<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C, 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
-------------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ...................... to ......................
Commission File Number 33-93644 and 333-50839
----------------------
DAY INTERNATIONAL GROUP, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 31-1436 349
-------- -----------
(State or other jurisdiction of (I.R.S. Employer ID No.)
incorporation or organization)
130 West Second Street, Suite 1700, Dayton, Ohio 45402
- -------------------------------------------------- ----------
(Address of principal executive offices) (zip code)
(937) 224-4000
- -----------------------------------
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
The number of Common Shares of the Company, $0.01 per share par value,
outstanding as of November 15, 1999 was 23,298
<PAGE> 2
DAY INTERNATIONAL GROUP, INC.
Index
<TABLE>
<CAPTION>
Pages
-----
Part I: Financial Information
Item 1. Financial Statements:
<S> <C>
Condensed Consolidated Balance Sheets as of September 30, 1999
and December 31, 1998 3
Condensed Consolidated Statements of Operations for the three months
ended September 30, 1999 and 1998 4
Condensed Consolidated Statements of Operations for the nine months
ended September 30, 1999 and 1998 5
Condensed Consolidated Statements of Comprehensive (Loss) Income
for the three months ended September 30, 1999 and 1998 6
Condensed Consolidated Statements of Comprehensive (Loss) Income
for the nine months ended September 30, 1999 and 1998 6
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 1999 and 1998 7
Notes to Condensed Consolidated Financial Statements 8 - 22
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 23 - 30
Part II: Other Information
Item 1 - Legal Proceedings 31
Item 2 - Changes in Securities and Use of Proceeds 31
Item 6 - Exhibits and Reports on Form 8-K 31
Signature 31
</TABLE>
2
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS 1999 1998
---- ----
<S> <C> <C>
Cash and cash equivalents $ 380 $ 4,762
Accounts receivable (less allowance for doubtful
accounts of $1,743 and $1,384) 26,185 18,630
Inventories 23,524 19,179
Prepaid expenses and other current assets 1,346 1,267
Deferred tax assets 2,548 2,543
--------- ---------
Total current assets 53,983 46,381
Property, plant and equipment, net 53,873 50,305
Goodwill and other intangible assets 150,071 157,799
Deferred tax assets 2,482 1,523
Other assets 3,172 1,400
--------- ---------
TOTAL ASSETS $ 263,581 $ 257,408
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable $ 5,960 $ 5,905
Accrued associate-related costs and other accrued expenses 13,477 13,229
Income taxes payable 2,213 2,913
Interest payable 4,438 4,336
Current maturities of long-term debt 1,292 1,292
--------- ---------
Total current liabilities 27,380 27,675
Long-term and subordinated long-term debt 259,851 256,223
Deferred tax liabilities 1,086 1,353
Other long-term liabilities 19,648 15,813
Commitments and contingencies
--------- ---------
Total liabilities 307,965 301,064
Exchangeable preferred stock 40,402 36,627
STOCKHOLDERS' (DEFICIT) EQUITY:
Common Shares 1 1
Additional paid-in-capital
Contra-equity associated with the assumption of
majority shareholder's bridge loan (68,772) (68,772)
Retained earnings (deficit) (13,229) (10,370)
Foreign currency translation adjustment (2,786) (1,142)
--------- ---------
Total stockholders' (deficit) equity (84,786) (80,283)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY $ 263,581 $ 257,408
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
NET SALES $ 44,569 $ 46,466
COST OF GOODS SOLD 27,942 29,206
-------- --------
GROSS PROFIT 16,627 17,260
SELLING, GENERAL AND ADMINISTRATIVE 7,407 7,146
AMORTIZATION OF INTANGIBLES 903 641
MANAGEMENT FEES 276 244
-------- --------
OPERATING PROFIT 8,041 9,229
OTHER EXPENSES:
Interest expense (including amortization
of deferred financing costs of $600 in 1999 and
$576 in 1998) 6,863 6,743
Other expense (income)--net 69 216
-------- --------
6,932 6,890
-------- --------
INCOME BEFORE INCOME TAXES 1,109 2,270
INCOME TAXES 480 916
-------- --------
NET INCOME 629 1,354
PREFERRED STOCK DIVIDENDS (1,260) (1,110)
AMORTIZATION OF PREFERRED STOCK
ISSUANCE COSTS (42) (42)
-------- --------
NET LOSS AVAILABLE
TO COMMON SHAREHOLDERS $ (673) $ 202
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
NET SALES $ 130,660 $ 132,516
COST OF GOODS SOLD 81,730 83,047
--------- ---------
GROSS PROFIT 48,930 49,469
SELLING, GENERAL AND ADMINISTRATIVE 22,790 21,695
COMPENSATION AND RELATED
TRANSACTION COSTS 18,018
AMORTIZATION OF INTANGIBLES 2,714 1,934
MANAGEMENT FEES 806 722
--------- ---------
OPERATING PROFIT 22,620 7,100
OTHER EXPENSES:
Interest expense (including amortization
of deferred financing costs of $1,800 in 1999 and
$1,448 in 1998 20,608 20,714
Other expense (income)--net 337 396
--------- ---------
20,945 21,110
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEMS 1,675 (14,010)
INCOME TAXES (BENEFIT) 757 (2,512)
--------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS 918 (11,498)
EXTRAORDINARY LOSSES ON EARLY
EXTINGUISHMENT OF DEBT (NET OF TAX
BENEFIT OF $2,368) - 3,552
--------- ---------
NET INCOME (LOSS) 918 (15,050)
PREFERRED STOCK DIVIDENDS (3,650) (2,365)
AMORTIZATION OF PREFERRED STOCK
ISSUANCE COSTS (126) (91)
--------- ---------
NET LOSS AVAILABLE
TO COMMON SHAREHOLDERS $ (2,858) $ (17,506)
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(IN THOUSANDS)
1999 1998
---- ----
NET INCOME $ 629 $1,354
FOREIGN CURRENCY TRANSLATION ADJUSTMENT 1,114 483
------ ------
COMPREHENSIVE NET INCOME $1,743 $1,837
====== ======
DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(IN THOUSANDS)
1999 1998
---- ----
NET INCOME (LOSS) $ 918 $(15,050)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT (1,644) 571
-------- --------
COMPREHENSIVE NET LOSS $ (726) $(14,479)
======== ========
See notes to condensed consolidated financial statements.
6
<PAGE> 7
DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 918 $ (15,050)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Extraordinary loss on early extinguishment of debt 3,552
Depreciation and amortization 11,731 9,754
Deferred income taxes (959) (3,765)
Non-cash charge related to stock option awards - 8,585
Change in operating assets and liabilities (4,740) (1,196)
--------- ---------
Net cash provided by operating activities 6,950 1,880
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,281) (5,383)
Cash paid for acquisition (10,464) -
--------- ---------
Net cash used in investing activities (14,745) (5,383)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of 2008 notes 111,134
Proceeds from issuance of exchangeable preferred stock 32,986
Proceeds from issuance of common stock 230
Proceeds from issuance of term loans 40,000
Contributions from shareholders 4,573
Repayment of existing credit facility (30,902)
Repayment of bridge loan (140,000)
Payment of consent fee (6,500)
Payments of deferred financing fees (2,742)
Payments on term loan (969) (8,000)
Net borrowings on revolving credit facility 4,590 2,000
--------- ---------
Net cash provided by financing activities 3,621 2,779
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (208) 546
--------- ---------
CASH AND CASH EQUIVALENTS:
Net (decrease) in cash and cash equivalents (4,382) (178)
Cash and cash equivalents at beginning of period 4,762 780
--------- ---------
Cash and cash equivalents at end of period $ 380 $ 602
========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURES
NON CASH TRANSACTIONS:
Assumption of bridge loan $ 140,000
=========
Preferred stock dividends $ 3,650 $ 2,365
========= =========
Amortization of preferred stock discount $ 126 $ 91
========= =========
Capital contribution $ 4,530
=========
</TABLE>
See notes to condensed consolidated financial statements.
7
<PAGE> 8
DAY INTERNATIONAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
A. BASIS OF PRESENTATION - The balance sheet as of December 31, 1998 is
condensed financial information derived from the audited balance sheet. The
interim financial statements are unaudited. The financial statements of Day
International Group, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles and, in the opinion of management,
reflect all adjustments (consisting of normal recurring accruals) necessary for
a fair presentation in accordance with generally accepted accounting principles
for the periods presented. The results of operations and cash flows for the
interim periods presented are not necessarily indicative of the results for the
full year.
B. ACQUISITIONS AND RELATED TRANSACTIONS - On January 16, 1998, affiliates of
Greenwich Street Capital Partners, Inc. ("Greenwich Street") and SG Capital
Partners LLC ("SGCP") acquired substantially all of the common stock of the
Company for approximately $206 million (the "Acquisition"), with the Company's
management retaining the balance of the common stock. In conjunction with the
Acquisition, the Company entered into a $60 million Senior Secured Credit
Facility (the "Senior Secured Credit Facility") consisting of a $40 million Term
Loan (the "Term Loan") and a $20 million Revolving Credit Facility (the
"Revolving Credit Facility"). Proceeds from the Term Loan were used to repay the
Company's then existing credit facility and to pay certain acquisition related
fees and expenses. As a result of such repayment of the Company's then existing
Credit Facility, $0.7 million of deferred financing fees were written off as an
extraordinary item. The Acquisition also resulted in compensation related
expenses of $17.0 million associated with employment agreements with certain key
members of management and amendments to the Company's Stock Option Plan.
On March 18, 1998, the Company successfully completed a Consent Solicitation
(the "Consent") with respect to its $100.0 million 11 1/8% Senior Subordinated
Notes which are due in 2005 (the "2005 Notes"). The Consent permitted the
Company to issue $115.0 million of 9 1/2% Senior Subordinated Notes (the "2008
Notes") and $35.0 million of 12 1/4% Exchangeable Preferred Stock (the
"Exchangeable Preferred Stock"). The Consent also allowed the Company to assume
a $140.0 million Bridge Loan (the "Bridge Loan") incurred by its majority
shareholder in connection with the Acquisition, and effected certain other
changes to the Indenture governing the 2005 Notes, including the elimination of
the provisions of the Indenture subordinating the 2005 Notes to other
indebtedness of the Company. As consideration for the Consent, the Company paid
a Consent fee of $65 for every $1,000 of notes held. The proceeds from the
issuance of the 2008 Notes and the Exchangeable Preferred Stock were used to
repay the Bridge Loan and to pay other financing fees and expenses. Expenses
associated with obtaining the Consent were approximately $1.0 million. As a
result of the repayment of the Bridge Loan, $5.2 million of deferred financing
fees and expenses were also written off as an extraordinary item. The
Acquisition did not require a change in the Company's historical basis of
accounting since the Company's 2005 Notes remained outstanding following the
Acquisition.
8
<PAGE> 9
Effective December 31, 1998, the Company acquired the stock of Rotec
Hulsensysteme GmbH ("Rotec") and entered into a five-year noncompete agreement
with the selling shareholders. The acquisition was financed through an
additional $10 million term loan under the Senior Secured Credit Facility and
additional equity from the Company's two major shareholders and was accounted
for as a purchase in accordance with Accounting Principles Board Opinion No. 16.
Effective September 30, 1999, the Company acquired the Textile Products
Operations of Armstrong World Industries, Inc. ("TPO"). The acquisition was
financed through the Revolving Credit Line of the Senior Secured Credit Facility
along with a portion of the proceeds from the Convertible Preferred Stock
referred to in Note C. The acquisition has been accounted for as a purchase in
accordance with Accounting Principles Board Opinion No. 16 in the September 30,
1999 balance sheet.
TPO manufactures and markets precision engineered rubber cots, aprons and other
fabricated rubber components used by the worldwide textile industry under the
brand name of Accotex. Day intends to continue to market the product lines
acquired under the Accotex brand name where permitted.
C. SUBSEQUENT EVENTS - On October 19, 1999 the Company completed its acquisition
of the stock of privately-held Varn International for $59.3 million in cash,
plus expenses. The purchase price is subject to certain adjustments for changes
in working capital and future revenue growth.
The acquisition was financed through the private placement of $38.5 million of
18% convertible cumulative preferred stock (the "Convertible Preferred Stock")
and by amending and restating the existing $60 million Senior Secured Credit
Facility ($40 million term and $20 million revolver). The Amended and Restated
Senior Secured Credit Facility provides for a $70 million Term Loan and a $20
million Revolving Credit Facility. The Revolving Credit Facility includes a $10
million letter of credit subfacility ($530 of letters of credit were outstanding
at October 19, 1999) and a $1 million swingline loan subfacility. The amounts
available under the Revolving Credit Facility are subject to a borrowing base
limitation (defined generally as $5 million plus 50% of eligible domestic
inventory and 80% of eligible domestic accounts receivable). At October 18,
1999, $19.5 million was available under the Senior Secured Credit Facility. The
Senior Secured Credit Facility requires a commitment fee of 1/2% a year on the
unused portion of the revolving line of credit. Interest on the term loan is
based on the banks' base rate plus 1.75% or the LIBOR rate plus 2.75%. Interest
rates on LIBOR borrowings are fixed for one, two, three or six month periods at
the Company's discretion.
The term loans mature in 21 consecutive quarterly installments, commencing on
March 31, 2000. Principal payments are to be made in the following amounts:
installments 1-4, $1.9 million per installment; installments 5-8, $2.5 million
per installment; installments 9-20, $3.7 million per installment; and
installment 21, $7.5 million.
Varn is a leading worldwide supplier of pressroom chemicals to the printing
industry. Varn also manufactures the Kompac brand of automatic dampening systems
for printing presses through its Graph Tech subsidiary. Headquartered in
Oakland, New Jersey, Varn has manufacturing facilities in Addison,
9
<PAGE> 10
IL; Houston, TX; Ontario, Canada; Manchester, England; Willich, Germany;
Johannesburg, South Africa; Melbourne, Australia; Kuala Lumpur, Malaysia and a
joint venture in Foshan, China.
The following summarizes the changes in stockholders' (deficit) equity for the
nine months ended September 30, 1999:
<TABLE>
<CAPTION>
(dollars in thousands)
FOREIGN
COMMON SHARES RETAINED CURRENCY
------------- CONTRA EARNINGS TRANSLATION
SHARES AMOUNT EQUITY (DEFICIT) ADJUSTMENT
------ ------ ------ --------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 23,298 $ 1 $(68,772) $(10,370) $ (1,142)
Net income 918
Preferred stock dividends (3,650)
Amortization of preferred
stock discount (126)
Foreign currency
translation adjustment - - - - (1,644)
-------- -------- -------- -------- --------
Balance at September 30, 1999 23,298 $ 1 $(68,772) $(13,228) $ (2,786)
======== ======== ======== ======== ========
</TABLE>
D. INVENTORIES
Inventories as of September 30, 1999 and December 31, 1998 consist of:
SEPTEMBER 30, DECEMBER 31,
1999 1998
---- ----
Finished Goods $12,596 $ 9,762
Work in Progress 5,810 5,220
Raw Materials 5,118 4,197
------- -------
$23,524 $19,179
======= =======
The acquisition of the Armstrong Textile Products Operations increased
inventories by approximately $4,500 as of September 30, 1999.
10
<PAGE> 11
E. BUSINESS SEGMENTS
The Company produces precision-engineered rubber products, specializing in the
design and customization of consumable image-transfer products for the graphic
arts (printing) industry and fiber handling products for the textile industry.
The Company's printing components division ("Image Transfer") designs,
manufactures and markets high-quality printing blankets and sleeves for use in
offset printing.
Segment performance is evaluated based on operating profit results compared to
the annual operating plan. Intersegment sales and transfers are not material.
The Company manages the two segments as separate strategic business units. They
are managed separately because each business unit requires different
manufacturing processes, technology and marketing strategies.
THREE MONTHS ENDED SEPTEMBER 30, 1999
-------------------------------------
IMAGE
TRANSFER TEXTILE TOTALS
-------- ------- ------
Third party sales $37,400 $7,169 $44,569
Operating profit 10,694 262 10,956
THREE MONTHS ENDED SEPTEMBER 30, 1998
-------------------------------------
IMAGE
TRANSFER TEXTILE TOTALS
-------- ------- ------
Third party sales $38,192 $8,282 $46,474
Operating profit 10,667 641 11,308
NINE MONTHS ENDED SEPTEMBER 30, 1999
------------------------------------
IMAGE
TRANSFER TEXTILE TOTALS
-------- ------- ------
Third party sales $108,731 $21,929 $130,660
Operating profit 29,265 1,012 30,277
NINE MONTHS ENDED SEPTEMBER 30, 1998
------------------------------------
IMAGE
TRANSFER TEXTILE TOTALS
-------- ------- ------
Third party sales $106,904 $25,621 $132,525
Operating profit 28,490 2,685 31,175
11
<PAGE> 12
The following is a reconciliation of the operating profit reported above to the
amount reported in the Consolidated Financial Statements:
THREE MONTHS ENDED
------------------
SEPTEMBER 30,
-------------
1999 1998
---- ----
Segment operating profit $ 10,956 $ 11,308
APB #16 depreciation and amortization (1,622) (1,022)
Non allocated corporate expenses (114) (172)
Amortization of intangibles (903) (641)
Management fees (276) (244)
-------- --------
Total operating profit $ 8,041 $ 9,229
======== ========
NINE MONTHS ENDED
-----------------
SEPTEMBER 30,
-------------
1999 1998
---- ----
Segment operating profit $ 30,277 $ 31,175
APB #16 depreciation and amortization (3,666) (3,066)
Non allocated corporate expenses (471) (335)
Compensation and related transaction costs (18,018)
Amortization of intangibles (2,714) (1,934)
Management fees (806) (722)
-------- --------
Total operating profit $ 22,620 $ 7,100
======== ========
F. CONTINGENCIES - Claims have been made against the Company for the costs of
environmental remedial measures taken or to be taken. Reserves for such
liabilities have been established and no insurance recoveries have been
anticipated in the determination of the reserves. In management's opinion, the
aforementioned claims will be resolved without material adverse effect on the
results of operations, financial position or cash flows of the Company. The
Company's previous parent and its parent, M.A. Hanna, have agreed to indemnify
the Company for certain of the costs associated with these matters.
12
<PAGE> 13
G. SUPPLEMENTAL CONSOLIDATING INFORMATION - The Company issued $100,000 of 11
1/8% Senior Notes in conjunction with the purchase of Day International, Inc.,
("Day") from M.A. Hanna and in March 1998, the Company issued $115,000 of 9
1/2% Senior Subordinated Notes in conjunction with the acquisition of the
Company by Greenwich (collectively, the "Notes"). As a result of the 1995
acquisition, Day International, Inc. ("Day International" or "Guarantor")
became a wholly-owned subsidiary of the Company (which has no assets or
operations other than its investment in Day International). Day has provided a
full and unconditional guarantee of the Notes. The wholly owned foreign
subsidiaries of Day International are not guarantors with respect to the Notes
and do not have any credit arrangements senior to the Notes. The only
intercompany eliminations are the normal intercompany eliminations with regard
to intercompany sales and the Company's investment in the wholly owned non
guarantor subsidiaries. In 1996, intercompany notes were put in place through a
dividend which effectively transfers the interest expense from Day
International Group, Inc. to Day International, Inc. The following are the
supplemental combined condensed balance sheets as of September 30, 1999 and
December 31, 1998 and the supplemental combined condensed statements of
operations and cash flows for the three and nine months ended September 30,
1999 and 1998 with the investments in the subsidiaries accounted for using the
equity method. Separate complete financial statements of the Guarantor are not
presented because management has determined that they are not material to the
investors.
13
<PAGE> 14
DAY INTERNATIONAL GROUP, INC.
SUPPLEMENTAL COMBINING CONDENSED BALANCE SHEET
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
DAY
DAY INTER-
INTER- NATIONAL NON
NATIONAL INC. GUARANTOR
GROUP, INC. (GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 1,014 $ (1,430) $ 796 $ 380
Accounts receivable -- net 12,638 13,547 26,185
Inventories 13,461 10,063 23,524
Other assets 2,717 1,177 3,894
--------- --------- --------- --------- ---------
TOTAL CURRENT ASSETS 1,014 27,386 25,583 -- 53,983
Intercompany 261,143 -- $(261,143) --
Property, plant and equipment -- net 40,385 13,488 53,873
Investment in subsidiaries (51,454) 32,698 18,755 --
Intangible and other assets 136,967 18,758 155,725
--------- --------- --------- --------- ---------
TOTAL ASSETS $ 210,703 $ 237,437 $ 57,829 $(242,388) $ 263,581
========= ========= ========= ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable $ 3,282 $ 3,830 $ (1,152) $ 5,960
Current maturities of long-term debt $ 1,292 1,292
Accrued associate-related costs and
other expenses 4,438 8,840 6,850 20,128
--------- --------- --------- --------- ---------
TOTAL CURRENT LIABILITIES 5,730 12,122 10,680 (1,152) 27,380
Intercompany (13,279) 262,341 14,056 (263,118) --
Long-term and subordinated long-term
debt 259,851 259,851
Other long-term liabilities 13,936 6,798 20,734
Exchangeable preferred stock 40,402 40,402
Total stockholders' equity (deficit) (82,001) (50,962) 26,295 21,882 (84,786)
--------- --------- --------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 210,703 $ 237,437 $ 57,829 $(242,388) $ 263,581
========= ========= ========= ========= =========
</TABLE>
14
<PAGE> 15
DAY INTERNATIONAL GROUP, INC.
SUPPLEMENTAL COMBINING CONDENSED BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
DAY
DAY INTER-
INTER- NATIONAL NON
NATIONAL INC. GUARANTOR
GROUP, INC. (GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 3,256 $ (955) $ 2,461 $ 4,762
Accounts receivable -- net 10,147 8,483 18,630
Inventories 11,450 7,729 19,179
Other assets 2,527 1,283 3,810
--------- --------- --------- --------- ---------
TOTAL CURRENT ASSETS 3,256 23,169 19,956 -- 46,381
Intercompany 253,367 -- $(253,367) --
Property, plant and equipment -- net 36,812 13,493 50,305
Investment in subsidiaries (52,370) 28,561 23,809 --
Intangible and other assets 142,819 17,903 160,722
--------- --------- --------- --------- ---------
TOTAL ASSETS $ 204,253 $ 231,361 $ 51,352 $(229,558) $ 257,408
========= ========= ========= ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable $ 2,702 $ 3,337 $ (134) $ 5,905
Current maturities of long-term debt $ 1,292 1,292
Accrued associate-related costs and
other expenses 4,336 9,261 6,881 20,478
--------- --------- --------- --------- ---------
TOTAL CURRENT LIABILITIES 5,628 11,963 10,218 (134) 27,675
Intercompany (15,082) 255,984 12,331 (253,233) --
Long-term and subordinated long-term
debt 256,223 256,223
Other long-term liabilities 14,187 2,979 17,166
Exchangeable preferred stock 36,627 36,627
Total stockholders' equity (deficit) (79,143) (50,773) 25,824 23,809 (80,283)
--------- --------- --------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 204,253 $ 231,361 $ 51,352 $(229,558) $ 257,408
========= ========= ========= ========= =========
</TABLE>
15
<PAGE> 16
DAY INTERNATIONAL GROUP, INC.
SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
DAY
DAY INTER-
INTER- NATIONAL NON
NATIONAL INC. GUARANTOR
GROUP, INC. (GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 31,739 $ 12,830 $ -- $ 44,569
Cost of goods sold 18,892 9,050 27,942
-------- -------- -------- -------- --------
Gross profit -- 12,847 3,780 -- 16,627
Selling, general and administrative 1 5,145 2,261 7,407
Amortization of intangibles 822 81 903
Management fees 276 276
-------- -------- -------- -------- --------
Operating income (1) 6,604 1,438 -- 8,041
Other expenses (income):
Equity in (earnings) loss of subsidiaries (625) (762) 1,387 --
Interest expense 6,863 6,863
Other (income) expense (9) (33) 111 69
-------- -------- -------- -------- --------
Income (before income taxes 633 536 1,327 (1,387) 1,109
Income taxes (benefit) 4 (89) 565 480
-------- -------- -------- -------- --------
Net income $ 629 $ 625 $ 762 $ (1,387) $ 629
======== ======== ======== ======== ========
</TABLE>
16
<PAGE> 17
DAY INTERNATIONAL GROUP, INC.
SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
DAY
DAY INTER-
INTER- NATIONAL NON
NATIONAL INC. GUARANTOR
GROUP, INC. (GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 36,527 $ 9,939 $ $ 46,466
Cost of goods sold 21,851 7,355 29,206
-------- -------- -------- -------- --------
Gross profit -- 14,676 2,584 -- 17,260
Selling, general and administrative 18 5,233 1,895 7,146
Amortization of intangibles 629 12 641
Management fees 244 244
-------- -------- -------- -------- --------
Operating income (18) 8,570 677 -- 9,229
Other expenses (income):
Equity in loss (earnings) of subsidiaries (1,362) (273) 1,635 --
Interest expense 6,743 6,743
Other (income) expense (5) 42 179 216
-------- -------- -------- -------- --------
Income (loss) before income taxes 1,349 2,058 498 (1,635) 2,270
Income taxes (benefit) (5) 696 225 916
-------- -------- -------- -------- --------
Net income (loss) $ 1,354 $ 1,362 $ 273 $ (1,635) $ 1,354
======== ======== ======== ======== ========
</TABLE>
17
<PAGE> 18
DAY INTERNATIONAL GROUP, INC.
SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
DAY
DAY INTER-
INTER- NATIONAL NON
NATIONAL INC. GUARANTOR
GROUP, INC. (GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 92,417 $ 38,243 $ -- $130,660
Cost of goods sold 55,256 26,474 81,730
-------- -------- -------- -------- --------
Gross profit -- 37,161 11,769 -- 48,930
Selling, general and administrative 12 15,811 6,967 22,790
Amortization of intangibles 2,468 246 2,714
Management fees 806 806
-------- -------- -------- -------- --------
Operating income (12) 18,076 4,556 -- 22,620
Other expenses (income):
Equity in (earnings) loss of subsidiaries (917) (2,482) 3,399 --
Interest expense 20,608 20,608
Other (income) expense (14) 35 316 337
-------- -------- -------- -------- --------
Income (loss) before income taxes 919 (85) 4,240 (3,399) 1,675
Income taxes (benefit) 1 (1,002) 1,758 757
-------- -------- -------- -------- --------
Net income (loss) $ 918 $ 917 $ 2,482 $ (3,399) $ 918
======== ======== ======== ======== ========
</TABLE>
18
<PAGE> 19
DAY INTERNATIONAL GROUP, INC.
SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
DAY
DAY INTER-
INTER- NATIONAL NON
NATIONAL INC. GUARANTOR
GROUP, INC. (GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 100,627 $ 31,889 $ $ 132,516
Cost of goods sold 60,831 22,216 83,047
--------- --------- --------- --------- ---------
Gross profit -- 39,796 9,673 -- 49,469
Selling, general and administrative 47 15,863 5,785 21,695
Compensation and related transaction costs 18,018 18,018
Amortization of intangibles 1,900 34 1,934
Management fees 722 722
--------- --------- --------- --------- ---------
Operating income (47) 3,293 3,854 -- 7,100
Other expenses (income):
Equity in loss (earnings) of subsidiaries 10,162 (2,217) (7,945) --
Interest expense 2,797 17,917 20,714
Other (income) expense (39) 39 396 396
--------- --------- --------- --------- ---------
Income (loss) before income taxes
and extraordinary items (12,967) (12,446) 3,458 7,945 (14,010)
Income taxes (benefit) (1,041) (2,712) 1,241 (2,512)
--------- --------- --------- --------- ---------
Income (loss) before
extraordinary items (11,926) (9,734) 2,217 7,945 (11,498)
Extraordinary losses on early
extinguishment of debt 3,124 428 -- -- 3,552
--------- --------- --------- --------- ---------
Net income (loss) $ (15,050) $ (10,162) $ 2,217 $ 7,945 $ (15,050)
========= ========= ========= ========= =========
</TABLE>
19
<PAGE> 20
DAY INTERNATIONAL GROUP, INC.
SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
DAY
DAY INTER-
INTER- NATIONAL NON
NATIONAL INC. GUARANTOR
GROUP, INC. (GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating Activities:
Net income $ 918 $ 917 $ 2,482 $ (3,399) $ 918
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 10,062 1,669 11,731
Equity in (earnings) loss of subsidiaries (917) (2,482) 3,399 --
Deferred income taxes and other (959) (959)
Changes in operating assets and liabilities 102 (1,638) (2,372) (832) (4,740)
-------- -------- -------- -------- --------
Net cash provided by (used in)
operating activities 103 5,900 1,779 (832) 6,950
Investing activities:
Capital expenditures (2,604) (1,677) (4,281)
Cash paid for acquisition (10,464) -- -- (10,464)
-------- -------- -------- -------- --------
Net cash used in investing activities (10,464) (2,604) (1,677) -- (14,745)
Financing Activities:
Payments on term loans (969) (969)
Net borrowings on credit facilities 4,590 4,590
-------- -------- -------- -------- --------
Net cash provided by financing activities 3,621 -- -- -- 3,621
Intercompany transfers and dividends 4,498 (3,771) (1,559) 832 --
Effects of exchange rates on cash (208) (208)
-------- -------- -------- -------- --------
Cash and Cash Equivalents:
Net increase (decrease) in cash and
cash equivalents (2,242) (475) (1,665) -- (4,382)
Cash and cash equivalents at beginning of period 3,256 (955) 2,461 4,762
-------- -------- -------- -------- --------
Cash and cash equivalents at end of period $ 1,014 $ (1,430) $ 796 $ -- $ 380
======== ======== ======== ======== ========
</TABLE>
20
<PAGE> 21
DAY INTERNATIONAL GROUP, INC.
SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
DAY DAY INTER-
INTER- NATIONAL NON
NATIONAL INC. GUARANTOR
GROUP, INC. (GUARANTOR) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating Activities:
Net income (loss) $ (15,050) $ (10,162) $ 2,217 $ 7,945 $ (15,050)
Adjustments to reconcile net
income (loss)to net cash provided by
(used in) operating activities:
Extraordinary loss on early
extinguishment of debt 3,124 428 3,552
Depreciation and amortization 8,568 1,186 9,754
Non-cash charge related to stock
option awards 8,585 8,585
Equity in (earnings) loss of subsidiaries 10,162 (2,217) (7,945) --
Deferred income taxes and other (3,765) (3,765)
Changes in operating assets and liabilities 3,214 (4,683) 479 (206) (1,196)
--------- --------- --------- --------- ---------
Net cash provided by (used in)
operating activities 1,450 (3,246) 3,882 (206) 1,880
Investing activities:
Capital expenditures (3,486) (1,897) (5,383)
--------- --------- --------- --------- ---------
Net cash used in investing activities -- (3,486) (1,897) -- (5,383)
Financing Activities:
Proceeds from issuance of 2008 Notes 111,134 111,134
Proceeds from issuance of exchangeable
preferred stock 32,986 32,986
Proceeds from issuance of common stock 230 230
Proceeds from issuance of term loans 40,000 40,000
Contributions from shareholders 4,573 4,573
Repayment of existing credit facility (30,000) (902) (30,902)
Repayment of bridge loan (140,000) (140,000)
Payment of consent fee (6,500) (6,500)
Payment of deferred financing fees (2,742) (2,742)
Payments on the term loan (6,000) (6,000)
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities 3,681 -- (902) -- 2,779
Intercompany transfers and dividends (5,286) 6,225 (1,145) 206 --
Effects of exchange rates on cash 546 546
--------- --------- --------- --------- ---------
Cash and Cash Equivalents:
Net increase (decrease) in cash and
cash equivalents (155) (507) 484 -- (178)
Cash and cash equivalents at beginning of period 596 (320) 504 780
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period $ 441 $ (827) $ 988 $ -- $ 602
========= ========= ========= ========= =========
</TABLE>
21
<PAGE> 22
H. RECENTLY ISSUED ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and for Hedging Activities." Under the Statement, every derivative is recorded
in the balance sheet as either an asset or liability measured at its fair value.
Changes in the derivatives fair value will be recognized currently in earnings
unless specific hedge criteria are met.
Day will be required to adopt this standard for its fiscal 2001 financial
statements. Based on current hedging activities, Day does not anticipate this
standard to have a material effect on its financial statements.
22
<PAGE> 23
DAY INTERNATIONAL GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BASIS OF PRESENTATION
The following table sets forth, for the periods shown, net sales, cost of goods
sold, gross profit, selling, general and administrative expense ("SG&A"),
amortization of intangibles and operating income in millions of dollars and as a
percentage of net sales.
<TABLE>
<CAPTION>
Three Months Nine Months
------------ -----------
Ended September 30 Ended September 30
------------------ ------------------
1999 1998 1999 1998
---- ---- ---- ----
$ % $ % $ % $ %
---- ----- ---- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ................. 44.6 100.0 46.5 100.0 130.7 100.0 132.5 100.0
Costs of goods sold ....... 27.9 62.6 29.2 62.8 81.7 62.5 83.0 62.6
Gross profit .............. 16.6 37.4 17.3 37.2 48.9 37.5 49.5 37.4
SG&A ...................... 7.4 16.6 7.1 15.3 22.8 17.4 21.7 16.4
Compensation and related
transaction costs .... - - - - - - 18.0 13.6
Amortization of intangibles 0.9 2.0 0.6 1.3 2.7 2.1 1.9 1.4
Management Fees ........... 0.3 0.7 0.2 0.4 0.8 0.6 0.7 0.5
Operating income .......... 8.0 17.9 9.2 19.8 22.6 17.3 7.1 5.4
</TABLE>
COMPARISON OF RESULTS OF OPERATIONS
Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998
Net sales decreased to $44.6 million for the three months ended September 30,
1999 from $46.5 million for the comparable period in 1998, a decrease of $1.9
million or 4.1%. Sales volumes decreased by $1.5 million or 3.2% combined with
the effect of foreign currency translation of $0.4 million or 0.9%. Image
Transfer's sales decreased to $37.4 million for the three months ended September
30, 1999 from $38.2 million for the comparable period in 1998, an decrease of
$0.8 million or 2.1%. The acquisition of Rotec Hulsensysteme GmbH ("Rotec") at
the end of 1998 contributed $3.0 million to Image Transfer's net sales in the
three months ended September 30, 1999. Excluding sales contributed by Rotec,
Image Transfer sales decreased $3.8 million or 9.9% from the comparable period
in 1998. The decrease is mainly a result of lower domestic US sales combined
with lower US export sales to Japan and Latin America compared to the same
period a year ago. Sales in Europe were flat compared to a year ago while Mexico
is ahead of the same period a year ago. Foreign currency translation reduced
Image Transfer's revenue by $0.3 million or 0.8%. Textiles' sales were $7.2
million for the three months ended September 30, 1999 compared to $8.3 million
for the comparable period in 1998, a decrease of $1.1 million or 13.3%. Textile
sales decreased across all markets. The decline in Europe was a result of a
significant decline in
23
<PAGE> 24
sales to original equipment manufacturers ("OEM's"). The decline in sales to
OEM's is a result of the reduced buying power of the yarn spinners in the
Pacific Rim markets related to their currency devaluation's coupled with delays
in purchasing of new equipment by the major yarn manufacturers due to an overall
slow down in the world-wide yarn spinning industry that began in the second half
of 1998 and continued in the first nine months of 1999. Domestic sales were
lower as increased imports of low cost Asian yarns adversely impacted domestic
yarn producers. At the same time, domestic mills were faced with higher than
normal inventories causing several yarn spinning mills to be closed in the
second half of 1998 and the first nine months of 1999. Export sales to Asian
markets were adversely impacted by the currency devaluation's which occurred in
1998 making the Day products more expensive. Sales to carpet and fiber glass
manufacturers remained strong. Foreign currency translation had no material
impact on Textile's sales this quarter.
Gross profit decreased $0.7 million to $16.6 million for the three months ended
September 30, 1999 from $17.3 million for the three months ended September 30,
1998. As a percentage of net sales, gross profit increased to 37.4% for the
three months ended September 30, 1999 from 37.2% for the comparable period in
1998. Foreign currency translation reduced gross profit $0.1 million. Changes in
market mix along with slightly higher yields from production were the major
contributors to the improved gross margins.
SG&A increased to $7.4 million for the three months ended September 30, 1999
from $7.1 million for the comparable period in 1998, an increase of $0.3 million
or 4.2%. In the quarter ended September 30, 1999, foreign currency translation
caused SG&A to decrease by $0.1 million. As a percentage of net sales, SG&A
increased to 16.6% for the third quarter of 1999 compared to 15.3% for the third
quarter of 1998. Rotec accounted for $0.5 of this increase.
Amortization of intangibles increased to $0.9 million for the three months ended
September 30, 1999 from $0.6 million for the comparable period in 1998, an
increase of $0.3 million. The increase is a result of the amortization of the
goodwill in conjunction with the Rotec acquisition.
Operating income was $8.0 million for the three months ended September 30, 1999
compared to $9.2 million for the same period in 1998. As a percentage of net
sales, operating income decreased to 17.9% for the three months ended September
30, 1999 from 19.8% for the comparable period in 1998.
The effective tax rate for the third quarter of 1999 was 43.3% compared to 40.4%
for the third quarter of 1998. The lower effective tax rate in 1998 was mainly a
result of changes in the locations where European profits were generated with
more of the profits being generated in markets with lower tax rates in 1998.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30,
1998
Net sales were $130.7 million for the nine months ended September 30, 1999
compared to $132.5 for the same period in 1998, a decrease of $1.8 million or
1.4%. Sales volumes for the nine months ended September 30, 1999, were $1.0
million or 0.8% lower than the same period in 1998. Foreign currency
24
<PAGE> 25
translation reduced sales by $0.8 million for the nine months ended September
30, 1999 compared to the same period a year ago. Image Transfer's sales
increased to $108.7 million for the nine months ended September 30, 1999 from
$106.9 million for the comparable period in 1998, an increase of $1.8 million or
1.7%. The acquisition of Rotec Hulsensysteme GmbH ("Rotec") at the end of 1998
contributed $8.2 million to Image Transfer's net sales in the nine months ended
September 30, 1999. Excluding sales contributed by Rotec, Image Transfer sales
decreased $6.4 million or 6.0% from the comparable period in 1998. The decrease
is mainly a result of lower US domestic and export sales to Japan and Latin
America compared to the same period a year ago combined with lower sales in the
UK. Foreign currency translation reduced Image Transfer's revenue by $0.6
million or 0.6%. Textiles' sales were $21.9 million for the nine months ended
September 30, 1999 compared to $25.6 million for the comparable period in 1998;
a decrease of $3.7 million or 14.5%. Foreign currency translation accounted for
$0.2 million of the decrease. Textile sales decreased across all markets. The
decline in Europe was a result of a significant decline in sales to original
equipment manufacturers ("OEM's"). The decline in sales to OEM's is a result of
the reduced buying power of the yarn spinners in the Pacific Rim markets related
to their currency devaluation's coupled with delays in purchasing of new
equipment by the major yarn manufacturers due to an overall slow down in the
world-wide yarn spinning industry that began in the second half of 1998 and
continued in the first nine months of 1999. Domestic sales were lower as
increased imports of low cost Asian yarns adversely impacted domestic yarn
producers. At the same time, domestic mills were faced with higher than normal
inventories causing several yarn spinning mills to be closed in the second half
of 1998 and the first nine months of 1999. Export sales to Asian markets were
adversely impacted by the currency devaluation's which occurred in 1998 making
the Day products more expensive. Sales to carpet and fiber glass manufacturers
remained strong.
Gross profit for the nine months ended September 30, 1999 was $48.9 million
compared to $49.5 million for the nine months ended September 30, 1998, a
decrease of $0.6 million or 1.2%. As a percentage of net sales, gross profit
also remained virtually constant at 37.5% for the nine months ended September
30, 1999 compared to 37.4% for the same period of 1998. Gross profit decreased
$0.1 million as a result of foreign currency translation.
SG&A increased to $22.8 million for the nine months ended September 30, 1999
from $21.7 million for the comparable period in 1998, an increase of $1.1
million or 5.1%. The acquisition of Rotec on December 31, 1998 accounted for
$1.4 million of this increase. The increase in SG&A as a percent of sales is a
result of the fixed component of SG&A supporting the decreased sales volumes.
For the nine months ended September 30, 1999, foreign currency translation
decreased SG&A by $0.1 million. As a percentage of net sales, SG&A increased to
17.4% from 16.4%.
Amortization of intangibles increased to $2.7 million for the nine months ended
September 30, 1999 from $1.9 million for the comparable period in 1998, an
increase of $0.8 million. The increase is a result of the amortization of the
goodwill in conjunction with the Rotec acquisition.
In 1998, compensation and related acquisition costs include $8.6 million as a
result of changes in the Company's stock option plan, $8.4 million related to
amounts payable under certain management employment agreements and $1.0 million
of expenses associated with obtaining the Consent. All of
25
<PAGE> 26
these items arose out of the Acquisition and related transactions.
Operating income decreased to $22.6 million for the nine months ended September
30, 1999 from $25.1 million, excluding the compensation and related acquisition
costs, for the comparable period in 1998, a decrease of $2.5 million or 10.0%.
As a percentage of net sales (excluding the compensation and related acquisition
costs), operating income decreased to 17.3% for the nine months ended September
30, 1999 from 18.9% for the comparable period in 1998.
The effective tax rate for the first nine months of 1999 was an expense of 45.3%
compared to a benefit of 24.5% for the first nine months of 1998, including the
effect of the extraordinary item. The higher income tax percentage in 1999
compared to 1998 is mainly a result of the establishment of a deferred tax
valuation allowance in 1998 and more profits generated in markets with lower
rates in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically generated funds from its operations and its working
capital requirements have not exhibited seasonal fluctuations. Utilizing
converters to distribute the majority of its products, the Company is able to
maintain relatively minimal levels of working capital as the converters carry
the majority of inventory and maintain the receivables of the end users.
Cash Flows From Operating Activities. Cash flows provided by operations for the
nine months ended September 30, 1999 were $6.9 million compared to $1.9 million
for the nine months ended September 30, 1998. For the nine months ended
September 30, 1999, cash flows from operations were adversely impacted by a $4.5
million increase in working capital requirements. Cash flows from operations in
1998 were impacted by $9.5 million of compensation and related transaction costs
associated with the Acquisition.
Cash Flows From Investing Activities. The Company's expenditures for property,
plant and equipment were $7.1 million, $5.1 million and $5.2 million for 1998,
1997 and 1996, respectively. The Company believes that capital expenditures of
$9.0 million to $11.0 million over the next several years (inclusive of the
Rotec, Armstrong TPO and Varn businesses) will be sufficient to maintain its
market position. The Company expects to fund these capital expenditures from
cash flow from operations. Capital expenditures were $4.3 million and $5.4
million for the nine months ended September 30, 1999 and 1998, respectively.
Effective September 30, 1999, the Company acquired the Textile Products
Operations of Armstrong World Industries, Inc. The acquisition was financed
through the Revolving Credit Line of the Senior Secured Credit Facility along
with a portion of the proceeds from the Convertible Preferred Stock. The
acquisition has been accounted for as a purchase in accordance with Accounting
Principles Board Opinion No. 16. in the September 30, 1999 balance sheet.
26
<PAGE> 27
Cash Flows From Financing Activities. In the first nine months of 1999,
excluding the acquisition of the Textile Products Operations of Armstrong World
Industries, Inc., the Company repaid $5.9 million on its revolving line of
credit and $1.0 million on its term loans.
On October 19, 1999 the Company completed its acquisition of the stock of
privately-held Varn International for $59.3 million in cash, plus expenses. The
purchase price is subject to certain adjustments for changes in working capital
and future revenue growth.
The acquisition was financed through the private placement of $38.5 million of
18% convertible cumulative preferred stock and by amending and restating the
existing $60 million Senior Secured Credit Facility ($40 million term and $20
million revolver). The Amended and Restated Senior Secured Credit Facility
provides for a $70 million Term Loan and a $20 million Revolving Credit
Facility. The Revolving Credit Facility includes a $10 million letter of credit
subfacility ($530 of letters of credit were outstanding at October 18, 1999) and
a $1 million swingline loan subfacility. The amounts available under the
Revolving Credit Facility are subject to a borrowing base limitation (defined
generally as $5 million plus 50% of eligible domestic inventory and 80% of
eligible domestic accounts receivable). At October 18, 1999, $19.5 million was
available under the Senior Secured Credit Facility (calculated by applying the
applicable borrowing base limitation). The Senior Secured Credit Facility
requires a commitment fee of 1/2% a year on the unused portion of the revolving
line of credit. Interest on the term loan is based on the banks' base rate plus
1.75% or the LIBOR rate plus 2.75%. Interest rates on LIBOR borrowings are fixed
for one, two, three or six month periods at the Company's discretion.
The term loans mature in 21 consecutive quarterly installments, commencing on
March 31, 2000. Principal payments are to be made in the following amounts:
installments 1-4, $1.9 million per installment; installments 5-8, $2.5 million
per installment; installments 9-20, $3.7 million per installment; and
installment 21, $7.5 million.
In January 1998, the Company entered into a $60 million Senior Secured Credit
Facility, concurrent with the Acquisition. The facility consisted of a $40
million Term Loan and a $20 million Revolving Credit Facility. During the nine
months ended September 30, 1998, the Company made $6.0 million in payments on
the Term Loan. The proceeds from the Term Loan were used to repay the Company's
then existing US Credit Facility and to pay certain of the expenses associated
with the Acquisition.
Also, during the nine months ended September 30, 1998, the Company paid the
holders of the existing 2005 Notes a $6.5 million Consent Fee so as to permit
the Company to issue $115.0 million of 9 1/2% Senior Subordinated Notes due in
2008 (the "2008 Notes") and $35.0 million of 12 1/4% Exchangeable Preferred
Stock (the "Exchangeable Preferred Stock"). The Consent Agreement also allowed
the Company to assume the $140.0 million Bridge Loan (the "Bridge Loan") of its
new majority shareholder. The proceeds from the issuance of the 2008 Notes and
the Exchangeable Preferred Stock were used to repay the Bridge Loan and to pay
other financing fees and expenses. The Company also received a capital
contribution of $9.1 million from its majority shareholder in the nine months
ended September 30, 1998 which was used to pay certain financing fees and
expenses.
27
<PAGE> 28
As a result of the additional debt incurred by the Company in conjunction with
the Acquisition and subsequent events, the Company is highly leveraged. The
Company's aggregate indebtedness is approximately $261.1 million and the
aggregate liquidation preference of the Exchangeable Preferred Stock is $42.2
million.
The level of the Company's indebtedness could have important consequences
including: (i) a substantial portion of the Company's cash flow from operations
must be dedicated to debt service and will not be available for other purposes;
(ii) the Company's ability to obtain additional debt financing in the future for
working capital, capital expenditures, research and development or acquisitions
may be limited; (iii) the Company's level of indebtedness could limit its
flexibility in reacting to changes in its industries and economic conditions
generally.
The Company's ability to pay principal and interest on the Notes and dividends
on the Exchangeable Preferred Stock and to satisfy its other debt obligations,
including its debt obligations under the 2005 Notes, will depend upon its future
operating performance, which will be affected by prevailing economic conditions
and financial, business and other factors, certain of which are beyond its
control, as well as the availability of revolving credit borrowings under the
Revolving Credit Facility (which is subject to borrowing base limitations) or a
successor facility. The Company anticipates that its operating cash flow,
together with borrowings under the Revolving Credit Facility, will be sufficient
to meet its operating expenses and capital expenditures and to service its debt
requirements as they become due. However, there can be no assurance that the
Company's cash flow, availability under the Revolving Credit Facility and other
capital resources will be sufficient for payment of principal and interest on
its indebtedness, including the Senior Secured Credit Facility, the 2005 Notes
and the 2008 Notes, for the payment of periodic cash dividends on the
Exchangeable Preferred Stock, for any redemption of the Exchangeable Preferred
Stock for cash, or if the exchange debentures (the "Exchange Debentures") have
been issued in exchange for the Exchangeable Preferred Stock, the payment of
principal or cash interest on the Exchange Debentures. If the Company's cash
flow, availability under the Revolving Credit Facility and other capital
resources are insufficient to fund the Company's debt service obligations, the
Company may be forced to reduce or delay capital expenditures, to sell assets,
to restructure or refinance its indebtedness, or to seek additional equity
capital. There can be no assurance that any of such measures could be
implemented on satisfactory terms, or if implemented, would be successful or
would permit the Company to meet its debt service obligations.
Year 2000. The Year 2000 issue relates to the inability of information systems
to recognize and process date-sensitive information beyond January 1, 2000.
The Company recognizes the importance of the Year 2000 issue and now believes it
is substantially complete in its efforts to identify and rectify all potential
Year 2000 problems related to its Information Technology ("IT") systems,
manufacturing equipment, vendors and customers.
A Year 2000 committee has been established consisting of senior members of
management along with members of the IT and the facilities' engineering
departments. The committee's objective is to ensure that the Company will be
able to continue to service its customers, both internal and external, after
28
<PAGE> 29
January 1, 2000. The scope of the Year 2000 project includes (i) information
technology, both hardware and software; (ii) non-IT systems or embedded
technology such as micro controllers contained in various manufacturing and lab
equipment, environmental and safety systems, facilities and utilities; and (iii)
readiness of key third parties, including suppliers and customers and electronic
data interchange, where applicable, with those key third parties. If the
necessary modifications and conversions are not made on a timely basis, the Year
2000 issue could have a material impact on the Company's operations.
The Company is using internal resources, and where necessary, external resources
to perform most of the testing and remediation functions. Upgrades to the
Company's business system were completed and tested by the end of July 1999. A
complete inventory of all equipment (manufacturing and otherwise) has been
completed and communication with the manufacturers of the equipment has
commenced to determine whether the equipment is Year 2000 compliant. Letters
have been sent to all significant vendors and customers requesting them to
confirm the status of their Year 2000 projects. Responses have been received
from a majority of the vendors and customers and follow-up efforts are in
process with those who have not yet responded.
The Company's historical and estimated costs of remediation of all potential
Year 2000 problems have not been and are not anticipated to be material to the
Company's results of operations or financial position, and will be funded
through operating cash flows. Total costs associated with the remediation of the
Year 2000 issues (including systems, software, and non-IT systems replaced as a
result of Year 2000 issues) are currently estimated to be less than $1 million.
The largest cost factor to date has been the expenditure of management and
associates' time in attention to Year 2000 and related issues. Estimated
remediation costs are based on management's best estimates. There can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those anticipated, particularly if unanticipated Year 2000
issues arise.
While the Company expects to make the necessary modifications or changes to both
its internal IT and non-IT systems and existing product base in a timely
fashion, there can be no assurance that the Company's internal systems will not
be materially adversely affected by the advent of Year 2000.
In the event of a failure as a result of Year 2000 issues, the Company could
lose or have trouble accessing accurate internal data, resulting in incomplete
or inaccurate accounting of Company financial results, the Company's
manufacturing operating systems could be impaired, and the Company could be
required to expend significant resources to address such failures. In an effort
intended to minimize potential disruption to its internal systems, the Company
intends to perform additional hard-disk back-up of its rudimentary systems and
critical information in advance of the Year 2000.
Similarly, in the event of a failure as a result of Year 2000 issues in any
systems of third parties with whom the Company interacts, the Company could lose
or have trouble accessing or receive inaccurate third party data, experience
internal and external communications difficulties or have difficulty obtaining
components that are Year 2000 compliant from its vendors. The Company could also
experience a slowdown or reduction of sales if Year 2000 issues adversely affect
customers. In an effort
29
<PAGE> 30
to mitigate the potential impact of any failures, the Company has developed and
documented contingency plans for each critical area of the business.
Euro. The Company began accepting orders in the Euro and making payments in the
Euro effective January 1, 1999. Business system upgrades that allow for
transactions in the Euro are installed at the Company's European facilities.
Customers and suppliers have been contacted indicating the Company's ability to
transact business in the Euro on January 1, 1999 and price lists have been
modified accordingly. The Company does not anticipate any material impact to its
revenues, expenses or results of operations as a result of the adoption of the
Euro.
30
<PAGE> 31
DAY INTERNATIONAL GROUP, INC.
Part II: Other Information
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds - None
Item 6. Exhibits and Reports on Form 8-K
a. Reports on Form 8-K - During the quarter ended September 30, 1999, no
reports on Form 8-K were filed. On October 28, 1999 a report on Form
8-K was filed related to the Acquisition or Disposition of Assets for
the acquisition of Varn International.
b. Exhibits
2.1 Purchase Agreement between Armstrong World Industries, Inc. and
Armstrong World Industries GmbH, as Sellers and Day International,
Inc., as Buyer (portions omitted pursuant to a request for
confidential treatment)
27 Financial Data Schedule
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, each of the
Registrants has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Day International Group, Inc.
-----------------------------
(Registrant)
Date: November 15, 1999 /s/ Thomas J. Koenig
----------------- --------------------
Thomas J. Koenig
Vice President and
Chief Financial Officer
31
<PAGE> 32
This copy of the Purchase Agreement by and among Day International, Inc.,
Armstrong World Industries, Inc. and Armstrong World Industries GmbH does not
include the exhibits and schedules to such Agreement because these attachments
do not contain information which is material to an investment decision. These
attachments consist of various ancillary agreements relating to the Purchase
Agreement, including a Service Agreement and a Lease Agreement with respect to
the acquired businesses' operations in Germany, and the disclosure schedules
qualifying the sellers' representations and warranties in the Purchase
Agreement. A list of all of these attachments appears in the Table of Contents
of the filed copy of the Purchase Agreement. We agree to furnish a copy of any
such omitted attached supplementally to the Commission upon the Commission's
request.
<PAGE> 1
EXHIBIT 2.1
PURCHASE AGREEMENT
among
ARMSTRONG WORLD INDUSTRIES, INC.
and
ARMSTRONG WORLD INDUSTRIES GmbH,
as Sellers,
and
DAY INTERNATIONAL, INC.,
as Buyer
Dated as of July 29, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Certain Definitions.............................................................1
2. Purchase of Assets and Assumption of Liabilities
and Purchase of ATPG Share....................................................6
2.1 Purchase of Assets.....................................................6
(a) Greenville, South Carolina....................................7
(b) Other Assets..................................................7
2.2 Excluded Assets........................................................9
(a) Cash..........................................................9
(b) Bank Accounts.................................................9
(c) Intercompany Accounts.........................................9
(d) Certain Names.................................................9
(e) Hong Kong, Shanghai and Indonesia Assets......................9
(f) Occupancy Rights..............................................9
(g) Joint Ventures................................................9
(h) Insurance.....................................................9
(i) Employee Benefit Plans........................................9
(j) Intercompany Agreements.......................................9
(k) Certain Excluded Assets.......................................9
(l) Other Matters................................................10
(m) Munster Assets...............................................10
(n) ATPG Share...................................................10
(o) Certain Inventory Located In Mexico..........................10
2.3 Assumed Liabilities...................................................10
(a) Obligations Under Contracts..................................10
(b) Trade Payables...............................................10
2.4 Liabilities Not Assumed...............................................10
2.5 Proration of Taxes....................................................11
2.6 ATPG Share............................................................11
2.7 Nonassignable Contracts...............................................11
2.8 Collection of Receivables.............................................11
{OMITTED TEXT}*
2.10 Other Action..........................................................14
{OMITTED TEXT}*
</TABLE>
*The omitted text has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
{OMITTED TEXT}*
{OMITTED TEXT}*
4. Closing, Cash Payment; Purchase Price Adjustment...............................15
4.1 Closing...............................................................15
4.2 Cash Payment..........................................................15
4.3 Other Actions.........................................................15
4.4 Total Purchase Price Adjustment.......................................16
5. Representations and Warranties of Sellers......................................18
5.1 Organization, Power, Standing and Qualification.......................18
5.2 Due Authorization.....................................................19
5.3 Freedom to Contract...................................................19
5.4 Material Contracts....................................................19
5.5 Financial Information; Absence of Changes; Absence
of Undisclosed Liabilities..........................................21
(a) Financial Statements.........................................21
(b) Absence of Changes...........................................22
(c) Absence of Undisclosed Liabilities...........................23
(d) AWIG Pension Promise to Pay..................................23
5.6 Title to Property.....................................................23
5.7 Additional Information................................................24
5.8 Transactions with Affiliates..........................................24
5.9 Litigation............................................................25
5.10 Compliance with Law...................................................25
5.11 Environmental Matters.................................................25
5.12 Brokers...............................................................26
5.13 Intellectual Property.................................................26
5.14 Employees, Labor Matters, etc.........................................27
5.15 Employee Benefit Plans and Related Matters: ERISA.....................27
(a) Employee Benefit Plans.......................................27
(b) Qualification................................................27
(c) Compliance; Liability........................................27
5.16 Taxes.................................................................28
5.17 Customers and Suppliers...............................................29
</TABLE>
*The omitted text has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.
-ii-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
5.18 Assets................................................................30
5.19 Disclaimer of Sellers.................................................30
5.20 Capital Stock.........................................................30
5.21 ATPG Business, Subsidiaries, Permanent Establishments.................30
5.22 ATPG Restructuring....................................................31
6. Representations and Warranties of Buyer........................................31
6.1 Organization, Power and Standing......................................31
6.2 Authorization.........................................................31
6.3 Freedom to Contract...................................................31
6.4 Litigation............................................................32
6.5 Brokers...............................................................32
6.6 Certain Employment Arrangements.......................................32
6.7 Financial Information of Dundee and ROTEC; Absence of
Undisclosed Liabilities of Dundee and ROTEC...........................32
(a) Financial Statements.........................................32
(b) Absence of Undisclosed Liabilities of Dundee and ROTEC.......32
7. Certain Covenants..............................................................33
7.1 Transactions and Conduct of Business Pending the Closing..............33
(a) Examinations, Investigations.................................33
(b) Conduct of Business..........................................34
(c) Third Party Consent..........................................35
7.2 Regulatory and Other Approvals........................................36
7.3 Covenant Not to Compete...............................................36
7.4 Bulk Sales Laws.......................................................37
7.5 Employee Matters......................................................37
7.6 Pre-Closing Transfer of Munster Assets................................39
(a) Munster Equipment............................................39
(b) Munster Inventory............................................40
(c) Munster Materials and Supplies...............................40
7.7 ATPG Tax Matters......................................................40
7.8 Certain Information...................................................41
7.9 Certain Customs Procedures............................................41
7.10 Sales Analysis........................................................41
</TABLE>
-iii-
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
7.11 Trezzano Arrangements.................................................41
7.12 ATPG Audit............................................................41
7.13 Base Net Assets.......................................................41
7.14 Contributions to Capital..............................................41
7.15 Telephone Equipment...................................................42
7.16 Car Leases............................................................42
7.17 Mexican Inventory.....................................................42
7.18 Kroner Pension........................................................42
7.19 Termination of Kroner.................................................42
7.20 ATPG Fixed Asset Register.............................................42
7.21 Certain Buyer Covenants...............................................42
7.22 Closing Date Net Assets...............................................42
8. Conditions Precedent to Closing................................................42
8.1 Conditions Precedent to the Obligations of Buyer to
Complete the Closing................................................42
(a) Representations, Warranties and Covenants....................42
(b) Consents, Waivers, Licenses, Filings, etc....................43
(c) Injunction Order.............................................43
(d) Opinion of Sellers' Counsel..................................43
(e) FIRPTA Certificate...........................................43
(f) Title Insurance..............................................43
(g) Closing Certificate of Sellers...............................43
(h) Transfer Documents...........................................43
(i) Special Warranty Deed........................................44
(j) Assignment and Assumption Agreement..........................44
(k) Munster Lease................................................44
(l) Services Agreements..........................................44
(m) AWIG Transfer................................................44
(n) Other Documents..............................................44
(o) Escrow Account...............................................44
(p) Escrow Agreement.............................................44
8.2 Conditions Precedent to the Obligations of Sellers to Complete
the Closing........................................................44
(a) Representations, Warranties and Covenants....................44
</TABLE>
-iv-
<PAGE> 6
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
(b) Consents, Waivers, Licenses, Filings, etc....................45
(c) Injunction, Order............................................45
(d) Opinion of Buyer's Counsel...................................45
(e) Closing Certificate of Buyer.................................45
(f) Closing Wires................................................45
(g) Assignment and Assumption Agreement..........................45
(h) Other Agreements.............................................45
(i) Escrow Account...............................................45
(j) ATPG Agreement...............................................45
(k) Opinions of Buyer's Counsel Relating to the Loan Agreement...45
(l) Loan Agreement...............................................46
(m) Agreement to Pay.............................................46
(n) Escrow Agreement.............................................46
9. Post Closing Agreements........................................................46
9.1 Further Information...................................................46
9.2 Record Retention......................................................46
9.3 Tax Matters...........................................................46
9.4 Use of Names..........................................................47
9.5 Certain Accotex Trademarks............................................47
9.6 Further Assurances....................................................47
9.7 Filings...............................................................47
10. Survival; Indemnification......................................................48
10.1 Survival of Representations and Warranties............................48
10.2 Indemnification of Buyer..............................................48
10.3 Indemnification of Sellers............................................50
10.4 Limitations, Exclusive Provisions, No Rescission......................52
11. Termination of Agreement.......................................................52
11.1 Termination...........................................................52
11.2 Survival..............................................................52
12. Miscellaneous..................................................................53
12.1 Expenses..............................................................53
12.2 Notices...............................................................53
</TABLE>
-v-
<PAGE> 7
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
12.3 Disputes..............................................................54
12.4 Publicity, Confidentiality............................................54
12.5 Entire Agreement......................................................54
12.6 Waivers and Amendments................................................54
12.7 Governing Law.........................................................55
12.8 Binding Effect; No Assignment.........................................55
12.9 Variations in Pronouns................................................55
12.10 Counterparts..........................................................55
12.11 Exhibits and Schedules................................................55
12.12 Headings..............................................................55
12.13 Severability of Provisions............................................55
12.14 No Third Party Beneficiary............................................55
12.15 Exclusivity...........................................................55
</TABLE>
-vi-
<PAGE> 8
TABLE OF CONTENTS
(CONTINUED)
PAGE
Schedule 1.0 (a) - Base Net Assets
Schedule 2.1(a)(i) - Greenville Plant
Schedule 2.1(a)(ii) - Greenville Equipment
Schedule 2.1(b)(i) - R&D Equipment and R&D Records
Schedule 2.2(b)(iii) - Intellectual Property
Schedule 2.2(g) - Joint Ventures
Schedule 2.2(j) - Intercompany Agreements
Schedule 2.2(k) - Certain Excluded Assets
{OMITTED TEXT}*
Schedule 4.3(f) - Certain ATPG Agreements
Schedule 4.4(c)-1 - Form of Closing Statement of Net Assets
Schedule 4.4(c)-2 - Methodology for the Closing Statement
of Net Assets
Schedule 5.1 - Qualification to Do Business
Schedule 5.3 - Conflicts
Schedule 5.4(a) - Material Contracts
Schedule 5.4(b) - Enforceability of Contracts
Schedule 5.5(a) - Financial Statements of Sellers
Schedule 5.5(b) - Absence of Changes
Schedule 5.5(c) - Absence of Undisclosed Liabilities
Schedule 5.6(a) - Title to Property
Schedule 5.6(b) - Title Matters
Schedule 5.6(c) - Title to Assets and Properties
Schedule 5.8 - Transactions with Affiliates
Schedule 5.9 - Litigation
Schedule 5.10 - Compliance with Law
Schedule 5.11 - Environmental Matters
Schedule 5.13 - Intellectual Property Licenses
Schedule 5.14 - Employees; Labor Matters, etc.
Schedule 5.15 - Employee Benefit Plans
Schedule 5.16 - Taxes
Schedule 5.17 - Customers and Suppliers
Schedule 5.18 - Other Assets
Schedule 5.20(a) - ATPG Capital Stock
Schedule 7.1(b)(ii) - Conduct of Business
Schedule 7.3 - Covenant Not to Compete
Schedule 7.5(h) - Employee Matters
Schedule 7.6(a)-1 - Pre-Closing Transfers of Munster Assets
Schedule 7.6(a)-2 - Pre-Closing Transfers of Munster Assets -
Munster Equipment
Exhibit A - Form of Notarial Deed
Exhibit B - Form of Promise to Pay
Exhibit C - Press Announcement
Exhibit D - Form of Assignment and Assumption Agreement
Exhibit E - Form of Munster Lease
*The omitted text has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.
-vii-
<PAGE> 9
TABLE OF CONTENTS
(CONTINUED)
PAGE
Exhibit F1 - Form of General Services Agreement
Exhibit F2 - Form of Management Services Agreement
Exhibit G - Form of Agreement to Pay
-viii-
<PAGE> 10
PURCHASE AGREEMENT
------------------
AGREEMENT made this 29th day of July, 1999, by and among ARMSTRONG
WORLD INDUSTRIES, INC., a Pennsylvania corporation ("AWI"), and ARMSTRONG WORLD
INDUSTRIES GmbH, a corporation organized under the laws of the Federal Republic
of Germany ("AWIG," and together with AWI, the "SELLERS"), as sellers, and DAY
INTERNATIONAL, INC., a Delaware corporation ("BUYER"), as buyer.
RECITALS
--------
WHEREAS, AWI's Worldwide Textile Products Operation is engaged in the
business of manufacturing and selling products known as cots, aprons and
ribbons, for use primarily in textile machinery, at locations in the United
States, Europe, the Middle East and Asia; and
WHEREAS, AWIG is the sole owner of record of Armstrong Textile Products
GmbH, a limited liability company organized under the laws of the Federal
Republic of Germany ("ATPG") and registered at the Lower Court of Munster under
registration number HRB4813 (such ownership interest being referred to herein as
the "ATPG Share"); and
WHEREAS, at or prior to the Closing (as defined below), AWIG will
transfer to ATPG all assets, including goodwill but excluding real property,
owned by AWIG and used in connection with AWIG's Textile Products Operation in
the Federal Republic of Germany; and
WHEREAS, AWIG desires to sell, and Buyer desires to purchase, the ATPG
Share; and
WHEREAS, Sellers desire to sell, and Buyer desires to purchase,
substantially all of the assets owned or leased by Sellers relating to the
operation of the Business (as defined below), and in connection therewith, Buyer
has agreed to assume certain of the liabilities of Sellers relating to the
Business, all on the terms set forth in this Agreement; and
WHEREAS, certain terms used in this Agreement have the meanings
ascribed to such terms in Section 1;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants, representations and warranties contained in this Agreement, the
parties agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
have the following meanings unless the context otherwise requires:
"ATPG PENSION PROMISE TO PAY" has the meaning set forth in Section
4.3(e).
"ACTION OR PROCEEDING" means any litigation, action, suit, proceeding
or arbitration by any Person, or any investigation or audit by any Governmental
or Regulatory Body.
"AFFILIATE" means with respect to any Person, any other Person
controlling, controlled by or under common control with such first Person.
"ASSETS" has the meaning set forth in Section 2.1 of this Agreement.
"ASSIGNED CONTRACT" has the meaning set forth in Section 2.1(b)(v) of
this Agreement.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" has the meaning set forth in
Section 8.1(j) of this Agreement.
"ASSUMED LIABILITIES" has the meaning set forth in Section 2.3 of this
Agreement.
1
<PAGE> 11
"ATPG ASSUMED LIABILITIES" means the following liabilities and
obligations of ATPG: (i) obligations under all contracts to which ATPG is a
party to the extent set forth in a Schedule hereto or not required to be set
forth on a Schedule hereto, (ii) all trade payables of ATPG relating solely to
the Business and to the extent set forth on the Closing Statement of Net Assets,
{OMITTED TEXT}* (iv) liabilities to any Seller or any Affiliate of Seller
pursuant to the Munster Lease, the General Services Agreement, the Management
Services Agreement and the Trezzano Agreement and (v) any other liabilities of
ATPG set forth on the Closing Statement of Net Assets which are of the same type
as those liabilities of ATPG which were set forth on SCHEDULE 1.0(a) and were
included for purposes of calculating Base Net Assets; provided, however, ATPG
Assumed Liabilities shall expressly not include (A) except for obligations
specified in clauses (i) through (v) above, all obligations of ATPG to any
Affiliate, except as described in Section 4.4(b), or any director or officer of
ATPG or of any Affiliate of ATPG; (B) any obligations and liabilities of ATPG of
any kind, character or description whatsoever, known or unknown, contingent or
otherwise, other than those specified in clauses (i) through (v) above,
including, without limitation, (w) any and all liabilities with respect to Taxes
for any period or portion thereof ending on or before the Closing Date, (x) any
and all obligations, liabilities or responsibilities of ATPG arising out of or
relating to the breach by ATPG of any contract, except to the extent a reserve
therefor is expressly reflected on the face of (and not solely in any notes to)
the Closing Statement of Net Assets, (y) any and all liabilities or obligations
relating to any Transaction Expense or Transfer Taxes that is the responsibility
of ATPG or any Affiliate of AWI under the terms of this Agreement, and (z) any
liabilities or obligations under the Managing Director Employment Contract dated
January 1, 1997, between ATPG and Norbert Kroner.
"BASE NET ASSETS" means $7,761,170, which amount represents the total
current assets (excluding the Excluded Assets) minus the total current
liabilities (excluding the Excluded Liabilities) of the Business as determined
by reference to SCHEDULE 1.0(a).
{OMITTED TEXT}*
"BUSINESS" means the business of manufacturing and/or selling globally
(other than in India, Bhutan, Sri Lanka, Bangladesh and Nepal) products known as
cots, aprons and ribbons, for use primarily in textile machinery.
"BUSINESS DAY" means any day on which commercial banks are not
authorized or required by law to close in New York, New York.
"BUYER CLAIM" has the meaning set forth in Section 10.2(c) of this
Agreement.
"BUYER INDEMNIFIED PARTY" has the meaning set forth in Section 10.2(a)
of this Agreement.
"CLOSING" has the meaning set forth in Section 4.1 of this Agreement.
"CLOSING DATE" has the meaning set forth in Section 4.1 of this
Agreement.
"CLOSING DATE NET ASSETS" means the amount equal to the total current
assets (excluding the Excluded Assets) minus the total current liabilities
(excluding the Excluded Liabilities) of the Business as of the Closing Date,
which amount shall be determined by reference to the Closing Statement of Net
Assets. For the avoidance of doubt, the total current assets of the Business
referred to in the prior sentence will include all current assets of ATPG
(including, but not limited to, cash) and the total current liabilities of the
Business referred to in the prior sentence will include all current liabilities
of ATPG.
*The omitted text has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.
2
<PAGE> 12
"CLOSING STATEMENT OF NET ASSETS" has the meaning set forth in Section
4.4(c)-1 of this Agreement.
"CODE" means the United States Internal Revenue Code of 1986, as
amended.
"CONFIDENTIALITY AGREEMENT" means that certain Confidentiality
Agreement dated April 2, 1998, between AWI and Greenwich Street Capital
Partners.
"CONTRACTS AND OTHER AGREEMENTS" means all executory contracts,
agreements, understandings, indentures, notes, bonds, loans, instruments,
leases, guaranties, mortgages, franchises, licenses or commitments which are
legally binding. The phrase "contracts or other agreements" shall have a
correlative meaning.
"EMPLOYEE" or "EMPLOYEES" is defined in Section 5.15(a).
"ENVIRONMENTAL LAW" means any Law relating to the regulation or
protection of human health or safety, natural resources or the environment or to
emissions, discharges, releases or threatened releases of Hazardous Materials
into the environment.
"EQUIPMENT" means all machinery, tractors, fixtures, furniture,
equipment, automobiles, vehicles, tooling, tools, office equipment, furnishings
and other items of personal property (including, but not limited to, any of the
foregoing purchased subject to any conditional sales or title retention
agreement in favor of any other Person).
"ERISA" means the United States Employee Retirement Income Security Act
of 1974, as amended.
"ESCROW AGREEMENT" means that certain Preliminary Transaction and
Escrow Agreement, dated as of February 12, 1999, as amended, among AWI, the
Buyer and Chase Manhattan Trust Company, National Association, as escrow agent.
"EXCLUDED ASSET" has the meaning set forth in Section 2.2 of this
Agreement.
"EXCLUDED LIABILITIES" has the meaning set forth in Section 2.4 of this
Agreement.
"EXCLUDED MATTERS" means any antitrust or anticompetition law filing
with, notice to or approval of any Governmental or Regulatory Body in respect of
the transactions contemplated by this Agreement.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 5.5(a) of
this Agreement.
"GAAP" means United States generally accepted accounting principles as
in effect for the specified period.
"GENERAL SERVICES AGREEMENT" has the meaning set forth in Section
8.1(l) of this Agreement.
"GOVERNMENTAL OR REGULATORY BODY" means any state, nation or any
government or political subdivision thereof, whether federal, state, county,
local or foreign, including, but not limited to, any agency, authority, official
or instrumentality of any such government or political subdivision or any court,
tribunal or arbitrator(s) of competent jurisdiction, or any self-regulatory
organization.
"GREENVILLE EQUIPMENT" has the meaning set forth in Section 2.1(a)(ii)
of this Agreement.
"GREENVILLE INVENTORY" has the meaning set forth in Section 2.1(a)(iii)
of this Agreement.
3
<PAGE> 13
"GREENVILLE MATERIALS AND SUPPLIES" has the meaning set forth in
Section 2.1(a)(iv) of this Agreement.
"GREENVILLE PLANT" has the meaning set forth in Section 2.1(a)(i) of
this Agreement.
"HAZARDOUS MATERIAL" means any chemicals, materials or substances which
are defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants" or words
of similar import under any Environmental Law, including without limitation,
asbestos, regulated levels of polychlorinated biphenyls, petroleum products or
by-products, and urea-formaldehyde insulation.
"HSR ACT" means the United States Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"INTELLECTUAL PROPERTY" has the meaning set forth in Section
2.1(b)(iii).
"KNOWLEDGE" means, with respect to any of Sellers, the actual knowledge
of any executive officer of any Seller with responsibilities relating
principally to the Business, and with respect to the Buyer, the actual knowledge
of any executive officer of Buyer.
"INVENTORY" means all inventory, raw materials, work-in-process, parts,
accessories, finished goods and merchandise, packaging materials and other
supplies related thereto.
"LAW" means any law (including, but not limited to, common law),
constitution, treaty, statute, rule, regulation, ordinance and other
pronouncement having the effect of law of the United States of America, any
foreign country or any domestic or foreign state, county, city or other
political subdivision or of any other Governmental or Regulatory Body (including
the European Union) and any Order.
"LANCASTER FACILITY" has the meaning set forth in Section 2.2(f) of
this Agreement.
"LIEN" means any debt, mortgage, security interest, lien, encumbrance,
pledge, charge or adverse claim of any kind.
"LOSS" or "LOSSES" has the meaning set forth in Section 10.2(a) of this
Agreement.
"MANAGEMENT SERVICES AGREEMENT" has the meaning set forth in Section
8.1(l) of this Agreement.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
Assets, Business, liabilities, results of operations or condition (financial or
otherwise) of the Business, taken as a whole.
"MATERIALS AND SUPPLIES" means all materials, supplies, parts,
accessories, goods and other like products and items.
"MUNSTER ADJUSTMENT AMOUNT" has the meaning set forth in Section 2.9(b)
of this Agreement.
"MUNSTER EQUIPMENT" has the meaning set forth in Section 7.6(a) of this
Agreement.
"MUNSTER INVENTORY" has the meaning set forth in Section 7.6(b) of this
Agreement.
"MUNSTER LEASE" is the lease set forth in Exhibit E of this Agreement.
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<PAGE> 14
"MUNSTER MATERIALS AND SUPPLIES" has the meaning set forth in Section
7.6(c) of this Agreement.
"MUNSTER PLANT" has the meaning set forth in Section 7.6(a) of this
Agreement.
{OMITTED TEXT}*
"NET ASSETS" means the amount set forth on the form of Closing
Statement of Net Assets attached as SCHEDULE 4.4(c)-1.
"NET UNFUNDED ATPG PENSION LIABILITY" has the meaning set forth in
Section 5.5(d) of this Agreement.
"NEW ESCROW ACCOUNT" means the Escrow Account as defined in Section 1
of the New Escrow Agreement.
"NEW ESCROW AGREEMENT" means the Transaction Escrow Agreement among
Buyer, AWI and Chase Manhattan Trust Company, National Association, dated as of
July 29, 1999.
"NEW ESCROW DEPOSIT" means the Escrow Deposit as defined in Section 1
of the New Escrow Agreement.
"NOTICE OF DISAGREEMENT" has the meaning set forth in Section 4.4(d).
"OPTION" means, with respect to any Person, any security, right,
subscription, warrant, option, "phantom" stock right or other contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock of such Person or
(ii) receive any benefits or rights similar to any rights enjoyed by or accruing
to the holder of shares of capital stock of such Person, including any rights to
participate in the equity, income or election of directors or officers of such
Person.
"ORDER" means any writ, judgment, decree, decision, award, injunction
or similar order of, or agreement with, any Governmental or Regulatory Body, in
each case whether preliminary or final.
"PERMITTED LIEN" means (i) any Lien for Taxes not yet due or delinquent
or being contested in good faith by appropriate proceedings, PROVIDED, that
adequate reserves with respect to the Taxes being so contested are maintained on
the books of the Business in accordance with GAAP, (ii) any statutory Lien
arising in the ordinary course of business by operation of Law with respect to
an obligation or liability that is not yet due or delinquent and (iii) any minor
imperfection of title or similar Lien with respect to any material Asset which
does not materially diminish the value of such Asset or materially interfere
with the existing use of such Asset in the operations of the Business.
"PERSON" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental or Regulatory Body or other entity.
"PLANS" has the meaning set forth in Section 5.15(a) of this Agreement.
"POST-CLOSING NET ASSETS ADJUSTMENT" has the meaning set forth in
Section 4.4(g) of this Agreement.
"R&D EQUIPMENT" has the meaning set forth in Section 2.1(b)(i) of this
Agreement.
*The omitted text has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.
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"R&D RECORDS" has the meaning set forth in Section 2.1(b)(i) of this
Agreement.
"RETAINED NAMES AND MARKS" has the meaning set forth in Section 9.4 of
this Agreement.
"SELLER CLAIM" has the meaning set forth in Section 10.3(c) of this
Agreement.
"SELLER INDEMNIFIED PARTY" has the meaning set forth in Section 10.3(a)
of this Agreement.
"SUBSIDIARY" means a corporation, partnership, limited liability
company or other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries,
or both, by such Person.
"TAX" and "TAXES" means any federal, state, local, foreign or other
tax, duty, excise or other governmental charge or assessment or deficiencies
thereof (including all interest and penalties thereon and additions thereto
whether disputed or not).
"TAX RETURN" means any return, report, information return, or other
document (including any related or supporting information) filed or required to
be filed with any federal, state, local or foreign governmental entity or other
authority in connection with the determination, assessment or collection of any
Tax or the administration of any laws, regulations or administrative
requirements relating to any Tax.
"TOTAL PURCHASE PRICE" has the meaning set forth in Section 3.1 of this
Agreement.
"TRANSACTION EXPENSES" has the meaning set forth in Section 4.4(c) of
this Agreement.
"TRANSFER DOCUMENTS" has the meaning set forth in Section 8.1(h) of
this Agreement.
"TRANSFER TAXES" has the meaning set forth in Section 9.3 of this
Agreement.
"TRANSFERRED EMPLOYEES" has the meaning set forth in Section 7.5(a) of
this Agreement.
"TRANSITION PERIOD" has the meaning set forth in Section 2.9 of this
Agreement.
"TREZZANO AGREEMENT" has the meaning set forth in Section 7.11 of this
Agreement.
"TRIGGER EVENT DATE" has the meaning set forth in Section 2.9(a) of
this Agreement.
2. PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES AND PURCHASE OF
ATPG SHARE.
2.1 PURCHASE OF ASSETS. On the terms and subject to the conditions set
forth in this Agreement and except as provided in Section 2.2, on the Closing
Date, Sellers agree to sell, transfer, assign, convey and deliver to Buyer or
one or more wholly-owned Subsidiaries of Buyer (collectively, "Buyer Parties"),
and Buyer, either alone or through one or more Buyer Parties, agrees to
purchase, acquire and accept from Sellers all of Sellers' right, title and
interest, as of the Closing Date, in and under all the properties, assets,
rights, claims and contracts of every kind, character and description owned or
leased by Sellers solely in connection with the Business, whether real, personal
or mixed, tangible or intangible (including goodwill), including, without
limitation, all assets reflected in the most recent balance sheet comprising a
part of the Financial Statements or utilized in the operations reflected in the
Financial Statements, as the same may exist on the Closing Date, in all cases
free and clear of all Liens other than Permitted Liens, but excluding those
assets, properties and rights which are specifically excluded pursuant to this
Agreement (the foregoing are collectively referred to as the "Assets"). Except
as specifically
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excluded pursuant to Section 2.2 of this Agreement, the Assets include, without
limitation, all of the right, title and interest of Sellers as of the Closing
Date in and to the following:
(a) GREENVILLE, SOUTH CAROLINA.
(i) GREENVILLE PLANT. The real property more fully described
in SCHEDULE 2.1(a)(i), consisting of approximately 13 acres of land
located at U.S. 276 East, at Forrester Drive, Mauldin, South Carolina,
improved with a one-story industrial and office building and related
facilities (the "GREENVILLE PLANT").
(ii) GREENVILLE EQUIPMENT. The Equipment listed in SCHEDULE
2.1(a)(ii)(being Equipment presently located at the Greenville Plant),
together with any additions and less any dispositions occurring through
the Closing (the "GREENVILLE EQUIPMENT").
(iii) GREENVILLE INVENTORY. All Inventory owned by Sellers at
the time of the Closing and held at the Greenville Plant or elsewhere
in the United States for use in the Business (the "GREENVILLE
INVENTORY").
(iv) GREENVILLE MATERIALS AND SUPPLIES. All Materials and
Supplies owned by Sellers at the time of the Closing and held at the
Greenville Plant or elsewhere in the United States for use solely in
connection with the Assets or the Business in the United States (the
"GREENVILLE MATERIALS AND SUPPLIES").
(b) OTHER ASSETS.
(i) RESEARCH AND DEVELOPMENT. The equipment used to test
products and raw materials, which is located at the Greenville Plant,
together with any additions and less any dispositions occurring through
the Closing (the "R&D EQUIPMENT"), and all test records, standardized
tests and procedures and related software and critical data relating to
the Business and held at the Greenville Plant (the "R&D RECORDS"), in
each case as listed on SCHEDULE 2.1(b)(i).
(ii) COMPUTER PROGRAMS. All computer software, firmware,
programs and source disks, program documentation, tapes, manuals,
forms, guides and other materials with respect thereto owned by Sellers
(and any and all rights in, to and under licenses granted by Sellers
with respect thereto) that are essential to and relate solely to the
operation of the Business or the Assets (all of the items referred to
in this Section 2.1(b)(ii) are collectively referred to as the
"COMPUTER PROGRAMS").
(iii) INTELLECTUAL PROPERTY. All registered and common law
trademarks and tradenames, service marks and service names, and
registrations and applications for registration thereof, and foreign
counterparts thereof (if any) listed on SCHEDULE 2.1(b)(iii)(A); all
patents, patent applications and foreign counterparts thereof (if any)
listed on SCHEDULE 2.1(b)(iii)(B); all copyrights, copyright
applications and copyright registrations and foreign counterparts
thereof (if any) listed on SCHEDULE 2.1(b)(iii)(C); and all inventions,
discoveries, trade secrets, improvements, formulae, practices,
processes, methods, technology and know-how and similar proprietary
rights and related licenses and other agreements that are
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<PAGE> 17
owned by Sellers and used solely in connection with the Assets or the
Business (all of the foregoing and the R&D Records are collectively
referred to as the "INTELLECTUAL PROPERTY"; PROVIDED, HOWEVER, that
computer software, firmware, programs and source disks, program
documentation, tapes, manuals, forms, guides and other materials that
are licensed to any Seller or any Affiliate of any such Seller (other
than ATPG) shall not constitute or be deemed to constitute Intellectual
Property for any purposes of this Agreement).
(iv) ACCOUNTS RECEIVABLES. All accounts and notes receivable,
deferred charges, chattel paper, letters of credit and other rights to
receive payments held or owned by Sellers arising solely from the
Business or the Assets, including unpaid receivables arising solely in
connection with the Assigned Contracts (collectively, the "ACCOUNTS
RECEIVABLES").
(v) CONTRACTS. Except as otherwise provided in this Agreement,
all rights of Sellers in and to all distribution agreements,
consignment agreements, agency agreements, confidentiality agreements
(under which any Seller has provided information to a third party), all
purchase orders for the sale or purchase of goods and services, or
both, and all other contracts and other agreements of whatever nature
to which any Seller is a party and which pertain solely to the Assets
or the Business, in each case to the extent set forth on a Schedule
hereto or not required to be set forth on a Schedule hereto (all of the
items referred to in this Section 2.1(b)(v) are collectively referred
to as the "ASSIGNED CONTRACTS"; PROVIDED, HOWEVER, that any contracts
or agreements referred to above pursuant to which any Person licenses
software to any Seller or any Affiliate of any Seller (other than ATPG)
shall not constitute or be deemed to constitute Assigned Contracts for
any purposes of this Agreement).
(vi) PREPAID EXPENSES. All prepaid expenses of Sellers
relating solely to the conduct of the Business.
(vii) CLAIMS. All rights, privileges, claims, demands, choses
in action, prepayments, deposits, refunds, claims in bankruptcy,
indemnification agreements with, and indemnification rights against,
third parties, warranty claims (to the extent transferable), offsets
and other claims of Sellers arising solely out of the Business or the
Assets.
(viii) BOOKS AND RECORDS. Except with respect to income Taxes
and except as may be required under U.S. customs laws or regulations,
all sales and business records, files, books of account, customer and
supplier lists, books and records relating to Taxes, product
specifications, drawings, correspondence, engineering, maintenance,
operating and production records, advertising materials, customer
lists, cost and pricing information, business plans, quality control
records and manuals, blueprints, research and development files, record
books, litigation files, personnel records, credit records of customers
and other books and records of Sellers relating solely to the Assets or
the Business, including but not limited to, those relating to the
Assumed Liabilities.
(ix) PERMITS, APPROVALS. To the extent transfer is permitted
under Law, all permits, approvals, franchises, licenses or other rights
granted by Governmental
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<PAGE> 18
or Regulatory Bodies and all consents, grants and other rights of every
character whatsoever that are owned by Sellers solely in connection
with the ownership or operation of the Business or the Assets.
(x) GOODWILL. All goodwill of Sellers and all other rights,
properties and assets of any character whatsoever which are owned by
Sellers solely in connection with the Business or the Assets and which
are not otherwise described in this Agreement and not expressly
excluded from the terms of this Agreement.
2.2 EXCLUDED ASSETS. Any provision of this Agreement to the contrary
notwithstanding, Buyer Parties shall not acquire, and there shall be excluded
from the Assets, the following (the "Excluded Assets"):
(a) CASH. All cash, marketable securities, commercial paper,
certificates of deposit and other bank deposits, treasury bills and
other cash equivalents of Sellers.
(b) BANK ACCOUNTS. All rights with respect to bank accounts of
Sellers.
(c) INTERCOMPANY ACCOUNTS. All rights of any Seller or ATPG
related to the Business described in SCHEDULE 5.8 with respect to any
obligations of any Seller, any Affiliate of any Seller or any director
or officer of any Seller or of any Affiliate of any Seller.
(d) CERTAIN NAMES. All rights to use the name "Armstrong" or
substantially similar words, any corporate names, logos, trademarks or
trade names containing or using "Armstrong" or substantially similar
words.
(e) HONG KONG, SHANGHAI AND INDONESIA ASSETS. All equipment
and other assets located at Sellers' facilities and locations in Hong
Kong, Shanghai and Indonesia.
(f) OCCUPANCY RIGHTS. Any right to use or occupy the facility
located at 2500 Columbia Avenue, Lancaster, Pennsylvania (the
"LANCASTER FACILITY").
(g) JOINT VENTURES. Any and all rights of any Seller in, under
or with respect to INARCO LTD., an Indian company, including the
agreements set forth on SCHEDULE 2.2(g) and any other contracts or
agreements relating thereto.
(h) INSURANCE. All insurance policies of Sellers and all
rights of every nature and description under or arising out of such
policies.
(i) EMPLOYEE BENEFIT PLANS. All Plans of Sellers.
(j) INTERCOMPANY AGREEMENTS. Except as otherwise provided in
this Agreement, all agreements (written or oral), documents and
instruments, including those set forth on SCHEDULE 2.2(j) hereto,
pursuant to which any Seller (or any Affiliate of any Seller) provides
to any other Seller (or any Affiliate of such other Seller) assets,
services or facilities that are material to the Business.
(k) CERTAIN EXCLUDED ASSETS. All items set forth on SCHEDULE
2.2(k) hereto.
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<PAGE> 19
(l) OTHER MATTERS. All rights of any Seller under this
Agreement and the agreements and instruments delivered to Seller by any
Buyer Party pursuant to this Agreement and all other assets of Sellers
which are not owned or used by Sellers solely in the conduct of the
Business.
(m) MUNSTER ASSETS. All of the Munster Assets (as defined in
Section 7.6), (because those will be contributed by AWIG to ATPG at or
prior to Closing pursuant to Section 7.6 of this Agreement).
(n) ATPG SHARE. The ATPG Share.
(o) CERTAIN INVENTORY LOCATED IN MEXICO. All Inventory (with a
value of less than $10,000 at the date of this Agreement) that is the
subject of that certain Consignment Agreement dated February 13, 1998,
between AWI and Elkatex S.A.
2.3 ASSUMED LIABILITIES. Subject to the terms and conditions set forth
in this Agreement and except as provided in Section 2.4, Buyer agrees that, on
the Closing Date, Buyer shall assume and thereafter pay, perform and discharge
when due the following obligations and liabilities of Sellers with respect to
the Business as and to the extent existing on the Closing Date (the "ASSUMED
LIABILITIES"):
(a) OBLIGATIONS UNDER CONTRACTS. All obligations of any Seller
under the Assigned Contracts; and
(b) TRADE PAYABLES. All trade payables of the Business
relating solely to the Business to the extent set forth on the Closing
Statement of Net Assets.
Nothing contained in this Agreement shall require the Buyer to pay,
perform or discharge any Assumed Liability so long as it shall in good faith
contest or cause to be contested the amount or validity thereof and shall have
indemnified and have held harmless the Sellers with respect thereto pursuant to
the terms of this Agreement.
2.4 LIABILITIES NOT ASSUMED. Anything contained in this Agreement to
the contrary notwithstanding, Buyer Parties shall not assume, and there shall be
excluded from the Assumed Liabilities, the following (the "EXCLUDED
LIABILITIES"): (i) all obligations of any Seller to any other Seller, any
Affiliate of any Seller (other than ATPG as described in Section 4.4(b)) or any
director or officer of any Seller or of any Affiliate of any Seller; and (ii)
any obligations and liabilities of any Seller of any kind, character or
description whatsoever, known or unknown, contingent or otherwise, other than
the Assumed Liabilities, including, without limitation, (A) any and all
liabilities with respect to Taxes for any period or portion thereof ending on or
before the Closing Date, (B) all obligations, liabilities, commitments or
responsibilities relating to any employees, independent contractors or Plans,
(C) any and all obligations, liabilities or responsibilities of Sellers arising
out of or relating to the breach by Sellers of any Assigned Contract, except to
the extent a reserve therefor is expressly reflected on the face of (and not
solely in any notes to) the Closing Statement of Net Assets, and (D) any and all
liabilities or obligations relating to any Transaction Expense or Transfer Taxes
that is the responsibility of Sellers or any Affiliate of Sellers under the
terms of this Agreement. Sellers shall pay, perform and discharge in a timely
manner or shall make adequate provision for all of the Excluded Liabilities;
PROVIDED, HOWEVER, that Sellers may contest, in good faith, any claim of
liability asserted by a third party in respect thereof so long as it shall have
indemnified and have held harmless Buyer with respect thereto pursuant to the
terms of this Agreement.
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2.5 PRORATION OF TAXES. All Taxes with respect to a taxable period
beginning and ending before the Closing Date, but not yet due as of the Closing
Date, with respect to the Business shall be paid by Sellers. In the case of any
such Taxes payable with respect to a taxable period beginning before the Closing
Date and ending after the Closing Date, but not yet due as of the Closing Date,
Sellers shall pay that portion of such Taxes that is allocable to the portion of
such taxable period ending on the Closing Date based on an interim closing of
the books, and the balance shall be paid by Buyer, except that for Taxes (such
as real property Taxes) imposed on a periodic basis, Sellers shall pay that
portion of such Taxes that is equal to the product of the amount of such Taxes
and a fraction, the numerator of which is the number of days from the beginning
of such taxable period through and including the Closing Date and the
denominator of which is 365, and the balance shall be paid by one or more of the
Buyer Parties.
2.6 ATPG SHARE. On the terms and subject to the conditions set forth in
this Agreement, on the Closing Date AWIG agrees to sell to Buyer or any Buyer
Party, and Buyer agrees to or to cause such Buyer Party to purchase from AWIG,
all of the right, title and interest of AWIG in and to the ATPG Share, free and
clear of all Liens, by executing a notarial deed in the form attached as Exhibit
A hereto.
2.7 NONASSIGNABLE CONTRACTS. To the extent that the sale, conveyance,
transfer or assignment hereunder by Sellers to one or more of the Buyer Parties
of any Assigned Contract is not permitted or is not permitted without the
consent of any third party, this Agreement shall not be deemed to constitute an
undertaking to sell, convey, transfer or assign the same if such consent is not
given or if such an undertaking otherwise would constitute a breach of or cause
a loss of benefits thereunder. Sellers will use commercially reasonable efforts
to obtain, at Buyer's request, any and all such third party consents; provided,
however, that Sellers shall not be required to pay or incur any cost or expense
to obtain any third party consent which Sellers are not otherwise required to
pay or incur in accordance with the terms of the applicable Assigned Contract.
If any such third party consent is not obtained by Sellers before the Closing
and Sellers are unable to obtain such consents after the Closing, AWI and AWIG
will cooperate with Buyer (at Buyer's sole expense) in any reasonable
arrangement designed to provide to the applicable Buyer Party after the Closing
the benefits under the applicable Assigned Contract, including enforcement for
the benefit of such Buyer Party of any and all rights of Sellers against any
other Person arising out of breach or cancellation by such other Person of the
Assigned Contract.
2.8 COLLECTION OF RECEIVABLES. (a) From and after the Closing, the
Buyer Parties shall, and shall cause ATPG to, undertake the collection of (i)
all the Accounts Receivable and (ii) all accounts receivable of ATPG as of the
Closing Date, respectively (collectively, the "QUALIFIED ACCOUNTS RECEIVABLE"),
with the same diligence as is customarily employed by the Buyer and its
operating subsidiaries in connection with the collection of accounts receivable.
At the Closing, Seller will provide Buyer Parties with a schedule containing the
names and addresses of customers from whom Qualified Accounts Receivable are
outstanding as of the Closing Date, along with the amounts outstanding and aging
of such Qualified Accounts Receivable. The Buyer Parties will provide the
Sellers on a monthly basis with access to a reconciled schedule of cash receipts
listing all cash receipts from customers with respect to Qualified Accounts
Receivable as reasonably requested. Buyer shall not, and shall cause ATPG not
to, compromise, settle or adjust the amount of any of the Qualified Accounts
Receivable without the prior written consent of the Sellers, which consent shall
not be withheld unreasonably. To the extent that Buyer or ATPG has not collected
the full amount of the Qualified Accounts Receivable reflected on the Closing
Statement of Net Assets (less the reserve for doubtful amounts set forth
thereon) (such amount of such Qualified Accounts Receivable less such reserve
for doubtful amounts being referred to as the
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"Full Amount") within one hundred eighty (180) days after the Closing Date,
Sellers jointly and severally, agree to pay to Buyer thereupon the amount of
such deficiency and, concurrently with the payment by Sellers thereof, Buyer
shall, and shall cause ATPG to, reassign to Sellers all Qualified Accounts
Receivable included in the Closing Statement of Net Assets which then remain
outstanding and at that time, Sellers have the right to undertake themselves or
through third parties the collection of such Qualified Accounts Receivable,
provided all such collection efforts shall be conducted in the manner
customarily employed by the Sellers and consistent with Sellers' past practice
in connection with the collection of accounts receivable. To the extent that
Buyer or ATPG collects more than the Full Amount, Buyer shall pay to Sellers
from time to time the amount of such excess promptly upon receipt thereof. In
the event that Buyer or ATPG shall receive any remittance on behalf of any
account debtor with respect to any Qualified Account Receivable after such
Qualified Account Receivable has been reassigned to Sellers, Buyer or ATPG, as
applicable, shall endorse such remittance to the order of Sellers and forward
same to Sellers promptly upon receipt thereof. In the event that Sellers shall
receive any remittance on behalf of any account debtor with respect to any
Qualified Account Receivable which has not been reassigned to Sellers, Sellers
shall endorse such remittance to the order of Buyer and forward same to Buyer
promptly upon receipt thereof along with any advice regarding the application of
such payment.
(b) Unless expressly specified by a customer to the contrary,
each payment of an account receivable shall be applied to the oldest unpaid
invoice.
{OMITTED TEXT}*
*The omitted text has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.
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<PAGE> 22
{OMITTED TEXT}*
*The omitted text has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.
13
<PAGE> 23
{OMITTED TEXT}*
*The omitted text has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.
14
<PAGE> 24
{OMITTED TEXT}*
4. CLOSING, CASH PAYMENT; PURCHASE PRICE ADJUSTMENT.
4.1 CLOSING. Subject to the satisfaction or waiver of the conditions
set forth in Sections 8.1 and 8.2 hereof, the closing hereunder (the "CLOSING")
shall take place at 10:00 a.m., New York time, at the offices of Debevoise &
Plimpton, 875 Third Avenue, New York, New York, on September 30, 1999 or, unless
the parties otherwise agree in writing, such later date as shall be five
business days after the satisfaction or waiver of the conditions set forth in
Sections 8.1 and 8.2; PROVIDED, HOWEVER, that such date shall be no earlier than
forty-two days after the date of this Agreement, and provided further that in no
event shall such date be any date other than the date upon which the termination
of the agreement referred to in Section 4.3(b) shall become effective (the
"CLOSING DATE"), and anything contained in this Agreement notwithstanding, the
parties agree that satisfaction of the requirements of Sections 4.3(b) and
4.3(c) shall be conditions to Sellers' obligations to consummate the
transactions contemplated hereby.
4.2 CASH PAYMENT. At the Closing, Buyer Parties will pay an aggregate
amount equal to the difference between (i) the Total Purchase Price and (ii) the
New Escrow Deposit. At the Closing, Buyer and Sellers will also cause the New
Escrow Deposit to be transferred to the New Escrow Account in the manner
provided in Section 1 of the New Escrow Agreement. The New Escrow Deposit shall
be deemed to represent a portion of the ATPG Share Purchase Price.
4.3 OTHER ACTIONS.
(a) Simultaneously with the Closing, AWIG and the Buyer or its
designee will enter into a notarial transfer deed in the form of
Exhibit A before Dr. Norbert Zimmermann, Schadow Arkaden, Blumenstr.
28, 40212 Dusseldorf or any other German notary mutually agreed by the
parties on the transfer of the ATPG Shares pursuant to Section 2.6 of
this Agreement.
*The omitted text has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.
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(b) On or prior to the Closing, AWIG will terminate for good
cause (aus wichtigem Grund) with effect on the Closing Date, pursuant
to documentation reasonably satisfactory to and provided to Buyer, the
control- and profit transfer agreement (Beherrschungs- und
Ergebnisabfuhrungsvertrag) with ATPG dated 14 October 1997.
(c) Prior to the Closing, Sellers shall cause ATPG to change
its fiscal year to a new fiscal year ending on the Closing Date, such
change to become effective by registration in the competent commercial
register.
(d) Prior to the Closing or as soon as practicable thereafter,
Sellers shall have changed the name of ATPG to a name selected by Buyer
that does not contain "Armstrong" or substantially similar wording.
(e) On or prior to the Closing, AWI shall cause AWIG to issue
to ATPG a promise to pay (the "ATPG PENSION PROMISE TO PAY") by AWIG of
the Net Unfunded ATPG Pension Liability (as defined in Section 5.5(d)),
which promise shall be in the form of Exhibit B hereto. For purposes of
preparing the Closing Statement of Net Assets, the calculation of the
amount of the Net Unfunded ATPG Pension Liability as of the Closing
Date shall be deemed to be zero. All pension assets and liabilities
will be excluded from the Closing Date Net Assets.
(f) The ATPG agreements, arrangements or programs set forth in
SCHEDULE 4.3(f) shall be terminated, assigned or otherwise settled
prior to Closing. In the event that Buyer, any of its Affiliates or
ATPG incurs or retains any liability in connection with such
agreements, arrangements or programs after the Closing, Sellers agree
to indemnify and hold harmless Buyer, its Affiliates or ATPG, as the
case may be, for all such liabilities.
4.4 TOTAL PURCHASE PRICE ADJUSTMENT.
(a) After the Closing, the Total Purchase Price shall be
adjusted as follows:
(i) The Total Purchase Price shall be reduced by, and
Sellers shall pay to Buyer (or its designee), the aggregate
amount, if any, by which the Closing Date Net Assets are less
than the Base Net Assets, together with interest accrued
thereon from the Closing Date to the date of payment; or
(ii) The Total Purchase Price shall be increased by,
and Buyer shall pay to Sellers, the aggregate amount, if any,
by which the Closing Date Net Assets are greater than the Base
Net Assets, together with interest accrued thereon from the
Closing Date to the date of payment.
Such adjustment of the Total Purchase Price shall be determined and
paid in the manner set forth in this Section 4.4.
(b) To the extent that ATPG has intercompany receivables due
from Sellers, or any of their Affiliates, which are set forth on the
ATPG Closing Statement of Net Assets (the "ATPG CLOSING STATEMENT OF
NET ASSETS"), Sellers shall cause the applicable obligor, with respect
to such receivables, to pay such amounts, in full, to ATPG
simultaneously with the completion of the adjustment pursuant to the
provisions of Section 4.4(g). To the extent that ATPG has intercompany
payables due to Sellers, or any of their Affiliates, which are set
forth on the ATPG Closing Statement of Net Assets, Buyer shall cause
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ATPG to pay the applicable obligee, with respect to such payable, such
amounts, in full, simultaneously with the completion of the adjustment
pursuant to the provisions of Section 4.4(g).
(c) On or before the 90th day after the Closing Date, Buyer
will prepare and deliver to Sellers a statement of Net Assets of the
Business as of the Closing Date (the "CLOSING STATEMENT OF NET
ASSETS"). In connection with the preparation of the Closing Statement
of Net Assets, Buyer shall have the right to conduct, at its sole
expense, a physical count of all Inventory that constitutes a part of
the Assets. The Closing Statement of Net Assets will present Net Assets
in sufficient detail to determine any amounts owing to Buyer or
Sellers, as applicable, under Section 4.4(a). The Closing Statement of
Net Assets will be prepared in accordance with the principles,
procedures and elections reflected in the statement of net assets set
forth on Schedule 1.0(a), except to the extent they conflict with the
principles, procedures and elections set forth on Schedule 4.4(c)-2, in
which case the latter principles, procedures and elections shall
govern. The Closing Statement of Net Assets shall exclude (i) all
Excluded Liabilities and all Excluded Assets (ii) accrued but unpaid
Transfer Taxes payable by Sellers hereunder and (iii) any liabilities
or reserves of Sellers in respect of its fees and expenses incident to
the negotiation and preparation of this Agreement, and the consummation
of the transactions contemplated by this Agreement, including, without
limitation, any fees or expenses owing to Sellers' lawyers and
accountants in connection therewith ("TRANSACTION EXPENSES"). Subject
to the next paragraph, the Closing Statement of Net Assets delivered by
Buyer to Sellers shall be final, binding and conclusive on the parties
hereto. The ATPG Closing Statement of Net Assets shall include all
assets and liabilities of ATPG as required by U.S. GAAP.
(d) Not later than 15 days after the date the Closing
Statement of Net Assets is delivered to Sellers, Sellers shall review
it and shall notify Buyer in writing (the "NOTICE OF DISAGREEMENT")
whether Sellers disagree with the Closing Statement of Net Assets. The
Notice of Disagreement shall specify with reasonable detail the items,
if any, on the Closing Statement of Net Assets with which Sellers
disagree, and set forth the Sellers' proposed adjustment. The Sellers
may dispute items reflected on the Closing Statement of Net Assets only
on the basis that such amounts were not arrived at in accordance with
the application of the principles, procedures and elections set forth
in the preceding paragraph or resulted from mechanical errors of
computation. If Sellers shall fail to give Buyer such Notice of
Disagreement within such 15-day period, Sellers shall be deemed to have
agreed with Buyer as to the Closing Statement of Net Assets. Sellers
and their authorized representatives, including KPMG, Sellers'
independent public accountants, shall have the right to review all
information, including, but not limited to, all existing workpapers of
Buyer, utilized to prepare the Closing Statement of Net Assets, in each
case as are reasonably necessary to verify the accuracy and fairness of
presentation of the Closing Statement of Net Assets and its conformity
with the methodology and procedures set forth in the preceding
paragraph.
(e) In the event that Sellers deliver a Notice of Disagreement
to Buyer within the 15-day period referred to above, Sellers and Buyer
shall use reasonable efforts to resolve any such dispute, but if a
final resolution is not obtained within 30 days after the Notice of
Disagreement is delivered to Buyer, any remaining dispute shall be
resolved by Ernst & Young LLP, or, if such firm declines to act in such
capacity or at the time of such dispute has any existing relationship
with Sellers or Buyer or their Affiliates, to such other nationally
recognized firm of independent public accountants which shall then have
no
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existing relationship with Sellers or Buyer or their Affiliates, as
shall be mutually agreed upon by Sellers and Buyer. If Sellers and
Buyer are unable to mutually agree upon another accounting firm within
10 days after the expiration of such 30-day period, then Sellers and
Buyer each shall have the right to request the American Arbitration
Association, New York, New York, to appoint an independent accounting
firm. The chosen accounting firm may examine all work papers utilized
in connection with the accounting and preparation of the Closing
Statement of Net Assets but the scope of its engagement will be limited
to resolving those items which Sellers identified in the Notice of
Disagreement and determining whether such items were properly reflected
on the Closing Statement of Net Assets in accordance with the
requirements of this Section 4.4. The decision of such accounting firm
shall be delivered in a written report within 30 days after submission
thereof addressed to Sellers and Buyer, and such report shall be final,
binding and conclusive upon the parties hereto. The costs and fees of
such accounting firm shall be allocated between Buyer and Sellers in
the same proportion that (i) the aggregate amount of such remaining
disputed items so submitted to the accounting firm that is
unsuccessfully disputed by each (as determined by the accounting firm)
bears to (ii) the total amount of such remaining disputed items so
submitted. Buyer and Sellers shall reimburse the other, as applicable,
to the extent the other pays more than the amount so required pursuant
to the preceding sentence.
(f) The Net Assets set forth in the Closing Statement of Net
Assets, either as agreed to by Sellers and Buyer if such Closing
Statement of Net Assets is not referred to the accounting firm or as
finally determined by the accounting firm, are referred to as the
"CLOSING DATE NET ASSETS."
(g) On the fifth Business Day following agreement by Sellers
and Buyer to the Closing Statement of Net Assets or the delivery of the
report of the accounting firm in accordance with Section 4.4(e), as the
case may be, (i) Sellers shall pay in cash to Buyer (or its designee)
the amount, if any, determined pursuant to clause (a)(i) of this
Section 4.4 or (ii) Buyer shall pay to Sellers in cash the amount, if
any, determined pursuant to clause (a)(ii) of this Section 4.4 (any
such payment by Sellers or Buyer, as the case may be, being hereinafter
referred to as the "POST-CLOSING NET ASSETS ADJUSTMENT"). The
Post-Closing Net Assets Adjustment shall bear interest from the Closing
Date to the date of payment at the prime rate as reported in the WALL
STREET JOURNAL on the Business Day immediately prior to the Closing
Date, which interest shall be paid on the same date as such payment.
5. REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers, jointly and
severally, represent and warrant to Buyer as follows:
5.1 ORGANIZATION, POWER, STANDING AND QUALIFICATION. Each of Sellers
and ATPG is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization.
Each of Sellers has all requisite corporate power and authority to enter into
and perform this Agreement. Each of Sellers and ATPG is duly qualified to do
business as a foreign corporation in the jurisdictions set forth in SCHEDULE
5.1(a), which are all the jurisdictions where the character of the properties it
owns, leases or operates, or the conduct of the Business, requires such
qualification, other than in any jurisdiction where the failure to so qualify
would not have a Material Adverse Effect. ATPG is a company with limited
liability and is duly organized under the laws of the Federal Republic of
Germany and validly existing in accordance with the excerpt of the commercial
register attached as SCHEDULE 5.1(b) and the articles of incorporation filed
with the commercial register and attached as SCHEDULE 5.1(c). Except as
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disclosed in SCHEDULE 5.1(d) or as contemplated by Section 4.3 of this
Agreement, there are no shareholder resolutions amending the articles of
incorporation or any shareholder agreements or agreements between ATPG and its
shareholder relating to the constitution and or organization of ATPG.
5.2 DUE AUTHORIZATION. The execution and delivery by each of Sellers of
this Agreement, the performance by it of its obligations hereunder and the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of such Seller and their shareholders.
This Agreement has been duly executed and delivered by each of Sellers and is,
and all instruments of conveyance and other documents to be executed and
delivered by Sellers, as contemplated by this Agreement, will constitute, when
so executed and delivered, a valid and binding obligation of such Seller
enforceable against such Seller in accordance with its terms, except as such
enforcement may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors, (ii) general principles of equity (regardless of whether
such enforcement is considered in a proceeding in equity or at law) and (iii)
the fact that this Agreement is not enforceable against AWIG under German law
with regard to AWIG's obligation to transfer the ATPG Share, until and unless
AWIG transfers the ATPG Share to Buyer by properly executing the notarial deed,
a copy of which is attached at Exhibit A hereto.
5.3 FREEDOM TO CONTRACT. Except as set forth on SCHEDULE 5.3 and the
Excluded Matters, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby do not and will not (i)
violate or conflict with the provisions of the certificate of incorporation or
by-laws (or other comparable documents) of any Seller, (ii) except as would not
have a Material Adverse Effect, result in the imposition of any Lien under,
cause the acceleration of any obligation under, or violate or conflict with the
terms, conditions or provisions of any Material Contract or any other agreement
or instrument to which any Seller or ATPG is a party or by which it is bound,
(iii) except as would not have a Material Adverse Effect, result in a breach or
violation by any Seller or ATPG of any of the terms, conditions or provisions of
any Law or Order or (iv) except as would not have a Material Adverse Effect or
except for filings as described in Section 8.2(b), require any consent,
authorization or approval of, filing with or notice to any Governmental or
Regulatory Body.
5.4 MATERIAL CONTRACTS.
(a) SCHEDULE 5.4(a) sets forth a true, correct and complete
list, as of the date of this Agreement, of each of the following
contracts and other agreements (including any amendments thereto) to
which any Seller or ATPG is a party and which relate solely to the
Assets or the Business but specifically excludes all contracts and
other agreements pursuant to which any Seller (or any Affiliate of such
Seller) provides to any other Seller (or any Affiliate of such other
Seller) assets, services or facilities that are material to the
Business (collectively, the "MATERIAL CONTRACTS"):
(i) contracts and other agreements for the future
acquisition or sale of any assets involving $50,000
individually (or in the aggregate, in the case of any related
series of contracts and other agreements), other than
acquisitions or sales of Inventory or Materials and Supplies
in the ordinary course of business;
(ii) contracts and other agreements calling for
future aggregate purchase prices or payments to or from any
Seller or ATPG in any one year of more than
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$25,000 in any one case (or in the aggregate, in the case of
any related series of contracts and other agreements), or
involving the payment or receipt of $50,000 or more over the
lifetime of such agreements;
(iii) contracts and other agreements that will be
binding on Buyer or ATPG after the Closing and that contain
covenants prohibiting or limiting the right to compete of the
Business or prohibiting or restricting the ability of the
owner of the Business to deal in connection with the Business
with any Person or in any geographical area;
(iv) contracts and other agreements requiring the
payment by or to any Seller or ATPG of a royalty, override or
similar commission or fee of more than $50,000 in the
aggregate;
(v) collective bargaining agreements;
(vi) contracts and other agreements relating to (A)
Liens on any of the Assets or any assets or properties owned
by ATPG or (B) guarantees of the payment or performance of
obligations of any other Person that will be binding on Buyer
after the Closing;
(vii) contracts and other agreements pursuant to
which any Person has granted to any Seller or ATPG or has been
granted by any Seller or ATPG the right to use, purchase or
lease, or involve the bailment of, any tangible or intangible
property and involving the payment of aggregate amounts in
excess of $50,000;
(viii) mortgages, indentures, guaranties, security
agreements and any outstanding contracts and other agreements
and instruments relating to the borrowing of money, or any
extension of credit, which impose any Lien on any of the
Assets or any assets or properties owned by ATPG;
(ix) employment, consulting, maintenance, servicing
and agency agreements (other than standard, form employment
contracts executed by employees of ATPG);
(x) contracts and other agreements involving sales
agency, manufacturing, consignment, sales representative,
distributorship or marketing;
(xi) licenses to or from third parties of any
Intellectual Property that constitutes a part of the Assets or
any assets or properties owned by ATPG;
(xii) contracts and other agreements for the
construction or acquisition of fixed assets or other capital
expenditures;
(xiii) broker's or finder's agreements;
(xiv) contracts and other agreements relating to
partnerships, joint ventures or other arrangements involving a
sharing of profits or expenses, including, without limitation,
contracts and other agreements modifying or terminating any
such arrangements;
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(xv) contracts and other agreements to sell, lease or
otherwise dispose of any Asset or any assets or properties
owned by ATPG, in each case other than in the ordinary course
of business;
(xvi) contracts and other agreements with any
Affiliates or directors and officers of any Seller or ATPG;
and
(xvii) contracts and other agreements which permit,
prohibit or restrict the sharing of information regarding the
Assets or the Business.
True, correct and complete copies of all of the Material Contracts have
been delivered by Sellers to Buyer or otherwise made available to Buyer,
together with all amendments thereto.
(b) Except as disclosed in SCHEDULE 5.4(b), each of the
Material Contracts and each of the other Assigned Contracts is a
binding agreement, enforceable in accordance with its terms, of the
applicable Seller or ATPG, as the case may be, and, to the Knowledge of
such Seller, of each other party thereto, subject to the qualifications
that enforcement of the rights and remedies created thereby is subject
to: (i) bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting the rights and remedies of
creditors and (ii) general principles of equity (regardless of whether
such enforcement is considered in a proceeding in equity or at law).
None of Sellers or ATPG is in default (or to the Knowledge of Sellers
is alleged to be in default) in any material respect under any such
contract or other agreement, and to the Knowledge of Sellers, there
exists no event, condition or occurrence which after notice or lapse of
time, or both, would constitute such a default, in any material respect
under any of such contracts or other agreements. To the Knowledge of
Sellers, no other party to any such contract or other agreement is in
default in any material respect thereunder.
5.5 FINANCIAL INFORMATION; ABSENCE OF CHANGES; ABSENCE OF UNDISCLOSED
LIABILITIES.
(a) FINANCIAL STATEMENTS.
(i) Sellers have delivered to Buyer true, correct and
complete copies of the unaudited balance sheets of the
Business as of May 31, 1999, December 31, 1997 and December
31, 1998, and the related unaudited consolidated income
statements and statements of cash flow for each of the
respective five- and twelve-month periods then ended (such
financial statements are hereinafter collectively referred to
as the "FINANCIAL STATEMENTS") which are set forth on SCHEDULE
5.5(a). The Financial Statements (A) fairly present in all
material respects the financial condition and results of
operations of the Business, as of the respective dates thereof
and for the respective periods covered thereby (except for the
absence of information that would ordinarily be contained in
footnotes thereto) and (B) have been prepared in accordance
with U.S. GAAP consistently applied from period to period.
(ii) The annual financial statements (including
balance sheet, income statements and notes) of ATPG for 1998
(which includes balance sheets and income statements for 1997)
(the "ATPG Statements") which have been provided or made
available to Buyer have been duly prepared in accordance with
generally accepted German accounting principles observing
continuity in the accounting and
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evaluation principles, and present a true and fair view of the
assets, finance and results situation of ATPG as of the
relevant balance sheet dates.
(b) ABSENCE OF CHANGES. Except as expressly permitted or
contemplated by this Agreement, and except as set forth on SCHEDULE
5.5(b), since May 31, 1999, there has not been any change, or any event
or development (including any damage, destruction or loss, whether or
not covered by insurance) which, individually or together with other
such events, would result in a Material Adverse Effect or would have a
materially adverse effect on the ability of Sellers to consummate the
transactions contemplated hereby. Without limiting the foregoing, since
May 31, 1999 and except as expressly permitted by this Agreement or as
set forth on SCHEDULE 5.5(b), Sellers and ATPG have not:
(i) granted or committed to grant any bonus,
commission or other form of incentive compensation or
increased or committed to increase the compensation, fees or
pension, welfare, fringe or other benefits provided or payable
to or in respect of any of its employees, independent
contractors, directors, agents or representatives involved in
the Business, except for customary bonuses and regular salary
increases made in the ordinary course of business, consistent
with the past practice of the Business;
(ii) made any loans to any individuals, firms,
corporations or other entities, except in the ordinary course
of business, consistent with the past practice of the
Business;
(iii) written off any Accounts Receivable without
adequate consideration;
(iv) made any material change in any method of
accounting (for book or Tax purposes) or accounting practice;
(v) mortgaged, pledged or subjected to any Lien
(other than a Permitted Lien) any of the Assets or any assets
or properties owned by ATPG;
(vi) purchased or otherwise acquired, or sold,
leased, transferred or otherwise disposed of any material
properties or assets of the Business, except in the ordinary
course of business, consistent with Sellers' or ATPG's past
practices in the Business;
(vii) suffered any material damage, destruction or
loss (whether or not covered by insurance) with respect to the
Assets or any assets or properties owned by ATPG;
(viii) suffered any strike or any other labor dispute
with respect to the Business;
(ix) incurred any material liability or obligation
(whether absolute, accrued, contingent or otherwise) with
respect to the Business, except in the ordinary course of
business, consistent with Sellers' or ATPG's past practices;
or
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(x) entered into any material transaction or contract
or other agreement not in the ordinary course of business or
agreed (whether or not in writing) to do any of the foregoing.
(c) ABSENCE OF UNDISCLOSED LIABILITIES. Except (i) to the
extent reflected or reserved against on the face of (and not merely in
any notes to) the most recent balance sheet included in the Financial
Statements or the ATPG Statements or described in SCHEDULE 5.5(c) and
(ii) for liabilities and obligations that are (x) incurred after the
date of such balance sheets in the ordinary course of business
consistent with Sellers' or ATPG's past practice and (y) individually
and in the aggregate would not have or result in a Material Adverse
Effect, Seller has no liabilities or obligations of any nature with
respect to the Business or the Assets and ATPG has no liabilities or
obligations of any nature, in each case whether accrued, absolute,
contingent or otherwise (including, without limitation, liabilities as
guarantor or otherwise with respect to obligations of others) and
whether due or to become due.
(d) AWIG Pension Promise to Pay. AWIG has the financial
wherewithal to pay the net unfunded pension liability of ATPG (the "NET
UNFUNDED ATPG PENSION LIABILITY") that exists on the date of this
Agreement.
5.6 TITLE TO PROPERTY.
(a) Sellers have, and at the Closing Sellers will convey to
Buyer, good title to all the Assets (except for such leasehold and
licensed interests in personal property and leases described in
SCHEDULE 5.6(a) and except for all software that is licensed to any of
the Sellers by any Person) free and clear of any Liens, except for (i)
assets and properties disposed of in the ordinary course of business,
consistent with past practice, or as otherwise permitted by this
Agreement, (ii) Permitted Liens and (iii) the Liens described in
SCHEDULE 5.6(b)(i). The Assets referred to in the preceding sentence
include, without limitation, all assets, properties and rights of
Sellers shown or reflected on the most recent balance sheet included in
the Financial Statements or acquired by Sellers in connection with the
Business since the date of such balance sheet, except only for (i) cash
expended, (ii) any Excluded Assets and (iii) Inventories and other
assets used or sold and receivables collected in the ordinary course of
business since the date of such balance sheet. Sellers have maintained
all tangible Assets material to the Business in good working order,
subject only to ordinary wear and tear, and such Assets are suitable in
all material respects for the purposes for which they are being used on
the date of this Agreement.
(b) Sellers have, and at the Closing Sellers will convey to
Buyer, good and marketable fee title to the Greenville Plant, free and
clear of all Liens other than Permitted Liens and those matters
described in SCHEDULE 5.6(b)(i). Except as set forth in SCHEDULE
5.6(b)(ii), Sellers do not own, lease or otherwise have legal or
equitable title to any real property or interest related to the
Business except for the Greenville Plant and the Munster Plant. To
Sellers' Knowledge, Sellers have all easements, rights-of-way and
similar authorizations required for the existing use of the Greenville
Plant. All structures and other improvements and fixtures located at
the Greenville Plant and all machinery and equipment located on and
used at the Greenville Plant or otherwise used in the Business are in
good operating condition and repair for the conduct of the Business. To
Sellers' Knowledge, Sellers are not in default under any material
provision of any easement or any material covenant restriction or other
recorded agreement encumbering the Greenville
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Plant, and to the Knowledge of the Sellers, no event that with the
giving of notice, the passage of time or both would become a material
default, has occurred under any easement or any material covenant,
restriction or other agreement encumbering the Greenville Plant or the
land on which it is located. Except as otherwise expressly described in
SCHEDULE 5.6(b)(iii), neither the Greenville Plant, nor the use or
condition thereof, contravenes or violates any building, zoning, fire
safety, seismic, design, conversation, parking, architectural barriers
to the handicapped, occupational safety and health or other applicable
Law, or any restrictive covenant (whether or not permitted on the basis
of prior nonconforming use, waiver or variance), which contravention or
violation would have a Material Adverse Effect or otherwise impair the
ability of Buyer in any material respect to conduct the business and
operations of the Business as presently conducted or materially detract
from the value of such properties. There are no pending or, to the
Knowledge of Sellers, threatened (i) condemnation or appropriation
proceedings against the Greenville Plant or (ii) any Actions or
Proceedings alleging any violation of applicable Laws with respect to
the Greenville Plant or otherwise affecting all or any part of the
Greenville Plant. Sellers have not received any written citation,
subpoena, summons or other written notice alleging a violation of, or
asserting liability under, any applicable Laws with respect to the
Greenville Plant or the use or condition thereof. None of Sellers is in
default under any license, permit, certificate, authorization, lease,
contract or other agreement listed or described in SCHEDULE 5.6(b)(iv),
and, except as separately identified in SCHEDULE 5.6(b)(v), no
approval, authorization or consent of any Person is needed for any of
the foregoing to continue to be in full force and effect, and such
documents will not become unenforceable by Buyer following the
consummation of the transactions contemplated by this Agreement. The
Greenville Plant is assessed for real estate tax purposes as a wholly
independent tax lot separate from any adjoining land or improvements
not constituting a part of that parcel.
(c) With the exception of the Munster Assets and any software
that is licensed to ATPG by any Person, ATPG owns all assets,
properties and rights used solely in the Business (the "ATPG OWNED
ASSETS"). Except as described in SCHEDULE 5.6(c), ATPG has or will have
prior to the Closing good title to all ATPG Owned Assets and the
Munster Assets, free and clear of any Liens, except for (A) assets and
properties disposed of in the ordinary course of business, consistent
with past practice and (B) Permitted Liens.
(d) The ATPG Owned Assets include, without limitation, all
assets, properties and rights of ATPG shown or reflected on the ATPG
Statements or acquired by ATPG since the date of the latest balance
sheet included in such statements, except only for (A) cash expended
and (B) Inventories and other assets used or sold and receivables
collected in the ordinary course of business since the date of such
balance sheet. ATPG has maintained all tangible ATPG Owned Assets and
Munster Assets in good working order, subject only to ordinary wear and
tear.
5.7 ADDITIONAL INFORMATION. Sellers have heretofore delivered to Buyer
a true, correct and complete list of the lengths of service and current annual
salaries of each employee of the Business.
5.8 TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE 5.8,
all agreements (written or oral), documents and instruments pursuant to which
any Seller (or any Affiliate of such Seller) provides to any other Seller (or
any Affiliate of such other Seller) assets, services or facilities that are
material to the Business will be terminated at or prior to Closing without any
payment or other condition adverse to the Business or ATPG.
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5.9 LITIGATION. Except as described in SCHEDULE 5.9: (a) there is no
Action or Proceeding pending or, to the Knowledge of Sellers, threatened against
any Seller or ATPG which relates to the Business, the Assets or the Assumed
Liabilities, which, if adversely determined, would reasonably be expected to
have a Material Adverse Effect or would materially and adversely affect or
restrict the ability of Sellers to consummate the transactions contemplated
hereby; and (b) there is no Order to which any Seller or ATPG is subject which
relates to the Business, the Assets or the Assumed Liabilities and which has a
Material Adverse Effect or would materially and adversely affect or restrict the
ability of Sellers to consummate the transactions contemplated hereby.
5.10 COMPLIANCE WITH LAW. Except as set forth on SCHEDULE 5.10, (i)
none of Sellers or ATPG is in violation or breach of any Law (other than any
Environmental Law) to which the Business or the Assets or the Assumed
Liabilities or ATPG are subject, except as would not have a Material Adverse
Effect; (ii) Sellers and ATPG have all licenses, permits or other governmental
authorizations, approvals or consents (collectively, "GOVERNMENT APPROVALS")
necessary for the conduct of the Business or the ownership or use of the Assets,
except as would not have a Material Adverse Effect; and (iii) to the Knowledge
of Sellers, there exists no event that, with the giving of notice, the passage
of time, or both, would constitute a violation or breach of Law (other than any
Environmental Law) relating to the Business. There has been no material
violation, cancellation, suspension or revocation of, or default under, any
Governmental Approval or any written notice of any material violation,
cancellation, suspension, revocation, default or dispute received by Sellers or
ATPG affecting any Governmental Approval, and, to the Knowledge of Sellers, no
basis exists for any such action including, without limitation, as a result of
the consummation of the transactions contemplated by this Agreement.
5.11 ENVIRONMENTAL MATTERS. Except as disclosed in SCHEDULE 5.11:
(a) Each of Sellers and ATPG is in material compliance with
all applicable Environmental Laws pertaining to the conduct of the
Business (including the ownership and operation of the Greenville
Plant). No material violation by any of Sellers or ATPG is being
alleged or, to its knowledge, threatened in a writing received by any
Seller or ATPG relating to the conduct of the Business (including the
ownership and operation of the Greenville Plant).
(b) With respect to the conduct of the Business (including the
ownership and operation of the Greenville Plant), each of Sellers and
ATPG currently is in possession of, and in material compliance with,
all material permits and authorizations required pursuant to any
applicable Environmental Law.
(c) None of Sellers or ATPG has taken any action that will
result in, and none of Sellers or ATPG is subject to, any material
liability or obligation on the part of any Seller or ATPG relating to
(i) the environmental conditions on, under or from the Greenville
Plant, including, without limitation, the air, soil and groundwater
conditions at the Greenville Plant, or (ii) the past or present use,
handling, transport, treatment, generation, storage, disposal,
discharge, emission, or release of any Hazardous Materials at the
Greenville Plant.
(d) None of the current or past operations of Sellers or ATPG,
relating to the conduct of the Business, including, without limitation,
the Greenville Plant, is presently
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subject to any litigation, action or suit, and to the Knowledge of
Sellers, no such litigation, action or suit, related to any
Environmental Law is threatened.
(e) No Seller is subject to any outstanding order from, or
consent decree with, any Governmental or Regulatory Body or other
Person in respect of which any Seller or its Affiliates may be required
to incur costs arising from the release or threatened release of a
Hazardous Material at the Greenville Plant. No Seller has entered into
any contractual or other obligation (including indemnification
obligation) with any Governmental or Regulatory Body or other Person
pursuant to which any Seller or its Affiliates assumed responsibility
for, either directly or indirectly, the remediation of any condition
arising from or relating to the release or threatened release of
Hazardous Materials at the Greenville Plant.
(f) Sellers have disclosed and made available to the Buyer or
its representatives all material studies, analyses and test results
prepared by or on behalf of Sellers or ATPG relating to (i) the
environmental conditions on, under or about the Greenville Plant and
(ii) any Hazardous Materials used, handled, transported, treated,
generated, stored, discharged, emitted, or otherwise released by
Sellers on, under or from the Greenville Plant.
(g) Seller has removed and arranged for proper disposal of the
drums at the Greenville Plant that were identified in the March 28,
1998 site visit by O'Brien & Gere Engineers, along with any such drums
that may have accumulated at the Greenville facility between the date
of such visit and the date of this Agreement.
5.12 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Sellers directly with
Buyer without the intervention of any Person on behalf of Sellers in such manner
as to give rise to any valid claim by any Person against Buyer for a finder's
fee, brokerage commission or similar payment.
5.13 INTELLECTUAL PROPERTY. Schedules 2.1(b)(iii)(A), (B) and (C) set
forth a complete and correct list of all Intellectual Property that is owned by
Sellers in connection with the Business (the "Seller Owned Intellectual
Property"). SCHEDULE 5.13(a) sets forth a complete and correct list of all
Intellectual Property that is owned by ATPG (the "ATPG OWNED INTELLECTUAL
PROPERTY"). Any employee of either Seller or ATPG who has developed any
invention used principally in the Business has assigned (by contract or under
applicable Law) all of his or her rights in such invention to Sellers or ATPG,
as the case may be. SCHEDULE 5.13(b) sets forth a complete and correct list of
all written or oral licenses and arrangements (i) pursuant to which the use by
any Person of Intellectual Property is permitted by Sellers or ATPG and (ii)
pursuant to which the use by Sellers or ATPG of Intellectual Property is
permitted by any Person (collectively, the "INTELLECTUAL PROPERLY LICENSES").
All Intellectual Property Licenses that constitute part of the Assets or that
are held by ATPG are in full force and effect in accordance with their terms and
are in good standing with respect to the payment of fees. To the Knowledge of
Sellers, the conduct of the Business does not infringe the intellectual property
rights of any third party. To the Knowledge of Sellers, none of the Seller Owned
Intellectual Property that constitutes part of the Assets and none of the ATPG
Owned Intellectual Property is being infringed upon by third parties. The Seller
Owned Intellectual Property and the ATPG Owned Intellectual Property that have
been duly registered with, filed in or issued by, as the case may be, the United
States Patent and Trademark Office and United States Copyright Office or other
filing offices, domestic or foreign, are in good standing with respect to the
payment of maintenance fees in the respective filing offices. The trademark
"Press fit" was first used by AWI in the United States at least as
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early as January 1, 1990, and has been in continuous use in interstate commerce
in the United States by Sellers since then in connection with the Business. To
Sellers' Knowledge, Sellers and ATPG have maintained the secrecy of all
confidential Intellectual Property used in the Business. Except as set forth on
SCHEDULE 5.13(c), the Computer Programs are substantially year 2000 compliant
under reasonable business standards.
5.14 EMPLOYEES, LABOR MATTERS, ETC. Except as set forth in SCHEDULE
5.14 or under mandatory applicable foreign Law of general application, neither
Sellers nor ATPG is a party to or bound by any collective bargaining agreement
that relates to the Business, and, to the Knowledge of Sellers, there are no
labor unions or other organizations representing, purporting to represent or
attempting to represent any employees of the Business employed by any member of
Sellers or ATPG. Since December 31, 1997, there has not occurred or been
threatened any strike, slowdown, picketing, work stoppage, concerted refusal to
work overtime or other similar labor activity with respect to any employees of
any Seller of the Business. There are no labor disputes with respect to the
Business currently subject to any grievance procedure, arbitration or litigation
and there is no representation petition pending or, to the Knowledge of Sellers,
threatened with respect to any employee of the Business. Sellers and ATPG, with
respect to the Business, have complied with all applicable Laws pertaining to
the employment or termination of employment of their respective employees,
including, without limitation, all such Laws relating to labor relations, equal
employment opportunities, fair employment practices, prohibited discrimination
or distinction and other similar employment activities, except for any failure
so to comply that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
5.15 EMPLOYEE BENEFIT PLANS AND RELATED MATTERS: ERISA.
(a) EMPLOYEE BENEFIT PLANS. SCHEDULE 5.15(a) sets forth a
complete and correct list of each "employee benefit plan," as such term
is defined in Section 3(3) of ERISA, and each bonus, incentive or
deferred compensation, severance, termination, retention, change of
control, stock option, stock appreciation, stock purchase, phantom
stock or other equity-based, performance or other employee or retiree
benefit or compensation plan, program, arrangement, agreement, policy
or understanding, whether written or unwritten, that provides or may
provide benefits or compensation in respect of any employee or former
employee of any of Sellers or ATPG or the beneficiaries or dependents
of any such employee or former employee (hereinafter individually, an
"EMPLOYEE" and collectively, the "EMPLOYEES") or under which any
Employee is or may become eligible to participate or derive a benefit
and that is or has been maintained or established by any Seller or
ATPG, or to which any Seller or ATPG contributes or is or has been
obligated or required to contribute (collectively, the "PLANS").
(b) QUALIFICATION. Each Plan intended to be qualified under
Section 401 (a) of the Code, and the trust (if any) forming a part
thereof, has received a favorable determination letter from the IRS as
to its qualification under the Code and to the effect that each such
trust is exempt from taxation under Section 501(a) of the Code, and
nothing has occurred since the date of such determination letter that
would adversely affect such qualification or tax-exempt status.
(c) COMPLIANCE; LIABILITY.
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(i) To the Knowledge of Sellers, no event,
transaction or condition has occurred or exists with respect
to the Plans that would result in any material liability under
or pursuant to Title I or IV of ERISA or the penalty, excise
Tax or joint and several liability provisions of the Code
relating to employee benefit plans following the Closing to
Buyer or any of its Affiliates. All contributions and premiums
required to have been paid by Sellers or ATPG to each Plan
under the terms of any such Plan or its related trust,
insurance contract or other funding arrangement, or pursuant
to any applicable Law or collective bargaining agreement
(including ERISA and the Code) have been paid within the time
prescribed by any such Plan, agreement or applicable Law.
(ii) Each of the Plans has been operated and
administered in all respects in compliance with its terms, all
applicable Laws and all applicable collective bargaining
agreements, except for any failure so to comply that,
individually or in the aggregate, would not have or result in
a Material Adverse Effect. To the Knowledge of Sellers, there
are no material pending or threatened claims by or on behalf
of any of the Plans, by any Transferred Employee (as defined
below) or otherwise involving any such Plan or the assets of
any Plan (other than routine claims for benefits).
(iii) Except as set forth in SCHEDULE 5.15(c)(iii),
no Plan is a "multiple employer plan" within the meaning of
Section 4063 or 4064 of ERISA or a "multiemployer plan" within
the meaning of Section 4001(a)(3) of ERISA.
(iv) Except as set forth in SCHEDULE 5.15(c)(iv), no
Plan is subject to Section 412 of the Code or Section 302 or
Title IV of ERISA.
5.16 TAXES.
(a) Each of Sellers and ATPG has (or by the Closing will have) duly and
timely filed all Tax Returns relating to the Business or the Assets, including
without limitation, all Tax Returns of ATPG, required to be filed on or before
the Closing Date ("COVERED RETURNS"). Except for Taxes set forth on SCHEDULE
5.16(a), which are being contested in good faith and by appropriate proceedings,
the following Taxes have (or by the Closing Date will have) been duly and timely
paid: (i) all Taxes shown to be due on the Covered Returns, (ii) all
deficiencies and assessments of Taxes relating to the Business or the Assets,
including without limitation, all Taxes imposed on ATPG, of which written notice
has (or by the Closing Date will have) been received by any Seller and (iii) all
other material Taxes relating to the Business or the Assets due and payable on
or before the Closing Date of which any Seller is or reasonably should be (or by
the Closing Date will be or reasonably should be) aware (collectively, "COVERED
TAXES"). All Taxes required to be withheld by or on behalf of the Sellers in
connection with amounts paid or owing to any employee, independent contractor,
creditor or other party relating to the Business or the Assets ("WITHHOLDING
TAXES") have been withheld, and such withheld taxes have either been duly and
timely paid to the proper taxing authorities or set aside in accounts for such
purpose.
(b) Except as set forth on SCHEDULE 5.16(b), no agreement or other
document extending, or having the effect of extending, the period of assessment
or collection of any Covered Taxes or Withholding Taxes has been filed with any
taxing authority.
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(c) Except as set forth on SCHEDULE 5.16(c), (i) there are no
Covered Taxes or Withholding Taxes asserted in a writing received by
any Seller or ATPG by any taxing authority to be due and (ii) no issue
has been raised in a writing received by any Seller or ATPG by any
taxing authority in the course of any audit with respect to Covered
Taxes or Withholding Taxes. Except as set forth on SCHEDULE 5.16(c), no
Covered Taxes and no Withholding Taxes are currently under audit by any
Governmental Authority.
(d) Buyer will not be required to deduct and withhold any
amount pursuant to Section 1445(a) of the Code upon the transfer of the
Business hereunder.
(e) Except as set forth on SCHEDULE 5.16(e), there is no
litigation or administrative appeal pending or, to the Knowledge of any
Seller, threatened against or relating to any Seller or ATPG in
connection with Covered Taxes.
(f) Except as set forth on SCHEDULE 5.16(f), (i) no Assets are
treated as owned by any Person other than Sellers for U.S. federal
income tax purposes and (ii) none of the Assets is treated as tax
exempt use property for U.S. federal income tax purposes.
(g) ATPG has duly prepared and timely filed all its respective
tax returns. All taxes, social security contributions
(Sozialversicherungsbeitrage) and all other public law dues of any kind
owed by ATPG (the "ATPG Taxes") have been paid upon their due date or,
to the extent that such ATPG Taxes have not yet been due on the
respective statement day, have been fully accrued for in the balance
sheets being part of the ATPG Statements. SCHEDULE 5.16(g) is a
complete and correct description of the corporate income tax structure
of the usable equity (verwendbares Eigenkapital) of ATPG as of December
31, 1998, and there have been and will be, respectively, no changes
since then other than as introduced in the ordinary course of business
and in accordance with past practice.
(h) There are no outstanding adjustments for income Tax
purposes applicable to ATPG required as a result of changes in methods
of accounting effected on or before the Closing Date.
(i) Except as set forth on SCHEDULE 5.16(i), ATPG is not a
party to or bound by or has any obligation under any Tax allocation,
sharing, indemnity or similar agreement or arrangement, and ATPG (A) is
not and has not been a member of any group of companies filing a
consolidated, combined or unitary Income Tax Return and (B) has no
liability for the Taxes of any person as a transferee, successor,
indemnitor or guarantor; by contract or otherwise.
5.17 CUSTOMERS AND SUPPLIERS. Except as set forth on SCHEDULE 5.17, (i)
none of the 10 largest customers (which customers are not Affiliates of any
Seller) of the Business (based on the aggregate value of goods ordered from
Sellers and ATPG for the fiscal year ended December 31, 1998) has notified any
Seller or ATPG in writing that it has materially reduced or will materially
reduce its purchases of goods from Sellers or ATPG; (ii) none of Sellers or ATPG
has received any written notice that any Person with whom such Seller or ATPG
does a material amount of business and that is not an Affiliate of any such
Seller or ATPG will not continue to do business with such Seller or ATPG after
the Closing Date on terms and conditions substantially the same as those
prevailing during the past 12 fiscal months; and (iii) each Seller believes its
and ATPG's relations with persons and entities material to the conduct of the
Business are good.
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5.18 ASSETS. Except as set forth on SCHEDULE 5.18:
(a) The Assets constitute all of the properties and assets
used or held for use by Sellers solely in connection with the Business,
other than the Excluded Assets.
(b) Except for the items set forth on SCHEDULE 7.6(a)-1,
except for the fixtures described in Section 7.20 and except for the
services and facilities to be provided pursuant to the General Services
Agreement and the Munster Lease, the Munster Assets and the assets
owned by ATPG constitute all of the assets necessary for ATPG to engage
in the Business consistent with past practice. Notwithstanding the
foregoing, for the purposes of this Section 5.18, the software and
computers and repair and maintenance facilities which are operated by
any Affiliate of ATPG and the Excluded Assets shall be deemed not to be
primarily used in or material to the Business conducted by ATPG in
Munster, Germany.
5.19 DISCLAIMER OF SELLERS. Except as otherwise provided in this
Section 5, the Assets to be sold hereunder to Buyer are to be sold AS IS,
WITHOUT ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR INTENDED USE OR
OTHER EXPRESSED OR IMPLIED WARRANTY.
5.20 CAPITAL STOCK.
(a) The registered share capital of ATPG is DM 3.0 million and
is owned 100% by AWIG. ATPG's capital is fully paid in and no repayment
of capital contributions has been made, either open or concealed.
SCHEDULE 5.20(a) sets forth an extract from the Commercial Register,
Munster, Germany. As of the date of this Agreement, such extract sets
forth a completed and correct history of the registered capital of ATPG
since the day of its formation.
(b) AWIG is the legal and beneficial owner of the ATPG Share
which is free from any encumbrances or any other rights for the benefit
of third parties. AWIG has the right and the power to freely dispose of
the ATPG Share without the consent of any third party being required
for such disposal or such disposal violating the right of any third
party.
(c) The ATPG Share is not tainted for the purposes of Section
50c of the German Income Tax Act (i.e., all ATPG Shares have never been
held by shareholders not entitled to tax credit (nicht
anrechnungsberechtigte Anteilseigner) nor by funds organized under the
German Act on Capital Investment Companies. ATPG has never distributed
any constructive dividends (verdeckte Gewinnausschuttungen).
5.21 ATPG BUSINESS, SUBSIDIARIES, PERMANENT ESTABLISHMENTS.
(a) ATPG has been and currently is engaged in no business
activity other than the Business.
(b) ATPG has no Subsidiaries, but has a validly registered
branch in Trezzano, Italy, with a business address at Via Venezia 6,
20060 Trezzano, Italy (the "TREZZANO BRANCH")
(c) The only permanent business establishments of ATPG are the
Munster Plant and the Trezzano Branch.
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5.22 ATPG RESTRUCTURING.
(a) The transactions contemplated in Section 7.6 of this
Agreement will be tax-neutral for ATPG.
(b) The termination of the control- and profit transfer
agreement will not have any adverse tax consequences for ATPG.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to each of Sellers that:
6.1 ORGANIZATION, POWER AND STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and ROTEC, Dundee and each Buyer Party is a corporation or other
entity duly organized, validly existing and in good standing under its state of
incorporation or formation, as the case may be. Buyer, ROTEC, Dundee and each
other Buyer Party has all requisite corporate power and authority and all
necessary licenses and permits to carry on its business as it has been and is
currently being conducted, and to own, lease and operate the properties and
assets used in connection therewith and to be acquired pursuant hereto.
6.2 AUTHORIZATION. The execution and delivery of this Agreement by
Buyer or any other Buyer Party and by ROTEC and Dundee of the Loan Agreement and
the performance by each of them of their respective obligations hereunder and
thereunder and the transactions contemplated hereby, have been duly and validly
authorized by all necessary corporate action on the part of Buyer, any other
Buyer Party, ROTEC and Dundee and their respective shareholders. This Agreement
has been duly executed and delivered by Buyer or any other Buyer Party and is,
and all instruments of conveyance and other documents to be executed and
delivered by Buyer or any other Buyer Party, as contemplated by this Agreement,
will constitute, when so executed and delivered, and the Loan Agreement has been
duly executed and delivered by each of ROTEC and Dundee and is, a valid and
binding obligation of Buyer, any other Buyer Party, ROTEC or Dundee, as the case
may be, enforceable in accordance with its respective terms, except as such
enforcement may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors and (ii) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
6.3 FREEDOM TO CONTRACT. Except for the Excluded Matters, the execution
and delivery of this Agreement and the Loan Agreement do not, and the
consummation of the transactions contemplated hereby will not (i) violate or
conflict with the provisions of the certificate of incorporation or by-laws of
Buyer, any other Buyer Party, ROTEC or Dundee, (ii) result in the imposition of
any Lien under, cause the acceleration of any obligation under, or violate or
conflict with the terms, conditions or provisions of any contract or other
agreement or instrument to which Buyer, any other Buyer Party, ROTEC or Dundee
is a party or by which it is bound, (iii) except as would not have a material
adverse effect on Buyer's or any other Buyer Party's ability to consummate the
transactions contemplated by this Agreement, result in a breach by Buyer, any
other Buyer Party, ROTEC or Dundee of any of the terms, conditions or provisions
of any Law or Order or (iv) except for filings as described in Section 7.2(b),
require any consent, authorization or approval of, filing with or notice to any
Governmental or Regulatory Body.
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6.4 LITIGATION. Buyer is not a party to any Action or Proceeding
pending or, to the knowledge of Buyer, threatened, which, if adversely
determined, would reasonably be expected to adversely affect or restrict the
ability of Buyer to consummate the transactions contemplated by this Agreement.
There is no Order to which Buyer is subject which would reasonably be expected
to adversely affect or restrict the ability of Buyer to consummate the
transactions contemplated by this Agreement.
6.5 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Buyer directly with
Seller without the intervention of any Person on behalf of Buyer in such manner
as to give rise to any valid claim by any Person against Seller for a finder's
fee, brokerage commission or similar payment.
6.6 CERTAIN EMPLOYMENT ARRANGEMENTS. All arrangements, if any, with
respect to the employment of Norbert Kroner and Thomas Tymon by Buyer or any of
its Affiliates have been finalized to the mutual satisfaction of Buyer and
Messrs. Kroner and Tymon.
6.7 FINANCIAL INFORMATION OF DUNDEE AND ROTEC; ABSENCE OF UNDISCLOSED
LIABILITIES OF DUNDEE AND ROTEC.
(a) FINANCIAL STATEMENTS.
(i) Buyer has delivered to Sellers true, correct and
complete copies of the following (the "DAY FINANCIAL
STATEMENTS"): (x) with respect to ROTEC: (i) the audited
balance sheets of ROTEC as of December 31, 1998 and the
related audited statements of income for the twelve-month
period then ended and (ii) the unaudited balance sheets of
ROTEC as of June 30, 1999 and the related unaudited statements
of income for the six-month period then ended; and (y) with
respect to Dundee: (i) the audited balance sheets of Dundee as
of December 31, 1997 and the related audited statements of
income for the twelve-month period then ended, (ii) the
unaudited balance sheets of Dundee as of December 31, 1998 and
the related unaudited statements of income for the
twelve-month period then ended and (iii) the unaudited balance
sheets of Dundee as of June 30, 1999 and the related unaudited
statements of income for the six-month period then ended (such
Day Financial Statements are set forth on SCHEDULE 6.7(a)).
The Day Financial Statements (A) fairly present in all
material respects the financial condition and results of
operations of Dundee and ROTEC, as of the respective dates
thereof and for the respective periods covered thereby (except
for the absence of information that would ordinarily be
contained in footnotes thereto) and (B) have been prepared in
accordance with U.S. GAAP consistently applied from period to
period, except in the case of the balance sheets and related
income statements of ROTEC described in clauses (x)(i) and
(x)(ii) above, which have been prepared in accordance with
generally accepted accounting principles of Germany.
(b) ABSENCE OF UNDISCLOSED LIABILITIES OF DUNDEE AND ROTEC.
(i) Except (i) to the extent reflected or reserved
against on the face of (and not merely in any notes to) the
most recent balance sheet included in the Day Financial
Statements, (ii) for liabilities and obligations that are (x)
incurred after the date of such balance sheets in the ordinary
course of business consistent with Dundee's and ROTEC's past
practice and (y) individually and in the aggregate
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would not materially adversely affect Dundee's or
ROTEC's respective financial conditions and results
of operations and (iii) for liabilities and
obligations under any interest rate or currency
protection agreement, interest rate or currency
futures contract, interest rate or currency option,
interest rate or currency cap or other interest rate
or currency hedge agreement, in each case, to the
extent entered into, purchased or otherwise acquired
in the ordinary course of business of Dundee or ROTEC
with reputable financial institutions and not for the
purposes of speculation, Dundee and ROTEC have no
liabilities or obligations of any nature whether
accrued, absolute, contingent or otherwise
(including, without limitation, liabilities as
guarantor or otherwise with respect to obligations of
others) and whether due or to become due.
7. CERTAIN COVENANTS.
7.1 TRANSACTIONS AND CONDUCT OF BUSINESS PENDING THE CLOSING.
(a) EXAMINATIONS, INVESTIGATIONS. Subject to the limitations
set forth in this clause (a), at any time after the submission of the
filings contemplated by Section 7.2 and prior to the Closing Date, (i)
Buyer shall be entitled, through its employees and representatives
(including, without limitation, its counsel and accountants), to enter
upon and make such investigation of the Assets, and such examination of
the books and records, financial condition and operations of the
Business, as Buyer may reasonably request, (ii) Buyer shall be
entitled, through its employees and representatives, to enter upon the
Assets and solicit applications for employment with Buyer and to
conduct interviews with the Sellers' employees in accordance with
Buyer's customary practices, (it being understood and agreed that Buyer
will exercise this right and complete its review of such employees as
soon as practicable after the date of this Agreement) and (iii) Sellers
will make the management and employees of Sellers and ATPG available to
Buyer and provide such other information to Buyer and its authorized
representatives as shall have been reasonably requested by Buyer or
such authorized representatives. Buyer shall indemnify Sellers for any
costs, expenses, legal fees and other liabilities from claims, suits or
proceedings resulting from, or in connection with, actions taken by
Buyer in respect of these examinations and investigations. Any such
investigation, examination and employee interview shall be conducted
at, and members of management and employees of Sellers and ATPG who are
specifically identified by Buyer shall be made available as
contemplated by this paragraph at, reasonable times, under reasonable
circumstances and with reasonable advance notice; PROVIDED, HOWEVER,
that such investigation, examination or management availability shall
not unreasonably interfere with the business operations of Sellers or
ATPG, the regulatory filings (or review thereof by any Governmental or
Regulatory Body) contemplated by Section 7.2 or negotiations with
respect to and any disclosures to employees of ATPG. All information
provided to Buyer pursuant to this Section 7.1(a) shall be subject to
the provisions of the Confidentiality Agreement. Notwithstanding
anything to the contrary in this Agreement, Buyer agrees and
acknowledges that certain information, as determined by Sellers, about
the Business is commercially sensitive and, except as provided in that
certain letter agreement dated March 17, 1999, between Arthur Andersen
LLP, AWI, Day International Group, Inc. and Greenwich Street Capital
Partners, Inc., will not be disclosed to Buyer before the
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transactions contemplated by this Agreement are consummated or such
other time as may be agreed by the parties hereto.
(b) CONDUCT OF BUSINESS.
(i) From the date hereof through the Closing Date,
Sellers will use commercially reasonable efforts to (A)
conduct the Business in the ordinary course consistent with
past practice in all material respects, and (B) comply, in all
material respects, with all Laws and Orders applicable to the
Business. Sellers agree to inform Buyer promptly upon receipt
of Knowledge of the occurrence of any event occurring prior to
the Closing which could reasonably be expected to result in a
Material Adverse Effect.
(ii) Without limiting the generality of the
foregoing, without the prior written consent of Buyer,
Sellers, jointly and severally, covenant and agree that
Sellers will not do or agree to do, and will not permit ATPG
to do or agree to do, any of the following on or before the
Closing with respect to or in connection with the Assets or
the Business or ATPG, except as expressly permitted by this
Agreement or listed in SCHEDULE 7.1(b)(ii):
(A) Other than in the ordinary course of
business and consistent with Sellers' and ATPG's past
practices, grant any material bonus, commission or
other form of incentive compensation or increase the
compensation, fees or pension, welfare, fringe or
other benefits provided or payable to or in respect
of any officer, employee, independent contractor,
director, agent or representative involved in the
Business;
(B) Enter into any material contract,
commitment or transaction relating to the Assets or
Business not in the ordinary course of business and
consistent with past practices;
(C) Waive, cancel or compromise any material
right or claim of Sellers or ATPG other than in the
ordinary course of business and consistent with past
practices;
(D) Modify, amend, cancel or terminate any
Material Contract or other material agreement to
which any Seller or ATPG is a party other than in the
ordinary course of business and consistent with past
practices;
(E) (x) permit ATPG to make any material Tax
election, to amend any Tax Return, or to settle or
compromise any material Tax liability, or (y)
otherwise fail to conduct all Tax affairs relating to
Sellers and ATPG in a manner other than in the
ordinary course and in substantially the same manner
as such affairs would have been conducted if the
parties had not entered into this Agreement;
(F) Move or transfer any Assets (other than
Excluded Assets) to any location or property not
included in the Assets, other than in the ordinary
course of business consistent with past practices of
the Business; or
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(G) Take any action that would cause any of
the representations and warranties set forth in
Section 5 hereof to be untrue in any material
respect.
(iii) During the period from the date of this
Agreement to the Closing, Sellers, jointly and severally,
covenant and agree that Sellers, with respect to the Business
and the Assets, will use their reasonable best efforts,
consistent with past practices, to (A) maintain in all
material respects its relationships with its employees and its
customers, suppliers and other Persons with whom Sellers do
business; (B) keep in full force and effect insurance
comparable in amount and scope of coverage to insurance
carried by them on the date of this Agreement; (C) market its
products and services; (D) use its commercially reasonable
best efforts to keep its business and operations functioning
in a customary manner, retain its present employees so that
they will be available after the Closing; (E) make all capital
expenditures consistent with its current business plan; (F)
pay accounts payable and other obligations when they become
due and payable, except to the extent any delay in payment is
attributable to normal disputes in the ordinary course of
business consistent with the past practice of the Sellers; and
(G) perform in all material respects all of its obligations
under any contracts, agreements or other instruments relating
to or affecting any of the Assets or the Business.
(c) THIRD PARTY CONSENT. Sellers and Buyer agree to use
commercially reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement, including, without
limitation, the obtaining of all necessary waivers, consents and
approvals and the continuance in full force and effect of the permits,
contracts and other agreements set forth on the Schedules to this
Agreement and the fulfillment of each condition to the other party's
obligations set forth in Section 8 (it being understood and agreed that
Sellers and ATPG shall not be required to expend any amounts or incur
any liabilities in connection with obtaining any such necessary
third-party waivers, consents or approvals).
(d) Notwithstanding anything to the contrary contained in this
Agreement, any disruptions to or effect on the Business's relationships
with customers, suppliers, distributors, employees (including, but not
limited to, any strike or other labor dispute) or other third persons
that arises from or relates solely to the public announcement or other
permitted disclosure of the execution or terms of this Agreement shall
not constitute a breach of this Agreement or breach of any
representation, warranty or covenant; PROVIDED, HOWEVER, that solely
for purposes of determining whether or not the condition precedent set
forth in Section 8.1(a) has been satisfied, such condition shall be
deemed not to have been satisfied if for a period of two consecutive
days, which period includes the Closing Date, all or substantially all
of the work force of ATPG have failed to report to work (a "Qualified
Strike"), it being understood and agreed that in no event shall Sellers
have any liability under this Agreement to any Buyer Indemnified Party
as a result of a Qualified Strike. In addition, notwithstanding
anything to the contrary contained in this Agreement, Sellers or ATPG
may, if they elect in their sole discretion, pay or agree to pay
additional compensation, benefits or like amounts to employees of the
Business and such agreement or payment shall not be deemed to be a
breach or violation of any provisions of this Agreement; PROVIDED,
HOWEVER, that Sellers shall bear the expense of any such payments or
agreements in full whether payable by Sellers before the Closing or by
any Buyer Party after the Closing and if necessary, shall reimburse
ATPG or the Buyer for such amounts to
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the extent that such amounts are not otherwise required to be paid
pursuant to certain items referred to in SCHEDULE 5.15.
7.2 REGULATORY AND OTHER APPROVALS. Sellers and Buyer will (a) take all
commercially reasonable steps necessary or desirable, and proceed diligently and
in good faith and use all commercially reasonable efforts, as promptly as
practicable to obtain all consents, approvals or actions of, to make all filings
with and to give all notices to Governmental or Regulatory Bodies required of
such parties or their Affiliates to consummate the transactions contemplated
hereby, (b) provide such other information and communications to such
Governmental or Regulatory Bodies as such parties or such Governmental or
Regulatory Bodies may reasonably request in connection therewith and (c)
cooperate with each other as promptly as practicable in connection with the
foregoing. To the extent reasonably practicable, each party hereto will provide
prompt notification to the other party hereto or its Affiliates when any such
consent, approval, action, filing or notice referred to in clause (a) above is
obtained, taken, made or given, as applicable and will advise each other party
hereto of any communications (and, unless precluded by Law, provide copies in
advance to each other party hereto of any communications that are in writing,
other than the filings under the HSR Act described below) with any Governmental
or Regulatory Body regarding the transactions contemplated by this Agreement. In
addition to and not in limitation of the foregoing, unless the parties hereto
otherwise agree, Sellers and Buyer will make their respective filings under the
HSR Act within 5 Business Days after the date of this Agreement and coordinate
the timing for releasing a press announcement attached hereto as Exhibit C on
the first Business Day after each of Buyer and Sellers have made their
respective filings under the HSR Act.
7.3 COVENANT NOT TO COMPETE.
(a) Except as set forth on SCHEDULE 7.3, each of Sellers
agrees that it shall not at any time (i) within the five-year period
immediately following the Closing, directly or indirectly engage, or
have any ownership interest in any firm, corporation, partnership,
proprietorship or other business entity that engages (directly or
indirectly) in the Business, so long as Buyer, or any Affiliate of
Buyer, remains engaged in the Business; PROVIDED, HOWEVER, that it
shall not be a violation of this Section 7.3(a)(i) for any Seller to
own, directly or indirectly, solely as an investment, securities of any
Person which are traded on a national securities exchange or NASDAQ if
such Seller (x) is not a controlling Person or a member of a group
which controls such Person and (y) does not, directly or indirectly,
own more than 2% or more of any class of securities of such Person; or
(ii) within a three-year period immediately following the Closing,
employ, solicit or offer to employ any Transferred Employee. In
addition, during the period commencing on the date hereof and ending on
the Closing Date, except as required, and only to the extent required,
under foreign Law of mandatory application, if any, each of the Sellers
agrees that it shall not solicit or offer to employ any employee,
former employee or independent contractor of Seller who has been, or
may be, offered the opportunity to seek employment with the Buyer
pursuant to Section 7.5(a).
(b) Each Seller acknowledges that the covenants contained in
this Section 7.3 were a material and necessary inducement for Buyer to
agree to the transactions contemplated hereby, and that Sellers will
realize significant monetary benefit from these transactions, that
violation of any of the covenants contained in this Section 7.3 will
cause irreparable and continuing damage to Buyer, that Buyer shall be
entitled to injunctive or other equitable relief from any court of
competent jurisdiction restraining any further
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violation of such covenants and that such injunctive relief shall be
cumulative and in addition to any other rights or remedies to which
Buyer may be entitled.
(c) From and after the Closing Date, Sellers shall, and will
cause their Affiliates to, keep secret and retain in confidence, and
shall not use for the benefit of themselves or others except in
connection with the business and affairs of Buyer and its Affiliates,
all Intellectual Property, and shall not record, disclose or
disseminate such Intellectual Property to anyone outside of Buyer and
its Affiliates except with Buyer's express written consent and except
as otherwise required by law; provided, however, for purposes of this
Section 7.3(c), Intellectual Property shall not include any
information, technology or know-how or other matter which is readily
ascertainable from public or published information (without the
violation of any confidentiality agreement related thereto).
7.4 BULK SALES LAWS. Buyer waives compliance by Sellers, and Sellers
waive compliance by Buyer, with the provisions of any applicable bulk sales,
fraudulent conveyance or other law for the protection of creditors.
7.5 EMPLOYEE MATTERS.
(a) Except (i) as otherwise required under mandatory
applicable foreign Law of general application and (ii) with respect to
Employees of ATPG, subject to Buyer's sole discretion, Buyer will offer
employment to selected individuals who are actively employed in the
operation of the Business in the United States. Prior to the Closing
Date and subject to applicable Law, Sellers shall provide to Buyer
mutually agreed to information pertaining to Employees located in
Greenville, S.C. Those Employees (other than Employees of ATPG) who
accept Buyer's offers of employment, effective as of the Closing Date,
shall be referred to herein as the "TRANSFERRED EMPLOYEES." Buyer shall
provide (or cause to be provided) to each Transferred Employee (i) upon
and after the Closing, until the second anniversary of the Closing
Date, base pay and bonus programs no less than the base pay and bonus
programs in effect from the Sellers and their Affiliates immediately
before the Closing, (ii) employee benefit plans and programs, including
severance, that Buyer and its Affiliates offer to its employees as of
the Closing Date, it being understood that Buyer's employee benefit
plans and programs will include, without limitation, a defined
contribution plan qualified under Section 401(a) of the Code, with a
qualified cash or deferred feature as defined under Section 401(a) of
the Code and the regulations thereunder, and a group health plan
offering medical coverage to employees and eligible dependents, (iii)
upon and after the Closing, until the second anniversary of the Closing
Date, severance benefits no less favorable than those offered by
Sellers immediately before the Closing, determined without regard to
the Employment Protection Plan for Salaried Employees of Armstrong
World Industries, Inc., and (iv) without limiting clause (iii), upon
and after the Closing, benefits, including with respect to severance
(and taking into account benefits provided under clause (iii)), which
are no less favorable, in the aggregate, than the benefits offered by
Buyer and its Affiliates to other similarly situated employees from
time to time. All Transferred Employees shall receive credit for all
purposes (including, without limitation, for purposes of eligibility
and vesting provisions and provisions relating to waiting periods)
under the Buyer's employee benefit plans and programs (or, if
applicable, the plans and programs of its Affiliates) for service with
the Sellers and their Affiliates (and any predecessor service credited
under the Plans), other than for purposes of benefit accrual under a
defined benefit pension plan, and shall receive credit for all
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deductibles and co-payments incurred under health or other welfare
Plans before the Closing.
(b) Except as otherwise set forth herein (including, without
limitation, in Section 2.9 of this Agreement) or specifically agreed by
the parties hereto or as required under mandatory applicable foreign
Law of general application, from and after the Closing, Sellers shall
remain solely responsible for any and all liabilities, obligations and
commitments in respect of the Employees, including the Transferred
Employees and their beneficiaries and dependents, relating to or
arising in connection with or as a result of (i) the actual or
constructive termination of employment of any such Employee by the
Sellers or ATPG if any such event occurs before the Closing Date
(including, without limitation, in connection with the consummation of
the transactions contemplated by this Agreement) or (ii) the
participation in or accrual of benefits or compensation under, or the
failure to participate in or to accrue compensation or benefits under,
any Plan (other than ATPG's pension commitments described in the
Promise to Pay), in each case, to the extent relating to or arising in
periods prior to the Closing Date, including, without limitation,
claims, whether such claims are asserted before, on or after the
Closing Date, for medical, dental, hospitalization or other health
benefits, services or other treatments, life, disability, accidental
death or dismemberment, supplemental unemployment compensation or other
welfare or fringe benefits or expense reimbursements which claims
relate to or are based upon expenses incurred during periods before the
Closing Date, including, without limitation, all such claims for health
services, treatments or related expenses (including drugs, equipment
and similar expenses) rendered, purchased or utilized before the
Closing Date.
(c) From and after the Closing Date, Sellers shall remain
solely responsible for any and all liabilities, obligations or
commitments relating to or arising in connection with the requirements
of section 4980B of the Code to provide continuation of health care
coverage under any Plan in respect of (A) Employees, other than the
Transferred Employees and their covered dependents, and (B) to the
extent related to a qualifying event occurring before the Closing Date,
Transferred Employees and their covered dependents.
(d) From and after the Closing Date, Sellers shall, jointly
and severally, remain solely responsible for any and all liabilities,
obligations or commitments to or in respect of any Employee relating to
or arising in connection with any and all claims for workers'
compensation benefits arising in connection with any occupational
injury or disease occurring or existing on or prior to the Closing
Date.
(e) Sellers and Buyers agree to (A) treat Buyer as a
"successor employer" and Sellers as a "predecessor," within the meaning
of Sections 3121(a)(1) and 3306(b)(1) of the Code, with respect to
Transferred Employees who are employed by Buyer for purposes of Taxes
imposed under the United States Federal Unemployment Tax Act ("FUTA")
or the United States Federal Insurance Contributions Act ("FICA") and
(B) cooperate with each other to avoid, to the extent possible, the
filing of more than one IRS Form W-2 with respect to each such
Transferred Employee for the calendar year within which the Closing
occurs.
(f) At the request of Buyer with respect to any particular
applicable Law relating to employment, unemployment insurance, social
security, disability, workers' compensation, payroll, health care or
other similar tax other than taxes imposed under
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FICA and FUTA, Sellers and Buyer will (A) treat Buyer as a successor
employer and Sellers as a predecessor employer, within the meaning of
the relevant provisions of such applicable Law, with respect to
Transferred Employees who are employed by Buyer and (B) cooperate with
each other to avoid, to the extent possible, the filing of more than
one individual information reporting form pursuant to each such
applicable Law with respect to each such Transferred Employee for the
calendar year within which the Closing occurs.
(g) Effective as of the Closing, Buyer shall establish or
maintain a defined contribution plan which shall be qualified under
Section 401(a) of the Code upon and after the Closing (the "Buyer
Plan"). Buyer shall cause the Buyer Plan to accept direct rollovers of
"eligible rollover distributions" as defined in Section 402 of the
Code, consisting of cash (except as otherwise provided in the last
sentence of this Section 7.5(g)), with respect to Transferred Employees
from the Retirement Savings and Stock Ownership Plan of Armstrong World
Industries, Inc. and the Retirement Income Plan of Armstrong World
Industries Inc. Buyer shall provide Seller with such evidence of the
tax-qualified status of the Buyer Plan in connection with such
rollovers as Seller shall reasonably request. Seller and Buyer shall
work out procedures under which Transferred Employees who have existing
401(k) loans may directly roll over their loans from the 401(k) plan of
Armstrong World Industries, Inc. to the Buyer Plan, or shall agree upon
such other procedures to address such matters as shall be mutually
acceptable.
(h) As of the Closing, and subject thereafter to any and all
rights that Buyer may have to amend or terminate its plans, Buyer shall
maintain one or more group health plans which shall provide for medical
coverage of Transferred Employees on and after their retirement as
provided by SCHEDULE 7.5(h), except that such plan or plans shall
provide as of the Closing (subject thereafter to such rights to amend
or terminate) that Transferred Employees who have attained age 50 on or
before the Closing shall be permitted to retire thereunder if and when
they have attained age 55 and have been credited with five years of
service, provided that any Transferred Employee so retiring in reliance
on the foregoing exception may be required to pay the full cost of
coverage (that is, both the employer and employee portions of the
applicable premiums).
7.6 PRE-CLOSING TRANSFER OF MUNSTER ASSETS. Except as set forth on
SCHEDULE 7.6(a)-1, at or prior to the Closing, AWIG shall contribute as an
equity contribution to the capital reserves (Kapitalrucklage (EK 04)) of ATPG
all the properties, assets, rights, claims and contracts of every kind,
character and description owned by AWIG (other than real property) solely in
connection with the Business, that is conducted in the Federal Republic of
Germany or in Italy (collectively the "Munster Assets") pursuant to
documentation reasonably satisfactory to and provided to Buyer. Upon this
contribution, the business lease agreement between ATPG and AWIG of December 31,
1996, will collapse and, thus, automatically end. The parties agree that ATPG's
book value in the Munster Assets as set forth in the Closing Net Asset Statement
shall be deemed to be the fair market value of such assets. The Munster Assets
include, without limitation the following:
(a) MUNSTER EQUIPMENT. The Equipment listed in SCHEDULE
7.6(a)-2 (being Equipment located at ATPG's industrial facility at
Robert-Bosch-Strasse, 48153 Munster, Germany) (the "MUNSTER PLANT"),
together with any additions and less any dispositions occurring through
the Closing (the "MUNSTER EQUIPMENT").
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(b) MUNSTER INVENTORY. All Inventory owned by AWIG at the time
of the Closing (including consigned Inventory) and held at the Munster
Plant, or wherever else such Inventory is located, for use solely in
the Business (the "MUNSTER INVENTORY").
(c) MUNSTER MATERIALS AND SUPPLIES. All Materials and Supplies
owned by AWIG at the time of the Closing and held at the Munster Plant
or at any related facility or site for use solely in connection with
the Assets or in the Business (the "MUNSTER MATERIALS AND SUPPLIES").
7.7 ATPG TAX MATTERS.
(a) Unless otherwise required by law, Sellers shall pay, and
shall indemnify and hold harmless the Buyer Indemnified Parties or, at
the request of the Buyer, ATPG from and against, any Tax that is or may
become payable by ATPG or chargeable as a Lien upon the assets thereof
that is attributable to any period or a portion thereof ending, or
event occurring, on or prior to date of Closing, and has not been paid
as of the date of Closing. For purposes of this Section 7.7, any
liability for any Tax that is or may be payable by ATPG that is
attributable to a period which begins before and ends after the date of
Closing shall be apportioned between the portion of such period ending
on the date of Closing and the portion beginning on the date of Closing
Date in the manner set forth in Section 2.5.
(b) Sellers shall prepare and timely file, or cause to be
prepared and timely filed, with the relevant Governmental Authorities
all Tax Returns that are required to be filed by ATPG on or prior to
the date of Closing on a basis consistent with past practice. Buyer
shall prepare and timely file, or cause to be prepared and timely
filed, with the relevant Governmental Authorities all other Tax Returns
that are required to be filed by ATPG.
(c) Notwithstanding anything in this Agreement to the
contrary, Sellers shall control the conduct of all audits or
administrative or judicial proceedings with respect to the Tax
liabilities of ATPG for any period or portion thereof ending on or
prior to the Closing, PROVIDED that Sellers shall consult with Buyer
regarding the positions Sellers will assert in writing in connection
with any such audits or administrative or judicial proceeding and shall
not enter into any settlement of any such administrative or judicial
proceeding (if such settlement would adversely affect ATPG) without the
written consent of Buyer, which shall not be unreasonably withheld.
Buyer shall control all other administrative or judicial proceedings
with respect to the Tax liabilities of ATPG for any period or portion
thereof not described in the preceding sentence. Buyer shall give
notice to Sellers of any Tax adjustment proposed in writing pursuant to
any government audit or other proceeding if such adjustment could give
rise to a Claim for indemnification against Sellers pursuant to this
Section 7.7.
(d) Sellers and Buyer shall cooperate with respect to the
preparation of and filing of any Tax Return for which the other is
responsible pursuant to Section 7.7(b), and with respect to any Tax
audit or administrative or court proceeding relating to Taxes referred
to in Section 7.7(c), PROVIDED that such cooperation shall not
unreasonably interfere with the conduct of the business of the parties.
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7.8 CERTAIN INFORMATION. Buyer will not, and will cause its Affiliates
not to, (i) use any information (written or unwritten), technology or know-how
that does not constitute part of the Assets ("PROPRIETARY INFORMATION") and that
becomes known (intentionally or unintentionally) to Buyer or any of its
Affiliates during the term of the Munster Lease as a result of Buyer or any of
its Affiliates being present or conducting operations at the Munster Plant or
(ii) record, or disclose or disseminate to any Person, such Proprietary
Information, except with Sellers' express written consent and except as
otherwise required by law; PROVIDED, HOWEVER, for purposes of this Section 7.8,
Proprietary Information shall not include any information, technology or
know-how which is readily ascertainable from public or published information
(without the violation of any confidentiality agreement related thereto) or can
be shown from written records to have been known to Buyer prior to the Closing.
7.9 CERTAIN CUSTOMS PROCEDURES. Upon reasonable advance notice to Buyer
from Sellers, Buyer agrees to make available (provided such availability does
not materially interfere with the conduct of the Business) Transferred Employees
identified by Sellers to assist Sellers in connection with finalizing U.S. duty
drawback claims relating to imported products sold by Sellers prior to the
Closing Date and on which products AWI has paid duty.
7.10 SALES ANALYSIS. After the Closing, Buyer and AWI shall develop a
mutually acceptable program by which AWI will provide to Buyer certain sales
analysis information with respect to the Business conducted in Greenville, South
Carolina (the "SALES ANALYSIS") until the earlier of (i) the date on which Buyer
has systems in place to perform such Sales Analysis or (ii) December 31, 1999
(or such other date as the parties agree in writing). The costs to be charged by
AWI to Buyer for such Sales Analysis shall be mutually agreed to by the parties
and shall be based on standard AWI internal rates.
7.11 TREZZANO ARRANGEMENTS. Prior to the Closing, Buyer and Sellers
shall cooperate with each other to determine which space and services provided
by Armstrong Insulation Products S.r.L. to ATPG's Italian Branch will be
required by Buyer during the transition period contemplated by the General
Services Agreement. The terms upon which such space and services will be
provided as described above will be substantially similar to those in effect on
the date of this Agreement. The current service agreement shall be modified or
replaced to reflect the required services ( as so modified or replaced, the
"TREZZANO AGREEMENT").
7.12 ATPG AUDIT. Prior to the delivery of the Closing Statement of Net
Assets, Sellers shall at their sole expense deliver to Buyer financial
statements of ATPG for the period from January 1, 1999 to the Closing Date that
have been audited in accordance with German GAAP.
7.13 BASE NET ASSETS. Buyer and Sellers agree that the term Base Net
Assets includes certain items pursuant to the calculations in SCHEDULE 1.0(a)
which may or may not be trade payables, and these items are described in
footnotes 12 and 13 of SCHEDULE 1.0(a). In the event that these items are
determined by the parties in good faith not to be trade payables, then the
parties agree to negotiate in good faith adjustments to SCHEDULE 1.0(a) (and,
accordingly, the amount of the Base Net Assets) to the extent such liabilities
are not trade payables.
7.14 CONTRIBUTIONS TO CAPITAL. At or prior to the Closing, to the
extent that ATPG has liabilities to Sellers or any of their Affiliates as of the
Closing Date which Sellers or any of their Affiliates wish to cancel or
terminate without liability to ATPG on or before the Closing Date, such
liabilities may be contributed by Sellers or their Affiliates to ATPG's capital
reserve pursuant to documentation reasonably satisfactory to Buyer.
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7.15 TELEPHONE EQUIPMENT. Sellers and Buyer have agreed that AWI shall
enter into a new lease for telephone equipment that is year 2000 compliant,
which lease may be entered into prior to Closing.
7.16 CAR LEASES. The car leases associated with the Business at
Greenville shall not be assumed by Buyer at the Closing unless Sellers and Buyer
agree upon a cash payment to be made to Buyer by Sellers at the Closing to
compensate Buyer for the fact that such leases provide for low lease payments in
exchange for above market residual car values.
7.17 MEXICAN INVENTORY. Sellers and Buyer have agreed that the amount
of Inventory described in Section 2.2(o) of this Agreement shall not be
increased from the amount of Inventory that exists as of the date hereof.
7.18 KRONER PENSION. Sellers, and their Affiliates, shall have the
right to remove the pension assets and liabilities of Norbert Kroner from ATPG
prior to Closing. Such removal shall be without cost to ATPG.
7.19 TERMINATION OF KRONER. Sellers agree that they shall not terminate
Norbert Kroner's employment except for "good cause" (aus wichtigem Grund) as
such term is defined pursuant to German law.
7.20 ATPG FIXED ASSET REGISTER. Notwithstanding any other provision in
this Agreement, the parties agree that prior to the Closing, the following items
on the ATPG Fixed Asset Register are non-removable fixtures, which shall be
transferred to AWIG at net book value: 01,00310; 01,00311; 01,00315; 01,00317;
01,00318; 01,00319; 01,00321 through 01,00324.
{OMITTED TEXT}*
7.22 CLOSING DATE NET ASSETS. Sellers shall use their reasonable best
efforts to ensure that the amount of cash included in the Closing Date Net
Assets does not exceed the sum of (i) $150,000 plus (ii) the amount of account
receivables received on the two (2) Business Days prior to the Closing Date.
8. CONDITIONS PRECEDENT TO CLOSING.
8.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER TO COMPLETE THE
CLOSING. The obligations of Buyer to enter into and complete the Closing are
subject to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which may be waived by Buyer:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of Sellers contained in or made pursuant
to this Agreement and in any schedule, instrument, certificate,
agreement or document delivered pursuant to this Agreement which
*The omitted text has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.
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are qualified with respect to materiality shall be true, correct and
complete in all respects, and such representations and warranties of
Seller which are not qualified with respect to materiality shall be
true, correct and complete in all material respects, in each case on
and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date except as expressly stated herein to
be made as of a specified date. Sellers shall have performed and
complied in all material respects with all covenants and agreements
required by this Agreement to be performed or complied with by them on
or prior to the Closing Date.
(b) CONSENTS, WAIVERS, LICENSES, FILINGS, ETC. The applicable
waiting period under the HSR Act shall have expired and all material
consents, approvals, authorizations, licenses, registrations,
declarations or filings of any Governmental or Regulatory Body required
in connection with the consummation of the transactions contemplated
hereby shall have been obtained or made.
(c) INJUNCTION ORDER. At the Closing, there shall not be any
Order outstanding against any party hereto or Law promulgated that
prevents the consummation of, and no Action or Proceeding shall be
initiated by a Governmental or Regulatory Body or shall be pending or
threatened against a party hereto which questions the legality of,
seeks to restructure or to restrain or prevent the consummation of, the
transactions contemplated by this Agreement or any of the conditions to
the consummation of the transactions contemplated by this Agreement.
(d) OPINION OF SELLERS' COUNSEL. Sellers shall provide to the
Buyers opinions dated the Closing Date, from Rogers & Wells LLP,
special counsel to Sellers, and Frank A. Orban, Esq., internal counsel
to Sellers, in form and substance reasonably satisfactory to Buyer and
covering matters customary for transactions of this type.
(e) FIRPTA CERTIFICATE. Buyer shall have received a
certificate of AWI, dated the Closing Date and sworn to under penalty
of perjury, setting forth the name, address and federal tax
identification number of AWI and stating that AWI is not a "foreign
person" within the meaning of Section 1445 of the Code, such
certificate to be in the form set forth in the Treasury Regulations
thereunder.
(f) TITLE INSURANCE. Buyer shall have received at its own
expense standard 1992 form of American Land Title Association
mortgagee's and owner's policies of title insurance with respect to the
Greenville Plant, issued on the date of Closing by a title insurance
company reasonably acceptable to counsel for Buyer (the "TITLE
COMPANY") in an amount designated by Buyer insuring Buyer's ownership
of fee title without any of the Schedule B standard pre-printed
exceptions (other than taxes not yet due and payable and matters of
survey (if Buyer does not obtain a current ALTA/ACSM Land Title
Survey)) and free and clear of all Liens except as set forth on
SCHEDULE 5.6(b).
(g) CLOSING CERTIFICATE OF SELLERS. Each of Sellers shall have
delivered to Buyer certificates signed by an authorized officer of such
Seller, dated the Closing Date, as to the matters set forth in Section
8.1(a) and in form and substance reasonably satisfactory to Buyer.
(h) TRANSFER DOCUMENTS. Each of Sellers shall have delivered
to Buyer bills of sale, or other documents of transfer or assignment
which are customary with regard to
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particular Assets (together, the "TRANSFER DOCUMENTS"), in order to
transfer to Buyer ownership of all the personal property included in
the Assets.
(i) SPECIAL WARRANTY DEED. Each of Sellers shall have
delivered to Buyer a special warranty deed or deeds, in the form
customary in the jurisdictions in which particular items of real
property included in the Assets are located, in proper form for
recording in the appropriate recording offices, in order to transfer to
Buyer ownership of all the fee interests in real property owned by
Sellers and included in the Assets.
(j) ASSIGNMENT AND ASSUMPTION AGREEMENT. Each of Sellers shall
have delivered an executed counterpart of an agreement or agreements
(together the "ASSIGNMENT AND ASSUMPTION AGREEMENT") substantially in
the form of Exhibit D hereto, by which (i) Sellers assign to Buyer all
of Sellers' rights, and Buyer assumes all of Sellers' obligations,
under all the Assigned Contracts; (ii) Buyer assumes all the other
Assumed Liabilities, (iii) Buyer indemnifies Sellers in the manner set
forth in Section 10 hereof against any loss, liability or expense
because of Buyer's failure to fulfill any obligation or satisfy any
liability assumed by Buyer in the Assignment and Assumption Agreement,
and (iv) Sellers indemnify Buyer against any loss, liability or expense
with regard to any of the Excluded Liabilities in the manner set forth
in Section 10 hereof.
(k) MUNSTER LEASE. AWIG shall have delivered an executed
counterpart of a lease agreement (the "Munster Lease") in the form
attached as Exhibit E hereto.
(l) SERVICES AGREEMENTS. Each of Sellers or an Affiliate of
Seller shall have delivered executed counterparts of the agreements
(the "GENERAL SERVICES AGREEMENT" and the "MANAGEMENT SERVICES
AGREEMENT") in the forms attached as Exhibits F1 and F2 hereto.
(m) AWIG TRANSFER. AWIG shall have performed all actions
required under Section 4.3(a), (b), (c), (e) and (f) and Section 7.6 of
this Agreement.
(n) OTHER DOCUMENTS. Each of Sellers shall have delivered an
executed counterpart of all other documents Buyer reasonably requests
to evidence further the transfer of ownership of specific Assets to
Buyer.
(o) ESCROW ACCOUNT. The New Escrow Account shall have been
transferred to the Escrow Agent.
(p) ESCROW AGREEMENT. The New Escrow Agreement shall be in
full force and effect.
8.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS TO COMPLETE THE
CLOSING. The obligations of Sellers to enter into and complete the Closing are
subject to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which may be waived by Sellers:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of Buyer contained in or made pursuant
to this Agreement and in any schedule, instrument, certificate,
agreement or document delivered pursuant to this Agreement shall be
true, correct and complete in all material respects on and as of the
Closing Date with the same force and effect as though made on and as of
the Closing Date except as expressly
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stated herein to be made as of a specified date. Buyer shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with
by it on or prior to the Closing Date.
(b) CONSENTS, WAIVERS, LICENSES, FILINGS, ETC. The applicable
waiting period under the HSR Act shall have expired and all material
consents, approvals, authorizations, licenses, registrations,
declarations or filings of any Governmental or Regulatory Body required
in connection with the consummation of the transactions contemplated
hereby shall have been obtained or made.
(c) INJUNCTION, ORDER. At the Closing, there shall not be any
Order outstanding against any party hereto or Law promulgated that
prevents the consummation of, and no Action or Proceeding shall be
initiated by a Governmental or Regulatory Body or shall be pending or
threatened against a party hereto which questions the legality of,
seeks to restructure or to restrain or prevent the consummation of, the
transactions contemplated by this Agreement or any of the conditions to
the consummation of the transactions contemplated by this Agreement.
(d) OPINION OF BUYER'S COUNSEL. The Buyer shall provide to
Sellers an opinion dated the Closing Date from Debevoise & Plimpton,
special counsel to Buyer, in form and substance reasonably satisfactory
to Sellers and covering matters customary for transactions of this
type.
(e) CLOSING CERTIFICATE OF BUYER. Buyer shall have delivered
to Sellers a certificate signed by an authorized officer of Buyer,
dated the Closing Date, as to the matters set forth in Section 8.2(a)
and in form and substance reasonably satisfactory to Sellers.
(f) CLOSING WIRES. Buyer shall have delivered by wire transfer
to an account specified by AWI an amount equal to the difference
between (1) the Total Purchase Price and (2) the New Escrow Deposit.
(g) ASSIGNMENT AND ASSUMPTION AGREEMENT. Buyer shall have
delivered to Sellers an executed counterpart of the Assignment and
Assumption Agreement.
(h) OTHER AGREEMENTS. Buyer shall have delivered to Sellers an
executed counterpart of the General Services Agreement, the Management
Services Agreement and the Munster Lease.
(i) ESCROW ACCOUNT. The New Escrow Account shall have been
transferred to the Escrow Agent. (j) ATPG Agreement. ATPG shall have
delivered to Sellers an agreement in the form of Exhibit G to this
Agreement.
(k) OPINIONS OF BUYER'S COUNSEL RELATING TO THE LOAN
AGREEMENT. The opinions dated July 29, 1999 from Ashurst Morris Crisp,
Dundas & Wilson CS and Bruckhaus Westrick Heller Lober, special counsel
to Buyer, to Sellers shall be in full force and effect.
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(l) LOAN AGREEMENT . The Loan Agreement as described in
Section 2.9(e) shall be in full force and effect.
(m) AGREEMENT TO PAY. AWIG and ATPG shall have delivered to
ATPG and Sellers an executed Agreement to Pay in the form set forth in
Exhibit G of this Agreement.
(n) ESCROW AGREEMENT. The New Escrow Agreement shall be in
full force and effect.
9. POST CLOSING AGREEMENTS.
9.1 FURTHER INFORMATION. Following the Closing, each party will afford
to the other party, its counsel and its accountants, during normal business
hours, reasonable access to the books and records relating to the Assets or ATPG
or the Assumed Liabilities in its possession with respect to periods prior to
the Closing and the right to make copies and extracts therefrom, to the extent
that such access may be reasonably required by the requesting party (i) to
facilitate the investigation, litigation and final disposition of any claims
which may have been or may be made against any party or its Affiliates and (ii)
for any other reasonable business purpose, including complying with any audit
request, investigation or any other examination of any party hereto (or its
Affiliates) by any Governmental or Regulatory Body. Each party hereto (or its
Affiliates) and its agents shall keep confidential and not disclose any
information learned as a result of any examination of any party hereto (or its
Affiliates) conducted pursuant to this Section 9.1 to any other Person without
the prior written consent of the other party and each of Sellers covenants and
agrees that at all times subsequent to the Closing it will, and it will cause
its Affiliates to, maintain the confidentiality of non-public information
regarding ATPG or the Business and the Assets unless: (i) disclosure of such
information is required by Law or in connection with a proceeding arising out of
or relating to this Agreement or (ii) the terms are readily ascertainable from
public or published information, or trade sources (without violation of the
foregoing provisions of this sentence).
9.2 RECORD RETENTION. Each party agrees that for a period of not less
than seven years (or any longer period that may be required by any Governmental
or Regulatory Body) following the Closing Date, it shall not destroy or
otherwise dispose of any of the books and records relating to the Assets, ATPG
or the Assumed Liabilities in its possession with respect to periods prior to
the Closing. Each party shall have the right to destroy all or part of such
books and records after the seventh anniversary of the Closing Date (or any
longer period that may be required by any Governmental or Regulatory Body) or,
at an earlier time by giving each other party hereto 30 days' prior written
notice of such intended disposition and by offering to deliver to the other
party, at the other party's expense, custody of such books and records as such
first party may intend to destroy.
9.3 TAX MATTERS. Sellers shall file all necessary documentation and
returns with respect to sales, use, value added, transfer, real property
transfer, recording (including fees of the German notary public for the transfer
of the ATPG Share), gains, stock transfer and other similar taxes and fees (such
taxes and fees, including any interest or penalties thereon, are herein
sometimes called "Transfer Taxes"), PROVIDED that Buyer shall be permitted to
prepare any such Tax Returns that are the primary responsibility of the Buyer
Parties under applicable Law. Any such Tax Returns prepared by Buyer shall be
subject to Sellers' approval, which approval shall not be withheld unreasonably.
All Transfer Taxes arising out of or in connection with the transactions
effected pursuant to this Agreement shall be shared equally by Buyer, on the one
hand, and Sellers, on the other hand. Sellers and the Buyer Parties will
cooperate with each other in a commercially
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reasonable manner in attempting to minimize Transfer Taxes. Such cooperation
will include, without limitation, the Buyer Parties' providing to Sellers, and
the Sellers' providing to the Buyer Parties, all exemption certificates with
respect to Transfer Taxes that may be provided under applicable Law, in each
case, properly completed and executed by the proper party as provided under
applicable Law.
9.4 USE OF NAMES. Anything herein to the contrary notwithstanding, no
interest in or right to use the name "Armstrong" or any derivation thereof or
any logo, trademarks or trade name, other than as set forth in Section
2.1(b)(iii), is being transferred to Buyer pursuant to the transactions
contemplated hereby. The trademarks and trade names being retained by Sellers
are hereinafter referred to as the "Retained Names and Marks." Buyer will,
within a reasonable time following the Closing Date, remove or obliterate all
the Retained Names and Marks from its signs, purchase orders, invoices, sales
orders, labels, letterheads, shipping documents, shipping cartons, business
cards and other materials and Buyer shall not put into use after the Closing
Date any such materials; PROVIDED, HOWEVER, (i) Buyer shall be entitled to sell
items currently in Inventory or returned items that bear any Retained Named or
Mark so long as, commencing within two months after the Closing Date, Buyer uses
its own labels, shipping documents and shipping cartons in connection with such
sales, and (ii) Buyer shall place a stamp, mark or other notation on any such
labels, shipping documents or shipping cartons that identifies the Business as a
business of Buyer (and not Sellers) and if applicable, that such Retained Name
or Mark is a registered trademark or trade name. Buyer agrees that Sellers shall
have no responsibility for claims by third parties arising out of, or relating
to, the use by Buyer of any Retained Name or Mark after the Closing Date
pursuant to the terms of this Agreement.
9.5 CERTAIN ACCOTEX TRADEMARKS. Notwithstanding anything to the
contrary in this Agreement, the parties agree and understand that the Accotex
trademark in India, Bhutan, Sri Lanka, Bangladesh and Nepal (collectively, the
"Accotex Trademarks") are licensed to a third-party pursuant to that certain
Memorandum of Understanding dated January 19, 1999, among Armstrong World
Industries Ltd., AWI, Associated Rubber Industries Ltd. and INARCO Ltd., and do
not constitute, and shall not in any way be deemed to constitute, Assets. As
promptly as practicable after April 1, 2003, AWI shall transfer, assign, convey
and deliver (and shall execute and deliver to Buyer all instruments and
documents that are necessary to consummate such transfer, assignment, conveyance
and delivery) to Buyer without payment of additional consideration from Buyer to
AWI all of AWI's right, title and interest in and under the Accotex Trademarks.
9.6 FURTHER ASSURANCES. Subject to Section 2.7 of this Agreement, from
time to time after the Closing Date and at the expense of the Sellers and
without further consideration, the Sellers, upon the request of the Buyers, will
execute and deliver such instruments, documents, certifications and will take
such other actions as the Buyers reasonably may request in order to sell,
convey, transfer and assign to the Buyers, or to perfect or record the Buyers'
interest in or title to, or to vest more effectively in Buyer, any of the Assets
or the Business, or any of the liabilities or obligations assumed by the Buyer
or otherwise to carry out the purposes and intent of this Agreement. Each of the
parties hereto will cooperate with the other and execute and deliver to the
other parties hereto such other instruments and documents and take such other
actions as may be reasonably requested from time to time by any other party
hereto as necessary to carry out, evidence and confirm the intended purposes of
this Agreement.
9.7 FILINGS. The parties will cooperate in any filings required under
any Laws for the consummation or registration of any of the actions contemplated
hereunder, in particular regarding
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the registration of the termination of the control- and profit transfer
agreement between AWIG and ATPG pursuant to Section 4.3 of this Agreement in the
commercial register of ATPG.
10. SURVIVAL; INDEMNIFICATION.
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Sellers and Buyer contained in this Agreement will survive the
Closing until the date which is one year after the Closing Date, except for (i)
the representations and warranties contained in Section 5.11, which shall
survive the Closing until the date which is three (3) years after the Closing
Date, (ii) the representations and warranties contained in Sections 5.1, 5.2,
5.20(a) and 5.20(b), which shall survive the Closing until the date which is
thirty (30) years after the Closing Date, and (iii) the representations and
warranties contained in Sections 5.15 and 5.16, which shall survive the Closing
until thirty days following the expiration of the applicable statute of
limitations. No claim may be made against any party hereto and no party hereto
shall have any liability to any other party hereto after the applicable survival
period for a representation or warranty specified above shall have expired,
except that, if a claim shall be made by a party hereto against another party
hereto prior to the expiration of such survival period, then such survival
period shall be extended as it relates to such claim until such claim has been
satisfied or otherwise resolved as provided in this Section 10.
10.2 INDEMNIFICATION OF BUYER.
(a) Subject to the limitations contained in this Section 10,
Sellers, jointly and severally, agree to indemnify, defend and hold
harmless Buyer and any of its Affiliates, (including, for the avoidance
of doubt, ATPG) directors, officers, employees, agents, advisors,
representatives, successors and assigns (each, a "BUYER INDEMNIFIED
PARTY") from and against any and all losses, liabilities, and damages
(including punitive or exemplary damages and fines or penalties and any
interest thereon), demands, claims, actions, obligations, deficiencies,
costs and expenses (including reasonable fees and disbursements of
counsel) (hereinafter individually, a "LOSS" and collectively,
"LOSSES"), whether or not arising from third-party claims, incurred by
any such Buyer Indemnified Party which arise out of, or result from,
(i) any breach of any representation, warranty, covenant or agreement
of Sellers contained in this Agreement or in the officer's certificates
delivered by Sellers pursuant to Section 8.1(g), in each case, without
taking into account any qualification as to materiality or Material
Adverse Effect or like qualification contained in any such
representation, warranty, covenant or agreement, (ii) any Excluded
Liability, (iii) the ownership of the Assets or the operation of the
Business on or prior to the Closing Date, other than the Assumed
Liabilities and the ATPG Assumed Liabilities, (iv) any failure to
comply with the requirements of any applicable bulk sales law, (v) any
liabilities or obligations of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to become
due, relating to or in connection with ATPG prior to the Closing, other
than with respect to the ATPG Assumed Liabilities and the matters set
forth in Section 2.9 of this Agreement, or (vi) any and all Taxes of
any Seller or of any Affiliate thereof.
(b) No indemnification pursuant to Section 10.2(a)(i) of this
Agreement (other than in connection with any breach of Section 5.18)
shall be required with respect to any individual item of Loss, unless
such item exceeds $5,000 and unless the aggregate of all Losses of the
Buyer Indemnified Parties with respect to Section 10.2(a)(i) of this
Agreement (other than in connection with any breach of Section 5.18)
shall exceed
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$150,000, in which case Sellers shall not be required to pay or be
liable for the first $150,000 in aggregate amount of any such Losses.
Notwithstanding anything to the contrary in this Agreement, the Buyer
Indemnified Parties shall not be indemnified pursuant to Section
10.2(a)(i) of this Agreement with respect to any individual item of
Loss if the aggregate of all Losses incurred by the Buyer Indemnified
Parties pursuant to Section 10.2(a)(i) of this Agreement exceeds the
Total Purchase Price. For the purposes of this Section 10, in computing
such individual or aggregate amounts of Losses, the amount of each Loss
shall be deemed to be an amount (i) net of any insurance proceeds and
any indemnity, contribution or other similar payment payable by any
third party with respect thereto, and (ii) net of any reserves provided
for the situation in question which are included in Assets. Each Buyer
Indemnified Party shall pay to Sellers the amount of any Tax Benefit
realized by such Buyer Indemnified Party relating to any
indemnification payment hereunder promptly after such Tax Benefit is
actually realized, provided that in the event that such Tax Benefit of
such Buyer Indemnified Party is subsequently disallowed, or in the
event that the indemnification payment hereunder is treated as giving
rise to a liability for Taxes on the part of any Buyer Indemnified
Party, Sellers shall pay to such Buyer Indemnified Party the amount of
any Tax Detriment resulting therefrom promptly after such Tax Detriment
is actually realized. For purposes of Section 10.3(b) and this Section
10.2(b): (i) the term "TAX BENEFIT" shall mean the amount by which any
payment of Tax is decreased, the amount of any refund of Tax or the
amount by which any refund of Tax the recipient otherwise would have
received is increased; (ii) the term "TAX DETRIMENT" shall mean the
amount of any payment of Tax, the amount by which any payment of Tax
the payor otherwise would have been required to make is increased, or
the amount by which any refund of Tax is reduced; and (iii) the amount
of any Tax Benefit or any Tax Detriment shall be determined based on
the assumption that the item giving rise to such Tax Benefit or Tax
Detriment is utilized after all other relevant items have been taken
into account, as determined in good faith by the party reporting such
Tax Benefit or Tax Detriment on its Tax Return. Except to the extent
contrary to applicable Law, the parties agree to treat any such
indemnity payment as an adjustment to the Total Purchase Price and not
take any position on any tax return that is inconsistent with such
treatment. Anything contained herein to the contrary notwithstanding,
Sellers shall have no liability pursuant to Section 10.2 in respect of
any matter to the extent that (x) an accrual with respect to such
matter is included for the purposes of calculating the Closing Date Net
Assets or (y) the Purchase Price is adjusted in respect of such matter
pursuant to Section 4.4(b).
(c) Each Buyer Indemnified Party shall give Sellers prompt
written notice of any claim, assertion, event or Action or proceeding
(collectively, a "BUYER CLAIM") asserted against or incurred by a Buyer
Indemnified Party concerning any Loss as to which such Buyer
Indemnified Party may be entitled to indemnification hereunder. Sellers
shall have the right to direct, through counsel of their own choosing,
the defense or settlement of any such Buyer Claim at their own expense,
provided that (i) counsel for Sellers who shall conduct the defense or
settlement of such Buyer Claim shall be reasonably satisfactory to
Buyer, (ii) Sellers proceed in good faith, expeditiously and
diligently, (iii) Sellers provide the Buyer Indemnified Party a written
undertaking reasonably acceptable as to form to the Buyer Indemnified
Party to post any necessary bond or other security required in order to
stay any judgment pending an appeal in the event Sellers shall elect to
prosecute such appeal and (iv) the failure of such Buyer Indemnified
Party to give notice as provided herein shall not relieve Sellers of
their respective indemnification obligations under this
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Agreement except to the extent that Sellers are prejudiced as a result
of such failure to give notice. If Sellers elect to assume the defense
or settlement of any such Buyer Claim, such Buyer Indemnified Party may
participate in such defense or settlement, but in such case the
expenses of such Buyer Indemnified Party shall be paid by such Buyer
Indemnified Party. Such Buyer Indemnified Party shall provide Sellers
with reasonable access to its records and personnel relating to any
such Buyer Claim during normal business hours and shall otherwise
cooperate in all reasonable respects with Sellers in the defense or
settlement thereof, and Sellers shall reimburse such Buyer Indemnified
Party for all its reasonable out-of-pocket costs and expenses in
connection therewith. Except with the prior written consent of such
Buyer Indemnified Party, the Sellers, in the defense of any such claim
or litigation, shall not consent to entry of any judgment or enter into
any settlement (A) that provides for injunctive or other non-monetary
relief effecting such Buyer Indemnified Party or (B) that does not
include as an unconditional term thereof the giving by each claimant or
plaintiff to such Buyer Indemnified Party of a release from all
liability with respect to such claim or litigation. If Sellers shall
(A) fail to notify Buyer Indemnified Party of their intent to exercise
their rights to defend any Buyer Claim within 10 Business Days after
receipt of any Buyer Claim or (B) after commencing or undertaking any
such defense or settlement, fail to prosecute or withdraw from such
defense or settlement, such Buyer Indemnified Party shall have the
right to undertake the defense or settlement thereof, at Sellers'
expense. If such Buyer Indemnified Party assumes the defense of such
Buyer Claim pursuant to this subsection (c) and proposes to settle such
Buyer Claim prior to a final judgment thereon or to forego appeal with
respect thereto, then such Buyer Indemnified Party shall give Sellers
prompt written notice thereof but, in the case of clause (B) of this
Section 10.2(c), shall not settle such Buyer Claim or forego appeal
with respect thereto without the prior written consent of Sellers, such
consent not to be unreasonably withheld.
10.3 INDEMNIFICATION OF SELLERS.
(a) Subject to the limitations contained in this Section 10.3,
Buyer agrees to indemnify, defend and hold harmless Sellers and any of
their Affiliates, directors, officers, employees, agents, advisors,
representatives, successors and assigns (each, a "SELLER INDEMNIFIED
PARTY") from and against any and all Losses incurred by any such Seller
Indemnified Party which arise out of, or result from, (i) any material
inaccuracy in or any material breach of any representation, warranty,
covenant or agreement of Buyer contained in this Agreement or in the
officer's certificate delivered by Buyer pursuant to Section 8.2(e), in
each case, without taking into account any qualification as to
materiality or material adverse effect or like qualification contained
in any such representation, warranty, covenant or agreement, (ii) any
Assumed Liability, (iii) Buyer's use of any Retained Names and Marks
pursuant to Section 9.4 or (iv) Liabilities (other than Excluded
Liabilities) incurred by Buyer resulting from the operation of the
Business, including with respect to ATPG, on and after the Closing
Date, provided that, notwithstanding anything in this Agreement to the
contrary, Buyer shall have no obligation to indemnify any Seller
Indemnified Party for any of ATPG's obligations described in Section
2.9 of this Agreement except to the extent expressly agreed to by Buyer
in such Section 2.9.
(b) Payments by Buyer to a Seller Indemnified Party pursuant
to subsection (a) of Section 10.3(a) of this Agreement shall be limited
to the amount of any Loss that remains after deducting therefrom any
Tax benefit to such Seller Indemnified Party or any Affiliate thereof
and any insurance proceeds and any indemnity, contribution or other
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similar payment payable to such Seller Indemnified Party from any third
party with respect thereto. Each Seller Indemnified Party shall pay to
Buyer the amount of any Tax Benefit relating to any indemnification
payment realized by such Seller Indemnified Party relating to any
indemnification payment hereunder promptly after such Tax Benefit is
actually realized, PROVIDED that in the event that such Tax Benefit of
such Seller Indemnified Party is subsequently disallowed, or in the
event that the indemnification payment hereunder is treated as giving
rise to a liability for Taxes on the part of any Seller Indemnified
Party, Buyer shall pay to such Seller Indemnified Party the amount of
any Tax Detriment resulting therefrom promptly after such Tax Detriment
is actually realized. Except to the extent contrary to applicable Law,
the parties agree to treat any such indemnity payment as an adjustment
to the Total Purchase Price and not to take any position on any tax
return that is inconsistent with such treatment.
(c) Each Seller Indemnified Party shall give Buyer prompt
written notice of any claim, assertion, event or Action or Proceeding
(collectively, a "SELLER CLAIM") asserted against or incurred by a
Seller Indemnified Party concerning any Loss as to which such Seller
Indemnified Party may be entitled to indemnification hereunder. Buyer
shall have the right to direct, through counsel of its own choosing,
the defense or settlement of any such Seller Claim at its own expense,
provided that (i) counsel for Buyer who shall conduct the defense or
settlement of such Seller Claim shall be reasonably satisfactory to
such Seller Indemnified Party, (ii) Buyer proceeds in good faith,
expeditiously and diligently, (iii) Buyer provides the Seller
Indemnified Party a written undertaking reasonably acceptable as to
form to the Seller Indemnified Party to post any necessary bond or
other security required in order to stay any judgement pending an
appeal in the event Buyer shall elect to prosecute such appeal and (iv)
the failure of such Seller Indemnified Party to give notice as provided
herein shall not relieve Buyer of its indemnification obligation under
this Agreement except to the extent that Buyer is prejudiced as a
result of such failure to give notice. If Buyer elects to assume the
defense or settlement of any such Seller Claim, such Seller Indemnified
Party may participate in such defense or settlement, but in such case
the expenses of such Seller Indemnified Party shall be paid by such
Seller Indemnified Party. Such Seller Indemnified Party shall provide
Buyer with reasonable access to its records and personnel relating to
any such Seller Claim during normal business hours and shall otherwise
cooperate in all reasonable respects with Buyer in the defense or
settlement thereof, and the Buyer shall reimburse such Seller
Indemnified Party for all its reasonable out-of-pocket costs and
expenses in connection therewith. Except with the prior written consent
of such Seller Indemnified Party, the Buyer, in the defense of any such
claim or litigation, shall not consent to entry of any judgment or
enter into any settlement (A) that provides for injunctive or other
non-monetary relief effecting such Seller Indemnified Party or (B) that
does not include as an unconditional term thereof the giving by each
claimant or plaintiff to such Seller Indemnified Party of a release
from all liability with respect to such claim or litigation. If Buyer
shall fail (A) to notify Seller Indemnified Party of its intent to
exercise its rights to defend any Seller Claim within 10 Business Days
after receipt of any Seller Claim, or (B) after commencing or
undertaking any such defense or settlement, fail to prosecute or
withdraws from such defense or settlement, such Seller Indemnified
Party shall have the right to undertake the defense or settlement
thereof, at Buyer's expense. If such Seller Indemnified Party assumes
the defense of any such Seller Claim pursuant to this subsection (c)
and proposes to settle such Seller Claim prior to a final judgment
thereon or to forego appeal with respect thereto, then such Seller
Indemnified Party shall give Buyer
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prompt written notice thereof but, in the case of clause (B) of this
Section 10.3(c), shall not settle such Seller Claim or forego appeal
with respect thereto without the prior written consent of Sellers, such
consent not be unreasonably withheld. Notwithstanding anything to the
contrary in Section 10.2(c) and this Section 10.3(c), the provisions of
Section 10.2(c) and this Section 10.3(c) shall not apply to any claim
for indemnification under Section 7.7.
10.4 LIMITATIONS, EXCLUSIVE PROVISIONS, NO RESCISSION. Except as set
forth in this Agreement, Buyer and Sellers are not making any representation,
warranty, covenant or agreement with respect to the matters contained herein.
Anything herein to the contrary notwithstanding, no breach of any
representation, warranty, covenant or agreement contained herein shall give rise
to any right on the part of Buyer or any Seller, after the consummation of the
purchase and sale of the Business contemplated hereby, to rescind this Agreement
or any of the transactions contemplated hereby. Anything herein to the contrary
notwithstanding, neither Sellers nor Buyer shall have any liability hereunder,
and none of them is making any representation or warranty regarding, any
Excluded Matter.
11. TERMINATION OF AGREEMENT.
11.1 TERMINATION. This Agreement may be terminated prior to the Closing
as follows:
(a) By the mutual written consent of Sellers and Buyer;
(b) By Sellers or by Buyer, by giving written notice to the
other party, if the Closing shall not have occurred by December 31,
1999, or such later date as may be agreed to in writing by Sellers and
Buyer; PROVIDED, HOWEVER, that the right to terminate this Agreement
under this Section 11.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement shall have been
the cause of, or resulted in, the failure of the Closing to occur prior
to such date;
(c) By either Buyer or Sellers (i) if, (A) within 60 days
after the Buyer or the Sellers or their Affiliates receive either a
request for additional information from the Antitrust Division of the
Department of Justice ("DOJ") or the Federal Trade Commission ("FTC")
and (B) after having used their reasonable best efforts, the parties
have failed to resolve all issues and requests raised or made by the
DOJ or FTC referred to above; or (ii) if any court of competent
jurisdiction or other governmental agency of competent jurisdiction
shall have issued an Order or taken any other action restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby, and such Order shall have become final and
non-appealable;
(d) By Sellers, if Buyer shall have materially breached any of
its covenants herein or if Buyer shall have made a material
misrepresentation herein and not cured the same within 20 Business Days
of notice of such breach or misrepresentation; or
(e) By Buyer, if any of Sellers shall have materially breached
any of its covenants herein or if any of Sellers shall have made a
material misrepresentation and not cured the same within 20 Business
Days of notice of such breach or misrepresentation.
11.2 SURVIVAL. In the event this Agreement is terminated pursuant to
Section 11.1, (i) this Agreement shall become null and void and of no further
force and effect, except for the provisions of Section 12.1 and 12.4 and the
Confidentiality Agreement and (ii) there shall be no
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liability on the part of any Seller or Buyer or their respective officers,
directors or Affiliates; provided, however, that if such termination shall
result from the breach by a party of the provisions contained in this Agreement
such party shall be fully liable for any and all damages, costs and expenses
(including reasonable counsel fees) sustained or incurred by the other party
hereto to the extent that such damages, costs and expenses arise as a result of
such breach.
12. MISCELLANEOUS.
12.1 EXPENSES. Except as otherwise expressly provided herein, whether
or not the transactions contemplated by this Agreement shall be consummated,
each of the parties hereto shall pay its own expenses (including, without
limitation, attorney's and accountants' fees and out-of-pocket expenses)
incident to this Agreement and the transactions contemplated hereby.
12.2 NOTICES. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
given personally, sent by facsimile transmission or sent by prepaid air courier
or certified registered mail, postage prepaid. Any such notice shall be deemed
to have been given (a) when received, if delivered in person, or sent by
confirmed facsimile transmission, (b) two Business Days after dispatch, if sent
by prepaid air courier or (c) three Business Days following the mailing thereof,
if mailed by registered or certified first class mail, postage prepaid, return
receipt requested, in any such case as follows (or to such other address or
addresses as a party may have advised the other in the manner provided in this
Section 12.2):
If to Sellers:
--------------
Armstrong World Industries, Inc.
2500 Columbia Avenue
Lancaster, Pennsylvania 17604
Attention: Mark Adamczyk
Facsimile: (717) 396-2983
Phone: (717) 397-0611
With a copy to:
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Attention: Steven A. Hobbs, Esq.
Facsimile: (212) 878-8375
Phone: (212) 878-8000
If to Buyer:
------------
Day International, Inc.
130 W. Second Street
P.O. Box 338
Dayton, Ohio 45401-0338
53
<PAGE> 63
Attention: Dennis R. Wolters
Facsimile: (937) 226-0052
Phone: (937) 224-7124
With a copy to:
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 36th Floor
New York, NY 10013
Attention: Christine K. Vanden Beukel
Facsimile: (212) 816-0166
Phone: (212) 816-3662
With a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Stephen R. Hertz, Esq.
Facsimile: (212) 909-6836
Telephone: (212) 909-6000
12.3 DISPUTES. Any dispute arising from or related to this Agreement
may be brought in any state or federal court of competent jurisdiction in the
State of New York.
12.4 PUBLICITY, CONFIDENTIALITY. Except as required by Law, no
publicity release or public announcement concerning this Agreement or the
transactions contemplated hereby shall be made by Buyer or any Seller without
advance approval thereof by each other party hereto. While this Agreement is in
effect and after this Agreement terminates, each party hereto and its Affiliates
shall keep confidential, and shall not disclose, the terms of this Agreement to
any other Person without the prior consent of each other party hereto unless (i)
the disclosure is in response to an Order or subpoena, (ii) the terms are
readily ascertainable from public or published information, or trade sources
(without violation of the foregoing provisions of this sentence), (iii) the
disclosure is (A) in connection with any Action or Proceeding in respect of this
Agreement or (B) to a Governmental or Regulatory Body the filing with or consent
of which is a condition to or is otherwise required in connection with the
transactions contemplated by this Agreement or (iv) the disclosure is to any
officer, director, employee or agent of any party hereto or of any of its
Affiliates and such Person needs to know such information for purposes of
consummating the transactions contemplated by or the performance of this
Agreement.
12.5 ENTIRE AGREEMENT. The Confidentiality Agreement and this Agreement
(including the Exhibits and Schedules hereto) and the agreements, certificates
and other documents delivered pursuant to this Agreement contain the entire
agreement among the parties with respect to the transactions described herein,
and supersede all prior agreements, written or oral, with respect thereto.
12.6 WAIVERS AND AMENDMENTS. This Agreement may be amended, superseded,
cancelled, renewed or extended, and the terms hereof may be waived, only by a
written instrument
54
<PAGE> 64
signed by the parties or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof.
12.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to
principles of conflicts of law thereof.
12.8 BINDING EFFECT; NO ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors,
permitted assigns and legal representatives. This Agreement is not assignable by
any party hereto without the prior written consent of the other parties hereto
and any other purported assignment shall be null and void; provided, however,
that any party hereto may assign its rights (but not its obligations) under this
Agreement to one of its Affiliates. Notwithstanding the foregoing, AWIG may
assign after Closing all of its rights and obligations under this Agreement to
Armstrong World Industries (Holding) GmbH, provided 10 days prior written notice
is provided to Buyer.
12.9 VARIATIONS IN PRONOUNS. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
12.10 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
12.11 EXHIBITS AND SCHEDULES. The Exhibits and Schedules are a part of
this Agreement as if fully set forth herein. All references herein to Sections,
subsections, clauses, Exhibits and Schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require.
12.12 HEADINGS. The headings in this Agreement are for reference only,
and shall not affect the interpretation of this Agreement. Terms to which a
parenthetical German translation has been added in the body of the text shall be
interpreted throughout the Agreement with the meaning assigned to them by the
German translation.
12.13 SEVERABILITY OF PROVISIONS. If any provision or any portion of
any provision of this Agreement or the application of such provision or any
portion thereof to any Person or circumstance, shall be held invalid or
unenforceable, the remaining portion of such provision and the remaining
provisions of this Agreement, or the application of such provision or portion of
such provision as is held invalid or unenforceable to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby.
12.14 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Article 10.
12.15 EXCLUSIVITY. Prior to (i) the Closing or (ii) any termination of
this Agreement in accordance with Section 11 hereof, Sellers agree that they
will deal exclusively with Buyer in
55
<PAGE> 65
respect of the matters referred to in this Agreement and that none of them will
entertain, solicit, consider or otherwise encourage any offer from any other
person or entity for, or enter into any agreement with any other person or
entity with respect to, the direct or indirect sale, merger, consolidation
reorganization, acquisition, encumbrance, lease, transfer or conveyance of the
Assets or the Business or any of the shares or assets of ATPG and that they will
terminate any pending negotiations or agreements with any third party with
respect to the transactions described in the foregoing sentence.
56
<PAGE> 66
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Agreement on the date first above written.
ARMSTRONG WORLD INDUSTRIES, INC.
By:
---------------------------------
Name:
Title:
ARMSTRONG WORLD INDUSTRIES GmbH
By:
---------------------------------
Name:
Title:
DAY INTERNATIONAL, INC.
By:
---------------------------------
Name:
Title:
57
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DAY
INTERNATIONAL GROUP, INC'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM
10Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 380
<SECURITIES> 0
<RECEIVABLES> 26,185
<ALLOWANCES> 0
<INVENTORY> 23,524
<CURRENT-ASSETS> 53,983
<PP&E> 53,873
<DEPRECIATION> 0
<TOTAL-ASSETS> 263,581
<CURRENT-LIABILITIES> 27,380
<BONDS> 259,851
40,402
0
<COMMON> 1
<OTHER-SE> (84,787)
<TOTAL-LIABILITY-AND-EQUITY> 263,581
<SALES> 130,660
<TOTAL-REVENUES> 130,660
<CGS> 81,730
<TOTAL-COSTS> 108,040
<OTHER-EXPENSES> 337
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,608
<INCOME-PRETAX> 1,675
<INCOME-TAX> 757
<INCOME-CONTINUING> 918
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 918
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
