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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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) April 26, 1999
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MagneTek, Inc.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-10233 95-3917584
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(Commission File number) (I.R.S. Employer Identification No.)
26 Century Boulevard Nashville, Tennessee 37214
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (615) 316-5100
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(Former name or former address, if changed since last report)
INFORMATION TO BE INCLUDED IN THE REPORT
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective as of April 26, 1999 (the "Closing Date"), MagneTek, Inc., a
Delaware corporation (the "Registrant"), sold the assets, properties and
business of its generator business (the "Business") to Emerson Electric Co.,
a Missouri corporation (the "Buyer"). The Business, located in Lexington,
Tennessee, produces alternators for use with diesel and natural gas generator
sets. In accordance with the Asset Purchase Agreement dated as of April 26,
1999 between the Buyer and the Registrant (the "Agreement"), Buyer paid to
the Registrant $115 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 5. OTHER EVENTS.
On May 4, 1999, the Registrant's President and Chief Executive Officer,
Ronald H. Hoge, resigned.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
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c. Exhibits
99.1 April 27, 1999 Press Release of MagneTek, Inc.
99.2 Asset Purchase Agreement dated as of April 26, 1999 between the
Registrant and the Buyer.
99.3 May 4, 1999 Press Release of MagneTek, Inc.
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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: May 10, 1999
MagneTek, Inc.
By /s/ SAMUEL A. MILEY
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Samuel A. Miley, Esq.
Vice President, General Counsel
and Secretary
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EXHIBIT 99.1
MAGNETEK ANNOUNCES CLOSING OF SALE OF
GENERATOR BUSINESS TO EMERSON
NASHVILLE, Tenn.--(BUSINESS WIRE)--April 27, 1999--MagneTek, Inc.
(NYSE:MAG-news) today announced the closing of the sale of its generator
business, which produces alternators for use with diesel and natural gas
generator sets, to Emerson Electric Co. for $115 million. Proceeds will be
used to repay debt.
"The sale of the generator business is an important first step in the
company's execution of strategic actions designed to enhance shareholder
value, which is the focus of our Goldman Sachs led strategic review,"
commented President and CEO Ron Hoge. "That review should be concluded in the
next couple of weeks, at which time we expect additional actions will be
announced."
MagneTek manufactures integrated electrical products, including electric
motors, drives and systems, power electronics and lighting products used in a
wide range of commercial and industrial applications. The company reported
revenues of $1.2 billion for its fiscal year ended June 30, 1998, of which
approximately $100 million came from the generator business.
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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 which could affect MagneTek's
financial results, are described in the Company's filings with the Securities
and Exchange Commission.
For a copy of MagneTek's fiscal 1998 Annual Report call: 1-888-NYSEMAG
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CONTACT:
MagneTek Inc., Nashville
Nancy M. Falls, 615/316-5288
[email protected]
http://www.magnetek.com
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Exhibit 99.2
ASSET PURCHASE AGREEMENT
dated as of
April 26, 1999
between
EMERSON ELECTRIC CO.
and
MAGNETEK, INC.
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TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS
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SECTION 1.01. DEFINITIONS.......................................................................1
ARTICLE 2 PURCHASE AND SALE
SECTION 2.01. PURCHASE AND SALE................................................................10
SECTION 2.02. EXCLUDED ASSETS..................................................................12
SECTION 2.03. ASSUMED LIABILITIES..............................................................13
SECTION 2.04. EXCLUDED LIABILITIES.............................................................13
SECTION 2.05. ASSIGNMENT OF CONTRACTS AND RIGHTS...............................................15
SECTION 2.06. PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE.....................................15
SECTION 2.07. CLOSING..........................................................................16
SECTION 2.08. CLOSING STATEMENTS...............................................................17
SECTION 2.09. ADJUSTMENT OF PURCHASE PRICE.....................................................20
SECTION 2.10. ESCROW...........................................................................22
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER RELATING
TO CERTAIN CORPORATE MATTERS
SECTION 3.01. CORPORATE EXISTENCE AND POWER....................................................22
SECTION 3.02. CORPORATE AUTHORIZATION..........................................................22
SECTION 3.03. GOVERNMENTAL AUTHORIZATION.......................................................23
SECTION 3.04. NONCONTRAVENTION.................................................................23
SECTION 3.05. REQUIRED CONSENTS................................................................23
SECTION 3.06. JOINT VENTURE AFFILIATES.........................................................23
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER RELATING
TO THE BUSINESS (OTHER THAN AS CONDUCTED BY MAGNETEK FUZHOU)
SECTION 4.01. FINANCIAL STATEMENTS.............................................................24
SECTION 4.02. ABSENCE OF CERTAIN CHANGES.......................................................24
SECTION 4.03. MATERIAL CONTRACTS...............................................................26
SECTION 4.04. LITIGATION.......................................................................28
SECTION 4.05. COMPLIANCE WITH LAWS AND COURT ORDERS............................................28
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SECTION 4.06. PROPERTIES.......................................................................28
SECTION 4.07. SUFFICIENCY OF AND TITLE TO THE PURCHASED ASSETS.................................30
SECTION 4.08. PRODUCTS.........................................................................30
SECTION 4.09. INTELLECTUAL PROPERTY............................................................30
SECTION 4.10. LICENSES AND PERMITS ............................................................32
SECTION 4.11. INVENTORIES......................................................................33
SECTION 4.12. FINDERS'FEES.....................................................................33
SECTION 4.13. EMPLOYEES........................................................................33
SECTION 4.14. ENVIRONMENTAL COMPLIANCE.........................................................34
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER RELATING TO
MAGNETEK FUZHOU
SECTION 5.01. CORPORATE EXISTENCE AND POWER....................................................36
SECTION 5.02. CAPITALIZATION...................................................................36
SECTION 5.03. NONCONTRAVENTION.................................................................36
SECTION 5.04. AUTHORIZATION....................................................................37
SECTION 5.05. LITIGATION.......................................................................37
SECTION 5.06. COMPLIANCE WITH LAWS.............................................................37
SECTION 5.07. FINANCIAL STATEMENTS.............................................................37
SECTION 5.08. ABSENCE OF CERTAIN CHANGES.......................................................37
SECTION 5.09. UNDISCLOSED LIABILITIES..........................................................37
SECTION 5.10. MATERIAL CONTRACTS...............................................................38
SECTION 5.11. GOVERNMENTAL AUTHORIZATION.......................................................38
SECTION 5.12. SUBSIDIARIES AND JOINT VENTURE AFFILIATES........................................38
SECTION 5.13. TAX TREATMENT....................................................................38
SECTION 5.14. ENVIRONMENTAL MATTERS............................................................38
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF SELLER RELATING TO
MAGNETEK CHINA
SECTION 6.01. CORPORATE EXISTENCE AND POWER....................................................39
SECTION 6.02. SCOPE OF BUSINESS................................................................39
SECTION 6.03. CAPITALIZATION...................................................................39
SECTION 6.04. OWNERSHIP OF SHARES..............................................................40
SECTION 6.05. UNDISCLOSED LIABILITIES..........................................................40
SECTION 6.06. TAX TREATMENT....................................................................40
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF BUYER
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SECTION 7.01. CORPORATE EXISTENCE AND POWER....................................................40
SECTION 7.02. CORPORATE AUTHORIZATION..........................................................41
SECTION 7.03. GOVERNMENTAL AUTHORIZATION.......................................................41
SECTION 7.04. NONCONTRAVENTION.................................................................41
SECTION 7.05. LITIGATION.......................................................................41
SECTION 7.06. FINDERS'FEES.....................................................................41
ARTICLE 8 COVENANTS OF SELLER
SECTION 8.01. CONDUCT OF THE BUSINESS..........................................................42
SECTION 8.02. ACCESS TO INFORMATION; CONFIDENTIALITY...........................................43
SECTION 8.03. NOTICES OF CERTAIN EVENTS........................................................44
SECTION 8.04. NONCOMPETITION...................................................................45
SECTION 8.05. COLLECTION OF RECEIVABLES........................................................46
SECTION 8.06. CERTAIN CONTRACTS................................................................47
SECTION 8.07. MAGNETEK FUZHOU PAYABLES/RECEIVABLES.............................................47
SECTION 8.08. CONVEYANCE OF CERTAIN INTELLECTUAL PROPERTY RIGHTS...............................47
SECTION 8.09. APPROVALS/WAIVERS RELATING TO MAGNETEK CHINA......................................47
ARTICLE 9 COVENANTS OF BUYER
SECTION 9.01. ACCESS...........................................................................48
SECTION 9.02. CONFIDENTIALITY..................................................................48
ARTICLE 10 COVENANTS OF BUYER AND SELLER
SECTION 10.01. FURTHER ASSURANCES..............................................................48
SECTION 10.02. CERTAIN FILINGS.................................................................49
SECTION 10.03. PUBLIC ANNOUNCEMENTS............................................................49
SECTION 10.04. TRADEMARKS; TRADENAMES..........................................................49
SECTION 10.05. WARN ACT........................................................................49
SECTION 10.06. SELLER ACCOUNTS RECEIVABLE.......................................................49
SECTION 10.07. HUNGARIAN ASSETS.................................................................50
SECTION 10.08. INTEREST ON LATE PAYMENTS........................................................50
SECTION 10.09. ASSUMPTION OF WAREHOUSE LEASE...................................................50
SECTION 10.10. PAYMENT OF PAYABLES.............................................................51
ARTICLE 11 TAX MATTERS
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SECTION 11.01. TAX REPRESENTATIONS.............................................................51
SECTION 11.02. TAX COOPERATION; ALLOCATION OF TAXES; TAX COVENANTS.............................52
ARTICLE 12 EMPLOYEE BENEFITS
SECTION 12.01. ERISA REPRESENTATIONS...........................................................55
SECTION 12.02. EMPLOYEES AND OFFERS OF EMPLOYMENT..............................................56
SECTION 12.03. SELLER'S EMPLOYEE BENEFIT PLANS.................................................57
SECTION 12.04. BUYER BENEFIT PLANS.............................................................58
SECTION 12.05. QUALIFIED DEFINED BENEFIT PLANS.................................................59
SECTION 12.06. RETIREE HEALTH..................................................................60
SECTION 12.07. NO THIRD PARTY BENEFICIARIES....................................................61
SECTION 12.08. PAYMENT OF WORKERS'COMPENSATION CLAIMS AND HEALTH INSURANCE CLAIMS..............61
SECTION 12.09. CAFETERIA PLAN..................................................................61
ARTICLE 13 CONDITIONS TO CLOSING
SECTION 13.01. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER...................................62
SECTION 13.02. CONDITIONS TO OBLIGATION OF BUYER...............................................62
SECTION 13.03. CONDITIONS TO OBLIGATION OF SELLER..............................................63
ARTICLE 14 SURVIVAL; INDEMNIFICATION
SECTION 14.01. SURVIVAL........................................................................64
SECTION 14.02. INDEMNIFICATION.................................................................64
SECTION 14.03. LIMITATION ON INDEMNITY.........................................................67
SECTION 14.04. PROCEDURES FOR THIRD PARTY CLAIMS...............................................68
SECTION 14.05. PROCEDURES FOR DIRECT CLAIMS....................................................69
ARTICLE 15 TERMINATION
SECTION 15.01. GROUNDS FOR TERMINATION.........................................................70
SECTION 15.02. EFFECT OF TERMINATION...........................................................71
ARTICLE 16 MISCELLANEOUS
SECTION 16.01. NOTICES.........................................................................71
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SECTION 16.02. AMENDMENTS AND WAIVERS..........................................................72
SECTION 16.03. EXPENSES........................................................................73
SECTION 16.04. SUCCESSORS AND ASSIGNS..........................................................73
SECTION 16.05. GOVERNING LAW...................................................................73
SECTION 16.06. JURISDICTION....................................................................73
SECTION 16.07. WAIVER OF JURY TRIAL............................................................74
SECTION 16.08. REPRESENTATIONS AND WARRANTIES..................................................74
SECTION 16.09. COUNTERPARTS; EFFECTIVENESS.....................................................74
SECTION 16.10. ENTIRE AGREEMENT................................................................74
SECTION 16.11. BULK SALES LAWS.................................................................74
SECTION 16.12. CAPTIONS........................................................................75
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EXHIBITS
Exhibit A - Escrow Agreement
SCHEDULES
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Schedule 1.01(a) - Hungarian Assets
Schedule 1.01(b) - MagneTek Rights
Schedule 2.01 - Excluded Assets at the Lexington Tennessee Facility
Schedule 2.08 - Inventory Reserve
Schedule 3.03 - Governmental Authorizations
Schedule 3.04 - No Breach of Contract and No Violation of Applicable Law
or Charter Documents
Schedule 3.05 - Contracts Requiring Consent to Assign
Schedule 4.01 - Balance Sheets and Statements of Income and Cash
Flows - MagneTek
Schedule 4.02 - Absence of Material Changes
Schedule 4.03 - Material Contracts - MagneTek
Schedule 4.03(b) - Invalid or Non-Binding Agreements - MagneTek
Schedule 4.04 - Litigation - MagneTek
Schedule 4.05 - Non-Compliance with Laws and Court Orders - MagneTek
Schedule 4.06(a) - Real Property
Schedule 4.06(b) - Liens
Schedule 4.06(d) - Condition and Maintenance of Purchased Assets
Schedule 4.07(a) - Sufficiency of Purchased Assets
Schedule 4.08 - Product Liability Claims
Schedule 4.09(a) - Intellectual Property Rights and Licenses
Schedule 4.09(b) - Licences and Sublicences
Schedule 4.09(c) - Infringement or Misappropriation of Intellectual Property
Rights
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Schedule 4.09(d) - Trade Secrets, Processes and Formulae, Research and
Development Results and Other Know-How
Schedule 4.09(k) - Options, Licences and Sublicences of Business Intellectual
Property Rights
Schedule 4.09(l) - Payment of Royalties Under Business Intellectual Property
Rights Licences
Schedule 4.13(a) - Employees
Schedule 4.13(b) - Labor Practices
Schedule 4.14 - Environmental Compliance
Schedule 5.03 - Noncontravention - MagneTek Fuzhou
Schedule 5.05 - Litigation - MagneTek Fuzhou
Schedule 5.06 - Non-Compliance with Laws and Court Orders - MagneTek
Fuzhou
Schedule 5.07 - Balance Sheets and Statements of Income and Cash Flows
- MagneTek Fuzhou
Schedule 5.09 - Liabilities - MagneTek Fuzhou
Schedule 5.10 - Material Contracts to which MagneTek Fuzhou is a Party
Schedule 8.04 - Products Specifically Excluded from Noncompetition
Schedule 8.07 - Statement of Intercompany Accounts
Schedule 11.01 - Contested Tax Liabilities
Schedule 12.01(a) - Material Employer Plans
Schedule 12.01(b) - Multiemployer Plans and Employee Plans Subject to Title IV
of ERISA
Schedule 12.01(d) - Benefit Arrangements
Schedule 12.01(e) - Employee Post-Retirement and Medical or Health Plans
Schedule 12.01(f) - Material Increases in Expense of Maintaining Employee
Plans or Benefit Arrangements
Schedule 12.01(i) - International Plan Liabilities
Schedule 12.09 - Cafeteria Plan
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ASSET PURCHASE AGREEMENT
AGREEMENT dated as of April 26, 1999 between Emerson Electric Co., a
Missouri corporation ("BUYER"), and MagneTek, Inc., a Delaware corporation
("SELLER").
W I T N E S S E T H :
WHEREAS, Seller and its Subsidiaries, among other things, conducts a
business (which for the purposes of this Agreement shall not include the
businesses (or activities) described on Schedule 8.04) that consists of the
design, manufacture, sale and distribution of alternators (including associated
spare parts) (the "BUSINESS"), it being understood that (i) Caterpillar Inc. and
its Affiliates (including without limitation, F. G. Wilson, L.L.C. and its
Subsidiaries) is the primary customer of alternators sold by the Business under
the "MagneTek" name and (ii) part of the Business is conducted through a joint
venture in China.
WHEREAS, Buyer desires to purchase substantially all of the assets of
the Business, including the stock of the joint venture (through the acquisition
of a special purpose Cayman Islands holding company), from Seller, and Seller
desires to sell substantially all of the assets of the Business and such stock
to Buyer, upon the terms and subject to the conditions hereinafter set forth.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. DEFINITIONS.
(a) The following terms, as used herein, have the following meanings:
"ACCOUNTING REFEREE" means a nationally recognized accounting firm
jointly retained by Buyer and Seller.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such other Person.
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"APPLICABLE LAW" means, with respect to any Person, any statute, law,
ordinance, rule, administrative interpretation, regulation, order, writ,
injunction, directive, judgment, decree or other requirement of any Governmental
Authority (including any Environmental Law) applicable to such Person or any of
its Affiliates or any of their respective businesses, properties, assets or
Representatives (in connection with such Representative's activities on behalf
of such Person or any of its Affiliates).
"ASSIGNMENT AND ASSUMPTION AGREEMENTS" means one or more Assignment and
Assumption Agreements entered into on the date hereof between Buyer and one or
more of its Affiliates.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or required by
law to close.
"BUSINESS INTELLECTUAL PROPERTY RIGHTS" means Intellectual Property
Rights owned by or licensed to Seller or any of its Subsidiaries (other than the
MagneTek Rights) and either (i) used primarily in the Business or (ii) developed
primarily for the benefit of the Business (whether or not currently used or
implemented in any product or process).
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and any rules or regulations promulgated
thereunder.
"CLOSING" means the closing of the purchase and sale of the Purchased
Assets and the assumption of the Assumed Liabilities hereunder.
"CLOSING CENTURY 2000 RECEIVABLES" means the receivables relating
solely to the Century 2000 product line which are outstanding on the day prior
to the Closing Date.
"CLOSING DATE" means 12.01 a.m. on April 26, 1999.
"CLOSING STATEMENTS" means the Lexington Closing Balance Sheet and/or
the Fuzhou Closing Balance Sheet.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement dated
December 17, 1998, as amended, between Buyer and Seller.
"CONTEMPLATED TRANSACTIONS" means the transactions contemplated by the
Transaction Documents.
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"DAMAGES" means damage, loss, liability and expense (including without
limitation, reasonable out-of-pocket expenses of investigation and reasonable
attorneys' fees and expenses in connection with any action, suit or proceeding).
"DEBT" of Seller means at any date, (i) all obligations of Seller or
any of its Subsidiaries for borrowed money, (ii) all obligations of Seller or
any of its Subsidiaries evidenced by bonds, debentures, notes or other similar
instruments, (iii) all debt of others secured by a Lien on any asset of Seller
or any of its Subsidiaries, whether or not such debt is assumed by Seller or any
of its Subsidiaries and (iv) all debt of others guaranteed by Seller or any of
its Subsidiaries.
"EMPLOYEE PLANS" means the plans referred to in the first sentence of
Section 12.01.
"ENVIRONMENTAL LAWS" means any applicable federal, state, local or
foreign law (including, without limitation, common law), treaty, judicial
decision, regulation, rule, judgment, order, decree, injunction, permit or
governmental restriction or any agreement with any Governmental Authority
relating to the environment or to Hazardous Substances, including, without
limitation, CERCLA, the Resource Conservation and Recovery Act of 1976, as
amended, the Clean Air Act of 1970, as amended, the Federal Water Pollution
Control Act, as amended, the Toxic Substances Control Act of 1976, as amended,
and similar state, local or foreign laws, in each case as in effect on or prior
to the date hereof.
"ENVIRONMENTAL LIABILITIES" means any and all Damages (including cost
of any Remedial Action incurred after the Closing Date) other than MagneTek
Fuzhou Environmental Liabilities arising in connection with or in any way
relating to any property now or previously owned, leased or operated by the
Business, the Purchased Assets or any activities or operations occurring or
conducted in connection with the Business or at the Real Property (including,
without limitation, offsite disposal), whether or not disclosed pursuant to
Schedule 4.14, which arise out of or relate to the occurrence or existence prior
to the Closing Date, of (i) releases of Hazardous Substances, (ii) the use,
generation, storage, disposal, treatment or recycling of any Hazardous
Substances at or under the Real Property, (iii) facts, circumstances or
conditions which could result in a governmental or third party claim,
litigation, or proceeding relating to any Hazardous Substance or (iv) the
violation of or liability under any Environmental Law or Environmental Permit.
"ENVIRONMENTAL PERMITS" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of any Governmental
Authority required by Environmental Laws and affecting, or relating to, the
Business.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" of any entity means any other entity which, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
"ESCROW AGREEMENT" means the agreement among Buyer, Seller and Escrow
Agent in substantially the form of Exhibit G hereto.
"GOVERNMENTAL AUTHORITY" means any governmental authority, court,
self-regulatory organization, tribunal or any regulatory, administrative or
other agency.
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, ignitable,
corrosive, reactive or otherwise hazardous substance, waste or material or any
pollutant or contaminant, in each case regulated under any Environmental Law
including, without limitation, petroleum, its derivatives and by-products.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"HUNGARIAN ASSETS" means the assets located in Budapest, Hungary that
are set forth on Schedule 1.01(a).
"INTERNATIONAL PLAN" means an employment, severance or similar
contract, arrangement or policy (exclusive of any such contract which is
terminable within 30 days without liability of Seller or any of its ERISA
Affiliates), or a plan or arrangement providing for severance, insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
pension or retirement benefits or for deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation or benefits that (a) is
not an Employee Plan or a Benefit Arrangement, (b) is maintained or contributed
to by Seller or any of its ERISA Affiliate and (c) covers any employee or former
employee of Seller or any of its Subsidiaries.
"INTELLECTUAL PROPERTY RIGHT" means any trademark, service mark, trade
name, patent, copyright, trade secret, mask work, know-how, invention,
discovery, technology, information, formula, process, research and development
data, software and firmware or any other intellectual property right or other
intangible property (including registrations and applications for the foregoing
and
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derivatives, continuations, continuations-in-part, divisions, extensions,
reissues and renewals therefor).
"JOINT VENTURE AFFILIATE" means a corporation, partnership, limited
liability company or other entity through which a portion of the Business is
conducted in which Seller or any of its Subsidiaries hold a direct or indirect
equity, profit, voting or other interest.
"LEXINGTON BALANCE SHEET" means the unaudited balance sheet of the
Business as of November 30, 1998.
"LEXINGTON BALANCE SHEET DATE" means November 30, 1998.
"LEXINGTON TENNESSEE FACILITY" means the real property and facilities
located at 669 Natchez Trace Drive, Lexington, Tennessee.
"LIEN" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other similar claim of
any kind in respect of such property or asset. In addition, for the purposes of
the Transaction Documents, any property or asset shall be deemed to be subject
to a Lien if it is subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"LICENSE AGREEMENT" means the License Agreement dated as of the date
hereof between Buyer and Seller.
"MAGNETEK CHINA" means MagneTek China Limited, a Cayman Island Exempted
Company.
"MAGNETEK FUZHOU" means MagneTek Fuzhou Generator Company Limited, a
joint venture in China between Seller and Fujian Fufa Company Limited ("FUJIAN
FUFA").
"MAGNETEK FUZHOU BALANCE SHEET" means the unaudited balance sheet of
the MagneTek Fuzhou as of November 30, 1998.
"MAGNETEK FUZHOU BALANCE SHEET DATE" means November 30, 1998.
"MAGNETEK FUZHOU REAL PROPERTY" means all real property and leases of,
and other interests in, real property used or held by MagneTek Fuzhou.
"MAGNETEK RIGHTS" means Seller's rights as of Closing in all
trademarks, service marks, trade names or slogans that include "MagneTek", the
"MagneTek" logo, "Century", the "Energy Engineered M" and design and the "Power
M"
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design, all as are set forth in Schedule 1.01(b), and any marks, names or
slogans that are likely to cause confusion with the items set forth on Schedule
1.01(b).
"MANUFACTURING AND FACILITIES AGREEMENT" means the Integral Motor
Manufacturing Services and Facilities Sharing Agreement dated as of the date
hereof between Buyer and Seller.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
condition (financial or otherwise), business, assets, results of operations or,
to the knowledge of Seller, prospects of the Business (other than the Excluded
Assets).
"MIS AGREEMENT" means the Information Systems Support Agreement dated
as of the date hereof between Buyer and Seller.
"MULTIEMPLOYER PLAN" means each Employee Plan that is a multiemployer
plan, as defined in Section 3(37) of ERISA.
"OFF-SITE ENVIRONMENTAL LIABILITIES" means any and all Damages arising
under or relating to any Environmental Law (including the cost of any Remedial
Action incurred after the Closing Date) arising at or relating to real property
or facilities other than the Real Property, other than pertaining to MagneTek
Fuzhou, whether or not disclosed pursuant to Schedule 4.14, which arise out of
or relate to (x) the Business or any activities or operations occurring or
conducted in connection with the Business or the Seller and (y) (i) violations
of or liability under any Environmental Law occurring or existing on or prior to
the Closing Date or (ii) the disposal, treatment, transportation, arrangement
for transportation, discharge, injection, spilling, leaking, emission, dumping,
pumping, recycling or release of any Hazardous Substance on or prior to the
Closing Date, including without limitation the migration of any Hazardous
Substance from the Real Property onto any other property.
"ON-SITE ENVIRONMENTAL LIABILITIES" means any and all Damages arising
under or relating to any Environmental Law (including the cost of any Remedial
Action incurred after the Closing Date) and arising from acts occurring or
conditions existing on or prior to the Closing Date which results in the
existence (whether through discharge, injection, spillage, leakage, emission,
dumping, pumping, release or otherwise) of any Hazardous Substance in the
environment (including, without limitation, the soil or groundwater) at, on or
under the Real Property.
"PERMIT" means any licence, permit, certificate or other similar
authorization required for the operation of the Business.
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"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a Governmental Authority.
"PETTY CASH" means petty cash in respect of the Business in no event to
exceed $50,000 and provided such cash is kept either at the Lexington, Tennessee
facility or in Seller's bank account at Nationsbank Bank.
"PRE-CLOSING TAX PERIOD" means (i) any Tax period ending on or before
the Closing Date and (ii) with respect to a Tax period that commences before but
ends after the day of the Closing, the portion of such period up to and
including the Closing Date.
"PURCHASE PRICE" means the purchase price for the Purchased Assets.
"REAL PROPERTY" means real property and leases of, and other interests
in, real property used or held for use by Seller or any of its Subsidiaries
primarily in connection with the Business (other than the MagneTek Fuzhou Real
Property).
"REPRESENTATIVES" means with respect to any Person, the officers,
directors, employees, accountants, counsel, consultants advisors and agents of
such Person.
"SUBSIDIARY" means with respect to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other Persons performing
similar functions are at the time directly or indirectly owned by such Person.
It is understood that MagneTek Fuzhou shall be deemed not to be a Subsidiary of
Seller for purposes of each of the Transaction Documents.
"TAX" means (i) any tax, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest, penalty, addition to
tax or additional amount imposed by any Governmental Authority (a "TAXING
AUTHORITY") responsible for the imposition of any such tax (domestic or
foreign), including, without limitation, any net income, alternative or add-on
minimum tax, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, license, registration, recording, documentary,
conveyancing, gains, withholding on amounts paid to or by Seller, MagneTek China
or MagneTek Fuzhou, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custom, duty or (ii)
liability for the payment of any amounts of the type described in (i) as a
result of being party to any agreement or any express or implied obligation to
indemnify any other Person.
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"TAX ASSET" means any net operating loss, net capital loss, investment
credit, foreign tax credit, charitable deduction or any other credit or tax
attribute that could be carried forward or back to reduce Taxes.
"TRANSACTION DOCUMENTS" means this Agreement, the Manufacturing and
Facilities Agreement, the Voltage Regulator Supply Agreement, the License
Agreement and the MIS Agreement.
"TRANSFER TAXES" means excise, sales, use, value added, registration,
stamp, recording, documentary, conveyancing, franchise, property, transfer,
gains and similar Taxes, levies, charges and fees.
"VOLTAGE REGULATOR SUPPLY AGREEMENT" means the Voltage Regulator Supply
Agreement dated as of the date hereof between Buyer and Seller.
"WAREHOUSE" means the warehouse located at Lexington, Tennessee which
is currently used, inter alia, to store certain equipment relating to the
Business.
"WAREHOUSE LEASE" means the lease relating to the Warehouse.
"WARN ACT" means the Worker Adjustment and Retraining Notification Act.
"YEAR 2000 COMPLIANT" has the meaning assigned to it in the MIS
Agreement.
(b) "TO THE KNOWLEDGE OF SELLER" (or any similar phrase) means the
facts and matters known, or that should have been known had due and diligent
inquiries been made, by the management of Seller.
(c) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
TERM SECTION
<S> <C>
Accounting Referee Fees 2.06(e)
Active Employee 12.02(a)
Allocation 2.06(c)
Apportioned Obligations 11.02(b)
Allocation 2.06(c)
Assumed Liabilities 2.03
Benefit Arrangements 12.01(d)
Buyer Indemnified Party 14.02(a)
Buyer Pension Plan 12.05(b)(i)
Cayman Shares 6.03(a)
</TABLE>
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<TABLE>
<CAPTION>
TERM SECTION
<S> <C>
Contracts 2.01(e)
Employee Plans 12.01(a)
End Date 15.01(b)
Excluded Assets 2.02
Excluded Liabilities 2.04
Fuzhou Base Net Worth 2.09(c)
Fuzhou Closing Balance Sheet 2.08(c)
Fuzhou Closing Net Worth 2.09(c)
Fuzhou Final Net Worth 2.09(c)
Fuzhou Shares 6.03(a)
Grandfathered Transferred Employees 12.05(b)(iii)
Indemnified Parties 14.04(a)
Indemnifying Parties 14.04(a)
Lexington Base Net Worth 2.09(c)
Lexington Closing Balance Sheet 2.08(b)
Lexington Closing Net Worth 2.09(c)
Lexington Final Net Worth 2.09(c)
Permitted Liens 4.06(b)(iii)
Post-Closing Tax Period 11.02(b)
Purchased Assets 2.01
Required Consents 3.05
Returns 11.01(c)
Seller Indemnified Party 14.02(b)
Seller Retirement Plan 12.05(a)
Shares 6.03(a)
Straddle Taxes 14.02(a)(ix)(C)
Third Party Claims 14.04(a)
Transferred Employees 12.02(a)
</TABLE>
ARTICLE 2
PURCHASE AND SALE
SECTION 2.1. PURCHASE AND SALE. Except as otherwise provided in
Sections 2.02 and 2.04 and subject to the terms and conditions of this
Agreement, Buyer agrees to purchase from Seller and Seller agrees to sell,
convey, transfer, assign and deliver, or cause to be sold, conveyed,
transferred, assigned and delivered, to Buyer (or one or more designated
Subsidiaries of Buyer notified to Seller prior to the Closing Date) at the
Closing, free and clear of all Liens, other than Permitted Liens, all of
Seller's and its Subsidiaries' right, title and interest in,
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to and under the assets, properties and business, of every kind and description,
wherever located, personal or mixed, tangible or intangible, owned, held or used
primarily in connection with the Business by Seller and its Subsidiaries as the
same shall exist at the Closing Date, including (i) all such assets shown on the
Lexington Balance Sheet and not disposed of in the ordinary course of business
as permitted by this Agreement, (ii) all such assets not shown on the Lexington
Balance Sheet that have been fully depreciated or written off and (iii) all such
assets of the Business acquired after the Closing Date by Seller or any of its
Subsidiaries (the "PURCHASED ASSETS"), and including, without limitation, all
right, title and interest of Seller and its Subsidiaries in, to and under:
(a) the Cayman Shares;
(b) all Real Property, in each case together with all
buildings, fixtures, and improvements erected thereon, including
without limitation the property listed on Schedule 4.06(a);
(c) all personal property and interests therein used or held
for use in connection with the Business, including machinery,
equipment, furniture, office equipment, communications equipment,
vehicles, storage tanks, spare and replacement parts, fuel and other
tangible property;
(d) all raw materials, work-in-process, finished goods,
supplies and other inventories used or held for use in connection with
the Business;
(e) all rights under all contracts, agreements, leases,
licenses, binding commitments, sales and purchase orders to the extent
relating to or arising out of the conduct of the Business or the
ownership or use of the Purchased Assets other than the Warehouse Lease
(collectively, the "CONTRACTS");
(f) all accounts, notes and other receivables relating
exclusively to the Business;
(g) all prepaid expenses, including but not limited to ad
valorem taxes, leases and rentals relating to the Business;
(h) all Petty Cash;
(i) all of Seller's and its Subsidiaries' rights, claims,
credits, causes of action or rights of set-off against third parties
relating to the Business, including, without limitation, unliquidated
rights under
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manufacturers' and vendors' warranties but excluding rights under
insurance policies;
(j) all Business Intellectual Property Rights and all licenses
under Business Intellectual Property Rights including, but not limited
to, the items listed on Schedules 4.09(a) and (b) except as set forth
in the MIS Agreement;
(k) all transferable Permits used primarily in the Business,
including without limitation the transferable items listed on Schedule
4.10;
(l) all books, records, files and papers, whether in hard copy
or computer format, used primarily in the Business or relating to the
Purchased Assets including, without limitation, engineering
information, sales and promotional literature, manuals and data, sales
and purchase correspondence, lists of present and former suppliers,
lists of present and former customers and personnel and employment
records of Transferred Employees;
(m) the Hungarian Assets;
(n) all goodwill associated with the Business or the Purchased
Assets, together with the right to represent to third parties that
Buyer is the successor to the Business; and
(o) the outstanding net balance as of the Closing Date of all
amounts payable to Seller (including without limitation the net
receivable payable and the current portion of long-term debt) from
MagneTek Fuzhou after giving effect to Section 8.07.
Notwithstanding the foregoing or any provision in this Agreement to the
contrary, all of the assets located at the Lexington, Tennessee facility (other
than the assets that relate to Seller's integral horsepower motor business as
set forth or described on Schedule 2.01) constitute Purchased Assets, whether or
not any such assets are used primarily in the Business.
SECTION 2.2. EXCLUDED ASSETS. Buyer expressly understands and agrees
that the following assets and properties of Seller and its Subsidiaries (the
"EXCLUDED ASSETS") shall be excluded from the Purchased Assets:
(a) all of Seller's and its Subsidiaries' (other than MagneTek
China's) cash and cash equivalents on hand and in banks including,
without limitation, checking accounts, bank accounts, lock box numbers,
certificates of deposit, time deposits, securities and the proceeds of
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accounts receivable received prior to the Closing Date, including
uncashed checks in payment thereof received by Seller on or prior to
the Closing Date, in each case whether or not relating to the Business,
except for Petty Cash;
(b) insurance policies of Seller or any of its Subsidiaries;
(c) subject to the limited rights granted in Section 10.04,
the MagneTek Rights;
(d) except to the extent expressly provided in Sections 12.05
or 12.06, any assets relating to employee benefits or compensation
arrangements existing prior to the Closing Date including, without
limitation, any assets under any of Seller's or any of its
Subsidiaries' employee benefit agreements, plans or other arrangements
required to be listed on Schedule 12.01;
(e) any Purchased Assets sold or otherwise disposed of in the
ordinary course of business and not in violation of any provisions of
any of the Transaction Documents during the period from the date of
this Agreement until the Closing Date;
(f) Seller's and any of its Subsidiaries' (other than MagneTek
China's) corporate charter, qualifications to conduct business,
arrangements with registered agents relating to qualifications to
conduct business, taxpayer and other identification numbers, seals,
minute books, stock transfer books, blank stock certificates and other
documents relating solely to the organization, maintenance and
existence of Seller or any of its Subsidiaries as a company;
(g) (i) any asset or right that is provided to Buyer pursuant
to Section 14 of the Manufacturing and Facilities Agreement, (ii) the
Warehouse Lease (unless an election to assume such Lease shall have
been made by Buyer in accordance with Section 10.09) and (iii) the
rights and licenses granted to Buyer under the MIS Agreement, but
subject to the terms of the MIS Agreement;
(h) all books, records and information pertaining to Taxes,
other than the information to which Buyer is entitled under Section
11.02(a);
(i) the assets located at the Lexington, Tennessee facility
listed or described in the column labeled "PROD" where an item is
designated "MTR" on Schedule 2.01.
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SECTION 2.3. ASSUMED LIABILITIES. Upon the terms and subject to the
conditions of the Transaction Documents, Buyer agrees, effective as of the
Closing Date, to assume the following liabilities (collectively, the "ASSUMED
LIABILITIES"):
(a) all liabilities set forth on the Lexington Closing Balance
Sheet but only to the extent provided for on the Lexington Closing
Balance Sheet;
(b) all liabilities and obligations of Seller or any of its
Subsidiaries arising under the Contracts which remain to be performed,
in whole or in part after the Closing Date;
(c) all liabilities in respect of Transferred Employees to be
assumed by Buyer pursuant to Article 12 hereof;
(d) all payables relating solely to the Century 2000 product
line in an amount not to exceed the aggregate face amount of the
Closing Century 2000 Receivables less $75,000; and
(e) all accruals relating solely to the Century 2000 product
line.
SECTION 2.4. EXCLUDED LIABILITIES. Notwithstanding any provision in any
of the Transaction Documents or any other writing to the contrary, Buyer is
assuming only the Assumed Liabilities and is not assuming any other liability or
obligation of Seller or any of its Subsidiaries (or any predecessor of Seller or
any of its Subsidiaries or any prior owner of all or part of their businesses
and assets) of whatever nature, whether presently in existence or arising after
the date of this Agreement. All such other liabilities and obligations shall be
retained by and remain obligations and liabilities of Seller and its
Subsidiaries (all such liabilities and obligations not being assumed being
herein referred to as the "EXCLUDED LIABILITIES"), and, notwithstanding anything
to the contrary in any of the Transaction Documents, none of the following shall
be Assumed Liabilities for the purposes of this Agreement:
(a) any liability or obligation for Taxes except (i) as
accrued for on the Lexington Closing Balance Sheet and (ii) Taxes for
which Buyer is responsible pursuant to Sections 11.02(b) and (c) and
14.02(b);
(b) except to the extent expressly provided in Article 12 and
to the extent accrued on the Lexington Closing Balance Sheet, any
liability or obligation relating to employee benefits or compensation
arrangements existing prior to the Closing Date, including, without
limitation, any
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<PAGE>
liability or obligation under any of Seller's or any of its
Subsidiaries' employee benefit agreements, plans or other arrangements
required to be listed on Schedule 12.01;
(c) any liability for (i) warranty claims made after the
Closing Date for service, repair, replacement and similar work required
under Seller's or any of its Subsidiaries' written warranties with
respect to products sold or services provided prior to the Closing
Date, the expenses of which, at shop level cost (direct materials,
direct labor and factory overhead) exceed the warranty reserve on the
Lexington Closing Balance Sheet, (ii) workers' compensation claims with
respect to injuries to Transferred Employees prior to the Closing Date,
(iii) claims under health insurance plans of Seller or any of its
Subsidiaries with respect to medical services rendered to Transferred
Employees prior to the Closing Date (but not in respect of any sick
leave or disability benefits pertaining to any period after the Closing
Date regardless of when the relevant illness or condition arose) or
(iv) any product liability claims for injuries, property damage or
other Damages, arising with respect to products designed, manufactured,
sold, distributed or provided, or services provided, prior to the
Closing Date, the expenses of which exceed the product liability
reserve on the Lexington Closing Balance Sheet, but only if written
notice of such claims referred to in clauses (i) - (iv) above shall
have been delivered to Seller within the two-year period following the
Closing Date;
(d) all liabilities for any Debt of Seller or any of its
Subsidiaries;
(e) any Off-Site Environmental Liability;
(f) any liability or obligation relating to an Excluded Asset;
and
(g) any liability for infringement or misappropriation of any
Intellectual Property Rights by Seller of any of its Subsidiaries in
connection with the operation of the Business prior to Closing.
SECTION 2.5. ASSIGNMENT OF CONTRACTS AND RIGHTS. Neither this Agreement
nor any other Transaction Document shall constitute an agreement to assign any
Purchased Asset or any claim or right or any benefit arising thereunder or
resulting therefrom if such assignment, without the consent of a third party
thereto, would constitute a breach or other contravention of such Purchased
Asset or in any way adversely affect the rights of Buyer or Seller thereunder.
Seller and Buyer will use their best efforts (but without any payment of money
by Seller or Buyer) to obtain the consent of the other parties to any such
Purchased Asset or any claim or right or any benefit arising thereunder for the
assignment thereof to
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Buyer as Buyer may request. If such consent is not obtained, or if an attempted
assignment thereof would be ineffective or would adversely affect the rights of
Seller thereunder so that Buyer would not in fact receive all such rights,
Seller and Buyer will cooperate in a mutually agreeable arrangement under which
Buyer would obtain the benefits and assume the obligations thereunder in
accordance with the Transaction Documents, including sub-contracting,
sub-licensing, or sub-leasing to Buyer, or under which Seller would enforce for
the benefit of Buyer, with Buyer assuming Seller's obligations, any and all
rights of Seller against a third party thereto. In the case of any Contract to
which the previous sentence refers, Buyer shall, in its sole discretion, have
the right to require Seller to terminate such Contract to the extent the terms
thereof permit such termination in which case Seller shall (or shall cause its
Subsidiaries to) terminate such Contract to the extent the terms thereof permit
such termination. Seller will promptly pay to Buyer when received all monies
received by Seller under any Purchased Asset or any claim or right or any
benefit arising thereunder, in each case pertaining to post-Closing periods,
except to the extent the same represents an Excluded Asset. Notwithstanding
anything in the forgoing to the contrary, Seller shall not be relieved of its
obligations under the MIS Agreement.
SECTION 2.6. PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE. (a) The
Purchase Price is $115 million in cash. The Purchase Price shall be paid as
provided in Section 2.07 and shall be subject to adjustment as provided in
Section 2.09.
(b) The Purchase Price (plus Assumed Liabilities and plus or minus any
adjustments pursuant to Section 2.09, each to the extent properly taken into
account under Section 1060 of the Code) shall be allocated among the Purchased
Assets and the covenant not to compete contained in Section 8.04 as set forth in
this Section 2.06.
(c) As promptly as practicable, but in no event later than 60 days
after the determination of the final Purchase Price pursuant to Section 2.09,
Buyer shall deliver to Seller a statement setting forth the allocation of the
Purchase Price (plus Assumed Liabilities and plus or minus any adjustments
pursuant to Section 2.09) among the Purchased Assets and the covenant not to
compete contained in Section 8.04 in accordance with Code Section 1060 and the
regulations promulgated thereunder (the "ALLOCATION").
(d) Seller shall have a period of 30 days after the delivery of the
Allocation to consent to the Allocation, which consent shall not be unreasonably
withheld. Unless Seller provides written notice to Buyer within such 30 day
period that it does not consent to the Allocation, the Allocation shall be
binding on the parties without further adjustment.
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<PAGE>
(e) If Seller provides such written notice within the 30 day period,
Buyer and Seller shall negotiate in good faith and use their best efforts to
resolve such dispute. If the parties fail to agree within 10 days after the
delivery of the notice, then the Allocation shall be determined by the
Accounting Referee. The costs, fees and expenses of the Accounting Referee (the
"ACCOUNTING REFEREE FEES") shall be borne equally by Seller and Buyer.
(f) Seller and Buyer agree to (i) be bound by the Allocation as
finally determined, (ii) act in accordance with the Allocation in the
preparation of financial statements and filing of all Tax returns (including,
without limitation filing Form 8594 with its federal income Tax return for the
taxable year that includes the date of the Closing) and in the course of any Tax
audit, Tax review or Tax litigation relating thereto and (iii) take no position
and cause their Affiliates to take no position inconsistent with the Allocation
for tax purposes.
(g) Not later than 10 days prior to the filing of their respective
Forms 8594 relating to the Contemplated Transactions, each party shall deliver
to the other party a copy of its Form 8594.
SECTION 2.7. CLOSING. The Closing shall take place at the offices of
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York, as soon as
possible, but in no event later than 10 Business Days after satisfaction of the
conditions set forth in Article 13, or at such other time or place as Buyer and
Seller may agree. At the Closing, or in the case of (a) below, the day after the
Closing:
(a) Buyer shall deliver to Seller $115 million plus interest
of $15,753 in immediately available funds by wire transfer to an
account of Seller with a bank in the United States designated by
Seller, by notice to Buyer, not later than two Business Days prior to
the Closing Date (or if not so designated, then by certified or
official bank check payable in immediately available funds to the order
of Seller in such amount).
(b) Buyer and Seller shall enter into the Assignment and
Assumption Agreement.
(c) Seller and Buyer shall enter into (i) the Manufacturing
and Facilities Agreement, (ii) the Voltage Regulator Supply Agreement,
(iii) the License Agreement and (iv) the MIS Agreement.
(d) Seller shall deliver to Buyer a certificate or
certificates for the Cayman Shares duly endorsed in blank or
accompanied by stock powers duly endorsed in blank and except as set
forth in Section 8.09, such deeds,
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bills of sale, endorsements, consents, assignments and other good and
sufficient instruments of conveyance and assignment as the parties and
their respective counsel shall deem reasonably necessary or appropriate
to vest in Buyer (or a designated Subsidiary of Buyer) all right, title
and interest in, to and under the Purchased Assets.
(e) Seller shall deliver to Buyer a certification signed by
Seller, to the effect that Seller is not a "foreign person" as defined
in Section 1445 of the Code.
SECTION 2.8. CLOSING STATEMENTS. (a) As promptly as practicable, but no
later than 90 days after the Closing Date, Buyer will cause to be prepared and
delivered to Seller the Lexington Closing Balance Sheet and the Fuzhou Closing
Balance Sheet and a certificate based on such Closing Statements setting forth
Buyer's calculation of Lexington Closing Net Worth and Fuzhou Closing Net Worth.
(b) The Lexington Closing Balance Sheet (the "LEXINGTON CLOSING
BALANCE SHEET") shall (i) exclude any refund or credit for Taxes, any other
asset in respect of Taxes and deferred income tax assets and liabilities, (ii)
fairly present the combined financial position of the Purchased Assets and
Assumed Liabilities as at the close of business on the day prior to the day of
the Closing in accordance with United States generally accepted accounting
principles, except for the absence of footnotes, (iii) at Buyer's option, be
based on a physical inventory, (iv) be prepared as if the Lexington Closing
Balance Sheet related to the end of a financial year, (v) give effect to the
netting of intercompany accounts (including without limitation the receivable
payable by MagneTek Fuzhou and the current portion of long-term debt) as
contemplated by Section 8.07, as if such netting occurred on the day prior to
the Closing Date, (vi) exclude (A) the stock of MagneTek Fuzhou and MagneTek
China, (B) the Hungarian Assets, (C) the inventory, receivables, payables and
accruals relating solely to the Century 2000 product line, (D) any assets
relating to the implementation of the items described on Exhibit D to the MIS
Agreement (whether such items were acquired before or after the Lexington
Balance Sheet Date), (E) amounts payable by MagneTek Fuzhou referred to in
Section 2.01(o), and (F) the computer libraries and modules referred to in
Section 8.08 and (vii) include (x) any liabilities relating to the Hungarian
Assets (y) reserves (I) for warranty claims, (II) in an amount equal to
$1,470,000 (to reflect the matters referred to in Sections 12.05(b)(iv) and
12.06(b)) and (III) in an amount equal to Buyer's contribution to Seller 401(k)
Plan, if any, for pre-Closing liabilities and (z) the payables referred to in
Section 10.10 less any amount paid to Buyer by Seller pursuant to such Section.
The
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inventory (including raw materials and finished goods) reflected on the
Lexington Closing Balance Sheet shall be valued as described on Schedule 2.08.
(c) The Fuzhou Closing Balance Sheet (the "FUZHOU CLOSING BALANCE
SHEET") shall (i) exclude any refund or credit for Taxes, any other asset in
respect of Taxes and deferred income tax assets and liabilities, (ii) fairly
present the financial position of MagneTek Fuzhou as at the close of business on
the day prior to the day of the Closing in accordance with United States
generally accepted accounting principles, except that the inventory of MagneTek
Fuzhou will be valued on a basis consistent with the valuation method used in
preparing the MagneTek Fuzhou Balance Sheet, (iii) at Buyer's option, be based
on a physical inventory, (iv) be prepared as if the Fuzhou Closing Balance Sheet
related to the end of a financial year, (v) give effect to the netting of
intercompany accounts (including without limitation the receivable payable by
MagneTek Fuzhou to Seller and the current portion of long-term debt) as
contemplated by Section 8.07, as if such netting occurred on the day prior to
the Closing Date, (vi) exclude the net payable due to Seller from MagneTek
Fuzhou referred to in Section 2.01(o) and (vii) include line items substantially
consistent with those in the MagneTek Fuzhou Balance Sheet.
(d) For purposes of preparing the Closing Statements, Buyer shall have
access to Seller's records relating to the Business, and Seller shall make the
appropriate personnel reasonably available to Buyer. Seller shall be entitled to
review the Closing Statements and Buyer shall provide Seller at all reasonable
times with reasonable access to its personnel, properties and records for such
purpose.
(e) If Seller disagrees with Buyer's calculation of Lexington Closing
Net Worth and/or Fuzhou Closing Net Worth (as the case may be) delivered
pursuant to Section 2.08(a), Seller may, within 30 days after delivery of the
documents referred to in Section 2.08(a), deliver a notice to Buyer disagreeing
with Buyer's calculation of Lexington Closing Net Worth and/or Fuzhou Closing
Net Worth (as the case may be) and setting forth Seller's calculation of
Lexington Closing Net Worth and/or Fuzhou Closing Net Worth. Any such notice of
disagreement shall specify those items or amounts as to which Seller disagrees,
and Seller shall be deemed to have agreed with all other items and amounts
contained in the Lexington Closing Balance Sheet and/or the Fuzhou Closing
Balance Sheet (as the case may be) and the calculation of Lexington Closing Net
Worth and/or Fuzhou Closing Net Worth (as the case may be) delivered pursuant to
Section 2.08(a).
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(f) If a notice of disagreement shall be duly delivered pursuant to
Section 2.08(e), Buyer and Seller shall, during the 30 days following such
delivery, use their best efforts in good faith to reach agreement on the
disputed items or amounts in order to determine, as may be required, the amount
of Lexington Closing Net Worth and/or Fuzhou Closing Net Worth (as the case may
be), which amount shall not be less than the amount thereof shown in Buyer's
calculations delivered pursuant to Section 2.08(a) nor more than the amount
thereof shown in Seller's calculation delivered pursuant to Section 2.08(e). If
during such 30-day period, Buyer and Seller are unable to reach such agreement,
they shall promptly thereafter cause the Accounting Referee promptly to review
this Agreement and the disputed items or amounts for the purpose of calculating
Lexington Closing Net Worth and/or Fuzhou Closing Net Worth (as the case may
be). In making such calculation, the Accounting Referee shall consider only
those items or amounts in the Lexington Closing Balance Sheet and/or the Fuzhou
Closing Balance Sheet (as the case may be) or Buyer's calculation of Lexington
Closing Net Worth and/or Fuzhou Closing Net Worth (as the case may be) as to
which Seller has disagreed. As promptly as practicable and in any event within
30 days after its retention, the Accounting Referee shall deliver to Buyer and
Seller, a report setting forth such calculation. Such report shall be final and
binding upon Buyer and Seller. The cost of such review and report shall be borne
proportionally by Buyer and Seller based on the percentage difference between
such party's calculation of Lexington Closing Net Worth and/or Fuzhou Closing
Net Worth and the Accounting Referee's calculation of such amounts which
percentage difference shall be determined for each party by reference to a
fraction, the numerator of which shall be the positive difference between such
party's calculation of Lexington Closing Net Worth or Fuzhou Closing Net Worth,
as the case may be, and the Accounting Referee's calculation of such amount and
the denominator of which shall be the difference between Seller's calculation of
Lexington Closing Net Worth or Fuzhou Closing Net Worth, as the case may be, and
Buyer's calculation of such amount.
(g) Buyer and Seller agree that they will, and agree to cause their
respective accountants to, cooperate and assist in the preparation of the
Closing Statements and the calculation of Lexington Closing Net Worth and Fuzhou
Closing Net Worth and in the conduct of the audits and reviews referred to in
this Section 2.08, including without limitation, the making available to the
extent reasonably required of books, records, work papers and personnel.
SECTION 2.9. ADJUSTMENT OF PURCHASE PRICE. (a) If the sum of Lexington
Base Net Worth and Fuzhou Base Net Worth exceeds the sum of Lexington Final Net
Worth and Fuzhou Final Net Worth, Seller shall pay to Buyer, as an
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adjustment to the Purchase Price, in the manner and with interest as provided in
Section 2.09(b), the amount of such excess. If the sum of Lexington Final Net
Worth and Fuzhou Final Net Worth exceeds the sum of Lexington Base Net Worth and
Fuzhou Base Net Worth, Buyer shall pay to Seller, in the manner and with
interest as provided in Section 2.09(b), the amount of such excess.
(b) Any payment pursuant to Section 2.09(a) shall be made at a
mutually convenient time and place within 10 days after Lexington Final Net
Worth and Fuzhou Final Net Worth have been determined pursuant to Section 2.08,
by delivery by Buyer or Seller, as the case may be, in immediately available
funds by wire transfer to an account of the other party as may be designated by
such other party. The amount of any payment to be made pursuant to this Section
2.09 shall bear interest from the Closing Date to but excluding the date of
payment at a rate per annum equal to the effective interest rate per annum on
90-day U.S. Treasury Bills in effect from time to time during the period from
the Closing Date to the date of payment. Such interest shall be payable at the
same time as the payment to which it relates and shall be calculated daily on
the basis of a year of 365 days and the actual number of days elapsed.
(c) For purposes of Sections 2.08 and 2.09, the following terms shall
have the following meanings:
"FUZHOU BASE NET WORTH" means US $2,941,000.
"FUZHOU CLOSING NET WORTH" means 55% of the stockholder's equity of
MagneTek Fuzhou as shown on the Fuzhou Closing Balance Sheet: less all assets
that are classified as intangible assets, including, without limitation,
goodwill, patents, trademarks, deferred expenses and unamortized debt discount.
"FUZHOU FINAL NET WORTH" means the Fuzhou Closing Net Worth as shown
in Buyer's calculation delivered pursuant to Section 2.08(a), if no notice of
disagreement with respect thereto is duly delivered pursuant to Section 2.08(e);
or if such a notice of disagreement is delivered, as agreed by Buyer and Seller
pursuant to Section 2.08(f) or in the absence of such agreement, as shown in the
Accounting Referee's calculation delivered pursuant to Section 2.08(f); PROVIDED
that in no event shall Fuzhou Final Net Worth be less than Buyer's calculation
of Fuzhou Closing Net Worth delivered pursuant to Section 2.08(a) or more than
Seller's calculation of Fuzhou Closing Net Worth delivered pursuant to Section
2.08(e).
"LEXINGTON BASE NET WORTH" means the sum of $21,949,000 (based on the
Lexington Balance Sheet) plus $1,357,950 (55% of the value, as of the
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Lexington Balance Sheet Date, of the net amount due Seller from MagneTek Fuzhou
referred to in Section 2.01(o)).
"LEXINGTON CLOSING NET WORTH" means the excess of the value of the
Purchased Assets over the amount of the Assumed Liabilities as reflected on the
Lexington Closing Balance Sheet less (i) all assets that in accordance with
United States generally accepted accounting principles would be classified as
intangible assets, including, without limitation, goodwill, patents, trademarks,
deferred expenses and unamortized debt discount and (ii) to the extent reflected
in the Lexington Closing Balance Sheet, all amounts due to Seller under Article
11.
"LEXINGTON FINAL NET WORTH" means Lexington Closing Net Worth (i) as
shown in Buyer's calculation delivered pursuant to Section 2.08(a) if no notice
of disagreement with respect thereto is duly delivered pursuant to Section
2.08(e); or (ii) if such a notice of disagreement is delivered, (A) as agreed by
Buyer and Seller pursuant to Section 2.08(f) or (B) in the absence of such
agreement, as shown in the Accounting Referee's calculation delivered pursuant
to Section 2.08(f); PROVIDED that in no event shall Lexington Final Net Worth be
less than Buyer's calculation of Lexington Closing Net Worth delivered pursuant
to Section 2.08(a) or more than Seller's calculation of Lexington Closing Net
Worth delivered pursuant to Section 2.08(e).
SECTION 2.10. ESCROW. Seller agrees that if at any time during the 36
month period following the Closing Date, Seller or any of its Subsidiaries
disposes of or agrees to dispose of (whether by merger, sale of stock, sale of
assets or otherwise) in one or a series of transactions a business or businesses
that, individually or in the aggregate, generated reported revenues of $500
million or more in the 12 month period prior to the first public announcement of
such sale or agreement to sell (the "ESCROW TRIGGER"), Seller shall deliver
within 7 days to an escrow agent to be mutually agreed upon by the parties at
the relevant time $6 million in immediately available funds by wire transfer for
deposit pursuant to the Escrow Agreement. Seller further agrees to cooperate
with Buyer to identify an escrow agent and execute an Escrow Agreement,
substantially in the form of Exhibit A hereto, within 30 days of the Closing
Date. Emerson will pay any expense incured with respect to the Escrow Agreement,
prior to the date of the Escrow Trigger
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER RELATING TO CERTAIN CORPORATE MATTERS
Seller represents and warrants to Buyer as of the date of this
Agreement and as of the Closing Date that:
SECTION 3.1. CORPORATE EXISTENCE AND POWER. Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of
Delaware and has all corporate powers and all material governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted. Seller is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction which is material to
the operation of the Business where such qualification is necessary.
SECTION 3.2. CORPORATE AUTHORIZATION. The execution, delivery and
performance by Seller of each of the Transaction Documents and the consummation
of the Contemplated Transactions are within Seller's corporate powers and have
been duly authorized by all necessary corporate action on the part of Seller and
its Subsidiaries. Each of the Transaction Document constitutes a valid and
binding agreement of Seller, except as enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting creditors' rights
generally and general principles of equity.
SECTION 3.3. GOVERNMENTAL AUTHORIZATION. Except as set forth on
Schedule 3.03, the execution, delivery and performance by Seller of each of the
Transaction Documents and the consummation of the Contemplated Transactions
require no material action by or in respect of, or material filing with, any
Governmental Authority other than such action or filing which has been timely
taken or made.
SECTION 3.4. NONCONTRAVENTION. Except as set forth on Schedule 3.04,
the execution, delivery and performance by Seller of each of the Transaction
Documents and the consummation of the Contemplated Transactions do not and will
not (i)violate the certificate of incorporation or bylaws of Seller, (ii)
assuming compliance with the matters referred to in Section 3.03 violate any
material Applicable Law, (iii) assuming the obtaining of all Required and Other
Consents, constitute a material default under or give rise to any right of
termination, cancellation or acceleration of any right or obligation of Seller
or any of its Subsidiaries or to a loss of any material benefit relating to the
Business or the Purchased Assets to which Seller or any of its Subsidiaries is
entitled under any provision of any agreement or other instrument binding upon
Seller or any of its Subsidiaries or by which any of the Purchased Assets is or
may be bound or (iv)
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result in the creation or imposition of any material Lien, other than Permitted
Liens, on the Purchased Assets.
SECTION 3.5. REQUIRED CONSENTS. Schedule 3.05 sets forth each consent
or action required of any Person (the "REQUIRED CONSENTS") under any material
Contract that is necessary with respect to the execution, delivery and
performance of the Transaction Documents.
SECTION 3.6. JOINT VENTURE AFFILIATES. MagneTek Fuzhou is, and has
always been, the only Joint Venture Affiliate of Seller.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER RELATING TO THE BUSINESS
(OTHER THAN AS CONDUCTED BY MAGNETEK FUZHOU)
Seller represents and warrants to Buyer as of the date of this
Agreement and as of the Closing Date that with respect to the Business (which
shall not, for the purposes of this Article 4, include any part of the Business
conducted by MagneTek Fuzhou):
SECTION 4.1. FINANCIAL STATEMENTS. The unaudited statements of income
and cash flows for each of the years ended June 30, 1996, 1997 and 1998 and the
Lexington Balance Sheet and the related unaudited statements of income and cash
flows for the five months ended November 30, 1998, each as set forth in Schedule
4.01, fairly present, in conformity with United States generally accepted
accounting principles applied on a consistent basis, the good-faith estimate of
Seller's senior management of the financial position of the Business as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject to normal year-end adjustments in the case of the interim
financial statements), it being understood that such financial statements:
(i) do not contain footnotes;
(ii) exclude (A) the stock of MagneTek Fuzhou and MagneTek
China, (B) the Hungarian Assets, (C) the inventory, receivables,
payables and accruals relating solely to the Century 2000 product line,
(D) any assets relating to the implementation of the items described on
Exhibit D to the MIS Agreement (whether such assets were acquired
before or after
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the Lexington Balance Sheet Date) and (E) the net payable due to Seller
from MagneTek Fuzhou referred to in Section 2.01(o);
(iii) exclude the Excluded Assets and Excluded Liabilities;
(iv) exclude intercompany advances and receivables (other than
those resulting from the sale of products or services to or from
entities other than MagneTek Fuzhou) from assets;
(v) exclude intercompany liabilities (other than those
resulting from the sale of products or services to or from entities
other than MagneTek Fuzhou), accruals for Federal income taxes, retiree
health and welfare benefits, long-term liabilities, current maturities
of long-term liabilities; and
(vi) does not include any reserves for warranty claims.
SECTION 4.2. ABSENCE OF CERTAIN CHANGES. Except as disclosed in
Schedule 4.02, since November 30, 1998, the Business has been conducted in the
ordinary course consistent with past practices and there has not been:
(a) any event, occurrence, development or state of
circumstances or facts which, individually or in the aggregate, has had
or could reasonably be expected to have a Material Adverse Effect;
(b) any incurrence, assumption or guarantee by Seller or any
of its Subsidiaries of any indebtedness for borrowed money with respect
to the Business other than in the ordinary course of business
consistent with past practices and in amounts and on terms consistent
with past practices;
(c) any creation or other incurrence of any Lien, except for
Permitted Liens, on any Purchased Asset other than in the ordinary
course of business consistent with past practices;
(d) any material damage, destruction or other material
casualty loss (whether or not covered by insurance) affecting the
Business or any Purchased Asset;
(e) any Contract entered into by Seller or any of its
Subsidiaries relating to the Business or any Purchased Asset (including
the acquisition or disposition of any assets) or any relinquishment by
Seller or any of its Subsidiaries of any Contract or other right, in
either case, material to the
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Business, other than transactions and commitments in the ordinary
course of business consistent with past practices and the Contemplated
Transactions;
(f) except as contemplated by the Transaction Documents and
except for any such change after the date of this Agreement required by
reason of a concurrent change in United States generally accepted
accounting principles, any change in any method of accounting or
accounting practice by Seller or any of its Subsidiaries with respect
to the Business;
(g) any (i) employment, deferred compensation, severance,
retirement or other similar agreement entered into with any employee of
the Business (or any amendment to any such existing agreement), (ii)
grant of any severance or termination pay to any employee of the
Business, (iii) grant of, or increase in, annual compensation or other
benefits to any employee of the Business in excess of $10,000 or (iv)
material change in compensation or other benefits payable to any
employee of the Business pursuant to any severance or retirement plans
or policies thereof;
(h) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
representative of a labor union to organize any employees of the
Business, which employees were not subject to a collective bargaining
agreement at the Lexington Balance Sheet Date, or any lockouts,
strikes, slowdowns, work stoppages or threats of any of the foregoing
by or with respect to employees of the Business;
(i) any capital expenditure, or commitment for a capital
expenditure, in excess of $100,000 for additions or improvements to
property, plant and equipment (other than those capital expenditures
relating to items described in Exhibit D to the MIS Agreement);
(j) any declaration, setting aside or payment of any dividend
by MagneTek China;
(k) any acquisition of any line of business or real property
or any sale of a material portion of the Purchased Assets (other than
the sale of inventory in the ordinary course of business) by Seller or
any of its Subsidiaries (whether by merger, sale of stock, sale of
assets or otherwise);
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(l) any lease of real property entered into by Seller or any
of its Subsidiaries;
(m) any actions or efforts made by or on behalf of MagneTek or
any of its Subsidiaries, 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.
SECTION 4.3. MATERIAL CONTRACTS. (a) Except for the Contracts disclosed
on Schedule 4.03 and Contracts entered into subsequent to the date of this
Agreement in the ordinary course of business, with respect to the Business,
neither Seller nor any of its Subsidiaries is a party to or bound by:
(i) any lease (of personal property) providing for annual
rentals of $100,000 or more;
(ii) any lease of real property;
(iii) any agreement for the purchase of materials, supplies,
goods, services, equipment or other assets providing for either (A)
annual payments by Seller or any of its Subsidiaries of $100,000 or
more or (B) aggregate future payments by Seller or any of its
Subsidiaries of $100,000 or more;
(iv) any sales, distribution or other similar agreement
providing for the sale by Seller or any of its Subsidiaries of
materials, supplies, goods, services, equipment or other assets that
provides for either (A) annual payments to Seller or any of its
Subsidiaries of $100,000 or more or (B) aggregate future payments to
Seller or any of its Subsidiaries of $100,000 or more;
(v) any partnership, joint venture or other similar agreement
or arrangement;
(vi) any agreement relating to the acquisition or disposition
of any line of business or real property (whether by merger, sale of
stock, sale of assets or otherwise);
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(vii) any agreement relating to indebtedness for borrowed money
or the deferred purchase price of property (in either case, whether
incurred, assumed, guaranteed or secured by any asset);
(viii) any option, license, franchise or similar agreement;
(ix) any agency, dealer, sales representative, marketing or
other similar agreement;
(x) any agreement that limits the freedom of Seller or any of
its Subsidiaries to compete in any line of business or with any Person
or in any area or to own, operate, sell, transfer, pledge or otherwise
dispose of or encumber any Purchased Asset or which would so limit the
freedom of Buyer or any of its Affiliates after the Closing Date;
(xi) any agreement with or for the benefit of any Affiliate of
Seller;
(xii) any agreement, commitment or arrangement with a third
party that is material to the Business and not reflected in a written
document; or
(xiii) any other agreement, commitment or arrangement or plan not
made in the ordinary course of business consistent with past practices.
(b) Except as disclosed on Schedule 4.03(b) and with regard to
MagneTek Fuzhou as to which no representation is made hereunder, each Contract
is a valid and binding agreement of Seller or a Subsidiary of Seller and to the
knowledge of Seller, each other party to such Contract, enforceable against
Seller or such Subsidiary and, to the knowledge of Seller, each such other party
in accordance with its terms (except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally), and neither Seller or such Subsidiary
nor, to the knowledge of Seller or such Subsidiary, any other party to such
Contract, is in material default or has failed to perform any material
obligation heretofore required to be performed under such Contract. True and
complete copies of each such Contract have been delivered to Buyer. There are no
oral or written agreements or arrangements modifying or amending the terms and
conditions of any Contract.
SECTION 4.4. LITIGATION. Except as disclosed on Schedule 4.04, there is
no action, suit, investigation or proceeding pending against, or to the
knowledge
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of Seller, threatened against the Business or any Purchased Asset before any
court or arbitrator or any Governmental Authority which, individually or in the
aggregate, if determined or resolved adversely in accordance with the
plaintiff's demands, could reasonably be expected to be material to the Business
or which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the Contemplated Transactions. The provisions of this Section
4.04 do not apply to environmental matters, which are the subject of Section
4.14.
SECTION 4.5. COMPLIANCE WITH LAWS AND COURT ORDERS. Except as disclosed
on Schedule 4.05, neither Seller nor any of its Subsidiaries is in material
violation of, has (since January 1, 1996) materially violated, or to the
knowledge of Seller, is under investigation with respect to and has not been
threatened to be charged with or given notice of any material violation of, any
law, rule, regulation, judgment, injunction, order or decree applicable to the
Purchased Assets or the conduct of the Business. The provisions of this Section
4.05 do not apply to environmental matters, which are the subject of Section
4.14.
SECTION 4.6. PROPERTIES. (a) Schedule 4.06(a) correctly describes all
Real Property which Seller or any of its Subsidiaries owns and there is no real
estate leased or subleased by Seller or any of its Subsidiaries primarily in
connection with the Business other than the Warehouse Lease.
(b) Seller or a Subsidiary of Seller has good and marketable title to,
or in the case of leased personal property valid leasehold interests in, all of
the Purchased Assets (excluding Real Property, as to which no representation is
made), whether tangible or intangible, reflected on the Lexington Balance Sheet
or acquired after the Lexington Balance Sheet Date, except for properties and
assets sold since the Lexington Balance Sheet Date in the ordinary course of
business consistent with past practices. Except as disclosed on Schedule
4.06(b), no Purchased Asset is subject to any Lien, except:
(i) Liens disclosed on the Lexington Balance Sheet;
(ii) Liens for taxes not yet due or being contested in good
faith and for which adequate accruals or reserves have been established
on the Lexington Balance Sheet; or
(iii) Liens which do not materially detract from the value of
such Purchased Asset, or materially interfere with any present or
intended use of such Purchased Asset (clauses (i) - (iii) of this
Section 4.06(b) are, collectively, the "PERMITTED LIENS").
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(c) There are no developments affecting any of the Purchased Assets
pending or, to the knowledge of Seller threatened, which might materially
detract from the value, materially interfere with any present or intended use or
materially adversely affect the marketability of such Purchased Assets.
(d) Except as disclosed on Schedule 4.06(d) and other than with
respect to the roof of the Lexington Tennessee Facility, the vacuum impregnation
system at the Lexington Tennessee facility, the Hungarian Assets, or the assets
associated with the business heretofore conducted under the name "Century 2000",
the plants, buildings, structures and equipment included in the Purchased Assets
have no material defects, are in good operating condition and repair, are in
compliance with Applicable Law in all material respects and have been reasonably
maintained consistent with standards generally followed in the industry (giving
due account to the age and length of use of same, ordinary wear and tear
excepted), are adequate and suitable for their present or intended uses and, in
the case of plants, buildings and other structures (including, without
limitation, the roofs thereof (other than the roof at the Lexington Tennessee
facility)), are structurally sound, in all material respects. The provisions of
this Section 4.06(d) do not apply to environmental matters, which are the
subject of Section 4.14.
SECTION 4.7. SUFFICIENCY OF AND TITLE TO THE PURCHASED ASSETS. (a)
Except as set forth in the proviso following clauses (a) through (o) in Section
2.01 or Section 2.02(g), the Purchased Assets constitute all of the property and
assets which are primarily used or held for use by Seller and its Subsidiaries
to conduct the Business in the ordinary course and, in conjunction with the
rights and licenses accorded to Buyer under the Transaction Documents, are
adequate to conduct the Business on a basis consistent with past practices.
(b) Upon consummation of the Contemplated Transactions, Buyer will
have acquired good and marketable title in and to, or a valid leasehold interest
in, each of the Purchased Assets (except for Real Property, as to which no
representation is made), free and clear of all Liens, except for Permitted Liens
and Liens arising through Buyer.
SECTION 4.8. PRODUCTS. Each of the products produced or sold by Seller
or any of its Subsidiaries in connection with the Business 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 Applicable Laws, (ii) fit for the ordinary purposes
for which it is intended to be used and 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 disclosed on Schedule 4.08,
since January 1,
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1997 neither Seller nor any of its Subsidiaries has received any written notice
from a customer to the effect that a product it has developed or sold suffers
from a design defect, and to the knowledge of Seller, no basis for such a claim
currently exists.
SECTION 4.9. INTELLECTUAL PROPERTY. (a) Schedule 4.09(a) contains a
list of all Business Intellectual Property Rights, specifying as to each, as
applicable: (i) the nature of such Intellectual Property Right, (ii) the owner
of such Business Intellectual Property Right, (iii) the jurisdictions by or in
which such Business Intellectual Property Right (A) is recognized (without
regard to registration) or (B) has been issued or registered or in which an
application for such issuance or registration has been filed, (iv) the
registration or application numbers and (v) the termination or expiration dates.
Except to the extent included in the Purchased Assets, as of the date of this
Agreement, Seller has no Intellectual Property Rights that it is holding for the
primary benefit of the Business.
(b) Schedule 4.09(b) sets forth a list of all licenses, sublicenses
and other agreements as to which Seller or any of its Subsidiaries is a party
and pursuant to which any Person is authorized to use any Business Intellectual
Property Right, including (i) the date of such license or agreement, (ii) the
identity of all parties thereto, (iii) a description of the nature and subject
matter thereof, (iv) the applicable royalty and (v) the term thereof. Except as
set forth in Exhibits A and E to the MIS Agreement, there are no material
licenses to the Business Intellectual Property Rights or licences material to
the operation of the Business.
(c) Except as disclosed on Schedule 4.09(c), (i) since January 1,
1996, neither Seller nor any of its Subsidiaries has, in operating the Business,
infringed or misappropriated any Intellectual Property Right or been notified in
writing that it is a defendant in any action, suit, investigation or proceeding
relating to, or otherwise has been notified in writing of, any alleged claim of
infringement or misappropriation of any Intellectual Property Right by Seller or
any of its Subsidiaries in operating the Business and to the knowledge of
Seller, there are no facts raising a likelihood of infringement or
misappropriation, and (ii) since January 1, 1996, in respect of the Business,
neither Seller nor any of its Subsidiaries has an outstanding claim or suit for,
and to the knowledge of Seller, there is, and has been, no infringement or
misappropriation or facts raising a likelihood of infringement or
misappropriation by any other Person of any Business Intellectual Property
Rights. Neither Seller nor any of its Subsidiaries is subject to any outstanding
judgement, injunction, order, decree or agreement restricting the use or
transfer of any Business Intellectual Property Right or restricting the
licensing thereof by Seller or any of its Subsidiaries to any Person.
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(d) Except as disclosed on Schedule 4.09(d), to the knowledge of
Seller, none of the trade secrets processes and formulae, research and
development results and other know-how relating to the Business, the value of
which to Seller or any of its Subsidiaries is contingent upon maintenance of the
confidentiality thereof, has been disclosed by Seller or any of its Subsidiaries
to any Person other than employees and Representatives of Seller or any of its
Subsidiaries all of whom are bound by written confidentiality agreements
substantially in the form previously disclosed to Buyer. Except as disclosed on
Schedule 4.09(d) and for statutory warranties given in the ordinary course of
business in connection with the sale of goods to customers, neither Seller nor
any of its Subsidiaries has, in the course of the operation of the Business,
given indemnification, or a warranty against infringement or misappropriation,
in connection with any Intellectual Property Right to any other Person.
(e) Except for "background software" licensed from third parties "off
the shelf", Seller is the sole owner of or has a valid and enforceable license
to use all Business Intellectual Property Rights and Seller has good and
marketable title to the Business Intellectual Property Rights it owns, free and
clear of all Liens .
(f) To the knowledge of Seller, the Business Intellectual Property
Rights set forth in Schedule 4.09(a) are valid and enforceable.
(g) Seller has taken all actions necessary to maintain and protect the
Business Intellectual Property Rights set forth in Schedule 4.09(a) that it
owns. Each patent, patent application, registered trademark and trademark
application, and registered copyright has been duly registered with the United
States Patent and Trademark Office or such other domestic or foreign
Governmental Authority as indicated on Schedule 4.09, and all annuity,
maintenance, renewal and other similar fees relating to the same are current,
and such registrations, filings and issuances remain in full force and effect.
(h) Since January 1, 1996, there has been no claim made, nor to the
knowledge of Seller, threatened against Seller or any of its Subsidiaries
asserting the invalidity, misuse or unenforceability of any of the Business
Intellectual Property Rights or challenging Seller's or any of its Subsidiaries'
right to use or ownership of any of the Business Intellectual Property Rights,
and there are no grounds for any such claim or challenge.
(i) No loss of any of the Business Intellectual Property Rights is
pending, reasonably foreseeable or, to the knowledge of Seller, threatened other
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than any expiration in accordance with the terms of such Business Intellectual
Property Rights.
(j) Except for the third party consents set forth on Schedules 3.04 or
3.05(a) required for the transfer of third party licenses or as contemplated by
the MIS Agreement, the consummation of the Contemplated Transactions will not
alter, impair or extinguish any of the material Business Intellectual Property
Rights.
(k) Except as disclosed on Schedule 4.09(b), neither Seller nor any of
its Subsidiaries has granted any option, license, sublicense or agreement of any
kind relating to the Business Intellectual Property Rights.
(l) Except as disclosed on Schedule 4.09, Seller and its Subsidiaries
are not operating under any obligation to pay royalties under any Business
Intellectual Property Right license nor are they committed to enter into any
such obligation.
SECTION 4.10. LICENSES AND PERMITS . There are no material Permits
other than the Permits set forth on Schedule 4.14.
SECTION 4.11. INVENTORIES. The inventory set forth in the Lexington
Balance Sheet is properly stated in the Lexington Balance Sheet at the (i) at
the lower of cost or market (cost being determined by the FIFO accounting
method) and (ii) written off or reserved to the extent it is physically damaged,
previously used, obsolete, discontinued or treated as "excess" (as defined in
Schedule 2.08).
SECTION 4.12. FINDERS' FEES. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Seller or any of its Subsidiaries who might be entitled to any fee
or commission from Buyer or any of its Subsidiaries in connection with the
Contemplated Transactions.
SECTION 4.13. EMPLOYEES. (a) Schedule 4.13(a) sets forth a true and
complete list as of April 24, 1999 of (a) the names, job descriptions and hourly
or monthly wages of all "active employees" of the Business (as defined in
Section 12.02), by location, and (b) the wage rates for non-salaried active
employees of the Business (by classification). No cash bonuses are due to such
employees except as accrued on the Lexington Closing Balance Sheet and as
described on Schedule 4.13. No key employee of the Business has notified Seller
or any of its Subsidiaries that he or she intends to resign or retire as a
result of the Contemplated Transactions or otherwise within twelve months after
the Closing Date.
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(b) Seller and its Subsidiaries are in material compliance with all
Applicable Laws respecting employment and employment practices, terms and
conditions of employment and wages and laws in connection with the Transferred
Employees and other employees of the Business, and are not engaged in any unfair
labor practice. Except as disclosed on Schedule 4.13(b), (i) neither Seller nor
any of its Subsidiaries is a party, or is otherwise subject, to any collective
bargaining agreement or other labor union contract applicable to the Transferred
Employees, (ii) there are no activities or proceedings by a labor union or
representative thereof to organize any Transferred Employees, (iii) there are no
pending negotiations between Seller or any of its Subsidiaries and any labor
union or representative thereof with respect to the Transferred Employees, (iv)
there are no pending, and Seller and its Subsidiaries have not experienced since
January 1, 1996, any labor disputes, lockouts, strikes, slowdowns, work
stoppages, or threats thereof, with respect to the Transferred Employees, (v)
there is no unfair labor practice complaint pending, or to the knowledge of
Seller, threatened, against Seller or any of its Subsidiaries before the
National Labor Relations Board or any other investigation, charge, prosecution,
suit or other proceeding before any court or arbitrator or any governmental
body, agency or official relating to the Transferred Employees or the
representation thereof, (vi) there are no claims or actions pending, or to the
knowledge of Seller, threatened, between Seller and its Subsidiaries and any of
the Transferred Employees or labor organizations representing or seeking to
represent such employees, (vii) subject to Section 10.05, Seller and its
Subsidiaries have materially complied with the WARN Act and any similar state or
local laws regulating layoffs or employment terminations with respect to the
Transferred Employees and (viii) except as disclosed on Schedule 4.04, to the
knowledge of Seller, there are no facts or circumstances involving any
Transferred Employee that would form the basis of, or give rise to, any cause of
action, including, without limitation, unlawful termination based on
discrimination of any kind that could reasonably be expected to result in any
material liability to Seller or any of its Subsidiaries or to the Business after
the Closing.
SECTION 4.14. ENVIRONMENTAL COMPLIANCE. (a) Except as disclosed on
Schedule 4.14:
(i) in connection with or relating to the Purchased Assets or
the Business or the Real Property no written or, to the knowledge of
Seller, oral notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been
filed, no penalty has been assessed and no investigation, action,
claim, proceeding or review is pending or, to the knowledge of Seller,
threatened by any
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Governmental Authority or other Person with respect to any material,
unresolved matters relating to or arising out of any Environmental Law;
(ii) there are no material Environmental Liabilities arising in
connection with or in any way relating to the Purchased Assets, the
Business or the Real Property of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there
are no facts, events, conditions, situations or set of circumstances
which could reasonably be expected to result in or be the basis for any
such liability;
(iii) no polychlorinated biphenyls, radioactive material, lead,
asbestos-containing material, incinerator, surface impoundment, lagoon,
landfill, septic, wastewater treatment or other disposal system or
underground storage tank (active or inactive) is or has been present
at, on or under any Real Property or in any Purchased Asset or any
other property now or previously owned, leased or operated by Seller or
any of its Subsidiaries in connection with the Purchased Assets or the
Business, except in compliance in all material respects with Applicable
Law and in a manner that would not reasonably be expected to result in
a material liability to the Business;
(iv) no Hazardous Substance has been discharged, disposed of,
dumped, injected, pumped, deposited, spilled, leaked, emitted or
released at, on or under any Real Property or any other property now or
previously owned, leased or operated by Seller or any of its
Subsidiaries in connection with the Purchased Assets or the Business in
a manner which violates any Environmental Law or would reasonably be
expected to result in a material liability to the Business;
(v) no Real Property or any other property now or previously
owned, leased or operated by Seller or any of its Subsidiaries in
connection with the Purchased Assets or the Business is listed or, to
the knowledge of Seller, proposed for listing on any list of sites
requiring investigation or cleanup; and
(b) Since January 1, 1996, the Purchased Assets, the Business and the
Real Property, each of Seller and its Subsidiaries are and have been operated in
compliance in all material respects with all Environmental Laws and have been
and are in compliance with all Environmental Permits; such Environmental Permits
are valid and in full force and effect, and neither Seller nor any of its
Subsidiaries is in material default under any such Environmental Permit.
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(c) Since January 1, 1994, and to Seller's actual, current knowledge,
without investigation, prior to January 1, 1994, there has been no third party
environmental investigation, study, audit or test of the Real Property or any
other property or facility now or previously owned or leased by Seller or any of
its Subsidiaries in connection with the Purchased Assets or the Business which
has not been delivered by Seller to Buyer at least 10 days prior to the date of
this Agreement.
(d) None of the Purchased Assets or Real Property is located in New
Jersey or Connecticut.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER RELATING TO MAGNETEK
FUZHOU
Anything in this Agreement notwithstanding, except as set forth in this
Article 5 and Sections 11 and 12, no other representation or warranty concerning
MagneTek Fuzhou, whether express or implied, is made in this Agreement. Seller
represents and warrants to Buyer as of the date of this Agreement and as of the
Closing Date that with respect MagneTek Fuzhou:
SECTION 5.1. CORPORATE EXISTENCE AND POWER. MagneTek Fuzhou is a
Sino-American equity joint venture duly organized, validly existing pursuant to
a Sino-Foreign Equity Joint Venture Contract between MagneTek and Fujian Fufa
(the "JOINT VENTURE AGREEMENT") and in good standing under the Company Law of
the People's Republic of China.
SECTION 5.2. CAPITALIZATION. (a) The Joint Venture Agreement provides
that the registered capital of MagneTek Fuzhou (the "FUZHOU CAPITAL")
contributed by MagneTek shall be $5,801,583, which shall comprise 55% of the
total Fuzhou Capital. MagneTek's scheduled cash contributions totaling
$4,188,583 have been duly made and certified in accordance with the Joint
Venture Agreement. While MagneTek has also made a non-cash contribution to the
Fuzhou Capital, it is disputed whether this contribution satisfied MagneTek's
scheduled $1,613,000 non-cash contribution and no certification of this
contribution to Fuzhou Capital has been obtained.
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(b) MagneTek China and Fujian Fufa are the sole record and beneficial
owners of the Fuzhou Capital. The Fuzhou Capital owned by MagneTek China is free
and clear of any Lien and any other limitation or restriction except under the
Joint Venture Agreement or Applicable Law of general application.
SECTION 5.3. NONCONTRAVENTION. Except as set forth on Schedule 5.03,
the execution, delivery and performance by Seller of each of the Transaction
Documents and the consummation of the Contemplated Transactions do not and will
not materially violate the agreements and instruments comprising the Joint
Venture Agreement, constitute a default under or give rise to any right of
termination, cancellation or acceleration of any material right or obligation of
MagneTek Fuzhou or to a loss of any material benefit relating to the Business to
which MagneTek Fuzhou is entitled under any provision of any agreement or other
instrument binding upon MagneTek Fuzhou.
SECTION 5.4. AUTHORIZATION. MagneTek Fuzhou has all corporate powers
and material Permits required to carry on its business as now conducted.
SECTION 5.5. LITIGATION. Except as disclosed on Schedule 5.05, there is
no action, suit, investigation or proceeding pending against, or to the
knowledge of Seller, threatened against MagneTek Fuzhou before any court or
arbitrator or any Governmental Authority which, individually or in the
aggregate, if determined or resolved adversely in accordance with the
plaintiff's demands, could reasonably be expected to be material to MagneTek
Fuzhou or which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the Contemplated Transactions.
SECTION 5.6. COMPLIANCE WITH LAWS. Except as disclosed on Schedule
5.06, MagneTek Fuzhou is not in violation of, has not violated, or to the
knowledge of Seller, is not under investigation with respect to or threatened to
be charged with or given notice of any violation of, any material Permit
(including Environmental Permits) or material law, rule, regulation, judgment,
injunction, order or decree applicable to it or the conduct of its business.
SECTION 5.7. FINANCIAL STATEMENTS. The MagneTek Fuzhou Balance Sheet as
of November 30, 1998, as set forth in Schedule 5.07, was prepared in accordance
with past practice.
SECTION 5.8. ABSENCE OF CERTAIN CHANGES. Since the MagneTek Fuzhou
Balance Sheet Date, the business of MagneTek Fuzhou has been conducted in the
ordinary course consistent with past practices and there has not been any event,
occurrence, development relating to the business of MagneTek Fuzhou, or any
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action taken by MagneTek Fuzhou, that is described in Section 4.02 (other than
Section 4.02(j)). The provisions of Section 4.02 are hereby incorporated by
reference into this Section 5.08, and for such purpose, references in Section
4.02 to Seller or any of its Subsidiaries shall be deemed to be MagneTek Fuzhou,
references to the Business shall be deemed to be the business of MagneTek Fuzhou
and references to Purchased Assets shall be ignored.
SECTION 5.9. UNDISCLOSED LIABILITIES. There are no liabilities or
obligations of MagneTek Fuzhou of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, other than:
(i) liabilities provided for in the MagneTek Fuzhou Balance
Sheet;
(ii) liabilities disclosed on Schedule 5.09; and
(iii) other undisclosed liabilities which, individually or in
the aggregate, are not material to MagneTek Fuzhou.
SECTION 5.10. MATERIAL CONTRACTS. Schedule 5.10 sets forth a list of
each Contract that is described in Section 4.03 to which MagneTek Fuzhou is a
party. Except as disclosed on Schedule 5.10, each Contract is a valid and
binding agreement of MagneTek Fuzhou and to the knowledge of Seller, each other
party to such Contract, enforceable against MagneTek Fuzhou or its Subsidiaries
and, to the knowledge of Seller, such other party in accordance with its terms
(except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally) and neither MagneTek Fuzhou nor, to the knowledge of Seller, any
other party to such Contract is in material default or has failed to perform any
material obligation heretofore required to be performed under such Contract.
True and complete copies (or translations thereof) of each such Contract have
been delivered to Buyer.
SECTION 5.11. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Seller of each of the Transaction Documents and the consummation
of the Contemplated Transactions require no material action by or in respect of,
or material filing with, any Governmental Authority with respect to MagneTek
Fuzhou other than such action or filing which has been timely taken or made.
SECTION 5.12. SUBSIDIARIES AND JOINT VENTURE AFFILIATES. There are, and
have been, no Subsidiaries or Joint Venture Affiliates of MagneTek Fuzhou.
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SECTION 5.13. TAX TREATMENT. MagneTek Fuzhou is treated as a
partnership under Section 7701 of the Code and the regulations thereunder.
SECTION 5.14. ENVIRONMENTAL MATTERS. (a) No Hazardous Substance has
been discharged, disposed of, dumped, injected, pumped, deposited, spilled,
leaked, emitted or released at, on or under any MagneTek Fuzhou Real Property or
any other property now or previously owned, leased or operated by MagneTek
Fuzhou in a manner which violates any Environmental Law or would reasonably be
expected to result in a material liability to MagneTek Fuzhou.
(b) No MagneTek Fuzhou Real Property or other property now or
previously owned, leased or operated by MagneTek Fuzhou nor any property to
which Hazardous Substances located on or resulting from the use of any MagneTek
Fuzhou Real Property has been transported nor any property to which MagneTek
Fuzhou has, directly or indirectly, transported or arranged for the
transportation of any Hazardous Substances is listed or, to the knowledge of
Seller, proposed for listing on any list of sites requiring investigation or
cleanup which, in any event, would reasonably be expected to reasonably be
expected to result in a material liability to MagneTek Fuzhou.
(c) Neither Seller nor MagneTek Fuzhou have commissioned or received
any environmental investigation, study, audit or test of the MagneTek Fuzhou
Real Property or any other property now or previously owned, leased or operated
by MagneTek Fuzhou which has not been delivered by Seller to Buyer at least ten
days prior to the date of this Agreement. Any such environmental investigation,
study, audit, test review or the analysis conducted after the date of this
Agreement will be promptly delivered by Seller to Buyer.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLER RELATING TO MAGNETEK CHINA
Anything in this Agreement notwithstanding, except as set forth in
Article 3, this Article 6, Article 11 and Article 12, no other representation or
warranty concerning MagneTek China, whether expressed or implied, is made in
this Agreement. Seller represents and warrants to Buyer as of the date of this
Agreement and as of the Closing Date that with respect to MagneTek China:
SECTION 6.1. CORPORATE EXISTENCE AND POWER. MagneTek China is a Cayman
Islands exempted company duly organized, validly existing and in good
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standing in the Cayman Islands and has all corporate powers and material Permits
required to carry on its business as now conducted.
SECTION 6.2. SCOPE OF BUSINESS. The only business MagneTek China
conducts and the only assets it holds as of the date of this Agreement (and has
ever in the past conducted or held) is comprised of the ownership of Seller's
interest in MagneTek Fuzhou.
SECTION 6.3. CAPITALIZATION. (a) The authorized capital stock of
MagneTek China consists of 50,000 ordinary shares, par value US$1.00 per share.
As of the date hereof, there are outstanding 10 ordinary shares of MagneTek
China (the "CAYMAN SHARES").
(b) All of the Cayman Shares have been duly authorized and validly
issued and are fully paid and non-assessable. There are no other outstanding
shares of capital stock or voting securities of MagneTek China, securities of
MagneTek China convertible into or exchangeable for shares of capital stock or
voting securities of MagneTek China or options or other rights to acquire from
MagneTek China, or other obligation of MagneTek China to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of MagneTek China and there are no
outstanding obligations of MagneTek China to repurchase, redeem or otherwise
acquire any such securities.
SECTION 6.4. OWNERSHIP OF SHARES. Seller is the record and beneficial
owner of 100% of the Cayman Shares, free and clear of any Lien and any other
limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of the Cayman Shares), and will transfer and deliver to
Buyer at the Closing valid title to the Cayman Shares free and clear of any Lien
and any such limitation or restriction.
SECTION 6.5. UNDISCLOSED LIABILITIES. MagneTek China has no liabilities
or obligations of any kind except those arising in the ordinary course of
business pertaining to the maintenance of its corporate existence and the
ownership of Seller's interest in MagneTek Fuzhou, and has no liabilities or
obligations of any kind whatsoever for Taxes.
SECTION 6.6. TAX TREATMENT. MagneTek China is treated as a corporation
under Section 7701 of the Code and the regulations thereunder.
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ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date of this
Agreement and as of the Closing Date that:
SECTION 7.1. CORPORATE EXISTENCE AND POWER. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of Missouri
and has all corporate powers and all material governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted.
SECTION 7.2. CORPORATE AUTHORIZATION. The execution, delivery and
performance by Buyer of the Transaction Documents and the consummation of the
Contemplated Transactions are within the corporate powers of Buyer and have been
duly authorized by all necessary corporate action on the part of Buyer. Each
Transaction Document constitutes a valid and binding agreement of Buyer except
as enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting creditors' rights generally and general principles of
equity.
SECTION 7.3. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Buyer of the Transaction Documents and the consummation of the
Contemplated Transactions require no material action by or in respect of, or
material filing with, any Governmental Authority other than (i) such action or
filing which has been timely taken or made and (ii) such other actions or
filings as to which the failure to make or obtain would not, individually or in
the aggregate, be material to Buyer.
SECTION 7.4. NONCONTRAVENTION. The execution, delivery and performance
by Buyer of the Transaction Documents and the consummation of the Contemplated
Transactions do not and will not (i) violate the certificate of incorporation or
bylaws of Buyer or (ii) assuming compliance with the matters referred to in
Section 7.03, materially violate any Applicable Law.
SECTION 7.5. LITIGATION. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer threatened against or
affecting, Buyer before any court or arbitrator or any Governmental Authority
which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay the Contemplated Transactions.
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SECTION 7.6. FINDERS' FEES. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Buyer who might be entitled to any fee or commission from Seller or
any of its Subsidiaries in connection with the Contemplated Transactions.
ARTICLE 8
COVENANTS OF SELLER
SECTION 8.1. CONDUCT OF THE BUSINESS. From the date of this Agreement
until the Closing Date, Seller will, and will cause each of its Subsidiaries and
(subject to the consent, voting or veto rights of Fujian Fufa Company Limited
under the joint venture agreement or any other agreement relating to MagneTek
Fuzhou) MagneTek Fuzhou to, conduct the Business in the ordinary course
consistent with past practices and use its best efforts to preserve intact the
business organizations and relationships with third parties and to keep
available the services of the present employees of the Business. Without
limiting the generality of the foregoing, from the date of this Agreement until
the Closing Date, unless Buyer has consented thereto, Seller will not and will
cause each of its Subsidiaries and (subject to the consent, voting or veto
rights of Fujian Fufa Company Limited under the joint venture agreement or any
other agreement relating to MagneTek Fuzhou) MagneTek Fuzhou not to (in respect
of the Business):
(a) make any capital expenditure, or group of related capital
expenditures, relating to the Business or the Purchased Assets in excess of
$75,000;
(b) sell, lease, license or otherwise dispose of any Purchased Assets
except (i) pursuant to existing Contracts and (ii) in the ordinary course of
business consistent with past practices;
(c) fail to maintain the books and records of the Business in the
ordinary course of business consistent with past practices;
(d) enter into any guarantees of performance or post any performance
bonds, standby letters of credit or other similar arrangements guaranteeing or
securing performance of obligations under Contracts (other than with respect to
Contracts which are Excluded Assets), other than in the ordinary course of
business consistent with past practices;
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(e) fail to maintain in good repair, subject to ordinary wear and tear,
the premises, fixtures, machinery, furniture and equipment of the Business in a
manner consistent with past practices;
(f) sell, pledge, factor, encumber or otherwise transfer any
receivables arising from or otherwise relating to the Business (other than
Excluded Assets) or pursuant to its credit agreement, which encumbrances will be
removed at Closing; (g) establish or dissolve MagneTek Fuzhou or MagneTek China
or any Subsidiaries of Seller that are involved, directly or indirectly, in the
conduct of the Business or that hold any Purchased Assets;
(h) transfer or reassign any employee of Seller or any of its
Subsidiaries or MagneTek Fuzhou whose principal responsibility involves the
conduct of the Business (other than transfers or reassignments of employees in
the ordinary course of business);
(i) (i) take or agree or commit to take any action that would make any
representation or warranty of Seller under any of the Transaction Documents
inaccurate in any respect at, or as of any time prior to, the Closing Date or
(ii) omit or agree or commit to omit to take any action necessary to prevent any
such representation or warranty from being inaccurate in any respect at any such
time;
(j) acquire or dispose of any real property or any line of business;
(k) enter into any agreement relating to the acquisition or disposition
of any material product line of the Business;
(l) enter into any contract, agreement or commitment with respect to
any of the foregoing;
(m) abandon or permit the lapse of any Business Intellectual Property
Right; or
(n) enter into any lease of real property.
SECTION 8.2. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) From the date
of this Agreement until the Closing, Seller will (i) give Buyer and its
Affiliates and Representatives reasonable access upon reasonable notice to the
offices, properties, books and records (including, without limitation, copies of
all Contracts) of Seller, any of its Subsidiaries or MagneTek Fuzhou relating to
the Business, (ii) permit Buyer and its Affiliates and Representatives to
conduct
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environmental investigations, including, without limitation, sampling of air,
water (including ground water), soil and building materials, during normal
business hours and upon reasonable notice, (iii) furnish to Buyer and its
Affiliates and Representatives such financial and operating data and other
information relating to the Business as such Persons may reasonably request and
(iv) instruct its employees and Representatives to cooperate with Buyer in its
investigation of the Business. Any investigation pursuant to this Section
8.02(a) shall be conducted in such manner as not to interfere unreasonably with
the conduct of the business of Seller.
(b) On and after the day of the Closing, Seller will afford promptly to
Buyer and its Affiliates and Representatives access to its books and records
related to the Business, the Purchased Assets or the Assumed Liabilities during
normal business hours and upon reasonable prior notice; PROVIDED that any such
access by Buyer shall not unreasonably interfere with the conduct of the
business of Seller.
(c) On and after the day of the Closing, Seller will hold, and will use
its best efforts to cause its Subsidiaries and Representatives to hold, in
confidence, unless compelled to disclose by Applicable Law, all confidential
documents and information concerning the Business, (including any confidential
information or documents provided to it pursuant to Section 9.01 and any trade
secrets or other proprietary information forming a part of the Business
Intellectual Property Rights) (the "CONFIDENTIAL INFORMATION") except to the
extent that such information is (i) in the public domain through no fault of
Seller or its Subsidiaries or any of their Representatives or (ii) later
lawfully acquired by Seller or any of its Subsidiaries on a non-confidential
basis from sources other than Buyer or any of its Affiliates. The obligation of
Seller and its Subsidiaries 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 8.04, it being understood, however, that this
Section 8.02 shall continue to preclude the divulgence of Confidential
Information by Seller to third parties after the expiration of the covenant
contained in Section 8.04.
SECTION 8.3. NOTICES OF CERTAIN EVENTS. Seller shall promptly notify
Buyer of:
(a) any changes or events which, individually or in the
aggregate, have had or could reasonably be expected to have a Material
Adverse Effect;
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(b) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection
with the Contemplated Transactions;
(c) any notice or other communication from any Governmental
Authority in connection with the Contemplated Transactions;
(d) any actions, suits, claims, investigations or proceedings
commenced or, to the knowledge of Seller, threatened against, relating
to or involving the Business that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to
Section 4.04;
(e) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the Business or any Purchased Asset
or part thereof in any material respect;
(f) any Purchased Asset or part of any Purchased Asset that
becomes the subject of any proceeding or, to the knowledge of Seller,
threatened proceeding for the taking of such Purchased Asset or any
part of such Purchased Asset or of any right relating thereto by
condemnation, eminent domain or other similar governmental action; and
(g) the termination of employment or resignation of any
employee of the Business with a salary or wages in excess of $50,000.
SECTION 8.4. NONCOMPETITION. (a) Seller agrees that until the fifth
anniversary of the Closing Date, it will not, and will cause each of its
Subsidiaries not to, engage, either directly or indirectly, as a principal or
for its own account or solely or jointly with others, or as stockholders or
holders of the equity interests in any Person (other than as the owner of less
than 5% of the stock of a publicly traded company), in any business anywhere in
the world involving the design or manufacture, sale or distribution of any
alternator products (including associated spare parts) other than products
described on Schedule 8.04. Notwithstanding the forgoing sentence, Buyer
acknowledges that provided Seller promptly terminates those Contracts that Buyer
requests Seller to terminate in accordance with Section 2.05, Seller shall not
be in breach of this Section 8.04(a) for so long as it continues to perform
under such Contracts until the relevant Contracts are terminated.
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(b) Except to the extent otherwise provided in Section 10(c) of the
Manufacturing and Facilities Agreement, Seller agrees that until the later of
(i) the third anniversary of the Closing Date and (ii) one year after the
termination of the Manufacturing and Facilities Agreement, it will not, and will
cause each of its Subsidiaries not to, directly or indirectly, employ or solicit
for employment any Transferred Employee, employee of MagneTek Fuzhou or other
Person employed to work in the Business by Buyer or any of its Subsidiaries
after the Closing Date. It shall be a breach of this Section 8.04(b) to give any
Transferred Employee any indication or assurance that Seller or any of its
Subsidiaries will, directly or indirectly, offer such Transferred Employee
employment after such Transferred Employee leaves the employ of Buyer or any
Affiliate of Buyer.
(c) Buyer agrees that until the later of (i) the third anniversary of
the Closing Date and (ii) one year after the termination of the Manufacturing
and Facilities Agreement, it will not, and will cause each of its Subsidiaries
not to, directly or indirectly, employ or solicit for employment any Person
employed by Seller or any of its Subsidiaries after the Closing Date who works
in the Seller's integral horsepower motors business and is located at the
Lexington Tennessee facility.
(d) If any provision contained in this Section 8.04 shall for any
reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Section 8.04, but this Section 8.04 shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein. It
is the intention of the parties that if any of the restrictions or covenants
contained in this Section 8.04 is held to cover a geographic area or to be for a
length of time which is not permitted by Applicable Law, or in any way construed
to be too broad or to any extent invalid, such provision shall not be construed
to be null, void and of no effect, but to the extent such provision would be
valid or enforceable under Applicable Law, a court of competent jurisdiction
shall construe and interpret or reform this Section 8.04 to provide for a
covenant having the maximum enforceable geographic area, time period and other
provisions (not greater than those contained herein) as shall be valid and
enforceable under such Applicable Law. Each of Seller and Buyer acknowledges
that the other party would be irreparably harmed by any breach of this Section
8.04 and that there would be no adequate remedy at law or in damages to
compensate the other party for any such breach. Seller and Buyer agree that the
other party shall be entitled to injunctive relief requiring specific
performance by the offending party of this Section 8.04, and Seller and Buyer
consent to the entry of such injunctive relief.
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SECTION 8.5. COLLECTION OF RECEIVABLES. Seller agrees that from and
after the Closing Date, Buyer shall have the right and authority to collect for
its own account all accounts receivable that are included in the Purchased
Assets and to endorse with the name of Seller or any of its Subsidiaries any
checks or drafts received with respect to any such account receivable. Seller
also agrees that it shall promptly deliver or cause to be promptly delivered to
Buyer any cash or other property received directly or indirectly by Seller or
any of its Subsidiaries with respect to any such accounts receivable, including
any amounts payable as interest.
SECTION 8.6. CERTAIN CONTRACTS. Seller shall, and shall cause each of
its Subsidiaries and (subject to the consent, voting or veto rights of Fujian
Fufa Company Limited under the joint venture agreement or any other agreement
relating to MagneTek Fuzhou) MagneTek Fuzhou to, take all actions commercially
reasonable to ensure that all Contracts entered into by Seller, MagneTek Fuzhou
or any such Subsidiaries on or after the date of this Agreement and prior to the
Closing Date do not require a consent or other action by any Person as a result
of the execution, delivery or performance of the Transaction Documents or the
consummation of the Contemplated Transactions.
SECTION 8.7. MAGNETEK FUZHOU PAYABLES/RECEIVABLES. All intercompany
accounts (including without limitation the net receivable payable and the
current portion of long-term debt) between Seller or its Subsidiaries, on the
one hand, and MagneTek Fuzhou or MagneTek China, on the other hand, as of the
Closing shall be netted (irrespective of the terms of payment of such
intercompany accounts) at the Closing. The balance of any amount due to Seller
from MagneTek Fuzhou shall be assigned to Buyer in accordance with Section
2.01(o). Seller represents that Schedule 8.07 sets forth a statement describing
in reasonable detail the calculation of all such intercompany account balances
based upon the latest available financial information as of such date.
SECTION 8.8. CONVEYANCE OF CERTAIN INTELLECTUAL PROPERTY RIGHTS. As
soon as possible, but in no event later than 30 days, after the Closing Date,
Seller shall deliver to Buyer all of the computer libraries of designs and
computer modules owned by Seller which relate primarily to the Business, it
being understood that such libraries and modules shall constitute Purchased
Assets under this Agreement and that such conveyance shall be in the form of the
media available to MagneTek (without additional expense except as to the
separation of the relevant design modules), including source code and
documentation, if applicable.
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SECTION 8.9. APPROVALS/WAIVERS RELATING TO MAGNETEK CHINA. Seller
agrees to take any and all ministerial steps or actions required, if any, to
secure the approval of Fuzhou COFERT, and any other relevant Chinese authority,
to perfect the transfer of Seller's interest in MagneTek Fuzhou to MagneTek
China. In addition, Seller agrees to waive any amounts due to it currently, or
in the future, from MagneTek China relating to any royalty, or any other,
payments.
ARTICLE 9
COVENANTS OF BUYER
SECTION 9.1. ACCESS. On and after the day of the Closing, Buyer will
afford promptly to Seller, its Affiliates and its Representatives reasonable
access to its books and records during normal business hours and upon reasonable
prior notice to permit Seller to determine any matter relating to its rights and
obligations under any of the Transaction Documents; PROVIDED that any such
access by Seller, its Affiliates or its Representatives shall not unreasonably
interfere with the conduct of the business of Buyer. Buyer will retain all
records of the Business included in the Purchased Assets for a period of seven
years following the Closing Date.
SECTION 9.2. CONFIDENTIALITY. Buyer agrees that all information
provided to Buyer or any of its Affiliates and Representatives as contemplated
by this Agreement will be treated as if provided under the Confidentiality
Agreement. Buyer and Seller agree that the Confidentiality Agreement shall
terminate upon the Closing; PROVIDED that the obligations imposed upon Buyer by
the Confidentiality Agreement to hold in confidence any information provided to
Buyer under the Confidentiality Agreement that relates to any business of Seller
(other than the Business) shall survive for the period of time specified in the
Confidentiality Agreement.
ARTICLE 10
COVENANTS OF BUYER AND SELLER
SECTION 10.1. FURTHER ASSURANCES. Subject to the terms and conditions
of this Agreement, Buyer and Seller will use their best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or
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desirable under Applicable Laws to consummate the Contemplated Transactions.
Seller and Buyer agree to execute and deliver such other documents,
certificates, agreements and other writings and to take such other actions as
may be necessary or desirable in order to consummate or implement expeditiously
the Contemplated Transactions and to transfer the Business and the Purchased
Assets to Buyer.
SECTION 10.2. CERTAIN FILINGS. Seller and Buyer shall cooperate with
one another (i) in determining whether any action by or in respect of, or filing
with, any Governmental Authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any Contracts,
in connection with the consummation of the Contemplated Transactions and (ii) in
taking such actions or making any such filings, furnishing information required
in connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers.
SECTION 10.3. PUBLIC ANNOUNCEMENTS. Seller and Buyer agree to consult
with one another before issuing any press release or making any public statement
with respect to the Transaction Documents or the Contemplated Transactions and,
except as may be required by Applicable Law or any listing agreement with any
national securities exchange, will not issue any such press release or make any
such public statement prior to such consultation.
SECTION 10.4. TRADEMARKS; TRADENAMES. After the Closing, Buyer and its
Affiliates shall have the right to sell existing inventory and to use existing
packaging, labeling, containers, supplies, technical data sheets and any similar
materials bearing any MagneTek Rights until the earlier of (i) 12 months after
the Closing Date and (ii) the date existing inventory is exhausted. For a
reasonable period not to exceed 12 months after the Closing Date, Buyer shall
have the right to use MagneTek Rights in advertising that cannot be changed by
Buyer using reasonable efforts. Buyer shall comply with all Applicable Laws in
any use of packaging or labeling containing MagneTek Rights.
SECTION 10.5. WARN ACT. The parties agree to cooperate in good faith to
determine whether any notification may be required under the WARN Act (and any
similar state or local laws) as a result of the Contemplated Transactions. Buyer
will be responsible for providing any notification that may be required under
the WARN Act (and any similar state or local laws) with respect to any
Transferred Employees. Seller will be responsible for providing any notification
that may be required under the WARN Act (and any similar state or local laws)
with respect to any employees of the Business that are not Transferred
Employees.
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SECTION 10.6. SELLER ACCOUNTS RECEIVABLE. Buyer agrees to forward or
cause to be forwarded to Seller, within three Business Days after the receipt
and determination thereof, any and all proceeds from accounts receivable of
Seller (relating to a business other than the Business) that are received by
Buyer or any of its Subsidiaries after the Closing Date. If, after the Closing
Date, Buyer or any of its Subsidiaries receives any payment from any Person who
at the time has outstanding accounts receivable as to both Buyer and Seller, and
the payment (a) does not indicate whether it is in respect of Seller accounts
receivable (relating to a business other than the Business) or Buyer accounts
receivable or (b) indicates that it is in payment of both types of accounts
receivable without specifying the portion to be allocated to each, then Seller
or 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 Buyer,
Seller or any Subsidiary of either, as applicable.
SECTION 10.7. HUNGARIAN ASSETS. Seller shall provide Buyer with access
(at reasonable times) to the facilities where the Hungarian Assets are located.
Seller shall permit Buyer (with minimal reasonable disruption of Seller's
business) to crate and ship the Hungarian Assets at Buyer's sole cost and risk
and Buyer agrees to ship all such Hungarian Assets no later than 60 days after
the date hereof.
SECTION 10.8. INTEREST ON LATE PAYMENTS. Buyer and Seller each agree
that all payments to be made by any party pursuant to any provision in this
Agreement and not paid within 10 days of demand, shall bear interest at a rate
per annum equal to the effective interest rate per annum on 90-day U.S. Treasury
Bills in effect from time to time during the 90-day period beginning immediately
prior to the date of demand of such payment. Such interest shall be payable at
the same time as the payment to which it relates and shall be calculated daily
on the basis of a year of 365 days and the actual number of days elapsed.
SECTION 10.9. ASSUMPTION OF WAREHOUSE LEASE. For a period not to exceed
three months after the Closing Date (the "OPTION PERIOD"), Buyer shall have the
right, but not the obligation, to assume all of Seller's rights and obligations,
and Seller agrees to convey, transfer and assign to Buyer all of its rights and
obligations, under the Warehouse Lease. Buyer shall notify Seller no later than
5 days prior to the proposed date of assignment that it wishes to exercise its
right under this Section 10.09 (the "PURCHASED RIGHT"). If Buyer so notifies
Seller, then the Warehouse Lease shall be deemed for the purposes of this
Agreement to constitute a Purchased Asset and future obligations arising
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thereunder shall constitute an Assumed Liability. If Buyer does not exercise its
Purchase Right, Buyer shall remove all equipment relating to the Business from
the Warehouse no later than the last day of the Option Period.
SECTION 10.10. PAYMENT OF PAYABLES. To the extent reflected in the
Lexington Closing Balance Sheet or the amount paid by Seller below, Buyer agrees
to pay, in the ordinary course, all accounts payable outstanding on the date
hereof attributable to the Business and the motors business conducted at the
Lexington Tennessee Facility. No later than 21 days from the date hereof, Seller
agrees to pay to Buyer an amount equal to Seller's good faith estimate of the
aggregate amount of such payables attributable to the motors business. Any
amounts not paid by Seller pursuant to the preceding sentence shall be accrued
on the Lexington Closing Balance Sheet.
ARTICLE 11
TAX MATTERS
SECTION 11.1. TAX REPRESENTATIONS. Seller hereby represents and
warrants to Buyer as of the date of this Agreement and as of the Closing Date
that:
(a) Seller has or, if applicable will have, timely paid all
Taxes payable by it for the Pre-Closing Tax Period which will have been
required to be paid prior to the Closing Date, the non-payment of which
would result in a Lien on any Purchased Asset, would otherwise
adversely affect the Business following the Closing Date or would
result in Buyer becoming liable or responsible therefor, other than
Taxes contested in good faith through appropriate proceedings, as set
forth on Schedule 11.01.
(b) Seller has established, in accordance with United States
generally accepted accounting principles applied on a basis consistent
with that of preceding periods, adequate reserves for the payment of,
and will timely pay all Tax liabilities, assessments, interest and
penalties which arise from or with respect to the Purchased Assets or
the operation of the Business and are the responsibility of Seller
pursuant to this Agreement, the non-payment of which would result in a
Lien on any Purchased Asset, would otherwise adversely affect the
Business following the Closing Date or would result in Buyer becoming
liable therefor, other than Taxes
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contested in good faith through appropriate proceedings, as set forth
on Schedule 11.01.
(c) With respect to the Business, (i) other than with respect
to Taxes contested in good faith through appropriate proceedings, as
set forth on Schedule 11.01, all material Tax returns, statements,
reports and forms (including estimated tax or information returns and
reports) required to be filed with any Taxing Authority with respect to
any Pre-Closing Tax Period by or on behalf of Seller (to the extent
related to the Business), the Business or MagneTek Fuzhou
(collectively, the "RETURNS") have, to the extent required to be filed
on or before the date of this Agreement, been filed when due in
accordance with all Applicable Laws; (ii) as of the time of filing,
such Returns correctly reflected the facts regarding the income,
business, assets, operations, activities and status of Seller (to the
extent related to the Business), the Business and any other information
required to be shown therein; and (iii) all Taxes shown as due and
payable on such Returns that have been filed have been timely paid, or
withheld and remitted to the appropriate Taxing Authority.
(d) MagneTek Fuzhou is not and never has been part of an
affiliated, consolidated, combined or unitary group.
(e) With the exception of that certain Sino-American Equity
Joint Venture Contract Between Fujian Fufa Limited and MagneTek, Inc.
for the Establishment of MagneTek Fuzhou Generator Limited, neither
Seller nor MagneTek Fuzhou has entered into any agreement or
arrangement with any Person (including any Taxing Authority) with
regard to Taxes that is or will be binding on Buyer, MagneTek Fuzhou or
any of their Affiliates.
SECTION 11.2. TAX COOPERATION; ALLOCATION OF TAXES; TAX COVENANTS . (a)
Buyer and Seller agree to furnish or cause to be furnished to each other, upon
request, as promptly as practicable, such information and assistance relating to
the Business and the Purchased Assets (including, without limitation, access to
books and records) as is reasonably necessary for the filing of all Tax returns,
the making of any election relating to Taxes, the preparation for any audit by
any Taxing Authority, and the prosecution or defense of any claim, suit or
proceeding relating to any Tax. Buyer and Seller shall retain all books and
records with respect to Taxes pertaining to the Purchased Assets for a period of
at least six years following the Closing Date. At the end of such period, each
party shall provide the other with at least ten days prior written notice before
destroying any
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such books and records, during which period the party receiving such notice can
elect to take possession, at its own expense, of such books and records. Seller
and Buyer and Seller shall cooperate with each other in the conduct of any audit
or other proceeding relating to Taxes involving the Purchased Assets or the
Business.
(b) All real property taxes, personal property taxes and similar ad
valorem obligations not accrued on the Lexington Balance Sheet levied with
respect to the Purchased Assets for a taxable period which includes (but does
not end on) the day of the Closing (collectively, the "APPORTIONED Obligations")
shall be apportioned between Seller and Buyer based on the number of days of
such taxable period included in the Pre-Closing Tax Period and the number of
days of such taxable period after the Closing Date (with respect to any such
taxable period, the "POST-CLOSING TAX PERIOD"). Seller shall be liable for the
proportionate amount of such taxes that is attributable to the Pre-Closing Tax
Period, except to the extent such taxes are included as a liability in computing
Lexington Closing Net Worth or Fuzhou Closing Net Worth, as finally determined
pursuant to Section 2.09, and Buyer shall be liable for the proportionate amount
of such taxes that is attributable to the Post-Closing Tax Period. Upon receipt
of any bill for real or personal property taxes relating to the Purchased
Assets, each of Seller and Buyer shall present a statement to the other setting
forth the amount of reimbursement to which each is entitled under this Section
11.02(b) together with such supporting evidence as is reasonably necessary to
calculate the proration amount. The proration amount shall be paid by the party
owing it to the other within 10 days after delivery of such statement. In the
event that either Seller or Buyer shall make any payment for which it is
entitled to reimbursement under this Section 11.02(b), the other party shall
make such reimbursement promptly but in no event later than 10 days after the
presentation of a statement setting forth the amount of reimbursement to which
the presenting party is entitled along with such supporting evidence as is
reasonably necessary to calculate the amount of reimbursement.
(c) Subject to Section 16.11, all Transfer Taxes incurred in
connection with the Contemplated Transactions shall be paid one-half by Buyer
and one-half by Seller. Seller and Buyer will, each at its own expense, file all
necessary Tax returns and other documentation with respect to such Transfer
Taxes required to be filed by each of them. Upon receipt of any bill for such
Transfer Taxes, each of Seller and Buyer shall present a statement to the other
setting forth the amount of reimbursement to which each is entitled under this
Section 11.02(c) together with such supporting evidence as is reasonably
necessary to calculate the proration amount. In the event that either Seller or
Buyer shall make any payment
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for which it is entitled to reimbursement under this Section 11.02(c), the other
party shall make such reimbursement promptly but in no event later than 10 days
after the presentation of a statement setting forth the amount of reimbursement
to which the presenting party is entitled along with such supporting evidence as
is reasonably necessary to calculate the amount of reimbursement.
(d) With respect to MagneTek Fuzhou and MagneTek China, (i) without
the prior written consent of Buyer, neither Seller nor any Subsidiary of Seller
shall, to the extent it may affect or relate to MagneTek Fuzhou or MagneTek
China, nor shall Seller or any Subsidiary of Seller (subject to the consent,
voting or veto rights of Fujian Fufa Company Limited under the joint venture
agreement or any other agreement relating to MagneTek Fuzhou) cause or permit
MagneTek Fuzhou to, make or change any Tax election, change any annual Tax
accounting period, adopt or change any method of Tax accounting, file any
amended Return, enter into any closing agreement, settle any Tax claim or
assessment, surrender any right to claim a Tax refund, consent to any extension
or waiver of the limitations period applicable to any Tax claim or assessment or
take or omit to take any other action, if any such action or omission would have
the effect of increasing the Tax liability or reducing any Tax Asset of MagneTek
Fuzhou, MagneTek China or Buyer; and (ii) to the extent within the control of
Seller or any Subsidiary of Seller, all Returns not required to be filed on or
before the date of this Agreement (x) will be filed when due in accordance with
all Applicable Laws and (y) as of the time of filing, will correctly reflect the
facts regarding the income, business, assets, operations, activities and status
of MagneTek Fuzhou and MagneTek China and any other information required to be
shown therein.
(e) Seller agrees to cooperate with Buyer in its efforts to secure
the same Tennessee unemployment insurance rate currently assigned to Seller
under Tenn. Code. Ann. Sec. 50-7-403(b)(2). Seller understands and acknowledges
that Buyer may seek to make an election under Sections 338 and 754 of the Code
with respect to the acquisition of the shares of MagneTek China and any
resulting deemed acquisition of the interests in MagneTek Fuzhou, respectively,
and Seller will not object to any such election. Seller will cooperate if
required and as reasonably requested in order to enable MagneTek China to make
an election under Section 754 of the Code with respect to a deemed sale of its
interest in MagneTek Fuzhou arising from any such election under Section 338 of
the Code. Notwithstanding anything in this Agreement to the contrary, (i) Seller
makes no representations concerning the ability to make or the consequences of
making any such election, and (ii) Seller and its Affiliates shall have no
liability to Buyer or its Affiliates, and Buyer and its Affiliates shall have no
liability to Seller and its Affiliates, arising from or relating to any such
elections (and for purposes of this
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clause (ii) MagneTek China and MagneTek Fuzhou shall be considered Affiliates of
Buyer).
ARTICLE 12
EMPLOYEE BENEFITS
SECTION 12.1. ERISA REPRESENTATIONS. Seller represents and warrants to
Buyer as of the date of this Agreement and as of the Closing Date that:
(a) Schedule 12.01(a) lists each material "EMPLOYEE BENEFIT PLAN", as
such term is defined in Section 3(3) of ERISA, which (i) is subject to any
provision of ERISA, (ii) is maintained, administered or contributed to by Seller
or any of its ERISA Affiliates and (iii) covers any current employee of the
Business (hereinafter referred to collectively as the "EMPLOYEE PLANS"). With
respect to each Employee Plan, Seller has provided a true and complete copy of
such plan document and the most recently filed Form 5500 and an accurate summary
description of such plan. Seller has provided Buyer with or made available to
Buyer, or has caused to be provided to Buyer or made available to Buyer,
complete actuarial data (including age, salary, service and related data) as of
the most recent practicable date for employees of the Business.
(b) Except as provided in Schedule 12.01(b), no Employee Plan is a
Multiemployer Plan and no Employee Plan is subject to Title IV of ERISA. Neither
Seller nor any of Seller's Affiliates has incurred any liability under Title IV
of ERISA arising in connection with the termination of or complete or partial
withdrawal from any plan covered or previously covered by Title IV of ERISA that
could become, after the Closing Date, an obligation of Buyer or any of its
Affiliates.
(c) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code.
(d) Schedule 12.01(d) includes a list of each employment, severance or
other similar contract, arrangement or policy (written or oral) and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits or
for
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deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (i) is not an Employee Plan, (ii) is
entered into, maintained or contributed to, as the case may be, by Seller or any
of its ERISA Affiliates and (iii) covers any U.S. employee of the Business. Such
contracts, plans and arrangements as are described above, copies or descriptions
of all of which have been made available or furnished previously to Buyer are
hereinafter referred to collectively as the "BENEFIT ARRANGEMENTS." Each Benefit
Arrangement has been maintained in substantial compliance with its terms and
with the requirements prescribed by Applicable Law.
(e) With respect to the employees of the Business, there are no
employee post-retirement medical or health plans in effect, except as required
by Section 601 of ERISA or as otherwise disclosed on Schedule 12.01(e).
(f) Except as disclosed on Schedule 12.01(f), there has been no
amendment to, written interpretation of or announcement (whether written or not
written) by Seller or any of its Subsidiaries relating to, or change in employee
participation or coverage under, any Employee Plan or Benefit Arrangement which
would increase materially the aggregate expense of maintaining such Employee
Plans and Benefit Arrangements above the level of the expense incurred in
respect thereof for the most recent fiscal year.
(g) The Purchased Assets are not now nor will they after the passage of
time be subject to any Lien imposed under Section 412(n) of the Code by reason
of the failure of Seller or its Subsidiaries to make timely installments or
other payments required by Section 412 of the Code.
(h) No Transferred Employee will become entitled to any severance
benefit or enhanced benefit solely as a result of the Contemplated Transactions.
(i) Except as set forth in Schedule 12.01(i), neither Seller nor any of
its Subsidiaries has incurred any liability under any International Plan that
could become, after the Closing Date, an obligation of Buyer or any of its
Affiliates.
SECTION 12.2. EMPLOYEES AND OFFERS OF EMPLOYMENT. (a) A reasonable time
prior to, and effective on the day of the Closing, Buyer shall offer employment
to all active employees of the Business, other than employees of MagneTek
Fuzhou; PROVIDED that Buyer may terminate at any time after the day of the
Closing the employment of any employee who accepts such offer. For purposes of
this Article 12, the term "ACTIVE EMPLOYEE" shall mean any individual
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who, at the Closing Date, is actively employed by Seller (and listed on Schedule
4.13), including any employee who is on vacation leave or jury duty, or who is
on other authorized leave of absence other than family or worker's compensation
leave, military service or lay-off with recall rights as of the Closing Date
(all such inactive employees shall be offered employment by Buyer prior to the
Closing Date but only 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 short-term or long-term disability leave or
unauthorized leave of absence or who has terminated his or her employment or
retired before the Closing Date. Any such offers shall be at such salary or wage
and benefit levels and on such other terms and conditions as Buyer shall in its
sole discretion deem appropriate. The employees who accept and actually commence
employment with Buyer are hereinafter collectively referred to as the
"TRANSFERRED EMPLOYEES". Seller will not take, and will cause each of its
Subsidiaries not to take, any action which would impede, hinder, interfere or
otherwise compete with Buyer's effort to hire any Transferred Employees. Buyer
shall not assume responsibility for any Transferred Employee until such employee
commences employment with Buyer.
SECTION 12.3. SELLER'S EMPLOYEE BENEFIT PLANS. (a) Seller shall retain
all obligations and liabilities under the Employee Plans, Benefit Arrangements
and International Plans in respect of each employee or former employee
(including any beneficiary thereof) who is not a Transferred Employee. Except as
expressly set forth in this Article 12, Seller or its designated Affiliate shall
retain all liabilities and obligations in respect of Transferred Employees under
the Employee Plans, Benefit Arrangements and International Plans, and neither
Buyer nor any of its Affiliates shall have any liability with respect thereto.
Except as expressly set forth in this Article 12, no assets of any Employee
Plan, Benefit Arrangement or International Plan shall be transferred to Buyer or
any of its Affiliates or to any plan of Buyer or any of its Affiliates. Accrued
benefits or account balances of Transferred Employees under the Employee Plans
that are intended to qualify under Section 401(a) of the Code shall be 100%
vested as of the Closing Date.
(b) With respect to any Employee Plan or Benefit Arrangements covering
medical expenses, Seller shall be responsible for all claims (whether or not
reported) and expenses incurred during the period prior to the Closing Date. On
the Closing Date, Buyer or one of its Affiliates shall make available to the
Transferred Employees a health plan which shall waive any exclusion or
limitation with respect to pre-existing conditions and shall provide that any
expenses incurred under a health plan of Seller by a Transferred Employee or his
covered beneficiaries or dependents during 1999 shall be taken into account
under
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such Buyer health plan for purposes of satisfying applicable deductible,
coinsurance and maximum out-of-pocket provisions. Buyer shall cause its health
plan to be responsible in accordance with the terms thereof for all health
benefit claims by Transferred Employees and their covered beneficiaries or
dependents for claims incurred on or after the Closing Date.
SECTION 12.4. BUYER BENEFIT PLANS. (a) Buyer or one of its Affiliates
will recognize all service of the Transferred Employees with Seller or any of
its Subsidiaries, for purposes of eligibility to participate and vesting in
those employee benefit plans, within the meaning of Section 3(3) of ERISA, in
which the Transferred Employees are enrolled by Buyer or one of its Affiliates
after the Closing Date.
(b) Effective not later than 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.
(c) Effective on the Closing Date Seller shall spinoff 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 August
1, 1999, Seller shall cause to be transferred to the Buyer 401(k) Plan cash, or
other assets, including participant notes held in such transferred accounts as
Buyer and Seller may agree, having a fair market value equal to the aggregate
value of the account balances in the Seller 401(k) Plan as of the date of the
plan asset transfer for each Transferred Employee. 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.
(d) 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,
Buyer shall assume all of the Seller's liabilities under the Seller 401(k) Plan
with respect to such Transferred Employees and Seller shall have no further
liability to such Transferred Employees under the Seller 401(k) Plan other than
liability arising out
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of any breach of fiduciary duties or any non-exempt prohibited transaction
occurring prior to such transfer of assets and liabilities.
SECTION 12.5. QUALIFIED DEFINED BENEFIT PLANS.
(a) Seller shall retain all liabilities and obligations under the
MagneTek Flexcare Plus Retirement Pension Plan ("SELLER RETIREMENT PLAN") in
respect of benefits accrued thereunder by Transferred Employees prior to the
Closing Date. No Transferred Employee shall accrue any benefit under the Seller
Retirement Plan in respect of service with Buyer after the Closing Date. No
assets or liabilities of the Seller Retirement Plan shall be transferred to a
pension plan maintained by Buyer. For the Plan year in which the Closing Date
occurs, Seller shall provide each Transferred Employee with the contribution
credit such Transferred Employee would have accrued under the Seller Retirement
Plan had such employee remained employed by Seller through the end of such Plan
year, but based only on the Transferred Employee's covered compensation earned
through the Closing Date.
(b) (i) Effective as of the Closing Date, Buyer shall adopt or
designate a defined benefit retirement plan qualified under Section 401(a) of
the Code ("BUYER PENSION PLAN") under which all Transferred Employees who were
participants in the Seller Retirement Plan immediately prior to the Closing Date
shall be eligible to participate, and which provides retirement benefits at
normal retirement age that are in the aggregate substantially similar in value
to those in effect under the Seller Retirement Plan on the date hereof.
(ii) The Buyer Pension Plan shall provide that service
recognized for purposes of determining benefits under the Seller
Retirement Plan prior to the Closing Date shall constitute service
under the Buyer Pension Plan for purposes of vesting, eligibility for
participation, early retirement, early retirement subsidies, and for
such other purposes as Buyer deems appropriate. The amount of benefit
provided under the Buyer Pension Plan shall be based solely on benefit
service with Buyer after the Closing Date and pensionable compensation
earned with Buyer and Seller.
(iii) Notwithstanding (ii), Transferred Employees who meet the
requirements outlined in Section A5.2 of Supplement A to the Seller
Retirement Plan as in effect on the Closing Date and who were former
Century Plan participants as defined in that section shall be
considered to be "GRANDFATHERED TRANSFERRED EMPLOYEES." With respect to
each Grandfathered Transferred Employee, the amount of benefit provided
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under the Buyer Pension Plan shall be determined as the greater of (A)
or (B) below, as follows:
(A) The benefit described in Section A5.2(b)(ii) of
the Seller Retirement Plan in effect on the Closing Date,
based on total benefit service and pensionable compensation
with Buyer and Seller at the time employment with Buyer
terminates, and payable as a life annuity, reduced by the
amount payable under the Seller Retirement Plan as a life
annuity as if such employee had elected the same commencement
date under the Seller Retirement Plan.
(B) The sum of (i) and (ii):
(i) The benefit described in Section
A5.2(b)(ii) of the Seller Retirement Plan in effect
on the Closing Date, based on benefit service with
Seller as of the Closing Date, but reflecting all
pensionable compensation with Buyer and Seller at the
time employment with Buyer terminates, payable as a
life annuity, reduced by the amount payable under the
Seller Retirement Plan as a life annuity as if such
employee had elected the same commencement date under
the Seller Retirement Plan.
(ii) The benefit earned under the Buyer
Pension Plan based on benefit service with Buyer
after the Closing Date and all pensionable
compensation earned with Buyer and Seller.
(iv) In consideration of (iii) above and the increased pension
cost to Buyer, Buyer and Seller agree that the amount of $120,000 will
be reflected as a liability on the Lexington Closing Balance Sheet.
SECTION 12.6. RETIREE HEALTH. (a) 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"). Seller shall retain all retiree health liabilities
attributable to any period prior to the Closing Date, if any, in respect of all
other Transferred Employees, including those hired by Seller on or after January
1, 1992. 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
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which shall provide retiree medical benefits that are in the aggregate
substantially similar in value to those provided under Seller's Retiree Medical
Plan. Buyer agrees not to terminate or amend in a manner that is materially
adverse to the Participating Transferred Employees the rights and benefits of
Participating Transferred Employees in such retiree medical plan.
(b) In consideration of the foregoing and the increased retiree
medical cost to Buyer, Buyer and Seller agree that the amount of $1,350,000 will
be reflected as a liability on the Lexington Closing Balance Sheet.
SECTION 12.7. NO THIRD PARTY BENEFICIARIES. No provision of this
Article 12 shall create any third party beneficiary or other rights in any
employee or former employee (including any beneficiary or dependent thereof) of
Seller or of any of its Subsidiaries in respect of continued employment (or
resumed employment) with either Buyer or any of its Affiliates and no provision
of this Article 12 shall create any such rights in any such Persons in respect
of any benefits that may be provided, directly or indirectly, under any Employee
Plan or Benefit Arrangement or any plan or arrangement which may be established
by Buyer or any of its Affiliates. No provision of this Agreement shall
constitute a limitation on rights to amend, modify or terminate after the
Closing any such plans or arrangements of Buyer or any of its Affiliates.
SECTION 12.8. PAYMENT OF WORKERS' COMPENSATION CLAIMS AND HEALTH
INSURANCE CLAIMS. Seller agrees to promptly process and to promptly pay, in each
case consistent with past practice, (i) all workers' compensation claims with
respect to injuries to Transferred Employees prior to the Closing Date and (ii)
all claims under health insurance plans of Seller or any of its Subsidiaries
with respect to medical services rendered to Transferred Employees prior to the
Closing Date.
SECTION 12.9. CAFETERIA PLAN. 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 12.09 hereto.
ARTICLE 13
CONDITIONS TO CLOSING
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SECTION 13.1. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER. The
obligations of Buyer and Seller to consummate the Closing are subject to the
satisfaction of the following conditions:
(a) Any applicable waiting period under the HSR Act relating
to the Contemplated Transactions hereby shall have expired or been
terminated.
(b) No provision of any Applicable Law shall prohibit the
consummation of the Closing.
(c) The Manufacturing and Facilities Agreement shall have been
executed and delivered.
SECTION 13.2. CONDITIONS TO OBLIGATION OF BUYER. The obligation of
Buyer to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) (i) Seller shall have performed in all material respects
all of its obligations under the Transaction Documents required to be
performed by it prior to the Closing Date, (ii) the representations and
warranties of Seller contained in the Transaction Documents and in any
certificate or other writing delivered by Seller or any Subsidiary of
Seller pursuant to any Transaction Document shall be true at and as of
the Closing Date, as if made at and as of such date with only such
exceptions as would not in the aggregate reasonably be expected to have
a Material Adverse Effect and (iii) Buyer shall have received a
certificate signed by an officer of Seller to the foregoing effect.
(b) There shall not be threatened, instituted or pending any
action or proceeding by any Person before any Governmental Authority,
(i) seeking to restrain, prohibit or otherwise interfere with the
ownership or operation by Buyer or any of its Affiliates of all or any
material portion of the Purchased Assets or of any portion of the
business or assets of Buyer or any of its Affiliates or to compel Buyer
or any of its Affiliates to dispose of all or any material portion of
the Purchased Assets or of any portion of the business or assets of
Buyer or any of its Affiliates or (ii) seeking to require divestiture
by Buyer or any of its Affiliates of any Purchased Assets.
(c) The Voltage Regulator Supply Agreement, the MIS Agreement
and the License Agreement shall have been executed at delivered.
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(d) Seller shall have received all Required Consents and all
consents, authorizations or approvals from the Governmental Authorities
referred to in Section 3.03 or 4.14, in each case in form and substance
reasonably satisfactory to Buyer, and no such consent, authorization or
approval shall have been revoked.
(e) Buyer shall have obtained (i) an Owner's Policy of Title
Insurance insuring good and marketable title to the Real Property
described on Schedule 4.06(a) subject only to Permitted Liens and (ii)
a survey of such Real Property disclosing a state of facts that,
subject to Permitted Liens, would not otherwise render title
unmarketable.
(f) Buyer shall have received all documents it may reasonably
request relating to the existence of Seller and the authority of Seller
for each of the Transaction Documents, all in form and substance
reasonably satisfactory to Buyer.
SECTION 13.3. CONDITIONS TO OBLIGATION OF SELLER. The obligation of
Seller to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) (i) Buyer shall have performed in all material respects
all of its obligations under the Transaction Documents required to be
performed by it prior to the Closing Date, (ii) the representations and
warranties of Buyer contained in the Transaction Documents and in any
certificate or other writing delivered by Buyer or any Subsidiary of
Buyer pursuant to the Transaction Documents shall be true in all
material respects at and as of the Closing Date, as if made at and as
of such date and (iii) Seller shall have received a certificate signed
by an officer of Buyer to the foregoing effect.
(b) Buyer shall have received all consents, authorizations or
approvals from Governmental Authorities referred to in Section 7.03, in
each case in form and substance reasonably satisfactory to Seller, and
no such consent, authorization or approval shall have been revoked.
(c) Seller shall have received all documents it may reasonably
request relating to the existence of Buyer and the authority of Buyer
for each of the Transaction Documents, all in form and substance
reasonably satisfactory to Seller.
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ARTICLE 14
SURVIVAL; INDEMNIFICATION
SECTION 14.1. SURVIVAL. The representations and warranties of the
parties hereto contained in this Agreement or in any other Transaction Documents
or in any certificate or other writing delivered pursuant to any Transaction
Document shall survive the Closing until 24 months after the Closing Date;
PROVIDED that the representations and warranties contained in (i) Sections 3.01,
3.02, 4.07(b) and Article 6 shall survive indefinitely and (ii) Section 5.13,
Article 11 and Section 12.01(b), (c) and (g) shall survive until 60 days after
the expiration of the statute of limitations applicable to the matters covered
thereby (giving effect to any waiver, mitigation or extension thereof), if
later. Notwithstanding the preceding sentence, any representation or warranty in
respect of which indemnity may be sought under this Agreement shall survive the
time at which it would otherwise terminate pursuant to the preceding sentence,
if notice of the inaccuracy thereof giving rise to such right of indemnity shall
have been given to the party against whom such indemnity may be sought prior to
such time. The covenants and agreements of the parties (including, without
limitation, the covenants and agreements of the parties set forth in this
Article 14) contained in this Agreement or in any other Transaction Document
shall survive indefinitely.
SECTION 14.2. INDEMNIFICATION. (a) In the event the Closing occurs,
Seller hereby indemnifies Buyer and its Affiliates and Representatives (each a
"BUYER INDEMNIFIED PARTY") against and agrees to hold each of them harmless from
any and all Damages incurred or suffered by such Buyer Indemnified Parties
arising out of:
(i) any breach of representation, warranty, covenant or
agreement made or to be performed by Seller or any of its Subsidiaries
pursuant to any of the Transaction Documents;
(ii) any Excluded Liability (including, without limitation, any
failure by Seller or any of its Subsidiaries to perform or in due
course pay and discharge any Excluded Liability);
(iii) any liability in respect of any Taxes of MagneTek Fuzhou
that are attributable to the Pre-Closing Tax Period, other than Taxes
incurred on the Closing Date arising outside of the ordinary course of
the Business as a result of actions taken by or at the request of Buyer
or its
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Affiliates (other than actions provided for or contemplated by this
Agreement) and any Taxes that are the responsibility of Buyer pursuant
to Section 11.02;
(iv) the enforcement of the rights of any Buyer Indemnified
Party under this Section 14.02(a);
(v) any action, proceeding, investigation, or other
negotiation with the Equal Employment Opportunity Commission or any
other plaintiff or potential plaintiff which (i) relates to or arises
out of any pre-Closing employment discrimination attributable to Seller
and (ii) relates to issues raised, directly or indirectly, by EEOC
Charge Number ###-##-####, which Damages may include, but shall not be
limited to, all training costs associated with any equitable remedy
imposed by any court of competent jurisdiction or pursuant to an
agreement relating to issues, directly or indirectly, raised by EEOC
Charge Number ###-##-####;
(vi) any other action, proceeding, investigation, or other
negotiation with the Equal Employment Opportunity Commission or any
other plaintiff or potential plaintiff which relates to or arises out
of any pre-Closing employment discrimination attributable to Seller,
which Damages may include, but shall not be limited to, all training
costs associated with any equitable remedy imposed by any court of
competent jurisdiction or pursuant to an agreement relating to the
foregoing;
(vii) any liability or obligation of MagneTek China of any kind
whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise relating to any period prior to the Closing
Date, whether or not known on the Closing Date;
(viii) the items described on Schedule 4.14, numbers 7 and 15,
arising, respectively, out of any obligation or failure to comply with
the provisions of the Resource Conversion and Recovery Act of 1976, as
amended or the federal categorical waste pretreatment standards
pursuant to the Clean Water Act of 1977, as amended; or
(ix) any On-Site Environmental Liability of which Seller has
been notified within five (5) years from the Closing Date
PROVIDED that (A) Seller shall not be liable under Section 14.02(a)(i) for
breaches of representation or warranty (other than representations and
warranties contained
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in Article 6 and Section 11.01) unless the aggregate amount of Damages with
respect thereto exceeds $1 million (in which case Seller shall indemnify Buyer
for such $1 million plus any amount in Damages exceeding such amount), (B)
Seller's maximum liability under Section 14.02(a)(i) for breaches of
representation or warranty (other than the representations and warranties
contained in Article 5, all representations and warranties contained in Articles
11 and 12 relating to MagneTek Fuzhou, Article 6 and Section 11.01) shall not
exceed $115 million inclusive of the amount under clause (C) and (C) Seller's
maximum liability under Section 14.02(a)(i) and (iii) with respect to any
representations or warranty contained in Article 5 and all representation and
warranties contained in Articles 11 and 12 relating to MagneTek Fuzhou shall not
exceed $3 million. The fact that the survival period with respect to any
representation or warranty has terminated or that indemnification for breaches
of representations and warranties is subject to the limitations set forth in
this Section 14.02(a) shall not limit or affect in any respect Seller's
indemnification obligations with respect to any covenants, agreements, Excluded
Liabilities or Taxes (even if such obligations are also the subject of a
representation or warranty). For purposes of Section 14.02(a)(iii), in the case
of any Taxes that are imposed on a periodic basis and are payable for a Tax
period that includes (but does not end on) the day of the Closing ("STRADDLE
Taxes"), the portion of such Tax related to the portion of such Tax period
ending on and including the Closing Date shall (x) in the case of any Tax based
on or related to income or expenses (including but not limited to payroll) and
any gross receipts, sales or use Tax, be deemed equal to the amount which would
be payable if the relevant Tax period ended on and included the Closing Date and
(y) in all other cases, be determined on a per diem basis.
(b) Buyer hereby indemnifies Seller and its Affiliates and
Representatives (each a "SELLER INDEMNIFIED PARTY") against and agrees to hold
each of them harmless from any and all Damages incurred or suffered by such
Seller Indemnified Parties arising out of:
(i) any or breach of representation, warranty, covenant or
agreement made or to be performed by Buyer pursuant to any of the
Transaction Documents;
(ii) any Assumed Liability (including, without limitation, any
failure by Buyer to perform or in due course pay and discharge any
Assumed Liability) assigned to and assumed by Buyer pursuant to the
terms of this Agreement, any Taxes of or relating to the Business for
periods other than Pre-Closing Tax Periods for which Seller is not
liable
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pursuant to Section 14.02(a), and Tax liability, if any, arising from
the Business incurred on the Closing Date as a result of actions taken
by Buyer or its Affiliates outside of the ordinary course of the
Business (other than actions provided for or contemplated by this
Agreement);
(iii) the enforcement of the rights of any Seller Indemnified
Party under this Section 14.02(b); or
(iv) the conduct of the Business on or after the Closing Date.
(c) Buyer shall not be indemnified for Damages (determined as provided
below) relating to any breach of a representation or warranty of Seller under
this Agreement to the extent such breach is known to a member of the senior
management of Buyer (which shall be understood to include Messrs. Robert Levy
and Jean-Paul Montupet) prior to the Buyer's execution and delivery of this
Agreement. For such purposes, the non-indemnified Damages shall be limited to
the type of Damages and the amount thereof actually known to the applicable
member of Buyer's senior management prior to the execution and delivery of this
Agreement attributable to such breach. Seller shall bear the burden of proof
with respect to this Section 14.02(c). The foregoing shall not limit any of
Buyer's other rights to indemnification.
SECTION 14.3. LIMITATION ON INDEMNITY. (a) The amount of any Damages
for which indemnification is provided to Buyer under this Article 14 shall be
net of any reserve in respect thereof reflected on the Closing Statements.
(b) No party shall, in any event, be liable to any Indemnified Party
for any consequential damages 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 Contemplated Transactions.
(c) The parties hereto agree that the provisions of the Transaction
Documents are intended to provide the exclusive remedy as to all Damages each
may incur arising from, or relating to, the Contemplated Transactions and each
party hereby waives, to the extent it may do so, any other rights or remedies
that may arise under any applicable statute, rule or regulation with respect to
the Contemplated Transactions, including, without limitation, claims for
contribution or other rights of recovery arising out of or relating to any
Environmental Law.
(e) To the extent permitted by law, any indemnification payment for
Taxes for purposes of federal, state and local income Taxes, be treated as a
purchase price adjustment.
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SECTION 14.4. PROCEDURES FOR THIRD PARTY CLAIMS. (a) The parties
seeking indemnification under Section 14.02 (the "INDEMNIFIED PARTIES") agree to
give prompt notice to the parties against whom indemnity is sought (the
"INDEMNIFYING PARTIES") of the assertion of any claim, or the commencement of
any suit, action or proceeding in respect of which indemnity may be sought under
Section 14.02 (the "THIRD PARTY CLAIMS"). The failure by any Indemnified Party
so to notify the Indemnifying Party shall not relieve the Indemnifying Parties
from any liability which it may have to such Indemnified Party with respect to
any claim made pursuant to this Section 14.04, except to the extent such failure
shall actually prejudice an Indemnifying Party.
(b) Upon receipt of notice from the Indemnified Parties pursuant to
Section 14.02(a), the Indemnifying Parties will, subject to the provisions of
Section 14.04(c) and except with respect to a claim relating to Straddle Taxes,
assume the defense and control of such Third Party Claims but shall allow the
Indemnified Parties a reasonable opportunity to participate in the defense of
such Third Party Claims with their own counsel and at their own expense (except
as provided in Section 14.04(d)). In the case of Straddle Taxes, the Indemnified
Party shall allow the Indemnifying Parties a reasonable opportunity to
participate in the defense of such Third Party Claims with their own counsel and
at their own expense. The Indemnifying Parties shall select counsel, contractors
and consultants of recognized standing and competence after consultation with
the Indemnified Parties, shall take all steps necessary in the defense or
settlement of such Third Party Claims, and shall at all times diligently and
promptly pursue the resolution of such Third Party Claims. The Indemnified
Parties shall, and shall cause each of their Affiliates and Representatives to,
cooperate fully with the Indemnifying Parties in the defense of any Third Party
Claim defended by the Indemnifying Parties.
(c) The Indemnifying Parties shall be authorized to consent to a
settlement of, or the entry of any judgment arising from, any Third Party Claim,
without the consent of any Indemnified Party, but only if the Indemnifying
Parties shall (1) pay or cause to be paid all amounts arising out of such
settlement or judgment concurrently with the effectiveness of such settlement,
(2) not encumber any of the assets of any Indemnified Party or agree to any
restriction or condition that would apply or adversely affect any Indemnified
Party or the conduct of any Indemnified Party's business, (3) not enter into any
settlement with respect to any Tax if such settlement could adversely affect the
Tax liability of Buyer, any of its Affiliates, or, upon Closing, MagneTek Fuzhou
and (4) obtain, as a condition of any settlement or other resolution, a complete
release of any Indemnified Party potentially affected by such Third Party Claim
without further obligation.
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Without limitation of the foregoing, Buyer agrees to cooperate with Seller in
settling or resolving any action, suit, investigation or proceeding relating to
issues raised directly or indirectly by EEOC Charge Number ###-##-####, 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.
(d) The Indemnifying Parties shall also be liable for the reasonable
fees and expenses of counsel incurred by each Indemnified Party in defending any
Third Party Claim if such Third Party Claim, if successful, is likely to result
in a judgment, decree or order of injunction or other equitable relief or relief
for other than money Damages against such Indemnified Party.
SECTION 14.5. PROCEDURES FOR DIRECT CLAIMS. In the event any
Indemnified Party should have a claim for indemnity against any Indemnifying
Party that does not involve a Third Party Claim, the Indemnified Party shall
deliver notice of such claim with reasonable promptness to the Indemnifying
Party. The failure by any Indemnified Party so to notify the Indemnifying Party
shall not relieve the Indemnifying Party from any liability that it may have to
such Indemnified Party with respect to any claim made pursuant to this Section
14.05. If the Indemnifying Party does not notify the Indemnified Party within 20
calendar days following its receipt of such notice that the Indemnifying Party
disputes its liability to the Indemnified Party under this Article 14, the claim
specified by the Indemnified Party in such notice shall be conclusively deemed a
liability of the Indemnifying Party under this Article 14, and the Indemnifying
Party shall pay the amount of such liability to the Indemnified Party on demand
or, in the case of any notice in which the amount of the claim (or any portion
of the claim) is estimated, on such later date when the amount of such claim (or
such portion of such claim) becomes finally determined. If the Indemnifying
Party has timely disputed its liability with respect to such claim as provided
above, the Indemnifying Party and the Indemnified Party shall resolve such
dispute in accordance with Section 16.06.
ARTICLE 15
TERMINATION
SECTION 15.1. GROUNDS FOR TERMINATION. The Transaction Documents may be
terminated at any time prior to the Closing:
(a) by mutual written agreement of Buyer and Seller;
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(b) by either Buyer or Seller if the Closing shall not have been
consummated within 6 months of the date of this Agreement (the "END DATE");
PROVIDED that neither Buyer nor Seller may terminate the Transaction Documents
pursuant to this Section 15.01(b) if the Closing shall not have been consummated
by the End Date by reason of the failure of such party or any of its
Subsidiaries to perform in all material respects any of its or their respective
covenants or agreements contained in the Transaction Documents;
(c) by Buyer, if a breach of any representation, warranty, covenant or
agreement on the part of Seller set forth in this Agreement shall have occurred
that would cause any of the conditions set forth in Section 13.01 or 13.02 not
to be satisfied, and such breach is incapable of being cured or, if capable of
being cured, shall not have been cured within 30 days following receipt by
Seller of notice of such breach from Buyer;
(d) by Seller, if a breach of any representation, warranty, covenant
or agreement on the part of Buyer set forth in this Agreement shall have
occurred that would cause any of the conditions set forth in Section 13.01 or
13.03 not to be satisfied, and such breach is incapable of being cured or, if
capable of being cured, shall not have been cured within 30 days following
receipt by Buyer of notice of such breach from Seller; or
(e) by either Buyer or Seller if there shall be any law or regulation
that makes consummation of the Contemplated Transactions illegal or otherwise
prohibited or if consummation of the Contemplated Transactions would violate any
nonappealable final order, decree or judgment of any court or governmental body
having competent jurisdiction.
The party desiring to terminate the Transaction Documents pursuant to
clauses (b) - (e) of the preceding sentence shall give notice of such
termination to the other party.
SECTION 15.2. EFFECT OF TERMINATION. If the Transaction Documents are
terminated as permitted by Section 15.01, such termination shall be without
liability of either party (or any Affiliate or Representative of such party) to
any other party to any Transaction Document; PROVIDED that if such termination
shall result from the (i) failure of any party to this Agreement to fulfill a
condition to the performance of the obligations of the other party that is
within the control of such party, (ii) failure of any party to this Agreement to
perform a covenant or agreement contained in any Transaction Document, or (iii)
breach by any party to
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this Agreement of any representation or warranty or agreement contained in this
Agreement made as of the date of this Agreement, such party shall be fully
liable for any and all Damages incurred or suffered by any other party as a
result of such failure or breach. The provisions of Sections 9.02, 10.03, 14.02,
14.04, 14.05, 16.03, 16.05, 16.06, 16.07 and this Section 15.02 shall survive
any termination of the Transaction Documents pursuant to Section 15.01.
ARTICLE 16
MISCELLANEOUS
SECTION 16.1. NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given,
if to Buyer, to:
Emerson Electric Co.
8000 W. Florissant Avenue
St. Louis, Missouri 63136
Attention: W. Wayne Withers
Fax: (314) 553-3205
with a copy to:
Attention: Robert M. Levy
Fax: (314) 553-3851
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Phillip R. Mills
Fax: (212) 450-4800
if to Seller, to:
MagneTek, Inc.
26 Century Boulevard
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Nashville, Tennessee 37214
Attention: Samuel A. Miley
Fax: (615) 316-5192
with a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles
California 90071-3197
Attention: Jennifer Bellah Maguire
Fax: (213) 229-7520
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
SECTION 16.2. AMENDMENTS AND WAIVERS. (a) Any provision of any
Transaction Document may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed, in the case of an amendment, by each party
to such Transaction Document, or in the case of a waiver, by the party against
whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege under any Transaction Document shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
SECTION 16.3. EXPENSES. Except as otherwise provided in any Transaction
Document, all costs and expenses incurred in connection with the Contemplated
Transactions shall be paid by the party incurring such cost or expense.
SECTION 16.4. SUCCESSORS AND ASSIGNS. The provisions of the this
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns; PROVIDED that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of each other party, except (i) pursuant to a
merger or other business
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combination involving a party hereto, (ii) by Emerson, in whole or in part, to
one more of its Affiliates; PROVIDED that, in each case, no such assignment
shall relieve the assigning party of, and such party shall remain fully liable
for, its duties and obligations hereunder.
SECTION 16.5. GOVERNING LAW. Each Transaction Document shall be
governed by and construed in accordance with the law of the State of New York,
without regard to the conflicts of law rules of such state.
SECTION 16.6. JURISDICTION. Except as otherwise expressly provided in
any of the Transaction Documents, the parties hereto agree that any suit, action
or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, any of the Transaction Documents or the
Contemplated Transactions shall be brought in a federal court in the United
States of America and each of the parties hereby consents to the jurisdiction of
such courts (and of the appropriate appellate courts therefrom) in any such
suit, action or proceeding and irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such suit, action or proceeding in any such court or that
any such suit, action or proceeding which is brought in any such court has been
brought in an inconvenient forum. Notwithstanding the foregoing, if any federal
court shall independently determine that any such suit, action or proceeding
cannot be properly litigated in a federal court due to lack of jurisdiction,
then such suit, action or proceeding may be brought in any state court in the
United States of America which shall have proper jurisdiction. Process in any
such suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any such court. Without
limiting the foregoing, each party agrees that service of process on such party
as provided in Section 16.01 shall be deemed effective service of process on
such party.
SECTION 16.7. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO ANY OF THE TRANSACTION DOCUMENTS OR THE
CONTEMPLATED TRANSACTIONS.
SECTION 16.8. REPRESENTATIONS AND WARRANTIES. Except as expressly
provided herein, neither Seller nor any of its Subsidiaries makes any
representation or warranty concerning the Purchased Assets or the Business.
SECTION 16.9. COUNTERPARTS; EFFECTIVENESS. Each Transaction Document
may be signed in any number of counterparts, each of which shall be an original,
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with the same effect as if the signatures were upon the same instrument. Each
Transaction Document shall become effective when each party shall have received
a counterpart of such Transaction Document signed by the other party to such
Transaction Document. No provision of any of the Transaction Documents is
intended to confer upon any Person other than the parties to such Transaction
Document any rights or remedies under such Transaction Document.
SECTION 16.10. ENTIRE AGREEMENT. The Transaction Documents (and any
other agreements contemplated thereby) and the Confidentiality Agreement
constitute the entire agreement between the parties with respect to the subject
matter of such documents and supersede all prior agreements and understandings,
both oral and written, (including the letter of intent dated December 17, 1998)
between the parties with respect to the subject matter of such documents. No
representation, inducement, promise, understanding, condition or warranty not
set forth in any Transaction Document has been made or relied upon by any party
to such Transaction Document.
SECTION 16.11. BULK SALES LAWS. Buyer and Seller each hereby waive
compliance by Seller with the provisions of the "bulk sales", "bulk transfer" or
similar laws of any state. Seller agrees to indemnify and hold Buyer harmless
against any and all claims, losses, damages, liabilities, costs and expenses
incurred by Buyer or any of its Affiliates as a result of any failure to comply
with any such "bulk sales", "bulk transfer" or similar laws.
SECTION 16.12. CAPTIONS. The captions in this Agreement are included
for convenience of reference only and shall be ignored in the construction or
interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
EMERSON ELECTRIC CO.
By: /s/ ROBERT M. LEVY
----------------------------------------
Name: Robert M. Levy
Title: Assistant Vice President,
Development
MAGNETEK, INC.
By: /s/ DAVID P. REILAND
----------------------------------------
Name: David P. Reiland
Title: Senior Vice President and Chief
Financial Officer
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For Release: May 5, 1999
Contact: Robert Murray
615/316-5270
Nashville, TN--MagneTek, Inc. (NYSE:MAG) today reported that Ronald N. Hoge
has resigned as president and chief executive officer to pursue other
interests. Company chairman Andrew G. Galef will assume Mr. Hoge's duties as
CEO. No new president was named at this time.
Mr. Hoge stated that his three years with MagneTek have been stimulating
and rewarding, and actions taken during that period should result in future
benefits to the company.
MagneTek manufactures integrated electrical products*, including
electric motors, variable-speed drives, power supplies and lighting products
for a wide range of commercial and industrial applications. The company
reported sales of $1.2 billion for its fiscal year ended June 30, 1998.
*Integrated electrical products combine magnetic and electronic components
for optimum performance in defined applications. Performance characteristics
include product size and weight, energy efficiency, power quality,
controllability and cost.
