sellers by Buyer pursuant to this
Agreement;
(j) certain inventory valued at approximately $274,534 relating
to the Automatic Test Equipment business of Sellers;
5
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(k) lockboxes and lockbox accounts;
(l) all assets of Sellers used primarily in connection with
Sellers' corporate functions (including but not limited to their respective
corporate charters, taxpayer and other identification numbers, seals, minute
books and stock transfer books);
(m) all amounts payable to the Division by Sellers or any of
their Affiliates;
(n) all assets under all Employee Plans and ERISA Affiliate
Plans; and
(o) the assets set forth on Schedule 1.5O.
1.6 RETAINED LIABILITIES. The term "Retained Liabilities"
means:
(a) all Taxes for which Buyer is indemnified pursuant to
Section 9.3(c);
(b) all Financing Obligations;
(c) all obligations under the Non-Assigned Contracts;
(d) all Liabilities of Sellers or the Subsidiaries under or
arising in connection with any Employee Plan or ERISA Affiliate Plan (whether
relating to periods before or after the Closing Date), other than Liabilities
for benefits accrued on the Final Closing Balance Sheet or otherwise expressly
assumed hereunder;
(e) any and all Liabilities of any Seller or Affiliate of any
Seller of any kind, character or description, that are not attributable to the
Division or the Division Assets, including, without limitation, all Controlled
Group Liabilities;
(f) all Liabilities arising from the Retained Assets;
(g) all Liabilities for fees and expenses (including Taxes
referred to in Section 5.11) incurred by or on behalf of any of Sellers or the
Subsidiaries or any of their Affiliates in connection with the Transaction
Documents and the Transactions, except to the extent that Buyer has specifically
assumed or agreed to assume responsibility for such fees and expenses in any
Transaction Document;
(h) all Liabilities owing to any of Sellers or any of their
Affiliates;
(i) all other Liabilities for which Sellers have expressly
assumed responsibility pursuant to this Agreement;
6
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(j) all Liabilities currently owing to any Person from whom
Sellers acquired any of the businesses comprising the Division, and any related
bank guarantee, including without limitation the Retained German Pension
Liability and the related bank guarantee of Dresdner Bank (subject to
Section 7.8 hereof);
(k) all Liabilities relating to any Pre-Closing Environmental
Matter; or
(l) all Pending or Threatened Litigation.
ARTICLE II
PURCHASE PRICE
2.1 CONSIDERATION. The purchase price for the Stock and the
Purchased Assets and the amount paid for the covenant not to compete described
in Section 5.3 will consist in the aggregate of $33,000,000 in cash, subject to
adjustment as provided in Sections 2.2 and 2.3 (the "Purchase Price").
2.2 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price of
$33,000,000 is based on the unaudited combined balance sheet of the Division,
including only Division Assets and Division Liabilities, and excluding the
Retained Assets and the Retained Liabilities, as of July 31, 1994 (the "Adjusted
July Balance Sheet"), a copy of which is set forth at Schedule 2.2, and will be
subject to the adjustments to be made pursuant to Section 2.3.
2.3 POST-CLOSING ADJUSTMENTS TO PURCHASE PRICE.
(a) Within thirty (30) days after the Closing Date, Sellers
shall prepare and deliver to Buyer a combined, unaudited balance sheet of the
Division as of the close of business on October 31, 1994, including only the
Division Assets and the Division Liabilities and excluding the Retained Assets
and the Retained Liabilities (the "Final Closing Balance Sheet"). For purposes
of preparing the Final Closing Balance Sheet, Buyer shall make Division
Employees available to Sellers (without charge) and such employees shall
cooperate in all reasonable respects with Sellers in preparing the Final Closing
Balance Sheet. The Final Closing Balance Sheet shall be prepared in accordance
with generally accepted accounting principles consistent with those used in
preparation of the Adjusted July Balance Sheet (except as set forth below with
respect to the Assumed German Pension Liabilities) and shall fairly present in
all material respects the Division Assets and Division Liabilities as of
October 31, 1994. In preparing the Final Closing Balance Sheet, all known
accounting entries (including all known liabilities and accruals) will be taken
into account, regardless of amount, and all identified errors and omissions will
be corrected and adjustments made. The Final Closing Balance Sheet will include
as a liability the amount of the Assumed German Pension Liabilities (the parties
acknowledging, however, that there was no such accrual on the Adjusted July
Balance Sheet). The Purchase Price shall (as applicable) (1) be increased in
the amount by which Net Worth as set forth on the Final
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Closing Balance Sheet (as finally determined in accordance with Section 2.3(c))
exceeds $32,649,338, or (2) decreased in the amount by which $32,649,338 exceeds
Net Worth as set forth on the Final Closing Balance Sheet (as finally determined
in accordance with Section 2.3(c)), such increase or decrease being referred to
herein as the "Balance Sheet Adjustment." For purposes of the foregoing, "Net
Worth" shall mean total assets minus total liabilities (with such adjustments as
are consistent with the methodology used in preparing the Adjusted July Balance
Sheet except as set forth above with respect to the Assumed German Pension
Liability).
(b) Concurrent with delivery of the Final Closing Balance Sheet,
Sellers shall deliver to Buyer a schedule (the "Cash Schedule") detailing
(i) all cash generated by the Division during the period (the "Adjustment
Period") from and including November 1, 1994 through and including the Closing
Date, including all uncashed checks received by the Acquired Subsidiaries or
Sellers (in connection with the Division) during the Adjustment Period
("Generated Cash") and (ii) all cash used by the Division during the Adjustment
Period, including all uncashed checks issued by the Acquired Subsidiaries or
Sellers (in connection with the Division) during the Adjustment Period, but
excluding any financing expenses and amounts (such as management fees and
corporate allocations) paid by the Division to any Seller or any Affiliate of
any Seller other than in direct payment for goods or services rendered
("Expended Cash"). In the event that the Cash Schedule (as finally determined
in accordance with Section 2.3(c)) shows an excess of Expended Cash over
Generated Cash, then the Purchase Price shall be increased in an amount equal to
such excess; and if the Cash Schedule shows an excess of Generated Cash over
Expended Cash, the Purchase Price shall be decreased by an amount equal to such
excess (such increase or decrease referred to herein as the "Interim Cash
Adjustment").
(c) Buyer shall be entitled to review the Final Closing Balance
Sheet and the Cash Schedule and the working papers of Sellers relating to the
Final Closing Balance Sheet and the Cash Schedule, and to have the same audited
and/or reviewed by an accounting firm of Buyer's choice ("Buyer's Accountants").
Sellers shall provide Buyer and Buyer's Accountants access at all reasonable
times to its personnel, properties, books and records to the extent relevant to
such audit and/or review. The Final Closing Balance Sheet and the Cash Schedule
shall become final and binding upon the parties on (i) the ninetieth day
following delivery thereof if Buyer elects to have the same reviewed and/or
audited by Buyer's Accountants, or (ii) the thirtieth day following delivery
thereof if Buyer does not so elect, and in either case unless Buyer gives
written notice to MagneTek of its disagreement with any aspect of the Final
Closing Balance Sheet or the Cash Schedule (a "Notice of Disagreement") prior to
such date. Any Notice of Disagreement shall specify in reasonable detail the
nature of any disagreement so asserted. If a timely Notice of Disagreement is
received by MagneTek with respect to the Final Closing Balance Sheet or the Cash
Schedule, then the Final Closing Balance Sheet or the Cash Schedule (as revised
in accordance with clause (x) or (y) below), shall become final and binding upon
the parties on the earlier of (x) the date the parties hereto resolve in writing
any differences they have with respect to any matter specified in a Notice of
Disagreement or (y) the date any matters properly in dispute are finally
resolved in writing by the Accounting Firm. During the thirty (30) days
immediately following the delivery of any Notice of Disagreement, Sellers and
Buyer shall
8
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seek in good faith to resolve in writing any differences which they may have
with respect to any matter specified in such Notice of Disagreement. During
such period, Sellers and Buyer shall each have access to the other party's
working papers prepared in connection with the other party's preparation or
review of the Final Closing Balance Sheet or the Cash Schedule. At the end of
such 30-day period, Sellers and Buyer shall submit to an independent Big Six
accounting firm mutually acceptable to them (other than Buyer's Accountants or
any other accounting firm that provides significant services to any Seller or
Buyer) (the "Accounting Firm") for review and resolution any and all matters
which remain in dispute, and which were properly included in any Notice of
Disagreement, and the Accounting Firm shall reach a final, binding resolution of
all matters which remain in dispute. The Final Closing Balance Sheet and the
Cash Schedule, with such adjustments as are necessary to reflect the Accounting
Firm's resolution of the matters in dispute, shall become final and binding on
Buyer and Sellers on the date the Accounting Firm delivers its final resolution
to the parties. The fees and expenses of the Accounting Firm in connection with
the procedures contemplated pursuant to this Section 2.3 shall be borne 50% by
Buyer and 50% by Sellers.
(d) Based on the Final Closing Balance Sheet and the Cash
Schedule as determined under Subsections (a), (b) and (c) above, the Final
Adjustment Factor (as defined below) will be calculated as provided herein. In
the event that a timely Notice of Disagreement has been given, the Final
Adjustment Factor shall be calculated (x) by the parties pursuant to the
resolution in writing of any differences between them, or (y) by the Accounting
Firm, in writing, as part of its final resolution of disputes. In the event
that no Notice of Disagreement has been given, the Final Adjustment Factor will
be calculated by Sellers and delivered to Buyer within three (3) Business Days
following the date on which the Final Closing Balance Sheet and the Cash
Schedule become final and binding. The "Final Adjustment Factor" shall be
(i) the increase (expressed as a positive number) or decrease (expressed as a
negative number) in Purchase Price pursuant to the Balance Sheet Adjustment,
PLUS (ii) the increase (expressed as a positive number) or decrease (expressed
as a negative number) in Purchase Price pursuant to the Interim Cash Adjustment.
In the event the Final Adjustment Factor is a positive number, then Buyer shall
pay to Sellers (as additional Purchase Price) an amount equal to the Final
Adjustment Factor plus an additional amount equal to interest thereon calculated
at the Applicable Rate for the period from (and including) the Closing Date to
(but not including) the date such payment is made (the "Interest Period"); and
in the event the Final Adjustment Factor is a negative number, then Sellers
shall pay to Buyer (as a refund of Purchase Price) an amount equal to the Final
Adjustment Factor (expressed as if a positive number) plus an additional amount
equal to interest thereon calculated at the Applicable Rate for the Interest
Period. Within three (3) Business Days following determination of the Final
Adjustment Factor, such payment shall be made in cash, via wire transfer to an
account designated at least 48 hours in advance by the party or parties to
receive such payment, by Buyer or Sellers, as the case may be, to the other
party or parties.
(e) Notwithstanding the foregoing provisions of this section
2.3, no adjustment to the Purchase Price pursuant to this Section 2.3 shall be
made unless such adjustment would exceed $100,000, and if such adjustment would
exceed $100,000, then the full amount of such adjustment shall be made.
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2.4 MANNER OF PAYMENT. On the Closing Date, Buyer will pay
Sellers $33,000,000 by wire transfer of immediately available funds to the
account or accounts designated in advance by Sellers.
2.5 ALLOCATION OF PURCHASE PRICE. The Purchase Price plus the
Assumed Liabilities which give rise to basis for income tax purposes (the
"Aggregate Purchase Price") will be allocated among the Stock, the Purchased
Assets and the covenant not to compete described in Section 5.3. Buyer and
Sellers further agree that the aggregate fair market value of the foregoing
assets will be appraised at Buyer's expense by an appraisal firm of its choice
within 120 days after the Closing Date. Buyer shall thereafter promptly prepare
an IRS Form 8594 reflecting the allocation of the Aggregate Purchase Price among
the Stock, the Purchased Assets and the covenant not to compete (as adjusted
under Section 2.3) and such other information as required by the form, and shall
forward it to Sellers for their approval, which approval will not be withheld
unless the proposed contents of the form are, in the good faith determination of
the Seller, unreasonable. Except to the extent that Sellers determine in good
faith that such allocation is unreasonable, each of Buyer and Sellers shall file
IRS Form 8594 in a manner consistent with such allocation. Buyer and Sellers
shall each deliver to the other a copy of the IRS Form 8594 as filed with their
respective federal income tax return within thirty (30) days of the filing of
such return.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller hereby makes the following representations and warranties
to Buyer:
3.1 DUE ORGANIZATION AND QUALIFICATION. Each Seller and
Acquired Subsidiary is a corporation or similar organization under foreign law,
duly organized, validly existing and (with respect to United States entities) in
good standing under the laws of the jurisdiction of its formation, and has all
requisite corporate (or comparable power under foreign law) power and authority
to own or lease such of the Division Assets as it owns or leases and to carry on
the Business as it is presently being operated by such Seller or Acquired
Subsidiary, as the case may be, and in the place where such Division Assets are
respectively owned or leased by such Seller or Acquired Subsidiary and the
Business is conducted by such Seller or Acquired Subsidiary, as the case may be.
3.2 TITLE. Each Seller has, and upon conveyance of the Stock
and the Purchased Assets to Buyer by each Seller at the Closing in exchange for
the Purchase Price, will convey to Buyer its interests in the leased properties
leased by such Seller as described on the instruments of lease described on
Schedule 1.1J and good title to the Stock and all of the Purchased Assets,
whether real, personal or mixed, as are owned by such Seller, free and clear of
any and all Encumbrances other than Permitted Encumbrances and other than as set
forth on Schedule 3.2. Each Acquired Subsidiary has good and marketable title
in fee simple (or the equivalent thereto under foreign law) to all real estate
described on Schedule 1.1A as owned by such Acquired Subsidiary and interests in
the leased properties as described on the
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instruments of lease described on Schedule 1.1J as leased by it and good title
to all of the other assets, whether real, personal or mixed, owned by each
Acquired Subsidiary, free and clear of any and all Encumbrances other than
Permitted Encumbrances. Each Seller enjoys peaceable possession of all material
Purchased Assets owned by it and peaceable possession of all real property
leased by it. Each Acquired Subsidiary enjoys peaceable possession of all
material assets and real property owned or leased by it.
3.3 GOVERNMENT CONTRACTS.
(a) To the Knowledge of Sellers, during the past five (5) years,
no payment has been made by any of Sellers or the Subsidiaries, or by any Person
authorized to act on their behalf, to any Person in connection with any
Government Contract in violation of applicable procurement laws or regulations
or in violation of (or requiring disclosure pursuant to) the Foreign Corrupt
Practices Act or other laws.
(b) The Division's cost accounting and procurement systems with
respect to Government Contracts are in compliance in all material respects with
all applicable governmental regulations.
(c) With respect to each Government Contract, except as set
forth on Schedule 3.3: (i) each Seller and Subsidiary has complied with all
material terms and conditions of such Government Contract, including all
clauses, provisions and requirements incorporated expressly, by reference or by
operation of law therein; (ii) each Seller and Subsidiary has complied with all
material requirements of applicable laws, rules and regulations pertaining to
such Government Contract; (iii) all representations and certifications executed,
acknowledged or set forth in or pertaining to such Government Contract were
complete and correct in all material respects as of their effective date, and
each Seller and Subsidiary has complied in all material respects with all such
representations and certifications; (iv) neither the United States Government
nor any prime contractor, subcontractor or other Person has notified Sellers or
any Subsidiary in writing that any Seller or Subsidiary has breached or violated
any applicable law, or any material certification, representation, clause,
provision or requirement pertaining to such Government Contract; (v) since
January 1, 1993, no termination for convenience, cure notice or show cause
notice has been received by a Seller pertaining to such Government Contract,
except with respect to Government Contracts involving no more than $50,000 per
calendar year in the aggregate; and (vi) since January 1, 1992, no termination
for default has been received by a Seller pertaining to a Government Contract.
(d) Except as set forth on Schedule 3.3: (i) neither Sellers
nor any of the Subsidiaries nor, to the Knowledge of Sellers, any of their
respective directors, officers or employees is (or during the last five
(5) years has been) under administrative, civil or criminal investigation, or
indictment by any governmental authority with respect to any alleged
irregularity, misstatement or omission; and (ii) during the last five (5) years,
none of the Sellers or the Subsidiaries has made a voluntary disclosure to the
United States Government of any actual or potential violation of law arising
under or relating to a Government Contract (whether under the Voluntary
Disclosure program of the Department of
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Defense Inspector General or otherwise), which actual or potential violation
of law has not been finally resolved with the United States Government. Any
and all disclosures made pursuant to the Voluntary Disclosure program of the
Department of Defense Inspector General within the last five (5) years are
disclosed on Schedule 3.3, regardless whether the actual or potential
violation has been resolved.
(e) Except as set forth on Schedule 3.3, to the Knowledge of
Sellers, there exist (i) no material outstanding claims against Sellers or any
of the Subsidiaries, either by the United States Government or by any prime
contractor, subcontractor, vendor or other third party, arising under or
relating to any Government Contract; and (ii) no material disputes between any
of Sellers or the Subsidiaries and the United States Government under the
Contract Disputes Act or any other Federal statute or between any of Sellers or
the Subsidiaries and any prime contractor, subcontractor or vendor arising under
or relating to any Government Contract.
(f) None of Sellers or the Subsidiaries, nor, to the Knowledge
of Sellers, any of their directors, officers or employees is (or during the last
five (5) years has been) suspended or debarred from doing business with the
United States Government or is (or during such period was) the subject of a
finding of nonresponsibility or ineligibility for United States Government
contracting.
3.4 PATENTS, TRADEMARKS, ETC. Set forth on Schedule 3.4 is a
list of all United States and foreign patents and patent applications, trade
names, trademark and service mark registrations and applications or registered
trade dress rights, common law trademarks and copyright registrations and
applications owned or used by any Seller or Subsidiary related to the Business
(except for the names "MagneTek," "Energy Engineered," and the "Power M" design,
or any derivation thereof), or which any Seller or Subsidiary is licensed to use
or under which it possesses any similar rights ("Patent and Trademark Rights"),
all of which are part of the Division Assets. Except as set forth on Schedule
3.4, since July 1, 1992, none of the products, activities or operations of the
Business involve or have resulted in (i) to the Knowledge of Sellers,
infringement of, or (ii) any written claim of infringement of, any patent or
patent application, trade name, trademark or service mark registration or
application, common law trademark or trade dress rights, copyright or copyright
registration or application of any other person, firm or entity; and no
proceedings have been instituted, are pending, or, to the Knowledge of Sellers
threatened, which challenge the rights of Sellers or any of the Subsidiaries in
respect thereof. Except as set forth on Schedule 3.4, none of the Patent and
Trademark Rights, to Sellers' Knowledge, are being infringed by the products,
activities, operations, patents, trade names, trademarks, service marks, trade
dress rights or copyrights of any other person or persons and none are subject
to any outstanding order, judgment, decree, stipulation or agreement restricting
the use thereof. Except as set forth on Schedule 3.4, no Seller or Acquired
Subsidiary has given or is bound by an agreement of indemnification for patent,
trade name, service mark, trademark, trade dress or copyright infringement as to
any property produced, used or sold by the Division.
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3.5 GOVERNMENTAL AUTHORIZATIONS; CONSENTS.
(a) Except as set forth on Schedule 3.5, the execution, delivery
and performance by Sellers of this Agreement and the consummation by Sellers and
the Acquired Subsidiaries of the Transactions require no action by or in respect
of, or filing with, any Federal or state governmental body, agency, official or
authority other than (i) compliance with the applicable requirements of the HSR
Act or the Exon-Florio Amendment, (ii) compliance with and filings under section
13(a) or 15(d), as the case may be, of the Exchange Act, (iii) any necessary
approvals of the United States Department of Defense or any agencies,
departments or instrumentalities thereof in connection with the novation of
Government Contracts and the transfer or procurement of security clearances and
(iv) except as set forth in Section 7.7.
(b) Schedule 3.5 sets forth all consents, approvals, waivers and
other action required by any Person under any material Contract, instrument or
other document to which any Seller or Acquired Subsidiary is bound or which is
required or necessary for the assignment or transfer of such Contract to Buyer,
the execution, delivery and performance of the Transaction Documents by any
Seller or Acquired Subsidiary or the consummation of the Transactions by any
Seller or Acquired Subsidiary. Where referred to with an asterisk on
Schedule 3.5, such consents, approvals, waivers or other actions have been
obtained or completed.
3.6 COMPLIANCE WITH LAWS. Each Seller and Acquired Subsidiary
(i) has complied in all material respects with all laws, regulations, licensing
requirements and orders applicable to the Business, (ii) has filed with the
proper authorities all material statements and reports required by the laws,
regulations, licensing requirements and orders to which it or any of its
employees (because of their activities on behalf of their employer) is subject,
and (iii) possesses all necessary licenses, franchises, permits and governmental
authorizations to conduct the Business in the manner in which, and in the
jurisdictions and places where the Business is now conducted, and is not in
material violation of any such licenses, franchises, permits and governmental
authorizations. This Section 3.6 does not pertain to employee benefits matters,
environmental matters, or tax matters, such matters being the subject of
Sections 3.11, 3.12 and 3.16, respectively.
3.7 CONTRACTS. Schedule 3.7 sets forth all material Contracts,
other than Non-Assigned Contracts, to which any Seller or Subsidiary is a party
or by which it is bound relating to the operations of the Division, all of which
are part of the Division Assets, except as otherwise indicated on such Schedule.
Except as identified on Schedules 1.1D and 1.1J or as set forth on Schedule 3.7,
no Seller or Acquired Subsidiary is a party to or is bound or affected by any of
the following types of Contract relating to the operations of the Division:
(i) partnership, joint venture or teaming agreement; (ii) mortgage, deed of
trust, or other security agreement; (iii) guaranty or suretyship agreement or
performance bond; (iv) employment, consulting or compensation agreement or
arrangement (other than those relating to the German Entities) that provides for
annual compensation or severance benefits greater than $100,000 (or the foreign
equivalent) or is not terminable on six month's notice with a cost of less than
$100,000 (or the foreign equivalent); (v) labor or collective
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bargaining agreement (other than those relating to the German Entities);
(vi) debt instrument, loan agreement, letter of credit arrangement, or other
obligation relating to indebtedness for borrowed money or money lent to another;
(vii) deed or other document evidencing an interest in or contract to purchase
or sell real property; (viii) Contract for the acquisition of services,
supplies, equipment or other personal property involving more than $100,000;
(ix) powers of attorney; (x) Contract containing a noncompetition covenant;
(xi) offset agreement; (xii) any other Contract (other than purchase orders
under a master Contract already disclosed hereunder) that involves either an
unperformed commitment in excess of $100,000 or that, to the Knowledge of
Sellers, will result in a material loss to the Division; (xiii) any Contract
with any Seller or any Affiliate of any Seller; (xiv) any material license
agreement or arrangement pursuant to which Sellers or any Subsidiary licenses
any of the Transferred Intellectual Property; or (xv) any other material
Contract. Sellers have delivered or otherwise made available to Buyer or its
agents true, correct and complete copies of each of the Contracts listed on
Schedule 3.7, except as set forth thereon. There are no existing material
defaults by any Seller or Acquired Subsidiary party to such Contracts or events,
occurrences or acts that, with the giving of notice or lapse of time or both,
would constitute such defaults, and no penalties have been incurred nor are
material amendments pending, with respect to the Contracts. Sellers further
represent that (1) the Contracts are in full force and effect and are valid and
enforceable obligations of the parties thereto in accordance with their terms,
(2) to the Knowledge of Sellers, there are no existing material defaults by any
party to such Contracts other than Sellers or the Acquired Subsidiaries or
events, occurrences or acts that, with the giving of notice or lapse of time, or
both, would constitute such defaults, and (3) to the Knowledge of Sellers, since
January 1, 1993 no defenses, offsets or counterclaims have been asserted or may
be made by any party thereto. Except as set forth on Schedule 3.7, no Seller or
Acquired Subsidiary has waived any material rights thereunder except as may be
contained therein. Except as set forth on Schedule 3.7, no Seller or Subsidiary
has received written notice of any plan or intention of any other party to any
material Contract to exercise any right to cancel or terminate such Contract.
To the Knowledge of Sellers, since January 1, 1994 no supplier of the Division
has refused, or communicated that it will refuse, to continue to supply goods or
services on substantially the same terms as are currently made available to the
Division (including any volume discounts which may not continue to apply if
levels of purchase are reduced).
3.8 LITIGATION. Except as set forth on Schedule 3.8, there is
no action, suit, investigation or proceeding pending against, or to the
Knowledge of Seller threatened against any Seller or Acquired Subsidiary by any
Person which, if adversely determined or resolved, could have a Material Adverse
Effect or which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the Transactions. No Seller or Acquired Subsidiary, nor the
Division Assets, is subject to any material judgment, order, writ, injunction or
decree relating to the Business. For purposes of this Agreement, a "pending"
matter means any action, suit or proceeding as to which a complaint has been
filed and a Seller or Acquired Subsidiary has been served or otherwise given
notice as to such filing on or before the Closing Date.
3.9 CORPORATE POWER AND AUTHORITY. The execution, delivery and
performance of this Agreement by each Seller, and all other Transaction
Documents by the
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respective Sellers who are parties thereto and the consummation by each Seller
of the Transactions, have been duly authorized by all requisite corporate (or
comparable power under foreign law) action and no further action or approval is
required in order to permit any Seller to consummate the Transactions, except as
provided on Schedule 3.5, Section 7.2 and Section 7.7. This Agreement
constitutes, and all other Transaction Documents by and among the parties, when
executed and delivered in accordance with the terms thereof, will constitute the
legal, valid and binding obligations of the respective Seller that is a party
thereto, enforceable in accordance with their terms (subject, as to the
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights from time to time in
effect). Each Seller has full power, authority and legal right to enter into
this Agreement and all other agreements to which it is a party and to consummate
the Transactions. The execution and delivery of this Agreement and the
Transaction Documents by Sellers, and the consummation of the Transactions will
not (i) conflict with the charter documents of any Seller or Acquired
Subsidiary, (ii) result in any breach or termination of, or constitute a default
under, or constitute an event which with notice or lapse of time, or both, would
become a default under, or result in the creation of any Encumbrance (other than
a Permitted Encumbrance or an Encumbrance associated with Buyer's acquisition
financing) upon any of the Stock or the Division Assets under, or create any
rights of termination, cancellation or acceleration in any Person under, any
material Contract, or violate any order, writ, injunction or decree to which any
Seller or Acquired Subsidiary is a party, or by which any of the Division Assets
may be bound, or (iii) result in the violation of any provisions of law
applicable to the Division, any Seller or Acquired Subsidiary, the violation of
which could have a Material Adverse Effect.
3.10 LABOR RELATIONS.
(a) No Seller or Acquired Subsidiary since July 1, 1992 has
experienced or is experiencing, nor does any Seller have Knowledge of any
imminent strikes, work stoppages, slowdowns or other material interference with
or impairment of the Business by labor, nor, to the Knowledge of Seller has any
Seller or Acquired Subsidiary committed any material unfair labor practice in
the conduct of the Business. No United States Division Employee is represented
by any labor union or collective bargaining unit. No Seller or Acquired
Subsidiary is experiencing, nor does any Seller have knowledge of, any current
or contemplated union organization efforts or negotiations, or requests for
negotiations, for any representation or any labor contract relating to any
United States Division Employee.
(b) Schedule 3.10(b) is a true and complete list, as of June 30,
1994, of the employees of the German Entities ("German Employees"), setting
forth the names, position, tenure and salary of each of the German Employees.
The employment contracts with the German Employees do not contain any provisions
other than those contained in the Standard Contract, a copy of which is attached
to Schedule 3.10(b) and, except as set forth on Schedule 3.10(b), no further
written or oral agreements relating to the employment of the German Employees
(including agreements with the Workers Council or collective or other
agreements) have been entered into. None of the German Employees or former
employees of the German Entities has received a pension promise from either of
the German Entities, except for Mr. Kahrs, Mr. Bauch, Mr. Heusinger, Mr. Wendt,
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Mr. Mattheas, Mr. Rose, Mr. Steffen, Mr. Vieth, Mr. Hogelwecht, Mr. Janssen,
Mr. Newiger, Mr. Poetschat, Mr. Sinning, Ms. Dekker, Mr. Fokken, Mr. Milberg,
Mr. Kleemann, Mr. Kunst, Mr. Meyer, Mr. Puell, and Ms. Schulte. Except as set
forth on Schedule 3.8, no material labor disputes or strikes or court actions in
relation to labor issues are pending or, to the Knowledge of Sellers, threatened
with regard to the German Employees. The German Entities have duly deducted and
timely paid all German or other foreign social security contributions to be
deducted and paid (including, without limitation, social security pension
contributions to the "Bundesversicherungsanstalt fur Angestellte" or similar
pension contributions to other public organizations, unemployment insurance
contributions to the "Bundesanstalt fur Arbeit" and compulsory health insurance
contributions and other compulsory social contributions or insurance payments
with respect to the German Employees), and will continue to duly deduct and
timely pay such amounts which become due before the Closing Date.
3.11 EMPLOYEE BENEFIT PLANS.
(a) DEFINITIONS. The following term shall have the following
meaning, and this term may, unless the context otherwise requires, be used in
the singular or the plural depending on the reference.
EMPLOYEE PLAN. "Employee Plan" shall mean any United
States employment, consulting, severance or other similar contract,
arrangement or policy and each plan, arrangement, program, agreement or
commitment providing for insurance coverage (including, without
limitation, any self-insured arrangements), workers' compensation, fringe
benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits, life, health, disability or accident benefits
(including, without limitation, any "voluntary employees' beneficiary
association" as defined in section 501(c)(9) of the Code providing for the
same or other benefits) or for deferred compensation, profit-sharing,
bonuses, stock options, restricted stock, stock appreciation rights, stock
purchases or other forms of incentive compensation, or for post-retirement
insurance, compensation or benefits which (A) is entered into, maintained,
contributed to or required to be contributed to, as the case may be, by
Sellers or an Acquired Subsidiary or under which Sellers or any Acquired
Subsidiary may incur any liability, and (B) covers or has covered any
current or former United States Division Employees (with respect to their
relationship to the Division).
(b) REPRESENTATIONS. Sellers have provided Buyer with true and
complete copies of the most recent "MagneTek Associate Handbook" and
"Anaheim/Gardena Summary of Benefits and General Information" describing
Employee Plans, and there are no Employee Plans other than those described in
such handbooks under which any Acquired Subsidiary may incur any material
Liability that is not reflected on the Final Closing Balance Sheet. Except as
set forth on Schedule 3.11, Sellers represent and warrant as follows:
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(i) No Acquired Subsidiary has, at any time, maintained,
contributed to, participated or agreed to participate in a "multiemployer plan"
as defined in section 4001(a)(3) or 3(37) of ERISA.
(ii) None of the Sellers or any Acquired Subsidiary has any
announced or unannounced plan or legally binding commitment to create any
additional Employee Plans or amend or modify any existing Employee Plan, for
which any Acquired Subsidiary could reasonably be expected to incur a material
Liability; and except as provided by law, the employment of all United States
Division Employees and individuals rendering service to the Division in the
United States as independent contractors or otherwise is terminable at will.
(iii) The Acquired Subsidiaries have made all required
contributions under each Employee Plan for all periods through and including the
Closing Date or proper accruals have been made and are reflected on the
appropriate balance sheets and books and records.
(iv) There is no contract, agreement, plan or arrangement
covering any current or former United States Division Employee that,
individually or collectively, provides for the payment by any Acquired
Subsidiary to such employee of any material amount that is not deductible or
capitalizable under the Code. No Acquired Subsidiary will be required to "gross
up" or otherwise compensate any current or former United States Division
Employee because of the imposition of any excise tax (including any interest or
penalties related thereto) on the individual because of the applicability of
sections 280G and 4999 of the Code as a result of any Employee Plan or agreement
existing on or prior to the Closing Date.
(v) No entity (other than the Acquired Subsidiaries) which
is (or at any relevant time was) a member of a "controlled group of
corporations" with, under "common control" with, or otherwise required to be
aggregated with, any Seller or any Acquired Subsidiary, as set forth in section
414(b), (c) or (o) of the Code, has incurred any Liability with respect to or
under any employee benefit plan, program, policy or arrangement, including any
"pension plan" or "welfare plan" as defined in sections 3(2) and 3(1),
respectively, of ERISA, and any plan, program, policy or arrangement which
provides deferred compensation, profit sharing bonuses, stock options, stock
appreciation rights, stock purchases or other forms of incentive compensation
other than a German Benefit Plan (each an "ERISA Affiliate Plan"), which has or
will create any obligation by, or result in any Liability to, any Acquired
Subsidiary.
(vi) Each employee benefit plan, program, policy,
arrangement, agreement or commitment which (A) is entered into, maintained,
contributed to or required to be contributed to, as the case may be, by Sellers
or an Acquired Subsidiary or under which Sellers or any Acquired Subsidiary may
incur any liability, and (B) covers or has covered any current or former
employee of the German Entities (each a "German Benefit Plan") has been
maintained in substantial compliance with its terms and with the
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requirements prescribed by any and all applicable statutes, orders, rules and
regulations and has been maintained in good standing with applicable regulatory
authorities.
3.12 ENVIRONMENTAL MATTERS. Except as set forth on Schedule
3.12, to the Knowledge of Sellers:
(a) Sellers and the Acquired Subsidiaries are in substantial
compliance with all Environmental Laws in effect at the time of Closing in
connection with the operations of the Division and the Division Assets;
(b) Sellers and the Acquired Subsidiaries have no liability
under any Environmental Law with respect to the operations or properties of the
Division or the Division Assets which is material to the operations or the
financial condition of the Division;
(c) in the past three (3) years, no notices of any violation or
alleged violation of, or any liability under, any Environmental Law relating to
the operations of the Division or the Division Assets have been received by any
of Sellers or the Subsidiaries;
(d) there is no Substance that is used in a manner that may pose
any material risk to safety, health or the environment on or under any property
owned, leased or operated by the Division, currently or in the past, and there
has heretofore been no spillage, discharge, release or disposal of any such
Substance on, under or from such property in any amount or in any manner which
could reasonably be expected to result in material liability to the Division;
and
(e) there are no writs, injunctions, decrees, orders or
judgments outstanding, or any actions, suits, claims, proceedings or
investigations pending or, to Sellers' Knowledge, threatened, relating to
compliance with or liability under any Environmental Law affecting the Division.
3.13 AVAILABILITY OF DOCUMENTS. Each Seller has made available
for inspection by Buyer at the offices of such Seller true, correct and complete
copies of its charter documents and the charter documents of each Acquired
Subsidiary.
3.14 FINANCIAL CONDITION AND RESULTS OF OPERATIONS. MagneTek has
furnished to Buyer (i) the unaudited balance sheet and related unaudited
statements of income (including the deprecation, amortization and capital
spending data to the extent noted on Schedule 3.14) of the Division for the
fiscal years ended June 30, 1993 and June 30, 1994 and (ii) the unaudited
balance sheet and related unaudited statement of income of the Division for the
three-month period ended September 30, 1994 (collectively, the "Financial
Statements"), each of which are set forth on Schedule 3.14. Except as set forth
therein or on Schedule 3.14, the Financial Statements present fairly the
financial condition and results of operations of the Division as of the dates
and for the periods indicated and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis with
prior periods. Except as set forth on Schedule 3.14, the Adjusted July Balance
Sheet fairly presents, in all material respects, the Division Assets and
Division Liabilities on
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a combined basis as of July 31, 1994, and has been prepared in accordance with
generally accepted accounting principles consistent with those used in preparing
the Financial Statements.
To the Knowledge of Sellers, other than the Retained Liabilities, there
are no material Liabilities of or relating to the Division, except
(a) Liabilities which are reflected or reserved against on the Adjusted July
Balance Sheet and which have not been paid or discharged since the date thereof,
(b) Liabilities arising under the Contracts listed on Schedule 3.7 (or under
Contracts which, pursuant to the terms of Section 3.7, are not required to be so
listed), and (c) other Division Liabilities that were incurred since the date of
the Adjusted July Balance Sheet in the ordinary course of the Business and
consistent with the Division's past practices.
3.15 ASSETS OF THE DIVISION. The Division Assets and the rights
conferred by the Transaction Documents comprise all the properties and assets
reasonably necessary for the operation of the Business as conducted on the date
hereof. The Acquired Subsidiaries do not own any material assets that are not
Division Assets, nor are they liable for any material liabilities that are not
Division Liabilities.
3.16 TAXES. Except as set forth on Schedule 3.16:
(a) The Acquired Subsidiaries have duly and timely filed with
the appropriate governmental agencies all Tax Returns (including information
returns) required to be filed by the United States or any state or any political
subdivision thereof or any foreign jurisdiction. All such Tax Returns are
complete and accurate and properly reflect the Taxes of the Acquired
Subsidiaries for the periods covered thereby.
(b) The Acquired Subsidiaries have timely paid to taxing
authorities all Taxes which have become due with respect to any Tax Returns that
each has filed and any assessments of which each is aware. The Acquired
Subsidiaries have paid or accrued all amounts with respect to Taxes required to
be paid to Persons (other than Taxing authorities) such as pursuant to tax
sharing or allocation agreements with respect to all taxable periods or portions
of periods ending on or before the Closing Date. None of the Acquired
Subsidiaries is delinquent in the payment of any Tax, assessment or governmental
charge or amounts owed to other persons or entities with respect to Taxes.
(c) MagneTek has filed all Tax Returns that have become due
(giving effect to extensions of time to file) and has paid all liabilities for
Taxes that have become due and payable prior to the date hereof, except such Tax
Returns and Taxes (i) with respect to which the failure to file or pay,
respectively, would not have a Material Adverse Effect, or (ii) the filing or
payment, respectively, of which is being contested in good faith by MagneTek.
(d) There is no unpaid assessment, proposal for additional
Taxes, deficiency or delinquency in the payment of any of the Taxes of the
Acquired Subsidiaries, except to the extent that adequate liabilities or
reserves with respect thereto are accrued on
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the Financial Statements and the Adjusted July Balance Sheet in accordance with
GAAP or (i) such deficiency or claim is being contested in good faith by
appropriate proceedings, (ii) no such accrual is required by GAAP and (iii) the
nature and amount of the disputed Tax is set forth on Schedule 3.16.
(e) There are no Encumbrances for Taxes (other than for Taxes
not yet due and payable) upon any of the Division Assets or the Stock.
(f) No claim has ever been made by any authority in a
jurisdiction where Sellers or the Acquired Subsidiaries do not file Tax Returns
that Sellers or the Acquired Subsidiaries are or may be subject to taxation by
that jurisdiction in respect of the assets or operations of the Division;
(g) None of the German Entities is a "United States real
property holding corporation" within the meaning of section 897(c)(2) of the
Code, nor is any of Sellers a foreign person within the meaning of section
1445(b)(2) of the Code.
(h) None of the Division Assets constitutes property that Buyer,
or any Affiliate of Buyer, will be required to treat as being owned by another
person pursuant to the "Safe Harbor Lease" provisions of section 168(f)(8) of
the Code prior to repeal by the Tax Equity and Fiscal Responsibility Act of
1982.
(i) None of the Division Assets is, or at the Closing will be,
subject to a lease to a "tax-exempt entity" as such term is defined in
section 168(h)(2) of the Code.
(j) None of the Division Assets directly or indirectly secures
any debt the interest on which is tax-exempt under section 103(a) of the Code.
(k) None of the Acquired Subsidiaries currently is the
beneficiary of any extension of time within which to file any Tax Return;
(l) None of the Acquired Subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a tax assessment or deficiency;
(m) None of the Acquired Subsidiaries has filed a consent under
Code section 341(f) concerning collapsible corporations;
(n) None of the Acquired Subsidiaries has made any payments, nor
is it obligated to make any payments, and is not a party to any agreement that,
in and of itself, could obligate it to make any payments that will not be
deductible under Code section 280G;
(o) None of the Acquired Subsidiaries has filed with respect to
any item a disclosure statement pursuant to Code section 6662 or any comparable
disclosure with
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respect to foreign, state and/or local statutes with respect to items pertaining
to the assets or operations of the Division;
(p) None of the Acquired Subsidiaries (A) has been a member of
any affiliated group filing a consolidated federal income Tax Return (other than
a group the common parent of which is MagneTek, the "MagneTek Group") and (B)
has any liability for the Taxes of any person as defined in section 7701(a)(1)
of the Code (other than the MagneTek Group) under Treas. Reg. Section 1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise, except for such liabilities and agreements
as may have been incurred or entered into in the ordinary course of business and
which in the aggregate are not material in amount;
(q) There are no deemed elections in effect with respect to any
of the Acquired Subsidiaries pursuant to Code sections 338(e) or 338(f) or the
regulations thereunder;
(r) No member of the MagneTek Group will elect to have the
Company excluded from the MagneTek Group under Treas. Reg. Section 1.1502-
76(b)(5)(ii) for the MagneTek Group taxable year that includes the day
immediately preceding the Closing Date;
(s) Schedule 3.16 sets forth the Sellers' estimate of the
aggregate tax basis of certain categories of assets owned by the Acquired
Subsidiaries as of June 30, 1994. The sum of the tax bases of the assets of the
Acquired Subsidiaries as set forth on Schedule 3.16 does not exceed the actual
sum of the tax bases of the assets of the Acquired Subsidiaries as of June 30,
1994 by an amount which, if such actual amounts were properly taken into account
on the combined balance sheet of the Acquired Subsidiaries, prepared in
accordance with GAAP, as of June 30, 1994, would require that the Acquired
Subsidiaries include a deferred tax liability on such combined balance sheet,
net of all deferred tax assets without regard to any valuation allowance with
respect thereto.
(t) The Acquired Subsidiaries have maintained all sales and use
records and supporting documents in the manner required by applicable sales and
use Tax statutes and regulations;
(u) The Acquired Subsidiaries have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder, or other party
in connection with the Division;
(v) There are no pending or, to the best of Sellers' or any
Acquired Subsidiary's knowledge, threatened audits, investigations or claims for
or relating to any material liability in respect of Taxes payable by the
Acquired Subsidiaries and there are no matters under discussion with any
governmental authorities with respect to Taxes payable by the Acquired
Subsidiaries that are likely to result in a material additional amount of Taxes.
Federal income tax audits of the Acquired Subsidiaries have been completed for
each period
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set forth on Schedule 3.16. None of the Acquired Subsidiaries has been notified
that any taxing authority intends to audit a Tax Return of any other period;
(w) None of the Acquired Subsidiaries has entered into any tax-
sharing agreement or similar agreement that will remain in effect following the
Closing;
(x) Neither of the German Entities has been a member of an
affiliated group that has filed a consolidated United States Federal income tax
Return or of any group that has filed a combined, consolidated or unitary Tax
Return, other than such Tax Returns for Taxes for which the period for
assessment has expired (taking into account any extension or waiver thereof);
(y) Neither of the German Entities is (i) engaged in a United
States trade or business for federal income tax purposes; (ii) a passive foreign
investment company within the meaning of the Code; or (iii) a foreign investment
company within the meaning of the Code;
(z) None of the Acquired Subsidiaries is a party to any joint
venture, partnership or other arrangement or contract which is treated as a
partnership for tax purposes;
(aa) MagneTek will not be required to include any amount in gross
income with respect to the German Entities pursuant to section 951 of the Code
for the taxable period ending on the date prior to the Closing Date. None of
the German Entities has an investment in United States property within the
meaning of section 956 of the Code;
(bb) The amount of any liability for deferred Taxes of the
Acquired Subsidiaries on a combined basis will not, at Closing, exceed the
amount of any deferred tax assets of the Acquired Subsidiaries at Closing, all
determined in accordance with GAAP.
(cc) The "Gliederung des verwendbaren Eigenkapitals" of the
German Entities pursuant to section 30 of the German Corporate Income Tax Act
("Korperschaftsteuergesetz") is accurately and properly reflected on the
German Corporate Income Tax Returns for these entities for the taxable period
ending before Closing Date. Net operating loss carryovers of these entities
for German corporate income tax purposes as well as for German trade income
tax ("Gewerbertragsteuer") purposes are also accurately and properly
reflected on the German Tax Returns of the German Entities for the taxable
period ending before the Closing Date.
3.17 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1994,
except as set forth on Schedule 3.17, (i) there has not been any change in the
Division Assets, Division Liabilities or financial condition or operations of
the Division that has had or could reasonably be expected to have a Material
Adverse Effect; (ii) no Seller or Acquired Subsidiary has contracted for or paid
any capital expenditures in excess of $100,000 (or the foreign equivalent)
relating to the Division; (iii) no Seller or Acquired Subsidiary has forgiven or
canceled any material debts or claims or released or waived any material right
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relating to the Division; (iv) no Seller or Acquired Subsidiary has suffered any
damage or destruction to or loss of any Division Assets in excess of $100,000
and not covered by insurance, or has disposed of any material assets (other than
current assets, such as Inventory, disposed of in the ordinary course of
business); (v) no Seller or Acquired Subsidiary has lost customers or suppliers
that would have a Material Adverse Effect; (vi) no Seller or Acquired Subsidiary
has undergone any change in accounting methods, principles or practices relating
to the Division; (vii) no Seller or Acquired Subsidiary has increased the rate
of compensation payable or to become payable to any director, officer or other
Division Employee, other than in the ordinary course of business; (viii) no
Seller or Acquired Subsidiary has cancelled or terminated any material Contract
relating to the Division or entered into any material Contract relating to the
Division which is not in the ordinary course of the Business; and (ix) no Seller
or Acquired Subsidiary has entered into any transaction that is material to this
Agreement, any other Transaction Document, the Transactions, the Division or to
any of the Division Assets that would have a Material Adverse Effect.
3.18 ACQUIRED SUBSIDIARIES.
(a) The authorized, issued and outstanding capital stock (or
equivalent under foreign law) of, and the jurisdiction of formation of, each of
the Acquired Subsidiaries is as set forth on Schedule 3.18. All of the issued
and outstanding shares of capital stock of each of the Acquired Subsidiaries
were validly issued and are fully-paid and nonassessable (or the foreign law
equivalent), were not issued in violation of the preemptive rights of any
stockholder (or the foreign law equivalent) and are owned as set forth above
free and clear of any Encumbrances (other than a Permitted Encumbrance or an
Encumbrance arising through Buyer). There are no outstanding subscriptions,
options, warrants, rights, convertible securities, calls, commitments or
agreements (or the foreign law equivalent) to issue shares of capital stock or
other securities of any of the Acquired Subsidiaries.
(b) The Stock constitutes all of the outstanding capital stock
of the Company and the German Entities. None of the Company or the German
Entities own any Subsidiaries or any shareholdings, joint venture or other
interests in any other Person.
(c) The registered share capital (Stammkapital) of MagneTek
EuroAtlas GmbH amounts to DM 1,000,000 and is divided into two shares
(Geschaftsanteil) of DM 200,000 each, two shares of DM 75,000 each, and three
shares of DM 150,000 each. The registered share capital (Stammkapital) of
MagneTek JovyAtlas GmbH amounts to DM 200,000 and is divided into one share
(Geschaftsanteil) of DM 20,000, one share of DM 80,000 and one share of DM
100,000. Deutschland is entitled to transfer such shares without
restrictions, the shares are not encumbered with rights of third parties, and
such shares do not represent Deutschland's entire or almost entire property.
The terms of the lease contract dated December 15, 1983, as amended, between
MagneTek JovyAtlas GmbH and Dr. Ing. Jovy Electronic GmbH & Co. KG on the use
of the real property and building used by it at the time of the Closing do
not permit the lessor thereunder to terminate such lease because of the sale
of the shares of MagneTek JovyAtlas GmbH to the Buyer.
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3.19 BACKLOG. Schedule 3.19 sets forth each Contract of any of
Sellers or the Subsidiaries relating to the Division and having backlog as of
July 31, 1994 in excess of $100,000 and a description of the same, including the
name of each customer, the dollar amount of funded backlog and backlog unfunded
by the United States Congress or any customer in respect of undelivered orders.
Except as set forth on Schedule 3.19, all of the Contracts constituting the
backlog of Sellers or the Subsidiaries relating to the Division were entered
into in the ordinary course of business and are capable of performance in
accordance with their terms by the Division.
3.20 CLEARANCES. Schedule 3.20 sets forth all material security
clearances held by Sellers and the Acquired Subsidiaries relating to the
Business.
3.21 BROKERS FEES. Except as set forth on Schedule 3.21 (which
fees shall be the sole responsibility of Sellers), no broker, finder or
investment banker is entitled to any brokerage, finders fee or other fee or
commission in connection with the Transactions as a result of any actions taken
by any of Sellers or their Affiliates.
3.22 WARRANTY CLAIMS. Except as set forth on Schedule 3.22,
there are no material existing or, to Sellers' Knowledge, threatened claims or
any facts upon which a material claim properly could be based, against any of
Sellers or the Subsidiaries for or related to goods of the Division which are
defective or fail to meet any service or product warranties or any applicable
federal, state or local standards or specifications. Since January 1, 1992,
none of Sellers or the Acquired Subsidiaries has received written notice of any
statements, citations or decisions by any governmental or regulatory body
stating that any of its products is defective or unsafe or fails to meet any
standards promulgated by any such governmental or regulatory body.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties to each
Seller:
4.1 DUE ORGANIZATION AND QUALIFICATION. Buyer is a corporation
duly formed, validly existing and in good standing under the laws of the State
of Delaware, and has all requisite corporate power and authority to own or lease
its properties and to carry on its business as it is presently being operated
and in the place where such properties are owned or leased and such business is
conducted.
4.2 CORPORATE POWER AND AUTHORITY. The execution, delivery and
performance of this Agreement by Buyer, and all other Transaction Documents to
which Buyer is a party, and the consummation by it of the Transactions, have
been duly authorized by all requisite corporate action and no further action or
approval is required in order to permit Buyer to consummate the transactions
contemplated hereby and thereby, except as contemplated in this Agreement. This
Agreement constitutes, and all other Transaction
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Documents to which Buyer is a party, when executed and delivered in accordance
with the terms thereof, will constitute the legal, valid and binding obligations
of Buyer, enforceable in accordance with their terms (subject, as to the
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights from time to time in
effect). Buyer has full power, authority and legal right to enter into this
Agreement and all other agreements by and among the parties and to consummate
the Transactions. The execution and performance of this Agreement and the
Transaction Documents to which Buyer is a party, and the consummation of the
Transactions will not (i) conflict with the certificate of incorporation or
bylaws of Buyer, (ii) result in any breach or termination of, or constitute a
default under, or constitute an event which with notice or lapse of time, or
both, would become a default under, or result in the creation of any Encumbrance
(other than a Permitted Encumbrance or an Encumbrance associated with Buyer's
acquisition financing for the Division) upon any asset of Buyer under, or create
any rights of termination, cancellation or acceleration in any person under, any
contract, lease, arrangement or commitment, or violate any order, writ,
injunction or decree, to which Buyer is a party or by which Buyer or its assets,
business or operations may be bound, or (iii) result in the violation of any
provisions of law applicable to Buyer, the violation of which could have a
material adverse effect upon the business, operations or assets of Buyer or upon
the consummation of the Transactions.
4.3 GOVERNMENTAL AUTHORIZATIONS; CONSENTS.
(a) The execution, delivery and performance by Buyer of this
Agreement and the consummation by Buyer of the transactions contemplated hereby
require no action by or in respect of, or filing with, any Federal or state
governmental body, agency, official or authority other than (i) compliance with
the applicable requirements of the HSR Act or the Exon-Florio Amendment,
(ii) compliance with and filings under section 13(a) or 15(d), as the case may
be, of the Exchange Act, (iii) any necessary approvals of the United States
Department of Defense, or any agencies, departments or instrumentalities thereof
in connection with the novation of Government Contracts or the transfer or
procurement of security clearances, and (iv) except as set forth in Section 7.7.
(b) No consent, approval, waiver or other action by any person
under any contract, agreement, indenture, lease, instrument or other document to
which Buyer is a party or by which it is bound is required or necessary for the
execution, delivery and performance of this Agreement by Buyer or the
consummation of the transactions contemplated hereby.
4.4 LITIGATION. There is no pending or threatened litigation in
any court or any proceeding before any governmental body, agency, official or
authority (i) in which it is sought to restrain, prohibit, invalidate or obtain
damages in respect of the consummation of the purchase and sale of the Division
Assets or the other Transactions, (ii) which could, if adversely determined or
resolved, result in any material adverse change in the business, operations or
assets or the condition, financial or otherwise, or results of operations of
Buyer or upon the consummation of the Transactions or (iii) which could, if
adversely determined,
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have a material adverse effect on the right or ability of Buyer to carry on its
business substantially as now conducted.
4.5 COMPLIANCE WITH LAW. Buyer has complied with all laws,
regulations, licensing requirements and orders applicable to its business the
breach or violation of which could have a material adverse effect on said
business, (ii) has filed with the proper authorities all material statements and
reports required by the laws, regulations, licensing requirements and orders to
which it is subject and (iii) possesses all necessary licenses, franchises,
permits and governmental authorizations to conduct its business in the manner in
which and in the jurisdictions and places where such business is now conducted.
4.6 BUYER'S ACKNOWLEDGMENT. Buyer acknowledges and agrees that,
other than the representations and warranties of Sellers specifically contained
in this Agreement (including the Schedules and Exhibits hereto) and the other
Transaction Documents (including any certificates delivered pursuant hereto or
thereto), there are no representations or warranties of any Seller either
expressed or implied with respect to any Seller or Acquired Subsidiary, the
Business, the Division Assets, the Division, or the Transactions.
4.7 BROKER'S FEES. No broker, finder or investment banker is
entitled to any brokerage, finder's fee or commission in connection with the
Transactions as a result of actions taken by Buyer or its Affiliates, except for
any fees payable to The Carlyle Group, L.P. or an Affiliate thereof (for which
Buyer will be solely responsible).
4.8 HSR ACT MATTERS. PTS Holdings, Inc., the newly-formed
parent of Buyer, is the "ultimate parent entity" of the "acquiring person" (as
the foregoing terms are defined in 16 C.F.R. Section 801.1 and 801.2) and its
annual "net sales" and "total assets" (as the foregoing terms are defined in 16
C.F.R. Section 801.11) are each less than $10 million.
ARTICLE V
COVENANTS OF SELLERS
Sellers hereby covenant and agree with Buyer as follows:
5.1 APPROVALS OF THIRD PARTIES. As soon as practicable after
the date hereof, both before and after Closing, Sellers will use all reasonable
efforts to secure or cause to be secured all necessary consents, approvals and
clearances of third parties that heretofore have not been procured and that may
be required to consummate the Transactions including, without limitation, the
consents, approvals and clearances referred to without asterisks on Schedule 3.5
hereof, and will otherwise use all reasonable efforts to cause the consummation
of the Transactions.
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5.2 ACCESS TO BOOKS AND RECORDS.
(a) For a period of seven (7) years following the Closing,
Sellers will retain all Records held by them and not conveyed to Buyer
hereunder. During such period, Sellers will afford authorized representatives
of Buyer (including its auditors) access to such Records at reasonable times and
during normal business hours at the principal business office of any of Sellers,
or at such other location or locations at which such Records may be stored or
maintained from time to time, and will permit such representatives to make
abstracts from, or copies of, any of such Records, or to obtain temporary
possession of any thereof as may be reasonably required by Buyer at such Buyer's
sole cost and expense. During such period, Sellers will, at Buyer's expense
(limited, however, to Buyer's reasonable out-of-pocket expenditures plus
reimbursement for employee time on the basis set forth in Section 5.2(b) below),
cooperate with Buyer in furnishing information, evidence, testimony, and other
reasonable assistance in connection with any action, proceeding, Tax audit,
employee or labor dispute or investigation to which such Buyer or any of its
Affiliates is subject relating to the Business or the Division. The term
"Record" as used in this Section 5.2 shall include any data processing files or
other computerized data.
(b) If more than five (5) working days as to any particular
matter is required to be expended by employees of Sellers and their Affiliates
in responding to a request of Buyer under this Section 5.2, then Sellers'
provision of such employees may be conditioned on Buyer's agreement to reimburse
Sellers at reasonable per diem rates (calculated on a basis consistent with the
labor rates applicable to such employees for other purposes) for the services of
such employees; PROVIDED that no such reimbursement shall be required for the
assistance of such employees in connection with any litigation or disputes for
which Buyer is required to indemnify Sellers hereunder.
5.3 COVENANT NOT TO COMPETE.
(a) Sellers and their Affiliates will not, on a worldwide basis,
at any time during the period of five (5) years from the Closing Date, directly
or indirectly, own, manage, operate, join, control or participate in the
ownership, management, operation or control of, any business which, or any
business organization any part of which, engages in activities relating to the
products listed on Schedule 5.3A hereof, except that Sellers and their
Affiliates may acquire (a) any Person, less than 10% of the gross revenues of
which are derived from a business involving the production of any of the
foregoing products (a "Competitive Business"), PROVIDED that the Competitive
Business is not thereafter expanded such that its revenues exceed 20% of the
gross revenues of such Person; or (b) no more than 5% of any class of securities
of a Person, if such securities are traded in any public market (within or
outside the United States) or 15% of any class of privately held securities of a
Person, in either case if such Person derives 10% or more of its gross revenues
from a Competitive Business. The remedy at law for any breach or attempted
breach of the provisions of this Section 5.3 will be inadequate and Buyer shall
be entitled to temporary or permanent injunctive relief against any breach or
attempted breach of such provision without the necessity of posting bond or
proving actual damages. It is the express intention of the parties hereto to
comply with all laws which may be applicable to this Section 5.3. Should
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any restriction contained in this Section 5.3 be found to contain limitations as
to time, geographical area or scope of activity that are not reasonable and
impose a greater restraint than is necessary to protect the goodwill or other
business interest of Buyer, it is expressly agreed that the covenant not to
compete contained in this Section 5.3 may be reformed or modified by the final
judgment of a court of competent jurisdiction to the extent necessary to cause
the limitations contained in this covenant not to compete as to time,
geographical area and scope of activity to be restrained to be reasonable and
impose a restraint that is not greater than necessary to protect Buyer and
enforce the covenant not to compete as reformed or modified. If any one or more
of the provisions contained in this Section 5.3 shall for any reason be held to
be invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
(b) Notwithstanding the foregoing, the covenant not to compete
as to items 2 and 3 on Schedule 5.3A shall be limited to nine (9) months.
5.4 ACCOUNTS RECEIVABLE. Sellers agree promptly to forward to
Buyer any and all proceeds from accounts receivable of the Division that are
received by Sellers after the Closing Date. If, after the Closing Date, a
Seller receives any payment from any Person who at the time of such payment has
outstanding accounts payable to Seller unrelated to the Business or the
Division, on the one hand (for the purposes of this Section and Section 6.5,
"Seller Accounts Receivable"), and to the Buyer or any Acquired Subsidiary, on
the other hand (for the purposes of this Section and Section 6.5, "Buyer
Accounts Receivable"), and the payment (a) does not indicate whether it is in
respect of Seller Accounts Receivable or Buyer Accounts Receivable or (b)
indicates that it is in payment of both Seller Accounts Receivable and Buyer
Accounts Receivable without specifying the portion to be allocated to each, then
Sellers and Buyer shall consult with one another to determine the proper
allocation of such payment; and, if they are unable to reach agreement on the
proper allocation, such payment shall be applied so as to retire Seller Accounts
Receivable and Buyer Accounts Receivable in chronological order based upon the
period of time such accounts receivable have been in existence.
5.5 TAX CERTIFICATES. Buyer will furnish resale or exemption
certificates to Sellers for Inventory and exempt machinery and equipment.
5.6 EMPLOYEE BENEFITS.
(a) Sellers remain obligated to provide continuation coverage to
their covered employees, former employees and their qualified beneficiaries (and
those of the Acquired Subsidiaries) in compliance with the provisions of Code
section 4980B and ERISA Section 601 ET SEQ. (herein referred to as "COBRA
Continuation Coverage"), and subject to Buyer establishing one or more group
health plans for the benefit of Transferred Employees as provided in Section
6.3(b), Sellers agree to indemnify and hold Buyer harmless from any claims for
COBRA Continuation Coverage made by or on behalf of such employees, former
employees and their qualified beneficiaries who are receiving COBRA Continuation
Coverage
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at the Closing or with respect to whom a qualifying event occurred either prior
to the Closing or as a result of the Closing of the transaction contemplated by
this Agreement.
(b) Sellers shall make all contributions due through the Closing
Date under the Employee Plans on behalf of all Transferred Employees. As of the
Closing Date, MagneTek shall fully vest all Transferred Employees in their
accrued benefits under the MagneTek FlexCare Plus Retirement Savings Plan and
the MagneTek FlexCare Plus Retirement Pension Plan. Effective as of the Closing
Date, the United States Division Employees shall cease accruing any benefits
under all Employee Plans (except for benefits accrued on the Final Closing
Balance Sheet), and MagneTek shall take, or cause to be taken, all such actions,
if any, as may be necessary to effect such cessation or continuation of benefit
accrual, as applicable.
(c) (i) Sellers remain obligated for Liabilities relating to
all claims by United States Division Employees (and their dependents and
beneficiaries) for benefits under all medical, dental, employee assistance,
life, accidental death and dismemberment, dependent life, short- and long-term
disability, and business travel accident plans of Sellers, but excluding any
German Benefit Plans, which are incurred on or prior to the Closing Date whether
or not notice of any such claim has been received by Sellers, the Acquired
Subsidiaries, Buyer or the plan as of the Closing Date, subject to the terms of
such plans (including without limitation any applicable insurance contracts).
(ii) MagneTek shall provide COBRA Continuation Coverage for
benefits under the MagneTek, Inc. Self-Funded Benefits Plan to United States
Transferred Employees (and their dependents and beneficiaries) without a premium
charge to such persons who are employees of MagneTek immediately prior to the
Closing Date, and shall similarly treat those United States Transferred
Employees who are employees of an Acquired Subsidiary on the Closing Date, from
the Closing Date until the earlier of January 1, 1995 or the date that Buyer
establishes a group health plan for United States Transferred Employees (the
"Transition Period"), and MagneTek shall be obligated for Liabilities relating
to all claims incurred by such individuals during the Transition Period in
accordance with the terms of such plan. On the date that is thirty (30) days
from the Closing Date, MagneTek shall invoice Buyer in an amount equal to the
actual cost incurred by MagneTek in providing the above-described coverage to
the United States Transferred Employees during such thirty (30) day period,
consistent with past practices (the "Billed Amount"), and Buyer shall remit the
Billed Amount promptly to MagneTek. At the end of the Transition Period,
MagneTek shall determine in good faith and forward to Buyer a report of the
actual cost of providing the above-described coverage during the Transition
Period, and Buyer shall remit to MagneTek the excess (if any) of such actual
cost over the Billed Amount. If the Billed Amount exceeds such actual cost,
MagneTek shall remit promptly to Buyer the excess amount.
(iii) For purposes of this Section 5.6(c), a claim will
be deemed incurred when the service which results in such claim is rendered.
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(d) Commencing with the date hereof and continuing to the
Closing Date and thereafter, Sellers shall make reasonably available to Buyer
such existing actuarial, financial, personnel and related information as may be
reasonably requested by Buyer with respect to any Employee Plan as it relates to
a Division Employee, including, but not limited to, compensation and employment
histories.
5.7 SUPPLY ARRANGEMENTS. Sellers will, and will cause MagneTek
S.p.A., Italy, MagneTek Drives & Systems and MagneTek Motors & Generators, and
certain of its other Affiliates to, continue to supply certain goods to the
Division on substantially the terms set forth on Exhibit A.
5.8 NO SOLICITATION.
(a) NO SOLICITATION. From the date hereof through the Closing
Date or the earlier termination of this Agreement, Sellers shall not, and shall
instruct each of their respective representatives (including, without
limitation, investment bankers, attorneys and accountants) not to, directly or
indirectly, enter into, solicit, initiate or continue any discussions or
negotiations with, or encourage or respond to any inquiries or proposals by, or
participate in any negotiations with, or provide any information to, or
otherwise cooperate in any other way with, any Person, other than Buyer and its
representatives, concerning any sale of all or any substantial portion of the
Division or the Division Assets, or any merger, consolidation, liquidation,
dissolution or similar transaction involving the Division or the Acquired
Subsidiaries (each such transaction being referred to herein as a "Proposed
Acquisition Transaction"), PROVIDED that the definition of "Proposed Acquisition
Transaction" does not include sales of substantially all of the stock or assets
of MagneTek (PROVIDED that such sale shall not alter any Seller's obligations
under this Agreement).
(b) NOTIFICATION. MagneTek will promptly notify Buyer if any
discussions or negotiations are sought to be initiated, any proposal is made, or
any information is requested, in each case with respect to any Proposed
Acquisition Transaction, and will notify Buyer of the terms of any proposal
which it may receive in respect of any such Proposed Acquisition Transaction,
including, without limitation, the identity of the prospective purchaser or
soliciting party.
5.9 ACCESS TO INFORMATION. From the date hereof through the
Closing Date, Sellers shall, and shall cause their employees to, afford Buyer
and its authorized representatives, during normal business hours and upon
reasonable notice to Sellers in a manner which will not unduly interfere with
the operation of the business of Sellers, complete access at all reasonable
times to the Division and the Division Assets for the purpose of inspecting the
same, and to the officers and employees of Sellers and the Subsidiaries, and
shall furnish Buyer and its authorized representatives all financial, operating
and other data and information as Buyer may reasonably request, except to the
extent that such access would violate any governmental regulation,
confidentiality agreement, claim of attorney-client privilege, law or order to
which Sellers, any Subsidiary, their employees or the Division are subject.
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5.10 CONDUCT OF BUSINESS. From the date hereof through the
Closing Date, Sellers shall, except as contemplated by this Agreement, or as
consented to by Buyer in writing, operate the business of the Division in the
ordinary course and substantially in accordance with past practice and will not
take any action inconsistent with this Agreement. Without limiting the
generality of the foregoing, as to the Division Sellers shall not, and Sellers
shall cause each of the Acquired Subsidiaries not to, except as specifically
contemplated by this Agreement:
(a) take any action that would require disclosure on
Schedule 3.17 had such action been taken prior to the date hereof;
(b) create or incur any Liability of the Acquired Subsidiaries
that is not a Division Liability;
(c) take any other action (or omit to take any action) which
would cause any representation or warranty of Sellers in this Agreement to be or
become untrue in any material respect as of the Closing Date; or
(d) enter into any agreement, or otherwise become obligated, to
take any action prohibited hereunder.
5.11 PAYMENT OF TAXES AND FEES. Sellers will timely pay all
sales, use, transfer and recording Taxes with respect to the sale of the Stock
and the Purchased Assets to Buyer. Buyer and Sellers shall share equally all
notarial fees associated with the sale of the German Entities.
5.12 CLOSURE/REMEDIATION OF LEER PAINT FACILITY. As soon as
practicable after the date hereof, both before and after Closing, Sellers shall
retain, at Sellers sole cost and expense, the services of an organization
reasonably satisfactory to Buyer, to conduct the removal and disposal of all
Substances located in the Paint Room at the Leer, Germany facility, including
but not limited to any Substances contained in the paint booth and paint
collection system in the Paint Room, or released from the paint booth and paint
collection system into the soil or groundwater ("Paint Room Remediation").
Sellers acknowledge and agree that the Paint Room Remediation shall comply with
all applicable German federal, state or local laws and regulations including,
but not limited to, all laws and regulations pertaining to the release or
disposal of Substances. Sellers shall complete the Paint Room Remediation no
later than 120 days after Closing. The obligations set forth in this
Section 5.12 are in addition to, and not limited by, the indemnities contained
in Section 9.3 of this Agreement.
ARTICLE VI
COVENANTS OF BUYER
Buyer hereby covenants and agrees with Sellers as follows:
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6.1 APPROVALS OF THIRD PARTIES. As soon as practicable after
the date hereof, both before and after Closing, Buyer will use its reasonable
efforts to assist Sellers to secure all necessary consents, approvals and
clearances of third parties that have not been procured prior to Closing and
that may be required to consummate the Transactions contemplated hereby and will
otherwise use all reasonable efforts to cause the consummation of the
Transactions in accordance with the terms and conditions of the Transaction
Documents.
6.2 ACCESS TO BOOKS AND RECORDS.
(a) For a period of seven (7) years following the Closing, Buyer
will retain all Records. During such period, Buyer will afford authorized
representatives of Sellers (including its auditors) access to such Records at
reasonable times and during normal business hours at the principal business
office of the Division, or at such other location or locations at which such
Records may be stored or maintained from time to time, and will permit such
representatives to make abstracts from, or copies of, any of such Records, or to
obtain temporary possession of any thereof as may be reasonably required by
Sellers at such Sellers' sole cost and expense. During such period, Buyer will,
at Sellers' expense (limited, however, to Buyer's reasonable out-of-pocket
expenditures plus reimbursement for employee time on the basis set forth in
Section 6.2(b) below), cooperate with Sellers in furnishing information,
evidence, testimony, and other reasonable assistance in connection with any
action, proceeding, Tax audit, employee or labor dispute or investigation to
which such Seller or any of its affiliates is subject relating to the Business
or the Division. The term "Record" as used in this Section 6.2 shall include
any data processing files or other computerized data.
(b) If more than five (5) working days as to any particular
matter is required to be expended by employees of Buyer and its Affiliates in
responding to a request of any Seller under this Section 6.2, then Buyer's
provision of such employees may be conditioned on Sellers' agreement to
reimburse Buyer at reasonable per diem rates (calculated on a basis consistent
with the labor rates applicable to such employees for other purposes) for the
services of such employees; PROVIDED that no such reimbursement shall be
required for the assistance of such employees in connection with any litigation
or disputes for which Sellers are required to indemnify Buyer hereunder.
6.3 EMPLOYEE BENEFIT MATTERS.
(a) EMPLOYEE RETENTION. Buyer shall offer employment to
commence as of the Closing Date to all Division Employees who are active
employees of Sellers as of the close of business on the Closing Date (except for
those Division Employees of Sellers who have received notice of termination from
a Seller on or prior to the Closing Date), and shall set salaries, wages and
employee benefits that, in the aggregate, are generally comparable in value to
those provided to Transferred Employees by Sellers and the Acquired Subsidiaries
as disclosed to Buyer, other than any retiree welfare benefits and other than
those benefits provided to certain Division Employees as described in
subsection (d) below; PROVIDED that nothing in this Agreement shall be construed
as granting any Division
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Employee any rights under this Agreement. Buyer has no present intention
(subject to its discretion as to employee performance) to terminate the
employment of any Transferred Employee within the sixty (60) days following the
Closing Date, except for those employees who have received notice of termination
on or prior to the Closing Date. Buyer also agrees to comply with the terms of
the WARN Act and any analogous state and German law following the Closing Date,
and shall be liable for and indemnify Sellers against all Liabilities, if any,
under the WARN Act, and analogous state and German law arising out of the
transaction contemplated by this Agreement with respect to a Transferred
Employee.
(b) EMPLOYEE BENEFIT PLANS. With respect to Buyer's benefit
plans, Buyer shall grant all Transferred Employees from and after the Closing
Date credit for all service with Sellers and their Affiliates and their
respective predecessors prior to the Closing Date for purposes of eligibility to
participate for which such service was recognized by Sellers and their
Affiliates. Not later than January 1, 1995, Buyer shall establish a health plan
for United States Transferred Employees which shall waive any exclusion or
limitation with respect to pre-existing conditions and actively-at-work
exclusions and shall provide that any expenses incurred by a United States
Transferred Employee or his covered dependents during the plan year in which
such plan is established shall be taken into account under such health plan for
such plan year for purposes of satisfying applicable deductible, coinsurance and
maximum out-of-pocket provisions. Buyer shall also cause its health plan to be
responsible for all health benefit claims by United States Transferred Employees
and their covered dependents for services rendered on or after the earlier of
the date such plan is established or January 1, 1995.
(c) VACATION, HOLIDAY, SICK AND SEVERANCE PAY. As of the
Closing Date, Buyer shall assume the Division Liabilities for vacation, holiday,
sick and severance pay to the extent such obligations are reflected in the Final
Closing Balance Sheet with respect to all United States Transferred Employees.
(d) TELEDYNE PENSION CREDITS. As soon as reasonably practicable
after MagneTek's actuaries complete the actuarial determinations required for
calculating the present value equivalent of the aggregate "Transition Credit
Amounts" that would be credited to the "Retirement Accounts" of those
Transferred Employees who are "Supplement C Participants" if such Transferred
Employees had continued to accrue service and benefits after the Closing Date
and through and including the last day of 1997 under the MagneTek FlexCare Plus
Retirement Pension Plan as in effect on the date hereof (hereinafter referred to
as the "MagneTek Pension Plan"), MagneTek shall pay such amount in cash to
Buyer; PROVIDED that if Buyer disputes such amount in good faith, Buyer and
Sellers shall negotiate in good faith to arrive at an amount reasonably
acceptable to Sellers and Buyer. Provided that MagneTek pays to Buyer the
amount set forth above, Buyer shall provide to those Transferred Employees who
are "Supplement C Participants" (as identified by MagneTek in writing delivered
to Buyer at the time of such payment) benefits in addition to those provided
pursuant to Section 6.3(a), which in the aggregate preserve the substantive
economic benefits provided to such Transferred Employees under Section C4.2 of
the MagneTek Pension Plan. Nothing herein shall obligate Buyer to replicate the
method of calculating "Transition Credit Amounts" or obligate Buyer to provide
any benefits to "Supplement C Participants" within a
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tax-qualified retirement plan of Buyer. For purposes of this Section 6.3(d),
the terms "Transition Credit Amounts," "Retirement Accounts" and "Supplement C
Participants" shall have the meanings set forth for such terms in the MagneTek
Pension Plan.
(e) THIRD-PARTY BENEFICIARIES. No provision of this Section 6.3
shall create any third-party beneficiary rights in any Division Employee
including, without limitation, any right to continued employment or employment
in any particular position with Buyer for any specified period of time after the
Closing Date.
6.4 LETTERS OF CREDIT, ETC. Buyer shall secure replacements for
the letters of credit, performance bonds and bank guarantees listed on Schedule
6.4 or alternative security satisfactory to the beneficiaries of such
instruments (except for the Dresdner Bank guarantee relating to the Retained
German Pension Liability).
6.5 ACCOUNTS RECEIVABLE. Buyer agrees to promptly forward or
cause to be forwarded to Sellers any and all proceeds from accounts receivable
of Sellers that are unrelated to the Business or the Division and that are
received by Buyer and the Division after the Closing Date. If, after the
Closing Date, Buyer receives any payment from any person who at the time of such
payment has outstanding Seller Accounts Receivable and Buyer Accounts Receivable
and the payment (a) does not indicate whether it is in respect of Seller
Accounts Receivable or Buyers Accounts Receivable or (b) indicates that it is in
payment of both Seller Accounts Receivable and Buyer Accounts Receivable without
specifying the portion to be allocated to each, then Seller and Buyer shall
consult with one another to determine the proper allocation of such payment;
and, if they are unable to reach agreement on the proper allocation, such
payment shall be applied so as to retire Seller Accounts and Buyer Accounts
Receivable in chronological order based upon the period of time such accounts
receivable have been in existence.
6.6 TAX MATTERS.
(a) For any taxable period of the Acquired Subsidiaries ending
on or after the Closing Date, Buyer shall timely prepare and file with the
appropriate Governmental Authorities all Tax Returns required to be filed and
will pay all Taxes due with respect to such Tax Returns; PROVIDED THAT Sellers
shall be given a copy of such returns no later than thirty (30) days prior to
the filing thereof and Buyer shall make such changes thereto as Sellers
reasonably request prior to the filing thereof (unless Buyer reasonably
determines any such change not to be appropriate under applicable law);
PROVIDED, FURTHER, that Sellers will reimburse Buyer pursuant to Section 9.3(c)
with respect to its portion of taxes due for the taxable periods covered by such
Tax Returns, except that, if Buyer wrongfully fails to make changes in such Tax
Returns that were reasonably requested by Sellers, then Sellers shall not be
required to reimburse Buyer for such portion as would not have been payable had
Buyer made such changes; PROVIDED, FURTHER, that if Buyer makes changes
requested by Sellers and it is finally determined that such changes are improper
under applicable law, Sellers shall remain liable for their portion of such
Taxes under Section 9.3(c)(i)(1). For any taxable period of the Acquired
Subsidiaries that ends before the Closing Date (including any portion of a
taxable period includible in a combined,
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consolidated, unitary or similar return for a period prior to the Closing Date),
Sellers shall timely prepare and file with the appropriate Governmental
Authorities all Tax Returns required to be filed and will pay all Taxes due with
respect to such Returns. Buyer and Sellers agree to cause the Acquired
Subsidiaries to file all Tax Returns for the period including the Closing Date
on the basis that the relevant taxable period ended as of the close of business
on the day preceding the Closing Date, unless the relevant Governmental
Authority will not accept a Tax Return filed on that basis. Buyer and Sellers
further agree to prepare the permanent records of the Sellers and the Acquired
Subsidiaries in a manner that would result in the tax items of the Acquired
Subsidiaries being included in the consolidated federal income Tax return of
MagneTek for periods up to, but not after, the close of business on the day
before the Closing Date.
(b) Any refunds or credits of Taxes of the Acquired Subsidiaries
paid with respect to taxable periods ending before the Closing Date shall be for
the account of Sellers. Any refunds or credits of Taxes of the Acquired
Subsidiaries paid with respect to taxable periods beginning on or after the
Closing Date shall be for the account of Buyer. Any refunds or credits of Taxes
of the Acquired Subsidiaries paid with respect to any Straddle Period shall be
prorated between Sellers and Buyer. Buyer and Seller shall cooperate to effect
the purposes of the foregoing provisions. Any amounts payable to Buyer or
Sellers shall be net of any tax cost or benefit to the payor attributable to the
receipt of such refund and/or the payment of such amounts; in no event shall
such payment exceed the amount of the refund. Notwithstanding the foregoing,
the control of the prosecution of a claim for refund of Taxes attributable to
Pre-Closing Tax Periods paid pursuant to a deficiency assessed subsequent to the
Closing Date as a result of an audit shall be governed by the provisions of
Section 9.3(c).
(c) Sellers shall be responsible for filing any consolidated,
combined or unitary Tax returns for periods prior to the Closing Date which are
required as a result of examination adjustments made by the IRS or by the
applicable state, local or foreign taxing authorities for such periods as
finally determined. For those jurisdictions in which separate Tax Returns are
filed by the Acquired Subsidiaries, any required returns resulting from such
examination adjustments, as finally determined, shall be prepared by Sellers and
furnished to Buyer or the Acquired Subsidiaries, as the case may be, for
approval (which approval shall not be unreasonably withheld or delayed),
signature and filing at least thirty (30) days prior to the due date for filing
such returns.
(d) Except as otherwise specifically provided for in this
Agreement, all other Taxes shall be payable and be the responsibility of the
party on whom such Taxes are imposed.
(e) Sellers shall deliver to Buyer at the Closing (i) a
"certification of non-foreign status" described in Treasury Regulation
section 1.1445-2(a)(2) with respect to MagneTek and Tempe, and (ii) a
certification of Deutschland that the stock of the German Entities does not
constitute a "United States real property interest," in accordance with Treasury
Regulation section 1.1445-2(c)(3).
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(f) Sellers shall cause the provisions of any Tax sharing
agreement to which the Division or any Acquired Subsidiary is a party to be
terminated no later than the close of business on the day preceding the Closing
Date.
(g) Buyer shall not, and shall cause its Affiliates not to, make
an election pursuant to section 338 of the Code with respect to the purchase of
the stock of the German Entities.
ARTICLE VII
MUTUAL COVENANTS OF SELLERS AND BUYER
Sellers and Buyer covenant and agree as follows:
7.1 CONFIDENTIALITY.
(a) Buyer acknowledges that the information being provided to it by
Sellers is subject to the terms of the Confidentiality Agreement, the terms of
which are incorporated herein by reference. Effective upon, and only upon, the
Closing, the Confidentiality Agreement will terminate; PROVIDED, HOWEVER, that
Buyer acknowledges that the Confidentiality Agreement will terminate only with
respect to information relating solely to the Division Assets, the Division
Liabilities or the Business; and PROVIDED, FURTHER, that Buyer acknowledges that
any and all other confidential or proprietary information provided to it by
Sellers or Sellers' representatives concerning Sellers shall remain subject to
the terms and conditions of the Confidentiality Agreement after the date of the
Closing.
(b) Sellers and the Subsidiaries may have obtained confidential
or proprietary information relating to the business, operations and assets of
the Division. Following the Closing, Sellers and the Subsidiaries shall treat
such information as confidential, preserve the confidentiality thereof, not
duplicate or use such information, and instruct their employees who have had
access to such information to keep confidential and not to use any such
information unless such information (i) is now or is hereafter disclosed,
through no act or omission of Sellers or the Subsidiaries, in a manner making it
available to the general public or (ii) is required by law to be disclosed.
7.2 ASSIGNMENT OF CONTRACTS AND RIGHTS. Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign or novate any Contract or any claim or right or any
benefit arising thereunder or resulting therefrom if an attempted assignment or
novation thereof, without the consent of a third party thereto, would constitute
a breach or other contravention thereof or in any way adversely affect the
rights of Buyer or Sellers thereunder, except to the extent such consent(s) have
been obtained. With respect to any Government Contract or any claim, right or
benefit arising thereunder or resulting therefrom, Buyer and Sellers each will
use all reasonable efforts, both before and after Closing, to obtain the consent
(including, without limitation, by way of novation) of the other parties to any
such Contract for the assignment or novation thereof to Buyer with the release
of Sellers (PROVIDED, HOWEVER, that the release of Sellers
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shall not be made a condition to obtaining such consent). With respect to any
other Contract or any claim, right or benefit arising thereunder or resulting
therefrom, to the extent requested by Buyer, Buyer and Sellers will use their
respective reasonable best efforts, both before and after Closing, to obtain the
consent of the other parties to any such Contract for the assignment or novation
thereof to Buyer with the release of Sellers (PROVIDED, HOWEVER, that the
release of Sellers shall not be made a condition to obtaining such consent). If
any such consent is not obtained, or if an attempted assignment or novation of
any such Contract would be ineffective or would materially adversely affect the
rights of Sellers thereunder so that Buyer would not in fact receive all such
rights, Sellers and Buyer will cooperate in a mutually agreeable arrangement
under which Buyer would obtain substantially the same economic benefits that
would be obtained under an assignment or novation thereof and assume the
obligations thereunder in accordance with this Agreement, including
subcontracting, sub-licensing, or subleasing to Buyer, or under which Sellers
would enforce for the benefit of Buyer, with Buyer assuming Sellers'
obligations, any and all rights of Sellers against a third party thereto.
Sellers will promptly pay to Buyer when received all monies received by any
Seller or its Affiliates under any Contract or any claim or right or any benefit
arising thereunder not transferred pursuant to this Section 7.2, except to the
extent the same represents a Non-Assigned Contract. Buyer's obligations in
respect of such unassigned contracts shall be commensurate with the benefits
thereof made available to Buyer pursuant to any arrangement referred to herein,
and shall comprise Assumed Liabilities. Any contract as to which consent is
obtained after the Closing Date shall thereafter comprise an Assigned Contract.
The reasonable efforts required hereby shall not include any requirement to
institute suit, to offer or grant financial accommodations or to assume
additional Liabilities, except to the extent funded by Buyer.
7.3 USE OF TRADEMARK AND TRADE NAMES. Notwithstanding anything
to the contrary in this Agreement, Buyer may continue to use the name "MagneTek"
and related trademarks, corporate names, and trade names incorporating
"MagneTek," and the stylized "MagneTek" logos (i) in displays, signage and
postings for the period after the Closing Date necessary to permit the
reasonably prompt removal of such names, and only to the extent such displays,
signage or postings exist on the Closing Date; (ii) for a period of two years,
to state the Company's former affiliation with MagneTek (E.G., "formerly a
division of MagneTek, Inc.") and (iii) to the extent any such trade names,
trademarks, service marks or logos appear on stationery, packaging materials,
supplies or inventory on hand as of the Closing Date or on order at the time of
the Closing, until such is exhausted.
7.4 NOTIFICATION OF CERTAIN MATTERS. From the date hereof
through the Closing Date, Sellers shall give prompt notice to Buyer and Buyer
shall give prompt notice to Sellers of (a) the occurrence, or failure to occur,
of any event which occurrence or failure would be likely to cause any of
Sellers' or Buyer's respective representations or warranties contained in this
Agreement to be untrue or inaccurate in any material respect as of the date
hereof or Closing Date and (b) any material failure of any of Sellers or Buyer
to comply with or satisfy any of its respective covenants, conditions or
agreements to be complied with or satisfied by it under this Agreement;
PROVIDED, HOWEVER, that such disclosure shall not be deemed to cure any breach
of a representation, warranty, covenant or agreement, or to satisfy any
condition.
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7.5 FURTHER ASSURANCES. Each of the parties hereto agrees, both
before and after the Closing, (i) to use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the
Transactions, (ii) to execute any documents, instruments or conveyances of any
kind which may be reasonably necessary or advisable to carry out any of the
Transactions, and (iii) to cooperate with each other in connection with the
foregoing and with the fulfillment of all conditions to this Agreement.
7.6 PROFITS OF GERMAN ENTITIES. The parties agree that, subject
to the provisions of Sections 1.5(a) and 2.3, Buyer shall be entitled to any
profits (within the meaning of German law) of the German Entities that have not
been distributed to the shareholders or otherwise disbursed prior to the Closing
Date.
7.7 GERMAN SHARE TRANSFER MATTERS. The parties to this
Agreement acknowledge that the acquisition of the shares of the German Entities
by Buyer will require the prior approval of the Bundeskartellamt (German Federal
Cartel Office) as provided for under German antitrust laws and that any
agreements creating an obligation of Buyer to acquire the shares, and the
consummation of such Agreement, would be null and void without such prior
approval. The parties therefore acknowledge that this Agreement, to the extent
that it relates to the German Entities, is subject to the condition precedent of
the Bundeskartellamt giving its consent to the conclusion and consummation of
the purchase of the German Entities by Buyer, or the Bundeskartellamt declaring
that reasons to prohibit the purchase of the German Entities by Buyer do not
exist, PROVIDED that the German Share Transfer Agreement attached hereto as
Exhibit B (the "German Share Transfer Agreement") will be executed as soon as
practicable after the execution of this Agreement. Furthermore, Sellers agree
to support Buyer in any reasonable respect and as may be required in order to
obtain the approval of the German Federal Cartel Office. With respect to the
German Entities, Deutschland shall, as soon as practicable after the execution
of this Agreement, irrevocably authorize certain of the partners of the Hamburg
law firm Schon Nolte Finkelnburg & Clemm, or such other person or persons as are
reasonably acceptable to Buyer, to sign in its name and on its behalf a duly
notarized copy of the German Share Transfer Agreement. The German Share
Transfer Agreement shall be executed as soon as practicable after the signing of
this Agreement before a Hamburg notary chosen by Buyer.
7.8 AGREEMENTS PERTAINING TO RETAINED GERMAN PENSION LIABILITY.
While the Retained German Pension Liability is a Retained Liability, it is
agreed and understood that it will remain a liability of EuroAtlas, and that
MagneTek's indemnification obligation to Buyer shall arise only as and when
payments owed to Mr. Heusinger become due pursuant to the terms of such
Liability. MagneTek agrees to maintain the existing letter of credit or to
replace or back it with a similar letter of credit such that (i) the terms of
the Retained German Pension Liability are fulfilled and (ii) any exposure to
EuroAtlas is either nonexistent or supported in full by a corresponding
obligation of MagneTek or a Subsidiary; and MagneTek shall cause such letter of
credit to be increased in amount as may be required by applicable law or in
order to comply with clause (ii) of this sentence. It is further understood
that MagneTek shall be permitted to conduct negotiations with Mr. Heusinger
looking to eliminate the Retained German Pension Liability (and related letter
of credit) from
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the books of EuroAtlas and to replace the same with any arrangement satisfactory
to Mr. Heusinger, and that Buyer will cause EuroAtlas to provide all reasonable
cooperation in connection with such effort, PROVIDED it remains free from any
obligation as to the Retained German Pension Liability.
ARTICLE VIII
CLOSING; CONDITIONS PRECEDENT; RISK OF LOSS
8.1 DATE AND PLACE OF CLOSING. Subject to satisfaction or
waiver of the conditions to the obligations of the parties, the purchase and
sale of the Stock and the Purchased Assets pursuant to this Agreement shall be
consummated at a closing (the "Closing") to be held in the offices of Cahill,
Gordon & Reindel, Eighty Pine Street, New York, NY 10005, at 10:00 A.M. Eastern
Standard Time, on November 22, 1994 (the "Closing Date"). Title to the Stock
and the Purchased Assets shall be deemed to have passed from Sellers to Buyer as
of 12:01 a.m., California time, on the Closing Date.
8.2 SELLERS' PERFORMANCE. At the Closing, concurrently with
performance by Buyer of its obligations to be performed at the Closing:
(a) CONVEYANCES. Sellers shall execute and deliver to Buyer, in
form and substance acceptable to Buyer, (i) a combined bill of sale and
Assignment and Assumption Agreement in substantially the form attached hereto as
Exhibit C conveying to Buyer all items of personalty and rights under Assigned
Contracts included among the Purchased Assets and providing for the assumption
by Buyer of the Assumed Liabilities, and (ii) all other assignments,
endorsements and instruments of transfer as shall be necessary or appropriate to
carry out the intent of this Agreement and as shall be sufficient to vest in
Buyer all of Sellers' right, title and interest in the Purchased Assets. If
requested by Buyer, such documents shall be in a form suitable for recording.
(b) RECORDS. Sellers shall deliver to Buyer all Records
included in the Division Assets.
(c) OPINIONS OF SELLERS' COUNSEL. Buyer shall have received an
opinion from Gibson, Dunn & Crutcher, counsel for Sellers, dated the Closing
Date, and from Samuel A. Miley, Vice President, Secretary and General Counsel to
MagneTek, each in form and substance reasonably acceptable to Buyer (and on
which Buyer's lenders will be entitled to rely).
(d) CONSENTS. Sellers shall deliver to Buyer the consents and
approvals required to be obtained by Sellers and set forth on Schedule 3.5.
(e) STOCK. Sellers shall deliver to Buyer certificates
representing the Stock (to the extent certificated), duly endorsed or
accompanied by stock powers duly executed in blank and otherwise in a form
acceptable for transfer on the books of each of the Company and the German
Entities, and any documents that are necessary for the transfer to
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Buyer of good title to the Stock, with any requisite transfer tax or stamps
attached or provided for.
(f) NOTICE TO GERMAN COUNSEL. Sellers shall deliver to Buyer or
to a party designated by Buyer the notice contemplated in Section 4 of the
German Share Transfer Agreement to the effect that the Purchase Price has been
received by Sellers.
(g) CHARTER DOCUMENTS. Sellers shall deliver to Buyer a copy of
the Articles of Incorporation (or the foreign equivalent thereof) of each
Acquired Subsidiary with all amendments thereto, a copy of the bylaws (or the
foreign equivalent thereof) of each of the Acquired Subsidiaries as amended
through the Closing Date, certified by the secretary (or closest German
equivalent) of each respective Acquired Subsidiary, and all corporate minute
books and stock records of the Company, and certificates of good standing (or
the foreign equivalent thereof) for the jurisdiction of incorporation of each
Acquired Subsidiary and each jurisdiction where each Acquired Subsidiary is
qualified to do business, as a foreign corporation, each of which shall be
certified as of a date within ten (10) days prior to the Closing Date by the
Secretary of State (or the foreign equivalent thereof reasonably acceptable to
Buyer) of the jurisdictions of incorporation and qualification.
(h) RELEASES OF LIENS. Sellers shall deliver to Buyer executed
releases by the appropriate creditors of any and all liens or other Encumbrances
(other than Permitted Encumbrances) on any of the Division Assets or the Stock.
8.3 BUYER'S PERFORMANCE. At the Closing, concurrently with the
performance by Sellers of their obligations to be performed at the Closing,
Buyer shall:
(a) PURCHASE PRICE. Deliver to Sellers the Purchase Price by
wire transfer specified in Section 2.4.
(b) ASSIGNMENT AND ASSUMPTION AGREEMENT. Execute and deliver to
Sellers the Assignment and Assumption Agreement in substantially the form
attached hereto as Exhibit C.
(c) OPINION OF COUNSEL TO BUYER. Sellers shall have received an
opinion from Latham & Watkins, counsel for Buyer, dated the Closing Date, in
form and substance reasonably acceptable to Sellers.
(d) RELEASE OF LETTERS OF CREDIT, ETC. Buyer shall have
obtained replacement letters of credit for, or alternative security satisfactory
to the beneficiaries of, the letters of credit, performance bonds and bank
guarantees of Sellers with respect to the Division set forth on Schedule 6.4
(other than the Dresdner Bank guaranty relating to the Retained German Pension
Liability).
(e) CONSENTS. Buyer shall deliver to Sellers evidence of the
clearance required from the German Federal Cartel Office.
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8.4 OTHER INSTRUMENTS AND ACTIONS. In addition to the
foregoing, Buyer and Sellers agree as follows:
(a) FURTHER ACTION BY SELLERS. At any time and from time to
time, at or after the Closing, upon request of Buyer, Sellers shall do, execute,
acknowledge and deliver or shall cause to be done, executed, acknowledged and
delivered all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney and assurances as may reasonably be required in order to vest
in and confirm to Buyer full and complete title to, possession of, and the right
to use and enjoy, the Stock and the Purchased Assets.
(b) FURTHER ACTION BY BUYER. At any time and from time to time,
at or after the Closing, upon request of Sellers, Buyer shall do, execute,
acknowledge and deliver or shall cause to be done, executed, acknowledged and
delivered all such further acts and assurances as may reasonably be required in
order to better assure and confirm to Sellers the assumption by Buyer of the
obligations to render performance which are to be assumed by Buyer pursuant to
this Agreement.
8.5 CONDITIONS TO SELLERS' OBLIGATIONS. The obligations of
Sellers to effect the Closing are subject, in the discretion of Sellers, to the
satisfaction, on or prior to the Closing, of each of the following conditions,
any of which may be waived by Sellers:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects at and as of the date of this
Agreement and at and as of the Closing, and Buyer shall have performed and
satisfied all material agreements and covenants required hereby to be performed
by Buyer prior to the Closing.
(b) NO PROCEEDINGS, LITIGATION OR LAWS. No action by any
governmental authority of competent jurisdiction or other Person shall have been
instituted which would reasonably be expected to materially damage any Seller if
the transactions contemplated hereunder are consummated.
(c) CERTIFICATES. Buyer shall furnish Sellers with
such certificates of its duly authorized officers and others to evidence
compliance with the conditions set forth in this Article VIII as may be
reasonably requested by Sellers.
(d) CORPORATE DOCUMENTS. Sellers shall have received from Buyer
resolutions adopted by the board of directors of Buyer approving this Agreement,
the Transaction Documents and the Transactions, certified by Buyer's corporate
secretary.
(e) CONSENTS. All governmental consents necessary (except for
Government Contract assignment or novation) to effect the Closing shall have
been obtained.
(f) OTHER AGREEMENTS. Buyer shall have executed and delivered
the Transaction Documents in the forms attached as exhibits hereto or in forms
mutually acceptable to Sellers and Buyer.
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(g) OFFICERS CERTIFICATES. Sellers shall have received
Certificates in the form of Exhibit D hereto from each of Messrs. Kahrs, Dotson
and Menken.
8.6 CONDITIONS TO BUYER'S OBLIGATIONS. The obligations of Buyer
to consummate the transactions provided for hereby are subject, in the
discretion of Buyer to the satisfaction, on or prior to the Closing, of each of
the following conditions, any of which may be waived by Buyer:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of Sellers contained in this Agreement shall be
true and correct in all material respects at and as of the date of this
Agreement and at and as of the Closing, and Sellers shall have performed and
satisfied all material agreements and covenants required hereby to be performed
by them prior to the Closing.
(b) CONSENTS; ASSIGNMENT. All governmental consents necessary
to effect the Closing and for the operation of the business by Buyer shall have
been obtained except for novations required to be obtained from the U.S.
Government or any agency thereof in connection with a Government Contract. All
Contracts to which a Seller is a party that are material to the Division (and
all Contracts of an Acquired Subsidiary that are material to the Division and
that require a consent upon a change of control of such Acquired Subsidiary),
including, without limitation, all of the Contracts set forth on Schedules 1.1J
or 3.7 hereto either (A) shall have been validly assigned to Buyer, which
assignments shall be reasonably acceptable to Buyer with consents and approvals
required from third parties having been obtained, or (B) shall have been treated
pursuant to Section 7.2 such that Buyer would obtain substantially the same
economic benefits that would be obtained under an assignment thereof.
(c) NO PROCEEDINGS OR LITIGATION. No action by any governmental
authority of competent jurisdiction or other Person shall have been instituted
which would reasonably be expected to materially damage Buyer if the
transactions contemplated hereby are consummated.
(d) CERTIFICATES. Sellers shall furnish Buyer with such
certificates of its duly authorized officers and others to evidence compliance
with the conditions set forth in this Article VIII as may be reasonably
requested by Buyer.
(e) CORPORATE DOCUMENTS. Buyer shall have received from Sellers
resolutions adopted by the boards of directors of Sellers (except for
Deutschland) approving this Agreement, the Transaction Documents and the
Transactions, certified by each Seller's corporate secretary, as applicable.
(f) OTHER AGREEMENTS. Sellers shall have executed and delivered
the Transaction Documents in the forms attached as exhibits hereto or in forms
mutually satisfactory to Sellers and Buyer.
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(g) GERMAN FEDERAL CARTEL OFFICE APPROVAL. Buyer shall have
received all requisite clearances from the German Federal Cartel Office.
8.7 RISK OF LOSS. If any material portion of the Division
Assets is destroyed or damaged by fire or any other cause on or prior to the
Closing Date, Sellers shall give written notice to Buyer as soon as practicable
after, but in any event within five (5) calendar days of, discovery of such
damage or destruction, including specification of the amount of insurance, if
any, covering such Division Assets and the amount, if any, which Sellers are
otherwise entitled to receive as a consequence of such damage or destruction.
Prior to the Closing, Buyer shall have the option, which shall be exercised by
written notice to Sellers within ten (10) calendar days after receipt of
Sellers' notice or if there are not ten (10) calendar days prior to the Closing
Date, as soon as practicable prior to the Closing Date, of (a) accepting such
Division Assets in their destroyed or damaged condition in which event Buyer
shall be entitled to the proceeds of any insurance or other proceeds payable
with respect to such loss, or the cash equivalent thereof, and to such
indemnification for any uninsured portion of such loss pursuant to Article IX,
and the full Purchase Price shall be paid for such Division Assets,
(b) excluding such Division Assets from this Agreement, in which event the
Purchase Price shall be reduced by the amount allocated to such Division Assets,
as mutually agreed between Sellers and Buyer or (c) after providing Sellers with
a reasonable opportunity to cure, terminating this Agreement in accordance with
Section 10.1 if such damage or destruction has a Material Adverse Effect.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1 EXPENSES AND LOSSES. For purposes of this Article IX, the
following definitions shall apply:
"EXPENSES" shall mean any and all reasonable out-of-pocket expenses
incurred in connection with investigating, defending or asserting any claim,
action, suit or proceeding in connection with any matter indemnified against
(including, without limitation, the reasonable out of pocket fees and expenses
of legal-counsel).
"LOSSES" shall mean any and all losses, costs, obligations,
settlements, payments, fines, penalties, expenses, awards or judgments.
9.2 BASKET FOR INDEMNIFICATION. Except with respect to
Liabilities described in Subsections 9.3(a) and 9.4(a), with respect to which
the obligation to indemnify shall be absolute, neither Sellers nor Buyer will be
responsible for indemnifying the other Sellers or Buyer, as the case may be, for
any Losses or Expenses until the aggregate of all such Losses and Expenses
exceed $500,000 (and then only to the extent of any such excess).
9.3 INDEMNIFICATION BY SELLERS. Sellers agree, jointly and
severally, to indemnify and hold harmless Buyer and its officers, directors,
employees, agents, investors and Affiliates from and against any and all Losses
and Expenses in connection with or
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arising from (i) the Liabilities set forth in Section 9.3(a) below and
(ii) subject to the limitations of Section 9.3(b), any breach or inaccuracy of
any representation, warranty, covenant or agreement set forth in any of the
Transaction Documents (including any certificates delivered pursuant thereto):
(a) Sellers' indemnification with respect to the following
Liabilities (whether arising in connection with an Acquired Subsidiary or a
Division Asset) shall not be limited in either amount or time (except as
otherwise set forth in Section 9.3(b) with respect to indemnification pursuant
to clause (vii) below):
(i) TAXES. Any Liability for Taxes for which Buyer is
indemnified pursuant to Section 9.3(c).
(ii) FINANCING OBLIGATIONS. Any Financing Obligations.
(iii) EMPLOYEE BENEFITS-RELATED. All Liabilities (other
than Liabilities for benefits accrued on the Final Closing Balance Sheet or
otherwise expressly assumed hereunder) under, relating to or arising in
connection with any Employee Plan or ERISA Affiliate Plan, including without
limitation (1) any Losses or Expenses or commitment to, or offset in favor of,
any Governmental Authority and (2) any refusal of any Governmental Authority to
reimburse Buyer fully for costs of any employee benefit plan or benefit
arrangement maintained or contributed to by Buyer which costs are allocable to
flexibly priced contracts with any such Governmental Authority to the extent
that such refusal is related to the closure, termination, or funding status of
any Employee Plan or ERISA Affiliate Plan.
(iv) LIABILITIES UNRELATED TO THE BUSINESS. Any and
all Liabilities of Sellers or any of their affiliates of any kind, character or
description, that are not attributable to the Division or the Division Assets,
including, without limitation, all Controlled Group Liabilities.
(v) LIABILITIES RELATING TO THE RETAINED ASSETS. All
claims against and obligations of Sellers under the Non-Assigned Contracts and
all other Liabilities of Sellers relating to the Retained Assets.
(vi) PENDING OR THREATENED LITIGATION OR KNOWN
DISPUTES. All Pending or Threatened Litigation.
(vii) ENVIRONMENTAL LIABILITIES. All Liabilities
relating to Pre-Closing Environmental Matters, subject to the provisions of
Section 9.3(b) and Section 9.3(d).
(viii) OTHER RETAINED LIABILITIES. All other Retained
Liabilities, including without limitation the Retained German Pension Liability.
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(b) Except as set forth below, other than matters that are also
subject to indemnification under Section 9.3(a), Sellers' indemnification with
respect to any breach or inaccuracy of any representation, warranty, covenant or
agreement ("Buyer's General Claims") shall be limited to claims made or
identified to Sellers with reasonable specificity within a period of two (2)
years after Closing. Sellers' indemnification for claims arising under
Sections 9.3(a)(vii) and 9.3(d) ("Buyer's Environmental Claims") shall be
limited to claims made or identified to Sellers with reasonable specificity
within a period of five (5) years after the Closing. Notwithstanding the
foregoing, Buyer's General Claims, insofar as any thereof pertain to a claimed
breach of the representations made in Section 3.16, shall be limited to claims
made or identified to Sellers with reasonable specificity prior to the
expiration of the statute of limitations applicable to the taxable period of
Sellers (or the portion thereof) ending the day before the Closing Date, which
limitation shall not be extended by any extension or waiver thereof not effected
by MagneTek or a then-existing Subsidiary thereof. Sellers' liability for
Buyer's General Claims and Buyer's Environmental Claims shall be limited to an
aggregate amount of $12,000,000 in respect of all such Claims.
(c) TAX INDEMNIFICATION.
(i) Subject to the terms and conditions of this Article IX,
Sellers shall indemnify Buyer and its Affiliates (including the Acquired
Subsidiaries) and each of their respective officers, directors, employees and
agents and hold them harmless from (1) all liability for Taxes of Sellers and
the Acquired Subsidiaries for Pre-Closing Tax Periods (as defined below);
(2) all liability for Taxes incurred as a result of actions outside the ordinary
course of business taken by the Sellers or the Acquired Subsidiaries at the
direction of Sellers on the Closing Date; (3) all liability of the Acquired
Subsidiaries for Taxes of any person as defined in section 7701(a)(1) of the
Code (other than the MagneTek Group) under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract, or otherwise, except for such liabilities and agreements as may
have been incurred or entered into in the ordinary course of business and which
in the aggregate are not material in amount; (4) all liability for Taxes
incurred as a result of any income or gain restored to the income of the Company
under the consolidated return rules of Treas. Reg. Section 1.1502-13, -13T, -14,
- -14T or -19 by reason of the Company ceasing to be a member of the MagneTek
Group; and (5) all liability for Expenses incurred with respect to any item
indemnified pursuant to clauses (1) through (4). "Pre-Closing Tax Period" shall
mean any taxable period ending before the Closing Date and the portion ending at
the close of business the day preceding the Closing Date of any taxable period
that includes (but does not end on) the Closing Date.
(ii) Buyer shall indemnify Sellers and their Affiliates and
each of their respective officers, directors, employees and agents, and hold
them harmless from (1) all liability for Taxes of Buyer and the Acquired
Subsidiaries for any taxable period ending on or after the Closing Date (except
to the extent such taxable period began before the Closing Date, in which case
Buyer's indemnity will cover only that portion of any such Taxes that are not
for the Pre-Closing Tax Period), and (2) all liability for Expenses incurred
with respect to any item indemnified pursuant to clause (1).
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(iii) In the case of any taxable period that includes
(but does not end on) the Closing Date (a "Straddle Period"), the Taxes of
Sellers and the Acquired Subsidiaries, for the portion of the Straddle Period
that constitutes a Pre-Closing Tax Period, shall be computed as if such taxable
period ended as of the close of business on the day preceding the Closing Date.
Sellers' obligation to indemnify Buyer pursuant to clause (a)(i) of the first
sentence of this Section 9.3(c) with respect to Taxes for a Straddle Period
shall be limited to an amount equal to the excess of (x) Taxes for the portion
of the Straddle Period that constitutes a Pre-Closing Tax Period (as calculated
pursuant to the preceding sentence) over (y) (A) the amount of Taxes for the
Straddle Period paid, or provided for through estimated Taxes or deposits paid,
at any time by a Seller, plus (B) the amount of such Taxes paid or provided for
through estimated Taxes or deposits paid by Sellers or the Acquired Subsidiaries
on or prior to the Closing Date. Sellers shall pay such excess to Buyer within
thirty (30) days after the Tax Return for such Straddle Period (other than a Tax
Return with respect to estimated Tax) is filed (or required to be filed, if
later).
(iv) At least thirty (30) days prior to the filing by Buyer
or any of the Acquired Subsidiaries of a Tax Return for a Straddle Period, Buyer
shall notify MagneTek of any amount payable by any Seller calculated in
accordance with this Section 9.3(c) and shall provide MagneTek with reasonably
detailed computations to support the amount notified. Sellers shall pay to
Buyer the amount within thirty (30) days after the Tax Return for the Straddle
Period (other than a Tax Return with respect to estimated Taxes) is filed or
required to be filed, if later, except to the extent such amounts would not have
been payable had Buyer not wrongfully failed to make changes to the Tax Return
required to be made pursuant to Section 6.6(a). The amount payable by Sellers
or Buyer, as the case may be, pursuant to this paragraph shall be adjusted to
reflect any final determination with respect to Taxes for a Straddle Period and
payments between Sellers and Buyer to reflect such adjustments shall be made if
necessary. Such adjustments and any resulting payments shall be made within
sixty (60) days of such final determination. Buyer and Sellers acknowledge
that, except to the extent otherwise provided in this Agreement, they have no
obligation to indemnify each other for any Taxes other than as specifically
provided in this Section 9.3(c).
(A) If a claim (including an informal or proposed
claim) shall be made by any Tax authority, which, if successful, might result in
an indemnity payment to any Person hereunder (a "Tax Indemnitee"), the Tax
Indemnitee shall promptly notify the party against whom indemnification is or
may be sought (the "Tax Indemnitor") in writing of such claim (a "Tax Claim").
If notice of a Tax Claim is not given to the Tax Indemnitor within a sufficient
period of time to allow the Tax Indemnitor to effectively contest such Tax
Claim, or in reasonable detail to apprise the Tax Indemnitor of the nature of
the Tax Claim, in each case taking into account the facts and circumstances with
respect to such Tax Claim, the Tax Indemnitor shall not be liable to the Tax
Indemnitee to the extent that the Tax Indemnitor's ability to effectively
contest such Tax Claim is actually prejudiced as a result thereof (without
consideration of the merits of the claim or the Tax Indemnitor's potential
arguments against such claim).
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(B) With respect to any Tax Claim, the Tax Indemnitor
shall control all proceedings taken in connection with such Tax Claim
(including, without limitation, selection of counsel) and, without limiting the
foregoing, may in its sole discretion pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with any taxing
authority with respect thereto and may, in its sole discretion, either pay the
Tax claimed and sue for a refund where applicable law permits such refund suits
or contest the Tax Claim in any permissible manner, PROVIDED, HOWEVER, that the
Tax Indemnitor shall not settle or compromise a Tax Claim without giving thirty
(30) days prior notice to the Tax Indemnitee, and without the Tax Indemnitee's
consent, which shall not be unreasonably withheld or delayed. The Tax
Indemnitee, and each of its Affiliates, shall cooperate with the Tax Indemnitor
in contesting any Tax Claim, which cooperation shall include, without
limitation, the filing of amended Tax Returns or claims for refund, the
execution of settlement documents, the retention and (upon the Tax Indemnitor's
request) the provision to Tax Indemnitor of Records and information which are
reasonably relevant to such Tax Claim, and making employees available on a
mutually convenient basis to provide additional information or explanation of
any material provided hereunder or to testify at proceedings relating to such
Tax Claim.
(d) INDEMNIFICATION FOR PRE-CLOSING ENVIRONMENTAL MATTERS. In
the event that Buyer becomes aware of any action, proceeding, investigation or
claim relating to any Pre-Closing Environmental Matter (a "Pre-Closing
Environmental Proceeding"), notice thereof shall be given to Sellers as promptly
as practicable. Buyer will use its reasonable best efforts to provide notice of
Pre-Closing Environmental Proceedings to Sellers as promptly as practicable so
that Sellers can take control of the defense and investigation thereof, if they
so elect, in accordance with this Section 9.3(d); PROVIDED that the failure of
Buyer to give timely notice hereunder shall not affect rights of any indemnified
person to indemnification hereunder, to the extent that Sellers have not
suffered actual damage caused by such failure. After receipt of notice of a
Pre-Closing Environmental Proceeding, if Sellers acknowledge in writing to Buyer
that Sellers shall be obligated under the terms of their indemnity hereunder in
connection with such matter, then Sellers shall be entitled, if they so elect:
(i) to take control of the defense and investigation of such matter; and (ii) to
employ and engage attorneys and consultants of their own choice to handle and
defend the same, at Sellers' cost, risk and expense. However, in connection
with such matters, Sellers may not compromise or settle any claims or admit any
liability on behalf of any Indemnified Person, contractually bind any
Indemnified Person, or conduct or enter into any agreement to conduct any
investigation, remedial action or other action at or under any Facility without
the written consent of Buyer, such consent not to be unreasonably withheld. If
Sellers have taken control of a matter, they will keep Buyer reasonably informed
of the progress of any such investigation, defense, compromise or settlement of
such matter. In the event Sellers notify Buyer of their intent to take control
of a Pre-Closing Environmental Proceeding, Sellers shall have no further
obligation to indemnify Buyer or any other Indemnified Person with respect to
any expenses voluntarily incurred by such other Indemnified Person in connection
with such matter after the date on which Sellers take control of such matter,
except to the extent that such expenses were necessary to mitigate further
damages or to comply with any Environmental Law and Sellers have failed to take
appropriate measures to ensure such compliance or mitigation of damages (as
applicable).
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Buyer shall cooperate in all reasonable respects with Sellers and their
attorneys in the investigation and defense of such matter; and Buyer may, at its
own cost, participate in the investigation and defense of such matter. In
connection with Sellers' control of any Pre-Closing Environmental Proceeding,
Buyer shall: (i) afford Sellers and their authorized representatives, during
normal business hours and upon reasonable notice to Buyer, access to any
Facility and to officers and employees of Buyer to the extent reasonably
necessary for Sellers to defend or investigate such matter, and (ii) furnish
Sellers and their authorized representatives all non-privileged relevant data
and information which they may reasonably request. Sellers will not utilize
their rights of access and right to information in a manner that unreasonably
interferes with or interrupts the operations of the affected Facility or the
Division, and will take all actions reasonably necessary to minimize disruption
of the operations of Buyer.
If Sellers fail to take control of a Pre-Closing Environmental
Proceeding within fifteen (15) calendar days after receipt of the notice of a
Pre-Closing Environmental Proceeding, Buyer will (upon delivering notice to such
effect to Sellers) have the right to undertake the investigation, defense,
compromise or settlement of such matter and Sellers shall have the right to
participate therein at their own cost. If Buyer takes control of the matter,
Buyer will keep Sellers reasonably informed of the progress of such matter. If
an action, proceeding, investigation or claim concerns both a Pre-Closing
Environmental Matter and another matter arising from events occurring after
Closing for which Sellers are not liable or otherwise responsible under this
Agreement, Sellers may assume control of that portion of the matter concerning a
Pre-Closing Environmental Matter in accordance with the provisions stated above,
and shall not be obligated to respond to or contribute to the cost of responding
to the remaining portion of the matter which does not relate to a Pre-Closing
Environmental Matter. In such instances where each of Buyer and Sellers is in
control of a portion of a matter, each of Buyer and Sellers shall in good faith
attempt to agree upon an appropriate allocation of the costs of responding to
such matter and an appropriate arrangement for communicating with governmental
authorities and other persons and for otherwise cooperating in the response to
such matter.
9.4 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and
hold harmless the Sellers and their officers, directors, employees, investors
and Affiliates from and against any and all Losses and Expenses in connection
with or arising from the following subject to such limitations as to time and
amount as may be set forth for any category of Liabilities below:
(a) Buyer's indemnification with respect to Division
Liabilities, Taxes as set forth in Section 9.3(c), amounts to be paid by Buyer
pursuant to Section 5.6(c)(ii) relating to COBRA Continuation Coverage during
the Transition Period, and all liabilities for fees and expenses to the extent
expressly assumed by Buyer hereunder, shall not be limited in either amount or
time.
(b) Buyer's indemnification with respect to any breach or
inaccuracy of any representation, warranty, covenant or agreement of Buyer
("Sellers' General Claim") shall be limited to claims made or identified to
Buyer with reasonable
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specificity within a period of two (2) years after Closing. Buyer's
indemnification for Post-Closing Environmental Matters shall be limited to
claims made with reasonable specificity within a period of five (5) years after
the Closing. Buyer's liability for Sellers' General Claims and for Post-Closing
Environmental Matters shall be limited to an aggregate amount of $12,000,000 in
respect of all such claims.
(c) INDEMNIFICATION FOR POST-CLOSING ENVIRONMENTAL MATTERS. In
the event that any Seller becomes aware of any action, proceeding, investigation
or claim relating to any Post-Closing Environmental Matter (a "Post-Closing
Environmental Proceeding"), notice thereof shall be given to Buyer as promptly
as practicable. Each Seller will use its reasonable best efforts to provide
notice of Post-Closing Environmental Proceedings to Buyer as promptly as
practicable so that Buyer can take control of the defense and investigation of
such claims, if it so elects, in accordance with this Section 9.4(c); PROVIDED
that the failure of Sellers to give timely notice hereunder shall not affect
rights of any indemnified person to indemnification hereunder, to the extent
that Buyer has not suffered actual damage caused by such failure. After receipt
of notice of a Post-Closing Environmental Proceeding, if Buyer acknowledges in
writing to Sellers that Buyer shall be obligated under the terms of its
indemnity hereunder in connection with such matter, then Buyer shall be
entitled, if it so elects: (i) to take control of the defense and investigation
of such matter; and (ii) to employ and engage attorneys and consultants of their
own choice to handle and defend the same, at Buyer's cost, risk and expense.
However, in connection with such matters, Buyer may not compromise or settle any
claims or admit any liability on behalf of any Indemnified Person, contractually
bind any Indemnified Person, or conduct or enter into any agreement to conduct
any investigation, remedial action or other action at or under any relevant
facility then used by a Seller without the written consent of Sellers, such
consent not to be unreasonably withheld. If Buyer has taken control of a
matter, it will keep Sellers reasonably informed of the progress of any such
investigation, defense, compromise or settlement of such matter. In the event
Buyer notifies Sellers of its intent to take control of a Post-Closing
Environmental Proceeding, Buyer shall have no further obligation to indemnify
Sellers or any other Indemnified Person with respect to any expenses voluntarily
incurred by such other Indemnified Person in connection with such matter after
the date on which Buyer takes control of such matter, except to the extent that
such expenses were necessary to mitigate further damages or to comply with any
Environmental Law and Buyer has failed to take appropriate measures to ensure
such compliance or mitigation of damages (as applicable).
Sellers shall cooperate in all reasonable respects with Buyer and its
attorneys in the investigation and defense of such matter; and each Seller may,
at its own cost, participate in the investigation and defense of such matter.
In connection with Buyer's control of any Post-Closing Environmental Proceeding,
each Seller shall: (i) afford Buyer and its authorized representatives, during
normal business hours and upon reasonable notice to Sellers, access to any
relevant facility then used by a Seller and to officers and employees of Sellers
to the extent reasonably necessary for Buyer to defend or investigate such
matter, and (ii) furnish Buyer and its authorized representatives all non-
privileged relevant data and information which it may reasonably request. Buyer
will not utilize its rights of access and right to information in a manner that
unreasonably interferes with or interrupts the operations
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of the affected facility (if used by a Seller) or the business of Sellers, and
will take all actions reasonably necessary to minimize disruption of the
operations of Sellers.
If Buyer fails to take control of a Post-Closing Environmental
Proceeding within fifteen (15) calendar days after receipt of the notice of a
Post-Closing Environmental Proceeding, Sellers will (upon delivering notice to
such effect to Buyer) have the right to undertake the investigation, defense,
compromise or settlement of such matter and Buyer shall have the right to
participate therein at its own cost. If Sellers take control of the matter,
Sellers will keep Buyer reasonably informed of the progress of such matter. If
an action, proceeding, investigation or claim concerns both a Post-Closing
Environmental Matter and another matter arising from events occurring prior to
or after Closing for which Buyer is not liable or otherwise responsible under
this Agreement, Buyer may assume control of that portion of the matter
concerning a Post-Closing Environmental Matter in accordance with the provisions
stated above, and shall not be obligated to respond to or contribute to the cost
of responding to the remaining portion of the matter which does not relate to a
Post-Closing Environmental Matter. In such instances where each of Sellers and
Buyer is in control of a portion of a matter, each of Sellers and Buyer shall in
good faith attempt to agree upon an appropriate allocation of the costs of
responding to such matter and an appropriate arrangement for communicating with
governmental authorities and other persons and for otherwise cooperating in the
response to such matter.
9.5 NOTICE OF LOSS. Subject to the provisions of
Sections 9.3(c), 9.3(d) and 9.4(c) (which shall govern in lieu of Sections 9.5
and 9.6 with respect to all matters covered thereby) if a claim for
indemnification hereunder (a "Claim") is to be made by an Indemnified Party,
such Indemnified Party shall give written notice (a "Claim Notice") to the
Indemnifying Party as soon as practicable after such Indemnified Party becomes
aware of any fact, condition or event which may give rise to any Expense or Loss
for which indemnification may be sought under this Article IX. If any lawsuit
or enforcement action is filed against any Indemnified Party hereunder, notice
thereof (a "Third Party Notice") shall be given to the Indemnifying Party as
promptly as practicable (and in any event within thirty (30) calendar days after
the service of the citation or summons). The failure of any Indemnified Party
to give timely notice hereunder shall not affect rights to indemnification
hereunder, except to the extent that the Indemnifying Party demonstrates actual
damage caused by such failure.
9.6 DEFENSE OF CLAIMS. Except as otherwise set forth in
Sections 9.3(c), 9.3(d) and 9.4(c), after receipt of a Claim Notice or a Third
Party Notice, if the Indemnifying Party shall acknowledge in writing to the
Indemnified Party that the Indemnifying Party shall be obligated under the terms
of its indemnity hereunder in connection with such lawsuit or action, then the
Indemnifying Party shall be entitled, if it so elects, (i) to take control of
the defense and investigation of such lawsuit or action, (ii) to employ and
engage attorneys of its own choice (such counsel to be reasonably acceptable to
the Indemnified Party) to handle and defend the same, at the Indemnifying
Party's cost, risk and expense (unless the named parties to such action or
proceeding include both the Indemnifying Party and the Indemnified Party and the
indemnified party has been advised in writing by counsel that there may be one
or more legal defenses available to such
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Indemnified Party that are different from or additional to those available to
the Indemnifying Party), and (iii) to compromise or settle such claim, which
compromise or settlement shall be made only with the written consent of the
Indemnified Party, such consent not to be unreasonably withheld. The
Indemnified Party shall cooperate in all reasonable respects with the
Indemnifying Party and such attorneys in the investigation, trial and defense of
such lawsuit or action and any appeal arising therefrom; and the Indemnified
Party may, at its own cost, participate in the investigation, trial and defense
of such lawsuit or action and any appeal arising therefrom. The parties shall
also cooperate with each other in any notifications to insurers. If the
Indemnifying Party fails to assume the defense of such claim within fifteen (15)
calendar days after receipt of the Claim Notice or the Third Party Notice, the
Indemnified Party against which such claim has been asserted will (upon
delivering notice to such effect to the Indemnifying Party) have the right to
undertake the defense, compromise or settlement of such claim and the
Indemnifying Party shall have the right to participate therein at its own cost;
PROVIDED, HOWEVER, that such claim shall not be compromised or settled without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. In the event the Indemnified Party assumes the defense
of the claim, the Indemnified Party will keep the Indemnifying Party reasonably
informed of the progress of any such defense, compromise or settlement.
9.7 INDEMNIFICATION RELATING TO CERTAIN PRODUCT-RELATED MATTERS.
Sellers and Buyer agree that notwithstanding the fact that it is not included on
Schedule 3.8, the matters referred to on Schedule 3.22 (hereinafter, the
"Product Failure") will be treated as a Retained Liability for which Buyer is
indemnified in full under Section 9.3(a) in the same manner as a threatened
litigation. Notwithstanding the foregoing, even if there shall not have been a
Claim (within the meaning of Section 9.5) in respect thereof, Sellers shall be
entitled to take commercially reasonable measures to obviate, reduce or mitigate
any liability relating to the Product Failure, including, without limitation,
the issuance of any recall notice or provision of replacement parts and labor,
all at its own expense and after reasonable notice to Buyer. In addition, to
the extent Sellers wish to pursue any claim against a manufacturer in respect of
the Product Failure, any amounts recovered therefrom shall be considered
Retained Assets, and Buyer shall provide reasonable cooperation, including
serving as a nominal plaintiff, subject to the provisions of Section 6.2(b)
hereof. In the event of a Claim (within the meaning of Section 9.5), the
provisions of Section 9.6 hereof shall apply; however, the existence of one or
more Claims shall not diminish Sellers' right to take commercially reasonable
prophylactic measures as referred to above.
9.8 LOSSES NET OF INSURANCE, TAXES.
(a) The amount of any Loss for which indemnification is provided
under this Article IX shall be net of any amounts recovered or recoverable by
the Indemnified Person under insurance policies, or in the form of a refund of
Taxes or a reduction in Taxes otherwise payable, with respect to such Loss.
(b) The parties hereto agree that, from and after the Closing,
the indemnification provisions of this Article IX are intended to provide the
exclusive remedy as to all Losses that either may incur arising from or relating
to the Transactions, and each
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party hereby waives, to the extent it may do so, any other rights or remedies
that may arise under any applicable statute, rule or regulation.
ARTICLE X
MISCELLANEOUS
10.1 TERMINATION.
(a) TERMINATION. This Agreement may be terminated at any time
prior to Closing:
(i) by mutual written consent of Buyer and Sellers;
(ii) by Buyer or Sellers if the Closing shall not have
occurred on or before December 31, 1994; PROVIDED, HOWEVER, that if Buyer or
Sellers have the right to terminate this Agreement under clause (iii) or (iv),
respectively, of this Section 10.1(a), the breaching party may not terminate
this Agreement until March 31, 1995 and, if the breach is for any reason other
than a breach of a representation or warranty and the breaching party has not
cured the breach by March 31, 1995, the breaching party shall on such date
promptly pay to the non-breaching party all fees and expenses (including,
without limitation, attorneys and accountants fees) incurred by the non-
breaching party in connection with the proposed purchase of the Division both
before and after the date hereof up to March 31, 1995;
(iii) by Buyer if there is a material breach of any
representation or warranty of Sellers or any covenant or agreement to be
complied with or performed by Sellers pursuant to the terms of this Agreement,
PROVIDED that Buyer may not terminate this Agreement prior to the Closing if
Sellers have not had an adequate opportunity to cure such failure; or
(iv) by Sellers if there is a material breach of any
representation or warranty of Buyer or of any covenant or agreement to be
complied with or performed by Buyer pursuant to the terms of this Agreement;
PROVIDED that Sellers may not terminate this Agreement prior to the Closing if
Buyer has not had an adequate opportunity to cure such failure.
(b) IN THE EVENT OF TERMINATION. In the event of termination of
this Agreement:
(i) each party will redeliver all documents, work papers
and other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same;
(ii) the provisions of the Confidentiality Agreement shall
continue in full force and effect; and
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(iii) no party hereto shall have any liability or
further obligation to any other party to this Agreement, PROVIDED that, in
addition to any liability for fees and expenses incurred pursuant to Section
10.1(a)(ii), a party shall remain liable for any breach of this Agreement (other
than of a representation or warranty) by it occurring prior to the termination
of this Agreement.
10.2 EXPENSES AND FINDERS' FEES. Except as set forth in Section
5.11, each party hereto will bear its own costs and expenses associated with the
Transactions, including the payment of any agents' or finders' fees due in
connection with the transaction contemplated hereby. Without limiting the
generality of the foregoing, none of the costs and expenses of Buyer or its
Affiliates will be paid out of the Division Assets prior to Closing.
10.3 ENTIRE AGREEMENT. Together with the Confidentiality
Agreement (to the extent provided herein), this Agreement, the Schedules and
Exhibits hereto and any side letter concurrently or subsequently executed,
constitute the entire contract and shall supersede all prior agreements and
understandings, both written and oral, between the parties hereto with respect
to the subject matter hereof and no party shall be liable or bound to the other
in any manner by any representations or warranties except as specifically set
forth herein or expressly required to be made or delivered pursuant hereto.
10.4 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto. Nothing in this Agreement,
express or implied, is intended to confer upon any party, other than the parties
and their respective successors and assigns, any rights, remedies, obligations
or Liabilities under or by reason of such agreements. This Agreement and the
rights and obligations hereunder shall not be assignable or transferable by any
party hereto without the prior written consent of the other parties hereto,
which consent shall not be unreasonably withheld; PROVIDED, HOWEVER, that Buyer
may assign this Agreement and Buyer's rights and obligations hereunder to a
subsidiary of Buyer or to a lender as security, without the prior written
consent of any other party hereto.
10.5 IDENTICAL COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall for all purposes be deemed to be
an original and all of which shall constitute the same instrument, but only one
of which need be produced.
10.6 HEADINGS. The headings of the paragraphs and subparagraphs
of this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
10.7 USE OF CERTAIN TERMS. As used in this Agreement, the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular paragraph, subparagraph or
other subdivision.
10.8 MODIFICATION AND WAIVER. Any of the terms or conditions of
this Agreement may be waived in writing at any time, whether before or after
action thereon by the party which is entitled to the benefits thereof; and this
Agreement may be modified or
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amended at any time, whether before or after action thereon by the parties. No
supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by all of the parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver.
10.9 NOTICES. All notices, consents, requests, instructions,
approvals and/or communications provided for herein, shall be validly given,
made or served if in writing or by facsimile or overnight delivery and addressed
to the party to be notified as follows:
(i) If to a Seller:
MagneTek, Inc.
26 Century Boulevard
Nashville, Tennessee 37229
Attention: Samuel A. Miley
Facsimile Number: (615) 316-5181
Copy to:
Gibson, Dunn & Crutcher
2029 Century Park East
Suite 4000
Los Angeles, CA 90067
Attention: Jennifer Bellah, Esq.
Facsimile Number: (310) 277-5827
(ii) If to Buyer:
PTS, Inc.
c/o The Carlyle Group
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attention: Allan M. Holt
Facsimile Number: (202) 347-9250
Copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004
Attention: Bruce E. Rosenblum, Esq.
Facsimile Number: (202) 637-2201
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The designation of the person to be so notified or the address of such
person for the purposes of such notice may be changed from time to time by a
similar notice. Notices shall be deemed to have been given (i) if delivered
personally or otherwise actually received, (ii) if sent by overnight delivery
service, (iii) if mailed by first class United States mail, postage prepaid,
registered or certified, with return receipt requested, or (iv) if sent by
facsimile. Any notice, as provided in clause (iii) above, which is addressed
and mailed in the manner herein provided shall be conclusively presumed to have
been duly given to the party to which it is addressed at the close of business,
local time of the recipient, on the third business day after the day it is so
placed in the mail. Notice given in any manner described in this section shall
be effective upon receipt by the addressees thereof.
10.10 GOVERNING LAW. The parties hereby agree that this Agreement
has been executed and delivered in the State of New York and shall be construed
and enforced in accordance with and governed by the laws thereof, except as to
the German Share Transfer Agreement which shall be governed by German law.
10.11 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Accounting Firm" shall mean the independent public accounting firm set
forth in Section 2.3(c).
"Acquired Subsidiaries" means the Company, the German Entities and each
of their respective Subsidiaries.
"Adjusted July Balance Sheet" has the meaning set forth in Section 2.2.
"Adjustment Period" has the meaning set forth in Section 2.3(b).
"Affiliate" has the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act by the SEC, as in effect on the date hereof.
"Aggregate Purchase Price" shall have the meaning set forth in
Section 2.5.
"Applicable Rate" means the "prime rate" as set forth in the WALL
STREET JOURNAL on the Closing Date, and if such publication shall contain more
than one "prime rate" on such date, then the average of such rates.
"Arbitration Notice" has the meaning set forth in Section 11.3.
"Assigned Contract" has the meaning set forth in Section 1.1(d).
"Assignment and Assumption Agreement" means an Assumption Agreement in
substantially the form attached hereto as Exhibit C.
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"Assumed German Pension Liabilities" has the meaning set forth in
Section 1.4(e).
"Assumed Liabilities" shall have the meaning set forth in Section 1.4.
"Balance Sheet Adjustments" has the meaning set forth in Section
2.3(a).
"Bill of Sale and Assignment" means a Bill of Sale and Assignment in
substantially the form attached hereto as Exhibit C.
"Billed Amount" has the meaning set forth in Section 5.6(c)(ii).
"Business" has the meaning set forth in the Recitals hereto.
"Business Day" means a day other than a Saturday or a Sunday or other
day on which commercial banks in New York are authorized or required by law to
close.
"Buyer" has the meaning set forth in the preamble hereto.
"Buyer Accounts Receivable" has the meaning set forth in Section 5.4.
"Buyer's Accountants" has the meaning set forth in Section 2.3(c).
"Buyer's Environmental Claims" has the meaning set forth in
Section 9.3(b).
"Buyer's General Claims" has the meaning set forth in Section 9.3(b).
"Cash Schedule" has the meaning set forth in Section 2.3(b).
"Claim" has the meaning set forth in Section 9.5.
"Claim Notice" has the meaning set forth in Section 9.5.
"Closing" has the meaning set forth in Section 8.1.
"Closing Date" means the day on which the Closing occurs pursuant to
Section 8.1.
"COBRA Continuation Coverage" has the meaning set forth in Section 5.6.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Company" has the meaning set forth in the recitals to this Agreement.
"Competitive Business" has the meaning set forth in Section 5.3.
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"Confidentiality Agreement" means that certain Confidentiality
Agreement entered into between The Carlyle Group and MagneTek, Inc. executed by
The Carlyle Group on September 8, 1994.
"Contract" means any contract, subcontract, agreement, license, lease,
sales or purchase order or other legally binding commitment, whether written or
oral.
"Controlled Group Liabilities" means any and all Liabilities under (i)
Title IV of ERISA, (ii) section 302 of ERISA, (iii) sections 412 and 4971 of the
Code, (iv) the continuation coverage requirements of section 601 et seq. of
ERISA and section 4980B of the Code and (v) corresponding or similar provisions
of foreign laws or regulations.
"CPR" means the Center for Public Resources, Inc.
"DCAA" means the Defense Contract Audit Agency.
"Division" has the meaning set forth in the recitals hereto.
"Division Assets" has the meaning set forth in Section 1.1.
"Division Employee" means any person employed by the Business on the
Closing Date, including, without limitation, any Person on lay-off, leave of
absence, sick or short-term disability leave.
"Division Liabilities" has the meaning set forth in Section 1.4.
"Employee Plan" has the meaning set forth in Section 3.11(a).
"Encumbrances" means any option, mortgage, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or other security agreement
of any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement or any financing lease having
substantially the same economic effect as any of the foregoing).
"Environmental Law" shall mean any and all United States and German
federal, state, or local statutes, rules, laws, regulations, ordinances, codes
or common law relating to pollution or the environment (including without
limitation the Handling of Substances or the presence of Substances at a
Facility owned, leased or used by Sellers or the Subsidiaries at any time prior
to the Closing Date) that are applicable to the Division.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means, with respect to any entity, trade or business,
any other entity, trade or business that is a member of a group described in
section 414(b), (c), (m) or (o) of the Code or section 4001(b)(1) of ERISA that
includes the first entity, trade or
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business, or that it a member of the same "controlled group" as the first entity
trade or business pursuant to section 4001(a)(14) of ERISA.
"ERISA Affiliate Plan" has the meaning set forth in Section 3.11(b)(v).
"EuroAtlas" means MagneTek EuroAtlas GmbH, a German company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations of the SEC promulgated from
time to time thereunder.
"Exon-Florio Amendment" shall mean the Exon-Florio Amendment to the
Defense Production Act of 1990.
"Expended Cash" has the meaning set forth in Section 2.3(b).
"Expenses" has the meaning set forth in Article IX.
"Facility" has the meaning set forth in the definition of "Pre-Closing
Environmental Matters."
"Final Adjustment Factor" has the meaning set forth in Section 2.3(d).
"Final Closing Balance Sheet" has the meaning set forth in
Section 2.3(a).
"Financial Statements" has the meaning set forth in Section 3.14.
"Financing Obligations" shall mean (i) indebtedness of Sellers, the
Subsidiaries or any of their respective Affiliates for borrowed money,
(ii) obligations of Sellers, the Subsidiaries or any of their respective
Affiliates evidenced by bonds, notes, debentures or similar instruments (other
than surety or similar bonds), (iii) obligations of Sellers, the Subsidiaries or
any of their respective Affiliates under capitalized leases, except to the
extent disclosed on Schedule 10.11A, (iv) obligations under conditional sale,
title retention or similar agreements or arrangements creating an obligation of
Sellers, the Subsidiaries or any of their respective Affiliates with respect to
the deferred purchase price of property (other than customary trade credit),
except to the extent disclosed on Schedule 10.11A, and (v) all obligations of
Sellers, the Subsidiaries or any of their respective Affiliates to guarantee any
of the foregoing types of obligations on behalf of others; PROVIDED that
Financing Obligations shall not include any Liabilities incurred by Buyer (or by
the Acquired Subsidiaries under Buyer's control) subsequent to Closing.
"Foreign Corrupt Practices Act" means the Foreign Corrupt Practices Act
of 1977, as amended from time to time.
"GAAP" means generally accepted accounting principles in the United
States of America.
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"Generated Cash" has the meaning set forth in Section 2.3(b).
"German Benefit Plan" has the meaning set forth in Section 3.11(b)(vi).
"German Employees" has the meaning set forth in Section 3.10(b).
"German Share Transfer Agreement" has the meaning set forth in
Section 7.7.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Government Contract" shall mean any bid, quotation, proposal,
contract, agreement, work authorization, lease, commitment of sale or purchase
order of Sellers or the Subsidiaries relating to the Business that (i) is with
the United States Government or (ii) a subcontract with a prime contractor (or
another subcontractor) with respect to any contract of the type described in
clause (i).
"Handling" has the meaning set forth in the definition of "Pre-Closing
Environmental Matters".
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended from time to time.
"Indemnified Person" means, with respect to any Loss, the Person
seeking indemnification hereunder.
"Indemnifying Person" means, with respect to any Loss, the Person from
whom indemnification is being sought hereunder.
"Interest Period" has the meaning set forth in Section 2.3(d).
"Interim Cash Adjustment" has the meaning set forth in Section 2.3(b).
"Inventory" has the meaning set forth in Section 1.1(c).
"IRS" means the United States Internal Revenue Service.
"Knowledge of Seller" or "Seller's Knowledge" with reference to any of
the representations and warranties of Seller means the actual knowledge of any
"officer" of MagneTek, as such term is defined in 17 C.F.R. Section 240.16a-
1(f), and of Mr. Gene Dotson, Mr. Morris Menken and Mr. Klaus Kahrs.
"Liabilities" shall mean liabilities, obligations or commitments of any
nature, absolute, accrued, contingent or otherwise, whether matured or
unmatured, and whether material or not material.
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"Losses" has the meaning set forth in Article IX.
"Material" when used in connection with a representation and warranty
of Sellers shall mean material to the Business or the Division, taken as a
whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property or condition (financial or other) of the Business
or the Division, taken as a whole or (b) the ability of Sellers to consummate
the Transactions.
"Net Worth" has the meaning set forth in Section 2.3(a).
"Non-Assigned Contracts" means those Contracts designated as "Excluded
Contracts" on Schedule 1.1D.
"Notice of Disagreement" has the meaning set forth in Section 2.3(c).
"Paint Room" shall mean and include the area and equipment to the east
of the production factory at the Leer, Germany facility, including but not
limited to the paint booth and related equipment and the paint collection system
and related equipment (including the paint collection basin).
"Paint Room Remediation" has the meaning set forth in Section 5.12.
"Patent and Trademark Rights" has the meaning set forth in Section 3.4.
"Pending or Threatened Litigation" means any action, suit or proceeding
(i) against any Seller or Acquired Subsidiary as to which a complaint has been
filed and a Seller or Acquired Subsidiary has been served or otherwise given
notice as to such filing on or before the Closing Date or (ii) which has been
threatened against any Seller or Acquired Subsidiary and is set forth on
Schedule 3.8.
"Permitted Encumbrances" shall mean: (i) mechanics', carriers',
workmen's, repairmen's or other like Encumbrances arising or incurred in the
ordinary course of business and which secure Division Liabilities that are not
due and payable or which are being contested in good faith by appropriate
proceedings with appropriate reserves set aside therefor, (ii) Encumbrances for
Taxes and other governmental charges which (x) are not due and payable or (y)
are being contested in good faith and by appropriate proceedings with
appropriate reserves set aside therefor; and (iii) as to interests in real
estate, (A) easements, covenants, rights-of-way and other similar restrictions
of record, (B) zoning, building and other similar restrictions, (C) Encumbrances
that have been placed by any developer, landlord or other third party on
property over which Seller has easement rights or on any of Seller's leased
property and subordination or similar agreements relating thereto and
(D) unrecorded easements, covenants, rights-of-way or other similar
restrictions, PROVIDED any such interest described in this clause (iii) does not
materially interfere with the use to which such real estate is presently used.
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"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Personal Property" has the meaning set forth in Section 1.1(b).
"Post-Closing Environmental Matters" shall mean (i) the production,
use, generation, storage, treatment, transport, recycling, disposal, discharge,
release, or other handling or disposition at any time after the Closing Date of
any Substances, either in, on, under or from any real property or facility owned
or leased by any Seller and conveyed to Buyer pursuant to this Agreement
("Transferred Facility"), including, without limitation, the effects of such
handling of Substances on resources, Persons, or property within or outside the
boundaries of any Transferred Facility, (ii) the presence after the Closing Date
of Substances in, on or under any Transferred Facility, PROVIDED that the
Substances were not in, on or under the Transferred Facility on or prior to the
Closing Date, (iii) the failure after the Closing Date of any Transferred
Facility or any operations of Buyer to be in compliance with any Environmental
Laws PROVIDED that the failure to be in compliance did not begin on or prior to
the Closing Date, and (iv) any other act, omission or condition existing with
respect to the Division or the Division Assets after the Closing Date which
gives rise to Liability under any Environmental Laws, PROVIDED that the act,
omission or condition did not give rise to Liability under any Environmental
Laws on or prior to the Closing Date.
"Post-Closing Environmental Proceeding" has the meaning set forth in
Section 9.4(c).
"Pre-Closing Environmental Matters" shall mean (i) the production, use,
generation, storage, treatment, transport, recycling, disposal, discharge,
release, or other handling or disposition at any time on or prior to the Closing
Date (collectively, "Handling"), of any hazardous materials or other toxic,
hazardous, or other regulated wastes, substances products, pollutants or
materials including, without limitation, asbestos, petroleum including crude oil
or any fraction thereof, petroleum products and any substance regulated under an
Environmental Law (collectively, "Substances"), either in, on, under or from any
real property or facility owned, leased, operated or used at any time by
Sellers, the Acquired Subsidiaries or any of their Affiliates (or a predecessor
of any Seller or Subsidiary or any of their respective Affiliates) ("Facility"),
including, without limitation, the effects of such Handling of Substances on
resources, Persons, or property within or outside the boundaries of any
Facility, (ii) the presence as of the Closing Date of Substances in, on or under
any Facility regardless of how the Substances came to rest at, on or under the
Facility, (iii) the failure on or prior to the Closing Date of any Facility or
any operations of Seller or its Subsidiaries to be in compliance with any
Environmental Laws in effect at the time of Closing, and (iv) any other act,
omission or condition existing with respect to the Division or the Division
Assets or any Facility prior to the Closing Date which gives rise to Liability
under any Environmental Laws in effect at the time of Closing. Pre-Closing
Environmental Matters shall in no event be considered to include the presence of
asbestos in or upon any improvements located on a Facility at any time, other
than insofar as remediation or
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containment may reasonably be required as to friable asbestos in such a Facility
on the Closing Date.
"Pre-Closing Environmental Proceeding" has the meaning set forth in
Section 9.3(d).
"Pre-Closing Tax Period" has the meaning set forth in Section 9.3(c).
"Proposed Acquisition Transaction" has the meaning set forth in
Section 5.8.
"Purchase Price" has the meaning set forth in Section 2.1.
"Purchased Assets" has the meaning set forth in Section 1.1.
"Records" means all of Sellers' or Buyer's (as the context shall
indicate) books and records relating to or used in connection with the Division
or the Business.
"Retained Assets" has the meaning set forth in Section 1.5.
"Retained Liabilities" has the meaning set forth in Section 1.6.
"Retained German Pension Liability" has the meaning set forth in
Section 1.4(e).
"Rules" has the meaning set forth in Section 11.3.
"SEC" means the Securities and Exchange commission.
"Seller" and "Sellers" have the meanings set forth in the preamble
hereto.
"Seller Accounts Receivable" has the meaning set forth in Section 5.4.
"Seller Facility" means any real property or facility used at any time
by Sellers or the Subsidiaries or any of their Affiliates and not transferred to
Buyer pursuant to this Agreement.
"Sellers' General Claims" has the meaning set forth in Section 9.4(b).
"Straddle Period" has the meaning set forth in Section 9.3(c).
"Subsidiary" means (a) any corporation in an unbroken chain of
corporations beginning with either a Seller and/or a Subsidiary of a Seller if
each of the corporations other than the last corporation in the unbroken chain
then owns stock possessing 50 percent or more of the combined voting power of
all classes of stock in one of the other corporations in such chain, (b) any
partnership in which a Seller or a Subsidiary of a Seller is a General Partner,
or (c) any partnership in which a Seller or a Subsidiary of a Seller possesses a
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50 percent or greater interest in the total capital or total income of such
partnership. Unless explicitly stated otherwise, the term "Subsidiaries" shall
include the Acquired Subsidiaries.
"Substances" has the meaning set forth in the definition of "Pre-
Closing Environmental Matters".
"Tax" or "Taxes" means, with respect to any Person, any federal, state,
local or foreign net income, gross income, gross receipts, sales, use, ad
valorem, value-added, capital, unitary, intangible, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, transfer,
occupation, premium, property or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, addition to tax or additional amount
imposed by any jurisdiction or other taxing authority, on such Person.
"Tax Claim" has the meaning set forth in Section 9.3(c).
"Tax Indemnitee" has the meaning set forth in Section 9.3(c).
"Tax Indemnitor" has the meaning set forth in Section 9.3(c).
"Tax Return" means all Tax returns, reports or forms.
"Teledyne" means Teledyne Industries, Inc.
"Third Party Notice" has the meaning set forth in Section 9.5.
"Transaction Documents" means (i) this Agreement, (ii) the Bill of
Sale, (iii) the Assignment and Assumption Agreement, (iv) the License Agreement,
(v) the deeds of conveyance of real property, and (iv) any other document
delivered or executed pursuant to any of the foregoing.
"Transactions" means the transactions contemplated by the Transaction
Documents.
"Transferred Employee" means any person employed by the Business on the
Closing Date who is required in accordance with Section 6.3(a) to be offered
employment by Buyer and who accepts such employment, and any employee of an
Acquired Subsidiary who is an employee of an Acquired Subsidiary on the Closing
Date (other than those Division Employees who have received notice of
termination from such Acquired Subsidiary on or prior to the Closing Date).
"Transferred Intellectual Property" has the meaning set forth in
Section 1.1(e).
"Transition Period" has the meaning set forth in Section 5.6(c)(ii).
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"United States Division Employees" means all Division Employees other
than the German Employees.
"United States Transferred Employees" means all Transferred Employees
that are not employed by the German Entities.
"Used in the operation of the Division" has the meaning set forth in
Section 1.1.
10.12 OTHER DEFINITIONAL PROVISIONS.
(a) Terms defined in this Agreement in Sections other than
Section 10.11 shall have the meanings as so defined when used in this Agreement.
(b) As used herein, accounting terms not defined or to the
extent not defined, shall have the respective meanings given to them under GAAP.
(c) Unless express reference is made to Business Days,
references to days shall be to calendar days.
10.13 SEVERABILITY. Should any of the provisions of this
Agreement be invalid or unenforceable such invalidity or unenforceability shall
not affect the validity of the remaining provisions. The parties hereby agree
to cooperate to substitute the invalid or unenforceable provision by a valid or
enforceable provision which comes the closest to the economic result of the
unenforceable or invalid provision.
ARTICLE XI
MEDIATION AND ARBITRATION
11.1 NEGOTIATION AND MEDIATION. The parties will attempt in good
faith to resolve any controversy or dispute arising out of or relating to this
Agreement promptly by negotiations between or among the parties. The
negotiation process may be started by notice by any party to the other parties,
and the parties agree to negotiate in good faith and select an independent
mediator to facilitate the negotiations and conduct at least eight (8)
consecutive hours of mediated negotiations within thirty (30) days after the
notice is first sent. If, within ten (10) days after the initial notice the
parties are not able to agree upon a mediator, the party originally giving the
notice shall promptly notify the Center for Public Resources, Inc. ("CPR"), 366
Madison Avenue, New York, New York 10017; telephone (212) 949-6490; fax (212)
949-8859. CPR will promptly designate a mediator who is independent and
impartial, and CPR's decision about the identity of the mediator will be final
and binding.
11.2 NO LITIGATION. No arbitration may be commenced by any party
unless and until a negotiation complying with the foregoing paragraph has been
completed, and except for litigation in order to procure injunctive relief
instituted pursuant to Section 5.3 of
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this Agreement and except for litigation for other injunctive relief, whether
temporary, permanent or otherwise, no litigation or other proceeding may ever be
instituted in any court for the purpose of adjudicating, interpreting or
enforcing any of the rights or obligations of the parties hereto or any rights
or obligations relating to the subject matter hereof, whether or not covered by
the express terms of this Agreement, or for the purpose of adjudicating a breach
or termination or the validity of this Agreement, or for the purpose of
appealing any decision of an arbitrator, except a proceeding instituted for the
sole purpose of compelling the parties to mediate and/or arbitrate under the
terms of this Agreement and having the award or judgment of an arbitrator
entered and enforced.
11.3 BINDING ARBITRATION. If a controversy or dispute is not
resolved after completion of the negotiation process described above, then, upon
notice by any party to the other parties (an "Arbitration Notice") and to CPR,
the controversy or dispute shall be submitted to a sole arbitrator who is
independent and impartial, for binding arbitration in accordance with CPR's
Rules for Non-Administered Arbitration of Business Disputes (the "Rules"). The
parties agree that they will faithfully observe this Agreement and the Rules and
that they will abide by and perform any award rendered by the arbitrator. The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
Section 1-16 (or by the same principles enunciated by such Act in the event it
may not be technically applicable). The award or judgment of the arbitrator
shall be final and binding on all parties and judgment upon the award of
judgment of the arbitrator may be entered and enforced by any court having
jurisdiction. The fees and expenses of the arbitrator will be shared ratably by
all parties engaged in the dispute or controversy.
11.4 SELECTION OF ARBITRATOR. Promptly after the Arbitration
Notice is given, CPR will select three (3) possible arbitrators, to whom CPR
will give the identities of the parties and the general nature of the
controversy. If any of those arbitrators disqualifies himself or declines to
serve, CPR shall continue to designate potential arbitrators until the parties
have three (3) to select from. After the panel of three (3) potential
arbitrators has been completed, a two-page summary of the background of each of
the potential arbitrators will be given to each of the parties, and the parties
will have a period of ten (10) days after receiving the summaries in which to
attempt to agree upon the arbitrator to conduct the arbitration. If the parties
are unable to agree upon an arbitrator, then one of the parties shall notify
CPR, and CPR shall select the arbitrator from one of the three, or less, if one
or more has been found to be disqualified or removes himself from consideration
(if all three are disqualified or remove themselves, then CPR shall start the
arbitration-selection process over again). The decision of CPR with respect to
the selection of the arbitrator will be final and binding.
11.5 ARBITRATION HEARING. Within ten (10) days after the
selection of the arbitrator, the parties and their counsel will appear before
the arbitrator at a place and time designated by the arbitrator for the purpose
of each party making a one hour or less presentation and summary of the case.
Thereafter, the arbitrator will set dates and times for additional hearings
until the proceeding is concluded. The desire and goal of the parties is, and
the arbitrator will be advised that his goal should be, to conduct and conclude
the arbitration proceeding as expeditiously as possible. If any party or his
counsel fails to appear
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at any hearing, the arbitrator shall be entitled to reach a decision based upon
the evidence which has been presented to him by the parties who did appear.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed in counterparts all as of the date first above written.
SELLERS:
MAGNETEK, INC.
By: /s/ David P. Reiland
------------------------------
Name: DAVID P. REILAND
---------------------
Title: EXECUTIVE V.P.
----------------------
MAGNETEK TEMPE, INC.
By: /s/ David P. Reiland
------------------------------
Name: DAVID P. REILAND
---------------------
Title: PRESIDENT
----------------------
MAGNETEK DEUTSCHLAND HOLDING
GMBH
By: /s/ Marty Schwenner
------------------------------
Name: MARTY SCHWENNER
---------------------
Title: MANAGING DIRECTOR
----------------------
By: DAVID P. REILAND
ATTORNEY-IN-FACT
BUYER:
PTS, INC.
By: /s/ Illegible
------------------------------
Name: Illegible
---------------------
Title: Vice President
----------------------
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List of Schedules and Exhibits
SCHEDULES
- ---------
1 Description of the Division and the Business
1.1A Real Property
1.1B(i) Personal Property
1.1B(ii) Interests of U.S. Government
1.1D Non-Assigned Contracts
1.1F Licenses, Permits, Franchises and Authorizations
1.1G Accounts Receivable
1.1J Leasehold Interests
1.5O Other Retained Assets
2.2 Adjusted July Balance Sheet
3.2 Results of Lien Search
3.3 Government Contracts Matters
3.4 Patents, Trademarks, Etc.
3.5 Required Consents
3.7 Contracts
3.8 Litigation
3.10(b) Labor Matters
3.11 Employee Benefits
3.12 Environmental Matters
3.14 Financial Statements
3.16 Tax Matters
3.17 Changes
3.18 Capitalization of Acquired Subsidiaries
3.19 Backlog
3.20 Security Clearances
3.21 Brokers' Fees
3.22 Warranty Claims
5.3A Non-Compete Products
6.4 Letters of Credit
10.11A Financing Obligations
<PAGE>
EXHIBITS
- --------
A Supply Arrangements
B German Share Transfer Agreement
C Bill of Sale and Assignment and Assumption Agreement
D Certificate
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 6th day of March, 1995, by and between
MAGNETEK, INC., a Delaware corporation ("Seller"), and GN ACQUISITION
PARTNERS, L.P., a Delaware limited partnership ("Buyer").
BACKGROUND
Seller and Buyer entered into an Asset Purchase agreement dated as of
December 1, 1994 (the "December 1, Agreement"). Seller has terminated the
December 1, Agreement and Seller and Buyer desire that this Agreement shall
represent the entire understanding and agreement between the parties with
respect to the subject matter hereof and that this Agreement shall supersede
all prior agreements or negotiations between Buyer and Seller.
Seller owns a division which carries on a sign components business at
Roosevelt Business Center, 2809-2811 Southampton Road, Philadelphia,
Pennsylvania and 8180 Newington Road, Newington Industrial Park, Newington,
Virginia (the "Business") under the name and style "General Neon" (the
"Division"). Buyer desires to acquire, and Seller desires to sell to Buyer,
the assets of Seller used in the operation of the Business.
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions set forth herein, the parties hereby agree as follows:
TERMS AND CONDITIONS
1. ASSETS PURCHASED. At the Closing, Seller shall sell, assign,
convey, transfer and deliver to Buyer all of Seller's and Division's property
and assets, tangible, intangible and intellectual property used solely in the
operation of the Business (collectively the "Purchased Assets"), including
without limitation (except as set forth in Section 1.9 below) the following:
1.1 All machinery, equipment, motor vehicles, component parts,
tools, drawings, plans, specifications, office equipment, furniture and
fixtures, supplies, computer hardware and software, prepaid expenses and
other prepaid assets, and personal property of Division including, but not
limited to, those items described on Schedule 1.1 attached hereto (the
"Personal Property").
1.2 All inventory, including, but not limited to, raw material,
work-in-process, finished goods and parts inventory described on Schedule 1.2
attached hereto (the "Inventory").
1.3 All contracts, customer orders, purchase orders, leases and
agreements (including any permits, licenses, and insurance policies which
relate to the operation of the Business or the Purchased Assets and which are
agreed to be assumed by Buyer, as specifically listed on Schedule 1.3
attached hereto (the "Assigned Contracts")).
<PAGE>
1.4 All business records which pertain directly or indirectly to
customers, suppliers, advertising, promotional materials, sales, service,
delivery, internal organization, or operations (the "Records").
1.5 All patents, trademarks and copyrights, trade secrets, secret
and confidential information, inventions and improvements, know-how, and any
rights associated therewith, including, but not limited to, those items
described in Schedule 1.5 attached hereto (the "Intellectual Property").
1.6 The Business conducted by Seller through Division on the
Closing Date as a going concern, including any and all goodwill connected
therewith, telephone and FAX numbers, and Seller's right to use the name
"General Neon" and all related names and derivations thereof (the
"Intangibles").
1.7 All cash on hand or on deposit ("Cash"), any interest bearing
obligations and all accounts ("Accounts") or notes receivable less than 90
days old ("Notes").
1.8 The leasehold interest of Seller in and to certain Leases
dated August 14, 1984 and March 12, 1986, respectively, between Anvil
Construction Co. and Seller for the Philadelphia, Pennsylvania location, and,
between Newington Joint Venture and Seller for the Newington, Virginia
location, and all leasehold improvements, licenses and privileges pertaining
thereto ("the Real Property").
1.9 Notwithstanding any other provisions contained herein, those
assets listed on Schedule 1.9 (the "Excluded Assets") are specifically
excluded from the Purchased Assets.
1.10(a) For a period of one year following the Closing, or such
shorter period as Seller shall designate, Buyer shall collect for the account
of the Seller, the Accounts more than 90 days past the date of the invoice
outstanding as of the Closing Date (the "Aged Accounts"). At the Closing,
Buyer and Seller shall produce a schedule of the Aged Accounts. Buyer's
efforts to collect the Aged Accounts shall be undertaken in good faith and in
a manner consistent with the normal and customary practices and procedures of
Division prior to Closing. Buyer shall apply payments received from
customers as follows:
(i) Upon receipt of payment from a customer
following the Closing in which the customer has identified,
referenced or otherwise specified the statement(s) or
invoice(s) for which the payment is being made, Buyer will
apply the payments in the manner specified by the customer.
(ii) In the event that a customer which has
an Aged Account outstanding is sold products on a C.O.D.
basis following the Closing, Buyer shall require that such
customer remit upon delivery of such products an amount
equal to 10% of the invoice total which added amount shall
be applied against the Aged Accounts of the
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customer in the manner described elsewhere in this Section 1.10.
The remainder of the payment received shall be retained by Buyer.
(iii) In the event a customer who remits
a payment to Buyer following the Closing does not identify,
reference or otherwise specify the statement(s) or
invoice(s) for which the payment is being made, 90% of such
payment shall be applied to Accounts less than 90 days past
the date of invoice as of the Closing Date and 10% of such
payment shall be applied to the Aged Accounts (in each case
to the oldest invoice first, unless such invoice is in
dispute, in which case the payment shall be applied to the
next oldest undisputed invoice).
(b) Seller shall have the right to file liens and take any
other actions Seller deems reasonable in regard to collections of Aged
Accounts following the Closing, provided that Seller shall notify Buyer of
its intention to take such actions prior to initiating them.
(c) In connection with its obligations under this Section
1.10, Buyer shall not be permitted without Seller's consent, to make any
concessions or give any credit or discount in respect of the Aged Accounts.
Buyer shall not be obligated to commence any litigation or collection
proceedings with respect to any Aged Account.
(d) Buyer will provide a monthly accounting of the collection
of all Aged Accounts collected following the Closing and forward seventy-five
percent (75%) of the proceeds received in payment of the Aged Accounts to
Seller on a monthly basis. Buyer shall be entitled to retain the remaining
twenty-five percent (25%) of any and all such collections. Seller shall have
the right at any time following the Closing to conduct an audit of the
collection of the Aged Accounts. Buyer shall make available for Seller any
and all correspondence from customers, and other work papers, books and
records deemed necessary by Seller for the purpose of conducting such
audit(s).
(e) At any time following the Closing designated by Seller,
Buyer agrees to forward to those parties having Aged Accounts a letter
notifying them that amounts owed by such partes pursuant to the Aged Accounts
are owned by Seller and should thereafter be remitted directly to Seller in
accordance with Seller's directions. Such correspondence shall be subject to
the prior review and approval by Seller.
All Schedules shall be updated by Seller as of the Closing Date.
2. ASSUMED LIABILITIES. Seller agrees that Buyer is assuming no
liabilities of Seller or Division, whether accrued, absolute, contingent,
known or unknown, or otherwise, EXCEPT for those liabilities specifically
identified on Schedule 2 hereto (collectively the "Assumed Liabilities').
3
<PAGE>
3. PURCHASE PRICE FOR PURCHASED ASSETS; EARNEST MONEY. (a) The
consideration to be paid to Seller by Buyer for the Purchased Assets (the
"Purchase Price") shall be One Million Seven Hundred Fifty Thousand and
00/100 Dollars ($1,750,000.00), plus the Assumed Liabilities and Seller's
portion of the Aged Accounts.
(b) Pursuant to the terms of an Escrow Agreement dated the date
hereof among Buyer, Seller and Bass, Berry & Sims, as escrow agent (the
"Escrow Agent"), Buyer has deposited with the Escrow Agent One Hundred
Seventy-Five Thousand and No/100ths Dollars ($175,000.00) to be held in
accordance with the terms of the Escrow Agreement pending the closing or
termination of the transactions contemplated by this Agreement.
(c) The Purchase Price shall be allocated by Buyer and Seller as
set forth on Schedule 3(c).
4. COVENANT NOT TO COMPETE. At the Closing, Seller shall execute a
Covenant Not to Compete (the "Covenant Not to Compete") with Buyer, in
substantially the form set forth as Exhibit 4 attached hereto.
5. DELIVERY FREE OF ENCUMBRANCES; ASSIGNMENT OF LEASES OF REAL
PROPERTY.
5.1 PURCHASED ASSETS. Seller shall deliver good and marketable
title to the Purchased Assets (other than those Purchased Assets referred to
in Section 1.8) free and clear of all mortgages, liens, claims, pledges,
security interests and other encumbrances whatsoever. On or prior to the
Closing Date, Seller shall have discharged or terminated any financing
statements, mortgages, claims or liens which may be outstanding against the
Purchased Assets.
5.2 ASSIGNMENT OF LEASES OF REAL PROPERTY. Seller agrees to
assign to Buyer the leases comprising the Real Property.
6. ACTIONS PRIOR TO CLOSING. Prior to the Closing:
6.1 CONDUCT OF BUSINESS. Seller shall carry on and conduct the
Division's business only in the usual, regular and ordinary manner, without
any, material change in the policies, practices and methods pursued prior to
the date hereof. Seller shall not undertake any of the following actions
without the prior written consent of Buyer, other than in the ordinary course
of business: (i) incur any, indebtedness with respect to the Division or the
Business for borrowed money or enter into any contract agreement or other
commitment involving expenditure of, or series of related expenditures in the
aggregate, of more than $10,000.00; (ii) sell, assign, lease, transfer or
otherwise dispose of, or mortgage or pledge, or impose or allow to be imposed
any lien, charge or encumbrance on, or agree to sell, transfer or, otherwise
dispose of any of the Purchased Assets (other than sales of inventory in the
ordinary course of business); (iii) discharge or satisfy any lien or
encumbrance or pay or satisfy any obligation or liability (absolute, accrued,
contingent or otherwise) other than (a) in the ordinary course of business,
or (b) Assumed Liabilities; (iv) cancel or agree to cancel any debt or claim
or waive
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any right owing or accruing to the Division or the Business, except in the
ordinary course of business; (v) make or agree to make any loan to any
officer or to any affiliate of any, shareholder, officer or director from or
chargeable against the Purchased Assets, or declare, set aside or pay to any
shareholder any dividend or other distribution of any kind from the Purchased
Assets in respect of its capital stock or other securities or agree to take
any such action, or enter into any transaction on behalf of or binding upon
Division (including, without limitation, any contract or other arrangement
providing for employment of, furnishing of services by, rental of real or
personal property from, or otherwise requiring payments to) with any
shareholder, officer or director or any affiliate; (vi) increase the
compensation payable, or to become payable, by Seller to any officer,
employee, consultant or agent of Division, or any commissions to any
distributor or sales persons; (vii) pay, or make any bonus, stock option,
profit sharing, pension, retirement, deferred compensation or other similar
payment or arrangement, except in the ordinary, course of the administration
of Seller's existing pension plans; or (viii) cause Division to enter into
any employment agreement sales agency or other contract or arrangement with
respect to the performance of personal services, which would not be
cancelable by Buyer, without penalty.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The obligation of
Buyer to consummate the transactions contemplated hereby is subject to the
fulfillment (or, waiver by Buyer) prior to or at the Closing of each of the
following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller contained in this Agreement and all other documents
related hereto, shall be true and correct in all material respects at and as
of the Closing Date as though such representations and warranties were made
at and as of such date.
7.2 PERFORMANCE. Seller shall have in all material respects
performed and complied with all covenants, agreements and conditions required
by this Agreement, and all other documents related hereto, to be performed or
complied with by it prior to or on the Closing Date.
7.3 NO CASUALTY. Prior to the Closing Date, Seller shall not have
incurred, or be threatened with, a material liability or casualty which would
materially impair the value of the Purchased Assets.
7.4 OPINION OF COUNSEL. Buyer shall have received the favorable
opinion of counsel to Seller dated the Closing Date and in form and substance
satisfactory to Buyer's counsel in the form attached hereto as Exhibit 7.5.
7.5 NO MATERIAL ADVERSE CHANGE. There shall not have been any
material adverse change in the Business or the Division which materially
affects the ability of the Buyer to conduct the Business as presently
conducted or which materially impairs the value of the Purchased Assets.
5
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8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. The obligation of
Seller to consummate the transactions contemplated hereby is subject to the
fulfillment prior to or at the Closing Date of each of the following
conditions (unless previously waived by Seller):
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer contained in this Agreement and all other documents
related hereto, shall be true and correct in all material respects at and as
of the Closing Date as though such representations and warranties were made
at and as of such time.
8.2 PERFORMANCE. Buyer shall have in all material respects
performed and complied with all covenants, agreements and conditions required
by this Agreement and all other documents related hereto, to be performed or
complied with by it prior to and at the Closing Date.
8.3 OPINION OF COUNSEL. Seller shall have received the favorable
opinion of counsel to Buyer dated as of the Closing Date and in form and
substance satisfactory to Seller's counsel in the form attached hereto as
Exhibit 8.3.
9. CLOSING. The closing of the transaction contemplated herein (the
"Closing") shall take place at the offices of Bass, Berry and Sims, 2700
First American Center, Nashville, Tennessee at 10:00 a.m. on April 4, 1995,
or such earlier date as the parties hereto mutually agree (the "Closing
Date"). The Closing shall be deemed effective as of the close of business on
April 1, 1995 (the "Effective Date"), and, all transactions and activities of
the Division occurring after that date shall be for the benefit of Buyer and
the Buyer shall be responsible therefor. At the Closing, Seller shall
deliver possession of the Purchased Assets to Buyer, and shall execute and
deliver to Buyer a bill of sale, assignment of lease and all other
instruments of transfer and other documents necessary or appropriate to close
the transaction. At the Closing, Buyer shall deliver the Purchase Price, an
assumption agreement in form identical to Exhibit 9, and all other documents
necessary to close the transaction.
10. TIME OF CLOSING. The transaction shall be deemed to have occurred
at 12:01 a.m. on the Effective Date. From and after such time, and
contingent upon the occurrence of the Closing hereunder, the income,
expenses, liabilities and risks of ownership attributed to the Purchased
Assets and the Business shall be the responsibility and for the benefit of
Buyer.
11. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer as of the date hereof and as of the Closing:
11.1 ORGANIZATION AND STANDING. Seller is now and on the Closing
Date shall be a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and Seller has all
requisite power and authority to own its properties and conduct the Business.
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11.2 AUTHORIZATION. All necessary corporate action to duly approve
the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein has been taken by Seller
and this Agreement and any document schedule, exhibit or certificate prepared
in connection herewith, constitute a valid and binding agreement of Seller
enforceable in accordance with their respective terms, except as such
enforcement may be subject to bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors rights in general, and to general
principles of equity.
11.3 INSOLVENCY. No insolvency proceeding of any character,
including without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary,
affecting Seller, the Division or Purchased Assets is pending or, to the
knowledge of Seller, threatened. Seller has not taken any action in
contemplation of, or which would constitute the basis for, the institution of
any such insolvency proceedings.
11.4 PERMITS AND LICENSES. Seller now has and on the Closing Date
shall have all necessary permits, certificates, licenses, approvals, consents
and other authorizations required for the Division to carry on and conduct
the Business and to own, lease, use and operate the Division's properties at
the places and in the manner in which the Business is conducted, except for
any such permits, certificates, licenses, approvals, consents or other
authorizations, the lack of which shall not have a material adverse affect on
the Business. A complete list of such permits, certificates, licenses,
approvals, consents and other authorizations is included in Schedule 11.4
attached hereto.
11.5 FINANCIAL STATEMENTS. Seller has delivered to Buyer the
financial statements of the Division listed in Schedule 11.5 attached hereto,
and Seller shall deliver, prior to the Closing, copies of all financial
statements of the Division prepared by it for each full month prior to the
Closing (the "Financial Statements"). Except as disclosed on Schedule 11.6,
the Financial Statements fairly and accurately present the financial position
of Division as of the dates indicated, and the results of its operations as
of the dates indicated and for the periods covered thereby.
11.6 NO UNDISCLOSED LIABILITIES. Except as otherwise disclosed on
Schedule 11.6 or as incurred in the ordinary course of business in normal
amounts subsequent to June 30, 1994, to the knowledge of Seller, Division has
not, and will not have any material liabilities (fixed or contingent
including without limitation any tax liabilities due or to become due) which
are not fully disclosed in the Financial Statements, other than those
incurred in the ordinary course of business since the date of the financial
statements.
11.7 NO ADVERSE CHANGES. Except as otherwise disclosed in the
Financial Statements or in Schedule 11.7, since June 30, 1994, to the
knowledge of Seller, there has not been (i) any occurrence, condition or
development that has materially and adversely affected, or is likely to
materially and adversely affect Division or the Purchased Assets, its
prospects, condition, affairs, operations or assets, and there has been no
material change in the operations, assets, employee relations or financial
condition of Division or the Business, (ii) any
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indebtedness incurred with respect to Seller relative to Division, or its
assets, except in the ordinary course of business, (iii) any sale, transfer,
lease, mortgage, pledge, grant of security interest in or other encumbrance
on the Purchased Assets (other than sales of inventory made in the ordinary
course of business), (iv) any purchase of or agreement to purchase any
additional assets or properties for use by Division, other than in the
ordinary course of business, or (v) any union organizing activity with
respect to employees, or (vi) the occurrence of any event or the taking of
any action which would not be permitted under Section 6.1 if such action or
event were to have occurred during the period specified in Section 6.1.
11.8 EMPLOYEES. Attached hereto as Schedule 11.8 is a complete and
accurate list of the names and job titles of the employees of Division,
together with a description of all employment agreements, bonus plans,
deferred compensation plans, employee pension plans or retirement plans,
employee profit sharing plans, employee stock purchase and stock option
plans, hospitalization insurance, and other plans and arrangements providing
for employee benefits of employees of Division ("Employee Benefits"). Seller
shall supply the Buyer with a list showing the compensation paid to each
employee as of the date of this Agreement. Except as listed on Schedule
11.8, all employees of Division are employees at-will and shall have no
entitlement to employment by virtue of any oral or written contract, employer
policy, or otherwise, and neither Division nor its employees are parties to
any collective bargaining agreement affecting the Business. Seller does not
have any "pension plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended) other than those
identified in Schedule 11.8. As of the date hereof and for the past three
years, to the knowledge of Seller, there is not nor has there been, any
strike, lock out, sit down, slow down, formal grievance or other material
labor dispute whatsoever pending or threatened against Seller which in any
manner materially affects Division. To the knowledge of Seller, Seller is
and has been in compliance with all rules regulating wages or hours of
employees of Division. All accrued obligations of Seller relating to
employees of Division, whether arising by operation of law, by contract or by
past service, or payments to trusts or other funds or to any governmental
agency, or to any individual employee (or his legal representatives) with
respect to unemployment compensation benefits, profit sharing or retirement
benefits, or social security benefits have been paid, or shall have been paid
on or before the Closing Date, by Seller. All obligations of Seller to
Division's employees, whether arising by operation of law, by contract, or by
past practice, for vacation and holiday pay, bonuses, and other forms of
compensation which are or may become payable to such employees have been or
will be paid by Seller or will be fully accrued in the Financial Statements
prior to the Closing Date.
11.9 CONFLICT WITH EXISTING AGREEMENTS. The execution, delivery,
and performance of this Agreement by Seller and the consummation of the
transactions contemplated hereby: (i) does not violate, with or without the
giving of notice or the lapse of time, or both, any provisions of law
applicable to Seller, (ii) will not conflict with, or result in the breach or
termination of any provision of, or constitute a default under Seller's
Articles of Incorporation or Bylaws, or any indenture, mortgage, deed of
trust, or other material instrument, contract or agreement (other than the
leases in respect of the Real Property, which require the consent of the
landlord to this assignment), or any order, judgment, arbitration award, or
decree to which
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Seller is a party and by which it or any of Division's assets and properties
are bound (including the Purchased Assets), and (iii) will not result in the
creation of any lien, charge, or encumbrance upon any of the properties,
assets, or business of Division, other than those violations, conflicts,
breaches, defaults, terminations, liens, changes or encumbrances that would
not have a material adverse effect on the Business or the Division.
11.10 THE REAL PROPERTY. To the knowledge of Seller, the use of
the Real Property by Division under the Leases and the conduct therein of the
Business have not violated, and are not expected to violate, any law, rule or
regulation of any governmental body or authority. The Real Property has
water supply and sewage and waste disposal facilities, sufficient for the
operation of the Business on the date hereof. To the knowledge of Seller,
Seller and Division are in full compliance with the terms of the Leases.
11.11 MATERIAL CONTRACTS. Within 20 days after signing this
Agreement, but in not less than 10 days before the Closing, Seller shall
provide to Buyer a list of all contracts relating to the Business with a
value in excess of $10,000.00, alone or in the aggregate with other related
contracts. All of the Assigned Contracts (listed on Schedule 1.3 attached
hereto) are now and on the Closing Date shall be in full force and effect
without amendment thereto (unless such amendments are clearly noted) and
Seller is entitled to all benefits thereunder. All Assigned Contracts are
valid and binding obligations of the parties thereto in accordance with their
respective terms. No material default or alleged material default exists on
the part of Seller or Division, nor, to the knowledge of Seller, on the part
of any other party, under any Assigned Contract and, to the knowledge of
Seller, there exists no state of facts, which after notice or lapse of time,
would constitute a material default or breach in connection with any Assigned
Contract. Seller has no information which might reasonably indicate that any
customer or supplier of Division intends to cease purchasing from, selling to
or dealing with Division, nor has any information been brought to the
attention of Seller which might reasonably lead Seller to believe that any
customer or supplier intends to alter in any material respect, the amount of
such purchases, sales or the extent of dealings with Division or would alter
in any material respect its purchases from, sales to, or dealings with Buyer
in the event of the consummation of the transactions contemplated hereby.
11.12 TAXES. All federal, state and local tax returns and tax
reports required to be filed by Seller which relate in any way to Division or
the Business have been filed with the appropriate governmental agencies in
all jurisdictions in which such returns and reports are required to be filed;
all federal, state and local income, profits, franchise, sales, use,
occupation, property, excise, business and other taxes (including interest
and penalties) due from Seller which relate in any way to Seller's operation
of Division or the Business have been or will be fully paid by Seller.
11.13 COMPLIANCE WITH LAWS, RULES, REGULATIONS. To the knowledge
of Seller, Seller and, to the extent applicable, Division, are in compliance
in all material respects with all applicable statutes, ordinances, rules,
regulations, requirements, and orders of governments and governmental bodies
(including, but not limited to, all applicable statutes, ordinances,
regulations
9
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and codes relating to the environment, pollution, the treatment, storage or
disposal of chemicals, hazardous or toxic substances or wastes, building and
zoning, and related matters, and all labor related state and federal
legislation, including OSHA and COBRA) which pertain to the Business or
Division, except those as to which noncompliance would not have a materially
adverse effect on the Business or Division, and Seller has not received any
notice asserting any such noncompliance.
11.14 LITIGATION. Except as set forth on Schedule 11.14, there
are no claims, demands, disputes, actions, suits, proceedings or
investigations pending or, to the best of the knowledge of Seller threatened
against or directly affecting Seller, Division or the Business, at law or in
equity or before or by any federal, state, municipal or other governmental
department, commission, board, agency or instrumentality, domestic or foreign
and Seller is not subject to any presently effective adverse order, writ,
injunction or decree of any court, or any federal agency or instrumentality
affecting the Business.
11.15 PRODUCT LIABILITY. Except for losses, claims, damages and
expenses adequately covered by Seller's insurance or as set forth on Schedule
11.15 to the best of Seller's knowledge there are not (i) any liabilities of
Seller or Division, fixed or contingent, asserted and arising out of
incidents occurring on or before the Closing Date with respect to any product
liability or any similar claim that relates to any products sold by Division,
or (ii) any liabilities of Seller, fixed or contingent, asserted and arising
out of incidents occurring on or before the Closing Date with respect to any
claim for the breach of any express or implied product warranty, or any
similar claim that relates to any products sold by Division. To the best of
Seller's knowledge, no defect or deficiency exists in any of the products
sold by Division which could give rise to any such liabilities or claims.
11.16 ENVIRONMENTAL CONDITIONS. Seller has no knowledge of any
fact to the contrary that Division and the Real Property: (i) are in full
compliance with all requirements of federal, state and local environmental,
health or safety laws, regulations and administrative or judicial decrees, as
amended (the "Environmental Laws"); (ii) are not the subject of any
"Superfund" evaluation or investigation; and (iii) are not the subject of any
federal or state investigation or administrative proceeding evaluating
whether any remedial action is necessary to respond to a release of any
Hazardous Substance (as defined below). To the knowledge of Seller, Seller
(a) has not used, generated, stored, transported, disposed of, produced or
processed any Hazardous Substance at or on the Real Property except in
compliance with all Environmental Laws; (b) has not caused or permitted nor
has any knowledge of any release, disposal or discharge of any Hazardous
Substance on the Real Property; or (c) is not obligated under law to obtain,
any license, permit or permission relating to the generation, handling,
storage, transportation or disposal of any Hazardous Substance with respect
to the Purchased Assets or Real Property. As used herein, the term "Hazardous
Substance" means any toxic or hazardous waste, pollutants or substances,
including, but without limitation, asbestos, PCB'S, petroleum products and
by-products, substances defined or listed as "hazardous substances" or "toxic
substances" or similarly identified pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
42 U.S.C. Section 9061 ET SEQ., and
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any other hazardous or toxic substances or pollutants regulated under other
applicable Environmental Laws.
11.17 DISCLAIMER OF SELLER. Except as expressly provided herein,
SELLER MAKES NO REPRESENTATION OR WARRANTY CONCERNING THE PURCHASED ASSETS,
THE BUSINESS OR THE DIVISION, INCLUDING THOSE RELATING TO THE QUALITY,
CONDITION, MERCHANTABILITY, SALABILITY, OBSOLESCENCE, WORKING ORDER OR
FITNESS FOR A PARTICULAR PURPOSE. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
HEREIN, THE PURCHASED ASSETS, THE BUSINESS AND THE DIVISION ARE SOLD TO THE
BUYER "AS IS AND WHERE IS".
12. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and
warrants to Seller that:
12.1 ORGANIZATION AND STANDING. Buyer is now and, on the Closing
Date shall be, a limited partnership, duly organized and validly existing
under the laws of Delaware, and Buyer has all the requisite power and
authority to own its properties and conduct its business as now being
conducted.
12.2 AUTHORIZATION. All necessary action to duly approve the
execution, delivery and performance of this Agreement and the consummation of
the transaction contemplated hereby will have been taken by Buyer, and this
Agreement and any document, schedule, exhibit, or certificates prepared in
connection herewith, constitute a valid and binding agreement of Buyer
enforceable in accordance with their respective terms, except as such
enforcement may be subject to bankruptcy, insolvency, or similar laws
affecting the enforcement of creditor's rights in general, and to general
principles of equity.
12.3 INSOLVENCY. No insolvency, proceeding of any character,
including without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary,
affecting Buyer is pending or, to the knowledge of Buyer threatened. Buyer
has not taken any action in contemplation of, or which would constitute a
basis for, the institution of such insolvency proceedings.
12.4 CONFLICT WITH EXISTING AGREEMENTS. The execution, delivery
and performance of this Agreement by Buyer and the consummation of the
transactions contemplated hereby (i) does not violate, with or without the
giving of notice or the lapse of time, or both, any provisions of law
applicable to Buyer, (ii) will not conflict with, or result in the breach or
termination of any provision of or constitute a default under buyers
Certificate of Limited Partnership, Limited Partnership Agreement, or any
indenture, mortgage, deed of trust, or other instrument, contract, agreement
or any order, judgment, arbitration award or decree to which Buyer may be a
party or by which any of its assets and properties may be bound and will not
result in the creation of a lien, charge or encumbrance upon any of the
properties, asserts, or business of Buyer, except indebtedness incurred and
security interests granted by the Buyer in connection with the financing of
the Purchase Price hereunder.
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13. EMPLOYEES. Buyer shall hire all employees of Division and shall
provide medical benefits as set forth on Schedule 13 hereto. Seller shall be
liable for any salary, wages, bonuses, commissions, accrued vacations or sick
leave time, profit sharing or pension benefits, and any other compensation or
benefits as well as any actions or causes of action including, but not
limited to, unemployment compensation claims and workmen's compensation
claims which may be asserted by any of Division's employees if such claim
relates to or arises solely from his or her employment with Seller or
Division prior to Closing.
14. COVENANTS OF SELLER. Seller covenants and agrees with Buyer as
follows:
14.1 ASSIGNMENT OF RIGHT TO USE NAME. At the Closing, Seller
shall deliver to Buyer all documents necessary or appropriate to allow Buyer
to use the name "General Neon" and any other trade name used by Division in
the operation of the Business, provided, however, that in no event shall
Buyer be entitled to any rights in or to the name "MagneTek" or any
derivation thereof.
15. INDEMNIFICATION. Seller, its successors and assigns, shall defend,
indemnify and hold harmless Buyer and its directors, officers, shareholders,
agents, successors and assigns from and against any and all costs, losses,
claims, liabilities, fines, expenses, penalties, and damages (including
reasonable legal fees) in connection with or resulting from:
(a) All debts, liabilities and obligations of Seller,
whether accrued, absolute, contingent, known or unknown, or
otherwise, but excluding those arising under the Assumed
Liabilities;
(b) Any breach or default under this Agreement or any
document, schedule, exhibit or certificate hereunder;
(c) Any claims of creditors of Seller under Article VI
of the Uniform Commercial Code as enacted in any state who
has jurisdiction over the Purchased Assets, relating to bulk
transfers or otherwise (collectively "Bulk Sales Statutes"),
provided, that, Buyer waives compliance with such statutes;
and
(d) Seller shall not have any liability under this
Section 15 unless the aggregate of all Losses relating
thereto for which Seller would, but for this proviso, be
liable exceeds an amount equal to $25,000 (and then only to
the extent of such excess); and provided further, however,
that Seller's aggregate liability under this Section 15
shall in no event exceed $1,750,000.00. Buyer's entitlement
to indemnification pursuant to this Section 15 shall be
conditioned upon claims in respect thereto being submitted
by Buyer to Seller within one year after the Closing Date,
except for claims relating to taxes and employee claims
which are the responsibility of Seller pursuant to the terms
hereof, in which case, the applicable term shall be the
statute of limitations applicable to the underlying claim.
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Buyer, its successors and assigns, shall defend, indemnify and hold harmless
Seller and its directors, officers, shareholders, agents, successors and
assigns from and against any and all Losses in connection with or resulting
from:
(i) the existence of, or the failure of Buyer to
pay, perform and discharge when due, any of the Assumed
Liabilities; and
(ii) the ongoing operations of the Business, the
Division and the Purchased Assets after the Closing
Date;
16. EXPENSES. All out-of-pocket expenses of Seller incurred in the
negotiation, satisfaction and performance of this Agreement, including
without limitation, any legal and accounting expenses shall be paid by Seller
and shall not be charged to Division or the Business as an expense.
17. DEFAULT. In the event any Condition Precedent to Seller's or
Buyer's Obligation pursuant to Section 8 is not fulfilled because of the
other party's default in respect to any warranty, representation or covenant,
Seller or Buyer, as the case may be, may (i) elect to terminate this
Agreement or to consummate the transaction contemplated hereby, and (ii)
institute an action against the other party to compel the rectification and
correction of, or to recover damages for, such default.
18. RISK OF LOSS. The risk of loss or damage to the Purchased Assets
from fire or other casualty or cause shall be upon Seller at all times up to
the Closing.
19. TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) By mutual agreement of Seller and Buyer.
(b) By Buyer, if there has been a material violation
or breach by Seller of any of the agreements,
representations or warranties contained in this Agreement
which has not been waived in writing.
(c) By Seller, if there has been a material violation
or breach by the Buyer of any of the agreements,
representations or warranties contained in this Agreement
which has not been waived in writing.
(d) By Seller if the transactions contemplated by this
Agreement shall not have been consummated on or before April
4, 1995.
20. MISCELLANEOUS PROVISIONS.
20.1 REPRESENTATIONS AND WARRANTIES. All statements contained in
this Agreement or any document, schedule, exhibit, or certificate delivered
pursuant hereto shall be
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deemed to be representations and warranties made pursuant to this Agreement.
The representations and warranties made by the parties pursuant to this
Agreement shall not survive the consummation of the transaction contemplated
by this Agreement.
20.2 FINDERS, CONSULTANTS AND BROKERS. The parties hereby
represent and warrant to one another that no finder, broker or consultant has
been involved in the negotiations leading up to the execution of this
Agreement, and no finder's, broker's or consultant's fees or commissions are
payable in connection with the transaction contemplated hereby. Each party
agrees to defend, indemnify and hold harmless the other from and against any
such fees or commissions, and any liabilities or expenses related thereto
(including attorneys' fees) arising or alleged to arise from any agreements
entered into by such party.
20.3 NOTICES. All notices, demands and requests required or
permitted to be given under the provisions of this Agreement shall be in
writing and shall be deemed given (a) when personally delivered to the party
to be given such notice or other communication, (b) on the business day that
such notice or other communication is sent by facsimile or similar electronic
device, fully prepaid, which facsimile or similar electronic communication
shall promptly be confirmed by written notice, (c) on the third business day
following the date of deposit in the United States mail if such notice or
other communication is sent by certified or registered air mail with return
receipt requested and postage thereon fully prepaid, or (d) on the business
day following the day such notice or other communication is sent by reputable
overnight courier, to the following:
If to Seller: MagneTek, Inc.
26 Century Boulevard
Nashville, Tennessee 37229
Attention: Samuel A. Miley, Esq.
General Counsel
If to Buyer: GN Acquisition Partners, L.P.
c/o Donald B. Lifton
1400 N. Woodward, Suite 100
Bloomfield Hills, Michigan 48304
with a copy to: John A. Thurber, Esq.
Miller, Canfield, Paddock and Stone
1400 N. Woodward, Suite 100
Bloomfield Hills, Michigan 48304
or to such other person or address as the parties may designate in writing.
20.4 BENEFIT AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto, and their respective
successors, assigns, heirs and legal
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representatives. Neither Buyer nor Seller shall assign or attempt to assign
this Agreement without the prior written consent of the other party.
20.5 CHOICE OF LAW AND CHOICE OF FORUM. This Agreement shall be
governed, construed and enforced in accordance with the laws of the State of
Delaware. Any and all actions concerning any dispute arising hereunder shall
be filed and maintained only in a state or federal court sitting in the State
of Delaware, and the parties hereto consent and submit to the jurisdiction of
such state or federal court.
20.6 COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such
counterpart were upon the same instrument. Each executed copy shall be
deemed an executed original for all purposes.
20.7 ENTIRE AGREEMENT. This Agreement, and all documents,
schedules, exhibits or certificates prepared in connection herewith,
represent the entire understanding and agreement between the parties with
respect to the subject matter hereof, supersede all prior agreements or
negotiations between such parties, and may be amended, supplemented or
changed only by an agreement in writing which makes specific reference to
this Agreement or the agreement delivered pursuant hereto, as the case may
be, and which is signed by the party against whom enforcement of any such
amendment, supplement or modification is sought.
20.8 FURTHER ASSISTANCE. Seller shall cooperate with and assist
Buyer with the transfer of the Purchased Assets hereunder; refer all
complaints and notices; and take all other reasonable actions to assure a
smooth transition of the Business to Buyer. From time to time, at Buyer's
request, Seller shall also deliver such further instruments of conveyance and
transfer as may reasonably be required; and Seller shall take such other
action as Buyer may reasonably request to convey and transfer more
effectively to Buyer any of the property to be sold hereunder.
20.9 ARBITRATION. If Seller and Buyer are unable to agree on
material matters respecting the implementation or interpretation of this
Agreement, such material matters shall be determined by arbitration before a
single arbitrator in accordance with the Uniform Arbitration Act, as amended,
and under the auspices and rules of the American Arbitration Association.
The arbitrator shall be empowered to resolve all collateral matters relating
to the arbitration, including whether this Section and the provisions for
arbitration hereunder are properly invoked and applicable, to the end that
all questions, disputes and controversies be resolved and determined by the
arbitrator. The decision of the arbitrator shall be final and conclusive and
judgment on such decision may be entered in any court having jurisdiction.
20.10 CONFIDENTIALITY. Until the Closing, or in the event the
transactions contemplated herein are not consummated, each party agrees that
it shall hold in confidence all documents, materials and other information
which it shall have obtained regarding the other party during the course of
the negotiations leading to the consummation of the transaction contemplated
hereby (whether obtained before or after the date of this Agreement), the
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investigation provided for herein and the preparation of this Agreement and
other related documents. The obligation of each party to treat such
documents, materials and other information in confidence shall not apply to
any information which (i) such party can demonstrate was lawfully in is
possession prior to the disclosure thereof by the other party, (ii) is known
to the public and did not become so known through any violation of the legal
obligation of such party, (iii) is later lawfully acquired by such party from
other sources, or (iv) in the case of Buyer, relates to the Purchased Assets
or the Business subsequent to the Closing.
20.11 COUNTERPART SIGNATURES. This Agreement may be signed in
counterparts which, when taken together, shall constitute a fully executed
version hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duty authorized officers on the day and year first above
written.
Seller:
MAGNETEK, INC., a Delaware corporation
By: /s/ David P. Reiland
--------------------------------------
Its: Executive Vice President and
Chief Financial Officer
Buyer:
GN Acquisition Partners, L.P.
a Delaware limited partnership
By:
GN Management Corporation
a Delaware Corporation, its
General Partner
By: /s/ Rajender K. Arora
----------------------------
Rajender K Arora,
Its: Secretary-Treasurer
392634.01
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- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
among
MAGNETEK, INC.,
MAGNETEK NATIONAL ELECTRIC COIL, INC.*
and
800 KING AVENUE ACQUISITION CORP.
--------------------------------------
Dated as of March 13, 1995
--------------------------------------
SALE OF CERTAIN ASSETS OF MAGNETEK
NATIONAL ELECTRIC COIL, INC.
LOCATED IN COLUMBUS, OHIO RELATING TO
ROTATING EQUIPMENT REMANUFACTURING AND REPAIR
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.................................................... 1
1.1 Certain Defined Terms................................ 1
1.2 Other Definitional Provisions........................ 7
ARTICLE II CLOSING; PURCHASE PRICE ADJUSTMENT............................. 7
2.1 Sale and Transfer of the Assets...................... 7
2.2 Assets Not Transferred............................... 8
2.3 Assumed and Excluded Liabilities..................... 10
2.4 Closing.............................................. 11
2.5 Purchase Price Adjustment............................ 12
2.6 Tax Allocation....................................... 14
2.7 Sales and Use Tax.................................... 15
ARTICLE III CONDITIONS TO CLOSING..................................... 15
3.1 Buyer's Obligation................................... 15
3.2 Sellers' Obligation.................................. 16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MAGNETEK..................... 17
4.1 Authority; No Conflicts; Governmental
Consents............................................. 17
4.2 Financial Statements................................. 18
4.3 Taxes................................................ 18
4.4 Assets Other than Real Property Interests............ 18
4.5 Real Property........................................ 19
4.6 [Intentionally Omitted].............................. 19
4.7 Contracts............................................ 19
4.8 Litigation; Decrees.................................. 20
4.9 Employee and Related Matters......................... 21
4.10 Environmental Matters................................ 21
4.11 Employee and Labor Relations......................... 21
4.12 Exclusivity of Representations....................... 22
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER........................ 22
5.1 Authority; No Conflicts; Governmental
Consents............................................. 22
5.2 Actions and Proceedings, Etc......................... 23
5.3 Availability of Funds................................ 23
5.4 Buyer's Acknowledgment............................... 23
5.5 Exon-Florio.......................................... 23
5.6 No Knowledge of Sellers' Breach...................... 23
ARTICLE VI COVENANTS OF MAGNETEK.......................................... 24
6.1 Access............................................... 24
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6.2 Ordinary Conduct..................................... 24
6.3 Insurance............................................ 25
6.4 Title Commitment..................................... 25
6.5 Acquisition Proposals................................ 25
6.6 Accounts Receivable.................................. 25
ARTICLE VII COVENANTS OF BUYER........................................ 26
7.1 Confidentiality...................................... 26
7.2 Accounts Receivable.................................. 26
7.3 Waiver of Bulk Sales Law Compliance.................. 26
7.4 Excluded Assets...................................... 27
7.5 Insurance............................................ 27
7.6 Replacement Bonding.................................. 27
ARTICLE VIII MUTUAL COVENANTS.......................................... 28
8.1 Permits and Consents................................. 28
8.2 Cooperation.......................................... 30
8.3 Publicity............................................ 30
8.4 Reasonable Efforts and Further Assurances............ 30
8.5 Records.............................................. 30
8.6 Access to Former Business Records;
Cooperation in Litigation............................ 30
8.7 Use of Trademarks, Trade Names and
Corporate Names...................................... 31
8.8 Required Modifications or Replacements of
Products............................................. 31
8.9 Outstanding Contracts................................ 32
8.10 NASA Bid............................................. 32
ARTICLE IX EMPLOYEE BENEFIT MATTERS....................................... 33
9.1 Employee Retention................................... 33
9.2 Employee Benefit Plans............................... 33
9.3 Employees Covered by Collective Bargaining
Agreements........................................... 34
9.4 Bargaining Plans..................................... 34
9.5 Vacation, Holiday, Sick and Severance Pay............ 34
9.6 Access to Information................................ 34
9.7 Third-Party Beneficiaries............................ 34
ARTICLE X INDEMNIFICATION................................................ 34
10.1 Indemnification by MagneTek.......................... 34
10.2 Indemnification by Buyer............................. 35
10.3 Indemnification for Environmental Matters............ 36
10.4 Losses Net of Insurance, Etc......................... 36
10.5 Termination of Indemnification....................... 37
10.6 Procedures Relating to Indemnification
(Other than for Tax Claims).......................... 38
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10.7 Procedures Relating to Indemnification of
Tax Claims........................................... 39
10.8 Survival of Representations.......................... 40
ARTICLE XI GENERAL PROVISIONS............................................. 40
11.1 Assignment........................................... 40
11.2 No Third-Party Beneficiaries......................... 41
11.3 Termination.......................................... 41
11.4 Expenses............................................. 42
11.5 Attorneys' Fees...................................... 42
11.6 Amendments........................................... 42
11.7 Notices.............................................. 42
11.8 Interpretation; Exhibits and Schedules............... 43
11.9 Counterparts......................................... 44
11.10 Entire Agreement................................... 44
11.11 Fees............................................... 44
11.12 Severability....................................... 44
11.13 Governing Law...................................... 44
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EXHIBITS
- --------
EXHIBIT A Bill of Sale, Assignment and Assumption Agreement..............A-1
EXHIBIT B Opinion of Gibson, Dunn & Crutcher.............................B-1
EXHIBIT C Opinion of General Counsel of MagneTek.........................C-1
EXHIBIT D Opinion of Stanley L. Waldbaum.................................D-1
EXHIBIT E Form of Services and Lease Agreement...........................E-1
EXHIBIT F Form of Deed...................................................F-1
EXHIBIT G Form of Sharing Agreement......................................G-1
EXHIBIT H Form of Trademark License Agreement............................H-1
EXHIBIT I Form of Tradename License Agreement............................I-1
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SCHEDULES
- ---------
Schedule 1.1(a) December Balance Sheet
Schedule 1.1(b) Business Employees
Schedule 2.1(d) Description of Data
Schedule 2.2(h) Certain Excluded Assets
Schedule 2.6 Purchase Price Allocation
Schedule 4.1(b) Conflicts (Sellers)
Schedule 4.3 Taxes
Schedule 4.4 Liens
Schedule 4.5 King Avenue Property
Schedule 4.7 Certain Contracts
Schedule 4.8 Litigation
Schedule 4.9 Seller Plans
Schedule 4.11 Labor Matters
Schedule 5.1(b) Conflicts (Buyer)
Schedule 6.2 Exceptions to Ordinary Course
Schedule 7.6 Outstanding Bonds etc.
Schedule 11.11 Sellers' and Buyer's Brokers and Finders
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of March 13, 1995, among
MAGNETEK, INC., a Delaware corporation ("MagneTek"), MAGNETEK NATIONAL ELECTRIC
COIL, INC., a Delaware corporation ("NEC" and together with MagneTek,
"Sellers"), and 800 KING AVENUE ACQUISITION CORP., an Ohio corporation
("Buyer").
NEC, a wholly owned subsidiary of MagneTek, is engaged, through
its King Avenue, Columbus facility, in the business of repairing,
remanufacturing and upgrading generators and motors primarily for the utility
industry (the "Columbus Business"). Sellers desire to sell to Buyer certain
assets (other than excluded assets) relating to the Columbus Business. Buyer
desires to purchase such assets and is willing to assume certain associated
obligations and liabilities.
Accordingly, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms
defined):
"Affiliate" has the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act by the SEC, as in effect on the date
hereof.
"Assets" has the meaning set forth in Section 2.1.
"Assigned Contracts" has the meaning set forth in Section 2.1(e).
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Bill of Sale, Assignment and Assumption Agreement" means a Bill of
Sale, Assignment and Assumption Agreement in substantially the form attached
hereto as Exhibit A.
"Business Day" means a day other than a Saturday or a Sunday or
other day on which commercial banks in New York are authorized or required by
law to close.
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"Business Employee" means any employee of MagneTek or NEC working
primarily for the Columbus Business on the Closing Date, including any such
employee on vacation, family, illness or disability leave on such date, who
is listed on Schedule 1.1(b).
"Buyer Indemnified Person" has the meaning set forth in Section
10.1.
"Closing Balance Sheet" has the meaning set forth in Section 2.5.
"Closing Date" means the day on which the Closing occurs pursuant
to Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Collective Bargaining Agreement" means the Agreement between
MagneTek National Electric Coil, Columbus, Ohio, and International Union of
Electrical, Radio & Machine Workers, AFL-CIO-CLC and its Local No. 745, dated
March 4, 1993 and all schedules, appendices and letters of understanding
related thereto.
"Contract" means any contract, agreement, license, lease, sales or
purchase order or other legally binding commitment, whether written or oral,
to which MagneTek or NEC is a party and relating exclusively to the Columbus
Business.
"Contractual Obligation" means, as to any Person, any provision of
any note, bond or security issued by such Person or of any mortgage,
indenture, deed of trust, lease, license, franchise, contract, agreement,
instrument or undertaking to which such Person is a party or by which it or
any of its property or assets is subject.
"December Balance Sheet" means the unaudited balance sheet of the
Columbus Business as of December 31, 1994, attached hereto as Schedule 1.1(a).
"Employee Benefit Arrangements" means each and all pension,
supplemental pension, accidental death and dismemberment, life and health
insurance and benefits (including medical, dental, vision and
hospitalization), disability, holiday, vacation, sick pay, sick leave,
tuition refund, service award and other employee benefit arrangements, plans,
contracts or policies providing employee or executive compensation or
benefits to Business Employees, other than the Employee Benefit Plans.
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"Employee Benefit Plans" means each and all "employee benefit
plans," as defined in Section 3(3) of ERISA, maintained or contributed to by
either Seller or in which either Seller participates or participated and
which, in each case, provides benefits to Business Employees, including (i)
any such plans that are "employee welfare benefit plans" as defined in
Section 3(1) of ERISA and (ii) any such plans that are "employee pension
benefit plans" as defined in Section 3(2) of ERISA.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Resource Conservation
and Recovery Act of 1976, as amended, and any other applicable statutes,
regulations, rules, ordinances or codes which relate to the protection of the
environment from the effects of Hazardous Substances.
"Equipment" has the meaning set forth in Section 2.1(b).
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the SEC
promulgated from time to time thereunder.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.3.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Hazardous Substance" means any substance which is defined as a
hazardous waste or hazardous substance under any Environmental Law.
"High Voltage" means voltage greater than or equal to 11,000 KVA.
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"Indemnified Person" means, with respect to any Loss, the Person
seeking indemnification hereunder.
"Indemnifying Person" means, with respect to any Loss, the Person
from whom indemnification is being sought hereunder.
"Intellectual Property" has the meaning set forth in the Sharing
Agreement.
"Inventory" has the meaning set forth in Section 2.1(c).
"King Avenue Property" has the meaning set forth in Section 2.1(a).
"Knowledge of Seller" with reference to any of the representations
and warranties of MagneTek means the actual knowledge of any "officer" of
MagneTek as such term is defined in 17 C.F.R. 240.16a-1(f), to the extent
such officer had, on the date hereof, responsibility for matters that are the
subject of such representation and warranty; PROVIDED, HOWEVER, that unless
such an officer had (a) actual knowledge to the contrary or (b) direct
responsibility at the Columbus Business level for the subject matter thereof,
such knowledge is based solely upon information and materials supplied to
MagneTek by Columbus Business personnel, deemed for this purpose to include
Robert G. Barton and Thomas P. Steuber.
"Lien" means any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other) or other security agreement of any
kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement or any financing lease having
substantially the same economic effect as any of the foregoing).
"Loss" means any loss, liability, claim, damage or expense
(including reasonable attorneys' fees and disbursements and the costs of
investigation). Loss recoverable hereunder is subject to the limitations set
forth in Section 10.4.
"Material Adverse Effect" means a material adverse effect on (a)
the business, operations, property or condition (financial or other) of the
Columbus Business, taken as a whole, or (b) the ability of Sellers to
consummate the Transactions.
"Permits" has the meaning set forth in Section 2.1(f).
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"Permitted Liens" has the meaning set forth in Section 4.4.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Purchase Price" has the meaning set forth in Section 2.4.
"Quit Claim Deed" means the Quit Claim Deed to be granted by NEC to
Buyer in substantially the form attached hereto as Exhibit F.
"Reciprocal Easement Agreement" means the Reciprocal Easement
Agreement dated as of October 31, 1994 by and between NEC and Rail Products
International, Inc., an Ohio corporation ("RPI"), as amended to date.
"Records" has the meaning set forth in Section 2.1(g).
"Required Modification" means, with respect to any product, a
modification, improvement or enhancement which is (a) required by any
Requirement of Law or (b) otherwise necessary or advisable in MagneTek's sole
discretion to permit MagneTek to meet any duty or obligation owing by NEC to
remedy defects or hazards in such products or to provide any warning with
respect to any such defects or hazards. Required Modifications may include,
but shall not be limited to, modifications, improvements or enhancements
necessary to meet industry standards, or to implement design improvements, or
modifications of or supplements to the product's design, quality, components,
safety features, labeling, warnings or instructions. Required Modification
shall in no event mean or include any modification, improvement or
enhancement required by any written warranty covering the relevant product.
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
"RPI Agreement" has the meaning set forth in Section 2.2(i).
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"RPI Assets" has the meaning set forth in Section 2.2(i).
"SEC" means the Securities and Exchange Commission.
"Seller Plans" means each and all Employee Benefit Plans and
Employee Benefit Arrangements sponsored or maintained by NEC or MagneTek
under which any Columbus Business Employee participates or is entitled to
receive benefits.
"Services and Lease Agreement" means the agreement to be entered
into by NEC and Buyer in respect of certain engineering services to be
rendered by Buyer personnel and the use by Seller of certain real estate and
equipment at King Avenue, in substantially the form attached hereto as
Exhibit E.
"Sharing Agreement" means the agreement to be entered into by Buyer
and NEC pertaining to the license of certain intellectual property in
substantially the form of Exhibit G hereto.
"Tax" or "Taxes" means, with respect to any Person, any federal,
state, local or foreign net income, gross income, gross receipts, sales, use,
ad valorem, value-added, capital, unitary, intangible, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
transfer, occupation, premium, property or windfall profit tax, custom, duty
or other tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax or
additional amount imposed by any jurisdiction or other taxing authority, on
such Person.
"Tax Returns" has the meaning set forth in Section 4.3.
"Title Commitment" has the meaning set forth in Section 6.4.
"Trademark License Agreement" means the non-exclusive license
agreement pertaining to the "Neccobond" trademark and to various "NECCO"
tradenames to be entered into by Buyer and MagneTek in substantially the form
of Exhibit H hereto.
"Tradename License Agreement" means the non-exclusive license
agreement pertaining to the name "National Electric Coil" to be entered into
by Buyer and NEC in substantially the form of Exhibit I hereto.
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"Transaction Documents" means (i) this Agreement, (ii) the Bill of
Sale, Assignment and Assumption Agreement, (iii) the Services and Lease
Agreement, (iv) the Quit Claim Deed, (v) the Sharing Agreement, (vi) the
Trademark License Agreement and (vii) the Tradename License Agreement.
"Transactions" means the transactions contemplated by the
Transaction Documents.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Terms defined in this Agreement in Sections other
than Section 1.1 shall have the meanings as so defined when used in this
Agreement.
(b) As used herein, accounting terms not defined or to
the extent not defined shall have the respective meanings given to them under
GAAP.
(c) Unless express reference is made to Business Days,
references to days shall be to calendar days.
ARTICLE II
CLOSING; PURCHASE PRICE ADJUSTMENT
2.1 SALE AND TRANSFER OF THE ASSETS. Subject to the terms and
conditions of this Agreement, on the Closing Date, NEC and, to the extent
applicable, MagneTek, will sell, convey, transfer, assign and deliver to
Buyer all of their respective right, title and interest in and to the
following assets (except the Excluded Assets), as the same shall exist on the
Closing Date (the "Assets"):
(a) the real property (including all buildings,
improvements and structures located on such portion and all rights,
privileges, easements and appurtenances thereto) located at 800 King Avenue,
Columbus, Ohio 43212 described on Schedule 4.5 hereto (the "King Avenue
Property");
(b) all tangible personal property, including, without
limitation, the fixtures, furnishings, furniture, office supplies, vehicles,
rolling stock, tools, tooling and forms, machinery, equipment and computer
equipment (including software) located upon or affixed to the King Avenue
Property (collectively, including the fixtures, the "Equipment");
(c) all inventory, including, without limitation, raw
materials, work-in-process, finished goods, packaging materials, spare parts
and supplies of the Columbus Business (the "Inventory");
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(d) the Intellectual Property described on Schedule
2.1(d);
(e) all Contracts (including, but not limited to, all
Contracts listed on Schedule 4.7 and all Contracts entered into by the
Columbus Business through the Closing Date), except for any Contract that
requires the consent to assignment of a party thereto which consent has not
been obtained prior to the Closing Date pursuant to Section 8.1 (the
"Assigned Contracts");
(f) all transferable business licenses and permits used
exclusively in or relating exclusively to the Columbus Business or the Assets
(the "Permits");
(g) all books and records, employment records and files
(other than Intellectual Property, historical accounting, financial and Tax
records) related to or used by Sellers exclusively in connection with the
Assets and the operation of the Columbus Business and located at the King
Avenue Property (the "Records");
(h) all insurance proceeds paid or payable by any
insurance provider, other than Sellers or any Affiliate of Sellers, for any
Asset that is destroyed or damaged after the date hereof and prior to the
Closing;
(i) all accounts receivable and notes receivable of
Sellers on the Closing Date arising exclusively out of the activities of the
Columbus Business;
(j) the stock of MagneTek Power, Inc.; and
(k) all goodwill appurtenant to the foregoing Assets.
2.2 ASSETS NOT TRANSFERRED. Notwithstanding anything herein to
the contrary, the following assets are not included in the Assets and shall
be retained by Sellers (the "Excluded Assets"):
(a) all cash and cash equivalent items (except as
described in Section 2.1(h) and except for deposits and prepaid expenses
reflected on the Closing Balance Sheet and relating to Assumed Liabilities)
of Sellers, including, without limitation, checking accounts, bank accounts,
lock box files, certificates of deposit, time deposits, securities and the
proceeds of accounts receivable, including uncashed checks in payment thereof
received by Sellers on or prior to the Closing Date, in each case whether or
not relating to the Columbus Business;
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(b) all rights, properties and assets which have been
used or held for use in connection with the Columbus Business and which shall
have been transferred (including transfers by way of sale) or otherwise
disposed of prior to the Closing; PROVIDED, such transfers and disposals
shall have been in the ordinary course of the business of the Columbus
Business as conducted at the date hereof;
(c) rights to or claims for refunds or rebates of Taxes
and other governmental charges for periods ending on or prior to the Closing
Date and the benefit of net operating loss carryforwards, carrybacks or other
credits of Sellers, whether or not attributable to the Columbus Business;
(d) claims or rights against third parties, except those
arising with respect to events or breaches occurring after the Closing Date
under the Assigned Contracts; PROVIDED, HOWEVER, that any rights of
indemnification, contribution or reimbursement that may exist under the
Assigned Contracts in respect of Excluded Assets or Excluded Liabilities
hereunder shall be Excluded Assets;
(e) all insurance policies and rights thereunder,
including, but not limited to, rights to any cancellation value as of the
Closing Date;
(f) proprietary or confidential business or technical
information, records and policies that relate to any other division of either
Seller, to Sellers generally or to the division of which the Columbus
Business forms a part generally, or any of either Sellers' Affiliates,
including, without limitation, organization manuals and strategic plans, but
subject to the Sharing Agreement;
(g) subject to the limited rights granted in Section 8.7
and pursuant to the Sharing Agreement, the Trademark License Agreement and
Tradename License Agreement, all "MagneTek" and "NEC" marks, the NECCOBOND
trademark, and all trademarks or service marks, trade names, slogans or other
like property relating to or including the names "MagneTek," "National
Electric Coil" or "NEC," "NECCO", the mark MagneTek or NEC, or any derivative
thereof, and the MagneTek or NEC logo or any derivative thereof, and the name
"Energy Engineered," the "Power M" design, and any derivative thereof, and
Sellers' proprietary computer programs or other software, including, but not
limited to, Sellers' proprietary databases, accounting and reporting formats,
systems and procedures;
(h) the Intellectual Property described in Schedule
2.2(h) or covered by the Sharing Agreement;
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(i) those assets (the "RPI Assets") sold pursuant to that
certain Asset Purchase Agreement dated as of October 31, 1994 by and among
Sellers and Rail Products International, Inc., an Ohio corporation (the "RPI
Agreement") and any assets that may not be sold hereunder under the terms of
the RPI Agreement;
(j) all other assets of Sellers not expressly included in
the Assets to be sold hereunder, including, but not limited to, assets used
by Sellers or their Affiliates in other businesses of Sellers or at other
locations of the same division, and assets used primarily in connection with
Sellers' corporate functions (including but not limited to the corporate
charter, taxpayer and other identification numbers, seals, minute books and
stock transfer books), whether or not used for the benefit of the Columbus
Business; and
(k) the IBM mainframe computer and associated software.
2.3 ASSUMED AND EXCLUDED LIABILITIES. On the Closing Date, Buyer
shall execute and deliver to Sellers the Bill of Sale, Assignment and
Assumption Agreement pursuant to which Buyer shall assume and agree to pay,
perform and discharge when due, all the liabilities and obligations of
Sellers arising out of the business of the Columbus Business, of any kind or
nature, whether absolute, contingent, accrued or otherwise, and whether
arising before or after the Closing, including, without limitation, all
liabilities (i) for tax items assumed by Buyer under Section 2.7, (ii) under
the Assigned Contracts, (iii) in respect of the threatened litigation
referred to on Schedule 4.8 and (iv) all liabilities and obligations of Buyer
set forth in Article IX hereof (collectively, the "Assumed Liabilities");
PROVIDED, HOWEVER, that the Assumed Liabilities shall in no event include the
following liabilities (the "Excluded Liabilities"):
(a) any liability, responsibility or obligation with
respect to any Seller Plan, except (i) as provided in Article IX, (ii) under
the Collective Bargaining Agreement (to the extent provided in Article IX)
and (iii) pursuant to any Assigned Contract;
(b) any liability for (i) warranty claims made after the
Closing for service, repair, replacement and similar work required under
Sellers' written warranties with respect to products sold or services
provided prior to the Closing, the expenses of which, at shop level cost
(direct materials, direct labor and factory overhead), in the aggregate
exceed the warranty reserve on the Closing Balance Sheet, (ii) workers'
compensation claims with respect to injuries
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prior to the Closing, (iii) claims under health insurance plans of Sellers
for covered Business Employees with respect to services rendered prior to the
Closing (but not in respect of any sick leave or disability benefits
pertaining to any period after the Closing Date regardless of when the
relevant illness or condition arose) or (iv) any product liability claims for
injuries, property damage or other Losses, arising with respect to products
sold or services provided prior to the Closing, but only if written notice of
such claims described in clause (i), (ii), (iii) or (iv) shall have been
delivered by Buyer to MagneTek within the two-year period following the
Closing Date;
(c) any liability for Taxes for any period ending on or
prior to the Closing Date, excluding the tax items covered by Section 2.7;
(d) any liability under any litigation pertaining to the
Columbus Business as to which a complaint has been filed in state or federal
court, or an administrative charge or complaint has been filed with a
governmental agency, in each case prior to the Closing Date including,
without limitation, in respect of the EEOC complaint described on Schedule
4.8; and
(e) any liability under any contract as to which (i)
consent to assignment is required but has not been obtained and (ii) the
benefits have not been made available to Buyer as contemplated by Section 8.1
hereof.
2.4 CLOSING. The closing (the "Closing") of the purchase and sale
of the Assets shall be held at offices to be specified by Buyer in Columbus,
Ohio, at 10:00 a.m. on March 13, 1995, or if the conditions to Closing set
forth in Article III shall not have been satisfied or waived by such date,
subject to Section 11.3, as soon as practicable after such conditions shall
have been satisfied or waived. The date on which the Closing shall occur is
hereinafter referred to as the "Closing Date." At the Closing, Buyer shall
deliver to Sellers by wire transfer (to a bank account designated at least
two business days prior to the Closing Date in writing by Sellers)
immediately available funds in an amount equal to the sum of $4,862,900 (the
"Purchase Price"), plus or minus an estimate, if the parties mutually agree
prior to the Closing Date with respect thereto, of any adjustment to the
Purchase Price under Section 2.5 (the Purchase Price plus or minus such
estimate of any adjustment under Section 2.5 being hereinafter called the
"Closing Date Amount"), and such other documents as are required by this
Agreement.
At the Closing, Sellers shall deliver or cause to be delivered to
Buyer (a) the Bill of Sale, Assignment and
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Assumption Agreement, (b) the Quit Claim Deed, (c) the Services and Lease
Agreement, (d) the Sharing Agreement, (e) the Trademark License Agreement,
(f) the Tradename License Agreement, (g) the documents and agreements
referred to in Section 3.1 hereof and (h) such other instruments of transfer
and documents as Buyer may reasonably request; and Buyer shall deliver to
Sellers (i) the documents and agreements referred to in the preceding clauses
(a) through (f), (ii) the documents and agreements referred to in Section 3.2
hereof and (iii) such other instruments of assumption and documents as
Sellers may reasonably request. In addition, Sellers shall deliver to Buyer
at the Closing affidavits in form and substance satisfactory to Buyer, duly
executed and acknowledged, certifying that neither Seller is a foreign person
within the meaning of Section 1445(f)(3) of the Code, and any corresponding
affidavit required for state tax purposes.
2.5 PURCHASE PRICE ADJUSTMENT.
(a) Within 60 days after the Closing Date, Buyer shall
prepare and deliver to MagneTek a balance sheet of the Columbus Business as
of the close of business on the Closing Date comprising the Assets and the
outstanding Assumed Liabilities (the "Closing Balance Sheet"). For purposes
of preparing the Closing Balance Sheet, MagneTek shall make its accounting
personnel available to Buyer (without charge) and such employees shall, for
the purpose of assisting Buyer in preparing the Closing Balance Sheet, be
instructed by MagneTek to act at Buyer's direction.
During the 30 days immediately following MagneTek's receipt of the
Closing Balance Sheet, MagneTek shall be entitled to review the Closing
Balance Sheet and Buyer's working papers relating to the Closing Balance
Sheet, and Buyer shall provide MagneTek access at all reasonable times to its
personnel, properties, books and records to the extent relevant. The Closing
Balance Sheet shall become final and binding upon the parties on the 30th day
following delivery thereof unless MagneTek gives written notice to Buyer of
its disagreement with the Closing Balance Sheet (a "Notice of Disagreement")
prior to such date. Any Notice of Disagreement shall specify in reasonable
detail the nature of any disagreement so asserted. If a timely Notice of
Disagreement is received by Buyer with respect to the Closing Balance Sheet,
then the Closing Balance Sheet (as revised in accordance with clause (x) or
(y) below), shall become final and binding upon the parties on the earlier of
(x) the date the parties hereto resolve in writing any differences they have
with respect to any matter specified in a Notice of Disagreement or (y) the
date any matters properly in dispute are finally resolved in writing by the
Accounting Firm (as
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defined below). During the 30 days immediately following the delivery of any
Notice of Disagreement, MagneTek and Buyer shall seek in good faith to
resolve in writing any differences which they may have with respect to any
matter specified in such Notice of Disagreement. During such period, Buyer
and MagneTek shall each have access to the other party's working papers
prepared in connection with the other party's preparation of the Closing
Balance Sheet or a Notice of Disagreement. At the end of such 30-day period,
MagneTek and Buyer shall submit to an independent accounting firm (the
"Accounting Firm") for review and resolution any and all matters which remain
in dispute and which were properly included in any Notice of Disagreement,
and the Accounting Firm shall reach a final, binding resolution of all
matters which remain in dispute. The Closing Balance Sheet, with such
adjustments necessary to reflect the Accounting Firm's resolution of the
matters in dispute, shall become final and binding on Buyer and MagneTek on
the date the Accounting Firm delivers its final resolution to the parties.
The Accounting Firm shall be Arthur Anderson, or if such firm is unable or
unwilling to act, such other nationally recognized independent public
accounting firm with offices in Columbus, Ohio, as shall be agreed upon by
the parties hereto in writing. The cost of any arbitration (including the
fees and expenses of the Accounting Firm) pursuant to this Section 2.5 shall
be borne 50% by Buyer and 50% by MagneTek.
(b) The Closing Balance Sheet shall be prepared in
accordance with GAAP, applied in a manner consistent with that followed in
the preparation of the December Balance Sheet, subject to the following:
(i) the Closing Balance Sheet
shall not reflect any provision for Taxes
(whether as an asset or a liability);
(ii) intercompany advances shall
be eliminated;
(iii) inventory shall be valued on
a first-in first-out basis; and
(iv) all Excluded Assets (and all
related depreciation and reserves) shall be
eliminated and all Excluded Liabilities (and
related reserves) shall be eliminated.
(c) The Purchase Price shall be adjusted (after giving
effect to the estimation, if any, reflected in the Closing Date Amount) such
that the Purchase Price is (i) increased, to the extent that the aggregate net
book value of the Columbus Business increases from the amount reflected
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on the December Balance Sheet, and (ii) decreased, to the extent that such
aggregate net book value decreases. The Purchase Price shall be adjusted
upward or downward, dollar for dollar, in respect of any such negative or
positive adjustment; PROVIDED, HOWEVER, that no adjustment to the Purchase
Price pursuant to this Section 2.5 shall be made unless such adjustment would
exceed $100,000, and if the adjustment would exceed $100,000, then the full
amount of the adjustment shall be made; PROVIDED, FURTHER, HOWEVER, that the
estimated adjustment paid on the Closing Date, if any, shall be taken into
account in determining whether such threshold is met. Any required
adjustment to the Purchase Price pursuant to this Section 2.5 shall be
referred to as the "Purchase Price Adjustment."
(d) Buyer agrees, with respect to Purchase Price
Adjustments, that following the Closing, Buyer will not take any actions with
respect to the accounting books, records, policies and procedures of the
Columbus Business on which the Closing Balance Sheet is to be based that are
not consistent with GAAP applied in the manner consistent with the past
practices of the Columbus Business.
(f) Within 30 days after the receipt by MagneTek of the
Closing Balance Sheet in accordance with Section 2.5(a) hereof, Buyer shall
remit to Sellers or Sellers shall remit to Buyer, as the case may be, in
immediately available funds, any undisputed amounts constituting Purchase
Price Adjustments. With respect to any items that are the subject of a
Notice of Disagreement, payment shall be made in immediately available funds
within three Business Days after the resolution thereof pursuant to Section
2.5(a). Each payment pursuant to this Section 2.5 shall be made with
interest on the amount of the payment at an annual rate equal to the
reference rate quoted by the San Francisco branch of Bank of America on the
Closing Date for the period from the Closing Date to the date of payment,
computed on the basis of a 360-day year and actual days elapsed.
2.6 TAX ALLOCATION. Buyer and Sellers shall allocate the Purchase
Price plus the Assumed Liabilities (to the extent identifiable or reasonably
estimable as of the date hereof) to broad categories constituting components
of the Assets in accordance with Schedule 2.6 (as the same may be updated as
of the Closing to reflect changes in the Assets or Assumed Liabilities
occurring after the date thereof and prior to the Closing Date). Buyer and
Sellers shall report the purchase and sale of the Assets in accordance with
the agreed upon allocation among such broad categories for all Tax purposes
(including the filing of the forms prescribed under Section 1060 of the Code
and the Treasury Regulations
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promulgated thereunder), but such allocation shall not constrain reporting
for other purposes.
2.7 SALES AND USE TAX. Buyer and Sellers shall cooperate in
preparing, executing and filing use and sales Tax Returns relating to, and
Buyer and MagneTek shall share equally and pay when due, any and all sales,
real estate, transfer or use Tax due with regard to the purchase and sale of
the Assets. Such Tax Returns shall be prepared in a manner that is consistent
with the allocation of the Purchase Price and Assumed Liabilities
contemplated by Section 2.6. Buyer shall also furnish Sellers with a form of
resale certificate that complies with the requirements of Ohio and other
applicable state taxation laws.
ARTICLE III
CONDITIONS TO CLOSING
3.1 BUYER'S OBLIGATION. The obligations of Buyer to purchase and
pay for the Assets are subject to the satisfaction (or waiver by Buyer) as of
the Closing of the following conditions:
(a) The representations and warranties of MagneTek made
in this Agreement shall be true and correct in all material respects as of
the date hereof and, except as specifically contemplated by this Agreement,
on and as of the Closing, as though made on and as of the Closing Date, and
Sellers shall have performed or complied in all material respects with all
obligations and covenants required by this Agreement to be performed or
complied with by Sellers by the time of the Closing; and Sellers shall have
delivered to Buyer certificates dated the Closing Date and signed by an
authorized officer of the respective Sellers confirming the foregoing.
(b) Buyer shall have received an opinion dated the
Closing Date of Gibson, Dunn & Crutcher, counsel to Sellers, as to the
matters set forth in Exhibit B, and an opinion dated the Closing Date of
Samuel A. Miley, Esq., General Counsel of MagneTek, as to the matters set
forth in Exhibit C, which opinions shall be reasonably satisfactory in form
to Buyer.
(c) No injunction or order shall have been granted by any
Governmental Authority that would restrain or prohibit any of the
Transactions or that would impose damages as a result thereof, and no action
or proceeding shall be pending before any Governmental Authority in which any
Person seeks such a remedy (if in the opinion of counsel to Buyer
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there exists a reasonable risk of a materially adverse result in such pending
action or proceeding).
3.2 SELLERS' OBLIGATION. The obligations of Sellers to sell and
deliver the Assets to Buyer are subject to the satisfaction (or waiver by
Sellers) as of the Closing of the following conditions:
(a) The representations and warranties of Buyer made in
this Agreement shall be true and correct in all material respects as of the
date hereof and on and as of the Closing, as though made on and as of the
Closing Date, and Buyer shall have performed or complied in all material
respects with all obligations and covenants required by this Agreement to be
performed or complied with by Buyer by the time of the Closing; and Buyer
shall have delivered to Sellers a certificate dated the Closing Date and
signed by an authorized officer of Buyer confirming the foregoing.
(b) Sellers shall have received an opinion dated the
Closing Date of Stanley L. Waldbaum, Esq., counsel to Buyer, as to the
matters set forth in Exhibit D, which opinion shall be reasonably
satisfactory in form to Sellers.
(c) No injunction or order shall have been granted by any
Governmental Authority that would restrain or prohibit the Transactions or
that would impose damages as a result thereof, and no action or proceeding
shall be pending before any Governmental Authority in which any Person seeks
such a remedy (if in the opinion of counsel to Sellers there exists a
reasonable risk of a materially adverse result in such pending action or
proceeding).
(d) MagneTek shall have received from Buyer insurance
certificates reflecting compliance with the provisions of Section 7.5.
(e) MagneTek shall have received Releases from Daniel S.
Bucklew and Thomas P. Steuber in substantially the form attached to their
respective Retention Agreements dated as of March 1, 1994.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MAGNETEK
MagneTek hereby represents and warrants to Buyer as follows:
4.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS.
(a) Each Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each
Seller has all requisite corporate power and authority to enter into the
Transaction Documents and to consummate the Transactions. All corporate acts
and other proceedings required to be taken by each Seller to authorize the
execution, delivery and performance of the Transaction Documents and the
consummation of the Transactions have been duly and properly taken. This
Agreement has been duly executed and delivered by each Seller and constitutes
a valid and binding obligation of each Seller, enforceable against each
Seller in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(b) The execution and delivery of this Agreement does not
and of the other Transaction Documents will not, and the consummation of the
Transactions and compliance with the terms of the Transaction Documents will
not, conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
benefit under, or result in the creation of any Lien upon any of the
properties or assets of Sellers under, any provision of (i) the Certificate
of Incorporation or By-Laws of either Seller, (ii) subject to the matters
disclosed in Schedule 4.1(b), any Contractual Obligation of MagneTek or, to
the Knowledge of Seller, NEC, or (iii) any judgment, order or decree or,
subject to the matters described in clauses (A)-(E) below, any Requirement of
Law applicable to either Seller or its property or assets, other than, in the
case of clauses (ii) and (iii) above, any such conflicts, violations,
defaults, rights or Liens that, individually or in the aggregate, would not
have a Material Adverse Effect. No consent, approval, license, permit, order
or authorization of, or registration, declaration or filing with, any
Governmental Authority is required to be obtained or made by or with respect
to either Seller in connection with the execution and delivery of the
Transaction Documents or the
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consummation of the Transactions, other than (A) compliance with and filings
under Section 13(a) or 15(d), as the case may be, of the Exchange Act, (B)
compliance with and filings and notifications under applicable Environmental
Laws, (C) any necessary approvals in connection with the novation of
Contracts with governmental agencies, (D) those that may be required solely
by reason of Buyer's participation in the Transactions and (E) those that, if
not made or obtained, individually or in the aggregate, would not have a
Material Adverse Effect.
4.2 FINANCIAL STATEMENTS. To the Knowledge of Seller, the
December Balance Sheet was prepared in accordance with GAAP consistently
applied, and fairly presents the financial condition of the Columbus Business
as of December 31, 1994 except: (a) as set forth therein; (b) for the absence
of footnotes; (c) for normal recurring adjustments; and (d) to the extent it
was prepared on a PRO FORMA basis, with allocations of certain assets and
liabilities based upon good faith estimates of management.
4.3 TAXES.
(a) Except as disclosed on Schedule 4.3, (i) each Seller,
and any affiliated group within the meaning of Section 1504 of the Code of
which either Seller is or has been a member (the "Affiliated Group," but only
for the taxable period during which either Seller has been a member thereof)
have filed or caused to be filed in a timely manner (within any applicable
extension periods) with the appropriate Governmental Authority all Tax
returns, reports and forms (collectively, "Tax Returns") required to be filed
by the Code or by applicable laws, (ii) all Taxes shown on such Tax Returns
have been timely paid in full by the due date thereof, (iii) no Tax Liens
have been filed by any Tax authority against any property or assets of the
Columbus Business, and (iv) to the Knowledge of Seller, no claims are being
asserted in writing with respect to any Taxes relating to the Columbus
Business.
(b) Except as set forth in Schedule 4.3, (i) no property
of the Columbus Business is "tax exempt use property" within the meaning of
Section 168(h) of the Code, and (ii) the Assigned Contracts do not include
any lease made pursuant to former Section 168(f)(8) of the Code.
(c) Neither Seller is a "foreign person" within the
meaning of Section 1445(f)(3) of the Code.
4.4 ASSETS OTHER THAN REAL PROPERTY INTERESTS. NEC has good and
valid title to all assets reflected on the December Balance Sheet or
thereafter acquired, except those
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sold or otherwise disposed of since the date of such December Balance Sheet
in the ordinary course of business consistent with past practice, in each
case free and clear of all Liens except (a) such as are disclosed on Schedule
4.4 and (b) mechanics', carriers', workmen's, repairmen's or other like Liens
arising or incurred in the ordinary course of business, Liens arising under
original purchase price conditional sales contracts and equipment leases with
third parties entered into in the ordinary course of business, Liens for
Taxes and other governmental charges which are not yet due and payable or
which may thereafter be paid without penalty, and other imperfections of
title, restrictions or encumbrances, if any, which Liens, imperfections of
title, restrictions or other encumbrances do not, individually or in the
aggregate, materially impair the continued use and operation of the specific
assets to which they relate (the Liens described in the preceding clause (b)
are hereinafter referred to collectively as "Permitted Liens").
This Section 4.4 does not relate to real property or interests in
real property, such items being the subject of Section 4.5.
4.5 REAL PROPERTY. Schedule 4.5 sets forth a description of the
King Avenue Property. NEC has good, marketable and insurable fee title to
the King Avenue Property, free and clear of all Liens, easements, covenants,
rights-of-way and other similar restrictions of any nature whatsoever, except
(i) Permitted Liens, (ii) the Services and Lease Agreement, (iii) the
Reciprocal Easement Agreement, (iv) easements, covenants, rights-of-way and
other similar restrictions of record and (v) (A) zoning, building and other
similar restrictions, (B) Liens that have been placed by any developer,
landlord or other third party on property over which NEC has easement rights
and (C) unrecorded easements, covenants, rights-of-way or other similar
restrictions, none of which items set forth in clauses (A), (B) and (C)
above, individually or in the aggregate, materially impair the continued use
and operation of the property to which they relate.
4.6 [INTENTIONALLY OMITTED].
4.7 CONTRACTS. Schedule 4.7 sets forth a list of each of the
following types of Contracts:
(a) any employment or severance agreement that has an
aggregate future liability in excess of $100,000 and is not terminable by
notice of not more than 60 days for a cost of less than $50,000 (including
any contracts or agreements with Business Employees that relate to the
Transactions, other
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than any such contracts or agreements for which MagneTek is solely liable and
which are not assigned to Buyer);
(b) any employee collective bargaining agreement or other
contract with any labor union covering Business Employees;
(c) to the Knowledge of Seller, any Contract other than
in the ordinary course of business pursuant to which the aggregate of
payments to become due from or to either Seller is equal to or exceeds
$200,000, and which is not terminable by no more than 60 days' notice for a
cost of less than $100,000; and
(d) any lease (other than the Services and Lease
Agreement) or similar agreement under which NEC is a lessor or sublessor of,
or makes available for use by any third party (including another division of
either Seller), any King Avenue Property or premises otherwise occupied by
the Columbus Business.
Except as disclosed on Schedule 4.7, each Contract listed on
Schedule 4.7 is valid, binding and in full force and effect and is
enforceable by NEC or MagneTek, as the case may be, in accordance with its
terms. Except as disclosed in Schedule 4.7, to the Knowledge of Seller, NEC
or MagneTek, as the case may be, has performed all material obligations
required to be performed by it to date under the Contracts and is not (with
or without the lapse of time or the giving of notice, or both) in breach or
default in any material respect thereunder and, to the Knowledge of Seller,
no other party to any of the Contracts is (with or without the lapse of time
or the giving of notice, or both) in breach or default in any material
respect thereunder.
4.8 LITIGATION; DECREES. To the Knowledge of Seller, Schedule 4.8
sets forth a list, as of the date of this Agreement, of all pending and
threatened lawsuits or claims with respect to which NEC or MagneTek, as the
case may be, has contacted in writing the defendant or been contacted in
writing by the claimant or by counsel for the claimant by or against NEC or
MagneTek, as the case may be, relating, to the Knowledge of Seller, to the
Columbus Business which (a) involves a claim by or against either Seller of
more than $50,000, (b) seeks any injunctive relief or (c) relates to the
Transactions. To the Knowledge of Seller, except as disclosed on Schedule
4.8, neither NEC nor MagneTek, as the case may be, is in default under any
judgment, order or decree of any Governmental Authority applicable to the
Columbus Business, except where the default would not have a Material Adverse
Effect.
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4.9 EMPLOYEE AND RELATED MATTERS. Schedule 4.9 sets forth each
material Employee Benefit Plan. Sellers have made available to Buyer true,
complete and correct copies or summaries of each Plan so listed.
4.10 ENVIRONMENTAL MATTERS. To the Knowledge of Seller, as to the
Columbus Business and the King Avenue Property:
(a) NEC is not in material violation of any applicable
Environmental Law and is not under investigation or review by any
Governmental Authority with respect to compliance therewith, or with respect
to the generation, use, treatment, storage or disposal, or the spillage or
other release of any Hazardous Substance;
(b) There is no Hazardous Substance that is likely to
pose any material risk to safety, health or the environment, and there has
heretofore been no spillage, discharge, release or disposal of any such
Hazardous Substance by NEC on or under the King Avenue Property in an amount
and of a nature which could reasonably be expected to result in material
liability to the Columbus Business; and
(c) No pending citations, fines, penalties or claims have
been asserted against NEC under any Environmental Law which could reasonably
be expected to have a Material Adverse Effect and which have not been
reflected in the December Balance Sheet.
4.11 EMPLOYEE AND LABOR RELATIONS. Except as set forth on
Schedule 4.11:
(a) there is no labor strike, dispute, or work stoppage
or lockout pending, or, to the Knowledge of Seller, threatened, involving the
Columbus Business;
(b) there is no unfair labor practice charge or complaint
against NEC pending, or, to the Knowledge of Seller, threatened, before the
National Labor Relations Board involving the Columbus Business;
(c) there is no pending, or, to the Knowledge of Seller,
threatened, grievance involving an employee of the Columbus Business that, if
adversely decided, would have a Material Adverse Effect; and
(d) no charges with respect to or relating to NEC are
pending before the Equal Employment Opportunity Commission or any other
Governmental Authority responsible for the prevention of unlawful employment
practices as to which there is a reasonable likelihood of adverse
determination
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involving the Columbus Business, other than those which, if so determined,
would not have a Material Adverse Effect.
4.12 EXCLUSIVITY OF REPRESENTATIONS. EXCEPT AS EXPRESSLY PROVIDED
HEREIN, SELLERS MAKE NO REPRESENTATION OR WARRANTY CONCERNING THE ASSETS OR
THE COLUMBUS BUSINESS, INCLUDING AS TO THE QUALITY, CONDITION,
MERCHANTABILITY, SALABILITY, OBSOLESCENCE, WORKING ORDER OR FITNESS FOR A
PARTICULAR PURPOSE THEREOF. EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE ASSETS
ARE SOLD TO BUYER "AS IS."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
5.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS.
(a) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio. Buyer has
all requisite corporate power and authority to enter into this Agreement and
to consummate the Transactions. All corporate acts and other proceedings
required to be taken by Buyer to authorize the execution, delivery and
performance of this Agreement and the consummation of the Transactions have
been duly and properly taken. This Agreement has been duly executed and
delivered by Buyer and constitutes a valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally or by general principles (regardless of whether such enforceability
is considered in a proceeding in equity or law).
(b) Except as disclosed on Schedule 5.1(b), the execution
and delivery of this Agreement does not and of the other Transaction
Documents will not, and the consummation of the Transactions and compliance
with the terms of the Transaction Documents will not, conflict with, or
result in any violation of or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or
result in the creation of any Lien upon any of the properties or assets of
the Buyer under, any provision of (i) the Certificate of Incorporation or
By-Laws of Buyer, (ii) any Contractual Obligation of Buyer or (iii) any
judgment, order or decree or, subject to the matters described in clauses
(A)-(D) below, any Requirement of Law applicable to Buyer or its property or
assets. No
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material consent, approval, license, permit order or authorization of, or
registration, declaration or filing with, any Governmental Authority is
required to be obtained or made by or with respect to Buyer or its Affiliates
in connection with the execution and delivery of the Transaction Documents or
the consummation by Buyer of the Transactions, other than (A) compliance with
and filings under Section 13(a) and 15(d), as the case may be, of the
Exchange Act, (B) compliance with and filings and notifications under
applicable Environmental Laws, (C) any necessary approvals in connection with
the novation of Contracts with governmental agencies and (D) those that may
be required solely by reason of Sellers' (as opposed to any other third
party's) participation in the Transactions.
5.2 ACTIONS AND PROCEEDINGS, ETC. There are no (a) outstanding
judgments, orders, writs, injunctions or decrees of any court, governmental
agency or arbitration tribunal against Buyer or (b) actions, suits, claims or
legal, administrative or arbitration proceedings or investigations pending
or, to the knowledge of Buyer, threatened against Buyer.
5.3 AVAILABILITY OF FUNDS. Buyer has all funds, or binding
commitments as to the availability to Buyer of all funds, required to
consummate the Transactions.
5.4 BUYER'S ACKNOWLEDGMENT. Buyer acknowledges and agrees that,
(a) other than the representations and warranties of MagneTek specifically
contained in this Agreement, there are no representations or warranties of
either Seller either expressed or implied with respect to either Seller, the
Columbus Business or the Transactions and (b) it shall have a right to
indemnification solely as provided in Article X hereof and shall have no
claim or right to indemnification with respect to any information, documents
or materials furnished by either Seller or any of its officers, directors,
employees, agents or advisors, or otherwise available to Buyer.
5.5 EXON-FLORIO. Buyer is not a "foreign person" for purposes of
the Exon-Florio Amendment to the Defense Production Act of 1950.
5.6 NO KNOWLEDGE OF SELLER'S BREACH. Neither Buyer nor, to the
best knowledge of Buyer, any of its Affiliates, has knowledge of any breach
of any representation or warranty by MagneTek or of any other condition or
circumstance that would excuse Buyer from its timely performance of its
obligations hereunder. If any information relevant to the representations
and warranties of MagneTek under this Agreement shall come to Buyer's
attention before the Closing Date (whether through Sellers or otherwise),
then for the
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purposes of MagneTek's liability under such representations and warranties
the effect shall be as if the representations and warranties were so modified
in this Agreement, and no claim for indemnification may be made under Article
X hereof to the extent such claim would not arise under such modified
representation or warranty.
ARTICLE VI
COVENANTS OF MAGNETEK AND NEC
MagneTek and NEC severally, and not jointly, covenant and agree as
follows:
6.1 ACCESS. Subject to the provisions of Section 7.1 hereof,
prior to the Closing, NEC will give Buyer and its representatives, employees,
counsel and accountants, together with representatives of Persons providing
financing to Buyer for the Transactions, reasonable access, during normal
business hours and upon reasonable notice, to the personnel, properties,
books and records of the Columbus Business for purposes of investigating its
assets, operations, prospects, obligations and liabilities; PROVIDED,
HOWEVER, that such access does not unreasonably disrupt the normal operations
of the Columbus Business. Additionally, subject to the provisions of Section
7.1 hereof and to prior notification, and the consent (which will not be
unreasonably withheld or delayed) of NEC, Buyer and such representatives may
contact the principal customers and suppliers of the Columbus Business for
purposes of the foregoing investigation.
6.2 ORDINARY CONDUCT. Except as contemplated by this Agreement or
as set forth in Schedule 6.2, from the date hereof to the Closing, NEC will
cause the business of the Columbus Business to be conducted in the ordinary
course in substantially the same manner as presently conducted and will make
all reasonable efforts consistent with past practices to preserve
relationships with customers, suppliers and others with whom the Columbus
Business deals. Except as contemplated by this Agreement, NEC will not do
any of the following with respect to the Columbus Business without the prior
written consent of Buyer, which consent will not be unreasonably withheld or
delayed:
(a) adopt or amend in any material respect any Seller
Plan or collective bargaining agreement, except as required by law or insofar
as a collective bargaining agreement is then subject to negotiation in
advance of its expiration in the ordinary course;
(b) sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any material
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portion of its assets (other than Excluded Assets), except in the ordinary
course of business consistent with past practice;
(c) enter into any lease of real property, except any
renewals of existing leases; or
(d) agree, whether in writing or otherwise, to do any of
the foregoing.
6.3 INSURANCE. MagneTek shall keep, or cause to be kept, all
insurance policies presently maintained relating to the Columbus Business and
its properties, or replacements therefor, in full force and effect through
the close of business on the Closing Date. Buyer will not have any rights
under any such insurance policies from and after the Closing Date.
6.4 TITLE COMMITMENT. Buyer has obtained a standard form
commitment for an owner's policy of title insurance (the "Title Commitment")
issued by First American Title Insurance Corporation in the amount of
$2,100,000. Buyer shall reimburse NEC for one-half of the expense of the
Title Commitment.
6.5 ACQUISITION PROPOSALS. Neither Seller nor any Person
authorized by Sellers shall solicit, initiate or encourage any acquisition
proposal or engage in any discussion with respect thereto or provide
information to any other person concerning a possible sale of the Assets or
the business of the Columbus Business, unless MagneTek has made a reasonable
determination that Buyer will not consummate the Transactions and has given
notice to Buyer of such determination.
6.6 ACCOUNTS RECEIVABLE. Sellers agree promptly to forward to
Buyer any and all proceeds from accounts receivable of the Columbus Business
that are included in the Assets. If, after the Closing Date, either Seller
receives any payment from any Person who at the time of such payment has
outstanding accounts payable to either Seller, on the one hand (for the
purposes of this Section, "Seller Accounts Receivable"), and to Buyer, on the
other hand (for the purposes of this Section, "Buyer Accounts Receivable"),
and the payment (a) does not indicate whether it is in respect of Seller
Accounts Receivable or Buyer Accounts Receivable or (b) indicates that it is
in payment of both Seller Accounts Receivable and Buyer Accounts Receivable
without specifying the portion to be allocated to each, then Sellers and
Buyer shall consult with one another to determine the proper allocation of
such payment; and, if they are unable to reach agreement on the proper
allocation, such payment shall be applied so as to retire undisputed Seller
Accounts Receivable
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and undisputed Buyer Accounts Receivable in chronological order based upon
the period of time such accounts receivable have existed on the books of
Sellers or the Buyer, as applicable.
ARTICLE VII
COVENANTS OF BUYER
Buyer covenants and agrees as follows:
7.1 CONFIDENTIALITY. Buyer acknowledges that the information
being provided to it by Sellers is subject to the terms of a confidentiality
agreement for the benefit of Sellers dated as of December 13, 1994 (the
"Confidentiality Agreement") [please provide copy], the terms of which are
incorporated herein by reference. Effective upon, and only upon, the
Closing, the Confidentiality Agreement will terminate; PROVIDED, HOWEVER,
that Buyer acknowledges that the Confidentiality Agreement will terminate
only with respect to information relating solely to the Columbus Business;
and PROVIDED, FURTHER, HOWEVER, that Buyer acknowledges that any and all
other information provided to it by Sellers or Sellers' representatives
concerning Sellers shall remain subject to the terms and conditions of the
Confidentiality Agreement after the date of the Closing.
7.2 ACCOUNTS RECEIVABLE. Buyer agrees to promptly forward or
cause to be forwarded to MagneTek any and all proceeds from accounts
receivable of either Seller comprising Excluded Assets that are received by
Buyer or the Columbus Business after the Closing Date. If, after the Closing
Date, Buyer receives any payment from any Person who at the time of such
payment has outstanding Seller Accounts Receivable, and the payment (a) does
not indicate whether it is in respect of Seller Accounts Receivable or Buyer
Accounts Receivable or (b) indicates that it is in payment of both Seller
Accounts Receivable and Buyer Accounts Receivable without specifying the
portion to be allocated to each, then Sellers and Buyer shall consult with
one another to determine the proper allocation of such payment; and, if they
are unable to reach agreement on the proper allocation, such payment shall be
applied so as to retire undisputed Seller Accounts Receivable and undisputed
Buyer Accounts Receivable in chronological order based upon the period of
time such accounts receivable have existed on the books of the Sellers or
Buyer, as applicable.
7.3 WAIVER OF BULK SALES LAW COMPLIANCE. Buyer hereby waives
compliance by NEC and MagneTek with the requirements, if any, of Article 6 of
the Uniform Commercial Code as in force in any state in which Assets are
located and
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all other similar Requirements of Law applicable to bulk sales and transfers,
to the extent applicable to the Transactions. MagneTek shall indemnify Buyer
in connection with the foregoing matters pursuant to Section 10.1(c) hereof.
7.4 EXCLUDED ASSETS. If, after the Closing Date, Excluded Assets,
including but not limited to those referred to in Section 2.2(h) or set forth
on Schedule 2.2(h), shall remain on the premises utilized or controlled by
Buyer, then Buyer shall deliver such Excluded Assets to Sellers, at the
expense of Sellers, where and when requested by Sellers, and so long as such
assets remain in Buyer's control, shall exercise reasonable care with respect
thereto, and in no event less care than with respect to its own properties.
Without limiting the generality of the foregoing, Buyer shall provide access
to representatives of Sellers for the purposes of (i) removing the
Intellectual Property comprising Excluded Assets from the computer system of
Buyer and obtaining all hard copy, source code or object codes and any
related instruction manuals pertaining thereto and (ii) removing Intellectual
Property documentation comprising Excluded Assets from the main vault and
other storage areas at the King Avenue Property, provided Buyer receives
reasonable notice and such access occurs at reasonable times. Buyer and
Sellers agree that the removal of Intellectual Property Excluded Assets will
be supervised by William Kaikis on behalf of Sellers and that each of Buyer
and NEC will appoint an engineer to review the relevant materials and divide
them into the appropriate categories as between (x) Assets, (y) Excluded
Assets and (z) Intellectual Property subject to the Sharing Agreement, as
provided and defined herein and therein. In the event such engineers
disagree as to the allocation of any Intellectual Property, the matter shall
be referred for resolution to Evan Jeney and Alexander Levran. If Mr. Jeney
and Dr. Levran are unable to reach agreement, either party may seek judicial
resolution of the issue and, pending such resolution, the disputed item of
Intellectual Property shall be considered to form a part of the Sharing
Agreement but all copies thereof shall remain under NEC's control. In
addition, the parties agree that the IBM mainframe computer may remain at the
King Avenue Property at least until December 31, 1995.
7.5 INSURANCE. Buyer shall secure insurance with respect to the
Columbus Business from the Closing Date covering general liability and
products liability in amounts customary for the industry in which the
Columbus Business operates.
7.6 REPLACEMENT BONDING. Set forth on Schedule 7.6 is a list
reflecting, to the Knowledge of Seller, all currently outstanding letters of
credit, performance bonds, bank guaranties and other surety arrangements of
Sellers
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pertaining to the Columbus Business. As to those items indicated on such
Schedule with an asterisk, prior to the 60th day after the Closing Date,
Buyer shall have effectuated, to MagneTek's reasonable satisfaction, either
the replacement or the cancellation in full thereof, in each case in a manner
extinguishing all liability of either Seller thereunder, or shall have
arranged, at Buyer's sole expense and risk, a letter of credit to be issued
in Sellers' favor and to its reasonable satisfaction covering all of the
liability under such items. Notwithstanding the foregoing, as to the
performance bonds outstanding to NASA and Puerto Rico Electric Power
Authority ("PREPA"), Buyer shall use all reasonable efforts, within 120 days
after the Closing Date, to effectuate the novation of the related agreement,
the replacement of the performance bond with Buyer's bond and the
cancellation of Sellers' bonds. In the event such cancellation is not
effected prior to such 120th day in respect of either or both bonds, Buyer
shall obtain a letter of credit in favor of the relevant Seller in an amount
equal to 20% of the bond amount of such unreplaced bond, such letter or
letters of credit to be renewed until the relevant performance bond is
cancelled. In addition, for all periods following the Closing Date that
either the PREPA or NASA bond is outstanding, whether or not such a letter of
credit is required, Buyer shall reimburse Sellers in full for the expense of
maintaining such bonds.
ARTICLE VIII
MUTUAL COVENANTS
Each of Sellers and Buyer covenants and agrees as follows:
8.1 PERMITS AND CONSENTS.
(a) As promptly as practicable after the date hereof,
Buyer and Sellers shall make all filings with Governmental Authorities, and
use all reasonable efforts to obtain all permits, approvals, authorizations
and consents of all third parties, required to consummate the Transactions.
Buyer and Sellers shall furnish promptly to each other all information that
is not otherwise available to the other party and that such party may
reasonably request in connection with any such filing. Sellers and Buyer
shall use reasonable efforts to obtain such consents to the assignment of the
Assigned Contracts as may be required. Buyer acknowledges that consents to
the Transactions may be required from parties to the Assigned Contracts and
that Sellers will not assign to Buyer at the Closing any Assigned Contract
that by its terms requires, prior to such assignment, the consent of any
other contracting party thereto unless such consent has been obtained prior
to the Closing Date.
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(b) Buyer agrees that Sellers shall not have any
liability whatsoever to Buyer arising out of or relating to the failure to
obtain any consents to the assignment of Contracts that may be required in
connection with the Transactions or because of the default, acceleration or
termination of any Assigned Contract as a result thereof. Buyer further
agrees that no representation or warranty of MagneTek or covenant of MagneTek
or of NEC contained herein shall be breached or deemed breached, and no
condition shall be deemed not satisfied, as a result of (i) the failure to
obtain any such consent or as a result of any such acceleration or
termination or (ii) any lawsuit, action, claim, proceeding or investigation
commenced or threatened by or on behalf of any Person arising out of or
relating to the failure to obtain any such consent or any such acceleration
or termination. Sellers shall cooperate with Buyer in any reasonable manner
in connection with Buyer obtaining any such consents; PROVIDED, HOWEVER, that
such cooperation shall not include any requirement that either Seller
commence any litigation or offer or grant any accommodation (financial or
otherwise) to any third party. The Purchase Price shall not be subject to
adjustment because any such consents are not obtained.
(c) With respect to each such Assigned Contract not
assigned on the Closing Date, after the Closing Date Sellers shall continue
to deal with the other contracting party(ies) to such Assigned Contract as
the prime contracting party, and Buyer and Sellers shall continue to use
reasonable efforts to obtain the consent of all required parties to the
assignment of such Assigned Contract. Such Assigned Contract shall be
promptly assigned by Sellers to Buyer after receipt of such consent after the
Closing Date. Any Contract as to which consent is obtained after the Closing
Date shall thereupon comprise an Assigned Contract. Notwithstanding the
absence of any such consent, Buyer shall be entitled to the benefits of such
Assigned Contract accruing after the Closing Date to the extent that Sellers
may provide Buyer with such benefits without violating the terms of such
contract; and to the extent such benefits are so provided, Buyer agrees to
perform at its sole expense all of the obligations of Sellers to be performed
under such Assigned Contract after the Closing Date, such obligations to
comprise Assumed Liabilities hereunder.
(d) Without limiting the generality of the foregoing, the
parties acknowledge that Buyer will seek novations in respect of the
government contracts of Sellers included in the Transactions, and Sellers
undertake to provide customary and reasonable assistance to Buyer in respect
of the preparation of novation requests.
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8.2 COOPERATION. Buyer and Sellers shall cooperate with each
other and shall cause their officers, employees, agents, auditors and
representatives to cooperate with each other after the Closing to ensure the
orderly transition of the Columbus Business to Buyer and to minimize any
disruption to the respective businesses of Sellers or the Columbus Business
that might result from the Transactions. Neither party shall be required by
this Section 8.2 to take any action that would unreasonably interfere with
the conduct of its business.
8.3 PUBLICITY. Sellers and Buyer agree that, from the date hereof
through the Closing Date, no public release or announcement concerning the
Transactions shall be issued by any party without the prior consent of the
other parties (which consent shall not be unreasonably withheld or delayed),
except as such release or announcement may be required by any Requirement of
Law, in which case the party required to make the release or announcement
shall allow the other parties reasonable time to comment on such release or
announcement in advance of such issuance.
8.4 REASONABLE EFFORTS AND FURTHER ASSURANCES. Subject to the
terms and conditions of this Agreement (including the limitations set forth
in Section 8.1), each party will use all reasonable efforts to cause the
Closing to occur. Sellers and Buyer shall, at any time and from time to time
after the Closing, upon the reasonable request of another party, execute,
acknowledge, deliver and file all such further acts, transfers, conveyances,
assignments and assurances as may reasonably be required to effect the
Transactions.
8.5 RECORDS. After the Closing, upon reasonable written notice
and at Buyer's sole expense, Sellers agree to furnish or cause to be
furnished to Buyer and its representatives (including its auditors), access
at reasonable times and during normal business hours to such information
relating to the Columbus Business in Sellers' possession as is reasonably
necessary for financial reporting and accounting matters, the preparation and
filing of any Tax Returns, reports or forms or the defense of any Tax Claim
or assessment; PROVIDED, HOWEVER, that such access does not unreasonably
disrupt the normal operations of Sellers.
8.6 ACCESS TO FORMER BUSINESS RECORDS. For a period of seven
years following the Closing, Buyer will retain all Records. During such
period, Buyer will afford authorized representatives of Sellers (including
their auditors) access to such Records at reasonable times and during normal
business hours at the principal business office of the Columbus Business, or
at such other location or locations at which such Records may be stored or
maintained from time to time, and
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will permit such representatives to make abstracts from, or copies of, any of
such Records, or to obtain temporary possession of any thereof as may be
reasonably required by Sellers at Sellers' sole cost and expense. During such
period, Buyer will, at Sellers' expense (limited, however, to Buyer's
reasonable out-of-pocket expenditures without regard to any employee cost or
other overhead expenses), cooperate with Sellers in furnishing information,
evidence, testimony, and other reasonable assistance in connection with any
action, proceeding, Tax audit, or investigation to which Sellers or any of
their Affiliates is subject relating to the business of the Columbus Business
prior to the Closing. The term "Record" as used in this Section 8.6 shall
include any data processing files or other computerized data.
8.7 USE OF TRADEMARKS, TRADE NAMES AND CORPORATE NAMES.
Notwithstanding anything to the contrary in this Agreement, Buyer may
continue to use the name "MagneTek" and related trademarks, corporate names,
and trade names incorporating "MagneTek," and the stylized "MagneTek" logo
(i) in displays, signage and postings for the period after the Closing Date
necessary to permit the reasonably prompt removal of such names, and only to
the extent such displays, signage or postings exist on the Closing Date; (ii)
for a period of two years, to state the Columbus Business' former affiliation
with MagneTek (E.G., formerly a division of "MagneTek, Inc.") and (iii) to
the extent any such trade names, trademarks, service marks or logos appear on
stationery, packaging materials, supplies or inventory on hand as of the
Closing Date or on order at the time of the Closing, until such is exhausted.
Within ten Business Days of the Closing Date, Buyer shall cause the name of
MagneTek Power, Inc. to be changed to a name that does not include "MagneTek."
8.8 REQUIRED MODIFICATIONS OR REPLACEMENTS OF PRODUCTS. The
following provisions of this Section 8.8 shall govern the responsibilities of
Buyer and MagneTek regarding Required Modifications:
(a) Buyer shall advise MagneTek promptly after becoming aware
of any Required Modifications to the products shipped or services provided by
the Columbus Business prior to the Closing Date to the extent Buyer intends to
assert any claim under Article X hereof in respect of such product.
(b) Whether or not Buyer gives the foregoing notice, Buyer
shall make any Required Modifications requested by MagneTek to products shipped
or services provided by the Columbus Business prior to the Closing Date. If the
cost to MagneTek under Section 8.8(c) of implementing any such Required
Modification exceeds the cost to MagneTek of replacing such products, Buyer
shall replace such products at
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MagneTek's expense pursuant to Section 8.8(c). The obligation of Buyer
hereunder shall include, but not be limited to, such actions as MagneTek may
reasonably request for (i) the notification of customer and other third
parties in possession of the applicable products, (ii) the shipping of such
products, if necessary, to and from Buyer's facilities for modification,
improvement, enhancement or replacement, (iii) the production of replacement
products, parts or supplies necessary for the implementation of the product
modification, enhancement, improvement or replacement, (iv) the installation,
modification or replacement of the product by personnel of Buyer, either at
the customer's location or at Buyer's facilities, as appropriate, and (v)
recordkeeping and reports with respect to such product modifications,
enhancements, improvements or replacements to the extent required by law or
reasonably requested by MagneTek.
(c) MagneTek shall reimburse Buyer for direct materials,
direct labor and factory overhead incurred by Buyer in installing or
implementing any Required Modification under Section 8.8(b) or in producing any
replacement products, parts or supplies under Section 8.8(b), together with all
reasonable out-of-pocket shipping, postage and printing costs incurred by Buyer
in connection therewith.
8.9 OUTSTANDING CONTRACTS. Buyer and NEC acknowledge that NEC has
certain existing agreements and commitments (the principal of which are to
the Army Corps of Engineers, the City of Seattle and Duke Power) as to which
the Columbus Business has responsibilities, but which are not Assigned
Contracts. In respect of such agreements and commitments, to the extent
purchase orders have already been issued to the Columbus Business, Buyer and
NEC shall honor the terms thereof notwithstanding the consummation of the
Transactions.
8.10 NASA BID. NEC is currently bidding on Bid No.
RFTP-2-35995(JMS) Requisition/Purchase REQ No.-EE0228 (the "NASA Bid"). The
NASA Bid is not an Assigned Contract, but Buyer and NEC are each free to
pursue such bid separately following the Closing Date. Each party shall be
entitled to retain a full set of copies of NEC's file in connection with the
NASA Bid. It is the expectation of the parties that NEC and Buyer will work
together to pursue the NASA Bid, but neither party shall have any obligation
to work with the other in connection therewith.
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ARTICLE IX
EMPLOYEE BENEFIT MATTERS
9.1 EMPLOYEE RETENTION. Buyer shall offer employment to commence
as of the Closing Date to all Business Employees, at the same salaries and
wages and on substantially the same terms and conditions as those in effect
immediately prior to the Closing Date. Buyer has no present intention
(subject to its discretion as to employee performance) to terminate the
employment of any Business Employee within the 60 days following the Closing
Date, and Buyer assumes all obligations and liabilities, if any, under the
Worker Adjustment and Retraining Notification Act (the "WARN Act") and any
analogous Ohio legislation relating to or arising out of the Transactions.
Buyer also agrees to comply with the terms of the WARN Act and any analogous
Ohio legislation following the Closing Date. Sellers shall continue to be
responsible for any employees of the Columbus Business not included in the
definition of Business Employee.
9.2 EMPLOYEE BENEFIT PLANS. Effective as of the Closing Date, as
applicable, (a) Business Employees shall cease accruing any benefits under
any Seller Plan, and MagneTek shall take, or cause to be taken, all such
action, if any, as may be necessary to effect such cessation of participation
and (b) with respect to Business Employees who are not members of a
collective bargaining unit, Buyer shall establish employee benefit plans
providing benefits which in the aggregate are substantially the same as the
benefits provided to such Business Employees under Seller Plans (the "Buyer's
Benefit Plans"). With respect to the Buyer's Benefit Plans, Buyer shall
grant all Business Employees from and after the Closing Date credit for all
service with Sellers and their Affiliates and their respective predecessors
prior to the Closing Date for all purposes (other than the accrual of
benefits under a defined benefit pension plan, however, this proviso shall
not preclude Buyer from granting such credit) for which such service was
recognized by Sellers and their Affiliates. With respect to Buyer's Benefit
Plans (and any plan established or adopted pursuant to Section 9.4) that
provide medical or dental benefits after the Closing Date, such plans shall
waive any exclusion or limitation with respect to pre-existing conditions and
actively-at-work exclusions and shall provide that any expenses incurred on
or before the Closing Date by a Business Employee or his covered dependents
shall be taken into account under such health plans for purposes of
satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions. Buyer shall also cause its health plan(s) to be responsible for
all health benefit claims by Business Employees and their covered dependents
for services rendered after the Closing Date.
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9.3 EMPLOYEES COVERED BY COLLECTIVE BARGAINING AGREEMENTS. On,
and effective as of, the Closing Date, as applicable, Buyer shall expressly
recognize any collective bargaining representative recognized by Sellers as
of the Closing Date for any units that include Business Employees and shall
either: (i) assume any collective bargaining agreements existing on the
Closing Date with respect to Business employees ("Bargaining Employees"), or
(ii) negotiate with any such collective bargaining representative(s) a new
collective bargaining agreement(s) covering such Bargaining Employees;
PROVIDED, HOWEVER, in either case, Buyer shall assume and discharge all of
Sellers' obligations (except for obligations to make salary and similar
payments due for periods prior to the Closing Date) with respect to the
Bargaining Employees under any such bargaining agreements (including the
Collective Bargaining Agreement) on or after the Closing Date.
9.4 BARGAINING PLANS. Effective as of the Closing Date Buyer
shall establish for the benefit of the Bargaining Employees such employee
benefit plans as are required by the collective bargaining agreement that
includes the Business Employees ("Buyer's Bargaining Plans").
9.5 VACATION, HOLIDAY, SICK AND SEVERANCE PAY. As of the Closing
Date and the Termination Date, as applicable, Buyer shall assume all of
Sellers' obligations for vacation (including accrued vacation), holiday, sick
(including accrued sick) and severance (if any) pay to all Business Employees.
9.6 ACCESS TO INFORMATION. Sellers shall make reasonably
available to Buyer such actuarial, financial, personnel and related
information as may be reasonably requested by Buyer with respect to any
Seller Plan as it relates to a Business Employee, including, but not limited
to, compensation and employment histories.
9.7 THIRD-PARTY BENEFICIARIES. No provision of this Article IX
shall create any third-party beneficiary rights in any employee or former
employee of the Columbus Business (including any beneficiary or dependent
thereof), including, without limitation, any right to continued employment or
employment in any particular position with Buyer for any specified period of
time after the Closing Date.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY MAGNETEK. Subject to the terms and
conditions of this Article X, MagneTek shall indemnify Buyer and each of its
officers, directors, employees and agents (each, a "Buyer Indemnified
Person") against, and
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hold them harmless from, any Loss suffered or incurred by any such Buyer
Indemnified Person (other than any Loss relating to environmental matters,
for which indemnification provisions are set forth in Section 10.3) to the
extent arising from (a) if the Closing occurs, any breach of any
representation or warranty of MagneTek contained in this Agreement or in any
certificate, instrument or other document delivered pursuant hereto or in
connection herewith which by its terms survives the Closing, (b) any breach
of any covenant of MagneTek contained in this Agreement requiring performance
after the Closing Date or (c) if the Closing occurs, the existence of, or the
failure of Sellers to pay, perform and discharge when due, any of the
Excluded Liabilities (including, without limitation, any Losses as a result
of the failure of NEC to comply with any bulk sales laws referred to in
Section 7.3); PROVIDED, HOWEVER, that MagneTek shall not have any liability
under this Section 10.1 unless the aggregate of all Losses relating thereto
for which MagneTek would, but for this proviso, be liable exceeds, on a
cumulative basis with Losses for which Buyer is indemnified under Section
10.3, an amount equal to $50,000 (and then only to the extent of any such
excess); and PROVIDED FURTHER, HOWEVER, that MagneTek's aggregate liability
under this Section 10.1 and Section 10.3 shall in no event exceed $3,000,000.
Notwithstanding the foregoing, MagneTek shall have no obligation to
indemnify Buyer with respect to any Loss, including, but not limited to, any
breach of the representations set forth in Section 4.5, which are within the
scope of the Title Commitment, and Buyer agrees that its sole recourse with
respect to such matters shall be against the issuer of the Title Commitment.
10.2 INDEMNIFICATION BY BUYER. Subject to the terms and
conditions of this Article X, Buyer shall indemnify Sellers and each of their
respective officers, directors, employees and agents (each, a "Seller
Indemnified Person") against, and hold them harmless from, any Loss suffered
or incurred by any such Seller Indemnified Person (other than any relating to
environmental matters, for which indemnification provisions are set forth in
Section 10.3) to the extent arising from (a) if the Closing occurs, any
breach of any representation or warranty of Buyer contained in this Agreement
or in any certificate, instrument or other document delivered pursuant hereto
or in connection herewith which by its terms survives the Closing, (b) any
breach of any covenant of Buyer contained in this Agreement requiring
performance after the Closing Date, (c) if the Closing occurs, the existence
of, or the failure of Buyer to pay, perform and discharge when due, any of
the Assumed Liabilities and (d) if the Closing occurs, the ongoing operations
of Buyer and the Assets after the Closing Date; PROVIDED, HOWEVER, that Buyer
shall not have any liability under this Section 10.2 unless the aggregate of
all Losses relating thereto for which Buyer
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would, but for this proviso, be liable exceeds on a cumulative basis with
Losses for which Seller is indemnified under Section 10.3, an amount equal to
$50,000 (and then only to the extent of such excess); and PROVIDED FURTHER,
HOWEVER, that Buyer's aggregate liability under clauses (a) and (b) of this
Section 10.2 shall in no event exceed $3,000,000.
10.3 INDEMNIFICATION FOR ENVIRONMENTAL MATTERS. Subject to the
terms and conditions of this Article X, MagneTek shall indemnify and hold
Buyer Indemnified Persons harmless from and against all Losses resulting from
claims or demands by any Governmental Authority or any third party which is
unrelated to Buyer or its Affiliates arising under any Environmental Law, to
the extent such Losses (a) are attributable to the use and/or occupancy of
any premises owned or used by Sellers prior to the Closing Date (a "Seller
Facility") or to Hazardous Substances transported offsite from a Seller
Facility for treatment, storage or disposal prior to the Closing and (b)
exceed, on a cumulative basis with Losses for which Buyer is indemnified
under Section 10.1, an amount equal to $50,000; but only to the extent of
such excess and PROVIDED, FURTHER, that MagneTek's aggregate liability under
this Section 10.3 and Section 10.1 shall in no event exceed $3,000,000.
MagneTek's indemnification liability hereunder shall in no event be construed
to extend to or include any remediation or other liability arising as a
result of the presence or removal of asbestos in or upon any of the
improvements located on the King Avenue Property at any time. MagneTek's
obligation to indemnify Buyer under this Section 10.3 shall expire on the
second anniversary of the Closing Date, and Buyer hereby expressly releases
MagneTek from and after such second anniversary from any liability in respect
of the matters covered by such indemnification, whether arising by statute or
common law, or otherwise. Notwithstanding the foregoing, MagneTek shall have
no obligation to indemnify any Buyer Indemnified Person with respect to
conditions that existed prior to the utilization of the King Avenue Property
that commenced in 1933. Buyer shall indemnify and hold each Seller
Indemnified Person harmless from and against all Losses resulting from claims
or demands by any Governmental Authority or third party arising under any
Environmental Law to the extent such Losses are attributable to Buyer's use
and/or occupancy of any Seller Facility.
10.4 LOSSES NET OF INSURANCE, ETC.
(a) The amount of any Loss for which indemnification is
provided under this Article X shall be net of any amounts recovered or
recoverable by the Indemnified Person under insurance policies with respect
to such Loss and of any reserve in respect thereof reflected on the Closing
Balance Sheet.
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(b) If the Indemnifying Person makes any payment under
this Article X in respect of any Loss, the Indemnifying Person shall be
subrogated, to the extent of such payment, to the rights of the Indemnified
Person against any insurer or third party with respect to such Losses. The
Indemnified Person shall execute any required documents or instruments, serve
as a named plaintiff, or take any other similar steps necessary to effectuate
such subrogation.
(c) Notwithstanding anything to the contrary elsewhere in
this Agreement, no Indemnifying Person shall, in any event, be liable to the
other party for any consequential damages, including, but not limited to,
loss of revenue or income, business interruption, cost of capital, or loss of
business reputation or opportunity relating to the breach or alleged breach
of this Agreement. Each party agrees that it will not seek punitive damages
as to any matter under, relating to or arising out of the Transactions. The
foregoing shall not be interpreted, however, to limit indemnification for
Losses incurred as a result of the assertion by a claimant (other than the
parties hereto and their successors and assigns), in a Third-Party Claim (as
defined below) of claims for damages of the foregoing type.
(d) The parties hereto agree that the indemnification
provisions of this Article X are intended to provide the exclusive remedy as
to all Losses any Indemnified Person may incur arising from or relating to
the Transactions, and each party hereby waives, to the extent they may do so,
any other rights or remedies that may arise under any applicable statute,
rule or regulation. Moreover, notwithstanding anything to the contrary in
this Agreement, Buyer waives no rights it may have or come to have or to
pursue against any unrelated predecessors in interest of MagneTek or NEC.
10.5 TERMINATION OF INDEMNIFICATION. The obligations to indemnify
and hold harmless a party hereto, (A) pursuant to Sections 10.1(a) and
10.2(a), shall terminate when the applicable representation or warranty
terminates pursuant to Section 10.8, (B) pursuant to Section 10.3, shall
terminate as and to the extent set forth therein and (C) pursuant to Sections
10.1(b) and 10.2(b), shall terminate on the second anniversary of the Closing
Date; PROVIDED, HOWEVER, that as to clauses (A), (B) and (C) above, such
obligations to indemnify and hold harmless shall not terminate with respect
to any item as to which the person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice (stating in reasonable detail the basis (whether or not the amount of
Losses related to such claim is then known or estimable) of such claim) to
the Indemnifying Person.
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10.6 PROCEDURES RELATING TO INDEMNIFICATION (OTHER THAN FOR TAX
CLAIMS). In order for an Indemnified Person to be entitled to any
indemnification provided for under this Agreement (other than for Tax Claims)
in respect of, arising out of or involving a claim or demand made by any
Person against the Indemnified Person (a "Third-Party Claim"), such
Indemnified Person must notify the Indemnifying Person in writing, and in
reasonable detail, of the Third-Party Claim within 10 Business Days after
receipt by such Indemnified Person of written notice of the Third-Party
Claim; PROVIDED, HOWEVER, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
Indemnifying Person shall have been actually prejudiced as a result of such
failure (except that the Indemnifying Person shall not be liable for any
Losses incurred during the period in which the Indemnified Person failed to
give such notice). Thereafter, the Indemnified Person shall deliver to the
Indemnifying Person, within five Business Days after the Indemnified Person's
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnified Person relating to the Third-Party Claim.
If a Third-Party Claim is made against an Indemnified Person, the
Indemnifying Person will be entitled to participate in the defense thereof
and, if it so chooses, to assume the defense thereof with counsel selected by
the Indemnifying Person and reasonably satisfactory to the Indemnified
Person. Should the Indemnifying Person so elect to assume the defense of a
Third-Party Claim, the Indemnifying Person will not be liable to the
Indemnified Person for legal fees and expenses subsequently incurred by the
Indemnified Person in connection with the defense thereof. If the
Indemnifying Person assumes such defense, the Indemnified Person shall have
the right to participate in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by the Indemnifying Person,
it being understood that the Indemnifying Person shall control such defense.
The Indemnifying Person shall be liable for the fees and expenses of counsel
employed by the Indemnified Person for any period during which the
Indemnifying Person has not assumed the defense thereof (other than during
any period in which the Indemnified Person shall have failed to give notice
of the Third-Party Claim as provided above). If the Indemnifying Person
chooses to defend or prosecute any Third-Party Claim, all the parties hereto
shall cooperate in the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the Indemnifying Person's request) the
provision to the Indemnifying Person of records and information which are
reasonably relevant to such Third-Party Claim, and making employees available
on a mutually convenient basis in the manner specified in
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Section 8.6 hereof to provide additional information and explanation of any
material provided hereunder. Notwithstanding the foregoing, in the event a
Third-Party Claim is made against either Seller as to which MagneTek is
entitled to seek indemnification under this Article X and MagneTek concludes,
in its reasonable judgment, that Buyer lacks the financial and personnel
resources to vigorously defend MagneTek from such Third-Party Claim, MagneTek
may elect to retain the defense of such Third-Party Claim and shall be
entitled to be reimbursed by Buyer for its Losses incurred in such defense,
such expenditures to be reimbursed promptly after submission of invoices
therefor. Whether or not the Indemnifying Person shall have assumed the
defense of a Third-Party Claim, the Indemnified Person shall not admit any
liability with respect to, or settle, compromise or discharge, such
Third-Party Claim without the Indemnifying Person's prior written consent
(which consent shall not be unreasonably withheld or delayed). All Tax
Claims (as defined in Section 10.7) shall be governed by Section 10.7.
10.7 PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS.
(a) If a claim shall be made by any Tax authority, which,
if successful, might result in an indemnity payment to any Person hereunder
(a "Tax Indemnitee"), the Tax Indemnitee shall promptly notify the party
against whom indemnification is sought (the "Tax Indemnitor") in writing of
such claim (a "Tax Claim"). If notice of a Tax Claim is not given to the Tax
Indemnitor within a sufficient period of time to allow the Tax Indemnitor to
effectively contest such Tax Claim, or in reasonable detail to apprise the
Tax Indemnitor of the nature of the Tax Claim, in each case taking into
account the facts and circumstances with respect to such Tax Claim, the Tax
Indemnitor shall not be liable to the Tax Indemnitee to the extent that the
Tax Indemnitor's ability to effectively contest such Tax Claim is actually
prejudiced as a result thereof.
(b) With respect to any Tax Claim, the Tax Indemnitor
shall control all proceedings taken in connection with such Tax Claim
(including, without limitation, selection of counsel) and, without limiting
the foregoing, may in its sole discretion pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with any taxing
authority with respect thereto and may, in its sole discretion, either pay
the Tax claimed and sue for a refund where applicable law permits such refund
suits or contest the Tax Claim in any permissible manner; PROVIDED, HOWEVER,
that the Tax Indemnitor shall not settle or compromise a Tax Claim without
giving 30-days' prior notice to the Tax Indemnitee, and without the Tax
Indemnitee's consent, which shall not be
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unreasonably withheld or delayed, if such settlement or compromise would have
a material adverse effect on the Tax liabilities of the Tax Indemnitee, its
Affiliates or any member of its affiliated group. The Tax Indemnitee, and
each of its Affiliates, shall cooperate with the Tax Indemnitor in contesting
any Tax Claim, which cooperation shall include, without limitation, the
retention and (upon the Tax Indemnitor's request) the provision to Tax
Indemnitor of records and information which are reasonably relevant to such
Tax Claim, and making employees available on a mutually convenient basis to
provide additional information or explanation of any material provided
hereunder or to testify at proceedings relating to such Tax Claim.
10.8 SURVIVAL OF REPRESENTATIONS. The representations and
warranties in this Agreement (and in any other document delivered in
connection herewith which expressly survive the Closing) shall survive the
Closing solely for purposes of Sections 10.1 and 10.2 and shall terminate at
the close of business on the second anniversary of the Closing Date.
Notwithstanding the foregoing, (a) representations and warranties relating to
environmental matters in Section 4.10 shall not survive the Closing and (b)
Buyer's acknowledgment pursuant to Section 5.4 shall not expire. Nothing in
this Section 10.8 shall limit the duration of Section 10.3.
ARTICLE XI
GENERAL PROVISIONS
11.1 ASSIGNMENT. This Agreement shall be binding upon and shall
inure to the benefit of the parties' successors-in-interest and assigns.
This Agreement and the rights and obligations hereunder shall not be
assignable or transferable by Buyer other than by operation of law, including
by way of stock sale or merger, except to a buyer of substantially all the
assets of Buyer, without the prior written consent of MagneTek; PROVIDED,
HOWEVER, that (a) Buyer may assign its right to purchase the Assets hereunder
to an Affiliate of Buyer that can accurately make all of Buyer's
representations and warranties as of the Closing without the prior written
consent of MagneTek, but in no event shall any such assignment limit or
affect Buyer's obligations hereunder and (b) Buyer may assign its rights
(including its indemnification rights) hereunder or grant a security interest
in this Agreement, or both, to or for the benefit of any Person holding a
financial obligation of Buyer issued in connection with the financing of the
Transactions or in connection with any renewal, extension, modification,
amendment, refinancing, refunding or replacement of any such financial
obligation.
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11.2 NO THIRD-PARTY BENEFICIARIES. Except as provided in Section
11.1 as to permitted assignees and in Article X as to Indemnified Persons,
this Agreement is for the sole benefit of the parties hereto and their
permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any Person, other than the parties hereto and such
assigns, any legal or equitable rights hereunder.
11.3 TERMINATION.
(a) Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated (except as set forth in
Section 11.3(c)) and the Transactions abandoned at any time prior to the
Closing Date:
(i) by mutual written consent of
Sellers and Buyer;
(ii) by Sellers if any of the
conditions set forth in Section 3.2 shall
have become incapable of fulfillment, and
shall not have been waived by Sellers;
(iii) by Buyer if any of the
conditions set forth in Section 3.1 shall
have become incapable of fulfillment, and
shall not have been waived by Buyer; or
(iv) by Sellers or Buyer, if the
Closing does not occur on or prior to
April 30, 1995;
PROVIDED, HOWEVER, that the party seeking termination pursuant to clause (ii),
(iii) or (iv) is not materially in breach (after having been given written
notice and a five-Business Day cure period, if such breach is susceptible of
cure) of any of its representations, warranties, covenants or agreements
contained in this Agreement.
(b) In the event termination by Sellers or Buyer pursuant
to this Section 11.3 shall become effective, written notice thereof shall
forthwith be given to the other party and the Transactions shall be
terminated, without further action by either party. If the Transactions are
terminated as provided herein:
(i) Buyer shall return all
documents and copies and other material
received from Sellers relating to the
Transactions, whether so obtained before or
after the execution hereof, to Sellers;
41
<PAGE>
(ii) all confidential information
received by Buyer with respect to the
Columbus Business and Sellers shall be
treated in accordance with the
Confidentiality Agreement which shall remain
in full force and effect notwithstanding the
termination of this Agreement.
(c) If this Agreement is terminated and the Transactions
are abandoned as described in this Section 11.3, this Agreement shall become
void and of no further force and effect, except for the provisions of (i)
Section 7.1 relating to the obligation of Buyer to keep confidential certain
information and data obtained by it, (ii) Section 11.4 relating to certain
expenses, (iii) Section 8.3 relating to publicity, (iv) Section 11.5 relating
to attorneys' fees and expenses, (v) Section 11.11 relating to finder's fees
and broker's fees and (vi) this Section 11.3. Nothing in this Section 11.3
shall be deemed to release Sellers or Buyer from any liability for any breach
by such party of the terms and provisions of this Agreement or to impair the
right of Sellers or Buyer to compel specific performance by the other party
of its obligations under this Agreement.
11.4 EXPENSES. Whether or not the Transactions are consummated,
and except as otherwise provided in this Agreement, all fees, costs and
expenses incurred in connection with the Transaction Documents and the
Transactions shall be paid by the party incurring such fees, costs or
expenses.
11.5 ATTORNEYS' FEES. Should any litigation be commenced
concerning this Agreement or the rights and duties of any party with respect
to it, the party prevailing shall be entitled, in addition to such other
relief as may be granted, to a reasonable sum for such party's attorneys'
fees and expenses determined by the court in such litigation or in a separate
action brought for that purpose.
11.6 AMENDMENTS. No amendment to this Agreement shall be
effective unless it shall be in writing and signed by all parties hereto.
11.7 NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent prepaid telex, cable or telecopy, or sent, postage prepaid, by
registered, certified or express mail, or reputable overnight courier service
and shall be deemed given when so delivered by hand, telexed, cabled or
telecopied, or if mailed, three days after mailing (one business day in the
case of express mail or overnight courier service), as follows:
42
<PAGE>
(i) if to Buyer, to:
Mr. Evan Jeney
President
800 King Avenue Acquisition Corp.*
800 King Avenue
Columbus, Ohio 43212
with a copy to:
Stanley L. Waldbaum, Esq.
12 Hawk Street
Spring Valley, NY 10977
(ii) if to MagneTek, to:
MagneTek, Inc.
26 Century Boulevard
P.O. Box 290159
Nashville, Tennessee 37229-0159
Attention: Samuel A. Miley, Esq.
General Counsel
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071
Attention: Jennifer Bellah, Esq.
(iii) if to NEC, to:
MagneTek National Electric Coil, Inc.
c/o 26 Century Boulevard
P.O. Box 290159
Nashville, Tennessee 37229-0159
Attention: Samuel A. Miley, Esq.
Secretary
11.8 INTERPRETATION; EXHIBITS AND SCHEDULES. The headings
contained in this Agreement, in any Exhibit or Schedule hereto and in the
table of contents to this Agreement, are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Any matter disclosed in one Schedule hereto shall
- -----------------
* After the Closing Date, Buyer's name is expected to be changed to National
Electric Coil-Columbus, Inc.
43
<PAGE>
be deemed incorporated by reference into each other Schedule hereto and
disclosed in each such Schedule. All Exhibits and Schedules annexed hereto
or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. Any capitalized terms used in any
Schedule or Exhibit, but not otherwise defined therein, shall have the
meaning as defined in this Agreement. All of the Transaction Documents shall
be interpreted in such a manner as to harmonize and give effect to the
provisions thereof.
11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been
signed by each of the parties and delivered to the other party.
11.10 ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreement contain the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior oral
and written agreements and understandings relating to such subject matter.
11.11 FEES. Each party hereto hereby represents and warrants that
(a) the only brokers or finders that have acted for such party in connection
with this Agreement or the transactions contemplated hereby or that may be
entitled to any brokerage fee, finder's fee or commission in respect thereof
are set forth in Schedule 11.11 and (b) each party agrees that it will pay
all fees or commissions which may be payable to such firm(s) retained by it
or to which it may be obligated.
11.12 SEVERABILITY. If any provision of this Agreement or the
application of any such provision to any Person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not
affect any other provision hereof.
11.13 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
44
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
MAGNETEK, INC.
By:
-------------------------
Name: John P. Colling, Jr.
Title: Vice President and
Treasurer
800 KING AVENUE ACQUISITION CORP.
By:
------------------------
Name: Evan Jeney
Title:President
MAGNETEK NATIONAL ELECTRIC COIL, INC.
By:
------------------------
Name: John P. Colling, Jr.
Title: Vice President and
Chief Financial Officer
45
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and entered into
as of this 31st day of May 1995 between MagneTek National Electric Coil,
Inc., a Delaware corporation ("Seller"), and The Guardian Resin Corporation,
an Ohio corporation ("Buyer").
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.01. PURCHASE AND SALE OF ASSETS. (a) Subject to the terms and
conditions of this Agreement, Seller hereby sells, transfers, conveys,
assigns and delivers to Buyer and Buyer hereby purchases, acquires and
accepts from Seller the following described assets of Seller to the extent
directly related to its Resin Product Line located in Columbus, Ohio:
(i) those assets, including manufacturing
equipment, set forth on Schedule 1.01(i) attached hereto and
made a part hereof;
(ii) all raw materials and finished goods
inventories (collectively, the "Resin Product Line
Inventories");
(iii) those resin formulations set forth on
Schedule 1.01(iii) attached hereto and made a part hereof;
(iv) all laboratory notes and records and
formulas/processes in the developmental stage (including UL
files E150894 and E145909 and formulas maintained in PEI's
Abacus System);
(v) those approvals of Underwriters Laboratories,
Inc. set forth on Schedule 1.01(v) attached hereto and made
a part hereof;
(vi) past, active and identified potential client
lists set forth on Schedule 1.01(vi) attached hereto and
made a part hereof; and
(vii) insulation project costs set forth on
Schedule 1.01(vii) attached hereto and made a part hereof.
(b) For a period of sixty (60) days following the date hereof (the
"Collection Period"), Seller shall continue to collect for its own account
all accounts receivable directly related to the Resin Product Line. Seller's
efforts to collect such receivables shall be undertaken in a commercially
reasonable manner and in a manner consistent with the normal and customary
practices and procedures of Seller in respect of the Resin Product Line prior
to the date hereof. Buyer shall provide such commercial assistance in
collecting the receivables as Seller shall
<PAGE>
reasonably request. Seller shall have the option to sell, transfer, convey,
assign and deliver to Buyer all such receivables, exclusive of intra-company
receivables and receivables from Lewis Alice Co. (Customer No. 53201-2), (the
"Resin Product Line Receivables") for which Seller has not received payment
during the Collection Period by giving written notice to Buyer within ten
(10) days following the Collection Period. In the event Seller exercises
such option, Buyer shall purchase, acquire and accept from Seller such Resin
Product Line Receivables on the terms set forth in Section 2.03 hereof.
(c) The assets proposed to be transferred to Buyer pursuant to
Sections 1.01(a) and (b) of this Agreement are hereinafter collectively
referred to herein as the "Assets."
1.02. ASSUMPTION OF LIABILITIES. Buyer will not assume any debts,
liabilities, obligations, expenses, taxes, contracts or commitments of Seller
of any kind, character or description.
ARTICLE II
CONSIDERATION
2.01. PURCHASE PRICE. Subject to adjustment, as provided in Section
2.03 of this Agreement, the purchase price for the Assets shall be the sum of
(a) $196,500 and (b) the value of the Resin Product Line Inventories as
determined in accordance with the provisions of Section 2.02 hereof (such
purchase price, as adjusted pursuant to Section 2.03 of this Agreement, being
referred to herein as the "Purchase Price"). Except as contemplated by
Section 2.03 of this Agreement, on the date hereof Buyer shall deliver to
Seller a wire transfer of Federal or other immediately available funds in the
amount of the Purchase Price.
2.02. DETERMINATION OF VALUE OF RESIN PRODUCT LINE INVENTORIES. Within
three business days prior to the date of this Agreement, Buyer shall have
conducted a physical count of the Resin Product Line Inventories. Seller
shall have had a representative present to observe such physical count. The
Resin Product Line Inventories shall be valued at the lower of cost or market
in accordance with generally accepted accounting principles consistently
applied in accordance with Seller's accounting policies and procedures.
2.03. PAYMENT FOR RESIN PRODUCT LINE RECEIVABLES. In the event
Seller exercises its option set forth in Section 1.01(b) hereof, the Purchase
Price shall be increased on a dollar-for-dollar basis in an amount equal to
(a) the face amount of any Resin Product Line Receivables for which Seller
has not received payment during the Collection Period. The amount of such
increase to the Purchase Price pursuant to this Section 2.03 shall be paid by
Buyer to Seller not later than the seventy-fifth (75th) day following the
date of this Agreement by wire transfer of Federal or other immediately
available funds.
2
<PAGE>
2.04. ALLOCATION OF PURCHASE PRICE. Buyer and Seller agree that the
allocation of the Purchase Price for the Assets set forth on Schedule 2.04
attached hereto and made a part hereof shall be used for all financial,
accounting and tax purposes.
ARTICLE III
REPRESENTATIONS AND WARRANTIES BY SELLER
Seller hereby represents and warrants as follows:
3.01. ORGANIZATION AND GOOD STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby.
3.02. AUTHORIZATION. Seller has taken all action required by law, its
Articles of Incorporation, its Bylaws and otherwise to authorize the
execution and delivery by Seller of this Agreement and the consummation by
Seller of the transactions contemplated hereby.
3.03. VALID AND BINDING AGREEMENT. This Agreement constitutes the
valid and binding agreement of Seller, enforceable against Seller in
accordance with its terms, except as such enforcement may be subject to
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights in general, and to general principles of equity.
3.04. NO VIOLATION. The execution and delivery of this Agreement by
Seller does not, and the consummation of the transactions contemplated hereby
will not, (a) violate any provision of, or result in the creation of any lien
or security interest under, any material agreement, indenture, instrument,
lease, security agreement, mortgage or lien to which Seller is a party or by
which any of Seller's assets or properties are bound; (b) violate any
provision of the Articles of Incorporation or Bylaws of Seller; (c) violate
any order, arbitration award, judgment, writ, injunction, decree, statute,
rule or regulation applicable to Seller; or (d) violate any other contractual
or legal obligation or restriction to which Seller is subject.
3.05. TITLE TO ASSETS; ENCUMBRANCES. Seller has good and marketable
title to all of the Assets, free and clear of any mortgage, pledge, lien,
security interest, conditional sale agreement, encumbrance or charge of any
kind.
3.06. CONSENTS AND APPROVALS. Seller has obtained all consents,
approvals, authorizations or orders of third parties, including governmental
authorities, necessary for the authorization, execution and performance of
this Agreement by Seller.
3
<PAGE>
3.07. DISCLAIMER OF SELLER. Except as expressly provided herein,
SELLER MAKES NO REPRESENTATION OR WARRANTY CONCERNING THE ASSETS, INCLUDING
THOSE RELATING TO THE QUALITY, CONDITION, MERCHANTABILITY, SALABILITY,
OBSOLESCENCE, WORKING ORDER OR FITNESS FOR A PARTICULAR PURPOSE. EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED HEREIN, THE ASSETS ARE SOLD TO BUYER "AS IS AND
WHERE IS".
ARTICLE IV
REPRESENTATIONS AND WARRANTIES BY BUYER
Buyer hereby represents and warrants to Seller as follows:
4.01. ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Ohio and has full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby.
4.02. AUTHORIZATION. Buyer has taken all action required by law, its
Articles of Incorporation, its Code of Regulations and otherwise to authorize
the execution and delivery by Buyer of this Agreement and the consummation by
Buyer of the transactions contemplated hereby.
4.03. VALID AND BINDING AGREEMENT. This Agreement constitutes the
valid and binding agreement of Buyer, enforceable against Buyer in accordance
with its terms, except as such enforcement may be subject to bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights in
general, and to general principles of equity.
4.04. NO VIOLATION. The execution and delivery of this Agreement by
Buyer does not, and the consummation of the transactions contemplated hereby
will not, (a) violate any provision, or result in the creation of any lien or
security interest under, any agreement, indenture, instrument, lease,
security agreement, mortgage or lien to which Buyer is a party or by which it
is bound; (b) violate any provision of Buyer's Articles of Incorporation or
Bylaws; (c) violate any order, arbitration award, judgment, writ, injunction,
decree, statute, rule or regulation applicable to Buyer; or (d) violate any
other contractual or legal obligation or restriction to which Buyer is
subject.
4.05. CONSENTS AND APPROVALS. Buyer has obtained all consents,
approvals, authorizations or orders of third parties, including governmental
authorities, necessary for the authorization, execution and performance of
this Agreement by Buyer.
4
<PAGE>
ARTICLE V
MISCELLANEOUS
5.01. Covenants of Seller.
(a) Seller shall in good faith take all reasonable actions
necessary or appropriate to assist Buyer in obtaining a listing upon Seller's
"Supplier Bid List" as soon as reasonably practicable following the date
hereof. Such actions to be taken by Seller shall include, but not
necessarily be limited to, submitting Buyer as a candidate for status on
Seller's "Supplier Bid List" provided Buyer meets established criteria for
listing.
(b) Seller shall redact all resin formulations in the PEI Abacus
System transferred to Buyer hereby.
5.02. EXPENSES. All fees and expenses incurred by Seller, including
without limitation legal fees and expenses, in connection with this Agreement
will be borne by Seller and all fees and expenses incurred by Buyer,
including without limitation legal fees and expenses and the cost of
disassembling and removal of the Assets (which shall be done promptly
following the date hereof), in connection with this Agreement will be borne
by Buyer.
5.03. PARTIES IN INTEREST. All the terms and provisions of this
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the respective heirs, successors, assigns and legal or
personal representatives of the parties hereto.
5.04. ENTIRE AGREEMENT. This Agreement, including the schedules
referred to herein which form a part hereof, contains the entire
understanding of the parties with respect to its subject matter. There are
no restrictions, agreements, promises, warranties, covenants or undertakings
other than those expressly set forth herein or therein.
5.05. HEADINGS. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
5.06. SEVERABILITY. The invalidity of any term or terms of this
Agreement shall not affect any other term of this Agreement, which shall
remain in full force and effect.
5
<PAGE>
5.07. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed (registered or certified mail, postage
prepaid, return receipt requested) as follows:
If to Seller:
MagneTek, Inc.
26 Century Boulevard
Nashville, TN 37229
Attention: Samuel A. Miley, Esq.
General Counsel
If to Buyer:
The Guardian Resin Corporation
1089 Claycroft Road
Gahanna, Ohio 43004
Attention: Roger A. Ripley
or to such other address as any party may have furnished to the other in
writing in accordance herewith, except that notices of change of address
shall only be effective upon receipt.
5.08. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Ohio, without regard
to its conflict of laws rules.
5.09. COUNTERPARTS. This Agreement may be executed simultaneously in
one or more counterparts, with the same effect as if the signatories
executing the several counterparts had executed one counterpart, provided,
however, that the several executed counterparts shall together have been
signed by Buyer and Seller. All such executed counterparts shall together
constitute one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by a duly authorized officer of Buyer and Seller on the date first above
written.
SELLER:
MAGNETEK NATIONAL ELECTRIC COIL, INC.
By: /s/ John P. Colling, Jr.
----------------------------------
Title: Vice President
---------------------------
BUYER:
THE GUARDIAN RESIN CORPORATION
By: /s/ Roger A. Ripley
----------------------------------
Title: President
----------------------------
#357260.07
7
<PAGE>
AGREEMENT OF SALE
BETWEEN
GENERAL SIGNAL CORPORATION
AND
MAGNETEK, INC.
<PAGE>
TABLE OF CONTENTS
1. SALE AND TRANSFER OF SHARES AND CERTAIN RELATED
MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Sale of Shares. . . . . . . . . . . . . . . . . . . . . . 1
(b) Purchase Price. . . . . . . . . . . . . . . . . . . . . . 1
(c) Net Tangible Assets . . . . . . . . . . . . . . . . . . . 2
(d) Payment of Purchase Price . . . . . . . . . . . . . . . . 2
(e) Financial Dispute Resolution. . . . . . . . . . . . . . . 2
2. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Closing . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Charter Amendment . . . . . . . . . . . . . . . . . . . . 3
3. REPRESENTATIONS AND WARRANTIES BY SELLER. . . . . . . . . . . . . 4
(a) Organization of Company . . . . . . . . . . . . . . . . . 4
(b) Ability to Carry Out Agreement. . . . . . . . . . . . . . 4
(c) Authorization and Approval of Agreement . . . . . . . . . 5
(d) Capital Stock of Company. . . . . . . . . . . . . . . . . 5
(e) Financial . . . . . . . . . . . . . . . . . . . . . . . . 6
(f) Title to and Condition of Assets. . . . . . . . . . . . . 7
(g) Patents and Related Properties. . . . . . . . . . . . . . 8
(h) Contracts and Commitments . . . . . . . . . . . . . . . . 10
(i) No Breach of Statute or Contract. . . . . . . . . . . . . 12
(j) No Litigation or Adverse Events . . . . . . . . . . . . . 13
(k) Employment. . . . . . . . . . . . . . . . . . . . . . . . 14
(l) Compliance with Law . . . . . . . . . . . . . . . . . . . 15
(m) Environmental Matters . . . . . . . . . . . . . . . . . . 15
i
<PAGE>
(n) No Brokers or Finders . . . . . . . . . . . . . . . . . . 17
(o) Suppliers and Customers . . . . . . . . . . . . . . . . . 17
(p) Benefit Plans . . . . . . . . . . . . . . . . . . . . . . 17
(q) Insurance . . . . . . . . . . . . . . . . . . . . . . . . 18
(r) Backlog . . . . . . . . . . . . . . . . . . . . . . . . . 18
(s) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(t) Products. . . . . . . . . . . . . . . . . . . . . . . . . 20
4. REPRESENTATIONS AND WARRANTIES BY BUYER . . . . . . . . . . . . . 20
(a) Organization. . . . . . . . . . . . . . . . . . . . . . . 21
(b) Authorization and Approval of Agreement . . . . . . . . . 21
(c) Ability to Carry Out Agreement. . . . . . . . . . . . . . 21
(d) No Breach of Statute or Contract. . . . . . . . . . . . . 22
(e) No Brokers or Finders . . . . . . . . . . . . . . . . . . 22
5. CONDUCT OF THE BUSINESS OF COMPANY PENDING THE CLOSING
DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) Full Access . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Carry on in Regular Course. . . . . . . . . . . . . . . . 23
(c) Antitrust Laws. . . . . . . . . . . . . . . . . . . . . . 26
(d) Updating of Schedules . . . . . . . . . . . . . . . . . . 26
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS . . . . . . . . . . . 27
(a) No Material Adverse Event or Information. . . . . . . . . 27
(b) Representations and Warranties and Compliance
with Agreement. . . . . . . . . . . . . . . . . . . . . . 27
(c) Proceedings and Instruments Satisfactory. . . . . . . . . 28
(d) No Litigation . . . . . . . . . . . . . . . . . . . . . . 28
(e) Delivery of Documents . . . . . . . . . . . . . . . . . . 28
ii
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(f) Antitrust Improvements Act. . . . . . . . . . . . . . . . 28
(g) Consent . . . . . . . . . . . . . . . . . . . . . . . . . 29
(h) Waiver of Conditions by Buyer . . . . . . . . . . . . . . 29
7. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. . . . . . . . . . . 29
(a) Representations and Warranties and Compliance
with Agreement. . . . . . . . . . . . . . . . . . . . . . 29
(b) Proceedings and Instruments Satisfactory. . . . . . . . . 30
(c) Delivery of Documents . . . . . . . . . . . . . . . . . . 30
(d) No Litigation . . . . . . . . . . . . . . . . . . . . . . 30
(e) Antitrust Improvements Act. . . . . . . . . . . . . . . . 30
(f) Consent . . . . . . . . . . . . . . . . . . . . . . . . . 31
(g) Waiver of Conditions by Seller. . . . . . . . . . . . . . 31
8. DOCUMENTS TO BE DELIVERED AT CLOSING. . . . . . . . . . . . . . . 31
9. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . 34
(a) Seller General Indemnification. . . . . . . . . . . . . . 34
(b) Buyer General Indemnification . . . . . . . . . . . . . . 35
(c) Claims. . . . . . . . . . . . . . . . . . . . . . . . . . 35
(d) Special Seller Indemnification. . . . . . . . . . . . . . 37
(e) Tax Indemnification . . . . . . . . . . . . . . . . . . . 41
(f) Environmental Indemnification . . . . . . . . . . . . . . 46
(g) General Provisions Regarding Indemnity. . . . . . . . . . 54
10. EXPENSE, TAXES AND OTHER PRORATIONS . . . . . . . . . . . . . . . 56
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . 57
12. CERTAIN AGREEMENTS OF SELLER AND BUYER. . . . . . . . . . . . . . 57
(a) Records . . . . . . . . . . . . . . . . . . . . . . . . . 57
(b) Cooperation; Further Assurances . . . . . . . . . . . . . 58
iii
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(c) Employment; Benefit Plans . . . . . . . . . . . . . . . . 58
(d) Investment Banker . . . . . . . . . . . . . . . . . . . . 61
(e) Publicity . . . . . . . . . . . . . . . . . . . . . . . . 61
(f) Confidential Information. . . . . . . . . . . . . . . . . 61
(g) Business Supplies . . . . . . . . . . . . . . . . . . . . 62
(h) Mineral Oil, PCE, TCE, DCE and Other Existing
Contamination . . . . . . . . . . . . . . . . . . . . . . 63
(i) No Shopping . . . . . . . . . . . . . . . . . . . . . . . 65
(j) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 66
(k) Performance Bonds, Bank Accounts, Etc.. . . . . . . . . . 68
13. RESTRICTIVE COVENANTS AND TRADE SECRETS . . . . . . . . . . . . . 69
(a) Restrictive Covenants . . . . . . . . . . . . . . . . . . 69
(b) Trade Secrets . . . . . . . . . . . . . . . . . . . . . . 70
(c) Injunctive Relief . . . . . . . . . . . . . . . . . . . . 71
14. ENTIRE AGREEMENT AND AMENDMENTS . . . . . . . . . . . . . . . . . 71
15. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 72
16. PARTIES IN INTEREST . . . . . . . . . . . . . . . . . . . . . . . 72
17. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
18. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
19. LAW GOVERNING . . . . . . . . . . . . . . . . . . . . . . . . . . 74
20. WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
iv
<PAGE>
EXHIBITS
EXHIBIT A Forms of Opinions of Counsel of Seller
EXHIBIT B Form of Site Access Agreement
EXHIBIT C Form of Opinion of Counsel of Buyer
SCHEDULES
1(c) December 31, 1994 Balance Sheet
3(e) Financial Statements
3(f) Title to and Condition of Assets; Leases
3(g) Patents and Related Properties
3(h) Contracts and Commitments
3(i) No Breach of Statute or Contract
3(j) No Litigation or Adverse Events
3(k) Employment
3(l) Material Permits
3(m) Environmental Matters
3(o) Suppliers and Customers
3(p) Benefit Plans
3(r) Backlog
3(s) Taxes
12(a) Plan Termination Issues
13(a) Non-competition Products
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AGREEMENT OF SALE
AGREEMENT dated as of the 23rd day of June, 1995, between GENERAL SIGNAL
CORPORATION, a New York corporation ("Buyer") and MagneTek, Inc., a Delaware
corporation ("Seller").
WHEREAS, Seller wishes to sell to Buyer and Buyer wishes to purchase all of
the issued and outstanding shares of capital stock ("Shares") of MagneTek
Electric, Inc., a Wisconsin corporation and a wholly-owned subsidiary of Seller
(the "Company").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, Seller and Buyer hereby agree as follows:
1. SALE AND TRANSFER OF SHARES AND CERTAIN RELATED MATTERS.
(a) SALE OF SHARES. On the terms and subject to the conditions of
this Agreement, on the Closing Date (as defined in Section 2(a)) Seller shall
sell, transfer and deliver to Buyer, properly endorsed and in form for transfer
to Buyer, and Buyer shall purchase from Seller, the Shares.
(b) PURCHASE PRICE. Upon the terms and subject to the conditions set
forth in this Agreement, Buyer shall pay to Seller a purchase price of
$76,000,000 ("Purchase Price"), subject to the provisions of Section 1(d).
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(c) NET TANGIBLE ASSETS. "Net Tangible Assets" (which was
$21,742,000 on December 31, 1994) shall be calculated in the manner set forth on
EXHIBIT A to the Company's December 31, 1994 Balance Sheet attached hereto as
SCHEDULE 1(C), and shall be determined in accordance with generally accepted
accounting principles except as set forth on such EXHIBIT A.
(d) PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable
by federal wire transfer in immediately available United States funds on the
Closing Date. Any difference between Net Tangible Assets as reflected on the
December 31, 1994 Balance Sheet and Net Tangible Assets as reflected on the
Closing Statement (defined in Section 1(e) below) shall, within ten (10) days
after agreement on the Closing Statement (defined in and prepared pursuant to
the provisions of Section 1(e)), result in payment of the amount of such
difference from Buyer to Seller (in the event of an increase) or Seller to Buyer
(in the event of a decrease), as the case may be. Interest shall be payable
from the Closing Date to the date of payment at a rate equal to the "prime rate"
of interest charged by Chase Manhattan Bank, N.A., New York, New York to its
most credit worthy customers as of the Closing Date.
(e) FINANCIAL DISPUTE RESOLUTION. Within thirty (30) days after the
Closing Date, Buyer shall deliver to Seller a balance sheet prepared as of the
Closing Date upon
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the same basis as the Company's December 31, 1994 Balance Sheet (the "Closing
Statement"). In preparing the Closing Statement, Net Tangible Assets shall be
determined in accordance with the provisions of Section 1(c) hereof. Seller
shall have 30 days in which to review the Closing Statement. Should any
question arise during such review that Buyer and Seller cannot resolve between
themselves within a 30-day period following the period of Seller's receipt of
the Closing Statement, such question shall be referred to an independent public
accounting firm of national reputation selected by agreement of Buyer and Seller
to resolve such question and whose decision shall be final and binding on all
parties. The cost of any such accountant's review shall be shared equally by
Buyer and Seller. Any undisputed amount shall be paid promptly as provided in
Section 1(d) above.
2. CLOSING.
(a) CLOSING. The closing (the "Closing") of the transactions
provided for hereunder shall take place at the offices of Seller in Nashville,
Tennessee at 10:00 o'clock a.m. on July 27, 1995, or on such later date (in
either case, the "Closing Date"), as is two (2) business days after all of the
conditions set forth in Sections 6 and 7 have been satisfied, but in no event
later than October 15, 1995.
(b) CHARTER AMENDMENT. On the Closing Date, Buyer shall cause the
name of the Company to be changed so as to eliminate the name "MagneTek."
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3. REPRESENTATIONS AND WARRANTIES BY SELLER.
Seller represents and warrants that:
(a) ORGANIZATION OF COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Wisconsin and has all corporate power and authority to own and hold properties
of the Company and to conduct the business of the Company as such business is
now being conducted. The Company is in good standing in those jurisdictions in
which such qualification is required with respect to the operations of the
Company, except where the failure to so qualify would not adversely affect the
business or properties of the Company. On or before the Closing Date, Seller
shall furnish to Buyer a true and complete copy of the Articles of Incorporation
of the Company as amended to date, certified of recent date by the Secretary of
State of Wisconsin, and a true and complete copy of the Bylaws of the Company as
amended to date, certified by the Company's Secretary. The Articles of
Incorporation and Bylaws of the Company are in full force and effect, unamended
since the date of such certifications. Seller has delivered to Buyer a complete
copy of the Company's minutes from the date of Seller's acquisition of the
Company to the date hereof.
(b) ABILITY TO CARRY OUT AGREEMENT. Neither the Company nor Seller
is a party to, subject to, or bound by any agreement or instrument, or any
statute, regulation, pending litigation, judgment, order, writ, injunction or
decree of any
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court or governmental body which could reasonably be expected, on the Closing
Date, to prevent the performance of any of Seller's obligations under this
Agreement.
(c) AUTHORIZATION AND APPROVAL OF AGREEMENT. Seller has full
corporate power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby. The execution, delivery and performance by
Seller of this Agreement have been duly authorized by Seller's Board of
Directors and require no further corporate action for valid authorization. This
Agreement, upon its execution and delivery by Seller (assuming due
authorization, execution and delivery by Buyer), will constitute the legal,
valid and binding obligation of Seller, enforceable in accordance with its
terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting creditors rights
generally.
(d) CAPITAL STOCK OF COMPANY. The capitalization of the Company
consists of one share of capital stock. Seller owns outright, beneficially and
of record, all of the issued and outstanding shares of capital stock of the
Company, free and clear of any liens, encumbrances or security interests except
such as shall have been released before the Closing, and has not entered into
any agreement, other than this Agreement and the security agreement with the
agent under its senior credit facility (the "Bank Security Agreement," a copy of
which has been delivered to Buyer, and the terms of which
5
<PAGE>
will no longer apply to the Company and the Shares on the Closing Date) relating
to the disposition of the Shares. All outstanding shares of capital stock of
the Company were validly issued, and are fully paid and non-assessable. There
is no other outstanding class of capital stock and no other existing option,
warrant, right, call or commitment of any character relating to, and there are
no outstanding securities or other instruments (or any obligations of the
Company to issue such) convertible into or exchangeable for, any authorized but
unissued shares of capital stock of the Company. The Company has no
subsidiaries.
(e) FINANCIAL.
(i) Attached as SCHEDULE 3(E) hereto are the financial
statements (including income statements, a balance sheet and a statement of cash
flow) of the Company as of and for the years ended June 30, 1992, June 30, 1993
and June 30, 1994 and as of and for the six months ended December 31, 1994. The
foregoing financial statements were prepared in accordance with generally
accepted accounting principles, and present fairly in all material respects the
financial condition of the Company as at such dates and the results of
operations and changes in financial position of the Company for the periods then
ended except as set forth on EXHIBIT A to SCHEDULE 1(C).
(ii) Since December 31, 1994, the business of the Company has
been operated only in the ordinary and normal course and there has not been (1)
any material adverse change
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<PAGE>
in the condition (financial or otherwise) from that shown on the December 31,
1994 financial statements referred to in Section 1(c) above; or (2) any damage,
destruction, or loss, whether covered by insurance or not, materially adversely
affecting the properties or business of the Company or (3) any loan (other than
intercompany loans in the amount outstanding set forth on SCHEDULE 3(E)) or the
sale or exchange of any material asset or group of assets between the Company
and the Seller or any Affiliate of the Company. The term "Affiliate" as used in
this Agreement has the meaning ascribed thereto in Rule 12b-2 promulgated under
the Securities Exchange Act of 1934, as amended.
(f) TITLE TO AND CONDITION OF ASSETS. Other than (i) liens for
current taxes not yet due and payable, (ii) mechanics', carriers', workmen's,
repairmen's or similar liens incurred in the ordinary course of business,
(iii) easements, covenants, rights of way and other similar restrictions upon
real property, (iv) zoning, building and other similar restrictions and
(v) imperfections of title and encumbrances which are not substantial in
character, amount or extent and which do not detract from the value or interfere
with the present or contemplated use of the properties subject thereto or
affected thereby or otherwise impair the business operations of the Company, the
Company has good and marketable title to the assets reflected on the
December 31, 1994 Balance Sheet as owned by it, free and clear of all mortgages,
liens
7
<PAGE>
or other encumbrances, except as set forth in SCHEDULE 3(F) hereto. All of the
Company's assets are in the possession and control of the Company except for the
assets listed in SCHEDULE 3(F). Except as set forth thereon, all of the assets
located on the Company's facilities are owned or leased by the Company. A list
of all the personal property having a book value per unit in excess of $10,000
and all leases of real, personal, and mixed property under which the Company is
a lessor or lessee for which annual rentals exceed $25,000 is set forth on
SCHEDULE 3(F) hereto (indicating all property which is leased) and copies of
such leases, as amended to date, described in SCHEDULE 3(F) have been made
available to Buyer. All of the Company's assets are in good and usable
condition, ordinary wear and tear excepted, and currently are (without any
prediction as to periods after the Closing Date) sufficient to carry on the
business of the Company. The Company has quiet enjoyment under the leases
referred to on SCHEDULE 3(F).
(g) PATENTS AND RELATED PROPERTIES. The Company owns, or as of
the Closing Date will own, free of any encumbrances, (i) the entire right, title
and interest in and to the patents and patent applications set forth on
SCHEDULE 3(G) hereto and (ii) the entire right, title and interest in and to all
tradenames, trademarks and service marks, both domestic and foreign, both common
law and registered (including applications therefor) owned by the
8
<PAGE>
Company, a list of which is set forth on SCHEDULE 3(G) hereto. There are no
inventions of the Company in respect of which it anticipates filing a patent
application. SCHEDULE 3(G) sets forth a list of all patents, tradenames,
trademarks, service marks and copyrights currently used but not owned by the
Company and the arrangements pursuant to which such items are used. The Company
owns or has the right to use all material trade secrets, copyrights, inventions,
know-how, formulae, technical processes and information, rating, sizing,
manufacturing and testing techniques and procedures, operating procedures and
all other intangible property that is material to the business of the Company,
including all research data pertaining to any of the foregoing, all marketing
and distribution information, techniques and procedures, all engineering data
and plans, and all other material business data and information used by the
Company in connection with the business of the Company. Buyer acknowledges that
the technology used in the Company's goods and services is mature technology and
largely in the public domain. No licenses have been granted by the Company to,
or are used by the Company from, any third party in connection with any material
item of intellectual property as described in this Section 3(g) except as set
forth on SCHEDULE 3(G) hereto or in connection with marketing, advertising,
reselling and using of the Company's products by distributors or sales
representatives of the Company in the ordinary course of business. None of the
9
<PAGE>
Company's patents, patent applications, tradenames, trademarks, service marks,
copyrights or trade secrets are subject to any pending (as defined in
Section 3(j)) or, to the knowledge of Seller, threatened challenge to the
Company's right of use or ownership, nor does Seller know of any reasonable
basis for such challenge. All such patents, registered trademarks and service
marks owned by the Company are in good standing, with any required maintenance
fees paid through the Closing, and are recorded on the public record in the name
of the Company.
During the two (2) years prior to the Closing Date, Seller has not
received any written notice of a claim of infringement or violation of any third
party intellectual property rights by the making, using or selling of the
Company's products or services, nor were any such claims the subject of any
action or proceeding involving the Company.
(h) CONTRACTS AND COMMITMENTS. Except as set forth on
SCHEDULE 3(H) hereto:
(i) the Company has no contracts or commitments (including,
without limitation, sale of products, supply agreements, inventory purchase
obligations, bids, sales or service proposals, letters of credit, bank
guarantees, surety bonds and foreign exchange contracts) with respect to the
business of Company involving a liability or obligation in excess of $100,000
for any individual contract or $100,000 under all contracts with a single third
party or type of third
10
<PAGE>
party (such as banks), except for leases disclosed in SCHEDULE 3(f);
(ii) the Company has no outstanding contracts with officers,
employees, agents, consultants, advisors, distributors, salesmen, or sales
representatives;
(iii) the Company has no outstanding power of attorney to any
person, firm or corporation for any purpose whatsoever;
(iv) each material contract of the Company is in full force and
effect, constitutes the valid, legal and binding obligation of Company and, to
the Seller's knowledge, is the valid, legal and binding obligation of the other
parties thereto, and Company is not, and to Seller's knowledge the other
party(ies) thereto are not, in breach, violation or default under any such
material contract nor is there any claim of default, under any material
contracts of the Company;
(v) no purchase commitments or contracts of the Company were
entered into other than in the ordinary course of business;
(vi) there have been no claims involving repair or replacement
obligations with a cost exceeding $25,000 during the latest five years under the
product, design and/or service warranties (whether express or implied) of the
Company;
(vii) the Company is not restricted by agreement from carrying
on its business anywhere in the world;
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<PAGE>
(viii) the Company has granted no rebates to its customers
outside the ordinary course of business, nor has any improper payment in
consideration of receipt of an order been made;
(ix) to Seller's knowledge, no officer, director or key
employee of the Company has any material financial interest, direct or indirect,
in any of its suppliers or customers;
(x) the Company has no contract with any federal, state or
local governmental agency which is currently subject to renegotiation; and
(xi) since December 31, 1994 the Company's pricing policies
have not varied substantially from the pricing policies employed during the
calendar year ending on such date.
Copies of all written contracts and commitments set forth on SCHEDULE 3(h) have
been made available to Buyer for inspection. The information regarding bids,
sales and service proposals set forth on SCHEDULE 3(h) is as of June 19, 1995.
(i) NO BREACH OF STATUTE OR CONTRACT. Except as set forth on
SCHEDULE 3(i), neither the execution and delivery of this Agreement nor
compliance with the terms and provisions of this Agreement by Seller will breach
any statute or regulation of any governmental authority, domestic or foreign,
which violation would have a material adverse effect on the business of Seller
or Seller's ability to consummate the
12
<PAGE>
transaction contemplated hereby or will on the Closing Date conflict with or
result in a breach of any of the terms, conditions, or provisions of any
material agreement or instrument to which Seller or the Company is a party or by
which Seller or Company is or may be bound, or constitute a default thereunder,
which breach or default would have a material adverse effect on the business of
Seller or the Company or on Seller's ability to consummate the transaction
contemplated hereby, or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon, or give to others any interest or
other rights in, the Shares or the assets or business of the Company.
(j) NO LITIGATION OR ADVERSE EVENTS. Except as set forth on
SCHEDULE 3(j) or as could not reasonably be expected to materially and adversely
affect the financial condition of the Company or the conduct of its business,
there is no claim, suit, action, or administrative, arbitration, judicial or
governmental proceeding (including workers' compensation claims, product
liability claims, claims by employees or former employees or other liability
claims), or any governmental investigation, against or, in the case of a
governmental investigation, involving, the Company, pending or, to Seller's
knowledge, threatened. A list of all litigation, administrative, arbitration,
judicial or governmental proceedings or governmental investigations commenced
against or, in the case of a governmental
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<PAGE>
investigation, involving, the Company within the last three (3) years which
individually would have materially adversely affected the Company had they been
adversely determined is set forth on SCHEDULE 3(j). For purposes of this
Section 3(j), Section 3(g) and Section 9(d)(iv), a claim, suit, action or
administrative, arbitration, judicial or governmental proceeding is "pending" if
the Company has been served or notified in writing thereof, and a governmental
investigation is pending if written notice has been provided to the Company or
telephonic notice has been provided to Seller's general counsel.
(k) EMPLOYMENT. The Company is not a party to any collective
bargaining agreement. Except as set forth on SCHEDULE 3(k), the Company has no
employment agreements or policies that contain any severance or termination pay
obligations. Except as set forth on SCHEDULE 3(k), the Company has no employees
providing services to whom it is paying compensation at an annual base salary of
more than $50,000 for services rendered or otherwise and since December 31,
1994, has granted no increase in such compensation except in the ordinary course
of business. There have not been any union organizing efforts, strikes or labor
disputes involving employees of the Company materially and adversely affecting
the business of the Company during the most recent 24 months prior to the date
of this Agreement. No employees of the Company are on strike or threatening to
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<PAGE>
strike. SCHEDULE 3(k) lists the employees of the Company who currently are on
disability leave (long-term or short-term).
(l) COMPLIANCE WITH LAW. The Company is not, and on the date of
the Closing will not be, in violation of any law or regulation, local, state,
provincial or federal, pertaining to the operation or conduct of its business
including, without limitation, any applicable zoning, discrimination or safety
regulation or ordinance, the violation of which materially and adversely affects
the business of the Company. A list of all material licenses, certifications
and authorizations issued to the Company by local, state or federal authorities
is set forth on SCHEDULE 3(l) hereto. The Company has all licenses,
certifications or authorizations required to conduct its business.
(m) ENVIRONMENTAL MATTERS.]
(i) Except as set forth on Schedule 3(m), to the knowledge of
Seller and the Company, no Release of Hazardous Substances has occurred at or
from any of the Facilities in an amount or in a manner which reasonably could be
expected to result in material liability to the Company.
(ii) Except as set forth on Schedule 3(m), the Current Facilities
are, and at all times during the past five years have been operated in
substantial compliance with all applicable Environmental Laws and all material
orders, permits, licenses, approvals, authorizations and registrations
15
<PAGE>
required under or issued pursuant to any Environmental Law (collectively
"Permits") for the operation of the Current Facilities as of the Closing Date
have been obtained, are in effect and are being complied with in all material
respects.
(iii) Except as set forth on Schedule 3(m), no underground storage
tanks are currently, or, to the knowledge of Seller and the Company, in the past
have been located at one or more of the Current Facilities and no asbestos or
PCBs or equipment or material containing asbestos or PCBs is currently located
at the Current Facilities.
(iv) There are no pending or to Seller's or Company's knowledge
threatened Environmental Claims against Seller or the Company related to any of
the Facilities or to the business operations of the Company or, to the knowledge
of Seller, its current or former subsidiaries, and the Company has not assumed
or retained by contract, succession, assignment, acquisition, merger or
divestiture any liability or obligation for, or duty to defend, any
Environmental Claim asserted against any other person, corporation, organization
or entity or to perform or satisfy any obligations, responsibilities or duties
(including without limitation payment of penalties or fines) of any person,
corporation, organization or entity under any Environmental Law or Permit.
(v) Seller has provided and disclosed to Buyer all environmental
audit, assessment and investigation reports, notices under CERCLA and state
counterpart law (if any), and
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testing data in Seller's or the Company's possession related to the Facilities
or to the business operations of the Company or its present or former
subsidiaries.
(n) NO BROKERS OR FINDERS. Except as identified in Section 12(d)
hereof, no individual, firm, corporation or other person has, or as a result of
any of the transactions contemplated hereby will have, as a result of any
commitment of Seller with respect to such individual, firm, corporation or other
person, any right, interest or valid claim against or upon Buyer for any
commission, fee or other compensation as a broker or finder or for acting in any
similar capacity.
(o) SUPPLIERS AND CUSTOMERS. Since December 31, 1994, the Company
has not experienced a material disruption in the supply of materials (raw,
finished or otherwise) used or to be used in the business of the Company, except
as set forth on SCHEDULE 3(o) hereto. Except as set forth in SCHEDULE 3(O),
neither the Company nor Seller has received, since December 31, 1994, written
notice of intent to terminate any material contracts or agreements for the
purchase of the products of the Company.
(p) BENEFIT PLANS. The Company has no bonus, deferred
compensation, incentive compensation, stock purchase, stock option, profit
sharing, pension, vacation, sick leave, medical reimbursement, hospitalization,
severance, insurance plan, or other employee benefit plan, as defined in
Section 3(3) of the Employee Retirement Income Security Act of
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<PAGE>
1974, as amended ("ERISA"), either legally binding or not, nor is the Company
presently paying any deferred compensation, retiree medical benefits, pension or
other retirement allowance to anyone, all except as set forth on SCHEDULE 3(p)
hereto (collectively referred to herein as the "Plans"). Each Plan complies in
all material respects to all applicable requirements of ERISA, the Internal
Revenue Code, and other applicable law. Seller has instructed the management of
the Company to furnish to Buyer a schedule of all other benefit practices and
policies of the Company that are not Plans, E.G., a Christmas turkey program.
(q) INSURANCE. All of the Company's insurable assets are insured
or are self-insured in accordance with the Company's past practices, and will be
so insured until the Closing Date, in amounts and against risks that are in
accordance with the custom in the Company's industry and with respect to
self-insurance, consistent with practices of companies of Seller's size.
(r) BACKLOG. As of June 16, 1995, the Company's sales order
backlog was $60,963,524, and that backlog is listed in SCHEDULE 3(r). Except as
set forth on SCHEDULE 3(r), neither the Company nor Seller has received written
notice of intent to terminate any order reflected thereon.
(s) TAXES. Except as set forth on SCHEDULE 3(s):
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(i) The Company has filed or caused to be filed in a timely
manner (within any applicable extension periods) with the appropriate
governmental authority all material tax returns and other material
tax-related documents required to be filed by the Internal Revenue Code of
1986, as amended (the "Code"), or other applicable tax laws, all such returns
and other documents were correct and complete in all material respects, all
taxes, including withholding taxes, due from the Company prior to the date
hereof have been timely paid in full by the due date thereof, no material tax
liens or assessments have been filed by any governmental authority against
the Company or any property or assets of the Company (except liens for taxes
not yet due and payable), and there are no unresolved material claims that
have been asserted by any governmental authority in writing for any unpaid
taxes with respect to the Company or its operations or assets. SCHEDULE 3(s
) includes, for taxable years ending in 1988-1994, a list of those years for
which federal income tax returns have been audited by the Internal Revenue
Service and those years for which the statute of limitations on the
assessment of federal or state income taxes has been extended by agreement.
(ii) (A) Neither Seller nor the Company has made, with
respect to the Company or any property held by the Company, any consent under
Section 341 of the Code, (B) no property of the Company is "tax exempt use
property" within
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the meaning of Section 168(h) of the Code, (C) the Company is not a party to any
lease made pursuant to former Section 168(f)(8) of the Internal Revenue Code of
1954, and (D) the Company has not made and is not obligated to make any payments
in connection with the transaction contemplated by this Agreement that would
constitute excess parachute payments within the meaning of Section 280G of the
Code.
(iii) There are no outstanding agreements or waivers
extending the period of limitation applicable to any material taxes or tax
returns to be filed with respect to the Company.
(iv) As of the Closing Date the Company will not be a party
to any tax sharing agreement or similar arrangement, including any terminated
agreement as to which it could have any continuing liability. The Company
has no liability for taxes of any person (other than the Company) under
Treasury Regulation Section 1.1502-6 (or any similar provision of federal,
state, foreign or local law), as a transferee or successor, by contract or
otherwise.
(v) Seller is not a "foreign person" within the meaning of
Section 1445 of the Code.
(t) PRODUCTS. There have been no PCBs or asbestos containing
materials contained within products manufactured, distributed, reconditioned,
repaired or sold by the Company.
4. REPRESENTATIONS AND WARRANTIES BY BUYER.
Buyer represents, warrants and covenants that:
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(a) ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York and has
all corporate power and authority to own its properties, carry on its business
as and where such business is now conducted and to enter into and perform its
obligations under this Agreement.
(b) AUTHORIZATION AND APPROVAL OF AGREEMENT. Buyer has full
corporate power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Buyer have been duly authorized by Buyer's Board of Directors
and require no further corporate action for valid authorization. This
Agreement, upon its execution and delivery by Buyer (assuming due authorization,
execution and delivery by Seller), will constitute the legal, valid and binding
obligation of Buyer enforceable in accordance with its terms, subject to the
effect of applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditor's rights generally.
(c) ABILITY TO CARRY OUT AGREEMENT. Buyer is not a party to,
subject to or bound by any agreement or instrument, or any statute, regulation,
pending litigation, judgment, order, writ, injunction or decree of any court or
governmental body which could reasonably be expected, on the Closing Date, to
prevent the performance of any of its obligations under this Agreement.
21
<PAGE>
(d) NO BREACH OF STATUTE OR CONTRACT. Neither the execution and
delivery of this Agreement nor compliance with the terms and provisions of this
Agreement by the Buyer will breach any statute or regulation of any governmental
authority, domestic or foreign, which violation would have a material adverse
effect on the business of Buyer or Buyer's ability to consummate the transaction
contemplated hereby or will at the date of the Closing conflict with or result
in a breach of any of the terms, conditions or provisions of any material
agreement or instrument to which Buyer is a party or by which it is or may be
bound or constitute a default thereunder which breach or default would have a
material adverse effect on the business of Buyer or Buyer's ability to
consummate the transaction contemplated hereby.
(e) NO BROKERS OR FINDERS. No individual, firm, corporation or
other person has, or as a result of any of the transactions contemplated hereby
will have, as a result of any commitment of Buyer with respect to such
individual, firm, corporation or other person any right, interest or valid claim
against or upon Seller for any commission, fee or other compensation as broker
or finder or for acting in any similar capacity.
(f) Buyer has provided and disclosed to Seller all preacquisition
environmental audit, assessment and investigation reports prepared by its
consultants and all
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testing data in Buyer's possession related to the Company or its Facilities (as
defined in Section 9(f)).
5. CONDUCT OF THE BUSINESS OF COMPANY PENDING THE CLOSING DATE.
(a) FULL ACCESS. Buyer and its authorized representatives shall
have full access during normal business hours to all properties, books, records,
tax returns, contracts and documents of the Company, and Seller shall furnish or
cause to be furnished to Buyer and its authorized representatives all
information in respect of the affairs of Company as Buyer may reasonably
request.
(b) CARRY ON IN REGULAR COURSE. Seller agrees that pending the
Closing Date (except as contemplated by this Agreement, and subject to written
consent by Buyer to the contrary, which consent shall not be unreasonably
withheld or delayed), and except as contemplated hereby:
(i) The Company will carry on its business substantially in
the same manner as heretofore and shall not make or institute any unusual or
novel methods of manufacture, purchase, sale, lease, management, accounting,
or operation.
(ii) The Company will not increase or decrease the rates of
pay of the employees providing services or increase or decrease the fixed
compensation payable or to become payable to any employee or agent or commit
to do any of the foregoing (except for pay or compensation increases in the
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ordinary course of business consistent with past practices) or change any
pension plan in a manner that would bind Buyer.
(iii) The Company will not bid upon or enter into any
contract or commitment or engage in any transaction not in the usual and
ordinary course of its business and consistent with its past practices; but
in no event shall any contracts be entered into with dealers or distributors
of the Company's products other than renewals of agreements in existence at
the date hereof provided such renewed agreement can be terminated within one
year without cost.
(iv) The Company will not sell, lease, transfer or otherwise
dispose of its rights with respect to any of its material assets (other than
inventory in the ordinary course of business).
(v) The Company will not enter into any leases of capital
equipment.
(vi) All tangible property of the Company utilized in its
business will be maintained in good and usable condition, ordinary wear and
tear excepted.
(vii) Neither Seller nor the Company will create any
indebtedness for borrowed money which would be or could reasonably become a
lien or encumbrance on the Company's assets other than:
(1) that incurred pursuant to existing contracts
disclosed in the schedules hereto,
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(2) that incurred pursuant to commitments permitted
hereby; and,
(3) that reasonably incurred in doing the acts and
things contemplated by this Agreement.
(viii) Seller and the Company will use commercially
reasonable efforts (without making any commitments on behalf of Buyer) to
preserve the Company's business organization intact, to encourage key
employees of the Company to remain in their current positions until the
Closing and to preserve for Buyer the present relationships with the
suppliers and customers and others having business relations with Company.
(ix) The Company will not acquire fixed assets at cost in
excess of $100,000 individually or $500,000 in the aggregate, other than
pursuant to binding commitments disclosed in the schedules hereto and made
prior to the date of this Agreement.
(x) Neither Seller nor the Company will settle or agree to
settle, any material claim, action, suit, proceeding or investigation
involving the Company or waive any material right of the Company.
Nothing in this Agreement shall be construed, however, to limit Seller's ability
to cause the Company to distribute to Seller, on or before the Closing Date, all
cash excluded from the calculation of Net Tangible Assets.
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(c) ANTITRUST LAWS. Seller, on the one hand, and Buyer on the
other hand, will each make filings as required under Title II of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended. Each will furnish to the
other such necessary information and reasonable assistance as the other may
request in connection with its preparation of the initial and any necessary
additional filing or submission to any governmental agency, including, without
limitation, any additional filings necessary under the provisions of Title II of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Each
party will keep the other party apprised of the status of any inquiries made of
such party from the Federal Trade Commission, the Antitrust Division of the U.S.
Department of Justice or any other governmental agency or authority or members
of their respective staffs with respect to this Agreement or the transaction
contemplated hereby.
(d) UPDATING OF SCHEDULES. Seller shall be permitted (with the
consent of Buyer, which consent shall not be unreasonably withheld and shall not
be required in respect of (i) the backlog amount in Section 3(r), (ii) the list
of employees on disability leave referred to in Section 3(k) and shown on
SCHEDULE 3(k) and (iii) the list of outstanding performance bonds (including
those to be replaced) on SCHEDULE 3(h)) to update as of the Closing Date, by way
of revising the schedules, all representations and warranties not limited to the
date made, and shall so update the
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representation and warranty in Section 3(r) as to backlog (as of a date no more
than three Business Days prior to the Closing Date), and the representation and
warranty in Section 3(k) and on SCHEDULE 3(k) regarding employees on disability
(through the business day prior to the Closing Date) provided that Seller's
ability or duty, as the case may be, so to update the schedules shall not
vitiate the Buyer's condition to Closing in Section 6(a).
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.
The obligation of Buyer to consummate the transactions to be
entered into at the Closing is subject to each of the following:
(a) NO MATERIAL ADVERSE EVENT OR INFORMATION. No event shall
have occurred prior to the Closing which materially and adversely affects the
financial condition, assets or properties of the Company whether or not any such
event is covered by insurance.
(b) REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
AGREEMENT. The representations and warranties of Seller made hereunder are, at
and as of the Closing, true in all material respects with the same effect as
though such representations and warranties had been made or given on and as of
the Closing, except for changes contemplated or permitted by or under this
Agreement. Seller has performed and complied in all material respects with its
undertakings,
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agreements and conditions required by this Agreement to be performed or
complied with prior to or at the Closing.
(c) PROCEEDINGS AND INSTRUMENTS SATISFACTORY. All
proceedings, corporate or other, to be taken in connection with the transaction
contemplated by this Agreement and all documents required in connection
therewith or incident thereto, shall be reasonably satisfactory in form and
substance to Buyer's counsel.
(d) NO LITIGATION. No suit, investigation, action or other
proceeding shall be threatened or pending before any court or governmental
agency which has resulted or, in the opinion of counsel to Buyer there is a
reasonable risk that it may result, in the restraint, prohibition or the
obtaining of damages in connection with this Agreement or the consummation of
the transaction contemplated hereby.
(e) DELIVERY OF DOCUMENTS. Buyer shall have received all the
documents and the Shares required to be received pursuant to Section 8(a)
hereof.
(f) ANTITRUST IMPROVEMENTS ACT. All filings required to be
made under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), shall have been made and the waiting period thereunder shall
have expired or been terminated and neither the Department of Justice nor the
Federal Trade Commission shall have obtained an injunction preventing the
consummation of the transaction contemplated hereby.
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(g) CONSENT. On or before the Closing Date, Seller shall have
obtained any and all consents necessary (including, without limitation, those
set forth on SCHEDULE 3(i)) to validly consummate the transaction contemplated
in this Agreement, the lack of which would materially and adversely affect the
business of the Company, or there shall have been delivered to Buyer evidence
reasonably satisfactory to Buyer that such consents will be granted.
(h) WAIVER OF CONDITIONS BY BUYER. Buyer may, in its sole
discretion, waive any one or more of the conditions precedent set forth in (a)
through (g) above for the purpose of proceeding with the Closing. Unless the
parties otherwise agree in writing, such waiver shall have the effect of
nullifying any representation, warranty or agreement that is breached as a
result of the nonfulfillment of the waived condition.
7. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.
The obligation of Seller to consummate the transaction to be
entered into at the Closing is subject to each of the following:
(a) REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
AGREEMENT. The representations and warranties of Buyer made hereunder are, at
and as of the Closing, true in all material respects with the same effect as
though such representations and warranties had been made or given on and as of
the Closing, except for changes contemplated or
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permitted by or under this Agreement. Buyer has performed and complied in all
material respects with its undertakings, agreements and conditions required by
this Agreement to be performed or complied with prior to or at the Closing.
(b) PROCEEDINGS AND INSTRUMENTS SATISFACTORY. All
proceedings, corporate or other, to be taken in connection with the transaction
contemplated by this Agreement and all documents required in connection
therewith or incident thereto shall be reasonably satisfactory in form and
substance to Seller's counsel.
(c) DELIVERY OF DOCUMENTS. Seller shall have received all the
documents and the cash consideration required to be received pursuant to Section
8(b) hereof.
(d) NO LITIGATION. No suit, investigation, action or other
proceeding shall be threatened or pending before any court or governmental
agency which has resulted or, in the opinion of counsel to Seller there is a
reasonable risk that it may result, in the restraint, prohibition or the
obtaining of damages in connection with this Agreement or the consummation of
the transaction contemplated hereby.
(e) ANTITRUST IMPROVEMENTS ACT. All filings required to be
made under the HSR Act shall have been made, and the waiting period thereunder
shall have expired or been terminated and neither the Department of Justice nor
the Federal Trade Commission shall have obtained an injunction
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preventing the consummation of the transaction contemplated hereby.
(f) CONSENT. On or before the Closing Date, Seller shall have
obtained any and all consents necessary to validly consummate the transaction
contemplated in this Agreement the lack of which would either (i) result in a
breach of a representation and warranty which Buyer will not waive,
(ii) materially and adversely affect the Company or (iii) materially and
adversely affect Seller.
(g) WAIVER OF CONDITIONS BY SELLER. Seller may, in its sole
discretion, waive any one or more of the conditions precedent set forth in (a)
through (f) above for the purpose of proceeding with the Closing. Unless the
parties otherwise agree in writing, such waiver shall have the effect of
nullifying any representation, warranty or agreement that is breached as a
result of the nonfulfillment of the waived condition.
8. DOCUMENTS TO BE DELIVERED AT CLOSING.
(a) At the Closing, Seller shall deliver to Buyer the
following documents:
(i) The certificate or certificates representing
Seller's ownership of the Shares, properly endorsed and in form for transfer to
Buyer and such other instruments of assignment, transfer, conveyance or
endorsement, all in form reasonably satisfactory to the Buyer and its counsel,
as shall be necessary to transfer to the
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Buyer all of Seller's right, title, and interest in and to the Shares.
(ii) A certificate signed by a principal officer of
the Seller that the representations and warranties made by the Seller in this
Agreement are true in all material respects on and as of the Closing Date with
the same effect as though such representations and warranties had been made or
given on and as of the Closing Date and that the Seller has performed and
complied in all material respects with all of the obligations under this
Agreement which are required to be performed or complied with by it on or prior
to the Closing Date.
(iii) A certified copy of the duly adopted
resolutions of the Board of Directors of the Seller authorizing the execution of
this Agreement and the consummation of the transaction contemplated hereby.
(iv) An incumbency certificate with respect to all
parties executing on behalf of the Seller this Agreement or any of the documents
relating to the transaction contemplated hereby.
(v) Written opinions of Seller's counsel, Gibson,
Dunn & Crutcher, its General Counsel, Samuel A. Miley, and its Wisconsin
counsel, each dated as of the Closing addressed to Buyer in the form of
EXHIBITS A-1 THROUGH A-3 attached hereto.
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(vi) A Site Access Agreement in the form of
EXHIBIT B attached hereto.
(vii) Such other instruments or documents as the
Buyer may reasonably request.
(b) At the Closing, Buyer shall deliver to Seller the
following documents:
(i) A certificate signed by a principal officer of
the Buyer that the representations and warranties made by the Buyer in this
Agreement are true in all material respects on and as of the Closing Date with
the same effect as though such representations and warranties had been made or
given on and as of the Closing Date and that the Buyer has performed and
complied in all material respects with all of the obligations under this
Agreement which are required to be performed or complied with by it on or prior
to the Closing Date.
(ii) A certified copy of the duly adopted
resolutions of the Board of Directors authorizing the execution of this
Agreement and the consummation of the transaction contemplated hereby.
(iii) An incumbency certificate with respect to all
parties executing this Agreement or any of the documents relating to the
transaction contemplated hereby.
(iv) The cash consideration payable at the Closing
pursuant to Section 1(f) hereof.
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(v) A written opinion of Buyer's counsel, Frank J.
Simone, Jr., dated as of the Closing addressed to Seller in the form of
EXHIBIT C hereof.
(vi) A Site Access Agreement in the form of
EXHIBIT B attached hereto.
(vii) Such other instruments or documents as the
Buyer may reasonably request.
9. INDEMNIFICATION.
(a) SELLER GENERAL INDEMNIFICATION. Seller shall be liable to
Buyer and shall defend, indemnify and hold harmless Buyer, the Company and
their respective directors, officers, Affiliates, agents, employees,
successors and assigns (collectively "Buyer Indemnified Persons") against any
and all loss, liability or expense, including all actions, suits,
proceedings, claims, demands, assessments, judgments or costs or expenses
(including reasonable legal expenses) (all collectively referred to
hereinafter as "Losses") arising out of: (i) if the Closing occurs, the
breach of any representation or warranty of Seller contained in this
Agreement (or in any documents required under this Agreement to be furnished
to Buyer); and (ii) the nonfulfillment of any agreement, covenant or
obligation of the Seller contained in this Agreement, to the extent not
waived by Buyer in accordance with this Agreement or otherwise terminated or
extinguished by the terms of this Agreement; PROVIDED, HOWEVER, that: (i) no
liability shall be asserted against
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Seller under Subsection 9(a)(i), Subsection 9(d)(x)(i) or
Subsection 9(f)(ii)(A)-(C) until such time as the aggregate of all such Losses
for which indemnification is provided under such subsections exceeds $500,000,
in which case, recovery shall be for the entire amount of such claims, including
the initial $500,000. The indemnification provided pursuant to Section 9(a)(i)
shall terminate when the applicable representation and warranty expires pursuant
to Section 11 hereof.
(b) BUYER GENERAL INDEMNIFICATION. Buyer shall be liable to
Seller and shall defend, indemnify and hold harmless Seller and its directors,
officers, Affiliates, agents, employees, successors and assigns (collectively,
"Seller Indemnified Persons") against any and all Losses arising, directly or
indirectly, out of (i) if the Closing occurs, the breach of any representation
or warranty of Buyer contained in this Agreement (or in any documents required
under this Agreement to be furnished to Seller) and (ii) the nonfulfillment of
any agreement, covenant or obligation of Buyer contained in this Agreement, to
the extent not waived in writing by Seller or otherwise terminated or
extinguished by the terms of this Agreement.
(c) CLAIMS. If a claim is to be made by a party entitled to
indemnification hereunder against the indemnifying party, the party entitled to
such indemnification shall give written notice to the indemnifying party as soon
as practical
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after the party entitled to indemnification becomes aware of any fact, condition
or event which may give rise to damages for which indemnification may be sought
under this Section 9, and if any lawsuit or enforcement action is filed against
any party entitled to the benefit of indemnity hereunder, written notice thereof
shall be given to the indemnifying party as promptly as practicable (and in any
event within thirty (30) days after the service of the citation or summons);
PROVIDED, HOWEVER, that the failure of any indemnified party to give timely
notice shall not affect rights to indemnification hereunder except to the extent
that the indemnifying party demonstrates actual damage caused by such failure.
After such notice, the indemnifying party shall be entitled, if it so elects
(and has acknowledged its obligation to indemnify the indemnified party), to
take control of the defense, investigation and settlement of such lawsuit or
action and to employ and engage attorneys of its own choice to handle, defend or
settle the same, at the indemnifying party's cost, risk and expense provided
that the indemnifying party and its counsel shall proceed with diligence and in
good faith with respect thereto. The indemnified party shall cooperate in all
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; PROVIDED, HOWEVER, that the indemnified party may, at its own
cost, participate in the investigation, trial and defense of such
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lawsuit or action and any appeal arising therefrom. To the extent addressed
therein, a final determination of any such actions or claims will be binding and
conclusive upon the parties hereto as to the validity or invalidity, as the case
may be, of such actions or claims against the indemnifying party. In the event
the party of which indemnification is being requested does not inform the party
requesting indemnification in writing that it intends to acknowledge its
obligation to indemnify the indemnified party and to assume control for such
defense within 30 days after the date upon which written notice issues, the
party requesting indemnification in its sole discretion may defend or make
settlement of such action or claims and such settlement or other final
determination shall be binding upon the other party hereto. If the indemnifying
party has acknowledged its obligation to indemnify the indemnified party, no
person requesting indemnification shall settle any claim without the
indemnifying party's consent, which consent shall not be unreasonably withheld
or delayed. This Section 9(c) shall not apply to claims made pursuant to
Section 9(e).
(d) SPECIAL SELLER INDEMNIFICATION. In addition to the matters
covered by Section 9(a) hereof, Seller shall indemnify each Buyer Indemnified
Person for any Loss it incurs as a result of or arising from any of the
following:
(i) all liability for taxes for which Buyer is
indemnified pursuant to Section 9(e) below;
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(ii) all liabilities (other than liabilities for benefits
accrued on the Closing Statement or expressly assumed by Buyer hereunder)
under any Plan of Seller or the Company;
(iii) all liabilities for environmental matters for
which Buyer is indemnified pursuant to Section 9(f) below;
(iv) all liabilities for litigation and claims against the
Company that are pending (as defined in Section 3(j)) prior to the Closing
Date, including those referred to on SCHEDULE 3(j) hereof;
(v) all liabilities for warranty claims, including those
referred to on SCHEDULE 3(h), which are asserted by Buyer in writing within
five (5) years after the Closing Date, but only to the extent the reserve
therefor on the Closing Statement has been exhausted and that such warranty
claims pertain to products manufactured or services performed by or on behalf
of the Company prior to the Closing Date;
(vi) product liability claims and litigation against the
Company or Buyer, with respect to the Company, resulting from Occurrences (as
hereinafter defined) prior to the Closing Date other than any Occurrence
involving exposure to any substance or material;
(vii) all general or automobile liability claims and
litigation against the Company or the Buyer, with
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respect to the Company, resulting from Occurrences prior to the Closing Date;
(viii) all workers' compensation (including employer's
liability) claims and litigation against the Company or Buyer, with respect
to the Company, resulting from Occurrences prior to the Closing Date; and
(ix) all claims and litigation (with the exception of
worker's compensation matters) against the Company or Buyer, with respect to
the Company, by employees or former employees of the Company resulting from
an Occurrence prior to the Closing Date other than any Occurrence involving
exposure to any substance or material.
(x) (i) All personal or bodily injury claims and
litigation against the Company or Buyer, with respect to the Company, by persons
(including, without limitation, employees and product users) alleging exposure
prior to the Closing Date to Hazardous Substances (as defined in Section 9(f))
arising out of the business operations and/or products of the Company (an
"Exposure Claim"); (ii) in addition, the Seller's indemnification for Exposure
Claims shall apply to all such claims arising from the business operations
and/or products of any present or former subsidiary or affiliate of the
Company.
An "Occurrence" shall be any accident or other event,
continued or repeated exposure to conditions, or action or failure to act,
which results in a debt, obligation, duty,
39
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liability or loss; PROVIDED, HOWEVER, with respect to Occurrences within the
coverages of a liability insurance policy the term "Occurrence" shall have the
meaning set forth in and under such policy and shall be deemed to happen at the
time of which said policy would recognize an "Occurrence." Without limiting the
generality of the foregoing, a claim of product liability shall be deemed to
have occurred as of the date on which personal injury or property damage is
sustained.
The indemnification in clauses (i), (ii), (iv), (vi), (vii),
(viii) and (x)(ii) above shall not expire or be subject to any limitation. The
indemnification under clause (v) above shall apply in accordance with the terms
of such clause. Subject to the second following sentence, the indemnification
in clauses (ix) and (x)(i) shall only apply, respectively, to those claims and
litigations for which Buyer has placed Seller on notice no later than the second
anniversary of the Closing Date, in the case of clause (ix), and the seventh
anniversary of the Closing Date, in the case of clause (x)(i). The survival and
limitation of the indemnification in clause (iii) above is set forth in
Section 9(f). Insofar as a claim for which indemnification is provided under
Section 9(d)(ix) or (x)(i) is filed by an employee or former employee of the
Company (whether with a court, administrative agency or other governmental body
or arbitral tribunal) prior to the respective two-year period and seven-year
period referred to in the second preceding sentence
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and such claim is submitted or identified to Seller with reasonable specificity
within the applicable period, such indemnification shall include (A) any claim
by an additional claimant arising out of the same facts as those of which Seller
received timely notice and (B) any appellate, DE NOVO, administrative or other
subsequent proceeding which the original claimant (or any such additional
claimant) is entitled to file or pursue following the disposition of the initial
claim. In addition, the indemnification in Section 9(d)(x)(i) shall be
aggregated with all other indemnification that is subject to the $500,000
threshold set forth in Section 9(a).
(e) TAX INDEMNIFICATION.
Subject to the terms and conditions of this Section 9(e):
(i) Seller shall indemnify each Buyer Indemnified Person and
hold them harmless from (A) all liability for taxes of Seller and the Company
for Pre-Closing Tax Periods (as defined below), other than taxes described in
clause (B) of paragraph (ii) below, and (B) all liability for reasonable
legal fees and expenses (including interest) incurred with respect to any
item indemnified pursuant to clause (A). "Pre-Closing Tax Period" shall mean
any taxable period ending on or before the Closing Date and the portion
ending at 11:59 p.m. on the Closing Date of any taxable period that includes
(but does not end on) the Closing Date.
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(ii) Buyer shall, and shall cause the Company, jointly and
severally, to indemnify Seller and its affiliates, and each of their
officers, directors, employees and agents, and hold them harmless from (A)
all liability for taxes of the Company for any taxable period ending after
the Closing Date (except to the extent such taxable period began on or before
the Closing Date, in which case Buyer's indemnity will cover only that
portion of any such taxes that are not for the Pre-Closing Tax Period), (B)
all liability for taxes incurred as a result of actions outside the ordinary
course of business taken by Buyer or the Company following the Closing on the
Closing Date at the request or for the benefit of Buyer or its agents, and
(C) all liability for reasonable legal fees and expenses (including interest)
incurred with respect to any item indemnified pursuant to clauses (A) and (B).
(iii) In the case of any taxable period that includes (but
does not end on) the Closing Date (a "Straddle Period"), the taxes of the
Company for the portion of the Straddle Period that constitutes a Pre-Closing
Tax Period shall be computed as if such taxable period ended as of, and shall
be based on the operations of or ownership of assets by the Company for that
portion of the Straddle Period ending at 11:59 p.m. on the Closing Date
(other than taxes described in clause (B) of paragraph (ii) above). Seller's
obligation to indemnify Buyer pursuant to clause (i)(A) of this Section 9(e)
with respect to taxes for a Straddle Period shall be limited
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to an amount equal to the excess of (x) taxes for the portion of the Straddle
Period that constitutes a Pre-Closing Tax Period (as calculated pursuant to the
preceding sentence) over (y)(A) the amount of such taxes for the Straddle Period
paid, or provided for through estimated taxes or deposits paid, at any time by
Seller, plus (B) the amount of such taxes paid, or provided for through
estimated taxes or deposits paid, by the Company on or prior to the Closing
Date. If for any tax the amount described in clause (y) of the preceding
sentence exceeds the amount described in clause (x), Buyer shall pay such excess
to Seller no later than the date of filing of the tax return for the applicable
Straddle Period. Notwithstanding the foregoing, Seller shall have no obligation
to indemnify Buyer as to any expenses pertaining to taxes for a Straddle Period
to the extent such expenses arise as a result of Buyer's or the Company's
failure to properly report or pay such taxes when originally due.
(iv) At least thirty (30) days prior to the filing by Buyer
or the Company of a tax return for a Straddle Period, Buyer shall notify
Seller of any amount payable by Seller calculated in accordance with this
Section 9(e) and shall provide Seller with reasonably detailed computations
to support the amount notified. If Seller agrees with such computation,
Seller shall pay to Buyer the amount shown thereon as due on or prior to the
date on which the tax return for the Straddle Period (other than a tax return
with respect
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<PAGE>
to estimated taxes) is required to be filed. If Seller disagrees, either in
whole or in part, with such computation, Seller shall pay to Buyer, at the time
specified in the preceding sentence, the amount, if any, with respect to which
Seller agrees, and the balance shall be paid in accordance with the procedures
set forth in Section 9(e). The amount payable by Seller or Buyer, as the case
may be, pursuant to this Section 9(e) shall be adjusted to reflect any final
determination with respect to taxes for a Straddle Period and payments between
Seller and Buyer to reflect such adjustments shall be made if necessary. Such
adjustments and any resulting payments shall be made within sixty (60) days of
such final determination.
(v) If a claim (including an informal or proposed claim)
shall be made by any tax authority, which, if successful, might result in an
indemnity payment to any person pursuant to this Section 9(e) (a "Tax
Indemnitee"), the Tax Indemnitee shall promptly notify the party against whom
indemnification is or may be sought (the "Tax Indemnitor") in writing of such
claim (a "Tax Claim"). If notice of a Tax Claim is not given to the Tax
Indemnitor within a sufficient period of time to allow the Tax Indemnitor to
effectively contest such Tax Claim, or in reasonable detail to apprise the
Tax Indemnitor of the nature of the Tax Claim, the Tax Indemnitor shall not
be liable to the Tax Indemnitee to the extent that the Tax Indemnitor's
ability to effectively
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contest such Tax Claim is actually prejudiced as a result thereof (without
consideration of the merits of the claim or the Tax Indemnitor's potential
arguments against such claim).
(vi) With respect to any Tax Claim, the Tax Indemnitor shall
control all proceedings taken in connection with such Tax Claim (including,
without limitation, selection of counsel) and, without limiting the
foregoing, may in its sole discretion pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with any taxing
authority with respect thereto and may, in its sole discretion, either pay
the tax claimed and sue for a refund where applicable law permits such refund
suits or contest the Tax Claim in any permissible manner, provided, however,
that the Tax Indemnitee shall have the right to participate in any such
proceeding at its sole expense and that the Tax Indemnitor shall not settle
or compromise a Tax Claim without giving 30 days' prior notice to the Tax
Indemnitee, and without the Tax Indemnitee's consent, which shall not be
unreasonably withheld or delayed. The Tax Indemnitee, and each of its
affiliates, shall cooperate with the Tax Indemnitor in contesting any Tax
Claim, which cooperation shall include, without limitation, the filing of
amended tax returns or claims for refund, the execution of settlement
documents, the retention and (upon the Tax Indemnitor's request) the
provision to Tax Indemnitor of records and information which are reasonably
relevant to such Tax Claim,
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and making employees available on a mutually convenient basis to provide
additional information or explanation of any material provided hereunder or to
testify at proceedings related to such Tax Claim.
(vii) Amounts payable by Seller to Buyer, and by Buyer or the
Company, pursuant to this Section 9(e) shall be treated for all purposes as
an adjustment to the purchase price paid by the Buyer for the Shares, and all
amounts payable to the Company pursuant to this Section 9(e) shall be treated
for all purposes as a contribution to the capital of the Company.
(viii) Notwithstanding anything contained herein to the
contrary, no payment shall be made hereunder by Seller, on one hand, and
Buyer or the Company, on the other hand, in respect of taxes to the extent
the amount of such taxes was reflected in and reduced or increased,
respectively, Net Tangible Assets on the Closing Statement as finally
determined.
(f) ENVIRONMENTAL INDEMNIFICATION.
(i) The terms set forth below shall have the meanings ascribed
to them below.
"Claims" (see definition of Environmental Claims).
"Current Facilities" (see definition of Facilities).
"Environment" shall be defined as it is within CERCLA.
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"Environmental Claims" means any and all actions, suits,
orders, claims, liens, notices, investigations, proceedings or complaints,
whether any of the foregoing are administrative, judicial or otherwise,
(collectively "Claims") brought, issued, asserted or alleged by: (A) a
governmental authority or non-governmental person for compliance, injunctive
relief, damages (including but not limited to natural resource damages),
penalties, Remediation or other action pursuant to any applicable Environmental
Law; and/or (B) a third party seeking damages and/or injunctive relief related
to actual or alleged personal injury, wrongful death, property damage,
Remediation and/or other Loss resulting from the Release of a Hazardous
Substance; and/or (C) Buyer concerning contamination at, onto, under or from the
Current Facilities and activities related thereto which contamination exists as
of the Closing Date and which violates any current Environmental Law and/or for
which Remediation is required pursuant to any current Environmental Law.
Notwithstanding any other provision herein to the contrary, "Environmental
Claim" shall not include any Claim by any current or former employee of the
Company to the extent that the Claim concerns occupational safety or health
issues.
"Environmental Laws" means all federal and applicable state or
local laws, statutes, ordinances, rules, regulations, standards, criteria, and
guidelines relating to protection of the Environment including but not limited
to, as
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amended: the Resource Conservation Recovery Act of 1976, 42 U.S.C. Sections
6901 ET SEQ.; the Toxic Substances Control Act, 15 U.S.C. Sections 2601 ET SEQ.;
the Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA), 42 U.S.C. Sections 9601 ET SEQ.; the Federal Water Pollution Control
Act, 33 U.S.C Sections 1251 ET SEQ.; the Emergency Planning Community Right to
Know Act of 1986, 42 U.S.C. Sections 1101 ET SEQ.; and the Clean Air Act, 42
U.S.C. Sections 7401 ET SEQ. but excluding laws, statutes, ordinances, rules and
regulations to the extent they relate to occupational safety and health.
"Facilities" means "Current Facilities" and "Former
Facilities." "Current Facilities" means the real property located in Waukesha,
Wisconsin together with all buildings, structures, equipment and operations
thereon currently owned by, and any property presently leased by the Company or
at which the Company's operations are being conducted. "Former Facilities"
means the real property together with all buildings, structures, equipment and
operations thereon once but no longer owned, operated and/or leased by the
Company.
"Former Facilities" (see definition of Facilities).
"Hazardous Substances" means all substances currently defined
as "hazardous" under any applicable Environmental Law and petroleum and
petroleum products, mineral oil and any contaminants or pollutants or any
materials, substances or wastes which are defined or regulated as hazardous or
toxic under any Environmental Law.
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"Existing Contamination" shall be defined as it is within
Section 12(h).
"Release" shall be defined as it is within CERCLA.
"Remediation" means investigation, evaluation, treatment,
response, removal, remediation, abatement, containment, corrective action and
similar activities, including without limitation response activities within the
meaning of CERCLA.
(ii) SELLER'S INDEMNIFICATION OF BUYER.
Subject to the limitations set forth in this Article, Seller
shall and hereby does agree, at its sole cost and expense (but without
prejudice to any rights against third parties), to defend, indemnify and hold
harmless Buyer Indemnified Persons from and against any and all Losses to the
extent that such Losses result from or arise out of: (A) Environmental
Claims for violations of Environmental Law by the Company prior to the
Closing Date; (B) Environmental Claims relating to or arising out of
arrangements by the Company for offsite treatment, storage, recycling or
disposal of Hazardous Substances prior to the Closing Date; (C) Environmental
Claims relating to or arising out of any contamination in existence at the
Current Facilities prior to the Closing Date and/or any migration of
contamination at, onto, under or from the Facilities (which migration
commences at, onto, under or from such Current Facilities prior to the
Closing Date) excluding Existing Contamination; (D) any
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environmental liabilities (including but not limited to Environmental Claims)
related to the Company's Former Facilities and the operations and facilities of
any present or any former subsidiaries or affiliates of the Company; (E) the
breach or nonfulfillment of any representation, warranty, covenant or obligation
of Seller with respect to environmental matters contained within this Agreement
to the extent not terminated or extinguished by the terms of this Agreement;
and/or (F) any Environmental Claims relating to or arising out of the Existing
Contamination and the migration thereof. Notwithstanding the foregoing with
respect to any contamination at, onto, under or from the Current Facilities,
Seller shall not be responsible hereunder for any Environmental Claim to the
extent that the Environmental Claim arises out of migration to or from the
Current Facilities after the Closing Date, unless such migration commences at,
onto, under or from such Current Facilities prior to the Closing Date. Seller's
responsibility under section 9(f)(ii)(A)-(C) and (E) shall be based solely on
Environmental Laws in effect prior to and as of the Closing Date, except that
with respect to Existing Contamination Seller shall be responsible hereunder for
achieving compliance with any applicable more stringent Environmental Law which
becomes effective after the Closing Date until such time as Seller has obtained
written confirmation from the lead regulatory agency that all necessary
Remediation has been completed. Seller's
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responsibility for such Existing Contamination shall end with regard to
Remediation when it has obtained such confirmation. Notwithstanding any other
provision herein to the contrary, Buyer shall not be entitled to recover its
costs for due diligence or for oversight of work being performed by Seller.
With respect to any references to a violation of any Environmental Law in this
Agreement: (i) the existence of contamination, whether or not disclosed by
Seller or known by Buyer at Closing, shall be considered a violation of current
Environmental Laws and/or shall be considered to require Remediation pursuant to
a current Environmental Law if the levels of such contamination exceed current
rules, regulations, standards, criteria and guidelines published or enforced by
a governmental authority pursuant to such Environmental Law, and (ii) it is not
necessary for a governmental authority or non-governmental third party to have
issued an order, directive, notice or demand or filed suit or to have taken
other action for it to be considered a violation of and/or to require
Remediation pursuant to an Environmental Law. Notwithstanding the foregoing,
Seller shall not be required to Remediate any contamination if such Remediation
is not required as a result of a violation of law or by a governmental
authority.
(iii) BUYER'S INDEMNIFICATION OF SELLER. Upon and after the
Closing, Buyer shall and hereby does agree, at its sole cost and expense (but
without prejudice to any rights
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against third parties), to defend, indemnify and hold harmless Seller
Indemnified Persons from and against any and all Losses which may be imposed
upon, incurred by or asserted or awarded against Seller Indemnified Persons,
resulting from or arising out of any Environmental Claims to the extent that
such Environmental Claims relate to the Company's operations at any time and are
not subject to Sellers indemnification set forth in section 9(f)(ii) of this
Agreement.
(iv) INDEMNIFICATION PERIOD. Seller's liabilities under
section 9(f)(ii)(A)-(C) above shall be limited to Claims made or identified
to Seller with reasonable specificity within a period of seven (7) years
after the Closing Date, although Seller shall be responsible without time
limitation for: (a) claims for indemnification under section 9(f)(ii)(A)-(C)
presented within the seven (7) year period but not resolved within that
period; (b) Environmental Claims made by Governmental Authorities or other
third parties after such seven-year period if and to the extent that such
later Claims arise out of the same violations or facts underlying Claims for
which Seller has received proper notice within such seven-year period; and
(c) all Claims related to the Existing Contamination. Seller's liabilities
under section 9(f)(ii) (D)-(F), and Buyer's liabilities under section
9(f)(iii), shall continue without regard to any time limitation unless
otherwise terminated or extinguished by the terms of this Agreement.
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(v) BASKET. No liability shall be asserted against Seller
under section 9(f)(ii)(A)-(C) until such time as the aggregate of any such
Environmental Losses, when aggregated with other Losses referred to in
section 9(a)(i), exceeds $500,000, in which case recovery shall be for the
entire amount of such claims, including the initial $500,000. This basket
provision shall not apply, however, for costs, Losses or Claims for Existing
Contamination.
(vi) EXCLUSIVENESS. With respect to all matters relating to
the Environment, this section 9(f), together with sections 9(c) and 9(g),
shall provide the exclusive right of Buyer and Seller to recover from each
other, and Buyer and Seller waive all other rights against each other
(including rights of contribution under CERCLA) with respect to such matters,
except that Buyer does not waive any claim based on fraud in the inducement
related to this Agreement.
(vii) EMERGENCY ACTIONS BY BUYER. Notwithstanding the notice
provisions of section 9(c) or any other provision of this Agreement, Buyer
and the Company shall have the right, without prior notice to Seller or
waiting for Seller's response to a claim for indemnification, to take
appropriate actions, including but not limited to Remediation, in response to
emergencies and situations where an Environmental Law and/or directive of a
governmental authority requires action to be taken in a time period shorter
than the time period set forth in this Agreement for Seller to respond to
Buyer's
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request for indemnification in order to address a condition, occurrence or
activity at the Current Facilities. The fact that Buyer's and/or Company's
actions in response to such emergencies and situations were taken prior to
notice to Seller or prior to Seller's response to Buyer's request for
indemnification and/or Seller's agreement as to indemnification shall not be a
factor in determining whether such actions are included in Seller's
indemnification obligations hereunder and shall not be deemed a waiver by Buyer
of a claim related to such actions provided that Buyer otherwise gives notice to
Seller in accordance with section 9(c).
(g) GENERAL PROVISIONS REGARDING INDEMNITY.
(i) Buyer and Seller shall each be reimbursed upon demand for
the amount of indemnity due pursuant to this Agreement; PROVIDED, HOWEVER,
Buyer on the one hand and Seller on the other hand shall have the right to
set off and deduct from payments to be made by them pursuant to this
Agreement, the amount of any obligation due the indemnifying party from the
party entitled to indemnification under this Agreement.
(ii) The amount of any Loss for which indemnification is
provided under this Section 9 shall be net of any amounts recovered by the
indemnified person under insurance policies with respect to such Loss and of
any reserve in respect thereof reflected on the Closing Statement.
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(iii) If the indemnifying person makes any payment under this
Section 9 in respect of any Loss, the indemnifying person shall be
subrogated, to the extent of such payment, to the rights of the indemnified
person against any third party (other than an insurer) with respect to such
Losses. The indemnified person shall execute any required documents or
instruments, serve as a named plaintiff, or take any other similar steps
necessary to effectuate such subrogation. All costs of such subrogation
shall be at the sole cost of the indemnifying party pursuing such subrogation.
(iv) Each party agrees that it will not seek punitive damages
as to any matter under, relating to or arising out of the Agreement or the
transaction contemplated hereby. The foregoing shall not be deemed to
eliminate punitive damages from the definition of "Losses" insofar as it
pertains to a third-party recovery obtained against any indemnified party.
(v) The parties hereto agree that the indemnification
provisions of this Section 9 are intended to provide the exclusive remedy
(except in respect of either party's fraud) as to all Losses any indemnified
person may incur arising from or relating to the Agreement or the transaction
contemplated hereby, and each party hereby waives, to the extent they may do
so, any other rights or remedies that may arise under any applicable statute,
rule or regulation.
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(vi) The parties agree that the aggregate liability of Seller
under all provisions, including all indemnification provisions, of this
Agreement shall in no event exceed the Purchase Price.
(vii) Buyer acknowledges and agrees that any and all
currently existing analytical results with respect to the Facilities and any
and all test results generated in the course of or at the end of Buyer's
pre-acquisition environmental audit of the Facilities shall be treated as
confidential and, unless counsel to Buyer advises Buyer, in writing, that
disclosure is required by law, such results shall not be provided by Buyer to
any governmental authority or other third party without Seller's prior
written authorization, which authorization shall not be unreasonably withheld
or delayed.
10. EXPENSE, TAXES AND OTHER PRORATIONS.
(a) Each of the parties hereto shall be responsible for its
own legal, accounting and other expenses in connection with this Agreement and
the transaction contemplated hereby. Each party shall be responsible for any
and all federal and state income or excise taxes incurred by each of them,
respectively, as a result of this transaction.
(b) Seller shall pay any stamp or other taxes imposed by reason of
the transfer of the Shares or the change in ownership thereof provided for
hereunder and any deficiency, interest or penalty asserted with respect
thereto.
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11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations, warranties and agreements made by the
parties each to the other in this Agreement or pursuant hereto shall survive the
Closing and any investigation made at any time with respect thereto; PROVIDED,
HOWEVER, the representations and warranties of both parties contained herein
shall survive the Closing Date for a period of two (2) years from and after the
Closing except (i) as to Seller's representation and warranty as to title, which
shall not expire and (ii) as to the matters covered by Subsections 3(m)(iv) and
3(m)(v) and by Section 3(t), which shall expire on the third anniversary of the
Closing Date. Representations and warranties as to tax matters (Section 3(s))
and as to certain environmental matters (Section 3(m)(i)-(iii)) shall not
survive the Closing.
12. CERTAIN AGREEMENTS OF SELLER AND BUYER.
(a) RECORDS. The books and records of the Company shall be
available for inspection by Seller at any time during regular business hours for
a period of seven (7) years after the Closing and Seller may make such excerpts
therefrom for valid and reasonable continuing business purposes at its own
expense. During such period, Buyer will cause employees of the Company to
cooperate with Seller in furnishing any information, evidence, testimony or
other reasonable assistance (provided out-of-pocket expenditures related thereto
are paid by Seller) in connection with any action,
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proceeding, tax audit or investigation to which Seller or an affiliate of Seller
is subject relating to the business of the Company prior to the Closing. The
term "record" as used in this section shall include computerized data.
(b) COOPERATION; FURTHER ASSURANCES. Seller and Buyer shall use
commercially reasonable efforts to obtain any consents or other actions from
third parties required to consummate the transaction contemplated hereby, and
shall provide reasonably requested assistance and information to each other and
to the Company in connection therewith. From time to time after the Closing,
each party at the request of the other and without further consideration, agrees
to execute and deliver at its expense such additional instruments of transfer
and take such other action as reasonably may be requested so as to more
effectively transfer to and vest in Buyer ownership, and put Buyer in possession
of, the Shares and the underlying assets and business of the Company.
(c) EMPLOYMENT; BENEFIT PLANS. Buyer shall not be obligated to
continue to employ, or cause the Company to continue to employ all or any of the
Company's employees, or to continue to provide them with comparable benefits or
Plans to those now offered; however, Buyer shall cause the plans of the Company
or Buyer to credit the employees of the Company with their service with Seller
and the Company as of the Closing Date for participating and vesting purposes
only under Buyer's or the Company's plans. Buyer acknowledges that it
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and the Company have the sole responsibility and obligation for any actions
taken on or after the Closing Date to terminate the employment of any employee
of the Company and Buyer will hold harmless Seller from any claims or
obligations with respect thereto. The Seller will use reasonable efforts to
encourage key employees of the Company to remain in their current positions
until the Closing. For a period of three years following the Closing, no
solicitations or offers of employment will be made to these key employees or to
any other employee of the Company by the Seller.
Seller shall, except as set forth on SCHEDULE 12(a), effective on
the Closing Date, terminate or cause the Company to terminate all of the
Company's employees from participation in the Plans that are maintained by
Seller or the Company, and in all events Buyer shall have no responsibility or
obligation under any of such Plans with respect to employees or former employees
of the Company. Except as otherwise provided in the following two sentences of
this paragraph, Buyer shall not be liable for any long-term or short-term
disability benefits due or that may become due an employee of the Company for
any disability incurred on or before the Closing Date and Seller will hold
harmless Buyer for any claims or obligations with respect thereto. Effective as
of the Closing Date, Buyer will provide for immediate coverage under its own
group health plan for the employees of the Company on the Closing Date (other
than those listed on SCHEDULE 3(k)), which plan shall be
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liable for all services or expenses incurred on or after the Closing Date by any
such employee (or with respect to those employees listed on SCHEDULE 3(k),
incurred on or after their return to active employment with the Company) or any
covered beneficiary thereof. Such health plan of Buyer shall not have any
exclusion for pre-existing conditions.
To the extent permitted by law, as of the Closing Date Seller will
vest the employees of the Company in their accrued benefits under the Plans that
are qualified under Section 401(a) of the Internal Revenue Code, which accrued
benefits shall include a PRO rata (i.e. though the Closing Date) portion of the
contribution credits and special transition credits that such employees would
have accrued for 1995 under the Seller's pension plan had they remained employed
by a subsidiary of Seller through December 31, 1995. In no event will
additional benefits accrue under any Plan to any of the employees of the Company
after the Closing Date, except that with respect to its retiree health plan,
Seller agrees to permit those employees of the Company who on the Closing Date
satisfy the eligibility requirements for retirement under such plan to retire
thereunder upon their subsequent termination of employment with Buyer and its
Affiliates, subject to the then existing provisions of such retiree health plan
of Seller. However, nothing herein shall operate or be construed as preventing
Seller from at any time or times amending, changing the provisions, including
without
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limitation, the benefits and/or premiums, of such retiree health plan, or
terminating such plan.
(d) INVESTMENT BANKER. It is agreed and understood that Lehman
Brothers is acting as a broker for Seller with respect to this transaction.
Seller shall be fully and solely responsible for all fees, commissions and other
payments due to said firm.
(e) PUBLICITY. Except for such actions as counsel to Buyer or
Seller reasonably believe to be required by law, neither party shall issue any
press release or make any public statement regarding the transaction
contemplated hereby, without the prior approval of the other party, which
approval shall not be unreasonably withheld or delayed.
(f) CONFIDENTIAL INFORMATION. The parties acknowledge that the
transaction described herein is of a confidential nature and shall not be
disclosed except to consultants, advisors and affiliates, or as required by law,
until such time as the parties make a public announcement regarding the
transaction as provided in Section 12(e) above.
Buyer acknowledges that the information being provided to it by
Seller is subject to the terms of a confidentiality agreement between Buyer and
Seller dated as of March 1, 1994 (the "Confidentiality Agreement"), the terms of
which are incorporated herein by reference. Effective upon, and only upon the
Closing, the Confidentiality Agreement will terminate; PROVIDED, HOWEVER, that
Buyer acknowledges that the
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Confidentiality Agreement will terminate only with respect to the provisions
thereof pertaining to information relating solely to the Company, that any and
all other information provided to it by Seller or Seller's representatives
concerning Seller shall remain subject to the terms and conditions of the
Confidentiality Agreement after the date of the Closing, and that all other
provisions of the Confidentiality Agreement remain in full force and effect, in
each case for the term therein provided.
(g) BUSINESS SUPPLIES. The Company shall have the right for a
period of twelve (12) months after the Closing Date to exhaust the supply of
product literature, order forms, stationery, and other general supplies which
have been printed for use by the Company prior to the Closing Date which bear
the name "MagneTek," provided that Buyer shall cause the Company to alter or
otherwise indicate on the face of such forms that Seller has no legal connection
with or responsibility for the operations of the Company after the Closing Date.
In addition, for a period of two years following the Closing Date, the Company
shall be permitted to state the Company's former affiliation with MagneTek, Inc.
In addition, the Company may fully utilize all transformer castings or other
parts that are in its inventory on the Closing Date, regardless of the fact that
Seller's name or the name of an affiliate of Seller may appear thereon, without
limitation as to time.
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(h) MINERAL OIL, PCE, TCE, DCE AND OTHER EXISTING CONTAMINATION.
Seller agrees that after the Closing Date it will conduct, at its
sole cost, any Remediation that is required by regulatory authorities pursuant
to applicable Environmental Laws concerning: (i) the mineral oil and PCE, TCE,
and DCE contamination that exists in soil and/or groundwater at the Current
Facilities; and (ii) any other contamination of soil, surface water or
groundwater in existence at the Current Facilities before the Closing Date that
violates any current applicable Environmental Law (the contamination identified
in subparts (i) and (ii) shall be defined together as the "Existing
Contamination"). In addition to the foregoing, Seller shall be responsible for
any migration of Existing Contamination which migration commences at, onto,
under or from a Current Facility prior to the Closing Date. With respect to
Existing Contamination, Seller shall be responsible for achieving compliance
with any applicable more stringent Environmental Law which becomes effective
after the Closing Date. Seller's responsibility for Remediation of such
Existing Contamination shall be concluded when Seller obtains from the lead
regulatory agency written confirmation that all necessary Remediation actions
have been completed. Prior to the Closing Date, Seller agrees to use
commercially reasonable efforts to identify and remove from the Current
Facilities all substances containing PCE, TCE or DCE. Seller and Buyer shall
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coordinate the purchase of necessary replacement chemicals so that such
replacement chemicals shall be at the Current Facilities as of the Closing Date
unless the parties otherwise agree that certain substances in specific
quantities cannot be replaced.
Buyer shall cooperate fully with Seller's efforts to conduct
response activities pursuant to this Agreement. In accordance with the terms of
the Site Access Agreement attached as EXHIBIT B, Seller and its contractors
shall be afforded access to the Facilities at all reasonable times for the
purpose of conducting necessary Remediation activities. Seller shall be
responsible for managing all communications with governmental authorities
concerning such Remediation activities Seller takes pursuant to this Agreement,
and except as otherwise provided in this Agreement, Buyer shall not initiate any
communications with governmental authorities or other third parties that would
have the effect of interfering with Seller's efforts.
Seller agrees that prior to the Closing Date, Buyer has the right to
conduct at the perimeter of the Current Facilities, an investigation to
determine the presence of contamination, and whether there is migration of
contamination at, onto, under or from the Current Facilities, and if so, the
levels of such contamination. Seller and the Company shall cooperate fully in
Buyer's testing of environmental media along the perimeters of the Current
Facilities to make such a
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determination of contamination and/or migration. Such cooperation shall include
providing Buyer and Buyer's employees, consultants, contractors, agents and
representatives (collectively "Buyer's Representatives"): reasonable access to
the Current Facilities; maps, drawings, schematics and other documents in
possession of Seller or the Company indicating the location of underground
utilities and potential hazards to drilling; knowledgeable personnel,
consultants or other agents of Seller or the Company who can escort Buyer's
representatives through the Facilities and such other assistance as reasonably
requested by Buyer's Representatives in order to complete the task. Buyer shall
be responsible for ensuring the safety of its investigative activities,
including the determination of all underground utilities and other potential
hazards to drilling.
Notwithstanding any other provision of this Agreement to the
contrary, Seller shall have no responsibility for the removal or remediation of
asbestos-containing material at any of the Facilities.
(i) NO SHOPPING. Neither Seller nor any person authorized by
Seller shall solicit, initiate or encourage any acquisition proposal or engage
in any discussion with respect thereto to provide information to any other
person or entity concerning a possible sale of the Shares or the assets of the
Company.
(j) TAX MATTERS.
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(i) For any Straddle Period (as defined in Section 9(e)(iii)),
Buyer shall (or shall cause the Company to) timely prepare and file with the
appropriate governmental authorities all tax returns of the Company required to
be filed and will pay all taxes due with respect to such tax returns. For any
taxable period of the Company that ends on or before the Closing Date (including
any portion of a taxable period includable in a combined, consolidated, unitary
or similar return for a period prior to the Closing Date (hereinafter a
"consolidated return")), Seller shall timely prepare and file with the
appropriate governmental authorities all tax returns with respect to the Company
required to be filed and will pay all taxes due with respect to such returns.
Buyer agrees to cause the Company to file all tax returns for any Straddle
Period on the basis that the relevant taxable period ended as of 11:59 p.m. on
the Closing Date, unless the relevant governmental authority will not accept a
tax return filed on that basis. Buyer and Seller further agree (and Buyer
agrees to cause the Company) to prepare the permanent records of Buyer, Seller
and the Company in a manner that would result in the tax items of the Company
being included in the consolidated return of Seller for periods up to, but not
after, 11:59 p.m. on the Closing Date.
(ii) Except as provided in Section 9(e), any refunds or credits
of taxes of the Company paid with respect to taxable periods ending on or before
the Closing Date shall
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be for the account of Seller, any refunds or credits of taxes of the Company
paid with respect to taxable periods beginning after the Closing Date shall be
for the account of the Company and Buyer, and any refunds or credits of taxes of
the Company paid with respect to any Straddle Period (as defined in
Section 9(e)(iii)) shall be prorated equitably between Seller and Buyer. Buyer
and Seller shall cooperate to effect the purposes of the foregoing provisions.
Notwithstanding the foregoing, the control of the prosecution of a claim for
refund of taxes attributable to any Pre-Closing Tax Period (as defined in
Section 9(e)(i)) paid pursuant to a deficiency assessed subsequent to the
Closing Date as a result of an audit shall be governed by the provisions of
Section 9(e).
(iii) Seller shall be responsible for filing any consolidated
returns with respect to the Company for periods prior to and including the
Closing Date which are required as a result of examination adjustments made by
the IRS or by the applicable state, local or foreign taxing authorities for such
periods as finally determined. For those jurisdictions in which separate tax
returns are filed by the Company, any required returns for periods prior to or
including the Closing Date resulting from such examination adjustments, as
finally determined, shall be prepared by Seller and furnished to Buyer and the
Company for approval (which approval shall not be unreasonably withheld or
delayed), signature (if necessary) and filing.
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(k) PERFORMANCE BONDS, BANK ACCOUNTS, ETC. As of the Closing,
Buyer shall or shall cause the Company to use commercially reasonable efforts to
replace each letter of credit, performance bond or guaranty or suretyship
arrangement that is listed and indicated with an asterisk on SCHEDULE 3(h) under
clause (i) of such Schedule within 60 days of the Closing Date and will
indemnify Seller for all Losses it incurs as a result of any failure to have
replaced any such instrument on the Closing Date. Seller shall update
SCHEDULE 3(h) as of the Closing Date and any additional asterisked items shall
be subject to the preceding sentence. As of the Closing, all bank accounts,
safety deposits and other banking items (except any lock boxes) shall be
terminated by Seller and shall cease to be assets or liabilities of the Company.
To the extent there are checks outstanding on Company bank accounts prior to the
Closing Date, Seller will provide for adequate funding in the aforesaid bank
accounts. To the extent Seller receives checks in payment of any Company
accounts receivable after the Closing Date, Seller shall promptly endorse such
checks to the Company's account. If such a check is received in payment of
accounts receivable of both the Company and Seller or an affiliate of Seller,
Seller will remit only the applicable portion. If the Company receives any
checks after the Closing Date that represent payment of accounts receivable of
Seller
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or an affiliate of Seller, the Company will remit the applicable portion to
Seller or such Affiliate.
13. RESTRICTIVE COVENANTS AND TRADE SECRETS.
(a) RESTRICTIVE COVENANTS. For a period of five (5) years after
the Closing Date, Seller agrees that it shall not, directly or through any
Affiliate it then controls, design, market, sell, develop or manufacture any of
the products set forth on SCHEDULE 13(a) hereto. In addition, in the event
Seller disposes of either or both of the Louisville, Ohio or Bradenton, Florida
facilities of its Ohio transformer division, Seller shall attempt in good faith
to cause the purchaser or purchasers of such facilities to agree to be bound,
for the remainder of the five-year term, by the provisions of this
Section 13(a); PROVIDED, HOWEVER, that Seller shall not be obligated to obtain
such an agreement as a condition to completing the sale of either such facility.
Notwithstanding anything to the contrary in this Section 13(a), the acquisition
by MagneTek of (i) any entity, less than 10% of the gross revenues of which are
derived from a business involving the production of any of the foregoing
products (a "Competitive Business") or (ii) no more than 5% of any class of
securities of an entity, if such securities are traded in any public market
(within or outside of the United States) or 15% of any class of privately held
securities of an entity, in either case if such entity derives 10% or less of
its gross revenues from a Competitive Business, shall not
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constitute a breach of this Section 13(a). Moreover, nothing in this Agreement
shall be interpreted to prohibit Seller or any of its Affiliates from any of the
following:
(x) servicing or repairing any size or type of transformer; or
(y) designing, developing, marketing, selling, repairing,
servicing or manufacturing all transformer products not listed on
SCHEDULE 13(a), including any of the following products: (A) non-liquid power
transformers (dry type and cast coil type); (B) low power control transformers
(C) inverter type transformers up to 5 megawatts; and (D) inductors and
transformers used for harmonic filtering.
If a final judicial determination is made that any of the provisions
of this paragraph constitute an unreasonable or otherwise unenforceable
restriction against Seller, the provisions of this paragraph shall be rendered
void only to the extent that such judicial determination finds such provisions
to be unreasonable or otherwise unenforceable.
(b) TRADE SECRETS. Seller shall hold in confidence all knowledge
or information of a confidential nature in respect of the business of the
Company and not disclose, publish or make use of same without the consent of
Buyer or unless and until such knowledge and information shall have ceased to be
secret or confidential as evidenced by general public knowledge or availability
through public sources.
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(c) INJUNCTIVE RELIEF. Seller agrees that the remedy at law for
the breach of the foregoing provisions of this Section 13 shall be inadequate
and that Buyer shall be entitled to injunctive relief in addition to any other
remedy that it might have.
14. ENTIRE AGREEMENT AND AMENDMENTS.
This Agreement, including the schedules and exhibits referred to
herein which are a part hereof, contains the entire understanding of the parties
hereto with respect to the subject matter contained herein; supersedes and
cancels all prior agreements in principle, understandings or other agreements
among any or all of the parties hereto or on behalf of any or all of them with
respect to such subject matter; and may be amended only by a written instrument
executed by Seller and Buyer or their respective successors or assigns. There
are no representations, promises, warranties, covenants, undertakings or
understandings other than those expressly set forth herein. The section and
paragraph headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
15. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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16. PARTIES IN INTEREST.
This Agreement shall inure to the benefit of and be binding upon
Seller and Buyer and their respective affiliates, successors and assigns, but
except for a transfer by Buyer or Seller to (i) a corporate affiliate of Buyer
or Seller, respectively or (ii) in connection with the sale or other transfer of
substantially all of the assets or business of Buyer or Seller, respectively (in
either of which cases this Agreement may be transferred without the consent of
Seller or Buyer, respectively) this Agreement may not be assigned or otherwise
transferred by operation of law or otherwise without the prior written consent
of the other party hereto and except as specified herein shall not create any
rights on the part of any other person. Any such assignment or transfer without
such consent shall be void. Any transfer or assignment permitted hereunder
shall not release the parties hereto from the obligations which either of them
have agreed to undertake or perform hereunder.
17. TERMINATION.
Either Buyer or Seller (without liability to the other) by
written notice to the other, at any time prior to the date of the Closing, may
forthwith terminate this Agreement in the event (i) any of the conditions
precedent to the performance of the obligations of the party giving such notice
shall not have been fulfilled as of October 15, 1995 and shall not have been
waived by such party, (ii) a material
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default shall be made by the other party in observance or in the due and timely
performance of any of the covenants and agreements herein contained that cannot
be cured on or prior to the Closing or (iii) Buyer and Seller shall mutually
agree in writing to such termination. Regardless of whether or not Buyer and
Seller shall have terminated the Agreement in accordance with its terms or
consummated the transactions contemplated herein, their respective rights to
damage if the other party shall have failed to perform any condition precedent
or failed to observe or perform any covenant or agreement contained herein shall
not be prejudiced. Both Buyer and Seller shall have the right to specific
performance if this Agreement is not otherwise terminated.
18. NOTICES.
All notices, requests, demands and other communications should
be deemed to have been duly given if delivered or mailed, certified or
registered mail with postage prepaid, if to Seller to:
MagneTek, Inc.
26 Century Boulevard
P.O. Box 290159
Nashville, Tennessee 37229-0159
Attention: Samuel A. Miley, Esq.
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071-3197
Attention: Jennifer Bellah, Esq.
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or such other person and place as the Seller shall furnish to Buyer in writing;
and if to Buyer to:
General Signal Corporation
High Ridge Park
P.O. Box 10010
Stamford, Connecticut 06904
Attention: Philip A. Goodrich
Vice President-Corporate Development
with a copy to:
Mr. Frank J. Simone, Jr.
Assistant General Counsel
General Signal Corporation
High Ridge Park
P.O. Box 10010
Stamford, Connecticut 06904
or to such other person and place as the Buyer shall furnish to Seller in
writing.
19. LAW GOVERNING.
This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York without reference to choice of law
provisions of New York law.
20. WAIVERS.
Any party to this Agreement may, at its option, waive in
writing any and all of the conditions herein contained to which its obligations
hereunder are subject. The failure on the part of any party to exercise any
right, option or power arising out of or resulting from a breach or default by
any other party of any term, provision or covenant of this Agreement shall not
constitute a waiver of any such right, option or power as to any subsequent
breach or default.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed.
GENERAL SIGNAL CORPORATION (Buyer)
By:
---------------------------
Name:
--------------------------
Title:
------------------------
MAGNETEK, INC. (Seller)
By:
----------------------------
Name:
-------------------------
Title:
-------------------------
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- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ASSET AND STOCK PURCHASE AGREEMENT
among
MAGNETEK, INC.,
MAGNETEK NATIONAL ELECTRIC COIL, INC.
and
NATIONAL ELECTRIC COIL COMPANY, L.P.
--------------------------------------
Dated as of September 14, 1995
--------------------------------------
SALE OF CERTAIN ASSETS OF
MAGNETEK NATIONAL ELECTRIC COIL, INC. LOCATED IN
BROWNSVILLE, TEXAS, RELATING TO ROTATING EQUIPMENT
REMANUFACTURING AND REPAIR AND OF COIL COMPANY DE MEXICO,
S.A. DE C.V.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS............................................... 1
1.1 Certain Defined Terms..................................... 1
1.2 Other Definitional Provisions............................. 8
ARTICLE II CLOSING; PURCHASE PRICE ADJUSTMENT........................ 8
2.1 Sale and Transfer of the Assets........................... 8
2.2 Assets Not Transferred.................................... 10
2.3 Assumed and Excluded Liabilities.......................... 11
2.4 Closing................................................... 13
2.5 Purchase Price Adjustment................................. 13
2.6 Tax Allocation............................................ 17
2.7 Sales and Use Tax......................................... 17
ARTICLE III CONDITIONS TO CLOSING................................ 17
3.1 Buyer's Obligation........................................ 17
3.2 Sellers' Obligation....................................... 18
3.3 Condition Subsequent...................................... 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MAGNETEK................ 20
4.1 Authority; No Conflicts; Governmental Consents............ 20
4.2 Financial Statements...................................... 21
4.3 Taxes..................................................... 21
4.4 Title to Assets........................................... 22
4.5 Contracts................................................. 22
4.6 Litigation; Decrees....................................... 23
4.7 Employee and Related Matters.............................. 23
4.8 Environmental Matters..................................... 24
4.9 Employee and Labor Relations.............................. 24
4.10 Exclusivity of Representations............................ 25
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER................... 25
5.1 Authority; No Conflicts; Governmental Consents............ 25
5.2 Actions and Proceedings, etc.............................. 26
5.3 Availability of Funds..................................... 26
5.4 Buyer's Acknowledgment.................................... 26
5.5 Exon-Florio............................................... 27
5.6 No Knowledge of Sellers' Breach........................... 27
ARTICLE VI COVENANTS OF MAGNETEK..................................... 27
6.1 Accounts Receivable....................................... 27
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6.2 Offsite Assets............................................ 28
6.3 Glasmex Consolidation..................................... 28
ARTICLE VII COVENANTS OF BUYER................................... 29
7.1 Confidentiality........................................... 29
7.2 Accounts Receivable....................................... 29
7.3 Waiver of Bulk Sales Law Compliance....................... 30
7.4 Excluded Assets........................................... 30
7.5 Insurance................................................. 30
7.6 Replacement Bonding....................................... 30
ARTICLE VIII MUTUAL COVENANTS..................................... 30
8.1 Permits and Consents...................................... 30
8.2 Cooperation............................................... 32
8.3 Publicity................................................. 32
8.4 Reasonable Efforts and Further Assurances................. 32
8.5 Records; Cooperation in Litigation........................ 33
8.6 Access to Former Business Records;
Cooperation in Litigation................................. 33
8.7 Use of Trademarks and Trade Names......................... 33
8.8 Required Modifications or Replacements of Products........ 34
8.9 Warranty Work; ALCAN Inventory............................ 34
8.10 Tax Returns and Taxes for Coil Company.................... 35
ARTICLE IX EMPLOYEE BENEFIT MATTERS.................................. 35
9.1 Employee Retention........................................ 35
9.2 Employee Benefit Plans.................................... 36
9.3 Vacation, Holiday, Sick and Severance Pay................. 36
9.4 Access to Information..................................... 36
9.5 Third-Party Beneficiaries................................. 37
ARTICLE X INDEMNIFICATION........................................... 37
10.1 Indemnification by MagneTek............................... 37
10.2 Indemnification by Buyer.................................. 38
10.3 Indemnification for Environmental Matters................. 38
10.4 Losses Net of Insurance, etc.............................. 39
10.5 Termination of Indemnification............................ 40
10.6 Procedures Relating to Indemnification (Other than
for Tax Claims)........................................... 41
10.7 Procedures Relating to Indemnification of Tax Claims ..... 42
10.8 Survival of Representations............................... 43
ARTICLE XI GENERAL PROVISIONS........................................ 43
11.1 Assignment................................................ 43
11.2 No Third-Party Beneficiaries.............................. 44
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11.3 Termination............................................... 44
11.4 Expenses.................................................. 45
11.5 Attorneys' Fees........................................... 45
11.6 Amendments................................................ 45
11.7 Notices................................................... 45
11.8 Interpretation; Exhibits and Schedules.................... 46
11.9 Counterparts.............................................. 47
11.10 Entire Agreement.......................................... 47
11.11 Fees...................................................... 47
11.12 Severability.............................................. 47
11.13 Governing Law............................................. 47
EXHIBITS
Exhibit A Bill of Sale, Assignment and Assumption Agreement
Exhibit B Brownsville Sublease
Exhibit C License Agreement
Exhibit D Mexico Sublease
Exhibit E Services Agreement
Exhibit F Sharing Agreement Amendment
Exhibit G Legal Opinion--Sellers' Counsel
Exhibit H Legal Opinion--MagneTek
Exhibit I Legal Opinion--Buyer's Counsel
SCHEDULES
Schedule 1.1(a) Alcan Agreement
Schedule 1.1(b) Business Employees
Schedule 1.1(c) June Balance Sheets
Schedule 1.1(d) Mexico Facility
Schedule 2.1(a) Brownsville Facility
Schedule 2.1(d) Intellectual Property
Schedule 2.5 Special Reserve Matters
Schedule 2.6 Purchase Price Allocation
Schedule 4.1(b) Conflicts
Schedule 4.1(c) Mexican Consents
Schedule 4.3 Certain Tax Matters
Schedule 4.4 Specified Liens
Schedule 4.5 Certain Contracts
Schedule 4.6 Pending or Threatened Claims
Schedule 4.7 Employee Benefit Plans
Schedule 4.9 Employment and Labor Matters
Schedule 5.1(b) Conflicts with Buyer Obligations
Schedule 5.4 Certain Mexico Corporate Deficiencies
Schedule 7.6 Contractors and Performance Bonds
Schedule 11.11 Brokers or Finders
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ASSET AND STOCK PURCHASE AGREEMENT
ASSET AND STOCK PURCHASE AGREEMENT dated as of September 14,
1995, among MAGNETEK, INC., a Delaware corporation ("MagneTek"), MAGNETEK
NATIONAL ELECTRIC COIL, INC., a Delaware corporation ("NEC" and together with
MagneTek, "Sellers"), and NATIONAL ELECTRIC COIL COMPANY, L.P., an Ohio limited
partnership ("Buyer").
NEC, a wholly owned subsidiary of MagneTek, is engaged through
its Brownsville, Texas operation in repairing, remanufacturing and upgrading
motors and generators (turbines and hydroelectric) primarily for the utility
industry (the "Brownsville Business"). Sellers desire to sell to Buyer certain
assets (other than excluded assets) relating to the Brownsville Business, as
well as the stock of a Mexican subsidiary of MagneTek. Buyer desires to
purchase such assets and stock and is willing to assume certain associated
obligations and liabilities.
Accordingly, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms
defined):
"Affiliate" has the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act by the SEC, as in effect on the date
hereof.
"Alcan" means Alcan Smelters & Chemicals Limited.
"Alcan Agreement" means the agreement entered into on or about June
24, 1991 between MagneTek National Electric Coil and Alcan relating to a
repair performed by the Brownsville Business at the Kemano, British Columbia
power station of Alcan and the correspondence relating thereto dated June 28,
1991, attached hereto as Schedule 1.1(a).
"Assets" has the meaning set forth in Section 2.1.
"Assigned Contracts" has the meaning set forth in Section 2.1(e).
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"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Bill of Sale, Assignment and Assumption Agreement" means a
Bill of Sale, Assignment and Assumption Agreement in substantially the form
attached hereto as Exhibit A.
"Brownsville Sublease" means the Sublease between NEC and Buyer
in respect of the Brownsville Facility in substantially the form attached hereto
as Exhibit B.
"Brownsville Facility" means all of the leased facilities
described on Schedule 2.1(a), comprising the leased facilities owned by
Mr. Theodore R. Paul and currently occupied by MagneTek and/or its sublessees in
Brownsville, Texas, except (i) the leasehold occupied by the Louis Allis Company
pursuant to a sublease, (ii) the leasehold occupied by NEC's PEI division and
(iii) the leasehold occupied by MagneTek's Jefferson Transformer division.
"Business Day" means a day other than a Saturday or a Sunday or
other day on which commercial banks in New York are authorized or required by
law to close.
"Business Employees" means any employee of NEC employed by the
Brownsville Business, and all employees of Coil Company (including those
transferred from Glasmex or who ultimately remain employees of Glasmex pursuant
to Sections 3.3 and 6.3 hereof) on the Closing Date including any such employee
on vacation, family, illness or disability leave on such date. Schedule 1.1(b)
sets forth a list of Business Employees as of the date set forth thereon.
"Buyer Indemnified Person" has the meaning set forth in Section
10.1.
"Closing Balance Sheet" has the meaning set forth in Section 2.5.
"Closing Date" means the day on which the Closing occurs
pursuant to Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Coil Company" means Coil Company de Mexico, S.A. de C.V., a
company organized under the laws of Mexico.
"Contract" means any contract, agreement, license, lease, sales or
purchase order or other legally binding commitment, whether written or oral,
to which MagneTek or NEC
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is a party and relating exclusively to the Brownsville Business.
"Contractual Obligation" means, as to any Person, any provision of
any note, bond or security issued by such Person or of any mortgage,
indenture, deed of trust, lease, license, franchise, contract, agreement,
instrument or undertaking to which such Person is a party or by which it or
any of its property or assets is subject.
"Employee Benefit Arrangements" means each and all pension,
supplemental pension, accidental death and dismemberment, life and health
insurance and benefits (including medical, dental, vision and
hospitalization), disability, holiday, vacation, sick pay, sick leave,
tuition refund, service award and other employee benefit arrangements, plans,
contracts or policies providing employee or executive compensation or
benefits to Business Employees, other than the Employee Benefit Plans.
"Employee Benefit Plans" means each and all "employee benefit
plans," as defined in Section 3(3) of ERISA, maintained or contributed to by
either Seller or in which either Seller participates or participated and
which, in each case, provides benefits to Business Employees of the
Brownsville Business, including (i) any such plans that are "employee welfare
benefit plans" as defined in Section 3(1) of ERISA and (ii) any such plans
that are "employee pension benefit plans" as defined in Section 3(2) of ERISA.
"Environmental Law" means (a) with respect to the Brownsville
Business and the Brownsville Facility, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, and any other applicable
statutes, regulations, rules, ordinances or governmental codes which relate
to the protection of the environment from the effects of Hazardous
Substances; and (b) with respect to the Mexico Business and the Mexico
Facility, statutes, regulations, rules, ordinances or governmental codes of
the Republic of Mexico which relate to the protection of the environment from
the effects of Hazardous Substances and which are of nationwide
applicability, as in effect on the date of this Agreement.
"Equipment" has the meaning set forth in Section 2.1(b).
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the SEC
promulgated from time to time thereunder.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.3.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Glasmex" means Glasmex S.A. de C.V., a company organized under the
laws of Mexico.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Hazardous Substance" means any substance which is defined as a
hazardous waste or hazardous substance under any applicable statutes or
regulations currently in effect in the United States or Mexico adopted for
the protection of the environment.
"Indemnified Person" means, with respect to any Loss, the Person
seeking indemnification hereunder.
"Indemnifying Person" means, with respect to any Loss, the Person
from whom indemnification is being sought hereunder.
"Intellectual Property" has the meaning set forth in the Sharing
Agreement.
"Inventory" has the meaning set forth in Section 2.1(c).
"June Balance Sheets" means the unaudited balance sheets (i) of the
Brownsville Business and Coil Company (consolidated) as of June 18, 1995 and
(ii) of Glasmex as of July 3, 1995, in each case as attached hereto as
Schedule 1.1(c). As the context requires, "June Balance Sheet" refers to the
applicable balance sheet of any one of the foregoing attached.
"Knowledge of Seller" with reference to any of the representations
and warranties of MagneTek means the actual
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knowledge of any "officer" of MagneTek as such term is defined in 17 C.F.R.
Section 240.16a-1(f), to the extent such officer had, on the date hereof,
responsibility for matters that are the subject of such representation and
warranty; PROVIDED, HOWEVER, that unless such an officer had (a) actual
knowledge to the contrary or (b) direct responsibility at the Brownsville
Business level for the subject matter thereof, such knowledge is based solely
upon information and materials supplied to MagneTek by Business Employees
deemed for this purpose to be comprised of Messrs. Frederick Dawson and
William Kaikis.
"Landlord Consent" means the instrument or instruments required to
be executed by the lessor of the Brownsville Facility and the Mexico Facility
in connection with the consummation of the transactions contemplated by this
Agreement.
"License Agreement" means the non-exclusive license agreement
between Buyer as licensor and NEC as licensee, pertaining to the use of the
trademark "NECCOBOND" and "NEC," "NECCOBOND" and certain other tradenames, in
substantially the form of Exhibit C hereto.
"Lien" means any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other) or other security agreement of any
kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement or any financing lease having
substantially the same economic effect as any of the foregoing).
"Loss" means any loss, liability, claim, damage or expense
(including reasonable attorneys' fees and disbursements and the costs of
investigation). Loss recoverable hereunder is subject to the limitations set
forth in Section 10.4.
"Material Adverse Effect" means a material adverse effect on (a)
the business, operations, property or condition (financial or other) of the
Brownsville Business and the Mexico Business, taken as a whole, or (b) the
ability of Sellers to consummate the transactions contemplated by this
Agreement.
"Mexican Environmental Law" means solely the Environmental Law
described in clause (b) of the definition of Environmental Law.
"Mexico Business" means, collectively, the businesses currently
conducted by Coil Company and Glasmex.
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"Mexico Facility" means the all of the leased facilities currently
occupied by Glasmex or Coil Company in the State of Tamaulipas, Mexico, as
described on Schedule 1.1(d).
"Mexico Sublease" means the Sublease between Glasmex as sublessor
and Coil Company as sublessee substantially in the form of Exhibit D attached
hereto.
"Permits" has the meaning set forth in Section 2.1(f).
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Purchase Price" has the meaning set forth in Section 2.4.
"Records" has the meaning set forth in Section 2.1(g).
"Required Modification" means, with respect to any product, a
modification, improvement or enhancement which is (a) required by any
Requirement of Law or (b) otherwise necessary or advisable in MagneTek's sole
discretion to permit MagneTek to meet any duty or obligation owing by NEC to
remedy defects or hazards in such products or to provide any warning with
respect to any such defects or hazards. Required Modifications may include,
but shall not be limited to, modifications, improvements or enhancements
necessary to meet industry standards, or to implement design improvements, or
modifications of or supplements to the product's design, quality, components,
safety features, labeling, warnings or instructions. Required Modification
shall in no event mean or include any modification, improvement or
enhancement required by any written warranty covering the relevant product.
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
"RPI" means Rail Products International, Inc.
"SEC" means the Securities and Exchange Commission.
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"Seller Indemnified Person" has the meaning set forth in Section
10.2.
"Seller Plans" means each and all Employee Benefit Plans and
Employee Benefit Arrangements sponsored or maintained by NEC, MagneTek, Coil
Company or (prior to the Closing Date) Glasmex under which any Business
Employee of the Brownsville Business participates or is entitled to receive
benefits.
"Services Agreement" shall mean the Services Agreement between
MagneTek (in respect of its Jefferson Transformer division), NEC (in respect
of its PEI division) and Buyer in substantially the form attached hereto as
Exhibit E.
"Sharing Agreement" means the Sharing Agreement dated as of March
13, 1995, by and between NEC and 800 King Avenue Acquisition Corp. pertaining
to the license of certain intellectual property, as amended by the Sharing
Agreement Amendment.
"Sharing Agreement Amendment" means the amendment to the Sharing
Agreement, which amendment shall be entered into among National Electric
Coil-Columbus, Inc., NEC and Buyer in substantially the form attached hereto
as Exhibit F.
"Special Reserve" has the meaning set forth in Section 2.5.
"Tax" or "Taxes" means, with respect to any Person, any federal,
state, local or foreign net income, gross income, gross receipts, sales, use,
ad valorem, value-added, capital, unitary, intangible, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
transfer, occupation, premium, property or windfall profit tax, custom,
tariff, duty or other tax, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or penalty,
addition to tax or additional amount imposed by any jurisdiction or other
taxing authority, on such Person.
"Tax Returns" has the meaning set forth in Section 4.3.
"Transaction Documents" means (i) this Agreement, (ii) the Bill of
Sale, Assignment and Assumption Agreement; (iii) the Sharing Agreement
Amendment; (iv) the Services Agreement; (v) the License Agreement; (vi) the
Brownsville Sublease; (vii) the Mexico Sublease; and (viii) the Landlord
Consent.
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"Transactions" means the transactions contemplated by the
Transaction Documents.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Terms defined in this Agreement in Sections other
than Section 1.1 shall have the meanings as so defined when used in this
Agreement.
(b) As used herein, accounting terms not defined or to
the extent not defined, shall have the respective meanings given to them
under GAAP.
(c) Unless express reference is made to Business Days,
references to days shall be to calendar days.
ARTICLE II
CLOSING; PURCHASE PRICE ADJUSTMENT
2.1 SALE AND TRANSFER OF THE ASSETS AND STOCK. Subject to the
terms and conditions of this Agreement, on the Closing Date NEC and, to the
extent applicable, MagneTek, will sell, convey, transfer, assign and deliver
to Buyer all of their respective right, title and interest in and to the
following assets (except the Excluded Assets), as the same shall exist on the
Closing Date (the "Assets"):
(a) to the extent provided for in the Brownsville
Sublease and Mexico Sublease, respectively, Sellers' interest in the
Brownsville Facility and Mexico Facility, respectively;
(b) all tangible personal property, including, without
limitation, the fixtures, furnishings, furniture, office supplies, vehicles,
rolling stock, tools, tooling and forms, machinery, equipment, computer
equipment (including software), located upon or affixed to the Brownsville
Facility (collectively, including the fixtures, the "Equipment");
(c) all inventory, including without limitation, raw
materials, work-in-process, finished goods, packaging materials, spare parts
and supplies of the Brownsville Business included on its June Balance Sheet
(and the ALCAN inventory described in Section 8.9 that is not so included) or
acquired by the Brownsville Business thereafter, including the Glasmex/Hesgon
inventory heretofore stored in the facility of the PEI Division of NEC
located adjacent to the Brownsville Facility and included on the Closing
Balance Sheet (the "Inventory");
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(d) the Intellectual Property described on Schedule
2.1(d);
(e) all Contracts (including but not limited to all
Contracts listed on Schedule 4.5 and all Contracts entered into by the
Brownsville Business through the Closing Date), except for any Contract
(other than a Contract that has been fully performed but under which warranty
obligations remain outstanding) that requires the consent to assignment of a
party thereto which consent has not been obtained prior to the Closing Date
pursuant to Section 8.1, until such consent has been obtained (the "Assigned
Contracts");
(f) all transferable business licenses and permits used
exclusively in or relating exclusively to the Brownsville Business (the
"Permits");
(g) all books and records, employment records and files
(other than Intellectual Property that is not described on Schedule 2.1(d),
historical accounting, financial and Tax records) related to or used by
Sellers exclusively in connection with the Assets and the operation of the
Brownsville Business and located at the Brownsville Facility (the "Records");
(h) all insurance proceeds paid or payable by any
insurance provider, other than Sellers or any Affiliate of Sellers, for any
Asset that is destroyed or damaged after the date hereof and prior to the
Closing;
(i) all accounts receivable and notes receivable of
Sellers on the Closing Date arising exclusively out of the activities of the
Brownsville Business;
(j) the 246 shares of stock of Coil Company owned by
Sellers and all minute books, incorporation documents, stock transfer books
and corporate seals relating to Coil Company in Sellers' possession;
(k) the names "National Electric Coil," "NEC" and
"Neccobond," subject to NEC's rights under the License Agreement, and the
name "Hesgon";
(l) the trademark "HESGON" and the United States
federal registration thereof No. 1,020,160 and, subject to NEC's rights under
the License Agreement, the trademark "NECCOBOND" and the United States
federal registration thereof No. 1,571,303; and
(m) all goodwill appurtenant to the foregoing Assets.
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2.2 ASSETS NOT TRANSFERRED. Notwithstanding anything herein to
the contrary, the following assets are not included in the Assets and shall
be retained by Sellers (the "Excluded Assets"):
(a) all cash and cash equivalent items (except as
described in Section 2.1(h) and except for deposits and prepaid expenses
reflected on the Closing Balance Sheet and relating to Assumed Liabilities)
of Sellers, including, without limitation, checking accounts, bank accounts,
lock box numbers, certificates of deposit, time deposits, securities (other
than the stock of Coil Company) and the proceeds of accounts receivable,
including uncashed checks in payment thereof received by Sellers on or prior
to the Closing Date, in each case whether or not relating to the Brownsville
Business;
(b) all rights, properties, and assets which have been
used or held for use in connection with the Brownsville Business and which
shall have been transferred (including transfers by way of sale) or otherwise
disposed of prior to the Closing, provided such transfers and disposals shall
have been in the ordinary course of business;
(c) rights to or claims for refunds or rebates of Taxes
and other governmental charges for periods ending on or prior to the Closing
Date and the benefit of net operating loss carryforwards, carrybacks or other
credits of Sellers, whether or not attributable to the Brownsville Business,
including, without limitation, any right to or claim for refund or rebate of
Coil Company or Glasmex in respect of Taxes payable in connection with the
consummation of the Transactions;
(d) claims or rights against third parties, except
those arising with respect to events or breaches occurring after the Closing
Date under the Assigned Contracts; PROVIDED, HOWEVER, that any rights of
indemnification, contribution or reimbursement that may exist under the
Assigned Contracts in respect of Excluded Assets or Excluded Liabilities
hereunder shall be Excluded Assets;
(e) except as set forth in Section 2.1(h), all
insurance policies and rights thereunder, including but not limited to,
rights to any cancellation value as of the Closing Date;
(f) proprietary or confidential business or technical
information, records and policies that relate to any other division of either
Seller, to Sellers generally or to the division of which the Brownsville
Business and the Mexico Business forms a part generally, or any of either
Sellers'
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Affiliates, including, without limitation, organization manuals and strategic
plans, but subject to the provisions of the Sharing Agreement;
(g) subject to the limited rights granted in Section
8.7 and pursuant to the Sharing Agreement all "MagneTek" marks, and all
trademarks or service marks, trade names, slogans or other like property
relating to or including the name "MagneTek," the mark "MagneTek," or any
derivative thereof, and the "MagneTek" logo or any derivative thereof, the
name "Energy Engineered," the "Power M" design or any derivative thereof and
Sellers' proprietary computer programs or other software, including but not
limited to Sellers' proprietary data bases, accounting and reporting formats,
systems and procedures but excluding any software developed for and used
historically by the division of NEC comprised of the Brownsville Business and
the Columbus business;
(h) those assets sold pursuant to that certain Asset
Purchase Agreement dated as of October 31, 1994 by and among Sellers and RPI
and under that certain Asset Purchase Agreement dated as of March 13, 1995
among Sellers and 800 King Avenue Acquisition Corp.;
(i) all rights to receive payments from Alcan at the
end of the 10-year period referred to in "Option 2" of the Alcan Agreement in
respect of the "coil inventory" referred to in such Agreement;
(j) all other assets of Sellers not expressly included
in the Assets to be sold hereunder, including but not limited to assets used
by Sellers or their Affiliates in other businesses of Sellers or at other
locations of the same division, racks and other equipment of the PEI or
Jefferson Divisions of MagneTek whether located in such divisions' facilities
adjacent to the Brownsville Facility or elsewhere, and assets used primarily
in connection with Sellers' corporate functions (including but not limited to
the corporate charter, taxpayer and other identification numbers, seals,
minute books and stock transfer book), whether or not used for the benefit of
the Brownsville Business; and
(k) any asset or right that is covered by the Sharing
Agreement.
2.3 ASSUMED AND EXCLUDED LIABILITIES. On the Closing Date, Buyer
shall execute and deliver to Sellers the Bill of Sale, Assignment and
Assumption Agreement pursuant to which Buyer shall assume and agree to pay,
perform and discharge when due, all the liabilities and obligations of
Sellers arising out of the business of the Brownsville Business, of any kind
or nature, whether absolute, contingent,
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accrued or otherwise, and whether arising before or after the Closing
including, without limitation, all liabilities (i) for tax items assumed by
Buyer under Section 2.7, (ii) in respect of any threatened litigation
referred to on Schedule 4.6, (iii) under the Assigned Contracts, (iv) all
liabilities and obligations of Buyer set forth in Article IX hereof and (v)
all liabilities in respect of roof repairs required by the landlord at the
Brownsville Facility, but not to exceed the lesser of $48,000 or one-half of
the final cost of such repairs to the Main Building of the Brownsville
Facility (collectively, the "Assumed Liabilities"), it being acknowledged
that the contracts of Coil Company and Glasmex need not be expressly assumed
because the contracts of Glasmex are being assumed by Coil Company and the
stock of Coil Company is being acquired (and/or, the stock of Glasmex is
subsequently acquired pursuant to Section 3.3); PROVIDED, HOWEVER, that the
Assumed Liabilities shall in no event include the following liabilities (the
"Excluded Liabilities"):
(a) any liability, responsibility or obligation with
respect to any Seller Plan, except (i) as provided in Article IX and (ii)
pursuant to any Assigned Contracts;
(b) any liability for (i) warranty claims (other than
warranty claims under the Alcan Agreement or those covered by the Special
Reserve, none of which shall reduce the reserve on the Closing Balance Sheet
or otherwise give rise to any liability of either Seller) made after the
Closing for service, repair, replacement and similar work required under
Sellers' written warranties with respect to products sold or services
provided prior to the Closing, the expenses of which, at shop level cost
(direct materials, direct labor and factory overhead) in the aggregate exceed
the warranty reserve on the Closing Balance Sheet, (ii) workers' compensation
claims with respect to injuries prior to the Closing, (iii) claims under
health insurance plans of Sellers for covered Business Employees with respect
to services rendered prior to the Closing (but not in respect of any sick
leave or disability benefits pertaining to any period after the Closing Date
regardless of when the relevant illness or condition arose) or (iv) any
product liability claims for injuries, property damage or other Losses,
arising with respect to products sold or services provided prior to the
Closing, but only if written notice of such claims described in clause (ii),
(iii) or (iv) shall have been delivered to MagneTek within the two-year
period following the Closing Date;
(c) any liability for Taxes for any period ending on or
prior to the Closing Date, excluding the tax items covered by Section 2.7; and
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(d) any liability in connection with any litigation
pertaining to the Brownsville Business as to which a complaint has been filed
prior to the Closing Date.
2.4 CLOSING. The closing (the "Closing") of the purchase and sale
of the Assets shall be held at offices to be specified by Buyer in Columbus,
Ohio, at 10:00 a.m. on September 14, 1995, or if the conditions to Closing
set forth in Article III shall not have been satisfied or waived by such
date, subject to Section 11.3, as soon as practicable after such conditions
shall have been satisfied or waived. The date on which the Closing shall
occur is hereinafter referred to as the "Closing Date." At the Closing,
Buyer shall deliver to Sellers by wire transfer (to a bank account designated
at least two Business Days prior to the Closing Date in writing by Sellers)
immediately available funds in an amount equal to $3,205,000 (hereinafter,
the "Purchase Price"), plus or minus an estimate, if the parties mutually
agree prior to the Closing Date with respect thereto, of any adjustment to
the Purchase Price under Section 2.5 (the Purchase Price plus or minus such
estimate of any adjustment under Section 2.5 being hereinafter called the
"Closing Date Amount"), and such other documents as are required by this
Agreement.
At the Closing, Sellers shall deliver or cause to be delivered to
Buyer (a) the Bill of Sale, Assignment and Assumption Agreement, (b) the
License Agreement, (c) the Sharing Agreement Amendment, (d) the Services
Agreement, (e) the Brownsville Sublease, (f) the Mexico Sublease, (g) the
Landlord Consent, (h) the documents and agreements referred to in Section 3.1
hereof and (i) such other instruments of transfer and documents as Buyer may
reasonably request, and Buyer shall deliver to Sellers (i) the documents and
agreements referred to in the preceding clauses (a) through (g) and in
Section 3.2 hereof, (ii) the Landlord Consent if required by the landlord to
be executed and delivered by Buyer as well as Seller, and (iii) such other
instruments of assumption and documents as Sellers may reasonably request.
In addition, Sellers shall deliver to Buyer at the Closing affidavits in form
and substance satisfactory to Buyer, duly executed and acknowledged,
certifying that neither Seller is a foreign person within the meaning of
Section 1445(f)(3) of the Code, and any corresponding affidavit required for
state tax purposes.
2.5 PURCHASE PRICE ADJUSTMENT.
(a) Within 60 days after the Closing Date, Buyer shall
prepare and deliver to MagneTek a balance sheet of the Brownsville Business
and Coil Company as described in Section 2.5(b) below (the "Closing Balance
Sheet") and schedules (the "Cash Schedules") detailing (i) (A) as to the
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Brownsville Business and Coil Company, cash generated during the period from
and including June 18, 1995 and (B) as to Glasmax, from and including July 3,
1995, in each case through and including the Closing Date, including all
uncashed checks received by the Brownsville Business, Coil Company and
Glasmax during the respective covered periods ("Generated Cash") and (ii) (A)
as to the Brownsville Business and Coil Company, and (B) as to Glasmex, in
each case during the respective covered periods, all cash used during the
applicable period, including all uncashed checks issued by the relevant
Person during the applicable period, but excluding any intercompany payments
or allocations other than in direct payment of goods or services ("Expended
Cash"). For purposes of preparing the Closing Balance Sheet, Sellers shall
make their accounting personnel available to Buyer (without charge) and such
employees shall, for the purpose of assisting Buyer in preparing the Closing
Balance Sheet and Cash Schedule, be instructed by Sellers to act at Buyer's
direction.
During the 30 days immediately following MagneTek's receipt of the
Closing Balance Sheet and Cash Schedule, MagneTek shall be entitled to review
the Closing Balance Sheet and Cash Schedule and Buyer's working papers
relating to the Closing Balance Sheet and Cash Schedule, and Buyer shall
provide MagneTek access at all reasonable times to its personnel, properties,
books and records to the extent relevant. The Closing Balance Sheet and Cash
Schedule shall become final and binding upon the parties on the thirtieth day
following delivery thereof unless MagneTek gives written notice to Buyer of
its disagreement with the Closing Balance Sheet or Cash Schedule (a "Notice
of Disagreement") prior to such date. Any Notice of Disagreement shall
specify in reasonable detail the nature of any disagreement so asserted. If
a timely Notice of Disagreement is received by Buyer with respect to the
Closing Balance Sheet or Cash Schedule, then the Closing Balance Sheet or
Cash Schedule (as revised in accordance with clause (x) or (y) below), shall
become final and binding upon the parties on the earlier of (x) the date the
parties hereto resolve in writing any differences they have with respect to
any matter specified in a Notice of Disagreement or (y) the date any matters
properly in dispute are finally resolved in writing by the Accounting Firm
(as defined below). During the 30 days immediately following the delivery of
any Notice of Disagreement, MagneTek and Buyer shall seek in good faith to
resolve in writing any differences which they may have with respect to any
matter specified in such Notice of Disagreement. During such period, Buyer
and MagneTek shall each have access to the other party's working papers
prepared in connection with the other party's preparation of a Notice of
Disagreement. At the end of such 30-day period, MagneTek and Buyer shall
submit to an independent accounting firm (the "Accounting Firm") for review
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and resolution any and all matters which remain in dispute and which were
properly included in any Notice of Disagreement, and the Accounting Firm
shall reach a final, binding resolution of all matters which remain in
dispute. The Closing Balance Sheet and Cash Schedule, with such adjustments
necessary to reflect the Accounting Firm's resolution of the matters in
dispute, shall become final and binding on Buyer and MagneTek on the date the
Accounting Firm delivers its final resolution to the parties. The Accounting
Firm shall be such nationally recognized independent public accounting firm
with offices in Nashville, Tennessee, and Columbus, Ohio, as shall be agreed
upon by the parties hereto in writing. The cost of any arbitration
(including the fees and expenses of the Accounting Firm) pursuant to this
Section 2.5 shall be borne 50% by Buyer and 50% by MagneTek.
(b) The Closing Balance Sheet shall be prepared in
accordance with GAAP, applied in a manner consistent with that followed in
the preparation of the June Balance Sheets, and shall be identical to the
June Balance Sheets except insofar as any one or more of the following
adjustments is not reflected upon the June Balance Sheets:
(i) the Closing Balance Sheet shall
not reflect any provision for Taxes (whether as
an asset or a liability);
(ii) intercompany advances shall be
eliminated;
(iii) inventory shall be valued on a
first-in, first-out basis;
(iv) all Excluded Assets (and all
related depreciation and reserves) shall be
eliminated and all Excluded Liabilities (and
related reserves) shall be eliminated;
(v) the Closing Balance Sheet shall
reflect a special reserve (the "Special
Reserve") in an aggregate amount of $274,000,
reflecting Sellers' sole and complete liability
and obligation to Buyer in respect of all of
the following:
(A) Severance payments that are
or may become due to any employees of Coil
Company or Glasmex;
(B) Certain Glasmex inventory
described in Schedule 2.5; and
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(C) The additional matters
described in Schedule 2.5.
The Special Reserve shall apply to reduce the
Purchase Price, but in the event the actual
liabilities associated with such Reserve exceed
the amount thereof, Buyer shall have no claim
against Sellers and conversely, if the actual
amount of the Special Reserve exceeds the
associated liabilities, Buyer shall not be
required to pay any additional purchase price
to Sellers;
(vi) The inventory associated with
the warranty obligation under the Alcan
Agreement (currently having a book value of
approximately U.S. $380,000) shall be excluded
from the Closing Balance Sheet; provided,
however, that such inventory comprises part of
the Assets, and subject to Section 8.9 hereof;
and
(vii) All copper inventory that is
"tolled" at Southwire Company and Westinghouse
Wire Corporation shall be included on the
Closing Balance Sheet;
(c) The Purchase Price shall be adjusted (after giving
effect to the estimation, if any, reflected in the Closing Date Amount) such
that the Purchase Price is (i) increased, to the extent that the Cash Schedules
in the aggregate show a net excess of Expended Cash over Generated Cash, and
(ii) decreased, to the extent that the Cash Schedules in the aggregate show a
net excess of Generated Cash over Expended Cash. The Purchase Price shall be
adjusted upward or downward, dollar for dollar, in respect of any such negative
or positive adjustment; PROVIDED, HOWEVER, that the estimated adjustment paid on
the Closing Date shall be taken into account in determining whether such
threshold is met. Any required adjustment to the Purchase Price pursuant to
this Section 2.5 shall be referred to as the "Purchase Price Adjustment."
(d) Buyer agrees, with respect to Purchase Price
Adjustments, that following the Closing, Buyer will not take any actions with
respect to the accounting books, records, policies and procedures of the
Brownsville Business on which the Closing Balance Sheet is to be based that are
not consistent with GAAP applied in the manner consistent with the past
practices of the Brownsville Business.
(e) Within thirty days after the receipt by MagneTek of
the Closing Balance Sheet and Cash Schedules in
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accordance with Section 2.5(a) hereof, Buyer shall remit to Sellers or
Sellers shall remit to Buyer, as the case may be, in immediately available
funds, any undisputed amounts constituting Purchase Price Adjustments. With
respect to any items that are the subject of a Notice of Disagreement,
payment shall be made in immediately available funds within three business
days after the resolution thereof pursuant to Section 2.5(a). Each payment
pursuant to this Section 2.5 shall be made with interest on the amount of the
payment at an annual rate equal to the reference rate quoted by the San
Francisco branch of Bank of America on the Closing Date for the period from
the Closing Date to the date of payment, computed on the basis of a 360-day
year and actual days elapsed.
2.6 TAX ALLOCATION. Buyer and Sellers shall allocate the Purchase
Price and any Purchase Price Adjustments plus the Assumed Liabilities (to the
extent identifiable or reasonably estimable as of the date hereof) to broad
categories constituting components of the Assets in accordance with Schedule
2.6. Buyer and Sellers shall report the purchase and sale of the Assets in
accordance with the agreed upon allocation among such broad categories for
all Tax purposes (including the filing of the forms prescribed under Section
1060 of the Code and the Treasury Regulations promulgated thereunder), but
such allocation shall not constrain reporting for other purposes.
2.7 SALES AND USE TAX. Buyer and Sellers shall cooperate in
preparing, executing and filing use and sales Tax Returns relating to, and
Buyer and MagneTek shall share equally and pay when due, any and all sales,
real estate or stock transfer or use Tax due with regard to, the purchase and
sale of the Assets, except that Buyer and Coil Company shall not be
responsible for any such Taxes incurred by Glasmex or Coil Company in
connection with the transfer of assets from Glasmex to Coil Company. Such
Tax Returns shall be prepared in a manner that is consistent with the
allocation of the Purchase Price and Assumed Liabilities contemplated by
Section 2.6. Buyer shall also furnish Sellers with a form of resale
certificate that complies with the requirements of Texas and other applicable
state taxation laws and, if reasonably required by Sellers, a form of resale
certificate that complies with the requirements of any applicable laws of
Mexico.
ARTICLE III
CONDITIONS TO CLOSING
3.1 BUYER'S OBLIGATION. The obligations of Buyer to purchase and
pay for the Assets are subject to the
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satisfaction (or waiver by Buyer) as of the Closing of the following
conditions:
(a) The representations and warranties of MagneTek made
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as specifically contemplated by this Agreement, on and
as of the Closing, as though made on and as of the Closing Date, and Sellers
shall have performed or complied in all material respects with all obligations
and covenants required by this Agreement to be performed or complied with by
Sellers by the time of the Closing; and Sellers shall have delivered to Buyer
certificates dated the Closing Date and signed by an authorized officer of the
respective Sellers confirming the foregoing.
(b) Buyer shall have received an opinion dated the
Closing Date of Gibson, Dunn & Crutcher, counsel to Sellers, as to the matters
set forth in Exhibit G, and an opinion dated the Closing Date of Samuel A.
Miley, Esq., General Counsel of MagneTek, as to the matters set forth in
Exhibit H, which opinions shall be reasonably satisfactory in form to Buyer.
(c) The appropriate Seller or Glasmex, in the case of the
Mexico Sublease, shall have entered into the Bill of Sale, Assignment and
Assumption Agreement, the Sharing Agreement Amendment, the License Agreement,
the Brownsville Sublease, the Mexico Sublease and the Services Agreement.
(d) Sellers shall have executed and delivered to Buyer an
instrument of assignment of the 246 shares of stock of Coil Company owned by
Sellers.
(e) Buyer shall have received the Landlord Consent.
(f) No injunction or order shall have been granted by any
court or administrative agency or instrumentality of competent jurisdiction that
would restrain or prohibit any of the Transactions or that would impose damages
as a result thereof, and no action or proceeding shall be pending before any
court or administrative agency or instrumentality of competent jurisdiction in
which any Person seeks such a remedy (if in the opinion of counsel to Buyer
there exists a reasonable risk of a materially adverse result in such pending
action or proceeding).
3.2 SELLERS' OBLIGATION. The obligations of Sellers to sell and
deliver the Assets to Buyer are subject to the satisfaction (or waiver by
Sellers) as of the Closing of the following conditions:
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(a) The representations and warranties of Buyer made in
this Agreement shall be true and correct in all material respects as of the date
hereof and on and as of the Closing, as though made on and as of the Closing
Date, and Buyer shall have performed or complied in all material respects with
all obligations and covenants required by this Agreement to be performed or
complied with by Buyer by the time of the Closing; and Buyer shall have
delivered to Sellers a certificate dated the Closing Date and signed by an
authorized officer of Buyer confirming the foregoing.
(b) Sellers shall have received an opinion dated the
Closing Date of Stanley L. Waldbaum, Esq., counsel to Buyer, as to the matters
set forth in Exhibit I, which opinion shall be reasonably satisfactory in form
to Sellers.
(c) Buyer shall have entered into the Bill of Sale,
Assignment and Assumption Agreement, the Sharing Agreement Amendment, the
License Agreement, the Brownsville Sublease, and the Services Agreement.
(d) Coil Company shall have entered into the Mexico
Sublease.
(e) No injunction or order shall have been granted by any
court or administrative agency or instrumentality of competent jurisdiction that
would restrain or prohibit any of the Transactions or that would impose damages
as a result thereof, and no action or proceeding shall be pending before any
court or administrative agency or instrumentality of competent jurisdiction in
which any Person seeks such a remedy (if in the opinion of counsel to Sellers
there exists a reasonable risk of a materially adverse result in such pending
action or proceeding).
(f) MagneTek shall have received from Buyer insurance
certificates and documentation reflecting compliance with the provisions of
Sections 7.5 and 7.6.
3.3 CONDITION SUBSEQUENT. Sellers and Buyer agree that in the
event the Glasmex union does not grant its consent to the reorganization
contemplated by Section 6.3 in a form reasonably satisfactory to Buyer within
180 days after the Closing Date, Sellers and Buyer will jointly rescind and
reverse such transaction to the extent necessary to reinstate the former
Glasmex employees as Glasmex employees and, without further consideration,
Sellers will transfer all of the stock of Glasmex to Buyer and/or its
designees and deliver all instruments in its possession described in Section
2.1(j) hereof. Buyer acknowledges that such stock is encumbered by that
certain letter agreement with Mr. Paul dated May 23, 1988.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MAGNETEK
MagneTek hereby represents and warrants to Buyer as follows:
4.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS.
(a) Each Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each
Seller has all requisite corporate power and authority to enter into the
Transaction Documents and to consummate the Transactions. All corporate acts
and other proceedings required to be taken by each Seller to authorize the
execution, delivery and performance of the Transaction Documents and the
consummation of the Transactions have been duly and properly taken. This
Agreement has been duly executed and delivered by each Seller and constitutes a
valid and binding obligation of each Seller, enforceable against each Seller in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(b) The execution and delivery of this Agreement does not
and of the other Transaction Documents will not, and the consummation of the
Transactions and compliance with the terms of the Transaction Documents will not
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a benefit under, or
result in the creation of any Lien upon any of the properties or assets of
Sellers under, any provision of (i) the Certificate of Incorporation or By-Laws
of either Seller, (ii) subject to the matters disclosed in Schedule 4.1(b), any
Contractual Obligation of MagneTek or, to the Knowledge of Seller, NEC or
(iii) any judgment, order or decree or, subject to the matters described in
clauses (A)-(D) below, any United States Requirement of Law applicable to either
Seller or its property or assets, other than, in the case of clauses (ii) and
(iii) above, any such conflicts, violations, defaults, rights or Liens that,
individually or in the aggregate, would not have a Material Adverse Effect. No
consent, approval, license, permit, order or authorization of, or registration,
declaration or filing with, any United States Governmental Authority is required
to be obtained or made by or with respect to either Seller in connection with
the execution and
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delivery of the Transaction Documents or the consummation of the
Transactions, other than (A) compliance with and filings under Section 13(a)
or 15(d), as the case may be, of the Exchange Act, (B) compliance with and
filings and notifications under applicable Environmental Laws, (C) any
necessary approval of any Governmental Authority in connection with the
assignment or novation of any Contracts, (D) those that may be required
solely by reason of Buyer's participation in the Transactions and (E) those
that, if not made or obtained, individually or in the aggregate, would not
have a Material Adverse Effect.
(c) To the Knowledge of Seller, the sale of the stock of
Coil Company and the transactions contemplated by Section 6.3 hereof do not
require any consent, approval, license, permit, order, or authorization of, or
registration, declaration or filing with, any Mexican Governmental Authority or
any party to a Contractual Obligation of either Glasmex or Coil Company, other
than the consents and filings described in Schedule 4.1(c) hereof, none of which
has been obtained as of the Closing.
4.2 FINANCIAL STATEMENTS. To the Knowledge of Seller, the June
Balance Sheets were prepared in accordance with GAAP consistently applied,
and fairly presents the combined financial condition of the Brownsville
Business, Coil Company and Glasmex as of the respective dates thereof except:
(a) as set forth therein; (b) for the absence of footnotes; (c) for normal
recurring adjustments; and (d) to the extent it was prepared on a PRO FORMA
basis, with allocations of certain assets and liabilities based upon good
faith estimates of management.
4.3 TAXES.
(a) Except as disclosed on Schedule 4.3, each Seller, and
any affiliated group within the meaning of Section 1504 of the Code, of which
either Seller is or has been a member (the "Affiliated Group," but only for the
taxable period during which either Seller has been a member thereof), have filed
or caused to be filed in a timely manner (within any applicable extension
periods) with the appropriate Governmental Authority (i) all Tax returns,
reports and forms (collectively, "Tax Returns") required to be filed by the Code
or by applicable laws, (ii) all Taxes shown on such Tax Returns have been timely
paid in full by the due date thereof, (iii) no Tax Liens have been filed by any
Tax authority against any property or assets of the Brownsville Business, and
(iv) to the Knowledge of Sellers, no claims are being asserted in writing with
respect to any Taxes relating to the Brownsville Business.
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(b) Except as set forth in Schedule 4.3, (i) no property
of the Brownsville Business is "tax exempt use property" within the meaning of
Section 168(h) of the Code, and (ii) the Assigned Contracts do not include any
lease made pursuant to former Section 168(f)(8) of the Code.
(c) Neither Seller is a "foreign person" within the
meaning of Section 1445(f)(3) of the Code.
(d) No representation or warranty as to Taxes is made in
respect of Coil Company or Glasmex.
4.4 TITLE TO ASSETS. Either NEC or Coil Company has good and
marketable title to all assets reflected on the June Balance Sheet of the
Brownsville Business, except those sold or otherwise disposed of since the date
of such June Balance Sheet in the ordinary course of business consistent with
past practice, in each case free and clear of all Liens except (a) such as are
disclosed on Schedule 4.4 and (b) mechanics', carriers', workmen's, repairmen's
or other like Liens arising or incurred in the ordinary course of business,
Liens arising under original purchase price conditional sales contracts and
equipment leases with third parties entered into in the ordinary course of
business, Liens for Taxes and other governmental charges which are not yet due
and payable or which may thereafter be paid without penalty, and other
imperfections of title, restrictions or encumbrances, if any, which Liens,
imperfections of title, restrictions or other encumbrances do not, individually
or in the aggregate, materially impair the continued use and operation of the
specific assets to which they relate. Either MagneTek or NEC has good and
marketable title to 246 shares of the stock of Coil Company. The names of the
last known owners of the additional outstanding shares of the stock of Coil
Company are listed on Schedule 4.4.
4.5 CONTRACTS. Schedule 4.5 sets forth a list of each of the
following types of Contracts:
(a) any employment or severance agreement that has an
aggregate future liability in excess of $100,000 and is not terminable by notice
of not more than 60 days for a cost of less than $50,000 (excluding any
contracts or agreements with Business Employees that relate to the Transactions
but are not being assumed by Buyer);
(b) any employee collective bargaining agreement or other
contract with any labor union covering Business Employees;
(c) to the Knowledge of Sellers, any Contract other than
in the ordinary course of business pursuant to
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which the aggregate of payments to become due from or to either Seller is equal
to or exceeds $200,000, and which is not terminable by no more than 60 days'
notice for a cost of less than $100,000; and
(d) any lease or similar agreement under which NEC is a
lessor or sublessor of, or makes available for use by any third party (including
another division of either Seller), any Business Property or premises otherwise
occupied by the Brownsville Business.
Schedule 4.5 sets forth all such contracts (as such term is defined in the
definition of Contract) to which either Coil Company or Glasmex is a party.
Except as disclosed on Schedule 4.5, to the Knowledge of
Sellers, each Contract (or contract) listed on Schedule 4.5 is valid, binding
and in full force and effect and is enforceable by NEC, MagneTek, Coil Company
or Glasmex, as the case may be, in accordance with its terms. Except as
disclosed in Schedule 4.5, to the Knowledge of Sellers, MagneTek, NEC, Coil
Company or Glasmex, as the case may be, has performed all material obligations
required to be performed by it to date under the Contracts and is not (with or
without the lapse of time of the giving of notice, or both) in breach or default
in any material respect thereunder and, to the Knowledge of Sellers, no other
party to any of the Contracts (or contracts) is (with or without the lapse of
time or the giving of notice, or both) in breach or default in any material
respect thereunder.
4.6 LITIGATION; DECREES. To the Knowledge of Sellers, Schedule
4.6 sets forth a list, as of the date of this Agreement, of all pending and
threatened lawsuits or claims with respect to which either Seller has
contacted in writing the defendant or been contacted in writing by the
claimant or by counsel for the claimant by or against either Seller relating
to the Brownsville Business, Coil Company or Glasmex which (a) involves a
claim by or against either Seller of more than $50,000, (b) seeks any
injunctive relief or (c) relates to the Transactions. To the Knowledge of
Sellers, except as disclosed on Schedule 4.6, neither Seller is in default
under any judgment, order or decree of any Governmental Authority applicable
to the Brownsville Business, Coil Company or Glasmex except where the default
would not have a Material Adverse Effect.
4.7 EMPLOYEE AND RELATED MATTERS. Schedule 4.7 sets forth each
material Employee Benefit Plan. Sellers have made available to Buyer true,
complete and correct copies or summaries of each Plan so listed.
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4.8 ENVIRONMENTAL MATTERS. To the Knowledge of Sellers, except
for the matters disclosed or referred to in the Phase I Environmental Report
of the Brownsville Facility, as to the Brownsville Business:
(a) Sellers are not in material violation of any
applicable Environmental Law and are not under investigation or review by any
Governmental Authority with respect to compliance therewith, or with respect to
the generation, use, treatment, storage or disposal, or the spillage or other
release of any Hazardous Substance;
(b) There has heretofore been no spillage, discharge,
release or disposal of any such Hazardous Substance by NEC on or under the
Brownsville Facility in an amount and of a nature which could reasonably be
expected to result in material liability to the Brownsville Business; and
(c) No pending citations, fines, penalties or claims have
been asserted against NEC under any Environmental Law which could reasonably be
expected to have a Material Adverse Effect and which have not been reflected in
the June Balance Sheet.
No representation or warranty as to environmental matters
is made in respect of Coil Company or Glasmex.
4.9 EMPLOYEE AND LABOR RELATIONS. Except as set forth on
Schedule 4.9:
(a) there is no labor strike, dispute, or work stoppage
or lockout pending or, to the knowledge of Sellers, threatened, involving the
Brownsville Business or the Mexico Business;
(b) there is no unfair labor practice charge or complaint
against NEC pending, or threatened, before the National Labor Relations Board
involving the Brownsville Business;
(c) there is no pending or, to the knowledge of Sellers,
threatened grievance involving a Business Employee that, if adversely decided,
would have a Material Adverse Effect;
(d) no charges with respect to or relating to NEC are
pending before the Equal Employment Opportunity Commission or any other
Governmental Authority responsible for the prevention of unlawful employment
practices as to which there is a reasonable likelihood of adverse determination
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involving the Brownsville Business, other than those which, if so determined,
would not have a Material Adverse Effect; and
(e) to the Knowledge of Sellers, no charges with respect
to or relating to Coil Company or Glasmex are pending before any Mexican
Governmental Authority responsible for the prevention of unlawful employment
practices as to which there is a reasonable likelihood of adverse determination
involving the Mexico Business, other than those which, if so determined, would
not have a Material Adverse Effect.
4.10 EXCLUSIVITY OF REPRESENTATIONS. EXCEPT AS EXPRESSLY PROVIDED
HEREIN, SELLERS MAKE NO REPRESENTATION OR WARRANTY CONCERNING THE ASSETS
(INCLUDING THE STOCK OF COIL COMPANY AND THE ASSETS OF GLASMEX) OR THE
BROWNSVILLE BUSINESS, INCLUDING AS TO THE QUALITY, CONDITION, MERCHANTABILITY,
SALABILITY, OBSOLESCENCE, WORKING ORDER OR FITNESS FOR A PARTICULAR PURPOSE
THEREOF. EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE ASSETS OF THE BROWNSVILLE
BUSINESS ARE SOLD TO BUYER "AS IS AND WHERE IS," THE STOCK OF COIL COMPANY IS
SOLD TO BUYER "AS IS" AND, IF THE STOCK OF GLASMEX IS TRANSFERRED PURSUANT TO
SECTION 3.3, IT IS SOLD TO BUYER "AS IS."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
5.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS.
(a) Buyer is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Ohio.
Buyer has all requisite partnership power and authority to enter into this
Agreement and to consummate the Transactions. All acts and other proceedings
required to be taken by Buyer and its general partner to authorize the
execution, delivery and performance of this Agreement and the consummation of
the Transactions have been duly and properly taken. This Agreement has been
duly executed and delivered by Buyer and constitutes a valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally or by general principles (regardless of whether such
enforceability is considered in a proceeding in equity or law).
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(b) Except as disclosed on Schedule 5.1(b), the execution
and delivery of this Agreement does not and of the other Transaction Documents
will not, and the consummation of the Transactions and compliance with the terms
of the Transaction Documents will not, conflict with, or result in any violation
of or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of the Buyer under, any provision of
(i) the agreement of limited partnership of Buyer or the articles of
incorporation or bylaws of its general partner, (ii) any Contractual Obligation
of Buyer or (iii) any judgment, order or decree or, subject to the matters
described in clauses (A)-(C) below, any Requirement of Law applicable to Buyer
or its property or assets. No material consent, approval, license, permit order
or authorization of, or registration, declaration or filing with, any
Governmental Authority is required to be obtained or made by or with respect to
Buyer or its Affiliates in connection with the execution and delivery of the
Transaction Documents or the consummation by Buyer of the Transactions, other
than (A) compliance with and filings under Section 13(a) and 15(d), as the case
may be, of the Exchange Act, (B) compliance with and filings and notifications
under applicable Environmental Laws, (C) any necessary approval of any
Governmental Authority in connection with the novation of any Contracts and
(D) those that may be required solely by reason of Sellers' (as opposed to any
other third party's) participation in the Transactions.
5.2 ACTIONS AND PROCEEDINGS, ETC. There are no (a) outstanding
judgments, orders, writs, injunctions or decrees of any court, governmental
agency or arbitration tribunal against Buyer or (b) actions, suits, claims or
legal, administrative or arbitration proceedings or investigations pending or,
to the knowledge of Buyer, threatened against Buyer.
5.3 AVAILABILITY OF FUNDS. Buyer has all funds, or binding
commitments as to the availability to Buyer of all funds, required to
consummate the Transactions.
5.4 BUYER'S ACKNOWLEDGMENT. Buyer acknowledges and agrees that,
(a) other than the representations and warranties of MagneTek specifically
contained in this Agreement, there are no representations or warranties of
either Seller either expressed or implied with respect to either Seller, the
Brownsville Business, Coil Company, Glasmex or the Transactions, (b) that
Sellers have disclosed to Buyer the matters set forth on Schedule 5.4 with
respect to Coil Company and Glasmex and none of such matters or any consequences
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thereof shall be deemed a breach of any representation or warranty of either
Seller hereunder (PROVIDED, HOWEVER, that the Sellers' indemnification
obligation under clause (e) of Section 10.1 is not limited by the foregoing
acknowledgment), and (c) Buyer shall have a right to indemnification solely as
provided in Article X hereof and shall have no claim or right to indemnification
with respect to any information, documents or materials furnished by either
Seller or any of its officers, directors, employees, agents or advisors, or
otherwise available to Buyer.
5.5 EXON-FLORIO. Buyer is not a "foreign person" for purposes of the
Exon-Florio Amendment to the Defense Production Act of 1950.
5.6 NO KNOWLEDGE OF SELLERS' BREACH. Neither Buyer nor, to the best
knowledge of Buyer, any of its Affiliates, has knowledge of any breach of any
representation or warranty by MagneTek or of any other condition or circumstance
that would excuse Buyer from its timely performance of its obligations
hereunder. If Buyer obtains actual knowledge of any information relevant to the
representations and warranties of MagneTek under this Agreement prior to the
Closing Date (whether through Sellers or otherwise), then for the purposes of
MagneTek's liability under such representations and warranties the effect shall
be as if the representations and warranties were so modified in this Agreement,
and no claim for indemnification may be made under Article X hereof to the
extent such claim would not arise under such modified representation or
warranty.
ARTICLE VI
COVENANTS OF MAGNETEK AND NEC
MagneTek and NEC severally, and not jointly, covenant and agree
as follows:
6.1 ACCOUNTS RECEIVABLE. If, after the Closing Date, either Seller
receives any payment from any Person who at the time of such payment has
outstanding accounts payable to either Seller, on the one hand (for the purposes
of this Section, "Seller Accounts Receivable"), and to Buyer, on the other hand
(for the purposes of this Section, "Buyer Accounts Receivable"), and the payment
(a) does not indicate whether it is in respect of Seller Accounts Receivable or
Buyer Accounts Receivable or (b) indicates that it is in payment of both Seller
Accounts Receivable and Buyer Accounts Receivable without specifying the portion
to be allocated to each, then Sellers and Buyer shall consult with one another
to determine the proper allocation of such payment; and, if they are unable to
reach agreement on the proper allocation, such payment
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shall be applied so as to retire undisputed Seller Accounts Receivable and
undisputed Buyer Accounts Receivable in chronological order based upon the
period of time such accounts receivable have existed on the books of Sellers
or the Buyer, as applicable.
6.2 OFFSITE ASSETS. To the extent any Assets sold pursuant hereto
remain at NEC facilities that are not being transferred to Buyer, NEC agrees to
exercise reasonable care in respect thereof, and in no event less than it
exercises with respect to its own assets. In the event Buyer wishes to remove
such Assets, NEC shall cooperate in all reasonable respects, but Buyer shall
bear all expenses associated therewith.
6.3 GLASMEX CONSOLIDATION.
(a) On or prior to the Closing Date and without cost to
Buyer except as provided below:
(i) Sellers and Buyer shall cause Glasmex to
transfer, assign and convey to Coil Company all of its assets, other than its
interest as the beneficial owner of the Mexico Facility, by instrument or
instruments reasonably satisfactory to Sellers and Buyer;
(ii) Sellers and Buyer shall cause Glasmex to assign
to Coil Company all contracts (as such term is defined in the definition of
Contract) to which Glasmex is a party and shall cause Coil Company to assume the
obligations under such contracts of Glasmex, by instrument or instruments
reasonably satisfactory to Sellers and Buyer;
(iii) Sellers and Buyer shall cause Glasmex to
terminate the employment of its employees and shall cause Coil Company
concurrently to employ such persons on substantially the same terms and
conditions to the extent reasonably possible;
(iv) Sellers and Buyer shall cause Coil Company to
assume the liabilities of Glasmex accrued on its balance sheet and certain
liabilities pertaining to its employees including, without limitation, the
accrued severance pay obligations associated with such employees, by instrument
or instruments reasonably satisfactory to Buyer and Sellers; and
(v) Glasmex and Coil Company shall enter into the
Mexico Sublease.
(b) Buyer acknowledges that Sellers have not obtained the
consents or made the filings in respect of the foregoing transactions and that
certain consents and filings
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are likely required, as set forth to the Knowledge of Sellers in Schedule
4.1(c). Buyer acknowledges that the Transactions and the above transactions
are being consummated without such consents and filings in part to
accommodate Buyer's desired closing schedule and accordingly, agrees to use
reasonable efforts to obtain such consents and to complete such filings
promptly after the Closing Date. To the extent Buyer incurs out-of-pocket
expenses in connection with such actions, Buyer shall be reimbursed for up to
$5,000 of such expenses provided that documentation thereof is submitted no
later than the date the Closing Balance Sheet is required to be delivered
pursuant to Section 2.5.
ARTICLE VII
COVENANTS OF BUYER
Buyer covenants and agrees as follows:
7.1 CONFIDENTIALITY. Buyer acknowledges that the information
being provided to it by Sellers is subject to the terms of a confidentiality
agreement contained in the Management Agreement dated as of July 6, 1995 (the
"Confidentiality Agreement"), the terms of which are incorporated herein by
reference. Buyer hereby assumes all of the obligations of such
representative under the Confidentiality Agreement. Effective upon, and only
upon, the Closing, the Confidentiality Agreement will terminate; PROVIDED,
HOWEVER, that Buyer acknowledges that the Confidentiality Agreement will
terminate only with respect to information relating solely to the Brownsville
Business, Coil Company and Glasmex; and PROVIDED, FURTHER, HOWEVER, that
Buyer acknowledges that any and all other information provided to it by
Sellers or Sellers' representatives concerning Sellers shall remain subject
to the terms and conditions of the Confidentiality Agreement after the date
of the Closing.
7.2 ACCOUNTS RECEIVABLE. If, after the Closing Date, Buyer
receives any payment from any Person who at the time of such payment has
outstanding accounts payable to Sellers, on the one hand (for the purposes of
this Section, "Seller Accounts Receivable"), and to Buyer, on the other hand
(for the purposes of this Section, "Buyer Accounts Receivable"), and the
payment (a) does not indicate whether it is in respect of Seller Accounts
Receivable or Buyers Accounts Receivable or (b) indicates that it is in
payment of both Seller Accounts Receivable and Buyer Accounts Receivable
without specifying the portion to be allocated to each, then Sellers and
Buyer shall consult with one another to determine the proper allocation of
such payment; and, if they are unable to reach agreement on the proper
allocation, such payment shall be applied so as to retire undisputed Seller
Accounts
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Receivable and undisputed Buyer Accounts Receivable in chronological order
based upon the period of time such accounts receivable have existed on the
books of the Sellers or Buyer, as applicable.
7.3 WAIVER OF BULK SALES LAW COMPLIANCE. Buyer hereby waives
compliance by Sellers with the requirements, if any, of Article 6 of the
Uniform Commercial Code as in force in any state in which Assets are located
and all other similar Requirements of Law applicable to bulk sales and
transfers, to the extent applicable to the Transactions. MagneTek shall
indemnify Buyer in connection with the foregoing matters pursuant to Section
10.1(c) hereof.
7.4 EXCLUDED ASSETS. If, after the Closing Date, Excluded Assets
shall remain on the premises utilized or controlled by Buyer, then Buyer
shall, at MagneTek's expense, deliver such Excluded Assets to Sellers upon
the request of Sellers, and so long as such assets remain in Buyer's control,
shall exercise reasonable care with respect thereto, and in no event less
care than with respect to its own properties.
7.5 INSURANCE. Buyer shall secure insurance with respect to the
Brownsville Business from the Closing Date covering general liability and
products liability in amounts customary for the industry in which such
businesses operate.
7.6 REPLACEMENT BONDING. Within 30 days of the Closing Date, Buyer
shall secure replacements for certain performance bonds set forth on
Schedule 7.6, or shall have made alternative arrangements with the beneficiaries
thereof, to MagneTek's satisfaction. The foregoing shall not limit Buyer's
responsibility in respect of the matters as to which such instruments pertain,
which responsibility shall be governed by this Agreement in respect of the
applicable Assumed Liabilities. In addition, Buyer shall promptly reimburse
Sellers for the incremental expense of maintaining the foregoing instruments
from the Closing Date through the date they are so replaced.
ARTICLE VIII
MUTUAL COVENANTS
Each of Sellers and Buyer covenants and agrees as follows:
8.1 PERMITS AND CONSENTS.
(a) Except as expressly provided in Section 6.3 hereof,
as promptly as practicable after the date hereof, Buyer and Sellers shall make
all filings with
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Governmental Authorities, and use all reasonable efforts to
obtain all permits, approvals, authorizations and consents of all third parties,
required to consummate the Transactions. Buyer and Sellers shall furnish
promptly to each other all information that is not otherwise available to the
other party and that such party may reasonably request in connection with any
such filing. Sellers and Buyer shall use reasonable efforts to obtain such
consents to the assignment of the Assigned Contracts as may be required. Buyer
acknowledges that consents to the Transactions may be required from parties to
the Assigned Contracts and that Sellers will not assign to Buyer at the Closing
any Contract that by its terms requires, prior to such assignment, the consent
of any other contracting party thereto unless such consent has been obtained
prior to the Closing Date.
(b) Buyer agrees that Sellers shall not have any
liability whatsoever to Buyer arising out of or relating to the failure to
obtain any consents to the assignment of Contracts that may be required in
connection with the Transactions or because of the default, acceleration or
termination of any Contract as a result thereof. Buyer further agrees that no
representation or warranty of MagneTek or covenant of MagneTek or of NEC
contained herein shall be breached or deemed breached, and no condition shall be
deemed not satisfied, as a result of (i) the failure to obtain any such consent
or as a result of any such acceleration or termination or (ii) any lawsuit,
action, claim, proceeding or investigation commenced or threatened by or on
behalf of any Person arising out of or relating to the failure to obtain any
such consent or any such acceleration or termination. Sellers shall cooperate
with Buyer in any reasonable manner in connection with Buyer obtaining any such
consents; PROVIDED, HOWEVER, that such cooperation shall not include any
requirement that Sellers commence any litigation or offer or grant any
accommodation (financial or otherwise) to any third party. The Purchase Price
shall not be subject to adjustment by reason of any such consents that are not
obtained.
(c) With respect to each such Contract not assigned on
the Closing Date, after the Closing Date Sellers shall, to the extent necessary,
continue to deal with the other contracting party(ies) to such Contract as the
prime contracting party, and Buyer and Sellers shall continue to use reasonable
efforts to obtain the consent of all required parties to the assignment of such
Assigned Contract. Such Contract shall be deemed assigned by Sellers to Buyer
after receipt of such consent after the Closing Date. Any contract as to which
consent is obtained after the Closing Date shall thereupon comprise an Assigned
Contract. Notwithstanding the absence of any such consent, Buyer shall be
entitled to the benefits of such Contract accruing after the Closing Date to
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the extent that Sellers may provide Buyer with such benefits without violating
the terms of such Contract; and to the extent such benefits are so provided,
Buyer agrees to perform at its sole expense all of the obligations of Sellers
to be performed under such Contract after the Closing Date, such obligations to
comprise Assumed Liabilities hereunder.
(d) Without limiting the generality of the foregoing, the
parties acknowledge that Buyer will seek novations in respect of the government
contracts of Sellers included in the Transactions, and Sellers undertake to
provide customary and reasonable assistance to Buyer in respect of the
preparation of novation requests.
8.2 COOPERATION. Buyer and Sellers shall cooperate with each
other and shall cause their officers, employees, agents, auditors and
representatives to cooperate with each other after the Closing to ensure the
orderly transition of the Brownsville Business and Mexico Business to Buyer
and to minimize any disruption to the respective businesses of Sellers or the
Brownsville Business or Mexico Business that might result from the
Transactions. Sellers, at their own expense, shall cooperate with Buyer with
respect to the cure of any deficiencies concerning Coil Company disclosed on
Schedule 5.4 if reasonably requested by Buyer, but any out-of-pocket costs of
the cure of such deficiencies shall be at Buyer's expense. Neither party
shall be required by this Section 8.2 to take any action that would
unreasonably interfere with the conduct of its business.
8.3 PUBLICITY. Sellers and Buyer agree that, from the date hereof
through the Closing Date, no public release or announcement concerning the
Transactions shall be issued by any party without the prior consent of the
other parties (which consent shall not be unreasonably withheld or delayed),
except as such release or announcement may be required by any Requirement of
Law, in which case the party required to make the release or announcement
shall allow the other parties reasonable time to comment on such release or
announcement in advance of such issuance.
8.4 REASONABLE EFFORTS AND FURTHER ASSURANCES. Subject to the
terms and conditions of this Agreement (including the limitations set forth
in Section 8.1), each party will use all reasonable efforts to cause the
Closing to occur. Sellers and Buyer shall, at any time and from time to time
after the Closing, upon the reasonable request of another party, execute,
acknowledge, deliver and file all such further acts, transfers, conveyances,
assignments and assurances as may reasonably be required to effect the
Transactions.
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8.5 RECORDS; COOPERATION IN LITIGATION. After the Closing, upon
reasonable written notice and at Buyer's sole expense, Sellers agree to
furnish or cause to be furnished to Buyer and its representatives (including
its auditors), access at reasonable times and during normal business hours to
such information relating to the Assets in Sellers' possession as is
reasonably necessary for financial reporting and accounting matters, the
preparation and filing of any Tax Returns, reports or forms or the defense of
any Tax Claim or assessment; PROVIDED, HOWEVER, that such access does not
unreasonably disrupt the normal operations of Sellers.
8.6 ACCESS TO FORMER BUSINESS RECORDS; COOPERATION IN LITIGATION.
For a period of seven years following the Closing, Buyer will retain all
Records. During such period, Buyer will afford authorized representatives of
Sellers (including their auditors) access to such Records at reasonable times
and during normal business hours at its principal business office, or at such
other location or locations at which such Records may be stored or maintained
from time to time, and will permit such representatives to make abstracts
from, or copies of, any of such Records, or to obtain temporary possession of
any thereof as may be reasonably required by Sellers at Sellers' sole cost
and expense. During such period, Buyer will, at Sellers' expense (limited,
however, to Buyer's reasonable out-of-pocket expenditures without regard to
any employee cost or other overhead expenses), cooperate with Sellers in
furnishing information, evidence, testimony, and other reasonable assistance
in connection with any action, proceeding, Tax audit, or investigation to
which Sellers or any of their Affiliates is subject relating to the
Brownsville Business, Coil Company or Glasmex prior to the Closing. The term
"Record" as used in this Section 8.6 shall include any data processing files
or other computerized data.
8.7 USE OF TRADEMARKS AND TRADE NAMES. Notwithstanding anything
to the contrary in this Agreement, Buyer and Coil Company, as applicable, may
continue to use the name "MagneTek" and related trademarks, corporate names,
and trade names incorporating "MagneTek" and the stylized "MagneTek" logos
(i) in displays, signage and postings for the period after the Closing Date
necessary to permit the reasonably prompt removal of such names, and only to
the extent such displays, signage or postings exist on the Closing Date; (ii)
for a period of two years, to state the Brownsville Business' former
affiliation with MagneTek (e.g., formerly a division of "MagneTek, Inc.") and
(iii) to the extent any such trade names, trademarks, service marks or logos
appear on stationery, packaging materials, supplies or inventory on hand as
of the Closing Date or on order at the time of the Closing, until such is
exhausted.
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8.8 REQUIRED MODIFICATIONS OR REPLACEMENTS OF PRODUCTS. The
following provisions of this Section 8.8 shall govern the responsibilities of
Buyer and MagneTek regarding Required Modifications:
(a) Buyer shall advise MagneTek promptly after becoming
aware of any Required Modifications to the products shipped or services provided
by the Brownsville Business prior to the Closing Date to the extent Buyer
intends to assert any claim under Article X hereof in respect of such products.
(b) Whether or not Buyer gives the foregoing notice,
Buyer shall make any Required Modifications to products shipped or services
provided by the Brownsville Business prior to the Closing Date which are
necessary or advisable, in the reasonable discretion of MagneTek. If the cost
to MagneTek under Section 8.8(c) of implementing any such Required Modification
exceeds the cost to MagneTek of replacing such products, Buyer shall replace
such products at MagneTek's expense pursuant to Section 8.8(c). The obligation
of Buyer hereunder shall include, but not be limited to, such actions as
MagneTek may reasonably request for (i) the notification of customer and other
third parties in possession of the applicable products, (ii) the shipping of
such products, if necessary, to and from Buyer's facilities for modification,
improvement, enhancement or replacement, (iii) the production of replacement
products, parts or supplies necessary for the implementation of the product
modification, enhancement, improvement or replacement, (iv) the installation,
modification or replacement of the product by personnel of Buyer, either at the
customer's location or at Buyer's facilities, as appropriate, and
(v) recordkeeping and reports with respect to such product modifications,
enhancements, improvements or replacements to the extent required by law or
reasonably requested by MagneTek.
(c) MagneTek shall reimburse Buyer for direct materials,
direct labor and factory overhead incurred by Buyer in installing or
implementing any Required Modification under Section 8.8(b) or in producing any
replacement products, parts or supplies under Section 8.8(b), together with all
reasonable out-of-pocket shipping, postage and printing costs incurred by Buyer
in connection therewith.
8.9 WARRANTY WORK; ALCAN INVENTORY. As set forth in Section
2.3(b), Buyer shall perform all required warranty work (including labor and
materials) pertaining to products sold or services provided by the
Brownsville Business prior to the Closing Date, including, without
limitation, all warranty work in respect of the Alcan Agreement. Such
warranty obligations shall not reduce the reserve referred to in
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Section 2.3(b). In addition, Buyer shall acquire, as part of the Assets, the
"coil inventory" pertaining to the Alcan Agreement warranty obligation, which
currently has a book value of approximately U.S. $380,000, notwithstanding
that such coil inventory has been eliminated from the Closing Balance Sheet.
To the extent such coil inventory is disposed of by Buyer and is required to
be replaced pursuant to "Option 2" of the Alcan Agreement, then Buyer, at no
cost to Sellers, will be responsible for the replacement of such coil
inventory. At the expiration of the 10-year period referred to in "Option 2"
of the Alcan Agreement, any funds that are received by Buyer from Alcan in
respect of the "coil inventory" will be remitted promptly to MagneTek, it
being acknowledged that Sellers have not assigned to Buyer the right to
receive payment from Alcan at the expiration of such 10-year period.
8.10 TAX RETURNS AND TAXES FOR COIL COMPANY. Seller shall prepare
or cause to be prepared all Tax returns and reports of Coil Company (and/or,
if it acquires the Glasmex stock pursuant to Section 3.3 hereof, of Glasmex)
the due date for which (taking into account any extensions of time for
filing) is on or before the Closing Date, and shall pay or cause to be paid
all Taxes required to be shown on such returns or reports as due. Buyer
shall prepare or cause to be prepared all returns and reports of Coil Company
the due date for which (taking into account extensions of time for filing) is
after the Closing Date, and except as otherwise provided in this Section
8.10, shall pay or cause to be paid all Taxes required to be shown on such
returns or reports as due. If any such returns or reports prepared by Seller
cover a period that includes the Closing Date (an "Overlap Period"), Seller
will pay to Buyer an amount equal to the Tax liability of Coil Company (or
Glasmex, if applicable) that would have resulted had the Overlap Period ended
on the Closing Date, computed in a manner consistent with prior periods. Any
amount so payable by Seller shall be paid to Buyer within fifteen (15)
business days following receipt of written notice from Buyer of the amount
due, together with the computations thereof and supporting workpapers,
provided Seller approves of the amount (such approval not to be unreasonably
withheld).
ARTICLE IX
EMPLOYEE BENEFIT MATTERS
9.1 EMPLOYEE RETENTION. Buyer shall offer employment to commence
as of the Closing Date to all Business Employees of the Brownsville Business,
at the same salaries and wages and on substantially the same terms and
conditions as those in effect immediately prior to the Closing Date.
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Buyer has no present intention (subject to its discretion as to employee
performance) to terminate the employment of any Business Employee within the
sixty (60) days following the Closing Date, and Buyer assumes all obligations
and liabilities, if any, under the Worker Adjustment and Retraining
Notification Act (the "WARN Act") and any analogous state legislation
relating to or arising out of the Transactions. Buyer automatically assumes
all comparable liabilities under Mexican law by acquiring the stock of Coil
Company and, if applicable pursuant to Section 3.3, of Glasmex.
9.2 EMPLOYEE BENEFIT PLANS. Effective as of the Closing Date,
Business Employees shall cease accruing any benefits under any Seller Plan,
and MagneTek shall take, or cause to be taken, all such action, if any, as
may be necessary to effect such cessation of participation. Effective as of
the Closing Date, Buyer shall establish health plans for the Business
Employees of the Brownsville Business that are similar to those now offered
to salaried Business Employees of the Brownsville Business, and such plans
shall waive any exclusion or limitation with respect to pre-existing
conditions and actively-at-work exclusions and shall provide that any
expenses incurred on or before the Closing Date by a Business Employee of the
Brownsville Business or his covered dependents shall be taken into account
under such health plans for purposes of satisfying applicable deductible,
coinsurance and maximum out-of-pocket provisions. By virtue of acquiring the
stock of Coil Company and, if applicable pursuant to Section 3.3 of Glasmex,
Buyer automatically assumes all liabilities of the Employee Benefit
Arrangements as to Business Employees of the Mexico Business.
9.3 VACATION, HOLIDAY, SICK AND SEVERANCE PAY. As of the Closing
Date, Buyer shall assume all of Sellers' obligations for vacation (including
accrued vacation), holiday, sick (including accrued sick) and severance (if
any) pay to all Business Employees. By virtue of acquiring the stock of Coil
Company, Buyer automatically assumes all of such liabilities as to the
Business Employees of Coil Company, including Business Employees of Coil
Company who formerly were employees of Glasmex. Buyer acknowledges that such
liabilities as to such employees of Glasmex were not and will not be
discharged in connection with their transfer of employment to Coil Company.
9.4 ACCESS TO INFORMATION. Sellers shall make reasonably
available to Buyer such actuarial, financial, personnel and related
information as may be reasonably requested by Buyer with respect to any
Seller Plan as it relates to a Business Employee, including, but not limited
to, compensation and employment histories.
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9.5 THIRD-PARTY BENEFICIARIES. No provision of this Article IX
shall create any third-party beneficiary rights in any employee or former
Business Employee (including any beneficiary or dependent thereof),
including, without limitation, any right to continued employment or
employment in any particular position with Buyer for any specified period of
time after the Closing Date.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY MAGNETEK. Subject to the terms and
conditions of this Article X, MagneTek shall indemnify Buyer and each of its
officers, directors, employees and agents (each, a "Buyer Indemnified
Person") against, and hold them harmless from, any Loss suffered or incurred
by any such Buyer Indemnified Person (other than any Loss relating to
environmental matters, for which indemnification provisions are set forth in
Section 10.3) to the extent arising from (a) if the Closing occurs, any
breach of any representation or warranty of MagneTek contained in this
Agreement which survives the Closing or in any certificate, instrument or
other document delivered pursuant hereto or in connection herewith which by
its terms survives the Closing, (b) any breach of any covenant of MagneTek
contained in this Agreement requiring performance after the Closing Date, (c)
if the Closing occurs, the existence of, or the failure of Sellers to pay,
perform and discharge when due, any of the Excluded Liabilities (including,
without limitation, any Losses as a result of the failure to comply with any
bulk sales laws referred to in Section 7.3), (d) if the Closing occurs, any
litigation pertaining to the Mexico Business as to which a complaint has been
filed and notice thereof duly provided to Glasmex or Coil Company prior to
the Closing Date, or (e) if the Closing occurs, any claims or demands made by
any Governmental Authority or any third party which is unrelated to Buyer or
its Affiliates arising from deficiencies relating to Coil Company or Glasmex
set forth on Schedule 5.4 (PROVIDED that Buyer shall have afforded Sellers
the opportunity to mitigate any such Loss by cooperating with Buyer in the
cure of such deficiencies pursuant to Section 8.2); PROVIDED, HOWEVER, that
MagneTek shall not have any liability under this Section 10.1 unless the
aggregate of all Losses relating thereto for which MagneTek would, but for
this proviso, be liable exceeds on a cumulative basis with Losses for which
Buyer is indemnified under Section 10.3, an amount equal to $50,000 (and then
only to the extent of any such excess); and PROVIDED FURTHER, HOWEVER, that
MagneTek's aggregate liability under this Section 10.1 and Section 10.3 shall
in no event exceed $2,000,000.
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10.2 INDEMNIFICATION BY BUYER. Subject to the terms and
conditions of this Article X, Buyer shall indemnify Sellers and each of their
respective officers, directors, employees and agents (each, a "Seller
Indemnified Person") against, and hold them harmless from, any Loss suffered
or incurred by any such Seller Indemnified Person (other than any Loss
relating to environmental matters, for which indemnification provisions are
set forth in Section 10.3) to the extent arising from (a) if the Closing
occurs, any breach of any representation or warranty of Buyer contained in
this Agreement which survives the Closing or in any certificate, instrument
or other document delivered pursuant hereto or in connection herewith which
by its terms survives the Closing, (b) any breach of any covenant of Buyer
contained in this Agreement requiring performance after the Closing Date, (c)
if the Closing occurs, the existence of, or the failure of Buyer to pay,
perform and discharge when due, any of the Assumed Liabilities (including,
for purposes of this Article X, the liabilities of Glasmex assumed by Coil
Company pursuant to Section 6.3), (d) if the Closing occurs, the failure of
Buyer or Coil Company (or Glasmex, if acquired by Buyer) to pay, perform or
discharge when due any liability under Mexican law referred to in the last
sentence of Section 9.1 and (e) if the Closing occurs, the ongoing operations
of Buyer, Coil Company (and Glasmex, if acquired by Buyer) and the Assets
after the Closing Date; PROVIDED, HOWEVER, that Buyer shall not have any
liability under this Section 10.2 unless the aggregate of all Losses relating
thereto for which Buyer would, but for this proviso, be liable exceeds on a
cumulative basis with Losses for which Sellers are indemnified under Section
10.3, an amount equal to $50,000 (and then only to the extent of such
excess); and PROVIDED FURTHER, HOWEVER, that Buyer's aggregate liability
under clauses (a) and (b) of this Section 10.2 shall in no event exceed
$2,000,000.
10.3 INDEMNIFICATION FOR ENVIRONMENTAL MATTERS. Subject to the
terms and conditions of this Article X, MagneTek shall indemnify and hold
Buyer Indemnified Persons harmless from and against all Losses resulting from
claims or demands by any Governmental Authority or any third party which is
unrelated to Buyer or its Affiliates arising under any Environmental Law to
the extent such Losses (a) either (i) are attributable to the use and/or
occupancy of the Brownsville Facility or to Hazardous Substances transported
offsite from the Brownsville Facility for treatment, storage or disposal
prior to the Closing or (ii) are attributable to the use and/or occupancy of
the Mexico Facility or to Hazardous Substances transported offsite from the
Mexico Facility for treatment, storage or disposal prior to the Closing and
such Losses and claims or demands are made by a third party as aforesaid and
arise under Mexican Environmental Law; and (b) exceed, on a cumulative basis
with Losses for which Buyer
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is indemnified under Section 10.1, an amount equal to $50,000; but only to
the extent of such excess and PROVIDED, FURTHER, that MagneTek's aggregate
liability under this Section 10.3 and Section 10.1 shall in no event exceed
$2,000,000. MagneTek's indemnification liability hereunder shall in no event
be construed to extend to or include any remediation or other liability
arising as a result of the presence or removal of asbestos in or upon any of
the improvements located on the Brownsville or Mexico Facilities or any other
facility of either Seller at any time. MagneTek's obligation to indemnify
Buyer under this Section 10.3 shall expire on the second anniversary of the
Closing Date, and Buyer hereby expressly releases each Seller from and after
such second anniversary from any liability in respect of the matters covered
by such indemnification, whether arising by statute or common law, or
otherwise. MagneTek shall have no obligation to indemnify any Buyer
Indemnified Person with respect to any condition or circumstance relating to
the Brownsville Facility or the Brownsville Business prior to the utilization
of the Brownsville Facility that commenced in 1983, or with respect to any
condition or circumstance relating to the Mexico Facility or the Mexico
Business prior to Seller's acquisition of Glasmex. In addition, Magnetek
shall have no obligation to indemnify Buyer in respect of the matter referred
to in item 6 of Schedule 2.5 hereto, and such matter shall not contribute to
the $50,000 deductible hereunder. Buyer shall indemnify and hold each Seller
Indemnified Person harmless from and against all Losses resulting from claims
or demands by any Governmental Authority or third-party arising under any
Environmental Law to the extent such Losses are attributable to the use
and/or occupancy by Buyer or any Affiliate of Buyer of the Brownsville or
Mexico Facility.
10.4 LOSSES NET OF INSURANCE, ETC.
(a) The amount of any Loss for which indemnification is
provided under this Article X shall be net of any amounts recovered or
recoverable by the Indemnified Person under insurance policies with respect
to such Loss and of any reserve in respect thereof reflected on the Closing
Balance Sheet.
(b) If the Indemnifying Person makes any payment under
this Article X in respect of any Loss, the Indemnifying Person shall be
subrogated, to the extent of such payment, to the rights of the Indemnified
Person against any insurer or third party with respect to such Losses. The
Indemnified Person shall execute any required documents or instruments, serve
as a named plaintiff, or take any other similar steps necessary to effectuate
such subrogation.
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(c) Notwithstanding anything to the contrary elsewhere
in this Agreement, no Indemnifying Person shall, in any event, be liable to
the other party for any consequential damages, including, but not limited to,
loss of revenue or income, business interruption, cost of capital, or loss of
business reputation or opportunity relating to the breach or alleged breach
of this Agreement. Each party agrees that it will not seek punitive damages
as to any matter under, relating to or arising out of the Transactions. The
foregoing shall not be interpreted, however, to limit indemnification for
Losses incurred as a result of the assertion by a claimant (other than the
parties hereto and their successors and assigns), in a Third-Party Claim (as
defined below) of claims for damages of the foregoing type.
(d) The parties hereto agree that the indemnification
provisions of this Article X are intended to provide the exclusive remedy as
to all Losses any Indemnified Person may incur arising from or relating to
the Transactions, and each party hereby waives, to the extent they may do so,
any other rights or remedies that may arise under any applicable statute,
rule or regulation. Moreover, notwithstanding anything to the contrary in
this Agreement, Buyer waives no rights it may have or come to have or to
pursue against any unrelated predecessors in interest of MagneTek or NEC.
(e) No Buyer Indemnified Person shall have any right,
nor shall Magnetek have any liability under this Article X in respect of, any
claim for indemnification under Section 10.1 or 10.3 to the extent such claim
arises from any action or omission that occurred on or after July 6, 1995 and
was under the control of Buyer or its Affiliates or agents pursuant to the
Management Agreement referred to in Section 7.1 hereof.
(f) To the extent any Indemnified Person incurs a Loss
for which a right to indemnification may be asserted under this Article X and
such Loss is incurred in Mexican currency, for purposes of calculating the
amount of such Loss under this Agreement, the New York selling exchange rate
published in THE WALL STREET JOURNAL on the date the Loss was incurred shall
govern.
10.5 TERMINATION OF INDEMNIFICATION. The obligations to indemnify
and hold harmless a party hereto, (A) pursuant to Sections 10.1(a) and
10.2(a), shall terminate when the applicable representation or warranty
terminates pursuant to Section 10.8, (B) pursuant to Section 10.3, shall
terminate as and to the extent set forth therein and (C) pursuant to Sections
10.1(b) and 10.2(b), shall terminate on the second anniversary of the Closing
Date (except as to
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Sections 7.6, 8.6, 8.7 and 8.9 which shall survive indefinitely or for any
applicable periods set forth therein); PROVIDED, HOWEVER, that as to clauses
(A), (B) and (C) above, such obligations to indemnify and hold harmless shall
not terminate with respect to any item as to which the person to be
indemnified shall have, before the expiration of the applicable period,
previously made a claim by delivering a notice (stating in reasonable detail
the basis (whether or not the amount of Losses related to such claim is then
known or estimable) of such claim) to the Indemnifying Person.
10.6 PROCEDURES RELATING TO INDEMNIFICATION (OTHER THAN FOR TAX
CLAIMS). In order for an Indemnified Person to be entitled to any
indemnification provided for under this Agreement (other than for Tax Claims)
in respect of, arising out of or involving a claim or demand made by any
Person against the Indemnified Person (a "Third-Party Claim"), such
Indemnified Person must notify the Indemnifying Person in writing, and in
reasonable detail, of the Third-Party Claim within 10 Business Days after
receipt by such Indemnified Person of written notice of the Third-Party
Claim; PROVIDED, HOWEVER, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
Indemnifying Person shall have been actually prejudiced as a result of such
failure (except that the Indemnifying Person shall not be liable for any
Losses incurred during the period in which the Indemnified Person failed to
give such notice). Thereafter, the Indemnified Person shall deliver to the
Indemnifying Person, within five Business Days after the Indemnified Person's
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnified Person relating to the Third-Party Claim.
If a Third-Party Claim is made against an Indemnified Person, the
Indemnifying Person will be entitled to participate in the defense thereof
and, if it so chooses, to assume the defense thereof with counsel selected by
the Indemnifying Person and reasonably satisfactory to the Indemnified
Person. Should the Indemnifying Person so elect to assume the defense of a
Third-Party Claim, the Indemnifying Person will not be liable to the
Indemnified Person for legal fees and expenses subsequently incurred by the
Indemnified Person in connection with the defense thereof. If the
Indemnifying Person assumes such defense, the Indemnified Person shall have
the right to participate in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by the Indemnifying Person,
it being understood that the Indemnifying Person shall control such defense.
The Indemnifying Person shall be liable for the fees and expenses of counsel
employed by the Indemnified Person for any period during which the
Indemnifying Person has not
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assumed the defense thereof (other than during any period in which the
Indemnified Person shall have failed to give notice of the Third Party Claim
as provided above). If the Indemnifying Person chooses to defend or prosecute
any Third-Party Claim, all the parties hereto shall cooperate in the defense
or prosecution thereof. Such cooperation shall include the retention and
(upon the Indemnifying Person's request) the provision to the Indemnifying
Person of records and information which are reasonably relevant to such
Third-Party Claim, and making employees available on a mutually convenient
basis in the manner specified in Section 8.6 hereof to provide additional
information and explanation of any material provided hereunder.
Notwithstanding the foregoing, in the event a Third-Party Claim is made
against either Seller as to which MagneTek is entitled to seek
indemnification under this Article X and MagneTek concludes, in its
reasonable judgment, that Buyer lacks the financial and personnel resources
to vigorously defend MagneTek from such Third-Party Claim, MagneTek may elect
to retain the defense of such Third-Party Claim and shall be entitled to be
reimbursed by Buyer for its Losses incurred in such defense, such
expenditures to be reimbursed promptly after submission of invoices therefor.
Whether or not the Indemnifying Person shall have assumed the defense of a
Third-Party Claim, the Indemnified Person shall not admit any liability with
respect to, or settle, compromise or discharge, such Third-Party Claim
without the Indemnifying Person's prior written consent (which consent shall
not be unreasonably withheld or delayed). All Tax Claims (as defined in
Section 10.7) shall be governed by Section 10.7.
10.7 PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS.
(a) If a claim shall be made by any Tax authority,
which, if successful, might result in an indemnity payment to any Person
hereunder (a "Tax Indemnitee"), the Tax Indemnitee shall promptly notify the
party against whom indemnification is sought (the "Tax Indemnitor") in
writing of such claim (a "Tax Claim"). If notice of a Tax Claim is not given
to the Tax Indemnitor within a sufficient period of time to allow the Tax
Indemnitor to effectively contest such Tax Claim, or in reasonable detail to
apprise the Tax Indemnitor of the nature of the Tax Claim, in each case
taking into account the facts and circumstances with respect to such Tax
Claim, the Tax Indemnitor shall not be liable to the Tax Indemnitee to the
extent that the Tax Indemnitor's ability to effectively contest such Tax
Claim is actually prejudiced as a result thereof.
(b) With respect to any Tax Claim, the Tax Indemnitor
shall control all proceedings taken in connection with such Tax Claim
(including, without limitation, selection
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of counsel) and, without limiting the foregoing, may in its sole discretion
pursue or forego any and all administrative appeals, proceedings, hearings
and conferences with any taxing authority with respect thereto and may, in
its sole discretion, either pay the Tax claimed and sue for a refund where
applicable law permits such refund suits or contest the Tax Claim in any
permissible manner, provided, however, that the Tax Indemnitor shall not
settle or compromise a Tax Claim without giving 30 days' prior notice to the
Tax Indemnitee, and without the Tax Indemnitee's consent, which shall not be
unreasonably withheld or delayed, if such settlement or compromise would have
a material adverse effect on the Tax liabilities of the Tax Indemnitee, its
Affiliates or any member of its affiliated group. The Tax Indemnitee, and
each of its Affiliates, shall cooperate with the Tax Indemnitor in contesting
any Tax Claim, which cooperation shall include, without limitation, the
retention and (upon the Tax Indemnitor's request) the provision to Tax
Indemnitor of records and information which are reasonably relevant to such
Tax Claim, and making employees available on a mutually convenient basis to
provide additional information or explanation of any material provided
hereunder or to testify at proceedings relating to such Tax Claim.
10.8 SURVIVAL OF REPRESENTATIONS. The representations and
warranties in this Agreement shall survive the Closing solely for purposes of
Sections 10.1 and 10.2 and shall terminate at the close of business on the
second anniversary of the Closing Date. Notwithstanding the foregoing, (a)
the representations and warranties relating to environmental matters in
Section 4.8 shall not survive the Closing and (b) Buyer's acknowledgment
pursuant to Section 5.4 shall not expire. Nothing in this Section 10.8 shall
limit the duration of Section 10.3.
ARTICLE XI
GENERAL PROVISIONS
11.1 ASSIGNMENT. This Agreement shall be binding upon and shall
inure to the benefit of the parties' successor-in-interest and assigns. This
Agreement and the rights and obligations hereunder shall not be assignable or
transferable by Buyer other than by operation of law, including by way of
stock sale or merger, except to a buyer of substantially all the assets of
Buyer, without the prior written consent of MagneTek; PROVIDED, HOWEVER, that
(a) Buyer may assign its right to purchase the Assets hereunder to an
Affiliate of Buyer that can accurately make all of Buyer's representations
and warranties as of the Closing without the prior written consent of
MagneTek, but in no event shall any
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such assignment limit or affect Buyer's obligations hereunder and (b) Buyer
may assign its rights (including its indemnification rights) hereunder or
grant a security interest in this Agreement, or both, to or for the benefit
of any Person holding a financial obligation of Buyer issued in connection
with the financing of the Transactions or in connection with any renewal,
extension, modification, amendment, refinancing, refunding or replacement of
any such financial obligation.
11.2 NO THIRD-PARTY BENEFICIARIES. Except as provided in Section
11.1 as to permitted assignees and in Article X as to Indemnified Persons,
this Agreement is for the sole benefit of the parties hereto and their
permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any Person, other than the parties hereto and such
assigns, any legal or equitable rights hereunder.
11.3 TERMINATION.
(a) Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated (except as set forth in
Section 11.3(c)) and the Transactions abandoned at any time prior to the Closing
Date:
(i) by mutual written consent
of Sellers and Buyer;
(ii) by Sellers if any of the conditions set forth
in Section 3.2 shall have become incapable of fulfillment,
and shall not have been waived by Sellers;
(iii) by Buyer if any of the conditions set forth in
Section 3.1 shall have become incapable of fulfillment,
and shall not have been waived by Buyer; or
(iv) by Sellers or Buyer, if the Closing does
not occur on or prior to September 30, 1995; PROVIDED,
HOWEVER, that the party seeking termination pursuant
to clause (ii), (iii) or (iv) is not materially in breach
(after having been given written notice and a five-Business
Day cure period, if such breach is susceptible of cure) of
any of its representations, warranties, covenants or
agreements contained in this Agreement.
(b) In the event of termination by Sellers or Buyer
pursuant to this Section 11.3, written notice thereof shall forthwith be given
to the other party and the
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Transactions shall be terminated, without further action by either party. If
the Transactions are terminated as provided herein:
(i) Buyer shall return all documents and
copies and other material received from Sellers relating to
the Transactions, whether so obtained before or after
the execution hereof, to Sellers;
(ii) all confidential information received
by Buyer with respect to the Brownsville Business, Coil
Company and Glasmex and Sellers shall be treated in
accordance with the Confidentiality Agreement which
shall remain in full force and effect notwithstanding
the termination of this Agreement.
(c) If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 11.3, this
Agreement shall become void and of no further force and effect, except for the
provisions of (i) Section 7.1 relating to the obligation of Buyer to keep
confidential certain information and data obtained by it, (ii) Section 11.4
relating to certain expenses, (iii) Section 8.3 relating to publicity,
(iv) Section 11.11 relating to finder's fees and broker's fees and (v) this
Section 11.3. Nothing in this Section 11.3 shall be deemed to release Sellers
or Buyer from any liability for any breach by such party of the terms and
provisions of this Agreement or to impair the right of Sellers or Buyer to
compel specific performance by the other party of its obligations under this
Agreement.
11.4 EXPENSES. Whether or not the Transactions are consummated,
and except as otherwise provided in this Agreement, all fees, costs and
expenses incurred in connection with the Transaction Documents and the
Transactions shall be paid by the party incurring such fees, costs or
expenses.
11.5 ATTORNEYS' FEES. Should any litigation be commenced
concerning this Agreement or the rights and duties of any party with respect
to it, the party prevailing shall be entitled, in addition to such other
relief as may be granted, to a reasonable sum for such party's attorneys'
fees and expenses determined by the court in such litigation or in a separate
action brought for that purpose.
11.6 AMENDMENTS. No amendment to this Agreement shall be
effective unless it shall be in writing and signed by both parties hereto.
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11.7 NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent prepaid telex, cable or telecopy, or sent, postage prepaid, by
registered, certified or express mail, or reputable overnight courier service
and shall be deemed given when so delivered by hand, telexed, cabled or
telecopied, or if mailed, three days after mailing (one business day in the
case of express mail or overnight courier service), as follows:
(i) if to Buyer, to:
National Electric Coil Company, L.P.
c/o National Electric Coil-Columbus
800 King Avenue
Columbus, Ohio 43212
with a copy to:
Stanley L. Waldbaum, Esq.
12 Hawk Street
Spring Valley, NY 10977
(ii) if to MagneTek, to:
MagneTek, Inc.
26 Century Boulevard
P.O. Box 290159
Nashville, Tennessee 37229-0159
Attention: Samuel A. Miley, Esq.
General Counsel
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
48th Floor
Los Angeles, California 90071
Attention: Jennifer Bellah, Esq.
(iii) if to NEC, to:
MagneTek National Electric Coil, Inc.
c/o 26 Century Boulevard
P.O. Box 290159
Nashville, Tennessee 37229-0159
Attention: Samuel A. Miley, Esq.
Secretary
11.8 INTERPRETATION; EXHIBITS AND SCHEDULES. The headings
contained in this Agreement, in any Exhibit or Schedule hereto and in the
table of contents to this
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Agreement, are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Any matter disclosed in one
Schedule hereto shall be deemed incorporated by reference into each other
Schedule hereto and disclosed in each such Schedule. All Exhibits and
Schedules annexed hereto or referred to herein are hereby incorporated in and
made a part of this Agreement as if set forth in full herein. Any
capitalized terms used in any Schedule or Exhibit, but not otherwise defined
therein, shall have the meaning as defined in this Agreement. All of the
Transaction Documents shall be interpreted in such a manner as to harmonize
and give effect to the provisions thereof.
11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been
signed by each of the parties and delivered to the other party.
11.10 ENTIRE AGREEMENT. This Agreement, the Sharing Agreement and
the Confidentiality Agreement contain the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersede all prior oral and written agreements and understandings relating
to such subject matter. 11.11FEES. Each party hereto hereby represents and
warrants that (a) the only brokers or finders that have acted for such party
in connection with this Agreement or the transactions contemplated hereby or
that may be entitled to any brokerage fee, finder's fee or commission in
respect thereof are set forth in Schedule 11.11 and (b) each party agrees
that it will pay all fees or commissions which may be payable to such firm(s)
retained by it or to which it may be obligated.
11.12 SEVERABILITY. If any provision of this Agreement or the
application of any such provision to any Person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not
affect any other provision hereof.
11.13 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
MAGNETEK, INC.
By:
-----------------------------------
Name: David P. Reiland
Title: Executive Vice President
MAGNETEK NATIONAL ELECTRIC COIL, INC.
By:
-----------------------------------
Name: David P. Reiland
Title: President
NATIONAL ELECTRIC COIL COMPANY, L.P.
By: Advanced Coil Technology,
Inc., its general partner
By:
-----------------------------------
Name: Robert G. Barton
Title: President
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EXHIBIT 13
SELECTED FINANCIAL DATA
STATEMENT OF INCOME DATA
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30.
AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA 1995** 1994** 1993 1992 1991
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $1,202,536 $1,133,126 $1,119,392 $883,466 $779,137
Income (loss):
Continuing operations 21,496 (16,942) 19,263 14,712 10,582
Discontinued operations (14,400) (28,503) 7,770 10,331 24,065
Extraordinary item (4,820) -- -- (2,857) --
Cumulative effect of accounting changes -- -- (48,734) -- --
Net income (loss) 2,276 (45,445) (21,701) 22,186 34,647
- -------------------------------------------------------------------------------------------------------
Per common share -- primary:
Income (loss) from continuing operations
before extraordinary item and cumulative
effect of accounting changes $.87 $(0.69) $0.78 $0.61 $0.45
Net income (loss) $.09 $(1.84) $(0.87) $0.92 $1.47
Per common share -- fully diluted:
Income (loss) from continuing operations
before extraordinary item and cumulative
effect of accounting changes $.84 * $0.73 $0.59 $0.45
Net income (loss) * * * $0.90 $1.47
- -------------------------------------------------------------------------------------------------------
<FN>
* Per share amounts on a fully diluted basis are omitted as such amounts are
anti-dilutive in relation to primary per share amounts.
** Loss from discontinued operations includes after tax charges of $14,400 and
$25,041 for the years ended June 30, 1995 and 1994 respectively reflecting
estimated losses on disposition.
Loss from continuing operations for the year ended June 30, 1994 includes
pretax charges aggregating $33,871 reflecting restructuring and other costs
(see Notes 2 and 7 to Consolidated Financial Statements).
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
AS OF JUNE 30. AMOUNTS IN THOUSANDS 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total assets $857,168 $931,358 $995,359 $888,668 $739,142
Long-term debt, including current portion 448,467 523,779 523,301 428,880 403,071
Common stockholders' equity 117,278 113,082 163,029 196,463 158,651
- --------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
In July, 1994, the Company's Board of Directors adopted a formal plan of
disposal for certain businesses in connection with an overall restructuring
program designed to focus the Company's resources on its core product lines and
to reduce debt. The businesses designated for disposition included the Company's
utility, military, controls and custom motor segments.
As of June 30, 1995, the Company had sold its military, controls and custom
motors businesses in a series of transactions, as well as certain product lines
of its utility business. Subsequent to fiscal 1995 year end, the Company sold
its medium power transformer business, which represented most of the remainder
of the utility business. The Company is in various stages of completing
transactions for the disposition of certain minor remaining operations.
Operating results and net assets of the above businesses through their disposal
date are included as "discontinued operations" in the accompanying consolidated
financial statements. Accordingly, the discussion that follows concerns only the
results of continuing operations. See Note 2 for additional information about
discontinued operations and the restructuring program.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<CAPTION>
BALLASTS & TRANSFORMERS REVENUE
(in millions of dollars)
<S> <C>
FY-95 $687.3 (+4%)
FY-94 $660.5 (-7%)
FY-93 $712.6
<CAPTION>
MOTORS & CONTROLS REVENUE
(in millions of dollars)
<S> <C>
FY-95 $515.2 (+9%)
FY-94 $472.6 (+16%)
FY-93 $406.9
TOTAL COMPANY REVENUE
(in millions of dollars)
<S> <C>
FY-95 $1,203 (+6%)
FY-94 $1,133 (+1%)
FY-93 $1,119
- --------------------------------------------------------------------------------
</TABLE>
The Company currently operates in two business segments: Ballasts &
Transformers, including primarily lighting products (magnetic and electronic
lighting ballasts), power supplies and small transformer products; and Motors &
Controls, which includes fractional and integral horsepower electric motors,
medium voltage generators and electronic adjustable speed drives.
During fiscal 1995, sales of electronic lighting ballasts, of which MagneTek is
a leading supplier, rebounded sharply from a significant drop in fiscal 1994.
The 1994 drop was caused by a substantial increase in industry production rates
and customer inventories, which occurred primarily during fiscal 1993, in
response to perceived demand which exceeded actual end-user demand. Customer
order rates and Company shipments declined sharply in fiscal 1994 as the excess
inventories were being consumed. End-user demand for electronic ballasts
continued to grow (albeit at a slower rate than originally perceived in 1993);
and in early fiscal 1995, demand, production rates and inventories came into
closer alignment, resulting in stronger order rates and increased shipments
during this fiscal year.
Sales of magnetic ballasts have declined slightly over the past two fiscal
years; however, the Company expects sales of these ballasts to decline at a more
rapid rate in the future as they are displaced by electronic ballasts in more
applications. Consequently, the Company also believes sales of electronic
ballasts will continue to increase.
The strengthening of the U.S. economy resulted in growing demand for the
Company's motor, generator and drive products throughout most of fiscal 1994 and
1995. Demand was particularly strong for fractional horsepower motors, although
demand for these motors began to soften during the last quarter of fiscal 1995.
Margin increases, while gradual in fiscal 1994 because price increases were
largely offset by cost increases, accelerated in fiscal 1995 due to
volume-related production efficiencies and an overall reduction in
administrative costs.
16
<PAGE>
RESULTS OF OPERATIONS
NET SALES AND GROSS PROFIT
Total MagneTek net sales were $1.203 billion in fiscal 1995, an increase of
6% over fiscal 1994's $1.133 billion. This followed a 1% increase in fiscal
1994 revenue over 1993's $1.119 billion. The overall revenue increase in
fiscal 1995 includes the sales increases in electronic ballasts and
fractional horsepower motors referred to above, partially offset by lower
sales of transformer products in Europe. Net sales in the Company's two
business segments are shown below, left.
Both the 1994 decline and 1995 rebound in Ballasts & Transformers segment
revenue were due to swings in U.S. electronic ballast sales, which dropped by
almost 30% in 1994 then grew by over 40% in 1995 as production levels began
to reflect actual demand. The steady growth in Motors & Controls revenue from
1993 through 1995 generally reflects U.S. economic growth, but was
attributable specifically to fractional horsepower motor sales increases of
16% and 8% in 1994 and 1995, respectively, and to above average electronic
drive and generator sales growth in the same years.
- --------------------------------------------------------------------------------
PHOTO W/CAPTION
DAVID REILAND, EXECUTIVE VICE PRESIDENT & CFO:
"IMPROVEMENTS IN GROSS MARGINS AND CASH GENERATION ARE OUR TWO PRIMARY
OBJECTIVES... AND KEYS TO OUR FUTURE SUCCESS."
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
GROSS PROFIT
(in millions of dollars)
<S> <C>
FY-95 $239.6 (20% of sales)
FY-94 $195.4 (17% of sales)
FY-93 $241.9 (22% of sales)
<CAPTION>
SG&A
(in millions of dollars)
<S> <C>
FY-95 $164.3 (14% of sales)
FY-94 $185.5 (16% of sales)
FY-93 $172.3 (15% of sales)
<CAPTION>
OPERATING PROFIT
(in millions of dollars)
<S> <C>
FY-95 $75.4
FY-94 $9.9
FY-93 $69.6
- --------------------------------------------------------------------------------
</TABLE>
The Company's gross profit increased to $239.6 million in fiscal 1995 from
$195.4 million in fiscal 1994, and its gross margin improved to 20% of sales
in 1995 from 17% in 1994. Gross profit in 1994 includes charges aggregating
$19.1 million for inventory write-downs and other reserves provided in
conjunction with the Company's restructuring program (see Note 2). Excluding
these charges, the gross margin in 1994 was 19% of sales.
The overall increase in gross profit was due to volume-related efficiency
improvements in the electronic ballast and fractional horsepower motor
businesses. Electronic ballasts' gross profit in the U.S. grew by over $20
million, adding a full eight percentage points to gross margin for that
product line. Gross margins in other domestic lighting product lines were
fairly comparable to 1994, with material cost increases offset by price
increases. In Europe, gross margins improved in power supplies but declined
in magnetic ballasts, primarily due to the effect of the strong Deutschmark
(DM) on pricing.
From 1993 to 1994, overall gross profit decreased approximately $46 million
due to weakness in the electronic ballast business and the restructuring
charges referred to above. Gross margins in the Motors & Controls businesses
were up year-to-year with labor and material cost increases offset by price
increases and efficiency gains.
OPERATING EXPENSES
Selling, general and administrative (SG&A) expense was $164.3 million (13.7%
of net sales) in fiscal 1995, down from $185.5 million (16.4% of net sales)
in fiscal 1994 and $172.3 million (15.4% of net sales) in 1993. SG&A expense
in 1994 includes charges associated with the Company's restructuring program
aggregating $12.1 million as well as a $2.7 million charge reflecting costs
to settle litigation (see Note 7). Excluding these charges, SG&A expense was
15.1% of sales in 1994. The 1995 decline in total SG&A expense resulted from
administrative consolidations and cost reduction programs completed largely
during late 1994 and 1995.
INTEREST AND OTHER EXPENSES
Interest expense of $34.4 million in 1995 was up over fiscal 1994's $32
million, which was up slightly from $31.5 million in 1993. The increase in
1995 reflects increased working capital levels. Interest expense allocated to
discontinued operations and not reflected in the foregoing figures amounted
to $10.8 million, $15.8 million and $16.4 million in 1995, 1994 and 1993,
respectively (see Note 2).
17
<PAGE>
Including interest allocated to discontinued operations, total interest
expense incurred by the Company was $45.2 million, $47.8 million and $47.9
million in 1995, 1994 and 1993, respectively. The overall decline in 1995
interest expense reflects lower overall borrowings as proceeds from the sales
of discontinued operations were applied to debt reduction. The interest
expense decline was limited by increased borrowings to support higher working
capital balances and generally higher variable interest rates.
NET INCOME (LOSS)
In fiscal 1995, before extraordinary items, the Company recorded income from
continuing operations of $21.5 million, or $.87 per share ($.84 per share,
fully diluted) compared to a loss of $16.9 million, or $.69 per share, in
1994. Charges associated with the Company's restructuring program and the
litigation settlement mentioned above amounted to more than $20 million, or
$.84 per share, in 1994. Income from continuing operations before the
cumulative effect of accounting changes was $19.3 million, or $.78 per share
($.73 per share, fully diluted) in 1993.
During 1995 and 1994, the Company recorded aggregate losses from discontinued
operations of $14.4 million and $28.5 million, respectively. These amounts
were based on actual and estimated proceeds from the disposal of the
discontinued operations, as well as actual and estimated operating results of
these operations prior to their sale. Discontinued operations generated
income of $7.8 million in 1993.
In fiscal 1995, the Company refinanced its existing bank credit facilities
(see Note 4) and fully repaid outstanding borrowings under then existing bank
facilities in both the U.S. and Europe. The Company also fully redeemed, at a
premium, all of its remaining outstanding Senior Notes, which had an
aggregate face value of $135 million. The call premium associated with the
redemption of the Senior Notes, plus the unamortized portion of deferred
financing costs related to the Senior Notes and prior bank borrowings, is
reflected on the income statement as an extraordinary item related to early
extinguishment of debt.
In fiscal 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 106 - "Employers' Accounting for Postretirement Benefits
Other Than Pensions" - and SFAS No. 109 - "Accounting for Income Taxes". The
cumulative effect of the adoption of these two accounting standards resulted
in a one-time charge of $48.7 million (see Notes 6 and 9).
Net income, taking into account the results of both continuing and
discontinued operations, extraordinary items and the cumulative effect of
accounting changes, was: $2.3 million or $.09 per share in 1995, a loss of
$45.4 million or $1.84 in 1994 and a loss of $21.7 million or $.87 per share
in 1993.
LIQUIDITY AND CAPITAL RESOURCES
The amount outstanding under long-term borrowings (including current portion)
was $448 million as of June 30, 1995, down from approximately $524 million as
of both June 30, 1994 and 1993. The decrease in long-term borrowings resulted
from the use of proceeds from the sale of discontinued operations (see Note
2), which aggregated approximately $106 million during fiscal 1995, partially
offset by increased borrowings to support higher working capital levels. Net
cash provided by operating activities was $9.2 million, as income from
operations and noncash charges were largely offset by increased working
capital. Cash provided by investing activities was $63.6 million, including
proceeds from the sale of discontinued operations net of capital expenditures.
On March 31, 1995, the Company entered into an agreement with a group of
banks (Bank Loan Agreement) whereby the banks committed to lend up to $225
million under a revolving facility and $75 million under a term loan facility
(see Note 4). Proceeds from the Bank Loan Agreement were used to fully repay
all outstanding borrowings under the Company's former Revolving Credit
Agreement and its European Loan Agreement, and to fully redeem its 11.45
percent Senior Notes.
In July, 1995, the Company sold its medium power transformer business for a
cash price of $76 million, subject to certain post closing adjustments.
Proceeds from the sale were used to fully repay the term loan portion of
borrowings outstanding under the Bank Loan Agreement described above. This
transaction largely completed the Company's divestiture program. Proceeds
from the disposition of remaining minor discontinued operations will be used
to further repay long-term borrowings.
The Company may be subject to certain potential environmental and legal
liabilities (see Note 7).
18
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA. 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,202,536 $1,133,126 $1,119,392
Cost of sales 962,900 937,719 877,514
- ---------------------------------------------------------------------------------------------------
Gross profit 239,636 195,407 241,878
Selling, general and administrative expenses 164,280 185,509 172,259
- ---------------------------------------------------------------------------------------------------
Income from operations 75,356 9,898 69,619
Interest expense 34,398 32,018 31,542
Other expense, net 4,562 2,322 5,614
- ---------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before
provision (benefit) for income taxes, extraordinary
item and cumulative effect of accounting changes 36,396 (24,442) 32,463
Provision (benefit) for income taxes 14,900 (7,500) 13,200
- ---------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before
extraordinary item and cumulative effect of
accounting changes 21,496 (16,942) 19,263
Discontinued operations--
Income (loss) from operations (net of taxes) -- (3,462) 7,770
Loss on disposal (net of tax benefit) (14,400) (25,041) --
Extraordinary item--loss on early extinguishment of
debt (net of tax benefit) (4,820) -- --
Cumulative effect of changes in accounting for
postretirement medical benefits (net of tax benefit)
and income taxes -- -- (48,734)
- ---------------------------------------------------------------------------------------------------
Net income (loss) $ 2,276 $ (45,445) $ (21,701)
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Per common share -- primary:
Income (loss) from continuing operations before
extraordinary item and cumulative effect of
accounting changes $ .87 $ (.69) $ .78
Income (loss) from discontinued operations (.58) (1.15) .31
Extraordinary item (.20) -- --
Cumulative effect of accounting changes -- (1.96)
- ---------------------------------------------------------------------------------------------------
Net income (loss) $ .09 $ (1.84) $ (.87)
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Per common share -- fully diluted:
Income (loss) from continuing operations before
extraordinary item and cumulative effect of
accounting changes $ .84 $ * $ .73
Income (loss) from discontinued operations * * .30
Extraordinary item * -- --
Cumulative effect of accounting changes -- -- *
- ---------------------------------------------------------------------------------------------------
Net Income (loss) $ * $ * $ *
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
<FN>
*Per share amounts on a fully diluted basis have been omitted as such amounts
are anti-dilutive in relation to primary per share amounts.
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
19
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF JUNE 30,
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA. 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- -------------------------------------------------------------------------------------------------
CURRENT ASSETS:
Cash $ 311 $ 7,013
Accounts receivable, less allowance for doubtful accounts of
$4,421 in 1995 and $4,745 in 1994 235,252 217,106
Inventories 225,461 196,527
Deferred income taxes 25,463 20,688
Prepaids and other assets 3,749 12,282
- -------------------------------------------------------------------------------------------------
Total current assets 490,236 453,616
- -------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT:
Land 4,089 4,033
Buildings and improvements 62,359 63,511
Machinery and equipment 335,403 311,664
- -------------------------------------------------------------------------------------------------
401,851 379,208
Less accumulated depreciation and amortization 201,751 172,163
- -------------------------------------------------------------------------------------------------
Net property, plant and equipment 200,100 207,045
- -------------------------------------------------------------------------------------------------
Net assets of discontinued operations 98,118 197,217
Cost in excess of fair value of net assets acquired, less accumulated
amortization of $6,990 in 1995 and $6,005 in 1994 33,134 35,391
Deferred financing costs, intangible and other assets, less accumulated
amortization of $16,021 in 1995 and $12,927 in 1994 35,580 38,089
- -------------------------------------------------------------------------------------------------
$857,168 $931,358
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable $118,002 $117,884
Accrued liabilities 79,234 80,287
Current portion of long-term debt 17,580 49,998
- -------------------------------------------------------------------------------------------------
Total current liabilities 214,816 248,169
- -------------------------------------------------------------------------------------------------
Long-term debt, net of current portion 430,887 473,781
Other long-term obligations 81,369 77,316
Deferred income taxes 12,818 19,010
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 100,000,000 shares authorized
24,680,000 and 24,205,000 shares issued and outstanding 247 242
Additional paid-in capital 81,142 76,364
Retained earnings 59,950 57,674
Cumulative translation adjustment (15,127) (16,561)
Minimum pension liability (8,934) (4,637)
- -------------------------------------------------------------------------------------------------
Total stockholders' equity 117,278 $113,082
- -------------------------------------------------------------------------------------------------
$857,168 $931,358
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE MINIMUM
COMMON STOCK PAID-IN RETAINED TRANSLATION PENSION
AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA. SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT LIABILITY
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1992 23,844,000 $238 $71,888 $124,820 $(483) --
- ----------------------------------------------------------------------------------------------------------------------------------
Exercise of stock options 278,000 3 3,606 -- -- --
Translation adjustment -- -- -- -- (15,342) --
Net loss -- -- -- (21,701) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1993 24,122,000 241 75,494 103,119 (15,825) --
- ----------------------------------------------------------------------------------------------------------------------------------
Exercise of stock options 83,000 1 870 -- -- --
Translation adjustment -- -- -- -- (736) --
Minimum pension liability -- -- -- -- -- (4,637)
Net loss -- -- -- (45,445) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1994 24,205,000 242 76,364 57,674 (16,561) (4,637)
- ----------------------------------------------------------------------------------------------------------------------------------
Exercise of stock options 455,000 5 4,778 -- -- --
Restricted stock grant 20,000 -- -- -- -- --
Translation adjustment -- -- -- -- 1,434 --
Minimum pension liability -- -- -- -- -- (4,297)
Net Income -- -- -- 2,276 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1995 24,680,000 $247 $81,142 $59,950 $(15,127) $(8,934)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
22
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30, AMOUNTS IN THOUSANDS 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations $21,496 $(16,942) $19,263
- ------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile income (loss) from continuing operations to net
cash provided by operating activities:
Depreciation and amortization 38,680 36,418 33,581
Gain on sale of assets -- (2,236) (2,584)
Restructuring charges -- 31,221 --
Changes in operating assets and liabilities of continuing operations, net of
effects from acquired companies (50,976) (18,331) (78,644)
- ------------------------------------------------------------------------------------------------------------------------------
Total adjustments (12,296) 47,072 (47,647)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 9,200 30,130 (28,384)
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of and investment in companies, net of cash acquired -- -- (24,540)
Proceeds from sale of businesses and assets 105,644 8,216 13,223
Capital expenditures (43,895) (43,338) (57,850)
Annuity contract and other investments 1,853 3,085 (9,787)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 63,602 (32,037) (78,954)
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under bank and other long-term obligations 81,217 15,238 110,213
Proceeds from issuance of common stock 3,736 871 3,609
Repayment of bank and other long-term obligations (171,000) (15,090) (9,157)
Increase in deferred financing costs (5,446) (703) (2,553)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (91,493) 316 102,112
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used in continuing operations (18,691) (1,591) (5,226)
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations (14,400) (28,503) 7,770
Adjustments to reconcile income (loss) to net cash provided by
discontinued operations:
Depreciation and amortization 7,738 11,211 12,154
Loss on disposal and other noncash charges 12,338 27,341 --
Changes in operating assets and liabilities of discontinued
operations 7,717 (2,994) (210)
Capital expenditures (1,404) (6,057) (9,951)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by discontinued operations 11,989 998 9,763
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (6,702) (593) 4,537
Cash at beginning of year 7,013 7,606 3,069
- ------------------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 311 $7,013 $7,606
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in the notes to consolidated financial statements are expressed in
thousands, except share and per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of MagneTek, Inc. and
its subsidiaries (the Company). All significant intercompany accounts and
transactions have been eliminated. Reclassification of certain selling, general
and administrative costs to cost of sales for fiscal years 1994 and 1993 have
been made to conform to the presentation in the current fiscal year.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
PROPERTY, PLANT AND EQUIPMENT
Additions and improvements are capitalized at cost, whereas expenditures for
maintenance and repairs are charged to expense as incurred. Depreciation is
provided over the estimated useful lives of the respective assets principally on
the straight-line method.
DEFERRED FINANCING COSTS, INTANGIBLE AND OTHER ASSETS
Costs incurred to obtain financing are deferred and amortized principally on a
debt-outstanding method over the term of financing acquired. Amortization
expense relating to deferred financing costs was $2,425, $2,358 and $2,006 for
the years ended June 30, 1995, 1994 and 1993 respectively. Cost in excess of
fair value of net assets acquired (goodwill) is being amortized using the
straight-line method over a forty-year period. The Company assesses the
recoverability of goodwill based upon several factors, including management's
intention with respect to the operations to which the goodwill relates and those
operations' projected future income and undiscounted cash flows. Write-downs of
goodwill are recognized when it is determined that the value of such asset has
been impaired. Amortization expense relating to goodwill was $985, $1,018, and
$1,050 for the years ended June 30, 1995, 1994 and 1993 respectively.
Amortization expense relating to deferred financing costs and goodwill is
included in the Consolidated Statements of Income as other expense.
INCOME TAXES
Income taxes are provided based upon the results of operations for financial
reporting purposes and include deferred income taxes applicable to timing
differences between financial and taxable income.
Federal income taxes are not provided currently on undistributed earnings of
foreign subsidiaries since the Company presently intends to reinvest any
earnings overseas indefinitely. At June 30, 1995, the Company had an accumulated
deficit in its foreign operations.
EARNINGS PER SHARE
Primary earnings per share are computed based upon the weighted average number
of common and common equivalent (principally stock options) shares outstanding.
Fully diluted earnings per share are computed based upon the weighted average
number of common and common equivalent shares outstanding including the effect
of additional shares related to the Company's Convertible Notes as if conversion
to common shares had occurred at the beginning of the fiscal year. Earnings have
also been adjusted for interest expense on the Convertible Notes.
FISCAL YEAR
The Company uses a fifty-two, fifty-three week fiscal year which ends on the
Sunday nearest June 30. For clarity of presentation, all periods are presented
as if the year ended on June 30. Fiscal years 1995 and 1993 contained 52 weeks.
Fiscal year 1994 contained 53 weeks.
24
<PAGE>
2. DISCONTINUED OPERATIONS AND RESTRUCTURING COSTS
In July, 1994, the Company's Board of Directors adopted a formal plan of
disposal for certain businesses in connection with an overall restructuring
program designed to focus the Company's resources on its core product lines and
reduce debt. The segments to be disposed of comprised the Company's utility,
military, controls and custom motor segments. The businesses identified for
divestiture have been classified as discontinued operations in the accompanying
financial statements.
During the fiscal year ended June 30, 1994, the Company provided for estimated
losses on disposal of the discontinued operations, net of tax benefit of $2,300,
in the amount of $25,041 which included a provision for anticipated operating
losses prior to disposal. During the fiscal year ended June 30, 1995, the
Company provided for additional losses on disposal, net of tax benefit of
$7,200, in the amount of $14,400. The additional provision was required
primarily due to lower than anticipated sales proceeds primarily associated with
the sale of utility segment businesses and higher than anticipated operating
losses prior to the sale of these and other discontinued operations. The tax
benefits recorded in connection with these losses are less than the benefits
computed using statutory rates due to the disallowance (for tax purposes) of a
portion of the losses on the sale of certain discontinued operations.
The operating results of the discontinued operations are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $246,021 $365,609 $392,773
Income (loss) before provision for income taxes (12,369) $(3,362) $13,170
Provision (benefit) for income taxes (4,700) 100 5,400
- -------------------------------------------------------------------------------------------------------------
Income (loss) of discontinued operations $(7,669) $(3,462) $7,770
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Results for the years ended June 30, 1994 and 1993 are reported separately as
discontinued operations in the accompanying Consolidated Statements of Income.
Results for the year ended June 30, 1995 were charged to reserves established in
connection with the provisions for estimated losses on disposal referred to
above. A portion of the Company's consolidated interest expense has been
allocated to the results of discontinued operations based upon the ratio of the
net assets of discontinued operations to the total net assets of the Company.
Total interest expense allocated to discontinued operations and included in the
results above was $10,788, $15,806 and $16,414 for the years ended June 30,
1995, 1994 and 1993, respectively.
During the year ended June 30, 1995, the Company sold in cash transactions
substantially all of the businesses comprising its military and controls
segments and certain of the businesses comprising its utility segment. These
transactions included sales of assets, subject to certain liabilities, as well
as sales of the stock of certain subsidiaries. During the year ended June 30,
1994, the Company sold in a cash transaction substantially all of the assets,
subject to certain liabilities of its custom motor business. Aggregate net
proceeds from transactions consummated as of June 30, 1995 were approximately
$114,000. In July 1995, the Company sold the stock of its medium power
transformer business, which represented the majority of the remainder of the
Company's utility segment for a cash purchase price of $76,000, subject to
certain post closing adjustments. All proceeds were used to repay debt. The
Company is in various stages of consummating other transactions for the
remaining minor discontinued operations (comprised primarily of the remainder of
the utility segment) and expects to fully complete its divestiture program
during the first half of fiscal 1996.
In connection with the restructuring program, the Company also undertook a
review of its core product lines with the objective of developing actions to
reduce costs and improve future profitability. The Company identified a
substantial amount of potentially obsolete or excess inventory related to the
Company's electronic ballast product line based upon current and projected
demand and production rates for this product line. The Company also relocated
and consolidated a number of operating and administrative locations as part of
the overall restructuring program. As a result of this review, the Company
recorded charges to income aggregating $31,221 related to potentially obsolete
or excess inventory, severance and relocation costs associated with the
restructuring. Of this amount, $19,135 is included in cost of sales and $12,086
is included in selling, general and administrative expense in the Consolidated
Statement of Income for the year ended June 30, 1994. Of the originally
established restructuring reserve of $31,221, the remaining balance at June 30,
1995 is $3,611. Noncash charges applicable to inventory and asset write-offs as
well as warranty replacement amounted to $18,440. Cash expenditures of $9,170
associated with severance, relocation and redundant lease costs have been
incurred to date. The company expects the remaining restructuring reserve of
$3,611 to result in future cash outlays of approximately $1,200, and further
expects to complete all restructuring activities by June 30, 1996.
25
<PAGE>
3. INVENTORIES
Inventories at June 30, consist of the following:
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and stock parts $66,507 $59,943
Work-in-process 45,803 43,198
Finished Goods 113,151 93,386
- ---------------------------------------------------------------------------------------------------------------------
$225,461 $196,527
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
4. LONG-TERM DEBT AND BANK BORROWING ARRANGEMENTS
Long-term debt at June 30, consists of the following:
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revolving bank loans $155,021 $173,549
Term loan 75,000 --
11.45 percent Senior Notes, interest payable semi-annually, due June 30, 1997 -- 135,000
10.75 percent Senior Subordinated Debentures, interest payable semi-annually,
due November 15, 1998 125,000 125,000
8 percent Convertible Subordinated Notes, interest payable semi-annually,
convertible into 4,687,500 shares of common stock, due September 2001 75,000 75,000
Miscellaneous installment notes, capital leases and other obligations at rates
ranging from 6.3 percent to 13.5 percent, due through 2000 18,446 15,230
- ---------------------------------------------------------------------------------------------------------------------
448,467 523,779
Less current portion 17,580 49,998
- ---------------------------------------------------------------------------------------------------------------------
$430,887 $473,781
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
BANK BORROWING ARRANGEMENTS
On March 31, 1995, the Company entered into an agreement with a group of banks
(Bank Loan Agreement) whereby the banks have committed to lend up to $225,000
under a revolving loan facility and $75,000 under a term loan facility through
September 30, 1998. Borrowings under these facilities bear interest at the
banks' prime lending rate plus three-quarters percent or, at the Company's
option, the London Interbank Offered Rate plus two percent. These rates may be
reduced by up to three-quarters and one and one-quarter percent, respectively,
based upon the achievement of certain debt-to-cash-flow ratios. At June 30,
1995 borrowings under the Bank Loan Agreement bore interest at a weighted
average rate of approximately 8.1%. The Company is required to pay a commitment
fee of three-eighths percent on the unused commitment.
Borrowings under the Bank Loan Agreements are secured by domestic accounts
receivable and inventories and by the stock of the Company's domestic
subsidiaries. The Bank Loan Agreement contains certain provisions and covenants
which, among other things, restrict the payment of cash dividends on common
stock, limit the amount of future indebtedness and require the Company to
maintain specified levels of net worth and cash flow.
Proceeds from the Bank Loan Agreement were used to fully repay all outstanding
borrowings under the Company's former Revolving Credit Agreement, the European
Loan Agreement and to fully redeem the Company's 11.45 percent Senior Notes
including a call premium. The unamortized portion of deferred financing costs
associated with all of the above repaid debt together with the premium paid in
excess of the face value on the Senior Notes are included in the extraordinary
loss on early extinguishment of debt in the accompanying Consolidated Income
Statement for the year ended June 30, 1995.
The Company's European subsidiaries have certain limited arrangements locally to
finance working capital requirements. Borrowings under these arrangements are
secured by accounts receivable and inventories of the respective subsidiaries.
In July 1995, the Company fully repaid all borrowings under the term loan
facility with proceeds from the sale of its medium power transformer business
(see Note 2).
SENIOR SUBORDINATED DEBENTURES
The 10.75 percent Senior Subordinated Debentures ("Subordinated Debentures") are
not redeemable by the Company prior to maturity in November, 1998. The
Subordinated Debentures are subordinated to borrowings under the Bank Loan
Agreement.
The indenture related to the Subordinated Debentures contains certain covenants
which, among other things, limit the nature and amount of future indebtedness
and restrict the payment of dividends on common stock.
CONVERTIBLE SUBORDINATED NOTES
The 8 percent Convertible Subordinated Notes ("Convertible Notes") are
redeemable at the option of the Company, in whole or in part, at redemption
prices set forth in the indenture, and, at the option of the holder, are
convertible into common stock of the Company at $16.00 per share at any time
prior to maturity in September, 2001.
Aggregate principal maturities on long-term debt outstanding at June 30, 1995
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1995
- --------------------------------------------------------------------------------
<S> <C>
1996 17,580
1997 31,035
1998 26,811
1999 291,114
2000 2,799
Thereafter 79,128
- --------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
5. FAIR VALUES OF FINANCIAL INSTRUMENTS
The recorded amounts and estimated fair value of the Company's significant
financial instruments as of June 30, 1995 were as follows:
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.75 percent Senior Subordinated Debentures $125,000 $131,563
8 percent Convertible Subordinated Notes 75,000 73,500
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
The fair values of long-term debt were estimated based on quoted market prices
or through broker quotations. The carrying amounts of certain financial
instruments such as cash, annuity contracts and borrowings under short-term
revolving credit agreements approximate their fair values.
The Company enters into futures contracts to provide an economic hedge against
fluctuations in copper prices. Gains and losses are recorded in cost of sales as
the related purchased copper is incorporated into finished products and sold.
Unrealized gains on open contracts at June 30, 1995 were not material to the
Company's results of operations.
6. INCOME TAXES
Effective July 1, 1992, the Company changed its method of accounting for income
taxes to the liability method of accounting for income taxes with the adoption
of Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" (SFAS No. 109). As permitted under the new rules, prior years' financial
statements have not been restated. The cumulative effect of adopting SFAS No.
109 was a charge to income of $13,000 or $.52 per share on a primary basis in
the year ended June 30, 1993.
Income tax expense (benefit) is allocated in the financial statements as
follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) from continuing operations before extraordinary
item and cumulative effect of accounting changes $14,900 $(7,500) $13,200
Extraordinary item (3,200) -- --
Cumulative effect of accounting changes -- -- (22,370)
- -------------------------------------------------------------------------------------------------------------
Income tax expense (benefit) attributable to continuing
operations 11,700 (7,500) (9,170)
Discontinued operations (7,200) (2,200) 5,400
- -------------------------------------------------------------------------------------------------------------
Total $4,500 $(9,700) $(3,770)
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
The expense (benefit) for income taxes applicable to continuing operations is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT
Federal $3,575 $(3,836) $11,869
State 1,529 178 3,125
Foreign 1,419 942 (2,418)
DEFERRED:
Federal 5,603 (4,046) (19,689)
State and Foreign (426) (738) (2,057)
- ------------------------------------------------------------------------------
$11,700 $(7,500) $(9,170)
- ------------------------------------------------------------------------------
</TABLE>
Current taxes do not include the benefit related to the tax effect of stock
options exercised of $1,047 as such benefit was credited to paid in capital.
A reconciliation of the Company's effective tax rate to the statutory Federal
tax rate for income from continuing operations before extraordinary
items and cumulative effect of accounting changes is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30 AMOUNT % AMOUNT % AMOUNT %
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Provision (benefit) computed at the statutory rate $12,739 35.0 $(8,555) (35.0) $11,038 34.0
State income taxes, net of federal benefit 1,975 5.4 (371) (1.5) 1,937 6.0
Foreign tax rates in excess of federal statutory rate 108 .3 1,213 5.0) (173) (.5)
Permanent differences arising from application of purchase accounting 173 .5 141 .6 153 .5
Other (95) (.3) 72 .2 245 .7
- ----------------------------------------------------------------------------------------------------------------------------
$14,900 40.9 $(7,500) (30.7) $13,200 40.7
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Income (loss) before provision for income taxes of the Company's foreign
subsidiaries was approximately $(1,000), $1,500 and $1,300 for the years ended
June 30, 1995, 1994 and 1993.
29
<PAGE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets for continuing operations as
of June 30, 1995 and 1994 as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization (including differences in the basis of acquired assets) $32,190 $41,406
Pension costs 1,368 775
Inventory methods 3,454 2,616
- --------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities 37,012 44,797
- --------------------------------------------------------------------------------------------------------------
Deferred tax assets:
Postretirement medical benefit obligation 24,066 23,076
Inventory and other reserves (including Restructuring) 25,591 23,399
- --------------------------------------------------------------------------------------------------------------
Total deferred tax assets 49,657 46,475
- --------------------------------------------------------------------------------------------------------------
Net deferred tax assets $(12,645) $(1,678)
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Management believes that the deferred tax assets will ultimately be realized.
Management's conclusion is based on future taxable income that will result from
the reversal of the existing taxable temporary differences and from the
carryback of future tax losses to prior carryback years.
30
<PAGE>
7. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases certain facilities and machinery and equipment primarily
under operating lease arrangements. Future minimum rental payments under
noncancelable operating leases as of June 30, 1995 total $62,103 and are payable
in future fiscal years as follows: $12,676 in 1996; $11,419 in 1997; $9,951 in
1998; $8,148 in 1999; $7,568 in 2000 and $12,341 thereafter.
Rent expense for the years ended June 30, 1995, 1994 and 1993 was $18,769,
$18,673 and $16,715 respectively.
LITIGATION
PENSION MATTERS
Primarily in 1985, the Company entered into agreements with Executive Life
Insurance Company ("ELIC") under which ELIC assumed accrued pension obligations
under certain defined benefit retirement plans (collectively, the "Plan")
pursuant to an annuity purchase agreement. The Plan paid approximately $25,300
to ELIC under these agreements. In April 1991, the California Insurance
Commissioner (the "Commissioner") was named conservator of ELIC and the Los
Angeles Superior Court issued orders providing that ELIC would pay 70% of the
monthly payments due to the Company's retirees under the ELIC annuity contract.
Under the terms of a plan of rehabilitation, which includes an enhancement
agreement between the Commissioner and the National Organization of Life and
Health Guaranty Associations ("NOLHGA") to augment the benefits paid to ELIC
policyholders, individual annuitants with account values up to $100 will receive
100% of their benefits, resulting in the payment by the rehabilitated ELIC and
NOLHGA of substantially all of the required payments to the Company's employees
who are covered under the ELIC annuities. The rehabilitation plan provides for
reimbursement from the rehabilitated ELIC and from NOLHGA to the Company of
shortfall payments the Company had been providing from April 1991 to September
1993. The Company received reimbursement for a portion of such shortfall
payments during fiscal year 1995, and has reflected the reimbursement of the
remainder of such shortfall payments in other assets in its consolidated
financial statements.
Effective on July 22, 1992, the Company entered into agreements settling all
claims with respect to two complaints filed by the Department of Labor and by a
labor union against various defendants including the Company. The settlement
agreements required the Company, among other things, to provide back-up
insurance coverage in the form of an annuity purchased from an approved
insurance company equal to 30% of the obligation to existing retirees. The
Company also agreed to purchase additional coverage in the event payments from
third parties to annuitants fall below 70% of the required amount. If annuity
benefits under the back-up annuity are not needed to provide full benefit
payments to covered annuitants, the proceeds will be remitted to the Company on
an annual basis. On July 31, 1992, the Company purchased such an annuity from
Metropolitan Life Insurance Company for approximately $9,800. Such annuity will
only be used for retiree benefits in the event the combined payments by the
rehabilitated ELIC and NOLHGA fall below 100% of the required benefits.
The Company does not expect that the above transactions will have a material
effect on the Company. However, should ELIC (or its successor) and/or NOLHGA
fail to make required annuity payments in the future, such transactions could
have a material adverse effect upon the Company.
OTHER LITIGATION
Four substantially identical actions were filed in 1993 against the Company and
certain of its directors and officers. The four actions were subsequently
consolidated in a single amended complaint. The suit purported to be a class
action on behalf of purchasers of the Company's common stock from October 22,
1992 through August 6, 1993. The complaint asserted claims under the federal
securities laws, and alleged that the Company artificially inflated the price of
its common stock during the class period by failing to disclose adverse
developments in the Company's business. The complaint did not specify the amount
of damages sought. In July 1994, counsel for the Company defendants and the
plaintiffs reached an agreement in principle to settle the litigation. The Court
in April 1995 granted final approval of the settlement and dismissed the
plaintiffs' claims with prejudice. The Consolidated Statement of Income for the
year ended June 30, 1994 reflects a pretax charge of $2,650 representing costs
to the Company including legal fees associated with the settlement.
The Company was one of numerous defendants in a suit filed in 1993 by multiple
plaintiffs claiming damages for personal injuries allegedly resulting from
exposure to emissions allegedly generated by the defendants' manufacturing
facilities in or near Brownsville, Texas. The plaintiffs did not specify the
damages sought nor the particular emissions they contended implicated the
Company. The Company settled the case with the plaintiffs in June 1995. The
Consolidated Statement of Income for the year ended June 30, 1995 reflects a
pretax charge of $1,000 representing costs to the Company including legal fees
associated with the settlement.
The Company is a party to a number of product liability lawsuits, many of which
involve fires allegedly caused by defective ballasts. All of these cases are
being defended by the Company's insurers, and management believes that its
insurers will bear all legal costs and liability, except for applicable
deductibles, and that none of these proceedings individually or in the aggregate
will have a material adverse effect on the Company. In addition, the Company is
frequently named in asbestos-related lawsuits which do not involve material
amounts individually or in the aggregate.
31
<PAGE>
ENVIRONMENTAL MATTERS
GENERAL
The Company has from time to time discovered contamination by hazardous
substances at certain of its facilities. In response to such a discovery, the
Company conducts remediation activities to bring the facility into compliance
with applicable laws and regulations. Except as described below, the Company's
remediation activities for fiscal 1995 did not entail material expenditures, and
its remediation activities for fiscal 1996 are not expected to entail material
expenditures. Future discoveries of contaminated areas could entail material
expenditures, depending upon the extent and nature of the contamination.
CENTURY ELECTRIC (MCMINNVILLE, TENNESSEE)
Prior to its purchase by the Company in 1986, Century Electric, Inc.
("Century Electric") acquired a business from Gould Inc. ("Gould") in May
1983 which included a leasehold interest in a fractional horsepower electric
motor manufacturing facility located in McMinnville, Tennessee. In connection
with this acquisition, Gould agreed to indemnify Century Electric from and
against liabilities and expenses arising out of the handling and cleanup of
hazardous waste, including but not limited to cleaning up any PCBs at the
McMinnville facility (the "1983 Indemnity"). Investigation revealed the
presence of PCBs in portions of the soil and in the groundwater underlying
the facility and in certain offsite soil. Century Electric has kept the
Tennessee Department of Environment and Conservation, Division of Superfund,
apprised of test results from the investigation. The McMinnville plant has
been listed as a Tennessee Superfund Site, a report on that site has been
presented to the Tennessee legislature, and community officials and plant
employees have been notified of the presence of PCBs as above described. In
July 1993, Gould submitted to the State of Tennessee a Feasibility Study
recommending a cleanup of certain onsite soil with an estimated cost of
$4,700. This estimate does not include ancillary costs of onsite cleanup,
which are expected to be significant. Based upon currently available
information, the aggregate costs for cleanup of certain onsite soil,
including ancillary costs of onsite cleanup, are not expected to exceed
$15,000. Subsequent to June 30, 1994, Gould contracted for certain onsite
cleanup. In August and October 1994, Gould requested that the Company bear an
unspecified portion of these costs, and the Company declined. Gould, at its
own expense, arranged for the onsite cleanup to be performed during the period
from September 1994 through January 1995. Gould also conducted preliminary
investigation and cleanup of certain offsite contamination. The cost of any
further investigation and cleanup of offsite contamination cannot presently
be determined. The Company believes that the costs for further onsite
cleanup, including ancillary costs of onsite cleanup, and the costs for any
further offsite cleanup, are covered by the 1983 Indemnity. While the Company
believes that Gould will continue to perform under its indemnity obligations,
Gould's failure to perform such obligations could have a material adverse
effect on the Company.
OFFSITE LOCATIONS
The Company has been identified by the United States Environmental Protection
Agency and certain state agencies as a potentially responsible party for cleanup
costs associated with alleged past waste disposal practices at several offsite
locations. Due, in part, to the existence of indemnification from the former
owners of certain acquired businesses for cleanup costs at certain of these
sites, and except as described below, the Company's estimated share in liability
(if any) at the offsite facilities is not expected to be material. It is
possible that the Company will be named as a potentially responsible party in
the future with respect to other sites.
CROWN INDUSTRIES SITE (PIKE COUNTY, PENNSYLVANIA)
In March 1992, the Company was informed by the Pennsylvania Department of
Environmental Resources ("DER") that its Universal Manufacturing division is one
of a number of potentially responsible parties with respect to a planned
environmental investigation and cleanup at the Crown Industries site in Pike
County, Pennsylvania. The DER has provided a non binding preliminary allocation
of liability in connection with the site that assigned the Company a 30 percent
share. The aggregate expense of cleaning up the site is not currently known, but
some preliminary indications suggest a range of $5,000 to $15,000. To date, the
DER has sought reimbursement of approximately $500 in the aggregate from the
Company and the other potentially responsible parties. In connection with the
February 1986 acquisition of Universal Manufacturing, the Company and the
seller, Farley Northwest Industries, Inc. (the predecessor to Fruit of the Loom,
Inc., hereinafter collectively with such successor referred to as "FOL")
executed an environmental agreement. The Company has concluded that at least 90
percent of any liability it may incur relating to this site is covered by the
indemnification provisions of its environmental agreement with FOL, and FOL has
acknowledged such indemnity and is currently defending its own and the Company's
interest in this site.
FOL's failure to perform its obligations with respect to the Crown Industries
site under the environmental agreement could have a material adverse effect on
the Company.
INDEMNIFICATION OBLIGATIONS FROM RESTRUCTURING
In selling certain business operations, the Company from time to time has
agreed, subject to various conditions and limitations, to indemnify buyers with
respect to environmental liabilities associated with the acquired operations.
The Company's indemnification obligations pursuant to such agreements did not
entail material expenditures for fiscal 1995, and its indemnification
obligations for fiscal 1996 are not expected to entail material expenditures.
Future expenditures pursuant to such agreements could be material, depending
upon the nature of asserted claims subject to indemnification.
LETTERS OF CREDIT
The Company has approximately $20,000 of outstanding letters of credit as of
June 30, 1995.
32
<PAGE>
8. STOCK OPTION AGREEMENTS
The Company has two stock option plans (the "Plans") which provide for the
issuance of both incentive stock options (under Section 422A of the Internal
Revenue Code of 1986) and non-qualified stock options at exercise prices not
less than fair market value at the date of grant. One of the plans also provides
for the issuance of stock appreciation rights, restricted stock, unrestricted
stock, restricted stock rights and performance units. The total number of shares
of the Company's common stock authorized to be issued upon exercise of the stock
options and other stock rights under the Plans is 4,708,758. As of June 30, 1995
and 1994 shares available for grant were approximately 1,422,000 and 473,000
respectively. Options granted under the Plans generally vest in four equal
annual installments.
A summary of certain information with respect to options under the Plans
follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding, beginning of year 2,303,054 1,983,143 2,020,088
Options granted 357,500 903,000 368,000
Options exercised (454,594) (83,389) (278,320)
Weighted average exercise price $8.30 $7.69 $8.60
Options cancelled (266,375) (499,700) (126,625)
- -------------------------------------------------------------------------------------
Options outstanding, end of year 1,939,585 2,303,054 1,983,143
Weighted average price $12.52 $12.30 $11.02
- -------------------------------------------------------------------------------------
Exercisable options 1,113,116 963,107 909,318
- -------------------------------------------------------------------------------------
</TABLE>
The Company has also granted options in prior years under certain non-qualified
stock option agreements, terms of which are similar to the Plans. No such
options were granted, exercised or cancelled during the three years ended
June 30, 1995. As of June 30, 1995, options for 142,835 shares with a weighted
average price per share of $4.74 were outstanding, all of which were
exercisable.
The Company has granted stock appreciation rights (SARs) to certain of its
directors under director incentive compensation plans. As of June 30, 1995 SARs
with respect to 462,375 shares, with a weighted average exercise price of $11.66
were outstanding under these plans. In July of 1995, the Board of Directors
approved the conversion of SAR's with respect to 265,000 shares of common stock
into stock options with comparable share amounts and exercise prices.
33
<PAGE>
9. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company has defined benefit retirement plans which, collectively, cover
substantially all of its non-union employees and those union employees whose
collective bargaining agreements specifically provide for coverage. Effective
January 1, 1988, the Company merged all of its plans covering non-union domestic
employees into a single defined benefit plan (the "Plan"). The Plan provides
benefits based upon career average pay as defined in the Plan.
The net pension cost for the years ended June 30, 1995, 1994 and 1993 is as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during the period $6,935 $8,169 $7,615
Interest cost on projected benefit obligation 9,219 8,195 7,415
Investment return on plan assets (11,846) (1,180) (8,945)
Net amortization and deferral 2,789 (7,103) 888
- -------------------------------------------------------------------------------------
Net pension cost $7,097 $8,081 $6,973
- -------------------------------------------------------------------------------------
</TABLE>
The projected benefit obligation was determined using an assumed discount rate
of 7.75% for the year ended June 30, 1995 and 8.25% for the year ended June 30,
1994 and a 6% increase in the rate of compensation in both years. The average
expected long-term rate of return on plan assets is 8.5% for both years.
The funded status of the Company's defined benefit plans at June 30, 1995 and
1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C>
ACTUARIAL PRESENT VALUE OF:
Vested benefit obligation $116,004 $103,257
Non-vested benefits 9,353 4,134
Projected benefit obligation 127,949 112,301
Market value of plan assets 115,523 100,163
Plan assets less than projected benefit obligation (12,426) (12,138)
Unrecognized net loss 16,474 15,242
Unrecognized prior service income relating to merged plans (2,300) (2,778)
Unrecognized net asset (2,553) (2,917)
Minimum pension liability (8,934) (4,637)
Accrued pension cost 9,739 7,228
- -------------------------------------------------------------------------------------
</TABLE>
Pursuant to SFAS No. 87, "Employers' Accounting for Pensions," the Company has
recorded an additional minimum pension liability of $8,934 at June 30, 1995,
representing the difference between the Company's unfunded accumulated benefit
obligation and the recorded pension liability. The additional minimum pension
liability has been recorded as a reduction of equity.
It is the Company's policy to fund pension costs annually. Plan assets are
primarily invested in equity and government securities. The Company also has
benefit plans for certain of its foreign subsidiaries which are not reflected
above. These plans are not material to the Company's benefit plans as a whole.
In addition to the defined benefit retirement plans, most of the Company's
non-union employees participate in a defined contribution savings plan which
provides for employee contributions up to specified percentages of compensation
as defined in the plan. The Company's' contribution is equal to 50% of the first
1% and 20% of the next 5% of the employee's contribution. Annual Company
sponsored contributions are subject to a limitation of six hundred dollars per
employee. Company contributions were $1,629, $936, and $828 during the plan
years ended March 31, 1995, 1994, and 1993, respectively. Company contributions
vest over a five-year period.
34
<PAGE>
POSTRETIREMENT MEDICAL BENEFIT PLANS
The Company provides certain health care benefits for certain eligible retired
employees. Approximately 25% of the currently active (but not retired) employees
are eligible for benefits under these contributory plans under which the
Company's subsidy varies by the employee group. However, for employees retiring
after December 31, 1991, the amount of subsidy to be paid by the Company will be
"capped" at the 1991 plan cost levels and all future trend increases will be
borne by the employees. Employees hired after December 31, 1991 will not receive
any Company subsidy.
Effective July 1, 1992, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (SFAS No. 106), changing to the accrual method of accounting for
certain postretirement benefits other than pensions, primarily health care
benefits. SFAS No. 106 requires the expected cost of future benefits to be
charged to expense during the periods in which the employees render service.
Previously, the Company recognized these costs on a "pay-as-you-go," or cash
basis.
The Company implemented SFAS No. 106 on the immediate recognition basis
effective July 1, 1992, and as a result, recognized a one-time pretax charge of
$58,104 ($35,734 or $1.44 per share on a primary basis, after tax). The change
in accounting resulted in an increase in the annual expense recognized for these
postretirement benefits of approximately $2,400.
The accumulated postretirement benefit obligation as of June 30, 1995 and 1994
consisted of unfunded obligations related to the following:
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C>
Retirees $48,066 $47,195
Fully eligible active plan participants 5,450 4,129
Other active participants 6,271 6,098
Unrecognized gain 1,333 2,408
- -------------------------------------------------------------------------------------
$61,120 $59,830
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
Net periodic postretirement benefit costs for the years ended June 30, 1995,
1994 and 1993 include the following components:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30 1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost benefits earned during period $405 $515 $432
Interest cost on accumulated postretirement
benefit obligation 4,384 4,472 4,833
- -------------------------------------------------------------------------------------
$4,789 $4,987 $5,265
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
The Company's current policy is to fund the cost of the postretirement health
care benefits on a "pay-as-you-go" basis as in prior years.
For measurement purposes, a 10% and 9% annual rate of increase (8% and 7% for
HMO plans) in the per capita cost of covered health care claims was assumed for
fiscal 1995 and fiscal 1996, respectively; the rate of increase was assumed to
decrease to 5.75% by 2009 and remain at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amounts reported. To
illustrate, increasing the assumed health care cost trend by 1 percentage point
in each year would increase the accumulated postretirement benefit obligation by
approximately $4,500 and the aggregate of service and interest cost components
of the annual net postretirement health care cost by approximately $372. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.75% for the year ended June 30, 1995 and
8.25% and 8.5% for the years ended June 30, 1994, and 1993 respectively.
10. RELATED PARTY TRANSACTIONS
The Company has an agreement with the Spectrum Group, Inc. whereby Spectrum will
provide management services to the company through fiscal 1999 at an annual fee
plus certain allocated and out of pocket expenses. The Company's chairman and
chief executive officer, is also the chairman of Spectrum. The services provided
include consultation and direct management assistance with respect to
operations, strategic planning and other aspects of the business of the Company.
Fees and expenses paid to Spectrum for these services under the agreement
amounted to $818, $715 and $684 for the years ended June 30, 1995, 1994 and 1993
respectively.
During the years ended June 30, 1995, 1994 and 1993, the Company paid
approximately $948, $914 and $500, respectively in fees to charter an aircraft
owned by a company in which the chairman and chief executive officer is the
principal shareholder. The Company believes the fees paid were equivalent to
those that would be paid under an arm's-length transaction.
35
<PAGE>
A member of the Company's Board of Directors served as a consultant to the
Company on various aspects of the Company's business and strategic issues. Fees
paid for said services by the Company during the periods ended June 30, 1995 and
1994 were $137 and $146 respectively. Aggregate fees and expenses for the same
periods were $158 and $171.
11. ACCRUED LIABILITIES
Accrued liabilities consist of the following at June 30:
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C>
Salaries, wages and related items $29,068 $28,790
Warranty 14,580 13,865
Interest 4,703 3,906
Income taxes 2,196 2,537
Restructuring reserves (see Note 2) 3,611 8,236
Other 25,076 22,953
- -------------------------------------------------------------------------------------
$79,234 $80,287
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
12. SUPPLEMENTAL CASH FLOW INFORMATION
Changes in operating assets and liabilities of continuing operations, net of
effects from acquired companies, follow:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
(Increase) decrease in accounts receivable $(21,166) $ 29,927 $(56,661)
(Increase) decrease in inventories (39,718) (10,640) (8,425)
(Increase) decrease in prepaids and other current assets 3,758 (3,258) (889)
(Increase) decrease in other operating assets (111) (1) 9,837
Increase (decrease) in accounts payable 3,481 (14,180) 2,912
Increase (decrease) in accrued liabilities 6,193 (20,858) (24,106)
Increase (decrease) in deferred income taxes (6,192) (4,785) 1,796
Increase (decrease) in other operating liabilities 2,779 5,464 (3,108)
- -------------------------------------------------------------------------------------
$(50,976) $(18,331) $(78,644)
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Cash paid for interest and income taxes follows:
Interest $43,388 $54,841 $46,471
Income taxes $10,548 $5,335 $16,481
Reconciliation of assets acquired and liabilities assumed:
Fair value of assets acquired -- -- $44,477
Liabilities assumed -- -- 19,937
- -------------------------------------------------------------------------------------
Cash paid for acquisitions -- -- $24,540
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
13. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
The Company currently operates in two business segments: Ballasts and
Transformers and Motors and Controls.
The Ballasts and Transformers segment produces electrical conversion products,
including magnetic and electronic ballasts for various lighting applications,
transformers for power transmission in commercial and industrial buildings and a
wide range of electronic and industrial equipment, power supplies for use in
computer and office equipment and power converters for recreational vehicles.
The Motors and Controls segment designs, manufactures and markets a broad range
of high quality fractional and integral electric motors, medium output
generators and electronic adjustable speed drives and systems.
The Company sells its products primarily to large original equipment
manufacturers and distributors. The Company performs ongoing credit evaluations
of its customers' financial conditions and generally requires no collateral. The
Company has no significant concentration of credit risk.
Financial information by business segment for continuing operations follow:
<TABLE>
<CAPTION>
BALLASTS AND MOTORS AND
FOR THE YEAR ENDED JUNE 30, 1995 TRANSFORMERS CONTROLS TOTAL
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $687,319 $515,217 $1,202,536
Operating income 35,901 39,455 75,356
Identifiable assets* 525,545 331,623 857,168
Capital expenditures 23,056 20,839 43,895
Depreciation and amortization 24,118 14,562 38,680
- ------------------------------------------------------------------------------------------------------------------
BALLASTS AND MOTORS AND
FOR THE YEAR ENDED JUNE 30, 1994 TRANSFORMERS CONTROLS TOTAL
- ------------------------------------------------------------------------------------------------------------------
Sales $660,524 $472,602 $1,133,126
Operating income (loss) (16,821) 26,719 9,898
Identifiable assets* 510,314 421,044 931,358
Capital expenditures 28,887 14,451 43,338
Depreciation and amortization 22,841 13,577 36,418
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Operating income (loss) for the year ended June 30, 1994, reflects pretax
charges of $28,822 and $2,339 in the Ballasts and Transformers and Motors and
Controls segments, respectively, related to restructuring and other costs
primarily in the electronic ballast business (see Note 2).
<TABLE>
<CAPTION>
BALLASTS AND MOTORS AND
FOR THE YEAR ENDED JUNE 30, 1993 TRANSFORMERS CONTROLS TOTAL
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $712,568 $406,824 $1,119,392
Operating income 45,064 24,555 69,619
Identifiable assets* 565,500 429,859 995,359
Capital expenditures 46,529 11,321 57,850
Depreciation and amortization 20,531 13,050 33,581
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
*Identifiable assets include net assets of discontinued operations of $ 98,118,
$197,217 and $233,716 for 1995, 1994, and 1993 respectively.
37
<PAGE>
Geographic information with respect to the Company's European Subsidiaries
follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $175,727 $202,593 $215,323
Operating income 6,003 10,004 11,651
Identifiable assets 158,207 174,736 179,688
Capital expenditures 8,532 9,723 10,095
Depreciation and amortization 8,475 8,689 8,266
- -------------------------------------------------------------------------------
</TABLE>
The Company's foreign operations outside of Europe are not material. Export
sales were $60,204, $60,143 and $55,075 in 1995, 1994 and 1993, respectively.
15. QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
1995 QUARTER ENDED SEPT. 30 DEC. 31 MAR. 31 JUNE 30
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $274,755 $290,627 $318,652 $318,502
Gross profit 51,720 58,687 64,386 64,843
Provision (benefit) for income taxes 1,924 3,246 4,795 4,935
Income (loss) from continuing operations before extraordinary
item and cumulative effect of accounting changes 2,658 4,480 6,901 7,457
Net income (loss) 5,758 4,480 2,081 (10,043)
PER COMMON SHARE:
Primary:
Income (loss) from continuing operations before extraordinary
item and cumulative effect of accounting changes $.11 $.18 $.28 $.30
Net income (loss) $.23 $.18 $.08 $(.40)
Fully diluted:
Income (loss) from continuing operations before extraordinary
item and cumulative effect of accounting changes $.11 $.18 $.26 $.28)
Net income (loss) $.23 $.18 * *
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
In the first quarter of fiscal 1995, the Company recorded a $3,100 gain (net of
tax) associated with the sale of the controls business. The Company recorded a
third quarter extraordinary after tax loss of $4,820 associated with the
write-off of deferred financing costs and premiums paid to extinguish its 11.45
percent Senior Notes (see Note 4). Fourth quarter results included a $17,500
charge to provide for additional losses on disposal of discontinued operations
(see Note 2).
38
<PAGE>
<TABLE>
<CAPTION>
1994 QUARTER ENDED SEPT. 30 DEC. 31 MAR. 31 JUNE 30
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $280,361 $259,296 $287,095 $306,374
Gross profit 57,522 26,109 55,759 56,017
Provision (benefit) for income taxes (1,134) (10,093) 1,355 104
Income (loss) from continuing operations before extraordinary
item and cumulative effect of accounting changes 1,567 (21,800) 3,057 234
Net income (loss) 1,406 (42,502) 1,683 (6,032)
PER COMMON SHARE:
Primary:
Income (loss) from continuing operations before extraordinary
item and cumulative effect of accounting changes $0.06 $(0.88) $0.12 $0.01
Net income (loss) $0.06 $(1.72) $0.07 $(0.24)
Fully diluted:
Income (loss) from continuing operations before extraordinary
item and cumulative effect of accounting changes $0.06 * $0.12 $0.01)
Net income (loss) $0.06 * $0.07 *
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
*Per share amounts on a fully diluted basis are omitted as such amounts are
anti-dilutive in relation to primary per share amounts.
In the second quarter of fiscal 1994, gross profit and income (loss) from
continuing operations before extraordinary items and cumulative effect of
accounting changes include pretax charges of $19,135 and $31,221, respectively,
reflecting restructuring and other costs primarily related to the electronic
ballast business (see Note 2). In the fourth quarter of fiscal 1994, Income
(loss) from continuing operations before extraordinary items and cumulative
effect of accounting changes includes a pretax charge of $2,650 reflecting the
estimated costs to the Company to settle pending litigation (see Note 7).
39
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS
MAGNETEK, INC.
We have audited the accompanying consolidated balance sheets of MagneTek, Inc.
as of June 30, 1995 and 1994, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended June 30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of MagneTek, Inc. at
June 30, 1995 and 1994, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended June 30, 1995, in
conformity with generally accepted accounting principles.
As discussed in Notes 6 and 9 to the financial statements, the Company changed
its method of accounting for income taxes and postretirement medical benefits in
1993.
ERNST & YOUNG LLP
St. Louis, Missouri
August 14, 1995
40
<PAGE>
EXHIBIT 21
SUBSIDIARIES
State or Country
Subsidiary of Incorporation
- ------------------------------------------------------- ----------------------
MagneTek Century Electric, Inc. Delaware
MagneTek Europe N.V. Netherlands
<PAGE>
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-3 Nos. 33-31932, 33-40222, 33-41854 and 33-43856) and in the related
Prospectuses, and in the Registration Statements (Form S-8 Nos. 33-31439,
33-33887, 33-34112, 33-34834, 33-44519 and 33-58929) pertaining to the 1987
Stock Option Plan of MagneTek, Inc., the MagneTek, Inc. FlexCare Plus
Retirement Savings Plan, the 1989 Incentive Stock Compensation Plan of
MagneTek, Inc., the MagneTek Unionized Employee Savings Plan, the Amended
and Restated 1989 Incentive Stock Compensation Plan of MagneTek, Inc., and
the Second Amended and Restated 1989 Incentive Stock Compensation Plan of
MagneTek, Inc., of our reports dated August 14, 1995, with respect to the
consolidated financial statements and schedule of MagneTek, Inc. included or
incorporated by reference in the Annual Report (Form 10-K) for the year ended
June 30, 1995.
St. Louis, Missouri ERNST & YOUNG LLP
September 27, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 311
<SECURITIES> 0
<RECEIVABLES> 239,673
<ALLOWANCES> 4,421
<INVENTORY> 225,461
<CURRENT-ASSETS> 490,236
<PP&E> 401,851
<DEPRECIATION> 201,751
<TOTAL-ASSETS> 857,168
<CURRENT-LIABILITIES> 214,816
<BONDS> 448,467
<COMMON> 247
0
0
<OTHER-SE> 117,031
<TOTAL-LIABILITY-AND-EQUITY> 857,168
<SALES> 1,202,536
<TOTAL-REVENUES> 1,202,536
<CGS> 962,900
<TOTAL-COSTS> 962,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,398
<INCOME-PRETAX> 36,396
<INCOME-TAX> 14,900
<INCOME-CONTINUING> 21,496
<DISCONTINUED> (14,400)
<EXTRAORDINARY> (4,820)
<CHANGES> 0
<NET-INCOME> 2,276
<EPS-PRIMARY> .87
<EPS-DILUTED> .84
</TABLE>
