<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 2, 1999
- ------------------------------------------------------------------------------
MagneTek, Inc.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
- ------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
1-10233 95-3917584
- ------------------------ ------------------------------------
(Commission File number) (I.R.S. Employer Identification No.)
26 Century Boulevard Nashville, Tennessee 37214
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (615) 316-5100
--------------
- ------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 2. Acquisition or Disposition of Assets.
-------------------------------------
Effective as of August 2, 1999 (the "Closing Date"), MagneTek, Inc.,
a Delaware corporation (the "Registrant"), together with MagneTek Service
(U.K.) Limited, a subsidiary company organized under the laws of the United
Kingdom ("MagneTek UK"), sold the assets, properties and interests of its
motors business (the "Business") to A.O. Smith Corporation, a Delaware
corporation (the "Buyer"). The Business, conducted domestically and
internationally, develops, manufactures, sells and distributes fractional,
integral and DC electric motors. In accordance with the Asset Purchase
Agreement dated as of June 28, 1999 by and among the Buyer, MagneTek UK and
the Registrant (the "Agreement"), the Buyer paid to the Registrant $253
million in cash and also assumed certain liabilities. The purchase price paid
by the Buyer for the Business was the result of arms-length negotiations
between the Registrant and the Buyer. The Agreement provides that the
purchase price is subject to certain adjustments. The description of the
foregoing transaction is qualified by reference to the Agreement, filed as an
Exhibit hereto.
Prior to the Agreement, no material relationship existed between the
Buyer and the Registrant or any of its affiliates, any director or officer of
the Registrant, or any associate of any such director or officer.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
-------------------------------------------------------------------
c. Exhibits
99.1 August 2, 1999 Press Release of MagneTek, Inc.
99.2 Asset Purchase Agreement dated as of June 28, 1999 by and
among the Registrant, MagneTek UK and the Buyer.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be filed on its
behalf by the undersigned hereunto duly authorized.
Date: August 11, 1999
MagneTek, Inc.
By: /S/ SAMUEL A. MILEY
---------------------------------------------
Samuel A. Miley, Esq.
Vice President, General Counsel and Secretary
3
<PAGE>
EXHIBIT 99.1
RELEASE: MONDAY, AUGUST 2, 1999
Contact: Bob Murray
615/316-5270
[email protected]
--------------------
MAGNETEK SELLS ITS ELECTRIC MOTOR BUSINESS
NASHVILLE, TN--MagneTek, Inc. (NYSE:MAG) today announced that it has
completed the sale of its electric motors business to A.O. Smith Corporation
(NYSE:AOS), Milwaukee, WI for $253 million. MagneTek's electric motor
business accounted for revenues of $367 million, or about 1/3 of the
company's total revenues, in 1998.
In April, Emerson Electric (NYSE:EMR) purchased MagneTek's generator
business for $115 million. Proceeds from both divestitures will be used to
pay down debt and to repurchase up to 10 million shares of MagneTek common
stock, representing about 1/3 of the company's shares outstanding.
As a result, MagneTek will be a much stronger company financially and
more focused industrially. Electronic products will account for the majority
of its revenues, a third of which will be generated in Euro-markets.
MagneTek will report the results of its 1999 fiscal year and fourth
quarter on August 26. The company said that it will treat its motor generator
businesses as discontinued operations, and will record one-time charges in
connection with down-sizing and overhead reduction. These actions, together
with business disruptions related partly to the divestiture process, will
result in reported losses from continuing operations in the fourth quarter
and fiscal year. However, the company will report net profits for both the
quarter and the year as a result of the gain on the sale of its generator
business.
MagneTek is a multi-national manufacturer of electronic power products
for lighting, information technology, power conversion and motion control
applications.
- -------------------------------------------------------------------------------
THE FOREGOING ANNOUNCEMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT ARE
SUBJECT TO RISKS AND UNCERTAINTIES WHICH, IN MANY CASES, ARE BEYOND THE
CONTROL OF THE COMPANY. THESE INCLUDE BUT ARE NOT LIMITED TO ECONOMIC
CONDITIONS IN GENERAL, BUSINESS CONDITIONS IN ELECTRICAL AND ELECTRONIC
EQUIPMENT MARKETS, COMPETITIVE FACTORS SUCH AS PRICING AND TECHNOLOGY, AND
THE RISK THAT THE COMPANY'S ULTIMATE COSTS OF DOING BUSINESS EXCEED PRESENT
ESTIMATES. FURTHER INFORMATION ON FACTORS THAT COULD AFFECT MAGNETEK'S
FINANCIAL RESULTS ARE DESCRIBED IN THE COMPANY'S FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION.
<PAGE>
- ------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
among
MAGNETEK, INC.,
MAGNETEK SERVICE (U.K.) LIMITED
and
A.O. SMITH CORPORATION
SALE OF MOTORS DIVISION
---------------------------
Dated as of June 28, 1999
---------------------------
- ------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
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..........................................................................11
2.6. Tax Allocation.....................................................................................14
2.7. Transfer Taxes.....................................................................................14
ARTICLE III CONDITIONS TO CLOSING...............................................................................15
3.1. Buyer's Obligation.................................................................................15
3.2. Sellers' Obligation................................................................................15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER.............................................................16
4.1. Authority; No Conflicts; Governmental Consents; Corporate Matters..................................16
4.2. Financial Statements; Absence of Changes...........................................................18
4.3. Taxes..............................................................................................20
4.4. Assets Other than Real Property Interests..........................................................20
4.5. Real Property......................................................................................21
4.6. Intellectual Property..............................................................................21
4.7. Contracts..........................................................................................22
4.8. Litigation; Decrees................................................................................23
4.9. Employee and Related Matters.......................................................................23
4.10. Environmental Matters.............................................................................23
4.11. Employee and Labor Relations......................................................................24
4.12. Compliance With Law; Permits......................................................................24
4.13. Product Warranty and Product Liability............................................................25
4.14. Assets of the Business............................................................................25
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER...............................................................26
5.1. Authority; No Conflicts; Governmental Consents.....................................................26
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
5.2. Actions and Proceedings, Etc.......................................................................27
5.3. Buyer's Acknowledgment.............................................................................27
5.4. Solvency...........................................................................................27
5.5. No Knowledge of Sellers' Breach....................................................................27
ARTICLE VI COVENANTS OF SELLER..................................................................................28
6.1. Access.............................................................................................28
6.2. Ordinary Conduct; No Shopping......................................................................28
6.3. Insurance..........................................................................................28
6.4. Title Commitment...................................................................................29
6.5. Accounts Receivable................................................................................29
6.6. Noncompetition.....................................................................................30
6.7. Confidential Information...........................................................................31
6.8. Repurchase of Certain Accounts Receivable..........................................................31
6.9. Resolution or Remediation of Certain Environmental Matters Identified Prior to the Closing
Date..........................................................................................31
ARTICLE VII COVENANTS OF BUYER..................................................................................35
7.1. Confidentiality....................................................................................35
7.2. Accounts Receivable................................................................................35
7.3. Waiver of Bulk Sales Law Compliance................................................................35
7.4. Excluded Assets....................................................................................35
7.5. Cooperation........................................................................................36
7.6. Change of Company Names............................................................................36
ARTICLE VIII MUTUAL COVENANTS...................................................................................36
8.1. HSR Filings; Permits and Consents..................................................................36
8.2. Cooperation........................................................................................37
8.3. Publicity..........................................................................................38
8.4. Reasonable Efforts.................................................................................38
8.5. Records............................................................................................38
8.6. Access to Former Business Records..................................................................38
8.7. Use of Trademark and Trade Names...................................................................39
8.8. Tax Returns and Payments...........................................................................39
8.9. Cegled Facility....................................................................................40
ARTICLE IX EMPLOYEE BENEFIT MATTERS.............................................................................41
9.1. Employee Retention.................................................................................41
9.2. Employee Benefit Plans.............................................................................41
9.3. Vacation and Holiday Pay...........................................................................42
9.4. Access to Information..............................................................................42
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
9.5. Company Employees and Plans........................................................................42
9.6. Pension Plan.......................................................................................43
9.7. 401(k) Plan........................................................................................44
9.8. Third-Party Beneficiaries..........................................................................45
9.9. Payroll Tax........................................................................................45
ARTICLE X INDEMNIFICATION.......................................................................................45
10.1. Indemnification by Seller.........................................................................45
10.2. Indemnification by Buyer..........................................................................46
10.3. Environmental Matters.............................................................................46
10.4. Losses Net of Insurance, Etc......................................................................48
10.5. Termination of Indemnification....................................................................49
10.6. Procedures Relating to Indemnification (Other than for Tax Claims)................................49
10.7. Procedures Relating to Indemnification of Tax Claims..............................................50
10.8. Survival of Representations.......................................................................51
ARTICLE XI GENERAL PROVISIONS...................................................................................51
11.1. Assignment........................................................................................51
11.2. No Third-Party Beneficiaries......................................................................52
11.3. Termination.......................................................................................52
11.4. Expenses..........................................................................................53
11.5. Equitable Relief..................................................................................53
11.6. Amendments........................................................................................53
11.7. Notices...........................................................................................53
11.8. Interpretation; Exhibits and Schedules............................................................54
11.9. Counterparts......................................................................................55
11.10. Entire Agreement.................................................................................55
11.11. Fees.............................................................................................55
11.12. Severability.....................................................................................55
11.13. Governing Law....................................................................................55
EXHIBITS
Bill of Sale and Assignment and Assumption Agreement........................................Exhibit A
Summary of Terms of Supply and Service Agreements...........................................Exhibit B
License Agreement...........................................................................Exhibit C
</TABLE>
iii
<PAGE>
LIST OF SCHEDULES
Schedule 1.1(a) Knowledge of Seller
Schedule 1.1(b) Valdarno Development Projects
Schedule 2.1(a) Owned Property
Schedule 2.1(b) Leased Property
Schedule 2.1(e) Intellectual Property
Schedule 2.2(m) Excluded Facilities
Schedule 4.1(b) Qualification To Do Business
Schedule 4.1(c) Seller Required Consents
Schedule 4.1(e) Capitalization of the Companies
Schedule 4.2 Financial Statements
Schedule 4.2(b) Certain Changes
Schedule 4.2(c) Other Liabilities
Schedule 4.3 Taxes
Schedule 4.4(a) Liens
Schedule 4.4(b) Year 2000 Remediation Actions; Oracle Implementation
Schedule 4.6 Intellectual Property Matters
Schedule 4.7 Contracts
Schedule 4.8 Litigation
Schedule 4.9 Employee Benefits
Schedule 4.10 Environmental Matters
Schedule 4.11 Labor Matters
Schedule 4.12(a) Compliance with Law
Schedule 4.12(b) Permits
Schedule 4.13 Product Warranty and Product Liability
Schedule 4.14 Assets and Services of the Business
Schedule 5.1(b) Buyer Required Consents
Schedule 5.6 Knowledge of Buyer
Schedule 6.2 Conduct of Business
Schedule 6.6 Restricted Motors
Schedule 6.8 Certain Accounts Receivable
Schedule 6.9 Remediation of Certain Matters
Schedule 9.2(c) Cafeteria Plan
iv
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of June 28, 1999, among MAGNETEK,
INC., a Delaware corporation ("Seller" or "MagneTek"), MAGNETEK SERVICE
(U.K.), LIMITED, a company organized under the laws of the United Kingdom
("UK" and together with MagneTek, "Sellers"), and A.O. SMITH CORPORATION, a
Delaware corporation ("Buyer").
MagneTek, through its Motors and Controls Division (the "Division"),
has historically engaged in the business of developing, manufacturing,
selling and distributing fractional, integral and DC electric motors (the
"Business"). MagneTek conducts the Business domestically as a division (the
"Domestic Business") and internationally, through MagneTek Hungaria Kft.,
Igmex, S.A. de C.V., MagneTek Universal Electric Limited, MagneTek Canada
Limited, MagneTek (SEA) PTE Ltd. and MagneTek BV, companies formed,
respectively, under the laws of Hungary, Mexico, the United Kingdom, Canada,
Singapore and the Netherlands. The parties hereto desire that MagneTek sell,
transfer, convey and assign to Buyer (i) substantially all of the assets,
properties, interests in properties and rights used in the Domestic Business,
and (ii) the stock ("Stock") of MagneTek Hungaria Kft., Igmex, S.A. de C.V.
and MagneTek Universal Electric Limited, MagneTek Canada Limited, MagneTek
(SEA) PTE Ltd. and MagneTek B.V. (collectively, the "Companies" and
respectively, "Hungary," "Igmex," "UK Limited," "Canada," "SEA" and "BV"),
and that Buyer purchase and acquire the same, subject to the assumption by
Buyer of the liabilities and obligations of Seller relating to the Business,
upon the terms and subject to the conditions hereinafter set forth.
AGREEMENT
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.
"April Balance Sheet" means the unaudited balance sheet of
the Business as of April 25, 1999, attached hereto as part of Schedule 4.2.
"Assets" has the meaning set forth in Section 2.1.
1
<PAGE>
"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.
"Budapest Facility" has the meaning set forth in the preamble.
"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 who, at the
Closing Date, is actively employed by MagneTek (other than individuals
located at the Excluded Facilities) working primarily for the Business,
including any employee who is on vacation leave or jury duty, or who is on
other authorized leave of absence other than short-term disability, family or
workers' compensation leave, military service or lay-off with recall rights
as of the Closing Date (all such inactive employees shall be deemed to be
"Business Employees" effective as of the date they return to active
employment in the Business), but shall exclude any other inactive or former
employee including any individual who is on long-term disability leave or
unauthorized leave of absence or who has terminated his or her employment or
retired before the Closing Date.
"Business Property" has the meaning set forth in Section
4.5 hereto.
"Cegled Facility" means the facility of Hungary located in
Cegled.
"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.
"Companies" has the meaning set forth in the preamble.
"Competitive Business" has the meaning set forth in Section
6.6.
"Confidential Information" has the meaning set forth in
Section 6.7.
"Contract" means any contract, agreement, license, lease,
sales or purchase order or other legally binding commitment, whether written
or oral.
"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 to
which it or any of its property or assets is subject.
2
<PAGE>
"Domestic Business" has the meaning set forth in the preamble.
"EEOC Charge" means the Equal Employment Opportunity
Commission Charge No. ###-##-#### described on Schedule 4.8.
"Effective Time" has the meaning set forth in Section 2.4.
"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),
fringe benefit, flexible spending account programs and other employee benefit
arrangements, plans, contracts, policies or practices providing employee or
executive compensation or benefits to any Business Employee or current or former
employees of any of the Companies, 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 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 collectively 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, codes or common law which
relate to the protection of human health or the environment, as in effect on the
date hereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Estimated Closing Balance Sheet" has the meaning set forth
in Section 2.5.
"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 Facilities" has the meaning set forth in Section
2.2.
"Excluded Liabilities" has the meaning set forth in Section
2.3.
"Facilities" has the meaning set forth in Section 10.3.
"Final Closing Balance Sheet" has the meaning set forth in
Section 2.5.
3
<PAGE>
"GAAP" means generally accepted accounting principles in
the United States of America.
"Generator Agreement" means the Asset Purchase Agreement
between Seller and Emerson Electric Company dated as of April 26, 1999 for the
sale of the Generator Business.
"Generator Business" means the assets comprising the generator
business of Seller, including certain assets which have been used in other
businesses of Seller.
"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 which is defined as a
hazardous waste, hazardous substance, pollutant or contaminant under any
Environmental Law, including but not limited to, polychlorinated biphenyls
("PCBs"), petroleum or petroleum fractions, and asbestos.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Intellectual Property" has the meaning set forth in
Section 2.1(e).
"Knowledge of Seller" with reference to any of the
representations and warranties of Seller means the actual knowledge of the
Persons listed on Schedule 1.1, and does not refer to the knowledge of any
other Person. In all cases in which the Knowledge of Seller is in issue,
Buyer shall bear the burden of proof with respect thereto.
"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.
"Lien" means any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other) or other security agreement of any kind
or nature whatsoever.
"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 any circumstance, change or
effect that is materially adverse to the business, assets, financial condition
or results of operations of the Business taken as a whole, but excluding the
effects of changes that are generally applicable to the industries and markets
in which the Business operates.
-4-
<PAGE>
"McMinnville Facility" means the Facility located in
McMinnville, Tennessee.
"Mexican Antitrust Law" has the meaning set forth in
Section 3.1(c).
"Motor Supply Agreement" means the Integral Motor
Manufacturing Services and Facilities sharing Agreement between MagneTek and
Emerson Electric Co. dated as of April 26, 1999.
"Owned Property" has the meaning set forth in Section
2.1(a).
"Permits" has the meaning set forth in Section 4.12.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"Products" has the meaning set forth in Section 4.13.
"Records" has the meaning set forth in Section 8.5.
"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 or award 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.
"Restricted Motors" has the meaning set forth in Section
6.6.
"SEC" means the Securities and Exchange Commission.
"Seller" has the meaning set forth in the preamble hereto.
"Seller Plans" means each and all Employee Benefit Plans
and Employee Benefit Arrangements sponsored or maintained by Sellers or any
of the Companies under which Business Employees or current or former
employees of the Companies participate or are entitled to receive benefits.
"Stock" has the meaning set forth in the preamble hereto
"Supply and Service Agreements" means (i) the agreement for
the supply of wire and capacitors, to the Business between Buyer and Seller;
(ii) the agreement between Buyer and Seller in respect of sharing and
provision of certain services and facilities relating to MagneTek's logistics
function; (iii) the agreement of Seller to provide certain services to Buyer
in respect of data processing, software support and upgrade, and the
remediation of "Year 2000" matters, in each case described in clauses (i)
through (iii), as outlined on Exhibit B; (iv) the agreement of
5
<PAGE>
Seller to supply Buyer with certain products in connection with the
development projects listed on Schedule 1.1(b), such agreement to be similar
to comparable agreements for supply of custom products by MagneTek's business
in Valdarno, Italy; and (v) the license agreement pursuant to which Seller
and Buyer are cross-licensing certain intellectual property in substantially
the form of Exhibit C hereto (the "License Agreement").
"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.
"Transaction Documents" means (i) this Agreement, (ii) the
Bill of Sale, Assignment and Assumption Agreement, (iii) the deeds of
conveyance of Owned Property and (iv) the Supply and Service Agreements.
"Transactions" means the transactions contemplated by the
Transaction Documents.
"Transferred Employees" has the meaning set forth in
Section 9.1.
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 and to the Stock and all of the business, rights, claims and
assets (except the Excluded Assets) of Seller, to the extent that they are
used primarily (unless otherwise stated) in the operations of the Domestic
Business, as the same shall exist on the Closing Date (collectively, the
"Assets"). The Assets include, but are not limited to, the following assets
or rights of Seller:
6
<PAGE>
(a) the real property (including all buildings,
improvements and structures located thereon and all rights, privileges,
easements and appurtenances thereto) described on Schedule 2.1(a) hereto (the
"Owned Property");
(b) the leasehold interests used by the Business
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, 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 Business Properties
(collectively, the "Equipment");
(d) all inventory, including without limitation, raw
materials, work-in-process, finished goods, packaging materials, spare parts
and supplies relating primarily to the Business;
(e) all know-how, trade secrets, processes and
specifications used primarily in the Business and all 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 to which Seller is a party that relate
primarily to the Domestic Business, including but not limited to all
Contracts of Seller listed on Schedule 4.7, the Motor Supply Agreement and
all Contracts entered into by Seller through the Closing Date (the "Assigned
Contracts");
(g) all transferable business licenses and permits used
exclusively in or relating exclusively to the Business or the Assets (the
"Permits");
(h) all books and records (other than Tax records), or
portions thereof relating to the Domestic Business, including 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 Business and located at
the Business Property (the "Records");
(i) all insurance proceeds paid or payable by any insurance
provider, other than Seller or any Affiliate of Seller, for any Asset that is
destroyed or damaged after the date hereof and prior to the Closing;
(j) all notes, drafts and accounts receivable, or portions
thereof, arising exclusively out of the Domestic Business;
(k) all prepaid expenses, advances and deposits (including
utility deposits), or portions thereof, arising exclusively out of the
Business;
7
<PAGE>
(l) all causes of action, claims, demands, rights and
privileges against third parties that relate primarily to the Assets or the
Business, including, without limitation, all claims for past infringement of
Intellectual Property and all warranties and guaranties received from
vendors, suppliers or manufacturers with respect to the Assets or the
Business;
(m) the facilities listed with an asterisk and described as
logistics facilities on Schedule 2.1(b), whether or not historically used
primarily in the Business; and
(n) all other intangible rights and assets of Seller that
relate primarily to the Business, including and without limitation, the
rights to intellectual property developed primarily for the Business at
Seller's Advanced Development Center in St. Louis, all goodwill appurtenant
to the foregoing Assets and the right to represent to third parties that
Buyer is the successor to the Business.
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 cash and cash equivalent items (except as described
in Section 2.1(i) and (k)) including, without limitation, checking accounts,
bank accounts, lock box numbers, certificates of deposit, time deposits,
securities, and the proceeds of accounts receivable, including uncashed
checks in payment thereof, received by Seller on or prior to the Closing Date;
(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 carryforwards, carrybacks or other
credits of Seller, whether or not attributable to the Business;
(d) claims or rights against third parties not described in
Section 2.1(l), 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 of Seller's right, title and interest in the assets
sold pursuant to the Generator Agreement;
(f) proprietary or confidential business or technical
information, records and policies that relate generally to Seller and are not
used primarily in the Business, including, without limitation, organization
manuals, strategic plans and Tax records and related information;
8
<PAGE>
(g) subject to the limited rights granted in Section 8.7,
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 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, but excluding any
software developed primarily for the Business;
(h) all Records relating to pending lawsuits (other than
any included in the Assumed Liabilities) to which Seller is a party and which
involve the Business;
(i) any interests in any joint venture to which any of
Sellers is a party;
(j) all notes, drafts and accounts receivable or other
obligations for the payment of money made or owed by any Affiliate of Sellers;
(k) all Seller's rights in, to and under any commodity
options, puts, calls, forwards or similar agreements with respect to
commodities used by the Business;
(l) the Cegled Facility;
(m) the logistics facilities of Seller, whether or not
historically used primarily in the Business, set forth on Schedule 2.2(m) and
any facility closed by the Business before the Closing Date (collectively
with the Cegled Facility, the "Excluded Facilities");
(n) the intellectual property that is licensed as part
of the Supply and Service Agreements; and
(o) all other 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 Business.
2.3 ASSUMED AND EXCLUDED LIABILITIES. On the Closing Date,
Buyer shall execute and deliver to Sellers the 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 any kind or nature, whether absolute, contingent,
accrued or otherwise, and whether arising before or after the Closing
including, without limitation, all liabilities and obligations for (i) Taxes
assumed by Buyer under Section 2.7, (ii) under the Assigned Contracts and
(iii) 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"):
9
<PAGE>
(a) any liability in respect of litigation pending
(including the EEOC Charge) against any Seller or Company in respect of the
Business prior to the Closing Date and set forth on Schedule 4.8 hereto;
(b) any liability, responsibility or obligation with
respect to (i) any Seller Plan, except as provided in Article IX and, subject
to clause (ii), excluding any Assigned Contract, (ii) any payments required
to be made under any severance or change of control plan or agreement and
(iii) any payroll or payroll tax obligation;
(c) any liability for (i) warranty claims made after the
Closing Date for service, repair, replacement and similar work required under
the Business' written warranties with respect to products sold or services
provided prior to the Closing, the expenses of which in the aggregate exceed
the warranty reserve on the Final Closing Balance Sheet, (ii) claims under
health insurance plans of Seller for covered Business Employees with respect
to services rendered prior to the Closing Date, (iii) any product liability
claims for injuries, property damage or other Losses incurred prior to the
third anniversary of the closing Date in respect of any product manufactured
by a Seller or a Company prior to the Closing Date, (iv) any claims based
upon an employee of the Business' exposure to asbestos prior to the Closing
Date or (v) any liability for workers' compensation claims for injuries
incurred prior to the Closing Date, but only if written notice of such claims
described in clause (i), (ii), (iv) or (v) shall have been delivered to
Seller within the two-year period following the Closing Date;
(d) any liability for Taxes of Seller (but not of the
Companies) for any period or portion thereof ending on or prior to the
Closing Date, excluding the Taxes that are the responsibility of Buyer
pursuant to Section 2.7 or those reflected on the Final Closing Balance Sheet.
(e) any liability for any claim relating to motors
manufactured by the Business that contain or are alleged to contain asbestos;
(f) any liability attributable, based on events, facts or
circumstances existing or occurring prior to the Closing Date, to Hazardous
Materials transported offsite from a Facility for treatment, storage,
disposal or recycling prior to the Closing Date;
(g) any obligation of Seller under and pursuant to any
commodity options, puts, calls, forwards or similar agreements with respect
to commodities used by the Business;
(h) except pursuant to the Motor Supply Agreement, any
liability arising from or related to the Excluded Assets, the disposition by
any of Sellers of any business or part thereof at any time or from any
facility closed by the Business before the Closing Date;
(i) all notes, drafts and accounts payable or other
obligations for the payment of money made or owed to any Affiliate of
Sellers; and
-10-
<PAGE>
(j) any liability covered by the insurance policies of
Sellers in effect on or prior to the Closing Date, but only to the extent a
Seller receives proceeds thereunder from a party other than a Seller or an
Affiliate of a Seller.
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 53202-5367, at 9:00 a.m. on August 2,
1999, 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." The Closing will be deemed effective at 12:01 a.m. on the
Closing Date (the "Effective Time"). 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 Two Hundred Fifty-Three Million
Dollars ($253,000,000) as adjusted based upon the estimated Closing Equity as
reflected on the Estimated Closing Balance Sheet, and such other documents as
are required by this Agreement. The purchase price (the "Purchase Price") for
the Assets shall be (a) the assumption of the Assumed Liabilities and (b)
$253,000,000 minus (i) the amount, if any, by which the Closing Equity as
reflected on the Final Closing Balance Sheet is less than the sum of (x)
$161,067,000 plus (y) the face amount of any accounts receivable described on
Schedule 6.8, whether or not collected, plus (ii) the amount, if any, by
which the Closing Equity as reflected on the Final Closing Balance Sheet
exceeds the sum of (x) $161,067,000 plus (y) the face amount of any accounts
receivable described on Schedule 6.8, whether or not collected.
At the Closing, Seller shall deliver or cause to be delivered to
Buyer (a) the Bill of Sale, Assignment and Assumption Agreement, (b)
certificates representing the Stock accompanied by stock powers, duly
executed in blank, (c) limited warranty deeds (or the equivalent thereof in
any jurisdiction in which limited warranty deeds may not be used) in
recordable form for the Owned Property being conveyed, (d) the Supply and
Service Agreements and (e) such other instruments of transfer and documents
(including assignments of Intellectual Property) as Buyer may reasonably
request, and Buyer shall deliver to Seller (a) the Assignment and Assumption
Agreement (b) the Supply and Service Agreements and (c) such other
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 reasonably 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. Prior to the Closing, Seller and
Buyer will negotiate in good faith the terms of the definitive Supply and
Service Agreements in respect of the matters outlined on Exhibit B.
2.5 PURCHASE PRICE ADJUSTMENT.
(a) The Purchase Price shall be subject to appropriate
adjustment after the Closing Date, based upon the calculation of the Closing
Equity (as hereinafter defined) on the Closing Date. The "Closing Equity"
will be the difference between the value of the Assets and
11
<PAGE>
the Assumed Liabilities, all as shown on the Estimated Closing Balance Sheet
or the Final Closing Balance Sheet, as applicable.
(b) For purposes of determining the amount payable by Buyer
at the Closing, not less than ten (10) business days prior to the Closing
Date, Seller shall, in consultation with Buyer, prepare and deliver to Buyer
an estimated balance sheet of the Business as of the Effective Time, which
shall represent Seller's reasonable estimate of the Final Closing Balance
Sheet. In the event Buyer shall object to any of the information set forth on
the Estimated Closing Balance Sheet as presented by Seller, the parties shall
negotiate in good faith and agree on appropriate adjustments such that such
balance sheet reflects a reasonable estimate of the Final Closing Balance
Sheet and the Closing Equity to be reflected on the Final Closing Balance
Sheet, but in the absence of such agreement, the most recent month-end
balance sheet of the Business shall control (the estimated balance sheet as
agreed to by the parties pursuant to this Section 2.5(b), or in the absence
of such agreement, the most recent month-end balance sheet of the Business,
is herein referred to as the "Estimated Closing Balance Sheet"). In
connection with the determination of the Estimated Closing Balance Sheet,
Seller shall provide to Buyer such information and detail as Buyer shall
reasonably request.
(c) Within 60 days after the Closing Date, Buyer shall
prepare and deliver to Seller a balance sheet of the Business as of the
Effective Time comprising the Assets and the outstanding Assumed Liabilities
prepared in a manner consistent with the April Balance Sheet and this Section
2.5 (the "Final Closing Balance Sheet"). The balances of the following
accounts on the Final Closing Balance Sheet will be identical to the balances
of such accounts on the April Balance Sheet: (i) capitalized interest; (ii)
accrued vacation and holiday pay and (iii) FIFO reserve.
During the 30 days immediately following Seller's
receipt of the Final Closing Balance Sheet, Seller shall be entitled to
review the Final Closing Balance Sheet and Buyer's working papers relating to
the Final Balance Sheet. The Final Closing Balance Sheet shall become final
and binding upon the parties on the thirtieth day following delivery thereof
unless Seller gives written notice to Buyer of its disagreement with the
method of presentation of the Final Closing Balance Sheet (a "Notice of
Disagreement") prior to such date (the "Review Expiration Date"). Any Notice
of Disagreement shall specify in reasonable detail the nature of any
disagreement so asserted and the reasons therefor. If a timely Notice of
Disagreement is received by Buyer with respect to the Final Closing Balance
Sheet, then the Final 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, Seller and Buyer 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
12
<PAGE>
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 Accounting Firm will
be instructed to use every reasonable effort to issue its determination
within fifteen (15) days of submission of the dispute to it, and in all
events, within thirty (30) days after such submission. The Final 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 (such date being the "Settlement Date"). The
Accounting Firm shall be Arthur Andersen LLP, 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
fees and expenses of the Accounting Firm pursuant to this Section 2.5 shall
be borne 50% by Buyer and 50% by Seller.
(d) If the Closing Equity as reflected on the Final Closing
Balance Sheet is determined to be less than the Closing Equity as reflected
on the Estimated Closing Balance Sheet, there will be a dollar-for-dollar
downward adjustment of the Purchase Price, with Seller being obligated to pay
Buyer the sum by which the Closing Equity as reflected on the Final Closing
Balance Sheet is less than the Closing Equity as reflected on the Estimated
Closing Balance Sheet. If the Closing Equity as reflected on the Final
Closing Balance Sheet is determined to be greater than the Closing Equity as
reflected on the Estimated Closing Balance Sheet, there will be a
dollar-for-dollar upward adjustment of the Purchase Price, with Buyer being
obligated to pay Seller any sum by which the Closing Equity as reflected on
the Final Closing Balance Sheet exceeds the Closing Equity as reflected on
the Estimated Closing Balance Sheet. The Purchase Price shall also be subject
to adjustment after the Closing Date on account of the proration of water,
electricity, gas, sewage and other utility charges and taxes applicable to
the Business if and only to the extent such amounts are not reflected on the
Final Closing Balance Sheet. In addition, the Purchase Price shall be reduced
(but no other change will be made to the April Balance Sheet or the Final
Closing Balance Sheet) to reflect the exclusion of any Business Property at
the Closing pursuant to Section 6.9 by multiplying the net book value of such
Business Property as reflected on the April Balance Sheet by a fraction, the
numerator of which is the Purchase Price and the denominator of which is the
net book value of the Business as reflected on the April Balance Sheet. If
the Purchase Price is subject to adjustment pursuant to this Section 2.5(d),
the required adjustment, together with interest on the amount being paid from
the Closing Date to the date of payment at a rate per annum equal to the
90-day London Inter-Bank Offered Rate ("LIBOR") on the Closing Date, shall be
paid within five (5) days after the Review Expiration Date or, if a Notice of
Disagreement was delivered by Seller, the Settlement Date, and, if a Business
Property that was not transferred to Buyer at the Closing pursuant to Section
6.9 is subsequently transferred to Buyer after the Closing, the related
portion of the Purchase Price will be paid, within five (5) days after the
date of the transfer of such Business Property pursuant to Section 6.9.
Either party may, in its discretion, make a payment pursuant to this Section
2.5(d) prior to the final determination of the Final Closing Balance Sheet
for the purpose of reducing the interest it may be obligated to pay pursuant
to such provision.
13
<PAGE>
(e) The Estimated Closing Balance Sheet and the Final
Closing Balance Sheet shall be prepared in accordance with GAAP, applied in a
manner consistent with that followed in the preparation of the balance sheet
described in Section 4.2(b)(iii).
(f) Buyer agrees, with respect to adjustments to the
Purchase Price pursuant to Section 2.5(d) hereof, 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 Final 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.
2.6 TAX ALLOCATION. Within ninety (90) days following the
Closing Date, representatives of Buyer and Seller shall meet and discuss the
allocation of the amount of the Purchase Price (to the extent identifiable or
reasonably estimable and taken into account for federal tax purposes) to
broad categories constituting components of the Assets and the covenant not
to compete contained in Section 6.6 hereof that each party believes is
appropriate. Within one hundred twenty (120) days following the Closing Date,
Buyer shall deliver to Seller Buyer's reasonable determination, taking into
account in good faith the discussion between the representatives of Buyer and
Seller, of such allocation, which determination shall be subject to Seller's
consent, which consent shall not be unreasonably withheld. If Buyer and
Seller are unable to agree on such allocation, then the Accounting Firm will
be retained to determine such allocation (the cost of which shall be borne
equally by Buyer and Seller). Buyer and Seller shall report the purchase and
sale of the Assets in accordance with such allocation (as finally determined)
for all Tax purposes (including the filing of the forms prescribed under
Section 1060 of the Code and the Treasury Regulations promulgated thereunder).
2.7 TRANSFER TAXES. Buyer and Seller shall cooperate in
preparing, executing and filing use, sales, real estate, transfer and similar
Tax returns relating to, and at the Closing, Buyer and Seller each shall pay
one-half, of any and all sales, real estate, transfer, use and similar Taxes
due with regard to, the purchase and sale of the Assets. To the extent such
Taxes are not computed at the Closing, the parties shall each pay their
respective one-half of such Taxes when they are due. Under no circumstances
shall Buyer's obligation hereunder or the Taxes giving rise thereto be
reflected as a liability on the Final Closing Balance Sheet nor will Seller's
obligation hereunder or the Taxes giving rise thereto be considered an
Assumed Liability. 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 will cooperate with Seller in providing
such resale certificates as may be requested in order to comply with the
requirements of applicable state taxation laws. Without limiting the
generality of the foregoing, if requested by Seller, Buyer agrees to enter
into a separate agreement that is entirely consistent with the terms hereof,
but evidences solely the transfer of the Stock of Igmex and the portion of
the Purchase Price allocable thereto.
14
<PAGE>
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 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
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 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) 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).
(c) The waiting period under the HSR Act shall have expired
or been terminated and the parties shall have received the necessary approval
under the Mexican Federal Law of Economic Competition (the "Mexican Antitrust
Law").
(d) All authorizations, approvals, notices, consents and
waivers that are required to effect the Transactions, the failure to obtain
or provide, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect, shall have been obtained and copies
thereof provided to Buyer.
3.2 SELLER'S OBLIGATION. The obligation of Seller to sell and
deliver the Assets to Buyer is subject 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.
15
<PAGE>
(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 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
Seller there exists a reasonable risk of a materially adverse result in such
pending action or proceeding).
(c) The waiting period under the HSR Act shall have expired
or been terminated and the parties shall have received the necessary approval
under the Mexican Antitrust Law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
4.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS; CORPORATE
MATTERS.
(a) Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. UK is
a company duly organized and validly existing under the laws of the United
Kingdom. Hungary is a company duly organized, validly existing under the laws
of Hungary. Canada is a company duly organized and existing under the laws of
Canada. Igmex is a company duly organized under the laws of Mexico. SEA is a
company duly organized and existing under the laws of Singapore. BV is a
company duly organized and existing under the laws of the Netherlands. 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 Sellers to authorize the
execution, delivery and performance of the Transaction Documents and the
consummation of the Transactions have been duly and properly taken,
including, without limitation, any shareholder approvals. This Agreement has
been, and each of the Transaction Documents, when executed, will be, duly
executed and delivered by each Seller and constitute a valid and binding
obligation of such Seller, enforceable against such Seller in accordance with
their respective 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 the United States in which MagneTek is qualified to do
business.
(c) 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
16
<PAGE>
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 or the Companies under,
any provision of (i) the Certificate of Incorporation or By-Laws or other
organizational or governing documents of Sellers or the Companies, (ii)
subject to the matters disclosed in Schedule 4.1(c), any Contractual
Obligation of Sellers or the Companies or (iii) any judgment, order or decree
or, subject to the matters described in clauses (A)-(D) below, Requirement of
Law applicable to Sellers or the Companies or their respective 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 Sellers 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, (D) compliance with and filings under the
HSR Act and the Mexican Antitrust Law and (E) those that, if not made or
obtained, individually or in the aggregate, would not have a Material Adverse
Effect.
(d) Each of the Companies is duly incorporated and is
validly subsisting and, in jurisdictions in which the concept is recognized,
is in good standing under the laws of the jurisdiction in which it is
organized, and has all requisite corporate power and authority to own, lease
and operate its properties and to conduct its business as it is now being
conducted. Each of the Companies is duly licensed or qualified and in good
standing as a foreign corporation in each jurisdiction in which the ownership
of its property or the nature of the business conducted by it is such as to
require it to be so licensed or qualified, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect on the
Companies.
(e) The authorized shares of each of the Companies consists
of the shares listed on Schedule 4.1(e), all of which are issued and
outstanding and constitute the Stock. Schedule 4.1(e) sets forth the
respective dates of formation of each Company. Except as set forth on such
Schedule, since the respective dates the Companies were acquired or formed by
the respective Sellers, no other Person has merged with or into any of the
Companies. All the outstanding shares of Stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive
rights, except as provided by applicable law. The only business each of the
Companies currently conducts, and has conducted since the Company was
acquired or formed by the Sellers, is the Business. The Companies do not own
or lease any real properties other than the Business Properties.
(f) None of the Companies has granted any outstanding
options, warrants, rights or other securities convertible into or
exchangeable or exercisable for its shares or any other commitments or
agreements providing for the issuance of additional shares, the sale of
treasury shares, or for the repurchase or redemption of such Company's
shares. There are no
17
<PAGE>
agreements of any kind which obligate one of the Companies to issue,
purchase, redeem or otherwise acquire any of its shares.
(g) None of the Companies directly or indirectly owns any
interest in any other corporation, partnership, joint venture or other
business association or entity, foreign or domestic.
4.2 FINANCIAL STATEMENTS; ABSENCE OF CHANGES.
(a) Schedule 4.2 contains a true and complete copy of
the following:
(i) the unaudited balance sheet of the Business as at
June 30, 1998, and the related unaudited statements of income for the
fiscal year then ended; and
(ii) the unaudited balance sheet of the Business as
of December 31, 1998, and the related statements of income for the
six-month period ended December 31, 1998; and
(iii) the unaudited balance sheet of the Business as
of April 30, 1999 and the related statements of income for the
ten-month period ended April 25, 1999.
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), the Financial Statements: (A) were
prepared in accordance with the books and records of MagneTek, (B) fairly
present the financial position of the Business in each case at and as of the
dates indicated, and the results of operations, of the Business for the
periods indicated and (C) except as otherwise set forth on Schedule 4.2(a),
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 CHANGES. Except as set forth on Schedule
4.2(b), since December 31, 1998, 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 assets
(including, without limitation, levels of working capital and the
material components thereof), liabilities, earnings or financial
condition of the Business;
(ii) 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 $500,000;
18
<PAGE>
(iii) (x) material increases in the benefits under
any Seller Plans; (y) material increases in salary payable to any
employee of the Business (other than employees described in clause (z))
other than in the ordinary course of the business of the Business and
consistent with past practice or (z) other than any increases approved
in advance by Buyer, any increases in salary or bonus payable to any
employee of the Business who is a participant in MagneTek's Incentive
Compensation Program;
(iv) to the Knowledge of Seller, 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 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 any part or
division thereof;
(vii) actions or efforts made by or on behalf of
Sellers or the Companies, which would, or would have the effect of,
accelerating sales of the Business or revenue recognition relating to
the Business, which in the ordinary course of business would be
attributable to post-Closing periods, to pre-Closing periods;
(viii)other material transactions relating to the
Business, other than in the ordinary course of the Business and
consistent with past practice; or
(ix) agreements or understandings, whether in writing
or otherwise, for any of Sellers or the Companies to take any of the
actions specified in items (i) through (viii) above.
(c) ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to
the extent specifically disclosed in the April Balance Sheet, or in Schedule
4.2(c), Seller does not have any liabilities relating to the Business, and
none of the Companies has any liabilities, other than:
(i) liabilities and obligations incurred since the
date of the April Balance Sheet in the ordinary course of business and
consistent with past practice and which have not had or will not have a
Material Adverse Effect, or
(ii) liabilities disclosed in this Agreement or any
schedule to this Agreement, or which are of the type or kind required
to be disclosed in the schedules, but are not disclosed solely because
they fall below the minimum threshold amount, term or materiality of
the disclosures required by the terms of this Agreement to be set forth
in such schedules.
19
<PAGE>
4.3 TAXES.
(a) Except as disclosed on Schedule 4.3, (i) Seller has
filed or caused to be filed all material Tax returns of Seller which have
become due (taking into account valid extensions of time to file) prior to
the date hereof, and has paid or caused to be paid all Taxes due, in each
case to the extent Buyer would incur liability under a successor liability
(or similar) statute for failure to file such returns or pay such Taxes by
reason of its acquisition of the Business, (ii) Seller has filed or caused to
be filed all material Tax returns of the Companies which have become due
(taking into account valid extensions of time to file) prior to the date
hereof, and has paid or caused to be paid all Taxes due, (iii) there are no
outstanding Tax Liens that have been filed by any Tax authority against any
property or assets of the Business and (iv) no claims are being asserted in
writing with respect to any Taxes relating to the Business for which Buyer
could be held liable under a successor liability (or similar) statute by
reason of its acquisition of the Business.
(b) The provision made for Taxes on the April Balance Sheet
is sufficient for the payment of all Taxes of the Companies due as of the
date of the April Balance Sheet. Since the date of the April Balance Sheet,
the Companies have not incurred any Taxes other than Taxes incurred in the
ordinary course of business consistent in type and amount with past practices
of the Companies.
(c) Since they were acquired or incorporated by Sellers,
none of the Companies has been part of an affiliated, consolidated, combined
or unitary group other than the consolidated group of one of the Sellers.
(d) 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.
(e) 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
marketable title to all assets reflected on the Balance Sheet or thereafter
acquired, except those sold or otherwise disposed of since the date of such
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 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
20
<PAGE>
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"). Seller has completed each of the actions described on
Schedule 4.4 under the heading "Year 2000 Remediation and Oracle
Implementation Actions."
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 2.1(a) sets forth a complete list of all
Owned Properties and Schedule 2.1(b) sets forth 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 "Business Property" and collectively as "Business
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 (or contained in the respective title
deeds) 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 2.1(e) sets forth a list of all
material Intellectual Property (excluding know-how, trade secrets,
specifications and processes and any such Intellectual Property that is
included in Excluded Assets). MagneTek or one of the Companies is the owner
of record, free and clear of any Liens other than Permitted Liens, in the
relevant Patent or Trademark Office of all patents, trademark registrations
or applications therefor on Schedule 2.1(e). With respect to registered
trademarks, Schedule 2.1(e) 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 and except for
licenses of software or firmware used in the Business that are generally
available "off-the-shelf" through commercial software vendors, MagneTek or
one of the Companies owns or has the right to use, without payment to any
other party, the Intellectual Property except where the failure so to own or
have the right to use such Intellectual Property would not have a Material
Adverse Effect. Except as disclosed on Schedule 4.6, no third party has been
licensed or permitted to use any of the Intellectual Property. Except as set
forth on Schedule 4.8, no claims are pending or, to the Knowledge of Seller,
threatened against Seller or any of the Companies by any person with respect
to the ownership, validity, enforceability or use of any Intellectual
Property, challenging or questioning the validity or effectiveness of any
such Intellectual Property or alleging that any of Seller (in respect of the
Business) or any Company is infringing upon the intellectual property rights
of others, except in each such case, such claims as would not, individually
or in the aggregate, have a Material Adverse Effect. To the Knowledge of
Seller, except as disclosed on such Schedule, none of the Companies or
MagneTek (in respect of the Business) are infringing
21
<PAGE>
on any third party's intellectual property in the operation of the Business
except for such infringement which, individually or in the aggregate, would
not have a Material Adverse Effect.
4.7 CONTRACTS. Schedule 4.7 sets forth a list of each of the
following types of Contracts to which MagneTek is a party and which relate to
the Domestic Business or to which any Company is a party:
(a) any employment or severance agreement that has an
aggregate future liability in excess of $100,000 (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 Seller or a Company is equal to or exceeds
$500,000, and which is not terminable by no more than 60 days' notice or as
to which the cost to terminate such Contract equals or exceeds $500,000;
(d) (i) any distributor, dealer, sales, advertising,
agency, manufacturer's representative, franchise or similar Contract
currently in effect, regardless of the amount of commissions payable
thereunder, or (ii) any other contract requiring the payment of any
commissions in excess of $500,000 per year;
(e) any option or other agreement to purchase or otherwise
acquire or sell or otherwise dispose of any interest in real property;
(f) any guaranty of the obligations of third parties;
(g) any agreement under which the Business or a Company has
agreed to indemnify any third party with respect to, or to share, the Tax
liability of any third party;
(h) any commitment to make a capital expenditure or to
purchase a capital asset in excess of $100,000 by or on behalf of Seller or
the Companies in connection with the operation of the Business;
(i) any agreement or commitment relating to the location of
employees or minimum number of employees to be employed by Seller with
respect to the Business or the Companies; or
(j) any other Contract which is material to the Business,
the Assets or Assumed Liabilities other than this Agreement and the
Transaction Documents.
22
<PAGE>
Except as disclosed on Schedule 4.7, each Contract listed
on Schedule 4.7 (and to the extent leases are not listed on Schedule 4.7,
each lease in respect of Leased Property) is valid, binding and in full force
and effect and is enforceable by the Seller or the Company that is party
thereto in accordance with its terms. Except as disclosed in Schedule 4.7,
the Seller or the Company that is party thereto has performed all material
obligations required to be performed by it to date under the Contracts and is
not in breach or default in any material respect thereunder and, to the
Knowledge of Seller, no other party to any of the Contracts is in breach or
default in any material respect thereunder.
The Motor Supply Agreement contains methodology for
determining the actual cost of the motors produced under such Agreement that
is the same in all material respects as the methodology historically used in
the Business to determine such costs.
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 Seller,
threatened lawsuits or claims with respect to which Seller or one of the
Companies has been contacted in writing by the claimant or by counsel for the
claimant relating to the Business which (a) has or can be reasonably expected
to have an adverse effect on the Business exceeding $250,000 in damages or
costs of compliance with an order or judgment, (b) seeks any injunctive
relief or (c) seeks to prevent the Transactions. Schedule 4.8 sets forth a
description of Sellers' and the Companies' product liability experience in
respect of the Business for the period beginning July 1, 1997 to the present.
Neither Seller nor any Company is in default under any judgment, order or
decree of any court, administrative agency or commission or other
Governmental Authority applicable to the Business; except where the default
would not have a Material Adverse Effect.
4.9 EMPLOYEE AND RELATED MATTERS. Schedule 4.9 sets forth each
material Seller Plan. Each such Seller Plan has been maintained in material
compliance with all applicable laws and regulations and in accordance in all
material respects with the provisions of such Seller Plan. None of MagneTek's
assets is subject to a Lien, actual or contingent, under Section 4068 of
ERISA, nor will consummation of the Transactions give rise to liability under
Sections 4062, 4063, 4064, 4069 or 4201 of ERISA. Seller has made available
to Buyer true, complete and correct copies of (i) each such 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
each Seller Plan that is subject to Title IV of ERISA and (iii) the most
recent summary plan description for each Seller Plan for which such a summary
plan description is required.
4.10 ENVIRONMENTAL MATTERS. Except as disclosed on Schedule 4.10, or
in any report prepared for Buyer reflecting results of investigations
conducted in connection with Buyer's acquisition-related due diligence
("Buyer Environmental Reports"):
(a) (i) the Business is in compliance with all applicable
Environmental Laws, including permitting requirements, except where any
instance of non-compliance would not have a Material Adverse Effect and (ii)
since January 1, 1997 Seller has not received written notice of any claim,
investigation, demand or notice by any Person alleging non-compliance with or
23
<PAGE>
liability under any Environmental Law in respect of the Business which would,
individually or in the aggregate, have a Material Adverse Effect and, to the
Knowledge of Seller, Seller is not the subject of any such claim,
investigation or demand. To the Knowledge of Seller, there is no underground
storage tank at any Business Property, and there has not been any underground
storage tank at any Business Property of the Domestic Business.
(b) Except for the existing conditions at and around the
McMinnville Facility, there is no existing contamination by, and there has
not been the release of, any Hazardous Material on, at or under any Business
Property that has or would have a Material Adverse Effect. Except where the
presence of a Hazardous Material or the knowledge of the presence of a
Hazardous Material constitutes a failure to comply with Environmental Laws,
nothing in this Section 4.10(b) pertains to any compliance or permitting
matters, which are covered solely by Section 4.10(a).
No representation or warranty is made in this Agreement as to any matters
relating to the environment, Environmental Laws or Hazardous Materials except
in this Section 4.10.
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
Business;
(b) to the Knowledge of Seller, no union organization
campaign is in progress with respect to the employees of the Business, and no
question concerning representation exists respecting such employees;
(c) there is no unfair labor practice charge or complaint
against Seller or any Company pending, or, to the Knowledge of Seller,
threatened, before the National Labor Relations Board or similar governmental
agency outside of the United States involving the Business that has or can be
reasonably expected to have a Material Adverse Effect;
(d) there is no pending, or, to the Knowledge of Seller,
threatened, grievance involving an employee of the Business that has or can
be reasonably expected to have, if adversely decided, a Material Adverse
Effect; and
(e) no charges with respect to or relating to Seller or any
Company in respect of the Business are pending before the Equal Employment
Opportunity Commission or any other Governmental Authority responsible for
the prevention of unlawful employment practices that has or can be reasonably
expected to have a Material Adverse Effect.
4.12 COMPLIANCE WITH LAW; PERMITS.
(a) Except as set forth in Schedule 4.12(a), none of Seller
or the Companies are in violation of any Requirement of Law applicable to the
Business, which violation has or
24
<PAGE>
can be reasonably expected to have an adverse effect on the Business
exceeding $250,000 in damages or costs of compliance with Requirements of Law.
(b) Except as set forth in Schedule 4.12(b), (i) Seller and
the Companies have all licenses, permits, orders, approvals and other
authorizations of or from all Governmental Authorities which are necessary in
the conduct of the Business ("Permits"), (ii) such Permits are in full force
and effect, and (iii) no violations or claimed violations are pending before
any Governmental Authority with respect to such Permits except any such
violation or claimed violation as would not be required to be set forth on
Schedule 4.8.
4.13 PRODUCT WARRANTY AND PRODUCT LIABILITY. Schedule 4.13 contains
a true, correct and complete copy of Seller's and the Companies' standard
warranty or warranties for sales of Products. Except as set forth or
described on Schedule 4.13, neither Seller nor the Companies has outstanding
any warranty which differs in any material respect from such standard
warranties. Except as set forth on Schedule 4.13, MagneTek has not received
notice, since July 1, 1998, from any customer to the effect that such
customer has experienced product quality problems of such significance that
it has reason to believe a concession of over $25,000 would be required in
order to resolve such customer's concerns. Each of the Products produced or
sold by Seller in connection with the Business or by the Companies is, and at
all times up to and including the sale of such Product has been, (i) in
compliance in all material respects with all Requirements of Law, (ii) fit
for the ordinary purposes for which it is intended to be used and (iii)
conforms in all material respects to any promises or affirmations of fact
made on the packaging or instructions for such product or in connection with
its sale. Except as set forth on Schedule 4.13, on the date of this
Agreement, to the extent required by law or by a customer, all Products
currently offered by the Business have been rated and approved by
Underwriters Laboratories or the analogous foreign body, as the case may be.
The Business is in compliance in all material respects with all requirements
relating to such ratings and approvals, and Seller and the Companies have not
received any notice that such ratings or approvals may be revoked or
withdrawn. Schedule 4.13 sets forth a description of all warranty claims
processed since July 1, 1998 and all customer concessions, in each case that
have been recorded in amounts exceeding, in any one such claim or concession,
$50,000. The term "Products" as used in this Section 4.13 means any and all
products currently designed, manufactured, distributed or sold by Seller or
the Companies or subject to ongoing warranty.
4.14 ASSETS OF THE BUSINESS. Except for any Excluded Assets (other
than those described in Section 2.2(e) or (f)) or Assets that may not be
transferred to Buyer pursuant to Section 8.1 and except as set forth on
Schedule 4.14, the Assets, the assets of the Companies and the rights
conferred by the Transaction Documents comprise all of the properties, assets
(including, without limitation, computer software and licenses therefor) and
rights of Seller and the Companies material to the conduct of the Business as
presently conducted and are adequate to conduct the Business on a basis
consistent with past practice. Schedule 4.14 lists all material services
provided by employees of Seller or its Affiliates (other than employees
located at the Facilities) that relate to the Business and all material
supply arrangements between the Business and another business of Seller or
any Affiliate of Seller, in each case since July 1, 1998. EXCEPT
25
<PAGE>
AS EXPRESSLY PROVIDED HEREIN, SELLER MAKES 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 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 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 the Transaction Documents and the Transactions
have been duly and properly taken. This Agreement has been, and the
Transaction Documents, when executed, will be, duly executed and delivered by
Buyer and constitute valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective 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, statute, law, ordinance, rule or regulation 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 court, administrative agency or commission or other 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 state environmental laws, (C) compliance with
and filings under the HSR Act and the Mexican Antitrust Law and (D) those
26
<PAGE>
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 in either case that
are reasonably likely to materially and adversely affect the ability of Buyer
to enter into and perform its obligations under this Agreement.
5.3 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 such Seller, the 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.
5.4 SOLVENCY. Immediately after giving effect to the Transactions,
Buyer will be able to pay its debts as they become due and will own property
which has a fair salable value greater than the amounts required to pay its
debts (including a reasonable estimate of the amount of all contingent
liabilities). Immediately after giving effect to the Transactions, Buyer will
have adequate capital to carry on its businesses. No transfer of property is
being made and no obligation is being incurred in connection with the
transactions contemplated by this Agreement with the intent to hinder, delay
or defraud either person or future creditors of Buyer.
5.5 NO KNOWLEDGE OF SELLER'S BREACH. Buyer does not have knowledge
of any breach of any representation or warranty by Seller. If Buyer obtains
knowledge relevant to the representations and warranties of Seller under this
Agreement before the Closing Date (whether through Seller or otherwise), then
for the purposes of Seller'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. For purposes of this Section 5.6, Buyer
will not be deemed to have knowledge of any breach of any representation or
warranty unless one of the individuals named in Schedule 5.6 has actual
knowledge thereof, and Seller shall bear the burden of proof with respect
thereto.
27
<PAGE>
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 reasonable access during normal business hours and
upon reasonable notice, to the personnel, properties, books and records 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. 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.
Without limiting Seller's obligations under this Section 6.1, upon the
Closing or sooner with the consent of Seller, which shall not be unreasonably
withheld, Buyer may arrange, at Buyer's expense, to have such financial
statements for the Business audited as Buyer is required to file with the
Securities and Exchange Commission in a Current Report on Form 8-K pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended.
6.2 ORDINARY CONDUCT; NO SHOPPING. 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 relationships with employees, customers, suppliers and
others with whom the Business deals. Except as contemplated by this
Agreement, Seller will not, without the prior written consent of Buyer, which
consent will not be unreasonably withheld or delayed, (i) take any action
which would cause the representations and warranties of Seller herein to be
untrue in any material respect or (ii) transfer any employee of the Business
to another business of MagneTek or transfer any employee of another MagneTek
business to the Business. Seller will provide Buyer with interim monthly
financial statements of the Business and other management reports as and when
they are available. Seller will not directly or indirectly (through a
representative or otherwise) solicit or furnish any information to any
prospective buyer, commence, or conduct presently ongoing, negotiations with
any other party or enter into any agreement with any other party concerning
the sale of the Business or the Assets or any part thereof (an "Acquisition
Proposal"), and Seller will immediately advise Buyer of the receipt of any
Acquisition Proposal.
6.3 INSURANCE. Seller 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. Buyer will not have any rights under
any such insurance policies from and after the Closing Date.
28
<PAGE>
6.4 TITLE COMMITMENT. Prior to Closing, Seller shall furnish to
Buyer at the parties' expense, equally shared a standard ALTA Form 1992
commitment for an owner's policy of title insurance (the "Title Commitment"),
together with a copy of each document referenced in said commitments, issued
by a title company selected by Buyer ("Title Company") in an amount
determined by Buyer prior to the Closing and reasonably acceptable to Seller
as to each Owned Property being conveyed insuring good and marketable title
thereto (expressly including all easements and other appurtenances) and
including extended coverage deleting all of the standard exceptions,
nonimputation endorsements and containing such additional endorsements as
Buyer shall reasonably request; PROVIDED that Buyer shall bear all
incremental premium expense for such endorsements to the extent such expense
exceeds ten thousand dollars ($10,000) in the aggregate. Seller agrees to
provide the Title Company with such affidavits, certificates or indemnitees
as the Title Company may reasonably require to issue the above-referenced
Title Commitment and corresponding title policy. Seller shall also cooperate
with Buyer to enable Buyer to obtain, at Buyer's expense, not less than ten
(10) Business Days prior to closing, surveys of each Owned Property prepared
in accordance with current ALTA/ASCM standards, certified to Buyer and the
Title Company each dated no more than ninety (90) days prior to Closing and
containing a detailed legal description, such ALTA/ASCM Table A requirements
as may be requested by Buyer, and a surveyor's certificate acceptable to
Buyer and the Title Company and prepared by a surveyor satisfactory to Buyer
licensed to practice in the state where the Owned Property is located. Buyer
shall have ten (10) Business Days after receipt of said Title Commitments and
surveys in which to raise title objections as to any material matters. If
such objections are raised by Buyer, then Seller shall have fifteen (15) days
from the date such objections are raised to cure the same and the Closing
Date shall be extended accordingly. If objections are not satisfied by the
extended Closing Date, this Agreement shall terminate unless Buyer elects to
waive the unsatisfied objections and consummate the Transactions.
6.5 ACCOUNTS RECEIVABLE. For a period of sixty (60) days after the
Closing, on the first business day of each week after the Closing Date, and
thereafter, promptly following receipt of proceeds from accounts receivable
of the Business, Seller agrees to promptly forward to Buyer any and all
proceeds from accounts receivable of the Business 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 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 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 Receivable and
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 the case may be.
29
<PAGE>
6.6 NONCOMPETITION.
(a) Each Seller acknowledges and recognizes that the
Business has been conducted by Sellers, and substantial sales of its products
have been made, throughout the world, 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 and as an
inducement to Buyer to consummate the Transactions, Sellers shall not from
and after the Closing until the fifth anniversary of the Closing Date (A)
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 (and including the
license of the MagneTek mark in connection with a Competitive Business), or
(B) induce any employee of Buyer or the Business to terminate his employment
with Buyer. As used herein, "Competitive Business" shall mean any business
involving the sale of any of the products described in Schedule 6.6
("Restricted Motors") in any city or county in any state of the United States
or anywhere outside the United States. Anything in this Section 6.6 to the
contrary notwithstanding, the acquisition by any Seller 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 6.6 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 Sellers from (i) acquiring no more than 5%,
in the case of a privately held Person, and no more than 5%, in 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 or (ii) selling any Restricted Motor in combination with
any drive product. In addition, the provisions of this Section 6.6 will
automatically expire and become null and void in the event of a change of
control of MagneTek. For purposes of this Section 6.6, a change of control of
MagneTek will be deemed to have occurred if, as a result of one or a series
of related transactions, Persons beneficially owning at least 51% of
MagneTek's voting stock prior to the first such transaction cease to continue
to beneficially own such voting stock (directly or through one or more
holding companies), it being understood that this provision is intended to
apply to circumstances in which a third Person acquires or succeeds to
ownership or control of substantially all of the assets or business of
MagneTek as constituted immediately prior to such acquisition or succession.
In the event of a change of control, the successor to MagneTek shall be
bound, for the remainder of the term of this Section 6.6, not to use the
MagneTek mark in connection with the sale of any Restricted Motors.
(b) The prohibition in Section 6.6(a) shall apply to all
political subdivisions or regions in all states of the United States and all
geographical areas worldwide. Sellers agree that, in connection with the
purchase by Buyer of the Assets (including the goodwill) of the Business, the
time and geographic restrictions set forth above are reasonable. Sellers
agree that the remedy at law for any breach by Sellers of this Section 6.6
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 6.6 shall not render any other term or provision
contained herein unenforceable or invalid. If the activities described in
Section 6.6(a) or the period of time or the
30
<PAGE>
geographical area covered by this Section 6.6 should be deemed too extensive,
then the parties intend that this Section 6.6 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.
6.7 CONFIDENTIAL INFORMATION. On and after the day of the Closing,
Sellers will hold, and will use their best efforts to cause their respective
officers, directors, employees, accountants, counsel, consultants, advisors
and agents ("Representatives") to hold, in confidence, unless compelled to
disclose by any Requirement of Law, all confidential documents and
information concerning the Business (including any confidential information
or documents provided to it pursuant to Section 8.6 and any trade secrets or
other proprietary information forming a part of the Intellectual Property)
(the "Confidential Information"), except to the extent that such information
is (a) in the public domain through no fault of Sellers or any of their
Representatives or (b) later lawfully acquired by Sellers on a
non-confidential basis from sources other than Buyer or any of its
Affiliates. The obligation of Sellers to hold any such information in
confidence shall be satisfied if they exercise the same care with respect to
such information as they would take to preserve the confidentiality of their
own similar information. Nothing in the foregoing is intended to expand the
covenant of Seller contained in Section 6.6, it being understood, however,
that this Section 6.7 shall continue to preclude the divulgence of
Confidential Information by Sellers to third parties after the expiration of
the covenant contained in Section 6.6.
6.8 REPURCHASE OF CERTAIN ACCOUNTS RECEIVABLE. MagneTek agrees that
it will purchase, for the face amount thereof, any or all of the accounts
receivable described on Schedule 6.8 as to which the Buyer notifies MagneTek
that it will require such repurchase. Such notice must be given by Buyer, if
at all, no earlier than October 31, 1999 and no later than November 15, 1999.
6.9 RESOLUTION OR REMEDIATION OF CERTAIN ENVIRONMENTAL MATTERS
IDENTIFIED PRIOR TO THE CLOSING DATE.
(a) MagneTek agrees, at its own expense no later than the
90th day after the Closing Date, to resolve or correct the matters described
on Schedule 6.9 as required under applicable Environmental Law, with the
rights and duties of the parties in respect of the conduct of such activities
being subject to the provisions of Section 10.3 hereof. In the event MagneTek
fails to fulfill timely the foregoing obligation, Buyer shall be entitled to
assume the remaining work necessary to perform such obligations, and MagneTek
will indemnify Buyer for all of its out-of-pocket expenses reasonably
incurred in such performance. In all events, MagneTek will indemnify Buyer
for any Losses arising from any non-compliance of the Business or Business
Properties with applicable Environmental Law reflected on Schedule 6.9.
(b) Buyer will provide MagneTek with the Buyer
Environmental Reports promptly as these become available. In respect of all
such properties other than the McMinnville Facility and the facility at
Owosso, Michigan (the "Secondary Properties"), MagneTek will
31
<PAGE>
notify Buyer on or before the Closing Date as to whether it elects to retain
any such Secondary Property or to transfer it (or the related leasehold
interest) to Buyer. In the event MagneTek elects to transfer a Secondary
Property, MagneTek will thereby have agreed to perform, at its sole cost and
expense, all investigation and remediation necessary under Environmental Law
in respect of such Secondary Property, in which case the provisions of
Section 10.3 shall govern the parties' respective rights and duties. In the
event MagneTek does not so elect to transfer a Secondary Property, MagneTek
will have an additional 120-day period during which to evaluate the necessary
investigation and remediation, at the end of which it will have the right to
notify Buyer that it does elect to transfer the Secondary Property, and such
notification will also evidence MagneTek's agreement to perform the required
investigation and remediation as aforesaid. MagneTek may also determine, at
the end of such 120-day period, that it will not transfer the Secondary
Property, in which case such Secondary Property will be considered an
Excluded Facility for all purposes hereunder except that the employees of
such facility who would not otherwise be Business Employees will continue to
be treated as Business Employees under this Agreement. During such 120-day
period, the Purchase Price will be provisionally adjusted to reflect the
exclusion of any Secondary Property not transferred, subject to payment of
the amount provisionally excluded (as adjusted to reflect changes in the
ordinary course of business in the net book value of such Business Property
from that reflected on the April Balance Sheet) in the event MagneTek elects
to transfer the Secondary Property at the end of such period. The parties'
conduct during such 120-day period will comply with the provisions of Section
10.3. In the event MagneTek ultimately retains a Secondary Property, MagneTek
and Buyer will negotiate in good faith prior to the Closing to enter into a
lease (which will be a sublease, if permitted, in the case of a Business
Property as to which Seller holds only a leasehold interest) ending on the
second anniversary of the date on which MagneTek notifies Buyer that it will
not transfer the applicable Secondary Property, or such earlier date as Buyer
shall request, such lease to provide for payment by Buyer of (i) all expenses
relating to the ownership and operation of the Secondary Property (subject to
Seller's obligations under this Agreement, and other than certain significant
repair items to be negotiated) and (ii) market rental in the vicinity of the
Secondary Property. MagneTek will be responsible for all severance costs of
employees terminated in connection with Buyer's vacating the Secondary
Property, which it will pay to terminated employees on the same basis as it
would have paid had such employees remained in or been in MagneTek's employ
through the date of their termination assuming payment in accordance with
MagneTek's severance guidelines and policies in effect on the date hereof. In
all events, MagneTek will indemnify Buyer for any Losses it reasonably incurs
under Environmental Law as a result of the continued existence, during such
120-day period and of any lease term, of the condition of the relevant
Secondary Property on the Closing Date. Any risk and cost of vacating the
Secondary Property at the end of the lease term will, except as aforesaid, be
entirely borne by Buyer.
(c) In respect of the Owosso facility, Buyer will have the
right to notify Seller on or before the Closing Date that it elects not to
accept the transfer of such facility and Seller will have the right to notify
Buyer on or before the Closing Date that it elects not to transfer such
facility. In the absence of such notice, the Owosso facility will be treated
the same as a
32
<PAGE>
Secondary Facility that is transferred to Buyer as described in subparagraph
(b) above. In the event Buyer so notifies MagneTek, or MagneTek so notifies
Buyer, both parties will have 270 days at their own respective expense to
evaluate the necessary investigation and remediation. In the event either
party gives the foregoing notice, MagneTek and Buyer will negotiate in good
faith to enter into a lease prior to the Closing upon the same terms as are
set forth above, and the employees of such facility will be treated as
Business Employees. The parties' conduct during such period shall comply with
Section 10.3, except that MagneTek will cooperate with Buyer and Buyer will
be permitted (before and after the Closing) to take such actions as are
necessary to complete a "Baseline Environmental Assessment" and file a report
with respect thereto in accordance with Michigan law, and Buyer will give
MagneTek a reasonable opportunity to comment upon materials prepared for such
filings and will accept any reasonable input from MagneTek in the process.
Buyer will have the right, prior to the end of such 270-day period or the
time the Governmental Authorities exercising jurisdiction over such
remediation have approved an investigation and remediation plan relating to
the facility, whichever is later, to notify MagneTek whether it will accept
the transfer of the Owosso facility, and MagneTek will have the right, within
such 270-day period, to notify Buyer that it elects not to transfer such
facility. If neither party elects to prevent the transfer, the Owosso
facility will be transferred promptly after the expiration or waiver of the
applicable period and MagneTek will thereby have agreed to perform, at its
sole cost and expense, all investigation and remediation necessary under
Environmental Law in respect of the Owosso facility, and the provisions of
Section 10.3 will govern the parties' respective rights and duties. If either
party elects to provisionally exclude the Owosso facility from the
Transaction, the Purchase Price will be provisionally adjusted as set forth
in Section 2.5(d), subject to the payment to MagneTek in the event of the
subsequent transfer of the Owosso facility of the amount so excluded (as
adjusted to reflect changes in the ordinary course of business in the net
book value of the Owosso facility from that reflected on the April Balance
Sheet). In the event either Buyer or MagneTek elects not to transfer the
Owosso facility, the parties will extend the lease until no later than the
second anniversary of the date on which notice is given by a party that the
Owosso facility will not be transferred. In the event the exclusion of the
facility occurs at MagneTek's election, MagneTek will have the same
responsibility for severance to employees as is described under subparagraph
(b) above, and in the event such exclusion is at the election of Buyer, Buyer
will have all responsibility for severance of such employees. In each such
case and except as to the employees as described in this subparagraph (c),
the Owosso facility will as a result of such exclusion be considered an
Excluded Facility for all purposes hereunder. MagneTek will indemnify Buyer
for any Losses it reasonably incurs under Environmental Law as a result of
the continued existence, during the period during which transfer of the
Owosso facility is held in abeyance and of any lease term, of the condition
of the Owosso facility on the Closing Date. Any risk and cost of vacating the
Owosso facility at the end of the lease term will, except as aforesaid, be
entirely borne by Buyer.
(d) MagneTek agrees to use commercially reasonable efforts
to assign or otherwise make available to the Buyer the benefits of its
indemnification agreement from GA-TEK, Inc. (a purported successor to Gould,
Inc. hereinafter, "Gould") pertaining to the conditions at the McMinnville
Facility, in each case without breaching any obligations or
33
<PAGE>
releasing any rights it has in respect thereto, it being the parties'
intention to respect all of the provisions of such indemnification agreement
and to cooperate with each other in respect of its enforcement. Buyer agrees,
whether or not such consent is obtained, to use commercially reasonable
efforts (but without expenditure of more than incidental monies or the
obligation to institute litigation or to materially delay) to seek
performance from Gould of such indemnification prior to pursuing MagneTek.
Buyer also agrees that if MagneTek obtains and pays all premiums for and
maintains insurance in respect of the foregoing conditions at the McMinnville
Facility that is substantially commensurate with the indemnification provided
to the Buyer under Section 10.1(d) in respect of the McMinnville Facility
(and retains all liability and obligation in respect of any deductible or
retention associated with such insurance), and such insurance is reasonably
acceptable to Buyer, then such indemnification will expire automatically and
MagneTek will have no liability or obligation to Buyer thereunder except the
premiums and deductibles for such insurance. In addition, in the event
MagneTek obtains the consent to assignment from Gould as described above in
form and substance reasonably acceptable to Buyer, and Buyer obtains, and is
able to substantiate to its reasonable satisfaction, evidence that Gould is
at least as fiscally viable as MagneTek as of the Closing Date, Buyer will
also release MagneTek from its indemnification obligation in respect of the
McMinnville Facility (except insofar as MagneTek has any independent
responsibility for such conditions at the McMinnville Facility). The parties
agree that to the extent MagneTek is responsible for performing or ensuring
the performance of the investigation and remediation of the McMinnville
Facility, as between the parties the provisions of Section 10.3 hereof will
govern the parties' rights and duties. In addition, unless MagneTek's
indemnification liability for the McMinnville Facility has theretofore been
released under this subparagraph by virtue of MagneTek providing insurance to
Buyer, if at any time after the Closing MagneTek's net worth shall be less
than $80,000,000, MagneTek will at its expense within 30 days after receiving
a request from Buyer to do so, obtain and deliver to Buyer, and thereafter
maintain, a letter of credit, suretyship bond or similar instrument in form
and substance (including the identity of the issuer) reasonably acceptable to
Buyer in favor of Buyer in respect of the remaining estimated clean-up cost
for the McMinnville Facility in respect of the indemnification provided to
Buyer under Section 10.1(d) (to be determined without regard to any future
contribution thereto by Gould), such bond or other instrument to be
progressively reduced as the clean-up progresses (and to be cancelled at such
time as the remaining exposure is less than $1,000,000). Buyer and MagneTek
will at such time negotiate in good faith as to the appropriate amount to be
secured by such instrument (or any reduction in the amount thereof). If Buyer
and MagneTek fail to agree as to the appropriate amount of such surety (or
any reduction thereof), then at any time at the request of either party they
shall select a nationally recognized environmental consultant to resolve the
dispute. Buyer and MagneTek will use commercially reasonable efforts to
ensure that the appropriate amount to be secured by such instrument (or any
reduction thereof) is determined within 30 days after the first request by a
party to determine such amount. If MagneTek (or a successor in interest to
its obligation hereunder) ceases to report financial information in publicly
available filings with the SEC, then MagneTek will, at the reasonable request
of Buyer from time to time, furnish Buyer with financial statements from
which its net worth is reasonably ascertainable.
34
<PAGE>
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 the terms of a confidentiality
agreement between Buyer and Seller (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 Business;
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 terms and conditions of the
Confidentiality Agreement after the date of the Closing.
7.2 ACCOUNTS RECEIVABLE. For a period of sixty (60) days after the
Closing, on the first business day of each week after the Closing Date, and
thereafter, promptly following receipt of proceeds from accounts receivable
of Seller, 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 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 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 Seller Accounts Receivable and
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 the case may be.
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 Requirements of Law applicable to bulk sales and
transfers, to the extent applicable to the Transactions.
7.4 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 request and expense of 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.
35
<PAGE>
7.5 COOPERATION. Buyer agrees to cooperate with MagneTek in
resolving any action, suit, investigation or proceeding relating to issues
raised directly or indirectly by the EEOC Charge, which cooperation shall
include, but not be limited to, not unreasonably withholding its consent to
be bound by any order or directive issued by the EEOC. MagneTek will
indemnify Buyer for any Loss it incurs as a result of such cooperation
including, but not limited to, training costs associated with any equitable
remedy imposed by any court or pursuant to any settlement agreement.
7.6 CHANGE OF COMPANY NAMES. Effective on or promptly after the
Closing Date, Buyer will take such actions as are necessary under local law
to remove the name "MagneTek" from that of any of the Companies it will
operate after the Closing.
ARTICLE VIII
MUTUAL COVENANTS
Each of Seller and Buyer covenant and agree as follows:
8.1 HSR FILINGS; PERMITS AND CONSENTS.
(a) Seller and Buyer will as promptly as practicable, but
in no event later than ten Business Days following the execution and delivery
of this Agreement, file 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.
Seller and Buyer shall furnish to the other such 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.
Seller 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. 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 Seller shall make all other 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. Without limiting the generality of the
foregoing, Seller shall use commercially reasonable efforts to assist Buyer
in replicating all of Seller's Underwriters Laboratories and similar product
testing service association approvals and certifications related to the
Business; PROVIDED, that Buyer will reimburse Seller for any out-of-pocket
expense incurred in such activities and Seller will not be required to
provide more than incidental and DE MINIMUS employee services in connection
therewith. Buyer and Seller shall furnish promptly to each other all
information that is not otherwise available to the other
36
<PAGE>
party and that such party may reasonably request in connection with any such
filing. Buyer and Seller 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, notwithstanding any other provision hereof, 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.
(c) Buyer agrees that Seller shall have no 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, 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.
(d) 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 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 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; PROVIDED, HOWEVER, that, to the extent such benefits are not so
provided, Buyer shall have no obligation pursuant to Section 2.3 with respect
to such Contract and any such Contract shall not be deemed to be an Asset,
and the related liability shall not be deemed an Assumed Liability.
Notwithstanding anything to the contrary in this Section 8.1, Seller shall
not be relieved of its obligations under the Supply and Service Agreements.
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 Business to Buyer and to minimize any disruption to
the respective businesses of Seller or the Business that might result from
the
37
<PAGE>
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, from the date hereof
through the Closing Date, no public release or announcement concerning the
Transactions shall be issued without the prior consent of each party (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. Notwithstanding the foregoing, Seller shall provide
Buyer access to, and facilitate meetings with, the employees of the Business
for the purposes of making announcements concerning, and preparing for the
consummation of, the Transactions.
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. Each of Seller
and Buyer will promptly notify the other promptly after learning of the
occurrence of any event or circumstance which would reasonably be expected to
cause any condition to Closing not to be satisfied.
8.5 RECORDS. On the Closing Date, Seller shall deliver or cause to
be delivered to Buyer all Records and materials that would be Records if
located at a Business Property which are material to and used primarily in
the Business (to the extent not then in the possession of the Business),
except any Records relating to Excluded Liabilities (including, without
limitation, to Seller's 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 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 Buyer or such representatives to make
abstracts from, or copies of, any of such information, or to obtain temporary
possession of any thereof as may be reasonably required by Buyer at Buyer's
sole cost and expense; PROVIDED, HOWEVER, that such access does not
unreasonably disrupt the normal operations of such Seller. For a period of
seven (7) years following the Closing, MagneTek will retain all of such
information relating to the Business.
8.6 ACCESS TO FORMER BUSINESS RECORDS. For a period of seven (7)
years following the Closing, Buyer will retain all Records. During such
period, upon reasonable written notice and at Seller's sole expense Buyer
will afford authorized representatives of Seller (including its auditors)
access to such Records in Buyer's possession 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 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 such
Seller's sole
38
<PAGE>
cost and expense; PROVIDED, HOWEVER, that such access does not unreasonably
disrupt the normal operations of Buyer. 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 such Seller or any of its Affiliates is
subject relating to the business of the Business prior to the Closing.
Notwithstanding the foregoing, while the existence of an adversarial
proceeding between the parties will not abrogate or suspend the provisions of
this Section 8.6, as to Records or information directly applicable pertinent
to such dispute, the parties may not utilize this Section 8.6 but rather,
absent agreement, must utilize the available rules of discovery. The term
"Record" as used in this Section 8.6 shall include any data processing files
or other computerized data.
8.7 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
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."); (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;
PROVIDED, HOWEVER, that in respect of all such items other than finished
goods inventory (and if such finished goods are packaged, the packaging),
such continued use will cease on the second anniversary of the Closing Date,
and in respect of finished goods inventory and any related packaging, such
continued use will cease on the fourth anniversary of the Closing Date; (iv)
as to any item of tooling in existence on the Closing Date that bears such
trade names, trademarks, service marks or logos, until it becomes necessary
for Buyer to replace such tooling in the ordinary course of business, at
which time Buyer shall replace such tooling with tooling that does not bear
such trade names, trademarks, service marks or logos; and (v) to the extent
any such trade names, trademarks, service marks or logos appear or inventory
produced after the Closing Date using tooling described in clause (iv), until
such inventory is exhausted. In addition, Buyer agrees that it will not use
the name "Universal" (alone or with the name "Electric") in connection with
any lighting product it may manufacture or sell now or in the future, and
MagneTek agrees not to use such name in connection with any Restricted Motors
or drives product it may manufacture or sell in the future or drives product.
Except for "Universal," MagneTek will not use any of the trademarks or trade
names on Schedule 2.1(e), or any trademarks or trade names confusingly
similar thereto, in connection with any products it may manufacture or sell
in the future.
8.8 TAX RETURNS AND PAYMENTS.
(a) Seller shall prepare or cause to be prepared and shall
file or cause to be filed all Tax returns of the Companies required to be filed
on or prior to the Closing Date (taking
39
<PAGE>
into account valid extensions of time to file), and Buyer shall prepare or
cause to be prepared and file or cause to be filed all other Tax returns of
the Companies. All returns prepared by Seller and Buyer (to the extent such
returns cover periods prior to the Closing Date) shall, except as otherwise
required by law, be prepared in a manner consistent with past practice of the
Companies.
(b) To the extent permitted by law, Seller and Buyer shall
use their best efforts to cause any Taxable period of the Companies to close
on the Closing Date.
(c) With the view to minimize all Taxes payable by each of
the Companies or payable as a result of the transactions contemplated by this
Agreement to the maximum extent permitted by applicable law, Seller and Buyer
shall cooperate in good faith in (i) preparing and filing all Tax returns
with respect to the Companies and the sale of the Business, (ii) maintaining
and making available to each other all records necessary in connection with
Taxes relating to such returns and (iii) resolving all disputes and audits
with respect to such Taxes. Buyer and Seller recognize that each may need
access, from time to time, after the Closing Date, to certain accounting and
tax records and information held by the other, including all computerized
books and records and any such information stored on any other form of media
("Tax Records"); therefore, Buyer and Seller agree (x) to allow (and Buyer
and Seller shall cause the Companies to allow) each other and their agents
and representatives, at times and dates mutually acceptable to the parties,
to inspect, review and make copies of such Tax Records and to make available
the appropriate personnel with knowledge of such Tax Records to help answer
questions, such activities to be conducted during normal business hours and
with the requesting party paying out of pocket expenses only and (y) to offer
the other parties such records before destroying such records. Buyer shall,
and shall cause the Companies to, provide information to Seller necessary for
the preparation of all Tax returns required to be prepared or filed by Seller.
(d) Seller shall have the sole and exclusive authority to
file amended United States Federal Tax returns for any periods that end prior
to or include the Closing Date. Any refunds with respect to such Tax returns
shall be the property of Seller. Buyer shall have the sole and exclusive
authority to file amended Tax returns of the Companies (other than such
Federal Tax returns), to enter into any settlement with respect to any period
that ends prior to or includes the Closing Date and to receive all refunds
relating thereto; PROVIDED that Seller shall have no liability to Buyer for a
breach of representation or warranty or otherwise caused by, and Buyer shall
hold Seller harmless from and against any and all costs, expenses and
liabilities (including but not limited to Taxes) arising from, any such
amendment or settlement.
(e) Buyer shall not and shall not permit its Affiliates
(including the Companies) to make any election under Section 338 of the Code
(with respect to the purchase of the Companies) or any other Tax election
that could affect the liability of Seller for Taxes.
8.9 CEGLED FACILITY. On the Closing Date, Seller will cause Hungary
to convey the Cegled Facility to a Hungarian subsidiary of MagneTek, without
any adjustment to the Purchase Price. Hungary will enter into a lease in a
form reasonably satisfactory to Buyer with the
40
<PAGE>
transferee of the Cegled Facility expiring on the first anniversary of the
Closing Date, providing for Hungary to pay all costs and expenses (subject to
Seller's obligations under this Agreement and excluding significant repairs
to be negotiated) associated with the ownership and operation of the Cegled
Facility (but no additional rent). Buyer will be entitled at any time prior
to the first anniversary of the Closing Date to remove from the Cegled
Facility all such physical assets and fixtures as can be removed without
damaging the facility, at Buyer's sole risk and expense. On such first
anniversary, Buyer will be deemed to have executed a quitclaim in favor of
the owner of the Cegled Facility in respect of any assets left at the Cegled
Facility. Upon the Closing, the employees at the Cegled Facility will remain
employees of Hungary until the first anniversary of the Closing Date. Buyer
will notify Seller on or before such first anniversary of its desire to
terminate any such Cegled employees and, if Buyer so elects, MagneTek will
pay half of the associated severance costs in respect of any such terminated
employees, PROVIDED that Buyer will not be required to pay more than
$200,000, and MagneTek will assume any remaining severance liability. As soon
as practicable after the date hereof, Seller will deliver to Buyer all
environmental reports in its possession or the possession of its agents or
consultants relating to the Cegled Facility. If the contents of such reports
are not reasonably satisfactory to Buyer, then Buyer may request and, if so
requested, the parties shall negotiate in good faith an amendment to this
Agreement to provide that instead of purchasing the Stock of Hungary at the
Closing, Buyer will acquire the assets of Hungary and assume its liabilities,
with the Cegled Facility as an Excluded Facility.
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 salaries and wages
commensurate with the responsibilities such Business Employees will have
after the Closing Date and otherwise on terms and conditions that in the
aggregate are substantially the same as those in effect immediately prior to
the Closing Date. The Business Employees who accept and actually commence
employment with Buyer are hereinafter collectively referred to as
"Transferred Employees." It is agreed and acknowledged, subject to the
foregoing, that Buyer may terminate at any time after the Closing Date the
employment of any Transferred Employee or employee of any Company. Buyer
assumes all obligations and liabilities, if any, under the Worker Adjustment
and Retraining Notification Act (the "WARN Act") and any comparable state or
foreign laws arising out of the Transactions.
9.2 EMPLOYEE BENEFIT PLANS.
(a) Effective as of the Closing Date, (i) Transferred
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 (ii) Buyer shall adopt or
designate employee benefit plans providing benefits which in the aggregate are
substantially the same as the benefits provided to such Transferred Employees
under Seller's
41
<PAGE>
FlexCare Plus Retirement Savings Plan, FlexCare Plus Retirement Pension Plan,
Self-Funded Benefit Plan and Insured Benefit Plan (the "Buyer's Benefit
Plans"). With respect to the Buyer's Benefit Plans, Buyer shall grant all
Transferred 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 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 that provide health
benefits after the Closing Date, such plans shall waive any exclusions or
limitations with respect to pre-existing conditions and actively-at-work
exclusions, except to the same extent the Transferred Employee is subject to
a pre-existing condition or actively-at-work exclusion on the Closing Date
under any Seller Plan that provides health benefits, and shall provide that
any expenses incurred during 1999 on or before the Closing Date by a
Transferred 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 Business Employees and their covered dependents for services rendered
after the Closing Date.
(b) Buyer shall assume liability for retiree health
benefits in respect of Transferred Employees who were employed by Seller
prior to January 1, 1992 and who are or will be entitled to retiree health
benefits under the terms of Seller's Retiree Medical Plan ("Participating
Transferred Employees"). Effective as of the Closing Date, Buyer shall adopt
or designate a retiree medical plan in which all Participating Transferred
Employees shall be eligible to participate, and which shall provide retiree
medical benefits that are in the aggregate substantially similar in value to
those provided under Seller's Retiree Medical Plan.
(c) On the Closing Date, Seller shall spinoff to Buyer, and
Buyer shall become the sponsor of, that portion of the MagneTek, Inc.
Cafeteria Plan that is applicable to Transferred Employees, as provided in
the spinoff/transfer of sponsorship agreement attached as Schedule 9.2(c)
hereof.
9.3 VACATION AND HOLIDAY PAY. As of the Closing Date, Buyer shall
assume all of Seller's obligations for vacation and holiday pay to all
Transferred Employees.
9.4 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 Business Employee, including, but not limited
to, compensation and employment histories.
9.5 COMPANY EMPLOYEES AND PLANS. Buyer acknowledges that, by
operation of law, the Companies shall be and remain liable for all
obligations under Seller Plans pertaining to the current and former employees
of the Companies.
42
<PAGE>
9.6 PENSION PLAN.
(a) The Transferred Employees participate in a qualified
defined benefit plan maintained by MagneTek ("Seller's Pension Plan"). Seller
represents and warrants that Seller's Pension Plan and related trust meet the
requirements for qualification under Section 401 of the Code, and shall
continue to meet such requirements as of the date of the transfer described
in subparagraph (c) below. Seller shall provide to Buyer copies of Seller's
Pension Plan and related trust and a copy of the most recent determination
letter issued by the Internal Revenue Service with respect to Seller's
Pension Plan. Seller agrees to cause (or to amend Seller's Pension Plan to
require) the administrator of Seller's Pension Plan to credit to the
Retirement Account of each Business Employee who becomes a Transferred
Employee on or within 90 days following the Closing (such date employment
with Seller ceases being the "Transfer Date"), (i) the employer contribution
credit that would have been allocated to the Retirement Account of such
Transferred Employee had such Transferred Employee remained employed by
Seller through the last day of the plan year in which the Closing occurs (but
taking into account only the compensation earned by the Transferred Employee
through his or her Transfer Date), and (ii) the interest credit that would
have been allocated to the Retirement Account of such Transferred Employee
for the plan year in which the Closing occurs, prorated based upon the ratio
of number of days in such plan year which fall on or before his or her
Transfer Date to 365.
(b) Buyer shall establish or designate a qualified defined
benefit plan ("Buyer's Retirement Plan") for the benefit of the Transferred
Employees. Buyer represents and warrants that Buyer's Retirement Plan and
related trust shall meet the requirements for qualification under Section 401
of the Code as of the date of the transfer described in subparagraph (c)
below. Prior to such transfer, Buyer shall provide to Seller satisfactory
evidence that Buyer's Retirement Plan meets such qualification requirements.
Buyer shall cause Buyer's Retirement Plan: (i) to recognize the past service
of the Transferred Employees with Seller and its affiliates for
participation, benefit eligibility and vesting purposes under Buyer's
Retirement Plan to the same extent as such past service is recognized for
such purposes under Seller's Pension Plan immediately prior to the Closing
Date; and (ii) to recognize the future service of the Transferred Employees
with Buyer and its affiliates on and after the Closing Date for all purposes
under Buyer's Retirement Plan.
(c) As soon as reasonably practical after, but within 120
days following, the Closing Date, the actuary for Seller's Pension Plan shall
determine, with respect to those Business Employees who become Transferred
Employees on, or within 90 days after, the Closing Date, the amount of assets
of Seller's Pension Plan to be allocated (the "Allocated Assets") to the
accrued benefits of such Transferred Employees under Seller's Pension Plan as
of the Closing Date, excluding those benefits funded by the annuity contracts
owned by Seller's Pension Plan or Seller (the "Annuity Contracts"). With
respect to those Business Employees who become Transferred Employees after,
but within 90 days following the Closing Date for purposes of this
allocation, their accrued benefits shall include the additional benefits
accrued under Seller's Pension Plan from the Closing Date to their respective
Transfer Dates. The determination of such Allocated Assets shall be performed
on a plan termination basis in accordance with the rules and procedures
described in Section 4044 of ERISA. The actuarial assumptions used for the
allocation
43
<PAGE>
determination shall be the assumptions used by the Pension Benefit Guaranty
Corporation on the Closing Date for valuing plan benefits of trusteed plans.
The accrued benefits being spunoff to the Buyer's Retirement Plan are all
benefits accrued by the Transferred Employees under Seller's Pension Plan,
other than those benefits provided under the Annuity Contracts and the
benefits of those Business Employees who become Transferred Employees more
than 90 days after the Closing Date (the "Transferred Benefits"). As soon as
reasonably practicable after the calculation of the Allocated Assets is
completed, Seller shall cause the trustee of Seller's Pension Plan to
transfer to the trustee of Buyer's Retirement Plan cash or other assets
reasonably acceptable to Buyer equal to the amount of Allocated Assets, plus
interest thereon at the applicable interest rate used in the calculations of
the Allocated Assets, from the Closing Date to the actual date of transfer of
such assets. After the Closing Date, the sole and exclusive responsibility
for providing the Transferred Benefits shall be that of the Buyer's
Retirement Plan and Buyer. As soon as reasonably practicable after, but
within 120 days following, the Closing Date, Seller shall request the actuary
for Seller's Pension Plan to determine the present value of the Transferred
Benefits (the "ABO Amount"). Such calculation shall be determined as of the
Closing Date using a 7.25% discount rate, 1983 Group Annuity Mortality Table
(applied to each Transferred Employee whose benefit is being transferred on
an age and gender-specific basis), and such other actuarial assumptions as
were used by the actuary for Seller's Pension Plan for purposes of preparing
the January 1, 1998 actuarial valuation report for purposes of determining
plan funding. Buyer's actuary shall have the opportunity to review and
approve the accuracy of the calculations. As soon as reasonably practicable
after such calculations are completed and approved by Buyer's actuary, Seller
shall pay Buyer an amount equal to the excess, if any, of the ABO Amount over
the amount of Allocated Assets, as defined in Section 9.6(c) plus interest on
such excess from the Closing Date to the date of payment at a rate per annum
equal to LIBOR on the Closing Date. However, if the amount of Allocated
Assets exceeds the ABO Amount, Buyer shall pay Seller an amount equal to such
excess as soon as reasonably practical following such determination plus
interest on such excess from the Closing Date to the date of payment at a
rate per annum equal to LIBOR on the Closing Date.
9.7 401(k) PLAN.
(a) Effective on the Closing Date, Buyer shall adopt or
designate a defined contribution plan qualified under Section 401(a) and
Section 401(k) of the Code (the "Buyer 401(k) Plan") in which Transferred
Employees shall be eligible to participate on and after the Closing Date to
the same extent such Transferred Employees were eligible to participate in
the MagneTek Flexcare Plus Retirement Savings Plan ("Seller 401(k) Plan")
immediately prior to the Closing Date.
(b) Effective on the Closing Date, Seller shall spin-off to
the Buyer 401(k) Plan the accounts of the Transferred Employees in the Seller
401(k) Plan and as soon as practicable following the Closing Date, but not
later than sixty days after the Closing Date, Seller shall cause to be
transferred to the Buyer 401(k) Plan the assets allocated to such accounts,
including shares of MagneTek stock held in the Company Stock Fund. Buyer
agrees to cause the Buyer 401(k) Plan to continue to maintain the spunoff
Company Stock Fund for a period of not
44
<PAGE>
less than one year from the Closing Date; PROVIDED that Buyer's 401(k) Plan
is not obligated to permit additional contributions to be made to said
Company Stock Fund. Prior to the actual transfer of such assets, the
Transferred Employees shall not be permitted to make withdrawals or loans
from the spunoff accounts and any loan repayments with respect to spunoff
participant notes shall be made to the trustee of the Buyer 401(k) Plan trust.
(c) Seller and Buyer shall cooperate with each other during
the period beginning on the date hereof and ending on the date the assets are
transferred to the trust maintained under the Buyer 401(k) Plan to ensure the
ongoing operation and administration of the Seller 401(k) Plan and the Buyer
401(k) Plan with respect to such Transferred Employees. Following such
transfer of assets, the sole and exclusive responsibility for providing the
benefits that are attributable to plan assets transferred to Buyer's 401(k)
Plan shall be that of Buyer's 401(k) Plan and Buyer.
9.8 THIRD-PARTY BENEFICIARIES. No provision of this Article IX
shall create any third-party beneficiary rights in any employee of former
employer of the 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.
9.9 PAYROLL TAX. Seller and Buyer agree that, with respect to
Business Employees who accept employment with Buyer upon the Closing, they
will take the position that they respectively meet the definitions of
"predecessor" and "successor" as defined in Revenue Procedure 96-60 and IRS
Regulation Section 31.3121(a)(1)-1(b). Absent a mutual agreement to the
contrary, Seller and Buyer will use "Standard Procedure" described in Section
4 of Revenue Procedure 96-60. Seller shall supply to Buyer, with respect to
all Business Employees who accept employment with Buyer upon the Closing, all
cumulative payroll information as of the Closing Date that Buyer shall
reasonably request in order to employ IRS Regulation Section
31.3121(a)(1)-1(b).
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 Affiliates,
officers, directors, employees and agents against, and hold them harmless
from, any Loss suffered or incurred by any such Indemnified Person 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 (ignoring, for purposes of determining the
existence of any such inaccuracy or breach or the amount of Loss with respect
thereto, any "materiality" or "Material Adverse Effect" qualification set
forth in such representation or warranty), (b) any breach of any covenant of
Seller contained in this Agreement, (c) if the Closing occurs, the existence
of, or the failure of Seller to pay, perform and discharge when due,
45
<PAGE>
any of the Excluded Liabilities, whether such Excluded Liabilities are
liabilities of Seller or of any of the Companies (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) or (d) Losses related to the
existing conditions at the McMinnville Facility (including the remediation
thereof), subject to the potential release of such indemnification pursuant
to the provisions of Section 6.9(d) hereof; PROVIDED, HOWEVER, that Seller
shall have no liability under Section 10.1(a) unless the aggregate of all
Losses relating thereto for which Seller would, but for this proviso, be
liable exceeds $3,000,000 (Three Million Dollars) (and then only to the
extent of any such excess); and PROVIDED FURTHER, HOWEVER, that Seller's
aggregate liability under Section 10.1(a) shall in no event exceed 25% of the
Purchase Price.
10.2 INDEMNIFICATION BY BUYER. Subject to the terms and conditions
of this Article X, Buyer shall indemnify Seller and each of its Affiliates,
officers, directors, employees and agents against, and hold them harmless
from, any Loss suffered or incurred by any such 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 (ignoring, for purposes
of determining the existence of any such inaccuracy or breach or the amount
of Loss with respect thereto, any "materiality" or "Material Adverse Effect"
qualification set forth in such representation or warranty), (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, any Loss caused by the ongoing
operations of Buyer and the Assets after the Closing Date PROVIDED, HOWEVER,
that Buyer shall have no liability under clause 10.2(a) unless the aggregate
of all Losses relating thereto for which Buyer would, but for this proviso,
be liable exceeds on a cumulative basis $3,000,000 (Three Million Dollars)
(and then only to the extent of any such excess); and PROVIDED FURTHER,
HOWEVER, that Buyer's aggregate liability under Section 10.2(a) shall in no
event exceed 25% of the Purchase Price.
10.3 ENVIRONMENTAL MATTERS.
(a) With respect to any Losses relating to or arising from
any Environmental Laws for which Buyer seeks indemnity under Section 10.1
("Environmental Losses"), Buyer shall provide notice to Seller specifying in
reasonable detail, to the extent known, the nature of the Environmental
Losses and the estimated amount to remediate the condition giving rise to the
Environmental Losses, to the extent it is then quantifiable (which estimate
shall not be conclusive of the final amount of any Environmental Losses). The
obligations and restrictions of this Section 10.3(a) as to notice will not
apply to Losses relating to or arising from any Environmental Laws for which
Buyer is indemnified pursuant to Section 6.9. Notwithstanding the foregoing,
the obligations and restrictions of this Section 10.3 shall not apply to
Losses relating to or arising from any Environmental Laws for which Buyer
seeks indemnity under Section 10.1(c) as Excluded Liabilities except that the
provisions of Section 10.3(d) below will apply to such indemnity.
46
<PAGE>
(b) Seller shall have the right to control and investigate
and/or remediate any condition giving rise to a claim or demand for
indemnification by Buyer under this Agreement with respect to any
Environmental Losses; PROVIDED, HOWEVER, that in such circumstances, Seller
shall (i) not unreasonably interfere with Buyer's operations; (ii) provide
Buyer with an opportunity to review and comment in advance on all work plans,
investigations and other environmental remediation activities, and
incorporate all reasonable comments of Buyer and (iii) be permitted to place
title restrictions on any affected property, PROVIDED such restrictions do
not interfere with the like industrial use thereof or violate the terms of
any Business Lease; PROVIDED, FURTHER, that if after written notice and a
reasonable opportunity to cure Seller does not exercise such right to
control, investigate or remediate within a reasonable period, or fails to
diligently continue to control, investigate and remediate, Buyer may exercise
such right and Seller will indemnify Buyer for all of its out-of-pocket
expenses reasonably incurred in doing so. Seller and its employees,
contractors, representatives and agents shall have reasonable access at
reasonable times to facilities used in connection with the Business (the
"Facilities") for the purpose of conducting any investigation and/or
remediation, including any sampling or monitoring required to be performed by
Seller after the Closing Date. Seller shall use all reasonable efforts to
minimize disruption to the Business as a result of conducting any such
investigation or remediation, and will keep Buyer generally informed as to
the progress of remediation activities and generally consult with Buyer and
consider Buyer's input in respect thereof. The parties acknowledge that Buyer
will have the right to control any environmental matter as to which the
expense is not expected to exceed the threshold for indemnification and no
claim is expected to be made hereunder, but that the provisions of this
Section 10.3(b) will become applicable at such time as Buyer desires to seek
indemnification hereunder in respect of such a claim as a result of greater
than anticipated expenses or because the threshold has been satisfied
independently. "Business Lease" means any lease of a Business Property that
is in effect on the Closing Date, including any extension or renewal thereof
that does not adversely affect the duties of MagneTek under this Article X.
(c) Buyer shall use reasonable efforts to cooperate with
the Seller to minimize costs with respect to Environmental Losses. Nothing in
this Agreement shall require Seller to perform any environmental remediation
activities or other environmental testing, sampling or monitoring activities
beyond the minimum required by applicable Environmental Laws or the terms of
any Business Lease (except that as to the McMinnville Facility, remediation
will not be deemed completed until the Governmental Authorities exercising
jurisdiction over such remediation have completed their approval process in
respect thereof).
(d) Except as required by law, as contemplated by Section
6.9(c) or in the circumstances in Section 6.9(a) and 10.3(b) where Buyer is
entitled to assume control and does so, Buyer shall not initiate or direct
any correspondence to a Governmental Authority in respect of an environmental
matter covered by the indemnification in Section 10.1 and shall give prompt
written notice to Seller of any report or other document submitted by
requirement of a Governmental Authority, to a Governmental Authority which
describes any such matter. To the extent reasonably possible in the
circumstances, Buyer shall have the right to review and comment upon any
submission to a Governmental Authority which describes or addresses any
47
<PAGE>
environmental condition for which Buyer is claiming indemnification from
Seller hereunder (and Seller will cooperate with Buyer in responding to such
requests, including making available all relevant records in its possession
or under its control), and Seller shall revise such submission in accordance
with Buyer's reasonable comments thereon. To the extent reasonably possible
in the circumstances, Seller shall give Buyer prompt written notice of, and
Buyer and/or its representatives shall have the right to participate in, any
phone call or meeting with any Governmental Authority at which any
environmental condition for which Buyer is claiming indemnification from
Seller hereunder is to be discussed or addressed in any manner.
(e) Seller shall not have any obligation to indemnify any
Buyer Indemnified Party from and against (i) any Environmental Losses arising
from or related to any change in the use of the Business Property from
industrial use; (ii) any Environmental Losses arising from or related to any
amendment to or change in any Environmental Law from that which is in effect
on the date hereof (except that as to the McMinnville Facility, remediation
will not be deemed completed until the Governmental Authorities exercising
jurisdiction over such remediation have completed their approval process in
respect thereof) or (iii) any remediation or other liability arising as a
result of the presence of asbestos in or upon any of the improvements located
on the Business Property at any time. Notwithstanding anything to the
contrary contained herein, Seller will not have any obligation to indemnify
Buyer Indemnified Parties from and against any Environmental Losses (w) which
do not relate to an environmental condition in existence prior to the
Closing, (x) arising with respect to any release of a Hazardous Material by
Buyer, (y) resulting from Buyer, its agents and representatives, conducting
invasive investigations, sampling or monitoring of the Facilities unless (A)
required to do so by Environmental Laws or a Governmental Authority or (B)
conducted in response to a material claim asserted by a third party, in
connection with Buyer's acquisition-related due diligence, or as contemplated
by Section 6.9 or (z) resulting from any act or knowing failure to act of
Buyer, its employees, contractors, representatives or agents to further cause
or exacerbate the leaking, migration or release of any Hazardous Materials at
the Facilities (but only to the extent of such further cause or
exacerbation). Seller will not have any obligation to indemnify Buyer with
respect to supervision, information or oversight costs incurred in connection
with any remediation performed by Seller for which Buyer seeks indemnity.
Buyer acknowledges that nothing contained herein absolves it of any
obligation under any Environmental Law for Environmental Losses with respect
to violations of Environmental Laws by Buyer, its employees, contractors,
representatives or agents.
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 actually recovered
or which could be recovered, on a commercially reasonable basis, by the
Indemnified Person under insurance policies with respect to such Loss and of
any related reserve in respect thereof reflected on the Final Closing Balance
Sheet; PROVIDED, HOWEVER, that the amount of such Loss will not be reduced to
the extent the Indemnified Person can demonstrate that a net increase in
insurance premiums has occurred or is reasonably likely to occur as a result
of such claim (whether by retrospective or retroactive
48
<PAGE>
premium adjustment, and giving effect to the present value of any such
premium increase over the period for which it is reasonably anticipated to be
effective) and PROVIDED, FURTHER, that this Section 10.4(a) will not be
applicable to the extent it constitutes an improper waiver of the insurer's
rights of subrogation against the Indemnifying Person. Notwithstanding the
foregoing, Buyer will not have any obligation (i) to seek insurance recovery
in respect of Losses to the extent such recovery would be precluded or would
preclude other (A) pending claims or (B) claims reasonably likely, based upon
past claims experience, to be submitted as a result of the applicable policy
coverage limit, or (ii) to maintain insurance for the benefit or in the name
of Sellers, or to make Sellers named insureds, after the Closing.
(b) 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, diminution in value, 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 of
claims for damages of the foregoing type.
(c) Except as expressly set forth in Section 6.6(b) and
Section 11.5 as to equitable remedies, 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, pursuant to Sections 10.1(a) and 10.2(a),
shall terminate when the applicable representation or warranty terminates
pursuant to Section 10.8; 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.
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
49
<PAGE>
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 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 an Indemnified Person as to which such Indemnified Person is
entitled to seek indemnification hereunder and (i) such Indemnified Person
reasonably concludes that the Indemnifying Person lacks the financial and
personnel resources to vigorously defend such Indemnified Person, or that the
Indemnifying Person is not diligently defending such Indemnified Person, or
(ii) if there is a reasonable probability that a Third-Party Claim may
materially and adversely affect an Indemnified Person other than as a result
of money damages or money payments, then in each such case the Indemnified
Person may elect to retain the defense of such Third-Party Claim and will be
entitled to be reimbursed by the Indemnifying Person 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 notice of an audit, examination or other proceeding
is received from any Tax authority, which, if successful, might result in an
indemnity payment to any Person
51
<PAGE>
hereunder (a "Tax Indemnitee"), the Tax Indemnitee shall promptly notify the
party against whom indemnification is sought (the "Tax Indemnitor") in
writing of such potential 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 participate in such audit, examination or
proceeding, 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 audits, examinations and other proceedings 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 any 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 15 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. 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(a) and 10.2(a) and, except as set forth in the next sentence, shall
terminate at the close of business 18 months after the Closing Date. The
representations and warranties in Sections 4.1 and 4.10(b) shall terminate on
the fifth anniversary of the Closing Date, the representations and warranties
in Section 4.3 shall survive for the applicable statute of limitations
pertaining to the underlying tax liability and the representations and
warranties contained in Section 4.5 shall not survive the Closing.
ARTICLE XI
GENERAL PROVISIONS
11.1 ASSIGNMENT. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by either party other than
by operation of law or in connection with a merger or sale of substantially
all the assets of such party without the prior written consent of the other,
which consent will not be unreasonably withheld; PROVIDED, HOWEVER, that
Buyer may assign its right to purchase the Assets hereunder to an Affiliate
of Buyer without the prior written
51
<PAGE>
consent of MagneTek; PROVIDED FURTHER, HOWEVER, that no assignment shall
limit or affect Buyer's obligations hereunder. Notwithstanding the foregoing,
it shall be deemed unreasonable for (i) either MagneTek or Buyer to withhold
their consent to an assignment of this Agreement in whole, to an entity of
the net worth of which is equal to or exceeds that of the assignor or (ii)
MagneTek to withhold its consent to an assignment of this Agreement in part
to an entity the net worth of which equals or exceeds the prior twelve
months' revenues for the portion of the Business being sold.
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 Seller and Buyer;
(ii) by Seller (x) 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 or (y) the condition in Section 3.1(c)
shall not have been satisfied on or before July 12, 1999;
(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 September 30, 1999.
(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;
and
(ii) all confidential information received by Buyer
with respect to the Business and Seller shall be treated in accordance
with the Confidentiality
52
<PAGE>
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 8.3
relating to publicity, (iii) Section 11.4 relating to certain expenses, (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 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.
11.5 EQUITABLE RELIEF. The parties hereto agree that in the event
of Sellers' breach of its obligations to consummate the Transactions, damages
may prove insufficient and Buyer should be entitled to the remedy of specific
performance.
11.6 AMENDMENTS. No amendment to this Agreement shall be effective
unless it shall be in writing and signed by MagneTek and A.O. Smith
Corporation.
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:
A.O. Smith Corporation
11270 West Park Place
P.O. Box 23972
Milwaukee, Wisconsin 53223-0972
Attention: Steve W. Rettler
Telephone: (414) 359-4048
Telecopier: (414) 359-4198
53
<PAGE>
WITH A COPY TO:
A.O. Smith Corporation
11270 West Park Place
P.O. Box 23972
Milwaukee, Wisconsin 53223-0972
Attention: W. David Romoser, Esq.
Telephone: (414) 359-4137
Telecopier: (414) 359-4143
AND TO:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5367
Attention: Patrick G. Quick, Esq.
Telephone: (414) 297-5678
Telecopier: (414) 297-4900
(ii) IF TO SELLER, TO:
MagneTek, Inc.
26 Century Boulevard
Nashville, Tennessee 37214
Attention: Samuel A. Miley, Esq.
Telephone: (615) 316-5260
Telecopier: (615) 316-5192
WITH A COPY TO:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Attention: Jennifer Bellah Maguire, Esq.
Telephone: (213) 229-7986
Telecopier: (213) 229-7520
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.
Information set forth in each Schedule specifically refers to the article and
section of this Agreement to which such information is responsive, and such
information shall not be deemed to have been disclosed with respect to any
statement in any article and section that is not qualified by reference to
the pertinent Schedule or, except with regard to information set forth on the
face of any Schedule that makes reasonably apparent its applicability to any
other Schedule,
54
<PAGE>
with respect to any other article or section of this Agreement or for any
other purpose. The Schedules shall not vary, change or alter the language of
the representations and warranties contained in this Agreement. 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 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 Robert W. Baird & Co. Incorporated with respect to Buyer and Goldman
Sachs with respect to Seller, and (b) each of Buyer and Seller agrees that it
will pay all fees or commissions which may be payable to such firm(s) as are
describe in clause (a) as relating to it.
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.
55
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
SELLERS:
MAGNETEK, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
MAGNETEK SERVICE (U.K.) LIMITED
By:_________________________________
Name:_______________________________
Title:______________________________
BUYER:
A.O. SMITH CORPORATION
By:_________________________________
Name:_______________________________
Title:______________________________
56
