<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): June 8, 1998
--------------
Total Control Products, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 333-18539 36-3209178
- ---------------------------- ------------------- -------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File number) Identification No.)
2001 North Janice Avenue
Melrose Park, Illinois 60160
- ---------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 345-5500
---------------
_____________________________________________________
Former name or former address, if changed since last report
<PAGE>
Item 5. OTHER EVENTS.
On June 8, 1998, a wholly owned subsidiary of Total Control Products,
Inc. (the "Registrant"), purchased substantially all of the assets of the
Deeco Systems division (the "Division") of Lucas Automation and Control
Engineering, Inc., a Virginia corporation (the "Seller"). The aggregate
consideration paid or to be paid by Registrant to Seller in connection with
this transaction was (a) $5.5 million, subject to certain adjustments, paid
at the closing; and (b) up to an additional $2 million if the Division meets
certain financial targets during its 1999 fiscal year, from February 1, 1998
through January 31, 1999. A copy of the Acquisition Agreement is attached
hereto as Exhibit 10.1 and is hereby incorporated by reference.
Additionally, in connection with the transaction, Registrant executed a
guaranty agreement (the "Guaranty") with Seller, whereby Registrant
guaranteed the performance of all of the obligations of its subsidiary under
the Agreement. A copy of the Guaranty is attached hereto as Exhibit 10.2 and
is hereby incorporated by reference.
A copy of the press release of the Registrant, dated June 8, 1998, is
attached hereto as Exhibit 10.3 and is hereby incorporated by reference.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
10.1 Acquisition Agreement dated as of June 8, 1998 by and between VA
Acquisition Corp., an Illinois corporation, and Lucas Automation
and Control Engineering, Inc., a Virginia corporation.
10.2 Guaranty Agreement dated as of June 8, 1998 executed by
Registrant.
10.3 Press Release dated June 8, 1998.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: June 17, 1998 TOTAL CONTROL PRODUCTS, INC.
By: /s/ Nic Gihl
-----------------------------
Name: Nic Gihl
Title: President, Chief Executive Officer
and Chairman
<PAGE>
INDEX
Exhibit
Number Description of Document
- -------- --------------------------
10.1 Acquisition Agreement dated as of June 8, 1998 by and between VA
Acquisition Corp., an Illinois corporation, and Lucas Automation and
Control Engineering, Inc., a Virginia corporation.
10.2 Guaranty Agreement dated as of June 8, 1998 executed by Registrant.
10.3 Press Release dated June 8, 1998.
<PAGE>
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made this 8th day of
June, 1998, by and between LUCAS AUTOMATION & CONTROL ENGINEERING INC., a
corporation incorporated under the laws of the Commonwealth of Virginia, with
its principal place of business at 1000 Lucas Way, Hampton, Virginia 23666
(hereinafter referred to as "Seller"), and VA ACQUISITION CORP., a
corporation incorporated under the laws of the State of Illinois, with its
principal place of business at 2001 N. Janice Avenue, Melrose Park, Illinois
60160 (hereinafter referred to as "Buyer"), a wholly owned subsidiary of
Total Control Products, Inc., an Illinois corporation ("TCP").
RECITALS:
A. Seller is engaged, at its facility at 31047 Genstar Road, Hayward,
California, (the "Premises") in the design, manufacture, assembly and sale of
environment resistant electronic interface equipment with flat panel displays
(the "Business").
B. Upon the terms set forth in this Agreement, Seller desires to sell
to Buyer and Buyer desires to purchase from Seller various assets associated
with the Business;
Therefore, in consideration of the mutual promises and mutual covenants
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Seller and Buyer
agree as follows:
1. ACQUISITION OF ASSETS.
1.1 PURCHASE AND SALE OF ASSETS. Seller hereby sells, conveys,
transfers, assigns and delivers to Buyer, and Buyer hereby buys and acquires
from Seller, all of Seller's right, title and interest in and to the Assets
(as defined in Section 1.2) and the Business as a going concern and all
goodwill associated with the Business, free and clear of all liens, claims,
encumbrances or security interests of any kind.
1.2 DEFINITION OF ASSETS. For purposes of this Agreement, and except
as provided in Section 1.4 below, the "Assets" means and includes the assets,
properties and rights of Seller which, as of the date hereof, Seller owns or
has a right to use and are used exclusively in the Business. The Assets
include without limitation the following:
1.2.1 TANGIBLE PERSONAL PROPERTY. All machinery, equipment,
tools, computer hardware, fixtures and other tangible personal property
located at the Premises, including that listed in Schedule 1.2.1 (the
"Equipment"), but excluding any computer hardware as described in Section
1.4.6.
1.2.2 INVENTORIES. All inventories of raw materials, operating
supplies, packaging materials, component parts, replacement and spare parts,
work in process and finished
<PAGE>
goods used exclusively in the Business (the "Inventories"), but excluding
customer inventories as described in Section 1.4.2.
1.2.3 PURCHASE CONTRACTS. All of Seller's rights in and to
contracts made or orders given by Seller (the "Purchase Contracts") relating
to the purchase of materials, utilities, chemicals, parts, supplies,
commodities and services for use in the Business, all as listed in Schedule
1.2.3.
1.2.4 SALES CONTRACTS. All of Seller's rights in and to
contracts made or orders given to Seller (the "Sales Contracts") listed in
Schedule 1.2.4 for the sale of products manufactured or services delivered by
the Business ("Products').
1.2.5 OTHER CONTRACTS. All of Seller's rights in and to those
contracts, licenses, manufacturer's representative agreements, commission
sales agreements, distributor agreements, or other agreements, all as listed
on Schedule 1.2.5 to which Seller is a party and entered into for the benefit
of the Business (the "Other Contracts"). The Purchase Contracts, Sales
Contracts and Other Contracts are hereinafter collectively referred to as the
"Assigned Contracts".
1.2.6 PERMITS. All permits, approvals and qualifications, to
the extent legally transferable, which have been issued to Seller by any
state or local governmental agency and relate to the conduct of the Business
and listed in Schedule 1.2.6. Buyer shall be responsible for the proper
transfer of all existing facility permits, including without limitation all
air use and hazardous waste generation permits and notifications to the
extent required by California law.
1.2.7 PERSONAL PROPERTY LEASES. Subject to the provisions of
Section 1.3, all leases for machinery, equipment and other tangible personal
property leased from third persons and listed in Schedule 1.2.5 (the
"Personal Property Leases").
1.2.8 BOOKS AND RECORDS. Except as provided in Section 1.4.7
books and records, files and other documents (including such items recorded
on computer storage media) used exclusively in the ongoing operation of the
Business and access to all other books, records, files and other documents
which may be necessary to such ongoing operations for the purpose of copying
such materials on reasonable notice to Seller by Buyer.
1.2.9 INTELLECTUAL PROPERTY RIGHTS. The following intellectual
property rights, together with any associated goodwill (the "Intellectual
Property Rights"):
1.2.9.1 (i) inventions, patents, patent applications and
patent rights (the "Patents"), (ii) trademarks, service marks, slogans, trade
dress, trade names, symbols and logos (collectively the "Trademarks"); and
(iii) copyrights and copyright applications, each of (i), (ii) and (iii) as
set forth on Schedule 1.2.9.1;
1.2.9.2 licenses to Seller under any Patents, copyrights,
Trademarks, trade secrets or other proprietary rights as set forth on
Schedule 1.2.5;
2
<PAGE>
1.2.9.3 all licenses and property rights in computer software
used in the Business, including all documentation and source codes with
respect to such software which is in Seller's possession or control and
rights related thereto as set forth in Schedule 1.2.5; but excluding the MIS
software as described in Schedule 3.4.9 and
1.2.9.4 the trade secrets of or pertaining to the Business,
customer lists, customer records and information and customer requirements,
specifications, plans, designs, research data, proprietary know-how,
formulas, processes, manufacturing methods, drawings, blueprints, flow
sheets, equipment and parts lists and descriptions and related instructions
and manuals used exclusively in the Business, and all goodwill and royalties
and the licenses, agreements and other contracts and commitments relating to
any of the foregoing.
1.2.10 ACCOUNTS RECEIVABLE. All accounts receivable and all other
trade amounts which third parties owe to Seller in connection with the
Business, whether arising from the sale of products or services provided or
otherwise as set forth on the Closing Balance Sheet (the "Accounts
Receivable"). Intercompany receivables from business in the LucasVarity
Group are not included in the Assets.
1.2.11 PREPAID ITEMS AND UTILITY DEPOSITS. All of Seller's right,
title and interest in and to expenses and charges prepaid by Seller in
connection with the Business including, without limitation, advances,
deposits (for utilities or otherwise) and prepaid rent (the "Prepaid Items")
as set forth on Schedule 1.2.11.
1.2.12 NAME. Seller's rights to the names "DEECO", "DEECO
SYSTEMS", "DECO", "TOUCH ASSIST", "POWER ASSIST" and "SEALTOUCH" and any
variations thereof.
1.2.13 SALES AND PROMOTIONAL MATERIALS. Except as provided in
Section 1.4.3, all sales and promotional materials, catalogues and
advertising literature used in connection with or relating to the Business.
1.2.14 TELEPHONE NUMBERS. All of Seller's rights to the telephone
numbers of Seller relating exclusively to the operation of the Business.
1.2.15 WORLD WIDE WEB. All rights, title and interest in Seller's
world wide web site, commonly known by the address WWW.DEECO.COM, but
excluding access rights to Seller's server, and as soon as reasonably
practicable after the date hereof, Buyer shall delete all LucasVarity name(s)
and Logos from the current site at Buyer's expense.
1.3 CONSENTS TO ASSIGNMENTS. Other provisions hereof notwithstanding,
this Agreement will not be deemed an assignment or transfer, or an attempted
assignment or transfer, of any right or privilege if such assignment or
transfer would constitute a breach or violation of any contract, lease,
permit or license under state, federal or local law. To the extent that any
consent, approval or waiver is required for Seller's transfer of any right or
interest to Buyer in respect of any Assets, Seller will use its best efforts
to obtain such consent, approval and/or waiver and Buyer
3
<PAGE>
agrees to cooperate with Seller and provide information and/or documentation
as may be reasonably necessary to obtain such consent, approval and/or
waiver. If obtaining such consents and approvals involves the payment of any
fees, charges or costs, any such amounts shall be paid by Buyer, but no such
amounts shall be incurred or paid without Buyer's prior written consent,
unless specifically required to be paid by Seller under applicable laws or
regulations. If any consent to the transfer or assignment to Buyer is not
obtained, or if an attempted transfer or assignment would be ineffective or
would materially affect the rights or privileges of Buyer, or if a contract
is assigned to Buyer pursuant to the provisions hereof and the other
contracting party thereafter raises objections to the assignment and refuses
to allow Buyer to perform the contract on the terms therein provided, or
threatens to terminate the contract or sue for damages, Buyer and Seller
shall cooperate in any arrangement Buyer may reasonably request to provide
Buyer the benefits under such contract. Cooperation may include, without
limitation, an arrangement between Buyer and Seller pursuant to which Seller
shall nominally perform an order or contract as an agent for Buyer or Buyer
shall serve as a subcontractor of Seller, and in any event, Buyer shall
retain the economic benefits or detriments of the order or contract.
1.4 EXCLUDED ASSETS. Other provisions hereof notwithstanding, Seller
will not sell to Buyer and Seller will retain as its own property all of
Seller's rights in and to each and all of the following assets, properties
and rights related to the Business as of the date hereof, which hereby are
excluded from the Assets:
1.4.1 CASH AND CASH EQUIVALENTS. All cash, cash equivalents and
bank deposits and certificates of deposit.
1.4.2 CUSTOMER INVENTORIES. All customer owned inventories
located at Seller's Premises, whether raw materials, supplies, component
parts, work in progress or finished goods as set forth on Schedule 1.4.2
1.4.3 GOODWILL, NAME AND TRADEMARK. The names and expressions
"Lucas", "Varity", "LucasVarity", "Lucas Control Systems", any variations
thereof, and any logos or symbols thereof, whether used as a trade name,
trademark or otherwise, along with any other trade names or assumed names of
the Seller, and any goodwill associated therewith, except those set forth
under Sections 1.2.9 or 1.2.12 provided that for a period of up to one
hundred eighty (180) days after the date hereof, Buyer may continue to use
all existing sales and marketing brochures and other promotional materials,
notwithstanding the fact that they contain the LucasVarity trade names, as
long as Buyer prominently identifies on any material or document containing
such trademarks by way of a stamp, sticker or other imprint, the fact that it
is no longer affiliated with Seller, LucasVarity, or their affiliates.
Thereafter, all such materials and documents shall be destroyed or returned
to Seller. In no event, however, will Buyer continue to use any invoices,
purchase orders, order forms, business cards or letterhead containing the
LucasVarity trade names after the date hereof.
1.4.4 GROUP SUPPLIER CONTRACTS. All of Seller's rights in and to
any Supplier Contracts for goods or services which have been established by
an affiliate of Seller as part of the
4
<PAGE>
LucasVarity Group purchasing program and in which the Business participates
or is eligible to participate including those set out in Schedule 1.4.4.
1.4.5 EXCLUDED CONTRACTS. All contracts, claims and rights (and
benefits arising therefrom) binding on Seller, other than the Assigned
Contracts, Personal Property Leases or Intellectual Property Rights.
1.4.6. MIS HARDWARE. All MIS server hardware and server
connecting equipment located in the Premises to be used in providing MIS
services as set out in Section 3.4.9.
1.4.7 CORPORATE AND BUSINESS RECORDS. All corporate documents and
records, including, without limitation, minute books, stock records,
certificates, all tax records and any records relating to any asset retained
by Seller and any liability or obligation of Seller, which Buyer is not
required to assume hereunder (the "Books and Records").
1.4.8 BENEFIT PLANS. Any and all Plans, Welfare Plans and other
Employee Benefit Plans, (each as defined herein) including without
limitation, all plan documents, trust agreements and insurance policies
relating thereto, and all papers, documents and records relating thereto, and
all assets thereof as set forth on Schedule 1.4.8.
2. CONSIDERATION FOR ASSETS.
2.1 PURCHASE PRICE. Upon the terms of this Agreement, in consideration
for the purchase of the Assets, Buyer will (a) pay to Seller the sum of Five
Million Five Hundred Thousand ($5,500,000.00) Dollars in United States
currency as adjusted under Section 2.3 (the "Purchase Price"), and (b) assume
the Assumed Liabilities (as hereafter defined).
2.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid as
follows: (a) Two Hundred Fifty Thousand Dollars ($250,000), has been
previously paid by Buyer to Seller and shall be credited against the Purchase
Price, and (b) Five Million Two Hundred Fifty Thousand ($5,250,000.00)
Dollars ("Closing Payment") shall be paid by Buyer to Seller on the date
hereof by wire transfer of immediately available funds to the account of
Seller at:
CITIBANK, NA
NEW YORK, NEW YORK
ABA/Routing # 021-000-089
Credit to: Lucas Control Systems
Account No. 4064-5436
2.3 PURCHASE PRICE ADJUSTMENT. The Purchase Price shall be adjusted
as follows:
2.3.1 BOOKINGS CREDIT. The Purchase Price shall be adjusted in
accordance with this Section 2.3.1 with respect to orders for the sale of
products, parts, repairs or engineering or consulting services of the
Business (collectively, the "Products") received during the 1998 fiscal year
(the "1998 fiscal year") which runs from February 1, 1998 through January 31,
1999 (the
5
<PAGE>
"Bookings"). The value of each order shall consist of the net sales price of
the order (excluding from the total invoice amount taxes, freight, insurance
and customs duties) for the sale of Products less the amount of returns,
credits or adjustments with respect to such Products. (a) For any order of
Products received from the customers set out on Schedule 2.3.1(a) only the
portion of any order(s) received during the 1998 fiscal year with a requested
shipping date within twelve (12) months from the date of such order shall be
included in Bookings, (b) for all other orders of Products from any source,
including, without limitation, customers, sales agents, or representatives,
distributors or others (but excluding TCP, its affiliates or any of the
persons listed on Schedule 2.3.1(a), provided, that if such Products are sold
by TCP or its affiliates, such sales shall be included in Bookings to the
extent such sales were made in accordance with the provisions of this Section
2.3.1), only that the portion of any order(s) of Products received during the
1998 fiscal year with a requested shipping date prior to April 1, 1999, shall
be included in Bookings, and (c) the amount of any removal or deletion of
open but unfilled orders from a fiscal year prior to the 1998 fiscal year
shall not be deducted from Bookings. The Bookings received by Seller from
February 1, 1998 through the date hereof are set forth in Schedule 2.3.1(B).
Schedule 2.3.1(c) includes a list of all open purchase orders and
anticipated shipping dates of all such orders. Following the close of the
1998 fiscal year Buyer shall provide to Seller not later than February 15,
1999, a report of the 1998 fiscal year Bookings (the "1998 Report") which
report shall be in a form similar to and consistent with Schedule 2.3.1(B).
Seller shall have until February 28, 1999 to respond in writing to Buyer with
any objections or challenges to the 1998 Report (the "Dispute Notice"). If
the Seller does not respond in writing to the 1998 Report by February 28,
1999, such Report shall be final and binding on the parties hereto. If
Seller delivers a Dispute Notice to Buyer on or prior to February 28, 1999
and Buyer and Seller cannot resolve any dispute between them concerning the
amount of the 1998 fiscal year Bookings by March 12, 1999, both parties
hereby agree that such dispute shall immediately be submitted to an
independent auditor from the firm of Ernst & Young for binding arbitration
and determination of the amount of 1998 fiscal year Bookings, which
determination shall be rendered in not more than thirty (30) days from the
date of receipt by the above firm of the Dispute Notice provided by either
Buyer or Seller (or both of them) and whose determination shall be final and
binding on the parties hereto. The costs and fees of such independent
auditor shall be shared equally by Buyer and Seller. Following the
determination of the amount of the 1998 fiscal year Bookings, either as a
result of an agreement between Buyer and Seller, or the arbitration of the
auditor, the Purchase Price for the Assets shall be increased by One Dollar
Sixty Cents ($1.60) for each One Dollar ($1.00) that the 1998 fiscal year
Bookings exceed Fifteen Million Dollars ($15,000,000.00), up to a maximum
increase in the Purchase Price of Two Million Dollars ($2,000,000.00). Such
increase in the Purchase Price, if any, shall be paid by Buyer to Seller by
wire transfer of immediately available funds to the same account of Seller as
set forth in Section 2.2.1 above or to such other account as Seller may
direct to Buyer in writing. Buyer shall make such payment, if any, upon the
earlier of: (i) March 1, 1999, if Seller makes no objections or challenges to
the 1998 Report ; or (ii) ten (10) days after the resolution of any dispute
as to the 1998 fiscal year Bookings, whether as a result of agreement by
Buyer and Seller or determination of the 1998 fiscal year Bookings by the
independent auditor. In the event that the 1998 fiscal year Bookings are
less than Fifteen Million Dollars ($15,000,000.00), there shall be no
adjustment to the Purchase Price as a result of such shortfall.
6
<PAGE>
2.3.2 NET WORTH ADJUSTMENT. The value by which the book value
of the Assets as of the close of business on June 5, 1998 exceeds the book
value of the Assumed Liabilities as of the close of business on June 5, 1998
shall be known as "Net Worth". Not later than July 6, 1998, Seller shall
prepare and deliver to Buyer a balance sheet of the Business as of the close
of business on June 5, 1998 showing the book value of the Assets as the only
assets of the Business, and showing the book value of the Assumed Liabilities
as the only liabilities of the Business (the "Closing Balance Sheet"). The
Closing Balance Sheet shall be prepared from Seller's books and records in
accordance with generally accepted accounting principles ("GAAP") applied
consistently with those used in preparing the year end balance sheet of the
Business except for (i) GAAP exceptions of a non-material nature consistent
with those applied by Seller in the year end balance sheet, (ii) Excluded
Assets and Retained Liabilities shall not be included in the Closing Balance
Sheet, (iii) the Closing Balance Sheet shall contain prorata accruals for
utilities, property taxes, sales commissions, and like items, (iv)
Inventories shall be determined pursuant to a physical count, the cost of
which shall be borne by Seller and at which both Buyer and Seller may be
represented (each at its own cost), and (v) the Closing Balance Sheet shall
contain (i) a warranty reserve equal to $80,000; (ii) an Accounts Receivable
reserve for doubtful accounts equal to $25,000 and (iii) an Inventory reserve
equal to $784,000. Buyer shall have thirty (30) days after receipt of the
Closing Balance Sheet to dispute any of the items contained on the Closing
Balance Sheet by delivering written notice of such dispute to Seller (a "Net
Worth Dispute Notice"). If Buyer does not deliver a Net Worth Dispute Notice
to Seller within such thirty (30) day period, the Closing Balance Sheet shall
be final and binding on the parties hereto. If Buyer delivers a Net Worth
Dispute Notice to Seller within such thirty (30) day period and Buyer and
Seller cannot resolve any dispute between them concerning the Closing Balance
Sheet within ten (10) days after Seller's receipt of the Net Worth Dispute
Notice, both parties hereby agree that such dispute shall immediately be
submitted to an independent auditor from the firm of Ernst & Young for
binding arbitration and determination of the Net Worth of the Business as of
the date hereof which determination shall be rendered in not more than
thirty (30) days from the date of receipt by the above firm of the notice of
dispute provided by either Buyer or Seller (or both of them) and whose
determination shall be final and binding on the parties hereto. The costs
and fees of such independent auditor shall be shared equally by Buyer and
Seller. Following determination of the Net Worth of the Business either as a
result of an agreement between Buyer and Seller or the arbitration of the
auditor, the Purchase Price shall be decreased by One Dollar ($1.00) for
each One Dollar ($1.00) that the Net Worth is less than Three Million Two
Hundred Thousand Dollars ($3,200,000.00) and shall be increased by One Dollar
($1.00) for each One Dollar ($1.00) that the Net Worth is more than Three
Million Three Hundred Thousand Dollars ($3,300,000.00). Such adjustment to
the Purchase Price (if any) shall be paid by Seller to Buyer or Buyer to
Seller, as the case may be, not later than ten (10) days after the final
determination of Net Worth in immediately available funds.
2.4 PURCHASE PRICE ALLOCATION. Seller and Buyer agree that the
Purchase Price shall be allocated among the Assets, tangible and intangible
on the basis of an allocation (the "Allocation") determined by Buyer. The
Allocation shall, on delivery, become part of this Agreement for all
purposes. Seller and Buyer agree to report, pursuant to Section 1060 of the
Internal Revenue Code of 1986 as amended and the regulations promulgated
thereunder, if and when required, the Allocation of the Purchase Price, as
adjusted, among the Assets in a manner
7
<PAGE>
entirely consistent with such Allocation in the preparation and filing of all
tax returns (including IRS Form 8594).
2.5 ASSUMPTION OF LIABILITIES. On the terms of this Agreement, Buyer
shall assume as of the date hereof, and shall thereafter pay, perform and
discharge when due those liabilities and obligations of Seller (and only
those liabilities and obligations of Seller) specifically identified in this
Section 2.5 (the "Assumed Liabilities"):
2.5.1 ASSIGNED CONTRACTS. All of Seller's obligations and
liabilities arising after the date hereof under the Assigned Contracts and
not arising as a result of the breach or violation of any such agreement
prior to the date hereof.
2.5.2 LEASES. Seller's obligations and liabilities arising
after the date hereof under and related to the Personal Property Leases and
not arising as a result of the breach or violation of any such lease prior to
the date hereof.
2.5.3 ACCOUNTS PAYABLE. All accounts payable which have been
incurred in the usual and ordinary course of the Business and as set out on
the Closing Balance Sheet.
2.5.4 ACCRUED EXPENSES. All of Seller's obligations and
liabilities for accrued but unpaid payroll, payroll taxes, vacation,
commissions and other business related miscellaneous accruals (the "Accrued
Expenses") all as set out on the Closing Balance Sheet, including accrued
liabilities of the Business, if any, under the contracts of Seller not
assumed by Buyer, .
2.5.5 PRODUCT WARRANTIES. Seller's obligations and liabilities
for product returns, repairs and adjustments as set out in Section 6.6
2.6 RETAINED LIABILITIES. Buyer shall not assume or be liable for any
liabilities or obligations of Seller, whenever arising and whether primary or
secondary, direct or indirect, absolute or contingent, contractual, tortuous
or otherwise, other than those specifically identified or described in
Section 2.5 (all such liabilities and obligations of Seller other than those
specifically assumed by Buyer identified or described in Section 2.5 are
hereinafter collectively referred to as the "Retained Liabilities"). Seller
agrees to promptly pay and discharge when due all of the Retained
Liabilities. The Retained Liabilities shall include, without limitation, all
trade account payables and accrued and unpaid expenses of Seller not included
on the Closing Balance Sheet, accounts payable, expenses incurred by Seller
in connection with the transactions contemplated hereby (including legal,
accounting and investment banking expenses), bank indebtedness or
indebtedness for borrowed money, accrued wages, accrued vacation, payroll and
withholding tax liability not included on the Closing Balance Sheet,
contingent liabilities, all liabilities, whether actual or contingent,
associated with the Plans, Welfare Plans and Employee Benefit Plans (as
defined herein) whether owed to beneficiaries, benefit providers, plans or
trusts, governmental regulators or any other party, liabilities under
agreements not assumed by Buyer, claims relating to returns of product which
were sold by Seller prior to the date hereof (other than as provided in
Section 6.6), environmental liabilities (except as provided in Section 7.3),
Tax (as
8
<PAGE>
defined herein) liabilities and liabilities to any affiliate of Seller. As
used in this Agreement, "Taxes" means all federal, state, local, foreign and
other net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, social security, Medicare or other health
program, excise, severance, stamp, occupation, premium, property (including
property Taxes assessed against a landlord of Seller, but borne by Seller
pursuant to a lease), windfall profits, customs, duties or other taxes, fees,
assessments or charges of any kind whatever of a nature similar to taxes,
together with any interest and any penalties, additions to tax or other
additional amounts with respect thereto.
2.6.1 BENEFIT PLANS. Without limiting the generality of the
foregoing, Buyer shall not assume or be liable for any obligation or
liability now or hereafter arising under, or in connection with, or in
respect of the Plans, Welfare Plans or other Employee Benefit Plans or any
other plan, fund or program which Seller has at any time directly or
indirectly maintained, sponsored or contributed to.
2.6.2 INCENTIVE COMPENSATION PLANS. Buyer shall not assume or
be liable for any obligation or liability now or hereafter arising under, or
in connection with, or in respect of any incentive compensation plan which
Seller maintained or provided as part of the Business, including without
limitation, any bonus plans, stay-on incentives, and retention bonus schemes
including those set forth on Schedule 2.6.2, except for accrued but unpaid
commissions, if any, as set out on the Closing Balance Sheet.
2.7 NO EXPANSION OF THIRD PARTY RIGHTS. The assumption by Buyer
of the Assumed Liabilities shall not expand the rights or remedies of any
third party against Buyer or Seller as compared to the rights and remedies
which such third party would have had against Seller had Buyer not assumed
the Assumed Liabilities. Without limiting the generality of the preceding
sentence, the assumption by Buyer of the Assumed Liabilities shall not create
any third party beneficiary rights. Notwithstanding the foregoing, unless
and to the extent that Seller has specifically made a representation or
warranty under the provisions of Section 4 hereof, Seller does not represent
or warrant to Buyer the rights or remedies of any third party concerning the
Assumed Liabilities.
3. CLOSING.
3.1 CLOSING . The transactions herein contemplated and required by
this Agreement will be completed and closed by Seller and Buyer at a meeting
("Closing") at Seller's offices on the date hereof. The Closing shall be
deemed effective as of the close of business Pacific time, on the date hereof.
3.2 BUYER'S OBLIGATION. At the Closing, in addition to any other
documents specifically required to be delivered or acts required to be
performed by Buyer pursuant to this Agreement, Buyer will deliver to Seller,
at Buyer's expense, in proper form for recording (if recording thereof is
required):
9
<PAGE>
3.2.1 by wire transfer the portion of the Purchase Price to
Seller's bank account set forth in Section 2.2(b);
3.2.2 an agreement of assumption (the "Assumption Agreement")
under the terms of which Buyer assumes Seller's liabilities and obligations
pursuant to Section 2.5.
3.2.3 a certificate of good standing of Buyer under the laws of
the State of Illinois;
3.2.4 an opinion of Buyer's counsel, D'Ancona & Pflaum, in a
form reasonably satisfactory to Seller's counsel;
3.2.5 an executed sublease agreement for the Premises (the
"Sublease");
3.2.6 an executed guarantee by TCP of Buyer's obligations arising
under this Agreement;
3.2.7 all other documents and agreements reasonably required to
be delivered by Buyer as a condition to Closing.
3.3 SELLER'S OBLIGATIONS. At the Closing , in addition to any other
documents specifically required to be delivered or acts required to be
performed by Seller pursuant to this Agreement, Seller will deliver to Buyer,
at Seller's expense, in proper form for recording (if recording thereof is
required):
3.3.1 a fully executed Bill of Sale, Assignment and Conveyance
for the Assets;
3.3.2 executed Assignment(s) of Patents;
3.3.3 executed Assignment(s) of the Intellectual Property
Rights;
3.3.4 a certificate of good standing of Seller under the laws
of the Commonwealth of Virginia;
3.3.5 an opinion of Seller's in-house counsel in a form
reasonably satisfactory to Buyer's counsel;
3.3.6 evidence of the third party consents contemplated by
Section 1.3, the lack of which would have a material adverse effect upon the
Business;
3.3.7 an executed sublease for the Premises;
3.3.8 all other documents and agreements reasonably required to
be delivered by Seller as a condition to Closing.
10
<PAGE>
3.4 ADDITIONAL OBLIGATIONS. The parties agree to the following:
3.4.1 TRANSFER TAXES. In accordance with applicable statutes
and regulations, any and all transfer or sales taxes payable as a result of
the transaction contemplated and required by this Agreement shall be paid by
the required party under such statute; provided however, that Buyer shall be
responsible for any amount of tax resulting from a valuation of the Equipment
in excess of the book value as set out on the Closing Balance Sheet.
3.4.2 EXPENSES. Unless otherwise required by applicable law or
regulation, Buyer shall be responsible for costs, fees or expenses to obtain
or transfer any permits or approvals required in the operation of the
Business. Except as otherwise provided in this Agreement, each of the parties
hereto shall bear such party's own expenses in connection with this Agreement
and the transactions contemplated hereby, including, without limitation, all
legal costs and expenses.
3.4.3 ACCESS. For a period of seven (7) years after the
Closing, Buyer will afford to Seller and its accountants and attorneys
reasonable access to the books and records which Seller delivers to Buyer
hereunder, and will permit Seller to make extracts and copies therefrom for
any proper purpose. For a period of seven (7) years after the Closing, Seller
will afford to Buyer and its accountants and attorneys reasonable access to
the books and records which Seller retains pursuant to Section 1.4.7 and will
permit Buyer to make extracts and copies therefrom for any proper purpose.
3.4.4 TRADE NAMES. After the Closing, except as provided in
Section 1.4.3, Buyer will not use any of Seller's or Seller's affiliates'
trade names, trademarks, logos or symbols, including "Lucas", "Varity",
"LucasVarity", "Lucas Control Systems" and any variations thereof, and, as
soon as reasonably practicable after the date hereof, shall remove such names
and trademarks from all products, packaging material and business forms and
will not use or apply such names or trademarks to any product, packaging,
business forms or otherwise. At any time after the date hereof, Seller and
Seller's affiliates shall cease to use and shall not license or permit any
third party to use the names "DEECO", "DEECO SYSTEMS", "DECO", "SEALTOUCH",
"TOUCH ASSIST", "POWER ASSIST", or any name, slogan, logo, trade name, trade
dress or trademark which is similar or deceptively similar to any of the
aforementioned, provided however, that Seller shall place a stamp, sticker or
imprint upon existing business Brochures of Lucas Control Systems which may
include the names "DEECO" or "DEECO SYSTEMS" indicating that DEECO is no
longer affiliated with Seller, LucasVarity or their affiliates.
3.4.5 EMPLOYEE MATTERS. Buyer shall offer employment to all
employees of Seller listed on Schedule 3.4.8, (the "Transferred Employees").
On the date hereof, Buyer shall have the right, but not the obligation, to
hire each of the other employees of the Business including those employees on
short term disability or workers' compensation leave who are released to
return to work by November 1, 1998 (the "Other Employees"). The total
compensation contained in the offer of employment to such Transferred
Employees shall be substantially equivalent to the total compensation
provided by Seller to such employees
11
<PAGE>
immediately prior to the date hereof. Except as provided in Section 3.4.8,
Buyer, in its sole discretion, shall determine the period of employment for
each Transferred Employee and the Other Employees hired by Buyer and the
parties acknowledge that as of the date hereof the Transferred Employees and
the Other Employees shall cease to be employees of Seller. Buyer shall be
responsible for all claims, causes of action, judgments, damages including
reasonable attorney fees, penalties and liabilities including severance
payments, if any (other than the severance obligations contained in the
agreements listed on Schedule 2.6.2), arising out of, resulting from or
related to the employment, offer of employment or termination of the
Transferred Employees and the Other Employees after the date hereof, and
Buyer shall indemnify and hold Seller harmless from and against any such
claims, including without limitation, "WARN" Act claims, claims of
constructive termination or otherwise arising from the transactions
contemplated by this Agreement. Buyer shall not be responsible for any
claims or liabilities arising out of, resulting from or related to Seller's
employment of the Transferred Employees or the Other Employees prior to the
date hereof and Seller shall indemnify and hold Buyer harmless from and
against any such claims. Notwithstanding the foregoing, to the extent that
any employees of the Business who are on short term disability or workers'
compensation leave as of the date hereof do not return to work due to
circumstances beyond the control of Buyer by November 1, 1998, Seller shall
indemnify and hold Buyer harmless for all costs and expenses incurred by
Buyer after November 1, 1998 with respect to such employees.
3.4.6 TRANSITION. In order to assist Buyer in the transition of
the Business, Seller agrees to enter into an arrangement with Buyer known as
a secording arrangement whereby Seller's employee, Thomas Kramer, shall
remain an employee of Seller, but shall perform services for and under the
direction and control of Buyer for a period beginning on the date hereof and
ending on January 31, 1999. As consideration for this arrangement , Buyer
agrees to reimburse Seller on a monthly basis for the full cost of this
employee, including without limitation, wages of approximately 10,000 DM per
month, the cost of benefits provided to such employee, the rental of Mr.
Kramer's office in Seller's facility in Wendlingen, Germany at US$1,000.00
per month, bonuses (to be determined by Buyer in its sole discretion), and
reimbursement of expenses, including car allowance, of approximately 5,000 DM
per month approved by Buyer during the term of the arrangement. Seller shall
not increase the salary or benefits of Mr. Kramer without the written consent
of Buyer which shall not be unreasonably withheld.
3.4.7 SUBLEASE. Seller currently occupies the Premises,
pursuant to a lease of real property ("Lease"). Buyer agrees to sublease
from Seller the Premises under the terms and conditions as are contained in
the Sublease for a term beginning on the date hereof and ending on January
31, 1999. In the event that Buyer wishes to assume the Lease in its entirety
or to sublease the Premises for the balance of the term of the Lease, Buyer
shall so notify Seller in writing not later than August 1, 1998. In the
event that Buyer elects to occupy the Premises after January 31, 1999, Buyer
shall either assume the Lease or sublease the Premises from Seller (both
subject to the consent of the Lessor under the Lease) for the entire balance
of the term of the Lease. If Buyer elects not to remain in the Premises after
January 31, 1999, Buyer shall, not later than that date, vacate the Premises
and surrender same to Seller in substantially the same condition as upon
commencement of Buyer's occupancy.
12
<PAGE>
3.4.8 BOOKINGS. Buyer agrees that beginning on the date hereof
until January 31, 1999, Buyer shall use commercially reasonable efforts to
retain the services of the employees listed on Schedule 3.4.8. Buyer further
agrees not to relocate the manufacture of the products of the Business away
from the Premises prior to October 1, 1998. Through January 31, 1999, Buyer
shall use commercially reasonable efforts to maximize the Bookings of the
Business and shall pursue, accept and list Bookings in a manner consistent
with the past practices of the Business. Buyer shall provide to Seller
monthly reports of Bookings within ten (10) business days after the end of
each month and upon the reasonable request of Seller shall meet with Seller
quarterly to review the interim progress of Bookings between the date hereof
and January 31, 1999. At such meeting(s) Buyer shall provide to Seller data
and information reasonably sufficient for Seller to determine the actual
amount of Bookings received through the end of the last monthly report and
the likely prospects of any additional Bookings which may then be
contemplated by or known to Buyer. In determining the total Bookings, (a)
all products of TCP or its affiliates ordered by the customers listed on
Schedule 2.3.1(a) in accordance with Section 2.3.1 shall be included in
Bookings; (b) all orders for TCP's or its affiliates' products that are
placed in accordance with Section 2.3.1 by previous customers of the Business
(other than from customers listed on Schedule 2.3.1(a)), to the extent that
the products ordered by such customers are similar to the products previously
purchased by such customers from the Business, shall be included in Bookings;
and (c) any orders of TCP's or its affiliates' products that are placed by
the sales representatives employed by the Business immediately prior to the
date hereof in accordance with Section 2.3.1 hereof shall be included in
Bookings to the extent that the products ordered perform identical functions
to products sold or offered by the Business immediately prior to the date
hereof. Notwithstanding the foregoing, Buyer shall not be obligated to accept
any order for the sale of products unless the estimated material costs with
respect to such order are less than or equal to sixty-five percent (65%) of
the net invoice amount (excluding taxes, freights, insurance and custom
duties) of such order.
3.4.9 MIS SERVICES. Seller agrees to provide to Buyer access to
Seller's central computer system substantially equivalent to that which
existed prior to Closing, including without limitation, use of the "Growth
Power" software for the use of the Business at its present location for a
term beginning on the date hereof and ending not later than January 31,
1999. Buyer shall pay Seller on a monthly basis an access fee of Five
Thousand Dollars ($5,000.00) per month for the first three (3) months and Ten
Thousand Dollars ($10,000.00) per month thereafter or a prorated amount
thereof for any partial month. Buyer may terminate such service upon at
least thirty (30) days prior written notice to Seller. Seller shall endeavor
to provide the services set forth on Schedule 3.4.9 and to provide Buyer with
access to the computer system, but Seller makes no warranty to Buyer
regarding the accuracy, completeness, adaptability, or functionality of any
such services or software provided to Buyer pursuant to this Section, and
Seller shall not be liable to Buyer or any third party regarding Buyer's use
of or access to Seller's computer system.
3.4.10 CONTRACT NOVATION. To the extent required by applicable
law or regulations, Buyer at its own expense shall be responsible for
novation of the government purchase contracts set out on Schedule 3.4.10.
Seller shall assist in these requests for novation as
13
<PAGE>
reasonably requested by Buyer, and Seller shall execute such documents as may
be reasonably required as part of such novation requests.
14
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF SELLER.
4.1 REPRESENTATIONS AND WARRANTIES. Seller hereby makes the
following representations and warranties to Buyer as of the date hereof:
4.1.1 CORPORATE ORGANIZATION. Seller (a) is a corporation duly
organized and validly existing and in good standing under the laws of the
Commonwealth of Virginia; and (b) is duly qualified or licensed to do
business and is in good standing in all jurisdictions in which it owns or
leases property relating to the Business or in which the conduct of the
Business requires it to so qualify or be licensed.
4.1.2 AUTHORITY. Seller has full power and authority
(corporate and other) to execute, deliver and perform this Agreement and the
other documents referenced herein and the transactions contemplated hereby,
and the execution, delivery and performance of this Agreement and the other
documents referenced herein have been duly authorized and approved by all
necessary corporate action, and this Agreement and the other documents
referenced herein constitute a valid and binding agreement of Seller,
enforceable against Seller in accordance with their respective terms.
4.1.3 NO CONFLICT. Seller's execution and delivery of this
Agreement and performance of its obligations hereunder (i) are not in
violation or breach of, and will not conflict with or constitute a default
under, any of the terms of the certificate of incorporation or by-laws or
other governing documents of Seller or any note, debt instrument, security
agreement, lease, deed of trust or mortgage, or any other contract, agreement
or commitment binding upon Seller or affecting any of the Assets, (ii) will
not conflict with or violate any applicable law, rule, regulation, judgment,
order or decree of any government, governmental instrumentality or court
having jurisdiction over Seller, or any of the Assets, and (iii) do not
require any material consent, approval or authorization of, or declaration,
of or registration with, any domestic governmental or regulatory authority.
4.1.4 COMPLIANCE WITH LAWS. Seller holds all material permits,
licenses, variances, exemptions, orders and approvals of any court, arbitral,
tribunal, administrative agency or commissioner or other governmental or
other regulatory authority or agency ("Governmental Entities") necessary for
the lawful conduct of the Business (the "Permits"), all of which are listed
on Schedule 1.2.6 attached hereto. Seller is in substantial compliance with
the terms of the Permits. Seller is in substantial compliance with all laws,
ordinances or regulations of all Governmental Entities in connection with the
operation of the Business.
4.1.5 BOOKS AND RECORDS. Except as set forth on Schedule 4.1.5
Seller's books, accounts and records relating to the Business are, and have
been, maintained in a usual, regular and ordinary manner, in accordance with
GAAP except for non-material exceptions thereto and all material transactions
to which Seller is or has been a party with respect to the operation of the
Business are properly reflected therein.
15
<PAGE>
4.1.6 FINANCIAL STATEMENTS. Schedule 4.1.6 attached hereto
contains complete and accurate copies of the unaudited balance sheets of the
Business as of and for the fiscal years ended January 31, 1998 and 1997 and
statements of income of the Business for fiscal year ending January 31, 1998
(the "Financial Statements"). Schedule 4.1.6 also contains complete and
accurate copies of the unaudited balance sheet and statement of income of the
Business for the three (3) month period ended May 1, 1998 (the "Interim
Financial Statements"). Except as set forth on Schedule 4.1.6 the Financial
Statements and the Interim Financial Statements fairly present in all
material respects the financial position of the Business as of the dates
thereof and the results of operations and cashflows of the Business for the
periods covered by said statements, all in accordance with GAAP, except for
non-material exceptions consistently applied by the Business.
4.1.7 ACCOUNTS RECEIVABLE. None of the trade receivables and
notes receivable which are reflected on the Financial Statements, the Interim
Financial Statements or which arose subsequent to the date of the Interim
Financial Statements, is or was to Seller's knowledge subject to any
counterclaim or set off. Except as set out on Schedule 4.1.7 all of such
trade receivables arose out of bona fide, arms-length transactions for the
sale of goods or performance of services, and all such trade receivables and
notes receivable are good and collectible (or have been collected) in the
ordinary course of business using normal collection practices at the
aggregate recorded amounts thereof, less the amount of applicable reserves
for doubtful accounts and for allowances and discounts. Seller has no
outstanding sales on consignment, sales on approval, sales on return or
guaranteed sales in connection with the operation of the Business.
4.1.8 INVENTORY. All Inventories of the Business consists of
items of a quantity and quality historically useable and/or saleable in the
normal course of the Business, some of which items may be saleable in excess
of one year. Items of slow-moving material which may be saleable in excess
of two years have been written down by twenty-five percent (25%) consistent
with the past practice of the Business on an item by item basis. To Seller's
knowledge, the Inventories are free from defects in materials and/or
workmanship. All Inventories reflected in the Financial Statements or the
Interim Financial Statements are valued at the lower of cost or market with
cost determined by the first in first out accounting method. Since April 30,
1998, there has not been a material change in the level of the Inventories.
All Inventories except for demonstration equipment, tooling or inventory set
out on Schedule 4.1.8 are, and all other tools, dies, jigs, patterns, molds,
equipment, supplies and other materials used in the production of Inventories
are, located at the Premises. To Seller's knowledge, all Inventories have
been produced in material compliance with applicable laws.
4.1.9 INTELLECTUAL PROPERTY. Except as set out on Schedule 4.1.9
(a) Seller is the owner of or duly licensed to use each Trademark and its
associated goodwill; (b) each Trademark registration exists and has been
maintained in good standing; (c) each Patent exists, is owned by or licensed
to Seller, and has been maintained in good standing; (d) each copyright
registration exists and is owned by Seller; (e) Seller has not received any
notice that any other firm, corporation, association or person claims the
right to use in connection with similar or closely related goods and in the
same geographic area, any mark which is identical or confusingly similar to
any of the Trademarks; (f) Seller has no knowledge of any claim that any
third party
16
<PAGE>
asserts ownership rights in any of the Intellectual Property Rights; (g)
Seller has no knowledge of any claim or any reason to believe that Seller's
use of any Intellectual Property Right infringes any right of any third
party; (h) Seller has no knowledge or any reason to believe that any third
party is infringing on any of Seller's rights in any of the Intellectual
Property Rights; and (i) Seller has no knowledge or any reason to believe
that any of its actions have infringed or are infringing on any third party's
intellectual property rights.
4.1.10 TITLE TO THE ASSETS. Seller has and will transfer to
Buyer good and marketable title to the Assets, free and clear of all
mortgages, easements, leases, agreements, restrictions, security interests,
pledges, liens or encumbrances of any kind, or any conditional sale agreement
or other title retention agreement.
4.1.11 REAL ESTATE. (a) Except for the storage space described on
Schedule 1.2.5 and the Premises, Seller does not use any real estate in
connection with the operation of the Business. The Premises is leased to
Seller pursuant to the Lease. None of the improvements comprising the
Premises, or the businesses conducted or proposed to be conducted by Seller
thereon, are in material violation of any applicable law. No material
expenditures are required to be made for the repair or maintenance of any
improvements on the Premises or for the Premises to be used for its intended
purpose. Seller is not in material default under any agreement relating to
the Premises nor, to the best knowledge of Seller, is any other party thereto
in default thereunder. There are no condemnation proceedings pending or, to
the best of Seller's knowledge, threatened with respect to any portion of the
Premises. (b) No Governmental Authority has asserted any challenges or
appeals regarding the amount of the taxes on, or the assessed valuation of,
the Premises, and Seller has no special arrangement or agreement with any
Governmental Authority with respect thereto. There is no tax assessment (in
addition to the normal, annual general real estate tax assessment, including,
ad valorem property taxes imposed upon the real and personal property owned
by the Seller for 1998) pending or, to the best of Seller's knowledge,
threatened with respect to any portion of the Premises to the extent Seller
is liable for payment therefor.
4.1.12 EQUIPMENT.. To the best of Seller's knowledge all tangible
assets and facilities of Seller included in the Assets are in good operating
condition and repair (ordinary wear and tear excepted). The Equipment
transferred to Buyer pursuant to this Agreement is, to the best of Seller's
knowledge, sufficient to carry on the Business as it was conducted by Seller
immediately prior to Closing.
4.1.13 ASSIGNED CONTRACTS. Except as set out on Schedule 4.1.13
Seller is not a party to, or bound by, or the issuer or beneficiary of, any
undischarged written or oral contract, other than the Assigned Contracts,
which was entered into by Seller in connection with the operation of the
Business, including, without limitation: (i) any agreement or arrangement
obligating Seller to pay or receive, or pursuant to which Seller has
previously paid or received, an amount in excess of $20,000 (other than
purchase orders and sales orders entered into in the ordinary course of
business); (ii) any agreement or arrangement which by its terms cannot be
terminated by Seller for a period in excess of thirty (30) days without
payment or penalty; (iii) any employment or consulting agreement; (iv) any
agreement restricting in any manner Seller's
17
<PAGE>
right to compete with any other person or entity in connection with the
operation of the Business, or the right of any other party to compete with
Seller in connection with the operation of the Business; (v) any secrecy or
confidentiality agreement; or (vi) any requirements contract. To the best of
Seller's knowledge, each of the Assigned Contracts is in full force and
effect and binding upon the parties hereto, and neither Seller nor any other
party is in default under any of the Assigned Contracts. Seller has not
assigned any of its rights under any of the Assigned Contracts to any person
or entity.
4.1.14 LEASES. Schedule 1.2.7 sets forth a complete list of the
Personal Property Leases and Exhibit 3.4.7(a) lists the Real Property Lease
with sublease rights being assigned under the terms of this Agreement. To
the best of Seller's knowledge, each of the Personal Property Leases and the
Real Property Leases are in full force and effect and neither Seller nor any
other party is in default under any of the Personal Property Leases and the
Real Property Leases. Seller has not assigned any of its rights under any of
the Personal Property Leases or the Real Property Leases to any person or
entity.
4.1.15 LITIGATION. Except as disclosed on Schedule 4.1.15, there
is no litigation or proceeding, in law or in equity, and there are no
proceedings or governmental investigations before any Governmental Authority,
pending or, to the best of Seller's knowledge, threatened against Seller, or
any of Seller's officers or directors, with respect to or affecting the
Business or related to the consummation of the transaction contemplated
hereby. There are no facts known to Seller which, if known by a potential
claimant or governmental authority, would give rise to a claim or proceeding
which, if asserted or conducted with results unfavorable to Seller, would
have a material adverse effect on the Business before or after the Closing.
4.1.16 WARRANTIES. Except as disclosed on the Schedule 4.1.16,
Seller has made no oral or written warranties in connection with the
operation of the Business, with respect to the quality or absence of defects
of its products or services. Except as disclosed on Schedule 4.1.17, there
are no material claims pending, or to Seller's knowledge, anticipated or
threatened with respect to the quality of or absence of defects in any of the
products or services of the Business. Except as disclosed on Schedule
4.1.16, Seller has not been paid or been required to pay direct, incidental,
or consequential damages to any person in connection with any of such
products or services.
4.1.17 PRODUCT LIABILITY. Seller has received no notice nor does
Seller have any knowledge relating to any claim (other than a product
warranty claim) involving any product manufactured, produced, distributed or
sold by or on behalf of Seller in connection with the operation of the
Business resulting from an alleged defect in design, manufacture, materials
or workmanship, or any alleged failure to warn, or from any breach of implied
warranties or representations.
4.1.18 ARBITRATION. Seller is not a party to, or bound by, any
decree, order or arbitration award (or agreement entered into in any
administrative, judicial or arbitration proceeding with any Governmental
Authority) with respect to or affecting the Business.
18
<PAGE>
4.1.19 EMPLOYEE BENEFITS. Except as set forth on Schedule 4.1.19,
neither Seller nor any corporation or business which is now or at the
relevant time was an affiliate of Seller as determined under the Code section
414(b), (c), (m) or (o) ("ERISA Affiliate") maintains, administers,
contributes to or has any liability under, or has maintained, administered,
contributed to or had any liability under, nor do the employees relating to
the Business or any ERISA Affiliate receive or have any reason to expect to
receive as a condition of employment, benefits pursuant to any employee
pension benefit plan (as defined in Section 3(2) of ERISA) ("Plan"),
including, without limitation, any multi-employer plan as defined in Section
3(37) of ERISA ("Multi-Employer Plan") or any non-qualified deferred
compensation plan or retirement plan; employee welfare benefit plan (as
defined in Section 3(1)of ERISA) ("Welfare Plan"), including any other plan,
program, agreement or arrangement under which former employees relating to
the Business or an ERISA Affiliate (or their beneficiaries) are entitled, or
current employees relating to the Business or an ERISA Affiliate will be
entitled, following termination of employment, to medical, health or life
insurance or other benefits other than pursuant to benefit contribution
rights granted by statute or federal law or bonus, stock, stock purchase or
stock option plan, severance plan, salary continuation, vacation, sick leave,
fringe benefit, incentive, insurance, welfare or similar plan or arrangement
("Employee Benefit Plan").
4.1.20 LABOR MATTERS. Except as set forth in Schedule 4.1.20 or
for events that occur after the date hereof which are disclosed in writing by
Seller to Buyer, (a) there is no labor strike, dispute, slowdown, work
stoppage or lockout pending or, to the knowledge of Seller, threatened
against or affecting the Business, and during the past three years, there has
not been any such action; (b) to Seller's knowledge, there are no union
claims or petitions to represent the employees of Seller relating to the
Business; (c) Seller is not a party to or bound by any collective bargaining
or similar agreement with any labor organization, or work rules or practices
agreed to with any labor organization or employee association applicable to
employees of Seller relating to the Business; (d) none of the employees of
Seller relating to the Business are represented by any labor organization and
Seller has no knowledge of any current union organizing activities among such
employees, nor to Seller's knowledge does any question concerning
representation exist concerning such employees; (e) in connection with the
Business, Seller is, and has at all times been, in material compliance with
all applicable employment laws and practices, including, without limitation,
any such laws relating to employment discrimination, occupational safety and
health and unfair labor practices; (f) in connection with the Business, there
is no unfair labor practice charge or complaint against Seller pending or, to
the best knowledge of Seller, threatened before the National Labor Relations
Board or any charges or complaints, or facts which could give rise to a
charge or complaint, pending or threatened with any Governmental Entity who
has jurisdiction over unlawful employment practices; (g) there is no
grievance or arbitration proceeding arising out of any collective bargaining
agreement or other grievance procedure pending relating to the Business; (h)
Seller is not delinquent in payments to any of its employees of the Business
for wages, salaries, commissions, bonuses or other direct compensation for
any services performed by them prior to the Closing or amounts required to be
reimbursed to such employees; (i) upon termination of the employment of any
of the employees of the Business after the Closing, Seller will not be liable
to any of such employees for severance pay except as set out in Section
3.4.5; (j) the employment of each of the Business' employees is terminable at
will without cost to Seller except for
19
<PAGE>
payments required under the Plans, Welfare Plans and Employee Benefit Plans
and payment of accrued salaries or wages and vacation pay; (k) no employee or
former employee of the Business has any right to be rehired by Seller prior
to Seller hiring a person not previously employed by Seller; and (l) Schedule
4.1.20 contains a true and complete list of all employees of the Business who
are employed by Seller as of the date hereof, and said list correctly
reflects their base salaries, wages, (other than benefits under the Plans,
Welfare Plans and Employee Benefit Plans), dates of employment and positions.
4.1.21 ENVIRONMENTAL MATTERS. The Assets and the Business are in
substantial compliance with all Environmental Laws (as herein defined) and
Environmental Permits (as herein defined). A copy of any notice, citation,
inquiry or complaint relating to the Assets or the Business which Seller has
received in the past three years of any alleged violation of any
Environmental Law or Environmental Permit is contained in Schedule 4.1.21
attached hereto. Seller possesses all Environmental Permits which are
required for the operation of the Business, and is in compliance with the
provisions of all such Environmental Permits. Copies of all Environmental
Permits relating to the Business and issued to Seller are contained in
Schedule 4.1.21. As used in this Agreement, "Environmental Laws" means all
federal, state and local statutes, regulations, ordinances, rules,
regulations and policies, all court orders and decrees and arbitration
awards, and the common law, which pertain to environmental matters or
contamination of any type whatsoever; and "Environmental Permits" means
licenses, permits, registrations, governmental approvals, agreements and
consents which are required under or are issued pursuant to "Environmental
Laws".
4.1.22 INTERIM CONDUCT OF BUSINESS. Except as otherwise
contemplated by this Agreement or as disclosed on Schedule 4.1.22, since
January 31, 1998, Seller has not, in connection with the operation of the
Business; (a) sold, assigned, leased, exchanged, transferred or otherwise
disposed of any material portion of the Business' assets or property, except
for sales of Inventories and cash applied in the payment of liabilities of
the Business, in the usual and ordinary course of business in accordance with
Seller's past practices; (b) suffered any material casualty, damage,
destruction or loss, or interruption in use, of any material asset, property
or portion of Inventories (whether or not covered by insurance), on account
of fire, flood, riot, strike or other hazard or Act of God; (c) made or
suffered any material change in the conduct or nature of any aspect of the
Business, whether or not made in the ordinary course of business or whether
or not such change had a material adverse effect of the Business; (d) waived
any material right arising out of the conduct of, or with respect to, the
Business; (e) made any change in accounting methods or principles; (f)
written-off any material assets as unusable, or obsolete or for any other
reason; or (g) without limitation by the enumeration of any of the foregoing,
entered into any transaction other than in accordance with past practices.
Notwithstanding the foregoing, Seller shall not be deemed to have breached
the terms of this Section 4.1.22 by entering into this Agreement or by
consummating the transactions contemplated hereby.
4.1.23 AFFILIATED TRANSACTIONS. For purposes of this Agreement,
the term "Related Party" shall mean: any division of Seller (other than the
Business), any present or former officer, director, stockholder or affiliate
of Seller or any predecessor in interest to Seller, any present or former
known spouse, ancestor or descendant of any of the aforementioned
20
<PAGE>
persons or any trust or other similar entity for the benefit of any of the
foregoing persons. No property or interest in any property (including,
without limitation, designs and drawings concerning machinery) which relates
to and is or will be necessary or useful in the present or currently
contemplated future operation of the Business, is presently owned by or
leased or licensed by or to any Related Party. In its operation of the
Business, Seller has not bought or sold from a Related Party, any raw
materials, parts, components, or finished products or any engineering or
marketing services related thereto. The Financial Statements and the Interim
Financial Statements do not exclude any direct costs related to the operation
of the Business which were incurred by Seller.
4.1.24 SIGNIFICANT CUSTOMERS, SUPPLIERS AND EMPLOYEES. Schedule
4.1.2 sets forth an accurate list of the Business' Significant Customers (as
defined herein), Significant Suppliers (as defined herein) and Significant
Employees (as defined herein). Seller has no knowledge of any intention or
indication of intention by a (a) Significant Customer to terminate its
business relationship with the Business or to limit or alter its business
relationship with the Business in any material respect; (b) Significant
Supplier to terminate its business relationship with the Business or to limit
or alter its business relationship with the Business in any material respect;
or (c) Significant Employee intends to terminate or has terminated his
employment with the Business. As used herein, "Significant Customer" means
the 10 largest customers of the Business measured in terms of sales volume in
dollars for the fiscal year ended January 31, 1998 and 1997. "Significant
Supplier" means any supplier of the Business from whom Seller has purchased
$100,000 or more of goods for the Business during the fiscal year ended
January 31, 1998 or 1997; and "Significant Employee" means all persons listed
on Schedule 3.4.8.
4.1.25 BRIBES. In connection with the operation of the Business,
neither Seller nor, to Seller's knowledge, any of its former or current
officers, directors, employees, agents or representatives has made or
received, directly or indirectly, any bribes or kickbacks, illegal political
contributions, payments from corporate funds not recorded on the books and
records of Seller, payments from corporate funds to governmental officials,
in their individual capacities, for the purpose of affecting their action or
the action of the government they represent, to obtain favorable treatment in
securing business or licenses or to obtain special concessions, or illegal
payments from corporate funds to obtain or retain business.
4.1.26 ADVISOR FEES. W. Y. Campbell Company has been retained by
Seller as its advisor in the sale of the Assets. The payment of any
commission or any other fee due to W. Y. Campbell & Company upon consummation
of the transaction contemplated by this Agreement shall be the sole
responsibility of the Seller. Seller further represents and warrants that no
other broker, advisor or finder has been involved with this transaction or is
entitled to a commission or fee in connection herewith.
4.1.27 PROJECTIONS. All projections and proforma financial and
other information used in or to compile any projections or business plans
provided by Seller are based on good faith estimates and assumptions by the
management of Seller, it being recognized by Buyer that projections as to
future events are not to be viewed as fact and that actual results during the
21
<PAGE>
periods covered by any such projections may differ from the projected
results, and the differences may be material.
4.1.28 ACCURACY OF STATEMENTS. To the best knowledge of Seller,
no representation or warranty made by Seller in this Agreement or any
schedule or other agreement to be furnished to Buyer pursuant to this
Agreement contains any untrue statement of a material fact or omits to state
a material fact necessary to make the statements not misleading. The
representations and warranties of Seller shall be deemed to be made as of the
Closing Date.
4.1.29 SELLER'S KNOWLEDGE. As used in this Agreement "Seller's
Knowledge" and words of similar import shall mean the actual knowledge after
due inquiry of the following individuals who are employees of Seller: R.
Davies, R. DeWelt, D. Mehring, F. Worth, D. Moffit, C. McManus, A. Ortega, J.
Blasius, J. Ormaner.
5. REPRESENTATIONS AND WARRANTIES OF BUYER.
5.1 REPRESENTATIONS AND WARRANTIES. Buyer hereby makes the following
representations and warranties to Seller as of the date hereof:
5.1.1 CORPORATION ORGANIZATION. (a) Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Illinois; and (b) is duly qualified or licensed to do business and is in
good standing in all jurisdictions in which it owns or leases property
relating to the Business or in which the conduct of the Business requires it
to so qualify or be licensed.
5.1.2 AUTHORITY. Buyer has full power and authority (corporate
and other) to execute, deliver and perform this Agreement and the other
documents referenced herein and the transactions contemplated hereby, and the
execution, delivery and performance of this Agreement and the other documents
referenced herein have been duly authorized and approved by all necessary
corporate action, and this Agreement and the other documents referenced
herein constitutes a valid and binding Agreement of Buyer.
5.1.3 NO CONFLICT. Buyer's execution and delivery of this
Agreement and performance of its obligations hereunder (i) are not in
violation or breach of, and will not conflict with or constitute a default
under, any of the terms of the articles of incorporation or by-laws, or other
governing documents of Buyer or any note, debt instrument, security
agreement, lease, deed of trust or mortgage, or any other contract, agreement
or commitment binding upon Buyer or any of its assets or properties, and (ii)
will not conflict with or violate any applicable law, rule, regulations,
judgment, order or decree or any government, governmental instrumentality or
court having jurisdiction over Buyer, or any of its assets or properties, and
(iii) do not require any material consent, approval or authorization of, or
declaration, of or registration with, any domestic governmental or regulatory
authority.
5.1.4 ADVISOR FEES. Michael Blitzer Associates has been
retained by Buyer as its advisor in the purchase of the Assets. The payment
of any commission or any other fee due to
22
<PAGE>
Michael Blitzer Associates upon consummation of the transaction contemplated
by this Agreement shall be the sole responsibility of Buyer. Buyer further
represents and warrants that no other broker, advisor or finder has been
involved with this transaction or is entitled to a commission or fee in
connection herewith.
5.1.5 BUYER'S CAPACITY. Buyer and TCP collectively have the
financial and other capacity necessary to enable them to satisfy Buyer's
obligations under this Agreement, and any other documents and instruments to
be executed and delivered pursuant hereto and to consummate the transactions
contemplated hereby and at Closing will not be insolvent.
5.1.6 ACCURACY OF STATEMENTS. To the best knowledge of Buyer, no
representation or warranty made by Buyer in this Agreement or any schedule or
agreement to be furnished herewith contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements not misleading. The representations and
warranties of Buyer shall be deemed to be made as of the date hereof.
5.1.7 RELIANCE. Buyer has conducted an independent inquiry of the
Business. Buyer has relied on the results of such inquiry (for which Seller
does not bear any responsibility) and the representations and warranties of
Seller contained in Section 4 of this Agreement, including the Schedules
relating thereto. The representations and warranties of Seller contained in
Section 4 constitute the sole and exclusive representations and warranties of
Seller to Buyer in connection with this Agreement and the transactions
contemplated hereby and Buyer acknowledges that all other representations and
warranties or any projections or business plans of Seller are specifically
disclaimed and may not be relied upon or serve as a basis for a claim against
Seller.
5.1.8 BUYER'S KNOWLEDGE. As used in this Agreement, "Buyer's
Knowledge" and words of similar import shall mean the actual knowledge, after
due inquiry of the following individuals who are employees of Buyer: N. Gihl,
P. Nicholson, M. Howlett, D. Lambert, B. Morgan and E. Foster.
6. COVENANTS.
6.1 CONFIDENTIALITY. As a further inducement for Buyer to enter into
this Agreement, Seller agrees that for the longest period permitted by law
after the date hereof, Seller shall, and shall cause its Affiliates to, hold
in the strictest confidence, and not, without the prior written approval; of
Buyer, use for its own benefit or the benefit of any party other than Buyer
or disclose to any person, firm or corporation other than Buyer any
Confidential Information. For purposes of this Agreement, intending that the
term shall be broadly construed to include anything protectible as a trade
secret or confidential information under applicable law, "Confidential
Information" shall mean all information, and all documents and other tangible
items which record information relating to or useful in connection with the
Business, which at the time or times concerned is protectible as a trade
secret or confidential information under applicable law; provided that
confidential information shall not include any information to the extent
that (i) the disclosure of such information to a third party is reasonably
required in
23
<PAGE>
connection with the fulfillment of a party's obligations under this
Agreement, and such third party shall enter into an agreement to keep such
information confidential, (ii) such information shall become generally known
to the public through no violation of Sections 6.1 or 6.5 of this Agreement,
and (iii) the disclosure of such information is required by a court of
competent jurisdiction or by law.
6.2 INJUNCTIVE RELIEF. The Seller and Buyer acknowledge and agree that
the remedy at law for any breach of any of their respective obligations under
Sections 3.4.3 through 3.4.10 or Sections 6.1, 6.4, 6.5 or 6.8 hereof would
be inadequate, and agree and consent that temporary and permanent injunctive
relief may be granted in a proceeding which may be brought to enforce any
provision of Sections 3.4.3 through 3.4.10 or Sections 6.1, 6.4, 6.5 or 6.8
without the necessity of proof of actual damage. Seller and Buyer recognize
that the absence of a time limitation in Section 6.1 is reasonable and
properly required for the protection of Buyer and in the event that the
absence of such limitation is deemed to be unreasonable by a court of
competent jurisdiction, the parties agree and submit to the imposition of
such a limitation as said court shall deem reasonable.
6.3 THIRD PARTY CONSENTS. Prior to the Closing, each of Seller and
Buyer shall use all reasonable efforts to obtain the agreements,
authorizations, consents, orders and approvals of federal, state and local
regulatory bodies and officials, courts and other third parties that may be
or become necessary for the performance of their respective obligations
pursuant to this Agreement and the consummation of the transactions
contemplated by this Agreement and shall cooperate fully with each other in
seeking promptly to obtain such agreements, authorizations, consents, orders
and approvals as may be necessary for the performance of their respective
obligations pursuant to this Agreement. Neither Seller nor Buyer shall take
any action that is likely to have the effect of delaying, impairing or
impeding the receipt of any required agreements or approvals and each shall
use all reasonable efforts to secure such agreements or approvals as promptly
as possible.
6.4 FURTHER ACTION. Buyer and Seller shall execute such other
documents and take such further action, at or after the Closing, as may be
reasonably required or desirable to carry out the provisions of this
Agreement and the transactions contemplated by this Agreement. Upon the
terms and subject to the conditions of this Agreement, Buyer and Seller shall
take, or cause to be taken, all actions and to do, or cause to be done, all
other things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement,
and to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings.
6.5 ANNOUNCEMENTS. Except as and to the extent required by applicable
law, neither Buyer nor Seller shall make any public announcements in respect
of this Agreement or the transactions contemplated by this Agreement or
otherwise communicate with any third party, including, without limitation,
news media, without the prior written consent of the other party which
consent shall not be unreasonably withheld, and Buyer and Seller shall
cooperate as to the timing and contents of any such announcement.
24
<PAGE>
6.6 PRODUCT RETURNS AND ADJUSTMENTS. Buyer shall assume all
obligations under written or implied warranties to repair or replace
defective products which were sold by Seller prior to the date hereof up to
the amount shown on the Closing Balance Sheet for product warranty reserves.
If Buyer incurs direct material and labor costs in excess of such reserved
amount, Buyer's right of reimbursement shall be subject to the
indemnification procedures set forth in Section 7. Buyer shall have all
obligations under written or implied warranties to repair or replace
defective products which are sold after the date hereof, and Buyer shall
indemnify and hold Seller harmless with respect thereto under the
indemnification procedures set forth in Section 7.
6.7 PRODUCTS LIABILITY. Seller shall retain all liability including
personal injury and property damage (whether based on "strict liability" laws
or otherwise), arising out of or in connection with any products sold by
Seller prior to the date hereof, and Seller shall indemnify and hold Buyer
harmless with respect thereto under the indemnification procedures set forth
in Section 7. Buyer shall have all liability including personal injury and
property damage (whether based on "strict liability" laws or otherwise),
arising out of or in connection with any products sold after the date
hereof, and Buyer shall indemnify and hold Seller harmless with respect
thereto under the indemnification procedures set forth in Section 7.
6.8 NON-SOLICITATION. Seller agrees, for a period of two (2) years
following the date hereof, not to solicit any third-party customers of the
Business who purchased DEECO product line applications from Seller within two
years prior to the date hereof. Seller shall be restricted from soliciting
such third party customers only for the sale of products of Seller that are
in direct competition with the products produced in the Business as of the
date hereof. Seller also agrees that for a period of two (2) years after the
date hereof, Seller shall not take any action which is calculated to persuade
any salaried, technical or professional employees, representatives or agents
of Buyer to terminate their association with Buyer.
6.9 PAYMENTS OF ACCOUNTS RECEIVABLE. In the event Seller shall
receive after the Closing any instrument of payment of any of the Accounts
Receivable, Seller shall forthwith delivery it to Buyer, endorsed where
necessary, without recourse, in favor of Buyer. If Buyer does not receive
payment of the full amount of the Accounts Receivable from each of M-Tech or
Palomar Spectrum on or prior to ninety (90) days after the date hereof, (a)
Seller shall promptly pay to Buyer an amount equal to the uncollected balance
of those receivables; and (b) Buyer shall convey to Seller the rights to the
uncollected portion of such receivables.
7. DAMAGES AND INDEMNIFICATION.
7.1 INDEMNIFY BY SELLER. Seller shall defend, indemnify, and hold
harmless Buyer and Buyer's affiliates, and their respective directors,
officers, employees, shareholders, representatives, and agents, against and
with respect to any and all losses, costs, damages, assessments,
administrative fines or penalties, liability, obligations, claims or expenses
(including reasonable professional fees and similar expenses) (collectively,
the "Losses") from, resulting by reason of or arising in connection with: (a)
any and all liabilities of Seller of any nature, whether accrued, absolute,
contingent, or otherwise, other than the Assumed Liabilities;
25
<PAGE>
(b) any inaccuracy in or breach of any of the representations, or, warranties
made or to be performed by Seller pursuant to this Agreement or under any of
the other certificates, agreements or other documents delivered by Seller in
connection herewith or any breach thereof arising from a claim asserted by a
third party, or (c) any breach of any covenants or agreements made or to be
performed by Seller pursuant to this Agreement or under any of the other
certificates, agreements or other documents delivered by Seller in connection
herewith; or (d) Seller's operation of the Business prior to the date hereof.
7.2 INDEMNITY BY BUYER. Buyer shall defend, indemnify, and hold
harmless Seller and Seller's affiliates, and their respective directors,
officers, employees, shareholders, representatives, and agents, against and
with respect to any and all Losses from, resulting by reason of or arising in
connection with: (a) any inaccuracy in or breach of any of the
representations, or warranties made or to be performed by Buyer pursuant to
this Agreement or under any of the other certificates, agreements or other
documents delivered by Buyer in connection herewith or any breach thereof
arising from a claim asserted by a third party, (b) any breach of any
covenants or agreements made or to be performed by Buyer pursuant to this
Agreement or under any of the other certificates, agreements or other
documents delivered by Buyer in connection herewith; (c) any claim or demand
made or liability asserted against Seller due to Buyer's failure or alleged
failure to pay, perform or discharge any Assumed Liability or (d) Buyer's
operation of the Business after the date hereof.
7.3 ENVIRONMENTAL MATTERS INDEMNIFICATION. This Section 7.3 shall
constitute the entire agreement of the parties with respect to environmental
matters and shall control in the event of conflict with any other term,
provision or agreement, whether written or oral.
7.3.1 PRE-EXISTING CONTAMINATION. As used herein, the term
"Pre-existing Contamination" shall mean any contamination in violation of any
Environmental Law which existed or occurred prior to the date hereof, or any
condition, whether or not on or off site which is related to, migrated from
or is associated with any such contamination.
7.3.2 LIABILITY. It is the intention of both Buyer and Seller
that Seller shall retain any and all liability imposed by any Environmental
Law for Pre-existing Contamination and further that Buyer and Seller agree
that any release or similar action caused by Buyer or its agents which
results in or exacerbates any contamination is the responsibility of Buyer.
It shall be the burden of Seller to establish than any contamination was not
a Pre-existing Contamination. Moreover, any liability imposed by an
Environmental Law which does not relate to any contamination caused during
the period of time that Buyer occupied the Premises shall be the sole
responsibility of Seller. This discovery by Buyer of any violation of an
Environmental Law that occurred prior to the date hereof, or environmental
condition related to Pre-existing Contamination, shall require a
comprehensive study to determine the extent of any Pre-existing
Contamination. The scope of such investigation and the cost thereof shall be
the sole obligation of Seller. Buyer agrees that all data obtained and
reports developed as a result of any such investigation are confidential, and
all data and reports shall be so labeled, but that such reports and data will
be provided to Seller under an obligation of confidentiality. Unless
otherwise required by law, Buyer will not disclose any such data or reports
to any third party, including,
26
<PAGE>
but not limited to governmental agencies, individuals, corporations, or the
public without the prior written consent of Seller.
7.3.4 REMEDIATION. Seller shall indemnify and hold Buyer
harmless for any and all liabilities imposed on Buyer for the clean-up or
remediation of any Pre-existing Contamination.
7.4 UCC BULK SALES INDEMNIFICATION. Buyer hereby waives Seller's
compliance with the Uniform Commercial Code provisions of California law
regarding bulk transfers. Other provisions hereof notwithstanding, Seller
will indemnify and hold Buyer harmless from all Losses attributable to
Seller's failure to comply with any provision of such laws in respect of the
Assets sold to Buyer hereunder.
7.5 INDEMNIFICATION NOTICE. The party seeking indemnification under
this Section 7 agrees to give prompt notice to the party against whom
indemnity may be sought (the "Indemnifying Party") of the assertion of any
claim or the commencement of any suit, action or proceeding in respect of
which indemnity may be sought under this section; provided, however, that in
the event such notice is not given or is delayed and the Indemnifying Party
is not materially prejudiced thereby, the Indemnified Party's rights
hereunder shall not be affected. The Indemnifying Party shall have the right
at its own expense, to control the defense and the Indemnifying Party shall
not settle the matter without the consent of the Indemnified Party, which
consent shall not be unreasonably withheld. The Indemnified Party shall have
the right to participate in such defense by notice to the Indemnifying Party.
If upon the Indemnifying Party's consent, the Indemnified Party assumes such
defense, the Indemnified Party shall not settle the matter without the
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld.
7.6 LIMITATION ON LIABILITY. The Indemnifying Party shall not have any
liability or obligation to the Indemnified Party under Sections 7.1(b) or
7.2(a), (i) for any individual claims or losses which amount to $2,500.00 or
less ("Excluded Claims"); (ii) unless the aggregate cumulative total of all
Losses under Sections 7.1(b) or 7.2(a), as the case may be, other than
Excluded Claims incurred by the Indemnified Party exceeds Seventy-Five
Thousand Dollars($75,000), but once all Losses incurred by the Indemnified
Party under Sections 7.1(b) or 7.2(a), as the case may be, exceed such
amount, the Indemnified Party shall be entitled to indemnification for all
Losses under Sections 7.1(b) or 7.2(a), as the case may be, from the first
dollar of Losses, excluding all Excluded Claims, and (iii) to the extent that
the Indemnified Party actually receives insurance proceeds to cover any such
Losses under Sections 7.1(b) or 7.2(a), as the case may be. Notwithstanding
any other provision of this Agreement, the total maximum aggregate
indemnification for all Losses incurred by the Indemnified Party pursuant to
Section 7.1(b) or Section 7.2(a), as the case may be, shall not exceed one
half of the Purchase Price. The Indemnified Party shall not be entitled to
make any claim for a breach of a representation or warranty pursuant to
Sections 7.1(b) or 7.2(a) at any time after the period of time set forth in
Section 8.3.
8 MISCELLANEOUS.
27
<PAGE>
8.1 ASSIGNMENT. This Agreement shall not be assignable by either
party, except upon written consent of the other party.
8.2 NOTICES. All notices, consents, approvals or other notifications
required or permitted to be sent by one party to the other party hereunder
shall be in writing and may be delivered by hand, by facsimile, by nationally
recognized overnight courier service, or by United States mail. Notices
delivered by United States mail shall be deemed given three (3) business days
after being deposited in the United States mail, postage prepaid, registered
or certified mail. Notices delivered by hand, by facsimile or by nationally
recognized overnight courier service shall be deemed given on the first
business day following receipt; provided, however, that a notice delivered by
facsimile shall only be effective if such notice is also delivered by hand,
or deposited in the United States mail, postage prepaid, registered or
certified mail, on or before two (2) business days after its delivery by
facsimile. All notices shall be addressed to such other party at the address
set forth below, or, the last address of such party as shall have been
communicated to the other party:
If to Seller Lucas Automation & Control
Engineering, Inc.
1000 Lucas Way
Hampton, Virginia 23666
Attention: Robert Davies
Fax No. 757 766 2666
with a copy to: Robert A. Leier, Esquire
LucasVarity
13873 Park Center Road
Hallmark Building - Suite 65
Herndon, Virginia 20171
Fax No. 703 834 2648
If to Buyer: Total Control Products, Inc.
2001 N. Janice Avenue
Melrose Park, Illinois 60160
Attention: Nicholas Gihl
Fax No. 708 345 6792
with a copy to: Mark S. Albert, Esquire
D'Ancona & Pfluam
30 North LaSalle - Suite 2900
Chicago, Illinois 60602
Fax No. 312 580 0923
8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained herein or in any schedule or other document attached
hereto shall be deemed
28
<PAGE>
representations and warranties of the party by whom or on whose behalf the
same are delivered and all representations and warranties made by such party
to this Agreement shall survive the Closing for a period not to exceed
eighteen (18) months, except that the representations and warranties set
forth in Sections 4.1.1, 4.1.2, 4.1.3, 4.1.10, 4.1.21, 5.1.1, 5.1.2, 5.1.3,
shall survive the Closing for a period not to exceed five (5) years. Any
claim based upon a breach of such warranty or representation must be
initiated within the above terms.
8.4 SEVERABILITY. If, for any reason, any provision of this Agreement
shall be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any of the other
provisions of this Agreement, but this Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein.
8.5 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of California, except
where the laws of some other jurisdiction mandatorily apply.
86 ENTIRE AGREEMENT. This Agreement together with the Schedules
hereto, embodies the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings relating to the subject matter hereof.
8.7 WAIVER. This Agreement and the terms hereof may be changed,
waived, modified, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver,
modification, discharge or termination is sought. No waiver of any right or
remedy in respect of any occurrence or event on one occasion shall be deemed
a waiver of such right or remedy in respect of such occurrence or event on
any other occasion unless specifically provided for in writing executed by
the party to be so bound.
8.8 COOPERATION. Seller and Buyer shall fully cooperate with one
another and shall provide to each other any assistance reasonably required to
complete the transactions contemplated by this Agreement.
8.9 HEADINGS. The headings in this Agreement are for purposes of
reference only, and shall not limit or otherwise affect the meaning thereof.
8.10 EXECUTION. This Agreement may be executed simultaneously in
several counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.11 INTERPRETATION AND AGREEMENT PREPARATION. The parties hereto
agree that this Agreement is the product of negotiations between
sophisticated parties and individuals, all of whom were represented by
counsel, and each of whom had an opportunity to participate in, and did
participate in, the drafting of each provision hereof. Accordingly,
ambiguities in this Agreement, if any, shall not be construed strictly or in
favor of or against any party hereto but rather shall be given a fair and
reasonable construction.
29
<PAGE>
8.12 CONSENTS. Whenever the terms of this Agreement require the consent
of a party be provided, unless this Agreement stipulates otherwise, such
consent shall not be unreasonably withheld.
8.13 ARBITRATION. Other than as provided in Section 6.2, any dispute
arising out of this Agreement or the transactions contemplated hereby shall
be settled by arbitration before a single arbitrator in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in San
Francisco, California and judgment upon the award rendered by the arbitrator
may be entered in any court having jurisdiction thereof. The parties
acknowledge that time is of the essence in connection with resolving any
dispute and that the parties will cooperate with each other to promptly
arbitrate any such matters. The arbitrator shall award the prevailing party
all costs, attorney fees, and other out-of-pocket expenses relating to the
dispute incurred by such party.
8.14 SUCCESSORS AND ASSIGNS. Subject to Section 8.1 hereof, this
Agreement shall be binding upon and inure to the benefit of the successors
and permitted assigns of each of the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LUCAS AUTOMATION & CONTROL
ENGINEERING INC. VA ACQUISITION CORP.
By: /S/ ROBERT DAVIES By: /S/ NICHOLAS GIHL
---------------------- -----------------------
Robert Davies Nicholas Gihl
Its: President Its: President
30
<PAGE>
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT dated June 8, 1998, by TOTAL CONTROL PRODUCTS
INC., an Illinois corporation ("Guarantor"), is made and given to LUCAS
AUTOMATION & CONTROL ENGINEERING INC., a Virginia corporation ("Lucas").
RECITALS
A. Guarantor is the owner of all the outstanding shares of VA
ACQUISITION CORP., an Illinois corporation ("Subsidiary").
B. Subsidiary and Lucas have entered into the Acquisition Agreement
for the sale of assets dated June 8, 1998 (the "Agreement"). Section 3.2.6
of the Agreement provides that Guarantor will deliver this guaranty as a
condition to the consummation of the transactions contemplated under the
Agreement.
AGREEMENTS
1. In order to induce Lucas to consummate the Agreement and in
consideration of the material benefits to be derived by Guarantor from the
performance by Subsidiary under the Agreement, and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Guarantor hereby guarantees to Lucas the prompt and complete payment and
performance when due or when required to be performed of the obligations and
liabilities of Subsidiary arising under the Agreement and under the documents
delivered by Subsidiary pursuant to the Agreement (all such liabilities and
obligations being hereinafter collectively referred to as the "Liabilities")
to the extent that Subsidiary would be liable for such amounts. Guarantor
further agrees to pay any and all reasonable expenses which may be paid or
incurred by Lucas in enforcing its rights with respect to the Liabilities
and/or this Guaranty (including all reasonable legal fees and expenses), if
the Guarantor is found to be liable for such Liabilities.
2. Initially capitalized terms not otherwise defined herein shall have
the respective meanings set forth in the Agreement.
3. The obligations of Guarantor under this Guaranty shall remain in
full force and effect until all the Liabilities have been indefeasibly paid
and performed or until Subsidiary is no longer liable to Lucas under the
Agreement and payment of the Liabilities is not subject to rescission or
repayment under any bankruptcy, insolvency, reorganization, receivership,
arrangement or similar proceeding affecting Subsidiary. This is a guaranty
of payment and not of collection.
4. Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Liabilities and notice of or proof of
reliance by Lucas upon this Guaranty or acceptance of this Guaranty and the
Liabilities. Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or non-payment to or upon Subsidiary or
Guarantor with respect to the Liabilities. This Guaranty shall remain in
full force and effect
1
<PAGE>
and be binding in accordance with and to the extent of its terms upon the
Guarantor and its successors and assigns, and shall enure to the benefit of
Lucas and its successors and assigns, until either (a) all the Liabilities
shall have been indefeasibly satisfied by payment in full or the obligations
of Guarantor under this Guaranty shall have been indefeasibly satisfied by
payment in full, or (b) Subsidiary's obligations under the Agreement have
expired or terminated, whichever first occurs.
5. This Guaranty shall continue to be effective, or be reinstated, as
the case may be, if at any time, payment, or any part thereof, of any of the
Liabilities is rescinded or must otherwise be restored or returned by Lucas
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization
of Subsidiary or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, Subsidiary
or any substantial part of its property, or otherwise, all as though such
payments had not been made.
6. No failure to exercise and no delay in exercising, on the part of
Lucas, any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof, or the exercise of
any other power or right. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
7. No provision of this Guaranty shall be waived, amended or
supplemented except by a written instrument executed by Guarantor and Lucas.
This Guaranty shall be governed by and construed and interpreted in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty on the day and
year first above written.
TOTAL CONTROL PRODUCTS INC.
By: /S/ NICHOLAS GIHL
----------------------------------
NICHOLAS GIHL, President
2
<PAGE>
Total Control Acquires Industrial Computer Company
MELROSE PARK, Ill., June 8 -- Total Control Products, Inc. announced that it
has signed an agreement to acquire substantially all of the net operating
assets of Deeco Systems (Deeco), a designer and manufacturer of flat panel
factory automation products, for $5.5 million in cash and an earn out of up
to $2 million if certain financial targets for the twelve month period ended
January 31, 1999 are met. Deeco is an operating business unit within
LucasVarity's Electrical and Electronic Systems Division. Revenues of Deeco
were approximately $15 million for the twelve months ended January 31, 1998.
Total Control designs, develops and markets products and technology for the
control segment of the industrial automation market. These products range
from closed architecture programmable logic controller operator interfaces
and industrial computers to open architecture control software and systems,
and are sold primarily through an international network of independent
distributors.
For further information contact Peter Nicholson, Chief Financial Officer at
Total Control Products, Inc., 2001 N. Janice Ave. Melrose Park, Ill., 60160,
708-345-5500 or Juli Ballesteros, Communications Manager, North America,
Electrical and Electronic Systems Division at LucasVarity at 703-834-2810.
NOTE: Statements and projections concerning the future financial condition,
results of operations and business of Total Control Products, Inc. and
subsidiaries are "forward-looking"' statements which are inherently
uncertain. Actual performance and results are subject to many risk factors,
including changing market conditions, the timing of new product introductions
by the Company, its competitors or third parties, the loss of any significant
distributors, currency fluctuations, disruption in the supply of components
for the Company's products, and other factors discussed in the Company's
March 11, 1997 prospectus for its initial public offering.
SOURCE: Total Control Products, Inc.
