SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 27, 1997
SIMPSON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 0-6611 38-1225111
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
47603 Halyard Drive, Plymouth, Michigan, 48170
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including are code (313) 207-6200
(Former name or former address, if changed since last report)
ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
On June 27, 1997, Simpson Industries, Inc. (the "Company") acquired the
Vibration Attenuation Division of Holset Engineering, Ltd., a subsidiary of
Cummins Engine Company, Inc. ("VA Division") for a payment of $73,500,000.
The purchase price was financed from borrowings under the Company's credit
agreement. For financial reporting purposes, the VA Divisions acquisition
will be accounted for using the purchase method in accordance with generally
accepted accounting principles.
A copy of the Purchase Agreement is filed herewith as Exhibit 2.1 and a copy
of the press release issued by the Company regarding the VA Division
acquisition is filed herewith as Exhibit 99. Both of these exhibits are
incorporated by reference herein.
ITEM 7 - FINANCIAL STATEMENTS PRO FORMA INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
The required financial statements will be filed no later than 60 days
from the date this Form 8-K was required to be filed.
(b) Pro Forma Financial Information
The required pro forma financial information will be filed no later than
60 days from the date this Form 8-K was required to be filed.
(c) Exhibits:
2.1 Purchase Agreement, dated as of June 3, 1997 between
Simpson Industries, Inc. and Cummins Engine Company, Inc.
99 Press Release dated June 30, 1997
PAGE
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SIMPSON INDUSTRIES, INC.
By: /S/ JAMES E. GARPOW
James E. Garpow
Assistant Secretary
Dated: July 14, 1997
PAGE
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INDEX TO EXHIBIT
EXHIBIT NO. DOCUMENT
2.1 Purchase Agreement, dated as of June 3, 1997 between
Simpson Industries, Inc. and Cummins Engine Company, Inc.
99 Press Release dated June 30, 1997
PURCHASE AGREEMENT
BETWEEN
SIMPSON INDUSTRIES, INC.,
a Michigan corporation,
AND
CUMMINS ENGINE COMPANY, INC.
an Indiana corporation
June 3, 1997
PAGE
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TABLE OF CONTENTS
PAGE
I. PURCHASE AND SALE. . . . . . . . . . . . . . . . . . . . . 1
1.1 Purchase and Sale. . . . . . . . . . . . . . . . . . 1
1.2 VA Shares. . . . . . . . . . . . . . . . . . . . . . 1
1.3 Subsidiary Definitions . . . . . . . . . . . . . . . 2
1.4 VA Assets. . . . . . . . . . . . . . . . . . . . . . 2
1.5 Excluded Assets. . . . . . . . . . . . . . . . . . . 4
1.6 Certain VA Asset Liabilities Assumed . . . . . . . . 4
1.7 Liabilities Not Assumed. . . . . . . . . . . . . . . 5
1.8 Purchase Price . . . . . . . . . . . . . . . . . . . 6
1.9 Payment of Purchase Price. . . . . . . . . . . . . . 6
1.10 Post-Closing Adjustment. . . . . . . . . . . . . . 6
1.11 Allocation . . . . . . . . . . . . . . . . . . . . . 7
II. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Closing Date . . . . . . . . . . . . . . . . . . . . 7
2.2 Deliveries at the Closing. . . . . . . . . . . . . . 7
2.3 Third Party Consents . . . . . . . . . . . . . . . . 8
III. REPRESENTATIONS AND WARRANTIES OF CEC. . . . . . . . . . 8
3.1 Organization . . . . . . . . . . . . . . . . . . . . 8
3.2 Qualification; Location of VA Business and Assets. . 8
3.3 Subsidiaries and Investments . . . . . . . . . . . . 9
3.4 Authority and Enforceability . . . . . . . . . . . . 9
3.5 Third-Party Consents and Governmental Approvals. . . 9
3.6 No Conflict or Violation . . . . . . . . . . . . . . 9
3.7 Financial Condition and Liabilities. . . . . . . . .10
3.8 Absence of Certain Changes . . . . . . . . . . . . .10
3.9 Accounts Receivable. . . . . . . . . . . . . . . . .12
3.10 Inventories. . . . . . . . . . . . . . . . . . . . .12
3.11 Title. . . . . . . . . . . . . . . . . . . . . . . .12
3.12 Condition of Assets. . . . . . . . . . . . . . . . .12
3.13 Owned Real Property. . . . . . . . . . . . . . . . .13
3.14 Leased Real Property . . . . . . . . . . . . . . . .13
3.15 Leased Personal Property . . . . . . . . . . . . . .14
3.16 Employment Matters . . . . . . . . . . . . . . . . .14
3.17 Employee Benefit Plans . . . . . . . . . . . . . . .16
3.18 Material Contracts . . . . . . . . . . . . . . . . .17
3.19 Customers and Suppliers. . . . . . . . . . . . . . .18
3.20 Tax Returns and Taxes. . . . . . . . . . . . . . . .18
3.21 Licenses and Permits . . . . . . . . . . . . . . . .19
3.22 Intellectual Property Rights . . . . . . . . . . . .19
3.23 No Pending Litigation or Proceedings . . . . . . . .20
3.24 Compliance with Laws . . . . . . . . . . . . . . . .21
3.25 Occupational Safety. . . . . . . . . . . . . . . . .21
3.26 Environmental Matters. . . . . . . . . . . . . . . .21
3.27 Insurance Coverage . . . . . . . . . . . . . . . . .23
3.28 Products Liability and Warranty Claims . . . . . . .23
3.29 Ownership of Subsidiaries. . . . . . . . . . . . . .24
3.30 Capitalization.. . . . . . . . . . . . . . . . . . .24
3.31 Insider Interests. . . . . . . . . . . . . . . . . .24
3.32 Brokers and Finders. . . . . . . . . . . . . . . . .24
3.33 Disclosure . . . . . . . . . . . . . . . . . . . . .24
IV. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . .24
4.1 Organization . . . . . . . . . . . . . . . . . . . .24
4.2 Authority and Enforceability . . . . . . . . . . . .25
4.3 Third-Party Consents . . . . . . . . . . . . . . . .25
4.4 No Conflict or Violation . . . . . . . . . . . . . .25
V. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . .25
5.1 Access to Information. . . . . . . . . . . . . . . .25
5.2 Conduct of VA Business . . . . . . . . . . . . . . .25
5.3 Consents and Governmental Approvals. . . . . . . . .26
5.4 Best Efforts . . . . . . . . . . . . . . . . . . . .26
5.5 Further Assurances . . . . . . . . . . . . . . . . .26
5.6 Update Schedules . . . . . . . . . . . . . . . . . .26
5.7 Bulk Transfer Laws . . . . . . . . . . . . . . . . .26
5.8 Insurance Indemnity. . . . . . . . . . . . . . . . .27
5.9 Product Liability Matters. . . . . . . . . . . . . .27
5.10 Checks and Drafts. . . . . . . . . . . . . . . . . .27
5.11 Employees on Lay Off . . . . . . . . . . . . . . . .27
5.12 Power of Attorney. . . . . . . . . . . . . . . . . .27
5.13 Tax Clearance Certificates, Filings and Notices. . .28
5.14. . . . . . . . . . . . . . . . . . . . . . . . . . .28
5.15 Employment of UK Employees . . . . . . . . . . . . .28
5.16 Cooperation in Litigation. . . . . . . . . . . . . .28
5.17 Exclusivity. . . . . . . . . . . . . . . . . . . . .28
5.18 Public Announcement. . . . . . . . . . . . . . . . .29
5.19 Confidentiality. . . . . . . . . . . . . . . . . . .29
5.20 Access to Records. . . . . . . . . . . . . . . . . .29
5.21 Covenant Not to Compete. . . . . . . . . . . . . . .29
5.22 Services Under Chinese Licenses. . . . . . . . . . .30
5.23 Holset Korea Ltd.. . . . . . . . . . . . . . . . . .30
5.24 UK Pension Plans . . . . . . . . . . . . . . . . . .30
VI. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . .30
6.1 Conditions to Obligations of Buyer . . . . . . . . .30
6.2 Conditions to Obligations of CEC . . . . . . . . . .32
VII. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . .33
7.1 Indemnification By CEC . . . . . . . . . . . . . . .33
7.2 Indemnification by Buyer . . . . . . . . . . . . . .34
7.3 Defense of Claims. . . . . . . . . . . . . . . . . .34
7.4 Survival of Representations and Warranties . . . . .36
7.5 Remedies . . . . . . . . . . . . . . . . . . . . . .36
7.6 Indemnification Limitations. . . . . . . . . . . . .36
VIII. TERMINATION . . . . . . . . . . . . . . . . . . . . . .36
8.1 Termination. . . . . . . . . . . . . . . . . . . . .36
8.2 Effect of Termination. . . . . . . . . . . . . . . .37
IX. OTHER PROVISIONS. . . . . . . . . . . . . . . . . . . . .37
9.1 Restrictive Trade Practices Act 1976 . . . . . . . .37
9.2 United Kingdom Value Added Tax.. . . . . . . . . . .37
9.3 Arbitration. . . . . . . . . . . . . . . . . . . . .39
9.4 Annexes, Exhibits and Schedules. . . . . . . . . . .39
9.5 Amendment. . . . . . . . . . . . . . . . . . . . . .39
9.6 Extension; Waiver. . . . . . . . . . . . . . . . . .39
9.7 Entire Agreement; No Third Party Beneficiaries . . .40
9.8 Governing Law. . . . . . . . . . . . . . . . . . . .40
9.9 Accounting Terms . . . . . . . . . . . . . . . . . .40
9.10 Certain Definitions. . . . . . . . . . . . . . . . .40
9.11 Notices. . . . . . . . . . . . . . . . . . . . . . .40
9.12 Counterparts; Headings . . . . . . . . . . . . . . .41
9.13 Expenses . . . . . . . . . . . . . . . . . . . . . .41
9.14 Successors and Assigns . . . . . . . . . . . . . . .42
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EXHIBITS
Exhibit A - VA Business
Exhibit B - Assumption Agreement
Exhibit C - Supply Agreement
Exhibit D - Technical Agreement
Exhibit E - Administrative Services Agreements
SCHEDULES
Schedule 1.4 UK Real Estate Transfer Provisions
Schedule 1.5 Excluded Assets
Schedule 1.8 Payment of Purchase Price
Schedule 1.10 Post closing Balance Sheet Procedures
Schedule 1.11 Allocation of Purchase Price
Schedule 2.2 Foreign Jurisdiction Closing Documents
Schedule 3.2 Location of VA Business
Schedule 3.5 Consents
Schedule 3.7 Pre-Closing Balance Sheet
Schedule 3.8 Certain Changes
Schedule 3.11 Permitted Liens
Schedule 3.13 Owned Real Property
Schedule 3.14 Leased Real Property
Schedule 3.15 Leased Personal Property
Schedule 3.16 Employment Matters
Schedule 3.17 Employee Benefit Plans
Schedule 3.18 Material Contracts
Schedule 3.19 Significant Customers and Suppliers
Schedule 3.20 Taxes
Schedule 3.22 Intellectual Property Rights
Schedule 3.23 Pending Litigation
Schedule 3.26 Environmental Matters
Schedule 3.30 Capitalization of Share Subsidiaries
Schedule 3.31 Insider Interests
Schedule 5.15 Employment of UK Employees
Schedule 5.24 UK Pension Plans
PAGE
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INDEX OF DEFINED TERMS
SECTION
Accounts Receivable. . . . . . . . . . . . . . . . . . . . . 3.9
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . .9.10
Aggregate Net Asset Value. . . . . . . . . . . . . . . . 1.10(b)
Agreement. . . . . . . . . . . . . . . . . . . . . . . .Preamble
Allocation . . . . . . . . . . . . . . . . . . . . . . . . .1.11
Asset Subsidiaries . . . . . . . . . . . . . . . . . . . .1.3(b)
Assumed Liabilities. . . . . . . . . . . . . . . . . . . . . 1.6
Assumption Agreement . . . . . . . . . . . . . . . . . . . . 1.6
Buyer. . . . . . . . . . . . . . . . . . . . . . . . . .Preamble
Buyer Documents. . . . . . . . . . . . . . . . . . . . . . . 4.2
Buyer's Indemnified Persons. . . . . . . . . . . . . . . . . 7.1
CEC. . . . . . . . . . . . . . . . . . . . . . . . . . .Preamble
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Closing Balance Sheet. . . . . . . . . . . . . . . . . . 1.10(a)
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Contaminant. . . . . . . . . . . . . . . . . . . . . . . 3.26(a)
Employee Plans . . . . . . . . . . . . . . . . . . . . . . .3.17
Environmental Claim. . . . . . . . . . . . . . . . . . . . . 7.1
Environmental Laws . . . . . . . . . . . . . . . . . . . 3.26(b)
Environmental Permits. . . . . . . . . . . . . . . . . . 3.26(c)
Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . 1.5
Excluded Liabilities . . . . . . . . . . . . . . . . . . . . 1.7
Generally Accepted Accounting Principles . . . . . . . . . .9.10
Governmental Body. . . . . . . . . . . . . . . . . . . . . . 3.5
Holset . . . . . . . . . . . . . . . . . . . . . . . .1.4(g)(ii)
Indemnified Party. . . . . . . . . . . . . . . . . . . . . . 7.3
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . 7.3
Intellectual Property Rights . . . . . . . . . . . . . . .1.4(g)
Issued Rights and Applications . . . . . . . . . . . . . . .3.22
Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . .9.10
Leased Personal Property . . . . . . . . . . . . . . . . . .3.15
Legal Expenses . . . . . . . . . . . . . . . . . . . . . . . 7.1
License Agreements . . . . . . . . . . . . . . . . . . . . .3.22
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.10
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
Material Contracts . . . . . . . . . . . . . . . . . . . 3.18(l)
Owned Real Property. . . . . . . . . . . . . . . . . . . . .3.13
Permits. . . . . . . . . . . . . . . . . . . . . . . . . .1.4(h)
Permitted Liens. . . . . . . . . . . . . . . . . . . . . . .3.11
Person . . . . . . . . . . . . . . . . . . . . . . . . . . .9.10
Pre-Closing Balance Sheet. . . . . . . . . . . . . . . . . . 3.7
Product Liability . . . . . . . . . . . . . . . . . . . . . 5.9
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . 1.8
Real Property Leases . . . . . . . . . . . . . . . . . . . .3.14
Release. . . . . . . . . . . . . . . . . . . . . . . . . 3.26(d)
Remedial Action. . . . . . . . . . . . . . . . . . . . . 3.26(e)
Sale Documents . . . . . . . . . . . . . . . . . . . . . . . 3.4
Share Subsidiaries . . . . . . . . . . . . . . . . . . . .1.3(a)
Significant Customers. . . . . . . . . . . . . . . . . . . .3.19
Significant Supplier . . . . . . . . . . . . . . . . . . . .3.19
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . .1.3(c)
Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . .3.20
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .3.20
Title. . . . . . . . . . . . . . . . . . . . . . . . . . . .3.11
VA Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 1.4
VA Business. . . . . . . . . . . . . . . . . . . . . . .Preamble
VA Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
PAGE
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") made as of June 3, 1997 by
and between Simpson Industries, Inc., a Michigan corporation ("Buyer"),
Cummins Engine Company, Inc., an Indiana corporation ("CEC").
BACKGROUND
A. CEC is engaged in the development, manufacture and sale of
noise and vibration attenuation products (the "VA Business") in England,
France, Spain and other locations through various subsidiaries and joint
ventures as more particularly described on Exhibit A.
B. Buyer is engaged in a similar business in the United States and
desires to acquire from CEC the assets and properties of the VA Business on
a going concern basis.
C. CEC desires to sell to Buyer, and Buyer desires to purchase
from CEC, the VA Shares (as defined in Section 1.2) and the VA Assets (as
defined in Section 1.4), which constitutes all of the VA Business, together
with the covenant of CEC not to compete with the VA Business as carried on
by Buyer following completion of the transaction and other consideration,
all on the terms and conditions and for the consideration herein set forth.
NOW THEREFORE, in consideration of the foregoing premises and the
covenants, agreements, representations and warranties contained herein, the
parties hereto agree as follows:
I. PURCHASE AND SALE
1.1 Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, CEC agrees to sell, assign, transfer, convey
and deliver, or cause its subsidiaries to sell, assign, transfer, convey
and deliver, to Buyer (or in Buyer's sole discretion, any subsidiary or
subsidiaries of Buyer), and Buyer agrees to purchase, at the Closing (as
defined in Section 2.1), all the VA Shares and the VA Assets.
1.2 VA Shares. The term "VA Shares" means:
(a) all of the outstanding capital stock of Techniparts SAS
(France);
(b) all of the outstanding capital stock of Dampers Iberica SA
(Spain);
(c) all of the outstanding capital stock of Dampers SAS
(France);
(d) all of the capital stock of Hodek Engineering Works Private
Limited (India) owned by CEC or its subsidiaries, which represents
20% of all of the outstanding capital stock of Hodek Engineering
Works Private Limited (India); and
(e) all of the capital stock of Holset Korea Ltd. owned by CEC
or its subsidiaries, which represents 51% of all of the outstanding
capital stock of Holset Korea Ltd..
1.3 Subsidiary Definitions.
(a) the term "Share Subsidiaries" means Techniparts SAS
(France), Dampers Iberica SA (Spain), Dampers SAS (France), Hodek
Engineering Works Private Limited (India) and Holset Korea Ltd.;
(b) the term "Asset Subsidiaries" means Holset Engineering
Company Limited (UK), Cummins Brasil, Ltda., Cummins S.A. de C.V. and
the VA business divisions of CEC; and
(c) the term "Subsidiary" means any Share Subsidiary or Asset
Subsidiary and the term "Subsidiaries" means all of the Share
Subsidiaries and Asset Subsidiaries, collectively.
1.4 VA Assets. The term "VA Assets" means all of the assets,
properties, goodwill and rights owned by CEC and the Asset Subsidiaries and
used or held for use principally in connection with the operation of the VA
Business, of whatever kind and nature, real or personal, tangible or
intangible, other than the Excluded Assets (as defined in Section 1.5),
including, but not limited to, the following:
(a) all cash, cash equivalents, prepaid expenses and deposits;
(b) [intentionally omitted]
(c) all inventory (including raw materials, components, work in
process, finished goods and similar items) of Holset Engineering
Company Limited (UK), the VA business divisions of CEC, and the VA
inventory of Cummins S.A. de C.V. but of no other Asset Subsidiary;
(d) all machinery, equipment, tools, dies, jigs, patterns,
trade fixtures, molds, spare parts, vehicles, furniture and supplies;
(e) all rights in, to and under all leases of tools, furniture,
machinery, supplies, vehicles, equipment and other items of personal
property, including those listed on Schedule 3.15;
(f) all real property, leasehold and other interests in real
property, in each case together with all buildings, improvements,
fixtures and all appurtenances thereto, including all such items
listed on Schedules 3.13 and 3.14;
(g) all right, title and interest in, to and under the
following, which shall be referred to herein collectively as the
"Intellectual Property Rights":
(i) all inventions (whether patentable or unpatentable
and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and
reexaminations thereof;
(ii) subject to the terms of the License Agreement
referenced in Section 6.1(e) concerning use of the name
"Holset", all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all
translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and
all applications, registrations, and renewals in connection
therewith;
(iii) all copyrightable works, all copyrights, all mask
works, and all applications, registrations, and renewals in
connection therewith;
(iv) all trade secrets and confidential business
information (including ideas, research and development,
technology, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and
proposals); and
(v) all other proprietary rights, all copies and
tangible embodiments of any of the foregoing (in whatever form
or medium), and all license agreements (as licensee or
licensor) relating to any of the foregoing;
(h) all right, title and interest in, to and under all
franchises, licenses, permits, orders, certificates, approvals and
other governmental authorizations which are necessary to own or lease
and operate its assets and to conduct the VA Business ("Permits");
(i) all right, title and interest in, to and under all
contracts, agreements, purchase orders, customer orders, work orders,
insurance policies, warranties and all other legally binding
arrangements, whether oral or written, to which CEC or any Asset
Subsidiary is a party or by which CEC or any Asset Subsidiary is
bound that are listed on Schedule 3.18 and all other contracts,
agreements, purchase orders, customer orders, work orders, insurance
policies, warranties and other arrangements that are not required to
be listed on such Schedule because of the amount thereof and which
were entered into in the ordinary course of the VA Business;
(j) all computer programs and a copy of the source code and
object code of all such programs, together with all additions,
modifications, updates, and enhancements thereto; all design
specifications including, but not limited to, program descriptions,
system flow charts, file layouts, report layouts, screen layouts, and
all other computer program documentation; and all user's manuals,
training manuals, sales literature, and other system and operations
documentation relating to such computer programs;
(k) all rights, claims, causes of action and choses in action
(including, but not limited to, rights of collection, set-off and
indemnification) existing on the Closing Date, the benefits of which
have been assumed by or assigned to Buyer pursuant to this Agreement;
(l) all books and records relating to the VA Business,
including financial, accounting and personnel records, property
records, production records, engineering records, environmental
compliance records, files, invoices, customer lists and records,
supplier lists and records and other data owned or used by CEC or any
Asset Subsidiary relating to the VA Assets described in subparagraphs
(a) through (k) of this Section 1.4; and
(m) all other tangible and intangible assets relating to the VA
Business, whether or not carried at value or listed on the books and
records of CEC or an Asset Subsidiary, and whether or not in the
possession of CEC, an Asset Subsidiary or others.
CEC and the Asset Subsidiaries will sell and convey with full title
guarantee to Buyer all real estate included in the VA Assets by warranty
deed or similar form of conveyance, satisfactory in form and substance to
counsel for Buyer, subject only to such Permitted Liens as are referred to
in Schedule 3.11. The sale and conveyance of the UK Properties will also
be subject to the provisions of Schedule 1.4. CEC and the Asset
Subsidiaries will sell and transfer to Buyer all personal property included
in the VA Assets by delivery.
1.5 Excluded Assets. The term "Excluded Assets" means:
(a) minute books, stock records, tax returns and similar
corporate records of the Asset Subsidiaries; and
(b) the assets, properties or rights set forth on Schedule 1.5.
1.6 Certain VA Asset Liabilities Assumed. Upon the terms and sub-
ject to the conditions of this Agreement, Buyer shall execute and deliver
to CEC on the Closing Date (as defined in Section 2.1) an agreement in the
form attached hereto as Exhibit B (the "Assumption Agreement") pursuant to
which Buyer shall assume and agree to pay, perform and discharge the
following, which shall be referred to herein collectively as the "Assumed
Liabilities":
(a) all obligations and liabilities of the VA Business of the
Asset Subsidiaries existing on the Closing Date and set forth on,
reserved against or reflected in the Closing Balance Sheet (as
defined in Section 1.10(a)), as finally determined in accordance with
Section 1.10; and
(b) all obligations and liabilities of the VA Business of the
Asset Subsidiaries under the contracts and agreements which are to be
acquired by Buyer pursuant to the provisions of this Agreement, and
with respect to which Buyer succeeds to the rights of the Asset
Subsidiaries thereunder, to the extent that such obligations and
liabilities accrue from and after the Closing Date.
1.7 Liabilities Not Assumed. Except as set forth in Section 1.6,
Buyer shall not assume or agree to pay, perform or discharge any
obligations, liabilities, contracts or commitments of any Subsidiary or
affiliate or shareholder of any Subsidiary of any kind or nature whatsoever
(the "Excluded Liabilities"). Without limiting the generality of the
foregoing and except as fully accrued as a liability on the Closing Balance
Sheet, as finally determined in accordance with Section 1.10, Buyer shall
not assume or become liable to pay, perform or discharge any of the
following:
(a) any obligations or liabilities of CEC or any Subsidiary
arising or incurred in connection with the negotiation, preparation,
investigation and performance of this Agreement and the transactions
contemplated hereby, including, without limitation, fees and expenses
of counsel, accountants, consultants, advisers, brokers and others
(including any brokers, finders or originators fees or commissions);
(b) any product liability or similar claim for injury to person
or property which arises out of or is based upon any express or
implied representations, warranty, agreement or guarantee made by CEC
or any Subsidiary, or by reason of the improper performance or
malfunctioning of a product, improper design or manufacture, failure
to adequately package, label or warn of hazards or other related
product defects of any products at any time manufactured or sold or
any service performed by CEC or any Subsidiary on or prior to the
Closing Date;
(c) any obligations or liabilities of CEC or any Subsidiary
arising under or in connection with any Employee Plan (as defined in
Section 3.17(a)) providing benefits to any present or former employee
of CEC or any Subsidiary;
(d) any obligations or liabilities of CEC or any Subsidiary for
any present or past employees, agents or independent contractors of
CEC or any Subsidiary, including any workers' compensation claims and
employee severance claims of CEC or any Subsidiary;
(e) any obligations or liabilities with respect to the
litigation, investigations and other matters set forth on Schedule
3.23;
(f) any obligations or liabilities for any Taxes (as defined in
Section 3.20) of CEC or any Subsidiary except with respect to any
Stamp Duty due as a result of the conveyance and transfer from CEC
or any Subsidiary to Buyer of the VA Business; and
(g) any obligations or liabilities arising out of or related to
the transfer of Holset SNC (France) as referenced in Section 6.1(k).
1.8 Purchase Price. As consideration for the purchase for the VA
Shares and the VA Assets and for the noncompetition covenant of CEC (on
behalf of itself and its subsidiaries), Buyer, in addition to assuming the
Assumed Obligations, shall pay to CEC as provided in Schedule 1.8 an
aggregate purchase price of Seventy Three Million Five Hundred Thousand
Dollars (U.S. $73,500,000) (the "Purchase Price"), subject to the post-
closing adjustment described in Section 1.10.
1.9 Payment of Purchase Price. At the Closing, Buyer shall pay to
CEC the Purchase Price by bank cashier's check or bank wire transfer to
such account(s) as CEC shall designate, which sum shall thereafter be
subject to the post-closing adjustment described in Section 1.10.
1.10 Post-Closing Adjustment. A post-closing adjustment to the
Purchase Price shall be made as follows:
(a) Within thirty (30) days after the Closing, or as soon as
practicable thereafter, a combining balance sheet of the VA Business
will be prepared by or under the direction of CEC as at the close of
business on June 29, 1997 (the "Closing Balance Sheet") and shall be
furnished to Buyer. The Closing Balance Sheet, together with notes
thereto, shall (A) be in accordance with the books and records of the
Asset Subsidiaries and the Share Subsidiaries, (B) present fairly the
financial condition of the VA Business as of such date, and (C) have
been prepared in accordance with Generally Accepted Accounting
Principles applied on a basis consistent with the Pre-closing Balance
Sheet (as defined in Section 3.7), and in accordance with the
accounting procedures described on Schedule 1.10. The Closing
Balance Sheet shall be reviewed by Buyer and audited by Buyer's
independent accountants within thirty (30) days of the date it is
furnished to Buyer, or as soon as practicable thereafter. If any
questions should arise during such review and audit which CEC or
Buyer cannot resolve between themselves, such questions shall be
referred to the independent accountants representing each of the
parties, who shall within thirty (30) days thereafter attempt to
resolve such questions, and any decision mutually agreeable to such
accountants shall be binding upon both CEC and Buyer. If, after
thirty (30) days, the independent accountants of CEC and Buyer are
unable to arrive at a resolution of any issue relating to the Closing
Balance Sheet, such independent accountants will appoint a third
accounting firm satisfactory to each of them, which shall be directed
to resolve such questions within fifteen (15) days thereafter, and
whose decision shall be final and binding on both parties. Any
agreement as to the Closing Balance Sheet shall be in writing and
signed by or on behalf of CEC and Buyer.
(b) If the Net Assets, as defined, of the VA Business shown on
the Closing Balance Sheet exceeds Twenty Five Million Seventy Seven
Thousand Dollars ($25,077,000), Buyer shall pay to CEC the amount of
such excess in cash (without interest) within thirty (30) days after
the date on which Buyer and CEC shall have indicated their agreement
to the Closing Balance Sheet (or the date on which any disputes
relating to the Closing Balance Sheet shall have been resolved as
provided in (a) above). If the Aggregate Net Asset Value of the
Business shown on the Closing Balance Sheet is less than Twenty Five
Million Seventy Seven Thousand Dollars ($25,077,000), CEC shall pay
such deficiency in cash (without interest) to Buyer within thirty
(30) days after the date on which Buyer and CEC shall have indicated
their agreement to the Closing Balance Sheet (or the date on which
any disputes relating to the Closing Balance Sheet shall have been
resolved as provided in (a) above).
1.11 Allocation. The Purchase Price and the liabilities assumed by
Buyer in accordance with Section 1.6 shall be allocated among the VA Shares
and the VA Assets substantially as set forth on Schedule 1.11, with such
adjustments as may be agreed between Buyer and CEC within 30 days following
Closing. CEC, on behalf of itself and the Asset Subsidiaries, and Buyer
each hereby covenant and agree that they will not take a position on any
income tax return, before any governmental agency charged with the
collection of any income tax, or in any judicial proceeding, that is in any
way inconsistent with the terms of this Section 1.11.
II. CLOSING
2.1 Closing Date. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Dykema
Gossett PLLC, 23rd Floor, 400 Renaissance Center, Detroit, Michigan at
10:00 a.m., local time, on June 27, 1997, to be effective as of the close
of business on June 29, 1997, or at such other location, time or date as
may be mutually agreed upon between Buyer and CEC (such time and date being
herein called the "Closing Date").
2.2 Deliveries at the Closing. At the Closing:
(a) CEC shall deliver or cause to be delivered to Buyer, as
required, (i) stock certificates representing the VA Shares properly
executed for transfer to Buyer (or to any subsidiary or subsidiaries
of Buyer as determined in the sole discretion of Buyer), (ii)
properly executed deeds, assignments and other instruments of
transfer relating to the VA Assets in form and substance meeting the
requirements of all applicable laws and reasonably satisfactory to
Buyer and its counsel, provided that where Buyer is satisfied that
title to any of the VA Assets located in the United Kingdom can
effectively pass by way of physical delivery without the use of any
document of transfer, CEC shall deliver or cause to be delivered such
VA Assets to Buyer at Closing, such delivery to take place by means
of the relevant VA Assets being retained at the places at which they
are physically located at the Closing to the order of Buyer, (iii)
the various agreements, opinions, certificates and other documents
and instruments referred to in Schedule 2.2 (relating to requirements
for transfer in foreign jurisdictions) and in Section 6.1, and (iv)
such other documents, certificates, consents or opinions as Buyer or
its counsel may reasonably request to establish compliance with the
requirements of all laws having application to CEC, any Subsidiary,
the VA Shares, the VA Assets or the VA Business, and to demonstrate
satisfaction of the conditions and compliance with the agreements set
forth in this Agreement; and
(b) Buyer shall deliver to CEC (i) the payment of the Purchase
Price as provided in Section 1.9, (ii) the Assumption Agreement
referred to in Section 1.6, (iii) the various agreements, opinions,
certificates and other documents and instruments referred to in
Schedule 2.2 (relating to requirements for transfer in foreign
jurisdictions) and in Section 6.2, and (iv) such other documents as
CEC or its counsel may reasonably request to demonstrate satisfaction
of the conditions and compliance with the agreements set forth in
this Agreement.
2.3 Third Party Consents. To the extent that the rights of any
Asset Subsidiary under any agreement, contract, commitment, lease, Permits
or other asset to be assigned to Buyer hereunder may not be assigned
without the consent of another person which has not been obtained, this
Agreement shall not constitute an agreement to assign the same if an
attempted assignment would constitute a breach thereof or be unlawful, and
CEC or such Asset Subsidiary, at its expense, shall use its best efforts to
obtain any such required consent(s) as promptly as possible. If any such
consent shall not be obtained or if any attempted assignment would be
ineffective or would impair Buyer's rights under the asset in question so
that Buyer would not in effect acquire the benefit of all such rights, CEC
or such Asset Subsidiary, to the maximum extent permitted by law and the
asset, shall act after the Closing as Buyer's agent in order to obtain for
it the benefits thereunder and shall cooperate, to the maximum extent
permitted by law and the asset, with Buyer in any other reasonable
arrangement designed to provide such benefits to Buyer.
III. REPRESENTATIONS AND WARRANTIES OF CEC
CEC represents and warrants to Buyer that the following
representations and warranties are true and correct on the date hereof and
will be true and correct as of the Closing Date:
3.1 Organization. CEC and each Subsidiary is a company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. CEC and each Share Subsidiary has all
requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on the VA Business as and where now
being conducted. CEC and each Subsidiary has heretofore delivered to
Buyer complete and correct copies of its Charter, Bylaws or other
organizational documents, as currently in effect.
3.2 Qualification; Location of VA Business and Assets. CEC and
each Subsidiary is duly licensed or qualified to do the VA Business and is
in good standing in the jurisdictions set forth on Schedule 3.2, which
jurisdictions to the knowledge of CEC and the Subsidiaries are the only
jurisdictions wherein the character or location of the properties owned or
leased or the nature of activities conducted by CEC or such Subsidiary make
such qualification necessary. There has not been any claim by any
jurisdiction to the effect that CEC or any Subsidiary is required to
qualify or otherwise to be authorized to do the VA Business in any
jurisdiction in which CEC or any such Subsidiary has not qualified or
obtained such authorization. Set forth on Schedule 3.2 is each location
where CEC or any Subsidiary (a) has a place of business concerning the VA
Business, or (b) owns or leases property concerning the VA Business.
3.3 Subsidiaries and Investments. No Share Subsidiary holds any
stock or other interest, either of record, beneficially or equitably, in
any firm, venture, corporation, partnership or other entity.
3.4 Authority and Enforceability. CEC has full power and authority
to enter into this Agreement and CEC and each Subsidiary has the authority
to carry out the transactions contemplated hereby. The execution, delivery
and performance of this Agreement and the other agreements and documents to
be executed and delivered by CEC and any Subsidiary pursuant to the
provisions of this Agreement (the "Sale Documents") have been duly
authorized by all necessary action on the part of CEC and each such
Subsidiary. This Agreement and the Sale Documents have been duly executed
and delivered by CEC and each such Subsidiary and constitute the legal,
valid and binding obligation of CEC and each such Subsidiary enforceable in
accordance with their respective terms.
3.5 Third-Party Consents and Governmental Approvals. Except as set
forth on Schedule 3.5, no consent, authorization or approval of, and no
registration or filing with, any third parties or any federal, state,
regional or local governmental, administrative or regulatory body or
authority ("Governmental Body") to which CEC, any Subsidiary or any of
their VA Business properties or assets are subject is required for the
execution, delivery and performance of this Agreement and the Sale
Documents by CEC and the consummation by CEC and the Subsidiaries of the
transactions contemplated hereby and thereby.
3.6 No Conflict or Violation. The execution, delivery and
performance of this Agreement and the Sale Documents, the consummation by
CEC and the Subsidiaries of the transactions contemplated hereby and
thereby, and the compliance with the terms hereof and thereof do not and
will not (with or without notice, the passage of time, or both), (a)
violate any provision of the Charter, Bylaws or other organizational
document of CEC or any Subsidiary, (b) violate, conflict with or result in
a breach of or constitute a default under, any term, condition, or
provision of any agreement, contract, mortgage, lease or other instrument,
document or understanding relating to the VA Business to which CEC or any
Subsidiary is a party, by which CEC and any Subsidiary may have rights or
by which any of the assets of CEC or any Subsidiary relating to the VA
Business may be bound or affected, (c) violate any law, ordinance, code,
rule, regulation, order, judgment, injunction, award or decree of any
court, arbitrator, administrative agency, authority or Governmental Body
applicable to CEC or any Subsidiary or their assets, (d) give any person
the right to terminate, modify, accelerate or otherwise change the existing
rights or obligations of CEC or any Subsidiary relating to the VA Business
or assets of CEC or any Subsidiary relating to the VA Business, or (e)
result in the creation of any Lien on any of the assets of any Subsidiary
relating to the VA Business.
3.7 Financial Condition and Liabilities. CEC has previously
delivered to Buyer true and complete copies of (a) statements of income for
the years ended December 31, 1994, 1995 and 1996, respectively, of the VA
Business, and (b) a combining balance sheet of the VA Business as of
December 31, 1996 together with the related notes thereto (the "Pre-Closing
Balance Sheet"), all of which are correct and complete and in accordance
with the books and records of CEC and the Subsidiaries and have been
prepared in accordance with Generally Accepted Accounting Principles
consistently applied throughout the periods involved. The Pre-Closing
Balance Sheet is attached hereto as Schedule 3.7. Such balance sheets and
financial information accurately present the financial condition, assets
and liabilities of the VA Business as of the dates indicated, and such
statements of income present fairly the results of operations of the VA
Business for the periods indicated. The VA Business has no liability or
obligation of any nature, whether due or to become due, fixed, contingent,
accrued or otherwise, including liabilities for or in respect of Taxes and
any interest or penalties relating thereto, except (a) to the extent fully
reflected as a liability on the Pre-Closing Balance Sheet and (b)
liabilities incurred in the ordinary course of business since December 31,
1996 and fully reflected as liabilities on the books of account of CEC or
the Subsidiaries, none of which, individually or in the aggregate, has been
materially adverse.
3.8 Absence of Certain Changes. Except as set forth on Schedule
3.8, since December 31, 1996, neither CEC or any Subsidiary has with
respect to the VA Business:
(a) incurred any liability or obligation, fixed, contingent,
accrued, or otherwise, other than liabilities incurred in the
ordinary course of business consistent with past practice, or
discharged or satisfied any Lien or paid any liabilities, other than
in the ordinary course of business consistent with past practice, or
failed to pay or discharge when due any material liabilities
(individually or in the aggregate), or failed to perform any material
obligations (individually or in the aggregate);
(b) mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract
or other encumbrance of any nature whatsoever;
(c) made or suffered any amendment or termination of any
material agreement, contract, commitment, lease or plan to which it
is a party or by which it is bound, or canceled, modified or waived
any material debts or claims held by it or waived any rights material
to the VA Business;
(d) declared, set aside or paid any dividend or made or agreed
to make any other distribution or payment in respect of the capital
shares of any Share Subsidiary or redeemed, purchased or otherwise
acquired or agreed to redeem, purchase or acquire any of the capital
shares of any Share Subsidiary;
(e) sold or in any way transferred or otherwise disposed of any
of its assets or property except for sales of products and other
transfers and dispositions in the ordinary course of business;
(f) suffered any casualty, damage, destruction or loss, or any
material interruption in use, of any material assets or properties,
whether or not covered by insurance, or suffered any repeated,
recurring or prolonged shortage, cessation or interruption of
supplies or utility or other services required to conduct its
business and operations;
(g) suffered any material change in its business, operations,
assets, liabilities, properties, prospects or condition (financial or
otherwise);
(h) made or committed to make any capital expenditures or
capital additions or betterments exceeding in the aggregate U.S.
$50,000;
(i) had any actual or overtly threatened employee strikes, work
stoppages, slow-downs or lock outs, or had any material change in its
relationship with any of its employees, salesmen, distributors, or
independent contractors;
(j) made any material change in the rate of compensation,
commission, bonus, or other remuneration payable, or paid or agreed
to pay any bonus, extra compensation, pension, severance, vacation
pay, loan or advance, to any shareholder, director, officer,
employee, salesman, or distributor other than regularly scheduled
increases, bonuses, severance payments, and vacation pay as to which
Buyer has received prior written notice;
(k) changed any of the accounting principles followed by it or
the methods of applying such principles;
(l) transferred or granted any rights under, or entered into
any settlement regarding the breach or infringement of, any license,
patent, copyright, trademark, service mark, trade name, or invention,
or modified any existing rights with respect thereto;
(m) revalued any of its assets;
(n) waived or released any right or claim, or instituted,
settled, or agreed to settle any litigation, action, proceeding, or
arbitration related to its assets or the VA Business;
(o) failed to replenish its inventories or supplies in a normal
and customary manner consistent with prior practices or made any
purchase commitment other than in the ordinary course of business;
(p) except for the execution of this Agreement, entered into
any transaction other than in the ordinary course of business
consistent with past practice;
(q) changed its corporate form or parent entity; or
(r) agreed to do any of the foregoing.
3.9 Accounts Receivable. The accounts receivable of the VA
Business as set forth on the Pre-Closing Balance Sheet or arising since the
date thereof are valid and genuine; have arisen solely out of bona fide
sales and deliveries of goods, performance of services and other business
transactions in the ordinary course of business consistent with past
practice; are not subject to valid defenses, set-offs or counterclaims; and
are fully collectible in the normal and ordinary course of business within
thirty (30) days after billing, except, in the case of accounts receivable
appearing on the Pre-Closing Balance Sheet, to the extent of the reserve
for doubtful accounts reflected on the Pre-Closing Balance Sheet. The
reserve for doubtful accounts on the Pre-Closing Balance Sheet has been
determined in accordance with Generally Accepted Accounting Principles
consistent with past practice.
3.10 Inventories. All inventory of the VA Business, including,
without limitation, raw materials, work in process and finished goods,
reflected on the Pre-Closing Balance Sheet or acquired since the date
thereof was acquired and has been maintained in the ordinary course of
business; is merchantable; consists of items of a quality and quantity
usable and saleable in the ordinary course of business; is valued at the
lower of cost or market value; and is not subject to any write-down or
write-off. Except as specifically reserved on the Pre-Closing Balance
Sheet, none of the inventory of the VA Business is obsolete or slow moving.
Neither CEC nor any Subsidiary is under any liability or obligation with
respect to the return of products or inventory concerning the VA Business
in the possession of fabricators, customers, or other parties.
3.11 Title. CEC and the Subsidiaries have good and marketable title
to all of the assets of the VA Business free and clear of all Liens of any
nature whatsoever, except as set forth on Schedule 3.11 ("Permitted
Liens"). The assets owned or leased by the Share Subsidiaries together
with the VA Assets include all the assets and properties which are
necessary to conduct the VA Business as presently conducted, and to perform
all of the contracts, leases, agreements, commitments, purchase orders,
work orders, customer orders, and other arrangements of the VA Business.
There are sufficient tools, machinery and equipment included in the assets
being conveyed to Buyer in operating condition adequate to operate the VA
Business as presently conducted.
3.12 Condition of Assets. All of the buildings, structures and
fixtures owned or leased by CEC and the Subsidiaries concerning the VA
Business are in good operating condition and repair, subject only to
ordinary wear and maintenance given the age of such buildings, structures
and fixtures, and are usable in the regular and ordinary course of
business. All machinery, equipment and other personal property owned or
leased by CEC and the Subsidiaries material to the business, operations or
financial condition of the VA Business is in good operating condition and
repair, subject only to ordinary wear and maintenance, and are usable in
the regular and ordinary course of business.
3.13 Owned Real Property. Schedule 3.13 contains a correct and
complete list of the street address and legal description of all real
property owned of record or beneficially by CEC or any Subsidiary and used
or held for use in the VA Business (the "Owned Real Property"). Except as
set forth on Schedule 3.13:
(a) all buildings, structures and improvements located on,
fixtures contained in, and appurtenances attached to the Owned Real
Property conform to all applicable federal, state and local laws,
regulations and ordinances, and the Owned Real Property is zoned for
the purposes for which it is presently used;
(b) there are no pending or, to the knowledge of CEC and the
Subsidiaries, threatened condemnation proceedings, lawsuits or
administrative actions by any Governmental Body relating to the Owned
Real Property or other matters affecting materially or adversely the
current use, occupancy or value thereof;
(c) Neither CEC or any Subsidiary has received any written or
oral notice from or on behalf of any Governmental Body for
assessments for public improvements against any of the Owned Real
Property which remains unpaid and, to the knowledge of CEC and the
Subsidiaries, no such assessment has been proposed;
(d) all structures and improvements on any Owned Real Property
are within the lot lines and do not encroach on any adjoining
premises, there are no encroachments on any Owned Real Property by
any structures and improvements on any adjoining premises, and none
of the Owned Real Property is located within any flood plain or
subject to any similar type of restriction for which any permits or
licenses necessary to the use thereof have not been obtained; and
(e) all facilities located on the Owned Real Property are
supplied with utilities and other services necessary for the
operation of such facilities, all of which services are adequate in
accordance with all applicable laws, ordinances, rules and
regulations.
3.14 Leased Real Property. Schedule 3.14 contains a correct and
complete list of all leases for real property leased by CEC or any
Subsidiary in connection with the VA Business (the "Real Property Leases").
True, correct and complete copies of all Real Property Leases have been
delivered to Buyer. The Real Property Leases are valid, binding,
enforceable and in full force and effect, there is no default thereunder
and no event has occurred which with notice or lapse of time or both, would
constitute a default, or permit termination, modification or acceleration
thereunder. Neither CEC nor any Subsidiary has assigned, pledged,
encumbered or sublet its interest in any Real Property Lease. The leased
Real Property is in compliance with all applicable laws, orders,
regulations, ordinances and governmental and contractual requirements
relating to its construction, use and operation.
3.15 Leased Personal Property. Schedule 3.15 contains a correct and
complete list of all leases and other agreements with payments in excess of
$1,000 per year under which CEC or any Subsidiary leases, holds or operates
in connection with the VA Business any tools, furniture, machinery,
equipment, vehicles or other personal property owned by any other person.
True, correct and complete copies of all such leases and agreements have
been delivered to Buyer. All of such leases and agreements are valid,
binding, enforceable and in full force and effect, and, to the knowledge of
CEC and the Subsidiaries, there is no default thereunder and no event has
occurred which, with notice or lapse of time or both, would constitute a
default or permit termination, modification or acceleration thereunder.
3.16 Employment Matters.
(a) Schedule 3.16 lists the name, date of hire and/or
appointment and current annual salary, commissions, allowances or
wage rates, along with any arrangement to increase such annual
salary, commissions, allowances or wage rates, of each employee of
CEC or any Subsidiary in the VA Business who is paid at an annual
rate in excess of $50,000 per annum, together with a statement of the
nature of the services rendered.
(b) Schedule 3.16 lists the names and addresses of all agents
or agencies of CEC or any Subsidiary (including powers of attorney)
with power or authority to bind CEC or any Subsidiary in any material
respect in connection with the VA Business and the purpose and scope
of authority of such agency.
(c) Except as disclosed on Schedule 3.16, with respect to the
VA Business:
(i) neither CEC nor any Subsidiary is a party to any
collective bargaining agreement or other contract or agreement
with any labor organization or other representative of any of
its employees nor is any such contract or agreement presently
being negotiated;
(ii) to the knowledge of CEC and the Subsidiaries, there
is no unfair labor practice charge or complaint pending or
threatened against or otherwise affecting the employees of CEC
or any Subsidiary;
(iii) there is no labor strike, slowdown, work stoppage,
dispute, lockout or other labor controversy in effect,
threatened against or otherwise affecting CEC or any
Subsidiary, and neither CEC nor any Subsidiary has experienced
any such labor controversy within the past five years;
(iv) no grievance is pending or, to the knowledge of CEC
and the Subsidiaries, threatened from any employee of CEC or
any Subsidiary;
(v) neither CEC nor any Subsidiary is a party to any
employment agreement or consulting agreement with any person or
entity with payments in excess of $50,000 per year, nor is any
such contract or agreement presently being negotiated;
(vi) no action, suit, complaint, charge, arbitration,
inquiry, proceeding or investigation by or before any court,
governmental agency, administrative agency or Governmental Body
brought by or on behalf of any employee, prospective employee,
former employee, retiree, labor organization or other
representative of the employees of CEC or any Subsidiary is
pending or, to the knowledge of CEC and the Subsidiaries,
threatened;
(vii) neither CEC nor any Subsidiary is a party to or
otherwise bound by, any consent decree with, or citation by,
any Government Body relating to employees or employment
practices, wages, hours, and terms and conditions of
employment;
(viii) CEC and each Subsidiary has paid in full, or
accrued in its financial books and records, to all of its
respective employees, all wages, salaries, commissions,
bonuses, benefits and other compensation due to such employees
or otherwise arising under any policy, practice, agreement,
plan, program, statute or other law;
(ix) neither CEC nor any Subsidiary is liable for any
severance pay or other payments to any employee or former
employee arising from the termination of employment, and
neither CEC, any Subsidiary nor Buyer will have any liability
under any benefit or severance policy, practice, agreement,
plan, or program which exists or arises, or may be deemed to
exist or arise, under any applicable law or otherwise, as a
result of or in connection with the transactions contemplated
by this Agreement or as a result of the termination by CEC or
any Subsidiary of any persons employed thereby on or prior to
the Closing Date;
(x) to the knowledge of CEC and the Subsidiaries, CEC and
each Subsidiary is in compliance with its notification
obligations under all governmental laws and regulations, and
all other notification and bargaining obligations arising under
any collective bargaining agreement, statute or otherwise; and
(xi) to the knowledge of CEC and the Subsidiaries, the
services of all employees essential to the VA Business will
continue to be available on the same terms and at the same
locations for the continuation of the VA Business after
consummation of the transactions contemplated hereby.
3.17 Employee Benefit Plans.
(a) Schedule 3.17 contains a true and complete list of all
employment-related plans or schemes relating to the VA Business,
including but not limited to, employment or consulting agreements,
collective bargaining and supplemental agreements, pension, profit
sharing, incentive, bonus, deferred compensation, retirement, stock
option, stock purchase, severance, medical and hospitalization,
insurance, vacation, salary continuation, sick pay, welfare, fringe
benefit and other employee benefit plans, contracts, programs,
policies and arrangements, whether written or oral, which CEC or any
Subsidiary maintains or maintained, or under which CEC or any
Subsidiary has or had any obligations with respect to any employee,
now or at any time during the past five years (the "Employee Plans").
(b) Except as set forth in Schedule 3.17, (i) neither CEC nor
any Subsidiary has unfunded liabilities in connection with any of the
Employee Plans; (ii) all contributions, premium payments and other
payments due from CEC or any Subsidiary to or under such Employee
Plans have been paid in a timely manner; and (iii) all additional
contributions, premium payments and other payments due on or before
the Closing Date shall have been paid by that date.
(c) Except as set forth in Schedule 3.17, there are no
circumstances or events which have occurred or will occur with
respect to any Employee Plan which could result at any time within
five years of the Closing Date in an insufficiency of such Employee
Plan's assets necessary to satisfy all benefit liabilities under the
Employee Plan.
(d) Between the date of this Agreement and the Closing Date, no
Employee Plan will be, (i) terminated (whether partially or
otherwise), nor will any proceedings be initiated to terminate any
such Employee Plan; (ii) amended in any manner which would directly
or indirectly increase the benefits accrued or to be accrued by any
participant thereunder; or (iii) amended in any manner which would
materially increase the cost of maintaining such Employee Plan.
(e) Except as set forth in Schedule 3.17, with respect to each
of the Employee Plans:
(i) each Employee Plan has been established,
maintained, funded and administered in all material respects in
accordance with its governing documents, and all applicable
provisions, applicable laws and all regulations thereunder;
(ii) all disclosures to employees and all filings and
other reports relating to each such Employee Plan and required
under all applicable laws, and all regulations thereunder to
have been made or filed on or before the Closing Date have been
or will be duly and timely made or filed by that date;
(iii) there is no litigation, disputed claim (other than
routine claims for benefits), governmental proceeding, audit,
inquiry or investigation pending or, to the knowledge of CEC
and the Subsidiaries, threatened with respect to any such
Employee Plan, its related assets or trusts, or any fiduciary,
administrator or sponsor of such Employee Plan; and
(iv) true and complete copies of the following have been
delivered to Buyer: the current Employee Plan document
(including a written description of all oral Employee Plans),
any amendments thereto, and the related summary plans
description, if any; each trust or custodial agreement and each
deposit administration, group annuity, insurance or other
funding agreement associated with each such Employee Plan; for
the last three Employee Plan years, the financial information
or reports, valuation reports, and/or actuarial reports
relating to each such Employee Plan; all rulings relating
thereto, and all applications for such rulings; and all filing
and reports filed with any Governmental Body at any time
during the three year period ending on the Closing Date, along
with all schedules and reports filed therewith.
3.18 Material Contracts. Except as set forth on Schedule 3.18 (and
except for the collective bargaining agreements, employment agreements,
consulting agreements and leases described on Schedules 3.14, 3.15 and 3.16
which are incorporated by reference into Schedule 3.18), neither CEC nor
any Subsidiary is a party with respect to the VA Business to any
outstanding:
(a) commitment, contract, or agreement involving an obligation
or liability of more than U.S. $50,000 (excluding orders for the
purchase of standard products accepted in the ordinary course of
business and providing for prevailing prices and customary conditions
of sale);
(b) agreement, contract or commitment containing any non-
competition, confidentiality (other than confidentiality agreements
entered into in the ordinary course of business with customers) or
other limitations restricting the conduct of the business of CEC or
any Subsidiary or the use or disclosure of any information in the
possession of CEC or any Subsidiary;
(c) agreement or contract relating to the mortgaging, pledging
or the placing of a Lien on any of the properties or assets of CEC or
any Subsidiary;
(d) note, debenture, bond, equipment trust agreement, letter of
credit agreement, loan agreement or other contract or commitment for
the borrowing or lending of money or guarantee, pledge or undertaking
of the indebtedness of any other person;
(e) loans to employees, officers, directors or affiliates;
(f) agreement or commitment for any capital expenditure or
leasehold improvement in excess of U.S. $100,000;
(g) partnership, joint venture, or similar agreement;
(h) currency or interest rate exchange or other financial
derivative agreement;
(i) any manufacturer's representative agreement, brokers
agreement, distributorship or dealer agreement or other agreement
relating to the sale or distribution of products to or by persons;
(j) any agreement entered into relating to the acquisition or
disposition of businesses, product lines or assets, except those
agreements entered into in the ordinary course of business;
(k) any indemnification agreement with an employee, except for
indemnification provisions relative thereto contained in the Charter
or Bylaws of CEC or any Subsidiary; or
(l) any other written or oral agreement or commitment which is
material to the operations or business prospects of CEC or any
Subsidiary (the foregoing are referred to herein, collectively, as
the "Material Contracts", and each individually as a "Material
Contract").
Each of the Material Contracts listed on Schedule 3.18 (or incorporated
therein by reference) and those not required to be listed therein because
of the amount thereof, is valid, binding and enforceable in accordance with
its terms. Except as set forth on Schedule 3.18, neither CEC nor any
Subsidiary is, and, to the knowledge of CEC and the Subsidiaries, no other
party thereto is, in default of any obligation, covenant or condition
contained therein, and no event has occurred which with or without the
giving of notice or lapse of time, or both, would constitute a default
thereunder. True and complete copies of all Material Contracts have been
delivered to Buyer.
3.19 Customers and Suppliers. Except as set forth on Schedule 3.19,
neither CEC nor any Subsidiary has any knowledge of any intention of or
indication by a "Significant Customer" of the VA Business or a "Significant
Supplier" (both as defined below) to terminate its business relationship
with CEC or any Subsidiary or to limit or alter its business relationship
with CEC or any Subsidiary in any material respect. As used in this
Agreement, "Significant Supplier" and "Significant Customers" mean any of
the ten (10) largest suppliers or customers, as the case may be, by dollar
volume, of the VA Business during the 1996 calendar year. Schedule 3.19 of
the Disclosure Schedules contains a true and correct list of all of the
Significant Customer and Significant Suppliers of the VA Business.
3.20 Tax Returns and Taxes. CEC and each Subsidiary has with
respect to the VA Business (i) timely filed all federal, state, local and
foreign tax returns, reports, statements and other similar filings (the
"Tax Returns") which are required to be filed with respect to any federal,
state, local or foreign income, payroll, withholding, excise, sales, use,
personal property, occupancy, business, mercantile, real estate, capital
stock, franchise or other taxes (the "Taxes"); and (ii) paid all Taxes,
interest, penalties, assessments and deficiencies due or assessed pursuant
to the Tax Returns. All Tax Returns properly reflect the liabilities of
CEC and each Subsidiary for Taxes for the periods, properties or events
covered thereby. Except as set forth on Schedule 3.20, no current
extensions of time in which to file any Tax Returns have been executed or
filed with any taxing authority; neither CEC nor any Subsidiary has
received any notice of assessment of additional Taxes and has not executed
or filed with any taxing authority any agreement extending the period of
assessment of any Taxes; there are no claims, examinations, proceedings or
proposed deficiencies for Taxes pending or, to the knowledge of CEC and the
Subsidiaries, threatened against CEC or any Subsidiary; and CEC and each
Subsidiary are current in the payment of all withholding and other employee
Taxes which are due and payable. The accruals for Taxes contained in the
Pre-Closing Balance Sheet are adequate to cover all liabilities for Taxes
for all periods ending on or before December 31, 1996, and include adequate
provisions for all deferred Taxes. All Taxes for periods beginning after
December 31, 1996, have been paid or are adequately reserved against on the
books of CEC or the Subsidiaries.
3.21 Licenses and Permits. CEC and each Subsidiary owns, holds,
possesses or lawfully uses all Permits which are necessary to own or lease
and operate its assets and to conduct the VA Business as now or previously
conducted by it. All Permits relating to the VA Business are fully
assignable to Buyer without the consent or approval of any third party or
governmental body and without the need to reapply for any new Permit. CEC
and the Subsidiaries have fulfilled and performed their obligations under
each of the Permits, and no event has occurred which constitutes or, after
notice or lapse of time or both, would constitute a breach or default under
any of the Permits or would permit revocation or termination of any of the
Permits. The Permits are in full force and effect and are renewable by
their terms or in the ordinary course of business without the need to
comply with any special qualification procedures or to pay any amounts
other than routine filing fees. None of the Permits will be adversely
affected by consummation of the transactions contemplated hereby.
3.22 Intellectual Property Rights. Set forth on Schedule 3.22(a)
with respect to the VA Business is a correct and complete list of all
domestic and foreign (i) patents and registered trademarks, tradenames and
service marks held, owned or used by CEC or any Subsidiary, and (ii)
patent, trademark, tradename and service mark applications filed in
connection with the VA Business (the "Issued Rights and Applications").
Set forth on Schedule 3.22(b) with respect to the VA Business is a correct
and complete list of all license and other agreements allowing CEC or any
Subsidiary to use intellectual property rights of third parties, either as
licensee or as licensor, or affecting the VA Business (the "License
Agreements"). Except as set forth on Schedule 3.22:
(a) no other intellectual property rights are required or
necessary to conduct the VA Business as presently conducted or
proposed to be conducted;
(b) CEC and the Subsidiaries have and own all right, title and
interest in and to all of the Intellectual Property Rights (including
the exclusive right to use, sell, license or dispose of such rights
and to bring actions for infringement thereof) free and clear of any
and all Liens;
(c) CEC and the Subsidiaries have taken all appropriate actions
and made all applications and filings pursuant to applicable federal
and state law to perfect, protect and maintain its interests in the
Issued Rights and Applications;
(d) Neither CEC nor any Subsidiary has any knowledge of any
infringements of, or claims or assertions of infringement of, any of
the Intellectual Property Rights;
(e) Neither CEC nor any Subsidiary has taken or omitted to
take, any action which would have the effect of waiving any of its
rights relating to any of the Intellectual Property Rights;
(f) there have been no claims, and, to the knowledge of CEC and
the Subsidiaries, there is no basis for any claim challenging the
ownership, scope, validity or enforceability of any of the
Intellectual Property Rights;
(g) the manufacture, advertising, sale or use of any products
now or heretofore manufactured or sold by CEC or any Subsidiary did
not and do not infringe (nor has any claim been made that any such
action infringes) the intellectual property rights of others;
(h) each of the License Agreements is in full force and effect
and, to the knowledge of CEC and the Subsidiaries, there has occurred
no default which is continuing in respect of any License Agreement;
and
(i) there are no royalties, honoraria, fees or other payments
payable by CEC or any Subsidiary to any person by reason of the
ownership, use, license, sale or disposition of the Intellectual
Property Rights.
3.23 No Pending Litigation or Proceedings. Except as set forth on
Schedule 3.23, with respect to the VA Business, there is no litigation,
investigation, arbitration or proceeding pending or, to the knowledge of
CEC and the Subsidiaries, threatened against or affecting CEC or any
Subsidiary or any of the their properties or assets, at law or in equity,
by or before any court, arbitrator or Governmental Body, nor do CEC and the
Subsidiaries know of any reasonably likely basis for any such litigation,
arbitration, investigation or proceeding, the result of which could
adversely affect the VA Business or the transactions contemplated hereby.
There are presently no outstanding judgments, decrees or orders of any
court or any Governmental Body against or affecting the VA Business.
3.24 Compliance with Laws. The VA Business of CEC and each
Subsidiary has been conducted in compliance in all material respects with
all applicable laws, statutes, rules, regulations and orders of all
Governmental Bodies. No notice, citation, summons or order has been
assessed and no investigation or review is pending or, to the knowledge of
CEC and the Subsidiaries, threatened by any Governmental Body or third
party with respect to any alleged violation by CEC or any Subsidiary in any
material respect of any such laws, statutes, rules, regulations or orders.
Without limiting the generality of the foregoing, neither CEC nor any
Subsidiary is party to any agreement or arrangement (whether or not
intended to be legally binding) or is in the pursuit of any course of
conduct which is registrable under the United Kingdom Restrictive Trade
Practices Acts 1976 and 1977, or prohibited by or capable of giving rise to
an investigation by the United Kingdom Director-General of Fair Trading or
a reference to the United Kingdom Monopolies and Mergers Commissions or is
in material contravention or breach of any of the following European Union
or United Kingdom Laws and Regulations: The Treaty of Rome 1957; the Fair
Trading Act 1973; the Consumer Credit Act 1974; the Health and Safety at
Work etc. Act 1974; the Trade Descriptions Acts 1968 and 1972; the
Restrictive Trade Practices Act 1976 and 1977; the Competition Act 1980;
the Data protection Act 1984; the Clean Air Acts 1956 and 1968; the Control
of Pollution Act 1974; the Health and Safety at Work etc. Act 1974; the
Water Act 1989; and the Environmental Protection Act 1990; or statutory
instruments, any regulations, orders, notices or directions made under any
of the foregoing.
3.25 Occupational Safety. All of the facilities of CEC and the
Subsidiaries are maintained and operated in compliance with all laws and
regulations relating to occupational health and safety. Neither CEC nor
any Subsidiary is or has been subject to any investigation, fine, penalty
or citation concerning the VA Business relating to or arising out of a
violation of any applicable law or governmental regulation.
3.26 Environmental Matters. (a) Schedule 3.26 contains a complete
list of all solid waste dumps and hazardous waste disposal, treatment, and
storage facilities which are presently or were used by CEC or any
Subsidiary at any time in the operation of the VA Business for disposal of
hazardous substances.
(b) Except as disclosed on Schedule 3.26 with respect to the
VA Business:
(i) CEC and the Subsidiaries have kept all records, and
have made all filings required by applicable Environmental Laws
(as hereinafter defined) with respect to emissions into the
environment (including solids, liquids and gases) and the
proper disposal of such materials (including solid and waste
materials);
(ii) no Environmental Permits (as hereinafter defined)
are required for the operation of the VA Business; all
Environmental Permits are in full force and effect;
(iii) CEC and the Subsidiaries have operated the VA
Business in compliance in all material respects with all
Environmental Permits and applicable Environmental Laws
governing its operations, properties and assets;
(iv) the operations of the VA Business do not involve
the generation, transportation, treatment, storage, or disposal
of hazardous waste;
(v) neither CEC nor any Subsidiary has disposed of any
hazardous waste or substance by placing it in or on the ground
or waters of any property owned, leased or used in the
operation of the VA Business. In the United Kingdom, neither
CEC nor any Subsidiary produces or uses any substances, or uses
any processes in the manufacture or processing of its products,
which are currently proscribed by the United Kingdom Secretary
of State for the Environment, the United Kingdom Inspectorate
of Pollution, the United Kingdom National Rivers Authority or
any United Kingdom local authority under any applicable
environmental law;
(vi) to the knowledge of CEC and the Subsidiaries, no
underground storage tanks or surface impoundments are located
at, on, or under any property owned or leased in the operation
of the VA Business;
(vii) there is not pending or, to the knowledge of CEC
and the Subsidiaries, threatened against CEC or any Subsidiary
any civil, criminal or administrative action, suit, summons,
citation, complaint, claim, notice of violation, demand,
judgment, order, lien, proceeding or hearing, based on or
related to any Environmental Permit or Environmental Law or the
presence, manufacture, generation, processing, distribution,
use, sale, treatment, recycling, receipt, storage, disposal,
transport, arranging for transportation, treatment or disposal,
or handling, or the emission, discharge, release or threatened
release into the environment, of any hazardous substance;
(viii) to the knowledge of CEC and the Subsidiaries, none
of the operations of the VA Business is the subject of any
investigation by any Governmental Body evaluating whether any
Remedial Action (as hereinafter defined) is needed to respond
to a Release (as hereinafter defined) of any Contaminant (as
hereinafter defined) into the environment;
(ix) neither CEC nor any Subsidiary has filed, nor have
any of them been required to file, any notice under federal,
state, or local laws indicating past or present treatment,
storage, or disposal of a hazardous waste as defined under
applicable Environmental Laws or reporting a spill or Release
of a Contaminant at, on, under or about any property owned,
leased or used in the operation of the VA Business; and
(x) no lien in favor of any governmental authority for (i)
any liability under any Environmental Laws or (ii) damages
arising from or costs incurred by such governmental authority
in response to a Release of a Contaminant into the environment
has been filed or attached to the property owned or leased in
the operation of the VA Business.
For the purposes of this Agreement:
(a) "Contaminant" means those substances which are regulated
by or form the basis of liability under any Environmental Laws,
including, but not limited to, asbestos, and polychlorinated
biphenyls ("PCBs");
(b) "Environmental Laws" means all applicable foreign,
federal, state, and local laws, regulations or ordinances in effect
on the Closing Date relative to air quality, water quality, solid
waste management, hazardous or toxic substances or the protection of
health or the environment;
(c) "Environmental Permits" means, collectively, all permits,
consents, approvals, registrations, certifications and authorizations
presently required under Environmental Laws;
(d) "Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal,
leaching, or migration into the environment, including the movement
of any Contaminant or other substance through or in the air, soil,
surface water, groundwater, or property; and
(e) "Remedial Action" means any action required under any
Environmental Laws to (i) clean up, remove, treat, or in any other
way address any Contaminant or other substance in the environment,
(ii) prevent the Release or threat of Release, or minimize the
further Release of any Contaminant or other substance so it does not
migrate or endanger or threaten to endanger public health or welfare
or the environment, or (iii) perform pre-remedial studies and
investigations and post-remedial monitoring and care.
3.27 Insurance Coverage. CEC and each Subsidiary presently
maintains with respect to the VA Business, and has at all times prior to
the date hereof maintained, liability, casualty, property loss and other
insurance coverages upon its properties and with respect to the conduct of
its business in such amounts, of such kinds and with such insurance
carriers as are generally deemed appropriate and sufficient for companies
of a similar size engaged in similar types of business and operations.
3.28 Products Liability and Warranty Claims. With respect to the VA
Business:
(a) neither CEC nor any Subsidiary has made any oral or written
warranties with respect to the quality or absence of defects of its
products or services which are in force as of the date of this
Agreement;
(b) there are no liabilities of or claims against CEC or any
Subsidiary and, to the knowledge of CEC and the Subsidiaries, no
liabilities or claims are threatened against CEC or any Subsidiary,
with respect to any product liability (or similar claim) or product
warranty (or similar claim) that relates to any product manufactured
or sold in the VA Business.
(c) Neither CEC nor any Subsidiary has knowledge of any facts
or circumstances which might reasonably give rise to such liabilities
or claims.
3.29 Ownership of Subsidiaries. CEC, or one of its subsidiaries [or
affiliates], is the record and beneficial owner of the VA Shares, and the
delivery of the VA Shares as provided in this Agreement will vest in Buyer
legal and valid title to the VA Shares, free and clear of all Liens,
liabilities and obligations.
3.30 Capitalization. The authorized capital stock of each Share
Subsidiary and the number of outstanding VA Shares of such capital stock
and the names of the owners thereof are set forth on Schedule 3.30, all of
which VA Shares are validly issued, fully paid and nonassessable. There
are no outstanding securities convertible into, exchangeable for, or
carrying the right to acquire, equity securities of any Share Subsidiary.
3.31 Insider Interests. Except as set forth on Schedule 3.31, no
officer or director of CEC or any Subsidiary has any interest in any
property, real or personal, tangible or intangible, including without
limitation the Intellectual Property Rights used in or pertaining to the VA
Business, and no such person has any business relationship with CEC or any
Subsidiary except as such officer or director.
3.32 Brokers and Finders. Neither CEC nor any Subsidiary has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finders' fees, and no broker
or finder has acted directly or indirectly for CEC or any Subsidiary in
connection with this Agreement or the transactions contemplated herein.
3.33 Disclosure. No representation or warranty of CEC or any
Subsidiary contained in this Agreement, and no statement contained in any
certificate, schedule, list or other writing furnished to Buyer pursuant
hereto, contains any untrue statement of a material fact or omits to state
a material fact necessary in order to make the statements contained herein
or therein, in light of the circumstances under which such statements are
made, not misleading.
IV. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to CEC as follows:
4.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
formation. Buyer has all requisite corporate power and authority to own,
lease and operate its properties and assets and to carry out its business
as and where now being conducted.
4.2 Authority and Enforceability. The execution, delivery and
performance of this Agreement, the Employment Agreements, and all other
agreements and documents to be delivered by Buyer pursuant to the
provisions of this Agreement (the "Buyer Documents") have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement and the Buyer Documents have been duly executed and delivered by
Buyer and constitute the legal, valid and binding obligation of Buyer
enforceable in accordance with their respective terms.
4.3 Third-Party Consents. No consent, authorization or approval
of, and no registration or filing with, any third parties or any
governmental or regulatory body or authority is required for the execution,
delivery and performance of this Agreement and the Buyer Documents by Buyer
and the consummation of the transactions contemplated hereby.
4.4 No Conflict or Violation. The execution, delivery and
performance of this Agreement and the Buyer Documents, the consummation by
Buyer of the transactions contemplated hereby and thereby, and the
compliance with the terms hereof and thereof by Buyer do not and will not
(with or without notice, the lapse of time, or both) (a) violate any
provision of the organizational documents of Buyer, (b) violate, conflict
with or result in a breach of or constitute a default under, any term,
condition, or provision of any agreement, contract, mortgage, lease or
other instrument, document or understanding to which Buyer is a party, by
which it may have rights or by which any of its assets may be bound or
affected, (c) violate any law, ordinance, code, rule, regulation, order,
judgment, injunction, award or decree of any court, arbitrator,
administrative agency or governmental body or authority applicable to Buyer
or its assets.
V. COVENANTS
5.1 Access to Information. CEC and the Subsidiaries shall afford
to the officers, employees, accountants, attorneys and authorized
representatives of Buyer reasonable access to the facilities, properties,
books and records, customers, suppliers and employees of CEC and the
Subsidiaries in order that Buyer may have reasonable opportunity to make
such investigation as it shall desire concerning the VA Business. CEC will
furnish Buyer with such additional financial and operating data and other
information relating to the business, properties, assets, financial
condition and prospects of the VA Business as Buyer may reasonably request
from time to time. In the event this Agreement is terminated prior to the
Closing, upon request of CEC, all books, records and other material
obtained by Buyer concerning the VA Business, including copies thereof,
will be returned by Buyer, and Buyer will not disclose or use any
confidential information so obtained.
5.2 Conduct of VA Business. Except as otherwise contemplated by
this Agreement, during the period from the date of this Agreement and
continuing until the Closing, CEC and each Subsidiary agrees to operate the
VA Business in the ordinary course and consistent with past practices and
to use its best efforts to: (a) preserve the VA Business intact and
conserve the goodwill related thereto, (b) preserve intact the present
business organization of each Subsidiary, keep available the services of
present officers and key employees, (c) preserve present relationships with
suppliers, customers, lenders and others having business dealings with
them, (d) maintain in full force and effect all Permits required for the
operation of the VA Business as presently conducted, (e) maintain
consistent with past practices all buildings, offices and other properties
of the VA Business, or (f) not knowingly do any act or omit any act or
permit any omission to act which will cause a breach or default under any
of the contracts, commitments or obligations included in the VA Business.
Without the prior written consent of Buyer, neither CEC nor any Subsidiary
shall engage in any activity, take any action, or enter into any
transaction of the type described in Section 3.8.
5.3 Consents and Governmental Approvals. CEC and each Subsidiary
shall obtain, prior to the Closing Date, all consents, authorizations and
registrations specified in Schedule 3.5.
5.4 Best Efforts. Subject to the terms and conditions of this
Agreement, each of the parties shall use its best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things
necessary or desirable to consummate the transactions provided for in this
Agreement.
5.5 Further Assurances. CEC and each Subsidiary, after the
Closing, without further consideration, shall execute, acknowledge, and
deliver any further deeds, assignments, conveyances, and other assurances,
documents, and instruments of transfer, reasonably requested by Buyer, and
shall take any other action consistent with the terms of this Agreement
that may reasonably be requested by Buyer for the purpose of assigning,
transferring, granting, conveying, and confirming the VA Business or any
part of the VA Business to Buyer or to better enable Buyer to complete,
perform or discharge any of the liabilities or obligations assumed by
Buyer. Each of the parties hereto will cooperate with the other and
execute and deliver to the other parties hereto such other instruments and
documents and take such other actions as may be reasonably requested from
time to time by any other party hereto as necessary to carry out, evidence
and confirm the intended purposes of this Agreement.
5.6 Update Schedules. CEC shall promptly disclose to Buyer any
information contained in its representations and warranties or the
Schedules which, because of an event occurring after the date hereof, is
incomplete or is no longer correct as of all times after the date hereof
until the Closing Date; provided, however, that none of such disclosures
shall be deemed to modify, amend or supplement the representations and
warranties of CEC or the Schedules hereto for the purpose of Article III
hereof, unless Buyer shall have consented thereto in writing.
5.7 Bulk Transfer Laws. Buyer hereby waives compliance by CEC with
the provisions of any so-called "bulk transfer" or "creditor notification"
law of any jurisdiction in connection with the sale of the VA Business to
Buyer. In accordance with the terms of Section 7.1, CEC agrees to
indemnify and hold harmless Buyer from and against any and all Losses (as
defined in Section 7.1) that may be asserted by third parties against
Buyer as a result of noncompliance with any such bulk transfer law.
5.8 Insurance Indemnity. CEC shall be responsible for all prior
insurance charges related to the VA Business including, but not limited to,
retrospective additional premiums, additional charges incurred by any audit
or exposure changes or any deferral charges incurred by CEC or any
Subsidiary. CEC shall also be responsible for any insured, self-insured,
or deductible amounts of loss to the conclusion of each and every loss
(including any reopened claims) incurred prior to the Closing Date. CEC
shall indemnify and hold Buyer harmless from and against all claims,
demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries and deficiencies, including interest, penalties and actual
attorney's fees incurred relating to any error or omission in reporting of
loss to any insurance or excess insurance company.
5.9 Product Liability Matters. CEC and Buyer agree, with respect
to claims arising out of claimed injury to persons or property by reason of
the improper performance or malfunctioning of a product, improper design or
manufacture, failure to adequately package, label or warn of hazards or
other related product defects of any products at any time manufactured or
sold by CEC or any Subsidiary or in connection with the VA Business (any of
the foregoing, a "product liability claim"), that: (i) if any such product
liability claim arises out of an accident or occurrence involving a product
manufactured on or prior to the Closing Date, the defense and handling of
the same will be undertaken by CEC directly or through the appropriate
insurance contract, and CEC will indemnify, defend and hold Buyer harmless
with respect to any claim; and (ii) if any such product liability claim
arises out of an accident or occurrence involving a product manufactured
after the Closing Date, the defense and handling of the same will be
undertaken by Buyer directly or through the appropriate insurance contract,
and Buyer will indemnify, defend and hold CEC harmless with respect to any
such claim. Buyer will develop and implement a procedure for marking
products to facilitate identification of such products as manufactured
after the Closing Date. With regard to the investigation and defense of
product liability claims, each party agrees to provide the other with such
documentary material and assistance of personnel (subject to reimbursement
of reasonable travel and lodging expenses) as is available to one party and
as the other may reasonably require in connection with such investigation
or defense.
5.10 Checks and Drafts. CEC shall honor (whether presented before,
on, or after the Closing) all checks and drafts drawn by CEC or any Asset
Subsidiary on or prior to the Closing to pay trade payables and accrued
expenses of the VA Business.
5.11 Employees on Lay Off. CEC and each Subsidiary has given all
notices required under any law or regulation to all employees who were
terminated or laid off by CEC or any Subsidiary prior to the Closing Date.
CEC shall be solely responsible for all obligations under any law or
regulation with respect to such employees.
5.12 Power of Attorney. Effective as of the Closing Date, CEC
appoints Buyer, its successors and assigns, its attorney-in-fact with full
power of substitution, in the name of CEC, any Subsidiary or Buyer, to (i)
undertake all proceedings that Buyer may deem proper to collect, assert or
enforce any claim, right or title of any kind in or to the VA Business;
(ii) to defend or compromise any and all actions, suits or proceedings in
respect of the VA Business; and (iii) to take all action that Buyer may
reasonably deem proper, other than committing CEC or any Subsidiary to any
obligation or liability, in order to provide for Buyer the benefits under
the VA Business. CEC acknowledges that the foregoing powers are coupled
with an interest and shall be irrevocable. Also, effective as of the
Closing Date, CEC appoints Buyer its attorney-in-fact to open all mail
relating to the VA Business addressed to CEC or any Subsidiary and to
endorse in the name of CEC or any Subsidiary any checks, drafts, or other
instruments received in payment on account of the VA Business. Buyer
promptly will send to CEC all mail not relating to the VA Business, except
personal mail of any employee or former employee of the VA Business.
5.13 Tax Clearance Certificates, Filings and Notices. CEC and each
Asset Subsidiary shall cooperate with Buyer and take all actions required
to obtain all conditional tax clearances, tax clearance certificates and
similar documents in connection with the consummation of the transactions
contemplated by this Agreement. CEC and each Subsidiary shall make all
filings and deliver all notices required by any employment security, taxing
or other governmental authority and any notices under any plant closing
laws in connection with the consummation of the transactions contemplated
by this Agreement.
5.14 [Intentionally omitted]
5.15 Employment of UK Employees. Buyer shall offer employment on an
"at will" basis to all current, full time employees of the VA Business on
the Closing Date. The employment of VA Business employees of Holset
Engineering Company Limited (UK) shall be in accordance with the terms of
Schedule 5.15. Buyer shall provide employees of the VA Business who are
employed by Buyer with health and welfare benefits substantially equivalent
to those provided by CEC immediately prior to the Closing Date. CEC will
use best efforts to ensure the availability of such employees for Buyer.
Nothing contained in this Agreement shall confer on any employee of CEC any
right with respect to continuance of employment by Buyer, nor shall
anything herein interfere with Buyer's right to terminate the employment of
an employee at any time.
5.16 Cooperation in Litigation. In the event that, after the
Closing Date, CEC or Buyer shall require the participation of officers and
employees employed by the other to aid in the defense or settlement of
litigation or claims by third parties, and so long as there exists no
conflict of interest between the parties, CEC and Buyer shall use their
best efforts to make such officers and employees available to participate
in such defense, provided that the party requiring the participation of
such officers or employees shall pay all reasonable out-of-pocket costs,
charges and expenses arising from such participation.
5.17 Exclusivity. Neither CEC nor any Subsidiary shall (i) solicit,
initiate or encourage the submission of any proposal or offer from any
person relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets of the VA Business
(including any acquisition structured as a merger, consolidation or share
exchange) or (ii) participate in any discussions or negotiations regarding,
furnishing any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any person to do or
seek any of the foregoing.
5.18 Public Announcement. CEC and Buyer shall not, without the
approval of the other, make any press release or other public announcement
concerning, or discuss with third parties the financial details of, the
transactions contemplated by this Agreement, except as and to the extent
that such parties shall be so obligated by law or regulation, in which case
the other shall be advised and such parties shall use their best efforts to
cause a mutually agreeable release or announcement to be issued; provided,
however, that the foregoing shall not preclude communications or
disclosures necessary to implement the provisions of this Agreement or to
comply with all applicable statutory or regulatory disclosure obligations.
At the time of the signing of this Agreement, or as soon as practicable
thereafter, CEC and Buyer shall jointly communicate such event, in form and
substance reasonably acceptable to each, to the customers, suppliers and
employees of the VA Business.
5.19 Confidentiality. Unless and until the Closing has been
consummated, Buyer will hold, and shall cause their counsel, independent
certified public accountants, appraisers and investment bankers to hold, in
confidence any confidential data or information made available to Buyer in
connection with this Agreement with respect to the VA Business using the
same standard of care to protect such confidential data or information as
is used to protect Buyer's confidential information. If the transactions
contemplated by this Agreement are not consummated, Buyer agrees that it
shall return or cause to be returned to CEC all written materials and all
copies thereof that were supplied to Buyer by CEC and that contain any such
confidential data or information.
5.20 Access to Records. For a period of five (5) years after the
Closing Date, CEC, the Asset Subsidiaries and Buyer shall each retain and
make their respective books and records available for inspection by the
other party or its duly authorized representatives, and each other party
and such representatives shall have reasonable access to (including the
right to make copies of), all of such books and records, to the extent that
such access may reasonably be required in connection with matters relating
to or affected by the operation of the VA Assets or the VA Business prior
to the Closing. Each party shall be solely responsible for any costs or
expenses incurred by it pursuant to this Section 5.20. After such five (5)
year period, all such records may be destroyed by the party retaining them,
unless the other party reasonably requests that, at such other party's
expense, such records be retained.
5.21 Covenant Not to Compete.
(a) Neither CEC nor any of its subsidiaries shall for a period
of five years after the Closing Date, compete with Buyer anywhere in
the world by owning, managing, operating, controlling, participating
in the ownership, management or control of, or engaging in or
offering to engage in directly or indirectly, as partner,
shareholder, director, officer, employee, agent, creditor,
consultant, joint venturer, investor or in any other capacity or
manner whatsoever, any business activity directly or indirectly
competitive with the VA Business.
(b) CEC acknowledges that given the nature of the VA Business
the covenants contained in this Section 5.21 contain reasonable
limitations as to time, geographical area and scope of activity to be
restrained, and do not impose a greater restraint than is necessary
to protect and preserve for the benefit of Buyer the goodwill of the
VA Business and to protect the legitimate business interests of
Buyer. If, however, this Section 5.21 is determined by any court of
competent jurisdiction to be unenforceable by reason of its extending
for too long a period of time or over too large a geographic area or
by reason of its being too extensive in any other respect or for any
other reason it will be interpreted to extend only over the longest
period of time for which it may be enforceable and/or over the
largest geographical area as to which it may be enforceable and/or to
the maximum extent in all other aspects as to which it may be
enforceable, all as determined by such court and in such action.
(c) Buyer and CEC acknowledge and agree that the remedy at law
for any breach of this Section 5.21 will be inadequate and that
Buyer, in addition to any other relief available to it, shall be
entitled to temporary and permanent injunctive relief without the
necessity of proving actual damage.
5.22 Services Under Chinese Licenses. CEC shall use Buyer to
provide vibration attenuation technical support services under all current
license agreements which CEC or its subsidiaries have in China. CEC and
Buyer shall use their good faith best efforts to agree upon an appropriate
percentage of the royalties received by CEC or its subsidiaries, under such
license agreements which will be paid to Buyer for its vibration
attenuation technical support services. CEC shall pay Buyer royalty fees
of $.235 per engine relating to the License Agreement, dated November 15,
1986, between CEC and Dong Feng Motor Corporation.
5.23 Holset Korea Ltd. Buyer and CEC shall use their good faith
best efforts to arrange for the purchase by Buyer on the Closing Date of
the 39% interest in Holset Korea Ltd. held by Chairman Lee.
5.24 UK Pension Plans. Buyer and CEC shall establish a process
under which Buyer will assume certain UK pension liabilities of CEC and
receive certain UK pension assets of CEC in accordance with the procedures
and upon the assumptions set forth on Schedule 5.24.
VI. CONDITIONS TO CLOSING
6.1 Conditions to Obligations of Buyer. The obligations of Buyer
to consummate the transactions provided for by this Agreement are subject,
at the discretion of Buyer, to the satisfaction at or prior to the Closing
of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of CEC contained in this Agreement shall be true and
correct at and as of the Closing as if such representations and
warranties were made at the Closing, and CEC shall have performed all
agreements and covenants required by this Agreement to be performed
by it prior to or at the Closing Date. On the Closing Date, there
shall be delivered to Buyer a certificate signed on behalf of CEC to
the foregoing effect.
(b) Material Adverse Change. Since the date of this Agreement,
there shall not have occurred with respect to any Subsidiary (i) any
material adverse change in the condition (financial or otherwise),
nature or amount of liabilities, results of operations, assets,
business or prospects of the VA Business or any events which,
individually or in the aggregate, could reasonably be expected to
have such a material adverse change, (ii) any material adverse
governmental or regulatory change affecting the VA Business, and
(iii) any material damage to the assets or properties of the VA
Business by fire, flood, casualty, act of God or other cause,
regardless of insurance coverage for such damage.
(c) Consents and Governmental Approvals. The parties shall
have obtained all consents, authorizations, approvals, registrations,
and waivers from third parties and Governmental Bodies specified in
Schedule 3.5 or otherwise required by applicable laws necessary to
permit the transactions contemplated by this Agreement.
(d) Certificate of Title. CEC shall have delivered to Buyer
the Certificate of Title concerning the real property being
transferred in the UK, such Certificate to be in form and substance
reasonably acceptable to Buyer.
(e) Holset License Agreement. CEC shall have delivered to
Buyer a duly executed License Agreement concerning the use of the
name "Holset" in form and substance reasonably acceptable to Buyer
and CEC, which License Agreement shall provide, among other things,
for the use by Buyer of the name "Holset" in connection with the
manufacture and sale of industrial dampers through December 31, 1999
and automotive dampers for a period of nine months following Closing.
(f) Supply Agreement. CEC shall have delivered to Buyer a duly
executed Supply Agreement substantially in the form attached hereto
as Exhibit C (the "Supply Agreement").
(g) Technical Agreement. CEC shall have delivered to Buyer a
duly executed Technical Agreement substantially in the form attached
hereto as Exhibit D (the "Technical Agreement").
(h) Administrative Services Agreements. CEC shall have
delivered to Buyer duly executed Administrative Services Agreements
substantially in the form attached hereto as Exhibit E (the "Administrative
Services Agreements").
(i) [Intentionally omitted]
(j) Legal Opinion. Buyer shall have received an opinion from
David C. Wright, Esq., general counsel to CEC, in form and substance
reasonably acceptable to Buyer.
(k) Holset SNC (France). Dampers SAS (France) shall have
transferred the stock of Holset SNC (France) to any entity other than
a Share Subsidiary.
(l) Litigation: Other Events. No action, suit or proceeding
shall have been instituted by any person which seeks to prohibit,
restrict or delay consummation of the transactions contemplated
herein or any of the conditions material to consummation of the
transactions contemplated herein.
6.2 Conditions to Obligations of CEC. The obligations of CEC to
consummate the transactions provided for by this Agreement are subject, in
the discretion of CEC, to the satisfaction at or prior to the Closing Date
of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and
correct at and as of the Closing as if such representations and
warranties were made at and as of the Closing, and Buyer shall have
performed all agreements and covenants required by this Agreement to
be performed by it prior to or at the Closing Date. On the Closing
Date, there shall be delivered to CEC a certificate signed on behalf
of Buyer to the foregoing effect.
(b) Governmental Approvals. The parties shall have obtained
all authorizations and approvals of or by any Governmental Bodies
specified in Schedule 3.5 necessary to permit the transactions
contemplated by this Agreement.
(c) Supply Agreement. Buyer shall have delivered to CEC a duly
executed Supply Agreement.
(d) Technical Agreement. Buyer shall have delivered to CEC a
duly executed Technical Agreement.
(e) Legal Opinion. CEC shall have received an opinion from
Dykema Gossett PLLC, counsel for Buyer, in form and substance
reasonably acceptable to CEC.
(f) Patent License Agreement. Buyer shall have delivered to
CEC a duly executed Patent License Agreement for the nonexclusive
right to use the torsional shock isolated fuel pump drive gear (ID
#1519), Crank gear isolator for internal combustion engine (ID
#1498), fuel system vibration damper (U.S. Patent No. 5558066, ID
#1337), and crankshaft seal with dust exclusion feature (ID #1446),
in form and substance reasonably acceptable to CEC and Buyer.
VII. INDEMNIFICATION
7.1 Indemnification By CEC. Notwithstanding any investigation of
the VA Business by or on behalf of Buyer, CEC shall indemnify, defend and
hold harmless Buyer, its successors and assigns, and their officers,
directors, employees, agents, subsidiaries and affiliates ("Buyer's
Indemnified Persons") from and against any and all losses, liabilities,
claims, obligations, damages, deficiencies, actions, judgments, regulatory,
legislative or judicial proceedings or investigations, assessments, levies,
fines, penalties, costs and Legal Expenses (as defined below)
(collectively, "Losses"), arising out of, based upon or in any way relating
to:
(a) any misrepresentation in or breach of any representation or
warranty or nonfulfillment of any covenant, agreement or other
obligation of CEC set forth in this Agreement or in any document
delivered to Buyer pursuant to the provisions of this Agreement;
(b) any Excluded Liability;
(c) any claims by parties other than Buyer to the extent
caused by acts or omissions of CEC or any Subsidiary on or prior to
the Closing Date, including, but not limited to, claims for Losses
which arise or arose out of the operation of the VA Business by CEC
or the Subsidiaries or by virtue of the ownership of the VA Business
by CEC or the Subsidiaries on or prior to the Closing Date;
(d) any Environmental Claim (as hereinafter defined) arising
under any of the Environmental Laws or any Remedial Action arising
pursuant to any of the Environmental Laws including, but not limited
to, investigation, remediation, treatment or clean up of any
Contaminant that is reasonably shown to have been or be present,
released, or disposed of prior to the Closing Date on properties now
or previously owned or leased by CEC or any Subsidiary, or which are
reasonably shown to have migrated or been discharged or transported
from such properties prior to the Closing Date, in violation of
Environmental Laws, or at levels which could give rise to liability
for investigation, remediation, removal, treatment or clean up under
Environmental Laws; provided that the disclosures made pursuant to
Section 3.26 or any attachment thereto in no way limit the right of
any of Buyer's Indemnified Persons to indemnification under this
Section 7.1; and
(e) enforcement of this Section 7.1.
"Legal Expenses" means reasonable attorneys', accountants',
investigators', and experts' fees, and expenses reasonably sustained or
incurred in connection with the defense or investigation of any Losses.
"Environmental Claim" means any notice of any violation, claim,
demand, abatement or other order or direction (conditional or otherwise) by
any governmental authority or any person for personal injury (including
sickness, disease or death), tangible or intangible property damage, damage
to the environment, nuisance, pollution, contamination or other adverse
affects on the environment, or for fines, penalties or restrictions,
resulting from or based upon (i) the existence, or the continuation of the
existence, of a Release (including, but not limited to, sudden or non-
sudden, accidental or non-accidental Releases) of, or exposure to, any
substance, chemical, material, pollutant, contaminant, odor or audible
noise or other release or emission in, into or onto the environment
(including, but not limited to, the air, ground, water or any surface) at,
in, by, from, or related to the VA Business of CEC or any Subsidiary or any
properties owned or leased by CEC or any Subsidiary in connection with the
VA Business, (ii) the environmental aspects of the transportation, storage,
treatment or disposal of contaminants or other substances in connection
with the operation of the VA Business or any properties owned or leased by
CEC or any Subsidiary in connection with the VA Business, (iii) the
violation, or alleged violation, of any statutes, ordinances, orders,
rules, regulations, permits or licenses of or from any governmental
authority, agency or court relating to environmental matters connected with
the VA Business or any properties now or previously owned or leased by CEC
or any Subsidiary.
7.2 Indemnification by Buyer. Notwithstanding any investigation of
the business and assets of Buyer by or on behalf of CEC, Buyer shall
indemnify, defend and hold harmless CEC from and against any and all Losses
arising out of, based upon or in any way relating to:
(a) any misrepresentation in or breach of any representation or
warranty or nonfulfillment of any covenant, agreement or other
obligation of Buyer set forth in this Agreement or in any document
delivered to CEC pursuant to the provisions of this Agreement;
(b) any Assumed Liability;
(c) any claims by parties other than CEC and any Subsidiary to
the extent caused by the acts or omissions of Buyer after the Closing
Date, including, but not limited to, claims for Losses which arise
out of the operation of the VA Business by Buyer or by virtue of
ownership of the VA Business by Buyer after the Closing Date,
including, but not limited to, any product liability claim with
respect to any products at any time manufactured by Buyer after the
Closing Date; and
(d) enforcement of this Section 7.2.
7.3 Defense of Claims. If any legal proceedings shall be
instituted or any claim is asserted by any third party in respect of which
any party hereto may have an obligation to indemnify another party, the
party asserting such right to indemnity (the "Indemnified Party") shall
give the party from whom indemnity is sought (the "Indemnifying Party")
written notice thereof, but any failure to so notify the Indemnifying Party
shall not relieve it from any liability that it may have to the Indemnified
Party other than to the extent the Indemnifying Party is actually
prejudiced thereby. The Indemnifying Party shall have the right, at its
option and expense, to participate in the defense of such proceeding or
claim, but not to control the defense, negotiation or settlement thereof,
which control shall at all times rest with the Indemnified Party, unless
the Indemnifying Party (i) admits in writing its liability to the
Indemnified Party hereunder with respect to such proceeding or claim; and
(ii) furnishes satisfactory evidence of its financial ability to indemnify
the Indemnified Party, in which case, the Indemnifying Party may assume
such control at its expense through counsel reasonably satisfactory to such
Indemnified Party; provided, however, that:
(a) the Indemnified Party shall be entitled to participate in
the defense of such claim and to employ counsel at its own expense to
assist in the handling of such claim; provided, however, that the
employment of such counsel shall be at the expense of the
Indemnifying Party if the Indemnified Party determines in good faith
that such participation is appropriate in light of defenses not
available to the Indemnifying Party, conflicts of interest or other
similar circumstances;
(b) the Indemnifying Party shall obtain the prior written
approval of the Indemnified Party before entering into any settlement
of such claim or ceasing to defend against such claim (with such
approval not to be unreasonably withheld);
(c) no Indemnifying Party shall consent to the entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff
to each Indemnified Party of a release from all liability in respect
of such claim; and
(d) the Indemnifying Party shall not be entitled to control
(but shall be entitled to participate at its own expense in the
defense of), and the Indemnified Party shall be entitled to have sole
control over, the defense or settlement of (A) any claim to the
extent the claim seeks an order, injunction, non-monetary or other
equitable relief against the Indemnified Party which, if successful,
could materially interfere with the business, operations, assets,
condition (financial or otherwise) or prospects of the Indemnified
Party or (B) any claim relating to Taxes.
After written notice by the Indemnifying Party to the Indemnified Party of
its election to assume control of the defense of any such action, the
Indemnifying Party shall not be liable to such Indemnified Party hereunder
for any Legal Expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation and of liaison counsel for the Indemnified Party; provided,
however, that the Indemnifying Party shall be liable for such Legal
Expenses if the Indemnified Party determines in good faith that the
incurrence of the same is appropriate in light of defenses not available to
the Indemnifying Party, conflicts of interest or other similar
circumstances. If the Indemnifying Party does not assume control of the
defense of such claim as provided in this Section 7.3, the Indemnified
Party shall have the right to defend such claim in such manner as it may
deem appropriate at the cost and expense of the Indemnifying Party, and the
Indemnifying Party will promptly reimburse the Indemnified Party therefor
in accordance with this Section 7.3. The reimbursement of fees, costs and
expenses required by this Section 7.3 shall be made by periodic payments
during the course of the investigations or defense, as and when bills are
received or expenses incurred.
7.4 Survival of Representations and Warranties. The
representations and warranties of each party, contained in this Agreement
shall survive the Closing Date for a period of two years following the
Closing Date. Any claim for indemnity under Sections 7.1 or 7.2 shall be
asserted in writing within the foregoing two-year period, except that any
claim relating to Sections 3.11, 3.17, 3.20, 3.26 or 3.28 may be asserted
until 60 days after the running of the applicable statute of limitations
with respect to the taxable period to which the particular claim relates.
7.5 Remedies. The rights and remedies of each party hereto arising
by reason of the breach of any representation or warranty, or the default
in any covenant, condition or undertaking by any other party hereto, shall
not be limited to those set forth in this Agreement.
7.6 Indemnification Limitations. Except for Losses relating to
breaches of Section 3.20 (relating to Taxes) and payment of Seller's fees
and expenses referred to in Section 9.13, as to which the limitations of
this Section 7.6 shall not apply, Buyer's Indemnified Persons may not
assert any claim for Losses under Section 7.1 until the aggregate amount of
such claims under this Agreement exceed Two Hundred Thousand Dollars
($200,000), and then Buyer's Indemnified Persons may only assert claims
for the excess of such aggregate claims over Two Hundred Thousand Dollars
($200,000).
VIII. TERMINATION
8.1 Termination. This Agreement may be terminated at any time
prior to Closing:
(a) by mutual consent of CEC and Buyer;
(b) by Buyer prior to the Closing Date if Buyer, in its sole
discretion, is not satisfied with its financial, business or legal
due diligence review of the VA Business, including an environmental
audit of the VA Business.
(c) by either Buyer or CEC if there has been a material breach
of any representation, warranty, covenant or agreement on the part of
the other party set forth in this Agreement which is not remedied
within 15 days of written notice to the other party;
(d) by either Buyer or CEC at any time after December 31, 1997
(the "Final Termination Date"), provided that if the Closing shall
not have occurred by the Final Termination Date as the result of a
breach of this Agreement, then any party responsible for such breach
may not avail itself of the right under this Section 8.1, and
provided further that in any such event, the non-breaching party(ies)
shall not be deprived of any remedy hereunder or at law against the
breaching party;
(e) by Buyer if the Closing shall not have occurred on the
Closing Date by reason of the failure of any of the conditions
specified in Section 6.1 and such failure has not been waived by
Buyer (unless the failure results primarily from Buyer itself
breaching any representation, warranty or covenant contained in this
Agreement);
(f) by CEC if the Closing shall not have occurred by the
Closing Date by reason of the failure of any of the conditions
specified in Section 6.2 and such failure has not been waived by CEC
(unless the failure results primarily from any CEC or any Subsidiary
breaching any representation, warranty or covenant contained in this
Agreement); or
(g) by either Buyer or CEC if a court of competent
jurisdiction or Governmental Body shall have issued an order, decree
or ruling or taken any other action, in each case permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and nonappealable.
8.2 Effect of Termination. In the event of termination of this
Agreement by either CEC or Buyer, as provided above, this Agreement shall
forthwith terminate and there shall be no liability on the part of either
CEC or Buyer, except for liabilities arising from a material breach by a
party hereto of any of its representations, warranties, covenants or
agreements set forth in this Agreement; provided, however, that the
obligations of the parties set forth in Sections 5.19 (Confidentiality) and
9.13 (Expenses) hereof shall survive such termination.
IX. OTHER PROVISIONS
9.1 Restrictive Trade Practices Act 1976. Notwithstanding any
other provision of this Agreement, no party which carries on business
within the United Kingdom shall give effect to, or enforce or purport to
enforce any restriction contained in this Agreement or in any arrangement
of which this Agreement forms part and by virtue of which this Agreement is
subject to registration under the Restrictive Trade Practices Act 1976
until the day after particulars of this Agreement and any such arrangement
shall have been furnished to the Office of Fair Trading pursuant to Section
24 of that Act.
9.2 United Kingdom Value Added Tax.
9.2.1 CEC and Buyer intend that the VA Assets used or held for use in
connection with the operation of the VA Business shall be sold
as a going concern and that in as far as such VA Assets are so
used or held in the United Kingdom that Section 49 VATA and
Article 5 of the Value Added Tax (Special Provisions) Order
1995 shall apply to the transfer of such Assets.
9.2.2 CEC and Buyer shall use all reasonable endeavors to secure that
the transfer of the VA Assets under this Agreement is treated
as neither a supply of goods nor a supply of services for the
purposes of VAT.
9.2.3 Buyer declares its intention to use the VA Assets in carrying
on the VA Business and CEC and Buyer each warrants to the other
that they are each on completion a taxable person duly
registered for VAT purposes.
9.2.4 CEC and Buyer agree that they will give notice of the transfer
of VA Assets pursuant to this Agreement to HM Customs and
Excise as required by Paragraph 11 of Schedule 1 VATA or by
Paragraph 6 of the Value Added Tax Regulations 1995 or as
otherwise required by UK law.
9.2.5 CEC will request permission from HM Customs and Excise to
retain any records of the VA Business pursuant to Section
49(1)(b) VATA (or otherwise) and undertakes to retain and make
available to Buyer all such documents and records not delivered
to Buyer which are reasonably required for the purposes of
complying with the obligations of Buyer in relation to VAT and
in particular under Part XV of the Value Added Tax Regulations
1995 (capital goods scheme) in relation to any of the VA Assets
acquired pursuant to this Agreement and to provide access to
and copies of such records to Buyer and its agent (at Buyer's
cost) on reasonable notice.
9.2.6 If HM Customs and Excise notify CEC that VAT is chargeable on
the transfer of the VA Assets under this Agreement or on any
part of the same then (subject to clause 9.2.7) Buyer shall, in
addition to the portion of the Purchase Price attributable to
such assets, pay the amount of any such VAT (and any penalty
and interest incurred by CEC for late payment of such VAT save
to the extent that such penalty or interest is due to any
delay, default or omission by CEC) to CEC on delivery by CEC of
the appropriate tax invoice. Such VAT shall be payable on the
later of Completion of 5 days after CEC gives Buyer notice of
such notification together with the appropriate tax invoice.
9.2.7 If there is any disagreement between the offices of HM Customs
and Excise that deal with the respective VAT affairs of CEC and
Buyer as to whether VAT should be chargeable on the transfer of
the VA Assets pursuant to this Agreement (or any part of such
Assets), VAT will not be regarded as chargeable for the
purposes of this Agreement until agreement on the position has
been reached by the relevant offices of HM Customs and Excise
and notified to each of CEC and Buyer (and for the purposes of
this subclause it shall be assumed that such disagreement
exists until Buyer has received notification of the view of the
office of HM Customs and Excise that deals with the VAT affairs
of Buyer).
9.2.8 If any amount paid by Buyer to CEC in respect of VAT pursuant
to this Agreement is subsequently found to have been paid in
error before CEC shall have accounted to HM Customs and Excise
in respect of that amount then CEC shall promptly repay such
amount to Buyer and shall issue Buyer with a credit note in the
appropriate amount.
9.2.9 If any amount paid by Buyer to CEC in respect of VAT pursuant
to this Agreement is subsequently found to have been paid in
error after CEC shall have accounted to HM customs and Excise
in respect of that amount CEC shall use all reasonable
endeavors to obtain repayment of such amount from HM Customs
and Excise. CEC shall promptly upon receiving repayment from
HM Customs and Excise of such amount pay such amount to Buyer
together with a credit note in the appropriate amount.
9.3 Arbitration. Except as provided in Sections 1.10 and 5.21, any
dispute arising under this Agreement shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association. It is the intention of the parties that the
arbitration award will be final and binding, shall not be appealable and
that a judgment of any circuit court having jurisdiction thereof may be
rendered upon the award, and enforcement may be had according to its terms.
All arbitrations shall be conducted by a single arbitrator selected from
the commercial panel of the Chicago, Illinois office of the American
Arbitration Association. The place of arbitration shall be the offices of
the American Arbitration Association in Chicago, Illinois. Each party
shall bear its own arbitration costs and expenses. The arbitrator shall
not have jurisdiction or authority to change, alter, amend, modify, add to
or subtract from any of the provisions of this Agreement. The arbitrator's
sole authority shall be to interpret or apply any clause or clauses of this
Agreement.
9.4 Annexes, Exhibits and Schedules. All Annexes, Exhibits and
Schedules referred to herein are intended to be and hereby are specifically
made a part of this Agreement.
9.5 Amendment. This Agreement and the Exhibits and Schedules
hereto may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
9.6 Extension; Waiver. At any time prior to the Closing Date, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered pursuant hereto and (c) waive
compliance by the other party with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
9.7 Entire Agreement; No Third Party Beneficiaries. This
Agreement, together with the Annexes, Exhibits and Schedules hereto, (a)
constitutes the entire Agreement between the parties pertaining to the
subject matter hereof and supersedes all prior and contemporaneous
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, and (b) is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan, regardless
of the laws that might otherwise govern under applicable principles of
conflicts of law, except with respect to matters of law concerning transfer
of the VA Shares, transfer of the VA Assets or the internal corporate
affairs of any Subsidiary, as to which matters the laws of the jurisdiction
in which such VA Assets are located or under which the respective
Subsidiary derives its powers shall govern.
9.9 Accounting Terms. All accounting terms used herein which are
not expressly defined in this Agreement shall have the respective meanings
given to them in accordance with Generally Accepted Accounting Principles
in the U.S. on the date hereof.
9.10 Certain Definitions. For purposes of this Agreement:
"Affiliate" or "affiliate" of a specified person shall mean a person
that directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, the
person specified.
"Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles in the United States consistent with
those used by CEC in connection with the preparation of the Pre-
Closing Balance Sheet.
"Lien" shall mean any pledge, lien (including without limitation any
tax lien), charge, claim, encumbrance, security interest, mortgage,
option, restriction on transfer (including without limitation any
buy-sell agreement or right of first refusal or offer), forfeiture,
penalty, license, equity or other right of another person of every
nature and description whatsoever.
"Person" or "person" shall mean an individual or any company,
corporation, partnership, joint venture, association, limited
liability company, trust, unincorporated organization, or other legal
entity or a government or governmental entity.
"To the knowledge," or "known," and words of similar import shall
mean the knowledge of a person after all due and careful
investigation.
9.11 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, sent by
facsimile transmission or mailed by registered or certified mail, postage
prepaid, return receipt requested, as follows:
If to SI or Buyer, addressed to:
Roy E. Parrott
Simpson Industries, Inc.
47603 Halyard Drive
Plymouth, Michigan 48170-2429
(313) 207-6570 - facsimile
With a copy to:
Frank K. Zinn, Esq. or D. Richard McDonald, Esq.
Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243-1668
(313) 568-6915 - facsimile
If to CEC, addressed to:
Richard B. Stoner, Jr.
Group Vice President
Cummins Engine Company, Inc.
500 Jackson Street
Columbus, Indiana 47201
(812) 377-7897
With a copy to:
David C. Wright, Esq.
Cummins Engine Company, Inc.
500 Jackson Street
Columbus, Indiana 47201
(812) 377-3269
or to such other place and with such other copies as either party may
designate as to itself by written notice to the others.
9.12 Counterparts; Headings. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The headings
of the several Articles and Sections herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning
or interpretation of this Agreement.
9.13 Expenses. Regardless of whether the transactions contemplated
hereby are consummated, each party hereto shall pay its or their own costs
and expenses, including legal, accounting, consulting and other
professional fees, incurred in connection with the negotiation,
preparation, investigation, and performance by such party of this Agreement
and the transactions contemplated hereunder.
9.14 Successors and Assigns. This Agreement, and all rights and
powers granted hereby, will bind and inure to the benefit of the parties
hereto and their respective successors and assigns.
Signatures Appear on Next Page
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
CUMMINS ENGINE COMPANY, INC.
By:
Its:
SIMPSON INDUSTRIES, INC.
By:
Its:
PAGE
<PAGE>
EXHIBIT A
VA BUSINESS
* Selected assets of CEC
* Selected assets of Holset Engineering Company Limited (UK)
* Selected assets of Cummins Brasil, Ltda.
* Selected assets of Cummins S.A. de C.V.
* All of the capital stock of Dampers Iberica SA (Spain)
* All of the capital stock of Dampers SAS (France)
* All of the capital stock of Techniparts SAS (France)
* 51% interest in Holset Korea Ltd.
* 20% interest in Hodek Engineering Works Private Limited (India)
* License Agreements in China and Japan
SIMPSON INDUSTRIES COMPLETES ACQUISITION;
GAINS NEW CUSTOMERS, TECHNOLOGY AND INFRASTRUCTURE
IN INTERNATIONAL EXPANSION
Plymouth, Michigan -- Simpson Industries, Inc. (Nasdaq: SMPS) today
announced it has completed its purchase of the Great Britain-based
Vibration Attenuation (VA) Business of Holset Engineering Company, Ltd., a
subsidiary of Cummins Engine Co., Inc. (NYSE: CUM). The transaction is
effective June 29, 1997, and financial results will be consolidated in the
third quarter beginning July 1.
Combined purchase price and transaction costs totaled approximately $76
million. Financing in the amount of $65 million was through a private
placement of debt.
"This is a healthy, profitable business that we identified and a
springboard for us to extend our market leadership in engine vibration
dampers as part of our broader Noise, Vibration and Harshness (NVH)
capabilities," said Roy E. Parrott, president and chief executive officer.
"It makes us the world's largest manufacturer of dampers."
"Equally important, we will use our international facilities to market,
produce and deliver products from our other product groups. Initially, we
will manufacture a knuckle for the Ford Transit van -- a European mid-size,
high volume commercial truck -- in Europe."
"With the inclusion of our new international business, we are looking
for total sales of about $440 million in 1997. We expect Simpson's 1997
net income to be reduced by about two cents a share as we absorb transition
costs in the second half. For 1998 and beyond we expect a net addition to
Simpson's profitability from our new international business."
"Our product mix will change with NVH products comprising about one-third
of total sales revenues compared to one quarter in 1996. This step
also extends our product line to include viscous dampers for larger diesel
engines and provides strong opportunities for future growth in engineered
products for medium and heavy duty engines. Revenues will shift to a
slightly greater proportion of products for medium and heavy duty engines,"
Mr. Parrott said.
"We are planning a seamless transition for customers," said Mr. Parrott.
"Edward Ahmad, who has been in charge of the VA business in Halifax, U.K.,
will become a Vice President of Simpson and will continue to be responsible
for leading the business in Europe and Asia, as Managing Director."
"In our consolidating industry, it is more important than ever to meet
the changing requirements of our customers. As our customers asked for
more design and engineering capabilities, we are meeting that need with our
Technical Center. We were an early qualifier for QS-9000. We intend to be
a strong competitor in this business worldwide, and we look forward to this
new opportunity to expand with our product and infrastructure
capabilities," Mr. Parrott concluded.
Simpson's new VA Business supplies rubber dampers for light and medium-
duty engines and viscous dampers for heavy-duty diesel engine customers.
Manufacturing operations are located in England, France, Spain, Mexico,
Brazil and Korea. The company is also a partner in a joint venture located
in India. In addition to Cummins, current customers of the business
include Peugeot, Renault (light and heavy duty), Scania, Kia Motors,
Nissan, GM's Open, Ford's Jaguar, Iveco, Volvo and MAN. Revenues for the
division were $67 million in 1996.
Simpson Industries supplies powertrain and chassis products to original
equipment manufacturers with current operations in North America and has
long been a key supplier to Cummins. Simpson's products are focused in
four groups: noise, vibration and harshness; wheel-end and suspension,
modular engine assemblies and high-precision machined components.
Simpson's North American manufacturing units are located throughout the
Midwest, as well as North Carolina, Ontario and Mexico. In 1996, Simpson
reported earnings of $17.6 million on sales of $408 million.
CONTACT: Richard J. Koslowski, Manager, Planning & Analysis of Simpson
Industries, (313) 207-6200; or Dixie Watterson of Capital Investor
Relations, (847) 491-0725.
To receive a copy of this and other Simpson press releases by fax, please
call Company News-On-Call at 800-758-5804 - extension 107165, or you can
access the information via the Internet at http://www.prnewswire.com./
