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AGREEMENT FOR SALE AND PURCHASE
OF ASSETS
BETWEEN
THE B.F.GOODRICH COMPANY
("Seller")
AND
PMD GROUP INC.
("Buyer")
DATED AS OF NOVEMBER 28, 2000
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE OF ASSETS...................................2
Section 1.1. Transaction; Sale Assets......................................2
Section 1.2. Excluded Assets...............................................4
Section 1.3. Title to Sale Assets..........................................6
Section 1.4. Excluded Liabilities..........................................6
Section 1.5. Assumed Liabilities...........................................7
Section 1.6. Purchase Price................................................8
Section 1.7. Allocation of Purchase Price..................................8
Section 1.8. Closing.......................................................9
Section 1.9. Purchase Price Adjustment.....................................9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER.....................12
Section 2.1. Organization; Power..........................................12
Section 2.2. Capitalization...............................................13
Section 2.3. Authority; No Violation......................................13
Section 2.4. Ownership of Stock and Equity Interest.......................14
Section 2.5. Title to Sale Assets and Related Matters.....................14
Section 2.7. Other Tangible Property......................................14
Section 2.8. No Sales or Options..........................................15
Section 2.9 Financial Statements.........................................15
Section 2.10. Actions Pending..............................................15
Section 2.11. Absence of Changes or Events.................................16
Section 2.12. Compliance with Laws: No Default............................16
Section 2.13. Real Property................................................17
Section 2.14. Material Contracts...........................................17
Section 2.15. Licenses and Permits.........................................19
Section 2.16. Intellectual Property........................................20
Section 2.17. Environmental Matters........................................21
Section 2.18. Labor Relations; Employees...................................23
Section 2.19. Employee Benefit Plans.......................................24
Section 2.20. Tax Matters..................................................26
Section 2.21. Brokers' or Finders' Fee.....................................28
Section 2.22. No Other Representations and Warranties......................28
Section 2.23. No Gifts or Similar Benefits.................................29
Section 2.24. Affiliate Transactions.......................................29
Section 2.25. Suppliers and Customers......................................29
Section 2.26. Product Liability Claims.....................................29
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER......................29
Section 3.1. Organization; Power..........................................30
Section 3.2. Authority; No Violation; Etc.................................30
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<PAGE> 3
Section 3.3. Consents and Approvals.......................................30
Section 3.4. Actions Pending..............................................31
Section 3.5. Disclaimer as to Condition of Sale Assets....................31
Section 3.6. Nonreliance..................................................31
Section 3.8. Investment Intent............................................31
Section 3.9. Legend.......................................................31
Section 3.10. Brokers' or Finders' Fees....................................32
Section 3.11. Financing....................................................32
Section 3.12. Buyer Investment Plan........................................32
Section 3.13. No Other Representations Or Warranties.......................32
ARTICLE IV PRE-CLOSING COVENANTS OF SELLER..............................32
Section 4.1. Maintenance of Corporate and Entity Status...................32
Section 4.2. Operation of the Business....................................32
Section 4.3. Other Offers.................................................35
Section 4.4. Access to Information........................................35
Section 4.5. Insurance....................................................36
Section 4.6. Required Consents and Approvals..............................36
Section 4.7. Pre-Transaction Notification, Transfer Statutes..............36
Section 4.8. Seller's Actions.............................................38
Section 4.9. Notice of Material Adverse Change............................38
Section 4.10. Cooperation..................................................38
Section 4.11. Intercompany Accounts........................................39
Section 4.12. Acquisition of Rights to Confidentiality.....................39
Section 4.13. Textile Consolidation Project................................39
Section 4.14. Satisfaction of Indebtedness.................................39
Section 4.15. Transfer of Excluded Real Property...........................39
ARTICLE V PRE-CLOSING COVENANTS OF BUYER...............................40
Section 5.1. Required Consents and Approvals..............................40
Section 5.2. Pre-Transaction Notification.................................40
Section 5.3. Buyer's Actions..............................................41
Section 5.4. Notice of Material Adverse Change............................41
Section 5.5. Cooperation..................................................41
ARTICLE VI CONDITIONS PRECEDENT TO PERFORMANCE OF BUYER.................41
Section 6.1. Accuracy of Representations and Warranties of Seller.........41
Section 6.2. Compliance...................................................42
Section 6.3. Approval.....................................................42
Section 6.4. Authorization................................................42
Section 6.5. Litigation...................................................42
Section 6.6. Closing Deliveries...........................................43
Section 6.7. Material Adverse Effect......................................43
Section 6.8 Financing....................................................43
ARTICLE VII CONDITIONS PRECEDENT TO PERFORMANCE OF SELLER................43
Section 7.1. Accuracy of Representations and Warranties of Buyer..........43
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<PAGE> 4
Section 7.2. Compliance...................................................43
Section 7.3. Approval.....................................................44
Section 7.4. Authorization................................................44
Section 7.5. Litigation...................................................44
Section 7.6. Closing Deliveries...........................................44
ARTICLE VIII TERMINATION..................................................45
Section 8.1. Termination by Mutual Agreement..............................45
Section 8.2. Termination by Buyer.........................................45
Section 8.3. Termination by Seller........................................45
Section 8.4. Termination with Respect to Antitrust Matters................45
Section 8.5. Effect of Termination........................................46
ARTICLE IX ADDITIONAL AGREEMENTS........................................46
Section 9.1. Confidentiality..............................................46
Section 9.2. Obligations with Respect to Seller's Employees...............46
Section 9.3. Certain Costs................................................54
Section 9.4. Option to Purchase EMD Business..............................55
Section 9.5. Title to Real Property.......................................55
Section 9.6. Product Liability Claims.....................................55
Section 9.7. Bulk Transfer Laws...........................................55
Section 9.8. Name Changes of Stock Group Subsidiaries.....................56
Section 9.9. Provision of Transition Services.............................56
Section 9.10. Further Assurances...........................................56
Section 9.11. Accounting and Other Assistance..............................58
Section 9.12. Tax Matters..................................................59
Section 9.13. Noncompetition...............................................66
Section 9.14. Directors' and Officers' Insurance...........................67
Section 9.15. Operating Cash...............................................67
Section 9.16. Aerospace Lease..............................................67
Section 9.17. EMD Lease....................................................67
Section 9.18. Sublicense of Lemelson License...............................67
ARTICLE X CLOSING DELIVERIES...........................................68
Section 10.1. Deliveries to Buyer at the Closing...........................68
Section 10.2. Deliveries to Seller at the Closing..........................69
Section 10.3. Third-Party Consents.........................................70
ARTICLE XI INDEMNIFICATION..............................................71
Section 11.1. Indemnification By Seller....................................71
Section 11.2. Indemnification by Buyer.....................................71
Section 11.3. Indemnity and Cost Sharing with Respect to
Environmental Costs..........................................72
Section 11.4. Claims.......................................................79
Section 11.5. Survival of Representations and Warranties...................80
Section 11.6. Indemnification Limitations..................................80
Section 11.7. Exclusive Remedy.............................................81
Section 11.8. Lost Profits and Special Damages.............................81
iii
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ARTICLE XII MISCELLANEOUS PROVISIONS.....................................82
Section 12.1. Counterparts.................................................82
Section 12.2. Entire Agreement.............................................82
Section 12.3. Exhibits and Disclosure Statement............................82
Section 12.4. Expenses.....................................................82
Section 12.5. Interpretation...............................................82
Section 12.6. Governing Law................................................82
Section 12.7. Headings.....................................................82
Section 12.8. Interpretation...............................................82
Section 12.9. Modification and Waiver......................................83
Section 12.10. Notices......................................................83
Section 12.11. Press Release................................................85
Section 12.12. Rights of Parties Assignability; Binding Effect..............85
Section 12.13. Currency.....................................................85
Section 12.14. Severability.................................................85
Appendix A. Certain Definitions.........................................A-1
Exhibits
--------
A May 31, 2000 Balance Sheet
B May 31, 2000 Working Capital Statement
C Terms of Seller Note
D Commitment Letters
E Terms of Aerospace Lease Agreement
F Terms of EMD Lease Agreement
Schedules
---------
B(i) Stock Selling Subsidiaries; Stock Subsidiaries
B(ii) Asset Subsidiaries
D Equity Subsidiaries
E Indirect Subsidiaries
1.1(a) Real Property Acquired by Asset Purchase
1.1(e) Certain Contracts Assigned by Asset Purchase
1.1(f) Certain Intangible Acquired by Asset Purchase
1.2(j) Retained Intellectual Property
1.2(l) EMD Assets
1.2(m) Brecksville Vacant Land
1.2(n) Closed Facilities
1.2(o) Textile Dyes Business
1.2(p) Other Excluded Assets
1.5 Other Assumed Liabilities
1.7 Allocation of Purchase Price
1.9 Principles for Preparation of Seller's Working Capital Statement
4.2(a) Capital Expenditures
iv
<PAGE> 6
4.2(b) Operation of Business
4.4 Access to Information
4.10 Cooperation
4.13 Textile Consolidation Project
6.4(b) Material Consents
9.1 Confidentiality Agreement
9.2(d) Transition Arrangements
9.5 Surveys/Title Commitments
9.10(d) Defined Remediation Projects
11.3(c) Certain Identified Facilities
11.3(e)(ii) Apportionment
11.3(g) Certain Identified Areas
A Persons Deemed to Have Knowledge
Disclosure Schedule
-------------------
Section 2.1(a) List of Subsidiaries
Section 2.2(a) Capitalization of corporate Subsidiaries that are part of
Stock Group
Section 2.2(b) Capitalization of Equity Subsidiaries
Section 2.2(d) Incumbent Directors and Officers
Section 2.3 Defaults and Violations
Section 2.5 Title to Sale Assets
Section 2.7 Other Tangible Property
Section 2.8 Sales or Options
Section 2.9(a) Financial Statements
Section 2.9(b) Liabilities Not Reflected in Financial Statements
Section 2.9(c) Debt For Borrowing Money
Section 2.10 Actions Pending
Section 2.11 Change or Events
Section 2.12 Compliance with Laws; Defaults
Section 2.13(a) Owned Real Property
Section 2.13(b) Condemnation Proceedings
Section 2.13(c) Leased Real Property
Section 2.14 Material Contracts
Section 2.15 Licenses and Permits
Section 2.16(a) Intellectual Property
Section 2.16(b) Intellectual Property Restrictions
Section 2.16(c) Infringement of Intellectual Property
Section 2.16(d) Intellectual Property Licensed to Third Parties
Section 2.16(e) Intellectual Property License or Royalty Fees Arrangements
with Third Parties
Section 2.16(f) Actions Pending regarding Intellectual Property
Section 2.16(g) Infringements on Intellectual Property
Section 2.16(h) Intellectual Property Agreements to be Assigned to Buyer
(except patents and trademarks)
Section 2.17(a) Environmental Compliance
Section 2.17(b) Environmental Matters
Section 2.17(g) Connecticut and New Jersey Operations
v
<PAGE> 7
Section 2.18 Collective Bargaining Agreement; Labor Relations
Section 2.19(a) Employee Plans
Section 2.19(d) Certain Payments due upon Consummation of Transaction
Section 2.19(f) Retiree Benefit Plans
Section 2.20 Tax Matters
Section 2.20(a) Tax Group
Section 2.20(c) Tax Returns of Stock Subsidiaries and Equity Subsidiaries
Section 2.20(g) Other Tax Returns
Section 2.23 Gifts and Similar Benefits
Section 2.24 Affiliate Transactions
Section 2.25 Suppliers and Customers
Section 2.26 Product Liability Claims
vi
<PAGE> 8
AGREEMENT FOR SALE AND PURCHASE
OF ASSETS
This Agreement for Sale and Purchase of Assets (the "Agreement") dated
as of November 28, 2000 is by and between THE B.F.GOODRICH COMPANY, a New York
corporation ("Seller"), and PMD GROUP INC., a Delaware corporation ("Buyer").
R E C I T A L S
A. Seller's Performance Materials business segment develops,
manufactures, markets, distributes and sells a broad range of specialty
thermoplastic materials and polymer additives, thickeners, emulsions and other
additives for consumer and industrial applications (the "Business").
B. Each of the companies listed in Schedule B(i) (the "Stock Selling
Subsidiaries") and the companies listed in Schedule B(ii) (the "Asset
Subsidiaries") is a direct or indirect wholly owned subsidiary of Seller;
C. Seller and each of the Stock Selling Subsidiaries is the registered
and beneficial owner of the share capital of those companies set forth opposite
their respective names in Schedule B(i) (the "Stock Subsidiaries");
D. Seller is the beneficial owner of the membership or ownership
interest of those companies set forth in Schedule D (the "Equity Subsidiaries").
E. Each Stock Subsidiary is the beneficial owner of share capital or
other ownership interest of those companies for which it is identified as the
"Stock Selling Subsidiary" in Schedule E (the "Indirect Subsidiaries" and,
collectively with the Stock Subsidiaries and the Equity Subsidiaries, the "Stock
Group").
F. The Business is carried on through Seller, the Asset Subsidiaries,
and the members of the Stock Group (the Asset Subsidiaries and the members of
the Stock Group are collectively referred to as the "Subsidiaries").
G. Seller desires to sell or cause to be sold to Buyer (the "Sale") and
Buyer desires to purchase from Seller, the Stock Selling Subsidiaries and the
Asset Subsidiaries (the "Purchase") (i) the Stock and the Equity Interest (as
defined below) and (ii) all of the assets that are used, held for use or useful
solely or primarily in connection with the operation of the Business, on the
terms, and subject to the conditions, set forth herein.
H. Seller is acting in its own name and on behalf of the Stock Selling
Subsidiaries and the Asset Subsidiaries.
<PAGE> 9
I. Capitalized terms used in this Agreement shall have the meaning
ascribed to such terms in Appendix A attached to this Agreement.
A G R E E M E N T S
In consideration of the mutual representations, warranties, covenants,
agreements and conditions contained herein and in order to set forth the terms
and conditions of the Purchase and the Sale (together, the "Transaction") and
the manner of effecting the Transaction, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
SECTION 1.1. TRANSACTION; SALE ASSETS. On the Closing Date:
Stock. Seller shall, and shall cause each relevant Stock
Selling Subsidiary to, transfer, assign and deliver to Buyer (or its designee)
all of the issued and outstanding shares of capital stock (the "Stock") of the
Stock Subsidiaries;
Equity Interest. Seller shall, and shall cause each relevant
Stock Selling Subsidiary to, transfer, assign, and deliver to Buyer (or its
designee) all of its membership or ownership interest (the "Equity Interest") in
and to the Equity Subsidiaries; and
Assets. Seller shall, and shall cause each Asset Subsidiary
to, sell, transfer, assign and deliver to Buyer (or its designee) all of their
respective right, title and interest in and to all other assets owned, on the
Closing Date, by Seller or by any Asset Subsidiaries that are used, held for use
or useful solely or primarily in connection with the operation of the Business
(the "Assets," and together with the Stock and the Equity Interest, the "Sale
Assets").
Buyer (or its designee) shall purchase the Sale Assets from Seller, the
Asset Subsidiaries and the Stock Selling Subsidiaries, all for the consideration
and upon and subject to the other terms and conditions hereinafter set forth.
The Assets include, without limitation, the following assets, rights,
interests and other properties of Seller and the Asset Subsidiaries, but the
Assets specifically exclude the Excluded Assets as described in Section 1.2:
(a) Real Property. All of Seller's and the Asset Subsidiaries'
right, title and interests in the Owned Real Property (each parcel of which is
described in Schedule 1.1(a)) (the "Real Property Acquired by Asset Purchase"),
together with all buildings, improvements, fixtures and appurtenances thereto.
(b) Inventory and Supplies. All right, title and interest of
Seller and any Asset Subsidiaries in inventory and supplies on the Closing Date
that are used, held for use or useful solely or primarily in connection with the
operation of the Business, including without limitation,
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raw materials, work-in-process and finished goods, inventory and supplies in
transit or on consignment and any and all other supplies stored, kept or
maintained by or on behalf of Seller and the Asset Subsidiaries, wherever
located, (the "Inventory and Supplies Acquired by Asset Purchase").
(c) Tangible Property. All right, title and interest of Seller
and any Asset Subsidiaries in the tangible property, other than the Inventory
and Supplies Acquired by Asset Purchase, on the Closing Date that is used, held
for use or useful solely or primarily in connection with the operation of the
Business, including, without limitation, all leasehold improvements, equipment,
furniture and fixtures, machinery, vehicles, tools and other fixed assets and
all records relating thereto including operating and engineering records (the
"Other Tangible Property Acquired by Asset Purchase").
(d) Accounts Receivable. All right, title and interest of
Seller and any Asset Subsidiaries in accounts, notes and other receivables of
the Business on the Closing Date, and any collateral or other security relating
thereto and all proceeds thereof (the "Receivables Acquired by Asset Purchase").
(e) Contract Rights. Subject to Section 10.3, all of Seller's
and the Asset Subsidiaries' rights under those contracts, sales and purchase
orders, customer orders, leases for real and personal property, licenses,
commitments and agreements to which any of Seller and the Asset Subsidiaries are
a party on the Closing Date that are used, held for use or useful solely or
primarily in connection with the operation of the Business including, but not
limited to, those set forth on Schedule 1.1(e) (the "Contracts Assigned by Asset
Purchase").
(f) Intellectual Property Rights. Except as provided in
Sections 1.2(i) and 1.2(j), below, all of Seller's and the Asset Subsidiaries'
rights in domestic and foreign patents, trademarks, software licenses, trade
names, service marks, copyrights, government approvals, permits and
authorizations (irrespective of whether such governmental approvals, permits and
authorizations apply to intellectual property matters, but excluding Permits
which are non-transferable under applicable law), together with all applications
and registrations for any of the foregoing, customer lists, supplier lists,
technical know-how, utility models, designs, proprietary software, trade
secrets, confidential information and other similar intangible assets and all
licenses, agreements and permissions related to the foregoing owned by Seller
and the Asset Subsidiaries on the Closing Date and used, held for use, or useful
solely or primarily in connection with the operation of the Business, including,
but not limited to, the items set forth on Schedule 1.1(f) (the "Intangibles
Acquired by Asset Purchase").
(g) Books and Records. Originals of all books and records of
Seller and the Asset Subsidiaries relating solely to the Business and copies of
portions of such of the books and records to the extent they relate primarily to
the Business which, in the reasonable discretion of Buyer, will be necessary or
useful to Buyer in connection with the operation of the Business following the
Closing Date (the "Books and Records Acquired by Asset Purchase").
(h) Certain Prepaid Expenses. All non-refundable and
transferable prepaid expenses, prepaid assets and deposits paid by Seller or the
Asset Subsidiaries prior to the Closing
3
<PAGE> 11
Date related solely or primarily to the Business for which Buyer will receive
the benefit after the Closing Date (the "Assigned Prepaid Expenses Acquired by
Asset Purchase").
(i) Causes of Action. All of Seller's and the Asset
Subsidiaries' rights, credits, causes of action or rights of set-off against
third parties relating to the Sale Assets or any assets of the members of the
Stock Group, including, without limitation, unliquidated rights under
manufacturer's and vendor warranties.
(j) Goodwill. All goodwill associated with the Business or the
Sale Assets, together with the right to represent to third parties that the
Buyer is the successor to the Business.
(k) Other Assets. Except as provided in Section 1.2 below, the
right, title and interest of Seller and any Asset Subsidiaries in all other
tangible and intangible assets on the Closing Date that are used, held for use,
or useful solely or primarily in connection with the operation of the Business.
SECTION 1.2. EXCLUDED ASSETS. Notwithstanding anything in Section 1.1
above to the contrary, specifically excluded from the Transaction are the
following assets none of which shall be a part of the Assets or assets held by
any member of the Stock Group (the "Excluded Assets"):
(a) All cash, cash equivalents, securities available for sale,
bank accounts, and certificates of deposit other than cash in the amount of Five
Million Dollars ($5,000,000), as described in Section 9.15 and other than any
cash taken into account in calculating the Purchase Price pursuant to Section
1.9(a)(ii).
(b) All prepaid expenses, prepaid assets and deposits, any of
which are non-transferable and are refundable to Seller or any of its
Subsidiaries (including without limitation prepaid insurance and related rights
to the refund of unearned premiums as of the Closing Date, cash on deposit with
the Internal Revenue Service, state or foreign taxing authorities, public
utilities and other service providers) and owned by Seller or any of its
Subsidiaries on the Closing Date, but only to the extent such assets are
excluded for purposes of calculating Net Working Capital of the Business as of
the Closing Date.
(c) Tax Returns and tax records of Seller and its Subsidiaries
(other than the Tax Returns and Tax records of the members of the Stock Group)
and all rights of Seller or any of its Subsidiaries to any claims for any
federal, state, local or foreign tax refunds relating to the operation of the
Business or the ownership of the Sale Assets during periods prior to the Closing
Date, but only to the extent such claims for refunds are excluded for purposes
of calculating Net Working Capital of the Business as of the Closing Date.
(d) All books, files, papers and records (including without
limitation minute books and stock transfer records) relating solely or primarily
to general corporate affairs of Seller, the Stock Selling Subsidiaries and the
Asset Subsidiaries and any records or instruments relating solely or primarily
to the Excluded Assets.
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(e) All policies of insurance of Seller and its Subsidiaries
and all of Seller's and its Subsidiaries' rights thereunder.
(f) Permits which are non-transferable under applicable law.
(g) Except to the extent provided in Section 9.2, (i) all of
the assets of the Employee Benefit Plans, (ii) any insurance contract, trust,
third party administrator contract, or other funding arrangement for such plans,
(iii) any contracts with third parties relating to the administration of such
plans, and (iv) any monies held by Seller or its Subsidiaries in any account
dedicated to the payment of benefits or insurance premiums relating to any such
plan.
(h) Any software computer programs and data bases which are
not solely or primarily used or held for use in the Business.
(i) Except as otherwise set forth in Section 9.8, all of
Seller's and its Subsidiaries' rights to use the name "Goodrich," "B.F.
Goodrich" and "BFG," alone or in combination with any other words or terms or
variations of such words or terms.
(j) Any intellectual property of Seller or its Subsidiaries,
including, patents, licenses, trademarks, trade names, copyrights, know-how and
trade secrets (i) that are not solely or primarily used, held for use or useful
in connection with the operation of the Business, or (ii) that are listed on
Schedule 1.2(j) ("Retained Intellectual Property").
(k) Except as otherwise set forth in Section 4.12, (i)
information relating to Seller's negotiations for the sale or other ownership
arrangement of all or a portion of the Business and any other transaction with
Buyer or any third party who or which was interested in the Business or any
other businesses, divisions, commercial business units or assets of Seller or
its Subsidiaries or affiliates and (ii) any confidential information of third
parties which is contained within records exclusively dedicated for and relating
to the Business, or otherwise held under an obligation of confidentiality, which
is subject to an obligation of confidentiality which is not assumed by Buyer
pursuant to this Agreement or otherwise or for which consent for such assumption
is necessary and not obtained.
(l) Subject to Section 9.4, all of the assets directly related
to Seller's Electronic Materials Business ("EMD Business") including but not
limited to those assets described on Schedule 1.2(l).
(m) That certain parcel of vacant land of approximately 150
acres in Brecksville, Ohio, as depicted on the map attached to Schedule 1.2(m)
(the "Brecksville Vacant Land").
(n) All of the real property of those facilities described on
Schedule 1.2(n) (the "Closed Facilities") along with all of the tangible
personal property located at the Closed Facilities.
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(o) All of the real property described on Schedule 1.2(o) (the
"Textile Dyes Facilities") along with all of the assets directly related to the
Textile Dyes business, including, but not limited to, those described on
Schedule 1.2(o).
(p) All other assets of Seller or the Asset Subsidiaries not
used or useful solely or primarily in connection with the Business and/or
otherwise listed in Schedule 1.2(p).
SECTION 1.3. TITLE TO SALE ASSETS. At the Closing, the Sale Assets
shall be sold, transferred, assigned and conveyed to Buyer free and clear of any
and all liens, mortgages, pledges, security interests, conditional sales
agreements, charges, claims, options, conditions, easements and restrictions of
record and any other encumbrances of any kind or nature whatsoever
(collectively, "Encumbrances"), except (in the case of the Assets) for Permitted
Encumbrances and except as otherwise expressly provided in this Agreement. On
the Closing Date, Seller shall, and shall cause the Stock Selling Subsidiaries
to, transfer to Buyer (or its designee) good and marketable title to the Stock
and the Equity Interest, free and clear of all Encumbrances, proxies, voting
rights or agreements and other restrictions and limitations of any kind.
SECTION 1.4. EXCLUDED LIABILITIES. Except as expressly set forth in
Section 1.5, Buyer shall neither assume nor become responsible for any
Liabilities of Seller or its Subsidiaries or affiliates at the Closing
(collectively, the "Excluded Liabilities"). All Excluded Liabilities shall
remain the sole obligation and responsibility of Seller, its Subsidiaries or
affiliates or predecessors (in each case, who are not members of the Stock
Group), as applicable. The Excluded Liabilities include, without limitation, the
following:
(a) Liabilities relating to or arising in respect of any of
the Excluded Assets;
(b) Liabilities in respect of Taxes, or any reporting
requirement or estimated Tax payable with respect thereto, including all Taxes
resulting from or with respect to the Assets prior to the Closing (except as
provided in Section 9.12);
(c) the fees and expenses incurred by the Seller or any of its
Subsidiaries or affiliates in connection with negotiating, preparing, closing
and carrying out the provisions of this Agreement and the Transaction,
including, but not limited to, the fees, disbursements and expenses for Seller's
attorneys, accountants, financial advisers and any other consultants;
(d) except as provided in Section 9.2, all liabilities with
respect to Employee Benefit Plans, including liabilities for post-retirement
health and life insurance benefits, Management Continuity Agreements, Retention
Agreements, Management Retention Agreements and Supplemental Executive
Retirement Plan Agreements;
(e) any indebtedness for borrowed money of Seller or any of
its Subsidiaries or affiliates to third parties or to Seller or any of its
Subsidiaries or affiliates (other than amounts owed between any members of the
Stock Group) and any guarantees or obligations to reimburse a bank or any other
Person under any letter of credit or similar obligations, and any interest,
fees, prepayment premium and other amounts payable in respect thereof;
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(f) all Liabilities against which Seller has agreed to
indemnify Buyer pursuant to this Agreement but only to the extent of such
obligation to indemnify;
(g) Liabilities arising in connection with any (i) disposition
prior to the Closing by Seller or any of its affiliates of stock or assets
(whether by stock or asset sale, merger or other transaction) formerly
comprising a product line, segment, portion or division of the Business,
including without limitation, Liabilities arising in connection with the
dispositions of Tremco, Inc. and Tremco Autobody Technologies, Inc. or (ii)
product line, segment, portion or division of the Business discontinued prior to
the Closing;
(h) Liabilities arising in connection with product lines of
the Business manufactured, sold or delivered prior to the Closing Date
(including, without limitation, Liabilities under any warranty or product
liability claims or product recalls or defects, including defective material,
design or manufacturing claims) which product lines are not, as of the date
hereof or as of the Closing Date, currently manufactured or sold by the
Business; and
(i) Other Liabilities expressly assumed or retained by Seller
under this Agreement.
SECTION 1.5. ASSUMED LIABILITIES. Notwithstanding anything in this
Agreement to the contrary, at the Closing, Buyer shall assume and agree to pay,
perform and discharge as and when due the following Liabilities of the Seller or
the Asset Subsidiaries (the "Assumed Liabilities"):
(a) bona fide liabilities of the Business (other than any
non-current Liability described in Section 1.4(a) through Section 1.4(i)) as
reflected, or for which amounts are reserved for, on the Closing Balance Sheet
to the extent such liabilities are of the type reflected on the May 31, 2000
Balance Sheet or are of a different type and arose subsequent thereto and are
taken into account in the calculation of the Net Working Capital as of the
Closing Date;
(b) Except as provided in Section 1.4(f), Liabilities relating
to or arising out of or incurred in connection with the performance after the
Closing Date of all Contracts Assigned by Asset Purchase (other than items set
forth in Section 1.4(d));
(c) Except as provided in Sections 1.4(h) or 9.6, Liabilities
under any warranty or product liability claims, or product recalls or defects,
including defective material, design or manufacturing claims and merchandise
returns made or received after the Closing Date with respect to products of the
Business manufactured, sold or delivered by Seller or its Subsidiaries prior to,
on or after the Closing Date;
(d) Liabilities of the Business constituting Permitted
Encumbrances;
(e) Other Liabilities expressly assumed by Buyer under this
Agreement or listed on Schedule 1.5; and
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(f) Except as otherwise specifically provided in this
Agreement, Liabilities arising from events relating to the ownership of the
Assets and/or operation of the Business or Assets with respect to the period
after the Closing Date.
SECTION 1.6. PURCHASE PRICE. The purchase price to be paid by Buyer for
the Sale Assets shall be One Billion Four Hundred Million United States Dollars
($1,400,000,000) (as such number may be adjusted pursuant to the immediately
succeeding sentence and Section 1.9, the "Purchase Price"). The Purchase Price
(as adjusted pursuant to Section 1.9(i)) shall be paid at the Closing as
follows: (i) the delivery of a promissory note, containing those terms set forth
on Exhibit C, in the amount of Two Hundred Million Dollars ($200,000,000)
("Seller Note") and (ii) the remainder of the Purchase Price in immediately
available funds in United States Dollars to an account designated in writing by
Seller; provided that, at Buyer's option (exercisable anytime prior to the
Closing) the principal amount of the Seller Note may be reduced by up to Seventy
Five Million Dollars ($75,000,000) and the cash portion of the Purchase Price
increased by an amount equal to 80% of any such principal amount reduction. The
Purchase Price (as adjusted pursuant to the immediately preceding sentence and
Section 1.9(i)) shall be subject to a post-closing adjustment as provided in
Section 1.9.
SECTION 1.7. ALLOCATION OF PURCHASE PRICE.
(a) Buyer shall prepare (and send to Seller) a proposed
allocation of the Purchase Price and the Assumed Liabilities to the Sale Assets
in accordance with the guidelines set forth in Schedule 1.7 no later than
forty-five (45) days after the Determination Date. The parties acknowledge that
such allocation shall be determined based on the fair market values of the Sale
Assets in accordance with Section 1060 of the Code, or under Section 338 of the
Code, in each case to the extent such Section applies to the Transaction. If
Seller disagrees with Buyer's proposed allocation, the parties will negotiate in
good faith in an attempt to resolve such disagreement. If the parties are unable
to solve such disagreement, the parties agree to submit such dispute to Deloitte
& Touche LLP pursuant to procedures similar to those set forth in Section
1.9(f). If Deloitte & Touche LLP determines that Buyer's proposed allocation
with respect to any disputed items reflects a reasonable estimate of the
relative fair market values of the Sale Assets, Seller agrees to abide by such
determination. If Deloitte & Touche LLP determines that Buyer's proposed
allocation with respect to any disputed items does not reflect a reasonable
estimate of the relative fair market values of the Sale Assets, Deloitte &
Touche LLP shall determine the relative fair market values with respect to any
disputed items, together with any appropriate corresponding allocation, provided
that such determination must reflect the minimum allocations set forth on
Schedule 1.7, and Buyer and Seller agree to abide by Deloitte & Touche LLP's
determination of fair market value. The parties shall report (including with
respect to the filing of Form 8594 with the Internal Revenue Service, to the
extent such Form is applicable hereto) the sale and purchase of the Sale Assets
for all income tax purposes in a manner consistent with such agreed allocations
and shall not, in connection with the filing of applicable Tax Returns, make any
allocation of the Purchase Price and Assumed Liabilities which is contrary to
such agreed allocations. The parties agree to consult with one another with
respect to any tax audit, controversy, or litigation relating to such
allocations.
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<PAGE> 16
(b) Buyer shall use reasonable efforts to prepare a tentative
allocation of the Purchase Price and deliver such allocation to Seller, prior to
Closing, provided that such tentative allocation shall be limited to the
appropriate portions of the Purchase Price that are to be allocated to the
following entities: BFGoodrich F.C.C., Inc., BFGoodrich Chemical Belgie BVBA,
and BFGoodrich Chemical Spain S.A. Buyer and Seller agree that such tentative
allocations may be revised without prejudice when included in the allocation
prepared pursuant to (a) above.
(c) Buyer and Seller agree for all relevant tax purposes, to
the extent (i) the Purchase Price is properly allocable under the provisions of
paragraph (a) to Sale Assets that are not directly owned by Seller but are
instead owned by an Asset Subsidiary or a Stock Selling Subsidiary, and (ii) the
appropriate portion of the Purchase Price is paid to Seller in lieu of such
Asset Subsidiary or Stock Subsidiary, that in such event the allocable portion
of the Purchase Price received by Seller shall be held by Seller as collection
agent for, and for the benefit of, the appropriate Asset Subsidiary or Stock
Selling Subsidiary, and that such Subsidiary shall be deemed to possess the
beneficial ownership of such allocable portion of the Purchase Price. Buyer and
Seller agree that they shall cooperate in the preparation and execution of any
documentation determined to be necessary or desirable in effectuating the intent
of this provision to the extent Buyer and Seller mutually determine that such
documentation is appropriate.
SECTION 1.8. CLOSING. The consummation of the Transaction contemplated
hereby (the "Closing") shall take place at 9:00 a.m., Eastern Standard Time, on
the later of: (i) February 26, 2001 or (ii) ten (10) business days after the
satisfaction or waiver of the conditions set forth in a Article VI and VII
(other than those conditions that by their nature are to be satisfied at
Closing, but subject to the satisfaction of such conditions), in the offices of
Squire, Sanders & Dempsey L.L.P., 4900 Key Tower, 127 Public Square, Cleveland,
Ohio 44114, or at such other time and place as Buyer and Seller shall mutually
agree (the date on which the Closing takes place being referred to as the
"Closing Date"). All actions scheduled in this Agreement for the Closing Date
shall be deemed to occur simultaneously. For accounting purposes, the Closing
shall be deemed to be effective at 5:00 p.m., Eastern Standard Time, on the
Closing Date.
SECTION 1.9. PURCHASE PRICE ADJUSTMENT.
(a) A Purchase Price adjustment to the Purchase Price shall be
made as follows: (i) the amount of any indebtedness for borrowed money of Seller
or any of its affiliates from third parties that Buyer is assuming pursuant to
this Agreement and the amount of any indebtedness for borrowed money of any
consolidated members of the Stock Group from third parties shall be subtracted
from the Purchase Price; (ii) the amount of cash and cash equivalents in excess
of Five Million Dollars ($5,000,000) held in or by the wholly owned members of
the Stock Group as of the Closing Date shall be added to the Purchase Price,
(iii) the change in Net Working Capital as of the Closing Date (as finally
determined below) shall be added to or subtracted from the Purchase Price, and
(iv) the amount, if any, of the adjustment derived in Section 1.9(i) shall be
subtracted from the Purchase Price, provided that such adjustment shall be
effectuated solely through reduction of the Seller Note as described in Section
1.9(i).
(b) left blank intentionally.
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(c) Within sixty (60) days following the Closing, Seller shall
prepare and deliver to Buyer an audited consolidated statement of assets to be
sold and liabilities to be assumed of the Business as of the Closing Date
("Closing Balance Sheet") as reported on by Ernst & Young LLP, together with a
computation of the Net Working Capital as of the Closing Date ("Seller's Closing
Working Capital Statement") prepared in a manner consistent with the
consolidated statement of assets to be sold and liabilities to be assumed of the
Business as of May 31, 2000, attached as Exhibit A hereto (the "May 31, 2000
Balance Sheet") and the computation of the Net Working Capital as of May 31,
2000, attached as Exhibit B hereto ("May 31, 2000 Working Capital Statement").
The Closing Balance Sheet and Seller's Closing Working Capital Statement shall
be, and the May 31, 2000 Balance Sheet and May 31, 2000 Working Capital
Statement were, prepared consistent with past practice, in accordance with
accounting principles generally accepted in the United States consistently
applied, and in accordance with the principles set forth in the financial policy
manual of Seller, previously delivered to Buyer (the "Guide"), except in the
case of the May 31, 2000 and the Seller's Closing Working Capital Statement, as
provided in Schedule 1.9. In the event the Seller's Closing Working Capital
Statement cannot be prepared both in accordance with generally accepted
accounting principles and in a manner consistent with the Guide, compliance with
generally accepted accounting principles shall be given priority, it being
understood that the Guide is intended to be an interpretation of generally
accepted accounting principles. As used in this Agreement, "Net Working Capital"
shall be determined in accordance with Schedule 1.9. Subject to (g) and (h)
below, (i) to the extent the Net Working Capital as of the Closing Date as
finally determined is greater than $197,119,757, the Purchase Price shall be
increased by the amount of such difference pursuant to Section 1.9(a)(iii) up to
a maximum of Twenty-Five Million Dollars ($25,000,000), and (ii) to the extent
the Net Working Capital as of the Closing Date as finally determined is less
than $197,119,757, the Purchase Price shall be decreased by the amount of such
difference pursuant to Section 1.9(a)(iii).
(d) Buyer and its representatives shall have the right to
observe the work performed by Seller and/or its representatives in connection
with the preparation of the Closing Balance Sheet and Seller's Closing Working
Capital Statement, to examine and make copies of the work papers and other
documents generated or reviewed in connection with the preparation of the
Closing Balance Sheet and Seller's Closing Working Capital Statement and the May
31, 2000 Balance Sheet and the May 31, 2000 Working Capital Statement, and to
access the books and records of Seller related to the Closing Balance Sheet and
Seller's Closing Working Capital Statement and the May 31, 2000 Balance Sheet
and the May 31, 2000 Working Capital Statement.
(e) Buyer shall have forty-five (45) days after the receipt of
Seller's Closing Working Capital Statement to review Seller's Closing Working
Capital Statement, the work papers and other documents generated or reviewed by
Seller in connection with the preparation of Seller's Closing Working Capital
Statement, and the books and records of Seller related to Seller's Closing
Working Capital Statement ("Buyer's Review Period"). If, within Buyer's Review
Period, Buyer disputes any item(s) on Seller's Closing Working Capital
Statement, Buyer shall give Seller written notice of such disagreement
specifically identifying the item(s) and amount(s) in dispute and the basis for
such dispute (the "Buyer's Notice"). The parties shall
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<PAGE> 18
use their reasonable efforts to reach agreement with respect to such disputed
items within forty-five (45) days following the delivery of Buyer's Notice, or
such longer period as may be agreed upon by the parties (the "Resolution
Period"). Any item(s) on Seller's Closing Working Capital Statement not
specifically identified in writing as a disputed item before the end of Buyer's
Review Period shall be deemed to have been accepted by Buyer and shall not be
subject to any further dispute, review or change.
(f) If the parties fail to reach a mutually agreeable
determination with respect to Seller's Closing Working Capital Statement within
the Resolution Period, the disputed item(s) shall be resolved and, as a result
thereof, the amount of the Net Working Capital on the Closing Date shall be
definitely and finally resolved by Deloitte & Touche LLP, or if Deloitte &
Touche LLP does not agree in writing to serve in such capacity, a
nationally-recognized firm of independent public accountants agreed upon by both
Seller and Buyer (in either case, the "Accounting Firm"), who shall act as
experts not as arbitrators and whose determination shall be final and binding.
The Accounting Firm shall have agreed in writing to serve in such capacity
pursuant to the terms herein described within fifteen (15) days following the
end of the Resolution Period, and the determination of the Net Working Capital
shall be completed by the Accounting Firm within forty-five (45) days following
the end of the Resolution Period. The Accounting Firm shall address only those
issues in dispute, and may not assign a value to any item greater than the
greatest value for such item claimed by either party or less than the smallest
value for such item claimed by either party. The fees, costs and expenses of the
Accounting Firm shall be borne proportionately by Buyer and Seller to the extent
that each party's calculation of Net Working Capital differs from the Net
Working Capital as finally determined by the Accounting Firm. The allocation of
cost by the Accounting Firm shall be final and binding on the parties. The
Accounting Firm's determination of Net Working Capital shall be completed in a
manner consistent with the principles set forth in this Section 1.9.
(g) If, as a result of the post-closing adjustment as
described in (a) above, the Purchase Price is to be reduced, the amount of such
reduction, with interest thereon calculated as indicated below (the "Reduction
Amount") shall be paid by wire transfer of immediately available funds to an
account designated in writing by Buyer, within ten (10) business days following
the date (the "Determination Date") of the final determination of the Net
Working Capital as of the Closing Date pursuant to the foregoing procedures. The
interest shall be calculated at the rate(s) of interest per annum announced from
time to time by Citibank N.A. (or its successor) as its U.S. prime rate minus 1%
from the Closing Date through the payment date (the "Applicable Rate"). The
Reduction Amount shall be treated for income tax purposes as an adjustment to
the Purchase Price.
(h) If, as a result of the post-closing adjustment as
described in (a) above, the Purchase Price is to be increased, the amount of
such increase with interest on such amount (the "Increased Amount") shall be
paid within ten (10) business days following the Determination Date. The
interest shall be calculated at the Applicable Rate from the Closing Date
through the payment date. The Increased Amount shall be paid by wire transfer of
immediately available funds to an account designated in writing by Seller, and
shall be treated for income tax purposes as an adjustment to the Purchase Price.
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(i) If the earnings of the Business before interest, taxes,
depreciation and amortization ("EBITDA") for the fiscal quarter ending December
31, 2000 are less than $52,500,000 then the principal amount of the Seller Note
shall be reduced by an amount equal to 6.5 times the difference between EBITDA
for such quarter and $52,500,000 and any associated interest shall be
eliminated. EBITDA will be calculated from the results of operations of the
Business as publicly reported by Seller in the ordinary course of business,
adjusted on a pro-forma basis for this purpose to (i) exclude revenue and
expenses associated with the EMD Business, (ii) reflect pension expense and
retiree health care expenses in a manner identical to the pro-forma period for
the first three (3) quarters of 2000, (iii) exclude the effect of research and
development expenses associated with the Business' drug delivery systems, (iv)
exclude the results of the Textile Dyes business (as well as any gain or loss or
transaction costs associated with the sale of this business), (v) exclude costs
and expenses associated with implementation of the Textile Consolidation
Project, (vi) exclude costs and expenses associated with matters that constitute
Excluded Liabilities under the Agreement, and (vii) exclude any costs or
expenses associated with the Business divestiture process.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Buyer to enter into this Agreement and to
consummate the Purchase, Seller represents and warrants to Buyer as of the date
hereof and as of the Closing Date as follows:
SECTION 2.1. ORGANIZATION; POWER.
(a) Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York. Each of the
Subsidiaries and the Stock Selling Subsidiaries is a corporation or other
business entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, as listed for each on Section
2.1(a) of Seller's Disclosure Schedule attached to this Agreement (the
"Disclosure Schedule").
(b) Seller and each of the Asset Subsidiaries, Stock
Subsidiaries and the Stock Selling Subsidiaries have all requisite power and
authority to own, lease and operate the Sale Assets (and, in the case of the
members of the Stock Group that are affiliates of Seller, their assets), to
carry on the Business as it is now being conducted by each, respectively, and to
enter into, execute and deliver this Agreement and to consummate the
Transaction.
(c) Seller and each of the Asset Subsidiaries, Stock
Subsidiaries, the members of the Stock Group and the Stock Selling Subsidiaries
is duly qualified to do business as a foreign corporation or business entity in
each jurisdiction where the conduct of its business or ownership of its
properties requires such qualification, except where the failure to qualify
would not reasonably be expected to have a Material Adverse Effect.
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SECTION 2.2 CAPITALIZATION.
(a) The authorized, issued and outstanding capital stock of
each member of the Stock Group (other than the Equity Subsidiaries) is as set
forth in Section 2.2(a) of the Disclosure Schedule, and all of the issued and
outstanding shares of stock of members of the Stock Group have been duly
authorized and validly issued, and are fully paid and nonassessable, and have
not been issued in violation of the preemptive rights of any Person and are
owned by the Person identified as such in Section 2.2(a) of the Disclosure
Schedule, free and clear of Encumbrances.
(b) The ownership interest of each member or owner of each of
the Equity Subsidiaries is as set forth in Section 2.2(b) of the Disclosure
Schedule and all such interests have been validly issued and are fully paid,
have not been issued in violation of the preemptive rights of any Person and are
owned by the Person indicated in Section 2.2(b) of the Disclosure Schedule free
and clear of Encumbrances.
(c) Neither Seller nor any of the Stock Selling Subsidiaries
or the members of the Stock Group that are affiliates of Seller are a party to
any outstanding subscriptions, contracts to purchase capital stock or other
securities, conversion privileges, options, warrants or rights of any kind, with
respect to the purchase, sale or voting of any of the Stock, any of the stock of
any member of the Stock Group or any of the Equity Interest.
(d) Set forth on Section 2.2(d) of the Disclosure Schedule is
a true and complete list of the incumbent directors and officers of each member
of the Stock Group.
SECTION 2.3. AUTHORITY; NO VIOLATION.
(a) The execution and delivery of this Agreement and the
consummation of the Transaction have been duly and validly authorized by all
necessary corporate or other action on the part of Seller, the Asset
Subsidiaries, the members of the Stock Group and the Stock Selling Subsidiaries.
This Agreement is a valid and binding obligation of Seller, the Subsidiaries,
the members of the Stock Group that are affiliates of Seller and the Stock
Selling Subsidiaries, enforceable against each of them in accordance with its
terms, except as the enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws relating to or
limiting creditors' rights generally or by general principles of equity,
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
(b) Except as set forth in Section 2.3 of the Disclosure
Schedule, neither the execution and delivery of this Agreement, nor the
consummation of the Transaction, nor compliance by Seller, the Subsidiaries, the
members of the Stock Group and the Stock Selling Subsidiaries with any of the
provisions of the Agreement, will conflict with, violate, result in a breach of,
constitute a default (or an event that, with notice or lapse of time, or both,
would constitute a default) under, or give rise to any right of termination,
cancellation or acceleration, result in the creation of any material Encumbrance
upon any of the Sale Assets, or the assets of any member of the Stock Group, or
require any authorization, consent, approval, exemption or
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<PAGE> 21
other action by or notice to any court or other governmental body or any other
Person under (i) any provision of the constitutional documents of Seller, the
Subsidiaries, the members of the Stock Group or the Stock Selling Subsidiaries,
or (ii) (x) any of the terms, conditions or provisions of any material
indenture, lease, mortgage, loan agreement, contract or other agreement or to
which Seller, any Subsidiary, any Stock Selling Subsidiary or any member of the
Stock Group is bound or which is a Contract Assigned by Asset Purchase, or (y)
any material Permit, law, rule or regulation of any governmental body, agency or
authority, or any judgment, order, writ, injunction or decree of any court,
arbitrator or governmental body, agency or authority to which Seller, the
Subsidiaries, the Stock Selling Subsidiaries, the members of the Stock Group,
the Sale Assets or the assets of any member of the Stock Group are subject.
SECTION 2.4. OWNERSHIP OF STOCK AND EQUITY INTEREST. Seller or one of
the Stock Selling Subsidiaries has good and marketable title to the Stock, free
and clear of any Encumbrance, and has the right, power and authority to sell and
transfer the Stock to Buyer (or its designee) in the manner provided herein. One
of the Stock Subsidiaries or another member of the Stock Group has good and
marketable title to the shares of capital stock or other ownership interests of
the Indirect Subsidiaries as reflected in Sections 2.2(a) and (b) of the
Disclosure Schedule ("Indirectly Owned Stock"), free and clear of any
Encumbrances. None of the Stock or the Indirectly Owned Stock is subject to any
voting trust or voting agreement, nor is any proxy in effect with respect
thereto. Seller has good and marketable title to the Equity Interest, free and
clear of any Encumbrance, and has the right, power and authority to sell and
transfer the Equity Interest to Buyer (or its designee) in the manner provided
herein. The Equity Interest is not subject to any voting trust or voting
agreement, nor is any proxy in effect with respect thereto. Except for the
Stock, the Indirectly Owned Stock and the Equity Interest, no member of the
Stock Group owns any stock, or other equity or ownership rights in any Person.
SECTION 2.5. TITLE TO SALE ASSETS AND RELATED MATTERS. Except as set
forth in Section 2.5 of the Disclosure Schedule, Seller or one of its
Subsidiaries has, and, subject to the receipt of any required consents, after
giving effect to the Transaction Buyer will have, good and marketable title to,
or uses under valid and subsisting leases or licenses, all of the Assets and, in
the case of the members of the Stock Group, their respective assets (including
those reflected on the May 31, 2000 Balance Sheet, except for assets sold,
consumed or otherwise disposed of in the ordinary course of business since the
date of the May 31, 2000 Balance Sheet), in all cases free and clear of all
Encumbrances, except Permitted Encumbrances.
SECTION 2.6. LEFT BLANK INTENTIONALLY
SECTION 2.7. OTHER TANGIBLE PROPERTY. The Sale Assets and the assets of
the members of the Stock Group include all of the properties, assets and rights
that are used, held for use or useful solely or primarily in the conduct of the
Business as currently conducted. Except as provided in Section 2.7 of the
Disclosure Schedule, the Other Tangible Property is adequate for the conduct of
the Business as currently conducted. Except as provided in Section 2.7 of the
Disclosure Schedule, the machinery and equipment included in the Other Tangible
Property Acquired by Asset Purchase has been maintained in a manner sufficient
to permit the conduct of the Business in the ordinary course, and may be so
operated in such a manner at the Closing in all material respects.
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SECTION 2.8. NO SALES OR OPTIONS. Except for this Agreement and except
as set forth in Section 2.8 of the Disclosure Schedule, neither Seller nor any
of its affiliates have entered into any agreement for the sale or lease of, or
given any Person an option to lease or purchase, all or any part of the Sale
Assets or assets of any member of the Stock Group, except for sales of inventory
items in the ordinary course of the Business, sales of supplies in the ordinary
course of the Business, consistent with past practice, or the disposal of
machinery or equipment in the ordinary course of the Business, consistent with
past practice.
SECTION 2.9 FINANCIAL STATEMENTS.
(a) Seller has delivered to Buyer (i) the unaudited balance
sheets and statements of income and cash flows of the Business as of and for the
nine-month period ended September 30, 1999 and 2000, (ii) the May 31, 2000
Balance Sheet and (iii) the audited balance sheets and statements of income and
cash flows of the Business for the years ended December 31, 1997, 1998, 1999
together with the notes to such financial statements, accompanied in the case of
this clause (iii), by an unqualified opinion of Ernst &Young LLP (the financial
statements described above, together with the notes to such financial
statements, collectively, the "Financial Statements.") Except as described in
Section 2.9(a) of the Disclosure Schedule, the Financial Statements (i) were
prepared in accordance with accounting principles generally accepted in the
United States, consistently applied; and (ii) present fairly in all material
respects the financial condition and results of operations of the Business for
the periods referred to therein (or, in the case of the May 31, 2000 Balance
Sheet, the assets and liabilities of the Business as held for sale in connection
with the Transaction).
(b) Neither Seller, nor any Asset Subsidiary (to the extent
related to the Business), nor any member of the Stock Group has any liabilities
or obligations of any nature (whether accrued, absolute, contingent, unasserted,
known, unknown or otherwise), except (i) as set forth as a liability on the May
31, 2000 Balance Sheet, (ii) as are Excluded Liabilities, (iii) items disclosed
in Section 2.9(b) of the Disclosure Schedule, (iv) liabilities and obligations
incurred since the date of the May 31, 2000 Balance Sheet in the ordinary course
of business and not in violation of any of the terms of this Agreement, (v)
liabilities and obligations arising under any contract or agreement or (vi)
other liabilities which in the aggregate would not have Material Adverse Effect.
(c) Except as set forth in Section 2.9(c) of the Disclosure
Schedule, no member of the Stock Group has outstanding any debt for borrowed
money or any finance leases required by accounting principles generally accepted
in the United States to be capitalized and the Assumed Liabilities do not
include obligations under any such finance leases.
SECTION 2.10. ACTIONS PENDING. Except as set forth in Section 2.10 of
the Disclosure Schedule, there are no material actions, suits, claims, written
notices, hearings or proceedings (excluding actions, suits, claims, notices,
hearings or proceedings related to Taxes) pending or, to Seller's Knowledge,
threatened against Seller or any of the Subsidiaries or any properties or rights
of Seller or the Subsidiaries related to the Business, by or before any court,
arbitrator or governmental body, agency or authority. Except as set forth in
Section 2.10 of the Disclosure
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<PAGE> 23
Schedule, to Seller's Knowledge there are no material inquiries or
investigations (excluding inquires or investigations relating to Taxes) pending
or threatened against Seller or any of the Subsidiaries or any properties or
rights of Seller or the Subsidiaries related to the Business, by or before any
court, arbitrator or governmental body, agency or authority. Except as set forth
on Schedule 2.10, neither Seller nor any Subsidiary is subject to any order,
writ, injunction or decree of any court or any federal, state, municipal or
other domestic or foreign governmental department, commission, board, bureau,
agency or instrumentality (other than as relating to Permits), in each case
relating and material to the Business.
SECTION 2.11. ABSENCE OF CHANGES OR EVENTS. Except as contemplated by
this Agreement or as described in Section 2.11 of the Disclosure Schedule, since
December 31, 1999, the Business has in all material respects been conducted only
in the ordinary course, and neither Seller nor any of its affiliates has:
(a) Mortgaged, pledged or subjected to any Encumbrance any
material portion of the Sale Assets or any material portion of the assets of any
members of the Stock Group;
(b) Encountered any actual or, to Seller's Knowledge,
threatened labor union organizing activity or collective bargaining agreement
negotiation, had any actual or, to Seller's Knowledge, threatened employee
strikes, work stoppages, slow-downs or lock-outs, or experienced any material
change in its relationship with employees or the agents, consultants,
salespersons, distributors or independent contractors of the Business;
(c) Except for the Transition Arrangements, made any change in
the rate of compensation, commission, bonus or other direct or indirect
remuneration payable, or paid or agreed to pay, conditionally or otherwise, any
bonus, extra compensation, pension, severance or vacation pay, to any director,
officer, Employee, consultant, sales representative, distributor or independent
contractor of the Business, other than in the ordinary course of the Business,
consistent with past practice; entered into any employment contract with any
officer or salaried employee, or instituted any employee welfare, bonus, stock
option, profit-sharing, retirement or similar plan or arrangement other than in
the ordinary course of the Business, consistent with past practice;
(d) Suffered any change, event or condition that, in any
individual case or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect;
(e) Taken any action which, if it had been taken after the
date of this Agreement, would have been a breach of Section 4.2; or
(f) Entered into any agreement or contract, made any
commitment or otherwise obligated itself to take any of the types of action
described in subsections (a) through (e) of this Section 2.11.
SECTION 2.12. COMPLIANCE WITH LAWS: NO DEFAULT. Except as described in
Section 2.12 of the Disclosure Schedule, and except for those matters regarding
any Environmental Laws, Seller and its affiliates are in compliance in all
material respects with each
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applicable law, rule, regulation, ordinance, writ, injunction, permit,
resolution, approval, order, decree, policy or guideline of any court,
arbitrator or governmental agency, body or authority to which they or the Sale
Assets or any assets of the members of the Stock Group are subject (including
without limitation applicable laws, rules and regulations relating to antitrust,
civil rights, and occupational health and safety).
SECTION 2.13. REAL PROPERTY.
(a) Section 2.13(a) of the Disclosure Schedule contains a list
of all of the Owned Real Property and the name of the record title holder
thereof. With respect to such Owned Real Property either the Seller or one of
the Subsidiaries owns good and marketable title to such real property, free and
clear of all Encumbrances other than Permitted Encumbrances. Except as described
in Section 2.13(a) of the Disclosure Schedule, there are no leases, subleases,
licenses, concessions or other agreements granting to any Person the right of
use or occupancy of any material portion of such Owned Real Property; and there
are no outstanding options or rights of first refusal to purchase any parcel of
such Owned Real Property, any portion thereof or interest therein. The Owned
Real Property, together with the Leased Real Property, includes all real
property that is used, held for use or useful solely or primarily in the conduct
of the Business, except for Excluded Assets.
(b) Except as described in Section 2.13(b) of the Disclosure
Schedule, there is no current, or to Seller's Knowledge, proposed condemnation
proceeding, requisition or taking proposal by any public authority of any
material portion of the Owned Real Property.
(c) Section 2.13(c) of the Disclosure Schedule contains a list
of all Leased Real Property and the names of the lessee and lessor thereof. To
Seller's Knowledge, the leases with respect to such property are in full force
and effect, and Seller or one of the Subsidiaries holds a valid and existing
leasehold interest under each of the leases free and clear of all Encumbrances
except for Permitted Encumbrances. Buyer either has been supplied with, or has
been given access to, complete and accurate copies of each of the leases and
none of such leases have, to Seller's Knowledge, been modified in any material
respect, except to the extent that such modifications are disclosed by the
copies delivered to Buyer. Neither Seller nor one of the Subsidiaries is, to
Seller's Knowledge, in default in any material respect under any of such leases,
and, to Seller's Knowledge, none of the landlords or lessors are in default in
any material respect thereunder.
SECTION 2.14. MATERIAL CONTRACTS.
(a) Section 2.14 of the Disclosure Schedule lists all
agreements and contracts, including all amendments thereto, that relate solely
or primarily to the Business to which Seller or its Subsidiaries or affiliates
are parties or to which they are subject or by which the Sale Assets or Seller
or its Subsidiaries or affiliates are bound, and that fall into one or more of
the following categories (the "Material Contracts"):
(i) All agreements and contracts entered into with
customers and suppliers that individually involve the payment at an annual
amount in excess of Three Million
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Dollars ($3,000,000) and are not cancelable upon notice without payment or
consent within ninety (90) days;
(ii) All agreements and contracts relating to capital
expenditures at an annual amount in excess of Five Hundred Thousand Dollars
($500,000);
(iii) All agreements and contracts relating to the
grant or receipt by Seller or any of its Subsidiaries of any license or royalty
fees or other similar payment obligations to or from any Person that Seller
reasonably believes will be in excess of Eight Hundred Thousand Dollars
($800,000) in the calendar year 2000;
(iv) any covenant not to compete, or other covenant,
contained in a contract or agreement restricting Seller's and its Subsidiaries'
development, manufacture, marketing or distribution of any current product lines
of the Business with at least Five Million Dollars ($5,000,000) of annual sales
other than (i) restrictions on the use of Intellectual Property contained in
patent, license or joint development agreements which are customary for those
types of agreements and (ii) those contained in distributorship agreements or
grants of exclusive territories entered into in the ordinary course of business;
(v) left blank intentionally;
(vi) any lease or similar agreement for the lease or
use of (as lesser or lessee) any machinery, equipment, vehicle or other tangible
personal property owned by any Person in each case, other than leases entered
into in the ordinary course of business and providing for payments of not more
than One Million Dollars ($1,000,000) per year;
(vii) other than (i) purchase orders or other
agreements executed in the ordinary course of business extending repayment terms
to third parties and (ii) lines of credit and secured debt of the affiliates of
the Seller supporting payroll, working capital, capital expenditures and other
ordinary course operations of the legal entity; and (iii) debt instruments of
the various joint venture entities of which Seller is a member, partner or
shareholder, any agreement, contract or other instrument entered into with any
third party under which any affiliate of the Seller has borrowed any money from,
or issued any note, bond, debenture or other evidence of indebtedness to, any
Person or any other note, bond, debenture or other evidence of indebtedness
issued to any Person;
(viii) (i) other than agreements executed in the
ordinary course of business, including, but not limited to, performance
guarantees and parent-subsidiary guarantees of performance, any agreement,
contract or other instrument under which any Person has, directly or indirectly,
guaranteed liabilities or obligations of any member of the Stock Group or the
Business or (ii) any agreement pursuant to which any member of the Stock Group
or the Business has, directly or indirectly, guaranteed liabilities or
obligations of any Person;
(ix) any agreement, contract, or other instrument
under which (i) any Person other than Seller has, directly or indirectly,
guaranteed indebtedness for borrowed money
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of any member of the Stock Group or the Business or (ii) any member of the Stock
Group or the Business has, directly or indirectly, guaranteed indebtedness for
borrowed money of any Person;
(x) other than purchase orders or other agreements
executed in the ordinary course of business extending repayment terms to third
parties, any agreement, contract or other instrument entered into with any third
party under which any member of the Stock Group has, directly or indirectly,
made any advance, loan, extension of credit or capital contribution to, or other
investment in, any Person;
(xi) other than agreements executed in the ordinary
course of business, including, but not limited to, purchase and sale orders,
leases and license agreements, any agreement or instrument providing for
indemnification of any Person with respect to material liabilities relating to
any current or former business;
(xii) to Seller's Knowledge any prior acquisition or
disposition by Seller or any of its affiliates from or to, as applicable, any
third party of stock or assets formerly (in the case of dispositions) comprising
a product line, segment, portion or division of the Business (by way of merger,
consolidation, sale or otherwise) where any member of the Stock Group or the
Business has any continuing obligations thereunder other than agreements
relating to acquisitions or dispositions by Seller, its affiliates or the
Business with a purchase price of less than Five Million Dollars ($5,000,000);
and
(xiii) any joint venture or partnership agreement.
(b) All of the Material Contracts are the valid and binding
obligations of the Seller, Asset Subsidiaries or member of the Stock Group, a
party thereto, and to Seller's knowledge, the other parties thereto, are in full
force and effect and as to Seller and/or its respective affiliates are
enforceable in accordance with their respective terms, except as the enforcement
may be limited by bankruptcy, insolvency, moratorium or other laws relating to
or limiting creditors' rights generally or by general principles of equity,
regardless of whether such enforceability is considered in a proceeding at law
or in equity. Neither Seller nor one of the Subsidiaries is in breach or default
in any material respect under any Material Contract and, to Seller's Knowledge,
no other party to any of the Material Contracts is in breach or default in any
material respect thereunder.
SECTION 2.15. LICENSES AND PERMITS. Except as provided in Section 2.15
of the Disclosure Schedule, Seller and the Subsidiaries own, hold, possess or
lawfully use all licenses, permits, certificates, approvals, resolutions,
consents and other authorizations ("Permits") which are necessary in order to
operate in all material respects the Sale Assets and the assets of the members
of the Stock Group as now operated by them or to conduct the Business as now
conducted by them.
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SECTION 2.16. INTELLECTUAL PROPERTY.
(a) All patents, patent applications, including utility and
design patents and patent applications, trademarks, trademark applications,
trade names, service marks, and registered copyrights, which are owned and
currently in use by Seller or its Subsidiaries and used or held for use solely
or primarily in connection with the operation of the Business are listed or
described in Section 2.16(a) of the Disclosure Schedule (the "Intellectual
Property"). As used herein, the term "Intellectual Property Agreements" means
those agreements which are listed in Schedules 2.16 (d), (e) and (h) hereof. The
Intellectual Property together with the Intellectual Property Agreements are
sufficient for the conduct of the Business as it is presently conducted by
Seller and its Subsidiaries. Except as disclosed in Section 2.16 of the
Disclosure Schedule, Seller has no Knowledge of any written notice from a third
party unambiguously alleging that any patent listed or described in Section
2.16(a) of the Disclosure Schedule is invalid except for such notices which are
not reasonably expected to have a material effect on a material product line of
the Business. Except as disclosed on Section 2.16(a) of the Disclosure Schedule,
Seller or its Subsidiaries have title and ownership interests to the
Intellectual Property, as described in Section 2.16(a) of the Disclosure
Schedule (other than trade secrets).
(b) Except as specified in Sections 1.2(i) and 1.2(j) and
Section 2.16(b) of the Disclosure Schedule, there are no restrictions or
limitations on Seller's or the relevant Subsidiaries' right to use any
Intellectual Property or any rights obtained through the Intellectual Property
Agreements, except for any restrictions or limitations which would not
reasonably be expected to have a Material Adverse Effect. Except as specified in
Sections 1.2(i) and 1.2(j) and Section 2.16(b) of the Disclosure Schedule, and
subject to the receipt of any required consent, there are no prohibitions on the
transfer to Buyer of any Intellectual Property or Intellectual Property
Agreements as such transfer is contemplated by this Agreement, except for any
prohibitions which would not reasonably be expected to have a material effect on
a material product line of the Business. Except as provided in Sections 1.2(i)
and 1.2(j) above, all of Seller's or the relevant Subsidiaries' rights in and to
such Intellectual Property and the Intellectual Property Agreements will be
conveyed to Buyer pursuant to this Agreement subject to the receipt of any
required consents.
(c) Except as disclosed in Section 2.16(c) of the Disclosure
Schedule, to Seller's Knowledge, neither Seller nor any of its affiliates have
received written notice that the Business infringes or misappropriates any
intellectual property rights of others, and neither Seller nor any of its
Subsidiaries that are affiliates have been charged nor, to Seller's Knowledge,
threatened in writing to be charged with infringing or misappropriating the
intellectual property rights of others, except in either case for any
infringements which would not reasonably be expected to have a Material Adverse
Effect.
(d) Except as disclosed on Section 2.16(d) of the Disclosure
Schedule, neither Seller nor any of its affiliates have licensed any third party
to use any Intellectual Property or any rights obtained through the Intellectual
Property Agreements that is material to the Business.
(e) Except as described on Section 2.16(e) of the Disclosure
Schedule, neither Seller nor any of its affiliates have entered into any
contract or made any arrangement pursuant
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to which any third party is entitled to any royalty or other compensation for
the use of any Intellectual Property that is material to the Business. Except as
disclosed in Section 2.16(e) of the Disclosure Schedule, after the Closing Date
no license or royalty fee or other compensation shall be payable to any third
party with respect to the use of any of the Intellectual Property that is
material to the Business.
(f) Except as set forth on Section 2.16(f) of the Disclosure
Schedule, there are no pending or, to Seller's Knowledge, threatened material
legal or governmental proceedings, including opposition, cancellation,
interferences, proceedings or suits, directly relating to the Intellectual
Property and the Intellectual Property Agreements.
(g) Except as set forth on Section 2.16(g) of the Disclosure
Schedule, to Seller's Knowledge, no Person is infringing upon or is otherwise
violating any of the Intellectual Property and the Intellectual Property
Agreements, except for any infringement and violations which would not
reasonably be expected to have a Material Adverse Effect.
(h) Except for agreements entered into in the ordinary course
of business, including, but not limited to, confidentiality agreements and
consulting agreements, Section 2.16(h) of the Disclosure Schedule contains a
list of the material agreements exclusively dedicated to Intellectual Property
that are to be assigned to Buyer. To Seller's Knowledge, Section 2.16(h) of the
Disclosure Schedule is complete and accurate in all material respects, and
Seller and its relevant affiliates have the right to assign the items on Section
2.16(h) of the Disclosure Schedule to the Buyer, except as provided otherwise in
Sections 1.2(i) or 1.2(j) above (subject to the receipt of any required
consents) and each license, sublicense, agreement or permission disclosed in
Schedule 2.16(h) of the Disclosure Schedule is a valid and binding obligation of
the Seller, Asset Subsidiaries or member of the Stock Group, a party thereto,
and to Seller's Knowledge, the other parties thereto, to Seller's Knowledge is
in full force and effect and, as to Seller and/or its respective affiliates, is
enforceable in accordance with its respective terms, except as such enforcement
may be limited by bankruptcy, insolvency, moratorium or other laws relating to
or limiting creditors' rights generally or by general principles of equity,
regardless of whether such enforceability is considered in a proceeding at law
or in equity. To Seller's Knowledge, Seller or a relevant Subsidiary is not in
breach or otherwise in default in any material respect of the agreements listed
in Schedule 2.16(h), and, to Seller's Knowledge, no event has occurred which
with notice or lapse of time would constitute a material breach or default or
permit termination, modification or acceleration thereunder.
SECTION 2.17. ENVIRONMENTAL MATTERS.
(a) Except as set forth in Section 2.17(a) of the Disclosure
Schedule, and except for any breach of Section 2.17(a) that is not reasonably
expected to result in Environmental Costs exceeding $100,000 (it being
understood and agreed that such $100,000 is a threshold and not a deductible),
the Seller and each Asset Subsidiary (to the extent related to the Business),
the Business, each member of the Stock Group, the Owned Real Property and the
Leased Real Property and the operations conducted thereon (i) are in compliance
with all applicable Environmental Laws, (ii) have obtained, and are in
compliance with, all permits, licenses, authorizations, registrations and other
governmental consents required by applicable
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Environmental Laws ("Environmental Permits"), and have made all required filings
for issuance or renewal of such Environmental Permits; and (iii) there are no
claims, notices, civil, criminal or administrative actions, suits, hearings,
investigations, inquiries or proceedings pending or, to Seller's Knowledge,
threatened against the Seller or any Asset Subsidiary or any member of the Stock
Group that allege non-compliance;
(b) Except as set forth in Section 2.17(b) of the Disclosure
Schedule, and except as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, there is no contamination of, and
there have been no releases or threatened releases of Hazardous Materials at the
Owned Real Property, the Leased Real Property, or any other real property owned,
leased or operated by Seller or the Asset Subsidiaries in connection with the
Business or by any member of the Stock Group (or, to Seller's Knowledge, any
real property formerly owned, leased or operated by Seller or the Asset
Subsidiaries (or any predecessor of Seller or its Subsidiaries) in connection
with the Business or by any member of the Stock Group);
(c) Except as set forth in Section 2.17(b) of the Disclosure
Schedule, and except as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, there are no claims, notices,
civil, criminal or administrative actions, suits, hearings, investigations,
inquiries or proceedings pending or, to Seller's Knowledge, threatened against
the Seller or any Asset Subsidiary (in connection with the Business) or any
member of the Stock Group that are based on or related to any Environmental
Matters;
(d) Except as set forth in Section 2.17(b) of the Disclosure
Schedule, neither the Owned Real Property, the Leased Real Property, any other
property currently or formerly owned, leased, or operated by Seller or the Asset
Subsidiaries in connection with the Business or by any member of the Stock
Group, nor (to Seller's Knowledge) any site at or to which Seller or the Asset
Subsidiaries (in connection with the Business) or any member of the Stock Group
has disposed of, transported, or arranged for the transportation of, any
Hazardous Materials, has been listed on, or proposed for listing on, the
National Priorities List, the Comprehensive Environmental Response, Compensation
and Liability Information System ("CERCLIS") list, or any comparable State list
of properties to be investigated and/or remediated; and
(e) Except as set forth in Section 2.17(b) of the Disclosure
Schedule, and except as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, there are no past or present
conditions, events, circumstances, facts, activities, practices, incidents,
actions, omissions or plans that could reasonably be expected to (A) interfere
with or prevent continued compliance by the Business or any member of the Stock
Group with Environmental Laws and the requirements of Environmental Permits or
(B) give rise to any liability or other obligation under any Environmental Laws
that would require the Business or any member of the Stock Group to incur any
Environmental Costs.
(f) The Seller has delivered or made available to Buyer true
and complete copies and results of any material reports, studies, analyses,
tests, or monitoring possessed or initiated by Seller or its Subsidiaries with
respect to Environmental Matters relating to the Business or, to Seller's
knowledge, any Member of the Stock Group.
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(g) Except as set forth in Section 2.17(g) of the Disclosure
Schedule, none of the Seller or any Asset Subsidiary (to the extent related to
the Business) or any member of the Stock Group owns, leases or operates or has
owned, leased or operated, any property in Connecticut or New Jersey.
SECTION 2.18. LABOR RELATIONS; EMPLOYEES. Except as described in
Section 2.18 of the Disclosure Schedule:
(a) Labor Relations
(i) except as mandated by law (other than U.S.
federal, state and local laws) neither
Seller nor its Subsidiaries are party to any
collective bargaining or similar agreement
with respect to the Business work force or
any portion thereof;
(ii) no material employee strike, work stoppage,
lock-out or labor dispute is pending or, to
Seller's Knowledge, threatened against or
involving the Business;
(iii) no material unfair labor practice or similar
charge or complaint against the Business is
pending, or to Seller's Knowledge,
threatened; and neither Seller nor any of
its Subsidiaries have engaged in any
material unfair labor practices within the
meaning of the National Labor Relations Act
and the Railway Labor Act;
(iv) no material union grievance or similar
complaint is pending or, to Seller's
Knowledge, threatened with respect to the
Business;
(v) no material collective bargaining or similar
agreement is currently being negotiated or
is currently subject to negotiation or
renegotiation by Seller or its Subsidiaries
with respect to employees of the Business;
and
(vi) no material action, suit or complaint, by or
before any court, arbitrator or governmental
body, agency or authority has been brought
against Seller or any of its Subsidiaries by
or on behalf of any employee or former
employee of the Business and is pending or,
to Seller's Knowledge, is threatened.
(b) Employment Matters. The Seller and each of its
Subsidiaries (i) is in compliance in all material respects with all applicable
federal, state and local laws, rules and regulations (U.S. and non-U.S.)
respecting employment, employment practices, labor, terms and conditions of
employment, occupational safety and wages and hours, in each case, with respect
to employees of the Business; (ii) has withheld all amounts required by law or
by agreement to be withheld from the wages, salaries and other payments to
employees of the Business (other
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than employment taxes); (iii) is not liable for any arrears of wages or any
penalty for failure to comply with any of the foregoing; (iv) is not liable for
any payment to any trust or other fund or to any governmental or administrative
authority, with respect to unemployment compensation benefits, social security
or other benefits for employees of the Business; and (v) has not classified any
individual as "independent contractor" or of similar status who, according to
the law of the jurisdiction, should have been classified as an employee or of
similar status and which classification could result in a material Loss.
SECTION 2.19. EMPLOYEE BENEFIT PLANS.
(a) Schedule 2.19(a) contains a true and complete list of each
material Employee Benefit Plan other than any plan mandated by law (other than
U.S. federal, state and local laws) or covering less than 25 participants and
each Employee Agreement providing for an annual base salary of more than U.S.
$100,000 or its non-U.S. equivalent. Buyer has received a copy of the Transition
Arrangements that Seller established for employees of the Business. All Employee
Benefit Plans and Employee Agreements have been maintained, operated and/or
complied with in all material respects in accordance with both their terms and
with the requirements of all applicable statutes, orders, rules and regulations,
including without limitation ERISA and the Code. All contributions required to
be made to Employee Benefit Plans have been made. Seller has made available to
Buyer the following documents with respect to each Employee Benefit Plan and
each Employee Agreement: (i) a true and complete copy of all written documents
comprising each such Employee Benefit Plan (including but not limited to
amendments, insurance contracts, and individual agreements relating thereto) and
Employee Agreement or, if there is no such written document, an accurate and
complete description of the Employee Benefit Plan or Employee Agreement; (ii)
the two (2) most recent Forms 5500 (or such other applicable Forms 5500),
including all schedules thereto, if applicable; (iii) the two (2) most recent
financial statements and actuarial reports, if any; (iv) the summary plan
description currently in effect and all material modifications thereof, if any;
(v) the most recent Internal Revenue Service determination letter, if any; and
(vi) any material communication to any Employee or Employees relating to any
Employee Benefit Plan that is materially inconsistent with the plan documents
described in clause (i) of this Section 2.19(a).
(b) With respect to each Employee Benefit Plan: (i) each plan
which is intended to be "qualified" within the meaning of Section 401(a) of the
Code (or any equivalent non-U.S. statute) has been determined to be so qualified
by the Internal Revenue Service or applicable non-U.S. governmental authority
and is so qualified, and each related trust is exempt from taxation under
Section 501 (a) of the Code, if applicable; (ii) there has been no "prohibited
transaction," as such term is defined in Section 4975 of the Code or Section 406
of ERISA, within the last five (5) years, (iii) within the last five (5) years,
no such plan has been terminated under either a distress or standard termination
as provided in Title IV of ERISA, nor has any notice of intent to terminate any
plan been filed with the Pension Benefit Guaranty Corporation ("PBGC"), nor has
the PBGC issued notice of intent to terminate a plan; (iv) no plan has incurred
any "accumulated funding deficiency," as such term is defined in Section 412 of
the Code and Section 302 of ERISA (whether or not waived) within the last five
(5) years; (v) all reporting and disclosure requirements applicable under Title
I of ERISA (or any equivalent non-
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U.S. statute) have been satisfied; (vi) no plan is under audit or investigation
by the IRS, the Department of Labor, the PBGC or other regulatory agency or
applicable non-U.S. governmental authority, and to the Knowledge of the Seller
no such audit or investigation is pending or threatened; and (vii) no liability
under any plan has been funded nor has any such obligation been satisfied with
the purchase of a contract from an insurance company as to which the Seller or
any of its Subsidiaries has received notice that such insurance company is
insolvent or is in rehabilitation or any similar proceeding. There are no
material actions, suits or other claims pending with respect to any Employee
Benefit Plan, other than routine claims for benefits, qualified domestic
relations orders (as defined in ERISA Section 206(d)) and qualified medical
child support orders (as defined in ERISA Section 609) and to Seller's
Knowledge, no such actions, suits or other claims are threatened.
(c) With respect to each Employee Pension Benefit Plan, all
contributions which are due (including all employer contributions and employee
salary reduction contributions) have been paid to such plan. With respect to all
other Employee Benefit Plans, all premiums and other payments which are due have
been paid. The funded status of any non-U.S. Employee Pension Benefit Plan as
reflected in the May 2000 report of Price Waterhouse Coopers, which has been
provided to Buyer, is accurate.
(d) Except as disclosed in Section 2.19(d) of the Disclosure
Schedule, as otherwise provided in this Agreement or as is required under
Section 411(d)(3) of the Code, neither the execution nor delivery of this
Agreement, nor the consummation of the Transaction (either alone or together
with any other event), will (i) result in any payment (including without
limitation any bonus, severance, unemployment compensation, forgiveness of
indebtedness, or golden parachute payment) becoming due to any employee of the
Business, (ii) increase any benefit otherwise payable under any of the Employee
Benefit Plans or (iii) result in the acceleration of the time of payment,
vesting or funding, of any such benefit.
(e) Neither Seller nor any ERISA Affiliate (including the
Subsidiaries) has or will have any liability (contingent or otherwise) to or in
connection with (i) any multiemployer plan (within the meaning of Section 3(37)
of ERISA), or (ii) any other Employee Benefit Plan, which would result in any
liability to Buyer or any of the Subsidiaries or have a material adverse impact
upon the Sale Assets or subject the Sale Assets to any lien under ERISA or the
Code or the laws of any country.
(f) Except as set forth in Section 2.19(f) of the Disclosure
Schedule, neither the Seller nor any of its Subsidiaries (i) maintains or
contributes to any Employee Benefit Plan (excluding any plan mandated by law
(other than U.S. federal, state and local laws) and any plan covering less than
25 participants based outside the United States) which provides, or has any
liability to provide, life insurance, medical, severance or other employee
welfare benefits to any employee of the Business upon his retirement or
termination of employment, except as may be required by Section 4980B of the
Code; or (ii) has ever represented, promised or contracted in written form to
any employee (either individually or to employees as a group) that such
employee(s) would be provided with life insurance, medical, severance or other
employee welfare benefits upon their retirement or termination of employment,
except to the extent required by Section 4980B of the Code.
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SECTION 2.20. TAX MATTERS. Except as disclosed in Section 2.20 of the
Disclosure Schedule:
Representations Solely with Respect to members of the Tax Group.
(a) All Income Tax Returns (other than those that relate to
municipal taxes) and all Tax Returns that relate to Taxes in excess of $20,000,
in each case required to be filed with respect to each of the members of the
Stock Group, other than the members of the Stock Group listed on Section 2.20(a)
of the Disclosure Schedule (the Stock Group, less such scheduled exceptions, the
"Tax Group"), have been filed. All such Tax Returns were correct and complete in
all material respects. All Taxes required to be paid by or with respect to
members of the Tax Group have been or will be timely paid, or are being
contested in good faith. None of the members of the Tax Group currently are the
beneficiary of any extension of time within which to file any Income Tax Returns
(other than those that relate to municipal taxes) or any Tax Returns that relate
to Taxes in excess of $20,000.
(b) There is no litigation, dispute, or claim concerning any
Tax liability in excess of $20,000 of any of the members of the Tax Group either
(A) claimed or raised by any tax authority in writing or (B) as to which any of
the officers of Seller or of any of the members of the Tax Group, or the Tax
Director of the Business, has knowledge based upon personal contact with any
agent of such authority. No member of the Stock Group is required to include in
income any adjustment pursuant to Section 481(a) or 482 of the Code or any
analogous provision of state, local or foreign law as a result of any prior
audit, proceeding, or agreement with any taxing authority (nor has any taxing
authority proposed in writing any such adjustment). All Tax deficiencies in
excess of $20,000 that have been claimed, proposed, or assessed against any
member of the Tax Group have been fully paid or finally settled, or are being
contested in good faith by appropriate proceedings.
(c) Section 2.20(c) of the Disclosure Schedule lists all
federal, state, local, and foreign Tax Returns filed with respect to each of the
members of the Tax Group for Taxable Periods ended on or after December 31,
1996, indicates those Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit. Except as so indicated, all
Tax Returns filed with respect to each of the members of the Tax Group through
the Tax year ended December 31, 1996 have been examined and closed or are Tax
Returns with respect to which the applicable period for assessment under
applicable law, after giving effect to extensions or waivers, has expired.
Seller has made available to the Buyer correct and complete copies of all such
federal, state, local, and foreign Tax Returns, and statements of deficiencies
assessed against, or agreed to by any of the members of the Tax Group since
December 31, 1996. Seller has made available to Buyer complete and accurate
copies of all audit and examination reports, letter rulings, and technical
advice memoranda relating to United States federal, state, local and foreign
Taxes with respect to each member of the Tax Group, and any closing agreements
with respect to any member of the Tax Group with any taxing authority, in each
case which could affect the liability for Taxes of any member of the Tax Group
after the Closing. None of the members of the Tax Group has
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waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.
(d) None of the members of the Tax Group has filed a consent
under Code Section 341(f) concerning collapsible corporations. None of the
members of the Tax Group has been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the applicable
period specified in Code Section 897(c)(1)(A)(ii). None of the members of the
Tax Group is a party to any Tax allocation or sharing agreement that will
survive the Closing and will have no liability or obligation under such an
agreement. None of the members of the Tax Group (A) has been a member of an
affiliated group filing a consolidated combined, or unitary federal, state,
local or foreign Income Tax Return or VAT Return (other than a group the common
parent of which was the Seller) or (B) has any liability for the Taxes of any
Person (other than Taxes of the Seller and any member of its consolidated group)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise.
No taxing authority in a jurisdiction where a member of the Tax Group does not
file Tax Returns has made a claim, assertion or threat that such member is or
may be subject to taxation by such jurisdiction. All amounts required to be
collected or withheld by members of the Tax Group with respect to Taxes have
been duly collected or withheld and any such amounts that are required to be
remitted to any taxing authority have been duly remitted. To the Knowledge of
the officers of Seller or of any of the members of the Tax Group, or of the Tax
Director of the Business, no taxing authority, body, or official in any
jurisdiction has challenged any transaction to which any member of the Tax Group
has been a party on the basis that its main purpose, or one of its main
purposes, was the avoidance of Tax. Neither Seller nor any member of the Tax
Group has participated in or cooperated with an international boycott within the
meaning of Section 999 of the Code or has been requested to do so in connection
with any transaction or proposed transaction. To the Knowledge of the officers
of Seller or of any of the members of the Tax Group, or of the Tax Director of
the Business, no member of the Tax Group has income in excess of $20,000 that
has been accrued under GAAP prior to the Closing, but which has not been accrued
for Income Tax purposes prior to the Closing. None of the Sale Assets nor the
assets owned by any members of the Tax Group is: (i) subject to a tax benefit
transfer lease executed in accordance with Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended or (ii) "tax-exempt use property" within the
meaning of Section 168(h) of the Code.
(e) (i) Each member of the Tax Group organized under the laws
of, or doing business in, any country that has a Value Added Tax ("VAT") (y) is
duly registered for VAT in respect of the Business and has maintained all
requisite records for that purpose and (z) has complied with all relevant VAT
legislation.
(ii) To the Knowledge of the officers of Seller and
of any member of the Stock Group, or of the Tax Director of the Business, there
have been no circumstances that would give rise to the application to Goodrich
Canada, Inc. of Section 80, 80.01, 80.02, or 80.04 of the Income Tax Act
(Canada) of the similar provisions of any applicable provincial tax legislation.
(iii) To the Knowledge of the officers of Seller and
of any member of the Tax Group, or of the Tax Director of the Business, each
member of the Tax Group has duly
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stamped all documents which are material to the business of such entity or to
the Business, in each jurisdiction where relevant.
Representations with Respect to Seller and its Subsidiaries, other than
members of the Tax Group.
(f) Each of the Seller and its Subsidiaries (other than
members of the Tax Group) has filed all Income Tax Returns (other than those
that relate to municipal taxes) and all Tax Returns that relate to Taxes in
excess of $20,000 that it was required to file, and has timely paid all Taxes in
excess of $20,000 required to be paid by it, to the extent such Tax Returns and
Taxes are related to the Business or the Sale Assets.
(g) Section 2.20(g) of the Disclosure Schedule lists all Tax
Returns filed with respect to the Business or the Sale Assets by Seller or any
of the Subsidiaries (other than members of the Tax Group), in either case for
Taxable Periods ended on or after December 31, 1996, indicates those Tax Returns
that have been audited, and indicates those Tax Returns that currently are the
subject of audit. Seller has made available to the Buyer correct and complete
copies of all such federal, state, and local Tax Returns (or the relevant
portions thereof), examination reports, and statements of deficiencies assessed
against or agreed to by any of the Seller and its Subsidiaries (other than
members of the Tax Group) since December 31, 1996, to the extent such Returns,
reports, or statements relate to the Business.
(h) Neither Seller nor any of its Subsidiaries (other than
members of the Tax Group) are a party to any Tax allocation or sharing agreement
that will (i) remain in effect subsequent to the Transaction and (ii) impose any
obligation on Buyer or any of its affiliates or any member of the Stock Group.
(i) No taxing authority in a jurisdiction where the Seller or
any of its Subsidiaries does not file Tax Returns with respect to the Business
or Sale Assets has made a claim, assertion or threat that such entity is or may
be subject to taxation by such jurisdiction with respect to the Business or Sale
Assets.
(j) All amounts with respect to the Business or the Sales
Assets required to be collected or withheld by Seller and each of its
Subsidiaries (other than members of the Stock Group) with respect to Taxes have
been duly collected or withheld and any such amounts that are required to be
remitted to any taxing authority have been duly remitted.
SECTION 2.21. BROKERS' OR FINDERS' FEE. Except for Morgan Stanley & Co.
Incorporated (whose fees shall be paid by Seller), no agent, broker, investment
banker or other Person or firm acting on behalf of Seller, its Subsidiaries, or
any of their respective directors, officers or affiliates, or under the
authority of any of them, is or will be entitled to any broker's or finder's fee
or any other commission or similar fee, directly or indirectly, from Seller or
its Subsidiaries in connection with the Transaction.
SECTION 2.22. NO OTHER REPRESENTATIONS AND WARRANTIES. EXCEPT AS SET
FORTH IN THIS AGREEMENT, NEITHER SELLER NOR ANY OF ITS SUBSIDIARIES MAKES, AND
NO PARTY SHALL BE ENTITLED TO RELY UPON, ANY REPRESENTATION OR
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WARRANTY AS TO ANY FACT OR MATTER OTHER THAN AS EXPRESSLY SET FORTH HEREIN.
SECTION 2.23. NO GIFTS OR SIMILAR BENEFITS. Except as provided in
Section 2.23 of the Disclosure Schedule, since January 1, 1998, neither the
Seller nor any of its affiliates nor, to the Knowledge of Seller, any of their
respective directors, officers, agents, employees or Persons acting on their
behalf has, in connection with the conduct of the Business, directly or
indirectly, given or agreed to give any significant gift or similar benefit to
any supplier, customer, governmental employee or other Person who was, is or may
be in a position to help or hinder the Business (or assist in connection with
any actual or proposed transaction) under circumstances that involve a violation
of any governmental law or regulation which is then in effect and which could
reasonably be expected to subject the Business to any material damage or
penalty.
SECTION 2.24. AFFILIATE TRANSACTIONS. Except as set forth in Section
2.24 of the Disclosure Schedule, neither Seller (other than through its interest
in the Assets) nor any of its affiliates (other than the members of Stock Group)
(i) has any interest in any property (real or personal, tangible or intangible)
or Contract material to the Business (other than property or Contracts being
conveyed to Buyer (or its designee) pursuant to this Agreement), (ii) has any
direct or indirect interest in any Person with which Seller (to the extent
related to the Business) or any member of the Stock Group competes in any
material product or service category or has a material business relationship or
(iii) provides material services to the Business or any member of Stock Group.
SECTION 2.25. SUPPLIERS AND CUSTOMERS. Section 2.25 of the Disclosure
Schedule lists the top 20 suppliers and customers (by dollar value) from or to
whom the Business purchased or sold goods for the period from January 1, 1999 to
December 31, 1999. To Seller's Knowledge, except as set forth on Section 2.25 of
the Disclosure Schedule, since the date of the May 31, 2000 Balance Sheet, there
has not been any material adverse change in the business relationship with any
supplier or customer named in Section 2.25 of the Disclosure Schedule or the
customers or suppliers of the Business, taken as a whole, except for such
changes reflecting either general economic or industry conditions.
SECTION 2.26. PRODUCT LIABILITY CLAIMS. Section 2.26 of the Disclosure
Schedule lists all product liability claims in excess of Two Million Dollars
($2,000,000) per claim (related to the Business), filed against Seller or any of
its affiliates on or after January 1, 1996 and, in each case, any amounts paid
in connection with the resolution thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to Seller to enter into this Agreement and to
consummate the Sale, Buyer represents and warrants to Seller as of the date
hereof and as of the Closing Date as follows:
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SECTION 3.1. ORGANIZATION; POWER.
(a) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of Delaware.
(b) Buyer has all the requisite corporate power and authority
to own, lease and operate its assets, to carry on its business as it is now
being conducted and to enter into, execute and deliver this Agreement, to
consummate the Transaction, and to comply with and fulfill the terms and
conditions of this Agreement.
SECTION 3.2. AUTHORITY; NO VIOLATION; ETC.
(a) The execution and delivery of this Agreement and the
consummation of the Transaction have been duly and validly authorized by all
necessary corporate action on the part of Buyer. This Agreement is a valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms, except as the enforcement may be affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws relating to or
limiting creditors' rights generally or by general principles of equity,
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
(b) Neither the execution and delivery of this Agreement, nor
the consummation of the Transaction, nor compliance by Buyer with any of the
provisions of the Agreement, will:
(i) conflict with, violate, result in a breach of,
constitute a default (or an event that, with notice or lapse of time, or both,
would constitute a default) under, or give rise to any right of termination,
cancellation or acceleration under any provision of the Certificate of
Incorporation or Bylaws of Buyer, or any of the terms, conditions or provisions
of any note, lien, bond, mortgage, indenture, license, lease, contract,
commitment, agreement, understanding, arrangement, restriction or other
instrument or obligation to which Buyer is a party or by which Buyer may be
bound; or
(ii) violate in any material respect any law, rule or
regulation of any governmental body, agency or authority or any material
judgment, order, writ, injunction or decree of any court, arbitrator or
governmental body, agency or authority to which Buyer or its assets are subject.
SECTION 3.3. CONSENTS AND APPROVALS. Except for the expiration or early
termination of the applicable waiting period under the HSR Act and
investigations and approvals of the Transaction by, or the expiration of any
deadlines for banning the Transaction without prohibitory order from, each
Antitrust Authority, the execution, delivery and performance of this Agreement
by Buyer, and the consummation of the Transaction, will not require any notice
to, action of, filing with or consent, authorization, order or approval from,
any court, arbitrator or governmental body, agency or authority, or any other
third party, except any such notice, action, filing, consent, authorization,
order or approval not reasonably expected to materially delay the Transaction.
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SECTION 3.4. ACTIONS PENDING. There are no actions, suits, proceedings
pending or, to Buyer's Knowledge, threatened against Buyer or any properties or
rights of Buyer by or before any court, arbitrator or governmental body, agency
or authority which, in any manner, challenges or seeks to prevent, enjoin, alter
or materially delay the Transaction.
SECTION 3.5. DISCLAIMER AS TO CONDITION OF SALE ASSETS. It is the
express intention of Buyer and Seller that (except to the extent expressly
provided in this Agreement) the Sale Assets shall be acquired by or conveyed to
Buyer "as is" and in their present condition and state or repair and without any
implied or express warranties of any type whatsoever except as expressly set
forth herein.
SECTION 3.6. NONRELIANCE. In connection with its decision to purchase
the Sale Assets, Buyer, on behalf of itself and its affiliates and related
parties, acknowledges, understands and agrees that (a) Buyer is a sophisticated
party with such knowledge and experience in business matters that it appreciates
the merits and risks of purchasing the Sale Assets and consummating the
Transaction, (b) Buyer is not relying upon the representations and warranties
and information set forth in the Offering Memorandum dated May 2000 and
distributed by Morgan Stanley & Co. Incorporated, (or any information made
available to Buyer in data rooms or by presentations of the management of the
Business) except that Seller represents and warrants to Buyer that the pro forma
adjustments reflected in the financial statements and data contained in the
Offering Memorandum were based on assumptions that Seller in good faith believed
to be reasonable, (c) Buyer is not relying upon any forward looking projections,
forecasts, budgets, financial data or any other forward looking information
(written or oral) with respect to the Sale Assets or the Business prepared by or
furnished to it by or on behalf of Seller ("Forward Looking Data") except that
Seller represents and warrants to Buyer that the Forward Looking Data was
prepared in good faith by Seller, (d) Buyer recognizes that significant
uncertainties are inherent in such Forward Looking Data and that, except as set
forth in 3.6(c) above, Seller and its Subsidiaries have not made any
representations or warranties, expressed or implied, relating to the Forward
Looking Data, and (e) Buyer takes full responsibility for making its own
evaluation as to the adequacy and accuracy of such Forward Looking Data.
SECTION 3.7. LEFT BLANK INTENTIONALLY.
SECTION 3.8. INVESTMENT INTENT. Buyer (or its designee) is acquiring
the Stock and Equity Interest for its own account for investment purposes only
and not with a view to, or for sale or resale in connection with, any public
distribution thereof or with any present intention of selling, distributing or
otherwise disposing of the Stock or Equity Interest in violation of applicable
securities laws.
SECTION 3.9. LEGEND. Buyer understands that the Stock of the Stock
Subsidiaries incorporated in the United States is characterized as "restricted
securities" under the federal securities laws inasmuch as it is being acquired
from Seller in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Securities Act of 1933, as amended, only in certain
limited circumstances. It is understood that the certificates evidencing the
Stock of the Stock Subsidiaries incorporated in the United States shall bear the
following legend:
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"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD EXCEPT AS PERMITTED
UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS, PURSUANT
TO REGISTRATION OR AN EXEMPTION THEREFROM."
SECTION 3.10. BROKERS' OR FINDERS'