UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ___________________
Commission File No. 1-9389
C&D TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-3314599
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 Union Meeting Road
Blue Bell, Pennsylvania 19422
(Address of principal executive office)
(Zip Code)
(215) 619-2700
(Registrant's telephone number, including area code)
_____________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO_____
Number of shares of the Registrant's Common Stock outstanding on December 7,
1998: 12,452,299
<PAGE>
C&D TECHNOLOGIES, INC.
AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1 - Financial Statements
Consolidated Balance Sheets -
October 31, 1998 and January 31, 1998................. 3
Consolidated Statements of Income -
Three and Nine Months Ended October 31, 1998
and 1997.............................................. 5
Consolidated Statements of Cash Flows -
Nine Months Ended October 31, 1998 and 1997........... 6
Consolidated Statements of Comprehensive Income
Three and Nine Months Ended October 31, 1998
and 1997.............................................. 8
Notes to Consolidated Financial Statements............. 9
Report of Independent Accountants...................... 16
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations...... 17
PART II. OTHER INFORMATION 23
SIGNATURES 24
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
October 31, January 31,
1998 1998*
---- ----
ASSETS
Current assets:
Cash and cash equivalents................. $ 490 $ 1,167
Accounts receivable, less allowance for
doubtful accounts of $1,828 and
$1,701, respectively................. 47,207 42,742
Inventories............................... 49,412 40,735
Deferred income taxes..................... 8,011 7,871
Other current assets...................... 1,420 885
------- -------
Total current assets........... 106,540 93,400
Property, plant and equipment, net.............. 60,667 57,058
Intangible and other assets, net................ 4,615 5,339
Goodwill, net................................... 10,277 10,701
------- -------
Total assets................... $182,099 $166,498
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......... $ 218 $ 321
Accounts payable.......................... 23,046 22,791
Accrued liabilities....................... 17,874 16,012
Income taxes ............................. 2,098 3,689
Other current liabilities................. 2,976 3,245
------- -------
Total current liabilities...... 46,212 46,058
Deferred income taxes........................... 2,684 2,376
Long-term debt.................................. 3,999 10,267
Other liabilities............................... 12,178 10,492
------- -------
Total liabilities.............. 65,073 69,193
------- -------
*Reclassified for comparative purposes to reflect the Company's two-for-one
stock split, effected in the form of a 100% stock dividend.
The accompanying notes are an integral part of these statements.
3
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(Dollars in thousands)
(Unaudited)
October 31, January 31,
1998 1998*
---- ----
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 75,000,000 and
10,000,000 shares authorized; 13,270,704
and 13,228,898 shares issued, respectively
(as adjusted for the two-for-one stock
split, effected in the form of a 100%
stock dividend)......................... 133 132
Additional paid-in capital.................. 42,026 41,364
Treasury stock, at cost, 905,102 shares (as
adjusted for the two-for-one stock split,
effected in the form of a 100% stock
dividend)............................... (10,819) (10,819)
Notes receivable from stockholder, net of
discount of $28......................... - (1,029)
Cumulative translation adjustment........... (68) (248)
Retained earnings........................... 85,754 67,905
------- -------
Total stockholders' equity....... 117,026 97,305
------- -------
Total liabilities and
stockholders' equity........... $182,099 $166,498
======= =======
*Reclassified for comparative purposes to reflect the Company's two-for-one
stock split, effected in the form of a 100% stock dividend.
The accompanying notes are an integral part of these statements.
4
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three months ended Nine months ended
October 31, October 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales............................ $ 81,598 $ 81,381 $240,580 $230,102
Cost of sales........................ 57,743 60,725 174,298 170,989
------- ------- ------- -------
Gross profit..................... 23,855 20,656 66,282 59,113
Selling, general and
administrative expenses.......... 11,286 9,678 30,921 28,543
Research and development
expenses......................... 2,071 2,156 6,132 6,358
------- ------- ------- -------
Operating income................. 10,498 8,822 29,229 24,212
Interest expense, net................ 14 301 90 1,041
Other expense, net................... 47 132 189 843
------- ------- ------- -------
Income before income taxes....... 10,437 8,389 28,950 22,328
Provision for income taxes........... 3,665 3,070 10,422 8,170
------- ------- ------- -------
Net income....................... $ 6,772 $ 5,319 $ 18,528 $ 14,158
======= ======= ======= =======
Net income per common share*......... $ 0.55 $ 0.44 $ 1.50 $ 1.16
======= ======= ======= =======
Net income per common share -
assuming dilution*............... $ 0.53 $ 0.42 $ 1.45 $ 1.12
======= ======= ======= =======
Dividends per share*................. $0.02750 $0.01375 $0.05500 $0.04125
======= ======= ======= =======
</TABLE>
* Per share amounts have been adjusted to reflect the Company's two-for-one
stock split, effected in the form of a 100% stock dividend, where appropriate.
The accompanying notes are an integral part of these statements.
5
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine months ended
October 31,
1998 1997
---- ----
Cash flows provided (used) by operating activities:
Net income ..................................... $ 18,528 $ 14,158
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............. 8,862 8,770
Deferred income taxes..................... 168 434
Loss on disposal of assets................ 163 72
Changes in:
Accounts receivable................. (4,511) (2,443)
Inventories......................... (8,525) (1,354)
Other current assets................ (493) (717)
Accounts payable.................... 192 (921)
Accrued liabilities................. 2,123 3,580
Income taxes payable................ (1,404) (123)
Other current liabilities........... (272) (1,459)
Other liabilities................... 1,677 2,178
Other, net................................ 336 269
------- -------
Net cash provided by operating activities........... 16,844 22,444
------- -------
Cash flows provided (used) by investing activities:
Acquisition of property, plant and equipment.... (11,813) (9,266)
Proceeds from disposal of property, plant
and equipment................................ 69 13
Change in restricted cash....................... - 1
------- -------
Net cash used by investing activities............... (11,744) (9,252)
------- -------
Cash flows provided (used) by financing activities:
Repayment of long-term debt..................... (6,374) (11,621)
Repayment of note receivable from stockholder... 1,057 664
Proceeds from issuance of common stock, net..... 382 435
Payment of common stock dividends............... (848) (671)
------- -------
The accompanying notes are an integral part of these statements.
6
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Dollars in thousands)
(Unaudited)
Nine months ended
October 31,
1998 1997
---- ----
Net cash used by financing activities............... (5,783) (11,193)
------ ------
Effect of exchange rate changes on cash............. 6 (36)
------ ------
(Decrease) increase in
cash and cash equivalents........................ (677) 1,963
Cash and cash equivalents at beginning
of period........................................ 1,167 952
------ ------
Cash and cash equivalents at end of period.......... $ 490 $ 2,915
====== ======
SCHEDULE OF NONCASH INVESTING AND
FINANCIAL ACTIVITIES
Fair market value of treasury stock issued to
pension plans ...................................... $ - $ 847
The accompanying notes are an integral part of these statements.
7
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited) (Unaudited)
Three months ended Nine months ended
October 31, October 31,
1998 1997 1998 1997
---- ---- ---- ----
Net income ....................... $6,772 $5,319 $18,528 $14,158
Other comprehensive income, net of tax:
Foreign currency
translation adjustments ... 147 468 180 64
----- ----- ------ ------
Total comprehensive income........ $6,919 $5,787 $18,708 $14,222
===== ===== ====== ======
The accompanying notes are an integral part of these statements.
8
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(UNAUDITED)
1. INTERIM STATEMENTS
The accompanying interim consolidated financial statements of C&D
TECHNOLOGIES, INC. (together with its operating subsidiaries, the "Company")
should be read in conjunction with the consolidated financial statements and
notes thereto contained in the Company's Annual Report to Shareholders for the
fiscal year ended January 31, 1998. The January 31, 1998 amounts were derived
from the Company's Audited Financial Statements. The consolidated financial
statements presented herein are unaudited but, in the opinion of management,
include all necessary adjustments (which comprise only normal recurring items)
required for a fair presentation of the consolidated financial position as of
October 31, 1998 and the consolidated statements of income for the three and
nine months ended October 31, 1998 and 1997 and the consolidated statements of
cash flows for the nine months ended October 31, 1998 and 1997 and the
consolidated statements of comprehensive income for the three and nine months
ended October 31, 1998 and 1997. However, interim results of operations
necessarily involve more estimates than annual results and may not be indicative
of results for the full fiscal year.
2. STOCK SPLIT
On July 24, 1998 the Company completed a two-for-one stock split, effected
in the form of a 100% stock dividend to stockholders of record on July 10, 1998.
This transaction resulted in a transfer on the Company's balance sheet of $66 to
common stock from additional paid-in-capital. The accompanying financial
statements and management's discussion and analysis of results of operations and
financial condition, including all share and per share amounts, have been
adjusted to reflect this transaction.
3. INVENTORIES
Inventories consisted of the following:
October 31, January 31,
1998 1998
---- ----
Raw materials ........................... $20,158 $17,099
Work-in-progress ........................ 12,367 9,990
Finished goods .......................... 16,887 13,646
------ ------
$49,412 $40,735
====== ======
4. INCOME TAXES
A reconciliation of the provision for income taxes from the statutory rate
to the effective rate is as follows:
Nine months ended
October 31,
1998 1997
---- ----
U.S. statutory income tax ...................... 35.0% 35.0%
State tax, net of federal income tax benefit.... 3.1 3.4
Foreign sales corporation ...................... (0.9) (1.1)
Tax effect of foreign operations ............... (0.5) (0.9)
Research and development credit ................ (0.7) -
Other........................................... - 0.2
---- ----
36.0% 36.6%
==== ====
9
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share data)
(UNAUDITED)
5. NET INCOME PER COMMON SHARE
Net income per common share for the three and nine months ended October 31,
1998 and 1997 is based on the weighted average number of shares of Common Stock
outstanding. Net income per common share - assuming dilution reflects the
potential dilution that could occur if stock options were exercised.
(Unaudited) (Unaudited)
Three months ended Nine months ended
October 31, October 31,
1998 1997* 1998 1997*
---- ---- ---- ----
Net income (A)............... $6,772 $5,319 $18,528 $14,158
Weighted average shares
of common stock
outstanding (B)........... 12,354,732 12,222,034 12,343,820 12,195,246
Assumed conversion of stock
options, net of shares
assumed reacquired........ 426,163 453,280 473,767 400,710
------- ------- ------- -------
Weighted average common
shares - assuming
dilution (C).............. 12,780,895 12,675,314 12,817,587 12,595,956
Net income per common
share (A/B)............... $0.55 $0.44 $1.50 $1.16
Net income per common
share - assuming
dilution (A/C)............ $0.53 $0.42 $1.45 $1.12
* Restated to reflect the Company's two-for-one stock split, effected in the
form of a 100% stock dividend, where appropriate.
10
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share data)
(UNAUDITED)
6. CONTINGENT LIABILITIES
With regard to the following contingent liabilities there have been no
material changes since January 31, 1998.
Because the Company uses lead and other hazardous substances in its
manufacturing processes, it is subject to numerous federal, Canadian, Mexican,
Irish, state and local laws and regulations that are designed to protect the
environment and employee health and safety.
These laws and regulations include requirements relating to the handling,
storage, use and disposal of hazardous materials and solid wastes, recordkeeping
and periodic reporting to governmental entities regarding the use of hazardous
substances and disposal of hazardous wastes, monitoring and permitting of air
and water emissions and monitoring and protecting workers from exposure to
hazardous substances, including lead used in the Company's manufacturing
processes. In the opinion of the Company, the Company complies in all material
respects with these laws and regulations.
Notwithstanding such compliance, if damage to persons or the environment
has been or is caused by hazardous substances used, generated or disposed of in
the conduct of the Company's business (or that of a predecessor to the extent
the Company is not indemnified therefor), the Company may be held liable for
the damage and be required to pay the cost of investigating and remedying the
same, and the amount of any such liability could be material to the results of
operations or financial condition. However, under the terms of the purchase
agreement with Allied Corporation ("Allied") for the Acquisition of the Company
(the "Acquisition Agreement"), Allied is obligated to indemnify the Company for
any liabilities of this type resulting from conditions existing at January 28,
1986 that were not disclosed by Allied to the Company in the schedules to the
Acquisition Agreement.
The Company, along with numerous other parties, has been requested to
provide information to the United States Environmental Protection Agency (the
"EPA") in connection with investigations of the source and extent of
contamination at several lead smelting facilities (the "Third Party Facilities")
to which the Company had made scrap lead shipments for reclamation prior to the
date of the Acquisition. As of January 16, 1989, the Company entered into an
agreement with other potentially responsible parties ("PRPs") relating to
remediation of a portion of one of the Third Party Facilities, the former NL
Industries ("NL"), facility in Pedricktown, New Jersey (the "NL Site"), which
11
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share data)
(UNAUDITED)
6. CONTINGENT LIABILITIES (continued)
agreement provides for their joint funding on a proportionate basis of certain
remedial investigation and feasibility study activities with respect to that
site.
In fiscal 1993 in accordance with an EPA order, a group comprised of the
Company and 30 other parties commenced work on the cleanup of a portion of the
NL Site based on a specified remedial approach which is now completed. The
Company did not incur costs in excess of the amount previously reserved.
With regard to the remainder of the NL Site, the EPA is pursuing
negotiations with NL and the other PRPs, including the Company, regarding the
conduct and funding of the remedial work plan. The allocation percentages
between parties and the basis for allocation of cost have been agreed to by the
PRPs and NL. Based upon currently available information, the Company estimates
its share of cost for this phase of the clean-up to range from $210 to $242, the
majority of which is expected to be paid out over the next two years.
Accordingly, the Company has established a reserve for this potential exposure.
The remedial investigation and feasibility study at a second Third Party
Facility, the former Tonolli Incorporated facility at Nesquehoning, Pennsylvania
(the "Tonolli Site"), was completed in fiscal 1993. The EPA and the PRPs have
initiated the remedial action at the site. Based on the estimated cost of the
remedial approach selected by the EPA, the Company believes that the potential
cost of remedial action at the Tonolli Site is likely to range between $16,000
and $17,000. The Company's allocable share of this cost has not been finally
determined, and will depend on such variables as the financial capability of
various other PRPs to fund their respective allocable shares of the remedial
cost. Based on currently available information, however, the Company believes
that its most likely exposure with respect to the Tonolli Site will be the
approximately $579 previously reserved, the majority of which is expected to be
paid over the next two years. The Company expects to recover a portion of its
monetary obligations for the remediation of the Tonolli site through litigation
against third parties and recalcitrant PRPs.
The Company has responded to requests for information from the EPA with
regard to three other Third Party Facilities, one in September 1991, one (the
"Chicago Site") in October 1991, and the third (the "ILCO Site") in October
1993. Of the three sites, the Company has been identified as a PRP at the ILCO
and Chicago Sites only.
12
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share data)
(UNAUDITED)
6. CONTINGENT LIABILITIES (continued)
On October 31, 1995 the Company received confirmation from the EPA that it
is a de minimis PRP at the ILCO Site. In May 1998, the ILCO site was resolved
with the payment of an immaterial amount, which was less than the amount
previously reserved.
Based on currently available information, the Company believes that the
potential cost of the remediation at the Chicago Site is likely to range between
$8,000 and $10,500 (based on the preliminary estimated costs of the remediation
approach negotiated with the EPA). Sufficient information is not available to
determine the Company's allocable share of this cost. Based on currently
available information, however, the Company believes that its most likely
exposure with respect to the Chicago Site will be the approximately $283
previously reserved, the majority of which is expected to be paid over the next
two to five years.
Allied has accepted responsibility under the Acquisition Agreement for
potential liabilities relating to all Third Party Facilities other than the
aforementioned Sites. Based on currently available information, management of
the Company believes that the foregoing will not have a material adverse effect
on the Company's business, financial condition or results of operations.
13
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share data)
(UNAUDITED)
7. NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which is effective for
fiscal years beginning after December 15, 1997. This statement establishes
standards for the disclosure of segment results. It requires that segments be
determined using the "management approach," which means the way management
organizes the segments within the enterprise for making operating decisions and
assessing performance. The Company has not yet determined the impact of the
implementation of SFAS No. 131.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." This statement significantly
changes current financial statement disclosure requirements from those that were
required under SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." Some of the more
significant effects of SFAS No. 132 are that it: (i) standardizes the disclosure
requirements for pensions and other postretirement benefits and presents them in
one footnote; (ii) requires that additional information be disclosed regarding
changes in the benefit obligation and fair values of plan assets; (iii)
eliminates certain disclosures that are no longer considered useful, including
general descriptions of the plans; (iv) permits the aggregation of information
about certain plans; (v) provides reduced disclosure requirements for nonpublic
entities; (vi) revises disclosures about defined contribution plans; and (vii)
changes disclosures relating to multi-employer plans. SFAS No. 132 does not
change the existing measurement or recognition provisions of SFAS Nos. 87, 88 or
106. SFAS No. 132 is effective for fiscal years beginning after December 15,
1997. The Company believes that the adoption of SFAS No. 132 will not have a
material effect on its financial position or results of operations.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 requires costs of start-up activities and organization
costs to be charged to expense as incurred. SOP 98-5 is effective for financial
statements for years beginning after December 15, 1998. The Company believes
that the adoption of SOP 98-5 will not have a material effect on its financial
position or results of operations.
14
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share data)
(UNAUDITED)
7. NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED (continued)
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes new procedures
for accounting for derivatives and hedging activities and supersedes and amends
a number of existing standards. This statement is effective for fiscal years
beginning after June 15, 1999. The Company currently uses derivatives such as
interest rate swap agreements, currency swaps and currency forwards to
effectively fix the interest rate on a portion of the Company's floating rate
debt and the exchange rate on Canadian and Mexican assets, liabilities and cash
flows. Under current accounting standards, no gain or loss is recognized on
changes in the fair value of these derivatives. Under this statement, gains or
losses will be recognized based on changes in the fair value of the derivatives
which generally occur as a result of changes in interest rates and foreign
currency exchange rates. The Company is currently evaluating the financial
impact of adoption of this statement. The Company believes that the adoption of
SFAS No. 133 will not have a material effect on its financial position or
results of operations.
8. SUBSEQUENT EVENT
On November 23, 1998, the Company entered into an agreement with Johnson
Controls, Inc. ("JCI") to acquire the assets of JCI's industrial battery
business for $135 million plus the assumption of certain liabilities, subject to
adjustment based, among other things, on the Company's investigation of the
business prior to closing. Consummation of the acquisition is subject to a
number of conditions, including the obtaining of consents under material
contracts, the receipt of all necessary regulatory approvals and the Company's
obtaining of financing. See "Management's Discussion and Analysis -- Liquidity
and Capital Resources." The closing of the acquisition is expected to occur on
or about February 1, 1999. A portion of the business consists of an interest in
a joint venture in Shanghai, People's Republic of China, the closing of which
may take place at a later date if the consent of the joint venture partner and
relevant government authorities is not timely obtained.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
C&D TECHNOLOGIES, INC.
We have reviewed the accompanying consolidated balance sheet of C&D
TECHNOLOGIES, INC. and Subsidiaries as of October 31, 1998, the related
consolidated statements of income for the three and nine months ended October
31, 1998 and 1997, the related consolidated statements of cash flows for the
nine months ended October 31, 1998 and 1997 and the related consolidated
statements of comprehensive income for the three and nine months ended October
31, 1998 and 1997. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of January 31, 1998 and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended (not presented herein); and in our report dated March 10, 1998,
we expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying consolidated
balance sheet as of January 31, 1998, is fairly presented, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PRICEWATERHOUSECOOPERS LLP
Philadelphia, Pennsylvania
November 24, 1998
16
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net sales for the fiscal 1999 third quarter were flat at $81,598,000 versus
$81,381,000 for the same period of the prior year. Fiscal 1999 third quarter
sales to the telecommunications, control and UPS markets were up three percent,
27 percent and 10 percent, respectively, compared to the third quarter of fiscal
1998. These sales increases were offset by lower non-telecommunications-related
power conversion sales and motive power sales, which were down 16 percent and
five percent, respectively. On a company-wide basis, fiscal 1999 third quarter
telecommunications-related sales were approximately 51 percent of total company
sales versus 50 percent of sales for the third quarter of fiscal 1998.
Telecommunications-related sales in the third quarter of the current year were
adversely affected by significantly lower cellular phone battery charger sales
versus the same quarter of the prior year. This resulted from the
discontinuation by a major customer of a particular type of phone for which this
charger was supplied. The Company expects this shortfall to continue throughout
the fourth quarter of fiscal 1999. Net sales for the nine months ended October
31, 1998 increased $10,478,000 or five percent over the equivalent period in
fiscal 1998. The increase in sales for the nine months ended October 31, 1998
compared to the same period in the prior year was primarily due to higher sales
to the telecommunications and control markets, up 10 percent and 11 percent,
respectively, partially offset by an 11 percent decrease in
non-telecommunications-related power conversion sales. On a company-wide basis,
telecommunications-related sales were approximately 50 percent of total company
sales during the first nine months of fiscal 1999 versus 48 percent for the
comparable period of the prior year.
Gross profit increased $3,199,000 or 15 percent for the third quarter of
fiscal 1999 and increased $7,169,000 or 12 percent for the nine-month period
ended October 31, 1998 over the comparable periods in the prior year. Gross
margin increased to 29.2 percent for the third quarter of fiscal 1999 versus
25.4 percent for the comparable quarter of the prior year, primarily as a result
of lower material costs, shift in product mix and improved operating
efficiencies. For the nine months ended October 31, 1998, gross margin increased
to 27.6 percent, up from 25.7 percent from the same nine-month period of fiscal
1998, primarily as a result of lower material costs and improved operating
efficiencies.
Selling, general and administrative expenses for the three months ended
October 31, 1998 increased $1,608,000 or 17 percent over the comparable period
of the prior year. This increase was primarily due to higher payroll and new
sales branch location related costs, commission expense and due diligence costs
in the third quarter of fiscal 1999 versus the equivalent period of the prior
year. For the nine-month period ended October 31, 1998, selling, general and
administrative expenses increased $2,378,000 or eight percent over the same
period of the prior year. This increase was primarily due to higher commission
expense, payroll and new sales branch location related costs, travel expense and
due diligence costs for the first nine months of fiscal 1999, partially offset
by the absence in the current nine-month period of charges related to the
accelerated write-off of goodwill and intangible assets and the resolution of
legal disputes that occurred in the comparable period of the prior year.
Research and development expenses remained proportional to sales at three
percent of sales for the third quarter and first nine months of both fiscal 1999
and 1998.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Interest expense, net, decreased $287,000 in the third quarter of fiscal
1999 versus the comparable period of the prior year primarily due to lower debt
balances outstanding. For the nine-month period ended October 31, 1998, interest
expense, net, decreased $951,000 compared to the same period in fiscal 1998
primarily due to lower debt balances outstanding coupled with higher capitalized
interest related to plant expansions.
Other expense, net, for the third quarter of fiscal 1999 decreased $85,000
primarily due to higher purchase price discounts compared to the third quarter
of fiscal 1998. For the nine months ended October 31, 1998, other expense, net,
decreased $654,000 from the comparable period in the prior year primarily due to
the absence in the current nine-month period of amortization expense associated
with the write-off of capitalized debt acquisition costs related to the
Company's credit facility and the Development Authority of Rockdale County
Industrial Revenue Bonds. Also contributing to this decrease was higher purchase
price discounts for the first nine months of fiscal 1999 versus the same period
of the prior year.
Income tax expense for the third quarter and first nine months of fiscal
1999 increased $595,000 and $2,252,000, respectively, over the comparable
periods of the prior year, primarily as a result of higher income before taxes,
partially offset by a lower effective tax rate. The reduction in the effective
tax rate for the first nine months of fiscal 1999 to 36.0 percent versus 36.6
percent in the same period of the prior year was primarily due to tax credits
related to research and development.
As a result of the above, net income increased 27 percent for the third
quarter of fiscal 1999 and increased 31 percent for the nine-month period ended
October 31, 1998 versus the comparable periods of the prior year. Net income in
the third quarter of fiscal 1999 increased to $6,772,000 or 55 cents per common
share - basic and 53 cents per common share - assuming dilution. For the nine
months ended October 31, 1998, net income increased to $18,528,000 or $1.50 per
common share - basic and $1.45 per common share - assuming dilution.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities decreased $5,600,000 or 25
percent to $16,844,000 for the nine-month period ended October 31, 1998 compared
to $22,444,000 in the comparable period of the prior year. The decrease in net
cash provided by operating activities was primarily due to a larger increase in
inventory and accounts receivable during the first nine months of fiscal 1999
compared to the same period of the prior year, partially offset by higher net
income during the current year. The increase in inventory was primarily related
to the Company's power conversion business.
Net cash used by investing activities during the first nine months of
fiscal 1999 increased $2,492,000 to $11,744,000 versus the comparable period of
the prior year. This increase was primarily due to higher spending related to
the acquisition of property, plant and equipment.
Net cash used by financing activities for the nine-month period ended
October 31, 1998 decreased $5,410,000 to $5,783,000 compared to $11,193,000
during the same period of the prior year. The decrease in net cash used by
financing activities was primarily the result of lower cash flows provided by
operations and higher capital spending during the first nine months of fiscal
1999 compared to the same period of the prior year, coupled with a decrease in
cash in the current year versus an increase in the prior year.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
The Company has signed an agreement to acquire the industrial battery
business of JCI, subject to a number of conditions. These conditions include the
obtaining of financing for the acquisition and for subsequent operations by the
Company, on terms satisfactory to the Company. The Company has obtained a
commitment from NationsBanc Montgomery Securities regarding the arranging of
financing, which is also subject to a number of conditions. The majority of the
business is expected to be acquired on or about February 1, 1999. There can be
no assurance that the acquisition will be consummated or that financing will be
obtained on terms satisfactory to the Company.
If the acquisition described above is not consumated, the Company's
availability, under the current loan agreement, is expected to be sufficient to
meet its ongoing cash needs for working capital requirements, debt service and
capital expenditures. Capital expenditures in the first nine months of fiscal
1999 were incurred primarily to fund capacity expansion, new product
development, a continuing series of cost reduction programs, normal maintenance
capital, and regulatory compliance. Aggregate fiscal 1999 capital expenditures
are expected to be approximately $16,000,000 for similar purposes.
READINESS FOR YEAR 2000
The Company is taking action to ensure its operations will not be adversely
affected by potential Year 2000 computer failures and has developed a Year 2000
Readiness Plan. The Company's Chief Financial Officer is responsible for
overseeing the execution of the plan and reports quarterly to the Audit
Committee of the Company's Board of Directors on the status of the Year 2000
Readiness Plan. The plan addresses the following four areas: (a) information
technology systems (consisting of computer hardware and software related to the
Company's business systems as well as its engineering and test equipment); (b)
non-information technology systems (including embedded technology such as
microcontrollers, which are typically found in such things as telephone systems,
security systems, fax machines, etc.); (c) products sold to customers; and (d)
third party issues (including significant suppliers and customers). The
Company's Year 2000 Readiness Plan generally includes the following phases for
each of the four areas noted above: identification and risk assessment;
development and implementation of a remediation plan; acceptance testing; and
contingency planning for high risk critical areas.
The Company has identified certain deficiencies related to its information
technology systems and is in the process of addressing them through upgrades or
other remediation. The Company has two main computer systems that are utilized
to run its business systems. These computer systems, one located at the
Company's headquarters and the other located in Tucson, Arizona, are undergoing
remediation efforts and currently are in the acceptance testing phase. These
information technology remediation efforts are expected to be completed by the
end of the first quarter of fiscal 2000.
In terms of non-information technology systems, the Company has identified
those items which may require remediation or replacement. The Company is in the
process of addressing those items and expects to complete remediation or
replacement and testing by the middle of fiscal 2000.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
The Company has completed its assessment of Year 2000 compliance with
respect to its battery and electronics products that are currently being sold to
customers and has concluded that all significant products are compliant.
With respect to third parties, the Company is in the process of identifying
and contacting its significant suppliers and will shortly begin to contact its
major customers to determine the extent to which the Company may be vulnerable
to such third parties' failure to address their own year 2000 issues. This
process includes the solicitation of written responses to questionnaires and/or
meetings with certain of such third parties. As a result, the Company's
assessment will be substantially dependent on information provided by third
parties. The Company expects to materially complete this assessment process by
the end of the first quarter of fiscal 2000.
Based upon the Company's current estimates, additional out-of-pocket costs
associated with its Year 2000 compliance are expected to be immaterial. These
costs are anticipated to be incurred primarily in fiscal 1999 and include third
party consultants and programmers; remediation of existing software; and
replacement or remediation of embedded chips. Such costs do not include internal
management time, which is not expected to be material to the Company's results
of operations or financial condition.
The Company believes that its most significant risk with respect to Year
2000 issues relates to the performance and readiness status of third parties. As
with all manufacturing companies, a reasonable worst case Year 2000 scenario
would be the result of failures of third parties (including without limitation,
governmental entities, utilities and entities with which the Company has no
direct involvement) that negatively impact the Company's raw material supply
chain or ability to provide products to customers or the ability of customers to
purchase products, or events affecting regional, national or global economies
generally. The impact of these failures cannot be estimated at this time;
however, the Company is considering contingency plans to limit, to the extent
possible, the financial impact of these failures on the Company's results of
operations. Any such plans would necessarily be limited to matters over which
the Company can reasonably control.
The Company's Year 2000 efforts are ongoing and its overall plan, as well
as the consideration of contingency plans, will continue to evolve as new
information becomes available. While the Company anticipates continuity of its
business activities, that continuity will be dependent upon its ability, and the
ability of third parties with whom the Company relies on directly, or
indirectly, to be Year 2000 compliant.
NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. This statement establishes standards for the
disclosure of segment results. It requires that segments be determined using the
"management approach," which means the way management organizes the segments
within the enterprise for making operating decisions and assessing performance.
The Company has not yet determined the impact of the implementation of SFAS No.
131.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED (continued)
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." This statement significantly
changes current financial statement disclosure requirements from those that were
required under SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." Some of the more
significant effects of SFAS No. 132 are that it: (i) standardizes the disclosure
requirements for pensions and other postretirement benefits and presents them in
one footnote; (ii) requires that additional information be disclosed regarding
changes in the benefit obligation and fair values of plan assets; (iii)
eliminates certain disclosures that are no longer considered useful, including
general descriptions of the plans; (iv) permits the aggregation of information
about certain plans; (v) provides reduced disclosure requirements for nonpublic
entities; (vi) revises disclosures about defined contribution plans; and (vii)
changes disclosures relating to multi-employer plans. SFAS No. 132 does not
change the existing measurement or recognition provisions of SFAS Nos. 87, 88 or
106. SFAS No. 132 is effective for fiscal years beginning after December 15,
1997. The Company believes that the adoption of SFAS No. 132 will not have a
material effect on its financial position or results of operations.
In April 1998, the American Institute of Certified Public Accountants
issued SOP 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5
requires costs of start-up activities and organization costs to be charged to
expense as incurred. SOP 98-5 is effective for financial statements for years
beginning after December 15, 1998. The Company believes that the adoption of
SOP 98-5 will not have a material effect on its financial position or results of
operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes new procedures
for accounting for derivatives and hedging activities and supersedes and amends
a number of existing standards. This statement is effective for fiscal years
beginning after June 15, 1999. The Company currently uses derivatives such as
interest rate swap agreements, currency swaps and currency forwards to
effectively fix the interest rate on a portion of the Company's floating rate
debt and the exchange rate on Canadian and Mexican assets, liabilities and cash
flows. Under current accounting standards, no gain or loss is recognized on
changes in the fair value of these derivatives. Under this statement, gains or
losses will be recognized based on changes in the fair value of the derivatives
which generally occur as a result of changes in interest rates and foreign
currency exchange rates. The Company is currently evaluating the financial
impact of adoption of this statement. The Company believes that the adoption of
SFAS No. 133 will not have a material effect on its financial position or
results of operations.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
FORWARD LOOKING STATEMENTS
Certain information contained in this Quarterly Report on Form 10-Q,
including, without limitation, information appearing under Item 2, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," are
forward-looking statements (within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Factors
that appear with the forward-looking statements, or in the Company's other
Securities and Exchange Commission filings, could affect the Company's actual
results and could cause the Company's actual results to differ materially from
those expressed in any forward-looking statements made by the Company in this
Quarterly Report on Form 10-Q.
22
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Employment Agreement, dated October 22, 1998, between Wade H.
Roberts, Jr. and the Company (filed herewith).
10.2 Purchase and Sale Agreement, dated as of November 23, 1998, among
Johnson Controls, Inc. and Its Subsidiaries as Seller and C&D
TECHNOLOGIES, INC. and C&D Acquisition Corp. as Purchaser (filed
herewith).
15. Letter from PricewaterhouseCoopers LLP, independent accountants
for the Company, regarding unaudited interim financial infor-
mation (filed herewith).
27. Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K:
None
23
<PAGE>
SIGNATURES
- -------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
C&D TECHNOLOGIES, INC.
December 11, 1998 BY: /s/ Alfred Weber
---------------------------------
Alfred Weber
Chairman and Chief Executive
Officer
December 11, 1998 BY: /s/ Stephen E. Markert, Jr.
----------------------------------
Stephen E. Markert, Jr.
Vice President Finance and
Treasurer
(Principal Financial and
Accounting Officer)
24
<PAGE>
EXHIBIT INDEX
10.1 Employment Agreement, dated October 22, 1998, between Wade H.
Roberts, Jr. and the Company.
10.2 Purchase and Sale Agreement, dated as of November 23, 1998, among
Johnson Controls, Inc. and Its Subsidiaries as Seller and C&D
TECHNOLOGIES, INC. and C&D Acquisition Corp. as Purchaser.
15. Letter from PricewaterhouseCoopers LLP, independent accountants
for the Company, regarding unaudited interim financial infor-
mation.
27. Financial Data Schedule.
25
C&D TECHNOLOGIES, INC.
1400 Union Meeting Road
Blue Bell, Pennsylvania 19422-0858
Mr. Wade H. Roberts, Jr.
1385 Eaves Spring Road
Malvern, Pennsylvania 19355 As of October 22, 1998
Dear Mr. Roberts:
C&D TECHNOLOGIES, INC., a Delaware corporation (the
"Company"), agrees to employ you, and you agree to be employed by the Company,
on the following terms and conditions:
1. TERM OF EMPLOYMENT. Except for earlier termination as
provided in Section 9 below, your employment under this Agreement, and the term
of this Agreement, shall be for an initial period commencing on October 22, 1998
(the "Effective Date"), and terminating on the second anniversary of such date
(the "Initial Term"). After the Initial Term, this Agreement and your employment
hereunder shall be renewed automatically for successive terms of one year each
(each, a "Renewal Term"), unless prior to the end of the Initial Term or any
Renewal Term either party shall have given to the other party at least 90 days'
prior written notice (a "Termination Notice") of termination of this Agreement.
If a Termination Notice is given by either party, (a) the Company shall, without
any liability to you, have the right, exercisable at any time after the
Termination Notice is given, to elect any other person to the office or offices
in which you are then serving and to remove you from such office or offices, but
(b) except for the obligations set forth in Sections 3, 4 and 5, all other
obligations each of you and the Company have to the other, including the
Company's obligation to pay your compensation and make available the benefits to
which you are entitled hereunder, shall continue until the end of the Initial
Term or any Renewal Term, as the case may be, or thereafter, to the extent such
obligations survive pursuant to the terms of this Agreement.
2. COMPENSATION AND BENEFITS. (a) From and after the Effective
Date, you shall be compensated for performance of your obligations under this
Agreement at a rate of not less than $275,000 per annum (such salary, as
adjusted from time to time, hereinafter referred to as the "Base Salary"),
payable in such manner as is consistent with the Company's payroll practices for
executive employees. Effective upon any promotion to Chief Executive Officer
pursuant to Section 3(a), your Base Salary for the period subsequent to such
promotion shall increase to a minimum of $325,000 per annum as determined by the
Board of Directors in its sole discretion, and the Board of Directors may from
time to time thereafter consider future increases in Base Salary in its sole
discretion.
<PAGE>
(b) You shall have the benefit of and be entitled to
participate in such employee benefit plans and programs, including life,
disability and medical insurance, pension, savings, retirement and other similar
plans, as the Company now has or hereafter may establish from time to time, and
in which you would be entitled to participate pursuant to the terms thereof,
including without limitation the Company's existing Supplemental Executive
Retirement Plan ("SERP"). The foregoing, however, shall not be construed to
require the Company to establish any such plans or to prevent the Company from
modifying or terminating any such plans, and no such action or failure thereof
shall affect this Agreement.
(c) You shall be entitled (i) to participate in the Company's
Incentive Compensation Plan each year in accordance with criteria and for
amounts approved by the Compensation Committee, and (ii) to be granted options,
to the extent (if any) approved by the Compensation Committee or the relevant
Option Committee, under the Company's stock option plans in effect from time to
time. Without limiting the foregoing, you shall have a targeted bonus for the
fiscal year ending January 31, 1999 of 40% of the Base Salary paid to you during
the period in which you were employed hereunder, and 40% of your Base Salary for
the following fiscal year increasing to 50% of your Base Salary for the portion
of such year following any promotion to Chief Executive Officer pursuant to
Section 3 (with the actual payment of any bonus described herein being dependent
on your achievement of targeted objectives). In addition, you shall as of the
Effective Date be granted a non-qualified stock option to purchase up to 25,000
shares of the Company's Common Stock ("Original Grant") pursuant to the
Company's 1998 Stock Option Plan, having an exercise price equal to the closing
price of the Company's Common Stock on the New York Stock Exchange on the
Effective Date, vesting in one-third increments on the first, second and third
anniversaries of the Effective Date and expiring 10 years from the Effective
Date, subject, however, to earlier vesting upon termination of this Agreement as
provided in Section 9(h) below and otherwise subject to the terms and conditions
contained in the Company's 1998 Stock Option Plan and current form of Option
Agreement.
(d) In the event of a Change of Control Termination of this
Agreement (as defined in Exhibit A hereto), you shall be entitled to certain
payments and benefits as provided in Exhibit A hereto, which payments and
benefits shall be in substitution for, not in addition to, the payments and
benefits otherwise payable under this Agreement in the event of termination.
(e) You shall be entitled to four weeks of vacation each year.
(f) The Company shall reimburse you annually for up to $5,000
of fees and expenses incurred by you for personal tax and financial planning
advice, upon presentation by you of appropriate substantiation of such fees and
expenses. You shall also be reimbursed for any reasonable legal fees incurred by
you in the negotiation and preparation of this Agreement.
(g) The Company shall provide you with a leased automobile of
reasonable size and quality suitable to your position, and shall pay or
reimburse you for insurance, repairs, maintenance and fuel expenses with regard
to such automobile. You acknowledge that some or all
2
<PAGE>
of the benefits provided under this Section 2(g) may constitute taxable income
for which you are responsible for payment of income taxes.
3. DUTIES. (a) During the term of your employment hereunder,
including any Renewal Term hereof, you shall serve and the Company shall employ
you as the President and Chief Operating Officer of the Company with such
executive duties and responsibilities consistent with such positions and stature
as the Board of Directors from time to time may determine. It is the current
intention of the Company to appoint you as Chief Executive Officer of the
Company, effective April 1, 1999, although your appointment to that office shall
be subject to the approval of the Board of Directors at that time in its
discretion; provided that, if you are not appointed as Chief Executive Officer,
you shall have the termination right set forth in Section 9(g) below. You shall
report to, and act under the general direction of, the Chairman of the Board of
Directors; PROVIDED, that upon any appointment hereunder as Chief Executive
Officer of the Company, you shall report to, and act under the general direction
of, the Board of Directors. You shall use your best efforts to carry out the
instructions of the Chairman of the Board of Directors or of the Board of
Directors, as the case may be. You shall be elected to the Board of Directors by
vote of the directors no later than September 29, 1998, such election be
effective upon the Effective Date. You shall thereafter be nominated, on an
annual basis so long as you continue to be employed under this Agreement, for
election by the stockholders as a director of the Company and, if elected, you
shall serve as a director, without additional compensation. In addition, at the
request of the Board of Directors, you shall serve as an officer and/or director
of any of the Company's subsidiaries, in all cases in conformity with the
organizational documents and the policies of the Board of Directors of each such
subsidiary, without additional compensation.
(b) You shall devote your entire business time and energies
during normal business hours to the business and affairs of the Company and its
subsidiaries. Nothing in this Section shall be construed as prohibiting you from
investing your personal assets in businesses in which your participation is
solely that of a passive investor in such form or manner as will not violate
Section 6 hereof or require any services on your part in the operation or
affairs of those businesses. You may also participate in philanthropic or civic
activities so long as they do not materially interfere with your performance of
your duties hereunder.
(c) You shall be subject to the Company's rules, practices and
policies applicable to the Company's senior executive employees.
4. WORKING AND OTHER FACILITIES. During the Initial Term and
any Renewal Term, you shall be provided with such working facilities and other
support services as are suitable to your position and appropriate for the
performance of your duties. In the event the Company's principal executive
offices are relocated to a location more than 50 miles from their present
location, the Company shall reimburse your moving expenses (including reasonable
costs relating to any interim living accommodations).
3
<PAGE>
5. EXPENSES. The Company shall reimburse you for all
reasonable expenses incurred by you in connection with your employment upon
presentation of appropriate documentation therefor in accordance with the
Company's expense reimbursement practices.
6. RESTRICTIVE COVENANTS. (a) During such time as you shall be
employed by the Company, and for a period of one year thereafter, you shall not,
without the written consent of the Board of Directors, directly or indirectly,
become associated with, render services to, invest in, represent, advise or
otherwise participate as an officer, employee, director, stockholder, partner or
agent of, or as a consultant for, any business anywhere in the world which is
competitive with the business in which the Company is engaged at the time your
employment with the Company ceases (a "Competitive Business"); PROVIDED,
HOWEVER, that (i) nothing herein shall prevent you from investing in up to 5% of
the securities of any company listed on a national securities exchange or quoted
on the NASDAQ quotation system, as long as your involvement with any such
company is solely that of a stockholder, and (ii) nothing herein is intended to
prevent you from being employed following the termination of your employment
with the Company by any business other than a Competitive Business. You
acknowledge that the provisions of this Section 6 are reasonable in light of the
Company's worldwide business operations and the position in which you will serve
at the Company and that they will not prevent you from obtaining employment
after the termination of this Agreement.
(b) The parties hereto intend that the covenant contained in
this Section 6 shall be deemed a series of separate covenants for each
appropriate jurisdiction. If, in any judicial proceeding, a court shall refuse
to enforce all the separate covenants deemed included in this Section 6 on
grounds that, taken together, they cover too extensive a geographic area, the
parties intend that those covenants (taken in order of the least populous
jurisdictions) which, if eliminated would permit the remaining separate
covenants to be enforced in that proceeding, shall, for the purpose of such
proceeding, be deemed eliminated from the provisions of this Section 6.
7. CONFIDENTIALITY, NONINTERFERENCE AND PROPRIETARY
INFORMATION. (a) In the course of your employment by the Company hereunder, you
will have access to Confidential or Proprietary Data or Information of the
Company. You shall not at any time divulge or communicate to any person, nor
shall you direct any Company employee to divulge or communicate to any person
(other than to a person bound by confidentiality obligations similar to those
contained herein and other than as necessary in performing your duties
hereunder) or use to the detriment of the Company or for the benefit of any
other person, any of such Confidential or Proprietary Data or Information,
except to the extent the same (i) becomes publicly known other than through a
breach of this Agreement by you, (ii) was known to you prior to the disclosure
thereof by the Company to you or (iii) is subsequently disclosed to you by a
third party who shall not have received it under any obligation of
confidentiality to the Company. The provisions of this Section 7(a) shall
survive your employment hereunder, whether by the normal expiration thereof or
otherwise, for as long as such data or information remains confidential. For
purposes of this Agreement, the term "Confidential or Proprietary Data or
Information" shall mean data or information not generally available to the
public, including personnel information, financial information, customer lists,
supplier lists, product and trading specifications, trade secrets, information
concerning product composition and formulas,
4
<PAGE>
tools and dies, drawings and schematics, manufacturing processes, information
regarding operations, systems and services, knowhow, computer and any other
processed or collated data, computer programs, and pricing, marketing, sales and
advertising data.
(b) You shall not, during the term of this Agreement and for a
period of one year after the termination of your employment by the Company, for
your own account or for the account of any other person, interfere in any
material respect with the Company's relationship with any of its suppliers,
customers or employees; PROVIDED, however, that you shall not be prohibited from
contacting suppliers or customers after termination of your employment with
regard to matters that do not violate your noncompetition or confidentiality
obligations contained in Sections 6(a) and 7(a); and, PROVIDED, FURTHER, that
such contacts do not interfere in any material respect with the Company's
relationship with such parties.
(c) You shall at all times promptly disclose to the Company,
in such form and manner as the Company reasonably may require, any inventions,
improvements or procedural or methodological innovations, programs, methods,
forms, systems, services, designs, marketing ideas, products or processes
(whether or not capable of being trade-marked, copyrighted or patented)
conceived or developed or created by you during and in connection with your
employment hereunder and which relate to the business of the Company
("Intellectual Property"). All such Intellectual Property shall be the sole
property of the Company. You shall execute such instruments and perform such
acts as reasonably may be requested by the Company to transfer to and perfect in
the Company all legally protectable rights in such Intellectual Property. If the
Company is unable for any reason to secure your signature on such instruments,
you hereby irrevocably appoint the Company and its officers and agents as your
agents and attorneys-in-fact to execute such instruments and to do such things
with the same legal force and effect as if executed or done by you.
(d) All written materials, records and documents made by you
or coming into your possession during your employment concerning any products,
processes or equipment, manufactured, used, developed, investigated or
considered by the Company or otherwise concerning the business or affairs of the
Company, shall be the sole property of the Company, and upon termination of your
employment, or upon the request of the Company during your employment, you shall
deliver the same to the Company. In addition, upon termination of your
employment, or upon request of the Company during your employment, you shall
deliver to the Company all other Company property in your possession or under
your control, including confidential or proprietary data or information and all
Company credit cards.
8. EQUITABLE RELIEF. With respect to the covenants contained
in SECTIONS 6 AND 7 of this Agreement, you acknowledge that any remedy at law
for any breach of said covenants may be inadequate and that the Company, in
addition to its rights at law, shall be entitled to specific performance or any
other mode of injunctive or other equitable relief to enforce its rights
hereunder.
9. TERMINATION; ADDITIONAL COMPENSATION. This Agreement, and
your employment hereunder, shall terminate prior to the end of the Initial Term
or any Renewal Term, upon the following terms and conditions:
5
<PAGE>
(a) This Agreement shall terminate automatically on the date
of your death.
(b) This Agreement shall be terminated, at the option of the
Company, if you are unable to perform a substantial portion of your duties
hereunder for any 120 days (whether or not consecutive) during any period of 365
consecutive days by reason of physical or mental disability. Notwithstanding the
foregoing, the Company shall continue to pay to you, until six months after
termination of your employment due to such disability, your Base Salary at the
rate in effect on the date of termination, but less any amounts paid to you
pursuant to any disability policy sponsored by or made available through the
Company ("Disability Policy"). After such six month period, you shall be
entitled to receive any amounts due and owing pursuant to any Disability Policy
to the extent you qualify therefor under the terms of such Disability Policy.
For purposes of this Agreement, "PHYSICAL OR MENTAL DISABILITY" shall mean your
inability, due to health reasons, to discharge properly your duties of
employment, supported by the opinion of a physician reasonably satisfactory to
both you and the Company. If the parties do not agree on a mutually satisfactory
physician within ten days of written demand by one or the other, a physician
shall be selected by the president of the Pennsylvania Medical Association, and
the physician shall, within 30 days thereafter, make a determination as to
whether disability exists and certify the same in writing. The services of the
physician shall be paid for by the Company. You shall fully cooperate with the
examining physician including submitting yourself to such examinations as may be
requested by the physician for the purpose of determining whether you are
disabled.
(c) This Agreement shall terminate immediately if your
employment is terminated hereunder for Cause. The term "Cause" shall mean, for
purposes of this Agreement: (i) an act or acts of willful material
misrepresentation, fraud or dishonesty by you which results in the personal
enrichment of you or another person or entity at the expense of the Company;
(ii) your admission, confession or conviction of any felony or any other crime
or offense involving misuse or misappropriation of money or other property;
(iii) any act involving gross moral turpitude by you which adversely affects the
Company; (iv) your continued material breach of any obligations under this
Agreement 30 days after the Company has given you notice thereof in reasonable
detail, if such breach has not been cured by you during such period; or (v) your
gross negligence or willful misconduct with respect to your duties or gross
misfeasance of office. Notwithstanding the foregoing and Section 1(d)(ii) of the
SERP, the definition of "Cause" solely for purposes of the SERP shall be the
definition of "Cause" contained in Section 1(d)(i) of the SERP.
(d) Upon termination of this Agreement for any reason other
than pursuant to Section 9(f) or (g) below, in addition to any other rights or
benefits to which you may be entitled under this Agreement, you shall be paid
all Accrued Obligations through the date of termination. The term "Accrued
Obligations" shall mean (i) your Base Salary through the date of termination;
(ii) any bonus earned pursuant to the terms of any applicable incentive
compensation or bonus plans of the Company but not yet paid with respect to any
fiscal year completed prior to termination; (iii) a prorated bonus for the
fiscal year in which termination occurs equal to the product of (x) any bonus
paid to you for the prior fiscal year of the Company multiplied by (y) a
fraction, the numerator of which is the number of days in the current fiscal
year during which you were employed by the Company, and the denominator of which
is 365; and (iv) any accrued vacation pay not yet paid by
6
<PAGE>
the Company; PROVIDED, that if termination is by the Company for Cause or by you
voluntarily, the term "Accrued Obligations" will not include the amounts
referred to in clause (iii) above. Upon termination of this Agreement (other
than by the Company for Cause or pursuant to Section 9(f) or (g) below or by you
in violation of this Agreement), (A) you shall also be entitled to all rights
and benefits under benefit and incentive plans (other than those relating to
bonuses) in accordance with the respective terms of those plans; (B) you shall
be reimbursed for all your business expenses incurred prior to termination in
accordance with Section 5 above; (C) the Company shall, at your request within
15 days after termination and at your expense, assign to you the lease and any
related purchase option for the automobile provided to you pursuant to Section
2(g), PROVIDED such lease and purchase option is assignable; and (D) to the
extent the Company's life insurance plan has a conversion option available upon
termination of employment, the Company shall make such option available to you.
Upon termination by the Company for Cause, you shall be reimbursed for all your
business expenses incurred prior to termination in accordance with Section 5
above. For purposes of clause (ii) above, a bonus shall be deemed to be earned
upon completion of the fiscal year to which it relates regardless of whether the
Board of Directors or its Compensation Committee has approved bonuses for such
year as of the date of termination.
(e) Except upon the occurrence of a Change of Control
Termination (as defined in Exhibit A), if your employment hereunder shall be
terminated by the Company (i) without Cause, other than pursuant to Section 9(a)
or 9(b), or (ii) as a result of nonrenewal pursuant to a Termination Notice
given by the Company under Section 1, then in addition to any other rights or
benefits to which you may be entitled, the Company shall, for a period of one
year after termination, (x) continue to pay you your Base Salary at the rate in
effect on the date of termination; (y) continue to provide you with a leased
automobile pursuant to Section 2(g); and (z) continue all other benefits
provided to you prior to termination (except not including any bonus with
respect to the period after termination); provided, however, that to the extent
the Company's benefit plans do not permit such continued participation or such
participation would have an adverse tax impact on such plans or on the other
participants in such plans or is otherwise prohibited by applicable law, the
Company may instead provide materially equivalent benefits to you outside such
plans (which, in the case of medical insurance benefits, may be provided by the
Company paying any COBRA premiums, COBRA coverage in any event to be measured
from the date of termination of employment).
(f) In the event of a Change of Control Termination, this
Agreement shall terminate in accordance with the terms of Exhibit A, and the
payments and benefits to which you shall be entitled shall be governed solely by
Exhibit A.
(g) In the event you either are notified by the Board of
Directors in writing that you will not be appointed Chief Executive Officer of
the Company or are not appointed, effective on or before April 30, 1999, to the
position of Chief Executive Officer of the Company, you shall have the right
upon fifteen (15) business days prior written notice to terminate this Agreement
("Elective Termination Notice"), provided that such notice is given no later
than sixty (60) days after the earlier of the date you are notified in writing
that you will not be appointed to such position or April 30, 1999. If you do not
give an Elective Termination Notice within such period, you shall continue to
serve as President and Chief Operating Officer under the terms of this
Agreement, which
7
<PAGE>
shall continue in full force and effect. If you give an Elective Termination
Notice within such period, this Agreement shall terminate (except for your
obligations under Sections 6, 7 and 8) and you shall be paid (i) the Accrued
Obligations described in Section 9(d)(i), (ii) and (iv) above and (ii) a
severance payment amount equal to $325,000, payable in equal installments during
the one year period following termination in accordance with the Company's
normal payroll practices. In addition, upon such termination, you shall be
entitled to the rights described in Section 9(d)(B), (C) and (D), and the
Company, for a period of one year following termination, shall continue to
provide you with a leased automobile pursuant to Section 2(g) and shall continue
your coverage under the Company's life and medical insurance plans, subject to
the proviso in the last sentence under Section 9(e) above. The foregoing right
to terminate this Agreement by giving an Elective Termination Notice shall
constitute the sole right or remedy you have in the event the Company fails to
appoint you Chief Executive Officer.
(h) In the event this Agreement is terminated for any reason
by the Company (other than due to death, disability or for Cause), or the
Company provides a Termination Notice as set forth in Section 1, upon
termination of your employment under this Agreement, any unvested options from
the Original Grant which you may own which would otherwise have vested within
one year from the date of termination shall be deemed to vest effective upon the
date of termination and become exercisable for a period of 90 days following the
date of termination. All other unvested options from the Original Grant shall
terminate. In the event of a termination by you pursuant to Section 9(g), all
unvested options under the Original Grant shall vest effective upon termination
and become exercisable for a period of 90 days following the date of
termination. In any event, any vested options from the Original Grant not
exercised within 90 days after termination of employment shall terminate.
10. REPRESENTATION. You hereby represent and warrant that you
are not subject to any employment agreement, non-competition or confidentiality
agreement or other commitment which either would be violated by your entering
into or performing your obligations under this Agreement or which would restrict
in any manner or interfere with the performance of your obligation under this
Agreement.
11. ENTIRE AGREEMENT; MODIFICATION; CONSTRUCTION. This
Agreement, together with Exhibit A hereto, constitutes the full and complete
understanding of the parties, and supersedes all prior agreements and
understandings, oral or written, between the parties, with respect to the
subject matter hereof. Exhibit A is hereby incorporated by reference and made a
part of this Agreement. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, oral or otherwise, have
been made by either party, or anyone acting on behalf of either party, which are
not set forth herein. This Agreement may not be modified or amended except by an
instrument in writing signed by the party against which enforcement thereof may
be sought.
12. SEVERABILITY. Any term or provision of this Agreement that
is held to be invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of that invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
8
<PAGE>
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction.
13. WAIVER OF BREACH. The waiver by either party of a breach
of any provision of this Agreement, which waiver must be in writing to be
effective, shall not operate as or be construed as a waiver of any subsequent
breach.
14. NOTICES. All notices hereunder shall be in writing and
shall be sent by messenger or by certified or registered mail, postage prepaid,
return receipt requested, if to you, to your residence set forth above, with a
copy to Davis, Riter, Parry & Hartmann, 1525 Locust Street, Philadelphia,
Pennsylvania 19102-3732, Attention: Herbert Hoffman, Esq. and if to the Company,
to the Vice President-Human Resources, at the Company's address set forth above,
with a copy to Proskauer Rose LLP, 1585 Broadway, New York, New York 10036,
Attention: Steven L. Kirshenbaum, Esq., or to such other address as either party
to this Agreement shall specify to the other.
15. ASSIGNABILITY; BINDING EFFECT. This Agreement shall not be
assignable by either party, except that it may be assigned to an acquiror of all
or substantially all of the assets of the Company or other successor the
Company, subject to your rights arising from a Change of Control as provided in
Exhibit A. This Agreement shall be binding upon and inure to the benefit of you,
your legal representatives, heirs and distributees, and shall be binding upon
and inure to the benefit of the Company, its successors and assigns.
16. GOVERNING LAW. All questions pertaining to the validity,
construction, execution and performance of this Agreement shall be construed and
governed in accordance with the laws of the Commonwealth of Pennsylvania,
without giving effect to the conflicts or choice of law provisions thereof.
17. ARBITRATION. Any controversy or claim arising out of or
relating to this contract, or the breach thereof, shall be settled in
Philadelphia, Pennsylvania or other mutually agreed location, by arbitration
administered by the American Arbitration Association under its Commercial
Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may
be entered in any court having jurisdiction thereof.
18. HEADINGS. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in several
counterparts each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
If you are in agreement with the foregoing, please sign the
duplicate original in the space provided below and return it to the Company.
9
<PAGE>
C&D TECHNOLOGIES, INC.
By:
Title:
Agreed as of the date
first above written:
/s/ Wade H. Roberts, Jr.
------------------------
Wade H. Roberts, Jr.
10
<PAGE>
EXHIBIT A TO EMPLOYMENT AGREEMENT ("AGREEMENT")
OF WADE H. ROBERTS, JR. ("EXECUTIVE")
(Capitalized terms used herein and not otherwise defined have the meanings given
to them in the Agreement.)
I. SPECIAL TERMINATION PROVISIONS. In the event a Change of Control (as defined
below) occurs, and within 24 months after such Change of Control: (a) the
Executive's employment with the Company is terminated by the Executive pursuant
to a Termination for Good Reason (as defined below); or (b) the Executive's
employment with the Company is terminated by the Company for any reason other
than death, disability or for Cause pursuant to Sections 9(a), (b) or (c) of the
Agreement; or (c) the Agreement is not renewed due to a Termination Notice given
by the Company, as provided in Section 1 of the Agreement (the events under
clauses (a), (b) and (c) herein collectively called a "Change of Control
Termination"), the Executive shall be entitled to receive the payments and
benefits set forth in Section III below.
II. DEFINITIONS. (a) CHANGE OF CONTROL. For purposes of the Agreement, a "Change
of Control" shall be deemed to have occurred if: (i) any person (as defined in
Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and as used in Sections 13(d) and 14(d) thereof)), excluding the
Company, any "Subsidiary" and any employee benefit plan sponsored or maintained
by the Company or any Subsidiary (including any trustee of any such plan acting
in his capacity as trustee), but including a "group" as defined in Section
13(d)(3) of the Exchange Act, becomes the beneficial owner of shares of the
Company having at least 30% of the total number of votes that may be cast for
the election of directors of the Company; (ii) the shareholders of the Company
shall approve any merger or other business combination of the Company, sale of
all or substantially all of the Company's assets or combination of the foregoing
transactions (a "Transaction"), other than a Transaction involving only the
Company and one or more of its Subsidiaries, or a Transaction immediately
following which the shareholders of the Company immediately prior to the
Transaction continue to have a majority of the voting power in the resulting
entity (excluding for this purpose any shareholder of the Company owning
directly or indirectly more than 10% of the shares of the other company involved
in the Transaction) and no person is the beneficial owner of 30% of the shares
of the resulting entity as contemplated by Section II(a)(i) above; or (iii)
within any 24 month period beginning on or after the date hereof, the persons
who were directors of the Company immediately before the beginning of such
period (the "Incumbent Directors") shall cease to constitute at least a majority
of the Board or the board of directors of any successor to the Company, PROVIDED
that any director who was not a director as of the date hereof shall be deemed
to be an Incumbent Director if such director was elected to the Board by, or on
the recommendation of or with the approval of, at least two-thirds of the
directors who then qualified as Incumbent Directors either actually or by prior
operation of this Section II(a)(iii), unless such election, recommendation or
approval was the result of an actual or threatened election contest of the type
contemplated by Regulation 14a-11 promulgated under the Exchange Act or any
successor provision. Notwithstanding the foregoing, no Change of Control of the
Company shall be deemed to have occurred for purposes of this Agreement by
reason of any actions or events in
<PAGE>
which the Executive participates in a capacity other than in his capacity as an
executive or director of the Company.
(b) TERMINATION FOR GOOD REASON. For purposes of the
Agreement, a "Termination for Good Reason" means a termination by Executive by
written notice given within 90 days after the occurrence of the Good Reason
event. A notice of Termination for Good Reason shall indicate the specific
termination provision in Section II(c) relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
Termination for Good Reason. The failure by Executive to set forth in such
notice any facts or circumstances which contribute to the showing of Good Reason
shall not waive any right of Executive hereunder or preclude Executive from
asserting such fact or circumstance in enforcing his rights hereunder. The
notice of Termination for Good Reason shall provide for a date of termination
not less than 10 nor more than 60 days after the date such Notice of Termination
for Good Reason is given.
(c) GOOD REASON. For purposes of the Agreement, "Good Reason"
shall mean the occurrence, without Executive's express written consent, of any
of the following circumstances, unless such circumstances are fully corrected
prior to the date of termination specified in the notice of Termination for Good
Reason as contemplated in Section II(b) above: (i) any material diminution of
Executive's positions, duties or responsibilities hereunder (except in each case
in connection with the termination of Executive's employment for Cause pursuant
to Section 9(c) of the Agreement or due to disability or death pursuant to
Sections 9(a) or 9(b) of the Agreement, or temporarily as a result of
Executive's illness or other absence), or the assignment to Executive of duties
or responsibilities that are inconsistent with Executive's position under the
Agreement at the time of a Change of Control; (ii) removal of, or the
nonreelection of, the Executive from the officer positions with the Company
specified in the Agreement; (iii) relocation of the Company's principal
executive offices to a location more than 50 miles from its location at the time
of the Change of Control; (iv) failure by the Company, after a Change of
Control, (A) to continue any bonus plan, program or arrangement in which
Executive is entitled to participate immediately prior to the Change of Control
(the "Bonus Plans"), provided that any such Bonus Plans may be modified at the
Company's discretion from time to time but shall be deemed terminated if (x) any
such plan does not remain substantially in the form in effect prior to such
modification and (y) if plans providing Executive with substantially similar
benefits are not substituted therefor ("Substitute Plans"), or (B) to continue
Executive as a participant in the Bonus Plans and Substitute Plans on at least
the same basis as to potential amount of the bonus and substantially the same
level of criteria for achievability thereof as Executive participated in
immediately prior to any change in such plans or awards, in accordance with the
Bonus Plans and the Substitute Plans; (v) any material breach by the Company of
any provision of the Agreement; (vi) if the Executive is on the Board of
Directors at the time of a Change of Control, Executive's removal from or
failure to be reelected to the Board of Directors thereafter; or (vii) failure
of any successor to the Company to assume in a writing delivered to Executive
upon the assignee becoming such, the obligations of the Company hereunder.
III. PAYMENTS AND BENEFITS. Upon a Change of Control Termination, as provided in
Section I above, the Company shall pay or provide the Executive the following
payments and benefits:
2
<PAGE>
(a) The Company shall pay to the Executive in a lump sum
within five business days after the date of termination any Accrued Obligations.
(b) The Company shall pay to the Executive as severance pay,
not later than the fifth business day following the date of termination of
Executive's employment:
(i) a lump sum in an amount equal to two years of the
Executive's Base Salary (or the aggregate Base Salary the Executive would have
earned for the Term Balance, as defined below, if greater); and
(ii) a lump sum in an amount equal to the product of
(A) the annual bonus paid by the Company to the Executive based on the average
of the bonuses paid during the last two fiscal years of the Company ending prior
to the date of termination (or, if the Executive has been employed by the
Company for less than two years at the date of termination, an amount equal to
the average of the annual bonus payable to Executive under the Agreement with
respect to the fiscal year ending January 31, 1999 and Executive's targeted
bonus under the Agreement with respect to the fiscal year ending January 31,
2000), multiplied by (B) the greater of two or the number of years (including
fractions) remaining in the Term Balance.
For purposes of the Agreement, the term "Term Balance" shall mean the balance of
the Initial Term after termination, if termination occurs during the Initial
Term.
(c) As additional severance, the Company shall continue the
participation of the Executive and the Executive's dependents for the greater of
two years or the Term Balance (and at the same level and at the same charges to
the Executive) in all health, medical and accident, life and other welfare plans
(as defined in Section 3(1) of ERISA), in which the Executive was participating
immediately prior to the date of termination, except for any disability plans,
and shall provide the Executive with a leased automobile pursuant to Section
2(g) of the Agreement for such period; provided, however, that to the extent the
Company's plans do not permit such continued participation or such participation
would have an adverse tax impact on such plans or on the other participants in
such plans, the Company may instead provide materially equivalent benefits to
the Executive outside of such plans; provided, further, that under such
circumstances, (i) medical insurance benefits may be provided by the Company
paying any COBRA premiums (COBRA coverage, in any event, to be measured from the
date of termination of employment) and (ii) if the Company is unable to continue
the Executive's life insurance coverage, it shall pay the Executive an amount
equal to twice the premium paid during the year prior to termination or if the
Executive converts the insurance to an individual policy, the Company shall pay
the premium for such insurance for two years.
The Executive shall complete such forms and take such physical
examinations as reasonably requested by the Company. To the extent the Executive
incurs any tax obligation as a result of the provisions of this paragraph (c)
that the Executive would not have incurred if the Executive remained an employee
of the Company and had continued to participate in the benefit plans as an
employee, the Company shall pay to the Executive, at the time the tax is due, an
amount to cover such taxes and the taxes on the amount paid to cover such taxes.
3
<PAGE>
(d) To the extent permitted under the terms of the applicable
stock option or restricted stock plan (if any), any stock options that would
vest in the two years after termination, or during the Term Balance, if greater,
and any restricted stock that would become nonforfeitable in such two year
period or during the Term Balance, if greater, shall immediately vest or become
nonforfeitable, as the case may be, and the exercise period of any stock options
shall be extended as if the Executive remained employed until the end of such
additional two years, or the Term Balance, whichever is longer. In the event the
foregoing sentence becomes applicable, the Company agrees to cause the Board of
Directors to take all steps necessary to implement the foregoing sentence.
4
PURCHASE AND SALE AGREEMENT
Dated as of November 23, 1998
AMONG
JOHNSON CONTROLS, INC.
AND
ITS SUBSIDIARIES
AS SELLER
AND
C&D TECHNOLOGIES, INC.
AND
C&D ACQUISITION CORP.
AS PURCHASER
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Purchase and Sale.......................................................1
1.1 Purchased Assets..................................................1
1.2 Excluded Assets...................................................3
1.3 Parent to Cause Purchaser to Perform Obligations..................4
ARTICLE II
Liabilities.............................................................4
2.1 Assumption of Liabilities.........................................4
2.2 Retained Liabilities..............................................5
ARTICLE III
Purchase Price..........................................................6
3.1 Purchase Price....................................................6
3.2 Payment at Closing................................................6
ARTICLE IV
Determination and Allocation of Adjusted
Purchase Price..........................................................6
4.1 Closing Statement of Net Assets...................................6
4.2 Review of Closing Statement of Net Assets.........................7
4.3 Cooperation.......................................................7
4.4 Settlement of Adjusted Purchase Price.............................7
4.5 Net Asset Value...................................................8
4.6 Allocation of Purchase Price......................................8
ARTICLE V
Closing Matters.........................................................8
5.1 The Closing.......................................................8
ARTICLE VI
Transfer After the Closing.............................................10
6.1 Further Instruments and Actions..................................10
6.2 Purchased Assets Requiring Consents..............................10
ARTICLE VII
Actions Prior to Closing...............................................10
7.1 Access...........................................................10
7.2 Obtaining of Consents............................................11
7.3 Actions of Seller and Conduct of Business........................12
7.4 Actions of Purchaser.............................................13
7.5 Public Announcements.............................................13
i
<PAGE>
7.6 No Negotiations..................................................13
ARTICLE VIII
Representations and Warranties of Seller...............................13
8.1 Organization and Authority.......................................13
8.2 Purchased Subsidiaries...........................................13
8.3 Corporate Action; No Conflict....................................14
8.4 Financial Statements and Related Matters.........................15
8.5 Real Property....................................................15
8.6 Tangible Assets Other Than Owned Real Property...................16
8.7 Contracts, Customers and Suppliers...............................16
8.8 Litigation.......................................................17
8.9 Compliance with Law..............................................17
8.10 Employee Benefit Plans...........................................18
8.11 Purchased Rights.................................................18
8.12 Absence of Certain Changes or Events.............................19
8.13 Environmental Matters............................................20
8.14 Accounts Receivable; Inventory; Product Warranty.................21
8.15 Tax Matters......................................................21
8.16 Labor Matters....................................................22
8.17 Questionable Payments............................................22
8.18 Disclosure.......................................................23
ARTICLE IX
Representations and Warranties of Purchaser............................23
9.1 Organization and Authority.......................................23
9.2 Corporate Action; No Conflict....................................23
ARTICLE X
Conditions to Obligations of Purchaser.................................24
10.1 Performance of Covenants.........................................24
10.2 Representations and Warranties...................................24
10.3 Opinion of Counsel...............................................24
10.4 Government Filings; Consents and Approvals.......................24
10.5 No Proceedings...................................................25
10.6 Authorization....................................................25
10.7 Secretary's Certificate..........................................25
10.8 Resignation......................................................25
10.9 Relocation of R&D Laboratory.....................................25
10.10 Accounts Receivable Aging........................................25
10.11 Title Insurance..................................................25
10.12 Taxes for Johnson Controls Battery (U.K.) Ltd....................25
10.13 Financing........................................................25
10.14 Supply Arrangements..............................................25
10.15 Other Agreements.................................................26
10.16 China............................................................26
ii
<PAGE>
ARTICLE XI
Conditions to Obligations of Seller....................................26
11.1 Performance of Covenants.........................................26
11.2 Representations and Warranties...................................26
11.3 Notice of Breach.................................................26
11.4 Government Filings...............................................26
11.5 Authorization....................................................26
ARTICLE XII
Employee Matters.......................................................27
12.1 Scope of Section.................................................27
12.2 Employment Status................................................27
12.3 Pension Plans....................................................27
12.4 Defined Contribution Plans.......................................28
12.5 Tax-Free Spending Plans..........................................28
12.6 Union Contracts..................................................28
12.7 Welfare Benefit Plans - Interim Services.........................29
12.8 Purchaser's Welfare Benefit Plans................................29
12.9 Employment Agreements............................................29
ARTICLE XIII
Obligations After Closing..............................................30
13.1 Access...........................................................30
13.2 Allocation of Taxes..............................................30
13.3 Transition Services..............................................30
13.4 Post-Closing Payments............................................30
13.5 Further Assurances...............................................31
13.6 Orifice Pasting Machines.........................................31
ARTICLE XIV
Notices................................................................31
ARTICLE XV
Further Covenants......................................................32
15.1 Cooperation by Purchaser.........................................32
15.2 Cooperation by Seller............................................32
15.3 Cooperation on Tax, Accounting and Other Matters.................32
15.4 Confidentiality..................................................33
15.5 Covenant Not to Compete..........................................34
15.6 Non-Solicitation of Employees....................................35
15.7 Non-Solicitation or Interference with Customers and Suppliers....35
15.8 Product Replacement and Repairs..................................35
15.9 Certain Accounts Receivable......................................35
iii
<PAGE>
ARTICLE XVI
Survival of Representations and Warranties
and Indemnification....................................................36
16.1 Survival.........................................................36
16.2 Indemnification by Seller........................................36
16.3 Indemnification by Purchaser.....................................37
16.4 Indemnification Procedure........................................37
ARTICLE XVII
Miscellaneous..........................................................38
17.1 Broker Compensation..............................................38
17.2 Bulk Sales Act...................................................38
17.3 Expenses.........................................................39
17.4 Binding Agreement................................................39
17.5 Entire Agreement.................................................39
17.6 Governing Law....................................................39
17.7 No Rights of Third Parties.......................................39
17.8 Counterparts.....................................................39
17.9 Headings; Table of Contents......................................39
17.10 Termination......................................................40
17.11 Dispute Resolution...............................................41
17.12 Representation by Counsel; Interpretation........................41
17.13 Knowledge of Seller..............................................41
17.14 Dollar Amounts...................................................41
17.15 Passage of Title and Risk of Loss................................42
iv
<PAGE>
DEFINITIONS
The following terms which appear in this Agreement are defined in the following
Sections:
Term Section or Other Location
Active Employees.......................................................12.2
Affiliate............................................................1.1(b)
Agreement..........................................................Preamble
Assigned Contracts..............................................1.1(a)(vii)
Assumed Liabilities.....................................................2.1
Audit Changes...........................................................4.1
Benefit Plans.......................................................8.10(a)
Business...........................................................Preamble
Claim................................................................1.1(b)
Closing..............................................................5.1(a)
Closing Date.........................................................5.1(a)
Closing Payment.........................................................3.2
Closing Statement of Net Assets.........................................4.1
Code................................................................8.10(a)
Competing Business..................................................15.5(b)
Confidentiality Agreement...........................................15.4(a)
Conveyance Instruments...............................................5.1(d)
Disputable Items........................................................4.2
Employees..............................................................12.1
Encumbrances.........................................................1.1(b)
Enviromental Assessments.............................................7.1(a)
Environmental Expenses...............................................7.1(a)
Envirommental Liabilities...........................................8.13(b)
Environmental Requirements..........................................8.13(b)
Environmental Work...................................................7.1(a)
ERISA...............................................................8.10(a)
ERISA Affiliate.....................................................8.10(a)
Excluded Assets.........................................................1.2
Financial Statements....................................................8.4
Firm....................................................................4.2
Foreign Plans.......................................................8.10(f)
Foreign Participants................................................8.10(f)
Hazardous Substances................................................8.13(b)
HSR Act..............................................................5.1(b)
Indemnification Deductible..........................................16.2(c)
Indemnitee..........................................................16.4(a)
Indemnitor..........................................................16.4(a)
Interim Period.........................................................12.9
Leased Real Property.............................................1.1(a)(ii)
Leases...........................................................1.1(a)(ii)
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Term Section or Other Location
Losses..............................................................16.2(a)
Material Adverse Effect.................................................8.2
Notice of Breach.....................................................7.1(b)
Notice of Claim.....................................................16.4(a)
Owned Real Property...............................................1.1(a)(i)
Parent.............................................................Preamble
Participant.........................................................12.6(b)
Permits..............................................................8.9(b)
Permitted Liens...................................................5.1(d)(i)
Permitted Owned Real Property Exceptions.............................8.5(a)
Prime Rate..............................................................4.4
Products.............................................................2.1(f)
Purchase Price..........................................................3.1
Purchased Assets.....................................................1.1(b)
Purchased Inventories............................................1.1(a)(iv)
Purchased Receivables.............................................1.1(a)(v)
Purchased Rights.................................................1.1(a)(ix)
Purchased Subsidiaries..................................................8.2
Purchaser..........................................................Preamble
Purchaser Information...............................................15.4(c)
Purchaser 401(k) Plan...............................................12.6(b)
Real Property....................................................1.1(a)(ii)
Reference Statement of Net Assets.......................................8.4
Related Documents.......................................................8.1
Representatives....................................................17.11(a)
Retained Employees.....................................................12.2
Retained Liabilities....................................................2.2
Returns.............................................................8.15(a)
Seller.............................................................Preamble
Seller Information..................................................15.4(b)
SJBC...............................................................Preamble
Taxes...............................................................8.15(c)
Transferred Employees..................................................12.2
U.S. Hourly Pension Plan...............................................12.5
U.S. Salaried Pension Plan.............................................12.5
Walkaway Amount........................................................10.2
Warranty Claims........................................................15.8
Welfare Benefits.......................................................12.9
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PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT, dated as of November 23, 1998 ("Agreement"),
by and between JOHNSON CONTROLS, INC., a Wisconsin corporation, having a
principal place of business at 5757 North Green Bay Avenue, Milwaukee, WI 53209,
together with certain of its subsidiaries, as set forth on Schedule 1.1, being
hereinafter collectively referred to as "Seller"), and C&D TECHNOLOGIES, INC., a
Delaware corporation, having a principal place of business at 1400 Union Meeting
Road, Blue Bell, Pennsylvania 19422 ("Parent"), and C&D ACQUISITION CORP., a
Delaware corporation, having a principal place of business at 1400 Union Meeting
Road, Blue Bell, Pennsylvania 19422 ("Purchaser").
WHEREAS, Seller is engaged in the line of business (the "Business")
comprised of the manufacture and sale of industrial batteries including the
Specialty Battery Division ("SBD") of Seller, the shares of Johnson Controls
Battery (UK) Limited and sixty-seven percent (67%) of the shares of Shanghai
Johnson Battery Company, Ltd. ("SJBC"); and
WHEREAS, Seller desires to sell or to cause to be sold to Purchaser and
Purchaser desires to purchase from Seller, subject to the assumption by
Purchaser of certain liabilities of Seller relating to the Business, on the
terms and conditions hereinafter set forth, substantially all of the assets and
properties primarily used in the Business as a going concern.
In consideration of the premises and of the mutual agreements hereinafter
set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 PURCHASED ASSETS:
(a) On the terms and subject to the conditions set forth in this
Agreement, Seller, together with certain wholly-owned subsidiaries (as disclosed
on Schedule 1.1), hereby agrees to sell, transfer, convey, assign and deliver to
Purchaser, or cause to be sold, transferred, conveyed, assigned and delivered to
Purchaser, and Purchaser agrees to purchase from Seller together with certain
wholly-owned subsidiaries, free and clear (except as described in Section 8.5(a)
below) of all Encumbrances, as hereinafter defined, all right, title and
interest in, to, and under the assets and properties of every nature, kind and
description, whether real, personal or mixed, tangible or intangible, used in,
held for use primarily in, or pertaining primarily to, the Business, as
hereinafter defined (other than Excluded Assets, as hereinafter defined),
wherever located, as the same shall exist immediately prior to the Closing, as
hereinafter defined, including, without limitation, the following assets of the
Business:
(i) the real property listed on Schedule 8.5(a), together with all
appurtenances thereto and all buildings and other structures, fixtures
and improvements located thereon (collectively, the "Owned Real
Property");
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(ii) subject to Section 5.1(e) below, the real property leases
listed on Schedule 8.5(b) (collectively, the "Leases"), together with
all of Seller's interest in all of the structures, fixtures and
improvements located on the real property covered by such Leases
(collectively, the "Leased Real Property"; and, together with the Owned
Real Property, the "Real Property");
(iii) all machinery and equipment, including, without limitation, all
manufacturing, production, maintenance, packaging, testing and other
machinery, tooling (including dies and molds) and equipment, vehicles
spare or replacement parts, computer equipment, furniture, fixtures,
plant and office equipment, supplies and other tangible personal
property, as well as laboratory equipment located at the Battery
Technology Center and used in the Business as described in Schedule
1.1(a)(iii), and including, without limitation, all tangible personal
property of Seller or its Affiliates located on the Real Property on
the date hereof;
(iv) all inventories, including, without limitation, raw materials,
work-in-process, finished goods, component parts, returned goods,
stores and supplies, packaging, shipping containers and other materials
(collectively, the "Purchased Inventories");
(v) all accounts and notes receivable (collectively, the "Purchased
Receivables");
(vi) all prepaid expenses relating to the Assumed Liabilities, as
hereinafter defined, including prepaid Taxes as hereinafter defined,
advances, credits and security, utility and other deposits but
excluding prepaid insurance and any prepaid item the substantial
benefit of which will not be usable by the Purchaser after the Closing;
(vii) subject to Section 5.1(e) below, all rights in and under all
contracts, arrangements, licenses, personal property leases,
commitments, purchase orders, sales orders and other agreements,
including, without limitation, any right to receive payment for
products sold or services rendered, and to receive goods and services,
pursuant to such agreements, and to assert claims and take other
rightful actions in respect of breaches, defaults and other violations
thereof (collectively, the "Assigned Contracts");
(viii) all operating records, data and other materials maintained
by or on behalf of, or otherwise relating to, the Business, including,
without limitation, all books, records, sales and sales promotional
data, advertising materials, customer lists and records, credit
information, cost and pricing information, supplier lists and records,
business plans, catalogs, mailing lists, distribution lists,
photographs, production data, engineering records, personnel and
payroll records, manufacturing and quality control records and
procedures, research and development files, intellectual property
disclosures, accounting records, and other materials related to any of
the foregoing items;
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(ix) subject to Section 1.2(c), 1.2(f) and 8.11, all patents,
trademarks, tradenames, service marks, copyrights, know-how and trade
secrets owned or used by Seller in the Business as provided in Schedule
8.11 (collectively, the "Purchased Rights") including, without
limitation, the name Dynasty, and all other names owned by Seller and
primarily used in, held for use in, or otherwise relating to the
Business;
(x) subject to Section 1.2(b) below, all Permits, as hereinafter
defined, to the extent they are assignable or transferable;
(xi) all rights, recoveries, refunds, counterclaims, rights of
set-off and other Claims, as hereinafter defined (known or unknown,
accrued or contingent), against third parties, including, without
limitation, warranty and other contractual claims, other than any of
the foregoing which relate solely to the Excluded Assets or Retained
Liabilities, as hereinafter defined;
(xii) all warranties, guarantees and letters of credit received from
vendors, suppliers or manufacturers;
(xiii) all of the capital stock and other ownership interests in
the Purchased Subsidiaries, as set out in Schedule 1.1; and
(xiv) all goodwill of the Business.
(b) The assets, properties, interests in properties and rights that
are to be sold, transferred, conveyed and assigned to Purchaser by Seller
hereunder shall be collectively referred to as the "Purchased Assets". As used
in this Agreement, the term "Encumbrances" means, collectively, all security
interests, judgments, liens (other than for taxes not yet payable), pledges,
escrows, claims, options, rights of first refusal, mortgages and encumbrances;
the term "Claim" means any claim, demand, action, suit or proceeding; and the
term "Affiliate" means any other person or entity that, directly or indirectly,
is controlled by or is under common control with such person.
1.2 EXCLUDED ASSETS: There are excepted from the Purchased Assets and the
term "Purchased Assets" does not mean or include the following assets
(collectively, the "Excluded Assets"):
(a) all cash and cash equivalent items on hand or on deposit and bank
accounts as of the Closing Date of this Agreement;
(b) all Permits to the extent they are not assignable or transferable;
(c) the assets listed in Schedule 1.2(c);
(d) rights to or claims for refunds, overpayments or rebates of Taxes
and other governmental charges for periods ending on or prior to the Closing
Date or for any pro
3
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rata portion of a period which straddles the Closing Date and the benefit of net
operating loss or capital loss carryforwards, carrybacks or other tax credits
(of whatever nature) of Seller;
(e) all insurance policies;
(f) the right to use the names "Johnson Controls", "Globe Union" and
"Hoover" and their registered and unregistered trademarks and logos; PROVIDED,
that Purchaser and the Purchased Subsidiaries shall have the right to sell
inventory included in the Purchased Assets containing such names, marks or logos
in the ordinary course and to use existing marketing and sales material with
appropriate stickering and shall, for six months after the closing, have the
right to use the "Johnson Controls" mark on existing poly molds; and
(g) all assets and properties of Seller and the Purchased Subsidiaries
not used primarily in, held for use primarily in, or pertaining primarily to,
the Business.
1.3 PARENT TO CAUSE PURCHASER TO PERFORM OBLIGATIONS. Parent shall cause
Purchaser to perform each of Purchaser's obligations hereunder.
ARTICLE II
LIABILITIES
2.1 ASSUMPTION OF LIABILITIES: Subject to the terms and conditions of
this Agreement, on the Closing Date, as hereinafter defined, Seller shall assign
to Purchaser, and Purchaser shall, except as set forth in Section 2.2 below,
assume and agree to perform and discharge the following liabilities and
obligations of Seller:
(a) obligations for the sale and delivery of products not shipped
prior to the close of business on the Closing Date under open sales orders, open
bids and sales contracts included in the Assigned Contracts, which were accepted
or made in the ordinary course of business of the Business prior to the close of
business on the Closing Date and which were not paid for prior to the Closing
Date;
(b) obligations for the purchase of raw materials, supplies and repair
and maintenance materials not received prior to the close of business on the
Closing Date and not included in the Purchased Inventory under open supply
contracts, purchase orders and commitments included in the Assigned Contracts,
which were given or made in the ordinary course of business of the Business;
(c) liabilities and obligations arising under the Assigned Contracts
in accordance with their respective terms except with respect to any breaches
thereof by the Business occurring prior to the Closing Date, including, without
limitation, payables owed by the Business to Seller or any of its Affiliates on
the Closing Date for goods sold and delivered in the ordinary course;
(d) (i) an amount limited to one-half of the Environmental Expenses
(as hereinafter defined), but not exceeding $1,750,000; (ii) any Environmental
Liability (as
4
<PAGE>
hereinafter defined) based upon a claim made after the fifth anniversary of the
Closing Date resulting solely from environmental conditions existing at
locations other than the Real Property to the extent those conditions resulted
from migration from a condition that existed on or prior to the Closing Date in,
on, under or at the Owned Real Property, but specifically excluding these
offsite matters referred to in clause (ii) of the definition of Environmental
Liabilities; and (iii) liability for environmental conditions at the Owned Real
Property, which conditions are not remediated by or as a result of the
Environmental Work.
(e) liabilities arising from obligations to Transferred Employees of
the Business relating to periods after the Closing to the extent set forth in
Article XII of this Agreement and liabilities for accrued vacation and other
accruals set forth in Schedule 8.4 to the extent set forth in Article XII of
this Agreement;
(f) liability for suits, claims, proceedings and actions made or
commenced after the Closing Date resulting from actual or alleged harm, injury
or damage to persons, property or business by products sold or shipped by the
Business ("Products") which are sold and shipped after the Closing Date
regardless of when such Products were manufactured, or when the incident or
accident giving rise to such liability occurs;
(g) liability for express or implied warranties of the Business,
including obligations to repair, replace, rework or to make refunds of amounts
paid for Products regardless of when such Products were manufactured, sold or
distributed or when defects became or become apparent, to the extent provided in
Section 15.8;
(h) liability for the recall, notification, retrofit or other
post-manufacture remedial or corrective actions relating to Products, regardless
of when such Products were manufactured, sold or shipped, to the extent provided
in Section 15.8;
(i) liability for all other claims, actions, suits, proceedings or
investigations arising solely out of events occurring after the Closing Date
involving the operations of the Business;
(j) third party bank debt of SJBC and intercompany payables of SJBC,
both as set out in Schedule 8.4 as adjusted at Closing.
The foregoing liabilities and obligations of Seller being assumed by
Purchaser hereunder shall be collectively referred to as the "Assumed
Liabilities".
2.2 RETAINED LIABILITIES: Seller shall retain, and shall remain exclusively
responsible for paying, performing and discharging when due, and Purchaser shall
not assume or have any responsibility for:
(a) all liabilities and obligations relating to or arising out of the
Excluded Assets;
(b) all liabilities and obligations for Taxes based on the income of
Seller
5
<PAGE>
arising out of or relating to the operation of the Business on or prior to the
close of business on the Closing Date;
(c) liability for suits, claims, proceedings and actions made or
commenced before or after the Closing Date resulting from actual or alleged
harm, injury or damage to persons, property or business by products sold or
shipped by the Business on or prior to the Closing Date, regardless of whether
those products were manufactured by the Business or when the incident or
accident giving rise to such liability occurred or occurs;
(d) all liabilities for Environmental Expenses and Environmental
Liabilities not assumed by Purchaser pursuant to Section 2.1(d);
(e) all liabilities and obligations relating to or arising out of the
Benefits Plans or any employee benefit plan, arrangement or policy established,
maintained, sponsored or contributed to by Seller or any ERISA Affiliates that
does not cover or relate to employees of the Business and all liabilities and
obligations relating to the Retained Employees;
(f) all liabilities and obligations relating to disputes with Mack
Molding Company;
(g) all liabilities for other claims, actions, suits, proceedings or
investigations arising out of events occurring solely on or prior to the Closing
Date involving the operations of the Business.
The liabilities and obligations of Seller which do not constitute Assumed
Liabilities and will be retained by Seller hereunder shall be collectively
referred to as the "Retained Liabilities".
ARTICLE III
PURCHASE PRICE
3.1 PURCHASE PRICE: The purchase price payable by Purchaser to Seller for
the Purchased Assets (the "Purchase Price") shall be $135 million plus the
Assumed Liabilities, subject to adjustment as provided in Article IV of this
Agreement.
3.2 PAYMENT AT CLOSING: At the Closing, Purchaser shall transfer to a bank
account designated by Seller the amount called for by this Agreement to be paid
on the Closing Date (the "Closing Payment") by a wire transfer of immediately
available funds.
ARTICLE IV
DETERMINATION AND ALLOCATION OF ADJUSTED
PURCHASE PRICE
4.1 CLOSING STATEMENT OF NET ASSETS: Within (60) calendar days after the
Closing Date, Seller shall prepare, and shall deliver to Purchaser an unaudited
balance sheet (the "Closing Statement of Net Assets") of the Business as at the
close of business on the fiscal
6
<PAGE>
month end immediately preceding the Closing Date. The Closing Statement of Net
Assets shall be prepared on a basis consistent with the Reference Statement of
Net Assets (as hereinafter defined), using the Seller's Accounting Principles
(as hereinafter defined) consistently applied and all books, records and
accounts of the Business, shall reflect all reserves, accruals and entries
necessary to reserve fully for all liabilities of the Business and shall fairly
present the financial position of the Business as of the Closing Date in all
material respects. Seller shall certify the Closing Statement of Net Assets as
having been prepared in accordance with this Agreement and as presenting
accurately the consolidated assets and liabilities of the Business as of the
Closing Date. Notwithstanding anything contained herein to the contrary, (i) the
Closing Statement of Net Assets shall include all accruals, reserves and other
adjustments generally made at year end on the same basis as generally made at
year end for items individually in excess of $5,000; and (ii) except to the
extent paid at or prior to the Closing, the full amount of any compensation or
benefits due to employees of the Business (including, without limitation,
salary, incentive compensation, bonuses, deferred compensation, vacation, sick
leave, insurance and benefit plan contributions) with regard to services
rendered through the Closing Date, regardless of when payable, shall be accrued
on the Closing Statement of Net Assets. As of the Closing Date, Seller shall
take a complete physical inventory of the inventory owned by the Business.
Purchaser (or its representatives) shall have the right to observe such physical
inventory and to review the results, work papers and procedures used in
conducting such physical inventory.
4.2 REVIEW OF CLOSING STATEMENT OF NET ASSETS: Purchaser shall have the
right to review the Closing Statement of Net Assets and all work papers relating
thereto and to notify Seller of its dispute of such Closing Statement, provided
that the scope of such dispute shall be limited to whether (i) there exists any
mathematical errors in the Closing Statement of Net Assets; and/or (ii) whether
the Closing Statement of Net Assets was prepared in accordance with Seller's
Accounting Principles (collectively "Disputable Items"). If Purchaser does not
notify Seller of any such dispute within thirty (30) days after the date the
Closing Statement of Net Assets is delivered to Purchaser, then the Closing
Statement of Net Assets delivered by Seller shall be deemed to be final,
conclusive and binding on the parties. If, however, Purchaser notifies Seller in
writing within such period of a Disputable Item and specifies (a) the Disputable
Item and Purchaser's basis for such a position, and (b) the amount of the
adjustment Purchaser proposes with respect to each Disputable Item, the parties
will then attempt to resolve their differences with respect thereto. If the
parties are unable to resolve their dispute, the unresolved Disputable Items
shall be referred, within sixty (60) days after the date the Closing Statement
of Net Assets is delivered to Purchaser, to the Chicago office of Deloitte &
Touche, LLP, certified public accountants, or if such firm is unable to or
unwilling to serve, to another "Big Five" accounting firm selected by the firm
declining to serve; provided such selected firm is not the regular independent
auditor of Seller or Purchaser (the "Firm"). The Firm shall be asked to
determine only whether the Closing Statement of Net Assets met the standards set
forth above in subsections (i) and (ii) and report to Seller and Purchaser upon
all Disputable Items within thirty (30) days after such referral. The decision
of the Firm shall be final, conclusive and binding on the parties hereto. The
fees and expenses of the Firm shall be shared equally by Seller and Purchaser.
4.3 COOPERATION: Representatives of Seller shall be given access to all
books,
7
<PAGE>
records and other data of the Business for the purpose of preparing the Closing
Statement of Net Assets. Personnel of the Purchaser may be consulted from time
to time by such representatives.
4.4 SETTLEMENT OF ADJUSTED PURCHASE PRICE: Within 10 days after the final
determination of the Closing Statement of Net Assets, Seller shall pay to
Purchaser the amount by which the Net Asset Value (as hereinafter defined) as
set forth on the Reference Statement of Net Assets exceeds the Net Asset Value
as set forth on the Closing Statement of Net Assets, or Purchaser shall pay to
Seller the amount by which the Net Asset Value as set forth on the Closing
Statement of Net Assets exceeds the Net Asset Value, as set forth on the
Reference Statement of Net Assets, as the case may be. In the event Purchaser
disputes any part of the Closing Statement of Net Assets pursuant to the
provisions of Section 4.2 of this Agreement, those portions of the Closing
Statement of Net Assets which are not in dispute shall be deemed finally
determined, and the payer of any adjustment due in accordance with this Section
4.4 shall nevertheless pay to the payee, within 30 days after the date the
Closing Statement of Net Assets is delivered to Purchaser by Seller, all amounts
then due with respect to such portion of the Closing Statement of Net Assets
which has been deemed finally determined. The amount of the payments described
in this Section 4.4 shall be paid by Seller to Purchaser, or by Purchaser to
Seller, as the case may be, with interest thereon from the Closing Date to the
date of such payment, calculated at a floating rate equal to the "Prime Rate"
quoted by The Chase Manhattan Bank, N.A., New York, New York from time to time
after the Closing Date to the date of payment, in immediately available funds
remitted by wire transfer to a bank designated by the payee thereof.
The parties understand and agree that the adjusted purchase price mechanism
set forth in Sections 4.1 - 4.5 is not intended to apply to disputes or
questions regarding the Reference Statement of Net Assets or the preparation
thereof, which disputes or questions instead shall be evaluated and decided
under Article XVI as a breach of warranty.
4.5 NET ASSET VALUE. The term "Net Asset Value" with respect to the
Business shall mean the total assets of the Business minus the total
liabilities, in each case as reflected on the Reference Statement of Net Assets
or the Closing Statement of Net Assets, as the case may be, subject to Section
10.16.
4.6 ALLOCATION OF PURCHASE PRICE: Seller agrees, at its sole cost, to have
the Purchased Assets appraised by a firm with expertise in such matters that is
reasonably agreeable to Purchaser. Seller and Purchaser shall mutually agree on
the instructions to the appraisal firm, which shall be jointly retained by
Seller and Purchaser. Seller and Purchaser agree to be bound by the results of
such appraisal and shall allocate the Purchase Price among the Purchased Assets
(including the portion allocated to each Purchased Subsidiary) in accordance
with the relative fair market values of the Purchased Assets as determined by
the appraisal as the same may hereafter be amended to reflect any changes
necessary as a result of any adjustment of the Purchase Price pursuant to this
Article IV, subject to Section 10.16. Seller and Purchaser agree to use the
allocation provided for herein for all purposes in any Federal and state income
or franchise tax return filed by them subsequent to the Closing Date, including
the determination by Seller of taxable gain or loss on the sale of the Purchased
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Assets and the determination by Purchaser of its tax basis with respect to the
Purchased Assets. Neither party will file any returns or reports in a manner
which is inconsistent with the appraisal or allocation.
ARTICLE V
CLOSING MATTERS
5.1 THE CLOSING:
(a) The purchase and sale (the "Closing") contemplated under this Agreement
shall take place at the offices of Seller, located at 5757 North Green Bay
Avenue, Milwaukee, WI or at such other place as the parties shall mutually agree
upon, at 10:00 A.M. local time on February 1, 1999, or such other time or date
as the parties shall mutually agree upon, or such later date as may be required
pursuant to paragraph (b) of this Section 5.1. The date the Closing takes place
is herein referred to as the "Closing Date". The Closing shall be effective as
of 12:01 a.m. on the Closing Date.
(b) If all applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended (the "HSR Act") and all equivalent filings
relating to the sale and purchase of the Purchased Subsidiaries, have not
expired or been otherwise terminated, by the date set forth in paragraph (a) of
this Section 5.1, the Closing shall, without the necessity of any action by or
consent of any party hereto, be postponed until five days after the date of
expiration or termination of the last such waiting periods.
(c) At the Closing, Purchaser shall transfer to a bank account designated
by Seller the Closing Payment in accordance with Section 3.2 above.
(d) At the Closing and effective on the Closing Date, Seller shall execute
and deliver (or cause to be executed and delivered) the following documents to
Purchaser (collectively, the "Conveyance Instruments"):
(i) such deed or deeds as shall be effective to vest in Purchaser
good and marketable fee simple title to all of the Owned Real Property,
free and clear of all Encumbrances, except for mechanics', carriers',
workmen's, repairmen's or other like liens arising or incurred in the
ordinary course of business regarding claims that are not yet due and
payable, liens for taxes, and other governmental charges which are not
due and payable or which may thereafter be paid without penalty,
(collectively, the "Permitted Liens") and any other exceptions which
may be listed on Schedule 8.5(a);
(ii) bills of sale, endorsements, assignments and other good and
sufficient instruments of sale, transfer, conveyance and assignment, in
form reasonably satisfactory to Purchaser, as shall be effective to
vest in Purchaser good and marketable title, free and clear of all
Encumbrances, to the Purchased Assets other than the Owned Real
Property; and
(iii) share certificates or other documents representing all of
Seller's
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<PAGE>
ownership of the Purchased Subsidiaries properly endorsed for transfer
of Seller's record and beneficial ownership in and to the Purchased
Subsidiaries.
(e) This Agreement shall not constitute an agreement to assign any
contract, license, lease, commitment, sales order or purchase order or other
agreement if an assignment or attempted assignment of the same without the
consent of the other party thereto would constitute a breach thereof or in any
way impair the rights of Seller thereunder.
(f) At the Closing, Seller shall cause any directors or officers of the
Purchased Subsidiaries who are officers or employees of Seller (other than
full-time employees of the Business) to resign or to be removed as directors and
officers thereof.
ARTICLE VI
TRANSFER AFTER THE CLOSING
6.1 FURTHER INSTRUMENTS AND ACTIONS: From time to time after the Closing
Date, upon request of Purchaser, Seller, without further consideration, shall
cooperate with Purchaser and shall duly execute, acknowledge and deliver all
such further deeds, assignments, transfers, conveyances and powers of attorney
and take such other actions and give such assurances as may be reasonably
required to convey to and vest in Purchaser all right, title and interest in all
the assets, property and business of Seller intended to be assigned, transferred
and conveyed pursuant to and as provided in and subject to the provisions of
this Agreement. Seller shall promptly pay or deliver to Purchaser any amounts or
items which may be received by Seller after the Closing which constitute
Purchased Assets.
6.2 PURCHASED ASSETS REQUIRING CONSENTS: In the event any consent of a
third party legally required for the sale, assignment or transfer to Purchaser
of any Purchased Asset (with respect to which, in the case of consents referred
to in Section 10.4, Purchaser has waived the closing condition) has not been
obtained by the Closing Date then such Purchased Asset shall not be deemed to be
sold or transferred to Purchaser at the Closing, but:
(a) Seller shall cooperate with Purchaser in entering into any reasonable
arrangement designed to provide Purchaser with the benefit of Seller's rights
under or pursuant to such Purchased Asset;
(b) Seller shall cooperate with Purchaser in obtaining any such required
consent or waiver after the Closing; and
(c) upon obtaining all required consents or waivers for such Purchased
Asset, such Purchased Asset shall be deemed to be sold or transferred to
Purchaser as of the receipt of such consents or waivers and Seller shall
execute, without further consideration from Purchaser, any documents reasonably
requested by Purchaser to confirm that such Purchased Asset has been assigned to
Purchaser.
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ARTICLE VII
ACTIONS PRIOR TO CLOSING
7.1 ACCESS; NOTICE OF BREACH: (a) For a period ending January 31, 1999,
Seller shall provide Purchaser the opportunity to conduct a full due diligence
review of the Business. For such purposes, Purchaser and its representatives
shall have, at all reasonable times, access to the Business, the Purchased
Assets, and the management staff of the Business as may be reasonably requested
by Purchaser and shall be permitted to contact customers of the Business, joint
venture partners of the Business and relevant governmental officials without
restriction but with prior notice to and coordination with Seller and shall
receive Seller's full and prompt cooperation regarding such endeavor. As part of
its diligence review, Purchaser shall have the right to retain an environmental
consultant reasonably acceptable to Seller to undertake environmental
assessments of the Real Property including, without limitation, Phase I and
Phase II environmental assessments on the Real Property (the "Environmental
Assessments"). The scope of the Environmental Assessments shall be agreed upon
by Seller and Purchaser and may include, among other things, intrusive sampling
and testing of soils and groundwater, and integrity testing of underground
storage tanks. Seller shall provide complete and unfettered access to the
Business and the Real Property for as much time as is necessary for the conduct
of the Environmental Assessments. The Environmental Assessments will be promptly
provided to Seller and Purchaser upon their completion. The Environmental
Assessments will make specific recommendations concerning certain additional
investigation, remediation and/or monitoring to be undertaken at or concerning
the Real Property and/or any adjacent property, the Purchased Assets or the
Business, and other recommendations may be made based upon discoveries made
during implementation of the initial recommendations (the implementation of such
recommendations being the "Environmental Work"). It is agreed that Seller shall
conduct and control the Environmental Work, including any negotiations or
contacts with the government officials. Based on the findings of the
Environmental Assessments, or discoveries made during conduct of the
Environmental Work, Seller shall promptly notify the appropriate governmental
authorities as required under Environmental Requirements (as hereinafter
defined). Seller shall promptly provide to Purchaser copies of all scopes of
work, sampling data, notices to or from government officials or a third party,
test results, evaluations, reports and correspondence concerning the
Environmental Work. The Environmental Work shall be deemed complete when Seller
receives "no further action" letters from relevant government officials or
agencies with respect to all the Environmental Work. The costs and expenses of
undertaking the Environmental Assessments and the Environmental Work, including
the fees and expenses of attorneys and environmental consultants, are
collectively referred to herein as the "Environmental Expenses". The obligations
of the partners under this Agreement shall not be affected by any delay in
completing the Environmental Assessments or Environmental Work until after the
end of the due diligence period referred to herein or the Closing.
(b) By the close of business on January 25, 1999, Purchaser shall deliver
to Seller a written list describing in reasonable detail all material breaches
of representations and warranties contained in Article VII hereof which
Purchaser has discovered or have been disclosed since the date of this Agreement
that are not reflected on the Reference Statement of Net assets or disclosed on
any Schedule hereto, together with the amount, if any, reasonably
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calculated as a proposed adjustment to the Purchase Price (or to the extent an
amount cannot be reasonably calculated, then a reasonable estimate of such
amount) ("Notice of Breach"). Prior to Closing, Seller and Purchaser shall meet
and attempt to resolve whether and to what extent such breaches will be
reflected in a Purchase Price adjustment to be recognized in the Closing
Payment; PROVIDED, HOWEVER, that any such Purchase Price adjustment agreed to
between the parties shall be subject to the Indemnification Deductible (as
defined below). If, prior to Closing, Seller and Purchaser are unable to resolve
the extent to which such breaches will be reflected in a Purchase Price
adjustment, such Notice of Breach shall, after Closing, be deemed a Notice of
Claim pursuant to Section 16.4 hereof.
7.2 OBTAINING OF CONSENTS:
(a) As soon as possible after the date hereof, each party shall (i)
cooperate with the other to make all necessary filings, including without
limitation, filings under the HSR Act and equivalent foreign laws and
regulations, and (ii) use commercially reasonable efforts to make all other
necessary filings with all governmental bodies or other regulatory authorities
to obtain licenses, permits, approvals, authorizations and consents of all third
parties required for the sale, assignment or transfer to Purchaser of any of the
Purchased Assets or the consummation of any of the transactions contemplated by
this Agreement.
(b) Seller shall bear the cost of complying with or obtaining the consent
to or approval of the transactions contemplated hereby of any governmental or
other third party, including without limitation, any such approval or consent
required by any safety, health, environmental or other applicable law or
regulation. Each party hereto shall provide to the other party such information
as the other party may reasonably request in order to enable it to prepare such
filings. Each party hereto shall also use its respective commercially reasonable
efforts to expedite any governmental or other third party review and to obtain
all such necessary consents, approvals, licenses and permits as promptly as
practicable; provided, than neither Purchaser nor any of its affiliates shall be
required to dispose of any assets in connection with the obtaining of any
consent, approval, license or Permit.
7.3 ACTIONS OF SELLER AND CONDUCT OF BUSINESS:
(a) Seller shall use commercially reasonable efforts to perform and satisfy
all conditions to Closing to be performed or satisfied by Seller under this
Agreement by the Closing Date or such other date by which performance is
required hereunder.
(b) From the date hereof through the Closing Date, unless otherwise agreed
in writing by Purchaser, Seller shall not, except as required or expressly
permitted pursuant to the terms hereof, make any material change in the conduct
of the Business or the Purchased Assets or enter into any material transaction
other than in the ordinary course of business and shall continue to conduct the
Business and cause each of the Purchased Subsidiaries to conduct their
respective businesses in the ordinary course of business. Prior to the Closing,
Seller shall use all reasonable efforts to preserve for Purchaser the goodwill
of the customers and suppliers of the Business and others having business
relations with Seller with respect to the Business, and shall do all things
reasonably requested by Purchaser for such
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purpose. Prior to the Closing, Seller shall promptly advise Purchaser in writing
of the commencement or threat against Purchaser of any suit, litigation or legal
proceeding against Seller or the Purchased Subsidiaries or with regard to the
transactions contemplated hereby. Prior to the Closing, Seller shall cause all
casualty and liability insurance coverage currently in effect with respect to
the Purchased Assets or the Business to remain in effect and apply all insurance
proceeds in respect of casualty to the Purchased Assets to the replacement or
rebuilding of the Purchased Assets; provided, that the foregoing shall not
affect Purchaser's rights in the event the representation contained in Section
8.12 is not correct as of the Closing.
(c) Without limiting the generality of the foregoing, from the date hereof
through the Closing Date, unless otherwise agreed in writing by Purchaser,
Seller shall not with respect to the Business, and shall not permit any
Purchased Subsidiary to:
(i) sell, lease, license or otherwise dispose of, or agree to sell,
lease, license or otherwise dispose of, any interest in any of the
Purchased Assets of the Business that are material, individually or in
the aggregate, to the Business, taken as a whole, except for sales of
inventory in the ordinary course of business consistent with past
practice;
(ii) permit, allow or subject any of the Purchased Assets to any
material mortgage, pledge, security interest, encumbrance or lien or
suffer such to be imposed, except for Permitted Liens;
(iii) except in the ordinary course of business, consistent with
past practice or as required by law or pursuant to the terms of a
collective bargaining agreement, increase in any manner the
compensation of, or enter into any new bonus or incentive agreement or
arrangement with, any of the Business' employees or amend any Benefit
Plan or Foreign Plan with respect to any employees of the Business; or
(iv) enter into one or more new agreements or contracts which
require the delivery by it of performance bonds in amounts exceeding,
in aggregate, twenty-five thousand dollars ($25,000);
(v) enter into any agreements other than in the ordinary course of
business; or
(vi) make any capital expenditures exceeding, in the aggregate,
$250,000, except as set forth in Schedule 7.3(c)(vi);
7.4 ACTIONS OF PURCHASER: Purchaser shall use commercially reasonable
efforts to perform and satisfy all conditions to Closing to be performed or
satisfied by Purchaser under this Agreement by the Closing Date or such other
date by which performance is required hereunder.
7.5 PUBLIC ANNOUNCEMENTS: From and after the date hereof and through the
Closing Date, Seller and Purchaser shall consult with each other before issuing
any press releases or
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otherwise making any public statements with respect to this Agreement and the
transactions contemplated hereby.
7.6 NO NEGOTIATIONS. Prior to the Closing, Seller shall not, nor shall it
give its permission to or authorize any officer, director, employee or
representative to, solicit or enter into negotiations or discussions of any kind
with any party, other than Purchaser or Parent, for the purchase and sale of all
or any portion of the Business or any of the Purchased Assets except with regard
to the sale of finished goods inventory in the ordinary course of business.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
8.1 ORGANIZATION AND AUTHORITY: Seller is a corporation duly organized,
validly existing and in good standing under the laws of Wisconsin, and Seller
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, to execute and
deliver this Agreement and all other agreements, instruments and documents to be
delivered by Seller hereunder (the "Related Documents") and to perform the
obligations to be performed by it hereunder and thereunder, and to consummate
the transactions contemplated hereby and thereby.
8.2 PURCHASED SUBSIDIARIES: Except for the corporations listed on Schedule
1.1 (the "Purchased Subsidiaries"), the Business does not currently own any
capital stock or other proprietary interest, directly or indirectly, in any
corporation or other entity or interest in any joint venture, whether or not a
separate legal entity is formed thereby. Schedule 1.1 correctly sets forth the
corporate name and the jurisdiction of incorporation with respect to each
Purchased Subsidiary. Each Purchased Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted and
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the properties owned or
leased by it or the nature of the business conducted by it makes such
qualification necessary except for any non-qualification which does not have a
material adverse effect on the business, operations, properties, prospects or
condition (financial or other) (a "Material Adverse Effect") of the Business.
The complete articles or certificate of incorporation and by-laws of each
Purchased Subsidiary, including in each case all amendments thereto, have been
provided to Purchaser. All the outstanding shares of the capital stock of each
class of each Purchased Subsidiary have been validly issued and are fully paid
and nonassessable and are owned, beneficially and of record, by Seller free and
clear of any Encumbrances. None of the Purchased Subsidiaries has issued any
securities, limited liability company interests or other ownership interests in
violation of any preemptive or similar rights and there are no outstanding (i)
securities or other ownership interests convertible into or exchangeable for any
shares of capital stock or other ownership interest of any of the Purchased
Subsidiaries; (ii) subscriptions, options, warrants, calls, commitments,
preemptive rights or other rights of any kind (absolute, contingent or
otherwise) entitling any third party to acquire or otherwise
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receive from any of the Purchased Subsidiaries any shares of capital stock or
other securities or ownership interests; or (iii) contracts, commitments,
agreements, understandings or arrangements of any kind relating to the issuance
of any capital stock or ownership interests of any of the Purchased
Subsidiaries, any such convertible or exchangeable securities, or any such
subscriptions, options, warrants or rights. There are no shares of stock or
other securities, limited liability company interests or other ownership
interests of the Purchased Subsidiaries reserved for issuance for any purpose.
All capital contributions required to be made to SJBC prior to the Closing have
been made, and there are no remaining obligations of the Business to make
capital contributions to SJBC.
8.3 CORPORATE ACTION; NO CONFLICT: The execution and delivery by Seller of
this Agreement and the Related Documents and Seller's performance of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate action of Seller. This Agreement has been duly and validly
executed and delivered by Seller and is, and each of the Related Documents when
executed and delivered by Seller in accordance with its terms will be, the valid
and binding obligation of Seller, enforceable against Seller in accordance with
their respective terms, except as limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors rights generally. Except as
set forth in Schedule 8.3, neither the execution, delivery or performance by
Seller of this Agreement or any of the Related Documents, nor the consummation
by Seller of the transactions contemplated hereby or thereby, nor compliance by
Seller with any provision hereof or thereof will (i) conflict with or result in
a breach of any provision of the charter or by-laws of Seller or any Purchased
Subsidiary or (ii) violate any provision of law, statute, rule or regulation, or
any order, writ, injunction, permit, judgment or decree of any court or other
governmental or regulatory authority or (iii) result in a breach of, or
constitute a default under (with or without notice, lapse of time or both) or
result in the invalidity of, or accelerate the performance required by or cause
or give rise to any right of acceleration or termination of any right or
obligation pursuant to, or require the consent of the other party to, any
Assigned Contract or any agreement set forth as an exhibit to Seller's Annual
Report on Form 10-K for Seller's last fiscal year or any Quarterly Reports on
Form 10-Q or Current Reports on Form 8-K filed with the Securities and Exchange
Commission since the end of Seller's last fiscal year; (iv) result in the
creation of, or with the passage of time result in the creation of, any
Encumbrance upon any assets or properties of the Business; or (v) require the
Seller or any Purchased Subsidiary to obtain any consent of or make any filing
with any governmental entity or other person (other than as referred to in
clause (iii) above), except as may be required under the HSR Act, except where
the failure to obtain any such consent or make any such filing would have a
Material Adverse Effect on the Business.
8.4 FINANCIAL STATEMENTS AND RELATED MATTERS: Set forth in Schedule 8.4
hereto is an unaudited Statement of Net Assets of the Business as at September
30, 1998 (the "Reference Statement of Net Assets") and related unaudited
statements of income of the Business for the indicated period then ended. Such
financial statements are collectively referred to herein as the "Financial
Statements." The Financial Statements have been prepared from the books and
records of the Business, and the Reference Statement of Net Assets has been
prepared in accordance with (the accounting principles ("Seller's Accounting
Principles") attached as Schedule 8.4, consistently applied. The accounting
books and records
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of the Business are accurate and complete in all material respects. The Business
has no direct or indirect liabilities, losses or obligations of any nature,
whether absolute, accrued, contingent or otherwise, that would be required to be
reflected on a balance sheet or the notes thereto prepared in accordance with
GAAP consistently applied other than (i) liabilities reflected, accrued or
reserved for in the Reference Statement of Net Assets; (ii) liabilities
disclosed in the Schedules to this Agreement; (iii) liabilities incurred in the
ordinary course of business subsequent to the date of the Reference Statement of
Net Assets and not inconsistent with past practice; (iv) liabilities or
performance obligations arising in the ordinary course of business (and not as a
result of a breach or default by the Seller or any Purchased Subsidiary out of
or under agreements, contracts, leases, arrangements or commitments to which the
Seller or a Purchased Subsidiary was a party as of the Balance Sheet Date; or
(v) liabilities under this Agreement.
8.5 REAL PROPERTY:
(a) Schedule 8.5(a) sets forth a list of all Owned Real Property and
all rights of the Business to acquire real property. Except for Permitted Liens
and the matters listed on Schedule 8.5(a) (collectively, the "Permitted Owned
Real Property Exceptions"), Seller or a Purchased Subsidiary has good and
marketable title to the Owned Real Property, free and clear of all Encumbrances
or other matters affecting title.
(b) Schedule 8.5(b) sets forth a list of all Leases. Each Lease is in
full force and effect and all rent and other sums and charges payable thereunder
by Seller or a Purchased Subsidiary are current and no notice of default by
Seller or a Purchased Subsidiary or termination under any Lease is outstanding.
A complete and correct copy of each Lease has been provided to Purchaser. All
material work required to be done by the Business as a tenant on such Real
Property has been duly performed.
(c) The improvements on the Real Property located in Milwaukee,
Wisconsin do not contain any interior or exterior structural defects or any
material defects in the plumbing, electrical, mechanical, heating, ventilating
or air conditioning systems. Such improvements do not contain any conditions
that would constitute a threat to worker health or safety or conditions which
would have a material adverse effect on the ability of the Business to be
conducted at such facility as presently conducted. There has been no damage to
any portion of the Real Property caused by fire or other casualty which has not
yet been fully repaired or restored. All roofs and basements are in good
condition and free of leaks. There has been no notice from any insurance company
requesting the performance of any work or alteration with respect to the Real
Property.
(d) All Real Property has adequate water, sewer and electric supply
for its present use.
(e) To the Knowledge (as hereinafter defined) of Seller, there is no
pending or contemplated annexation or condemnation or similar proceeding
affecting all or any portion of the Real Property, proposed or pending
proceeding to change or redefine the zoning classification of all or any portion
of the Real Property and no pending imposition of
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any special or other assessments for which Purchaser or a Purchased Subsidiary
would be responsible.
8.6 TANGIBLE ASSETS OTHER THAN OWNED REAL PROPERTY: Other than Owned Real
Property, which is the subject of Section 8.5 hereof, Seller and the Purchased
Subsidiaries have good, valid and marketable title to all the material tangible
assets of the Business, except those sold or otherwise disposed of in the
ordinary course of business consistent with Section 7.3(b), free and clear of
all Encumbrances, except for Permitted Liens and those tangible assets subject
to leases as set forth on Schedule 8.7. All material equipment included in the
Purchased Assets is in good working order and condition, ordinary wear and tear
excepted, and has been maintained in accordance with normal commercial practice
in all material respects. Except for the Excluded Assets, the Purchased Assets
comprise all assets necessary to operate the Business as presently conducted in
all material respects.
8.7 CONTRACTS, CUSTOMERS AND SUPPLIERS: (a) To the Knowledge of Seller,
Schedule 8.7 lists all material contracts, agreements, guarantees of payment or
performance, licenses, leases of personal property or conditional sales
contracts and all sales agency, sales representative and severance agreements,
and all employment and consulting agreements providing for annual base payments
in excess of $75,000, relating to or affecting the Business which extend beyond
the Closing Date, other than (i) purchase orders and sales orders entered into
in the ordinary course of business and (ii) contracts which by their terms
terminate or are unconditionally terminable by Seller without penalty within one
year after the date hereof and which individually involve a commitment for less
than $125,000. Except as set forth on Schedule 8.7, Seller and each Purchased
Subsidiary have in all material respects performed all the obligations required
to be performed by them to date, and are not in default in any respect under any
Assigned Contract except for possible defaults which do not in any material
respect impair the ability of the Business to conduct its operations as
heretofore conducted.
(b) There has not been any adverse change and there are no facts known to
Seller (or facts which arise between the date hereof and the Closing) which may
reasonably be expected to indicate that any adverse change may occur in the
business relationship of the Business with any customer or supplier accounting
for more than $500,000 of goods or services provided during the 12 months prior
to the date hereof; a list of the ten largest customers and seven largest
suppliers of the Business (by dollar amounts) over the past 12 months is set
forth in Schedule 8.7. Contact names, phone numbers and addresses for such
customers and suppliers will be provided within five days of the date hereof.
Except as set forth in Schedule 8.7, neither the Seller nor, to its Knowledge,
any officer, director, relative or Affiliate of Seller owns any interest in any
person or entity which is a supplier or customer of the Business (other than
less than 5% of interests in publicly-traded companies) or has any contractual
arrangements with the Business. Neither Seller nor any Purchased Subsidiary is
engaged in material disputes with any of its sales representatives or agents.
Except as set forth on Schedule 8.7, each such sales representative or agent has
remitted to Seller or a Purchased Subsidiary all amounts collected from
customers and owed to Seller nor any Purchased Subsidiary. Except as set forth
on Schedule 8.7, the Business has no liability to Affiliates or third parties
for indebtedness other than trade payables for goods provided in the ordinary
course of business which are current, including without limitation indebtedness
to financial
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institutions or any guaranty of the obligations of any other person; and except
as provided in Section 2.1(j) any such liability, indebtedness or obligation
will be terminated, contributed to capital or otherwise provided for at Seller's
expense on or prior to the Closing Date.
8.8 LITIGATION: Except as set forth on Schedule 8.8, there have not been
during the past three years, nor are there presently, any claims, actions,
suits, or investigations pending, or to the Knowledge of Seller threatened,
against Seller or any Purchased Subsidiary affecting the Business, Purchased
Assets or Assumed Liabilities, or against the transactions contemplated by this
Agreement, at law or in equity or before or by any court or other governmental
agency or instrumentality, domestic or foreign, or any arbitral body an adverse
outcome of which would have a Material Adverse Effect on the Business or a
material adverse effect on the ability of Seller to consummate the transactions
contemplated hereby. Except as set forth on Schedule 8.8, there are no charges
or complaints of discrimination pending before the Equal Employment Opportunity
Commission or any state or local agency with respect to the Business. There is
no outstanding order, injunction or decree affecting the Business or the ability
of Seller to consummate the transactions contemplated hereby.
8.9 COMPLIANCE WITH LAW:
(a) Except as set forth on Schedule 8.9(a), each of Seller, with
respect to the Business, and the Purchased Subsidiaries, is duly complying and
has during the past three years duly complied, in all material aspects, in
respect of its business, operations and properties, with applicable laws, rules,
regulations, orders, building and other codes, zoning and other ordinances,
permits, authorizations, judgments and decrees of all governmental entities.
Except as set forth on Schedule 8.9(a), Seller has no Knowledge of any present
or past failure so to comply or of any past or present events, activities or
practices of the Business which may be construed to indicate interference with
or prevention of continued compliance, in any material respect, with any laws,
rules or regulations or which may give rise to any common law or statutory
liability, or otherwise form the basis of any material claim, action, suit,
proceeding, hearing or investigation against the Business.
(b) Each of Seller, with respect to the Business, and the Purchased
Subsidiaries, has duly obtained all permits, concessions, grants, franchises,
licenses and other governmental authorizations and approvals (collectively,
"Permits") necessary for the conduct of its business; each of the foregoing is
set forth in Schedule 8.9(b) and is in full force and effect; there are no
proceedings pending or, to the Knowledge of the Seller, threatened which may
result in the revocation, cancellation, suspension or modification thereof; and
the consummation of the transactions contemplated hereby will not result in any
such revocation, cancellation, suspension or modification. This Section 8.9 does
not relate to environmental matters, it being the intent of the parties that the
only Section relating to environmental matters shall be Section 8.13.
8.10 EMPLOYEE BENEFIT PLANS:
(a) Schedule 8.10(a) lists all the employee benefit plans, policies
and
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arrangements (whether or not written, insured or self-insured) including,
without limitation, each "employee benefit plan" (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and
each other profit sharing, compensation, fringe benefit, health, life, stock
option, bonus, deferred compensation, excess, supplemental executive
compensation, cafeteria, employee stock purchase, vacation, sickness,
post-retirement, disability, severance, change in control, retention, individual
employment, consulting or other plan, policy, arrangement, trust fund or
agreement established, sponsored, maintained or contributed to (or with respect
to which any obligation to contribute has been undertaken) by Seller or any
ERISA Affiliate during the last six years with respect to active or retired U.S.
employees of the Business or their beneficiaries (the "Benefit Plans"). For
purposes of this Agreement, an "ERISA Affiliate" is any entity that would be
deemed a "single employer" with the Seller under Section 414(b), (c), (m) or (o)
of the Internal Revenue Code of 1986, as amended (the "Code") or Section 4001 of
ERISA.
(b) All Benefit Plans are maintained and operated in all material
respects in accordance with their respective terms and are in compliance in all
material respects with the applicable requirements of law, including without
limitation ERISA and the Code.
(c) Except as set forth on Schedule 8.10(c),each Benefit Plan which is
intended to qualify under Section 401(a) of the Code has received a favorable
determination letter that it is so qualified and that its trust is exempt from
taxation, and Seller is not aware of any facts which caused or could reasonably
be expected to cause such favorable determination letters to be revoked or the
loss of qualification or exemption.
(d) Neither Seller nor any ERISA Affiliate maintains or contributes
to, has maintained or contributed to, has been required to contribute to or has
any liability with respect to a "multi-employer plan," as such term is defined
in Section 414(f) of the Code or Sections 3(37) or 4001(a) of ERISA, with
respect to current or former employees of the Business.
(e) No "reportable event" within the meaning of Section 4043(b) of
ERISA has occurred, or is expected to occur, and the consummation of the
transactions contemplated by this Agreement will not result in a reportable
event. No amounts payable under any Benefit Plan will fail to be deductible for
federal income tax purposes by virtue of Sections 280G of the Code. Except as
set forth on Schedule 8.10(e), neither the Company nor any ERISA Affiliate has
any unfunded liabilities pursuant to any Benefit Plan that is an employee
pension plan under Section 3(2) of ERISA.
(f) Schedule 8.10(f) lists all employee benefit plans maintained by
Seller or the Business (collectively, the "Foreign Plans") for the benefit of
current salaried and hourly non-U.S. employees ("Foreign Participants") and
persons claiming through them, as well as former salaried and hourly non-U.S.
employees of the Business other than a plan (or contribution to a plan) that is
a governmental plan. Each Foreign Plan intended to qualify as tax-registered or
tax-favored plan under a foreign jurisdiction is the subject of a favorable
determination or similar approval, to the extent available, of the applicable
foreign governmental authorities and nothing has occurred or is expected to
occur that impaired or
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could impair such determination or approval or result in the imposition of any
penalty or liability. With respect to each Foreign Plan, the fair market value
of the assets of each funded Foreign Plan, the liability of each insurer for any
Foreign Plan funded through insurance or the book reserve established for any
Foreign Plan, together with any accrued contributions, is sufficient to procure
or provide for the accrued benefit obligations, as of the date of this
Agreement, with respect to all current and former participants in such Foreign
Plan according to the actuarial assumptions and valuations most recently used to
determine employer contributions to such Foreign Plan, which shall be
reasonable, and no transaction contemplated by this Agreement shall cause such
assets or insurance obligations to be less than such benefit obligations. Seller
and each Purchased Subsidiary has performed, in all material respects, all
obligations required with respect to each Foreign Plan and each Foreign Plan is
maintained and operated in all material respects in accordance with its terms
and is in compliance in all material respects with applicable law. Each Foreign
Plan covers solely employees of the Purchased Subsidiaries and does not cover
employees of Seller or any ERISA Affiliate other than the Purchased
Subsidiaries.
(g) All payments required by any Benefit Plan, any Foreign Plan, any
collective bargaining agreement or other agreement, or by law (including,
without limitation, all contributions, insurance premiums, or intercompany
charges) have been made on a timely basis and, with respect to all periods
through the date of the Closing, shall have been made prior to the Closing or
provided for by Seller, as applicable, by full accruals on the financial
statements relating to the Business. Except as contemplated under Sections 12.5
and 12.6 hereunder, the consummation of the transactions contemplated by this
Agreement will not give rise to any liability, including, without limitation,
liability for severance pay, unemployment compensation, termination pay or
withdrawal liability, or accelerate the time of payment or vesting or increase
the amount of compensation or benefits due to any employee or director of the
Business (whether current, former, or retired) or their beneficiaries solely by
reason of such transactions. Neither the Seller nor any ERISA Affiliate, or any
officer or employee thereof, has made any promises or commitments, whether
legally binding or not, to create any additional plan, agreement, or
arrangement, or to modify or change any existing Benefit Plan or Foreign Plan as
it relates to the Business.
8.11 PURCHASED RIGHTS: Except as set forth in Schedule 8.11,
(a) Seller or a Purchased Subsidiary owns, possesses, or has the right
to use all the Purchased Rights. Except as set forth in Schedule 8.11, such
Purchased Rights comprise all intellectual property necessary for the Business
to operate as presently conducted in all material respects.
(b) To the Knowledge of Seller, no product or service manufactured,
marketed, distributed or sold or proposed to be manufactured, marketed,
distributed or sold by the Business, or any intellectual property otherwise used
by the Business, infringes, misappropriates or misuses any rights of any other
person; and there is no pending or, to the Knowledge of Seller, threatened Claim
against Seller, the Business or any Purchased Subsidiary contesting the validity
of or right to use any of the Purchased Rights or any intellectual property
licensed to the Business pursuant to an Assigned Contract. Except as set
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forth on Schedule 8.11, neither the Seller, on behalf of the Business, nor any
Purchased Subsidiary, has asserted any claim against any other person that such
person has violated, infringed, misappropriated or misused any Purchased Right
or any intellectual property licensed to the Business pursuant to an Assigned
Contract, nor, to the Knowledge of Seller, is there any basis for such an
assertion. Invention assignment and confidentiality agreements in the form
previously provided to the Purchaser have been obtained form substantially all
employees of the Business.
8.12 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in Schedule
8.12 and Section 7.3, since the date of the Reference Statement of Net Assets,
the Business has been conducted only in the ordinary course and consistent with
past practice, and since such date neither Seller, with respect to the Business,
nor any Purchased Subsidiary has suffered any Material Adverse Effect on the
Business; suffered any material damage, destruction or casualty loss (whether or
not covered by insurance); granted any increase in the rate or terms of
compensation payable or to become payable to any of its directors, officers or
key employees, except increases occurring in the ordinary course of business in
accordance with its customary practices; amended or granted any increase in the
rate or terms of any employee benefit plan payment or arrangement; entered into
any material agreement except agreements in the ordinary course of business, or
any employment or severance agreement; made any change in its accounting
methods, principles or practices; borrowed or agreed to borrow any funds for
which Purchaser or a Purchased Subsidiary would be liable after the Closing;
paid, discharged or satisfied any claim, liability or obligation in excess of
$250,000, other than the payment, discharge or satisfaction of liabilities and
obligations incurred in the ordinary course of business and consistent with past
practice; prepaid any obligation having a fixed maturity of more than 90 days
form the date such obligation was issued or incurred; not paid, within a
reasonable date of when due, consistent with past practice, any accounts payable
in excess of $250,000 in the aggregate, or sought the extension of the payment
date of any accounts payable in excess of $250,000 in the aggregate; written
down the value of any inventory; permitted or allowed any of its Property or
assets to be subjected to any Encumbrance, except for liens for Permitted
Encumbrances and Encumbrances specifically set forth in the schedules hereto;
written off as uncollectible any notes or accounts receivable in excess of
$250,000; agreed to guaranty the obligations of any other person or entity;
granted any person or entity any power of attorney; canceled any debts or waived
any claims or rights in excess of $100,000; sold, transferred or otherwise
disposed of any of its properties or assets in excess of $100,000 in the
aggregate, except for the sale of inventory in the ordinary course of business
and consistent with past practice; disposed of, abandoned or permitted to lapse
any rights to the use of any Purchased Rights or disposed of or disclosed, or
permitted to be disclosed (except as necessary in the conduct of its business),
to any person other than representatives of Purchaser, any trade secret,
formula, process, know-how or similar information not theretofore a matter of
public knowledge; made any capital expenditures or commitments in excess of
$250,000 in the aggregate for repairs or additions to property, plant, equipment
or tangible capital assets; amended or taken steps to amend the organizational
documents of any Purchased Subsidiary; suffered any loss or become aware of any
prospective loss of any customers, suppliers, distributors, accounts, product
line or sales or management personnel; or agreed, whether in writing or
otherwise, to take any action described in this Section 8.12.
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8.13 ENVIRONMENTAL MATTERS:
(a) To the Knowledge of Seller, the Business and the Purchased Assets
are in compliance with Environmental Requirements, except for such
noncompliances as would not have a Material Adverse Effect on the Business.
"Environmental Requirements" shall mean all federal, state and local statutes,
regulations, and ordinances and the common law concerning pollution or
protection of human health, safety or the environment, including without
limitation all those relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control, or cleanup
of any hazardous materials, substances or wastes, as such requirements are
enacted and in effect on or prior to the Closing Date.
(b) To the Knowledge of Seller and except as set forth on Schedule
8.13, the Business has not received any written notice, report or other
information regarding any actual or alleged material violation of Environmental
Requirements, or any Environmental Liabilities, including any investigatory,
remedial or corrective obligations, relating to the Business or the Purchased
Assets arising under Environmental Requirements, the subject of which would have
a Material Adverse Effect on the Business. For purposes of this Agreement, the
term "Environmental Liabilities" shall mean any claims, judgments, damages
(including punitive damages), losses, penalties, fines, liabilities,
encumbrances, liens, violations, costs, and expenses (including attorneys' and
consultants' fees) of investigation, remediation, monitoring, or defense of any
matter relating to human health, safety, or the environment of whatever kind or
nature by any party, entity, authority which are incurred as a result of (i) the
existence (or alleged existence) prior to or on the Closing Date of materials
regulated under Environmental Requirements ("Hazardous Substances") in, on,
under, at, or emanating from the Real Property, the Purchased Assets, or any
real property formerly owned, leased, operated, or managed by Seller or any
Purchased Subsidiary; (ii) the offsite transportation, treatment, storage, or
disposal (or alleged offsite transportation, treatment, storage, or disposal) of
Hazardous Substances generated by Seller or any Purchased Subsidiary; or (iii)
the violation of or non-compliance with (or alleged violation of or
non-compliance with) any Environmental Requirements by Seller or any Purchased
Subsidiary, or which otherwise arise under Environmental Requirements as a
result (or allegedly as a result) of the acts or omissions of Seller or any
Purchased Subsidiary.
(c) Seller and the Purchased Subsidiaries have all the Permits
necessary for the conduct of the Business and for the operation of or on the
Purchased Assets which are required under the Environmental Requirements, all of
which are set forth on Schedule 8.13 (the "Environmental Permits"). Seller and
the Purchased Subsidiaries are in material compliance with the terms and
conditions of all such Environmental Permits and, to the Knowledge of Seller, no
reason exists why Purchaser and the Purchased Subsidiaries would not be capable
of continued operation of the Business and the Purchased Assets in full
compliance with the Environmental Permits and Environmental Requirements.
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(d) Neither Seller nor any Purchased Subsidiary has contractually, by
operation of law, by Environmental Requirements, or otherwise assumed or
succeeded to any environmental liabilities of any predecessors or any other
person or entity which relate in any way to the Business or the Purchased
Assets.
(e) Except as set forth on Schedule 8.13, there are no conditions
existing with respect to the Business or any Purchased Asset that require, or
which with the giving of notice or the passage of time or both will reasonably
likely require, remedial or corrective action, removal, monitoring, or closure
pursuant to Environmental Requirements.
(f) This Section 8.13 contains the sole and exclusive representations
and warranties of Seller with respect to any environmental matters, including
without limitation any arising under any Environmental Requirements.
8.14 ACCOUNTS RECEIVABLE; INVENTORY; PRODUCT WARRANTY: Except as provided
on Schedule 8.14, the Purchased Receivables represent sales actually made in the
ordinary course of business for goods or services delivered or rendered in bona
fide arm's-length transactions in accordance with the standard credit practices
of the Business, have not been extended or rolled over in order to make them
current, are not subject to counterclaims or setoffs and constitute only valid,
undisputed claims. Except as provided in Schedule 8.14 or reserved for in
Schedule 8.4, the Purchased Inventories do not include any items which are
obsolete, damaged, below standard quality, non-merchantable or slow moving
(i.e., items that are for discontinued or expected to be discontinued product
lines, or items that (A) have not been used or sold within 12 months prior to
the date hereof or (B) are in quantities exceeding the amount that has been used
or sold within that 12-month period). Except for the Telcom product line, which
is dealt with under Section 15.8, Seller has no reason to expect that, after the
Closing, there will be any increase in the rates of claims relating to
warranties for any line of the products sold by the Business from the rate for
that product line reflected in Schedule 8.14. To the Knowledge of Seller,
Schedule 8.14 sets forth in reasonable detail an accurate and complete summary
of all product warranty claims made by customers of the Business from January 1,
1997 to the date hereof and also sets forth a brief description of each express
warranty, service or repair policy applicable to the products sold by the
Business.
8.15 TAX MATTERS:
(a) In relation to the Purchased Subsidiaries and except as set forth
on Schedule 8.15, (i) Seller has paid all Taxes (as hereinafter defined)
required to be paid through the date hereof and will pay all Taxes required to
be paid by it for periods ending on or prior to the Closing Date and has filed
or will, prior to the Closing, file all returns, declarations of estimated Tax,
Tax reports, information returns and statements required to be filed by it prior
to the Closing (other than those for which extensions shall have been granted
prior to Closing) relating to any Taxes with respect to any income, properties
or operations of Seller prior to the Closing (collectively, "Returns"); (ii) as
of the time of filing, the Returns correctly reflected (and, as to any Returns
not filed as of the date hereof, will correctly reflect) the facts regarding the
income, business, assets, operations, activities and status of Seller and any
other
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information required to be shown therein; (iii) Seller has timely paid or, if
not yet due, made provisions on its books and records for all Taxes relating to
the operations of the Business that have been shown as due and payable on the
Returns that have been filed; and (iv) Seller has adequately accrued for any
unpaid Taxes relating to any period ending prior to the Closing Date.
(b) As of the Closing Date, there are no outstanding federal, state or
local tax assessments from any taxing or governmental authority against which
the Purchased Assets have been levied, or which have given rise to any security
interest or other encumbrance thereon.
(c) "Taxes" means all income taxes (including any tax on or based upon
net income, or gross income, or income as specially defined, or earnings, or
profits, or selected items of income, earnings or profits) and all gross
receipts, sales, use, ad valorem, transfer, franchise, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property or
windfall profits taxes, real property tax, alternative or add-on minimum taxes,
customs duties or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any governmental authority.
8.16 LABOR MATTERS: Except as disclosed on Schedule 8.16, (a) neither
Seller nor any Purchased Subsidiary is a party to or subject to any collective
bargaining agreement with any labor organization with respect to any operations
of the Business; (b) there are no agreements with labor unions, work councils or
associations representing employees of the Business, and no unions or other
collective bargaining units have been certified or recognized by any of Seller,
with respect to the Business, or the Purchased Subsidiaries as representing any
of its employees and there are no existing union organizing efforts or
representation questions with respect to any of the employees of the Business;
and (c) there is no labor strike or dispute, grievance, arbitration proceeding,
slowdown or stoppage, or charge of unfair labor practice actually pending,
threatened against or affecting the Business, nor have there been any of the
foregoing within the past three years. Schedule 8.16 sets forth a list of all
employees of the Business with an annual base salary in excess of $100,000 and
all individuals who are consultants and independent contractors of the Business
who have during the last 12 months received, or who are entitled to receive in
the future, annual compensation in excess of $100,000. Purchaser has been
provided with accurate and complete copies of all personnel manuals and policies
of the Business.
8.17 QUESTIONABLE PAYMENTS. To the Knowledge of Seller, none of the Seller,
with respect to the Business, the Purchased Subsidiaries or any director,
officer, agent, employee, or any other person acting on behalf of the Seller,
with respect to the Business, or any of the Purchased Subsidiaries, has,
directly or indirectly, used any corporate funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses; made any unlawful payment to
federal, state, local or foreign government officials or employees or to
political parties or campaigns; established or maintained any unlawful fund of
corporate monies or other assets; made or received any bribe, or any unlawful
rebate, payoff, influence payment, kickback or other payment; given any favor or
gift which is not deductible for federal income tax purposes;
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or made any bribe, kickback, or other payment of a similar or comparable nature,
to any federal, state, local or foreign governmental or non-governmental person,
regardless of form, whether in money, property, or services, to obtain favorable
treatment in securing business or to obtain special concessions, or to pay for
favorable treatments for business or for special concessions secured.
8.18 DISCLOSURE. The representations and warranties contained in Sections
8.1-8.17, inclusive, do not intentionally and fraudulently contain any untrue
statement of a material fact or intentionally and fraudulently omit to state any
material fact necessary in order to make the statements contained therein not
misleading. While Seller has attempted in good faith to cross reference between
Schedules, the parties agree that any item disclosed in any Schedule or listed
in the index to the Data Room established by Seller and provided to Purchaser
prior to the date hereof, has for all purposes and for all subdivisions of
Article VIII been disclosed by Seller to the extent, for such purposes and for
all subdivisions of Article VIII for which a reasonable reference can be drawn
from the item as disclosed in the Data Room or a Schedule hereto; provided, that
no information that has been redacted shall be deemed to have been provided to
Purchaser. Except where information has been specifically identified as being
redacted, all copies of documents provided to Purchaser prior to the date hereof
are true, complete and correct copies of such documents.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants:
9.1 ORGANIZATION AND AUTHORITY: Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of Delaware, and Purchaser
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, to execute and
deliver this Agreement and the Related Documents and to perform the obligations
to be performed by it hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby.
9.2 CORPORATE ACTION; NO CONFLICT: The execution, delivery and performance
by Purchaser of this Agreement and the Related Documents to be delivered by
Purchaser and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on the part of Purchaser. This Agreement has been duly and validly executed and
delivered by Purchaser and is, and each of the Related Documents when executed
and delivered by Purchaser in accordance with its terms will be, the valid and
binding obligation of Purchaser, enforceable in accordance with the terms
thereof, except as limited by bankruptcy, insolvency, reorganization or similar
laws affecting creditors rights generally and except that the term "enforceable"
shall not be deemed to include the availability of the remedy of specific
performance or any other equitable remedy available in the discretion of a
court. Neither the execution, delivery or performance by Purchaser of this
Agreement or any Related Document, nor the consummation by Purchaser of the
transactions contemplated hereby or thereby, nor compliance by Purchaser with
any provision hereof or thereof will (i) conflict with or result in a breach of
any provision of the
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charter or by-laws of Purchaser or (ii) violate any provision of law, statute,
rule or regulation or any order, writ, injunction, permit, judgment or decree of
any court or other governmental or regulatory authority applicable to Purchaser
or (iii) result in a breach of, or constitute a default under (with or without
notice, lapse of time or both) or result in the invalidity of, or accelerate the
performance required by or cause or give rise to any right of acceleration or
termination of any right or obligation pursuant to, or require the consent of
the other party to, any agreement set forth as an exhibit to Parent's Annual
Report on Form 10-K for Parent's last fiscal year or any Quarterly Reports on
Form 10-Q or Current Reports on Form 8-K filed with the Securities and Exchange
Commission since the end of Parent's last fiscal year, to the extent such
agreements will be in effect on the Closing Date; (iv) result in the creation
of, or with the passage of time result in the creation of, any Encumbrance upon
any assets or properties of the Purchaser, or (vii) require Parent to obtain any
consent of or make any filing with any governmental entity, except as may be
required under the HSR Act, except where the failure to obtain any such consent
or make any such filing would have a material adverse effect on the business,
operations, properties, prospects or condition (financial or other) of Parent.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under this Agreement are, at its option,
subject to the fulfillment, on or before the Closing Date, of each of the
following conditions precedent:
10.1 PERFORMANCE OF COVENANTS: Seller shall have performed and complied
with all terms, covenants and conditions required by this Agreement to be
performed or complied with by it on or before the Closing Date.
10.2 REPRESENTATIONS AND WARRANTIES: The representations and warranties of
Seller contained in this Agreement shall be true and correct in all material
respects as of the date hereof and as of the Closing Date as though such
representations and warranties had been made as of the Closing Date, except (a)
with respect to breaches or alleged breaches of the representations and
warranties contained in Article VIII that are included in a Notice of Breach
delivered pursuant to Section 7.1, where the bona-fide claims for a proposed
adjustment to Purchase Price are no greater than an aggregate of $15 million
(the "Walkaway Amount"); (b) to the extent of changes or developments
contemplated by the terms of this Agreement; and (c) for representations and
warranties that speak as of a specific date or time (which need only be true and
correct as of such date or time); and Purchaser shall have received at the
Closing a certificate of an officer of Seller, dated as of the Closing Date, to
such effect.
10.3 OPINION OF COUNSEL: Purchaser shall have received from Seller's
counsel an opinion dated the Closing Date as to matters related to SJBC, in form
and substance reasonably satisfactory to Purchaser
10.4 GOVERNMENT FILINGS; CONSENTS AND APPROVALS: All applicable waiting
periods (including any extensions thereof) required under the HSR Act and, all
equivalent regulations which require filings to be made in respect of the
Purchased Subsidiaries, shall have expired
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or been terminated, without the threat or initiation of legal action by the
relevant government authority. All other required governmental and third-party
consents and approvals and all Permits necessary for Purchaser to operate the
Business in all material respects as conducted by Seller on the date hereof
shall have been obtained without the imposition of terms that would have an
adverse effect on Purchaser or the Business.
10.5 NO PROCEEDINGS: There shall not be pending or threatened, any claim,
suit, action or other proceeding brought by a governmental agency before any
court or governmental agency, seeking to prohibit or restrain the transactions
contemplated by this Agreement or seeking damages in connection therewith.
10.6 AUTHORIZATION: All action necessary to authorize the execution,
delivery and performance by Seller of this Agreement and each of the Related
Documents and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by Seller, and Seller shall have
full power and right to consummate the transactions contemplated hereby and
thereby.
10.7 SECRETARY'S CERTIFICATE: Seller shall have delivered to Purchaser a
certificate of the Secretary or Assistant Secretary of Seller as to the
corporate resolutions authorizing the execution and delivery of this Agreement
and the transactions contemplated thereby and the incumbency and authority of
the person(s) signing this Agreement and the Related Documents for Seller.
10.8 RESIGNATION. Purchaser shall have received the written evidence of the
resignation or removal of those persons referred to in Section 5.1(f) from all
positions with any of the Purchased Subsidiaries.
10.9 RELOCATION OF R&D LABORATORY. The equipment listed in Schedule
1.1(a)(iii) and the 10 employees connected therewith shall have been relocated
to the Keefe Avenue facility.
10.10 ACCOUNTS RECEIVABLE AGING. Purchaser shall have received a true,
complete and correct accounts receivable aging of the Business as the last month
end prior to the Closing Date.
10.11 TITLE INSURANCE. Purchaser shall have obtained owners policies of
title insurance on the Owned Real Property in amounts, and containing only such
exceptions, as are satisfactory to Purchaser.
10.12 TAXES FOR JOHNSON CONTROLS BATTERY (U.K.) LTD. Seller shall provide
Purchaser with evidence that it has made estimated tax payments equal to its
pro-rated tax liability for the operations of Johnson Control Batteries (U.K.)
Ltd. through the Closing, which shall have been made within five days prior to
the Closing Date.
10.13 FINANCING. Purchaser shall have obtained financing for the
acquisition and ongoing operations of the Business on terms acceptable to
Purchaser.
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10.14 SUPPLY ARRANGEMENTS. At Purchaser's election, Seller and Purchaser
shall have entered into a five-year supply arrangement pursuant to which
Purchaser may purchase lead for the Business on the same terms as Seller is able
to purchase it on the date hereof; provided, that if any such lead is provided
to Seller by third party providers on the date hereof pursuant to supply
agreements having a term of less than five years from the Closing Date,
Purchaser shall have the right to "piggyback" on any renewals of Seller's
existing agreements with those suppliers upon the same terms and conditions as
Seller for up to a total of five years. At Purchaser's election, Seller and
Purchaser shall have entered into an agreement pursuant to which Seller would
add the capital equipment it would need to supply Purchaser's needs for poly
jars for the Business for a minimum of five years at prices in effect on the
date hereof and tooling to produce poly jars for such period at an agreed upon
price.
10.15 OTHER AGREEMENTS. Seller and Purchaser shall have entered into
agreements providing for the continuation of all service, license, supply and
other agreements and arrangements between Seller, its ultimate parent company or
any of their respective Affiliates and the Business, other than with respect to
back-office services, on terms reasonably acceptable to Purchaser and Seller.
These arrangements will include, among other things, an agreement having a term
of at least five years concerning the provision of technical services, products,
distribution and licenses regarding industrial and SLI batteries to SJBC, a
distribution agreement with Johnson Controls S.P.A., a license or sub-license of
the Lemulsen patent and other trademark and technology license agreements.
Seller and Purchase shall have also entered into the Transition Services
Agreement referred to in Section 13.13.
10.16 CHINA. If all conditions to Closing are satisfied other than
conditions with respect to SJBC, then, notwithstanding anything contained in
this Agreement to the contrary:
(a) the Closing shall proceed as to all components of the Business
other than SJBC;
(b) all representations, warranties, covenants, conditions,
indemnities and other provisions of this Agreement (and any other agreements
entered into between Seller and Purchaser at the Closing) relating to SJBC shall
continue in full force and effect until the consummation of the acquisition of
SJBC by Purchaser (the "SJBC Closing"); provided, that either party may
terminate the obligation of Purchaser and Seller to consummate the SJBC Closing
if the SJBC Closing has not occurred on or prior to the close of business on
November 23, 1999 or such other date as the parties may agree;
(c) Purchaser, Seller and their respective Affiliates shall enter into
all interim agreements reasonably necessary for the business of SJBC to continue
being conducted as conducted on the date hereof, on terms reasonably agreeable
to the parties;
(d) on the Closing Date, the cash portion of the Purchase Price
payable by Purchaser shall be $120 million, and the assets and liabilities of
SJBC shall be excluded from the Reference Statement of Net Assets and the
Closing Statement of Net Assets for the purpose of the post-closing adjustment
pursuant to Article IV;
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(e) prior to the SJBC Closing, SJBC shall be permitted to manufacture,
sell and distribute industrial batteries in China and elsewhere in the world as
provided for in existing agreements between SJBC and Seller on behalf of the
Business;
(f) prior to the SJBC Closing, Seller shall not permit SJBC to make
any dividends or distributions, and shall cause SJBC to apply all cash generated
by the SJBC business in excess of normal operational needs to (i) capital
expenditures required under the joint venture agreement of SJBC or otherwise
approved by Purchaser and (ii) the repayment of third-party indebtedness and
intercompany trade payables owing to Seller and its Affiliates;
(g) no portion of the Purchase Price will be allocated to SJBC until
after the SJBC Closing;
(h) at the SJBC Closing, Purchaser shall pay the remaining $15 million
cash portion of the initial Purchase Price to Seller, which shall be subject to
adjustment as provided in Article IV based on a separate Closing Statement of
Net Assets being prepared for SJBC;
(i) at the SJBC Closing, the actions contemplated by Article V to have
taken place at the Closing with respect to SJBC shall take place; and
(j) on the SJBC Closing Date, the agreements and arrangements referred
to in Section 10.15 with respect to the SJBC portion of the Business shall be
entered into.
ARTICLE XI
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement are, at its option, subject
to the fulfillment, on or before the Closing Date, of each of the following
conditions precedent:
11.1 PERFORMANCE OF COVENANTS: Purchaser shall have performed and complied
with all terms, covenants and conditions required by this Agreement to be
performed or complied with by it on or before the Closing Date.
11.2 REPRESENTATIONS AND WARRANTIES: The representations and warranties of
Purchaser contained in this Agreement shall be true and correct in all material
respects as the date hereof and as of the Closing Date, as though made on and as
of the Closing Date, except to the extent of changes or developments
contemplated by the terms of the Agreement, and except for representations and
warranties that speak as of a specific date or time (which need only be true and
correct as of such date or time); and Seller shall have received at the Closing
a certificate of an officer of Purchaser, dated as of the Closing Date, to such
effect.
11.3 NOTICE OF BREACH: There shall not have been delivered by Purchaser
Notices of Breach under Section 7.1 which set forth bona-fide claims for
proposed adjustments to the Purchase Price which are greater in the aggregate
than the Walkaway Amount.
11.4 GOVERNMENT FILINGS: All applicable waiting periods (including any
extensions
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thereof) required under the HSR Act and all equivalent laws and
regulations which require filings to be made in respect of the Purchased
Subsidiaries, shall have expired or been terminated, without the threat or
initiation of legal action by the relevant government authority.
11.5 AUTHORIZATION: All action necessary to authorize the execution,
delivery and performance of this Agreement and each of the Related Documents,
and the consummation of the transactions contemplated hereby and thereby shall
have been duly and validly taken by Purchaser, and Purchaser shall have full
power and right to consummate the transactions contemplated hereby and thereby.
ARTICLE XII
EMPLOYEE MATTERS
12.1 SCOPE OF SECTION: This Article XII contains the covenants and
agreements of the parties with respect to (a) the status of employment of the
employees of Seller employed in the Business (the "Employees"), and (b) employee
benefit plans.
12.2 EMPLOYMENT STATUS: Purchaser shall offer employment to all of the
Employees who are Active Employees of the Business on the Closing Date (except
those employees listed on Schedule 12.2, who shall be treated in the manner
described in such Schedule); provided, however, any such offer of employment
shall be contingent on the consummation of the Closing. Employees who are on an
approved leave of absence and who have a right to return to work in the Business
or whose employment is covered by a collective bargaining agreement and who are
on layoff with a right under such agreement to return to work in the Business or
who are on short-term (including pregnancy leave) or military leave are to be
considered actively employed, but that Employees on long-term medical and/or
workers compensation disability, and Employees whose employment has terminated
or will terminate prior to the Closing Date are not to be considered actively
employed. For the purposes of this Agreement (i) the terms "right to return to
work", "short-term disability", "long-term disability", and "pregnancy leave"
shall be construed in accordance with the personnel policies of the Business
covering Employees as of the Closing Date (if applicable), and (ii) Employees
who are actively employed in the Business on the Closing Date, as herein
defined, shall be referred to as "Active Employees". Active Employees who
affirmatively accept Purchaser's offer of employment are hereinafter
collectively called "Transferred Employees" and all Employees who are not
Transferred Employees are hereinafter collectively called "Retained Employees."
Notwithstanding the foregoing, nothing herein shall be construed as to prevent
Purchaser from terminating the employment of any Transferred Employee at any
time after the Closing Date for any reason (or no reason). Subject to applicable
law and to the terms of any collective bargaining agreement that Purchaser
assumes or is required to assume as a result of this Agreement or under
applicable law, as of the Closing Date, Purchaser shall offer employment to each
Active Employee at a base salary level equivalent to his/her current base salary
and shall provide employee benefits, including, without limitation, medical and
dental benefits, which are comparable to those benefits provided generally by
Purchaser to its employees who are not Transferred Employees. Notwithstanding
the foregoing, the parties hereto acknowledge that, subject to the terms of any
collectively bargaining agreement
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assumed by Purchaser under Section 12.8, Purchaser retains, in its sole
discretion, the right to amend and/or terminate any or all of its employee
benefit plans or programs from time to time. Seller shall deliver to Purchaser
as of the Closing Date all personnel files relating to Transferred Employees.
12.3 PRIOR SERVICE. With regard to non-represented Transferred Employees
who performed at least one year of service with Seller prior to the Closing,
Purchaser shall cause each employee benefit plan or compensation arrangement
established, maintained or contributed to by Purchaser to grant any such
Transferred Employee credit for all service with Seller for purposes of
eligibility and vesting (and not for benefit accrual purposes) with respect to
any employee pension benefit plan, as defined in Section 3(2) of ERISA, that is
intended to be qualified under Section 401(a) of the Code, and, to the extent
consistent with Purchaser's plans and policies, for purposes of eligibility and
determining the amount of any benefit with respect to any vacation program and
any employee welfare benefit plan as defined in Section 3(1) of ERISA
(including, without limitation, Purchaser's severance plans and policies in
effect from time to time).
12.4 VACATION. As of the Closing Date, Purchaser shall assume all
obligations of Seller to Transferred Employees for any accrued vacation pay
entitlement, provided that such obligations shall have been accrued on the
Closing Statement of Net Assets.
12.5 PENSION PLANS: The Johnson Controls Pension Plan (the "U. S. Salaried
Pension Plan") covers substantially all current non-represented Employees of the
Business who are employed in the United States. The Johnson Controls Pension
Plan Battery Division Hourly Employees (the "U. S. Hourly Pension Plan") cover
substantially all current represented Employees of the Business who are employed
in the United States. Effective as of the Closing Date, all Active Employees of
the Business who have completed at least one year of service as of the Closing
Date (i) shall be vested in their accrued benefit earned through the Closing
Date, and (ii) be eligible for a normal, early or deferred vested retirement
benefit under the U. S. Salaried Pension Plan or the U. S. Hourly Pension Plan,
as applicable, based upon such Employees having terminated employment with
Seller on the Closing Date, and such Employee's age and years of service under
the applicable plan as of that date. Distribution of the normal, early or
deferred vested retirement benefit accrued by any Active Employee, including
without limitation, the time of benefit payment and the form in which the
benefit is payable, shall be determined in accordance with the applicable terms
of the U. S. Salaried Pension Plan or U. S. Hourly Pension Plan.
12.6 DEFINED CONTRIBUTION PLANS:
(a) The accounts under the Johnson Controls Savings Plan of all Active
Employees of the Business who participate in such Savings Plan on the Closing
Date shall be fully vested as of the Closing Date and shall be distributable
according to the terms of such plan. Seller acknowledges that on and after the
Closing Date the account balances of such Active Employees shall be
distributable from such Savings Plan in accordance with Section 401(k)(10) of
the Code.
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(b) Purchaser shall permit any Transferred Employee who has an account
balance under the Savings Plan (a "Participant") to rollover (whether by direct
or indirect rollover, as selected by such Participant) his or her "eligible
rollover distribution" (as defined under Section 402(c)(4) of the Code) in the
form of cash, a promissory note (as described below) or any combination thereof
from the Savings Plan to a retirement plan maintained by Purchaser intended to
qualify under Section 401(a) of the Code and which contains a cash or deferred
feature under Section 401(k) of the Code ("Purchaser 401(k) Plan"). Purchaser
401(k) Plan shall not impose any waiting periods, service requirements or other
limitations that would prohibit any Participant from rolling over an eligible
rollover distribution from the Savings Plan into Purchaser 401(k) Plan. Seller
and the Savings Plan shall not place any Participant's plan loan into default or
declare a default with respect to any plan loan so long as such Participant
transfers his or her account balance under the Savings Plan, together with the
promissory note evidencing the plan loan, together with the applicable loan
documentation, to Purchaser 401(k) Plan through a direct rollover. Such loan
shall be assumed and continued by Purchaser 401(k) plan in a manner
substantially similar to the Savings Plan. Purchaser shall amend Purchaser
401(k) Plan and Seller shall amend the Savings Plan to the extent necessary in
order to effectuate the transactions contemplated under this Section 12.6.
Seller and Purchaser shall cooperate with each other (and cause the trustees of
the Savings Plan and Purchaser 401(k) Plan to cooperate with each other) with
respect to the rollover of the distributions to the Participants.
12.7 TAX-FREE SPENDING PLANS: The accounts under the Johnson Controls
Tax-Free Spending Plan of all Active Employees who participate in such Spending
Plan on the Closing Date, shall be available according to the terms of such plan
for the reimbursement of eligible claims incurred while the Active Employee was
covered under the plan.
12.8 UNION CONTRACTS: Purchaser shall assume all collective bargaining
agreements and union affiliations in effect with any Purchased Subsidiary.
Purchaser acknowledges that at Closing it will become a successor employer under
such collective bargaining agreements and/or union affiliations and agrees to
assume, perform and discharge all obligations of Seller under such agreements
upon Closing solely with respect to periods on and after the Closing Date.
Seller acknowledges that it shall retain any and all obligations and liabilities
relating to the Benefit Plans for Active Employees for periods prior to Closing
whose employment is covered by a collective bargaining agreement and that
Purchaser shall be entitled, under any such collective bargaining agreement, to
offset any benefit offered to such represented Employees by the same type of
benefit required to be paid to such represented Employees from any Benefit Plan
in order to avoid duplication of benefits.
12.9 WELFARE BENEFIT PLANS - INTERIM SERVICES: Seller agrees, as an
accommodation to Purchaser, that Purchaser may elect at any time prior to
Closing to have Seller continue to operate its 401(k), medical, dental, tax-free
spending, life insurance and disability plans ("Welfare Benefits") for the
benefit of the Transferred Employees during an interim period (the "Interim
Period") commencing on the Closing Date, and ending, for such benefits, on the
earlier of a date specified by Purchaser for such benefits or the first day of
Purchaser's first fiscal quarter coinciding with the last day of or next
following the end of the six (6) month period after the Closing Date; provided
that Transferred Employees shall not be eligible for
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a matching contribution under Seller's 401(k) plan with respect to periods on
and after the Closing Date. Notwithstanding the foregoing, Purchaser may elect
to have Seller continue to provide Welfare Benefits to the Transferred Employees
with or without 401(k) benefits. The purpose of this arrangement is to
facilitate benefit coverage until Purchaser is able to establish successor plans
for the Business. The parties agree that Purchaser is fully responsible for
benefits which are payable after the Closing Date as the result of the continued
operation of these plans for the Business. This Section 12.9 shall not be
construed to impose upon Seller any liability or responsibility under Seller's
or the Business plans except as expressly set forth in this Agreement.
Notwithstanding the foregoing, Seller shall maintain and operate such Welfare
Benefits in compliance with applicable law including, without limitation, ERISA
and the Code. During the Interim Period such Welfare Benefits shall be provided
to such Transferred Employees, new hires and their respective eligible
dependents through the Seller's existing plans and shall be identical to the
benefits afforded such individuals under Seller's applicable Welfare Benefit
plans immediately prior to the Closing Date, subject to any general amendments
or modifications made by the Seller to such Welfare Benefits. Solely with
respect to the Transferred Employees, Purchaser agrees to pay Seller, or if so
determined by Seller, any administrative representative of Seller, the premium
rates and other direct costs actually payable or incurred under, or
contributions made to, Seller's or the Business Welfare Benefit plans maintained
by Seller under this Section 12.9 for the Transferred Employees plus any
reasonable third party administrative service fees related to such premiums or
direct costs as well as any reasonable and necessary related administrative and
other expenses incurred by Seller for any such continued coverage thereunder.
12.10 EMPLOYMENT AGREEMENTS. Prior to the Closing Date, Seller shall use
its best efforts to cause the termination of all agreements, effective on the
Closing, between any Employee and Seller which permits any such Employee to
return to the employ of Seller within the two (2) year period following the
Closing Date and Seller shall use its best efforts to obtain the consent of any
such Employee to the termination. Purchaser will offer to each of those
Employees the opportunity to enter into employment or severance agreements with
Purchaser, effective as of the Closing Date, on mutually agreeable terms.
ARTICLE XIII
OBLIGATIONS AFTER CLOSING
13.1 ACCESS: In connection with any of the Retained Liabilities or any
financial audit of Seller or any Claim, tax audit or other governmental
investigation of Seller for any matter relating to any period prior to the
Closing, or for any other reasonable and lawful purpose, Purchaser shall, upon
request, permit Seller and its representatives to have access, at reasonable
times during normal business hours and in a manner which is not unreasonably
disruptive to the operations of Purchaser, to the Purchased Records and work
papers, books and records of Purchaser relating to the Business. Purchaser shall
maintain in an orderly manner, and shall not dispose of, the Purchased Records
or such work papers, books and records during the six year period beginning with
the Closing without Seller's consent. Following the expiration of such six-year
period, Purchaser may dispose of the Purchased Records or such work papers,
books and records at any time upon giving 90 days prior written notice to
Seller, unless Seller agrees to take possession thereof within such 90 days at
no
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expense to Purchaser.
13.2 ALLOCATION OF TAXES:
(a) All Taxes related to the Business accrued or accruable with
respect to events occurring prior to the Closing Date shall be borne by Seller
except as accrued on the Closing Statement of Net Assets. For this purpose, the
Closing Date shall be treated as the last day of a taxable period, whether or
not the taxable period in fact ends on such period. All Taxes related to the
Business accrued or accruable with respect to events occurring after the close
of business on the Closing Date will be borne by Purchaser.
(b) Except as accrued on the Closing Statement of Net Assets, the real
and personal property Taxes with respect to any Purchased Assets shall be
prorated based on the ratio of number of days in the pre-Closing period to the
number of days in the actual taxable period with respect to which Tax is
assessed, irrespective of when such Taxes are due, become a lien or are
assessed. Sales and use Taxes shall be deemed to accrue as property is
purchased, sold, used or transferred. All other Taxes shall accrue in accordance
with generally accepted accounting principles.
(c) Purchaser and Seller shall each pay one-half of all transfer Taxes
(including, without limitation, documentary, stamp gross receipts, registration,
conveyance, excise, records and similar Taxes) arising out of, in connection
with, or attributable to the transactions contemplated by this Agreement.
13.3 TRANSITION SERVICES: For a reasonable period of time following the
Closing, Seller agrees to provide to Purchaser such support services as may be
required for the transition of the Business to Purchaser. The terms of such
transition services shall be mutually agreed and set forth in a separate
Transition Services Agreement to be executed as of the Closing Date.
13.4 POST-CLOSING PAYMENTS: From and after the Closing Date, Purchaser
shall pay and perform, as and when due, the Assumed Liabilities, and Seller
shall pay and perform, as and when due, all liabilities and obligations relating
to the Business other than Assumed Liabilities, regardless of whether such
obligations or liabilities arise before or after the Closing.
13.5 FURTHER ASSURANCES: From time to time after the Closing, without
further consideration, the parties shall cooperate with each other and shall
execute and deliver instruments of transfer or assignment, or such other
documents to the other party as such other party reasonably may request to
evidence or perfect Purchaser's right, title and interest to the Purchased
Assets, and otherwise carry out the transactions contemplated by this Agreement.
13.6 ORIFICE PASTING MACHINES. Purchaser shall not use the orifice pasting
machines included in the Purchased Assets or acquired pursuant to the following
sentence for the manufacture of starting, lighting or ignition batteries other
than in China, and shall not dispose of such machines except in connection with
a sale of its industrial battery business in which
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the purchaser agrees to be bound by the provisions of this sentence. Seller
shall supply Purchaser from time to time after the Closing with such additional
orifice pasting machines as Purchaser may request for a price equal to the
manufacturer's price plus 10%.
ARTICLE XIV
NOTICES
All notices, consents, approvals or other notifications required of the
parties under this Agreement shall be in writing and shall be deemed properly
served if delivered personally or sent by registered or certified mail (return
receipt requested), facsimile or nationally-recognized courier or overnight
delivery service addressed to such other party at the address set forth below,
or at such other address as may hereafter be designated by either party in
writing, and shall be deemed delivered (i) five business days after being sent
by mail or (ii) when actually delivered if sent by mail, facsimile, courier or
overnight delivery service (or the next business day if delivered after regular
business hours or on a Saturday, Sunday or holiday).
(a) If to Seller:
Johnson Controls, Inc.
5757 North Green Bay Avenue
Milwaukee, WI 53209
Attention: Vice President and General Counsel
Facsimile # 414-228-2077
(b) If to Purchaser or Parent:
C&D TECHNOLOGIES, INC.
1400 Union Meeting Road
Blue Bell, Pennsylvania 19422
Attention: Chairman
Facsimile # 215-619-7841
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attention: Steven L. Kirshenbaum, Esq.
Facsimile # 212-969-2900
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ARTICLE XV
FURTHER COVENANTS
15.1 COOPERATION BY PURCHASER: In the event Seller is required to defend
against, or desires to prosecute, any action, suit or proceeding arising out of
a claim pertaining to the business or operations of the Business prior to the
Closing Date, Purchaser shall provide such assistance and cooperation,
including, without limitation, witnesses and documentary or other evidence as
may reasonably be requested by Seller in connection with its defense. Seller
shall reimburse Purchaser for its reasonable out-of-pocket expenses incurred in
providing such assistance and cooperation.
15.2 COOPERATION BY SELLER: In the event Purchaser is required to defend
against, or desires to prosecute, any action, suit or proceeding arising out of
a claim pertaining to a liability assumed or asset acquired by Purchaser
pursuant to this Agreement relating to the business or operations of the
Business, Seller shall provide such assistance and cooperation, including
without limitation, witnesses and documentary or other evidence, as may
reasonably be requested by Purchaser in connection with its defense. Purchaser
shall reimburse Seller for its reasonable out-of-pocket expenses incurred in
providing such assistance.
15.3 COOPERATION ON TAX, ACCOUNTING AND OTHER MATTERS:
(a) Purchaser and Seller agree to furnish or cause to be furnished to
each other, upon request, as promptly as practicable, such information
(including access to books and records) and assistance relating to the Business
as is reasonably necessary for the filing of any Return, for the preparation for
any audit, for the prosecution or defense of any claim relating to any proposed
adjustment with respect to Taxes, for year-end accounting requirements and any
reports or documents to be filed with any regulatory agency or for any other
reasonable purpose. Neither Purchaser nor Seller shall agree to settle or permit
the settlement of any Tax liability or compromise any claims with respect to
Taxes, which settlement or compromise may materially affect the liability for
Taxes (or right to Tax benefits of the other party, without such other party's
prior consent, which consent shall not be unreasonably withheld.
(b) Purchaser and Seller agree to retain or cause to be retained all
books and records pertinent to the Business (including the Returns, documents
and records relating to the assets and properties of both) until the applicable
period for assessment under applicable law (giving effect to any and all
properly claimed and valid extensions or waivers) has expired, and to abide by
or cause the compliance with all record retention agreements entered into with
any governmental or taxing authority.
(c) Purchaser and Seller shall cooperate with each other in the
conduct of any audit or other proceedings involving the Business for any Tax and
shall execute and deliver such powers of attorney and other documents as are
necessary to carry out the intent of this Section 15.3.
(d) Purchaser shall have the right to timely prepare and file, and
cause to
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be timely prepared and filed when due, any Tax return that is required to
include the operations, ownership, assets or activities of the Purchased
Subsidiaries for any period ending on or prior to the Closing Date to the extent
such Tax returns are not filed as of the Closing Date.
(e) Purchaser and Seller will, upon request, provide the other with
all information that is required to report pursuant to Section 6043 of the Code
and all Treasury Department Regulations promulgated thereunder.
15.4 CONFIDENTIALITY:
(a) Purchaser acknowledges that all information provided to any of it
and its Affiliates, agents and representatives by Seller and its Affiliates,
agents and representatives is subject to the terms of a confidentiality
agreement between or on behalf of Seller and Purchaser (the "Confidentiality
Agreement"), the terms of which are hereby incorporated herein by reference.
Effective upon, and only upon, the Closing, the Confidentiality Agreement shall
terminate; provided, however, that Purchaser acknowledges that the
Confidentiality Agreement shall terminate only with respect to information
provided to any of Purchaser and its Affiliates, agents or representatives that
relates primarily to the Business or otherwise is used in the ordinary course of
business of the Business; and provided further, however, that Purchaser
acknowledges that any and all information provided or made available to any of
it and its Affiliates, agents and representatives by or on behalf of the Sellers
(other than information relating primarily to Purchased Assets or the Business)
shall remain subject to the terms and conditions of the Confidentiality
Agreement after the Closing Date.
(b) Purchaser agrees that, after the Closing Date, Purchaser shall,
and shall use all reasonable efforts to cause its directors, officers,
employees, advisors and Affiliates to, keep the Seller Information (as defined
below) confidential following the Closing Date, except that any such Seller
Information required by law or legal or administrative process to be disclosed
may be disclosed without violating the provisions of this Section 15.4. For
purposes of this Agreement, the term "Seller Information" shall mean all
information concerning the Seller or its Affiliates, including (A) any trade
secrets, know-how and other confidential technical, business and financial
information, other than information that relates primarily to the Business or
the Purchased Assets or otherwise is used in the ordinary course of business of
the Business and other than any such information that is available to the public
on the Closing Date, or thereafter becomes available to the public other than as
a result of a breach of this Section 15.4(b).
(c) Seller agrees that, after the Closing Date, Seller shall, and
shall use all reasonable efforts to cause its directors, officers, employees,
advisors and Affiliates to, keep the Purchaser Information (as defined below)
confidential following the Closing Date, except that any such Purchaser
Information required by law or legal or administrative process to be disclosed
may be disclosed without violating the provisions of this Section 15.4. For
purposes of this Agreement, the term "Purchaser Information" shall mean all
information concerning the Business or the Purchaser or its Affiliates,
including any trade secrets, know-how and other confidential technical business
and financial information, other than
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information that is used in the ordinary course of business of Seller and other
than any such information that is available to the public on the Closing Date,
or thereafter becomes available to the public other than as a result of a breach
of this Section 15.4(c).
15.5 COVENANT NOT TO COMPETE: (a) In consideration of the benefits to
Seller hereunder and in order to induce Purchaser to enter into this Agreement,
each Seller hereby covenants and agrees that for a period of five (5) years
after the Closing Date, Seller shall not, and shall cause its majority owned
Affiliates to not, directly or indirectly, anywhere in the world, engage in,
conduct, manage, operate or control, or participate, in any manner whatsoever,
in the ownership, management, operation or control of, any business which
competes with the Business as it is conducted as of the Closing Date, except
that this non-compete obligation shall not apply as follows:
(b) The provisions of this Section 15.5 shall not preclude Seller from
acquiring control of an entity which has as a portion of its business which
competes with the Business (the "Competing Business"), but which primarily is
engaged in other lines of business; provided further, however, that in the event
Seller directly or indirectly acquires such a Competing Business during such
period, then whatever entity has acquired such Competing Business shall (i)
limit the competing Business solely to the production of competing products
which the Competing Business was obligated to produce pursuant to contracts
which were entered into prior to, and not in anticipation of such acquisition,
it being understood and agreed that the Competing Business will not renew any
such contract upon expiration of the term or any extended term in effect at the
time of such acquisition and (ii) discontinue the Competing Business or dispose
of the Competing Business to a non-affiliated entity within twelve (12) months
of the date of such acquisition. Purchaser shall be offered the right to acquire
the Competing Business prior to the time it is offered to any other person or
entity; if Purchaser declines to acquire the Competing Business, Seller may then
offer it for sale to other persons or entities on terms that are, in the
aggregate, no more favorable to the acquirer of the Competing Entity than those
that were offered to Purchaser.
(c) The provisions of this Section 15.5 shall not preclude Seller from
owning or participating in joint ventures in existence on the date hereof which
continue to operate industrial battery businesses in India, Latin America or
Mexico, in the same fashion as of the date hereof.
(d) Buyer acknowledges that nothing hereunder precludes Seller's
ability to develop, manufacture or sell batteries, including AGM batteries, for
starting, lighting or ignition.
(e) The parties hereto intend that the covenant contained in this
Section 15.5 shall be deemed a series of separate covenants for each appropriate
jurisdiction. If, in any judicial proceeding, a court shall refuse to enforce
all the separate covenants deemed included in this Section 15.5 on grounds that,
taken together, they cover too extensive a geographic area, the parties intend
that those covenants (taken in order of the least populous jurisdictions) which,
if eliminated would permit the remaining separate covenants to be enforced in
that proceeding, shall, for the purpose of such proceeding, be deemed eliminated
from the
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provisions of this Section 15.5.
15.6 NON-SOLICITATION OF EMPLOYEES. Neither Seller, nor any of their
respective Affiliates, shall directly or indirectly, for itself or on behalf of
any other person, hire any employee of Purchaser or the Business or Parent, as
the case may be, or any of their respective subsidiaries or induce or attempt to
induce any such employee to leave his or her employment. Neither Purchaser,
Parent nor the Business shall, directly or indirectly, for itself or on behalf
of any other person, hire any employee of Seller's remaining Battery business,
or induce or attempt to induce any such employee to leave his or her employment.
These reciprocal objections shall continue for a period of three years from the
date hereof, except as the parties may otherwise agree. The foregoing shall not
apply to the making of general solicitations for employment (as opposed to the
hiring of individuals recruited through general solicitations), or to employees
who have not been employed by Parent or Seller, or any of their respective
affiliates, as the case may be, for ninety (90) days.
15.7 NON-SOLICITATION OR INTERFERENCE WITH CUSTOMERS AND SUPPLIERS. Neither
Seller nor any of its Affiliates shall, directly or indirectly, for itself or on
behalf of any other person, solicit, divert, take away or attempt to take away
any of Purchaser's customers with respect to the Business or the patronage of
any such customers with respect to the Business or in any way interfere with,
disrupt or attempt to disrupt any then existing relationships between Purchaser
and any of such customers or contact or enter into any business transaction with
any such customers or suppliers or other persons for any such purpose at any
time within five (5) years from the date hereof.
15.8 PRODUCT REPLACEMENT AND REPAIRS. Purchaser will honor all outstanding
warranties and guaranties and other claims for replacements and repairs,
relating to products or services of the Business shipped, sold or furnished by
Seller prior to the Closing Date ("Warranty Claims"). A customer's rights under
Warranty Claims shall be determined by Purchaser pursuant to the Seller's
policies or contractual obligations relating to such customer as of the Closing
Date. The cost of honoring Warranty Claims shall be computed at Purchaser's then
generally prevailing labor rates and prices. Seller shall reimburse Purchaser,
upon invoice, for the cost of all Warranty Claims in excess of the amount of the
reserves specifically included therefor on the Closing Balance Sheet that are
incurred within four years after the Closing Date for the Telcom product line.
Purchaser shall be responsible for the cost of all other Warranty Claims.
Purchaser shall, upon request, provide Seller with reasonable documentation
related to Warranty Claims for which reimbursement is sought hereunder.
15.9 CERTAIN ACCOUNTS RECEIVABLE. If upon 120 calendar days after the
Closing Date any accounts receivable included in the Purchased Assets remain
uncollected and at least 60 days past due of their respective terms, Purchaser
may assign such accounts receivable to Seller by written notice of such
assignment to Seller specifying the accounts and amounts involved. Seller shall
thereupon pay to Buyer in cash the face amount of such assigned accounts
receivable within 10 calendar days. Both parties shall thereafter continue to
cooperate in Seller's collection of such accounts receivable.
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ARTICLE XVI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
AND INDEMNIFICATION
16.1 SURVIVAL:
None of the representations and warranties in this Agreement and in any
other document delivered in connection herewith shall survive the Closing,
except that the representation contained in Section 8.18 shall survive the
Closing for a period lasting until the first anniversary of the Closing.
Purchaser may not and shall not make any claim against Seller in respect of the
representations and warranties contained in Section 8.1 through and including
Section 8.17 unless such breach was described in the Notice of Breach delivered
by Purchaser to Seller prior to Closing in accordance with the provisions of
Section 7.1 hereof. To the extent any such breach is included in the Notice of
Breach and the parties proceed to Closing notwithstanding their respective
rights under Sections 10.2 and 11.3 hereof, then Seller shall indemnify
Purchaser pursuant to the terms of Section 16.2 below. Nothing contained herein
shall limit Claims with regard to Retained Liabilities or breaches of covenants
or agreements, which shall be independent of Claims with regard to breaches of
representations and warranties.
16.2 INDEMNIFICATION BY SELLER:
(a) From and after the Closing Date, Seller shall defend, indemnify
and hold harmless Purchaser and its directors, shareholders, officers,
employees, agents, consultants, representatives, Affiliates, successors and
assigns from and against any and all loss, liability, damage or expense
(including reasonable legal fees and expenses collectively "Losses"), which any
of them incurs as a result of (i) a breach of any representation or warranty
contained in Section 8.1 to and including Section 8.17 (without regard to
materiality or Material Adverse Effect qualifications contained therein),
provided such breach was included in the Notice of Breach delivered by Purchaser
to Seller prior to Closing in accordance with the provisions of Section 7.1
hereof; (ii) a breach of the representation and warranty contained in Section
8.18; provided, that Purchaser was not aware of such breach and failed to give
Seller timely notice thereof; (iii) any Retained Liabilities; and (iv) any
breach of any covenant or agreement contained herein or in any other document
executed and delivered at the Closing.
(b) The amount of any Losses incurred by Purchaser shall be reduced as
follows:
(i) by the net amount Purchaser recovers (after deducting all
attorneys' fees, expenses and other costs of recovery), from any
insurer or other third party liable for such Losses; and
(ii) where and to the extent the issue giving rise to any such Losses
was specifically reserved for in the Closing Statement of Net Assets or
gave rise to the payment of a post-closing adjustment amount as
described in Section 4.4.
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(c) Purchaser shall be entitled to indemnification under Section 16.2
(a)(i) only to the extent that the aggregate amount of such Losses (adjusted as
provided in paragraph (b) of this Section 16.2) exceeds a deductible amount of
$1.5 million (the "Indemnification Deductible"), in which event the Losses shall
be the amount, if any, which exceeds the Indemnification Deductible, provided
the aggregate amount payable in respect of indemnification under Section 16.2
(a)(i) shall not exceed the Walkaway Amount.
(d) The indemnity provided in this Section 16.2 shall be the sole and
exclusive remedy of Purchaser after the Closing Date with respect to any and all
claims relating to the subject matter of this Agreement other than for fraud. In
furtherance of the foregoing, Purchaser hereby waives, from and after the
Closing, to the fullest extent permitted under applicable law, any and all
rights, claims and causes of action it may have against Seller relating to the
subject matter of this Agreement arising under or based upon any federal, state,
local or foreign statute law, ordinance, rule or regulation or otherwise except
as otherwise provided under this Section 16.2 and for fraud.
16.3 INDEMNIFICATION BY PURCHASER: Purchaser shall indemnify and hold
harmless Seller and its directors, shareholders, officers, employees, agents,
consultants, representatives, Affiliates, successors and assigns from and
against any and all Losses which any of them may incur arising out of any
Assumed Liabilities.
16.4 INDEMNIFICATION PROCEDURE:
(a) Any party seeking indemnification hereunder (the "Indemnitee")
shall notify the parties liable for such indemnification (each an "Indemnitor")
in writing of any event, omission or occurrence which the Indemnitee has
determined has given or could give rise to Losses which are indemnifiable
hereunder (such written notice being hereinafter referred to as a "Notice of
Claim"). In all cases, such notice shall be given promptly, in accordance with
the relevant provisions of the Agreement regarding notice; provided, that the
failure of any Indemnitee to give notice as provided in this Section 16. 4 shall
not relieve the Indemnitor of its obligations under this Article XVI unless such
failure shall materially adversely affects the Indemnitor. A Notice of Claim
shall specify in reasonable detail the nature and any particulars of the event,
omission or occurrence giving rise to a right of indemnification. The Indemnitor
shall satisfy its obligations hereunder, as the case may be, within 30 days of
its receipt of a Notice of Claim; provided, however, that so long as the
Indemnitor is in good faith defending a claim pursuant to Section 16.4(b) below,
its obligation to indemnify the Indemnitee with respect thereto shall be
suspended. To the extent the parties disagree as to whether any Losses are
indemnifiable hereunder, such matters shall be resolved pursuant to Section
17.11 hereunder; provided, that during the pendency of any such dispute, the
party seeking indemnification may defend the Loss for which indemnification is
sought, and if it is determined that the Loss is one that is subject to
indemnification, the Indemnitor shall be bound by all actions taken by the party
seeking indemnification during the pendency of such dispute.
(b) With respect to any third party claim, demand, suit, action or
proceeding which is the subject of a Notice of Claim, the Indemnitor shall, in
good faith and
41
<PAGE>
at its own expense, defend, contest or otherwise protect against any such claim,
demand, suit, action or proceeding with legal counsel of its own selection. The
Indemnitee shall have the right, but not the obligation, to participate in the
defense thereof through counsel of its own choice and shall have the right, but
not the obligation, to assert any and all cross claims or counterclaims it may
have; provided, that the fees and expenses of counsel to Indemnitee shall be at
the Indemnitee's own expense unless (a) the employment of such counsel and the
payment of such fees and expenses both shall have been specifically authorized
by the Indemnitor in connection with the defense of such claim, demand, suit,
action or proceeding, or (b) the Indemnitee shall have reasonably concluded and
specifically notified the Indemnitor that there may be specific defenses
available to it which are different from or additional to those available to the
Indemnitor, or that such action, suit or proceeding involves or could have an
effect upon matters beyond the scope of the indemnity agreements contained
herein (in which case the Indemnitor, to the extent made necessary by such
different or additional defense or other effects, shall not have the right to
direct the defense of such claim, demand, suit, action or proceeding on behalf
of the Indemnitee). So long as the Indemnitor is defending in good faith any
such third party claim, demand, suit, action or proceeding, the Indemnitee shall
at all times cooperate, the expense of the Indemnitor, in all reasonable ways
with, make its relevant files and records available for inspection and copying
by, and make its employees available or otherwise render reasonable assistance
to, the Indemnitor. In the event that the Indemnitor fails to timely defend,
contest or otherwise protect against any such third party claim, demand, suit,
action or proceeding, the Indemnitee shall have the right, but not the
obligation, for the account of the Indemnitor to defend, contest, assert cross
claims or counterclaims, or otherwise protect against, the same and may make any
compromise or settlement thereof. The Indemnitor shall make no settlement
without Indemnitee's consent of any claims which Indemnitor has undertaken to
defend, unless (i) the Indemnitor fully indemnifies the Indemnitee for all
Losses; (ii) the Indemnitee receives an unconditional release with respect to
the facts underlying the claim; (iii) there is no finding or admission of
violation of law by, or effect on any other claims that may be made against, the
Indemnitee; and (iv) the relief granted in connection therewith requires no
action or inaction on the part of and has no other material effect on the
Indemnitee.
ARTICLE XVII
MISCELLANEOUS
17.1 BROKER COMPENSATION: Each of the parties hereto agrees to indemnify
the other against and hold the other harmless from any and all liabilities
(including, without limitation, cost of counsel fees in defending against such
liabilities) for brokerage commissions or finder's fees in connection with the
transactions contemplated by this Agreement, insofar as such claims shall be
based on arrangements or agreements made or claimed to have been made by or on
behalf of Seller or Purchaser, respectively. Seller shall pay the fee of Salomon
Smith Barney Inc. for its services in connection with the transactions
contemplated by this Agreement.
17.2 BULK SALES ACT: Purchaser waives compliance by Seller with any bulk
sales law which may be applicable to the transactions contemplated by this
Agreement; provided, however that Seller agrees to indemnify Purchaser and hold
it harmless from any loss, damage,
42
<PAGE>
liability, and expenses (including reasonable legal fees) resulting from such
noncompliance.
17.3 EXPENSES: Each of the parties hereto shall pay its own expenses in
connection with the negotiation and preparation of this Agreement and the
Related Documents; provided, that Seller shall pay all expenses of the Business
in connection with the transactions contemplated hereby.
17.4 BINDING AGREEMENT: This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
provided that neither party shall assign this Agreement without the prior
written consent of the other party hereto, and in no event will any assignment
relieve the assigning party of its obligations hereunder.
17.5 ENTIRE AGREEMENT: This Agreement (including the Exhibits and Schedules
hereto) (a) constitutes the entire agreement between the parties hereto with
respect to the purchase and sale of the Purchased Assets and the other
transactions contemplated hereby, (b) supersedes all prior negotiations and oral
or written understandings, if any, and (c) may not be amended or supplemented
except by an instrument in writing signed by both parties hereto. Neither party
makes any representation or warranty except as provided herein. Waiver by any
party of any breach of or failure to comply with any provision of this Agreement
by the other party shall not be construed as, or constitute, a continuing waiver
of such provision, or a waiver of any other breach of, or failure to comply
with, any other provision of this Agreement. No waiver of any such breach or
failure or of any term or condition of this Agreement shall be effective unless
in a written notice signed by the waiving party and delivered, in the manner
required for notices generally, to each affected party.
17.6 GOVERNING LAW: This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of Wisconsin.
17.7 NO RIGHTS OF THIRD PARTIES: Nothing in this Agreement is intended to
confer any right on any person other than the parties to it and their respective
successors and assigns; nor is anything in this Agreement intended to modify or
discharge the obligation or liability of any third person to any party to this
Agreement, nor shall any provision give any third person any right of
subrogation or action over against any party to this Agreement. Without limiting
the generality of the foregoing, no employee (whether former, current or future)
of either Purchaser, Seller or any Purchased Subsidiary (or any beneficiary
thereof) shall be treated as a third party beneficiary or have any rights or
interests hereunder.
17.8 COUNTERPARTS: This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17.9 HEADINGS; TABLE OF CONTENTS: The headings of the sections of this
Agreement and the table of contents at the forepart of this Agreement are
inserted for convenience only and shall not constitute a part hereof nor affect
the rights of the parties hereto.
43
<PAGE>
17.10 TERMINATION:
(a) Termination Events. Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned under any of the following circumstances.
(i) by the mutual written consent of Seller and Purchaser at any time
prior to the Closing Date;
(ii) by Seller if any of the conditions set forth in Article XI shall
have become incapable of fulfillment at any time or are not fulfilled
at Closing, and shall not have been waived by Seller;
(iii) by Purchaser if any of the conditions set forth in Article X
shall have become incapable of fulfillment at any time or are not
fulfilled at Closing, and shall not have been waived by Purchaser;
(iv) by either party at any time prior to the Closing Date, if
Purchaser has, in good faith, sent a Notice of Breach to Seller
informing Seller of (a) breaches of representations and warranties
under Section 8.1-8.17 which total, in the aggregate, more than the
Walkaway Amount, and the parties, after good faith discussions, are
unable to reach a mutually agreeable resolution, or (b) breach of the
representation and warranty contained in Section 8.18; or
(v) by either party if the Closing has not occurred by the close of
business on May 1, 1999.
(b) Notice of Termination. In the event of termination of this
Agreement by Seller or Purchaser pursuant to this Section 17.10, written notice
thereof shall be given to the other party and the transactions contemplated by
this Agreement shall be abandoned, without further action by any party. If the
transactions contemplated by this Agreement are abandoned as provided herein:
(i) Purchaser shall return all documents and copies and other
materials received from or on behalf of Seller relating to the
transactions contemplated hereby, whether so obtained before or after
the execution hereof, to the Seller;
(ii) all confidential information received by Purchaser with respect
to the Business shall be treated in accordance with the
Confidentiality Agreement, which shall remain in full force and effect
notwithstanding the termination of this Agreement; and
(iii) this Agreement shall become void and of no further force and
effect, except for the provisions of (i) Section 15.4 relating to the
obligations of each of Purchaser and Seller to keep confidential
certain information and data obtained by it, (ii) Section 7.5 relating
to publicity, (iii) Section 17.3 relating to certain expenses, (iv)
44
<PAGE>
Section 17.1 relating to broker's or finder's fees, and (v) this
Section 17.10. Nothing in this Section 17.10 shall be deemed to
release any party from any liability for any breach by such of the
terms and provisions of this Agreement, to impair the right of any
party to compel specific performance by another party or its or their
obligations under this Agreement, or to waive any rights of any party
under law not otherwise waived in this Agreement.
17.11 DISPUTE RESOLUTION.
(a) Negotiation. In the event of any dispute or disagreement between
Seller and Purchaser as to the interpretation of any provision of this
Agreement, the performance of obligations hereunder, or any other disputed
matter, such matter, upon written request of either party, shall be referred to
representatives of the parties for decision, each party being represented by a
senior executive officer who has no direct operational responsibility for the
matters contemplated by this Agreement (the "Representatives"). The
Representatives shall promptly meet in a good faith effort to resolve the
dispute. If the Representatives do not agree upon a decision within thirty (30)
calendar days after reference of the matter to them, either Purchaser or Seller
shall be free to exercise all remedies otherwise available to them.
(b) Jurisdiction. Each of the parties agrees that any dispute,
controversy or claim arising out of or in connection with this Agreement or any
alleged breach hereof shall be referred to the Delaware Business Court pursuant
to its rules and procedures. Either party may bring an action in such Court and
the other party shall hereby be deemed to have consented to personal
jurisdiction within the State of Delaware for such purpose and the jurisdiction
of such Court and its rules, and hereby waives any defense to any such action
based on the doctrine of forum non conveniens.
17.12 REPRESENTATION BY COUNSEL; INTERPRETATION. The Seller and Purchaser
acknowledge that each of them has been represented by counsel in connection with
this Agreement and the transactions contemplated hereby. Accordingly, any rule
of law or any legal decision that would require interpretation of any claimed
ambiguities in this Agreement against the party that drafted it has no
application and is expressly waived.
17.13 KNOWLEDGE OF SELLER. The term "Knowledge" as used with respect to
Seller in this Agreement means the actual knowledge after due inquiry of
Seller's management employees who shall be defined as those employees listed on
Schedule 17.13.
17.14 DOLLAR AMOUNTS. All dollar amounts referred to in this Agreement are
in United States Dollars.
45
<PAGE>
17.15 PASSAGE OF TITLE AND RISK OF LOSS. Legal title, equitable title and
risk of loss with respect to the Purchased Assets will not pass to Purchaser
until the Purchased Assets are transferred at Closing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
JOHNSON CONTROLS, INC.
/s/ Keith Wandell
BY President - JCBGI
-------------------------
Title:
C&D TECHNOLOGIES, INC.
BY /s/ A. Weber
-------------------------
Title: Chairman & CEO
C&D ACQUISITION CORP.
BY /s/ A. Weber
-------------------------
Title:Chairman & CEO
46
EXHIBIT 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: C&D TECHNOLOGIES, INC. and Subsidiaries
Registration on Forms S-8 (registration No. 33-31978,
No. 33-71390, No. 33-86672, No. 333-17979, No. 333-38891,
and No. 333-59177) and on Form S-3 (registration No. 333-38893)
We are aware that our report dated November 24, 1998 on our review of interim
financial information of C&D TECHNOLOGIES, INC. and Subsidiaries for the period
ended October 31, 1998 and included in the Company's quarterly report on Form
10-Q for the quarter then ended is incorporated by reference in the registration
statements of C&D TECHNOLOGIES, INC. and Subsidiaries on Forms S-8 (Registration
No. 33-31978, No. 33-71390, No. 33-86672, No. 333-17979, No. 333-38891, and No.
333-59177) and on Form S-3 (Registration No. 333-38893). Pursuant to Rule 436(c)
under the Securities Act of 1933, this report should not be considered a part of
the registration statement prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF 10/31/98 AND STATEMENT OF INCOME FOR THE PERIOD
ENDED 10/31/98 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> OCT-31-1998
<CASH> 490
<SECURITIES> 0
<RECEIVABLES> 49035
<ALLOWANCES> 1828
<INVENTORY> 49412
<CURRENT-ASSETS> 106540
<PP&E> 60667
<DEPRECIATION> 0
<TOTAL-ASSETS> 182099
<CURRENT-LIABILITIES> 46212
<BONDS> 3999
0
0
<COMMON> 133
<OTHER-SE> 116893
<TOTAL-LIABILITY-AND-EQUITY> 182099
<SALES> 240580
<TOTAL-REVENUES> 240580
<CGS> 174298
<TOTAL-COSTS> 174298
<OTHER-EXPENSES> 6132
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 90
<INCOME-PRETAX> 28950
<INCOME-TAX> 10422
<INCOME-CONTINUING> 18528
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18528
<EPS-PRIMARY> 1.50
<EPS-DILUTED> 1.45
</TABLE>
